Bottomed at long last?
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