Morning Mumble: BG Group & Iofina's 'half decent deal'...+Any old iron.

So the gossip mungers are stating that Exxon are in the UK Currently, I suspect they're in many places. I'm negative on the Exxon deal purely because I believe it's "more valuable" to other companies. One of those is BHP Billiton (BLT); they can afford BG Group, and perhaps "some" shareholders have already given some form of indicative welcome to a share plus cash merger between BLT & BG. 

It’s quite ironic really when you look at the assets of BG, most are admittedly for the future, but what more does an investor want apart from the obvious current cash flow. BG wrongly positioned itself so earnings are jam tomorrow, with declining Egyptian Revenues it doesn't bode well for the balance sheet. Sadly, the company will more than likely sell and divest its assets, weakening the longer-term earnings of the company. It makes one wonder why they developed the Curtis LNG platform (Aussie Asset) to sell it before 'cream' benefits the company. One awaits the developments of next month for a clearer indication. 

Iofina, "reduction" in head count is a welcome sign of the seriousness of the issues facing the company. One can't help but wonder if its blame the new guy formula won’t work either but only time will tell, at least they'll walk with 6 months’ salary in their back pocket. The RNS acknowledges they have offered to be consultants, however the company doesn't go as far to say whether they're taking them up on that offer. 

Hot on the heels of the "headcount savings", Iofina announce a Bond Issuance which an equity kick to it, albeit at a premium to the current SP and various other elements. The cash raised will keep the company afloat through 2014, and with any luck to the water permit approval which I personally believe has more chance of being beneficial to the company than the Iodine. There is an anomaly between what investors have been doing and what the company have done. It’s clear to say the expectations have been greater than the reality. Perhaps some mugs giving abuse for shorters would like to give a coherent discussion about why the company is so undervalued. I still maintain, why didn't you sell at £2+, it's not hindsight contrary to popular belief it's "common-sense Vs. Greed". 

Over to Russia, with Petropavlovsk Plc with their final results. If you think back to their interims there was a $500+M (I think nearer 600$M) write down which made sense. Allowing for exceptionals it’s clear the company's cost savings are at least on paper having a positive in terms of the Costs per Ounce. The company rightly highlights the debt reduction of $115M, in part by a shrewd entry to their bond market to buy up debt at a discount. The group has one thing hanging over its head, well more than one, being a Russian Operator, having debt (convertible bonds of $310M) to refinance by February 2015. Personally I can't see the attraction there, not from a western standpoint, albeit I am reliably informed that there are willing participants for an equity raising. Common-sense states its either Russian or Asia/Chinese investors that will assist POG. With covenant issues and the need for $310M the ICBC (Russian) has no choice but to be 'welcoming' to the positives of the company. 

For the RSA (Republic of South Africa) followers, Aquarius Platinum (AQP) one would be wise not to forget the issues and the amount of capital this company has needed over the past 3+ years just to obtain  the results to today. An item of interest for which has been a trading indicator for me, is the "lack of price movement" that AQP comments on despite more than 50% of the supply being removed from the market. Not only are parties becoming wiser to buying the commodity but more so, I suspect there's some blame to put at the ETF's including RSA's physicals that have stagnated the market by novice traders. One would have expected a 15% increase had the industry and their traders not been mothballed. Likewise, one cannot ignore the surpluses, even allowing for amateur PGM's traders, one cannot help but wonder if revisiting the "surplus" stock guidance would be prudent. With the three major producers and stocks dwindling, RSA Miners would be doing the industry a favour if they stayed on strike for 3 more months. 

Something that was coming across in news was "the apparent" news of China cutting down on Import Loans (See FT Article: China plans crackdown on iron ore import loans By Lucy Hornby in Beijing. Its somewhat amusing that the Government were pushing these only two years but now they don't like it. More to the point, as I commented on awhile back, the Government is trying to avoid the house of cards on large scale. So Shanxi Haixin Iron and Steel Group Co (not so insignificant) has now fully defaulted, we knew this in March, but of significance is the whether the Government allow this company to fully default. The monies are owed more to banks than to "retail punters". 

China have a significant overlap of debt, with suppliers lending monies to the steel mills and local companies "customers" also lending money. In essence, a triangulation of debt if one can picture it, if one goes they all go (well most). China has one choice here, 'refinance and roll up the steel mills debts' in such a convenient way Companies can almost 'tipp-ex' them off their balance sheets or 'muck up their growth targets significantly. Most figures estimate that the Chinese Steel Mills have between $210-250B of debt. My view is, $630-750B is at risk on a basic multiplier of debt due to the triangulation principles, so the Chinese have no choice but to "step in with the Shanxi Haixin et Al's debt problems...time will tell. 

The Chinese traders leveraged to the hilt on Iron Ore would be wise to ask for a little more money to shore up their positions as they unwind. With Iron Ore at Port increasing to near record levels, I suspect the issue isn't the slowdown in the mills at such drastic levels but the "bank and/or funders requirements" for payments before releasing the ore. Something missed by most commentary is the "bond" type delivery system and showing a lack of understanding on the market generally. BLT & RIO mirrored the iron ore issues, one wonders if it will not be too long before an overexposed supplier/trader of iron ore reports a significant default.