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JSE-listed African Rainbow Capital’s (ARC’s) intrinsic portfolio value increased by 16.3% from R10.55-billion as at June 30, 2020, to R12.27-billion as at June 30, this year.

Net fair value gains accounted for R909-million of the increase and net investments for the remaining R810-million increase.

The company’s cash in the ARC Fund also increased during the period under review by 582.9%, from R35-million, to R239-million; while debt in the ARC Fund also increased, from R440-million to R869-million during the period under review.

As such, ARC’s intrinsic net asset value (INAV) a share was R8.77, down from the R9.54 of the prior year.

The decrease in the diluted INAV a share is attributable to the dilutory impact of the increase in issued shares emanating from a R750-million rights issue in October 2020. The rights issue was done at an about 10% discount to the then prevailing market price which was at a significant discount to the intrinsic share value.

ARC notes that the impact of the dilution was countered to some extent by the performance of the ARC Fund during the year.

At period-end, ARC had an International Financial Reporting Standards net asset value a share of R8.85, down from the R9.57 of the year prior.


Among its investments, ARC holds an 82.7% interest in phosphate explorer and developer Kropz and a 100% interest in telecommunications provider Rain.

Although Kropz’s advanced development stage phosphate mine on the West Coast of South Africa, which forms 8.9% of the ARC Fund’s value, suffered initial setbacks, ARC reports that significant progress has been made and the construction of the reconfigured processing plant is largely on track.

It is anticipated that first ore through the plant will be processed in December.

In addition, Kropz is performing an updated feasibility study regarding its Cominco exploration asset in Congo-Brazzaville. This process is expected to be completed in October.

ARC effectively invested R455-million in the Kropz group in the year under review to fund both the construction of the required modification of the plant at Elandsfontein, as well as the cost to complete an updated feasibility study for Hinda (Cominco).

ARC co-CEO and executive director Johan van Zyl says the fund has made “significant progress” at the Elandsfontein project after spending quite a bit of time modifying the plant to get the consistency required to get the phosphate out at concentrations of above 30%.

“Removing the sand from the phosphate proved to be tougher than what was initially anticipated and caused a delay.”

He adds that the updated feasibility study for the Cominco asset will give ARC a good indication of what to do with this asset moving forward.

As for Rain, ARC reports the business continued to surpass expectations in terms of performance and managed to sustain a high level of customer growth throughout the reporting period.

ARC’s share in the value of the investment in Rain increased from R3.11-billion as at June 30, 2020, to R3.31-billion as at June 30, this year, as a result of R56-million additional investment and a fair value gain of R147-million over the year.

Rain exceeded its subscriber targets in both the fourth-generation and the fifth-generation (5G) market, with a key focus area going forward being on improving its customer experience, following a more rapid customer take-up and customer demand on the fringe of the network footprint, which created problems.

“But I think we are in a pretty good space moving forward,” he says.

ARC notes that Rain has been experiencing an unprecedented surge in demand for its products and services, and will also fully participate in the upcoming government-initiated spectrum auction.

“The 5G coverage in particular has expanded six-fold since the launch in September 2019, off a relatively low base, but now we are doing fairly well; we are way ahead of where we wanted to be,” says Van Zyl.

In this regard, ARC says a modest capital raise from Rain’s shareholders is in progress.

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