Good Morning,
Apologies for not responding to emails, work and mornings
are the essential hours. The luxuries of putting people in a coma have been
limited, plus travel not helping.
Sirius Minerals (SXX) recent share price moves have been
validated as Redcar and Cleveland Borough Council (RCBC) the planning office has recommended approval for 23 April
2015. Current reports of approval are premature as the meeting is next week.
Roger Bade yet again being the only one to notice the difference between
recommendation for approval and approval. SXX could just be a success story for
AIM investors, caveats apply and yes my position is bias, but not without
acknowledging the risks. As such, 50% of SXX was taken off the table, with the
remainder being left there for the longer term.
It’s the day to close Dec-Jan short positions in Hargreaves
Services (HSP), and hopefully have time to review later in the month. EMC
sentiment remains the same, albeit one is wise to acknowledge debt is being
paid down and there is the potential for returns post any disposals. The
conviction of why anyone would hold such a stock (EMC Sept 2014) is
validated, coal, bulk transportation, it's not a case of being out of favour,
it's simply a case of low margins and a dire market.
Octopus Investments Nominees Limited have seen the
light in HSP and judging by the volumes, others have cut their losses, now cleared,
there may be some light. With that in mind, its best to bank further profits,
as it appears Schroders are back in the market, there's a risk of
upside.
Petra Diamonds (PDL) give a trading update. Readers will be aware it’s not a
favoured diamond producer. PDL ignored the issues with Antwerp Bank
financing hole back in January (EMC: Antwerp Diamond Bank ADB) and today those issues
became a telling reality or perhaps acknowledged openly. Simply put in a
strained market, if you've not got quality, you're prices (read as revenues)
will and have been impacted.
PDL have reduced production guidance modestly, the matured
mining areas will have an impact but this should not be forever. Although PDL
now note the woes of ADB absence. The issues will not go away in the short term
with a strong dollar and potential liquidity squeezes. It will be offset by
growth in the Chinese diamond market and Dubai and Russian banks entering the
sector boding well for positive speculation. Today's weakness could just be a
buyers opportunity, the conference call was almost a verbatim
repeat of the trading update, save for the Q&A.
Diamond inventories are higher because of March tender
timing and as a result lower debtors. Liquidity and net debt has been
positively reduced, cash up, debt down and available headroom. Concerns about
lower grades towards 2019 are valid, apparently the new ore is "extremely
well understood" and PDL are confident of limited dilution in the fresh
ore. Declines are unlikely to be seen to the same levels in the current grade
of ore. The drop in prices seen up Christmas of a 9% decline has not continued
(positively), and apparently has stabilised with green shoots of financing
being seen.
CAPEX spend is in line with guidance, any hopes the benefits
of oil price are unlikely. With fuel costs lower one
would assume this should have improved bottom line albeit as production is
so heavily weighted towards labour, power is a small proportion of the
operating costs. Timing of tender on inventories and strong
finish to the year are crucial and PDL are well aware of this!
Odds are there's likely to be a strong finish to the year,
but not without risks of Alrosa and De Beers mismanaging their supplies to market
(oops and Rio). Not one for those ignoring the risks, as protests become more
widespread PDL by location may be insulated (to a degree). The weakness will present a buying opportunity for those incapable of calculation a return on shareholder funds.
The more recent bets on Madagascar Oil (MOIL) over the
last 4 months or so have finally paid off, albeit it might be wise to derisk on
the news! Hat tip Leggie, their Tsimiroro Development Plan has finally been approved,
at long last!
Oil was rather self-fulfilling with contracts needing a certain level...and guess where it closed.
Atb Fraser
Fraser- Re MOIL- Its quite sensible to take some money off the table today, the initial reaction to 11p plus was a bit too muppet led but the mkt cap of £30m at 5p was too low for what MOIL had in place and the prospects, even given the halved oil price. Madagascar are v proud to have their own oil now and this has helped with the favourable terms of their dev plan, which only needs a paltry $10m spending on infrastructure to get up to the 10kbopd level from where they are today. The major holders promised to add a further $50m late last year, so no problems with cash immediately, but the full Phase 2 $2.1bn to get to 50kbopd and then the numbers are Phase 3 (£12bn plus for 100kbopd) only come into play when the cashflow is available. So it would have been rude not to take some cash back today, but the future is good so I will play the rest long for now. With a steam flood, they recover a v high % (possibly 50% in this case) of the 1.7bn barrels but they have to burn a % off to heat the oil and make it viscous enough to rise (probably 35/40%) so one positive and one negative but the techniques and understanding is there and they have 100k barrels in storage so far, so it works. The field has a 50 year life looking forward so hopefully I can match that :-))
ReplyDeleteRe PDL- the 100k carat upgrade promised in 1/15 is now taken away, partially due to the known Cullinan quality issues, which were also clarified in 1/15 but not as clearly as some would have wished. They have also had less luck with exceptional stones. Miners all have quality issues from time to time, the areas between high grade deposits are by default low grade but they need digging through to get to the other side.... Still perhaps you are right and the Antwerp elephant in the room Bank should have been accepted at some point, which PDL have failed to do even today. PDL are in my portfolio, 7/10 buy at 71.5p and I did halve the holding last autumn (at £1.90 average) to add elsewhere but the projections are for a cash cow in a few years, and £1.60 looks about right today, so I will hold the rest and adopt the stale bull moniker.
Cheers. The Leggie
Fraser- Re SXX- another positive step or two from Scarborough BC re York Potash today-
ReplyDeletehttps://twitter.com/thescarboronews
Cheers. The Leggie