Wednesday 18 February 2009

Magna Africa Fund - Monthly Update January 2009

The Magna Africa Fund saw its value fall by 6.2% in January, dragged down by further sharp share price falls in Nigeria, where the Fund has significant exposure, though it also benefited from a number of positive stock-specific developments, suggesting an improving outlook.

Most South African shares gave back their December gains as investors took a more pessimistic view of economic developments, despite ongoing interest rate cuts. This was most evident in companies operating in the domestic economy with, for example, shares in the road construction group Raubex down 20% on the month. There seemed to be little reason for this movement: the company operates predominantly in South Africa, for clients such as the National Roads Agency, with an order book described by its chief financial officer as having “zero risk” as it only includes projects with firm start dates and assured funding. Such losses were however offset to a large
extent by share price gains amongst the miners, on the back of firmer precious metal prices. AngloGold Ashanti rose 16%, whilst Eastern Platinum was 18% higher. The stand-out performer was however First Uranium, the low-cost South African gold and uranium junior producer, whose share price more than doubled over the month as the market began to appreciate the financial strength of the company, bolstered by a successful CAD 61.5 million private placement of equity, and expectations of imminent metal production from both the company’s assets. Outside South Africa, the miners also fared well with the Zambian copper miner, First Quantum, up 35% and the
Mozambique titanium miner Kenmare Resources 33% higher.

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