Analysts shore up mine sector
FOUR more workers were killed in violent attacks as the longest and most costly labour stoppages for top platinum producers in South Africa rolled on. But there was some hope the disputes could be resolved by direct action as Lonmin became the latest owner to take a wage offer directly to employees.
Sidestepping the Association of Mineworkers and Construction Union (AMCU) in an attempt to resolve a four-month dispute, Lonmin was anticipating a general return to work on Wednesday, and said a security plan was in place to allow this to happen.
Fellow miners Anglo American Platinum and Impala Platinum have also put offers directly to employees after discussions with the AMCU collapsed.
Lonmin’s latest half-year figures showed the scars of the strike as platinum production fell 41pc, while earnings dropped to $34m from $93m.
Investec Securities analyst Marc Elliott said in a note: ‘ The poor results are not a surprise in light of the strike. Management is experienced at recovering from such disruption so we hope for a smooth ramp up. However, until workers return, estimating the operational performance in the year ahead is exceptionally challenging for all parties.’
Lonmin shares fell 11.5p to 271.2p as uncertainties remained.
Other miners, however, benefited after a shot in the arm from strategists at broker JP Morgan Cazenove who upgraded their recommendation on the sector to overweight, having being underweight on the industry for more than two years.
With the sector also buoyed by signs of a rebound in activity in top metals consumer China, Rio Tinto rose 151.5p to 3344p, Antofagasta added 27p to 796p and BHP Billiton took on 51.5p to 1948p.
The lift from the heavyweight mining sector helped the FTSE 100 index close 37.18 points higher at 6851.75. Strong early gains on Wall Street also helped, with the Dow trading at record levels helped by merger activity both real and imagined.
British American Tobacco rose 41p to 3458.5p after reports said the company has hired advisers to work on possible multi-billion pound deals in the US.
The FTSE 250 ended 96.14 points higher at 15,981.35. The more domestically focused index found support from Britain’s improving economic outlook after the Confederation of British Industry upgraded growth forecasts for this year and next and said it expects to see marked improvements in investment and productivity. Among the mid- cap gainers, Carillion climbed 4.7p higher to 366p after winning a £1.7bn contract from the Ministry of Defence, as well as a £100m Network Rail order. The support services and construction group has been named as preferred bidder for a five-year contract to manage the Government’s military housing estate, along with partner Amey.
Rival Babcock International rose 2p to 1225p as the company won a £200m five-year contract for track works from Network Rail. However, Babcock missed out on the MoD contracts despite being shortlisted. A third contract worth £322m to manage the MoD’s training estate went to Interserve, which added 23.5p at 690p ahead of a trading update due tomorrow.
There was takeover activity in the shale gas exploration sector again as Egdon Resources confirmed it is in advanced talks over the acquisition of Alkane Energy’s onshore assets. Hot on the heels of IGas’s £117m deal to buy Dart Energy, which will create the UK’s largest shale gas player, Egdon’s £8.5m transaction doesn’t quite register in the same league but does provide another signal to the market that UK shale assets are very much in play. Shares in Egdon Resources held firm at 20.5p, while Alkane Energy added 3p at 43.75p.
In other resource news, Green Dragon Gas unveiled a 113pc jump in proven reserves in an update on the company’s coal bed methane licences offshore China. After initial gains, Green Dragon shares slipped 8p lower to 533p.
There was a ride for AIM debutant Galasys, which provides ticketing systems to the fastgrowing theme park industry in Asia, with the shares closing above the flotation price of 22.5p at 24.5p.
Drugmaker Shire is expanding the firm’s disease portfolio with the acquisition of US biopharma group Lumena Pharmaceuticals, which has late-stage compounds for rare gastrointestinal conditions. The FTSE 100 firm, itself mooted as a takeover target, will make an upfront payment of $260m in cash for Lumena. Shares fell 24p to 3285p. ÷ SHARES in blur Group plunged 122.5p to 155p after the business exchange issued a second warning in a month and asked its broker to explore financing options. The group is attracting larger and more complex projects but extended delivery times mean there is a longer gap before blur can reap revenues. Blur lowered a 2013 revenue guidance to $4.8m, from around $5.6m, having cut that from $10m in April.