Monday, December 23, 2024

Ghost Bites (Anglo American | Choppies | Ellies | Gold Fields | Impala Platinum | Kibo Energy | Renergen | Textainer)

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Anglo American looks to raise 10 year USD debt (JSE: AGL)

Here’s your latest data point on the USD yield curve

I find major debt raises very interesting, particularly at the moment when the yield curve is all over the place. The latest example is Anglo American and its intention to raise $900 million in senior notes due in 2033. In other words, this is highly secured funding (from the perspective of the lenders) that Anglo will be able to use for a period of 10 years.

The company is offering to pay 5.5% on these notes, though what usually happens is that pricing is discovered through a bidding process and the final rate is sometimes adjusted. The mechanism to do this is to issue the notes at a discount or premium, depending on where the pricing ended up vs. the 5.5% coupon.

Time will tell whether there is sufficient appetite at Anglo’s intended price.


Choppies clarifies its position (JSE: CHP)

The company has reminded shareholders that it doesn’t own Choppies South Africa

Choppies is upset about an article in the Financial Mail that the company believes made it sound like the listed group could be in discussions with potential acquirers.

The point that the company has clarified is that Choppies South Africa was sold by the group more than three years ago. The new owner was only allowed to use the name for three years, a period that has already expired obviously.

In other words, any speculation related to Choppies South Africa has nothing to do with the listed company.


Ellies needs to be patient for Bundu (JSE: ELI)

The fulfilment date for conditions precedent has been extended

Fun fact: deals take a long time to close. They usually take longer than people expect, which is a great source of annoyance for everyone involved, especially those who are waiting to be paid a success fee. Yes, I speak from experience here!

The latest example is the Ellies acquisition of Bundu Power for up to R202.6 million, a significant deal for Ellies that has come at a premium valuation multiple. Ellies is rather desperate to evolve its business and Bundu Power has found itself in the right darkness at the right time, with Eskom doing wonderful things for the shareholders of that business.

There’s been quite a delay in the implementation of the deal, although no details are given on the source of the delay. The original date for fulfilment of conditions precedent was 30 April 2023, which has clearly come and gone. This has been extended to 31 August 2023.


A windfall for Gold Fields (JSE: GFI)

The company announced a new partnership in Canada

Before getting into the details of this story, I just have to point out this chart and how ridiculous the volatility actually is when it comes to gold miners:

Gold might be a source of returns that aren’t correlated with the rest of the market, but there is absolutely nothing steady about them. The recent chart looks like Zoom in the pandemic!

The latest news from Gold Fields is a partnership with Osisko Mining to develop and mine the Windfall project in Canada. Let’s hope that the name is a sign of things to come, as the investment for a 50% stake is C$600 million and that’s before any of the capital expenditure related to the project.

There are also a couple of exploration projects as part of this deal, with Gold Fields committing to fund the first C$75 million worth of development expenditure on them before the 50-50 split kicks in for remaining expenses.

The Windfall project has a life-of-mine of 10 years (which Gold Fields thinks is conservative) and an all-in sustaining cost (AISC) of $758/oz, which would make it one of the lowest cost mines in the portfolio.

And let’s face it: Canada is a low-risk jurisdiction in which to mine gold, which certainly doesn’t hurt the story.

First production from this asset is expected in 2025.


Impala Platinum’s production is under pressure (JSE: IMP)

We now have data for the nine months to March

Impala Platinum sources its production in various ways, ranging from managed volumes through to joint ventures. When all of that rolls up to the top, total 6E group production volumes fell by 9% for the nine months and sales volumes were 5% lower.

The blame has been laid squarely at the door of “load curtailment” which appears to be the mining industry’s way of describing Eskom’s ongoing failure to do anything useful for South Africa.

Things are tough at the moment for Implats. Full year production is likely to be at the lower end of guidance and unit costs are expected to be at the top end of provided guidance. And against this backdrop, the company is still trying to get the Royal Bafokeng Platinum deal across the line!


Kibo Energy releases interesting test results (JSE: KBO)

Could biofuel be a realistic alternative to conventional coal?

Kibo Energy is hoping to supply solid biofuel as an alternative to conventional coal, targeting international companies in the manufacturing industry.

The company has put its biofuel through testing by accredited laboratories and results are encouraging, with the selected biomass even outperforming conventional coal on some metrics.

After all the manure we’ve dealt with from Eskom, imagine a world where it runs on the stuff? Just kidding – I don’t think that Kibo’s biofuel is made from manure. I stand behind the rest of the sentence, though.


Renergen releases its annual report (JSE: REN)

This is a good opportunity to recap the key points about the company

At this stage, the revenue number in Renergen is a little pointless. Although the company is now selling liquefied natural gas (LNG), revenue of R12.7 million for the year is absolutely insignificant in the context of the Virginia project’s long-term story around helium in particular.

There were a major of key strategic developments in the past financial year, ranging from the successful equity due diligence by the Central Energy Fund through to credit due diligence by the US International Development Finance Corporation and Standard Bank.

I must pause there to point out the importance of the US relationship to Renergen at a time when our government is cozying up to Russia far more than the West. You simply cannot ignore the impact and risks of geopolitics. Renergen is looking to raise capital on the Nasdaq, so there are equity and debt capital raises underway with US counterparts. Critically, a significant source of future demand is the US, particularly given the initiatives in that country to onshore semiconductor (computer chip) production in response to risks around China and Taiwan.

Like I said, you cannot ignore geopolitics with something as strategically important as helium. Risks in Taiwan will drive demand from the US, provided we don’t sour our relations with the West.

As the company works towards commercial operation of the all-important Phase 2 project by 2026, there will be no shortage of volatility. If you want to gain a better understanding of the investment story, my Ghost Stories podcast with CEO Stefano Marani from February 2023 will be useful:

Take note that it was recorded before the details of the IPO were announced. Renergen is looking to raise $150 million during 2023 and doesn’t envisage needing more equity capital for the year after the IPO.


Textainer Group: watch the trend (JSE: TXT)

This is as cyclical a business as you’ll find

In the shipping business (and the related container business that Textainer is in), you need to constantly keep an eye on the numbers. This is the furthest thing from a buy-and-hold industry, as shipping is incredibly cyclical. We’ve seen Grindrod Shipping selling ships to pay down debt and we can now see revenue falling off its peaks at Textainer.

The biggest difference is actually the gain on sale of containers, which was significantly lower in this quarter than in prior quarters. Income from operations was just over $100 million in this period vs. $114 million in the comparable quarter last year. Net income attributable to common shareholders was $53.6 million vs. $72.7 million.

Average fleet utilisation has dropped to 98.8% from 99.7% a year ago.

Against headline earnings of $1.22 per share, the board has declared a dividend of $0.30 per share.


Little Bites:

  • Director dealings:
    • Des de Beer has bought R4.85 million worth of shares in Lighthouse Properties (JSE: LTE).
    • An associate of a director of Rex Trueform (JSE: RTN) has bought N shares worth R214k. N shares in African and Overseas Enterprises (JSE: AON) – part of the same overall group – were also bought with a value of R152k.
  • A non-executive director of Capitec (JSE: CPI) has entered into a huge hedging trade over shares worth R1.46 billion. The put strike price is R1,461 and the call strike is R2,517 per share. The average expiry date on the derivatives is just over 3 years.
  • If you are a shareholder in Absa (JSE: ABG), then you will be interested to know that the circular related to the B-BBEE transaction has been posted. I still think this was a huge missed opportunity to give retail investors another structure to invest in on the market.
  • The delisting of Jasco Electronics (JSE: JSC) is taking longer than planned because of delays in obtaining a compliance certificate from the Takeover Regulation Panel.
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