Good Morning,
Just when you start to look at a long in Petra
Diamonds (PDL), you're reminded of their woes but the time is not been wasted. The company now state the strategy
for addressing the low grades is not working nor is improving.
PDL’s woes came out in the analysts call back in February/April
(would have to check notes) were the concerns for the grades ‘whilst in transition’
on the mature ore. Today’s confirmation of what one analyst (hat tip) spotted
that PDL should have considered before the
market update. If memory serves me correctly PDL were meant to have a good
understanding of the ore.
The grades are lower with fewer high quality stones and the
bulk being smaller carats is going to result in lower revenues. EMC:
PDL April 2015 noted that a PDL lacking quality then revenues will
reflect this. With yet another downgrade in guidance (previous Q3)
not in quantity but the quality. As the profits warning strike rule applies,
any positives seen are now eroded by the management’s guidance. The market
would be wise to price in another, especially whilst the rump is now 2017+
Unless some degree of luck is on PDL’s side with exceptional
stones, it’s hit and miss on revenues, and the weighting towards end of year, results will now need to be very good. Date for the diary is the full year 2015 trading
update (Production and Sales Report) and annual guidance announcement on 27
July 2015.
The surprise will be if PDL can do $120M in the final
quarter. The shares should be about 150 pence after today’s news. Consideration
should be given to the potential sale of De Beers and balance sheet needing to
look ‘better’, expect a cap on pricing up to Christmas.
The average price per carat in Q3 for Cullinan was $106/CT,
after today, a prudent measure would be to downgrade expectations to around Finsch’s
Q3 numbers of $88/CT and strip out the majority of any “hope” in the recovery
of exceptional diamonds. Translating to $405-410M full year not $420M or $105m
ish Q4.
Graphene Nanochem (GRPH), when reading accounts, its
mystifying what the market is up to. GRPH’s preliminary
results are out and the award of a new
tender for $28M over 3 years. GRPH
state they are “Well positioned to
capitalise on the growth potential in the oil and gas ("O&G")
market.”
GRPH future revenues may have some potential, but unless
the window seat has changed its outlook, GRPH operate in O&G, have net debt
of circa $28.2M and do not make a profit. Fundraiser anyone?
On the back of Stans Energy third party litigation
funding agreement with Calunius, the Ontario
Divisional Court has set aside the Mareva Injunction over the Centerra
shares. Although freezing order has been applied for. The appeal, as Stans
Energy point out was set aside by the Court on procedural grounds, not on the
merits of the case. Being informed its likely they'll win the appeal, without being versed enough in the law its a binary bet at this stage.
What are the odds of bwin.party
digital entertainment (BPTY) being bought out now? Of course one sells 6%
of the company’s entire issued share capital because there’s a premium coming.
Perhaps march madness (in June). SpringOwl Gibraltar? (Poor I know!).
Security at Lonmin's (LMI)'s car parks might be a long-term additional expense as cars/buses were torched in protest at redundancies. Now the managed sale is over of GLEN stock, its back to the realities for LMI. LMI's market cap is now at a level to set up operations would be near 4 times as much $. If one was sensible, resolving the Furnace issues with a revisit of the ConRoast tech (held by JLP) the costs per ounce and long-term maintenance could be significantly reduced. Are analysts going to start to acknowledge the need for cash? For that matter, the company?
No time again and again for Gate Ventures (GATE) with a placing underway, would you?!?! Or PureCircle! However no reason to change the view that there’s “no reason to hold” EMC: Purecircle 10 September 2014. We can look forward to their trading update towards the end of the month/beginning of next.
Atb Fraser
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