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Credibility gap

The continuing slide in Highveld’s share price indicates minority shareholders clearly don’t believe the optimistic views voiced by chairman Bheki Shongwe and CEO Scott MacDonald. It has to be the minorities selling out, because trading volumes in the share remain low – which is to be expected, given that Russian group Evraz owns 85% of Highveld Steel and Vanadium Corporation [JSE:HVL], which it bought from former controlling shareholder Anglo American [JSE:AGL].

Its price sat at around 9000c in January but has dropped to around 5200c, which is particularly unfortunate, given I selected Highveld as one of my five stock picks for 2011 in Finweek’s cover story in our 13 January issue.

This is, of course, a highly volatile stock, reflecting the nature of its main commodity businesses – steel and vanadium. I picked Highveld mainly for its exposure to vanadium, which is rapidly establishing itself as a “green” metal of the future and of which there aren’t that many producers.

Vanadium “supercharges” batteries. Early in March, US President Barack Obama described vanadium redox fuel cells as “one of the coolest things I’ve ever said out loud”. But the impact of such developments does lie in the future.

MacDonald says: “Markets globally remain uncertain and an immediate improvement in demand is not foreseen. This, coupled with the high cost of electricity and the strong local currency, will tax our innovation and business skills.

“However, following the comprehensive plant maintenance and upgrade programme initiated in 2010, and the wide range of people and production-focused initiatives that have been launched and extended, we have stabilised the business to such an extent we can grow it to the advantage of all stakeholders.”

Ryan holds owns shares in Highveld
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