PGM prices are up on supply tightness and tighter environmental regulations. From Moneyweb.
A recovery in global auto sales and tightening emissions standards have driven rhodium prices to dizzying levels over the last month, propelling platinum to levels not seen in a decade.
Last month autocatalyst manufacturer Johnson Matthey said the rhodium demand of roughly 1 million ounces a year was under-supplied by 84 000 ounces in 2020, and that shortfall will likely continue in 2021 as global vehicle sales are expected to record a sharp bounce after a slump in 2020.
Global car sales are expected to rise almost 9% in 2021 after recording a 15% decline in 2020 as a result of Covid-related disruptions.
Rhodium, palladium and platinum are essential in cleaning exhaust emissions in vehicles. Rhodium is also used to reinforce glass for consumer electronics products. It accounts for a relatively small proportion of total mining output, but is a significant cash earner due to rising demand and prices.
Platinum prices are down by nearly half over the last 12 years, having been eclipsed by what were previously considered by-product metals – rhodium and palladium. Ironically, platinum fell victim to its own success, having traded at a high of over $2 200/oz in 2008 during the commodity super-surge.
Rhodium, once a relatively minor part of the platinum group metal (PGM) basket, is now a game changer, and a key factor behind the surge in platinum share prices in recent months.
A year ago rhodium traded at $13 000 an ounce, but this week it tore through $28 000/oz on the spot market, more than doubling in price over 12 months due to the rebounding auto market and a scramble by major producers in the US, Europe and Asia to secure supply in a tight market.
Rhodium, Platinum and Palladium prices
Source: Share Magic
Royal Bafokeng Platinum’s share price is up 553% from its March 2020 low. Its 2020 annual results are due out next week, and the market is expecting a maiden dividend from the platinum producer, adding a bit of extra spice to the price move. Impala Platinum (Implats) is up 380% and Anglo American Platinum (Amplats) 354% over the last 12 months.
SA is the world’s major source of PGMs and the Covid-related disruption to supply in 2020 accounts for the supply shortage in all three metals. Johnson Matthey says the 7 million to 8 million-a-year platinum market was undersupplied by nearly 400 000 ounces in 2020, while the 10 million-ounce-a-year palladium market was under-supplied by about 600 000 ounces.
Supply was further hit by an explosion at an Amplats processing plant in 2020, which contributed to a 42% drop in refined production for the last financial year. Overall PGM production was down 14% to 3.8 million ounces.
Implats rebounded sharply after the shutdown earlier in 2020, reporting a 29% increase in production over the same period in 2019. Though rhodium accounts for a small percentage of total ounces mined, it has an outsized impact on overall financial results.
Royal Bafokeng Platinum share price
Source: Share Magic
The average price achieved for rhodium sales at Implats for the six months to December was $12 454/oz, a figure which will be substantially higher in the current period.
Implats v Amplats share price
Source: Share Magic
The last super-cycle in platinum shares ended in 2008; shares then entered a steady decline over the next seven years. The market bottomed in 2018 and has been on a tear since then.
Impala still has some headroom to recover to its previous all-time high of R33 000 reached in May 2008, but Anglo Platinum has been breaking new all-time highs in the last two months.
Capital.com argues that the recent momentum in the platinum price is partly due to vaccination efforts worldwide, which will allow a return “to some form of normality.”
Nor is it likely that the emergence of electric vehicles will dislodge demand for platinum. Hybrid cars will be around for decades, and electric vehicle sales are only expected to surpass that of fossil-fuel cars by 2038, which means demand for platinum (and other PGMs) will be around for some time yet.
MicroStrategy CEO Michael Saylor recently held a conference to explain why he has moved his company’s cash into bitcoin. From Moneyweb.
Ross Stevens, CEO of Stone Ridge and executive chair of New York Digital Investment Group, was an early corporate adopter of bitcoin. The only cash he keeps is for the payment of immediate bills.
“Cash is now a liability, it’s no longer an asset. That has profound implications for corporate balance sheets,” he told a recent bitcoin conference for senior executives, explaining the logic of adopting bitcoin rather than cash as a store of value.
“A CEO has two jobs, executive and capital allocator. The first one is obvious, the second one is the CEO’s most important job,” said Stevens.
The conference was convened by MicroStrategy CEO Michael Saylor, who challenged Tesla CEO Elon Musk to follow his example and shift some of his balance sheet cash into bitcoin. Shortly thereafter, Tesla announced that it had put $1.5 billion of its $19 billion cash and near-cash into bitcoin.
The US dollar has depreciated by 3.38% a year since the end of the Second World War, and is today worth just 7% of its value in 1946. That depreciation has accelerated in the last decade, and any CEO planning 10 or 20 years into the future must now consider what is a safer store of value – cash, bitcoin or gold. The evidence is strongly in favour of bitcoin, says Saylor.
You can check out this interview by Bloomberg with Saylor here.
Saylor says with M2 money supply growth in the US at 25%, the cost of capital has exploded. Holding cash yielding negative returns is the road to serfdom. The S&P 500 index is up nearly 25% over the last year, so any executive would have to beat that return to justify their existence, otherwise return cash to shareholders.
On the other hand, bitcoin is up 460% over the last year, compared to 53% for the Nasdaq, 9% for gold and a negative 7.7% for US Treasury long bonds.
“Why bitcoin? You can’t hold traditional treasuries [because] you’re looking at a negative real yield of 15-25% a year. I have to manage shareholder value, and to grow that you have to grow your assets at a rate faster than the cost of capital,” says Saylor.
Any manager offering to generate returns of 1-3% return on capital will face shareholder demands for that capital to be returned. Bitcoin’s annual compound growth rate is 198% a year.
“Bitcoin is the hardest money on earth. It’s an institutional grade safe haven asset. It’s gold without all the imperfections of gold on a digital monetary network that moves at the speed of light that you can programme to do a million transactions a second,” adds Saylor.
“Why would you want it? For the same reason you would want to run electric power to your city or running water to your building.”
Bitcoin’s primary benefit as a money and store of value is that its issuance is capped at 21 million coins (there are currently 18.6 million in issue). It can never be inflated beyond that. The fact that it is electronic allows for payments and transfers at the speed of light.
“I think conventional treasury strategy is now intellectually and morally bankrupt and is a road to serfdom,” says Saylor. “You’re going to find increasingly there’s haves and have nots. There’s the elite that has incredible power like the Googles and Amazons and the Apples and they have more money and power and distribution than God.
“Then you have conventional businesses that have conventional cash flows and they are being increasingly marginalised.”
It is these conventional businesses that are expected to invest all of their capital in a currency that is devaluing at 15% or 20% a year, while the Big Tech monopolies are easily able to outpace the cost of capital because of the power they have accumulated – what Saylor calls the Main Street versus Wall Street dichotomy.
All conventional currencies are correlated to the US dollar, creating a race to the bottom as the dollar continues to devalue.
Companies that are asset-rich benefit from central bank money printing. Those that are cash-rich and asset-poor are subject to the steady debasement of their currency holdings.
In an environment where money supply was expanding at 0% a year, executives could focus on manufacturing or delivering services. Instead, money supply is being expanded at 25% a year, pushing businesses towards a Venezuela or Argentina situation, where business values in local currency terms tend towards zero as money supply accelerates (unless they switch into harder currencies).
Regulation has upsides
More regulation of cryptos is sometimes seen as negative for bitcoin, but Saylor believes it could increase institutional demand 10 to 100-fold due to the added regulatory oversight. In other words, there are virtually no downsides for bitcoin.
When China and India tried to regulate bitcoin, this merely increased the price for those already holding the asset, proving it is relatively immune to negative regulatory interference.
MicroStrategy is not just buying bitcoin with its available cash, it’s also leveraging its balance sheet to acquire more of the crypto. “We believe there is $100 trillion market total addressable market for a digital monetary network. It makes sense to buy as much of that asset as we can,” Saylor told Bloomberg.
What about the famed volatility of bitcoin?
Ross Stevens says bitcoin is not volatile.
“Learning bitcoin is like learning a foreign language. I now think in bitcoin. Bitcoin is not volatile – fiat is volatile. Fiat keeps getting cheaper in bitcoin terms.
“Money is technology. There’s not a line of distinction between what’s money and what’s not. No money is the best money, there’s always trade-offs. Bitcoin likely won’t last forever, because at the end of the day it’s a good.
“Why is bitcoin better than fiat? Because, young as it is, it holds its value over time.”
Stevens adds that bitcoin is the first store of value in history where supply is entirely unaffected by demand.
“Another requirement of money is its saleability across space – can you move it? Gold is hard to move. Bitcoin moves faster than fiat across space, with settlement completed in about an hour. There is no credit risk with bitcoin.”
Visa and Mastercard may allow you to purchase a coffee in seconds, but settlement can take up to a few days. That’s because of the various intermediary players in the transaction chain.
Another argument against bitcoin is its excessive consumption of electricity for mining it. Stevens says as bitcoin prices rise, mining it will become the most profitable use of energy in the world. Bitcoin mining will enable the monetising of clean energy sources such as waterfalls and rivers in remote areas. “In time, people will migrate to cheap, clean energy sources. That’s a fundamental shift in energy supply and demand. In the past, the challenge was to move energy to population centres. This could reverse that.”
Stone Ridge has maintained all its reserves in bitcoin since 2017, and only keeps sufficient cash for paying the immediate bills.
New Open Secrets report says South Africans should demand an end to the flow of weapons to this tragedy. From Moneyweb.
Yemen is the locus of the world’s worst humanitarian crisis, leaving 80% of the population in need of humanitarian help.
Schools, factories and hospitals have been destroyed and there is evidence that civilians have been deliberately targeted. It’s a complex conflict with abuses on all sides. In September 2020, a UN report concluded that both Saudi Arabia and the UAE, along with the government of Yemen and secessionist forces, have committed acts that may amount to war crimes. These actions include targeting and murdering civilians, rape and sexual violence, torture, and use of child soldiers.
A new report by Open Secrets, a non-profit group investigating and exposing economic crimes, shows SA arms companies have profited from the Yemen conflict to the tune of R11 billion since 2010, most of this coming since 2014.
In 2015 and 2016, two years after the conflict began, nearly half of all SA’s approved weapons exports were bound for Saudi Arabia and UAE, two states that are shoring up the Yemeni government.
“In 2019, there was a brief respite from South African complicity in arming these warring parties when a dispute over the terms of the end-user certificate (EUC) delayed the granting of export permits to several countries, including the UAE and Saudi Arabia,” says the report.
Open Secrets explains that an end-user certificate is intended to prevent munitions from ending up just anywhere. It effectively means that a purchasing country needs to agree that the munitions bought will not be transferred any further without the selling country’s permission.
The report focuses mainly on Rheinmetall Denel Munition (RDM), a South African-based joint venture between Denel and Rheinmetall Waffe Munition GmbH (which holds a 51% stake in the JV).
RDM has been supplying weapons to Saudi Arabia and UAE since before the conflict began, and has set up a munitions factory in Saudi Arabia that produces, among other things, mortars that are believed to have been used in human rights abuses.
It’s difficult to identify the source of munitions because they fragment when exploded and local forces prevent local civil society groups from retrieving fragments for identification. But Open Secrets says there is compelling evidence to suggest these weapons were used in the 2018 attack on the port city of Hodeidah by Saudi and UAE forces and their allies attempting to dislodge Houthi resistance fighters.
Denel-built armoured vehicles were spotted being used by militia groups allied to the UAE, and fragments of munitions most probably made in SA were detected by UN inspectors and investigative journalism group Bellingcat.
When asked to respond to these claims by Open Secrets, “RDM declined to provide a response to this specific question, saying only that it applied to the NCACC (National Conventional Arms Control Committee) for all necessary permissions to export weapons from South Africa. Open Secrets prompted RDM to provide an answer to the specific question on the Hodeidah attack, but it has chosen not to do so,” says the report.
By far the biggest supplier of arms to the conflict is the US, followed by Britain, France and Spain. SA ranks fourteenth in terms of arms supply.
“For all of these countries and the companies based in each, the war in Yemen has been an endless bonanza of profit as the thirst for bombs and guns never ceases,” says Open Secrets.
Rheinmetall faces a ban in Germany against exporting any weapons to Saudi Arabia, in large part due to concerns about human rights violations committed by Saudi Arabia and their partners in Yemen. While the report focuses on RDM, all roads lead back to Germany, says Open Secrets. “Ultimately Rheinmetall Waffe Munition GmbH, and executives in Germany higher up in Rheinmetall’s corporate food chain, are effectively responsible for RDM’s operations in South Africa and so they too should be held accountable for human rights violations.”
The NCACC is guilty of regulatory failure over an extended period of time.
When asked to respond to these claims, the committee revealed “not only a lackadaisical approach to regulation but an absolute failure to appreciate the seriousness of their task and the magnitude of the consequences.”
The NCACC is unique in that it is made up of ministers and deputy ministers appointed directly by the president. Its most crucial regular function is to assess and decide on whether to grant or refuse export permits for weapons and other controlled items. The law requires the defence minister to appoint an independent inspectorate to ensure the weapons conform with international and local laws, treaties and regulations.
Despite being swaddled in laws and regulations, the evidence suggests that arms companies face few questions from the NCACC when applying for permits to enter contracts with foreign states and export weapons. The NCACC’s annual reports show that between 2015 and 2019, it approved 1 108 applications by South African companies for permission to enter supply contracts with foreign persons and companies. In that period, it denied only 10 applications. In both 2017 and 2019, not a single application was denied, says Open Secrets.
“By law, the NCACC may not permit the export of weapons where those weapons will contribute to human rights violations or worsening conflict. It must take into account ‘all publicly available information’ when making these decisions.”
The reports concludes that the NCACC is failing to uphold its mandate, given the well-documented reports of atrocities in Yemen.
As for the role of inspectors in the arms trade, Defence and Military Veterans Minister Nosiviwe Mapisa-Nqakula conceded that democratic South Africa has only ever conducted one inspection of exported defence equipment – “hardly a commitment to enforcing the regulatory framework,” says the report.
The NCACC appears to be weak under pressure from arms producers seeking exports permits. When the regulator attempted to enforce tighter controls on exports – by allowing inspectors to ascertain whether SA arms ended up in the wrong hands – the arms producers pushed back, and got he NCACC to settle on a more accommodating wording which would allow for a “diplomatic process” rather than inspection by a seasoned weapons expert. In no time at all, exports to the region were back on track.
Co-author of the report, Michael Marchant, says the Middle East has become a cash cow for arms producers from all over the world, particularly as the conflict has escalated. “From a South African perspective, we can see from the figures that exports to those countries engaged in the Yemen conflict exploded from 10% to 15% before 2013 to 38% and more than 40% after 2014 when the conflict really picked up.“
The human costs of this conflict are staggering: in 2020, the United Nations put the death count at 233 000, while Human Rights Watch estimated that up to 14 million people were at risk of starvation – something Saudi Arabia was using as a tactic in the conflict. By the end of 2019, roughly 18 million Yemenis had no drinking water and more than a million were impacted by a cholera outbreak.
The Yemeni revolution was part of the wider Arab Spring that swept the Middle East in 2011. The Houthi rebels and their allies took over large parts of the north and west of the country in March 2015, prompting Yemeni President Abd-Rabbu Mansour Hadi to retreat to Aden and declare it the provisional capital.
Saudi Arabia’s intervention in Yemen is framed as a way of preventing Iranian “aggression and expansion” in the area, and though Iran’s involvement has grown in recent years, the Houthis are a home-grown movement pushed closer to Iran by the escalating war.
Open Secrets concludes by arguing SA should stop approving export permits for SA weapons destined for Saudi Arabia, the UAE or another party involved in the conflict; NCACC should provide quarterly reports to Parliament (instead of filing often two years late); make human rights central of SA’s foreign policy (instead of mouthing off about our “concerns” about the crisis while allowing arms to gush into the region); get the Hawks to investigate RDM for its possible complicity in war and other crimes; and get SA civil society to stand in solidarity with the people of Yemen.
Open Secrets wrote to RDM in December 2020 and asked questions about its exports to Saudi Arabia and the UAE, as well as on the value of contracts to these countries since 2015, and whether measures were put in place to ensure its clients did not violate the provisions of the end user certificates they are required by law to sign.
According to Open Secrets, RDM declined to answer these specific questions. Instead, the company’s CEO Jan-Patrick Helmsen offered a brief blanket response to the issues raised. Helmsen described the South African munitions as ‘highly regulated’, pointing out that:
“RDM can only supply its products after receipt of the required national South African governmental approval, such as a marketing and contracting permit from the NCACC and the required export permits from the Directorate of Conventional Arms Control (DCAC). RDM also needs to adhere to various other national and international legislation. RDM will at all times adhere to the South African legislation and its requirements. It must be noted that these requirements are at par with all our international counterparts and RDM will always adhere to South African legislation and its requirements.
“RDM cannot deliver its products to its clients until receipt of a EUC and an export permit from the DCAC has been issued. The South African government, in terms of Clause 4.3 of the issued End-User Certificate, also maintains the right to attend to inspections of such munitions after delivery with an inter-governmental bilateral agreement.
“RDM needs to comply with stringent internal Rheinmetall compliance checks and approval procedures prior to receiving authorisation to enter into supply agreements. These compliance checks are based on international best practice and make use of international processes and systems to confirm that all information is correct and that no compliance risks will arise.”
As to why RDM would not engage with the specifics about their exports to Saudi Arabia and the UAE, RDM simply stated that: “In line with industry norms and requirements, RDM is not at liberty to share any information relating to agreements entered into with its clients. RDM is committed to being an ethical corporate citizen, which entails always abiding by the laws of the Republic of South Africa. As such, RDM strictly adheres to and is restricted by all relevant legislation, including export regulations, of the Republic of South Africa.”
Some 21 questions were also sent to the NCACC by Open Secrets, which says the specific questions were ignored. The following reply was received instead:
“From the ensuing criteria it would be clear that the NCACC would rely on various South African Organs of State mandated to provide information that is analysed and refined to meet the strict requirements of s15 of the Act. The NCACC relies on Official sources for its risk assessment. Key among these entities are Department of International Relations and Cooperation (DIRCO) State Security Agency (SSA) and Defence Intelligence (DI).
“Therefore, what informs other countries in relation to Yemen and the possible involvement of Rheinmetall Denel Munitions of Germany (sic) with regard to using their subsidiary in South Africa to procure controlled items, while it is noted is no concern of the NCACC, unless flagged as such.
“South Africa receives queries related to South African produced and exported controlled items, through the South African Mission at the United Nations in New York. Entities that do verification and who provide evidence are being responded to without fail. This means that this office will deal with all verified claims and as per usual respond through our Mission at the UN. Therefore the Hodeidah matter has not been directed to this office. The cost and the exploration of insufficient/unsupported claims would render efforts at addressing the concern(s) or such claim(s) not feasible and not effective.”
To which Open Secrets replies: “This is frankly a staggering admission of the NCACC’s failure to fulfil its legal mandate, and a feeble attempt to pass on responsibility to other parts of the state.”
In the hope the failed bitcoin scheme can still be saved. From Moneyweb.
The application for the final liquidation of Mirror Trading International (MTI) has been postponed until May 31, apparently by groups who believe the company can still be saved.
Moneyweb understands three groups are opposing the final liquidation in favour of business rescue, alternatively that they be allowed to restructure the company’s debts in terms of a Section 155 (of the Companies Act) compromise.
MTI was placed in provisional liquidation in December last year when investors tried without success to withdraw funds from the scheme, which was rated by Chainalysis as by far the world’s biggest crypto scam of 2020.
Provisional liquidator of MTI, Riaan van Rooyen, told Moneyweb that the reason for the postponement was due to “certain parties intervening who believe that the company can be saved. I think it is unlikely (that the company can be saved).”
Van Rooyen says some traces of the estimated 23 000 bitcoin (worth R17 billion) transferred to MTI by tens of thousands of investors had been located, but a full accounting of what happened to investor funds will take more time. Van Rooyen adds that there is still no sign of MTI CEO Johann Steynberg, who disappeared last year, apparently to Brazil.
“We can’t confirm the amount of bitcoin at this stage. We are busy with a section 417/418 inquiry (which is a secret inquiry), and seen in the context of the estate, we are reluctant to comment at this stage,” adds Van Rooyen.
Brandon Topham, head of enforcement at the Financial Sector Conduct Authority (FSCA), says it is impossible that an unlawful scheme like MTI could be saved.
“It was a Ponzi scheme. This is a business that never traded. It was operating without a licence. How can you save an unlawful scheme?”
The FSCA advised the public to steer clear of MTI in August last year on the basis that it was operating without a proper licence and was making extravagant claims of returns of up to 10% a month, using a computerised trading system.
When the FSCA investigated, it found no evidence of any successful trading. In November 20202, the regulator conducted search and seizure raids on the offices of MTI and homes of some of its senior executives, and in November opened a criminal case against the company.
MTI was structured as a multi-level marketing scheme that rewarded members for signing up new investors, for which they could earn 10% commission on sums invested. The scheme was astonishingly successful at attracting new investors, even after repeated warnings by the FSCA to steer clear of the company and its promises of high returns. By some accounts it managed to attract more than 60 000 investors, some with multiple accounts. There were an estimated 280 000 accounts in existence at the time the company was placed in provisional liquidation in December, though some of these were certainly fake accounts opened to generate extra commissions for participating scheme members.
The MTI database was hacked by Anonymous ZA, and appears to show some outrageous returns by those at the top of the multi-level marketing scheme. The top earners managed to accumulate more than R100 million by building a “downline” of hundreds and even thousands of new members. One lead member started with $100 in April 2019 and ended up making R37 million 20 months later.
MTI members will now have to wait until May to see if the company can be rescued or will be placed in final liquidation. The FSCA has warned that those who profited unlawfully from the scheme will be asked to repay the money, and SA Revenue Services will also likely be keeping an eye out for its share of the take.
For a Section 155 compromise to succeed, it must have the support of 75% of creditors, but this route does not provide any moratorium against legal action during negotiations with creditors, nor does it protect those who signed surety for the company.
Tesla, MicroStrategy and Square are three companies offering indirect exposure to bitcoin, but there are others. From Moneyweb.
Some investment mandates specifically preclude a direct investment in cryptocurrencies, but there are ways to invest in stocks that provide an indirect exposure to bitcoin.
Perhaps the most high profile of these is Tesla, which recently announced a $1.5 billion investment in bitcoin, equivalent to nearly 10% of its treasury assets. “Having some Bitcoin, which is simply a less dumb form of liquidity than cash, is adventurous enough for an S&P 500 company,” tweeted Tesla CEO Elon Musk on February 19.
Musk was persuaded of the benefits of bitcoin as a store of value by MicroStrategy CEO Michael Saylor, who challenged Musk to convert the Tesla balance sheet from US dollars to bitcoin.
Musk later clarified his interest in bitcoin with this tweet (see second tweet):
That news sent bitcoin, and Tesla’s share price, on a rampage, before both gave back some of their gains. The strong move into bitcoin, though massively beneficial to the share price over the last month, adds risk and volatility to the company outside of its involvement in the production of electric vehicles.
Tesla share price
Saylor has become a bitcoin cheerleader, recently hosting a bitcoin corporate strategy conference for thousands of senior executives to explain how, and why, they should adopt this new form of money. His reasoning: the inevitability of the US dollar’s further decline as fiat money issuance has gone into overdrive.
MicroStrategy last week announced that it had spent another $1.03 billion on bitcoin at an average price of $52 765 per coin (the price has since dropped to about $43 600).
The company provides business intelligence, mobile software, and cloud-based services, but has recently attracted attention for its embrace of bitcoin as a treasury reserve asset, based on expectations of further US dollar weakness, declining returns from cash, and macroeconomic instability.
“The company now holds over 90 000 bitcoins, reaffirming our belief that bitcoin, as the world’s most widely-adopted cryptocurrency, can serve as a dependable store of value,” said Saylor in a statement last week. “We will continue to pursue our strategy of acquiring bitcoin with excess cash and we may from time to time, subject to market conditions, issue debt or equity securities in capital raising transactions with the objective of using the proceeds to purchase additional bitcoin.”
The company spent over $1 billion in 2020 acquiring bitcoin at an average price of about $16 000. The 175% surge in bitcoin since then powered MicroStrategy’s share price briefly above $1 000, before retreating to $752. The stock is now widely regarded as a proxy for bitcoin.
MicroStrategy share price
Grayscale Bitcoin Trust has become the default entry point for companies and firms to gain exposure to bitcoin where their investment mandates specifically preclude them from directly investing in cryptos.
This is a dilemma that is facing many investment firms now realising they can no longer ignore the outsize returns generated in this new asset class. Grayscale takes care of issues such as bitcoin custody. Though the stock price tends to mimic bitcoin, this is an imperfect correlation. Investors are often paying a hefty premium for entry, and the swings in the stock price can be more exaggerated than bitcoin itself.
Grayscale Bitcoin Trust stock price
Another evangelist for bitcoin is Jack Dorsey, CEO of Twitter and founder of electronic payments firm Square, which has about 3% of the $150 billion digital advertising market.
Square owns more than 8 000 bitcoin, acquired in the last six months, equivalent to about 5% of its total assets at the end of 2020.
“The investment is part of Square’s ongoing commitment to bitcoin, and the company plans to assess its aggregate investment in bitcoin relative to its other investments on an ongoing basis,” the company said in its earnings statement.
Square stock price
Silvergate Capital is a digital asset bank with nearly $5 billion in crypto-backed deposits, and only went public in 2019. It allows customers to switch between fiat and crypto through its Silvergate Exchange Network. Clients include Square and Coinbase, a crypto exchange that launched in 2012 and recently announced that it intends to list on the Nasdaq exchange.
Silvergate is a new type of banking enterprise, fully enabled for the crypto revolution underway, targeting the largest fintech and digital currency companies and investors around the world.
Silvergate Capital stock price
Mogo is a Canadian fintech company involved in developing digital financial solutions. In December 2020, it announced it would invest $1.5 billion in bitcoin, equivalent to about 1.5% of its total assets as of the third quarter of 2020. The company says it will make additional bitcoin investments in 2021. Its MogoCrypto app was launched in 2018 to allow Canadians to buy and sell bitcoin in real-time.
“We are strong believers in bitcoin as an asset class and believe this investment is consistent with our goal to make bitcoin investing available to all Canadians. In addition, we believe bitcoin represents an attractive investment for our shareholders with significant long-term potential as its adoption continues to grow globally,” said Greg Feller, president and CFO of Mogo.
Mogo Inc stock price
Galaxy Digital is a diversified financial services and investment management innovator in the digital asset, cryptocurrency, and blockchain technology sector. The company had assets under management of $407 million at the end of the third quarter of 2020, including $82.4 million in passive bitcoin and index fund products.
Galaxy Digital stock price
Other stocks with exposure to bitcoin and blockchain include:
Hut 8 Mining Corporation (a bitcoin miner, whose stock price has gone up from C$1.47 to C$10 since December 2020);
Bitfarms (also a bitcoin miner; share price up from C$0.6 to C$5.90 since December);
Voyager Digital, which offers the ability to buy and sell more than 50 cryptocurrencies and earn interest on 22 of them (its stock price went up nearly 10-fold to C$19.63 since December); and
Hive Blockchain Technologies (stock price up from C$1.20 to nearly C$5 since December). Hive is a crypto mining firm. The company last week announced the purchase of 3 000 next generation “miners” to generate additional cash flow from its crypto mining activities. Cash and coin assets are currently worth $65 million.
In this case to get rid of a municipal manager who just won’t leave, despite repeated accusations of mismanagement. From Moneyweb.
It seems the citizens of North West province have had it with dysfunctional local governments.
Moneyweb recently reported on a judgment in the Mmabatho High Court handing over control of water and sewage services in Kgetlenrivier to local residents after they had been left to rot.
Now a non-profit group called the Centre for Good Governance and Social Justice has brought a case before the same court, asking it to remove the municipal manager of Mamusa Local Municipality in North West province (based in Schweizer-Reneke), arguing that the manager is unqualified for the job and has run it into the ground.
“This court case came about because the municipality was placed under tremendous pressure by one local political faction to employ the manager, despite the fact that the interview panel did not recommend him for the post for want of qualifications and experience,” says Mandla Mpempe, executive director of the Centre for Good Governance and Social Justice.
And it’s not just Mpempe saying that.
A November 2020 legal opinion commissioned by the municipality itself found that Reuben Gincane had been appointed as Mamusa’s municipal manager between 2012 and 2017 despite not having the required qualifications.
Gincane was again appointed as municipal manager in late 2020 despite objections from residents, and in disregard of the recommendations of the interview panel.
The legal opinion on his appointment concludes that his lack of qualifications renders his appointment null and void.
Taking back control
“We have to start taking back control of local government in this country from the corrupt factions that have infiltrated it if we are to provide any kind of decent life for the people who live in these areas,” says Mpempe, a veteran ANC member and anti-apartheid activist who has now turned his attention to bringing accountability to local government.
Mamusa residents complain that sewage is spilling into the streets and even into houses, water supply is inconsistent and of poor quality, and broken street lamps and potholes remain unrepaired.
Yet rates and taxes are collected with ruthless efficiency – with a current debtors collection ratio of more than 100% in 2019.
This is according to Municipal Money, a website that tracks municipal performance across the country.
The same website shows that Mamusa relies on rates and taxes for about 58% of its spending, and the balance from national and provincial government.
Municipal council dissolved
The provincial government dissolved the municipal council in 2019 and placed it under administration after service delivery protests turned violent.
Even the mayor of Mamusa, Gotsilekgosi Batsi, has urged the local Member of the Executive Council (MEC) for Cooperative Governance and Traditional Affairs (Cogta) to intervene in what is claimed to be a highly irregular appointment of the municipal manager – apparently to no avail.
Batsi points to Gincane’s record of poor governance and lack of experience as reasons for demanding his removal.
Evidence in the financials
In a letter to the MEC, of which Moneyweb has a copy, Batsi spells out his reasons for demanding Gincane’s removal:
He presided over eight years of audit disclaimers issued by the Auditor-General;
In 2015/16, unauthorised expenditure amounting to R26.3 million was incurred;
Misrepresentations of fact were observed in the municipality’s cash flow statements; and
Payments amounting to R24.5 million were made without following supply chain management processes.
There is another intriguing aspect to this story.
Arson, forgery, criminal case
Mpempe says that in June 2017 the South African Municipal Workers Union (Samwu) embarked on violent protests and burnt down the municipal offices.
“Their reasons had nothing to do with labour issues, but politics. They demanded that the then mayor, Aron Motswana, resign.
“In the process they burnt down the municipal offices.”
Three of the protesting workers were arrested for arson and public violence. Two were acquitted and one was sent to prison. It was later found that three internal municipal workers were involved in the arson attack, for which they were dismissed. The dismissed municipal workers applied for review at the SA Local Government Bargaining Council and were found to have been correctly dismissed. They then purported to have approached the Labour Court.
On January 24, 2020, a few days after local by-elections in Mamusa, a settlement agreement was apparently signed and the workers were reinstated.
Mpempe and the Centre for Good Governance and Social Justice say this settlement agreement is a forgery. The centre has opened a criminal case of fraud, corruption and forgery under case number 13/7/2020 with the Schweizer-Reneke police.
“This matter is receiving attention, however, these employees are at work,” says Mpempe.
The centre is emboldened by the recent success of Kgetlengrivier residents who have been ordered by the court to take over water and sewage services. Mpempe has been meeting with the lawyers for the Kgetlengrivier residents and plans to launch a similar legal challenge against the Mamusa municipality.
“We’ve suffered through years of broken service delivery, electricity outages, water supply interruptions and incompetent management,” says Mpempe.
“We would like nothing more than to have the court hand over control of local services to residents so that we can appoint service providers who are actually willing and able to do the job.”
Moneyweb reached out to Mamusa municipality and the North West provincial Cogta for comment.
The municipality promised a reply to emailed questions by Friday, February 19, but no reply was received, despite follow up.
Similarly, no reply was received from the provincial department of Cogta.
Or face contempt of court charge – following a challenge brought by Liberty Fighters Network. From Moneyweb.
Reyno de Beer of the Liberty Fighters Network (LFN) has spent years waging war against the banks, property investment companies and speculators over unlawful repossessions and evictions, and has accumulated more than a few impressive court victories along the way.
He has no formal legal training, other than an aborted effort to complete a BCom Law degree, abandoned due to lack of funds.
But that hasn’t stopped him from taking on the whales of the legal world.
Legal experts like consumer crusader Leonard Benjamin have commended De Beer’s guts and the careful framing of his legal arguments.
And he now has Minister of Cooperative Governance and Traditional Affairs Nkosazana Dlamini-Zuma in his sights. This week he fired off a letter to the minister and her legal team giving her five days to amend lockdown regulations already declared unconstitutional by the courts, or she will face a contempt of court charge – which is a criminal offence.
This follows an action brought by LFN in June last year in the Pretoria High Court declaring the national state of disaster, established under the Disaster Management Act, declared unconstitutional and unlawful.
Judge Norman Davis ruled that most of the regulations were irrational and invalid.
This ruling was appealed by government, and the case has ricocheted through the courts since then.
Earlier this month Judge Davis ruled again, this time dismissing LFN’s application to have the national state of disaster declared invalid, and to declare Dlamini-Zuma in contempt of court for not amending the offending regulations after the June 2020 judgment.
Davis explained that “the factual, regulatory and legal landscapes” had undergone unprecedented changes since the Covid lockdown was first announced in March 2020.
De Beer says behind all the legal argument is a frightening overreach of government power dressed up as a health crisis.
The crisis required every South African to surrender their human rights to unaccountable authorities, often guided by poor science.
Millions of people have been thrown out of work, lost their businesses or suffered a reduction in income, while no serious effort appears to have been made to find less drastic measures to avert this outcome.
Lockdown regulations were amended several times, presenting a moving target for the various groups challenging them.
Judge agrees with ‘absurdity’ of beach ban
LFN pointed to the ridiculousness of banning beach visits in its campaign to contain the spread of the virus, and claimed the science behind mask-wearing is unconvincing. The group also wants the ban on religious gatherings overturned, though Judge Davis said this had been rendered moot by the latest amendment to the lockdown regulations allowing for church gatherings up to certain limits.
Despite a judgment that appears to go heavily against LFN, Davis did agree with some aspects of the LFN case, such as the “absurdity” of the beach ban, which has since been lifted.
While a plain reading of the judgment suggests victory for the government, this is far from the case, according to De Beer.
“The government’s appeal against the June 2020 judgment had lapsed by 12 October 2020 due to the minister’s late filing of her court papers. We are saying that renders all of her regulations under the Disaster Management Act to be null and void, which means any of the restrictions on going to beaches, religious gatherings, selling alcohol outside the regulated times – all of these are of no legal force. The judgment by Judge Davis did not overturn this aspect of the June 2020 ruling he made.
”We have now put the minister on terms,” says De Beer
“She has five days to amend the regulations to comply with the court ruling of June 2020 or we will bring a contempt of court application against her personally on the normal court roll, rather than as a matter of urgency.”
The LFN letter to the minister reads: “It appears as if you yourself, Minister, [are] being put on a ‘wild goose chase’ by your legal team, and especially having failed to lodge your appeal on time creating massive difficulties for you at present.”
The minister’s failure to lodge her additional appeal on time meant that many of the measures undertaken under the Disaster Regulations are no longer legally enforceable.
‘No merit’ says State Attorney
In a letter of reply to the LFN, the State Attorney says the regulations in dispute have been repealed and replaced by the minister. “There is therefore no merit to the threatened contempt application, and there are no measures to the minister to take in order to ‘comply’ with the court order.”
The State Attorney also appears to take offence at LFN’s approach to the late filing of the appeal by the Supreme Court of Appeal (SCA), and says it will now ask the SCA to make a determination on the condonation application (asking permission for a late filing to be forgiven) as a matter of urgency.
De Beer says he is pleased with the outcome of the ruling by Judge Davis “as it confirmed that many of our arguments were spot on”.
However, he is disappointed with the judge’s refusal to overturn the compulsory wearing-of-masks regulation on the grounds this was needed to protect others.
“This stance is factually misplaced as the court chose to ignore several facts proving that it’s nothing but propaganda,” says De Beer.
The LFN will consider whether to formally request leave to appeal this part of the ruling in the SCA.
Despite production setbacks due to Covid. From Moneyweb.
It was the year of Covid, but also of China’s remarkable economic recovery.
The country brushed aside the effects of the pandemic in the second half of 2020 to record 6% growth in steel production over the previous year. Chinese infrastructure investment declined 20% in the first quarter of 2020, then swung back to register nearly 1% year-on-year growth.
This worked to Kumba Iron Ore’s advantage, pushing average realised prices for the year to $115 a ton.
The average price of iron ore fines delivered into Chinese ports ended 2020 17% higher than the previous year due to surging demand, helped by government stimulus packages to revive the economyand supply disruptions in key supplier economies, notably Brazil, SA, Canada, Chile and Peru.
Kumba was able to command a slightly higher than average market price due to the quality of product it supplies, the result of a deliberate programme focusing on higher value iron ore.
Total tonnage mined decreased by 14% to 256Mt from 297Mt the previous year, mainly due to Covid and weather-related disruptions, as well as equipment reliability and availability.
Higher iron ore prices and a weaker rand translated to a record Ebitda (earnings before interest, tax, depreciation and amortisation) of R45.8 billion and free cash flow of R20.7 billion for the 2020 financial year.
“Our Ebitda margin rose to 57%, up from 52% in 2019 as we adapted our value chain and capitalised on our high quality iron ore products. Together with the strengthening price, this allowed us to achieve a 19% higher average realised FOB [free-on-board] export price,” said Kumba CEO Themba Mkhwanazi at a results presentation on Tuesday.
Margins were further boosted by cost discipline resulting in savings of R1.3 billion, including R613 million of Covid-related savings.
Kumba also announced a R3.6 billion investment to extend the life of its Sishen operation in the Northern Cape to 2040, using advanced ultra-high dense media separation (UHDMS) technology to optimise output. This technology allows Kumba to produce high quality iron ore from low grade material containing iron ore of between 40% and 48%.
Last year Kumba and Anglo American gave the go-ahead for the Kapstevel South mine at Kolomela, which it is estimated will cost R7 billion and yield an internal after-tax rate of return of about 25%.
Mkhwanazi says the company is continuing with its exploration programme in the Northern Cape to further develop its resource pipeline.
Total capex for 2021 is expected to be around R11 billion, which includes the deferral of non-critical capital spending from 2020. Slightly less than half of this will go to the development of the Kapstevel South pit, and the UHDMS project to recover low grade material.
Revenue of R80.1 billion, up 24.6% on 2019
Operating expenses up 10.7% to R39.1 billion
Attributable free cash flow of R20.7 billion, up by 21%
Return on Capital Employed of 109%, up from 83%
Final cash dividend of R41.30 per share, giving a total cash dividend of R60.90 per share
Average realised FOB export price of $115/tonne
Cost savings of R1.3 billion, keeping C1 costs at US$31/t
Ebitda margin of 57%, up from 52%
Sishen life extension potential to 2039 with R3.6 billion UHDMS project approved in February 2021.
Investing a regular amount in crypto each month is a proven way to grow your account over time. From Moneyweb.
This may be a frightening time for anyone considering getting involved in cryptos for the first time. Bitcoin appears headed for $60 000 (R887 000) after cracking $20 000 (R295 668) two months ago. It’s up 185% in just eight weeks.
Ethereum broke $600 just two months ago and is now headed for $2 000 – a gain of 230% in two months.
Cardano is up nearly 500% in the last two months.
These gains are so dizzying that many fear they have missed the boat, though these same fears were expressed in prior years when bitcoin first broke R10 000, then R100 000, and then R300 000.
Each time bitcoin has broken its previous high.
“Many people fear crypto prices have shot [up] so high that it is too late to enter the market, but we should remember that there have been price surges like this in the past. Instead of trying to enter at a favourable price, investing a bit every month is a proven way participate in the rise in cryptocurrencies like bitcoin,” says Farzam Ehsani, CEO of crypto exchange VALR.
Moneyweb previously reported on the advantages of rand cost averaging in November 2020, but that article certainly needs updating in light of recent price moves.
Had you invested $100 a month over the last three years, your total capital invested to date would be $3 700 (R54 000 at an average ZAR/USD exchange rate of R14.60).
That $3 700 invested would have grown to an astonishing $25 000 (R365 000) over three years.
Take a look at the following graph from Dollar Cost Averaging Bitcoin (dcabtc.com). Dollar (or rand) cost averaging is where you invest a regular amount of money in an asset, usually monthly or weekly.
Investing $100 a month for three years would have grown your bitcoin holdings to $25 000, a 575% growth on the capital invested. By way of comparison, the same amount invested in the Dow Jones Industrial Index (the red line in the graph below) would have returned $4 460 over the same period, while gold would have returned $4 488.
The rand cost averaging strategy is advisable for investors who are looking to buy bitcoin for the long term, since it protects them from potentially allocating all their capital at a price peak.
It is possible to tweak this strategy by using charts to time your investment, particularly when bitcoin looks oversold on a relative strength index (RSI). The chart below shows the RSI (in purple) against the USD bitcoin price. Prices are generally considered “overbought” when the RSI is above 70 and “oversold” below 30. As can be seen from the chart below, bitcoin’s RSI hasn’t been near 30 in months due to the strength of the bull market, so an RSI of 40-50 would have substituted for a good entry point.
For those with little technical knowledge of markets, however, it is better to avoid trying to time the market.
Sean Sanders, CEO of crypto investment platform Revix, says rand cost averaging has become a favoured method for retail investors looking to capitalise on the phenomenal growth in crypto assets prices in recent months.
“It’s a relatively safe way to invest, and you don’t get too hung up on the volatility in crypto prices. When prices drop, you get an opportunity to buy in at a lower price, but we haven’t seen much of that opportunity in the last few months. Since November last year, the prices have been headed one way, and that’s up.”
The main advantage of rand cost averaging, if done at regular intervals such as the end of each month, is that it avoids having to time the market. The less attention paid to price under this strategy, the better.
Fuel cell battery vehicles, driven by Chinese demand, will help drive demand for platinum group metals. From Moneyweb.
A 71% increase in the PGM (platinum group metal) basket price boosted Anglo Platinum’s earnings by 39% for the 2020 financial year.
This was despite the setbacks of the Covid lockdown which dropped PGM production by 14% to 3.8 million ounces (oz), and an explosion at a key converter plant which dropped refined production by 42% to 2.7 million oz. The first phase of the converter plant was restored to production in November last year, within budget and ahead of schedule.
Strong PGM prices and a weaker rand helped brush these setbacks aside, resulting in a 39% increase to R41.6 billion in Ebitda (earnings before interest, tax, depreciation and amortisation).
PGM basket prices increased to R33 320 per ounce sold from R19 534 in 2019.
Anglo Platinum reported a strong recovery in the second half of 2020, with own-mines production up 1% compared to the same period in 2019 (adjusting for the sections at Amandelbult that came to their end of mine life).
Converter plant stoppage, rebuild
Refining on behalf of third party contractors was seriously impacted by the stoppage at the converter plant.
Some R500 million was expended on restoring the first phase of the downed plant. The second phase unit is now undergoing its full rebuild, which is scheduled to be completed in the second half of 2021 at an estimated capital cost of R550-R600 million.
The interruption at the converter plant resulted in a build-up of work-in-progress inventory of around one million PGM ounces. It is expected that this inventory will be released by the end of 2022.
Demand for light vehicles dropped 14% last year but is now back to near normal levels, led by demand from China. Demand was further underpinned by a 5% increase in PGM per light vehicle manufactured.
Jewellery demand is weak, but recovering, while industrial and investment uptake held up surprisingly well in an otherwise trying year.
The long-awaited lift-off of the hydrogen economy is critical to the future of platinum mines, with 109 corporate members of the Hydrogen Council and nine new national hydrogen strategies announced – all aimed at reducing carbon output using hydrogen-based technologies.
A green future for PGMs
Signalling its commitment to green energy, Anglo Platinum CEO Natascha Viljoen says the group will pilot its first hydrogen fuel cell truck in the first half of 2021, leading eventually the replacement of all diesel-powered trucks at the Mogalakwena mine.
Also being considered is the use of hydrogen fuel cells as a source of energy for processing facilities across the group.
The building of a 75MW photovoltaic plant at Mogalakwena mine will reduce carbon emissions by up to 25%.
The plan is to scale this up substantially in the coming years to reduce dependence on the Eskom grid as well as scale back carbon emissions.
Costs per unit up 15%
The 14% drop in mining production had a flow-through effect on unit costs per PGM ounce, which increased by 15% to R11 739 (2019: R10 189). By the fourth quarter of 2020, all Anglo Platinum mines were operating at 100% of normal capacity.
Buoyed by a weaker rand and strong PGM prices, the group’s Ebitda margin was hoisted to a robust 55%, up from 43% the previous year.
Net sales revenue increased by 38% to R137.8 billion (2019: R99.6 billion), mainly due to an improvement in PGM prices and higher sales from trading activities. This more than offset the supply disruption to customers following the temporary closure of the converter plant.
Return on capital employed increased to 72% (2019: 58%), and the company’s net cash position improved to R18.7 billion (2019: R17.3 billion).
A final dividend of R35.35 per share, or R9.4 billion, was declared – based on a payout ratio of 40% of headline earnings.
Source: Anglo Platinum 2020 results presentation
All heavy trucks sold in China and India by 2023 will need platinum-based catalysers, though many manufacturers are implementing these targets ahead of time. Platinum loadings in Chinese trucks will be three times higher in 2023 than in 2019, with a similar trend emerging in India.
Source: Anglo Platinum 2020 results presentation
Looking to the future, Viljoen says by 2022 all operations will be mechanised or modernised with a view to improving safety and pushing the group into the lower half of competitors’ cost curve. New and safer technologies are being employed to improve safety, such as emulsion-based blasting and winch operations developed in-house to halt operations when workers get too close.
PGM production is expected to return to pre-Covid-19 levels of 4.2-4.6 million oz in 2021, while refined production is expected to reach 4.6-5 million oz. PGM sales volumes are forecast to be in line with refined production. Unit costs are expected to remain between R11 000 and R11 500 an ounce.
Total capital expenditure is expected to be R7-R7.5 billion, not counting capitalised waste-stripping expenditure of R2.8-R3.1 billion.
“The supply and demand for PGMs are both forecast to rise in 2021 compared to 2020,” says the group.
“This was always likely as both have already improved significantly since the first half of 2020, mainly owing to the world learning to live with Covid-19.
“The rollout of effective vaccines now suggests further upside, though how soon they bring the promise of ‘normality’ will vary by country and sector and, in some cases, ‘normality’ will be different than it was before the pandemic.
“We expect palladium and rhodium to remain in deficit this year. Platinum is forecast to be in a small surplus.”