Capitalise on confusion

IT IS every company’s worst nightmare. First, a fraud that appears to go to the heart of one of its key assets. Then, a costly and distracting investigation that could actually prove more damaging than the theft itself. With 60 employees suspended, around 40 per cent of the Buzwagi mine’s staff, production will now be 30koz lower, and 10koz lower in the third quarter.

Clever investors will ignore the short-term distraction and capitalise on the confusion. The production setback in Tanzania will have little impact on the firm’s net asset value (NAV), even if profits take a hit in 2010. Numis now thinks the miner will book net profit after tax of $129m for the full year, compared to earlier estimates of $151m. It’s a big hit, but the shock has been more than factored into the share price, which fell some ten per cent yesterday. In the long-term, there is every chance the stock will be re-rated from its current low of 1.1 times NAV. Buy now. It will be worth the wait.