The South32 Ltd (ASX: S32) share price is falling on Wednesday morning.
In early trade, the mining giant's shares are down 2% to $4.91.
Image source: Getty Images
Why is the South32 share price falling?
The weakness in the South32 share price on Wednesday appears to have been driven by an update on an acquisition.
According to the release, South32 has successfully completed the acquisition of an additional 16.6% shareholding and related rights in Mozal Aluminium from MCA Metals.
The release notes that South32 has paid a final cash consideration of ~US$200 million. This figure reflects elevated cash and working capital adjustments at acquisition date as the business continues to benefit from strong aluminium prices.
Following completion, South32's shareholding in Mozal Aluminium increases to 63.7%. This means that the company's equity share of aluminium production is now expected to be 281kt for FY 2022 and 370kt for FY 2023.
However, this appears to have fallen short of the market's expectations, which could be why the South32 share price is falling today.
Back in September, South32 revealed that it would acquire up to an additional 25% shareholding for US$250 million. This would take its shareholding up to 75%. But instead, the company has acquired 16.6% for US$200 million. Not only is it getting less shareholding, it is paying a higher premium for it.
'Another major milestone'
Nevertheless, South32's Chief Executive Officer, Graham Kerr, was pleased with the news.
Our acquisition of an additional interest in Mozal Aluminium is another major milestone and comes 22 years following the commissioning of the hydro-powered smelter. It further integrates our position along the aluminium value chain with the smelter a major customer of our Worsley Alumina refinery.
We are continuing to increase our exposure to metals important to a low carbon future. Following today's completion and the progress with the Alumar aluminium smelter restart in Brazil using 100% renewable power3, we remain on track to grow our annualised equity share of green aluminium production by more than 100% before the end of FY23, taking the Group's total aluminium production next year to 1,230kt.
