Evolution mining analyst Charles Kernot highlighted Xstrata’s (LON:XTA) strategic shift, in term of its investment in growth projects.
This morning Xstrata gave the green light to a US$1.36 billion development project to build a new coal mine in Australia.
The new mine will produce 8 million tonnes of export thermal and semi soft coking coal each year, for a 26 year mine life.
Construction will start in early 2011 and the first coal is expected to be delivered in July 2012.
“Xstrata is continuing its change from an acquisitive powerhouse to an organic growth generator and now expects to spend around US$6bn/year on its growth projects,” Kernot said in a note to clients.
“This is comparable with Rio Tinto’s US$11bn/year of capital expenditure given the relative size of the two groups.”
He adds: Xstrata’s share price has risen by 10% from our target price in the space of just one week. However, rather than yo-yo our recommendation we keep the stock at Neutral.”
Fellow Evolution analyst, Keith Morris stressed that Wood Group’s (LON:WG) latest bit of business represents its first major contract win in the Middle East.
This morning the company announced that its joint venture in the middle east has been awarded a US$800 million contract from Petroleum Development Oman (PDO).
It will provide engineering and maintenance services for seven years, with a three year extension option.
“We like the operational gearing of Wood Group and its exposure to current and future growth in demand for engineering services (E&PF division) and North American down-hole products and services in the Well Support division,” Morris said.
He adds: “We upgrade our target price to 550p (from 500p).”
Elsewhere Fairfax analyst Marc Elliot examined Diamondcorp’s (LON:DCP, JSE:DMC) decision to adapt its underground development and raise £2.95 million in a placing.
The analyst believes that the placing will strengthen the company’s financial position considerably.
“Extending the depth required to take the bulk sample, despite delaying progress, does carry certain benefits in that the work being done would have been necessary later next year when developing the mine for full production in 2012, therefore effectively bringing forward progress,” Elliot said in a note to clients.
He adds: “We will be updating our numbers in due course to reflect this development and look forward to the results of the bulk sample in April.”
The analyst emphasised that a positive sampling result would lead to a major re-rating for Diamondcorp.
Diamondcorp has also earmarked £0.5 million to accelerate bulk sampling in Botswana, where it is a 77.5 percent stake in the PL/71 license.
It also plans to pay off £1 million of its debt to the Africa Opportunity Fund LP - US$1.55 million is due in April 2011.
The rest of the cash is being used for general working capital purposes.
Fox-Davies oil analyst Lionel Therond looked at San Leon Energy’s (LON:SLE) £59.6 million placing , which will fund an extensive seismic and drilling programme in Morocco and Poland.
Therond believes that the dilution from the placing is balanced by the positive impact of the accelerated exploration programme.
“This is a sizeable placing that provides funding through the next 18 months of exploration activities,” Therond said in a note to clients.
He adds: Poland is clearly a beneficiary with progress on several fronts and in particular the carboniferous shale gas play, as well as conventional oil and gas.
“Albania is also being brought forward, highlighting the attractiveness of the assets,
“We are less convinced about the rationale to spend exploration dollars in some of the acreage in Morocco given that part lies in disputed territories ... although we understand that the prospects to be tested in Tarfaya are clearly to the north of the disputed zone.”
The analyst rates San Leon as a ‘buy’ with a 65 pence target.