Morning Mumble: Sirius Minerals NYMNPA, Platech's cashbox placing & clever play and Anglo's Sherlock Award + Paragon Diamonds "share buyback!"

Good Morning,

Its rather bemusing that the market expected the planning officers report to do anything bar go against the grain and recommend anything! In summary, 

• Officers' policy conclusion is that they do not believe the development represents exceptional circumstances and that the economic benefits and mitigation/compensation do not outweigh the harm caused.

• Officers acknowledge the high level of mitigations, the significance of the economic and social benefits which could attain national significance and the very strong local support.

• Special Planning Committee to meet, as previously announced, on 30 June 2015 to determine the application.

The full report is available: NYMNPA Special Planning Committee Report (PDF). Anyone that did not derisk significantly really needs to consider their approach. With no recommendation, it’s down to the planning committee to determine the result. One suspects that the "no recommendation" is to avoid the potential legal implications of being pro-ante the project. Its down to the test for a ‘Major Development’ that is a key government policy. In the event of refusal, expect SXX to become representative of arbitration value, circa threepence. 

30th June beckons...where Members of the Authority will make a decision on the application, based on their own views of the planning balance, and have the option to resolve to approve, defer a decision or refuse the application. One suspects it will either be approve or deferral, refusal has significant consequences on a number of levels. 

Playtech (PTEC) have announced a placing that should be considered a cashbox and has only aided the short component in PTEC. With greater scrutiny over PTEC and analysis of its core business (including PLUS), PTEC's model needs cash. The commitment to buy PLUS is one of a binary nature, both shrewd and well-timed or simply, a stupid gamble where the product offering could have been replicated with a better perception of brand. 

As PLUS has had so many issues, its "plug and play" type model is now ruined (in regulated markets) expect some significant revisions and reconditioning on growth forecasts. With a vast amount of convertible loan notes/bonds in existence at circa £7.25 and the placing. Wonders would never cease if the placing was at the convertible price level?

PTEC holdings at 9.36% in PLUS. The market simply should price in the takeover happening now, as PTEC are merely saving themselves near 5% of the offer price in market. Clever? if it turns out a good buy not goodbye, time will tell. With 44.96% voting in favour now, they need a smidge over 5% to do the deal. Unfortunate for a few funds, some of which had the opportunity to avoid such a calamity. Alas, don't consider the amateurs knowing a thing or two!

Apparently, Anglo American (AAL) shareholders pressing for more cost savings, Investors press Anglo American chief executive for cost cuts. It’s taken a considerable length of time to realise the returns of 15% ROCE (Return on Capital Employed), are but a mere hope. One was in a quandary about whether to give the Sherlock Award to the company or the shareholders believing in the unachievable target, with the asset class, commodity price and OPEX costs. 

The performance to date suggests Mr Cutifani has over-suggested/promised in a backdrop of misery for asset sales and rationale of costs for a producer with little hope of cost savings in its current structure. Alternatively, it could have been much worse? Unlikely. It may have been safer for the Australian to stay at Ashanti Gold.

In the current climate it would be unwise to sell De Beers in the current cycle of diamonds. Having been in place for two years two months, it’s mystifying what has taken shareholders so long to realise what has not happened. 

The obvious has occurred, dire performance, coupled with the disposal of assets that are very unlikely to achieve anywhere near was is hoped or implied price. Anglo's other entities operate in a depressed market with the outlook clouded by contradictory data from China and slump in ore prices. 

Examples of sales, the Mantos Blancos and Mantoverde mines, as well as its 50.1% stakes in El Soldado mine, and the Chagres smelter have been slow. Its alleged Codelco have trumped X2's offer of $486M. Although unlikely as Codelco's natural fit is Chagres, with their smelter division and need to create value in their own offering/assets.  AAL (management) could just be forced to take fire sale prices to appease their shareholders. 

Other analysts and reporters suggest the Mantos Blancos and Mantoverde mines won't achieve anywhere near the $1B hoped and there's an offer by Glencore and X2 Resources around $500M. Any expectations of a value of near $1B save for some 'wannabe' conglomerate, are unlikely to become a reality. Although the wildcard goes to GKR Corporation, whom may come through as a strong contender, being well financed and having not completed a deal for near 12 months. 

GKR purchased the Navachab Gold Mine in Namibia from AngloGold Ashanti in June 14. Not necessarily the best timed purchase, and minor in the grand scheme of things. Mantos Blancos and Mantoverde mines, as well as its 50.1% stakes in El Soldado mine, may have economies of scale for GKR and certainly fit their remit. Over to the Qatari advisors!

Is the time right to buy Anglo? Perhaps as pressure mounts, although the South African issues cannot be ignored nor can the likely hit on the bottom line by divesting such assets into a separate entity. AAL must now be considering a perfume dowry of financing to cover up the quality of the South African assets and lack of returns.  Sound familiar? South32? Whom managed to obtain funding lower than Rio's! 

AAL is perhaps a buy as its near the target of 905 pence, being near or thereabouts, there's limited downside for the shorts, neutral perhaps or knife catcher. Certainly not short from now until further news. 

Paragon Diamonds (PRG) announced 'debt financing' to commence a share buyback programme and "to support short term working capital requirements" whilst the Company progresses the acquisition of the Mothae Diamond Project in Lesotho from Lucara Diamond Corporation (the “Mothae Acquisition”) which was announced on 5 May 2015. 

It begs the question of the sensibility of such an arrangement, when PRG are starved of cash and could only raise £130K in March. Over to International Triangle General Trading LLC whom control the shots. Perhaps its more to fund the flights to and from Lesotho whilst creating a squeeze in the stock to get another placing away post the Mothae acquisition? Who knows...in the absence of news, the price is about right. 

The cost of such a deal me simply outweighs the benefits to shareholders of a modest increase in SP, and one would be wise to factor in a few risks in this type of irrational corporate action. Surely if the company has prospects and potential the market will rate this on results "not" hopes. With the expense of borrowing, warrants and costs, why this was done now is bemusing!

Atb Fraser