Our opinion on the current state of S32

South 32 (S32) was spun out of BHP Billiton in 2015 and contained all of BHP's South African coal assets. It is, in its own right, a diversified miner of base metals and minerals such as zinc, coal, aluminium, silver, lead, nickel and manganese. It operates in South Africa, South America and Australia. The company has separated out its coal assets in South Africa and especially those which supply Eskom, into a separate entity which was sold on 1st June 2020 to Seriti. At the same time the company has announced that it has bought the remaining 83% of Arizona Mining which it did not already own. Arizona Mining has extensive interests in zinc, manganese and silver described by South 32's CEO, Graham Kerr, as "...one of the most exciting base metal projects in the world". Clearly, this is another international mining house that is distancing itself from South Africa because of the administrative and legislative uncertainty here. Kerr has stated that "...mining exploration is out of the question in South Africa until the new mining charter is finalised". In moving away from South African investments, South 32 is following in the footsteps of BHP and Anglo. In our view, South32 is an excellent mining conglomerate with good medium-term potential to exploit the recovery in base metals and minerals. The company has said that for the moment it plans to hold onto its South Deep mine. The company is continuing with its $1,4bn share buy-back. The company is working to supply its Hillside smelter with renewable energy and transition away from Eskom over the next 10 years. In its results for the year to 30th June 2023 the company reported revenue down 20% and headline earnings per share (HEPS) of 22,6c (US) compared with 59,5c in the previous year. The company said, "During the year, we delivered strong production growth in commodities that are critical for a low-carbon future. We set three annual production records and realised the benefit of our recent portfolio improvements, increasing aluminium production by 14 per cent, base metals by 17 per cent and manganese by 4 per cent". Technically, the share was in an upward trend after COVID19, but has been falling since March 2023 as commodity prices fell.