PM Bolt-On: A Chinese missive, from Dudley, through the GDP, to Venezuela and "can you" because Icahn't.

Good Evening,

A gaunt through the week’s events, having only been back at it a day or three and travelling, its taking some time to get back into it. Does anyone else find it concerning how predictable central banks are becoming in their actions for short-term praise? Rather than longer-term policy benefits? Not exactly exuding confidence in the markets, but for the populist investors it’s a license to print money.

Someone got up one morning and realised the dollar impacts on the global economy, l’économie de base/basic economics. Only two days before, William Dudley, head of the New York branch Fed, told a conference that it was “important not to overreact to short-term market developments”.

The poignant part being Dudley accepted that the argument for tightening monetary policy as early as September seemed “less compelling to me than it was a few weeks ago.” (FT :). Fed’s William Dudley cools talk of September lift-off.

With a sense of relief felt by the markets, we had good news for the US economy, with revisions of the GDP to 3.7% (annual equivalent), up from 2.3%. Those in the know are now are campaigning for a rate rise, having only a few days previously been remonstrating for prudence on interest rates are now (WSJ). Just don’t tell the bond king Jeffrey Gundlach.

We have had Venezuela cryingfoul and inferring the need for an emergency OPEC meeting.  With some suggesting American production was going to fall (and inventories), oil about turned and rocketed. The concern being this didn't catch many (if anyone) off-guard, unless of course you’re a trader snoozing at your desk at 4am (GMT) and making significant profit, surely this never happened. 

Was this bottom (bounce) the obvious call for every-man and his dog? It certainly looks that way with all the various commentators agreeing. Momentum and sentiment set the volume alight with a mighty bounce. With the issues of liquidity in China and the realities of emerging markets, it’s likely the markets won’t deny the realities for forever.

All one needs now is further liquidity crisis to impact on the global bounce. What say you for further Chinese market woes, with the suspended bankrupts coming out of the closet or better still, “a large failure?” This will be evident not only in the capital outflows but productivity.

To continue the theme, China'srichest man says its time for government to abandon high growth rate 'fantasy'. Irony really, what with a company built on leverage and the need for growth? With international deals getting bigger, it’s starting to signify a complete cooling in the Chinese domestic market (ex-growth or limited and suspicions of a recession). With Wanda buying the Ironman Triathlonowner for 585 million pounds (if you include the debt), it’s a deepening sign of what is to come for China.

With memories of Japan in the 80/90’s, we have had FOSUN on the acquisition trial with Club Méditerranée (FT)  and partnership with Thomas Cook (Reuters). Remember this is on the back of acquiring stakes in Cirque du Soleil and Jeff Robinov’s Studio 8, plus Meadowbrook  and more (UK Property's JVs to come). Anyone for the high top?

Latterly, we have Albert Edwards via PM@FT, with a suggestion we have a 99.7 per cent probability that we are now in a bear market.  Worse, the professor of economics, Christopher Balding wanting to hug the Chinese, perhaps in sympathy.  What of the Chinese taxation revenues in decline?

There’s suspicions that China isn't perhaps telling all, with a focus on consumption. Whether a valid theme, it certainly questions any significant bounce. Especially in those economies more reliant on commodity sales. Or perhaps one should rephrase, were reliant, leaving shortfalls in their budgets. 

Certain countries are now ‘attempting’ to entice those with wealth to come and buy into the bigger picture, of course without trace. Surely not, the DoJ et al, do need a new dog to kick for compensation as banks have rolled over and coughed up the moular. Whatever next? Dubai property crash?

In the US markets we have Icahn acquiring a stake in Freeport-McMoRan (NYSE: FCX). One of the favoured leveraged miners shorts of 2010-15 (to be exact 4 years in total), now coming back with a decent cost cutting exercise to enable the company to keep the lights on (contrary to EMC thoughts).

Whether one should read too much into Icahn’s8.46% stake is open for debate. Icahn’s ability to buy value in commodities is questionable, as evidenced by their ventures into Chesapeake with 10.98%. It’s not a great call in the short-to-mid-term.  Over the longer-term, there’s a reduced risk of failure in FCX thanks to cost cutting, but why buy into a slump until the variables have played out?

Freeport-McMoRan (NYSE: FCX), have completed the unthinkable in avoiding the “majority” of a fundraiser in excess of the announced $1Billion. Not only does it indicate the bottom of the “trough in their cash demands” as Morgan Stanley seem to think, but give some hope for the future.

If commodity prices appreciate from here, FCX have done just enough to avoid significant issues with their announcement -  spending cuts in response to “Market Conditions”  read in conjunction with their previous Oil & Gas  capital budget commitments.  

What pantomime will next few weeks bring? A predictable element of about turns, anticipated volatility with the big boys "torching each other on a daily basis." Protection anyone??? 

In the current climate, it would be wise to consider business models, especially those “bidding” on certain contracts at the moment. Where the needs of winning a bid should not be at the expense of profitability. We shall be hearing about this later in the year…rest assured, even those larger entities with “currently” good balance sheets.  

Finally, it would be rude not to finish off with a validation, even for "foster carers" of the stock-market, JD Capital are exiting capital southbound!

Atb Fraser

PM Bolt-On: Nae bad, as the Scotsman would have you believe at BHP Billiton (BLT)...and some. Come on the cheap money, lance it...!

Good Evening,

Due to the asx, one forgot to press publish.

As of last night, the themes were remarkably predictable thanks in part to the S32 interims (Short 32). BLT's expectations and the marked denial were evidenced in the webcast and the consensus. More on this in due course, as a teaser, could there be a capex issue for short32?

BHP Billiton's (BLT) webcast and presentation gave nothing more away that wasn't contained in the year end results. Despite being pressed on BLT’s expectations of commodity prices a number of times, Andrew Mackenzie elected to avoid answering. This has wider implications for those that believe it's down to the analysts to cover those assumptions (dig). Talk about horse and cart scenario, we expect to "do this" but we aren't going to tell the market the prices or assumptions we base these on. Although, notably, their assumptions by EMC estimates are "about the price" now. 

BLT are in a more privileged position than the likes of (Anto-f-ghastly) but not without risks. Not only are they on the lookout for a $6-$10B acquisition (my estimates), but their current gearing/leverage is better than most, albeit could be better (post further writedowns). BLT asserts they are determined to make projects workable/profitable at current prices, rather than the tone of "care and maintenance” other entities have suggested.

There appears to be some irregularities in the CAPEX and guidance given, a near $1.5B  difference in 6 months, which Andrew was pressed on not once but twice. Andrew wanted to take "this offline" to clarify the items. One wonders, whether these "offline discussions" will make it into the public domain, as it has some significance. From $12.5B to the quoted $11B today (for 2015) is concerning. As one analyst questioned, did they simply stop spending for 6 weeks. 

Whatever way the cat is skinned, BLT cannot maintain the dividend commitment without an improvement in cashflow via a) an increase in commodity prices, b) improvement in costs (that are entirely absent of an "all in associated costs basis,” but hey lets ignore this) c) reducing capex, including sustaining capex and finally, d) assuming the sustaining capital costs can be managed at circa $5/t they need to achieve an OPEX of $15/t. We'll be back to this in due course, because one suspects it's overly optimistic.

The elephant in the room went unanswered, namely taxation. Yes, this was ignored by pretty much everyone, taxation liability. BLT announced the woes of taxation only a week ago. If one was to break down the cost per employee, one has to wonder what the level of profitability is for Singapore worker compared to those in Australia. We are of course not suggesting the Australian Government are not considering this (‘onest gov).

Over to BLT, "almost 100 per cent of the profit from the sale of Australian commodities, from mine to customer, is subject to Australian tax – totalling $8.7 billion in taxes and royalties in Australia in the 2014 financial year." Really?...

BLT's figures were better than envisaged (EMC), but below consensus. BLT will have the same currency beneficiation that marginal producers will have to enable an improvement in OPEX costs, albeit with asset writedowns.

Regular readers will note the views here of the FX AUD trades, as the favoured currency play. Although it’s sensible to consider the implications of Saudi Riyal and the U$D peg. Those complacent marginal traders surely don't want another CHF debacle? Do they? 

There couldn't be more noise made about the "simplification premium" if they had tried. However, when pushed on it, one couldn't help but wonder if Andrew/BLT really meant was the ‘board’ has an inability to multitask (& perhaps some analysts). When pushed on it, to expand on the meaning of simplification, it didn't have the same dramatic effect that the term hoped to embrace. In essence, the board got rid of a short (Short32/South32: EMC call), to enable a focus on "three pillars." (EMC term now).

Without wanting to do a pseudo-analysis of the results, it comes down to earnings. These are guaranteed to fall for the next financial year, save for some act of god (Chinese mega-stimulus). BLT’s sensitivity to sustain operating profitability (P+ve cashflow); namely iron ore, oil and copper, doesn't bode well. 

There are challenges to the guidance given today, in light of the current outlook for “the three pillars” (as one cannot mention the other). Quite how the market expects BLT to perform, isn't so much a mystery, but more so reliance on a recovery of the three of the pillars. We’ll ignore the bauxite/Aluminium issues presented by Dupre Analytics, but the significance should at least acknowledged. Hat-tip on some significant work there and one suspect there’s “more to come on other Chinese entities.”

Oil's decline is likely to impact around $1.65B on BLT revenues. The recent decline in steel, metallurgical coal prices and iron ore, will undoubtedly impact. Whether BLT's guidance to their iron ore costs can be achieved is another story.

Rio Tinto's (RIO) is the preferred model, with RIO leading the charge in cash cost terms. Simply, one would be sensible to factor in a cash unit cost of $16.5/t for BLT, rather than the hoped for $15/t. 

The same for the read across on copper, where Rio advised that the second half is expected to be impacted by a decline in grades and water availability (Ref: to Escondida). Although absent from the BLT today and lacking further discussion. Should we stop looking for themes in accounts and just accept what we are told? 

Longer-term, today presents an opportunity assuming there's a telescope looking past the 3.5/7 year cycles and considering the super cycle per se. It was/is an opportunity for sentiment, aided in part by the Chinese Central Bank / PBOC meddling with the liquidity.

The move was an admittance of how bad things have got, with more to come. All expected, whilst avoiding shock and ore, an RRR decline of a further 100-150bp (EMC Estimates) is required. We note the auto-leasing implications, saving the likes of Daimler/VW.

Contrary to some expectations, the EMC has a target price/range of 1350 for BLT based on today's news. If they there are currency movements in the AUD (Aussie Dollar/expected) and the Chilean Peso (CLP/also expected) and USD interest rates, then BLT are set to benefit on an operating cost level basis. For the short-termism, it was rude not to have some "on the news."

If one wants a dividend at the expense of growth (CAPEX) this is the stock. Assuming BLT avoid biting the bullet and acquire an asset in the oil and gas sector, there's limited upside (circa 35%). 

More on ANTO in due course now their cash has gone. Thoughts for the evening - what are the implications for Caterpillar in the current climate. What are the implications for the Chinese “losing their life savings?” This has more weight that most analysts give credit for….analogies to a stalling plane going virtual were made on the morning call. 

Finally, thanks in part to Li, China (the people) want an explanation for their losses. With prices high, wages low, and China aiming for 7%, we have to acknowledge GDP (we’ll call it faux-growth) is now lower. This is evidenced in part by “cheap money” being thrown at the boil, rather than lance it. Come on the cheap money...whoops, not good for Wall Street…

Atb Fraser

Morning Mumble: Prozac Anyone? Maybe a Coffee? Dr Copper & all taking a spanking - whilst likening Glencore's webcast to Star Trek's Captain Kirk & Engineer Scotty...plus the need to actually do a full days work whilst on Holiday. RIO finally surpasses the 2200 target price.

Good Afternoon, 

Back up, albeit briefly... 

It's been a while! Although far from inactive - it has been fun to relax and enjoy the holidays.

The views and positions here have pleasingly been validated by the market. A pleasant bet being honoured on RIO hitting (and surpassing) my target price of 2200 pence today! Now, with a tangent look at Glencore, with some analogies to Star Trek.

We'll ignore what the critics stated about the target prices here and on FTML, with some pleasing emails of acknowledgement. Stopped clock or not (as some called it here) there was no deviation. Not because of stubbornness, but the indicators have only become a) apparent and b) a lot worse than even those reading here thought. So why would one change their view over the longer-term? Perhaps revisit the analysis but certainly not change this view, at the moment.

Initial analysis started to appear more positive after Glencore’s webcast on the 2015 half-year report. If you have a position in any stock, in any country, it's sensible to consider the webcast and in particular the defensive body language displayed and the wide range of earnings guidance. Also, as a validation, a quick visit to Fortescue Metals Group (FMG) annual results that aided the selloff in Australia last night.

In the webcast (45 mins onwards (Q&A) section), it was noted that some analysts were rightfully enquiring about the leveraged nature of the balance sheet, specifically what flexibility there is in the working capital. 

The market is now waking up to the acknowledgement of Glencore’s wider guidance of $2.7-$3.7bn (Page 9 in Presentation). Being near 2 months into H2, one surely should have been able to be more specific or is there lot of hope being priced in? It does suggest there's a lack of confidence in their operating divisions including Russian Wheat export taxes, Canada grain harvests and the copper / oil woes and finally, China.  Is this representative of the current wider global theme?

Least we not forget Glencore's thermal coal adjustments. Despite assertions of profitability and low costs, why did Glencore have “no other option but to scale back 18MT’s of thermal coal per annum.” Is it implying that Glencore are not understanding the full extent of the market deterioration in commodities, or perhaps across the board? Not a good thing if you operate in such fields.

There are a number of issues Glencore's copper division appear to have missed. One being that the "sudden" appearance of significant physical, that is suggesting a destocking of inventories. We are even starting to think that it suggests the Asian market had stored significantly more than what the market had allowed for in warehouses and of those cashing out (by pulling levers).

Having had a target price for Glencore of 165 since from Xstrata (XTA) merger completion on the 2 May 2013. The risks are still there in China, Russia, Canada, in fact every area that Glencore has an operating divisions, but more importantly net debt and its ratings, inventory valuations (and consequences of hedging), whilst being in a global deflationary environment.

Glencore are in a position of being forced to sell off assets, allegedly non-prime/central to Glencore's needs. We note Glencore announced the sale of Tampakan, Falcondo and Sipilou on the 14th August. The buyer, a subsidiary of the Alcantara Group (via their subsidiary Indophil Resources NL) appear to have benefited from Glencore's woes. Not forgetting that the sale also proves the case that yet more volume is hitting the market. Or are Glencore and the market believing that Indophil purchased these assets to do absolutely nothing with them? “Give o’er…” as Polonius said in Hamlet!

There's going to be a temptation by funds to start averaging down given the current price compared to the IPO. We'll ignore the warped belief of the investment case for Glencore, but some 'averaging' down will give risk to shorts in the interim. Without further woes in the price of oil, copper and agri-commodities it's “about the price” (for now), with more volume likely around the 150 pence.

Simply, Glencore is no-longer a conviction short, until further testing and understanding. Namely, “how bad is it really in China?” China’s next about turn in policies, devaluation and protectionism is likely to answer that. To the detriment, of course, of their trading partners – both Asian and global.

It’s ironic that Glencore go as far as to blame 'aggressive' short-selling on copper woes. Hang on a minute, don't Glencore have a copper trading desk? It would be a fair statement if they were but a "mere" producer blaming the woes of the market, rather than a fully integrated Goliath.

It’s rather taking the biscuit to point the finger when you have a capital intensive trading / marketing division? Were GLEN the counter-parties of such positions? What is the impact of the Russian export taxation on profits, with most trading houses with active positions from June taking a large hit?

If we liken Ivan Glasenberg to Captain Kirk and Steven Kalmin to Scotty the "engineer" from Star Trek, it is bemusing to review the discussions in the webcast regarding debt, working capital and trading/financing deals (Circa 50 mins onwards). 

When pushed on the debt position, debt rating and the hypothetical situation of $2/lb copper, Capt. Kirk/Ivan explained the benefits of being a trading house etc...Where there is flexibility in business model. Steve aka Scotty was able to step up the power or reduce it accordingly by these magic levers to reduce working capital, change the interest rate on internal lending to trading / marketing or look to derisk financing positions with third parties. Warp speed anyone? Perhaps Scotty in reality is “giving all he can Captain?!”

Admittedly there's evidence in the webcast of both Capt. Kirk and Scotty not understanding the business. Glencore need to reduce their debt by about $8B and essentially by as much as the carrying value of the inventories. Why was there no comment on the reduction in volumes across their divisions? After all it’s essential to trading to have volume.

Glencore’s biggest concern is its inability to call the market. One would have thought the overall theme of a market would have enabled better guidance rather than statements about “China being weaker than anyone envisaged.”

Likewise, Scotty suggested, that one can simply reduce inventories and/or working capital in addition to intra-company loan rates. This may actually be harder than what Glencore have previously done in the past. Especially in light of volumes of commodities available in the short-term. Their selling, could actually warp (speed) the market further (at least in the very short-term).

Glencore have failed to consider the currency benefits of a strong dollar on the marginal producers, that are given (yet more) lifelines. Especially as America “hops along” to an interest rate increase (but no doubt delayed by 9 months+).

The currency beneficiation has not only helped the likes of Kaz Minerals and FQM stay in business, but most other leveraged players. The ability of producers to ramp up to reduce the costs further, whilst  putting a glut on the market, is under-appreciated (at present).

Admittedly there's some hope, Glencore think the worst is over in agriculture - with the new wheat export tax now having visibility. Glencore appear to think there's near balance of supply and demand in copper and the market price is false. Ironically those statements were made just before the PMI data for China (1). The market is waking up to just how leveraged and unstable/weak China was, but one suspects not how weak it is. Could Glencore have been overly optimistic, so far it would appear they are, and perhaps will still be. 

An example being copper piping, where over the weekend Li informs us there's a couple of cargoes going for a proverbial song. Has someone perhaps been caught on the hop contractually? More on this later, if we manage to find out a price.

Yet in contrast to these cargoes (as a snap shot), analysts are banking on China spending on the electricity supply grid and infrastructure. This may actually be a pointless exercise as energy use has reduced near 3%, one cannot see China being able to afford the previous levels of wastage to support the economy.

Whilst avoiding being gleeful of near 4 years work in commodities, one suspects the market is now at risk of capitulating to a bear market, with the wider ramifications needing further analysis.

For copper, there are contradictory indicators coming out of the sector. We have Platt's* on the one hand forecasting growth in 2015 of near 5% whereas ICSG (International Copper Study Group) at negative 3%* (Source: ICSG PDF File). That's some range considering what the implications are at an economic level, although more recently there have been a few production issues in the market that may provide support (based on a reducing supply). 

Like in China, are we now going to see the forced selling of stock pledged/secured against loans or mortgages globally? What of the collateralised loans? Or perhaps with a hope of security “in cash” now being forced to sell. An example being the sale by Martin Rowley of First Quantum Minerals. Whatever the reason behind Martin’s sale, one suspects there’s going to be more globally, whether current or former management of most companies. It’s certainly the case in China, Asian and Pacific economies.

Freeport-McMoRan (FCX) are a prime example of expanding into the rout of commodities. They are yet to press the button for equity (perhaps due to lack of interest). Are they waiting for glimmers of hope in the commodity prices? One suspects they cannot wait much longer without a restructuring/raising.

China have significant problems that without a multi-pronged approach to their economy, without some form of foundation building rather than bubble focus, their economy will continue to raise concerns. The next trend (reiteration) is likely to be PFI (Private finance initiatives) or PPP's (Public Private Partnerships).

The Chinese have very cunningly been creating their own supply chains, whether Aluminium, Steel, Copper, Nickel, Coal to petroleum. This is evidenced in Taiwan, where they have felt the might of China in the semiconductor market.

Taiwan’s semiconductor exports were significantly larger than China, their market was near 3 times the size of Chinese in 2009 but is now is en par with the Chinese market. Like solar panels in Germany, this expansion into a commercial space and supply has hurt them. Many Emerging Markets will have to consider the implications of the determination of a weakness in their currency, with a reducing demand and reducing level of investment in their countries. Examples being Taiwan, Thailand, Korea and Japan.

If one considers read across of the semiconductor market in Taiwan to the copper draw/demand on copper in China. Then China’s demand/needs may not change that much, but what may is the demand from predominantly emerging Asian markets that have relied upon China. These markets have only just woken up to the fact their industries have been replaced/replicated.  

One cannot ignore the compliment from a devout critic of the views here, where "the macro environment commentary on China/Asia and India is very accurate and almost psychic here", (to quote one reader. Maybe it's only one reader!

May be a little biased of course, but one would be hard to disagree in light of the carnage on the markets and ensuing ‘recorrection’, reading back and comparing here with the realities of the PMI data and those of the bulls of the commodities. 

Why did this blog post became so popular over the weekend, EMC: Fanya Metal Exchange. What of others? Perhaps it was after this article about angry investors capturing the head of Fanya metals exchange (FT). Quite how much commodity do physical ETFS have, what are the implications for the Jo'burg PGM ETF's etc..With humour, should one be factoring in security costs for under-performing companies?  

Atb Fraser

*Platt's from memory does not distinguish between refined and unrefined copper whereas ICSG is focussed on refined copper. 

1) Add Diary of Release Dates for PMI information to your diary. 

Morning Mumble (Shhh don't tell anyone): Voilà Freeport-McMoran (FCX), Mr Debt with implications for Vedanta, FQM, and the turnaround of HSP? + "The largest "Sale of Things" in 6 years

Good Afternoon,

Whilst no one is looking I've managed to sneak a couple of things in, including the Wolf Minerals (WLFE) call that wasn't that informative if I'm honest. They did highlight the reduction in global output as higher cost producers either close, mothball or are placed on care and maintenance. It didn't help dialling in late as I forgot the time difference. 

Having had my fair share of alcohol on a sunny cliff side restaurant, it dawned on me whilst looking down, what about that rather large entity known as Freeport-McMoRan (NYSE: FCX) Mr Debt! We know and understand leverage, it's not a good idea to be "over-leveraged" in a space of falling commodities nor so where one of the main consumers is "unwilling to pay much of a premium to operating costs."

Often there's a perception that leverage is prudent, it’s got tax benefits etc...Simply, that's a positive in small doses, but to bet the ranch on loans/bonds that in percentage to equity are just plain silly. More so, a common mistake of those trading CFD's/Spreadbets that perhaps have more aspiration than the reality of their consequence. The commodities sector is a prime example of what was wrong with Northern Rock. Plains Exploration simply was a wrong purchase for FCX, not now, but at the time it was wrong, no hindsight is needed. 

The behemoth of companies that have bet on such expansion with debt. They've been covered for a long time, finally the realities are bearing down on these leveraged plays. The Yuan / RMB depreciation is unsurprising, for those following the debacle of the Chinese companies with high inventories as a result of over production and cheap borrowings,. We know too well the outcome, voilà solar panels, housing, copper, iron ore, coal, stock-market, infrastructure projects, government revenue streams declining including corporate taxation and land sales (albeit improving) etc...

With Chinese inventories expanding at factories, gate prices under pressure and limited sales, they've got to entice customers somehow. So why not devalue their entire offering and have a "sale of things." 

The devaluation is the primary example of what "has been banged on about here" for how long, to quote one avid critic. More so, one suspects its as a result of the FED's guidance and strengthening of the dollar, perhaps an FX play that could wobble the potential for America. Least we note forget, the Yuan RMB is "almost" a dollar, commodities, goods, services often represented in USD terms. 

With misguided expectations, the ramifications will have wider implications than are being felt in the aluminium sector, steel, plastic goods space etc...etc...The Chinese are now entering the market with oversupply of semi-processed and finished goods. Shipping rates anyone? 

With Freeport-McMoRan guiding on the requirements of $1B of cash required, it would be rude not to consider the fact they need more than that paltry $1B suggested. The balance sheet by EMC estimates is near $21.2B Debt and limited cash (estimates: $340M).

FCX debt is simply unsustainable in the current commodities cycle, especially as Plains Exploration was more prudently called "Pains Exploration." FCX needs around $2.5B and the market should be aware $1B is only a temporary measure, whereas something more prudent would be to raise near $2.5-4B to enable the finalisation of capital commitments on projects and give sensible space and time to a restructuring. 

FCX could even utilise FQM's excuse for a capital raising that was on the basis of "a stronger copper market following a period of weakness"? (EMC: FQM 30 July 2015). Maybe even throw in a bone or two about consensus on WTI being circa $59/bbl in 2016 to tempt those believers and copper at $3.50/lb by year end...

If one was leveraged a la Vedanta (VED) or Freeport-McMoRan (FCX) the outlook isn't great. Vedanta are trying to raid the Cairn India's cash pile. This is insufficient, allowing for all their operations (capex needs) and now zinc suffering with a 10% drop since their announcement that they were rather "upbeat on." EMC: VED (31st July 2015) and FQM's Bitter Sweet Pill (EMC: FQM). 

Will FCX have to offer a large discount or motivate the stock, the latter is more unlikely than the former. Although FCX shareholders appeared to have celebrated FCX needing $1b when it's rather like putting a band aid on a share bite. 

We had a day of comedy yesterday. There was a celebratory notice by Vedanta commencing iron ore operations at Codli in Sanguem Taluka in Goa with 3.1m/t's hitting the market. Are we missing something? Perhaps the get out of jail free card is the terminology "The Company is likely to recommence operations from August 10, 2015." Surely an announcement on the same day and being 5 hours ahead of the UK reduces the chances of operations not commencing? Perhaps that's being too picky, after all, a quick trawl here and grammar and perfection don't exactly go hand in hand.

So with a global surplus, what more did the commodities sector want than more than another 3.1mt's of iron ore with a potential 2M further to come?  Hip Hip Hooray, what next African Minerals (AMI) making a return? Although with humour, one wonders if that was the only commodity to suffer due to a few accounting issues at AMI. This dropped in the inbox yesterday, Theophilus Gbenda Blog (2012), surely not but the infrastructure deal does give food for thought. 

Results out for Hargreaves Services (HSP) that will need more time. See: Closing HSP short Positions. If there were some decent results in the coal space, these were them. 

Fraser

Morning Mumble: Dialight (DIA) almost cheery, Freeport-McMoran & Rio's Copper Confusion. The summer snow edition to finish on (with humour): RRL, AFPO's deal of the century & RRR? Phorm on Phorm

Good Morning,

In an admittance of just how bad things are, Dialight (DIA/DIRE) initiate a cost reductions. Having only sped through the RNS on the basis of having had the money and am unable to manage a position whilst on holiday, it’s surprising they haven't mentioned anything about their inventory. 

As a quick reminder, turnover up, cash down, profit down and in the absence of an effective cost management process, net debt is now around £10M. The market capitalisation is a smidge under £180M (550 pence/32.5M shares in issue). From previously having a modest dividend, this one has been torched. 

So today, they reduce the workforce near 12% (130 personnel) and incur a few costs as a result. Question being, what's taken so long to get to the consultation process? Are management so reactive to the company's position? We'll exclude save for Mr Sutsko from that having been in the position a short period of time. 

Why pay interest on debt when carrying inventory at levels near £36.5M, which raises the question of a goods/inventories impairment. We shall perhaps revisit Dialight post hols for a deeper look at these (date for diary October)...as there could just be some potential! 

Over to Dialight (bold is the addition,

Michael Sutsko, Group Chief Executive, said:

"I believe that we have a huge opportunity ahead and Dialight is well positioned to capture significant value in our rapidly growing markets. However, as sales continue to grow, the business has taken on excess costs which have resulted in our poor first half performance.

We firmly believe that our team can deliver continued growth with future resources being added in line with our strategy. This action is a key part of our plans to transform our business in the short term whilst realigning to deliver profitable growth going forward. As previously indicated, we will report back with the findings of our strategic review in October."

It’s confusing, the company didn't know its cost of sales went up disproportionately to revenue prior to Mr Sutsko's appointment? Finger on the pulse folks! This company may be in turnaround mode, but one has a suspicion there may be a requirement for some cash. The company reminded us they have significant headroom on banking covenants, maintaining financial flexibility, this maybe so, but there's also prudence. Leverage whilst struggling to maintain profits isn't always best, especially when carrying so much inventory as it's a road to ruin. 

We acknowledge the appointment of Michael Sutsko, who has only been in the hot seat 8 weeks, it’s certainly more than the board has done previously. Who'd have thought turning modestly positive, perhaps misguidedly on the hopes of a turnaround but time will tell. Mr Sutsko appears to have initiated more in 8 weeks than anything previously. This smacks of complacency on the part of the previous/current incumbents. 

One is finding it hard to balance the views within the copper industry, we have had FCX wanting to reduce higher cost production (Cost Reduction Plans for FCX), with further budget reductions in oil and gas already identified, albeit limited. Expect more in due course regarding their copper operations.

The problem is there appears to be a confusion/contradiction between what FCX are stating production cuts, to that of what Rio Tinto have inferred in terms of copper consensus and output (PDF Presentation and MP3 File of Presentation (both downloads and a must listen). Worth a note is the time of development including permitting to production around 40 mins circa in.

More is needed on this to go through the presentation including Rio's thoughts on Bauxite in Malaysia and Indonesia. Including the anomalies in Rio's costs, very similar to BHP Billiton's (BLT). Cost per tonne are circa $35-40/t, rely on the lower quoted in the results/presentation at your peril.

With enough depression in the commodities sector, Australia now get to debate the importance (or not) of Rio's assertions to expand Silvergrass. This has previously been delayed, so whether Rio are just teasing Twiggy (Andrew Forrest) or planning to ramp up a further 10mtpa. 

Interestingly, Rio mention in passing that Silvergrass is to maintain the quality of blended iron ore. Is the quality at Yandicoogina declining quicker than envisaged? Having expanded its current brownfield sites, Silvergrass's development might be needed sooner rather than later. 

As promised the summer ski edition, yesterday Range Resources (RRL) came up in conversation. Do people really "invest" in this company now? Today, they give a Trinidad update, having not had chance to follow this crap for some time, it was handy to be reminded of this EMC: Range Resources (December 2013). The chart makes for skiing and is a cautionary tale to all. Although they do assert they’re cashflow positive, at what level? At what stage does the market wake up and consider cashflow?

RRL may, it may not, who really cares? Save for some random event, its unlikely to get any more air time. Although as a positive, apparently the writing style and commentary here has allegedly improved...be your own judge!

Staying with the skiing theme, trending was African potash's COMESA deal (AFPO) with some humour that this will be the Glencore 2.0, it has certainly grabbed attention. Even Chemicals Technology picked up the story, so on to hopes of being an AIM Goliath. The perfect opportunity for those in the last placing to exit swiftly. Whether this deal amounts to significant cashflow is another matter, await terms etc...High risk punts aren't always bad, and there may just be life in the old dog yet. With a proverbial piste of a share chart since IPO. 

Maybe COMESA's customers lost the number of their current suppliers or had not considered conducting a cooperative tender process? COMESA has sought deals since 2012 at various levels. They've certainly improved agriculture, including the launch of the Regional Payment and Settlement System (REPSS). The cooperative approach and expansion of COMESA could just be the big-brother AFPO need. Sometimes it’s fun to be on a rollercoaster?

Whilst typing, one cannot help but notice Red Rock Resources (RRR), motoring away. With the final thought in this special summer snow edition is, the Phorm fundraiser. Phorm have Phorm fundraiser. You have to give companies like this some phorm of credit for just keeping going. If there's ever an AIM TV, we may see adverts for "you can give just £500 a month" to feed this board or that board. 

Limited time to discuss the UK Mail (UKM) trading statement whose indications back in May that it was going to be bad and have become rather self-fulfilling (and worse). It’s wise to read UK Mail and acknowledge the issues. Profits expected to be 40% less compared to last year...despite "opportunities." Have UKM been conservative with the guidance? 

Happy Hols, Fraser

PM Bolt-On: Good news for Zambia + ZESCO & First Quantum Minerals

Good Evening, 

ZESCO have managed to source additional power to replace the hydro shortfall. First Quantum (FQM) are prudently quick to update the market on their power improvements. Over to FQM, full power supply was restored to its Kansanshi operation and Sentinel project by ZESCO, Zambia's state-run power company.

TORONTO, ONTARIO--(Marketwired - Aug. 6, 2015) - First Quantum Minerals Ltd. ("First Quantum" or the "Company") (TSX:FM)(LSE:FQM) today reported that, on August 6, 2015, full power supply was restored to its Kansanshi operation and Sentinel project by ZESCO, Zambia's state-run power company. This follows the receipt of notice of the declaration of Force Majeure for the supply of electricity from ZESCO to Kansanshi and the subsequent reduction in electricity supply to both Kansanshi and Sentinel as reported on July 27, 2015.

While the Company believes some restrictions may be re-imposed during the remainder of 2015, ZESCO has stated that it has contracted independent power producers such as Maamba Collieries Limited and Itezhi Tezhi Power Corporation through the signing of Power Purchase Agreements to procure more electricity by the end of 2015.

On Behalf of the Board of Directors of First Quantum Minerals Ltd.

G. Clive Newall, President

Although not necessarily permanent, at least ZESCO are being active. Admittedly with parliamentary discussions in Zambia showing knowledge of likely electrical generation problems, could it could have been completed sooner? A very healthy bounce post the news, can it be sustained? ZESCO have not confirmed whether the new supply is online now or whether they have increased production at Kariba et al. (Source:Hydropower.com/Zambia)

We shall await news from Glencore, Vedanta and Barrick. 

Atb Fraser

Morning Mumble: Hiatuses, Commodities waffling including China DCE/Mills Iron Ore Fillip, the Nickel stand-off, Oh Rio + Genel.

Good Morning,

It’s that time of year where things wind down for the summer break. With visits and holidays planned and a few things going on behind the scenes, it'll be more of a rest from trading/investing and the market. Allowing for pool and travel time, there should be some time for the odd comment after tomorrow. 

It’s been thought provoking how the contracts have been trading on iron ore on the DCE (Dalian Commodities Exchange), with the liquidity only "appearing" more recently (16th July), almost identically to the contraction in crude prices. 

Is the previous absence and contraction in leverage now being restored? Are the Government "interventions" starting to iron out these issues (poor I know)? At the moment it looks more of a bounce than anything else, with the speculation of the port inventories and the steel mill holidays for the 70th anniversary celebration. 

We had Goldman attempting to work out the amount spent by the Chinese on the stock market rescue (FT). Alas the figure is always dependent on ones positions and perhaps there's some work that is earning them significant fees at the moment. Some figures were already in state media prior to the article, from when the "intervention" commenced. 

When one factors in all the considerations it dwarfs the $188B by Goldman. As on suspects certain factors have not been included such as the financial provisions to SEO's that were reliant on monies from impending IPO's, brokerages (and companies) requiring margin/funding assistance directly and that excludes the near $200B that the Government has spent via the CSR for lending on margin (near Goldman's numbers), brokerage assistance and more importantly "direct market equity assistance." Oh, don't forget the bond issuances and "pension company" purchases. Maybe there will be a holding’s RNS?

It’s in China's interests to play down the amount of money spent, as the significance of such a figure will show the gravity of the problem. They need to show the availability of funds to reassure the punters and wider public (confidence). All sorts of knock on consequences, for which economists will have such grand names for. 

One suspects iron ore is a bounce with the steel mills running at reduce capacity, even allowing for the fillip in steel and iron ore prices. In discussions with Li, he has evidenced steel mills avoiding restocking on any notable scale, showing perhaps a generally limited outlook of capacity/orders. 

Steel mills have a number of woes, evidenced in part by the steel-home china iron ore inventory numbers (lower than 2013), showing a) lack confidence in the steel price recovery and demand b) significant cashflow issues (even in state owned mills, more consideration required on that) c) better stock management d) awaiting a stimulus in infrastructure. It’s hoped there can be China special with various people in due course, more so evidencing the flow of money. (Promises Promises/Pie Crust?). 

The same for Nickel inventories (port), which dipped as low as 6MT in stock piles in January. There's restocking occurring without any movement in price. Inventories have grown to 10.75MT's and increasing (Chinese and LME & importantly Asia ex-LME). In contrast to the assumed deficit is nowhere in sight and prices are under pressure. 

There appears to be a momentary stand-off for a minimum price occurring on Chinese (and globally) prices at the moment circa $5/lb ($10,800/t). One suspects the LME on warrant supplies will have to drop significantly before any major appreciation in the price. In contrast the price has dropped near 28%, whilst a restocking of some 4-5MT's has occurred. There's also the consideration of supply coming online from Indonesia (end 2015). Please note this is excluding other inventories outside LME/Chinese Ports.

Earlier in the year it was sensible to consider the Nickel shortfall against assumed production and demand, on the back of Indonesian ban. The revisions are now taking place with an increase in LME/Warehousing inventories increasing near 50% fold. It would appear the bets are now on the second half for shortfalls and increased consumption. Really? Save for some Goliath type stimulus, post a significant bond raise by the Chinese (estimates ranging between $188B and $544B), maybe? 

Note the Shanghai Futures Exchange (SHFE) nickel contracts since launch appear to have spanked the price, especially Norilsk nickel for futures on SHFE. As a thought, with greater transparency that started with Iron Ore, the prices of commodities have suffered. Was the dinosaur opaque model detrimental to Chinas needs and global purchasing? Was there too much power in the hands of the marketeers? The results are certainly suggesting so.

On the market, Rio Tinto have announced they have delivered first half underlying earnings of $2.9 billion. Beating the whisper, but being priced in yesterday as consensus was anticipating something special. In reality, there's merely a delay in recognition of commodities prices having tanked across their operating divisions. 

There's positives in terms of dividend increases (beating consensus), share buybacks on-going and an emphasis on cost reduction. One does wonder how much more Rio can reduce costs without impacting on the bottom line. Rio have a very efficient model, without a doubt, most strive towards it. Debt's up a smidge to 13.683B from 12.495B (10% ish), although nothing near the likes of small producers that debt to equity would make northern rock shiver (FQM). 

Over to Rio to put it in context

As expected at the start of the year, the macro environment and commodity outlook facing the mining industry has been challenging. Commodity prices are under pressure, in some cases falling to levels not seen since 2009 in the aftermath of the Global Financial Crisis. Moderating Chinese demand, continued supply growth and downward shifts in industry cost curves are all contributing to weaker markets. Global macroeconomic risks have also added to short-term volatility, and China's equity market correction and Greece's debt negotiations have resulted in concerns of financial markets impacting commodity trading.

As with all cycles, we expect the current cyclical weakness will pass as global economic growth picks up and commodity markets rebalance. However, the recovery will be characterised by slower commodity demand growth compared to the past decade and a likely continued focus on productivity and costs over capital project development. This is the industry's "New Normal", in which producers at the lower end of the cost curve will maintain their competitive advantage, but higher cost producers will be exposed.

The importance being that Rio are expecting slower commodity demand growth compared to the last decade. Perhaps they can inform the Chinese premier? 

Genel (GENL) give a reminder to the market of how harsh the cashflow conditions are at the moment. The half yearly evidences the obvious, cash down, negative cashflow, net debt up. All this whilst appraising, developing and producing assets in the hope one day KRG coughs up some cash. There's hope though, over to Genel,

"Genel's operating performance in the first half of 2015 was strong, with net working interest production up 41% to 88,800 bopd. In recent days the KRG has made a public commitment to pay international oil companies on a sustainable basis from September 2015. These regular and predictable payments will allow Genel to fully capitalise on our strategic opportunities.

We remain committed to the Kurdistan Region of Iraq and will continue to invest in our existing oil fields while moving our major gas fields forward to development, creating significant value for both Genel and the KRG."

The final thought goes to something that was expected earlier, bad debts in China, with non-performing loans rising to 1.8 trillion yuan ($289.92 billion) as of the end of June, up 35.7 percent from a year prior, (Reuters). What is the impact for the grey lending and underground margin contingent that will also be suffering, perhaps it’s safe to assume disproportionally. RRR (reserve requirement ratio) may need a modest adjustment. 

Atb Fraser

PM Bolt-On: Scotgold (SGZ) and Jubilee Platinum (JLP), no surprises, a fundraiser.

Good Afternoon,

A day of tiddlers.

Scotgold (SGZ) have found their website, Scotgold Resources.com.au where they give an updated presentation (all 34 pages).

Continuing on the theme from Jubilee Platinum (JLP)'s this morning EMC: JLP Almost & IRR questions. , JLP have rattled the tin, who'd have thought it....a fundraiser for the shortfall at 3.4 pence raising £2.4M + GBP 0.46 million warrants + circa £50K debt in settlement. 

One assumes the financing can be signed off now? At £2.4M one hopes they've done their figures correctly. Warrants have been cashed in and resolved some debt issues with the issuance of shares. 

When did the placing start?!

Atb Fraser

Morning Mumble: Its all positive, Jubilee Platinum (JLP) IRR30%? Based on what?, Polypipe (PLP) & Scotgold (SGZ), have they gone into printing?

Good Morning,

Jubilee Platinum (JLP), a company whose share price has bounced, allowing for the platinum price and overall industry outlook. In support of the share price movinement, JLP put out an announcement confirming financing discussions are progressing, "almost" all the financing is there, but better, the surface treatment returns are a whopping 30%. This may be so, but based on what calculations? See below...

The Platinum Surface Projects target to process 80,000 tons per month of platinum containing surface material delivering an estimated production of 42,000 ounces of PGM's per annum. The Platinum Surface Projects are expected to achieve an IRR in excess of 30% net of taxation.

One is fully aware of the efficiencies of the ConRoast process and how this benefits recoveries. How has a NOMAD (SPARK Advisory Partners) signed off on this IRR expectation? Based on what numbers? What is the platinum price assumption? $950/oz ? What is JLP's expectations of the PGM prices? What is the prill split*? Admittedly, JLP’s outlook is a a lot better than previously, although is JLP a company where the assets/tech should be valued not the management? 

The acquisition of Nuaire by PolyPipe (PLP) is very good for both businesses. The market, is wise to rate it on a number of levels including the purchase price and earnings enhancements. Not often that deals are conducted at levels that are sensible in today's markets. 

It’s rare to read a bankable feasibility study (BFS) on AIM with some sensible assumptions. Recognition has to go to Scotgold Resources's (SGZ) Cononish Gold and Silver Project, Having wanted a cheeky short (intraday) on SGZ previously, the company have to raise some cash but financing on the back of the BFS looks more positive. SGZ, post financing is likely to look like it has potential. These sort of BFS numbers make financing a lot easier. 

With amusement, when one was looking for the Appendix to the BFS, unless SGZ have gone into printing, the perhaps would be wise to give their correct company website in announcements. SGZ’s website is http://www.scotgoldresources.com.au/ not as quoted, http://www.scotgold.com/ (printing company).

Yet more Fortescue Metals Group (FMG) speculation, last time it was Baosteel and CITIC Group. This time round its China's Hebei Iron & Steel Group and Tewoo Group (separately). Over to the FIRB (Foreign Investment Review Board). Being both state owned entities and FGM wanting to derisk minority stakes at mine level or the rail and ports assets, there may be a good chance of a deal, but do not expect anything to be concluded at speed. Hebei would perhaps be the favourite, but does Tewoo's need to diversify/distance itself from Real Estate...? 

FXPO noted, but limited time. 

Atb Fraser

*Prill split, is platinum group metal ratios of production including PT (Platinum), PD (Palladium),, RH (Rhodium), AU (Gold), PGE (Platinum Group elements), RU (Ruthenium) and IR (Iridium). Note: PGE, RU and IR are often excluded from the prill split.

Morning Mumble: Kumba Iron Ore: What's $200M between friends (AMSA), India's restrictive practices? VED, Rhino Resources, Chapter 11 (NYSE: ANR) & The Market Vectors Coal ETF (NYSE:KOL) Whoops! + Fresnillo! & SXX Good News!

Good Morning,

We knew Kumba Iron Ore (JSE: KIO) had difficulties. It appears ArcelorMittal South Africa (AMSA) have won the spat with Kumba over the 20% Sishen, see: EMC: Kumba + Sishen. Just not how it was expected, but they've won conversely/perversely. They did something very shrewd, they are now simply not paying a premium for Kumba's ore any more. What’s $200M of revenue between friends?

The market should be appalled with itself for reacting so slowly to the pricing assumptions of AMSA. Kumba has relied upon a sales agreement with AMSA for near 12 years, whereby 6.5MT was contracted via a supply agreement. Last year’s contract was worth just over $500M to Kumba. Unfortunately, the supply agreement does not appear to be mutually beneficial anymore, and perhaps never will be again. AMSA can simply import iron ore at near 60% less than the price ($80/t EMC assumptions) that they had been paying to Kumba. 

This contractual issue/supply agreement has a number of impacts. Not only does the profit on the supply contact equate to almost all the entire planned CAPEX for Kumba, but more so, this revenue supports the operations at Kumba's Northern Cape operations. With the contract value, assuming Kumba roll-over, being worth near $300M compared to the previous $500+M. essentially at a loss when factoring in an all in cost basis for Kumba.

One suspects the contract negotiations were at an advanced stage when a leak appeared in how AMSA was strong arming Kumba (tut tut that’s just naughty!). As mentioned previously, it's a price setters market (remember this). The Chinese wielded that axe near two years ago.

Kumba have some very difficult choices to make including cuts and/or pricing in respect of AMSA. It’s likely to be far worse for Kumba than it is for AMSA and Anglo America (AAL) (majority shareholder in Kumba). AAL may have the opportunity to fill the void, so perhaps are offering AMSA some attractive terms. AMSA’s location near Saldanha Bay could not be better for them. One analysts suggest AMSA may be tempted by Minas Rio supply.

Additionally, AMSA’s strong arm approach is likely to be punishing, as they are under significant pressure by a global oversupply of steel. If there are no Government protectionary measures put in place soon, not only in South African but India, steel producers will (not could) be forced out of business by cheap Chinese imports. Expect news on import quotas or import levies in due course. Evidenced by the aluminium prices producers in India are already suffering from because of a slump in prices and surge in cheap imports. (BALCO/Vedanta)

With a market capitalisation of $2.6B  ($1:ZAR12.64). Would you be long? There's more woes to come as Kumba’s LOM's are reducing as a result of a change in operational focus. CAPEX under significant pressure, even if they “maintain the AMSA business for another year.” Unless the global price recovers, Kumba, may not be a casualty but certainly a shadow of its former self. The impact for Exxaro may just be more significant…chequebooks please.

With interest, is the Chairman's Statement from the AGM at Vedanta (VED), where there's an emphasis on "Make in India” leading to a bounce today. There's significant pressure on India relating to their import duties that could be described as restrictive. 

India is changing, examples being the relaxation of cabotage rules (Carriage of cargo between two points within a country by a vessel or vehicle registered in another country), but is likely to put pressure on the national operators and producers in the longer-term.

The Indian Government is being pressed externally to review all levies including, agricultural and consumer goods. Complaints are already lodged with the WTO, examples being the application of the Avian Influenza restrictions. (WTO: Indian Avian Influenza). Worthy of a read to grasp the economic outlook of India is the most recent WTO Trade Policy Review: India (2 and 4 June 2015).

Some very good news for Sirius Minerals (SXX) today, with the publication of their corn and soybean crop study . The size of both these markets is material. Potash producers, sit up and take note. With no reason to hold this stock currently, one has to factor in the viability of the polyhalite being a tempting factor. Good news to assist the management in their fundraising.

Can Glencore's woes get any worse? We'll let those more inclined to see what the impairment should be on their thermal coal operations. However, their miners may actually assist the price with planned strikes etc... South African mine union threatens legal action against Glencore’s job cut plans. Remember, Anglo impaired their Australian Coal and Minas Rio assets in July by near $3.5B. Glencore blame ESKOM for the woes, perhaps they should shut some production? FT Glencore South Africa (Optimum Coal Unit). Has GLEN not been so exposed to thermal coal, then they would have fared better? 

One hopes EDF Trading Resources gets there $125M from the sale of their share in the Pennsylvania Land Resources Holding JV with Alpha Natural Resources (NYSE: ANR). ANR has natural gas assets that may pay some of the bills, but they can finalise those valuation with a chapter 11 wrapper. Over to Rhino Resources (RNO) to take a kicking as well...This doesn’t bode well for the The Market Vectors Coal ETF (NYSE:KOL) that's performed like a proverbial dog. 

Limited time to cover Fresnillo (FRES) interim results but worthy of further work, especially around the costs on an all in basis increasing. Sensibly, FRES have reduced the exploration budget for this year in light of more challenging precious metals market conditions. It would be wise not to ignore the benefits of the hedging programme either that benefits the bottom line. CAPEX for the full year 2015 has been tapered back but still expected to be in the region of $570m (vs. previous expectation of c. $700m). Whether they can achieve the 570m target is another matter. 

Atb Fraser

Morning Mumble: Robertson's Jam (Fox Marble), Wandisco (WAND) & the panacea for the PGM industry.

Good Morning,

Is it starting to look like a management issue (or perhaps capability issues) with Fox Marble (FOX), after today's operational update? A Lack of orders, issues with machinery, some small orders, some advanced payments and  fire at Prometec SrL, the company responsible for supplying and refurbishing two major pieces of machinery due to be installed at the factory (total write-off). As a plus they were insured. Adding to yet more delays, including 'accessing the higher quality stone.’ At what stage will the company start being proactive? We had EMC: Fox Marble May 2015. 

Having given FOX the benefit of the doubt in December 2014 (EMC), there's little sympathy left for management 8+ months later. Fox Marble, like a few companies on AIM have quality assets, it's just the management erode the value for a number of reasons. FOX may have created an over-expectation in shareholders by their guidance. They certainly haven't delivered and the price will be punished as a result.

For shareholders, they can but hope the management are going to resolve the woes of their existing operations before entering into a joint venture in North America, which should further increase its penetration into the world's largest consumer of polished marble. Time for a management change? Unlikely as the management hold near 25% of the stock, the issue is, whether people will continue to hold is another story. At what stage were all these operational woes including poor sales performance known?

As a plus, there's some jam in there, with visits from their Chinese partner/agent and some politicians, assuming you can be bothered to read the entire RNS. If there wasn't enough in the announcement to attempt dissuade holders from selling, as a last ditch effort, FOX remind the market, as of the 30th June they had €5.6 million in the bank (one hopes not Greek). 

Over to Chris Gilbert, CEO of FOX, to summarise the disaster, "Whilst the first half has been disappointing in terms of sales and we have had some unforeseen operational frustrations, we remain confident in our objective of being a major international supplier of high quality marble. In order to underpin the development of our sales channels we have appointed three additional experienced marble sales staff over the last few months, and we expect that this will also bear fruit as we bring on the production of Illyric White marble from Malesheva 2 and larger volumes from the Sivec quarries in Macedonia." 

Syrah Resources (ASX: SYR) have done the unthinkable and conducted a capital raising (placing). Here's yours truly thinking there cannot be that many mugs out there. Congratulations to SYR and team, they only go and do this on a fully underwritten basis for AU$$211 million (Placement) and Entitlement Offer). This won’t change ones view of the company, Slater and Gordon managed to raise monies.

If one has researched Syrah Resources and the neighbours licensing, it would be wise to start questioning the valuations. Certainly that of Syrah resources, where almost identical operations are valued near 4 fold less (Triton Minerals). Triton Minerals (ASX: TON) has teamed up with AMG Mining AG whom have an interesting history themselves with the debacle that occurred at with Timminco in Canada. 

With a global supply...oops global demand being limited for Graphite currently. Admittedly, one shouldn’t exclude a business on global demand as there “may be” new opportunities. However, the new opportunities do not appear to be presenting to the market. Least we forget Kenmare Resource’s (KMR) venture into Graphite. With Vanadium making a brief recovery and support coming to the price in the market. The prices are now likely to be shattered come 2017/18 when Syrah bring yet more vanadium and graphite into the supply chains. Unless of course there’s a significant change somewhere.

Question for the logistic providers, “why is Nacala port preferred over Pemba?” The port's website is down at Pemba, but should it not be in the frame as a preferred port, compared to Nacala? Immaterial really, when considering the viability of extracting the ore with the current demand, outlook and cycle of commodities. Disappointingly, one has to wait until the trading halt is lifted and the shares resume trading on Thursday, 6 August 2015 (Ex-entitlement).

We had a do at the weekend, where Wandisco (WAND) came up after their sales update and Tom Winnifrith’s short in August views on WAND.  It’s timely, as we introduce the label "JAM" to the EMC to identify companies. Not only the likes of WAND and FOX, but for the entirety of the market as the need arises. As a reiteration, there is no need to change from the view in January EMC: WAND. The lack of cash is the theme and lack of sales/profit. 

From dialogue today (RG H/Tip),...Does Team UK (the markets) not know that Subversion, CVS and Git (and Hadoop) are readily available? In addition to being open source, where some feel WAND do not add additional content to warrant a premium? With one chap coming out with a PT of 14.5 pence, its certainly punchy and one that the market may have to swallow.  

The PGM industry is suffering, as a result of power increases, wage inflation and operational woes, and needs some assistance. We have the answer, or more poignantly, Lonmin (LMI) has the answer. With the market waking up to the realities of LMI, save for a rescue plan from a Chinese entity that themselves are under pressure themselves, the company is due a rerating (downwards).

The panacea for the PGM industry is a large casualty, and LMI fits the bill. Big enough to reduce the over-supply, small enough not to be a significant casualty for the banks. This would also free up electricity capacity, reduce the strangle hold on labour prices but create a deflationary cycle on mining costs in South Africa.

Norilsk Nickel preliminary consolidated production results for the second quarter and the first half of 2015, shows supply increasing into a stagnating market. Norilsk guidance of Palladium (Q performance up 15% q-o-q) targeting 2,580M to 2.610M ounces for the year and 590K-615K (Q2 performance up 6% q-o-q) ounces of Platinum. Just one of many producers ramping up in an attempting to reduce costs to a viable level. 

Any short-term relief is limited with demand and/or speculation being below forecasts. With car and truck (heavy duty) sales coming under pressure from reducing capital investment, Lonmin could just be what the entire PGM industry needs, closure. Removing overnight, a good proportion off the surplus.

In the absence of closure, LMI have their work cut out, with a capital raising required, potentially just to fend off the banks and then there's other woes of cost inflation throughout their entire chain, never mind being in South Africa (RSA) 

Its been pointed out the link off the Indian Times story was inadvertently missed. Hopefully this will be corrected. 

Atb Fraser