Today - Friday, August 28, 2015
- FMC Corp. (FMC -0.2%) is downgraded to Neutral from Buy at Longbow Research, citing continuing weakness in Brazilian ag markets, further weakening of the real and the potential for lower Brazilian crop imports into China.
- The firm sees a “diminished likelihood” of fundamental and operational improvements in H2 of this year, given weaker Latin American markets and potential for lower crop prices and sluggish demand for crop protection chemicals, which suggests an EPS miss.
- Carl Icahn, who revealed an 8.5% stake in downtrodden Freeport McMoRan (FCX +2.7%) late yesterday, is "one of the best instinct investors of all time and often invests at the right point in a cycle,” according to 13D Monitor, and investors appear to agree, sending shares higher and capping a two-day 32% spike.
- "If Icahn wants a board seat, the question is not whether he will get one or not, but how quickly he will get one. When stocks get beaten up like this, it is very easy for an activist to implement its agenda,” 13D Monitor says, noting that Icahn got on the Cheniere Energy board less than three weeks after announcing his active stake.
- Citigroup’s Brian Yu sees potential value creation from divesting the oil and gas business under the right circumstances and deleveraging the balance sheet, effectively undoing the 2013 acquisitions of Plains Exploration & Production and McMoRan Exploration.
- S&P Capital IQ’s Matthew Miller raises his rating on the stock to Hold from Sell which a $12 target price, up from $10, citing Icahn’s stake as well as lower operating and capital costs.
- While the latest round of cost-cutting actions illustrate FCX's ability to manage an increasingly challenging price environment, Deutsche Bank thinks a primary equity raise and/or some monetization of E&P assets are still needed to truly strengthen the balance sheet.
- Slightly in the red for most of the morning following yesterday's melt-up, crude oil has turned sharply higher again in the past few minutes, now up 3.75% to $44.16 per barrel. Black gold had traded south of $38 during Monday's panic.
- Asleep for most of the week as the markets tossed and turned, gold has moved higher by 1.15% to $1,135.50 per ounce.
- There's no particular news out, but an appearance on CNBC by leading Fed dove Kocherlakota (not a FOMC voter this year) makes for a good excuse. Given the weakening inflation numbers, the Minneapolis Fed boss said a near-term rate hike would not be appropriate. More interesting, he's not against consideration of QE4, and says the Fed still has asset-purchase tools.
- ETFs: GLD, USO, OIL, IAU, UCO, PHYS, UWTI, SCO, SGOL, BNO, DBO, UGL, DWTI, DGP, GTU, GLL, DTO, UGA, UGLD, DZZ, USL, GLDI, OUNZ, DGL, DNO, DGZ, DGLD, AGOL, UHN, OLO, SZO, GEUR, UBG, GYEN, OLEM, QGLDX
- Century Aluminum (CENX -0.7%) pulls back slightly from yesterday's 24% boost, as investors rewarded the company's recent decisions to idle (Hawesville) and permanently close (Ravenswood) operations that are losing cash.
- Deutsche Bank’s Jorge Beristain maintains a Buy rating on the stock while reducing his price target from $19 to $10, expecting reduced overhead costs to ease the cash strain on U.S. smelters and result in improved profitability once aluminum prices recover.
- Grundartangi in Iceland remains CENX’s only profitable smelter at current prices, with the Sebree and Mt. Holly smelters in the U.S. essentially offering optionality for the time when aluminum prices recover.
- China is trying to push its two biggest aluminum businesses together as part of a planned shake-up of state-owned enterprises, a move that would create the world's largest aluminum maker, Reuters reports.
- Power company State Power Investment is in talks to spin off its aluminum assets to Chinalco (ACH -0.7%), according to the report.
- SPI, which inherited the loss-making aluminum assets when it was formed from the merger of two state-owned enterprises in June, is said to be eager to abandon the sector, which is suffering from a supply glut.
- First Quantum Minerals (OTCPK:FQVLF) says it has started production at its $2.1B Sentinel copper mine in Zambia, which has been under construction since 2012.
- First Quantum expects the mine to produce 280K-300K metric tons/year of copper at full production from one large low-grade ore body containing 0.51% copper.
- Ramp up to commercial production levels is expected to begin after the state power utility connects electricity to the mine by next month.
- Glencore's (OTCPK:GLCNF, OTCPK:GLNCY) giant McArthur River zinc mine in Australia could be ordered to close unless it improves its environmental record and increases a financial bond covering rehabilitation of the site, government officials say.
- Residents near the mine have complained of smoke coming from a waste rock dump, traces of lead in fish, and a contamination incident last year which resulted in cattle in the area having to be destroyed.
- Glencore says it is seeking a balanced solution that meets the expectations of the government, the mine and the community.
- Crude prices are steadying after bouncing back from six-and-a-half-year lows on positive U.S. growth numbers, recovering equities markets and reports of an emergency OPEC meeting.
- On Thursday, oil saw its biggest one-day bounce since 2009 with North Sea Brent and U.S. light crude rising more than 10%.
- WTI crude is now on track for its first weekly gain in nine weeks, ending its longest losing streak since 1986.
- Crude futures -1.3% to $42.03/bbl.
- ETFs: USO, OIL, UCO, UWTI, SCO, BNO, DBO, DWTI, DTO, USL, DNO, OLO, SZO, OLEM
Thursday, August 27, 2015
- Better not get too excited about today's 10% spike in crude oil, as brokers and traders said much of the big gains were driven by traders closing out short bets against the market as prices surged.
- Bets by financial investors in the market that prices will fall were at their highest level since early April, according to the CFTC's most recent data last week.
- Ed Morse, head of global commodity research at Citigroup, says he "wouldn’t be surprised" if WTI drops below $30/bbl later this year before rebounding and actually needs to drop to that level since prices above $30 will not trigger production cuts.
- ETFs: USO, OIL, XLE, UCO, UWTI, VDE, ERX, OIH, SCO, XOP, BNO, DBO, DWTI, ERY, DIG, DTO, DUG, BGR, USL, XES, IYE, IEO, IEZ, DNO, FENY, PXE, PXI, FIF, PXJ, DBE, OLO, SZO, NDP, RYE, RJN, FXN, OLEM, DDG, JJE, ONG, UBN
- Viterra, the Canadian grain handler owned by Glencore (OTCPK:GLCNF, OTCPK:GLNCY), agrees to acquire the largest oilseed processing plant in eastern Canada for $190M to triple crushing capacity.
- The deal more than triples Viterra's crushing capacity, which the company says places it among the three biggest processors in Canada with Bunge and Cargill.
- The Quebec plant on the St. Lawrence Seaway can process 1.05M metric tons/year of canola and soybeans; Canada is the world's top producer of canola.
- Freeport McMoRan (NYSE:FCX) +20.2% AH, on top of a 28.6% gain in today's regular trading, after Carl Icahn discloses an 8.46% active stake in the company.
- According to a 13D filing, Icahn says he plans to engage in discussions with FCX management and board relating to the company's capex, capital structure and executive compensation as well as curtailment of high-cost production operations.
- Icahn also says he may seek board seats and discuss the size and composition of the board.
- Platform Specialty Products (PAH +11.2%) surges following news that Chairman Martin Franklin and the Nicolas Berggruen Charitable Foundation recently purchased more than 448K shares of the company's common stock.
- Franklin submitted an SEC Form 4 announcing the purchase of an aggregate of 224.1K shares, and on Aug. 25 and 26 the Foundation also bought a total of 224.1K shares.
- Freeport McMoRan (FCX +25.4%) surges as much as 30%, an intraday record for the company, after announcing plans to cut spending and production, and lowering its 2016 capex budget by 29% from its $5.6B estimate issued in July.
- FCX now expects its 2016 copper production to come in ~150M lbs. lower than estimated, seeing 5.25B lbs. in copper sales compared with 5.4B lbs. previously, mainly because of reduced activity at several mines in the Americas; mining will be suspended at its facility in Arizona, while output will be cut in half Tyrone in New Mexico and El Abra in Chile.
- FCX shares are worth at least $14 on sum-of-the-parts valuations, using "very conservative” assumptions, Jefferies analyst Christopher LaFemina writes, adding that FCX could still sell assets such as its Cerro Verde, El Abra and Morenci mines if steps taken so far to improve the balance sheet are not enough.
- Also, copper prices have rallied 4.2% today to a nearly two-week high, sparked by the rally in Chinese and U.S. stocks, as well as other commodities.
- According to the WSJ, Venezuela is pushing for an emergency OPEC meeting to come up with a plan to combat the rout in oil prices. Any strategy would likely need the cooperation of non-OPEC producers, namely Russia, says one OPEC delegate.
- Russia would like closer ties with OPEC, but to this point hasn't had interest in cutting production to do so.
- OPEC isn't scheduled to meet again until Dec. 4, and has shot down previous requests for an emergency meeting.
- WTI crude oil is higher by 9.4% to $42.23 per barrel. USO +8.3%
- The Energy Select SPDR's (XLE +3.8%) gain this session is more than double that of the S&P 500.
- ETFs: USO, OIL, UCO, UWTI, SCO, BNO, DBO, DWTI, DTO, UGA, USL, DNO, UHN, OLO, SZO, OLEM, XLE, VDE, ERX, OIH, XOP, ERY, DIG, DUG, BGR, IYE, IEO, FENY, PXE, FIF, PXJ, NDP, RYE, FXN, DDG, DRIP, GUSH
- Goldcorp (NYSE:GG) and Teck Resources (NYSE:TCK) say they are forming a joint venture to combine and develop neighboring projects in Chile, in an effort to cut development costs as metal prices languish at multi-year lows.
- Based on a preliminary economic assessment, the JV plans a conveyor to transport ore from GG's El Morro gold and copper project to a single line mill at TCK's Relincho copper and molybdenum project.
- An initial capital cost target of $3.5B to bring the two projects into production compares to previous estimates of $3.9B for El Morro and $4.5B for Relincho.
- GG also agrees to acquire New Gold's (NYSEMKT:NGD) 30% interest in El Morro for $90M plus a 4% gold stream on future gold production from the property.
- Freeport McMoRan (NYSE:FCX) +4.1% premarket after announcing further spending and production cuts in response to declining copper prices, which will result in a 10% workforce reduction at its U.S. mining operations.
- FCX cuts its projected 2016 capital spending for mining and energy to $4B, 29% lower than the $5.6B estimate it provided a month ago; the company maintains its expectation for $2.8B in spending for this year.
- FCX also lowers its copper sales outlook by 150M lbs./year in 2016 and 2017, as well as its 2016 unit site production estimate by 20%.
- Shares fell to 13-year lows yesterday, closing at $7.91.
- A top court in Greece rules in favor of Eldorado Gold (NYSE:EGO) over its disputed mining project in the country, although the project is expected to remain on hold for the time being, Reuters reports.
- The ruling after the government said last week that it was halting the project, one of the biggest foreign investments in the country, arguing that EGO had violated contractual terms.
- EGO says the favorable ruling does not allow it to restart activities but undermines the argument the government had used to revoke its permits.
- Is the Great Deflation Scare of 2015 over? Yesterday afternoon's melt-up in the U.S. ignited a major global rally in not just stocks, but commodities as well (except for gold of course).
- Leading the way higher is crude oil with a 4.1% gain, or $1.58 per barrel to $40.18. USO +3.05% premarket.
- Copper's (NYSEARCA:JJC) on the move as well, up 1.7% to $2.29 per pound. The red metal had taken out lows going all the way back to 2009 earlier this week.
- ETFs: USO, OIL, UCO, UWTI, SCO, BNO, DBO, DWTI, DTO, UGA, USL, DNO, UHN, OLO, SZO, OLEM
Wednesday, August 26, 2015
- Monsanto (NYSE:MON) finished +8.5% today after dropping its bid for Syngenta, and Citigroup maintains its Buy rating on the stock as management "showed discipline" by ending the process.
- With the offer now off the table, MON said it plans to resume repurchasing its own shares, and Citi says the commitment to return capital to shareholders could alleviate fears that MON will quickly undertake another major transaction; MON has ~$4B remaining on its two-year, $10B share repurchase program announced in mid-2014.
- Although the macro ag backdrop is challenging with farm incomes falling and low grain prices, Citi says MON remains "well positioned as the strongest seed company with the best R&D pipeline in the industry."
- Republic Airways (NASDAQ:RJET) plunged 36.7% today after a local pilots' union ruled against allowing a vote on its new contract offer, placing the carrier's future in doubt.
- The local Teamsters union objected to language in the contract that would prevent the union from encouraging its members to work at other regional airlines, Bloomberg reports.
- In RJET’s latest contract offer, which it presented to pilots Thursday, new first officers would receive a 74% pay increase with a smaller raise for more-senior aviators; the Teamsters' proposal reportedly includes provisions that would cost the airline more than $1B over the next three years, excluding a $348M ratification bonus.
- RJET has warned that it may file for Chapter 11 bankruptcy if it can't work out a labor agreement with pilots.
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