ACEMAN's  Instablog

Nat Rothschild, continuing in a long line of family investors in mining going back to the late 18th century in London and Paris, formed his company VALLAR nearly a year ago to effect a deal regarding thermal coal for Chinese industrial uses.

As of November 19, 2010, the terms of a deal which has been agreed to by various parties has been signed.

VALLAR, a cash shell looking for the right investment and with its $3 Bn will buy into and exchange stock for controlling stock in two major thermal coal companies in Indonesia, owned jointly by PT Bumi Resources and PT Berau Coal.

Why this deal? Stripped down it comes to this: China needs thermal coal in the worst way to build the 10 to 20 new cities that it has planned and thus needs thermal coal to electrify these cities and make steel for buildings and infrastructure. All said and done, the capex calculations both on depreciation and amortization and capex to sales and the cost of mining and delivering the coal is significantly less costly than say coal from Australia, South Africa and Canada.

Also, India has just begun a similar plan to build in effect each year for the next twenty years what would be equivalent to one-third of the UK's electricity demands per year and thus needs mountains of thermal coal. Indonesian coal is easily accessible. Just look at your world atlas and you'll see.

How to get involved in this deal? You might pony up $150 million. If that doesn't work, VALLAR and the new entity will be listed on the LSE FTSE 100 as an Indonesian company, a first time for Indonesia and a real coup for the LSE.

ACEMAN a Paris


Disclosure: no positions

Y'all can be religious or agnostic about this or a non-believer, but is there such a thing as "perfection." Apparently so if you believe the latest quarterly results of the Holy Quadrivium namely, Citigroup, BOA, JPMorgan chase and Goldman Sachs. How does y'all measure a "Perfect Quarter" (see Bloomberg, 05/12/2010)? The standard appears to be "zero days of trading losses in the first quarter." This must be some sort of droll joke of some sort.Does the "standard" also include the TARP money, or rather handout, too. Is this involved in the measurement? I wonder how most investors must feel, knowing quite well that the losses they were playing against the house. Those of us who do make some hard cash know hard hard it is to be free of losses week after week, month after month. So I'd like to propose to y'all to storm these Trading/Banker Oligarchs wherever they sit and demand to see what sort of financial shenanigans are goin' on and also see if we can detect accounting gimmicks and fraud in their regulatory filings. If y'all believe in perfection, I'd make a bet that y'all believe in the tooth fairy, too.

Disclosure: No Positions

Y'all have to be a risk arbitrageur at heart to manage to stick with private Glencore, one of the world's largest commodities traders and owners of substantial interests in aluminum, bauxite, rare minerals and supply chain logistics. But the squeeze is on and the competition is fierce to grow the company and compete with the Big Boys, so once again it will try to merge via acquistion with XSRAY.PK (XSTRATA: London and Zurich) after being jilted by AAUKY.

Glencore already has a nice tranche of XSRAY, possibly 37%, and they do have a family inheritance that goes back to Marc Rich and friends. But the real objective will be the ability to go to the liquidity markets while trading off the resultant volatility as long as China's copper consumption remain strong. It's not unreasonable to see higher copper prices if traders think that there's a deficit in inventory in the future. Even copper scrap can't help enough.

Moreover, China, as the world's largest copper consumer wouldn't mind a third party in the mix to compete with RTP, BHP and et al while its copper appetite continues to grow over the next year.Y'all have to connect the dots on this one and place your money down and have patience as things hot up.

ACEMAN

Disclosure: Long BHP, RTP, XSRAY, AAUKY