The South32 Ltd (ASX: S32) share price is rising today.
The miner has a new addition to its explorations portfolio — one it expects to reap financial benefits from very quickly.
At the time of writing, the South32 share price is up 2.27% to $4.51.
Here are the details of its acquisition.
Image source: Getty Images
What asset has South32 bought?
Yesterday, the miner officially completed its acquisition of a 45% stake in the Sierra Gorda copper mine located in the Antofagasta region of Chile.
The mine holds more than a billion tonnes of copper-molybdenum-gold sulphide mineral reserve. It has a lifespan of more than 20 years.
The miner announced its plans to acquire Sierra Gorda back in October. The news excited ASX investors, with the South32 share price leaping as high as 11% to $4.07.
South32 paid US$1.4 billion for its stake, with a "contingent price-linked consideration component" of up to US$500 million. The company said the US$500 million is payable at "threshold copper production rates and prices" between now and 2025.
South32 funded the acquisition using US$600 million in cash and US$800 million in debt.
Looking forward, the miner anticipates mine life extension and improvement costs to be US$15 million. Operating unit costs are estimated at US$1.63 per pound of copper equivalent production.
What did management say?
Chief executive officer, Graham Kerr, said:
Our acquisition of an interest in the Sierra Gorda copper mine is a major milestone for South32.
By adding copper to our portfolio, along with our recent commitments to substantially increase our green aluminium production, we are making significant progress reshaping our portfolio for a low carbon future.
Sierra Gorda will immediately contribute to earnings, improve Group operating margins and give South32 long term exposure to a metal that is increasingly hard to discover, develop and produce.
We believe copper will play a key role in the world's decarbonisation and energy transition.
South32 share price snapshot
Over the past 12 months, the South32 share price has increased by 58%. The share price hit a 52-week low of $2.66 in March 2021 and a high of $4.65 just last week. This followed the release of the company's latest financial results.
The miner declared an interim dividend of US 8.7 cents per share fully franked. This was a giant 621% increase against its H1 FY21 payment.
The company has a market capitalisation of $20.9 billion and a price-to-earnings ratio (P/E) of 18.99.
