Our opinion on the current state of SOUTH32(S32)

South32 (S32) is a major player in the global mining sector, initially spun off from BHP Billiton in 2015 to manage BHP's South African coal assets. Today, it stands as a diversified miner involved in the extraction of base metals and minerals like zinc, coal, aluminium, silver, lead, nickel, and manganese, with operations extending across South Africa, South America, and Australia.

Significant strategic shifts have been a hallmark of South32's operational strategy. In a notable move, the company divested its South African coal assets, which primarily supplied Eskom, to Seriti as of 1st June 2020. This divestiture is part of a broader trend where South32 is reducing its exposure to South Africa, citing administrative and legislative uncertainties. This sentiment is mirrored in comments by CEO Graham Kerr, who has expressed reservations about mining exploration in South Africa until the mining charter is finalized.

Concurrently, South32 has enhanced its investment in base metals through the acquisition of the remaining 83% of Arizona Mining, not previously owned. This acquisition is strategic, considering Arizona Mining's rich portfolio in zinc, manganese, and silver, which Kerr described as "one of the most exciting base metal projects in the world."

Financially, South32 has faced challenges with its revenue down 20% for the year ending 30th June 2023. However, headline earnings per share (HEPS) stood at 22.6 cents (US), a decrease from the previous year's 59.5 cents. Despite this downturn, the company has reported strong production growth in commodities crucial for a low-carbon future, achieving record production levels in aluminium, base metals, and manganese.

Continued operational updates through 2023 and into 2024 reveal a company adapting to market demands and environmental considerations. Notably, South32 plans to transition its Hillside smelter to renewable energy sources and reduce dependence on Eskom over the next decade. This is part of a $1.4 billion share buy-back plan, indicating confidence in the company's value and future.

Recent production updates have been mixed, with stable guidance overall but specific challenges such as the impact of hurricane Megan on its Australian manganese operations. The company's share price has mirrored the volatility in the commodity markets, showing resilience post-COVID19 but facing declines as commodity prices fell since March 2023.

In conclusion, South32 remains a robust entity in the mining sector with a strategic focus on diversification and sustainability. It offers significant potential for investors looking to engage with a company actively transitioning towards commodities that support a low-carbon future while navigating the complexities of global and regional mining landscapes.