South32’s earnings double on base metals and price surge

South32 has reported a doubling of its annual earnings thanks to a strong performance in its base metals business and commodity price tailwinds.

On Thursday, the group reported headline earnings of $1.08bn for the year to end-June, from $560m a year ago. HEPS rose to 24c from 12.4c.

South32 declared a final dividend of 5.4c per share and the board has extended the capital management programme to September 2027, with $209m remaining to be returned to shareholders.

At the halfway stage of the financial year, South32 paid an interim dividend of 3.9c.

Describing the year as “one of the best financial results” in its history, South32 reported that underlying earnings before interest, tax, depreciation and amortisation (ebitda) rose by 28% to $2.5bn.

“Cannington (Australia) and Sierra Gorda’s (Chile) operating performance enabled the group to capture the benefit of higher prices across copper, zinc and silver, supporting increased earnings and cash flow from our base metals business,” CEO Matt Daley said.

Group cash flow from operations increased by $352m to $610m after investing $711m at Hermosa (US) to grow the group’s future base metals production.

“This enabled the group to maintain a strong balance sheet with net cash of $283m, while returning $327m to shareholders during the year,” said Daley.

He added that the sale of South32’s aluminium value chain assets to Alcoa will simplify and strengthen its portfolio, positioning the group as a leading base metal focused company with high-margin assets and a pipeline of compelling growth options in copper, zinc and silver.

South32 is moving ahead with the sale of its aluminium value chain assets, excluding Mozal Aluminium , to Alcoa in a deal worth up to $5.6bn. The transaction, announced on July 1, is expected to be completed in the second half of the 2027 financial year, subject to shareholder approval and other conditions.

The sale marks one of the biggest changes to South32 ’s portfolio since the company was formed. Once completed, the company said about 85% of its earnings will come from base and precious metals, redirecting its focus away from aluminium and towards commodities such as copper and zinc.

“We are continuing to enhance our copper exposure through Sierra Gorda , which increased its ore reserve estimate by 61% to approximately 1.1-billion tonnes following successful infill drilling programmes. Sierra Gorda is expected to deliver production growth of 5% in FY27 and a further 2% in FY28, supported by higher planned copper grades,” he said.

Beyond this, the recently sanctioned fourth grinding line project is expected to increase production by approximately 30% from financial year 2031.

“We are advancing construction of the Taylor zinc-lead-silver project at Hermosa, which is expected to deliver attractive returns from its long-life, low-cost production of zinc, silver and lead. In addition, exploration results at the adjacent Peake deposit support its potential as a future source of copper production and mine life extension within the Taylor development,” he said.