JSE at a record: Top man­agers’ share picks

Finweek English Edition - - FRONT PAGE - BY DAVID MCKAY

An­glo Amer­i­can Plat­inum ( Am­plats) CEO Chris Grif­fith ex­pects to have fi­nalised plans for the sale of the group’s non-core Rusten­burg and Union sec­tion mines by the mid­dle of the year. If the truth be told, how­ever, the longer the process takes, the bet­ter for Am­plats.

An­a­lysts be­lieve that as 2015 moves from win­ter to au­tumn, the for­tunes of plat­inum group met­als (PGMs) will im­prove and there­fore sup­port the bullish price fore­casts Am­plats is no doubt build­ing into its mod­els for the as­sets due to be sold.

“We’ve once again re­vised our PGM price out­look, but re­tain our con­vic­tion that metal prices will begin to im­prove from the mid­dle of this year,” said JP Mor­gan in a re­cent re­port.

“For us, the ques­tion is ‘when’ rather than ‘ if ’ plat­inum prices move higher, with the tim­ing of this call determined by the di­rec­tion of the dollar and US in­ter­est rates, avail­able stocks of metal in the mar­ket and the global macro- eco­nomic out­look,” it said.

It’s a view shared by Am­plats. Speak­ing at the Min­ing Ind­aba where it pre­sented its full-year f ig­ures, Griff ith said above-ground in­ven­to­ries of metal that had been pre­vi­ously plug­ging the sup­ply def icit in plat­inum over the last three years would soon be di­min­ished.

“The f un­da­men­tals of t he mar­ket will recom­mence their role in the plat­inum mar­ket,” said Grif­fith in his pre­sen­ta­tion. Ac­cord­ing to Am­plats, in­ven­to­ries sup­plied the mar­ket with PGMs through the f ive-month strike last year in which the price of plat­inum barely moved (in fact it fell) even though most of South Africa’s ma­jor pro­duc­ers weren’t min­ing any metal.

Es­ti­mates are that in­ven­to­ries fell to 2.2m ounces from 4.1m oz over the last three years. In­vest­ment hold­ings in plat­inum have fallen, it’s true, but an in­crease in au­to­cat­a­lyst pro­duc­tion and the re­vival of the US econ­omy are edg­ing plat­inum back to health.

Am­plats is also the choice pick of In­vestec As­set Man­age­ment, but the com­pany is scep­ti­cal of the plat­inum sec­tor in gen­eral. While it ex­pects the price of the metal to im­prove through­out the year “...plat­inum shares seem to be pric­ing in an almighty leap in earn­ings”. This will only come about if the plat­inum price is sig­nif icantly higher which In­vestec be­lieves would have to be $1 500 to $1 600 per ounce.

“As men­tioned, while we do ex­pect the metal price to rise, it is not suf­fi­cient to jus­tify the cur­rent share prices,” said In­vestec. “Some of the higher-cost plat­inum pro­duc­ers, such as Im­pala and Lon­min, are un­der strain,” it said. It’s also note­wor­thy that at a cur­rent price of about $1 220 per ounce, most of SA’s plat­inum shares are not pro­duc­ing any free cash.

Re­mem­ber, Lon­min re­cently said it hoped to sup­port its growth projects on the gen­er­a­tion of free cash, which raises the risk that fur­ther pro­duc­tion cuts are in the pipes for at least one of SA’s ma­jor plat­inum pro­duc­ers.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.