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Broker Spotlight brings some of the more intriguing and topical analyst coverage to centre-stage. The daily column aims to illuminate thoughts and opinions behind the big stories. London is one of the financial capitals of world. The influential and closely followed views of its analysts regularly move markets and split opinion. The Broker Spotlight column arms Proactive readers with the added insight from the often colourful thoughts and headline-grabbing valuations from the City’s analyst community.
Broker Round-up part 2, including Afferro Mining, Nyota Minerals, Landore Resources, Fox Marble, Lansdowne Oil & GasJanuary 17 2013, 3:37pm
Afferro Mining (LON:AFF) now looks to have a number of big players chasing its tail.
The west African iron ore development company today confirmed press speculation that Indian giant Jindal Steel and Power is among these potential suitors.
Afferro confirmed last month that it had received bid approaches, which has helped lift the share price.
Prior to this latest announcement, AIM-listed International Mining and Infrastructure Corporation (LON:IMIC) was the only company to have been linked formally with a possible offer.
Broker SP Angel saw it as good news for the company as it needs interest from parties with the capacity to take on a project of this size.
“The power requirements for the project as well as transport infrastructure should make this an interesting investment for a partner looking to make an infrastructure investment,” said analyst John Meyer.
“The share price should be supported by the cash that the company has to keep the project going while it has discussions with interested parties.”
Shares lifted 3.9% to 85.45p on the news.
Talks between Ethiopia’s mining ministry and Nyota Minerals (LON:NYO) over fiscal and legal aspects of the Tulu Kapi gold project are the only thing that stands in the way of the mineral explorer digging for gold.
That’s according to broker Ocean, which sees today’s news that the definitive feasibility study was up to scratch as positive for Nyota.
Now all that is left is to agree are the terms for the mining licence.
Analyst Christopher Welch said: “Ethiopia has set quite a high bar for both royalty rates and corporate tax rates going into these discussions but there is good potential for Nyota to secure lower rates as development of Tulu Kapi will have a massive positive impact on the country as a whole.”
Landore Resources’ (LON:LND) Junior Lake project in Ontario is on track for production in 2015-16 after it announced a significant increase in indicated nickel resources.
Alison Turner, an analyst at broker Panmure Gordon, said today’s upgrade increases the total resource at Junior Lake to 55,100 tonnes of contained metal.
It represented a 25% increase in contained metal at B4-7 and a 22% increase in the grade, though the latest update took a significantly more conservative approach than previously.
Turner added that the new 1.5-2Mt exploration target implies a potential 19,000-25,000 tonnes contained metal upside on top of the new 55,100 resource base, while the potential to extend B4-7 even further west could add a further 20,000 tonnes as well as adding considerable platinum group metals (PGM) potential.
In valuation terms, the broker left its 12p target unchanged but said confidence has been boosted by the resources now being classified as indicated.
In addition, the new exploration target could add 3p to its price target, while any success further in the west could mean an additional uplift of between 4p-5p.
Fox Marble (LON:FOX) has acquired the rights to extract marble from a quarry in the west of the country, close to its red marble quarry at Cervenilla.
News of the deal not only sent shares up 6%, but was also well received by City analysts.
Fox-Davies Capital said the deal is good news, but is keeping its ‘speculative buy’ rating until more light is shed on its other licences.
“Whilst hugely encouraging and positive, we are still waiting for further clarity on whether the four licenses Fox Marble had annulled in December will be reinstated as the company is currently pursuing legal remedies,” said the small cap specialist.
In the small cap oil space, brokers appreciated Lansdowne Oil & Gas’s (LON:LOGP) announcement that its projects in the Celtic Sea have been substantially derisked as it continues to progress move farm-out talks with interested.
Broker N +1 Singer noted that today's news demonstrated “positive” signs from Lansdowne's wider portfolio, with focus shifting away from Barryroe momentarily.
It keeps its 62p target price and 'hold' rating on the stock.
Mining giant Rio Tinto (LON:RIO) may have sacked its chief executive after huge write-downs, but Citi analysts see his departure as a good thing, upgrading it as a result.
Tom Albanese has lost the top job after Rio revealed mammoth write-downs to the tune of $14bn, including $3bn from its Mozambique coal operations.
The broker was not much of a fan of outgoing Albanese, criticising his poor capital allocation and a lack of shareholder focus.
“We believe today’s announcement could significantly realign Rio Tinto with shareholder interests through reduced M&A and reduced capex spend,” said analyst Heath Jansen.
He reckons the move – while it may hurt the shares in the short-term – will ultimately be a positive move for the stock further down the line.
Jansen now rates the stock a ‘buy’, previously ‘neutral’, and lifts his target price to 4,000p from 3,300p.
Liberum Capital and Bank of America Merrill Lynch analysts agreed, with ‘buy’ recommendations on the stock.
In its round-up of the mining sector, it likes the look of Indonesian coal miner Bumi (LON:BUMI), co-founded by financier Nat Rothschild, following a meeting with its CEO.
“Post the meeting we feel even more strongly that the board’s current proposal to split from the Bakries is the only workable solution,” the broker said.
It believes that shareholders will vote in favour of the split at the general meeting at the end of February – something Rothschild has been pushing for ever since the relationship with the influential Bakrie family broke down.
It was a busy day for mining analysts, who unleashed a raft of notes on investors.
Also in the fray was Exane BNP Paribas, which had an upbeat view on the mining sector.
It likes cyclical names, such as Rio and Antofagasta (LON:ANTO), picking out the duo as its top dogs.
As a result it downgraded Xstrata to ‘neutral’, while also cutting Anglo American (LON:AAL) to ‘underperform’ with given its earnings and valuation risk.
Citi also reckons the time may be right to turn up the heat on British Gas owner Centrica (LON:CNA).
Analyst Robert Coates admits that 2013 will undoubtedly bring both challenges and opportunities for Centrica given the loss of free carbon and the first-time impact of the carbon floor tax.
This will put pressure on power generation profits, while the continued economic weakness and tough operating environment is likely to hold back operating profit growth in the downstream business.
“With previous targets for the US business having been met and the tough operating environment in the UK likely to hold back any downstream growth, 2013 will provide an opportunity to refresh Centrica's equity story and refocus the strategy where required,” Coates added.
He has a ‘buy’ rating and 360p target price as the company is capable of delivering moderate earnings growth in the medium-term.