On the roll again
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.