Good Morning,
As a decent analyst described the iron ore appreciation, as a "the
Australian iron ore dead cat has a tin of cream." You'd be hard pushed
to disagree. There's an element of physical restocking pushing the price up
currently with the minnows left to have the price dictated by the seller, but
the overall theme remains the same, oversupply, lower demand.
The Chinese data, reduction in RRR (reserve requirement ratio for those
that complain of the alleged extensive use of acronyms here, get real)
is an attempt to offset the capital flight and what the EMC has commented on
many a time, the "rolling over of distressed loans and/or alleged
financial products." The recent improvement in the Chinese unemployment
rate is a farce, forget any conspiracy, it would appear that China have
cleverly added a significant number to the migrant worker lists, a staggering
310M now, previously circa 293-298m.
In discussions with Li, he mentioned a "new" survey
based approach to unemployment, for which he's finding out more details. Albeit
the EMC thinks new may be stretching a long-time policy. From memory, it’s
based on taxation, disclosure and bank deposits but only for those that are
registered for unemployment benefits and are a 'permanent' resident. It’s wise
to wait for more details. What is telling is the contradiction between the
official headline rate, which decreased to 4.05% and the survey figure which is
nearer 5.1%.
Li's view, having family classified as migrant workers is, the figure is
a lot larger, with the gap (read as break) between jobs for migrant workers is
growing. They are managing to live on their lower income. Enough for now, but
its clear there's a pattern emerging that will have a further impact on the
main expectations of growth.
More importantly, to give people a wider view of normalisation and
pricing expectations (read as performance), from the National Bureau of Statistics of China. Advance
payments totalled 626.0 billion yuan, a staggering decreased 8.4 percent. The
entire sector needs to level out, with limited reason to take a risk on any new
housing or commercial property, whilst the sector declines at a rate of
knots.
The merged graphs make for a compelling comparison, with some strength
being shown in commercial/retail property, residential is still in significant
decline (click on image to enlarge). One would be wise
to look at the advance payments (link), totalling 626.0
billion yuan, a decreased 8.4 percent, and now without some sentiment change
set in trend.
Petra Diamonds (PDL) bond issue for the
Cullinan plant isn't good news for shareholders, whose return on their shareholder
funds has been dire. Despite what's said in the conference call, contradicting a
lot of previous assertions including those one only 8 days ago and in the
results regarding CAPEX.
The lack of discussion or disclosure, with 'everything' being hunky-dory
previously leaves a bitter taste. It suggests to the EMC that shareholders
returns (EMC PDL 16 April 2015) are
likely to be worse than previous reports. It’s wise, when the market is
surprised, like many a company before them, despite the terminology allegedly
being positives, is often not.
The basis for the funding is large stones are currently crushed in the
plant, despite them finding a ‘world record’. Albeit PDL do state ‘when it
isn’t not configured correctly.’ Admittedly there will be savings via
efficiencies including OPEX, Security and maintenance. It’s inferred
that it will save “up to 15 ZAR per tonne”, current costs have been up to 90ZAR
per tonne. We'll see, but don't get excited about seeing any returns shortly,
more so a further dent in the bottom line!
Wolf Minerals (WLFE), it might be prudent to revisit their pricing
expectations and remind the market re: TIN and Tungsten prices. With an
expected production near 1k/tpa of tin at $20K/T, new guidance will be
required. From memory, their projections were based on $20K/t, better than the
current price. Perhaps WLFE are thankfully they're currently not
producing!
The All in Sustaining Costs (AISC) per MTU should have improved as
result of 24/7 operations rather than the 5.5 working week that was previously
modelled. WLFE's guidance/expectations of a recovery in the Tungsten price from
January 2015, is somewhat absent, current pricing is around US$257.5/mtu,
admittedly in a recovery mode, but below WLFE's current expectations of nearer
$300/mtu.
No time to cover the Vedanta (VED) update or the poor performance of Sirius
Minerals (SXX) post approval update.
Atb Fraser
Apologies for the poor layout, grammar and readability, very limited time so rushed out in a matter of minutes.
Fraser- Hi- back from Friday duties now.
ReplyDeleteRe WLFE- yes, some old figures used re tin even in the latest Corp Presentation, but the AISC (All in sustaining cost) comes to $128/mtu, which needs adjusting up by $5/mtu for the tin credit (at $15k/t not $20k/t) and even when you add the debt costs (all being paid back over the first 5.5 years) of $42/mtu, when get a current total for all costs of $175/mtu, which leaves a nice margin against the current $257.50/mtu. Tungsten has been quite weak over the last 6 months, down from well over $350/mtu last year, based on global weakness and little insight into this opaque market. The new play from WLFE will stir things up a bit, and most expect tungsten to soar over the next few years but even at current levels WLFE are a low cost producer and they should be fine and a play on the price of tungsten in the main if anyone wants one of those.
Re PDL- yes, that new milling plant for Cullinan has come out of leftfield as far as I can see. Its clear they have been looking at Cullinan and its kit for a few years, the maintenance costs had been rising and it appears the 113 year old mine still has plenty of more years left in it and the incidents of crushing bigger diamonds getting on the mgmts. nerves and affecting the bottom line considerably, as the special stones are so very important in gem mining. So they feel $142m will pay for itself, using modern techniques to collect and preserve the stones. Cullinan has been prolific over the years, they are the only major source of blue diamonds in the world so perhaps spending a few dollars on the old lady is in fact in order.
Cheers. The Leggie
Evening Leggie, long night for myself this evening as playing host to the dark side contingent for a bash. The AISC, having had more time, estimate to be near $161MTU. I've based this on a 5% saving by 24/7 operatons, a higher production level near 21% higher, but with less credit from the tin, 20%. Shall be interesting, but the "company needs to give guidance."
ReplyDeletePDL, the conference call today, should have just been a webcast. The plant yes old, but the terminology was telling. One would be wise to look at the return on shareholder funds, even allowing for the ramp up and reduction in costs,conveyor belts and size of plants etc...
Cheers F
Fraser- Thanks for your input there. I can see little old WLFE disrupting the dopey old tungsten market, which is of course very Chinese dependant.
DeleteHave a great night- at least it will stop anyone with a gin bottle in each hand from spoofing or carrying out any other skulduggery at your place tonight... and hopefully the Yanks will hold off from their drone strike on the Global Evil Shorters too :-))
Cheers. The Leggie