Good Morning, the celebrations and festivities are now in hangover mode thanks to commodities. Just to start off with a cheery January post.
In light of the FT article on FX trading, it it would be rude not to consider the emerging market currencies being trashed by the USD. Had the author conducted a bit more research and digging he'd have realised the issues that the profitable traders come up against.
With the USD Vs ZAR (South African Rand) in a tight pattern looking for $1:R12.15 but only if it breaks the ceiling of $1:R11.87-11.92. Positive for those producers negative for imports and inflation in South Africa, BLT (BHP Billiton) could just have some welcome relief to its slide.
The outlook of lower interest rates throughout 2015 and the impact of the oil benefits on inflation, we have the GBP being kicked by favoured plays. The shorts GBP Vs, USD & AUD being predictable with a slide from £1: $1.5260 and £1:AU$1.92 to AU$1.8737 currently. The former aided by the FED words in December has a real risk of testing £1: $1.4250, obviously with 8 support lines to be tested before that finale. We'll move swiftly on before there are accusations of being an educator!. We'll save the USD MXN woes for another day as it charges towards USD1:MXN15.
Copper despite GLEN's insistence became the obvious casualty not just because of the surplus which is not being strategically hoovered up by the Chinese. We'll ignore the fact LME supplies and stocks are on the up, future contracts/prices are in the decline and aided by the strength in dollar you would be wise to ignore the bulls until one of the components change. Then again, with the likely costs per tonne/lb (whichever is your fancy) declining circa 12% as a result of oil depreciation one could be forgiven for holding your copper stocks. Expect those marginal producers to have some post-Christmas cheer as a result. As an after thought, could AMI (African Minerals) be given some breathing space as a result of oil prices?
CAML (Central Asia Metals) have come out with their 2014 Production Update and 2015 Outlook. In it CAML note they achieve their 11K tonnes of copper by a smidgen over 1% at 11,136 tonnes. The expansion continues with the benefits likely to be seen later in the year (Q4 figures) as commissioning is in Q2 2015.
CAML with a decent cash balance (Circa $42.6M) post any expansion costs (and overruns), and even allowing for a $2.65/lb price CAML are well positioned for shareholder benefits such as return of capital and share buybacks. Hopefully these will be managed better than a certain platinum stocks whom would struggle to manage a brewery party! In the short-term there will be some impact on due to movements in the copper price. Its certainly a safer bet than some. If one could only get over the Director share sales....
One just has to balance whether the limited potential of over achievement by CAML and returns are a positive; one for the duller component of a portfolio. With C1(*see below) cash costs likely to be lower than the previous quarters (circa 7% by my estimates) even with a decline in copper prices there will be an improvement in profit.
The additional caveat for copper and CAML outside of the dollar strength caveat for copper being that if Chinese financing for the metal declines further the price will deteriorate, so one would be wise to keep an eye on Chinese copper import data, and the CAPEX spending of State Grid Corporation of China and the China Southern Power Grid Company . With any change in spending likely to improve/remove demand...
So with the Dow Jones (DJIA) weighted circa 9% on Oil & Gas stocks the obvious happened yesterday. Its pleasing the market is acting in an orderly way rather than denial based on misinformation and ignorance. Not that one should stake the house on anything but after my Oil Commentary, is oil now likely to find the bottom?
As a number of decent analysts have pointed out this morning, there is a further disconnect from gold and oil. With Gold being a hedge of risk and inflation, surely there is a contradiction coming with oil prices down significantly (impact on economies and products), a strong dollar and an appreciating Gold price?
Amara Mining (AMA) (Yaoure amazing) announce a 63% increase in Indicated Resources at Yaoure and just to echo the obvious, over to Randgold! The irony of being considered a "junior" miner...
Limited time for Entertainment One's acquisition of Mark Gordon Company, as a random fact I think he was an executive or the producer on Grey's Anatomy (I should do a charity auction for a day in the head of Fraser). Yet another move for Entertainment One into the production and distribution (lucrative) with ETO being off its highs, its certainly looking more tempting, albeit the caveat being the purchase via debt has to be funded from somewhere eventually (Caution with leveraged plays); over to ITV again! In addition Ferrexpo plc Q4 production update...the Ukrainian issues having the obvious impact.
Atb Fraser
As promised: *C1 Cash Costs - costs of mining, milling & concentrating, production administration & general expenses. Including property & production royalties not related to revenues or profits, metal concentrate treatment charges & freight or marketing costs less the net value of the by-product credits.
Its suggested that LGO is being manipulated. Has anyone checked the oil price or the cash balance of LGO. Then consider the announcement yesterday "of joint broker" to widen the shareholder base is because...or better still, how the shareholder base will be widened?! Give over...
ReplyDeleteThere's gossip Cala homes is being oflloaded by L&G after a savvy deal from Lloyds in 2013. If this is correct, with its construction models centred on affluent areas it could just be a very shrewd investment.
Its suggested that Babcock have entered the fray for bidding on Mouchel, save for an exceptional bid from Kier, would it not be wiser to list...
When will Enquest press the button! The question of the week...
Atb Fraser
Fraser- Hi- just back from worldly matters so in catch up mode re the last few hours.
ReplyDeleteRe CAML- I do like the fact these guys don't have all the messy stuff that comes to those that actually mine things-- they have a proven bus model, the tech is sound and works in the winter and their cost of prod must be at or v near the lowest in the copper business. So you are right, more divs are on the cards even after the expansion is paid for and they have the Copper Bay update due soon, so some capex plans over the Chile coming up when they announce that in the coming weeks. The data I have re CB is very robust so I suspect this will be v positive in due course. And not priced in at all, as far as I can see, albeit v early stages there.
Re AMA- yes, the takeover looks more likely than them getting through to prod there-- the IRR and all in costs should be stunning at the end of Q1 PFS, so that may well be when certain parties pounce. Even if they don't, they have a queue with Samsung at the front to help with the $400m capex, the all in sust costs of circa $600/oz being v attractive even in the current climate.
Im happy to be v long both, albeit AMA may have that status rudely interrupted in due course.
Cheers. The Leggie