Wait­ing for a div­i­dend

Finweek English Edition - - MARKETPLACE -

Kumba has had a mas­sive run as the price in­creased some five-fold off the lows of late 2015.

The re­al­ity is that the bind the com­pany found it­self in, and which saw the div­i­dend be­ing can­celled, is likely over. Iron ore prices look set to set­tle around $50 and this will mas­sively help cash flow. More im­por­tantly, Kumba has op­ti­mised op­er­a­tions, which now sees it only min­ing the higher ore bod­ies. This will im­prove yields and also boost earn­ings and cash flow.

I don’t see the stock mov­ing much higher, but a re­turn of the div­i­dend should help the com­pany hold its cur­rent price lev­els and the div­i­dend will be a de­cent re­ward for hold­ing on. The big risk here is the exit by An­glo Amer­i­can, which wants to dis­pose of its 69.7% stake in the com­pany. This would most likely be done via an un­bundling to share­hold­ers, but that has some chal­lenges as many An­glo share­hold­ers are reg­is­tered in Lon­don, where Kumba does not trade. Fur­ther, any un­bundling could put short-term pres­sure on the share as those re­ceiv­ing Kumba sell their stake.

Kumba's Kolomela mine in Post­mas­burg, North­ern Cape

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.