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  • McRae Industries: This Company Is Hard Not To Like [View article]
    thanks for keeping their 10 year achievements in western/work boots into perspective... their results certainly blew the lights out..
    Mar 19, 2013. 06:14 PM | Likes Like |Link to Comment
  • The Truth About Robin Raina's Ebix: Part I [View article]
    let the operative business speak for itself.. I wouldnt even bother about rebuttal.. no managerial distractions... stay on course.. being a mini multinational gives them all reasons to act the way they have organized themselves.. microsoft also has a european headquarters in Zuerich and it makes sense for this US corp not to be dumb with its revenues and earnings generated by a global customer base. all power to thee.. ebix.. ..an article like this can serve as a good reference point for more due diligence.. I was just starting my due diligence on this this week as I had gotten out of the name after ADAM buyout.. couldnt figure out at the time what EBIX was worth.. now 2 plus years later this has evolved nicely wiht no appreciation by the market and yet the company and its business seem to have involved operatively speaking in satisfactory ways.... so I will use this short sellers writeup as a due diligence reference point.. software rollup stories sooner or later have to end up with some indigestion.. I remember the long waiting period in Practiceworks and eventually lots of rewards..
    Feb 21, 2013. 02:20 PM | 2 Likes Like |Link to Comment
  • Brazil Fast Food Is Substantially Undervalued And Has A Moat [View article]
    it was actually 2million reais with much of it paid out deferred.. so not a big deal. we will have one more thing to track... on the bright side of things at least they own this franchising system as opposed to managing market development for others as was the case with Doggis, KFC or Pizza Hut.

    According the the report below they are manufacturing their own yoghurt and have plans to expand.

    The issue of competition remains, and this has the impact on same store sales growth or sometimes lack thereof. Bobs is a much better place than when I first ate at a bob's in 2004. BK entry no doubt spoilt the party partially. there are however other burger concepts such as Boomerang which offer a very tasty product and its worth to track them. I dont think boomerang was around in 2004.

    IPO and LBO and private equity are important valuation drivers, especially in the retail centric brazilian capital markets.. The most popular IPO category I guess were pharmacies and before that maybe education stocks and real estate developers. what would have to happen before Bobs could go private and re-launch in Brazil as an IPO? Maybe a matter of 5 years? or somethign to be celebrated during the soccer world cup/ olympiadas interval? in the end though these are just capital markets fantasies.. what about same store sales growth the ultimate measure of market share, popularity, moat etc.

    http://bit.ly/YRStjv
    Jan 2, 2013. 10:10 AM | 1 Like Like |Link to Comment
  • Brazil Fast Food Is Substantially Undervalued And Has A Moat [View article]
    Another aspect going on here is Burger King owned by the Private Equity vehicle of Jorge Paulo Lemann... This is a serious competitor to be reckoned with particularly since BK has very aggressive roll-out plans in Brazil.. from that perspective, the 300K that BOBS saves with SEC filing fees come in handy.. Recently I walked by a newly opened Burger King on Ave Rio Branco in the centre of Rio and it was packed to the degree where I got annoyed at all these people loitering around on the public walkway outside the BK... BK is a new kid on the block in Brazil and getting lots of PR traction and also traction in the checkout counters.
    That being said, Bobs itself has had an agressive store remodeling plan and Image makeover and the results have been encouraging. Bob's stores today look a lot more inviting than they used to. This is a plus as it bats it out with the biggies like MacD and BK.
    Although I am a long time Bobs follower since the stock was at 1.50 in 2004. I have been less than sanguine about the ongoing increases in the minimum wages... next one is to kick in early in 2013. this will add further pressures. they will have to innovate more along the menu items to justify the price they are charging. Recently I picked up some pamphlets from McDonalds whereby they give away a 2 reais icecream with the purchase of any Menu... just another illustration of competitive discounting to keep the aisles filled. i was also shocked to see that my favorite giraffas icecream parlor anchored in an Extra supermarket had been pushed aside by McDonalds... McDonalds is clearly not content to lose market share to either Bobs or Burger King. nor Giraffas. So you may have the burger wars going on here in Brazilian turf just in the same style it happened in US 10 years ago. The olympics may be the opportunity for McDonalds to reassert its claim in Brazil as top dog. or Burger King will look to capitalize on this opportunity ahead of any more agressive posturing in capital markets through their reverse merger vehicle. The idea of moat as a keyword borrowed from Buffet is in a way a much abused way of describing the competitive landscape out there in the turf. The bobs reality is a lot less glorious than the number 2 position would suggest.. setting up stores and finding quality franchisees is a lot harder than appears. if I am not mistaken most of the Bobs location growth has come from opening small kiosks and icecream mini formats. This would suggest a certain degree of saturation in the core category of Bob's Burgers. Bobs is risking to expose itself on too many fronts, with doggis, yoggi, kiosks, etc. After reading about the yoggi purchase, I randomly seleced a yoggis at the shopping Iguatemi in Rio de Janeiro to check out what they have on offer. the product was nice but overpriced for the location where this store was located, cornered by a couple favelas and low to medium middle class neighborhoods. This is far from comprehensive and unless you see the P&L of a store like this or monitor a day or two what the store traffic really is you may not get conclusive results... one thing though that appears clear is that there is no shortage of burger and yogurt icecream concepts and parlors... my feeling was that the Yoggis purchase was a defensive move, but to be quite honest, I am quite happy with the core ice cream and shake categories at Bob's.. one would have to track their M&A and franchise partnering track record in more detail to know if they have a golden hand at this, or not. My feeling so far is that they might have been better off focusing all their efforts on Bob's and nothign but bob's instead of KFC, Pizza Hut, Doggis, Yoggis, in Boca al Lupo. or whatever it is called. These are major corporate distractions and didnt come for free for Bobs shareholders.... so deregister here to save 300K here but waste 10 to 20 million on some brash corporate M&A... could be an illustration of penny wise and dollar foolish. could be.. I havent understood the strategies with respect to any of these evolving brands in the portfolio nearly enough to really comment. KFC has got some presence in Rio. But it doesnt look like Bobs is in charge of KFC for all of Brazil. The same can be said about Pizza Hut which now sports some 100 or so point of sale in Brazil and is popular but Yum has retained much of this growth upside, while Bobs gets to develop territory in the greater sao paulo area. until Yum brands fully takes over the show..this is what it seems to me. Contracts and partnering agreements signed in 2007/9 just dont seem to me to be as firm as I had thought. Sounds to me more like partnering for as long as it is of interest to Yum Brands.. Thus in a way the partnering enthusiasm has waned, even as you claim multi brand fast food holding company.. you dont invest in something where you cant contractually keep the upside for 30-50 100 years... I would have to carefully review and revisit what is going on with any of these multi brand fast food properties that they now manage under their umbrella. i sold out my shares after the yoggis deal was announced and after checking out myself what they got themselves into with yoggis. its not something I would have paid the money they paid for. The deregistration will make the sharing of information elective, rather than mandatory. No doubt this will strengthen the bargaining power of insiders and managers vis a vis any partner organizations.. far from an illustration of moat though. if they had a moat they could remain public and push through any price volume deal with coca cola any way they like, but seriously, nobody in their right mind would put on Pepsi Cola in the soda fountain in Brazil. They just dont have the popularity for that.. likewise, if not Sadia meats, would these guys really want to put Aurora or Rezende meats in their burgers.. I doubt it. so the way it looks to me, Bob's has limited supply choices... unlike the vertically integrated McDo and BK. I am sure there will be some symbiotic relationship between a sadia and Bob's that results in a win win. you'd hope that it will be an increasing market share rather than a decreasing. Jorge Paulo Lemann has a nice farm outside rio and sure enough must be aware of farm economics and meat economy. whatever his plans are with BK and whatever his sourcing plans for BK as BK gains scale in Brazil watch those margins. BK is likely to reveal more about its operations and strategies through their reverse listing vehicle.. I forgot the name of it.. they recently reverse merged into the london listed SPAC formerly controlled by Bill Ackman.. and it will be listed in NY soon. So if Arcos Dorados is a pain in the neck publicity wise I sure would expect NYSE listed BK jointly owned by Bill Ackman and Jorge Paulo Lemann to become a big pain. If Giraffas, which has a clean crisp corporate concept is pushed aside by McDonalds, i think the same could in principle happen to Bobs once McDo and BK have figured out how they slice up the market. you dont see mcdo, bk or giraffas do any multi brand strategies.. mcdo is the closest as it gets with their coffee shops in Brazil. But even that is a low risk strategy for them as their coffees are anchored in existing Mcdo stores. There are no new lease commitments with that multi brand strategy.. but more of a genuine cross selling strategy.. to the mcdo core consumer.. now that you sell lunch and dinner to the mcdo consumer, why not also sell ice cream and coffee and breakfast. it kind of closes the loop in the one and same location. for increased revenue per store. as opposed to more revenues spread out over ever more stores (as is the case of Bobs). Bob's same store sales growth hasent really kept up with Brazilian inflation. So, there goes your market share as the middle class evolves. The key shortcoming of Bobs is that they sell to their customeres dry sandwiches/burgers while upselling them onthe sauces and molhos.. Each sandwich should come automatically with a sauce without the customer having to ask for it or upselling it.. This is a key way to square off withe the customer give that this is fast food. you dont want the customer to ever eat a dry sandwich without the sauce just because the customer felt he could not afford the 1.50 reais extra charge for adding a sauce to his burger. The sauce is very expensive compered to the price of burger.. if Bobs would stop playing aorund wiht their customer for that extra corporate sauce sale they sure would have a product out there that would be competitive. the way the product is presented to customer now, the customer experience is left to chances. its not like they should hand out 10 pouches of sauce to every customer but 1. that would be what I expect them to do and for 10 years already... this makes me believe that if Bobs upper management has been for 10 years disregarding basic consumer satisfaction principles, in favor of what they consider the corporate bottom line, there is just a tiny problem here in Houston. Maybe they need the generous corporate wallet of JP Lemann so as to give away those sauces for free so customers keep coming back with the biggest of smiles on their faces instead of squaring it off with a store rep of why this extra charge of the sauce of 1.50 is necessary or not... .with 1000 Bob's location, this could be a 2 billino reais revenue joint if it was run according to best of breed hospitality principles... nickle and diming customers and shareholders is bad policy.. penny wise, but dollar foolish.. that one customer or tourist who walks during soccer world cup into a Bobs and walks out with a dry sandwich because he didnt want to pay extra for a 1.50 sauce will be a customer lost for life. nuff said...
    Dec 31, 2012. 09:09 AM | 1 Like Like |Link to Comment
  • What Does Fairfax's Prem Watsa See In SandRidge Energy's Management? [View article]
    sure enough watsa owns something that is way ahead of common stock and hence you have to situate him more along the lines of a distressed investor. winning no matter what with a preferred return and such. Watsa made a great move on The Brick Ltd and other such companies in serious need of stabilizing capital. as to Tom Ward isnt this the guy who split ways with Aubrey McClendon of Chesapeake. There must even be a Carl Icahn connection deep in that corporate DNA. 100 dollar oil sounds great as I expect oil to crash to 50. looks very appetizing
    Dec 10, 2012. 02:41 PM | Likes Like |Link to Comment
  • Takeover Bids From Petronas And CNOOC Looking Riskier [View article]
    That is a brilliant analogy on George Orwell. Now I am starting to be in a holiday mood.. viterra, nexen and progress deals on the finishing lines. what more can I hope for. shaw-cbi is coming to a shareholder meeting dec 20.. hopefully crowning things. a very wide spread has narrowed substantially over nuclear irrationality.. I should start some sort of irrationality index. just to capture all the junk that people fart out of their mouths to fill the airwaves. The market is a basket case of irrationality.... pundits get the airwaves and bloggers and followers spew their hate mail at each other while the sweet smell of profits R'us
    Dec 10, 2012. 12:00 PM | Likes Like |Link to Comment
  • Takeover Bids From Petronas And CNOOC Looking Riskier [View article]
    yeah.. right... this is what I call generalizing things and fear mongering phobia. Evidently you dont invest in any of the names you just highlighted.... by the amount of negativity seen in yours and others comments, I still believe that upside prevails.

    Just look at Viterra deal closing today.. so much negativity priced in the deal just a few days agone and not it all puffed up in smoke..

    I think this accumulation of negativity has to do with the Mayan Calendar or other solar constellation and some people just would love it to call it a doomsday.. and that clock to December 21 I guess is ticking..

    So... I hope Harper doesnt lose any bit of his good sleep over this because it would be a shame. people look for 10 different reasons of why these SOEs are evil and of all thigns I didnt here yet was the SEC accountancy argument. Forcing any of these SOE companies to list their Canadian affiliates on the TSX as offered in undertakings supposedly by Progress and Nexen will be a mere travesty. A charade to make regulators happy and send a few buckets of fees to the advisory and legal guild. Its not something the auditors of privately held firms could not resolve on canadian soil. After all these are resource companies and if they break the law, you swoop up their resource assets and physical asset installations, such as oil sands upgraders, pipelines or LNG export trains.. This SEC accountancy argument rings very hollow at best with regards to specific application to Energy companies which by default have a capital intensity (high mechanization of extraction) and by default have to be strong capitalized.

    Any better reasons why not to open the door to SOEs willing to undertake the investments that Canadians arent willing to fund with their own pocketbook? Canadians are good and prospecting, exploring, putting the deals together. As regards to exploitation and commercializations better leave it to the guys willing to put up the capital and lots of it. Its funny that you bring this accountancy argument to SOEs.. you could just as well bring it up to any junior mining company traded on venture exchanges in vancouver or toronto..

    The accountancy argument by the way is covered by the provisions that SOE companies have to behave as legit commercial entities.. So, in case you are aware of it the first transfer pricing dispute in Canadian Courts involves Glaxo Smith Kline (GSK) in a case where they import active ingredient for pharma (API) from Singapore and overbilling canadian sub at absurd prices so as to have little tax in Canada and maximum lucre in singapore where almosts no taxes are paid anyway.. there is a long list of transfer pricing disputes that have not yet made it to the supreme court.. so stay tuned.. The SEC is a poor place for the Revenue Agency of Canada to resolve these issues.. When the time is right and if disputes should exist, some other venue is aptly equipped to hear the case, if something is at stake for Canada.

    People at this point come up with all kinds of thinly veiled excuses of why SOEs are dangerous.. .. The other day Bloomberg ran a story that Harper was debriefed about the key assets CNOOC would acquire with Nexen in the UK> well boy, isnt that a UK regulatory question to resolve? And it doesnt look like they have claimed jurisdictional responsibility.. I guess the UK has lots of other more pressing issues to consider as to which foreign player now controls the Buzzard field. I clearly dont expect Harper to chime in on that debate of what happens in UK. Even as some pundits think this is relevant in the evaluation of the net benefit to canada evaluation.. needless to say its a completely twisted argument.. a travesty of a sick government mind at best.
    Dec 7, 2012. 09:57 AM | Likes Like |Link to Comment
  • Rockwood Bids To Swallow Talison Lithium After Talison Swallowed Salares [View article]
    not so fast.. looks like someone stole the cheese here..

    Chengdu 1 : Rockwood 0

    That is a quite daring turn of events given how US has greatly dominated this space for many years and everything was poised for ROC to even have a bigger market share than they already had.

    That is one coup for the Chinese...
    Dec 6, 2012. 05:29 PM | Likes Like |Link to Comment
  • Sinopec's M&A - A Front For China's Larger Oil Game [View article]
    Here is a somewhat contrarian take on the Total exit from this offshore field. Total is not exactly part of the dumb money oil supply chain. There is probably reason why they exited a supposedly lucrative and new oilfield.

    http://bit.ly/TJBy2W

    There is also a technology element to this deal, which should be of benefit to Sinopec/China.

    http://bit.ly/UgAHmM

    They'll probably reverse engineer the floating production platform and mass produce in the future Made in China. This is a state of the art piece of hardware commissioned in 2008 with input from many top technology suppliers and delivered in late 2011. Presumably it has all the bells and whistles, even if it were ultimately not to produce in Nigeria. The interesting part here is that the 20% stake also is the operating stake. So a minority investments is getting them access to the full monty.

    This particular project is not affected by Nigerian floods as there is no exposure to onshore.

    On the other hand we do not very well know how this project is ramping up production wise. Is it a disappointment. Will the Nigerian government honor leases for production sharing entered under sweetheart deals? already sometime back the orignal 222 lease was halved in acreage to its current OML 138 size, with the other share of the acreage becoming OML 139. Do the same terms apply to OML 139 as applied to 222? Probably not. This is merely an illustration of post signing modification of existing leases.

    They leases might be left as is but overall tax regimes for offshore may be about to change. That would clearly alter the economics of the project as a whole.

    For the fun of things, Shell and some of its partners are exiting another Nigerian venture alltogether and this is just their official press release announcing the event. The underlying reasons for Shell getting out should be probed in further detail. All of these players highlight in their PR the many decades that they have been doing business in Nigeria, so nobody keeps even thinking that this is the end to their Nigeria plans. Time will tell if this is so.

    Royal Dutch Shell plc: SPDC Completes Sale of Nigerian OML

    [03-September-2012]

    THE HAGUE, the Netherlands, September 3, 2012 /PRNewswire/ –

    Shell Petroleum Development Company of Nigeria Limited (SPDC), a subsidiary of Royal Dutch Shell plc (Shell) (NYSE: RDS.A)(NYSE: RDS.B), completed on August 31st 2012 the assignment of its 30% interest in Oil Mining Lease (OML) 40 in the Niger Delta to Elcrest Exploration and Production Nigeria Limited. Total cash proceeds for SPDC amount to some US$102million.

    This divestment is part of Shell’s strategy of refocusing its onshore interests in Nigeria and in line with the Federal Government of Nigeria’s aim of developing Nigerian companies in the country’s upstream oil and gas business. Including this license, six onshore lease assignments have been completed by SPDC in Nigeria since 2010.

    “These divestments mark another step in the strategy to re-focus the SPDC portfolio. SPDC is positioned well for investment and growth opportunities in all areas, including domestic gas, which will be delivered with the support of our government, partners and the people of Nigeria” said Mutiu Sunmonu, Country Chairman in Nigeria.

    Shell has been in Nigeria for more than 50 years and remains committed to keeping a long-term presence there – both onshore and offshore. Through SPDC and its other Nigerian companies, it responsibly produces the oil and gas needed to fuel the economic and industrial growth that generates wealth for the nation and jobs for Nigerians.

    Elcrest Exploration and Production Nigeria Limited is a majority Nigerian-owned consortium consisting of Starcrest Nigeria Energy Limited and Eland Oil and Gas Limited. OML 40 covers an area of some 498 square kilometres and includes the Opuama, Abiala and Adagbassa Creek fields and related facilities. Operations had been shut down since 2006 because of militant activity.

    Total E&P Nigeria Limited (10%) and Nigerian Agip Oil Company Limited (5%) have also assigned their interests in the lease, ultimately giving the buyers a 45% interest.

    All approvals have been received from the relevant authorities of the Federal Government of Nigeria and the Nigerian National Petroleum Corporation.
    Dec 6, 2012. 08:13 AM | Likes Like |Link to Comment
  • Screening For Shareholder Composition: 30 Strange Stocks [View article]
    you've got yourself a compilation of market beating stocks.. at least the companies I have familiarity with look good as value trap selections. value traps more often than not do not turn out that trapped if there is real value in balance sheet... its more a patience game and negotiation game.. Even my disfunctional value trap TREK Resources is making me money after all these years.. I will have to go through your list and update myself on these flagged strange situations.. of all names you flagged, DVLN is the one I have most current familiarity and they sure are in bed with Dr. Strangelove. But so far it has not hurt the stock performance in the past 3 years. i have been involved with them for 6 years plus... for the record.. making money on all my purchases but this has not always been the case.. long term though is the idea with that particular name... DVLN's got an intrinsic value of at least 10,000 USD per share and current book value per share of over 5,500.. unbelievable to think that at one point the stock was trading as low as 650 bucks per share, (after undertaking a 1 for 7500 reverse split).. I am curious to see what other name made it into your strangeness screen.. I am kind of disappointed that SNFCA didnt make it.. possibly becaause of their disfunctional A&C class share structure.. with the C shares not publicly traded at all, hence not easily screenable. But that is an idea for another screen... screen for strange companies with a share class that is not traded but holding a large part of the economic and voting control. I'd be curious what companies pop up other than SNFCA... anyway. your compilation is worth GOLD.. congrats for sharing it with us.
    Dec 3, 2012. 07:15 AM | Likes Like |Link to Comment
  • There Is Still Time For A 27% Return On The Nexen Deal [View article]
    The last massive upgrader project undertaken in Canada and almost of symbolic proportions is the Syncrude upgrader where lots of companies have a stake, including Nexen including Sinopec. et al. Long Lake could be tooled into a massive upgrader project of the type that Syncrude is but this does require capital and vision, none of which were apparent at Nexen itself or otherwise in Canadian oil sands landscape.. Otherwise the 8-10 degree API bitumen would leave canada as 35 degree API, for the bulk of the volume produced.

    That would be the real benefit to the Canadian oil patch.

    to me the Nexen / CNOOc deal looks inherently approvable because I see a very high likelihood that it moves CAnada into the direction of producing more upgraded oil product and hence allowing for better royalty capture. more upgrading means more royalty capture.. otherwise nobody would be talking about a goal of having 2/3rd of oil sands upgraded in canada by a certain date..

    There are now some emerging rumors swirling in the press that CNOOC should be force to divest the 7-9% Syncrude stake as part of any eventual approval. If that is what is needed to get approval so be it. I am sure CNOOC will be a lot more interested to own and operate their own 100% upgrader with 360,000 BOPD capacity than to be part of a joint venture with no operating involvement. Syncrude represents the past. and Canadian like to hang on with a weeping eye to the past. Ultimately... CNOOC is in this to make a serious buck on this for themselves and there are many ways to do this. Selling Syncrude stake at a non commercial price at some point could become a deal breaker if this was demanded..
    Nov 28, 2012. 11:40 AM | Likes Like |Link to Comment
  • There Is Still Time For A 27% Return On The Nexen Deal [View article]
    Sinopec owns a piece of Nigeria oil field, not Long Lake.
    CNOOc owns a JV interest in Long Lake

    (Sinopec is the same firm that bought Daylight, gaining natural gas acreage).

    The issue of Long Lake is bad geology. Although hydrocarbons are there, the stuff I believe is 2000 ft below the surface. This is very different than surface mining of deposits that are 150-200 feet below ground or stuff in that depth dug out by SAGD.

    in other words not all oil sands deposits are born equal.

    Athabasca oil sands is a project that is reasonably close to the surface, thus lending itself to surface mining and easy SAGD.

    That being said, under CNOOC ownership, I think Nexen would do just what everybody is not doing in Canada, namely build upgrader capacity..

    Currently only about 26% of the bitumen dug out of the ground in Canada is upgraded into 32-39 degree API upgraded product.

    The goal, i dont remember if it was alberta or of canada as a whole, was to have at least 2/3rd of bitumen from oil sands upgraded by a certain deadline that again escapes me.

    the Long Lake project although way above cost and not efficient through its own project is interesting from the perspective that any ultimate owner of this project on a 100% basis can decide to crank up capital expenditures of the upgrader from 70,000 BOPD all the way to 360,000.... BOPD...

    instead of trying to get in a tortuous effort bitumen out of long lake themselves (they get about 33,000 BOPd on their own), they could simply buy bitumen in the merchant market at a huge discount to WTI and create a huge cracking spread at their upgraders.

    I think this could be a very legit ultimate game plan. oil, hydrocarbons ultimately stay in canada but under a serious and committed owner (CNOOC) Canada finally gets more investment into merchant upgrader capacity and CNOOC will still have to look who supplies to it the bitumen, if there is no economic way to get it out of the ground themselves. Evidently this scenario doesnt envision investment in a full scale refinery but sure enough a lot more upgrading capacity.. moving the product up from 8-10 degree API to 39 degree API is almost akin to creating the value from refining.

    It does require some out of the box thinking state owned enterprise to go forward with such counterintuitive capex plans. after all, Shell canada or Exxon would not just build a upgrader with massive capacity, for others in the Canadian oil sands patch to be using on a toll basis.

    I dont think anyone is seriously thinking at the many opportunities that exist within Nexen once really innovative thinking is applied at existing operations, processes and assets.

    And yes, you do need capital and lots of it to get these projects moving off the ground. Why is nobody investing in upgraders even in Alberta.. Because it is much less capital intensive to stuff it into a pipeline and ship it to the gulf coast. Where someone else will reap the absurd margin for themselves of buying dilluted bitumen at big discount, and upgrading and refining it into some high value stuff to be sold in a global market.

    Nexen and Progress deals are just illustrative of the lack of visions in the Canadian oil patch which tends to be dominated by IOCs to begin with.

    IOC I believe are afraid that under increased Chinese ownership, these firms will perform a lot better and leave more value on the ground in Canada for local tax collector to collect et al.
    Nov 28, 2012. 11:20 AM | Likes Like |Link to Comment
  • There Is Still Time For A 27% Return On The Nexen Deal [View article]
    A very thoughtful article on an interesting strategy most people on this board have never thought of and accordingly do not give due credit.. anyway.. good article..

    now, the negativity by the bloggers continues as adequately expressed on this thread.. this tells me that your option strategy is just the way to go on this one.

    Most of the folks with a real job cant actually be bother about this vitriolic resource nationalism that captivates the mass media in Canada.. controversy is nice and good but in the end you dont get anything done anymore.. NO doubt NDP posters must be very active making noise against the deal and indeed it must be 90% of the deal reactions.. just like the Conservatives were smart enough
    to rally support at the last election and make sure voters would turn out, so has the NDP grown up in mobilizing its minions to post junk science on different forums.

    In the end with this cacophony of opinions, S. harper and his Gov will do what least anyone would expect and this seems well captured in the options trade suggested here.

    so thanks for pointing this almost obvious one to seize on this opportunity.

    Through this whole foreign investment episode in Canada it becomes very clear that China and other foreign reserve savers should not laving their hard earned dollars on stupid, second rate properties that are hard to turn a buck on. 90% of the commentators dont have any good understanding what Nexen assets are all about to begin with. This is where it gets funny. I havent heart any relevant comments with regards to Nexen oil sands operations, relating to technology embedded in this company or even any thoughtful commentaries about the upgraders which they run and that typically would help understand the investment in the right context.

    In the end running an oil sands upgrader in Long Lake means exactly what? How likely is upgraded oil sands product to be shipped via a rockies heavy crude pipeline to the West Coast or directly to China? These are important questions to be answered because you would cut out right there on the whole China investmetn in Canada phobia.. the Long Lake upgrader presumably produces an 38-39 degree API product.. How likely is it that such value added upgraded product will be mixed with Bitumen for the overseas China trade... IN my opinion not likely at all. IN fact, Nexen says it in its annual report that all the Nexen oil sands oil flows via Hardisty pipeline into US and Canada..

    Seen from that perspective, if the Chinese can turn around this Nexen oil sands project in CAnada, probably the most legit hydrocarbon asset they own in Canada, then the resulting hydrocarbons are bound to remain almost certainly in Canada and USA. There is just no easy way for this 39 degree high quality product to be going into another market in an easy fashion.

    These are all theoretical considerations. The fact is Long Lake is not an easy to exploit resource asset. Otherwise Suncor would not have divested their JV stake back in 2000 or so. Suncor was the original JV partner next to Opti Inc.. on a 50-50 basis. The history of Long Lake is a troubled one and not much progress has occurred in 12-14 years running.

    So, Harper. go ahead and approve this deal in good conscience.. With Chinese investment this is more likely than not to preserve Canadian jobs, than if the asset was left in the hands of Suncor, Nexen or any other Canadian steward of these types of properties.

    For CNOOC this will be a nice apprenticeship. to be operating for the first time a real oil sands project, but this is not a task where anyone will envy them. The lessons they will learn from operating oil sands are not easily applicable in China as Chinese oil sands structure have deteriorated over time through exposure of hydrocarbons to oxidation... No doubt CNOOC will work hard to make this Long Lake thing work against all odds. And by doing so they will look like a very efficient SOE.. this is all of the visionary stuff underlying this particular deal.

    The important thing here is that you have a company CNOOC willing to invest another 5-8 billion into this Long Lake to try to get it to the stated capacity of around 360,000 BOPD... versus 70,000 or less right now.. notice that in the last quarter.. Nexen only internally generated from oil sands about 33,000 BOPD while another 30,000 BOPD of bitumen was purchased from third parties.. This is so they could run their upgraders efficiently.. Nexen is far from an efficient producer at what they are doing in Canada. Given that Total just sold its 20% interest in Nigeria oil field to Sinopec for 2.5 billion and Nexen owns a similar 20% stake in that same Nigeria oil field, we at least know that Nexen has assets that are worth something to someone... and at a minimum can be sold to a Chinese state owned oil company, of the type of Sinopec or CNOOC... well.. how about they then just accept CNOOC as the winning bidder for this whole set of assets to begin with.

    CNOOC bought the Opti Inc assets from creditors at what amounted to 75 cents on the dollar of debt with a token value chipped in for shareholders just to get the scheme of arrangement done. Opti at the time owned 35% of Long Lake.. No doubt, this Long Lake needs still so much capital to boost production to anywhere near economic viability.

    This deal very much to me appears of net benefit to Canada. IN whatever way these cNOOC guys make sense of the underlying assets, it will be better than shutting them down alltogether. This might be a legit option that Nexen and Opti/CNOOC would have to face at some point if oil prices take a tumble. People do not sufficiently factor into the scenario the opportunity of a global recession and a major drop in oil prices that wont make projects like Long Lake viable for at least a decade..

    end of story..
    Nov 27, 2012. 07:37 AM | 2 Likes Like |Link to Comment
  • Tronox: This 4.4% Dividend Yield Equity Trades At A Bargain 5x Earnings [View article]
    That is right... as you can see though from the ill informed posts on this board, the average US investor getting attracted by such opportunities as TROX is a ho-hum-and a bottle of rum type investors that sees environmental harm as a source of profit. TROX did get restructured because of a shoddy operating history of its own, principally in the US. The naive view is that environmental liabilities can be settled in court or out of court. So, from an investors standpoint, I havent met yet anyone who actually would have bothered to read the lengthy documentation that underlies the various components of the project in Mtunzini. And yet these documents are all publicly available.. But this would be way too complicated for the guys of Imperial Capital and other market making cheerleaders to analyze and incorporate in their analysis.. This is way beyond what is customarily expected in post bankruptcy research, even in the US and from such firms as IMperial or Jefferies. what you can say in the end is that ample warning on due diligence flags was given but as you can see it mostly falls onto deaf ears, and yet people have a hard time to understand why the stock is off 50% since the merger was completed. People focus on fairy tale logic such as a stable dividend, gargantuan Net Operating Loss carryforward of supposed cash from a settlement with former parent co on environmental liabilities (actually TROX would only get a tax benefit but no cash payout). If you can Mtunzini99, you should post the links to all the electronic data files on these projects that are available through various sources. You have to admit that the SA mining permitting process is a very complicated beast for the outsider to understand. Your average event driven investor doesnt study the social and environmental impacts of what they get involved, but they do care once something has taken the stage of a lawsuit with monetary damages going against a company. Wall Street in other words is incredibly reactive and short term thinking in nature.. None of the TROX investors cares what Mtunzini looks in 10 years.. they literally could not care less. Even though it should be part of a very informed due diligence to say the least.

    If I may ask you, what do you see as alternative mining methods, if TROX were to skip the existing BAR and go for a full scoping study. There will be folks that are interested in a high volatility situation such as this when all the bad news is really priced in, which is not really the case at this point. What are the alternative mining methods that could be applied to this and would this result in a reduced scope of the mine itself, thus leading to reduced reserve live and reduced Net Present Value for just that part of the TROX mining project. I am sure that the economics will be still good enough if the project ultimately costs 1 billion and the mining life is reduced to 8 years by just digging out the best parts of the ore. This may though not be return maximising to TROX and its shareholders.. Hence clearly a desire of TROX and predecessors to fight this tooth and nail because a 20-50 million public relations and regulatory budget to push it through and buy everyone off along the way is a lot cheaper than 300-400 million in added expenses and 3-4 years reduced mining life.

    Are the Fairtalk PR pieces still circulated by the company highlighting the benefits of the project to the community?
    Nov 19, 2012. 06:29 AM | Likes Like |Link to Comment
  • Tronox: This 4.4% Dividend Yield Equity Trades At A Bargain 5x Earnings [View article]
    The just published earnings report is worth pondering on, coupled with temporary delays at Fairbreeze (injunctions?)... The demand shoe has not yet dropped but any manifestation thereof will not be taken lightly. As far as share buybacks go, Trox has fired its ammunition. Otherwise it will soon life exxaro above the 45% share level which they cant. This thing has now officially dropped 50%¨in value since I first circled in on this with commentaries made in June July on Trox articles. I am not sure yet that the problems highlighted earlier are yet manifest. Its a 2013 story for cost issues to show up and bottlenecks to be visible. The stock though hasnt acted lightly on minor developments. EBITDA still looked OK. Rio bought some assets from BHP to get their hands on reserves. prices are still saving the day. Harold Simmons exiting his titaniums metals business could be viewed as a bearish signal on one part of the consumption industry, although not the one related to pigments. Glad I sold my warrants on the mere intuition. One quarter is not yet enough for me to retest any of these waters. I dont understand the SA permitting process enough to even know how much local conservancies can stand in the way of their expansion projects. So far it looks like they are pushing this into 2013.. Stalling tactics that shareholders have not much reason to like. Only a drop in demand will save the day operationally but this will not be great for revenues. nuff said.. No special dividend so far. Weak stock price is not just related to TROX but also other pigment producers. KRO didnt look too strong. HUN was the bright spot. TROX Finance LLC bonds dropped under par, to 98 and change. Once they deploy the cash into offshore projects things will start to get more interesting. I clearly hear no $60 Trox calls no more but this is what I aim for in the bonds as a trigger to look in earnest how they are doing. Trox bonds at 60 would only give a yield of 11-12% to bond holders. God knows where the stock will be when bonds are at 60 cents on dollar. Short term there could be a dead cat bounce, as the manifested EBITDA numbers didnt sound yet like carnage.. as it rolls forward that picture though should further deteriorate. The best price signal of investor fear would be if the bonds start to sell really off into 2013 without Trox redeploying any of its cash into SA.. after all they do have the choice when and if to allocate to SA and the market will thank them for taking the time to only proceed once all things fall into place. Just because they did a deal and raised the debt financing doesnt mean you have to follow through on your own juvenile follies. Possibly by the time carnage in the industry is manifest, that $800 million cash hoard with buy you plenty of fine producing reserve assets in friendlier jurisdictions. The SA projects in my view has to be finances with SA lending sources.. Only they understand the risks inherent in their peculiar mining sector to underwrite those risks appropriately. Let the Exxaro directors figure this one out and work hard for their money. It shouldnt be a free ride for them.
    Nov 13, 2012. 07:27 PM | Likes Like |Link to Comment
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