Security issues in the DRC ruined Alphamin’s quarter (JSE: APH)
As expected, annual guidance has been reduced
Alphamin has released its production and operational update for Q1 of 2025. As operations ceased on 13 March 2025, they basically lost over half a month of production. It’s therefore not a surprise to see an 18% drop in contained tin production vs. the immediately preceding quarter (ended December 2024).
If anything, it would’ve been worse if not for the higher tin grade of the ore that was processed this quarter. They processed 31% less ore, with the overall tin grade coming in at 3.55% vs. 3.00% in the preceding quarter. They expect the higher grade to average down over the rest of the year.
It does sound as though they’ve managed to catch up some of the lost sales after the end of the quarter in terms of sales and exports. They were sitting at 3,863 tonnes sold by the end of March, with a much better number of 4,581 tonnes by 16 April. Even then, they are way below the 4,942 tonnes in the preceding quarter (without taking into account an extra couple of weeks).
Due to the drop in production, all-in sustaining cost per tonne was up 9%. This more than offset the benefit of a 7% increase in price per tonne, so EBITDA was down 19% vs. the preceding quarter.
Will they be able to catch up by the end of the year? Not when it comes to production it seems, with guidance for the full year decreased from 20,000 tonnes to 17,500 tonnes. They are also playing it safe with the balance sheet, choosing not to declare a final FY24 dividend.
Notably, the current managing director of the operating subsidiary in the DRC has elected to retire. Perhaps the latest stress was enough for him to call it a day. A replacement with substantial experience has been announced, so at least there is someone willing to take on the challenge.
Copper and iron ore lead the way at BHP (JSE: BHG)
Record nine-month production numbers are great news
Mining groups can’t control broader commodity prices. They can however allocate capital and manage their production levels in such a way as to build the best possible business over time. This is why investors put a lot of weight on things like production numbers, as they show how well (or poorly) the business is controlling the controllables.
BHP is making a song and dance about its nine-month production numbers and with good reason, as copper and iron ore production achieved record levels. Alongside this good news, the group acknowledges the tariff risks and the broader impact they could have on economic growth, while pointing to a “flight to quality” among mining assets as a mitigating factor for the group. There’s certainly been a flight in capital – a flight away from the sector, with the share price down 22% over 12 months.
Of course, record production in and of itself isn’t always exciting. For example, copper production increased by 10% to record numbers, yet Iron ore was up just 1%. One commodity is a story of growth and the other is a story of consistency, but both are records. There are also examples of commodities in crisis, like nickel where production fell 49% and and the facility has transitioned into temporary suspension. In the coal business, they had some wet weather to deal with in this quarter, dampening growth vs. the preceding quarter – literally.
If you look across the various mining operations, then production guidance for the full year is either unchanged or indicated as being towards the upper range of production guidance.
Despite the production performance, BHP’s share price is down more than 22% in the past 12 months due to pressure in iron ore and coal prices. Copper prices are trending in the right direction at least, so they are growing in the right place.
Merafe’s production reflects a difficult market (JSE: MRF)
And this is why the share price is down so much in the past year
Merafe’s share price has lost over 18% of its value in the past 12 months. This actually isn’t too bad vs. some of the huge negative moves we’ve seen in the mining sector. For example, Glencore (with whom Merafe has a chrome joint venture) has suffered a drop in price of over 40% over the same period!
The production update for the first quarter of the financial year shows that things are still in a difficult place vs. the comparable period. Attributable ferrochrome production decreased by 7% year-on-year, with the company noting that this is “in response to market conditions” – in other words, commodity prices are still a problem.
A modest uptick in AUM at Ninety One (JSE: NY1 | JSE: N91)
In the context of the past quarter, this actually looks decent
Ninety One reports quarterly updates on its assets under management (AUM). As companies like Ninety One earn revenue based on AUM, this is literally the lifeblood of the group.
AUM is affected by two things: net flows (the difference between investments and withdrawals by clients) and market movements. Companies that have built excellent distribution networks have generally done well (e.g. PSG Financial Services / Quilter), while those who depend more on market movements and independent financial advisors have struggled to achieve meaningful growth in AUM.
Market movements have been tough this year, so one would expect to see pressure on AUM over the past quarter. It’s pretty good in my books that Ninety One ended the financial year with AUM of £130.8 billion, representing a very small increase over the £130.2 billion as at the end of December 2024. Compared to the £126.0 billion as at the end of March 2024, they are up 3.8% for the year.
Hardly exciting, but could certainly have been worse.
Coal quality challenges continue to plague Sasol (JSE: SOL)
Global recession risks are relevant here as well
As you are probably aware, Sasol has been a tough story in recent years. This share price was close to R420 at one point in early 2023. Today, it trades at R66. Many hard lessons have been learnt by people on a stock that was also responsible for creating incredible wealth during the pandemic – provided you sold and banked your gains, of course.
There are various challenges at the moment, including the US tariffs and what they could mean for the global economy. A recession wouldn’t be kind to Sasol. Even without Trump, there are other significant hurdles, like coal quality and the impact it is having on Secunda Operations. Not only are they having to invest heavily to improve this, but they are also having to buy higher quality coal elsewhere in the meantime.
In a production update for the nine months to March, Sasol noted that the Mining business (Secunda Operations) has seen a 5% drop in production quarter-on-quarter. Over nine months, the decrease is 2%, so things have deteriorated over the course of the year. With production under pressure, cost per ton is R650 – R670, significantly worse than previous guidance of R600 – R640 per ton. The mitigating factor is an improved performance by Transnet Freight Rail, leading to a 40% increase in external sales (quarter-on-quarter) and 13% on a year-to-date basis.
Coal quality also impacts the Fuels business, with a further negative impact coming from flooding and fire incidents. Although they hope to largely meet their production guidance, it will be at the lower end of the range. Sales volumes are expected to be between 1% and 3% lower than the previous year
In the Gas business, production was impacted by unrest in Mozambique and planned maintenance. Despite being below last year’s numbers at the moment, they are hoping for a strong finish to the year that takes them 0% to 5% above the previous year.
Finishing off the local business, we have Chemicals Africa and a stronger Q3 vs. Q2 as they caught up on sales. The year-to-date picture is still a 2% drop in production, with an increase in the average basket price taking revenue to just 1% higher vs. the previous year. With Secunda production impacting this business and with tariff uncertainty as a factor now as well, sales volumes for the year are expected to be 2% to 4% lower.
Moving on to the International Chemicals business, the US operation continues to be a massive headache. Despite a 12% improvement in the average sales basket price on a year-to-date basis, revenue is down 5% thanks to a substantial drop in production. Some of this is due to planned maintenance, but there were unplanned outages as well. Finally the business in Eurasia also struggled with production, but to a far lesser extent that the US. This was good enough for a revenue increase of 3%, with production down 2% and prices thankfully up 5%.
Sasol’s share price is down 25% so far this year. It’s a very brave play in this environment.
South32 is on track to achieve its full year guidance (JSE: S32)
It looks like only one of the operations will fall short
South32 has released its production report for the quarter and nine months ended March 2025. This means there’s just one quarter left of the financial year, so one would hope to see them tracking strongly against their full year guidance.
This is indeed the case, with guidance unchanged across all but one of the group’s operations. Weather and other issues in Queensland caused guidance at Cannington to be decreased by 10%. As for the rest, it’s a promising story.
All eyes in mining seem to be on copper at the moment, so it’s worth highlighting that Sierra Gorda payable copper equivalent production increased by 20% year-on-based on a nine-month view.
To add to the positive news around production, the group also swung strongly into a positive net cash position, with net cash up $299 million to $252 million.
On the capex front, the focus from a growth capital perspective is on the Hermosa project, where South32 has invested $355 million over nine months. This is the Taylor zinc-lead-silver project, with sinking of the main shaft due to commence in June 2025.
It’s important to remember that maintenance capex is a feature of mining as well, as there are many fixed assets that need to be replaced over time. For context, South32 spent $294 million on capex over nine months excluding the major development projects.
Zeder’s NAV per share is down, but you must adjust for the special dividend (JSE: ZED)
This is very important when investment holding companies are selling off assets
Investment holding companies focus on net asset value (NAV) per share in their reporting. This is essentially management’s indication of what they believe that the group is worth. When the group is selling off assets and distributing the proceeds to shareholders (rather than doing share buybacks), you can expect to see a significant drop in the NAV per share. This is because the group is literally smaller than it was before, all else held equal.
Of course, all else isn’t usually held equal. There are valuation movements in the remaining assets as well. So, when Zeder tells you that NAV per share as at February 2025 is between 66 and 75 cents lower vs. the prior year, with the special dividend only explaining 61 cents of that move, you know that the rest of the portfolio took a knock to its value.
If we strip the 61 cents out of the base (R2.48) and use the guided range of R1.73 to R1.82 for the calculation, we find that the rest of the portfolio dropped in value by between 2.7% and 7.5%.
Nibbles:
- Director dealings:
- Various Mpact (JSE: MPT) directors sold shares worth over R12 million in aggregate. This related to share awards and there’s no indication that this was only the taxable portion, so I assume that it wasn’t.
- The CEO of Sun International (JSE: SUI) sold shares worth almost R6.5 million. The shares relate to share awards and the announcement isn’t explicit on whether this is only the taxable portion. As above, I therefore assume that it isn’t.
- The CFO of Clicks (JSE: CLS) bought R743k worth of shares in the company now that the results are out in the wild. Based on the results, I don’t blame him.
- An independent non-executive director of OUTsurance (JSE: OUT) bought R255k worth of shares in the company.
- Absa (JSE: ABG) looks to be joining the list of companies that have repurchased their listed preference shares. The Absa ones trade under the ticker JSE: ABSP. At one point, issuing preferences shares was a popular funding mechanism for both banks and corporates. For banks, this was driven by Basel regulations that have subsequently changed. It’s also worth mentioning that liquidity turned out to be thin in many of the corporate (and even banking) instruments, as there wasn’t much investor appetite for them beyond large institutions looking to buy and hold them. As there’s limited appeal in keeping these instruments out in the wild, Absa is looking to buy the shares at R930 per share via a scheme of arrangement, with a standby offer in case the scheme doesn’t pass. The latest traded price for the preference shares was R820 per share, so there’s a buyout premium here as one would expect to see. Absa will potentially part with R4.6 billion if the scheme gets approved, so the relative lack of activity in this sector doesn’t mean that there aren’t large numbers at play.
- Brimstone Investment Corporation (JSE: BRT | JSE: BRN) issues shares to executives under a forfeitable share plan. This isn’t unusual. What is unusual is that the group then repurchases those shares under a specific repurchase. Why not just pay cash under a phantom share scheme, I hear you ask? I have no idea. Truly, I do not see the point of issuing and then repurchasing shares as compensation for executives, unless there’s some kind of tax benefit that I’m not familiar with.
- Acsion Limited (JSE: ACS), released an updated cautionary announcement. The first one came out in March. The update is that Acsion has entered into negotiations with an unrelated third party regarding a potential acquisition. At this stage, there’s no certainty whatsoever of a deal happening.
