Morning Mumble: ASX (Miners) Iron Ore, China (uh oh) Pandora's Box has been opened and CAML + more time needed for GLEN/Gold

Good Morning,

It’s been a long day already with limited sleep due to the antic on the ASX and Iron Ore. Those on the morning ring round appeared positioned well on Iron Ore and on the ASX (Namely Fortescue Metals Group). The market (sell side) is making hay whilst the sun shines. Iron Ore has limited support with risks being put on increasing production and declining demand (echoes of old). So with that, all the iron ore stocks softened up. 

Rio's risk is losing support as Vale's deals with China put pressure on their revenue, same for BLT. Rio and BLT's risks were known, with Vale securing all the funding for S11D and the ability to market at anything between $18.5/t and $21.25 we may be hearing a tempering of expansion plans for the "big boys." 

It was an absolute pleasure to get an acknowledgement of the work here from a certain analyst. It’s pleasing when those disagreeing and criticising come round to acknowledge just a fraction of what goes on behind the scenes. It shall be framed and pinned to the wall, a welcome sign the market is acknowledging not only the amateurs but a more conservative expectation of events and performance. Thank you sincerely.

With Vale being just off it’s more recent lows and the lowest to my knowledge for near 10 years, its going to get some revisions. As a higher cost producer, Vale's decline has been warranted, with a management of costs that questions some projects. Its time to consider there being greater upside than down. S11D is due online later next year, and with that one expects some buying into the potential recovery of the company. With that it’s the first time in near 3 years there has not been a short position(s) on Vale.

China has been playing with the margin requirements and leverage for "betting" on the indices (Shanghai Composite Index Stock & Shenzhen Stock Exchange Composite Index (SZCOMP)). Conversely tinkering with the very limits they put in place to protect excess speculation. 

Chinese “Regulator” (China Securities Regulatory Commission (CSRC)), has now proposed an increase in margined trading, yes contra to previously policies. The Chinese are knee-jerk in an attempt to maintain a disorderly orderly market propped up my speculation. Bailing out a raft of speculators that are in the crapper with ZERO, if not negative gains, for near 14 months.

As was covered here (and only here (EMC)) the issue is the margin (Pandora’s Box) itself that now appears to have been opened by CSRC and the Government. Not the market manipulation that has been alleged by the Chinese Government, encouraging pro-speculation upon growth, the time is now etc…etc…Likewise, the legalising of Pension funds to buy equities in addition to Government agencies now entering the market.

The Chinese government, via related entities and with the assistance of CSRC, was (EMC view) actively buying into near 35 stocks just before the bell, prompting a recovery and in some a rally.

If ever there was manipulation, the Chinese should look in their own back yard. IPO’s encouraged to be so stupidly priced, every man and his dog has a slice of the action. As Li put it, its “easy” to have 10+ trading accounts now and more if you go to the “unregulated” market, where leverage is so extreme people are at risk of losing everything or more.

With the PBOC (Peoples’ Bank of China) having lowered the reserved rate ratios of the banks, the CSRC have followed suit, lowering the ratio so speculators can leverage more against the same amount. Worse, contrary to the previous assertions by the CSRC of enforcing a more sensible approach of restricting the rolling of positions. The CSRC is now allowing the very brokers they gave a proverbial slap to, to do what they did previously. Roll them over, in some cases, state entities are providing liquidity and securitisation to enable this.

To spread the risk further, which is perverse, the CSRC is proposing every man and his dog arm themselves with a margined trading account. Having previously been restricted to those with “cash” (there’s a way round this) of circa $75-105K, it’s now open to everyone.

The CSRC knee-jerking one wouldn’t expect much more needed to resolve this bear market. However SHCOMP and SZCOMP have decided to cut all their fees. Promoting speculation on the crap as well. We can but breathe a sigh of relief it’s not just on AIM crap rises but now SHCOMP/SZCOMP where Co’s with limited potential, little hope and worse massive liabilities are stupidly valued. If one doesn't fall in line and "just buy", we'll investigate market manipulation, oops too late! (BBC Link).

On the AIM, Central Asia Metals (CAML) gave an up on Kounrad Production, post the leak of organic inventory or as they are now calling it a mechanical incident. Here we expected and still maintain a target of 11,700/t for the year (EMC) rather than the 12K/t guidance today. For those thinking this is being a little hard, its still above the 11.1K achieved in 2014. The market has acknowledged this.

No time to cover Glencore in Iran or Graphite, but the latter we shall return to both, in addition to Gold. As today is full of compliments, it’s a pleasure to hear from those whom managed to save a few quid in CIC Gold Grp (CICG)! Not to be confused with Conygar Inv (CIC), whom are an entirely different company with assets and cash!!!! Christmas for Zoopla (ZPLA) and AO World, more needed.

Atb Fraser

Morning Mumble: China's (absent) panacea (Off-on-one), Fortescue Metals (FMG) sub AU$2 where next, Central Asian Metals (CAML), Gulf Keystone's disappointment.

Good Morning, 

We had little surprise that China would cut interest rates, now at 4.85% and effect from yesterday. Its China's attempt for secondary stimulus in the housing market and the various benefits of attempting to improve aggregate demand (AD). Although the economic stimuli to date appears to have merely slowed the fall. 

The stock market "readjustment" is now a full-swim aided by pure bear market. The cut in interest rates unlikely to prop the market up, as the bull trend came to a dramatic end. Quite how the Chinese expected to shore up the Shanghai Stock Exchange Composite Index (SHCOMP) and Shenzhen Stock Exchange Composite Index (SZCOMP - the tech related index a k a the Chinese Silicon Valley) is mystifying. 

The SHCOMP has fallen just over 20% at 4,123.484 and the SZCOMP did 22% over the fortnight at 2,404.719, with margin being the most common-phrase around China for those trades. Without any bounce, expect further forced selling on SHCOMP and SZCOMP. 

EMC: China Australia Mirror Trades has a number of similarities including the massive increases on stocks as outlined. What is of concern is the interest rate to GDP growth. With the EMC being far from an economist. It’s prudent to consider if interest rates are 4.85% then should there be a cut in expectations for the GDP of China? Currently expected to be 7%, with a basic trend implying a slowing of growth in China and factory productivity and gate prices far from picking up. 

The Chinese are simply becoming risk averse, and any temptation to buy assets despite the aggregate costs all reducing. Property prices (Sales Prices of Residential Buildings in 70 Medium and Large-sized Cities in May 2015 Chinese Government Statistics) both commercial and residential, continue to fall or simply not sell at all. The measure of the 70 Cities, although is warped slightly, shows falls of between 6.9% and 0.9% on property sold compared to the previous period. What is not measured, are the incentives to progress the sale, which are also eating into developers margins. 

Not only is the stimulus meant to aid the commercial entities, we have the Chinese Local Government near doubling the size of debt swap program. It doesn't mean much, but considering how leveraged and hard up local government (LG) is, any green shoots of cheaper borrowing will be welcome. Where there's a hidden "nearly unemployed" figure that's growing in LG's and SOE (State owned enterprises). 

With the PRC (People's Republic of China) searching for a panacea for a slowing economy that has so far been absent. The PRC have attempted to cover all the corners of the economy, but without any improvement in China's economic climate, expect more trimming of borrowing costs and direct QE, if the latest round has little to no impact. 

As a reminder, the PRC has attempted to improve financial liquidity by injecting cash into the banks. This financial injection also had specific provisions to target development (little impact) also known as pledged supplementary lending (PSL). The PRC has reduced borrowing costs consistently since 2012 (falling asset prices) but also cut banks’ reserve rate ratios (RRR) in an attempt to give greater scope for lending (limited impact). Likewise, the loosening of home ownership and mortgage criteria has not had little if any effect. 

Its ironic, that whilst the Chinese are tweaking their RRR and interest rates, the converse is happening with LG bonds. Where just recently there’s been a confetti like approach, as LG's have issued near the entire amount of 2014 Debt just in the past 7 weeks (11th May-26th June 15), and the market is betting those costs are going to rise.

With the PRC and PBOC (People's Bank of China) now being forced into buying LG bonds to maintain a sense of stability with the wider market objectives it's not going to be pretty. Expected further news of PSL’s in due course, where the PBOC will no doubt have to focus on LG bonds with a targeted rate of circa 3.10% to maintain stability. 

LG's have circa 23 Trillion Yuan of to refinance and in the current market conditions, its going to be a corporate parent styled transaction (PSL). If the PBOC do not get involved in LG bonds, there's a risk of debt costs spiralling and stalling any growth planned or intended by the LG's themselves. It would be prudent to watch the Chinese bond market for a spike later next week if the same trend continues, no doubt after a brief fall. 

For any recovery, one would be wise to look to the National Golden Week (黄金周 (国庆节) (02nd October 2015) to indicate the recovery in the property sector. Typically the peak season for residential property. Will it happen? 

This weekend is all about Grexit, As stated at the time the newly formed Greek government back in January had an agenda. Now with capital controls in place even in the short-term it’s not looking pretty. The referendum, although I though the offer had been withdrawn, is going ahead whether there is a purpose to it or not. The view being that Greece needs to get through their peak tourist season with a Euro. Although the odds of this happening are slowly shrinking. 

The lack of compromise could have wider implications for the wider group of the EU, namely Italy, Spain and Portugal. Where the austerity and inferences of "who is calling the shots at the EU" creating a negative sentiment, that if Greece exits, expect others to consider it. The breaking of even one in the EU ranks (Greece) will have dire consequences, whether risked or just perceived for the entire EU block. 

With a secondary currency more likely than ever, what next for Greece. Perhaps pain up front is the preferred model? Over to the wider Greek citizens to decide their own sentence. So the Market will ebb and flow based on (mis)information and events over the next week. The resultant impact is already being seen in commodities, with most losing key levels of support. 

Amur Minerals (AMC) gives an update on Kun-Manie. One is a little confused by the optimised design as there's a number of assumptions which contradict the current viability. Kun-Manie will no doubt be viable 'at some point in the future' but it’s certainly not soon. With limited time to cover it full, it's wise to look at the assumed costs. 

AMC have not adjusted the SRK Pre-Feasibility Study (PFS) assumed price from 2007 for the price of Nickel. There's a lot happened since then and the Nickel sector has changed considerably. Not only is AMC up their results and the update, but one must assume that investors have considered the fact the project is uneconomic. 

Nickel is currently $5.45/lb, well below the $5.60/lb support considerably away from the assumed pricing of US$7.50 per pound (US$16,534 per tonne) and US$9.50 per pound (US$20,940 per tonne), Internal Rates of Return (IRR)(post-tax) of 21% and 32% respectively, or a minus figure at current rates! There is no reason to change the view on this stock! The company need buckets of cash to develop this asset, and in the current market, who would be a lender? 

Lonmin's managed sale by Glencore should be given an award. How they managed to achieve the price they did is staggering! The company, holders specifically are waking up to the realities of not only doing business in South Africa but of assets that are borderline uneconomic in the current climate.

The PGM prices failed to recover globally despite LMI being on reduced production. So there's unlikely to be any change with them going full guns. With a growing unsavoury contingent burning workers buses and cars, its not looking rosy for LMI! 

Central Asia Metals's (CAML) Kounrad production update isn't good news. 

During normal production activity a problem occurred in the solvent extraction (SX) section which resulted in a significant quantity of the organic inventory being lost to the dumps within a very short time frame. After inspection, it was identified that one of nine weir plates in the recently commissioned SX mixer settler had fallen out of position, resulting in the ability of the organic inventory to escape from the circuit via the raffinate and onto the dumps. The reasons for the failure of the weir plate are currently being investigated by site management.

On Saturday the problem was rectified and the plant was started again but at a much lower flow rate. This will continue for several more days until the site team can stabilise the plant and determine the full extent of the loss of organic inventory, any impact on the pipeline infrastructure and the duration of time that the plant will need to operate at reduced production capacity before the organic inventories can be replenished.

If one is currently investigating the failure, surely the rectification of the problem raises the question of the risk of it happening again. Hmmm...Would it be wise to consider the director sales again? With impaired production and reduced capacity, mining is never simple. Forecasted production will not be 13K/pa this year, one suspects it’s likely to be 11,700 with a finger in the air. 

The market was expecting a lot more from the Gulf Keystone (GKP) update, where cash is not where it needs to be. The production and marketing update is positive, but likely to be insufficient in cashflow terms. Essential for a producer with limited cash of US$68.7m with intentions to fund increased output to 100Kbopd. 

One hopes GKP will get their payments (both present and historic), although they state they're in discussions with the Kurdistan Regional Government's (KRG) Ministry of Natural Resources (MNR). Perhaps instead of discussing, they could just obtain payment from the MNR? 

In the absence of payments coming soon, expect GKP's assets to be sold for limited upside. A producer that's cashflow is limited by other entities, that appear uncontrollable? Also, as a final thought, is the third party oil transaction a related one to previous management? Just a thought? 

The bears finally got their patience rewarded in HSS Hire with a trading update that is not positive at all. The company was only IPO'd 9 February 2015. Christmas cards all round for another IPO that raises questions over the valuations. Hat-tip to JPMorgan for flogging prudently. 

With corrections across the indices over the weekend, led by woes in China, the FTSE and DJI all took a battering. Reminds all round to be aware of weekend volatility on positions. 

Petroceltic (PCI) contemplate a bond issue. One supposes it wise to state that, although it does exude confidence in the bond market, or are the terms just accepted as being dire. One to watch...this could have issues if such a bond issuance fails and the banks come a knocking for $50M+. Does it also suggest a deal is being done on the Ain Tsila development? Surely it would have been sensible to grab all the monies at once, especially for Ain Tsila? Unless of course PCI are dipping their toe in the water!  

Finally, Fortescue Metals Group (FMG) breached its AU$2 a share market closing at AU$1.93. The bears are out with their trumpets for all to hear with predicts as risky as $20-30/t. The Chinese clearly gave out their indications with a cautionary warnings from Xinchuang Li (EMC) and EMC Mundane Iron Ore Again.

Atb Fraser

Morning Mumble: ASX: Energy Resources of Australia Chair + 2 NEDS quit and perhaps the investors should! CAML's risks of Copper Bay!

Good Morning, 

Three of Energy Resources of Australia (ASX: ERA) directors resigned on Monday. The issues are fourfold, not only is the lease and likely extension of it going to be difficult to finalise, but the pollution (clean up), price of uranium and general outlook. 

Unless ASX:ERA can find someone (anyone) to take on the liabilities of a five year clean up and that would want a project that has lost near £350M for Rio Tinto over 4.5 years, the stock is set for a finale that does not bode well for equity holders betting long. ERA should be renamed White Elephant! 

Its perplexing to see why Central Asia Metals (CAML) have increased their stake in copper bay. There's not only the environment issues (not on a scale of ERA) but with the price of copper and likely return, CAML are at risking of diluting their niche. 

Chañaral Bay Pre-feasibility Study (PFS) Results...as per the announcement.

Project economics are based on the mineral resources estimated on the beach and do not consider the material that may be identified in the surf and bay zone, and a preliminary capital expenditure estimate of US$88 million. Estimated C1 cash costs of operation are US$1.34/lb with a project NPV at 8% discount rate of approximately US$50 million after tax, with an IRR of 21% based on a long term copper price of US$3/lb. Future exploitation of the surf and bay zones may provide significant economic upside to the Project.

Unless CAML can identify a higher volume of mining, the risks for a 21% return don't stack up in comparison to Kounrad. Although low cost, one suspect the all in associated costs, are a smidge towards $2/lb. One however cannot go wrong with Dr Copper if you derisk along the way. 

Save for a decent analyst spotting the plummet yesterday, what are the implications for the credits from copper producers?  Especially those reliant on the sale of Molybdenum. Although paltry its going to hit the bottom line of most...Rio from memory produce near 10K/tpa of Molybdenum. Small but also contributing towards the bottom line! 

More later...hopefully? 

Atb Fraser

Morning Mumble: The First Quantum (FQM) gloat (with humour), Bookers (BOK) Gem Diamonds, CAML's positives + The Start of where's Li from Hanergy.

Good Morning,

First Quantum (FQM) are passing the cap around for Cdn$1.25 billion (Circa £660M) to expand production whilst maintaining the same debt levels. We'll ignore the fact that FQM should have fund-raised when the Canadian Dollar was stronger, on the basis the share price has modestly improved albeit for no apparent reason. 

FQM, have been clever here, as they needed cash about 5 months ago based on the EMC view. This is contrary to one "Muppet" handsomely overpaid by a commodities firm. The EMC always loves a contrarian statement of "you simply do not know what you are talking about Fraser and should stick to those AIM tiddlers!" Well it would appear said muppet has not only been wrong about iron ore, copper, the impacts of Zambian taxation and Royalties, Lonmin and now FQM. All of course will be forgiven for a case or two of plonk and in good humour! 

FQM's Q1 results stated, the "Company remains compliant with all finance covenants under the Financing Agreements and expects to remain so in the future." What they FQM did not mention was thei the need for cash to fund expansion. The EMC's view is as always simple, investors including those muppet fund-managers and analysts, should have sold (EMC: Selling FQM). 

One of the best acquisitions by a company in a long-time, Bookers to acquire Londis and Budgens. Hat-tip to a certain savvy West-Country retailer broker whom in January spotted the crossover of Mike Baker being appointed as Budgens Brand Manager/Director. Will Mike Baker be overall Brand Director in the combined entity? With a lineage starting from Sainsbury’s, and some hard work, there aren't too many potential candidates. All the market needs now is Booker to acquire Iceland and the Big Food Group will be put back as a single entity, although Malcolm Walker might have a thing or two to say about that! 

Gem Diamonds (GEM) (See also: EMC: GEM Diamonds (February 15) seller of GEMD) give a sales and operational update. The update is now looking positive for GEMD, with prices near those of Q4 with a fractional improvement. The market has seen no further declines in pricing, with GEMD's average of US$ 2,146 per carat (first three tenders of 2015) compared to US$2,140 per carat in Q4 14. Ghaghoo is progressing well with recovery grades above resources averages (for now) and optimisation of recovery has improved recovery of all grades. 

GEMD has net cash of US$ 56.9 million at the date of this report, with financing in place, expect share price to gain some support on weakness with performance like to improve as a result of Ghaghoo. Over to GEMD to give the cautionary notes: 

Diamond Market - During the Period diamond traders continued the cautious approach they have adopted since Q3 2014. Increased liquidity constraints following the closure of the Antwerp Diamond Bank, together with tighter credit terms imposed by other diamond banks continued to put pressure on the rough diamond market. The Basel Watch and Jewellery Show which took place in March did not significantly improve sentiment in the polished market as traders wait for improved demand for polished diamonds. Notwithstanding this, prices achieved for Letšeng's high value, large rough diamond production remained resilient during the Period.

Overall it was rude not to have some on weakness, although small it may be the start of a positive headwind for the sector. Especially as some analysts have realised financial liquidity is important. 

Central Asian Mining (CAML) update on the Kounrad expansion, aiming for 13K/t's of copper for this year and 15K next, the share price movement is justified, perhaps as its got a little ahead of itself. 

Just Eat's tin is out for a modest £445 million, will give an indication of the confidence in this stock; wise to watch! With some humour, we are starting the "where is Li Hejun of Hanergy?" 

Of pertinence to Kenmare (KMR) is the update from Iluka Resources via their  AGM statement, "Needless to say, for the company to proceed to a binding offer, we need to have confidence around the financial merit and the value creation opportunity for our shareholders and our ability to manage Kenmare’s operation for the benefit of all stakeholders." 

Iluka are sounding more and more like they have KMR over a barrel. Maybe a revision in the offer? PRU? perhaps some wisdom this time? In Hindsight, the first offer from Iluka Resources was a prime example of why this companies company's SP is in the doldrums. Was it not near double the current indicated offer!?1 

Atb Fraser.

Morning Mumble: (Holiday Mode) EMED Plc & CAML, and a QPP Cheeky One!

Good Morning, 

Its pleasing to see a decent amount of news-flow on a Monday.

EMED have an extension to the loan facility. This extension reads as though a strong armed is being applied to force (or appear to) force EMED into accept 'some' terms that are on the table currently from the 'three' (Trafigura, Orion Mine Finance and Hong Kong Xiangguang International). One assumes they'll be able to organise a meeting by 30 April 2015 to avoid incurring extension fees. 

Some egg on the faces of those with very large positions in QPP (Quindell) today, with the gossip proving right. QPP, for those with any interest now, was something to avoid as the risks being significantly unknown. It was surprising to speak to such a well-versed trader today whose position was impacted by the news in Australia of Slater & Gordon overnight. One for the learning curve?! Today it would have been rude not to have a cheeky short "on the news." 

Central Asia Metals (CAML) full-year results beat even the most bullish expectations, dividend up, revenues up and profit beating the whisper by near 30%. Return on shareholder funds even allowing for FX impairments and rebalancing of Kenges Rakishev 16.02% holding, are positive. 

Improving EPS, bottom line and the Tenge devaluation aiding costs CAML's cause. 60% of the cost base is Kazakhstan Tenge. Expects further bottom line improvements as the full affects of the Tenge devaluation kick in, assuming production levels are maintained. 

With the copper market adopting a more realistic outlook, even with the current prices, its hard not to justify 'turning positive on CAML (again). See  EMC: CAML from January. The EMC is slowly getting over its issue with the director sales by Mr Nick Clarke, Chief Executive Officer, although one will always have an issue with a director without skin in the game? We'll save that for another day, expect a special dividend in due course. 

Arian Silver (AGQ) achieves first concentrate production at San José, with the more recent net smelter royalty purchase AGQ's woes may just about to turn. Today's "not" very interesting news is Bluefield Solar (BSIF) most recent acquisition, those SIPP investors will find it hard not to have some form of lower risk stability, with a yield of just under 6% isn't too be sniffed at (EMC 2014 (BSIF).  AND, GKP (Gulf Keystone) get an extension on their homework!

Anglo American's (AAL's)  inability to sell its assets and now looking to give them away doesn't bode well for Jubilee Platinum's (JLP) Tjate project in the mid-to-long-term. Blackrock realising AAL's woes a little too late, or perhaps "just in time" and selling down.

The news award goes to Randgold Resources (RRS), whom see growth opportunities.

Atb Fraser

Morning Mumble: I CU all the way...BLT pushing with expansion, and CAML hitting the mark!

Am I missing something with AIM? Admittedly it makes no difference to me, but what are companies doing awarding themselves 4%+ of the company based on??? Tower Resources PLC Grant of Options and Exercise of Warrants Only 75M shares at the placing price from Tower Resources PLC Placing, Acquisition and Preliminary Results from the week before. Where else in the world can you get the ability to buy stock at last week’s prices? It would appear the board room of Tower Resources is one of those places! 

The company wants to be very careful, as its these sort of things shareholders are looking at. Imagine if the placees were told...we've got a brilliant company that needs cash, are you interested? Were they at any stage informed that a significant percentage of those monies would be diluted to award "options." to Directors. The event is so material of the mind-set of the company parties would be wise to flip the stock and go elsewhere.

So back to the markets: BHP Billiton's results  are obviously bullish with the 10% headline increase in production. 

So the race is on to force companies out of the market place not only with Iron Ore but Coal as well, with an additional 2Mt's hitting the market despite it being so dire. The fittest companies will survive, but certainly not those overwhelmed with debt. Copper increasing and I suspect revised guidance upwards is on its way with expansion plans. With RIO and BLT's dividend one would be wise to hold them in a long portfolio. 

BLT's news bodes well for RIO (as they weren't as bullish as BLT in their announcement yesterday). In addition to the news from Mongolia that things are progressing at Rio’s Turquoise Hill Says Parties to Seek OT Funding Extension is the Government finally giving clarity on Royalty, Taxes and the like. Turquoise can then be taken out by Rio, the 1700 workers reemployed and everyone's happy in the bliss that is Oyu Tolgoi. We knew back in March that AMEC were advertising for workers, so one assumes this process is further along than the press realise?

We all must welcome Polypipe (PLP) to the market with Admission to Trading on the London Stock Exchange. Will the founders/PE backers run to the door quickly? A quick look over the market shoulder at the Appliance Online (AO.) share price is positive for me. Will they have to change their name to "Insurance Online?" 

So with Fresnillo and Hochschild's announcing yesterday would you be holding silver stocks long? We have Fresnillo coming out with production inline however its higher cost sector friend Hochschild's results yesterday don't elude to much in the way of any positives nor is there much commentary of the Silver Price down 20% on average over the last 12 months, costs will be key and HOC are now limited in their savings. 

HOC announced in March that their costs were around $18.6 per ounce and that was during a year of "savings/costs focus", with the current silver price not leaving much headroom and after the $27+M annualised interest costs on their Senior Notes, there's little left for shareholders. If you're in profit at HOC, you'd be wise to sell up or switch to FRES with costs around the $5.6 per ounce all in, significantly better than HOC. 

Now who'd have thought Tesco would have been cooking on gas today? Would you have been short going into results final results. Tesco have some relief, but it takes no rocket science to realise the three companies have to transform their pricing perception and offerings in light of significant competition. Asda clearly are winning, albeit all appear to be losing between 4-6% of their turnover to the lower priced offerings of Aldi and Lidl. 

The final thought for the day goes to Central Asian Metals 2013 Full Year Results, with 100% of the Kounrad Copper Mine income being attributable from now going forth, the earnings are set to benefit further. With 9 pence per share final dividend, there are not many around AIM doing what they say! The costs per pound are spot on, albeit I see some increase in these going forward at around 5%, the dividend coverage is more than affordable. Currently in at a fully inclusive cost in Kazakhstan is $1.13/lb albeit last year was $0.98/lb (2012).

Atb Fraser

Morning Mumble: Stimulus (you'll need it to read it) & Commodities and the China/UK Financing Switch.

China appears to be vehement about its expansion plans at the risk of other sectors. So, it was around this time last year China introduced a Mini-Stimulus, unsurprisingly it was..."Housing for the Poor & Railways" (why don't they just be damned and open work houses & Almshouses). Now that appears to have done absolutely zip, so guess what they're doing this year? Nope, throw common-sense to the wind, they're not going to let the economy cement its foundations instead roll the risks up and continue to focus on Housing for the Poor & Railways, only 6,500 Kilometres of track...up near 1K on last year. 

One's assuming they can lay track on track? As they surely must be running out of the plausible Railway Expansion zones. Demand will, I'm categorical about this, not meet demand if this type of stimulus continues without consolidation across all sectors. One simply cannot expand and not ignore the fractured foundations of the two tier financing, with defaults here there and everywhere. 

So a thought for the China bulls. A shocking level of companies in China have sold assets to China to fund not expansion but debt repayment. What will they sell next to fund such a necessity of repaying their obligations? One assumes they can't sell the obligation? This has been common-across all the stressed Sectors save for the Solar Industry and belatedly construction. It, put simply, is a train wreck waiting to happen (sorry couldn't resist), one that will be ignored by the "old stimulus" packages they merely reword to keep the "Analysts happy." 

Do not think for a minute its a prediction of the end of the world, more a stark reality that "common-sense" is approaching. All the papers are reporting on the "stimulus" to meet Growth Targets. If one has a lobotomy you could be excused, but there's no news here folks it's a rehash of wording for what was planned in 2013, it was happening 'whatever'. You'll get the idea, as China attracts finance with the promise of riches via the Railways, one would do well to minimise their risks there...It reminds me of the American Railways, but I'll save that for another day and no doubt when I feel Wild Wild West...

In the market, I've missed something, it was disappointing, I had actually considered it thoroughly but forgot to continue the thought process through to the overall impact of the supply China and Australia. I'm more annoyed with myself for keeping my note book in such bad order. The "gap" in the Supply and Demand of commodities is the High Grade Ores, which have had a better than expected performance. This is the norm, but more importantly, is a necessity for the Mills and Producers in China whom have to reduce their pollution. So you have China pushing High Quality through the rood, and 'standard and inferior' only being propped up...this is mirrored the same for Nickel, whom since the obvious happened, has had a nice 19-21% run.

The question is, when will China adopt a realistic attitude to its economy about financing, expansion and maintaining the basic principles of Supply & Demand? From the Amateur, me (smiles), I've been watching the consolidation in China take charge and the bits that are being ignored. So everything that's in the crap now, that has defaulted and/or is, will post 2016 gain again. Solar, Coal and the stronger real estate companies (less leverage) will do well, including Carbon Emission Trading (the lovely intangible). Those expanding, based on the same principles, will (de)falter in due course as their coke fuelled frenzy of bonds dries up. This won't (oops best hedge my bets), isn't likely to be all at once, but will slowly unwind as China "over the next 5-6 years up to 2020 forces the economy to become financially independent. "

China will be akin to your 13/14 year old daughter/son spending all their allowance and then having an advance on next years as well. They're in essence betting on your income being maintained. So the 'buzz' will be no doubt called Environment Enhancement or Environmental Protection (or any such spin) post this five year plan, the Thirteenth Guideline (2016–2020) (Five year plan) will likely be consolidation. One simply cannot continue even without common-sense at the same rate. 

Albeit, as a trader I should be thankful for China additional QE stimulus on the markets. So in essence we've had a bucketload of them. PPI Claims, (I still want to know why they randomly text people are they that stupid), We've had Governmental QE, not only with rescue 'strategic elements of industry' (banks etc...) but we've also had them being able to sell a few assets at bargain basement prices, (many thanks once again).

For the UK, the consolidation in the sector is likely to have a higher impact on the banks than one realises. Bank lending, whether the Government says otherwise is most likely to deteriorate as companies such as Renovo (used to be a Pharma but acquire Ultimate Finance Group their Preliminary Results) and GLIF Plc (Link to Results) come in to their own (Psst I'm long on Both, the former more recently Inspired Capital INSC). For myself, with my cash element I have elected to start funding as well, as the returns are around 7%...much better than the last minute crap you get with ISA's.

This 'secondary' lending, albeit with conditions and pricing, is likely to force the banks to become conventional and dull. Its one reason I don't see Barclays and Barclays Investment Bank staying together. Parties will and have argued that separated they'd be weaker or one poorer, however a divestment were BARC holders get one share in each is likely to be the way forward. Barclays Retail can then ignore any issues with the IB section and just shrug in a very sort of French manner about any other misselling scandals that come to the fore.

Back to the market now, with Dunelm Mill coming in nicely with Interim Management Statement which should provide some support to the stellar performance in its shareprice over 6 years. For Rachel, selling her house and investing (shoving was her word) into Dunelm mill when she went to work in Hong Kong has proved a very savvy move (Congrats).

It looks like Kingfisher is betting on the French/European recovery now with Kingfisher entering into exclusive negotiations to acquire Mr Bricolage. One will be hoping their foray into Europe will be better than Marks & Spencer. Having not really looked at the ownership structure for some time, it would appear it's a very good expansion, with sites in France, Belgium, Argentina, Bulgaria, Madagascar, Spain, and Uruguay it 'could' be a very shrewd deal. 

So on the back of BLT (BHP Billiton's) announcement of their 4 or 5 pillars (depending how many fingers you have) Anglo American (AAL) are now inclined to wave bye bye to their Angloplats operation. Not that this has not been suggested every year since 2008, it's now very plausible. The same as BLT will no doubt do, give the shareholders 1 share in Anglo Platinum for every share they have in AAL. So for the next 12 months, IPO's will be lower, instead crap will be spun out for more people to own the crap. Would you be a holder of a stock that is being held to ransom by the workers? 

Sadly out of time to cover AMI (African Minerals Full Year Results) announcement, polyhalite (SXX implications of Verde Potash), Copper (Central Asia Metals plc Q1 2014 Production Update inline and positive), Uranium support and improvement (improving outlook), Fluorspar (take outs) and Iron Ore (default on deliveries). If life was easy, I would just paid for a narrative...sadly I cannot pay myself to write!