Small Talk: Peru panic takes toll on copper firm Monterrico

Click to follow
The Independent Online

What is going on at the Peru-focused copper miner Monterrico Metals? Although the price of copper has soared since the start of the year - and hit a record high on Friday - Monterrico shares have been in sharp decline. They started the year at around the 400p level but finished last week at 288.5p.

Partly to blame are two fund raisings the company has completed during this period, giving it an inflow of £10m. But there have also been major concerns about the political future of Peru. The run-up to yesterday's presidential elections in the South American country has been dominated by the left-winger Ollanta Humala. Opinion polls tip him to win the ballot and go into next month's second round run-off as the man to beat.

Mr Humala, a largely untried figure in the world of politics, has campaigned for greater state control over the economy, including the possible renegotiation of contracts with foreign resource companies as a means to extracting more royalties for Peru. Such rhetoric has obviously unnerved investors in Monterrico. Its Rio Blanco project (which is still under development) is thought to be capable of one day producing 200,000 to 280,000 tonnes of copper per annum. This makes it a key resource in the poor South American country, and as such is unlikely to escape the attention of a new administration.

Should Mr Humala win May's run-off election, the nightmare scenario for foreign companies would be if the left-winger turns out to be a radical in the mould of Hugo Chavez. Since taking the reins of government in Venezuela during the late 1990s, Mr Chavez has redefined the terms under which foreign companies can operate in the country. He has insisted on state control of any venture. Those companies that have not complied have had assets seized.

John Meyer, the mining analyst at Numis Securities, is not concerned about the outcome of Peru's elections. Whatever the result, he argues, it is unlikely that a new government will move against developers such as Monterrico as this would have the effect of stalling much-needed investment in new mines. He believes that a left-wing government is more likely to focus on the excess profits being made by mines which are already up and running.

Nevertheless, while the political uncertainty exists, it is probably best that investors avoid Monterrico Metals.

Sinosoft's maiden

Sinosoft Technology will post maiden results tomorrow and the word on the street says they will not disappoint. Shares in the Chinese software group had a good run last week in anticipation of the full-year figures. Analysts expect it to unveil a 25 per cent jump in pre-tax profit to $3.4m (£2m) on sales of $6.3m.

Sinosoft is benefiting from the rapid digitalisation of China. It provides tax collection software to local government and because only its products are compatible, businesses have to buy the same too. In 2001 the company made its name by winning the contract to handle a pilot system in Jiangsu province. After the success of the scheme it has since won a highly lucrative deal to roll out its software throughout the whole of China.

At the last count Sinosoft had 28,000 customers paying between $100 and $100,000 (depending on how complicated their business is). Clearly this figure is set to soar as the group's offering goes nationwide.

Hambledon to shine

Things are due to start happening again at Hambledon Mining. Over the next few weeks the gold explorer is expected to get a final permit from the Kazakhstan authorities giving it the green light to start the development of its Sekisovskoye project.

Hambledon is planning an open pit mine with a processing facility on site. The plant equipment is also due to arrive in the coming weeks.

Analysts view Hambledon as one of AIM's more promising exploration plays thanks to the impressive infrastructure around the Sekisovskoye prospect.

Dabble in Babble and it could be the next Skype

Babble.net, a Hertfordshire-based company aiming to rival US internet phone giant Skype, will float on Ofex this month. Babble boasts 100,000 users who enjoy free calls to landlines all over the world. It makes money by charging for calls to mobiles and more exotic fixed-line destinations. When it does charge, however, it aims to provide a significantly cheaper service than that currently offered by alternative players, whether they be fixed-line, mobile or internet.

So far the group has built its subscriber base without spending a penny on ads. This is about to change. The £600,000 Babble hopes to raise from its 24 April Ofex float will be used to fund a marketing campaign.

It will also use some of the cash to expand its infrastructure.

Comments