Lonmin Share Discussion Threads

[redbaron10] 07/5/2016 16:49

Gold/Platinum now represents 40% of my investments.All this talk of gold should comprise 5% of one's investment portfolio is conventional wisdom.We do not live in normal times,so i have increased my precious metal holdings.For rackers1 benefit,i bought more Acacia mining after its pullback and going ex-dividend,on Friday at 322p prior to the nfpayroll number out of the US.I have never invested in Lonmin on platinum's possible forward demand as far as its industrial uses are concerned(ie in catalytic convertors).Even though there is some demand from this quarter,so much pt is recycled these dates that this recovered pt goes a long way to meeting this demand anyway.Every year there's the argument of a pt deficit or surplus,but clearly for some time there has been an over-supply of the commodity.I have become increasingly bullish on precious metals.At long last we will get no more talk of a US rate rise in June.It was never going to happen after the events at the beginning of this year after the last rate rise in Dec 15.To be honest there's more chance of further monetary easing in the US rather than a rate rise.The dollar has little reason to strengthen from here.Good news for gold/plat.We have the prospect of the Brexit vote.This is going to create very volatile,jittery markets for the next 7 weeks.Nervous investors head for safe haven plays.Good news for gold/plat.After our referendum,we have the party conventions in the US with Trump and Clinton likely to be nominated for the November presidential election.Hence no Fed rate rise,more market volatility.Good news again.We have witnessed the Bank of Japan reducing rates to the point they have negative interest rates.This should mean the yen depreciating and helping Japanese exports.What has happened? The yen has appreciated! Ditto the eurozone.Mario Draghi and the ECB now have negative interest rates and the Euro has strengthened.We do not live in normal economic times.Currency valuations have now been so utterly corrupted by Central bank policies like quantitative easing and deliberate manipulation that markets have no idea of a currencies 'true' worth.If only gold and plat can provide a credible value reference measure then it becomes the global currency all defer to.Good for gold/plat.Conventional wisdom has it that deflation is bad for precious metals.Precious metals are a hedge against inflation.Inflation is good news for precious metal prices.Yet we have rampant deflation and gold/plat prices rise dramatically.We do not live in normal economic times.Banks and their share prices provide a barometer to the health of economies around the world.Where in the world do we have a banking sector that is in rude health? We are talking 8 years here since a zero interest rate policy was adopted.As i have mentioned in previous posts ,what has happened to all that extra consumer spending expected after fuel prices dropped dramatically? More money in consumer pockets but they are not spending it.Why? We do not live in normal economic times.Geopolitical events like a Greek default ,or the UK actually voting to leave the EU, isn't going to result in gold/plat prices falling.Massive global indebtedness.Massive capital flows from debtor to creditor nations.Dollar denominated debt is still hurting the interest payers, despite a little easing in the dollar's strength.I believe the oil price is still too high,so what happens when that falls again.Are we going to see that correlation again with falling oil prices dragging down all global markets? Where was that much heralded price bonanza to all the oil importing country's economies? India,China Japan should have booming,expanding economies from the energy dividend they have received from low oil prices.It hasn't happened because there is low or no global growth.The world is in a total mess economically and i have no answers to what should be done.Meanwhile i will try to protect my investments,and leave some cash for the next opportunity.

[russell250] 07/5/2016 15:59

any views on impact of weaker dollar following poor non farm Friday - more importantly commodities and miners - I sold my entire holding of Barclays Tuesday am - and bought glencore - crazy fool or magical move we see - on 17k a pt with that -

[russell250] 07/5/2016 15:57

tesla over rated - but agree apple needs to use its cash or watch it dwindle - tesla struggling hit 80-90 k production this year -
who can make the energy replacement battery to eliminate oil , food manufacture etc - I am 52yrs if ( hopefully) I live for 25yrs could see it.
Perpetual energy - as in film - knight and day ( funny film)

[redbaron10] 07/5/2016 15:21

With $200bn rotting on 'Apple' balancesheet,there's talk of Tesla being bought out by Apple.Elon Musk has trouble meeting annual production targets now,how is Tesla going to ramp up production on the model s to meet all the $1000 depositors?There will need to be a fundraising to achieve this.Why bother when Apple has the readies! Don't know what Elon would say about his baby being swallowed by Apple.It will be a brave journalist to ask him!

[russell250] 07/5/2016 14:53

electric cars - non oil fueled products - whoever creates a battery to service our energy needs - will make apple look like a aim company

[careful] 07/5/2016 14:06

the threat of electric cars must be non existent.
Tesla boasts about 200miles before recharge.
..and recharge takes several hours.

I cannot go any distance (electric) without hanging around for hours whilst I get a recharge.
Just like my golf trolley.It can be trusted for 18 holes only.

It takes 5 minutes after 400 miles to top up with petrol/diesel.
A non starter is electric in more ways than one.

Just Imagine an electric formula one.
those pit stops take 10 seconds right now.
Lewis Hamilton would wait round for 10 hours.
I do not think so.

[careful] 07/5/2016 13:57

I was considering how these miners are valued.
RRS(gold) is priced at about 44pe.
In part it is about the value of its reserves.

applying a pe of 40 to LMI at todays price would need a EPS of about 5p to justify.
we know they have quality mines and decades of reserves.

the value of these assets is linked to the average price of PMG's throughout the life of the mine on a discounted cash flow basis.
Guessing an average platinum price of $1500/oz over the next ten years suggests that todays share price could be far to low.
I am thinking India,China the whole damn works.

[redbaron10] 07/5/2016 12:43

Only mentioned the 'o'-level bit to emphasize how old and decrepit i am .I need a set of jump-leads to get me going most days now.

[careful] 07/5/2016 09:16

The attitude for long term investors in LMI is different from traders.
A great future for PMG's going forward over the next 10 years and lmi has great assets to develop.
Even closed mines could be reopened if the PMG prices increase.

I see in todays Daily telegraph that Rio are to invest $5.3bn to further develop a Mongolian copper mine they jointly own.
it will reach full production in 2027.
The point is that the current copper price does not justify it, just as the current gas price does not justify Shells takeover of BG.

These projects will yield great riches to be sure in the future.
On the same basis LMI is way undervalued at £468m and its assts are understated.
take a 5-10 year view and you will probably do very well.

[careful] 07/5/2016 08:16

not maths just arithmetic.

[elvisrocks] 07/5/2016 06:41

Oh this is interesting on the maths, Ben says there are continuing moving parts to the story, the Pt price, XR and operating environment (safety stoppages). The accounting rules say you take to profit at average XR for the period, a problem is that the closing XR on Sept 30 which becomes the opening XR for Oct 1 was either 12.83 or 13.83 per my memory from the annual report when I looked for it last week. I'll see if my GCSE level maths hat can think that through any more.

[redbaron10] 06/5/2016 22:14

You're right careful,ancient history.Look forward to the future with lonmin,the history of this company since 2008 ish is a horror story.Fifty shades of brown! Comparatives can be useful though.

[redbaron10] 06/5/2016 22:05

Just for clarification,the reference point for my calculations is 21/1/2016 when pt was $820oz and xr R16.5:1 to todays pt $1080oz,xr R14.9:1

[careful] 06/5/2016 21:55

interesting but feb 9th is ancient history.
with luck the price of plat could hit $1100 next week ($1088 tonight.)

We can all wait a few days for the LMI interims and some real data.
it is possible that the PMG prices could surprise on the upside now that the fed interest rate moves look to be sidelined.

A stable fed kills off negative speculation of the physical metals. Who knows they may go long.
In these speculation driven markets another 10-20% upside could happen.
We would be off to the races in that event.

Volatility works both ways.

[redbaron10] 06/5/2016 21:46

Long time since my maths 'O'-level elvis but with my rough calculations,a$250oz increase from $820oz represents a 33% increase to the upside(profit).The negative downside as far as LMI balance sheet is concerned is SA rand decreasing from 16.5 :$1 to 14.5:$1 This is a 14% downside. In this scenario the pt increase is far more productive to our cause than the negative aspect of the rand on the overhead production costs.Ben and Lonmin are quids in.No sorry rands in.I may be totally wrong on this.Don't quote me.

[elvisrocks] 06/5/2016 21:17

Redbaron, what you are missing is that 12 weeks ago Big Ben said he "never would have thought he would celebrate with Pt at $920" but "that Lonmin were there or thereabouts" (in terms of breaking cash-even). The XR was then 16.5 but has now dropped to 14.5 whilst Pt has shot up, in other words Lonmin are still "there or thereabouts". The Rand has strengthened not weakened = problem. If you don't believe me, here are the articles.

[cudmore] 06/5/2016 15:54

Still waiting for that £2 target here

[redbaron10] 06/5/2016 15:13

Message is getting through!

[redbaron10] 06/5/2016 14:24

Unless i'm missing something,with pt up $250oz in 16 weeks,what's negative for Ben to report.If he and his management team have been doing their job,and the pt price only likely to go higher here without a US interest rate rise,the forward guidance and target must be positive.

[careful] 06/5/2016 11:24

it comes down to our confidence in Ben Magara the CEO.
i was impressed with him during the conference call.
We need a tidy strong balance sheet and ruthless cash control.
the plan was to concentate on the better lower cost shafts etc.

I am backing Ben Magara.
he is fighting the same battle all mining CEOs are fighting at this time.

good to see the platinum price rising a touch today.

[lazyhisnibs] 06/5/2016 11:07

Meaning that many recently challenged companies (great n' small) but with a sustainable business model could still be years away from making profits at headline level?

Assuming the restructuring is done to schedule (especially the shaft 'closures' and related voluntary redundancies) are the cash costs per oz likely to rise or fall?

[careful] 06/5/2016 10:43

lazy.
we all know that non cash items or 'provisions' have become meaningless.
net assets should be between $1500-1800m.
if they write down some more it may mean nothing.

the cash position is much more important.
as is average cost of production.
and the all important union relationships.

these non cash writedowns and provisions are making a farce of balance sheets.
see Tesco write down about £7bn off assets last year.
Look at the asset value of Next of just £312m against a cap of £8bn.
And Kaz the copper miner.
Net assets of $322M with a cap of $1050m

[lazyhisnibs] 06/5/2016 10:31

"PMG prices would not need to rocket as you say."

careful,

My response to your request for a guess regarding profit going forward is in brackets at the bottom of this post.

OK, the word rocket was a bit much but my point was that I 'guess' there will be provisions not just this year but next too. So, I'm guessing PGM prices would need to go up a lot more for Lonmin to be in profit in 2017 after provisions are applied. As to what is a 'lot' then even if an amateur like me did a half decent job of estimating on a spreadsheet it would still be a guess largely because of another wild card being the rand.

My interpretation of the last quarterly report was that putting shafts on to care and maintenance was going to plan which I'll admit surprised me but that relies on my memory being accurate including that management intended to close those identified by the end of 2016 which I took to mean the calendar year. If restructuring is going to plan then maybe you're right about another re-rate. Time will tell and in the mean time that Barclays target is a bit of a shocker. I get the impression institutions are often keen for targets to get in to the public domain. If my suspicions are right then it would be fairer if their assumptions also made it that far down the food chain. At least with UBS, their "through the cycle" argument in respect of the required platinum price made it down as far as people like you and I. (And Kojak who crunched it.)

---------------


From my previous post:-

(careful,

I'm not spreadsheeting this yet as I won't touch it again until management have completed the re-structuring. But you say guess so I would say an operating loss this year.

Unless PGM prices rocket next year (i.e. Lonmin's year) I suspect any operating profit will be provisioned away.)

[redbaron10] 06/5/2016 09:30

Sorry can't help.Putting anything Barclay's related in the same sentence with the word 'sensible' has me struggling!

[elvisrocks] 06/5/2016 09:08

Can anyone give me a sensible answer why BarCap have put a 25p target price on Lonmin this week?