South32 Mining and Metals is a mining and metals company based in Perth, Western Australia. The company’s assets include aluminium, bauxite, energy, and metallurgical coal, and it operates in Australia, South Africa, and South America.
South32 also has two development activities in North America and multiple partnerships with junior explorers worldwide, focusing on increasing base metals exposure.
About South32
South32 Ltd is a mining and metals company established in Australia. On May 25, 2015, South32 spun off from BHP Billiton. Alumina, aluminium, manganese, silver, zinc, lead, nickel, metallurgical coal (for steelmaking), and thermal coal are all produced.
Worsley Alumina, a Western Australian integrated bauxite mine and an alumina refinery, is one of the company’s sectors. It also owns and operates Hillside Aluminium, a South African aluminium smelter.
The company operates Mozal Aluminium as an Aluminium smelter in Mozambique; Brazil Alumina, an Alumina refinery in Brazil; Illawarra Metallurgical Coal, an underground metallurgical coal mine in New South Wales; Eagle Downs metallurgical coal deposit in Queensland, Australia.
South32 also operates Australia Manganese, which is an integrated producer of manganese ore in the Northern Territory and alloy in Tasmania, Australia; Cerro Matoso, which operates laterite ferronickel mining and smelting complex in Colombia; and Australia Manganese, which is an integrated producer of manganese ore in the Northern Territory and alloy in Tasmania, Australia.
The company is publicly traded on the Australian Securities Exchange and has secondary listings on the Johannesburg and London Stock Exchanges.
Image source: pvl – stock.adobe.com
South32 Investments
South32 manufactures aluminium and mines zinc, lead, silver, steel ingredient manganese, thermal coal, coking coal, and metallurgical coal, all of which are primarily utilised in the production of steel.
Aluminium, which accounts for more than one-third of South32’s income, is in high demand in the industrial sector and consumes a lot of energy.
South32 is working on several projects. These include the Ambler Metals joint venture, which has base metals and gold, and a Mexican base-metals project with zinc, lead, silver, and manganese.
These will not be operational next year or the year after, but South32 is investing $75 million on the Mexican project this year, with a pre-feasibility study scheduled by the end of the year.
South32 has also profited from the sale of an asset this year. It sold three gold royalties, which are rights to a percentage of future sales, for $40 million in cash and $15 million in Elemental Royalties shares, giving it a 19% shareholder value.
The list of investments and acquisitions of South32 include:
1. Arizona Mining
In June 2018, South32 acquired Arizona Mining. They paid $1.3 billion for the acquisition.
Arizona Mining is a Canadian mineral exploration firm concentrating its efforts on developing its 80 per cent owned Hermosa property in Santa Cruz County, Arizona.
The company provides mineral exploration and development services, including mining and extraction of zinc, lead, and silver assets, allowing clients to obtain high-quality minerals.
2. Trilogy Metals
Trilogy Metals Inc is a mineral exploration company in its early stages. The firm focuses on exploring and expanding its mineral resource properties, including the Upper Kobuk Mineral Projects in Alaska’s Ambler mining sector.
Its properties include an Arctic copper-zinc-lead-gold-silver project and other mineralised opportunities within a volcanogenic massive sulphide belt and a bornite carbonate-hosted copper project.
South32 IPO
As mentioned earlier, South32 has a primary IPO listing on the Australian Securities Exchange with secondary listings on the Johannesburg and London Stock Exchanges.
As the company is listed on some of the biggest stock exchanges, it draws shareholders worldwide.
Exchange rates and other non-cash impairments reduced South32’s after-tax profit in the first half of 2021 by half, to $53 million, compared to the first half of 2020, but underlying earnings increased by 4%, to $136 million.
South32 business strategy
South 32’s strategy is to make a difference through developing natural resources that will improve people’s lives now and for future generations. The company’s owners and partners have faith in it to realise the full potential of its resources.
The business strategy of South32 depends on:
- Optimising business by working safely, minimising impact, consistently delivering stable and predictable performance, and continually improving its competitiveness
- Unlock the full value of its business through its people, innovation, projects and technology
- Identify and pursue opportunities to sustainably reshape the company’s business for the future, and create enduring social, environmental and economic value.
The company also focuses on creating local jobs, empowering and investing in communities, and contributing to governments through paying taxes and royalties while achieving sector-leading returns for its shareholders.
South32 stock analysis
South32 is listed on the JSE under the symbol of S32. A relatively new player compared with other major mining houses, South32 has a portfolio of operations that provide exposure to what has been termed the secondary mining boom.
The stock of South32 remains in a weak consolidation. The fundamental view of the company doesn’t look attractive for investors. The dividend yield for the stock is 1.2%, while the P/E ratio is near 393.
S32 has shown a nice rise in the stock price over a year. The year ahead promises significant returns for the company due to high prices for aluminium, nickel, and metallurgical coal. In contrast, zinc, aluminium, manganese, and metallurgical coal will increase year on year.
One current disadvantage is that its dividend yield is far lower than its competitors. However, a long-running share repurchase program contributes to shareholders’ overall gains. Investors can invest in stocks for capital gains.
Bottom line
Although a new player in the industry, South32 has gained a strong reputation among investors and shareholders.
With a market cap of $147 billion, South32 appears undervalued based on earnings and provides exposure to the larger industrial-strength trend through a distinct set of metals.
South32, like the majors, aspires to achieve net-zero carbon emissions within the next 30 years, which will allow it to accelerate its ambition to reshape the company’s operation sustainably for the future.
