Oil prices fall, stumbling emerging markets dent outlook and growth likely to be at the lower end near 7.1%, its rosy just not as rosy as someone would have you believe. China are dealing with deflation across the board and with so much weighted against property which is in a dire slump, the bets are increasing for stimulus.
With Russia and emerging markets set for a kicking in the proverbial expect some more volatility in the global markets. Asia and India are likely to suffer more woes as a result of the risks being placed on their economies, commodities obviously are reacting accordingly. The Super Cycle is clearly in contraction the positive being for AISC (all-in-sustaining-costs) which should develop a positive cycle for shareholders assuming the management of companies get competitive.
The irony being the contraction will have caused the markets to stay lower for longer where they cut costs/spending significantly. Oil (Brent) has to drop below $51.05 before it becomes oversold. The measure being that 75% of the market cannot be profitable at that level. Basic economics shows the market cannot be oversold until the majority are unable to produce at the price aka survival of the fittest. America could potentially weather circa 48.15$/bl.
Copper has been the silent short with demand per day since mid-November dropping suggesting the the economics of lower demand are playing out compared to a steady level of supply and demand and potential deficit (GLEN's views). One to watch...and just to assist the supplies of copper and BLT's iron ore stance on copper, US Senate Approval Paves the Way for Copper Projects. Keep on pushing the copper supply boys! We'll need Kleenex for a certain copper trader if the price continues to drop (perhaps some hedging would be wise).
The woes of the U$D and Oil are playing out predictably (link to 9th December 2014 ECM) on gold, with drops overnight in Asia consistent with the theme of NY, the gauntlet for Europe to keep it's head above $1200/oz. With costs dropping in terms of production and the key AISCs one would be wise to consider $915/oz a real risk if oil maintains its path. Yes $915/oz, there's some negative cheer to keep the Petropavlovsk (POG) contingent that are still holding happy. You know what's coming, a mirror and a chat! POG are worth no more than 5.25 pence as it stands and that's assuming a gold price of $1200/oz, yet again too predictable only a week ago, year ago etc...Nevermind the implications for Randgold et al (RRS).
Staying with today's overly positive theme, a favourite of mine recently (not for the long either), Zanaga Iron Ore (ZIOC) project update has announced their plans. We'll leave ZIOC to summarise why the project isn't progressing that much and rather sums up GLEN's (Glencore's) need to be patient to take it cheaply approach. From the RNS: During the Funding Round initiative conducted jointly by ZIOC and Glencore, a number of entities expressed an interest in discussing an investment in the Project alongside the joint venture partners. Engagement with interested entities is expected to continue, however, we believe that current iron ore market conditions need to stabilise before formal discussions can resume.
And Clifford Elphick, the Non-Executive Chairman of ZIOC commented: "Following the recent drop in iron ore prices, we are cognisant of the need to reduce the annual cash costs of the Project. Fortunately, the most costly work programmes required for the assessment of the Zanaga Project have already concluded alongside the completion of the Feasibility Study, and the Project's key value-adding activities will now be conducted off a much lower cost base.". Read as: in other words not much is likely to happen for the foreseeable future.
If one is to believe the Zanaga Iron Ore Project Feasibility Study Results then surely there's a contradiction between expressions of interest and viability of the project. At the suggested figures (and costs) and GLEN's desire for iron ore there remains only one possible outcome, a lovely cheap take out? This months top performers (short) save for Pathfinder in the longs, are Rio Tinto (RIO) racing BLT (BHP Billiton), GLEN yet to have a further kicking, but with greater illiquidity in the stock it'll take a little longer for the rot.
Perhaps certain parties at a recent mining get-together want to reappraise there 3000-3300 targets on RIO and discreetly tippex out the buy recommendation, along with many others. Why any analysts in a declining and shifting market goes bullish on a stock where earnings are being eroded is something I've yet to learn? Fees anyone? Knife catching!
What more does the AIM market want that Sula Iron & Gold (SULA)'s Maiden JORC Compliant Mineral Resource Estimate at its 100% owned Ferensola iron ore project in Sierra Leone. There will be many that wish to thank Kibo Mining (KIBO) for making sure the market understands the Imweru Gold Project, with limited figures to work out a rate of return, the assumed gold price doesn't bode well for financing, 90% recoveries, 0.40g/t cut off...its time for myself to start thinking about mining behind the garden shed! We'll await the full operational update from KIBO "before year end an operational and strategic overview for the Company covering and summarising all areas of operations, current status and forward looking plans." Placing anyone?
Limited time for Afren's (AFR) drilling result which will no doubt be lost in the seas of red for oilers currently. If one found refined oil it would still be negative in the current market. Better yet, Antrim Energy (AEY) response to the offer from Sound Oil is odd. Could someone just slip a copy of today's oil and gas prices under their noses and if AEY already have said prices, could someone turn it the right way round! In a backwards sense for shareholders, Bowleven (BLVN) directors should be congratulated for not coming out with a repriced LTIP (Long-term incentive plan) with the Lapse of December 2011 LTIP awards.
The departure of Iofina's (IOF) Director is being rightly priced in today, one wonders what other focus Mr. Jeffery Ploen has? Perhaps its just not being part of Iofina?
On a very cheery note for a Tuesday, Atb Fraser
Just as a caveat as it appears some investors are intent on disliking warnings and the realities of the market. I may have positions in some of the stocks covered today; the odds are its short, but one should consider the fact it’s my personal perspective on the market and is not intended to be a tip sheet, advice or guidance. If one is struggling to find common-sense please do not read!
ReplyDeleteBetter still please utilise the following link: http://www.nsandi.com/savings-premium-bonds The customer service is excellent and the only short available is the Government!
Atb Fraser
Fraser- Hi- A good last few days for the Horsemen of the Apocalypes or shorters as the term is now in common use. I have my Stale Long t shirt printed now and no doubt it will confuse all bar a few that see it. You will have to wear your Short And Proud t shirt in tandem.
ReplyDeleteThe Russian 6.5% hike to 17% screams of desperation and how often is that successful?? Mr Putin may have to move a few troops in a easterly direction if he wants to have an economy left to manage. Interesting times.
Re AFR- yes, perhaps the best result would be to not find oil at present. The market panics over the capex of development, whereas dusters need no further capex :-)) Perhaps we could see a trend for AIM oilers underreporting oil finds for the next few months to hold their share prices up?? It looks like a good play to me....
Re PFP- the market is v volatile today, with the spread flying up and down like a tarts knickers. 1.32p just hit 1.82p and then 1.25p within a few seconds... Now if I were Iluka I would be casting an eye over the higher grade assets here rather than paying off the debt on their neighbours mismanaged "asset". Hmmmm- perhaps too early for that given the fat lady is still gargling and the Moz courts are comatose at the best of times.
Must go now as worldly matters call.
Cheers. The Leggie
Fraser- The General and Pal have responded via their blog now- Im not sure if you want to publish here but its here if you do- either way, it doesn't look like they are in a mood to talk, but perhaps its just part of their negotiating position.
ReplyDeletehttp://pathfinderminerals.blogspot.co.uk/
Cheers. The Leggie
Having been pointed in this direction a few months back its no wonder it has status. Not the style the broadsheets would permit but should with a uniquely brilliant grasp. FT would do a lot worse & that includes some of those employed. Well done on BT your views did not go unnoticed. Merry Christmas & thank you MA
ReplyDeleteIntuitive work on oil Fraser after last nights trade. Any views going forward if possible? Happy New year RT
ReplyDelete