South Africa’s Colour Divide Affecting Mining

South Africa’s latest mining overhaul could be mired in a long legal battle after producers vowed to stop the changes even as the government said it’s time the black majority benefits from the country’s mineral wealth.

Mineral Resources Minister Mosebenzi Zwane unveiled new rules for so-called black economic empowerment, including tougher ownership requirements, a community-development tax equal to 1 percent of revenue, and expanded quotas for buying goods and services from black-owned companies.

The Chamber of Mines, which represents South Africa’s biggest producers, plans to start fighting the plan in court as soon as next week.

“This charter’s not going to see the light of day anytime soon,” Peter Leon, the Africa co-chair at law firm Herbert Smith Freehills LLP, said by phone on Thursday. “We’re looking at years of protracted litigation.”

 

Producers are fuming after having been kept in the dark on the details of the updated Mining Charter and the chamber refused to attend a last-minute meeting with Zwane’s department earlier Thursday, saying it wouldn’t be coopted into lending support.

The new rules, which don’t give credit for deals already concluded and from which black shareholders have since divested, will deter investment and serve as a “nail in the coffin” for the industry, said Steve Phiri, the chief executive officer of platinum producer Royal Bafokeng Platinum Ltd.

Court Battle

“We’re confident of our prospects in court,” he told reporters in Johannesburg. “I would not rule out the possibility of this matter being decided by the highest court in the land.”

Miners would still prefer to reach a negotiated solution but are prepared to fight the changes if needed, Chamber of Mines President Mxolisi Mgojo told reporters.

Under the new rules, companies must ensure that their South African assets are 30 percent black-owned within 12 months, up from a previous level of 26 percent. If upheld, several of the country’s biggest mining companies would have to sell new stakes, raising the risk of dilution for existing investors.

“The value destruction is hard to quantify and the uncertainty will persist,” Liberum Capital Ltd. analysts including Ben Davis said in a note. “What is certain is that South Africa continues to be a terrible destination for mining investment and assets in South Africa will continue to trade at a discount.”

South Africa holds the biggest reserves of platinum, chrome and manganese and mining companies operating in the country include Anglo American Plc, Glencore Plc and AngloGold Ashanti Ltd.

White Male

The push for increased black ownership of the industry is part of an effort to address the legacy of apartheid and, with its highly paid, mainly white, male executives overseeing hundreds of thousands of workers laboring in some of the world’s deepest and most dangerous operations, the mining industry is starkly symbolic of the country’s persisting inequalities. Yet critics say many deals have mainly benefited the politically connected elite and deter foreign investors.

Mining companies may also be getting caught in the cross hairs of local politics and posturing ahead of the ruling African National Congress’s leadership conference in December, said Theo Venter, a political analyst at North West University’s business school in Potchefstroom, west of Johannesburg.

The party will seek an urgent meeting with Zwane on the charter and is concerned about potential job losses as a result of the new charter, it said on Thursday.

“Given the fact that the mining industry has shed about 60,000 jobs in the last five years, we don’t want legislation that will add to that bloodbath,” ANC spokesman Zizi Kodwa said by phone.

The ANC conference will pit rival factions, including one led by President Jacob Zuma, against each other.

“This is part of an effort by the Zuma faction to provide hard evidence that they are trying to put radical economic transformation into practice,” Venter said. “They are saying: ‘We are not only talking, we are doing something.’”

Cheerio

The Pinstripe and Bowler Club shares information with MF Solutions Ltd

Low Oil

Oil traded near the lowest closing level in seven months as U.S. gasoline supplies unexpectedly rose for a second week.

Futures were little changed in New York after slumping 3.7 percent Wednesday, the first drop in four sessions. Motor-fuel stockpiles expanded by 2.1 million barrels last week, the Energy Information Administration reported. Most analysts surveyed by Bloomberg had forecast a decline. Crude output climbed while nationwide inventories fell less than predicted.

Oil has declined almost 8 percent this month amid speculation that rising U.S. supplies will offset output curbs by the Organization of Petroleum Exporting Countries and its allies, including Russia. New production from OPEC rivals will be more than enough to meet demand growth next year, the International Energy Agency said Wednesday in its first forecast for 2018.

“Any build in U.S. commercial stocks gives us an indication of the uphill battle OPEC is facing,” said Tamas Varga, an analyst at PVM Oil Associates Ltd. in London. “Although last week the big bearish surprise came in the form of significant builds across the board, this time around gasoline was responsible for the consequences.”

West Texas Intermediate for July delivery was at $44.70 a barrel on the New York Mercantile Exchange, down 3 cents, at 10:01 a.m. London time. Total volume traded was about 46 percent above the 100-day average. Prices dropped $1.73 to $44.73 on Wednesday, the lowest close since Nov. 14.

Brent for August settlement was up 10 cents at $47.10 a barrel on the London-based ICE Futures Europe exchange. Prices slid $1.72, or 3.5 percent, to $47 on Wednesday. The global benchmark crude traded at a premium of $2.14 to August WTI.

U.S. crude stockpiles dropped by 1.66 million barrels last week, the EIA reported Wednesday. Inventories were forecast to decline by 2.45 million, according to the median estimate in a Bloomberg survey. Production rose by 12,000 barrels a day to 9.33 million barrels a day.

Oil-market news:

  • The Qatar crisis is reverberating in Libya, inflaming political divisions in the war-torn oil exporter and dragging commodity-trading giant Glencore Plc into a dispute over crude sales.
  • Iraq is driving up crude-oil exports to the U.S., the world’s second-biggest import market, just as there are signs Saudi Arabia is honoring a pledge to restrict such deliveries, according to tanker-tracking data.

Cheerio

The Pinstripe and Bowler Club shares information with MF Solutions Ltd.

People Getting Serious About Marijuana

The taboo’s about even discussing the green weed have slowly relaxed over the last decade. It’s medical benefits have long been lauded despite the obvious stigma.

Imperial Brands Plc gained the services of a leader in the field of medicinal cannabis as the British tobacco manufacturer seeks to further its push beyond cigarettes.

Simon Langelier, a 30-year veteran of Philip Morris International Inc., joined the board as a non-executive director this week, the Bristol-based company said in a statement Tuesday.

Langelier is chairman of PharmaCielo Ltd., a supplier of medicinal-grade cannabis oil extracts. He joined the Canadian-based company in 2015 after a career at Philip Morris that included heading up the next-generation products unit from 2007 to 2010. Imperial stands to benefit from his experience in tobacco and “wider consumer adjacencies,” Chairman Mark Williamson said in the statement.

About 18 months after jettisoning the word “tobacco” from its name, the appointment advances Imperial Brands’s efforts to move beyond its main product, as smoking rates in developed nations dwindle. While focusing on e-cigarettes, Imperial previously resisted another alternative to cigarettes — heated tobacco devices, but that stance could be easing. Philip Morris’s main reduced-risk product is a heated tobacco device called iQOS.

In May, Imperial’s Chief Development Officer Matthew Phillips said the company was assessing whether demand for heated-tobacco devices would pick up outside of Japan, where iQOS has captured 7.1 percent of the country’s cigarette market since its launch in 2015. The company could have a product on the market within months, if needed, he said.

“Imperial’s one-pronged strategy in next-generation tobacco isn’t particularly wise,” Eamonn Ferry, an analyst at Exane BNP Paribas, said by phone. “It’s sensible that they appear to be now softening their stance on heat-not-burn, given the success of the format in Japan.”

At Philip Morris, Langelier established a joint venture for the worldwide commercialization of the company’s smoke-free products.

His experience at PharmaCielo will be beneficial in helping Imperial eke out opportunities should marijuana be legalized at the federal level in the U.S., Ferry said. The expertise tobacco firms have in crop farming and distribution has spurred speculation that they may eventually seek to enter the cannabis market. Cowen & Co. estimates the U.S. part of the industry will surpass $50 billion in sales this decade.

Cheerio.

The Pinstripe and Bowler Club shares information with MF Solutions Ltd.

NASDAQ Tumble Through Just 5 Stocks.

When it comes to the ongoing technology beat-down in the stock market, it appears not all shares are created equal.

Indeed, just five names account for nearly 75 percent of the drop in the Nasdaq Composite Index, which has fallen more than 2.1 percent since June 7. Meanwhile, the Dow Jones Industrial Average and S&P 500 Index are roughly unchanged over the same time frame.

Much of this dynamic is due to giants like Apple Inc., Microsoft Corp. and Goggle parent Alphabet Inc. falling as much as 6.5 percent. Add Facebook and Amazon to the mix and those companies account for nearly 30 percent of the index’s weighting, and their outsize impact has driven the gauge lower even though the bulk of the stocks are doing fine.

This selloff was “way overdue given the extreme out-performance and positioning in technology shares,” Morgan Stanley analyst Michael Wilson wrote in a note to clients Monday, Shares of Apple, for instance, are still up 25 percent this year, giving them room to fall.

But while Wilson expects the drubbing to continue in the short-term, he doesn’t think the market has seen a peak in tech shares.

“We would be surprised if this is the end for technology stocks given the very strong earnings growth we are witnessing,” he wrote.

Analysts now believe performance in technology will depend on the economic outlook. And if conditions change, finance will be the likely beneficiary.

“If the current economic ‘Goldilocks’ environment persists, technology and other growth stocks should continue to outperform, despite today’s price declines,” Goldman Sachs Group Inc. analysts led by David Kostin wrote in a note to clients late Friday. “However, if investors recalibrate expectations for inflation and Fed policy to match the growth optimism suggested by the S&P 500 level, higher rates should lead to financial sector outperformance.”

Cheerio.

The Pinstripe and Bowler Club shares information with MF Solutions Ltd.

 

UK Election : What Could It Mean To You.

U.K.’s citizens have just voted their next set of Parliament members.

What were the results and why should traders care? Here are a couple of answers:

Why did Theresa May call for snap elections anyway?

Back in mid-April, Prime Minister Theresa May called for a snap election despite her promises to wait for the May 2020 scheduled elections. The plan was to capitalize on her (and her party’s) popularity and strengthen their numbers ahead of the crucial Brexit negotiations.

Back then the Conservative Party held 330 seats, just a smidge above the 326 required to form a majority in the 650 seats of the Lower House. The Labour Party came in second (229 seats), followed by the Scottish National Party (54) and the Liberal Democrats (9).

The pound rallied at her announcement as market players and their cats had bet on a landslide win for the Tories, with polls attributing double-digit leads against the next party.

Did May’s gamble pay off?

Not even a little bit. In the weeks that followed, May’s hard stance on Brexit, two terror attacks in the U.K., a few REALLY unpopular bits in the Conservative Party manifesto, and hard campaigning from her opponents have pulled the Tories’ lead down to uncomfortable levels.

Fast forward to Election Day and now May’s party has…more regrets than seats in the Parliament.

With a voter turnout of 68.7% – the highest since 1997 – and only one more constituency left undeclared, Theresa May’s Conservative Party is expected to snag 318 seats in the Parliament, 12 fewer than when she called for the elections.

The Labour Party is expected to get 261 seats (+31 seats) while the Liberal Democrats (12) and Democratic Unionist Party (10) also added to their numbers. The Scottish National Party (35) also lost seats, though.

What does this mean for the government?

In a word, trouble. With no party reaching parliamentary majority, the U.K. officially has a “hung Parliament.”

Basically, having a hung Parliament means that it will be harder for the MPs to reach decisions. But as leader of the party with the most seats, May will be given a choice if she wants to (a) form a coalition or (b) run a minority government.

Forming a coalition means teaming up Survival-style to get the required 326 votes. In this scenario the Tories would sign a formal coalition as PM David Cameron did with the Liberal Democrats in 2010. The Tories would have to give up control, though, and likely give Cabinet positions to the other party.

Or they could choose to run a minority government and enter into “confidence and supply” agreements, wherein a small party or independent MPs will “supply” their votes on bills and “confidence” votes in exchange for progress for their pet causes.

What does this mean for Brexit negotiations?

More trouble. Remember that May wanted to reinforce their numbers to improve her bargaining position with the EU and increase chances of a “good deal” for Britain. If you recall, she has said that “no deal is better than a bad deal.”

But with the Conservative Party not even getting majority, things just got a lot harder for May. Not only does she have to soften some of her stances (not all Tories are in favor of a hard Brexit), but she might have to scrap some of her plans altogether.

The lack of majority could also lead to delays in the Brexit negotiations. Formal talks was scheduled to start on June 19 but already EU’s Chief Brexit negotiator Michel Barnier tweeted:

“Brexit negotiations should start when UK is ready; timetable and EU positions are clear. Let’s put our minds together on striking a deal.”

Recall that Britain has already officially triggered Article 50 of the Lisbon Treaty. This means that they have two years to negotiate their way out of the EU. Tick tock.

Any other surprises?

As you can see on the chart above, Nicola Sturgeon’s Scottish National Party also lost bigly. More importantly, Alex Salmond – Sturgeon’s deputy, mentor, and a key SNP member, has lost his seat in Gordon.

This means that we won’t see a second Scottish referendum anytime soon. Already Sturgeon has shared that she would “properly think” about whether to press ahead with Referendum 2.0 after the Tories enjoyed their best performance in Scotland since 1983.

Nick Clegg, THE leader of the Lib Dems in 2010 and former Deputy Prime Minister, also lost his seat in Sheffield Hallam to Jared O’Hara of the Labour party. Yikes!

How did the markets react?

The pound took its hardest hit when exit polls – which have been good predictors of actual results – pointed to a hung parliament.

The currency also dropped by its sharpest since the EU referendum and made new lows while the final tallies were shaping up. However, it also saw retracements at the start of the London session.

FTSE 100, which includes companies that would profit from a weaker pound, opened higher today. Meanwhile, FTSE 250, which has more local companies, are marginally lower on the day.

It’s also interesting to note that utilities companies are among the biggest winners today. One possible reason is that the lack of majority would mean that the Labour Party won’t likely push through with nationalizing them while Theresa May can’t cap their bills either.

What now?

PM May revealed that she has seen the Queen and has formally asked permission to form a government.

Apparently, she’s now teaming up with the Democratic Unionist Party (DUP) to form a coalition in time for the start of Brexit negotiations AND the opening of the new Parliamentin 10 days.

Thing is, the DUP isn’t a fan of a “hard Brexit.” DUP founder Arlene Foster once shared that “No one wants to see a hard Brexit,” adding that “no one wants to see a hard border.”

This means that, unless May convinces Foster and her gang to come over to the “hard” side, then we’ll likely see a toned down version of May’s initial Brexit plans.

Cheerio

The Pinstripe and Bowler Club shares information with MF Solutions Ltd.

 

UK OK ?

The U.K. could suffer another ratings downgrade after a General Election led to a hung parliament, Moritz Kraemer, sovereign chief ratings officer at S&P Global, said on Friday.

The U.K. lost its triple A rating after the country voted to leave the European Union in June of last year. S&P said at the time that it was worried the decision would lead to a deterioration of the U.K.’s economic performance and institutional framework.

Kraemer said on Friday that the latest election outcome proves the rating update was correct and further ones could be on the way.

“We have the outlook on the ratings still on negative indicating that further downgrade or downgrades could be in the wings going forward,” he said.

“This depends pretty much on the further outcome of the Brexit negotiations and the reality that the U.K. will face outside the EU, which is still uncertain,” Kraemer added.

Brexit talks, which were due to begin in a couple of weeks, are set to be delayed until the U.K. has a new government in place. The associated uncertainty could hurt the country’s economy by further derailing investment decisions.

Kramer noted that this was the second unnecessary referendum/election in the U.K. “This is quite a track record,” he said.

The upcoming decisions of U.K. lawmakers will be closely watched. Kathrin Muehlbronner, a Moody’s senior vice president and lead U.K. sovereign analyst, said via email: “Moody’s is monitoring the U.K.’s process of forming a new government and will assess the credit implications in due course.”

“As previously stated, the future path of the U.K. sovereign rating will be largely driven by two factors: first, the outcome of the U.K.’s negotiations on leaving the European Union and the implications this has for the country’s growth outlook; Second, fiscal developments, given the country’s fiscal deficit and rising public debt,” she added.

The outcome of the election also seemed to indicate that voters are tired of austerity policies.

Cheerio

The Pinstripe and Bowler Club shares information with MF Solutions Ltd

Russian Grain Gain

Russia’s wheat fields are expected to see warm, dry weather in the next two weeks, a relief for farmers that have struggled with a cold and soggy planting season.

Wet fields of winter wheat will start drying out, which would benefit the crop to be harvested next month, according to Commodity Weather Group. Later in June, most models show rain will return, which would replenish soil moisture and keep the crop in good shape, said David Streit, a forecaster for the Bethesda, Maryland-based firm.

“Russia has a good soil moisture supply in place going into this drier spell that the wheat can tap into,” Streit said, adding that the dry weather will help prevent disease.

Bad weather has lowered expectations for Russia’s total grains production, and traders are closely watching weather forecasts ahead. Earlier this month, the Agriculture Ministry cut production estimates to as low as 100 million metric tons from a previous forecast of 110 million tons, according to a report from Tass news service, which cited an interview with the minister.

Cold, Wet

Earlier in the year, cold weather in central and southern Russia, the main areas for winter wheat, raised the risk of delays to the wheat and barley harvest. It’s also possible that central and eastern Ukraine, and central portions of Russia’s North Caucasus could see lower yields, said Kyle Tapley, a senior agricultural meteorologist at MDA Weather Services.

“I don’t see major problems for the winter wheat except for some falling behind with vegetation, but it is not the major issue,” said Dmitry Rylko, director general of Institute for Agricultural Market Studies in Moscow.

The weather could be a bigger problem for spring crops, such as wheat, barley and corn, which are falling behind in planting and development, he said.

In the spring-wheat areas of Volga region and the Urals, the fields will likely remain cold and wet over the next 10 days, which could slow planting and early crop growth, said Tapley of MDA. However, conditions could improve later in the season, he said.

Sowing of spring wheat, the smaller of the two main wheat harvests in Russia, are lagging behind last year’s pace. Plantings account for 12.5 million hectares (30.9 million acres) as of June 2, compared with 13.3 million hectares a year before, according to the Agriculture Ministry.

Spring wheat, mainly grown in Siberia, usually accounts for a third of Russia’s total harvest.

Cheerio

The Pinstripe and Bowler Club shares information with MF Solutions Ltd.