South32 LTD’s [ASX:S32] shares are up by 0.98%, or 0.035 points, in today’s trading — continuing on from a very positive year.
S32 is an Australian mining company excavating minerals, including aluminium and manganese, through numerous sites around the world. It was part of BHP Billiton before they demerged in May 2015. In the last 12 months they’ve had a fairly positive performance. In May they hit record highs of $4.07 a share.
Earlier this month, the company presented an all-cash offer to acquire the remaining 83% of Canadian resource company Arizona Mining, a company in which they already held a 17% interest. The offer was worth an approximate of AU$1.75 billion.
Why the big purchase for South32?
The Toronto-listed Arizona Mining owns the zinc-lead-silver Hermosa project, which includes two polymetallic deposits and land with the potential for discovering additional reserves.
In a time when many mining companies are looking for new solutions, it’s easy to see why the purchase was so attractive — S32’s new site can act as a replacement for their ageing Queensland mine.
What does this mean for investors?
Whilst their recent news is all very exciting, the key to their future remains in their financial health.
The company currently has high cash coverage, and their low debt levels indicate they can utilise their borrowings efficiently in generating cash flow.
S32 has built up its total debt levels in the last 12 months, from nothing to AU$913m, including both the current and long-term debt.
With this rise, S32 currently has AU$2.71b remaining in cash for further short-term investments.
The company also exhibits proper management of their current assets and upcoming liabilities.
It appears South32 is looking long-term in their investment decisions and business operations.
South32 tends to be considered a reliable investment opportunity. Whilst there are always risks with mining stocks, S32 has a promising year ahead.
For Money Morning
PS: South32 has had a good year for investors. But Money Morning Resources Analyst Jason Stevenson has found some mining stocks in the he believes could bring investors vastly larger returns this year. To download his free investment report, ‘The Top 10 Mining Stocks in Australia for 2018’, click here.