Clarence Beaks
09 Oct 2017
370p appears the top again (nm)
LK Hyman
09 Oct 2017
Re: RIO V GLEN - FAO LKH Eadwig,Your maps are very misleading. Superficially they suggest that the spread of both RIO's and GLEN's businesses is similar. However the great majority of RIO's assets are in Oz, the USA, Canada and Chile which are a lot less dodgy than some of the places where your man Ivan has planted his flag.LKH on the flybridge
Eadwig
09 Oct 2017
RIO V GLEN - FAO LKH You're always talking about GLEN's assets being in more dodgy places. The maps below don't prove anything because the importance and quality of the assets aren't weighted, but the overlap is marked, as is the lesser number of RIO assets - or maybe its just the cartographic style. I suspect RIO's assets are bigger on average though. That is a double-edged sword as we've seen recently in RIO. Generally, fewer, higher quality assets is surely a plus longer-term, however. RIO's assets are better quality generally speaking, I believe.[link]
Eadwig
09 Oct 2017
Re: More spending LKH, "The clue is in the location, m8. I wouldn't invest a red cent of the Hyman shilling in South Africa at the moment."I am glad to see it is in Cape Town, I must admit. But yeah, anywhere in Africa is higher risk, unfortunately, lets face it. You might have a point about securing fuel reserves. There were shortages in South East Africa on at lest one occasion over the last year, which has impacted mining companies. The good ones have already made contingency plans - this seems a bit over the top for that.EadwigPS. The phrase you appear to have picked up off me, along with a few others here, is actually 'one thin red cent'. Not just 'a red cent', which is a whole, legitimate, American penny. A thin red cent has been 'shaved' or 'clipped', so is worth even less. I assume anyway - its a phrase I picked up of a business partner who grew up in USA and had an American father whom I can just hear saying such a phrase (I maybe did). He was very much a wordsmith and every word he used added meaning. He was a pleasure to talk to, actually, and much missed.
LK Hyman
08 Oct 2017
Re: More spending Eadwig,"Unsure why they want it though"I think they want it principally to provide an assured source of fuels to their own chunky mining assets in South Africa.LKH on the flybridge
LK Hyman
08 Oct 2017
Re: More spending Eadwig,"Personally I'm astounded that you can buy a refinery (or even a 75% share of one) anywhere for (just) under $1Bn"The clue is in the location, m8. I wouldn't invest a red cent of the Hyman shilling in South Africa at the moment.LKH on the flybridge bring me my machine gu
Eadwig
08 Oct 2017
Re: More spending Yes. Looks like this deal to buy a refinery, petrol stations and associated infrastructure in S. Africa & Botswana has finally gone through. The price is well down on what it was originally rumoured to be when the deal was first mooted in the media.Personally I'm astounded that you can buy a refinery (or even a 75% share of one) anywhere for (just) under $1Bn, let alone a 75% stake in 800 petrol stations and pipeline infrastructure thrown in too.Unsure why they want it though ... If anything, they appear to be running down their involvement with oil production (good!) and have sold of most of their bio-fuel Ag interests. Possibly all of them, actually, I'm having a bit of a blank on that one right now.The refinery is in Cape Town and has a capacity of 100K bbl/day and GLEN will keep the existing management in place. "It is understood it could seek a partner to take on a share of the business down the line", says the Telegraph. I'm sure they will as they have no expertise themselves in this area. Probably someone will buy out the other 25% from Chevron, who have been trying to off-load these assets for ages in the race by all oilers to strengthen balance sheets in the face of persistent low oil prices.
gamesinvestor
06 Oct 2017
More spending [link]
Clarence Beaks
05 Oct 2017
Nerve holding Glad I held my nerve on that last dip, would have been quite costly to me selling down in the 330's.I expect this to drop tomorrow after a good run again this week. profit lock in expected.
Eadwig
04 Oct 2017
Re: As posted on RIO board Games "or you for keeping this for the loooong term?"GLEN is one of a handful of non-tech and non-UK housing companies that I want in my portfolio more or less indefinitely, as things stand. Unfortunately, I'm down to just a single tranche with an add price of @300p for the next, so its not making much impact on my portfolio right now. I couldn't give you a top price for it. I like the 'shooting from the hip' aspect, although i don't agree with every decision (they're still chasing Chevron's petrol stations in S. Africa, for example. Why?) But, you shouldn't mix that up with the 'marketing' (trading) division.Most of that is very simple making money on the spread. It does also mean that they realise better prices for their own produce (look at ANTO as an example of the difference between the selling price of Cu and what they actually achieve. It isn't huge but it all adds up).It does mean that they have to maintain a huge lending facility that is unused also ($10Bn last time I checked), in order to meet stress test worst case scenarios, basically. This in turn screws up certain metrics if you're unaware. It also costs money and their raising their current credit rating will see a big shift to their bottom line. Shooting from the hip to grab opportunities as they come up doesn't tend to help that scenario.Also, they divested their Ag business when forced to reduce capital, and that had by far the best 'marketing' margin. They have replaced the revenues with the deal with Russia for selling the oil from the national company - but those margins are terrible, so much more capital involved, one way or another, to maker the same cash.I'm done with all other major miners, especially diversified ones. Far too staid (and too complex to analyse properly) and at best you end up with a company grinding out a 5% yield. Then the next downturn comes along and they switch it off again. If you can catch them on the recovery slope, all well and good, but I have a poor track record of doing that.5% yield may be great for some people but it is 66% short of my MINIMUM target each year, so there's really no point me going there with my new investment targets and strategy, unless the company is owned by a thruster, always looking for more growth, that is.I'd rather take a gamble on the odd AIM miner or possibly a larger company like ANTO that is focussed on just the one product IF I can catch it at the right time in the cycle to ride a recovery trend. More chance of that with a single product company than there is these big diversified boys.
Eadwig
04 Oct 2017
Re: As posted on RIO board LKH, "I don't think I've ever referred to him as a clown, m8! "No, indeed. I wasn't quoting you. However, you painted an image of the red-braces wearing trader cliche (a cliche with a firm basis in fact) from the 1980s, and most of those people were indeed clowns - my words, very wealthy clowns with an attitude of being untouchable. If you don't think it is so, then read "Liar's Poker' by Michael Lewis - an inside look leading up to the 87 crash. The traders were the least worst part of it all. The managers were totally negligent, wilfully so, and the customers weren't very much better.If they had been allowed to continue like that, they could have ended up in a situation which put the whole of the capitalist system in rightful risk of failing, or at least being dumped by the electorate for some more apparently sound alternative (in the minds of those who have known nothing else).Oh! They were allowed to continue like that! In fact laws were passed to make it even easier to do the same things, but faster and in more intricate and complex ways. Thatcher and her 'quick buck today' has a lot to answer for.Read 'The Big Short' by the same author. 'Flash Boys' and 'Boomerang' I can also recommend."New Caledonia (basically a huge US marine base)"A huge EX-marine base, I should have said. With all the port facilities etc mostly built during WWII to support the largest logistics base in the Pacific theatre. That has very much helped support the nickel mining industry which is a big part of their economy, New Caledonia has the largest nickel deposits in the world, I believe, certainly a very large percentage of known deposits (over 20% I think)Last time I looked, it also had a GDP per capita similar to that of New Zealand. It might be a bit out of the way, but I've never understood why you've always pointed it out as a bad place to do business in. You load a boat up with ore and it doesn't much matter where it originates, does it?Now Congo is another matter .... The source of a lot of GLEN's gold (just expanded and improved with much capital expended) and their main source of cobalt, making them the largest producer in the world.I'm hoping the population of Congo is war-weary enough for peace to continue for at least another generation. One of the very worst examples of colonial excesses (Belgium) and they gain independence and spend most of it fighting each other.Trouble is, the country is stuffed full of valuable mineral resources which doesn't necessarily help stability. The world needs to stable Congo, not just because it makes up the better part of central Africa with god knows how many borders onto smaller nations, but also because one of its valuable mineral resources is huge deposits of Uranium, of which new ones are being found all the time.The place is so big and much of it so remote, anyone with the cash and the will could dig up Uranium and smuggle it out through a dozen porous borders manned, if at all, buy guards who will look the other way for a small consideration.I hope GLEN's presence there will bring some stability to the place, but it is going to take much more than a bunch of even the most ethical miners to turn Congo, and its wide mix of tribal peoples, into a model developing country and emerging economy.When it finally is turned around, it should rank right up there with Russia and Brazil in terms of its potential. I doubt I'll see it in my lifetime.
gamesinvestor
04 Oct 2017
Re: As posted on RIO board "Its true some of the decisions GLEN make do seem to be based on opportunity rather than longer term strategy. "EW -- I think that about sums it up. It's always a good idea to have a clear strategy rather than shoot from the hip -- but I guess by it's very nature Glencore is an opportunist trader 1st and a mining company second -- anything is for sale and anything can be bought.What's your top price for this puppy?I feel somewhere near 400p is a reasonable exit point as by that time it's P/E will be in mid to high teens -- enough for any cyclical commodity company maybe?Games -- or you for keeping this for the loooong term?
LK Hyman
04 Oct 2017
Re: As posted on RIO board Eadwig,"definitely isn't the clown LKH likes to paint a picture of (no red braces in sight)."I don't think I've ever referred to him as a clown, m8! There's just something about the feller ... can't put my finger on it ... that makes me not want to entrust the tiny Hyman shilling to his care. He reminds me of several people I came across in my oil trading days, extremely clever but somehow discomforting. Also he seems perpetually to have that slight Nixon-like sheen of sweat on his face ... not a reason to steer clear of GLEN, I grant you, but one of those soft dog-whistle signals that are sufficient to make me turn to the reassurance of RIO in preference to GLEN."New Caledonia (basically a huge US marine base)"I doubt that the Frenchies would agree with that statement!LKH on the flybridge nothing gets past hi
Eadwig
04 Oct 2017
Re: As posted on RIO board Games,ComparisonsHmm. As I said, you should look again. I don't think comparing companies on recovery years (2016) is very relevant. Just one example is GLEN stopped some production to support prices, which affected the 2016 figures. RIO ploughed on regardless. Surely its the forward years you are interested in? What I suggest you do, instead is, look at the H1 results and forward guidance. I haven't done the above exercise comparing the two companies, by the way, so am not trying to tell you one is better than the other, just that I could see immediately from my own analysis (see posts below) that the figures for GLEN were way off for the current situation (9 months on from those figures in the FT).I'm not following RIO close enough to be able to see at a glance if those figures are realistic. It is safe to say they reflect a faster recovery than GLEN. You also have to remember that you are not comparing two like mining companies. Some metrics are not relevant.Commodities, especially metals. I don't think there is a HUGE amount of additional demand. However, there are new rules applied and being applied in China, and there is no question that this is:a) cutting down Chinese production where it existed, eg. coal, rare earths.b) effectively adding to demand in terms of imports, as it bans illegal recycling methods etc.It seems an odd thing (or is it just my Western sensibilities?), but I think there has been enough action now to conclude the Chinese are indeed serious about the reforms they have been talking about. A good demand indicator is record stockpiles at metal exchanges have now reduced markedly. It is only an indicator though.c) EVs are growing at a faster rate than expected. I'm not wholly convinced as to how much that translates into additional base metal demand. Copper, maybe. Definitely the battery metals, manganese, cobalt, lithium, nickel. GLEN produces much more of those than RIO (except lithium - which I think is a mistake by RIO, or anyone else trying to take on the big 4 producers). BUT, it doesn't really move the needle on the GLEN share price at the moment. Longer-term? I'd rather GLEN had the reserves than not, but they lost money on nickel in H1 this year, as they overhaul that mine and reduce the cost of production. Benefits wont be seen fully until year end 2018.It is true GLEN have various assets around the globe like Australia, Peru, Chile, Congo, USA and New Caledonia (basically a huge US marine base). On the other hand, RIO have much of their copper future pinned on Mongolia, the second worst country to do business in after Nigeria, in my experience of approx 80 countries. (S. Africa 3rd worst). I'm sure you are aware of their problems in Indonesia.Eadwig ""If you want to hold for the long term, GLEN gives you the cover in a downturn""Games >>> ummm - not sure that's the case, Glencore almost went bust in the last one.Its true, it didn't work in the last downturn because GLEN had very high levels of debt.It is also true that the profits from the marketing division remained remarkably stable through 2011-2016 at around $2.2Bn to 2.7Bn each year. And that is the cover you have.GLEN made the same mistakes as every other major I can name that it tried to buy growth during the super-cycle, then wrote off or sold off (at a loss) most of the assets it had acquired.The whisper was they were going out of business which would have been catastrophic ion global terms if all their commodity trades had to be unravelled, akin to Lehman Brothers going under at least. GLEN are the third largest commodity trader in the world, last I saw figures.However, when they went to the market for more money, the directors put up 15% of their own cash, and they had to limit the number of the hundreds of financial institutions that wanted a part of the business. They limited it to either 50 or 250, I can't remember which off hand.Since then debt has been redu
gamesinvestor
03 Oct 2017
Re: As posted on RIO board ""If you want to hold for the long term, GLEN gives you the cover in a downturn"">>> ummm - not sure that's the case, Glencore almost went bust in the last one."Not sure where you got 2% from. It makes (slightly) more than in net profits from trading alone."">> [link] margins 3.45%Net Profit Margin 0.92%Operating Margin 1.62% (somewhat lower than 2%)Return on assets - 1.37%Return on Equity - 4.84%Return on Investment - 2.02%""""ROCE for RIO and GLEN are not comparable. You aren't gauging two mining companies.GLEN will always have far more capital employed in the marketing portion of the business.""">>> Mining is I expect much more capital intensive than a trading floor which tends to be capital light and relies on transaction quantity and expertise in skimming margins of each trade.Eadwig -- I guess my decision is going to be more based on two or three things - one the cyclical nature of the industry and both Glen and Rio are very exposed to this. The second is the rapid recovery of late which has seen commodity prices driven up emotionally, and some say not especially due to actual commodity demand and usage. Like any market it gets pumped by greed and dumped by fear. This in turn has driven the stock prices up at an even faster rate.The third is Ivan - one never knows what he's going to do next and he risked the company last time by overleveraging with acquisitions and he may do that all over again - next time maybe the exit won't be so easy.Games
