South32 in spotlight for big deal

South32 shareholders have been somewhat frustrated by its lack of movement to boost growth prospects or performance.

South32 is becoming a point of focus among deal makers, with expectations growing it could be about to embark on some sort of transformational corporate activity.

The logic behind the theory is that the $13bn miner has been relatively dormant from a mergers and acquisitions point of view since it was spun out of BHP around 2015.

Shareholders have been somewhat frustrated by its lack of movement to boost growth prospects or performance and the company is under pressure for transformational change.

But its sale of Illawarra Metallurgical Coal last year was considered widely around the market as a stellar result, netting $2.5bn from Stanmore Coal backer Golden Energy and M Resources and sees it cashed up for future opportunities.

It comes at a time that there’s chatter about plenty of robust discussion within South32’s boardroom about the company’s future direction, with chief executive Graham Kerr at the helm for a decade.

Most expect that at the forefront of the minds of the group’s decision makers is an acquisition. The thinking is that South32 would almost certainly love to buy a copper asset.

One of the obvious opportunities would be buying the remaining interest in the Sierra Gorda copper mine in Chile. It currently owns 45 per cent and the Polish government-backed KGHM owns the remainder.

Bubbling away in the background is the sale process for the Neves-Corvo copper and zinc mine in Portugal through advisory firm BMO that may sell for about $1bn.

South32 is seen as a candidate to line up for that asset – so is Sandfire Resources, although the understanding is that Sandfire will likely sidestep the process.

Lundin Mining acquired Neves-Corvo as part of the company’s 2006 merger with EuroZinc Mining.

The zinc plant was recently expanded to a design nameplate capacity of 2.5 million tonnes per annum. It is expected to produce 30,000 to 35,000 tonnes of copper for 2024.