Morning Mumble: PureCicle (PURE) the potential turnaround (yeah right) & commodities (a strong dollar is causing margin issues)

Morning, having not slept again due to the lurgy please excuse my coherency this morning. Being awake for near 3 days takes it toll, although very good to catch up with paperwork instead of trading. As an act of Sympathy, I got sent a pot noodle to get me better I feel so valued! Anyway, enough of manflu...

PureCircle have surprised the market with their final results. The stock is very illiquid and easy to trade, but has the company turned a corner. Their's a total absence of commentary on the Vitamin Water contract it appears to have lost (Circa 4th August) as the manufacturer reverted back to sugar to maintain the customers. Ignoring the salient point that in my view PURE should have updated the market on this, albeit depending on revenues the NOMAD may believe it was not a essential. 

The company is on a PE (near 50 fold) mirroring Appliance Online (AO.) & Just Eat proportions. With Tate & Lyle getting into the Stevia market as well this could create some competitiveness. For myself the net debt repayments don't add up when comparing Net Debt for 2013 to 2014. Revenues are up and profit is a paltry $2.3 and stock (inventory) of $86M for a £1 billion company there's a lot priced in. The company simply aren't doing it for me, with "hopes of higher revenues this year and next" (see Higher inventory volumes have been sustained again in anticipation of higher sustained future sales volume growth. (in Inventories). The simple fact is they don't appear to be selling it in sufficient numbers to warrant the valuation. At this price you'd expect everything to be going rosy, alas until things are priced sensible there's no reason to hold.

Kingfisher (KGF), interim results came as no surprise for France contrary to the rude informing I did not know what I was talking about re: France sales. So for that person whom wished to email me with his views without acknowledging reality. Here's the out-going Chief Exec Sir Ian Cheshire words:

"This was a difficult first half with demand in our largest and most significant market, France, remaining particularly weak with a sharp market downturn experienced in our second quarter. We did though deliver flat profits in France, a resilient performance despite the difficult backdrop. However, conditions in the UK were more favourable with better weather and encouraging signs in the smaller tradesman market. We were able to capitalise on the better conditions with Screwfix performing particularly well growing sales by 23%. B&Q UK & Ireland also delivered their best H1 sales growth in over a decade as the new team start to gain traction with its re-energising initiatives and started to make progress with its plan to better position the business for the future."

After the Q2 update which enabled every man and his dog to open a PLUS500 a/c and short. Of course, PLUS500 have a unique platform etc...and costs are significantly lower and evidently only keep customers around 16-18 months but this isn't churn (scuse the sarcasm). Anyway, back to KGF, its more than likely with France's figures are still falling (Castorama France -0.6% LFL; Brico Dépôt France -4.3% LFL) it doesn't bode well for their largest market but overall group performance was a credit to cost control, management and profit. With the Share purchase programme back in force and cash up there's going to be support to the stock. For the long-termers, its likely the price is very competitive so with that in mind, from my death bed, I've opened a long. Shocking I know...

We shall move swiftly on from the obvious for New World Resources...quite why anyone was holding long is beyond me!

Now here's a surprise folks, Orogen Gold PLC announce a Placing raising £1.125m - further drilling - Mutsk, Now after the last placing, and this can someone give me reason to hold the stock. This company's share price speaks for itself, and the closer to zero the more chance there is for a bounce. I've been following ORE for some time (short) and have no reason to change this, albeit I am closing as there's nothing left for me. The last placing in October 2013 came as no surprise...here's my twitter feed I only allow myself to read, (its a good thought banker for me):

Just look at the RNS flow up to the last placing and then this placing, coincidence. As such, any good news now has a risk associated with it, best of success to the long holders. 

Premier Oil (PMO) have their Solan Facilities installed with the subsea oil storage tank, jacket and topsides all in place. This, plus Catcher, is key to cashflows in the short term and expect some positives in the price and certainly now deserves a fresh look.

With the dollar surging ahead, base metals have had to give, with an obvious trade due to the strength of the dollar. With secondary supplies of copper swelling (repossession) its likely the price will come under pressure with a potential $2.85/lb but certainly $3.00. All the PGM's being kicked save for Gold and Silver which saw some knife catching overnight in Asia. Its more and more looking like the bottom is near for gold by the trades, but will to be proven wrong. 

As a result of the downfall in metals prices (contrary to the Chinese Growth story), its likely those ingredients used for steel production are likely to come under pressure. It would be wise to watch the producers/prices of coking coal, limestone, dolomite manganese, aluminium and nickel. 

Atb Fraser (typing with the grim-reaper at his side). 

Afternoon Catch up Cont..: Trading Halt for Stans Energy Corp. (TSX: HRE)

IIROC Trade Halt - Stans Energy Corp.

09/09/2014 | 09:10am US/Eastern

Vancouver, British Columbia--(Newsfile Corp. - September 9, 2014) - The following issues have been halted by IIROC:

Company: Stans Energy Corp.

TSX-V Symbol: HRE

Reason: At the Request of the Company Pending News

Halt Time (ET) 09:04

IIROC can make a decision to impose a temporary suspension of trading in a security of a publicly listed company, usually in anticipation of a material news announcement by the company. Trading halts are issued based on the principle that all investors should have the same timely access to important company information. IIROC is the national self-regulatory organization which oversees all investment dealers and trading activity on debt and equity marketplaces in Canada.

For further information: IIROC Inquiries 1-877-442-4322 (Option 3) - Please note that IIROC is not able to provide any additional information regarding a specific trading halt. Information is limited to general enquiries only.

© Newsfilecorp 2014

Could they have found some cash!?! 

Afternoon Death Bed recap: BLUR Group

For those following on from Thursday, 22 May 2014 Morning Mumble: (PM Edition) For those following Blur Group (BLUR) and Friday, 23 May 2014 Morning Mumble (Very brief): In light of the "recommended" offer for MOG Mediterranean Oil & Gas plc by Rockhopper Exploration plc. & Blur Group (I was right). 

Today's interims may just be the true turnaround of Blur's company rot, Unaudited Interim Results. To quote: "Blur Group completed its $21m fundraise (net proceeds after costs) in June which funds the Company through to profitability and enables the continued acceleration of new customer acquisition, technology development and regional expansion into Asia. The better than planned 1H 2014 EBITDA of $(3.995)m reflects the management's tight focus on achieving profitability."

So it raised $21m burnt $6 and is left with $24.4M excluding liabilities which ironically is almost identical to the "net cash generated from operations of (5,586,050). The brackets aren't a typo, that's a negative. Quite why anyone would have held this stock long is beyond me. Apparently J O Hambro Capital Management Limited disagrees upping their holdings. What is apparent is there is some scale to the revenues, albeit the EBITDA isn't exactly something to brag about. Nil or negative cashflow from operations doesn't exactly tick a box either.

What is interesting is the growth and with this in mind the ideology of Blur Group might just become enticing to a major whom has the cash and scalability to make the presence felt. For this reason I'm reviewing Blur for a possible long. The stocks off its July lows of a tad under 60 pence those holding less than 2 months will have done well. Where next for BLUR....if they can get to cashflow positive (and profit) within their targets it'll be a win, if not expect a further placing. currently its a higher risk long, but not for any widows or orphans.

Atb Fraser

Edited for some typo's

Morning Mumble: ManFlu (Death Bed) & Pedra Diamonds & the fall of silver?

Morning, it would appear I've come down with a dreaded lurgy, perhaps its the shock of doing some work! So today it's the odd meeting via cam and recuperation. Its either a lurgy or detoxing is bad for you or worse still I've been infected by a child! As Ian delightfully put it, perhaps I had my food spiked to stop me shorting. I will avoid the graphics...so I have sent my sick note to Ian and Hugo on the basis they can pick up the slack.

Petra Diamonds (PDL) have come up a blinder with a 232 Carat Diamond. With results due on 18th Sept 2014 (brought forward) it could not be better timed for PDL, albeit one will be hoping for more clarification on the capex increases announced and the sale of the 122.52 Carat Cullinan Blue Diamond with the sale process closing on Friday (12th). Admittedly the CAPEX inscrease should improve recoveries. One expects net debt to increase marginally, to around $135M net. with sufficient headroom in agreed borrowings. I'm betting on around £15m for the Blue Diamond as a sales figures, which would assist with cashflow / give sufficient headroom for the changes in capex spending. 

PDL shares have not recovered since the placement of the Awal Bank where the market has not been assisted by the cost overruns and potential 13.2 million shares are only locked in until the end of October. Will there be another sale, I'm told this is unlikely, but unlikely and definitely not are two different things.

Why anyone would want to hold Coal (knife catching) or Hargreaves Services (HSP) is beyond me, but perhaps I'm missing something. Yes profit up which is surprising but the long term trend has not changed, albeit today's results will offer some support to the company longer term. They're significantly better than I expected, so whilst able to muster the energy, I'm closing my short on the HSP (closed 693.4). With the potential return of capital to shareholders, analysts will see this as a positive and turn somewhat bullish in the Preliminary results for the year ended 31 May 2014 its clear the debt is reducing and with the Disposal and Strategy Update offering some hope to shareholders. With all those involved in April 2013 Placing likely to still be holding they're down give or take 10% currently. 

Whilst writing about Fresnillo (FRES)/Hochschild (HOC) this dropped in my inbox from Roger Bade, "Fresnillo (FRES)/Hochschild (HOC) – SELL It is not clear why Hochschild is holding up better than Fresnillo against a falling silver price; it should be the other way round as Hochschild is more heavily leveraged, having higher costs." I have to concur, but more importantly with HOC so heavily leveraged if the key support of $18.98/oz there's some serious problems for HOC. With an all-in sustaining costs of $17.5/oz its not looking good, more so with debt around $260m by my estimates, there's $350m of 7.875% of Senior Notes to be paid for on top of the sustaining costs! Circa. $27.5M in interest alone (adding around a dollar+ an ounce to costs (fag packet). In the current market its hard to justify a price anywhere above 125 pence.

Before the bookkeepers get all upset, I'm aware HOC acquired International Minerals Corporation in 2013 for $271 million and had CAPEX commitments for Inmaculada of $134 million. However this all needs paying for! Those involved in the placing last year (October ish) would be wise to take their 155+ and disappear if Silver loses its vital support. One hopes HOC are hedged to some degree. The market looked to be awaiting clarity on the $18.98/oz silver support with $18.81 curcial. The bottom feeders will be out in due course...wakey wakey HSBC!

I was trying to keep this a Quindell (QPP) free zone, but QPP inform us of the Court judgement won against Gotham City Research. Its interesting there was no defence from Gotham, as such any information they put in the public domain will have been used to assessed the validity of claims and weighed against those of QPP. Due to no-contest I suspect there will be some venting from the longs, shorts and perhaps even those without a position that like to grandstand. Is Non-Contest a win?

Why would Gotham not dispute the claim having had such conviction for their assessment and assertions? Was it down to not being able to afford a defence? Not recognising the authority of the court? If as Gotham assert it was a clear cut case, a lawyer would not have been required to show the facts. The saga will no doubt carry on for sometime...What I do have concern with is those not being accountable and appear to ignore the legal process. Remember, Gotham will be hard pushed to justify an appeal based on "no response and no defence" despite being aware of the matter. Roll on the next twist in the saga, or perhaps further legal actions as the rumour is.

Back to the sick bed!

Atb Fraser

Edit: please see Morning Mumble: Shorts, Savannah Petroleum & all that glitters is not just gold! Commentary on Petra Diamonds (PDL).

Afternoon Ramble: Berkeley Grp Hlds (BKG)

For those following FTML, you'll note the absolute nature of a short last week on the 1st Sept 2014 with their Interim Results. To the surprise (of at least me) Nick Simpkin has left the Board of Berkeley with immediate effect. The issue for myself was the wording of trading that had "reverted to normal transaction levels." To me that said Berkeley Grp Hlds (BKG) was over cooked on the market! See chart for validation...

Atb Fraser (off to the canal)

Morning Mumble (its cheery honest): What to do with those Kefi shares? Anglo looking to sell individual 'assets'.

It came as no surprise that Nyota Minerals (NYO) resolutions were approved (RNS). I still ask the question, even as a holder of a paltry amount why this company is continuing. Return everything to shareholders, and shut the shop is the best way forward. There was a day, some 3+ years ago I had high hopes for NYO. Then things didn't go as they planned so I shorted the stock for obvious reasons. 

The entire sector pretty much was a sure bet on a short. Patagonia Gold et al all got a good kicking as the gold bug turned into a bad case that the clinic couldn't give a dose of to cure! NYO had more woes than most, just look at the spend and then subsequent departures and sale to Kefi. KEFI got a bargain to say the least, albeit that was because they were capable of reworking the feasibility of the Tulu Kapi. The question is, what do I do with the Kefi shares, donate them somewhere, offer them as a prize? hold till they reach £10 a share!?! I don't rate the company irrespective of assets, and unless there's decent news I suspect the market will punish the SP further, I think it was last 1.5 pence . 

With one gold company long in my portfolio, Amara Mining (AMA). Its got everything one would want for now and the bets are on for Randgold (RRS) (not to be confused by Range Resources (RRL) Mr W whom purchased the wrong stock). Today's Director purchase news, although small, is a positive for the holders in AMA, One will await the initial Feasibility Study for the Yaoure Gold Project in Q1 2015. There's a low risk of a placing before the feasibility news as they're fully funded through to Q2 by my estimates. 

So Anglo America (ALL) are going it piecemeal (FT Article Ruling out Corporate Break Up) to cure 70% of their portfolio that are either under performing or should be shut (my view). Could it be that AAL's assets are so dire a wholesale approach to the assets up for sale is considered a lot more risky than BHP Billiton's (BLT). It will takes some time to sell individual assets but that facts are blindingly obvious as who would invest in South Africa after the last mining strike.

Having held Ironveld (IRON) (no long having sold all the way to 20 pence), still hold Sylvania Platinum (SLP) and looking to exit at the first opportunity and have been short pretty much everything South Africa including SLP. I have limited involvement in South Africa via import and exports, but very well risk managed. The Country is on the avoid list for the foreseeable future. Lesotho, being the exception for some higher risk exposure to diamonds in Lesotho and Botswana. 

ECR Minerals plc Convertible Loan Facility with conversion at 92.5% of the average daily volume weighted average price (VWAP) during the 10 trading days preceding the conversion date, it makes one wonder why anyone would buy shares in the company let alone a director (News today); we'll ignore the fact it's £1,150 trade!  The only asset I believe ECR have are the tax losses which would be useful to an buyer! 

With Platinum Group Metals + Gold and Silver being supported at the detriment of the US Jobs data. Has the current bottom for the metals been found? It would appear the market is starting to bet on it! 

Now to yet more casualties in the iron ore industry with Australia's small caps suffering due to the major's ramping up. Iron ore price fall starts to hurt smaller miners will be a theme for a lot of marginal producers, one wonders how LOND and AMI's current prices are fairing in the current market (Badly) and doesn't bode well for financing/strategic partner support. Even the Chinese post some really bad deals are wise to overpaying. 

This week sees us hearing about Inflation (UK) (estimated 1.8%) on Tuesday, but more importantly for FX is the ECB Report on Thursday (direct link) and to top the week off, US Retail Sales with consensus being wide from positive 1% to minus 0.5%! Now with kids in decline for another generation in America and the return to school buying season of August margins will yet again be under pressure. It doesn't look positive, with my estimates around zero to negative US Commerce Department for update on Friday. 

Trust everyone had a good weekend! The new healthier me is returning, and not a drop of alcohol!

Atb Fraser.

Morning Mumble (via Email): (Coffee Essential) Belatedly, but getting there! Heavy on the potash! ECB's Dire Straits!

Lesotho’s Prime Minister Thomas Thabane has returned to state house in the capital Maseru on Wednesday. People I know there have said things haven't changed much before, during or after the coup that was not. Its my view as Lesotho starts to become hotter for FDI (Foreign Direct Investment) greed will be a motivator in the Country (there's a shock!). It’s envisaged that David Seeiso has things in hand (the current King), he's well educated (if I'm correct UK based and studied law). As such, it would be wise to subscribe more risk to the companies operating there or awareness of risk at the very least. 

Coups or fears of one are damaging for those needing finance albeit producers would be at risk as well. The risk protector is the fact that the Lesotho Government already own 30% of Gem Diamonds (GEMD) Letšeng mine. One assumes there's an element of good faith especially as things start to improve in the diamond sector even with an easing in some pricing (June 2015 envisaged). Across a couple of borders and only 430 kms away GEMD's other mine Ghaghoo had its official opening. One will await an update from Gem Diamonds in due course but do not expect too much until phase 1 is fully ramped up in 2015! 

Am I the only one having a predictable case of déjà vu? The Philippines, rather than encourage investment at the detriment of Indonesia, have decided to consider a ban on unprocessed ore with a Philippines Senator (namely Bam) filing a bill to ban mineral ore exports. So guess what happened with the Nickel price since the announcement three days ago? Not a lot! Unusually where speculators would have been in the market, they didn't (I'll come to that later). China is getting panicky and ramping up efforts to process ore in Indonesia (secure supply); nevermind the small amount of Chinese traders that 'bought large' over in Asia as the news dropped to secure supplies.

The Philippines, as a result of their power costs/shortages, dire road network & infrastructure may end up being an also ran! Introducing a Smelter Royalty/Bond would be a better way forward but as apparent in Indonesia; they have to screw it up first! 

Now potash, on a contrast to equal supply and demand (Nickel currently) but with demand increasing, potash producers are not helping themselves. On the one hand you have SXX (Sirius Minerals) wanting to produce Polyhalite (Chemical Symbol K2Ca2Mg(SO4)4•2(H2O)) whom appear to be capable of producing a better product and is likely to be in demand, whereas the Financial Post reports massive Potash over Supply, albeit I think they've got their figures a little mixed but are actually on the ball. 

With increased supply coming to the market it doesn't bode well for the long term. Prices will remain under pressure, especially with the risks with the Canadian producers coming along. Quite why anyone would back new developments of potash now is beyond me (exc. Sirius Minerals (SXX). (See: Canpotex partners Potash Corp of Saskatchewan overview by Wayne Brownlee (Due 17th Sept) (will provide an overview of the state of the industry and current market conditions as well as an update of PotashCorp’s activities), Mosaic Co (Second Quarter 2014 Results) (Dire) and Agrium Inc.(Q2 Quarterly Earnings Report (see Market outlook page 11) (Not so bad but the outlook looks challenging). 

So with potash production increasing significantly, world potash demand by FAO ((Food and Agriculture Organization of the United Nations) is predicted to grow for Nitrogen (N), phosphate (P2O5) and potash (K2O) annually by 1.3, 2.0, and 3.7 percent, respectively up to 2016 (FAO). FAO have not been so bad with historic predictions save for 2008, and 2011 food prices. Yet surprisingly supply is set to out strip demand this by near 30%. For the SXX holders, one should note in the entire FAO report that there is no mention of Polyhalite which will increase the oversupply of N, P2O5 & K20 post 2017.

Now for the trader, one should consider why commodities are having such little speculation on them. Even Nickel, where the Chinese are confused as to what to do with the Philippines situation that only resulted in demand led panic spike up 25 cents and eased to 15 cents at $8.70-8.77/lb. The concern is the lack of speculation on Gold, PGM's, Nickel et Al (Before the Harvard critics get on my back I know the et al is wrong but required!). 

Its more than likely that the EU action (purchasing loans aka asset backed securities and covered bonds from October 14) will result in a spike in Gold (attempted risk on for Europeans) but those speculating on a wider spike may be sadly disappointed. Short-term target of around $1305-1335/oz. for gold is more than likely post any unwinding of margined longs (Chinese). There’s a very good suggestions that the commodities markets are subdued because of the contraction in Chinese financing; more than likely the case. Any action is likely to start post quadruple witching on the 19th of this month, with a refocus on commodities, rather than equities. Perhaps long indices, long Nickel and gold...time will tell. 

On an Indonesian focus (read as Churchill Mining (CHL), it's noted that Energy Minister Jero Wacik has actually resigned. With that in mind, do Indonesia have the opportunity to rectify a number of issues in one swoop and blame the departing? Also it's noted the shorters on CHL got categorically torched the other day, disappointing but unsurprising with the potential (not without risks). Now Joko (the incoming Indonesian President on the 20th October 2014) has his work cut out in the country’s mining sector (scuse the pun), nevermind fuel subsidy issues. Could Jero Wacik have resigned because of the Corruption Eradication Commission (KPK) investigation into bribes? Time will tell…As Indonesia are evidently replicating the cleanse of corruption that is taking place in China currently.

With this week being so focused on FX trading, it’s no surprise that as a result of ECB designs on partial quantitative easing, its been difficult to keep a pace with the share action fully.

It would appear there's been a fictional request by the ECB folks for this weeks Friday Video on a Saturday, to assist with getting their economy going! The title ironically is very apt.

One assumes the market will be excited about Morrisons update!

Atb Fraser