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SOUTH32 LIMITED

S32 JSE Listed
Market Cap
~R195.0 Billion

Role: Senior Equity Analyst (JSE) Subject: Investment Analysis – South32 Limited (JSE: S32) Date: 13 January 2026

Here is the comprehensive investment analysis for South32 Limited, the diversified global mining group spun out of BHP in 2015.

Step 1: Data Gathering & Source Verification

Reporting Periods Analyzed:

Key SENS Announcements (Last 12 Months):

  • 09 Jan 2026: 2026 Calendar of Key Dates (Confirming Feb 2026 Interim Results release).
  • 01 Dec 2025: Completion of Cerro Matoso Divestment (Strategic portfolio exit).
  • 28 Aug 2025: Financial Results for the year ended 30 June 2025 (Profit rebound & Dividend declaration).
  • 17 Jul 2025: Quarterly Report June 2025 (Strong copper/aluminium production finish).

Step 2: Metric Extraction

  • Market Cap: ~R195.0 Billion (ZAR)

  • Context: A large-cap diversified miner, though smaller than former parent BHP or rival Glencore.

  • Dividend Yield (L12M): 2.5%

  • Calculation: Interim (3.4 US cents) + Final (2.6 US cents) = 6.0 US cents.
  • ZAR Equivalent: Approx. 108 ZAR cents total dividends against a share price of ~4340c.

  • Note: Yield is lower than historical averages due to heavy CAPEX spending on the Hermosa project and lower commodity prices earlier in the cycle.

  • Liquidity Check: High (Low Risk)

  • Metric: Average daily value traded on JSE is >R130m. As a dual-listed stock (ASX, LSE, JSE), arbitrage keeps liquidity deep.

  • P/E Ratio: 19.3x

  • Calculation: Share Price (~R43.40) / Earnings Per Share (~R2.25).

  • Context: Trading at a premium to the SA mining sector average (usually 8x-12x), reflecting the "green metal" premium and exit from coal.

  • Net Asset Value (NAV): R34.74 per share

  • Metric Used: Net Tangible Assets (NTA) of US$1.93 converted at ZAR/USD ~18.00.
  • Price-to-NAV: 1.25x. The stock trades at a premium to its tangible book value, pricing in future growth from the Hermosa (Zinc/Manganese) project.

Step 3: Operational & Strategic Analysis

Business Overview: South32 has aggressively transformed its portfolio to exit carbon-intensive assets (Coal) and focus on metals critical to the energy transition.

  • Primary Streams: Aluminium (Mozal/Hillside/Brazil), Alumina (Worsley), Copper (Sierra Gorda), Zinc/Lead/Silver (Cannington/Hermosa), and Manganese.
  • Recent Shifts: Completed the sale of Illawarra Metallurgical Coal and Cerro Matoso (Nickel) in late 2025 to fund the development of the Hermosa project in Arizona.

Performance Trend (FY2025 vs Prior):

  • Revenue: Expanding. Group revenue rose 17% to US$5.78bn in FY25.
  • Profitability: Turnaround. Swung from a loss in FY24 to a Profit After Tax of US666m.
  • Production: Copper production grew 20% and Aluminium 6%, offsetting declines in mature assets.
  • Costs: Operating margins expanded to 26% (from 22%) as higher volumes and cost-out initiatives took effect.

Sector Context (Macro Factor):

  • "Greenflation" & Grid Expansion: The global push for renewable energy grids is driving structural demand for Aluminium (lightweighting/cabling) and Copper (electrification). South32 is now a "pure play" on this theme relative to peers who still hold significant thermal coal assets.

Step 4: The Verdict

Bull Case (The "Hermosa" Pivot): Best-in-Class Portfolio Transformation. South32 has done what other miners are only talking about: it has successfully shed its "dirty" coal legacy and pivoted entirely to future-facing metals. The Hermosa project (Zinc/Manganese in the USA) is a tier-1 asset located in a low-risk jurisdiction. As this project ramps up, it will re-rate the company from a "mature yield stock" to a "growth miner."

Bear Case (Valuation Risk): Priced for Perfection. Trading at 19x P/E and a premium to NAV (1.25x), the market has already fully priced in the success of the transition. Execution risk at Hermosa remains high (mining projects rarely finish on time/budget), and the current 2.5% dividend yield provides little "wait-to-get-paid" incentive compared to peers like Glencore or Anglo American.

Fair Value Estimate: R38.00 - R41.00 Based on a Sum-of-the-Parts (SOTP) valuation. The current price of ~R43.40 suggests the stock is slightly overvalued in the short term, incorporating a "takeover premium" or excessive optimism on zinc prices.

Final Rating: HOLD

Rationale: The strategy is excellent, but the price is high. The stock has run hard (+18% in 6 months). Investors should wait for a pullback to the R38.00 level or a dip in Aluminium prices before adding fresh capital. It is a high-quality hold, but not a compelling buy at these levels.

AI Generated Analysis Last Updated: 2026-01-14