The South32 Ltd (ASX: S32) share price will be on watch this morning after the ASX miner announced that its current agreement with AusQuest will be extended for a further two years.
South32 has seen a sharp decline in its share price over the past two trading days, caught up in the wider market turmoil with its shares hit harder than most. During those two days alone, the South32 share price tumbled by 24%.
At the time of writing, the South32 share price is down by 1.67% to $1.765, while the S&P/ASX 200 Index (INDEXASX: XJO) has fallen 1.0%.
Details of the new agreement
The initial Strategic Alliance Agreement between South32 and AusQuest has been in place since early 2017 to develop a pipeline of high-potential exploration opportunities in Australia and internationally. With the new extension announced this morning, the agreement will be extended for a two-year period ending in December 2021.
The announcement noted that targeted projects under this strategic alliance include copper, zinc and nickel projects in Australia and Peru, although other types of minerals styles and jurisdictions may be incorporated.
Current exploration opportunities that are already in place between the two companies are set to continue to progress to the drill-ready stage. These exploration opportunities will be funded by South32.
The initial programs will continue to be managed by AusQuest in consultation with South32, with the aim of getting them up to the drill-ready stage as quickly as possible.
AusQuest currently has 6 exploration opportunities projects that fall under the Strategic Alliance Agreement, 3 of which are in Australia and 3 of which are in Peru.
South32 has the option to earn a 70% interest in each project for a total expenditure consideration of US$4.5 million when the projects reach the Drill Ready Opportunity stage. If South32 elects to earn an interest, a joint venture will be triggered between both companies.
Recap of South32's recent financial results
Last month, South32 reported a disappointing set of financial results for the six months to December 31 compared with the same period last year (1H19). The company reported a 16% decline in revenues to US$3.22 billion, while profits before tax dropped sharply by 72% to US$251 million. Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) came in at US$678 million, down 48%.
On a more positive note, the company expects production of most commodities, including alumina, aluminium, manganese and metallurgical coal, to increase going forward into FY21.
