A Tale of Two Golden Strategies The Fi…

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Among the yellow stuff miners, Pan African Resources and Gold Fields have generated positive returns for shareholders over the past year. The other local counters are plunged into the red. Interestingly, the strategies couldn’t be more different at these two companies.

Pan African Resources is getting into it quietly, having achieved record production in the year ended June 2022. The strategic objective has been to reduce senior debt, which has been achieved with great success. Debt (measured in US dollars) has fallen by more than 70% in the past 12 months, creating real shareholder value.

Gold Fields is playing the much riskier game, attempting a landmark transaction in the form of a proposed merger with Yamana Gold. The idea is that it brings high-quality, long-lived assets to the group that are located in attractive jurisdictions. South African investors fear global mergers, having been burned several times before.

So far, Pan African Resources has taken the lead in the sector on a 12-month basis, while Gold Fields suffered a significant drop in value after the Yamana deal was announced.

Small resource companies get away with it

Jubilee Metals has an outrageous stock price chart, up more than 265% since the start of the pandemic and down more than 20% this year. Junior mining is quite a rollercoaster.

It was a week of positive news for the group, with excellent progress being made in the copper and cobalt parts of the business in Zambia. There was also the appointment of a new director, Tracey Kerr, with previous experience in a very senior role at Anglo American. The Jubilee is on.

Renergen is no stranger to investors, with a PR strategy almost as exciting as the company itself. At the Virginia Gas project, commercial operation is expected once customer sites are ready to begin accepting product. Renergen expects this to be the case by the end of July.

Another name to watch is Orion Minerals, which is busy drilling on the Prieska project. Orion is working on an early production strategy to take advantage of copper prices and drilling results appear to support this approach.

However, the trajectory for the price of copper is less favourable, with the metal plunging on fears of a recession. Copper is trading at around $7,260 per ton against recent highs of over $10,400.

Emira goes for Transcend Residential Property Fund

Emira already owns 40.69% of Transcend and now the property fund wants the rest, although the structure used is a general offer rather than a scheme of arrangement.

It means Emira is happy to buy any number of shares at the offer price (R5.38 per share). In contrast, an arrangement deal is an all-or-nothing mechanism that also comes with a delisting.

Transcend won’t walk away from this offer, even though few people would notice, as there is very little trading on the shares. Transcend’s comments on the price should be interesting, as the net asset value per share as of December 31, 2021 was R8.08.

Good news at Steinhoff (and a fine)

Let’s start with the bad news first, because we wonder when the skeletons in the Steinhoff closet will be gone for good. The final penalty for shareholders is an 11.3 million euro fine payable to BaFin, the German regulator. This concerns the late publication of the 2016/2017 financial statements and other information gaps.

In much better news, Steinhoff’s European discount retail chain, Pepco Group, is increasing its revenue by leaps and bounds. It seems that as soon as Pep is in the name, the discount is a success.

In case you were wondering, the Pepco brand in Poland was launched by Pepkor as part of a European strategy and has proven to be very successful. So the names are no coincidence. The company landed in the Steinhoff Group when Christo Wiese sold Pepkor to Steinhoff in what would become his worst decision ever.

There were concerns around the Pepco Group when Andy Bond announced earlier this year that he would step down as CEO for health reasons. Fortunately, the succession plan appears to be working, with third-quarter sales up 17.1% at constant exchange rates. The Pepco banner recorded phenomenal growth of 28.5%.

An aggressive deployment strategy is underway, which explains the high growth rate. Like-for-like growth was 4.9%, which remains respectable.

The year-to-date (nine months) result is revenue growth of 17.4% at constant currencies and 350 net new stores were opened this fiscal year, with an annual target of 450 new stores net.

However, profits are what really matters, so it will be important to thoroughly analyze the financial results for the full year.

For now, we can safely say that revenue growth is over the moon. DM168

After years spent in investment banking by The Finance Ghost, his mother’s dire predictions have come true: he has become a ghost.

This story first appeared in our weekly DM168 newspaper, which is available nationwide for R25.

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