Good Morning,
Kenmare today confirmed the EMC view that operations should
have only been nine months of the year. KMR Operations Update confirmed "the
effect of the power outage will be mitigated due to the significant levels of
ilmenite product inventories on hand. The Company has recently secured
additional off-take volumes with a new ilmenite customer for the product that
makes up the bulk of the inventories on hand at Moma." For the
punts in at circa 2-3 pence, things might just be improving enough or Iluka
Resources to finalise all the due diligence conducted so
far.
The FT inform us of that the fate of copper hinges on Chinese demand. The EMC ran with looking further east for copper demand, to Japan and
America. What the traders are currently missing is the absence of
speculation in copper for China at the moment.
Demand and restocking is occurring
post Chinese New Year and with better stock management, stocks are
not being filled without consideration for the market. Li's quote of the day
is, "they're learning how to trade and restock" without contracting
supplies sufficiently to spike the prices.
With China adopting a sensible approach to any stimulus and
resetting market expectations by lowering the GDP to around 7%, the market
cannot justify the speculation. So far, none of it has worked, with the supply
of housing at all-time highs, one wonders why the prices aren't declining
more.
Li, has had a couple of dinners recently, despite piling on
the pounds post Chinese New Year has found Chinese property prices are
declining further. His opportunity surveys of up and coming
professionals is threefold, wage to loan ratios (affordability), wage
stagnation (and unemployment risks) and most importantly of all, delayed
purchases on the basis there's too much of an offering and limited
bargains.
The FT copper article suggests the funds short on copper on
the "Shanghai Futures Exchange show that the same funds have not
reduced their short positions following the end of the new year holiday."
With growing speculation in Japan and America, one would be unwise to take the
foot off the pedal in Shanghai until your full game has been unwound. Apologies
for the lack of city speak of the hedges in the purchase of physical metal (the
longs) that the same funds are making at the moment.
What the city and those sent musketeer-like to
ascertain the demand for copper is the planned "build out of the
electricity grid" isn't on the scales that have previously been guided nor
is it likely to be. China is accepting growth and over-capacity. The grid was
in part dependent on the growth in housing and 'urbanisation'. If housing is
stalling, with factories demand erratic and exports under-pressure slightly (via
shipping figures), the outlook for growth in copper demand is going to be down
on the current expectations.
The outlook is for growth, however, limited on the
expectations of the likes of Glencore and Rio. With a high-users finding demand
visibility harder to predict, most are electing to avoid longer-term contracts
where they have been previously punished or locked in at a significant higher
prices. Just in time...
Car factories, one might be wise to check the number of car
factories in China and the absolute over-capacity in car manufacturing. For
those simple like myself, a brief statistic is there were 125 car factories
(plants) in China 2014 running at 90% capacity and by 2017 there will be 148
factories (EMC:Li based on current intended use). So with
over-capacity, car manufacturers would be wise to factor in a significant
pressure on margins. With every manufacturer hugging the same space of Chinese
growth, over-supply, margin contraction and dwindling growth in sales are going
to be a common news item.
Sirius Minerals (SXX), placing and warrant extension, SXX would be wise to attempt
to cover near £28M to avoid the need for further funds in the short-term. The
placing is likely to be the cap now until such time as the approvals are in
place. Ten percent discount to the price in light of the potential is somewhat
of an insult, then again, it's not selling a placing nowadays it’s
called giving away.
Thanks to Roger, Allied Nevada Gold Files for Chapter 11 Bankruptcy Protection. and Ormonde Mining (ORM) watch, Canada-based Almonty Industries proposes to acquire Ormonde Mining, has to be better than the other?!?! Over to the shareholders but putting a spanner in the works of certain management?
Limited time to cover the aluminium (AL) woes (testing significant levels of support), EMC considers the weakness in AL as a contradiction to some sectors of growth.. The gossip of Nevsun's (TSX: ANV), most recent potential acquisition. Cairn speculation upon us as the market digs in to the realities of the tax demands, orphans and widows need not apply. One hopes the speculators with some waterproof shorts managed to lump in on the short!
Atb Fraser
Atlas Iron didn't drop overnight and is still 15 Aussie cents.
Fraser- Hi- I would expect SXX to grab what they can now, as suggested, so the RNS in an hour could well announce they have raised well over £20m after their initial £15m request, which would have been pretty much guaranteed by the 2 placees, Liberum and Macquarie in my view. So perhaps £25m coming at 7p shortly there.
ReplyDeleteRe ORM- Almonty back again--- they wont have to offer 5.7p now, perhaps 4.5p will do the trick. We don't know how good a deal ORM did with the Oaktree crew, but given their rationale is to pick on distressed companies, I would feel that 4.5p cash now would be better than a small percentage and some mgmt. fees (attractive to some fat cats on the board no doubt) in the future. Will ORM even RNS the offer or just press on with their shotgun marriage to Oaktree... lets see.
Re CNE- strange that the Indian tax info came on the same day as the results.... hmmm. Anyway, anyone who has followed the Vodafone Indian tax case will have probably expected this one with CNE to run and run. The Indians retrospectives changed their tax laws in 2012 as they felt they had been cheated out of massive capital gains tax payments via certain major takeovers, but it appears their changes may not have been watertight, so the lawyers are ordering superyachts and will continue to do so for a few more years. The mkt shouldn't have really expected CNE to reach an early settlement with India, despite the change of government, so its over to the learned gents now and it could be 5 years before the result is known. Could be another intl arb case for my other portfolio in due course.
Cheers. The Leggie
Cheers. The Leggie