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
