Friday 27 December 2013

Merry Christmas: Churchill Mining & Rurelec

Interruptions in festive celebrations:

Churchill Mining plc Jurisdiction Hearing Update (27th December 2013)- the grinding cogs are getting there! Seems they expect a Jurisdictional update by give or take end of February. If this is positive, apart from any share appreciation, it will also lead to some form of fundraiser. One would hope for around 40p per share raiser to avoid significant issues/dilution. The fundraiser should be easy to leverage off post jurisdictional clarification. Assuming (as I believe) that the result is positive for CHL/Planet (subsidiary of CHL but combined case.) Should enable some trade opportunities as well...

Rurelec PLC Anticipated Arbitration Award & Loan Extension (20th December 2013) - There's been a number of messages left, in the absence of a name I'm loathed to publish/authorise simply because you need to place some identity on the contributor. Are RUR on an inside period on the International Arbitration result? To put it simply, no they aren't unless they have been notified of a decision, as such notwithstanding any other news to market about power generation, the RUR board are free to purchase on the basis the news isn't known.

So I hope everyone had a good Christmas day etc...I can say mine was one to remember for the better. A really good day, and can highly recommend people not cooking for themselves but getting others to do it. Not even a care for if something is remembered or is the timing right! Brilliant day, and to top it off; a present from http://www.shiteshirts.com/ For those with a sense of humour and wishing to liven the odd party or get together up, I can highly recommend it! 

Have a good break if you're off and if not, enjoy it when you are!

Atb Fraser

Thursday 19 December 2013

Christmas Cheer & Slim Chances...

Well folks, I shut down trading today. Ian landed around 13:00hrs and went to straight to the pub. Having been in Africa for 3 months nearly it was allegedly because he hadn't had a decent drink, but I shall post a photo to disprove that statement in due course! We are decamping to the pub, so I will relay some thoughts tomorrow before shutting down until the New Year.


Save for Rurelec, where there is a slim chance of news tomorrow, I won't be monitoring stocks. I have set my alerts up to catch the news so I'll spend a few days acclimatising to work again in the New Year. Two thousand and fourteen beckons. 


Enjoy the festivities and don't read items that are not needed, use the time to enjoy why you trade or aspire to wealth improvements. Perhaps even consider if you need to trade or invest on the markets and if so what are you aiming for. Look at the rights and whatfor's of investing; it's not right for everyone.

Many thanks for the messages and challenges, I am sure there will be a different cycle of risk for next year. What most are calling risk on, for smaller caps I'll call it 'risk off.' 

And what a year to end on a trade for GBPAUD (Ozzie dollar), the Government (Ozzy) needs it weaker and their needs are also the markets! is it heading for support at £1:$1.91, or even higher around the AU$2.04?

All the best, Fraser and in absence, Ian....

Wednesday 18 December 2013

Antics & Suspicions: Exillion (LSE: EXI) & No-Surprises


Another prime example where the downside had greater chance of occurring than any returns on the upside. 

Well it comes as no surprise that EXI are no longer in discussions. Furthermore, I wonder what will happen to 'all those' trades and whom will be the beneficial owners in say 6 months.The shenanigans and trades just didn't not add up. My suspicions around it being an attempt to ascertain the value more so than an offer have been in part confirmed in the announcement today. 

The Board of Exillon is pleased that the sale process that has been conducted over the past three months has helped to demonstrate the value of the Company's assets.  The Board of Exillon is committed to working constructively with its new shareholders to deliver value for all shareholders.

Yes the share price moved, but that's what happens 'on the whole' during offer periods, the market speculates on the value. Anyone holding the stock in my view likes to gamble, and if you wish to gamble further, carry on. When items did not stack up, it pays to sell and walk away! Its yet another anomaly to AIM. Very hard to determine the bottom/floor or eventual trading range but its certainly not where it has been. In August they had around $90M of cash, this should increase...but today is a godsend for the volatility traders as it attempts to find a level...Russian Oiler, AIM, Oligarchs, what more contributions does one need to create risk? 

Atb Fraser


Tuesday 17 December 2013

The Iofina update: Iofina PLC 2013 Review and 2014 Outlook & Solar & Coal (Mining) Bonds (Chinese)

Iofina

Seems Iofina have now stated (the obvious) what I had commented on via Markets Live. Increases in stock, declines in the Iodine market and the progress of the company being slower than envisaged with inventory being built up. Iofina PLC 2013 Review and 2014 Outlook announcement today has caused a significant risk, for me it's an avoid until its settled. 

Its suspected that some trying are trying to grab some profit on what they should have taken many times over at £2, £2.5 £1.5 and the like and didn't...told you so? No not at all, we all have our own investment strategy, but I would personally be giving myself a good talking to if I had not taken profit a lot higher, closed positions and better still sold via a Reserve Stop Loss because of the 'news and position in the company changing. Anyway, enough of trading, that's hindsight for those stuck and a pleasure for those whom did the right thing without the need for hindsight.

What the company does state is the forecasts are now back to the levels of 2012's EBITDA, so will the market reflect that with a price of say 20-40 pence? Could be interesting to watch as I think its too early to say for certain. Overall, its disappointing for a technology that has so much value but all the same, I would await a greater visibility. Please note the volume again...

On to Bonds, as there's another crisis looming, yes Chinese. 

I started researching Solar 'outfits' when I received an email in August 2009 about PVCS being a buy; albeit it did have validity in the argument it go me thinking about the entire Industry, and looking at the likes of Q-Cells of Germany, Solyndra of California and this led me to Suntech Power. 

At the time I was just learning about shorting, and also had a negative opinion of shorters; they were Satan spawned. However, little did I realise my entire position would change within 3-6 months to shorting most items. Yes I belatedly realised there was a LOT of crap out there and still is. My long portfolio you would laugh at in terms of how small it is now in comparison to my shorts. This will change I am sure but I call myself a negative trader now. Not devotedly going negative but it seems so much easier to find crap than it does good! Or should the term be bad news or pathetically overpriced rubbish! 

Anyway, back to 'solar', I was thinking about a couple of shorts I spent significant time researching around Solar Panels, the likes of PVCS, but my main short was Suntech Power Holdings, (Now Departed from the NYSE). The problem these Chinese companies had/have is the bonds they issued were based on the view there never being a downturn in the market and on the back of Development Loans from Chinese Depts. Solar panel prices were declining so fast, it was clearly becoming a problem, resulting in Suntech not filing any a/cs since Q2 2012.

The market valued the company when the entire industry with the exception of a couple of businesses was in dire straits. As such the oversupply and downturn (also the continued over production) caused the prices of wafers to fall a good 70% and still currently be 60% off the 2010 prices . So led myself to double up on shorts as it was clear the market had not realised that bonds were due. Defaults have happened in China with Local/National Governments supporting some of the Solar Companies via grants etc...The market has slowly turned but the problem appears to be China tried to access and oversupply an industry that was reliant on strict supply and demand controls. The marker in essence was broken by the juggernaut of Chinese production (automation) trying to undercut the Japanese and German suppliers. 

The solar market looks to have bottomed, progression will be far from as quick as the monies are not being spent on R&D to develop products. One to follow to keep partially abreast of the sage is Pure Wafer PLC 2013 Final Results: A Transformational Year. With Debt now reduced and cashflow improving, it looks like the tide has turned...However, as its consolidated, in the absence of news there's no rush. (I'll perhaps discuss consolidation at a later date, but for those that used to read my board, I short a lot of stocks that consolidate for limited periods of time after consolidation). 

Coal Bonds So my point, (I'm getting there honest!), is the Coal Industry in China has been for some time stressed and in decline as has the American support is all but gone for their Coal Mining Industry. This is a very similar story  to Solar Wafers. The market for sometime has been in decline, i.e. ArchCoal share price as an example and their results. So China won't be any different, albeit perhaps more protectionary of their Industry. What the concern is for one of China's Coal Co's is the significant dawn approaching due to default. Coal group’s woes threaten China’s trust industry By Simon Rabinovitch in Beijing.

What the article does not mention is the a lot of the "shadow" lending banks that were formed to plug the restrictions in lending to miners are funded on cheaper monies borrowed from the "real" banks then pumped into assets (alleged) and bonds that pay a higher return. Akin to what the UK had as stooging, (borrowing and zero % and placing in savings a/c's at 5%+). Some did well, but on the whole people were not controlled enough to repay the monies instead racking up further debt...So as it stands, Thermal Coal may in the short-term do well as demand/supply issues arise as companies default/go bust, but with the supply clearly being more than demand over the longer term, it does not bode well for the Thermal Coal sector. 

Coking coal (what is also called metallurgical coal) will perform a lot better...for those geeks out there it takes around 3Qtrs of a Tonne of coking coal to to produce 1 tonne of steel. Coking coal is likely to be better supported than the likes of Thermal Coal (Pending China's growth). This will be supported in part by Countries switching away from Coal to cleaner forms of energy i.e. Gas. Albeit Japan is building two new coal power fire stations by end of 2014 to plug their Nuclear gap. Bangladesh and the Indian continent might provide some support as well. (World Coal Facts for the Geeks)

It shall be interesting going forward, perhaps the US will see a significant consolidation of the Industries like Solar has seen, where instead of 170 companies in China on the Solar train, there will be 12?


Monday 16 December 2013

London Mining Plc Director Dealing (Cont..)...another!


From my earlier post about director purchases you will note another director, this time the Chairman Michael Miles, has gone and invested near £50K (+a few) in the company he chairs. This as I discussed is a positive and isn't a paltry amount. Perhaps others can learn from this example?! I doubt it...but you will note the predictable nature of the purchases. The directors have consistently risked their own capital and put their money into the game...

Have a good Monday! Atb Fraser

Sunday 15 December 2013

Not International Arbitration but some tenuous links to Churchill Mining: Iofina Plc (IOF) & Indonesian Protectionism...Nickel gone mad!

After a number of messages & comments regarding the Friday 13th December 2013 Water Permit Iofina RNS. I thought it'd cover it. For clarity, the IOF thread ADVFN FJP IOF Holdings Page was my work on the company from near 3 years ago before every-man and his dog started punting it. I received a large amount of abuse, and people hoping the company would go bust. I stopped reading the boards as such shortly after that...a) because I was busier and b) I don't need to read 99% of the trash that is there. For BB users, it would pay to read it to be aware of the risks of posting or using BB's. Had I followed their advice of a 'dog of a company' and similar I'd have missed out!

IOFina by my estimates has around 2.4-2.5% of the stock tradable so its tightly held and as such volatile; so 2-3M volume will move it! I'm perplex why some investors did not take some off the table when it spiked, but that's for them to deal with. I find it pathetic people hold hold hold and not take any profit. Are they mad...or just so greedy they can't use their common-sense; of course a 10 fold profit isn't "something to consider selling into is it!" (I hope you sense my sarcasm there) However, that's another discussion and something I'll perhaps cover another time or when this blog changes in the New Year.

My RSL (Reserve Stop Loss) kicked in because it's a stock that is so illiquid I don't wish to be caught in a tank (loss). It was a loss on a recent purchase it's nothing that I would cry about having sold a lot of stock significantly higher. The cause? The Water Permits, firstly, I was surprised that IOF did not RNS's it immediately, perhaps there is a reasonable excuse, but everyone else had read the denial of the permit for  Pending Water Right Applications before Iofina had RNS'd the news (not a positive display of management of market news).

The problem from what I can see is people (investors) are adding so much value into each element of the company before it happens, its either creating an unnecessarily high share price or people's psychology of the share is so stressed (I think the latter in this case). The value for the water permit is hard to determine until any deal is done, but it's certainly not the only reason why people should be holding on to the stock at the moment above it 'adding some value at some point in the future.' The value is in the Iodine production *(Plus technology) and will at some point be taken over by SQM or similar; did the water permit issues mean the value should have plummeted, not at all, but that's the markets.... This doesn't mean you shouldn't have some form of trade plan though, those that ignore the signals generally pay dearly. A prime example being Range Resources (LSE: RRL), a stock I've traded every now and again but not on the positive side for a long time.


People that have ignored the story of RRL should make themselves aware of it to understand the reasons for it (including what risks to ascribe to the management). RRL are similar to a lot of companies that have had or are having a complete destruction in the share price; ironically its almost identical to Nyota Minerals (NYO). There were a number of shorting signals with failed promises of the sale of assets, the acquisition and worse still, the complete destruction in share support. Without any deal soon, I don't envisage Range going anywhere soon. Worst still, even with good news it takes a significant time to bring new investors to the table as most will rightly look to save some via an exit on any good news. Nighthawk being a prime example..I now avoid (or short) once a company cannot keep to its 'aims and objectives' i.e. Market Promises. I'd rather miss some gains than not have confidence in my investment decisions.

This leads me to my earlier post in the week about Victoria Oil & Gas. So from what I can make out the management were in essence part-responsible for the legal actions and the costs to deal with those legal issues arising. However, please look at the next accounts to see if there's a reduction in their salary and no bonuses, including the withdrawal of their options, shall we say on the same % as the share price? Then correlate the SP to the targets that haven't been met...see below for the dire performance.


For the week ahead, due to the sell off on the major miners, I envisage some Christmas support coming in. Will that mean a rise? Yes but nothing of significance without some material change in the indicators. Rio surprises me, as the Chinese appear to love Australian Iron Ore (at the moment) and perhaps more so with the deterioration in the Australian Dollar (my main Forex play) they'll increase their support.

The main story appears to be whether other Countries will benefit from the Indonesian Export Ban. My view is there's going to be a backtrack by the Indonesian Government until such time as the Indonesian Smelter Capacity can handle such requirements (if ever). The main benefactors of any ill-thought move by the Indo Government in my view will be the Philippines for pricing and quality but not quantity, close proximity being a benefit as well. Nickel however should make some obvious trades as the deadline approaches: January 2014. 

The Nickel industry in the Philippines is incapable of upping production in such a short space of time and would take till 2015 (end of) at best to meet Indonesia's contribution to the world market. A good time for a small time Nickel Miners listed to start attracting finance agreements! I hope they use the window wisely. Didn't Dwyka (now known as Nyota Minerals) have a Nickel deposit but based in Burundi near Xstrata's? which I don't think will ever progress; a lot of drilling but that's about it. Based on the news, DMCI's offer for ENK plc was a very clever move! Perhaps totally undervalued by the larger shareholders in the company...Ironically Toledo Mining, whom if I remember correctly had the same suitor as ENK earlier this year, have utilised this "positive news" delist the company from AIM. Strange to say the least!

The Nickel Institute is worth a read to understand more about the Commodity, as Indonesian Nickel is of high grade and it could knock supply and demand significantly. The main loser will be Indonesia in terms of revenue, and the additional costs to the consumer/buyer by the surge in price of Nickel if there is no common-sense applied to the new law! If Indonesia don't do the sensible thing, it will lead to how many small Nickel companies closing until smelter capacity is up and running. China have stock piles that will support production demands for around 5-6 months at best, so with that, producers will resort to using lower grade Nickel. This will in turn push up production costs and all costs throughout the chain. 

Indonesia CANNOT afford to lose the massive amounts of export revenue, estimate as much as $400m a month by Reuters (on the 6th December 2013) and trade that is currently there for their resources that will be instantly cut off. bar the small amount complying with the new law. Indonesia needs in excess of 128 new smelters ; (I think it was Barclays commenting on it not so long ago)! Its a prime example of Indonesia's total ignorance of its industries and knee-jerk protectionary regulations (look at the Churchill Ruling on appeal decision ). I do wonder if Indonesia make up their laws over a Weekend with significant amounts of booze. Surely someone in the Indonesian Government thought: Excellent move in terms of creating Country revenues, but...we don't have the smelters! Surely??? Well it would appear not... 

Have a good weekend! Atb Fraser

Friday 13 December 2013

Risks of International Arbitration - Victoria Oil & Gas


I think its important people look at but disregard Victoria Oil & Gas (VOG) in the context of Rurelec but not Oxus Plc (OXS) or Churchill Mining (CHL)! Its annoying that the VOG case wasn't covered in the public domain the same as Bolivia albeit its unsurprising as its two companies involved. This raises some of the risks for CHL & Oxus that albeit may find in their favour will present some issues such as fault being laid at their doors as it is NOT a straight nationalisation process that Rurelec had the benefit of. 

The arbitration award/decision still leaves a cloud over the company. Now looking at the RNS and decision, what it reads to me is that VOG were too quick with their default. You will notice there's an absence of an apology to shareholders for this action. They basically for the sake of 15 days, cost themselves a significant amount of money. Obviously there's more to it than that, but that's the facts of it. RNS in Italics...
The Company announces that the Award in the ICC Arbitration proceedings brought by RSM has now been handed down to the parties. Whilst numerous RSM claims were either withdrawn or rejected, the Tribunal has determined that the cure period for RSM's "unequivocal default" should have been 30 days and not the 15 days contended for by the Company.  Consequently the automatic contractual forfeiture of RSM's interest in the Concession has not been upheld.   
 ICC Arbitral Proceedings
In May 2013 the Tribunal accepted RSM's request to withdraw four of its claims in the arbitral proceedings 'with prejudice' including its claim that Rodeo Development Limited (RDL) had unilaterally and wrongfully applied for an Exploration Licence of 44 sq. km adjacent to the Exploitation License area. In June 2013 the evidentiary hearing took place in Denver, Colorado.  On 11 December 2013 the ICC published the Award in this matter.
In summary the Tribunal's findings were as follows:
1.   The Second Cash Call issued by RDL to RSM was validly made in accordance with the contracts signed by the parties;
2.   RSM does not have a carried interest in the Logbaba project and the Tribunal has upheld RDL's interpretation and operation of the cash call procedure;
3.   RSM was "unequivocally in default" by failing to pay the Second Cash Call on time;
4.   A valid default notice was served by the Company on RSM on 2 July 2011;
5.   The parties had "sharply conflicting, equally plausible interpretations of the First Arbitration Award determined in RDL's favour on 31 May 2011." The 'conflict' related to whether there had been a prior default by RSM evidenced in the 31 May 2011 arbitration award. If there had been a previous default as the Company contended, then the 15 day contractual cure period applied to the second default before automatic forfeiture. If there was no earlier default the period was 30 days;
6.   Notwithstanding the Company's reasonable position on the question of a prior default, the Tribunal found that it had not been established to the level of certainty required by Texas Law when dealing with forfeiture of a participating interest. Accordingly the Tribunal declared that RSM's 40% interest in the Exploitation Licence for the Concession has not been forfeited;
7.   As a consequence the LA102 and LA104 wells which were to be transferred to RSM under the terms of the first arbitral award dated 31 May 2011 must now be transferred to RSM. These wells are shut in and abandoned, having been drilled in the 1950's.
8.   Success in the arbitration was found to have "been divided" such that each party is to bear its own costs of the proceeding;

As a consequence of the matters outlined above, the position between the parties is as follows:
·    RSM must now pay the Second Cash Call in the amount of US$4.1m promptly or else risk a further default.
·    In accordance with the Tribunal's endorsement of RDL's operation of the cash call procedure, RDL will shortly be issuing a third cash call for RSM's 40% share of expenditures incurred since the second cash call (June 2011) in the amount of approximately US$20m. RSM is obligated to pay the third cash call within 10 days of receiving the cash call failing which it will once again be in default.
·    RSM is required to pay all future cash calls for on account sums and expenditures in accordance with the terms of the agreement.
·    RDL remains entitled to recoup approximately $65 million of drilling costs before RSM can claim its share of profits.
·    RDL will now be pursuing RSM for payment of US$512,000 representing the unpaid costs awarded to RDL in the first arbitration.
Commenting on the Arbitration Kevin Foo, Chairman, of Victoria Oil and Gas; "We had a dispute with RSM and it is now resolved. The Company now has a contributing partner responsible for 40% share of all costs going forward and who is obliged to pay an outstanding cash call of approximately $4 million.  Additional  cash calls of approximately $20m are also due to be issued imminently.   Under Agreements with RSM, RDL expects to recoup the majority of its $65m capital expenditure on wells 105 and 106 before any profit distribution is due to RSM. Furthermore, VOG's subsidiary RDL is entitled to apply for an additional 44 sq. km area exploration area that borders our existing 20sq km Exploitation License on three sides."
What is not mentioned is that there could be further risks of Arbitration and costs due to the way the manner has been handled so far including the 'Business Relationship' between the two parties. Likewise I am unsure whether RSM can afford to pay their share of the 'cash calls'. I would assume so, or they would not have proceeded with the Arbitration? Surely they were aware of the possible outcomes and as such made sure they could afford the consequences of their actions i.e. Paying their share! Will it be positive if RDL (VOG's subsidary) maintain their holding and RSM default, yes assuming they don't rush to default RSM. 

If RSM have not got the cash, I forsee a) further default (and legal action) or b) a deal to reduce their (RSM) % interests and obtain a form of free carry for the works so far. Either way, what investors can learn from this is its a company that has repeatedly had jam tomorrow, even their production guidance has been reduced how many times since it started? Their forecasts for New Customers? What does amaze me is why shareholders tolerated it for so long without a change of Board / Management? If the past is an indicator of future success then the returns are...? Will I invest in VOG? Yes but nothing significant, but I'd not be betting the house on it, all the bad news is priced in albeit I find it strange that Directors can claim their full salary package/consultancy fees on the basis they have hit HOW many targets? Perhaps I'm expecting too much from the "leaders" of a company in terms of responsibility. 

Rurelec over the long term & Discussion Director Purchases (Not Rurelec)

So Rurelec wins Three New PPAs in Peru Totalling 30MW at a price of US$58 to US$60 per MWh. Not a bad pricing structure I was led to believe by a friend of mine who knows a lot more about power generation that I ever will. 

What is interesting is, for Peru it adds to the value already there. The guff from the company website (Peru overview) already shows they have 5 turbines on a hydro project (Cascade Hydro / Canchayllo/Santa Rita) in the Junin/Ancash provinces in Peru (link takes you to the RUR map). I won't bore you with the rest of the spec, you can read it yourself. However what is interesting the 30MW competitive tender process is in the same Junin Province as the current Cascade Operations (a positive in terms of costs and management issues).

Obviously cash is need, but its on its way, Peter Earl suggested that this was before Christmas, however if it isn't in my view it represents a buying opportunity.  I'm in a position where I want the news but on my terms! i.e. a Little later please if you will so the myopic and over exposed traders have to sell up and run! The delay in my view won't be because of any bad news, but because of the process and legal processes don't run on schedule most of the time (just see the Victoria Oil & Gas Arbitration Delays). Recent examples being Gulf Keystone for the muppet contingent!

The longer-term view for Rurelec is looking better than anything I could have imagined. In fact it was only in discussions around 6 months ago that I had a view of it being a sole trade on the International Arbitration decision, sell on the news and off to new horizons. This, strangely for me as I'm autistic trader (black or white in viewpoint no fences allowed), has changed, I'm not on a fence either. I firmly believe in light of the deals and the alingment of director interests means good or bad, the Directors are with you in pain or positives. 

As such I don't think they're in it for a quick kill either. I do wonder if Rurelec will in the future align itself to Santiago and delist of AIM. The benefits are massive, local support, funding and reducing listing costs. I don't envisage this straight away either, due to the support by AIM from holders, including Sterling. Without it, as a holder, you would have clearly had a situation similar to Oxus Plc (LSE: OXS). Something that Oxus seem totally oblivious to, further more refuse to answer any questions or suggestions of a placing I have put to them. One can only assume they love the 'overhang' of the ELF/SEDA on their stock.  

It shall be an interesting story ahead for Rurelec, perhaps valuations and future strategies will give more confidence in the stock post the International Arbitration award. Remember folks, they had an asset, the asset was making a profit and as such the asset has an overall value. I take the view that Rurelec will achieve the upper end of their guidance. The Arbitration panel would be hard pushed to justify a lower valuation. Of course the Bolivian Government will disagree, as they cannot be seem to be making damaging decisions for their Country. 

So the clock is ticking and Rurelec have clearly not just sat there and waited for the Arb decision. Something if I'm honest 12 months ago I'd have wanted them to do. i.e. Conserve cash and just become a shell. Yes, I actually believe that the future is looking significantly better than 12 months ago. Of course, people would be silly not to protect their position and take some off the table to bank profit. Rurelec is moving to my longer term portfolio. So in the absence of any other operational news, its 'merely' the Christmas cheer that is required now!

Director Awards (Non-Rurelec related) - On to something that I have a pet hate about, where Directors award options, some at Nil cost, but generally dilutive to the tune of around 5% of the company over a 3 year period. This style is to me unjustifiable, its not as if they've persuaded a bank or PE (Private Equity) to back an MBO. They've been appointed and generally haven't risked and aligned their interests. Excuses are "because of closed periods" or financial circumstances etc...Well I'm sorry to say, Companies are a simple Yes or No, the directors actually feel the company is viable and will improve in value so buy stock, or they don't think it has value and consider the risks unreasonable so don't buy. As such any company you're involved with, if the Directors aren't putting Skin in the game, consider it a significant risk and factor that in.

So its positive to see the likes of London Mining today, yes guidance off around 10% and allegedly a few one off issues, but the the Company was informed that on 13 December 2013 Sir Nicholas Bonsor, Deputy Chairman of the Board of London Mining, acquired 11,820 ordinary shares in the Company at a price of 100.125 pence per ordinary share. Ok its not massive, 11K GBP but the fact he's clearly stating the company has value goes some way to show the investors he agrees with his statements. Perhaps other directors will take the opportunity of cheap shares. I've been a supporter of London Mining for a long time, yes I've sold and bought, longed and shorted, but the long-term value is backed with management. The management clearly do the right deals, ok Debt expensive but at least it 'ensures' the risk of dilution to shareholders is limited! Unlike however many companies I could name!! 

Take for example Kazakhmys, they have to raise significant cash at some point, the question is, are they praying for a rise in the share price? Hmmm having been short for nearly a full year, I closed most of my mining positions as I believe they're due some positives at 'some point' so the risk at the prices they are now makes it a gamble so I'll await indicators. One of those will be fundraisings. So watch Kazakhmys, any rights issue or fundraiser is likely to impact on the SP, albeit it may be slow with opportunities to short to the "all in price post" rights issue. That was my signal for the short on BARC, if the weighted price was 287, the market had to price in the risks i.e. trading fines and penalties etc..and the difficulties they face as a bank. I'll proof read and amend later, apologies for errors as ML is on!

Atb Fraser (Now proof read "allegedly")

Friday 6 December 2013

Christmas cheer from Rurelec albeit not necessarily planned for with a mini placing to 'trade partners.'


Now call me miserable today, Friday I now don't trade merely research and enjoy life generally with the odd lunch out. I'm also looking at things negatively for short positions on stocks.

I am all for mechanisms to make a company progress, but correct me if I'm wrong but was there 'meant to be no further issue of shares?' The company's cash situation is far from dire and better still, could this 'subscription' have not waited till after the award? I know it's a small amount 'in real terms' but all the same I don't like it. I  won't be selling, but I will be questioning it!

In due course, I'll see if the company wish to comment on it. I have to on balance, acknowledge they've managed things well so far and far from the likes of the Oxus Monthly dilution which you have to factor in as a risk there, so buying over significant periods of time will help things. Oxus really need to resolve the cash flow and dilution with a one off placing! I did email the company to this affect but no response. With the Calunius link etc...a fundraiser is easier than they perhaps imagine and would stabilise the SP and avoid the longstanding short via the equity raising agreement SEDA or EFF. 

The company (back to Rurelec) have been fair overall, but I see absolutely no reason for this placing at this time, with potentially "a maximum" of 18 days before news (according to the BRR article). Alas, time will tell!

I will in the  New Year be changing the blog to cover more items, people will be able to comment but subject to approval etc...So continue that theme...

A number of rumours flying round Bellzone have allegedly agreed terms for the CIF (Chinese Investment Fund) to finance their activities through to production and Emed finance is now just a matter of Governmental Approval of permits. Something I don't see the Spanish Regulators dilly-dallying over for obvious economic reasons. However, the ownership issues caused by Trafigura Beheer BV (Trafigura) might cause a buying opportunity in the New Year pending how its resolved. 

So will Utilities become Dogs along with the Financials next week or will there be a Christmas run? I don't think so on all fronts, with the FTSE having done so well over the year its very unlikely. Watch for the tapering noise though, there is fear (significant trader fear) in the impact across commodities and with the significant deterioration of the Gold $, it could find that Gold makes/settles in a level around the 1100's. 

So with that in mind, have a good weekend! I kindly had a case of Hendricks delivered today for Christmas, many thanks Rich! I shall duly toast you when I partake in the odd one!

Atb Fraser

Thursday 5 December 2013

Shareholder Interests, yet more alignment with the shareholder!


You cannot accuse Rurelec or the directors of doing what 'most AIM companies do' and award themselves a stupid amount of options and better still have at least put their own 'skin in the game.' 

The annoyance is where Directors (of other companies) seem to think they can award themselves 5% of the company. For those that do the odd company deal, you'll note this is a similar percentage to the MBO 'free carry Directors get in Management Buy Outs' (MBO's). So they award themselves 5% of the company without taking the risks? Get real or get a real job! 

On this post, freely comment on companies that do this, perhaps then post them a link to the entire post, especially where the performance of the company has been dire and they "not only need their £200K a year salary but a significant amount of free stock to motivate them!" There is a clear cut equation for when directors 'value their awards more than the effort they put in' so be very risk averse if you see it. One reason I shorted Vialogy was because of the "options" without the performance...and look now!

So let me get this right, the 'other' companies pay themselves significantly more than MBO deal requirements and want more shareholder cash in the form of options etc...I can understand options whereby there is very good performance but not when their is the normal dilution and eternal poor performance. 


So as a reminder from an earlier post, my best practice and gold standard is Iofina. Grant of Options to Directors anything whereby there is a significant benefit to the Directors without the risk is unjustifiable. Congratulations to Iofina, I'll send them a Christmas Card!

Atb Fraser.