Wolf Minerals (WLFE) & Churchill Mining (CHL) inc. tangents.

Wolf Minerals (WLFE) & Churchill Mining: Placings & being wrong.

Wolf Minerals Ltd GBP99.2m Fundraise for Tungsten-Tin Project (16.3p)  is good news for the company, no matter the financial climate in the short-term (save for the end of the world or significant deterioration in the Tungsten-Tin markets), they’re funded. WLF is a lesson for AIM companies, value, reward and shareholder loyalty although that is not exempt from risks. Its positive to funds, namely Resource Capital Fund V L.P. (RCF) and TTI (NZ) Limited a wholly owned subsidiary of Todd Corporation Limited ("Todd"), have bought into the placing as it shows their belief in the project.

The concern from a trading perspective is this creates a greater percentage held long. The liquidity, or lack of it, has implications which are exploitable such as longing/shorting, with greater volatility. For myself it’s a god-send for Long only it can be of significant impact. The company, based on forecasts and fundamentals is going places, albeit there will be plenty of time to buy between now and production. The question is, will it have a marked drop below the placing price? I believe so. So patience...One would be wise to consider the share movements of Blinx and ASC as illquid comparators. 

Having been short, as I have been open about (I’m still uncomfortable disclosing positions not for loss but the overlap of views), Wolf have performed exactly how a stock should do. This for some long-holders is an unwelcome event but lets face it common-sense was on the cards for how long? Are parties really expecting a placing to be near the highs of 27-29 pence. Trading is not difficult once your inner voice of common-sense is listened to. So over time tranche buy the equity for a longer-term hold, yes it does happen, 

Sorry for the delay Leggie I was trading Ophir, well short and close, but it was a trading! Now today’s news, where I was wrong. Churchill Mining (CHL). This was one of the reasons the board game about. Having known Ian near 34 years, we ended up drunk one night and wondered if there could be significant monies made of out stocks “pre-news” that were in arbitration. Roll forward a significant amount of time, and it is working, albeit not without some learning curves along the way. My view, was that CHL needed cash more urgently and this was in wrong based on today’s news.

CHL have around $3.64 million as of today. Admittedly this won’t go far in terms of litigation, especially international arbitration. If you just look at the costs associated with Rurelec its fair to throw a ball park of around $10M on top of operating costs. What is positive is CHL do not need to (yet), but will want to raise monies, so this in terms of pitching the news is a positive aka less of a discount (hopefully). They haven’t done badly so far, so can only assume they would continue on that track.

The risks for CHL as an investor are being totally out now, as Intrepid Mining have shown things can become finalised/resolved quickly, albeit not necessarily to the satisfaction of all parties, but perhaps the best resolution ‘at that time.’

Today’s Ophir news was surprising in the market, and the value placed on the drill of Gabon Padouck Deep-1 Well (Duster) does not bode well for the company that’s SP has been in decline. Without the papers to hand in front of me, its hard to assess the damage of the duster. Albeit one thing parties do not appear to acknowledge is Ophir is ‘deepwater’ with costs higher, success rates lower and greater expectations parties would have been well placed to hedge 50% of their holding or go short pre-news as the upside was significantly less than the downside.

Finally, the long-awaited news on La Bambas Copper project is nearing its resolution. Parties are suggesting $5B for the asset, it’s cost GLENcore around $2B so far, so not a bad profit. I cannot ignore the back of my mind that GLEN appear to want to hold on to this asset, albeit when negotiating you don’t want to infer its crap! I wonder if the news will be closer to $4.2B all in…time will tell, Friday? With MMG, Guoxin International Investment Corp. and CITIC Metal Co. Ltd. All building and their advisors being the big boys, it won’t be far off the mark: BMO Capital Markets & Credit Suisse for GLEN & Deutsche Bank for MMG et al, its rare one will walk away without near their demands. 

Perhaps GLEN can "then" remove the obstacles to the Transglobe & Caracal Energy Deal and take them all out for around $2B..Paying down Debt by $1.5B and acquiring the assets it has nearly been involved with a few times.  

Unsurprisingly there's significant volatility and a lack of momentum in Zinc (Zn for those Scientist) and Copper (Cu) and the positive being the unsurprising rise of Nickel  (Ni). I still can't remember that saying to remember all of the period table! Old age? Or just brain lazy?!? Nickel's supplies have been totally over-estimated, myself included closing my longs too early. Indonesia perhaps knew more about the supply than other parties. Their confidence in the ban on unprocessed ores is clearly pushing prices. This won't pay the miners wages in Indonesia though!

Very interesting discussion with an Aussie Trader whom has spotted the tightening of supply in Gold (Au (go me with the periodic table recitals). I noticed the arbitrage of buying US and selling Asia for gold awhile back and the need for this to "peter out" (scuse the pun). This appears to be now happening, with a directional uptrend, albeit slow. The interesting element is there has been a consistent buyer in the market since the Ukraine fiasco/crisis. Aussie Rich believes without conspiracy, to be a place to put monies that would otherwise be able to be repatriated. Either way its certainly assisting the gold market stabilise for a push upwards if it continues for 30 trading days (big if)

For the shorters out there, with the confirmed trend on Smith’s Group’s (SMIN) the Interim Results won’t be assisting the push on the share price. With a perfect shorting principles being met, over-egged SP, figures not meeting consensus, higher lows and lower highs...assisting perfectly with profit taking. For those parties learning, look at the rises. Parties should be considering closing positions as the band of highs to lows narrows. Edit/Addition: Not hard to realise the negative impacts of earnings that will 'categorically' be hit by adverse exchange rates.

Atb Fraser

Without a proofreader!