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Mixed bag for mining stocks as AngloGold CEO says goodbye

Kelvin Dushnisky calls it a day after releasing a great set of results.
Those in gold or platinum have reason to smile; others not so much. ArcelorMittal SA reported a R12bn drop in revenue for the half year to June. Image: Matthew Staver, Bloomberg

It was a mixed bag of news and results for mining companies last week, some good and some awful.

AngloGold CEO Kelvin Dushnisky announced that he is leaving after two years, handing over the reins for the time being to chief financial officer Christine Ramon until a permanent replacement is found.

No reason was given for the resignation, though it won’t be for lack of results.

It may have something to do with the request from the Public Investment Corporation (PIC) for details relating to a bonus of $800 000 awarded to Dushnisky by AngloGold for stepping across from Barrick Gold in 2018.

AngloGold reported that Dushnisky voluntarily repaid the $800 000 (R13.4 million) after earlier receiving an incentive bonus of $926 160 (R15.5 million) from Barrick. The PIC is one of the largest shareholders in AngloGold, with 11.4%, and in June raised its concerns over the bonus with the gold producer’s board.

Outgoing CEO Kelvin Dushnisky, who AngloGold says voluntarily repaid his R13.4m bonus. Image: Matthew Staver, Bloomberg

Another possible explanation that has been speculated is there may be no better time to lock in share options than over the last year or two and exit with some financial dignity.

AngloGold Ashanti share price

Dushinsky certainly had some luck on his side, presiding over a five-fold increase in the share price in his two years at the helm and a three-fold increase in interim profits for the six months to June 2020. How much of this was due to a rampant gold price and how much to management is unclear.

The world’s number three gold producer – which sold its sole remaining SA gold assets to Harmony earlier this year – reported operating profit was of $621 million (R10.4 billion)

In a Sens announcement released last week AngloGold advised that headline earnings for the June 2020 period are expected to be between $392 million and $416 million (2019: $120 million), with headline earnings per share (Heps) of between US 94 cents and US 99 cents (2019: US 29 cents).

Pandemic pressure

Anchor Capital’s resource analyst Seleho Tsastsi says what is clear from the results now coming through is that sales volumes have been hurt by the Covid-19 lockdown, though precious metals producers have been inoculated to some extent by strong commodity prices. Amplats sales volumes were down 46%, and Kumba Iron Ore’s were down 13%.

“Anglo American took a hammering from the Covid shutdown, with a 67% drop in interim earnings,” says Tsastsi. “Diamond sales fell through the floor and coal revenue was also sharply down. The contribution from platinum, which accounts for 23% of operating profit, was hit both by the lockdown and the explosion of a converter plant in March, which should be back on line by the end of the year.

“So the news for precious metals producers has been good to excellent, while for the rest it’s a mixed bag.”

Some good news for SA

Kumba reported half-year revenue had declined 8.5% to R31.58 billion, with diluted EPS at R26.15 (2019: R31.15). Good news for the country and the Northern Cape was its approval of the R7 billion Kapstevel South project at its Kolomela mine, with major shareholder Anglo American also signing off on the deal.

Across the water, booming iron ore prices enabled Rio Tinto to announce a $2.5 billion return of cash to shareholders, cementing its position as one of the UK’s biggest dividend payers.

Angloplats reported a thumping 28% increase in net sales revenue to R54.8 billion for the half year to June, with EPS at R25.12 (2019: R27.79).

Tsatsi says Royal Bafokeng Platinum will record a strong interim financial rebound despite a hefty blow to its production in the first half of the year due to Covid.

A trading statement from Merafe Resources suggests attributable ferrochrome production from the Glencore Merafe Chrome Venture will decrease by 42% compared with the prior comparative period. The company expects its basic loss per share to be around 2.79c, compared with EPS of 6.6c and its headline loss per share to be 3.41c, compared with Heps of 6.6c in the same period of last year.

Chrome prices remain under pressure, while energy-related costs are eating away at margins.

Also reporting results this week was steel producer ArcelorMittal South Africa, which reported a whopping R12 billion drop in revenue for the half year to June (2019: R21.74 billion). The loss for the period was R2.3 billion (2019: loss of R644 million), while headline loss per share was 239 cents per share (2019: headline loss of 58 cents per share).

ArcelorMittal share price

These are great times if you’re in gold or platinum. Apart from that, there’s little to celebrate in these times.

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