Among the yellow stuff miners, Pan African Resources and Gold Fields have delivered positive shareholder returns over the past year. Other local counters are deeply in the red. It is interesting that the strategies cannot be different in those two businesses.
Pan African Resources is quietly getting on with it, having just achieved record production in the year ending June 2022. The strategic focus has been to reduce senior debt, something that has been achieved with great success. Debt (measured in US dollars) has been reduced by over 70% in the last 12 months, creating real value for shareholders.
Gold Fields is playing a far riskier game, attempting a significant transaction in the form of a proposed merger with Yamana Gold. The idea is to introduce high-quality, long-term assets in this way to a group located in attractive jurisdictions. South African investors are afraid of global mergers, as they have been many times before.
For now, Pan African Resources has taken the lead in the sector on a 12-month basis as Gold Fields suffered a major decline in value following the announcement of the Yamana deal.
Junior resource companies are pulling out
Jubilee Metals has an amazing share price chart, which is up over 265% since the start of the pandemic and down over 20% this year. Junior mining is quite popular.
It has been a positive week of news for the group, with excellent progress in the copper and cobalt parts of the business in Zambia. There was also the appointment of a new director, Tracey Kerr, with previous experience in a very senior role at Anglo American. The jubilee is coming.
Renergen is no stranger to investors, with a PR strategy that is almost as exciting as the business itself. At the Virginia Gas project, commercial operation is expected when customer sites are ready to begin receiving product. Renergen expects this to be the case by the end of July.
Another name to watch out for is Orion Minerals, which is busy drilling on the Prieska project. Orion is pursuing an early production strategy to take advantage of copper prices and drilling results appear to support this approach.
The price path for copper is less supportive though, with the metal jumping on recession concerns. Copper is trading at around $7,260 a tonne, down from recent highs of more than $10,400.
Emira wins Transcend Residential Property Fund
Emira already holds 40.69% in Transcend and now the property fund wants the rest, although the structure being used is a general offer rather than a scheme of arrangement.
This means that Emira is happy to buy any amount of shares at the offered price (R5.38 per share). In contrast, the arrangement scheme is an all-or-nothing mechanism followed by delisting.
Transcend will not withdraw from this offer, although few would notice if it did, as there is very little trading in the stock. Transcend’s comments on the price should be interesting, as the net asset value per share as at 31 December 2021 was R8.08.
Some good news at Steinhoff (and a fine)
Let’s break the bad news first, because one wonders when the skeletons in Steinhoff’s closet will be gone forever. The latest penalty for shareholders is a fine of 11.3 million euros to be paid to BaFin, the German regulator. This relates to the late release of the 2016/2017 financial statements and other disclosure deficiencies.
In much better news, Steinhoff’s European discount retailer Pepco Group is growing by leaps and bounds. It seems that as soon as Pep is in the name, discount retail is a success.
If you are wondering, the Pepco brand in Poland launched Pepkor as a European strategy and it proved to be very successful, so the names are not a coincidence. The business came to the Steinhoff Group when Christo Wiese sold Pepkor to Steinhoff in what would become his worst decision ever.
There were concerns about Pepco Group when Andy Bond announced earlier this year that he would be stepping down as CEO for health reasons. Fortunately, the succession plan appears to be working, with third quarter sales up 17.1% on a constant currency basis. The Pepco banner achieved an incredible 28.5% growth.
An aggressive rollout strategy is underway, which explains the high growth rate. Like-for-like growth was 4.9%, which is still respectable.
The YTD result (nine months) is revenue growth of 17.4% on a constant currency basis and 350 net new stores opened this financial year, with a full year target of 450 net new stores.
However, profit is what really counts, so the financial results for the full year will be important for detailed analysis.
For now, we can safely say that revenue growth has stalled. DM168
After years in investment banking by The Finance Ghost, his mother’s dire predictions came true: he became a ghost.
This story first appeared in our weekly DM168 newspaper, which is available nationwide for R25.