Neptune Buys Into Foreign-Listed African Miners to Reduce Risks

Neptune Investment Management Ltd. increased its holding of foreign-listed African mining companies to tap into less-liquid, growing markets, while limiting exposure to South African metals producers, Shelley McKeaveney, manager of Neptune Africa Fund, said.

Neptune has recently added companies, including Sierra Leone’s Sierra Rutile Ltd., London Mining Plc, the second-largest iron-ore producer in the country, and Kenmare Resources Plc, a miner operating on the north-east coast of Mozambique, “partly to reflect a more positive view on the materials sector,” McKeaveney told a meeting of investors in London today.

About 50 workers died last year in violence related to a series of illegal strikes that shut mines and curbed production in Africa’s largest economy. The violence peaked on Aug. 16, when police killed 34 protesters at Lonmin Plc’s Marikana platinum mine in the North West province. Impala Platinum Holdings Ltd. had a six-week strike last year in which four people died and 120,000 ounces of metal were lost.

“We haven’t had much exposure to the large-cap South African mines since the first quarter of last year,” McKeaveney said. “With the trouble on the Impala mine in February last year, we’ve gotten a bit spooked. The South African mining sector is perhaps not the best place for us to be right now.”

Neptune looks for “very strong production growth,” rather than betting on the metals price and expansion projects are under way at Sierra Rutile, London Mining and Kenmare, she said.

‘Mining Friendly’

“Even if the iron ore price goes absolutely nowhere this year, London Mining is going to treble its production,” McKeaveney said.

Sierra Leone is “exceptionally mining friendly,” with the country having completed “peaceful elections” last year, she said.

Kenmare shares have rallied 15 percent this year, while London Mining rose 7.4 percent and Sierra Rutile added 5.3 percent. The MSCI Emerging Markets Index has retreated 0.4 percent in the period.

Buying into foreign-listed African companies reduces “foreign exchange risks,” McKeaveney said. “It also means that we can get exposure to countries that don’t have stock exchanges or that have stock exchanges that aren’t liquid or accessible.”