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August 7/08
A) The Future of Coal Burns Bright
I found this story amazing :
1) China has reduced factory production to reduce pollution for the Olympics
2) The Chinese economy is " supposed to slow"
3) a new coal fired electrical generation plant opens every ten days in China
4) there are critical shortages of coal - to the extent that China , a former exporter is now an importer
Aug. 6 (Bloomberg) -- China's central province of Hubei, which has the world's largest hydropower station, has started rationing electricity to meet demand during the Olympics and the summer after fuel supplies fell.
The provincial government decided to cut power supplies to the capital city of Wuhan by 34 percent, the city of Huangshi by 31 percent and Huanggang by 16 percent, the local economic commission said in a statement posted on its Web site.
China, facing its sixth year of electricity shortages, mothballed 3 percent of its coal-fired generating capacity as of July 25 after fuel supplies dwindled, State Grid Corp. of China said last week. Coal stockpiles at Hubei's power plants have fallen below the ``caution line'' of 750,000 metric tons, the provincial government said. ``Insufficient coal supplies forced the closure of an increasing number of power plants in the province,'' the commission said. ``We decided to start rationing power supplies from Aug. 5 in order to ensure basic power demand for the summer and Olympics are met.'' Some high-energy-consuming companies will be shut to curb demand, the provincial government said. Supplies to ``small'' steelmakers, petrochemical producers and cement plants will be stopped, it said, without providing details.
Caution Line
State Grid said last week 46 percent of the power stations on its network have coal stockpiles below the ``caution line'' or seven days of consumption. More than 1 billion people rely on State Grid for their power.
The coal shortage may worsen in winter as power demand remains high and hydropower output falls to a seasonal low, it said.
China's Shandong province is facing its worst electricity shortage in a decade and is unable to meet a third of the region's power demand, Qilu Evening News reported Aug. 4, citing Shandong Electric Power Corp.
The AMP Coal Portfolio ( in part - see the book for other company selections )
Teck Cominco ( TCK.B) $ 42.73 up .52 ( 1.23%)
Sprott Resource Corp. ( SCP) $ 3.10 up .29 ( 10.3%)
Waratah Coal ( WCI) $ 2.73 up .03 ( 1%)
B ) A Million Barrels Of Production Lost
Market Yawns and Oil Trades Lower - indicates market sentiment swing Two weeks ago this would have been a $ 5 spike in oil
A Turkish section of a BP Plc-led pipeline carrying Azeri oil to Turkey's Mediterranean coast was shut last night after an explosion sparked a fire.
The fire will burn for another 24 hours ``in the best case scenario,'' Mehmet Akif Sam, spokesman for the Ankara- based Energy Ministry, said today. Repairs and testing will take at least three to four days, and transportation of oil through the pipeline may be halted until the middle of next week, he said.
Firefighters turned off two valves to stop the flow of oil and allow the fire to burn out along a stretch of six kilometers (3.7 miles), which has an estimated capacity of 10,000 cubic meters of oil, Sam said.
C ) Birchcliff Rebound
BIR $ 11.50 up .53 ( 4.8%)
May have more to do with the stock being oversold than the market uptick - but we'll take it Watch the weekly storage report Thursday.
Wednesday market in nat gas :
Natural gas advanced as speculators who had sold contracts on a bet that prices would fall bought the positions back to protect gains or limit losses.
Gas has fallen 34 percent since June 30 on rising supplies and declining crude oil prices. ``You're getting a round of short covering ahead of the inventory report tomorrow,'' said Ed Kennedy, a trader with Commercial Brokerage Corp. in Miami. ``You can expect buying after the decline we had in the past month.''
Caveat : Prices Remain Below $9.00
Natural gas for September delivery rose 4.7 cents, or 0.5 percent, to settle at $8.773 per million British thermal units at 3:01 p.m. on the New York Mercantile Exchange. Gas earlier climbed as high as $8.977 and fell as low as $8.552.
Intraday prices touched $13.694 per million Btu on July 2, the highest since Dec. 22, 2005, when gas rose to $14.385. On this trading date in 2007, gas closed at $6.208 per million Btu
D ) Financials and Housing -
Two Cautionary Tales for Bottom Fishers
1 ) The Ugly Sisters were dating AIG
( follow up to yesterday's AMP lead story)
Down 10 % in after hours trading on the following news -
American International Group Inc., the world's biggest insurer by assets, posted a $5.36 billion loss as writedowns tied to the housing slump wiped out profit for a third straight quarter. Shares fell 8.2 percent in extended trading.
The loss in the period ended June 30 equaled $2.06 a share, compared with profit of $4.28 billion, or $1.64, a year earlier, the New York-based company said today in a statement. The loss excluding the declines in the value of some investments was $1.32 billion, or 51 cents a share, missing by $1.28 the average estimate of 19 analysts surveyed by Bloomberg.
``They're still dealing with the environment for credit- default swaps, which is very difficult,'' said Keith Wirtz, who helps manage $23 billion including 1.3 million AIG shares as chief investment officer of Fifth Third Asset Management in Cincinnati. ``Investment income is being pressured.''
2) Fannie and Freddie - why cousins should not marry
( follow up to yesterday's lead article )
Bill Gross, who manages the world's biggest bond fund (PIMCO), said the U.S. Treasury will probably be forced to buy as much as $30 billion of preferred shares in both Fannie Mae and Freddie Mac to help shore up their capital.
``By the end of the third quarter, the preferred stock in Fannie and Freddie will be issued, the Treasury will have bought it,'' Gross, co-chief investment officer at Pacific Investment Management Co., said today in an interview on Bloomberg Television. ``We'll be on our way toward a joint Treasury-agency combination.''
Gross adds to a growing chorus of investors and analysts predicting U.S. Treasury Secretary Henry Paulson will need to use his newly won power to prop up Freddie and Fannie. Freddie posted a second-quarter loss that was three times wider than analysts estimated and said credit losses doubled in three months, heightening concerns it may not be able to weather the worst housing slump since the Great Depression.
D ) Vindication for AMP Book
The AMP Book has long carried a piece on Legg Mason and the portfolio of beaten up stocks favoured by that firm . Here is today's news from Massachusetts :
The Massachusetts state pension fund pulled $2 billion in assets from Legg Mason Inc.'s Bill Miller and four other firms as part of a plan to shift all U.S. equity assets from managers who actively pick stocks to buy and sell.
The board of the $50.6 billion pension fund approved the switch at a meeting today, citing ``inconsistent performance,'' said Francy Ronayne, a spokeswoman for Massachusetts Treasurer Timothy Cahill in Boston. The money was assigned to portfolios run by State Street Corp. and three hedge funds that are designed to track the investment performance of indexes, or baskets of securities.
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E ) Agrium Reports
AGU $ 87.16 up $4.38 ( 5.3%)
Agrium Inc profits more than doubled in the second quarter as surging grain prices pushed up demand and prices for the fertilizers it sells to farmers and wholesale markets.
Agrium, the world's third-largest nitrogen producer and the top U.S. retailer of crop supplies, earned $636 million or $4.00 a share in the quarter, up from $229 million or $1.70 a share a year ago.
The Calgary, Alberta-based company had forecast earnings of $2.80 to $3.00 a share in June, but it said the estimate did not include returns from the UAP chain of retail stores it acquired earlier this year.
Agrium said the UAP acquisition is estimated to have contributed around 70 cents to its diluted earnings per share for the May 5 to June 30, 2008 period.
Analysts had expected earnings of $3.23 per share, on average, according to Reuters Estimates.
Forecast remains strong on rising sales volume and rising prices
Agrium said sales rose to $3.87 billion from $2.03 billion as it sold more fertilizer, chemicals and seed at higher prices than a year earlier.
F ) Peyto Reports
PEY.UN $ 16.94 up .42 ( 2.54%)
Although I personally sold Peyto to build up a position in BIR , it remains a top notch company in terms of management working for shareholders .
The second quarter was highlighted by stronger commodity prices, increased distributions and increased capital spending as improved business conditions offered better returns. The following summarizes performance highlights of the business for the second quarter of 2008.
-Capital expenditures – $21.5 million was invested into finding and developing new natural gas reserves in the quarter, a 66% increase from Q2 2007. Over 75% of the capital was spent in June following spring breakup. Capital expenditures for the first half of 2008 were $54.6 million versus $43.4 million for the first half of 2007, an increase of 26%
- Production - decreased 5% from 20,509 boe/d in the second quarter of 2007 to 19,530 boe/d in the second quarter of 2008
- Production per unit - decreased 5% per trust unit from the second quarter of 2007, after adjusting for debt and future unrealized performance based compensation
- Per unit funds from operations – increased 7% from the previous year to $0.70/unit
- Strong commodity prices – Natural gas prices, both before and after hedging, were stronger in Q2 2008 with prices averaging $10.46/mcf and $9.32/mcf, respectively versus $8.10/mcf and $8.59/mcf in Q2 2007 - Hedging – a $10.1 million loss for the three months ending June 30, 2008 was realized
- Distributions per unit increased 5% from the second quarter of 2007 while the cash payout ratio decreased to 63% in Q2 2008 from 64% in Q2 2007. A total of $46.6 million or $0.44 per unit was distributed to unitholders in the second quarter of 2008
- Net debt increased 9% from $415 million in Q2 2007 to $454 million in Q2 2008. This leaves available borrowing capacity of $96 million on bank lines of $550 million
G ) Scorpio Mining
SCM $ 1.12 down .03
Shipments Begin and a New Gold Spin Off Announced
Scorpio Mining Corporation (TSX:SPM) is very pleased to announce that on Tuesday, July 29th, 2008 it started shipping lead concentrate from its 100% owned Nuestra Senora project, Sinaloa State, Mexico.
Peter J. Hawley, Chairman, CEO reports, "Last week was very exciting for the Company as it marks a milestone towards receiving this quarter our first ever cash flow from the project. Currently we are only consistently running one of the two ball mills at an average rate for the month of July of 625 tonnes per day as the mill tune-up nears completion. It is interesting to note that on one day in the month the Company ran 1,048 tonnes of material through both ball mills. First cash receipts for both the lead and zinc concentrates are expected approximately mid September 2008."
2) Scorpio Mining Corporation ("Scorpio Mining"),(TSX:SPM) is pleased to announce that Scorpio Gold Corporation ("Scorpio Gold") a 93.5% owned private subsidiary of Scorpio Mining, which holds certain gold assets in Nova Scotia and Quebec, has signed a Letter of Intent ("LOI") with Cincoro Gold Corp. ("Cincoro", TSX.V: FIV.P), a capital pool company listed on the TSXV Venture Exchange, whereby Cincoro has agreed to purchase (the "Acquisition") all of the issued and outstanding common shares of Scorpio Gold or otherwise complete a business combination with Cincoro. The Acquisition, if completed, will constitute Cincoro's "qualifying transaction" under the policies of the Exchange. The transaction with Cincoro will see Scorpio Mining become the controlling shareholder in Cincoro.
The resulting company, to be called Scorpio Gold Corporation, will have a public trading platform and greater access to financial markets to advance Scorpio Gold's portfolio of advanced stage development properties in Nova Scotia and Quebec, and will be able to call on Scorpio Mining's expertise in Mexico for acquiring, developing, or operating complementary projects in Mexico.
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The AMP (Apprentice Millionaire Program) is a stock market blog dedicated to advice, strategies and recommendations to enable an average investor to learn to outperform the market. Outperformance is measured in consistently beating the major market averages. The financial and educational goals are to build your portfolio to a million dollars. We believe that stock market success can be learned. We offer a track record of investment success and portfolio management based on a combination of fundamental and technical analysis within the business cycle. Our stock selections are not restricted to one category - but are mainly small cap Canadian companies emphasizing growth and aggressive management. We have a track record of sucess with junior oil and gas, mining and industrial companies which offer the potential to ramp up to mid cap status.This is a focused approach that does not include buying bonds or mutual funds. The AMP is not a "buy and hold forever" strategy. Positions are held and added to, provided the fundamental growth of the company and sector continues as per our reasons when they were purchased. |
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