Morning Mumble: Hiatuses and...Ken's Mare (KMR) Equity for shareholders? Anglo + De Beers, Glencore and some news about a former Jam Tomorrow Employee Rurelec & Questions for their NOMAD.

Good Morning,

Very busy - although amusingly, there were suggestions we had visited the dark side and started working for a long-only fund! Chance for a recap later this week on the pertinent issues from the 22 November to present, although nothing much has changed, save for news driven events.

Iluka Resources sensibly announced the long-awaited termination of discussions with Kenmare Resources (KMR) - it’s wise for parties to read the RNS. Those followers will be unsurprised by this "news.” 

KMR equity holders have the opportunity to participate in the dreams of the future. So to sugar-coat the dire state of the KMR’s financial position they have announced plans for an investment by State General Reserve Fund (SGRF), a further capital raising, and balance sheet restructuring

Over to KMR (bold, italics and underlining are additions):-

SGRF, a sovereign wealth fund of the Sultanate of Oman, has approved in principle an investment of US$100 million in the firm placing via one of its subsidiaries, subject to and conditional upon, inter alia, agreement of a subscription agreement, agreement of arrangements with the Group's project lenders on the Group's capital structure, procurement of commitments from other shareholders in respect of an additional minimum US$75 million capital, necessary Kenmare shareholder approvals, and finalisation of a prospectus.

Wait….continue reading:

Moma is a world-class asset that encompasses a large, long life ore body. Total invested capital exceeds US$1.2 billion, with the mine producing more than 7% of global TiO2 feedstock supply - being the largest merchant producer of ilmenite globally.

Having invested capital that exceeds $1.2B, and producing 7% of global TiO2 feedstock, it would appear the management are going to hang around to run the next stage of the "KMR turnaround story/saga." This is despite being in charge whilst a transformation of a once multi-million pound company into a small cap with a £12M valuation took place. One has to wonder what the board’s remuneration and bonuses have been over the years in comparison to the returns for shareholders. 

The question that those supporting shareholders should ask is, “are the management right for the future?” If the past is an indicator of the future, prudence would be to have a fresh start with a clean sweep. Those whom played the KMR pub quiz last year on FTML, will no doubt be aware of the dire performance for shareholders.

What’s another $175M in the grand scheme of things? Will the prudential be putting up any ‘wonga’ into the fundraiser? More to the point, is $175M enough?

There remain a number of material matters that need to be agreed to enable Kenmare to deliver the planned capital raising and there can be no certainty at this time that they will be achieved. Kenmare welcomes the indicated support from SGRF and appreciates the support of key shareholders.

We’ll watch from a distance, although if one was short, prudence would suggest closing on the news today. KMR Net Debt must be around $315-332M by EMC estimates.

Continuing with a theme of shareholder value and with some amusement for those following the debacle at LGO Energy. Judging by the latest announcement they’re off to find and/or recognise shareholder value with  a strategic review. 

LGO also update the market on the Trinity Exploration no-deal on the Tabaquite Block by issuing 41,487,776 to Trinity Exploration. Trinity’s statement on Tabaquite Block, Trinidad ends with: 

The decision to cancel the SPA has been considered as part of management's overall assessment of means to better realise the value and future potential of the Tabaquite Block. 

  

We have Glencore (GLEN) updating the market this Thursday. NH and David Sheppard at the FT ran with something a bit more positive, “Glencoreexpects to cut debt ahead of schedule.” - Sensible and common-sense discussion about GLEN's earnings forecasts in the current environment. Pay attention to the terminology used on Thursday, one suspects there may be a few statements coming from the back foot.

Sadly for GLEN's workers Collinsville coal mine in north Queensland, 180 workers are to lose their jobs. Is this an admission of the dire state of the coal industry? It certainly explains why Mick Davis is taking his time with X2 Resources, perhaps to Rio's annoyance. 

In the weekend press we had Anglo American allegedly slashing their dividend (again and again), talk about echoes – news must be thin on the ground! Anglo’s investors’ day tomorrow (08th Dec). We can no doubt look forward to all the positives of a diversified miner and what this offers investors, whilst struggling with depressed pricing.

With Anglo’s subsidiaries either under water in terms of operational costs (Kumba Iron Ore/De Beers), lacking flexibility in CAPEX (Minas Rio) or needing to deleverage the balance sheet. The future doesn't look rosy. Anglo is now realising the hard choices it has to make and the limited flexibility. Quite why they have not pressed the equity raise/capital injection button is anyone’s guess. Surely they'll want to get in there before all the others?

We note that De Beers have sold Kimberley Mines in South Africa to Petra Diamonds and Ekapa Mining for a rather low sum. If one looks at the capital De Beers spent on Kimberly and the plant etc…it gives a rather good indication of the amount pressure to monetise what assets they have/can sell.  An article from May 2015, makes for an interesting read… Engineering News - De Beers inviting bids for life-extending takeover of Kimberley Mines. Was the USD to South African Rand/ZAR near $1:ZAR5 in 2002/3?

For those that have followed a company Rurelec that we consider jam tomorrow, its not often one gets validated in their views so quickly. Over the weekend attention was drawn to the following announcement on Independent Power Corporation PLC.  See the previous commentary here (EMC) when the IPC was "spun out" or Rurelec to allegedly save costs.

Questions:

a)      When did the Independent Power Corporation PLC, Peter Earl and Anglo Kazakh TransAsian Pipeline Corporation Limited commence discussions? We may be able to update on this shortly...

b)      Was this before or after the spin off?

c)       Was the NOMAD consulted on the “spin-off?”

See the original announcement and terminology 19^th June 2015 - Director Change (Peter Earl) leaving & IPC. Then see the replacement, Spinout of Subsidiary. Albeit it’s somewhat immaterial as the horse has already bolted.

Atb Fraser.

PM Bolt-On: Lonmin (LMI) & Anglo American (AAL) - Kumba, Exxaro, Minas...+ Copper and Chinese Interest Rate Cuts (+waffle) + WPP & Majestic Wines

Good Evening,

Last week, hopes of Lonmin (LMI) being the casualty that the Platinum/Palladium industry needed faded away, with their latest refinancing. Not only would this have removed a significant proportion of the surplus off the market but perhaps improved the outlook favourable. The deal is yet to be inked and with quite a few outcomes it’s not without its risk. 

There's gossip (or hope) of interested parties post the update on trading, business plan and funding. With a number of outcomes, the poignant question is "what equity is there in Lonmin for non-participating shareholders?" The likely outcomes:

1. LMI may raise the monies and based on their cash costs of ZAR10,339 per PGM could have a chance of recovery. Assuming one ignores the past fundraisers that Lonmin quickly burnt through - previously raising in December 2012, 
2. The $817M kept the lights on since -  LMI fail to raise the monies based on shareholders experiences to date - geo-political risk, miner/worker demands, inflationary costs (Eskom's price rises are unsustainable) and the outlook for platinum/diesel associated catalytic converter risks. 
3. LMI raise a partial amount to satisfy the banks in the interim whilst a buyer for LMI is found. The difficulty is determining the value of equity/assets after dilutive equity raise. The risks cannot be totally ignored. 

Lonmin (LMI) -

The Board intends to announce on 9 November 2015 the full terms of the Proposed Rights Issue to provide the new equity funding required of US$400 million and to publish a prospectus and the audited results for the Group for the year ended 30 September 2015. The Proposed Rights Issue is expected to be underwritten on 9 November 2015, inter-conditional with the Amended Debt Facilities.

With not long to decide, it’s over to those already torched and/or underwriting to strike a price. Could this be a 4:1 dilution?

We had Anglo American (AAL) come out the other day and say just how bad it is. Like Lonmin, Anglo face an uphill battle of immense proportions. There's a number of items to be considered, we shall be coming back to them in due course over the coming weeks, specifically the items the market is ignoring.

Not forgetting that the comparable quarter for platinum production was during a strike, it’s sensible to read right to left on the chart below. Save for the warping of platinum, the results are a disaster for shareholders. There's a real risk of De Beers being sold near the bottom of the market. Admittedly there appears to be some form of resistance from the board to dispose of the main value in Anglo, they may be forced into a corner.

The lack of debt guidance in Q3’s is always an issue, but on results there's an indication that the dividend is going to be toast. Cashflow doesn't look ‘great’ and the outlook isn't much better. We estimate $12.6B in debt currently.

Overview (from Q3)

	Q3 2015	Q3 2014	% vs. Q3 2014	YTD 2015	YTD 2014	% vs. YTD 2014
Iron ore - Kumba (Mt)	11.4	13.0	(12)%	33.9	35.8	(5)%
Iron ore - Minas-Rio (Mt)(1)	2.9	-	nm	5.9	-	nm
Export metallurgical coal (Mt)	5.5	5.1	8%	15.7	16.0	(2)%
Export thermal coal (Mt)	8.8	9.0	(2)%	26.1	25.0	5%
Copper (t)(3) (4)	171,100	176,900	(3)%	527,400	573,300	(8)%
Nickel (t)(5)	6,800	10,700	(36)%	19,800	30,500	(35)%
Platinum (produced ounces) (koz)(6)	614	541	14%	1,739	1,267	37%
Diamonds (Mct)(7)	6.0	8.2	(27)%	21.6	24.2	(11)%

 *See notes 1-7 end of commentary

We’ve previously discussed the issues at Kumba Iron (Sishen Iron Ore Company Proprietary Limited (SIOC), more so the difficulties with cost controls. This should have been implemented earlier.

Kumba’s operating costs target is a fairy tale at circa $40/t. Whether this can be sustained longer-term is another question. In the short-term there's a possibility, but sustaining capital investment can only be modestly be reduced. 

The majority of South African operators are suffering and Kumba’s Sishen FE mine is not exempt from the ensuing operational issues and potential unrest. Kumba had a reduction in iron ore production from the forecast 33Mt to 31 Mt (6%)) and an increase in waste tonnage from 200 Mt to 230 Mt (15%). 

Not only do Kumba/Anglo have lower iron ore prices, lower production and higher costs all unwelcome at the cashflow/profits level. The risks associated with the Exxaro black economic empowerment (BEE) vehicle should not be ignored. (EMC: July Morning Mumble: Anglo's further woes thanks to Kumba/Exxaro). Similar to Anglo's dividends, shareholders should not discount the possibility of any credible dividends from Kumba and consider them toast for the foreseeable future. 

Luckily for Exxaro they have the International Development Corporation (IDC) (Article: Creamer Media Mining Weekly) to bail/refinance them. The IDC do not have the greatest track record of investments, en par with the International Finance Corporation (IFC) whom notably invested in Nyota Minerals (2010). With their entire holding now being worth a paltry £48K (Approx.). Admittedly, Nyota was one of those that many (including here) got wrong at the time, but luckily wised up to.

The Kumba Iron Ore fan club need to consider how distressed the operations are. Moving more earth, for less production etc... The FX beneficiation of the South African Rand is of limited positive and remember, with FX devaluation, asset values in dollar terms will depreciate. As eluded to previously, the ArcelorMittal contract premium was in essence a subsidy / saviour for Kumba. They have now stopped gift-aiding.

Anglo's Minas Rio production was a smidge off the pace, allegedly owing to the drought. However, what Anglo have forgotten to mention the “collective holidays” that the company are utilising. Save for benefit to OPEX costs in the short-term aided in part by the Brazilian Real (BRL), ramp-up expectations should be revised downwards. Minas Rio needs 92+% operational capacity to attain a limited/exclusive status of having a profitable mine (with humour).  

We know that contractors have been delayed and/or appointments to positions not made as has been reported in the press. One expects further downgrades at Minas Rio unless their employment returns to viable capacity to improve ramp-up.

Remembering that Minas Rio is another obligation for capital expenditure on the Anglo balance sheet. Anglo are unable to cut this expenditure without significant write-downs/losses that would also impact on assumed cashflow.

Least we remind ourselves of Roy Hill’s first shipment that was pencilled in for this month that is now likely for November/December. See: GinaRinehart's Roy Hill mine to miss deadline for first shipment

Copper production was better than expect but still down, in part owing to the sale of some assets. Its noted diamond prices continue to fall and De Beers are forced to scale back production to offer some support in the market. 

The Chinese created a trading event on Friday, with the majority of commodity share prices benefiting for 10 or so minutes. That was until the realities sunk in, that as the Chinese had cut its 1 year lending rate to 4.35% (25bps reduction) it raised questions about the very state of the economy. The 6^th rate cut in 11 months.

In move contradicts the 6.9% GDP figures that came and the Press Conference of the Ministry of Commerce on October 20, 2015. Having discussed previously the need for cuts, expect a reserve requirement ratio cut of 100bps to 17.5% sooner rather than later (although this may now be averaging out, with the real time rate being lower. The interest rate cut has created more fear than confidence.

There's a likelihood of credit becoming cheaper for longer in China, the threat of further monetary easing in Europe and America’s limitations of a rate rise may give some false dawns. With the trade surplus in decline, China’s switch to consumerism/consumption will/ has to be the more rapid. 

China has to adapt to the full blown capitalist model sooner rather than later to sustain growth and sustain some form wage inflation. This will promote employment opportunities and offset the reduction in manufacturing that is occurring - evidenced in part by the reduction in trade surplus.

China’s “competitive edge" as a manufacturing super power is being eroded. The capital outflows from China are triggering a longer-term devaluation of the yuan. Over the coming quarters China will be compelled to reduce the capital/deposit requirements for property, for leases (including autos) and embrace the leveraged ratios considered the norm in the west. Examples being 90-95% mortgages (perhaps even the equivalent of help to buy in mid-lower tier cities. In addition to near nil deposit autos and cheap consumer credit.

With consumerism/consumption being promoted, China has to bet on service, retail, leisure and tourism sectors. In the absence of any consumption type stimulus China will be in a downtrend until at least demand catches up again.

Expect further cuts in the lending rates and RRR, otherwise China’s corporations are heading for default, including SEO and private/public listed companies. We know Chinese Co's are struggling to maintain debt payments.

The MarkitFlash U.S. Manufacturing PMI ™ showed a five-month high for October that is ultimately making any rate increase harder for the Fed. Admittedly the Q3 results for industrials are contradicting the FED’s confidence in the robustness of the US economy.Could the Chinese capital outflows be aiding the US Manufacturing, a Chinese version of QE with a flight to safer climbs?

More to come on WPP, a model based on acquisition? Majestic Wines - the new off-license? Eroding margins where there's a hope people will order between one and five bottles from Majestic Wine's rather than at their normal supermarket? What are the real costs of customer enticements at Naked Wines? With incentives from the likes of Moneysupermarket/Uswitch? 

Atb Fraser

• (1) Saleable production

• (2) Production includes medium carbon ferro-manganese

• (3) Within export coking and export PCI coals there are different grades of coal with                        different weighted average prices compared to benchmark

• (4) Includes both hard coking coal and PCI sales volumes

• (5)Excludes Anglo American Platinum's copper production

• (6) ASCu = acid soluble copper

• (7) TCu = total copper

Morning Mumble: Turning Japanese - FT, Anglo and Lonmin: Yuck.

Good Morning,

Importantly for everyone that reads the pink pages (via whatever medium), the FT is Turning Japanese. Amusingly, being well off the mark thinking it was Reuters, four city folk were bang on the money. The concern being, that it was never suggested that to gain entry to the city trading houses, one had to know the lyrics and Turning Japanese as a desktop short-cut. We'll remain silent on what that infers for those in city! Whatever next...

After enquiries about IT errors and the like, as a reminder this is a channel for views, pending time. 

It is appreciative that people source the views, whether they agree with them or not, it's a pleasure to read people disagreeing without referring to status or position with insulting terms. With apologies being accepted, and thank you for them, its time to look forward. Perhaps, the EMC will not be a dirty secret of a reference point in future, before penning ones analysis. 

Fear not though, there's a suspicion we shall disagree, but now with a mutual respect. We'll see how it goes this afternoon, meeting with a city chap whose views have differed slightly to here. Especially on copper, iron ore, nickel and zinc. Who picks up the tab is another story and will there be a bun fight!?

On to the carnage from of the market Lonmin (LMI), whom cut this, reduce this, care and maintenance (C&M) that and look for further savings. If someone has not thought of it already, perhaps shutting up shop would support the entire industry. There cannot be much more to cut can there? LMI have been sensible in placing those operations on C&M with least initial cost (contractor mining). How LMI can make money including financing costs etc...at anything below 1185 (under review as well), is anyone's guessing. 

LMI's Q3 2015 Production update is woeful on all levels. With the management now "defending" the value of shareholders. Had this come in 2011 then perhaps we'd have been discussing something very different. LMI is a prime example of inefficiency whilst attempting efficiency. So, without pulling apart the numbers, its fair to say LMI are paying the market to produce PGM's. 

As mentioned in, EMC: Kumba Iron ore one suspect there's going to be an increase in Lost Time Injury Frequency Rate (LTIFR). Sadly LMI workers have been impacted by this as well, with cost cuttings all round, there's a difficult balance between profitability, productivity and viability. Sympathy to the families involved. 

Some contradictory statements, but over to LMI refinancing

We are reviewing the appropriate capital structure for the Company in the new pricing environment as we consider the need to re-finance our debt facilities. The Board is considering the full range of options available to secure long term capital and expects to update the market by the time of our full year results in November 2015.

If any financial institution will stump up (via refinancing) any monies (debt) without a commitment from shareholders, they'll be brave. 

Lonmin Chief Executive Ben Magara said:

"Lonmin is defending value for all stakeholders in responding to the platinum pricing crisis by taking swift, decisive even though difficult measures. Losing jobs is not pleasant but everyone is having to take significant short term pain to preserve optionality for the long term. All costs have to be reduced including labour and I hope our formal consultation process will come up with mitigations to minimise job losses.‎"

Ben's got his hands full, with a growing discontent in South Africa, it's not going to be easy to "minimise" job losses. With the number of unprofitable operations, it’s hard to minimise what needs C&M on a grand scale. LMI, in my view, is not going a concern. The surplus in the global PGM industry (far from assisted by Russia) will make it difficult to justify any investment. If one hasn't noticed already, in the absence of a Chinese aid package (and its being touted), opps one means investment, LMI is destined for AIM at the very best. 

In summary, to go long, without acknowledging all the geo-political, economic and commodity related woes, would require one’s head being looked at. Good luck to those on any form of book build. The facts are clear, even with yet more cash, will it resolve LMI's profitability? Yes, but only if operations are shrunk to an AIM sized entity. 

Continuing in the same vein, we have Anglo America (AAL) reporting H1 results today. Handily, if we do a quick copy and paste from LMI, with the addition of "impairments, write-downs and flog this and flog that" its makes life easier. So, AAL, whom cut this, reduce this, flog this, care and maintenance (C&M) that and look for further savings here and there, are not in the same boat, but it looks like the same boat race. 

We'll summarise quickly with net debt up at a staggering $625 million to $13,496 million and a loss reported for the entire year. Admittedly, there's post-period receipts for the sale of the Tarmac division of $1.6B, which are being applied to debt (like they had a choice). 

If anyone ever speaks to AAL anymore, could they be so kind as to ask them to bump up the P&L reporting to near the top of the page. As a few savvy analysts have realised it's stashed down the pile. 

So AAL have....Commodity price-driven impairments of $3.5 billion after tax, including $2.9 billion at Minas-Rio. Productivity improvements and indirect and capital cost reductions accelerated, with disposals being progressed. 

AAL have very wisely spotted that iron ore is at a cross-roads. With higher cost producers disappearing from the market, these have been replaced by newer lower cost producers. Kumba's lack of dividend is going to exponentially hurt AAL, nevermind the Exarro Resources woes. 

De Beer's couldn't even save the day this year compared to last, "De Beers saw a continuation of the market weakness of late 2014 during the first six months of 2015, resulting in a 25% underlying EBIT decrease. In response to these market conditions, the business has revised production guidance for 2015 to 29 to 31 million carats, while continuing to focus on its operational metrics. De Beers also reduced unit costs by 10% in dollar terms. Read across to smaller producers...

Why AAL is up on anything but the dividend today is a mystery, and that is questionable why it's being paid. The Dividend can only be paid on the assumption of sales receipts from other assets, failing this they'll have to scrap it. This questions the sensibility of such a policy rather than improve the balance sheet. We'll leave the summary to, at 30 June 2015, Anglo American's ratings were Moody's Baa2 (negative outlook) and Standard & Poor's BBB- (stable outlook).

Question of the day, were RIO/BLT were wise to machine gun their way to capacity just to survive? An example being Roy Hill, with Gina Rinehart continuing unabated despite some issues with the family trust that may or may not need resolving. 

Maybe more time later, although that's becoming a reoccurring theme.  

Atb Fraser

Belated Morning Mumble & PM Bolt On: Shaft'ed (SHFT), AAL something's lacking in the sandwich & AHhhhhhhhh'fren + the Alleged amateur of aim...+the paradigm shift in China's iron ore.

Good Evening, 

With Indaba and a few other items going on it’s been extremely busy week with meetings and teleconferencing from the UK. Today a slide show was emailed around with myself to be "formerly" known as the Amateur of AIM. It’s a pleasure to drink their gin this evening, but restricting the consumption to a few rather than two cases (apology accepted). 

Shaft Sinkers (SHFT) hit the wall with a financing update at 12:32, just a few weeks after a "yoff" (read as person younger than I in a position I'd have loved when I was his age) challenged the EMC analysis of the company and why it hadn't gone bust!?! SHFT is dogged with its inability to share the risks of contracting with the miners, creating an imbalance in returns and something contractors need to learn (mail box for a quote to understand this; its not cheap!). 

SHFT's issues were endemic of commodity prices declining (receding super-cycle), opex/capex cuts, the South African strikes whilst not forgetting the Kazakhstan contacts were totally misunderstood by the market and lack of risk sharing in contracting. It was one of the favoured shorts, kick the dogs. The employees and staff should be ok, it would be wise for investors to note a few key names from the board in their journal for future reference.

Anglo American (AAL) Full Year Results 2014 is/was abysmal. The write-down on Minas-Rio of $3.5 billion is laughable when the company state Minas -Rio is ahead of schedule in October [2014] and expect to bring the project in $400 million below the revised budget. Do the company have a handle on costs at all? Revising costs up, then coming in significantly below the revised budget. Sounds pretty much like a blank cheque. 

The savvy will start questioning whether AAL's net debt target of $12B is realistic in the current environment. With debt set to peak at $15.5 billion (EMC estimates) by end of year, commodities and free cashflow are going to have to significantly improve before one becomes positive on this stock. De Beers should be called Long32 (to mimic BLT's short32/south32) and be divested to support the balance sheet whilst there's value in the market. The market stupidly reacted today, and will ignore the realities. Up near 20% off its lows anyone would be thinking it’s going great guns. 

Afren (AFR) has had a lot of rumours abound today, as per FTML it was proven to be BS, save for the low ball offer that SEPLAT (SEPL) were offering. Afren shot out the gate with little option to maintain but to maintain there's value, with offer talks being terminated. SEPL announcing they had completed extensive due diligence on Afren and made a written proposal to the Board of Afren that provided critical and significant near-term liquidity and value for the stakeholders of Afren. Value for stakeholders...loose term for "not the shareholders"? 

It would appear David Lenigas has started a snowball on Bacanora Minerals (BCN) after the recent request to gain a seat on the board via REM (Rare Earth Minerals). A decent holder said today, they'll reconsider the viability of BCN if David Lenigas gains a seat on the board. Voters would be wise to think where their money is best placed. There's a number of items going on the side lines with BCN and good to follow as the big boys (exc. REM) start to play...its best to leave that one there, however if you're widow(er) or orphan you'd be advised to avoid.

With oil's absolute focus on rig counts it’s a speculators licence to print money as oil was propelled above $60/bbl (Brent) with the Euro-zone giving it a little squirt. Why it's rocketing away is purely down to a bounce with the surplus even allowing for a reduction in production still out gunning demand. The market is rushing to price in a reducing rig count, some "weather issues" (as Malcy eluded to in his blog) creating a better balance. 

The final thought of the weak (scuse the pun) is the iron ore short and the Vale gaining permission to utilise their giant ore carriers to China on Monday. Obviously this has nothing to do with some agreements with Cosco (China Ocean Shipping Group) and the related transactions. 

It’s rare to be able to quote EMC directly, so here's with a little clip from today:

"If China subsidises native production by 30$ a tonne for 125mt it effectively causes over supply and a short to $55/t. The subsidy via development grants will be partially offset by the 700mt at the lower price.  

China have just shorted Rio and BLT by allowing the super ore carriers in on Monday (9th) something Rio et al forgot to mention in their updates! Expect Cosco (China Merchants Energy Shipping state owned), to get further involved in the low cost super/giant carriers the deal with Vale from last year showing they're willing to apply pressure on Australia . The deal with Vale/Brazil has in essence reduced the need for 30% of Australian ore alternatively they [Rio et al] must slash prices.”

We'll leave it there...see you on Monday! 

Atb Fraser

Morning Mumble: Lonmin (really) & Anglo American (AAL) & my dog BBY.

This is definitely a summer to remember in terms of weather and market stupidity with IPO's priced above viability...I'll perhaps save that for a separate post pending time etc...

LMI's 3rd Quarter Production Report & IMS is rather simple to run through, net cash is Nil, but they have banking facilities, they expect to have a cash surplus by quarter four of FY2014 but strangely only be at 80% of normal monthly production. Yes that's right, LMI are such a powerful and cash generative company they'll have surplus cash at 80% of the company annualised production. We'll ignore the fact of labour costs up 12%, energy costs going up near 11% and PGM prices around $1465-1480 an ounce with slack in the market. 

As most are predicting there is an increasing risk of a further placing to save the company. Personally, after the last rescue placing in 2012 the righting (sorry I know) is on the wall. By my estimates, pending the banks tolerances, this is likely to be April 2015 "to assist the company's balance sheet." So the Market irrationally rewards LMI with a morning uptick, wonders will never cease. one shall await the next update before taking a position. The time to close LMI was amazingly, at the end of the strike...

Anglo American, yesterday we saw news of them putting their Manganese Projects with BLT up for sale. This is in addition to Anglo May Announce Nine More Assets for Sale says Standard Bank. All obvious but perhaps more relevant to shareholders will be any price achieved. It doesn't bode well for a company when you realise you've got some "lower" value assets to sell which are priced significantly higher on your books. "Driving Value" (the names they think of, what next "back to basics making decent returns"), appears in their eyes to be working, they have their work cut out with the asset sales. The Coal division seems very well managed indeed, yes improvements across the board, allowing some for a significant decline in coal prices. 

Minas Rio is on track and having secured long-term agreements for the majority of Minas Rio's forecasted 26 million tons of iron ore production, its now a question of what price. Saying that with yet more increases into the market, AAL's targeted returns are now coming in to question (+15). End of the year is the date to watch....perhaps this time next year one will be able to assess the true and factual potential of Minas Rio, which has allegedly come in on budget.

Save for the potential bad news in iron ore and ignoring the debt targets, AAL has come in significant better that most envisaged. Perhaps its time to revisit the viability of an investment with gearing around 23% and the potential turnaround now in full swing, rather than just being spoken about. It was pleasing to see De Beers coming in very well indeed, even above the most bullish of estimates. The new rough diamond sales contracts with more rigorous financial and governance requirements in order to be eligible for supply should already be priced into the market. Most lenders have already required the same of the market for near 6 months, reducing the levels of financing, so should bode well for stability in the market. De Beers, will be set to benefit, along with most AIM Diamond miners/explorers whom will significantly benefit from stability in terms of looking at borrowings and financing new production/developments. Currently, with my target price of 1385, I should perhaps review this figure in light of today's announcement. 

Minco appears to be missing the point re: Woodstock, as I covered awhile back. The Technical Report on its 100% owned Woodstock Manganese Property, New Brunswick, Canada still doesn't give me any confidence to part with some cash to invest...One would be wise to look at 2% NSR royalty on the Curraghinalt gold property in Northern Ireland which is being explored by Dalradian Resources Inc. (TSX-"DNA"). Assuming fair value and production. This perhaps could be sold off to give Minco some cash, say £7M at fire sale prices...to spend on their other wonderful assets. 

RBS was rather predictable/amusing...Preliminary Interim Results 2014 given the American results and better still, the litigation and conduct costs will have more clarity, then the bank can get back to profits rather than transition of wealth from the private to public sector. 

Finally a dog of mine for which I have been pleasingly short on for some time now (without Checking around Jan/Feb), Balfour Beatty (BBY) has found a date! Who would have thought it, very well timed by but not without risks. Possible merger between Balfour Beatty plc ("Balfour Beatty") and Carillion plc ("Carillion") Possible Merger, this has some significant cost savings and over lap of costs. It would be no surprise if Aecom (NYSE:ACM) came out of the closet after a more definitive statement by BBY & CLLN. 

Atb Fraser