Market Report: Fund managers rush into mining and oil stocks

It is boom time for small-cap exploration stocks. Of the top 20 small-cap gainers yesterday 11 were either miners or oil explorers, reminding many in the market of the heady days of the internet boom four years ago. The parallels are quite striking.

It is boom time for small-cap exploration stocks. Of the top 20 small-cap gainers yesterday 11 were either miners or oil explorers, reminding many in the market of the heady days of the internet boom four years ago. The parallels are quite striking. As with internet shares, explorers are essentially "blue sky" stocks offering investors the prospect of a huge capital appreciation should they back a company that makesa massive find.

City fund managers are falling over themselves to give such companies money. "When a small mining or oil company comes to the market looking for cash the main question being asked of them by fund managers is how much do you want," one broker commented.

Among yesterday's best performers was Imperial Energy, up 28.5p to 221p. On Monday the group, which is focused on oil and gas discovery in the former Soviet Union, is expected to unveil a fund raising at about the 200p level. That is not bad going for a company that floated in April at just 25p.

Elsewhere, River Diamonds jumped 0.37p to 3.12p after announcing that it had acquired a site in Brazil. It plans to start mining there in November. Petra Diamonds, which is tipped to come out with bullish news from its prospect in Angola, rose 5.5p to 73p while Central African Mining and Exploration, which is chaired by the ex-England cricketer Phil Edmonds, jumped 0.63p to 5.75p. The group has gold and tantalum investments in Mozambique, Democratic Republic of Congo and South Africa.

Toledo Mining gained 0.13p to 2.5p on word that next week's update on its nickel project in the Philippines will impress. Meawhile, the Mexican silver miner Minco soared 1.75p to 15p and Aminex, which is looking for oil off Tanzania's shores, added 2.45p to 15.45p. The Australia focused Mercator Gold made an impressive debut on the market. Listing at 6p it closed at 8.12p.

In the blue chip universe, the FTSE 100 finished on a positive note, but only just. The index rose 0.2 points to 4,698.9, having traded as high as 4,724 at one point in the session. Man Group touched the 1,460p level in early trade on rumours that it had agreed a 1,850p-a-share takeover from Merrill Lynch. Gossips talked of the deal being announced by midday and when no such statement was issued traders rushed to exit the stock. Man closed at 1,397p, up 35p.

Reuters was in demand, rising 11.5p to 346p, after an internal company memo from Tom Glocer, its chief executive, indicated that the information provider is growing revenues for the first time in four years. Citigroup slashed its rating on Reed Elsevier, 7p weaker at 501p, to an outright "sell". It argued that the group's scientific publishing business is in long-term decline and set a 450p price target on the stock.

Scottish & Newcastle dropped 7.5p to 276p amid speculation that the Russian government is planning a ban on outdoor drinking. S&N has heavy exposure to the country but analysts noted that the rumour is not new.

Morgan Stanley told its clients not to expect anything radical from Whitbread's strategic review. It is being conducted by Alan Parker, the leisure giant's new chief executive, and is scheduled to be unveiled later this month. Whitbread dropped 10.5p to 827.5p.

Thus gave up 0.25p to 14.75p as Seymour Pierce came away from a visit to the telecoms company in a cautious mood. The broker warned that Thus is under significant competitive pressure from rivals such as Cable & Wireless, down 1p to 99.25p, and that the stock's valuation is by no means cheap. Commenting on the recent takeover speculation surrounding the company, Seymour Pierce said: "Consolidation remains potentially the most significant driver of share price performance. Despite persistent rumours, in our view that prospect remains as far away as ever".

TBI improved 4.5p to 73.5p on reports that some of the leading shareholders in the airports operator are pushing for a break-up of the company. However, one leading shareholder poured cold water on the talk. "There are no such plans at present and if there were I would know about them", the shareholder said.

GW Pharmaceuticals was 9p higher at 127.5p on the back of a bullish note from Evolution Securities. The broker slapped a "buy" recommendation on GW and told investors that it is unlikely UK regulators would reject the biotech group's Sativex drug. Evolution takes the view that approval of the product is a case of "when" and not "if".

Empire Interactive, the computer games developer, added 0.75p to 11p amid heavy institutional demand. Word has it 3i and New Star Asset Management have taken maiden stakes in the company after last week's strong interim results.