Market Report: Fresnillo glisters as gold price soars
Wednesday 22 August 2012
As the price of gold hit a three-month high, metal miners from around the world shone brighter with Mexico's Fresnillo top of the FTSE 100 leader board.
The world's largest silver producer and the second-largest gold producer in Mexico was up 87p to 1581p.
The rise in gold, which reached $1641.2 an ounce yesterday, was attributed to rumours of further stimulus from the US's Federal Reserve and hope of further demand in China.
Fresnillo's run was joined by west and central African miner Randgold Resources, up 150p to 6315p, while FTSE 250 and Russian-based Petropavlovsk, previously known as Peter Hambro Mining, was up 11.9p to 476p and Egypt's Cetamin was up by 2.5p to 73.6p.
African Barrick, which is currently the subject of a bid from China's largest gold producer – China National Gold Group – was up 19p to 452p. The rise was in spite of a downgrade from strong buy to neutral from analysts at Westhouse Securities following the recent surge in its shares.
Stocks rose across Europe and the US as the summer rally continued amid hopes of extra stimulus from central banks.
On Wall Street, the Standard & Poor 500 reached a high of 1422.98, up 0.3 per cent, back to May 2008 levels. In August alone it has risen 3 per cent. In a similarly optimistic mood the FTSE 100 was up 33.15 points at 5,857.52.
But the markets await the Greek prime minister's meeting with Germany's Chancellor Angela Merkel at the end of the week.
Oil and gas shares were gushing again yesterday with Heritage Oil leading the pack. The mid-cap oil explorer, a favourite with the small-investor community, jumped 36.9p to 205p, a 22 per cent rise.
The splurge followed news it has struck a deal to sell part of a gas block in Iraq's Kurdistan region – a hot spot for the sector at the moment.
The deal means its planned rights issue to partially fund its buying spree in Nigeria's oilfields is no longer needed.
Heritage, founded by Tony Buckingham, the colourful, one-time special forces soldier and America's Cup challenger, is flogging the gas block to Genel Energy in two phases.
It is selling a 26 per cent stake in its Miran Block and an interest in a related joint operating agreement for $156m (£99m). The second part of the deal is a loan of $294m which can be exchanged for Heritage's remaining interest in Miran at a later stage.
Heritage's planned adventure in Nigeria began in June when it paid Shell $850m for the fields known as OML 30.
Genel has beefed up its presence in Kurdistan. The deal sees Genel's holding in the Miran Block swell to 51 per cent. Genel fell 2p on the news to 700p.
Afren, another FTSE 250 explorer with a penchant for Kurdistan and Africa, revealed production was ahead of expectations in its half-year results yesterday. Shares were up 3.1p to 129.6p and Investec and Oriel Securities retained their buy recommendations.
The sector also saw a short, sharp gush in Ophir Energy shares. Its Fortuna East-1 (R5) exploration well has found gas. Ophir slickly moved up 24p to 549.5p.
The price of oil rose by around $1 a barrel towards $115, boosted mainlyby hopes the European Central Bank will introduce measures to turn the struggling eurozone around.
Meanwhile, Aim-listed Red Emperor has temporarily halted trading in its shares until it issues a drilling update on its Shabeel North well.
Beleaguered technology firm Pursuit Dynamics fell again to 7.5p, down 2p.
FTSE 100 Scottish engineering group Weir, which services the pumps used in the mining, oil and gas sectors, ticked up 26p to 1776p today. Analysts at Deutsche Bank think "rising ore and energy consumption, deteriorating grades and high wear rates make this an inherently attractive business".
Deutsche issued a 2,150p target price and a buy rating.
But things were slightly less rosy at fellow Scottish energy services firm John Wood Group. Its shares fell 7.5p to 828p today. But Credit Suisse reiterated its outperform rating and its 925p target price.
On the small-cap index, the bid chatter for online betting group Sportingbet continued with Canaccord analyst Simon Davies describing the group as an obvious bid target and that Ladbrokes, Betfair, Bwin.Party, Opap could be "obvious buyers". However, the shares were unchanged at 41p.
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