Donald Trump plan will lift metal prices: Brian Gilbertson
Donald Trump’s promise of $1 trillion investment in infrastructure in the US could help boost world commodity prices.
Donald Trump’s promise to invest $1 trillion in infrastructure in the US could help boost world commodity prices, particularly those involved in steelmaking such as iron ore and manganese, former BHP chief executive Brian Gilbertson says.
“If the things that Mr Trump says turn out to be true, there is going to be an enormous investment in infrastructure in the US,” he told The Australian in an interview yesterday in Sydney.
“All of that means more demand for steel, which means more demand for manganese.”
Mr Gilbertson, who was BHP chief executive for six months in 2003 before leaving after a disagreement with its then chairman Don Argus, said there had been a fundamental change in world commodity markets, particularly those involved in steelmaking, since prices hit lows in late 2015.
The South Africa-based mining executive, who chairs the Perth-based Jupiter Mines, said the company would appoint advisers soon to look at a potential relisting in the wake of the recovery of the world manganese price.
One of the company’s major assets is a 49.9 per cent stake in South Africa’s Tshipi manganese mine, which is now producing some 2.4 million tonnes a year.
Jupiter was delisted from the ASX in January 2014 after its shares were hit by the fall in commodity prices. Directors took the move to delist after its market capitalisation fell from $1 billion to under $200 million with its shares at 10c. The company made a pitch to shareholders in Sydney yesterday, outlining progress on the Tshipi mine in the Kalahari desert that is now exporting most of its production, and pointing to the recovery in the world price of manganese from a low of $US1.50 to current levels of $US6.92 per DMTU (dry metric tonne unit).
Mr Gilbertson said Jupiter had bought its stake in the deposit in 2010, when it was “not much more than a patch of barren veldt”. The open-cut mine, which is next to the Mamatwan manganese mine owned by BHP spin-off South32, has been developed and is now exporting the bulk of its production.
Jupiter is making a capital return to shareholders of $73m in the form of a share buyback priced at 53c a share, more than five times the price the company was trading at when it delisted.
Mr Gilbertson said the commodity industry had gone into a bear market in the years after Jupiter bought into the mine in 2010.
“The share prices of the major global diversified companies tumbled, commodity prices declined for five years and it really was a difficult time,” he said.
“None of the commodity companies were excluded, including Jupiter, which was trying to build up its mines.”
But he said the bear market “appears to have come to an end” and “we now have a producing, efficient mine in Tshipi”.
Mr Gilbertson said Jupiter was not counting on any impact from the Trump administration on commodity prices in its plans to consider a relisting on the ASX.
“At the end of 2015 something started to turn. Equity and commodity prices are up three to four times from that bottom,” he said.
“There has been a strong improvement in the fortunes of the equity and the commodity markets including the prices of iron ore, coking coal and manganese.”
He said commodity prices had eased back a little recently but the price of manganese was still strong. “I hesitate to make forecasts on commodity prices, but I don’t see them going back to the levels we saw a year ago,” he said.
Mr Gilbertson said production costs at the Tshipi mine were coming in significantly lower than the company expected when it made its investment in 2010. At the time the company was working on production costs of between $US2.60 and $US2.80 per DMTU. But executives said at current production levels of more than 2 million tonnes a year the cost had come down to about $US1.80 per DMTU.
“Relisting of the company is not the only option,” he said.
“We will appoint advisers in the next few weeks to guide us through the process. If there is some consolidation of the Kalahari basin, which I think is quite possible, it could mean stronger prices for our shareholders over a substantial period.”
Mr Gilbertson’s private company Pallinghurst is a significant shareholder in Jupiter.
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