Shares in London are up in early trading despite growing concerns over Brexit unity in government following David Davis' resignation. Click here for The Trader Nicole Elliott's latest take on the markets.
IC TIP UPDATES:
When Sirius Minerals (SXX) eventually comes to export its POLY4 production, it will do so from the Redcar Bulk Terminal. The prospective potash miner says Redcar will provide it with greater flexibility in storage and port operations, and loading services for up to 10 million tonnes of product per annum. Confirmation of the change of port, through which Tata Steel used to import raw materials, has been interpreted by analysts (and the company) as a de-risking event, which reduces the scope of construction work. Buy.
Cairn Energy (CNE) has provided a wide-ranging update on its ongoing tax dispute with Indian authorities, confirming that all submissions have been made by both parties, and that a fortnight-long hearing will commence on 20 August. The market reacted positively this morning, sending shares up 2 per cent, though Indian tax authorities have informed Cairn that they have sold part of the shareholding in Vedanta Limited Cairn says was unfairly seized, netting $216m in the process. Further sales are possible, though the FTSE 250 group said the status of the seized assets does not “affect the merits of Cairn's claims, the amount of relief sought, or the enforceability of the arbitral award”. Buy.
Atalaya Mining (ATYM) has updated its resources and reserves estimate for the Riotinto copper project, revealing a 29 per cent uptick in mineral reserves, a 21 per cent jump in contained copper to 822,000 tonnes, and a $512m net present value. The latter, which uses an 8 per cent discount rate and a $3-a-pound long-term copper price, also benefits from a reduced all-in sustaining cost profile, which should be further aided by a capital expenditure programme to increase output to 15,000 tonnes a year. Buy.
The full scale of a second quarter slump in production at Centamin’s (CEY) Sukari mine has been revealed. In the three months to June, total gold production of 92,803 ounces was 25.5 per cent down on the same period in 2017, due to a sharp drop in grades in both the underground and open pit mining operations. The company remains confident of hitting revised full-year targets, and chief executive Andrew Pardey reports “progress throughout June in the open pit”, though another comment – “focus now remains firmly on delivering the underground operations back in line with forecasts” – looks to have tested market confidence that renewed guidance is achievable from here. Under review.
Chrome and platinum prices may have proved erratic over the last year, but Tharisa (THS) has once again put in a solid production performance. Third quarter output from the South African miner set records for recoveries and production of both metal groups, and posted a 25 per cent quarter-on-quarter leap in specialty grade chrome concentrate production. The group has now also gone more than two million worker shifts without a fatality. Buy.
Shares in Stobart Group (STOB) are up nearly 5 per cent this morning after Ian Ferguson was re-elected as chairman with 51.2 per cent of shareholder support. This follows a campaign by former chief executive Andrew Tinkler to have Mr Ferguson replaced by retail entrepreneur Philip Day. Mr Tinkler received 51.4 per cent of the vote to be re-elected as a director, but this was blocked by the board since they fired Mr Tinkler last month for breach of fiduciary duty. Buy.
Law firm Gateley (GTLY) has acquired Kiddy & Partners, a group of human capital consultants specialising in talent management and leadership development. The transaction will cost Gateley around £0.85m initially, half in cash and half in shares. Deferred consideration of up to around £2.2m will be paid subject to certain performance requirements, also to be settled half in cash and half in shares. The maximum consideration cannot exceed £3m. For the year ending December 2017, Kiddy saw pro forma continuing revenues of £2.4m, with operating profits of £0.21m. The acquisition should be immediately earnings enhancing for Gateley. Buy.
KEY STORIES:
Beleaguered retail chain Mothercare (MTC) has provided further detail on its rescue mission this morning. As well as an equity placing to raise £32.5m on 27 July, the group has also revised its debt facilities, which now provide an additional £67.5m in financial headroom. Furthermore, the completion of the group’s company voluntary arrangement (CVA) means that 60 UK-based Mothercare stores will close their doors. That will leave the group with 77 trading stores, of which 19 have achieved lower rent. As for current trading, bosses say conditions remain consistently challenging, both in the UK and abroad.
Shares in Inmarsat (ISAT) are up 4 per cent this morning. Late on Friday, satellite communication giant Echostar announced it did not intend to make an offer for the group. Shares in ISAT dropped on Friday morning after the group rejected an earlier Echostar offer, then again once the Echostar withdrew its offer, making it look likely this morning’s rise is the shares recovering some of their footing. Hold.
OTHER COMPANY NEWS:
K3 Business Technology (KBT) said its half-year results to May reflect a significant recovery in underlying profitability, thanks to a major restructuring and a refocused sales strategy. Indeed, while revenues grew by 2.6 per cent to £41.4m, the gross margin rose from 46.8 per cent to 52.2 per cent – in turn driving adjusted operating profits up to £1.7m versus a loss of £3.1m a year earlier. On a reported basis, further down the income statement, pre-tax losses narrowed from £5.8m to £1m. Management at K3, which works with retail, manufacturing and distribution customers, says the second half – its stronger earnings period – has already “started very encouragingly”.
Shares in newly-debuted Yellow Cake (YCA) lifted today after it received 8.1 million pounds of uranium from Kazatomprom. The uranium, which will be stored at Cameco’s Port Hope facility in Ontario, was acquired below spot price from the Kazakh miner following using funds raised from investors anticipating prices for the nuclear material will rise alongside a tightening market.
