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.

Morning Mumble: ASOS - with market muppetry - Genel (GENL) its looking like a turn around but two swallows don't make a summer & VW - the realities + putting Presidential hopefuls media campaigns to shame.

Good Morning, in the morning as well!

Very brief so kept it to bullets...hopefully. 

• ASOS - (ASC) Final Results were out today and they were ahead of EMC expectations - bought into the sell-off. Consideration is, that although they don't justify PE's of a stellar proportions, its common-sense to consider the positives. 

• ASC have finally realised the need for brand loyalty in the online market space with their roll out of ASOS Rewards loyalty scheme. Its negative on margins (50 bps) but does encourage repeat business. With sales likely to be around 17-20% ahead for the year. Over to ASOS:

Following a successful trial, we will launch our new ASOS Rewards loyalty scheme during the next six months, initially for our UK customers. This rewards programme allows customers to build up points on purchases, which become convertible into vouchers for use on our platforms. In addition to this, customers will unlock a wide variety of other rewards such as birthday discounts, free next day deliveries and exclusive content.  

• Genel Energy - (GENL) gave a trading & operational update that was about the market. Swiftly followed by the Receipt of payment for KRI oil exports from Taq Taq field from the Kurdistan Regional Government (KRG). The "if" factor is the need for regular payments to be maintained and the market has had many a false dawn. The costs are being managed and with the current level of KRG payments at least interest payments and debt service is more than likely. 

• GENL - Consideration should be given to the guidance that is implying that supply was shut in until such time as the KRG put up. Time will tell on the latter, but certainly more positive than at the half yearly. 

• Volkswagen AG (ETR: VOW) recent share price support will be tested as news becomes apparent. Reuters - Edmunds.com and associated piece is telling, now consider the implications of the downside in Europe and potential further pressure in China. 

• VW have been very clever in the main - dealing with the crisis in text book crisis management. Credit where credit is due, they've kept the media and associated press articles focused on the marque VW, without the domino effect crashing through Audi, Seat and Skoda. Although, there may be some perception/overlap it will be limited. 

• Research (EMC's - we fund our own so reference it) - The opportunity based research on peoples’ perceptions of car manufacturers suggests that there is a devaluation in the VW marque - Passat/Jetta/Not Polo/Golf and Gold Estate and Sharan with a lesser degree to the Beetle. The irony being the Touareg, where owners 'didn't tend to worry' (we've avoided using the words, do not care).

• The impact and terminology used was more positive on the 3 other marques in the VW stable namely Audi, Seat and Skoda. Although this may change as lawyers grasp the media to force a settlement rather than have a showdown in the court room. This is a significant event risk/crisis management for VW. 

• For those that know a Bentley owner, whom we shall call Indiana. When asked about his perception of emissions on cars. Don't expect many donations to Save the Planet or Greenpeace in his name over the next few years! With a suggestion that he never gets to drive his car! As if!!

• Costs regarding the ‘fix’ for the VW Emissions fixing/rigging are likely to be higher than the initial consensus - Triple Pundit runs with - As Recalls of Volkswagen Cars Begin, Costs Could Climb to $40B. Those early share price targets of buy sub €130 will no doubt be under review. We maintain our target for VW - €87.63 (Euros) a share. The damage is yet to be done to perception. Over to VW's media campaign that will no doubt put some presidential hopefuls’ budgets to shame! 

• Rurelec – (RUR) The amount of communications regarding Sterling Trust today is truly staggering. We've had the company down as a jam tomorrow stock since the handling of the International Arbitration and then the spin-out of Independent Power Corporation from Rurelec. 

• Sadly for Sterling Trust lessons of diversification are a little too late. The spin-out/off of IPC contradicted the transaction in the first place. In the absence of further developments that may return a little to shareholders, don't hold out much hope. RUR has been a sell since the international arbitration and does not warrant much other rating bar avoid/high risk punts only. Have IPSA announced similar – one simply cannot be bothered to check.  

• Hochschild - (HOC) new shares hit the market today. With so much leverage, why they only raised the limited amount and didn't elect to shore up the balance sheet is anyone's guess. Perhaps there simply wasn't the appetite for a large fundraiser in the silver space currently?

• Some half decent results for gold miners today, more later once we've found a few additional toes to aide things. Petropavlovsk Plc (POG)’s interim management statement and Polymetal International (POLY)’s Q3 results.

• We’re hearing various bits of gossip regarding Glencore’s Zambia mines - namely Mopani – are GLEN conducting a deal to finance the expansion whilst maintain operations? One suspects not, but any rumours to assist their price won't go unappreciated by the IR department! Perhaps one for the broad-sheets? Anyone up for some Mopani?

• Vale SA – (NYSE: VALE) production report – were described as strong. With records being set in production it’s not good news for the FE (Iron Ore) price. More time needed there.

• Glencore - (GLEN) will be pleased that they "sold" their the Falcondo nickel operations and the Sipilou nickel projects. What with Vale’s nickel production up, Vedanta’s Hindustan Zinc Q2 production announcement hasn't assisted Glencore one bit! What’s the read across to Glencore’s affirmative action? VED need a stronger headwind than just Zinc

• Vale’s Q3 - results here.

Atb Fraser

Morning Mumble: China + Gold...AAL's / JSE: AMS hand count of PGM's. Rambler's talking of expansion! + RUR's default.

Good Morning, Forgot to press publish this morning, Good Afternoon,

It’s hard to start this morning due to there being so much to cover and little time. 

Everything is going on in China, on the stock market, in the economy and the slowdown in development (read as reducing investment). How's that for economic analysis?! In essence there is no fiscal policy that will not be considered by China to maintain the economy.  

The long fated transfer of wealth between Government and citizen/comrade has now stalled, including the Chinese people's investment in mainland China generally. With monetary outflows from China increasing both directly and via the Shanghai-Hong Kong Stock Connect, the Government is left having to fill the void/gaping hole. Orders are on the increase from mainland China to the Honk Kong (Southbound), where the mature market is allegedly benefiting from greater disclosure and transparency. 

With China catching a cold, those Asian trading partners (south-south trade) are under pressure. What this means for those recently listed, including Alibaba (NYSE: BABA), is yet to be fully determined. BABA will not be exempt from reduced ordering and trade efficiencies that are put in place (read as reduced wastage).  Also likely to have a knock on for Standard Chartered (STAN), whose capital requirement rumours are being raised again, after today's new management changes. How much does STAN need? Although more recently STAN have developed a conservative approach to lending.

Often when looking at the realistic view of China, people mistake negativity or a lack of positives as being the end of the world, rather than resetting expectations. Some brokers, whom were so bullish when attending Camp AV last year (2014) are now reassessing their position on China. One would be wise to consider the notes from Aviate et al (China once upon a time bull's), and look how it’s turned out in 13 short months in comparison to the bullish predictions. 

The drop in construction both residential and commercial, has serious implications for the Chinese economy, throughout the entire supply chain both materials and labour. Factories’ own inventory levels are rising, not helped by lower gate prices. Steel mills producing above and beyond demand but "committed" to certain higher cost Government obligations or funding gets withdrawn. 

Precious Metals are all under pressure (EMC: Gold the “bears” will have this market for longer), the falls in Asia one suspects are a result of a certain trader cashing in their chips. 

Gold: $1116/oz (had been as low as $1080/oz. as knife catchers entered the market). 

Silver: $14.80/oz (had been as low as $14.55/oz.)

Platinum: $980/oz. (had been as low as $970/oz.)

Palladium: $605/oz (previously touched $600/oz.)

Copper: $2.4650/lb 

China is giving an appearance of confidence, with their stock market measures attempting to entice the public to buy into the story. Having committed near $200b of funds in a month or so to margin/equity, its merely propped up the fall. Whilst holding fire on a further $275B worth of equity rescue, (Bloomberg: China Securities Finance Corp ($483B) funding to imply support.

China's latest vote was to release its gold figures. Not only did this conveniently happen on Friday with near 1,658 metric tons of gold under the security of PBoC (remember that phrase it may be important). We'll ignore why China hasn't released any gold figures for near 5 years, and leave that for the conspiracy theorists that make little money. What is important though is the disclosure for the purpose of the IMF (International Monetary Fund) SDR (Special Drawing Rights) for the Yuan. Expect a revision upwards of Gold holdings in due course from China. 

In entire contradiction, the crash in Gold. Another Fund having a coup on the Shanghai Gold Exchange catching most off guard. Whether the seller had other obligations that prompted the sale, is immaterial to the action of resetting the pricing a la Copper (14th January 2015), in addition to shorting Gold. Selling 160K ounces is not to be sniffed at, especially during such quiet trade and limited volumes. What are the implications for CitiGroup who’s trading in precious metals has near quintupled in 4 short months with around $45-50B exposure.

On to the market, Anglo American Platinum Earnings Reconciliation by Anglo American, is almost laughable. It raises significant questions over how Anglo Plat's recognising its inventory. After, a physical count of in-process metals (in the ordinary course of business) resulted in the Company increasing its estimate of the quantity of inventory by an additional c.130koz of platinum and 75koz of palladium. Source: Anglo American Platinum Interim Report Anglo Platinum (JSE: AMS). AMS already down 4% from opening. 

From Anglo Plats ...continues with the repositioning to create a high quality asset portfolio, with low cost and high margin production, low safety risk and high mechanisation potential. The assets that do not form part of the retained portfolio are part of the disposal program. 

If anyone is minded, could they pleased identify the "high quality assets" to save significant investigation time. At current prices, the read across to all the producers with platinum at $980/oz. isn't looking great, Lonmin must have near 6 months before the desperation of cash comes to the fore, if it hasn't already. 

Rambler Metals and Mining (RMM) Pre-feasibility Study has a number of assumption in it, although better than some! RMM, Average copper price of USD $2.79 per pound, gold price of USD $1,100 per ounce and silver of USD $15.54 per ounce. Long term pricing of USD $2.79 per pound, $1075 per ounce and $15.50 per ounce for copper, gold and silver respectively. 

RMM hopes to fund most of it from bulk mining Footwall Zone (LFZ), which is allegedly self-funding from current operations (Circa $66M). Even so, there's a capital short-fall of near $9M and assessing possible debt fundraising has been initiated. The funding plan does not make economic sense on the 5 year plan. With more risks created by the self-funding rate over 5 years. Debt-financing alone does not stack up, especially in the current environment so will there be a % of equity dilution/warrants or associated kickers to entice the backers. 

Having not covered RMM since EMC: RMM 9th December 2014. With the denial contingent still suggesting things can get better. One has to question how much of the cashflow supports financing at current prices. This is likely to be RMM's last chance, in the absence of a rebound in RMM's produced commodities, there's a requirement for cash for this expansion. With a modest improvement in grades more recently, RMM are likely to be able to "sell the story." Any purchases would only be high risk speculation in the current market.

More news for Rurelec (RUR) today that was missing two little words in the title, "loan default." RUR announce the appointment of directors, but update on the default that has taken place. Expect a roller-coaster of a ride for anyone still holding! 

Atb Fraser

Morning Mumble: Chinese unemployment on the rise, BLT's delayed bad news & Anto & Rio's Mo (no I've not lost it).

Good Morning,

China's unemployment figures are on the rise. It’s an open secret that people are out of work or 'job sharing' until they find something else. With the change in school rules for migrant workers in municipals it’s harder a choice for families. Left with a choice sending children back to the country for education, where often there's little resources or educating privately.

With amusement, both the SHCOMP (currently 3,803.4600) and SZCOMP (2062.8640) are holding steady. The only buyers appear to be those with Government funds or backing. The news is all positive for the likes of media with little mention of anything regarding a "contraction of liquidity" of any form. China have got a rare opportunity to blame the lack of GDP growth on the stockmarket manipulation causing a slowdown, the seeds are already being sown.

We had some significant news out with BHP Billiton's (BLT) write-down after the onshore asset review and today's Rio Tinto's (RIO) Q2 operations update/review. BLT's review will be bite-sized, for the market to ignore the greater woes. The onshore asset review should have been announced on the 25th August (date for diary) with all the "others." However, the market shall carry on obliviously ignorant to what will not be a pretty review. Save of course for a remarkable uptick in commodities.

Rio on the other hand have forgotten to mention to the market about near 14% increase in copper production costs.  Due to molybdenum (Mo) having a serious decline since January of epic proportions any by-product cash cost credits are limited. One would have a thought with Mo being of such a benefit to the bottom line costs of copper via by-product credits, they'd have given Mo a cursory mention. Antofagasta are not absent of these woes, making up near the same Mo by-product benefit to cash costs. Can it be viable to produce MO at the current prices?

Rio also had revisions to guidance for Iron Ore (weather related), Uranium (decline grades) and titanium dioxide slag. With Energy Resources of Australia’s (ASX: ERA) lower mill head grade and recovery impacting on processed ore, it’s not the only problem there with a writedown expected in the interims. Rössing’s grades are recovering from comparative quarter weakness, but being in Namibia there’s no mention of taxation woes at a corporate level.

One could argue it was in Rio’s interests to not “force” the weather, supporting some sensibility in iron ore prices. Things are not going well at Bingham (EMC: Bingham) Over to Rio,

Kennecott Utah Copper

Mined copper production for the first half was significantly lower than the same period of 2014 due to the current focus on de-weighting and de-watering the east wall of Bingham Canyon which is expected to continue in the second half.

Lower mine production, partly mitigated by a drawdown of inventory, resulted in first half refined production being significantly lower than in the same period of 2014. To optimise smelter utilisation Kennecott continues to toll third party concentrate, with 166 thousand tonnes of concentrate received and smelted in the first half. This is excluded from reported production figures.

There’s also no mention of a possible insurance claim in respect of Bingham…Escondida (Chile) is also suffering from water availability and which will be made worse by the decline in grades. Will Rio be forced into using desalination and what are the impacts for Iodine producers? Piping water from the coast could be costly. All dwarfed in-part by the ramp up at Oyu Tolgoi which as always raises the question of when Rio will take out Turquoise Hill Resources (TSX: TRQ).

Rio should have a rerating here, based on cashflow rather than the aspirations of a growing super-mining, now under-review. Limited upside of growth, more so evidence of a cashflow star that the market, if they have to hug one stock may be wise to do so with Rio? Under-review.

We have had Iofina (IOF) offer up another smoke and mirrors piece to the market with a Corporate & Trading Update. Is it beyond sensibility why the shareholders were not updated on the cash position of the company? EMC: Iofina Cashflow absent. Over to Iofina, The Board is delighted to report that the Company was EBITDA positive in H1 2015. The company has debt, whether they’re supportive or not, any hope of the convertible element kicking in is but a mere distant memory.

Likewise, IOF debt holders will want a ‘sweetener’ in the event of any debt renegotiations.  Whether this company is scaling up is immaterial to the cash balance. Ironically, having spoken with Hugo, the technical wizard believes Iofina could see some upward pressure but too early to say, personally I don’t think so.

If one applies a sensible correlation between a different sector, say Iron Ore with comparatives between Atlas Iron (ASX: AGO) (as Iofina) and Rio Tinto (Rio) as (Sociedad Química y Minera/NYSE: SQM), its easy to explain the iodine price woes. With producers having rushed into the space and global demand declining, it’s no wonder Iodine has performed like it has (almost identical to iron Ore).

Iofina, having been a favoured play here, selling £2+, is now a leveraged model on Iodine. In the absence of any improvements in Iodine prices or sales by IOF, expect an identical replica to Atlas. The only caveat being the event risk of SQM et al seeing some longer potential for the IOF tech. Although, considering the peak demand in Japan post Fukushima, the market didn’t get the continued return they had hoped for in pricing.

Ironically, a chap noticed whilst in Japan when iodine prices increased significantly, consumers switched to seaweed. Although this won’t explain the large decline in price on its own, it rather does make one consider the alternative risks, same for televisions.

It would be rude not to cover Rurelec (RUR), having only recently be upgraded from the (EMC) Jam Tomorrow Award , they now gain the full (EMC) "destroyer of any value for shareholders award."  With a good kicking at the AGM. It’s no wonder the short-term loan facility requires clarification. It would appear that Sterling Trust Limited have grown tired of the shambles, and are now likely to want to attempt to recover some of their monies, if at all possible.

There is a question about why Peter Earl resigned, and left with ‘an asset’ that was meant to improve the global footprint of Rurelec but now “spun out” to save costs. The AGM announcement was insulting left until 4:30pm despite it taking place at 10:30am in the day. Perhaps Colin Emson needed to find the password? If you’re still a holder, perhaps it’s time to revisit your investing values?

Anglo American’s (AAL) Q2 Production Report makes for a compelling read of the realities facing the company, with write-downs now expected in the interims. Sadly for Anglo there were insufficient positives to make the proverbial “sandwich” of good news, bad news, and good news.

With AAL now stretching the facts to consider their situation unique to one annus horribilis. If ever there was a cursory reminder of crap. Simply, there is no reason whatsoever why I should change my view from 2011. Despite challenges to my view point over near four years, this company is in need of a complete corporate overhaul.

Investors would be wise to apply a barge pole unless they enjoy a gambling like thrill on AAL. The two positives are marred with bad news, platinum being compared to a previous strike quarter and thermal coal prices on decline (post Japanese contract settlements). Had there been time, AAL’s news is worthy of a biblical length comment on the woes of all operations. Over to the city, to now realise the train-wreck…no doubt totally ignored one cannot turn a blind eye for ever.

Like Rio Tinto, Anglo are suffering the water shortages woes now (in Los Bronces) where water managing is becoming a skill. Overall made worse by the “speed” (stability restrictions) places on Collahuasi avoid vibrations on two processing lines.

Water appears to be the norm for operating in environments where there is an ambundance of copper. To keep it simple, whether Anglo’s production is in line with guidance or not, production declines will not be helpful whilst commodity prices are under pressure. Any one would think Anglo were writing the news for a “bull cycle” of commodity super prices.

On a more positive note, EMED Mining (EMED) finally got their municipal activity licence. With production due end of Q3 2015, EMED should have some form of rerating. One disappointing factor for EMED will be their profit. Since overcoming significant hurdles to develop Proyecto Riotinto, it’s unlikely the current copper price will have an impact on the viability. What may do is any “leverage” that may be considered. Having been a buyer until recently, there’s some decent potential, but do not get too carried away with expectation.

A very interesting meeting with a plant engineer whom knows about Wolf Minerals (WLFE) and the plant they’re using. In order to save a few $$ they elected to go for a different kit which would not only reduce costs but also improve efficiencies.

Normal service perhaps next week! Poor old Petroceltic (PCI), where Worldview there appears to be a repeat of recent events. Are Worldview intent on damage the company to the point it becomes uninvestable then buy it on the cheap? Surely not…

Luckily for Zincox (ZOX) the SP rose sufficiently to lock in a few punters with a placing  that’s allegedly going to improve performance. Previously it was coating the inner shells of the heat exchanger, now its debottlenecking supply and replacing said heat exchangers. What is of concern is the “lack of domestic EAFD (Electric Arc Furnace Dust) that might just be essential to operations!

What ZOX responsibly mentions is the critical need of the EAFD. With a rise in Zinc prices likely with a contraction in supply, how are ZOX going to manage this. Crucial, the competition for EAFD has not “hotted” up yet, but will do towards the end of the year and ZOX already cannot manage supply. So how are they going to cope with increased competition?  

More so, with the woes of the heat exchangers they’re now replacing them. Please note the utilisation of the word “troublesome equipment” within the RNS. With an absence of EAFD, how are ZOX going to convince third party funders of the “future” potential.

Either this company is totally under-priced or the realities of ZOX’s promises are telling a different story. Within the RNS there’s hopes for $40M EBITDA plant with an inference that the mechanics of the RCF process/plant is proven. Strangely similar to other companies able to “demonstrate” a proven technique. With support likely around the 12 pence market until a joint venture in conjunction with bank financing?

The question of the week, how much floating storage do Iran have….

Atb Fraser

Morning Mumble: CIC Gold, Rurelec (RUR) the debacle and questionable business, Juridica (JIL), Mundane Iron Ore (again), TYO, MIO, DCE and Anglo Pacific.

Good Morning

CIC Gold Group Limited whom allegedly has prominent Chinese gold miners and international mine developers as backers intends to list. It will be certainly an interesting story to follow with various entities struggling on AIM or giving dire returns there's hope for CIC, or is there?

The story doesn't start with CIC Gold but with CIC Capital. CIC Capital notoriously went from sub 1 pence to 10 pence on the back of very little and then subsequently suspended/delisted in 2014. Of course, the current holders are 'looking' for growth. 

If one is contacted by VSA or similar regarding the IPO, it would be wise to ask what DD has been completed on this company including whom the “prominent Chinese gold miners and international mine developers are involved." If one has the time, the prospectus is here. It would be wise to look at the number of shares (the issuance of) and why they have been issued to CIC Capital. 

Rurelec's debacle is not over yet. Today there is a wave of announcements, some that shareholders should perhaps consider more positive, one that is not is the "gifting" of IPC to Peter Earl by Rurelec as he departs. I think RUR have rephrased "spinning-out." 

RUR purchased IPC for £16,560,483.87 including the two Siemens Westinghouse 701 DU turbines that were subsequently sold for £1.2M leaving some £15.3M valuation for IPC. How IPC, can "spin out" (changed as I was typing) to "remove in excess of £500,000 worth of overheads out of the Rurelec Group" is questionable. If all the assets and liabilities have been transferred into Rurelec. One assumes they're factoring in Mr Earl's £230K remuneration commitments? 

What is laughable is, IPC was meant to "accelerate Rurelec's organic growth and increase Rurelec's global footprint." IPC & Rurelec share the same offices, on the 17th Floor, Millbank Tower London. Were their separate staff being transferred out, name Peter Earl and associates? In essence the savings are not savings to RUR in the true sense of the word, without clarity on what "savings are being made). We'll ignore the director loans to a subsidiary but these under Related Party Transactions in final results out today. 

Should the "independent directors" not check with the NOMAD whether this transaction (Spin-Out) is fair to shareholders? In fact, having acquired IPC to increase their footprint, the "nominal sum" payment is laughable, based on potential goodwill and positioning in the market. 

IPC, as a company has a brand value (including goodwill) over and above the assets. However, having been a shareholder in RUR previously and sold out after the dire issue of the International Arbitration and subsequent misunderstanding of Third Party Litigation Funding. It would be wise to reconsider any position if the company cannot protect what assets it had left (or has). 

Should you consider Peter Earl a net seller in the stock now? Having been in consideration of the Jam Tomorrow Award, this may prove very unfair. Perhaps RUR are now being upgraded for consideration of the "destroyer of any value for shareholders award." In gifting / spinning out IPC at a nominal sum! The company would be hard pushed to justify the sale (now spin), when in IPC's own website words, http://www.indpow.co.uk/,

"Independent Power Corporation PLC is one of the United Kingdom's leading power developers and power plant operators. Founded in 1995, IPC has developed, owned or operated 7,000 MW of thermal and hydro power generation facilities in North America, Latin America, South Africa, Asia and Europe." [Within Source of website ]. This was subsequently changed to,

IPC has owned, operated or developed over 4,000MW of thermal and hydropower generation facilities in Latin American, North America, South Africa and Europe. (Current)

IPC's brand/business/company even as a shell should be marketed for sale. 

Having taken profits and dividends in both Juridica (JIL) and Burford (BUR) today's portfolio update was negative on the bottom line. Measured in NAV, JIL is valued after today around $150M (ish) without checking. Consequently, the stock correctly repriced the stock 88 pence. 

With some volatility in JIL at the moment, it’s hard to justify any share appreciation based on the NAV. As a result, a disappointing 17% return over near 3 years on this investment, allowing for today's sale with no further holding. Better than most bank returns but disappointing. Time will tell whether its wisdom to hold Burford (BUR), performing better over the 3 years with a better blend of small dividend and share appreciation (50%) ish. 

The iron ore price gave the proverbial kicking to the producers. Sensibly the drop away from the ceiling set by the Chinese (EMC: Mundane Iron Ore Spot Price) is now a reality. With some hedgies banking significant profits. This was a common-sense trade, especially in light of the reduced imports that fell 8% in May to just under 18MT’s for 62% fines but the price has temporarily. 

There’s a lack of speculation in the physical spot prices / supply / immediate delivery including that on the DCE (Dalian Commodity Exchange). Closing positions on Copper and Iron Ore on the basis they are currently linked. Copper, with the dollar's weakness and potential restock has a greater degree of risk in the short, than Iron Ore. Iron's critical level of support circa $60/t (62% fines) and 65% fines now sub $70 and looking for support. Seven days previously at $74/t (6% decline in a week). 

With steel prices softening in China due to lower demand, iron ore is logically following suit. The belated restocking, was a convenient necessity for all concerned push prices up off the lows. The lack of sustained demand will have the speculators looking to any further declines in the ports inventories just keeping its head above 80m/t's. As a result, in line with the dropping iron ore price, the SP in Rio, BLT, Vale and FMG have all followed. 

A question for the majority of Energy Resources of Australia (ASX: ERA), in light of all the news on Ranger 3 Deeps project – further update and Rio's inclination to avoid funding much further. What reason is there to hold the stock further? Denial? 

Save for some Knight in Shining Armour, of Chinese lineage perhaps? Rio and ERA have appraised the feasibility of expansion and simply, in the current outlook, it’s non-viable. This does not bode well for the other producers if an established entity cannot find economic reasoning to extend LOM (Life of Mine) and justify investment. One hopes if they are also Atlas Iron holders (ASX: AGO) they can keep merge this disapproval in a joint email to save time! 

The market is mystifying at times, on the one hand its prices in any risk (proactive) and likewise, it reactively points out the obvious. Today selling the remainder of Anglo Pacific (APF) and closing spread bet positions. It would be easy to think I've lost my marbles after a decent recovery and better outlook. Well simply, if the Coal Settlement Contracts are as announced it doesn't bode well for Kestrel. Rightly as Roger Bade points out, "it's not good news for APF". 

APF are diversified, but one cannot help to wonder if there's a swelling in supply. How this bodes for US exporters/producers is another question or Mitsubishi Corp, whose share price has seen a decent recovery of late, near 25% gains in a year. Admittedly significantly more diversified than APF from Banking, Food, Machinery, Chemicals & the all-important energy. For those trading the related stocks TYO (Tokyo Stock Exchange) one would be wise to consider the implications. 

Finally, Minco (MIO) announce further drilling results. It adds nothing really exceptional at this stage to the value of Bachans, due to depth and narrowness of veins. As tight as 85cms in depth) and as narrow as 50cms in width. Back to that old chestnut of strategic speculation by the Chinese and potential JV/total sale. Buchan's may need a revaluation in due course, after more drilling. 

Atb Fraser

PM Bolt-On: International Arbitration, Stans Energy (TSX: HRE), Rurelec and Oxus.

Good Evening,

Stans Energy (TSX: HRE) secures litigation funding arrangement with Calunius Capital (Calunius) . One hopes its on better terms than Rurelec Plc (RUR) had. Although Stans have the advantage of an award made to the sum of $118M against the Kyrgyz Republic. 

Kyrgyz Republic is attempting to appeal the award to the International Arbitration Court of the Moscow Chamber of Commerce and Industry. Having already had the award set aside, its not an easy road for Stans. 

One wonders what funding arrangement has been made with Calunius, as a lot of the hard work had already been completed, or were they over a barrel. With a market cap of CDN$10m its not a stock without risks, orphans or those wishing for NS&I returns. 

Without a doubt, Stans need cash and have been surviving on paltry placements of circa CDN$500K. Perhaps the market is wise to the comments of Peter Earl Rurelec Chief Executive (bold is an addition) or the unknown date of the appeal. 

"The results released today are massively affected by the write down we have been forced to take against the book value of our Bolivian assets following the disastrous Arbitration Award of the Permanent Court of Arbitration in The Hague on 1st February 2014 and the subsequent pressure placed on us by an avaricious and mean spirited lender whose lack of support forced us to agree with the Government of Bolivia a large discount against the already unsatisfactory PCA Award.

Rurelec may have some "financing" news out in due course, the market is right to price in the risks of a placing. In fact the company is in danger of getting a jam tomorrow award. Rurelec must be thankful of Radix Investments UK support, whom like Stirling may find themselves holding significantly longer than they intended. 

Calunius are also funding Oxus Plc (OXS) claim against Republic of Uzbekistan. OXS's decision was meant to be finalised back in December 2014, however its "slightly delayed." 

Atb Fraser

Rurelec: Alleged settlement & "countdown".

There's been a number of people speculating the "countdown" to the settlement announcement has begun. Its reasonable to say with Bolivia prepping its 'people' via various newspapers that "they have to pay up"...that its not far off as per what was left as a message here: Five companies ask the state $ 1,835 MM for expropriations (Oldish article from 23rd October 2013)

The most comical of which is Evo Moralez's assertions early last month. Yes Moralez actually asserted that a business part owned by the Spanish Agency for Air Navigation (AENA) for the nationalization of its subsidiary in Bolivia, Bolivian Airport Services SA (SABSA), and that instead of paying for nationalising, the owners should instead pay the Bolivia! You can read it here: Evo says that there is nothing to negotiate with Abertis

Ok, its acknowledged that SABSA had received subsidies to develop the airports, but likewise they had taken on the financial risk and developed assets that Moralez is strangely remiss of his acceptance that Bolivia can't do anything major. Its quite clear that Moralez' actions suggest he wrongfully entices companies "with the promise" of protection to then only nationalise them once they've achieved the objectives because Bolivia are incapable of it under his management. I base this on the premise that if Bolivia were capable of developing these assets, including those owned by Rurelec etc...they would not need to 'encourage' investment in their country to later nationalise them. Or am I missing something there....

Bolivia, ironically are only damaging themselves with their conduct, albeit, with the legal 'expertise' being developed its likely Bolivia will now have to pay more and more in terms of 'fair value compensation' than they have previously. If correct in this view, Rurelec's award is likely to be the upper levels of what has been validate/evidenced during the process.

Bolivia will 'no doubt protest' over the level of the award, afterall, it's not because these businesses were so purposeful they were essential to the "nationalisation plan." One wonders why Bolivia has to nationalise anything if a) it's worthless b) never likely to make a profit and c) on the basis of a+b never likely to make a return why nationalise them? Perhaps there's a good case for Bolivia actually 'realising' they should pay fair value rather than this pathetic assertion the assets are worthless.

Lets wait and see, however I don't envisage news in October with the clock ticking, willing to be wrong!

What does not need to be known about International Arbitration Claims

Good Morning *Assuming Ian posts this in the morning. As you've no doubt guessed, this isn't Ian this morning: I've compiled this and emailed it to Ian after some silly questions from idiots emailing me about Rurelec. Silly because they're rather immaterial and treated with some sarcasm...

Question: When will the settlement be paid?

Answer: It doesn't matter, stop worrying about what is really unnecessary as the Market will price the award in and then its time to sell and move on. If the market doesn't price the award in, then continue buying as per previous arrangements, don't get greedy! That's what I'll be doing...but you don't have to! After all it's your money not mine!

Question: What if Bolivia don't pay?

Answer: Not one country has gone against the Arbitration Ruling and not paid. It's a huge big sign around a Country's neck about Bond Prices, confidence to do business/invest and latterly any assets outside the country can be seized. This makes trading very difficult default unlike government bonds.

Question: What about other information we don't know? Such as the amount? 

Answer: Well work on a worst case scenario and price that in per share and if it offers 100% upside or more then it's viable as a risk/reward.

Further commentary includes...but I've waited ages? Can I wait until the end result to buy and what happens if it fails. 

They're all simple...all investments take time unless you're chasing a ponzi type scheme. You may be able to wait until the award is announced (ruling) but the risks of paying are a higher price for having more known variables are not always worth it. Finally, if it fails, the company becomes a shell company and you've pretty much lost what you've put in. Simple due diligence reduces the likelihood of this though...and trading the stock before proceedings are finalised is useful. They're rarely settled by compromise agreement...there's a possibility on CHL though!

I was reading the post as well, its good to see people paying an interest in this type of investment. 

Personally I've been buying and selling RUR over the time frame because it was clearly not in Bolivia's vested interest to settle early. Why would they, it's clear they nationalised the business (more certainties than CHL) it's clear  they have to pay, the only 'risk' is the amount of the award (in my view). So work on the basics and it's really simple...unless of course you want to make it complex by looking for questions and statements that HAVE NO BEARING ON A CASE. For me, I'll explain...I personally believe that RUR is worth around £95M post settlement. On the news I dare say if it spikes I'll take some and then if it goes stupid, I'll sell all. I wont have regrets at making stupid amounts of returns over the 3 years.

Remember, anything you read here is NOT an offer or invitation to buy, it's sad that I/Others have to put the Dumb Dumb statements on, but all the same it's important buyers/sellers take responsibility for their own purchases and sales. Likewise, challenge what is being said, research it, do your own so to speak. Don't forget prices go down more than they go up! Likewise, this is my opinion which is based on my own reading and isn't to be taken as a guarantee.

Atb Fraser

Stocks referred to are LSE: RUR (Rurelec) & LSE: CHL (Churchill Mining)

Rurelec's Filings

Hope everyone had a good weekend! I had a few friends visit in London to christen my new pad! It certainly was christened, today I'm suffering the cobweb effects of Alcohol to excess.

So what's happening in the world of International Arbitration for AIM today: http://www.investegate.co.uk/rurelec-plc--rur-/rns/transcripts-of-the-final-hearing-against-bolivia/201304150700103134C/

Now, I've reliably worked out that the payment should be in full...however what I work out and the reality may be very different. The Carbon Emissions Credits may not stand the test in Court but were worth claiming, because it was a secondary business and will depend on whether Bolivia were claiming them...

Now there's a lot of misconceptions for Rurelec's claim, arising mainly because people don't actually understand the process. When at panel/court, there has not been one case where the assets (unless saleable/moveable such as capital Equipment) have been returned to the Claimant (Rurelec) by the Respondent (Bolivian Government). Now what concerns me is, people are inferring this may happen...perhaps even is more likely. They have a belief that RUR in this case is suing for their assets back...that option expired by the time they got to court, so not it's a straight financial settlement. Well you could argue it expired when Bolivia did what they did...showing a clear illegal act in BIT terms.

I spent sometime going through the board commentary with a friend, some may have read his BB years back before idiots started reading, FJP73/Fraser. The chaps unfortunately known me 31 years this September. Fraser, he now works for a small company that use his derivatives expertise in the mining sector. He may comment from time to time in my name, having been attending and studying International Arbitration claims in detail since before Rurelec and attends most conferences on it...enough of blowing smoke up him! 

What would be interesting for Churchill holders is to review the documentation and issues that RUR have. Remembering that there's a difference in claim between CHL/RUR. Now remember, there's a risk CHL have their license returned at this stage, unlike RUR, whose chances of having their assets returned are 'near to nil' as the faith and confidence in the country has been eroded by the Bolivian Governments actions (please note the Terminology).

Now when looking at the similarities, there's a stark difference that CHL attempted to utilise the local law process to have the assets returned to them. So there's an argument they have a weaker case, however, my view is that it strengthens their claim as they tried to resolve the matter utilising the Native process available which further compounds their claim/the fraud or alleged wrong-doings.

Once the jurisdictional issues have been resolved, then CHL's claim becomes 'safer' there are a few issues at hand or should I say risks. That no investor has been able to review the licenses directly, however I'm sure CHL's legal team have and would have advised no further action if CHL couldn't prove entitlement to licenses etc...

So I'm taking the CHL evidence in good faith, knowing/believing they have excellent legal representation and if it can be shown they have a claim to the licenses then they'll win. It's as simple as that...likewise Indonesia protesting too much I have to take as a sign of...ermmmm...guilt (perhaps?).

When people have had time to review RUR's claim and positives negatives, I'll cover more on it... 

Rurelec & the Overlap

There appears to be significant overlap between Rurelec investors and Churchill.

Assuming Rurelec hit the Twenty Pence Mark or thereabouts I envisage some further exposure for Oxus Plc and Churchill Mining. My reasoning is simple, investors will gain a better understanding of the process and have more faith (read as blind faith for a few idiots on BB's).

For clarity, I have been involved with Third party Litigation Funding directly and in directly for a number of years. I would encourage people to look at What Calunius, Juridica and Burford do and also review their results. I'm biased as I have a shareholding there as well...

I'll have a moan for awhile as well..what is up with Bulletin Boards? There used to be a quality about them, analysis, discussion and a belief in discussing risks. It is appalling to see trollers, rampers/derampers and people that post purely without being risk aware. 

Consider the above, then answer me this question...when has a Company failed in its Arbitration Claim that's 'rights have been impacted by a Government's inefficiency either by Nationalisation, lack of protection of rights or a deliberate failure to enable 'freedom to do business? I'm not going to answer it because when people learn the risks, they'll actually realise how good International Arbitration Claims are for an investor! 

For the limited readers I have, which is nice, I actually want you to consider the above properly...I'd also like you to consider when BB's have lost you money and why they should not be used...have a good evening!