The Finance Ghost: Mining, mining everywhere – and lots of cash for some, but dry news for others

The Finance Ghost: Mining, mining everywhere – and lots of cash for some, but dry news for others
(Photo: Waldo Swiegers / Bloomberg via Getty Images)

Investors in the mining and resources sector have been kept extremely busy recently, as were investment analysts who couldn’t have had much sleep. This is a whirlwind summary of the biggest releases.

Sasol got plenty of attention on Tuesday, 28 August, by announcing a return to dividends. An increase in the average rand oil price per barrel of 68% did wonders for the earnings and the balance sheet, enabling a R14.70 dividend to be declared. Net debt to earnings before interest, taxes, depreciation and amortisation (Ebitda) is just 0.8x, so the turnaround at Sasol continues.

Zanele Matlala, the CEO of Merafe Resources, dampened the mood on the same day, dishing out a very bearish commentary alongside great numbers. It’s all about outlook rather than the prior year and there are concerns for ferrochrome, with falling prices and inflationary costs.

South32 deserves a mention for its year of record earnings and cash flow. Headline earnings per share (Heps) was more than six times higher for the year ended June 2022 than the prior year, a remarkable performance driven by a 69% increase in revenue from continuing operations and Ebitda margin expansion from 26.4% to 47.1%. There has been extensive corporate activity this year, including acquisitions in copper, aluminium and bauxite.

Gold counters were a mixed bag. Harmony Gold was horrible, now in a loss-making position thanks to substantial impairments. The group has elected to restructure its Tshepong operations and the life of the mine has been cut from 19 years to seven, driving the bulk of the impairment. DRDGold saw Heps decline by 22% after revenue fell by 3%. Gold Fields brought some shine, with Heps up by 29%.

Sibanye-Stillwater results show financial damage inflicted by a protracted labour strike. Gold production fell by 65% on the previous six months at a time when the average gold price was 7.3% higher, so the company couldn’t take advantage. Combine that with flooding in US platinum operations and a drop in headline earnings was inevitable. Despite that, it was the company’s third-highest interim profit since 2013!

In deal news, Afrimat is walking away from the Gravenhage manganese project because the Department of Water and Sanitation granted a water licence that deviated materially from the application made. The seller is now in dispute with Afrimat.

Impala Platinum has a framework agreement with the government on employment, supporting small business and localisation. It’s a critical step in the deal with Royal Bafokeng Platinum, which awaits approval from the Competition Tribunal.

Italtile: home improvement champ

Cashbuild’s trading statement for the year ended June 2022 told an ugly story. With a shift in consumer spending away from home improvement and building projects, Heps fell by between 30% and 35%.

By contrast, Italtile had profit growth at a time when revenue fell, showing operational excellence and cost discipline. Turnover fell by 2%, yet Heps was up by 9%.

Dealing with dentists

Universal Partners is an investment holding company listed in Mauritius and on the JSE, with a diverse portfolio that includes a stake in a UK-based dentistry group. Universal is selling its stake in Dentex to Portman for cash and shares in the merged entity. This will create the largest private dental group in the UK, with an impressive footprint in Europe as well. 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 countrywide for R25.


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