PM Bolt-On: SABMiller, Commodities: Iron Ore & Base Metals - China & Glencore's coal neighbour + a little bling! + DOM, CWD & Majestic Wine's realities!

Good Evening,

There's significant demands on time at the moment, so apologies. 

Agreement has finally been reached between AB InBev and SABMiller. A rewarding trade for those going for the overnight 'thrill'. The discount to the £44 deal should not go unnoticed and evidencing how savage the arb market is ncurrently (BG included).

The benefits to Molson Coors (NYSE: TAP) should not be ignored but prudence dictates that profit taking would now be wise. 

Those longer term readers will remember Duncan Fox - who is no doubt relieved that the MegaBrew deal has been inked (*subject to regulatory approval). Duncan was  seen discussing SabMiller the other day (BBerg). Duncan can now look forward to the daily implications and sale of a stake in China Resources Snow Breweries.

In commodities there’s a growing trend that Europe are partially buying the story, the US consolidating it, but Asia are selling it (perhaps Asia is not in denial about the outlook). Iron ore has levelled around $54.5/t, but will not be assisted by the World Steel Short Range Outlook for 2015-2016. Worth a read, rather than taking the media reports.

The World Steel short range outlook factors in a number of assumptions that have yet to occur. Especially as a significant number of major projects are more than 50% complete and delays happening with new projects. All creating a hesitancy in opinion, it’s understandably difficult to measure the longer-term outlook without further flag waving stimulus from the Chinese Government.

Previously with any stimulation, there was a bias towards infrastructure, now with an emphasis on consumption, save for the Housing sector (the maintain stay), there could be a number of wild cards. Expect some focus on recycling, waste management and development of services.

What shouldn't be ignored are the indicators of increased inventories - sales not keeping a pace with production, exports down, imports down and pricing pressures evidencing the low factory gate prices. The only issue is...that's both in the US and China. It’s no wonder that FED rates are looking like they will be lower for longer. 

In Coal, there’s an inkling that a deal isn’t far off between Rio & X2 Resources. Rio's yearning to divest the Allied & Coal assets may, with X2 Resources willingness, have implications for Glencore’s margins. MickDavis (The Sydney Morning Herald), if the time is now, it may just put pressure on Glencore to merge the Australian asset with X2 being the operator.

The synergies are notable and Glencore must be kicking themselves that, save for a white knight, now lack the financial muscle to complete on the Rio deal. It’s ironic X2’s timing of a $2-3B deal, not only could imply the bottom of the market in coal/thermal coal, but more so strong arm Glencore into accepting a joint venture. Rio’s Bengalla sale to New Hope Coal (ASX: NHC) implies X2 would need to pay near $3B, but $2-3B is a sensible range.

Irrespective of such a coal deal, and Glencore's hopes a bull market in commodity prices, the reactions have been muted so far. Glencore’s newsflow continues unabated, and not always welcome, with Jim Chanos coming out and admitting he's "a potential purchaser."

It’s not the headlines that Glencore needed, as it shows Chanos’s is short the stock and highlights their woes. A brave call after such moves, but not without some sensibility in the statements.

The whole idea was if there was a downturn in the commodities markets the trading acumen would help offset the hard assets. It didn’t work that way. If that was the reason to put this thing together one has to question that strategy,” Chanos said.

Not forgetting that Glencore’s actions meant they’ve yet again gone into a corner where others are loathed to go. Remember Glencore attempted to shut in thermal coal production for a longer period and failed miserably. What happened to thermal prices when Glencore turned production back on? Down!

We are increasingly hearing of a drought in diamond financing at the moment, with Qatar being slow to finance new deals the prices are suffering (Idex Online). There is a possibility Qatar's financing options are limited at the moment. In part with the purchase of an agricultural business off Glencore (rumours) and taking a bath in a few stocks.

Retail demand appears subdued, but with contradictory news suggesting its more Global Emerging Markets than Western economies. Validated in part by the Alrosa and De Beers issues ref: Prices including allowing sight-holders to walk away from the tables. 

More to come on this in due course - worth considering why the need for the Dubai Diamond Exchange (DDE) to host a financing event. Is there going to be a recovery or more of a softer lander for prices? Alrosa's and De Beers' prices cuts will not have helped matters and the Russian currency gain is making any form of support difficult, with the Ruble/USD FX benefits.

With updates due soon from De Beers (Anglo American (AAL)), Alrosa MCX: ALRS, Rio Tinto (RIO), Dominion Diamond Corp (TSX/NYSE: DDC), Lucara Diamond Corp (TSX: LUC), Petra Diamonds (PDL) and Gem Diamonds (GEMD) – the market will obviously gain a better understanding of the situation.

Will Dominoes pizza (DOM) follow in the footsteps of Gregg's reporting and appreciate tomorrow? There's a lot of hope and expectation built in - with an early exit in the Rugby by England and the X factor / Strictly benefits losing appeal, will the pricing perception finally sink it? 

What justifies Countrywide's (CWD) premium rating? Not a lot...and looking more like a sell. With the capital markets day going down by certain preferred analysts like a damp squid, its getting hard to justify any premium to the valuation. 

And Finally, the market has awoken to the realities of Majestic Wines (MJW) yet again, with such headlines as Naked Wines Launches "Text for Wine" service, would you be long? No doubt some more consolidation due in the sector in due course. 

Atb Fraser

Apologies re: Grammar.

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: 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: Chinese Property Bonds &....wonder will never cease, oil revisions downwards.

China's overseas property investment to reach $20 bln in 2015-study As Kaisa defaults, Goldman sees value in the property builders. The property slowdown is forcing the insurers and larger Chinese developers to diversify their holdings to an international hedge. Its wise to consider this the top of the property cycle as the leverage is unlikely to be paid with internal growth faltering.

Li put it simply , "there's just so much on the market a buyer is being deterred from the off ings". Li I am sure meant offerings but you get the idea. Li's been tracking the property market since the clamp down on corruption in China and the charts are staggering, dropping almost identically from 18 March 2013 to today. Surely the Chinese housing situation isn't directly linked to corruption that the dropped started 4 days after Xi Jinping became president?!

Today, Royal Dutch Shell (RDSA) announced there 4th Quarter and Full Year 2014 Unaudited Results and with it a very logical  update balancing growth and returns to address the sector issues they are experiencing was the license to print money for those short on the news. RDSA's prudence in their sales was more fortune than well-timed divestments. 

RDSA buybacks are scrapped (wisely) the investors (long only) are now the ones to take the pain, with earnings significantly under pressure and limited further divestments, I have to wonder if RDSA will be on the acquisition trail very soon, there is some very well-placed gossip of a very large acquisition. Over to UBS to get the ball rolling. Over to the Industrial Engineering components to react appropriately. 

Glencore (GLEN) appear to not know what to do with their coal operations. Glencore considers cuts at South Africa coal unit Optimum, having tried closing its Australian operations for 3 weeks, why did they bother opening it again? Now they're considering South Africa (RSA). 

GLENs asset classes should be considered tier 2. Over to GLEN to meander through with an inconsistent strategy. Had GLEN had the understanding of the market like they should do, the only benefit was to the short-term price where as soon as the news of the restart came the price gave up any support. We'll blame China for the thermal coal prices, rather than the entire change in global demand. The one saviour may be that RSA could be compelled to buy / take these struggling assets off miners hands to shore up the ailing economy, with the Rand like to depreciate further there's going to be a few bargains*.

For those whom dislike the shorters, they'd be wise to check the prices of PDL (Petra Diamonds) and Gem Diamonds (GEMD), the market has awoken to the fact the sale of Antwerp Diamond Bank to a Real Estate company (Yinren Group) didn't go as planned (a year ago). 

Of great significance, Shanghai, Hong Kong shares fall as China launches new probe into margin trading China Securities Regulatory Commission (CSRC) perhaps have found something in the alleged routine checks. 

Kaz Minerals Q4 production report from Roger Bade gets the chocolate teapot award. For myself, you'd be rude if you didn't agree there is no guidance on currency or costs. The market has to look over its shoulder at the all in net cash costs of $2.04/lb (not all in costs circa $2.75/lb EMC estimate) of the interims last August. With prices stabilising and likely to appreciate over the next 12 months, save for more economic woes and the Greek issues, plus Bozshakol Copper Project and Aktogay Copper Mine coming on stream there should be an element of knife catching now. 

Kaz's debts should not be ignored with the Chinese Development Bank (CDB) funding there's room for discussions. Kaz location to China is obviously strategic for both parties, time to start considering the positives.

Atb Fraser

Morning Mumble: Anglo Pacific belated...

Good Morning,

My daughter's bug impacting on the this mornings items slightly, where she wanted to sit and comforted with honey and lemon. So the world stopped for 5 hours and now back to normality whilst she sleeps or until she wakes.

A few weeks ago EMC Anglo Pacific Isua license & General Nice Development Limited was announced by all and sundry but not the royalty holder. Whether they had additional news or not, it would have been sensible to have updated the market about any discussions. If APF's Isua Project lien was on the title (the norm), irrespective of ownership, APF's royalty should have been good. APF belatedly update on the Isua Project being sold to General Nice Development. 

It should be noted the lack of a reversal in the $15M (write-down) and the absence of any impairment for the loss of $30M for a change in ownership. Anglo Pacific's assets are a play on a bull market, the price "looks" about right for now (but). Investors may have their patience significantly tested if Rio Tinto has a change of mind as APF's fortunes are expectant on the performance of Kestrel  (update 21st January 2015). It does show there's some potential but APF has not exactly warmed to the investors. Judging by Rio's intentions not to lose market share APF will benefit. Its looking like its time to turn just a little positive on APF.

As a seller of GEM Diamonds (GEMD) yesterday (EMC) they give a Trading Update for Q4 2014, with deterioration in prices, near 18-24% pending on view. The contraction in part is a 45-62% reduction in financing by the Antwerp Diamond Bank (ADB*) that seeks to exit the sector. With buyers being sought and opportunity being seen by investors this contraction is likely to go through but improve with June/July 2015 *(EMC forecasts) likely for a fuller recovery; save for significant changes in global economics and Russia.  

GEMD sees this trending going forward into Q1 2015. With the slack yet to be filled by ADB* it will take some time for a recovery in finances for the market liquidity, with a risk the traders preferring the absence of speculation with greater upside from the lower prices. The concern being that Petra Diamonds (PDL) seems to not consider the ADB exit of  the mark as significance. One would expect them to be aware of this as they have an office in the International Diamond Council (IDC) Building in Antwerp.

With circa 70-80% of diamond firms having accounts with ADB its wonder prices held up so well. An ending of tradition that's last since 1934, why KBC Bank N.V (the parent) couldn't find a buyer for the portfolio and ADB as a whole.

First Quantum Mining (FQM) update on its production and sales for the three months and year ended December 31, 2014 and production and capital expenditure outlook for the full year 2015. Over to FQM's First Quantum's CEO and Chairman Philip Pascall, 

"The financial and commodity markets have started 2015 with high volatility on concerns about the global economy, demand for natural resources and companies' liquidity positions. As a result, our share price, along with others in the sector, has been materially affected. While we have high confidence in the mid to long-term outlook for copper, we are mindful of the current concerns.  As always, we pay close attention to the Company's financial position to make sure there is sufficient flexibility despite having an active project development pipeline.  At Cobre Panama, we have substantially reduced the planned capital expenditure for 2015 to $600 million without compromising the project's progress. We also maintain strong and supportive relationships with our principal banks that have worked with us throughout the development of the Company and through several economic and commodity cycles,"

Zambia's Kansanshi's mine (FQM 80%/20% Zambia Consolidated Copper Mines (ZCCM) is still hampered by smelter capacity. Things are progressing with first pour at Sentinel (also Zambia) and forecasted production of 150-200k/t's later this year (circa August). We'll shudder at the costs per lb which must loss making at the current price. 

Then in December (2014), the atmospheric leach tank at failure at Ravensthorpe (Nickel) (FQM 100% Western Australia) doesn't bode well either. Quite how one scales back $600m at Cobra Panama (copper 80% FQM/20% Korea Panama Mining Corp (KPMC)) without compromising the projects progress questions the previous expenditure. Its wise to be picky, but common-sense is never absent from investments (certainly not here), then why were they spending the extra $600M? With production on the decline in the final quarter, sales in copper were only modestly lower than the previous year (consistent with global trend). At $2.54/lb for copper, the market will ignore the woes and buy into the stock. 

Iron ore depreciating and Fortescue Metals Group (FMG) (Why iron ore won’t rebound any time soon). having a moment of carnage before recovering on the ASX with Rio and BLT having the knife put to them as well. With the price well dropping in futures a further 5% the market might need to revise price expectations. Can you convert bulk shipping into a floating production, storage and offloading (FPSO) facility? Please note the sarcasm. The FT ML fans will of course prefer Neil's commentary on the topic Iron ore falls to lowest since May 2009 on weak China demand. Implications for steel anyone?

Goldman I don't think expected their short-term bullish comments on gold to be so short with the drop. Goldman Sachs See Short-Term Strength In Gold, Remains Long-Term Bearish.

Who'd have thought Afren at near 6 pence...anyone!?!?! Yes, proudly here EMC: Evening Bolt On: Afren & MPI + Alleged CU Chaos (Investments). Today's update validating some shrewd positions with a Review of Afren's Capital Structure out today its reading like a slow motion train wreck. 

The no news but sensible decision by United Utilities (UU.) to accept the final determination. With the RPI target on dividend being a comfort to the dull goliath investment funds wanting income, the price is about right. Although the wise will have under review due to the appreciation over the last 12 months. Private Equity and Sovereign Wealth Funds will now be able to cast an accurate rule of the likes of UU. and SSE.

Atb Fraser

Antwerp Diamond Bank (ADB*) is owned by KBC Bank N.V and unlisted, EPIC attributable for the use within the article and not associated or inferred as being to another company. 

Morning Mumble: a euro thrown across the bow of Bourgeoisiem, Petra Diamond's (PDL), GEMD + Grocers

Good Morning, 

There shall be a few sore heads in Greece today and Troika's headache is just starting. Fear not, you will not find the in-depth implications or thesis on Greece leaving the Euro here.  The risks are somewhat being ignored, the outcome for the rest of Europe may be more significant than the press and Government's acknowledge. Simply put, if one feels like a kicked dog in the corner, even the most placid of people get up, fight or leave.

You'd expect nothing less to read the risk aware view here. The EU would be wise to gauge whether Greece is part of a trend that is spreading in popularity across Europe. With the increase in extreme views in the UK and across Europe there is something that the EU isn't addressing that is causing discontent. Greece, as the potential bellwether of voters across Europe warning. After all, there's a little bit of extremism in all and it requires groups to create trends for people to jump on the bandwagon and turn the switch on for the moderates. Examples being UKIP, where the other UK parties are adopting moderate attempts at similar policies.

Greece may have been the master of its own destiny and financial distress, now it would appear they are again, BBCAnti-austerity Syriza wins Greek election. The global assessors will ignore why Syriza has won this election (via coalition) and focus on the financial implications for the EU. 

The Greek elections are being misunderstood by the markets. Greece is blamed for the slide in the Euro, oil and commodity prices and not the US inventory levels being the highest in 85 years nor Saudi's views or business as usual. Greece should be viewed as a potential indicator of political fashions and trends. This is likely to have greater implications than any financial damage and benefits the European Disunion. 

The jury for gold appreciation is out for the time being on the Greek elections with the implications in oil already being misunderstood. The flight to safety as Syriza get their feet under the table by renegotiation and face-saving of greater importance than financial prudence. Surely years of pain for a stronger economy over the longer-term is better; we have prime examples of excessive spending under Labour Governments in the UK. A quick perusal of historic UK government borrowing will clarify the position.

It would be wise to revisit EMED's projections before spending all those gains on the final permitting being obtained. With copper catching a cold in Asia with little support for base metals (absence of long speculation) trading at circa $2.46/lbs, EMED's return for investors now needs to be considered appropriately. The long-term view being if they can survive this market and minimise costs now they're likely to go from strength to strength. Cashflow will be welcome but how much of it remains the question. 

As Roger Bade points out this morning the price assumptions in the Technical Report from 2013 (here) might need a few revisions. To quote EMED (Page 9 Tech Report), "A copper spot price assumption of $3.50/lb used in the projects economics analysis compares to relative current market copper prices of $3.70lbs ($8,200/t) and a trailing 5 year average above $3.00/lb.” 

When reading through the technical report to net present value (NPV) if one was to apply a 12.5% discount, the project would be currently losing money at sub $2.50/lbs. Estimates (my own), suggest it would be better to increase to 9m/t p.a. and raise a full $254M, to fund through to larger expansion and reduced costs that "could" be completed by end of year two. The funding would give viability to the long investors and transparency. The relevance of copper has an impact on the secured loan facility that was able to paid in copper subject to the price being above $6,613.86/t, although there's still time for the market to recover it would be wise to acknowledge these risks. Over to the market to be despondent on this…5m/t's is simply not viable in the current market and outlook.

Anglo American (AAL) shareholders have finally seen sense, in fact the whole sector has...can we see some realistic pricing to entice longer-term shareholders into the stock. Over to Credit Suisse with their preferred AAL and RIO (Rio Tinto) for a little review? We hope AAL can find some muppet for their Dawson and Foxleigh mines l. With Q4 results due 28th Jan, we can look forward to something spectacular. 

Petra Diamonds (PDL) have announced what the market knew in terms of prices softening but maintaining a common-sense. It's hoped the dividend will provide some hope for the stock, but this will be unlikely today. No matter what you call it, it’s a revision downwards, over to Awal Bank SA to give it another kicking...with 13.2 million shares needing a home. As a result of PDL, I decided to sell Gem Diamonds (GEMD). 

For those supermarket/grocer investors and the people wishing to expose shorting funds, it would be wise to read the Delhaize Group 2014 revenues and preliminary results. Turnaround stories in grocers are possible as shown by Delhaize Group (Euronext Brussels: DELB) & listed NYSE if you want to play Euro/USD arb. DELB was a prime shorting candidate a 3+ years ago, it's now recovered, with results coming in strong today the longs in the recovery are benefiting. With Europe likely to be the indicator of how grocers recover it would be wise to follow a few including Carrefour. Roble S.A. yet again having a nice coup back in May 2012 (See: EMC Short Sellers) 

Carrefour could just be coming in to play, Les Echoes (The Moulin family owners of Galeries Lafayette increasestake in Carrefour to 9.5%) and the English version, via Reuters. Whether the Moulin family increase their stake further is another question. They say no others have a differing view. 

With most aware of the Igas Energy debacle, Statement re Finance Facility, there's a gossip of some large bets going in! Better late than never...

Atb Fraser

Morning Mumble: Shorts, Savannah Petroleum & all that glitters is not just gold!

Good Morning, what a delight waking up to sun rising...Pets at Home (sinking) hitting all-time low's AO. (AO World), doing the same with obvious results. AO.'s lack of support is a knife catchers void currently. Taking the first of a few positions in Morrison's on the basis of the appointment, which acknowledges the severity of the situation. A well-timed and considered appointment, (note: I bet Andrew Higginson wrote his own ticket as well!) Andrew Higginson to become Chairman (MRW) in 2015.

Its hoped people were able to watch the dispatches programme on Supermarkets. Its nothing that was not already known but well put together, more importantly, it shows the changes ahead for retailers. Will endeavour to find parties a link in due course.

Nautical Petroleum is coming back, no not being spun out of Cairn but...Savannah Petroleum Intends to float on Aim. The Company appears to pushing the exploration, appraisal and anticipated eventual development and production of conventional oil deposits located in the R1/R2 PSC area. Now it was my understanding that China National Petroleum Corporation (CNPC) had the rights to this Agadem Field on an exclusive basis (awarded 7 years ago). So whilst digging away in the press releases for the Niger Government, I found this: Press release (Niger Government) Ministers Meeting 06th June 2014 Scrolling down to page 3 (see below highlighted in red),

III. AU TITRE DU MINISTERE DE L’ENERGIE ET DU PETROLE.

Le Conseil des Ministres a examiné et adopté le Projet de décret portant approbation du Contrat de Partage de Production (CPP) entre la République du Niger et la société Savannah Petroleum, relatif au bloc R1&R2.

Ces deux (2) blocs représentent une portion de 50 % du bloc d’Agadem, objet de l’autorisation exclusive de recherche pour hydrocarbures accordée en 2007 à la société CNPC-NP-SA.

For those of us without schoolboy French:

III. UNDER THE MINISTRY OF ENERGY AND OIL.

The Council of Ministers considered and adopted the Draft Decree approval of the Production Sharing Contract (PSC) between the Republic of Niger and Savannah Petroleum Company, on the block

R1 & R2.

These two (2) blocks represent a proportion of 50% of Agadem block, subject to the exclusive exploration license for hydrocarbons granted in 2007 to the company CNPC-NP-SA.

I’ve highlighted the item in red that contradicts my thinking that the CNPC already has the rights. Perhaps CNPC have consented to this move, but more so, what happens to their current operations/exploration activities. Perhaps I’ve missed that the CNPC/Savannah Petroleum have done a deal? However, check through the Government announcements for Niger, there’s no such approval for changes or ratification to a deal. One shall wait and see if there's more clarity. Should this item not be disclosed as there is a potential conflict. Are CNPC aware of the award, albeit they will be with noise Savannah Petroleum's intention to join AIM. Perhaps Strand Hanson will be able to clarify this as the NOMAD, whom I shall call in due course. 

Back to the news, Gem Diamonds comes in a trooper today with a trading update which is very positive indeed. For those seeing that all that glitters in not gold but diamonds, then this bodes well. I commented on the fnancial changes in the Diamond Market (contraction of financing & Anglo American's (Read as De Beers) new sales contracts which bodes well for greater stability in the market. 

I'll let the highlights do the talking:

Letšeng delivers exceptional performance

·       80% increase in Letšeng's revenue*to US$ 147.8 million compared to H1 2013

·       29% increase to 54 678 in carats recovered compared to H1 2013.

·       14% increase to 53 799 in carats sold* in the first five tenders of 2014, compared to H1 2013.

·       58% increase in average value per carat of US$ 2 747* achieved for the first five tenders of 2014, compared to H1 2013.

·       37 rough diamonds achieved a value in excess of US$ 1.0 million each.

·       77 rough diamonds achieved a value in excess of US$ 20 000 per carat.

·       5 rough diamonds achieved a value in excess of US$ 60 000 per carat.

·       A total of 311 rough diamonds greater than 10.8 carats in size were sold.

·       Three exceptional quality +100 carat diamonds - a 162.02 carat, a 161.31 carat and a 132.55 carat, were sold for US$ 11.1 million, US$ 2.4 million and US$ 7.5 million, respectively.

·       Tonnes of ore treated up 6% on H1 2013.

The downside is there is still no clarity on the size of any potential dividend to enable a fair assessment of value, with cash of US$ 114 million cash as at 30 June 2014 (approx £67m) the market may get over excited at the potential of 36 pence in dividends. The company has certainly turned a corner…With a debt facility of, 390 Million Maloti (don’t get too excited) its roughly $36M/£21M (approx), there’s head room to reward the patient investor.

With Ghaghoo;s first sale of diamonds scheduled before the year end there’s potential upside. To quote: “The first diamonds produced during the commissioning of the plant have, as anticipated, been of a significantly higher quality and average size than those mined during the exploration phase. A 20 carat and two 10 carat diamonds have been recovered from the first 2 400 carats recovered as at end of June 2014. This compares to the largest diamond recovered in the exploration sampling of 7 carats. During the development of the production level there has been a greater quantity of water encountered than indicated by the exploration drilling. Steps have been taken to deal with this and it is not anticipated that there will be any impact on the planned production targets for 2014.”

One expects GEMD to make further highs today on the back of this update…the risk being more clarity on the dividend policy and diamond prices…albeit with greater stability as the leverage has been reduced in the sector to stop it over cooking on speculation. It would appear the play today is short Petra Diamonds whom appears overvalued based on GEMD’s update. Petra’s trading update (28th July 2014) yesterday wasn’t the most positive. When considering the potential of GEMD…

One will watch with interest the impact of the Ebola Virus on various producers, the News Agencies appear much faster than the AIM companies whom should be informing us.

Atb Fraser

Awaiting the news of the Burford Bonds before discussion!