SPOTLIGHT: South32 faces cost-cutting pressure on price weakness

Commodity price weakness and cost-cutting measures will be in the spotlight when South32, the world’s largest producer of manganese ore, publishes its 2015 financial year results on Monday August 24.

Weak demand and oversupply have caused manganese ore prices to lose as much as 30% of their value since the start of 2015, while nickel and aluminium – where the miner also has interests – are trading near six-year lows.

As analysts at Investec wrote in May, it was an “unfortunate time” for BHP Billiton to divest its non-core assets.
South32’s share price on the Australian Securities Exchange (ASX) has lost over 25% of its value since trading started on May 18, and with the new company’s second-quarter results came the news of $1.9 billion in likely writedowns against its manganese and coal assets.

For now, “the investment case for South32 hinges on a few factors, including the price outlook for the company’s key commodities and the ability of the management team to reduce costs over the coming years,” Alon Olsha, head of metals and mining research at Macquarie...


Charlotte Radford

August 21, 2015

10:50 GMT