Morning Mumble: What a week, a quick recap!

Good Morning,

What a week, with most pre-election polls being a joke. Having thought that the UK would have ended up with a Labour SNP coalition, the UK should be pleased. A slim majority means that nothing too drastic is likely to happen (yet) but more so, Labour's financial record isn't put to the test again. Expect European issues to be a proverbial echo of will they won't they. 

There is a plus to this election, Ed Balls is out of politics (for now), whether you agree or not, its certainly my Christmas and I suspect one Sharon Shoesmith will be pleased with. So as a thank you for all Ed did whilst in Government and in opposition, Good Bye! (BBC).

Despite the dollar being in good form, the hedge funds and Chinese are betting on their own recovery, for most it'll be a positive. For Weatherly International (WTI), the price has to travel significantly before they're in the money. WTI's trading update is dire, and if they cannot get costs under control this placing will look expensive with cash costs per tonne of $7,763. For old money that's around $3.50/lb ish.

The bet is whether WTI can ramp up and reduce their costs, with guidance slipping back. The market may have some relief after their shining knight (Orion Mine Finance) didn't have them over a barrel and instead anted up (USD) $5.2 million at 2 pence. Why the cost overrun facility wasn't used is another question, perhaps an indicator of things to come! 

Laden with debt and debt payments due from November, what's the odds more cash is needed. WTI should now praying for a large bull run to near $3.75/lb or their costs reducing 20%, both are a challenge, with constrained production its not looking pretty. CEO out, COO in, over to Orion to dictate the show. 

On the 21st May those Glencore (GLEN) holders can look forward to receiving their Lonmin (LMI) stock (AGM approval). With a slight recovery in the price, as the shorts closed, it’s not looking pretty for LMI. With their discussions to reduce costs, it’s all too little too late. Simply put, LMI's figures don't stack up and after the last debacle where muppets gift-aided $817m (09 November 2012). Time now to pass the cap around again, or conduct some drastic cuts. If the latter doesn’t work, at least they’ve got a few more willing muppets in the form of post-Glencore holders. The time is now for more cash psychologically, a fully under-written gift-aider at 85 pence should entice most.

The cuts are 'perhaps' too little too late, those firms that bought into the rights issue had a choice, good money after bad? Will there be a recovery? No doubt, but simply put, the money may just be safer under the mattress! More so, if these cuts can be imposed/implemented without an impact on production then why wasn't it conducted earlier! LMI is one for the list of management to beware of when investing, if their names pop up elsewhere. LMI should be managed as a social enterprise by the Republic of South Africa. As such, they may be able to entice the IMF to waste some monies as well, perhaps even the Chinese version?

On a brighter note, Sirius Minerals (SXX) informed us the special committee date has been set for the 30th June (Put it in your diary now). Still in sector, Highfield Resources has its cap out for $106M to build move forward their Spanish licenses. Muga being central to the licenses in Spain is key, and initial indications are there's been a positive uptake in raising the cash, albeit that has the caveat of "at what price." One ASX trader suggests its a mere 5% discount to close...

Randgold Resources (RRS), Q1 Results were out, it’s very hard to justify the valuation, save for being protectionary on the basis of if one must invest in gold, then perhaps bigger is better?!?! RRS note the supply of gold is slowing (only marginally currently), which may actually assist the price and save some of the higher cost Co's that are just about surviving. 

RRS is a traders dream currently, although as it continues so do the risks of a break out, but not yet. RRS remain silent on acquisitions. A well-placed geologist bumped into some RRS personnel in another African nation...one wonders what they could have been doing there, perhaps their Satellite Navigation went wonky coming from Mali to Côte d’Ivoire?!

Atb Fraser

PM Bolt on: LEX. Miners: Where to be in a world of low commodity prices?

Good afternoon,

Today I afforded myself a treat with 1 hour of Miners: Where to be in a world of low commodity prices? Some food for thought there today that needs some consideration for those in the cycle of investing. For myself, dull for others, it was an enjoyable session. 

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