South32 Poised for Transformational Deal Amid Market Speculation

South32, a $13 billion mining giant spun out of BHP in 2015, is drawing increased attention from dealmakers, with growing expectations that the company may soon embark on a major corporate transformation. Despite being relatively inactive in mergers and acquisitions since its inception, pressure is mounting on South32 to pursue growth and improve performance.

The sale of Illawarra Metallurgical Coal last year, which fetched $2.5 billion from Stanmore Coal backer Golden Energy and M Resources, has left South32 well-positioned for future opportunities. Market insiders suggest that the company’s leadership, led by CEO Graham Kerr, is actively discussing the company’s strategic direction, with a potential acquisition being a likely outcome.

Industry speculation points to a strong interest in acquiring a copper asset. One prime candidate is the remaining 55% stake in the Sierra Gorda copper mine in Chile, currently owned by Polish government-backed KGHM. South32 already owns a 45% share in the mine, making it a logical next step for expansion.

Another potential target is the Neves-Corvo copper and zinc mine in Portugal, currently on the market through advisory firm BMO. The asset, valued at around $1 billion, is also attracting interest from South32, although Sandfire Resources, another potential buyer, is expected to pass on the opportunity. Lundin Mining acquired Neves-Corvo in 2006 through a merger with EuroZinc Mining, and the mine’s zinc plant was recently expanded to a capacity of 2.5 million tonnes per annum. The mine is projected to produce 30,000 to 35,000 tonnes of copper in 2024.

As South32 faces increasing pressure from shareholders for transformational change, the company’s next move is eagerly anticipated by industry watchers, who believe a significant acquisition could be on the horizon.