HomeBusiness and policyWhat South African mining shares should you buy as an investment?

What South African mining shares should you buy as an investment?

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).