[miningmx.com] – 2013 has been a stomach-churning time for David Ellwood, CEO of JSE-listed metals trading company, Metmar. In that time, his wealth in the company has taken a R20m beating. That’s enough to put anyone off their porridge.
The company also posted its first loss since he helped found the organisation some 27 years ago. How does that feel? “It feels terrible,’ he says, somewhat ruefully. “We were perhaps too defensive,’ he says of how the company turned down risky revenue in the last year.
But the metals trading market is a difficult place to be. Mining might not be for sissies, but the trading side of the business is positively cut-throat. And Chinese importers are proving themselves to have the sharpest knives at the moment.
Ellwood doesn’t provide details but any slippages in the complicated logistics chain in shifting tonnes of chrome or coal from SA to China is immediately exploited by the purchaser who declines to take receipt unless there’s a re-negotiation. “The Chinese are experts,’ says Ellwood.
There are some fundamental issues in Metmar, too. Apart from R60m in write-downs, which accounted for a major part of the R180m profit to loss reversal in the year to February, there’s also the question of Metmar’s exposure to assets where it doesn’t have a voice.
It was one of the reasons Beacon Rock Corporate Services, a company in which entrepreneurs Tom Borman and Peter Gain are principals, took a 25% stake in Metmar last year. They are seeking to reposition the business and have already started by lifting its investment in Kivu Resources, a tin and tantalite prospect Rwanda to 32% from about 10%.
Meanwhile, other assets are up for disposal. Metmar’s 20% stake in the Pering Base Metals is one. It also didn’t proceed with the building of a larger anthracite mine in KwaZulu-Natal known as Fuleni.
Michael Golding a corporate finance veteran has also been appointed to take Metmar’s investment profile forward.
The strategy had been to take equity positions in mines in order to secure the offtake. One of the more successful investments is likely to be the company’s 4.8% stake in the manganese sintering operation owned by Kalagadi Manganese.
Broadly speaking, Ellwood has a more positive outlook on the 2013/13 financial year. “I think we’re through the worst. The US is showing signs of recovery and that will help the Chinese market,’ says Ellwood.
For now, however, shareholders have spoken. Shares in Metmar opened at R2.20 this year giving Ellwood a value of R58.9m on his 11.52% stake (26.78 million shares) which compares to the current R1.45/share level.
