South32 to acquire a 45% interest in the Sierra Gorda Copper Mine
(Incorporated in Australia under the Corporations Act 2001 (Cth))
(ACN 093 732 597)
ASX / LSE / JSE Share Code: S32 ADR: SOUHY
14 October 2021
SOUTH32 TO ACQUIRE A 45% INTEREST IN THE SIERRA GORDA COPPER MINE
South32 Limited (ASX, LSE, JSE: S32; ADR: SOUHY) (South32) is pleased to announce that it has
entered into two binding conditional agreements with Sumitomo Metal Mining (TYO: 5713) and
Sumitomo Corporation (TYO: 8053) (collectively Sumitomo) to acquire a 45% interest in the
Sierra Gorda copper mine in Chile (Sierra Gorda) via the acquisition of a 45% indirect interest
in Sierra Gorda S.C.M. (SGSCM) for an upfront cash consideration of US$1.55B(note 1) (Transaction).
South32 has also agreed to provide Sumitomo with a contingent price-linked consideration of up to
US$500M, payable at threshold copper production rates and prices in the years 2022-25(note 2).
Sierra Gorda is an operating mine in the prolific Antofagasta copper mining region, which is
expected to produce 180kt of copper, 5kt of molybdenum, 54koz of gold and 1.6Moz of silver in
2021 (100% basis)(note 3). The acquisition provides South32 with joint control alongside 55% joint
venture partner KGHM Polska Miedz (KGHM), a global miner listed in Poland.
• The Transaction is expected to be immediately earnings accretive, with the upfront
purchase consideration benchmarking favourably to historical investment, production and
valuation multiples (3.3x FY21 Underlying EBITDA)(note 4).
• Funding will be via a combination of cash on hand and an underwritten US$1B acquisition
debt facility that will maintain our balance sheet strength and flexibility. The Group’s
unaudited net cash balance at the end of September 2021 was US$660M.
• We expect to use our current strong cash generation to minimise acquisition debt facility
utilisation, replacing it with long-term funding following completion, with the intention of
maintaining our investment grade credit rating through the cycle(note 5).
• We will continue our flexible execution approach with regards to the remaining US$231M
capital management program balance.
South32 Chief Executive Officer, Graham Kerr said ‘We are actively reshaping our portfolio for a
low carbon world and the acquisition of an interest in Sierra Gorda will increase our exposure to
the commodities important to that transition. Copper is a critical metal in the decarbonisation of
the world’s energy networks and has strong long-term market fundamentals.
“Adding Sierra Gorda further improves our portfolio and is expected to immediately lift Group
margins and earnings, supporting future shareholder returns while retaining strength and
flexibility in our Balance Sheet.
“The transaction expands our operating and development presence in the Americas and
provides exposure to a long-life asset with a large resource base. The operation has existing
opportunities to unlock further upside through improved production efficiency, resource
expansion and exploration.
“Through our extensive due diligence of the opportunity over the past nine months, we believe
we have identified an operation that is benefitting from significant historical investment and
current, capital efficient de-bottlenecking work. The operation is serviced by excellent infrastructure,
including access to renewable power and seawater for processing. Looking ahead we see an opportunity for
continued strong performance at Sierra Gorda with our new partner, KGHM, that can deliver
substantial value to South32’s shareholders.”
Sumitomo has agreed to provide South32 with a tax indemnity in relation to potential changes in
the Chilean in-country tax regime as it pertains to SGSCM up to an agreed cap.
The Transaction is subject to the waiver or non-exercise of pre-emption rights held by KGHM
under the Joint Venture Agreement. If KGHM exercises its pre-emption rights then the Transaction will not
proceed and Sumitomo will instead dispose of the 45% interest to KGHM on the same terms and
conditions as the agreement with South32. There will be minimal fees payable by South32 on
the acquisition debt facility in this scenario.
Completion of the Transaction is expected around the end of calendar year 2021, subject to
conditions including competition and regulatory approvals, for which South32 has agreed to a
break fee payable in limited circumstances.
Sierra Gorda overview
Sierra Gorda is a conventional open pit mine located in the Antofagasta region, at relatively low
altitude (1,700m above sea level) in northern Chile. The mine commenced construction in 2011, ahead of
commissioning in 2014. The operation benefits from high quality, modern processing
equipment, with historical capital investment to CY20 of ~US$5B (100% basis). It is serviced by
established infrastructure, including renewable power and a seawater pipeline, with freight rail
and a national highway connecting the operation to the ports of Antofagasta and Angamos.
Sierra Gorda is a large scale operation, with a copper-molybdenum-gold sulphide mineral
reserve(note 6) of more than 1 billion tonnes, and a mine life of more than 20 years(note 7). The scale and
costs of the operation benchmark favourably with other top Chilean mines of similar scale with
the operation on-track to produce copper equivalent production of 214kt in CY21e(note 8) at Operating
unit costs of ~US$1.29/lb(note 9).
There are a range of growth and improvement opportunities available to Sierra Gorda, including
the capital efficient de-bottlenecking project that is underway to lift plant throughput by ~6% to
~50Mtpa and copper recoveries by ~2% to 85% in the medium term(note 10). A feasibility study is
underway for a brownfield Oxide Project which is assessing the opportunity to process material
stockpiled at the mine(note 11). Potential exists for further exploration upside at the Pampa Lina
deposit and across the regional land package.
KGHM is a Polish multinational corporation that employs around 34,000 people around the
world and has been a major copper and silver producer for more than 50 years. KGHM has eight
mines located in Poland, Canada, the USA and Chile and is actively advancing a further four projects.
1 Subject to customary working capital and net debt adjustments.
2 50% of incremental revenue realised above the following copper price thresholds, only where payable copper production
exceeds the agreed thresholds: CY22: US$4.10/lb and 158kt Cu, CY23: US$3.90/lb and 151kt Cu, CY24: US$3.85/lb and 166kt
Cu, CY25: US$3.80/lb and 158kt Cu.
3 Refer to production guidance and production target as outlined in “Foreign Estimates – clarifying statements as required
by ASX Listing Rule 5.12” in this announcement. Key facts and material assumptions to support the reasonable basis for
disclosing production targets and forecast financial information is provided in Annexure B of this announcement.
4 Upfront Enterprise Value (EV) refers to the upfront bid EV of US$1.7B, which comprises US$1.55B upfront purchase
consideration and target net debt of ~US$150M.
5 We expect to maintain our current BBB+ and Baa1 credit ratings, with S&P and Moody’s respectively.
6 Prepared in accordance with NI 43-101 and the Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Standards.
7 Refer to “Foreign Estimates – clarifying statements as required by ASX Listing Rule 5.12” in this announcement.
8 Recovered metal in CuEq terms is calculated using the total revenue divided by the Cu price. Average metallurgical
recovery assumptions are 83% for Cu, 57% for Molybdenum and 53% for gold. The prices used are Sierra Gorda’s CY20 realised prices excluding the
impact of treatment and refining charges.
9 Operating unit cost is Revenue less Underlying EBITDA, excluding third party sales and TCRCs, divided by sales volumes.
10 Medium term target is expected average CY22 to CY26.
11 Stockpiled ore referred to in this announcement is unclassified and South32 cannot confirm whether the estimate has
been compiled using an appropriate foreign reporting code.
UBS AG is acting as financial adviser and Herbert Smith Freehills as legal adviser to South32.
Cariola Díez Pérez-Cotapos is acting as Chilean legal adviser to South32.
South32 is a globally diversified mining and metals company. 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
produce bauxite, alumina, aluminium, metallurgical coal, manganese, nickel, silver, lead and zinc
at our operations in Australia, Southern Africa and South America. With a focus on growing our
base metals exposure, we also have two development options in North America and several
partnerships with junior explorers around the world.
Alex Volante Tom Gallop
T +61 8 9324 9029 T +61 8 9324 9030
M +61 403 328 408 M +61 439 353 948
E Alex.Volante@south32.net E Tom.Gallop@south32.net
Miles Godfrey Jenny White
M +61 415 325 906 T +44 20 7798 1773
E Miles.Godfrey@south32.net M +44 7900 046 758
Further information on South32 can be found at www.south32.net.
This announcement contains inside information.
Approved for release by Graham Kerr, Chief Executive Officer
JSE Sponsor: UBS South Africa (Pty) Ltd
14 October 2021
This release 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 release,
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 release. Readers are cautioned not to put undue reliance on forward-looking
statements. Except as required by applicable laws or regulations, the South32 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. South32 cautions against reliance on any forward looking statements or guidance,
particularly in light of the current economic climate and the significant volatility, uncertainty and
disruption arising in connection with COVID-19.
Foreign Estimates – clarifying statements as required by ASX Listing Rule 5.12
The estimates of mineral resource and mineral reserve for Sierra Gorda Cu-Mo-Au deposit are
qualifying foreign estimates under the ASX Listing Rules and stated by KGHM as being classified
in accordance with National Instrument 43-101 and CIM Standard for Disclosure (NI 43-101) as
at 31 December 2014 and published by KGHM Polska Miedz on their website on 25 June 2015
(https://kghm.com/sites/kghm2014/files/mrmr_english.pdf). The mineral resource estimates
are reported inclusive of mineral reserves. These qualifying foreign estimates have not been
updated since 1 January 2015. South32 is representing the mineral resource and mineral reserve
estimates on a 100% basis and in million tonnes for tonnage whereas information on mineral
resource and mineral reserve published by KGHM Polska Miedz on their website on 25 June
2015 are presented on a 55% basis and in kilo tonnes for tonnage. South32 Competent Persons
converted the mineral resource and mineral reserve estimate to a 100% basis and in million
tonnes by dividing the tonnage by 550 in discussion with the SGSCM Technical Team. In
discussion with SGSCM Technical Team, contained metals were also converted using factors
provided in footnote c) of Table 2. South32 confirms that no additional estimation or
assumptions were considered in the tonnage conversion to represent the estimates on a 100%
basis. Production depletion to date would likely result in approximately 18% reduction in the
reported mineral resource and approximately 20% reduction in the reported mineral reserve for
sulphide ore. In addition, approximately 110Mt of oxide mineral reserves have been stockpiled
The categories of mineral resource classification used are in accordance with NI 43-101 and the
CIM Standards. NI 43-101 is a ‘qualifying foreign estimate’ (Chapter 19, ASX Listing Rules) and
has similar categories of resource classification as the JORC Code (Appendix 5A, ASX Listing Rules).
Similarly, the categories used for Ore Reserve classification is similar as the JORC Code but is named
differently. Ore Reserve is referred as mineral reserve, Proved Ore Reserve is referred as proven
mineral reserve and Probable Ore Reserve is referred as probable mineral reserve under NI 43-
101. In accordance with NI 43-101 and CIM Standards, mineral resources are not mineral
reserves and do not have demonstrated economic viability. There is no certainty that all or any
part of mineral resources will be converted to mineral reserves. Additional drilling may be
required to verify geological and mineralisation continuity, and there is no certainty that all the
inferred resource will be converted to measured and indicated resource. Quantity and grades
are estimates and are rounded to reflect that the estimates are an approximation.
South32 considers these estimates to be both material and relevant to South32 given that Sierra
Gorda has the potential to be a material mining project to South32.
Reliability of estimate: The estimates of mineral resources and mineral reserves were reported
in accordance with NI 43-101 in the technical report “Mineral Resources and Mineral Reserves
Report” dated 25 June 2015. South32’s key technical and operational personnel conducted site
visits as part of the due diligence process. South32 has been provided information on mining and
processing parameters and operational performance to date.
Sierra Gorda is an operating mine and infrastructure is in place to run the mine in its stated
capacity. All legislative approvals are in place to enable extraction of the stated mineral reserves.
To the extent known, the mineral resource estimate was completed using 1,352 drill holes and
the mineral reserves were estimated assuming an open pit mine with conventional sulphide
flotation facility to produce copper and molybdenum concentrates.
South32 is not in possession of any new information or data relating to the foreign estimate that
materially impacts on the reliability of the estimates. The assessment of reliability using criteria
in Table 1 of Appendix 5A (JORC Code) is provided in Annexure A of this announcement.
This announcement contains information in relation to the Sierra Gorda deposit, financial
forecasts and assumptions as provided to South32 by Sumitomo Metal Mining Co. Ltd and
Sumitomo Corporation, as part of our due diligence with respect to the Transaction. All material
assumptions (including economic) upon which this information and financial forecasts are based
are contained in this market announcement.
Following completion of the Transaction, it is South32’s intention to conduct a work program to
report resources in accordance with the JORC Code. Additionally, a resource optimisation study
will be conducted to convert the Mineral Resources to Ore Reserves and report Ore Reserves in
accordance with the JORC Code (2012). The work program is anticipated to be completed within
three years and will be funded using internal cash reserves.
• The estimates of mineral resources and mineral reserves for Sierra Gorda are
qualifying foreign estimates under the ASX Listing Rules and are not reported in
accordance with the JORC Code.
• Competent Persons have not done sufficient work to classify the qualifying foreign
estimates as Mineral Resources and Ore Reserves in accordance with the JORC Code.
• It is uncertain, that following evaluation, the foreign estimates will be able to be
reported as Mineral Resources or Ore Reserves in accordance with the JORC Code.
Competent Persons’ statements
In accordance with ASX listing rule 5.12, Matthew Readford, a Competent Person, employee of
South32 and Member (Chartered Professional) of the Australasian Institute of Mining and
Metallurgy, confirms the information in this market announcement that relates to the Sierra
Gorda NI 43-101 mineral resource foreign estimate published by KGHM Polska Miedz on their
website on 25 June 2015 is an accurate representation of the available data and studies for
Sierra Gorda Mine provided to South32 by Sumitomo Metal Mining Co. Ltd and Sumitomo
Corporation, Joint Venture owners of Sierra Gorda S.C.M. Matthew Readford has sufficient
experience that is relevant to the style of mineralisation and type of deposit under consideration
and to the activity being undertaken to qualify as a competent person for the reporting of
Mineral Resources in accordance with the Australasian Code for Reporting of Exploration
Results, Mineral Resources and Ore Reserves (The JORC Code). Mr Readford consents to the inclusion
in the report of the matters based on their information in the form and context in which it appears.
In accordance with ASX listing rule 5.12, Quinton de Klerk, a Competent Person, employee of
Cube Consulting Pty Ltd and Fellow of the Australasian Institute of Mining and Metallurgy,
confirms the information in this market announcement that relates to the Sierra Gorda NI 43-
101 mineral reserve foreign estimate published by KGHM Polska Miedz on their public website on
25 June 2015 is an accurate representation of the available data and studies for Sierra Gorda Mine
provided to South32 by Sumitomo Metal Mining Co. Ltd and Sumitomo Corporation, Joint Venture owners
of Sierra Gorda S.C.M. Quinton de Klerk has sufficient experience that is relevant to the style of
mineralisation and type of deposit under consideration and the activity being undertaken to qualify
as competent person for the reporting of Ore Reserves in accordance with the Australasian Code for
Reporting of Exploration Results, Mineral Resources and Ore Reserves (The JORC Code). Mr de Klerk
consents to the inclusion in the report of the matters based on their information in the form and
context in which it appears.
Table 1: mineral resource and mineral reserve as at 31 December 2014 (55% basis)(note (a))
Mineral resource Contained metal
Type Classification Cu(%) Au Mo(%) Cu(t) Au(kg) Mo(t)
Sulphide Measured 200,503 0.41 0.07 0.03 818,053 13,835 58,146
Indicated 683,135 0.40 0.06 0.02 2,712,045 40,305 129,796
indicated 883,638 0.40 0.06 0.02 3,530,098 54,140 187,942
Inferred 46,036 0.35 0.04 0.01 161,127 1,749 2,762
resource 929,674 0.40 0.06 0.02 3,691,225 55,889 190,704
Oxide Measured 13,241 0.38 50,579
Indicated 39,052 0.33 129,262
indicated 52,292 0.34 179,841
Inferred 540 0.26 1,403
Total mineral 52,833 0.34 181,244
Mineral reserve Contained metal
Type Classification Tonnes Cu (%) Au Mo(%) Cu(t) Au(kg) Mo(t)
Sulphide Proven 189,135 0.41 0.07 0.03 775,454 13,239 56,741
Probable 610,669 0.40 0.06 0.02 2,442,674 36,640 122,134
Total mineral reserve 799,804 0.40 0.06 0.02 3,218,128 49,879 178,875
Oxide Proven 12,884 0.38 49,300
Probable 37,378 0.33 124,307
Total mineral reserve 50,263 0.35 173,607
Stockpiled ore 24,687 0.33 81,009
a) The mineral resource and mineral reserve estimates represent the 55% ownership of KGHM as a proportion of the
actual total mineral resource and mineral reserve estimates. Tables may not add due to rounding.
Table 2: mineral resource and mineral reserve as at 31 December 2014 (100% basis)(note)(a))
Mineral resource Contained metal(note)(c))
Type Classification Tonnes Cu(%) Au(g/t) Mo(%) Cu(Mt) Au(t) Mo(kt)
Sulphide Measured 365 0.41 0.07 0.03 1.49 25.2 105.7
Indicated 1,242 0.40 0.06 0.02 4.93 73.3 236.0
indicated 1,607 0.40 0.06 0.02 6.42 98.4 341.7
Inferred 84 0.35 0.04 0.01 0.29 3.2 5.0
resource 1,690 0.40 0.06 0.02 6.71 101.6 346.7
Oxide Measured 24 0.38 0.09
Indicated 71 0.33 0.24
indicated 95 0.34 0.33
Inferred 1 0.26 0.00
resource 96 0.34 0.33
Mineral reserve Contained metal(c)
Type Classification Tonnes Cu (%) Au(g/t) Mo(%) Cu(Mt) Au(t) Mo(kt)
Sulphide Proven 344 0.41 0.07 0.03 1.41 24.1 103.2
Probable 1,110 0.40 0.06 0.02 4.44 66.6 222.1
Total mineral reserve 1,454 0.40 0.06 0.02 5.85 90.7 325.2
Oxide Proven 23 0.38 0.09
Probable 68 0.33 0.23
Total mineral reserve 91 0.35 0.32
Stockpiled ore(note(b)) 45 0.33 0.15
a) Tables may not add due to rounding.
b) Stockpiled ore referred to in this announcement is unclassified and South32 cannot confirm whether the estimate has
been compiled using an appropriate foreign reporting code.
c) The contained metals were converted using the following: Cu(t) to Cu(Mt) – Dividing by 0.55 million; Au (kg) to Au(t) –
Dividing by 550; and Mo(t) to Mo(kt) – Dividing by 550.
The following document has today been submitted to the National Storage Mechanism and will
shortly be available for inspection at
• South32 Limited – South32 to acquire a 45% interest in the Sierra Gorda Copper Mine –
Annexures A and B
Date: 14-10-2021 08:20:00
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