Good afternoon, everybody, and thank you for joining us for South32's 2022 Annual General Meeting. My name is Karen Wood, and I'm pleased to chair the meeting today. Before we begin, it's my very great pleasure to invite Ingrid Cumming to deliver a Welcome to Country. But before I ask Ingrid to come forward, I would like to acknowledge the Whadjuk people of the Noongar Nation, and I acknowledge the elders, past, present, and emerging of the lands on which you are located today and the lands on which South32 conducts its business around the world. In the spirit of reconciliation and respect, we will continue to support initiatives that strengthen the unique cultural and spiritual relationships that Indigenous and tribal people have to the land, waters, and seas, and their rich contribution to society to ensure their legacy continues and extends for future generations.
[Foreign Language]Please join with me in making Ingrid welcome as she conducts the welcome to country on behalf of the Whadjuk people. [Foreigh Language] Not bad, huh? Thank you very much for your very lovely acknowledgement, and to your commitment to our First Nations people from across not only Noongar country, but the world, and in our beautiful country. My name is Ingrid Cumming. I'm a Whadjuk Ballardong Noongar woman, Whadjuk being the area we all meet today. We actually are located in front of a traditional space called Galup, and it's also in the area of Boorloo, which is the Perth area.
It's my honor, on behalf of my elders, past, present, and emerging, which I thank so very much for giving me the honor to do welcome to country or wandjoo boodja, to be here today, representing 36,000-38,000 Noongar people from across the Noongar Nation of the southwest. In the spirit of reconciliation, I'm gonna ask you all to join with me as I sing to the ancestors to come and look over all of you today as you sit here in beautiful Boorloo, as you have your very important gathering today, your AGM, and ask them to bring in the kooparda wirin, the good spirit. So all you have to do is clap your hands, and I'll give AUD 50 to anyone who can translate. Are you ready? Thank you for joining in. The ancestors do not discriminate.
They believe everybody, man, woman, people, are all welcome here on Whadjuk Noongar country. Thank you for joining in the ceremony. Know that the kooparda wirin, the good spirit, is with us all today for this very important gathering and know that reconciliation is truly in the heart of this organization, and we are thrilled as First Nations people to walk alongside with you on that journey. Thank you very much. Wandjoo boodja. Welcome to Country, everybody. Thank you.
Thank you so much, Ingrid. It means a great deal to us to have you with us. I'm joining you today from South32's office in Perth, along with our Chief Executive Officer, excuse me, Graham Kerr, our Company Secretary, Claire Tolcon, and joining me on stage from my far left are Non-Executive Directors Wayne Osborn, Xiaoling Liu, and Futhi Mtoba, and on my far right, Keith Rumble and Guy Lansdown. Non-Executive Director, Frank Cooper, is joining us remotely today. He's unable to be with us as a result of ill health, and we welcome him into the meeting. Also with us today, either in person or remotely, are members of South32's Lead Team. The board together with some members of the Lead Team who are here, look forward to catching up with those shareholders who are with us in person after the meeting.
We also have with us Graham Hogg, who's representing the company's auditor, KPMG, and Tim Horgan, who is again, looking after us from Computershare Investor Services and has been appointed Returning Officer for the meeting and scrutineer of the vote on resolutions 2A to 5. I can confirm that a quorum is present and now formally declare the meeting over. I'm going to ask Claire Tolcon, our company secretary, to run through a few procedural matters before we get the meeting proper underway.
Thank you, Karen, and good afternoon, everybody. This year, we are conducting a hybrid meeting using Computershare's meeting platform, enabling shareholders, proxy holders, and guests to attend. Through this platform, all virtual attendees are able to watch a live webcast of the meeting, while shareholders and proxy holders are also able to ask questions and vote. For those shareholders joining us in person, please take note of the emergency exits. In the event of an emergency, you will hear a beeping sound, which is an investigation signal. Please remain seated. The next sound you will hear is a whooping sound, which is the evacuation signal. Please remain calm and make your way to the nearest exit. South32 and Brookfield staff will direct you to the meeting point down on Mounts Bay Road and will advise when it is safe to return to the building.
For those shareholders joining us online, please stay connected, and we will message you through the meeting platform as soon as possible. Questions received in advance of the meeting will be read out by our moderator, Hayley Cardy. For those attending in person, microphones are available in the aisles. If you wish to ask a question, please raise your hand and introduce yourself to one of the microphone attendants, who will introduce you to the meeting. For those attending online, you may begin submitting questions now by clicking on the Q&A icon. Alternatively, if you wish to ask a question verbally, please dial the appropriate telephone number to be connected to the audio question line. Continue to listen to the meeting, and at the appropriate time, the chair will ask the moderator to invite you to ask your question.
If we receive multiple questions on the same topic, we may group them together when we answer. As stated in the Notice of Meeting, voting will be conducted by way of a poll on all resolutions, and the Chair will open voting shortly. For those attending in person, physical voting cards will be used. For those attending online, if you are eligible to vote, once voting opens, press the Vote icon. To cast your vote, simply select one of the options. You can cast your vote and change your vote on each resolution at any time until the Chair declares the voting closed. If you have difficulties with the platform, please refer to the online meeting guide, which is available under the Documents icon. In the unlikely event that we experience any major technical difficulties, we will provide you with updates through our website and stock exchanges.
I will now hand you back to the Chair.
Many thanks, Claire. I now declare voting open on all resolutions, so you may complete your voting form and submit your votes online at any time from now. It is a very great pleasure to be back in Perth for this meeting. We've had a gap for a couple of years, as you all know, and I'm conscious that we have people joining us online from around the country and around the world, and I want to thank you for making the effort to participate. While we achieved a lot during the last financial year, we can't overlook the fact that during that year, we lost one of our contractors who was working at our Wessels mine in South Africa. Mr. Desmond Menezes was fatally injured in November of last year while performing electrical work on-site.
On behalf of all of us on the board, I express my deepest sympathies to Mr. Menezes' family, friends, and, of course, his colleagues. The board has reviewed the findings of the investigation following Mr. Menezes' death and has been briefed on the steps taken to prevent a similar incident occurring in the future. Improving our safety performance is an ongoing focus for the board, for the lead team, and of course, for the entire business. Graham will speak to some of the work we have underway to achieve this important goal. To meet our commitment that each one of our colleagues goes home safe and well at the end of every shift, we are also focused on supporting our people to feel included and respected at work.
We strive to ensure that any work for South32 is undertaken in a way that is consistent with our values and our Code of Business Conduct . As you would expect, we've learned what we can from recent reports into workplace misconduct and sexual harassment in our industry. These learnings have guided us as we identify and respond to the risk factors for harassment, just as we do for other safety risks. At the heart of our work is a commitment to foster a culture where our people feel safe to speak up when they are a victim of or a witness to an incident of misconduct, whatever form that takes. The board, working with the lead team, sets the direction and tone for workplace culture. We're working hard to embed inclusion and diversity into everything we do through the implementation of our inclusion and diversity action plan.
A critical part of that action plan has been the development of our new internal Inclusion and Diversity Standard, which sets minimum requirements for all elements of people management. From this financial year, our measurable objectives include actions targeted at improving inclusion and diversity in our workplace, in addition to measuring the representation of women and Black people in our workforce. We are a signatory to the 40:40 Vision initiative, led by HESTA, Health Employees Superannuation Trust Australia to achieve gender balance in executive leadership across all ASX 300 companies by 2030. We've broadened our objectives for this year to align our female representation targets at all levels of the organization to the 40:40 Vision by 2029. Turning now to our operating and financial results.
We achieved strong, realized prices for our commodities this year, despite a challenging global environment, which included market volatility and the tragic conflict in Ukraine. Our operations performed well, delivering underlying earnings before interest, tax, depreciation, and amortization of $4.8 billion and free cash flow of $2.6 billion. The group's statutory profit after tax was $2.7 billion, and we ended the financial year with a net cash balance of $538 million, having returned $1.3 billion to our shareholders. This included dividends totaling $1.2 billion and $128 million returned to shareholders as part of our ongoing capital management program.
We further expanded our capital management program by $156- 2.3 billion, leaving $250 million to be returned by September 2023. Our strong financial performance during financial year 2022 and disciplined approach to capital allocation have supported investment in our business to improve our portfolio by increasing our exposure to the commodities critical to the transition to a low-carbon world.... This is a fundamental part of our strategy to identify and pursue opportunities to sustainably reshape our business for the future. During the year, we acquired a 45% stake in the Sierra Gorda copper mine in Chile. We increased our shareholdings in Mozal Aluminium in Mozambique and the Mineração Rio do Norte bauxite mine in Brazil. We participated in the restart of the Alumar aluminium smelter, also in Brazil.
All are significant steps for our business. The board visited Sierra Gorda in June as we resumed our program of site visits following a two-year pause as a result of COVID. Graham and I also visited our Hermosa project, where a pre-feasibility study for the Taylor deposit was completed during the year, demonstrating potential for a sustainable, low-cost operation producing zinc, lead, and silver. We've commenced the feasibility study on Taylor ahead of a final investment decision expected mid-next year. Graham and his team are also reviewing options to potentially accelerate the development pathway for the Clark deposit at Hermosa, where there is potential to produce battery-grade manganese for rapidly growing domestic markets in the United States. The board also visited Worsley Alumina, which, alongside Hillside Aluminium, Mozal Aluminium, and Illawarra Metallurgical Coal, is an important focus of our efforts to achieve material reductions in operational greenhouse gas emissions.
Delivering on our climate change commitment is fundamental to our purpose. We cannot make a difference by using our natural resources to improve people's lives now and for generations to come if we do not address the risks that climate change presents. As many of you will now have seen, we've published our Climate Change Action Plan as part of our Sustainable Development Report. This plan will be put to you today for consideration. The plan brings together the work that has been underway since South32 was formed in 2015, and sets out our approach, progress to date, and the actions we're taking to address the risks and opportunities that climate change presents.
It describes how we're working in collaboration with our stakeholders to prepare our business for the global energy transition, to meet our climate change commitments, and to achieve a just transition for our people, our business, and of course, our communities. Our approach to climate change is focused on four key areas, all of which are integrated into our strategy and are overseen by the board. The first is reshaping our portfolio to the commodities that are critical in the transition to a low-carbon world. Second is decarbonizing our operations with a focus on the four operations within our portfolio, which account for the majority of our emissions profile. Third is understanding and responding to the potential physical impacts of climate change on our business to build operational resilience. The inclusion of our approach to physical climate risk is a key differentiator of the plan.
Fourth, working with others to innovate and address shared challenges across industry and to decarbonize the value chain. Recognizing that we have a critical role to play in contributing to the decarbonization of the value chain in partnership with our customers and suppliers, the plan includes a new goal of net zero Scope 3 greenhouse gas emissions by 2050. This follows our goal of achieving net zero operational emissions by 2050 and our target to halve our operational emissions, that's Scope 1 and 2, by 2035. Although we do not have direct operational control over activities in the value chain, we are committed to proactively collaborating with our suppliers, customers, industry peers, and other value chain partners to make a meaningful contribution to the actions and innovations required to reduce Scope 3 emissions.
The plan also includes a new commitment that we will not develop or invest in greenfield metallurgical coal projects. At this stage, we've not set a short-term emissions reduction target. I want to assure you that this does not ignore the importance of short-term actions to reduce emissions or indeed, the interest our shareholders have in measuring our progress. Rather, it reflects the technical, commercial, and social complexities of some of our large emitting operations. Your board will only set a short-term target when we're confident that we can commit to a meaningful reduction that we believe we can deliver within the nominated time period. That is not to say that we're not focused on short-term emissions reduction initiatives, and Graham will go into some of the considerations and our progress in more detail shortly.
Your board regularly assesses progress against our climate change commitments, and as you know, that progress is tied to remuneration at lead team level and below. We report on this progress annually. On the issue of biodiversity, we recognize the importance of protecting ecosystems and have committed to no net loss for all new projects and major expansions. We understand that it is our responsibility to minimize the impacts of land clearing and to rehabilitate land disturbed by our activities. We're committed to supporting meaningful and sustainable initiatives that address key threats and promote improved conservation outcomes within the bio regions where we operate. Just as we have progressed our work to improve our environmental performance, the same is also true of our social performance.
This year, we evolved our approach to partnering with our communities to more clearly define how we can contribute societal value through our broader social contribution, including economic development, planning, respecting human rights, and our approach to cultural heritage. Many of our operations and projects intersect areas of cultural significance, and we understand we have a critical role to play in preserving cultural heritage. During the year, we completed cultural heritage reviews for our operations in the Americas and Southern Africa, following similar reviews of our Australian operations in 2021. The reviews inform the ongoing development of our approach to engagement with Indigenous, traditional, and tribal peoples. As a significant employer and investor in Australia, we recognize the positive impact we can have on reconciliation.
Our Innovate Reconciliation Action Plan has been developed to create a foundation for improvement in areas such as Indigenous employment, Indigenous procurement, cultural awareness, and maintaining strong relationships with Aboriginal and Torres Strait Islander peoples in the communities where we operate. We continue to review progress on our Innovate Reconciliation Action Plan to identify opportunities for improvement. We support the Uluru Statement from the Heart as the pathway towards reconciliation put forward by Australia's First Nations people to enshrine the voice of First Nations into the Australian Constitution. Because of the work we do and the impact it has on communities around Australia, we believe it's important that we use our voice to support this act of reconciliation, which can only foster deeper understanding and more constructive relationships between Aboriginal and Torres Strait Islander peoples and non-Indigenous Australians.
We support the opportunity for all Australians to participate in this act of reconciliation. Over the past seven years, South32 has undergone a major transformation to become a global, diversified producer of the commodities critical to a low-carbon future. This transformational work would not have been possible without the strength of our underlying operating performance, which enabled us to capitalize on record conditions for many of our commodities. On behalf of all of us on the board, I would like to thank our shareholders for their ongoing support and reiterate our thanks to our people right around the world for their hard work and commitment. It's now my pleasure to hand you over to Graham.
Thank you, Karen. Good afternoon, everyone, and thank you for joining us at today's meeting. Before I begin, I, too, acknowledge the traditional owners of the land in which we meet, the Whadjuk people of the Noongar Nation, and I pay my respects to the elders past, present, and emerging. It's great to be able to return in part to face-to-face engagement, to look back on what has been a transformational time for our business. A time where we accelerated our portfolio transformation and delivered record earnings, cash flow, and shareholder returns. However, the most important commitment we make at South32 is that everyone goes home safe and well at the end of every shift. As Karen mentioned, we did not achieve this, this year.
I'm deeply saddened by the loss of our col league, Mr. Desmond Menezes, a contractor who was fatally injured while working at our Wessels mine at South Africa Manganese, in November 2021. On behalf of the lead team, I'd like to express our deepest sympathies to Mr. Menezes' family, friends, and colleagues. Since 2020, we have disclosed contractor fatalities that occur during activities associated with our operations, but they have taken place in locations where we do not have control. Sadly, earlier this month, Mr. Ephraim Sesele Moreke lost his life in a road accident in South Africa.
It is deeply upsetting that someone has lost their life while undertaking work for our business and hasn't returned home to their loved ones. My sympathies are with his family, friends, and colleagues. We will work with the contracting company to understand what more can be done to reduce the risk of a similar incident occurring again.
We know we must continue to improve our safety performance, and a significant amount of work is underway to achieve this. In the first half of financial year 2022, we partnered with a leading safety consultant to review our safety performance and identify areas for improvement. This formed the foundation of our safety improvement program, a three-year global program of work designed to achieve a step change in our safety performance. To better support our contractors, we have developed and rolled out our Contractor Management Standard, which defines performance requirements for managing our contractors. Keeping our people safe is fundamental to achieving our purpose and will maintain a relentless focus on this work. Just as we strive to create workplaces that are physically safe, we must also create a psychologically safe environment for our people.
Karen spoke about our commitment to foster a culture where people feel safe to speak up, and we are working to create the culture in order to support our people if they experience any form of disrespectful behavior, harassment, or bullying. All forms of workplace misconduct present a threat to the physical and psychological health and safety of our people. Over the past year, we continued to undertake a significant amount of work so our people feel safe, included, and respected at work. We also engage directly with our people through our annual Your Voice survey, to better understand their day-to-day lived experience and perceptions of our culture. We know there is always more to do, and we are working to understand and respond to the risk factors for harassment, just as we do for other safety risks.
More recently, our work has also been informed by broader industry learnings following the publication of key reports on this critical issue. Global events, such as the Russian invasion of Ukraine and the prolonged impacts of COVID-19, have contributed to a volatile economic environment and inflationary pressures throughout the year. Against this backdrop, we delivered record earnings and cash flow in FY 2022. We could not have achieved these results without the efforts of teams around the world, and I want to thank our people for their contribution to our success. Our stable operating performance and portfolio improvements enabled us to capitalize on the tailwinds of commodity prices. Despite adverse impacts from weather and labor availability challenges brought on by COVID-19, our operations delivered largely through revised plans.
Some production highlights during the year included: achieving record production at Worsley Alumina, Hillside Aluminium, and Mozal Aluminium, continuing to test their maximum technical capacity. Exceeding production guidance at Cannington, as we transition to a new mine configuration, bringing forward higher grade material. The team at Cerro Matoso achieving a 22% increase in nickel production. We finished the year with a strong balance sheet, with net cash of $538 million, after funding $1.5 billion of the portfolio improvements during the year, leaving us well placed to navigate further uncertainty in the short term.
Our strong financial position and disciplined allocation approach to capital management enabled us to pay a record $648 million fully franked ordinary dividend in respect of FY 2022, and $139 million fully franked special dividend, taking total dividends to a record $0.257 per share for the year. Our total shareholder returns of $1.3 billion in respect of FY 2022, including our ongoing on-market share buyback, was also a record. We expect to see external volatility and uncertainty continue into 2023, with ongoing geopolitical conflicts and supply chain disruptions leading to inflationary pressure across our industry. We will continue to focus on cost management and expect to see the benefit of production growth in the next financial year, which we anticipate will help to mitigate industry-wide cost inflation.
In what is our seventh year as a business, the South32 of 2022 looks very different to the South32 at the time we were established in 2015. Over the past seven years, we have transformed the portfolio to focus on increasing our exposure to the commodities critical to a low-carbon future, and that transformation continued in FY 2022. We acquired immediate exposure to copper through our 45% stake in Chile's Cerro Negro copper mine. We grew our exposure to low-carbon aluminum through our increased shareholding in the hydro-powered Mozal aluminium smelter in Mozambique, and participated in the restart of the 100% renewable-powered Brazil aluminium smelter. Through these investments, we expect to double our share of low-carbon aluminum production capacity.
In August, we announced that we would not proceed with investment in Dendrobium Next Domain project at our Illawarra Metallurgical Coal Mine in Australia. The decision followed consideration of recently completed study work and extensive analysis of alternatives considered for the complex. Through this work, we determined that the expected returns from the upfront capital expenditure did not justify an investment relative to alternatives considered for the complex, and so we decided not to proceed with the project. We will now focus on continuing to optimize Dendrobium and the broader Illawarra Metallurgical Coal Complex to extend the mine life within approved domains. This decision increases our capacity to direct capital towards our other opportunities, including our world-class development options in North America, that have the potential to underpin a significant growth profile to produce commodities critical to a low-carbon future.
During the year, we continued to progress work at Hermosa, our development option in Arizona. We reached an important milestone on Hermosa's zinc, lead, silver Taylor deposit with the completion of the pre-feasibility study and have now commenced the feasibility study. The final investment decision for Taylor is planned for mid-calendar year 2023. At Hermosa's Clark deposit, a scoping study confirmed its potential for an integrated underground mining operation producing battery-grade manganese. The U.S. government announced it would invoke the Defense Production Act, supporting the production of critical minerals, including manganese. Following this decision, we are looking at potential options to potentially accelerate the development pathway for the Clark deposit. Turning now to climate change. We understand the need for action on climate change, and our Climate Change Action Plan s outline how we are responding by addressing our biggest challenges.
As Karen mentioned, decarbonizing our operations is fundamental to the delivery of our plan, which outlines our operational decarbonization pathway to support delivery of our medium-term target and our long-term goal. Our operational decarbonization pathway consists of three steps: efficiency initiatives in the near term, transition to low carbon energy in the medium term, and technology solutions in the longer term. Within that broad framework, our approach takes into account the unique characteristics and challenges for decarbonization of each facility in our portfolio, with a firm focus on those operations that make up the majority of our footprint. At Hillside Aluminium, we are focused on transitioning the energy source from coal-based power supplied by the South African electricity grid to secure reliable and affordable low carbon energy in the medium term.
The existing power agreement for Hillside expires in 2021, and the transition to a low carbon energy source will be techno-economic and commercially complex due to the smelter's constant high energy demand. We'll work with Eskom, government, and commercial partners to develop and implement an energy solution at the scale required for a large aluminium smelter. At Worsley Alumina, we are also studying options to transition the operations energy source, but there are technical complexities to be addressed. Large-scale deployment of renewable energy, such as solar and wind, which do not generate steam directly, would require a change to Worsley's alumina process and energy infrastructure, and a substantial expansion and modification of the energy grid would be required to deliver renewable power at the necessary scale for the industrial users in the region. Therefore, we expect to decarbonize Worsley Alumina in two stages.
We are working towards a conversion of the on-site boilers to natural gas, which will reduce operational emissions in the medium term. Longer term, we are seeking new technologies to support increased electrification and renewable energy for the refinery, which will require broader investment in shared infrastructure in the region. Given the complexities in decarbonizing energy sources for Hillside Aluminium and Worsley Alumina, we have not set a short-term emissions reduction target. We'll continue to evaluate our options, but we will only set a short-term target when we are confident on our pathway to meet such a target.
In the interim, we remain committed to prioritizing efforts across our operations in the near term, from energy efficiency programs to the maturation and execution of energy switching and technology solutions and low carbon design principles that have the potential to materially reduce the greenhouse gas emissions footprint of our operations in line with our medium-term target. Delivering on our climate change commitments is fundamental to our purpose. We'll continue to regularly review our approach, and we remain committed to transparent reporting on our progress. I look forward to the feedback on our approach. I'd like to touch on the importance of our stakeholders, particularly the communities where we operate. We are committed to supporting and building meaningful relationships in our communities, and we actively engage the stakeholders to understand their interests and aspirations and identify opportunities to work together to create shared value.
In FY 2022, we were proud to invest $31.1 million in community initiatives, an increase of 40% from FY 2021. Our direct community investment was across our four key focus areas: education, leadership, economic participation, good health and social well-being, and natural resources resilience. In South Africa, we support the growth of business environment through ESD, Enterprise and Supplier Development. We collaborate and work with small, medium, and micro enterprises on ESD, which support South Africa's transition towards fair economic distribution and the alleviation of poverty. Through this collaboration, we aim to do business with an increasing percentage of Black-owned suppliers. In FY 2022, we increased our target for ESD spend from $4.73- 10.71 million.
By working with suppliers and local communities, we exceeded this with FY 2022 ESC-ESD spend of $17.5 million. Finally, I'd like to again take the opportunity to thank our teams around the world who have worked hard to deliver results in what is a challenging global environment. Their contribution towards our success cannot be overstated. Looking ahead, we are well positioned for FY 2023, given our growing production profile and strong balance sheet, and we are well placed to capitalize on the increasing demand for the commodities needed as the world transitions to a low carbon future. We will continue to position South32 for an exciting future over the next 12 months and beyond. Thank you for joining us today and for your ongoing support. I'll now hand back to our chair.
Thanks, Graham. We'll now move to the formal items of business. Each resolution and the explanatory notes are outlined in the Notice of Meeting , dated 12th September 2022. As well as consideration of the financial statements, the business before us today includes 5 ordinary resolutions. As you will have seen in the notice, the board recommends shareholders vote in favor of all of those resolutions. I intend to vote all undirected proxies that I hold as chair in the same manner. We'll work through each resolution in order, and I'll provide you with a summary of the proxies that we've received as we progress. I'll also invite questions on each resolution. The first item of business is to receive the Financial Report, Directors' Report, and Auditor's Report set out in the company's annual report for the financial year ended 30 June 2022.
There is no requirement to approve these reports, and we're simply tabling them for discussion. As I mentioned earlier, we do have Graham Hogg from KPMG with us, and Graham is available to answer questions relating to the audit. Hayley, could I ask you to read questions that have been received in advance of the meeting, and I'll respond to these for the benefit of all shareholders. Thank you.
Thank you, Chair. The first question is from Mrs. Helen Elizabeth Haysom, and the question is: When will the company limit the payments to senior executives and the CEO to no more than 10 times the wage of the lowest-paid staff member or contractor? This will deliver significant benefits to shareholders.
Thanks, Hayley, and thanks, Mrs. Haysom, for your question. I certainly understand the point of the question in terms of trying to find the right balance between executive remuneration, right across the business, and it's certainly something that our Remuneration Committee, under the able leadership of Wayne Osborn, spends a great deal of time on. We have worked very hard, as I say, under Wayne's leadership, to find that right balance, and I think if you have a look at some of the steps taken in more recent years, you'll see that borne out. A couple of years ago, Graham waived an entitlement to around $5 million worth of benefits because collectively, and I mean collectively, between the board and Graham, we felt that it was beyond a level that was appropriate.
Just last year, we reduced the earning opportunity for Graham and members of the lead team down from 300% of face value, under the long-term plan, to 200%. So I think you'd have to agree that we have been very prudent on the remuneration front. I should, you know, I really would like to use this opportunity, too, just to make a comment about the quality of our executive team. We have some of the very best in the business. I know that because I also know that not a week goes by that somebody else doesn't try and lure them away from South32. They are committed to the company because they're committed to the purpose of this organization and the journey we're on. But we have to be realistic about this. We do need to be competitive.
We operate in a competitive environment for remuneration. So while the formula that Mrs. Haysom suggests is one way of looking at it, it really would not be in the interests of South32's shareholders to run the risk of losing these quality people. Thanks, Hayley.
Chair, the next two questions are similar, so I'll give you both of these together. The first is also from Mrs. Haysom, and her question is: When will the company ensure that the board has at least 50% women and is diverse in terms of age and ethnicity and background, including Indigenous members? The second question comes from Dr. Marjorie Elizabeth Dunlop and Mr. Philip Justin Dunlop, and their question is: When will the company have appropriate proportions of board members and management team by gender, Indigenous, ethnic, and disability?
Thanks, Hayley. I mean, those aspirations are clearly aspirations we share. Both, in my address earlier and in Graham's, we spoke about trying to build an inclusive work environment, and of course, that means getting the right gender balance together and a balance representing some of those other factors that have been mentioned. If you haven't had an opportunity to have a look at the Sustainable Development Report , that is worth going through just to have a look at the work that is being done on the inclusion and diversity initiative, but also, of course, the statistics that we disclose there about current representation. I mean, I think as you look at the table here, we do have a board, I'm very, glad to be able to say, which is diverse in terms of a number of its characteristics.
We do measure, on an ongoing basis, the representation of women in our workforce, and as I said in my earlier address, Black people in our South African operations. In fact, I'm happy to say that 62% of the management team across the South African business is represented by Black people. We have set some new medium-term targets for female representation in the business to get to greater than 40% by FY 2029. I mentioned that earlier, and in particular, females in our leadership groups to bring that number to greater than 40% by financial year 2027. So we're on a path. I also mentioned we are a signatory to the 40:40 Vision of HESTA, which I think is an outstanding initiative, and we're, of course, reporting against that.
So the message I would leave you with on this is this: It is a matter on which the board is very focused. Graham is very focused across his leadership team, and we won't be satisfied until we have a representation that meets the targets we've set for ourselves.
Chair, the next question is from Mr. and Mrs. Trivedi, and the question is: When can you offer bonus shares?
Thank you. We don't issue bonus shares or, or indeed, operate a dividend reinvestment plan, as some others do. As part of our capital management framework, we distribute profits to shareholders, of course, in the form of ordinary dividends, and we also have a flexible capital management program under which we distribute special dividends and complete some on-market buybacks. In fact, since the formation of South32, we've distributed a total of around $5 billion under those mechanisms. And something I think our shareholders would be no doubt pleased about.
The final pre-submitted question is from Ms. Celestine Margaret Eckrick, and the question is: Why are ordinary shareholders ignored in the bonus regime established for KMPs? There has never been a bonus issue or rights issue to ordinary shareholders. Please explain the rationale which favors the already well-remunerated KMPs.
Thanks, Hayley, and thanks, Mrs. Eckrick, for your question. The, the management share plans are, of course, designed for a different purpose than rewarding shareholders. I spoke about the manner in which we return profits to shareholders under the ordinary dividend policy, but also, of course, under the flexible capital management program. The, the sort of plan I think that Mrs. Eckrick is speaking about is one that's set up to form a key component of executive remuneration, and one that has served us well under both the short and the long-term incentive plans. Thanks, Hayley. Are there any other questions or comments on the financial report or the directors' report or auditors' report?
She knows me. Alan Dickson, representing the Australian Shareholders' Association. I have a few questions. The first one, a simple one: When can we get a five-year summary report in the annual report? Number one. Number two is, Taylor and Clark are right next to each other. You've got Taylor doing the feasibility study now. Does that depend on what really happens to Clark, which is above it? Is that going to impact it? And my third question is, you've gone into Chile, but Chile doesn't have the same requirements as far as the reserves are concerned. When were we going to get the JORC-approved reserves for the Chile operation?
Thanks, Alan, and welcome to the meeting. It's nice to see you again. Alan and I have had a couple of conversations during the course of the year. The Australian Shareholders' Association is one with which we engage on a regular basis, and we've had the conversation about the five-year summary on a number of occasions. I can assure you, Alan, and your members, that it is one that we've talked a great deal about internally. We do produce a set of results, of course, high-level results, in the front part of the annual report for the current year and this year for the previous year. On some occasions, we have been able to report two previous years, but we've never been able to do the five-year picture.
The reason we can't do that is the amount of movement that we've had in South32's portfolio. I mean, Graham spoke about this, as did I earlier. The extent of the change in this portfolio, all consistent with our strategy over the last seven years, has been extensive. So to produce a five-year comparator table means we would have to go back and restate all of those years to make that information useful on an apples-for-apples basis. It is an onerous task on the finance team and not one that we can accommodate you on at this time. But I would like to leave you with the assurance that next year, we hope we can give you the current year plus two previous years.
But as our CFO, Katie Tovich, tells me, that will depend on how the portfolio might move around during that period and when, whether any restatement is necessary. But I know Katie would be really happy to talk to you about some of the complexities of that, perhaps, perhaps after the meeting. Alan's smiling because we've had this conversation for a long time, and nothing would please us more, Alan, than to be able to say, "Yes, we can do it." And perhaps one day the portfolio will be stable enough to do that. Although maybe that's not what we want. Maybe we're a bit of this constant rejigging of the portfolio is actually in the interests of everyone.
On your second question in relation to the Hermosa deposit, let me get Graham just to give you a bit of detail on that. But you'll remember that we have completed the pre-feasibility study. We have released those outcomes. The feasibility study is underway now, and we expect to have that completed sometime around the middle of next calendar year. In fact, we're planning to visit Hermosa in the middle of the year just to have a look at progress on that. But Graham, on the Taylor and Clark deposit piece.
Absolutely, Karen, and thanks for the question, Alan. Hermosa is an interesting, I guess, play for South32 because it is a basin play, so there's multiple deposits there. So at the moment, Taylor is the most advanced project. As Karen mentioned, we have finished the pre-feasibility. We're now in feasibility. That is a lead, silver, and zinc mine, and we expect that feasibility study to be finished by about mid-calendar year next year, and then we'll make an investment decision. On top of Taylor, we have Clark, which is a manganese oxide deposit, and it does actually sit across the top. It's a different system, so it's not the same system.
And there absolutely, potentially are some synergies around mining the two together, even though they have different processing facilities. We expect to finish the pre-feasibility on Clark by the end of this calendar year, and at that time, we'll have a look at the opportunity of potentially integrating the two. The one thing that is worth calling out, with the changes in the U.S. around the need for critical minerals around decarbonization and the push to have manganese become more of battery composition for EVs, such as Tesla, Ford, et cetera, there is actually a chance that Clark could even go faster than Taylor. So that's something the team is actually having a look at now at the same time.
But on top of Taylor and Clark, we've also got another potential target we're looking at, which is Peake, which is more copper-oriented, and there's probably about another 12 highly prospective, if you like, targets that we're looking at, if you like, on that piece of land. So I would probably think about Hermosa as a multi-generational play, where we'll end up with multiple mines if everything goes to plan.
Thanks, Graham. Alan, on your third question on Sierra Gorda, you'll recall that we did complete that acquisition in February of this year, and the work is underway as we speak to finalize the, resource and reserves report for JORC. We would expect to have that work completed by about the second half of this financial year, so in the first half of next calendar year. Thank you. Hayley, any further questions you have on the webcast?
Yes, Chair, two questions on the webcast. The first is from Mr. Stephen Mayne, and the question is: The South32 constitution has a director entrenchment provision, which requires external candidates for the board to be nominated by 100 shareholders or holders of more than 5% of total shares on issue. This was slipped in by the BHP board with the demerger and is out of step with market practice. When the likes of Lendlease and Orica attempted to introduce this provision, it was voted down by shareholders. Will the board promise a constitutional amendment at next year's AGM to regularize its constitution rather than putting unnecessary barriers in front of external board candidates whose shareholders may wish to support?
Thanks, Hayley, and thanks, Mr. Mayne, for your question. I may be wrong because I didn't join the board right at the outset of the formation of South32. I don't think we've had any external candidate put their name forward for election. So, I don't think this has been a barrier, but I'll certainly be happy to take your question and your comments back to the board, and we'll talk about it. Thank you.
Chair, the next question is also from Mr. Stephen Mayne. This is the last question on the webcast. Did any of the five main proxy advisors, ACSI, Ownership Matters, Glass Lewis, ISS, and ASA, recommend a vote against any of today's resolutions? Has there been a material proxy protest vote against any of today's resolutions, and if so, what was the rationale?
The answer to that is no, but I do need to put a caveat on that. Some of the proxy advisors, and I'm thinking specifically about ISS, do produce bespoke reports for particular constituents. So in the main proxy report that was published, the recommendation, I think I'm right, Claire, in saying, was to vote in favor of all of the resolutions. But in some of the bespoke reports that were targeting particular investors, and I think, really bespoke for the Climate Change Action Plan, there was a recommendation to vote against. Thanks, Hayley.
Thank you.
Chair, I'd like to introduce Tim Frodsham.
Hello, Mr. Frodsham. Welcome.
Hello, thanks for your time.
Pleasure.
Just a quick question. I noted in the company's latest annual report, I think page 131, Eagle Downs, that South32 has categorically ruled out developing or investing in any greenfield metallurgical coal deposits. With the Dendrobium Extension Project also off the cards, can you also confirm that South32 will not be pursuing any new brownfield metallurgical coal mine projects, or would South32 plan any extension projects, for example, at Appin?
Yeah.
Yeah.
Thanks for your question. That is not a commitment that we've made. We have certainly announced in the Climate Change Action Plan, as you say, that we won't invest in new greenfields projects, but we have not made a commitment not to do any brownfield work at the Illawarra Metallurgical Coal Complex on the east coast of Australia. I should say that our decision to not invest in greenfields projects in metallurgical coal is not because we don't think that there is a significant future for metallurgical coal in the steelmaking process. It's very difficult for us to think that that commodity will be displaced in that process in, I don't know, a decade, probably more likely two decades.
So we intend to continue to run Illawarra to produce metallurgical coal to meet not only our contractual commitments to BlueScope that we supply in that part of the world, but also as a key part of our business. Graham, anything you wanted to add to that?
Just maybe on Eagle Downs, our commitment is not to develop a new greenfields operation, so we will not be taking Eagle Downs forward. To Karen's point, we do believe that metallurgical coal is different from thermal coal or energy coal. Today, there are substitutes around solar, wind. There are no substitutes today for metallurgical coal. We are lucky that when it comes to metallurgical coal, we produce hard coking coal of the best quality in Illawarra, so it probably has the lowest carbon emissions footprint of that. Ultimately, to Karen's point, we do see that green steel will come via hydrogen, but it's probably somewhere beyond two decades, if you like, before that's actually in the position where it's viable commercially and also technically. We have current approvals that happen to around FY 2037, 2038 in the current area.
We'll continue to invest in that business to make sure our people are safe, and we can deliver on our commitments around Hard coking coal. But certainly no plans to develop anything new or buy anything new.
Thank you. Thanks very much.
Pleasure. Thank you.
Chair, I would like to introduce Cyril Tobin.
Hello, Mr. Tobin. Welcome.
Good afternoon. I have a question on the Eagle Downs divestment. The annual report at page 131 notes that the recoverable amount for Eagle Downs has been revised downwards to nil. But the report also states that South32 is continuing to investigate the potential divestment of its interests in that project. Now, given that the International Energy Agency, among others, has concluded that there is no room for new coal mines if we're to have any chance of limiting global warming to 1.5 degrees Celsius, and given that South32's own analysis shows that a 1.5 degree scenario would greatly benefit our company, why doesn't South32 just drop its efforts to divest Eagle Downs to another entity which would try to develop the project?
Yeah. Thanks for your question, Mr. Tobin. It's a very relevant one as we think about options on these matters. Eagle Downs is a metallurgical coal deposit, as opposed to a energy coal, and it goes to the differentiation Graham made earlier. We believe, and we think this is absolutely fundamental, that steel will be required as the world transitions to a low-carbon future. All of the infrastructure that people talk about in relation to achieving that low-carbon world will require steel, which means, to Graham's point, we will need metallurgical coal in the world to do that. And so the production of metallurgical coal is going to be important. Now, in any divestment, we are always very careful. We did this when we sold the energy coal business in South Africa.
Very careful about the people that we entertain a sale to, to make sure that they will operate as best we can see, in accordance with the sort of commitments that South32 has made. So I think you can be assured that we will take, our, consideration of a disposal of that asset, with great seriousness. But we are continuing to look at the possibility of selling our interest in Eagle Downs. Graham?
Maybe just a couple of comments I'll add is, one, it's a 50/50 joint venture between ourselves and Aquila, so it's actually a process that obviously we've got some agreement in place. It exists in the existing joint venture about taking it forward. The other point I'd make out, while you're right, that the IEA report does talk about the fall of metallurgical coal. Metallurgical coal is made up of a variety of different coals. So in that, you've got hard coking coal, you've got PCI, you've got semi-soft, for example. Hard coking coal, our own modeling shows that in a 1.5 degree world, there's actually more demand for hard coking coal. So I think it's important to understand you've got thermal coal, you've got metallurgical coal, then you've got a split of different products.
It's not a project for us to develop, but there are some people close by that might have some natural synergies in their existing operations. But it's more we've got to work through it with our joint venture partner based out of respect and the history we have together.
Thank you very much.
Thanks, Mr. Tobin. Appreciate you being with us. Hayley, anything else on the telephone?
Chair, there was just a second part to Mr. Mayne's question, so I'll read that out now. It says: "Companies are increasingly disclosing their proxies to the ASX with the formal addresses. Dexus and Brambles have both done this in recent days. Will South32 do this next year to fully inform all stakeholders in a more timely manner?
Thanks, Hayley, and thanks again, Mr. Mayne, for your question. It is actually one that we considered when we were getting prepared for today's AGM. We have always disclosed the proxy results after the vote in the room. You know, over recent years, we've canvassed shareholders who attend the meeting to see how they would best like to see proxies, either before they vote or after. And we've come to the conclusion that those who are here would actually like to vote before they know what the outcome is, but get a disclosure after that vote has taken place. So that's what we've elected to do today. We think that's the better course, but of course, we're always open to the views of shareholders if they would like to see a change on that front. Thank you. It doesn't look like. Oh, yes, we do.
Chair, I'd like to introduce M.P. Nayak.
Hello, Mr. Nayak. Welcome.
Just a simple question. Your reports are good. What you see you achieved as an achievement last year?
One achievement?
Anything you see.
Okay.
That you people did a good job.
Okay.
Number two, you were demerged seven years back. Can you tell me what benefits you have till today? And third is, I do not see lithium and rare earths in your portfolio. What is your plan?
Let me just try and answer the first couple of questions. I'm not sure I got the third one, so I don't go away, 'cause you might just need to help me with that. Look, there's been an enormous number of achievements over the course of the last financial year. I think the way in which the management team have led the reorientation of the portfolio to focus on commodities with a future in a low carbon world has really been outstanding. We spoke about some of those earlier. The acquisition of our interest in the copper mine in Chile, increasing our exposure to renewable powered aluminum has been very important.
It was a year where we enjoyed strong commodity prices, but the team did an outstanding job to focus on costs, because, of course, in the environment we've been in and the environment we're going to be in, I think, for some time, the focus on cost has been critically important. And third, and I don't say this by any means as the least, because it is really the most important thing, is the work that Graham has led across the organization to renew our focus on safety. You know, we talked earlier about the loss of Mr. Menezes in November of last year, a contractor. All of the fatalities that South32 have had since demerger have been in South Africa, and a majority of those have been contractors.
Which means we have had to focus very carefully on how we are supporting contractors to support our business. So they're the things I think that I would focus on during the course of the year. Your second question?
Well, the second is, you demerger from BHP seven years back.
Yes.
Correct?
Yep.
I was in that meeting when Jack announced that. Today, what do you see you have done changes in seven years and achieved better?
Yeah. Well, look, I think Graham spoke to some of these things when he spoke about how the portfolio has changed and the nature of the company has changed over that period of time. Assets have gone out, low-performing assets have gone out, other assets have come in, completely consistent with our strategy. W e don't think about this as doing better than BHP. There were very good reasons to separate South32 from BHP. We are a different organization. We're a significantly smaller organization, with fundamentally different assets. But I think Graham has built an outstanding team of people right around the world. He's been able to work through that team of people to improve the operating performance of the assets that we have.
Performance, that I think is evident through the work that has been reported over the previous seven years. So, you know, the board would look at the progress that's been made and say, I think it met the expectations of the board at the outset of the demerger. You know, I mentioned earlier the return of almost, actually just over $5 billion to shareholders over that period of time, so it's very significant. And you did have a third question, but I'm sorry, I didn't-
That was, I do not see lithium, rare earth metals, or metals which technologies will need in your portfolio. What is your forward plan for that?
Did you, in the portfolio?
Yeah, I'll take that one.
You want to take that?
So the question is around lithium and rare earth minerals?
Correct.
Maybe just building on Karen's response to the second question. When we started from the demerger, we probably had a commodity exposure of roughly 50% bulks, 50% base metals. The base metals component is important, 'cause while you're right on lithium, if you think about things like silver, zinc, and copper, which we didn't have at the time, they're all gonna be exponentially needed in a world that decarbonizes. So we've had a strong focus on how we get exposure to that. We'll come back to lithium, rare earth minerals. If you look at where we are today, 50/50 at the time of the demerger, with no growth options. You know, today, we've probably got a split of 75% base metals, 25% bulks, and if we deliver on our plans around Taylor, et cetera, we'll probably move to 85% base metals exposure.
We also, at the time of the demerger, had no growth portfolio. You know, this year we're gonna double our production of green aluminum, which is another metal critical as the world decarbonizes, and we've got a compound annual growth rate this year of roughly, depends on your commodity price year, let's say it's around the 10%. And going forward, we have a number of growth options in the Americas. So I think we're very different from when we started, and the metals we have are very important to how the world's gonna decarbonize. For example, the demand for zinc will actually more than double. Manganese, we believe, has a role to play in battery technology, and copper and aluminum are also critically important.
Lithium is an interesting one, because lithium is a commodity we like, but it's fair to say at the moment, we think it's priced very high. And we think over time, that'll correct, and that might present an opportunity, but we do like lithium. I guess where we're probably a little bit interested in watching is there's a lot of potential lithium supply in South America that hasn't eventuated, that we thought might have. That's something we'll continue to watch. Rare earth minerals is interesting. We like them, but they're a very small niche market. What we would really like to add to the portfolio is more nickel, zinc, and copper.
All of those are critical, if you like, in the decarbonization world and have equally as attractive growth rates, if you like, around lithium, but they're actually something we bring skills to the table, too, as well. Does that help?
No, that's good. The reason I ask lithium is, emerging technologies will need it, right?
Yep.
Plus, it gives you a balanced portfolio in mining. And I think when I saw, I. You know, you know your operations better. I just opened that page, and I said, "We are far behind." Five year later, you will have everybody running for lithium, and you say, "We don't have.
Yeah, I guess part of our challenge is to do things of value for our shareholders. If we went out and bought it today, I'm not sure we'd make money for our shareholders, whereas I do think there are opportunities in zinc, nickel, and copper that will. But we'll keep watching lithium for those opportunities. We like the commodity.
Okay. Thank you.
Pleasure. Okay, we do have another question. Hi, Alan.
Hi. I've just been reading the September quarter report, and I see you've got coal problems for Worsley, and you're talking about even importing it. Are you importing that from Illawarra, or are you gonna fast-track the conversion to gas?
Yeah. You are right, Alan. We do have coal problems at Worsley, and I'll ask Graham to comment on that. But no, we're not importing it from across the country. We're very reluctantly having to import because we can't access coal from the two suppliers that we have at Collie. And so the first shipment that we are going to import will come from Indonesia. That's about 15%, I think, Graham, of,
Give or take.
Yeah.
Yep.
Of requirements, but you might want to just add to that.
Yeah, look, I think good question. First and foremost, the coal that comes out of Illawarra again, is hard coking coal that's best used in steel making. It's not designed for energy generation, in particular, what Worsley needs is steam for the process, so it's not suitable for that. We will import a portion of coal from Indonesia to try and supplement where there are gaps. To give some context, at the moment, we do have gas. We have coal burners down at Worsley that we're actually working through the process of slowly converting them to gas, because that will actually dramatically change our emissions profile. It's not around the capital. It's five boilers, about, you know, $10 million a boiler. We've got plans for the first, and the second one already in train.
The bigger challenge at the moment is the availability of gas in Western Australia, so that's what we're sort of watching. The coal situation is interesting because we share, if you like, two suppliers of coal that also feed the power stations that provide the power for Western Australia, in particular the Southwest Grid. We're working very closely with the government, the coal suppliers, to make sure that we don't also interrupt what's going on with the power stations and hence the domestic users of coal. But ultimately, we plan to move from coal to gas and then gas to another form as technology develops.
Thanks, Graham. Thanks, Alan. Okay, thank you. I don't think there are any other questions at this time, so we'll move to the next item of business. Resolutions 2A and 2B seek approval for the re-election of Frank Cooper and Futhi Mtoba as directors of the company. Frank and Futhi were both appointed in 2015 and re-elected at the annual general meeting in 2020. During the year, and in accordance with our usual practice, all directors participated in a review of the effectiveness of the board and each individual board member. The board wholeheartedly supports the re-election of Frank and Futhi, recognizing the considerable expertise that each brings to our work. First, resolution 2A is for the re-election of Frank Cooper, who, as I mentioned earlier, is prevented from being with us today as a result of ill health.
He has been, as I said, a Non-Executive Director of South32 since the formation of the company. His contribution as Chair of the Risk and Audit Committee is highly regarded by his fellow board members. His extensive leadership and business strategy experience, financial acumen and skills in corporate development, legal and regulatory compliance, and risk management are also highly valuable to the board. The board has reviewed Frank's performance, and we recommend that shareholders vote in favor of his re-election. I am going to ask Frank to now address the meeting.
Thank you, Karen, and good afternoon, everyone. It has been an honor to serve on the board of South32 since it became a listed entity in 2015, and I hope to continue that work with your support today. In addition to my board position, I am also chair of the board's Risk and Audit Committee and a member of both the Nomination and Governance Committee and the Remuneration Committee. By background, I am a chartered accountant with more than 40 years experience in the finance and accounting profession. I was previously a partner at Ernst & Young, a partner at PricewaterhouseCoopers, and a managing partner for Arthur Andersen in Perth for just over 10 years, during which time I specialized in the mining, energy, and utility sectors.
In addition to the financial and accounting experience I bring to the South32 board, I also bring a strong understanding of legal and regulatory compliance and substantial experience in risk and management oversight. My experience with listed companies and expertise in corporate development, together with my strong focus on organizational philosophy, values, and governance, assists me in overseeing the implementation of South32's strategy. On 18 October, I retired from the role of Commissioner and Chairman, Insurance Commission of Western Australia, a position I held for almost 10 years. I am currently a non-executive director of Woodside Energy Group Limited, including as Chair of the Audit and Risk Committee. My other current appointments include Pro-Chancellor, University of Western Australia, Director, St. John of God Australia Limited, and Director, Wright Prospecting Pty Limited.
I and my fellow directors are satisfied that these appointments do not impact on my ability to meet my commitment to the South32 Board. Today, I am seeking your support for re-election so I can continue serving the interests of South32 shareholders. I will now hand back to our Chair.
Many thanks, Frank. Are there any questions or comments on this resolution? Nothing in the room. Hayley?
No, nothing on the webcast or the phones.
Thank you. Then may I please ask you to enter your vote on Resolution Two A. We have the proxies that we've received now on display. Thank you. I'll now move to Resolution Two B, the re-election of Futhi Mtoba as a director of the company. Like Frank, Futhi has been a non-executive director since the formation of South32. Her contribution is highly regarded by the board. In particular, Futhi brings financial, economic, and public policy expertise and leadership experience, together with her extensive social performance and community skills and knowledge. Following the review of Futhi's performance, the board recommends that shareholders vote in favor of her re-election. I now ask Futhi to address the meeting. Thanks, Futhi.
Thank you, Karen, and good afternoon, everyone. It has been an honor to serve on the board of South32 since it became a listed entity in 2015, and I'm seeking your support for re-election today so I can continue serving the interests of South32's shareholders. In addition to my board position, I'm also a member of two of South32's board committees, the Nomination and Governance Committee and the Audit and Risk Committee. I'm a chartered accountant with an extensive career in business and community engagement in South Africa. I joined Deloitte and Touche in 1988, specializing in financial services. I was one of the first African Black women to be appointed partner by one of the Big Four accounting firm, and I was later appointed Chairman of Deloitte Southern Africa.
I bring financial, economic, and public policy expertise and leadership experience to the South32 board, and an extensive knowledge and experience in social performance and community and stakeholder engagement. I'm a co-founder of TEACH South Africa, which recruits graduates to teach math, English, science, and technology in underprivileged schools, and I've held several board positions on organizations focused on economic development and community engagement. I've also held positions, including as a member of the International Monetary Fund Advisory Group on Sub-Saharan Africa, the World Economic Forum Global Advisory Council, and the United Nations Global Compact. My other current appointments include Non-Executive Director and Deputy Chair of the Public Investment Corporation Limited and a Chair of its Audit Committee, an organization with $134 billion assets under management.
A Director of Discovery Bank Holdings Limited, a Lead Independent Director and Audit Committee Chair of Discovery Bank Limited, Director of Aluwani Capital Partners, and the Director of the International Women's Forum South Africa. I and my fellow directors are satisfied that these appointments do not impact on my ability to meet my commitment to the South32 board. It has been an honor to serve on South32 board over the past seven years, and I hope to continue that work with your support today. I'll now hand back over to Karen. Thank you.
Thanks, Futhi. Are there any questions or comments on this resolution? We don't have any in the room. Hayley, anything from you?
No, no questions, Chair.
Thank you. So may I now ask you to enter your vote on Resolution Two B, and in accordance with our practice, the proxies are displayed on the screen. I'm delighted that Frank and Futhi have been re-elected to continue their outstanding work for South32. I'll now move to Item 3, which refers to the adoption of the Remuneration Report for the year ended 30 June 2022, and that can be found on pages 74 to 102 of the annual report. Under the Corporations Act, listed companies are required to provide a remuneration report, and while the vote for the report is advisory, the board does value input from shareholders and will take the outcome of this vote into account when determining the company's approach.
The board is committed to a remuneration philosophy and framework that supports implementation and achievement of our strategy and business objectives. We're satisfied that that framework has enabled us to reflect overall business performance and shareholder experience while providing the right balance between appropriate remuneration outcomes and incentivizing our executives. We believe that actual pay outcomes for the CEO since demerger are testament to this alignment. However, we also believe that we need to continuously review that framework to ensure it remains fit for purpose. As outlined in the 2021 remuneration report, the following long-term incentive changes came into effect for 2022. First, we reduced, as I mentioned earlier, the face value of the awards for all executive key management personnel by 33%.
Second, we introduced two strategic measures of 10% each into the long-term incentive plan, one for performance of climate change commitments and the other on the transition of our portfolio toward the commodities critical to a low carbon world. As a result, we increased the weighting of the financial measures in the short-term incentive plan to achieve an appropriate balance of measures across both elements of variable pay and to avoid duplication between the short and long-term incentive plans. Finally, we moved from an index to a constituent group of companies for the global mining comparator group. This better aligns to market practice. No adjustments were made to fixed remuneration or target short-term incentives. Our business scorecard guides short-term incentives for our executives.
Last year, we delivered a strong operational result, including record production at Worsley Alumina and our Mozambique and South Africa aluminum smelters operating at maximum technical capacity. We also delivered outstanding results in a number of areas of sustainability, including reducing the risk of material health exposures in our business and making another strong contribution to the communities in which we operate. Our performance has been recognized in our business scorecard outcome for the 2022 financial year of 99.6% out of a possible 150%. Notwithstanding our strong financial results, the Board exercised its discretion to apply a negative business modifier to reduce outcomes by 20% for the CEO and the Chief Operating Officer of the African operations at the time of the fatality at our Wessels mine that we spoke about earlier.
The board also recognized Graham's individual performance for 2022, including his leadership and significant individual contribution to the strong financial performance and record returns to shareholders. As a result, Graham received a short-term incentive outcome of 112% of target or 74% of the maximum available under the plan, which is the first time he's received an STI outcome above target. The long-term incentive is the component of executive remuneration most closely linked to the shareholder experience. It rewards executives for delivering shareholder returns that exceed peer benchmarks. Although our total shareholder return over the 4-year performance period was 37% and 60% in the 2022 financial year alone, this fell short of the threshold level required for vesting, and all of the 2019 financial year long-term incentive awards lapsed.
No changes are proposed to our remuneration framework for the 2023 Financial Year. In 2023, Graham will receive a 5% increase in fixed remuneration, his second increase since becoming CEO in 2015. Other key executive personnel will receive increases, primarily to reflect market movements in the geographies our executive personnel are located. Are there any questions or comments on this resolution? It doesn't look like we have any in the room. Hayley, do you have any online?
No, we have no questions online or on the phone.
Thank you. Then I'd now ask you to enter your vote on resolution 3. The voting restrictions for this resolution are set out in the Notice of Meeting , and of course, we have the proxies received on display now. Thank you. I'll now move to resolution 4, which is to seek shareholder approval for the proposed grant of rights to our CEO. While we intend to source the shares that will be allocated to Graham from the market, if his award vests, the board is seeking shareholder approval in the interests of transparency and good corporate governance, and to preserve flexibility to issue shares if that is considered more appropriate at the time of vesting. The rights relate to Graham's long-term incentive for the 2023 financial year and the deferred equity component of his short-term incentive award for the 2022 financial year.
As I mentioned earlier, we made changes to the vesting conditions by adding two strategic measures, one on climate change and one on portfolio, accounting for 10% each. Performance on each will be assessed by the board at the end of the four-year performance period in June 2026. The remaining 80% will continue to be assessed using relative total shareholder return over a four-year performance period. The manner in which performance is assessed is set out in the Notice of Meeting. Do we have any questions on this resolution? Don't have any in the room. Hayley, do you have any online?
No, there are no questions on this item.
Thanks, Hayley. I'll now ask you to enter your vote for Resolution Four. Again, the voting restrictions on this resolution are set out in the Notice of Meeting . And proxy is displayed on the screen. Thank you. I'll now move to resolution number 5. This resolution is a non-binding advisory vote in relation to South32's Climate Change Action Plan, which is set out on pages 68 to 105 of the Company's 2022 Sustainable Development Report. The Climate Change Action Plan is our latest climate change disclosure and sets out our approach, our commitments, our progress to date, our unique risks and opportunities, and the actions we are taking to play our part in addressing climate change.
Our greenhouse gas emissions reduction goals and target are delivered through the work described in this plan, which is a continuation of the work underway since 2015, when South32 was established. Delivering on our climate change commitments is fundamental to our purpose: to make a difference by developing natural resources, improving people's lives now and for generations to come. Our approach to climate change is aligned to that purpose and integrated with our strategy. As I mentioned earlier, it's focused on, first, reshaping our portfolio towards the commodities that are critical in the transition to a low carbon world. Second, decarbonizing our operations with a focus on the four operations within our portfolio that account for the majority of our greenhouse gas emissions. Third, understanding and responding to the potential physical impacts of climate change on our business to build operational resilience.
Fourth, working with others to innovate and address shared challenges across industry and to decarbonize the value chain. The plan is intended to provide transparency to shareholders on our approach to climate change and to describe the actions we're taking to address the risks and opportunities that climate change presents. As set out in the plan, we're building on the foundations of our long-term goal and medium-term target for Scope 1 and 2 greenhouse gas emissions by adding a long-term goal of net zero Scope 3 greenhouse gas emissions by 2050. As I said earlier, the plan also includes a new commitment that we will not develop or invest in greenfield metallurgical coal projects. The purpose of the vote on this resolution is to seek shareholder endorsement of that approach. It's an opportunity for our shareholders to discuss and provide feedback on this important topic.
Shareholders aren't being asked to take responsibility for the company's climate change strategy. This accountability sits firmly with your board, who've approved the Climate Change Action Plan. The vote on this resolution doesn't bind the directors or the company, as it's advisory only. However, I want to assure you that the board will take the outcome of the vote and shareholder feedback into consideration when determining the company's approach to climate change going forward.
To provide transparency to shareholders, we'll continue to provide annual updates on our p rogress on climate change, and we intend to prepare an updated Climate Change Action Plan at least every three years and submit the plan to shareholders for a non-binding advisory vote. The board recommends shareholders vote in favor of this resolution. Do we have any questions? Hayley, it doesn't look like we have any questions in the room. Do you have any from the webcast?
Yes, we do, Chair. The first question is from Miss Athena Pezzullo, and the question is: As net zero is purely a political consensus, not one based on science, what backup action plan does South32 have in the event that other countries drop net zero and decarbonization?
Thanks, Ms. Pezzullo, for your question. I think the approach South32 has taken in the Climate Change Action Plan should give you some assurance that our plans are credible, they're pragmatic, and they reflect the nature of our portfolio. You will see that we have set a medium-term target of 2035, not 2030, as some others have done, and, of course, as many have asked us to do, because we don't feel, given the complexity of some of our operations, that we're in a position to make that commitment. That ought, I think, to give you some confidence that as we've gone about setting our target and the goals that we've spoken about earlier today, we've done so with delivery in mind. Graham, anything you want to add to that question?
Probably the only thing I'd add, Karen, is I think we have positioned the portfolio with a bias towards base metals. If we think about that demand for base metals, we don't necessarily think it's gonna be triggered by regulatory changes by governments or legislative changes. The reality is, as you see customer demand today, we can already see changing when you look at EV penetration, when you look at the installation of more solar, which requires silver and copper panels. When you look at demand for more wind turbines, offshore requires more zinc. So from our perspective, regardless of regulatory changes, we believe customer demand is driving us towards the commodities that we've chosen to grow in. And certainly as an organization, we do believe in climate change, but putting aside that, we think customer demand is also gonna drive the demand for our products.
Thanks, Graham. I think one other comment I'd make about this is, we are at South32 in the fortunate position of not dealing with climate change as a project, if you like, set off to one side. You know, since the company was only formed in 2015, our thinking about climate change, our thinking about the orientation of the portfolio and the decarbonization of our assets, really has been part and parcel of the strategy development for the company, and is absolutely central to how we look at every decision that we need to make. Hayley?
The next question is also from Ms. Pezzoli, and the question is: How much in dollars is it costing South32 to do all this net zero action? Is South32 painting itself into a corner of decarbon, only to find demand for these drop off in the future?
Look, I think that the answer to that goes back to the comments I made earlier, which is about the prudence with which we've gone about putting our Climate Change Action Plan in place. So I don't see that as a risk, but Graham, do you want to?
Look, the majority of our carbon emissions come from two operations, Hillside and Worsley. Both of those, it's not about spending capital. As I talked about the boilers, the cost of converting a boiler is not materially high in terms of CapEx. It's more about energy sources. And if you look at South Africa, there will naturally be a move towards renewables, and we look to actually tap into that move, not to build our own renewable capacity. And as you think about what happens in Worsley around the coal, that sort of supply to create the steam as part of the Bayer process, that coal is naturally moving towards gas as coal runs out. So it's not very capital intensive for us. It's more about the energy sources than the long-term security of our business.
Thanks, Graham. Hayley.
Chair, the next question is from Fiona Deutsch, and her question is: We note that our company's 2022 Climate Change Action Plan states that metallurgical coal demand will be higher under a 1.5 degree scenario. We also note that the International Energy Agency states that under its 1.5 degree scenario, metallurgical coal demand falls almost as fast as thermal demand and no new mines will be needed. Why has South32 reached such a different conclusion from the IEA on the role of metallurgical coal in a low-carbon world?
Thanks, Hayley. I think we largely addressed this question earlier in the meeting, and in particular, just to emphasize the view that we have, a well-supported view, that metallurgical coal will continue to be required as a key component of the steelmaking process for a very long time to come, and the importance of steel in supporting alternative energy sources. So, Graham, anything you think we've missed in answering that earlier question you wanted to highlight?
The only thing I'd cover off is, we don't dispute the IEA's finding that metallurgical coal decline will drop off because it's made up of hard coking coal, semi-soft, PCI, et cetera. What we model in our numbers is hard coking coals, which is a component of metallurgical coal. We do believe that that demand will grow in a 1.5-degree world because of the reasons that Karen spoke about. We don't disagree with the outright finding. It's more the subset of what we believe that's important.
Thanks, Graham. Hayley.
I have another question from Ms. Pezzoli, and her question is: Given the complexity of decarbonizing and the enormous costs, what proof do you have that this is based on real science?
Thanks, Ms. Pezzoli. I assume you mean our target and our goals when you ask about the real science backing it. You know, I said earlier that we haven't gone into the preparation of the Climate Change Action Plan lightly. The board has played a key role in working with the management team to come up with the commitments that we've made, commitments that go to all aspects of the strategy. But if we think about the particular projects across our assets, and Graham spoke earlier about the four key assets that contribute most to our emissions profile, then a considerable amount of work is being done at the asset level to roll out these decarbonization projects. Some of that work will depend on technology to emerge, but some of that work is underway now.
I think it's important perhaps to understand not only the weighting of our emissions profile, but also some of the complexities involved in the work that we're doing. You know, nearly 60% of our Scope 1 and 2 emissions come from one asset, that's the Hillside Aluminum Smelter on the east coast of South Africa. The commercial, the technical, the social complexities involved in dealing with that significant contribution to our emissions profile are immense. And it is the reason, as I indicated earlier, that we have a 2035 target, a realistic target, we think, to reduce our greenhouse gas emissions in a way that not only takes those technical and commercial complexities into account, but the very real social consequences of dealing with that particular problem for us.
I think, you know, you would all be familiar with some of the challenges in working in that part of the world, which we can elaborate on if you would like. Hayley, anything else?
Chair, the next question is from Stephen Mayne, and his question is: Why not commit to a non-binding Climate Change Action Plan vote every year, just like the non-binding vote on the remuneration report? Also, when disclosing the outcome of voting on all resolutions today, could you please advise the ASX how many shareholders voted for and against each item, similar to what happens with a scheme of arrangement? This will provide a better gauge of retail shareholder sentiment on all resolutions, and with a disclosure initiative adopted by the likes of Metcash, Altium, and Dexus last year, and Tabcorp did it yesterday. I'd be interested to see how many retail shareholders supported the Climate Action Plan.
Thanks, Mr. Mayne. Let me take that second suggestion on board. On your first question, we did spend a lot of time thinking about whether we would put the Climate Change Action Plan up for shareholder consideration on an annual basis or every three years. In fact, last year, when we made the commitment that we would put a say on climate to a vote this year, we undertook to talk to a great many of our shareholders who had an interest in this subject and get their feedback about how they thought we should approach this, not only in terms of whether we put a vote up every year, but also in terms of the content that they were looking for on the Climate Change Action Plan. We've done a great many meetings seeking that input.
On balance, after we had those consultations, we came to the conclusion that most of our shareholders were very comfortable in having this resolution come forward every three years. We did commit during that consultation process that if there was a significant change, we may well come back to put a vote up in the interim. We've committed to making sure that we update our work on the action plan on an annual basis, and we think that that meets the ongoing needs of shareholders. But as I say, rest assured that if we did make any significant changes, we would bring those back to shareholders on a more, interim basis, if you like, than waiting the full three years.
Chair, this is the final question on the webcast, and it's from Ms. Pezzoli, and her question is: Has the board considered the toxic waste created by expired renewable energy sources, such as wind, solar, and batteries? What plans has the board in place for dealing with this environmentally toxic waste?
Oh, that, that's a very good question, Hayley, and I'm going to ask Graham to comment.
Thanks, Karen. Look, I think it is an interesting question. I mean, as the world sort of thinks about a more closed loop or a circular economy, the opportunities for, you know, some of these wastes, if you like, areas that are highlighted around batteries, actually also create opportunities. Not sure it's necessarily in our wheelhouse, or we provide the necessary skills for it, but it's certainly something we have a team having a think about and a look at what options are available or who else we might potentially partner with over life.
Thanks, Graham. I mean, I guess in all seriousness, it does raise the real issue for everybody dealing with the complexity of addressing the climate change imperative. You know, what we are committed to at South32 is recognizing the imperative, building it into our strategy, delivering on the commitments we've made. But there is no easy solution in this space, as I think we're all coming to understand and recognize. But thanks, Ms. Pezzoli, for your interest in the action plan and your questions today. We do appreciate it. Hayley?
Chair, we have no further questions on the webcast or on the phone.
Thank you. Then, could I ask you to enter your vote for resolution 5 now? And, as we have, the summary of the proxies are now on the screen. Thank you. We've now considered all of the items of business today, but before I close the meeting, are there any other questions that any shareholder would like to raise? We do have one in the room. Thank you.
This is with respect to climate change, independent of that. What is your position on utilization of solar energy at your operations around the globe? You know-
Yes.
You could still be using that. And, number two is, you know, you use so many machines which consume diesel. A lot of them either go, but inefficiently, or they are not utilized to the full capacity.
Yes.
This has got your climate impact and the cost impact to the shareholders, you know, your cost of operations. How are you tackling that?
Yeah. Indeed, it does. And I'm going to ask Graham to give you some specifics on the utilization of solar, because we do have it across a number of our operations. We also have significant opportunities in greenfield projects, like the Hermosa project that Graham spoke to earlier. But on the question of where we've done most of our work on solar and electrification of the fleet that you were talking about, Graham, you might just want to give us your thoughts.
Thanks, Karen. We do actually have some solar already in place. For example, at Cannington, the village and some of its infrastructure runs off a solar farm that was probably built about three and a half years ago. When it comes to heavy equipment, we're not like a large, iron ore mine, where we have a fleet of massive trucks. We probably have a smaller fleet of equipment, so we have less exposure to diesel and hence have smaller amounts of equipment. But I think there's always an opportunity to improve on the utilization of that equipment and the availability, and that's certainly a focus in every discussion we have around operational performance.
But I think medium to long term, and even probably more short to medium term, we've actually got a team, and we're working with a bigger consortium about how we move our vehicles away from diesel to more batteries, or renewable sources of power. So for example, you know, as we think about, particularly about places like Hermosa, we'll probably have 100% renewable power coming into the operation, which will be a combination of probably solar and wind. We're already exploring some of the underground equipment that are based off electric equipment, which we're trialing at Cannington, so that's certainly the way of the future. And as we think about replacing, you know, the power source in Hillside, we've been doing a lot of work on a project called Green Shoot, which is around a combination of solar and also wind.
We actually are looking in that space very strongly.
Thanks, Graham. Hayley, anything from you?
Nothing further, Chair.
Okay. Well, thank you. Given we don't have any further questions, if you haven't already done so, you might complete your voting cards and place them in the ballot boxes that will be passed around, or of course, enter your votes online. We will leave the poll open for a further 10 minutes just to give you an opportunity to complete that process if you haven't already done so. The results of the poll will be released to stock exchanges and published on the company's website as soon as possible.
That does bring us to the end of the 2022 AGM, and on behalf of all of the members of the board and all of us at South32, I would like to thank shareholders and guests for joining us today, and I invite those shareholders who are able to be with us in person to join us for some refreshments. We do look forward to your continued support in the coming year. Subject to the finalization of the poll, I now declare the meeting closed. Thank you again, and good afternoon.