South32 Agrees to Divest Cerro Matoso Nickel Operation
Why we think this is neutral
The divestment of Cerro Matoso is a strategic move by South32 to streamline its portfolio and focus on higher-margin businesses. While the transaction will result in a one-time impairment charge, it provides additional balance sheet flexibility to support South32's growth options in copper and zinc. The contingent payments linked to future nickel prices and production levels introduce some uncertainty, but the assumption of liabilities by the buyer reduces South32's risk exposure.
Key Points
- South32 has agreed to sell its Cerro Matoso nickel operation to a subsidiary of CoreX Holding B.V.
- The buyer will pay nominal consideration upfront and assume all current and future liabilities of Cerro Matoso
- South32 will receive up to $100M in future cash payments linked to production, nickel prices, and permitting milestones
- The transaction is subject to international merger clearances and is expected to complete in late CY25
- South32 will record a ~$130M impairment expense related to the divestment, which will be excluded from its FY25 underlying earnings
Summary
South32 Limited has entered into a binding agreement to sell its Cerro Matoso nickel operation to a subsidiary of CoreX Holding B.V. The transaction follows a strategic review in response to structural changes in the nickel market. On completion, the buyer will pay nominal consideration and assume economic and operating control of Cerro Matoso, including all current and future liabilities. The buyer will also make future cash payments of up to $100M, linked to future production and nickel prices, as well as permitting milestones. The transaction is subject to international merger clearances and is expected to complete in late CY25. South32 will record an impairment expense of ~$130M related to the divestment, which will be excluded from its FY25 underlying earnings.