South32 1H Profit Jumps, Seeks Cerro Matoso Nickel Mine Sale...

South32 1H Profit Jumps, Seeks Cerro Matoso Nickel Mine Sale 13/02/2025

By Rhiannon Hoyle WSJ

Miner South32 on Thursday said its first-half profit rose more than sixfold on higher commodity prices, but that it will look to sell its Cerro Matoso nickel operation in northern Colombia amid a structural downturn in that market.

The Australia-based company said it made a net profit of $360 million for the six months through December, up from a profit of $53 million a year earlier. Earnings gained as commodity prices improved and the company produced more aluminum and copper, said Chief Executive Graham Kerr.

Underlying earnings before interest, taxes, depreciation and amortization rose by 44%, to $1.02 billion.

"We are focused on continuing our strong operating performance into the second half, unlocking value from our growth pipeline and continuing to reward shareholders as our financial performance improves," Kerr said.

The company said it would pay an interim dividend of 3.4 cents a share. A year ago, it paid investors 0.4 cents a share.

South32 said it has started a sales process for the Cerro Matoso operation as structural changes in the nickel market put pressure on both nickel prices and discounts for the company's ferronickel product.

A yearlong strategic review found some options to make the mine more competitive, but the estimated returns aren't sufficient enough for South32 to currently make further investments, it said.

South32 said it will continue to look at ways to cut costs at the operation, to offset the impact of lower planned nickel grades, in parallel with the sales process.

The company said it has benefited from the recent sale of its Illawarra Metallurgical Coal, which has sharpened the company's focus on minerals and metals it expects will be critical to the world's energy transition.

"The sale has also simplified our business, lowered our sustaining capital intensity and strengthened our balance sheet, enabling us to self-fund our growth in zinc and copper," Kerr said.

South32 is currently building the $2.16 billion Taylor zinc, lead and silver mine at its Hermosa project in southern Arizona.
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Ash here.

Here is some of the answer to my question - what will S32 buy?

GK says zinc and copper. Sure, go ahead.

Hermosa Taylor is destined to become a bottom quartile, top jurisdiction Zn producer. Hard to imagine another project matching or exceeding that measure, though if one of that quality became available, S32 would want it.

So the cash pile is destined for copper. Any acquisition would likely be a producing miner or under construction mine.

Sandfire is within reach, though it would be expensive. Capstone Copper? Hudbay? Lundin?

S32 already has a quality aluminium chain, the other major base metal in the electrical revolution.

Ash