Sibanye's Aquarius offer gives JSE a boost

Johannesburg - News about the transformation of the gold mining group Sibanye Gold [JSE:SGL] into a significant platinum producer helped the JSE survive an early bout of profit-taking on Tuesday morning.

Sibanye announced on Tuesday that it is acquiring the entire share capital of Aquarius Platinum [JSE:AQP] for R4bn and the share prices of both companies rose significantly, with Aquarius gaining more than 40% and Sibanye over 10%.

READ: Sibanye makes cash offer for Aquarius Platinum

These gains helped the Resources index rise 0.80% by midday, which also helped pull the All-share and Top 40 indices higher by midday.

The Resources index opened almost 1% higher on Tuesday morning but quickly fell victim to profit-taking and was soon about 0.5% lower than Monday’s close before the market recovered.

Imara SP Reid said before the day’s trading in its daily Market Snapshot that the bourse has additional upside potential, but there is the danger that further strength can be used as an opportunity to lock in recent advances. The JSE is now 3.46% higher over the past seven days and 9.32% stronger over the past 30 days.

That was exactly what happened. By midday the All-share index was 0.28% in the black at 52 215 points after trading as low as 51 814 points earlier, while the Top 40 index was 0.18% stronger at 46 777 points but was also in the red in earlier trade at 46 392 points.

By midday Aquarius had gained 40% to trade at R2.38 and Sibanye was 10.15% higher at R19.75. Both shares have moved strongly over the past seven days, with Aquarius gaining 16.44% and Sibanye 7.44%. Sibanye’s strong move also helped the Gold index gain 4.55%.

The transaction will allow Sibanye to consolidate the operations of Aquarius – which include the Kroondal and Mimosa mines – with those of the Rustenburg operations it recently acquired from Anglo American Platinum which will unlock significant synergies.

The JSE received a boost on Friday and gained strongly on Monday after lacklustre US economic data fuelled doubts that the US economy is robust enough to withstand a rate hike before year-end.

The possibility that US interest rates will remain low for longer is good news for emerging markets like South Africa, particularly if it means that the Federal Reserve will continue with its loose policy which has helped shore up riskier assets globally by providing cheap cash.
US non-farm payrolls rose by 142 000 in September, considerably lower than the 203 000 jobs the markets had expected, data showed on Friday. The jobs report also showed a stall in US hourly wage growth. Other US business indices were also weaker than expected.

Investors are now expected to turn their attention to a speech by Federal Reserve Bank of San Francisco president John Williams later on Tuesday, reflecting on the economic outlook in the world's top economy. The  US Federal Open Market Committee will publish the minutes of the September policy meeting on Thursday.

By midday the Financial index was also 0.21% higher with the Industrial index only 0.14% improved. Richemont [JSE:CFR] gave the index a boost, but some of the the other big guns were significantly lower.

Richemont was at midday another 2.71% higher after a strong run on Monday, which means the share has now gained 11.8% over the past 30 days.

The international dealer in luxury goods received a boost when Yoox Net-a-Porter SpA, the world’s biggest online fashion retailer in which Richemont has acquired an interest of about 50%, made a strong debut on Monday on the stock exchange in Milan.

Richemont said earlier full-year profit will be boosted by an accounting gain of €610m to €670m from the transaction.

SABMiller [JSE:SAB], which gained almost 30% over the past 30 days on the news that Anheuser-Busch InBev plans a merger with the JSE listed group, lost 2.74% to R756.66 on Monday.

Bloomberg reported that SABMiller hasrejected an informal takeover offer from Anheuser-Busch InBev that it considered too low, citing people familiar with the matter.

READ: SABMiller said to have snubbed AB InBev offer

Naspers [JSE:NPN] was a victim of profit-taking after a strong run of more than 12% over the past seven days. By midday the share was 2.55% softer at R1 868.00.

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