South32 Holds FY26 Production Steady, Invests $338M in Hermosa Project

Consistent Performance Amid Strategic Shifts

South32 has delivered a steady operational performance in the first half of FY26, maintaining production guidance across its operated assets despite some challenges in non-operated operations. The company’s CEO, Graham Kerr, highlighted the group’s ability to sustain a strong financial position while investing in growth projects and returning capital to shareholders.

The divestment of Cerro Matoso, completed in December 2025, marks a significant step in South32’s strategy to streamline its portfolio and focus on high-quality base metals operations. This move aligns with the company’s intent to prioritise assets with strong growth potential and operational resilience.

Project Development and Exploration Momentum

Capital expenditure at the Hermosa project remains robust, with US$338 million invested in the half-year period. Construction of the Taylor zinc-lead-silver deposit is progressing well, including shaft sinking and surface infrastructure development. The completion of the exploration decline at the Clark battery-grade manganese deposit further underscores South32’s commitment to expanding its battery metals footprint.

Meanwhile, the Ambler Metals joint venture in Alaska has approved a US$35 million work program for 2026, targeting the high-grade Arctic polymetallic deposit. This initiative benefits from recent federal approvals for the Ambler Access Road, a critical infrastructure component that will facilitate future development in this underexplored region.

Operational Highlights and Cost Management

Operationally, South32’s assets performed largely in line with expectations. Sierra Gorda delivered strong copper volumes and cash returns, with potential upside from increased molybdenum, gold, and silver production. Cannington exceeded planned processing rates, boosting zinc equivalent production by 13% in the December quarter.

On the cost front, operating unit costs are tracking in line with or below guidance across most operations, reflecting effective cost management and operational discipline. However, Mozal Aluminium faces a challenging outlook due to electricity supply constraints, leading to a planned transition to care and maintenance from March 2026. This will temporarily reduce aluminium output but is a necessary step given the energy supply issues.

Financial Returns and Shareholder Value

South32 returned US$152 million to shareholders in the first half of FY26 through fully franked dividends and on-market share buy-backs, nearing completion of its US$2.5 billion capital management program. The company also reported a temporary working capital build due to higher commodity prices and sales timing, with expectations of inventory drawdown and cash generation in the second half.

Commodity prices showed mixed trends, with copper and precious metals strengthening, while alumina and manganese prices declined. South32’s diversified portfolio and focus on base metals position it well to navigate these market dynamics.