Wednesday, 11 February 2015

Pm Bolt On: The Whooping great Lonmin and Skyshorts &....Glencore, Aussie Dollar + Oil.

Good evening, 

Exceptionally busy day but moving swiftly on to the realities biting in the PGM sector and digital TV rights sector. It would appear Glencore (GLEN) could not find a company desperate to take on their Lonmin stake bar the currently holders gaining “in specie." Has Ivan lost his touch of being able to do deals?

Lonmin (LMI) and RSA (Republic of South Africa) unless something remarkably changes is unexciting and unlikely to produce decent returns for holders. GLEN's actions have capped any positives LMI would have had, although the shorters will have welcomed the reaction. We will ignore LMI's margins, they don't appear to want to comment above stating they're profitable

For those knowing more about LMI, quite why they're spending what they do on their furnaces without introducing ConRoast in its full form is something perhaps the company would like to answer. Does the company need reminding they have grandfather rights in the technology? Bob the Builder would welcome this type of contracting work, build, blow up repair...perhaps Shaft Sinkers should morph itself into blow up repairs?

GLEN's production report was out, avoiding the killing the shares deserved. Spending has been cut from just shy of $8 billion to $6.5, GLEN's positioning in the market with its assets doesn't bode well for the underlying earnings that will be announced in 3 March 2015. Production was far from enough to prevent a drop in earnings, but the market likes the additional cuts, when is GLEN's dividend under review/shelved? 

Those LMI in specie holders looking for a new home, there's always ITV, with a lot of noise coming out from some decent corners of the city about a potential offer. The caveat I'm long in ITV and would welcome a take out by Vodafone or Liberty. Having attempted to test this not one journalist (all 8) known to EMC have been able to validate the chatter. So it comes with a high risk warning. 

GBPAUD (£Vs. AU$), the favoured FX play, with the political issues and rate cuts, commodity prices and general state of the economy, Australia has got its wish on a weaker currency. All those years ago, via Moorad's Shout Table in the Long Room the targets were a little expectant in terms of time frames. Closing the GBPAUD longs and awaiting the next set of indicators post £1VsAU$1.97. 

Australia will be affected by the iron ore 'cost war' with Rio battening down the hatches in Pilbara and giving the signal to the sector, Rio Tinto stops hiring in bid to cut costs, Australian's may be at risk of causing their own increase in unemployment by their determination to allow the excessive supply of iron ore and coal. GLEN's suspension (temporary shutdown) of coal production in Australia was too little too late for the market as their figures of increased production evidenced, over supplying your own market is never wise by circa 8-9mt's minimum. 

Oil (Crude & WTI) continue the realisation of inventories and take a further kicking, the Chinese speculators disappeared as quick as they came, we'll await the press realising the floating storage being below market consensus. WTI trading $49.10/bbl off 1.84% for March contracts and Brent's disparity narrowing at $54.72/bbl off -3.03%, not great for those, including the minnows Trap Oil (TRAP). TRAP came out and gave their holders a royal awakening with a corporate and operational update, one wonders if they were asleep at the wheel as investors.

Hats off to BT.A for playing a very shrewd game and forcing SKY to weaken its competitive edge and overpaying on premier league rights. Unless Sky have bought the rights to a magic show, the end user is going to have to wear some of the costs or the shareholder, its unlikely to be much of the latter. The term unsustainable covers Sky's premier lead bidding very well. Sky needs a few more users to spread the cost...

Who would have thought it, Apple going into First Solar, what next Tesla? Surely gold isn’t weak due to Apple share price appreciation at $1219.10/oz. 

Atb Fraser.

1 comment:

  1. Fraser- Hi- nice blue day today, with RIO generating cash v well despite the headwinds, divi up and buyback too, with debt falling and capex constrained, perhaps a few other majors could learn a few things here. The iron ore war is more winnable than the oil war, given the long lead in times for extra production in iron ore, whilst the shale guys can start drill and producing again within months if the tide turns there, so its difficult to link these two wars and see a supply squeeze that we will get in a few years with iron ore in the oil world. Just my thoughts re the iron squeeze in 2017/19, but the majors wont invest in anything iron at present so I think its a valid scenario and it would favour RIO and BLT in due course.

    Re Floating oil stocks- yes, a known phenomenon, with the Chinese using tankers to hold much of the speculative stocks they have bought recently, which will mean less demand in the months/year ahead and some distortion in the tanker world too. And some losses, no doubt, so far as they have bought all the way down. It would be nice to see any reliable figures here.

    Re ALM- another push from Paul Ms fav tip, £4,74 now and prob worth double based on the limited comparatives, the NASDAQ mkt (where it would find a nature home) and the fact that the big holders are all adding. Im holding forever, my normal long timescale :-))

    Re Russia- so we have a ceasefire starting on Sunday, according to Vlad. So 3 days of tidying up the frontlines no doubt, and informing the rebels, who apparently haven't taken part in the talks. Hmmm.

    Cheers. The Leggie

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