South32 Limited (S32) Earnings Call Transcript

[Presentation] Welcome, everyone, and thank you for joining us today in person and online. My name is Stephen Pearce, and it's my great privilege to Chair South32 Annual General Meeting for the first time. I'd like to start by acknowledging the traditional owners of the land on which we meet the Whadjuk people of the Nunga nation, and pay my respect to elders, past and present. I also acknowledge and pay my respects to the other indigenous traditional and tribal peoples of the land where South32 is located and where we conduct our business around the world. In the spirit of respect and reconciliation, we will continue to support initiatives that strengthen culture and the ways of life of indigenous, traditional and tribal people so that their legacy continues and extends to future generations. I'd now like to ask Barry Winmar to come forward to offer a welcome to country.

[Foreign Language] I'll begin by acknowledging my oldest past and present. Also acknowledge today we stand on my ancestral land. This is the land of the Whadjuk Noongar people. I represent a civilization with the longest continuous connection to this place for some 65,000 years. I represent elders and leaders and I welcome visitors to the sacred lands for more than 3,000 generations. I welcome the country's assign on mutual respect. I acknowledge and pay more respect to South32 for including a welcome to country as part of today's Annual General Meeting. We also like to acknowledge First Nations people that are with us here in the room and also the care of the land and relationships with the First Nations peoples on the lands on which South32 operates. [Foreign Language] From the beginning of time until the end, this Noongar country. Noongar people have been grateful keepers of our nation for many, many years. [Foreign Language] We respect the earth mother and understand we belong to her. She does not belong to us. It all her beauty, we find comfort. And she becomes a place for everyone to become keepers of Noongar country. [Foreign Language] We ask that you look, listen, understand and embrace all the alumina country, this is forever our home. Well, good morning, ladies and gentlemen. It's now my privilege to be here today on the land of more people, Whadjuk Noongar people. This is my grandmother's country, and it's not to be here today. I started with Warren on the digit redo to awaken the spirits of my ancestor the sound to reverberate through this ground to awaken them that they're visitors here today. And those that have traveled and those that live here for the good spirits to watch over each and every one of you where you're at this place because this is a safe place today. And so also to ensure once your business is completed, there is a safe passage back to your homelands and the arms of the families of your loved ones. In Noogar culture, we talk about the challenges that we have faced. We know that the challenges of yesterday we try and solve those problems today because there will be more challenges tomorrow. And South32 has a transformational change in the last 12 months with a change of leadership. And we look to the future, just as Noongar people do, but we stand together all as Australians, and we look to this as we watch a Sunrise comes over those hills, shines on this beautiful Whadjuk Noongar country. And rest on our golden Shores. We know the challenges are coming, but we know if we stand United as Australians, all of the one people looking after this country in this wonderful country and the lands in which we work and operate and care for the people that are most importantly to our business, we know that we will get through. So with the responsibility to state upon me running our elders and leaders, I welcome everybody here today, and I say to you, [Foreign Language]. Hello and welcome. My heart is happy as we gathered here this morning. Welcome, everybody.

Thank you, Barry. I really do love the sound of the digit we do, and I really admire the skills in being able to play that as well skills, I don't have. Listen, we're really grateful that you are with us here today on the banks of the durable again or the Swan River. So thank you again very much. Appreciate it. I'm joining you today along with Matt Daley, who was appointed our Chief Executive Officer and Managing Director on the 1st of July and Claire Tolcon, our Company Secretary. Joining me on stage from my far right that way Directors is Jane Nelson. Welcome, Jane. Geoff Healy along Lu. Wayne Osborn and Claire, I've introduced and from the far end on my left is Mandlesilo Msimang, welcome. Sinead Kaufman, Carlos Meseda Sharon Warberton and, of course, Matt. So thank you all for joining us today. Members of South32's lead team are also attending today either in person or remotely. And also joining us, Jane Bailey from KPMG, the company's auditor; and Chris Dedrick from Computershare Investor Services, who's been appointed as returning officer and scrutineer of the poll. I confirm that a quorum is present and formally declare the meeting open. I'll just now ask Claire to run through some of the procedural matters.

Thank you, Stephen. Today's AGM is being conducted as a hybrid meeting, enabling shareholders, proxy holders and guests to attend in person or online. For those joining us in person, please take note of the emergency exits, and the evacuation information displayed on screen. If you would like to ask a question, when prompted, please raise your hand and introduce yourself to 1 of our microphone attendants. Please retain your voting card until you're asked to complete and submit it towards the end of the meeting. For those joining us online, if an emergency occurs in the room, please remain connected. An update will be provided through the online platform. You may submit a written question using the Q&A icon on your screen. You may also ask a verbal question using the dial-in facility, details of which are available within the platform. Eligible shareholders may cast their votes using the vote icon until voting closes. Questions received in advance of the meeting will be read by our moderator, Mark Worthington. If multiple questions are received on the same topic, we may group them together and provide a single response. If we experience a technological failure that prevents shareholders from having a reasonable opportunity to participate updates will be provided on South32's website and the relevant stock exchanges. I want to hand you back to Stephen. .

Many thanks, Claire. Much appreciate it. As stated in the notice of meeting, all resolutions will be decided today by poll, and I now declare the voting open, so you may begin recording your vote. The proxy position on each item of business, together with the Chairs and CEO addresses, has been released to the ASX before the commencement of this AGM. We'll also display the proxy position on each resolution before inviting questions on that resolution. I'll now do the Chair's address. So this year has been a significant change -- has seen significant change at South32. Before last year's AGM, it was announced that Karen Wood would retire from the Board. That was after 8 years as a Non-Executive Director. including 7 as Chair. During that time, we were fortunate to benefit from Karen's knowledge, strong governance principles and purpose-driven approach. As Chair, she worked with our Board and management team to reposition South 32 and capitalize on the increasing global demand for base metals. I'd like to acknowledge Karen for her major contribution to our business. Karen retired on the 1st of March, and I then worked with our inaugural CEO, Graham Kerr, to oversee the final stages of the CEO transition process, which led to Matt being appointed to the role. I also congratulate Graham on his outstanding contribution to South32 over the past 11 years. He was instrumental in defining our purpose and strategy. He established a values-based and safety-focused culture, and he was a driving force in reshaping our portfolio with a disciplined approach to capital management. The South32 we are today is in large part because of Graham's vision. He set up a strong foundation for our future success. I welcome Matt to his first AGM and we'll hear from Matt shortly. Matt is a highly accomplished executive who brings extensive operational and leadership experience to South32. He joined our company in February initially as Deputy CEO, where he oversaw our Australian and African operations. Since then, he spent time on our sites and engaged with many of our stakeholders. He has a clear plan to take our business forward, centered on delivering safe and reliable operations and continuing to grow our production of base metals. I know he's looking forward to meeting more of you after the meeting. In March this year, not long after joining South32, Matt traveled to Worsley Aluminum after Simon was fatally injured at the refinery. Simon was undertaking a plant maintenance activity with his work crew when the incident occurred. On behalf of the Board, I want to express our heartfelt sympathies to Simon's family and friends and to the people at Worsley, who were deeply affected by his passing. The Board actively engaged with management on our response, and Matt will provide more details on this shortly. You'll also notice some other new faces up here today. At last year's AGM, we said farewell to 2 of our inaugural directors, Frank Cooper and FudiMintoba, who retired that day. Since then, as part of our Board process, we've welcomed 2 new independent nonexecutive directors, Geoff Healy in December; and Sinead Kaufman in April. Jeff has more than 3 decades of experience within professional services and Natural Resources Industries, while Sinead has 30 years international experience in the resources sector. They both bring a range of skills and are contributing significant value to the Board. As well as leadership change this year has also seen the announcement of transformational change for our portfolio. On 30th of June, we entered into a binding conditional agreement to sell our aluminum value chain assets to Alcoa for up to USD 5.6 billion. As part of that transaction, Alcoa will acquire South32's interest in Worsley Alumina, Hillside Aluminium, MRN bauxite mine, the Brazil Alumina refinery in the Brazil aluminum smelter. The transaction is expected to complete in the second half of FY '27, subject to the labor and satisfaction of relevant conditions, and it is, of course, subject to shareholder approval later in this meeting. Matt will talk more to what it means for our portfolio going forward. What I will say now is that this transaction is transformational for South32 A step change that repositions us as an upstream base metals company with high-margin assets and transformational growth. And it will provide us with additional balance sheet flexibility to invest in our next phase of growth while delivering shareholder returns. The sale of our aluminum value chain assets will materially change our emissions profile, energy use and exposure to certain climate-related risks and opportunities. While Hillside and Worsley account for more than 95% of our operational emissions in FY '26, the transaction will also have implications for our climate change action plan in our target to halve net operational emissions by financial year 35 from FY '21 levels. We're already reviewing what this means for our climate change approach, including our FY '35 target. Decarbonization pathways, key assumptions, planned initiatives and measures we use to track progress. We'll update shareholders on the outcome of this work and reflect on any resulting change in future reporting. Visiting our operations and offices is a highlight for the Board, it gives us a chance to witness our business in action assess our workplace culture around the world and crucially see how our people approach safety. In December, the Board was delighted to visit our Hermosa project in Arizona. Hermosa has the potential to become a significant long-term producer of critical minerals across multiple deposits. Will there -- well there we also attended community engagement event at Nogales where our remote operations facility is being built. And we learned more about the social and economic benefits this project expected to support in the region. In February, we held a Board program at office in Johannesburg in South Africa. We also traveled to the town of Matan to see the enduring benefits of our social investment initiatives. We tooled a clinic, which offers preventative health care, a primary school, which reports children and young adults living with mild intellectual difficulties and a center which provides protection and support for vulnerable children. This commitment to community is a great example of social investment that aligns with our purpose of making a difference by improving people's lives now and for generations to come. Across our global operations, we understand our important role in responsibly operating our assets and making a meaningful economic and social contribution to the communities in which we operate. We were proud to invest USD 23 million on social investment initiatives during this year. At the same time, we know our activities can have adverse impact and we seek to minimize those through the implementation of our sustainability policy. This sets out our commitment to continuously improve performance, optimize our positive contributions and mitigate adverse impacts. FY '26 or a continuation of global geopolitical instability and economic volatility across markets. We tackle the effects of disruptions to supply chains inflationary pressures and ongoing trade tariff announcements. Against this backdrop, we recorded a strong operating performance. We returned USD 327 million to our shareholders during the year. This included $292 million in fully franked ordinary dividends and $35 million via our on-market share buyback. This reflected our strong financial performance and disciplined approach to capital allocation. In February, the Board increased our capital management program by USD 100 million, taking it to $2.6 billion. In this new financial year, we approved a further extension of the program to September next year with USD 209 million remaining to be returned to shareholders. In closing, I'd like to reiterate how honored I am to be the Chair of South32 at this time of our transformation, and I'm excited about what lies ahead for the company. The Board's focus now is working with Matt and his leadership team on our key strategic priorities. This includes completing the sale of our aluminum value chain assets, progressing our Hermosa project and continuing to grow our exposure to base metals. Of course, we cannot do that without support of our investors, and we thank you for that, and I look forward to continued engagement with you. I'd also like to thank our people around the world for their hard work, commitment to safety and focus on delivering our purpose and strategy. I'll now hand over to Matt.

Thank you, Stephen. I'd also like to acknowledge the Wudjack people of the Noongar nation and pay my respects to the elders past, present and emerging. So thank you, everyone, for joining us today. It's a real honor to speak to you at my first AGM as the South32 CEO. Since joining the company in February, I've had the chance to visit our operations, meet many of our employees, stakeholders and investors around the world. As Stephen mentioned, it's been a year of significant change for South32, where we've taken steps to simplify our business, strengthen our financial position and advance the growth opportunities that will define our future. Now the most important measure of the success of our company is the safety of our people. And by that measure, we've not achieved the standards we expect of ourselves this year. In March, as Stephen mentioned, our colleague Simon Mokami was fatally injured at an incident at Worsley alumina. On behalf of everyone at South32, I extend my deepest condolences to Simon's family friends and colleagues. I visited Worsley shortly after the incident to support the team and gain an understanding of what happened. We've worked with authorities to reinforce how we manage working at heights risks at Worsley including through our existing controls, permits and risk management processes. More broadly, we'll continue to look across the entire group for opportunities to design work differently, to eliminate or reduce working in heights risks where feasible. Now during the year, we did see improvements in our trends in key leading and lagging indicators, including our significant hazardous frequency rate, which increased by 25%. Our lost time injury frequency, which improved by 29% and our total recordable injury frequency, which improved by 8%. Now this shows we are getting better at identifying hazards and putting controls in place to prevent incidents and the number of injuries we're having is reducing. But these statistics don't change the fact the person did not return home to their loved ones, and we will never lose sight of that fact. As CEO, I'm unwavering in my commitment to a workplace free from fatalities and that commitment must guide every decision that we take at the company. Now FY '26 was a real pivotal year for our business, where the portfolio continued to evolve. In December, we completed the divestment of Cerro Matoso. And in March, Mozal Aluminum was placed in care and maintenance after not being able to secure sufficient and affordable long-term power supply. As Stephen mentioned, in July, we announced the next step in the transformation of our business with the agreement to sell the aluminum value chain assets to Alcoa. Consistent with our strategy, the sale repositioned South32 as the leading base metals company listed on the ASX and allows us to realize the value that comes from combining our alumina operations with Alcoa's in Western Australia. Now for South32, it will unlock significant value for our shareholders. Once completed, will be a simpler business, focused on high-margin base metals assets in Tier 1 jurisdictions with a clear pathway to substantial growth in copper and zinc. We'll have the balance sheet strength, the financial flexibility to fund that growth while continuing to deliver shareholder returns. Now with a more focused portfolio, we're creating more value through a simpler asset-led operating model. This means putting accountability and decision-making closer to the ore body to make decisions quicker and deliver safe, consistent operating performance. Over time, we expect these changes to lower our overheads by around USD 125 million which will further strengthen our competitiveness and ability to invest in growth. When we talk about our pathway to transformational growth, the first component comes from near-term embedded growth in copper and zinc. Two commodities with attractive fundamentals. We have high-margin assets that can grow production from projects already in construction by 55%. Now a large part of that will come from Hermosa's large-scale, long-life zinc-led silver Taylor project. Earlier this year, an assessment of Taylor's project milestones confirmed its potential to deliver attractive returns, and we expect its operating life to increase by 5 years now to 33 years. Our growth capital expenditure was updated to around USD 3.3 billion, and first production is now expected in the second half of FY '28. Taylor will also support future growth phases at Hermosa, including the peak deposit where exploration work is continuing to support the potential for a future copper production. Hermosa also has a highly prospective land package, where more than 15 prospects have been identified for future drill testing. Now alongside Hermosa, there's near-term copper growth at Sierra Gorda, where construction has now commenced on the fourth grinding line, which is expected to increase copper equivalent production by around 30% by 2031. In the meantime at Sierra Gorda, we also anticipate production growth of 5% in FY '27 and a further 2% in FY '28 and supported by higher planned copper grades. Now in addition to this near-term growth, we have substantial work underway across our pipeline of life extension projects and greenfield options. At Cannington, we're investing to extend underground mine life and unlock value from its high-margin silver-rich production. We're also progressing study work for a potential open pit development. Beyond this, we have exciting development opportunities in base metals. In Alaska, Ambler Metals joint venture offers high-grade copper and zinc options. We continue to make progress with some field work now complete and key milestones have been achieved on permitting and access. The Arctic deposit was recently confirmed as covered project under the U.S. government's FAST-41 program building on its support for Ambler Access Road in October 2025, which is an important step towards unlocking the Ambler mining district potential. Now alongside our focus on base metals, we also have a strong position in manganese where our focus is to run these operations safely and reliably. At GenCo, the team continues to manage elevated water levels on site including the approvals and water management infrastructure required to sustain production, and we're looking at low-cost life extension options in the Eastern leases north and the southern areas. Now global markets remain volatile this year, and we continue to manage external factors such as higher freight rates and raw material input costs. Despite this, our base metals business drove strong earnings and cash flow underpinned by disciplined operating performance, enabling us to really capture the benefit of those commodity price tailwinds while actively managing and mitigating the impacts of industry-wide inflationary pressure. Our underlying EBITDA increased by 28% to USD 2.5 billion, and underlying earnings increased by 55% to $1 billion, and we finished the year with net cash of $283 million. This is one of our best ever financial results, which is underpinned by strong performance across our base metals assets. As we enter the next phase of South32, we do so with a really strong business. Now much of this is due to the really strong leadership of our inaugural CEO, Graham Kerr, and I would like to personally thank him for his significant contribution. Going forward, we will have a simplified high-quality portfolio, a strong balance sheet and a clear strategy focused on the metals the world needs. We're advancing attractive growth and life extension opportunities. And combined with our exploration pipeline, we have the potential to deliver growth and returns to our shareholders for decades to come. How we deliver matters just as much as what we deliver, and we remain committed to creating enduring value for our host communities through jobs, opportunities and economic benefits that our operations provide. So in closing, I want to thank our people across the world for their hard work and dedication during this year of significant change. Our future is bright, and I look forward to delivering on our strategy and seeing what we can achieve together. Thank you very much. I'll now hand back to Stephen.

Thank you, Matt. We'll now move to the formal items of business. Each resolution and the accompanying explanatory notes are set out in the Notice of Meeting dated the 10th of September 2026. In addition to consideration of the company's reports, the business before the meeting comprises 8 ordinary resolutions and 1 special resolution. A further conditional ordinary resolution set out in item 8 of the notice of meeting will not be put to the meeting. Based on the proxy votes received and released to the ASX prior to the meeting, together with the votes available to be cast at the meeting today, less than 25% of votes will be less than 25% of votes will be cast against the resolution 4 to adopt the 2026 remuneration report. As a result, the company will not receive a second strike and the resolution contained in Item 8 is not needed to be considered by shareholders. Other than in respect of resolutions in which they have a personal interest, the directors recommend that shareholders vote in favor of resolutions 2 to 6 inclusive. The directors unanimously recommend that shareholders vote in favor of Resolution 7 in the absence of a superior proposal and subject to the independent expert maintaining its conclusion that the proposed disposal is in the best interest of shareholders. I intend to vote all available undirected proxies I hold as Chair in accordance with the Board's recommendations. We will work through each resolution in order, display the summary of proxies received and invite questions on each of them. The first item of business is to receive and consider the financial report, directors' report, sustainability report and auditor's report for the financial year ended 30 June 2026, as set out in the company's 2026 annual report. It's a mouthful. Shareholders are not required to vote on these reports, they are tabled for discussion. As mentioned earlier, Jane Bailey from KPMG is with us and available to answer questions relating to the conduct of the audit and the auditor's report, including relevant questions concerning the audit and assurance work relating to the sustainability report. Before inviting questions or comments on the report, I would like to address any questions submitted by the shareholders before the meeting. Mark, could you please read any relevant request with any relevant questions received in advance of the meeting.

Chair, the first question is from Mr. Kevin Sales when can I expect the dividend reinvestment plan to start ?

Thank you, Mr. Samal for your question. South32 doesn't currently have the dividend reinvestment plan as we don't feel it necessary to increase shares on issue. I understand that Computershare has a facility called reinvest that shareholders can access via their website if they make the decision to reinvest their dividends, so absolutely their decision to do so or you could buy shares on market in the normal way. So I'd encourage you to have a look at their website. Thank you.

The next question is from Ms. Pauline Clark. What is the strategy to diversify for trade disruptions? .

Yes. Thank you, Mr. Clark. It's a very topical subject at the moment and probably part of a broader risk assessment that we look at, at the Board and management point of view in terms of business continuity and potential disruptions and it does form part of our material risks that we discussed in the annual report. We really tailor our approach depending on the risk that we see. Where possible, we established long-term relationships with key suppliers, particularly if they're global suppliers, and they can supply us long term around the globe where our operations sit. If that's not possible, then we'll look at specific circumstances and sometimes we'll try to split the supply between a couple of suppliers so that we can manage the risk of supply disruption. That's the main way that we look at trying to manage that sort of risk.

The next question is also from Mrs. Clarke. How is South32 stress testing its portfolio and capital allocation decisions against prolonged geopolitical instability, shifting tariffs and supply chain disruption and what specific indicators would trigger a change in the strategy.

Yes. Thank you, Mr. Clark. Again, again, very topical. Again, it's probably part of a broader risk that we look at in terms of things that could disrupt the operations but also from a capital management point of view, what really underpins our strategy there is the strength of the balance sheet. And we really do try to set that up. So it can see us through the ups and downs of the commodity cycle. I think that's one thing we are guaranteed as a company in our industry. that things will go up and down over time. So we run sensitivities on that. We look at prolonged downturns, actions that we would take, et cetera. But we also have a quite material undrawn financial facilities that should we need to, we could draw on. But it's also part of the reason we allocate capital often in a 10-year and 20-year time frame. And so we need to set the balance sheet and the company up to see through those ups and downs. And maybe that's why sometimes we're accused of having a conservative balance sheet, but it is for a very, very good reason. Thank you.

The next question is from Mr. David Bros. Copper assets seem to be a metal of the future along with rare earth elements. What assets does South32 have that could be classed as critical metals of the future.

That really has been a major emphasis of our whole strategy of portfolio transformation is to pivot towards those future-facing base and critical minerals. And I think we've been pretty successful to that, obviously, subject to today's vote and completion of the aluminum transaction. Most of the products that we produce are listed as critical minerals in places like the U.S., Australia, EU and Japan. And those countries have identified things right in our sweet spot copper, zinc, lead, silver and manganese in terms of amongst their critical minerals. So we are very, very well placed to produce those metals that the world needs. And also, as Matt spoke about, we have a very exciting future in front of us in terms of the growth that we can deliver as we deliver some of the projects in front of us. Thank you.

The next question is from Mrs. Helen Hasen. When is the company going to reduce the remuneration packages for the senior executives and Board members to no more than 10x the wage of the lowest paid employee or contractor. .

Yes. Thank you. Ms. Hasen. We appreciate it's a sensitive topic, but we need to attract and retain high-caliber leadership team and Board to run the business of South32 and we need to do that in a competitive way. We benchmark our remuneration structures, salaries, et cetera, to make sure that we're competitive. And we don't have any plans at this stage to cap that remuneration in the way that you suggest. We do disclose, however, our pay ratios, they're contained in the sustainability section on our website. So I encourage you to look at that and we intend to keep doing so, but we don't have any plans to cap remuneration.

The next question is from Ms. Natasha Lee. While artificial intelligence has been deployed to improve safety, and I understand that AI cannot eliminate all risks given there was a fatality in the post-event safety review, would AI have assisted to predict or mitigate this risk.

Yes. Matt and I both referenced, it was really a tragic incident down at Worsley, and we're working with authorities to learn whatever lessons we can from that incident and make sure we apply them across the whole organization. It is still subject to ongoing review in investigation. So I'm limited as to what I can say on the specifics. But as a general point, yes, AI can absolutely play a key role in some of our safety initiatives, if it's used well and use sensibly in the operations. We already do some of that and maybe just a couple of examples You can use AI to look at truck movements and compliance with safety protocols. So do the truck stop at stop Science. Are they maintaining the right speed as they're moving, whether it be on open road or in roads around the mine sites. You'd be familiar now with some of the technology in your own modern cars that look at your eyes in terms of tightness and those sort of things. And we adopt all of those things sensibly and where it makes sense to do that. . We absolutely remain open to those sort of initiatives because they can complement some of the policies and practices and just enhance the culture across the organization. So very open to that used properly.

The next question is also from Ms. Lee. It's good that water reuse and recycling has increased significantly, and there has been installation of infrastructure to treat nonpotable water at Hillside Aluminium. Is this type of infrastructure planned to be deployed at other sites? And is it possible that near 100% water recycling or reuse be possible in the near term.

Yes. Water Stewardship is a really important matter for us to manage through. And we have quite detailed policies and procedures and discussions across the organization as to how we do that best. In my experience, I'm yet to find what I would call the Goldilocks mine that has the exact right balance of water in and water out. They are very, very hard to come by. They either have way too much water, not enough order or even if they are broadly balanced over a year, it all comes down in 3 months of the year and his drive for the other 9 months. So it's a very, very difficult thing to manage across large mine sites. Nonetheless, from the center, obviously, we try to establish the policy procedures, the directions, et cetera. A lot of the on-site initiatives really need to be tailored to the site. And the Hillside example that you use is a really good one. where we can retreat, reuse and capture some of that water in our processing facilities. And each of the teams at the local locations look at exactly that sort of initiative as to how we can capture and best use that water. It is a scarce resource. We recognize that across the globe. And so we try to set ourselves up to do the best that we possibly can in that space.

Chair, there are no further pre-submitted questions.

Thank you. I will then turn to the room. Are there any questions or comments from shareholders in the room. I think we have one here on my left.

Chair, introducing Cameron.

Thank you, Chair, Cameron McNeela, just my name. First, well done on maintaining gender parity on the board. I'm particularly pleased to see Ms. Kaufman joined us well. I understand from last year's AGM, there had not been a competitive tender for the independent audit in the 10 years since the demerger from BHP. Have you done or planned for a competitive tender for the audit since last year's AGM?

Yes. We -- every year, we review the performance of the auditors as part of our normal annual reporting processes in cycle. And we do that by the Audit Committee initially, but it's also reported up to the Board. And we also talked to a lot of the senior leadership across the organization to get their feedback. We also get feedback from the auditors as to how we've gone because it is a bit of a 2-way street, and we do want appropriate challenge from the auditors. . You'd be aware, obviously, South32 was formed just over the 10 years ago. And so no, we haven't done a formal tender. We have done a couple of sort of formal reviews and processes across the performance and whether we should, in fact, go to market. So it's only been the 12, 13, years -- what about to 12, 13 years that have been on board. Even if we adopted the new sort of regime that maybe is being talked about and is similar to the U.K. processes, you would come up to mandatory rotation at the 20-year mark. But it is something that we review every single 12-month period, but we haven't planned to do that at this point in time. Thanks for the question. We have another question over there.

Chair introducing John Campbell.

Stephen, thank you very much for your time earlier to have a meeting with us to discuss our concerns and Wayne Osborn, too. Chairman, I'm representing Australian Shareholders' Association. I've got proxies from 460 shareholders about 4.3 million shares significantly less than last year. I'm not sure what we've done.

Because they like what we're doing, John, I'm sure.

Maybe -- and you're right. On Hermosa, I commented last year, the ore grades are lower than Cannington. And in the meantime, you've come up with a cost overruns on the development quite a significant amount. We appreciate this is a very long-running mine that it's going to go well. Your return on invested capital this year of about 13.6%, I think it was. Do you see Hermosa improving on that return on invested capital over time?

Yes, I do, John. I think Hermosa is a really exciting project for us. And yes, I acknowledge we did announce an increase in the capital and a slight increase in the time as well. But if you look at the detail in that announcement, we also announced a significant step-up in reserves and resources and applying anything like today's commodity price is a substantial increase -- so we're really pleased with the project, not pleased with the delay and the cost increase, let me say. But we will going forward, assuming that the Alcoa transaction completes, we will have then a complete portfolio of higher-margin base metals projects. So yes, over time, as that project comes online, I would expect our overall return on capital to improve.

I've got questions on the sale of aluminum, but I expect your question when the resolution comes up.

We will absolutely address questions on that, if you're happy to wait. John, can I just acknowledge why I do have a moment your role in the I know we don't always agree with all of your questions and your points. But the role that you play is a very valuable role. So I'd just like to acknowledge that. And I understand it may be your last appearance at this AGM?

I think so. Yes.

So listen, congratulations for the role you've played in the way you've interacted with the company. It's much appreciated.

It's a pleasure actually. Thank you.

Any other questions in the room on this particular topic, I will come to the other ones lately. Mark, are there any written or online questions that we need to go to.

There are no further questions on this item.

Lovely. Thank you. So we'll move to the next item on Resolution 2 is for the reelection of Dr. Xiaoling Liu as a director of the company. Xiaoling has been an independent Non-Executive Director of South32 since the 1st of November 2017. She's a member of the Nomination and Governance Committee, Risk and Audit Committee and Chair of the Sustainability Committee. The Board, with Xiaoling abstaining, recommends that shareholders vote in favor of Xiaoling's reelection. Xiaoling, can I please invite you to address the meeting.

Thank you. Stephen. Good afternoon, everyone. I have served on the South32 Board since November 2017. I chair the Sustainability Committee, and I'm a member of Risk and Audit Committee and the Nomination and Governance Committee. Before joining the Board, I spent 26 years with Rio Tinto, most recently as President and CEO of Rio Tinto Minerals. I have since held a number of nonexecutive director roles with other listed companies. I have drawn this executive and Board experience to contribute to the Board oversight of safety, operational and financial performance, major projects, sustainability and innovation. It has been our honor to serve on the Board, and I thank you for your support over the years. As Steven mentioned, this is intended to be my final term on the Board. I do not currently intend to seek reelection when this term concludes. Now I'll hand over back to my Chair. .

Thank you very much, Xiaoling. Are there any questions or comments on this resolution? Mark, anything online?

There are no further questions at this time.

Many thanks. If you have not already done so, please you'll record your vote on Resolution 2. Thank you. Resolution 2b is for the reelection of Carlos Mesquita as Director of the company. Carlos has been an independent Non-Executive Director of South32 since the first of May 2023. He's a member of the Nomination and Governance Committee and the Sustainability Committee. The Board, with Carlos abstaining, recommends that shareholders vote in favor of Carlos' reelection. Carlos, can I please invite you to address the meeting.

Thank you, Stephen, and good afternoon, everyone. I have served on the South32 Board since May 2023. And I'm a member of the Sustainability Committee and the Nomination and Governance Committee. During my 30 years with BHP, I held senior operational and project roles, including an asset President of Mozal Aluminum and Escondida. I have done on the experience to contribute to the Board's oversight of safety operational performance, capital allocation, major projects and risk. It's a privilege to serve on the Board, and I would be grateful for your support for my reelection today. I will now hand back to you, Chair.

Thank you, Carlos. Are there any questions or comments on this resolution in the room? Mark, any questions online? .

There are no further questions.

Okay. Many thanks. If you haven't already done so, please you'll record your vote on Resolution 2B. Thank you. Resolution 2C is for the reelection of Jane Nelson as a Director of the company Jane has also been an independent Nonexecutive Director of South32 since the 1st of May 2023. He's also a member of the Nomination and Governance Committee and the Sustainability Committee. The Board with Jane abstaining, recommends that shareholders vote in favor of Jane's reelection. Jane, can I please invite you to address the meeting.