Technical analyst Clive Maund talks about the
world's largest and lowest cost producer of both lead and silver.
South32
Ltd. (S32:ASX) has the distinction of owning the giant Cannington
Mine, the world's largest and lowest cost producer of both lead and
silver, which is good to know, since we are of the opinion that silver is at
a very low price and is an extremely good value investment here. The company
is also a very big producer of other base metals, but as far as is known has
not yet discovered any unobtanium.
The stock charts only go back about 3 years because the company was spun off
from BHP Billiton several years ago.
On the all data chart which goes back to mid-2015 we can see that after
being spun off, South32 continued to drop in a severe downtrend in sympathy
with a weak sector, until it hit bottom in January 2016. It then reversed
into a strong uptrend, again in sympathy with a now strong sector, but while
the sector advance stopped and reversed in August 2016, South32 carried on to
higher levels until December 2016, and then ran off into a long consolidation
pattern that ended with an upside breakout the following September. This
quite strong upleg continued until January and last month it reacted back to
its rising 200-day moving average and to a point not far above the support
level shown, where it is suspected to be forming an intermediate base
pattern, because the rising 200-day moving average is an indication that the
trend is still up, and this factor is thought to override the rather weak
On-balance Volume line in the recent past, especially because of the now
positive outlook for gold and particularly silver.
The following chart is the same all data chart as the one above, but with the
Market Vectors Gold Miners ETF, GDX, overlayed, so that the performance of
South32 can be compared with the performance of the PM sector as a whole. As
we can see, it moved with it until the Summer of 2016, but after that South32
outperformed significantly, which is all the more impressive given the drab
performance of silver over the past year or two.
On the 1-year chart we can see recent action in rather more detail, in
particular how the reaction back from the January high has presented a better
entry point. The still rising 200-day moving average and proximity of strong
support indicate a high probability that it will turn up from this area, and
it is currently believed to be making a small Double Bottom with its late
January low, that will lead to another upleg.
The number of shares in issue is a daunting 5.2 billion, but that doesn’t
seem to have slowed it down, probably because it is a mining company whose
output of silver and base metals is on a truly gigantic scale.
A preliminary search for the company's website turned up what I at first
thought was a social or welfare club. When you enter it you find yourself on
a website that is wonderfully politically correct, and for example it is
easier to find information on the company's anti-slavery policy than it is to
find information on production and the company appears to be almost
apologizing for mining as in "Look, we have to make these big holes in
the ground, so that you can have metals for your cars, iphones and washing
machines etc” – it's enough to make an old school miner cringe – wonder what Crocodile
Dundee would have to say about it? that in reality they would look more
like all-in wrestlers.
Back to South32, while the company’s website may portray it is as a social
club and a fun place to work, the underlying reality is that they “produce
the goods” and in vast quantities, and in a world in which many companies
produce nothing of any substance, it represents a solid investment at a time
when commodities look set to move to the forefront and become one of the best
performing sectors.
South32 is thus rated as a solid investment here for the future, that is
at a good entry point after its recent dip. The company's stock also trades
on the London Stock Exchange in big volumes and the Johannesburg Stock
Exchange.
South32 website
South32 Ltd, S32.ASX, S32.LSS, closed at A$3.18 on 13th March 18, trading
at 181.10 at 2.53 pm GMT on 13th March 18.
Stay tuned – for upcoming reports on neighboring South31 and South33.
Disclosure:
1) Clive Maund: I, or members of my immediate household or family, own shares
of the following companies mentioned in this article: None. I personally am,
or members of my immediate household or family are, paid by the following
companies mentioned in this article: None. My company has a financial
relationship with the following companies mentioned in this article: None.
CliveMaund.com disclosures below. I determined which companies would be
included in this article based on my research and understanding of the
sector.
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Charts provided by the author.
CliveMaund.com Disclosure:
The above represents the opinion and analysis of Mr Maund, based on data
available to him, at the time of writing. Mr. Maund's opinions are his own,
and are not a recommendation or an offer to buy or sell securities. Mr. Maund
is an independent analyst who receives no compensation of any kind from any
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in any financial markets may involve serious risk of loss, Mr. Maund
recommends that you consult with a qualified investment advisor, one licensed
by appropriate regulatory agencies in your legal jurisdiction and do your own
due diligence and research when making any kind of a transaction with
financial ramifications. Although a qualified and experienced stock market
analyst, Clive Maund is not a Registered Securities Advisor. Therefore Mr.
Maund's opinions on the market and stocks can only be construed as a
solicitation to buy and sell securities when they are subject to the prior
approval and endorsement of a Registered Securities Advisor operating in
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