Kool Keith
25 Sep 2017
Iron ore under pressure [link]
LK Hyman
25 Sep 2017
Re: RIO v Glencore Games,I'd choose RIO over GLEN every time. If you look at RIO's iron ore mines they've got the biggest and best quality uns in the world .... and nice and close to China where all the demand is. They've got a damn fine Copper biznay with a nice mix of safe and sensible (USA), and risky but attractive (Mongolia and Indonesia) and they've got another damn fine Aluminium biznay (Alcan) though it's a goddamn shame they paid so much for it ... but that's years ago now.I wouldn't pay much heed to the difference in margins 'cos GLEN's are (presumably) low because of their huge low margin trading biznay but, every time I trawl through GLEN's mines, a lot of 'em are in far off places of which we know little. For example they've got a nickel mine in New Caledonia which is complete pants. And their E&P oil business isn't worth a cup of warm spit.Good luck with whatever you decide to do. All I need to do on the rare occasions when I think of buying GLEN is to look at a pic of Glasenberg and axe mesen "Do I want this feller to be in charge of my tiny wad?" The feeling then goes away.LKH on the flybridge
gamesinvestor
25 Sep 2017
RIO v Glencore Contemplating selling my remaining holding in Glencore and either keeping my current holding in RIO, or adding to it.In RIO's favour are it's higher operating margins close to 28% compared to Glen at 2%RIO's ROCE -- difficult to measure I know with changing commodity prices but on a stab in the air basis RIO looks close to 10% in current climate and Glencore (I haven't the foggiest to be honest).With RIO one assumes a fairly steady as she goes management - with Ivan and Glencore I don't think one can ever predict what he will do next.RIO is mostly concentrated in Iron Ore which could be a disadvantage in another downturn in construction - Glencore is more diverse but also geographically very fragmented into dangerous and unpredictable regimes I assume.The share prices have both recovered dramatically from the low's :-RIO from 15XX to 34XX -- 120%Glencore probably twice that as it was considered bust 2 years back.Have they both had their day in the sun and it's over the top and down the hill from here perhaps? Both companies earnings are expected to tail off next year - RIO more than Glen perhaps.On Dividend -- RIO is already back up to over 5% where Glen is stil 2-3% but expected to rise significantly next year -- but next year is a long way off in commodity prices innit?On borrowings -- RIO is sitting on £17BN against a pre-tax £6.7Bn last year and Glen was £23Bn last year against a loss -- but looking forward this is improving dramatically for this year at least.Brokers seem to pencil in a 15% upside on both companies.Any views on this lot before I lean on the red and or green buttons?Games
LK Hyman
22 Sep 2017
Re: Woody's view on RIO Games,"still he's missed out on the growth so far hasn't he?"Yeah, this is the point, innit though, m8? Sounds as if ol' Woodentop is just evincing sour grapes!My continuing faith in RIO was bolstered by summat that I read somewhere yesterday, namely that the Chinees have taken some sorta action which means that the premium which RIO can charge for its high quality iron ore is likely to rise vis a vis the discount which the likes of Fortescue can charge for its carp quality ore. I hadn't realised that the stuff came in different qualities before - assumed it was all same same never mind, but apparently not. One learns something every day. Lumps and Fines rang a vague bell, but it's even more complex than that, apparently.The latest buy back is another good sign that Jean-Sebastien has learned the lesson about not splashing the cash on damnfool M&A whenever commodity prices rise a bit.RIO is approaching the saintly status of ULVR in my shrunken wad ... high praise indeed.LKH on the flybridge
LK Hyman
22 Sep 2017
Strange .... RIO yesterday announced a $2.5 billion buyback of Ltd and PLC shares as their means of returning the proceeds of the Oz Coal and Allied sale to shareholders (or rather to ex-shareholders LOL).This is what they said about the RIO Ltd buyback (which incidentally is a lot smaller than the PLC buyback):"Rio Tinto Limited will invite eligible shareholders in Australia or New Zealand to tender Rio Tinto Limited shares at discounts of between 8 and 14 per cent".This will be an off-market transaction, whereas the PLC transaction, which will be executed in 2018, will be on-market ... and therefore at no discount to the market price.If they can persuade sellers to sell at a discount to the market price in Oz and Na Zillun, why can they not try to pull the same stunt in PLC markets, eh? Why pay "full" market price in Blighty?It looks as if the reason may have something to do (as it so often does) with tax, but it still seems strange to me to adopt what looks like a more expensive route for the PLC shares than that which is being pursued for the Ltd shares.Whatever, this looks like a good move to me.LKH on the flybridge
gamesinvestor
22 Sep 2017
Woody's view on RIO This from his Income Fund update for August :-"""Furthermore, we would argue that this behaviour has introduced more risk to certain parts of the market. To demonstrate this, let’s look at what has happened in the UK mining sector – a sector to which the fund is not exposed – over the last eighteen months. The sector had a great run in 2016 and has enjoyed another strong rally over the summer months. For example, Rio Tinto’s share price started 2016 at £19.80. Since then it has risen almost 90% to end August at £37.47. Mining companies like Rio Tinto have benefited from a significant increase in the price of the commodities that they produce. We have missed out on those gains, in part because we did not anticipate the rally in commodity prices, but primarily because we do not believe the increase in commodity prices that we have seen is fundamentally justified.On the face of it, mining company shares may not look expensively valued, because earnings, dividend and cash flow forecasts have all increased broadly in tandem with share prices. But the question we always return to is, “what if those commodity price increases are not sustainable?”. We have written before about the amount of financial speculation that currently takes place in commodity markets in China – the scale is enormous and alarming. >>> I suppose this part is quite telling regarding the amount of trading relative to the actual usage of the stuff :-""""""For example, the amount of iron ore volume that is traded in China every day now regularly exceeds the country’s entire annual output of that commodity. Meanwhile, global supply growth has continued to outstrip global demand growth across many commodities, including iron ore and copper. This fundamental dynamic is naturally more likely to result in commodity price declines, rather than increases, which suggests that something other than fundamentals has been driving price behaviour across the commodity spectrum."""""""""""""Obviously, the China growth story has been central to the investment case for commodities and commodity producers for a long time. Growth has slowed in recent years but policymakers have prioritised economic stability, with annual growth of 6.5% currently targeted, seemingly at any cost. Growth has become increasingly dependent on credit, with the IMF estimating that the credit intensity of the Chinese economy is now close to 5x – in other words, for every 1 unit of incremental output, the Chinese economy now needs nearly 5 units of debt. This worries us – Chinese credit growth far outstrips that of the US and other western economies in the build-up to the global financial crisis. Indeed, it is widely acknowledged that China already has a substantial bad debt problem and policymakers have been increasingly innovative in their attempts to stave off their own banking crisis. They have so far managed to delay that conclusion but are running out of options to continue to do so. There is growing evidence too, that policymakers are becoming more interested in the quality of growth rather than the quantity of it – all of this points to a very different Chinese economic performance in the years ahead, than the one that financial markets have become accustomed to.""""">>>> Woody may have a point, but still he's missed out on the growth so far hasn't he?Games -- Much rather invest in Circassia, or Provident Financial, or Capita, or the AA, or Centrica or Rolls Royce or Allied Minds or Game Group or .......
LK Hyman
16 Sep 2017
Re: Glencore revival rumours? Games,"1.3% of my wad in RIO and a mere 0.61% in GLEN"RIO is 10.1% of mine. LKH on the flybridge
LK Hyman
16 Sep 2017
Re: Glencore revival rumours? Games,"you could do a Shell------> BG type move switch all your RIO into GLEN."Nah. I don't trust GLEN and I like RIO as it is.I don't feel that RIO wants to merge with GLEN, so the initiative is with GLEN to propose some deal structure that works for both sides to overcome RIO's reluctance. Perhaps a nil premium merger using new equity? Combined with a priori nice clear agreement about synergies, staff cuts, post merger disposals.It could work, though I feel that the cuture of the two organisations is very different, which might make it hard for them to produce a nice integrated company. GLEN is more entrepreneurial, with a trader's mindset, whereas RIO is a nice safe pair of hands run by sensible pragmatic miners.Not sure how the Ockers would feel about the "Australianness" of RIO being watered down by a tie-up with GLEN, which has no national ties (Switzerland doesn't count).LKH on the flybridge happy to listen to any proposal and vote accordingl
gamesinvestor
16 Sep 2017
Re: Glencore revival rumours? "I imagine that Glasenberg would want to be the big banana which wouldn't sit well with the RIO lads I suspect."LK -- If that were correct and Glencore were the acquirer so to speak, and given the size of RIO would that mean Glencore reverting a new dangerous debt position - especially after they recently sold off the family silver to reduce it in the last 2 years?If you thought it would be the other way around, you could do a Shell------> BG type move switch all your RIO into GLEN.Games - 1.3% of my wad in RIO and a mere 0.61% in GLEN
II Editor
15 Sep 2017
NEW ARTICLE: FTSE 100 support collapses "After four months trading sideways, North Korea and a sterling rally have conspired to dump the @GB:UKX:FTSE 100 below 7,200 for the first time since April.Since Tuesday, the blue-chip index has lost more than 230 points, or 3%, initially the ..."[link]
LK Hyman
13 Sep 2017
Glencore revival rumours? The FT reports revival of talk about a RIO/GLEN merger, which started with a (quickly rejected) GLEN initiative last year.It makes a fair bit of sense to me. Little overlap apart from copper. It would enable GLEN's trading skills to be applied to RIO's big volumes .... assuming that that would add value LOL.Interestingly the FT says that Chinalco, a big RIO shareholder, would welcome the increased clout that a combo would have.Not sure how good a cultural fit it would be, mind, as I imagine that Glasenberg would want to be the big banana which wouldn't sit well with the RIO lads I suspect.LKH on the flybridge
LK Hyman
04 Sep 2017
Re: Liberum Games,I have no idea what is going to happen to metals/minerals prices over the short, medium, or long term but, given that some 80% of RIO's business is iron ore and they have the biggest and best reserves of the stuff in the world (in Oz), which is within a stone's throw of China which, with luck, will want to import it in increasing quantities for years to come, I am happy to entrust part of my shrunken wad to RIO, given that its prospective yield is as near as damnit 5% which is enough for me.In addition its growing exposure to copper and its strong position in aluminium, diamonds, salt, borax, uranium, coal and various abstruse minerals provide further reassurance that, while it may not shoot the lights out, it remains a vital contributor to world prosperity. That's worthy of support.LKH on the flybridge
Eadwig
04 Sep 2017
Re: Liberum Liberum are the pits when it comes to miners. As I have said here before. I personally wouldn't take any notice of them in this sector. They may be good elsewhere, but what we see of their mining analysis as none clients is basically what we already saw 6 weeks ago, as a rule, ie. expect a hold reiteration and price target on GLEN of about 280p any time soon.
gamesinvestor
04 Sep 2017
Liberum Well an entertaining read if nothing else :-[link] American (AAL) replaces Rio Tinto (RIO) as the top mining sell. "Cheap valuations show the market doesn't believe current commodity prices are sustainable, we believe that they will go even lower," writes analyst Ben Davis."We maintain our bearish commodity outlook into 2018 as demand in China decelerates with ongoing credit tightening and slowing fixed asset investment, causing spot [free cashflow] yield to fall to 2%."""I wouldn't disagree with them on selling Anglo, but are they even close in their assessment that RIO should be on a sell list right now?Strangely enough RIO is becoming less cheap by the day it seems, as is Glencore.I think Liberum has failed to see the rising price of commodities, the debt reduction at these companies and the fact the share prices are no longer that cheap. -- He must have dusted that paragraph off from two years ago and cut and pasted it -- a bit like a solicitor doing conveyancing - I think !!Games -- Analysts -- pppp --- tttttt !!!!!
Eadwig
04 Sep 2017
And Now Nickel! (Copied from GLEN board)"Nickel surged to the highest level in more than two years, and copper chalked up its best mark since 2014, as bets on tighter markets, especially in top consumer China, keep metals buoyant after their longest run of weekly gains in a decade.Nickel advanced as much as 2.9 percent to $12,380 a metric ton, its highest since June 2015. Copper climbed as much as 1.2 percent to $6,915 a ton. All metals rose after the LME Index of six contracts capped an eight-week advance last Friday -- one short of a record run in 2006.“It certainly feels like there is a broad resetting of expectations that are driving the metals at the moment,” Daniel Hynes, senior commodities strategist at Australia & New Zealand Banking Group Ltd., said. “I was in China last week and I got the very strong impression that the environmental push is having a pretty profound impact, and that’s not something that’s going to fall away quickly.”Industrial metals are rising amid speculation that sustained demand growth, coupled with restrained supply, will tighten markets. In China, environmental inspections and planned anti-pollution curbs on steel and aluminium have stoked expectations of shortages. Gains are also fuelled by a weaker dollar, a stronger Chinese currency, and a super-charged steel market in China that’s steering sentiment for other commodities.Hot-rolled coil, a major steel product, reached a fresh record on the Shanghai Futures Exchange, rising as much as 3.5 percent. The steel rally has a “blow-on” effect on the whole metals sector, Hynes said. “To an extent they are related by demand, so it’s not surprising they get pulled along.”Miners are gaining from the metals surge, with the Bloomberg World Mining Index of shares rising for an 11th day to the highest since 2014.
