Record iron ore and copper production at BHP (JSE: BHG)
And yet the share price is down nearly 10% over 12 months
This is a great example of how mining companies can only “control the controllables” (i.e. production), with overall performance actually reliant on global commodity prices. Even though BHP achieved record iron ore and copper production in the year ended June 2025, the share price is down nearly 10% over the past 12 months. This is because global iron ore prices are under pressure thanks to factors like weak steel demand in China, an issue that has strongly contributed to the seemingly inevitable death of ArcelorMittal’s longs business as well.
On the plus side, copper prices have climbed sharply in the past year, so that certainly helps. The average realised price was 7% higher for BHP. Copper assets are all the rage at the moment, with underlying drivers including global electrification. BHP’s copper production increased by 8% year-on-year. Unfortunately, they do anticipate a dip in production in FY26, with a planned lower grade in Chile.
In iron ore, production for FY26 is expected to be slightly higher than in FY25. This means that BHP would benefit tremendously from any kind of global stimulus activity, especially in China as a potential response to the current geopolitical pressures being championed by the US. Average realised prices for iron ore fell 19% in FY25, so any relief would be most welcomed by investors.
Coal prices were also under pressure in this period, with average realised prices for steelmaking coal and energy coal down 27% and 11% respectively.
When mining houses achieve their production targets, it means good news for unit costs as well. This is because of the overheads associated with production, which are then spread across a higher number of units. So, with such strong production numbers at BHP, it’s not a surprise that they are on track for unit cost guidance in most of their operations.
The group’s capital expenditure for the year is expected to be in line with full-year guidance of $10 billion. Net debt will be around $13 billion. The Jansen Stage 1 potash project is 68% complete, with a total expected capex bill of $7 to $7.4 billion for that asset and first production expected to be in mid-2027.
Hyprop finally plays its hand re: MAS (JSE: HYP | JSE: MSP)
I’m happy to see Hyprop going ahead with this
As I’ve mentioned several times regarding this situation, I wasn’t a fan of Hyprop raising capital from the market with only the vague promise of moving ahead with an offer to MAS shareholders. I’m pleased to see that they pulled the trigger on it, otherwise it would’ve set a questionable precedent around investors throwing cash at listed companies without much guarantee of what it would be used for.
For MAS of course, this adds yet more spice into the mix. We already have Prime Kapital on one side of the equation, who called a shareholders meeting that I don’t think went to plan at all. Then we have a group of South African institutional shareholders who have their own views on this situation, calling for several changes to the board. Now, on top of this, we have Hyprop swooping in with a cash-and-shares offer to MAS shareholders.
There’s a cash alternative capped at R800 million, which is in line with Hyprop’s recent capital raise. With MAS trading on a market cap of R16.5 billion, that amount won’t go very far. For this deal to have any chance of success, MAS shareholders need to be happy to receive 0.42224 Hyprop shares per MAS share. At Friday’s closing price, that values MAS at R18.44 per share. The cash offer is based on R24 per MAS share. MAS is currently trading at around R23 per share. Clearly, there are a few nuances here.
The cash offer at R24 per share is really just a sweetener. Presumably every shareholder who wants to accept the offer will ask for the maximum possible cash amount as the implied value per share is much higher. But there’s not much cash to go around, so the blender offer price is much closer to what share exchange ratio suggests.
Why is Hyprop doing this? Apart from the fact that they are putting in a pretty opportunistic bid in terms of the share exchange ratio, the other benefit is that Hyprop already has some exposure in Eastern Europe that would be much larger if they could get this deal done. If all goes ahead and Hyprop gets a controlling stake in MAS, that stake would be around a third of Hyprop’s net asset value.
Why would MAS shareholders say yes to this? Well, the price implied by the share ratio is in line with where MAS was trading as recently as the end of May, with speculative trade around deal activity having driven the recent performance. This means that for large shareholders who have been on the MAS register for a while, the Hyprop deal isn’t unappealing relative to their average in-prices. If the various deals simply fizzle out, then MAS shareholders could easily see the price drop back down to the implied Hyprop offer level anyway – or worse. Hyprop shares are also more liquid than MAS (and infinitely more liquid than the preference share that Prime Kapital initially wanted to list as part of their plan to acquire MAS), so that makes a difference as well. Hyprop describes those proposed instruments as having “unknown liquidity” – that’s a rather kind way to put it. We know that the liquidity will be close to zero on an obscure inward listed preference share, which is why Prime Kapital’s initial salvo got no traction in the market.
What’s the catch? Well, a condition for the offer is that Hyprop would need to hold at least a controlling stake in MAS when all is said and done (i.e. more than 50%). Hyprop also requires access to all the documents related to the Prime Kapital relationship and the underlying investments, with the offer only going ahead if those terms are acceptable to Hyprop. There are a bunch of regulatory conditions as well of course.
Even if the Hyprop offer proves to be popular with shareholders, there’s still a long road to walk with governance at MAS and solving the shareholder relationships.
An update on the Quantum Foods shareholder register (JSE: QFH)
Punters who hoped for a juicy take-private deal have been disappointed
In case you’re keeping track of Quantum Foods, the company has announced that major shareholders Braemar Trading and Country Bird Holdings have entered into a right of first refusal arrangement. As the name suggests, if either party wants to sell their shares, they must offer it to the other party first. If this happens, the buyer (either way around) would end up with 47.54% of the total shares in issue, so they must each currently hold the same number of shares in Quantum Foods.
The parties confirm that they aren’t acting in concert with each other or any other third party and that they currently don’t have an intention to make an offer to shareholders.
The chart is a cautionary tale about speculative buying in the hope of a take-private, as the share price has washed away since the chaos we saw in early 2024:
Flooding in February ruined Valterra Platinum’s half-year numbers (JSE: VAL)
In case you’ve forgotten, this is the renamed Anglo American Platinum
Valterra Platinum’s share price is up more than 50% year-to-date, with the market celebrating much improved conditions in the PGM sector. And yet, earnings for the first half have nosedived, with HEPS expected to be be between 76% and 88% lower. Despite this announcement coming out early on Friday, Valterra still closed over 5% higher for the day!
The market is clearly looking firmly to the future here, which tells you that the latest result is an anomaly. Indeed, the cause of the pain is a 25% drop in PGM sales volumes, thanks to significant flooding in February that affected the Tumela Mine at Amandelbult. There were some other factors as well, but the flooding was clearly the big issue.
The reason why the share price is still doing well is because Valterra expects a strong recovery in the second half, with a plan to deliver production within guidance (admittedly at the lower end). It also helps that if you exclude Amandelbult, own-mine production was actually up 1%.
There was also R1.4 billion in once-off demerger costs for the split from Anglo American, more than offset by R2.1 billion in cost savings achieved in the period. And although it affects EPS rather than HEPS, there was a R0.9 billion write-off of work done at Mortimer Smelter, with the decision taken to place it on care and maintenance.
The average realised basket price was 6% higher in dollars, boosted by a 16% higher realised rhodium price and a 2% increase in realised platinum and palladium prices.
Vodacom and Remgro announce revised terms of the fibre deal (JSE: VOD | JSE: REM)
Technically, the Competition Tribunal still needs to approve this on 22nd July
After an incredibly long process to try and get this deal across the line (the first terms announcement was released in November 2021 – and no, that’s not a typo), Vodacom and Remgro are nearly there. The Competition Commission has agreed to support the deal, with the Competition Tribunal hearing scheduled for 22nd July. Although the expectation is that it will be approved, anything can still happen.
There are some changes to the financial terms of the deal. I’m not convinced that the changes in the latest announcement capture the details of the conditions under which the Competition Commission changed its mind, so perhaps more details will emerge after the Competition Tribunal hearing.
In the meantime, what we know is that Vodacom will contribute its fibre business valued at R4.9 billion and will subscribe for new shares in Maziv for R6.1 billion in cash. They will then invest a further R2.5 billion in acquiring Maziv shares from Remgro subsidiary CIVH, taking Vodacom’s stake in the enlarged fibre entity to 30%.
Now, the R2.5 billion will be reduced if Maziv declares a pre-implementation dividend of R4.2 billion, which essentially means stripping out the excess cash before Vodacom becomes a shareholder. If this happens, Vodacom’s purchase of the additional shares would be for R1.2 billion, not R2.5 billion.
Here’s another complication: so much time has passed since the 2021 announcement that Maziv acquired 49.96% in Hero Telecoms, which means Vodacom needs to cough up for its 30% share of that stake as well. This comes to R0.6 billion in cash. Maziv is looking to acquire almost all the remaining shares in Herotel, in which case Vodacom could be on the hook for a further R0.8 billion in cash.
A further change is that Vodacom’s original option to acquire up to an additional 10% in Maziv has now been changed to 4.95%. In other words, at a value to be agreed at the time (and not less than the valuation of the current transaction), Vodacom would be able to increase its stake to 34.95%. Notably, the only party that would be diluted by the exercise of this option is Remgro, not the other shareholders in CIVH.
So, some tweaks here and there to allow for the passage of time, along with a reduction in Vodacom’s potential overall stake. Roll on 22nd July…
Nibbles:
- Director dealings:
- The CEO of Vunani (JSE: VUN) bought shares worth R87.6k.
- A director of a subsidiary of Capital Appreciation (JSE: CTA) sold share awards worth R48.7k. The announcement doesn’t specify whether this is the taxable portion, so I assume it isn’t.
- Generally speaking, 4Sight Holdings (JSE: 4SI) is a small company that behaves like a big company. The latest news is that they are acquiring properties that they currently occupy from the CEO. Now, on the one hand, this removes a related party relationship. But on the other, it means that R23.65 million will be invested in property, an asset class that theoretically offers much lower returns than 4Sight needs to be achieving. But the silver lining is that they are saving R4.5 million in annual lease payments, so they are buying it on a yield of 19%. The property was independently valued at R22.8 million (and they are getting it for R21.66 million, as R1.99 million is for furniture and fixtures), so the company is buying the property at slightly below market value. The effective yield is so high that it seems as though the company was paying far too high a rental, so I’m glad to see this being cleaned up.
- Sable Exploration and Mining (JSE: SXM) terminated CM&A as its auditors and has replaced them with Balushi Inc. At that end of the market, you’ll find auditors that you’ve probably never heard of before.
