South32 Ltd (ASX: S32) shares have been a volatile bunch in 2024, fluctuating between $2.83 and nearly $4.00 apiece.
Currently, they are up 9% this year to date and finished the session at $3.63 apiece on Friday.
But South32 investors have endured stomach-churning volatility this year as cyclical commodity markets took a turn downwards, with many major categories in the red so far in 2024.
So, what lies ahead for South32 shares in 2025? Let's see what the experts think.
Mixed markets for South32 shares
South32's portfolio of commodities, including aluminium, manganese, and copper, places it at the centre of the global energy transition.
These materials are seen as critical for producing renewable energy and lowering emissions, and consequently, they are on the Australian Government's Strategic Minerals List.
But the prices of these metals have been quite volatile in 2024. Aluminium, for instance, hit highs of US$2,767 per tonne in May.
It then sank to US$2,224 a tonne by the end of July before recovering to its current price of US$2,632 a tonne at the time of writing.
Still, these base metals are expected to contribute 90% of South32's revenue moving forward.
In addition, the miner signed a US$166 million agreement with the US Department of Energy (DOE) earlier this year to support its Clark manganese project. Manganese is used in the production of batteries.
So, irrespective of the current commodity price cycle, the general consensus is these metals are essential to meet the new age of energy demand.
The miner's position as a producer has several analysts keeping close eyes on South32 shares.
What's the broker view for 2025?
Brokers are bullish on South32 shares, with the consensus of analyst estimates recommending a buy on the mining stock.
Consensus estimates forecast earnings growth of 69% over the next two years and dividend growth of nearly 30%.
Meanwhile, Goldman Sachs rates South32 shares a buy and values the stock at $3.90 apiece.
After revising its capital expenditure assumptions for the year, it says there are four reasons it is bullish on the company.
We remain Buy rated on S32 based on:
- Robust [free cash flow] FCF in FY25 on higher metal prices and production recovery/growth: GS commodity team are bullish copper, aluminium, alumina, zinc and met coal…
- Attractive valuation… and an attractive NTM EV/EBITDA multiple of ~5.2x vs. the global mining sector average of ~6x…
- Strong balance sheet and supportive share buyback… the sale of the Illawarra met coal will push the balance sheet into a net cash position providing S32 with increased flexibility for capital returns…
- Upside potential from base metal growth projects: there are numerous growth projects/options that will provide long-dated base metals growth…
Goldman forecasts sales of $6 billion from the miner in 2025 and expects it to pay dividends of 6 cents per share.
If it does hit the $3.90 price target, this implies an 8.7% return for the next 12 months, including dividends.
Foolish takeaway
South32 shares have pushed sideways in the back end of 2024 as the company continues transitioning its portfolio to align with global energy trends.
But the prices of the commodities it mines have been volatile in the past few years, translating to volatile share prices for the miner.
Still, brokers rate the company a buy, putting it in a good position for 2025. The South32 share price is up 16% in the last 12 months.
