South32 (ASX:S32) increases capital returns by $258m and sets climate goals

The South32 Ltd (ASX:32) share price could find new fans after the miner increased its capital management program following an asset sale.
The post South32 (ASX:S32) increases capital returns by $258m and sets climate goals appeared first on The Motley Fool Australia. –

South32 share price capital management Businessman paying Australian money, ASX shares

The South32 Ltd (ASX:32) share price could find new fans after the miner increased its capital management program following an asset sale.

Management said it will add an extra US$200 million ($258 million) to the program that can be used for share buybacks and other capital return initiatives.

It will also aim to halve its Scope 1 and 2 operational emissions by FY35. South32 will outline details on both strategies in a call to analysts and investors today.

South32 outlines strategy post coal divestment

It isn’t coincidental that this news follows hot on the heels of its South Africa Energy Coal divestment.

I see the move as a double win for shareholders. It gives management some extra cash to play with and appeases concerns about its environmental track record.

Any increase in capital management is usually a positive for ASX shares. This should be no different for the South32 share price.

More share buybacks in the wings?

However, the additional US$200 million isn’t particularly significant as the miner had already allocated around US$1.86 billion to this long-standing program.

A chunk of this is being tipped into its on-market share buyback. The highest the diversified miner has paid for its shares was $4.235 in October 2018 and the lowest its paid was $1.625 in March of last year.

South32 still has US$115.9 million in its war chest for share buybacks. Given the modest US$200 million top-up that announced today, I won’t be surprised if most or all of it is earmarked for buybacks.

South32 share price outperforming

But management won’t be picking up bargains on that front. The South32 share price surged by nearly 60% over the past year.

That’s about inline with the BHP Group Ltd (ASX: BHP) share price, which spun-off South32 in 2015. While the South32 share price is ahead of Rio Tinto Limited (ASX: RIO) share price gain of 48%, the group is behind Fortescue Metals Group Limited (ASX: FMG) share price increase of 84%.

But that’s still well ahead of the30% gain by the S&P/ASX 200 Index (Index:^AXJO) over the same period.

What’s driving the South32 share price higher

Fortescue has an oversized leverage to record high iron ore prices, but South32 is also benefiting from the commodities supercycle 2.0.

Aluminium, zinc and nickel have all been running hot thanks to three tailwinds. These are the rise in construction activity, industrial production and the energy transition.

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Motley Fool contributor Brendon Lau owns shares of BHP Billiton Limited, Fortescue Metals Group Limited, Rio Tinto Ltd., and South32 Ltd. 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.

The post South32 (ASX:S32) increases capital returns by $258m and sets climate goals appeared first on The Motley Fool Australia.

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