Morning Mumble: Glencore (of course), Countrywide (CWD) and Vedanta + various items needing further analysis.

Good Morning,

With so much going on, there’s no apologies. Admittedly the messages enquiring after my well-being were somewhat amusing. We’ve had oil supply contracting thus the price appreciating - as a result of Brazilian strikes and Libyan woes. As mentioned a few months ago, oil is about the money. With fears of floods in Texas and the like expect, the futures to rally – Hooray for another swallow.

There’s been various discussions regarding commodities trading, some better written than others, Banks face fresh pressure on physical commodities (FT). Positively for Glencore they've been dealing with it sooner rather than later, the implications for their available finance will no doubt pan out in due course. 

Leading in to what was announced yesterday in the US, Streaming Transaction - Antamina with Silver Wheaton. Quite simply, compared to Teck Corporation (TSE/TSX: TCK.B) it’s a scorching deal. No doubt structured tax efficiently as well. Will need to revisit this to do a comparative, but on the face of it the 20% of spot price for a reduction of the upfront monies is a winner for Glencore. The also hint/imply there’s another one in due course. 

With limited time, the Q3 and corporate update by Glencore is pretty much as expected, Debt is starting to be within sensible levels. Perhaps the webcast all those months back should be revisited for a body language lesson, not only in presenting but the reaction to “risks” that were rightly questioned. 

With what Silver Wheaton and Franco Nevada (both listed) are paying, why companies are not rocking up to their door I’ll never know (scuse the pun). What if Silver Wheaton’s tax position is challenged? Not only do we need to consider the implications on the commodity prices they operate in and the flexibility of accepting terms, but what are their investors’ expectations. They are now under the gaze of the EMC followers. 

We had countrywide confirm everything the market knew about Foxtons today, with a profits warning disguised as a trading update. Simply the recovery wasn’t there as they expected and with guidance lower. With this in mind, there’s no reason to buy the stock above 360 pence or hold it! Unless you’re in denial…surely not as a reader of here!!

Vedanta interim results were dire in comparison to Vedanta Limited’s update on the 27 October. Time permitting, we’ll perhaps return this evening for GLEN and VED. Glencore may be out of the woods, but Vedanta need an injection of Cairn Energy cash. Their model without the conclusion of the Cairn India deal has vapours of a debt for equity deal, which perhaps won’t be so kind to equity holders. 

The market really does need to consider the issues being seen across Aluminium, Steel and Iron Ore. Mentioned here awhile back, the subsidies relating to energy pricing and employment are tipping the scales to one of outright 150% anti-dumping taxation to avoid world domination and carnage of localised industries. We recently read that Cliff Natural Resources was looking for their toys outside the proverbial pram with regard to the actions of the Chinese. 

The final thought goes to a strong dollar, copper, and the iron ore price that has a smell of napalm about it, $46.5-$47/t. With China’s GDP guidance now being acknowledged as a realistic 4%, (A win for EMC), we’ll consider the implications over coffee. 

Atb Fraser

Morning Mumble: Iofina (IOF), Beowulf (BEM), Victoria Oil & Gas (VOG) and Foxton's (FOXT) the commission debacle.

Good Morning,

If Iofina's (IOF) water project is such a "non-core asset", why is the share price reacting the way it is? When investors learn to read accounts there's a difference between positive EBITDA and being cashflow positive. The company admittedly has a decent patent, the problem is there's an unrealistic belief in the profits (and or cashflow) that can be made in the current Iodine market. 

SQM gave a good indication of their intention at the last conference call on the 20th May 2015. Those thinking it’s despicable to short a stock that has now removed the potential revenue prospects for the foreseeable future, it’s wise to consider the facts. There's a global strategy in the absence of higher prices to increase volume (akin to the iron ore story). 

When considering SQM's (Sociedad Química y Minera) (+ Chile's) approach including those of the Japanese, China, Turkmenistan, Azerbaijan, Russian and Indonesia (we'll exclude America's production) all aiming to produce the same if not more, the price isn't likely to recover any time soon. With Iodine demand set to increase circa 3.5% globally, most producers are aiming for 5+% production growth

Over to SQM to give IOF the realities of their cashflow situation (more important than EBITDA in this case). From SQM's conference call statement, Revenue reported for the first quarter was in line with expectations given our current strategy; lower average prices have helped stimulate demand, and this, along with a more aggressive volume strategy have aided in higher sales volumes during the first quarter. Prices, which were down 30% compared to the first quarter of last year, were anticipated, and are also in line with this strategy. Going forward, we expect iodine volumes in 2015 to exceed volumes seen during 2014 by around 5%.

With Beowulf (BEM) test work delivering 'super' high grade concentrate over 71 per cent iron. Normally one would get excited about such results had it been anywhere nearer production and without a suspicion of tin rattling. EMC: Beowulf 1st June 15. With 68% prices varying, the average quote this morning ranged between $70-100/t. It’s certainly going to make Kallak more enticing as the costs per tonne mean anything below $90/t due to location and wage costs is unlikely to provide any cashflow. It'll add value to Kallak, but wise to consider how far away such a project is!

Victoria Oil & Gas (VOG) gave a decent new thermal gas connections and production update. In the past, VOG have set some targets that in hindsight may have been unrealistic. Their target of "10.5mmscf/d target for the calendar year 2015," was conversely as poor for being on the low side. Today Kevin Foo, has implied they're going to exceed the 10.5mmscf a day." This is on the back of gaining 3 new c customers, Dangote, New Foods and Sic Cacaos. 

VOG are now focussing on additional customers in the Bonaberi industrial area across the Wouri River. VOG's monthly average gas consumption is triple the February average and they expect to exceed the 10.5mmscf/d target for the calendar year 2015. As always never rate the management here, things are changing positively but the management is as much a risk as the geopolitical issues. Target price revised towards the £1.15, having derisk it’s a long-term hold. 

As often is the case, utility companies suffer with leaks and supply constraints, it would appear if the "gossip" is correct that VOG's biggest leak appears to be a contractor. If so, the near 18 scuffs a day peak recently achieved but not in the public domain will not have happened. If parties, whether investors/speculators or gamblers wish to rely on this information, they would be wise to consider the legalities of such info. 

Finally, Foxton's (FOXT) is being punished this morning with a nervous silence from the company. Foxton's appear to have been charging "some" customers a commission on top of work completed. This in addition to the alleged fee/commission that they charge the supplier/contractor whom resolves the issue. I thought landlords knew about these practices. Having expanded into managing the neighbouring properties of rentals near mine recently, some are pleasantly surprised

Irrespective of the legal bill involved in this, the damage is setting in on the Foxton's letting department practices. Anyone whom owns UK property and utilises a letting agent is simply throwing money away, save for a few exception i.e. living abroad or more than 250 miles away from the property. Credit references and employer checks are between £50-100, advertising for tenants circa £40 a void (empty property) and/or even getting on Zoopla and Rightmove + Prime Location for around £60 a property for 3 month periods. Far outweighing the costs associated with an agent. They merely pick up the phone and speak to yourself about the issues...money for old rope. 

Atb Fraser