Morning Mumble: Sirius Minerals NYMNPA, Platech's cashbox placing & clever play and Anglo's Sherlock Award + Paragon Diamonds "share buyback!"

Good Morning,

Its rather bemusing that the market expected the planning officers report to do anything bar go against the grain and recommend anything! In summary, 

• Officers' policy conclusion is that they do not believe the development represents exceptional circumstances and that the economic benefits and mitigation/compensation do not outweigh the harm caused.

• Officers acknowledge the high level of mitigations, the significance of the economic and social benefits which could attain national significance and the very strong local support.

• Special Planning Committee to meet, as previously announced, on 30 June 2015 to determine the application.

The full report is available: NYMNPA Special Planning Committee Report (PDF). Anyone that did not derisk significantly really needs to consider their approach. With no recommendation, it’s down to the planning committee to determine the result. One suspects that the "no recommendation" is to avoid the potential legal implications of being pro-ante the project. Its down to the test for a ‘Major Development’ that is a key government policy. In the event of refusal, expect SXX to become representative of arbitration value, circa threepence. 

30th June beckons...where Members of the Authority will make a decision on the application, based on their own views of the planning balance, and have the option to resolve to approve, defer a decision or refuse the application. One suspects it will either be approve or deferral, refusal has significant consequences on a number of levels. 

Playtech (PTEC) have announced a placing that should be considered a cashbox and has only aided the short component in PTEC. With greater scrutiny over PTEC and analysis of its core business (including PLUS), PTEC's model needs cash. The commitment to buy PLUS is one of a binary nature, both shrewd and well-timed or simply, a stupid gamble where the product offering could have been replicated with a better perception of brand. 

As PLUS has had so many issues, its "plug and play" type model is now ruined (in regulated markets) expect some significant revisions and reconditioning on growth forecasts. With a vast amount of convertible loan notes/bonds in existence at circa £7.25 and the placing. Wonders would never cease if the placing was at the convertible price level?

PTEC holdings at 9.36% in PLUS. The market simply should price in the takeover happening now, as PTEC are merely saving themselves near 5% of the offer price in market. Clever? if it turns out a good buy not goodbye, time will tell. With 44.96% voting in favour now, they need a smidge over 5% to do the deal. Unfortunate for a few funds, some of which had the opportunity to avoid such a calamity. Alas, don't consider the amateurs knowing a thing or two!

Apparently, Anglo American (AAL) shareholders pressing for more cost savings, Investors press Anglo American chief executive for cost cuts. It’s taken a considerable length of time to realise the returns of 15% ROCE (Return on Capital Employed), are but a mere hope. One was in a quandary about whether to give the Sherlock Award to the company or the shareholders believing in the unachievable target, with the asset class, commodity price and OPEX costs. 

The performance to date suggests Mr Cutifani has over-suggested/promised in a backdrop of misery for asset sales and rationale of costs for a producer with little hope of cost savings in its current structure. Alternatively, it could have been much worse? Unlikely. It may have been safer for the Australian to stay at Ashanti Gold.

In the current climate it would be unwise to sell De Beers in the current cycle of diamonds. Having been in place for two years two months, it’s mystifying what has taken shareholders so long to realise what has not happened. 

The obvious has occurred, dire performance, coupled with the disposal of assets that are very unlikely to achieve anywhere near was is hoped or implied price. Anglo's other entities operate in a depressed market with the outlook clouded by contradictory data from China and slump in ore prices. 

Examples of sales, the Mantos Blancos and Mantoverde mines, as well as its 50.1% stakes in El Soldado mine, and the Chagres smelter have been slow. Its alleged Codelco have trumped X2's offer of $486M. Although unlikely as Codelco's natural fit is Chagres, with their smelter division and need to create value in their own offering/assets.  AAL (management) could just be forced to take fire sale prices to appease their shareholders. 

Other analysts and reporters suggest the Mantos Blancos and Mantoverde mines won't achieve anywhere near the $1B hoped and there's an offer by Glencore and X2 Resources around $500M. Any expectations of a value of near $1B save for some 'wannabe' conglomerate, are unlikely to become a reality. Although the wildcard goes to GKR Corporation, whom may come through as a strong contender, being well financed and having not completed a deal for near 12 months. 

GKR purchased the Navachab Gold Mine in Namibia from AngloGold Ashanti in June 14. Not necessarily the best timed purchase, and minor in the grand scheme of things. Mantos Blancos and Mantoverde mines, as well as its 50.1% stakes in El Soldado mine, may have economies of scale for GKR and certainly fit their remit. Over to the Qatari advisors!

Is the time right to buy Anglo? Perhaps as pressure mounts, although the South African issues cannot be ignored nor can the likely hit on the bottom line by divesting such assets into a separate entity. AAL must now be considering a perfume dowry of financing to cover up the quality of the South African assets and lack of returns.  Sound familiar? South32? Whom managed to obtain funding lower than Rio's! 

AAL is perhaps a buy as its near the target of 905 pence, being near or thereabouts, there's limited downside for the shorts, neutral perhaps or knife catcher. Certainly not short from now until further news. 

Paragon Diamonds (PRG) announced 'debt financing' to commence a share buyback programme and "to support short term working capital requirements" whilst the Company progresses the acquisition of the Mothae Diamond Project in Lesotho from Lucara Diamond Corporation (the “Mothae Acquisition”) which was announced on 5 May 2015. 

It begs the question of the sensibility of such an arrangement, when PRG are starved of cash and could only raise £130K in March. Over to International Triangle General Trading LLC whom control the shots. Perhaps its more to fund the flights to and from Lesotho whilst creating a squeeze in the stock to get another placing away post the Mothae acquisition? Who knows...in the absence of news, the price is about right. 

The cost of such a deal me simply outweighs the benefits to shareholders of a modest increase in SP, and one would be wise to factor in a few risks in this type of irrational corporate action. Surely if the company has prospects and potential the market will rate this on results "not" hopes. With the expense of borrowing, warrants and costs, why this was done now is bemusing!

Atb Fraser

Morning Mumble: Obviously the Election (or perhaps shambles) &...Blightie to Bling!

Good Morning,

The political message is simple, vote for financial prudence, it has and will reward all including future generations. There is one major political party that has at every turn destroyed any financial strengths this county has had, over to labour to cite the social benefits of a huge overdraft! 

Forget all the waffle and look how you balance your own household, the very basics of politics are at stake, and you will take the blame for placing incompetence in charge. So if you don't want to vote, do it, it’s your obligations. This is not because of the wars or suffragettes, but simply it’s important you get off your backside and get down there to make sure the majority views are heard; rather than the agendas.

The implications and closeness of this election has ramifications across the market,, whether public spending, Staffline's bet on A4E and the hope of a labour victory, G4S, Serco, Babcock (although it would be wise to consider the trends occurring in BAB), oh you get the idea...so for myself, due to the uncertainty (and potential idiocy) of voters its wise to a greater level of cash and avoid the risks most of the election risks on the market. 

The oil traders are making hay under the noses of common-sense, with the run to $70/bbl (currently $67.14/bbl Brent & $60.81/bbl WTI) in light of the shale numbers retrenching with production slowing, although modestly at the moment. So in the absence of any conviction to $70/bbl yours truly took the cash now, with greater downside risk, its wiser to wait for better indicators than currently presenting. Albeit a saviour for those higher cost producers, whom are as we drink breakfast tea, utilising this run to shore up their balance sheets or entice speculators for another 100 Billion barrels of...under Gatwick. 

Morrisons (MRW), had a worse reaction to sector trends than envisaged, causing a rush for the door as the price overshot the sellside's expectations on opening! Sadly there was not enough conviction here to go into the results short. The interim management statement is more or less guff, with a focus on improving service, the consumers best decide what they want, a) service and price or b) just price. It's likely to be the former as evidenced by the growth of independent stores, but will take significant time. Morrison's in essence is a primary candidate for PE with a decent rebranding, can they do it?

The bankers must be laughing all the way back to the office, with Petra Diamonds (PDL) $300M Notes at 8.25%. This is another example of the contradictions in the market place, Fortescue Metals Group's recent refinancing of $2.3B at 9.75%pa. PDL would have a better chance of improving shareholder funds by offering to finance diamonds, than the current level attained in operations. Holders can of course hold their bated breath for the recovery of large diamonds that aren't 'smashed' by the current crusher. Better still, with South African woes, it would have perhaps been wise to raise in USD/RUB and ZAR.

The EMC noted Highfield Resources (ASX: HFR) a couple of weeks ago (EMC HFR) and overnight they requested a trading halt. The excitement was short lived when it was realised they want to raise a significant amount of cash! Will ICL become a significant shareholder, or more interestingly, CCCC? Not long to wait! With HFR now having rights to the entire basin, there's unlikely to be any type of ransom situation, with the licenses/land in between Vipasca and Sierra del Perdon projects now being under their control. 

The Paragon Diamonds (PRG) announcement to acquire Mothae Kimberlite Diamond Project in Lesotho from Lucara did not go unnoticed. Lesotho Government have been welcoming of investment (to a degree) but one would factor in certain risks. PRG state the Lesotho Government are in favour of this deal. Perhaps the revenue is a bigger enticement than their previously held remit of one operator one mine ethos in Lesotho. A first for PRG to EMC's knowledge and a few savvy analysts, congrats PRG. 

Even allowing for the royalty arrangement in respect of 5% profit interest, the deal is on the cheap side, Lucara believe their capital is deployed better elsewhere. With Dubai stepping into the void left by the Antwerp Diamond Bank (ADB) they have via International Triangle General Trading (ITGT) also increased the debt facility for PRG. Not without risks, but capitalised at £16m ish, its gotta still be worth a punt and holding!

The Kleenex award goes to a few trades whom have been historically short on African Copper (ACU) this dire model of a listed company is to delist. What will those traders do to pay for Christmas now, save for them being shafted on the spread to close. 

Today's amusement came with the trading update on SCS, having bought into the newly listed company for some quick sentiment profits based on the DFS market valuation, we have the 'trading' update. Apparently it's general election uncertainty and warmer weather that impacted on trading. The latter may be so, but really, the general election? SCS also benefited from a significant amount of advertising pre-IPO, which will have enticed the customers in, with the trend cyclical it was only a matter of time. Over to DFS to confirm they're suffering the same woes (EMC: DFS), what with that general election uncertainty! 

For the FTML readers, you'll be enjoying the carnage at Optimal Payments (OPAY), the Skrill purchase looked overpriced, notwithstanding the fact holders are hedging with significant shorts themselves! The market is appropriately rebalancing post the rights issue from memory at 166 pence. Magnetar will hopefully offset some of their losses at TeleCity (TCY)! 

Atb Fraser