The Afternoon Preamble: Providence Resources (PVR) & Lansdowne Oil & Gas; Churchill Mining (CHL) and CPP Group (CPP).

Good Afternoon, it was going to be a reply Leggie, but there's so much going on and pre-close down for the weekend it was wiser to make a full post.

Afren was a good trade Leggie (for now), Intra-trades were the leader of the day. If you were following my belated commentary on FTML the other day you'll note what happened to most AIM Oilers today, with PVR and Lansdowne Oil making predictable moves. The echoes of a farm out are unsurprising in terms of rumour so one will await an update from the company on progress in due course.

Thank you D for being the CHL items to my attention, perhaps as Leggie eluded to there will be a change in Indonesian sentiment see below:

Churchill Mining PLC & Planet Mining Pty Ltd vs. Republic of Indonesia Document Inspection

There appears to be some gamesmanship happening with objections about delays for the sake of three days, however I am sure the Tribunal are wise to this!

Regarding supermarkets, I have no short positions as of this afternoon. I was trying to evaluate if there was a further fall due, but as I did not have am immediate belief I elected to close with equity only in Morrison's currently for the belief that it will be taken out (3-4% negative currently).

It was interesting to read that CPP have had a deadline (30th August 2014) (FCA Link) put on the claims for compensation. How this transpires and whether the FCA doesn't have a change of tone is another thing but in my view unlikely. What is interesting is Martin Lewis has requested an extension to this date. Now I'm not one to Money Saving Expert, or the benefits to retailers, however how can one justify an extension when they've been so prolific in publicising it. If the argument is that parties/ex-customers are unaware then I would suggest that is taking the proverbial a little. CPP's claims as of today are: CPP's half yearly report today. This may be a slow recovery for the higher risk taker or alternatively avoid; policy's down around 1M already compared to the same period. 

Finally, for those on a meter, Ofwat draft decisions keep bills down, should enable one to buy a bottle of one this weekend if you want to spend it now! One would be wise to appraise their utility holdings.

Have a good weekend, plenty of reading for me as I get up to speed.

Atb Fraser

N.B. The volumes in Sylvania Platinum (SLP) are very surprising, with dividend out to 2015 it is certainly raising questions about what is going on! Perhaps the appearance of a new presentation means it can be put down to PR/IR for the company, albeit there was rumour of a buyout. This I firmly believe is BS...but for once only have an equity position in this company and am well aware of the risks in terms of South Africa, board costs and the structure, which if adjusted could mean a quarterly dividend for holders instead of salary costs. One perhaps for me to discuss at another time. 

P.S. Apologies for not proof reading.

Morning Mumble (with Music for the Oldies): Nefarious thoughts towards Europe (Gas), Ageism & Afren Plc

There will no doubt be a game out in due course called Ukraine, the Russian Quest. It’s my view the Russian sales of "We've only just begun" by the Carpenters are rocketing. So for those so old they can barely consider shorting a stock, some music from your era. 

Sticking with the oldies that like to moan about the weather its my view that Putin (NT Times) has realised that Europe gets darker and colder from now (Read as September) until March. So if one was hotting up the Ukrainian situation I'd be turn off the gas around December. Just to see how positive those reliant on the Russian commodity become to Russian Ukraine and European Ukraine.

Food for thought, and with reports via the News (I don't think I know any Ukrainian traders) that Russia is army is helping the separatist rebels (it’s not quite like that but its very hard adding drama to finance) will come as no surprise. Before one starts to cringe at where today's mumble could have gone, I'll stop before I show a remake of Luke I am your Father, with Putin as the Father and Merkel as Luke! For those with humour and German (Fi et al), you may want to see Angela Merkel vs. Star Wars Imperial March.

We are all well aware of the outlook for coal, Bogdanka SA, Poland’s 2nd Largest reiterated the theme (28/08/2014) globally. One just has to look at New World Resources (NWR) (RNS's) to see the very predictable calamity and financing issues. Nuclear is the way forward save for anything revolutionary. The interest in the sale of certain Uranium trading units is evidence of this and yellow cake will be the plat du jour soon enough. If one looks at Japan and China, the demand is growing, despite certain murmurs of coal led generation. 

Considering the obvious, would one be backing Continental Coal Ltd (COOL)? In fact, would one be backing any type of enterprise in South Africa where the alleged stability is far from low risk? COOL have one benefit in that 75% of their sales are domestic. Albeit new power generation in South Africa is limited and even the forecasts won't keep up with demand. The line-up of directors will assist people in making a decision. 

The Afren Plc half yearly results were as expected. It's a brave company that publicly suspends directors, and it was on this basis that I elected to trade Afren yesterday on the basis of the company's statements. Further reiterated in the half yearly (bold item to be noted);

“At this stage no misstatements have been identified. Furthermore, the Board's assessment is that based on facts to date the existing carrying values of the relevant assets in the balance sheet are unimpaired. Further details are given in Note 10.”

What should not be ignored is (see bold) “Principal risks to 2014 performance - The principal risks and uncertainties faced by the Group were documented in the Annual Report and Accounts for the year ended 31 December 2013. The Directors consider the risks the Group faces to remain the same for the remainder of 2014. Following the suspension of two principal executives and two associate directors, the Directors consider there is a heightened risk of disruption including due to possible loss of staff, potential difficulties in relationships with partners, providers of finance and other stakeholders.”

So Afren are investigating, with the amounts included in the balance sheet at 30 June 2014 which are expected to be covered by this independent review include:

• US$39.9 million of advances to Partners in 2012 included in Prepayments and advances to Partners (31 December 2013: US$99.3 million);

• US$93.3 million of amounts paid to Partners to secure agreement to field extensions included in Property, plant and equipment relating to the Okoro field (31 December 2013: US$98.5 million); and

• § US$1.9 million included in Property, plant and equipment relating to the Ebok field (31 December 2013: US$2.0 million), together with an associated amount of US$298.0 million attributed to deferred tax assets, reducing the deferred tax gain in the 2013 income statement. 

The positives are there with the highlights:

• · 1H 2014 net production of 33,488 bopd; Full year production guidance revised to 32,000 to 36,000 bopd, removing Barda Rash, due to temporary suspension of activities.

• · Two rigs on location and drilling ahead offshore Nigeria on the Ebok and Okoro fields; Central Fault Block Extension platform to be installed in Q3 2014.

• · Approval received from the Department of Petroleum Resources for the initial five well development of the Ogini Field. Rig on location and development drilling well underway.

• · 3D seismic acquisition on OPL 310 complete and interpretation ongoing; further drilling to commence in Q4 2014.

• · Profit after tax of US$160 million (1H 2013: US$62 million) reflects tax exemption at Ebok offsetting reduction in pre-tax profit and revenue.

• · The balance sheet remained strong with net assets of US$1,972 million (1H 2013: US$1,498 million).

Save for the investigation Afren look on track with news soon on Ebok & Okoro. Having trading on yesterday’s suspension news, I am looking to acquire equity in Afren again 96.45 currently. 

Chariot Oil & Gas (CHAR) finally have their cash with admission of placing shares and likely to be a cap on the stock until farm out. 

Sirius Minerals Plc (SXX) appear to have yet more warrants converted, one would be wise to watch the volumes. Has it capped out the SP?!

No time to coverage Entertainment One’s (ETO) completion of the acquisition for Force Four Productions. 6 months ago this was my wife’s largest holdings, it was purchased purely on the back of the Twilight Series she liked, I believe around 65 pence. It now deserves a better look in light of the substantial changes and potential growth. 

Atb Fraser

Morning Mumble: The Chinese bets are not paying off...(contraplay) & everything is not so rosy in the garden = Desperate Rights Issues & Iron Ore (Any old Iron)

The season of desperation in China is contradicting the Chinese bulls that appear to think the growth train does not need to slow down and consolidate. I maintain that my realistic growth forecasts of 4.2% ish rather than China’s headline of 7+% its simply unsustainable when one factors in real ‘waste’. A primary example being the Country Garden Rights Issue announced earlier and following up on BBerg.

Its difficult to short Chinese companies, so one has to find a correlation, such as OTC or similar listings. What is surprising is the reduction in shorts, some 43M reduction in shares by the end of July compared to now…Current shorts on OTC for Country Garden are around 5M shares…albeit well in the money! I would go as far to suggest its limited to a few savvy private traders ahead of the curve ball!

Yet again a Chinese company has been predictable in its actions for those trading, following more closely they’ll remember the Solar “eclipse” (this blog) folding due to their overproduction and saturation of a market (Ironically they may be doing this again). So the market ignored the significance of Country Garden Bond Offering Delay earlier this year (May 2015). With bonds now trading at an 11+% discount to par and some, the market is waking up to the realities of saturation. Notwithstanding that housing is a “key contributor” to the Chinese Growth story. Looking at the rights issue, and debt payments Country Garden might need to come back to the market unless things pick up within 9 months.

Following on from my Real Estate Transaction Taxation Revenues post it comes as no surprise the decline is increasing and discounts widening. As such, the very predictable elements are coming to the fore as the Developers attempt to entice parties to part with cash for property. What next BOGOF?

So with purchase restrictions on property ownership being removed, mortgage approvals being sped up and most "friends" already utilised to propel the housing boom there's only one thing left! Correction! As a wannabe slum landlord focusing on distressed property, it comes as no surprise similar issues are occurring in China to that of 2008/09 UK & US. This will have a direct impact on Iron Ore demand over the coming months as new builds slow down or come to a virtual halt (it would be wise to watch copper as well). A positive being that this will allow the market to consolidate, albeit the Chinese Government cannot be ruled out of coming forward with a "new" stimulus in providing yet more social housing.

Iron Ore, which you could argue is solely reliant on Chinese demand currently with the massive output proposals, is weakening as the Bulls learn the stark reality of a credit contradiction in the Market. It’s with no surprise that demand has weakened. Reliably it looks like Chinese ore traders are reducing leverage and coming to a common-sense market. The duplicate borrowing (ghost inventory) that has occurred which appears to have exacerbated the drop in finance available from lenders whom have been forced to conduct retrospective due diligence. So with ozzie 62%FE ore now at $88/89t and the Chinese prices following suit, there’s a stark reality ensuing for those lower quality producers in addition to Ebola concerns. London Mining, like AMI need a White Knight, whom this shall be may not come as a surprise to some, but needed quickly.

Staying with the theme of White Knights, Petropavlovsk (POG) (the day I spell this correctly first time will be a truly wonderful day) has announced their Half Yearly Report. This is the Albemarle & Bond of the Gold producing world and its surviving (just). The interims are actually better than I expected.

What should be of concern to an investor is POG's Debt to Equity, I eluded to this yesterday with regard to Kenmare (KMR) and today’s example is a lot worse. If one was to consider POG’s net debt totalled US$924 million as of 30th June 2014, then POG’s Equity attributable to the shareholders of Petropavlovsk PLC being $761.306m gives a Northern Rock example of leverage of 121.35% Debt to Equity position. This leaves on options and expect some rights issue or equity loss for holders of around 50% to the current SP unless someone is will to stump up $400M. If one was to include IRC, the sums would slightly improve to 91.5% debt to equity. Still staggering all the same…perhaps they can “self-cert” the loan?

Today’s piece had to be written in two halves due to a peanut butter on toast incident and my desk, the desk and keyboard lost to a near 2½ year old armed with peanut butter and toast that had escaped the breakfast room.

Amara Mining's H1 & Q2 Results are pretty academic, the question is how long is going to take for Randgold to sort the situation out and pay up! The bets seem to be on post any prefeasibility study! One shall wait and see. 

Chariot Oil & Gas’s news suggests partnering is at the engagement state with the wedding to be announced in due course. CHAR Namibia Update.

And finally, Kromek's Final Results suggestion the opinion they listed a year too early was more than likely correct. Cash £6M, suggests save for an exceptional contract, that KMK will need cash within 12 months…
For the humour, a message was left yesterday about me appearing depressed and negative, so why do I invest at all. I suspect they do not grasp how I trade! Thanks for the concern!

Atb Fraser

Morning Mumble: LGO, seriously! & Ken's Mare (KMR) did you really expect anything better ++ The Chirpy Edition!

Its not till you read an RNS like that of today's Leni Gas & Oil (LGO) (Disc: No current holding having taken all profit and equity out). LGO was never a management bet and those that have followed the story of LGO's dire performance prior to Trindad will understand why.

Leni Gas & Oil (Founder Steps Down) is no surprise as the majority of people will not back the entity. Just because of the changes, the investment case above the quality of the assets does not necessarily improve. So ignoring the commentary certain Directors made about Mediterranean Oil & Gas now Rockhopper (reviewing & shorts closed) and the fact the number of shares has gone from 919,254,965 in November 2010 to 2,668,195,353 shares as of July 2014. would one be stating…

“…It is no exaggeration to say that David Lenigas has made an enormous contribution to the business throughout his tenure, and we wish him all the best with his other business ventures. On behalf of the Board and all the team, I would like to thank David for his contribution and for his unswerving commitment to LGO. I am sure his entrepreneurial spirit will live on in the Company as we seek to continue the growth trajectory of the last year." One shall let the reader decide…

When considering the above one surely cannot forget the Spanish Sale (or not or was or is) or the alleged affordability of the legal case against MOG. The legal debacle by total coincidence had a placing during the cost assessment process and award despite previous assurances of it being affordable etc...We'll reserve judgement on the acquisition of the Fram Exploration (Trinidad) Limited Trinity-Inniss Field & £7m placing that capped out the SP in July. Alas goodbye David Leni-Gas and welcome to a new image for the company, oh what do you say to LGO instead of Leni Gas & Oil?

Staying with a chirpy tune, Kenmare Resources (KMR) Half-Yearly Results today…now save for a white knight that would have to be desperate, debt is $349.632m down from $358.519m the previous year (2013) but the APR is “only” 9.2%. So when considering their cash of $37.3 KMR ($67.5 million 2013) have net debt of $312.332m (2014) compared to Net debt of $291.019, in 2013. Yes you’ve read it correctly, Net Debt has gone up only $21ish m.

You’ll note KMR have restructured the debts etc…to allow for what one should really call a Wonga Rollover or Chinese Real Estate Loan in 2019! Will Iluka Resources be betting on recovering Ilmenite prices? With the Debt costs, production & company situation one finds it very hard to justify any significant valuation. Perhaps someone will step up and surprise us all! Iluka have time on their hands with KMR's $37m cash they are looking more and more like a rescue placing assuming parties are supportive of this and suddenly do not want to revisit Iluka’s offer (read as bite their hand off). Certainly appears Iluka are holding the cards, perhaps a scare of 16.5p a share would tip the scales?

On to positives, one assumes Afren have a clearer picture of what has gone on so are able to update the market on Fridaywith their results. Will those of us seeing the buying opportunity be validated in their assessment of the situation on the tank after the suspension of directors?

Further positives in terms of my positions in Foxtons were validated with the half yearly results out today. The market reacted accordingly with the slow down in sales and cooling of the London market thanks to the new affordability structure. Will this impact further down the line, more than likely. With forecasts of £180M in revenue for the full year, one cannot help but wonder if this is too rich! One would be wise to follow Blackrock!

Its amusing to see Lonmin’s response on the speculation about closing shafts…. Statement on Press Speculation stating that no decision has been taken “as of yet.” So with that in mind, do they have many other options? One would not want to be long on LMI save for trading opportunities.

Finally, ECR Minerals Plc might have something of value with the MGA’s release from administration it is expected by the Company that MGA will possess tax losses estimated to total approximately A$80 million. The tax losses surely have more value than their other assets?

More time required on the Paragon Diamonds deal today and due to yet more meetings, will have to wait to more closely at Transfer of Convertible Loan Agreement & Board Changes.

Having just come back from Hols and getting back into the swing of things with meetings and training it will be sporadic as I attempt to avoid working past 11am!

Atb Fraser

Edited: to adjust currency value from £ to $ & typo.

Morning Mumble: (I am back) Important changes for Indonesia (Subianto appeal denied BBC)

BBC Subianto appeal denied as Indonesia court backs Widodo win. Has significance on a number of levels, from fuel duty/subsidies to the mining policy. Where the revenues and Smelter Bond/Royalties could be utilised to fund Jokowi's Social Welfare Reforms.

Coup? I suspect not...

Atb Fraser

Morning Mumble: The name change has worked http://erraticmarketcoverage.blogspot.co.uk/

There we are, finally a seamless transition.

Atb Fraser

Morning Mumble: Changing to http://erraticmarketcoverage.blogspot.co.uk/ prior to down time (holiday)

Good Morning, What an evening! If you could see me now haha

More importantly, the web address is changing to: http://erraticmarketcoverage.blogspot.co.uk/ so please adjust your settings. Whilst away comments will be approved by Ian if he ever connects back with reality! 

Thanks to blogger for doing this the slow way!

Many thanks & happy holidays, Fraser.

Morning Mumble: Retrospective Guidance Cuts (ArcelorMittal) Iron Ore &...Holidays

Good Morning, last night’s antics were a pleasure its not often losing money comes with such hilarity. We had an evening at the casino last night and to give you an idea of my ability to lose I shall cover the entire evening with...everyone won save for I! It got to a point you were assured of winning by betting against me! A pleasure though...and don't forget your passports folks otherwise it’s a return taxi trip for the passport!

On to the wonders of the market, this is my last blog for two weeks (ish), the name will be changing in that time as well so please mark the other one (above). I'm taking some pride in the fact the unique visitors (excluding bots & search engines) is up to a level I didn't think would happen (you all must be desperate!). This is despite the promise of the LGO litigation coverage, for which I shall keep mention until it happens!

Its surprising the ArcelorMittal (MT) have only just reduced their guidance on profits by near $1b and I suspect with write-downs it'll be a lot lower; the market were late to realise it would be worse than forecast earnings (no joke and very poor analytical skills by the buy fraternity!); the dividend huggers may want to reappraise this company quickly! ArcelorMittal reports second quarter 2014 and half year 2014 results (read the pain) albeit they did pay a good % of debt down they're targeting $15B in debt....

MT have an assumption for Iron Ore of $105/t for the full year 2014 (from $120/t previously) implying a second-half average of $100/t. Yes, with rose tinted spectacles one can see $105 being full year, but when Chinese prices near $96-$97 (the latter 3 month delivery), I'm unsure how they come to balance their guidance even allowing for 2/3rd's of MT's business being European focused. With the oversupply (increasing production) coming from the majors, ArcelorMittal guidance may prove too high even allowing for the revisions. With their guidance including capex costs $/t for Liberia not being below $100/t this is not going to assist (with Capex increasing there as well). MT are forecasting apparent steel consumption (ASC) growth in Europe of 2014 of 3-4%, US 5% and China 3-3.5%. The only figure I currently agree with is China's , but will post-holidays review this. (expect the majors to follow suit with revisions in due course / depreciation in share prices.

Often parties put too much interest in Director share purchases, unless they’re noteworthy consider a) if a director doesn’t pay fair market price there’s a risk b) if they’re options are massively in the money (at the award or after significant delcines in the SP) consider there’s a risk c) if they’re free options that director would not have any motivation to achieve (certainly true of AIM save for a few exceptions). However today we have the Anglo American Mr Peter Whitcutt, a PDMR, has today sold 73,419 ordinary shares at a price of £16.205 per share. £1,189,754.90 is a significant signal to the market. I’m unsure of the current price but lets see if the market pays attention as well.

We welcome Savannah Petroleum SAVP First Day of Dealings on AIM, for which there needs to be clarity on the licenses as per my previous post…one to watch currently.

What are Red Rock Resources doing? They have the rights to acquire 100% of the issued capital of Australian cloud computing service and infrastructure provider Cloud Lands Digital Fortress Pty Ltd ("Cloud Lands") Resources to clouds…Review required.

Afren continuing its climb, so have elected to take all profits on spreadbets (being the larger holding) and let equity/cfd ride.

Atb Fraser