Ann: Daily share buy-back notice - Appendix 3E, page-9

ANZ Investing notes two broker reports since SAEC divestment:

South32 Price Target Cut 3% to A$3.10/Share by Macquarie18/05/2021 8:58AM. No story, headline only

South32 Price Target Raised 23% to A$3.25/Share by Morgans20/05/2021 11:21AM. No story, headline only

Goldman Sacs said:

South32 (S32.AX, S32.L): SA Coal sale to complete 1 June, focus to pivot to base metals growth & capital returns; Buy (S32.AX on CL) 17 May 2021 | 10:02PM AEST

S32 has announced that the South Africa Energy Coal (SAEC) divestment to Seriti is now unconditional and is expected to complete on 1 June 2021. SA Energy coal is FCF & NPV negative on our estimates, and represents c. 20% of S32's cost base. We view such a divestment as transformational for S32 and highlight the following positive potential impacts to the company from the sale;

ESG: we estimate it will reduce S32's thermal coal revenue from 12% of group revenue to less than 1%, therefore making S32 more attractive from an ESG perspective

NPV and FCF positive transaction: We value SA Energy coal at -US$889mn when including the US$875mn of rehab provisions (at end Dec 2020).

We forecast the NPV uplift from the sale will be c. US$660mn / 19cps or 6% post the US$230mn vendor support package (rehab and working capital facilities) being provided to Seriti,

Increased capital returns: The removal of US$660mn of net liabilities will strengthen S32's balance sheet and allow an increase in capital returns in our view. S32 had US$517mn of net cash at end of March and S32 has previously stated that their ideal net debt position is US$250mn.

We think the coal divestment could unlock up to US$1bn (c. A30cps) of capital that could potentially be returned to shareholders over the next few years through extending the current US$169mn (end of March balance) share buyback program and via special dividends.

(4) Base metals growth now the focus: The Pre-feasibility Study (PFS) on the Hermosa zinc/silver/lead projects in Arizona is due in early July. We value Hermosa at US$1.1bn and assume first production in FY25, with the asset increasing S32's EBITDA by c. 10% or c. US$500mn p.a. at full production.

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Well, at last someone else has an opinion about Hermosa first production! I stuck up 6+ years, GS thinks FY 25, or <4 years.

OK

Ash