Small Talk: Disaster can help Discovery
Monday 08 March 2010
The huge earthquake in Chile last weekend – which measured a massive 8.8 on the Richter scale and had killed more than 800 people at the last count – has pushed up copper prices after power cuts caused production to halt at many of the country's mines.
Dreadful though it is for the people and businesses of Chile, that amounts to great news for the Alternative Investment Market (Aim)-listed Discovery Metals.
The group has copper assets in Botswana, where fortunately there has not been an earthquake, and as production in Chile stopped, so the group's share price has benefited. In the last week alone, Discovery Metals' stock has put on more than 10 per cent. In fairness to Discovery, there is more to the company than just disasters elsewhere. The company spends its time developing its Boseto project, which is on the Kalahari copper belt in north-west Botswana.
The group has promised the market that it will be producing in region of 25 kilotonnes per annum by the middle of next year, with the building of a mine set to be completed at the site by this summer. The group is also expected to announce, possibly as early as this week, that it is about to sign an off-take agreement, which should also provide a fillip for the share price.
We don't approve of pushing an agenda after the Chilean earthquake, but Discovery Metals is nonetheless going places. There is more than enough happening in the coming weeks and months to support further share price gains.
Regulation is making Aim less attractive
There is not a small company boss in Britain that isn't complaining about something. If not patchy consumer confidence, then the banks' unwillingness to lend money, and if it is not the banks, then it is almost certainly something else.
Top of the list among many on Aim is the cost of maintaining a listing on the small-cap exchange, which has led to a number deciding that a public listing is not worth the cost. However, even those considering moving on to Aim may be put off by research published last week, which says the cost of listing on the exchange is on the way up.
According to the accountants at UHY Hacker Young, and the law firm Trowers & Hamlins, the cost of listing on Aim increased during 2009 to reach an average of 7.24 per cent of funds raised by a company, up from 7 per cent in 2008.
UHY Hacker Young and Trowers & Hamlins reckon that "the highly charged regulatory environment means professional advisers, such as Nomads, have had to subject Aim candidates to ever-greater levels of due diligence which is pushing up the cost of listing on Aim".
Charles Wilson, a partner at Trowers & Hamlins, said: "Protecting investors without adding overwhelming compliance costs to companies has been crucial to Aim. However, a greater emphasis on regulation has driven up costs. For Aim to stay competitive against the likes of Nasdaq and EuroNext, it is vital for it to achieve the right balance between regulation and cost."
Mining Kenmare to raise £180m
*Kenmare Resources, which has its hopeful titanium assets located on the Mozambique coast in south eastern Africa, announced a £180m fundraising on Friday, making it the biggest placing by any London-listed miner this year.
Kenmare has the advantage of being on the main board of the LSE, although with a market capitalisation of a touch more than £200m, it is still smaller than a number of the larger Aim-listed resources outfits.
The group reckons the money will allow it to capture about 10 per cent of the world's supply of titanium, which is generally used in the manufacture of paints and coatings. It also hopes to expand the capacity of its Moma mine by as much as 50 per cent.
The placing is fully underwritten, and at 12p a share, comes at a very significant 42 per cent discount to last Thursday's closing price.
While the group's share price will undoubtedly benefit in the longer term if all its plans come off, a number of investors were certainly irritated by the discount offered on Friday, with the shares dropping by 26.5 per cent, to close the day at 15.25p.
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