Good Evening,
It’s been a busy period, so apologies as it was planned to
cover more. The obvious happened with oil being impacted by inventory levels
but with a significant amount of speculation anywhere near $60/bbl (Brent) and
$48/bbl (WTI).
The market keeps waking up to the realities of another false
dawn but over to the Baker
Hughs rig count to install some more hope. The support levels are
being defined currently, aided in part by storage not necessarily for
speculation save for security of supply. The market is attempting to get ahead
of itself with the speculation of drilling rig declines, what next? Well Counts
via Baker Hughes? Surely not...
KAZ Minerals (KAZ) announced the audited
results (for 31/12/14). Cuprum Holding have taken the crap and
allegedly left the good within KAZ. As things are not going to plan, KAZ's
backers have kindly been willing [waived] to forget about the covenants on
gearing until Bozshakol Mine gets off the ground, so they continue in the same
vein until 1st July 2016. Had KAZ added 5 days they could have timed it nicely
Capital City Day in Kazakhstan. Not because of the changes in Capital
City, but more so the need for capital! (Poor I know...)
KAZ's gearing has shot through the roof, more so
than expected, in part due to the copper price falling more than those
conservative parties thought! Shareholder funds written down, debt down a
paltry amount, but gearing doubling as a % of shareholder funds and by EMC
estimates surpassing the 70% as of today. It took the market quite some time to
read a simplistic announcement and realise the concerns. With Kaz's currently
cost per lb, they'll be hoping for better data out of China on the back of the
PMI data.
Copper being the trade on PMI data, responded well to HSBC
Flash China Manufacturing PMI. Copper's move mirror/validated factory
production being well up and the Chinese New Year bringing fresh hopes of
positives. Noteworthy the PMI data is contradicting the shipping, factory
gate prices and company profits with production being up for the first time in
5 months. We should read into that that native demand is stronger than
exports.
Shorts were wise to cover on the China PMI data as the
economy starts to benefit from the commodity drops. Copper is/was the weight of
the PMI data, it responded well bouncing to just shy of $2.70/lbs (5% jump).
The point to be wary of is housing is the driver for Chinese copper, it's
stalling and this will dampen spirits in part.
The market is now learning myopia creates volatility, as
such speculators are looking further east of China to Japan and America for
more solid copper indicators. China's issues are known and priced into the
market. Japan and America are anticipated to spend, copper will trend (P+ve)
for the long speculators, tapered in part by the Chinese known issues. Save for
any issues causing risk off volatility. Additionally, the price is being
supported by almost all the majors suffering from a drop in grades and alleged lower
guidance (even fractional).
With the gap narrowing in the supply and demand (for the
interim), its wise to take profits. We are led to believe that the Zambian spat
will be resolved shortly, so Barrick et al can ramp up production once again,
putting some breaks on coppers appreciation.
Baobab's (BAO) largest shareholder strikes and
crystallises losses for every long-term holder if selling today (including
here). Having seen value in the asset, the proposed delisting and cash offer is a disgrace to a
decent asset. Unfortunately is what the market is as the market allegedly
struggles to find financing. Booking a loss on BAO today is not with
disappointment but more a caveat towards the directors (whom will for decent
investors become uninvestable).
BAO's Directors for some reason have an agenda to delist, if
both proposals fail *(unlikely) it’s worth kicking the directors into touch. It’s
asserted $12M will be difficult to raise within the current market, which
rather sums up the capabilities of the management. If you see such parties on
the header of anything trade-able, add a risk caveat. One can but hope for
another bid? But don't hold out much hope...
More later, but for those following my SIPP dullness, Blue Solar Income Fund release their unaudited
Condensed Consolidated Interim Financial Statements for the Six Months Ended 31
December 2014, bang on the money...
No time for WLFE, GLEN, RIO or Vale, but later?!?!
Atb Fraser
Forgot to mention the http://uk.reuters.com/article/2015/02/24/turquoise-hill-southgobi-sale-idUKL1N0VY1KU20150224 Turquoise Hill to sell remaining stake in Mongolia's SouthGobi. Over to Rio to clear up the Turquoise Hill Resources holders and consolidate it...Atb Fraser
ReplyDeleteFraser- Hi- up early as usual....
ReplyDeleteRe BAO- yes some long shares here so its a loss for me too. The Tete asset is v attractive but the moves from bulk iron ore producer (Plan A) to pig iron producer (Plan B) to steel producer (Plan C) were all in response to the massive drop in iron ore prices and showed the mgmt. had some understanding. I guess that Redbird had them by the short and curlies, having supported them via a major shareholding and the recent loans, so the mgmt. probably didn't have much say in the cash offer, maybe just ensuring it wasn't a nil premium 4p offer. I had pretty much written off these monies, so Im not too angry today-- the major issue here was the iron ore war, which turned a nice project into a one in which the final capex (even if the DFS had been paid for) was more suitable for a private consortium to fund rather than an AIM tiddler. A sign of the times-- I wonder what terms ORM got from their US PE "partner"--- lets see...
Re WLFE- another solid update- they were fortunate to get their capex in place before the recent mining slump and they are a month ahead of my schedule here. The implementation has been v v professional, with even time for some tweeks (steeper mine walls) to be incorporated and the dry commissioning starts next month, rather than 4/15 as originally planned. It is rare for new mines to be implemented so smoothly- lets see if the plant works and the end produce is as expected-- WTI got their copper project in ahead of schedule by seem to have some issues with what the end produce is now??!! WLFE covering my tax loss on BAO this week...
Cheers. The Leggie