Could South32 shareholders be in for a $200 million payday?

A young woman sits on her lounge looking pleasantly surprised at what she's seeing on her laptop screen as she reads about the South32 share priceA young woman sits on her lounge looking pleasantly surprised at what she's seeing on her laptop screen as she reads about the South32 share price

South32 Ltd (ASX: S32) shareholders could be in for a payday following the recent sale of the company’s non-core base metals royalties.

The sale price of up to US$200 million, including US$103 million in cash payments, will be a big boost for South32’s coffers.

At yesterday’s market close, the South32 share price finished 0.85% higher at $3.56.

For context, the S&P/ASX 200 Index (ASX: XJO) was relatively flat, down 0.02%.

Let’s take a closer look at the diversified mining and metals company’s latest divestment.

South32 strengthens its balance sheet

The South32 share price has remained in a sideways channel of late. Yesterday, the company delivered its June quarterly report to the market.

In the update, South32 highlighted the successful sale of four non-core base metals royalties to Anglo Pacific Group Plc. This largely comprised copper and nickel assets in Australia, Chile, and the United States.

Subsequently, South32 expects to receive a US$135 million (A$195 million) post-tax gain within the ‘other income’ category in FY23.

However, it’s possible that with a souped-up balance sheet, South32 could hand some of the profits to shareholders in the near future. This may come in the form of a special dividend payment or even a bigger buyback.

South32 CEO, Graham Kerr provided a small hint, saying:

Our strong financial position and capital management framework, which is designed to reward our shareholders as our financial performance improves, supported further returns across the year via our on-market share buy-back, bringing total returns under our capital management program to US$1.9 billion since its inception.

If this does occur, South32 shares could move northwards if new investors decide to jump in on the action.

South32 share price summary

During the recent commodity boom, the South32 share price rocketed to an all-time high of $5.44.

However, this was short-lived. Aluminium prices have retraced to 52-week lows and coal has moved in circles. Ultimately, this has weighed on investor sentiment as talk of a potential recession persists.

So far in 2022, the South32 share price is down 12.5%. But it’s up 19% over the past 12 months.

South32 has a price-to-earnings (P/E) ratio of 10.22 and commands a market capitalisation of roughly $16.47 billion.

The post Could South32 shareholders be in for a $200 million payday? 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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