Good Morning,
Continuing on from my theme in March, EMC: VOG March 2015, today Victoria Oil & Gas update
the market on Logbaba Power Station Online. Excuse the sarcasm, but if
the power output has increased then surely ones production has also. VOG are in
danger of achieving what they say, this is a rare event, as long-term followers
should know well.
The EMC does not change the view that the management are the
risk to any VOG holding, the asset and developments are good, the power
generation means VOG should have a utility premium applied, subject of course
to geo-political and management discounts. Today confirms, average gas
production since the 50MW has been online is 14.5mmscf/d with a daily peak of
15.3mmscf/d, all good for the bottom line. With that in mind, a review is
required, expect a re-rating.
The market belated realised that BLT (EMC yesterday) were slowing production growth, so
with the closure of shorts globally, the prices motored near 5-6%. However, overnight
we've had Vale, doing the exact opposite, with a record quarter! Vale's Q1 figures, N4WS expansion plans are likely to
have an impact and make up the shortfall that BLT had aided the market
with.
With limited time, analysts may be wise to consider issue
that producers even in China are assessing the viability of expanding
production/operations to compete at these prices. Certainly, Rio, BLT and
Vale's positions are not assured, viable yes. The issue the market has, or
should have, is the closures of mines are not happening quick enough to reduce
supply. Perhaps the forecasts will need revisiting on price.
Staying in sector, Fortescue Metals Group (ASX: FMG) have
finalised the 'refinancing', where every man, woman and Wonga loan specialist
jumped on the bandwagon. Quite clearly showing FMG's management have panicked,
with an interest offering of 9.75% per annum, uplifted from the original (USD) $1.5B
offering to $2.3B. When there is such an increase, save for income hunters
realising the benefits, questions should be raised about the pricing.
Over to FMG, “We’ve seen strong demand from the
market which will result in repayment of our 2017 and 2018 debt in full,
refinancing of US$450m of our 2019 debt and an additional US$350m to further
strengthen our balance sheet.” They only achieved such an uplift
because of a mispricing on the interest rate, admittedly it removes a few
obstacles, but all the same, the % is laughable, admittedly it gives FMG fresh
'hope,' One suspects they board would be wise not to beg for production cuts
from the majors again...any time soon.
Sirius Minerals (SXX) should be congratulated for requesting
the suspension of their stock. Those naughty traders whom
planned to travel up had all their plans thwarted at the last minute. One hopes
they obtain refunds on their accommodation!
On the Anglo Pacific (APF) news front, APF have only gone
and given some guidance on Kestrel. EMC's view this should be shortly
after Rio's rather than two days later. Its positive, APF estimate that
Rio Tinto will mine between 60% and 65% of total production within Anglo
Pacific's royalty lands during 2016. Being a buyer of APF (not without
risks), the amount of investments and financing sunk into royalties, one would
have liked to see APF be more proactive about their investments. This is the
third time now!
Little time to summarise the Gemfields (GEM), (not Gem
Diamonds as one confused analyst got today), the auction results were crap,
albeit allegedly at a profit even at $4 a carat. We'll avoid sugar-coating, so it’s
wise to read the auction results. One has a suspicion there's plenty of
'lower' quality stones heading to eBay at a large premium. Those cheapskates
should set up alerts now!
What GEM are doing utilising a decent grading system to
enable bidders to have confidence (or not) as has been evidenced from the
previous auctions. Expect some positives in the short-term, especially after a
few analysts were on a jolly to visit operations.
With a positive Montepuez maiden resource due in H2
(need to check), it’s likely to enable a clarity on the valuation of the
company. With limited debt ($20M last time it was checked for Kagem), cash
at the bank, there's a lot worse out there. With an improvement in sector
financing and a sensible approach to improving production, GEM are benefiting,
out-performing the sector near 40%, contrary to the view of EMC. One has to
wonder whether the 'share options" granted 7 days ago is taking the proverbial somewhat.
Atb Fraser
Hi Fraser- a 2am start- I was just getting back from London then.... I hope it was worth it and someone got a good kicking.
ReplyDeleteRe SXX- I suspect Macquarie are the key to the suspension here. One of the only NOMAD lead moves Ive seen recently, with NOMADs generally preferring to snort white powder etc etc than advise and suggest moves. The Redcar meeting should really be a rubber stamp, so there will be some movement if they don't follow the planning officers recs and say Yes today.
Re GEM- no real precedent for this sale but $4/carat did look a tad low for me too. No guidance either re what % were heat treated which makes it difficult to compare going forwards too. So GEM had been on a v strong run and a bit of selling today was to be expected. My long is from 25p from 2011 so its a v recent buy for me and I will hold on this news, as the next auction in 6/15 should be a better indication re weakness/strength re prices. A nice company that created a unique market for its product. Not quite in the same way as SXX, who had to educate re a completely unknown product (polyhalite) but they have moved coloured gemstones into the 21st century.
Re VOG- nice to see they have hooked up both power stations to their gas without incident. They did employ Bodgett and Scarper re their hysterical river crossing, which would have done quicker with a good man, a spade and a bucket no doubt, but since then the mgmt. have been on probation for me too, the dunce caps are off (for now) and they have the jury out for now, watching their next move. There is another power station, they could go down the cng gas route to reach other towns in the area, but maybe the next news will be from Bowleven ironically, who have their drill at Bomono just up the road and if it hits what it may well hit, some sort of deal could ensue between VOG and BLVN. Im long both so interested in the next few months here.
Cheers. The Leggie
Cheers. The Leggie