Sean K
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Net debt increased half a billion to US$782 last quarter so not sure about buying anything. Maybe I'm missing something on their balance sheet.
S32 - South32 Limited
- Thread starter UMike
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Net debt increased half a billion to US$782 last quarter so not sure about buying anything. Maybe I'm missing something on their balance sheet.
DrBourse
If you don't Ask, you don't Get.
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Hi @Sean K ….
The S32 Debt increase is OK IMO… The S32 IV as at 8/11/23 was $5.26….
From My Analysis 8/11/23 the “Debt is Providing Positive Returns to Shareholders” & “ Company Share Price Provides More Value than the 10yr Bond Rate’’…
Also the following is an Old Post of mine from 2001 that may help explain my opinion of the S32 Debt:_
It is geared towards the Beginners, I know you will understand what I am getting at, and take the post below in the right way.....
“A High Debt/Equity Ratio OR Increased Debt needs to be investigated before anyone jumps to an incorrect assumption....
Debt can be a problem in some cases, But for some stocks the "Excessive or Increased Debt" is Providing Positive Returns to Shareholders....
Remember there is "Good, Productive Debt" But there is also "Bad and Unproductive Debt", the trick is identifying what is OK relative to individual companies....
Say that Debt is helping provide a 2.5% Div Yield,…..Zero Debt they would also probably have a Zero Div Yield - so theoretically a bit more Productive Debt could increase that return substantially - This is where astute directors etc come to the fore - Good Financial Management will make a company greater - Bad Financial Management will send a company broke....
Have you researched the Co Directors and the Financial Team, what is their past record like???....Do they know what they are doing with the current increased Debt???......How much is Short Term Debt, How much is Long Term Debt, What are the Loan Contract Details...are there Roll Over Provisions in the Contracts....What are the Loan % Rates, and are the Rates Competitive, or are they exorbitant????….Look at their Balance Sheet/Financial Position, Do they have money invested that could be used to repay the debts at a minutes notice????…..
What are the Tax Implications with such a High Debt Load, Good or Bad????….
In the current interest rate environment, can higher Debt to Equity ratios be sustained.
Back in the Old Days punters like us only had those mythical % guidelines to help our decision making process - in todays environment we have endless research resources at our fingertips..
The Old Rules like the ones people refer to are just that, "Old Rules.
Basically, the Debt to Equity Ratio (D/E Ratio) OR Increased Debt is explained as “to express all company liabilities as a % of Shareholders Equity”…..
I should also mention that there are NUMEROUS different ways to calculate the D/E Ratio…
Here are a few of the options:- ….
1. Total Liabilities/Shareholder Equity multiplied by 100 = Ratio %....
2. Interest Bearing Debt/ Shareholder Equity multiplied by 100 = Ratio %....
3. Interest Bearing Debt minus Cash/ Shareholder Equity multiplied by 100 = Ratio %....
4. Shareholder Equity/Long Term Debt multiplied by 100 = Ratio %....
5. Long Term Debt plus Total Equity = Capitalisation THEN That capitalisation Total is used in the final calculation of:- Capitalisation/Long Term Debt multiplied by 100 = Ratio %....
6. Total Liabilities/Net Worth minus Intangible Assets…
7. Financial Debt/ Shareholder Funds minus Intangibles & Preference Capital…
Some Analysts show their D/E Ratio as “Gearing or Leverage Ratios”…
And there are several more ways to calculate a D/E Ratio…
Misinterpreting the Debt can be fatal to your profits – you may be missing out on a great trade because you used a Ratio that was ridiculously high, when, with the correct calculation is was actually very low…
The bottom line as usual is DYOR…
Find out how your provider calculates their D/E Ratio, and then decide if that calculation is what you need to help in your analysis procedures….
The following snapshot shows just one example of what differences that can be produced – the result for each company’s D/E Ratio can differ by 100’s"….
Last edited:
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since S32 isn't restricted to 'world class assets ( or even tier one assets ) i would have thought they would gobble up some nearby tiddlers as 'bolt-ons ' and generate some synergies like that
however am really glad i didn't 'back-up the truck ' to add to my BHP divestment entitlement
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in many cases i was betting NO and reduced ( or exited ) my holdings in response ( and not just in the materials/energy sector )
Sean K
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Yes, and as @DrBourse says debt isn't necessarily a bad thing. I'm not following this closely enough to see how it's expanded by a half a bil in a quarter. Must be development capital, mostly at Hermosa and the return to shareholders. I think it was around $1.2b last FY. I guess with acquisitions you need the balance sheet and cash flow to finance getting into further debt. Not sure how much they could take on and still be in the debt to equity range DrB would be comfortable with. Could they bolt on $1b, $2b extra debt? I suppose it could be debt and/or script as well. They were in a better position for buying up a year or so ago, but other assets have shrunk in value too so it might just be relative. If they do go on M&A hopefully it's something I own!
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I don't follow S32, but this might be of interest for those that do.
www.abc.net.au
Fresh call for health tests on Groote Eylandt due to mine dust, following chief minister's resignation
The reshuffled Northern Territory government has refused to investigate health concerns about the remote manganese mine at the centre of former chief minister Natasha Fyles's resignation in December.
www.abc.net.au
Sean K
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This was hard to hold in 2023, what a crap year. Something seems to have changed. Maybe just general market sentiment at the end of last year that destroyed my full year XAO pluck.
Good morning
It has been reported today (22/02/23) via News Corp Media, that S32 cuts its copper production guidance by 3 per cent for the 2024 financial year, after mixed production results for the December quarter. South32 says operating unit costs are expected to be in line or below its guidance for the majority of its operations in the first half.
The company says it is well positioned to capture the benefit of improved market conditions through expected production growth of 7 per cent in the second half and its ongoing focus on cost efficiencies.
"In the December 2023 quarter, our production results were mixed," chief executive Graham Kerr says. "Highlights for the quarter included a 20 per cent increase in zinc and nickel and a 7 per cent increase in silver.
"We also delivered record aluminium production for the half, as Hillside Aluminium maintained its strong performance and Brazil Aluminium continued to ramp up. However, production from Brazil Alumina, Mozal Aluminium and molybdenum output from Sierra Gorda was below plan, with flow on impacts to annual production guidance."
Have a very nice week.
Kind regards
rcw1
It has been reported today (22/02/23) via News Corp Media, that S32 cuts its copper production guidance by 3 per cent for the 2024 financial year, after mixed production results for the December quarter. South32 says operating unit costs are expected to be in line or below its guidance for the majority of its operations in the first half.
The company says it is well positioned to capture the benefit of improved market conditions through expected production growth of 7 per cent in the second half and its ongoing focus on cost efficiencies.
"In the December 2023 quarter, our production results were mixed," chief executive Graham Kerr says. "Highlights for the quarter included a 20 per cent increase in zinc and nickel and a 7 per cent increase in silver.
"We also delivered record aluminium production for the half, as Hillside Aluminium maintained its strong performance and Brazil Aluminium continued to ramp up. However, production from Brazil Alumina, Mozal Aluminium and molybdenum output from Sierra Gorda was below plan, with flow on impacts to annual production guidance."
Have a very nice week.
Kind regards
rcw1
Sean K
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The SP pretty much fell over after I posted that chart above. XAO was on the same path so could have been following general sentiment, or some bad numbers were factored in. Just looks mixed on the surface of it but institutions probably had their own forecasts pencilled in.
UMike
Klutzing in Thai
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Looking at swapping some PNV for some S32.
Bounced off $3.01 before. Will it happen again?
Bounced off $3.01 before. Will it happen again?
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RESULTS FOR ANNOUNCEMENT TO THE MARKET
This page and the accompanying 57 pages comprise the half year end financial information given to the Australian Securities Exchange (ASX) under Listing Rule 4.2A.
This statement includes the unaudited consolidated results of the South32 Group for the half year ended 31 December 2023 (H1 FY24) compared with the half year ended 31 December 2022 (H1 FY23).
The half year report should be read in conjunction with the Financial Report for the year ended 30 June 2023.
Figures in italics indicate that an adjustment has been made since the financial information was previously reported.
US$M H1 FY24 H1 FY23 %
Underlying revenue 3,881 4,524 (14%)
Profit after tax 53 685 (92%)
Underlying earnings 40 560 (93%)
NET TANGIBLE ASSETS PER SHARE Net tangible assets per ordinary share were US$1.99 as at 31 December 2023 (US$2.02 as at 30 June 2023) (1) .
DIVIDENDS The Board has resolved to pay an interim dividend of US 0.4 cents per share (fully-franked) for the half year ended 31 December 2023.
The record date for determining entitlements to dividends is 8 March 2024; payment date is 4 April 2024.
part of a much longer release
PS (xx ) means DOWN )
i hold S32
$1 ??
will try to read in full later ..but the headline ..
do i want to throw in a cheeky bid .. decisions decisions
This page and the accompanying 57 pages comprise the half year end financial information given to the Australian Securities Exchange (ASX) under Listing Rule 4.2A.
This statement includes the unaudited consolidated results of the South32 Group for the half year ended 31 December 2023 (H1 FY24) compared with the half year ended 31 December 2022 (H1 FY23).
The half year report should be read in conjunction with the Financial Report for the year ended 30 June 2023.
Figures in italics indicate that an adjustment has been made since the financial information was previously reported.
US$M H1 FY24 H1 FY23 %
Underlying revenue 3,881 4,524 (14%)
Profit after tax 53 685 (92%)
Underlying earnings 40 560 (93%)
NET TANGIBLE ASSETS PER SHARE Net tangible assets per ordinary share were US$1.99 as at 31 December 2023 (US$2.02 as at 30 June 2023) (1) .
DIVIDENDS The Board has resolved to pay an interim dividend of US 0.4 cents per share (fully-franked) for the half year ended 31 December 2023.
The record date for determining entitlements to dividends is 8 March 2024; payment date is 4 April 2024.
part of a much longer release
PS (xx ) means DOWN )
i hold S32
$1 ??
will try to read in full later ..but the headline ..
do i want to throw in a cheeky bid .. decisions decisions
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South32 is unloved right now and that might be the best thing for long term investors
South32 is unloved right now and that might be the best thing for long term investors
Depressed commodity prices and rising costs are taking their toll at South32 but commodities is a sector where being contrarian can pay off.
not currently unloved enough to tempt me to add more
i hold S32 ( partly as a result of the BHP demerger )
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*** In addition, over 60% of the portfolio is linked to commodities that will benefit from decarbonisation, such as aluminium, copper and manganese. ***
looking at aluminium producers elsewhere i get the impression aluminium is a major casualty in the decarbonization trend
looking at aluminium producers elsewhere i get the impression aluminium is a major casualty in the decarbonization trend
Sean K
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South32 is unloved right now and that might be the best thing for long term investors
South32 is unloved right now and that might be the best thing for long term investors
Depressed commodity prices and rising costs are taking their toll at South32 but commodities is a sector where being contrarian can pay off.www.livewiremarkets.com
not currently unloved enough to tempt me to add more
i hold S32 ( partly as a result of the BHP demerger )
2021 was an excellent year. I bought most of mine around the 4 buck zone.
Just broken some more support. But support doesn't mean anything with this puppy.
Metals prices have killed it. Thanks China!
I wonder when things turn around, or are we going into a lost decade of low commodity prices...
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bought the ones i didn't get gifted ( from BHP ) for $2.63 and reduced the holding last year @ $4.40
i don't hate S32 but not currently excited enough to rush to but more , either
S32 might be the stock to watch to gauge wider mining trends though
i don't hate S32 but not currently excited enough to rush to but more , either
S32 might be the stock to watch to gauge wider mining trends though
It doesn't look great.
12 projects with a combined EBIT of $236M but $220M of that comes from just 2 projects, Illawarra and Cannington.
Hermossa projected IRR of only 12% using a 2013 zinc price of $3207 compared to today's $2340.
Looking at their earnings sensitivities on slide 54, they really need aluminium to improve.
Hermossa $2B cost.
Feels like they are going all in on Hermossa with pocket 2's.
Dividend of 0.4c just to maintain appearances.
Leave this one for braver souls for now.
12 projects with a combined EBIT of $236M but $220M of that comes from just 2 projects, Illawarra and Cannington.
Hermossa projected IRR of only 12% using a 2013 zinc price of $3207 compared to today's $2340.
Looking at their earnings sensitivities on slide 54, they really need aluminium to improve.
Hermossa $2B cost.
Feels like they are going all in on Hermossa with pocket 2's.
Dividend of 0.4c just to maintain appearances.
Leave this one for braver souls for now.
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Mining is a cyclical business.
I'm not brave enough to be buying S32 at the moment, but I'm happy to hang onto what I hold waiting for the inevitable upturn.
I'm not brave enough to be buying S32 at the moment, but I'm happy to hang onto what I hold waiting for the inevitable upturn.
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Yeah I'm not buying either despite having been a fan of the company and once eager to buy it if contrarian opportunity presented. Taylor at Hermosa has been such a disappointment with the huge write-down. I really fell for that project in part because of the size and silver in the resource.
One thing that's always left me uneasy about South though is its operations in S.Africa, a doomed and larcenous state I feel, and with electricity supply and cost being a critical issue too.
Held
One thing that's always left me uneasy about South though is its operations in S.Africa, a doomed and larcenous state I feel, and with electricity supply and cost being a critical issue too.
Held
Dona Ferentes
A little bit OC⚡DC
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“Like everyone we are seeing the nickel price crash with the increase in production coming out of Indonesia and their ability using Chinese technology to virtually convert class 2 [nickel] to class 1 at a price people didn’t think was possible”
- Graham Kerr, CEO South32 Ltd
- Graham Kerr, CEO South32 Ltd
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SALE OF ILLAWARRA METALLURGICAL COAL
South32 Limited (ASX / LSE / JSE: S32; ADR: SOUHY) (South32) has entered into a binding agreement to sell Illawarra Metallurgical Coal1 (Transaction) to an entity owned by Golden Energy and Resources Pte Ltd (GEAR) and M Resources Pty Ltd (M Resources) (the Buyer).
The consideration for the Transaction is up to US$1,650M comprising:
• Upfront cash consideration of US$1,050M2, payable at completion;
• Deferred cash consideration of US$250M, payable in 2030; and
• Contingent price-linked cash consideration of up to US$350M3. The total consideration represents a multiple of approximately 7.2x average annual free cash flow for Illawarra Metallurgical Coal4.
The Transaction is expected to complete in H1 FY25, subject to the satisfaction of certain conditions including Foreign Investment Review Board approval, customary regulatory approvals and the waiver or non-exercise of pre-emption rights held by BlueScope Steel (AIS) Proprietary Limited (BlueScope).
The Buyer will assume economic and operating control of Illawarra Metallurgical Coal on completion of the Transaction, including all current and future liabilities.
South32 Chief Executive Officer, Graham Kerr said: “This Transaction will realise significant value for our shareholders and is consistent with our strategy to reshape our portfolio toward commodities critical in the transition to a low-carbon future.
“It will streamline our portfolio, strengthen our balance sheet and unlock capital to invest in our high-quality development projects in copper and zinc. “The Transaction will also simplify our business and reduce our capital intensity.
“Illawarra Metallurgical Coal produces high-quality metallurgical coal, a key ingredient in the production of steel, which will be required until low-carbon steel becomes economically viable on a commercial scale.
“GEAR and M Resources are established participants in the Australian metallurgical coal industry, with a strong commitment to environmental and safety standards, who are well positioned to continue Illawarra Metallurgical Coal’s contribution to the local steel industry and the Illawarra and Macarthur regions.
“Our focus remains the safe and reliable operation of Illawarra Metallurgical Coal.
Over the coming months we will work with the Buyer, our workforce, the local community, government, customers and suppliers to support a successful transition of ownership.”
Transaction highlights
The Transaction will unlock significant value for our shareholders and is consistent with our strategy:
• Upfront and deferred cash consideration of US$1,300M plus exposure to metallurgical coal price upside of up to US$350M through contingent price-linked cash consideration;
• Simplifies our portfolio to focus on our operating positions and growth options in the aluminium value chain, base metals and manganese;
• Strengthens our balance sheet and unlocks capital to invest in our high-quality development projects in copper and zinc, which have the potential to underpin a ~45% increase in our base metals production5;
• Reduces our operating footprint and our functional support; and
• Reduces our capital intensity, with Illawarra Metallurgical Coal comprising ~35% of Group capital expenditure6.
Following completion, the proceeds from the Transaction will be allocated in accordance with our capital management framework and commitment to an investment grade credit rating.
Our capital management framework is designed to support investment in our business and deliver returns to shareholders in the most efficient and value accretive manner.
Transaction details The Transaction is subject to the waiver or non-exercise of pre-emption rights held by BlueScope, pursuant to a coal supply agreement between Illawarra Metallurgical Coal and BlueScope. If BlueScope exercises its pre-emption rights, the Transaction with the Buyer will not proceed and South32 will instead divest Illawarra Metallurgical Coal to BlueScope on the same commercial terms and conditions as agreed with the Buyer.
The Transaction is also subject to no material adverse change prior to completion, pursuant to which the Buyer may elect to terminate the Transaction if an uncured event occurs resulting in a significant reduction in coal output, net assets or reserves.
The material adverse change definition is also subject to a number of customary exclusions.
The Transaction includes an upfront deposit of US$40M payable to South32.
The deposit will be refunded if the conditions precedent to the Transaction are not satisfied (with the exception of international merger clearances)
Accounting and tax
Illawarra Metallurgical Coal will be reported in the South32 Group’s Underlying financial results as a discontinued operation until completion of the Transaction.
Upon completion, South32’s shareholding in Illawarra Metallurgical Coal, including all associated assets and liabilities, will be transferred to the Buyer.
As a result of the Transaction, the Group’s FY24 financial statements will include a non-cash impairment reversal of up to ~US$520M (~US$370M post-tax).
This income will be excluded from FY24 Underlying earnings, in accordance with the Group’s accounting policies.
We do not expect a cash tax liability upon completion of the Transaction.
Advisers BofA Securities is acting as a financial adviser and Herbert Smith Freehills as legal adviser to South32.
The Buyer GEAR M Illawarra Met Coal Pty Ltd will acquire 100% of Illawarra Metallurgical Coal. Subsidiaries of GEAR and M Resources hold shares in GEAR M Illawarra Met Coal Pty Ltd of 70% and 30% respectively.
The completion obligations of the Buyer are guaranteed by GEAR.
GEAR is an investment vehicle that is focused on resources in Asia Pacific.
GEAR’s current major investments include a 59% interest in Stanmore Resources Limited, an Australian domiciled and listed metallurgical coal producer with operations in the Bowen Basin in Queensland, and a 50% interest in Ravenswood Gold, a significant gold mining operation located in north-east Queensland.
M Resources is an investment and marketing company with a global market presence and offices in Australia, Singapore, Switzerland, UK, US, India, Latin America, and China.
M Resources specialises in the trading of various metallurgical coal products for steel manufacturing.
M Resources also has substantial investments across the mining value chain, including Stanmore Resources, One Rail, Metarock, and others.
i hold S32
will be interesting to see if BSL takes the preemptive rights up
how will the market react to this
seems that S32 can't operate coal mines effectively ( first the African assets,now this )
South32 Limited (ASX / LSE / JSE: S32; ADR: SOUHY) (South32) has entered into a binding agreement to sell Illawarra Metallurgical Coal1 (Transaction) to an entity owned by Golden Energy and Resources Pte Ltd (GEAR) and M Resources Pty Ltd (M Resources) (the Buyer).
The consideration for the Transaction is up to US$1,650M comprising:
• Upfront cash consideration of US$1,050M2, payable at completion;
• Deferred cash consideration of US$250M, payable in 2030; and
• Contingent price-linked cash consideration of up to US$350M3. The total consideration represents a multiple of approximately 7.2x average annual free cash flow for Illawarra Metallurgical Coal4.
The Transaction is expected to complete in H1 FY25, subject to the satisfaction of certain conditions including Foreign Investment Review Board approval, customary regulatory approvals and the waiver or non-exercise of pre-emption rights held by BlueScope Steel (AIS) Proprietary Limited (BlueScope).
The Buyer will assume economic and operating control of Illawarra Metallurgical Coal on completion of the Transaction, including all current and future liabilities.
South32 Chief Executive Officer, Graham Kerr said: “This Transaction will realise significant value for our shareholders and is consistent with our strategy to reshape our portfolio toward commodities critical in the transition to a low-carbon future.
“It will streamline our portfolio, strengthen our balance sheet and unlock capital to invest in our high-quality development projects in copper and zinc. “The Transaction will also simplify our business and reduce our capital intensity.
“Illawarra Metallurgical Coal produces high-quality metallurgical coal, a key ingredient in the production of steel, which will be required until low-carbon steel becomes economically viable on a commercial scale.
“GEAR and M Resources are established participants in the Australian metallurgical coal industry, with a strong commitment to environmental and safety standards, who are well positioned to continue Illawarra Metallurgical Coal’s contribution to the local steel industry and the Illawarra and Macarthur regions.
“Our focus remains the safe and reliable operation of Illawarra Metallurgical Coal.
Over the coming months we will work with the Buyer, our workforce, the local community, government, customers and suppliers to support a successful transition of ownership.”
Transaction highlights
The Transaction will unlock significant value for our shareholders and is consistent with our strategy:
• Upfront and deferred cash consideration of US$1,300M plus exposure to metallurgical coal price upside of up to US$350M through contingent price-linked cash consideration;
• Simplifies our portfolio to focus on our operating positions and growth options in the aluminium value chain, base metals and manganese;
• Strengthens our balance sheet and unlocks capital to invest in our high-quality development projects in copper and zinc, which have the potential to underpin a ~45% increase in our base metals production5;
• Reduces our operating footprint and our functional support; and
• Reduces our capital intensity, with Illawarra Metallurgical Coal comprising ~35% of Group capital expenditure6.
Following completion, the proceeds from the Transaction will be allocated in accordance with our capital management framework and commitment to an investment grade credit rating.
Our capital management framework is designed to support investment in our business and deliver returns to shareholders in the most efficient and value accretive manner.
Transaction details The Transaction is subject to the waiver or non-exercise of pre-emption rights held by BlueScope, pursuant to a coal supply agreement between Illawarra Metallurgical Coal and BlueScope. If BlueScope exercises its pre-emption rights, the Transaction with the Buyer will not proceed and South32 will instead divest Illawarra Metallurgical Coal to BlueScope on the same commercial terms and conditions as agreed with the Buyer.
The Transaction is also subject to no material adverse change prior to completion, pursuant to which the Buyer may elect to terminate the Transaction if an uncured event occurs resulting in a significant reduction in coal output, net assets or reserves.
The material adverse change definition is also subject to a number of customary exclusions.
The Transaction includes an upfront deposit of US$40M payable to South32.
The deposit will be refunded if the conditions precedent to the Transaction are not satisfied (with the exception of international merger clearances)
Accounting and tax
Illawarra Metallurgical Coal will be reported in the South32 Group’s Underlying financial results as a discontinued operation until completion of the Transaction.
Upon completion, South32’s shareholding in Illawarra Metallurgical Coal, including all associated assets and liabilities, will be transferred to the Buyer.
As a result of the Transaction, the Group’s FY24 financial statements will include a non-cash impairment reversal of up to ~US$520M (~US$370M post-tax).
This income will be excluded from FY24 Underlying earnings, in accordance with the Group’s accounting policies.
We do not expect a cash tax liability upon completion of the Transaction.
Advisers BofA Securities is acting as a financial adviser and Herbert Smith Freehills as legal adviser to South32.
The Buyer GEAR M Illawarra Met Coal Pty Ltd will acquire 100% of Illawarra Metallurgical Coal. Subsidiaries of GEAR and M Resources hold shares in GEAR M Illawarra Met Coal Pty Ltd of 70% and 30% respectively.
The completion obligations of the Buyer are guaranteed by GEAR.
GEAR is an investment vehicle that is focused on resources in Asia Pacific.
GEAR’s current major investments include a 59% interest in Stanmore Resources Limited, an Australian domiciled and listed metallurgical coal producer with operations in the Bowen Basin in Queensland, and a 50% interest in Ravenswood Gold, a significant gold mining operation located in north-east Queensland.
M Resources is an investment and marketing company with a global market presence and offices in Australia, Singapore, Switzerland, UK, US, India, Latin America, and China.
M Resources specialises in the trading of various metallurgical coal products for steel manufacturing.
M Resources also has substantial investments across the mining value chain, including Stanmore Resources, One Rail, Metarock, and others.
i hold S32
will be interesting to see if BSL takes the preemptive rights up
how will the market react to this
seems that S32 can't operate coal mines effectively ( first the African assets,now this )
