Good Evening,
With Indaba and a few other items going on it’s
been extremely busy week with meetings and teleconferencing from the UK. Today a
slide show was emailed around with myself to be "formerly" known as
the Amateur of AIM. It’s a pleasure to drink their gin
this evening, but restricting the consumption to a few rather than two cases (apology
accepted).
Shaft Sinkers (SHFT) hit the wall with a financing update at 12:32, just a few weeks after a
"yoff" (read as person younger than I in a position I'd have loved
when I was his age) challenged the EMC analysis of the company and why it
hadn't gone bust!?! SHFT is dogged with its inability to share
the risks of contracting with the miners, creating an imbalance in returns and
something contractors need to learn (mail box for a quote to understand this;
its not cheap!).
SHFT's issues were endemic of commodity prices
declining (receding super-cycle), opex/capex cuts, the South African strikes whilst not forgetting the
Kazakhstan contacts were totally misunderstood by the market and lack of risk
sharing in contracting. It was one of the favoured shorts, kick the dogs.
The employees and staff should be ok, it would be wise for investors to note a
few key names from the board in their journal for future reference.
Anglo American (AAL) Full Year Results 2014 is/was abysmal. The write-down
on Minas-Rio of $3.5 billion is laughable
when the company state Minas -Rio is ahead of
schedule in October [2014] and expect to bring the project in $400 million
below the revised budget. Do the company have a handle on costs at
all? Revising costs up, then coming in significantly below the revised budget.
Sounds pretty much like a blank cheque.
The savvy will start questioning whether AAL's net
debt target of $12B is realistic in the current environment. With debt set to peak at
$15.5 billion (EMC estimates) by end of year, commodities and free cashflow are
going to have to significantly improve before one becomes positive on this
stock. De Beers should be called Long32 (to mimic BLT's
short32/south32) and be divested to support the balance sheet whilst
there's value in the market. The market stupidly reacted today, and will ignore
the realities. Up near 20% off its lows anyone would be thinking it’s going
great guns.
Afren (AFR) has had a lot of rumours abound
today, as per FTML it was proven to be BS, save
for the low ball offer that SEPLAT (SEPL) were offering. Afren shot
out the gate with little option to maintain but to maintain there's value, with
offer talks being terminated. SEPL announcing they had
completed extensive due diligence on Afren and made a written
proposal to the Board of Afren that provided critical and significant near-term
liquidity and value for the stakeholders of Afren. Value for
stakeholders...loose term for "not the shareholders"?
It would appear David Lenigas has started a
snowball on Bacanora
Minerals (BCN) after the recent request to gain a seat on the board
via REM (Rare Earth Minerals). A decent holder said today, they'll
reconsider the viability of BCN if David Lenigas gains a seat on the board.
Voters would be wise to think where their money is best placed. There's a
number of items going on the side lines with BCN and good to follow as the big
boys (exc. REM) start to play...its best to leave that one there, however if
you're widow(er) or orphan you'd be advised to avoid.
With oil's absolute focus on rig counts it’s
a speculators licence to print money as oil was propelled above $60/bbl (Brent) with the Euro-zone
giving it a little squirt. Why it's rocketing away is purely down to a
bounce with the surplus even allowing for a reduction in production still out
gunning demand. The market is rushing to price in a reducing rig count, some
"weather issues" (as Malcy
eluded to in his blog) creating a better balance.
The final thought of the weak (scuse the pun) is the iron
ore short and the Vale gaining permission to utilise their giant ore carriers to China on Monday.
Obviously this has nothing to do with some agreements with Cosco (China
Ocean Shipping Group) and the related transactions.
It’s rare to be able to quote EMC directly, so here's with a little clip from today:
"If China subsidises native production by 30$ a
tonne for 125mt it effectively causes over supply and a short to $55/t. The
subsidy via development grants will be partially offset by the 700mt at the
lower price.
China have just shorted Rio and BLT by allowing the super
ore carriers in on Monday (9th) something Rio et al forgot to mention in their
updates! Expect Cosco (China Merchants Energy Shipping state owned), to
get further involved in the low cost super/giant carriers the deal with Vale
from last year showing they're willing to apply pressure on Australia . The
deal with Vale/Brazil has in essence reduced the need for 30% of Australian ore
alternatively they [Rio et al] must slash prices.”
We'll leave it there...see you on Monday!
Atb Fraser
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