PM Bolt-On: Was he pushed or did he jump +...FQM & Noble Group (Cap in hand)

Good Evening,

How dare you think it's VW!

It’s rather full on at the moment, for those thinking one twiddles thumbs all day. Thoughts in the morning are limited. It’s around this time I'd kick Li and Ian for their limited input, but hooray, they're working flat out. Hugo's man-flu is in recovery, so almost full-house. 

It was only a few weeks ago we were discussing the conviction of selling short Caterpillar (NYSE: CAT). This has been a focus here for some time, not just because of Mining but Shale and Construction per se. 

When should Caterpillar have updated the market on their outlook? Was the threshold for notifying the market today post a review, or perhaps a month prior to Chris Curfman vice president of Caterpillar's Mining Sales & Support Division's retirement? It’s somewhat immaterial to the outlook but it raises the question of "was he pushed or did he jump?"

Caterpillar et al where stunned when commodities all crashed, and operating costs became all the rage - admittedly the markets attempted to deny this for too longer period of time. This is not hindsight but more a realisation of basic economics. Caterpillar now have to reduce prices, irrespective of their commentary about market share gains. Feel free to catch up with the proverbial sandwich 8-K Report of unscheduled material events or corporate event. 

Points:

1. What are the risks to Caterpillar finance and future planned growth? What inventory levels are they committed to? Are there likely to be stock write-downs in addition to the adjustments for the restructuring.
2. With limited focus on new mine development, plus machines being utilised more efficiently - what are the implications on new sales? Part margins? Service agreements?  
3. With other companies attempting to maintain space in a more competitive market, Caterpillar's premium is at risk. Margins are key...over to the Japanese/China. The latter in terms of machinery has been totally overlooked! 
4. Can Caterpillar reduce costs quick enough? Caterpillar's savings in operating costs have a long lead time and not without significant cost. 
5. With new machinery on a cycle, Caterpillar may find the Aldi and Lidl scenario being played out. Over to heavy machinery manufacturers with better FX outlook (weakening). 

What's a few days? It was meant to be commented on the other day, but FQM holdings in company. Now one could be forgiven for the odd day, but 232 days after passing the threshold to report? 

Some VW: Some comments on EMC: VW that's worth noting (comments sections). More soon on Chinese liquidity, global inventories and borrowing as a percentage of company assets. 

Finally, we have Noble Group (SGX: N21) where rumours are rife that they sounding out investors for a Glencore type rights issue. Noble Group are allegedly cap in hand for $750-$1B. Would you? Not on your Nelly! In the absence of being able to roll-up their debt, expect some clever enticements for investors. (Glencore 2.0). 

Common-sense caveats apply about trading gossip...although with their balance sheet looking like a train wreck and other "issues", admittedly disputed, one suspects it’s got some plausibility to it. 

Atb Fraser (Tired so if the spelling/grammar police are out, feel free to correct.)

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

Good Afternoon,

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Fraser

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

Good Evening, 

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

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

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

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

G. Clive Newall, President

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

We shall await news from Glencore, Vedanta and Barrick. 

Atb Fraser

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

Good Morning,

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Over to Rio to put it in context

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

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

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

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

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

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

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

Atb Fraser

Morning Mumble: First Quantum Mining (FQM) bitter sweet pill, GEM Diamonds, how things change in 2 months.

Good Morning,

First Quantum Mining (FQM) give their Q2 Results, you won't like them, so here's some sugar to help the medicine go down (read as dividend). Not only is the later unaffordable its putting further strain on an already distressed balance sheet, albeit only $18M (ish). 

What level of cash generation was assumed for expansion of Cobre Panama, One notes the project is progressing with no change in "capex" at $6.4 billion. With total capex for this year at $1.4B and $600M to be spent on Cobre Panana. There is some good news, in 2016, FQM  focus will be on optimizing the phasing of capital expenditure at Cobre Panama, while keeping the project on track. Obviously no need this year then?

FQM state,   "During the quarter, we launched and completed an equity issue. The decision to do so was based on our belief of a stronger copper market following this period of weakness. Proceeds from this initiative provide the Company with the financial flexibility to continue to build its production base. We are thankful to several long-time and new shareholders whose support made the issue a success, noted Philip Pascall," First Quantum's Chairman and CEO."

So the decision to equity raise was based on "a stronger copper market following a period of weakness"? Phew, one had a suspicion it was as a result of reduced cashflow woes, covenants being suspended (waved goodbye) and a compulsory commitment to significant levels of CAPEX on Cobre Panama. It must be entirely coincidental that of the $1,121B capital raise, $1B was needed to repay debt at a senior level and the remainder equating to the $117M hit being taken on the ENRC $430 million Promissory Note.

EMC estimates of NET debt position as of today are around $4,956.9B allowing for the recent falls in the price of copper, gold and nickel. In the absence of an improvement in the copper price that is sustained and above $2.55/lb, debt levels are likely to be higher than those reported in the financial accounts for 2014.

It’s sensible to consider whether there is a full availability of the undrawn facilities in the absence of covenants? Circa $7B all in. Especially in light of FQM's capex being towards to the higher end of the revised figures for 2015 in the 2014 accounts, significantly reduced cashflow and limited room for cost improvements. We'll ignore the $400M in inventories at year end, perhaps a little hair cut by $100M would be wise, or FQM could alternatively have their fingers crossed, and raise "a further $800M in anticipation of an improving copper market?" 

There's further issues with the closure of Sentinel process plant, pending an evaluation in light of the load shedding on the grid. Sensibly, FQM has seen common-sense to redirect the majority of Sentinel's power allocation to enable Kansanshi to operate close to full capacity. This obviously has implications for Sentinel, likewise the timeframe is unknown and one suspects while delaying the ramp-up at Sentinel. Putting near 150K/t of copper back into next year’s earnings (Cashflow assumptions?)

Having bought into Gem Diamonds (GEMD) recovery (EMC: May) today they update the market H1 trading update that replicates what De Beers experiences (EMC: Anglo 24th July). Having sold and taken a loss on small long, there will be no rush to return. 

We note the market for small stones has softened considerably and is likely to continue to do so with the woes in Asia / China. Ghaghoo sales are down near 20% compared between the first and second sale, admittedly commissioning sales and more so for cashflow. Although they do acknowledge that the next sale will include a higher proportion of diamonds from the main body of the VKSE phase of the kimberlite ore (better quality). 

Ghaghoo is however turning into a row of disappointments, admittedly not far off the main body of ore it’s perhaps one for those with a longer-term perspective and a rosier outlook. With tougher going ground conditions impacting on slot development in the first five production tunnels and constrained production ramp-up, its not great news. More so the need for specialist expertise has been employed to ensure there is no further major ingress of water as the access decline and rim tunnel on Level 1 both begin advancing through the water fissure area in order to gain access to the second production section. Will main Ghaghoo production improves things? 

Wolf Minerals (WLFE) update the market  on the progress on the development of Drakelands. All appeared to be going well save for the price of Tungsten and Tin. It would appear that Wolf Minerals have only just noticed the price of Tungsten dropping significantly since commencing mine development.

Investors will be wise to work through a model of around $200/MTU and tin and $12k/t. rather than what was inferred previously. Although there are significant synergies and production improvements from a 24/7 operation model rather than the 5.5 model that was worked on. Costs per MTU should reduce further than those implied originally, circa $174/MTU. It may be worth WLFE not processing the tin? 

Although the preregistration for the dial in, like that of AO World is not welcomed. With the availability of the web, one could register via a web page or even not be permitted to speak without registration. Whomever is advising of these practices would be wise to reconsider. 

Not time to discuss the vanadium woes nor copper.

Morning Mumble: They have Phorm, NEXT guidance improvements. Can it get any worse for First Quantum (FQM), load-shedding! + AQP & GKN + DRX

Good Morning,

I would like to apologise to readers for kicking this proverbial dog, but Phorm have Phorm. Today, the can is kicked back with a convertible loan note extension. In essence this is a pre-placing, keep the air conditioning running type corporate action. With little to add to Phorm, EMC: criteria for a huge short March 2014. 

The long-only contingent are celebrating with a stonking trading statement from Next (NXT). EMC: NXT March 2015. Over to Next (NXT), with an increased sales and profit guidance for the full year that supports a timely buy note by Citi on Monday. With no buy back, but the floor raised to £69.62 and a special dividend of 60 pence (2 November 2015). One will sit and wait for the trading opportunities. It’s noted a lack of margin commentary or analysis.

First Quantum Mining (FQM), has received notification of a Force Majeure for the supply of electricity to its Kansanshi operation from ZESCO. With load shedding/supply being reduced 23+% at Kansanshi Operations and Sentinel being reduced the same from 55 to 42. How this affects the guidance and ramp up is another question. A likely 2400 tonnes per day feed through, the costs will move out to the previous $1.77/lb (not C1). Are Vedanta (VED) affected as ZESCO have suggested it’s just in the North West region? Also, was the load-shedding announcement made on the 13th July? 

For the geographically minded, this has been on the cards for some time. ZESCO is reliant on Kariba Dam. Water levels there have been at lows and the outlook isn't great either. There's a material shortfall of 550 MW this year. The problem is likely to get worse, as so far the power reductions are plumb on the middle of guidance, whereas the the grid is showing a 30% deficit in power generation. Perhaps Aggreko can assist? They should be on the phone already, if they haven't already been. That's a significant 'potential' contract...

There's has been an absence of reporting from Vedanta. VED's Zambian operations are not insignificant, nor are Glencore's, who also have an interest in Mopani Copper Mines plc along with FQM. The load shedding issues will not be resolved until the end of the year at the earliest.

The issues have been discussed in the Zambia parliament over recent months by the perhaps outspoken Mr Patrick Mucheleka (MP). Not only taking a significant interest in copper, power generation but more importantly, the acquittal of former President Rupiah Banda. Perhaps to the disappointment of President Edgar Lungu?

A psychic announcement for Lonmin (LMI) thanks to Aquarius Platinum (AQP), whom Q4 production results. The pertinent issue in the commentary from Jean Nel, CEO Aquarius Platinum said (see bold): The fourth quarter was characterised by a particularly good performance from both Aquarius operating mines. Both Kroondal and Mimosa again improved safety, delivered all time fourth quarter production records and reduced costs, in what remains a challenging operating environment. The performance is testimony to a disciplined approach to operations and the operating teams at Kroondal and Mimosa deserve much credit for this. From a macro perspective, the lower metal prices which prevailed during the period and especially post quarter end will not only require an increased focus on safety, cost and production discipline, an approach which Aquarius will remain committed to, but also a focussed assessment of the viability of each shaft at each operating mine to ensure the sustainability of the business in a low metal price environment.

In case anyone is trying to fathom out what calendar AQP work to, today's is Q4. A lot of work has been carried out at AQP. Sadly the share price is unlikely to benefit much from it. It’s a testimony to the capabilities of the staff. The overall outlook won't help AQP, expect more cuts to production from unprofitable shafts. Although near a more realistic valuation than LMI...whom must be haemorrhaging cash! 

GKN results, acquisition and cash placing for another day...but watch that space. The book runners will not doubt suggest the job was difficult in the prevailing market etc.! Of course it was 'Gov.' Rather insightful after yesterday's EMC: JMAT read across for GKN! Drax's half yearly today aren't so bad. Having been a knife catcher on the climate levy changes, and a strategic review under way to consider the long term options for the Group. 

Atb Fraser

Morning Mumble: Is Greece's agenda paying off? SHCOMP etc...Copper (FQM), Iron ore, Sierra Rutile (SRX), CMCL &...Margin Margin Margin!

Good Morning,

So the vote about "terms" that were allegedly withdrawn has taken place and the outcome is now being consolidated by those denying the gravity of the situation Greece 'feels' it’s in.

Since Tsipras's election and formation of a coalition of sorts, Greece has been on a train with one track and no other routes or exits for its destiny. Not only will this have implications for Greece for the longer-term (35+ years), but will raise doubt over Europe's ability to keep its members in line (the status quo).

China is not assisting matters, with the press realising (belatedly) that the Chinese Government [was] is providing liquidity to the CFD/Spread bet companies offering margin. EMC:Margin and Securisation (03rd July 2015).

Over the weekend, the FT ran with Chinainjects liquidity in attempt to reassure markets. The CSRC (China Securities Regulatory Commission) has come out and stated what the market was aware of. The PBOC is now providing finance to the China Securities Finance Corp (CSFP) to maintain the stability of the market. Is it a case of one cannot be seen to lose on the markets, where 300+ funds have been created since February, with the majority betting long.

These actions and a blind belief of stock performance have created a squeeze of immense proportions The CSRC is tasked with attempting to stabilise something they were warning about in December 2014. 

Those fund managers "speaking positively" [99.9%] are being given the financial muscle to create stability. The PBOC, via 3 financial houses, has been in the market for huge chunks of equity, in specific entities across all sectors (34 stocks in total). One assumes giving greater liquidity in the market or slowing the fall.

The Chinese Government think "stability" is now the main staple of the day. With such a large percentage margin trading, near double the reported figure in the FT (17%). The margins/leverage on Shanghai Stock Exchange Composite Index (SHCOMP) and Shenzhen Stock Exchange Composite Index (SZCOMP) and SouthChina Morning Post (SCMP), is actually near 30% of the entire market if one includes the grey market. With the grey being the biggest risk to any stability, due to the leverage multiples that have been offered compared to the CSRC regulated houses.

In December 2014 the CSRC carried out "out on-site inspection" of the majority of securities firms including margin trading and short selling, pledge-based repo and securities trading with repurchase agreement. Not only did they have concerns about the rolling of positions but the amount of leverage that was being offered.

The basis of the investigation was to head off any financial boom and bust type squeezes. It did just that with commodities speculation being reduced massively, with most across the board losing any form of support. Time will tell, but it’s wise not to bet against Goliath's determined to avoid any inference of failure.

Quite where the train of IPO's and delisting of Chinese entities from Global Exchanges goes now is a question that will need answering. The Chinese market is reliant of the Emperor's new clothes to bet long. Without the onslaught of IPO's to maintain silly valuations, people will quickly start to close their positions or avoid betting on the crap.

The crap will have other companies reversed into it, to enable a perceived quick route to a Chinese listing where the regulator doesn't like sellers! See Focus Media's attempts...Reuters (June 2015). This is not the only one either! SOE (State Owned Enterprises) are going to have a rough time of it shifting of the PRC (Peoples' Republic of China's) balance sheet and into the market.

All China’s main brokerages have agreed not to sell shares, perversely so the market can recover to 4500, currently 3,775.912. There's a long if ever there was one! Additionally they have had a whip round and put near $20b into a fund to assist the “Government” with stabilisation. Please note, the Chinese Government / PBOC is likely to be spending near $100B on a similar basis and has also been active in the market! 

Moving on to ASX, FTSE and AIM, with Australia waking up on a Monday to a shock of a horror. Lo and behold commodities dropped and so did the stock. Iron Ore producers were pleasingly punished, (they ignored the Chinese warnings from EMC:warnings from Xinchuang Li  and now the price-setters are making hay whilst the sun shines. It’s not the best market with demand down and the price setters’ appetite for any premium being unplayable. One wonders if there's two steel mills margined up to the hilt speculating not only on Copper but SHCOMP & SZCOMP. 

With one major shareholder in the “China’s Shanghai Chaos fund” needing a little collateral, the fund closed its entire position on Friday/Monday.  Not necessarily the best time after the article by the FT on copper, China’slow rates sound death knell for copper carry trade by Henry Sanderson. A very good piece, which covers the woes of the industry. The read across to other commodities is also likely. 

How does this impact on First Quantum Minerals (FQM), where their production is not only in breach of the ignored covenants but also raises serious questions of the viability of the project being a "bet on the appreciation of copper." (EMC:FQM Gloat & EMC:FQM Moving the goal posts). This is just after Canaccord Genuity places a buy note out with 20% ish upside.

How all these commodity crashes and the like have propped up China's economy is another question. With factory gate prices, inflation and growth all having an impact, is it still wise to pin the tail to circa 4.5% realistic growth when stripping out wastage? 

Caledonia Mining (CMCL) give a Q22015 production update  that is in line. With the company actively managing production grades and looking to maintain the longevity of Blank Mine it’s a positive update. With the revised investment plan looking to benefit production from 2016, the company is spending its cash wisely.

Production up, although comparatively speaking production costs are creeping up again! From $959/oz. on an all in sustaining cost (AISC) bases to $969/oz. AISC eroding 1% of the 4.7% increase in production from the previous quarter. Production is still down 7.4% on the LFL comparative quarter in 2014.

What is not commented on is the grades impacting on the AISC that have spiked near 7% on the comparative quarter from $903/oz. to today's $969/oz. Overall a positive but those costs will have to be kept in check. One assumes with the sinking of no 6 Winze this has had an impact on operational costs as well?

With limited time, Sierra Rutile's (SRX) share price recovery is justified on the back of today's Q22015 production update. Having previously found little hope for rutile prices, the company appear to be managing the company pro-actively.

SRX's cash costs have been managed very well. Costs reducing from $799/t in H1 2013, $609/t in H1 2014 to today’s $527/t., mostly on the back of an increase in Rutile production and they reiterate they’re on track to meet their rutile production guidance of 120,000 - 130,000 tonnes.

All this whilst planned shut-down of the Lanti Dredge Mine for maintenance and commencement of construction of the Gangama Dry Mine being on schedule and budget! With some cherry topping, completion of the Sembehun Dry Mine scoping study. It highlights long-term dry mining project with strong economics. One will have to wait and see. Perhaps some green shoots at long last, at about the money and a recent broker appointment, its wise not to rush in.

Atb Fraser

Morning Mumble: Camp AV, Evraz (EVR), HSS Hire Group (HSS), Speedy Hire PLC (SDY), Sirius Minerals (SXX), Phorm!! Has Zambia lost the plot? Hargreaves Services (HSP) and NIPT, sensible placing!

Good Morning,

A hot day yesterday at Camp AV! For those that were there a plunge pool and ice baths would have been brilliant addition, perhaps next year? The ice-cream seller was in high demand and certainly a welcome relief.

It was good to catch up with a few people yesterday, some previously unknown and others old timers. The question of the day was, who was the lady with the body guards? We know the inquisitive were just interested in the person rather than the lady's looks! We won't mention those totally fascinated by the lady in question. 

It was a pleasure to listen to some of those highlighting the issues in markets, the Enron chap (CFO) Andrew Fastow. Disappointing that I missed a significant part of but was very good for the little  I did manage to grab. 

The rabble team quiz were jinxed from the off, with the system rushing through questions and not submitting our last set of answers to the total. Not that it would have made any difference to the winners, spending more time revising! To next year...

The holiday season upon us, it’s time to close positions, to avoid any issues and the need for management. One in particular EMC: Evraz, Steel and Sugar (April 2015). The credit here goes to Hugo for our entry point being 205, and today's is no credit here for this trade, it’s down to Hugo's technical analysis. The entry point would have been 187, post breaking 206. An acknowledgement that technical analysis pays 202 it was. Looking at the percentage rate, on the issue of 4-year 15 billion rouble bond (approx. $275 million), it tells the true story of the issues facing EVR. 

EVR have further woes with the South African unit Evraz Highveld Steel & Vanadium (JSE: EHS) that's turnaround hasn't exactly gone to plan. With the share price dropping 95%+ in 3 years, it’s not clear when EVR will write-down the full value of JSE: EHS. 

With the hard work done, it was the day (yesterday) to sell the remainder of Sirius Minerals (SXX). The company planning an update in due course after the approval. With a significant amount of cash needed after an update on the fine print, it suggests limited upside from here at the moment. For those in the longer-term, it’s likely the company will take the asset to full production. If SXX haven't already been on the phone to start the funding, they will be. 

It was a coup yesterday, with HSS reporting on Monday (EMC) the read across wasn't positive for Speedy Hire (SDY). SDY announced a profit warning and a change in the board. SDY have they been unsuccessful in 'divesting' the remainder of the oil and gas division in the middle-east.  Having shut down the equipment hire operation business in the region, one suspects any sale is going for a song now or closure. The board have also identified some contributing factors to 'poor' trading:

• A lack of available equipment during the network optimisation programme.

• A focus on strategic accounts at the expense of SME customers. (*Addition Small & Medium Enterprises)

• Poor customer service caused by disruption during the implementation of a new IT and MI system.

The statements suggest the company's eye has been taken off the ball. With such items contradicting the very survival and purpose. If one does not have the equipment, limited focus on the bread and butter (SME) and "poor" customer service, you're not going to win many friends. 

SDY are quite likely struggling with margins on key accounts as the sector as becomes more competitive. HSS's woes in cooling are not the only thing felt by SDY. Date for Dairy, HSS due to announce on Wednesday 26 August 2015. 

Having previously had woes SDY's with accounting irregularities (gaping hole in the accounts for Gulf oil & gas) and now being forced to be ultra-conservative with forecasts and the overall management of the company. 

Those with a risk appetite may consider SDY's soon to be ultra-conservative approach as a buying opportunity. SDY will have to increase equipment spending to fill the voids it’s identified. Greater customer service costs will impact on margins. 

SDY's relatively low net debt to EBITDA ratio (when compared to HSS) will instil some confidence. Even allowing for a £25M increase in debt to £130M with plenty of headroom in the (recently renewed) £180 million 5-year asset-based revolving facility. Both companies are en par with 35% losses for holders. One hopes their customers don't stick the knife in 'after the news'. 

When should HSS & SDY have informed the market? With contradictory statements by HSS Q1 in line with expectations May 2015. Just 5-6 weeks later, the trading update specifically states that April and May...

The Group's trading performance through Q2 was marginally below expectations, primarily impacted by weakness in Key Accounts customer activity across a number of sectors particularly in April and May, as well as reduced demand for cooling equipment during the period. In June, we have seen customer activity begin to return to more normalised levels, with order books building into the second half of the year.

Standard life should perhaps be asking how on the one hand trading is in line and then some weeks later it’s suddenly below for the same period? Same for SDY whom initiated a board level review of the business. What led them to this decision and what evidence did they have to conduct a 10 week investigation and not inform the market?

After Phorm's (PHRM) woes EMC March 2014 nothing has changed for the company. To quote in full, to save time.

Leggie, Phorm.....I wanted to do a lengthy piece until I realised Tom W had, for which covers a lot of the items. What I will say is, and as an assurance to Phorm, the fundraiser meets the criteria for a huge short...I look forward to the news with glee.

(Edited: added in Bold).

Having shifted their strategy to China, the annual report reads of a chilling indictment of the views 16 months ago. Over to Phorm to inform you of the operational highlights. 

Operational

• Successful launch of the Company's machine-learning technology offering a solution which can function without the requirement for an Internet Service Provider ("ISP")

• Launched operations in the United States with initial test campaigns being converted into revenue generating commercial campaigns within a matter of weeks.

• Shifted strategy in China to partnership model, reducing cost base by approximately $0.5 million per month.

• Focused the Company's resources on its core markets; China, Russia and the US.

• Global peak daily opted-in users achieved in 2014 of 148 million, including a peak figure of 109 million in China.

• High calibre board appointments in Lex Fenwick, the former CEO of Dow Jones & Co. and Bloomberg L.P. and Johannes Minho Roth, a highly experienced and respected fund manager.

Disappointingly there's limited downside potential for those wanting to acknowledge the facts and ability of this company. Over to Phorm again,

In April 2015, the Company raised £6.00 million gross, via a placing and subscription, to fund the Group's general working capital requirements. As at 30 June 2015, the Company had a net cash position of £0.9 million, which, at the current over-head run rate, taking account of additional funds due and our ability to manage our working capital, is expected to last until early August 2015. The Company is urgently exploring funding options with a view to securing additional working capital in the short term.

Placing at sub 1 pence? Would you!?!?!?!?!?!?!?!

A few companies will be reconsidering their positions in Zambia this week, Barrick Gold (TSX:ABX), Glencore (GLEN) and First Quantum Mineral (FQM). With Zambia yo-yoing between budget deficits and milking the miners, its not going to be easy for Zambian Miners. Zambia from memory scrapped corporation taxes last year (sept/oct) to change to a 20% taxation of revenue (open pit) and 6-8% for underground mining. Yesterday (1^st July) started the reversion back to the 30% corporation tax that is en par with the 20% taxation.

Not only is the corporation taxation an issue, Zambia are now proposing a mineral export ban that have not been beneficiated in the country? How Zambia will manage this will a reliance on hydro power and a shortfall in capacity is another matter.

Had Christopher Yaluma, the Minister of mines, energy & water development thought through his statements, he would have been wise to outline how this "theory" of native beneficiation (processing) will be worked through.

Not only are Zambia in danger of deterring any possible FDI (Foreign Direct Investment), but companies would be wise to consider any further investment on projects. The Government appear to have a complete inability to implement sensible taxation and policy without considering it fully first (aka consultation). 

Little time for Hargreaves Services (HSP), period end trading update with more information to (EMC) review the company. The drop today was perhaps a little harsh, but with the words 'coal', the market is likely to misprice the woes. Staying with coal, the placees in Coal of Africa Ltd (CZA) will be far from chuffed with the failure of Mooiplaats. Of course they're continuing discussions..........................

Premaitha (NIPT) pressing the button at a sensible time with a sensible discount to the sp.

Atb Fraser

Morning Mumble: First Quantum Minerals (FQM) (some positives), CAM, yet more flipping of options! The spat at Mwana Africa (MWA)

Good Morning,

First Quantum Minerals (FQM) gave an update on the ramp-up progress of its new copper smelter in Zambia after the bell yesterday. Significant progress has been made on the cash costs with a modest improvement in C1 costs from $1.36 to $1.25/lb. It’s wise to ignore the previous quarter's $1.77/lb on the basis of ramp up.

A positive for the management, commercial production is expected to be declared in the third quarter of 2015 - ahead of the previous expectation of the first quarter 2016. Although one could argue this was a soft target. Not forgetting that C1 costs are likely to be impacted by the Zambian corporate tax and mining royalty regime, that starts around the time of commercial production, if not before.

With the stock trading at near 900 pence, there's going to have to be some consistent production records including cost efficiencies to warrant such a valuation with copper circa $2.60/lb ($5700/t). Amazingly where the Chinese are closing out yet again!

Staying on the theme of copper it's noted at the price and with the likely expenditure, one savvy analyst a k a Roger Bade has downgraded Central Asia Metals (CAML) to a hold, based on the price of copper, the CAPEX and distraction from Kounrad. 

As one should expect from EMC, it’s always wise to consider Directors true alignment with shareholders. Today we are informed that Nigel Robinson, Chief Financial Officer excised and flogged all his options. Not the first time this has occurred either. If one assumes Robinson is a savvy man with financial prudence, then one would be wise to ask why he has sold all his options. 

This is not the first time Robinson has conducted such an activity and brings in to question the purpose of the options in the first place. Long-term incentives plans and options are allegedly to align management with shareholders. If this was the case, considering today's announcement and that previously, sell, Nicholson and Clarke's excise and sell (22 October 2014), Robert Cathery's sale (1st October 2015), Nigel Hurst-Brown sale (23 April 2015). 

As always, directors’ alignment or lack of raising significant questions. Being at the helm, especially in Nigel Robinson's case, gives a damn good indication of the outlook. Hargreaves Hale will have something to discuss this weekend? Another ENK Plc (ENK) in the making? Over to D&A...and Montoya Investments if memory serves me correctly. With the potential for greater dividends over the coming year, it raises questions about the sales but also M&A. 

It never rains but pours for the serial disappointer Mwana Africa (MWA). It the gossip is correct MWA have had a spat with their NOMAD and Broker and the result is notice being given. Surely it's nothing to do with Mr Yat Hoi Ning?!?! With an operations and exploration update due next month, if you're a holder keep fingers crossed for calmer seas, perhaps even some positive news out of Bindura? 

Today's woes are being felt for the holders in Molycorp (NYSE: MCP) as the company files for chapter 11. Not unexpected. As a leveraged bet on the Chinese restrictions that unwound the company and sank its fortunes, there may be some hope post any restructuring. With a proverbial piste of a share price, any holders left really need to consider their thesis on investing. Mark Smith, must be relieved to not be involved with MCP anymore, and Largo Resources (TSX: LGO) looking brighter. 

TSX: LGO have gained final approval from the Brazilian Development Bank "BNDES" and its consortium of commercial banks for the restructuring of its main construction debt facility (the "BNDES Facility"). In addition, TSX: LGO (EMC: Largo needs $60M CDN Minimum) raised $75.3M CDN to shore up their balance sheet. With the price around the placing circa CDN$0.80, there's some potential, but not without associated sector risks. 

Anglo Pacific (APF) should welcome the income from the Maracás Menchen Mine Royalty, having fallen on the back of the coal settlement contacts (EMC: APF Coal Settlement Contracts Ref: APF), they're going to struggle to hit their target this year. 

Red Rock Resources (RRR) are now hunting elephants, with an investment in an oil company of the same name. This mini-me-conglomerate really needs to consider shareholder returns before conducting such plate spinning exercises. Today means the final proceeds from the Columbian sale have been committed / spent. This companies performance and confetti issues are not going unnoticed, but what next? If one remembers the Ariston advert of yesteryear, it’s highly probable. 

Finally, the thought goes to Richard Magides acquiring a stake in Energy Resources of Australia (ASX: ERA) via Zentree Investments. Perhaps the white knight caveat of a Chinese or Singapore backers is coming in to play? Notification of Holding may be a leverage play on the consecutive losses running at near AU$1 Billion. 

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: REM's Desperation & Writedowns lost in the GLEN. Copper Gossip & Spain 2.0.

Good Morning, 

Markets tend to be more confident in the UK as it shrugs of its seasonal affective disorder to start the spring afresh, but not for long! It was yesterday the supreme chartists (exc. Hugo) are now calling for a FTSE 100 retrace to near 4000. To quote Hugo, as it's unusual for him to be consider the FTSE, if there was a retrace it would be circa 5100, nowhere near the 4000 being bandied around. 

REM (Rare Earth Minerals) appear desperate to get above 20% before any such EGM at Bacanora Minerals (BCN). LGO don't have the necessary cash to remove the issue of a vote for the appointment of a Director to the board. The question should be, how much cash do REM have left? No much is the answer…

Having spoken to a few savvy investors in BCN it's unlikely that David Lenigas will achieve the intentions via REM without 20%+ direct holding. All holders should be thanking REM for creating a large illiquid squeeze (do not blame shorters as they were near nil or should have been!) in the stock with the price near doubling. This does not mean they should vote REM or any associates on to the board, far from it in fact.

Glencore's (GLEN) preliminary results 2014 in EMC's view should have taken a huge hit on thermal coal.  The carrying values have warp the overall figures to give a false sense of security for an improvement in the dividend, up 9% today. Viterra saved GLEN from dismal results, debt reductions of circa $5.2b will aided those with myopia and the savings from the incorporation of crap from XTA (Xstrata) are just mystifying. Although when one unwinds the debt, it’s worth noting the sole reduction was down to Las Bambas sale. Had the 'synergies' and CAPEX reductions be substantial enough, the level of debt paid down would have been circa $6.4B and potentially nearer $7b. (Time for a picture, it's dire!) 

The preliminary snapshot sums GLEN up, but doesn't give the whole picture. The market should have been selling into these results. They are dire if you add in coal and the return on shareholder funds, laughable. Roger Bade goes with 4.2% return on shareholder funds. 

Its ironic BLT (BHP Billiton) achieved better than GLEN despite having Short32 to get people's mouths watering. Although, with GLEN's trading division and the level of capital intensity required you'd be a fool to expect the same metrics as Rio/BLT and dare I say it Vale, whom have their own issues.

Roger asks some very good questions about the reasoning or underlying issues within GLEN regarding fees, commissions and pay. Perhaps GLEN was more suited as an unlisted anomaly. Well not for the sellers! It’s very hard to justify a valuation above 265 pence for GLEN, and that's pushing it. So over to the analysts to maintain the status quo with targets of 330-360 pence, obviously not for their own money though!

Analysts are left guessing where GLEN will cut its CAPEX. We'll leave the summary to GLEN, "Responding to the volatile market backdrop, we comprehensively reviewed the appropriate level of capex for 2015. Originally guided to $7.9 billion, we now expect 2015 total industrial capex to be in the $6.5-$6.8 billion range, with reduced spend across the broad portfolio." Coal? Oil? Alternatively OPEX? Marketing? Perhaps more transparency on the marketing fees and 'associated' costs? 

Of course we should end the GLEN commentary on a high note with the largest LMI (Lonmin) short...the in-specie distribution. How has the stock performed since GLEN's in-specie announcement 11 Feb 2015? Those two analysts in RSA (Republic of South Africa) that thought it would be good for liquidity, with a TP or near 240! 

With Mugabe's 91st Celebrations being in the headlines, Mwana Africa (MWA) managed to raise $20M via a bond issue for the smelter restart from ZIM institutionals. One hopes MWA have checked the lead times for the equipment they need in for the smelter reopening in 9 months’ time. 

There's a guaranteed uncertainty coming to the politics of Zimbabwe. It would be sensible to consider this with any investment, irrespective of the benefits of the commodity (namely Nickel). ZANU PF (The Zimbabwe African National Union – Patriotic Front) are in turmoil about who takes over...Even the MDC-T (Movement for Democratic Change) are becoming soft in their old age and wanting to maintain the status quo of ZANU PF, lip-service objections?

Copper gossip via Li in China, Zambia are alleged to be reviewing the overall tax-rate for open-pit mining that has impacted copper production and sentiment on any investments there. After initial discussions with the operators, Zambia are alleged to be reviewing the 20% royalty rate to 12-14%, although ahead of the previous 6% welcomed by the miners. 

Zambia have risked their entire industry in the short-term with the revisions to the Zambian corporate tax and mining royalty regime. With First Quantum's Sentinel mine coming on stream, they have had to revert to their lenders to tweak their covenants. The 12% for Vedanta is still far from positive, and creates risks, despite a recovery in the copper price (currently 2.66/lb)

With Zambia appearing to want to play a hard line on taxation (at least at the moment) Vedanta (VED) is at real risk of being the casualty. Its capital and corporate structure drastically need simplifying/clarifying in order to survive, VED appear have got ahead of itself in the price recovery. 

A few super-yachts cancelled today?

Atb Fraser