PM Bolt-On: Non Farm Payrolls & Weaklings - Freeport & Valeant wth some hindsight on IMIC (International Mining & Infrastructure Corporation)

Good Afternoon,

The UK wasn’t the only place with fireworks this with week. What with the Non-Farm Payrolls (NFP 271,000) increasing the probability of a rate rise – now the odds are looking at 85/15 in favour.

The NFP fanfare has forced investors to consider the risks of heavily leveraged companies and those made vulnerable by the liquidity contraction across emerging markets and/or commodities space.

In the longer-term there may be some reward by investing in restructuring plays like Freeport-McMoRan, but not for the faint hearted. The recovery in leveraged companies isn’t clear cut either, so expect some reality/stresses in the short-term.

Commodities producers reacted this week (selling) –

1. China’s focus on innovation and a limited response to an infrastructure stimulus. (Hopes of higher PE - long the SHCOMP on hopes and/or China 300 only on momentum).
2. Standard Chartered’s (STAN) prudence sticking the knife into the commodity sector and a realisation of avoiding a light in a tunnel or two (Qingdao). We hope for STAN’s sake it’s not a train coming towards them - Currently no reason to hold the stock.
3. Fears being realised of a credit bubble/liquidity contracting in emerging markets.
4. German Manufacturing Data (negative for copper) – answers on a post card.

& Friday’s…

5.  Boom busting NFP figure that was a wildcard and above expectations.  

Companies will need to bolster their balances sheets if they operate in a deflationary market, especially those with significant debt and limited operational free cash flow. Remind you of anyone? Not just Anglo, but the market will now belatedly start focusing on rightful candidates. We had the analogy in the morning call that “certain traders are like a bunch of hyenas!!” As if!

The open secret of “debt to revenue service costs” is finally acknowledged as a risk. Not that the writing hasn’t been on the wall for some time. Admittedly, It’s difficult to find a reason to hold US equities with the dollar strengthening. Those goliaths are going to take a haircut to earnings.

With fears of larger scale corporate default and financial bubbles, the market is now factoring in restructurings whether it be fundraising, equity issues, convertible notes or debt for equity a k a dilution for the weak.

Shareholders should be prudent to the possibilities of losing control via the back door or worse, there being limited equity left for shareholders. Freeport-McMoRan (FCX) are not immune to these woes either, but with Icahn on board at least there’s some form of hope signal for the shareholders.

Valeant - without repeating the woes of Valeant (VRX) verbatim (See Citron Research) – it is the pharmaceutical equivalent of VW as it has so many unquantifiable liabilities. With three + warnings out now, it’s likely a case of the die-hards hugging the stock. "Value seekers" will no doubt be sifting the wreckage and be tempted to trade. 

From a psychological model, with such a nuclear fallout and one suspects more to come, is there any reason to hold Valeant? What is the value? What are the risks? With the market perversely needing to be told of the value or limit the slow motion car wreck, what is the likely outcome? With such a wide range of variables, what pricing methodology does one use for Valeant? The price range here up until Thursday was $56-$103 and now, we suspect there’s more potential liabilities, so have narrowed this to $38-$44 a share.

The damage within the pharmacy/dispensary industry cannot be ignored. Pharmacists may now follow the cost conscious route across all prescriptions, not just related to Valeant medications.

In coming to a price, we’ve considered Valeant’s responses and what we assume Pershing Square may be ignoring. Of course Pershing may be selling/have sold, but in the absence of a notification, we’ll assume they’re holding.

For consideration:

1.       Was Philidor using pharmacy codes for pharmacies it had not (yet) acquired e.g. R&O?  

a.     Did they have permission to use them?

b.   What are the implications for Valeant if they are considered to a shadow director/owner of Philidor? Do the rights that Valeant acquired in Philidor mean they have also liabilities?

2.      Its been suggested that dermatology products sold through Philidor were of average profitability -  if we assume that at least some revenues comprised of generics costing $5 or less, but when combined by Valeant and branded it enabled a charge of $400 plus++. If this is correct, then it becomes very difficult to buy into the average profitability claims suggested as the ‘worst case downside.’

3.   It’s been inferred that Philidor filled/dispensed prescriptions even when they were not required / requested. If Valeant’s revenues were reliant on the revenues of 3 units when only one was needed - what are the real implications on Philidor closing/departing company? Repeat prescription business will in essence be torched?  

4.       There’s been vague disclosures as to what other 'specialty pharmacy' networks Valeant has. Will this have further implications?

In making a few assumptions from the above, it’s easy to come to conclusion that the impact on Valeant profits is likely to be double digit. As a reminder, Valeant in October 2015 disclosed they had $1,420M cash and debt of $30,883.3M. What will earnings be and the outlook? If one conducted a simple calculation, deducting net debt from the market capitalisation, what equity would left for shareholders?

In the small caps it would appear there's a sense of déjà vu. Those that remember the views expressed here EMC: International Mining & Infrastructure Corporation (IMIC). To quote yours truly:

International Mining & Infrastructure Corporation plc (IMIC) loan conversion shows the faith in the company, a mere 30% discount to the SP. One hopes you've sense my irony with the mere...the 1 year chart must surely look like the cellar steps! Next stop 10 pence? 

It would be wise to think how the terms are fair and reasonable as Strand Hanson Limited, the Company's Nominated Adviser (NOMAD), consider that the terms of this transaction are fair and reasonable insofar as the shareholders of IMIC are concerned. Its not something I shall be complaining about having rated this as a sell since they acquired Afferro Mining Inc.

IMIC was suspended after the resignation of their NOMAD Strand Hanson in October.  As a positive those holding the Afferro Mining Inc. bonds of yesteryear get a few more shares (whether they’re tradable is another issue), with the conversion notice yesterday.  Is IMIC now extinct? Or can they pull off the unthinkable in the current mining space? Perhaps even find a NOMAD?

So whether it’s goodbye or see you in another form? Who knows…It’s wise to keep an eye on the assets of the micro craps, perhaps not the companies that trade them left and right, but follow the assets.

In other news, the South African and Australian “anti-EMC fan club appears to have gone silent!” Surely it’s not the Zumba Iron Ore share price? Atlas or perhaps Slater & Gordon?

The final thoughts go to Anglo American (AAL) having a rights issue?? The odds are getting higher! BHP Billiton (BLT) tailings damn could be a significant liability...what are the implications and costs? We have varying ranges and estimates as high as $2B excluding losts dividends and as low as $450M, 

Atb Fraser

Morning Mumble: Chinese Auto's (Designs) - reduction in sales tax + housing stimulus + Vedanta (Iron ore), Glencore (Thermal Coal + PGM) and Centamin

Good Morning, 

Near all mining/resource stocks rose until the last hour yesterday where profit-taking took place. In part due to the Chinese machine waking up in what would have been near 12hrs later.  With one day of trading before a weekend, the markets will be looking to some indication of the Chinese outlook. In addition of course to the PR (Glencore) and the overall commodity price actions. The SHCOMP finished up near 3% in thin but positive trading.

With shorting currently limited in China it’s unlikely anyone has been impacted significantly and in fact, their market is likely to have profited. There will be a read across to the higher material costs to Chinese manufacturers and producers. Despite thin volume, iron ore has been slipping and with margin requirements being higher, don’t expect too much of a recovery with supply increasing.

We've discussed the decline in liquidity in China for some time, whether in SOE's (State Owned Enterprises), private sector or Local Government, there’s a very consistent theme. The FT has highlighted what has been known about for some time: China futures market decimated by trading curbs. All the same worth a read, but more so to keep an eye how things pan out. 

News is apparently flowing out of China that new stimulus packages were announced whilst the Golden Week Holidays were in full flow. It wasn’t this week at all, the policy came into effect on the 1st October, just in time for the Golden Week! One wonders when people will read the press releases properly.

In an effort to stop the rot and improve the decline in car sales (See: CAAM Chinese Association of Automobile Manufacturers), they have cut the sales tax on passenger vehicles to 5% (from 10%). The criteria is limited to engines below the 1,600CC and time limited until the end Dec 2016. 

With a degree of humour, VW might have some good news - China are likely to implement additional incentives for cars that don’t meet the emission standards. We obviously avoided calling the scheme scrappage.

For Western Manufacturers importing or operating under a JV there will be some positives. The main beneficiaries are likely to be the Chinese manufacturers with small engines. Feel free to check out the designs see: Great Wall Automobile Company, Guangzhou Automobile Group Co., Ltd (GAC), Zhejiang Geely Holding Group, Changan and SAIC Autos (MG Rover etc...). We are obviously not qualified to comment on the design or quality, perhaps there’s some cultural differences one needs to acknowledge?

Considering the last time (2008/09) such a specific stimulus was implemented, sales peaked near 40%, albeit declined 50% year on year until now being reduced back to normalised single-digit growth.

With consumption being the key focus, a mobile population will be incentivised to spend hard. Whether it be an increased numbers of shopping trips, holidays (driving holidays are on the increase), eating or visiting family, it’s a delightable feast for the economy and the tax revenues!  Assuming of course that the Chinese buy into the enticement / tax cut.

With income growth slowing, deflation and risk of redundancy or job sharing in most sectors, being enticed to take on the liability of a car with a) via credit or b) utilise savings – it’s going to be hard to entice new customers.

Until more recently similar contractions have been seen in the housing sector, where buyers have been unwilling to buy in significant numbers. What with the newly married “living” with parents situation is on the increase again in China.

Property buyers in China know all too well about paying over the odds for assets. Last week’s adjustment to the down payment requirements for a home will aid the property sector. With a reduction to 25% from 30% it’s a notable enticement for some. Although only likely to benefit those whom are well on the road to purchasing a property – albeit purchasing off the Government is still the preferred method with such hefty discounts available.

China now has an emerging tier 1 and 2 divide (North-South Divide), where prices of property in small cities and towns are falling, whilst larger towns are seeing a renewed interest. Aided in part by a reduction in prices, free-goods and price reductions that the tier 1 market has barely had to adopt to motivate sales. (See Top 10 below – if you have to buy)

1. Hong Kong
2. Shanghai
3. Beijing
4. Shenzhen
5. Guangzhou
6. Shenyang
7. Qingdao
8. Nanjing
9. Tianjin- this may however change as investment is focused elsewhere. 
10. Chengdu

We had Vedanta seeking permission to export more iron ore from Goa. Why they’re bothering with prices at $40/t FOB, is anyone’s guess with Roy Hill and Tonkolili (Shandong) firing up. One suspects they have to be at full capacity to make their operations modestly cashflow positive.

Just as Glencore’s had plugged most of the holes, yet more market woes. NH@FT’s article on Australia thermal coal price at 8-year low has been followed by Coal Problems Being Made Worse by Global Slowdown, Glencore Says (BBerg) - not the best timing for Glencore. However, one is minded to think conservatively with regard to thermal coal.

Its best to avoid sticking pins to prices specifically, especially the likes of coal where so many have been burnt before. It’s prudent to test the theory that the prices are perhaps near to the bottom - over to X2 Resources and Rio.

Like many in the commodities space, the marginal producers have been saved by costs that are reflected in dollar terms, with a benefit from a weak local currency for labour and energy/fuel costs reducers. The operators have averted (delayed) the inevitable pressures to shut in production/mothball. As the situation reverses, expect a tightening in supply to benefit pricing.

Glencore’s discounted offering is as a result of declining demand in once upon a time more stable markets that had some degree of clarity in outlook. Japan’s restart of Nuclearreactors  benefited the likes of Tohoku Electric Power, whom have just agreed with Glencore for premium thermal coal contract at $64.60/t.  A near 14% discount to the previous contract has not gone unnoticed.

The issues being experienced in South Korea and Taiwan won’t have helped the bargaining power of the thermal coal producers. Asian countries, with a majority of trade bias towards China are starting to see a tightening of liquidity in part because of reduced trade with China.

As a positive Oil, save for any major uplift in crude supply (Shale operators be warned) that would impact on pricing, its likely to have found some form of a floor. With shale producers having an appetite to hedge their production around current prices, its suggesting production is reaching some form of normality - contrary to the earlier opportunities that were missed.

Glencore appear to not be pushing the news they’ve shut in production at the Eland platinum mine in South Africa, with the loss of 818 jobs.

Over to gold - Centamin Egypt (CEY) Q32015 Preliminary Production Results reminding the market why it’s sensible to factor in lower on grades, production or machinery woes. CEY’s grades weren’t near the reserve average, so suspect costs to be impacted to a small degree.

Given a sensible headwind in grades, CEY are likely to just drag themselves over the 430K bottom line guidance by near 2K ounces, assuming production of near 110K+ ounces in the 4th Quarter. A reminder that production was meant to have annualised at a rate of 450K ounces by the 3rd Quarter if not the 4th. As stated in the Q1 production results. Date for diary, 11th November 2015.

Finally, a positive result for Northern Dynasty Minerals, where a report by Former US Senator & Secretary of Defense William S. Cohen has been released. Suffice to say it doesn’t read well for the conduct of the EPA.   

Atb Fraser

Morning Mumble: Chinese PMI Services & Manufacturing Data (deflation), the western capital ducks fly home.

Good Morning, Oops, Good Afternoon after typing up and forgetting to publish. 

With such a glut of PMI data, the inbox was rammed with everything from the positives of the Czech data to the woes of China and Nikkei India Manufacturing PMI™. 

The Chinese Caixin General Services PMI™ & General Manufacturing PMI™ data pre-empted the sell-off in Rio Tinto (RIO), BLT (BHP Billiton) and Fortescue Metals Group (FMG) in Australia. This was whilst the profit taking on oil occurred (the money for old rope trade of August). Why papers are suggesting traders got torched, when in all probability, the shorts caused the spike en mass closing.

Chinese/Indian PMI data has not supported the Iron Ore (FE62) price, in fact adding greater discounts to inferior products (discount for lower quality iron ore) - watch out Atlas Iron at 3 Aussie cents a share, the graph won’t look too bad! The FE62 price has had some support, thanks in part to a redirection of supplies because of Chinese WW2 celebrations and the Athletic events in Beijing. 

The events impacted/distorted orders provided some market support thanks to the air pollution orders covering August 20- 3rd September? There was also immediate premium applied to the majority of commodities handled at Tianjin after the explosion. Tianjin’s major imports after cars/autos are light trucking and containers, are Ethylene (15% of national supply), 15% of Wheat imports and 30% of the domestic steel exports. Not a minor port, but capacity easily filled elsewhere. 

There appears to be a conflict in the Chinese leadership, one perhaps that could end with a few changes. As one new source of information put it, the Chinese are now witch hunting people even for saying "sell" on Chinese Bulletin Boards. 

We had known for a while about the issues in the Chinese stock market. Likewise, Li's trading accounts being suspended and his two or was it three interviews with "regulatory forces". Now Li now has no working trading account. On the plus side, Li's one of the lucky ones being "permitted/allowed" to withdraw all his monies. 

The actions of the Chinese Government is now one of fear, with arrests across all areas of the stock market. The charges are listed as, i) manipulation ii) profiting from the Chinese Government intervention iii) assisting others to profit iv) spreading rumour (whether false or accurate) v) accepting bribes to provide information of Government intervention. 

We'll just rephrase the i-v, i) Chinese Government purchases, ii) alleged Chinese senior government selling stock amazingly just as the "Government Team" is buying, iii) brokers and "team Government" assisting all iv) Chinese news channels encouraging buying and open threats to those considering selling anything v) as item ii, where "the senior hierarchy" have been almost immune to the stock market movements. 

Risk off today? Why not, we love a market that's incapable of assessing fundamentals and is merely crowd driven. Although the disappointment is coming to those with South Africa exposure. Not only have wage and energy costs not helped matters, but more so the political outlook and 'uncertainty' may impact on operations as redundancies become more significant. 

Anglo American's woes have been made worse thanks to Alrosa. Anyone want to buy a 'once upon a star decent entity known as De Beers?' It would appear not...not only the price reduction, but Alrosa it appears have realised 'forcing ones contractually obliged long-term sight-holders to purchase might be a bad idea!' 

Atb Fraser 

PM Bolt-On: China's new Company for bad stocks.

Good Evening,

As announced yesterday more so informally. We are now understanding the actions with a little bit more information. Today/Yesterday the Chinese have launched a vehicle/bank/company (please delete as you feel appropriate), that will buy stocks to stabilise the market. 

Similar to what the Chinese Government did with bad loans strangling Chinese banks almost 12 years ago, they're now repeating the same tactics with the supermarket. Apparently the bad debts / new bad bank was hailed a success because it only lost half the money it "invested", 

From what we have understood so far, the remit is so loose its creating significant uncertainty on the market. The policy has not been explained fully, perhaps the Chinese Government does not know yet but what most grasped yesterday is only half of it, "unlimited liquidity" (無限的流動性). Whether this "Unlimited Finance Entity" buys companies that are suspended and wraps them up or just the stock of the seller is unknown as of yet. The policy and remit will be announced formerly next week. 

The ramifications, "liquidity" and overall confidence in China by their own people will be felt for a very long time to come. With the knee-jerking to cash under the mattress for quite a few, the property sector may suffer further pain. As a result, loan approvals have plummeted over recent days, and the PBOC are looking at injecting another round of cash into the banks to cover short-to-medium-term financing requirements, with a rather loose set of criteria for approval attached. 

Interesting all the same! 

Atb Fraser

Morning Mumble: SHCOMP/SZCOMP farce. Gold & Silver's weakness despite demand (Same for Commodities) and Amur Minerals (AMC), MONI

Good Morning,

If your house is going to be flooded and some rooms are cut off, you save possessions from the rooms you have access to. The exact same thing is happening on the Chinese markets as a result of further trading halts by companies. Traders or blind speculators are saving what they can, whilst the behemoth type stability funds buy large stocks directly or via ETF. 

FT China steps up efforts to halt stock market rout, and wider market are now reported what was widely known on the trading floor and here. The PBOC (People's Bank of China) funds are being utilised by the China Securities Finance Co. (CSF) (CSFP was previously used here but to keep in line with wider commentary the "P" has been dropped) to buy stocks direct in the market, as well as provide margin liquidity to brokerages. The total sum of the parts is approaching $140B, this should be called another form of QE.

On the one hand you have oil dropping, but perversely PetroChina is breaking ranks and staging a bull-run of legendary proportions. Tacking on near 25% price appreciation as the "stability" band aid funds buy less risky investments. So as a trader, you'd sell anything that isn't being bought and buy what the Government/Funds are buying, or run for the hills? 

With promises of improved margin and the like, the rule of 5% short is near non-existent. Li cannot get a short on for love nor money, with technical problems and various other 'reasons'. The Government is attempting to stop any form of selling, from suspension to undertakings from large brokerages (24 now) not to sell. 

Well some are adhering to the no-sales-agreement, but limited time to explain what is happening on “opening", for which followers should check. Simply, China collectively buys stocks the herd are running to the door with, the likes of Yeast Angel and then post lunch the price tanks as the buyers disappear but it’s not 8% down, only say 4%. That's if the entire market isn't in a trading halt by the end of the week. 

There's a number of brokers that have serious liquidity problems. Some of those were "told off" for excessively lending and rolling over positions only 7 months ago. The gossip is they've blown up (financially a la CHF) because clients are unable to liquidate positions that may have been in profit, because they're suspended and are unable to cover serious losses. Until the brokerages have been able to access emergency margin provisions put in place by the CSF, 'traders' accounts' will remain suspended. Another win for the policy makers, limiting sales!

Yesterday, with safe havens been sort in the west in light of China and the EU boil that needs lancing, Greece. Silver was surprisingly weak, the obvious shall occur for those leveraged silver producers we love to kick on weakness (HOC/FRES). The same for gold, with a modest bounce well below what was expected. 

It looks like American Futures traders have such large positions (short) that any headwind of buying is wiped out. The decimation caused by the over-speculation a few years back, has left the gold market unbalanced. Some traders committed such levels of $ in 2012/13 that the thought of speculating long has left the market void. 

The last time the mint ran out of Silver in November 2014, the price spiked near 20% over three months, the same happened yesterday. The difference being the entire absence of Chinese speculators in commodities, the “bears” will have this market for longer. The Chinese cashed in significant positions this week, no doubt as their margin was squeezed in the equity positions, liquidating positions in Nickel, Silver, Iron Ore, Tin and pretty much all commodities. 

The prime example being Nickel, where the Chinese are happy to accept near physical spot prices, with limited futures trading the price fell through the $5/lb support like a brick. Same for Iron Ore, price setting iron ore outside of the market at $45/t well below the market $49/t. With the usual suspects, Rio Tinto (RIO), BHP Billiton (BLT) and Fortescue Metals Group (FMG) all taking a kicking. 

FMG is entirely absent of any support for obvious reasons, being the higher cost producer of the majors. At AU$1.67 a share the $2 support is but mere history, with $1 a share likely, but wisdom dictates to take profits. One hopes those Atlas Iron holders don't hug this stock through the pain, although riskier for the bears with the possibility of event risk.

For those with a memory on this Wednesday morning, Rio is only 240 pence off the 12 month target of 2200 pence, with most Companies tapering back their assumptions / targets to circa 2800-3000 it may just be still too much. It was Deutsche Bank at 4200 pence at the time that raised a few eyebrows a year ago. That case of wine will be thoroughly enjoy from a good sport whom accepts differing opinions are positive for the market. 

The above a complete validation for conviction short Amur Minerals (AMC). The company is still over-valued on all levels. Admittedly depreciating quicker than anticipated but far from complaining. The project is uneconomic and after yesterdays' fall, and the company is "perhaps" worth cash.  

This nicely brings us on to Monitise (MONI) whom are the unfortunate beneficiary of another selling shareholder. MONI inform us that they have been notified by Visa Europe...that it will reduce its shareholding over time while continuing to work with the Company throughout the duration of its current commercial agreement. Those holders in the stock will be used to a declining SP, so perhaps an opportunity to average down further and then hug the stock? Better still embrace the “2016 profit forecast!” Cash is king, and MONI burn it like no tomorrow and whether its profitable or not in 2016, the positive cashflow may not be! 

Some bizarre events on Aga Rangemaster (AGA) today...more later perhaps. With gossip of the deal being off...surely the company would have updated!?!

Atb Fraser

Morning Mumble: Schtump by SHCOMP & SZCOMP! Copper, Iron ore and market woes + Iron ore & Nickel.

Good Morning,

Having had a late night/early morning, its at times bewildering to see the latest actions on the Chinese markets. Not only are insurance companies wading into the market to "assist" with stability but companies have woken up to requesting trading halts (Reuters). It’s now approaching near 1/5th of the 2800 on the Shanghai and Shenzhen Stock Exchanges are now suspended. 

How the reduction in trading costs will assist with the support of the Markets. It was not restrictive before nor the cause of the volatility. Anyone would have thought the cause for the fall was the prohibitive costs of trading. 

China has also restricted the size of purchases of CSI 500 index futures to 1,200 lots for rise and fall. In a bizarre turn of events, the Central Huijin Investment Company (CHIC) (financing arm of the Chinese government) has started purchasing ETF's at an undisclosed rate nor with any guidance of for how long or what funds etc. Likewise the funding restrictions in on commodities is not helping Copper et al, on a pivotal $2.50/lb (circa). 

China Securities Finance Co. (CSFP) is now cashed up, as per EMC: PBOC providing funds to CSFP. So with State Owned Enterprises (SEO) listed on their markets, the Chinese are merely buying them. Limiting the transfer of wealth from Government to Comrade/Citizen. Disorderly all the way. 

From this morning (EMC link) (in full in italics)

In looking for a long position, it's likely any such long trade on trade on the SHCOMP and SZCOMP would be foolish on Chinese markets (without a good set of indicators)

With the Chinese government attempting a soft landing in most areas from property, employment and now the stockmarket, it's pertinent to consider a new dawn approaching for its overheated margin fuelled bull market, that's now having a contraction.

In 3 months (September) the HK-Shenzhen trading goes live. This may provide a brief element of support, but the theme is set, irrespective of whether the Chinese government can halt the selling in the short-term.

The Chinese government should look at the Hang Seng Index before any further intervention. Although the wider populous will not like the results, on comparative weighting the SHCOMP and SZCOMP look positively overcooked.

China needs a stockmarket, but with so many investors already torched, at what point does the bubble pop!? It doesn't bode well for the long term if primary brokers, acting in concert, agree not to sell stocks, more so create a fund to buy them. Although the terms of such purchases are unknown currently, one suspects they are not buying the crap!

Cyan Holdings (CYAN) give a trading update that's so full of jam, anything now above cash value is looking like jam. A perennial failure to deliver and they appear to have found some intelligent folk to stump up £4.6M gross. Its now well-funded to seek to secure more orders and increase revenues. Promise + Placing has so far not delivered the = revenue.

The placing at 0.2 pence may provide support in the short-term but as cash burn occurs so will the SP in the absence of an order. The placees appear totally unaware of the previous promises and lack of delivery. Having had 3,279,766,136 shares (2014) and 2,797,766,136 share (2013), the trend isn’t looking good with 6,780,873,628 mid-way through 2015. Some dilution...

With very limited company news, save for the obvious commodities debacle with iron ore hitting $52.30-53.15/t Atlas's short lived recovery may me look like a historic glimmer of hope (dead cat bounce) with funding. Although, all parties should be congratulated for working so tirelessly to at least attempt a recovery, the crucial funding phase is due...soon (well maybe). 

With AU$58M committed so far, will the backers take a leap of faith! Rather them than I! Or at least rather them with someone else's money! They need a further AU$122M minimum, and their job has just got very hard indeed with the iron ore price being trashed a further 20%.

With limited support for iron ore, including an absence of speculation, one has to ask, can iron ore hit $33-37/t? Having thought long and hard about this, margin/speculation down, demand down, over-supply, reducing steel mill capacity, its simply not sounding rosy. The road may be merrier for nickel pig iron as Chinese inventories deplete and a "normal" market environment starts to appear. 

With Nickel floundering around $5.1175-$5.3080/lb there's limited prospects for producers. In the absence of a recovery in price, the market will force a recovery by shelving expansion plans. Thus, a conviction short on Amur Minerals (AMC) is maintained (although still reducing with wisdom (taking profits)! The nickel market is admittedly fickle with lumpy trades throwing the price, its wise to be cautiously bullish to $6.15/lbs

How will the liquidity and financing crisis that is developing impact on Central Rand's $150M (up to) sale. 

Atb Fraser

Morning Mumble: Is Greece's agenda paying off? SHCOMP etc...Copper (FQM), Iron ore, Sierra Rutile (SRX), CMCL &...Margin Margin Margin!

Good Morning,

So the vote about "terms" that were allegedly withdrawn has taken place and the outcome is now being consolidated by those denying the gravity of the situation Greece 'feels' it’s in.

Since Tsipras's election and formation of a coalition of sorts, Greece has been on a train with one track and no other routes or exits for its destiny. Not only will this have implications for Greece for the longer-term (35+ years), but will raise doubt over Europe's ability to keep its members in line (the status quo).

China is not assisting matters, with the press realising (belatedly) that the Chinese Government [was] is providing liquidity to the CFD/Spread bet companies offering margin. EMC:Margin and Securisation (03rd July 2015).

Over the weekend, the FT ran with Chinainjects liquidity in attempt to reassure markets. The CSRC (China Securities Regulatory Commission) has come out and stated what the market was aware of. The PBOC is now providing finance to the China Securities Finance Corp (CSFP) to maintain the stability of the market. Is it a case of one cannot be seen to lose on the markets, where 300+ funds have been created since February, with the majority betting long.

These actions and a blind belief of stock performance have created a squeeze of immense proportions The CSRC is tasked with attempting to stabilise something they were warning about in December 2014. 

Those fund managers "speaking positively" [99.9%] are being given the financial muscle to create stability. The PBOC, via 3 financial houses, has been in the market for huge chunks of equity, in specific entities across all sectors (34 stocks in total). One assumes giving greater liquidity in the market or slowing the fall.

The Chinese Government think "stability" is now the main staple of the day. With such a large percentage margin trading, near double the reported figure in the FT (17%). The margins/leverage on Shanghai Stock Exchange Composite Index (SHCOMP) and Shenzhen Stock Exchange Composite Index (SZCOMP) and SouthChina Morning Post (SCMP), is actually near 30% of the entire market if one includes the grey market. With the grey being the biggest risk to any stability, due to the leverage multiples that have been offered compared to the CSRC regulated houses.

In December 2014 the CSRC carried out "out on-site inspection" of the majority of securities firms including margin trading and short selling, pledge-based repo and securities trading with repurchase agreement. Not only did they have concerns about the rolling of positions but the amount of leverage that was being offered.

The basis of the investigation was to head off any financial boom and bust type squeezes. It did just that with commodities speculation being reduced massively, with most across the board losing any form of support. Time will tell, but it’s wise not to bet against Goliath's determined to avoid any inference of failure.

Quite where the train of IPO's and delisting of Chinese entities from Global Exchanges goes now is a question that will need answering. The Chinese market is reliant of the Emperor's new clothes to bet long. Without the onslaught of IPO's to maintain silly valuations, people will quickly start to close their positions or avoid betting on the crap.

The crap will have other companies reversed into it, to enable a perceived quick route to a Chinese listing where the regulator doesn't like sellers! See Focus Media's attempts...Reuters (June 2015). This is not the only one either! SOE (State Owned Enterprises) are going to have a rough time of it shifting of the PRC (Peoples' Republic of China's) balance sheet and into the market.

All China’s main brokerages have agreed not to sell shares, perversely so the market can recover to 4500, currently 3,775.912. There's a long if ever there was one! Additionally they have had a whip round and put near $20b into a fund to assist the “Government” with stabilisation. Please note, the Chinese Government / PBOC is likely to be spending near $100B on a similar basis and has also been active in the market! 

Moving on to ASX, FTSE and AIM, with Australia waking up on a Monday to a shock of a horror. Lo and behold commodities dropped and so did the stock. Iron Ore producers were pleasingly punished, (they ignored the Chinese warnings from EMC:warnings from Xinchuang Li  and now the price-setters are making hay whilst the sun shines. It’s not the best market with demand down and the price setters’ appetite for any premium being unplayable. One wonders if there's two steel mills margined up to the hilt speculating not only on Copper but SHCOMP & SZCOMP. 

With one major shareholder in the “China’s Shanghai Chaos fund” needing a little collateral, the fund closed its entire position on Friday/Monday.  Not necessarily the best time after the article by the FT on copper, China’slow rates sound death knell for copper carry trade by Henry Sanderson. A very good piece, which covers the woes of the industry. The read across to other commodities is also likely. 

How does this impact on First Quantum Minerals (FQM), where their production is not only in breach of the ignored covenants but also raises serious questions of the viability of the project being a "bet on the appreciation of copper." (EMC:FQM Gloat & EMC:FQM Moving the goal posts). This is just after Canaccord Genuity places a buy note out with 20% ish upside.

How all these commodity crashes and the like have propped up China's economy is another question. With factory gate prices, inflation and growth all having an impact, is it still wise to pin the tail to circa 4.5% realistic growth when stripping out wastage? 

Caledonia Mining (CMCL) give a Q22015 production update  that is in line. With the company actively managing production grades and looking to maintain the longevity of Blank Mine it’s a positive update. With the revised investment plan looking to benefit production from 2016, the company is spending its cash wisely.

Production up, although comparatively speaking production costs are creeping up again! From $959/oz. on an all in sustaining cost (AISC) bases to $969/oz. AISC eroding 1% of the 4.7% increase in production from the previous quarter. Production is still down 7.4% on the LFL comparative quarter in 2014.

What is not commented on is the grades impacting on the AISC that have spiked near 7% on the comparative quarter from $903/oz. to today's $969/oz. Overall a positive but those costs will have to be kept in check. One assumes with the sinking of no 6 Winze this has had an impact on operational costs as well?

With limited time, Sierra Rutile's (SRX) share price recovery is justified on the back of today's Q22015 production update. Having previously found little hope for rutile prices, the company appear to be managing the company pro-actively.

SRX's cash costs have been managed very well. Costs reducing from $799/t in H1 2013, $609/t in H1 2014 to today’s $527/t., mostly on the back of an increase in Rutile production and they reiterate they’re on track to meet their rutile production guidance of 120,000 - 130,000 tonnes.

All this whilst planned shut-down of the Lanti Dredge Mine for maintenance and commencement of construction of the Gangama Dry Mine being on schedule and budget! With some cherry topping, completion of the Sembehun Dry Mine scoping study. It highlights long-term dry mining project with strong economics. One will have to wait and see. Perhaps some green shoots at long last, at about the money and a recent broker appointment, its wise not to rush in.

Atb Fraser

Morning Mumble: ASX (Miners) Iron Ore, China (uh oh) Pandora's Box has been opened and CAML + more time needed for GLEN/Gold

Good Morning,

It’s been a long day already with limited sleep due to the antic on the ASX and Iron Ore. Those on the morning ring round appeared positioned well on Iron Ore and on the ASX (Namely Fortescue Metals Group). The market (sell side) is making hay whilst the sun shines. Iron Ore has limited support with risks being put on increasing production and declining demand (echoes of old). So with that, all the iron ore stocks softened up. 

Rio's risk is losing support as Vale's deals with China put pressure on their revenue, same for BLT. Rio and BLT's risks were known, with Vale securing all the funding for S11D and the ability to market at anything between $18.5/t and $21.25 we may be hearing a tempering of expansion plans for the "big boys." 

It was an absolute pleasure to get an acknowledgement of the work here from a certain analyst. It’s pleasing when those disagreeing and criticising come round to acknowledge just a fraction of what goes on behind the scenes. It shall be framed and pinned to the wall, a welcome sign the market is acknowledging not only the amateurs but a more conservative expectation of events and performance. Thank you sincerely.

With Vale being just off it’s more recent lows and the lowest to my knowledge for near 10 years, its going to get some revisions. As a higher cost producer, Vale's decline has been warranted, with a management of costs that questions some projects. Its time to consider there being greater upside than down. S11D is due online later next year, and with that one expects some buying into the potential recovery of the company. With that it’s the first time in near 3 years there has not been a short position(s) on Vale.

China has been playing with the margin requirements and leverage for "betting" on the indices (Shanghai Composite Index Stock & Shenzhen Stock Exchange Composite Index (SZCOMP)). Conversely tinkering with the very limits they put in place to protect excess speculation. 

Chinese “Regulator” (China Securities Regulatory Commission (CSRC)), has now proposed an increase in margined trading, yes contra to previously policies. The Chinese are knee-jerk in an attempt to maintain a disorderly orderly market propped up my speculation. Bailing out a raft of speculators that are in the crapper with ZERO, if not negative gains, for near 14 months.

As was covered here (and only here (EMC)) the issue is the margin (Pandora’s Box) itself that now appears to have been opened by CSRC and the Government. Not the market manipulation that has been alleged by the Chinese Government, encouraging pro-speculation upon growth, the time is now etc…etc…Likewise, the legalising of Pension funds to buy equities in addition to Government agencies now entering the market.

The Chinese government, via related entities and with the assistance of CSRC, was (EMC view) actively buying into near 35 stocks just before the bell, prompting a recovery and in some a rally.

If ever there was manipulation, the Chinese should look in their own back yard. IPO’s encouraged to be so stupidly priced, every man and his dog has a slice of the action. As Li put it, its “easy” to have 10+ trading accounts now and more if you go to the “unregulated” market, where leverage is so extreme people are at risk of losing everything or more.

With the PBOC (Peoples’ Bank of China) having lowered the reserved rate ratios of the banks, the CSRC have followed suit, lowering the ratio so speculators can leverage more against the same amount. Worse, contrary to the previous assertions by the CSRC of enforcing a more sensible approach of restricting the rolling of positions. The CSRC is now allowing the very brokers they gave a proverbial slap to, to do what they did previously. Roll them over, in some cases, state entities are providing liquidity and securitisation to enable this.

To spread the risk further, which is perverse, the CSRC is proposing every man and his dog arm themselves with a margined trading account. Having previously been restricted to those with “cash” (there’s a way round this) of circa $75-105K, it’s now open to everyone.

The CSRC knee-jerking one wouldn’t expect much more needed to resolve this bear market. However SHCOMP and SZCOMP have decided to cut all their fees. Promoting speculation on the crap as well. We can but breathe a sigh of relief it’s not just on AIM crap rises but now SHCOMP/SZCOMP where Co’s with limited potential, little hope and worse massive liabilities are stupidly valued. If one doesn't fall in line and "just buy", we'll investigate market manipulation, oops too late! (BBC Link).

On the AIM, Central Asia Metals (CAML) gave an up on Kounrad Production, post the leak of organic inventory or as they are now calling it a mechanical incident. Here we expected and still maintain a target of 11,700/t for the year (EMC) rather than the 12K/t guidance today. For those thinking this is being a little hard, its still above the 11.1K achieved in 2014. The market has acknowledged this.

No time to cover Glencore in Iran or Graphite, but the latter we shall return to both, in addition to Gold. As today is full of compliments, it’s a pleasure to hear from those whom managed to save a few quid in CIC Gold Grp (CICG)! Not to be confused with Conygar Inv (CIC), whom are an entirely different company with assets and cash!!!! Christmas for Zoopla (ZPLA) and AO World, more needed.

Atb Fraser

Morning Mumble: SHCOMP, A buffet of commodity woes (Short32) and the implications for Alumina Ltd, Rio's Coal, Hargreaves Services (HSP) and SXX the gamble.

Good Morning,

One may require a nice ice-tea or G&T in certain circumstances. 

Trading on the SHCOMP (Shanghai Stock Exchange Composite Index) was volatile, a plunge from opening of near 5% following by gains of some 10% from the low. Closing near the high for the day at 4,277.223. Margins and leverage appear to be the issue, with the drop being covered post the closing of positions. Has the Chinese Government saved the day? 

Remaining short on Amur Minerals (AMC) but also banking considerable profits, this company is over-priced for the stage it’s at, the cash it has, and the economic potential (or lack of) for the asset . Those following the wider story will note how logistics will become a nightmare and funding is of a scale, that even Sirius Minerals (SXX) with decent support and decent geopolitical headwinds, will still have to be very persuasive about.

AMC PEA (Preliminary Economic Assessment) / PFS (Pre-Feasibility Study) suggested the viability isn't for this time, especially as Nickel has limited to no support and volatile. Maybe in years to come, utilising a telescope and some hope for "guidance." The SRK guidance / consensus of future prices was based on a different climate around 8 years ago. The super-cycle may shift such a degree it becomes economic sooner than envisaged, but the odds are currently against that. 

Nickel is currently trading $5.2231-$5.2345/lb and has been as low as $5.11-14/lb overnight. Those aware of the position of Nickel will not be surprised by the moves over the past week. Concerns regarding the limited growth in the very sectors that are the highest users of Nickel. Watch the $5:08/lb.

For those, including some analysts that have a wish to improve their understanding of the sector (present company included), consider the Nickel Institute (Materials and uses), for a brief helicopter view of the commodity. Often giving a better understanding of the market than covering it with "linked to steel demand." Not the greatest month either for South 32 whose woes despite being Short32 are increasing as commodities take a further hit. 

South 32's (S32/Short32) 'portfolio' of assets produce alumina with the Chinese prices still falling and the Australian prices attempting to keep up, aluminium (sub key $0.80/lb at 0.76/lb), coal (enough said), manganese (anti-dumping investigation and sub critical $2 at $1.93/kg, nickel $5.23/lb), silver ($15.7/Oz.), lead (fairly consistent but trading at a crucial support level of 0.80/lb and zinc (consistent trend currently $0.92/lb). Life isn't too great for South32, although its one to play in any whiffs of recovery. 

The market is not ignorant to the Alumina downgrades across the sector, with producers "almost" scaling back production but never getting round to it. The poker face is in-danger of forcing the wheels off the higher leveraged players. The favoured pure play short is Alumina Ltd that mirrors the market woes. Playing the OTC (OTCMKTS: AWCMY) and ASX: AWC. In the absence of a recovery in both the ex-works price for alumina and such a swelling of inventory in the pacific, ASX: AWC will struggle with share support. 

With Mick Davis buying (possibly) Rio's coal assets (FT), the Yorkshire Post highlights the industry woes where the Hatfield Colliery is closing. This was expected, but the timing has been brought forward by a year or so. The government is unlikely to offer support despite it being tabled in the commons.

Mick's timing is likely to be very well orchestrated. Having sat on his hands and refused to pay anywhere near the expectations of the industry, could RIO's capex needs force their hands with their thermal coal operations. Alternatively, Mick could buy S32 once it's been giving a thorough kicking by the market for being "unfortunately" aligned to the downward cycle of commodities.  

Perhaps time to review Hargreaves Services (HSP), having closed again recently, with Net Assets Circa £150M and net debt around £20M. The company is now priced towards the top end of any valuation, but more than likely nearing the bottom than of this massive drop. With the sentiment in the coal sector and the decision by major investors/funds to avoid any exposure, the stocks have been punished. 

Yesterday was the last opportunity to dump the warrants in Sirius Minerals (SXX) ahead of the committee meeting today. With the stock suspended today awaiting the announcement it's D-Day. With the no person wishing to appear the guilty party, from a psychological perspective on is betting on a deferral to the Secretary of State. 

Having taken profit the outcome is immaterial, the speculators have scope for considerable gains but not without risks. 3 pence circa on refusal. 5 pence on deferral, 38 pence on approval (guesstimates). With an 85% probability of approval/deferral, it shall be interesting! 

The eyes are on Gold at the moment for a place of safety. With dwindling demand and reducing supply in the current climate, it’s that favourite sport of kick the higher cost producers. Tungsten's brief recovery has ended with a damp squid at $217/MTU.

No time to fully cover Obtala Resources' (OBT) final results, with the over-expectation becoming a disappointing reality with this stock, expect further selling after a period of hope. Returns and cashflow are key and in the absence of guidance of earnings, revenues any speculation is limited to hope. Perhaps one for those brave folk that can convince themselves the returns on assets of circa £100M are favourable. Quite how investors are meant to buy a stock with little guidance for an agricultural business also in timber? 

Atb Fraser

Morning Mumble: China's (absent) panacea (Off-on-one), Fortescue Metals (FMG) sub AU$2 where next, Central Asian Metals (CAML), Gulf Keystone's disappointment.

Good Morning, 

We had little surprise that China would cut interest rates, now at 4.85% and effect from yesterday. Its China's attempt for secondary stimulus in the housing market and the various benefits of attempting to improve aggregate demand (AD). Although the economic stimuli to date appears to have merely slowed the fall. 

The stock market "readjustment" is now a full-swim aided by pure bear market. The cut in interest rates unlikely to prop the market up, as the bull trend came to a dramatic end. Quite how the Chinese expected to shore up the Shanghai Stock Exchange Composite Index (SHCOMP) and Shenzhen Stock Exchange Composite Index (SZCOMP - the tech related index a k a the Chinese Silicon Valley) is mystifying. 

The SHCOMP has fallen just over 20% at 4,123.484 and the SZCOMP did 22% over the fortnight at 2,404.719, with margin being the most common-phrase around China for those trades. Without any bounce, expect further forced selling on SHCOMP and SZCOMP. 

EMC: China Australia Mirror Trades has a number of similarities including the massive increases on stocks as outlined. What is of concern is the interest rate to GDP growth. With the EMC being far from an economist. It’s prudent to consider if interest rates are 4.85% then should there be a cut in expectations for the GDP of China? Currently expected to be 7%, with a basic trend implying a slowing of growth in China and factory productivity and gate prices far from picking up. 

The Chinese are simply becoming risk averse, and any temptation to buy assets despite the aggregate costs all reducing. Property prices (Sales Prices of Residential Buildings in 70 Medium and Large-sized Cities in May 2015 Chinese Government Statistics) both commercial and residential, continue to fall or simply not sell at all. The measure of the 70 Cities, although is warped slightly, shows falls of between 6.9% and 0.9% on property sold compared to the previous period. What is not measured, are the incentives to progress the sale, which are also eating into developers margins. 

Not only is the stimulus meant to aid the commercial entities, we have the Chinese Local Government near doubling the size of debt swap program. It doesn't mean much, but considering how leveraged and hard up local government (LG) is, any green shoots of cheaper borrowing will be welcome. Where there's a hidden "nearly unemployed" figure that's growing in LG's and SOE (State owned enterprises). 

With the PRC (People's Republic of China) searching for a panacea for a slowing economy that has so far been absent. The PRC have attempted to cover all the corners of the economy, but without any improvement in China's economic climate, expect more trimming of borrowing costs and direct QE, if the latest round has little to no impact. 

As a reminder, the PRC has attempted to improve financial liquidity by injecting cash into the banks. This financial injection also had specific provisions to target development (little impact) also known as pledged supplementary lending (PSL). The PRC has reduced borrowing costs consistently since 2012 (falling asset prices) but also cut banks’ reserve rate ratios (RRR) in an attempt to give greater scope for lending (limited impact). Likewise, the loosening of home ownership and mortgage criteria has not had little if any effect. 

Its ironic, that whilst the Chinese are tweaking their RRR and interest rates, the converse is happening with LG bonds. Where just recently there’s been a confetti like approach, as LG's have issued near the entire amount of 2014 Debt just in the past 7 weeks (11th May-26th June 15), and the market is betting those costs are going to rise.

With the PRC and PBOC (People's Bank of China) now being forced into buying LG bonds to maintain a sense of stability with the wider market objectives it's not going to be pretty. Expected further news of PSL’s in due course, where the PBOC will no doubt have to focus on LG bonds with a targeted rate of circa 3.10% to maintain stability. 

LG's have circa 23 Trillion Yuan of to refinance and in the current market conditions, its going to be a corporate parent styled transaction (PSL). If the PBOC do not get involved in LG bonds, there's a risk of debt costs spiralling and stalling any growth planned or intended by the LG's themselves. It would be prudent to watch the Chinese bond market for a spike later next week if the same trend continues, no doubt after a brief fall. 

For any recovery, one would be wise to look to the National Golden Week (黄金周 (国庆节) (02nd October 2015) to indicate the recovery in the property sector. Typically the peak season for residential property. Will it happen? 

This weekend is all about Grexit, As stated at the time the newly formed Greek government back in January had an agenda. Now with capital controls in place even in the short-term it’s not looking pretty. The referendum, although I though the offer had been withdrawn, is going ahead whether there is a purpose to it or not. The view being that Greece needs to get through their peak tourist season with a Euro. Although the odds of this happening are slowly shrinking. 

The lack of compromise could have wider implications for the wider group of the EU, namely Italy, Spain and Portugal. Where the austerity and inferences of "who is calling the shots at the EU" creating a negative sentiment, that if Greece exits, expect others to consider it. The breaking of even one in the EU ranks (Greece) will have dire consequences, whether risked or just perceived for the entire EU block. 

With a secondary currency more likely than ever, what next for Greece. Perhaps pain up front is the preferred model? Over to the wider Greek citizens to decide their own sentence. So the Market will ebb and flow based on (mis)information and events over the next week. The resultant impact is already being seen in commodities, with most losing key levels of support. 

Amur Minerals (AMC) gives an update on Kun-Manie. One is a little confused by the optimised design as there's a number of assumptions which contradict the current viability. Kun-Manie will no doubt be viable 'at some point in the future' but it’s certainly not soon. With limited time to cover it full, it's wise to look at the assumed costs. 

AMC have not adjusted the SRK Pre-Feasibility Study (PFS) assumed price from 2007 for the price of Nickel. There's a lot happened since then and the Nickel sector has changed considerably. Not only is AMC up their results and the update, but one must assume that investors have considered the fact the project is uneconomic. 

Nickel is currently $5.45/lb, well below the $5.60/lb support considerably away from the assumed pricing of US$7.50 per pound (US$16,534 per tonne) and US$9.50 per pound (US$20,940 per tonne), Internal Rates of Return (IRR)(post-tax) of 21% and 32% respectively, or a minus figure at current rates! There is no reason to change the view on this stock! The company need buckets of cash to develop this asset, and in the current market, who would be a lender? 

Lonmin's managed sale by Glencore should be given an award. How they managed to achieve the price they did is staggering! The company, holders specifically are waking up to the realities of not only doing business in South Africa but of assets that are borderline uneconomic in the current climate.

The PGM prices failed to recover globally despite LMI being on reduced production. So there's unlikely to be any change with them going full guns. With a growing unsavoury contingent burning workers buses and cars, its not looking rosy for LMI! 

Central Asia Metals's (CAML) Kounrad production update isn't good news. 

During normal production activity a problem occurred in the solvent extraction (SX) section which resulted in a significant quantity of the organic inventory being lost to the dumps within a very short time frame. After inspection, it was identified that one of nine weir plates in the recently commissioned SX mixer settler had fallen out of position, resulting in the ability of the organic inventory to escape from the circuit via the raffinate and onto the dumps. The reasons for the failure of the weir plate are currently being investigated by site management.

On Saturday the problem was rectified and the plant was started again but at a much lower flow rate. This will continue for several more days until the site team can stabilise the plant and determine the full extent of the loss of organic inventory, any impact on the pipeline infrastructure and the duration of time that the plant will need to operate at reduced production capacity before the organic inventories can be replenished.

If one is currently investigating the failure, surely the rectification of the problem raises the question of the risk of it happening again. Hmmm...Would it be wise to consider the director sales again? With impaired production and reduced capacity, mining is never simple. Forecasted production will not be 13K/pa this year, one suspects it’s likely to be 11,700 with a finger in the air. 

The market was expecting a lot more from the Gulf Keystone (GKP) update, where cash is not where it needs to be. The production and marketing update is positive, but likely to be insufficient in cashflow terms. Essential for a producer with limited cash of US$68.7m with intentions to fund increased output to 100Kbopd. 

One hopes GKP will get their payments (both present and historic), although they state they're in discussions with the Kurdistan Regional Government's (KRG) Ministry of Natural Resources (MNR). Perhaps instead of discussing, they could just obtain payment from the MNR? 

In the absence of payments coming soon, expect GKP's assets to be sold for limited upside. A producer that's cashflow is limited by other entities, that appear uncontrollable? Also, as a final thought, is the third party oil transaction a related one to previous management? Just a thought? 

The bears finally got their patience rewarded in HSS Hire with a trading update that is not positive at all. The company was only IPO'd 9 February 2015. Christmas cards all round for another IPO that raises questions over the valuations. Hat-tip to JPMorgan for flogging prudently. 

With corrections across the indices over the weekend, led by woes in China, the FTSE and DJI all took a battering. Reminds all round to be aware of weekend volatility on positions. 

Petroceltic (PCI) contemplate a bond issue. One supposes it wise to state that, although it does exude confidence in the bond market, or are the terms just accepted as being dire. One to watch...this could have issues if such a bond issuance fails and the banks come a knocking for $50M+. Does it also suggest a deal is being done on the Ain Tsila development? Surely it would have been sensible to grab all the monies at once, especially for Ain Tsila? Unless of course PCI are dipping their toe in the water!  

Finally, Fortescue Metals Group (FMG) breached its AU$2 a share market closing at AU$1.93. The bears are out with their trumpets for all to hear with predicts as risky as $20-30/t. The Chinese clearly gave out their indications with a cautionary warnings from Xinchuang Li (EMC) and EMC Mundane Iron Ore Again.

Atb Fraser