#1= EIII IIIE SOUTH 32 28 September 2016 South32 Limited (Incorporated in Australia under the Corporations Act 2001 (Cth)) (ACN 093 732 597) ASX/LSE/JSE Share Code: S32 ISIN: AU000000S320 south32.net SOUTH AFRICA ENERGY COAL - KLIPSPRUIT SITE TOUR PRESENTATION South32 Limited (ASX, LSE, JSE: S32) (South32) will today host an investor and analyst site tour to its South Africa Energy Coal Klipspruit mine in Mpumalanga, South Africa. About South32 South 32 is a globally diversified mining and metals company with high quality operations in Australia, Southern Africa and South America. Our purpose is to make a difference by developing natural resources, improving people's lives now and for generations to come. We are trusted by our owners and partners to realise the potential of their resources. We have a simple strategy to maximise the potential of our assets and shareholder returns by optimising our existing operations, unlocking their potential and identifying new opportunities to compete for capital. FURTHER INFORMATION INVESTOR RELATIONS Alex Volante T +61 8 9324 9029 Rob Ward T +61 8 9324 9340 M +61 431 596 831 M +61 403 328 408 E Alex. [email protected] E MEDIA RELATIONS James Clothier T +61 8 9324 9697 M +61 413 319 031 E [email protected] [email protected] Further information on South32 can be found at www.south32.net. JSE Sponsor: UBS South Africa (Pty) Ltd 28 September 2016 Registered Office: Level 35, 108 St Georges Terrace, Perth Western Australia 6000, Australia ABN 84 093 732 597 Registered in Australia#2ΞΙΙΙ IIIE SOUTH32 KLIPSPRUIT INVESTOR TOUR 28 SEPTEMBER 2016 E SOUTH32 85D#3IMPORTANT NOTICES ΞΙΙΙ ΙΙΙΞ SOUTH32 This presentation should be read in conjunction with the Annual Financial Report as at 30 June 2016, Financial Results and Outlook - Year ended 30 June 2016, Quarterly Report for June 2016 and any other announcements made by South32 in accordance with its continuous disclosure obligations. FORWARD LOOKING STATEMENTS This presentation contains forward-looking statements, including statements about trends in commodity prices and currency exchange rates; demand for commodities; production forecasts; plans, strategies and objectives of management; capital costs and scheduling; operating costs; anticipated productive lives of projects, mines and facilities; and provisions and contingent liabilities. These forward-looking statements reflect expectations at the date of this presentation, however they are not guarantees or predictions of future performance. They involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results to differ materially from those expressed in the statements contained in this presentation. Readers are cautioned not to put undue reliance on forward-looking statements. Except as required by applicable laws or regulations, the South 32 Group does not undertake to publicly update or review any forward looking statements, whether as a result of new information or future events. Past performance cannot be relied on as a guide to future performance. The denotation (e) refers to an estimate or forecast year. NON-IFRS FINANCIAL INFORMATION This presentation includes certain non-IFRS financial measures, including Underlying earnings, Underlying EBIT and Underlying EBITDA, Underlying basic earnings per share, Underlying effective tax rate, Underlying EBIT margin, Underlying EBITDA margin, Underlying return on capital, Free cash flow, net debt, net operating assets and ROIC. These measures are used internally by management to assess the performance of our business, make decisions on the allocation of our resources and assess operational management. Non-IFRS measures have not been subject to audit or review and should not be considered as an indication of or alternative to an IFRS measure of profitability, financial performance or liquidity. NO OFFER OF SECURITIES Nothing in this presentation should be read or understood as an offer or recommendation to buy or sell South32 securities, or be treated or relied upon as a recommendation or advice by South32. RELIANCE ON THIRD PARTY INFORMATION Any information contained in this presentation that has been derived from publicly available sources (or views based on such information) has not been independently verified. The South32 Group does not make any representation or warranty about the accuracy, completeness or reliability of the information. This presentation should not be relied upon as a recommendation or forecast by South32. NO FINANCIAL OR INVESTMENT ADVICE - SOUTH AFRICA South32 does not provide any financial or investment 'advice' as that term is defined in the South African Financial Advisory and Intermediary Services Act, 37 of 2002, and we strongly recommend that you seek professional advice. CURRENCY All references to dollars, cents or $ in this document are to US currency, unless otherwise stated. COAL RESERVES AND COAL RESOURCES Details of South32 Klipspruit, Wolverkans Middelburg Complex and Khutala Coal Resource and Coal Reserve estimates which appear in this presentation are estimates previously disclosed in the South32 Annual report 2016 dated 8 August 2016 in compliance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves, 2012. The Competent Persons responsible for resources were: Khutala - G Gemmell (Pri. Sci. Nat., SACNASP), Klipspruit - H Strauss (MGSSA), Wolvekrans Middelburg Complex: S Kara (Pri. Sci. Nat., SACNASP), L Visser (Pri. Sci. Nat., SACNASP). The Competent Person responsible for reserves for Khutala, Klipspruit and Wolvekrans Middelburg Complex was P Mulder (MSAIMM). All the named Competent Persons are full time employees of South32. South32 is not aware of any new information or data that materially affects these Resource and Reserve estimates and that all material assumptions and technical parameters underpinning the estimates continue to apply and have not materially changed. The company confirms that the form and context in which the resource and reserve estimates are presented have not been materially modified from the original market announcements. Reserve Life is calculated based on the current stated Ore Reserves divided by the current approved nominated production rate as at the end of FY2016. 28 SEPTEMBER 2016 KLIPSPRUIT INVESTOR TOUR SLIDE 2#4SOUTH AFRICA ENERGY COAL RESOURCE AND RESERVE STATEMENT Coal Resources As at 30 June 2016 III Measured Coal Resources Indicated Coal Resources Inferred Coal Resources Total Coal Resources ΞΙΙΙ ΙΙΙΞ SOUTH 32 South32 Interest Deposit (1)(2) Mining Method Kcal/k Kcal/k Kcal/k Kcal/ Coal Type Mt % Ash % VM % S g CV Mt % Ash % VM % S g cv Mt % Ash % VM % S g cv Mt % Ash % VM % S kg CV % South Africa - Operating mines Khutala ос Th 1,104 30.2 22.7 1.19 4,900 1,104 30.2 22.7 1.19 4,900 92 UG Th 219 34.6 20.6 0.90 4,440 219 34.6 20.6 0.90 4,440 Klipspruit OC Th 114 28.3 22.4 1.21 5,150 114. 28.3 22.4 1.21 5,150 92 Wolvekrans Middelburg ос Th 663 26.3 22.8 1.12 5,520 17 29.2 22.9 1.01 5,190 115 28.9 23.2 1.08 5,210 795 26.8 22.8 1.11 5,470 92 Complex Coal Reserves As at 30 June 2016 Deposit (1)(2)(4)(5) Mining Method Coal Type Mt Proved Coal Reserves Probable Coal Reserves Total Coal Reserves Proved Marketable Coal Reserves Probable Marketable Coal Reserves Total Marketable Coal Reserves Reserve Life South32 Interest Mt Mt Mt % Ash % VM % S Kcal/kg CV Mt % Ash % VM % S Kcal/kg CV Mt % Ash % VM % S Kcal/kg CV Years % South Africa Operating mines Khutala UG Th 47 Klipspruit OC Th Export 31 ос Th Wolvekrans Middelburg ос Th Complex ос Th Export ос Th Domestic 47 47 34.1 31 9.1 14.2 21.3 0.89 25.1 0.47 4,520 6,290 47 34.1 9.1 14.2 21.3. 0.89 25.1 0.47 4,520 9.0 92 6,290 92 4.0 15 25.0 21.0 0.58 5,290 15 25.0 21.0 0.58 5,290 466 17 483 92 24 174 15.9 130 25.4 25.3 0.48 21.3 0.92 6,280 5,420 7 15.9 25.3 0.48 4 25.4 21.3 0.92 6,280 5,420 181 15.9 134 25.4 25.3 0.48 21.3 0.92 6,280 5,420 (1) Cut-off criteria Coal Resources Coal Reserves Khutala Klipspruit ≥ 1.0m seam thickness for OC, ≥ 2.5m seam thickness for UG, ≥ 24% dry ash-free volatile matter. ≥ 1.0m seam thickness, ≤ 45% ash, ≥ 24% dry ash-free volatile matter. Wolvekrans Middelburg Complex ≥ 1.0m seam thickness, ≤ 45% ash, ≥ 17.9% volatile matter. (2) Tonnes and qualities are reported on an air-dried basis. ≥ 1.0m seam thickness for OC, ≥ 3.6m seam thickness for UG. ≥ 1.0m seam thickness, varying CV ≥ 3,580 Kcal/kg to ≥ 4,300KCal/kg, ≤ 45% ash. ≥ 1.0m seam thickness, ≥ 2,870 Kcal/kg CV, ≤ 45% ash, ≥ 17.9% volatile matter. (3) Leandra: Increase in Coal Resource tonnes due to additional drilling. (4) Process recoveries for the operations: Khutala Klipspruit Wolvekrans Middelburg Complex 100% 79% 67% 28 SEPTEMBER 2016 KLIPSPRUIT INVESTOR TOUR SLIDE 3#5SUSTAINABILITY PERFORMANCE • • III One fatality at South Africa Energy Coal in FY16: Klipspruit (June 2016) Delivering a step change in safety for South Africa Energy Coal by: - - Building a more inclusive workplace with a strong culture of care and accountability Ensuring that work is well-designed and we continuously improve and learn ΞΙΙΙ ΙΙΙΞ SOUTH 32 Total Recordable Injury Frequency Rate for SA Energy Coal (per million hours worked) 3.5 FY15 4.5 FY16 1.2 FY17 YTD . - Continuously improving and learning Undertaking a thorough technical and leadership capability review to define, assess and address potential gaps Strong focus on controlling occupational exposures and significantly reduced occupational illness frequency Comprehensive wetland offset strategy developed, including the plan for Klipspruit Life Extension Project 28 SEPTEMBER 2016 KLIPSPRUIT INVESTOR TOUR Occupational Illness Frequency Rate¹ for SA Energy Coal (employees and contractors illness per million hours worked) Note: 1. 4.9 FY15 0.1 0.0 FY16 FY17 YTD occupational illness frequency rate is zero FY17 YTD SLIDE 4#6COMMITTED TO TRANSFORMATION • Committed to the National Transformation Agenda as enacted in the B-BBEE Act and the Mining Charter Accelerated the implementation of key transformation initiatives: Klipspruit workforce diversity - - Facilitating economic empowerment with broad-based equity ownership structures Working towards equitable representation and the upskilling of our historically disadvantaged workforce at all levels Developing black small and medium enterprises and the creation of opportunities for growth for existing black enterprises Increasing our local engagement through focussed and sustainable community development Improving the housing and living conditions of our employees and ensuring our plans are aligned with our values and the requirements of the South African Mining Charter Recruiting from within our local communities 28 SEPTEMBER 2016 KLIPSPRUIT INVESTOR TOUR 50% 65% ΞΙΙΙ ΙΙΙΞ SOUTH32 Black South African Women Senior Management Total workforce 17% SLIDE 5#7COMMUNITY AND ECONOMIC CONTRIBUTION . We want to be trusted by society and the communities in which we operate South32 FY16 Community investment by country ■South Africa 56% ■ Colombia 25% Australia • • During FY16, South32 contributed US$16.5M to Community investment, of which US$5.0M was spent at South Africa Energy coal Energy Coal South Africa community investment focusses on education, health, community based agriculture initiatives and local waste recycling and seeks to: • • Empower employees to contribute to their community and society Support local communities in areas of need 13% 6% III • • Develop long-term projects focussed on delivering positive outcomes for future generations At South Africa Energy Coal a wetland offset strategy has been developed to ensure no net loss in wetland function as a result of mining activities. 28 SEPTEMBER 2016 KLIPSPRUIT INVESTOR TOUR Mozambique ΞΙΙΙ ΙΙΙΞ SOUTH32 SLIDE 6#8BROAD-BASED EQUITY OWNERSHIP STRUCTURE ΞΙΙΙ ΙΙΙΞ SOUTH32 III 100% 50% South321 92% South Africa Energy Coal 100% Klipspruit Phola Processing Plant Wolvekrans Middelburg Complex (WMC) Phembani Group² 8% 100% 21% Khutala Richards Bay Coal Terminal (RBCT) Notes: 1. 2. South32 has undertaken a number of historic asset transactions where it has transferred South Africa Energy Coal resources to historically disadvantaged entities which resulted in more than 26% ownership empowerment. These transactions were completed in consultation with the DMR to ensure consistency with the requirements of the Mining Charter. The interests owned by our BEE partner, Phembani Group, were acquired using vendor finance, with the loans repayable to South32 via distributions attributable to these parties, pro rata to their share in South Africa Energy Coal. Until these loans are repaid, South32's interest in South Africa Energy Coal is accounted at 100%. 28 SEPTEMBER 2016 KLIPSPRUIT INVESTOR TOUR SLIDE 7#9SOUTH AFRICA ENERGY COAL KEY METRICS Operating cost, including Sustaining capital expenditure¹ FY16 Operating cost (excluding Sustaining capital) ΞΙΙΙ ΙΙΙΞ SOUTH 32 ■Labour related 33 33 26% 24% 27 Transport & logistics 26 Operating unit cost, 1,137 including Sustaining 888 capital expenditure (US$/t) Raw materials & consumables 813 21% 29% Other FY15 FY16 FY17e Costs expected to decline in FY17 as the assumed depreciation of the South African Rand offsets an increase in stripping activity required to access new mining areas, primarily at WMC Operating cost, including Sustaining capital expenditure (US$M) Fixed: ~65% Variable: ~35% Employee and contractor headcount 2 9,530 FY15 7,070 FY16 7,740 FY17e Notes: 1. 2. Operating unit cost, including Sustaining capital expenditure, and Sustaining capital expenditure guidance for FY17e, include royalties (where appropriate) and the influence of exchange rate assumptions, and are predicated on a thermal coal price of US$54/t (API4) and a USD:ZAR exchange rate of 16.57; which reflect forward markets at the end of May 2016 or our internal expectations. Compares end of period average contractors and employees for respective financial years (FY15, FY16 and FY17e). 28 SEPTEMBER 2016 KLIPSPRUIT INVESTOR TOUR SLIDE 8#10SOUTH AFRICA ENERGY COAL Klipspruit production (Mt) 7.3 7.2 7.8 FY16 FY17e FY18e - Klipspruit Life Extension project Now in Feasibility study phase - Low capital expenditure development option Using existing infrastructure 14 Klipspruit ΞΙΙΙ ΙΙΙΞ SOUTH32 Middelburg eMalahleni WMC production (Mt) 15.5 15.1 13.4 Klipspruit Extension N12 DUVHA KENDAL Khutala Khutala Extension Wolvekrans Middelburg Complex KOMATI HENDRINA Contract type FY16 FY17e FY18e Duvha: Coal Supply Agreement 8.5Mtpa equity share Current fixed-price contract with two annual escalations Extends to 2024 (Eskom option to extend) Additional investment required to access new areas Richards Bay Coal Terminal 21.4% interest KRIEL Transnet contract Covers 16.4Mtpa of exports from Klipspruit and WMC until 2024 Take-or-pay obligation of 15.6Mtpa P MATLA 28 SEPTEMBER 2016 KLIPSPRUIT INVESTOR TOUR Khutala production (Mt) Contract type 8.9 8.6 8.6 - Design capacity 91Mtpa - CY15 exports 75.4Mt FY16 FY17e FY18e Kendal: Coal Supply Agreement of 13.3Mtpa Current cost-plus agreement until 2033 Working with Eskom to extend life of the underground mine Khutala life extension Further options with Eskom, under the current agreement, to recapitalise and move to open cut Export coal production Domestic coal production SLIDE 9#11III WOLVEKRANS MIDDELBURG COMPLEX Wolvekrans Middelburg Complex Discovery/history Reserves Resources Wolvekrans North Dump • Commenced production in 1982 • 315Mt; Reserve life: 24 years • 795Mt Mining . Open-cut; dragline and truck and shovel Mining right valid until 1 Dec 2041, with renewal right for another 30 years Saleable coal production (Mt) 16.0 15.5 15.1 13.4 FY15 FY16 FY17e FY18e 28 SEPTEMBER 2016 KLIPSPRUIT INVESTOR TOUR Export Wolvekrans North Opencast North Middlings Plant ΞΙΙΙ ΙΙΙΞ SOUTH 32 North Export Plant (Care and maintenance since July 2016) Export 6000 kCal South Export Plant Export 5500 kcal Wolvekrans South Opencast SCP Bypass (Raw) Wolvekrans VDD Dump Domestic Destone Export 4800 kcal VDD Mobile Plant Duvha Power Station Lurco Toll Wash (In construction) SLIDE 10#12KHUTALA Khutala Discovery/history Reserves • . Resources • • Mining • Commenced production in 1984 47Mt; Reserve life: 9 years 1,323Mt Underground bord and pillar Mining right valid until 10 Oct 2041 Saleable coal production (Mt) 10.2 8.9 8.6 8.6 28 SEPTEMBER 2016 KLIPSPRUIT INVESTOR TOUR Domestic HOOKK ΞΙΙΙ ΙΙΙΞ SOUTH 32 SLIDE 11#13KLIPSPRUIT Klipspruit Discovery/history Reserves Resources Commenced production in 2003 • 24.1 Mt; Reserve life: 4 years • 114Mt (excluding resources for Klipspruit expansion) . Mining · 29" KLIPSPRUIT COLLIERY 0 500 1000 1500 2000 metres Single dragline; multi seam open-cut mine with a truck and shovel mini pit Mining right valid until 10 Oct 2041, with renewal right for another 30 years BANKFONTEIN 216 IR Processing • Processed at Phola Processing Plant Products • Export thermal coal Saleable coal production (Mt) 7.8 7.8 7.3 7.2 FY15 FY16 FY17e FY18e 28 SEPTEMBER 2016 KLIPSPRUIT INVESTOR TOUR Export Bankfontein PHOLA PLANT 803 IS PRINSHOF 2 |S Smaldeel LITON 69 IS Kilpspruit South ZONDAGSVLEI 9 IS ANGLO 828 IS 29°03' ΞΙΙΙ ΙΙΙΞ SOUTH 32 KLIPSPRUIT BOUNDARY 5 IS PIT AREAS Coordinate System: WGS84-L029 Klipspruit Colliery JM/BA-11/2014 EMPR WETLANDS 100m BUFFER -26'03" SLIDE 12#14KLIPSPRUIT CURRENT LAYOUT Shovel Mined Out Area Rehabilitation Area Truck & Shovel Main Pit Dragline Area Operation Main Pit Dragline Mined out Area Discard Dump Dragline Operation Mining Offices Train Load out Phola Plant Crusher 28 SEPTEMBER 2016 KLIPSPRUIT INVESTOR TOUR Klipspruit South ΞΙΙΙ ΙΙΙΞ SOUTH32 SLIDE 13#15KLIPSPRUIT PROCESSING 1 Mining Tip CUSTOMER OOOO Primary Crushing Crushing to -250 mm Secondary Crushing Crushing to -100 mm Removal of rocks 2 4 Tertiary Crushing Bivitec Screening Washing Crushing to -50 mm 3 Raw Bypass Middlings Product Stockpile Shipping Export Semi-live PORT 1 Mining and ROM Stockpiles • • Routine analysis from the geological drilling programme Ad-hoc stockpile sampling on as needed basis 2 Crushing Auto-sampling on the crushing line stream conducted ahead of the feed to plant/ blending yard stockpiles 3 Raw Bypass . The fraction of bypassed product auto-sampled on belt as added onto washed middlings 28 SEPTEMBER 2016 KLIPSPRUIT INVESTOR TOUR Railing 4 5 5 Plant Products Export Product ΞΙΙΙ ΙΙΙΞ SOUTH32 Stockpile • Auto-sampled on an as • produced basis for quality control Rail consignments Auto-sampling done as product is reclaimed to silo SLIDE 14#16EIII IIIE SOUTH 32