Morning Mumble: Tribal (TRB) the tone continues...China, Lonmin (LMI) & Amur's Christmas Present.

Good Morning, 

Machine gun like this morning...

Tribal Group (TRB) - EMC coverage from October. The suspicions we had two months ago have proven accurate and they’ve certainly thrown the kitchen sink in…To quote:

One has a suspicion that the Chief Executive search hasn't gone as seamlessly as thought. What is the debt position of the company and more so....see bold (additions from EMC) that should be thought provoking. There are some positives, we didn't need to highlight the entire announcement. That's Tribal's third strike on the bases of profits/performance updates and as such the caveat of caution applies, expect a kitchen sink approach upon appointment. 

Its Rights Issue and Move to AIM, Tribal have now made the statement that so many before them have ignored. Standard Chartered (STAN) and Lonmin (LMI) both casualties of the same approach, waving a flag for the Rights Issue? The finances are dire…With that in mind and a whiff of smoke and fire, its time for the market to acknowledge the facts and stick the knife in. So expect averaging down, running or avoiding…

The Chinese retail sales and industrial output figures were a surprise, with the shift to consumption growing in pace, there’s time over Christmas to consider the implications for the wider markets. What the implications are for the non-performing loans, negative equity and the overall indebtedness of the Chinese commodities sector and associated industries. China’s Premier and Executives know full well the problems brewing in the mining provinces and the discontent that is brewing.

With Christmas upon us, the rally is likely to be muted as the realities of trading updates and profit warnings increase the anxiety on the visibility in earnings. Albeit, it is the week of celebration and joy, with interest rates being increased in the US on the 16th December. With that China has linked their currency to a broader basket (FT) …but are the rate hikes in the US priced in? The rate cuts and stimulus so far in China appears to be helping the economy, expect more from China post the US interest rate hike.

2016 will present a very different mix of opportunities in the markets, both in the commodities space and retail. With the FTSE hitting the 6K target for near Christmas it’s time for a reality check. Oil and Base Metals will pretty much determine the global markets over the coming weeks…and going into 2016. M&A should now be considered...essential. 

Lonmin (LMI) thank their shareholders… the shareholders are unlikely to be releasing a similar RNS to the management? With the confirmation from the Public Investment Corporation of South Africa (PIC) being stuffed with a 29.99% holding. With so many changes in the PGM space the industry still needs to shut in capacity. LMI’s efforts will assist but we estimate the sector is over supplied by near 650K ounces per annum. With the Russian Ruble weakness it’s not likely to reduce anytime soon.

With the season of goodwill upon us, we wish Crede Capital Group seasonal tidings. It would appear Crede are also in a festive mood, as AmurMinerals announced today.

Atb Fraser

Morning Mumble: LMI (Lonmin), PGM's via GFMS, Serabi Gold, Tribal Group + Otto and Capital Drilling!

Good Morning,

The share price of Lonmin (LMI) is rather telling that Glencore (GLEN) shareholders do/did not value or rate LMI. We shall keep this simple, in the absence of an improving outlook, reduced costs and CAPEX and OPEX clarity LMI is on a path of dilution (rights issue). With GLEN now ex-dividend as of yesterday, LMI is being punished, opps the correct term is "managed sales."

Perhaps the value of LMI for some funds will be ignored and held until an improvement or corporate action involving the Republic of South Africa (RSA) Government. The thought for the day goes to those analysts thinking the furnaces have "exceptional or one off costs", that shouldn't be factored into longer-term workings. One assumes they're new to the chrome issues within the PGM industry?!?!?!

LMI will not be assisted by GFMS annual survey is out on the poor man's Reuters Eikon that platinum has the potential to test $1K/oz. It’s not beyond the realms of possibility, with LMI needing to "dump" rather than manage the sale of near 200K with a growing differential between supply and demand. 

With the improvements and an expanding market in recycling  of catalysts, limited growth and even with a shortfall in supply PGM's failed to respond. One could be minded to think the speculators are locked in to Jo'burg ETF's at a loss so are unwilling to apply further capital, same for the Chinese and hedgies focusing on bottlenecking.  SO GFMS put the range to $1K/oz. to $1290/oz. 

Someone popped a BRR media discussion on Serabi Gold (SRB) into my box this morning on the back of the Unaudited Financial Results for the First Quarter 2015. SRB's suggestion there's the potential for M&A in the sector are of concern. SRB are another company that should focus on their current assets, get their start-up at Palito running efficiently and prove up their resources, rather than spinning a plate they can ill-afford to diversify on.

There is little margin on the balance sheet for M&A, save for the issue of confetti. Currently the Brazilian Real (BRL) is favouring their cost base in reporting terms, and with the downgrades in banks, the issues in the economy is unlikely to change. The USD/BRL of 1:3 should perhaps be considered the key support/potential floor. 

With the last placing just over a year ago, the FX losses kitchen sinked and ramp up progressing well, SRB is now looking more positive than the past 4 years. A producer (at a profit) and potential to return monies to shareholders over the longer-term, SRB should not be ignored. Likewise their liabilities, if there was a hiccup in their plans or a significant movement in BRL terms could hurt them. 

Tribal Group (TRB) gave an update into the AGM. With timelines going out further, one would be wise not to ascribe too much value in light of a second warning about the timing of and Keith Evan's departing, the warning signs were there! Having missed the previous year’s targets, the terminology is far from positive, but with a new 'man soon to be at the wheel' there's some hope. 

It was interesting to hear some excitement in the Oz about SC55 operated by Otto Energy. Tiddler watch, Red Emperor (RMP) Resources have a 15% working interest (WI) on a capped cost basis USD5.625m. If costs exceed RMP cap they have the right to reduce their WI!

RMP, a small cap with near £5M in cash (and most of it spoken for, if not all), there's no room for failure. As Ian put it a binary bet on the outcome of drilling in Q3. SC55 was originally farmed out to BHP, time will tell whether they were prudent to have walked away. Widows and orphans need not apply! 

For those with a memory of RMP, they used to be a shareholder in Highfield Resources (ASX: HFR) whom recently raised AU$101M. RMP sold all their stock at circa 80 cents a share (only 4 months or so ago). With little sign of the ASX: HFR ending its bull run at the time, RMP's timing was should be considered poor, or should it be worded as desperate for cash? 

Had Aureus Mining (AUE) been able to release a sensible RNS about their Q1 progress and Management Discussion and Analysis (MD&A), there would have been time to speed through it rather than the snakes and ladders approach to RNS’ing! You can read it here. Their IR best shape up, or investors (including small funds simply won't bother!), first pour expect end of the month! 

No time for the gold speculation in Asia/NYSE (also arbitrage), with investors hoovering up physical ETF's, nor WTI/ struggling to maintain it's $60/bbl support and the Brent GAP expanding again. The analyst who reads the papers two days ago after best have a whip round to speed up coverage.

Thought for the weekend, is the worst over for Capital Drilling (CAPD), compared to those leveraged operators! Good piece in LEX PGM Plunge with Alan Livsey and Richard Stovin-Bradford. Missing some very important indicators but all the same thought provoking. 

Atb Fraser