South32 : Cannington Mineral Resource and Ore Reserves Update

24 August 2017

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 Limited (ASX, LSE, JSE: S32; ADR: SOUHY) (South32) announces changes to its estimates of Mineral Resources and Ore Reserves for the Cannington silver-lead-zinc mine:

• A 42% increase in total estimated open cut Mineral Resource with a 20% reduction in total estimated underground Mineral Resource. A reclassification has resulted in a 24% increase in Measured Mineral Resources.

• A 9% increase in total estimated underground Ore Reserves with a 31% increase in Proved Ore Reserves.

The Cannington polymetallic underground operation is 100% owned by South32 and is located in northwest Queensland, Australia. Full details of this update are contained in the attached report.

South32 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 on South32 can be found at www.south32.net.

JSE Sponsor: UBS South Africa (Pty) Ltd

24 August 2017

Registered Office: Level 35, 108 St Georges Terrace, Perth Western Australia 6000, Australia ABN 84 093 732 597 Registered in Australia

Update on estimates of Mineral Resources and Ore Reserves

South32 confirms a 42% increase in the total estimated open cut Mineral Resource at Cannington to 29 Mt, compared to the previously published 30 June 2016 estimate (see Appendix 1 Table 1 and Table 2). The increase is due to a revision of the 'reasonable prospects for eventual economic extraction' criteria for open cut mining. The open cut Mineral Resource preserves the potential development option until a decision is required, beyond 2020.

A 24% increase in the total estimated Measured Mineral Resource (to 80 Mt) reflects a change in classification approach of this Mineral Resource, that considers confidence in both geological and grade estimation continuity.

A 20% reduction (to 15.6 Mt) in the previously reported underground Mineral Resource is attributable to its reclassification to the open cut Mineral Resource; mining depletion and sterilisation of the underground Mineral Resource; and an increase in reporting net smelter return (NSR) cut-off.

South32 confirms a 9% increase (to 2Mt) in total estimated underground Ore Reserves at Cannington compared to the previously published 30 June 2016 estimate. The increase is due to additional drilling, and an updated resource model and mine plans. Changes include a 31% increase (to 5.4Mt) in the Proved Ore Reserve reflecting changes to the Mineral Resource classification approach.

The Mineral Resources and Ore Reserves estimates as at 30 June 2017 are presented in Appendix 1 Table 1 and Table 3 and a comparison to the previously published Mineral Resources and Ore Reserves estimates (as at 30 June 2016) are presented in Table 2 and Table 4.

The estimates of Mineral Resources and Ore Reserves are reported in accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves, 2012 (JORC Code) and the Australian Securities Exchange Listing Rules. The breakdown of the total estimates of Mineral Resources and Ore Reserves into the specific JORC Code categories is contained in the Appendix 1 tables. This report summarises the information contained in the JORC Code Table 1 which is included in Appendix 2 to this report.

Estimate of Mineral Resources

Cannington is a Broken Hill Type (BHT) silver-lead-zinc massive sulphide deposit hosted by Proterozoic age high-grade metamorphic lithologies of the Soldiers Cap Group, located in the Eastern Succession of the Mount Isa Block.

Mineralisation is stratiform bound along the limbs of a tight isoclinal recumbent synform with an easterly dip and a southerly plunge. The core of the synform is composed of amphibolite with encompassing silver-lead-zinc sulphide mineralisation. The mineralisation has been divided into nine types based on textural, mineralogical and geochemical characteristics which assist in defining metallurgical performance.

Out of a total of 6,884 drill holes considered for this resource update, 6,803 are diamond core and 81 are surface percussion/reverse circulation drill holes. 89% of the diamond core holes were drilled from underground using a fan drilling pattern.

All diamond core samples were halved and samples were collected on one metre (m) intervals through the mineralised zone, including a visually identifiable buffer of at least six metres into the non-mineralised core. The samples were submitted for preparation and analysis at the Cannington on-site laboratory. The mineralised intersections are verified by mine geologists throughout each drilling programme and field duplicates are within an acceptable range for resource modelling.

Samples are crushed to a nominal 2mm from which a 300g sub-sample is pulverized to 90% passing 75 microns, subjected to a three acid digest, and analysed by Inductively Coupled Plasma

• Optical Emission Spectrometry (ICP-OES). Coarse crushed duplicates and laboratory pulp duplicates were undertaken at a submission rate of one in ten samples and one in 100 samples were sent to an external laboratory for analysis.

  Laboratory quality assurance and quality control measures at the Cannington laboratory include eight geological standards made of homogenised Cannington ore representing the range of Mineral Resource grades.

  Cut-off grade

  Cannington is a polymetallic deposit and a NSR dollar value is used for representing the minimum block value required for potential economic extraction, determined as follows:

  • Underground Mineral Resource cut-off of A$130/t (Dry Metric Tonnes); and

  • Open cut Mineral Resource cut-off of A$58/t.

Cannington has been operating as an underground long hole open stope mine for 20 years and uses periodically updated performance data to establish its modifying factors. This includes geological interpretations with defined mineralisation and waste lithology as well as metallurgical recovery assumptions which are reconciled annually.

Resource estimation is performed by ordinary kriging interpolation for silver (Ag), lead (Pb), zinc (Zn) and for minor elements: iron (Fe), arsenic (As), bismuth (Bi), magnesium oxide (MgO) and silica oxide (SiO2). Search estimation criteria are consistent with geostatistical models developed for each estimation domain according to the appropriate geological controls. Validation includes statistical analysis, swath plots and visual inspection.

Specific gravity measurements from drill cores are used as the basis for estimating dry bulk density in tonnage calculations for both mineralised and non-mineralised material.

Mineral Resources are classified based on the level of data informing both the geological model and grade estimation. Infill underground drill spacing to approximately 12.5mN x 15mE x 15mRL in the majority of modelled areas provides a high confidence basis for geological modelling. Grade estimation confidence is overlain on the geological modelling classification criteria. The kriging variance is matched to block estimation conditions that relate to the number and distance of data, informing the estimate in relation to semi-variogram models for Ag, Pb and Zn.

Estimate of Ore Reserves

The declared Ore Reserves are based on the Mineral Resource estimate as at 30 June 2017.

Cannington is an operating underground mine which has been in continuous operation since 1997. Sufficient studies have been undertaken to enable Mineral Resources to be converted to Ore Reserves on the basis of current operating methods and practices. The run-of-mine (ROM) ore is beneficiated on site before being transported by road to the rail load-out facility (Yurbi) for transport to Townsville.

Capital costs are based on the expected future development of the mine, tailings facilities and sustaining capital requirements. The costs are accounted for in the operation's valuation models. Operating costs are estimated as part of the internal budgeting process. Transport charges are based on current truck, rail and shipping contracts and are estimated as part of the internal budgeting process. Other economic assumptions used for valuation reflect South32's view on demand, supply, volume forecasts and competitor analysis and are commercially sensitive.

Proved and Probable Ore Reserves are derived from the respective Mineral Resource classification. Internal dilution within the Ore Reserve stope boundaries represents

The Mineral Resource inside each stope is considered for Ore Reserve should it have

The Reserve Life reported in FY17 reflects the scheduled extraction period in years for the total Ore Reserves in the current approved life of operation plan. In FY16, Reserve Life was reported as the Ore Reserves divided by the FY16 nominated production rate.