Analysing the buy and sell spread since Wednesday, 27th of April 2011 one will witness that the buying is outnumbering sellers significantly. From the last three trading sessions 2.90-1, 2.6-1 and 1.9-1 despite negative trading sessions on the ASX. Volumes is not strong enough, and sellers are still lurking. We need bigger news to change the investor's mindset.
The reason why the SP is not reacting is that investors are still hesitant since the Constitutional Court ruling (fear), the BFS is not out and the JV is not secured. In addition, to sovereign fears across Africa, with the most recent news coming from Namibia that could have further implication on future mining rights etc (note, it may not have impact on existing ones where some investors may have overreacted).
We are now in May. I wish to see the BFS this month. Xstrata's 90 day option (could be sooner) from BFS release will fall in nicely before the 31st August 2011 option expirary. However, personally, I feel it could be a high risk gamble if one is to take a large punt on the options. For, the timeframe is too short and one will need the BFS, JV and external factors to align quickly, and perfectly... For, what is in it for Management to make the stars align before end of August when their millions of options have already expired in December 2010?
The only other reason I see for a deal to be done quickly, is because bigger players in the industry is forecasting strong platinum prices and desire or is competing to take advantage by bringing projects online in a world where PGM demand is accelerating faster than supply. In addition, Xstrata's large ferrochrome smelters and power plants will be coming online by 2013. i.e. Faster the development of Genorah/Tubatse the better to reap and plan for synergies between the projects.
I hope management can prove my doubts wrong and to strengthen our trust in this company.
LM
NKP Price at posting:
34.5¢ Sentiment: Buy Disclosure: Held
