Morning Mumble: Was the PM Add of 23/02/15: LGO predictable including the debt ++Plus the de-constructed hopes of the BLT Sandwich

Good Morning,

Many thanks for the enquiries why there has not been comments but it’s simply put, work is very busy with some work for those entities looking to profit from shorters, the white knights. Fear not, there were no cuts or bruises and thank you to certain parties for those mad enough to allow the Ninja known as my daughter tearing up your office whilst in meetings. 

LGO Energy (LGO) had the appointment of a joint broker on 5 January 2015, EMC: LGO Energy. Although not much of a short its always nice to pick on these eventualities that are more certain such as certain entities companies contradict contradicting their "cashflow" forecasts and debt arrangements and whilst raising and raising, and...You get the idea. Today, there is the issue of equity and oil swap arrangement with BNP. Today's news makes it wise to close the shorts on LGO.

The arrangement may be positive for LGO longer term, but if one looks back at the placing etc. There are material risks investors should not ignore including the "revenue per barrel of the Spanish assets all those years ago". LGO is in the same basket as Victoria Oil & Gas (VOG), where the management decisions come with certain risks that can have a material impact on the value of a holding. Although the SP held up better than envisaged with every man and his dog working out the obvious. (Link relevant twice today EMC: JRG + LGO Placing (history repeating itself))

Had Anglo Pacific (APF) been proactive with their investor relations they would have announced to the market that Largo Resources (TSX: LGO) received a non-binding indicative term sheet from its consortium of lenders (Largo link). TSX: LGO are hoping, subject to committee approval, to defer its debt amortization schedule and extend the maturities for its construction debt facility and its export credit facilities for its Maracás Menchen Mine. 

TSX: LGO give an update on the progress and the asset for investors that like layman's terms. The market should now be accustomed to the poor updates as shown with Isua Project in Greenland (EMC: Isua). APF will obviously be busy hunting a transformational top quality coal royalty to be bothered about something they paid $22M only 8/9 months ago. So for those holders unable to gain anything useful you read it above in the Largo link. 

BLT (BHP Billiton), with Andrew Mackenzie (CEO) opening his 2015 Interim Results Presentation by raising his arms to demonstrate how comfortable he is with the results. The market is going to like the interims. South32 (Known here as short32) demerger remains on track to be completed in the first half of the 2015 calendar year. 

Net debt was higher than EMC considered by circa $500M but negligible in the grand scheme of things. Post a few items needed more urgently its maybe wise to revisit BLT. Returns are lousy in % terms of capital applied, but the market ignores such things, so like Rio, over to the bulls to assist the sensible in making decent intraday gains. Copper (circa 11 mins in) within BLT suffered the same woes as most of the industry with energy inc. water and grades being lower. Despite lower prices BLT have done better than expect. Iron Ore update (circa 13 mins in)...too much to cover in such a short time.

Just Retirement Group (JRG) being a trade EMC: JRG + LGO Placing (history repeating itself). Comedy on the OPEC Emergency beliefs at these prices, investors and analysts should not read too much into "news" that contradict what statements have been made in the past. 

Atb Fraser

Morning Mumble: Anglo Pacific belated...

Good Morning,

My daughter's bug impacting on the this mornings items slightly, where she wanted to sit and comforted with honey and lemon. So the world stopped for 5 hours and now back to normality whilst she sleeps or until she wakes.

A few weeks ago EMC Anglo Pacific Isua license & General Nice Development Limited was announced by all and sundry but not the royalty holder. Whether they had additional news or not, it would have been sensible to have updated the market about any discussions. If APF's Isua Project lien was on the title (the norm), irrespective of ownership, APF's royalty should have been good. APF belatedly update on the Isua Project being sold to General Nice Development. 

It should be noted the lack of a reversal in the $15M (write-down) and the absence of any impairment for the loss of $30M for a change in ownership. Anglo Pacific's assets are a play on a bull market, the price "looks" about right for now (but). Investors may have their patience significantly tested if Rio Tinto has a change of mind as APF's fortunes are expectant on the performance of Kestrel  (update 21st January 2015). It does show there's some potential but APF has not exactly warmed to the investors. Judging by Rio's intentions not to lose market share APF will benefit. Its looking like its time to turn just a little positive on APF.

As a seller of GEM Diamonds (GEMD) yesterday (EMC) they give a Trading Update for Q4 2014, with deterioration in prices, near 18-24% pending on view. The contraction in part is a 45-62% reduction in financing by the Antwerp Diamond Bank (ADB*) that seeks to exit the sector. With buyers being sought and opportunity being seen by investors this contraction is likely to go through but improve with June/July 2015 *(EMC forecasts) likely for a fuller recovery; save for significant changes in global economics and Russia.  

GEMD sees this trending going forward into Q1 2015. With the slack yet to be filled by ADB* it will take some time for a recovery in finances for the market liquidity, with a risk the traders preferring the absence of speculation with greater upside from the lower prices. The concern being that Petra Diamonds (PDL) seems to not consider the ADB exit of  the mark as significance. One would expect them to be aware of this as they have an office in the International Diamond Council (IDC) Building in Antwerp.

With circa 70-80% of diamond firms having accounts with ADB its wonder prices held up so well. An ending of tradition that's last since 1934, why KBC Bank N.V (the parent) couldn't find a buyer for the portfolio and ADB as a whole.

First Quantum Mining (FQM) update on its production and sales for the three months and year ended December 31, 2014 and production and capital expenditure outlook for the full year 2015. Over to FQM's First Quantum's CEO and Chairman Philip Pascall, 

"The financial and commodity markets have started 2015 with high volatility on concerns about the global economy, demand for natural resources and companies' liquidity positions. As a result, our share price, along with others in the sector, has been materially affected. While we have high confidence in the mid to long-term outlook for copper, we are mindful of the current concerns.  As always, we pay close attention to the Company's financial position to make sure there is sufficient flexibility despite having an active project development pipeline.  At Cobre Panama, we have substantially reduced the planned capital expenditure for 2015 to $600 million without compromising the project's progress. We also maintain strong and supportive relationships with our principal banks that have worked with us throughout the development of the Company and through several economic and commodity cycles,"

Zambia's Kansanshi's mine (FQM 80%/20% Zambia Consolidated Copper Mines (ZCCM) is still hampered by smelter capacity. Things are progressing with first pour at Sentinel (also Zambia) and forecasted production of 150-200k/t's later this year (circa August). We'll shudder at the costs per lb which must loss making at the current price. 

Then in December (2014), the atmospheric leach tank at failure at Ravensthorpe (Nickel) (FQM 100% Western Australia) doesn't bode well either. Quite how one scales back $600m at Cobra Panama (copper 80% FQM/20% Korea Panama Mining Corp (KPMC)) without compromising the projects progress questions the previous expenditure. Its wise to be picky, but common-sense is never absent from investments (certainly not here), then why were they spending the extra $600M? With production on the decline in the final quarter, sales in copper were only modestly lower than the previous year (consistent with global trend). At $2.54/lb for copper, the market will ignore the woes and buy into the stock. 

Iron ore depreciating and Fortescue Metals Group (FMG) (Why iron ore won’t rebound any time soon). having a moment of carnage before recovering on the ASX with Rio and BLT having the knife put to them as well. With the price well dropping in futures a further 5% the market might need to revise price expectations. Can you convert bulk shipping into a floating production, storage and offloading (FPSO) facility? Please note the sarcasm. The FT ML fans will of course prefer Neil's commentary on the topic Iron ore falls to lowest since May 2009 on weak China demand. Implications for steel anyone?

Goldman I don't think expected their short-term bullish comments on gold to be so short with the drop. Goldman Sachs See Short-Term Strength In Gold, Remains Long-Term Bearish.

Who'd have thought Afren at near 6 pence...anyone!?!?! Yes, proudly here EMC: Evening Bolt On: Afren & MPI + Alleged CU Chaos (Investments). Today's update validating some shrewd positions with a Review of Afren's Capital Structure out today its reading like a slow motion train wreck. 

The no news but sensible decision by United Utilities (UU.) to accept the final determination. With the RPI target on dividend being a comfort to the dull goliath investment funds wanting income, the price is about right. Although the wise will have under review due to the appreciation over the last 12 months. Private Equity and Sovereign Wealth Funds will now be able to cast an accurate rule of the likes of UU. and SSE.

Atb Fraser

Antwerp Diamond Bank (ADB*) is owned by KBC Bank N.V and unlisted, EPIC attributable for the use within the article and not associated or inferred as being to another company. 

Morning Mumble: Anglo Pacific Isua license & General Nice Development Limited

Back again!

Thanks to the prompt from Roger Bade today in his morning coverage about Isua. New strong force behind London Mining Greenland. People will be aware of General Nice Development Limited because of their association with Petropavlovsk PLC and IRC. With this action, it makes one wonder about the economics of the project, unless of course its one for the very long-term. 

Is the drop on APF (Anglo Pacific) today an acknowledgement of the loss of royalty (unlikely as its three days old). One would have assumed the royalty was on the project (lien against title). Perhaps APF would like to update their market on the specifics. We know its written down (impaired), but is that written off? Isua update in the Q3 Interim Management Statement, where they give an undertaking to update the market..perhaps by Christmas then?

Atb Fraser