One-cent a share firm offers 10-billion shares

At what point do you throw in the towel? It is a question that littleknown Nutritional Holdings, the JSE-listed maker of fortified dryfood products, might do well to ask itself as it gets set to embark on a capital raise.

This would not, you’d think, be feasible when your shares trade at all of 1c.

And yet in one of the most breathtakingly large rights issues of recent times — though possibly the smallest in value — Nutritional Holdings (share code: NUT) is about to offer 10-billion shares to ordinary investors, at the princely subscription price of 0.001c a share. Yes, we are talking fractions here.

What it hopes to raise? R10m. You can’t buy a house on Cape Town’s Atlantic seaboard for that. It suggests that remaining listed is an issue of pride more than anything else.

The offer is underwritten, but if NUT has your attention, perhaps it would be helpful to acquaint yourself with what it does.

Nutritional Holdings’ vision is to “fight malnutrition and tackle food security” among Southern Africa’s poor. It makes and sells fortified dry-food products for the lower-income market and mass-feeding schemes. It also manufactures chlorine-free water purification products.

The business does have fair turnover for a 1c share: almost R43m in the 2018 financial year, but its losses were not insignificant either, at R13.8m. Cashflow is a problem. Despite it all, the company remains a going concern. Just not one, perhaps, for the JSE’s books.

The glowing views of South Deep early this decade from people at the upper echelons of Gold Fields didn’t give a single hint about the difficulties that were to follow.

South Deep, the R32bn gold mine in Gold Fields, has never come close to realising the potential management envisioned for the asset when it bought it in 2006. The mine had a rocky start with Western Areas under the leadership of the infamous Brett Kebble and the spats it had with Canadian partners in building the mine. At the official opening of the mine, Kebble, who perpetrated one of the worst frauds in SA’s mining history, called the mine with its 3km deep shaft the “world’s most expensive long-drop”.

Investors in Gold Fields must feel the same way. There has been precious little to show for the R22bn purchase price and the R10bn subsequently invested in the mine.

The early vision was for South Deep to produce up to 800,000oz of gold a year from one of the world’s largest untouched ore bodies in a grand mechanised mine moving millions of tons of ore each year with a relatively small and highly skilled workforce.

Last year, after a number of downward revisions and misses on targets, management settled on 480,000oz by 2022 and an investment of another R2bn.

On Tuesday, that target was abandoned, and the workforce faces being cut by 1,560 people.

There is no end in sight for this mine, which CEO Nick Holland keeps telling the market the company understands and has a measure of the problems besetting it.

The question now is surely how much longer shareholders will tolerate this increasingly heavy albatross around the company’s neck.