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I think Ukraine will take Kherson by the end of August, and then either Russian resistance disintegrates, or there is another stalemate until the end of the year. If Putin dies from the cancer, then the game is over and Russians will withdraw immediately.
The other nice thing is that all profitability reducing factors seem transitory and related to the war, which must finish in one way or another by the end of the year. Cost of production increased mainly due to higher energy prices. It is quite impressive that it is possible to secure energy in Ukraine now, despite the war being top priority. I expect cash cost of production to go back more or less in the future.
The nice thing is that FerrExpo significantly increased its European market share during the war ("Sales mix for the Group's products has been largely limited to European customers since the outbreak of Russia's invasion of Ukraine in February 2022"). Once the blockade of Black Sea ports is lifted, they can easily surpass 2021 sales volumes. It is likely that Russian ore will be out of the market, as Russia will be awarded a terrorist state status by the US.
All factors line up. Iron ore starts an uptrend, Russians are going to leave Kherson in the next 2-5 weeks. Out of good will, of course.
And it could be a good time for industrial metals https://www.advisorperspectives.com/commentaries/2022/07/25/copper-just-collapsed-time-to-get-long
What was evident one month ago is now in the mainstream news.
https://www.bloomberg.com/news/articles/2022-07-25/long-range-guns-given-to-ukraine-open-door-to-new-phase-of-war
Let me add a couple of good news.
1) As I told before, HIMARS has become a game changer in this war. These are satellite-guided rockets, with the accuracy of 3 meters, moving with 3 x sonic speed up to 300 km, and invulnerable to the Russian air defence system. They are methodically destroying headquarters, artillery depots, clusters of troops, communication lines with high precision, using the US satellite and local Ukraine intelligence for GPS locating of the priority targets. Russian war analytics are in total panic by now. My forecast is that the Ukrainians will take Kherson before September, and the war will finish before the end of the year, with the defeat of the Russian army and possible disintegration of the Russian Federation.
2) In the 7th round of sanctions, Russian steel and iron will be banned in the EU. European market is for Ferrexpo to take.
Good luck and DYOR.
It says: "As of the end of May 2022, the Group had produced 4.4 million tonnes of iron ore pellets, representing a level 8% below the same point in 2021. The Group has realised a combined 0.4 million tonne increase in iron ore inventories in the months of March, April and May 2022, which the Group will look to reduce as logistics constraints ease over time."
So they produced 8% less, and could not sell 0.4 m which gives another 8% or so. My understanding is that they sold 4.0m, or 84% of previous year's production. They also say:
"The Group ... has recently operated in line with the historic level of sales to European markets, in addition to serving excess demand derived from reduced deliveries of Russian iron ore into Europe."
Let's see Q2 results.
Iron ore (62% Fe fines) is at 114 now, and it was at 92 in Nov/2021 when FXPO was priced around 300. No one knows where iron ore goes in the nearest future. It may recover due to the China reopening, or it may drop further on recession fears. The point is that FXPO is grossly underpriced relative to its cash flows and ore price. Due to the war, of course.
The war has not really disrupted FXPO operations. It sold 20% or so less pellets recently due to logistics difficulties, but we will probably see a healthy Q2 profit in a few days.
Will they cancel div? I do not see why. This is a company with lots of cash and zero debt. Cash flows continue uninterrupted. Iron ore prices are still high enough to warrant 300 valuations. Why not to pay?
Pokerchips. I am not saying people can be changed overnight. What I am saying is that EU candidacy will be good for Ukrainian stocks and make them more expensive (higher P/E mults). An effort in the right direction and adherence to the law is enough.
snudge1234, I am sorry, but I do not have time explaining why Ukraine will win this war. It would require discussing a lot of basics. Neither do I want to get entangled in pointless arguments with ideologically biased people here. I propose to simply wait until September, and see what happens. Even if Ukraine could not win, FXPO would be fine, as Russia has zero resources for moving into Poltava. It took Russians 80 days to advance 15 kilometres and take a tiny city of Severodonetsk, while Western weapons have not yet arrived, and HIMARS were not yet engaged in long-distance shootings of Russian military headquarters and warehouses.
As a small hint. In August 1943, German troops controlled a lot of territory. Yet, after the Battle of Kursk, it was clear the German Reich was finished. Simply because the Allies combined could deploy 2-3 times more resources.
One makes money when one has an edge. Understanding how this war is going to develop within the next few months provides a critical edge for making money in FXPO. Non-experts should get out and look for a domain where their expertise could be better applied.
Eradicating corruption is never easy. Usually leaders who attempt to do it, do not survive for a long time. That's why EU candidacy is so important - it will provide an extra motivation to the population. Becoming part of the European family is a dream of many Ukrainians. They associate it with freedom and economic prosperity. Besides, Zelensky will have a high approval rating after crashing Russia and winning the war. This will provide an extra credibility for doing the unpopular job.
Ukraine is granted candidate status to the EU membership. This will greatly help Zelensky in his anti-corruption fight after ending the war, and make Ukrainian companies more attractive for foreign investments.
Congratulations to the Ukrainian people!
https://www.bloomberg.com/news/articles/2022-06-23/ukraine-wins-symbolic-step-on-long-path-to-eu-membership
Professional people don't say "deluded", they say "biased", haha. And though it is difficult to stay unbiased in this conflict watching the humanitarian catastrophe, I hope I am unbiased at the level where my investments are concerned. I would be a bad investor if I could not compartmentalize.
It is true that sanctions on Russia are not super efficient short term. However, they are breaking whatever high-end technological sector Russia had, making it an economically ******ed third-world country for the decades to come. Also sanctions prevent Russia from buying microchips and spare parts for its weapons.
Sanctions could not destroy Russia short-term, but the delivery of heavy weapons to the Ukraine could. And there is a good movement in that direction. Yesterday in Brussels it was decided to give the Ukraine 18 HIMARS and M270, in addition to other weapons and artillery. This could spell serious trouble for Russians. Let's have this conversation again when the Ukrainians take Kherson back, for example. :)
I do not see Russia "having the upper hand" in this war. What I see is the Ukrainian army is not having enough artillery and heavy weapons to start the counter-offensive.
Today, the defence ministers of 50 countries ("Ramstein 3" group) are meeting in Brussels, where new weapons delivery schedule will be discussed and approved.
https://www.reuters.com/world/europe/ukraines-need-more-weapons-major-focus-defense-ministers-meet-2022-06-15/
On June 17, the European Commission is expected to recommend that Ukraine be granted candidate status to join the bloc with conditions linked to the rule of law and the fight against corruption. EU leaders will discuss Ukraine’s application to join the bloc during the next summit on June 23-24 in Brussels.
Once the war is finished (perhaps, in Sep-Dec/2022), Ukraine can find itself on a fast-track membership application, with a president who, by his overwhelming popularity after winning the war, has a mandate and is fully committed to the rule of law, fundamental rights and fight against corruption. This will likely bring P/E multiples assessment for everything investable in the Ukraine. I can easily see P/E mults expanding into 5-10 range in a couple of years, in line with the European developing countries counterparts. That would mean the price going to the multiples of what it is now.
Russians cannot blow up railway infrastructure. Rails are easy to fix. Each ballistic or cruise missile costs between 7-10 million dollars to produce. They are used only for "worthy" targets, like intelligence-confirmed train with Western weapons. This could cause short-term damage and blockage, but nothing serious for commercial logistics.
If the price is going to be above 300 in September, then who cares what the trajectory is.
Now it is official https://www.bloomberg.com/news/articles/2022-05-31/biden-says-us-will-provide-advanced-rocket-systems-to-ukraine