Anglo American can be thankful for iron ore (JSE: AGL)
And yes, diamonds are still in trouble
2025 is a major transitional year for Anglo American. They will be demerging Anglo American Platinum (see further down) in the next month or so. They are in the process of selling the Steelmaking Coal business to Peabody Energy and the Nickel business to MMG Singapore. And although they have a new long-term diamond sales agreement in place with the Government of Botswana, they would love to sell De Beers.
The focus is on copper, iron ore and manganese ore in terms of currently producing assets. Although copper performed in line with guidance, production was still 15% lower. Iron ore (a combination of Kumba and Minas Rio) saw production increase by 2%. Manganese ore struggled, down 60% thanks to the impact of a tropical cyclone in March 2024.
Steelmaking coal saw a drop of 41% in production due to an underground fire. This is what triggered a recent announcement that the deal with Peabody Energy may still have some issues to overcome. I don’t know about you, but that kind of drop sounds like a material adverse change to me. They are still aiming to complete this deal by the third quarter.
Diamond production fell by 11%, which they call a “production response” to the “prolonged period of lower demand” – in other words, there aren’t enough people who want expensive mined diamonds.
In good news, commodity prices look much better year-on-year across copper and iron ore, with a modest uptick in the basket price for PGMs. As for diamonds, the price is down 38% year-on-year. It turns out that “forever” is a more flexible term than the De Beers ads would have us believe.
A sharp drop in production at Anglo American Platinum (JSE: AMS)
A seasonal impact was expected, but there were other issues
Anglo American Platinum (Amplats) has enjoyed a year-to-date share price increase of 12.6%. Despite all the chaos out there, the market is for some reason believing in platinum again – at least, to some extent.
Sadly, these companies still can’t catch a break. Amplats had to deal with flooding at the Tumela mine in February, driving an 8% decrease in production at own-managed mines. Adjusting for the flooding, production was flat. Unfortunately, you can’t just adjust for something like that.
Refined PGM production is seasonally lower at this time of year due to stock counts and planned maintenance, but the issues like the flooding still didn’t help. Production fell by a substantial 30% and sales volumes were down by a similar percentage.
Despite this, guidance for the full year is unchanged at this stage.
Notably, the average realised basket price was up 3% in dollar terms. Platinum was 11% higher and ruthenium increased 36%, but palladium was down 8%. This is a timely reminder that you can’t just track the platinum price and assume that the basket is changing by a similar percentage. Also, don’t forget the currency impact – the ZAR basket price is down 1%.
The company expects to start trading under the name Valterra Platinum from 2nd June. Perhaps a new name will also lead to improved luck!
Consistent growth at Cashbuild (JSE: CSB)
And most of it is coming from volumes, not inflation
Cashbuild provides a sales update each quarter. The latest one represents the third quarter of the financial year, so it’s helpful to see how the year has been progressing.
The answer is: steadily. The latest quarter reflects revenue growth of 5% year-on-year, a number that I’ve become accustomed to seeing. Existing stores were good for 4% and the stores put in place since July 2023 contributed 1% growth.
Volumes were up 7% and selling inflation was 1.6% at the end of March. I can therefore only assume that the sales mix is responsible for such a volumes and pricing combination ending up at 5% overall revenue growth.
Cashbuild South Africa, which is 82% of the group, grew by 5% for the quarter and 6% year-to-date, so there’s a slight slowdown there, but not by much. The Common Monetary Area businesses (6% of total sales) grew 2% this quarter, with a flat performance year-to-date. Botswana and Malawi (5% of sales) had a pretty incredible quarter, up 26%! The year-to-date performance for those countries is only 6% though.
Finally, the recurring headache that is P&L Hardware is a disappointment once more, with sales down 8% for the quarter. They are up just 2% year-to-date.
The share price has had a horrible time this year, down 26%. If we actually see a rate cut soon in South Africa, that should help catalyse some growth here.
Good news for Gold Fields in Ghana (JSE: GFI)
There’s never a dull moment in Africa
African governments don’t exactly have a reputation for being easy to deal with. Last week, we saw Gold Fields announce that they couldn’t reach an agreement with the government in Ghana around the Damang mine, leading to what was essentially an eviction notice.
A few negotiations later, there’s now a new mining lease in place for 12 months. That’s not exactly a long-term agreement, now is it? At least mining can restart now, subject to various permits and a ratification by parliament. In the meantime, Damang will process surface stockpiles.
By the end of 2025, they will finalise the bankable feasibility study to extend the life of the mine. As for who will benefit from that, the government of Ghana requires the parties to work towards a “transition of the asset to ownership by the people of Ghana” – but the announcement doesn’t say anything about the extent of that ownership.
There’s a broader story with the government in Ghana, as the Tarkwa mine is also in that country. Mine lease extensions are due for renewal in 2027, so this probably won’t be the last time that we see some stressful negotiations.
A happier tune at Kumba Iron Ore (JSE: SPR)
There’s even an improvement in rail performance
Kumba Iron Ore released a production and sales report for the quarter ended March 2025. We are so used to seeing disappointing stuff around Transnet and the related impact on production, so it really is great to see an upswing in fortunes. Of course, there’s a very low base effect here, but let’s focus on the positives.
A 5% improvement in Transnet’s rail performance supported a 6% increase in sales volumes. This allows Kumba to maintain its production and sales guidance for the year, as well as the unit cost guidance. You can see that they aren’t getting ahead of themselves here.
Despite the sales increase, total production was actually down 3% as they decided to drawdown on finished stock at Sishen. Again, this is a sign of conservatism in the group. It’s going to take a long time for Transnet to rebuild any kind of trust in the sector, leading to sustained higher production.
In terms of pricing, they indicate that they achieved an average realised FOB export price of $98/wmt, which is 11% above the benchmark price. I’m not sure why they didn’t give the price in the comparable quarter in the announcement. I went digging for last year’s SENS announcement and found that it was $89/wmt, so they’ve even seen an improvement in price!
Despite a clear improvement, the share price is down 29% over 12 months. Is the market being too conservative here?
Supermarket Income REIT is seeding a joint venture with Blue Owl Capital (JSE: SPR)
Blue Owl Capital is a large US alternative asset manager
Supermarket Income REIT has entered into a joint venture arrangement with Blue Owl Capital, a US alternative asset manager with over $250 million in assets under management.
The structure will see Supermarket Income REIT seed the joint venture with eight property assets from the existing portfolio. The pricing is a 3% premium to the book value as at December 2024. The combined value is £403 million and the average net initial yield is 6.6%.
The key here is that the REIT will retain a 50% interest in the joint venture, which means they are effectively selling half of the portfolio to Blue Owl at the above valuation. The net cash consideration is around £200 million. Now, here’s the kicker: the REIT will also receive a 0.6% management fee on the gross asset value, as well as a potential performance fee.
This is clearly a ploy to improve return on equity, as they are unlocking cash at a solid valuation, plus they are earning a management fee on the gross value of the joint venture, not only their half. The idea is for the joint venture to grow over time, with a plan to reach £1 billion in assets. Simply, Supermarket Income REIT is bringing the expertise (and some existing properties) and Blue Owl is bringing the money.
The joint venture itself is expected to be financed at a loan-to-value (LTV) of 55%. The REIT will use the proceeds from the joint venture to reduce debt and the company LTV is expected to be 31%.
Orion Minerals has secured a loan of $2 million from a shareholder (JSE: ORN)
Junior mining is all about raising capital to keep feeding the capex machine
Orion Minerals announced that a $2 million convertible loan facility has been put in place with the entertainingly-named Ratel Growth. A previous director, Thomas Borman, is the controlling shareholder of that company.
The idea here is that the loan balance will be set off against the amount subscribed for by Ratel Growth in future capital raises. The debt is unsecured and the interest rate is 12% per annum, so this seems like a decent deal for Orion in terms of access to funding. I think it’s a strong show of faith by the ex-director in what Orion is doing at its projects.
Zeder faced some valuation pressures in Zaad (JSE: ZED)
When looking at the net asset value per share, remember to adjust for the dividend
Zeder’s net asset value (NAV) per share was R1.77 as at the end of February 2025. The drop of 71 cents year-on-year is mainly because of the special dividend of 61 cents. As you can see though, there was also some downward pressure on NAV from valuation movements, as the dividend cannot explain the entire move.
Zaad is a business with complex geographical exposures. There are operations in Africa and Turkey, as well as in South Africa. The valuation of the South African assets went the right way, but not to such an extent that it could offset the difficulties in Turkey and Africa.
Zeder remains focused on selling assets and distributing cash to shareholders. This is likely going to require piecemeal disposals of the Zaad businesses, with the most recent example being an announcement in March to sell the operations in Zimbabwe, Mozambique and Zambia for a total of R135 million.
Nibbles:
- Director dealings:
- The CEO of Sun International (JSE: SUI) sold shares worth R8.1 million related to share awards. The announcement isn’t explicit on whether this is only the taxable portion.
- Standard Bank (JSE: SBK) keeps telling us a promising story about 2025 (and they just released pretty solid quarterly earnings), yet directors and execs are happy to sell shares. The latest example is the CEO of CIB (with a front-row seat to corporate dealmaking, including in Africa) selling shares worth R6.9 million.
- Des de Beer is still at it, buying shares in Lighthouse Properties (JSE: LTE) worth R5.9 million.
- Clientèle (JSE: CLI) announced the acquisition of Emerald Life back in November 2024. The deal was intended to be funded through the issuance of preference shares to Investec. Although shareholders approved the deal structure, subsequent engagement with the Prudential Authority has led to a change to the structure. They will fund it through a combination of free cash and an issuance of preference shares by a subsidiary of Clientèle to a subsidiary of Investec to the value of R570 million. There are then some subsequent steps to get the funding to the right place in Clientèle through a tax efficient process. Due to the amended structure, another shareholder circular and vote will be required to make the relevant legal amendments.
- Showmax continues to gobble up capital, with MultiChoice (JSE: MCG) announcing that a total of $145 million in equity funding has gone into Showmax since 27 September 2024. Remember, this is in partnership with Comcast Corporation subsidiary NBCUniversal Media, so this isn’t entirely MultiChoice’s burden. Still, if you wondered why the MultiChoice balance sheet is under pressure, here’s one of your answers.
- Eastern Platinum (JSE: EPS) announced that Charlie Liu is the new non-executive chair, replacing George Dorin who passed away in March. Liu is the chairman of Ka An Development Co. Limited, a long-term shareholder of Eastern Platinum.
