Can South32 Limited Regain Momentum in 2026 as Key Projects Advance?

South32 (S32) has spent the last several years reshaping its portfolio around alumina, aluminum, manganese, copper, zinc, and nickel while advancing its most important development project, Hermosa. The stock has been volatile, reflecting the challenges of managing a diverse portfolio amid shifting commodity markets and operational disruptions, but management continues to emphasize steady operating improvements and long-term positioning in critical minerals.

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The company now benefits from improving production across several operations, a stronger balance sheet supported by distributions from equity-accounted assets, and advancing work at Hermosa, which has become a key part of South32’s long-term strategy. Operational consistency has improved compared to the prior year, and several assets, including Australia Manganese and Sierra Gorda, delivered meaningful volume increases. This foundation sets up a clearer picture heading into FY26.

Investors watching the name today are focused on whether these operational gains and capital discipline can create a bridge to stronger earnings as commodity markets stabilize. South32 remains exposed to price movements in aluminum, alumina, manganese, and base metals, but its mix increasingly aligns with long-term demand linked to electrification and infrastructure needs.

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Financial Story

South32’s recent results showed a mix of operational recovery and disciplined capital management, which helped strengthen its financial footing even as commodity prices fluctuated. Production gains were notable across key divisions, including a 12% increase in payable copper equivalent output at Sierra Gorda and a 33% rise in manganese volumes as Australia Manganese executed its recovery plan. These improvements contributed to higher operating stability across the portfolio.

Cash generation benefited from US$117M in net distributions from Sierra Gorda and manganese, helping offset increased working capital and continued investment in Hermosa. The balance sheet ended the quarter with US$64M in net cash, down modestly but still supportive of ongoing development plans. Insurance recoveries tied to Tropical Cyclone Megan further strengthened the position, underscoring the role of one-off factors in the quarter.

Strategic actions also continued to reshape the business. The Cerro Matoso divestment remained on track, narrowing South32’s focus to higher-margin, transition-aligned assets. Meanwhile, capital expenditure accelerated at Hermosa as shaft sinking and infrastructure development advanced. The investment case for the project remains central to South32’s long-term growth pathway, and FY26 guidance across all major operations remains unchanged.

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Broader Market Context

Resource stocks have faced choppy conditions as investors weigh slowing global growth against structural demand for energy transition materials. Aluminum and alumina prices have been range-bound, while copper sentiment has improved on expectations of tight supply in 2026.

Manganese markets have shown early signs of stabilizing after recent volatility. In this environment, companies with diversified production and balance sheet flexibility have been better positioned to absorb fluctuations, and South32 is increasingly viewed through that lens.

1. Operational Stability and Volume Growth

South32 has worked to restore operational momentum across the portfolio, and the latest results show significant progress. Sierra Gorda delivered a strong quarter, with higher grades and a significant lift in molybdenum, resulting in a 12% increase in copper equivalent production. The performance reflects more stable operating conditions and management’s continued focus on reliability. As markets look toward 2026, this improved consistency provides a firmer base for earnings expectations.

Australia Manganese was another standout, delivering an 83% quarter-on-quarter increase in production as its recovery plan took hold. The business also ramped up export shipments, aided by the newly commissioned wharf infrastructure. These improvements help offset challenges in parts of the metals portfolio, including Cannington, where lower grades temporarily weighed on zinc output. The mix shows a company gradually regaining operational balance.

Investors have been especially focused on how these gains translate into stronger medium-term visibility. With FY26 production guidance unchanged across all major assets, the company appears on a more predictable trajectory. Operational stability has often been a swing factor in South32’s valuation, and renewed consistency may help narrow the gap between spot performance and long-term potential.

2. Hermosa and the Strategic Shift Toward Critical Minerals

Hermosa remains the centerpiece of South32’s forward strategy, and the September quarter brought meaningful progress. Capital spending increased as shaft sinking advanced on both the ventilation and main shafts, while foundation work for the process plant also began. The exploration decline for the Clark battery-grade manganese deposit remains on track for completion by the December 2025 quarter, reinforcing management’s confidence in the timeline.

The long-term investment case for Hermosa is tied to its role as the only advanced battery-grade manganese project in the United States. With policy momentum behind strategic minerals and increasing interest in non-Chinese supply chains, Hermosa provides South32 with exposure to structural demand drivers that extend well beyond commodity cycles. The recent U.S. government support for the Ambler Access Road adds another layer of optionality to the company’s North American portfolio.

This shift toward critical minerals reflects a broader transformation in South32’s identity. Historically viewed as a diversified miner with exposure to bulk and base commodities, the company is now leaning more heavily into metals linked to electrification and grid infrastructure. For investors looking beyond 2026, the question is how quickly Hermosa’s development curve can reshape the earnings mix.

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3. Capital Allocation, Balance Sheet Strength, and Risks

South32 maintained a disciplined approach to capital allocation, returning US$7M through share buybacks, paying a US$117M dividend, and reinvesting heavily in growth. Net cash declined modestly due to Hermosa spending and increased working capital, but the company still retains financial flexibility heading into a period where capital commitments will continue to rise. Distributions from Sierra Gorda and manganese remain a reliable support.

Valuation today reflects both the operational volatility of the past year and uncertainty around commodity pricing, leaving South32 trading at levels that seem disconnected from its emerging transition-metal profile. Investors appear cautious about the timeline and cost profile of Hermosa, as well as the risk of electricity supply constraints at Mozal Aluminum. These factors will shape sentiment through 2026 as more clarity emerges.

The upside case hinges on sustained production improvements, supportive commodity prices, and progress at Hermosa. The downside risks, including grade variability at Cannington or delays at development projects, remain part of the narrative. South32’s ability to manage these moving pieces will determine whether the stock re-rates alongside the broader energy transition theme.

The TIKR Takeaway

TIKR’s data shows a company moving past operational disruptions while investing heavily in assets tied to future-facing demand. Production consistency is improving, distributions support cash flow, and Hermosa introduces long-term strategic potential that could reshape the business.

The valuation model highlights moderated forecasts but also indicates that small improvements in pricing or execution can create meaningful leverage in returns. With stable guidance, ongoing development progress, and a balance sheet that can support growth, South32 enters 2026 with a clearer runway than investors may assume.

Should You Buy, Sell, or Hold South32 Stock in 2025?

South32 sits in a more balanced position today than it did a year ago. Operational stability has improved, Hermosa continues to move forward, and the balance sheet still carries enough flexibility to support growth. The stock also trades at levels that already bake in a fair amount of caution.

At the same time, commodity volatility and project-execution risk remain part of the story, and investors may want clearer milestones before assigning a stronger view.Given that mix, the most reasonable stance is a neutral one. South32 has a path to upside if execution holds and markets stabilize, but patience remains important as the company works through the next phase of its transition.

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Disclaimer:

Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!