Friday, December 26, 2014
- Spurred by hopes China's efforts to relax lending rules are a sign that broader (inflation-boosting) stimulus efforts are on tap, gold and silver prices are rallying, and taking the shares of miners up with them. COMEX gold is up 1.8% to $1,194.50/oz., and COMEX silver is up 2.5% to $16.11/oz. GLD +1.7%. SLV +2.2%.
- Gold stocks: AUY +3%. GG +4.6%. AGI +4.1%. ABX +3.4%. KGC +3.7%. GFI +3.7%.
- Silver stocks: SLW +2.3%. SSRI +6.9%. PAAS +1.9%. AG +3.6%. CDE +4.1%. HL +4.2%. SVM +6.8%. EXK +5.4%. TAHO +5.3%.
- Like many other commodities names, the group was hit hard a month ago when crude prices plunged in response to OPEC's decision to leave oil production unchanged.
- ETFs: AGQ, IAU, USLV, SIVR, SGOL, ZSL, UGL, DGP, GLL, UGLD, DZZ, SLVO, GLDI, DSLV, OUNZ, DGL, DBS, DGZ, DGLD, AGOL, TBAR, USV, UBG, GLDE, BAR, GYEN, GEUR, BARS, GGBP
Wednesday, December 24, 2014
- Iamgold (NYSE:IAG) is on the lookout for acquisitions and is open to being acquired itself in 2015, fueled by a $500M cash injection from the pending sale of a Canadian mine, as the precious metals mining industry adjusts to a lower-price reality, CEO Steve Letwin says.
- The miner is in active discussions about potential transactions valued at ~$800M alone and larger deals with a partner, the CEO says.
- IAG, which has mines in Burkina Faso, Canada and Suriname, will target assets with all-in sustaining costs of $1,000/oz. after reporting costs of $1,115/oz. in Q3.
- Letwin says he expects consolidation will pick up across the industry next year as managements and boards adjust to the idea that gold prices and equity valuations may be lower for longer.
- Monsanto (MON -1.3%) is downgraded to Neutral from Buy at Miller Tabak, which believes it is time for investors to cash in before increased product competition comes back into focus.
- While the firm thinks forward purchasing by farmers was slower this year, partly due to commodity price uncertainty and a delayed harvest, it notes that MON had flagged during its Q4 conference call that Q1 2015 earnings would fall ~50% Y/Y.
- Tabak also thinks MON will need to work harder to maintain global market share compared to the past three years, and thus does not see Q1 earnings as a major market mover for shares.
- Crude oil losses mount in the wake of a surprise buildup of oil inventories, as the EIA reported that inventories rose by 7.3M barrels in the week ending Dec. 19; consensus had called for a draw of 2.4M.
- Oil prices have been slammed since mid-summer by oversupply concerns, and today Nymex -2.3% to $55.81/bbl and Brent -2.7% at $60.02.
- U.S. energy stocks are under pressure; the Energy Select Sector SPDR (NYSEARCA:XLE) -1.2% while the broader market is higher.
- ETFs: USO, OIL, UCO, ERX, VDE, OIH, SCO, XOP, ERY, DIG, BNO, DTO, DBO, DUG, IYE, XES, IEO, CRUD, IEZ, UWTI, PXE, USL, FENY, DWTI, PXJ, DNO, RYE, SZO, FXN, OLO, DDG, OLEM, TWTI
- LSB Industries (NYSE:LXU) says Jack Golsen, chairman of the board and CEO as well as the founder of the company, will step down as CEO and assume the role of executive chairman, effective Jan. 1.
- Barry Golsen, currently vice chairman, president and COO, will become president and CEO.
- Golsen founded LSB Industries in 1969 and has served as chairman of the board and CEO since the company's inception.
Tuesday, December 23, 2014
- Canadian Natural Resources (CNQ +2%) says it has stopped pumping steam into a well at its Wolf Lake facility in Alberta when oil products started leaking into an aquifer.
- CNQ first reported a casing break in one of the thermal wells at Wolf Lake on Oct. 29, which is when the company stopped steaming at the site; the Alberta Energy Regulator says the incident did not meet its posting criteria at the time because it did not impact a water body.
- Neither the company nor the regulator knows how much benzene had leaked into the underground aquifer, which alternates between pumping steam into the earth and pumping bitumen out of it.
- DuPont (DD +1.6%) and Monsanto (MON +0.6%) say they have agreed to settle their long-running technology dispute and dismiss their respective patent infringement lawsuits pending in court.
- The litigation related to claims by MON that DD had infringed certain MON seed chipping patents and claims by DD that MON had infringed certain DD patents related to seed processing.
- Terms of the settlement are not disclosed.
- The new tax laws in Zambia could turn out to be a positive for First Quantum Minerals (OTCPK:FQVLF) even as high-cost producers such as Barrick Gold (NYSE:ABX) begin to close operations, CIBC analyst Tom Meyer says.
- Zambia's budget, which included a revision to the mining tax scheme that would require open pit miners to pay a 20% mineral royalty tax, was passed on Dec. 17 and First Quantum’s stock has come under pressure since ~40% of the company’s operating base is located in the country.
- "As a low cost producer in Zambia, First Quantum could be a net beneficiary of the new system,” Meyer says, adding that a comparison of effective tax rates under the two systems "shows that the new system is increasingly favorable for the miners when the copper price is rising.”
9:59 AM| 5 Comments
- Freeport McMoRan (NYSE:FCX) needs to build two Indonesian copper smelters for ~$4B by 2020, a government official says as talks resume over the miner's future in the country.
- As part of July's MOU with Indonesia's government that ended a six-month tax dispute and paved the way for the resumption of copper concentrate exports, FCX agreed to develop a $2.3B smelter by 2017; the government is now asking the company to build a second smelter by 2020 for another ~$1.5B.
- FCX is working with Newmont Mining (NYSE:NEM) on the building of the first smelter, which is expected to process 1.6M metric tons/year of copper concentrate into copper cathode.
Monday, December 22, 2014
- Global iron ore producers fell today after Australia's Department of Industry slashed its iron ore price estimate by a third due to surging output, which has outpaced Chinese demand and growth, creating a surplus.
- Iron ore prices will average $63/metric ton, vs. $94/ton forecast in September and this year's expected average of ~$88, according to the government's latest quarterly report.
- Ore with 62% content delivered to Qingdao, China, fell 1.8% to $67.90/metric ton, the lowest price since June 2009 and extending this year’s rout to 50%.
- Not everyone is quite so gloomy: Prices appear oversold and there’s potential for a relief rally in H2 2015, Australia & New Zealand Banking says, forecast iron ore to average $80/ton, noting that any recovery will be driven by supply cuts, including high-cost mines in China, where the industry is losing at current prices.
- During today's trading: BHP -2%, RIO -1.8%, VALE -0.6%, CLF -7.9%.
- There's not much happening with the equity averages, but crude oil is back on the move, down 3% to $55.40 per barrel. USO -4.75%. Gold's slipping as well, off 1.1% to $1,182 per ounce.
- Looking more broadly, the Bloomberg Commodities Index has returned to a level not seen since May 2009. Coffee owners, however, are in high cotton - up 57.5% YTD. I's the best asset market investment of 2014, beating out #2 - the Shanghai Composite - by more than 1.4K basis points.
- Broad commodity ETFs: DBC, DJP, GSG, RJI, GCC, USCI, GSC, GSP, RGRC, DJCI, LSC, DEE, UCI, FTGC, CMD, DYY, BCM, DDP, UCD, CMDT, COMT, DPU, SBV, CSCB, PDBC, CSCR
- South Korea says it has filed a complaint with the WTO seeking to nullify U.S. tariffs levied on imports of certain Korean steel products.
- The U.S. Commerce Department in July imposed tariffs of up to 16% on South Korean steel pipes and tubes used for oil drilling in response to the alleged dumping of steel products in the U.S., and the International Trade Commission confirmed the tariffs in August in what was viewed as a victory for U.S. steelmakers (NYSEARCA:SLX).
- Related stocks: X -5.4%, AKS -5.7%, NUE +0.2%, STLD -1.1%.
- Natural gas prices fall 9.5% to near two-year lows at $3.133/mmBtu, in the biggest one-day percentage loss since February and the lowest intraday price since January 2013, on mild weather forecasts and inventory that is above year-ago levels.
- Prices are now down more than 15% in three straight losing sessions and are 30% lower than the six-month high closing price of $4.489/mmBtu it hit just a month ago.
- Weather has been unseasonably warm for December, limiting demand for home heating and allowing relatively low stockpiles to catch up to where they were a year ago and encouraging traders to sell based on the belief that supply is relatively healthy.
- Gas producers are among the biggest early decliners: XOM -1.1%, CHK -7.3%, APC -2.6%, SWN -6%, DVN -2.2%, COP -2.3%, BP -1.5%, COG -4%, BHP -1.9%, CVX -1.3%, ECA -5.1%, EQT -4.3%, RDS.A -1.7%, UPL -12%, WPX -6.9%, EOG -1%, OXY -1.1%, RRC -6.1%, APA -2.3%, AR -3.2%, CNX -3%, QEP -4.8%, LINE -4.9%, NBL -1.6%, SM -2.6%, XEC -4.2%, PXD -2.9%, NFX -5.1%.
- ETFs: UNG, DGAZ, UGAZ, BOIL, GAZ, FCG, GASL, KOLD, UNL, NAGS, DCNG
Friday, December 19, 2014
- S&W Seed (NASDAQ:SANW) agrees to acquire of all of DuPont Pioneer's (NYSE:DD) alfalfa production and research facility assets, as well as all non-GMO alfalfa germplasm, for up to $42M.
- S&W also agrees to be DuPont Pioneer's sole supplier of alfalfa seed through 2024.
- S&W expects the alfalfa business to contribute $26M of incremental annual revenues in FY 2015 and $40M in FY 2016.
- Paragon Shipping (PRGN +10.2%) shares are substantially undervalued and could double next year, Maxim Group analysts say in naming PRGN as the top pick among dry bulk shippers for 2015.
- The firm notes that supply/demand balance in the Panamax fleet should be bolstered by increased coal shipments and exports of U.S. grain to China.
- Based on its estimated balance sheet and fleet for 2015, Maxim calculates a forward NAV of $8.12, implying that PRGN trades at ~0.29x estimates.; the firm's $6 price target implies a 0.74x multiple of the estimated NAV.
- Potash (POT +1.9%) is upgraded to Buy from Neutral with a $40 price target, up from $38, at UBS, citing the company's strong dividend and improving free cash flow.
- UBS says the planned closure of Mosaic's Carlsbad operations in Jan. 2015 and the current flood at Uralkali's Solikamsk-2 mine could remove 2.4M -3.4M metric tons of combined capacity from the market and provides an opportunity for POT to gain more volumes, which also could lead to higher pricing.
- POT’s dividend yields ~4%, and UBS believes it provides downside protection given that the dividend can be funded even if potash prices remain flat; the firm thinks that over time POT may be able to return excess cash to shareholders through an increased dividend or further share repurchases.
- Other potash producers are higher: MOS +2%, AGU +0.4%, IPI +2.6%.
- WTI crude oil has nearly recouped the week's losses today, up 4.5% to $56.80 per barrel. The move, however, doesn't even register on a daily chart.
- Next year? Former WSJ energy reporter Ben Casselman takes to the FiveThirtyEight blog to remind that when he picked up the oil & gas beat in 2008, there was only one thing the experts agreed on: "U.S. oil production was in permanent, terminal decline ... No one has any idea what oil prices will do.”
- ETFs: USO, OIL, UCO, SCO, BNO, UGA, DTO, DBO, CRUD, UWTI, USL, DWTI, UHN, DNO, SZO, OLO, OLEM, TWTI
- Kinross Gold (KGC -1.7%) is downgraded to Neutral from Buy with a $3 price target, down from $3.25, at UBS, citing KGC's 10% share appreciation in recent days.
- The firm also believes - assuming relatively stable commodity prices - further appreciation in KGC may be limited as some investors could re-assess emerging market risks given ongoing macroeconomic developments.
Thursday, December 18, 2014
- Solazyme (NASDAQ:SZYM) says it has taken steps to lower operating expenses, including a workforce reduction and other cost-cutting measures, and anticipates a reduction in annualized cash operating expenses of at least $18M in 2015, according to an SEC filing.
- SZYM expects to record a charge of $3M-$5M in Q4 2014 as a result of the plan.