Market Report: Gold miners drop some clangers

  • @lucytobin

All that glisters wasn't gold for investors yesterday. Two gold miners, one with a decidedly more boring name than the other, proffered some news to the market, and neither went down very well.

First up was Shanta Gold, down 3.125p at 16.75p after the East Africa-focused goldminer unveiled a placing to raise $30m. The cash, Shanta said, will be used to meet "short term financing requirements" while it ramps up its New Luika mine in Tanzania. The phrase sent alarm bells ringing with investors, and shares in the Aim-listed miner went a-tumbling.

Meanwhile, Polymetal International, the Russian-focused business controlled by entrepreneurs Alexander Nesis and Alexander Mamut, warned it had suffered a delay in launching production at a gold deposit in the Chukotka peninsula in Russia's far east. Polymetal had to cut its forecasts for gold production next year by 100,000 troy ounces, about 8 per cent.

Shares in the company, which joined the benchmark index last year, fell 5p to 1,155p. Still, investors have been enjoying a strong ride: the shares have risen 53 per cent since June, thanks to soaring gold prices.

Elsewhere, Bumi, the miner which saw its co-founder and most famous backer, Nathaniel Rothschild, quit the board amid a row with Indonesia's influential Bakrie family this week, was back in focus. The company said an independent investigation into financial irregularities at its Indonesian operations was ongoing, despite a proposal from the Bakrie family to unwind the business.

"The board will not make any recommendations regarding the [Bakrie] proposals until the investigation is appropriately advanced," Bumi said. The miner's shares ticked up 4.7p to 254p.

In total, the miners added 21 points to the FTSE 100 index, amid hopes that China is about to embark on more stimulus measures to lift its economy, providing a boost for commodities. GDP figures for the country today are expected to show growth slowing to 7.4 per cent in the third quarter.

With no major eurozone worries, decent employment numbers and no other obvious reason for panic, the benchmark FTSE 100 ended up 40.37 points heavier at 5,910.91 – above the 5,900 mark for the first time in a month, despite a string of stocks going ex-dividend. BAE Systems was one of them; down 7.3p at 321.6p. Capital Shopping Centres, Close Brothers and Ted Baker were also trading ex-divi.

BP, up 13p at 448.35p , accounted for nearly a quarter of the Footsie advance as expectations grew it is about to unveil a tie-up with Rosneft as the Russian state oil giant takes over BP's TNK-BP joint venture.

Meanwhile, UBS sent out a Tannoy announcement to Tesco investors: it's not that bad. The supermarket did indeed admit to its first fall in profits for nearly 20 years this month, and yes, a lot of people hate it and sport witty T-shirt slogans such as "Tescopoly". But Tesco is still a massive money-making machine – with scope to return £8bn in buybacks – that investors would do well to check into, UBS analysts said. UBS slapped Tesco with a buy rating – from neutral – and helped to send the shop's shares up 8.4p to 316.3p. Rivals J Sainsbury and Morrison clung on to its momentum, respectively up 1.3p to 357.7p and 1.9p to 269.1p.

Royal Bank of Scotland's announcement that it is coming out of the £282bn state-backed insurance scheme set up when it was bailed out four years ago saw it gain 6.1p to 286.1p. The Footsie's other bailed-out lender, Lloyds Banking Group, which also joined the Asset Protection Scheme before leaving it in late 2009, lost 0.62p to 42.14p.

Elsewhere, a week after RBS successfully floated 30 per cent of its Direct Line insurance unit, analysts were invited to a meeting with management. The biscuits can't have been up to much, because Joy Ferneyhough at Espirito Santo moaned: "The presentation last[ed] 100 minutes and Q&A 15 [minutes] … pretty disappointing given the presentation was 60+ pages of marketing, with very little focus on financials." But Numis's Nick Johnson flagged up the "clear path to profit growth" and shares responded, rising 3.75p to 193p.

The online gambling group 888 was riding high following a positive update. The company expects full-year earnings to beat expectations after a booming third quarter, and analysts rushed to raise their forecasts. Canaccord Genuity's Simon Davies said: "Poker was the star performer". Its shares rose 16.75p to 109p.