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Kapulo is open pit and its cash costs are estimated at 1.92 $/lb. Kapulo is fully built, but no money is left for the working capital. If they get the few million dollars needed without much dilution, the upside for stock holders could still be huge!

some more: NSC & CSX UNP & BNSF/BRK_A ORCL & SAP

GE & UTX (narrow-body jet engines) GE & Rolls Royce (wide-body jet engines) Sonova & William Demant Intel & AMD NVIDIA & ATI/AMD

No. But the same argument would also fit for oil, for example. Looking back more than 10 years, the average historical price of oil was rather 20$ than 100$. About 20 % of copper supply is produced at cash cost above 2$. It would need a collapse of Chinese copper demand to wipe out producers with cash costs comparable to Mawson West.

German value boutique ACATIS bought some BBBY stock in June: "Purchases in the international equity funds • Bed Bath & Beyond: Bed Bath & Beyond is an American retailer which offers particularly furnishings in the areas of bathroom, bedroom, kitchen and dining room. The share price has come under pressure after increased investment in the expansion of the online business, which resulted in a decrease in operating margin. We consider the decline as only temporary and expect higher margins in the medium term. The rating is currently at an historic low (PER 2015e 11.5)."

Management predicted cash-costs at Dikulushi underground to be about 2 $/lb copper. Last quarter it was 3.47 $/lb, higher than the market price. They burned cash. Nevertheless, management celebrates that 2014 production target of 7,000 – 9,000 tonnes of copper in concentrate will be met (but maybe at the price of negative cash-flow???). However, Kapulo is the key for the future value of Mawson West. They have to be successful to ramp up Kapulo within the next 2-3 quarters and to reach cash-cost target of 2 $/lb at Kapulo. With reported grades and open-pit mining, these targets seem to be achievable quite easily. In this case, the stock will at least double, in my opinion. Obviously, Mr. Market distrusts management now and is in a wait and see position.

Thanks for sharing your numbers. I realized that terms of the syndicated loan are quite reasonable for Songa (3m LIBOR +2.75 % and + 3,25 % margin). So, your numbers on interest and FCF seem realistic to me. However, the financial leverage still scares me. I think I will stay with good old and conservative Fred Olsen. :-)

Thanks for sharing this idea. All 4 newbuilds have 8 year firm contracts but at rather low dayrates. The company will have to take on about USD 2 billion of new debt to finance the newbuilds. Only newbuilds no. 1 and 2 are already financed, 3 and 4 are not yet. They will have to pay really high interest. It will be difficult (and probably rather expensive) to mobilize all four rigs in a short period of time, because they need 700 new employees. So there is really high uncertainty here and together with high financial leverage much can go wrong for shareholders. In spite of price/book of 0.3, this is rather an option than a stock with a margin of safety. Can you share your calculations?

Thanks, yadayada. I wonder why they have to pay 7.625 % for a 1.5 year USD bond (!). It is rated “Ba2” by Moody’s and “BB” by S&P, not too bad. Is this an extra premium on everything related to China?

I do not understand why there seems to be a huge disconnect between the prices of used mining equipment (that Emeco sold up to 50 % below book value) and new mining equipment, that is sold by the market leader Caterpillar, for example. Sales and profits for Caterpillar are going to rise this and next year, as far as analyst consensus is concerned. Can anybody try to explain this different development?

Both businesses are mediocre, in my opinion. Both are under pressure. With long-term trends towards outsourcing in many industries, I also do not think that contract mining will disappear. Macnahon was moderately profitable even before the Australian mining boom of the last 10 years. With EV/EBITDA of about 1.5 (ok, more are less at peak earnings) not much has to go right for this idea to play out. In the worst case (liquidation) Macmahon's advantage vs. Emeco is the longer duration of their contracts. Their gradual expiration gives them more time to dispose their assets, probably close to book value. I am glad about your confidence regarding Emeco though, because I own small positions in both companies.

Agreed with most of your statements, but: "My point was, if Zinc and Iron pick up for example, you dont make any money on the other picks." Why not? All plays in this beaten down sector have under utilized assets and would profit. MacMahon trades with at least the same discount to book as Emeco (p/b 0.3), does not lose money and has lower financial leverage, so they do not have to sell their mining equipment at steep discounts. Therefore, I as myself if risk/reward might be better there. If it only trades at book value, it is a threebagger. Less than two years ago, Mr. Market thought it was worth more than 2x book value. More or less the same is true for Emeco, I realize that. I see more risk with Emeco than with Macmahon that book value continues to decrease over the next quarters or years, so the gap could close not only by share price appreciation, but at least partly also by future losses. So looking ahead 3-5 years you will probably make some money with Emeco, too.

I think they will survive. The question I am asking myself is, whether the margin of safety is large enough. Asset disposals are made at about 20 % discounts to book-value recently. Together with relatively high financial leverage this over time reduces the value left for shareholders. They are cash-flow positive, but the net income also reduces book value.

yadayada, good point. But also Emeco diluted shareholders, not in this mining downturn but in the last one (2002). With price/book at 0.3, little net debt after the capital increase and positive earnings, MacMahon does not need perfect management to work for buyers at current prices. But the bad news from Emeco shows that the worst still is not behind us. I expected operations in Indonesia to stop, but the reduced guidance is bad news. However, there are some companies too cheap to ignore. I find also Sedgman and Swick Mining Services interesting. Emeco now seems to be one of the weakest plays with its high debt load low ebitda and negative earnings.

Trading halt today, pending the release of an announcement "in relation to inside information of the Company".