Why is the South32 (ASX:S32) share price hitting all-time highs today?

a person stands arms outstretched on the top of a mountain with a beautiful sunrise in the sky

Shares in diversified mining company South32 Ltd (ASX: S32) have nudged past 52-week highs today after pushing less than 2% higher on Wednesday.

South32 shares are now changing hands at $4.12 apiece after rallying as high as $4.19 and as low as $4.11 throughout the session.

Another record high for South32

It was a formidable year in 2021 for South32, with investors realising a 62% gain after shares jumped from a low of $2.78 back in August.

Since then, the South32 share price has been on an upward trajectory and shows no signs of slowing in today’s session.

Investors bought in at the lows following the release of its FY21 results which were a solid outcome for the company. South32 grew revenue 4% year on year to US$6.3 billion whereas EBITDA expanded by 32% to US$1.56 billion.

Much of the growth was underscored by corresponding record production throughout its portfolio constituents from projects like Australia Manganese, Worsley Alumina and also Brazil Alumina.

Aside from that, South32’s recent equity stake in the Sierra Gorda copper mine in Chile has given investors and brokers alike another boost of confidence.

For instance, Goldman Sachs reckons that South32 is a worthy aluminium play over the medium to long-term. The broker notes that South32 is “seeing positive sign posts on China production caps with greater focus on environmental issues, positively impacting price”.

As such, it estimates a free cash flow yield of around 16-18% in FY22 and FY23 for South 32 – over 20% at spot when factoring in the economics of this forecast, and values the company at $4.40 per share.

Macquarie is also constructive on South32, rating it as a buy on a $5.20 per share valuation. The investment bank also likes South32’s exposure to the mine in Chile in terms of free cash flow and forecasts a fully-franked dividend yield of 6% for investors to sink their teeth into in FY22.

Aside from these points, several of South32’s underlying commodities are well within another upswing and are showing strengths once again.

For instance, the price of aluminium is surging back towards 10-year highs at US$2,960/tonne, whereas zinc is now trading near the same record levels at US$3,607/tonne. Each of the metals has gained 46% and 30% in the past year, respectively.

Given the strengths in South32’s operations and underlying commodity markets, the picture starts to form as to what might be underpinning the South32 share price today.

South32 share price snapshot

In the last 12 months, the South32 share price has climbed more than 57% after rallying another 8% in the past month.

Shares have rallied this year to date as well and now sit 3% in the green, building on momentum earned in 2021.

Each of these returns is well ahead of the benchmark S&P/ASX 200 Index (ASX: XJO)’s return in the last year.

The post Why is the South32 (ASX:S32) share price hitting all-time highs today? appeared first on The Motley Fool Australia.

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The author has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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