Archive for the 'Gold' Category

BaDEx getting ready to launch as Zambia’s second securities exchange

A new securities exchange in Lusaka (Zambia) is installing tried-and-tested bond and derivative trading software and says it will be ready to launch operations next month, May 2012. BaDEx has trading platforms that include spot and derivative trading in bonds, currency, commodities (such as derivatives on metals and silo certificates on the spot market) and a variety of other derivatives including agricultural commodities, precious metals, equity and energy.

There is also a central scrip depository system (CSD) with a separate core management, risk solution, surveillance and settlement systems and platforms. The CSD will apparently link to CSDs in South Africa, Europe and the US and with the central Bank of Zambia’s real-time gross settlement system.

BaDEx, also known as Bond and Derivatives Exchange, reports that it was licensed by Zambia’s Securities and Exchange Commission on 1 January 2012 and the licence covers all securities under the Securities Act – bonds, equity, derivatives and commodities. It has signed a contract effective 12 March with South Africa’s STT (www.sttsoftware.co.za, which has also provided the JSE’s  bond trading software for many years), for STT to immediately deploy trading, clearing, settlement and surveillance systems, and systems for auctioning government securities that will be suitable for the central bank, among others.

Dominic Kabanje, CEO of BaDEx, told AfricanCapitalMarketsNews that the exchange is a public-liability company owned by “banks, pension funds and private companies including the major securities dealers in Zambia”. He says they started with 6 local stockbroking members (approach stockbrokers Madison Asset, Integral Initiatives, Intermarket Securities, Laurence Paul Investment Services, Pangaea Renaissance, African Alliance Securities for more information) but are also looking for remote members, working with a South African merchant bank.

Mr Kabanje said they are now doing primary listings. BaDEx will start secondary trading using an online, Internet-based platform when the systems go live and are also seeking to partner with an international clearing house. In a press release he said they had been excited for 18 months: “We are glad to have finally concluded and signed the contract with our software systems vendors. STT applications have been tried and tested in the South African financial markets at the Johannesburg Stock Exchange (JSE), who have used this software for the past 18 years.

“We are currently setting up a network of domestic and foreign-based settlement banks, local and remote foreign members and dealers, institutional underwriters, a clearing house as well as primary panels of domestic, regional and international investors. We plan to link up all willing domestic and regional banks, institutional investors, pension funds, treasury departments, the local central bank, the government debt management office and the local member brokers to our system by providing interfaces and online access to our platforms.

“We will also shortly join the international community of CSDs in South Africa, Europe and the United States initially to facilitate faster and smoother clearing of international securities transactions. The applications from STT and others will enable us to do this and in addition will allow us to compete internationally for bond and derivatives business”.

“I do not see any obstacles from the Zambian side for companies wishing to list. Even SA companies can list on BaDEx. We want Zambian companies to dual list on JSE and BaDEx. At BaDEx we are implementing SADC protocols on the free-trade area as well as enhancing intra-regional trade. An exchange is one such conduit for regional trade. We will, however, have to deal with the problem of exchange controls in SA.”

Michelle Janke, STT’s Managing Director, said the company was happy to reach further into SADC: “We have worked closely with the executives of BaDEx for more than a year, and the closely formed relationship will stand us in good stead over the coming months whilst we deliver all the software applications and prepare the new securities market in Zambia to go live. We hope that in due course through an ongoing cooperation between BaDEx and regional merchant banks we can assist in transforming Lusaka into a key financial hub within the SADC region. We will be there to make this happen operationally.”

Products to be traded include: corporate bonds, municipal bonds, currency futures and options, interest-rate derivatives (including swaps), equity derivatives and commodity derivatives on underlying copper, cobalt, gold, oil, wheat, soya and maize spot markets, bond derivatives market, spot bond market, spot and currency derivatives market, commodities derivatives (including metals) and the commodities spot markets (with silo certificates), agricultural derivatives market, spot equity and equity derivatives markets, precious metals derivatives market and energy derivatives market.

Dar Es Salaam bourse aims for IPO and 2 cross listings, capital controls easing

As the East African region moves towards faster integration, Tanzania is preparing to ease controls on the amount of shares foreigners can buy, in line with changes in the rest of the region. The Dar Es Salaam Stock Exchange (www.dse.co.tz) is also hoping to increase from 15 to 18 listed companies and is preparing for an initial public offering (IPO) for Precision Air (www.precisionairtz.com) during September and cross-listings of 2 mining firms listed in London.
Gabriel Kitua, CEO of the Tanzanian bourse, told Reuters on 24 August at a meeting organised by the Nairobi Stock Exchange: “Tanzania is not exactly a closed market. Up to 60% of any listed security is available to any citizen of the world, 40% is reserved for Tanzanians… with time, the control will be erased especially as we go to the regional monetary union where free movement of funds across the countries will automatically be there.”
Reuters says the 5-nation East African Community (EAC) bloc of Rwanda, Burundi, Uganda, Tanzania and Kenya aims to have a monetary union in place in 2012 and move to a political federation by 2015. It reports that Tanzania has the tighter capital controls, including barring foreigners from investing in government securities.
Kitua also said that the approval of the cross-listing of African Barrick Gold Corporation (www.africanbarrickgold.com) is advanced: “The approval process is almost complete”. He added “The other one is in very initial stages … it is a mining company,” according to Reuters.
Barrick (ABX, listed on the Toronto and New York stock exchanges) owns 73.9% of African Barrick Gold and raised $884 million through offering the rest of the shares in an IPO on the London Stock Exchange in March 2010. Barrick describes itself as “the gold industry leader, with a portfolio of 26 operating mines and advanced exploration and development projects located across 5 continents”.
Precision Air’s listing application was received and being considered by the Capital Markets and Securities Authority (CMSA) in February, according to local news reports. At the time it was reported that Precision Air sought to raise $25m (about TSh38bn) in the IPO. Kenya Airways owned 49% and Michael Shirima, the founder and chairman of the airline, owned 51%. The IPO would see their stakes diluted to 34.2% and 34.6% respectively.
Reuters also adds that East African Breweries Ltd of Kenya is expected to offload its 20% stake in Tanzania Breweries Limited in a public offering. Kitua rejected claims in a regional paper earlier this year that EABL had been compelled by Tanzanian authorities to offer the shares at a set price: “In capital markets there is no compelling of people. This is a free market economy and decisions are done by the board of directors of the companies and no one can interfere with that.”
The agency says the most heavily traded shares on the DSE are banks such as CRDB and National Microfinance Bank and manufacturer Tanzania Cigarette Company. TBL is the biggest by market value.
“For the last 12 months the Tanzania share index has risen by 17% and the all share index by close to 7%. The market has been growing,” Kitua said. The Tanzania share index excludes shares cross-listed from the NSE, including Kenya Airways. Kitua said the postive performance is due to good earnings by listed companies and the stable Tanzanian economy: “There are signals that the trend will be on an increase for the next 6 months.” He warned that inflation is past 10% and is emerging as a challenge.
The DSE delisted the National Investment Company (NICOL) with effect from 6 July after a 1-month suspension from 6 June and it become the first company in the 12-year history of the Tanzanian bourse to be delisted. This was on account of the firm’s failure to submit 2009 and 2010 financial results, and failure to comply with a directive from the DSE Governing Council about plans to sell 22m shares it owned in National Microfinance Bank (NMB), which is also listed.

Revolution at Egyptian Exchange – innovations to boost liquidity

The Egyptian Exchange (www.egyptse.com) is to introduce new products and trading innovations, including remote orders placed abroad, exchange-traded funds (ETFs), intraday trades and short selling. Mohamed Abdel Salam, chairman of the Exchange, told Reuters that transparency was up and political uncertainty was down in Egypt since the political uprising that overthrew former president Hosni Mubarak and this is bringing more investor confidence.
The trading changes had been delayed as the political mandate of the old government decreased. Some innovations could be introduced in July and talks on remote orders are to resume with the London Stock Exchange (www.londonstockexchange.com) on 20 June.
Mohamed Abdel Salam told Reuters in an interview on 13 June: “There are indicators that show the market is improving because of the revolution. First, it reduced political risk. In the past, things were vague. If the president were to die, would his son take over, or would the army? Many people have started trusting us now, and we are also trying to reduce transaction costs on foreign investors … so I think we will now introduce short-selling and intraday trade in the first days of July.”
He said that companies had been on time in publishing quarterly results, indicating the effects of the revolution on their earnings, and this improved the country’s credibility. In addition, since the changes institutional investors had become more prominent: “The market is becoming more stable, because institutional investors have begun to outnumber individual investors, who used to cause sharp market moves by their emotional trading.” Egypt is one of the African exchanges with very many active local individual shareholders.
He said the aim of the changes is to bring new energy into the exchange: “Egypt’s market is in need of new blood to be pumped in; it needs new products … It is unarguable that this is a main way to increase liquidity and volume.” Previously there had been moves to introduce short selling in 2008 but this had not been introduced in 2010 as scheduled.

Remote orders with FIX
The Egyptian Exchange aims to allow investors to place orders from abroad although trading would still have to be executed through a local broker. Investors could use the Financial Information eXchange (FIX) protocol (www.fixprotocol.org) to place orders and secure the details until the transaction was completed by the broker. The first link was due to be introduced via London in mid-2010, reports the agency, followed by links to centres in the Gulf. The Chairman said the delays had been caused by technical problems at the LSE and talks would resume this week on 20 June.
Another plan is for dual-listings with exchanges such as Qatar, Dubai, Abu Dhabi and Kuwait. Abdel Salam said: “There are Gulf companies that expressed a desire to enrol in the Egyptian stock exchange but I cannot disclose names now.” Several exchanges have been vying to form the centre of Arab trading.
Commodity trading in gold could be established through a fund and talks are on with Egypt’s Chamber of Metallurgical Industries. The Chairman said: “We want to introduce a new way to trade gold called ETC, standing for Exchange Traded Commodities; this should facilitate trading of raw gold, and Egypt is a strategic gold producer, so we should make use of it.”
The Egyptian Exchange was closed from 27 January to 23 March after the popular uprising and it faced turbulence and pent-up demand when it did open. The benchmark EGX 30 Index closed on 13 June at 5,550.22, down 17.5% since the revolution although the trend has been positive since a low of 4,850.41 on 8 May.

Zimbabwe Minister “blocks” Duration gold miner’s Toronto SE listing

According to media reports, Zimbabwe’s Indigenization Minister Saviour Kasukuwere is declining to give permission for leading gold miner Duration Gold (www.durationgold.com) to raise US$7 mn by listing on the Toronto Stock Exchange (www.tmx.com).
According to a report in businessdigest of the Zimbabwe Independent newspaper, the minister wants an empowerment plan detailing how Duration will empower black Zimbabweans in line with the Government’s 2010 economic empowerment regulations under which foreigners must sell controlling shareholdings to black Zimbabweans.
He also apparently believes the money could be raised locally on the Zimbabwe Stock Exchange.
The minister confirmed that Duration had written for permission to list but told the newspaper “I cannot comment on anything”.
The company is an investment by Clarity Capital (www.claritycapital.com), a US-based fund founded in 1996 by Allan Dolan, that claims on its website: “Clarity has the capital and in-house expertise to create and grow successful businesses. We don’t just invest in promising ventures, we incubate and operate them.
“Clarity specialises in the minerals, life sciences, energy and creative industries sectors. Our entrepreneurial team of over 25 technical and commercial experts, from scientists, engineers and geologists to accountants, lawyers and financiers, are passionate about building value. Our goal is to deliver returns of 5 to 10 times our invested capital over a 3- to 5-year period.”
A fellow company, Whetstone Minerals, is listed on the TSX. According to the news report, Duration intended to retain 30% of the capital raised outside Zimbabwe for head office expenses. The newspaper does not report any comment or confirmation from the company.
Duration’s website describes it as “a Zimbabwe focused, private, emerging gold producer and explorer. The Company, majority owned by Clarity Capital and its employees, currently has a global resource base of 4.2 million oz of gold. Formed in 2006, Duration partnered with two long standing Zimbabwean mining families, the Muirs and the Thompsons, and now owns 5 core assets with historic production of 4.6 million oz. Each core asset has the potential to produce over 1 million ounces of gold. Duration is licensed to market and sell its gold on the open market. It sells gold at international spot prices and receives freely transferable foreign currency in return. The company is cash flow positive and generates a healthy EBITDA from its current operations.
Duration’s objective is to develop its existing asset base into a 350,000 oz per year producer, based on 5 bankable feasibility studies targeted for completion by 2014. Acquisition of additional producing and advanced stage assets will also bolster the company’s annual production.”
Zimbabwe’s economic regulations gazetted in March 2010 gives the Minister authority to approve and disapprove deals involving foreign equity participation. He previously sought to block the sale of Barclays Bank subsidiary, Custodial Financial Service, on grounds that the bank did not comply with indigenisation and economic empowerment regulations. This deal was part of the sale by Barclays Bank plc of its African custody businesses to Standard Chartered Bank.

Institutions react to Cote d’Ivoire crisis

Markets are reacting quickly to the news that Laurent Gbagbo was sworn in as president of Cote d’Ivoire on Saturday (4 Dec). The World Bank (www.worldbank.org) and African Development Bank (www.afdb.org) on Sunday said in a joint statement on the crisis: “The African Development Bank and the World Bank, longstanding multilateral development partners of Côte d’Ivoire, view with great concern and frustration the events unfolding in Côte d’Ivoire in the aftermath of the long-awaited elections which were supposed to usher in peace, stability and a basis for improved governance and inclusive growth that reflects participation of all of Côte d’Ivoire.
“We therefore share the serious concerns expressed by the United Nations, the African Union, Economic Community of West African States and other international partners who have supported Côte d’Ivoire’s development efforts.”
The two institutions are reported on Reuters to be reviewing their lending programmes. They provide loans and grants to support programmes fighting poverty. The World Bank has tied the cancellation of $3 billion of Ivory Coast’s external debt, estimated at $12.5 billion, to the elections. Cote d’Ivoire is the world’s top grower of cocoa – the unrest is pushing up prices – and has a popular $2.3 billion Eurobond on which the yield had not moved much before the election but Reuters reports that it is now up to 11.67%, from 10% after the first election round.
Opposition leader, Alassane Ouattara, was named winner of the vote by an Election Commission and the UN endorsed the results showing him gaining the required 10% lead. Then the Constitutional Council over-ruled this after rejecting hundreds of thousands of votes from Northern areas and gave the election to former president Gbagbo.
Both men have declared themselves president and formed governments and the African Union has sent Thabo Mbeki in Abidjan as mediator. Ouattara warned there was a risk of throwing the country back into a north-south conflict which had for decades paralyzed what previously been a promising economy.
The banks said a prolonged crisis in Ivory Coast would plunge more Ivorians deeper into poverty and hurt stability and economic prosperity throughout the region. “We wish to continue working with the people of Côte d’Ivoire in the fight against poverty but it is difficult to do so effectively in an environment of prolonged uncertainty and tension. Accordingly, in line with our policies, we will continue to closely monitor developments and reassess the usefulness and effectiveness of our programs given the breakdown in governance.”
The African Union, the Economic Community of West African States (ECOWAS), the United Nations, the United States, France and the European Union all rejected Gbagbo’s claimed electoral victory.
Australia’s largest gold mining company Newcrest Mining Ltd., based in Melbourne, has suspended operations at its Bonikro mine in Ivory Coast, reported Bloomberg. The mine is near Hire, about 250 kilometres north-west of Abidjan. Newcrest said in a statement to the Australian Stock Exchange that it produces about 120,000 ounces of gold annually. The company said: “Plans are in place to recommence operations as soon as possible,” the company said. “A detailed security plan is in place and includes provision for temporary evacuation of employees should the situation deteriorate.” previous unrest had forced the AfDB to relocate to Tunisia and many international companies to leave.
Newcrest acquired the Bonikro operation as part of the takeover of Lihir Gold Ltd. that completed this year.

Gold Exchange-Traded Fund targets Botswana SE

Absa Capital of South Africa says it is getting closer to a secondary listing on the Botswana Stock Exchange (BSE) of an Exchange Traded Fund. The NewGold Gold Bullion Debentures (NewGold) is the world’s third largest gold ETF and the largest on the South African Stock Exchange (JSE Ltd).

The listing could come by December, but first regulatory approval and finding a local partner is required, according to a report in Mmegi newspaper. Absa Capital is keen for the fund to classified as a local asset in terms of investment requirements, and they are discussing with asset managers and others to support it.

Absa Capital Associate Principal Dr Vladimir Nedeljkovic reportedly told a media presentation at the BSE that NewGold offers institutional and retail investors a new asset class and a chance to invest in gold in a cost-effective, secure and efficient way. The ETF was apparently developed in association with the World Gold Council. NewGold Gold Bullion Debentures are securities backed by the physical gold-bullion. Each NewGold Debenture is initially valued at 1/100 of one fine troy ounce of gold.

According to the report, the BSE suffers low liquidity and instruments such as this could help attract more trading and capital. Local fund managers reportedly invest up to 70% of their funds under management outside Botswana, partly due to lack of opportunities.