RE: letter of engagement14 Feb 2020 01:07
My understanding of the letter of engagement situation:
EUA are waiting for CITIC and VTB to bring suitable offers to them.
We've only 'heard' of three potential suitors brought to the table by CITIC, we haven't heard anything from VTB as to whether they have possible suitors.
I would suggest that three is a good number to start a bidding war as you only need two.
I also very much doubt that VTB would be empty handed in this scenario so potentially quite a few offers/counter-offers being considered before the winner decided and the letter is signed and a finder's fee negotiated.
We know that China is desperate for more palladium to comply with its own emissions policy. Russia, with their vast deposits, would prefer to control the market and sell it to them at a premium rather than just collect taxes.
An example of this control of the market I read about in the last week or so (don't remember where but it wasn't twitter!) Norilsk Nickel recently loaned three tonnes of Pd from its stockpile to alleviate the global shortage but expects three tonnes back, which the global market will have to find from somewhere.
As other mines, including Montechundra, supply the market a portion will need to be filtered back to Norilsk to pay back the loan thus ensuring the ongoing scarcity of Pd and maintaining the high price.
With the value of Pd soaring helped by the Russian control of the market what price would have to be paid for the replacement Pd and what price would it be when it is eventually sold?
No need to say then that the numbers involved here are huge.
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