Monday, 1 April 2013

Still no growth in the fallow fertiliser sector

In fact, not really since the heady days of 2008 when phosphate prices soared well past their historical trends and stocks such as the then recently listed Minemakers (MAK) delighted its shareholders by hitting $2.58 in April that year.

The stock now sits at 13.5c, the world-class Wonarah project in the Northern Territory remains undeveloped, its 842 million tonnes grading 18.1 per cent still awaiting the right economics.

Transport costs have been the killer, so now MAK is working on a plan to produce downstream products such as superphosphoric acid rather than load phosphate rock on trucks and trains and haul it to Darwin. At present prices of between $US180 and $US200 a tonne, that simply does not work. SPA commands over $US1000/tonne.

MAK is also partnering with Balamara Resources (BMB) if the latter beats the other two international consortia bidding for a huge deposit in Togo.

Meanwhile, Phosphate Australia (POZ) is contemplating selling its NT deposit as it now prefers gold.

And investors seem to have lost interest in the sector notwithstanding the fundamentals looking as good as ever. Brazilian explorer Aguia Resources (AGR) may recently have announced a new discovery, but that has not prevented its stock price eroding. It fell 16.7 per cent on Thursday, taking it to a 52-week low of 10c. Minbos Resources (MNB) has been making considerable progress in Angola and in Congo-Kinshasa but to little avail so far as investors are concerned, the stock languishing at 3.7c.

The one seeming winner so far is Krucible Metals (KRB) which, if all goes according to plan, will in a few weeks get its hands on $12 million after selling several of its Queensland phosphate tenements to fertiliser manufacturer Daton Group Australia (DTG).

But back to those fundamentals.

Australia is the fifth-largest user in the world (behind China, India, the US and Brazil). Fertiliser is going to become increasingly crucial to the world's ability to feed itself, with global per capita arable land expected to drop from 0.46ha now to 0.21ha by 2039.

In the shorter term, any political eruptions in the zone running from Morocco to Syria could disrupt a large percentage of the world's phosphate production.

Just as gold hovered about the $US40 an ounce mark for decades, so between the mid-1980s and 2006 phosphate rock was stuck at about $US50/tonne. In 2008, phosphate went over $US500/tonne before the GFC pricked that bubble.

But, as Aguia notes in a presentation delivered on Thursday, those high prices opened up the phosphate business to juniors. There were five phosphate juniors globally in 2006; now there are 25. But, as usual, the Canadians value their companies more highly: the 12 phosphate juniors listed in Toronto are worth a total of $759m, while the 10 on the ASX have a combined cap of $180m.

There is a case to be made that big investors and joint-venture partners won't look at any phosphate project with less than one billion tonnes.

Which is the rationale behind Rum Jungle Resources (RUM) last week issuing its bidder's statement in the hostile lunge at Central Australian Phosphate (CEN). The two companies have adjacent projects in the Northern Territory, located just 80km from the rail line running to Darwin.

RUM's case is that, together, the projects have the chance to prove up more than that one billion tonnes, and a merger would mean only one logistics outlay -- either a slurry pipeline, road or spur railway to get the phosphate to the Darwin line.

And it would mean access to capital. RUM's largest shareholder is the deep-pocketed Washington H. Soul Pattinson (SOL). Investor Lion Selection Group (LSX) is also on the register.

But, apparently, there's not much enthusiasm for the plan over at CEN -- which does not suggest an early resolution.

And, surely, some junior is soon going to break out of the ennui engulfing much of our phosphate sector.

The D-word

DIAMONDS have not been an investor's best friend, having been the riskiest of the speculative exploration sectors. Plenty of juniors have ended up on the rocks (and not the diamond ones) looking for the stones.

But Canaccord Genuity's Warwick Grigor -- who more than a decade ago issued a scathing report on the diamond juniors -- thinks he's found a potential gem, and has recommended his clients have a butchers at Goodrich Resources (GRX) which recently bought the Ellendale diamond mine in Western Australia. Well, clearly, some of his clients did just that because after the note went out on email the stock jumped 14.3 per cent to 20c.

Grigor reckons Ellendale is the acquisition of the decade. The mine supplies 50 per cent of the world's fancy yellow diamonds marketed by Tiffany (which recently hiked the price from $US3800 a carat to $US5000). Unlike other new diamond entrants, Goodrich (soon to rename itself Kimberley Diamonds) doesn't face all those years of exploration and development. It is buying an operating mine from its British owner (which deemed Ellendale at near its end).

Grigor thinks they sold too soon: there will be four more years of diamond extraction, possibly more (and he says there are diamonds to be recovered from the tailings dam). The Brits paid $300m for the mine and sold it for $3.2m cash upfront. He sees GRX having net cash flow of between $30m and $40m.

We've also been meaning to draw your attention to Miles Kennedy's Lucapa Diamond Co (LOM) which recently announced its Angola project hosts type IIa diamonds, described as "the world's rarest and most valuable gems".

These type of diamonds account for less than 1 per cent of global supply and all the world's most famous large white flawless diamonds (including the Star of Sierra Leone and the Lesotho Promise) are type IIa, the company says.

But can the once-bitten diamond stock investors out there become enthusiastic yet again about diamond stories? Are shoulders drooping just at the mention of the D-word?

Friday, 4 November 2011

Bank boss incensed about getting 2 cents from public

When Loren Snyder's debit card was damaged recently, Bank of America wanted $5 to issue a new one.

That struck Snyder, a bank customer for many years, as penny-wise and pound-foolish.

"I know the CEO has to have his summer cottage and his yacht," the 63-year-old Medford man said. "But would it hurt them to give me a new card?"

Brian T. Moynihan doesn't like that kind of talk.

Moynihan, Bank of America's chief executive officer, said the other day he is "incensed" by people criticizing the banking giant.

He used the strong word — it's from the Latin for fire and means "very angry" — speaking to bank employees at the bank's Charlotte, N.C., headquarters, saying he gets "a little incensed when you think about how much good all of you do, whether it's volunteer hours, charitable giving we do, serving clients and customers well."

He went on to say to the bank's critics, "You ought to think a little about that before you start yelling at us."

If you think a little about that, you'll quickly see it's completely irrelevant. All those charitable, volunteering employees have nothing to do with what people are yelling about. If banking had an Academy Award for disingenuousness, Moynihan would be the industry's Meryl Streep.

Yes, Bank of America branches have employees who are really nice people. But the analysts, regulators, investors, customers and others who are "yelling" at the bank aren't yelling at its employees, they're yelling about the bank's behavior.

Does Moynihan think people didn't notice that the second-largest American non-oil company (after only Walmart) took $45 billion in Troubled Asset Relief Program bailout money and then announced they would charge people $5 a month to use their debit cards to access their own money? Netflix is now facing a customer revolt for the same kind of thinking.

The bank repaid the TARP money. It's still planning on taking the $5 a month from customers who don't have mortgages with it or maintain a $5,000 minimum balance.

Moynihan said the "place to win the battle" over the banks battered image is at the state and local level, referring to the bank's practice of supporting some worthwhile causes and putting its name on them, a common form of cheap advertising. But even out here, far from Wall Street, we hicks aren't so easily distracted.

Asked how he felt about the prospect of paying B of A $5 a month to use his own money after paying another $5 for the card to do it with, Snyder, who owns a local dental supply business, said, "Can I use profanity?"

Does Moynihan think people at the local level don't remember the bank's $50 billion "deal from hell" to buy bankruptcy-bound Merrill Lynch, and the $3.6 billion it handed out in bonuses to Merrill Lynch executives even as Merrill was reporting a loss of $27 billion for the year, and B of A was seeking more TARP money?

Maybe if people didn't look past the local level they wouldn't have noticed that when two of B of A's top executives, both reporting to Moynihan, were shown the door last month, their severance pay was more than $11 million.

To put this in a local perspective, it would take Snyder 2.2 million months to pay off those two. That $14 billion legal fund (which some analysts say is insufficient) B of A has set aside for lawsuits stemming from its role in the mortgage mess? Snyder can cover that in 2.8 billion months.

Moynihan has an attitude that gets you described as "beleaguered." That's understandable. In a J.D. Power and Associates customer satisfaction survey this month, B of A came in 24th out of 24 banks (see Jason Linkins on the Huffington Post).

Meanwhile, named the bank the nation's second-worst American company of any kind. B of A missed the gold only because of the presence of Darth Vader-ish BP on the list. But since the "it's-not-our-fault" oil spillers are a British company, B of A could probably claim the all-American double: last in customer satisfaction and first as worst American company.

Maybe some of the people yelling want to know why, if Moynihan gets so incensed on behalf of the bank's charitable employees, he is planning to cut 30,000 of them from the payroll, as the bank announced last month.

Maybe they notice that B of A is facing skepticism from the market, anger from investors, lawsuits from its role in the mortgage debacle and a government investigation into its foreclosure practices, which have included such quirks as trying to foreclose on the wrong home. For a funny (although probably not if it's your home) take on this, see John Oliver "foreclosing" on B of A on for Aug. 8.

Or that the bank has been selling off assets. Or that its common stock has been dipping under $7 in recent days, about half its 52-week high. Or that it's being sued by the Feds for allegedly misrepresenting the quality of mortgages it sold to Fannie Mae and Freddie Mac.

Some have even noticed that the bank claims a book value (assets minus liabilities) of more than $200 billion, although the market doesn't agree, and its actual market cap is only about $72 billion. Some people think that spells trouble, nationally and locally.

Wednesday, 27 April 2011

House gives its OK to cutting gas tax by 5 cents

The House Wednesday approved a two-month reduction in the state’s gas tax, but the proposal faces an uncertain fate in the Senate.
The House voted 201-108 to approve the 5-cent gas tax reduction from 18 cents a gallon proposed by House Speaker Bill O’Brien, who has said the decrease will provide some relief for consumers and will bring more people across the border to buy gas, lottery tickets, food and other goods and services.
But opponents argued consumers will never see the benefit, while repairs to the state’s roads and bridges will be delayed.
Gov. John Lynch called the reduction a “political gimmick” that will not result in a price reduction at the pumps. “It will never happen.” he said after the Executive Council meeting.
Asked if he would veto the bill, he said that would be speculative because “I don’t believe it is going to get to me. I think the Senate is going to look at it and recognize it for the gimmick that it is.”
The reduction was included in Senate Bill 78 (click to view text), which eliminates the $30 surcharge on auto registrations. The bill passed on a 208-98 vote.
During the House debate, Rep. David Campbell, D-Nashua, said the gas tax reduction will have a negative impact on the state’s roads and bridges and will not have the desired results because consumers will never see it.
“Look at the conditions of our roads and bridges,” Campbell said. “The timing couldn’t be worse.“
The 5-cent decrease will cost the highway fund $7 million, which includes $840,000 earmarked to help cities and towns repair their roads and bridges, he added.
“That nickel will be gobbled up by the big gas companies and the big oil companies . . . Who are seeing record profits,” Campbell said.
The price of gas in surrounding states with higher gas taxes are often lower than they are in New Hampshire, he noted.
But supporters argued out-of-state motorists are buying their fuel in New Hampshire today, and a drop in the tax will bring even more people over the border.
Rep. Ken Weyler, R-Kingston, said half the cars at a gas station in his community are from Massachusetts and that station is two miles over the border.
The tax cut “will bring more people from out-of-state and other sources of revenue,” Weyler said. “This talk about damage to road and bridges I don’t see.”
Off the $7 million, he said, $2 million would go to the Department of Safety, while another $2 million would go to the betterment program. That leaves only $2 million for roads and bridges, he said.
Weyler said the arguments against the gas tax reduction are “more tales of gloom and doom that never come true.“
House Majority Leader B.J Bettencourt, R-Salem, said while some call the gas tax reduction a gimmick, politicians in Massachusetts don’t think so and neither do senior citizens living on a fixed incomes.
“It is easy to call this a gimmick and oppose this, but it is much more difficult to put out a plan of your own,” Bettencourt said.
The Senate will have to vote on the gas tax proposal.
O’Brien said he hopes the Senate will take up the plan next Wednesday when it meets.
However the Senate does not have to do that and could take several weeks or more to take up the proposal.

Friday, 1 April 2011

Gas prices jump 14 cents in 2 days

WHAT HAPPENED? Gasoline prices took another jump Thursday, rising to $3.69 a gallon at most area stations. That jump, combined with one Wednesday, means gas prices are 14 cents a gallon higher than when the week began. They are also at their highest level since October 2008.
WHAT ABOUT DIESEL? Diesel is also high. A gallon of diesel fuel now fetches $4.10, nearly a dollar more than a year ago. The highest recorded average price of diesel in Erie was $4.98, on May 31, 2008.
WHAT'S DRIVING THIS? The price of oil rose to a 30-month high Thursday as fighters loyal to Moammar Gadhafi pushed back rebels from key areas in eastern Libya. Benchmark West Texas Intermediate crude rose $2.45, more than 2 percent, to settle at $106.72 a barrel on the New York Mercantile Exchange. At one point it hit $106.83, the highest it's been since September 2008. In London, Brent crude rose $2.10 to $117.05 per barrel.

Monday, 14 March 2011

Maine gasoline prices rise average 2 cents in week

A website that monitors gasoline prices says average pump prices in Maine have risen 2 cents per gallon in the past week to $3.58 per gallon. says Sunday's prices were 77.4 cents per gallon higher than they were the same day one year ago, and 37.6 cents per gallon higher than a month ago.
The website says prices nationally have increased 3.8 cents per gallon during the last week to $3.53 per gallon. The national average has risen 40.5 cents per gallon during the last month and is 74.5 cents per gallon higher than this day one year ago.