Reading Time: 3 minutes

7:00 pm   Monday 19 September 2011

If you had been following the Philippine government’s T-bill auction over the past few months, you’ll be pretty convinced by now that people really have nowhere to park their money.  Today, the 90-day T-bill averaged 0.69 % per annum in yield which is really next to nothing.  There is even a 20% withholding tax, so the return to the investor is even smaller.  No wonder, people are scrambling everywhere to find a good return on their cash.

Philippine stocks did better today than most of its Asian counterparts except Japan were sorely in the red; although I would not crow out loud for the PSEi because in spite of the rise in the index, value turnover was lower than usual.  The good news is that the market saw net foreign buying of Php 226 million.

My recent favorite mining stock – LC – appears to be hitting a wall nowadays.  It is having a tough time breaking convincingly past the 1.40 level even if it traded as high as 1.47 two Fridays ago.  In trading days, it seems such a long time already.  The Gold Field cash payment is expected to take place on 20 September, and there is no indication that it will not go through.  The market seems have bought the expectation already, and now, it is selling on news.  It does not mean, however, that the story is over for LC.  I am still of the conviction that LC will trade above Php 2.00 within the next 6 to 8 months and progressively move higher as more of the resources are developed.  In the meantime, we have seen a near term peak and we should be finding a trough in the next few weeks.  Short term traders may have difficulty making money for the time being.  Time to find the next exciting stock before coming back to LC.

For that matter, I would like to talk about a mining stock report on a stock that is most likely unknown to many.  Previously, I mentioned a price and volume spike on this stock last Friday.  I am referring to NiHAO Mineral Resources which I gather is already in production stage in one of its mines.  According to one research note, it has mining properties is Isabela, Zambales, Misamis Oriental, Masbate, and North Cotabato.  NI has a 30%  stake in Oriental Vision Mining Corporation (ORVI) which has a 15, 983 hectare mining claim in South Cotabato and is operator for several mining claims totaling 39, 196 hectares in Dinagat Island, Surigao, Sarangani and Biliran.  ORVI’s flagship mining project is the Palhi Nickel Mine in Dinagat Islands, where the company had already shipped 8 boat loads (424, 736 WMT) of limonite and saprolite ore to several Chinese buyers.  ORVI’s other key mining projects are the Sangay Nickel-Chromite Project and the South Surigao Coal Project, both are in the advanced development stage.

The Palhi Nickel Project is a nickel deposit located in a 2,314 ha. property in Dinagat Island.  Initial exploration showed 28 million dry metric tons (DMT) of JORC-eligible nickel ore resources.  Mining operations in Palhi started in 4Q 2010 with 400,000 wmt of nickel ore shipped.  From May 2011 to date, 425,000 wmt of nickel ore was already shipped.  Someone told me that the 9th, 10th, and 11th shipments are preparing to be loaded.  The details of past shipments to the best of my knowledge are as follows:

Shipment no. 1 2 3 4 5 6 7 8
Departure Date 5/19/2011 6/2/2011 7/3/2011 7/14/2011 7/31/2011 8/15/2001 8/17/2011 8/30/2011
Buyer Tsingshan Xiamen ITG Dun Feng Sinosteel Sichuan Sichuan Tsingshan Dun Feng
Destination China China China China China China China China
Volume (wmt) 56,876 50,680 51,900 55,350 56,280 46,200 55,050 52,400
Ni grades 0.9% 0.9% 1.8%, 0.6% 2.0%, 0.6% 1.4% 1.4% 0.9% 0.6%
Fe grades 51% 49% 30%, 50% <20%, 49% 30% 30% 48% 50%

I cannot guarantee the accuracy of the table but I believe that these figures can be verified at the Mines and Geosciences Bureau of the DENR, so please do some homework before swallowing this note hook, line and sinker.

From what I gather, ORVI is headed by the same person who previously operated some of the nickel mines of Nickel Asia.  The stock is not yet widely traded, and the market cap is only around Php 3 billion.  NI had seen a lot of volatility in the past so it might not sit well with the faint of heart.  But if one believes that NI can indeed sustain mine development and production activities that would make it eventually appeal to institutional investors, I believe it presents a reasonably compelling risk reward pay-off.  Technically, the charts indicate that NI is overbought, so one has to ponder his strategy carefully.

As for the rest of the market, I think what we are seeing is selective positioning.  TEL is up slightly.  I think it is worthwhile to accumulate TEL.  AEV, AP, MER and URC were firmly up also on what looks to be accumulation buying as well.  PX is down sharply by 2.8% for no apparent reason, but PXP was sharply higher.  I guess both stocks look to be disjoint from each other.  EDC is up with good volume; I hope sentiment improves on this stock.

Generally, the market is trendless.  One has to think strategy more thoroughly in order to gain in a market such as what we have today.

Related posts