South32 Ltd.

Overview Key strengths Key risks Diversified portfolio of commodities across multiple countries. Smaller scale compared with its large, diversified peers such as BHP Group Ltd., Rio Tinto PLC, and Glencore PLC. Repositioning of portfolio away from thermal coal into base metals. Cyclical and capital-intensive mining industry. Conservative financial policies with a flexible capital structure that can absorb some volatility through the mining cycle. Like its peers, South32 has a recent history of competing for opportunistic acquisitions of quality assets in lower-risk jurisdictions. The recent announcement by South32 to acquire a 45% interest in the Sierra Gorda copper mine in Chile for up to US$2.05 billion (of which US$500 million is subject to an earnout agreement) demonstrates the highly competitive environment

...South32 will continue to progress its portfolio and growth strategy, including through exploration and partnerships to manage concentration risk. The recent announcement by South32 to acquire a 45% interest in the Sierra Gorda copper mine in Chile for up to US$2.05 billion (of which US$500 million is subject to an earnout agreement) demonstrates the highly competitive environment for base metal assets. Notwithstanding this transaction, we believe South32 faces competition from the larger diversified players who have stronger balance sheet capacity to compete for good quality, low-cost and long-life assets. Thus, we expect greenfield development opportunities to continue to be a key pillar in South32's growth ambitions. In our view, South32's balance sheet may not...

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