from the editor

Finweek English Edition - - CONTENTS - JANA MARAIS

there’s one thing you need to re­mem­ber when you chat to th­ese ju­nior min­ers,” an iron ore exec once told me dur­ing a con­fer­ence in Monte Carlo. This was in 2008 at the height of the com­modi­ties boom. “Some of them want to mine ore, but most of them just want to mine the mar­ket.”

Spot prices were hit­ting new record highs al­most daily, and there seemed to be no end to China’s de­mand for iron ore – or the num­ber of ju­nior min­ers with ex­plo­ration rights in won­der­fully re­mote parts of the world.

The exec had a par­tic­u­larly am­bi­tious dream: he wanted to build a new iron ore mine north of the Arc­tic Cir­cle in Canada. In ad­di­tion to the weather prob­lems, which would halt ship­ments for a few months a year, the project also re­quired mas­sive rail and port in­fras­truc­ture in­vest­ments. (More than seven years and quite a bit of share­holder pain later, the first ore was shipped.)

Two things re­minded me of this in­ter­view. Firstly, the China Iron and Steel As­so­ci­a­tion warned that Chi­nese de­mand for steel, a bell­wether of the econ­omy, is con­tract­ing at an “un­prece­dented pace”.

And se­condly, we saw the 15th list­ing of the year on the JSE this week. We’ve seen the most ini­tial pub­lic of­fer­ings to the JSE to date this year since 2007, with the value of deals ris­ing to the high­est level since 2010, ac­cord­ing to Bloomberg data. With the JSE still trad­ing at his­tor­i­cally high (and ex­pen­sive) lev­els, it is un­der­stand­able why many un­listed com­pa­nies see it as a good time to raise eq­uity at an at­trac­tive val­u­a­tion.

On the other hand, the In­ter­na­tional Mone­tary Fund is ex­pect­ing the econ­omy to grow by 1.4% this year and only 1.3% in 2016, the slow­est pace since 2009’s re­ces­sion. Busi­ness con­fi­dence is at its low­est lev­els in 22 years.

Cer­tainly a good time, then, to heed the iron ore exec’s warn­ing and keep an eye out for those who are sim­ply here to mine the mar­ket – and at top dol­lar, too.

Mat­ter of fact In the 29 Oc­to­ber is­sue, we er­ro­neously re­ported that “Adapt IT presents a good buy­ing op­por­tu­nity at any level above R100/share, with pro­jected up­side to R141.50/share lev­els in the near to short term.” It should have read “…at any level above R10/share, with pro­jected up­side to R14.15/ share”. We apol­o­gise for any in­con­ve­nience caused by the er­ror.

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