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.
• Related content: BHP Billiton Reveals New Details for South32; How Will it Impact the Market?
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.
• Related content: Rio Tinto follows BHP's lead, looks to sell its higher-cost aluminium assets
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.
Copper production from top ten companies to increase by 3.8%
Copper production from the world’s top companies is set to increase by up to 3.8% this year, following a fall of 0.2% in 2020, GlobalData analysis reveals. Last year’s marginal slump saw production drop to 11.76 million tonnes (Mt).
The initial impact of the COVID-19 pandemic on mining operations was immense, however, six of the ten largest copper producers succeeded in increasing output last year. In 2021, copper production from the top ten copper companies is expected to bounce back, rising by up to 3.8%, to reach 12.2Mt, according to GlobalData, a leading data and analytics company.
The highest increase in copper production was by Canada’s First Quantum, which, despite all the challenges, reported 10.4% growth in 2020. The company’s Sentinel mine in Zambia and Cobre Panama were key contributors to this growth. While the latter remained under care and maintenance between April and August 2020, it delivered record production levels during the subsequent months.
Codelco, the world’s largest producer of the red metal used in electric vehicles, also bucked the trend.
Vinneth Bajaj, Associate Project Manager at GlobalData, commented: “Despite Codelco reporting over 3,400 active cases during July 2020, the company achieved 1.2% growth in its production in 2020. The company implemented a four-phase plan, as part of the COVID-19 measures, to ensure the health and safety of its employees, while also avoiding any significant impact to its copper output.”
Although the overall impact was minimal, declines in production were observed from Glencore (8.2%), Antofagasta (4.7%), BHP (3.9%) and Freeport McMoRan (1.3%). Reduced operational workforces due to COVID-19 measures, lower ore grades and production halts due to maintenance were the key disruptors to output during 2020.
The move towards electric vehicles and clean energy from renewables sources such as solar panels and wind turbines has driven the copper price to all-time highs. Copper has been among the best performers over the last month where metals ranging from aluminum to iron ore have surged to their highest prices in years. The rally is being fueled by stimulus measures, near-zero interest rates and signs that economies are recovering from the global pandemic.