South32 is the trendy new name for Billiton, the ragbag of mines that BHP has decided it no longer wants. Turning the usual logic of mergers on its head, BHP argued that a simpler structure would help costs and gave the businesses away to its shareholders in May. They have been able to curb their enthusiasm, and since they unwrapped their unrequested present, the price has gone south by 15 per cent.

Something similar has happened at Lonmin, an accident-prone remnant of Tiny Rowland’s African empire. Its biggest shareholder, Glencore, failed to find a buyer at ever-reducing prices and gave the holding to its shareholders. To say that Lonmin has been an investment disaster rather understates things. After touching £40 in 2007, the share price is 108p now.

As with South32, it’s uncomfortably clear why nobody bought it, and why giving it away was the last resort. Fellow miner Rio Tinto may do better with its Aussie coal business, a rounding error on its vast balance sheet, now that Mick Davis (late of Xtrata) is proving that hope springs eternal in a miner’s breast. He wants to make a contrarian bet and buy it.

Encouragement came this week from Deutsche Bank with a 175-page potboiler. After much time and effort,  the bank’s analysts conclude that mining stocks are cheap. Mind you, they thought Lonmin was worth 310p last time they looked.

It’s possible that manganese (South32), platinum (Lonmin) and coal prices have bottomed. Investors dream of mining companies run by cost-conscious executives who dig holes only for profit, and who understand that there are few bargains in takeovers. Those execs should have, written in big, friendly letters above their desks, the first law of commodities: today’s shortage is tomorrow’s glut. They might even find their stocks back in fashion.

Beware, heavy plant crossing

It’s been quite a week in the perennially-exciting world of plant hire. Shares in both HSS and Speedy fell off the back of the low loader as they warned of performance “marginally below” expectations (HSS) or “slower than expected” (Speedy). It’s no wonder traders were taken by surprise. Construction is booming, market leader Ashtead has posted recond profits, and it’s barely a month since HSS said things were going swimmingly (“in line with expectations”, in the jargon) with good volume growth.

Indeed, it’s only five months since the shares were floated through Cazenove and Numis by its private equity owners, Exponent. As is the usual way with offers from such sellers, most of the proceeds were needed to pay down debt. Even before this week’s shocker, the shares were below the 210p offer price. They’re one-third off now.

This may not be a special offer worth pursuing. Plant hire is like leasing, a business which has been almost as disastrous as banking for investors over the years. The tax regulations encourage taking on more debt, demand is fickle, and competition is fierce. Avoiding the shares is a good rule.

Railway not working? Build another one!

My old friend Stephen “Bozo” Byers got one thing right at the Department of Transport: he created Network Rail as a not-for-profit company, and it’s succeeded magnificently. Nearly two-thirds of its revenue comes from taxpayers, while his absurd pretence that its debt wasn’t on the public books was abandoned in 2013.

His other idea, that 30-50 “public members” would hold the board to account is also being quietly dropped. Now, after months of denial, the latest transport secretary has finally admitted that the track upgrade programme is a fantasy. It will twice as long for half as much improvement as budgeted.

Yet demonstrating, Greek style, that a good politician can believe two contradictory things at once, there is no suggestion that Patrick McLoughlin might abandon HS2 and try to make what we’ve already got work better. The official forecasts for this £50bn vanity project have been comprehensively demolished by Clive Hollick’s Lords committee, and to add insult to financial injury,  HS2 is poaching the company’s scarce talent to bolster its own expertise. Surely thay can’t prefer working in London to Notwork Rail’s glittering palace in Milton Keynes?

This is my FT column from Saturday

 

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