Morning Mumble: The Rumour Mill in Afren & Gulf Keystone...positives for KEFI? surely not!

Good Morning,

Afren (AFR), appear not to have updated the market on "the likely" outcome of the bondholders with monies allegedly already being discussed. Speculators would be wise to acknowledge the risks associated with the equity going to 3 pence. 

This morning, Leggie rightly points out it's an identical play to Petropavlovsk Plc (POG), whom Deutsche Bank AG put their head above the parapet with 7%. AFR, was once upon a time a darling of EMC, including most of the supporters, logically it was wise to exit. Is there a lesson here about hedging and leverage? 

Sticking with the rumours, Gulf Keystone (GKP) allegedly have some visitors either heading to or currently on site in Kurdistan. With a Competent Persons Report (CPR) due very soon don't expect too much before this but with GKP about the money at the moment, it would perhaps be wise to watch the volumes. 

Eurocel (ECEL) are coming to the market with conditional listing today and unconditionally on Monday. The IPO with the Dutch and management cashing out circa 50% of their holding, we'll leave it to the pundits to assess the viability of the company. With a valuation of £175M gives an implied yield of 6% assuming no growth. Investors would be wise to look that all the previous year’s performance, not just 2014!

A few analysts had some comical backtracking (belatedly) on Fresnillo (FRES) today. The Financial Results for the Year Ended Dec 2014 are as expected, crap. We do not need rocket scientists to point out the obvious between 2013 and 2014 in terms of silver prices, with a 18% decline in realised prices and nearer 32% if one was to include the last 3 months with the average weight price down, towards $17/oz., at best. 

It’s worth noting, with FRES's expansion and long game, it'll give some comfort to long-only holders to top up/average down. The news is a signal for yours truly to close shorts to reappraise fully, FRES's production costs have dropped which helped to offset the grade declines but could not keep up with the price of silver tanking. With averaged prices significantly lower since the reporting period, FRES need to get a handle on costs. Although it's ironic shareholder funds performed better than GLEN, a whopping 5%. 

What are Bacanora Minerals (BCN) playing at? Holders voted with their feet today for good reason and to show their disapproval sold a minor amount to give the board a clear indication of their views. If the board do not take today's price action as an indicator of shareholder opinion, they would be wise to learn. 

BCN may go strength to strength from here is immaterial to the value the company had yesterday. There would have been no successful outcome on the EGM based on a quick poll of decent holders. Having closed spread bets the profit has been left to run in equity, with a different risk profile as a result of the appointment today. BCN can look forward to some Horse Hill type twitter updates. On a positive, with funding readily available for "key" projects and a CEO not far away from for BCN the outlook is positive for the assets only. 

It’s rare to see anything positive for the shareholders out of KEFI but today they have come out with a decent update.. With some easy finance should be available locally for Jibal Qutman, KEFI would be wise to focus some significant effort on pushing the project into production. 

The key for the stakeholders being the oxidised material where recovery rates likely to be in the 80-90 percentile. Hawiah has some appetising comments where KEFI seem to think they can “identify large base metal (copper, gold and zinc) targets at depth." Could KEFI just be turning a corner and warrant a buy? We'll await further base metal analysis. 

Limited time to cover the significant amount of oil hedging currently underway! 

Atb Fraser

Morning Mumble: REM increases its stake, POG's links to PVR and CNA being the new Tesco?

Good Morning, well for most, as there's a dreaded manflu and virus is here!

REM (Rare Earth Minerals) increases strategic holding in Bacanora Minerals to 14.37%. Doesn't bode well for Bacanora, based on past performance. With Graham Edwards having (or potentially) having an interest in 24+% it will be interesting to see how voting goes at the EGM.

The developmentss at Petropavlovsk (POG) are becoming a circus with an update.. So the board believe their proposal is better than Sapinda's that is allegedly at a higher share price than that being underwritten. Surely those underwriting the current proposal don't what the apple cart rocked, with belief that is very high risk of insolvency in the event POG board and bond holders don't get their way. Sapinda should outline their proposal with all necessary paperwork including evidence of funding sooner rather than later.

For those with an interest or following of PVR (Providence Resources), Sapinda are involved in Sequa Petroleum whom are rumoured to be the farm-in partner for PVR (EMC Sequa and share sale) and are currently alleged to be raising the necessary cash to fund this deal. So are POG correct in their analysis about the ability of Sapinda to raise the cash? Over to Sapinda to up the ante or better yet, ante up!

PDL (Petra Diamonds) have come out with very positive results and a paying down a significant proportion of debt in their interim results. The numbers are healthy, in fact higher than what the EMC expected. Having recently been short (EMC) across the sector for the play. We are becoming more positive after PDL's interims so a review is needed as financing is coming back into Antwerp via the Middle East (EMC GEMD + Antwerp Bank.)

Russia is impacting on precious stone sales in 2015, the contraction should have already been felt. PDL believe prices have stabilised. And with a few new lenders in the market, they'll be cautious about over leverage. Israel may just surprise us yet with a new diamond fund, but don’t expect too much price appreciate in the short-term (if any).

There's been some gossip in recent days about Centrica (CNA) acquiring Smart Metering Systems (SMS), could the wires have been crossed? With SMS’s contracts with major energy companies would not necessarily have any added value added in acquiring SMS, more so its likely to be a negative.  

With CNA results out today, one cannot see them making too many acquisitions whilst they slash the dividend. They have announced a small contract with Total Gas & Power Limited (TGP), with the potential for an uplift in the order size. It would certainly fit with Centrica's longer-term plans, but perhaps not SMS and certainly not now! A logical fit would perhaps be Melrose and incorporate SMS within Elster.

No need to comment too much on CNA’s final results. An Oil & Gas + utility company disappointing the market. Revenues up, debt up, profit down, group investment down a whopping 68% with a further 40% cut in E&P capex by 2016, as a result they've 'reset' the dividend. CNA could just be the Tesco of the energy sector...? Over to London to push those close to the margin to spin the Canadian interest in CNA into the rumour mill. 

Atb Fraser

Morning Mumble: All that Glitters Au Ag, Amara's placing, Weatherly, GLIF & JD Wetherspoon.

Good Morning, 

A pleasure when the smaller boys make a decent packet out of the market in comparison to the houses of grandeur such as the high fees for M&A or the odd take private element. 

Having traded long on gold on the back of CHF and China, yes China gave gold a leg up plus Asian trading and NY. China's data created yet more demand on gold risk, so this morning its time to take the majority of profits (perhaps earlier buy but yet again solid profits). It’s not so long ago a few savvy investors picked up some significant low cost gold bets (EMC). It would appear the corporate gold traders were caught napping by the move and very few have profited from the appreciation of gold. Kudos to the few, with a not so paltry pay cheque either.

With gold and silver in fashion at the moment, it is wise to buy exposure into those leveraged plays such as the once upon a time short, HOC (Hochschild) who has appreciated near 30% since the change in sentiment and trend for Ag circa $18.30/oz. HOC's now making a profit again! With HOC's Q4 production update being a lot better than most (includingmyself thought). 

The HOC holders can breathe a sigh of relief with HOC completing a decent hedging programme to lock in some transparency over cashflow even if prices appreciate. With HOC signing agreements to hedge the sale of 6,000,000 ounces of silver at $17.75 per ounce for 2015. This is in addition to the previous agreement to hedge 38,000 ounces of gold for 2015 at $1,300 per ounce.

We'll side step Petropavlovsk (POG) purely on the basis of unnecessary appreciation over Christmas and without justification. 

Copper appears to be looking for a floor / support in the price at the moment, although the deals being done and stocks increasing at LME certainly leave a lot for the interpretation. The guessing for copper will continue as two dominant warrant holders sit on their hands (maybe slightly singed). 

With metal warranted against the January 2015 date becoming prompt this week supplies are likely to up-tick contradicting the narrow bands of supply and demand. One certainly to keep your eye on if trading, especially if the physical market becomes tighter (allegedly) again. (Circa 19th April 2015). One suspects that Standard Bank's Aug/Sept notes on copper might need a slight revision. 

The question over the short-term is will the Chinese smelter excess still be managed appropriately (drip feeding back in to the market) with some losses stacking up or is there likely to be a very short-term swell in physical to meet obligations? The market I suspect will wait till factory restarts before taking an opinion. With factory gate prices lower there's pressure on the market to maintain a competitive (read as cheaper) attractiveness.

We see the results of Amara Mining's (AMA) placing which shaves certain assumptions off the target or take out price, down around 10% of previous estimates (Approximate 25.2 - 28 pence now.) The positives are any suitor is wise to acknowledge AMA is now far from vulnerable to speculative approaches being funded to an investment project decision and is supported. If the book-build was so well supported why is there a discount to market of 15% or thereabouts? 

In-between AMA's announcement of its intentionto conduct a placing (worth a read) and today the costs of the BFS and completion apparently appreciated 10% or should it be the needs appreciated 10%. It’s acknowledged that with a prevailing wind for gold it was wise to press the button on cash. The disappointment being, if Peel Hunt and GMP Securities Europe had to offer a discount on the price, it does not bode well for other entities looking for cash. So in the absence of Randgold (EMC May 2014) news or Samsung, Q4 2015 looks to be the date in mind, one hopes financing can be encouraged in the current gold climate sooner rather than later. 

Stating the obvious award goes to J D Wetherspoon(JDW) with increased competition from the supermarkets. JDW more recent declines I thought were obvious, with landlords’ holidays often taken post-Christmas? With calls for equality in treatment stating the obvious bad news in the sector etc...if JDW don't like the sector why are they operating in it? Expanding yet claiming discriminatory pressures is never a good thing with increased LFL sales and margins, albeit under pressure from their wage increases are healthy. JDW's update will be taken as well as Majestic Wine's (MJW)! The hangover should have been taken post-Christmas. 

Its the day for the GLIF  (GLI Finance ) dividend announcement (see: EMC GLIF April 2014) and only two days ago Inspired Capital (INSC) (the old Renovo aka Ultimate Finance Group) trading update.

Bowleven (BLVN) informed the market of the two well exploration drilling programme on the Bomono Permit, with fingers cross for the company (no position), they'll need it! WTI (Weatherly International) quarterly operations and production update does not bode well! From EMC, will it stop the rot!, we had our answer sooner than expected! 

Little time to discuss the BLT (BHP Billiton) Operational Review Half Year Ended 31 Dec 2014 shale being an obvious candidate for some tighter cost controls and copper even performing well (grades?), Anglo Pacific's update on the Kestrel royalty, seeming like desperation to maintain the SP. Afren's update hasn't gone down well re: amortisation payment.

Atb Fraser

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

Belatedly: The market woke up the realities of what Pressure Technologies did (PRES)

Pressure Technologies today finally informed the market they're in the oil sector being unfortunately punished (Disc: Short). Its unfortunate as the company is well managed and has been a significant long until more recently. Today's final results are positive but one would be wise to work on a 20% reduction in revenue for the year ahead as a conservative approach.

As a separate note, it was amusing to share my thoughts on Petropavlovsk (POG) today with a target price of circa 5.25 pence. Its amazing certain people are supporting the rights issue, would someone be kind enough to remind me if certain parties sold significantly higher so of course it would be rude not to support a rights issue at...5 pence. With the current state of oil likely to have implications (negative) for gold its not a placing without risk.

Atb Fraser

Addition: I had been asked today quite a few times what is happening with Kenmare. The only thing I can conclude is that Kemnare's likely to be an all share offer in the current climate which means any offer is materially lower because of the Iluka Resources share price, down near 30% and dropping since September. 

Amusingly it was some tittle tattle that stated that Rio had a few chaps walk out their offices the other day whom may suggest there's corporate activity going on. It shall be interesting as the market, like I, has removed any possibility of a corporate action on a number of levels. That is not even considering the regulatory approval needed. Perhaps once could have another crap co spin off for certain assets. 

The noise coming out of the investor day for Anglo American (AAL) isn't positive either. Currently with a lethal case of some lurgy no woman could survive its with regret I wasn't able to take the time. So here's a few items, including the webcast and presentation. AAL despite my views should be congratulated for taking this approach of transparency.