Gold prices have been soaring in the last few years, and that has created increased focus on Africa stocks and sub-Saharan investments. After all, resource-rich Africa is one of the top gold producing regions of the world and has some of the largest available reserves on the planet.
But while metals and mining is big business in Africa, there are a few other commodity-related companies that trade domestically as American depositary receipts, or ADRs, which may be worth a look. As ADRs, these Africa stocks must follow the same SEC regulations as U.S.-based blue chips – a level of scrutiny that can give investors confidence in the books and management of these stocks.
Here’s a list of the six largest ADRs in Africa that trade on major exchanges in the U.S., along with performance so far in 2010:
AngloGold Ashanti (AU)
Industry: Metals & Mining
Market Cap: $15.7 billion
YTD Returns: +6.5%
Located in Johannesburg, South Africa, AngloGold Ashanti (NYSE: AU) is a global gold producer. AngloGold has 21 operations and exploration programs all over the world and at the beginning of 2010 had a total ore reserve over 71 million ounces. Since January, the stock has gained +$2.62 to where it currently stands at $42.83. This mining stock has bounced around recently, having greatly outperformed earnings estimates in December 2009 and June 2010, while underperforming in September 2009 and March 2010.
Recently, AngloGold recommenced the agreement of the “Gramalote Project” with fellow mining company B2Gold, in which both companies will explore and drill a 10,000 square meter area of Colombia.
DRDGOLD Ltd. (DROOY)
Industry: Metals & Mining
Market Cap: $156 million
YTD Returns: -40.4%
DRDGOLD Ltd. (NASDAQ: DROOY) is involved with the exploration, extracting, processing and smelting of gold. In 2009, DRD acquired 35% interest from Mogale Gold, 50% interest in Witfontein Mining and 28.3% interest in West Wits SA.
DRDGOLD has had a tough time in 2010, as stock prices have fallen -40.4%, or $2.76. The last eight years have not been very kind to this gold stock. In June of 2002, DRD was trading over $50, but has since fallen over -92% to its current price of just $4.08. The bad news continued for the South African company in its last income statement when it reported quarterly earnings growth of -71% year-over-year, and an operating margin of -10.9%.
Gold Fields (GFI)
Industry: Metals & Mining
Market Cap: $10.1 billion
YTD Returns: +8.9%
Gold Fields (NYSE: GFI) is a producer of gold and a holder of gold reserves, headquartered in South Africa. Its gold reserves are located in South Africa, Ghana, Australia and Peru. GFI is primarily involved with the exploring, extracting, processing and smelting of gold. This mining company has seen moderate gains since January, and is up +8.9% year-to-date. Over the past 52-weeks the stock has climbed +21.5%. Experts are projecting earnings of $0.33 for Gold Fields, up from actual EPS of $0.17 last quarter. Several weeks ago, hedge fund Eton Park bought heavily into the gold market, including Gold Fields, which may have contributed to GFI’s +9.8% stock surge this month.
Harmony Gold (HMY)
Industry: Metals & Mining
Market Cap: $4.4 billion
YTD Returns: +1.7%
Another gold producer from South Africa, Harmony Gold (NYSE: HMY) possesses approximately 48.2 million ounces of gold reserves. During its 2009 fiscal year, the company processed 21.1 million tons of ore. Harmony’s stock has had an up-and-down 2010 so far, but is currently above even at $10.34. Despite being up almost +2% on the year, Harmony missed its earnings estimate by -100%. Additionally, the mining company reported a net profit margin of -11.6%.
There has been more bad news from Harmony, as the company announced this week that it will delay opening its new $816 million shaft due to monetary constraints. This caused the stock price to fall slightly.
Sappi (SPP)
Industry: Paper & Forest Products
Market Cap: $2.3 billion
YTD Returns: -6.3%
Global paper and pulp company Sappi (NYSE: SPP) is also headquartered in South Africa. Sappi produces coated woodfree and coated mechanical paper used in books, brochures, magazines, catalogues and other print materials. Since January, the stock has slid -6.3%, however, Sappi is still up 21.2% over the past 52 weeks. Last quarter, SPP reported a net profit margin of 4%, and the paper company has also outperformed earnings estimates three of the last four quarters. This quarter, analysts are projecting earnings of $0.09 off of an EPS of -$0.02 last year.
Sasol Ltd. (SSL)
Industry: Oil Gas and Consumable Fuels
Market Cap: $24.8 billion
YTD Returns: -5.8%
Sasol Ltd. (NYSE: SSL) is an integrated energy and chemicals company based in South Africa. The company is divided into two segments: South African energy cluster and International energy cluster. 2010 has not been kind to Sasol, which has seen its stock price drop $2.30 since January. The stock has been on a rollercoaster ride over the past 12 months, and is currently down -1.8% over that span. The company has also seen a quarterly earnings growth of -30.1% year-over-year.
Sasol disappointed shareholders in June when it decided to cut back on its dividend to match its drop in earnings. It claimed that the dividend would be raised once earnings were back on par, but the stock has continued to sputter during that time.
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