South32 bets big on copper boom

SPEAKER_1 (0:02)

You're listening to the MoneywebNOW podcast series with Simon Brown. Live streamed every weekday at 6:30 a.m. It's Tuesday, 20 October.

Simon Brown (0:15)

Chinese one- and five-year loan prime rates unchanged at 3 and 3.5 percent, respectively. I'm Simon Brown, coming at you live and loud from the Moneyweb Studios in Houghton, Johannesburg. On the show today, Alyssa Viljoen shares of course, MD Merchant West Investments, the South32 update. Lots of copper there, lots of zinc there, I mean important metals. And I've got to say, I don't think that the stock sold off a bit this year. Sorry, rallied quite hard this year, sold off recently, not looking overly expensive. And then all the jitters, the AI jitters over the weekend, which seemed overdone. I want to get a quick view on that. Zak Calisto, CEO of Karoo, first half results. Curious if the fuel price is seeing their less demand for driving, perhaps more demand for their services. And then Calgro M3 results as they spend on that bank and fault district city infrastructure and continue to dispose of non-core assets.

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Simon Brown (2:21)

Tilly and I with Alyssa Viljoen, Merchant West Investments, which is an MD. Alyssa, appreciate the early morning. South32, their production guidance came out yesterday, pretty much maintaining the guidance, not much change, zinc, copper, important parts of their business, and frankly, an important part of, I think, the broader picture. If we think the energy transition, if we think the AI infrastructure rollout, important minerals. Let's hear your takes on South32.

Alyssa Viljoen (2:49)

Morning, Simon. Yeah, the company, I think, really is fundamentally repositioning the business. So, like you said, they're focusing more on copper and zinc. And this is, I think, really important for AI infrastructure. But I think when we just look at those results, one of the highlights was actually the copper operation in Chile, the Sierra Gordon mine. And we saw production increasing about 11%, quarter on quarter. So, really high quality copper coming through and good production numbers. So, but strategically, the business is sort of shifting. And shareholders approved the proposal of the aluminum assets to Alcoa.

So, I think they're also getting rid of a lot of the sort of non-core assets and saying, you know, we don't want to be a diversified mining company anymore. We want to actually be focused on specific metal businesses, specifically copper and zinc. And this is really important because you've got this structural long-term theme actually coming through. You need copper for electric vehicles. You need copper for electricity grid. You need copper for upside down flying cars.

And, you know, it's difficult to actually bring copper into the market. These are really capital intensive projects. It takes years to actually bring this into development. On the other side, though, zinc is a bit less exciting from an investment perspective. But you still need zinc in industrial activity. So zinc is used to galvanize steel and protect the infrastructure from corrosion. So also a really important nettle. South32 is investing quite heavily in a project that they call HOMOSA in the US. They've spent quite a bit of money, almost $200 million during this quarter. So I think they really try to focus, and I like it when businesses focus, when they say, let's become experts in this one field. But this project that they're investing in the US still needs to deliver.

So I think the long-term story of South32 is changing.

Simon Brown (5:07)

It is, and I agree with you. I like to focus, as you say, COP is important, Zinc fits in there as well. That sale to ACOA, it's like 92 billion. It's a big, big, big number. But I do like that idea on the focus. A quick change of tack. We had US markets very spooked last week into the weekend.