Good Morning,
A pleasure when the smaller boys make a decent packet out of
the market in comparison to the houses of grandeur such as the high fees for
M&A or the odd take private element.
Having traded long on gold on the back
of CHF and China, yes China gave gold a
leg up plus Asian trading and NY. China's data
created yet more demand on gold risk, so this morning its time to take the
majority of profits (perhaps earlier buy but yet again solid profits). It’s not so
long ago a few savvy investors picked up some significant low
cost gold bets (EMC). It would appear the
corporate gold traders were caught napping by the move and
very few have profited from the appreciation of gold. Kudos to the
few, with a not so paltry pay cheque either.
With gold and silver in
fashion at the moment, it is wise to buy exposure into those leveraged
plays such as the once upon a time short, HOC (Hochschild) who
has appreciated near 30% since the change in sentiment and trend for Ag circa
$18.30/oz. HOC's now making a profit again! With
HOC's Q4 production update being a lot better than most (includingmyself thought).
The HOC holders can breathe a sigh of
relief with HOC completing a decent hedging programme to lock
in some transparency over cashflow even if prices appreciate. With HOC signing
agreements to hedge the sale of 6,000,000 ounces of silver at $17.75
per ounce for 2015. This is in addition to the previous agreement to hedge
38,000 ounces of gold for 2015 at $1,300 per ounce.
We'll side step Petropavlovsk (POG) purely
on the basis of unnecessary appreciation over Christmas and without
justification.
Copper appears to be looking for a floor
/ support in the price at the moment, although the deals being done
and stocks increasing at LME certainly leave a lot for the
interpretation. The guessing for copper will
continue as two dominant warrant holders sit on their hands (maybe
slightly singed).
With metal warranted against the January
2015 date becoming prompt this week supplies are likely to up-tick
contradicting the narrow bands of supply and demand. One certainly to keep your
eye on if trading, especially if the physical market becomes tighter (allegedly) again.
(Circa 19th April 2015). One suspects that Standard Bank's Aug/Sept
notes on copper might need a slight revision.
The question over the short-term is will the Chinese
smelter excess still be managed appropriately (drip feeding back in to
the market) with some losses stacking up or is there likely to be a very
short-term swell in physical to meet obligations? The market I suspect will
wait till factory restarts before taking an opinion. With factory gate
prices lower there's pressure on the market to maintain a competitive
(read as cheaper) attractiveness.
We see the results of Amara Mining's (AMA) placing which shaves
certain assumptions off the target or take out price, down around 10% of
previous estimates (Approximate 25.2 - 28 pence now.) The positives are any
suitor is wise to acknowledge AMA is now far from vulnerable
to speculative approaches being funded to an investment project decision and is
supported. If the book-build was so well supported why is there a discount to
market of 15% or thereabouts?
In-between AMA's announcement of its intentionto conduct a placing (worth a read) and today the costs of the BFS and
completion apparently appreciated 10% or should it be the needs appreciated
10%. It’s acknowledged that with a prevailing wind for gold it was wise to
press the button on cash. The disappointment being, if Peel Hunt and GMP
Securities Europe had to offer a discount on the price, it does not
bode well for other entities looking for cash. So in the absence of Randgold
(EMC May 2014) news or Samsung, Q4 2015
looks to be the date in mind, one hopes financing can be encouraged in the
current gold climate sooner rather than later.
Stating the obvious award goes to J D Wetherspoon(JDW) with increased competition
from the supermarkets. JDW more recent declines I thought
were obvious, with landlords’ holidays often taken post-Christmas? With calls
for equality in treatment stating the obvious bad news in the sector
etc...if JDW don't like the sector why are they operating in
it? Expanding yet claiming discriminatory pressures is never a good thing with
increased LFL sales and margins, albeit under
pressure from their wage increases are healthy. JDW's update
will be taken as well as Majestic Wine's (MJW)! The hangover
should have been taken post-Christmas.
Its the day for the GLIF (GLI Finance ) dividend announcement (see: EMC GLIF April 2014) and only two days ago Inspired
Capital (INSC) (the old Renovo aka Ultimate Finance Group) trading update.
Bowleven (BLVN) informed the market of the two
well exploration drilling programme on the Bomono Permit, with fingers cross
for the company (no position), they'll need it! WTI (Weatherly
International) quarterly operations and production update does not
bode well! From EMC, will it stop the rot!, we had our answer sooner than
expected!
Little time to discuss the BLT (BHP Billiton) Operational Review Half Year Ended 31 Dec 2014 shale
being an obvious candidate for some tighter cost controls and copper even
performing well (grades?), Anglo Pacific's update on the Kestrel royalty, seeming like desperation to maintain the
SP. Afren's update hasn't gone down well re: amortisation payment.
Atb Fraser
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