Good morning. It's not a small cap, but I have to mention the Q1 trading update from WM Morrison Supermarkets (LON:MRW) this morning, which is shocking - it reports LFL sales down by 7.1% (excl. fuel, which if it's included worsens that to down 8.2%). I don't recall ever seeing such a steep decline in a supermarket's sales, and this surely makes their shares uninvestable now, and for the first time raises the prospect that a major UK supermarket might eventually end up going bust, if that trend continues? Morrisons confirms guidance of £325-375m profit this year. That doesn't look a lot in comparison with £2.8bn of net debt. Discounters are forcing the major supermarkets to reduce prices, so I'm wary of going near any of them as an investor - will dividends be sustained?




Zanaga Iron Ore (LON:ZIOC)

Regulars might remember that this is my one incursion into the resources sector, which is an area that I normally steer clear of, as it needs specialist knowledge to make money here. Also it's like searching for a needle in a haystack, with the majority of smaller Listed resource companies just burning cash & going nowhere.

However in the case of Zanaga, a number of special factors convinced me that this one was worth backing. It has net cash, and the cash burn for the feasbility study on this vast iron ore project in West Africa has been almost entirely financed by mining giant Glencore, the 50% (less one share) JV partner to Zanaga.

Much to everyone's amazement, Glencore seem to be pressing ahead with this project, whereas the market had assumed the project was dead once Glencore took over Xstrata (whose project this was originally), and over $300m has been invested already by Xstrata/Glencore just on the Feasibility Study, release of which has been announced today, along with the applications having been submitted to the Government of the Republic of Congo (which is the smaller, more stable of the two countries called Congo).

Key features of this project are that the capex requirement has been reduced from an original $7.5bn, to $2.2bn for stage one, with a further $2.5bn capex required for stage two, but self-funding. Also it is premium quality iron…

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