Good Morning,
Not connected with the title, we'll side step the busy
schedule yesterday that resulted in a faux pas by yours truly. When discussing
another company that was appropriately labelled crap, its wise to consider
people’s connection or association with said crap (or more so, do homework
beforehand). After that momentary silence, perhaps realism on their part,
things did improve.
Sirius Minerals (SXX) appears to have more leaks that Horse
Hill, readers of the Whitby Gazette will be aware of the local news of
'likely approval.' On top of that, Roger bade informs us that the "North York
Moors National Park (NYMNPA) Director of Planning recommending for approval
North Yorkshire Council’s proposed park and ride scheme near Whitby; 180 of the
spaces are dedicated for York Potash. Now you can’t have a park and ride for a
mine without having that mine as well, can you?"
With the obvious needs of the capital requirements of a
mine, SXX has the benefit of a stable geopolitical environment, and save for
any elected party member getting a bee in the bonnet. SXX is not a case of
rubber stamping, but procedural meddling. SXX has a high chance of a positive
outcome for the company and perhaps the equity holders.
The market would be wise not to be over-expectant on SXX's
timelines, but more importantly, having been a buyer, its wise to acknowledge
the risk of potential dilution. This is one of a few companies where there's a
willing cooperation and acknowledgement of dilution. Equityholders should be
open to dilution, SXX, subject to the low risk possibility that would be highly
damaging to any value if the mining application was refused, has the potential
of a great future.
Obviously there is a risk of a 'nearby mine' meddling in the
process, one that shouldn't be ignore. The board of Cleveland Potash would be wise to consider they live
in a glass house. If the aged memory is correct Shaft Sinkers had the contract
for Cleveland Potash, how things change.
With things hotting up in Columbia, Red Rocks sale of Columbian gold mine, should be a
welcome reduction in security costs at a local level. One cannot help but
wonder what the risks are of default of payments are by Colombia Milling
Limited (CML). The company isn't so diverse or large enough to be enticing
for a balanced investment. Its one that falls into the very high/blind punt
areas of investments. The company may have assets, however as most are feeling,
save for lithium and a few rare earth minerals being flavour of the year,
there's a continual pressure on funding.
Yesterday, a chap spent significant time looking at the
costs of production for AIM companies, there's commodity price expectations
(and subsequent) returns that are simply unrealistic in the short-to-mid-term.
We'll save naming and shaming for the time being and wait for a better
opportunity, however readers will be aware of EMC views on specific companies.
Iron Ore allegedly bounced on stockpiles reducing.
Its rare to entirely disagree with news, but what utter hogwash, Iron ore rallies on China inventory fall. Stocks are
still high in China, the reaction was the result of two entities buying in the
market as a result of their supply agreements coming to an end suddenly.
The market would be wise to check assertions from time to
time, including the EMC. So from Li, (many thanks) this morning. “China's
ports are still holding high levels of iron ore, even [with] steel mill[s]
restocking. Inventories [continue] to remain high. Market orders are slowing
near [as quick] as the supply is reducing from the market. With demand in China
continuing to slow iron ore [is] piled up at Chinese ports”
Connemara Mining obtained five new prospecting licenses that
are apparently on trend with other operators in the area. Fundraiser anyone?
Not a stock that's been covered, but with rises like this, the company would be
wise to jump on sentiment and get some cash as the coffers as they must be near
dry! In the absence of some decent news and lack of borrow, CON won't be
covered any time soon.
For the vanadium followers, Evraz's equity value in Highveld Steel and Vanadium may
need revisiting. This does not bode well for Kenmare (KMR) or Sierra Rutile's
(SRX) outlook, are Highveld one of the distressed sellers in the market?
Whatever is happening at Ormonde Mining (ORM) is anyone's
guess. Almonty Industries Inc (TSX-V : AII) do not appear to have engaged
in the process or perhaps they are keeping their powder dry. ORM update on the Barruecopardo Project Financing, with
absolutely no information contained within it. Simply put, in the absence of
Almonty coming up with some of the goods, Oaktree will acquire an asset for a
song, ORM will retain some 'sort' of management fee, and equity-holders are at
risk of having little if any value.
Over to ORM, "Very significant progress has
been made during the exclusivity period, and the parties are expected to be in
a position to finalise agreements shortly. A further announcement will be made
in due course." Very significant? Well that would be open to
interpretation, how this is considered material news in the absence of
specifics is of "concern". Does the NOMAD consider the omission of
the material facts of progress satisfactory?
Limited time for Anglo Asian Mining's (AAZ) update, with positives across the board, increased
production (floatation plant due online Q3 (possibly Q4), running down
inventories (sales exceeding production) and production in line. The
disappointment is there's no guidance on cash costs, leaving one to throw a
dart at costs.
It would have been nice to have some guidance on all in cash
costs as a result of material movements in energy costs (fuel) and heap
leaching costs coming down near 20% in the six months. Quick calculations suggest AAZ's costs should be around $945/oz, although this has a significant margin for error, circa 10%. With the
repayment of debt going as planned, AAZ can ill-afford any hiccups, with around
$0.5M cash at hand there's little margin for error.
Atb Fraser
