Mining, mining everywhere
Investors in the mining and resources sector were kept extremely busy this week, as were investment analysts who couldn’t have had much sleep. This is a whirlwind summary of the biggest releases.
Sasol got plenty of attention by announcing a return to dividends. An increase in the average rand oil price per barrel of 68% did wonders for the earnings and the balance sheet, enabling a R14.70 dividend to be declared. Net debt to EBITDA is just 0.8x, so the turnaround at Sasol continues.
The CEO of Merafe dampened the mood on the same day, dishing out a very bearish commentary alongside great numbers. It’s all about outlook rather than the prior year and there are concerns for ferrochrome, with falling prices and inflationary costs.
South32 deserves a mention for its year of record earnings and cash flow. HEPS was over 6x higher for the year ended June 2022 than in the prior year, a remarkable performance driven by a 69% increase in revenue from continuing operations and
EBITDA margin expansion from 26.4% to 47.1%. There has been extensive corporate activity this year, including acquisitions in copper, aluminium and bauxite.
Gold counters were a mixed bag. Harmony Gold was horrible, now in a loss-making position thanks to substantial impairments. The group has elected to restructure the Tshepong operations and the life of mine has been cut from 19 years to seven, driving the bulk of the impairment. DRDGOLD saw HEPS decline by 22% after revenue fell by 3%. Gold Fields brought some shine, with HEPS up by 29%.
Sibanye-Stillwater results show financial damage inflicted by a protracted labour strike. Gold production fell by 65% on the previous six months at a time when the average gold price was 7.3% higher, so the company couldn’t take advantage. Combine that with flooding in US platinum operations and a drop in headline earnings was inevitable. Despite that, it was the company’s third-highest interim profit since 2013!
In deal news, Afrimat is walking away from the Gravenhage manganese project because the Department of Water and Sanitation granted a water licence that deviated materially from the application made. The seller is now in dispute with Afrimat.
Impala Platinum has a framework agreement with the government on employment, supporting small business and localisation.