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South32 share price sinks again

South32 Ltd (ASX: S32) saw its share price fall 3.8% to just over $1.00 in late afternoon trade today, as investors grow ever more concerned about falling commodity prices.

The miner was spun out of BHP Billiton Limited (ASX: BHP) in May this year, with shares trading above $2.00. It’s all been downhill from there.

South32 share price

Source: Yahoo Finance

Investors are clearly concerned that South32’s assets aren’t worth the value on the company’s books, with A$2.89 of net tangible assets alone at the end of June 2015. In other words, the market thinks the company is worth about one-third of what its assets were valued at just 5 months ago.

No doubt, South32 is facing the prospect of huge writedowns when it reports its half-year results for the six months to end of December in February 2016.

South32 has a diversified portfolio of commodities including alumina, aluminium, energy and metallurgical coal, manganese, nickel, lead, silver and zinc, with operations around the globe. My colleague Mitch Sonogan filed an in-depth report back in June this year warning investors to avoid South32.

Falling commodities prices aren’t the only problem though.

The company is expected to drop its secondary London listing early next year due to a lack of liquidity, which has contributed to the falling share price.

Mining.com also reports that South32 is set to let 400 jobs go at its South African manganese mine. Manganese prices have slumped by 30% since BHP announced plans to demerge its non-core assets in August 2014.

Foolish takeaway

With so much uncertainty surrounding the company, the share price could go anywhere, and the current large discount to net tangible assets suggests there’s no base that might hold the share price up at some stage.

Look out below.

 

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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