Markets
London
The FTSE-100 finished yesterday's session 0.64% higher at 7,097.50, whilst the FTSE AIM All-Share index closed 0.08% down at 825.94.
Wall Street
In New York last night, the Dow Jones gained 0.49% to stand at 18,329.04, the S&P-500 strengthened 0.46% to 2,163.66 and the Nasdaq rose 0.69% to end the session at 5,328.68.
Asia
In Asian markets this morning, the Nikkei 225 had risen 1.02% to 17,032.42, while the Hang Seng fell 1.25% to 23,553.45.
Oil
In early morning trade WTI crude was down 0.16% to $51.27/bbl and Brent was off 0.11% at $53.08.
Headlines
Pensions regulator wants more powers to protect workers
The Pensions Regulator is asking for new powers to stop final-salary pension schemes being dumped when companies are sold. Lesley Titcomb would like firms with large pension deficits to be required to inform her if a sale is imminent and powers to intervene if necessary. At the moment, companies do not have to inform the regulator before a sale. The government insists it has a robust and flexible system for regulating occupational pensions. The risk to final-salary or defined-benefit schemes when a company is sold has come under the spotlight following the collapse of BHS. The retail group went into administration shortly after being sold for £1 by former owner Sir Philip Green. The pension scheme is reported to have a deficit of nearly £600m and is now likely to go into the pension's lifeboat, the Pension Protection Fund. Workers who have not yet retired will get 90% of the pension they expected.
Company news
Eurasia Mining (LON:EUA, 1.08p) - Speculative Buy
Eurasia announced it has signed an EPC contract for its Monchetundra project with Chinese state enterprise Sinosteel valued at $176m. The contract is subject to receiving a mining license from the Russian authorities (there are other lesser conditions not detailed) at which point we understand Sinosteel is committed to exercise the contract. i.e. this is not an MOU or Heads of Terms but a binding contract. To get the Mining License, Eurasia must submit the necessary paperwork (essentially the feasibility study), targeted before the end of 2016. Timing will then depend on the speed of Russian government departments. The $176m contract will be financed with c.$150m debt provided by Sinosteel and 15% equity, to be provided by the owner (currently Eurasia). Given that Sinosteel is state owned, we would regard the $150m debt to be in place. Interestingly and a positive, of the $176m contract, $50m will be subcontracted back to Eurasia. If this work can be delivered for less than $50m it would be profitable.
Our view: Monchetundra has been somewhat under the radar and resource estimates have not been announced. However 16,000m have been drilled and approximately $20m spent (most by Anglo American), while the nature of this contract suggests resources capable of underpinning a respectable sized operation (e.g. 50koz per annum). It may take some time for the mining license to come through and reading between the lines Eurasia continues to discuss JV-ing the project or an outright sale. Either way this is very positive and significantly increases the value of Monchetundra. We maintain a Speculative Buy rating on the stock.
Beaufort Securities acts as corporate broker for Eurasia Mining plc
Hummingbird Resources (LON:HUM, 24.75p) – Speculative Buy
Hummingbird Resources, the gold exploration and development company with assets in Mali and Liberia, announced today that civil works have commenced at its 2.2Moz Yanfolila gold project in Mali following recent appointment of IMAGRI-SARL as civil works contractor. IMARGI-SARL is a leading specialist of building, mining and industrial infrastructure in Mali and will be responsible for the completion of plant civil works. Surveying, setting out and trenching have started on site in preparation for concrete pouring later this month. Hummingbird states that the project is on schedule and within budget for first gold pour by the end of 2017.
Our view: Having recently secured the majority of project funding Hummingbird is now laying the ground work for full-scale construction at Yanfolila. This is a significant milestone for the company as it continues to target first gold pour by end of 2017 and 132,000oz of production within the first year of operation. We look forward to further developments as the construction process proceeds. In the meantime, we maintain a Speculative Buy rating on the stock.
Beaufort Securities acts as a corporate broker to Hummingbird Resources plc
Savannah Resources (LON:SAV, 4.08p) – Speculative Buy
Savannah Resources, the diversified mining group focused on exploration and development of mineral sands in Mozambique and copper-gold projects in Oman, announced today a new consortium arrangement with Rio Tinto covering heavy minerals sands projects in Mozambique. The new consortium agreement, following consultations with the Ministry of Mineral Resources and Energy of Mozambique, covers Savannah's Jangamo and Rio Tinto's Chilubane and Mutamba projects, allowing Savannah to commence a scoping study imminently which it expects to complete by the end of Q1 2017.
Our view: The new agreement with Rio Tinto is positive news for Savannah as it will be the operator of the combined projects and can earned up to a 51% beneficial interest in stages by undertaking scoping, pre-feasibility and feasibility studies. The combined projects include an established resource of 65Mt grading 4.2% total heavy minerals (THM) and an exploration target of between seven and 12Bt grading from 3 to 4.5% THM. We look forward to further project updates and completion of the scoping study. In the meantime, we maintain a Speculative Buy rating on the stock.
Beaufort Securities acts as a corporate broker to Savannah Resources Plc
Petards Group (LON:PEG, 18.25p) - Speculatuve Buy
Petards has announced that it has been awarded a contract to supply Great Western Railway with Petards' eyeTrain systems. The new contract, which is worth c.£6 million, is for the design, development, supply and installation of eyeTrain systems to be fitted to Class 165 and 166 Diesel Multiple Units (DMU) trains. The developed systems add substantial new software driven functionality to Petards' existing eyeTrain solutions. Engineering development is already underway and will make a contribution to 2016 revenues. This is expected to be completed by the third quarter of 2017 when deliveries of the integrated systems will commence with scheduled completion by the end of 2018.
Our view: Further excellent news for Petards which has been selected by Great Western Railway to work with them on this exciting project which further enhances Petards' position in the rail industry and significantly strengthens the Group's present order book for delivery in 2017 and 2018. This news follows September's excellent Interim results, and our comment on the August announcement of the additional contract win with Bombardier, for the eyeTrain system, for the new AVENTRA Electrical Multiple Unit Trains. The Great Western Railways' £6m contract continues the already stated momentum and we confirm our Speculative Buy stance and consider the shares undervalued.