Fallout at Afarak immense

There lots of stories now swirling around the Finnish financial authorities fine against Danko Koncar, the principle owner of Afarak; Afarak is NOT a party to the fine. The share price rose because other shareholders, not only the minority shareholders in Finland,may be able to cash out their shares at E2.50, more the double today’s price which has already risen almost 17%.

In addition, the Finnish government is investigating the company and may have additional charges coming. Also, is Afarak’s management working for all the shareholders or just the majority shareholder?

Afarak reportedly tried to “sell” marketing agreements to two trading companies to raise money and had a tentative deal with a Chinese company to sell its South African chrome mines, but those deals are now thought to be on indefinite hold.

Exclusive listing on the London Stock Exchange may be a a pipe dream now with LSE officials taking a look at the company.

Koncar fined E50-million by Finnish financial authorities; trouble brewing for Afarak

Danko Koncar, the principle owner of Afarak is in a whole lot of trouble. The Finnish financial authorities just announced a conditional fine of E40-million and a supplementary fine of E10-million for each month that the fine isn’t paid. And, Afarak will have to pay the minority shareholders who brought the action AT LEAST E2.50 per share; for comparsion, Afarak’s price was around E0.90 per share until the decision is now trading up to E1.05 per share.

Of course, Koncar will appeal.

This alone will cost the company about E50-million. As a result, something has to give. Afarak may have to sell a major asset and Koncar, if the fine is imposed, will have to start dumping his shares in the company of try to pledge his other assets.

For the full FIN-FSA statement

FIN-FSA obliges Danko Koncar to launch takeover bid for Afarak Group Plc shares – enforced by running conditional fine

The Financial Supervisory Authority (FIN-FSA) has, by a decision issued on 21 February 2018, obliged Danko Koncar to launch a takeover bid for Afarak Group Plc shares and imposed a running conditional fine to enforce the obligations stated in the decision. The base amount of the conditional fine is 40,000,000 million euro and supplementary amount 10,000,000 million euro per each full month during which the obligation is not complied with.

Koncar must publish a mandatory bid referred to in the Securities Markets Act within a month of the date of service of the FIN-FSA decision to him. Koncar has not yet been served with the decision as required by the law and hence the period is not yet running. The bid prodecure must be launched within a month of publication of the bid, and the bid must be executed in accordance with its terms and conditions.

The purpose of the imposition of a conditional fine is to enforce the obligee to comply with the main obligation. The FIN-FSA has determined the amount of the conditional fine proportionally to the total minimum amount of the bid consideration. In setting the conditional fine and determining its amount, the FIN-FSA has also taken into account that Koncar has failed to comply with one of the key provisions of the Securities Markets Act protecting minority shareholders, which has served to undermine confidence in the securities markets.

The obligation to launch a bid is one of the key provisions of the Securities Markets Act protecting minority shareholders. The purpose of the obligation is to protect other shareholders of the company in a situation where control in the company is concentrated to a single shareholder or a group of shareholders by agreement or other form of common understanding.

The FIN-FSA considers that Koncar and entities controlled by him have acted in concert with Hino Resources Co. Ltd, Finaline Business Limited and Koncar’s spouse Jelena Manojlovic in order to exercise control in Afarak. This conduct has been long-standing and systematic, and investors operating in the markets have been unaware of it. The voting rights of the persons acting in concert have exceeded the bid obligation threshold continuously at least as of 22 October 2009. Their combined voting rights in Afarak amount to approximately 41.56 percent.

The FIN-FSA has imposed the obligation to launch a bid on Koncar, since he has been an active party in acting in concert and he has had the largest interest in exercising control in Afarak. In the FIN-FSA’s view, assessed as a whole, the arrangement at hand is intended among other things to hide shareholdings by allocating part of the holdings to Hino and Finaline at least in order for Koncar to avoid the emergence of an obligation to launch a bid. Due to the acting in concert, effective control in Afarak is concentrated without launching a mandatory bid for other Afarak shareholders as required by the law.

In accordance with the Securities Markets Act, the bid consideration shall be at least the highest price paid by the party under the obligation to launch a bid or by a person acting in concert with the obligee during the six months preceding the arising of the obligation to launch a bid. If the party under the obligation to launch bid or a person acting in concert with the obligee, after the arising of the obligation to launch a bid and prior to the close of the mandatory bid period, purchases shares in the target company on terms that are more favourable than those of the bid, the bid consideration shall be raised to correspond to this purchase on more favourable terms. In this case, the highest price paid for Afarak shares

was 2.50 euro per share paid by Finaline in 2011. Therefore, in accordance with the Securities Markets Act, the bid consideration in the mandatory bid should be at least 2.50 euro per share.

The decision of the FIN-FSA is not yet legally binding. Koncar has the right to appeal the decision of 21 February 2018 to the Helsinki Administrative Court within 30 days of the date of service of the decision. Information on date when Koncar has been served with the decision and on the legal validity of the decision is available at the FIN-FSA website.



Hurry Hurry, buy your EV metals before the world runs out of them

I couldn’t help but notice that Eramet and Glencore in their 2017 financials couldn’t say enough about metals in the electric vehicle (EV) market. All of a sudden, well not so sudden in Glencore’s case, the metals world has a new HOT concept to sell, metals to the EVs. Whether it is cobalt, tied with lithium, as the two sizzling commodities, or nickel or manganese or you name it.

If you add EV to your presentation, investors, the companies’ boards, and the financial analysts will fall all over you. It’s the fifty-year supercycle without China or even India. And, it makes the rare earth craze of a few years ago passé.

Being the contrarian that I am, let’s look at it with a more candid eye. GM sold about 3.1-million cars in the US last year, while Ford sold another 2.6-million units. And, SUV sales by all manufacturers were around 7-million units. Total US car sales were over 15-million units last year.

Tesla, the darling of Wall Street, sold about 101,000 cars. EVs around the world account for about 1.5% of sales. Of course the percentage growth of EVs is staggering, but consider you are starting for around zero.

Many developed countries, including China, are saying that the internal combustion engine is doomed and won’t be around much longer. They are issuing all sort of mandates and edicts about the future. It’s as if buyers don’t have a say in this—they don’t.

Also, despite what many people say, EVs depend on government subsidies and the more EVs, the higher the bill. Also, by putting the drop dead date far enough into the future, today’s leaders don’t have to worry since they won’t be around to blame.

Also, current EVs still have a limited range and take a long time to recharge. And, several million gas stations will have to be replaced with charging systems. My neighbor has a very expensive Tesla, which I always say is the safest car since it never leaves the driveway.

My problem, however, isn’t that EVs will eventually be a major propulsion source for cars, but that the technology is EVOLVING. The trouble with predicting the future is that it is based on today’s knowledge. Computers are getting quicker with more storage with less materials. The number of cars, whether they are EVs or gas powered, could substantially drop in a shared economy world.

The internal combustion engine has over 150 years of development. It keeps getting better with more power, uses less fuel and has less emissions. It’s going to be that way with EVs. The energy storage systems of today will be the Univac computers of the 1950s.

That means we shouldn’t invest in EVs, but the investment should be in technology, not metals that could be used in future EVs. It’s the build it and they will come mentality.

As my good friend told me (in Italian) a good lie is better than a bad truth.

Little change in European 0.10% LC FeCr prices

What’s what’s the price of 0.10% C low-carbon ferrochrome in Europe? was the question recently asked of me. After checking around the answer is $2.25 per lb for truckload amounts, 60 days credit, ddp. No runaway prices there.

Steelmin pays off debt to Red Rock; to start FeSi production in April

Steelmin, a company Red Rock Resources financed so that it could complete the refurbishment and recommissioning of a ferrosilicon smelter in Jajce, Bosnia, has repaid in full the €4,314,688.68 loan to Red Rock. Red Rock retains a 22% fully diluted shareholding in Steelmin.

Red Rock understands that Steelmin now forecasts first production to be in April 2018 (previously reported as March).

Steelmin’s plant will initially consist of the refurbished Furnace V of 29,000 mtpy of ferrosilicon and 5,800 mtpy of microsilica, and after a planned (but not yet funded) refurbishment of a second furnace will have a combined capacity of 48,720-mtpy ferrosilicon and 9,700 mtpy of microsilica.

Steelmin controls furnaces IV and V from the original Electrobosna complex.  Furnace V has a 48-MVA installed power Elkem furnace. Furnace IV, the smaller of the two, has a 30-MVA Tagliaferri furnace.  Given its larger total capacity Steelmin decided to bring furnace V on initially and then move to recommission furnace IV later in 2018.

Refurbishment for the second furnace is expected to begin later in 2018.

Assore latest Mn producer to report increased output and sales

Assore sold 1,556,000 mt of manganese ore, excluding shipments to its Cato Ridge Works, in the half year ended Dec. 31, 2017 vs. 1,417,000 mt in the same 2016 period. Manganese alloy sales rose 17% during the same period to 162,000 mt. Chrome ore sales rose to 794,000 mt, up from 733,000 mt in the second half of 2017, up 8% YoY.

The average manganese ore prices (44% grade Mn per dmtu was $6.30 in the second half of 2017 vs. $6.02 in the same 2016 period, up 5%, while the 44% Cr ore price price fell to $195 per mt from $224, down 13%.

Mining and beneficiation efficiency at Dwarsrivier chrome mine improved by 3.1% and 0.7%, respectively, compared to 2016. These efficiency improvements, together with labor productivity improvements resulted in an overall increase in production volumes of 7.2%. Inflationary increases were effectively countered by improved efficiencies and cost of production was marginally higher (0.1%) on a per-mt basis. A new monthly production record was achieved in July 2017. Cash flow (before capital expenditure) was ZAR990-million following record half-year sales volumes.

Even though demand for chrome ore remained healthy, prices over the current period were lower than 2016. This was mainly due to an abnormally high price spike exceeding (US dollars $400 per mt) that occurred in 2016 as a result of extremely low chrome ore inventories as well as higher levels of stainless steel production in China. These inventories normalized to a level of 2.3-million mt for the current period, which brought about lower prices.

Sales volumes of manganese ore were well above the levels of the previous period, due to a combination of factors. The logistical issues at Port Elizabeth, which restricted sales volumes in the previous period, were mostly resolved by July 2017. In the current period, railage availability was also higher as a result of increased export capacity via Saldanha Port. This additional availability was met by increased production from Nchwaning II shaft at Assmang’s Black Rock manganese mines. Production at Sakura Ferroalloys SDN BHD, Malaysia (Sakura), has reached and exceeded capacity, resulting in higher sales volumes of manganese alloys.

Demand for manganese ore remained strong, driven by weaker than expected Chinese domestic production of manganese ore, increased production of crude steel and significantly higher Chinese electrolytic manganese metal (EMM) production. This resulted in an undersupplied market, thus providing support for strong but stable prices for both the high-grade (44% manganese content) and the lower-grade (37% manganese content) indices.

The average level of the SA rand/US dollar exchange rate was 6% stronger across the current period, which offset the impacts of the improved US dollar selling prices and sales volumes to a limited extent.


Michigan senators tell ITC to be careful with Si dumping duties

Dow Silicones continues to pull out political muscle. Michigan’s two US Senators, Debbie Stabenow andGary Peters co-wrote a letter to the ITC saying the commission should consider adverse circumstances before making any decision on silicon metal dumping duties. Dow is headquartered in Michigan.

Attached is the letter