Morning Mumble par Deux:Share Sales (GLEN), Share Options (AUE) + Iron Ore settling

Par deux,

Glencore had William (Bill) Macaulay flog the remainder of his holding in Glencore (GLEN) 42,071,878 shares for a combined total of £117,744,367.35. Having only two weeks earlier notified the market he sold 27,974,350 shares grossing £84,370,639.60 (Combined gross total:£202,115,006.95). What this signifies in respect of GLEN's key market and likely performance is another matter. 

The potential of Aureus Mining (AUE) with ramp up at Liberty, its a little disappointing to see the company grant stock options. Lets face it, these options type hedges are becoming a trait of AIM, although AEU could argue they need incentives. Is David Reading's annual salary of $548,623 insufficient, (Inc. Salary, other short-term benefits and share based payments). The other directors, its fair to say it's reasonable in light of their smaller salaries of circa 70K inclusive. With such little skin in the game as a percentage of the company, its hard to justify the incentives

What companies like AUE should be aware of is the growing share register of "more serious investors". Whom are not fearful of raising their objections. You could argue it's justifiable, but its also fair to assume its simply somewhat unfair on the basis of the the shareholder returns to date, over the longer-term.

With volumes still up on the Dalian Commodity Exchange (DCE) for iron ore, a split between physical demand and speculation of near 50/50 is maintaining the price, although easing slightly. One would still be wise to keep an eye on the volumes before taking a position.

Atb Fraser

Morning Mumble: Curve Balls from Israel (PLUS500 & Playtech (PTEC tie-up)), Beowulf, Patagonia's departure, Aureus Mining & Republican Fishing!

Good Morning,

A bizarre event when you read an RNS and think, is that exactly what I've been saying (self-admittance) of a company in dire straits. PLUS announce that Playtech (PTEC) are buying them for 400 pence per share. Shareholders have no choice, there's significant warnings in the RNS (bold is an addition): 

• On 18 May 2015, Plus500 announced that the UK Financial Conduct Authority ("FCA") had required a review of its Anti-Money Laundering ("AML") financial sanction systems and other related regulatory controls which led to Plus500UK Limited ("Plus500UK") prohibiting all transactions for existing customers until additional AML procedures have been completed. As a result, Plus500UK ceased on-boarding new customers.

• Further to this, recent events and associated publicity have meant that Plus500 has become the subject of increased scrutiny and has received additional requests for information from its regulators in the jurisdictions in which it is licensed. Whilst Plus500's products, technology and marketing skills remain strong, the recent regulatory scrutiny placed on Plus500 has highlighted the advantages of expanding the operational infrastructure to support a business of its size.

• Playtech intends to provide Plus500 with access to its market leading technology and infrastructure, in combination with its expertise of operating a multi-jurisdictional regulated business.

• Plus500's Board now expects group revenue for 2015 to be lower than in 2014, with margins expected to be significantly lower due to maintained marketing spend.

For those unhappy PLUS holders considerably higher, what are you unhappy with? You've been saved! The market has kindly reacted to PTEC with some short-term profits, with PLUS overshooting as some buy back, almost LFL to the shorts on PTEC. Akin to QPP, whom in my typo and CwC’s offering was more accurate than realised!

The price is either too expensive or shrewdly timed. PTEC are obviously betting on lower churn and think they're able to mitigate the damage by a typical public house like "under new management sign." It would appear they're now prohibiting all transactions until AML procedures are complete. 

Apparently because of publicity, PLUS 500 have come under increased scrutiny, which its more than probable they should have done at the start. Worse, is a complete admittance that PLUS is lacking the expertise of operating a multi-jurisdictional regulated business. 

Time for some rereading of those broker notes that were significantly lower that today’s guidance would suggest, was it Liberum (admittedly house). The plus (poor I know) is everyone should have made money, the shorts and the longs (a rare occurrence). Simply, if shareholders reject this, they're stuffed! 

Does this corporate action remove the need for PLUS to give a profits warning substantially outside of what has already been suggested? The most notable statement from plus is the absurd commentary "Whilst Plus500's products, technology and marketing skills remain strong, the recent regulatory scrutiny placed on Plus500 has highlighted the advantages of expanding the operational infrastructure to support a business of its size." So all those shorts run over to PTEC to dissect and analyse the "potential benefits" with some easy money when the shorts ran to the door 400+ on PLUS! 

Its been some time since Beowulf (BEM) was looked at, with the tin likely to be rattled soon EMC: BEM 1 December 14. The announcement would be encouraging had iron ore been near the $90/t (circa), without a surplus in the iron ore industry and China going hell for leather. 

BEM's Kallak project would be somewhere near viable, perhaps in 5+ years. With near £180K cash left post deduction of liabilities, there "may be a need for some cash in the meter to keep the lights on!" Thankfully, shareholders in the last placing can look forward to the prospects of BEM advancing  "other value creating opportunities." 

Its with some sadness that Bill Humphries is stepping down from the board of Patagonia Gold (PGD). Perhaps retirement or other opportunities. PGD directors have on the most part kept skin in the game, supporting the company even when the market has been against them. I've never met Bill or anyone from PGD, but all the same, AIM have lost a decent fellow. Admittedly their chart looks like an admirable piste, but perhaps some potential? 

Aureus Mining (AUE) announce first pour at the Liberty Gold Project, as expected earlier in the month, EMC: 11 May 15, the shares have responded positively, but there may be some more in there yet. As always, its wise to close the higher risk positions into rises and leave the longer-term monies to work. 

Surely not, hook line and sinker, Fishing Republic, a fishing business with 7 shops and online presence. With a resilient market, consolidation is going to be difficult, but one perhaps to follow with admirable plans, whether they turn out to be a tail or not is another matter! 

Over to Northland Capital, with 72.5% held tightly by family, its a tiddler (I know) with potential volatility, perhaps even potential if acquisitions are priced well/in non-dilution form (possible?). The fishing market should not be ignored, with a die-hard following. 

Limited time for the  Gulf Keystone (GKP) appointment that may puzzle a few nor the Sunrise Resources (SRES) "Bonanza", which if one was suspicious would now be followed by a placing. The grades are good, but bonanza? They're chip samples! Some more time needed on Sierra Rutile (SRX) positive results of Sembehun Dry Mine study.

Atb Fraser

Disclaimer.

Morning Mumble: LMI (Lonmin), PGM's via GFMS, Serabi Gold, Tribal Group + Otto and Capital Drilling!

Good Morning,

The share price of Lonmin (LMI) is rather telling that Glencore (GLEN) shareholders do/did not value or rate LMI. We shall keep this simple, in the absence of an improving outlook, reduced costs and CAPEX and OPEX clarity LMI is on a path of dilution (rights issue). With GLEN now ex-dividend as of yesterday, LMI is being punished, opps the correct term is "managed sales."

Perhaps the value of LMI for some funds will be ignored and held until an improvement or corporate action involving the Republic of South Africa (RSA) Government. The thought for the day goes to those analysts thinking the furnaces have "exceptional or one off costs", that shouldn't be factored into longer-term workings. One assumes they're new to the chrome issues within the PGM industry?!?!?!

LMI will not be assisted by GFMS annual survey is out on the poor man's Reuters Eikon that platinum has the potential to test $1K/oz. It’s not beyond the realms of possibility, with LMI needing to "dump" rather than manage the sale of near 200K with a growing differential between supply and demand. 

With the improvements and an expanding market in recycling  of catalysts, limited growth and even with a shortfall in supply PGM's failed to respond. One could be minded to think the speculators are locked in to Jo'burg ETF's at a loss so are unwilling to apply further capital, same for the Chinese and hedgies focusing on bottlenecking.  SO GFMS put the range to $1K/oz. to $1290/oz. 

Someone popped a BRR media discussion on Serabi Gold (SRB) into my box this morning on the back of the Unaudited Financial Results for the First Quarter 2015. SRB's suggestion there's the potential for M&A in the sector are of concern. SRB are another company that should focus on their current assets, get their start-up at Palito running efficiently and prove up their resources, rather than spinning a plate they can ill-afford to diversify on.

There is little margin on the balance sheet for M&A, save for the issue of confetti. Currently the Brazilian Real (BRL) is favouring their cost base in reporting terms, and with the downgrades in banks, the issues in the economy is unlikely to change. The USD/BRL of 1:3 should perhaps be considered the key support/potential floor. 

With the last placing just over a year ago, the FX losses kitchen sinked and ramp up progressing well, SRB is now looking more positive than the past 4 years. A producer (at a profit) and potential to return monies to shareholders over the longer-term, SRB should not be ignored. Likewise their liabilities, if there was a hiccup in their plans or a significant movement in BRL terms could hurt them. 

Tribal Group (TRB) gave an update into the AGM. With timelines going out further, one would be wise not to ascribe too much value in light of a second warning about the timing of and Keith Evan's departing, the warning signs were there! Having missed the previous year’s targets, the terminology is far from positive, but with a new 'man soon to be at the wheel' there's some hope. 

It was interesting to hear some excitement in the Oz about SC55 operated by Otto Energy. Tiddler watch, Red Emperor (RMP) Resources have a 15% working interest (WI) on a capped cost basis USD5.625m. If costs exceed RMP cap they have the right to reduce their WI!

RMP, a small cap with near £5M in cash (and most of it spoken for, if not all), there's no room for failure. As Ian put it a binary bet on the outcome of drilling in Q3. SC55 was originally farmed out to BHP, time will tell whether they were prudent to have walked away. Widows and orphans need not apply! 

For those with a memory of RMP, they used to be a shareholder in Highfield Resources (ASX: HFR) whom recently raised AU$101M. RMP sold all their stock at circa 80 cents a share (only 4 months or so ago). With little sign of the ASX: HFR ending its bull run at the time, RMP's timing was should be considered poor, or should it be worded as desperate for cash? 

Had Aureus Mining (AUE) been able to release a sensible RNS about their Q1 progress and Management Discussion and Analysis (MD&A), there would have been time to speed through it rather than the snakes and ladders approach to RNS’ing! You can read it here. Their IR best shape up, or investors (including small funds simply won't bother!), first pour expect end of the month! 

No time for the gold speculation in Asia/NYSE (also arbitrage), with investors hoovering up physical ETF's, nor WTI/ struggling to maintain it's $60/bbl support and the Brent GAP expanding again. The analyst who reads the papers two days ago after best have a whip round to speed up coverage.

Thought for the weekend, is the worst over for Capital Drilling (CAPD), compared to those leveraged operators! Good piece in LEX PGM Plunge with Alan Livsey and Richard Stovin-Bradford. Missing some very important indicators but all the same thought provoking. 

Atb Fraser

Morning Mumble: Lonmin, Aureus Mining (AUE) and Orogen Gold.

Good Morning,

Has the market lost its mind, Lonmin results are dire. 

We'll ignore the electricity issues (likely 13%+ appreciation over 4 years) as this makes up a modest 7% of production costs and focus on the costs. As LMI kindly outline, unit cost of production per PGM ounce rose from R13,058/oz. to R10,516/oz. Using LMI's average exchange rate, South African Rand (ZAR/R) to US Dollar, R/$ 11.48, costs were $916/oz, before associated costs. 

Average prices achieved on the key metal PGM basket (excluding by-product revenue) $916/Oz. (2014: $999/oz.) PGM basket (including by-product revenue) $988/oz (2014: $1,056/oz). Simply put, why are LMI bothering. If any expectant Glencore LMI holders are planning on retaining their stock, it would be interesting to hear why. Maybe they like gift-aid, keeping construction workers in employment with the forth bridge of furnaces? 

With the market pricing in Platinum at $1135/oz today, LMI believe their 200K ounces locked up due to Furnace One & Two being shut down for maintenance and repairs would have reduced their debt. Indeed it would, but there's a trend occurring, so any debt reduction is going to be short lived.

Production backlog will unwound in the second half. So will global prices by the looks of things if they haven't appreciated with 200K ounces being "locked in." The question is will the sales be at a profit, loss or break-even, there's two probabilities and it certainly isn't a profit. 

It would be wise not to get too excited by the 70+% increases in production as the comparative period had a strike on! So LMI would perhaps be wise to consider their inventories 200K ounces higher and drip into market, over 24 months.

For those long-standing readers of EMC, you'll note the positives of Aureus Mining (AUE), with the company declaring Liberia is Ebola free, well for 42 days so far. They update its Bea Mountain Mining Licence has been enlarged to include the Leopard Rock gold target. With first production due in 3 weeks (or perhaps sooner, the share price should respond. (EMC: Aureus Mining).

Highfield Resources (ASX: HFR) come out with a 10% discounted placing for $101M below the targeted amount but enough to raise the debt for their Muga Potash Mine, expect news of a $166M debt facility in due course. 

A rare earth miner may just have a significant haircut...no time either for Orogen Gold (ORE), had those punters listened...EMC: ORE and the no news award goes to AFC Energy AFC Energy.

Atb Fraser