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Rising US dollar weakens gold and silver to drag do Randgold, POG and Fresnillo, but FTSE 100 gains

27th Oct 2009, 12:22 pm Rising US dollar weakens gold and silver to drag do Randgold, POG and Fresnillo, but FTSE 100 gains

Overview: the FTSE 100 rose in early trade, tacking on about 0.5% as losses in the banking sector were more than made up for by the oil and gas stocks, which were on the rise following better than expected quarterly results from BP (LSE: BP). The London based oil and gas supermajor posted a profit of US$5.34 billion, considerably higher than the anticipated profit og US$3 billion. Pharmaceutical company GlaxoSmithKline (LSE: GSK) also did well, climbing 2.5% after securing approval to sell its leukaemia drug in the US.

Reed Elsevier (LSE: REL) emerged atop the leaderboard, buoyed by an upgrade to “outperform” from “underperform” by Exane BNP Paribas. The publishing group rallied 4.5% on the news. Cable & Wireless (LSE: CW) and Home Retail Group (LSE: HOME) also made it to the top, advancing 2%.

Just like the financial stocks, miners were in decline in the morning, responding to yesterday’s fall in metal prices. Commercial property company Sergo (LSE: SGRO) and asset management company Schroders (LSE: SDR) joined in with losses of 2.5%.

Partly nationalised banks Lloyds (LSE: LLOY) and Royal Bank of Scotland (LSE: RBS) still were in decline a day after the European Commission told Dutch bank ING to cut its balance sheet to receive state aid.

Stock index futures in the US were mixed with S&P 500 and the Nasdaq composite projected to open lower, while the Dow Jones average is set to open with small gains.

Commodities

Oil prices were slightly higher with December Brent Crude standing at US$77.62/barrel, while US light, sweet crude inched higher to US$79.18/barrel after falling from $81 to $78 yesterday.

BP (LSE: BP) gained 4% on stronger than expected quarterly report. Fellow FTSE 100 constituents Shell (LSE: RDSA) and BG Group (LSE: BG) added more than 1% in sympathy. Cairn Energy (LSE: CNE) and Petrofac (LSE: PFC) rose marginally, while Tullow Oil (LSE: TLW) slid 1.7%.

Midcaps fell into the same pattern. Heritage Oil (LSE: HOIL) declined 1%, while Dragon Oil (LSE: DGO) rose 1%. Dana Petroleum (LSE: DNX) was flat.

Most junior companies were in decline. Eastern Europe focused junior Aurelian Oil & Gas (AIM: AUL) was at the bottom of the pile with an 8% slide. North Sea explorers Xcite Energy (AIM: XEL) and North American based explorer Nighthawk Energy (AIM: HAWK) followed with losses of over 5%.

Peru, Colombia and Cuba operating oil and gas explorer and producer Gold Oil (LSE: GOO) was down 5%.

US focused junior Empyrean Energy (AIM: EME), Mongolia-focused Petro Matad Ltd (AIM: MATD) and Kazakhstan operating Max Petroleum (LSE: MXP) all shed more than 4%.

Africa and FSU operating oil and gas junior Victoria Oil & Gas (AIM: VOG) and energy investor Xtract Energy PLC (AIM: XTR) declined more than 3.5%.

Miners tumble as Gold, Silver and Platinum weaken

Gold was slightly lower at US$1,039/oz, while Silver held steady at US$17.11/oz. Platinum moved down to US$1,329/oz.

Platinum focused Lonmin (LSE: LMI) and Johnson Matthey (LSE: JMAT) were the top performers in the sector today, holding on to marginal gains.

Blue chip gold producer Randgold Resources (LSE: RRS) declined marginally, while fellow FTSE 100 constituent silver miner Fresnillo (LSE: FRES) lost 1.8%.

Midcaps were in decline with Aquarius Platinum and silver producer Hochschild Mining (LSE: HOC) shedding about 2.5%, while gold miner Petropavlovsk (LSE: POG) dropped 1.3%.

Turkey focused gold miner Ariana Resources (AIM: AAU) led the juniors with a 14% surge after announcing a joint venture with a Turkish partner to develop the Sindirgi and Tavsan projects in the country.

Tajikistan operating gold miner Kryso Resources (AIM: KYS) and Lesotho operating diamond miner Kopane Diamond Developments (AIM: KDD) also were in demand, adding 5% and 3.5% respectively.
Most other small cap miners declined.

Commodity asset development company Mercator Gold (AIM: MCR) was among the leading fallers with a 7% loss. Copper and gold miner EMED Mining (AIM: EMED) and Western Australia operating Norseman Gold (AIM: NGL) both lost 6%, while Canada based junior gold developer Rambler Metals and Mining Plc (AIM: RMM) and Argentina focused gold explorer Patagonia Gold (AIM: PGD) gave up more than 5%.

Australian gold and copper prospector Solomon Gold (AIM: SOLG) declined 4.5%, while Kazakhstan operating gold producer and copper developer Frontier Mining (AIM: FML) and South Africa and Botswana operating diamond miner Firestone Diamonds (AIM: FDI) both moved down 3.5%.

Base metals

Copper and Nickel slightly improved from the morning levels, rising to US$2.97/pound and US$8.44/pound respectively, while Zinc climbed to US$1.04/pound.

BHP Billiton (LSE: BLT), Rio Tinto (LSE: RIO) and Xstrata (LSE: XTA) were the leading performers in the group, holding on to small gains.

Anglo American (LSE: ANTO) was flat, while Antofagasta (LSE: ANTO) and Kazkahmys (LSE: KAZ) declined insignificantly.

Eurasian Natural Resources (LSE: ENRC) slipped 1.5%, while Vedanta Resources (LSE: VED) was at the bottom of the pile with a 3% loss.

London's only listed pure iron ore producer and FTSE 250 constituent, Ferrexpo (LSE: FXPO) moved with the market, declining 2%.

Russia focused nickel and copper producer Amur Minerals (AIM: AMC) was among the leading fallers with a 6.5% slide. Laterite nickel specialist European Nickel (AIM: ENK) and tantalum concentrate supplier with assets in Mozambique Noventa (AIM: NVTA) followed, shedding more than 4%.

South American focused junior miner Herencia Resources (AIM: HER) and copper and nickel explorer Regency Mines (AIM: RGM) both lost more than 3.5%.

Banks, insurance, private equity

Banking stocks were in selling mode today as the sector was dragged down by a new round of losses from Lloyds and RBS.

Lloyds (LSE: LLOY) and Royal Bank of Scotland (LSE: RBS) were down 2.5% and 3% respectively, while Barclays (LSE: BARC) lost 2%. Standard Chartered (LSE: STAN) pulled back 1% and HSBC (LSE: HSBC) posted insignificant losses.

Insurers did better. Old Mutual (LSE: OML), Prudential (LSE: PRU) and Friends Provident (LSE: FP) all tacked on 1%, while Aviva (LSE: AV) rose marginally and Standard Life (LSE: SL) was flat. Legal & General (LSE: LGEN) posted small declines, while RSA Insurance Group (LSE: RSA) lost 1%.

Private equity group 3i (LSE: III) declined marginally.

Small Cap Movers

Other notable movers among the small caps included Latin America operating power producer Rurelec (AIM: RUR), while slipped 11% and Africa focused investor Lonrho (AIM: LONR) with a 6% climb.

Large and Mid Cap News

ARM Holdings (LSE: ARM, NASDAQ: ARMH), announced its unaudited financial results for the third quarter and nine months ended 30 September 2009. In the statement ARM revealed it has continued to outperform the semiconductor industry and gain market share, the two percent decrease in like-for-like profit remains in-line with previous guidance.

South African focused Platinum producer, Aquarius Platinum (LSE: AQP) revealed a significant improvement in its financial performance, reporting increased net profit in the period of $9.5 million versus a $21 million loss in 2008. Attributable production in the first quarter was 96,500 ounces of Platinum Group Metals (PGM). Aquarius has benefitted considerably from the improving state of PGM prices.

Mondi Group (LSE: MNDI) released it Interim Management Statement for Q3, performance  was in-line with expectations as Mondi achieved modestly lower quarter-on-quarter underlying profits. Volumes in most areas of the business continue to recover from the 2008 lows and price increases have recently been announced in most European packaging grades.

Small Cap News

West African focused gold deposit developer Cluff Gold (AIM & TSX: CLF) has commissioned the Angovia Gold Mine in Côte d'Ivoire, getting closer to achieving the targeted production level in Q4.

Upstream oil and gas company Aminex (AIM: AEX) has encountered oil shows and gas readings in the South Malak-1 well in the West Esh El Mellaha PSC (production sharing license) area in Egypt, which has now been drilled to a total depth of 11,200 feet.

Aberdeen-based offshore wind development company SeaEnergy (AIM: SEA) has entered an agreement with Taiwan Generations Corporation (TGC) to jointly plan, construct and operate windfarms in Taiwan, looking to capitalise on the country’s growing emphasis on renewable energy.

Obtala Resources PLC (AIM:OBT) said grab samples taken last month at the newly acquired Busolwa gold project in Tanzania show a “highly encouraging” potential for gold mineralisation within the wall rocks which are left behind by the current artisanal miners.

Tottenham Hotspur plc (AIM: TTNM) announced it has submitted its Planning Application for the proposed new stadium in the London Borough of Haringey. The move marks a major milestone in the Clubs regeneration plans. The new stadium and the surrounding developments are projected to improve earnings capacity through both ticket sales and revenues from a multi-million pound investment area which brings housing, retail, leisure and hospitality venues.

Gemfields PLC (AIM: GEM) said it has received the full US$5.9 million of proceeds from the July 2009 emeralds auction in London and that the response to date from stakeholders seeking to attend the forthcoming event in the last week of November has been “very positive”.

Shares in Ariana Resources PLC (AIM: AAU) rose after the Turkey-focused gold group announced it is setting up a 50-50 joint venture with a domestic partner to develop the Sindirgi and Tavsan projects in the country.

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