ShareHub Hotlist 2018 Review – Week 24

Week 24 certainly didn’t lack spice. Exactly what the casino needed as things were becoming a little dull.  Dull makes small coin… Volatility makes big coin. H1 enters its final phase of 2018 bringing with it, Mega Trade wars, Footy fever and Tesla paranoia. Apparently Elon Musk and Tesla are under attack…

“As you know, there are a long list of organizations that want Tesla to die,” Musk said. He referenced Wall Street short sellers “who have already lost billions of dollars,” oil and gas companies that “don’t love” to see solar power and electric cars advancing, and automakers that produce gasoline and diesel vehicles. “If they’re willing to cheat so much about emissions, maybe they’re willing to cheat in other ways?” he said.

Too true Elon. The world is a tricky place when you are single handedly driving change – change for the good. It’s astonishing in this modern day that the likes of VW have not been banged up and the company closed down after Dieselgate. It puzzles me why the US are able to rack up a $30bln bill and force VW to pay it but in Europe (and particularly the UK) litigation is almost unheard of. Well not quite… Slater & Gordon are on the brink of getting VW into court on behalf of over 60,000 owners. UK lawyers are bringing a series of allegations, including that Volkswagen manufacturers defrauded drivers, and that “defeat devices” broke EU rules. Subsequent VW software fixes have from what it seems caused other problems with cars. All in all drivers overpaid for vehicles and are left with a Brand that is no longer trusted.

‘Trust’ is fast becoming the trending word of late as North Korea and US puts its trust in getting a deal agreed which ironically may see a similar scenario to that of Iran. And we all know how that ended up. The trouble with ‘trust’ is that it is only worth a 4/5 year US election term and that’s assuming the acting President isn’t impeached along the way. ‘Trust’ often comes from proven results. Delivering on ones promise. Confidence. But it only takes a wobble here and there and ‘Trust’ goes out of the window. Just ask David De Gea. Do you stick with a butterfingered goalie or replace him with a new one? Trump has achieved some decent deals of late through a bully boy approach but his recent battle with China could be his butterfingered moment. Markets were bolstered by Trump’s America First and keen business drive. The DOW has indeed risen from 18k levels to test 26k levels earlier in the year. But in a trade war, especially one that is protracted, business ultimately suffers due to uncertainty. Just look at Brexit and the subsequent collapse of the UK economy. Markets are right to be concerned as Trump v China will ripple across the globe. Some will benefit from the tariffs and others will suffer. Trumps previous strategies has been to turn on the Tariff taps and then wait for negotiations. Usually these take place pretty swiftly. Then turn off the taps. But here’s the problem. China may not be able to match US $200bln tariff’s as their US quota is more like $130bln at best. But what China can do is drag it out. A long trade war would likely see Trump fall on his sword. China know how to hurt the US, but thankfully are holding fire in the hope that ‘negotiations’ can be completed in the near future. In the meantime, the longer it goes on, the worse it will get. The DOW will find support at 23,500 levels but below 23k and it’s going to be bear market time. In that scenario, 18k is more than possible and the Casino likes that.

Commodities yet again were clouted in week 24. A combination of OPEC fears combined with rising Dollar has put an end to the recent bullish sentiment. OPEC are set to meet tomorrow through to 22nd June to agree output increases. A modest increase of 600kbopd is not exactly going to fill the void left by Iran or Venezuela. Furthermore, After months and months of higher oil prices, the US rig count is beginning to look weak. Where are the new rigs? On a scrap heap somewhere after Dec 2014 OPEC actions is one guess. The reality is US production has increased to record breaking levels but there comes a point where the infrastructure simply cannot keep up. Workforces become hard to recruit. Rigs hard to find. Pipeline materials and backlogs all keep advances in check. The next few months will test out US shale’s ability to scale up in a space that has very little room left. That in itself may well enable OPEC to increase production again in Dec 2018 without making a dent in demand.

Week 24 Current positions:

The DailyMail continues to do well. The ShareHub top ten commodity picks are suffering. It’s astonishing that Gold has not spiked higher on risk off trades. It’s normally the go-to metal when equities look bearish. HUM are well placed to benefit from POG’s rises in the future and the stock is long overdue a return to test 40p levels. AMER has struggled with lower production and delays on exploration plans. The latter should be finally kicking off in July (H2) which should place a rocket under the share price upon any good news. Trading and volumes of late have been higher than usual on AMER which could suggest that the long term large HNWI seller may be nearing an end.

Heads up stock picks PDL, OPHR and MATD are doing ok with MATD having just raised £13.7m in a placing. The first of 6 high impact exploration wells should spud in July which has been a long time coming. Exciting times ahead for MATD holders.

For now, all eyes on OPEC this week!

DailyMail 2018 Week 24
ShareHub hotlist 2018 week 24
Guardian 2018 week 24

PetroMatad – Raises £13.7m in placing

PetroMatad, part of TheShareHub ‘heads up’ picks for 2018 (tipped at 7.12p) raised £13.7m in what looks like a pre-planned capital raise despite the apparent 16hr turnaround. The placing comes as a bit of a surprise as PetroMatad was fully funded for the 4 x high impact exploration campaign in Mongolia. There was no obvious reason for this capital raise at 10p a share which represents a 17.7% discount to the average daily vwap for the 30 days up to 12 June 2018. With 4 x wells, the company would have had several opportunities to secure further funding even with a duster or two. However, when you look a bit closer at the takeup of the 10p placing offer, you will note the following:

Concert Party Holding
Following Admission and the issue of the New Ordinary Shares to Enkhmaa Davaanyam, the Petrovis Group (being Petrovis Matad Inc, its underlying shareholders and their family members) will hold 196,849,199 Ordinary Shares representing 29.73 per cent of the Company’s enlarged issued share capital.

Prior to the fund raiser, the Petrovis Group held approx 27.81% or 146m shares based on holdings from the company website. After this fund raiser, the ‘family’ now hold 197m shares. That’s a whopping increase of 51m shares (assuming Petrovis new shareholding) which accounts for almost 38% of the new shares.

This capital raise looks timely just ahead of the first drill. It reminds of when GKP did a capital raise at 9p a share of which the CEO and connected parties (family) took on the bulk of the issue. A few weeks later and the company announced a multi-billion barrel discovery.

PetroMatad have bolstered the drill plan of 4 wells to 6. The total resources targeted is closing in on 1 billion barrels. I’m not convinced that the extra 2 x wells is a good enough reason to justify this discounted ‘family’ rated placing. That said, there is always something to be said with regard cash balances and outright exploration companies. Having a solid cash balance can enhance the value of any future farm in deals and should the company achieve this on the 2 x new wells, the value generation will undoubtedly be evident to all. Equally, if drill 1 or 2 comes in with gusher style discoveries, this placing at 10p will look rather fortunate for all involved and quite unnecessary.

With 4 x wells in 2018, shareholders will not be disappointed to see another 2 x wells planned for 2019. Just a shame the company didn’t issue the other 62% of shares to their extended family… their existing shareholders. An open offer deal could have been sorted as there are no major timeframe concerns on the new cash required.

Roll on the first well in July. Even if that’s a duster, there are another 5 wells coming shortly after which should underpin the share price considerably. As with all exploration, there is a risk all 6 drills come up dry so don’t underestimate the risk involved with your investments on outright explorers.

ShareHub Hotlist 2018 Review – Week 23

Another week passes and another UK retailer goes down. Poundworld has gone from selling products for £1 to ironically being sold lock, stock and barrel for £1. If the high street was a cliff, most retailers would be on the verge of going over it. Its an ever eroding cliff face. The sea of change comes in the form of a global digital tidal wave. It’s been on the cards for a few years now. The sad thing is, it probably won’t be too long before the ‘digital’ becomes the ‘bricks and mortar’ as branded Amazon stores start appearing in the high street. Stores which you can ‘instantly’ purchase what you require rather than waiting for 1 day delivery or a drone to drop your purchase off. That’s to come later. I have no issue with digital retail commerce, it brings with it many benefits. However, I do have a major issue with the likes of Amazon, Apple and Google paying minimal tax in the regions they trade in. Yes they generate some UK jobs but those jobs are not replacing the many UK retail job losses. In terms of taxes – it’s a massive issue that needs addressing. Trump and co are protecting American interests across the globe and it’s about time the EU and UK started slapping some firm ‘digital’ tax laws on these big American companies.

Last week saw the long and established London Stock Market wobble. Embarrassing for the LSE. More blushes were felt when news materialised that the FCA/LSE will press ahead with a controversial new premium listing to facilitate the Saudi Aramco IPO deal. Shameful stuff and just shows how greed drives mentality at the expense of credibility. Years of tradition and rules can be changed in a whisker if it means a decent pay day. Integrity ‘shot’ on that one but assuming all involved get a sniff of that $1 trillion due to hit the market it will make for a good bonus year. That said, it would not surprise me one bit if the vampire squid (GS) took the bulk of the order book as Trump and co has been cosying up with the Saudi’s of late. Certainly going to be an interesting IPO when it finally hits the market… next year?

Week 23 Review

Much of the same and a little like watching paint dry of late. I’m afraid the impending summer period is not likely to improve ‘market activity’ so best enjoy the sunshine and the footy over the coming weeks. The DailyMail continues to head the pack but TheShareHub has plenty in reserve for a strong H2. Top picks like AMER, HUM, CERP, PMO, TLW and so on should all do well as the drill bit turns and PoO continues to show strength. M&A is still missing in action but it might not be too long before the big super majors start picking off the little guys with large reserves. Ophir Energy looks primed like a T-bone on a sunny day. Keep you eyes on that one. Shell lost out on Cove Energy a while back and may well fancy taking OPHR out simply to gain a greater control/equity stake in Tanzanian assets. Due to being heavily oversold after the Fortuna Schumberger debacle, Ophir Energy is looking cheap especially based on potential production of 25kboepd post acquisition terms. Therefore, TheShareHub is initiating coverage on OPHR at 50p with a target on takeover being £1+. This is the 3rd heads up stock this year following MATD and PDL. There will be 5 heads up picks in 2018 with the latter 2 arriving exclusively in the email box of all ShareHub Subscribers.


London Stock Market down

The City of London stock market failed to open for business today. Blighty has a reputation for delayed trains which frustrates commuters on a daily basis. When it comes to the apparent crown jewels (where Brexit is concerned), the City of London runs like clockwork. Well today, it looks like an embarrassing glitch to the system. The normal go-to reason these days is poor old Putin and his army of hackers. No doubt some excuse will be made but either way, pre-Brexit, this is a very embarrassing moment for the LSE. For what it worth, I think a few magnets needed a tweak under the table and caused a few issues which have clearly taken longer to resolve than first thought. Punters will be invited back in shortly. For those on leverage or over exposed the delays could be costly as time stops for no one.


ShareHub Hotlist 2018 Review – Week 22

Another bonkers week out there in the floating bubble we call the world. From Sleeping tablets that induce racist rants to butter fingered goal keepers and last but not least…Journo’s faking news. Not sure the last one is anything new but it certainly had Putin and his buddies jumping for joy. Off the hook on that one it would appear unless of course he had a twin brother…

Last week apparently saw the weight of Oil shorts vs longs via hedge funds swing in favour of shorts for the first time in 3 months. Hence, you should expect the usual plethora of negative news stories to be circulating as the Hedge funds seek to maximise their positions and play with your mind. The truth is… with Oil near 3 to 4 year highs, you really would expect the US rig count to be higher. Yes it is rising, but it’s a country mile away from where it was when Oil was last trading in the $80’s. OPEC are set to meet up on June 22nd and if any past meetings are to go by, the headline news should be known a day or so before the official release. Calls to raise output are being confused with a yearly increase in supplies. The reality is, OPEC are already millions of barrels down due to issues in Libya, Venezuela and soon to be ‘IRAN’. Increasing output should not be seen as a negative – quite the opposite. This is not about flooding the market, but more about avoiding $100pb+. The Saudi’s have said for sometime now that they are keen on $75pb to $80pb ahead of their world first Saudi Aramco IPO set for next year. Keeping the range steady is an opportunity for OPEC to test the market out. Unfortunately the casino style market we trade and invest in is more about making money from wild swings than steady ships. The idea that Oil could trade in a tight range for the next 2 years+ would be enough to put some hedge funds out of business. Too much fun has been had over the last 4 years (or ten) and it would be healthy for all involved (US Oil Industry included) if some kind of formal agreement to support oil pricing at a set range could be drawn up. That would mean some kind of cap on US production too which might raise some eyebrows. But the fact is, it might be better making money from a steady $70pb to $80pb range for 5 years+ than a range of $80pb one year and $50pb the next. US shale ironically ‘needs’ a steady market to ensure investment returns. Without the latter, it’s possible that US production could begin to decrease in the future even with PoO in the $70’s. The fight for market share is decades long and I doubt it will disappear anytime soon but playing the ‘long’ game might help all involved plan for the future, a future which at present looks heavily under supplied due to lack of new projects and developments. Whilst PoO will consolidate before and after June 22nd, the bearish case for Oil has all but gone. It’s now more about what price is best for a barrel…over the next 18months… $75pb or $85pb (Brent). Catalysts such as Iranian sanctions should keep the PoO shorts tight.

Week 22 Review:

The Daily Mail top picks open up a small lead which is an impressive turnaround after being 10% down earlier in the year. That’s almost a 20% swing. The Guardian picks demonstrate a more familiar flat and boring bluechip market symptomatic of being near all time highs. The slow summer period is already upon us and news is light. TheShareHub top ten look solid but a few picks are still short of where they ought to be. Big news should be coming from CERP and HUM – both should confirm cash flow positive positions are increasing via greater production volumes. Outside the top ten picks TheShareHub’s 2 x heads up picks for the year are PDL and MATD. The delayed/disputed diamond sale has hit Petra Diamonds hard and last week saw the launch of a discounted rights issue. In theory, once the RI has been done, the company should be in good shape again. It might take sometime for the dust to settle but I would expect to see PDL back above 90p before year end. And finally, MATD… the minnow on the verge of super major sized exploration is just weeks away now from first spud of a whopping 4 x exploration well programme. The market should wake up a little once a firm spud date in July has been confirmed. At 11.5p, it has the potential to double in price and that’s before any discovery is made. Risks remain but with 4 drills in total, surely they can bag a big one. Don’t rule out a late farm in deal either… the recent Results RNS seemed to hint that partners are still being sought even though the company is fully funded. Interesting.

Hummingbird Resources – Security Incident

Artisinal Miners at work

Late yesterday HUM put out an RNS (as below) informing shareholders/investors of a security incident within Hummingbird’s licence blocks. It’s unstandable to see the usual knee-jerk reaction from retail investors in particular as the event is unfortunate and the RNS (due to rules) small on detail and as thus ‘open’ to interpretation. HUM will update further but the ‘word on the street’ is that the Mali Government forces were called in to ‘remove’ some Artisinal Miners from HUM’s Komana West licence block. The Mali Government are known for a zero tolerance policy and understandably when policing the North which is volatile with terror groups and other bandits. However, HUM’s Yanfolila Mine is in Southern Mali which is a different place entirely. Broadly peaceful and community driven. Unfortunately, whilst there are regional differences – the policing is much the same. Artisinal Mining is rife throughout Mali and most deaths occur through dangerous and risky gold extraction methods. Many Artisinal Miners lose their lives while hunting for Gold. For some it is a risk worth taking as any discoveries can be worth a decade of normal earnings and that’s assuming they are lucky enough to be employed. HUM runs several community projects designed specifically to build infrastructure such as sanitised water or schools etc. HUM also have a policy of recruiting Mali workers rather than expats. HUM has a work force that is 5% expats and 95% Mali locals. In the below RNS it is noted that 2 of the 3 Artisinal Miners were not from the local area. Whilst Mali has vast areas of untaped Gold exploration, foreign Artisinal Miners will look for easy pickings in and around existing Gold discoveries. The Mali Government clearly have a strict policy especially as they are keen to sell more licence blocks to international companies who have the capital resource and experience to extract the Gold and in turn create jobs for the local communities. Similar issues occur across africa whether it be diamonds, Gold or even Oil. Governments take strong action because if they didn’t, the Artisinal Miners could disrupt the Governments ability to attract international companies and gain much needed revenues.

Komana West is due for operations in Q3 and HUM also plan further exploration work elsewhere across the licence block. It’s unclear whether there are many other Artisinal Miners in the surrounding area but after yesterday’s events they would be wise to move into safer zones outside known Mali Government designated licence blocks.

Using this kind of force is impossible to comprehend or understand from a ‘western perspective’ especially without the facts or true context. But Africa is not alone. You don’t have to look too far east to see Journalists being ‘vanished’, ‘poisoned’ or just plain shot dead in cold blood for going against the establishment. Africa is far from perfect but whether killing elephants for ivory or illegally mining gold – the response is the same.

Hummingbird Resources will provide an update (eg more detail) on the incident. Although one would imagine that it will only come once Mali officials have sanctioned it and even then I’m not sure it will say too much more than what has been communicated thus far.


RNS: 29 May 2018
Hummingbird Resources plc
Security incident in Mali

In recent days, a limited number of people in the local area have disputed the Company’s plan, previously agreed with local community leaders, the Government of Mali’s Ministry of Mines and local government, to extend mining operations within the Company’s permit area to the Komana West deposit. Our understanding is that this group of people were acting unilaterally to stop the Company carrying out initial site preparation work at Komana West.

The Company has been informed by the Malian National Guard that while upholding the rule of law, requested of them by the Government of Mali, a security incident occurred. Very regrettably, we have been informed that this incident has led to the loss of at least three lives (two of which are believed not to be Malian nationals). The Company expresses its sincerest condolences to the families of the deceased and others affected by this incident.

All Hummingbird employees and contractors are safe. The process plant continues to operate at this time.

The Government of Mali has a 20% interest in the Yanfolila Gold Mine and the mine has a 95% Malian work force.

Further updates will be given by the Company as appropriate.