South32 (ASX:S32) share price climbs as $2bn copper mine stake gets green light

South32 is another step closer to adding a copper mine to its list of projects…

| More on:
Two excited mining workers in yellow high vis vests and hardhats shake hands to congratulate each other on a mineral discovery

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The South32 Ltd (ASX: S32) share price is edging higher on Thursday following its latest update.

In afternoon trade, shares in the diversified mining and metals company are up 0.98% to $3.59 apiece. This comes after a positive step forward in the company's endeavours to acquire a 45% stake in the Sierra Gorda copper mine in Chile.

Let's take a look at what it means for the ASX-listed mining giant.

Copper go-ahead gives South32 share price a push

Investors are snapping up shares in Australia's sixth-largest listed mining company today. The enthusiasm likely stems from South32's Sierra Gorda transaction update released to the market this morning.

According to the release, KGHM Polska Miedz (KGHM) has advised it will not exercise its pre-emptive rights to increase its shareholding in the Sierra Gorda mine.

KGHM is a Polish mining company that owns the other 55% portion of Sierra Gorda. The decision means South32 can proceed with acquiring its full 45% stake as originally intended. In turn, investors are looking upon the South32 share price fondly today.

Furthermore, South32 expects completion of the transaction to occur early in the 2022 calendar year. As per the original announcement, the copper mine acquisition comes with a price tag of US$1.55 billion (A$2.15 billion). Another US$500 million will be made available dependent on copper production rates between 2022 and 2025.

The acquisition comes at an opportune time, with experts forecasting long-term copper supply constraints. For reference, Sierra Gorda is expected to produce 180kt of copper in 2021 on a 100% basis, alongside other metals.

Analysts' take

South32's expansion into copper, further diversifying its operations, has caught the eye of analysts. For instance, analysts at Goldman Sachs are bullish on the company and its potential to generate significant free cash flow in the future.

Currently, the broker holds a conviction 'buy' rating and a $4.40 price target on the South32 share price.

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Materials Shares

Female miner in hard hat and safety vest on laptop with mining drill in background.
Broker Notes

Experts reveal 2 buys and 1 sell in the ASX 200 materials sector

And they're not all mining companies, either.

Read more »

A woman jumps for joy with a rocket drawn on the wall behind her.
Materials Shares

Pilbara Minerals shares jumps 10% on big news

This lithium miner is having a day to remember on Wednesday. But why?

Read more »

Three miners looking at a tablet.
Materials Shares

Why Bell Potter says this ASX mining stock is a top buy

Let's see which stock the broker is tipping to deliver big returns.

Read more »

A man holds his hand under his chin as he concentrates on his laptop screen and reads about the ANZ share price
Materials Shares

Down 39% in a year, why IGO shares still look overpriced

A leading expert doesn’t believe IGO shares are out of the woods just yet.

Read more »

Man with rocket wings which have flames coming out of them.
Materials Shares

This ASX 300 stock is surging 25% on US defence deal

The announcement of a 'a pivotal milestone' is getting investors excited today.

Read more »

A happy construction worker or miner holds a fistful of Australian dollar notes.
Materials Shares

$5,000 invested in BHP shares 5 years ago is now worth…

Will its shareholders be happy with their investment? Let's find out.

Read more »

A young man punches the air in delight as he reacts to great news on his mobile phone.
Materials Shares

Guess which ASX 200 stock is ending the week with a bang thanks to Rio Tinto

This stock has won a major contract from the mining giant.

Read more »

A man wearing a hard hat and high visibility vest looks out over a vast plain where heavy mining equipment can be seen in the background.
Materials Shares

Is it time to buy ASX lithium shares?

Lithium prices continue to sink. Has this created a buying opportunity?

Read more »