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.

**ENDS**

 

ShareHub Hotlist 2018 Review – Week 21

Week 21 concluded. Just another 5 weeks to go to H2. Thus far, we’ve had the euphoric extended santa party in early Q1 followed pretty swiftly with a market wash out which saw 1000pt day to day swings on the DOW. The dust has since settled, but the present market mentality is to ‘over-react’ to twitter/media headlines and then under-react to the real factual news. It’s not uncommon to see some jumpiness after such a bullish run. Take the recent pullback on PoO from $80pb to $75pb (Brent). Nothing goes up in a straight line so some profit taking was always going to take place at some point. But what followed across many commodity focused equities was way overdone. PMO as an example dropped around 30% based on a mere 6% decline in PoO. Tullow performed better yet still suffered a significant 15% slide. It might take a few more gyrations yet before the markets get some genuine alignments to higher PoO pricing which looks set to remain for the duration of 2018 or certainly through to the Saudi Aramco IPO. Post that massive event (world’s largest IPO), it is anyones guess.

Another week passes and another non-event for Mrs May and Brexit. The stalwarts in Brussels will have had their eyes on what’s being served up closer to home. Italian Spaghetti laced with popular toppings or Spanish fiery chorizo spiced tapas. It would appear that the EU has enough on its plate for now. Brexit, Texit or Spexit. It’s not going to end well no matter how you cut it. Elsewhere Mr Moon seems to have stolen Trumps thunder by rescuing the Korean talks. The market doesn’t like uncertainties, so issues such as Iranian sanctions and Korean talks will dominate near term. It tends to go a little quiet during World Cups almost as if there is a global political truce in place while the beautiful game gets played out. So don’t be surprised to see the usual summer malaise kick in. Issues around Putin (or Russia) seem to be eerily quiet. Although the owner of Chelski seems to have found the UK less than helpful when gaining a new UK visa. Easily solved… just head off to Israel and get a new citizenship. Surely Mrs May and co will not be side-footed by such shenanigans? Well, the UK Gov have been aware of Russian cash making its way through the City of London for decades and thus far not a lot has been done about it. Shocking really.

Week 21 review:

Yet again, the Daily Mail top 8 picks performed well while the ShareHub commodity focused top picks consolidated after some hefty gains. It’s neck and neck between these two. The Guardian picks suffered further but are still 0.5% up for the year. TheShareHub top ten picks quick fire summary below:

1. AMER – Poor H1 performance to date and large seller still dumping stock. But recovery from lows looks solid leaving decent upside ahead upon upcoming drilling success. Note: Dusters are also possible.

2. CERP – Next Quarterly update eagerly awaited especially on Production. Share price is 7% down for the year which leaves plenty of upside ahead based on playing catch up nevermind operational progress. The company hasn’t put a foot wrong so the static sp is a puzzle.

3. CORA – Decent exploration results. Next phase requires more cash hence another placing should be on its way or some other deal/arrangement?

4. HUM – Need to see a quarter or two of solid cashflows before market will mark up the share price to where it should be circa 60p+. Exploration phase to kick off soon providing near term catalysts along with shiny Gold coin sales. Plenty of upside in H2 assuming exploration phase goes well and cash continues to roll in as planned.

5. PFC – After the Barclays SFO debacle, it’s surprising to see PFC still suffering from this issue but until it is resolved.. the market will slap on a discount. RollsRoyce came through just fine and PFC should follow. Ops look on track.

6. PMO – Catcher going very well. High impact Mexico exploration around the corner and debt beginning to reduce. Cash flows pouring in with PoO in the $70’s and $80’s. The only surprise is that the SP is still sub 150p. After the Solan debacle, one can’t blame the market for taking the cautious view.

7. PVR – Barryroe looks set for a 2019 story rather than 2018 which is a disappointment. That said, booking an advance ticket ahead of that entertainment might prove fruitful as the stock looks cheap based on future plans.

8. SQZ – Needs to get more clarity on 50% Iranian owned assets but even placing these aside the cash flows should look solid for 2018. Plenty to do across their folio in 2018.

9. SOLG – Needs an updated MRE as the market is beginning to ignore the monthly resource updates no matter how great they are. Investors want to see planning for the future in tandem. Large development plans cannot be defined until full resource known but some kind of indication on an early commercial (smaller) development to bring in cash flows would be welcome.

10. WRES – Apart from the usual development issues, progress has been slow since the funding deal. The company nomad missed the fact that one of WRES’s largest shareholders appears to have failed to file accounts and as such has been struck off. Whilst WRES did update on this matter, it has yet to be finalised with the 6% holding being held by the Crown. Just how much do these nomads get paid these days? Spanish politics important to WRES so something to keep an eye on.

More updates to follow on the above ‘as and when’ the news rolls in.

PetroMatad cheap as chips

With royal wedding fever alive and kicking I thought it might be worth revisiting Kate & William’s more formal day. It was roughly 7 years ago (time flies doesn’t it?), in April 2011, when couple tied the knot. Around the same time, Chariot Oil & Gas raised a further £100m in cash from investors to fund an exploration drill in Namibia. Small change at the time? UBS thought so.

From 2009 through to 2011 (approx) Chariot Oil & Gas jumped from 16p to test 300p+. UBS at the time (2011) were giving out targets of 450p a share or roughly £800m market cap ahead of drilling.

Times have changed since then… or have they? Back in 2011 Brent averaged around $110 for the year. However, OPEX was nearer $75pb in those days giving $35pb or so towards profits. Today, Brent is shy of $80pb but OPEX on most producers is just below $40pb. Some have lower OPEX’s near $30pb. The profitable upside is actually higher now than it was in 2011.

So why is PetroMatad priced at £60m market cap when CHAR back in 2011 was priced at £400m?

A lot has to do with ‘market conditioning’ and ‘sentiment’. It’s been a while since we’ve had a mega discovery. Billion barrel discoveries are rare. The chances of success are low. So how does this compare to Premier Oil’s Mexico discovery? Or Hurricane Energy’s North Sea discoveries? Both are in the billions. Both have delivered the largest discoveries in the last decade yet the today’s market treats them like minnows. And as for ‘sentiment’. Well after a few dark years post OPEC’s Dec 2014 decision to flood the market, things are looking better again. Sentiment has improved although you wouldn’t know it looking at some minnows targeting big exploration.

Whilst I think many would agree that in the days of 2009 through to 2011 CHAR’s move from 16p to test 300p+ was a little premature, the point here is that UBS and other analysts at the time were comfortable with banging out broker notes with even higher targets.

Today, At 12p a share, PetroMatad is priced at just £61m. If it were to rise to the lofty heights of 50p a share, it would still be priced at half of what CHAR achieved 7 years ago when profit margins on oil production was indeed lower than they are today. As per usual, the market spins its own web of uncertainty but the truth is… billion dollar discoveries actually are possible as proven recently by PMO and HUR.

PetroMatad (MATD) are due to kick off a 4 x well exploration plan in the next 6 to 8 weeks. It is likely to be back to back drilling and assuming the summer fever is upon us, the usual non-stop AIM style excitement should run all the way through to October. It could be exhausting but with 4 x high impact drills lined up (100% owned), I reckon they stand a better chance of hitting the black stuff than CHAR ever did. If sentiment continues to improve, it might not be too long before PetroMatad’s share price improves too.

PetroMatad (MATD) is part of the ShareHub ‘heads up’ stocks for 2018. Usual risks apply. Please read the risk warnings in the sidebar.

ShareHub Hotlist 2018 Review – Week 20

A good week for all 2018 picks including the newspaper tipsters. It feels rather buoyant out there at present with the sun shining and Commodity stocks flying. But spare a thought (not for too long mind you) for Kairos hedge fund. They made roughly £150m shorting Carillion (approx) and then got smacked for six on Ocado to the tune of much the same… £150m+ (roughly). Win some and lose some? Looking at the timing of trades, it wasn’t a slow build decision. Someone somewhere at Karios decided that a hefty short on Ocado was a good idea. Now… as many know… ‘apparently’ the Carillion collapse was telegraphed to ‘some’ lucky bods months in advance tut tut. I doubt the FCA will have them by the necks but suffice to say, Carillion was a free short bet for some. I’m not suggesting that Karios had a heads up on Carillion’s precarious position but merely highlighting that shorting Carillon may not have been as inspired as it first appears. Looking at the woeful short position decision on Ocado, one would assume Karios’ luck ran out or they got some duff info… ouch. Shorting the big grocery/ supermarkets might have seemed like a good idea some months ago, but after Sainsbury/Asda pulled the rug under more spiv shorting hedge funds, you’d think some would have learned their lesson. When it comes to village idiots, Karios are not the only ones. Marshall Wace seem to be picking wrong bets more times than a punter on a fixed odds betting machine. Perhaps the EU should introduce a law to reduce Hedge Funds shorts to a minimum punt of £2 per stock? Now wouldn’t that be a great idea? Save them losing clients money and abusing the market on a daily basis? To be balanced, we all make good calls and bad. It’s never nice when you score at both ends. The Casino has a habit of getting your money off you even after its dished out some carrots. So just because you’ve made a few good calls of late and suddenly think you’re warren buffet, just remember, today’s market is at all time highs, the recent bullish run on equities is fundamentally down to low interest rates and QE. If you can’t make a few quid in this market, then you are definately in the wrong place.

After a few years of hanging off a cliff by its toenails, Premier Oil finally surges higher. The catcher development is a story about a field that plateaued at the right time. After PMO’s Solan development disaster, it will come with much cheer to investors who have been subjected to a helter skelter ride. PMO look out of the woods for now and based on past valuations, the market has still left some headroom to fill. 180p+ looks a fair level to ‘plateau’ through 2018 summer period. 2017 ShareHub pick ‘Tullow’ has also bounced back. The bots and Algo’s are really struggling to balance the upward movement of these stocks while trying to contain the major Indices. It’s all linked in some form or another. Considering the FTSE100 is notoriously ‘commodity’ heavy, it’s surprising the 8000 level has not been broken already. Looking at the next reshuffle the FTSE100 and FTSE250 could see many of the blackgold (and Gas) producers coming back into the mix. It wouldn’t hurt to pay attention to the admission / valuation criteria on some stocks like Premier Oil, historically, funds are forced to buy in upon entry and this often brings with it higher volumes, a different type of investor and solid spikes. Not always… but often.

Elsewhere… Gold has wobbled of late and looks odds on to bounce higher once the Hedge funds have had their fill. Risk factors are still very high across the Mena region but in other global parts issues over North Korea have reduced and it’s all gone eerily quiet over Russia. With the World Cup kicking off in Moscow in just under 4 weeks time, it’s going to be a precarious time for all involved. Hence it comes as no surprise to see tensions reduced ahead of this global televised bonanza. The media, sponsors and advertising channels have all invested billions into this event so important not to shoot themselves in the foot! First game up is OPEC vs NON-OPEC.

Congrats to Megan and Harry. Due to the unseasonable UK weather, Harry was not the only red top gleaming on the day. A few scorched followers will have been reaching for the calamine lotion on Sunday. Blighty was sparkling in every way as media channels beamed across the globe. Bodes well for Carney and co so I wouldn’t rule out an August Rate rise just yet.

And finally… ShareHub subscribers will be aware that due to GDPR regs, a new Privacy Policy is in place. To all non-subscribers, you may notice consent boxes appearing across the site. Please also read the new Privacy Policy. TheShareHub takes your privacy very seriously. As a ‘free’ site with no advertising or any form of revenue stream, TheShareHub is non-commercial and unlike Facebook or Twitter or Amazon etc etc TheShareHub does not seek to track you down or use your data in dark ways. The ‘Subscription button’ on TheShareHub has been temporarily removed (don’t panic) but will be reinstated on May 26th. More features are planned for ShareHub subscribers which may include a newsletter with 1 or 2 added ‘heads up’ stocks of interest.

Week 20 Review:

Stunning performance from the DailyMail picks which has turned a 10% decline some weeks ago into a 7.3% profit. The Algo’s are dragging every cat and dog up in the FTSE off the back of the commodity recovery. In theory that should begin to rebalance as blue chips get sold off and commodity stocks replace them. That said, never a bright idea to have all eggs in one basket so some diversification never goes amiss. A good recovery from AMER helped the ShareHub picks rise to 13% and that’s with weak performances from HUM, PFC, SQZ and WRES thrown in. When (or IF) these stocks finally buck the trend and surge higher, the ShareHub picks should be out of sight. For the moment, hats off to the DailyMail for putting in a fight. The Guardian picks are perhaps an example of how the blue chips (in general) are being parked while money finds its way into more ‘popular’ stocks.

Week 20 positions below: