South32 Ltd (ASX: S32) shares have been a mixed bag in 2024 and are up more than 11% this year.
The mining giant announced late on Monday a USD$22 million (AUD$33 million) investment in Canadian copper explorer American Eagle Gold (TSXV: AE), which holds the Nakinilerak (NAK) copper project in British Columbia.
Management says the move puts South32 front and centre to potentially benefit from the next generation of copper resources. Let's see.
South32 completes copper investment
South32 shares have been volatile this year, as have the prices of various commodities the miner produces.
The stock has traded as high as $3.96 in June and as low as $2.83 in August.
Now the mining giant has announced its acquisition of a 19.9% interest in American Eagle Gold, which has an option to acquire 100% of the NAK project.
This option is obviously highly valuable to South32 – more than the $33 million it paid to acquire the nearly 20% stake in American Eagle.
Chief Development Officer Simon Collins said the move increases South32's vision to secure assets in critical base metals like copper, which are in high demand given the global energy transition.
The investment provides us with exposure to an emerging copper exploration project with significant potential in a premier mining district.
It aligns with out strategy to build on our portfolio transformation as we work to discover our next generation of base metals.
Meanwhile, American Eagle said the investment shows the NAK site's potential whilst providing the company with ample cash.
We are very pleased to welcome South32 as a strategic investor in American Eagle. This investment marks our second major mining enterprise that has endorsed our project and our work at the NAK copper-gold porphyry project.
This investment underscores NAK's potential, significantly strengthens our balance sheet, and enhances NAK's profile.
South32 shares are more than 1% in the red on Tuesday at the time of writing.
Yesterday's announcement wasn't price-sensitive at all, but the S&P/ASX 200 Materials Index (ASX: XMJ) is down nearly 2% at the time of publication, suggesting weakness across the entire sector in today's session.
South32 shares rally on fundamentals
South32 shares have also rallied in recent weeks after the company's quarterly update, posted in October.
The company put up mixed results, with declines in production for alumina, nickel, silver, and zinc.
In better news, copper production increased significantly by 15% to 17.6 thousand tonnes (kt), surpassing market expectations of 16.5kt.
Aside from that, strengthening commodity prices have also had a positive impact, lifting the entire basket of ASX mining stocks since September.
Foolish takeout
This new investment in American Eagle's copper project positions South32 well in the race to secure assets of base metals.
These metals are critical for the impeding energy transition and are in hot demand. South32 shares are up 21% in the past year.
