Ghost Bites (Anglo American | Anglo American Platinum | Brait | Capital & Regional | Kumba Iron Ore | Orion Minerals | RMB Holdings)

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Copper remains the highlight at Anglo American (JSE: AGL)

As for diamonds, things aren’t so sparkly

As we know from the approach that BHP took to sniffing around Anglo American for a potential deal, the jewel in the crown at Anglo is copper. The rest ranges from reasonable to poor.

Starting with copper, production for the six months is 2% higher than in the comparable period last year. Although the second quarter saw a drop of 6%, Anglo believes that copper production is well on track for the full year plan.

The diamonds are a major concern at the moment, with De Beers attributing the pressure to subdued Chinese demand. The lab-grown diamond threat remains the elephant in the room and I continue to believe that there has been a structural decline in diamond demand.

On the iron ore side, Minas-Rio in Brazil achieved record second quarter production. This is just as well, because Kumba had to decrease production to align with what Transnet is capable of doing, as you’ll read elsewhere in this edition of Ghost Bites.

You’ll also read about Anglo American Platinum below, which is the hot potato that BHP didn’t want to buy and Anglo American doesn’t want to keep. PGM prices are a disaster and a decent production outcome at Anglo American Platinum isn’t enough to offset it.

As a final comment (and these Anglo updates are so huge that it’s quite tricky to figure out what to focus on), nickel production was flat. I reference this as BHP has just suspended Western Australia Nickel because of the oversupply situation in the nickel market.

From the outside looking in, it feels like Anglo just isn’t as sharp as it needs to be. With several parts of the business now facing difficult circumstances, they need to move forward with their promises to shareholders about unlocking value.

Anglo American Platinum flags a big drop in HEPS (JSE: AMS)

There’s not much they could do with PGM prices dropping to this extent`

Anglo American Platinum released a production report for the quarter ended June as well as a trading statement for the six months to June. Let’s start with the latter, as profits are what really count.

Sadly, HEPS will drop by between 15% and 25% for the period, with the PGM basket price down 24%. Within the basket, palladium was down 34% and rhodium took major strain, down 49%. Against that backdrop, it’s pretty impressive that the company managed to keep the drop in HEPS to only 15% – 25%. This was achieved by a 9% increase in PGM sales volumes, as well as cost savings achieved in the business.

In the production update, they note that guidance for the full year is unchanged in terms of production and all-in sustaining cost, which is expected to be below $1,050 per 3E ounce. It would do absolute wonders for this sector for PGM prices to move higher.

Another point from the production update worth highlighting is that sales volumes were up 14% in the second quarter, driven by a draw-down of finished goods in addition to higher production. In other words, the increase in PGM sales volumes can’t continue at this pace forever, as they dug into work-in-progress inventory to make this happen.

Brait is ready for the rights offer (JSE: BAT)

The offer is priced at a 25% discount to the 5-day average before the original announcement

Brait needs to raise R1.5 billion in equity. Christo Wiese, acting through Titan, is only too happy to pick up shares at this price. He is underwriting the full raise, plus he’s committed to take up the full R430 million in rights attributable to the existing shareholding.

I can’t see how this doesn’t end with a mandatory offer by Titan to shareholders of Brait, as the underwriting will most likely take the stake above the 35% threshold. This is because the new shares being issued will represent 65.8% of the enlarged share capital, so this really is a very large raise.

Other shareholders do have a chance to pick up more than their allocated rights if they so desire, with the ability to apply for excess applications. I remain surprised to see this, as Brait could’ve easily structured this rights offer to ensure that the maximum number of shares land in Titan’s hands.

The price is R0.59 per rights offer share, representing a 25% discount to the 5-day average before the original recapitalisation announcement on 3 June. The current share price is R0.97.

There might still be a deal for Capital & Regional (JSE: CRP)

The PUSU deadline has been extended once more`

Under UK takeover law, there’s a colourful concept known as PUSU, which stands for put up or shut up. I’m not joking. That really is the official term. It reminds me of my dad and his perennial favourite: sh*t or get off the pot.

Anyway, moving on, NewRiver REIT has been having discussions with Growthpoint (JSE: GRT) as the controlling shareholder of Capital & Regional about a potential transaction to acquire the shares. This would naturally end up as an offer for all the shares in Capital & Regional, but there’s not much point announcing a deal that Growthpoint wouldn’t accept anyway, so that’s where the negotiations are currently taking place.

NewRiver had until 18 July to either make a firm offer or confirm that it won’t be making the offer. This is the PUSU concept. In some cases, the UK takeover authorities agree to an extension to the deadline. The deadline has now been extended to 15 August to enable negotiations to continue.

For such a harsh sounding concept, it sure does have flexible dates.

Kumba’s production has moved lower thanks to Transnet (JSE: KIO)

It remains highly irritating that the private sector must right-size itself to fit Transnet

In and amongst all the GNU-phoria, it’s good to be reminded of the problems we need to solve in this country. A good example is Kumba Iron Ore, where production for the six months to June fell by 2% to avoid a build-up of stock that Transnet can’t rail to the port. At least the Transnet performance seemed to be in line with expectations, as ore railed to port also decreased by 2%. In other words, the company is having to deliberately hold itself back because Transnet cannot match the demand for its rail services.

Kumba also took advantage of a weaker period of demand to undertake a “pro-active mini-shut” and port equipment repairs in April. Production and sales guidance has been maintained for the full year, despite sales dropping by 5% in this period because of the combination of lower production and repairs.

With production down 2% and sales down 5%, there was a build up in finished stock to 8.2Mt from 7.8Mt at the end of December 2023, with 0.6Mt at Saldanha Bay Port and 0.2Mt loaded on a vessel but not yet sold.

The capital expenditure guidance is also unchanged at R8 billion to R9 billion for the full year.

Iron ore prices are a concern thanks to weak demand in China and Europe, with the Platts IODEX 62% Fe CFR benchmark iron ore price falling by 26% since the start of the year.

Right near the bottom of the update, Kumba notes that HEPS will be down by between 24% and 29%. This is due to the drop in benchmark prices and and decrease in sales volumes.

Orion Minerals raised most of what it wanted from sophisticated investors (JSE: ORN)

The share purchase plan with retail investors is still underway

Orion Minerals wanted to raise around A$7.7 million from institutions and sophisticated investors. They are also in the process of trying to raise up to A$5 million from existing shareholders under the share purchase plan, which makes space for retail investors to get involved. For more on that raise, refer to this podcast with Paul Miller of Utshalo, where he explains how they are working with Orion Minerals and why this is important.

Orion has announced that A$7.2 million has been raised from the institutions and sophisticated investors, so they raised most of what they were looking for but not the full amount. There’s no more coming from this source at least, so it will have to do.

What will be especially interesting to see is how close they get to the A$5 million under the share purchase plan. It sounds like an ambitious number to me, but junior miners like Orion tend to aim for the stars. Pun intended.

RMB Holdings declares a special dividend (JSE: RMH)

The proceeds from the disposal by Atterbury of 20% in Mall of Africa have flowed up

When the news first broke of Attacq’s (JSE: ATT) acquisition of 20% in Mall of Africa from Atterbury, RMB Holdings was surprisingly silent about the deal. Perhaps they didn’t want to create an expectation of a special dividend, as the relationship with Atterbury hasn’t exactly been smooth sailing. RMB Holdings can’t distribute the cash to its shareholders until Atterbury declared a dividend up to RMB Holdings.

The cash does seem to have flowed up, so the happy news for RMB Holdings shareholders is that the company has declared a special dividend of 3.75 cents per share. The share price is currently R0.40.

Little Bites:

• Director dealings:
  • The CEO of Stefanutti Stocks (JSE: SSK) bought shares worth R33.5k and another director bought shares worth R15.5k.
  • Michiel Le Roux has refinanced a hedge transaction over R194 million worth of shares in Capitec (JSE: CPI), with a put strike price of R2,424.11 and a call strike price of R4,437.19.

• Kibo Energy (JSE: KBO) announced the appointment of experience investment banker Clive Roberts as chairman of the company.

• Datatec (JSE: DTC) shareholders who elect the scrip dividend alternative (i.e. wish to receive shares instead of cash) will receive 3.56718 Datatec shares for every 100 shares held.

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