The South32 share price is on fire today. Here’s why.
The post Why the South32 (ASX:S32) share price is leaping 5% today appeared first on The Motley Fool Australia. –
The S&P/ASX 200 Index (ASX: XJO) has opened higher this Friday, giving ASX investors a much needed day in the green after a week of red days. At the time of writing, the ASX 200 is up 0.12% to 7,378 points.
But one ASX 200 share is going far better. That would be South32 Ltd (ASX: S32). The South32 share price has run out of the gate today, up a hefty 5.26% so far to $3.40 a share.
This big upward move comes after yesterday’s dramatic sell-off of the diversified ASX miner. The South32 share price plummeted by as much as 5.1% at one point, even though it finished the day down 3.3%.
Today’s move erases those losses and more. South32 shares are now up 3.2% over the past trading week, almost 17% over the past month, and an impressive 36.8% in 2021 so far. Over the past 12 months, South32 shares are up an even more impressive 59.8%.
So, what’s behind this strong share price appreciation?
Rivers of aluminium
Well, since South32 is a mining company, we already have a fair idea of what’s going on here.
Commodity prices have spent the past few months on fire. Yes, iron ore has cooled off in recent weeks, adding pressure to other iron ore miners like South32’s old owner BHP Group Ltd (ASX: BHP), and Rio Tinto Limited (ASX: RIO). Gold has been a bit flat, too. But outside these areas, commodity pricing has been exploding.
According to Yahoo Finance, aluminium prices have just notched a 13-year high. Nickel is also at its highest level since 2014. Thermal coal and natural gas prices are also booming.
South32 has extensive operations extracting aluminium, alumina and bauxite, as well as coal and nickel. All of these commodities have seen their pricing shoot the roof in recent weeks.
So, perhaps it’s no surprise the South32 share price has done the same.
What’s next for the South32 share price?
As my Fool colleague James covered this morning, broker Goldman Sachs is currently very bullish on the South32 share price, even after its recent gains.
Goldman currently rates this ASX 200 miner as a ‘buy’, with a 12-month share price target of $3.60. That implies a potential upside of about 5.9% over the next 12 months, not including dividend returns.
Speaking of dividends, Goldman also reckons South32 will be able to provide “double-digit yields from FY 2023 through to FY 2026”.
At the current South32 share price, the miner has a market capitalisation of $15.92 billion and a dividend yield of 1.87%.
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Motley Fool contributor Sebastian Bowen 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 Bruce Jackson.