Ghost Bites (Anglo American (De Beers) | Insimbi | Orion | TeleMasters)

Get the latest recap of JSE news in the Ghost Wrap podcast, brought to you by Mazars:

Anglo American has a slight uptick in diamond sales at De Beers (JSE: AGL)

But caution is still the flavour here

The debate around mined vs. lab grown diamonds continues, with De Beers (part of Anglo American) at least starting to show some improvement in sales after a dark period. The company can directly influence the level of supply in the market, which is exactly what it did to try and get prices to recover.

It seems to be working, with sales value for Cycle 3 of $445 million. That’s an improvement on Cycle 2 this year of $431 million, but remains lower than $542 million achieved in Cycle 3 of last year.

The economic landscape and slow pace of growth in China are also major contributing factors here. Although lab-grown diamonds don’t help, they are by no means the only challenge.

Insimbi had a tough time in the past year (JSE: ISB)

HEPS is down sharply

Insimbi Industrial Holdings released a trading statement in early February that indicated a drop in HEPS of at least 20% for the year ended 29 February 2024. That’s the minimum disclosure required by the JSE for a trading statement, so you always have to be careful when you see “at least 20%” – the wording “at least” can end up working very hard.

That’s the case here, with Insimbi expecting HEPS to be down by between 50% and 60% for the period. It will come in at between 11.02 cents and 13.78 cents.

The reasons? All the usual stuff, really. Apart from load shedding and higher interest rates, Insimbi is also exposed to the general state of our ports and transport infrastructure. A ban on exports of recycled metals is also listed among the negatives. Insimbi did what it could in terms of cost management, but couldn’t come out with an appealing earnings result. Still, it’s profitable and well capitalised and ready to step into the ring once more in the new financial year.

Orion takes an important step with the Okiep Copper Project (JSE: ORN)

There have been lots of complicated legal processes in the background

Back in 2021, Orion exercised a restructured option to directly acquire the mineral rights and various other assets related to the Okiep Copper Project, rather than shares in the entities themselves. The timing and manner of the transactions have been amended, with all parties other than the IDC having signed the addenda at this stage. The IDC is still dealing with internal approvals.

The remaining total consideration of R59.6 million remains unchanged, with the first phase settlement being R10.86 million in cash and R35.1 million in Orion shares, with disposal restrictions attached to those shares. The first settlement will take place when SARB approval is received.

Orion is aiming to conclude the Bankable Feasibility Study by June 2024, with the approval of the water use license outstanding before the project is fully permitted.

TeleMasters announces the structure of its B-BBEE deal for Catalytic Connections (JSE: TLM)

A good effort has been made here to minimise dilution for existing shareholders

People tend to forget that a B-BBEE deal isn’t as simple as previously disadvantaged individuals being empowered at the expense of those who have money. In a listed company, a costly B-BBEE deal hurts every single shareholder in that company of every colour. It’s a shift of value from one party to another, usually on economic terms that are highly in favour of the B-BBEE partner.

Sometimes, listed companies get it right to strike more of a balance, avoiding a scenario where the deal becomes extremely punitive to existing listed shareholders. TeleMasters is one such example, with the 30% deal in Catalytic Connections being structured intelligently to preserve the existing value for current shareholders. Future value creation is shared with the B-BBEE partner, in this case Sebenza Education and Empowerment Holdings, on a 70-30 basis.

As the announcement explains, this is achieved by Catalytic Connections creating preference shares equal to the current value of that company and issuing them to TeleMasters. This allows the B-BBEE party to subscribe for 30% of the shares in Catalytic Connections without taking on external debt. It’s a vastly superior structure to the usual externally leveraged deals that often end up underwater anyway.

Little Bites:

• Director dealings:
  • Des de Beer elected to receive R42.7 million worth of shares in Lighthouse Properties (JSE: LTE) in lieu of a cash dividend as part of the scrip distribution option. Receiving scrip dividends has been core to his strategy in recent times of significantly increasing his stake in Lighthouse.
  • A non-executive director of African Rainbow Minerals (JSE: ARI) sold shares worth R3.9 million,

• Motus (JSE: MTH) announced that Osman Arbee will be retiring as CEO of Motus with effect from 31 October 2024, having reached the retirement age of 65. He has been with the group for 20 years and has been CEO of Motus since 2017. Ockert Janse van Rensburg, currently the CFO of Motus, has been appointed as CEO with effect from 1 November 2024. He’s been in the CFO role since 2015 and served as CEO for six months while Arbee was ill, so there’s a strong succession story here.

INVEST IN SHARES