How Is South32 Capitalising on Copper and Manganese Growth Amid Power Uncertainty?
South32 reported a robust September quarter with a 12% rise in copper equivalent production and a 33% surge in manganese volumes, while advancing key projects and maintaining full-year guidance.
- 12% increase in payable copper equivalent production at Sierra Gorda
- 33% uplift in manganese volumes at Australia Manganese
- Continued capital investment in Hermosa zinc-lead-silver project
- Uncertainty over Mozal Aluminium’s electricity supply beyond March 2026
- US government support for Ambler Access Road unlocks Alaska mining potential
Strong Operational Momentum
South32 has delivered another quarter of solid operational performance, highlighted by a 12% increase in payable copper equivalent production at its Sierra Gorda mine and a remarkable 33% rise in manganese output at Australia Manganese. These gains reflect the company’s ongoing focus on safe, reliable operations and successful execution of recovery plans, particularly at Australia Manganese where export shipments ramped up as planned.
Alumina and aluminium production also showed modest growth, with Brazil Alumina operating above nameplate capacity and Mozal Aluminium increasing output by 3%, despite the looming challenge of uncertain electricity supply beyond March 2026. Hillside Aluminium continued to test its maximum technical capacity, underscoring operational resilience across South32’s portfolio.
Advancing Strategic Growth Projects
Capital expenditure remains focused on growth, with US$160 million invested at the Hermosa project during the quarter. Progress includes critical path shaft sinking at the Taylor zinc-lead-silver deposit and steady advancement of the exploration decline for the Clark battery-grade manganese deposit, both on track for completion by December 2025. Surface infrastructure development is also gaining momentum, setting the stage for increased construction activity throughout FY26.
Meanwhile, the US government’s recent approval of the Ambler Access Road represents a pivotal development for South32’s Ambler Metals joint venture in Alaska. This infrastructure unlocks access to high-grade copper and zinc resources, with the company also benefiting from a strategic equity investment by the US government in its joint venture partner, Trilogy Metals. Proceeds from share sales will be reinvested into exploration and development, signaling strong support for the project’s future.
Financial Strength and Portfolio Streamlining
South32’s financial position remains robust, supported by net distributions of US$117 million from equity accounted investments in Sierra Gorda and manganese operations. The company continued its disciplined capital management program, returning US$7 million to shareholders via share buy-backs and paying a fully-franked dividend of US$117 million post-quarter.
Notably, the divestment of Cerro Matoso is progressing as planned, expected to complete by December 2025. This move aligns with South32’s strategy to streamline its portfolio towards higher-margin commodities critical to the global energy transition.
Challenges on the Horizon
Despite these positive developments, uncertainty clouds the future of Mozal Aluminium, where negotiations to secure sufficient and affordable electricity have stalled. Without resolution, the smelter faces potential care and maintenance after the current supply agreement expires in March 2026, posing a significant operational risk.
Additionally, while production guidance for FY26 remains unchanged across all operations, the company acknowledges potential impacts from seasonal weather on manganese production and the inherent risks in completing the Cerro Matoso divestment.
Bottom Line?
South32’s strong quarter and strategic progress position it well, but power supply risks at Mozal and project execution remain key watchpoints.
Questions in the middle?
- Will South32 secure a long-term electricity supply to sustain Mozal Aluminium operations beyond March 2026?
- How will the Ambler Access Road development accelerate exploration and production timelines in Alaska?
- What impact will the Cerro Matoso divestment have on South32’s financials and portfolio focus?
