column Proactiveinvestors column RSS feed en Sun, 31 Jul 2016 02:38:13 +0100 Genera CMS (Proactiveinvestors) (Proactiveinvestors) Weak pound impacts Sainsbury's


Global markets lacked direction this week as central bank meetings took centre stage and oil prices drifted to levels not seen for more than three months.

Brent crude fell to $42 a barrel, nearly 20% down from its recent high in June, as concerns over a supply glut were quantified by data showing an unexpected increase in US crude supplies last week. The strong correlation between equities and oil prices earlier this year appears to have disappeared, although history shows us this won’t be ignored for long and last week’s spike in oil price volatility could regain investors focus.

As expected, the US Federal Reserve kept interest rates on hold and maintained the target range for the federal funds rate at 0.25% to 0.5%, although they held open the prospect of a second increase in interest rates later this year.

Near-term risks to the US economy have diminished, which coupled with data in the US having materially surprised on the upside in recent weeks and financial conditions fairly benign, there is a growing sense among analysts that rates will jump towards the end of 2016. Second quarter reporting season in the US supported this, with 65% of US companies so far beating expectations. 

The outlook for US interest rates contrasts sharply with many other nations and in particular the Bank of England, which is widely expected to take aggressive action at its policy meeting next week to counter the risks from Brexit.

Despite official figures indicating UK GDP unexpectedly picked up speed in the second quarter of 2016, economists warned this was likely to be a ‘last hurrah’ for growth, before a rapid slowdown in the wake of the referendum. A batch of major business surveys suggest that activity in services and manufacturing sectors fell at their fastest pace since 2009 in the wake of the public decision to leave the EU.

Analysts expect a sizeable package at the Bank of England’s next meeting on 4th August, which could include a 25 basis point rate cut, additional quantitative easing and restarting the funding for lending scheme. A failure to deliver much of this could disappoint the market.

Technical analysis of the FTSE 100 depicts the underlying strength of the index since the referendum, although the bearish divergence of the oscillators and the MACD histogram turning negative, suggests momentum is waning. Clear resistance at 6800 looks likely to hold, while near-term support should be found at 6435 and 6280. 

In conclusion, many market participants have asked me why the FTSE 100 is nearing a 12 month high post-Brexit, given the uncertainty, nervousness of consumers and deterioration in UK macro-economic data. The answer is largely down to exchange rates, a consideration many investors have largely ignored previously.

Sterling has fallen circa 13% against the dollar since Brexit, yet the top 100 companies attract 70% of sales/profits from outside the UK and 50% from outside Europe, so a weaker pound should equate to higher earnings per share for UK plc’s.  

Those firms, however, that generate the majority of their revenues in sterling will not reap the same benefits from a weak domestic currency. Supermarket giant, Sainsbury’s (Epic: SBRY), Britain’s biggest non-food retailer, generates circa 70% of revenues in sterling and could be more exposed should discretionary consumer spending be impacted by the uncertainty.

Results on 8th June revealed Sainsbury’s sales have gone back into decline after it reported a 0.8% fall in like-for-like sales for the first quarter to 4th June and the company warned of challenging times ahead.

The UK retail sector has fundamentally changed over the past decade, with discounters such as Aldi and Lidl gaining market share, while the expansion of pound stores and food price deflation have also squeezed profit margins at the big supermarkets. Furthermore, Asda, the UK’s most profitable retailer, is rumoured to be preparing a major price repositioning, which could seriously damage sector profits.

Many also question Sainsbury’s £1.4 billion acquisition of Home Retail Group (Epic: HOME), the owner of Argos and Habitat, which is expected to complete in August 2016. Over 72% of the company’s revenue is generated in sterling and many of their goods are imported, while Argos is also going through a multi-million pound makeover in another attempt to compete with the likes of Amazon.

Sainsbury’s trade on 10x earnings and growth is expected to fall by 6% in 2016 and 10% in 2017, although these figures could be accentuated by a weak pound. The debt pile of £1.6 billion is also due to rise to over £2 billion after the Home Retail Group acquisition, giving it a high gearing compared with a market value of £4.3 billion.

The chart of Sainsbury’s illustrates the downward trend with the moving averages intersecting and drifting lower, while the RSI remains lacklustre, indicating a severe lack of momentum.

Life is hard enough for Sainsbury’s, but the impact of Brexit, a weak domestic currency, a dangerous acquisition of Home Retail Group and an Asda-led price war will further impact the business, which could result in dividend cuts and perhaps the need to ask shareholders for additional capital.
At the time of writing the share price is 223.7p and given the risks, I foresee the shares drifting lower. Near-term targets are seen at 214.7p, 205.8p and 192.4p, while traders might consider short-selling the shares with a stop-loss at 232.5p.

This report was written by Michael Allen, equity specialist. The writer does not hold a position in Sainsbury’s. The material in this report has come from web-based data sources and Sainsbury’s corporate website.


Sat, 30 Jul 2016 07:00:00 +0100
Admiral making the right sort of waves I last looked at Admiral (LON:ADM) just over a year ago and had proposed a long term movement from 1,522p to 1,975p, an ambition achieved in March of this year.

About the only safe thing I can conclude is nine months qualifies as long term as this share has managed to outperform most of FTSE100 members in the last year.

Once again, I find myself in the position of being forced to rescale a chart in an effort to illustrate the share's new long term potentials as they have become truly impressive.

Currently trading around 2,140p, the share is viewed as heading to 2,390p with a secondary target of 2503p.

Such is the strength of this share that, on June 24, when the market decided to celebrate the Brexit vote by stuffing most share prices downward, Admiral's price did not even threaten the immediate uptrend 2015.

The majority of shares gleefully trashed the trend with the opening movement at 8am. I've circled the movement on the chart, just to highlight this as it also perhaps explains something else.

Admiral's share price is now trading higher than ever previously and this results in the curious situation where my software runs out of numbers at 2,740p.

This, of course, does not mean 2,740p is the highest Admiral may achieve.

It just suggests, should such a miracle occur, I'd tend expect some stutters around the level

Curiously, those ultimate prices I'm calculating will often be bettered if a share experiences a history of being gapped up at the open.

In the case of Admiral, I've already noticed this at the start of July when an effort was made to propel the price away from the 1,975p zone by gapping the price up to 2,084p.

I would not be surprised if some reversal were to take place to cover the gap but given this shares long term prospect, shall not be too alarmed.

The price would need break red, currently 1,775p, before I'd raise an eyebrow and mention the risk of 1,500p making a guest appearance.

In short, Admiral’s future potential, unlike its current telly advertising campaign, doesn’t suck.

Alistair is the founder of


Sat, 30 Jul 2016 07:00:00 +0100
Caterpillar’s results show mining’s recovery still tentative Fri, 29 Jul 2016 14:03:00 +0100 Commodities Week in a Minute: A welcome return to the desk, concerns over diamond demand plus DCP. Commodities

Diamonds and precious stones

For investors in the sector this week’s Anglo American results, or more precisely De Beers’ provided a note of caution for the rest of the year, certainly a view that is a little more conservative than many are hoping for, with good reason I must admit.

Proportionately H2 tends to generate lower returns than H1, but provides far more insight into the trends of the following six months or so. DB (and others) cautioning about social unrest and economic uncertainty is something to watch, especially as this is partly removed from the annual cycle of increasing inventories of polished goods following the splurge in rough purchases in H1. We should also consider the impact of Standard Chartered (plus others) continuing to withdraw their lending facilities to the industry probably driven by the notable bankruptcies of certain sightholders.

My view is that this is certainly going to impact demand for lower priced, commercial-type goods – already under the perceived pressure from synthetic goods.

Elsewhere, Snap Lake is apparently up for sale… I await that pitch document.

Finally, according to 77 Diamonds, Asscher-cut diamonds have “soared in popularity” since Pippa Middleton (You know, the one that helped drive a surge in tabloid pictures of Royal Posteriors) received an engagement ring with the fancy shape. Although the numerical increase in orders, I doubt is that great…

Precious metals

Coming back, from my travels I am slightly surprised to see bullion hovering around the $1,330 levels. Whilst a claim could easily be made for a consolidation in the trend, the commentary during the week regarding the lower than expected impact to the US economy from recent events has me a little concerned that we may be underestimating the risks to a rise before the end of the year. When I left it was practically zero chance, not so it seems now.

Admittedly, Acacia is off 7% today, but as I posted before, taking some profits from the space may not be the worst idea, certainly if bullion drifts below $1,300…

Portfolio insurance it seems, remains expensive.

(8% discount rate for CEY/ACA, 7% for RRS, sorry but I refuse to accept the countries of operation are “risk-free”)

Seems ETF’s buyers have stagnated…

And with it the momentum behind the futures market. (not to say it won’t pick up again)

Slightly out of date, but Chinese gold imports from Hong Kong fell almost 40% month on month to 70.9t in June.

Bulk commodities:

Iron ore prices continue to defy logic with prices roughly 10% higher in July with prices back around the levels seen in April, when we experienced how much the Chinese speculator can influence global pricing.
One of the main reasons behind the rise is the recovery in steel prices. Chinese steel mills have continually hit record rates of production following multiple credit expansion measures all at the same time as concerns over iron ore supplies permeate following the extensive flooding seen throughout Northern China. 
One concern will be the continued growth in port inventories…

Company announcements/news/meetings:

Many more company updates coming next week with model updates underway at this time…

DiamondCorp, Buy (PT: 11.5p)
Following the company's announcement on 27 July confirming that the South African Department of Mineral Resources has given permission for an immediate resumption of underground mining operations at the Lace diamond mine, we reinstate our formal coverage on DiamondCorp with a Buy recommendation and an unchanged 11.5p target price.
Importantly, we have retained our production forecasts in line with management guidance as we believe the impact of the suspension can be recovered through multiple work streams planned by the company before the end of the year. Our discount rate (12.6%) acknowledges the risks that lay before the team prior to full and profitable production is reached. Our NPV12.6 for the Lace operation remains $124.5m, equal to 19p/share.

Fri, 29 Jul 2016 11:01:00 +0100
Today's Market View - IronRidge Resources, Sierra Rutile IronRidge Resources* (LON:IRR) – 55mt Bauxite resource at Monogorilby, Australia
Sierra Rutile (LON:SRX) – Illuka makes cash offer for the company at 36p

Illuka’s offer for Sierra Rutile reads across to FinnAust’s project in Greenland and IronRidge’s new resource in Queensland, Australia

Dow Jones Industrials   -0. 09% At 18,456  
Nikkei 225   +0.56% At 16,569
HK Hang Seng   -1.28% At 21,891  
Shanghai Composite   -0.50% At   2,979  
FTSE 350 Mining   -1.06% At 11,579  
AIM Basic Resources   +0.25% At   2,261 –  AIM resource stocks rise 49% since the January low

China sending officials into regions to investigate private investment slowdown (Reuters)
• Reports suggest the Chinese government is sending teams of officials to investigate a rapid slowdown in private investment in the regions.
• The teams are to examine how government measures are working to stimulate investment in private and state run companies.
• While China grew faster than expected in Q2 mainly on strong housebuilding private investment fell to a new low as private businesses took a more cautious approach.
• One theory is that Chinese banks which prefer the security of state-sponsored companies have stifled private investment through increased lending charges for private companies which pay around 6% more interest on bank loans.

IMF overly optimistic about effectiveness of EU Bailouts
• The IMF is overly optimistic over the economic impact of EU bailouts according to the IMFs’ independent Evaluation offie.
• They say the handeling of crises raises issues of transparency and accountability and poses extraordinary challenges to policymakers.

Sovereign bond yields are up this morning as the BoJ stimulus came in below expectations.
• The yen has appreciated 2% past the 103 level against the US$ on the news, but has since given up some of its gains and is trading 1.1% up.
• A weaker US$ is providing little support for crude and metal prices with Brent hovering around $42/bbl and gold at $1,332/oz.
• European equities are up this morning (Euro Stoxx 50 +0.5%) led by better than expected results from financials and ahead of European banks’ stress test details due after the close of markets today.

US – All attention on Q2 GDP numbers today with estimates for the economy to post a strong rebound following a weak Q1 as activity was weighed down by the stronger US$ and a fall in private investments.
Date Index Period Actual Expected (Bloomberg) Previous
Tuesday S&P/CS Property Prices May -0.1%mom/5.2%yoy 0.1%mom/5.5%yoy -0.2%mom/5.4%yoy
  Consumer Confidence Jul 97.3 96 97.4
  - Current Situation Jul 118.3   116.6
  - Expectations (next 6 months) Jul 83.3   84.6
  New Home Sales Jun 3.5%mom 1.6%mom 0.0%mom
Wednesday Durable Goods/Core Jun -4.0%mom/-0.5%mom -1.4%mom/0.3%mom -2.8%mom/-0.4%mom
  Capital Goods Orders Jun 0.2%mom 0.2%mom -0.5%mom
  FOMC Rate   0.25%-0.50% 0.25%-0.50% 0.25%-0.50%
Thursday Weeklyt Jobless Claims   266k 262k 252k
Friday GDP (1st reading) Q2  2.5%qoq 1.1%qoq
  Core PCE     1.7%qoq 2.0%qoq
Source: Bloomberg    

Japan – The BoJ voted to leave interest rates at -0.1% and monetary base unchanged and instead opted to nearly double purchases of ETFs.
• In addition, the Bank said it will double the size of a dollar lending facility to $24bn.
• The stimulus came short of market expectations sending the yen and local government bond yields higher.
• A set of economic news showed the nation remained in deflation while core prices that exclude the effect of volatile oil and fresh food prices showed the pace of inflation slowed in Jun.
• The BoJ in turn cut its inflation estimates in the year to Mar/17 to 0.1%, down from 0.5% forecast previously, but kept 2017/18 inflation target unchanged at 1.7%.
CPI: -0.4%yoy in Jun v -0.4%yoy in May and -0.4%yoy forecast.
• CPI core: 0.4%yoy v 0.6%yoy in May and 0.5%yoy forecast.
• Industrial production: 1.9%mom/-1.9%yoy in Jun v -2.6%mom/-0.4%yoy in May and 0.5%mom/-2.9%yoy forecast.
• Retail sales: 0.2%mom/-1.4%yoy in Jun and -0.1%mom/-2.1%yoy in May and 0.3%mom/-1.2%yoy forecast.

Germany – As opposed to inflation numbers in France and Spain that showed econmies remained in deflation, Germany registered stronger than expected price gains in Jul.
• CPI (EU harmonised): 0.4%mom/0.4%yoy v 0.1%mom/0.2%yoy in Jun and 0.3%mom/0.3%yoy forecast.

France – Q2 GDP underperformed while inflation picked up in Jul but only marginally.
• Q2 GDP: 0.0%qoq/1.4%yoy v 0.7%qoq/1.3%yoy in Q1/16 and 0.2%qoq/1.6%yoy forecast.
• CPI (EU harmonised): -0.4%mom/0.4%yoy in Jul and 0.1%mom/0.3%yoy in Jun and -0..4%mom/0.4%yoy forecast.
• The economy has been hit by strikes at refineries and uncertainty over the Brexit vote, while the Finance Ministry maintained its full year growth forecast of 1.5% pointing to growth potential in H2/16.
• “The second-quarter figure is disappointing. But over and above the quarterly volatility, the French economy still has the recovery dynamic,” the Ministry said.
• The economy registered the strongest GDP growth in almost three years in the Jan-Mar period with a share of gains explained by a return of activity to normal levels post terrorist attacks of Q4.

Spain – The fourth largest economy in the Eurozone posted a slight slowdown in GDP growth in Q2/16 while inflation continued to run in the negative territory both on monthly and annual bases.
• Q2 GDP: 0.7%qoq/3.2%yoy v 0.8%qoq/3.4%yoy in Q1/16 and 0.7%qoq/3.1%yoy forecast.
• Policymakers failed to form new government following two general elections which resulted in a hung Parliament and Mariano Rajoy assuming caretaker functions in the meantime.
• On Thursday, Rajoy accepted the King Felipe’s nomination to form a government but the chances he will be able to secure the support of opposition parties in a confidence vote are slim.

Australia – Credit growth continued to run at a solid pace supported by record low borrowing rates.
• Private lending which includes mortgages, personal and business loans climbed 6.2%yoy in Jun v 6.5%yoy in May and 6.5%yoy forecast.
• The RBA cut rates twice in 2015 and once in 2016 (May).

US$1.1094/eur vs 1.1099/eur last week.    Yen 103.69/$ vs 104.76/$.    SAr 14.176/$ vs 14.240/$    $1.316/gbp vs $1.318/gbp.   
0.750/aud vs 0.754/aud.    CNY 6.655/$ vs 6.657/$. 

Commodity News
Peru June production figures highlight the potential for the nation to become the world’s second largest producer of copper behind Chile
• Copper output rose 42% yoy in June to 207,197t,
• Gold rose 4% to 406,422oz,
• Silver up 5% to 11.7moz,
• Zinc down 5% to 111,213t – this is a significant fall given the rise in zinc prices and the increase in forecasts by analysts who have woken up to the growing market deficit
• Lead up 1% to 25,258t,
• Iron down 1% to 721,889t,
• Tin down 7% to 1,554t – the fall in tin output is also interesting

Shanghai warehouse stock movements:
• Copper stocks down 9,503t x
• Aluminium stocks down16,719t
• Zinc stocks down 5,641t
• Lead stocks up 2,360t
• Nickel stocks up 1,133t
• Tin stocks unchanged

Precious metals:
Gold US$1,332/oz vs US$1,342/oz last week
Gold ETFs 64.4moz v 64.3moz last week – ETF holdings rise again
Platinum US$1,130/oz vs US$1,149/oz last week
Palladium US$697/oz vs US$706/oz last week
Silver US$20.05/oz vs US$20.34/oz last week
Base metals:   
Copper US$ 4,880/t vs US$4,873/t last week –
Aluminium US$ 1,615/t vs US$1,602t last week –
Nickel US$ 10,535/t vs US$10,555/t last week –
Zinc US$ 2,204/t vs US$2,188/t last week – zinc supply / deficit expected to rise to 221,000t from 25,000t in Q4 according to Reuters survey.
Lead US$ 1,801/t vs US$1,810/t last week
Tin US$ 17,780/t vs US$17,765/t last week – Spot Chinese tin supply expected to remain tight in July and August according to China Nonferrous Metals Industry Association

Oil US$42.0/bbl vs US$43.4/bbl last week
Natural Gas US$2.862/mmbtu vs US$2.668/mmbtu last week – US raising its share of LNG production as Shale Gas producers add to global production
Uranium US$26.75/lb vs US$26.25/lb last week –

Iron ore 62% Fe spot (cfr Tianjin) US$59.2/t vs US$58.0/t – Chinese iron ore miners are complaining that hundreds of domestic iron ore mines have been forced to close.
Steel – China is dedicating more funds to enable steel producers rationalise production and meet targets of capacity cuts of 45mt this year and 140mt by 2020.

Thermal coal (1st year forward cif ARA) US$61.0/t vs US$62.0/t last week –

Lithium – Airbus is working with FAA for approval to use lithium batteries in its A350 aircraft

Tungsten - APT European prices $180-190/mtu vs $175-185/mtu on last week –

Company News

IronRidge Resources* (LON:IRR) 17 pence, Mkt Cap £43.2m – 55mt Bauxite resource at Monogorilby, Australia
• IronRidge reports a maiden Bauxite resource at Monogorilby, Queensland, Australia.
• The 54.9mt JORC resource hosts 37.5% alumina and 8.5% total silica.
• The prospect may be repeated across a number of plateaus leading to a potential multiple upscaling of the resource.
• The resource is said to be easily upgradeable to a premium 52% alumina content for Direct Shipping Ore which can be readily sold to alumina refineries.
• The resource is measured at an average of 7-14m thick from surface.  10-20% of the current resource is assumed to represent surface material with the remainder representing the bulk of the JORC resource.
• The main mineral is Gibbsite, the preferred mineralogy for low temperature and low pressure refining to alumina.
• Logistically, the project is just 55km from a dormant rail line which connects to the Port of Bundaberg, which is known for its sugar exports as well as Bundaberg Rum.
• There is news that the State of Queensland might increase the capacity of the Bundaberg Port for minerals by allowing >5,000ha of land next to the port to be dedicated for industry and infrastructure corridors.  The port is unaffected by the Great Barrier Reef World Heritage Area and UNESCO sustainable planning laws making it a good port to expand exports from.
• To put this into context, Rio Tinto’s Weipa bauxite mine on the Cape York Peninsula, Queensland, produces around 26mtpa of Bauxite from a resource (MI&I) of over 1.5bn tonnes at a grade of 51.8% Al2O3. Rio Tinto’s other Australian bauxite operation at Gove in the Northern Territory has a resource of 46mt at a grade of 49.3% Al2O3.
• IronRidge’s resource is all currently classed as Inferred which is not unreasonable for an early stage project.
• Bauxite concentrate prices are said to be buoyant at US$49.5/t.  Alumina prices are quoted at US$238/t FOB Australia at present
• Titanium:  The project also contains high grade Titanium minerals grading 3.8-5%, which are said to be consistently identified within the resource drilling.  The grades are such that the project may be considered either as a bauxite project with significant titanium credits or as a titanium project with a significant bauxite credit.
• We expect IronRidge to continue to report more resources with potential for further development.
Conclusion:   The team are pressing ahead with their evaluation of the group’s mineral licenses.  The portfolio shows potential for a number of potentially world class projects ranging from iron ore to copper, gold.  With so much activity going on we have to wonder what will come next?
*SP Angel act as Nomad and Broker to IronRidge Resources

Sierra Rutile (LON:SRX) 37.3p, Mkt Cap £222m – Illuka makes cash offer for the company at 36p
• Illuka Resources, the Australian mineral sands producer is in discussions with Sierra Rutile and has made a cash offer for the company at 36 pence per share.
• Sierra Rutile runs one of the world’s larger mineral sands businesses based in Australia and withdrew an offer to buy Kenmare Resources late last year following its rejection by Kenmare management.
• Illuka’s move to buy more mineral sands production and resource indicates to us that Illuka is not only looking for replacement demand but also has a more bullish longer term view on titanium mineral sands prices.
• Sierra Rutile recently reported the successful commissioning of its Gangama Dry Mine project in Sierra Leone with nameplate capacity of 500t per hour.  Steady state production is expected within four months.
• Q2 sales at Sierra Rutile rise to 34,629t of rutile up 29% on Q1 and 16% yoy.
• The company has contracted 96% of its maximum targeted sales volumes of rutile into the titanium metal market.
• The company reported earlier this year that it had restarted sales into the titanium metals market. After several years of subdued demand  This was an encouraging sign that the demand for high-grade titanium feedstocks continues to strengthen.
• Full-year production is expected at upper end of guidance of 120,000-135,000t given the successful start up of dry mining at Gangama
• Strong demand from customers continues to encourage Sierra Rutile to raise production from its existing operations.
Conclusion:  Management should be congratulated for turning around and effectively rescuing the company from near-collapse some years ago along with support from Pala, the Swiss investment company.  The company acted fast to contain any impact from the Ebola virus and has supported healthcare within the region.

Fri, 29 Jul 2016 10:23:00 +0100
Brokers: IAG a "cause for concern" says Liberum Fri, 29 Jul 2016 09:49:00 +0100 In the news: Sierra Rutile/Iluka Resources FROM THE BROKING DESK
Sierra Rutile (SRX : LN) has announced that it has received an approach (at 36p/share in cash) from Iluka Resources (ILU : AU). Iluka entered a trading halt on the ASX today. SRX stated that discussions are at an advanced stage; however, it also said that there can be no certainty that an offer will be made or the terms of any such offer. The statement urged shareholders to take no action at this time.
In a market where sentiment towards mineral sands equities has turned around considerably this year, a possible offer for SRX comes as no surprise. Having traded at a low of 15p in January, the share price then recovered to trade in a narrow band around 22p from April until early June. Since then the share price has increased steadily and was trading at 38p yesterday (ie, a 6% premium to the price of the approach). SRX’s current market cap is £223m/US$294m. At the end of December 2015 the company had net current assets of US$14m, including short-term debts of US$30m. Long-term debt was US$21m. In April the company raised US$26m at 20p/share. Its major shareholders include Pala (53%), M&G (17%), JP Morgan AM (7%) and Neon Liberty (6%).
This offer is a reflection of the buoyancy in the mineral sands space at the moment. We covered this sentiment just last week in Jim Taylor and Imogen Whiteside’s Base Resources*† — Valuation Update, 21 July 2016.
To provide some background for this news, Sierra Rutile is the world’s second largest producer of rutile. It has a world-class resource base in Sierra Leone, which would support production for more than 50 years at the current rate.

High-quality Rutile Resource Base

The company produced 126,000t of rutile in 2014 at operating cash costs of US$614/t (net of by-product credits). Production is derived from dredge and dry mining operations at Lanti, which feed a mineral separation plant that has the capacity to produce 225,000tpa of rutile, and is therefore significantly underutilised.

Expanding Production

In April 2015 the company announced that it was to embark on the development of Stage 1 of the Gangama Dry Mining Project at a cost of US$44m. Although Stage 1 capacity is 46,000tpa of rutile, the company’s net increase in output will be limited to 20,000tpa owing to reductions in output elsewhere. Stage 1 is planned to have operating costs of US$295/t during its first five years of operation, reducing the company’s overall total cash costs to US$595/t. Stage 2 would double output from Gangama to 93,000tpa of rutile and would cost an additional US$33m to develop. Assuming the development of Stage 2 goes ahead, the project has a life in excess of 20 years.
Over the longer term the company is considering a further increase in production through the development of the US$99m Sembehun Project. This would add 77,000tpa of rutile over a mine life of 20 years.

Fri, 29 Jul 2016 09:29:00 +0100
In the papers: Premier Farnell, BT, EDF The Times
Savers use freedom to raid pension pots of £6 billion: Almost 800,000 savers have cashed out more than £6 billion from their retirement pots since the Treasury introduced new pension freedoms 15 months ago, official figures reveal.
Ford set to raise prices after $500 million Brexit hit: Ford has warned that Brexit means it will probably have to increase car prices to minimise a hit to its finances as the fall in the value of the pound eats into its earnings.
Premier Farnell draws interest from U.S.: A potential bidding battle has broken out for Premier Farnell, the British electronics distributor battered by two profit warnings and the departure of its Chief Executive last year.
Takeover isn’t chancing our Arm, insists SoftBank Boss: The Boss of SoftBank has attempted to reassure investors that his company will not overextend itself by paying £23.4 billion for Arm Holdings, the British tech group that it agreed to buy last week.
Schroders’ assets soar to £340 billion: Assets at one of the country’s largest fund Managers have reached a record high of more than £340 billion as market gains and the fall in the value of the pound pushed up the value of its investments by nearly £21 billion.
BT seeks to ring the changes as mobile takeover boosts profits: Sales and profits at BT jumped in the past three months, mainly because of the £12.5 billion takeover of EE, the mobile phone group.
Thomas Cook reels from year of terror: Thomas Cook cut its full-year profit forecast on the back of terrorist attacks across Europe, the failed military coup in Turkey and uncertainty caused by the Brexit vote.
Weak pound good for tourism, says Merlin: The Boss of Merlin Entertainments has predicted a boost to trading after the EU referendum, with the weak pound pulling in overseas tourists and staycationing Britons to its attractions.
BAE orders full speed ahead as profits edge up: BAE Systems said that the key U.S. defence market was showing “encouraging signs of a return to growth” as it reported a slight rise in profits.
The Independent
EDF board member resigns ahead of Hinkley Point nuclear power station vote: A board member of the French energy giant EDF has resigned ahead of a vote to give the green light to construction of the controversial Hinkley Point nuclear power station in Somerset.
Embarrassment for Christine Lagarde and IMF as Fund’s own watchdog slams its Eurozone record: The International Monetary Fund has been criticised by its own watchdog over its role in the Eurozone crisis and for allowing “political intervention” to contaminate its technical economic analyses.
Consumer confidence slides at fastest pace in 26 years after Brexit vote: Consumer confidence has fallen at its fastest pace in 26 years in the wake of Brexit according to the latest GfK survey.
The Daily Telegraph
Blockbuster growth at Amazon driven by global shoppers and cloud computing: Amazon has topped forecasts as its burgeoning cloud computing arm added to double-digit retail sales growth over the past quarter.
Google’s advertising powerhouse fuels double-digit growth: Online advertising has fuelled a better-than-expected 21% jump in revenues for Alphabet, the parent company of Google, while careful cost-control helped the firm to surpass profit forecasts.
Defence Chief Ian King stands firm on his future at BAE Systems: BAE Systems Boss Ian King will remain at the helm of the defence giant into next year with his successor, Chief operating officer Charles Woodburn, not expected to take over the reins until after the annual results.
Smith & Nephew robot-controlled knee surgery device wins approval from regulators: Orthopaedics specialist Smith & Nephew’s acquisition last year of a company that makes robot-controlled surgical tools has paid off after its key product won approval from regulators and carried out its first ever operation.
Brexit recession could cost banks £68 billion: Britain’s banks could take a £68 billion hit if the Brexit slowdown becomes a serious recession, according to analysts at credit ratings agency Moody’s.
Media barons at war as Vivendi backs out of Berlusconi pay-TV deal over ‘unachievable’ figures: A bid by Vivendi to renegotiate its takeover of Mediaset Premium, the struggling pay-TV business controlled by Italy’s Berlusconi dynasty, came after due diligence raised major doubts over its prospects, The Telegraph can reveal.
Sports Direct shares spike on buyback plans: Sports Direct shares have soared in their biggest one-day gain since 2009 after the company unveiled a £900 million share buyback.
The Guardian
IMF’s own watchdog criticises its handling of Eurozone crisis: The IMF’s handling of the financial crisis in the Eurozone has been criticised by the organisation’s own independent watchdog in a report that says the fund failed to spot the scale of the problem, was guilty of over-optimistic forecasts and left the impression that it was treating Europe differently.
Christian Candy denies gifts to brother were part of tax evasion plot: The luxury property tycoon Christian Candy has insisted he gave his brother Nick gifts worth more than £200 million out of family affection and respect for the dying wishes of their late father — and not as part of an alleged plot to evade tax.
Ryanair to force people with young children to pay for seat allocation: Ryanair has risked raising the ire of passengers after deciding to force any passenger travelling with children under 12 to pay for an allocated seat.
Daily Mail
Number of people in the U.K. going insolvent soars by more than a fifth compared with a year ago: The number of people going insolvent between April and June jumped by more than a fifth compared with a year earlier, official figures show.
Pharmaceuticals giant AstraZeneca could become bid target again, firm’s Chief Executive hints: The Boss of AstraZeneca has hinted that the company could become a bid target once again, two years after fighting off a £69billion bid from American rival Pfizer.
Rolls-Royce leads FTSE giants in to rehab as shares skyrocket despite dramatic fall in profits: Shares in Rolls-Royce soared as the British engineering giant signalled its turnaround plan was working – despite a dramatic fall in profits.
Bidding war over Leeds-based British tech firm Premier Farnell causes shares to jump 18%: Shares in Premier Farnell jumped 18% after a bidding war broke out for the British maker of the Raspberry Pi mini-computer.
Domino’s pizzas posts jump in U.K. sales by almost 11% while profits rise 20% to £40.9 million: Pepperoni Passion on a Friday night has yet again helped Domino’s Pizza post a jump in sales.
Bus and train operator National Express buys up Balaeric bus operator in Ibiza to help drive international sales: Bus and train operator National Express headed to Ibiza by buying up a Balearic bus operator to boost international sales.
Daily Express
Brexit had no impact on business and London still top for finance, says Credit Suisse: Britain’s vote to leave the European Union (EU) has had not affected business and London is set to remain an important financial hub, according to the Boss of a top international bank.
U.K. car production increased by 10% in past year: Car production has surged ahead, increasing by 10% over last year, but the industry has voiced concern about the impact on the business of leaving the European Union, a new report shows.
Brexit boom: House prices jump in July: House prices in Britain continued to rise in July, quashing the vote to leave the European Union (EU) would hit the market.
The Scottish Herald
Glasgow-based lender says Brexit vote could hit demand for loans: Clydesdale Bank Owner CYBG has highlighted uncertainty created by the U.K.’s vote to leave the European Union, which it said could impact on demand for credit.
Edinburgh biotech firm launches: A biotech company focused on utilising immunological approaches to diseases including dementia has been launched in Edinburgh.
Centurion Group and ATR Group to merge: Two Aberdeen equipment rental businesses are to merge to create a global player in the oil and gas services market with turnover of more than £100 million.
Phoenix gives sales staff 50% pay hike and cuts working hours: Car dealership Phoenix is to give its sales staff a 50% pay rise, increase commission on certain sales and reduce contracted hours by eight hours per week.
British Gas loses 400,000 customers in ‘demanding’ period for parent Centrica: Almost 400,000 customers deserted British Gas in the first half of the year as its parent firm, Centrica, saw profits take a dive.
The Scotsman
Diageo shrugs off Brexit threat as profits rise: Spirits giant Diageo has recovered its momentum after two flat years battling against an emerging market slowdown, with latest net like-for-like revenues up 2.8% at £10.5 billion and volumes climbing 1.3%.
Weir Group set for change as Boss Keith Cochrane steps down: Venerable engineering giant Weir Group is set for a change of leadership after announcing that Chief Executive Keith Cochrane is stepping down.
3,000 more jobs and 200 more branches to go at Lloyds Bank: Hundreds of Lloyds Banking Group job losses are threatened in Scotland after the bank announced that a further 3,000 staff are to go and 200 additional branches shut U.K.-wide by the end of next year.
Game of Thrones helps Sky leap to £8.3 billion in revenues: Sky has brushed aside economic uncertainty surrounding Britain’s referendum on the European Union to drive up revenues and profits. The Game Of Thrones broadcaster lifted operating profits 12% to £1.6 billion in the full year to June 30, while revenues climbed 7% to £11.9 billion over the period.
City A.M.
HS2 should be abandoned, says The TaxPayers’ Alliance: HS2 is an expensive vanity project that must be scrapped, according to think tank The TaxPayers’ Alliance (TPA).
Expedia sees second quarter revenues slip following promotional activities: Expedia has blamed a raft of new promotional activity for its failure to hit earnings forecasts for the second quarter.
Adidas results boosted by cancelled five-year contract with Chelsea: Adidas increased its guidance for 2016 for the fourth time this year when releasing second-quarter preliminary results.
French bank BPCE acquires hot fintech challenger Fidor: France’s fourth largest bank has gobbled up a fintech startup that specialises in digital banking. BPCE has acquired German challenger Fidor to push forward its digital strategy across Europe. Fidor, named one of Europe’s hottest fintech companies, currently operates in several countries including the U.K.
Rising consumer spending has pushed up MasterCard’s profits: MasterCard has reported expectation busting second-quarter profit of $983 million as customers increasingly use plastic over cash at the till.
Rival exchange eyes “opportunities” from LSE merger as European opposition grows: The head of pan-European exchange group Euronext has told of the growing opposition to the tie-up between the London Stock Exchange and Deutsche Boerse.
Anglo American jumps as its losses narrow in the first half: Anglo American shares closed up 5.48% to 843p this afternoon, after the embattled miner’s losses narrowed in the first half. The FTSE 100-listed firm posted a net loss of $813 (£617 million) in the six months to 30 June, more than two thirds less than the $3 billion loss it recorded the same time a year ago.
The iconic Empire Theatre in Leicester Square has just been sold to Cineworld: The historic Empire Theatre in Leicester Square is set to be rebranded after the cinema was sold to Cineworld. The deal sees Cineworld - the second largest cinema operator in Europe - also take on four other venues outside of London from Empire Cinemas.
Classic British marque Bristol Cars has just unveiled the Bristol Bullet - its first vehicle in more than a decade: Bristol Cars may be best known for its sleek classic numbers, but the iconic British car marque has just unveiled its latest sporty little runaround - and it’s bang up to date.

Fri, 29 Jul 2016 09:06:00 +0100
Market briefing: UK markets closed lower yesterday, as some disappointing corporate earnings weighed on investor sentiment UK Market Snapshot
UK markets closed lower yesterday, as some disappointing corporate earnings weighed on investor sentiment. Lloyds Banking Group lost 5.8%, after it posted a drop in its half yearly pre-tax earnings and warned that the Brexit vote would hurt its ability to boost dividend payments. Smith & Nephew dropped 5.6%, as its trading profit was hit for the first half of the year amid currency headwinds. Royal Dutch Shell dipped 2.9%, after it reported a sharp decline in its earnings for the second quarter due to slump in crude oil prices. On the positive side, Rolls-Royce Holdings rallied 13.5%, following upbeat adjusted earnings for the first half and it expressed confidence that it is on track to deliver a stronger performance in the next half. Sports Direct International surged 9.2%, after it announced a £90.0 million share repurchase programme. The FTSE 100 declined 0.4%, to close at 6,721.1, while the FTSE 250 fell 0.1%, to settle at 17,252.3.
US Market Snapshot
US markets ended mostly higher yesterday, as positive quarterly reports from major companies boosted market sentiment. Hershey advanced 2.9%, as it swung to a net profit in the second quarter from a loss in the same period last year. MasterCard gained 2.1%, following upbeat financial results for the second quarter. Facebook rose 1.4%, after it posted upbeat sales in the second quarter amid a surge in revenue from mobile advertisements. Harley-Davidson added 0.9%, after it posted higher than expected revenue and profit for the second quarter. On the flipside, Ford Motor plunged 8.2%, as its profit in the second quarter trailed analysts’ projections and warned about its full year earnings target. The S&P 500 gained 0.2%, to settle at 2,170.1. The DJIA shed 0.1%, to settle at 18,456.4, while the NASDAQ advanced 0.3%, to close at 5,155.0.
Europe Market Snapshot
Other European markets finished in the red yesterday, led by weakness in financial sector stocks. Saipem plummeted 9.8%, after it reduced its earnings outlook for 2016. Banks, Deutsche Bank and Banca Popolare di Milano fell 3.1% and 4.6%, respectively, ahead of the European Banking Authority’s stress test results due today. Telefonica dipped 4.5%, after its second quarter net earnings plunged more than 50.0% from last year on lower revenue and currency volatility. Total slid 0.5%, after it posted a significant drop in its profit for the second quarter. On the contrary, Neste surged 9.9%, following better than expected earnings for the second quarter. Adidas advanced 3.6%, after boosting its annual projected revenue and profit. The FTSEurofirst 300 index declined 1.0%, to close at 1,338.3. Among other European markets, the German DAX Xetra 30 slid 0.4%, to close at 10,274.9, while the French CAC-40 shed 0.6%, to settle at 4,420.6.
Asia Market Snapshot
Markets in Asia are trading mostly weaker this morning. Meanwhile, the Bank of Japan (BoJ) left key interest rates unchanged but increased buying of exchange-traded funds to ¥6.0 trillion. Exporters, Toyota Motor and Honda Motor have fallen 2.1%, respectively, while Mazda Motor has slid 3.6%, as the Japanese Yen strengthened following the BoJ’s policy decision. However, Nomura Holdings has gained 4.2%, after news emerged that it is planning a ¥45.0 billion buyback of its shares. In Hong Kong, energy majors, PetroChina and CNOOC has slipped 1.9% and 2.3%, respectively, on lower crude oil prices. In South Korea, Samsung Electronics has advanced 2.6%, while Hyundai Motor has declined 2.2%. The Nikkei 225 index is trading 0.4% lower at 16,411.4. The Hang Seng index is trading 0.8% down at 21,987.2, while the Kospi index is trading marginally higher at 2,021.9.

Commodity, Currency and Fixed Income Snapshots
Crude Oil

At 0330GMT today, Brent Crude Oil one month futures contract is trading 0.19% or $0.08 lower at $42.62 per barrel, ahead of weekly US rig count report by Baker Hughes, due later today.  Yesterday, the contract declined 1.77% or $0.77, to settle at $42.70 per barrel, amid concerns over global crude glut.
At 0330GMT today, Gold futures contract is trading 0.90% or $12.00 higher at $1344.30 per ounce. Yesterday, the contract advanced 0.42% or $5.60, to settle at $1332.30 per ounce, amid expectations that the US Federal Reserve would not hike its interest rates soon.
At 0330GMT today, the EUR is trading 0.05% higher against the USD at $1.1082, ahead of the Euro area GDP growth for the second quarter as well as consumer prices for July, set to release today. Yesterday, the EUR strengthened 0.17% versus the USD, to close at $1.1077, after German consumer prices rose more than expected in July.
At 0330GMT today, the GBP is trading 0.24% higher against the USD at $1.3195. Investors would closely assess the US annualised GDP data for the second quarter, due later in the day. Yesterday, the GBP weakened 0.45% versus the USD, to close at $1.3164. In economic news, UK GfK consumer confidence fell more than anticipated for July.
Fixed Income
In the US, long term treasury yields remained almost unchanged, with investors looking forward to today’s Bank of Japan policy meeting. Yesterday, yield on 10-year notes remained unchanged at 1.52%, while yield on 2-year notes slid 1 basis point to 0.72%. Meanwhile, 30-year bond yield remained flat at 2.23%.

Key Economic News
UK house prices unexpectedly climbed in July

On a MoM basis, the seasonally adjusted house prices in the UK registered an unexpected rise of 0.50% in July, compared to an advance of 0.20% in the prior month. Market expectation was for house prices to record a flat reading.
UK consumer confidence recorded a drop in July
The consumer confidence registered a drop to -12.00 in July, in the UK, compared to a level of -1.00 in the previous month. Markets were expecting the consumer confidence to ease to -8.00.
UK house prices rose more than expected in July
The non-seasonally adjusted house prices in the UK rose 5.20% on an annual basis in July, higher than market expectations for a rise of 4.50%. In the previous month, house prices had registered a rise of 5.10%.
Euro-zone services sentiment indicator rose surprisingly in July
The services sentiment indicator in the Euro-zone registered an unexpected rise to a level of 11.10 in July, higher than market expectations of a drop to 10.30. The services sentiment indicator had recorded a revised reading of 10.90 in the previous month.
Euro-zone consumer confidence index declined in July
In July, the final consumer confidence index in the Euro-zone fell to a level of -7.90, meeting market expectations. The preliminary figures had also recorded a fall to -7.90. In the previous month, the consumer confidence index had registered a revised reading of -7.20.
Euro-zone economic sentiment indicator advanced surprisingly in July
The economic sentiment indicator in the Euro-zone recorded an unexpected rise to 104.60 in July, compared to a reading of 104.40 in the previous month. Market anticipation was for the economic sentiment indicator to fall to 103.50.
Euro-zone industrial confidence index registered an unexpected rise in July
In July, the industrial confidence index recorded an unexpected rise to a level of -2.40 in the Euro-zone, compared to a reading of -2.80 in the prior month. Market anticipation was for the industrial confidence index to fall to a level of -3.30.
Euro-zone business climate indicator advanced unexpectedly in July
In July, the business climate indicator climbed unexpectedly to a level of 0.39 in the Euro-zone, compared to a reading of 0.22 in the previous month. Market anticipation was for the business climate indicator to fall to 0.17.
German number of people unemployed fell more than expected in July
The number of people unemployed in Germany dropped 7.00 K in July, more than market expectations for a fall of 4.00 K. The number of people unemployed had dropped 6.00 K in the previous month.
German HICP advanced more than expected in July
On a monthly basis in Germany, the flash harmonised consumer price index (HICP) advanced 0.40% in July, compared to an advance of 0.10% in the previous month. Markets were expecting the HICP to advance 0.30%.
German CPI advanced more than expected in July
In July, the flash consumer price index (CPI) climbed 0.30% in Germany, on a monthly basis, higher than market expectations for a rise of 0.20%. The CPI had advanced 0.10% in the prior month.
German unemployment rate remained flat in July
The seasonally adjusted unemployment rate remained flat at 6.10% in July, in Germany. Markets were expecting unemployment rate to record a steady reading.
Italian wage inflation registered a rise in June
In Italy, the wage inflation advanced to 0.20% in June. In the prior month, the wage inflation had registered a level of 0.00%.
Spanish unemployment rate declined in 2Q 2016
In 2Q 2016, unemployment rate registered a drop to 20.00% in Spain, compared to market expectations of a fall to a level of 20.30%. In the prior quarter, unemployment rate (survey) had recorded a level of 21.00%.
US initial jobless claims rose in the last week
The seasonally adjusted initial jobless claims in the US advanced to 266.00 K in the week ended 23 July 2016, compared to market expectations of a rise to a level of 262.00 K. In the prior week, initial jobless claims had registered a revised level of 252.00 K.
US continuing jobless claims advanced in the last week
In the week ended 16 July 2016, the seasonally adjusted continuing jobless claims in the US registered a rise to 2139.00 K, compared to a revised reading of 2132.00 K in the previous week. Markets were expecting continuing jobless claims to climb to a level of 2136.00 K.
US Kansas City Fed manufacturing activity index registered an unexpected drop in July
The Kansas City Fed manufacturing activity index eased unexpectedly to a level of -6.00 in July, in the US, compared to a reading of 2.00 in the prior month. Market anticipation was for the Kansas City Fed manufacturing activity index to advance to a level of 4.00.
BoJ expanded ETF buying and, kept interest rate unchanged
The Bank of Japan (BoJ) expanded the purchase of exchange-rated funds (ETF) to ¥6.0 trillion from ¥3.3 trillion. However, the central bank held the key interest rate steady at -0.1% and maintained its monetary base at an annual pace of ¥80 trillion.
Japanese retail trade fell more than expected in June
In June, on a YoY basis, retail trade in Japan fell 1.40%, more than market expectations for a drop of 1.20%. Retail trade had fallen by a revised 2.10% in the prior month.
Japanese industrial production dropped less than expected in June
On a YoY basis, the preliminary industrial production registered a drop of 1.90% in Japan, in June, less than market expectations for a drop of 2.90%. In the prior month, industrial production had recorded a drop of 0.40%.
Japanese National CPI ex-food, energy advanced less than expected in June
National CPI ex-food, energy in Japan rose 0.40% in June on a YoY basis, compared to a rise of 0.60% in the previous month. Market expectation was for National CPI ex-food, energy to climb 0.50%.
Japanese large retailer's sales dropped more than expected in June
On a monthly basis, large retailer's sales recorded a drop of 1.50% in Japan, in June, more than market expectations for a fall of 0.80%. Large retailer's sales had registered a drop of 2.20% in the previous month.
Japanese household spending declined more than expected in June
On an annual basis, household spending eased 2.20% in Japan, in June, compared to a fall of 1.10% in the prior month. Market anticipation was for household spending to drop 0.40%.
Japanese retail trade advanced less than expected in June
On a monthly basis, retail trade in Japan recorded a rise of 0.20% in June, compared to a revised fall of 0.10% in the prior month. Markets were expecting retail trade to advance 0.30%.
Japanese National CPI ex-fresh food fell more than expected in June
In June, on an annual basis, National CPI ex-fresh food dropped 0.50% in Japan, more than market expectations for a drop of 0.40%. National CPI ex-fresh food had recorded a drop of 0.40% in the prior month.
Japanese unemployment rate eased surprisingly in June
Unemployment rate recorded an unexpected drop to a level of 3.10% in June, in Japan, compared to a level of 3.20% in the prior month. Market expectation was for unemployment rate to record a steady reading.
Japanese national CPI dropped as expected in June
On an annual basis, in June, the national CPI fell 0.40% in Japan, at par with market expectations. The national CPI had registered a similar fall in the previous month.
Japanese industrial production advanced more than expected in June
The flash industrial production recorded a rise of 1.90% in Japan on a MoM basis in June, more than market expectations for a rise of 0.50%. In the prior month, industrial production had dropped 2.60%.


Fri, 29 Jul 2016 09:03:00 +0100
Northland Capital Partners View on the City - Altona Energy, Thor Mining, Holders Technology Altona Energy (ANR.L) – CORP: JV update
Market Cap: £3.6m; Current Price: 0.4p

From yesterday: Project on hold until PEL is acquired or granted
  Following recent discussions with the South Australian Government, the Arckaringa Coal Chemical Joint Venture (the JV) have been informed that it will also need a Petroleum Exploration Licences (PEL) in addition to its existing Exploration Licences before it can commence test drilling at Arckaringa.
  The PEL requires the higher levels of regulation and the joint venture company is reviewing the requirements.
  The three Exploration Licences that relate to the Arckaringa Project share a partial overlap with PELA604 an application owned by Linc Energy that is currently in voluntary administration. The South Australian Government has informed Altona that it may need to acquire PELA604 before it can commence work at the Project.
  Altona understands that the assets of Linc Energy are to be acquired by an unknown third party. The JV Company is currently trying to establish the identity of the purchaser and plans to enter negotiations to acquire the PEL.
  Altona expects this process could take several months but do not know definitively. Should the JV Company be unsuccessful it may re-enter discussions with the Governments Energy Department with a view to establishing a new licence for this shared area.
  Altona’s joint venture partners, Sino-Aus Energy Group and Wintask Group, will discuss possible variations to the JV agreement in due course. The partners have agreed that the Sino-Aus will not proceed with the subscription for 100m shares at 75p to raise £750,000 and will instead re-negotiate the terms and timing of the subscription.
  The partners have also agreed that the project should be postponed until the PEL is granted. Sino-Aus will be refunded the first tranche payment of A$5.4m less what has already been spent. Sino-Aus will deposit the funds into a short term investment instrument to allow a return to be generated. Wintask will leave its first tranche payment of A$0.6m in the JV.
  The reports by Parsons Brinkerhoff have been completed and once the PEL issues are resolved the project will be able to be advanced.
NORTHLAND CAPITAL PARTNERS VIEW: Disappointing developments for Altona Energy that will cause a delay to the advancement of the Arckaringa Coal Chemical Joint Venture. While the process of applying for a Petroleum Exploration Licence is fairly standard, the added complication of the partial overlap with Linc Energy’s PEL will make the process more problematic and extend the time frame for completion. The JV agreement may now be amended as will Sino-Aus’ subscription in Altona all of which adds to the uncertainty regarding the time line for advancement. Altona and its joint venture partners are now seeking to establish who the purchaser of Linc Energy is and to try to acquire the PEL from them.

Thor Mining (LON:THR) – CORP: Quarterly update
Market Cap: £1.7m; Current Price: 0.03p

Continues to examine potential acquisitions
  Thor Mining is planning a drill programme to test a magnetic anomaly located adjacent to Molyhil.
  During much of 2016 Thor has been assessing potential acquisitions. Several opportunities that offer near-term development with attractive capital and operating costs structures are being further evaluated.
  At the end of the quarter the Company had cash of A$307,000.
NORTHLAND CAPITAL PARTNERS VIEW: Thor Mining is continuing to assess a number of potential acquisitions and we look forward to further news in due course.

Holders Technology (LON:HDT) – CORP: Interim Results
Market Cap: £1.2m; Current Price: 28.5p
Interim revenue up 3.3%, losses reduced, cash improved

  Holders Technology, specialty laminates and materials supplier for printed circuit board manufacturers, and LED solutions provider to the lighting and industrial markets, announced Interim results for the six month period to 31 May 2016
  The company reported “a small improvement” in earnings, pre-exceptional items.  Total revenue rose 3.3% to £5.662m (2015: £5.479m).  Loss before restructuring items was reduced to £(68,000) compared to a loss of £(95,000) a year earlier.  Restructuring costs totalled £103,000 (none in H115) comprising employee termination costs and legal costs arising from an aborted transaction.  The reported loss at Pre-Tax level was £(171,000) compared to a H115 loss of £(95,000)
  Holders reported H116 PCB divisional revenue down 3.2% from £4.146m in H115 to £4.014m. The company reports that its German PCB division “experienced somewhat improved customer demand and achieved an increase in revenues”,  whereas “revenues from our smaller U.K. operation were adversely impacted by the discontinued distribution contract announced previously”.  PCB revenue was also impacted by the disposal in December 2015 of its interest in an Indian PCB joint venture
  Revenue from LED operations grew 23.6%, from £1.333m to £1.648m, with margin improvement from 31.1% to 32.3%. The company noted a contribution to growth from new products in its Components Division. Despite a 13% increase overheads due to additional sales, the level of losses in  LED activities was reduced to £(67,000) from £(109,000) a year earlier
  The company generated cash from operations of £0.293m (pre-tax), resulting in an improvement in period-end cash position of £0.726m compared to £0.443m at 30th November 2015 (H115: £0.511m).  There is no debt
  Holders Executive Chairman, Rudolf W. Weinreich, commented: “Results from both the PCB and LED divisions showed some progress. Our PCB divisions have further reduced their costs in order to remain competitive in challenging markets while our LED divisions have continued to grow their revenues and improve margins.  We continue to evaluate all possible routes to return the Group to satisfactory profitability”

Fri, 29 Jul 2016 08:59:00 +0100
VSA Capital Market Movers - Anglo African Agriculture Anglo African Agriculture: H1 Results & Strategic Review

Anglo African Agriculture (LON:AAAP), an African focused agribusiness 9.2%-owned by VSA Capital has announced its interim results for the six months to 30 April 2016.
• Revenue £821k, +19.9% YoY (H1 2015: £685k)
• Loss before taxation: £130k (H1 2015: £100k)
• Cash and cash equivalents as of 30 April 2016: £74k
• Strategic review launched; company now seeking a buyer or strategic partner

VSA Comment
Despite c20% revenue growth for the interim period, AAAP’s loss widened due to pressure on sales margins. The board of directors have now taken the decision to carry out a strategic review of the business with a view to selling, or bringing a strategic partner into the business.
AAAP has now entered an offer period in accordance with the City Takeover Code

Fri, 29 Jul 2016 08:51:00 +0100
Beaufort Securities Breakfast Alert: Herenica Resources, Keras Resources, Northcote Energy, Stellar Diamonds, ValiRx, BAE Systems, British American Tobacco, BT, Diageo, Domino's Pizza, Merlin Entertainments, Sky Markets

The FTSE-100 finished yesterday's session 0.44% lower at 6,721.06, whilst the FTSE AIM All-Share index closed 0.39% better-off at 754.19. In continental Europe, markets ended in the red due to losses in banking stocks. Investors digested a mixed set of corporate earnings released yesterday. France’s CAC 40 and Germany’s DAX declined 0.6% and 0.4%, respectively.
Wall Street
Wall Street ended marginally higher, as gains in technology stocks after better-than-expected earnings releases offset losses in telecom and energy stocks. The S&P 500 rose 0.2% in yesterday’s trading session.
Equities are trading mixed, as the Bank of Japan’s fresh stimulus measures disappointed the markets. The Nikkei 225 added 0.6%, despite the strengthening of yen. The Hang Seng was trading 0.7% down at 7:00 am.
Yesterday, WTI prices slid 1.9% to US$41.14 per barrel, while Brent oil prices dropped 1.8% to US$42.70 per barrel.

Consumer confidence in UK plunges in July
As per the latest survey from GfK, consumer confidence in the UK slumped to -12.0 in July from -1.0 in June, the sharpest m-o-m drop since March 1990. The significant decline was primarily due to increasing concerns about the country’s economic outlook among households and manufacturers after Brexit.

Company news

Herencia Resources (LON:HER, 0.03p) - Speculative Buy
Herencia announced that it completed the sale of Paguanta (zinc, silver, lead project) to an ASX co. Golden Rim. Net of some cash Golden Rim has already paid, Herencia will receive $0.8m today, $0.4m within 30 days and $50k within 60 days. Herencia will also receive $0.8m in Golden Rim equity if a mine is developed at Paguanta.

Our view: The Paguanta sale was dragging on and beginning to look like it might fall over. So this is good news for Herencia which will receive an injection of cash and can now focus on its flagship copper project, Picachos. We have a Spec Buy on Herencia.
Click here to request a call back from a broker regarding this recommendation.

Beaufort Securities acts as corporate broker to Herencia Resources

Keras Resources (LON:KRS, 0.85p) - Speculative Buy
Keras has published a quarterly update from its Grants Patch operation near Kalgoorlie. As a reminder, Keras has three gold projects in Australia, all based on tribute agreements (effectively lease agreements) where Keras does the mining and shares the revenues with the mining rights owner by way of tribute payments. Grants Patch is the first project being mined, next up is the higher grade Wycheproof, which will be followed by Lindsay’s. The longer term plan is to go underground, probably starting at the Prince of Wales deposit. In the period reported, operations were close to break even. Total operating costs were A$1,407/oz versus a gold price of A$1,687/oz however after paying the tribute, total costs were A$1,736/oz. Production was 2,763 ounces.

Our view: This is effectively Keras’ first quarter as a mining company (although the management team has considerable mining experience) and it is proving to be steep learning curve. That said, almost all mining operations have a ramp-up phase / optimisation phase when starting-up. Management expects future quarters to be cash generative as it implements various improvements - increased excavator and trucking capacity (more yellow goods), improved grade control, and renegotiated (lower cost) contracts with service suppliers. Mining is also moving to Wycheproof which has higher grades and a more favourable tribute agreement that Grants Patch. We have a Spec Buy on Keras.
Click here to request a call back from a broker regarding this recommendation.

Beaufort Securities acts as corporate broker to Keras Resources

Northcote Energy (LON:NCT, 0.03p) - Speculative Buy
Northcote published an update focusing on a newly signed gas offtake agreement at Shoats Creek. Enerfin Field Services will buy the gas from wells LM#14 and LM#20. Northcote and its partners must first install gas lines (gross cost $450k) and first gas revenues are expected from LM#14 (52.8% NRI to Northcote) in November.

Shoats Creek is Northcote’s main asset. It is conventional, shallow oil and gas production in Louisiana. The wells at Shoats Creek typically produce light oil and considerable quantities of gas which is currently not being sold. Current sales is oil-only from well LM#20 (where Northcote has a 15% net revenue interest) producing from the Frio formation. The Frio sand reservoir is softer than most (although not unconsolidated) but Northcote’s technical team has a good handle/expertise on its peculiarities. The other main producing formations at Shoats Creek are the Wilcox and Cockfield.

Our view: Gas sales will be a new and very significant source of revenue for Northcote going forward, so this is good news for shareholders. LM#14 (Northcote 53% NRI) will be tied in first for both oil and gas, followed by LM#20 for gas. Once LM#14 is producing, Northcote expects its Shoats Creek net production to increase by c.450%. Looking beyond LM#20 and LM#14, Northcote regards Shoats Creek as a valuable asset and where it plans to focus its resources. Shoats has three producing formations and multiple potential well sites. Regarding new wells, the unknown factors at this stage are funding (self-funded, new equity or RBL?) and working interest/net revenue interest on a well by well basis. Note that apart from the next 2 wells, Northcote has a 50% working interest (37.5% NRI) on all future wells. We have a Spec Buy on Northcote.
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Beaufort Securities acts as corporate broker to Northcote Energy

Stellar Diamonds (LON:STEL, 6.50p)
Stellar has signed earn-in agreements for its Baoulé kimberlite project in Guinea and over two new exploration licences it picked-up in Liberia. The earn-in partner is a Dubai based commodities group called Citigate Commodities Trading. At Baoulé, Citigate will invest $1.5m for 25%, a further $2m to get to 50% and fund a PFS to reach 75%. At the Liberian project phase 1 is $0.25m for 25%, $2m for the next 25% and $4m for a total of 80%. Both these agreements are subject to Citigate completing due diligence.

Our view: Assuming these JV agreements are executed (which we believe is probable) this is a very good result for Stellar. In the current funding environment, Stellar would find it difficult to fund these projects alone, especially now that it is focusing on developing the Tongo project in Sierra Leone. These earn-in agreements ensure Stellar retains significant exposure to both projects without the risk of a cash call.
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Beaufort Securities acts as corporate broker to Stellar Diamonds

ValiRx (LON:VAL, 7.0p) - Speculative Buy
ValiRx Plc, the life science company that focuses on clinical stage cancer therapeutic development, taking proprietary & novel technology for precision medicines towards commercialisation and partnering, yesterday announced that ValiSeek Limited, the joint venture between ValiRx and Tangent Reprofiling Limited has received notification of a New Zealand Patent Grant Allowance. Notification from the New Zealand Patent Office advises that the patent, granted in the US as patent US9072743 on 14th May 2015, has received allowance of grant in New Zealand. This patent covers both the formulation of VAL401 and its use as a treatment against hormone-related cancers, including lung cancer.

Our view: A positive announcement. This is the first non-US patent grant allowance received for the VAL401 project and effectively provides an international validation of the programme to support world-wide commercialisation. ValiSeek was formed to progress the drug through its remaining preclinical development and towards Phase II trials for the treatment of lung cancer and other oncology indications. The SEEK Group, of which Tangent Reprofiling Limited is part, was founded in 2004 and brings safe and low costs medicines to the patients as quickly as possible. It does this by modifying existing medicines to improve their efficacy, by changing the indication but keeping the dose and dosing regime the same or by creating a new medicine when the previous options are unavailable. Yesterday’s news represents another positive for ValiRx and Beaufort retains its Speculative Buy recommendation on the shares.
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Beaufort Securities acts as corporate broker to ValiRx

BAE Systems (LON:BAE, 538.0p) - Buy
BAE Systems declared results for the half year ended 30th June 2016 (H1 2016). During the period, revenue increased to £8,278m from £8,001m in H1 2015. EBITA improved to £849m from £776m in H1 2015. Consequently, profit improved to £418m from £398m in H1 2015, leading to an EPS of 12.9p compared with 12.3p in the same period last year. Order backlog stood at £36.3bn (H1 2015: £37.3bn). Net debt at the end of period stood at £2,036m compared with £1,422m as of 31st December 2015. On the operational front, BAE Systems won a contract worth £118m to build engineering and training facilities in the UK for F-35 Lightning II aircraft. The company was awarded three contracts worth £300m in total to support the UK Ministry of Defence (MOD)'s fleet of Hawk fast jet trainer aircraft until 2020. BAE Systems won a £472m UK MOD contract extension to the Type 26 frigate demonstration phase. In April 2016, Eurofighter partner, Leonardo, signed a contract to supply 28 Typhoon warplanes to Kuwait, which is expected to result in airframe manufacture, capability upgrade and Electronically Scanned radar integration work valued at approximately £1bn for BAE Systems. The company was awarded a £183m contract to provide three gun systems and a trainer for the Royal Navy's Type 26 frigate. The MBDA joint venture, in which BAE Systems has a 37.5% interest, won a number of new orders, of which BAE Systems' share stood at £462m in H1 2016. In July 2016, BAE Systems entered into a 10-year partnership arrangement with the UK MOD, expected to be worth £2.1bn to support the UK Typhoon fleet. The company declared a dividend of 8.6p, up 2% from H1 2015.

Our view: BAE Systems delivered strong performance in H1 2016 despite ongoing political and economic uncertainties. The company recorded higher revenue and profit levels in H1 2016 as demand for its services remained solid. BAE Systems witnessed an increase in military spending in some of its biggest markets, including the US and UK, after a long period of decline. Defence spending was supported by Western military operations against the Islamic State in Syria, Iraq and other locations, and increased Russian sabre rattling. The company secured several contracts in H1 2016 and enjoys a solid order backlog. BAE Systems remains committed to shareholders and increased the dividends payable. The company informed that the UK's decision to leave the EU would create uncertainty, but not impact its near-term business. We believe BAE can secure more high-profile contracts and is well placed with substantial resources and funds to deliver long-term growth. We maintain a Buy rating on the stock.
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British American Tobacco (LON:BATS, 4,782.50p) - Buy
British American Tobacco (‘BAT’), one of the world’s largest tobacco company, yesterday announced its half year results for the 6 months ended 30 June 2016 (H1 2016). During the period, revenue advanced by +4.2% at actual and +7.8% at constant exchange rate basis to £6,669m compared to the same period last year (H1 2015). The increase was due to strong volume performance and good pricing, part offset by the adverse foreign currency movement. On an organic basis, revenue grew at +6%. Due to -2.4% fall in operating margin on a reported basis to 36.8%, along with adverse foreign currency impact, pre-tax profit fell by -2% to £3,426m. Basic earnings per share, benefited from the acquisition and disposal by the Group's associate Reynolds American Inc., has improved by +1% to 143.8p. On the operational front, cigarette volume from subsidiaries increased by +3.4% to 332 billion, or +2.1% organically, driven by strong growth in Asia-Pacific and EEMEA (Eastern Europe, Middle East, and Africa). The volume of its five Global Drive Brands (Dunhill, Kent, Lucky Strike, Pall Mall and Rothmans) expanded by +10.8% and its UK Next Generation Products (such as e-cigarettes) has also grown. BAT’s Chairman, Richard Burrows commented “the business has delivered strong organic growth in the first six months of the year. With profit growth weighted to the second half of the year, we remain confident that we will deliver another year of good earnings growth at constant rates of exchange.” The Group declared an interim dividend of 51.3p per share, up +4%, which will be paid on 28 September 2016.

Our view: British American Tobacco delivered a pleasing result for the first half of 2016, despite the continuing pressure from volatile currencies. Assuming current exchange rates are maintained, the Group expect weak post-Brexit Sterling will create +4% translational tailwind for operating profit, while also contributing a -6% transactional headwind, for the full year. BAT increased share in its key markets (represent over 75% of the Group's volume) by +0.3%, through strong volume growth from Global Drive Brands. Its Next Generation Products also performed well with Vype now available in six markets, and iFuse, its first tobacco heating product, performing ahead of expectations in Bucharest, Romania. Having recently completed the acquisition of Ten Motives, a UK e-cigarettes company, BAT has strengthened its access to the traditional grocery and convenience channels in the UK vapour market. The Group continued to make significant R&D investment in Next Generation Products, which currently range from e-cigarette, those containing Licensed Medicinal Products (a nicotine product licensed as a medicine) and Tobacco Heating Products (an electronic device that heats a nicotine-containing liquid into an inhalable vapour). One of Licensed Medicinal Products, Voke, a nicotine inhaler, is plan to be launched in the UK later during 2016. As an increasing number of countries adopt new and various means in order to reduce domestic cigarette consumption, we believe BAT’s continuous investment in transforming its existing product portfolio is correct way to move the business forward. With its Board confidently forecasted “good earnings growth” for the full year along with an increased dividend, Beaufort reiterates its Buy rating on the stock.
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BT Group (LON:BT.A, 414.35p) - Buy
BT Group announced results for the first quarter ended 30th June 2016 (Q1 2017). Reported revenue for Q1 2017 increased 32% y-o-y to £5.8bn. EBITDA surged 24% to £1.8bn and operating profit rose 14% to £930m. Consequently, pre-tax profit increased 13% to £717m. EPS stood at 5.9p, down 3% from Q1 2016. Net debt at the end of the period stood at £9.6bn compared with £5.8bn at the end of Q1 2016. Normalised free cash flow increased to £448m from £106m in Q1 2016. The company has planned significant governance changes to further increase the independence and transparency of Openreach.

Our view: BT has begun FY 2017 positively and remains on track to meet the targets for the year. The company recorded an increase in revenue and profit margins, along with strong cash flow generation. Most of BT’s divisions performed better than Q1 2016. The company made strong progress in the integration of mobile phone group EE, along with business reorganisation. EE performed strongly on both financial and operational aspects. BT plans to roll out further fibre broadband in the coming months as well as 4G through the Emergency Services Network contract. The company aims to make these services readily available and deploy a new generation of ultrafast broadband. We are buoyed about BT’s progress in the quarter and look forward to further developments. Meanwhile, we maintain a Buy rating on the stock.
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Diageo (LON:DGE, 2,192.0p) - Buy
Organic results improved with volume growth of 1.3%, net sales growth of 2.8%, and operating profit growth of 3.5%. Reported net sales declined 3.0% as organic growth in each region and acquisitions were more than offset by adverse exchange and disposals. Operating profit grew 1.6% with organic growth, lower exceptional operating charges and acquisitions partially offset by adverse exchange and disposals. Free cash flow continued to be strong at £2.1 billion, up £134 million on last year. Operating cash flow was £2.5 billion. Basic EPS of 89.5 pence was down 6% as lower exceptional income reduced basic EPS by 6.1 pence. Pre-exceptional EPS increased 1% to 89.4 pence. The board recommended a final dividend increase of 5% bringing the full year dividend to 59.2 pence per share.

Our view: This is a good set of results delivering what Diageo set out to achieve this time last year and demonstrating momentum. This latter point we highlighted when selecting Diageo as one of our Tips For The Year. This better performance reflects the work done to strengthen the big brands through marketing and innovation, as well as expanding the distribution reach. Diageo’s six global brands and the important US spirits business are all back in growth and the Company has seen a significant improvement in the performance of the scotch and beer portfolios. These results position Diageo to deliver a stronger performance in FY17. The Company is confident of achieving its objective of mid-single digit top line growth, and in the three years ending FY19 delivering 100bps of organic operating margin improvement. We retain our Buy stance.
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Domino's Pizza (LON:DOM, 385.90p) - Buy
The Company has issued a strong set of interims for the 26 weeks to 26th June 2016. The UK market continues to underpin growth with eleven successive quarters of double digit LFL sales growth. A successful new opening store programme saw a record 31 (2015: 24) stores opened in the period and average sales per address in new stores is 24% ahead of the same period last year. Domino’s continued the success of digital investment programme in the UK with e-commerce total system sales ahead by 25% with mobile sales up 35% and mobile sales contribute 62% of online sales. Importantly, the Company reports a continued increase in franchisee profitability, with EBITDA performance up from 15.1% to 15.4%. Encouragingly, the Company report improving performances in international businesses with ROI delivering 12.7% like-for-like sales growth. The Swiss mature stores are showing good growth, with like-for-like sales up 11.7%, and progress in new and immature store portfolio. And the German investment performance is in line with expectations. Domino’s provided an update on its Nordic expansion, with a strategic investment of £24.0m to acquire minority interests in Domino's Iceland, Norway and Sweden, and the Company regard this as an exciting opportunity in attractive growth markets to further grow the Domino's brand. Finally, Group underlying operating profit and EPS up by more than 20% and strong operating cash conversion at more than 93% of EBITDA - net debt of £10.9m following £46.6m payments for international investments and £15.3m of share buy backs.

Our view:Another set of excellent figures with outstanding cash conversion, continued growth from potential increase in outlets and international growth and leading e-commerce platform justifies the high rating, but lower than Just Eat: we retain our BUY Recommendation.
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Merlin Entertainments (LON:MERL, 467.0p) - Buy
Merlin delivered its interim results to end-June 2016 yesterday. Group revenue grew by 5.3%, reflecting a strong contribution from new accommodation and attractions and a positive translational impact from non-Sterling earnings, partially offset by a slight decline in like-for-like revenue. Continued growth in LEGOLAND Parks, with revenue up 11.1%, with revenue at constant currency growing by 5.7%, and a further contribution from new accommodation. Midway Attractions delivered 7.1% revenue growth, with revenue at constant currency grew by 5.3% despite a like for like revenue decline of 0.2%, reflecting a strong contribution from new attractions. Like-for-like performance continues to be impacted by a challenging city centre tourist market, with heightened security concerns and the residual effect of stronger Sterling on the London Division. As expected, the Resort Theme Parks Operating Group (‘RTP’) continued to experience lower visitation at Alton Towers following the accident in June 2015. RTP revenues in the period declined by 7.0%; revenue at constant currency was down 9.1%, reflecting a 10.2% decline in like for like revenue offset by a contribution from new accommodation. Half year profit before tax increased to £50m (£49m) as a result of growth in EBITDA offset by an increased depreciation charge related to continued investment across the estate. Adjusted EPS rose by 3.2% to 3.6p, while dividends per share were lifted to 2.2p from 2.1p in the comparable period.

Our view:Much as expected, few surprises, but still an excellent, high quality vehicle. Merlin yesterday detailed a resilient trading performance despite challenging market conditions, a strong contribution from New Business Development, progress against each of the 2020 strategic milestones and continued confidence in its strategic outlook. Having built an exceptional diversified portfolio, management’s focus on delivering shareholder returns makes Merlin one of its sector’s highest quality plays. Based on 2016E earning of 20.2p/share followed by 22.8p the following year, forward multiples of 22.7x and 20.1x (or 12.7x and 11.5x EV/EBITDA) are still not expensive relatively speaking, although shareholders will be aware that a stellar post-Brexit share price performance now leaves only 10% to 15% upside still to go for. Beaufort retains its Buy recommendation on Merlin Entertainments.
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Sky (LON:SKY, 904.0p) - Buy
Sky declared results for the year ended 30th June 2016 (FY 2016). During the period, revenue increased 20% y-o-y to £12.0bn. The UK and Ireland recorded 7% growth in revenue to £8.4bn. Germany and Austria reported a 12% jump in revenue to £1.5bn. Italy registered a 2% rise in revenue to £2.1bn. Operating profit rose 1% to £977m. Adjusted operating profit surged 12% to £1.6bn. Pre-tax profit dropped to £752m from £1.5bn, mainly due to one-off gains from sales of stakes in ITV and the National Geographic Channel in FY 2015. EPS dropped to 39.0p from 79.1p in FY 2015. Adjusted EPS rose to 63.1p compared with 56.0p in FY 2015. Net debt as of 30th June 2016 stood at £6.2bn (30th June 2015: £5.1bn). Sky remains on track to achieve the current synergy target of £200m by 2017 and extended it to £400m by 2020. The company plans to launch an exclusive series of world-leading cookery show MasterChef in Germany. Sky is expanding its European streaming services with the launch of Sky Ticket in Germany, NOW TV in Italy and the NOW TV Combo in the UK. The company would also launch Ultra HD services in the UK and Germany. Sky Kids app is set to launch across Europe following the success in the UK and Ireland. Sky proposed a final dividend of 20.95p, taking total dividend for the year to 33.5p, up from 32.80p in FY 2015.

Our view:Sky performed well in FY 2016. The company expanded its business into new customer segments and markets. Sky developed more products and services to attract new customers. Over the past 12 months, Sky added 808,000 new customers and sold 3.3 million products. The company continued its strong performance in the UK and Ireland, with revenue crossing £8bn. Sky recorded it’s first-ever full-year operating profit in Germany and Australia, driven by a focus on improving customer proposition. The company increased the dividends payable to shareholders, marking the 12th consecutive year of dividend growth. Sky’s focus on operating efficiently and effectively has resulted in lower costs which have allowed it to make investments. Sky has invested in a new range of products in FY 2016, including the high-end Sky Q (links different screens across the home) and the Sky Now TV Combo (offers rolling bundles of internet, phone and pay-TV channels without long-term contracts). The company plans to expand its services across Europe to strengthen its hold in the market. In light of this argument, we maintain a Buy rating on the stock.
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Economic news
UK house prices

As per Nationwide, house prices in the UK rose 5.2% y-o-y in July compared with 5.1% in June. The markets expected a 4.5% rise in prices. On an m-o-m basis, prices increased 0.5% in July against 0.2% in June.
Germany unemployment change
The number of people without a job in Germany dropped by 7,000 to 2.68 million in July, the Federal Labour Agency said yesterday. Economists had forecasted unemployment to drop by nearly 4,000 for the month. The seasonally adjusted unemployment rate remained at 6.1% in July, in line with the market expectations.
Eurozone Consumer Confidence
As per data from European Commission, the Eurozone’s consumer confidence fell to -7.9 in July from -7.2 in June, in line with the preliminary estimates.
Germany CPI
Consumer price inflation (CPI) in the Germany rose 0.3% m-o-m in July, after a 0.1% increase in June, as per the estimates published by Destatis. The markets expected a 0.2% rise in prices. On y-o-y basis, consumer prices increased 0.4%, following a 0.3% increase last month. The markets expected a 0.3% rise in prices.
US initial jobless claims
Initial jobless claims in the US increased 14,000 to 266,000 in the week ended 23rd July, the Labor Department reported yesterday. Economists expected the claims to increase to 262,000. The four-week moving average fell 1,000 to 256,500 last week, the lowest level since April.

Fri, 29 Jul 2016 08:32:00 +0100
Did the BoJ hear us? FTSE 100 Index called to open +5pts at 6725, increasingly looking like it is turning over after a marked slowing in its Brexit bounce. Of note are falling highs since Wednesday’s 12-month peak which, coupled with falling lows since mid-week, puts the index in a bearish 3-day falling channel. This adds to the negative divergence we have been highlighting (rising highs on index, falling highs on RSI indicator). Bulls want to get back above 6750 while Bears want to see 6700 to confirm a reversal. Updated watch levels: Bullish 6755, Bearish 6705.
A neutral open comes after a mixed Asian session with the Bank of Japan failing to deliver what greedy markets wanted - more stimulus. We did ask whether it would do little or even hold off until September, like the ECB, in order to see what the BoE does next week and allow the Japanese government to introduce the fiscal stimulus it has announced. Some say a limited offering suggests the BoJ has run out of options. But just because it didn’t move overnight, doesn’t mean it won’t move later. Patience please.
Japan’s Nikkei is now positive in spite of the Yen strengthening, the USD/JPY currency cross maintaining its 3-month falling channel. Australia’s ASX is also positive despite oil prices continuing to leak and a weaker USD Basket failing to help the key commodity space. Even Gold! Note Banks/Financials/Insurance helping both bourses after Japanese rates weren’t taken further negative.
US bourses closed mixed ahead of today’s GDP print with the Nasdaq the outperformer after Facebook and Apple gave positive earnings updates. Dow component Ford, meanwhile, warned it may not meet its FY guidance after Q2 profits fell short of forecasts. Post-close we had results from Amazon and Alphabet which continued the tech earnings bonanza and should help paint a positive picture for US equities into the weekend.
Gold has ended up lower following some overnight volatility, with a stronger Yen winning out against the US Dollar. In breaking news, the Bank of Japan has just said that ‘QQE and negative rates have not reached their limit’ which could help stem a sell-off in USD/JPY and spell a bit more downside for Gold.
Brent and WTI are still trending down as the US gasoline glut continues and concerns surface about slowing global growth hitting demand. Bears eyeing potential downside targets of $41.75 and $40.50 respectively.
In Focus today will be the fallout from the overnight BoJ policy update which delivered fall less than markets were expecting in terms of stimulus (greedy markets always wanting more!). We’ve also got Eurozone and US Advance GDP for Q2 today which could shift sentiment into the weekend, along with a slew of important inflation data.
French Consumer Price Inflation is seen falling in July - again, less buying pressure to push up prices. A similar story is expected in Spain and for Eurozone as a whole  with the key core reading edging back on an annual basis along. GDP likely did the same in Q2.
This afternoon, US GDP Annualised (QoQ) is seen on a roll with consensus of 2.6% against a reading of 1.1% in Q1. Personal consumption also seen up which is all good for the US economy and could well bring Fed hawks out of their nests (even though they won’t raise rates just like that, they might start preparing markets…) so watch US equity markets around that one. Any inkling of cheap money for not much longer  and all that…
Rounding off the afternoon we’ve got US Chicago PMI which looks to be pulling back yet comfortably above the 50 watershed that separates growth from contraction. With Uni of Michigan Sentiment looking for a break back above 90, it looks like it’s all go in the US! The Baker Hughes Rig Count is set to kick the oil price in whichever direction it sees fit with its counting game. Here endeth July.

Fri, 29 Jul 2016 08:31:00 +0100
DNO/Gulf Keystone DNO/Gulf Keystone Petroleum
It has just been announced that DNO has made a cash and shares bid for GKP worth around $300m. The bid is hostile and has been presented to the GKP board without indications of any formal discussions. Obviously with only the DNO statement to work with investors should sit tight at least until GKP wake up and make a comment.
The announcement suggests that the cash element will ensure that bondholders get out a a premium to par which is not on offer under the current restructuring and that the equity element enables shareholders to remain exposed to Shaikan under DNO ownership, I hope that the last statement was written rather tongue in cheek…
As one would expect the usual business school lingo is deployed all over the announcement viz ‘unlocking of operational synergies’ and the deal will  ‘ create further scale’ which are undoubtedly true but will probably not read well at GKP HQ this morning as one must presume that in the last two years of trying to find a partner DNO must have been at the top of the list

Fri, 29 Jul 2016 08:30:00 +0100
3 Trends in Wastewater Treatment Biotechnology

Eoin Treacy's view
This sector was the darling of the investment community until about a year ago when Biogen had a disappointing quarter, Valeant’s business model blew  up shortly afterwards and despite the fact it is not a biotech company, the sector was hit by the same selling pressure. When politicians took aim at the high charges of drugs and new treatments, it contributed to additional selling pressure.

3 Trends in Wastewater Treatment
Thanks to a subscriber for this article by Ralph Exton at GE. Here is a section:

It is critical that we seek to spur increased adoption of water reuse – a strategy that allows the world to take advantage of a water source constantly replenished every day regardless of drought or climate change. Treated municipal wastewater is a virtually untapped resource. In North America, 75 percent of wastewater is treated (16 trillion gallons of water every day), but less than 4 percent of that water is reused. It’s a gap that needs to be closed.
The vast majority of treated municipal effluent is discharged into a local receiving stream. Technology exists to take this wastewater and treat it to a quality suitable for other, non-potable purposes: agricultural needs, groundwater recharge, industrial applications. In fact, wastewater can be treated to a quality suitable for drinking (if we can get past the “ick” factor of the toilet-to-tap water recycling concept).
Historically, policy has focused on effluent quality, pushing for discharge limits to protect the environment. This is important – and necessary. However, policy and regulation need to catch up with the growing acceptance of water reuse and begin to structure guidance around its implementation. It’s starting to happen in several corners of the world. For example, Saudi Araba increased its water tariff to encourage water reuse. The United Arab Emirates is opting for stronger conservation and reuse rather than investing in desalination technologies, which are effective but expensive.

Eoin Treacy's view
Fresh water is a precious commodity and, as with any naturally occurring resource, is unevenly dispersed globally. Nevertheless it is an expensive resource to develop infrastructure for and, because of its integral role in fostering life, the care that needs to go into making it potable means water represents a cost for the majority of households.

Macau's Chief Sees 2017 Economy Returning to Growth on Casinos
This article by Daniela Wei for Bloomberg may be of interest to subscribers. Here is a section:

“Macau’s gaming industry and the whole economy will continue to adjust, but the decline may shrink to 7.2 percent this year and even resume growth in 2017,” Chief Executive Fernando Chui said in a televised session of the city’s legislature Wednesday. “It’s a good time for Macau to re-position after a 25-month gaming revenue drop.”
Gross domestic product in Macau declined 20.3 percent in 2015, worsening from the 0.9 percent drop the year before, as the world’s largest gambling hub was hurt by China’s anti-corruption campaign that scared off high-rollers. The casino industry, which accounts for half of Macau’s GDP, is in the midst of a casino building boom to boost revenue from mainstream gamblers and tourists.
Recreational Gamblers
Macau’s government is working with its six casino operators to “improve synergies” between gaming and non-gaming pursuits, Chui said. The city is trying to reduce its reliance on gambling and is targeting to raise the proportion of casinos’ non-gaming revenue to 9 percent by 2020 from 6.6 percent in 2014.

Eoin Treacy's view
The outlook for the gaming sector and China are inextricably linked. Macau represents a much larger gambling market than even Las Vegas and that city also depends on the largesse of Chinese high rollers to drive profitability. With the outlook for growth improving in Macau that may be an initial sign that the Chinese tourist market is still healthy.

Fri, 29 Jul 2016 08:28:00 +0100
Oil price, Genel, Sundry-BP, Statoil, Total, Shell, Repsol, Weir Group, Tullow. And finally... Oil price
The oil price continues to drift off, with only the inventory stats seeming to influence at the moment and they are all bearish. Yesterday the EIA reported a build of 1.7m barrels against a forecast of a draw of 2m, teenage scribblers really not on the case at the moment. Gasoline built by 462/- barrels which wasnt as bad as expected but refinery rates are up and the market is not happy, it will get worse before it gets better. It will be interesting to see tomorrows data from the CFTC, it looks a bit as if money managers are increasing their short positions.
About the only thing going for Genel at the moment is that they are receiving full payments from the KRG at the moment meaning that they can progress investment on most fronts. Unfortunately the new, lower production guidance announced recently only brings down revenues and compromises value.
This week has seen the international oil majors produce Q2 numbers and it has been a mixed bag. So far BP and Statoil have missed their forecasts while Shell was a mixed bag although with a much better production figure, outwith BG. Total seem to be the star of the show, beating the whisper with out put and realisations up whilst beating their own target on cost savings. Repsol also beat the whisper and increased output not just from Talisman but also saw falls in downstream margins like the others.
Weir Group maintain guidance but the numbers were disappointing, particularly for a share that has doubled this year on a bit of a promise. Keith Cochrane has resigned as CEO and is to be replaced by current CFO Jon Stanton, this is exactly how the board played it when Keith arrived, I wonder if any thought was given to an external appointment of the next CEO?
And Tullow reported better than expected numbers yesterday and defied the doubters by announcing that the first shipment from TEN is being prepared and that Shell will take 650/- barrels in August. I remain positive on Tullow and consider the previous high of around 280p to be perfectly possible.
And finally…
The US PGA starts today and the field seems to be wider open that it might have been after recent results, ie it’s not the four glamour boys who have pulled out of Rio who lead the way.
And Celtic went to Astana last night and came back from 1-0 down to snatch what might be a useful draw.

Thu, 28 Jul 2016 11:27:00 +0100
Today's Market View - Anglo American, BHP Billiton, Caledonia Mining, Herencia Resources, Gemfields, Savannah Resources Anglo American (LON:AAL) – Interim Report highlights stronger balance sheet
BHP Billiton (LON:BLT) 977 pence, Mkt Cap £57.3bn – Samarco update
Caledonia Mining (LON:CMCL) – Increased ore resource at the Blanket mine
Herencia Resources (LON:HER) – Herencia complete sale of Paguanta in nick of time
Gemfields (LON:GEM) BUY, Target 82p – shares look good value following pullback in stock
Savannah Resources (LON:SAV) – Exploration underway at lithium projects in Finland

Tesla opens Gigafactory, states factory is two years ahead of schedule
• Video of Tesla’s Gigafoactory shows the factory is tooled up and ready to go in a matter of weeks according to a BBC report
• The $5bn factory which has $2bn of funding from Panasonic is not scheduled for full production till 2020 and will have the largest physical footprint of any building in the world.
• Panasonic will work on cell construction on one side of the factory before handing the cells over to Tesla for incorporation into its own battery packs
• Elon Musk reckons the scale of the factory should cut battery costs by 30%.
• We reckon battery manufacturing is entering a new era of innovation and development and we expect Tesla’s new batteries to be better, more reliable, longer lasting thank existing lithium batteries.
• The plant aims to produce 35GWh of battery power by 2018 more than total global battery production in 2014.  Production should continue to grow to 150GWh.  Improvements to battery capacity could lead to incremental growth in the plant’s per GWh capacity in future years.

Dow Jones Industrials   -0. 01% At 18,472  
Nikkei 225   -1.13% At 16,477 -        Japanese stock are up today on press reports the BoJ will issue a Yen 28tr ($268bn) stimulus package
HK Hang Seng   -0.20% At 22,174  
Shanghai Composite   +0.08% At   2,994  
FTSE 350 Mining   +1.71% At 11,822  
AIM Basic Resources   +0.41% At   2,255 –  AIM resource stocks rise 48% since the January low

Miners pick up on the back of stronger metal prices driven by a fall in the US$ index as chances for the Fed to hike rates before year end remain below 50%.
Brent is flat this morning following a sharp decline on Wednesday following an unexpected increase in US crude stockpiles last week.
Sovereign bond yields finished lower yesterday.

US – In line with market expectations the Fed left rate unchanged at 0.25-0.5% while leaving the door open for a potential hike in one of the three remaining meetings scheduled for this year.
• The central bank pointed out that near-term risks to the economy have subsided, consumption was strong and the labour market regained momentum following a poor May report.
• Overall, “the labour market strengthened and that economic activity has been expanding at a moderate rate,” the statement read.
• Chances for a rate hike have been little changed hovering around 50% that the Fed will tighten before year end.
• On a separate note, durable goods orders fell more than forecast coming in below 0 for a second consecutive month in Jun and capping what have been a weak quarter for capital and durable goods.
Date Index Period Actual Expected (Bloomberg) Previous
Tuesday S&P/CS Property Prices May -0.1%mom/5.2%yoy 0.1%mom/5.5%yoy -0.2%mom/5.4%yoy
  Consumer Confidence Jul 97.3 96 97.4
  - Current Situation Jul 118.3   116.6
  - Expectations (next 6 months) Jul 83.3   84.6
  New Home Sales Jun 3.5%mom 1.6%mom 0.0%mom
Wednesday Durable Goods/Core Jun -4.0%mom/-0.5%mom -1.4%mom/0.3%mom -2.8%mom/-0.4%mom
  Capital Goods Orders Jun 0.2%mom 0.2%mom -0.5%mom
  FOMC Rate   0.25%-0.50% 0.25%-0.50% 0.25%-0.50%
Thursday Weeklyt Jobless Claims     263k 253k
Friday GDP (1st reading) Q2  2.6%qoq 1.1%qoq
  Core PCE     1.7%qoq 2.0%qoq
Source: Bloomberg    

Germany – Inflation reports coming from different states point to an acceleration in inflation rates in Jul.
• Nationwide numbers are due later today.
CPI: 0.2%mom/0.3%yoy forecast and 0.1%mom/0.3%yoy in Jun.
• A separate report showed unemployment continued to fall in the largest European economy marking the 10th consecutive monthly decline.
• Jobless rate stood at 6.1%, unchanged on the previous month.
• Central bank President reiterated that growth in Gemrany will pick up in the current quarter and that Brexit has not changed the outlook.
• Economic growth accelerated in Q2 to 0.6% from 0.4% in Q1.

UK – economy grew faster than forecast before Brexit vote (Bloomberg)
Jul house prices post a 0.5%mom increase, although Nationwide warns of “softening ahead”.
• The increase took the annual increase for home average prices to 5.2%yoy, a little stronger than in Jun.
• Jul survey is reported to have been based on prices at the “mortgage offer stage” which may underestimate the effect of referendum and “may not be fully evident in Jul’s figures”.

Japan - Helicopter money – BoJ announces larger than expected stimulus
• Japan’s prime minister is compiling a stimulus package of $265bn to reflate the economy.
• Central banks are reported to be adding some $180bn to the global economy every month
• The stimulus should be good for equities and eventually raise inflation

Italy – Consumer confidence bounced back in last month breaking the downward trend recorded since the start of the year while manufacturing sentiment hit the highest level since Jan.
• Consumer confidence:111.3 v 110.2 in May and 109.2 forecast.
• Manufacturing sentiment: 103.1 v 102.9 in May and 102.0 forecast.
• Despite positive Jun numbers, as previously highlighted by Markit, sentiment and activity in manufacturing and services sectors   “quarterly average was the lowest” in over a year while “business confidence towards the outlook softened further, suggesting GDP growth has eased from the 0.3%qoq seen in Q1/16”.

Turkey – Jun numbers show a 41% decline in trourist traffic marking the single worst monthly drop on record.
• Lower tourist numbers were attributed to increased number of terrorist attacks and a fall out with Russia which led to a 88% drop in people traveling to the country for a holiday.
• Tourism accounts for voer 10% of the nation’s GDP.
• Given the failed coup in Jul, numbers are likely to fall further through summer.

US$1.1099/eur vs 1.0994/eur last week.    Yen 104.76/$ vs 105.54/$.    SAr 14.240/$ vs 14.280/$    $1.318/gbp vs $1.311/gbp.   
0.754/aud vs 0.749/aud.    CNY 6.657/$ vs 6.671/$. 

Commodity News
Precious metals:
Gold US$1,342/oz vs US$1,320/oz last week
Gold ETFs 64.3moz v 64.2moz last week –
Platinum US$1,149/oz vs US$1,096/oz last week
Palladium US$706/oz vs US$689/oz last week
Silver US$20.34/oz vs US$19.60/oz last week
Base metals:   
Copper US$ 4,873/t vs US$4,896/t last week –
Aluminium US$ 1,602/t vs US$1,598t last week –
Nickel US$ 10,555/t vs US$10,355/t last week – Sherritt reckons lenders will defer payments on$1.6bn of debt on its Ambatovy mine in Madagascar by the 5 August deadline.
• Sherritt reckons the industry needs a long term nickel price of $17,600-20,000/t to sustain the industry.
Zinc US$ 2,188/t vs US$2,221/t last week – zinc supply / deficit expected to rise to 221,000t from 25,000t in Q4 according to Reuters survey.
• Zinc futures prices are up around 50% this year
Lead US$ 1,810/t vs US$1,829/t last week
Tin US$ 17,765/t vs US$17,745/t last week –

Oil US$43.4/bbl vs US$44.6/bbl last week
Natural Gas US$2.668/mmbtu vs US$2.676/mmbtu last week – US raising its share of LNG production as Shale Gas producers add to global production
Uranium US$26.25/lb vs US$25.50/lb last week –

Iron ore 62% Fe spot (cfr Tianjin) US$58.0/t vs US$56.4/t – Chinese iron ore miners are complaining that hundreds of domestic iron ore mines have been forced to close.
• They accuse Australian producers of dumping iron ore into China in order to squeeze them out of business.
• We feel sure that Australia’s iron ore majors ship in accordance with demand.  Chinese producers need to understand the reality of being higher cost producers.
Rio Tinto reckon around 125mt of Chinese iron ore was displaced by imports last year representing around 25% of total domestic production.
• Many local producers face the reality of rising costs, falling grades / quality and lack of investment in ageing iron ore mines which can not compete with better quality and lower cost imports.
• It is likely that China will look to support some of these mines but will also continue to let the smaller enterprises go to the wall.

Steel – China is dedicating more funds to enable steel producers rationalise production and meet targets of capacity cuts of 45mt this year and 140mt by 2020.
• China currently produces a surplus 300mt pa and has so far achieved around a third of its planned cuts for this year.

Thermal coal (1st year forward cif ARA) US$62.0/t vs US$60.3/t last week – India state ports received 27.2mt of thermal coal from April to June up 3.8% yoy (Platts)
• Coking coal shipments fell 3.7% to 13mt

Lithium – Airbus is working with FAA for approval to use lithium batteries in its A350 aircraft

Tungsten - APT European prices $180-190/mtu vs $175-185/mtu on last week –

Company News

Anglo American (LON:AAL) 849 pence, Mkt Cap £10.95bn – Interim Report highlights stronger balance sheet
• Anglo American reports that the company is on course to reduce levels of net debt to below US$10bn by the end of 2016.
• At 30th June 2016, the net debt has already been reduced from US$12.9bn at the start of the year to US$11.7 billion reflecting the impact of US$1.1bn of attributable free cash flow.
• The US$1.5bn of cash disposal proceeds from the sale of the Brazilian phosphate and niobium businesses to China Molybdenum should be received during the second half of 2016.
• The company also highlights the “significant reduction in inventories at De Beers [down $0.5bn from $1.5bn at the start of the year], gains from the bond buy-back process and falling capital expenditure” (capex down to US$1.2bn vs H1 2015 – US$2.0bn) as important factors in bringing down its debt levels.
• Further asset disposals, including the group’s nickel business and the Moronbah and Grosvenor metallurgical coal operations, are progressing though “Any final decisions on sale will depend on value.”
• Based on weaker than expected commodity prices, the Moronbah - Grosvenor operations have, incurred impairment charges of US$1.2 billion “to reflect management’s best estimate of future metallurgical coal prices.”
• EBIT of US$1.38bn during the half year is dominated by the contribution ($585m or 42%) of De Beers, with the iron ore/ manganese operations (US$390m), coal (US$160m), platinum (US$134m) and copper (US$113m) all making significant contributions. Among the operating divisions, only the nickel business generated a loss (US$12m).
• The dominance of De Beers is further underlined by its US$379m (54%) contribution to the total US$698m of underlying earnings.
• The Minas Rio iron ore operation in Brazil continues to ramp up production, with a 128% increase in output to 6.8mt. The company comments that “The constrained pit and ongoing licence processes have resulted in lower than anticipated quality run-of-mine material. A provisional approval has been granted for the next phase of licencing which has allowed immediate access to the next tranche of reserves.” The company has now revised its 2016 production guidance for Minas Rio down to 15-17m tonnes from 15-18mt.
Conclusion: Anglo American has had a mixed first half on the operational front but has achieved some success in implementing debt reduction and with its disposal programme underway is on track to bring levels of net debt below US$10bn by the end of the year.

BHP Billiton (LON:BLT) 977 pence, Mkt Cap £57.3bn – Samarco update
• BHP Billiton reports that it will “recognise a provision in the range of US$1.1 billion to US$1.3 billion” to fund its 50% share of the Framework Agreement relating to setting up the Foundation to fund compensation and remedial work relating to the failure of the tailings dam at Samarco in Brazil.
• “The associated income statement charge will be recognised as an exceptional item in the June 2016 half-year, together with direct cost of approximately US$100 million (post tax).”
• Billiton has also agreed US$134m to fund the Foundation’s activities in providing “reparatory and compensatory programs.” This sum will, however be offset against the amount of the provision.

Caledonia Mining (LON:CMCL) 89.5 pence, Mkt Cap £46.7m – Increased ore resource at the Blanket mine
• Caledonia Mining has announced an increase to the ore resource base of its 49% owned Blanket mine in Zimbabwe.
• The new estimates, which refer only to the Blanket section of the mine, show that 343,000 tonnes of ore at a grade of 5.19 g/t gold (representing 47,700 oz of contained gold) has been upgraded from “inferred“  status to “indicated” as a result of recent diamond drilling.
• In addition, “1.276mt of new “inferred” resources at an average grade of 5g/t gold have been identified at depth paving “the way for the phase 2 expansion program to extend mining below the current target depth of 990m level.”
• The company points out that the “upgraded Indicated Resource of 343,000 tonnes, combined with the resources upgraded during 2015, have increased the quantum of reserves and indicated resources that may be used in the life of mine plan from 2,934,000 tonnes used for the the Technical Report prepared by Minxcon in December 2014, to 4,889,000 tonnes currently and represents an increase of 67% in terms of mineable tonnes and hence in the life of the mine.”
• Caledonia Mining expects to release further resource upgrades covering other areas of the mine during the second half of the year.
• The increased resource base at the Blanket mine, follows the announcement earlier this month that the new mine plan was delivering increased production  to achieve 2016 guidance of 50,000 oz of gold (2015 -42,800 oz) and maintaining the planned growth path towards 65,000 oz of production by 2017 and 80,000 oz pa by 2021.
Conclusion: The increased resources and mine life at Blanket should reassure doubters that the new mine plan can deliver the long-term future of the mine. We look forward to further resource updates for the AR Main, AR South and Eroica sections of the mine later this year and for news on the progress of the shaft sinking programme.

Herencia Resources (LON:HER) 0.04p, mkt cap £1.5m – Herencia complete sale of Paguanta in nick of time
• Herencia Resources report the last minute sale of their 70% stake in the Paguanta project in northern Chile for a total consideration of US$2.3m.
• GMR also agreed to pay up to an additional US$2.1m towards various contingent liabilities.
• “The US$2.3 million is payable in $1.5 million cash and a total of US$0.8 million in fully paid ordinary GMR shares (Shares) to Herencia at an issue price equal to the 20 day volume weighted average price, in the event a decision to mine is made at Paguanta.”
o The sale needed to be completed by tomorrow to avert a working capital crisis and to keep the company trading.
o Golden Rim Resources ‘GMR’ is paying US$800,000 today and a further US$413,000 within 30 days plus another US$50,000 within 60 days.
o A final payment of US$800,000 will be made in the event that a decision is made to mine at Paguanta.  GMR is also paying transaction taxes of up to US$50,000
o “Completion under the Proposed Transaction was due to take place prior to 4 July 2016, however due to delays with the flow of information; the parties agreed to extend the date of completion to no later than 29 July 2016. On 15 June 2016, the Company made a further announcement with the execution of formal documentation following which GMR provided Herencia with the second tranche of the deposit, totalling US$0.1 million.”
o Exploration:  the Company also has the Guamanga Copper Project in Chile.
Conclusion:  Herencia operates its Chilean projects from a corporate office in Perth and a technical and management office in Santiago.  We suspect the cost of running offices in Perth and Santiago will drain much of the sale proceeds if management are not careful.
To be fair Herencia have already slashed costs declaring total directors remuneration of £137,664 in 2015 vs £315,271 in 2014.  We hope the team can make good use of the new funds at their disposal.

Gemfields (LON:GEM) 34.3p, mkt cap £186.4m – shares look good value following pullback in stock
BUY 82 pence
• Gemfields shares look good value given what look like solid fundamentals in the market.
• The company expects to continue to see good demand at its forthcoming emerald and ruby auctions.
• Management continue to invest in the Kagem and Montepuez mines using local borrowing which has the benefits of higher than normal currency depreciation.
• The company has debt facilities for $30m worth of Zambian Kwacha in Zambia and $45m of metical in Mozambique paying an average rate of Libor + 4%
• Sales are in dollars, head office costs in sterling and borrowings in kwacha (Zambia) and ‘new metical’ (Mozambique)
• We believe the trend for using coloured stones in jewellery and for investment should remain firm.
• Exploration, the company is looking to acquire and develop licenses in Colombia which is now at peace with the FARC and in Sothern Ethopia near the Kenyan boarder.
Conclusion:  Gemfields looks to us like a solid company with potential for the discovery of ‘superstar’ rubies and emeralds to enhance returns.  While it is possible that liquidity issues in gemstone markets could impair auction sales and values we believe Gemfields could do better than many diamond producers in the event of a liquidity squeeze.

Savannah Resources (LONLSAV) 4.4 pence, Mkt Cap £16.9m – Exploration underway at lithium projects in Finland
• Savannah Resources has expanded its exploration horizons into Finland focussing on two new lithium prospects.
• The exploration is to target pegmatites with known lithium minerals of spodumene. Lepidolite and petalite with the aim of generating drill targets.
• The projects are early stage by the sounds of the announcement.
• With record temperatures recorded this week in the Middle East its good to know the geologists are able to work in a cooler climate.
• Kuait recorded 53.9 degrees Celsius (129 Fahrenheit ) yesterday equalising with Death Valley’s 54 degrees C. seen on 30 June 2013 as the world’s hottest reliably measured air temperature on Earth.  We note that other hotter temperatures but none of these are said to be credible.
• We look forward to further news on progress at Savannah’s copper properties in Oman when temperatures cool.

Thu, 28 Jul 2016 10:48:00 +0100
Rightmove climbing ladder despite Brexit gloom - broker Thu, 28 Jul 2016 10:12:00 +0100 In the papers: EDF, RBS, IKEA The Times
EDF poised to approve nuclear plant at Hinkley: The board of EDF, the energy group, is set to meet in Paris to approve plans for an £18 billion nuclear power station at Hinkley Point in Somerset.
Fresh banking crisis puts Renzi on brink: Italy faces an imminent banking crisis and a knife-edge referendum that threatens to topple the prime Minister and unleash political and economic chaos at home and across Europe.
Shoppers stay clear of high street: Shoppers deserted the high street immediately after the vote for Brexit as uncertainty swept the nation. Retail sales, as measured by a regular survey carried out by the CBI, suffered their biggest fall in more than four years during the first weeks after the EU referendum on June 23.
Facebook’s app and video drives advance: Facebook comfortably beat Wall Street forecasts on quarterly profit and revenue as the company’s mobile app and a drive into video attracted new advertisers and encouraged existing ones to spend more.
Profits disappear at Deutsche as €600 million set aside for legal action: Deutsche Bank’s quarterly profits plunged as the lender took a series of charges against potential legal action that all but wiped out its earnings.
Digital revenues fail to halt loss at GMG: The Owner of The Guardian newspaper has revealed it suffered a £173 million pretax loss last year after earnings were hurt by lower digital revenues.
RBS seeks deal on £12 billion rights issue claims: Royal Bank of Scotland is attempting to settle a multibillion-pound legal claim brought by shareholders who say they were misled into supporting the bank’s £12 billion rights issue in 2008.
Sky to put Premier League highlights up on Twitter: Sky Sports will publish hundreds of Premier League highlight videos on Twitter next season after striking a partnership deal.
Arm strong enough to brush off Apple hit: A sharp fall in iPhone sales has failed to dent the fortunes of ARM Holdings, the Cambridge-based company that designs most of the world’s smartphone microchips and which is about to be taken over by SoftBank, of Japan.
The Independent
Brexit will see U.K. house price growth slow nearly 4% by 2017, economists say: House prices growth is expected to slow following the U.K.’s vote to leave the European Union, according to economists.
Brexit must happen before we will consider trade deal with U.K., U.S. says: The U.S. will not start bilateral trade negotiations with the U.K. before it has split from the EU, according to the Government’s trade representative.
IKEA admits to charging customers twice due to computer glitch: Ikea customers that have visited any U.K. store last week have been urged to check their bank statements after the company admitted it charged more than 100 customers twice.
Nintendo reports $234 million loss ahead of launch of Pokemon Go: Pokémon Go’s global success has yet to translate into success for Nintendo as the Japanese game company posted a bigger than expected loss.
Boss of bankrupt budget holiday firm Low Cost Holidays warns more travel agents could collapse: Paul Evans, Chief Executive of the bankrupt Low Cost Holidays group, has warned that other online travel agents could fail.
European Commission appoints Chief Brexit negotiator but says he won’t speak to U.K. until Article 50 triggered: The European Commission has appointed a Chief Brexit negotiator but has made clear he will not engage with Britain until Article 50 is formally triggered - nor start work until 1 October.
The Daily Telegraph
Oil price hits freefall as U.S. glut takes market by surprise: Global oil prices plummeted over a dollar a barrel within minutes after official U.S. energy data showed an unexpected glut of oil in storage.
Chocolate billionaire Forrest Mars Junior dies aged 84: Forrest Mars Junior, the billionaire scion of the Mars confectionary empire, has died at the age of 84. Mr Mars, who inherited the business together with his brother and sister, ran the company for three decades.
Activist Elliott lifts SABMiller stake: An activist hedge fund that has been agitating for a higher takeover offer for SABMiller has lifted its stake in the FTSE 100 company, in an apparent signal it believes the brewer’s blockbuster deal with Anheuser-Busch InBev will not collapse.
Demand for homes undimmed, says housebuilder Taylor Wimpey: One of the U.K.’s biggest housebuilders has said the vote to leave the European Union has not affected demand for homes, despite warnings that buyers would put decisions on hold while the economy remains volatile.
Federal Reserve hints at sooner-than-expected rate rise as economic risks recede: U.S. interest rates could rise again in the coming months, the Federal Reserve has signalled, as policymakers said that risks to the world’s largest economy had receded.
Pound remains overvalued despite last month’s sharp fall, IMF warns: Sterling remains overvalued even after its big drop in the wake of the EU referendum, the International Monetary Fund has suggested.
Standard Chartered hires IMF’s José Viñals as new Chairman: British-based bank Standard Chartered is to appoint senior International Monetary Fund Executive José Viñals as its next Chairman after a 17-month search to find a candidate for the top job.
City Airport £344 million expansion plan takes off: A £344 million plan to expand London City Airport has been given the green light by the Government, just five months after a group of international investment funds swooped on the site for more than £2 billion.
The Guardian
U.K. car manufacturing hits high but industry warns of Brexit effect: British car manufacturing hit a 16-year high in the first half of 2016, but the industry says future growth, jobs and investment are at risk following the Brexit vote.
BHS: Frank Field calls on SFO to launch formal inquiry into demise: The co-author of a parliamentary report into the demise of BHS has called on the Serious Fraud Office to launch a formal inquiry into the actions of the department store chain’s former Owners.
U.K. economy grew by 0.6% before Brexit vote: Britain’s economy grew by a faster than expected 0.6% in the second quarter as businesses appeared to shrug off Brexit jitters in the run-up to the 23 June referendum.
U.K. Bosses went on share-buying spree after EU referendum: Britain’s top company Bosses went on a share-buying spree in the immediate aftermath of the EU referendum, spending more money on their own stock than at any time in the last decade.
GSK says Britain is still an attractive place to invest: GlaxoSmithKline is to invest £275 million at three of its U.K. factories with the creation of new jobs, as the pharmaceutical group insisted the country is still an attractive place to invest despite the Brexit vote.
Daily Mail
BP dividend here to stay despite huge £47 billion Gulf spill bill as profits fall 45% in a year on oil price slide and costs: Oil giant BP will continue to pay a dividend despite racking up a huge £47billion for the 2010 Gulf of Mexico explosion and oil spill.
Under-offer British tech star ARM reports robust profits as it shrugs off smartphone worries: ARM Holdings, the British technology star which last week agreed to be bought by Japan’s SoftBank, reported strong second quarter growth in both revenues and profits.
Broadcaster ITV puts battle plans in place for Brexit as shares jump on profits rise: ITV revealed it has put in place cost cutting measures in order to combat the economic uncertainty caused by the U.K.’s decision to leave the European Union as it posted a rise in first half profits.
FTSE firms told to come clean on multi-million pound bonuses for their Bosses to restore faith in the City: Blue chip firms have been told to come clean on multi-million pound bonuses for their Bosses in order to restore trust in the City.
Daily Express
Brexit bounce: Key FTSE 250 index wipes out EU referendum losses in just a month: Britain’s economy received another Brexit boost as the key FTSE 250 index of companies all but wiped out the losses sustained in the uncertainty following the EU referendum vote.
Santander could be about to axe rates on its popular 123 bank account: Millions of Santander bank customers could have their in-credit interest rates slashed, as the provider looks to cut perks on the popular 123 current account.
Britain’s Brexit boom: U.K. GDP beats expectations and jumps 0.6% in second quarter of 2016: Britain’s economy shrugged off the doom-mongers to grow by 0.6% in the second quarter of 2016, official figures revealed.
The Scottish Herald
Scottish construction sector stalls amid Brexit uncertainty: Growth in Scotland’s construction sector stalled in the latest quarter amid the uncertainty caused by the Brexit vote but many firms expect to increase activity in the coming year, research has found.
FanDuel signs up Opta for U.K. launch: Fanduel has demonstrated the focus it is placing on its U.K. launch by signing a partnership with sports data firm Opta.
McColl’s transformation on track: Retail group McColl’s is accelerating its growth plans after seeing like-for-like sales drop by 2.2% as its newsagent estate contends with price deflation and a lower demand for tobacco and newspapers.
Minoan Group share issue: Minoan Group has issued 3,000,000 shares at 8p to settle what it called “certain existing liabilities”. The Glasgow-based travel agent and resort developer made an application for the shares to be admitted to trading on the alternative investment market from next Tuesday.
Investment sees profit dip at Daysoft: Daysoft, the Blantyre-based online seller of daily disposable contact lenses has seen profits fall by 13% to £1.5 million after investing in substantial re-organisation of its manufacturing processes, and equipment upgrades.
Brexit vote fallout could push Scottish firms over the edge say experts: Uncertainty caused by the Brexit vote could pose big challenges for companies in Scotland following a sharp rise in insolvencies in the latest quarter, experts have warned.
Beer sales up, but shops not pubs benefit: Beer sales across the U.K. grew 1.5% in the second quarter, meaning 31 million extra pints were consumed versus this time last year. The figures, published in the British Beer & Pub Association’s quarterly Beer Barometer, reveal further signs of reversing a long period of decline.
The Scotsman
Shawbrook’s profits up but says too soon to judge Brexit effect: Challenger bank Shawbrook has brushed off an already-disclosed additional impairment charge in its second trading quarter to post a 14% rise in first-half underlying pretax profits.
Car retailer Lookers set to drive growth in Scotland: Lookers Audi is mulling the acquisition of further sites in Scotland in a twin-track strategy alongside organic growth as it targets turnover of £385 million north of the Border this year.
Marston’s welcomes sales boost thanks to Euro 2016: Pubs group Marston’s said that the tailwind to sales of UEFA Euro 2016 has helped offset mixed summer weather.
Capital move for financial planner Acumen: Acumen Financial Planning has boosted its business in Edinburgh with the acquisition of established practice Duckworth Alexander for an undisclosed sum.
Burger giant McDonald’s to create thousands of U.K. jobs: McDonald’s is to create 5,000 jobs by the end of next year, the fast food restaurant giant has announced.
City A.M.
The studio behind the James Bond franchise is reportedly in talks over a £300 million takeover with a U.S. property fund: The U.K.’s legendary Pinewood Film Studios could reportedly be sold within the week to an international property fund.
More than half of U.K. SMEs say banks are not “business friendly”, according to a new survey released: More than half of the U.K.’s small and medium-sized businesses say that banks are not business friendly. A survey of 850 SMEs by business loan specialist LDF found that 52% complaining about the banking sector’s support.
GoPro has announced two new cameras despite seeing revenues plunge over the last three months: Plunging revenues have not been enough to halt optimism at camera maker GoPro. The U.S. firm has announced plans to launch a consumer drone and the latest version of its wearable cameras by the end of the year.
Groupon hikes revenue forecasts despite swinging to $55 million quarterly loss: Groupon has reported a loss of $54.9 million (£41.5 million) for the second quarter, a year after notching a profit of $110 million. However, the discounts firm said that adjusted for charges and other items, it would have meant a loss of just $0.01 per share.
Emerging markets are winning the dash for cash after Brexit vote: Emerging markets are one of the big winners from the U.K.’s vote to leave the EU as economies have benefitted from an influx of foreign capital.
Brewin Dolphin soars on results that increase takeover speculation: Shares in wealth Manager Brewin Dolphin jumped over ten% despite a third quarter trading update that Boss David Nicol downplayed as “steady progress”.
Private equity Boss predicts autumn M&A activity boost for City of London: The Chief Executive of private equity firm 3i expects the City to experience a pick-up in mergers and acquisitions (M&A) activity after the summer.
Center Parcs to launch its first village outside of the U.K.: Activity holiday group Center Parcs is gearing up to launch its first site outside of the U.K. in 2019. Center Parcs has gained planning permission for its 395-acre “village” in County Longford, Ireland.

Thu, 28 Jul 2016 08:31:00 +0100
Market briefing:US markets ended mostly lower yesterday, after the US Federal Reserve kept door open for a September rate hike UK Market Snapshot
UK markets finished higher yesterday, after data showed that the nation’s economy expanded at a faster-than-expected rate in the second quarter. Rightmove soared 8.7%, after it posted a jump in its pre-tax profit for the six months ended 30 June and remained confident of achieving its full year expectations. ITV surged 6.8%, after it reported a rise in its revenue in the first half of the year due to the Euro 2016 soccer tournament and on expansion of its studio production business. Taylor Wimpey climbed 6.7%, following an increase in its half yearly pre-tax earnings and stated that it is fully committed to its dividend policy. On the contrary, Lancashire Holdings slid 1.9%, after reporting a drop in its first half profits. The FTSE 100 advanced 0.4%, to close at 6,750.4, while the FTSE 250 rose 1.2%, to settle at 17,265.9.
US Market Snapshot
US markets ended mostly lower yesterday, after the US Federal Reserve kept door open for a September rate hike citing that near-term risks to the economic growth have eased. Alere sank 28.6%, on reports that it is being summoned by the Justice Department’s criminal-fraud division and would be sold to Abbott Laboratories, up 0.2%, for $5.8 billion. Coca-Cola dipped 3.3%, as its second quarter revenue trailed analysts’ projections. Bucking the trend, Garmin soared 11.6%, following upbeat profit in the second quarter and as it boosted its earnings outlook for 2016. Apple jumped 6.5%, after its third quarter revenue decline was a smaller-than-expected. Boeing gained 0.8%, after it reported lower than expected loss for the second quarter. The S&P 500 slipped 0.1%, to settle at 2,166.6. The DJIA slid marginally, to settle at 18,472.2, while the NASDAQ advanced 0.6%, to close at 5,139.8.
Europe Market Snapshot
Other European markets closed in positive territory yesterday, led by gains in automobile sector and luxury goods makers. Peugeot rallied 9.3%, as its net earnings more than doubled in the six months ended 30 June compared to the same period of preceding year. LVMH Moet Hennessy Louis Vuitton surged 7.5%, after it reported its first half earnings that matched analysts’ projections. Peers, Kering and Christian Dior rose 2.4% and 3.9%, respectively. Banco Santander advanced 2.9%, as its net income for the second quarter beat market expectations. On the losing side, Deutsche Bank lost 4.2%, after its net profit plunged to €18.0 million in the second quarter from €796.0 million a year ago. The FTSEurofirst 300 index gained 0.4%, to close at 1,351.8. Among other European markets, the German DAX Xetra 30 rose 0.7%, to close at 10,319.6, while the French CAC-40 advanced 1.2%, to settle at 4,447.0.
Asia Market Snapshot
Markets in Asia are trading weaker this morning. In Japan, Fujifilm Holdings has plummeted 9.6%, after reporting downbeat earnings for the first quarter. Nintendo has declined 5.4%, as it posted an operating loss of $47.33 million in the first quarter. On the flipside, Advantest has rallied 11.2%, after raising its projected earnings for the full year. Alps Electric has surged 10.2%, following higher than expected profit in the first quarter. In Hong Kong, oil firms, PetroChina and CNOOC have fallen 0.9% and 2.3%, respectively. In South Korea, Samsung Electronics has slid 1.3%, despite reporting its most profitable quarter in two years, amid strong sales of its flagship Galaxy S7 smartphone. The Nikkei 225 index is trading 0.7% lower at 16,550.3. The Hang Seng index is trading 0.2% down at 22,164.2, while the Kospi index is trading 0.4% lower at 2,016.8.

Commodity, Currency and Fixed Income Snapshots
Crude Oil

At 0330GMT today, Brent Crude Oil one month futures contract is trading 0.25% or $0.11 higher at $43.58 per barrel. Yesterday, the contract declined 3.12% or $1.40, to settle at $43.47 per barrel, after the Energy Information Administration reported that US crude inventories unexpectedly climbed 1.7 million barrels in the week ended 22 July 2016.
At 0330GMT today, Gold futures contract is trading 1.41% or $18.70 higher at $1345.40 per ounce. Yesterday, the contract advanced 0.45% or $5.90, to settle at $1326.70 per ounce, after the US durable goods orders declined more than anticipated in June.
At 0330GMT today, the EUR is trading 0.14% higher against the USD at $1.1073, ahead of Germany’s flash consumer prices and unemployment rate for July, set for release later in the day. Yesterday, the EUR strengthened 0.66% versus the USD, to close at $1.1058, after German GfK consumer confidence came in slightly better than expected for August.
At 0330GMT today, the GBP is trading marginally lower against the USD at $1.3222, ahead GfK consumer confidence data for July, which will release tonight. Yesterday, the GBP strengthened 0.71% versus the USD, to close at $1.3223, after Britain’s GDP grew at a faster rate than expected in the second quarter of 2016.
Fixed Income
In the US, long term treasury prices rose and pushed yields lower, after the US Fed kept its key interest rates unchanged. Moreover, the US durable goods orders plunged in June, recording its biggest drop in almost two years. Yesterday, yield on 10-year notes fell 5 basis points to 1.52%, while yield on 2-year notes lost 2 basis points to 0.73%. Meanwhile, 30-year bond yield fell 5 basis points to 2.23%.

Key Economic News
UK index of services advanced as expected in May

In May, the index of services rose 0.30% in the UK, on a monthly basis, in line with market expectations. The index of services had risen 0.50% in the February-April 2016 period.
UK index of services unexpectedly fell in May
On a monthly basis, the index of services in the UK unexpectedly fell 0.10% in May, compared to a rise of 0.60% in the prior month. Market anticipation was for the index of services to rise 0.10%.
UK CBI distributive trade survey's retail sales balance declined in July
The CBI distributive trade survey's retail sales balance eased to 14.00% in the UK, in July, compared to a level of 4.00% in the previous month. Markets were expecting the CBI distributive trade survey's retail sales balance to ease to a level of 1.00%.
UK GDP advanced more than expected in 2Q 2016
In 2Q 2016, the flash gross domestic product (GDP) recorded a rise of 2.20% on a YoY basis in the UK, compared to a rise of 2.00% in the previous quarter. Market expectation was for GDP to advance 2.10%.
UK GDP rose more than expected in 2Q 2016
On a QoQ basis, the flash GDP climbed 0.60% in 2Q 2016, in the UK, higher than market expectations for an advance of 0.50%. In the previous quarter, GDP had registered a rise of 0.40%.
Euro-zone M3 money supply advanced as expected in June
In June, M3 money supply advanced 5.00% in the Euro-zone on a YoY basis, in line with market expectations. In the prior month, M3 money supply had advanced 4.90%.
German consumer confidence index recorded a decline in August
Compared to a reading of 10.10 in the previous month the consumer confidence index dropped to 10.00 in August, in Germany. Markets were expecting the consumer confidence index to fall to a level of 9.90.
German import price index declined as expected in June
On an annual basis, in June, the import price index registered a drop of 4.60% in Germany, compared to a fall of 5.50% in the prior month. Market anticipation was for the import price index to ease 4.60%.
German import price index rose less than expected in June
In June, the import price index in Germany registered a rise of 0.50% on a monthly basis, lower than market expectations for a rise of 0.60%. The import price index had climbed 0.90% in the prior month.
French PPI advanced in June
In France, the producer price index (PPI) registered a rise of 0.40% on a MoM basis, in June. The PPI had registered a revised similar rise in the previous month.
French consumer confidence fell in July
Consumer confidence eased to 96.00 in France, in July, in line with market expectations. In the prior month, consumer confidence had registered a reading of 97.00.
Italian business confidence index advanced unexpectedly in July
Compared to a revised level of 102.90 in the prior month the business confidence index in Italy registered an unexpected rise to a level of 103.10 in July. Markets were expecting the business confidence index to fall to 102.00.
Italian consumer confidence index rose surprisingly in July
In Italy, the consumer confidence index climbed unexpectedly to a level of 111.30 in July, higher than market expectations of a fall to a level of 109.20. In the previous month, the consumer confidence index had recorded a reading of 110.20.
Spanish retail sales advanced more than expected in June
On a YoY basis, retail sales registered a rise of 5.60% in June, in Spain, more than market expectations for a rise of 3.60%. In the prior month, retail sales had recorded a rise of 2.30%.
Swiss UBS consumption indicator climbed in June
UBS consumption indicator climbed to 1.34 in June, in Switzerland. UBS consumption indicator had registered a revised level of 1.24 in the prior month.
US Fed left rates unchanged at July meeting
The US Federal Reserve (Fed) kept the overnight interest rate target steady in the 0.25% to 0.5% range and reiterated that it continues to closely monitor global economic and financial developments. Moreover, the Fed cited improvements in the US labor market and stated that near-term risks to the economy have diminished.
US durable goods orders declined more than expected in June
The flash durable goods orders slid 4.00% in the US on a MoM basis in June, compared to a drop of 2.30% in the previous month. Markets were anticipating durable goods orders to ease 1.40%.
US pending home sales advanced less than expected in June
In the US, pending home sales climbed 0.30% on a YoY basis in June, lower than market expectations for a rise of 3.00%. Pending home sales had climbed 2.40% in the previous month.
US mortgage applications registered a drop in the last week
Mortgage applications recorded a drop of 11.20% in the US on a weekly basis, in the week ended 22 July 2016. In the previous week, mortgage applications had registered a drop of 1.30%.
US durable goods orders (ex transportation) unexpectedly declined in June
The preliminary durable goods orders (ex transportation) unexpectedly dropped 0.50% on a monthly basis in June, in the US, compared to a drop of 0.30% in the previous month. Markets were anticipating durable goods orders (ex transportation) to rise 0.30%.
US pending home sales advanced less than expected in June
On a MoM basis, pending home sales rose 0.20% in the US, in June, compared to a drop of 3.70% in the previous month. Market expectation was for pending home sales to climb 1.20%.
Japanese small business confidence index advanced in July
The small business confidence index recorded a rise to 47.80 in July, in Japan. The small business confidence index had recorded a reading of 46.50 in the prior month.


Thu, 28 Jul 2016 08:28:00 +0100
PM Abe's plan for $265 billion stimulus puts pressure on BOJ to ease PM Abe's plan for $265 billion stimulus puts pressure on BOJ to ease

Japan's prime minister unveiled a surprisingly large $265 billion stimulus package on Wednesday to reflate the world's third-largest economy, adding pressure on the central bank to match the measures with monetary stimulus later this week.
The earlier-than-expected announcement to boost the flagging economy sent Japanese and other Asian stock markets higher while it weighed on the safe-haven yen, but lacked crucial details on how much of the package would be direct government spending.
The size of the package, at more than 28 trillion yen ($265.30 billion), exceeds initial estimates of around 20 trillion yen and is nearly 6 percent the size of Japan's economy. It will consist of 13 trillion yen in "fiscal measures," which likely includes spending by national and local governments, as well as loan program.
"We need to take steps to support domestic demand and put the economy on a firmer recovery path," Shinzo Abe said in a speech in southern Japan on Wednesday. "I want to use various measures to increase our escape velocity from deflation."
The market expects the Bank of Japan to produce some fire power of its own at its rate review ending on Friday.

Eoin Treacy's view
In last night’s Audio I discussed the likelihood that the ¥100 represents something of a Rubicon for the Japanese as they decide how next to try and re-instil an inflation bias in economic activity. Today’s announcement of fresh fiscal stimulus is likely to be accompanied by additional measures from the BOJ; in a further iteration of the fiscal/monetary partnership that is the primary attribute of Abenomics.

Email of the day on the importance of a global perspective
I want to say thanks for all your interesting charts from all over the world. You both give us a fantastic view from around the globe! Some examples, Valeant, Kinder Morgan, Orocobre and metals. They have all recently helped me pay my expenses and more. And last but not least, Thank you for not bringing Brexit up every day, I suppose you have a lot of customers living outside England and Wales and a few of us do not think Brexit is the center of the world. A Swedish Citizen, and FM for more than 25 years. (With an international portfolio.) Keep up your good work.

Eoin Treacy's view
Thank you for your kind words and congratulations on seizing opportunities as they have presented themselves. It’s a big world out there and while the political ramifications of Brexit remain a major topic of conversation, not least in the UK and Europe, I believe we have a responsibility to focus on the investment ramifications of the event and also the fact that there are a great many asset classes for which the referendum has been a non-event.

Musings From the Oil Patch July 26th 2016
Thanks to a subscriber for this edition of Allen Brooks’ ever interesting report for PPHB which contains an interesting discussion on the longevity of products but here is a section on the liquefied natural gas market:
In recent months, two LNG cargoes from Cheniere Energy’s (LNG-NYSE) Sabine Pass export terminal in Louisiana have been delivered to Kuwait and Dubai. So far, since it began shipping LNG in February, Cheniere has sent cargos to seven countries, including Argentina, Chile, Brazil, India, Portugal, Dubai and Kuwait. The shipments to the Middle East reflect the soaring demand for energy in these countries. (As a testament to the nation’s energy demand issue, Saudi Arabia recently disclosed it has been drawing on its domestic oil inventories to meet the summer energy demand surge and to avoid having to further boost oil production above the country’s current 10.5 million barrels a day rate.) As all he countries in the Middle East have rapidly growing populations, their domestic demand is growing and tends to soar during the hot summer months. Most of these countries have large natural gas resources, but other than Qatar, which is currently the world’s largest LNG exporter, they are less developed. We expect the rest of the countries in the region will step up the pace of their natural gas resource development.

In order to appreciate the market potential for cheap U.S. natural gas, Kuwait’s LNG imports exploded from one million tons in 2012 to 3.04 million tons last year, according to the Middle East Economic Survey. We know that Saudi Arabia has been ramping up its drilling for natural gas in order to power more of the country’s water desalination plants and electricity generators. By using more domestic natural gas, Saudi Arabia will be able to reduce the volume of crude oil burned to power these facilitates. That will enable Saudi Arabia to have more of its crude oil output available for export and to generate income for the government, rather than burning it under utility boilers. For the meantime, we expect more U.S. LNG cargos will find their way to the Middle East. Those LNG exports will help to tighten the domestic gas market and send natural gas prices higher as we move into 2017, but we are not sure that the Middle East will become a long-term U.S. LNG export market. But the industry will take whatever demand it can find it now.

Eoin Treacy's view

For much of the last century natural gas was in such abundance that it had no economic value and was burned off as a by-product of oil drilling. With increasing demand for less polluting, but energy dense resources, to provide heating, cooling and cooking natural gas has experienced a renaissance.

Security Landscape Continues to Evolve

431 million new malware variants seen in 2015, an increase of 36% Source: Symantec Internet Security Report, April 2016
The mean number of days to resolve cyber-attacks is 46, with an average cost of $21,155/day (global, standardized into U.S. dollars) Source: Ponemon 2015 Global Cost of Cyber Crime Study, October 2015
9 breaches in 2015 with more than 10 million identities exposed: a total of 429 million exposed Source: Symantec Internet Security Report, April 2016
The mean annualized cost of cybercrime to global organizations is $7.7 million/year (standardized into U.S. dollars) Source: Ponemon 2015 Global Cost of Cyber Crime Study, October 2015

Eoin Treacy's view

The growth of cybercrime is nothing short of exponential not least because it is comparatively cheap to develop, it is global in nature, prosecution rates are woefully low and the rewards are highly attractive. Combatting the threat requires a war footing to be adopted by corporations and outside of the high tech sector many companies have proven ill-equipped to deal with the challenge.

Thu, 28 Jul 2016 08:26:00 +0100
Northland Capital Partners View on the City - Savannah Resources, Keras Resources, Premier African Minerals, Octagonal, ValiRx, Sunrise Resources Savannah Resources (LON:SAV) – CORP: Lithium Projects update
Market Cap: £17m; Current Price: 4.4p

Exploration commences at Somero and Eräjärvi
  Savannah Resources announces that its Somero and Eräjärvi reservation permits received no landowner objections during the one month statutory objection period.
  An exploration programme is now underway consisting of geological mapping, surface rock chip and channel sampling. This programme will target pegmatites with known lithium bearing minerals with the aim of generating drill targets in 2016. The programme is expected to take 8-10 weeks.
NORTHLAND CAPITAL PARTNERS VIEW: Savannah Resources has now commenced its initial exploration programme at its projects in Finland. Mapping by the Finnish Government at the projects has previously highlighted the presence of lithium bearing minerals including spodumeme, lepidolite and petalite.

Keras Resources (LON:KRS) – CORP: Quarterly operations update
Market Cap: £15.5m; Current Price: 1.15p

Lower productivity leads to loss during quarter ending 30/06/16
  The provisional quarter ending 30 June 16 saw production from the small scale open pits at Anomaly 22 and Accord totalled 2,763oz Au at a grade of 1,36g/t Au.
  Average opex including tribute agreement costs was A$1,736/oz Au, greater than the average gold price received of A$1,687/oz.
  Based on our estimates provisional revenue for the period totalled A$4.66m but provisional operational costs totalled A$4.80m. This was largely a result of lower than expected productivity in the small pits resulting in higher opex.
  At the end of the quarter the Company has net cash of £750,000.
NORTHLAND CAPITAL PARTNERS VIEW: A disappointing quarter from Keras Resources with the Company making a loss on its initial production where it has previously indicated positive cash flow was expected. Following this setback the Company has reacted quickly to improve margins by re-evaluating mining protocols and operating procedures. Higher-grades and the move to profit share rather than a production royalty should also help to improve margins as the Company starts mining at the Wycheproof Project.

Premier African Minerals (LON:PREM) – CORP: Directorate change
Market Cap: £12.3m; Current Price: 0.65p

From yesterday: Pamela Hueston steps down and Russel Swarts appointed
  Ms. Pamela Hueston has resigned as a Director of Premier African Minerals and Mr Russel Swarts has been appointed as a consultant to the Company and will provide oversight of the financial management.
NORTHLAND CAPITAL PARTNERS VIEW: Mr Swarts is a Chartered Accountant (South Africa) and has been in senior financial roles with a number of JSE listed companies and was also CFO of URU Metals (URU.L). He was CEO of the largest specialist telecommunication group in South African and a Director of a private equity investment group involved in energy and natural resources.

Octagonal (LON:OCT) – CORP: Trading update
Market Cap: £5.9m; Current Price: 1.05p

GIS reports record quarter to 30th June 2016
  Octagonal’s wholly owned subsidiary Global Investment Strategy (GIS) reported a record quarter to June 30th 2016 with sales of £1,542,300 and an unaudited net profit of £635,445 that represents a 18.9% increase YoY.
 The Company has also undertaken significant work to improve processing efficiencies, client reporting and reducing frictional costs, all of which is expected to have a positive effect on earnings during the rest of the year.
  The strong USD also has a positive effect for the business as 70% of earnings are in USD and only 20% of the costs.
  GIS is in the process of launching a new range of services to existing clients to include FX trading, Futures and Options trading and Portfolio management.
NORTHLAND CAPITAL PARTNERS VIEW: The strong 30th June 16 quarter follows on from the positive financial year to 31st March 16, despite the political and economic uncertainty for Octagonal and its wholly owned subsidiary Global Investment Strategy.

ValiRX (LON:VAL) – CORP: Patent Grant
Market Cap: £3.5m; Current Price: 6.75p

ValiSeek JV receives New Zealand Patent Grant Allowance
  ValiRx Plc, the life science company focused on clinical stage cancer therapeutic development, commercialisation of medicines and partnering, announces that ValiSeek Limited, its joint venture with Tangent Reprofiling Limited, has received notification of a New Zealand Patent Grant Allowance.
  Notification from the New Zealand Patent Office advises that the patent, which was granted a U.S. patent (US9072743) on 14th May 2015, has received allowance of grant in New Zealand. This patent covers both the formulation of VAL401 and its use as a treatment against hormone-related cancers, including lung cancer
  Dr Suzanne Dilly, CEO of ValiSeek Limited, commented: "This is the first non-US patent grant allowance received for the VAL401 project and as such, it provides an international validation of the programme to support world-wide commercialisation"

Sunrise Resources (LON:SRES) – SPECULATIVE BUY*: Project update
Market Cap: £2.5m; Current Price: 0.22p

From yesterday: Stakes licences over the Stonewall prospect
Sunrise Resource has staked 15 claims over the Stonewall epithermal gold prospect in the Walker Lane Mineral Belt in addition to the current gold-silver projects in its Westgold subsidiary. The Stonewall claims cover a large vein that has epithermal vein textures. Sunrise is currently researching historic exploration results from the area and will update in due course.
Following an internal review of its projects in Australia, Sunrise has surrendered its Corona Gold Project ahead of the next annual rental payment. Sunrise is seeking a joint venture partner to test its drill ready targets at the Bakers Project.
NORTHLAND CAPITAL PARTNERS VIEW: A mixture of portfolio expansion and rationalisation from Sunrise Resources. Exploration over the Corona and Bakers project in 2014 and 2015 defined low level anomalies at Corona that were considered a lower priority than those at the Bakers projects. This has lead Sunrise to drop Corona while seeking a joint venture partner for Bakers.


Thu, 28 Jul 2016 08:18:00 +0100
Might the BoJ hold pat too? FTSE 100 called to open -5pts at 6745, still holding its July uptrend of rising lows but wrestling with a slower pace of advance as its move towards the apex of what could turn out to be a bearish rising wedge. Nonetheless, a daily RSI not yet overbought suggests potential for further upside, evident via last night’s brief foray to 6780. The Bulls will be looking for any break above 6750 while Bears watch for any signs the uptrend is in jeopardy, which would likely require for 6720 to see a meaningful test. Watch levels: Bullish 6755, Bearish 6720.
A flat opening call comes after Asian stocks delivered a mixed session, echoing their US counterparts with the US Fed’s July update leaving investors a little uncertain about the path for US monetary policy normalisation. US data has been solid, perhaps warranting a hike in September, and it says external risks have receded, but peers are in a very different world, adding to stimulus and the outlook remains unclear, especially given what corporates are saying amid the plethora of UK, EU and US companies reporting  this week.
A weaker Dollar resulting from odds of a September rate hike falling helped the Yen strengthen to the detriment of Nikkei exporters, despite expectations that the BoJ is set to add to the government's bumper stimulus package tomorrow. Or might it hold off like the ECB until September, waiting to see what the BoE does next week in light of Brexit? Australia’s ASX is just positive, deriving some benefit from a weaker USD helping the metals and energy space (watch the Miners and Oil majors this morning).
US markets closed mixed after an FOMC statement that was a little less hawkish than markets had expected, such that they didn’t really know what to do with themselves. Rates kept as is, as expected, and no indication of a rate hike timetable although a rate hike in 2016 was kept on the table. The really heavy stuff came with an upgrade to the Fed’s economic outlook which said that near-term risks had receded. However this was balanced by the need to keep a close eye on external factors such as widespread geopolitical issues and sub-par inflation.
We’re back to where we were yesterday morning in terms of US equities although with a weaker USD this gives hope to market bulls looking for new highs. Note Durable Goods Orders disappointed yesterday, but the print is known for its volatile behaviour. Dollar-sensitive Gold has posted overnight gains with a strong move up above $1335 as the 50- and 200-hour moving averages make a bullish cross.
A surprise weekly 1.67m barrel build-up of Crude at US storage facilities saw big declines in oil prices, this adding to an existing gasoline glut (3rd consecutive week of growth). Both Brent and WTI are in consolidation mode ahead of another leg down which could see the markers fall back towards  $40.
Focus today will be on last night’s US Fed monetary policy update. A less hawkish tone than expected, in the face of recent stateside data strength and post-Brexit calm still leaves the door ajar for another US hike this year (September? December? We doubt it still). However, this would remain in stark contrast to global peers doing the exact opposite - boosting stimulus - effectively doing the Fed’s work for it, the reciprocal of their action keeping the USD strong, tightening policy indirectly.
Data-wise, German Unemployment is seen almost unchanged in July, however, any deviation from consensus could influence the DAX. The same is true for Eurozone Confidence figures which are expected a shade lower in July, which is understandable in light of the UK's Brexit vote. Any marked improvement in German Consumer Price Inflation (CPI) would surely be music to ECB President Draghi’s ears as he wills the Eurozone out of deflation.
Stateside, watch out for the Kansas City Fed Manufacturing emulating its Dallas and Richmond Fed counterparts with a bigger than expected July rebound this week which could boost sentiment for US equities and give a fillip to Wall Street as we move towards the European close. Note also that the ECB’s Costa and Coeure are both speaking.

Thu, 28 Jul 2016 08:17:00 +0100
VSA Capital Market Movers - Anglo American, KAZ Minerals Anglo American (LON:AAL)

Anglo American (LON:AAL) following weak production results has reported weak interim financial results. Revenue in H1 2016 of US$10.62bn was down 20% YoY while EBITDA of US$2.45bn was down 25% YoY. However, the net loss for the period was significantly reduced from US$3.02bn to US$0.81bn due to fewer one offs. Following its suspension in December 2015 there was no dividend announced.

Although commodity prices rallied through the period, they typically averaged lower YoY and this was insufficient to offset weaker production in copper as well as disruption at the Kumba iron ore operations and diamond production curtailments. More positively deleveraging continued with net debt down from US$12.9bn to US$11.7bn since December 2015.

With earnings remaining under pressure and operational issues continuing to dog AAL, the stock is our least preferred of the diversified majors. 

KAZ Minerals (LON:KAZ)

Kaz Mineral (LON:KAZ) has reported strong Q2 2016 results following the commissioning of Bozshakol and ramp up at Aktogay. Q2 2016 copper cathode production of 23.6kt was up 16% QoQ and 34% YoY. KAZ is on track to meet guidance of 130-155kt of copper in 2016.

Although copper grades have been significantly diluted by the advent of the new mines, the likely increase in costs in the near term is likely to be offset in part by the strong increase in gold production. Q2 2016 gold production doubled QoQ and was up 169% YoY to 26.1koz which was largely due to the new contribution from Bozshakol.

Thu, 28 Jul 2016 08:14:00 +0100
Beaufort Securities Breakfast Alert: ANGLE, ARM Holdings, Dignity, James Cropper, Taylor Wimpey, Tullow Oil Markets

The FTSE-100 finished yesterday's session 0.39% higher at 6,750.43, whilst the FTSE AIM All-Share index closed 0.66% better-off at 751.23. In continental Europe, markets ended in the green, boosted by positive corporate earnings and better-than-expected economic data in the UK. Investors awaited the monetary policy decision of the US Fed. France's CAC 40 and Germany's DAX rose 1.2% and 0.7%, respectively.
Wall Street
Wall Street ended slightly lower after the US Fed decided to keep interest rates unchanged and informed near-term risks to the economic outlook have reduced. Weak oil prices and mixed corporate earnings releases impacted investor sentiment. The S&P 500 dropped 0.1%, with the consumer staples sector losing the most.
Equities are trading lower as investors digested the US Fed's policy decision and await results of Bank of Japan's meeting. The Nikkei 225 shed 1.1%, as a strong yen exerted pressure on export-driven stocks. The Hang Seng was trading 0.3% down at 7:00 am.
Yesterday, Brent oil prices fell 3.1% to US$43.47 per barrel, whereas WTI prices dropped 2.3% to US$41.92 per barrel.

UK economic growth picks up in Q2 2016
UK's GDP grew 0.6% q-o-q in Q2 2016, as per preliminary estimates from the Office for National Statistics. This was faster than 0.5% forecast by economists and 0.4% in Q1 2016. The growth is mainly led by the biggest upturn in industrial production since 1999, particularly in car factories and pharmaceutical firms. On y-o-y basis, GDP increased 2.2% in Q2 2016 versus expectation of 2.1%.

Company news

ANGLE (LON:AGL, 67.0p) - Speculative Buy
ANGLE, the specialist medtech company, yesterday announced that it has initiated an ovarian cancer study in the United States, in addition to its recently opened European ovarian cancer study. The US study is being led by Dr Richard Moore at the University of Rochester Medical Center Wilmot Cancer Institute (New York State). Preparation and approvals for the US ovarian cancer study (known as the ANG-003 EMBER study) have been ongoing over recent months. The study has now been formally opened and the first few patients have already been recruited. The EMBER study is designed to enrol approximately 200 women with a diagnosed pelvic mass who are scheduled to undergo biopsy, laparotomy or laparoscopic surgery at the University of Rochester Medical Center. Enrolment will continue until a total of 50 evaluable women with a histopathologically confirmed malignancy have been identified. Blood from consenting patients will be processed using the Parsortix system to harvest any circulating tumour cells (CTCs) that may be present for evaluation. The Parsortix harvests from the women enrolled into the study will be evaluated for the presence of markers associated with malignancy in ovarian cancer cells. These results will then be compared with the histopathological diagnoses post-surgery to assess their association with whether the pelvic mass is benign or malignant. Additionally, a portion of the Parsortix harvest from each patient will be stored so that it can subsequently be used for verification of the molecular markers identified in ANGLE's European ovarian cancer study (ANG-001) as being optimal for the detection of ovarian cancer CTCs harvested by the Parsortix system.

Our view: There remains a large unmet medical need to accurately discriminate benign from malignant pelvic masses before surgery. The initiation of this US study reflects ANGLE's determination to secure substantial patient data from multiple locations as soon as possible to demonstrate the effectiveness of the ovarian clinical application and support regulatory approval. It builds upon ANGLE's formal collaborations with a world-class cancer centres from where key opinion leaders are working to identify applications with medical utility (clear benefit to patients) and to secure clinical data that demonstrates that utility in patient studies. Significantly in this respect, ANGLE differentiates itself from other medtech companies claiming similar abilities. In recent months, the medical world has become aware of a number of new, innovative, but early stage, non-invasive tests (be they derived from blood, saliva, sweat, antibodies etc.) that are apparently also capable of elementary and accurate detection of cancer. The fact remains, however, that detection in the form of a simple 'most probably yes' or 'most probably no' is, in fact, of only limited use unless the test is also capable of capturing or harvesting the same cancer cells for laboratory analysis. Without this, doctors will remain unable to ascertain key information, including identifying the cancer itself along with the extent to which it is aggressive or benign and therefore how to treat it. As such, ANGLE is the only such detection technology that is capable of offering such analysis and so, in Beaufort's opinion, is much more likely to become the globally recommended standard for hospitals and associated medical institutes. Recently, the Group secured major new funding from professional investors to progress clinical studies, which are expected to be sufficient to cover the next 2 years of planned clinical studies. Assuming all goes to plan, ongoing studies of ovarian cancer should have sufficiently concluded to permit first commercial sales to EU hospitals during 1H'2017. Beyond this, FDA authorisation for metastatic breast cancer is expected to be secured through substantive studies defined by three major US-based centres. Successful conclusion here, potentially offers scope for initial North American commercial sales for MBC later in 2017. Further indications, including ovarian and prostate will seek a similar route with the FDA. Importantly also, ANGLE management is already advanced in its discussions regarding necessary reimbursement codes for medical insurance in the States. Yesterday's news was a further important step for ANGLE and Beaufort retains its Speculative Buy recommendation on the shares.
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ARM Holdings (LON:ARM, 1,675.0p) - Hold
ARM Holdings declared its unaudited financial results for Q2 2016 and H1 2016 ended 30th June 2016. Revenue increased 17% y-o-y to £267.6m in Q2 2016 and 19% y-o-y to £544.1m in H1 2016. Operating margin declined to 35.4% in Q2 2016 from 40.4% in Q2 2015. Pre-tax profit increased 1% to £95.9m in Q2 2016, leading to EPS of 6.3p, up 17% y-o-y. Meanwhile, pre-tax profit increased 5% to £208.0m in H1 2016, leading to EPS of 12.8p, up 12% y-o-y. Net cash increased to £208.5m in H1 2016 from £161.8m in H1 2015. In Q2 2016, ARM Holdings acquired Apical, a global leader in imaging and embedded computer vision, for an upfront cash payment of £237.9m and a £13.6m contingent consideration. The company signed a partnership agreement with HOPU Investment Management, a Chinese private equity firm, to launch an industry fund focused on the Internet of things (IOT), smart devices, big data and cloud computing. ARM Holdings signed 25 processor licenses by a broad range of major technology companies. It received major strategic design contracts from NASA for embedded computing, Fujitsu and RIKEN for high-performance supercomputing, and other leading organisations. ARM Holdings signed five licences for ARM Cortex-A technology for high-performance and -efficiency app processors. Post the period, ARM Holdings signed an agreement on the terms for an all-cash acquisition of its entire issued and to-be-issued capital by Japan-based SoftBank. The consideration amount for the agreement is £24.3bn. ARM Holdings declared an interim dividend of 3.78p vis-à-vis 3.15p in the same period last year.

Our view: ARM Holdings delivered a good performance in H1 2016. During H1 2016, revenue growth was driven by a 23% rise in total technology royalty revenue to £288.0m. Technology licensing revenue registered a 16% increase to £212.5m. In Q2 2016, ARM Holdings shipped 3.6 billion chips, up 9% y-o-y. Demand for ARM Holdings' technology remained robust, evident from the number of licence agreements signed by the company in Q2 2016. Strong revenue and profit generation paved the way for high dividend. ARM Holdings undertook several initiatives, including a tie-up with HOPU Investment Management, to focus on IOT, smart devices, big data and cloud computing. The company's acquisition of Apical enhances its expertise in visual computing, a rapidly advancing field, which is enabling smart buildings, augmented reality, self-driving cars and advanced robotics. Beaufort regards the recent Recommended Offer from Softbank as the end-game for one of the UK's most successful technology stories of recent years. Appearing to have carefully engineered this all-cash take-over, with buy-in from both existing customer and regulator while also combining a pleasing sop for a sensitive UK government, suggests first class execution that is unlikely to challenge by other interested or envious peers. Accordingly, with little expected arbitrage now to go for, Beaufort suggests investors might like to put their gains to better effect elsewhere in the UK market where multiple post-Brexit opportunities presently exist. Beaufort reiterates its HOLD rating on the shares.
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Burford Capital (LON:BUR, 392.0p) - Buy
Burford Capital (Burford) declared its results for the half year ended 30th June 2016 (H1 2016). Income increased 88% y-o-y to US$76.2m and operating profit rose 117% to US$61.7m. Consequently, pre-tax profit soared 135% to US$55.8m leading to an EPS of 25.52 cents, 125% higher than H1 2015. Organic cash was reported at US$99m, including US$84m from litigation finance investments. Burford declared an interim dividend of 2.67 cents for H1 2016, payable on 28th October 2016, vis-à-vis 2.33 cents in H1 2015.

Our view: Burford registered a strong performance for H1 2016 despite volatility in financial markets. It registered a sharp rise in income, primarily due to a 110% y-o-y increase in income from litigation investment to US$64.4m. Its profit more than doubled in H1 2016, enabling it to increase returns to shareholders. Demand for Burford's capital remains solid, with new commitments to investments of US$200m (H1 2015: US$81m) at an average commitment level of more than US$10m. We are buoyed by Burford's performance in H1 2016 and look forward to further updates. Beaufort places a Buy recommendation on the stock.
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Dignity (LON:DTY, 2,682.0p) - Hold
Dignity, the UK provider of funeral related services, yesterday announced its interim results for the 26 week ended 24 June 2016 (H1 FY2016). During the period, revenue and operating profit declined by -0.4% and -6% to £158m and £54.7m, respectively, against comparable period (H1 FY2015). Pre-tax profit fell -7.8% to £41.5m, consequently, basic earnings per share reduced by -7.2% to 65.9p. The number of deaths was 302,000 compared to 317,000 in H1 FY2015. On the operational front, the Group acquired six funeral locations for £5.4m, of which, five satellite locations has already opened. Post the period, the Dignity has acquired one funeral location and opened three satellite locations. On top of this, the Group also announce the acquisition of five crematoria from Funeral Services Limited (trading as Co-op Funeralcare) for £43m on 31 May 2016. Acquisition of three freehold and one leasehold crematoria is now completed and the remaining leasehold crematoria is expected to complete during September 2016. The Board confirmed that the results are in line with its full year expectations. The Group proposed interim dividend of 7.85p per share, up +10%.

Our view: Dignity performed well during the first half of FY2016, delivering results slightly ahead of the Board and market's expectations. This was helped by improved Q2 underlying operating profits (excluding profit/loss on sale of fixed assets and external transaction costs) of £0.6m year-on-year. This H1 performance was delivered, despite its comparable period experienced an exceptional rise in death count versus the long term trends (being +7% higher than the comparative period, a highest rate of change in over 60 years). This was due to surge in mortality numbers driven by dementia and Alzheimer's related deaths and respiratory diseases (including flu) among older people (source: Office for National Statistics). Management has noted on a number of occasions already, however, that FY2016 will see the rate return to trend. Comparing the H1 FY2016 figures, on the other hand, with the more normalised numbers of H1 FY2014, underlying operating profit and underlying earnings per share was approximately +22% and +45% higher, respectively. The share price, however, given its spike of +9.5% since the outcome of Brexit vote, we now consider the shares correctly valued and Beaufort downgrades its recommendation from BUY to HOLD.
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James Cropper (LON:CRPR, 887.50p) - Buy
James Cropper released a trading update for the first quarter (Q1 2017). The company reported a 9% y-o-y rise in group sales. James Cropper's paper (Paper) and technical fibre product (TFP) divisions both registered sales growth (on a y-o-y basis). Developments at the company's new subsidiary James Cropper 3D Products remain on track. The first moulding machines were successfully commissioned during the period, and customer trials were undertaken. James Cropper's capital investment plans, and recruitment and R&D activities remain unchanged.

Our view: James Cropper has started the year on a strong note. Its performance in the first quarter was in line with expectations. The company's divisions registered positive growth during the period. Paper growth was largely due to the company's focus on high-value niche markets such as packaging, creative papers and digital. TFP's performance was driven by the energy, aerospace and industrial markets. According to James Cropper, its growth plans for the year would not be affected by Brexit. The company's exposure to currency has been alleviated by growing exports, which remain a key focus for the management. TFP plans to use its manufacturing capacity to increase sales into the aerospace, green technology and defence markets. The company would continue to focus on the development of its paper product portfolio in profitable niche markets. We are encouraged by James Cropper's performance in the first quarter and expect it to meet full-year results' expectations. Beaufort places a Buy recommendation a Buy rating on the stock.
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Taylor Wimpey (LON:TW., 154.60p) - Buy
Taylor Wimpey, the UK focused residential developer, yesterday announced its half year results for the period ended 3 July 2016 (H1 FY2016). During the period, total completions (excluding joint ventures) advanced by +3% to 6,019 homes and total average selling price expanded by +5.8% to c.£238k, against the comparable period (H1 FY2015). With margin maintained flat at 19.2%, pre-tax profit jumped +12% to £266.6m. Consequently, basic earnings per share improved by +13.8% to 6.6p. Net cash balance at the period-end stood at £116.7m (end-H1 FY2015: £87.6m), and return on net operating assets improved by +2% to 25.2%. The Group operate c.78k plots of short-term landbank where over 60% sourced from the strategic land pipeline. Post the period, as at 24 July 2016, the total forward sales (excluding joint ventures) grew by +11.6% to £2,237m. Taylor Wimpey's CEO, Pete Redfern commented "We have delivered a strong operational and financial performance with continued growth in profitability, building over 6,000 new homes across the country during the first half of 2016. We remain fully committed to the Dividend Policy we announced earlier this year which will deliver increased returns to shareholders." The Group declared interim dividend of 0.53p per share, up +8.2%, to be paid on 7 October 2016. The Group announced total dividend for FY2016 to be around £356m, or 10.91p per share.

Our view: As expected, Taylor Wimpey delivered strong performance for the H1 FY2016. While management chose to echo its peers, chorusing a verse of 'whilst it is still too early to assess the longer term impact of Brexit…', it nevertheless was able to confirm that the minor rise in the average cancellation rate that immediately followed the Referendum has since returned to the previous low level and that current trading remains in line with normal seasonal patterns. Whilst the ultra-premium housing market in central London continued to slow due to the impact of various government actions (including escalating Stamp Duties plus additional levies on international corporate purchases), the continuing supply-demand imbalance, low interest rates, government incentives and a 'business-as-usual' attitude by lenders has kept customer interest high elsewhere in the UK. As an experienced housebuilder who has been operating through a viciously cyclical sector, Taylor Wimpey has enhanced its net cash position by +33.2% to £116.7m in the H1 FY2016 year-on-year, and adopting 'selective land replacement' mode in the short term land market, maintaining short-term landbank between 75-80k plots. In FY2016, total dividend (including special dividends) of c.£356m (c.10.91p per share) will be paid to the shareholders, while in FY2017, the Board anticipates paying a total of £450m (including special dividends) or c.13.8p per share, up +26.5% versus FY2016, indicating a yield of 9% (based on a 154p share price). As previously announced, the Group remain fully committed to deliver increased returns to shareholders throughout the housing cycle, which reflects the Board's continuing confidence in its future prospects. In view of the apparent 'phoney bear market' that hit the housebuilder sector hard on immediate confirmation of Brexit, its lowly rating and good visibility still makes it an obvious choice for income investors. More specifically for Taylor Wimpey, an attractive current year dividend yield (7.1%), strong balance sheet and excellent order book with c.90% forward sold for FY2016, keeps the shares on Beaufort's BUY list, having upgraded the housebuilders back to overweight a month ago.
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Tullow Oil (LON:TLW, 204.80p) - Speculative Buy
Tullow's half year results were well flagged in Tullow's announcement on 30th June 2016 and reported in our Breakfast News on 1st July 2016. The first half profit after tax was $30 million. Lower revenues on prior year as a result of lower commodity prices and reduced Jubilee production, which is the subject of an insurance claim, were partially offset by significantly lower costs and write-offs. Net debt at 30 June 2016 was $4.7 billion with facility headroom and free cash of $1.0 billion. Additional headroom of $300m added through a successful Convertible Bond issue on 6 July, further diversifying sources of debt. Mark-to-market value of oil hedges of over $300 million at 30 June 2016; 38,500 bopd of second half 2016 oil production hedged at average floor price of $74/barrel. Importantly, the TEN Project is on schedule and on budget to deliver first oil in early August. TEN will increase Tullow's group net production by c. 60% when it reaches facility capacity around the end of 2016, enabling Tullow to deleverage organically. The Jubilee field's new operating procedures are working well with second half 2016 gross production expected to average 85,000 bopd. A project to spread moor the FPSO for the long term has commenced and insurers have been notified. East Africa upstream and pipeline projects in Kenya and Uganda moving towards FEED. Kenya Early Oil Pilot Scheme, with potential to deliver 2,000 bopd by the second half of 2017, being assessed with the Government of Kenya. The successful Kenya appraisal programme underpins estimated gross recoverable resource of up to 750mmbo. Exploration and appraisal programme to restart in the South Lokichar Basin in Q4 2016. New licences signed in H1 2016 in Zambia and Guyana; pre-drilling and scoping activities under evaluation in Suriname, Guyana, Jamaica, Uruguay and Namibia.

Our view: The start of production from the TEN field in early August will be transformational for the Group allowing Tullow to significantly increase its net production and begin the process of deleveraging its balance sheet. This project has remained on schedule and on budget since the day the Plan of Development was signed and demonstrates the Company's ability to deliver complex projects of this nature. The benefits of last year's cost-cutting programme are evident in the financial results, the significant TEN capital expenditure is largely complete and good progress has been made on the Jubilee Turret Project. Tullow is therefore well placed to move forward with a restructured and more efficient business that can deliver growth from its portfolio of high quality, low cost producing, development and exploration assets. We reiterate our Speculative Buy stance.

Thu, 28 Jul 2016 08:08:00 +0100
In the news: Burey Gold, Cornish Mining & Base Resources Burey Gold†† has continued to release impressive drill results from its 55%-owned Giro Gold Project in the north-eastern DRC. Shallow RC drilling has been testing 1km of the 4km x 2.5km Douze Match anomaly. Significant intercepts from the latest results included: 9m at 17.5 g/t, 13m at 8.4 g/t, 6m at 8.73 g/t and 17m at 2 g/t. The next set of results is expected in mid-August. The company will also commence an infill drilling programme at Kebigada to provide a maiden inferred resource end-2016/early-2017. For further details, see the Companies section below.
Elsewhere, long-time readers will know all about my affection for Cornish mining. As I while away the weeks until the second series of Poldark begins (put it in your diaries — 4 September), I’m delighted to see that the history of the area is being celebrated. A giant puppet, the snappily titled Cornish Man Mining Engine, is making its way along a 130-mile journey from Tavistock in Devon to the Geevor tin mine at Pendeen in Cornwall, representing the length of the Cornish Mining World Heritage Site to mark the tenth anniversary of the Cornwall and West Devon mining landscape being added to this list by Unesco. You can get the basics here.
I'll be keeping an eye on the puppet’s progress. I’m sure the frolics and capers will be endless, so I’ll let you know when anything happens. It does frustrate me that our proud mining history is generally so ignored. While the millennials look down on this as a ‘dirty’ industry, it’s been going on for centuries and has powered the economic growth of this country. We’ll see if the new PM has any appetite for reining in some of the renewable legislation that was supported by the previous administration. Finally, if you haven’t had a chance to read it yet, I’d thoroughly recommend having a look at Jim Taylor and COMPANIES

BYR : AU | A$0.068 | US$69m | Speculative Buy
Douze Match Delivers more High-grade Assays
Burey Gold announced the results of a further 31 shallow scout RC drill holes from the Douze Match prospect on its 55%-owned Giro Gold Project in the north-east of the DRC. The results included:
• 9m at 17.5 g/t from 6m, including 3m @ 156 g/t from 6m
• 13m at 8.4 g/t from 36m, including 6m at 17.6 g/t from 42m
• 6m at 8.73 g/t from 15m, including 3m at 1.9 g/t from 15m
• 17m at 2.0 g/t from 20m, including 7m at 2.9 g/t from 20m
All assays for this scout drilling programme were completed on 3m composite samples. The anomalous samples from this will be re-assayed on individual sample metres, with results expected to be available in mid-August. It was reported that visible gold had been panned from holes with assays pending.
Another RC rig has been contracted to commence a 7,500m infill drill programme at the Kebigada prospect, the area 15km SSE of Douze Match, where the company had focused its attention until late 2015. This programme is designed to allow a maiden inferred JORC resource for Kebigada to be calculated by around the end of 2016.
COMMENT: While the assay results were not as spectacular as some included in the announcement of 24 June, further high grade material was intersected on Line 4 and additional high grades were reported on Line 3.
The results from the 31 reported holes include some significant intervals that confirm the presence of widespread, high-grade gold mineralisation at the Douze Match prospect. As acknowledged by the company, further work is needed (and planned) in order to determine fully the orientation of the mineralised zones, controls on mineralisation, grades, true thicknesses and depth extent.
We believe that these results are encouraging — in some cases remarkable — and that they demonstrate the prospectivity of the greater Giro Project area. We also look forward to completion of the infill drilling programme at Kebigada and the estimation of a maiden resource, which is due around the end of the year, for which we suggest that a resource of around 2.0Moz of gold at a grade of 1.5-2.0 g/t may have been outlined.
We continue to recommend the company as a Speculative Buy.

The shallow RC programme was designed to test approximately 1km of strike of the 4km by 2.5km soil anomaly at Douze Match — A total of 31 shallow holes drilled on Lines 2, 3, 4 & 6 were reported, totalling 1,249m (an average of 40m).
Plan Showing Drill Fence Locations at the Douze Match Target Area


The company reported that the drilling identified three target areas that will be followed up with further conventional RC and diamond drilling — This will be used to determine the true widths of mineralisation, grade and continuity at depth. These zones are a high-grade quartz breccia zone on Line 4 and a granite/volcanic contact zone and sulphide-rich shear zone on Line 3.

Section Across Line 4

Holes DMRC 040 and DMRC 041 — These were drilled in the centre of Line 4 (see above) and were reported to have intersected the same quartz breccia zone from which spectacular assay results (2m @ 196 g/t and 15m @ 256 g/t) were reported on 24 June. Hole DMRC 040 returned 9m @ 17.5 g/t, although the best interval from DMRC 041 was 5m at 1.5 g/t.

Section Across Line 3

Holes DMRC 019 and DMRC 020 — High-grade mineralisation was also reported in these holes at the north-western end of Line 3 (see above). These holes returned results including 13m @ 8.4 g/t and 6m @ 8.7 g/t respectively. The holes were reported to have been drilled on the contact along the north-east trending contact of the granite and mafic volcanic units. Extensive Belgian and artisanal workings to the south-west of these holes on the same shear were to be followed up.

Holes DMRC029 and DMRC036 — These were drilled at the south-east end of Line 3. The two holes were reported to have intersected a zone of mineralisation with more than 5% sulphides. Significant assay results from these two holes included 17m at 2.0 g/t and 9m at 1.6 g/t respectively.
Results from Line 2, to the west of the interpreted shear zone were disappointing — As were those on Line 6, to the east of the high-grade material of Line 4.



Wed, 27 Jul 2016 11:45:00 +0100
Brokers: Centrica in favour with Credit Suisse Wed, 27 Jul 2016 10:53:00 +0100 Today's Market View - Antofagasta, Berkeley Energia, Connemara Mining, DiamondCorp, W Resources, Metminco, Kumba Iron Ore Antofagasta (LON:ANTO) HOLD – Production forecast at risk as group targets for lower end of targeted range
Berkeley Energia (LON:BKY) – Infrastructure development work underway
Connemara Mining (LON:CON) – Drilling results from Inishowen, Donegal
DiamondCorp (LON:DCP) –Suspension of underground mining at Lace lifted
Kumba Iron Ore (JSE:KIO) – Results for 6 months to 30th June show margin recovery
Metminco* (LON:MNC) – Departure of Chairman
W Resources (LON:WRES) – First blast at La Pariilla

CAT - was the best performing stock on the Dow Jones yesterday after earnings beat expectations.
• Big miners chasing ever lower grades in existing mines and buying more energy efficient trucks appears to have offset a stronger US dollar.

Dow Jones Industrials   -0.10% At 18,494  
Nikkei 225   +1.72% At 16,665 -        Japanese stock are up today on press reports the BoJ will issue a Yen 28tr ($268bn) stimulus package
HK Hang Seng   +0.40% At 22,219  
Shanghai Composite   -1.91% At   2,992  
FTSE 350 Mining   +1.59% At 11,665  
AIM Basic Resources   +2.05% At   2,246 –  AIM resource stocks rise 48% since the January low

US – House prices recorded a weaker than forecast increase in the last 12 months in May while new house sales hit the highest level in Jun supported by low borrowing interest rates and steady labour markets.
• Growth in the services industry steadied in Jul posting the weakest growth pace in six months.
• Composite PMI index tracking both services and manufacturing sector ticked up driven by gains in the industrial segment.
• The latest consumer confidence report released yesterday showed the gap between consumers current assessment and future expectations continued to widen.
• “Consumers were slightly more positive about current business and labor market conditions, suggesting the economy will continue to expand at a moderate pace,” Conference Board said.
• Fewer Americans expected an in increase in their incomes and an improvement in business conditions in the next six months in Jul compare to Jun.
Date Index Period Actual Expected (Bloomberg) Previous
Tuesday S&P/CS Property Prices May -0.1%mom/5.2%yoy 0.1%mom/5.5%yoy -0.2%mom/5.4%yoy
  Consumer Confidence Jul 97.3 96.0 97.4
  - Current Situation Jul 118.3   116.6
  - Expectations (next 6 months) Jul 83.3   84.6
  New Home Sales Jun 3.5%mom 1.6%mom 0.0%mom
Wednesday Durable Goods/Core Jun   -1.1%mom/0.3%mom -2.3%mom/-0.3%mom
  Capital Goods Orders Jun   0.2%mom -0.4%mom
FOMC Rate   0.25%-0.50% 0.25%-0.50%
Thursday Weeklyt Jobless Claims     263k 253k
Friday GDP (1st reading) Q2  2.6%qoq 1.1%qoq
  Core PCE     1.7%qoq 2.0%qoq
Source: Bloomberg    

China – Industrial profits have stabilised showing a 5.1%yoy increase in Jun indicating fiscal and monetary efforts to support the economy during the transitionary stage show results.

Japan – PM Shinzo Abe said the government is looking at launching a ¥28tn ($265bn) stimulus programme aiming to revive economic growth rate.
• The PM speech was short on details and how much of that money is new spending.
• The package should be complete next week.
• Topix index close 1.1% higher today while the yen has come off 0.7% on the news.

UK – The pound is set to strengthen on the back of better than forecast Q2 GDP growth numbers.
• Q2 GDP: 0.6%qoq/2.2%yoy v 0.4%qoq/2.0%yoy in Q1/16 and 0.5%qoq/2.1%yoy forecast.
• Industrial sector is reported to have recorded the best quarter since Q3/99 climbing 2.1%qoq following a 0.2%qoq decline in Q1/16
• Services growth slowed down a little to +0.5%qoq v +0.6%qoq in Q1/16 on the back of a weaker growth in business services and finance industries ahead of the Brexit vote.
• All in all, industrial and services sectors added 0.3pp and 0.37pp to growth, respectively; while, agriculture and construction posted quarterly declines.

Australia – The Australia dollar spiked against the US$ on the release of weaker than expected inflation data for Q2/16, but has since come back and is trading below pre-announcement levels as markets continue to expect the RBA to cut rates next week.
• Last time the RBA cut rates was in May/16 taking the cash rate target to 1.75%. down from 2.0%, following weak Q1 inflation data.
CPI: 0.4%qoq/1.0%yoy v -0.2%qoq/1.3%yoy in Q1/16 and 0.4%qoq/1.1%yoy forecast.

Air France warns that France is a dangerous destination
• This is a surprising statement from a national carrier to warn that its home territory is a dangerous place to fly to.
• We do understand there are many dangers in France the Tour de France, roundabouts, crusty Baguettes, Steak Tatar, ripe Cambembert, the Tour de France, over use of Garlic

Fireman Sam – episode withdrawn due to Koran slip
• Fireman Sam or more precisely one of his Fireman colleagues has slipped up on a page of the Koran in an episode which has now been withdrawn.
• The BBC has said it would no longer work with the animation studio responsible.  Next episode Fireman Sam and the Fat wa.

US$1.0994/eur vs 1.1007/eur last week.    Yen 105.54/$ vs 104.35/$.    SAr 14.280/$ vs 14.400/$    $1.311/gbp vs $1.310/gbp.   
0.749/aud vs 0.752/aud.    CNY 6.671/$ vs 6.675/$. 

Commodity News
Precious metals:
Gold US$1,320/oz vs US$1,321/oz last week
Gold ETFs 64.2moz v 64.3moz last week –
Platinum US$1,096/oz vs US$1,087/oz last week
Palladium US$689/oz vs US$684/oz last week
Silver US$19.60/oz vs US$19.68/oz last week
Base metals:   
Copper US$ 4,896/t vs US$4,869/t last week –
Aluminium US$ 1,598/t vs US$1,607t last week –
Nickel US$ 10,355/t vs US$10,280/t last week –
Zinc US$ 2,221/t vs US$2,223/t last week –
Lead US$ 1,829/t vs US$1,839/t last week
Tin US$ 17,745/t vs US$17,725/t last week –

Oil US$44.6/bbl vs US$44.4/bbl last week
Natural Gas US$2.676/mmbtu vs US$2.713/mmbtu last week
Uranium US$25.50/lb vs US$25.20/lb last week –

Lithium - Porsche reported to be hiring for electric car project
• Porsche is reported to be spending around €1bn on Mission E a battery powered sports car to rival the Tesla Model S
• We ask what took them so long?
• Electric vehicles offer vastly improved performance in terms of weight, balance, ride quality etc.  and you don’t get a noisy, smelly engine in the back.
• The only downsides are range, power availability for the air-conditioning and that old fashioned noisy engine sound.
• So, how will the UK grid supply power for all these new Plug in EVs and then how will the government tax them given the loss of duty on fossil fuels?
• And how will everyone recharge their EVs?
• The scene is set for EVs to take over just as soon as better batteries emerge – and improvements to manufacturing processes mean better batteries are on the way

Iron ore 62% Fe spot (cfr Tianjin) US$56.4/t vs US$54.7/t –
Iron ore - Iron ore futures are up for a third day in China on speculation for increased demand amid reconstruction and restocking post floods in northern China.
• Sep futures on the Dalian Futures Exchange increased 4% to CNY 464 ($70/t) and are up more than 6% this week.
• Spot iron ore prices added 2.2% to $58.1/t yesterday, the highest in more than a week, MetalBulletin reports.

Thermal coal (1st year forward cif ARA) US$60.3/t vs US$58.5/t last week

Tungsten - APT European prices $180-190/mtu vs $175-185/mtu on last week – a small rise in prices and not a fall as previously mentioned, sorry.

Company News

Antofagasta (LON:ANTO) 493p, Mkt Cap £4.9bn – Production forecast at risk as group targets for lower end of targeted range
• Antofagasta report a mixed set of production numbers today with production forecasts now targeting the lower end of the 710-740t range.
• Management warn of the risk to production from project work.
• Group copper production rose 5.8% qoq in Q2 to 166,200t
• Net cash cost fell 2.3% in Q2 to 125c/lb, Cash cost fell by 3.7% qoq to 157c/lb. 
• H1 output at 323,300t is likely to disappoint the market against many more bullish forecasts
• H1 cash costs fell by 28c to $1.60/lb
• Guidance:  management are now guiding to 160c/lb and 130c/lb post credits of moly, gold and silver.
• Capitalisation of stripping costs:  management are now capitalising stripping costs at Los Pelambres, while this is not particularly unusual for a mining company the change of policy looks more like a method of massaging the cost numbers lower. The move accounted for an 8c/lb cut in group costs through H1. 
• Los Pelambres:  continues to perform well with copper production rising 9.2% through the quarter to 89,800t vs 82,200t driven by better grades and higher throughput following major maintainece in Q1.  Cash costs for Los Pelambres remained steady at an impressive 1.33c/lb and were 34c/lb lower yoy or 20c/lb lower before the deferring of the stripping charge “with lower material movement and lower input prices being the main contributors.”
• Antucoya:  The new Antucoya mine is now at commercial production but a fatality at the mine is a bad sign and a very unfortunate event all round for a company with good historical record.  Antucoya produced 14,400t in Q2 as throughput rose vs 12,700 tonnes of copper in Q1.  Grades fell back to 0.35% from 0.42% in Q1 causing recovery rates to fall Antucoya cost $1.9bn to build.  Sales and costs are no longer being capitalised at Antucoya now that commercial production has been declared with production ramping up to a rate of 85,000tpa. 
o Centinela:  lower throughput caused Q2 production to fall despite better grades and better recovery rates.  Total copper production at Centinela was 48,300t vs 49,800t despite better grades as throughput fell due to repairs to the plant.  Management expect to mine significantly higher grades through the second half with better throughput also expected.
o Zaldivar (50%):  has now been integrated into Antofagasta.  Production rose through the quarter to 13,600t in Q2 vs 12,400t in Q1.  Grades also fell at Zaldivar as throughput rose, though recovery rates were also better helping cash costs to fall to 1.42c/lb vs $1.59/lb last quarter.
o Michilla:  remains on care and maintenance but could restart if copper prices rise again.
o Molybdenum production fell to 1,600t in Q2 vs 1,700t in Q1.  Production is variable according to which parts of the mine are being worked through each period. 
o Chile is showing disturbing signs of a regression to populist, anti capitalist/foreigner/foreign ownership sentiment.  It looks as if the stability of most of the last 20 years are over and that a less stable and reliable environment is in place.  Codelco are having to go out for large scale government-backed debt syndicates just to sustain current production levels with little in the pipeline of any great consequence.
 Copper market:  Chinese copper smelters are reported to be ramping up production as margins improve on a surplus of lower cost copper concentrates and on lower local energy prices.  The relative strength of the US dollar versus a recently depreciated renminbi also serves to stimulate Chinese copper production.   These factors are likely to have a depressing effect on copper prices in the short term. 
 Risks:  the group reports that inherent risks will persist until the tailings thickeners at Centinela and the ramp-up at Antucoya are completed. 
Conclusion:  Disappointing production performance in Q2 makes the year end production forecast yet more challenging even with the ramp up of Antucoya and contribution from Zaldivar. The fatality at Antucoya is a sign that production may have been chased at the cost of safety while a further fatality in the Transport division is also unfortunate and does not bode well for the group.

Berkeley Energia (LON:BKY) 49.3 pence, Mkt Cap £97.7m – Infrastructure development work underway
• Berkeley Energia reports that “work has now commenced on the road realignment and power line upgrade ahead of the main construction.”
• The road and power realignment will clear the way for initial mining at the first pit at Retortillo and the company has made progress “with equipment ordering, contractual permitting and with work on the ground which commenced recently.”
• Although exploration and evaluation of the Salamanca Uranium Project has been underway for the past ten years at a cost of over US$60m, the start of initial construction work is a milestone in the evolution of the project which is expected to become “Europe’s largest uranium mine, [and] one of the world’s top ten producers”.
• Based on the Definitive Feasibility Study (DFS)The mine will have an initial life of 14 years, however drilling is continuing both to upgrade currently known inferred resources and to investigate additional near surface targets within a ten km radius of the processing plant . Any success with these efforts provides the potential for significant extensions to the mine life.
• “The Company is of the view that whilst uranium prices will remain soft in the near term, in 2018, when Salamanca is scheduled to come on line, the market will be dominated by US utilities looking to re-contract. These utilities will also be competing with Chinese new reactor demand, which may lead to higher prices.”
• Following the recent royalty agreement with its major shareholder, Resource Capital, the company expects to receive an additional US$5m to bolster 30th June cash balances of A$11.3m shortly.
• The company is considering a range of financing options for the initial US$95.7m capital expenditure “with a view to fully funding the project’s development during the second half of 2016.”
Conclusion: The Salamanca Uranium project continues to be well funded for the completion of its preliminary work while a range of financing options for the full development are likely to be available for consideration during the second half of 2016.

Connemara Mining (LON:CON) 2.6p mkt cap £2m – Drilling results from Inishowen, Donegal
• Connemara Mining reports gold mineralisation in the first two holes of a four-hole drilling programme at its Inishowen project in County Donegal.
• The drilling, which is reported to be the second drilling programme in the area, has encountered what the company describes as “a new gold system … contained within quartz calcite veins, shears and an altered unit”.
• The individual assays reported show relatively narrow intersections, of which the highest grade is a 1m intersection at an average grade of 2.48 g/t gold and the widest is a 2.98m wide intersection at an average grade of 0.27 g/t gold. Further results are to be made available “within weeks”.
• We agree with the company’s comment that “This is still an early stage project”, however it is encouraging that the company has encountered gold mineralisation in what it suggests is a previously unrecognised gold-bearing structure.  At this stage, the mineralisation is still relatively narrow and low grade, however.
Conclusion: Connemara Mining has discovered an interesting gold occurrence in County Donegal; the challenge for future exploration will be to outline a coherent body of mineralisation at a sufficiently high grade to offer mining potential.

DiamondCorp (LON:DCP) 6.4 pence, Mkt Cap £30.5m –Suspension of underground mining at Lace lifted
• DiamondCorp has announced that the S African Department of Mineral Resources (DMR) has approved the immediate resumption of underground mining at the Lace Diamond Mine.
• Underground mining was suspended last week on the instructions of the DMR following an injury causing accident involving a fall of ground related to an explosives miss-fire.
• The DMR instructed that the mine should implement additional training on the handling of explosives and this, presumably, has now been completed to the DMR’s satisfaction.
Conclusion: The relatively speedy resumption of mining should minimise any production losses and the company has previously stated that “there is no material financial impact as a result of the temporary suspension”. The additional training should have a longer term benefit on the safe conduct of future operations.

Kumba Iron Ore (JSE:KIO) Zar 130, Mkt Cap Zar 42bn – Results for 6 months to 30th June show margin recovery
• Total production of iron ore was down by 21% to 17.8m tonnes reflecting the successful implementation of a new mine plan at the Sishen mine where production was pulled back by 29% to 11.54m tonnes.
• Other production cutbacks came at the Thabazimbi mine, where the mine is being closed, (down 42% to 370,000 tonnes) while output at the Kolomela mine was unchanged at 5.88mt (H1 2015 – 5.85mt).
• Overall, approximately 64% of output was lump ore with the balance as fines.
• Aided by a 29% decline in the Rand against the US$, cash margins have recovered to 29% from the 18% achieved in H2 2015 and in line with the 28% margin in H1 2015. The company “reduced controllable costs by $8/tonne from the average for the fill year 2015to achieve an average cash breakeven price of $34/tonne (CFR China) … well within the targeted range of $32/tonne- $40/tonne.”
• Operating free cash flow rose by 18% to R6.7bn and the balance sheet was strengthened to a net cash position of R548m.
• The company expects factors including “continued weakening supply demand fundamentals … to result in further pressure on the iron ore price for the remainder of the year.”  
Conclusion: The restructuring of the Sishen mine, coupled with continuing Rand weakness have helped restore Kumba’s margins but the iron ore price is expected to remain under pressure for the rest of this year.

Metminco* (LON:MNC) 0.16 pence, Mkt Cap £6.2m – Departure of Chairman
• Metminco has announced that its long-term Chairman, Tim Read, has elected to stand down from the Board as part of a scaling back of his business commitments.
• Tim Read, who has been a director of Metminco since April 2010 and the company’s Chairman since 2011, has been a long-established figure in the City’s mining scene for many years. We wish him well for the future.
*SP Angel act as joint-broker to Metminco.  An SP Angel analyst has visited the Miraflores mine site in Colombia

W Resources (LON:WRES) 0.40p, Mkt Cap £16.7m – First blast at La Pariilla
• W Resources reports that it has successfully completed the first blast at its La Parilla tungsten mine in Spain.
• The blast “covered the first two 10 metre benches in the Fast Track Mine area and open up directly accessible ore to the mine operation.”
• The company comments that “Process plant upgrades are planned to commence in September with concentrate production remaining on track for Q4 2016.”
• W Resources is pressing ahead with its plans for initial tungsten concentrate production by the end of this year.
• Benchmark ammonium paratungstate  prices remain below US$200/metric tonne unit and, with a low grade resource grading only 0.096% tungsten trioxide, process plant recovery rates will be critical to the success of La Parilla.
Conclusion: The first blast at La Parilla is a milestone in the project’s development. We believe that with plans to produce tungsten concentrate by the end of this year and a prevailing low commodity price, recovery rates will be critical for La Parilla.

Wed, 27 Jul 2016 10:27:00 +0100
Oil price, Sound Energy, Range Resources, And finally... Oil price
A mixed day for crude, very quiet as traders contemplated inventory stats that would likely show that WTI is suffering more that Brent at the moment. In the end they turned out to be right, the API numbers, after the close, were worse than expected, it was a draw but only 827/- barrels, the gifted amateurs on the street had predicted 2.3m. Gasoline, the bain of their lives also in recent weeks did actually show a very small draw of 423/- barrels whereas to whisper was a modest build.
Sound Energy
The good news just keeps on coming for Sound who today announce an extension of their agreement with Schlumberger, this time on their exciting Badile prospect. Schlumberger will invest €7.5m for a 20% option to acquire a Net Profit Interest in Badile by which they will pay for 30% of the costs of the first well and 20% thereafter.
Sound has consistently demonstrated an ability to use interesting and novel ways of using partners to achieve the financing needed to get their portfolio working for them. They should have much to say in upcoming presentations and of course results from their well programme of which I expect further news from Tendrara before long.
Range Resources
Today’s quarterly update from Range doesnt tell us anything we dont already know as there have been a number of announcements about drilling etc. The long term focus is obvious and concentration of development drilling and work on the waterflood projects continue. Shareholders will be happy to see the 2,500 b/d production forecast by the end of next year to be still in place and drilling of the MD 251 continues at present.
And finally…
RIP JT McNamara

Wed, 27 Jul 2016 10:21:00 +0100
Gold miners back in the game Gold miners back in the game

Our favourable view of gold is based on the following factors:
Challenging global economic growth;
Prevailing low to negative interest rates and easy monetary policies. Central banks with negative deposit rates incl. ECB, Japan, Switzerland, Denmark and Sweden. Correlated against the US 2-year real rate (r2 is 0.73), the implied gold price is ~$1460/oz (Figure 2);
Lingering uncertainty in the Eurozone since the Brexit vote;
Risks associated with China’s debt and debt: GDP ratio at ~$30 trillion and >200% which could force the People’s Bank of China to mobilize selling additional US treasuries to support the yuan and reduce capital outflows; and
Risks to the US dollar as balanced with the upside from potential modest rate hikes offset by potential instability post US elections. Call this the Trump factor! Although the US dollar is broadly inversely correlated with gold (r2 is 0.54), the (inverse) correlation with real rates is a better predictor for gold.
The conditions noted above have driven investors back to gold as an alternative safe-haven with no opportunity holding cost when compared to almost one third of global sovereign bonds trading at negative yields. Global ETF holdings are at a level last seen in May 2013 (Figure 4). In addition, COMEX net speculative positions in gold are at a multi-year high, which poses some risk of sell-off liquidations (Figure 5).
It is worth noting that the recent pullback in gold from this year’s near-term high of $1,360 is due to a certain level of political stability in Britain, but more importantly stronger US economic data triggering a reversal in bond yields and US dollar. Gold initially shrugged off the strong June employment data but last week’s manufacturing and retail sales data led to an acceleration in expectations of a fed funds rate hike by December (currently 45%). Nonetheless, we see this pullback as healthy and would look to accumulate gold equity exposure on weakness.

Eoin Treacy's view

The gold mining sector is offering leverage to the gold price for the first time in a decade following a painful process of rationalisation that squeezed management expansion plans and forced a return to a focus on cash flow. It is being helped by the fact that gold and gold miners are among the few sectors not hitting new all-time highs and therefore represent relative value and potentially catch up potential.

US to create nationwide network of EV charging stations

The US government has announced "an unprecedented set of actions" to pump up the country's plug-in electric vehicle market, including US$4.5 billion in loan guarantees to create a nationwide network of commercial scale and fast charging stations. The initiative to push for greater electric car adoption calls for a collaboration between federal and state agencies, utilities, major automakers and other groups.
The initiative will identify zero emission and alternative fuel corridors across the country, to determine the best locations to put in fast charging stations, as part of the Fixing America's Surface Transportation (FAST) Act.
As part of a partnership between the US departments of energy and transportation, a 2020 vision for a national fast charging network will be developed, with potential longer-term innovations that include up to 350 kW of direct current fast charging. According to the administration, a 350 kW DC system could charge a 200-mile-range battery in less than 10 minutes. For comparison, Tesla just boosted some of its Superchargers' power capacity to 145 kW, which is claimed the fastest currently available.

Eoin Treacy's view
Governments are getting behind the need for a jump in the efficiency of batteries. If electric vehicle range anxiety is truly to be overcome batteries that can power a car all day, with the air conditioning on, while charging my phone and iPad as I listen to the radio are required. Many people feel they need a workhorse that can fulfil just about any task rather than just commuting. Continued high demand for light trucks is testament to that which is probably why Elon Musk gave a nod to heavier vehicles when announcing his latest growth plan last week.

Pension Returns Slump, Squeezing States and Cities

“Many states and local governments may be facing difficult choices if investment returns remain low,” said Keith Brainard, research director at the National Association of State Retirement Administrators. “The money has to come from somewhere.”
Connecticut now allocates 10% of its budget to pay down unfunded pension liabilities that more than doubled in size over the past decade. Chicago’s $20 billion pension-funding hole prompted its credit rating to tumble to junk, a rare low mark for an economically diverse city.
A reminder of how long-term fortunes have turned came last week as two pension bellwethers reported their worst results since the 2008-09 financial crisis.
Weak annual gains for the California Public Employees’ Retirement System and California State Teachers’ Retirement System dropped their 20-year returns below 7.5% investment targets, to 7.03% and 7.1%, respectively. The two funds, known as Calpers and Calstrs, are the largest public pensions in the U.S. by assets and oversee a combined $484 billion for 2.6 million public workers and retirees.

Eoin Treacy's view

The underperformance of public pensions that invest primarily in bonds highlights the difference in returns between playing the market from a momentum perspective versus a yield-to-maturity buy-and-hold strategy. Pension funds tend to manage duration by reinvesting maturing bonds because that helps to marry future liabilities to predictable returns but in an environment where yields are low the premium paid for new issues is so high that long-term returns are impugned.

Wed, 27 Jul 2016 08:38:00 +0100
In the papers: Anheuser-Busch InBev, Apple, McDonald’s The Times
Beer merger on the brink after higher bid falls flat: Anheuser-Busch InBev has upped its offer for its rival SABMiller but the revised bid was immediately panned by one leading shareholder to leave the third biggest deal in corporate history teetering on the brink.
Sales of iPhone down again but Apple says the worst is over: Apple said customer demand for its iPhone was getting stronger and that the decline in sales had passed the “low point” as it reported third quarter results.
Brexit will not stall us, says car and plane parts maker: GKN, the car and aircraft parts maker, said it planned to cut costs by £30 million a year and divert efforts to its core automotive and aviation divisions as it brushed off Brexit threats.
Discounters beat the big four stores in growth race: The big four supermarkets appear to have avoided any immediate fallout from Brexit, although industry growth has been slow compared with last year.
FSB attacks bank’s negative rates warning: Business groups have warned that the prospect of negative interest rates could further damage fragile confidence among companies.
Virgin shelves move into small business lending amid EU angst: Virgin Money has shelved plans to move into business banking because of the uncertainty about Brexit’s impact on the economy.
Healthy idea set to smooth out wrinkles for Tesco: Shoppers at Tesco will be able to pick up a tube of organic snail gel, harvested from free-roaming gastropods, to help to soothe their skin.
The Independent
Brexit hits London luxury property prices as Capital & Counties cut £200 million off Earls Court land value: Capital & Counties, the London listed property company, has cut the value of its Earls Court development by 14% in a further sign that the value of central London luxury property is falling following U.K.’s vote to leave the EU.
Brexit supporters hit with record £935 billion pension deficit because of the EU referendum: The U.K. pension deficit hit a record level of £935 billion following U.K.’s vote to leave the EU, likely hitting pro-Brexit voters the hardest.
U.K. mortgage approvals fall to lowest level in 15 months in June, BBA says: U.K. mortgage approvals in June fell to their lowest level in 15 months as buyers got nervous about the state of the housing market in the run up to the EU referendum.
Pfizer subsidiary apparently made Arkansas execution drugs despite ban: An execution drug obtained by the Arkansas prison system this month appears to have been made by a subsidiary of Pfizer, even though the pharmaceutical giant has said it doesn’t want its drugs to be used in executions.
The Daily Telegraph
Deutsche Boerse wins investor support for London Stock Exchange merger: Deutsche Boerse has secured support from more than 60% of its investors for a £21 billion merger with the London Stock Exchange, two weeks later than originally planned, in a landmark that sets up the deal for the next, lengthy round of regulatory approvals.
Twitter shares dive as it reports heavy loss: Twitter has revealed a second-quarter loss of $106 million (£81 million) and warned that growth would slow significantly in the coming months, sending shares crashing.
All big banks could follow RBS and send rates negative: RBS and NatWest’s decision to consider cutting interest rates below zero could prompt all of the other big banks in the U.K. to follow suit, analysts believe, leaving most small businesses facing the prospect of paying for the privilege of holding money with their bank.
Oil slumps on surging supply but global economy picks up speed: Oil prices have tumbled to a three-month low as surging supply once again exposes the chronic global glut and threatens to perpetuate the energy slump for another year.
Executive pay must be tackled to rebuild trust in business, says powerful investor group: A powerful investor group has thrown down the gauntlet to companies over “excessive” and “ineffectual” Executive pay, presenting a 10-point plan it says will “rebuild trust” over Bosses’ high levels remuneration.
Goldman clashes in court over $1.2 billion claims Libyans were ‘unsophisticated’: The long-running $1.2 billion court battle between Goldman Sachs and the Libyan Investment Authority (LIA) is coming to an end, as each side sets out its closing arguments in London this week.
Drax ‘optimistic’ that winter power crunch will raise prices: Drax has said it is optimistic that tight U.K. power supplies this winter will raise electricity prices, after low prices led to a slump in profits in the first half of the year.
America’s appetite cools for McDonald’s despite new all-day breakfasts: McDonald’s, the world’s biggest restaurant chain, has fallen short of forecasts over the past three months as it struggled to defend its position in the crucial U.S. market.
Man Group profits slump ahead of Boss Manny Roman’s exit: Hedge fund giant Man Group has reported a 65% slide in pretax profits to $98 million as it weathered a “highly volatile” January to June period for markets and fund Managers.
Hundreds of North Sea workers down tools on Shell oil rigs: Around 400 North Sea oil workers have downed tools on Shell oil rigs in the sector’s first spate of industrial action in 28 years.
The Questor Column:
Buy Games Workshop as company leverages fantasy brands: Investors looking for an attractive yield and a company well placed to benefit from the pound’s steep falls could do worse than Games Workshop, a business that Questor feels has been overlooked. After a troubling end to 2015, revenues at the tabletop games maker have recovered, and the stock appears reasonably cheap, at a price-to-earnings multiple at just 11.2. Recent falls in the pound will make the Nottingham-based company more competitive, as it makes 72% of its sales overseas and has a domestically focused cost base. Games Workshop said that it is particularly sensitive to the U.S. dollar, against which sterling has dropped 10.9% since the start of the year, and also the euro, compared with which the pound is 11.8% cheaper over the same period. Tom Kirby, Games Workshop’s Chairman, and its former Chief Executive, stressed that the company was not selling out on its well-established brand by working with third-parties. The most troubling element of Games Workshop’s most recent update is its attack on the benefits of management diversity. A promise from Mr Kirby that the company’s next Chiefs will be internal hires, with at least a decade inside the firm, suggests that there is a risk of groupthink in the company. The challenge will be to recruit a new wave of younger, less affluent consumers, when the average sticker price of Games Workshop products has risen by around 3% in the last year, according to the company’s own figures. To overcome these hurdles, management must be careful not to get stuck in a fantasy world of their own. Yet, for now, Questor thinks that the stock has further to go. Buy. Games Workshop at 465¼p+9¼p. Questor says “Buy”.
The Guardian
Bank of England hawk signals interest rate cut to tackle slowdown: The prospect of a U.K. interest rate cut next week was virtually confirmed on Tuesday after a key member of the Bank of England’s policymaking committee warned the economy was in a worse state than he expected just a week ago.
U.K. joins Greece at bottom of wage growth league: Britain has suffered a bigger fall in real wages since the financial crisis than any other advanced country apart from Greece, research shows.
Executive pay: City report stops short of backing binding shareholder votes: A report by City grandees has set out a number of measures to help restore public confidence in Executive pay, but stopped short of endorsing Theresa May’s proposal for binding shareholder votes on senior management salaries.
Volkswagen emissions scandal: $15 billion settlement gets preliminary approval: A nearly $15 billion settlement over Volkswagen’s emissions cheating scandal cleared a key hurdle on Tuesday, with a federal judge giving preliminary approval to the deal that includes an option for Owners to have the carmaker buy back their vehicles.
BP profits plummet 44% as oil prices continue to fall: Profits at BP plunged 44% to $720 million (£550 million) in the second quarter of 2016, as the collapse of crude prices continues to affect the energy sector.
Daily Mail
BP dividend here to stay despite huge £47 billion Gulf spill bill as firm’s second-quarter profit falls 45% on the same period last year: Oil giant BP will continue to pay a dividend despite racking up a huge £47billion for the 2010 Gulf of Mexico explosion and oil spill.
Fevertree Drinks sales fizz by 67% to £40.6 million as young people choose to drink posh gin and tonic: Tonic water maker Fevertree Drinks reported a 69% rise in revenues to £40.6 million for the first half of the year as drinkers bought premium spirits and mixers in ever-increasing numbers.
Bookies Ladbrokes and Coral must sell at least 350 betting shops if they want £2.3 billion merger to continue: Ladbrokes and Coral have been told to offload 350-400 betting shops – or scrap their £2.3billion merger.
Blue chip firms warned to come clean on multi-million pound bonuses for their Bosses in order to restore faith in the City: Blue chip firms have been told to come clean on multi-million pound bonuses for their Bosses in order to restore trust in the City.
Shoppers shun Asda as sales drop 5.6% and is the worst performer among the Big Four supermarkets: Asda sales have fallen 5.6%, according to industry data. Britain’s second-largest grocer was the worst performer among the Big Four supermarkets as its market share shrank to 15.5% from 16.4% due to competition from Aldi and Lidl.
Daily Express
Pound plunges as Bank of England prepares to cut interest rates: The Bank of England is expected to cut interest rate in August after a member of its Monetary Policy Committee (MPC) called for action to boost the economy.
Life after EU: Britain to boost U.S. economic and trade ties with three new offices: Britain is to open three new offices in the United States to boost business and trade in the wake of the vote to leave the European Union (EU).
Tata Steel must pay more than £2 million after Health and Safety breaches: Tata Steel has been ordered to pay more than £2 million after two workers suffered serious injuries at one of its plants.
New rules for credit card firms will help borrowers pay off debts faster: Credit card borrowers will be able to clear debts faster and take control of their spending, under plans released by the regulator.
The Scottish Herald
Glasgow University in China tie-up: The University of Glasgow has signed an optoelectronics partnership agreement with a Chinese state-owned enterprise company focused on addressing demand for high-speed network connections for the internet.
Former Chief Executive of Braveheart Investment Group sells shares in firm: Geoffrey Thomson has sold his remaining holding in the Braveheart Investment Group which he used to run.
Kames reports property fund inflows: Asset Manager Kames Capital has reported an inflow into its U.K. commercial property fund. Reuters reported that Kames’s head of property management, Phil Clark, said that suggestions that commercial real estate values would be “far more resilient than the doomsday scenario some initially feared”.
PIRC opposes Directors at Monks: PIRC, the corporate governance lobby group, has recommended shareholders vote against the re-election of the Chairman and two Directors of Monks Investment Trust, writes Simon Bain
Economists forecast rate cut as MPC member changes tack: The vast bulk of economists are forecasting U.K. base rates will be cut from their record low of 0.5% next month, after surveys showing sharp economic contraction following the Brexit vote, a poll has revealed.
The Scotsman
Glasgow’s Macfarlane Group to expand reach in England: Scottish packaging group Macfarlane Group has raised £5.8 million from shareholders in an oversubscribed placing to fund its third takeover deal within four months.
Average house prices in Scotland down by 2.3%: Average house prices in Scotland fell by 2.3% between April and June compared with the same quarter in 2015.
BT under pressure from rivals after Ofcom Openreach ruling: BT faced fresh flak after the one-time telecoms monopoly avoided a break-up of its Openreach broadband division.
Energy Chiefs seek action on major off-shore wind farm: Renewables giants are demanding urgent action from Scottish Ministers to resolve a legal action threatening plans for a major wind farm off the Fife coast.
City A.M.
City stockbroker Cenkos is reportedly facing a fine of “hundreds of thousands” for its work with Quindell: City stockbroker Cenkos is reportedly facing a fine of “hundreds of thousands” from the FCA over its dealings with an insurance technology group.
Analog Devices is to acquire fellow U.S. chipmaker Linear Technology in a $15 billion deal: Massachusetts-based Analog Devices is to acquire fellow chipmaker Linear Technology in a deal worth $14.8 billion (£11.3 billion).
United Tech beats estimates and raises low-end full-year forecast: United Technologies Corp (UTC) handily beat analysts expectations in its most recent quarter. UTC – the U.S. maker of everything from Pratt & Whitney aircraft engines to lifts – also cheered investors by raising the low end of its full-year forecast by $1 billion.
Orange SA misses expectations but gets profit boost from EE sale: Orange SA – France’s largest telecoms company – has posted a sharp rise in its first-half profits due to the sale of its U.K. network EE to BT.
Simplicity is the key to success at Games Workshop: Spending hours carefully painting a model of a fantasy mythical creature isn’t everyone’s idea of a good time. But Nottingham-based Games Workshop continued a track record of profitability when it released its annual results.
Ex-William Hill online Boss Andrew Lee joins money transfer firm WorldRemit: The former managing Director of William Hill Online has joined money transfer service and London-based startup WorldRemit.
The World Bank has hiked its 2016 forecast for oil again: The World Bank has remained upbeat on the outlook for oil prices, despite fears that the market recovery will take longer than expected.
Shell’s Philippine unit fires starting gun on long-delayed IPO: Pilipinas Shell has finally fired the starting gun on its long-delayed initial public offering (IPO). The Royal Dutch Shell unit wants to raise as much as $629 million, according to a regulatory filing released. This means it will be one of the country’s biggest ever stock market debuts.

Wed, 27 Jul 2016 08:23:00 +0100
Market briefing: US markets finished mostly higher yesterday, with the Nasdaq closing at its highest level for 2016 UK Market Snapshot
UK markets closed mixed yesterday. The FTSE 100 index inched up following an advance in mining sector stocks. Rio Tinto, BHP Billiton and Fresnillo rose 3.1%, 3.3% and 3.7%, respectively. Provident Financial climbed 5.7%, as it reported a considerable rise in its first half pretax earnings and raised its dividend payout. BT Group gained 3.2%, after Ofcom, the UK regulator, stated that its Openreach infrastructure arm can continue to remain a part of the group, however it should become a separate company legally. On the contrary, Tesco declined 4.1%, on reports that its sales fell 0.7% in the 12 weeks to 17 July. BP slipped 1.3%, after it posted downbeat earnings for the second quarter. SABMiller lost 0.7%, even though the brewer received an improved takeover offer from Anheuser-Busch InBev. The FTSE 100 advanced 0.2%, to close at 6,724.0, while the FTSE 250 fell 0.1%, to settle at 17,069.1.
US Market Snapshot
US markets finished mostly higher yesterday, with the Nasdaq closing at its highest level for 2016. Linear Technology Corp soared 28.9%, after Analog Devices, up 3.9%, agreed to buy the former for about $14.8 billion. Texas Instruments rallied 7.9%, after it reported positive results in the second quarter and gave an upbeat financial outlook for the third quarter. EI DuPont de Nemours rose 0.4%, following the release of upbeat earnings in the second quarter. Bucking the trend, Gilead Sciences plummeted 8.5%, after it reduced its product sales outlook for 2016 due to decline in revenues from its Hepatitis C drugs, Sovaldi and Harvoni. McDonald’s dipped 4.5%, following disappointing same sales growth in the US for the second quarter. The S&P 500 gained marginally, to settle at 2,169.2. The DJIA shed 0.1%, to settle at 18,473.8, while the NASDAQ advanced 0.2%, to close at 5,110.0.
Europe Market Snapshot
Other European markets ended in the green yesterday, buoyed by gains in healthcare and consumer goods shares. Novo Nordisk rose 2.9%, after a leading broker projected another boost for its ‘Victoza’ diabetes product. Sportswear company, Adidas, added 0.1%. Faurecia climbed 4.3%, as it increased its 2016 outlook. AMS surged 12.4%, after it reported upbeat profit in the second quarter. Michelin & Cie. added 1.5%, after its operating profit for the first half of the year surpassed analyst expectations. However, Mediaset plunged 6.9%, after news emerged that Vivendi, up 0.1%, is no longer interested in acquiring the former’s pay-TV unit. Commerzbank dropped 4.5%, as its core tier 1 ratio declined in the second quarter. The FTSEurofirst 300 index gained 0.1%, to close at 1,347.0. Among other European markets, the German DAX Xetra 30 rose 0.5%, to close at 10,247.8, while the French CAC-40 advanced 0.2%, to settle at 4,394.8.
Asia Market Snapshot
Markets in Asia are trading mostly higher this morning. In Japan, the equities have jumped on media reports that Prime Minister, Shinzo Abe, will announce details of a ¥27.0 trillion stimulus package today. Export-oriented stocks, Suzuki Motor, Toyota Motor and Nissan Motor have climbed 1.8%, 3.5% and 4.7%, respectively, as the Japanese Yen fell against the US Dollar. On the flipside, Itochu has tumbled 5.6%, amid negative comments on its accounting practices by a US-based short seller. In Hong Kong, oil major, CNOOC and PetroChina have gained 0.3% and 0.4%, respectively. In South Korea, Samsung Electronics has eased 0.7%, while Lotte Shopping has added 0.5%. The Nikkei 225 index is trading 1.4% higher at 16,610.2. The Hang Seng index is trading 0.4% up at 22,216.7, while the Kospi index is trading 0.2% lower at 2,023.5.

Commodity, Currency and Fixed Income Snapshots
Crude Oil

At 0330GMT today, Brent Crude Oil one month futures contract is trading 0.25% or $0.11 lower at $44.76 per barrel, ahead of the Energy Information Administration’s weekly crude oil inventory data, scheduled to be released later today. Yesterday, the contract climbed 0.34% or $0.15, to settle at $44.87 per barrel, after the American Petroleum Institute reported that US crude stockpiles dropped by 827,000 barrels in the previous week.
At 0330GMT today, Gold futures contract is trading 0.23% or $3.10 higher at $1323.90 per ounce. Yesterday, the contract advanced 0.10% or $1.30, to settle at $1320.80 per ounce, reversing its losses from prior session.
At 0330GMT today, the EUR is trading 0.07% higher against the USD at $1.0994, ahead of German GfK consumer confidence survey data for August, set to release in a few hours. Yesterday, the EUR weakened 0.08% versus the USD, to close at $1.0986, surrendering its gains from last session. Meanwhile, the US consumer confidence fell marginally in July.
At 0330GMT today, the GBP is trading marginally lower against the USD at $1.3129, ahead of the crucial UK’s GDP growth data for the second quarter, due to release today. Market participants will closely await the release of the US Fed’s interest rate decision, scheduled later today. Yesterday, the GBP weakened 0.08% versus the USD, to close at $1.3130.
Fixed Income
In the US, long term treasury prices rose and pushed yields mostly lower, after data showed that the US services PMI unexpectedly dropped in July. Yesterday, yield on 10-year notes fell 1 basis points to 1.57%, while yield on 2-year notes gained 3 basis points to 0.75%. Meanwhile, 30-year bond yield fell 1 basis point to 2.28%.

Key Economic News
UK BBA mortgage approvals fell in June

BBA mortgage approvals registered a drop to 40.10 K in June, in the UK, compared to a revised reading of 41.84 K in the previous month. Market expectation was for BBA mortgage approvals to ease to a level of 39.65 K.
Spanish PPI registered a rise in June
In June, on a MoM basis, the producer price index (PPI) in Spain climbed 1.80%. The PPI had advanced 0.80% in the previous month.
Spanish PPI recorded a drop in June
The PPI registered a drop of 4.70% in Spain on a YoY basis, in June. The PPI had dropped by a revised 5.60% in the prior month.
US Markit services PMI dropped unexpectedly in July
In the US, the preliminary Markit services PMI eased unexpectedly to a level of 50.90 in July, lower than market expectations of a rise to a level of 52.00. In the previous month, Markit services PMI had registered a level of 51.40.
US Redbook index registered a rise in the last week
The Redbook index in the US registered a rise of 0.60% in the week ended 22 July 2016 on a YoY basis. In the previous week, the Redbook index had advanced 0.40%.
US Markit composite PMI climbed in July
The flash Markit composite PMI climbed to 51.50 in July, in the US, compared to a level of 51.20 in the prior month.
US S&P/Case-Shiller composite index of 20 metropolitan areas unexpectedly fell in May
The seasonally adjusted S&P/Case-Shiller composite index of 20 metropolitan areas in the US registered an unexpected drop of 0.05% on a MoM basis in May, compared to a revised fall of 0.18% in the previous month. Markets were anticipating the S&P/Case-Shiller composite index of 20 metropolitan areas to rise 0.10%.
US S&P/Case-Shiller home price index advanced in May
Compared to a reading of 186.63 in the prior month the S&P/Case-Shiller home price index climbed to 188.29 in the US, in May. Market expectation was for the S&P/Case-Shiller home price index to advance to a level of 189.50.
US Redbook index slid in the last week
The seasonally adjusted Redbook index slid 0.50% on a monthly basis, in the week ended 22 July 2016, in the US. In the prior week, the Redbook index had registered a similar fall.
US new home sales unexpectedly climbed in June
New home sales in the US registered an unexpected rise of 3.50%, on MoM basis, to a level of 592.00 K in June, compared to a revised reading of 572.00 K in the prior month. Market expectation was for new home sales to fall to 560.00 K.
US S&P/Case-Shiller composite home price index (HPI) of 20 metropolitan areas advanced less than expected in May
In May, the S&P/Case-Shiller composite home price index (HPI) of 20 metropolitan areas registered a rise of 5.24% on a YoY basis in the US, less than market expectations for an advance of 5.52%. The S&P/Case-Shiller composite home price index (HPI) of 20 metropolitan areas had registered a rise of 5.44% in the previous month.
US Richmond Fed manufacturing index climbed in July
The Richmond Fed manufacturing index in the US advanced to 10.00 in July, compared to market expectations of an advance to a level of -5.00. The Richmond Fed manufacturing index had recorded a revised reading of -10.00 in the previous month.
US CB consumer confidence index fell in July
In the US, the CB consumer confidence index eased to 97.30 in July, compared to market expectations of a drop to a level of 96.00. In the previous month, the CB consumer confidence index had registered a revised level of 97.40.


Wed, 27 Jul 2016 08:20:00 +0100
Northland Capital Partners View on the City - W Resources, TechFinancials, Sunrise Resources, Connemara Mining Company W Resources (LON:WRES) – BUY*: La Parrilla update
Market Cap: £14.6m; Current Price: 0.4p; Target Price: 1p

First Blast marks the commencement of mining
  W Resources has completed the first blast at its La Parrilla Tungsten Project.
  The blast covered the first two 10m benches in the Fast Track Mine area and opens up accessible ore to be mined.
  20 RC holes, drilled on the north and south lateral extensions of the pit, have been completed and assay results are awaited.
  No change to forecasts, rating or price target.

NORTHLAND CAPITAL PARTNERS VIEW: W Resources has completed the first blast at its La Parrilla hard rock tungsten project, located in Spain. The upgrades to the tailings processing plant are expected to commence in September allowing for initial concentrate production (Stage 1) to commence as expected Q416.

TechFinancials (LON:TECH) – BUY*: Termination of Agreement
Market Cap: £7.9m; Current Price: 11.5p; Target Price: 27p

Terminates JV with IBID Holdings
  TechFinancials is terminating its joint venture agreement with IBID Holdings due to a breach by the partner.
  The Company is considering legal action against its partner for violations that include but are not limited to failure to transfer the initial investment amount.
  No change to forecasts, rating or price target.

NORTHLAND CAPITAL PARTNERS VIEW: The termination of TechFinancials Joint venture agreement with IBID Holdings is not expected to have any material impact on the results for the current financial year and both B2B and B2C trading remains in line with market expectations.

Sunrise Resources (LON:SRES) – SPECULATIVE BUY: Garfield project update
Market Cap: £2.4m; Current Price: 0.2p

From yesterday: Positive initial trenching results
  Sunrise Resources has completed two trenches at the Garfield Copper-Gold Project.
  Trench 1 returned 22m at 0.33% Cu including 2m at 2.18% Cu and 0.48g/t Au from 16m and 2m at 1.2g/t Au and 0.07% Cu from 8m.
  Trench 2 did not reach bedrock and was not sampled.

NORTHLAND CAPITAL PARTNERS VIEW: The first trench from Sunrise Resources initial trenching programme at the Garfield Copper-Gold Project, located in Nevada, has returned some positive initial results highlighting significant mineralisation in present at the project. Sunrise now plans a follow up trenching programme this summer.

Connemara Mining Company (LON:CON) – CORP: Inishowen update
Market Cap: £1.5m; Current Price: 2.6p

New gold system defined
  Connemara Mining Company reports the results of the first two of four holes drilled during the second drill programme at the Inishowen Project, located in Donegal.
  Results include 1m at 2.48g/t Au from 33m (16-MR-04) and 2.98m at 0.27g/t Au (16-MR-05).

NORTHLAND CAPITAL PARTNERS VIEW: The first two holes encountered in Connemara Mining Company’s second drill programme at the Inishowen Project appear to have defined a new gold system in a Green Bed lithology. Results from the final two holes are expected within weeks.


Wed, 27 Jul 2016 08:14:00 +0100
Beaufort Securities Breakfast Alert: Harvest Minerals, KEFI Minerals BP GKN Man Group, Provident Financial, SABMiller Markets
The FTSE-100 finished yesterday's session 0.21% higher at 6,724.03, whilst the FTSE AIM All-Share index closed 0.24% higher at 746.27. In continental Europe, markets ended in the green, led by positive corporate earnings releases. Investors await decisions on the monetary policy by central banks this week. Germany’s DAX and France’s CAC 40 rose 0.5% and 0.2%, respectively.
Wall Street
Wall Street remained broadly unchanged amid mixed corporate earnings released yesterday. Investors were cautious ahead of the Fed’s policy statement today. The S&P 500 ended broadly flat, with the industrials and materials sectors being top performers and the telecommunications sector losing the most.
Equities are trading mixed ahead of key central bank decisions and earnings reports due in Japan. The Nikkei 225 surged 1.7%, boosted by a weaker yen, after reports indicated that the government’s fiscal stimulus package may be increased to ¥27tn. The Hang Seng was trading 0.3% down at 7:00 am.
Yesterday, Brent oil prices gained 0.3% to US$44.87 per barrel, whereas WTI prices fell 0.5% to US$42.92 per barrel.

Mortgage approvals in UK fall to 15-month low in June
As per the British Bankers’ Association, the number of mortgage approvals in the UK dropped to 40,103 in June from 41,842 in May, the lowest since March 2015. The value of net mortgage lending fell to £1.399bn in June from £1.665bn in May.

Company news

Harvest Minerals (LON:HMI, 4.88p) - Speculative Buy
Harvest published a maiden resource estimate for its Arapuá fertilizer project in Minas Gerais, Brazil. From approximately 3% of the known mineralisation on Harvest’s licences, consultants estimate indicated resources of 883kt at 4.21% K2O (potash) and 3.53% P2O5 (phosphate). The resource also includes other potentially valuable minerals including 6.34% CaO, 5.95% MgO and 35% SiO2. Although this is a small resource, Harvest’s immediate target is to develop a small scale 50kt per annum operation using a trial-mining licence or ‘GUIA’. The 883kt resource is more than sufficient and can be expanded if all goes well. The main objective is to establish a market for Arapuá’s multi-nutrient (mainly potash and phosphate) direct application product. Harvest has applied for the trial-mining permit, a scoping study is underway, and work has started on defining the initial product. Presumably this will include tests where the rock will be crushed to different sizes and applied to crops – much like the studies undertaken by Sirius Minerals.

Our view: Harvest Minerals’ Arapuá project could become a decent sized direct application fertilizer business. Although relatively low grade an Arapuá product would be a lower cost substitute to traditional fertilizers. In addition to cost advantages, the Arapuá rock is multi-nutrient containing potash, phosphate and secondary nutrients magnesium and calcium. At this stage there are several questions which need answering such as what price might an Arapuá product sell for, and how large is the market. Fortunately, Arapuá is located in a major agricultural belt in Brazil where large scale palm oil, coffee and sugar cane operations are obvious nearby markets. In terms of pricing and potential margins, the upcoming scoping study should provide some insight. In the meantime, we like the concept of a low capex, easy to mine direct application fertilizer product in Brazil, a country that currently imports most of its fertilizer requirements. Harvest only joined AIM in 4Q15, is a relatively unknown story, and its shares have effectively traded sideways since the start of the year. Although Arapuá is conceptual in nature, it has excellent potential and we recommend a speculative BUY.
Click here to request a call back from a broker regarding this recommendation.

Beaufort Securities acts as corporate broker to Harvest Minerals

KEFI Minerals (LON:KEFI, 0.54p) – Speculative Buy
KEFI has raised £3.8m which net of costs and including its existing cash takes it cash position to c.£5.8m. This is enough money to relocate the affected Tulu Kapi communities and start some of the pre-mine earthworks. It will also pay for closing the mine financing and includes $600k of exploration costs. Although the Tulu Kapi financing isn't yet closed, all parties (involved in the senior debt) are advanced in their due diligence and internal processes, we fully expect financial close in 4Q16. This would mean mine construction proper starting this year or in January.

Our view: Tulu Kapi is fast approaching the construction stage. The senior debt providers and mining contractors long ago started spending their own money, acting like they know mine construction will be starting soon. The fact that the mining contractor Ausdrill took part in the £3.8m placing demonstrates this, plus it shows Ausdrill's confidence in its ability to successfully selectively mine the Tulu Kapi orebody. Financial close, selective mining and community relocation are probably the three main concerns about KEFI. We believe these risks are being dispelled. Also worth noting is Odey's involvement (now 29.5%) who are very supportive of any future equity requirements. We recommend a SPEC BUY.
Click here to request a call back from a broker regarding this recommendation.

Beaufort Securities acts as corporate broker to KEFI Minerals plc

BP (LON:BP., 434.60p) - Buy
BP declared its results for Q2 2016 and H1 2016. Underlying replacement cost profit stood at US$720m for Q2 2016 compared with US$532m in Q1 2016 and US$1.31bn in Q2 2015. Underlying replacement cost profit for H1 2016 totalled US$1.25bn compared with US$3.89bn in H1 2015. The decline in cost profit is mainly due to the impact of lower oil and gas realisations on the upstream result. Net cash provided by operating activities was US$3.9bn for Q2 2016 and US$5.8bn for H1 2016 compared with US$6.3bn for Q2 2015 and US$8.1bn for H1 2015, respectively. Underlying operating cash flow for Q2 2016 before pre-tax Gulf of Mexico payments stood at US$5.5bn. Net debt at the end of the period stood at US$30.9bn compared with US$24.8bn at the end of H1 2015. Net debt ratio was 24.7% as at 30th June 2016 vis-à-vis 18.8% a year earlier. For H1 2016, capital expenditure on an accruals basis was US$8.1bn (organic capital expenditure was US$7.9bn) compared with US$9.1bn for the same period in 2015 (organic capital expenditure totalled US$8.9bn). Earlier this month, BP gave its final estimate of all costs related to the 2010 oil spill and informed that expected liabilities would total US$61.6bn. BP declared an interim dividend of 10 cents per ordinary share which is expected to be paid on 16th September 2016.

Our view: BP’s performance in H1 2016 was satisfactory. The company’s results were impacted by low oil prices and weak refining margins. Nonetheless, BP progressed well on restructuring and cost reduction plans, with the company reporting significant savings during the period. BP remains on track for the development of its next wave of material upstream projects. Market fundamentals continue to suggest that the combination of robust demand and weak supply growth would move global oil markets closer into balance by the end of the year. The Brent oil market price averaged US$46 per barrel in Q2 2016 compared with US$34 in Q1 2016 and US$62 in 2015. Meanwhile, BP merging its Norwegian business with that of Det Norske is a positive step. The combined industrial experience and strength of both companies would help Aker BP in growing into a huge exploration and production unit. As the company steadily improves cost, we expect it to adjust further within its financial frame despite low oil prices. In the light of this and the partial recovery in oil prices anticipated during H2 2016, we maintain a Buy recommendation on the shares.
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GKN (LON:GKN, 301.0p) - Buy
GKN, the global engineering group, yesterday announced results for the 6 months ended 30 June 2016 (H1 FY2016). During the period, on a statutory basis, sales advanced by +17% to £4,237m with +2% organically, while pre-tax profit declined -14% to £182m largely due to lower mark to market valuation of foreign exchange contracts. Earnings per share consequently fell by -4% to 9.5p. At the period end, the Group’s net debt stood at £918m (31 December 2015: £769m) and the total deficit on post-employment obligations amounted to £2,101m (31 December 2015: £1,558m). On the operational front, the Group said integration of Fokker Technologies acquired on 28 October 2015 is progressing well and remain on track. GKN is focused on cutting fixed costs, and set to achieve annualised savings of £30m from 2017, with a £35m one-off cost of optimisation programme charges in the H2. GKN Aerospace, the tier one supplier of airframe and engine structures, landing gear, electrical interconnection systems, transparencies and aftermarket services, saw organic growth of +2% with strong commercial sales growth, though margin was down by -1.5%. GKN Driveline, the supplier of automotive driveline systems and solutions, increased organic sales by +5% with flat margin. GKN Powder Metallurgy, the manufacturers of precision automotive sintered components, components for industrial and consumer applications and metal powder, witnessed organic sales growth in line with market, down -1%. GKN Land Systems, the supplier of power management products and services, also registered decline in organic sales growth by -6% due to challenging agricultural and construction equipment markets and the ceasing chassis contracts. GKN’s CEO, Nigel Stein commented “This is a good set of first half results with GKN continuing to make underlying progress in line with our expectations. GKN is in good shape with excellent technology and strong positions in the aerospace and automotive markets. We expect 2016 to be another year of growth, helped by currency translation and Fokker.” The Group declared interim dividend of 2.95p per share, up +2% which will be paid on 19 September 2016.

Our view: GKN performed in line with management’s expectation. The acquisition of Fokker Technologies turned fruitful, contributing £369m to sales and £28m to trading profits for the H1 FY2016. Although it has tightened the GKN Aerospace margin slightly, organic growth was achieved amid flat overall market growth. The Board also expect GKN Driveline and GKN Powder Metallurgy divisions continue to surpass the market growth. Given challenging agricultural and construction equipment markets for GKN Land Systems persists, we believe the Group is making a right decision to allocate its capital and focus towards improvement of productivity in their core aerospace and automotive divisions going forward. GKN sees limited impact from the Brexit in the medium term and confirmed it is expecting an “another year of growth” helped by Fokker Technologies and currency tailwinds in the FY2016. With these core divisions (91.8% of the H1 FY2016 sales) exhibiting satisfactory performances, we believe GNK remains well-positioned to achieve further growth in its global markets. Beaufort retain a Buy rating on the stock.
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Man Group (LON:EMG, 112.80p) - Hold
Man Group declared its interim results for the half year ended 30th June 2016 (H1 2016). Funds under management (FUM) dropped to US$76.4bn from US$78.7bn as at 31st December 2015. The group reported net inflows of US$1.0bn in H1 2016 compared with net outflows of US$2.6bn in H1 2015. Gross sales during the period slipped to US$9.8bn from US$10.5bn in H1 2015. Adjusted pre-tax profit slumped to US$98m from US$280m in H1 2015. Therefore, adjusted diluted EPS fell to 4.9 cents from 13.9 cents in H1 2015. The group had surplus regulatory capital of around US$470m after adjusting for the interim dividend, H1 2016 profits, and other reserve movements. Man Group declared an interim dividend of 4.5 cents per share (H1 2015: 5.4 cents per share). Luke Ellis would succeed Manny Roman as Chief Executive Officer with effect from 1st September 2016.

Our view: Man Group performed poorly in H1 2016, hurt by challenges in the global investment management industry. The group recorded a fall in FUM due to investment losses. Man Group’s pre-tax profit slumped to nearly a third compared to that in H1 2015, as performance fees took a hit from investment losses during a difficult period for hedge funds. Man Group lowered the dividends payable to shareholders owing to its weak results. The group plans to spend the surplus capital on acquisitions. The outlook for the industry remains bleak and especially vote on Brexit has added to the uncertainty and dampened investor confidence. In view of the difficult market conditions in the near term, we maintain a Hold rating on the stock.
Click here to request a call back from a broker regarding this recommendation.

Provident Financial (LON:PFG, 2748.0p) - Hold
Provident Financial (Provident) declared its interim results for the six months ended 30th June 2016. During the period, revenues increased to £571.6m from £555.3m in H1 2015. Pre-tax profit increased 48.9% to £165.4m, leading to an EPS of 86.0p, 39.2% higher than that in H1 2015. Annualised return on assets improved 0.1% to 15.7%. Vanquis Bank generated a pre-tax profit of £99.8m in H1 2016 vis-à-vis £86.7m in H1 2015. The bank recorded growth in customer numbers and average receivables (up 6.5% and 12.3%, respectively) against unchanged credit standards. The Consumer Credit Division (CCD)’s pre-tax profit increased 14.5% to £43.5m. Moneybarn registered 44.7% increase in pre-tax profit to £13.6m. Provident’s total funding capacity stands at £458m. The company has declared an interim dividend of 43.2p compared with 39.2p in H1 2015.

Our view: Provident delivered excellent performance in H1 2016. All three divisions performed strongly, resulting in higher margins for Provident. Vanquis Bank continued to register good growth, supported by increased direct mailing activity that resulted in higher new booking volumes. CCD and Moneybarn also recorded increase in profit levels and improvement in annualized return on assets. Provident’s cash position is strong and remains fully funded until May 2018. The company made progress in developing the further lending and digital capability at Satsuma. However, we note that there appears to be a slowdown at Vanquis Bank, which has been the main driver of growth in recent years. Also, Brexit has a substantial impact on capital markets. Growing uncertainty in the UK might slow growth, and increase unemployment and inflation. These factors may negatively impact Provident’s business growth. In light of the mixed outlook going ahead, we maintain a Hold rating on the stock.
Click here to request a call back from a broker regarding this recommendation.

SABMiller (LON:SAB, 4410.0p) - Hold
The Board of SABMiller notes the announcement by AB InBev that it has made a revised and final offer for the entire issued and to be issued share capital of SABMiller. The Board of SABMiller confirms that on 22 July 2016 its Chairman had a conversation with the Chairman of AB InBev about AB InBev's offer for SABMiller in light of recent exchange rate volatility and market movements. There was no discussion or agreement about the terms of yesterday's Revised Offer. The Revised Offer comprises an all-cash offer of GBP 45.00 per share in cash and a partial share alternative, available for approximately 41% of the SABMiller shares, consisting of 0.483969 unlisted shares and GBP 4.6588 in cash for each SABMiller share. The Board of SABMiller confirms that last week it engaged Centerview Partners to provide additional financial advice alongside that of its existing financial advisers. The Board will continue to consult with shareholders and will meet in due course formally to review, having regard to all facts and circumstances, the Revised Offer and a further announcement will be made thereafter.

Our view: It is our view that the offer is best accepted bearing in mind yesterday’s additional offer and so on balance we reduce our recommendation from BUY to HOLD, despite the positive trading statement last week. Indeed, there may be an advantage in selling if a profitable FTSE 350 with a decent yield appeals, especially those affected on the downside perceived to be a Brexit loser. Speak to your Broker who will be able to advise of a number of potential switches.

Wed, 27 Jul 2016 08:10:00 +0100
VSA Capital Market Movers - Antofagsta
Antofagasta (LON:ANTO) has released production results for Q2 2016 and has now indicated full year production is likely to be at the lower end of full year guidance. Unlike the diversified majors who released weak copper production results last week, ANTO posted an increase of 6% YoY and QoQ to 166kt largely due to stronger grade and throughput at Los Pelambres. Gold production was weaker, however, down 7% QoQ and 4% YoY to 53koz owing to lower grades and recoveries at Centinela. Due to the continued lower molybdenum grades experienced at Los Pelambres production was down 6% QoQ and 38% YoY to 1.6kt.

Cash costs before by-product credits were 9% lower QoQ and 19% YoY to US$1.57/lb and despite the weaker volume contribution from by-products this was offset by higher commodity prices meaning net cash costs were down 9% QOQ and 22% YoY to US$1.25/lb. The decrease was in part due to an accounting change for deferred stripping costs.

Copper production for the full year is guided to the lower end of the 710-740kt range with production weighted to H2 2016. Full year cash cost and net cash cost guidance of US$1.6/lb and US$1.3/lb implies a largely unchanged H2 2016. Copper fundamentals, in our view, remain attractive as global inventories have declined significantly through Q2 2016 whilst housing starts in China have posted a strong YoY recovery indicating further strong demand ahead.

Wed, 27 Jul 2016 08:08:00 +0100
Japan gives markets a poke via bumper stimulus hopes FTSE 100 called to open +15pts at 6740, with rising lows since Jul 6 holding firm through 6705. Another test of 6755 resistance could see 6800 revisited quickly to make fresh 12-month highs. This would maintain the impressive bullish post-Brexit rebound. Bears are keeping watch for any hints of weakness around 6720-30, hoping the index is merely topping out since mid-month, preparing for a reversal. Watch levels: Bullish 6760, Bearish 6715.
A positive opening call comes amid hopes of a bumper stimulus package (both fiscal and monetary; ¥‎28tn/$265bn) from Japan to prop up its flagging economy. This would keep firmly open the easy policy taps, something equity markets have come to love by depressed bond yields leaving investors with little choice but to rush towards equities.
Nikkei stocks (exporters in particular) are outperforming thanks to a weaker Yen (money printing devalues the currency). Elsewhere, markets are on watch for any hawkish rhetoric from the Fed this evening in light of recent solid US data and of course those all-important Eurozone bank stress tests. Australia's ASX is breakeven following disappointing inflation numbers while China is down sharply despite better Industrial Production data after Consumer Sentiment edged lower.
US equities should be quiet ahead of the FOMC announcement at 19:00 at which point traders should wake up and start, well, trading. Note that a more hawkish tone will likely see markets either have a tantrum (cheap money for not much longer - harrumph!) or make fresh all-time highs (US economy in great shape, woohoo!)
A generally tepid US earnings season chugged onwards overnight as Apple impressed (shares up 5%) with sales of iPhones beating forecasts. Evidently the kids are still foaming at the mouth for the latest model - you know, the one that’s a slightly lighter shade of rose gold.  Twitter’s results, on the other hand,  missed (shares down 8%) as the company continues to shuffle around in the dark for a way to actually make money.
Crude prices are still under pressure from worries about US gasoline inventories, despite still falling crude stockpiles which could simply indicate a fast stream of oil being fed into the refining system, rather than a reduction in upstream crude production. Still, given this situation it’s hard to see this imbalance continuing for too much longer. Weeks maybe.
Gold is adrift ahead of this afternoon’s potentially USD-moving Fed announcement. The Dollar could well have a short-term snap back given that it’s likely been pricing in a more hawkish message already, though note of course that any direct mention of a future rate hike timetable and/or talk of a trend of good US data could see further USD advances. All this, of course, will dictate direction for the yellow metal.
In focus today we have UK Q2 GDP (advance reading) at 9.30am. Economists predict a slight acceleration in growth to 0.5% for the quarter and 2.1% annualised, which may inspire UK equities, up from 0.4% and 2.0%, respectively, last quarter. June may have been slightly impacted by the run-up to the Brexit, but it is unlikely that much evidence of a slowdown is evident just yet. That said, the UK Index of Services (circa 75% of the UK economy; including Finance) is expected to have stalled in May (April was strong but merely reversed a negative March). Slower growth may fuel Brexit fears after last week’s saw UK PMI Services growth contract for the first time in over 5 years.
This afternoon US Durable Goods Orders (notoriously volatile) are forecast retreating in June which may dent US equities, but a rebound is seen when chunky transport (e.g. aircraft, ships) is excluded. Following strong New Home Sales (7yr high) yesterday, suggesting consumer confidence, Pending Home Sales are also expected to have rebounded in June rebound. Traders exposed to Oil will be watchful of US DOE Oil Inventories after another last night’s API data disappointed with a mere 800K barrel drawdown (lower than last week’s -2.3m) coupled with a 1.4m barrel rise in strategic inventories at Cushing, Oklahoma. This served to stifle a rebound by US and Brent Crude from their lows of yesterday.
To close the day, overnight central bank risk lurks in the form of the US Fed’s latest monetary policy update. It wants to hike rates but can’t really justify it while peers (BoJ, BoE and ECB) do quite the opposite, experimenting with ever-negative rates and increasingly innovative stimulus measures. US data may continue to impress, however, the more stimulus peers deliver, weakening their own currencies, effectively tightens stateside policy by strengthening the USD. Doing the Fed’s work for it. Expect plenty of hawkish rhetoric as usual, just to keep us all in check, but we still say it won’t hike until next year. Unless they deliver an early Christmas present again. This year is looking rather similar.

Wed, 27 Jul 2016 08:07:00 +0100
Today's Market View - Avalon Minerals, Horizonte Minerals, Kodal Minerals, Mkango Resources Avalon Minerals ltd (ASX:AVA) – drilling starts at high-grade lithium project in Sweden
Horizonte Minerals (LON:HZM) – Additional  licences awarded at the Araguaia nickel project
Kefi Minerals* (LON:KEFI) – Raising £3.8m
Kodal Minerals* (LON:KOD) – Exploration work in West African
Mkango Resources* (LON:MKA) – Option to acquire hydrochloric acid regeneration technology

European markets are trading level while Asian stocks climb toward their highest level since October driven by gains in telecom and gaming companies.
US equities closed lower on losses in energy stocks driven by a fall in oil prices.
• Copper hit the lowest level in nearly two weeks in Shanghai as local smelters raised output driven by increasing margins driven a surplus of concentrate.
• Nickel prices fell despite a Philippino MP calling for an outright ban on shipments of raw metal ores mimicking the Indonesian decision in 2014. The metal rallied more than 10% this month as new administration launched a review of mining permits in the country.
• The yen is up 1.5% this morning on the back of Finance Minister comments that the government is yet to decide on the size of a fiscal stimulus. Investors expect the BoJ to ease the policy further this Friday.
• Sterling fell a further 0.4% as an independent MPC member brought expectations of a monetary easing forward on weak economic data released on Friday (FT).
• Brent crude fell 0.7% after falling 4% over the past three sessions on concerns over US inventory levels.
• Major sovereign bond yields are lower ahead of the Fed and BoJ meetings today.

Lithium – Lithium Oxygen batteries could lead to lighter, longer range cars
• The boffins at the MIT, Argonne National Lab and Peking University have created a lithium oxygen battery which has the power and light weight of a lithium air battery but does not suffer from the short life or wasted heat issues.
• The lithium oxygen battery uses nanoscale particles which hold both oxygen and lithium and keeps the oxygen within the battery as it changes states.  This cuts energy losses and prevents changes in volume which shorten battery life spans.  It also does not suffer contamination from carbon dioxide or H2O and has some inherent protection against overcharging.
• The battery is still at the proof of concept stage but a prototype will soon follow.  The battery is thought to store 2x existing energy density..
• If this new battery is able to also benefit from other recent breakthroughs in electrode coatings and graphite flake alignment which may be applicable across a range of battery technologies then the performance of the battery may exceed the 2x energy density forecast making a big difference to consumers.
• New battery technology ‘will’ herald a new era for electric vehicles, consumer and industrial products.
• The electricity needed to power increased demand for plug-in electric vehicles will largely come from coal and nuclear and will be delivered through upgraded grid networks of copper and aluminium requiring more metal all round.  Increased distributed power from solar and wind will also become a part of the distribution network
• While the age of oil is not yet over, the hydrocarbon age may have seen its best years. 

Cobalt – Chinese investors / speculators buy cobalt for battery demand growth
• Chinese investors and speculators are reported to be buying up physical cobalt as they bank on new demand for cobalt batteries.
• Consumers are reported to be paying higher prices for forward deliveries with cobalt prices rising to $28-31,000/t for metal.

Chinese miners buy $4.5bn of foreign mining assets in H1
• Chinese companies have been taking full advantage of the rout in commodity markets to acquire mineral assets.
• Chinese backed funds and companies have bought over $4.5bn worth of non-China mining assets according to Baker & McKenzie.
• The figure is 18% higher yoy.
• China Molybdenum (CMOC) was the major buyer acquiring Freeport’s stake in Tenke Fungurume in the DRC for $2.65bn.  The mine is a major copper, cobalt producer.
• The company also agreed to buy Anglo’s niobium and phosphate assets in Brazil for US$1.5bn.
• Acquisitions are increasingly being made by private and provincial parastatal companies
• Jiangxi Ganfeng Lithium, China’s second largest lithium producer bought 43% of the Mount Marion lithium project in Western Australia in late 2015.
• Sichuan Railway Investment Group (SRIG) agreed a A$330m deal for 60% for Alton Mining’s Cloncurry’s copper-gold mine in Queensland, Australia. SRIG were already in jv with Alton Mining on the asset and are contributing US$213.5m to the project giving SRIG a 66% stake in the project.

Dow Jones Industrials   -0.42% At 18,493  
Nikkei 225   -1.43% At 16,383
HK Hang Seng   +0.62% At 22,130  
Shanghai Composite   +1.14% At   3,050  
FTSE 350 Mining   +0.69% At 11,310  
AIM Basic Resources   +1.59% At   2,201 –  AIM resource stocks rise 45% since January

Date Index Period Actual Expected (Bloomberg) Previous
Tuesday S&P/CS Property Prices May  0.2%mom/5.6%yoy 0.5%mom/5.4%yoy
Consumer Confidence Jul  95.5 98
  New Home Sales Jun   1.6%mom -6.0%mom
Wednesday Durable Goods/Core Jun   -1.1%mom/0.3%mom -2.3%mom/-0.3%mom
  Capital Goods Orders Jun   0.2%mom -0.4%mom
FOMC Rate   0.25%-0.50% 0.25%-0.50%
Thursday Weeklyt Jobless Claims     263k 253k
Friday GDP (1st reading) Q2  2.6%qoq 1.1%qoq
  Core PCE     1.7%qoq 2.0%qoq
Source: Bloomberg    

China – Monetary Conditions Indicator reached a five-year high in Jun helped by improved bank lending and a weaker currency, HSBC reported.

Japan – The administration is working on the fiscal stimulus package with no details on the size of the programme available at this moment.
• Meanwhile, Finance Minister said he hoped the BoJ would continue with its monetary stimulus efforts.
• The supplementary budget meeting is scheduled for this Friday, same day as the BoJ policy meeting, with the final decision on the size on Aug 2.

Germany – Business confidence came in better than forecast in Jul, while a little off from the Jun reading, the survey continued to point to a relative resilience of the local economy to the decision by the UK to leave the EU, Ifo Institute said.
• Ifo Business Climate: 108.3 v 108.7 in Jun (the highest since the start of the year) and 107.5 forecast.
• The report follows good manufacturing PMI numbers released last year as the index hit the highest level since early 2014.

UK – Business confidence fell to the lowest reading since early-2009 reflecting the effect of the Brexit vote in Jun.
• CBI Business Optimism: -47 v -5 in Jun and -15 forecast.
• Surveyed noted weak expectations for new orders and scaling back of investment plans post Brexit.
• “Concerns over economic and political conditions abroad as a constraint on export orders are at their highest since 1983,” CBI said.

South Korea – The economy, the fourth largest in the region, reported an accelerated increase in GDP in Q2/16 beating market estimates.
• Q2 GDP change: 0.7%qoq/3.2%%yoy v 0.5%qoq/2.8%yoy in Q1 and 0.6%qoq/3.0%yoy forecast.
• The government together with the central bank hs been adding to stimulus to try support local economy amid weak dometic consumption and falling exports.
• In Jun, the government announced a $17.5bn stimulus package while the Bank of Korea cut its benchmark rates.

Venezuela – Gold reserves have come off in May for a fourth consecutive month as the administration feels the pressure of diminished FX revenues on weaker oil prices.
• Holdings dropped to 6.24moz, down from 6.63moz in Apr, according the IMF data.
• Gold reserves fell 36% over the last 12 months and almost halved since Feb/15.

US$1.1007/eur vs 1.0985/eur last week.    Yen 104.35/$ vs 106.29/$.    SAr 14.400/$ vs 14.312/$   $1.310/gbp vs $1.315/gbp.   
0.752/aud vs 0.749/aud.    CNY 6.675/$ vs 6.679/$. 

Commodity News
Precious metals:
Gold US$1,321/oz vs US$1,315/oz last week
Gold ETFs 64.3moz v 64.5moz last week – ETF holdings pull back in summer trading
Platinum US$1,087/oz vs US$1,074/oz last week
Palladium US$684/oz vs US$676/oz last week
Silver US$19.68/oz vs US$19.46/oz last week
Base metals:   
Copper US$ 4,869/t vs US$4,929/t last week –
Aluminium US$ 1,607/t vs US$1,608t last week –
Nickel US$ 10,280/t vs US$10,445/t last week –
Zinc US$ 2,223/t vs US$2,262/t last week –
Lead US$ 1,839/t vs US$1,848/t last week
Tin US$ 17,725/t vs US$17,785/t last week –

Oil US$44.4/bbl vs US$45.4/bbl last week
Natural Gas US$2.713/mmbtu vs US$2.801/mmbtu last week
Uranium US$25.20/lb vs US$25.40/lb last week –

Iron ore 62% Fe spot (cfr Tianjin) US$54.6/t vs US$54.7/t – China imposes anti-dumping duties on EU, Japan, S Korea for steel shipments
• In a move which would make Niccolò Machiavelli proud, China is imposing anti-dumping duties on certain steel imports into China
• The new duties will range from around 37-46.3% according to the Chinese Ministry of Commerce as reported in the Taipei Times.
• We suspect the move is a pre-emptive strike against proposals in the EU for dumping steel into Europe
• The US has already imposed anti-dumping duties but the EU has been typically slow to impose similar dities.
• In 2012 the WTO ruled that  Chinese duties on high-tech steel from the US violated trade rules.  
• The WTO censured China last year for ongoing duties despite the judgement against it.

Thermal coal (1st year forward cif ARA) US$59.3/t vs US$58.5/t last week

Tungsten - APT European prices dropped to $180-190/mtu vs $175-185/mtu on last week

Company News

Avalon Minerals ltd (ASX:AVA) A$0.4, mkt cap A$20.1m - drilling starts at high-grade lithium project in Sweden
• Avalon Minerals which has been investigating a copper project at Kiruna in Sweden has turned its attention to lithium.
• The team led by Malcolm Norris, is following up on some high-grade intersections at the Kietyonmaki lithium project in Finland drilled by the Geological Survey of Finland.
o 12.9m @ 1.83% Li2O within a broader zone of 23M @ 1.53% Li2O
o 9m at 2.2% Li2O within a broader zone of 24m at 1.3% Li2O
o 1m @ 3.9% Li2O within a broader zone of 13m at 1.66% Li2O
o Peak value of 3m @ 4.35% Li2O (drill hole R310).
o The plan is to drill 3,000m of diamond drilling in around 17 drill holes to test around 400m strike length  and depth of 250m depth. 
o Drilling starts around mid August and will allow for preliminary metallurgical test work with a maiden lithium resource expected by the year end.
o Avalon is earning into the project in joint venture with Nortec Minerals Corp
Conclusion:  This feels like a positive development for Avalon

Horizonte Minerals (LON:HZM) 2.1 pence, Mkt Cap £14.3m – Additional  licences awarded at the Araguaia nickel project
• Horizonte Minerals reports that it has been awarded 3 further licences totalling 3,142 hectares to the south of its recently acquired Glencore Araguaia Project (GAP) in Brazil.
• The company has been progressively expanding its footprint in the region covered by ultramafic rocks which host laterite nickel deposits and now holds a total of 113,314 hectares within 19 licences.
• The company plans to “undertake a reconnaissance exploration programme to evaluate the potential of these new areas for additional nickel mineralisation. In addition, based on generative work recently completed, we have applied for three further licence areas, which is in line with our strategy to consolidate our land position in the district.”
• The company has previously disclosed that it is working on an updated pre-feasibility study, due for release during H2 2016, for the development of the Araguaia saprolite / laterite nickel deposit.
Conclusion: Horizonte Minerals is consolidating its holdings in the Araguaia district and continuing to apply for additional licences. We look forward to the updated pre-feasibility study later this year.
Kefi Minerals* (KEFI LN) 0.5 pence, Mkt Cap £17.0m – Raising £3.8m
• Kefi Minerals has announced that it has, conditionally, raised £3.8m through the issue of 761.9m shares at 0.5p/share.
• The proceeds are to be used to assist in the resettlement of the Tulu Kapi community as well as the costs of closing the project finance syndication. In addition, the company will recommence exploration on satellite deposits within trucking distance of the Tulu Kapi plant and further the exploration of its project at Jabal Qutman in Saudi Arabia.
• Odey Asset Management  “has subscribed in the Placing above its pro rata shareholding and, upon completion of the Placing, will have a beneficial interest in circa 29.5% of the issued capital of the Company.” “Ausdrill International Pty Ltd, an existing 7.31% shareholder has also subscribed in the Placing for approximately £266,160 (approximately US$350,000) to maintain its pro rata shareholding in KEFI.”
Conclusion: The funding has been well-supported by two of Kefi Minerals’ major shareholders and should help maintain the momentum of work by facilitating the start of the resettlement programme at Tulu Kapi and allow the exploration of outlying satellite deposits.

Kodal Minerals* (LON:KOD) 0.05p, mkt cap $1.8m – Exploration work in West African
• Kodal  Minerals reports on its exploration activities in west Africa where a trenching programme has commenced on the Nangalosso Gold project in Mali is following up previous work including a 3m wide intersection at an average grade of 7.12g/t within a wider mineralised zone of 21m averaging 7.12g/t gold in drill hole NNAC114; a 1m wide section averaging 7.8 g/t in drill hole NNAC021.
• To date, assay data has yet to be received from the first of the six trench programme at Nangalosso but the company reports that “initial geological inspection of the first trench (located 100m south of drill hole NNTR002) highlights abundant zones of quartz veining, strong alteration, haematite staining and strong geological structures.” The company expects exploration results in August 2016.
• Elsewhere, Kodal Minerals expects to start a programme of geochemical soil sampling at its wholly owned Korhogo project in Cote d’Ivoire shortly.
• Also in Cote d’Ivoire, activity in the joint venture exploration with Newcrest Mining at Dabakala is resuming with the establishment of a field camp in preparation for auger drilling of strong gold anomalies. The programme is expected to take 2 months with results expected in Q4.
Resolute Mining is continuing with geochemical soli sampling on the joint venture exploration at Nielle and Tiebissou and is in discussion with the Cote d’Ivoire Government for exploration access to the M’Bahaikro licence  area.
Conclusion: Since concluding the acquisition of the West African properties in June, Kodal is building up its exploration programme; we look forward to results as exploration progresses and assay results become available.
*SP Angel acts as Financial Advisor and Broker to the company.
*The author of this report does not hold shares in Kodal Minerals.
Three Partners of SP Angel and SP Angel LLP hold stock in Kodal Minerals due to their long running financial support for the company.

Mkango Resources* (LON:MKA) 4.4p, Mkt Cap £3.1m – Option to acquire hydrochloric acid regeneration technology
• Mkango Resources has announced that it has secured a two year option to acquire hydrochloric acid regeneration technology developed by McGill University in Canada.
• The process allows the production of high-strength hydrochloric acid from calcium chloride  using sulphuric acid and is “applicable in rare earths processing and other potential industrial applications”.
• The planned processing route for Mkango’s Songwe Hill rare earth project in Malawi uses hydrochloric acid to leach waste minerals (“gangue”) which produces calcium chloride. The McGill technology provides Mkango the scope to regenerate hydrochloric acid on-site “using the calcium chloride feed stream, supplemented with additional calcium chloride, together with sulphuric acid produced from Sulphur at a plant on site.”
• Harnessing this technology provides the opportunity to eliminate the need to transport large quantities of liquid hydrochloric acid to Songwe Hill by importing solid sulphur and calcium chloride feedstock to generate these key reagents on-site. This approach should simplify logistics and offer “significant potential cost” savings.
• In its November 2015 pre-feasibility study, Mkango Resources outline a project generating an after tax NPV of US$345m using a 10% discount rate and delivering a 37% IRR from an initial capital investment of US$216m. The potential operating cost savings will have to be balanced against any additional capital cost requirements to incorporate a hydrochloric acid regeneration module in the plant, however, in acquiring the rights to this technology Mkango has created additional options for its own plant development and may be able to roll out this expertise in due course.
Conclusion: Mkango Resources has the right to acquire technology which could simplify the provision of important reagents to its Songwe Hill rare earths project and deliver cost benefits in the processing plant.

Tue, 26 Jul 2016 10:46:00 +0100
Brokers: Deutsche downgrades housebuilders Tue, 26 Jul 2016 10:00:00 +0100 Today's Oil and Gas update - Green Dragon Gas, Nostra Terra Oil & Gas Headlines
In Brief:

Green Dragon Gas (LON:GDG – 273p) – Operations Update
Nostra Terra Oil and Gas Company (LON:NTOG – 1.63p) – Forward Strategy Required

In Brief
Green Dragon Gas (LON:GDG – 273p) – Operations Update: First the good. Operationally today's update is sound, with production rising strongly, but how this translates in to the all-important cash flow, note not revenues, remains to be seen. However, the real devil, which is always in the detail, is that the Company is in breach of its debt covenants. The Company is at pains to point out that this is before (the correct) inclusion of earnings associated with the CNOOC disputed areas. While the operational update is not the place to provide detail, now that this has been disclosed what is required from the Company at its next results is to quantify realistically where that is likely to come out. While there is a lot of uncertainty, and one wouldn’t like to prejudge the outcome of the audit that is being undertaken, this can all be encapsulated in a special paper reconciling where it is currently and where the various outcomes (high, expected and low) will place it post a successful audit. We have oft been a critic of GDG, and while the profligacy of the past is still a millstone hampering progress, bar the debt covenant breach, the Company is moving in the right direction. We think that how the Company responds to this potential crisis will be instructive, whether it chooses to hide behind waffle and hyperbole, or deliver a clear picture of the issue its facing and potential outcomes. Now it is over to the management.
Nostra Terra Oil and Gas Company (LON:NTOG – 1.63p) – Forward Strategy Required: With the pending disposal of the Chisholm Trail assets, we believe that the Company needs a clear strategy as to what it hopes to achieve with the revenues its generates from the sale and where it is aiming to get to. Otherwise there is always the risk that the funds dissolve away in the day to day running of the Company.

Tue, 26 Jul 2016 08:59:00 +0100
In the papers: BT, Arm Holdings, Deliveroo The Times
BT in compromise to keep Openreach: BT made a last-ditch offer to appoint an independent board and Chairman to oversee its Openreach division on the eve of a report by the regulator that may recommend a split.
We will be as big as Apple, promises Arm’s new Owner: A huge investment programme at Arm Holdings will propel Britain’s largest technology company on to the same plane as Google, Facebook, Amazon, Apple and Alibaba, its new Owner has said.
Finance Chiefs banned over ‘misleading’ loan accounting: Two former senior finance Executives have been banned from practising by their watchdog after failing to account correctly for a £4 million loan.
Guardian endowment loses £90m in a year: About £90 million was wiped off the value of the endowment that supports The Guardian newspaper last year, its Owner is expected to announce this week.
Royal Mint lifted by a bit of monkey business: Coins celebrating the Chinese lunar year of the monkey helped the Royal Mint to record the highest revenues in its history.
Roof may have blown off but the builders are back: Far be it from anyone to say that markets can be prone to panicking when the future looks uncertain, but it appears that the sell-off in the housing sector after the referendum result was perhaps a little overdone.
Amazon is close to delivering by drone: Amazon has moved another step forward in its quest to become the first retailer to deliver parcels by drone. It will announce that it has struck up a partnership with the government to “explore the steps needed to make the delivery of parcels by small drones a reality”.
The Independent
U.K. suspended payments from £3 billion EU development fund days after Brexit vote: Payments from a £3 billion European development fund were suspended indefinitely by the U.K. Government, just days after the vote to leave the EU, The Independent can reveal.
Deliveroo contracts ‘written to scare couriers from going to court over workers’ rights’: Deliveroo has outsmarted Uber by reportedly building clauses into the contracts of its couriers to prevent them from taking the company to court over worker’s rights.
Louis Vuitton Owner LVMH is to sell DKNY for $650m: LVMH has agreed to sell Donna Karan International, parent company of the DKNY label, to G-III Apparel Group for an enterprise value of $650 million. This represents a rare disposal for the French luxury-goods maker, which failed to turn around a label that once defined workplace attire for successful U.S. women.
BHS: twilight of the celebreneur: A report from a committee of MPs has demanded he makes “a large financial contribution” to help cover a £571m deficit in the pension scheme of defunct retailer BHS. The unspoken threat is that he could be stripped of his knighthood.
Heroine problem: Everything ends messily for Tosca, heroine of Puccini’s eponymous opera. Let us hope Toscafund does better as it seeks to oust Jan Astrand as Executive Chairman of Speedy Hire.
The Daily Telegraph
Break up the financial watchdog over HBOS failures, MPs urge: The City watchdog should be broken in two so that one unit can properly hunt down bad bankers while the other supervises the wider state of the finance industry, an influential group of MPs has said.
Nike Chief Executive's pay soars to $48m: The Boss of Nike has received a $30m pay rise thanks to stock awards intended to keep him at the firm for the long-term. Chief Executive Mark Parker was paid $47.6m for the year, with a static salary of $1.55m boosted by $33.5m-worth of stock grants, according to a stock market filing.
Hiscox’s profits sent soaring by fall in sterling: Insurance group Hiscox’s profits surged in the first half of the year, smashing forecasts because the lower pound boosted the value of its overseas earnings. Pretax profits climbed 52% to £206m, driven by an £87.3m gain on foreign currency holdings and earnings.
Value of London offices to drop by up to 10% as City feels Brexit pain, analysts warn: Property prices in London could fall by as much as 10% over the next few months, as the U.K. commercial real estate sector moves out of a bull market, according to analysts.
Ryanair may ditch U.K. domestic routes as it focuses on growth in Europe: Ryanair will start cutting flights from the U.K. later this year as part of the Irish budget airline’s plans to “pivot” investment away from the country following the surprise vote to leave the European Union.
The Questor Column:
Ryanair is well placed to ride out Brexit turbulence: There was a time when budget airline Ryanair was rarely out of the news, largely because of comments from outspoken Chief Executive Michael O’Leary. While it made great headlines, it also tended to draw from the fact that Ryanair was a money making machine in an industry where it's notoriously tough to turn a profit. Out went practices that made Ryanair the airline that passengers loved to hate, such as the no-compromises policy on baggage allowances and the glee on the faces of check-in staff as they imposed harsh charges on passengers who had forgotten to print their own boarding passes. Changes such as Always Getting Better and offering some of the services expected from a full-service airline, such as flexible tickets and allocated seating - have helped Ryanair become Europe’s largest budget airline, and it growth plans were repeated first-quarter results on Monday. Revenue in the three months to the end of June was 2% higher at €1.69 billion, profit after tax was up 4% at €256m, margin was steady at 15% but passenger numbers were 11% higher at 31.2m, despite the boost that Easter falling in the quarter gave last time round. Ryanair wants to carry 180m passengers by 2024 and the latest figures mean that steady progress is being made towards that number, with the airline expecting to fly 117m people this year, about a million more than in previous guidance. However, perhaps the biggest threat to Ryanair hitting the magic 180m - and the financial rewards that come with it - is Brexit. Ryanair is well-known for under-promising and over-delivering, so investors shouldn’t be too worried by this downbeat assessment. While there is always risk in airlines, Questor believes Ryanair is the best placed to ride out future problems of any of its competitors and upgrades to Buy. Ryanair at €11.59+€0.685. Questor says “Buy”.
The Guardian
Philip Green threatens to sue Frank Field over 'Maxwell slur': Sir Philip Green has instructed lawyers to demand an immediate apology from Frank Field, one of the senior MPs who led an inquiry into the failure of BHS.
NatWest paves way for introduction of negative interest rates: A major high street bank has paved the way for the introduction of negative interest rates for the first time in Britain by warning customers it may have to charge them to accept deposits.
Manufacturers feeling gloomy about future after Brexit vote: Britain’s manufacturers are planning to shed jobs and put investment on hold after the shock result of the Brexit vote provided the sharpest blow to business confidence since the global economy hit rock bottom in during the great recession more than seven years ago.
Labour proposes scrapping £1 billion tax relief designed to promote innovation: John McDonnell would look to reform or scrap a £1 billion tax relief that was initially designed by the previous Labour government as a means of promoting innovation in companies, including in the pharmaceutical industry.
Marissa Mayer hits out at 'gender bias' as Yahoo is sold for $5 billion: Verizon agreed to buy Yahoo’s core internet business for $4.83 billion (£3.62 billion) in cash on Monday, marking the final chapter in the struggling fortunes of the fading web pioneer.
MPs call for Financial Conduct Authority to lose enforcement powers: The Financial Conduct Authority (FCA) should be stripped of its powers to fine and ban individuals for wrongdoing, according to a report by MPs that calls on new Chancellor Philip Hammond to commission an independent review into whether an alternative investigatory body should be set up.
Daily Mail
William Hill jumps as rivals 888 and Rank make potential £3 billion merger approach, but bookmaker gives suitors a frosty response: Betting group William Hill has been approached by online rival 888 Holdings and casinos operator Rank Group over a potential £3billion three-way merger days after its Chief Executive was sacked.
Aberdeen Asset Management suffers more outflows but post-Brexit vote pound plunge helps boost overall performance: Aberdeen Asset Management has suffered another quarter of cash outflows as investors pulled £8.9billion out of its in funds, but asset values rose as the post-Brexit pound plunge provided a lift.
Daily Express
European banks slash jobs amid economy fears: Some of the biggest banks in Europe are slashing jobs amid expectations market conditions are set to darken in coming months.
Britain open for business: French giant Veolia to invest £750m and create 600 jobs: Britain has received another Brexit boost, as Veolia is set to plough £750million of investment into its U.K. business and create 600 new jobs.
German business morale falls after Brexit vote: German business morale deteriorated in July, suggesting company Executives have become less optimistic since Britain voted to leave the European Union.
The Scottish Herald
Food firm eyes further growth after £1m acquisition spree: Fine Food Holdings is targeting further acquisitions after extending its reach across Scotland with the acquisition of two specialist food companies.
Collapse of Dunne Group could have domino effect: A number of small contractors could be at risk after Bathgate-based construction firm Dunne Group entered administration last week with the loss of more than 500 jobs.
Scotch whisky distiller's profits hit by intense competition in U.K. and Taiwan: Scotch whisky distiller Edrington has posted a 13% drop in underlying annual pretax profits – hit by fierce competition in Taiwan and the U.K.
Shareholders in Greenock-based BPI approve takeover of packaging firm: Shareholders in Greenock-based British Polythene Industries have approved the £261 million takeover of the firm by RPC Group.
Water firm breaks ground on £16m extension: Highland Spring Group has broken ground on a major factory extension to house a new production line at its Blackford site in Perthshire.
Barrhead Travel opens new training centre: Barrhead Travel has hailed what it called a “significant” investment in a training academy to help fuel sustained expansion at the group.
The Scotsman
Japanese electronics firm pulls plug on world’s last video recorder: Japanese electronics maker Funai Electric is pulling the plug on the world’s last video cassette recorder. A company spokesman said that production will end sometime this month.
City A.M.
Theresa May could face static property market, says Stirling Ackroyd: Prime Minister Theresa May could well face a static London property market if history is anything to go by, analysts at Stirling Ackroyd have found.
Calls grow for major reform of business governance and pay ratios: British business is facing fresh pressure to undergo major reform, with Prime Minister Theresa May pledging to overhaul capitalism and revamp corporate governance.
Sprint shares accelerate after customer boost: Losses at Sprint, the fourth largest U.S. mobile network, have widened over the last quarter despite adding more customers than it has for nine years.
Hailo to merge with MyTaxi to take on Uber: Cab-hailing app Hailo is expected to announce a merger rival app MyTaxi. The move is part of a strategic investment by Mercedes-Benz-Owner Daimler – the Owner of MyTaxi – it was first reported by Sky News.
EasyJet recruits 1,200 new cabin crew despite challenging trading: EasyJet has announced that it is going to recruit 1,200 new staff despite recently reporting on a "difficult" trading environment.
Chablis prices set to soar as freak weather ruins up to half of harvest: Chablis prices are set to rise in the coming months as producers struggle with the effects of freak weather earlier in the year that destroyed up to half the region’s harvests.
U.K. could lose £250 billion in potential M&A deals after Brexit: Brexit could cost the U.K. economy hundreds of billions in lost M&A activity over the rest of the decade, as firms hold off wheeling and dealing in the aftermath of the EU referendum.

Tue, 26 Jul 2016 08:40:00 +0100