Morning Mumble: China + Gold...AAL's / JSE: AMS hand count of PGM's. Rambler's talking of expansion! + RUR's default.

Good Morning, Forgot to press publish this morning, Good Afternoon,

It’s hard to start this morning due to there being so much to cover and little time. 

Everything is going on in China, on the stock market, in the economy and the slowdown in development (read as reducing investment). How's that for economic analysis?! In essence there is no fiscal policy that will not be considered by China to maintain the economy.  

The long fated transfer of wealth between Government and citizen/comrade has now stalled, including the Chinese people's investment in mainland China generally. With monetary outflows from China increasing both directly and via the Shanghai-Hong Kong Stock Connect, the Government is left having to fill the void/gaping hole. Orders are on the increase from mainland China to the Honk Kong (Southbound), where the mature market is allegedly benefiting from greater disclosure and transparency. 

With China catching a cold, those Asian trading partners (south-south trade) are under pressure. What this means for those recently listed, including Alibaba (NYSE: BABA), is yet to be fully determined. BABA will not be exempt from reduced ordering and trade efficiencies that are put in place (read as reduced wastage).  Also likely to have a knock on for Standard Chartered (STAN), whose capital requirement rumours are being raised again, after today's new management changes. How much does STAN need? Although more recently STAN have developed a conservative approach to lending.

Often when looking at the realistic view of China, people mistake negativity or a lack of positives as being the end of the world, rather than resetting expectations. Some brokers, whom were so bullish when attending Camp AV last year (2014) are now reassessing their position on China. One would be wise to consider the notes from Aviate et al (China once upon a time bull's), and look how it’s turned out in 13 short months in comparison to the bullish predictions. 

The drop in construction both residential and commercial, has serious implications for the Chinese economy, throughout the entire supply chain both materials and labour. Factories’ own inventory levels are rising, not helped by lower gate prices. Steel mills producing above and beyond demand but "committed" to certain higher cost Government obligations or funding gets withdrawn. 

Precious Metals are all under pressure (EMC: Gold the “bears” will have this market for longer), the falls in Asia one suspects are a result of a certain trader cashing in their chips. 

Gold: $1116/oz (had been as low as $1080/oz. as knife catchers entered the market). 

Silver: $14.80/oz (had been as low as $14.55/oz.)

Platinum: $980/oz. (had been as low as $970/oz.)

Palladium: $605/oz (previously touched $600/oz.)

Copper: $2.4650/lb 

China is giving an appearance of confidence, with their stock market measures attempting to entice the public to buy into the story. Having committed near $200b of funds in a month or so to margin/equity, its merely propped up the fall. Whilst holding fire on a further $275B worth of equity rescue, (Bloomberg: China Securities Finance Corp ($483B) funding to imply support.

China's latest vote was to release its gold figures. Not only did this conveniently happen on Friday with near 1,658 metric tons of gold under the security of PBoC (remember that phrase it may be important). We'll ignore why China hasn't released any gold figures for near 5 years, and leave that for the conspiracy theorists that make little money. What is important though is the disclosure for the purpose of the IMF (International Monetary Fund) SDR (Special Drawing Rights) for the Yuan. Expect a revision upwards of Gold holdings in due course from China. 

In entire contradiction, the crash in Gold. Another Fund having a coup on the Shanghai Gold Exchange catching most off guard. Whether the seller had other obligations that prompted the sale, is immaterial to the action of resetting the pricing a la Copper (14th January 2015), in addition to shorting Gold. Selling 160K ounces is not to be sniffed at, especially during such quiet trade and limited volumes. What are the implications for CitiGroup who’s trading in precious metals has near quintupled in 4 short months with around $45-50B exposure.

On to the market, Anglo American Platinum Earnings Reconciliation by Anglo American, is almost laughable. It raises significant questions over how Anglo Plat's recognising its inventory. After, a physical count of in-process metals (in the ordinary course of business) resulted in the Company increasing its estimate of the quantity of inventory by an additional c.130koz of platinum and 75koz of palladium. Source: Anglo American Platinum Interim Report Anglo Platinum (JSE: AMS). AMS already down 4% from opening. 

From Anglo Plats ...continues with the repositioning to create a high quality asset portfolio, with low cost and high margin production, low safety risk and high mechanisation potential. The assets that do not form part of the retained portfolio are part of the disposal program. 

If anyone is minded, could they pleased identify the "high quality assets" to save significant investigation time. At current prices, the read across to all the producers with platinum at $980/oz. isn't looking great, Lonmin must have near 6 months before the desperation of cash comes to the fore, if it hasn't already. 

Rambler Metals and Mining (RMM) Pre-feasibility Study has a number of assumption in it, although better than some! RMM, Average copper price of USD $2.79 per pound, gold price of USD $1,100 per ounce and silver of USD $15.54 per ounce. Long term pricing of USD $2.79 per pound, $1075 per ounce and $15.50 per ounce for copper, gold and silver respectively. 

RMM hopes to fund most of it from bulk mining Footwall Zone (LFZ), which is allegedly self-funding from current operations (Circa $66M). Even so, there's a capital short-fall of near $9M and assessing possible debt fundraising has been initiated. The funding plan does not make economic sense on the 5 year plan. With more risks created by the self-funding rate over 5 years. Debt-financing alone does not stack up, especially in the current environment so will there be a % of equity dilution/warrants or associated kickers to entice the backers. 

Having not covered RMM since EMC: RMM 9th December 2014. With the denial contingent still suggesting things can get better. One has to question how much of the cashflow supports financing at current prices. This is likely to be RMM's last chance, in the absence of a rebound in RMM's produced commodities, there's a requirement for cash for this expansion. With a modest improvement in grades more recently, RMM are likely to be able to "sell the story." Any purchases would only be high risk speculation in the current market.

More news for Rurelec (RUR) today that was missing two little words in the title, "loan default." RUR announce the appointment of directors, but update on the default that has taken place. Expect a roller-coaster of a ride for anyone still holding! 

Atb Fraser

Morning Mumble: Sirius Minerals (SXX), Lonmin's (LMI) surely heading for AIM & AMC's bounce.

Good Morning,

Sirius Minerals gave an s, update on the key proposal that make it difficult to find any reason to hold the stock in the short-term. 

• Approvals close out work ongoing during government call-in window. Sirius have perhaps created a risk for the Government to hold an enquiry by the expansion of the production model being proposed. Although unlikely, it has to be consider. 

• Final decision notices for key approvals expected by end of September 2015. This timeframe may have to move significantly especially in light of a Definitive Feasibility Study (DFS) being published in Q4, although this may be Q1 2016. 

• DFS being finalised with input from approvals and key contract tenders. 

• DFS results expected to be published during Q4 2015

• Financing to focus principally on debt provision, split into two stages. The risk of performance is on stage one of the financing where there's likely to be a significantly higher element of equity requirement than in stage two. Perhaps most of the debt liability will be disproportionately weighted towards stage two. 

• Stage one financing expected to be completed by end of Q1 2016. Positive in so much as they wish to limit dilution, but...

• Good progress continuing to be made on polyhalite sales to support financings. Expect further news on this with some deals awaiting the "approvals" stage. This will also go to support / derisk the "call-in" possibility by National Government.

The expansion of the plan to near 10mtpa/20mtpa also brings with it a significant increase in CAPEX, although with operating cost benefits. Save for any corporate type event there's likely to be no reason to hold this stock unless you're "very" long-term. 

One has to wonder whether SXX may be considering a royalty type model with an upfront payment.

Iron Ore was thankfully trading around 5 minutes ahead of Rio/BLT's stock with the spike overnight benefiting the miners. This brief rally will benefit Atlas Mining's fundraising efforts. 

For those concerned about the AMC (Amur Minerals) position, its wise to revisit the 2007 SRK DFS and assumed pricing. Whether the project is profitable at $7.50-$9.50/lb is immaterial to the realities of today. Including amongst other things, rising inventories and all this whilst Indonesia restricts exports etc...the Supply Demand assumptions are warped. 

A quick glance at LME nickel stocks over the past 5 years gives a good indication of why there's price weakness. With near 1/3 of total annual world consumption just stored LME. As shorts take their profits expect a bounce in the short-term, true value will out!

More later...on China's commodity grab (QE). Is Lonmin LMI heading for AIM? What is LMI's capital requirements for this year with PGM's near their lows $1030/oz.  Some very interesting gold trades in Asia/America suggesting volatility is coming. 

Atb Fraser

Morning Mumble: SHCOMP, A buffet of commodity woes (Short32) and the implications for Alumina Ltd, Rio's Coal, Hargreaves Services (HSP) and SXX the gamble.

Good Morning,

One may require a nice ice-tea or G&T in certain circumstances. 

Trading on the SHCOMP (Shanghai Stock Exchange Composite Index) was volatile, a plunge from opening of near 5% following by gains of some 10% from the low. Closing near the high for the day at 4,277.223. Margins and leverage appear to be the issue, with the drop being covered post the closing of positions. Has the Chinese Government saved the day? 

Remaining short on Amur Minerals (AMC) but also banking considerable profits, this company is over-priced for the stage it’s at, the cash it has, and the economic potential (or lack of) for the asset . Those following the wider story will note how logistics will become a nightmare and funding is of a scale, that even Sirius Minerals (SXX) with decent support and decent geopolitical headwinds, will still have to be very persuasive about.

AMC PEA (Preliminary Economic Assessment) / PFS (Pre-Feasibility Study) suggested the viability isn't for this time, especially as Nickel has limited to no support and volatile. Maybe in years to come, utilising a telescope and some hope for "guidance." The SRK guidance / consensus of future prices was based on a different climate around 8 years ago. The super-cycle may shift such a degree it becomes economic sooner than envisaged, but the odds are currently against that. 

Nickel is currently trading $5.2231-$5.2345/lb and has been as low as $5.11-14/lb overnight. Those aware of the position of Nickel will not be surprised by the moves over the past week. Concerns regarding the limited growth in the very sectors that are the highest users of Nickel. Watch the $5:08/lb.

For those, including some analysts that have a wish to improve their understanding of the sector (present company included), consider the Nickel Institute (Materials and uses), for a brief helicopter view of the commodity. Often giving a better understanding of the market than covering it with "linked to steel demand." Not the greatest month either for South 32 whose woes despite being Short32 are increasing as commodities take a further hit. 

South 32's (S32/Short32) 'portfolio' of assets produce alumina with the Chinese prices still falling and the Australian prices attempting to keep up, aluminium (sub key $0.80/lb at 0.76/lb), coal (enough said), manganese (anti-dumping investigation and sub critical $2 at $1.93/kg, nickel $5.23/lb), silver ($15.7/Oz.), lead (fairly consistent but trading at a crucial support level of 0.80/lb and zinc (consistent trend currently $0.92/lb). Life isn't too great for South32, although its one to play in any whiffs of recovery. 

The market is not ignorant to the Alumina downgrades across the sector, with producers "almost" scaling back production but never getting round to it. The poker face is in-danger of forcing the wheels off the higher leveraged players. The favoured pure play short is Alumina Ltd that mirrors the market woes. Playing the OTC (OTCMKTS: AWCMY) and ASX: AWC. In the absence of a recovery in both the ex-works price for alumina and such a swelling of inventory in the pacific, ASX: AWC will struggle with share support. 

With Mick Davis buying (possibly) Rio's coal assets (FT), the Yorkshire Post highlights the industry woes where the Hatfield Colliery is closing. This was expected, but the timing has been brought forward by a year or so. The government is unlikely to offer support despite it being tabled in the commons.

Mick's timing is likely to be very well orchestrated. Having sat on his hands and refused to pay anywhere near the expectations of the industry, could RIO's capex needs force their hands with their thermal coal operations. Alternatively, Mick could buy S32 once it's been giving a thorough kicking by the market for being "unfortunately" aligned to the downward cycle of commodities.  

Perhaps time to review Hargreaves Services (HSP), having closed again recently, with Net Assets Circa £150M and net debt around £20M. The company is now priced towards the top end of any valuation, but more than likely nearing the bottom than of this massive drop. With the sentiment in the coal sector and the decision by major investors/funds to avoid any exposure, the stocks have been punished. 

Yesterday was the last opportunity to dump the warrants in Sirius Minerals (SXX) ahead of the committee meeting today. With the stock suspended today awaiting the announcement it's D-Day. With the no person wishing to appear the guilty party, from a psychological perspective on is betting on a deferral to the Secretary of State. 

Having taken profit the outcome is immaterial, the speculators have scope for considerable gains but not without risks. 3 pence circa on refusal. 5 pence on deferral, 38 pence on approval (guesstimates). With an 85% probability of approval/deferral, it shall be interesting! 

The eyes are on Gold at the moment for a place of safety. With dwindling demand and reducing supply in the current climate, it’s that favourite sport of kick the higher cost producers. Tungsten's brief recovery has ended with a damp squid at $217/MTU.

No time to fully cover Obtala Resources' (OBT) final results, with the over-expectation becoming a disappointing reality with this stock, expect further selling after a period of hope. Returns and cashflow are key and in the absence of guidance of earnings, revenues any speculation is limited to hope. Perhaps one for those brave folk that can convince themselves the returns on assets of circa £100M are favourable. Quite how investors are meant to buy a stock with little guidance for an agricultural business also in timber? 

Atb Fraser

Morning Mumble: BHP's South32 (Short32) allegedly less debt & BLT favours, yeah right! Rio's SP10 *(No Sun-protection) and ANTO.

Good Morning, 

There appears to be a lot of misinformation surrounding South32 in the press, where the journos need to take their socks off. There's no way in the world BLT could have loaded Short32 with any more debt, without significant risk to its debt rating and/or higher borrowing costs. Worse, the press have ignored the level at which BLT would have created a defaulting structure that would breach the legal requirements of corporate governance. 

The press ignore the fact that BLT have to ensure that South32/Short32 must be able to operate as a going concern. The commentators prefer to 'believe' that BLT are doing Short32 a favour by reducing the debt. When the sums of the liabilities are put to a total, they are in fact higher, merely labelled differently. 

For those not wishing to split-hairs, the liabilities are higher than 'consensus' with rehabilitation and closure ($1.5B and that may be circa 15-17% on the low side) plus debt of $674M, taking the liabilities and debt to $2.174B, with a $1.5b revolving credit facility being made available. When one considers the on-going liabilities, excluding those clearly labelled debt, its going to make leveraging (without dilution/equity raise) for any acquisitions very difficult, irrespective of the alleged financial prudence attached. Let’s see how the dividend policy goes. 

BLT define South32, as having high quality metals that will be a cash generator, that allegedly the "larger investors" welcome. We'll ignore the volatility of the entire asset class, with a cursory prompt for readers to check the price movements of aluminium recently, manganese is under pressure and coal is not without its significant woes; not so enticing when put in context. Of course Short32's dividend policy will entice the low risk miss-believers into acquiring the stock. 

 

With Manganese, Silver, Lead, Zinc and Alumina making up near 38.6% of Short32’s EBITDA, Short32 may benefit from the Bauxite supply issues thanks to Indonesia's unprocessed ore ban, and declining stocks of Aluminium/Bauxite and Alumina, but how have silver, lead and zinc performed? With any further slowdown in China, don't expect too much in the way of price appreciation, more so a levelling out of both Nickel and Aluminium.  

Staying with mining, and an indicator of the state of the market, Rio yesterday put a tender out for a cargo of high alumina SP10 iron ore cargo. Suffice to say this cargo has had limited interest. The Chinese simply are not prepared to take it without a huge discount, in fact, many aren't/weren't prepared to accept it. 

Higher alumina (circa 3.5%+) content in iron ore causes the slag to become 'rather' fluid during the steel-making process. Processors can be blend the higher grades with lower grade. Simply put, pollution/environmental regulations restrict these deals and limit the price. 5 years ago, some savvy traders would have combined the deal with some low alumina ore from Vale, blended it and made a profit. In today’s commodity cycle, it’s simply not worth the effort or time for most, without a decent discount circa 10%+

Antofagasta (ANTO) have surprised the market with worse than expected preliminary results (2014). We'll save the readers from obtaining an accountancy degree and wade through the waffle in machine gun like fashion. Copper prices down near 14%+ on the corresponding period, taxation in Chile up (it’s only been in force since 1st October 2014/PWC did a very good peace around this time). With margins under pressure and desalination likely to increase costs per pound, what were the markets hoping for today? Simply put, if the investors haven't already priced in lower expectation, they should be from now one in, but all is not lost! 

ANTO's Los Pelambres issues will have an impact on the next set of accounts. With a trending reduction in oil/energy costs, ANTO only managed a cash costs before by-product credits at $1.83/lb, a modest were 2.2% higher than the previous year despite a decline peso. These costs will grow as the wage deals / salary increases kick in over the next 4 years and the declines post reporting period in the copper price.

On a positive, any weakness in the Peso will benefit the reporting cash costs and CAPEX/OPEX expenditure with net cash costs, including by-product credits being a healthy $1.43/lb. The potential upside from Antucoya, Encuentro Oxides and Centinela should not be ignored.  One might just start to turn positive on ANTO with its cash costs being an envy, save for any more radicalisation and issues at Los Pelambres (and the El Mauro tailings dam). The reoccurring theme of grades should not be ignored though but better than management guidance, nor for every 1% movement in the PESO (CLP), it equates to $0.0075 cents P+ve/N-ve to production costs at the current USD Vs.CLP (Chilean Peso).

Unnecessary cheer at Lonmin (LMI) with the appointment of COO Ben Moolman and Bowleven (BLVN) finally have the cash in the bank. The market "may" just re-rate the company, albeit past performance and sector/industry woes will hinder any blue skies beliefs. Juridica Investments (JIL) disappointing the market for no particular reason with their final results. A long-term hold with some very good dividends so far, illiquid so one for the traders as well!

Atb Fraser

PM Bolt On: FX QE ECB KMR...Boron (not boring), what a steal!

Good Evening,

The ECB QE announcement was and did benefit the market (some quality) and dragged up some of the dross as well. Gold attempted to anchor in at $1310/Oz. and failed miserably (for now), with a good % of the Au market cashing in some very stale positions the market will look for further direction. Already the bulls are predicting $2k/oz. again! The Copper malaise continued ignoring anything QE, in fact shrugging the news off and dropping a cent or four to $2.57/lb circa $5665.87/t. 

The common-sense trades were FX movements and its now over to the market to eke out the beneficiaries of the ECB QE. With earnings under pressure from lower commodities, factory gate and exports, the jury for the ECB to cure the EU woes is out (myself included). 

Is it time for China to dump steel into the EU to suppress prices for longer and deflate consumer prices. This steel will of course be boron free (read as Tax Rebate) but there are limited alternatives with the Chinese market being awash with it. The surplus with the addition of boron (whether it was or not is another question) had previously made steel a competitive export (even for the poor performing mills) because of the 9% boron steel tax rebate that has now been cancelled. 

Russia has the potential to take up this strain from China, with the need for FX/Earnings Russia has been given the best headwind to obtain market share in hot-rolled steel exports. Russia has a weak Ruble () and Chinese contraction in steel exports in the short-term, Russian steel could be on to a winner! Evraz? OAO Novolipetsk Steel? Severstal? One wouldn't want to be holding the Indian equivalents, Tata’s costs are already difficult to manage, no market Europe for Russia? Nevermind India will do. Indian producers may become more bullish if the $1:56, where pricing will impact on Russian exports to India. .

The Chinese steel exports may contract in the short term, but Europe may find themselves the beneficiary of some cheap steel from China! With iron ore having plummeted and searching for a balance in pricing, steel prices declining 14%, if the two continue for much longer both steel and iron ore production may go into decline as well.

KMR (Kenmare Resources) proved the perfect trade today with the traders hearing the gossip of negotiations nearing an end that will give some assurances to any offer Iluka Resources wish to make (or not). KMR, as I've stated for a while at circa 2 pence becomes the pure down side protected/limited trade long. 

There's some loose gossip that Iluka Resources are not interested in to too many of the current senior management. How reliable this is is another matter and untested, but severance might be a stumbling block, could it go hostile? I doubt it as the creditors want more clarity on repayment and return on 'investment'. Iluka Resources as the larger entity will provide this if combined. With the chatter of 12 pence, it's certainly not for the faint-hearted 

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: CU tomorrow...Maike, Au+Ag and Greggs (GRG) + Oil Woah! Defaults coming...Goodbye Vedanta

China’s Maike says copper set to rebound By Henry Sanderson now the knife catching begins. Although futures and orders contradict the statements by He Jinbi. With copper futures edging lower for March at circa $2.7200/lb (flat) for May 2015 and being limited in orders, it questions the 3 month outlook by Maike. One would be wise to acknowledge that the outlook for copper in the mid-term is good, in the short-term, as alluded to yesterday (EMC) the economic indicators are not as positive as some would have you believe. What the pricing is suggesting is China could have been the material cost in copper by not their (ghost) speculation not their physical consumption.

With most traders looking at the technicals of gold bar the obvious common-sense approach, both Gold and Silver made solid gains. Gold (Au) $1236.40/oz. currently and Silver (Ag) $16.84/oz. Au is likely to see headroom resistance at circa $1239.90 and Ag circa $17.10. With the larger bets going in on NY and Asia for a material tick up some $100+/oz., the surprise will be if Au breaches $1350 by March 20th (Key date for those speculators reviewing more than H Samuel restocking (Sarcasm).

Having to review my thoughts on Greggs (GRG) EMC 15 December 2015. Showing its wise to follow the market (at times), with oil tumbling at faster levels, the weather being more than favourable and food on the go in season it was rude not to long through the Christmas period. What today's trading update does show is I was categorically wrong to call the fluke in September (EMC). Dixons Carphone (DC.) has performed as well, but banking as it hit my target price. Who'd have thought the long/short balance was near 50/50 for the Christmas period, albeit changing as the obvious candidates drop further. 

Greggs (GRG), momentum appears to be gaining strength and with no likely interest rate rises in the pipeline for some time, low oil, retail and grocery + convenience is likely to benefit save for a deterioration in their equation of positive trading (aka weather, retail and higher discretionary spending). Could the Supermarkets slower declines in LFL (like-for-like) have been saved by lower oil! Improving the costs in the entire supply chain and on the shelf.

W Resources (WRES) is yet to change tracks positively, and down to the Tungsten price...edging lower circa Tungsten APT European $295/mtu (Metric Tonne Unit). It might be wise for Thor Mining (THR) to revisit their expectations of prices at least sensibly and reduce their expected $354/mtu within their upgraded Feasibility Study. Even with some sensible revisions, THR's returns are looking half decent allowing for a higher cash cost. In addition to the lack of gold benefits as Crocodile Gold Australia Operations Pty Ltd ended the memorandum of understanding in August 2014.

It was common-sense the oil trade (read as don't be long) EMC Oil the Support, we're currently only two bucks off my critical $43.20/bbls before OPEC has to act at Crude Oil (Brent) $45.42/bbl. Whether they do or not is another matter as the material downside has to be balanced appropriately with the benefits. Strangely Quindell (QPP) had an exposé on the short ownership as soon as nature would allow, it’s strange that Brent & WTI traders have not ! Over to those complex trading houses with opaque ownership structures to keep silent and the press not to break the status quo! No conspiracy theories here, just facts.

What the market is doing with itself is hilarious, CityLink entered administration but it takes a huge great flag from UK Mail (UKM) today to point out the obvious with their Q3 trading update. The comedy this morning being "the gossip" in my in box with an alleged seasoned professional repeating an echo of years back when Better Capital (BCAP) bought CityLink. Are parties aware that BCAP owned CityLink? Its highly unlikely they'd be bidding for certain assets. BCAP years ago was my favoured play, selling out and moving on to Blue Solar in circa July 2013 for my low risk pension play. 

Whether early on not today it’s a sad day to be closing the shorts with Vedanta (VED). Having been shorting this stock since mid-2014 its time to bank and wait for further indicators and an update from the company. VED has a number of risks besides the commodities prices...that being the majority shareholder and what he decides for VED. With net debt at the last count being $9,054.6 million its likely the tumble in commodity prices has not improved debt, with a deterioration in cash but gross debt maintaining the same levels of $17,234.0 million. Perhaps a little premature but one is always wise to bank profits. This will need a revisit soon.

Little time for everything else on such a big day...

Atb Fraser

Morning Mumble: The Ghost of Alcyone Resources, Twin Hills

When Alcyone Resources called in the administrators one didn't expect to see their assets up for sale for long but this is not the case. With silver production small, the economies of scale are limited. By my estimates the Twin Hills Mine post a decent ramp up to circa 200K Ounces per month could have a cash cost of around $10/oz (U$D) and potentially lower, all in sustaining costs around $12/oz with a half decent rate of return. If anyone has a few mill spare...:-). 

Atb Fraser

Morning Mumble: Potential Manflu but more operational than some miners!

Good Morning, 

There's a spate of potential manflu which I appear to have caught from my daughter! So having been up most of the night with her one doesn't expect much activity today bar essential items. Staying with the theme of manflu it appears we had yesterday’s South32 announcement from BLT (BHP Billiton). The reasoning for the name is not because it gives a good indication of which way the share price is expected to go but because most of the assets are in the southern hemisphere. No doubt contradicting those with common-sense for some time as people position themselves. 

Yesterday also saw the announcement of LMI's Number One Furnace leaking molten furnace matte. For the regular followers of Lonmin (LMI), one hopes this isn't chrome related for saying that LMI have historic grandfather rights to ConRoast (owned by JLP for 10 years) why didn't they make improvements last time? So with cash costs likely to shoot up and net borrowing to increase (anyone's guess on the final figure) will there be the requirement for another rights issue? One assumes they won't be asking the International Finance Corporation for $100M. Quite how LMI will come up with a resolution to mitigate these issues shall be interesting. 

Today's announcement came as no surprise for the FitBug placing the disappointment was I lost out on a bet by a mere 12 hours. The loan conversion looks to be creating an overhang as well with anything above 1.5 pence being in the money. 

Rambler Metals (RMM) inform us of a reoccurring theme that continues with a decline in grade and revenue. With these sort of returns the case for a management change are increasing. RMM's measurements of earnings per share are dire the drop in grades and absence of disclosure of the grades sums things up. The denial contingent will state things can only get better...

Tesco's (TSCO) came out today with some a material statement which pending on demands will come back to in due course. With no position either way, it's certainly an indicator of how competitive the market is currently. Make this year count, next year's Christmas could well be 25% more expensive, so get the elastic waist expander and utilise those cheap track suit bottoms. 

Gold and silver have lost all energy recently after some serious swings the trading implies no one wants to hold a position long, up in NY, down in Asia and back up in London. It would appear a few Australian's had a slap of common-sense and finally got out of Atlas Iron last night. Those knife catchers reading Bloomberg wished they'd ignored Atlas Iron Offers Cheapest Bet on Ore’s Rebound: Real M&A. It makes you wonder what the position of Baosteel Group Corp (Chinese Steel producer) is. Tony Poli must be thankful of the deal earlier in the year, perhaps one of the best deals of the year. 

With Chinese import data out on Sunday, China's Nov iron ore imports hit second lowest this year on Sunday it was no surprise where the bets were. The figures I'm reliably informed have lead (I known!) to a lot of late night work for a few analysts to review their opinion of Rio/BLT. One hopes their figures are better than mine save for a GLEN bid which would be madness and my view is unaffordable. Next stop for Rio is said to be 2600...

So much to cover and so little time, this morning it was the day to close my Afren shorts with a view (no specific timeframe) to buy the equity with the short profits. Afren, despite its positives, is a lesson on when to take a loss sell and short. For those learning the arts of the dark side (as one chap calls it) Afren is perfect example of when to change the shorter-term opinion and get in there.

Atb Fraser

Morning Mumble: Carnage Part 1 Retail, Sugars & Safety in metals...Tate modern...(not so) and Silver WTH

With commodities on the slide the market introduced contempt  for the pricing with recovery in the iron ore producers in Asia and flat in the UK. However, looking at retail, why did Mothercare not snatch their arm/hand body off. The rights issues is a joke, as stated, any holder should have sold on the news...not now! It's cost them dear, the rights issue is a positive for the company, not for the holders. See: Morning Mumble: Iron Ore (From Kumba via Pilbara to Marampa) & LGO's placing...and does Mother Care?! (Poor I know).

Tate & Lyle came in with a lot of known issues all being stacked together, what the market are doing pricing the Co at such a level is beyond me. I have an aggressive target price on TATE of 465 pence. I'd avoid any longs in principle (subject to news changes) until the next warning coming in January. Sucralose might just save TATE, but quality is the key. Something PureCircle might need to look at...Tate still not valuing their Stevia Tasteva (TM) brand with no mention of it. The dividend statements might save them some short-term pain!

Metals has had support come in at last, with some stability across the board save for Iron Ore. Precious metals steady as they go, one would have thought the new trading opportunity would have improved things for gold? The Shanghai Gold Exchange should sort their data out but perhaps that will come over time but volumes were the highest for awhile so I dipped my toe in, the conversion issues to Yuan are very prohibitive, will the exchange last? 

Staying semi-precious with profit being a rarity, what are some silver producers doing with the current price is beyond me! What's the purpose to produce something more expensive than the price achievable! Hochschild’s (HOC) might just have a shock if this continues. Perhaps changing banks and broker to HSBC would assist the price? (please excuse my sarcasm there). Afterall, the writing was on the wall (Morning Mumble: ManFlu (Death Bed) & Pedra Diamonds & the fall of silver?). Rather obvious and not so long ago?

Its best if I let people work out what's going on with Chaarat Gold with NFC and NERIN to prepare DFS for them. Why parties would not be taking profit is beyond me....perhaps I'm myopic! Chinese involvement and cooperation, perhaps there's more profit to be had? Surely there's better out there, Amara? 

Apologies for the brief it has been a manic morning, with Alibaba shorts going brilliantly and in short supply now! Mothercare, FX and gold, I bought some gold at 1217$/oz (Volume is increasing), long that is!

Atb Fraser