Leave alone

Finweek English Edition - - Companies & Markets - BREN­DAN RYAN

AT 475c, TRANS HEX is sit­ting just above its 12-month low of 450c/share. How­ever, there are a num­ber of good rea­sons for that, and any in­vestor looking to buy on re­cov­ery grounds should prob­a­bly hold off. In the first place, there’s no need to rush in given the over­all state of the di­a­mond mar­ket, where rough prices have come off sharply due to the global credit cri­sis cur­rently af­fect­ing even spend­thrift Rus­sian oli­garchs.

Sec­ond, Trans Hex has a num­ber of its own prob­lems to deal with – in par­tic­u­lar, An­gola – which still don’t seem sorted out de­spite the pos­i­tive noises be­ing made by CEO Llewellyn Del­port.

Third, if you must own a di­a­mond share, there are bet­ter ones to in­vest in and also cur­rently sit­ting at rock-bot­tom prices, al­though you’d have to use your for­eign in­vest­ment al­lowance to get at the top two – Lon­don­listed Gem Di­a­monds and Pe­tra Di­a­monds.

Its lat­est re­sults for the six months to end-Septem­ber show Trans Hex made a loss of R64,3m com­pared with a loss of R11,2m for the pre­vi­ous com­pa­ra­ble six months and a loss of R18,5m for the year to end-March.

The main rea­son was a 24% drop in di­a­mond rev­enues due to lower prices and sales vol­umes, with more stock tied up in in­ven­tory. Del­port says pro­duc­tion in both An­gola and SA will rise and that Trans Hex is fi­nally turn­ing its An­golan op­er­a­tions around af­ter four years of ef­fort.

On the pos­i­tive side, Trans Hex is in exclusive ne­go­ti­a­tions with De Beers about the pos­si­ble ac­qui­si­tion of its Na­maqua­land op­er­a­tions. That could be highly ben­e­fi­cial for Trans Hex if it can ne­go­ti­ate the right terms, as the Na­maqua­land divi­sion pro­duced 300 000 carats last year, which is or­ders of mag­ni­tude greater than Trans Hex’s cur­rent SA out­put. Del­port re­fuses to com­ment on progress.

On the neg­a­tive side, Trans Hex could be up for sale. Im­pala Platinum is bid­ding for Mve­laphanda Re­sources to ac­quire Northam Platinum. But Mvela also con­trols Trans Hex and Im­plats is highly un­likely to want to move into the di­a­mond busi­ness.

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