South32 shares edge down as RBC calls Cerro Matoso sale 'positive for portfolio'
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More news: South32 shares were lower after morning trade as the diversified miner announced the sale of its Cerro Matoso ferronickel mine in Colombia.
Shares were down 0.5% to $3.11 at 12:20pm AEST, taking losses to nearly 20% over the last 12 months.
RBC Capital Markets analyst Kaan Peker said the divestment "does not come as a surprise". He noted that South32 had placed Cerro Matoso on a strategic review, with the intention to cut costs, close or divest the asset.
While the divestment price of $153 million is "marginally below" RBC's net asset value estimate for the mine, Peker said the move upgrades the portfolio as it removes a complex asset, which generates low free cash flow and faces ongoing structural headwinds.
He also believes the sale will increase South32's exposure to forward-facing commodities, such as copper, zinc and aluminium, and improves the prospects of capital management over the medium term.
South32 agrees $153m sale of Cerro Matoso mine to CoreX
The news: Diversified miner South32 has agreed to sell its Cerro Matoso ferronickel mine in Colombia to a subsidiary of industrial conglomerate CoreX for USD100 million ($153 million).
The numbers: South32 said CoreX will pay up to USD80 million in a price-linked consideration, based on future production and nickel prices. The remaining USD20 million will be paid in four equal instalments, based on milestones within the next five years for its Queresas and Porvenir North project.
The miner said its full-year financial statements will now include an impairment expense of USD130 million, which will be excluded from underlying earnings.
The context: South32 said the divestment follows a strategic review in response to structural changes in the nickel market.
On completion of the deal, which is expected in late 2025, CoreX will assume economic and operating control of Cerro Matoso, including all current and future liabilities.
Cerro Matoso is one of the largest open-pit ferronickel mines in the world. South32 assumed ownership of the site after the miner was spun off by BHP in 2015.
What they said: "The transaction is consistent with our strategy and will further streamline our portfolio toward higher margin businesses in minerals and metals critical to the world's energy transition," said South32 chief executive Graham Kerr.
"The transaction will deliver a clean separation of Cerro Matoso and provide additional balance sheet flexibility to support investment in our growth options in copper and zinc."
The source: ASX
