Undeterred by gloomy share price

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 19 Nov 2015   Posted by admin


South32 chief executive Graham Kerr at the company’s first AGM in Perth.

By Courtney Pearson

AT its first annual general meeting, held in Perth, South32 has assured shareholders that their loyalty will pay off after a long period of uninspiring share prices.

“Looking ahead, despite the challenging market conditions, I can assure you that we have the right strategy, the right balance sheet strength and management commitment to deliver sector-leading returns,” South32 chief executive Graham Kerr said at the meeting.

The company officially demerged from major player BHP Billiton in May this year and has been fairly quiet since, focusing on optimising its existing assets rather than pushing for new projects.

South32 has been plagued by lower than expected share prices since its inception, which dropped to $1.245 per share on the day of the meeting.

However Mr Kerr said the company’s share price wasn’t abnormal when compared to what the rest of the industry.

“The share price is disappointing but looking across the broader sector, especially across the big tier mining companies, I think we’ve performed in line with what you see with our peers,” he said.

“We’re very thankful that we have a strong balance sheet.”

At the end of the 2015 financial year the company had $1.68 billion of free cash flow before interest and tax and $402 million of net debt.

“Most importantly, our goal is to increase total shareholder returns, and not solely focus on increasing production volume,” South32 chairman David Crawford said at the AGM.

The company planned to optimise the performance of its current assets, convert high value resources to reserves and identify new options to compete for capital.

South32 was also focused on building stronger stakeholder relationships, particularly in South Africa and Columbia.

The company has alumina and aluminium, nickel, manganese, silver, lead, zinc and coal assets in Australia, Africa and South America; its manganese business across Australia and Africa has been the worst affected, with a number of mines in South Africa closed until a review of the business has been completed.

South32 also revealed that it would review its tailings dams following an major incident at BHP Billiton and Vale’s Samarco project in Brazil where a dam burst, creating one of BHP Billiton’s worst environmental disasters.

“I think it’s a reminder of how diligent and focused you have to be about getting the basics right and not losing sight of this, and as a consequence we discussed this week with our board what our exposure is,”  Mr Kerr said.

“We will go back and review all of our tailings dams and make sure that we have not only our own stringent internal review but an external review.”