South32 share price backtracks amid sale of royalties

While the ASX moves sideways ahead of the United States June inflation report, the South32 Ltd (ASX: S32) share price is backtracking today.

South32’s shares are in decline amid an announcement by the company regarding the partial acquisition of its portfolio of royalties.

At the time of writing, the mining outfit’s shares are down 2.54% to $3.46.

For context, the S&P/ASX 200 Index (ASX: XJO) is just 0.02% lower to 6,604.8 points.

South32 offloads non-core base metals royalties

Investors are offloading South32 shares on the back of the company’s release to the ASX late Tuesday afternoon.

In its statement, South32 advised it has entered into a binding agreement with the Anglo Pacific Group. This will see the sale of four non-core base metals royalties for an initial amount of US$185 million.

The base metals royalties concern advanced development stage copper and nickel projects in Australia, Chile, and the United States.

South32 stated there are no conditions required to proceed with the transaction which will be completed within five business days.

The fixed consideration includes US$103 million in cash and US$82 million in Anglo Pacific shares to be issued to South32.

However, a further US$15 million is subject to a contingent payment.

Once the transaction is wrapped up, South32 will hold an approximate 16.9% interest in Anglo Pacific.

South32 CEO Graham Kerr commented:

Today’s sale of another non-core royalty package is a further step forward in unlocking latent value from our portfolio.

The proposed transaction will realise an immediate cash payment, while also retaining long-term exposure to these royalties through our shareholding in Anglo Pacific.

Following the sale, we still retain an exciting package of 36 royalties at different stages of maturity, weighted towards base metals.

About Anglo Pacific

Listed on the London Stock Exchange, Anglo Pacific is a global natural resources royalty and streaming company.

With a diversified portfolio of 16 assets, its business model provides investors with a de-risked exposure to the mining sector.

Anglo Pacific has a strong balance sheet and uses its free cash flow to grow its portfolio and pay dividends.

South32 share price snapshot

Regardless of today’s decline, it has been a positive 12 months for South32 shares, climbing close to 18%.

However, in 2022 alone, its share price is down by around 14% following a fall in commodity prices, such as for aluminium and nickel.

South32 has a price-to-earnings (P/E) ratio of 11.59 and commands a market capitalisation of roughly $16 billion.

The post South32 share price backtracks amid sale of royalties appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras 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 Scott Phillips.

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