BHP Billiton's South32 disappoints in stock market debut
The coming out party for BHP Billiton’s spinoff South32 was mostly quiet on Monday as the ASX-listed company received a value at the lower end of analysts’ expectations.
Shares for South32 opened at A$2.13 (US$1.71) on the Australian Securities Exchange, way below analyst predictions of more than A$3.20 per share. According to WSJ, the current price gives the mining company a valuation at $A$11.3 billion (a little over US$9 billion).
Shares for South32 settled at A$2.05.
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In weeks leading up to the listing, many analysts had forecast a valuation between US$7 billion and US$13 billion based on the instability of commodity prices.
News of the disappointing outing hit BHP Billiton hard as shares for the world’s biggest miner by market capitalization fell $1.97 to $30.52 in early trading.
“I think it will be Thursday or Friday until everything settles down and we get a real, clear picture on where South32 will trade,” said Evan Lucas, a Melbourne-based analyst at broker IG. “It’s going to be pretty volatile until then, particularly given there was such a massive range of expectations ahead of the debut.”
For South32, the company’s main assets are mines and smelters focused on coal, manganese, aluminium and nickel. The company’ chief executive, Graham Kerr, said the company’s regional model would enable it to improve productivity and performance. “We will aim to combine strong operational performance with financial discipline as we seek to increase shareholder value,” Graham said.
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When asked if he was disappointed by South32’s debut price, Graham said: “I wouldn’t say I’m unhappy, but I’m not focused too much on it, to be honest.
In addition to the ASX, South32 will be listed on the U.K. and South Africa markets.
Vale invests $150mn to extend life of Manitoba operations
Vale has announced a $150mn CAD investment to extend current mining activities in Thompson, Manitoba by 10 years while aggressive exploration drilling of known orebodies holds the promise of mining well past 2040.
Global energy transition is boosting the market for nickel
The Thompson Mine Expansion is a two-phase project. The announcement represents Phase 1 and includes critical infrastructure such as new ventilation raises and fans, increased backfill capacity and additional power distribution. The changes are forecast to improve current production by 30%.
“This is the largest single investment we have made in our Thompson operations in the past two decades,” said Mark Travers, Executive Vice-President for Base Metals with Vale. “It is significant news for our employees, for the Thompson community and for the Province of Manitoba.
“The global movement to electric vehicles, renewable energies and carbon reduction has shone a welcome spotlight on nickel – positioning the metal we mine as a key contributor to a greener future and boosting world demand. We are proud that Thompson can be part of that future and part of the low carbon solution.”
Vale continues drilling program at Manitoba
Coupled with today’s announcement, Vale is continuing an extensive drilling program to further define known orebodies and search for new mineralization.
“This $150mn investment is just one part of our ambitious Thompson turnaround story. It is an indicator of our confidence in a long future for the Thompson operations,” added Dino Otranto, Chief Operating Officer for Vale’s North Atlantic Base Metals operations.
“Active collaboration between our design team, technical services, USW Local 6166, and our entire Thompson workforce has delivered a safe, efficient and fit-for-purpose plan that will enable us to extract the Thompson nickel resources for many years to come.”
The Thompson orebody was first discovered in 1956 by Vale (then known as Inco) following the adoption of new exploration technology and the largest exploration program to-date in the company’s history. Mining of the Thompson orebody began in 1961.
“We see the lighting of a path forward to a sustainable and prosperous future for Vale Base Metals in Manitoba,” said Gary Annett, General Manager of Vale’s Manitoba Operations.