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Beaufort Securities Breakfast Alert - Drop in consumer demand hits UK car manufacturing

Beaufort Securities Breakfast Alert - Drop in consumer demand hits UK car manufacturing

Markets

Europe
The FTSE-100 finished yesterday's session 1.09% lower at 7,587.98, whilst the FTSE AIM All-Share index was down 0.75% at 1,067.74. In continental Europe, the CAC-40 finished 0.87% lower at 5,473.78 whilst the DAX was down 0.95% at 13,197.71.

Wall Street
Last night in New York, the Dow Jones ended the session 362.59 points lower at 26,076.89, the S&P-500 lost 31.10 points to close at 2,822.43 and Nasdaq finished 64.02 points lower at 7,402.48.

Asia
In Asian markets this morning, the Nikkei 225 was 111.72 points lower at 23,180.25 heading into the close. The Hang Seng was up 44.38 points at 32,631.18 but the Shanghai Composite was 18.86 points lower at 3,469.15.

 

Oil
In early trade today, WTI crude was 0.87% lower at $63.94 per barrel and Brent was down 0.72% at $68.52 per barrel.

 

Headlines

Drop in consumer demand hits UK car manufacturing
Car manufacturing in the UK fell last year for the first time since 2009. According to new figures from the Society of Motor Manufacturers and Traders (SMMT), 1.67 million cars left UK factories in 2017, a decline of 3% compared with the year before. The SMMT says lower demand from UK consumers was the main reason for the fall, although exports also dipped. New investment in the UK motor industry shrank as well, falling to £1.1bn last year, compared with £1.66bn in 2016. Despite the decline last year, manufacturing in the UK remains high by historical standards, having risen steadily in the aftermath of the financial crisis. The number of cars that rolled off the production lines in 2017 was still the second highest since the turn of the century. But the SMMT remains concerned about the effects of falling business and consumer confidence, as well as what it calls confusion over the government's policy on diesel. Output for the domestic market fell by 9.8%, reflecting a decline in new car sales, which gathered pace towards the end of the year. Overseas demand continued to dominate production, with almost eight in every 10 cars built being sent abroad, more than half of them to the rest of the European Union.

 

Source: BBC News

Company news

 

Altus Strategies (LON:ALS) 8.50p – Speculative Buy
Altus announced that all conditions have been satisfied or waived in respect of the completion of the previously announced definitive agreement with Legend Gold Corp (LGN.V). The basic terms of the agreement are an all shares transaction where Legend shareholders end up owning 27.6% (41M shares) of the enlarged share capital of Altus. Legend has a portfolio of six strategically located gold projects in Western and Southern Mali that cover nearly 400km2 of prospective exploration ground and contain c 900koz of discovered gold resources. One of these, the Pitiangoma Est licence is located 35km south of the 7.5Moz Syama gold mine and is currently under a JV agreement with Resolute Mining (RSG.A). Altus has submitted an application for a dual listing of its shares on the TSX-V.

Beaufort Securities acts as a corporate broker to Altus Strategies plc

 

Amryt Pharma (LON:AMYT) 20.05p – Speculative Buy
Amryt Pharma yesterday announced that it has signed an exclusive distribution agreement for Lojuxta in Romania and Bulgaria with Romastru Trading SRL, a Bucharest-based pharmaceutical services company operating for over 23 years. Romastru is part of Pharaon Healthcare Europe, a conglomerate which provides a wide range of services, including medical, marketing research, storage and distribution. Lojuxta is approved for the treatment of Homozygous Familial Hypercholesterolaemia (‘HoFH’), of which, Amryt acquired exclusive marketing rights in the European Economic Area, Switzerland, Middle East, North Africa, Turkey and Israel. The company estimates that there are approximately 30 patients with HoFH in Romania and Bulgaria.

Our view: Amryt continues to expand its partnerships across licensed territories! This is the 4th distribution agreement in the last 3 months, following the Kingdom of Saudi Arabia, Switzerland and Central/Eastern Europe, altogether covering c.300 patients, demonstrating the product’s global interest. Lojuxta currently generate annualised revenue of €11.5m (H1 FY17) and has a potential addressable market size of c.€100m. Beyond Lojuxta, the company is currently in Phase III clinical trials of AP101 for the treatment of Epidermolysis Bullosa which is fully funded and expected to release interim analysis during this quarter (Q1 FY18). We maintain our Speculative Buy rating.


Beaufort Securities provides corporate sponsored research to Amryt Pharma Plc

 

Cradle Arc (LON:CRA) 9.75p – Speculative Buy

Cradle Arc has published an important announcement regarding DMS (dense media separation) at its operating copper mine in Zambia. Current copper production is limited by the size of the plant, but if effective, a DMS circuit at the front end could concentrate the feed grade and effectively double throughput and copper production. This morning Cradle Arc has announced independent testwork by SGS (one of the best) shows a DMS would work well - 85% copper recovery, mill feed grade of over 2% (currently closer to 1%), good gangue rejection, and mill throughput of 2.6 million tonnes per annum.

Our view: This is excellent news, although not a surprise for management which acquired Mowana knowing a DMS would transform the mine. Current production of circa 12kt copper per annum should now double to 20kt, potentially more depending on the run of mine grade. During 1Q18, Cradle Arc will finalise testwork and design of the DMS. It has also commissioned Wardell to produce a new block model with a DMS circuit factored in. Both should be complete in 1Q18, following which we expect management to push the button of the expansion project. A DMS will transform the economics of Mowana and we reiterate our Speculative Buy recommendation.

Beaufort Securities provides corporate sponsored research to Cradle Arc Plc

 

Jubilee Metals Group (LON:JLP 3.25p – Speculative Buy

Yesterday, Jubilee Metals published its 4Q17 trading update. Hernic’s profit increased to just below £1m (up 94%) while Dilokong profit was £0.25m despite 8 weeks of downtime on the 3rd party ore circuit. 1Q18 should be a stronger quarter with both plants operating for the full 3 months. On the new projects side, progress is being made at Kabwe, Dilokong PGMs and PlatCro. We expect to see all three projects progressed during 2018, which will probably include starting construction at Dilokong in 2H18.

Our view: The Jubilee metals investment case is a combination of steady cash flows from Hernic and Dilokong, plus new development projects. At Dilokong (PGM circuit) it looks like Jubilee will build its own PGM plant using its existing debt facility. At PlatCro testwork results are due shortly, and we don’t anticipate anything untoward. Regarding Kabwe (zinc and lead), Leon Coetzer said he “expects to receive the metal refining results shortly and then to be in a position to conclude our way forward on the project." We are expecting positive newsflow from the two operations and all three development projects during 2018. We have a Speculative Buy recommendation.

Beaufort Securities acts as a corporate broker to Jubilee Metals Group plc

 

Mineral & Financial Investments (LON:MAFL) 11.00p – Speculative Buy

Mineral & Financial Investment announced that TH Crestgate, a private investment company in which MAFL holds a 49% interest, received the final draft of the resource update of the LS-1 deposit at Lagoa Salgada zinc-copper project in southern Portugal. AGP Mining Consultants of Canada completed the resource evaluation. Total tonnage now stands at 9.6Mt grading 2.85% Zn, 2.79% Pb, 0.34% Cu, 53.43g/t Ag and 0.81g/t Au for the LS-1 Zone. Of note, is that 59% of the updated resources occurs within the Indicated category. On aggregate, LS-1 resource tonnage increased by 114% while maintaining the grades of the maiden resource. In addition to the LS-1 deposit, Lagoa Salgada hosts at least 16 other gravimetric anomalies which have yet to be fully tested.

Our view: The doubling of the resource tonnage while maintaining grades is encouraging given that the drill programme consisted of infill drilling with angled holes that demonstrates grade consistency through throughout the mineralised envelope. We note that the Company had previously stated an exploration target of 8 to 10Mt, which the above updated resource occurs at the top end of the estimate. The LS-1 deposit remains open to the south and to the east. We note that the high-grade tin (cassiterite) contents from the gossan zone were not included in the resource estimate and will included at a later date. In the meantime, we maintain a Speculative Buy on the stock.

Beaufort Securities acts as a corporate broker to Mineral & Financial Investments Limited

 

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