The South32 Ltd (ASX: S32) share price is up more than 1% today after the miner made an announcement regarding notes funding for its business.
For readers that aren't sure what South32 is, it's a diversified mining and metals business. It produces commodities including bauxite, alumina, aluminium, copper, silver, lead, zinc, nickel, metallurgical coal and manganese from operations in Australia, Southern Africa and South America.
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South32 prices new debt
The ASX mining share announced today that it has priced US$700 million of senior unsecured notes, which are due in 2032. The settlement of this offering of the notes is expected to happen in New York on 14 April 2022, subject to customary closing conditions.
South32 said that it intends to use the cash proceeds from the offering together with cash on hand, to fully repay money it had used through its acquisition bridge facility to fund the acquisition of a 45% interest in Sierra Gorda.
How much will the notes cost?
The miner told investors what the interest rate on this debt will be. The notes will pay interest in April and October each year, commencing in October 2022, at a rate of 4.35% per annum. These notes are guaranteed by South32 and some of its subsidiaries.
Management commentary
The South32 chief financial officer (CFO), Katie Tovich, said:
We are pleased that our strong financial position and disciplined approach to capital management has been recognised by investors with the successful execution of our inaugural US dollar bond issue.
Completion will enable our repayment of the US$800 million short-term acquisition bridge facility, that was drawn in February to support our acquisition of a 45% interest in the Sierra Gorda copper mine.
What do analysts think of the South32 share price?
One of the latest ratings on South32 comes from the broker Ord Minnett, which recently increased its price target on the business to $6.30 from $5. It still rates it as a buy.
The reason for that increased price target was the increase in prices for many of its commodities amid the Russian invasion of Ukraine, which has impacted different markets.
Based on Ord Minnett's numbers, the South32 share price is valued at 6x FY22's estimated earnings and 5x FY23's estimated earnings.
The high commodity prices are expected to flow through to bigger profits for the business and then fund larger dividends.
The broker thinks that South32 offers a grossed-up dividend yield of 14.8% in FY22 and 17.9% in FY23.
