South32 Open to Offers for Colombian Nickel Mine
February 16 2017 - 3:21AM
Dow Jones News
By Rhiannon Hoyle
SYDNEY--Mining company South32 Ltd. was born out of BHP Billiton
Ltd.'s desire to rid itself of assets ranging from alumina
refineries to manganese mines. Soon, South32 may consider doing
some housekeeping of its own.
In an interview, Chief Executive Graham Kerr said the company
was open to offers for its Cerro Matoso nickel mine in Colombia
because it was an odd fit in a portfolio that spans three
continents across the Southern Hemisphere. He also questioned
whether coal pits in South Africa had a long-term place in the
company's portfolio as more production is heading to domestic power
plants than markets overseas.
Global miners are sharpening their focus on shareholder value
even as rising commodity prices strengthen balance sheets after
several tough years. South32 ended December with $859 million in
net cash, up from $312 million six months earlier.
That has prompted many investors to speculate that South32 will
aggressively seek acquisitions, especially in base metals, while
other mining companies focus on cutting debt.
However, Mr. Kerr signaled the company continues to take a
cautious approach and its future could be owning fewer assets
rather than more. One deal that looks appealing is Anglo American
PLC's minority stakes in its manganese operations, but its
London-listed rival appears increasingly reluctant to sell
operations.
"You don't have to be the biggest to be the best," Mr. Kerr said
Thursday. "We don't see any compelling M&A acquisition at the
moment," other than some possible small exploration ventures.
Instead, the Perth-based miner is likely to consider capital
management--possibly an on-market buyback of shares--in the months
ahead. "We don't believe in holding excess cash," he said.
With big deals off the table for now, South32 might look to
carve out some operations that it inherited from BHP.
"The slightly odd fit is probably Cerro Matoso," a mine and
smelter in the Córdoba area of northern Colombia, Mr. Kerr said.
Most of South32's businesses are in Australia and South Africa.
South32 isn't currently marketing Cerro Matoso and has focused
on cutting costs and boosting production there over the past year.
"If someone is willing to come and address us to offer some dollars
that compensate for that, we would be interested in talking to
them," Mr. Kerr said.
South32 was created to house operations--including manganese and
bauxite mines--that struggled to attract investment under BHP,
which wanted to focus on expanding its oil, iron ore and copper
businesses. The spinoff was one of the biggest breakups in mining
history.
On Thursday, the company said it swung to a net profit of $620
million for the six months through December from a year-earlier
loss $1.75 billion. In the year-earlier period, it recorded about
$1.7 billion in impairment charges.
Among its operations, Cerro Matoso contributed about 5% of
revenue in the six months through December and it recorded a small
underlying loss. South32's coal mining operations in South
Africa--one of the country's top domestic suppliers and exporters
of coal used to make electricity--accounted for about 15% of
revenue and underlying earnings before interest and tax in the same
period.
Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com
(END) Dow Jones Newswires
February 16, 2017 03:06 ET (08:06 GMT)
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