First Read: US$5.6bn sale of Ally division to AAI a positive

Research evidence excerpt

First Read: US$5.6bn sale of Ally division to AAI a positive

J P M O R G A N Asia Pacific Equity Research

01 July 2026

South32 Overweight

S32.AX, S32 AU

First Read: US$5.6bn sale of Ally division to AAI a Price (30 Jun 26):A$3.90

positive Price Target (Dec-26):A$4.80

S32 has agreed to sell its aluminium value chain assets to Alcoa for an implied EV Australia

of up to US$5.6B, with Alcoa also assuming ~US$1.2B of rehab provisions.

Head of Australia Metals & Mining

Separately, the Sierra Gorda JV has approved FID on the fourth grinding line, and

the new CEO Matt Daley has now started. Key takeaways: 1) we are positive on Lyndon Fagan AC

the deal given it creates a vehicle that is simpler, and has a clearer investment (61-2) 9003-8648

lyndon.fagan@jpmorgan.com

proposition - ie S32 becomes a copper and silver focused company with growth, J.P. Morgan Securities Australia Limited

2) the deal value is short of JPMe NPV - however given uncertainty around the Jonathon Sharp

Hillside power contract long term we think it’s reasonable Alcoa isn’t paying 100c (61 2) 9003-8312

on the dollar - the deal leaks around 20cps of NPV but this is much less than the jonathon.sharp@jpmorgan.com

valuation discount of 90cps the stock is trading on, and 3) the signficant cash J.P. Morgan Securities Australia Limited

injection leaves S32 well positioned to fund Hermosa, undertake capital Branko Skocic

management, and M&A to reshape the portfolio. Importantly, growth via (61-3) 9633-4069

Hermosa, the Sierra Gorda 4th line, and Trilogy assets become significantly more branko.skocic@jpmorgan.com

J.P. Morgan Securities Australia Limited

material for the company. We rate S32 OW.

Devwrat Vegad

• Sale of Ally division for US$5.6bn. S32 has agreed to sell its aluminium value (91-22) 6157-3608