Digging Into Miners

You can use EQS and other tools to help find investing opportunities among African suppliers of raw materials.

BY BARBARA EVANS, YOMNA NASR, SCOTT QUIN AND VINCENT TONG

Type EQS <Go> to use the Equity Screening function to search for South Africa–listed mining companies such as Impala Platinum Holdings.

MONTHLY NEW-CAR SALES ROSE TO A RECORD of 7.3 million vehicles in March, according to data compiled by Bloomberg Industries. Driving the growth of the global auto industry are the emerging markets. Suppliers of raw materials in African countries may stand to benefit, too.

Consider miners of platinum and other precious metals that are used as catalysts in pollution-control devices in cars. Let’s take a look at some tools you could use to dig into such an idea and possibly uncover investing opportunities on the continent.

First, for an overview of the platinum market, you can use the Bloomberg Industries (BI) dashboard for precious metals mining. For a breakdown of platinum’s applications and related data such as vehicle sales, type BI PMET <Go> and click on Silver/PGM Downstream under Data Library. Auto catalysts account for about 39 percent of demand for the metal, while jewelry makes up 31 percent.

Platinum was among the better-performing commodities this year through June 11, with a gain of 3.5 percent. To track platinum price trends, type CPLY MTL <Go> for the Commodity Playbook function. Click on Platinum Spot to monitor key data related to trading in the metal. Among such items, the stock price of Impala Platinum Holdings Ltd., the world’s second-largest producer, was the data point most highly correlated with the spot price of the metal as of early June.

TO DIG INTO HOW ILLOVO, SOUTH AFRICA–BASED Impala compares with other mining companies listed in that country, type EQS <Go> for the Equity Screening function. EQS has two modes for creating searches: Screen Builder and Advanced Screening Mode. Let’s use Screen Builder: If the button on the left of the red tool bar says Screen Builder, then click on it. In Screen Builder mode, EQS displays a list of categories you can use to pare your universe to a particular group of securities. Click on Exchanges. Tab in to the SEARCH field, enter SOUTH AFRICA and click on the country in the list of matches. Click on the Update button. Next, click on Sectors. Enter MINING in the SEARCH field and press <Go>. Click on Update again. Click on the Results button for a list of companies.

To chart Impala’s shares in the EQS results, click on the box to the left of Analyze so that a check mark appears and then on the miner’s ticker.

Impala was battered by a number of events this year. The company agreed in March to sell a majority stake in its Zimbabwe unit to comply with that country’s indigenization program, which requires 51 percent local ownership. A series of strikes and clashes between rival unions cut production at one of the company’s South African mines. You can quickly get an overview of these stories on the chart in EQS. Click on the Events button on the chart tool bar and then on Most Read News. Move your cursor over the blue icons on the chart to display headlines.

TO COMPARE THE MINERS IN YOUR EQS results, you can add data columns to the display. Among the items you can tap are 220 environmental, social and governance indicators. For example, the 2010 South African mining charter calls on companies to expand opportunities for “historically disadvantaged South Africans” by increasing their share of senior management positions to 40 percent by 2014. To see which companies are on track to accomplish that, tab in to the ADD COLUMN field, enter % MINORITIES IN MANAGEMENT and click on the item in the list of matches. Select Latest Year and press <Go>. Impala reported 48 percent representation in 2011.

You can also display data on analyst recommendations in EQS. Enter ANR in the ADD COLUMN field, click on Recommendation Consensus in the list of matches and press <Go>. The Recommendation Consensus column displays a numeric value ranging from 1 to 5 that represents the average rating of analysts covering the company. Higher numbers are better: 1 and 2 correspond to sell recommendations, 3 to holds and 4 and 5 to buys.

In the EQS results screen’s Analyze section, you can also chart product and geographical segmentation data. Click on the arrow to the right of Chart and select Product Segmentation. Impala derived 89 percent of its revenue from precious metals. For mining companies, product segmentation can provide an indication of a firm’s sensitivity to price movements of a particular metal. Next, to help you assess geopolitical risk, select Geographical Segmentation. Impala got 85 percent of its revenue from operations in South Africa and 15 percent from Zimbabwe.

BARBARA EVANS, YOMNA NASR, SCOTT QUIN AND VINCENT TONG ARE ANALYSTS IN THE GLOBAL DATA DEPARTMENT AT BLOOMBERG IN LONDON. This email address is being protected from spambots. You need JavaScript enabled to view it. , This email address is being protected from spambots. You need JavaScript enabled to view it. , This email address is being protected from spambots. You need JavaScript enabled to view it. , This email address is being protected from spambots. You need JavaScript enabled to view it.

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Type top AFR <Go> for the day’s top news stories related to Africa.

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