There’s no buying opportunity in commodity bull market – Patrice Motsepe

Despite Covid-19’s dampening impact on the global economy, commodity prices such as gold and platinum have rallied as well as resource shares. Patrice Motsepe, one of Africa’s richest men and chairperson of African Rainbow Minerals (ARM), doesn’t see a buying opportunity at these lofty valuations.

Speaking at the presentation of the company’s annual results on Monday, Motsepe said ARM was on the lookout for “value-enhancing opportunities” but the environment wasn’t conducive at the moment.

“The timing is also important, because it is not a good time to buy when the prices are high.”

Gold is 23.3% higher since the start of March and recently reached an all-time high after investors flocked to safe haven assets as the global economy reeled from the effect of the Covid-19 pandemic. Palladium prices have also rallied over the past five months. The rise in commodity have benefited South African miners.

ARM, which has interests in platinum, coal ferrous metal and gold through its 13.83% stake in Harmony Gold, posted a 6% jump in headline earnings for the financial year to end of June, to R5.5 billion, up from R5.2 billion in the previous financial year.

The group’s coal business reported a headline loss of R487 million due to a decline in export thermal coal prices.

The company said its diversified portfolio of commodities helped it counter operational headwinds including the impact of Covid-19, as higher PGM and iron ore prices offset the negative impact of lower manganese ore, manganese alloys and thermal coal prices.

“We often find that investing in commodities that we already own creates more value for shareholders than acquiring new assets,” said Motsepe on the prospect of future acquisition.

Motsepe, who sits on the World Economic Forum Board of Trustees, also voiced his opinion on the the role of government in encouraging growth in the local mining sector, which has suffering from dwindling output and sluggish investment. The business leader, who has been vocal about providing tax breaks to companies, said there was a need to recognise the role of the private sector as an engine for much-needed job creation and incentivise companies.

“I have no doubt that that there is a big commitment to make this country a very good place for the private sector. There is a lot of good money that is on the sideline, and we have to incentivise [the private sector].”

“We’ve got to look at our tax legislation in the context and link it up with job creation. I am confident that there would be investments in the mining industry, create jobs,” he said, adding that the big challenge for the country was unemployment, quality education and skills.

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