A belated a Pm Bolt-On. Morning Mumble: Sirius Minerals (The final hour approaches), Firestone Diamonds, CICG and Gate Ventures

Oops forgot to press publish, so belatedly a Pm Bolt-On. 

Good Morning,

It was perplexing to hear of a number of holders not derisking either on the rise if larger or above 20+pence to find themselves with fear now engrained in the SP (EMC: SXX Derisking threepence target in the event of failure). With such a wide range of valuation between 3 pence and 45 pence. It’s not an easy play, save for some CFD terminals offering a form of arbitrage of a level it makes it a viable play. 

Firestone Diamonds (FDI) is delayed Liqhobong Mine development. FDI may be grateful for this, in light of a further softening in Diamond prices. One savvy analyst feels there's limited growth in the diamond market with the Russian's far from being controlled in their marketing and sales. 

Yesterday Gemfield's (GEM) evidenced the contraction in realised prices and a cap on financing where the traders have to have more skin in the game. Disappointment for FDI, even allowing for the FX and power line benefits, the expectations have been reset 6 months. Q4 2015. 

Finally, it’s the first day of dealings for CIC Gold, one certainly to follow more so for enjoyment than anything else. Same as Gate Ventures (GATE) where the NOMAD has quit, but GATE wish to inform the market they've raised some cash via a convertible loan note. The pricing and terms of such a deal are to remain a mystery for the time being. One assumes that common-sense will start to prevail! 

A slow morning! Thought for the day, if copper has a supply glut, what does this do for those overly leveraged copper producers? 

Atb Fraser

Morning Mumble: Gemfields' results lacking sparkling, Allied Minds, Tullow. Savannah Resources, Thorntons and BCN, with SRX (one hopes not the new AMI).

Good Morning,

Brief today as have a number of meetings then a school trip!

Gemfields's Singapore auction closed yesterday with an average of $617.42 per carat down a near 10% on the December 14 higher quality stones auction ($688.64/carat). In the absence of a decent marketing push, the decline in number of lots and sales revenue from these higher quality stones is going to continue. Not only were the lots sold a paltry 61% of those offered (46), but also was the price achieved. Over to GEM to find a way forward.

For those that didn't top slice, sell or trade Allied Minds (ALM), today brings news of their joint venture, ABLS (Allied-Bristol Life Sciences, LLC) acquiring licenses from Harvard. ABLS is a jointly owned entity between Allied Minds and Bristol-Myers Squibb Co.

Tullow Oil (TLW) have got off a little lighter tax bill than the Ugandan Government had hoped for. Both parties have agreed to a full and final figure of $250M, near $273M below what was claimed at $473M. TLW also have got an instalment plan put in place. After consideration of the $142 million already paid TLW have a mere $36M ($108 million in total).

Providence Resources (PVR), yet again gives news that is pretty much academic in the absence of the lack of a farm out for Barryroe. The Technical Update, Newgrange Prospect, although "good news" isn't what the market is looking for. In the absence of such a deal for Barryroe, one has to wonder how long Tony O' Reilly's position remains acceptable to the shareholders. 

Surely there are not rumblings of disgruntled and 'impatient' shareholders at PVR. Or worse, has the soon to be partner realised PVR are over a barrel and hard ball is being played out.

Savannah Resources (SAV), appears to being pushed in the press, with a deal where SAV can earn up to 51% Mutamba/Jangamo with the formation of Joint Venture with Rio Tinto of all companies. There's a number of woes here, firstly investors would be wise to consider the woes of this deal. Why Rio would want to be a minority partner in any business it conducts raises significant questions about Heavy Mineral Sands. This is guaranteed to be revisited in due course, expect a fund raising in due course on the back of the "significance." 

Ormonde Mining (ORM) will be grateful of the Oaktree financing as their final results out last Wednesday, show they had around 200K ish left in the kitty. Had investors paid attention to the EMC (EMC: ORM February 2015) they'd have saved themselves near 40% and some 70% longer-term. After today's update, one would be wise to consider how the financing assists with working capital requirements, same as SAV, this will be revisited. 

Shareholders in Thornton's (THT) have been saved, with an offer from Ferrero at 145 pence. In the absence of additional interest, it’s wise to take the cash and run, especially those in more recently over the past 3 months. Hat-tip Richard S and CwC for some decent research there, have conducted none of it myself it was a pleasure free-loading for once, although very small! 

Its noted that a certain small brokerage should get more commendation for their work especially after 3 kills in near as many days! Perhaps Charles Stanley can save themselves considerable time reviewing their targets and just put 145 pence! 

With a chance of Director at Bacanora Minerals (BCN), maybe the company forgot to thank him for his services? Of significance is the change at Sierra Rutile (SRX) whom has appointed a chap associated previously with African Minerals. A brave appointment in light of SRX's recent share price recovery. 

Atb Fraser

Morning Mumble: Victoria Oil & Gas (another EMC Amendment to their RNS) & Iron Ore (on my Christmas list), any old iron (Fortescue Metals Group)

Good Morning,

Continuing on from my theme in March, EMC: VOG March 2015, today Victoria Oil & Gas update the market on Logbaba Power Station Online. Excuse the sarcasm, but if the power output has increased then surely ones production has also. VOG are in danger of achieving what they say, this is a rare event, as long-term followers should know well.

The EMC does not change the view that the management are the risk to any VOG holding, the asset and developments are good, the power generation means VOG should have a utility premium applied, subject of course to geo-political and management discounts. Today confirms, average gas production since the 50MW has been online is 14.5mmscf/d with a daily peak of 15.3mmscf/d, all good for the bottom line. With that in mind, a review is required, expect a re-rating. 

The market belated realised that BLT (EMC yesterday) were slowing production growth, so with the closure of shorts globally, the prices motored near 5-6%. However, overnight we've had Vale, doing the exact opposite, with a record quarter! Vale's Q1 figures, N4WS expansion plans are likely to have an impact and make up the shortfall that BLT had aided the market with. 

With limited time, analysts may be wise to consider issue that producers even in China are assessing the viability of expanding production/operations to compete at these prices. Certainly, Rio, BLT and Vale's positions are not assured, viable yes. The issue the market has, or should have, is the closures of mines are not happening quick enough to reduce supply. Perhaps the forecasts will need revisiting on price. 

Staying in sector, Fortescue Metals Group (ASX: FMG) have finalised the 'refinancing', where every man, woman and Wonga loan specialist jumped on the bandwagon. Quite clearly showing FMG's management have panicked, with an interest offering of 9.75% per annum, uplifted from the original (USD) $1.5B offering to $2.3B. When there is such an increase, save for income hunters realising the benefits, questions should be raised about the pricing. 

Over to FMG, “We’ve seen strong demand from the market which will result in repayment of our 2017 and 2018 debt in full, refinancing of US$450m of our 2019 debt and an additional US$350m to further strengthen our balance sheet.” They only achieved such an uplift because of a mispricing on the interest rate, admittedly it removes a few obstacles, but all the same, the % is laughable, admittedly it gives FMG fresh 'hope,' One suspects they board would be wise not to beg for production cuts from the majors again...any time soon.

Sirius Minerals (SXX) should be congratulated for requesting the suspension of their stock. Those naughty traders whom planned to travel up had all their plans thwarted at the last minute. One hopes they obtain refunds on their accommodation!

On the Anglo Pacific (APF) news front, APF have only gone and given some guidance on Kestrel. EMC's view this should be shortly after Rio's rather than two days later. Its positive, APF estimate that Rio Tinto will mine between 60% and 65% of total production within Anglo Pacific's royalty lands during 2016. Being a buyer of APF (not without risks), the amount of investments and financing sunk into royalties, one would have liked to see APF be more proactive about their investments. This is the third time now!

Little time to summarise the Gemfields (GEM), (not Gem Diamonds as one confused analyst got today), the auction results were crap, albeit allegedly at a profit even at $4 a carat. We'll avoid sugar-coating, so it’s wise to read the auction results. One has a suspicion there's plenty of 'lower' quality stones heading to eBay at a large premium. Those cheapskates should set up alerts now! 

What GEM are doing utilising a decent grading system to enable bidders to have confidence (or not) as has been evidenced from the previous auctions. Expect some positives in the short-term, especially after a few analysts were on a jolly to visit operations. 

With a positive Montepuez maiden resource due in H2 (need to check), it’s likely to enable a clarity on the valuation of the company. With limited debt ($20M last time it was checked for Kagem), cash at the bank, there's a lot worse out there. With an improvement in sector financing and a sensible approach to improving production, GEM are benefiting, out-performing the sector near 40%, contrary to the view of EMC. One has to wonder whether the 'share options" granted 7 days ago is taking the proverbial somewhat. 

Atb Fraser

Morning Mumble: Greek Poker Clap-O-Meter, New Palm Oil or Napalm for Noble...???

Good Morning, 

Long day yesterday, on the way home I was reminded of my views just after the Greek election. Its felt Greece have a greater agenda than the debt and appear to be acting like they have nothing to lose. The poker face has big stakes (€323 billion), in the immediate if the grand total is excluded, this year alone Greece is meant to repay €26b. The Greek government are in a better position than those that are owed the money. Greece although failing in their international obligations, can enforce the hair cut with a sense of popularity. 

Excluding the IMF, International Bailout Fund and the combined total of "other European bonds", Germany, France, Italy and Spain all have the most to lose if Greece default. Well that's what analysts hope Italy and Spain don't notice, as its actually only Germany and France. There would be no reason for Italy or Spain to continue the status quo in the event of Greek default. 

Just after the election, I was in a meeting not with Greeks, but with two of the five living in Greece and they're of the view it's about as close as Scotland going independent*. That's fairly close for any analyst, logically if the populous are blaming the conditions for the bailout on the issues, then one is going to gain popularity whilst being in poverty, unity so to speak.

Greece is 50/50 on leaving the Euro, perhaps not the Euro-currency until such time as the Greek Government can appoint De La Rue for a little paper to be able to print the Drachma notes. The Greek Government allegedly created the note designs in 2012 when the EU hypothesised about the Grexit plan. 

If you've got tough measures to swallow, you may as well go it cold turkey and be done with it. Often when there's little left, it’s perhaps the wisest of options, reset of Greek economy and expectations. Consider the Grexit a resetting of standards, with significant consequences both locally and internationally, expect stocks to act accordingly with a sense of risk.

Off to the market, with Brent being the new copper (*currently keeping its head above $2.60/lb). The global bellwether of indicators, bouncing near 25% from lows, with supplies of WTI being greater than Brent, its premium to WTI is going to be validated in the short-term. It’s a hard call with Brent, with Greece wobbling, and the market pricing in rig reductions in advance, there's a good possibility (65%) of $70/bbl Brent and $64-68/bbl for WTI, save for a melt-down or two. A lifeline to those marginal oil producers and even Afren might have a new opportunity, but one doesn't hold out much hope. 

The latest victim of analysis appears to be Noble Group with the most publicised version being Iceberg Research. Having not read most of the report save for the headlines, people would be wise to see how this unfolds. Noble Group manages a portfolio of global supply chains covering a range of agricultural and energy products, as well as metals, minerals and ores. Quite why Iceberg Research published a report if they don't trade in the Singapore market and hasn't participated in any trade related to Noble Group. Unless something bigger is coming along... ...

Staying with Noble's theme, Simbe Darby Plantation may have just had a well-timed takeover of New Britain Palm Oil (NBPO). The palm oil market certainly looks to be turning a corner bouncing away from a critical $601/t. There's risks to the supply chain as Eltinus Omaleng, the bupati of Mimika Regency in Papua, has officially issued a decision document to call a complete stop to PT Pusaka Agro Lestari (PAL)’s activities. 

PAL is operated by Noble Group on behalf of COFCO, (China National Cereals, Oils and Foodstuffs Corporation). Whether legal or not it may go some-way to support the price as the industry signs to longer-ended-dated contracts that will change the sentiment in palm oil prices. In the event the excessive supplies continue to come to market palm oil is heading to $427-433/t. Those lipstick wearers can relax, supplies aren't that bad they need to start hoarding their favourite reds! 

A poignant day at Shaft Sinkers, bringing together those holders around an oil barrel to torch their certs. Shaft Sinkers suspends their stock with, "no value remaining that is attributable to the equity in the Company." This company is worth significant analysis, especially for a certain brokerage that published a report in 2011 that brought Shaft Sinkers to my attention. How SHFT managed 4 years 2 months on the market is a feat in itself, a bull market play that in a cash conscious environment was doomed to failure and will never succeed where the risks are not equitable with the owners of miners. 

Kenmare Resources (KMR) come out and state they've laid off 14% of their staff it was too little, too late to stave off the impact of reduced prices. There's going to be a further 15-20% of redundancies in the future. These actions appear to suggest that Iluka Resources whom can see potential if the employees are halved. With respect to some, it was not hard to work out if you're carrying an inventory of circa 25% of your annual sales that you can reduce costs by near 25%. Perhaps time to save a little in board room pay as well? Over to Iluka! 

EMC: As a seller of GEM Diamonds, validated the view on Gemfields (GEM) with their market update as Q4 trading was under pressure. Production up, costs up and grades down plus Faberge being impacted by Russian spending down a not so insignificant 12%. The diamond and precious gem sector is the Christmas trading quarter with restocking and reading across the numbers, the market doesn't appear to be in sparkling health! (I known).

The Russian's woes won't be the only issue as investors consider a conservative approach to investing and extravagance. Over to Ian Harebottle, CEO of GEM whom "remain upbeat about the growth and development of our sector and look forward to the results of our two forthcoming auctions and the various luxury events scheduled to take place over the next few months." 

It would be wise to believe there's still a softening in the market (not forever) and GEM have a lower quality rough emerald and beryl auction scheduled for the end of the month. If the gossip of a share consolidation is correct for GEM, they'd be wise to wait until the market has more clarity, what more does one need than a greater downside than up! 

Quadrise Fuels International (QFI) holders appear to be badgering the company why the price has tanked so much. The sell was July 2014 (EMC QFI July 2014), not with hindsight but more clarity required on the potential of QFI. Those whom appear shocked by the company's tank even after the Business Update. Do the holders have any understanding of the concept of the model, that being the difference between heavy fuel oil and diesels. Stick with utilities if in doubt...

Congratulations to Aureus Mining Inc. (AUE), who got the ink dry on the equity financing they announced recently including the rump from the IFC (International Finance Corporation). Save for further Ebola issues and further delays, AUE could just be on the turn. The New Liberty mine even allowing for higher all in cash costs by my figures of  $937/oz., still has a decent margin of profit not at today's prices, and would make circa IRR 25% at $1171/oz. 

Wood Group (WG.) reminding the market its not all doom and gloom, with full year results for the year ended 31 Dec 2014, but perhaps not out of the woods yet! 

Atb Fraser

*Political Rant: Well ignore the fact that Alex Salmond was categorically wrong, just look at the bellwether of oil that he relied so heavily upon. In supporting him, had your desired outcome occurred you'd have been selling the big issue to the English Government again, rather than the UK Government when needing a little assistance?