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ΞΙ IIIE SOUTH 32 14 October 2021 South32 Limited ( Incorporated in Australia under the Corporations Act 2001 ( Cth ) ) ( ACN 093 732 597 ) ASX / LSE / JSE Share Code : S32 ADR : SOUHY ISIN : AU000000S320 south32.net SOUTH32 TO ACQUIRE A 45 % INTEREST IN THE SIERRA GORDA COPPER MINE Conference call at 8:00 am Australian Western Standard Time , details overleaf . 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 $ 1.55B1 ( 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 2022-25² . 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 ) 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 ) 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 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 . " 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 Baal credit ratings , with S & P and Moody's respectively . Registered Office Level 35 108 St Georges Terrace Perth WA 6000 Australia ABN 84 093 732 597 Registered in Australia