Due Diligence – Commodites

I have mentioned this before, but my my perspective as a participant is that the most important first steps in any possible deal is due diligence … not only of the buyer (if possible at this stage) but ask for their source and the verification of all the information that a “contact” brings to you from their own communications.

These steps are essential in my view ..

  1.   What is their position in the chain of people who have brought the deal to you? If someone is more than one or perhaps two people away from a mandate or a buyer … it will be highly unlikely the deal will proceed … if you are a contact make sure you verify formally where you are in the chain with the buyer… also if you wish to be paid, make sure that the Buyer or their mandate authorises you to offer their requirement to your contacts.
  2.   What work have your contacts done to ensure the “buyer’s” veracity? and what have they accepted without question from their contact – this all reflects on the credibility of the contact and the possible deal itself.

Other Important points are :

What form has the enquiry come in? Verbal, a written via a general letter of Intent or letter of interest …. or via a Bank, a Hedge fund or trading platform – first step in to check when the enquiry was issued, if it is out of date ask for enquiry with a current date. Then contact the issuer to confirm it is valid.

Our first step after we have done the above is to ask for a profile of the buyer, then once received, do due diligence on the information therein – first thing is to check for dates, as so many times statements provided in these briefs can be verified or not by doing a simple google searches for location of offices, Corporate Officers and company registrations are fairly straight forward … also then search for corroborating articles in relevant news sources, concerning the alleged buyer. If no articles are found it is likely the whole enquiry is a fiction. If you have any doubts I would suggest contacting a due diligence service before you take it to a seller.

Statements made in concerning say tank storage can be verified, the easiest way is to do this is check with the relevant port facilities.

If you are a seller or direct to a seller, insist on talking to the buyer or the mandate … if you do not get the information from a gatekeeper, the least stressful option is to insist on the contact, if it is not provided, walk away.

If a contact insists on having a commission agreed to before connecting you, it is way to early for this, as the commission for the buyer side is specified by the buyer mandate … issuing a commission split before you have had an contact with a buyer, is basically a waste of time, the buyer or the mandate will specify who will be paid and how much, the seller mandate only controls the commission on the sell side, although in some circumstances I have agreed to allocate an amount to a buyer contact, the amount of which varies greatly but the basis of it comes down to what work they have put into the deal, if someone has taken an enquiry from their inbox and sent it out without any due diligence, which means we have to do all the work, then if a deal culminates the commission would be no more than a small spotters fee … nothing is for free … if a contact wants a commission he has to have actually contributed to the deal.

For me I will give a contact two chances …. for every deal that does not complete affects our own credibility with the supplier or refinery … hence if a deal does not complete due to a foreseeable error or oversight, you get one more chance and then we shall no longer engage.

Although this post actually applies more to Oil, minerals & other refined commodities as well as crude Oil, this general procedure also applies to such items as Gold, both bullion and unrefined such as Dore bars and nuggets … if you have any interest I shall post on this topic in the future … in the meantime, I wish you every success.

Commodities – Buyer Engagement

From a seller or a seller mandates point of view, the biggest time waster is the illusion that we are actually talking with a buyer, an authorised buyer mandate or agent.

Note all agents for publicly listed companies have to be lodged with the appropriate judiciary, the SCC for the USA or ASIC for Australia

However, normally we are taking to someone who says they are one of these, the end buyer, the authorised mandate or agent, but isn’t.

To combat this we have instituted a simple change, when asked we simply follow the process below.

1         Yes we can supply Crude and refined Oil products.

2         Yes we supply products CIF delivery at a discount (usually quantity dependant) below a local  benchmark (Except for Mazut which is generally sold at a fixed price)

3         But No, we won’t send an offer until the buyer has approved (in principle) our Conditions of contract

4         We then send out a file which includes our conditions of contract, upon which on agreement in principle to, we generate a fully authorised offer.

Silence usually follows, and Yes I would rather have silence than a full inbox and many deals, none of which are real.

Clear evidence of the end of the USD$ as dominant International Trading currency

This caught my attention recently …. an interesting read


After the UK announced that it will join the new China-led Asian Infrastructure Investment Bank (AIIB) as a founding member late last week, Germany, France and Italy decided yesterday to follow Britain’s lead and join as well….

This is part of an important transition from the old domination of the USD$ in Internal Trade, particularly in commodities, where up to now, the USD$ has been dominant. Recently there has been an increasing trend to trade commodities in the buyers or sellers currency – for instance in the case of transactions in the Chinese Yuan and the Russian Ruble.

These changes may well be detrimental to the United States in how it pays for overseas debt, that isn’t held in US Dollars. In that case it can no longer just print the necessary currency, it would have to buy the overseas currency at the prevailing exchange rate …. and with the liquidity of the United States already in question, with a estimated net solvency of approximately minus USD$60 trillion – the long term view is not positive, especially when the financial speculators start selling the USD aggressively.

The USA has no way of paying out its current deficit of in excess of USD$18 trillion dollars, accumulated by putting wars on credit card so to speak.  The United States, financially speaking is like a dead man walking …. I am not a financial specialist, but I cannot see a way out for them, unless they seriously cut their spending and increase income currently avoided through taxation loopholes. Surely if corporations are people then like the normal citizens of the USA, they should be taxed on the world wide income, regardless of the tax evasion strategies which they have in place.

A personal strategy would be not to leave funds in USD$ … to ruthlessly minimize your debt, and to put what funds you do have into “safe” (if there is such a thing) currencies, but preferably into hard assets like real estate or gold / silver, the actual metal not the paper equivalent. My personal strategy will be primarily real estate and keeping a minimum amount in liquid assets – and in setting up a simpler life style, whatever that means for you.

One thing that has had a marked effect on the value of the USD$ has been the confidence, Yes confidence that the world has in the currency, everything changes, that perception has changed in no small way due to the war that the American Republican party has been waging against President Obama, holding the USD economy as hostage … this in my view has been a major reason for the loss of face which has led to the loss of faith in this currency.

Good Luck .. just know everything changes and we are always in transition from what was, to what will be.

Time Wasters

This I think is the ultimate negative, when I venture back into commodities .. especially when you have been doing it a while.

You understand what is really being said –  their words cover up the fact that there is nothing real underneath

Recently I was approached through a trusted source of the potential for a buyer looking for product, as a official mandate for the seller, I spoke to those in question, who were evasive in the extreme, they were either operating as gatekeeper for a real contact or something far darker, time wasters, looking for something for nothing …

Some of the terms they used set off warning lights, but the reality was triggered when they asked for a SCO for product .. this to me was saying they had no one, they were merely going to take the offer and go shopping for a real buyer.

I give everyone I deal with two shots for access, they have all used up one .. so tired on wasting time … 

Stercoll Energy Service – an Oil buyer

We were recently approached by a company acting for Stercoll Energy Services Ltd …  (Stercoll details below)  … we agreed to issue the FCO once we received a categorical confirmation of the acceptance of the offer including the procedures for such .. below is their confirmation of their acceptance, received ..on the 20th of July 2012


Attn: Mr. David Sanders
Subj: D2 Gas Oil CIF Philippines

Status: Buyer, ready to proceed

Buyer has accepted all condition and oil specification offered by the seller, he is now ready to proceed. Please issue FCO a.s.a.p as per advised company and name of buyer via buyer’s designated information as stated below:_

                            Director Asian Regional Head Quarters

Email:                  info@stercoll.com


The Buyers Website is :   www.stercoll.com

The Full Corporate offer was issued to this address on the 24th  of July 2012, it was valid for 5 days.

We were approached shortly after issuing the Full Corporate Offer from the Skype address, of chief.emeka kalu a person who said that they were the buyer for the main company Stercoll .. corporate details available on the above website.

Just before the end of the validity period this same contact sought to vary the procedures, despite receiving confirmation of their agreement to them as above.

We gave the buyer all help necessary within the procedures to move forward … the FCO expired on July 30th, 2012

No further contact was received from the buyer by way of explanation as to why they failed to proceed. This behavior is unprofessional and was unexpected, especially after they agreed to the whole offer including procedures before we would even consider issuing the offer.

For us this whole exercise was a waste of time … and an expensive one, as it meant that the oil was not available to other buyers during the preparation and validity period of the FCO.

The “buyer” proved to be a time waster … at the very least.

The end of business as usual …

Life is good for many of us, so that it’s hard to confront the change that is here, and with that the inevitable end of the quality of life that we see around us.

So it strikes me as obvious that the world is going down a road, in some ways where civilizations have gone before, but not for the same reasons, we are in fact going down a one way road, to the destruction of what is, that we have come to consider as normal.

The reasons are self evident, they come back to greed and the need for ever more growth, leveraged growth, more .. more …  all are unsustainable flawed strategies –  I ask you how can one achieve continual growth in a finite world … this insatiable need for more … we have been all living in a fantasy land, especially the Politicians, who are convinced as they focus on statistics and spin, that they are doing a great job when all around, their citizens are paying the price for their inability to have a real original thought – their incompetence, their lack of leadership, their focus only on re-election, their terror at the inevitability of change – drives them to makes nice little touches around the edge of policy whilst the heart of the country decays and we lumber forward, down the wrong path.

This insatiable greed of a few, has brought us beyond the brink of a global financial meltdown, we are in fact toppling over the edge into oblivion as we speak … whole countries and regions are already suffering in the Euro zone, but the whole world will be within the inevitability of what is to come … our mindless pursuit of the status quo .. has indebted the majority of those in the present to virtual serfdom whilst those in control … known colloquially as the 1% .. but who are in reality probably more like just 10,000 people around the word, are so afraid of change that they have convinced our Politicians (who are only driven by the need to be re-elected) that they need to maintain the status quo, this flawed and failed financial structure – which has little benefit to the majority 99+%, except more of the same. 

It is time we allowed the system to fail, we no longer have the ability to prop it up –  we have to stop, mortgaging future generation to pay for our mistakes or steal their birthright … our beautiful home, this spaceship called earth.

When I walk around cities, I see the crumbling structures, both in stone and in systems that are struggling to maintain what we once were, I see lots of papering over the cracks, whilst the infrastructure rusts and crumbles away in silence.

Within the decade we are in, what is hidden now, will become visible to all, in the first instance with the failure of the Euro$, where whole governments are desperately trying to hang on by their finger nails … they will fail … the inevitable collapse will spark a world wide financial meltdown that has never been witnessed in history. In the United States, cities and states are even now technically bankrupt … what will happen when the Euro zone of some other key point in the chain fails .. the banks will fail … there can be no bailout .. change will be here –  this global correction will affect everyone in every country, those who think they are immune are living in fantasy land – this new reality will inflict misery and unrelenting hardship on everyone.

It will not be fun … in fact I cannot see an upside in the short term … it may take a couple of decades perhaps a generation before we can get back on our knees … maybe as long as a 50 years to a century before we can stand up and face the future with any sort optimism … the only way we have any chance of a future, is by changing what we value.

The OWS … the Occupy movement is a symptom, and a necessary one …. in American the Constitution has been and is being continually being walk into the mud, whilst those in power seek to silence those who would say … we have a problem .. sadly, the world economy is past the ability to be healed … change is here Ladies and Gentlemen, hang on, because we are in for the ride of our lives, the destination, the abyss … some of us will come out the other side … but very few … for us to survive, and have the capacity to we will have to have the ability to think outside of the box and really work together without agendas, and realise that economies are not about numbers … they are about fully utilizing all of us, for the benefit of all of us ….

I have spoken of this before back in between 2008 and now … then it was a warning .. now it is too late … money will be irrelevant to our future … the accumulation of wealth for its own sake, is now past its use by date … when it happens, from then on, and in the short to medium term, the only thing that will matter is being able to be sustainable in food, in shelter and energy …

Good Luck …

Veritas Gravitas and the MBA Oath

Here is the website in question the MBA Oath

In my opinion it is window dressing, ethicsvalues and principles is not something you can swear a voluntary compliance with … it is something that you learn through life, either in essential relationship with your parents and during your childhood or you learn it in the military or in some sort of value driven public service organisation …. that actually does something … to the oath giver .. it is the basis of honour, truth, loyalty …. values which have a profound meaning …

For those that take the oath and it is not part of their soul, it will have no effect on their lives, the whole idea that you can swear a voluntary adherence to leading a  life based on ethics and principles is a nonsense …

It might look good on your PR brochure but it means nothing … as they will always default to the values that they learnt .. usually a reflection of the society as whole that values nothing, creates nothing .. and only values consumption and excess.. and money of course.

Only those leaders that have grown up in an ethical and principled based learning environment or those exceptional military leaders that know that the result of their work has to create value for all … such voluntary oaths are of no real value to society .. otherwise this comes back to the essence of society .. that it looks good, sounds good … but means nothing … unless you are swearing compliance with something that has teeth or means something to the oath giver … its just so much spin.

Which it seems all our society is about …

Its gets more political as we move forward .. it is about how it looks, how it sounds rather than how it actually is…