Plan in place for hard years ahead
SOUTH32, created in the mining sector’s biggest spin-off in about a decade, expects a couple more tough years ahead for the industry and will keep an eye open for any potential acquisitions.
The Perth-based mining company is focused on improving performance at its operations, ranging from alumina to silver, chief executive Graham Kerr said yesterday in an interview with Bloomberg Television’s Trending-Business.
“We do have a strong balance sheet and we will look at opportunities, but mergers and acquisitions (activity) is always opportunistic; it’s not the strategy,” Kerr said. “Primary focus today is on the existing assets.”
Asset valuations are tumbling as mining companies are grappling with a slump in prices that’s pushed the Bloomberg commodity index of 22 raw materials, including nickel and silver, to the lowest since 1999 amid faltering demand in China, the biggest consumer of energy to metals.
“It’s always very difficult to call a bottom, and it’s a commodity-by-commodity analysis that’s required – we are planning for a couple of hard years in our business,” Kerr said. “If you look at the fundamentals, it’s very hard to believe commodity prices can continue to trade where they are, when the majority of producers are basically underwater.”
Output in eight of South32’s 12 product segments was poised to decline in the year through June, the company said earlier as it reported underlying earnings rose 41 percent. – Bloomberg