Bot­tomed at long last?

Finweek English Edition - - Companies & Markets - BREN­DAN RYAN

I MAKE THE FOL­LOW­ING buy rec­om­men­da­tion with some trep­i­da­tion, given that Trans Hex has been a dog since it went into An­gola in 2001 and be­cause I’ve been highly crit­i­cal of the com­pany over the past few years. But the bounce in its share price from 145c in May to around 290c cur­rently – de­spite the passed div­i­dend and loss of R797m for the fi­nan­cial year to end-March – is prob­a­bly in­dica­tive that a change for the bet­ter is fi­nally un­der way.

Trans Hex now has two ma­jor pos­i­tive fac­tors go­ing for it. The first is that it had R205m in the bank at end-March, mean­ing it doesn’t need to raise funds for the fore­see­able fu­ture un­der cur­rent grim mar­ket con­di­tions.

The sec­ond is that man­age­ment fi­nally seems to have got on top of the sit­u­a­tion in An­gola, where Trans Hex has haem­or­rhaged so much cash over re­cent years. Its two loss-mak­ing alluvial min­ing op­er­a­tions have been closed, and Trans Hex has put a ceil­ing of R5m/month on the money it will send to An­gola to sup­port op­er­a­tions there.

CEO Llewellyn Del­port in­di­cates man­age­ment’s terms for its pro­posed third mine – Luana, which are cur­rently be­ing ne­go­ti­ated – will be dif­fer­ent from the agree­ments struck about the first, which were more in favour of the An­golan gov­ern­ment than Trans Hex. “We’ve been through the uni­ver­sity in An­gola,” Del­port com­ments.

So with rough di­a­mond prices im­prov­ing – and as­sum­ing Trans Hex keeps its core Baken op­er­a­tions run­ning ef­fi­ciently – this looks like a nice re­cov­ery punt.

TRANS HEX GROUP

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