What’s next for South32?
In May 2015, BHP (ASX: BHP) made the bold decision to spin out twenty-two of its second-tier assets into a brand-new company. South32 (ASX: S32) instantly became Australia’s third-largest listed miner, debuting on the ASX at a market value of more than $11b.
Since its demerger from BHP, the company has doubled down on copper, zinc and manganese while slowly shedding its coal, ferronickel and aluminium assets as it streamlines its portfolio.
The company’s most recent, and arguably its largest, change was announced in July this year, when it agreed to sell its aluminium and bauxite assets, including its interest in the Boddington bauxite mine and the Worsley alumina operation in WA as part of an $8.1b (US$5.6b) transaction with Alcoa (ASX: AAI).
The deal comprises US$3.1b in upfront cash consideration, US$1b in Alcoa shares, about US$750m in net debt and lease liabilities to be assumed by Alcoa and up to US$750m in contingent cash consideration, linked to alumina and aluminium prices to 2030.
By divesting higher-carbon and lower-margin assets, the company is increasing its focus on commodities expected to underpin the energy transition.
New chief executive Matthew Daley says the streamlined portfolio will deliver stronger margins, lower costs and long-term growth.
But the company’s long-term success will depend on more than market fundamentals.
As with any miner, South32’s progress continues to be shaped by project approvals, energy availability, weather events, geopolitical uncertainty and the increasingly difficult task of bringing new mineral deposits into production.
Hermosa: critical mineral crown jewel
South32 has expanded well beyond Australia and South Africa, formative regions for the company linked by its namesake, the 32nd parallel south.
In 2018, South32 made its first major growth move with the acquisition of Arizona Mining, a Canadian-listed junior explorer with a standout asset — the Hermosa zinc-lead-manganese-silver project in Arizona.
With this acquisition, South32 had bought its way into a new strategic market.
Hermosa had abundant opportunities thanks to its proximity to established US infrastructure and customers at a time when governments were increasingly concerned with supply-chain security.
Zinc is crucial to industrial infrastructure, largely for its applications with galvanised steel, while manganese is a key battery mineral, and the US has long been reliant on its importation.
Hermosa offered an opportunity to develop domestic production at one site, with the added benefit of also producing silver and lead. South32 says Hermosa is one of the only advanced mining projects in the US capable of producing critical minerals zinc and manganese.
In April this year, South32 lifted growth capital at its?Taylor deposit within the Hermosa project?in Arizona by US$1.1b, while pushing first production out to H2 FY28.??
Pre-production capital expenditure has been brought up to about US$3.3b, with the miner citing scope?changes, higher?construction costs and broader inflationary pressures including the impacts of US tariffs.??
South32 now expects Taylor’s 4.3mtpa processing plant to achieve nameplate capacity by FY31.?
The delay has been attributed to contractor performance and productivity challenges in shaft construction, with mitigation measures only partially offsetting impacts on development timelines.??
Despite the changes, South32 said updated studies continue to support Taylor as a large-scale, long-life underground operation, with?an initial?operating life extended to about 33 years, up from 28 years at final investment approval.?
The project is expected to deliver about 10.4mt of zinc equivalent production across its life, including 3.7mt of zinc, 4.6mt of lead and 247moz of silver, with steady-state production averaging about 346,000tpa of zinc equivalent.??
At steady state, the project is expected to generate average annual EBITDA of US$650m,?with a post-tax net present value of?about?US$3.1b, based on long-term pricing assumptions.?
An evolving company
In early 2022, South32 made its move into copper when it acquired a 45% stake in the Sierra Gorda copper project in Chile for US$1.4b. The remaining 55% is held by South32’s joint venture partner KGHM Polska Miedz, a global miner listed in Poland.
Sierra Gorda has a copper-molybdenum-gold sulphide mineral reserve of more than 1bt and an expected mine life of more than 20 years.
In early 2024, South32 made its official exit from coal with the decision to divest one of its most significant legacy assets, the Illawarra coal operation in NSW. Illawarra was sold to Golden Energy and Resources (GEAR) and M Resources in a deal valued at US$1.65b, which included US$964m in upfront cash.
In late 2025, the company completed its exit from ferronickel with the divestment of its Cerro Matoso mine and smelter in Colombia. The transaction followed a strategic review in response to structural changes in the nickel market.
At the time, South32 said the sale further streamlined its portfolio towards higher-margin businesses in minerals and metals critical to the world’s energy transition, providing balance sheet flexibility to support investment in growth options in copper and zinc.
In July, the company announced another major strategic shift, agreeing to sell its aluminium value chain assets to Alcoa.
Under the agreement, Alcoa will also acquire the Hillside aluminium smelter and idled Bayside smelter property in South Africa, as well as the Mineração Rio do Norte bauxite mine and the Alumar alumina refinery and aluminium smelter in Brazil.
Alcoa will also assume related rehabilitation provisions of about US$1.2b.
The acquisition comes as Matthew Daley steps into the role of chief executive and managing director of South32, after Graham Kerr stepped down in late June.
“Following completion, our portfolio will be focused on high-quality, long-life assets leveraged to attractive market fundamentals, with approximately 85% of pro-forma EBITDA from base and precious metals,” Mr Daley said.
South32 says its funded growth profile is expected to deliver about 55% production growth from the Taylor project and Sierra Gorda’s fourth grinding line expansion.
“Our business will be simpler with a portfolio of higher margin upstream operations, reduced complexity and greater resilience,” Mr Daley said.
“This will enable a leaner, lower-cost operating model that will deliver ongoing value through an anticipated US$125m per annum reduction in overhead costs as new support structures are implemented.”
Transaction completion is targeted for H2 FY27, subject to South32 shareholder approval.
FY26 results exceed guidance
In FY26, South32?exceeded production guidance across several of its key businesses including aluminium and manganese.?
The company’s aluminium operations delivered 1% above production guidance, its Sierra Gorda copper mine exceeded guidance by 2% while its Cannington and manganese operations also finished 2% above guidance.
South32 also increased sales volumes by 15% in Q4, supported by improved logistics and stronger commodity markets.?
Construction of the Taylor zinc-lead-silver project at Hermosa continued during Q4.
On July 1, the Sierra Gorda joint venture approved its fourth grinding line project, while Hermosa received its final record of decision from the US Forest Service on July 7, completing the federal permitting process.
Mr Daley said the company had delivered a strong operational performance while repositioning the business for future growth.?
“We continued to deliver strong operating results, exceeding group production guidance for FY26,” he said.?
“We increased quarterly sales volumes by 15%, capturing the benefit of strong market conditions across many of our commodities and releasing working capital which added to the group’s cash generation.?
“We [also] achieved significant milestones for our copper and zinc development projects during the period.”?
With the Alcoa transaction targeted for completion in H2 FY27, South32’s next phase is becoming clearer.
The company says Taylor and Sierra Gorda’s fourth grinding line will deliver about 55% production growth, leaving the success of its decade-long portfolio transformation increasingly dependent on the execution of those two projects.
