Our opinion on the current state of SOUTH32(S32)South32 (S32) was spun out of BHP Billiton in 2015, inheriting BHP's South African coal assets. Today, it is a diversified miner of base metals and minerals, including zinc, coal, aluminium, silver, lead, nickel, and manganese, with operations in South Africa, South America, and Australia. In June 2020, South32 sold its South African coal assets to Seriti, reflecting its strategic move away from coal and a general distancing from South Africa due to the country's administrative and legislative uncertainty. The company is also focusing on other assets and growth opportunities globally.
South32 made a significant acquisition by purchasing the remaining 83% of Arizona Mining, which has extensive interests in zinc, manganese, and silver. This acquisition positions South32 to capitalize on what CEO Graham Kerr described as "one of the most exciting base metal projects in the world." Like BHP and Anglo, South32 is moving away from South African investments until the new mining charter is finalized, focusing on more stable jurisdictions.
South32 is actively reshaping its portfolio by selling off its South African coal interests while retaining its South Deep mine for now. The company has also committed to a $1.4 billion share buy-back program and is working to transition its Hillside smelter in South Africa away from reliance on Eskom by adopting renewable energy sources over the next decade.
For the year ending 30th June 2024, South32 reported a 3% drop in revenue and headline earnings per share (HEPS) of 6.5 US cents, down from 22.6 US cents in the previous year. The company highlighted strong operational performance, disciplined cost management, and higher prices for its key commodities, contributing to FY24 underlying EBITDA of $1.8 billion and underlying earnings of $380 million.
In its report for the three months ending 30th September 2024, South32 noted the completion of the sale of Illawarra Metallurgical Coal, with upfront cash proceeds of $964 million. The company expanded its capital management program by $200 million and continued its on-market share buy-back. South32 also maintained its FY25 production guidance for all operations, with a 5% increase in aluminium production at Hillside Aluminium as it tested its maximum technical capacity.
Technically, South32's share price trended upward after the COVID-19 recovery, but it has been declining since March 2023 due to falling commodity prices. As a commodity-driven stock, it remains volatile, reflecting global fluctuations in base metal prices. While the company has strong potential, particularly as base metal prices recover, its exposure to market volatility makes it a higher-risk investment.
Overall, South32 remains a well-managed mining conglomerate with growth potential in the medium term, especially as it expands its presence in base metals outside of South Africa.
