South32 Limited Up Streams On US$1 Billion Capital Management Plan

South32 Limited (ASX: S32) announced the further buyback of 1.5 million shares under its $1 billion capital management program. In today’s daily share buy-back notice, the miner notified the on-market buy-back of $4,774,653 value shares with as high as $3.260 per share and as low as $3.150 per share of consideration paid during the buy-back. It has taken the total value of shares bought back till date to approximately $838 million for the purchase of 270,982,781 shares on-market.

Recently, the company informed the commencement of a drilling program at Balladonia Nickel Project located in the Fraser Range region of Western Australia. As per the company’s information, this drilling program is designed to test the three different bedrock EM conductors, rich in sulphide mineralization.

South32’s Balladonia Nickel Project is subject to the Strategic Alliance Agreement (SAA) with AusQuest under which South32 has the right to earn a 70% interest in the project by spending US$4.0 million. The management believes that this drilling program may result in a new region for nickel exploration adjacent to the Nova-Bollinger discoveries.

In the quarterly results announcement, South32 announced 8% increase in total manganese ore production ahead of stronger demand and pricing. During the entire quarter ended 30 September 2018, the company continued its US$1 billion capital management program with net cash standing at US$679 million at the end of the quarter. The reduction in net cash position reflects the acquisition of Arizona Mining and Eagle Downs for a combined value of US$1,457 million.

As at 30 September 2018, 65% of the US$1 billion programs has been completed with US$154 million paid as special dividend and the purchase of 216M shares at a volume-weighted average price of A$3.03 per share. Further, the company invested US$12.1 million in exploration programs that includes a US$3.8 million investment directed towards the company’s 18 early stage greenfield exploration projects.

The annualized production rate in the September’s quarter was posted to 7.6 Mt underpinned by 54% growth in Illawarra Metallurgical Coal production of 1.9 Mt. It outlines a strong start of the year at Illawarra Metallurgical Coal driven by the improvement in longwall productivity. Looking into the FY 2019, the company expects to produce total 6,100 kt coal from Illawarra Metallurgical Coal project. FY19’s Alumina production is estimated to 3,965 kt from Worsley Alumina and 269 kt from Brazil Alumina. Whereas, Hillside Aluminium and Mozal Aluminium are forecasted to produce 720 kt and 269 kt aluminum, respectively.

With this update, South32 Limited shares edged up 1.887% or $0.060 to close at $3.240 on 24 December 2018. The stock last traded at a Price to Earnings ratio of 9.110 x with a market capitalization of $16.16 billion. However, the stock had a negative performance change of 5.11% over the last 12-months while since the past three months, it is down by 18.46%.


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