Decline in mining stocks sees the JSE fall from record high
All Share Index breaches 69 000 points for the first time, but ends the day 0.27% lower
SOUTH African stocks eased in late trade yesterday after swinging to an alltime high with the FTSE/JSE All Share Index (Alsi) breaching the 69 000 point mark for the first time before retreating and ending the day in the red.
The JSE benchmark index rallied more than 1.8 percent to 69 403 points during early trade as rising commodity prices lifted assets.
But the Alsi reversed the gains to close 0.27 percent lower at 68 326 points, dragged down by mining stocks as the gold spot price fell 0.76 percent to $1 709 (about R25 655) an ounce.
Major losses were recorded by resources and mining stocks as both indices lost 1.51 percent and 1.61 percent to 69 437 points and 66 173 points, respectively.
African Mineral Resources fell 4.22 percent to R284.63 per share, BHP was 3.8 percent down to R473.37, while Anglo American eased 0.53 percent to R611.86 per share.
The JSE has performed impressively since the beginning of 2021, increasing by more than 9 000 points, or more than 15 percent, so far this year.
February saw the JSE rise for a fourth consecutive month as positive developments in the US stimulus bill and progress in Covid-19 vaccine roll-outs continued to boost investor sentiment.
Anchor Capital’s derivatives specialist, Henre Herselman, said the momentum at international level was boosting the local market.
Herselman, however, said they wouldn’t be surprised to see some form of correction or consolidation in the near term.
“Momentum is firmly behind the All Share, as our resource counters and Naspers powers the local market to new highs, and one would have to favour the momentum,” Herselman said.
“I do, however, think some form of caution is advised in the short term, as the JSE has rallied nearly 15 percent in the first two months of the year already, leaving many short-term technical indicators a little overstretched.”
The rand remained muted as it rose 0.03 percent to R15 on the mark against the greenback by 5pm, reversing earlier gains after peaking at R14.88 as the dollar surged.
The dollar index edged higher as Treasury yields increased amid prospects of a strong economic rebound supported by a fiscal stimulus and a faster coronavirus vaccine roll-out.
Investors have been gauging the economic recovery, a potential stimulus package and quicker vaccination roll-outs in the US.
TreasuryOne’s currency strategist, Andre Cilliers, said the rand was likely to continue to trade lower for now, driven by movements in international markets.
“Traders will be keeping an eye on whether (US President Joe) Biden's $1.9 trillion fiscal stimulus package finally gets approved, as well as Friday's all-important payrolls data,” Cilliers said.
Investec economist Annabel Bishop said although the relaxation of the lockdown restrictions on Sunday opened up more economic activity somewhat, the county’s vaccine rollout programme remained a matter of concern.
Bishop said there were indications that the country could suffer a third and even a fourth wave of infections before herd immunity was attained.
She said economic activity would likely be weakened by the interruptions, with a third wave of infections expected in the second quarter.
“That is unless the full healthcare sector, both private and public, rolls out the vaccines much quicker than this, allowing for faster economic growth and the avoidance of a third, and even multiple, waves of Covid-19 infections, with multiple tightening of lockdown restrictions,” Bishop said.
AFRICAN Rainbow Minerals (ARM), chaired by billionaire Patrice Motsepe, posted record headline earnings during the six months ended December 2020 and doubled its interim dividend payout compared with a year earlier as commodity prices boosted its fortunes.
The group reported a 134 percent jump in headline earnings to a record R5.039 billion, or R25.87 a share, compared to R2.155bn, or R11.14 a share as iron ore prices reached record highs coupled with higher platinum metal group (PGM) dollar prices and manganese ore sales volumes.
ARM declared a R10 a share interim dividend representing a R2.24bn payout during the half year ended December compared to R5 a year ago.
Chief executive Mike Schmidt said the group’s operations navigated these turbulent times well, responding in an agile and responsible manner.
“We declared an interim dividend of R10 for the first half of the 2021 financial year from R5 per share and improved our financial position, which affords ARM flexibility to opportunistically pursue value-enhancing growth prospects,” said Schmidt.
The increase in commodity prices resulted in star performances from the ARM ferrous and platinum divisions, however, headline earnings plunged in the coal division on lower thermal coal prices, lower sales volumes due to reduced Eskom offtake and logistics and mining challenges and above-inflation production unit cost increase.
Headline earnings from ferrous was 60 percent higher at R2.95bn from R1.84bn a year earlier driven by a 99 percent increase in headline earnings in the iron ore division.
Attributable headline earnings from the platinum business increased by a whopping 200 percent to R2.021bn from R489 million as the Two Rivers and Modikwa mines benefited from a 35 percent and 162 percent increase in average realised dollar palladium and rhodium prices, respectively.
Schmidt said the group would grow
organically to produce an additional 300 000 ounces PGMs by 2024 after its board approved the R5.7bn expansion of the Two Rivers Mine in Limpopo and the Modikwa mine was also ramping up production.
Last month Impala Platinum, which jointly operates the Two Rivers mine, announced the Two Rivers Merensky Project which at steady state the project is expected to produce 182 000 6E PGM ounces a year, as well as 1 600 tons of nickel, and 1 300 tons of copper a year.
The construction of the Two Rivers Merensky Project is expected in July, with plant commissioning expected in the second quarter 2023.
Schmidt said the project would ensure the Two Rivers mine was positioned in the bottom half of the industry cash cost curve.
“I am proud of what we are going to achieve. I have no doubt we will deliver on time and in budget,” said Schmidt.
Anchor Capital investment analyst Seleho Tsatsi said ARM’s portfolio of commodities had been well-positioned to benefit from the rally that “we’ve seen in commodity prices over the past year or so”.
“Iron ore and PGMs, in particular, have really rallied strongly and producers of those commodities are earning cyclically high margins. Going forward, it’s likely that iron ore and PGMs will continue to drive earnings for ARM and if commodity prices remain somewhere near spot, you could see continued earnings growth in the short-term,” Tsatsi said.
ARM shares closed 3.89 percent lower at R285.61 on the JSE yesterday.