London Calling - July 13 2002Published by MAC on 2002-07-13
London Calling - July 13 2002
The Financial Times earlier this month produced its survey on European corporate "performance" - naming those companies which offer shareholders the best returns (TSR - or total shareholder return) - in other words provide the most profitable investment. [see "European Performance League" FT Suvey July 2 2002].
In the mining and aggregates (construction and building materials) sector, UK-registered companies are well ahead of the field. The top four most profitable dedicated mining companies are all British-registered (Lonmin, followed by BHPBilliton, Anglo American and Rio Tinto).
The top three aggregates companies are also British (Wolseley, BPB and Hanson).
Lonmin tops the bill - no doubt because of its re-structuring as a platinum producer in recent years. although it is also the biggest shareholder in Ashanti Gold. Lonmin's TSR last year was nearly 38% . But more important, over the past five years, its TSR reached a whopping 205% (In other words if you had invested in Lonmin before 1997 and re-invvested your dividends back into Lonmin shares, you would have doubled your capital gains in that period). This makes the company - which, in its former incarnation as Lonrho was one of the most exploitative British companies anywhere - perhaps the most attractive for mining investment of any in the world. (Lonmin earlier this month announced a deal with cash-strapped Ashanti which might end up in it increasing its shareholding in Ghana's top company over a medium period).
Rio Tinto is quite a way behind Lonmin in terms of profitable shareownership - at 70% TSR over the past five years; nonetheless the old warhorse came second in the "pure" mining sector. (Hanson (aggregates) , Lafarge (cement) , Pechiney (aluminium/bauxite) all did better in terms of shareholder returns.
Mining Wins Bronze
But perhaps most striking - and sobering for us - are the figures given by the FT for the Top Performing sectors across the board. Until last year, mining and metals production didn't feature at all among Europe's Top Ten performing sectors. Last year however, the total TSR for steel and other metals was 13.9%, making this the seventh most profitable sector. Mining (at an average of 20% TSR) shot from nowhere to third position overalll ( second only to tobacco (sic) and forestry/paper).
This is an illustration of the conventional "wisdom" employed by BHPBilliton and Anglo American when relocating to London (though BHPBiIlliton of course still has its HQ in Australia and is dual-listed there) ; also the degree to which the London Stock Exchange now outshines other mining equities markets.