Rurelec but so nearly a result! Its all about the timing...

Further re: Timing of Bolivian Compensation Award

Well it was so so close to the end of January, fair play and nothing up with that. I have elected not to post the massive amounts of comments about Rurelec (all 11 of them) save for 1 which sums most of them up. The reasoning being that they're very similar, and I will say it's brilliant that people are top slicing, taking profit and the like. Except 'Ben' best of success to you on your 100% all in strategy, takes some balls in today's market so you go! Please let me know how you did and when you sell.

I suspect the Company and holders will breathe a sigh of relief, and then Rurelec can get on with Energy Production and the PCA well behind them. Ironically, depending on the award it may make Bolivia more invest-able. Who'd have thought it, alas,  it doesn't come without caveats.

The summary to Rurelec: I believe on the whole Peter Earl and the board have handled the process very well. Yes there's some ups and downs to come but they're fairly obvious even the gamesmanship on Bolivia's part, but at least 'where possible' Rurelec have endeavoured to keep the market updated. In comparison to Oxus, it should be taken as a well done for managing the fund and loans etc...The placings, I haven't agreed with at times, but hey there's no pleasing me all the time. After all, Rurelec had a very valid argument of continuing with business outside of the PCA claim, for which they have done. The contentions I have with the timing of the last placing hasn't been hidden, but then again, I'm not aware of the full facts. The Santiago Listing I suspect isn't far behind either.  

So where too next...tranche buying on other claims? So it looks like Oxus is next, perhaps even Metro Baltic Horizon (MET)? Churchill will have a nice ride assuming jurisdictional validation. All to come...I may need some Beta testers for the new site assuming Patrick finishes it. I shouldn't moan he's not charging me a penny, albeit he did ask for three tips! So I reckon we're equal on that basis...or perhaps he owes me more work!

Atb Fraser

Wolf Minerals: The Finance Question with the rule of Common-Sense.

Wolf Minerals Ltd Quarterly Report 31 January 2014

This is growing into a good company. However, I have sold, not for fear of losing but common-sense and take profit . The rule applies (or should) to all investors but is often lacking and not just in investing. By my estimation, they have to raise a further £55-62m depending on which rules/estimates are used. Its my view it's higher than the companies estimates of £50m in addition to other finance if I was off the fence it would be £56.5M albeit not difficult for a company of this calibre. I suspect the terminology used will be 'due to an over subscribed placing/rights issue.' 

For me, its unusual not hold any equity in Wolf Minerals (the company) and certainly wont until the placing/rights issue is out the way. There will be a material drop in the price either prior or after the placing. Will I be short? Only if the indicators present itself which they don't currently, so I suspect I'll miss it. However, I don't believe there's any material upside that warrants continuing to hold. Perhaps I'll be wrong...but that'll be hindsight and its cost me nothing only missed profit which you should never worry about. 

The company has all the benefits and advantages of a decent company, unlike many I could list and for those that know me, the one I'm attempting to make them change their management ethos of "it'll improve some day and when it does we'll all be laughing" Yes, there's actually a company out there whose strategy is to do absolutely nothing bar award themselves 'shares' and significantly high fees whilst the company barely breaks even at Group Level. Sounds like many doesn't it! They are gradually giving in, with one falling by the wayside already, just 3 more to go and reduce their salary and jobs a good'un. Of course, their view is their salary is consistent with all the other companies. So let me get this right, they have not achieved their targets, issued options, have not achieved financially, pay rises and salaries in excess of 1/2$M a year ($5M collectively), but best of all, they believe they can do absolutely nothing to improve the share price 'until the market turns.' So if anyone is on such a retainer/salary and has that ethos, can you explain how you actually get motivated?! (bar a stonking salary). I personally would be unfulfilled!!

Its my view, and rightly pointed out by the what appears to only be Tom Winnifrith & Co, that companies treat PI's once they've got their monies (i.e. bought shares) as immaterial, with expressions of "if I could buy I would be filling my boots." I don't agree with some of the companies that Tom picks and discusses but that's investing. I dare say he wouldn't agree with some of the stocks I short that are crap but that's the market. What Companies don't realise is, after various promises and failed attempts to ignore the situation that company(ies) are in, they now face shareholders asking serious questions ad being better informed. I 'doff my cap' to Tom, I don't know him, have not met him, but do read some of his articles. A normal chap with a passion, whose ability to withdraw from controversy is nil, I suspect he loves the kill!

So have a good weekend!

Atb Fraser 

A reminder: Rurelec Plc Claimants [Rurelec's] Post Hearing Brief.

I was reading this after napping [a very long day for me], not to reaffirm my investment decision having already had profit and capital returned the rest is cream. I hope others have been prudent not to carry an all in policy unless of course you accept the pros & cons of such a strategy albeit the company is at a transformational point. Contrary to my original views this will also be a long-term holding, with trades where possible.

One of the messages which I won't post due to the explicit element of the language is "how can the PCA [Permanent Court of Arbitration] be allowed to let the decision go to the wire [the polite and short version]. The answer is simple, they do not have to give a decision even tomorrow, as they have the powers to extended the date if they see fit.

Obviously, due to the comments Peter Earl has made this would be disappointing for all holders in terms of expectation, but it is my view that Peter has been sincere in relaying the news from the PCA. Likewise, unlike a lot of companies, most directors have skin in the game around the price it is now. So it's fair to say, they see value above the current share price (the time-frames may agree or disagree with other holders but that's the name of investing).

I won't post immediately upon any award and/or decision as there are other things in life bar Rurelec. So for those wishing to read a one-sided view of the process, claim and case, here is Rurelec's Claimants Post Hearing Brief (31 May 2013) Source: Guaracachi & Rurelec v. Bolivia (Entire List of Documents)

Claimants Post-Hearing Brief (31 May 2013)

Atb Fraser

CMCL (Caledonia Mining): Geopolitical Risks

The new marketing arrangements Caledonia Mining Crp New New Marketing Arrangements for Gold Exports (28^th January 2014) have just given continued momentum to the decline in the SP. Most brokers will play down the item as not warranting the SP declines for the sake of less than 1.4% decrease in the value of the gold, now 98.5% as its more than affordable and also, in part surely can be offset as an expense.

For those with a longer memory, they will recall the events in 2008 (Caledonia Update on Operations 28 Oct 2008) whereby CMCL were not paid for their gold and had to put the Blanket Mine on care and maintenance/suspend mining. 

It’s a Geo-political risk that should be allowed for, but I hold and will continue to do so until things either hit my sell point either way or they’re bought out (the latter unlikely). If news presents itself it could well turn into International Arbitration, although I don’t see that currently, there could be a delay in payment but envisage there being an RNS typed around midday to confirm cleared funds  as it’s a material event and change with history showing there is a risk. With any news of payment I suspect so see the price stabilising…or the opposite without (buying opportunity potentially.)

Atb Fraser

Edit: Link taken from comment to make it work here Fidelity Printers and Refiners, ZB tie-up bears fruit (Zimbabwe Sunday Mail)

Fraser's ultimate short: New World Resources (Edited: Not quite ultimate)

I've left this as a title for Fraser to wake up and explain what the problems are with New World Resources. Feel free to state what you think they are. F's been short for some time now 14months- very insightful. Cheers Ian

Haha thanks for that one Ian! 

Edited: 

New World Resources (LON: NWR) was simple; higher costs, lower prices in essence a deteriorating coal market which they acknowledged in their own announcement dated: 14 January 2013. 'Declining Market etc....' On top of that, they raised EUR 275 million Senior Notes due 2021 just after the 14th January 2013 announcement to refinance notes due 2015 and for 'for fees, expenses and general corporate purposes.' 

My view was they were 'remortgaging' and got a coupon rate of of 7.875%. The overall coal prices were set to decline and costs were set to increase even allowing for "synergies." So they were trying to save monies in a declining market with forecasts of 10-15% deterioration in Coal expected across the board aka 'risk of dividend being cut totally and that meant a 'change in market valuation required.' So how they could have a benefit and justify what was a near £750M market cap with the entire industry and market against them there's only when way these Coalie companies are going in the current climate including in America. Coking Coal perhaps a different story but thermal is certainly over supplied and undervalued/demanded. 

My short was give or take February, so only 11 months, I think you're mistaking the "coverage" and the actual trade Ian. NWR I believe will have no shareholder value soon, if any, the Trading update and review of capital structure clearly shows they have to do some form of financing to cover the debt. This in my view is going to be a heavily discounted placing soon enough!

One certainly to learn from...

Atb Fraser

FX GBPAUD: The Aussie Dollar & Gold

For those that are ML contributors / readers you'll note the Aussie Dollar has hit my target for the short-term of £1:$1.91. I have no indicators to take a further position and closed all trades on the GBP. Mining wise this will impact on the bottom line of most exporters so look for a weakening in the revenues forecasts (RIO). 

The GBPAUD has had some significant run of late, appreciating near 13% in 6 months. I have been trading GBPAUD for a significant amount of time its the only FX I really understand, the others are too big in terms of variables for my small mind.

What it does suggest to me though is the spike is Gold in Asia over night and the relative weakness in America means that Gold may have sufficient ingredients for a directional play for a few months. I have not taken a position as of yet because I'm learning the correlation, but its starting to look more bearish in the short-term, perhaps $1150?

Personally I would be looking to India for a directional play, as currently the import restrictions and smuggling have assisted those short on the precious metal in banking significant gains. For coverage and thought, start here:  Sonia Gandhi seeks easing of gold curbs (Reuters 23 January 2014). Its not likely to have a massive impact but in the short after such news I would expect Gold demand to go up. 

My question for the weekend is, "when will New World Resources hit my short target price of 20 pence." The closest comment may get a few empty bottle of Gin!

Atb Fraser

Victoria Oil & Gas (LSE: VOG) & a small discussion on Rurelec...

Victoria Oil & Gas RSM Settlement and US$16.3m Received

Now, its positive for shareholders that some change in the attitude of all parties concerned is being evidenced/displayed. Why was this not put forward as a resolution by VOG in the first place? Perhaps it was, but it was clear in their RNS that this was absent at the time, so if they had put this as an offer it should have been notified within the RNS as it was material to the Company. 

Its my view there is some contempt being shown for shareholders and who that is is difficult to identify but I am beginning to wonder if it's more than one party. What there is in my view is a need for a change, its clear that the current parties are limited with a fractured relationship and not forgetting their RNS which showed they had some culpability when they released the RNS. 

Now if I had a share price performance similar to this, would I be thinking its time to let someone else move the company forward? I would like to know how much the International Arbitration cost VOG seeing as only a limited amount of monies were/are recoverable due to culpability. 

I shall maintain my holding, not for the benefits of any of the management as I class them as a risk in the company and to my profits, but for the assets which surely cannot be impacted further.

Now what would make me laugh about this RNS from Tower Resources Operational Update and Issue of Equity. Answers...

Finally Rurelec. It was pleasing to see parties take some profit and the price consolidate in the process yesterday. For the message relating to "why the %&%* would I be selling now unless I know something he/she doesn't." My answer is simple and perhaps difficult for those that would struggle to be an amoeba at scrabble. I was derisking a position as I had been acquiring the stock over a significant period of time, I would be stupid not to take/close positions that made me a profit. Did I sell all? No, but irrespective of what happens next I will have made a healthy profit.