The Markets
Market opening: UK markets are expected to open fairly flat this morning. At 7:25am FTSE-100 Futures were trading just 1-points higher.
New York: Wall Street ended slightly higher amid mixed economic data released yesterday. Investors await US nonfarm payrolls data to be declared today. The S&P 500 advanced 0.2%, led by the utilities sector.
Asia: Equities are trading higher. Investors remained wary over the outlook of China and awaited key US jobs data to be released today. The Nikkei 225 ended flat, whereas the Hang Seng was trading 2.7% up at 7:00 am.
Continental Europe: Markets ended in the red as investors remained concerned over slowdown in global economy. Further, weak manufacturing data released in the Eurozone and Germany dented investor sentiment. Germany’s DAX and France’s CAC 40 shed 1.6% and 0.7%, respectively.
Crude Oil: Yesterday, Brent and WTI oil prices decreased 1.4% and 0.8%, respectively. The spread between the two varieties stood at US$3.0 per barrel.
UK small caps: The FTSE AIM All-Share index closed 0.19% higher yesterday at 726.65.
Today’s news
UK labour costs rise in second quarter
As per the data from Office for National Statistics, unit labour costs in the UK rose 2.2% y-o-y in Q2 2015, fastest rise since Q4 2012, from 0.5% in Q1 2015. Further, productivity output per hour grew 0.9% q-o-q in Q2 2015, the fastest rise since 2011.
Company News
Jubilee Platinum (LON:JLP) – Speculative Buy
Jubilee Platinum, the Mines-to-Metals company focused on low-cost platinum mining and recovery, confirmed yesterday that it has completed the sale of its Middleburg smelter and power plant to Siyanda Resources Proprietary Ltd (previously announced on 16 July) for a total consideration of ZAR110.5m (£5.3m). Jubilee retains the right to construct a 5MW platinum furnace at the Middleburg site in the future and also has the right to participate in any expansion of the power plant site. Jubilee concluded the disposal with Siyanda Resources acting through Main Street 1347 Proprietary Limited, a special purpose vehicle established for the purposes of the disposal.
Our view: Jubilee continues with its strategy of fast tracking both of its surface platinum processing projects. Management is targeting 80,000 tons per month of platinum-bearing surface material and delivering 42,000 ounces of PGMs per annum. We are encouraged with the pace of development given that Jubilee has been recently incentivised to accelerate the construction and commissioning of the chrome beneficiation section of the ASA surface platinum-chrome tailings project. Despite the downward pressure on platinum prices, we believe Jubilee has the technical expertise and facilities to become a significant low cost PGM producer in the near term. As such, we reiterate our Speculative Buy on Jubilee Platinum.
Beaufort Securities acts as corporate broker to Jubilee Platinum plc
Orogen Gold (LON:ORE) – Speculative Buy
Orogen Gold, the gold and minerals exploration company focused in Europe, announced on 30 September 2015 that it has conditionally placed 1,800M shares at a price of 0.025p with new and existing shareholders. Gross proceeds of £450,000 will be used for working capital while the company continues to advance its Mutsk gold project in Aremnia and its Deli Jovan gold project in Serbia as well as developing new projects. The placing represents 32.7% of the Company’s enlarged share capital and will rank pari passu in all respects with existing shares. Application will be made for the issued shares to be admitted to trading on AIM, subject to approval, which is expected on or around 7 October 2015. Concurrently, Orogen also released its interim results for the period ending 30 June 2015 and announced the appointment of Colin Bird as its new CEO. The Group narrowed its pre-tax loss to £181,000 from £214,000 during the previous comparable period. As at 30 June 2015, Orogen has a cash balance of £851,000 (FY 2014:£1,118,000).
Our view: Whilst Orogen’s interim results were fairly academic for a mineral exploration company, we note with encouragement the appointment of Colin Bird, an experienced and established company director that has successfully developed several mineral exploration projects worldwide, as CEO. We look forward to exploration updates from the Mutsk gold project in Armenia now that Orogen has extended its exploration permit to July 2017, as it has the potential to host a large, low grade gold deposit. In the meantime, we maintain a Speculative Buy rating on the stock.
Beaufort Securities acts as corporate broker to Orogen Gold plc
Tullow Oil (LON:TLW) – Buy
Yesterday, Tullow Oil (Tullow) informed that the company along with its lending banks have completed the regular Reserve Based Lend (RBL) redetermination process and the company’s available debt capacity remains unchanged at US$3.7bn.
Our view: The aforementioned update showcases Tullow’s asset quality, enabling it to secure funding even in current adverse market condition. The company now has sufficient funds to meet its current demands along with developing the TEN (Tweneboa-Enyenra-Ntomme) Project. Tullow is progressing nicely in the project and remains on track to receive first oil in mid-2016. Post the commencement of the project, the company’s West Africa oil production is expected to generate around 100,000 barrels of oil per day in 2017. Further, as per the recently reported first half results of 2015, Tullow remained strong on cash generation and expects its restructuring program to deliver savings of US$500m over the next three years. Additionally, an operational update showed that the gas exports have increased to around 100 (Million standard cubic feet per day) mmscfd and the oil production has regained previous levels. Going forward, the company plans to deleverage the business with greater emphasis on major developments and phase out the non-core assets. In view of the overall optimism surrounding Tullow, we continue to recommend a Buy rating on the stock.
Economic News
Germany manufacturing PMI
As per the data released by Markit, the final manufacturing PMI of Germany slipped to 52.3 in September, from 53.3 in August. The markets expected a drop to 52.5.
Eurozone manufacturing PMI
Manufacturing PMI for the Eurozone fell to 52.0 in September, from 52.3 in August, final data from Markit showed yesterday. This was in line with the market expectations.
UK manufacturing PMI
The UK’s manufacturing PMI slipped to 51.5 in September from an upwardly revised reading of 51.6 in August, as per the data from Markit and the Chartered Institute of Purchasing & Supply. This was better than the market forecast of 51.3.
US initial jobless claims
Number of Americans filing their initial claims for unemployment benefits rose by 10,000 to a seasonally adjusted 277,000 in the week ended 26th September, from last week’s reading of 267,000, the Labor Department said yesterday. Economists had expected claims to increase to 271,000.
US manufacturing PMI
The final Markit PMI for the US stood at 53.1 in September, ahead of the preliminary estimates and market expectations of 53.0. The final US PMI for the month of August was recorded as 53.0.
US construction spending
US Construction spending increased 0.7% m-o-m to an annual rate of US$1.09tr in August, as per a report released by the US Commerce Department. Economists expected spending to rise 0.5% during the month.
US ISM manufacturing
US manufacturing PMI fell to 50.2 in September from 51.1 in August, as per the Institute of Supply Management (ISM). Economists forecasted a reading of 50.6. The index for new orders slipped to 50.1 from 51.7 in the previous month. While, the employment index dropped to 50.5 from 51.2 and the prices index fell to 38.0 from 39.0 in the previous month.