Market Report: African Barrick loses its shine amid tax worries

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The Independent Online

Fears that the Tanzanian government might move to impose a windfall levy on mining profits undermined the mood around African Barrick Gold last night.

The miner – the largest gold producer in Tanzania – saw its shares slump by nearly 8 per cent as traders fled on local press reports that the country's state planning commission had proposed the so-called "super profits tax". The concerns were such, and the appetite for risk so low, that the slide persisted even after the group rushed to reassure investors with an official stock market announcement shortly before noon.

"ABG is not aware of any such plans and has not been involved in any discussions or consultation in relation to this, either as ABG or through the Tanzanian Chamber of Minerals and Energy," it said, as its shares led the FTSE 100 loser board.

"All of our current operating mines are subject to Mineral Development Agreements, which guarantee tax and fiscal stabilisation for a long term mining project by reference to the law in force at the effective date of the agreement. These MDAs cannot be amended without our agreement."

Although the statement helped in moving the stock off earlier lows – it was down by more than 10 per cent at one point before the announcement – the market seemed to be unwilling to listen, with African Barrick ending the session at 415p, down a bruising 35p, against the backdrop of fresh reports that Government was indeed mulling a windfall levy.

The stock was also hampered by the fact that sentiment was already weak, with traders selling down the mining sector following overnight comments from the US Federal Reserve chairman Ben Bernanke pointing to the end of stimulus measures that have supported the world economy.

Overall, mr Bernanke's comments send the bulls into hiding, with the FTSE 100 losing 55.76 points to 5,808.89, and the FTSE 250 shedding 137.87 points to 11,870.9. Commodity markets were rattled by the suggestion that there would no more stimulus after the end of the second round of the Fed's quantitative easing programme this month.

That, and Mr Bernanke's less than cheery assessment of the recovery in the world's largest economy, stoked fears about the demand outlook for industrial metals such as copper, which soon lost ground. The movements fed through the equity market, with miners moving sharply lower.

Antofagasta was among the biggest losers, shedding nearly 5 per cent or 64p of its value to end the day at 1,226p. Kazakhmys fell by 42p to 1,229p. Compatriot ENRC was also lower, losing 16.5p to 803p.

The latter was in focus following its annual meeting, where the chairman, Dr Johannes Sittard, announced a review of the miner's corporate governance norms.

The group also slashed the size of its board, announcing the departure of four directors, including the former GlaxoSmithKline chief executive Sir Richard Sykes and Kenneth Olisa, both of whom failed to win enough votes to be re-elected. The other two – Abdurrahman Yedilbayev and Eduard Ustinov – did not stand for re-election

Elsewhere, the defence group Cobham was hit by some negative broker comment, sliding by more than 4 per cent or 9.7p to 213.9p after JP Morgan Cazenove lowered its target for the stock to 222p.

The broker also implemented minor cuts to its forecasts for the group, pinning its move the back of comments that the flow of orders had been slower than hoped in the year to date.

On the upside, software firm Misys was 9.2p better off at 388p, amid vague bid rumours. The chatter was supplemented by support from Jefferies, whose analysts raised their target price for the stock to 460p from 440p.

"In the absence of a full bid, Misys will, in our view, seek to sell [its core banking unit] first," the broker said, naming a number of possible bidders, including FIS, Fiserv and Sungard from the US, and Infosys and Tata Consultancy Services from India.

"But we would not rule out HCL, given its existing relationship with Misys. Lastly, we believe Temenos would likely be a keen bidder, but may lack the resources to pull it off."

Tate & Lyle's promotion to the FTSE 100 index was confirmed after the close of business last night. The index compiler said Tate, down 5.5p at 650.5p, would move up as a result of the latest index review, while the tour operator TUI Travel, down 2.6p at 222.7p, will lose its blue-chip status and move down to the FTSE 250.

The changes were based on the prices at the close on Tuesday, and will take effect from the start of trading on Monday, 20 June.

Other companies set to move into the FTSE 250 include New World Resources, the coal producer which was 2p lower at 915p last night, and Perform, the digital sports media group which was 3.5p higher at 234.5p ahead of the announcement.