I too struggle with the idea of selling off a cash cow which...

I too struggle with the idea of selling off a cash cow which produced mountains of free cash flow. I especially struggle, if the sale was for ideological reasons. For the record, I have trouble with the Taylor IRR, and like to write-off any concerns as passively accepting that people bigger and uglier than myself, who are running a $10+ billion company, have more idea than I do. I like to think Taylor is part of an overall strategy to develop Clarke and another (copper-focused) project at Hermosa.

The South32 annual report and various presentations already come across as far too woke and progressive for my tastes. Strangely enough, I've always liked this though, as contradictory as that may sound. My reasoning is that I would be happy if Tony Abbott had been made Prime Minister for life (joke; well...sort of...!). A focus on the pet projects of the left of politics is unfortunately the way of the world now and a key to getting things done. The climate change religion is almost untouchable. I need a company which is fully in tune with emissions and diversity targets, and willing to play the game and tick all the right boxes in order to get ahead. I chose South32 to invest in since it has the base metals exposure I crave. Electrification cannot happen without them. It's a safe bet. I need to deal with the fact that metallurgical coal looks totally out-of-place in a base metals company. Teck in Canada realised similarly. BHP divested oil and gas, and two coal mines. Like it or not (and I don't like it), I have to accept this divestment; as well as my own ignorance of finance, mining, and future commodity supply/demand equations for zinc and copper. I know what I don't know. It's an enormous damn list.

The ability of super funds to buy S32 shares with coal off the table (it sounds ridiculous, but as I wrote, it's 2024 and the way of the world) is certainly a consideration. It will not earn us one extra dollar though. It will only inflate the share price. I'm more interested in long term profitability and returns on capital.



USD$1.5 billion will go a long way towards paying for the Taylor project. GK said (above) that the capital will allow S32 to invest in "...development projects in copper and zinc". The zinc is obviously Taylor. I wonder though, if the copper mentioned is merely the fourth line at Sierra Gorda, or something else (developing Peake / Flux -- hopefully not!)? Which development projects? The purchase of a junior miner? There are some great opportunities at the moment. If part of the money were simply put into the Sierra Gorda expansion and cashflow positive in short order, we may not be much worse off. I'm speculating. I don't know. Ideally the cash is used for something which roughly (and quickly) replaces the Illawarra cash flow but in base metals.

I am certain this has been game-played and strategised to death at the Perth headquarters. Illawarra hasn't been sold on a whim or to meet emissions targets. Surely. No. I have to let this play out. We will find out in due course.

In regard to S32 being higher on the cost curve, okay sure. The assets were spun off by BHP because they contributed only about 4% to earnings (from memory) but were more of a nuisance than a benefit. BHP couldn't find a buyer at the right price (nobody wanted them!). The production costs are well known to the market and factored in to our share price right now. We benefit from a rise in commodity prices just the same as any other company.

I notice the word "turd" has been used twice by two different non-holding commenters today.




The reference comes from an episode of that Money Miners YouTube channel which chooses a different company each day to beat up on, in the search for clicks and attention. I find their antics puerile and unwatchable. That's where the terminology has come from. I mean no disrespect to the posters. They likely know this topic well, and have every right to be posting here. However, it's something I take into consideration for the sake of context.

I note we finished the day up almost 5% (although at noon, we were at break-even) so professional investors can't be too displeased with the news. I suspect 2024 will be a transformative year for S32, especially if the 4th line at Sierra Gorda is approved, Hermosa is already a 'go', and we may acquire another base metals asset in the coming months. I'm looking forward to it.