Are These Companies Heading To Zero? Vedanta Resources plc, Lonmin Plc, African Potash Ltd, KAZ Minerals PLC & Jubilee Platinum PLC

Are Vedanta Resources plc (LON: VED), Lonmin Plc (LON: LMI), African Potash Ltd (LON: AFPO), KAZ Minerals PLC (LON: KAZ) and Jubilee Platinum PLC (LON: JLP) going out of business?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The commodity rout has sent shockwaves across the mining sector. Unfortunately, it’s now becoming apparent that many miners won’t be able to survive the downturn.

Will KAZ Minerals (LSE: KAZ), Vedanta Resources (LSE: VED), Jubilee Platinum (LSE: JLP), Lonmin (LSE: LMI) and African Potash (LSE: AFPO) be able to survive?

Loss-making production  

At the end of August, Kaz’s shares jumped by a fifth after announcing the results, which beat expectations.

Since the release of these results, however, a lot has changed. Alongside the half-year results, Kaz revealed that its full-year copper production cost guidance would be in the region of 260 to 280 cents per pound. But at the end of August, the price of copper crashed to 220 cents per pound, indicating that Kaz is losing money on every pound of copper produced. 

Essential merger

According to City, it’s essential that Vedanta completes its merger with Cairn India for the company to be able to withstand the weakness in global commodity prices.

It’s so important that Vedanta completes its merger with Cairn India that credit ratings agency, Standard & Poor’s has placed Vedanta on credit watch, ahead of a possible downgrade if the merger doesn’t go ahead. 

Vedanta’s management expects the deal to complete during the fourth quarter of 2015. So, investors will have to wait for further clarity on Vedanta’s outlook. Still, management has stated that the company’s 9.4% is here to stay for the time being

Long way to go

Jubilee Platinum has surged 160% in the last six months weeks but has fallen by more than 30% since the beginning of August. News regarding asset sales, financing deals and the company’s pipeline of projects have all boosted the investment case for Jubilee, although the company has a long way to go before it can stand on its own two feet. 

Moreover, it is unclear how the 30% fall in the price of platinum over the past six months will affect the company.

And as the price of platinum slumps, Lonmin’s financial performance is only going for bad to worse. Lonmin is expected to post as pre-tax loss of £90m this year followed by a further £20m loss next year. Further, management is struggling to refinance the group’s debt.

Lonmin may look like a bargain, as it currently trades at a price to book value of just 0.06, but it should be avoided.

Difficult to call

It’s difficult to call African Potash’s outlook. With a market cap. of only £21.5m the company is off the radar of most investors but that hasn’t stopped the stock rising more than 600% over the past three months. 

Most of these gains have been driven by the news that African Potash has inked several supply deals for the supply of fertiliser. At the end of last week the company announced that it had agreed on a price of $500 per metric tonne in respect of 50,000 MT fertiliser product to be sold under a supply agreement signed at the end of August. Also, a trade finance facility of up to $50m is currently being arranged for African Potash. 

So unlike Vedanta, Lonmin and Kaz, African Potash looks to have a bright future ahead of it, as management push through the company’s business plan. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

The market is wrong about this FTSE 250 stock. I’m buying it in April

Stephen Wright thinks investors should look past a 49% decline in earnings per share and consider investing in a FTSE…

Read more »

Black father and two young daughters dancing at home
Investing Articles

1 FTSE 250 stock I own, and 1 I’d love to buy

Our writer explains why she’s eyeing up this FTSE 250 growth phenomenon, and may buy more shares in this property…

Read more »

View of Tower Bridge in Autumn
Investing Articles

The FTSE 100 is closing in on 8,000 points! Here’s what I’m buying before it’s too late!

As the FTSE 100 keeps gaining momentum, this Fool is on the lookout for bargains. Here's one stock he'd willingly…

Read more »

Investing Articles

3 ideas to help investors aim for a million-pound Stocks & Shares ISA

The UK has a growing number of Stocks and Shares ISA millionaires, and this plan may be one of the…

Read more »

Illustration of flames over a black background
Investing Articles

2 red-hot UK growth stocks to consider buying in April

These two growth stocks are performing well, but can they continue to deliver for investors through 2024 and beyond?

Read more »

Charticle

Is JD Sports Fashion one of the FTSE 100’s best value stocks? Here’s what the charts say!

The JD Sports Fashion share price remains a wild ride during the first quarter. Could it be one of the…

Read more »

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »