Tough times dull stocks

on prowl in sec­tor as share prices col­lapse and in­vestors lose in­ter­est

Finweek English Edition - - Companies & Markets - BREN­DAN RYAN

Though both Ki­lalea and BMO Cap­i­tal Mar­kets an­a­lyst James Pic­ton rate Pe­tra an “out­per­form but spec­u­la­tive” stock, its share price has con­tin­ued to fall. Pe­tra’s price sat at around 150p at end-2007 but dropped to a low of 73,5p/share on 22 Au­gust. Its price then re­cov­ered to 107p on news of the Wil­liamson deal but has started slid­ing again to sit cur­rently at 102p/share.

De Beers is now in dis­cus­sions with Trans Hex about its Na­maqua­land mines divi­sion, which it had pre­vi­ously in­di­cated it wanted to merge with Alexkor, a joint ven­ture be­tween the SA Gov­ern­ment and the Richtersveld com­mu­nity.

That’s the best news to emerge about Trans Hex in years, as the com­pany’s share price was beaten down mainly due to op­er­at­ing prob­lems in An­gola that have had se­vere fi­nan­cial con­se­quences. Trans Hex has also sold off its Sax­en­drift op­er­a­tion along the Mid­dle Or­ange River to Rockwell and dis­con­tin­ued its deep-wa­ter marine di­a­mond min­ing op­er­a­tions off Namibia’s coast.

That cur­rently leaves Trans Hex over­whelm­ingly de­pen­dent on its Baken and Richtersveld alluvial min­ing op­er­a­tions. Baken mined 71 856 carats of the to­tal 107 305 carats Trans Hex pro­duced in the year to end-March.

De Beers es­ti­mates 2008 pro­duc­tion from its Na­maqua­land mines at 330 000 carats and, as spokesman Tom Tweedy says: “Trans Hex has suc­cess­fully mined alluvial di­a­mond de­posits in the area that are lower mar­gin than our own.”

An ex­ec­u­tive at an­other di­a­mond pro­duc­ing com­pany says: “Trans Hex should be able to make a go of this. It’s their kind of min­ing in the same re­gion where they are al­ready op­er­at­ing suc­cess­fully.”

Yet Trans Hex’s price has dropped from around 875c when the news was an­nounced early in Septem­ber to cur­rent lev­els around 750c/share, just above its 12-month low of 720c.

AIM- (and JSE-listed) Di­a­mondCorp has also seen its price plunge from a 12-month high of R15 to R9/share cur­rently. How­ever, Di­a­mondCorp is in the for­tu­nate po­si­tion of hav­ing al­ready raised all the funds it needs to bring the Phase 2 un­der­ground de­vel­op­ment of its Lace kim­ber­lite di­a­mond mine in the Free State into pro­duc­tion.

Di­a­mondCorp CEO Paul Loudon says his pri­or­ity is to get the mine into pro­duc­tion and he’s not be­ing tempted to ex­pand by go­ing af­ter some of his dis­tressed fel­low di­a­mond min­ers.

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