South32 remains under Algo Engine sell conditions, but we continue to monitor the buying activity following increased speculation that the company could be a takeover target.
S32 reported June quarter production numbers which were in line with market expectations. Manganese and Cannington surprising to the upside and Met Coal disappointing.
June quarter manganese ore production was up on recent revised guidance.
2020 earnings will be down significantly on 2019, caused by lower commodity prices. EBIT will fall by 30 – 40% and EPS falls from $0.20 to $0.05. It’s not until 2022 that markets expect S32 earnings to recapture the levels of 2019.
A slow down in global economic growth would adversely impact prices across aluminium, alumina, manganese, nickel, silver and coal.
South32 is a globally diversified mining and metals company producing bauxite, alumina, aluminium, energy and metallurgical coal, manganese, nickel, silver, lead and zinc in Australia, Southern Africa and South America.
Earlier this week, Citi sent a note to clients suggesting Fortescue may look at a mega deal to buy the $9.7 billion diversified miner.
S32 remains under Algo Engine sell conditions, however, the opportunity is worth keeping an eye on, following the correction in the share price from $4.30 to $2.05 over the past 2 years.