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Views from the Trading Floor - Featuring Gulf Keystone, Dollar Index, Bowleven, EMED Mining and Kenmare Resources 9th July


From the trading floor

Dollar Index (DXY)

I highlighted the potential bounce off of the 50 day moving average (green line below) in the last note, and the ramifications for global indexes and commodity prices. The index is fast approaching the highs seen on the 1st of June at 83.54, with the index trading at 83.25 at the time of typing. Any break and close above the recent highs could spark a rally towards the 85 level.

Another comparison chart I watch closely, is the S&P 500 versus the Dollar index charted below. A couple of weeks ago I highlighted the important level this comparison index was heading towards, and the potential breakout and breakdown. It would appear that the dollar is heading for a breakout, with the S&P 500 heading for a breakdown of the recent trend. As we head into the US earning season tonight, its all to play for.

Saints & Sinners: Oil & Gas


Gulf Keystone (LON:GKP) continued to keep chins wagging after a report in The Telegraph from the 5th of July hinted that Kurdistan had begun trucking exports of crude oil across the border to Turkey. Other snippets of speculation that were doing the rounds included chatter that the courts had asked who was bankrolling Excalibur for the upcoming court case expected to begin on October. All speculation and chatter aside, one thing we can be sure of is the markets expecting an update on drilling from Shaikan 6 (SH-6). We would also be expecting an updated CPR report to factor in the recent drilling activity to be hitting the market soon. We are very bullish on the story and have been for some time, we currently have a BUY rating on the stock with a 350p price target. Shares were trading flat at 211p at the time of typing.

Bowleven (LON:BLVN) slipped 9% to 64.5p during early trading as short term speculators jumped ship as the speculated Monday RNS did not materialise. A couple of updates are due over the next few weeks, which are the full year numbers and the long awaited volumetric study. We will be watching the newswires closely over the next few sessions for both.

SacOil Holdings (LON:SAC) slipped 4% to 2.875p at the mid-price during afternoon trading after the company said that it is still in the process of considering specific potential transactions, which if successfully concluded, may have a material effect on the price of SacOil ordinary shares. The delay in reaching a resolution is due to a revised transaction structure, additional parties, and regulatory/ approval processes which are taking longer than initially anticipated. Shareholders are advised to continue to exercise caution when dealing in their SacOil Shares until a further announcement is made in this regard.

JKX Oil & Gas (LON:JKX) traded flat at 108.75p during early trading after the company said it has received the final permit to operate its Koshekhablskoye natural gas field in southern Russia, but warned that the anticipated ramping-up of production has been delayed while Well 27 is brought on stream. Well 27 is currently being sidetracked in the reservoir section following a blockage and is now anticipated to be on stream at the end of the third quarter.

TomCo Energy (LON:TOM) continued to push another 6% to 1.75p at the mid-price during early trading after the company said on Friday it won't to pursue an equity fundraising at the present time given the adverse market conditions and the delay to the issue of Red Leaf Resources Inc's groundwater discharge permit. TomCo will continue to review its funding options, which include the possible sale of its stake in Red Leaf, if appropriate. Red Leaf is undertaking additional voluntary water studies, including some additional drilling to further support its application for a groundwater discharge permit. TomCo believes that this won't affect the Red Leaf timetable of first commercial production from the early production system capsule planned for early 2014.

Ascent Resources (LON:AST) rebounded from its recent lows during afternoon trading, jumping 11% to 2.5p on twice Fridays volume by the 2pm hour. The shares are still a long way off of the 4p high seen early last year.


Saints & Sinners: Mining

EMED Mining (LON:EMED) surged 10% to 12.5p during early trading after the company said it has entered into a 10-million-euro Sale and Purchase Agreement for land needed for waste deposition next to the Rio Tinto Copper Mine in Spain, and added that it raised aggregate proceeds of five million dollars from a share subscription with an existing shareholder. Buys land from Rumbo 5-Cero, S.L., part of an Andalucian investment group. Parties intend to enter into a 50/50 joint venture to test and potentially exploit some tailings and waste dumps; EMED Mining will be the operator of the JV. Acquisition is required to restart production; satisfies almost all of the project's needs for tailings deposition from proposed operations. Major shareholder and cornerstone customer Yanggu Xiangguang Copper Co. Ltd agreed to subscribe for 32.2 million new ordinary shares at 10 pence per share for aggregate proceeds of $5 million. Funds will be partly applied in funding the cash consideration for the acquisition of the Land.

Centamin (LON:CEY) slipped 10% to 66p on speculation in the Egyptian press suggesting the company was at risk of having its concession agreement with the Cairo government revoked due to accusations of breaches of contract. This speculation forced the company to issue an RNS that said "Centamin notes that an un-named government source was quoted in a local Egyptian paper as stating there were breaches of the concession agreement. Centamin confirms that there have been no such breaches, no notice of breaches have been served and operations at Sukari continue as normal."

Kenmare Resources (LON:KMR) dropped 8% to 35.2p during early trading after Iluka reduced sales guidance for 2012. The company sold 87kt of zircon in H1 and forecasts full year sales of 200-300kt. Guidance on 8th May was cut be 14%, from 500kt to 430kt. Guidance for rutile and synthetic rutile was also reduced from guidance given in February. Rutile production guidance was cut from 225kt to 140-200kt and synthetic rutile from 310kt to 170-200kt The reduction is attributed to a deteriorating economic outlook and a reduction in indicated demand from customers for H2.

Berkeley Mineral Resources (LON:BMR) fell 8% to 3.4p at the mid-price during afternoon trading after the company said it hasn't been able to complete due diligence over the two remaining copper tailings dumps at the Chingola area in the north of the country. The company is continuing to negotiate with the directors of the parties concerned, with BMR's exclusive right to carry out due diligence for one cluster extended until at least Aug. 8. Berkeley also noted that its Zambian development team has started negotiations regarding option agreements over further copper clusters in the Ndola area in northern Zambia.

Pathfinder Minerals (LON:PFP) surged 11% to 1.05p at the mid-price during afternoon trading after the company said that on July 6 it obtained an order from the English High Court striking out the Defence and Counterclaim of ex-director General Veloso, Diogo Cavaco and JV Consultores Internacionais Limitada, the defendants, to the company's claims, on the basis of the Defendants' breaches of the English Court's orders and their stated intention no longer to participate in the English Court proceedings. The Court also ordered that there should be a hearing of the company and its subsidiary, IM Minerals Ltd's, or IMM, application for judgment on their claims on an expedited basis and that the Defendants should pay the Claimants' costs of the strike-out application.

Aurum Mining (LON:AUM) moved 8% higher to 3.25p at the mid-price during early trading after the company said it has been given approval to exercise its option to acquire five tungsten permits, known as the Morille permits, in Spain. Aurum said it has completed legal, technical and financial due diligence and that the 140,000 euros ($172,000) acquisition cost will be funded from existing cash. The vendor, who is a private individual, will retain a 1.5% net smelter royalty. Aurum is now in the process of incorporating a Spanish subsidiary to hold the Morille permits and as soon as the entity is incorporated it will proceed with the formal acquisition process. The Morille permit area is a brownfield site 15 kilometers southwest of Salamanca, covering an area of 5,796 hectares where there has been a long history high-quality tungsten concentrates production.


Commodities Corner

Gold - ↑Trading at $1583, up $2 (+0.13%)

Silver - ↑Trading at $27.21, up 4c (+0.66%)

Copper - ↑Trading at $7541, up $14 (+0.18%)

Zinc - ↓Trading at $1840, down $15 (-0.84%)

WTI Crude - ↑Trading at $84.47, up 1c (+0.02%)

Brent Crude - ↑Trading at $98.38, up 19c (+0.19%)

Any questions please don't hesitate to contact me at [email protected] or visit www.viewsfromthetradingfloor.com or www.fox-davies.com

Quick facts: Archer Daniels Midland

Price: 44.59 USD

Market: NYSE
Market Cap: $24.78 billion

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