On the roll again

Finweek English Edition - - COVERSTORY - BREN­DAN RYAN

You win some, you lose some. And dur­ing 2010 I screwed up big time. Serves me right for gloat­ing about my su­perb stock-pick­ing per­for­mance in 2009, where I had Me­torex up 145% and East­ern Plat­inum up 96%. For 2010 I was saved from a to­tal wipe out only by Northam Plat­inum which was 8,41% up and even there I was saved by the bell be­cause it plunged into neg­a­tive ter­ri­tory af­ter the cut-off date. Apart from that limited move into pos­i­tive ter­ri­tory, I broke even on Wesizwe Plat­inum, but was 20,34% down on Pallinghurst; 19,09% down on Keaton En­ergy and a hor­rific 40,59% down on Sim­mer & Jack Mines (Sim­mers).

That last one hurt. I thought with the Vulisango furore fi­nally sorted out the share must rise. I hadn’t counted on the fi­nan­cial and man­age­ment cri­sis at as­so­ci­ate First Ura­nium. End game was that Bernard Swanepoel’s Vil­lage Main Reef an­nounced a takeover of Sim­mers in De­cem­ber for Vil­lage paper, which val­ued the com­pany at 105c/share.

As for the oth­ers, they were hit by a litany of man­age­ment and op­er­at­ing prob­lems: Northam was look­ing good at around R75 un­til pro­duc­tion was ham­mered by a six-week-long strike; Keaton suf­fered de­lays in the devel­op­ment of its Vang­gat­fontein col­liery, and Pallinghurst’s plat­inum sub­sidiary Plat­min fell way short on pro­duc­tion fore­casts and was also em­broiled in an es­ca­lat­ing dis­pute with its black em­pow­er­ment part­ner at year-end.

But enough of the re­crim­i­na­tions: the 2011 min­ing casino is open and it’s time to roll the die again.

I think the eco­nomic fun­da­men­tals still look good for gold and I be­lieve the US dol­lar gold price will con­tinue to rise. The prob­lem is the rand, which con­tin­ues to strengthen and rob SA’s gold pro­duc­ers of much of the ben­e­fit of the ris­ing dol­lar gold price.

But I still want a gold share and this year it’s

at R83/ share. I think the turn­around on its SA’s op­er­a­tions is kick­ing in and the mar­ket has yet to fac­tor in the “com­pany mak­ing” at­tributes of the huge and rich cop­per/gold strike at Wafi/ Golpu in Pa­pua New Guinea.

Any se­ri­ous in­vestor in SA’s min­ing in­dus­try needs to own a plat­inum share and I’m go­ing to go for

– again. I picked in Jan­uary 2010 at 214c and it’s cur­rently around 240c/share. I don’t think the mar­ket has priced in the fun­da­men­tal change in the com­pany’s cir­cum­stances, given it has guar­an­teed fund­ing in the bag to build its mine – in­clud­ing a pro­viso that any cost over­runs are for the ac­count of the Chi­nese, not Wesizwe mi­nori­ties.

The metal with fun­da­men­tals that many ob­servers reckon are even bet­ter than gold is cop­per and I think the best-look­ing cop­per share on the JSE is – cur­rently sit­ting at 544c/share. Re­mem­ber Me­torex started 2010 at 490c but it’s now in a far stronger fi­nan­cial and op­er­at­ing po­si­tion. It has also got shot of all its SA op­er­a­tions and is fo­cused solely on its cop­per/cobalt mines in the Demo­cratic Re­pub­lic of Congo and Zam­bia. I think there’s more up­side in the share.

Next, some sta­bil­ity to the port­fo­lio in the form of at R267/ share. If the wheels do come off SA’s econ­omy this year, this group seems the best-placed of the re­sources heavy­weights to ride it out.

My fifth and fi­nal stock is – mainly for the vana­dium. That’s used mostly in the steel in­dus­try but is find­ing in­creas­ing ap­pli­ca­tions in en­ergy technology, where it’s used to “su­per­charge” lithium bat­ter­ies. If that use takes off there won’t be enough vana­dium to go around.

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