Morning Mumble: Chinese Auto's (Designs) - reduction in sales tax + housing stimulus + Vedanta (Iron ore), Glencore (Thermal Coal + PGM) and Centamin

Good Morning, 

Near all mining/resource stocks rose until the last hour yesterday where profit-taking took place. In part due to the Chinese machine waking up in what would have been near 12hrs later.  With one day of trading before a weekend, the markets will be looking to some indication of the Chinese outlook. In addition of course to the PR (Glencore) and the overall commodity price actions. The SHCOMP finished up near 3% in thin but positive trading.

With shorting currently limited in China it’s unlikely anyone has been impacted significantly and in fact, their market is likely to have profited. There will be a read across to the higher material costs to Chinese manufacturers and producers. Despite thin volume, iron ore has been slipping and with margin requirements being higher, don’t expect too much of a recovery with supply increasing.

We've discussed the decline in liquidity in China for some time, whether in SOE's (State Owned Enterprises), private sector or Local Government, there’s a very consistent theme. The FT has highlighted what has been known about for some time: China futures market decimated by trading curbs. All the same worth a read, but more so to keep an eye how things pan out. 

News is apparently flowing out of China that new stimulus packages were announced whilst the Golden Week Holidays were in full flow. It wasn’t this week at all, the policy came into effect on the 1st October, just in time for the Golden Week! One wonders when people will read the press releases properly.

In an effort to stop the rot and improve the decline in car sales (See: CAAM Chinese Association of Automobile Manufacturers), they have cut the sales tax on passenger vehicles to 5% (from 10%). The criteria is limited to engines below the 1,600CC and time limited until the end Dec 2016. 

With a degree of humour, VW might have some good news - China are likely to implement additional incentives for cars that don’t meet the emission standards. We obviously avoided calling the scheme scrappage.

For Western Manufacturers importing or operating under a JV there will be some positives. The main beneficiaries are likely to be the Chinese manufacturers with small engines. Feel free to check out the designs see: Great Wall Automobile Company, Guangzhou Automobile Group Co., Ltd (GAC), Zhejiang Geely Holding Group, Changan and SAIC Autos (MG Rover etc...). We are obviously not qualified to comment on the design or quality, perhaps there’s some cultural differences one needs to acknowledge?

Considering the last time (2008/09) such a specific stimulus was implemented, sales peaked near 40%, albeit declined 50% year on year until now being reduced back to normalised single-digit growth.

With consumption being the key focus, a mobile population will be incentivised to spend hard. Whether it be an increased numbers of shopping trips, holidays (driving holidays are on the increase), eating or visiting family, it’s a delightable feast for the economy and the tax revenues!  Assuming of course that the Chinese buy into the enticement / tax cut.

With income growth slowing, deflation and risk of redundancy or job sharing in most sectors, being enticed to take on the liability of a car with a) via credit or b) utilise savings – it’s going to be hard to entice new customers.

Until more recently similar contractions have been seen in the housing sector, where buyers have been unwilling to buy in significant numbers. What with the newly married “living” with parents situation is on the increase again in China.

Property buyers in China know all too well about paying over the odds for assets. Last week’s adjustment to the down payment requirements for a home will aid the property sector. With a reduction to 25% from 30% it’s a notable enticement for some. Although only likely to benefit those whom are well on the road to purchasing a property – albeit purchasing off the Government is still the preferred method with such hefty discounts available.

China now has an emerging tier 1 and 2 divide (North-South Divide), where prices of property in small cities and towns are falling, whilst larger towns are seeing a renewed interest. Aided in part by a reduction in prices, free-goods and price reductions that the tier 1 market has barely had to adopt to motivate sales. (See Top 10 below – if you have to buy)

1. Hong Kong
2. Shanghai
3. Beijing
4. Shenzhen
5. Guangzhou
6. Shenyang
7. Qingdao
8. Nanjing
9. Tianjin- this may however change as investment is focused elsewhere. 
10. Chengdu

We had Vedanta seeking permission to export more iron ore from Goa. Why they’re bothering with prices at $40/t FOB, is anyone’s guess with Roy Hill and Tonkolili (Shandong) firing up. One suspects they have to be at full capacity to make their operations modestly cashflow positive.

Just as Glencore’s had plugged most of the holes, yet more market woes. NH@FT’s article on Australia thermal coal price at 8-year low has been followed by Coal Problems Being Made Worse by Global Slowdown, Glencore Says (BBerg) - not the best timing for Glencore. However, one is minded to think conservatively with regard to thermal coal.

Its best to avoid sticking pins to prices specifically, especially the likes of coal where so many have been burnt before. It’s prudent to test the theory that the prices are perhaps near to the bottom - over to X2 Resources and Rio.

Like many in the commodities space, the marginal producers have been saved by costs that are reflected in dollar terms, with a benefit from a weak local currency for labour and energy/fuel costs reducers. The operators have averted (delayed) the inevitable pressures to shut in production/mothball. As the situation reverses, expect a tightening in supply to benefit pricing.

Glencore’s discounted offering is as a result of declining demand in once upon a time more stable markets that had some degree of clarity in outlook. Japan’s restart of Nuclearreactors  benefited the likes of Tohoku Electric Power, whom have just agreed with Glencore for premium thermal coal contract at $64.60/t.  A near 14% discount to the previous contract has not gone unnoticed.

The issues being experienced in South Korea and Taiwan won’t have helped the bargaining power of the thermal coal producers. Asian countries, with a majority of trade bias towards China are starting to see a tightening of liquidity in part because of reduced trade with China.

As a positive Oil, save for any major uplift in crude supply (Shale operators be warned) that would impact on pricing, its likely to have found some form of a floor. With shale producers having an appetite to hedge their production around current prices, its suggesting production is reaching some form of normality - contrary to the earlier opportunities that were missed.

Glencore appear to not be pushing the news they’ve shut in production at the Eland platinum mine in South Africa, with the loss of 818 jobs.

Over to gold - Centamin Egypt (CEY) Q32015 Preliminary Production Results reminding the market why it’s sensible to factor in lower on grades, production or machinery woes. CEY’s grades weren’t near the reserve average, so suspect costs to be impacted to a small degree.

Given a sensible headwind in grades, CEY are likely to just drag themselves over the 430K bottom line guidance by near 2K ounces, assuming production of near 110K+ ounces in the 4th Quarter. A reminder that production was meant to have annualised at a rate of 450K ounces by the 3rd Quarter if not the 4th. As stated in the Q1 production results. Date for diary, 11th November 2015.

Finally, a positive result for Northern Dynasty Minerals, where a report by Former US Senator & Secretary of Defense William S. Cohen has been released. Suffice to say it doesn’t read well for the conduct of the EPA.   

Atb Fraser

Morning Mumble: China (of course) + Liquidity with some likely sad news for a few Chinese traders, PLUS500 (what are its user costs). The pain of Graphene and GKP!

Good Morning,

Overnight the Chinese authorities have banned listed entities selling stock (if over 5%) in other listed entities for 6 months. So those collateralized loans should be safe for now, with a Band-Aid on the value of them. 

China curbs stock sales in effort to halt market rout and they've dealt with those insurers owed money from brokerages, by banning them from calling their positions (Reuters). The articles doesn't mention the liquidity issues the insurers are suffering as a result nor the Peoples' Bank of China assisting them with emergency funding "for as long as is needed."

The woes of China are causing a "drag effect" across all markets as a race to cash occurs. As seen on the DOW yesterday and other markets with Asian exposure. The FTSE/LSE's will have a similar occurrence. 

In essence, the Chinese are liquidating the positions that are left to cover the woes of being locked in in on native markets. After just a few days, where the Chinese market would have perhaps found a natural level and the issues resolving itself, it’s likely the woes will be engrained for the longer-term. 

Insurers have liabilities, brokers have liabilities and the population as a whole have commitments (rents, mortgages, car payments etc...) This rout or liquidity contraction is being felt across all market classes. The Chinese appear to have been oblivious to the ensuing train wreck and will recoil in terms of risk appetite and exposure to said risks. Same for their purchases, such as cars, food stuffs and luxury items. 

There's a lot of commitment tied up in the market (near $2 trillion). Chinese directors with stock pledged as collateral for loans against the now suspended stock. The Chinese Government, are reported to have pledged "unlimited liquidity." Around the same time as the state media reported this, all commodities rallied, as though a new source of financing had been found or the keys to the safe. The most notable bounce being Copper treading water around $2.50/lb and Nickel jumping above the key $5/lb to $5.15, but felt by all except precious metals. 

One cannot help but wonder if the Chinese Government are trying to patch leaks in the canoe as they appear, rather than taking stock of the situation. The insurers are now expected to shoulder some of the margin issues, along with the China Securities Regulatory Commission (CSR) and  Brokers, Margin houses and banks (PBOC holding the shoe/house). Local Governments have also seen a keen opportunity to tap the Central Government for some cash. 

The woes may be felt further with the "payday" events that have typically occurred in China, but will put further pressure on the system. Historically late payment of wages has been a normal practice, but in the absence of liquidity, this may be outside the normal practices. Especially if some companies were say "margin trading" when they were not expected to be and are now locked in. 

The SHCOMP (Shanghai Stock Exchange Composite Index) traded in a very large range of 3,373.54 - 3,748.48, with the predictable tank on opening with consistent buying throughout the day. Same for SZCOMP (Shenzhen Composite Index), trading in the range, 3,373.54 - 3,748.48.

The saddening part is the news will soon be awash in China of police arrests for "illegal short-selling practices." The scapegoats are going to have little ability to defend themselves with funds frozen already or to be frozen. The need by Chinese officials to find a scapegoat or 8 to lock up for perpetuity. 

Despite the crime being the stupid levels of long margin that was allowed to go unchecked or regulated properly. All that was needed was an 11% contraction to have a confirmed bear market rather than the normal 20%. Whereas to short in China is very difficult, not only restricted but limited to 5% of total stock, with tight controls previously in place. Even on the grey market, shorting was restricted which rather contradicts the Chinese officials’ assertions that it has been the product of a targeted and sustained shorting attack. Sounds good though doesn't it! 

PLUS500 have given a trading update. What the market would be wise to consider is who has deposited the funds a) the customer b) the company or c) an introducer? The number of active customers may have a significant distortion depending on the answer. PLUS500 traders (as per Facebook) are suggesting if you put pressure on PLUS they'll "give you between €100-200" pending on the value of that customer. More so, PLUS500 are believed to be including these "Freemans" as active customers (really?). 

Customers are in essence drawing their monies out, but first obtaining a freebie to fritter away on highly speculative bets, as between 100 and 200 trades/points are required to be able to draw out the €100-200. What is important in today's announce is the lack of Average user acquisition costs (AUAC) that will have to be revised in light of the "retention" attempts by PLUS. Or are PLUS going to introduce another cost item, say "customer retention costs." This has a material impact on bottom line of anywhere between, €9.3M and €18.6M pending on how generous PLUS have to be or have been. With some "whales" allegedly getting near €2.1K. 

The massive increase in the AUAC costs has not gone unnoticed. More importantly, with gossip from certain quarters suggesting there's some settlement by those "armed up with a lawyer" to recover all their losses during the suspension. Will this become a more common-theme? What is the impact or liability for PLUS. This is excluding the unknown quantum of any potential fine that appears to be a material breach of AML procedures. Over to Playtech to ask those questions during their due diligence. Do PLUS 5000 have to update the market on these liabilities both legal and potential fines? 

Centamin Egypt (CEY) gave a better than expected Q2 Production, ahead of guidance but overall guidance wisely remaining the same. With little in the way of costs per ounce guidance, one has to range between $729 and $655 per ounce. AISC (all-in-sustaining costs) should be around $945/oz but with some positive revision potential towards $915/oz. Grades into Q3 are key, as a lack of improvement will shave %'s off the overall FY of 430,000 and 440,000 ounces."

As one savvy analyst has noticed and is likely to give some greater PR to the graphene industry is the Collaboration between Haydale Graphene Industries (LSE: HAYD) and Talga Resources (PDF version) (ASX: TLG). 

With some unfortunate victims of the 'new tech' era, such as Graphene Nanochem (GRPH). whom operate in materials and chemicals such as  Fuel additives , oilfield chemicals and homecare products. Unfortunately for GRPH their margins will be squeeze across the board, whether there's potential out there for further contracts, there's been a sustained level of selling. 

With debt levels increasing, margins being squeezed and a number of plates spinning it would be wise to price in an equity raise. Whether the company are considering this or not, it's going to be no mean feat. Limited cash, debt of circa £30M, expect news of rescheduling of debt and some element of equity raise. The Company has been punished rightly/wrongly for perhaps being listed too soon. Or arguably from a company perspective of being able to access the capital markets. 

There is/was a lot of hype around the Graphene launches, including Applied Graphene (AGM). With no debt, AGM has not been punished to the same degree, however GRPH are at a different evolutionary stage. GRPH's IR needs a significant work-over irrespective of the sustained selling. When comparing, it would be wise to consider GRPH the leveraged play, whilst AGM/HAYD and ASX: TLG appear to be more reliant on the markets for capital than creditors. 

Limited time for Gulf Keystone (GKP) who's output guidance / forecast has been cut. As a positive GKP have received some cash and will hopefully be shipping oil out via the Turkish pipeline soon. The market didn't need reminding that as a result of the 5 weeks suspension production would be down, near as damn it the 10% GKP are guiding on today. With directors departing and the like, this low ball offer is looking more and more likely! Over to GKP TV for those incapable of reading! (Mentioning no names). With certain folks taking the jolly to Paris for the AGM, sobriety will be top of their lists. 

Atb Fraser

Morning Mumble: PLUS (Again), CEY's expectations in the future despite lower grades & more gold + Copper via TRQ +++Peppa Pig's owners...

Good Morning,

Yesterday's debacle has more repercussions than PLUS I think thought possible. One thing that "punters" should consider is the not so obvious "suitability questionnaire." As its common to kick a dog when it’s down, although things may not appear as bad as they first appear, there are questions that have been raised about Plus500's business model.

Having opened an account with PLUS with little more than a couple of clicks and trading was available. The notable difference was the lack of "proof of identity including the suitability" of product questionnaires. Somewhat of a large requirement and perhaps the main reason for the average revenue per user (ARPU) and no doubt the need for an increase in Average User Acquisition Cost (AUAC). Irrespective, thinking outside the box, if one has not completed a suitability questionnaire and has taken a loss, could this be misselling or similar? Perhaps even a fine. 

PLUS is something to watch as it unravels, both from a trading perspective but more so, if you held long, one assumes you a) trialled the product b) understood their procedures and c) were aware of the "Anti-Money Laundering (AML)" issues that were signalled on FTML and via Dan McCrum (if memory serves me correctly) last year. In addition to all the issues raised over the past 6-12 months. 

Two funds are clearly much better informed than us bears or they would not have been acquiring whilst the AML process was commenced a week ago, advertised on Facebook (yes no joke) and Twitter. 

Centamin (CEY), it would be wise for holders to catch up with the coverage today via a live webcast from 12:30pm 19th May 2015 for Capital Markets. The gist of it can be found, webcast slide presentation. With grades currently being below reserve average, one wonders how costs can be reduced! Perhaps CEY can enlighten us this afternoon. The sell is on mine life, but with limited cash returns at these levels its hard to get excited, unless of course another project starts to bear fruit. With limited exploration of the underground mining, its very hard to be confident with the 6g/t. If one was sceptical it looks more like a copy and paste job, 2016-19. See Page 26 onwards. 

We have another webcast in near 5 hours (3pm our time) from Turquoise Hill (TSX:TRQ & NYSE:TRQ) with an update on Oyu Tolgoi Underground Mine Development and Financing Plan. Up near 50% in 5 months it was wise to take all capital out on the rally. As the EMC covered in April, EMC: TRQ (Had investors paid attention to TRP as well they'd have saved around 90% of their monies!). 

As if by magic just a few days after their Q1 (& EMC: CMCL resource commentary), Caledonia Mining (CMCL) come out with a  resource upgrade, adding 491,000 tonnes from the Inferred to Indicated Resource categories and to add 47,000 tonnes of new inventory to Indicated Resource. With the price movement somewhat justified today, although please note its at depth its better than nothing! Obviously with Zimbabwean geo-political risks including the change from Chamber of Mines to the fidelity agreement. its not without its cons including grades. It wouldn't be a display of over-confidence for the small fry analysts to turn bullish (over the longer-term), although one eye needs to be kept on the Zimbabwean leadership! 

No time sadly for Entertainment One (ETO) full year Results, although disappointing film revenues that were rescued by Peppa and Co. Whether ETO can rescue the declines in film revenue is yet to be scene with four films in production, and some disappointment, the upside is there within family (read as kids) entertainment, where Peppa is "in America and soon to be in China."  Although its hard to find any justification for a share price above 360.

Atb Fraser

Morning Mumble: Centamin (CEY), Caledonia Mining (CMCL) and...Asian High Yield Bonds (Chinese Property)

Good Morning,

Some tangents this morning and very limited time. With Centamin Egypt (CEY) unaudited results for the Q1 2015 are identical to Q1 2015 Preliminary Production Results. With a dire ROE (Return on Equity) of a smidge under 10% (annualised around 38%) which is dire! With the warped nature of CEY not paying tax, simply put there's a requirement for a write-down.

Today's results certainly do not justify the uptick in the price, without more news 'on other developments' and expansion, CEY is about the money. We'll ignore the number of shares in issue being wrong and distorting performance slightly, but even so a performance improvement. CEY at the current gold price and likely outlook, is likely to be range bound. 

Staying in gold, Caledonia Mining (CMCL) Q1 are about the mark, costs a fraction up, profits down but dividend maintained. A positive for CMCL is the management have concluded that its best way forward is to focus on 'what's working at the moment.' To quote CMCL, Caledonia has increased its strategic and operational focus on the Blanket Mine and intends to close and dispose of non-core operations in Zambia and South Africa and to reduce operating and administrative expenses. Shareholders should be thankful the management realise this, often there is a tendency to spin too many plates. 

With a focus on costs, CMCL 'appear' to know what they need to do, one hopes there's not a raft of options or salary/bonus awards as a result of their likely successes in saving monies! Pending the success of the expansion plans for the Blanket Mine, expect some rewards going forward in 6-9 months. Other than a gold price improvement do not expect the stock to appreciate too much (in trend/range). With the absence of an indicated resource statement as defined in the PEA December 2014, confidence should be limited until the resources are measured with confidence, rather than "inferred currently. 

Sabmiller (SAB) will find it hard to justify any form of independence with results that are below the management forecasts. As a result of flat sales (poor I known) and the strength in the dollar SAB's bottom line has been impacted. Any strength, save for speculation of M&A is yet another justification to sell the stock. Its ironic soft drinks are performing better, perhaps as the trend suggests, SAB will have to work harder to maintain beer sales. The best hope for SAB is a take-out, over to Anheuser-Busch InBev whom today had a good justification to limit any premium if it were "going to make a move at the end of the month." 

There's a growing trend on the price of the "Asian High Yield Bonds", certainly for Chinese Property developers isn't looking good. With the Asian equities on a bull run, those higher leveraged companies would be wise to take advantage and raise cash to reduce debt. It’s always of concern when the Chinese Government (via State owned media) promotes speculation on the markets. The Shanghai Stock Exchange Composite Index (SHCOMP), has ironically mirrored the growth in speculation (margined trading). 

With second-home down-payment percentages becoming "flexible" it’s envisaged that there will be an uptick in down-payments and completions figures for the next set of data. As a result of the imbalance of supply, it’s likely those speculating will be knife catching to a degree. Over to Kaisa to look to sort its debt woes out, its certainly at the price for their bonds, save for Sunac interventions. Zhang Zhiron's majority shareholder in Glorious Property is at risk of being reduced. Zhang should thank his lucky starts a privatisation motion he made previously was rejected! 

Limited time,

Atb Fraser

Morning Mumble: BG Group finally succumbs to one of three suitors, is there another offer?

Good Morning, 

BG Group, the favoured long oil and gas play of the goliaths, has finally accepted a cash and share offer, albeit this wasn't the rumoured Exxon but Royal Dutch Shell (RDSA). The deal, at today's prices, will make any interested party think twice before making an offer. 

The offer is rich 'enough' allowing for the blend of assets, Egypt and Australia plus deep water opportunity and increasing market share in LNG. BG's cashflow for the future justifies the premium and will not be ignored by the big fish!  

RDSA now becomes the real bet and favoured over BP et al (save for M&A there but unlikely with litigation on-going). One cannot see any shareholder rejecting this offer. Its borderline rich and only a fool would consider voting this down.

Its one M&A action where it may just be worth holding the stock until the paint is dry, as two companies with plenty dry powder may just see future value above and beyond 1350 pence (383 pence cash and 0.4454 Shell B Shares). At the price, any offer is very unlikely, but...never say never. So entirely contradictory of the above, all stock was sold today!  A greater believer in taking the money now, rather than the hope! 

Staying in sector, with the gossip Gulf Keystone (GKP) just about to be 'part of a deal', with company being very tight-lipped, Malcy's assertions look to be bang on the money.  Some interesting moves to wash away the Easter fat!

We had Centamin Egypt (CEY) Q1 production report, without many concerns and bang on the money. CEY at some point need to change. With a suggestion of grades improving towards the end of this year and guidance back to 450K ounces per annum, there should be some improvement in broker opinion. The outlook, although marred by litigation and failed joint ventures has not done the company much good. Perhaps it’s time for a change of management at CEY. With no indication of costs, one assumes CEY have improved on the previous quarter/half by circa 6%. 

The iron ore producers had a mini-celebration with a common-sense assumption up to 15mpta of iron ore have disappeared off the market. For those following the saga, EMC had not appreciated that had Atlas got South West Creek up and running the cash costs would have been a not too shady, $42/t. Something that isn't that enticing in the current market but longer-term for bondholders there's some 'hope.' 

Sirius Minerals (SXX) announced the results of their potato crop trials last week (8th April), the benefits to 'key crops is not to be ignored nor are the capital requirements. SXX will be viable, although one should consider not going all in, more so buying over time. 

With some friends around Hatton Garden commenting on the news crews in the locality reporting on the heist, it’s nice to see a  Forensic Chemist wanting to apply to be a Jason Statham extra for the impending film. A few pounds lost might improve your chances Adrian! One can look forward to hearing about what was left behind, if its like previous robberies, laundered cash, guns and odd narcotic will be the flavour of the day! One hopes they had adequate insurance and expect some knock on benefits as dealers and jewellers restock. 

Atb Fraser 

Morning Mumble: Centamin Egypt (CEY) the jinx of AIM...'ALLO 'ALLO Alecto and watch the F(ORM).

Good Morning,

Centamin Egypt (CEY) are slowly becoming the curse of junior AIM wannabe gold miners. First there was Nyota Minerals (NYO) now Alecto Minerals (ALO). One can only assume CEY disliked what they have found within the two Ethiopian licenses, or have perhaps fallen out with the management. 

Although looking back at ALO's  placing rns that was a hugely discounted (circa 40+%), "two gold projects in Ethiopia which are currently subject to a joint venture with Centamin plc." Now had there been no discussions or a potential end to the joint venture with CEY, then I do not believe the wording of "currently" would have been used. Nor in fact the discount that was applied to the placing had CEY been involved. 

Did ALO know about the termination of the JV before or during the placing? Were there discussions about the termination happening whilst the placing was occuring? Over to those holders whom care enough to support this company. Yes, potential upside but not without significant shareholder support and risks. Raising 600KGBP at a 40% discount shows the realities of the situation.

CEY can now strong arm Kefi Minerals, where rumours have been loose but circling for awhile for a take out. Kefi Minerals are "currently" refining the NYO Definitive Feasibility Study (“DFS”/ aka the shambles under NYO), CEY are well positioned to offer funding either via equity or take out in Kefi. 

Knowing a few in Kefi, I suspect they'd not prefer an equity raise at the current SP. With the short 2.0 on Kefi by NYO holders despondent with all things gold like, the price of Kefi has performed exactly as it should. Perhaps KEFI will be the operator of Tulu Kapi for Centamin? This nicely brings us on to...

ORM Mining (ORM) give a Barruecopardo - Financing and Operations update including a loan whilst financing discussions take place of $1.5M. They've managed to find a party to fund the entire stage 1 development of Barruecopardo Tungsten Project (The project). Step forward Oaktree Capital Management, L.P. (Oaktree), "a leading global investment manager". ORM inform their shareholders ORM would be manager of the Project, and receive an ongoing management fee for this service. Ormonde has been assisted with the arrangement of this financing package by Swedbank Norway and Davy Corporate Finance (No doubt a fee payable).

What isn't clear is whether ORM will have any equity left in the project post inking the deal with Oaktree. For shareholders it appears like a near zero cash disposal of their asset for a management fee (as yet undisclosed) and a minuscule equity holding (if any) remaining in the project. 

Due to the significance or lack of in such a deal, one hopes there will be a vote put to shareholders on any such deal. Clarification will be required on what majority holder (namely Oaktree) ends up with in equity terms and what management fee is payable ORM (including the small print). One has to wonder whether there will be anything left for shareholders. 

POG, (Petropavlovsk) notes the statement made by Sapinda Holdings and perhaps there's some jostling?

Limited time, Atb Fraser.

Morning Mumble: Viability & Pricing (CEY) & Dreamland Horizonte Minerals (HZM)

Centamin presented an opportunity to walk in light of the price movement, I'd be surprised if people can warrant a higher target price save for the takeover rumours etc...bizarrely the price stepped up 10% (or near it). Well the market likes the odd blinker...to ignore the issues.

Horizonte Minerals, A stock I've had a few plays with over time, has published its Pre-Feasibility Study (PFS) that confirms economic and technical viability for Araguaia Nickel Project, Brazil. Now I hope you note my sarcasm here, but anything is viable on paper if you factor in "better anticipation and expectation" in the market place.

You read through it, like me, I won't try and pretend to understand the more complicated "schpeel," but what I do know is there are 2204.62 lbs in a tonne, and that makes my assessment easy! They're forecasting $19K/t a price that may well be achieved in the near future due to the Indonesian ban. However by the time the mine comes into production, its my view if the "ban" has not been modified, then its likely future supply will not be constricted. A ban by Indonesian currently and the price is range $7.2-$7.35/lb currently. You're thinking, this is the "PFS" there could be some modifications in the Bankable Feasibility Study, albeit HZM will need, ermmmm, cash for that part. 

When you balance it in, you should derive like I a Nickel price of 8.618265279277154$/lb. Sorry but you get the idea...it's only  modest $1.30/lb above the current price which I suspect will rise with further tightening of supplies around October. All positive, but all the same, I always thought you were meant to sell projects on past economics with "headroom" and cream for an increasing price. Am I wrong here?

Well with an average price over 20 years of say 15,000$/t or 6.803893641534596$/lb. I think I am being generous there, but guessing at the average without currently having access to the stats. You get the idea, its "only" 19% above the 20 year average, admittedly things have changed and it has peaked before at $53,000/t or just over $24/lb there's potential but at least be conservative with the pricing and expectations.

For the HZM holders, with the larger shareholders having 75% of the stock it'll be down to them to determine viability. Assuming one doesn't have rose tinted glassed they'll look for improvements in these economics at the BFS stage. Assuming they decide to go that way and not spin the project out to someone with deeper pockets at say 12pence a share "to keep some happy."

One of the mysteries in the market I have to say, assuming that all things remain equal there would be more upside in a Nickel long than there would be in HZM post a rise to 9p. Rather simplistic approach from myself but that's how I work.

ABM on the bank and just waiting to be clubbed by Creditors it would appear: Albermarle & Bond (ABM) Update on discussions with lenders. One begs to question what sort of discussions there were/are in light of the response: the lender "will not be able to support the management turnaround plan for the business The Board is continuing to work with the Company's lenders on possible alternative options for stakeholders."

So shareholders, pay up, or 'new shareholder' pay up and discount all the way. One thing is for certain, the leveraged model across the entire market whether it be Gold, Silver, Nickel (TALV) etc...does not work for parties thinking or considering it to be low risk. However it's positive for the press. They have been able to retrospectively write about what "was clearly and matter-of-factly" coming. 

Faroe Petroleum PLC Preliminary Results had a tone of consolidation. Perhaps the market will follow suit: Financially, with the positives coming for the company and development results should grow. There Net Cash situation is certainly a benefit and prudently (so far) spent and reserves being upgraded. The key to for me is the RBL (Reserves Based Lending) not burning a hole in their pocket and one will assume that will be prudently spent!

My long (Leggie sit down) on Kingfisher paid well, it’s a rarity for myself to go into results with full exposure. Kingfisherreports full year adjusted* pre-tax profits up 4.1% to £744 million and the markets somewhat surprised by the capital return programme. It boded well for the SP, for myself the longs are banked, purely as I do like to run a sensible operating rule of making a profit! One will await the ‘consensus’ before taking further positions, long or short…

Atb Fraser