Good Evening,
In my absence the market been in denial. The assumptions on
capex is that there will be a reduction in supply. So the market intelligence
focused on the drilling rig count than the supply. Inventories
were up and more than the consensus thought. Perhaps the consensus needs
some educating with their inability to read the obvious. No wonder the myopic
speculation became negative/nervous with Brent and WTI today
and ran for the hills. A few fingers were burnt in there today and wrongful
assumptions about strikes...you have been warned!
Struggling economies are under the cosh with reduced oil
revenues and a weaker currency the infighting is already occurring. It may pay
those bottom feeders to consider Turkey for the annual hols.
With the interest rate being the main enticement to the Turkish Lira (₺),
and the Central Bank under significant pressure the currency(ies) are going to
be volatile.
Record iron ore capacity was announced
coming out of Western Australia, it's a wonder who the casualties are. The
minnows we know but there will be some rights issues on Indian
producers with prices set lower than the international market. Add
into the mix the pressure from Russian operators with the
currency advantage it’s not looking positive. Its been known on the shop-floor
in China, but ignored by the analysts, that Steel Mills are
more willing to adopted the "just in time" approach for purchases.
The price is going to be stressed unless further stimulus is announced as the Chinese become
savvy at stock management; evidenced by the port inventory declines.
Mick Davies's X2 Resources (X2) may
come to Vale's assistance by purchasing some of their Nickel assets
including Sudbury Ontario (population significantly reliant on Vale's
nickel). Vale would like a partner for their Nickel ops, but
what price is realistic at these prices? X2 are now rumoured
to be finding some debt to fund a 'certain' acquisition. Who what when isn't
the question...we know what's available it's a question of timing.
The other day EMC
got "almost" positive on Anglo Pacific (APF), and
today, there's a
proposed acquisition and placing. How this placing got away as they also
announced reduction in dividend by
40% and they forget to mention that Largo Resources (TSX: LGO) (Vanadium
pure play) with Iron ore credits (or lack of) helping to miss all targets,
costs and we'll assume the debt can be refinanced.
Largo's cost issues alone live little room for
error. APF are interested in a 2% Royalty on, with targets
missed. Thanks to Roger Bade for pointing but, once confirmed, one might need
some smelling salts if you continue to hold. As discussed on EMC Largo
Resources and here (Afren
Favourable result & Largo Resources (Maracás).
Atb Fraser
