Locally listed mining stocks, despite facing continually depressed commodity prices, have started to rebound following renewed weakness in the rand, which moved back towards its worst level of the year (11.39).
While most of the rand’s depreciation against the dollar can be attributed to the greenback’s inherent strength (as current US stimulus measures came to an end), a credit ratings downgrade by the Moody’s Rating Agency provided an inherently domestic catalyst to compound local currency weakness.
Banking counters have reacted poorly to the news, but in truth last week’s share price losses within the sector were marginal in contrast with the previous week’s gains and perhaps can be attributed to short-term profit-taking following the bullish run.
Anglo American Platinum
Its rebound last week follows strong quarterly results (on a relative basis) reported. Headline earnings for the company returned to a profit of 11c per share in the quarter ending September 2014, from a loss of 22c per share in the June 2014 quarter and 5c (loss) per share in the September 2013 quarter. All-in sustaining costs improved by 19% (y/y) while production gained 8% over the period. Market participants would take note of the marginal improvement on the company’s net debt to adjusted earnings before interest, taxes, depreciation and amortisation in September 2014 at 1.64 from 2.02 times in September 2013.
The high levels of debt within the company have been of concern to investors and news that AngloGold Ashanti would be looking to its sale and/or partnership agreements to strengthen the company’s balance sheet rather than the previously proposed share dilution has appeased investor sentiment.
Found itself underperforming blue-chip counters last week. The decline on MTN has fallen sympathy to economic concerns in oil-rich Nigeria, as Africa’s largest economy battles a significantly weaker domestic currency (the naira) while the price of Brent crude continues to fall.
Nigeria accounts for around 50% of MTN’s earnings and investors are questioning the near-term expectation for growth and profitability from operations within the region over the near term.
This week will see domestic economic catalysts in the form of manufacturing production and sales data on Tuesday, retail trade sales on Wednesday and mining production and sales data scheduled for Thursday. Internationally, all eyes will be on the preliminary GDP data out of Europe on Friday, in particular the German print, which showed marginal economic contraction in the previous quarter.
Murison is a market analyst at IG. Follow him on Twitter @ShaunMurison_IG