Today - Wednesday, March 4, 2015
- Alcoa (AA -4.9%) tumbles to five-month lows following BofA's downgrade, which cited worsening aluminum fundamentals and the expectation that falling premiums can no longer offset price strength on the London Metal Exchange in the near term.
- The downgrade coincides with BofA's lowering of its average 2015 aluminum price forecast by 7.8%, and its global average premium forecast to $300/ton.
- A lower price is not the only impact from the downgrade, as implied volatility in the shares has jumped by 8.7% to 31.6% and stands just above the historic reading of movement on the underlying share price.
- Canadian banks are getting nervous as they struggle to find buyers for Silver Wheaton's (SLW -1.2%) $800M bought deal financing, Financial Post reports, as the company's stock continues to trade below the offer price.
- Sources say a very large portion remains unsold, with one describing the deal as a "train wreck.”
- The bought deal, announced Monday after the close, was priced at US$20.55/share, representing a 3% discount to SLW’s closing price that day.
- This is the third time in recent months where banks had trouble selling a very large mining stock offering, following Barrick Gold and Franco Nevada offerings that proved to be tough sells; FP says it shows that investor appetite for these stocks is not endless amid rough market conditions.
- Alcoa (NYSE:AA) -2.5% and Century Aluminum (NASDAQ:CENX) -1.6% premarket after BofA Merrill downgrades each to Neutral from Buy, as the firm lowers its aluminum forecasts to reflect worsening aluminum fundamentals from increased Chinese exports and pressure from LME warehouse rule changes.
- BofA says it still believes aluminum can be more defensive vs. other commodities, but it no longer expects falling premiums can be offset by LME price strength near term.
- The open bars, oysters, prime rib, rowdy parties, and luxury hotel suites are a thing of the past at the annual Toronto gathering of the Prospectors and Developers Association of Canada, having instead given way to chips and dip and Airbnb rentals thanks to the years-long slump in the sector.
- "I’m really depressed that I have to drink bourbon versus single malt scotch, it just doesn’t do it for me," says Ben Cox, CEO of Aston Bay Holdings (check out a price chart; it's a bet his shareholders feel even worse). "Everyone is panicked in the industry. If you are not humbled this year, whether you work for a major or a junior or anyone in-between, you are insane."
- "Flat is the new up," says another attendee. The gathering is "a little bit depressing," but a sign of the times.
- ETFs: GDXJ, JNUG, XME, JDST, SILJ, IGE, JUNR, PICK
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