PDSNET Market Snapshot

MC Mining (previously "Coal of Africa") (MCZ) is a small metallurgical coal-mining company with a single producing mine (Uitkomst). Aside from Uitkomst, the company is developing the Makhado project, the Vele colliery and MbeuYashu. The Makhado project is the company's flagship operation in the Limpopo province.

It is an opencast mine with a life of 16 years and the potential to be extended. In January 2019, the company announced the acquisition of surface rights which will make the Makhado project viable. Production is now expected to commence at the end of 2020 and the mine is expected to produce 800 000 tons of hard coking coal and 1 million tons of export thermal coal.

The Makhado purchase improves the risks substantially and makes this into a viable investment. The IDC has provided R245m for the project, but a further R530m is still needed. The company owns 69% of Baobab Mining and Exploration which owns the Makhado project. On 8th April 2024, Business Day reported that Goldway Capital had received acceptances from shareholders amounting to 83,67% of the issued shares - more than the 82,15% required for the takeover to proceed.

On 24th June 2024 the company announced that Godfrey Gomwe would be resign with effect from 30th June 2024. In an activities report for the 3 months to 31st March 2025 the company reported run-of mine production from Uitkomst down 13% and sales of 56320 tons of high grade coal. The company said, "Available cash and facilities of US$9 million at the period end (FY2025 Q2: US$4 million)." In an update on the 3 months to 30th June 2025 the company reported run-of-mine (ROM) coal production from Uitkomst Colliery improved 3% and Uitkomst Colliery sold 68,020t of high-grade coal.

In an update for the 3 months to 30th September 2025 the company reported run-of-mine production from Uitkomst down 21% from the previous quarter. The company said, "Available cash and facilities was US$13.2 million at the period end (FY2025 Q4: US$7.4 million)." This remains a volatile commodity share with only about R35 000 worth of shares changing hands on average each day, high debt levels and all the risks of mining exploration and development.

This is a ferrochrome operation controlled by Glencore which operates mines, furnaces and smelters in Mpumalanga and Limpopo. The Glencore-Merafe joint venture can produce up to 2,3m tons of ferrochrome per annum. Merafe gets 20,5% of the proceeds and the balance goes to Glencore.

The problem is electricity supply, because smelters require huge amounts of current. The 15,6% increase in Eskom tariffs last year was a major factor and the current year's increase of just under 10% from 1st April 2022 is a further problem. The company is concerned about Eskom's ability to supply additional power for expansion.

Their Lion 3 expansion has accordingly been suspended until this difficulty can be overcome. All smelters except Lydenburg are operating. The availability of trains from Transnet to move its product is another problem. Obviously, this is a commodity share and has risks, but the world's demand for stainless steel did increase with the economic boom in America, but that now appears to be coming to an end.

In its results for the six months to 30th June 2025 the company reported revenue down 47% and headline earnings per share (HEPS) down 55%. The company said, "Sustained pressure from the prolonged economic downturn in the global ferrochrome market has led to a significant profit decline of R233 million for the six months ended 30 June 2025." In an update on the 9 months to 30th September 2025 the company reported a 51% reduction mainly because of taking smelters off line in an "adverse market".

In an update on the 12 months to 31st December 2025 the company reported production down 63%. The company said, "This reduction in production is primarily attributable to the suspension of production at the Venture's smelters due to adverse market conditions". In a trading statement for the year to 31st December 2025 the company estimated that HEPS would decrease by between 62% and 82%.

The rising cost of electricity is major problem for this company. Technically, the share reached a high of 192c on 4th April 2022 and was trending down or moving sideways since then. It has found some brief support at 104c per share. It remains a volatile commodity share.

Northam (NPH) is a fully empowered platinum mining company which operates in the Bushveld complex. In the current difficult legislative environment where the 3rd mining charter is regarded as unfriendly from an investment point of view, Northam is probably the only mining house which is buying up new properties.

It has come to an arrangement with Anglo American to exploit a property adjacent to its Zondereinde mine (the deepest platinum mine in South Africa). It has also bought Eland Platinum from Glencore for R175m which it intends to re-start at a cost of R2bn. On 29th October 2019, the company announced the acquisition of Maroelabult for R20m which is west of the Eland mine with an analogous ore body.

This has accelerated the bringing to production of Eland and required very little capital. With the Eland mine, Northam got a concentrator plant which can process up to 250 000 tons a month. In return, Glencore got the right to market all of Northam's chrome. Zondereinde is a deep-level mine which has all the problems associated with mining at depth, while Booysendal is a shallow mechanised mine which is much easier to manage.

Both mines are profitable, but the empowerment structure results in Northam always reporting a loss because of the preference dividend that must be paid. Once Booysendal is complete the company should generate strong cash flows. The appointment of Mcebisi Jonas (former South African Minister of Finance) and Jean Nel (previously CEO of Aquarius Platinum) as non-executive directors has significantly added to the strength of the board.

The company has the stated intention of doubling its workforce as it strives to become a major PGM supplier in the world. With plans to increase production of PGM's over the next few years to 1 million ounces, this is probably one of the better options in the industry. The PGM industry has been navigating significantly depressed PGM prices and high inflation, together with a raft of global geopolitical uncertainties and locally, Eskom load curtailment events.

In its results for the six months to 31st December 2025 the company reported sales revenue up 60% and headline earnings per share (HEPS) up over 1000% at 1524c. The company paid a dividend of R2,8bn or 700c per share. At the end of the period the company had R2,8bn in debt with R9,3bn in cash and cash-equivalents.

We recommended waiting for a clear break up through the downward trendline before investigating further. That break came in May 2025 with the rising PGM prices and the share was added to the Winning Shares List (WSL) on 23-5-25 at 14311c. It has subsequently risen to 43335c and we expect it to rise further.

But it remains a volatile commodity share.

OUTsurance (OUT) took over the listing of Rand Merchant Insurance (RMI) with effect from 7th December 2022. RMI unbundled its stakes in Discovery (DSY), and Mommet (MTM) and sold its 30% stake in Hastings Plc for R14,6bn. By March 2023, all that was left was the insurance business of OUTsurance.

In its results for the year to 30th June 2025 the company reported gross written premiums up 16,8% and a claims ratio of 53,6%. The company's operating profit increased by 25,7% while its earnings were 29,6% higher. The company said, "OUTsurance Life grew operating profit by 65.9% to R438 million driven by reduced expenses, good new business momentum in the Direct and Funeral segments, coupled with the impact of favourable yield movements." In a trading statement for the six months to 31st December 2025 the company estimated that HEPS would increase by between 11% and 17%.

The company said, "Strong gross written premium and annualised new business growth across the Group's core direct short-term insurance operations; A strong claims and expense efficiency performance delivered by the South African short-term insurance operations". Technically, the share has been climbing steadily since the unbundling and we believe it will continue to perform.

We added it to the Winning Shares List (WSL) on 15th June 2024 at a price of 4457c. It has since risen to 7245c.

KAP International Holdings (KAP) is a diversified industrial company which produces and markets timber, chemicals (PET and related chemicals), bedding and car parts. It also has a logistics division. The acquisitions of Safripol and Hosaf were integrated into a polymers business under the Safripol name.

The bedding division showed strong growth with new investment in infrastructure and manufacturing capability. Growth in the automotive parts division was muted. This company was 43% owned by Steinhoff - which has now divested completely. The renewal of the government's Automotive Production and Development Programme (APDP) until 2035 will be a boost for KAP's parts manufacturing business.

The timber division is ramping up after the lockdown and demand for its products has remained buoyant. The automotive components division was severely impacted, and the post-lockdown recommencement has been slow. The bedding division was able to operate through the lockdown with strong demand for medical and agricultural needs.

Polymers also operated throughout the lockdown. In its results for the six months to 31st December 2025 the company reported revenue down 3% and headline earnings per share (HEPS) up 32%. The company drew attention to the following, "...increased operating costs related to the ramp-up of PG Bison’s new medium-density fibreboard (‘MDF’) line, the largest of the group’s major capital projects completed during the year ended 30 June 2024; and lower domestic new vehicle assembly volumes by mainly two major original equipment manufacturers (‘OEMs’), which resulted in a weaker performance by Feltex" Technically, the share has been falling since September 2024 and we recommend waiting for it to break up through its downward trendline before investigating further.

It has now broken up out of an "island formation" and has entered a new upward trend which we expect to continue. Obviously, the logistics problems at Transnet have been having an impact. We think it may represent good value at current levels, but it is volatile.