BHP spin-off South32 on rebound

Is it time to go counter-cyclical on South32? A question for the brave no doubt, but some of the clouds for the BHP Billiton spin-off could be parting.

A key aspect has been the removal of the selling pressure on the new company’s shares with the BHP Billiton retail share sale facility finally coming to an end. This saw about 1 per cent of South32 new shares come into the market.

That was on top of a sell down by fund manager Blackrock of the postion it inherited via its 5 per cent stake in BHP Billiton.

The company’s short life on the market has been dogged by falling commodity prices that started before its listing on May 15.

A month ago South32 flagged writedowns on its $3bn manganese operations as the price for the steel-hardening agent headed to $3 a dry metric tonne unit from a boom-time high of $11.20 and an average of $4.95 in 2013-14. The extent of any writedowns conversely will have a small uplift on the depreciation side of the ledger.

That came with an announcement that it would indefinitely delay the restart of three of the four furnaces at its Metalloys smelter near Johannesberg, a statement that won some praise from investors for being seen to respond quickly to changed market conditions.

Analysts at Deutsche Bank, Societe Generale, Liberum Credit Suisse, and most recently UBS have all lifted their ratings for the stock as it head to yesterday’s close of $1.78, down 1c.

All the while a generally open register and a grab bag of relatively sound assets also makes it tasty for a Glencore wannabe in a falling market.