Copper Shares Last week I wrote before the excitement in
the copper market had flared up. The aggressive buying of RST came from America, which got wind of the sensational rise of £160 in Chilean copper to £496 a ton. When the Rhodesian trouble started, RST were only about 44s. and had risen to 66s. by the end of last month. Then they jumped to 105s., with Zambia Anglo- American following up behind to 75s., but have reacted to 96s. and 76s. respectively. Will Zambia follow the Chilean lead of a 474 per cent rise in prices? It would be considered very rash, for consumers would begin to rush into substitute metals like aluminium. Speculators would there- fore be rash to rush into the copper belt shares. Although the mines received an average price of under £300 a ton in the last half of 1965, they have been paying royalties to the Zambian government on the basis of the London Metal Exchange price, which has soared to over £700. If producers' prices were raised to £496 a ton, the Zambian government might be tempted to increase the company profits tax. It has even been suggested that it should buy part of the output at the current producers' price of £336 and sell it in the open market. Whatever hap- pens, it is unlikely that the copper belt producers will get their rightful share of the metal boom. I would therefore be inclined to advise holders to sell part of their holding and exchange either into the South African copper producer MESSINA at 29s.. to yield 6.1 per cent (which sells its output on the free market), or into a company which would benefit from substitution, such as RTZ with its great aluminium project in Australia. I have recommended RTZ for other reasons in the past and still favour them at 33s. 9d., to yield 5.2 per cent. Here are the present prices and yields of the leading copper belt shares: 1966
14 t'
. (I)
ZS.
I:t L. X U>" 44- u >"
Roan Selection Trust 43/9 96/- 6/3.1 1.2 6.5% Nchanga 39/- 50/-
Rhokana 38/- 46/- 7/- 1.0 15.5% 6/9 1.0 14.2%
Zambia Anglo-Am.
10 / - 54/6 71 /- 10/- 1.1 14.3% Oil Shares
The giants have now published their full reports and the shareholders are left in no doubt about the tax effects on their dividends. BP will have sufficient over-spill reliefs to meet the extra cost of the dividend from 1966 to 1968. SHELL, on the other hand, will get relief to offset only two- fifths of the extra cost. So Shell shareholders face the risk of a cut in their 1966 dividend unless their gross profits and distributions rise sufficiently to minimise the need. Most brokers are going for 40 per cent gross instead of 374 per cent because the prospects before Shell, according to the chairman, Mr F. J. Stephens, have undoubtedly been improved, though he is more cautious than Sir Maurice Bridgeman, the chairman of BP, of the firmer trend of European oil market prices. Both, however, are bullish about the North Sea gas discoveries. The field is large, the gas is pure methane (better than the Dutch) and the output will be sufficient to meet half of the UK gas requirements. Long-term, both BP at 75s., to yield 5.3 per cent on, say, 20 per cent gross, and Shell at 40s. 9d., to yield 4.9 per cent on, say, 40 per cent gross, are good investments to hold.
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