Good Evening,
It would appear that the only
issues relate to Greece at the moment rather than the liquidity crisis occurring
in China and the likes of Puerto Rico defaulting (curve ball alert, more coming on this in
due course). A dramatic statement, but one only has to look at the
commodity woes of Dr Copper and his juniors to understand the yoyo of
liquidity. On the one hand you have physically purchasers “taking opportunity”,
and the rest of the market is a risk off environment. Even the hedge funds
are wary of (at the moment). Nickel a prime example...
China has all but banned the selling of stocks, cancelled the borrow on what little was left and
also hovered over those with a decent sense of market actions, to threaten them
to change and/or stop trading.
Whilst away, it’s been interesting to grasp a sense of
understanding on the Asian markets as a whole. A plus being there’s limited
ability to check the western news flow, without some neanderthal type market
assessment. Aslthough China are “protecting their
market” (shall we call it protecting confidence), the wider population not only
disbelieve the Chinese Government statements, but more so, are massively wary
of the outcome. Expect news on a few arrests in due course.
Housing is at risk on a number of levels more recently,
where there’s the threat of action by developers on potential customers pulling out of
deals. Quite how, even in Chinese terms, one is legally obliged to buy in the
absence of a contract is anyone’s guess. It would appear “by threatening it”
there’s some financial benefit for those developers. More on this later,
perhaps when at home! Accessing liquidity cash, akin to "fitting the BP compensation criteria, appears to be the staple diet of the month.
On AIM, we had Anglo Asian Mining (AAZ) coming out with
a productionupdate. One would be wise to wait until the next set of results before
getting carried away. Agitation leaching recoveries saved the decline in
grades, one hopes they can maintain this.
Copper production came in a corker at 236 tonnes, compared to 182/t (admittedly a poor
comparison). The reagent costs should still be coming down in price, but
disappointingly there’s no guidance on costs, yet again.
Although net debt was reduced, its
not wise to carry inventory and debt. With the director lending a small chunk ($4M) to continue ops more recently, it’s a positive that cashflow is appearing to be well managed. With the woes of commodities and the cashflow management needing a
dictator type management style. EMC:AAZ potential cash call looks like it will either be a slow journey whilst
paying down debt or today’s news is the positive before the dump.
It was interesting to listen to a trader whom considers Lonmin a screaming buy now. It’s not
Friday, it’s not gin o'clock and more so, one hopes he has a better
understanding than the rest of South Africa. This doesn't mean it’s not a bad
idea, its just significantly high risk.
Precious group metal (PGM) producers are right
on the wire at the moment, if volumes and demand do not pick up soon, expect a
low price for longer across the board. Not necessarily the best thing for
Lonmin, whom lets face it, had they consider other avenues for their marketing
and trading options, could have turned themselves into a force to be reckoned
with.
Hindsight is a wonderful thing, alas for Lonmin, one wouldn't like to be
in their shoes, especially in light of their OPEX CAPEX cost when considering
Platinum/Palladium. For the first time in a while my email box contains some
sensible suggestions about the PGM market, congrats pros!
On Exillions, limited time, but perhaps the company would like to make a few announcements about "holdings in company." Unless of course the rules only apply to mortals!
Atb Fraser
Hi Fraser- Nice work on China and PGMs as usual. My own take on PGMs is that things could well get worse before they get better. Its clear that the massive fall in fuel prices has affected the push for fuel efficiency, so the Yanks in particular order more 4x4s and gas guzzlers to celebrate and the demand for PGMs is diminished as a whole. The case re LMI is heightened as they are high cost, getting hit by wages demands and power cost hikes (which seemed unlimited until the latest pushback to Eskom re their neverending attempts to hike prices) they burn out their kit on a regular basis, they have high debt... the list is long and nasty. One day someone will make money going long on LMI, but in the meantime they will lose a few shirts. Too many red flags even for my adventurous portfolio and Im holding TPL and JLP in there so that is an indictment. If one wants to play PGMs there are a few safer ways of doing that without taking on all those other risks.
ReplyDeleteCheers. The Leggie
Fraser- Just noticed that SXX have had the "no call in" heads up from the SoS, which was a possible risk that could have delayed them from their current timetable.
ReplyDeletehttp://www.investegate.co.uk/sirius-minerals-plc--sxx-/rns/approvals-update/201507141228370116T/
It was the likely outcome given the local support and the central gov drive to simplify planning and get the Northern Powerhouse (aka the northern shithouse in some quarters) project some impetus. In the meantime, they have hit the road of institutions this week, so the share price will wobble as the banks try to get the best terms for any new investments via equity or bonds. Evil Knieval feels it will never be built but he obviously hasn't studied it very much at all so his short call at 17p yesterday looks a bit dumb today.
Cheers. The Leggie