Good Morning,
First Quantum Minerals (FQM) gave an update
on the ramp-up progress of its new copper smelter in Zambia after the
bell yesterday. Significant progress has been made on the cash costs with a
modest improvement in C1 costs from $1.36 to $1.25/lb. It’s wise to ignore the
previous quarter's $1.77/lb on the basis of ramp up.
A positive for the management, commercial
production is expected to be declared in the third quarter of 2015 - ahead of
the previous expectation of the first quarter 2016. Although one could
argue this was a soft target. Not forgetting that C1 costs are likely to be
impacted by the Zambian corporate tax and mining royalty regime, that
starts around the time of commercial production, if not before.
With the stock trading at near 900 pence, there's
going to have to be some consistent production records including cost
efficiencies to warrant such a valuation with copper circa $2.60/lb ($5700/t).
Amazingly where the Chinese are closing out yet again!
Staying on the theme of copper it's noted at the
price and with the likely expenditure, one savvy analyst a k a Roger Bade has
downgraded Central Asia Metals (CAML) to a hold, based on the
price of copper, the CAPEX and distraction from Kounrad.
As one should expect from EMC, it’s always wise to
consider Directors true alignment with shareholders. Today we are informed that
Nigel Robinson, Chief Financial Officer excised and flogged all his options. Not the first time this has occurred
either. If one assumes Robinson is a savvy man with financial prudence, then
one would be wise to ask why he has sold all his options.
This is not the first time Robinson has conducted
such an activity and brings in to question the purpose of the options in the
first place. Long-term incentives plans and options are allegedly to align
management with shareholders. If this was the case, considering today's
announcement and that previously, sell, Nicholson and Clarke's excise and sell (22 October 2014), Robert
Cathery's sale (1st October 2015), Nigel Hurst-Brown sale (23 April 2015).
As always, directors’ alignment or lack of raising
significant questions. Being at the helm, especially in Nigel Robinson's case,
gives a damn good indication of the outlook. Hargreaves Hale will have
something to discuss this weekend? Another ENK Plc (ENK) in the making? Over to
D&A...and Montoya Investments if memory serves me correctly. With the
potential for greater dividends over the coming year, it raises questions about
the sales but also M&A.
It never rains but pours for the serial
disappointer Mwana Africa (MWA). It the gossip is correct MWA have had a spat
with their NOMAD and Broker and the result is notice being given. Surely it's nothing to
do with Mr Yat Hoi Ning?!?! With an operations and exploration update due next
month, if you're a holder keep fingers crossed for calmer seas, perhaps even
some positive news out of Bindura?
Today's woes are being felt for the holders in
Molycorp (NYSE: MCP) as the company files for chapter 11. Not unexpected. As a leveraged bet on the Chinese
restrictions that unwound the company and sank its fortunes, there may be some
hope post any restructuring. With a proverbial piste of a share price, any
holders left really need to consider their thesis on investing. Mark Smith,
must be relieved to not be involved with MCP anymore, and Largo Resources (TSX:
LGO) looking brighter.
TSX: LGO have gained final approval from the Brazilian Development Bank
"BNDES" and its consortium of commercial banks for the restructuring
of its main construction debt facility (the "BNDES Facility"). In
addition, TSX: LGO (EMC: Largo needs $60M CDN Minimum) raised $75.3M CDN to shore up their balance sheet. With the
price around the placing circa CDN$0.80, there's some potential, but not without
associated sector risks.
Anglo Pacific (APF) should welcome the income from
the Maracás Menchen Mine Royalty, having fallen on the back of the
coal settlement contacts (EMC: APF Coal Settlement Contracts Ref: APF), they're going
to struggle to hit their target this year.
Red Rock Resources (RRR) are now hunting elephants, with an investment in an oil company of the same
name. This mini-me-conglomerate really needs to consider shareholder returns
before conducting such plate spinning exercises. Today means the final proceeds
from the Columbian sale have been committed / spent. This
companies performance and confetti issues are not going unnoticed, but what
next? If one remembers the Ariston advert
of yesteryear, it’s highly probable.
Finally, the thought goes to Richard Magides acquiring a stake in Energy Resources of
Australia (ASX: ERA) via Zentree Investments. Perhaps the white knight caveat
of a Chinese or Singapore backers is coming in to play? Notification of Holding may be a leverage play on
the consecutive losses running at near AU$1 Billion.
Atb Fraser
Hi Fraser- some interesting news today.
ReplyDeleteRe MWA- Mr Mpinga did write and tell major shareholders that if he had to leave, Peel Hunt would go too, so todays news isn't really news at all, as the threat was ignored. The Chinese faction won the boardroom war, Mr Ning and his pals have different plans for MWA and they should get a new Nomad in place well before the 1 month notice period runs out. The important move for them is first to the get the smelter up and running, which should be possible in the second half as the major pieces of kit were promised in 6/15 on site. They also need to guide the mkt re their strategic plans, the gold and nickel being active, what are the plans re the copper, diamond etc. Until this is clear, it is difficult to value the company, but 1.5p does look too low especially as today RNS was known.
Re CAML- Roger may disagree but CAML are wise to diversify and their reliance on Kounrad and the benevolence of the Kazak gov, so they are trading on a fairly heavy discount via the current jurisdiction. I bet Roger would be quick to criticise them if the The Copper Bay assessment is at a fairly early stage, I think it will be a major company asset and Kounrad wont last forever. The mgmt. have sold now and in the regime turned nasty, as in the past so Im happy to disagree with Roger and buy and have added again today. They are the lowest cost copper producer I can find, mainly because they don't mine, they just acid leach old waste piles. The dividend was 12.5p in 2014 and this could well inc in 2015. A great business model that could well be repeated in Chile, when the full numbers are revealed. Mark my words :-))
Re SXX- the rollercoaster continues, the shareholders now expect a firm Yes, despite the Parks Planning Officers report. The latter pages of the said report do set out the case for and against v well and the fact that the Park really do need that section 106 money to achieve their own strategic plans and fend off the gov budget cuts (40% since 2010), so my view here is that the PO must defend the National Park on one hand but he would actually be quite happy if the vote is a Yes. The end is nigh (meeting 30/6 and could move into 1/7 if lunch is really good) and it will be an open show of hands, so that helps SXX too.
Cheers. The Leggie
Correction- the second sentence re CAML should read-
ReplyDeleteI bet Roger would be quick to criticise them if the government in Kaz turned nasty, as in the past so Im happy to disagree with Roger and buy and have added again today.
I am not sure how those paragraphs got mixed up.
Cheers. The Leggie