Morning Mumble: Any Old Iron, Chinese Housing, Petra Diamonds (Really...), Wolf Minerals (Pricing update please) and VED, SXX

Good Morning,

As a decent analyst described the iron ore appreciation, as a "the Australian iron ore dead cat has a tin of cream." You'd be hard pushed to disagree. There's an element of physical restocking pushing the price up currently with the minnows left to have the price dictated by the seller, but the overall theme remains the same, oversupply, lower demand. 

The Chinese data, reduction in RRR (reserve requirement ratio for those that complain of the alleged extensive use of acronyms here, get real) is an attempt to offset the capital flight and what the EMC has commented on many a time, the "rolling over of distressed loans and/or alleged financial products." The recent improvement in the Chinese unemployment rate is a farce, forget any conspiracy, it would appear that China have cleverly added a significant number to the migrant worker lists, a staggering 310M now, previously circa 293-298m.

In discussions with Li, he mentioned a "new" survey based approach to unemployment, for which he's finding out more details. Albeit the EMC thinks new may be stretching a long-time policy. From memory, it’s based on taxation, disclosure and bank deposits but only for those that are registered for unemployment benefits and are a 'permanent' resident. It’s wise to wait for more details. What is telling is the contradiction between the official headline rate, which decreased to 4.05% and the survey figure which is nearer 5.1%. 

Li's view, having family classified as migrant workers is, the figure is a lot larger, with the gap (read as break) between jobs for migrant workers is growing. They are managing to live on their lower income. Enough for now, but its clear there's a pattern emerging that will have a further impact on the main expectations of growth.

More importantly, to give people a wider view of normalisation and pricing expectations (read as performance), from the National Bureau of Statistics of China. Advance payments totalled 626.0 billion yuan, a staggering decreased 8.4 percent. The entire sector needs to level out, with limited reason to take a risk on any new housing or commercial property, whilst the sector declines at a rate of knots. 

The merged graphs make for a compelling comparison, with some strength being shown in commercial/retail property, residential is still in significant decline (click on image to enlarge). One would be wise to look at the advance payments (link), totalling 626.0 billion yuan, a decreased 8.4 percent, and now without some sentiment change set in trend. 

Petra Diamonds (PDL) bond issue for the Cullinan plant isn't good news for shareholders, whose return on their shareholder funds has been dire. Despite what's said in the conference call, contradicting a lot of previous assertions including those one only 8 days ago and in the results regarding CAPEX. 

The lack of discussion or disclosure, with 'everything' being hunky-dory previously leaves a bitter taste. It suggests to the EMC that shareholders returns (EMC PDL 16 April 2015) are likely to be worse than previous reports. It’s wise, when the market is surprised, like many a company before them, despite the terminology allegedly being positives, is often not. 

The basis for the funding is large stones are currently crushed in the plant, despite them finding a ‘world record’. Albeit PDL do state ‘when it isn’t not configured correctly.’ Admittedly there will be savings via efficiencies including OPEX, Security and maintenance.  It’s inferred that it will save “up to 15 ZAR per tonne”, current costs have been up to 90ZAR per tonne. We'll see, but don't get excited about seeing any returns shortly, more so a further dent in the bottom line!

Wolf Minerals (WLFE), it might be prudent to revisit their pricing expectations and remind the market re: TIN and Tungsten prices. With an expected production near 1k/tpa of tin at $20K/T, new guidance will be required. From memory, their projections were based on $20K/t, better than the current price. Perhaps WLFE are thankfully they're currently not producing! 

The All in Sustaining Costs (AISC) per MTU should have improved as result of 24/7 operations rather than the 5.5 working week that was previously modelled. WLFE's guidance/expectations of a recovery in the Tungsten price from January 2015, is somewhat absent, current pricing is around US$257.5/mtu, admittedly in a recovery mode, but below WLFE's current expectations of nearer $300/mtu. 

No time to cover the Vedanta (VED) update or the poor performance of Sirius Minerals (SXX) post approval update.

Atb Fraser

Apologies for the poor layout, grammar and readability, very limited time so rushed out in a matter of minutes.  

Evening Bolt On: Food Glorious Food

Hopefully tomorrow the glut in cheap food and their surpluses...Feed Grains, Soya and Milk (Chinese over supply limited demand). This depends on a number of factors but may have to be put back to another day (read as never judging by past performance). There's likely to be some global intolerance both for gluten and lactose (poor I know). 

Oil's bounced with par trading between Brent and WTI, the game of chess is afoot. One would be wise to consider longs as higher risk but with significant reward if one catches the knife correctly. Significant interest in 2015 December Brent Futures circa $57.20/bbl. Floating storage? Oil to Asia, components and exports to America and Europe whilst the routes are cheap.

Today it was rude not to sell Bowleven (BLVN) and Greggs (GRG), whether this over time proves right, its something that I don't look over my shoulder at but will review. Having ridden the wave and made an paltry profit on the long BLVN trades I have little patience for it in the current climate. Greggs's only justification is on the news...

We should spend a moment in silence for those copper traders in denials about the price with limited time left before their positions need a resolution! A key price was hit today.

Very long day, Atb Fraser

Morning Mumble: Contrarian Gold & CU were told...+ Ahhh'fren + AO. World + SHFT

Good Morning, a fab weekend thank you!

Delays because of an earlier than planned phone conference as people appear to not know the UK is in a different time zone than Switzerland. You are forgiven, this once!

Copper hit a past low, pending one whom you listen to this is a 4 1/2 to 5 1/2 years. All "blamed" on the lack of Chinese Stimulus and Strong U$D. Read in conjunction with EMC Friday is here...Oil will be grateful & Copper lowering demand higher levels of "fire sale" inventory and China’s factory-gate prices tanked. The leverage or lack of, save for the provision by what the Chinese (Government) banks wish to provide now, is impacting on the copper market. 

The issues aside of this, as reported by most being that the German industrial production fell unexpectedly. If it was an unforeseen event, then the consensus should have read the August figures for Germany Industrial Production (GRIPIMOM) in August weren't these an indicator of a cycle? Blomberg ran: German Industrial Output Drops Most Since 2009. 

With futures dropping to $2.755/lb and the absence of positive speculation the trend is set. Historically if oil is setting news lows and tests historic support levels then perhaps copper's chances of Circa $2.5/lb are becoming a real risk. 

The oil cycle, inconsistent data from America in terms of wage growth (or lack of) and lack of new stimulus from China is creating inconsistent moves in Gold. Gold ran up to $1230/oz. slipping a tad to circa $1224/oz. In the absence of any change in the news global there is no reason for Gold to be trending so high. All deflationary indicators are kicking in (the above) with oil being the start of the cycle of lower costs (exc. for OPEC intervention).

Afren (AFR) today came back with a kicking for shareholders with the update on Barda Rash, Kurdistan region of Iraq far from the news the market was expecting. It doesn't bode well for any negotiations for the business as there was a belief of significant upside in Barda Rash. Will this impact on the offer? Hmmm...In fact save for a significantly discounted offer, will there be one! At the current SP its hard to find little value above the current price for equity holders and if oil deteriorates further, there's a potential default (nil value for shareholders). 

AO World (AO.) third quarter trading statement pleased the market today...one shall bide my time there for the next run! At a silly level of future earnings (even today) there's little room for mistakes from AO. 

The leaky ship award goes to Quindell (QPP) and the its only a moment of time award goes to shaft sinkers (SHFT). There's some rumours out of South Africa that certain mining companies are going to provide finance. Over to Impala, ENRC (Via KazChrome) and a few others to decide on the fate...shareholders shouldn't expect too much. From 2012 the writing on the wall has not been good for Shaft Sinkers, a casualty where the equitable risks to projects should have been considered in greater depth (I know bad pun). One will expect a nice apology from a certain group regarding the outcome for Shaft Sinkers. For a quote from a "professional"...your view of shft is misguided if it ever hits 5 pence there will be something very wrong. I wonder what said person thinks to tuppence give or take a few?

With Brent at $48.84/bbl...expect some carnage in the sector. With a timely reminder that Iron Ore dropping subs $70/t, there were no surprises to the casualties. On the Atlas Iron (ASX:AGO) front they were being punished as a result. One hopes they banked significant profits...

Atb Fraser

(Edited/Proof-read as I had a little more time to correct basic errors this mornings was in a significant rush apologies.) Original here: Unedited 

Morning Mumble: Oil the support...and a late night Cocoa or Coffee & a telling off for certain holders.

Good Morning, Coffee! Well cheaper coffee!

Nearly 1 month ago, EMC - Morning Mumble: China Data yet again contradicting those overly bullish analysts & shorters heaven! Certainly the Christmas Cheer! See: Brent support...With Brent Crude trading at $51.33/bbl the wiser folks will be reducing shorts or hedging as the odds of greater or severe drops has been reduced but is far from disappeared.  

Yesterday the EU reported the drop in consumer prices that has only gone to assist the negative outlook (Bloomberg: consumer prices). The consequence being that it has improved the likelihood of the oil price staying lower for longer and limit the potential of a recovery above $64/bbl (Brent) (approx. and under review). Over to the EU for the stimulus.

The speculators (long) are aware of risks with a short-term drop in Brent yesterday below $51/bbl to $49.66/bbl indicating there's a good chance of another step-down, especially if speculators absent themselves. Over to OPEC and the rebel components to force an emergency meeting to cut production if anything near $43.20/bbls is seen. One could almost place a Star Wars theme to the story and we would be wise to keep a close eye on ICE Futures Europe (MarketWatch Article) for a new lows in futures.

Any positive movement circa $3.50-$6/bbl (pending who you read) in futures will create speculation within shipping, the higher figure being required due to charter rates being significantly higher. One would be very surprised if ultra-slow steaming is introduced a la 2009, save for some Chinese influence. The Chinese seem willing to bail out higher cost South American countries rather than see supply reduced Chinese, Venezuelan presidents vow enhanced financing cooperation (Xinhua Net)

Will ignore the fact that ICE Futures Europe are to start cocoa contracts in Euros from April and save it for another day. One hopes United Cacao (CHOC) will be aided by this seeing as prices have fallen to the lows of 2010. With chocolatiers (term used loosely for some companies mentioning no names) committed to higher prices, could Cocoa have the glut that Oil is seeing today in 12 months? Buyers are totally absent from immediate physical markets (cash). Price increases will obviously have to adjust to demand, thus the consumer being the price dictator will dictate the supply chain. Amazingly similar to coffee, with a drop in prices 24-27% pending supply. Who'd have thought it...see my commentary on FTML in October 2014 for more detail on coffee.

With food pricing becoming more transparent globally, one envisages consistent pricing with greater speculation during periods of uncertainty. This has not been the case, as evidenced by the spike in coffee last year, which was unfounded (the short). We have Tesco's informing us of their trading update and plan of action. plus flogging Blinkbox and their Broadband Customers to TalkTalk. Goodbye Divi...but its a lot better than the market thought! Later perhaps get some response from Duncan as he's been on the ball so far!

As a side thought to TalkTalk, do parties join up to Tesco on price or because they don't want to be part of another network. One suspects customer loyalty was the primary focus...good luck with the margins there, albeit it would be interesting to see the acquisition costs

Caledonia Mining (CMCL) 2014 Production Update and 2015 Production Outlook does not bode well for the recovering SP with grade declines a poignant reminder of the issues facing miners on a day to day basis. Its disappointing the lack of commentary on how the recent oil price drops have impacted on CMCL energy costs and all in costs. The un-interruptible power supply agreement must be under review in light of diesel costs coming down in Zimbabwe. Is it time to review their needs and consider the stand-by generation costs once again seeing as they're paying a hefty premium for assured supply which still has interruptions (albeit the company perceive these as acceptable.) Hope/Jam placed on the revised investment plan. It will be very surprising if CMCL hit the same production as the year just gone...

Kenmare Resources (KMR) decide today's update should be related to the share price which is exactly where it should be in light of the risks associated with refinancing and Iluka Resources determined and demand approach to their Due Diligence. One can only assume Iluka Resources will know beyond doubt if KMR is for them. With a significant amount of leverage again Creditors (ransom), Iluka may just be able to structure the deal so all KMR holders debt or equity take a hair cut in the process. Not one for those whom like premium bond style investing.

The words "potential default" should not be ignored in this RNS nor should the returns to shareholders when compared to associated board costs and remuneration. Clearly I should consider another career...perhaps at the Pru? If certain parties are reading, they'll be wise to think about my thoughts once again about KMR. Forget told you so, parties would be wise to consider what justification there was in holding the stock with the outlook, the debt and management. You have been told.

Some cheer for Victoria Oil & Gas (VOG) whom are now in receipt of the $6.4m balance of $10.1m Cash Call Received from RSM. However there's gossip that as a result of Oil declining significantly certain parties wish to revisit their pricing contracts. Perhaps VOG will update the market on this if it's correct or clarify where possible the contract terms. Obviously there's more to the price than just oil, security of supply, economic and environmental benefits, however at the end of the dead, one is always wise to consider there bottom line (the client). The risk is common-sense and should not just be ignored as unlikely...

Now as a frequent traveller on trains the intention of thetrainline.com (I'm refusing to link) the RNS cannot be ignored. The deal with ATOC is viable, however one cannot help but wonder the replication of the APP and business now the value has been placed on the IPO. Those die hard IPO's of IT will be obviously queuing up, the shorts would be wise to wait post the steam and puff.

With rumours bouncing around regarding Circle Oil (COP), the director changes cannot go without a mention over the past two days, with the appointment of Susan Prior as Group Finance Director and the appointment of Mssrs Antony Maris and David MacFarlane as Non-Executive Directors of the Company. Next door to Gulfsands (GPX) whom are not without issues above and beyond the current global pricing crisis for the minnows, could we be seeing some more consolidation? With casualties starting to come thick and fast, Europa Oil & Gas (EOG) states the obvious today with an update. In the absence of any improvement in oil futures above circa 20% one has to question why you would hold any tiddler stocks save for higher risk take-out speculation nevermind the debt issues of certain companies!

With an unsurprising setback in Sirius Minerals (SXX) application process things bobble along without too many issues. Phosphate prices will be further under pressure due to declines in food prices this will only benefit SXX's marketing approach and offtake agreement process.

Atb Fraser  

Proof-reading no doubt required.