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MarketScreener Homepage  >  Equities  >  Australian Stock Exchange  >  South32 Limited    S32   AU000000S320


End-of-day quote. End-of-day quote Australian Stock Exchange - 10/29
2.05 AUD   -3.30%
10/29SOUTH32 : 2020 Annual General Meeting Voting Results
10/29SOUTH32 : 2020 Annual General Meeting Speeches
10/27SOUTH32 : helps local fire brigades prepare for summer (Illawarra Region)
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REFILE-COLUMN-Tasmanian manganese smelter sale points to greener future for metals: Russell

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08/17/2020 | 02:44am EDT

LAUNCESTON, Australia, Aug 17 (Reuters) - The sale of a manganese smelter in Tasmania isn't something that would normally gather too much attention in the wider world of global commodities, but it may be a harbinger of a wider move to more environmentally friendly steel and other metals.

Diversified miner South32 said on Aug. 13 that it had reached a deal to sell its Tasmanian Electro Metallurgical Co (TEMCO) unit to UK-based privately-held GFG Alliance.

TEMCO operates four electric arc furnaces that can produce up to 150,00 tonnes a year of high carbon ferromanganese and 120,000 tonnes a year of silicomanganese.

The deal, subject to approval from Australia's foreign investment review board, will see the facility change hands for what South32 termed a "nominal payment" from GFG.

So why would GFG, which operates steel and aluminium plants, as well as renewable energy operations, want a relatively small manganese smelter that has been struggling to survive in an increasingly competitive global environment?

The most compelling advantage for GFG is that TEMCO's plant is powered entirely by renewable energy.

Tasmania, the island state off mainland Australia's southern coast, gets all of its electricity from hydropower, wind farms and residential solar. There is a natural gas-fired power plant, but it is used only when drought cuts the hydro output, which is seldom given Tasmania's high levels of rainfall.

GFG Executive Chairman Sanjeev Gupta said TEMCO will help his Liberty steel group become more integrated across the supply chain, and also help achieve the company's target of being carbon neutral by 2030.

Manganese alloy is mainly used in stainless steel production, and TEMCO's output will fit in with Liberty's steel operations in South Australia state, where processes are being upgraded to use mainly renewable energy.

What Gupta is aiming for is the ability to manufacture and market steel products that are carbon neutral, which would be vastly different to how most of the world's steel is produced.

"By embracing Tasmania's plentiful supply of renewable energy, particularly the ability to power the submerged arc furnaces from Hydro Tasmania, the TEMCO facility will support our goal to be carbon neutral by 2030," Gupta said in a statement on GFG's website.

The production of each tonne of steel requires roughly 770 kg of coking coal and more than a tonne of iron ore.

Most iron ore mining uses fossil fuels to operate machinery, drive conveyors and loaders, and power trains and ships, making it a carbon-intensive commodity to mine and transport, especially given the huge volumes shipped to China.


While GFG's Liberty steel is a relatively small player, being the eighth-largest producer in the world outside China, the bet seems to be that not only will there be demand for clean, green steel, but also that it will command a premium.

GFG isn't the only company making an assumption that future profits will have to be greener. Other miners are looking at similar moves and the London Metal Exchange (LME) is investigating launching contracts for metals produced using lower carbon intensity.

It's still far from certain such green moves will work, or prove possible.

In some ways, the bet is that the shift to a low-carbon future will become unstoppable, and that consumers of metals will switch over to greener commodities.

Whether they are encouraged to do so by customers demanding climate-friendly products, tax incentives or subsidies, or taxes on carbon-intensive products remains a work in progress.

Renewable energies got their foothold in global systems through subsidies initially, but can stand on their own in most countries now.

Increased talk of carbon border taxes may also drive investment in greener commodities.

What GFG has done with buying TEMCO is take a view that the market will change, gambling that TEMCO's manganese alloy will eventually enjoy an advantage over similar products produced with coal-fired power. (Editing by Tom Hogue)

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Sales 2021 8 372 M 5 873 M 5 873 M
Net income 2021 565 M 396 M 396 M
Net cash 2021 980 M 687 M 687 M
P/E ratio 2021 16,6x
Yield 2021 2,78%
Capitalization 9 870 M 6 922 M 6 923 M
EV / Sales 2021 1,06x
EV / Sales 2022 1,00x
Nbr of Employees 13 624
Free-Float 98,8%
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Mean consensus BUY
Number of Analysts 13
Average target price 2,71 AUD
Last Close Price 2,05 AUD
Spread / Highest target 61,0%
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Spread / Lowest Target -7,32%
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Graham Kerr Chief Executive Officer, Executive Director & MD
Karen J. Wood Chairman
Mike Fraser Co-Chief Operating Officer
Jason Economidis Co-Chief Operating Officer
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