Our opinion on the current state of SOUTH32(S32)South32 (S32) was spun out of BHP Billiton in 2015, inheriting all of BHP's South African coal assets. It has since established itself as a diversified miner of base metals and minerals, including zinc, coal, aluminium, silver, lead, nickel, and manganese. The company operates in South Africa, South America, and Australia.
In 2020, South32 separated its South African coal assets, particularly those supplying Eskom, into a separate entity, which was sold to Seriti on 1st June 2020. Concurrently, the company acquired the remaining 83% of Arizona Mining, which it did not already own. Arizona Mining holds extensive interests in zinc, manganese, and silver, described by South32's CEO, Graham Kerr, as "...one of the most exciting base metal projects in the world." This move reflects South32's broader strategy to distance itself from South Africa due to administrative and legislative uncertainties, a trend also observed with BHP and Anglo American. Kerr has stated that "...mining exploration is out of the question in South Africa until the new mining charter is finalised."
Despite moving away from South African investments, South32 retains ownership of its South Deep mine for the time being. The company has also committed to a $1.4 billion share buy-back program. As part of its sustainability goals, South32 is transitioning its Hillside smelter to renewable energy sources, aiming to reduce reliance on Eskom over the next decade.
In its results for the year to 30th June 2024, South32 reported a 3% decline in revenue and headline earnings per share (HEPS) of 6.5 cents (US), down from 22.6 cents in the previous year. The company stated, "Improved operating performance, disciplined cost management, and higher prices for our key commodities lifted our financial results to finish the year. As a result, we recorded FY24 Underlying EBITDA of US$1.8 billion and Underlying earnings of US$380 million."
In a report for the three months to 30th September 2024, South32 announced the completion of the sale of Illawarra Metallurgical Coal, receiving upfront cash proceeds of US$964 million. The company expanded its capital management program by US$200 million and commenced an on-market share buy-back. It maintained FY25 production guidance for all operations, with aluminium production increasing by 5% as Hillside Aluminium tested its maximum technical capacity.
In an update for the three months to 31st December 2024, South32 reported a 14% increase in quarterly alumina production and returned US$169 million to shareholders through dividends and share buy-backs. The company highlighted its strong balance sheet and platform for growth in minerals and metals critical to the global energy transition, stating, "Having successfully divested Illawarra Metallurgical Coal in the September 2024 quarter, we have a strong balance sheet and platform for growth in minerals and metals critical to the world's energy transition."
Technically, the share experienced an upward trend following the COVID-19 pandemic but has been in decline since March 2022 due to falling commodity prices. South32 remains a volatile commodity share, influenced by global commodity price trends and its strategic positioning in the energy transition market.
