I've left this as a title for Fraser to wake up and explain what the problems are with New World Resources. Feel free to state what you think they are. F's been short for some time now 14months- very insightful. Cheers Ian
Haha thanks for that one Ian!
Edited:
New World Resources (LON: NWR) was simple; higher costs, lower prices in essence a deteriorating coal market which they acknowledged in their own announcement dated: 14 January 2013. 'Declining Market etc....' On top of that, they raised EUR 275 million Senior Notes due 2021 just after the 14th January 2013 announcement to refinance notes due 2015 and for 'for fees, expenses and general corporate purposes.'
My view was they were 'remortgaging' and got a coupon rate of of 7.875%. The overall coal prices were set to decline and costs were set to increase even allowing for "synergies." So they were trying to save monies in a declining market with forecasts of 10-15% deterioration in Coal expected across the board aka 'risk of dividend being cut totally and that meant a 'change in market valuation required.' So how they could have a benefit and justify what was a near £750M market cap with the entire industry and market against them there's only when way these Coalie companies are going in the current climate including in America. Coking Coal perhaps a different story but thermal is certainly over supplied and undervalued/demanded.
One certainly to learn from...
Atb Fraser
Ian/Fraser- apart from the short, there is not a lot to like with NWR :-) I cant see a scenario where they can trade their way out of their problems, the losses are built into their current position with coke and thermal coal so weak, so it will need the debt holders to be very generous if the shareholders aren't to get wiped out here. Im mainly long and I wont buy unless I feel I would buy the whole company, if I had the cash and I cant for the life of me see why the mkts feel NWR is still worth £150m. Its clear that BXR have over 60% of the shares and deep pockets so I guess they could put more money in, but why pour more good money after bad??
ReplyDeleteWhat do you think guys?
Cheers. The Leggie
Hi guys
ReplyDeleteIts interesting reading the comments about shorting here. Is there a spreadbetting company that anyone can recommend for covering the smaller companies? I have an IG account but they pretty much never cover companies of this size. It may be specific to my type of account but if anyone could recommend one that would be great.
Leggie- interesting movement on Zincox lately. I think it was you who mentioned them. I held off hoping for a bit lower buy in but its nearly doubled, hope you did better!
Oli
oli IG should do NWR & most others FCM are US based / look @ GFT also.
ReplyDeleteLeggie, there comes a point where investments arent viable- look into Zdenek Bakala - a very shrewd investor (on the whole) - cheers Ianh
ReplyDeleteOli- to be honest I wasn't expecting ZOX to move so quickly but I was looking for a zinc play just before Xmas and I crossed everyone else off my list, inc some interesting Canadian cos, and so I bought when their mkt cap hit £15m, share price 14.4p. They have around £48m in debts, which financed their S Korean plant, but they do have IFC on board and I feel that they have now got a better picture of their tech problems and some ways of fixing them without massive disruption. The buy was based on them getting a second plant built (prob Turkey, albeit Thailand and Russia also poss) and them reaching breakeven a few months earlier. I also felt that zinc supply and demand was heading in the right direction. The tech turns what is essentially a waste product from steel mills into a saleable zinc product, and this could be transformative on a global basis. Lets see. Im in long now, as usual :-))
ReplyDeleteCheers. The Leggie.
Ian- yes, Bakala is the big question mark hanging over any trades for NWR. No doubt he has some influence in the debt holders group so we may see an unusual outcome here, as hinted by Fraser. Cant see the shares going up thought, but I wont be putting my shirt on it.
ReplyDeleteCheers. The Leggie.
Thanks for that Rich, GFT seem to
ReplyDeleteWell done on ABM Fraser, 64% down today alone!
Oli
Oli, thanks for that I closed my ABM awhile back; no trades open as there presented a real risk of an 'above current share price offer.' The process to me says there's going to be a £35M fundraiser as a minimum. I have to wonder 'what' undervalued the business for saying now there's going to be a rights issue.
ReplyDeletePersonally, there could be a significant trade there post any issue, (long) but with consideration for the rights issue making a short in the first month before a change in trend (long). It will be interesting to see what their trading update is and whether they've managed to shift their stock.
Leggie, if you look at the trade, the only sensible option for Bakala if he wants to rescue anything is buy their debt at 10c in the Euro, and force nill return for shareholders. This isn't good for holders, but I'd question why they hadn't sold the stock based on performance and looming debt repayments.
Atb Fraser
Fraser
ReplyDeleteWhats your view re CMCL now- didn't they have to write off $4m that Fidelity didn't/couldn't pay in 2008- Im fairly sure they didn't cough up despite turning this debt into bonds. Plus they will be getting 98.5% instead of the current 99.9%. Lets hope they get the $3.8m due tomorrow. Thte company looks fine but the policians are still playing games in Zimbabwean, so the current rating could be about right?
Cheers. The Leggie
Leggie, CMCL (Caledonia Mining). I will post in a fresh thread...
ReplyDelete