Figures at investment summit not all fresh
The headline-grabbing numbers at President Cyril Ramaphosa’s investment conference looked spectacular and gave his presidency a ringing endorsement. But some of the investment numbers are not new, while others are a factor of doing business.
Anglo American’s $6bn commitment, for example, includes a $2bn investment in going underground at its depleted Venetia open-cast mine in Limpopo. This is a project that started in 2013.
What the rest will be is not clear, but Anglo says it will be invested in a fairly even spread over the next five years and will go towards sustaining capital which is money to keep the mines running and is hardly a new investment and life extension capital, which is money needed to prolong the duration of mining by exploration and converting resources to reserves, a key part of mining.
To call this a new investment is not entirely accurate, but to be fair Anglo CEO Mark Cutifani was warning towards the end of 2017 that if there was no favourable outcome to the hotly contested third iteration of the mining charter released by then mineral resources minister Mosebenzi Zwane, and if Jacob Zuma and his faction remained in power, the multinational resources group would have to closely reconsider its investments in SA.
Vedanta, an Indian resources company, is a keen investor in SA, having bought zinc assets from Anglo in 2011 and attracting $400m investment in the Gamsberg mining project, which started in 2015. It is looking at an expansion project that would cost $700m and include a smelter and refinery.
Purely on the mining front, the two biggest investment numbers from the two biggest companies help tell a good story, but they’re not entirely new.
Botswana-based ecotourism company Wilderness Holdings released some eye-catching interim results on Monday.
While the half-year to endAugust numbers from Wilderness a frustratingly illiquid stock may not be of too much interest to local JSE punters, the results do suggest that our neighbour’s tourism sector is enjoying some vibrant times.
Backers of local tourism stocks probably won’t like the comments from Wilderness directors that all geographical segments other than SA reported increases in segment profit. They noted that the two main drags on SA are additional corporate recoveries as well as a slowdown in the road transfer business, due to the impact on tourism following the water crisis in Cape Town.
The segmental operating profit breakdown showed the Botswana-based business growing 27% to 117-million pula, while the SA business fell 6% to 33-million pula.
The scary fact is that SA accounted for R505m, or about 65%, of the revenue line. This means margins were badly eroded in the interim period, perhaps indicating how tough the local ecotourism market has become. Overall, though, things look encouraging for Wilderness, with forward occupancy for the rest of the year matching the previous period.
The strength of the US economy should help numbers, too, with the bulk of Wilderness’s clients (46%) coming from the Americas. Interestingly, Wilderness shares touched their highest level yet on the JSE on Monday, albeit on minuscule volumes. The company should offer game investors on the JSE more of a free float to hunt.