Front-of-mind at the JSE today were the production updates from Kumba Iron-Ore and strike-dented Amplats, together with a five-year wage agreement between RBPlatinum and NUM that has left the market both surprised and astounded. Predictably, they were the focus of Alec Hogg's interview with Peter Major, Mining Analyst with Cadiz Corporate Solutions who, firstly, believes that Kumba is currently fully valued – given the combination of out-of-control costs and likely unsustainable current iron ore export prices. Amplats, says Peter, has a way to go. Currently trading (in dollar terms) at half of what it was three years ago, it is no mirror image of the Stock Market which has gone 40 to 50 per cent the other way in the same period! Finally, the NUM deal with RBPlatinum is clearly seen by Peter as a coup for the union that will require unprecedented growth in the platinum price if it is to be delivered. Follow the full interview here.GK.ALEC HOGG: Well, in the mining space the market has seen production updates today, on the stock exchange new service from Amplats and Kumba Iron-Ore. Meanwhile, RB Platinum concluded a five-year wage agreement deal, with the National Union of Mine Workers. That can only be very positive, given the current environment on labour relations. Peter Major, Mining Analyst with Cadiz Corporate Solutions is on the line to give us some insights into all of these. Peter, before I forget, Gary Booysen asked us if you would give your view on what the valuation, given what we've seen from Kumba today, given what's happened to the iron-ore price, generally, on Kumba's opportunities. Where would you value that stock, in your analysis?.PETER MAJOR: I wouldn't value it at any higher than it is now, Alec. I still think these iron-ore prices can come off a little bit. And Kumba, I just think their cost have gotten a bit out of control, over the last ten years, like most mining companies have. The only way you get your costs back, under control, is when you have a big fall in revenue and you are able to push through cost cuts, without the union burning your mine down and Government. If you just look at the Overberg that these guys are moving at Kumba, I think they're moving 250-million to 300-million tons a year, just to get, what; 45-million tons down on rail. So huge, huge overheads to move that ore, it is rich ore, they get a good price, but I don't think these prices are sustainable. And I think that is what that share is discounting. It is discounting lower high in ore prices and, if I'm wrong and these prices go back to 110 and 120, then yeah, Kumba should put on another 15 to 20 percent, but I don't think that's going to happen..ALEC HOGG: So, at the moment, there is nothing to get terribly excited about. We also had a production update from Anglo Platinum, as expected..PETER MAJOR: Yes, I think people were expecting a little better with Mark being there, because a lot of these mines were down, previously, especially the copper side, but even the diamond side of it. They are exceeding a lot of what was expected, but they've got to do a lot better. That share price is trading…… I don't know. It's trading, in Dollar terms, at around 27-Dollars and, you know, it was 55-Dollars just two to three years ago, now share commodity prices were higher but that's still a fall. It is trading at, literally, half of what it was three-years ago, and we all know that the Stock Market isn't half of what it was three-years ago, it's about 40 to 50 percent higher. They've got a long way to go. They're going to need more production increases, and they're going to need higher commodity prices than we have now..ALEC HOGG: The other platinum stock, one that seems to be doing a lot better, is RBPlats. Particularly with that announcement this morning that they've put together a five-year agreement, with the National Union of Mineworkers, that's got to be positive?.PETER MAJOR: Look, this is really positive for the NUM. If that was a listed company, I think it would be up 20-percent and the NUM team members, who negotiated this contract, if they were, given a pension of two-million Rand a year, each, they would be getting off cheap. I think it's a fantastic agreement for the workers. It is, literally, ten-percent compounded for the next five-years. I haven't had a ten-percent increase in 15-years, Alec. In fact, I haven't had a seven-percent increase in a year, in the last 15. Now, these guys are getting five-years at ten-percent. If you look at today's platinum price, when they are battling, they're making money but not much. Today's platinum price is 1.500. Now if you raise the platinum price ten-percent a year, for five-years, that's 2.375. It has never been seen, never, even in the boom times of 2007 did it crack 2.200. So I don't know where they think they're going to get the money to pay these kinds of increases..ALEC HOGG: I suppose the alternative though Peter, is that if they can't pay the increases they are just going to have to shed jobs..PETER MAJOR: Yes, like maybe all of them..ALEC HOGG: That was Peter Major, Mining Analysis from Cadiz Corporate Solutions.
