Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Lots of good posts.
A decent bounce today following the Franco-Russian diplomacy. But I imagine the parties of war in the US and UK will be deeply un-happy about this turn of events. I’m sure that they are as we speak doing their best to ensure that France is isolated. As this diplomacy revolves around the Minsk Agreements, which Kiev has no intention of implementing ever, I feel confident in saying that the talk of war will return soon enough and French efforts (however sane and laudable) will be scuppered.
So for POLY we can expect more volatility although the inherent value of a low PE and high and sustainable yield remains. DYOR and GLA.
Great post Olderandwiser.
I’m a value investor with a particular specialism in geo-politics, certainly not a TA - that’s way outside my area of understanding.
I feel there are opportunities to capitalise on the West’s dismal understanding of geo-political realities. The hysteria over an ‘imminent’ invasion has dissipated somewhat but markets have marked POLY down because it’s mainly a Russian play and Russia is a truly evil country which needs to be taught a lesson by the benevolent West.
I see no fundamentals for this mark down. POLY’s trading update didn’t indicate any concerns to me. Its assets are so far from Ukraine that they may as well be in a different continent, and the only threat Russia faces is western sanctions which most likely will have no or little impact on sales and distribution. Could London force a de-listing of POLY? I see that as highly unlikely given the degree of reputational harm to the UK market that it would do.
So for me POLY’s mark down is driven mostly by Russophobia and hysteria. I know that London is in desperate times and listing for war in Europe, but even these madmen don’t want a war on Russia.
This old weather trope is actually a nonsense. Mechanised units are trained to operate in all weathers, and equipment is designed to operate in mud as well as snow. Of course mud is more difficult than frozen ground, but it would be a mistake to swallow this nonsense that Russia needs frozen ground.
It really is best to ignore most western media with their hysterics and fake news.
Rich - what American troops? The ones that the US and UK are deploying in Poland, the Baltics, and anywhere but Ukraine?
Russia has escalation dominance. The West knows this. They are diligently supplying Ukraine with more weapons with which to ensure that, in the event of a conflict, more people will die but the outcome will be the same.
Whilst it’s difficult to under-estimate the degree of lunacy which the Dr Strangelove types in London and Washington are capable of achieving, even they will likely stop short of ejecting Russian banks from Swift.
Swift seems to have been quietly dropped from the daily hysteria rant, and the reason is most likely that Europe would be unable to pay for the Russian gas which keeps its economy alive.
My personal view remains that the US and UK would be happy to fight Russia to the last Ukrainian (a very principled position!) and their hysteria is partly because some of them would quite like for this to happen and partly for domestic political reasons.
EU states clearly don’t share their enthusiasm for war in Europe and are probably working hard to put their English speaking friends back in their straight jackets.
Either way, I think that the markets have probably priced in most of the reasonably likely scenarios.
Great post rbrand.
The Q4 update was in my view fairly positive. Net debt is under control, AISC is rising (as with virtually every miner across the world) but Poly’s margin is very comfortable whatever the reasonable vagaries of the gold price.
The SP has been knocked down by all the hysteria led by the US and UK. This hysteria serves their malign agenda of stirring up tensions and justifying the re-militarisation of Europe - a project they’re already rushing to implement.
But it gives us a chance to pick up Poly at a ridiculously low forward PE ratio and high dividend yield. And when the invasion hysteria disappears (as it inevitably will over the next few weeks) the SP should rise. At least there are ways for PIs to prosper from western aggression and hype.
Rbrabd is one of the few knowledgeable people commenting here. He is right - the Minsk agreements are the negotiated solution to the separatist regions. Everything has been agreed but Kiev refuses to implement parts it finds difficult.
Meanwhile, thanks to the hysteria of the US/UK axis, FXPO’s price continues its decline. Even Kiev is tiring of the constant war drums because they are ruining Ukraine’s economy even more. Who would invest there?
FXPO is suffering, but not because of Russia’s words or actions.
All rather amusing to see NATO described as a ‘defensive alliance’. Is Afghanistan part of the North Atlantic area? Was the bombing for 52 days of a defenceless Serbia part of it’s ‘defensive’ actions?
I’d also be fascinated to know how the UK and US sending arms to Ukraine, not even in NATO, part of diplomacy.
What are the ethics of sending arms to a country which you claim will be invaded by an overwhelming force? You know it won’t change the outcome but more people will die. Perhaps someone can explain the logic and how that’s all part of the well known ‘defensive’ nature of US / UK policy?
POLY is % down by more than FXPO. That also makes no sense on any objective basis. After all, if the west’s claims are true, FXPO’s assets are about to be seized by Russia.
Markets are of course sometimes highly irrational. But the sell off of Russian assets looks absurd. After all, the West bangs on about what it calls the ‘world order’ whilst lusting after sanctions which would effectively destroy that order by forcing Russia to permanently join the Asian axis led by China and creating a bi-polar world.
I’m not saying the West is led by intellectual pygmies, but it does seem to have been losing the great game played between world powers, stuck in some post imperial denial of the reality of its own decline.
FXPO down another 5% on opening.
Seems that wrapping oneself up in a narrative of Ukraine as a cute aspiring democracy being bullied by evil Russia isn’t helping FXPO escape geopolitical reality. Kiev’s erstwhile western saviours are not coming to the party despite their warm words.
Who’d have thought?
Bravo Shakhtar!
But it is you who has the agenda of hate, launching your vitriolic attacks on Putin and Russia. I never mentioned him!
If pointing out that FXPO is being buffeted by a geography it can’t escape is ‘defamatory’ or ‘inciting hatred’ or ‘false information’ then you’d have a point.
The share price is at 12 month lows. Why? FXPO can’t escape geopolitical reality, and your pathetic attempts to silence people with whom you disagree are risible.
I agree that FXPO is under-valued on fundamentals, and that there’s a geo-political discount. The problem is that geo- politics tends to be semi-permanent.
It’s extremely difficult to see how geo-political tensions will resolve quickly given that neither RU nor the US are likely to accommodate meaningful diplomacy. They try again tomorrow in Geneva.
Whilst Kiev continues its vain attempts to cuddle up to NATO there is no resolution. FXPO is a hapless pawn of geography and Ukrainian politics.
Well, I think that the Western sponsored armed coup in 2014, followed by the West’s arms sales, gifts and training of the Ukrainian military, has led Ukraine to the brink.
And let’s be clear, the West will happily fight Russia to the last Ukrainian but no further.
I can’t be confident that FXPO’s mines will be in Ukrainian hands for much longer, and I’m even less confident that FXPO’s distribution routes will be open for civilian purposes for much longer.
The West has made FXPO un-investable. Bravo!!
Financial markets are often irrational, and this creates opportunity for contrarian investors.
Inflation is rising and clearly not the ‘transient’ problem western central banks assured us it was. Gold is steady, falling again today. Western markets are near record highs whilst rising he media glibly talks about a Russian invasion which would bring inter state war to Europe.
None of this makes any sense. But that’s the point. Markets are highly irrational at the moment.
Incidentally, my advice would be to digest Russian media as well as western media. In fact, ignore UK media completely if you want a remotely nuanced understanding of the security dilemma in Europe. Far from it being ‘all Russia’s fault’, the rising insecurity in Europe has been building for 20 years as NATO broke promises, expanded eastwards, and engaged in wars outside Europe. We are now reaching the tipping point, the point when the security dilemma comes to the boil.
I think it’s extremely clear that Russia does want to change the status quo. The Kremlin has been very clear about this. The status quo, in the sense of creeping expansion of NATO to Russia’s borders, is explicitly unacceptable.
Now what this means in practical terms is unclear. But the West’s de facto rejection of diplomacy eliminates the most peaceful route for effecting change, and that’s exactly why the FXPO price is renewed its dive.
Regarding this question of why there has been no clarification on the issues noted in the Dec 7 RNS, I also note that this same RNS says:
‘Emulsion product quality has been restored and the underground production charging units have been fixed.’
It’s worth noting that it is ‘western intelligence’ and media which is hyping up invasion rhetoric, and liberally issuing threats of extensive sanctions.
None of this helps FXPO and those who have invested in it.
The POLY assets are not going to be in a war zone no matter what happens in Ukraine since Ukraine has virtually no capability to strike anything inside western Russia let alone further east.
Thus POLY offers an opportunity to take advantage of any additional over-reaction by the market.
Bwana made a great point below regarding having got the funding done in 2021 relative to 2022.
I think this is worth amplifying and reiterating. The macro risks in 2022 look extremely high. Economically the western world is over indebted and in danger of suffering from stagflation. Policy makers have precious little room for manoeuvre, and that’s without further Covid or other macro shocks. Markets may suffer badly in 2022 after the long bull run in 2020/21.
Geo-politically the west is struggling as its power wanes relative to the rest of the world. Western leaders still like to piously lecture others about what they call the ‘international community’ (basically states who follow US diktats) and the ‘rules based order’ (basically the post 1945 settlement created in US interests which has been assiduously undermined by both the US / NATO when it suits and other states including Russia to a point of near dysfunction).
The macro risks are therefore increasing and I don’t think markets fully understand this.
HZM did very well to get financing agreed this year. 2022 may be a very difficult year, and it’s difficult to see how HZM would have been able to put anything together, at least on these terms (I know some think they’re bad but it’s all relative) in 2022.
Ironically HZM’s position may strengthen further as barriers to entry and funding conditions likely become tougher in years ahead.
Yes, I think fundamentally it is a great company. But it’s in Ukraine and the geo-political risk is huge. Moreover, until the current Russophobic regime (notably backed and supported by the UK) is replaced by one which is more reflective of Ukraine’s permanent interests, then I see little scope for FXPO valuation to appreciate significantly.
In that sense, FXPO is a hapless victim of geo-political games. The quite deliberate stoking of regional tensions by London (with its military trainers, its patrol boat deal, and its FONOP stunt off the coast of Crimea in the summer) is a lamentable example of irresponsibly encouraging Kiev to take risks whilst simultaneously having absolutely no intention or ability to support it should the missiles fly.
FXPO is a very high risk play IMO. But if / when the Zekensky regime falls or sane diplomacy resumes on both sides, it’s one to seriously look at.
Like others I regard this asset purchase as a prudent and positive move by HZM. Of course there are risks attracted to purchasing second hand assets, but the purchase agreement reflects this.
Some people are fond of saying that Araguaia 1 is de-risked. It may be largely from a financing perspective (which is a huge obstacle overcome) but not developmentally and operationally (nor the external geo-political and macro economic risks which HZM are largely powerless to mitigate) .
So what we now face are the development and operational risks, and this RNS should be the first of many which address and mitigate those risks.
This is therefore a symbol of HZM’s progress towards operational development. In itself it’s not hugely important but symbolically it is. I hope that the market starts to take note.