Morning Mumble: Nickel & Randgold hunt...with not so strategic natural resources boom boom!

Speculation, or should it be called "factualisation" of the growing imbalance between the demand of Nickel and its supply. Contrary to the assertions by the press that are writing 'reactively' to the events unfolding, the speculators did not get involved fully to the realities of Nickel until last week. The price was purely increasing on a physical need and panic about limited supply. Speculators, hedgies et al, were slow to react the growing realities and aided the run significantly.

Oneis watching the significance if Nickel stays above $21318/t and the Chinese trade data later today that will, if negative create a short-term coverage of positions. The stark reality is that China, requiring Nickel in large amounts around September was forced to step into the Market. Chinese supplies are running low, with the contract season just gone in China, the surge was predictable. The Question is, will the Chinese hedge by buy their Nickel in the run or await some cooling. Logics dictate they're in the fray and will have to acquire, China has the low levels of Nickel reserves now, having stocked up in readiness for the Indonesian ban. 

This afternoon's LME session will be very interesting...for the sad so and so's like me.

One thing that Roger Bade picked up on (Randgold chair mulls takeover deals in Africa) that I have been building a position in is Amara Mining (AMA) meeting the criteria for Randgold's Acquisition Trail. Remember Randgold has just had a change at the top with Philippe Lietard replacing Christopher Coleman. He's looking at cash needy small caps with decent assets. This is nothing new Mark Bristow @Mines& Money (December 2013) outlined what Randgold was looking for but its positive that both parties are singing from the same hymn sheet. 

So have a look at the Mark Bristow Randgold Resources Presentation (slide 15 for the idol folks)

So in considering Randgold, then consider Amara Mining's Technical from the 1st May 2014 Report (highlights below), which rather sums up the case and gives a view for me that the stock is worth 28 pence+ and potentially, up to Roger's circa doubling of the stock. One awaits the market to wake up and realise...

• Post-tax IRR of 33% at a gold price of US$1,250 per ounce
• Post-tax Net Present Value ("NPV") of US$613 million at a gold price of US$1,250 per ounce and a discount rate of 8%
• Strong returns at lower gold prices with post-tax IRR of 25% and NPV of US$388 million at US$1,100        per ounce
• Average annual production remains strong at 279,000 ounces over a 10 year initial life of mine ("LOM")
• 6.5Mtpa scenario is based on an US$800 per ounce pit design with an average head grade of 1.53g/t, a       10% increase on the 8Mtpa scenario
• LOM average total cash costs (including royalties and refining) of US$594 per ounce, a 9% decrease on the 8Mtpa scenario
• All-in sustaining cash costs of US$624 per ounce, a 10% decrease on the 8Mtpa scenario
• Plant and infrastructure capital cost of US$244 million, with a contingency of US$37 million and an additional US$75 million for an owner-operated mining fleet - a 13% decrease on the total pre-production capital cost of the 8Mtpa scenario
• Rapid total payback period of 2.6 years
• Amara is fully funded to deliver a Pre-Feasibility Study ("PFS") for Yaoure in Q1 2015, following the successful placing and open offer in March 2014, which raised US$30.5 million, with in-fill drilling now underway.

So logically it fits, the question now is, does Randgold want it...there's no rush as they had a placing for $30M 2 months ago for AMA, which in fairness wasn't at much of a discount (pending on which graph you select) but more so was above the current SP. The case is more than probable on the bases that Yaoure will deliver the PFS by Q1 2015 (9months ish away) and Randgold's need to look for more developed asset or risk losing yet more of if its unjustifiable premium. 

Tissues may be required at Strategic Natural Resources today, with the fund raises that allegedly is good news for the company. For those interested in following the limping horse: Strategic Natural Subscription and board changes. Further pain is to come with yet more financing required...anyone for a highest convertible bond, with warrants? GKP holders should watch just to make themselves feel better...

Fox Marble, may however have some realisms priced into/out of their price with the AMG Statement which doesn't bode well for a 'darling'. Fox Marble AGM Statement.

The final thought goes to the debate about selling into the rise on FPM Faroe Petroluem and holding tight, I elected the Widow's and Orphan's approach of selling into it, whilst the "Dr Livingstone" elected to hold for the black gold. He will never learn...

Atb Fraser