Market Report: African Minerals' Chinese takeaway
Friday 27 September 2013
Punters yesterday bet that a billion-dollar deal with a Chinese export giant really was as good as it looked for African Minerals, after a number of false starts for the Aim- listed miner. African Minerals, founded by the controversial businessman Frank Timis – who is now executive chairman, agreed the $1bn (£623m) deal with China's largest import and export group, Tianjin Materials and Equipment Group Corporation (Tewoo).
The Chinese group will take a 10 per cent stake in African Minerals and 16.5 per cent of its Tonkolili iron ore project. African Minerals says the deal values the mine at $6bn.
Investors piled in on the news and pushed the miner up 68.25p – or 43.54 per cent – to 225p.The news comes after a difficult period for African Minerals which has gone through three chief executives in the past 18 months. It also faced a charge from China's Shandong Iron & Steel Group, which entered a $1.5bn deal with African Minerals last year. African Minerals failed to meet production targets and had to pay $56m to settle the issue.
So investors will be hoping the deal with Tewoo will now put it on the right track.
The pair will form a joint venture to market iron ore through Tianjin's port facilities. Analysts at Jefferies rated African Minerals a buy with a 300p price target and said the deal "underscores long-term value and de-risks sales".
Metal experts at Canaccord Genuity said: "Looking more broadly this suggests that Chinese strategic investors are still looking for long-term metal supply deals which we think shows that domestic entities in China still have rosy longer-term views of likely metal demand. This may mean that investor sentiment may improve as positive revisions are made to demand forecasts for iron ore and other metals. We will be revising our estimates reflecting this news."
The wider market was lacklustre and the FTSE 100 advanced just 14.06 points to 6,565.59.
Energy group Centrica was powerless to stop investors deserting it – the second day of sell-offs after Labour promised an energy price freeze.
Analysts and investors continued to be concerned about what Ed Miliband's plan could mean for utility stocks and scribblers at JPMorgan cut their rating for Centrica to neutral from overweight after a series of rating reductions on Wednesday from other analysts. Utilities groups such as SSE and Centrica saw £1bn evaporate from their value on Wednesday and the falls continued yesterday. Centrica remained at the bottom of the benchmark index and lost another 8.7p to 366.9p. SSE fell 29p to 1,460p.
Tullow Oil announced a new discovery in northern Kenya and jetted 8p to 1,061p.
On the mid-cap table betting group Ladbrokes crashed 14.3p to 173.8p when it revealed its digital profits would be just half the £27.5m expected. Its digital partner Playtech fell 22.5p to 721p on the news.
Travel agent Thomas Cook was out of favour but rival Thomson Holidays-owner Tui Travel issued a profits upgrade. Thomas Cook travelled down 10.3p to 145.3p and blue-chip Tui was sunnier, up 14p to 370.4p.
The small cap Russian gold mine company Petropavlovsk shone 2.75p brighter at 78.75p after reheated rumours that its chairman Peter Hambro could be plotting to take it private after the shares recently reached new lows.
Doughty Hanson has sold 45 million shares in the cable tie maker HellermannTyton that it floated in May.The sale leaves Doughty with a 21.6 per cent stake and it fell 17p to 265p.
Back on Aim, Atlantic Coal was 0.125p better at 0.25p after it issued strong results and increased coal production at its Pennsylvania plant.
Big data software specialist WANdisco placed 2 million new shares through Panmure Gordon at 950p a pop – a 7.8 per cent discount to the closing price on Wednesday. It closed the day at 990p.
The former Tory treasurer Lord Ashcroft – via his investment vehicle Geraldton Services – has sold most of its 43.6 per cent stake in document management and office relocation group Restore. The stake sale was at 131p a share and it packed in a 0.5p rise to 141p.
Canaccord Genuity decided Central Asia Metals was worth a buy and said that at its first-half results it was "true to its word and announced a substantial interim dividend" of 4p. It moved up 4.5p to 135p.
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