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Cape Town - If fortune favours the brave, then low-key empowerment investor Yakani has got it made.
This week Yakani forked out R17m to provide funding for Miranda Mineral Holdings, a junior mining and exploration company which has seen its share price crumble from 278c at mid-year to current levels of 50c on the JSE.
Yakani agreed to pay a premium price of 53c/share to take 32.2m shares in Miranda, buying into the exploration company at a time when most investors have been dumping the stock.
But then Yakani seems intent on developing a reputation for venturing where angels fear to tread. It was only a few weeks ago that it made headlines when it acquired a strategic stake in ailing brick manufacturing operation, African Brick Centre, for R45m.
Like Miranda, AltX-listed Afbrick was another stock that most investors had abandoned (with vigour), its share price tumbling to "priced for disaster " levels of under 20c.
After contemplating the Miranda and Afbrick transactions, one could easily construe Yakani's efforts as naively ambitious. Seriously, who - in these delicate market conditions - can afford to risk throwing cash at bombed-out small caps?
But there seems to be method in the madness. Perhaps it's important to understand exactly where Yakani comes from, and where it intends going.
Unashamedly ambitious
Yakani was formed by black economic empowerment (BEE) entrepreneurs Gilbert Phalafala and Sizwe Tati after they sold platinum mining assets into Lonmin in July 2007. The cash from the Lonmin transaction was invested in Yakani, which - according to CEO Hugo Knoetzer - still sits on a cash pile of R250m to R300m.
While the cash pile represents a sizeable war chest, Yakani can also count on considerable leverage from a R1bn portfolio of mining, infrastructure and property investments.
Knoetzer, however, is keen to stress that Yakani's investments have so far been funded with cash.
Yakani's website makes no bones about its ambitions. Displaying none of the usual corporate subtleties, the site declares that Yakani is "in a league of its own", adding that the company intends "to be the unparalleled investment house of choice in Southern Africa".
While there clearly is a determination to grow big, Yakani has set some tough hurdle rates for its portfolio, with Knoetzer pointing out that an internal rate of return of 40% has been set on its investments.
But why buy into the generally disregarded Miranda and Afbrick when the JSE is currently offering more than a few well-priced opportunities among bigger, more established infrastructure stocks?
Knoetzer intimates that both Miranda and Afbrick fit well into Yakani's portfolio of commodity and infrastructure investments.
Coal could be initial focus
As things stand, Yakani holds a stake in coal play Keaton Energy as well as a number of mining rights that span coal (a possible mine in the Waterberg area), phosphates and platinum.
Miranda's exploration portfolio - which comprises coal, diamonds, precious and industrial metals - overlaps with that of Yakani.
Reading between the lines, it would seem the initial focus area will be on coal assets. Knoetzer suggest that Yakani's coal assets could be listed, a transaction that would be relatively easy to facilitate through Miranda.
Interestingly, Miranda also offers clay assets which link up with Yakani's infrastructure assets (brick-making, roof trusses, paints) as well as Afbrick (which mines for clay and manufactures clay semi-face bricks). With Yakani's property division busy with an affordable housing project of about 600 houses in Witbank, clay may come in handy.
Another interesting point is that Yakani's swoop on Afbrick spurred interest in the brick-maker's shares, which have shifted from a low of 16c to 26c in the last few weeks.
One hopes Yakani will also rub off positively on Miranda, which has lost nearly three-quarters of its market value since mid-2008.
Yakani's cash injection should allow Miranda to "fast-track" exploration on its core prospects, and perhaps snap up an acquisition or two (without necessarily having to resort to issuing shares in settlement at these lowly levels).
Naturally, developments at Miranda's coal exploration and mining projects in KwaZulu-Natal - at Sesikhona, Uithoek, Burnside, Boschhoek/ Boschkloof, Wasbank, Amajuba, Learydale and Yarl - will be interesting to gauge over the next few months.
Miranda has already started preparing mining rights applications on the Amajuba and Uithoek projects, and is continuing to develop its three railway sidings Wasbank, Glencoe and Dannhauser.
Some of the Yakani capital will also be mobilised for Miranda's diamond interests, which directors believe have "the potential to become the second of Miranda's resource parcels to stand alone".
- Fin24.com
