Recharging
2Q23 PRODUCTION
Need To Know
- 1H23 group production +12%
- Commodity prices easing modestly
- Share buyback almost complete
Group copper equivalent production increased 12% in 1H23, but South32 (S32) has cooled full year guidance at its WA Cannington asset. Commodity prices, while still elevated, are beginning to ease.
S32’s remodelled portfolio is set to benefit from the global decarbonisation dogma. Group production for the full year is in-line with FY23 guidance and the development projects are making good progress, particularly at Hermosa.
The blemish at Cannington relates to lower mill throughput and labour availability affecting mining rates. These are likely temporary impacts and should be recoverable in due course. Cannington production guidance was reduced by 11% for the full year.
Unit operating costs are in control which suggests inflationary pressures have been well handled.
The buyback is 95% complete with just US$108m remaining. The company has now repurchased US$1.6bn of shares at an average price of A$3.00 per share (752m shares) and has also paid US$525m in special dividends.
Investment view
Not everything goes in a straight line, even when a company is performing well operationally, and prices are trending up. The bigger picture for S32 is that it has successfully tweaked its portfolio towards metals that are in demand for the global decarbonisation push.
Earnings remain most sensitive to aluminium and alumina pricing followed by metallurgical coal.
As China re-opens its economy, there could be some benefit to S32 although only 18% of FY22 revenue came from that source.
S32 has two years of higher capex ahead, so execution on projects is another key aspect to monitor.
Stock overview
Share Price
Company overview
South32 is a global commodities producer of bauxite, alumina, aluminium, copper, zinc, and nickel. It has operations in Australia, South Africa, North America and South America. Its main focus is base metals.
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