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May 9/08
What a day this has been.
What a rare mood I'm in.
Investor Nat King Cole' - known to The AMP as Nat Gas King Coal
A) Yamana Reports - a triple play
YRI $14.92 up $1.11 ( 8 %)
TORONTO — — Yamana Gold Inc. said Wednesday that its first-quarter profit nearly tripled on higher prices and sales of gold, copper concentrate and silver.
Merger results in profits
Yamana, which acquired Meridian Gold and Northern Orion Resources last year for $4.8-billion (U.S.), said
Adjusted earnings were $134.7-million, or 20 cents a share, up from $47.3-million, or 13 cents, in the year-before period.
Analysts polled by Reuters had expected a profit of 15 cents a share before exceptional items.
Net income was $63.1-million, up from $27.4-million, the company said. Revenues at the Toronto-based miner more than doubled to a record $356-million from $145.1-million a year earlier. Mine operating costs jumped by a similar magnitude to $195.2-million from $76.4-million.
Production
Quarterly production was 237,495 gold equivalent ounces, while realized prices jumped to $927 an ounce from $645.
For the second quarter, the company said production is expected to be between 265,000 and 280,000 gold equivalent ounces, and is expected to increase each quarter for the balance of the year.
Most of the increase will be from the El Penon mine in Chile, and the Chapada and Jacobina mines in Brazil, it said. At El Penon, planned production remains on track to reach an annualized level of 500,000 gold equivalent ounces by the end of 2008.
Production forecast - increases at increased commodity prices
Yamana has said it expects to produce between 1.2 million and 1.3 million gold equivalent ounces this year, rising to 2.2 million by 2012.
Yamana has seven operating mines and five in development.
B) OIL - Another Record
Crude oil, heating oil and gasoline rose to records on forecasts that consumption of distillate fuel, a category that includes diesel and heating oil, will outpace production.
``There's huge diesel demand growth in Asia, which is going to keep pressure on supplies,'' said James Ritterbusch, president of Ritterbusch & Associates, in Galena, Illinois. ``Whenever there's a big rise in one energy market there's an impact on the psychology of the other markets. Also, demand for crude oil will rise as refiners boost distillate output.''
Oil jumped above $124 after a government report showed that U.S. distillate-fuel inventories and refinery operations fell last week.
Crude oil for June delivery climbed 16 cents to settle at $123.69 a barrel at the 2:46 p.m. on the New York Mercantile Exchange, the highest close since trading began in 1983. Prices reached a record $124.61 a barrel today. Futures are double the level of a year ago.
Barclays Oil Forecast - raised
Barclays Capital raised its forecast for U.S. crude oil prices this year by 16 percent, citing stronger demand from China and the Middle East and declines in production at non-OPEC countries.
Barclays increased its average estimate for West Texas Intermediate, the physical grade for oil futures traded on the New York Mercantile Exchange, to $116.90 a barrel from its previous prediction of $100.80.
``Non-OPEC supply remains weak and continues to under perform dramatically relative to consensus expectations,'' Barclays said in a May 7 report, led by commodity research analyst Paul Horsnell.
Blame It On China
China, the world's fastest-growing major economy, has more than doubled oil use since New York crude dropped to this decade's low of $16.70 a barrel on Nov. 19, 2001. Record prices have failed to stem rising consumption in developing nations.
Crude futures for June delivery in New York rose $1.69, or 1.4 percent, to settle at $123.53 a barrel yesterday, the highest close since trading began in 1983, on signs that the U.S. economy is improving and may spur energy demand.
``We are in a phase during which the nature of the fundamentals is being revealed by the ascent of prices,'' the report said.
Supply Response
The supply response from oil-producing nations outside of the Organization of Petroleum Exporting Countries has been weak, with Russia ``having been added to the already-significant list of supply disappointments,'' the report said.
The drop in oil demand in the 30 developed nations, including the U.S., Japan and Germany, represented by Paris- based Organization for Economic Cooperation and Development ``has not been consistently large enough to bring global demand growth much below 1 million barrels a day,'' the report said.
``Non-OECD demand growth remains robust, most particularly China, Middle East and India,'' Horsnell said. ``The decline in OECD demand started in 2005 hasn't accelerated significantly.''
Alternative energy sources aren't being developed fast enough to stop fossil fuel prices from going higher and Barclays estimates the new investment flow into commodity indexes during the first quarter is $2 billion, which has gone mostly into agriculture and precious metals, not energy, the report said.
C) Hudbay
HBM $ 18.28 down .71 ( ( 3.74 %)
HudBay Minerals Inc. said yesterday it would consider closing a copper smelter in Manitoba as early as next year in a move likely to make the miner an even more attractive takeover target. The move would affect 250 workers at the smelter in Flin Flon, Man., and about 60 employees at an associated refinery in Michigan. The Winnipeg-based company gets some of the copper concentrates processed at its smelter from its own mines and it purchases some from suppliers. But surging prices for concentrate as well as high energy costs is hurting the smelter. "Right now, the driver on the smelter is pure and simply economics. We can't make enough money on processing and one of the big cost drivers is our energy source," Allen Palmiere, who took over in January as president and chief executive officer, said during a conference call.
D) Sprott Resource Corp
SCP $ 3.80 up .20 ( 5.56 %)
Up on increased volume - Coal story Expands
Sprott Resource Corp. Announces Additional US$24 Million Investment in PBS Coals
TORONTO, May 7 - (TSX: SCP) - Sprott Resource Corp. ("SRC") today announced that it has invested an additional US$24,000,000 in PBS Coals Corporation ("PBS Coals") as part of an aggregate funding of approximately US$64,500,000. The PBS Coals shareholders' agreement provides that SRC, and each other shareholder, has a pro-rata right to take up any further share offerings of PBS Coals. SRC has been informed that substantially all of the other shareholders have also elected to take up their pro-rata interests.
( The Reason it is in The AMP Portfolio )
"We believe the price of metallurgical coal will stay strong for some time, due to a structural deficit in the market," said Kevin Bambrough, President and CEO of SRC. "The expansion projects at PBS, including two new mines, an additional processing facility, the increasing of capacity at the existing processing facility and the acquisition of additional coal properties in the immediate area of the plants are on schedule and expected to allow the company to produce over 5 MM tons of primarily high quality metallurgical coal by the year 2010. PBS is an experienced low cost producer that is well positioned to deliver strong and steadily increasing operating and financial results over the next few years."
PBS Coals will use the proceeds to subscribe for additional shares of Mincorp Acquisition Corp. ("Mincorp"), which will use the additional funds to purchase, for cancellation, all outstanding warrants as well as 30% of Mincorp stock held by management. Upon the closing of the transactions SRC will continue to own approximately 37% of PBS Coals and PBS Coals will own over 85% of the common stock of Mincorp, with management and employees retaining the balance. SRC's effective diluted interest in Mincorp will increase from approximately 22.4% to 31.6%.
Mincorp, through its wholly owned subsidiaries PBS Coals, Inc. and RoxCoal, Inc., currently produces over 3 MM tons per annum of primarily high quality, low volatility metallurgical coal in Somerset County, Pennsylvania. Mincorp and its subsidiaries and predecessor companies have been operating open-pit and underground coal mines for more than 45 years, and have long standing relationships with many of the most significant global consumers of metallurgical coal.
E ) The ( Vancouver / May ) AMP Seminar
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What is Your Plan for 2008 ?
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"Building Your AMP Portfolio
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F ) Bow Valley Reports
CALGARY, May 7 /CNW/ - Bow Valley Energy Ltd. (TSX - BVX) announces its financial and operational results for the three months ended March 31, 2008.
Results will be in the next market letter - due to today's length
G) Western Financial Group
Net income decline leads to sell off - growth remains solid
WES $ 4.18 down .21 ( 4.78%)
“We have an encouraging start to 2008,” said Scott Tannas, Western’s C.E.O. “The Bank and Western Life are strong contributors and the Network saw a 13% revenue increase. Net income is down over Q1 2007 because of additional Network expenses that will normalize over the year. We’re on track to achieve our key 2008 objectives.”
|
2008 OBJECTIVES Same Store
Revenue
7%-10% growth Bank
Assets
10% growth EPS
8%-12% growth |
The Network showed solid growth in same store sales, up from 7.6% to 8.5% year over year. Products per customer held steady at 2.2%, while commissions and other customer revenue rose 13.4%.
Bank West grew its loan book by 84.3% due to the acquisition of Ubiquity Bank as well as through organic growth. The Bank is on budget with operating income growth of 142.0% to $697,000 for the first quarter of 2008 compared to the same quarter in 2007.
Western Life continues to post good numbers after a strong 2007. Premium and investment income rose 16.2%, policyholder benefits increased 8.7%, and while operating expenses rose 17.9%, overall operating income rose 41.2%.
The Company’s equity partners of Jennings Capital, HED, Falkins Insurance and Harvard Western had first quarter results in line with expectations.
Conference Call
Western Financial Group will host a conference call to discuss the Company's first quarter financial results on Friday, May 9, 2008 at 11:00 am Mountain Time (1:00 pm Eastern Time
H) Peyto Energy Trust
Pey.un $20.90 up .13 ( .63%)
Results are not as good as the growth forecast for Vero and Birchcliff - thus we are adding to those positions over Peyto.
The first quarter was highlighted by sustained distributions, increasing natural gas prices and improved financial flexibility. The following summarizes performance highlights of the business for the first quarter of 2008:
- Capital expenditures – $33.1 million was invested into finding and developing new natural gas reserves, down from $35.5 million in the previous quarter, but up from $30.5 million in Q1 2007
- Production - decreased 5% from 21,305 boe/d in the first quarter of 2007 to 20,342 boe/d in the first quarter of 2008
- Production per unit - decreased 4% per trust unit from the first quarter of 2007, after adjusting for net debt and future unrealized performance-based compensation
- Per unit funds from operations – decreased 9% from the previous year to $0.67/unit
- Commodity prices – natural gas prices, both before and after hedges, were lower in Q1 2008 with prices averaging $7.93/mcf and $8.49/mcf, respectively, versus $8.17/mcf and $9.77/mcf in Q1 2007
- Hedging – a $4.3 million gain for the three months ending March 31, 2008 was realized
- Distributions per unit were unchanged from the fourth quarter 2007 while the cash payout ratio decreased by 1% to 63%. A total of $44.8 million or $0.42 per unit was distributed to unitholders in the first quarter of 2008
- Net debt increased 7% from $427 million in Q1 2007 to $460 million in Q1 2008. This leaves available borrowing capacity of $90 million on bank lines of $550 million
I) Kinross Gold
K : TSX : $ 20.54 up $1.26 ( 6.54)
As oil prices retreated from Tuesday’s record high, gold started sliding, peer pressured by weaker bullion prices. Kinross Gold, the third-largest gold mining company based in Canada was down 3.2% (64 cents per share) after the gold producer reported after the bell on Tuesday that profit rose but EPS slipped as the number of outstanding shares increased.
Other metal companies, Agnico-Eagle Mines was down 2.6% ($1.66 per share) while the gold miners’ sub-index lost 1.1%, foreshadowing perhaps a drag in the materials sector. As Kinross announced on Tuesday revenue of $330.2 million, a 34% increase over the same period last year, hopefully it would be above to keep its head above the water, as other metals in the sector, like uranium, has been going stale.
J ) Oilexco* (OIL : TSX : $16.56 up .04
The Moth-man Prophecies. At last update, Oilexco was drilling an exploration well on the Moth prospect, located in Block 23/21 in the U.K. North Sea. The well will target hydrocarbons in a Jurassic Fulmar pinch out against a Lomond salt dome. Oilexco will earn a 50% equity interest in this block below the top of the Chalk zone. This well was targeting an Upper Jurassicaged Fulmar sand, which may contain either oil or gas. The well was expected to reach total depth by the end of April, of approximately 14,000 feet. If successful, following completion of operations on the well, it will be suspended as a potential future producer.
Capital expenses Top $ 700 M
The company plans to spend approximately US$707 million on exploration, appraisal, and development drilling in 2008. This program includes drilling an additional one or two production wells at the Brenda, an additional well in the Nicol field and one or two more development wells in the Balmoral production area. Development activities will also be focused on the Shelly field. Two production wells will be drilled mid year, and well completions and tie-ins to the Sevan Voyaguer are expected to occur in the fall with production commencing in the fourth quarter.
Procuction Target Remains 45,000 BOE
Oilexco anticipates exit production for 2008 to be approximately 45,000 bbl/d of oil.
K ) Potash Corp. of Sask.
POT : TSX : $202.65 up $2.95 ( 1.48%)
A little dirt on China: Sinofert Holding, the biggest importer of potash in the world, expects a shortage of up to three million tonnes of potash in China this year, or about a third of China’s total demand, which is expected to be 11-12 million tonnes in 2008. To avoid future shortfall, Sinofert wants to sign an import agreement much earlier, namely in 2009.
Does it mean the Chinese are willing to pay higher prices in the 2009 price negotiation? Recall, Canpotex, the Saskatchewan export cartel, settled the 2008 potash price up $400 a metric tonne, or up 230% from a year ago, with Sinofert in April. This is the first negotiation with China that can be viewed as a “success” in the past three years, and Credit Suisse thinks the negotiation confirms two things:
1) China’s negotiating position, while underestimated at the start, weakened as negotiations dragged on; and
2)Whatever China’s alternative sources of supply (via the Belarusian Potash Company and other producers), Canpotex is still in the driver's seat.
L ) Timminco fires back
TIM $24.85 up $1.15 ( 4.85%)
TORONTO (Reuters) - Shares of Timminco Ltd spiked in heavy volume on Thursday after the silicon processor said an outside consultant had declared its technology low-cost and holding the possibility to "reshape the silicon industry."
The Canadian company was the strongest stock on the Toronto Stock Exchange last year, but has in recent weeks faced questions about the commercial viability of its technology for purifying silicon for solar cells.
Timminco said it had commissioned an operational report from solar power consultant PHOTON. It said PHOTON had been given full access to its solar grade silicon production facility and to its accounting procedures.
According to Timminco, PHOTON managing director Michael Rogol said the company's processes have "potential for massive growth and, possibly, for reshaping the silicon industry."
The company's stock fell hard in April after an article in Barron's questioned the firm's technology. Timminco's assertions that it can purify metallurgical grade silicon in a cost-efficient way were also challenged by well-known Wall Street short seller Manuel Asensio.
Since then, the stock has been volatile, but has regained much of the ground it lost in April.
On Thursday, the shares initially jumped by nearly 12 percent when the stock resumed trading after the release. However, the stock then retrenched, and about 35 minutes into trading, it was up 40 Canadian cents, or 1.7 percent at C$24.10.
More than 5 million shares changed hands.
Timminco chief financial officer Robert Dietrich said the company commissioned the report due to heightened interest from potential customers about its technology, some of which was due, he said, to the additional media interest in the company in recent weeks. "We're attracting all kinds of different customers with different propositions, and it's getting to the point where everybody has these questions," he told Reuters. "It's not to say there's anything imminent."
Final Words
The behaviour of the market is unpredictable, but the behaviour of the market's participants is about as predictable as you can get. For long-term success, investors need the discipline to do two things:
1. Invest during points of pessimism
2. Exercise patience.
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