Flash Briefing: Bumper day for mining stocks, Naspers; Platinum producers face showdown; SARB rate cut on cards

By Linda van Tilburg

Here is today’s Biznews Flash Briefing:

  • South African mining stocks were driven to an almost 11 year high yesterday as iron-ore prices rallied and gold was shining due to its haven appeal as the case for a US interest rate cut strengthened, and an array of geopolitical risk threatened the world’s economies. Johannesburg’s FTSE/JSE Africa Mining Index gained as much as 2% yesterday to the highest level since July 2008. Anglo American, BHP and AngloGold Ashanti have contributed the most to this year’s 28% advance for the sector. The rand’s 3.4% decline against the dollar in the past month has also boosted the outlook for local miners.
  • This is good news for the gold mine sector as the latest statistics on mining production shows a decrease of 1.5% year-on-year in April. Gold Mining production fell by 19.5% over the period. Iron ore production was down almost 12% and chromium fell by 7%. The drop in gold production is due to strikes led by the Association of Mineworkers and Construction Union (Amcu).
  • South African platinum producers are preparing for significant wage demands as workers eye windfall earnings from a rally in metal prices. Amcu will present their demands to seven producers today and it is rumoured to be gunning for substantial increases as it feels that miners’ profits have increased substantially. Amcu has been targeting a monthly minimum wage of R12,500. The spokesperson for Anglo Platinum Jana Marais said they were expecting another tough round of negotiations.
  • While mining production has fallen, there was a sharp increase in motor trade sales of 10.4% year-on-year in April according to Statistics South Africa. Fuel sales and accessories surged by more than 11%, while new vehicle sales rose by 10.2%.
  • The Governor of the Reserve Bank Lesetja Kganyago says there may be room for interest rate cuts in the next year or two, given how weak the economy is. Governor Kganyago said in a speech, days after a row over the bank’s focus that he remained committed to the bank’s primary mandate of price stability.  He said there were expectations that monetary policy should shoulder more responsibilities in addressing growth constraints, but the expectations need to be based on the constitutional and legislative mandates of central banks.
  • Naspers Ltd.’s full-year earnings rose by as much as a third ahead of the technology group’s planned asset spinoff in Amsterdam. Core headline earnings per share, which strip out non-operational items, are expected to have grown by about a third, the company said in a statement ahead of more detailed financials scheduled for later this month. The market value of Naspers has increased by five times in the past six years, largely due to growth in Naspers’s 31% stake in Chinese internet giant Tencent Holdings Ltd.
  • Oil prices surged early yesterday by about 4% after two oil tankers were hit by explosions in the Gulf of Oman situated between Iran and the United Arab Emirates. The incident is stoking fears that diplomatic efforts won’t avert a military confrontation between Iran and the United States. On the JSE, the all share index was flat, but miners benefited from the prospect of rising oil prices. Upward movers were Exxaro and Harmony Gold whose shares rose by more than 4%, African Rainbow Minerals was up 3%, while retailers were down, Massmart by 4%, Truworths just under 4% and Shoprite by 3%.