DIAMOND IN THE ROUGH
DIAMOND MINING’S not for sissies. Neither is investing in diamond company shares, particularly the junior miners in South Africa that have caused much pain for shareholders.
So it’s interesting to note that Piet Viljoen at RE:CM recently started buying Trans Hex. In an article largely sceptical of resource shares on the asset managers’ website, Viljoen says, however, that RE:CM is not averse to resource shares trading at a discount to NAV and some of its best investment ideas have been discounted miners – Western Areas and Simmers for example. He sees Trans Hex as a similar value play.
We’d swallow hard and take the same view. There’s risk, but also a little more shine in this rough diamond. OPPORTUNITIES After stagnating for years, the share price has been recovering since late last year, moving up strongly in the past few weeks. We know RE:CM has been buying, but is it a case of somebody knowing something the market doesn’t? • The initial foray into Angola was disastrous and expensive, but management now says the expansion is showing results, with Luarica producing 95 000 carats in its first year of production. • Remgro, major shareholder with 35%, has a reputation for sticking with underperformers and supporting growth plans. RISKS There’s apparent management turmoil and a currency hedge way out of the money ( Finweek 30 November). Angola has substantial political risk. Ask the oil companies.