Australian Investment Blog

ASX:S32 18/06/2018

South32 (ASX:S32) spending cash

Stock

South32 (S32) $3.80 as at 18/06/2018

Event

South32 has agreed to buy junior Canadian Zinc miner Arizona Mining for $1.75bil in cash, a huge 50% premium to the last traded price. South32 already holds 17% of the Toronto listed company, earning it a board seat and a close look at Arizona’s key asset, Hermosa, which holds zinc, silver and lead. The deal, although sizable, doesn’t require South32 to raise debt, with enough cash on the balance sheet, however the asset is still in development phase and will require working capital to begin production. South32 (S32) Chart South32 Chart

Market Matters Take/Outlook

The purchase is positive, however it has come at a cost – S32 paying well over market value. We are negative South32 for its exposure to a range of base metals/commodities we don’t like – met coal being the biggest problem.

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