For those
trading Anglo American (AAL), short is the wisdom of the day! AAL Q2 Production Report validates holding Rio Tinto
over AAL. The coal production increases does not bode well for the market. The
update for me is dull (read as flat), one would put some cheer into the Nickel
production but reading through, appears there’s a planned rebuild of the
furnaces commencing in the second half of the year (Gulp). Platinum was pretty
much as expected, perhaps AAL would be wise to buy a AIM diamond miner
pre-development and get some decent low cost production up and running sharpish
to contribute to the bottom line.
Overview
|
Q2 2014
|
Q2 2013
|
% vs. Q2
2013
|
H1 2014
|
H1 2013
|
% vs. H1
2013
|
|
|
Iron ore (Mt)
|
11.5
|
11.3
|
2%
|
22.8
|
21.6
|
5%
|
|
Export metallurgical coal (Mt)
|
4.8
|
4.4
|
10%
|
10.9
|
9.0
|
21%
|
|
Export thermal coal (Mt)
|
8.1
|
8.5
|
(5)%
|
16.0
|
15.5
|
4%
|
|
Copper (t)(1)
|
194,400
|
183,000
|
6%
|
396,400
|
353,300
|
12%
|
|
Nickel (t)(2)
|
10,600
|
8,500
|
25%
|
19,800
|
14,700
|
35%
|
|
Platinum (equivalent refined) (koz)(3)
|
358
|
594
|
(40)%
|
715
|
1,177
|
(39)%
|
|
Diamonds (Mct)(4)
|
8.5
|
7.9
|
7%
|
16.0
|
14.3
|
12%
|
In comparison
yesterday’s update from Rio was good news albeit bad in terms of increasing
production into an over supplied market. Rio’s gauntlet firmly laid down to the
lower grade producers, even allowing for a 15% dip in Iron Ore Prices. In doing
so, it ensures there costs per tonne achieve a nice rate of return. The
entitled Rio
Tinto delivers very strong first half production update is somewhat punchy.
The results
ensure (my view) that Turquoise Hill Resources (TRQ) will be no more soon
enough, as Oyu Tolgoi ramps
up. With the recruitment by AMEC (mentioned
here awhile back ) progressing one expects there to be some announcement
about the
Mongolian Tax Authority claiming unpaid taxes etc. by year end to establish
a mutually beneficial plan. The benefits for TRQ are they raised $2.4
billion in January 2014 and repaid all Rio’s funding facilities the price
is firmly in the hands of TRQ holders.
Kenmare might be relieved to see RIO have delayed
their Titanium dioxide refurbishment of one of the nine furnaces. Albeit please
note, demand is soft…perhaps KMR are running back to the table with Iluka
Resources as 20p might be a tad too much when you weight KMR’s debt as well.
Rio’s message with ramp up, is sell higher cost
lower quality, buy Rio et al of the Elite, with expansion set to 360m/t, one
would be wise to avoid too much exposure to the longs on iron ore.
London Mining
(LOND’s) Q2
production today was better than I expected. LOND have realised grade is
now the key, with a 7% improvement helping their prices to USD86/dmt as a
result of improved grade, lower freight and hedging benefits. The key to LOND
is their “potential” strategic partner whereby they seem confident to complete “before”
end of 2014. A pat on the back for the
freight costs coming down near 12% to $30/wmt. On these figures, expansion is
the key here, including perhaps some j/v with a neighbour on a concentrator?
LGO’s (Leni
Oil & Gas) placing today bodes well for the share price raising
£7m but why not use the debt facility. Likewise, with raising £7m, it
questions the funding strategy of the company now. On the one hand it was
reserves based lending (RBL), now it’s to the market. Are LGO believing that
there’s further value in the share price? If so, why not use the RBL better
still “use some of the cash they raised to appraise the acquisition” in
addition to the RBL. This, if “one assumes” they hadn’t raised the £1m to pay
MOG, would mean they only had to borrow around $3m and fund the other items in
debt as well. Clear as mud! Thus having had my monies, LGO is now on my follow list
for curiosity rather than any active trading.
Finally,
Mothercare (MTC)
update today has wiped out the gains. With such little potential the small
potential premium on MTC to current SP made it unviable; what were parties
holding out for? Will it go/won’t it? With a trading statement like today, the
risks are increased of being stuck in a stock which is overpriced in the
absence of any takeover. Were MTC wise to reject £3…I think not!
Atb Fraser
Fraser- Hi- back now from other duties.
ReplyDeleteRe RIO- yes, I bet they plan to simplify the Mongolian position but they have taken a backward step after the latest tax claim, which may even end up with an int arb claim and we know how long those go on for so TRQ holders may have to wait a little longer for their RIO cheques. Im long RIO and I would like to see them take on OT directly but the authorities seem to blow hot and cold, encouraging outsider investment in grand statements and then shooting themselves in the feet via these regular disputes with TRQ- if that tax matter gets settled quickly, they will increase tax take via the ramp up- simples.... :-)) Perhaps brown paper bags stuffed with cash are the name of the game.
Re LGO- I guess the latest purchase needed cash to fund but David "Placing" Lenigas is at it again- I would suspect his 3 or 4 Horse Hill stakeholders will all take advantage of their inflated share prices over the next few weeks too. Im happy with my RGM holding, which seemed cheap even before that HH 5% deal.
Re HAWK- mixed update, with July figures now looking good and a gas find which if it is confirmed at 4mscf/d on a constant flow then that is commercial and worth as much as a 500bbl/day well, but it will need new kit. I added in the dip first thing at 11.3862p and they still look cheap, based on all parameters I use.
Re MET- so Commerzbank got a 7.5% stake at 11p!!!- and with 20p plus likely as their first distribution shortly and over 25p in cash plus the major case to come in 2015, that's a great deal for them and a really crazy deal for the vendors-- maybe they couldn't hold unlisted stocks, maybe they were connected to Commerzbank but if not, that's one of the stupidest sales of all time. :-))
Cheers. The Leggie