orion lucapa

BHP Billiton, DRDGold, Pan African Resources, Impala Platinum, Wescoal and platinum ETFs look a good buy as an investment.

AUTHOR: Peter Major, Mining Director at Cadiz Corporate Solutions

Your main determinant of a resource investment share is generally ‘your view of the commodity price’.

On a metal price basis – for South Africans – the Platinum ETF ‘NGPLT’ looks like safe at +15% per annum.

An investment can score through a depreciating rand – and/or – from a rise in the platinum price.

Platinum looks too cheap relative to gold. PLATINUM prices in $ oz. aren’t expensive.  If they rise $100/oz then Impala Platinum should really motor. It has a new and good CEO.

AngloGold Ashanti looks cheap and has fairly high-quality mines.

But the company has huge debt as well. So unless one believes the dollar gold price is going to start rising another $100/oz or more – why buy it?

Gold Fields is in a similar position. You need gold to rise at ‘least’ $100/oz in a short period of time – in order to get any out-performance.

Now Pan African Resources and ‘Durban Deep’ are different.

They are pure South African gold shares – and very dependent on the Rand even more than the dollar gold price. They have high capital expenditure – but if the rand loses 10% or more they should really perform.

Similar for Sibanye-Stillwater, but not nearly as much. It has too high a labour and electricity component, especially in South Africa.

For the company to really move up – it needs a $100/oz jump in platinum AND gold at the same time. Not impossible – but a bit risky.

The coal price in dollar per ton terms looks way too high to me – compared to oil and nearly everything else. Wescoal looks too cheap by far at current coal prices but should recover even if coal “comes off a bit”.

And – if coal falls even a little bit – the rand will weaken – which should help Wescoal a lot.

ArcelorMittal looks very cheap – but is still so risky. Ditto for Trans Hex.

Iron ore prices don’t look too high at +-$68/t.  But can they and manganese prices keep rising from here?

I don’t know.

But if they do – Associated Manganese is a quality share that should continue rising.

But I would feel better buying it on a pull back – rather than right now.

BHP Billiton looks cheaper and safer than the Anglos or Glencore (to me).