Bullish Thoughts: Insider trading still rampant on the ZSE

Bullish Thoughts did say in the last two editions of Diamonds & Dogs that there was really something funny with Falgold’s price.

The way it was moving up on tidly widly volumes pointed to share price manipulation…at least that’s what Bullish Thoughts had in mind.

Falgold went on to be the “largest listed mining company” by market cap in the process.

Counter	Previous Price USc	Shares In Issue	Market Cap ($)
BINDURA	3.10	126,048,355	3,907,499
FALGOLD	35.00	111,165,131	38,907,796
HWANGE	23.00	166,203,894	38,226,896
RIOZIM	55.00	29,986,011	16,492,306

Eventually Falgold did put up a cautionary this week to the effect that certain discussions were underway that would have a material impact on the company’s share price and it was in one of the small dailies with BancABC being in the fray as well as the financial advisor.

Now, does the share movement not point to insider trading here? A 250% gain in less than 30 days! SEC and the ZSE should do something about these developments.

Lay as he is, Bullish Thoughts had pointed out that the on the current fundamentals and funding gaps, the price movement was not justifiable…

Without belabouring the point, the issue here is that regulators and market players have a duty to promote the integrity of capital markets through ensuring that disclosures are made but quite importantly timeously as well otherwise what’s the point now when the prejudice has already happened.

Reminds us of the PPC fungibility issue where stockbrokers who had applied for the authority from RBZ bought the same shares in anticipation of the partial fungibility and regulators did nothing about it.

CBZ & ZB traded in closed periods in own shares and they got away with a warning.

Companies note severe losses but they do not give trading updates/ cautionary statements ahead of the results.

It’s not only the ZSE where regulators are failing investors and the general public.

Look at banking. The RBZ says NPLs are about 37% of loan book. Banks go on to provide only an average of 2% in the accounts and we all wait for the banks to go bust to be able to check which ones are the bad apples.

Surely, the regulator can do better to protect and promote market confidence.

No one wants to be the Greater Fool especially where US$ are involved.

Minimum Capital requirements up for banks & Insurance firms

Capital is scarce! That’s the first lesson in Form 3 Economics in high school.

Recently on the Zimbabwe financial markets regulators have indicated potential for increasing capital requirements for insurance companies and banks.

Bullish Thoughts welcomes the revision particularly for insurance businesses but at the same time feels that IPEC should decisively deal with issues of rate undercutting which corrodes the same capital.

Capital alone is not going to be the solution without the regulators being hard on brokers (who tend to promote rate undercutting through threatening “explicitly or otherwise” to move accounts to other insurers when quotes are deemed high.

On the banks though, the main problem has always been the issue of the capital quality. What really is tier 1 or tier 2 or tier 3? For banks these are largely paper entries unlike insurance where the capital can be physical buildings, money & bond markets instruments, cash or equities.

The central bank has to also insist on the banks having real & financial assets on the balance sheet rather than than the Zim dollar conversion paper entries masked as reserves and purpoting to be capital upon which a risk can be taken. It’s not capital in the proper sense of it which is why even with humongous amounts of “capita’ some banks could still not settle depositors demands!

Lastly, can someone educate Bullish Thoughts on why StanChart for example should have $250m in capital and CBZ Bank only $25m (of course CBZ has more than $25m) as a bare minimum?

Are foreign banks engaged in risky banking practices?

Note 1: New Dawn Trading Update

New Dawn Mining Corp. (TSX: ND)  a junior gold company focused on developing and expanding its mining assets and operations in Zimbabwe, reported consolidated gold production for the quarter ended June 30, 2012 of 9,536 ounces (8,702 ounces attributable to New Dawn, after adjusting for the minority interests' share of gold production), as compared to consolidated gold production for the quarter ended June 30, 2011 of 6,841 ounces (6,355 ounces attributable), an increase of 39.4% (36.9% increase on an attributable basis). 

As compared to consolidated gold production for the previous quarter ended March 31, 2012 of 8,736 ounces (7,926 ounces attributable), consolidated gold production for the current quarter ended June 30, 2012 increased by 9.2% (9.8% increase on an attributable basis).

Consolidated gold sales for the quarter ended June 30, 2012 totalled US$15,162,843 (US$13,776,012 attributable) at an average sales price per ounce of gold of US$1,608, as compared to US$9,791,973 (US$9,197,031 attributable) for the quarter ended June 30, 2011, an increase of 54.8% (49.8% increase on an attributable basis).

As compared to consolidated gold sales for the previous quarter ended March 31, 2012 of US$14,857,212 (US$13,551,287 attributable), consolidated gold sales for the current quarter ended June 30, 2012 increased by 2.0% (1.7% increase on an attributable basis). This increase in revenue for the quarter ended June 30, 2012 was accomplished despite a decline in the average price per ounce of gold to $1,516 for the quarter ended June 30, 2012 from $1,685 for the quarter ended March 31, 2012.

100% of proceeds from gold sales were received in US dollars.

At June 2012 quarter end, an additional 2,378 ounces of gold awaited export documentation for sale in South Africa, and will be included in July 2012 sales.

The Company will file its unaudited consolidated financial statements and related materials for its fiscal third quarter ended June 30, 2012, and report its consolidated results of operations for such period, on or before the filing deadline of August 14, 2012. 

New Dawn is a junior gold company currently focused on expanding its gold mining operations in Zimbabwe. New Dawn owns 100% of the Turk and Angelus Mine, the Old Nic Mine and the Camperdown Mine. In addition, New Dawn owns approximately 85% of the Dalny Mine, the Golden Quarry Mine and the Venice Mine (currently not in operation), and a portfolio of prospective exploration acreage in Zimbabwe. These six mines, five of which are currently operational, are divided into three significant gold camps, and have a combined milling capacity of 2,000 tonnes per day.

In addition to gold production, New Dawn is also actively exploring on highly prospective ground employing modern exploration techniques and deploying capital in Zimbabwe, a country that is proven to be geologically rich, highly prospective, and significantly under explored.

New Dawn, with its large gold resource, existing mine sites and production facilities, and current exploration programs, is a growing gold mining company in Zimbabwe, active in both gold production and gold exploration.-New Dawn