Morning Mumble: (Holiday Mode) EMED Plc & CAML, and a QPP Cheeky One!

Good Morning, 

Its pleasing to see a decent amount of news-flow on a Monday.

EMED have an extension to the loan facility. This extension reads as though a strong armed is being applied to force (or appear to) force EMED into accept 'some' terms that are on the table currently from the 'three' (Trafigura, Orion Mine Finance and Hong Kong Xiangguang International). One assumes they'll be able to organise a meeting by 30 April 2015 to avoid incurring extension fees. 

Some egg on the faces of those with very large positions in QPP (Quindell) today, with the gossip proving right. QPP, for those with any interest now, was something to avoid as the risks being significantly unknown. It was surprising to speak to such a well-versed trader today whose position was impacted by the news in Australia of Slater & Gordon overnight. One for the learning curve?! Today it would have been rude not to have a cheeky short "on the news." 

Central Asia Metals (CAML) full-year results beat even the most bullish expectations, dividend up, revenues up and profit beating the whisper by near 30%. Return on shareholder funds even allowing for FX impairments and rebalancing of Kenges Rakishev 16.02% holding, are positive. 

Improving EPS, bottom line and the Tenge devaluation aiding costs CAML's cause. 60% of the cost base is Kazakhstan Tenge. Expects further bottom line improvements as the full affects of the Tenge devaluation kick in, assuming production levels are maintained. 

With the copper market adopting a more realistic outlook, even with the current prices, its hard not to justify 'turning positive on CAML (again). See  EMC: CAML from January. The EMC is slowly getting over its issue with the director sales by Mr Nick Clarke, Chief Executive Officer, although one will always have an issue with a director without skin in the game? We'll save that for another day, expect a special dividend in due course. 

Arian Silver (AGQ) achieves first concentrate production at San José, with the more recent net smelter royalty purchase AGQ's woes may just about to turn. Today's "not" very interesting news is Bluefield Solar (BSIF) most recent acquisition, those SIPP investors will find it hard not to have some form of lower risk stability, with a yield of just under 6% isn't too be sniffed at (EMC 2014 (BSIF).  AND, GKP (Gulf Keystone) get an extension on their homework!

Anglo American's (AAL's)  inability to sell its assets and now looking to give them away doesn't bode well for Jubilee Platinum's (JLP) Tjate project in the mid-to-long-term. Blackrock realising AAL's woes a little too late, or perhaps "just in time" and selling down.

The news award goes to Randgold Resources (RRS), whom see growth opportunities.

Atb Fraser

Morning Mumble: CU under pressure in Asia and China, WAND (cashflow warning?), ENQ (the Coup) and Wolf (corrected)! + Food deflation is officially here!

Good Morning,

A brief one from me today with the luxury of time not being afforded this morning. People should organise meetings well in advance, instead of at 10pm the night before!

Asia and China is seeing higher volumes of copper, the perception is this is likely to be shorts, however it may actually be hedging for the larger boys, the three (Red Kite, GLEN and Trafigura), and the consumers of the commodity. Trading $2.55/lbs or $5621.78/t so just a smidge lower but volumes are up...panic stations for those over-exposed with quite a few bets going on for $2.11/lbs or $4673.79/t. Why $2.11 is confusing but perhaps time will tell. 

Having been short on WANdisco (WAND) from some higher ground, there's perhaps a reason to review this and jump on the bandwagon again. WANdisco's proposed placing really says the cashflow is not there. Its worth some analysis as WAND may not have the size to be viable on their own. Perhaps, if rumours are correct WAND should have accepted the offer earlier last year. 

Wolf(WLFE) Wolfe Minerals building activities update shows things are going along swimmingly. With commissioning for March 2015 and production due in August/September 2015, the appetite for this stock should progress. The Chinese market in tungsten down to circa $291/289 APT (Ammonium Para-tungstate) will give Europe an indicator of next month’s prices. 

Enquest (ENQ) today have update the market of their 'resilience' with trading and operations update showing the covenants have been reset. With rumours of a fundraiser being around for a month now, with little appetite previously, will ENQ be pressing that button now? I doubt it...the market may just reprice ENQ by Monday. Over to ENQ: Additional Information

Funding. In 2013, EnQuest entered into a revolving credit facility ('RCF') of up to $1.2 billion committed, plus a $500 million accordion feature. In light of recent low oil prices and in order to provide flexibility for EnQuest's capital investment programme, the RCF lending banks have agreed to relax the existing credit facility covenants. The net debt / EBITDA covenant has been increased to 5 times and the ratio of financial charges to EBITDA is reduced to 3 times, both until mid-2017. As at 31 December 2014, EnQuest's net debt was approximately $1.0 billion.

2014 production, revenue and EBITDA. EnQuest achieved provisional production for 2014 at the top end of its guidance range, 28,267 Boepd, up 17% on 2013. Revenue is expected to exceed $950 million and EBITDA is expected to be in the range of $530 million to $580 million.

ENQ with the appreciation of oil (as should be considered) was creating greater downside risk than upside. The disappointment being I was unable to get out of one position. So the Atlas Iron holders can cheers as all the profit disappeared saved only from a loss by the tighter spread from a loss. Will reappraise...a very good coup for ENQ. 

Food deflation is being seen by Premier Foods (PFD) trading update, worth a read whether you have a position or not. 

Atb Fraser

Evening Bolt On: Afren & MPI + Alleged CU Chaos (Investments)

Good Evening Morning, (forgot to press publish as well)

It was going to post this last night but after a long day and out most of the day don't expect much more. Hopefully copper won't CU you asleep!

Afren Plc (AFR) we know are being pursued by SEPLAT Petroleum Development Company plc (AFR share price movement statement 22nd December 2014). If we think back to EMC over to MPI the curve ball. It would appear the word (city street speak ha ha) in Nigeria (via Ian who is showing discontent and going to Indaba!) is MPI (Significant shareholder in SEPLAT) wanting to maintain its interest in SEPLAT by providing the cash element of any deal. 

What the AFR deal is valued at is down to conjecture and significant speculation. Investors can argue any case of valuation between 6 pence and 85 pence in share valuation, Save for today's close on longs and letting capital equity risk the end game, AFR is will be limited within my trading agenda for the foreseeable future or until a deal is or is not announced finalised.

Yesterday we had the FT China funds bring Chaos to metals markets Henry Sanderson and Neil Hume. This was known about around the time Red Kite's holdings were circa 60% of the LME (London Metals Exchange) copper in October 2014. Not only did it distort the futures market but create the equivalent of a raid effect on a stock commodity that's tightly held and without any natural principles of trading to derive a true market price. 

Investors would be wise to consider the impact not only of Shanghai Chaos Investment Co but 3 major trading houses betting on a long trend from January 2013 with copper bucking all the other commodity trends. Chaos Investment was not the distortion in the market it was the reality, the likes of RK Capital Management (Red Kite), Glencore (GLEN) and Trafigura Beheer BV (Trafigura) were the distortion.

The categorical absence of speculation in copper and the hoarding of undisclosed stores of Red Kite, GLEN and Trafigura have in essence created a false market (the three). Aided in part by the closure of Clive Capital (Circa $5B under management) in late 2013, Armajaro and Astenbeck performing below par and China not pushing forward their economies of scale that would make for the three being largely immaterial in price controls.

From 2013, LME warehouse owners were having to pay premiums to obtain physical deliveries of copper (the same as the other day when EMC commentated on Outcry pricing). For a considerable part of 2013 and most of 2014, the commodities traders forced industrial consumers to speculate rather than take the spot price. This unwound just after Christmas this year including the Chinese premium or risk within pricing (See Codelco EMC comments 12th December 2014)

What is known is there is nowhere near a deficit in copper, supplies and delivery are flowing with limited Chinese speculation. With Chinese speculation until December/January being absent, save for the larger boys funded by the Government for use, limited speculation and smaller funds including Chaos Investments the main elements were physical. The contraction was largely brought on by the Qingdao copper scandal and the three trading houses hoarding/limiting supply. Qingdao had a three pronged effect on the market, copper imports contracted notably, speculation reduced as a result of a contraction in financing and a realism returned to the health of the economy and market in pricing.

So with an alleged tightening of copper yet again (read as pricing controls, limitations and price premiums on immediate physical delivery), copper in the absence of Chaos et al with more to the trade than just Chaos see: EMC posts on main demand in China etc...), copper is likely to appreciate until of course a swelling of supply yet again is formally evidenced. So we are reminded of despite copper fall, Las Bambas construction continues, which if I'm correct is set for production end of Q1 2016 (circa 14 months away)

We will leave the discussion for another day on the mines at Sierra Gorda (Owner: KGHM International; Location Chile), Toromocho (Owner Chinalco, Peru), Oyu Tolgoi (Owner Rio Tinto with Turquoise Hill Mongolia) and Minas Ministro Hales (Codelco Chile) all on the ramp up or coming on stream copper supplies won’t be an issue even towards the critical stage of 2018. What is at risk is the clarity in pricing… (Old data so may need ownership structure changing from January 2014.)

Considering the flow of money with higher discretionary spending, we have JD Sports (I can't use fashion in the title apologies) performance following the Christmas trading period. Over to Sports Direct with the investment arm (my view). No time for the obvious CHF Gold benefits nor silver, nor platinum. The Oil technical trading suggests a movement towards $55/bbl in the short-term (and subject to change). 

Atb Fraser

Gossip: Seems IGG weren't the only one caught off-side by the Swiss Roll!