Just when you thought it was safe to lighten up on gold, the bullion price confidently traipses through the $5,000 mark. I have only once before seen gold at more than $5,000 — and that was brief and embarrassing.
When I worked on the Argus business pages in the early 1990s, I came in very much the worse for wear for a 5am first edition shift. I was not only a careless and callow youth but, for that shift, coffee-less too. Focused I was certainly not. Instead of setting the gold price headline at $335.35, I had sent down for printing a $353.35 headline which, at the time, would be considered a huge leap in bullion.
In those pre-internet days, we still had stone subs — people on the floor below the newsroom who physically cut the copy to shape. It was a pretty intimidating area, mainly because all the staff downstairs walked around with razor-sharp Stanley knives used to trim copy. One particular fellow did not enjoy journalists running downstairs to make finicky changes to pages — especially if it cut into his coffee break or broke his concentration on the racing pages. As he grew more irritated, he would click the blade of his Stanley knife faster and faster. I always feared being slashed, my youthful visage scarred forever. So, understandably, I made the changes to the gold price headline at a safe distance — not noticing a terrible mispositioning of the numbers. The first few copies of the Argus first edition thus came out trumpeting a gold price of $5,353. I don’t think too many people noticed, thankfully not even Bruce Cameron, my eagle-eyed boss at the time.
But back to the gold rush. While overwhelming fear-of-missing-out feelings will inevitably stir up in the hearts of many investors (myself included), it may not be the time for any radical portfolio reshuffling. Johnny-come-lately gold seekers may do well to read David McKay’s article in this week’s Investing section on the prospects for the various junior miners digging for the metal. Look, there’s also considerable comfort to be taken in the fact that many great investment minds also missed cashing in on gold’s incredible run. In fact, I wonder if South Africa’s towering tycoon Johann Rupert is kicking himself for not investing more in gold through Reinet.
Australia-listed West Wits Mining raised a not insubstantial $27.5m to fund production at its Qala shallows project on the West Rand
Not too many punters took notice that more than 10 years ago, Reinet snapped up 230,000 shares in SPDR Gold Shares, a physical gold instrument. At the time Reinet invested just €22m in SPDR, a tiny tilt compared with even some of the group’s fund investments. Ironically, this has turned out to be one of Reinet’s best investments, reflecting at €77m at end-December. Gold’s unrelenting push in January now puts SPDR markedly higher, and I estimate Reinet’s investment value at just more than €90m. I might be stretching things here but Reinet could, in time, represent a not insignificant gold play if the current cash position and the soon-to-be-disposed-of stake in Pension Insurance Corp are stripped out of the intrinsic NAV calculation, possibly via a huge special dividend (he says hopefully). Assuming Reinet’s active portfolio is worth just more than €1bn, the gold exposure equates to close to 10% of that value — and you are still able to buy in at a bit of a discount. It’s a straw, I know, but a glimmer of gold is better than nothing at all. Just saying.
Staying firmly with matters golden, it was interesting to note that Australia-listed West Wits Mining raised a not insubstantial $27.5m to fund production at its Qala shallows project on the West Rand. Would local investors, some of whom were probably not even born when the JSE still boasted a vibrant exploration and junior mining board, have been keen to participate in a West Wits fundraiser? Or are we now indifferent to junior mining efforts? I presume West Wits might consider a secondary listing on the JSE once Qala delivers sustainable production and profit — which still means local investors would miss out on all the early-stage fun.
Speaking of fun, I received a recording of last week’s Trematon Capital Investments AGM, which might well have been the place where sentiment for investment companies went to die. Much of the shareholder participation at the AGM hammered home the need to expediently wrap up the private education assets and property portfolio before directors’ fees and listings costs further erode value. Shareholder activist Albie Cilliers contended that the fees earned by certain directors in relation to their shareholdings in Trematon meant they “were not suffering as much as shareholders”.
The other key point was the value of Trematon’s investment in niche private school business Generations, where the value has been written down markedly at a time when the share price of AdvTech, the default education play on the JSE, has chalked up decent gains. Trematon admitted that growth expectations of its niche education offering had been too optimistic. The group also warned it would take time to improve performance at Generations, suggesting that profits could crimp in the short term as the fee model is adjusted and the curricula change. The big reality check was that Trematon had been engaged in a process of “price discovery” for all its assets — adding that “it was fair to say that in the schools business the process has been kind of disappointing”. What? No cash-flush private equity players keen on a (l)earning curve?
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