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2013-10-07 19:54:52
The tempesttoss'd shipping industry may yet swamp tanker operator Frontline after it reported fourthquarter results indicating that it's running into a squall with its bond payments. The shipper said if it couldn't raise additional equity or wasn't able to sell additional assets, it might not have enough cash to repay its $225 million convertible bond loan that's due in April 2015. They've beenterminating and redelivering ships not related to their core operations to remain afloat, but thinning its fleet further may not leave enough to fully function properly.
I've doubted before that Frontline will make it to safe harbor, and as its shares tank further it seems the market agrees, too. The rates they're earning on their VLCCs are practically nonexistent. The tanker operator said it took it and other carriers six months to push time charter rates up to the $20,000 to $25,000perday level, and then in a matter of weeks in 2013 it all fell apart.
Higher costs, lower prices
Palladium miner North American Palladium also reported quarterly results that weren't what the market wanted to hear. While it's counting on the expansion of its Lac des Iles mine in Quebec later this year to be the move that carries it into the future, getting there is proving bumpy. It expects the mine to be fully operational by the end of the third quarter and anticipates its cash costs to be in a range between $375 and $425 an ounce. Firstquarter cash costs proved to be $401 per ounce, but NAP provided second and thirdquarter guidance that showed them spiking to around $600. With palladium prices falling again and now down to $737 per ounce, it's getting to the point where it may be uneconomical to advance.
NAP reminds us that the quarterly results can be variable, but it's taking longer to get up and running than anticipated, which is something the market never likes to hear. As one of only two primary palladium mines, North American Palladium ought to have a lock on its position, but its troubles are depressing its share price, and that puts it at risk of becoming a potential takeover target.
One in a hundred
Century Aluminum also reported earnings that tarnished it with investors. While losses narrowed from $0.35 a share to $0.08, sales were lower than a year ago although volumes were higher. economy improves and the risk of sovereign defaults has eased.
The problem for it has been the costs associated with the electricity rates it pays at Hawesville and Ravenswood. It's advised the local utility at the former smelter of its intent to pull out of its contract if it can't get a better price, which would likely lead to a shutdown of the utility and the smelter. It's working to negotiate better rates too at Ravenswood and believes it's far along the path to reopening the smelter there.
Ready for a resurrection
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2 dead in San Francisco plane crash
