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The South32 Ltd The stock price (ASX: S32) ended the day higher, up 0.27% to $ 3.66 at the closing bell.
Shares of the mining and metals company started the week well, with investors posting a small gain since closing $ 3.58 on Friday.
Today’s price level marks a two-year high for the company, after its shares made a one-way trip south from 2019-2020, well before the pandemic ensued.
Why the recent gain in the South32 share price? Let’s dive in and take a look.
What’s going on at South32?
To exit September, South32 announced that it had increased its stake in the Mozal Aluminum smelter to 72.1%.
Mozal is located in Mozambique and is a shared property between South32, Mitsubishi and the Government of Mozambique.
It has a production forecast of 273 kt in fiscal years 22 and 23 on South32’s former 47.1% stake, which means the forecast could likely be adjusted with the increased investment by the company.
The accretive transaction was carried out on an acquisition multiple of 3.6 times earnings before interest, taxes, depreciation and amortization (EBITDA), and will be financed with the cash available to the company, which amounted to 553 million euros. dollars in August.
The specific details of the transaction are that it involved a purchase price of US $ 250 million, that it includes a profit-sharing agreement on increasing the stake with the Mitsubishi partners, and that adjustments for working capital and debt must be carried out.
Aside from these advancements, two of the main feedstocks South32 is exposed to – coal and aluminum – have both gotten bounties in recent times.
The price of coal has catapulted 338% higher in the past 12 months and recently rose again at the end of September.
There, it jumped $ 63.5 / tonne in about 2 weeks, as the price of aluminum has also been climbing higher in the past 12 months.
More recently, it has climbed around 6% to trade at US $ 3,029 / tonne, a shade below its all-time highs in 2008.
The South32 share price is sensitive to volatility in commodity markets as it is an ASX resource share that produces commodities.
So, with the recent forces seen in the company’s underlying markets, it’s starting to get a feel for what’s driving the South32 share price lately.
South32 Share Price Snapshot
The South32 share price has climbed 48% this year to date, offering an outsized return at that level.
It has also gained 67% in the last 12 months and 7% in the last month.
Each of these returns exceeded the S & P / ASX 200 Index (ASX: XJO) by about 20% over the past year.