Diamonds may be a girl’s best friend, but investors might prefer to stay aloof when it comes to sparkly little stones.
Since the delisting of De Beers (now exposed to the market via Anglo American), the JSE’s once well-populated diamond board has greatly diminished. Over the decades, there have been other hopefuls — such as Letseng, which was part of the greater Kebble empire. But most diamond contenders have faded into oblivion. To put it crudely, diamond dabblers have had carrots instead of carats...
Readers might remember Good Hope/Oakfields, Kimberley Consolidated Mining, Diamond Core Resources, Rockwell, Gem Corp, Zenith Concessions, Regional Resources and Benguela Concessions (Benco) — some of which at times flickered hopefully. That said — if you’d permit me to punt my own agenda — Gemfields certainly looks like a feisty little contender with its focus on rubies and gems.
Those interested in Gemfields can find mining expert David McKay’s intriguing cover story in the Investors Monthly accompanying this edition. My diamond diatribe was prompted by a realisation that I now, inadvertently, am a participant in this difficult industry.
Small investment company Astoria last week indicated that Trans Hex Group — a diamond miner that once belonged to the mighty Remgro — was planning to expand into the marine diamond sector via the acquisition of International Mining & Dredging Holdings (IMDH). In the proposed deal, Astoria will reduce its holding in Trans Hex from 35.7% to 25.1%, but at the same time commit $5.5m for negotiating a 25% stake in IMDH.
The shuffling of diamond interests follows a startling disclosure that Trans Hex — which two years ago looked down and out — had forked out a rather sumptuous dividend of R43m to Astoria in the first quarter of its 2022 financial year. This follows the R3m dividend paid by Trans Hex to Astoria in the year to end-December 2021.
For the record, the latest dividend collected by Astoria represents 13% of its market value — which might raise questions about what value will be accorded to the reduced Trans Hex stake at the end of the interim period to end-June. By my estimates, Trans Hex would have declared a total dividend of R128m — which is more than the entire company was worth when it delisted from the JSE a few years ago.
Marine mining is the one subsector of the diamond industry that brings out the romantic or adventurous investors — many of whom will recall the heyday of the legendary Sam Collins in the 1960s and 1970s. Still, I can only remember one successful marine diamond operation (outside De Beers Marine) in the past three decades: Ocean Diamond Mining Holdings (ODM), which, ironically, played a significant role in Trans Hex’s history.
ODM was headed by Andre Louw, a no-nonsense operator who managed to produce a steady flow of diamonds in successive quarters in the late 1990s. To cut a long story short, Trans Hex made a lowball bid for ODM, prompting retail tycoon Christo Wiese (who remains a shareholder in Trans Hex, by the way) to step in and snap up a kingmaker stake.
Wiese then sold his stake at a glittering profit to ambitious marine diamond miner Namco, which promptly ran the assets onto the rocks. Trans Hex had to settle for taking over the far less superior Benco assets, though I seem to remember one of ODM’s mining boats, the Ivan Prinsep, ending up with Trans Hex (before it abandoned its marine diamond ambitions).
I’ve often thought about how differently things may have turned out for Trans Hex had it managed to take control of ODM, and I suppose the hope will now be that the group can make a splash with IMDH. Exciting times, but I’ve followed the marine diamond sector for 30 years, and know that tempering my enthusiasm is probably the prudent thing to do.
Onto unrelated matters, I wonder how many sports enthusiasts spotted the shareholding switch in technology group PBT? In short, Spalding Investments 10 has increased its interest in PBT to 27%, while Yonex Investments sold out entirely.
The first woods in my golf bag were a set of battered Spalding and might have been instrumental in me developing a languid draw off the tee box. I used a square headed Yonex steel racket when Muir beat Grey in tennis in the early 1980s, but the PBT shareholding switch sounds like more than just a bit of gamesmanship to me.
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