Franz Wild and Janice Kew
THE PUBLIC Investment Corporation (PIC), Africa’s biggest fund manager, favours South African platinum equities over those of gold, betting against the price performance of the metals and the share performance of the companies that mine them.
The PIC, which manages assets of more than R1.4 trillion, is the biggest or second-largest shareholder in South Africa’s four biggest gold producers and two largest platinum producers.
It preferred platinum because of its industrial applications, while gold was primarily used in jewellery or for investment, chief investment officer Daniel Matjila said.
The gold price has advanced 7.2 percent this year compared with a 3.9 percent gain for platinum. At the same time, an index of gold stocks traded in Johannesburg surged 52 percent, heading for its first annual increase in three, while a measure of platinum shares declined 11 percent in what will be its fourth year of losses.
“Platinum is strategic in the long term,” Matjila said in an interview last week. “We like industrial metals, not those about sentiment.”
South Africa is Africa’s largest supplier of gold and the world’s biggest producer of platinum, accounting for about three quarters of supply.
The PIC, which manages money on behalf of the Government Employees Pension Fund, holds 11.8 percent of Impala Platinum (Implats), the second-largest producer of the metal, and 3.2 percent of Anglo American Platinum (Amplats), the biggest.
It also owns 7.6 percent of AngloGold Ashanti, 7.7 percent of Gold Fields, 7.5 percent of Sibanye Gold and 6.5 percent of Harmony Gold.
Output has tumbled at Amplats, Implats and Lonmin after a five-month wage strike this year, prompting the firms to review growth plans or to put mines up for sale.
“We want to hang in there,” Matjila said. “It should bounce back at some point. We are a long-term player.”
Police shot dead 34 protesters in August 2012 during a wage strike at Lonmin’s Marikana mine, the deadliest police action since the end of apartheid in 1994.
“The most important thing is to try and resolve all these problems around mining, the Marikana issue, the social issue,” Matjila said.
“We need to come up with a solution, at least a long-term solution.”
South Africa plans to promote manufacturing to reinvigorate sluggish economic growth, which measured an annualised 0.6 percent in the second quarter after contracting 0.6 percent in the first three months of the year.
South African companies should explore more ways of using platinum in domestic manufacturing, Matjila said.
Platinum is used in catalytic converters to reduce pollution from cars. Its use in fuel cells, which convert hydrogen into electricity, is being explored.
“It’s got such good industrial use. We need to figure out how to enhance that. Maybe through beneficiation and many other things, industries around that. And try to create even better value.”
The PIC would keep stakes in gold producers, Matjila said.
“We’ll continue to play in gold,” Matjila said.
“It’s still one of the most important precious metals in our view, but we don’t believe we’ll go in in a big way.
“The best we can do is just to keep the position we have at the moment.”
The PIC is also planning to boost its investment in producers of energy, a shortage of which has stifled South Africa’s economic growth.
The PIC would invest into potential shale gas projects “in a big way”, Matjila said.
Explorers including Royal Dutch Shell seek to tap as much as 390 trillion cubic feet of gas resources beneath the Karoo, the eighth-biggest deposit in the world, according to the US Energy Information Administration. As the government turns to private companies to help state-owned power utility Eskom fill a R225 billion expansion funding shortfall in the five years to March 2018, Matjila said the PIC would also be a “big player” in financing new power plants. – Bloomberg