The week got off to a slightly more upbeat start on the London Stock Exchange, with mining and resources stocks attracting some interest and broker coverage.
Daniel Stewart & Co featured Gulf Keystone Petroleum (LON:GKP) in its ‘Morning Meeting Note’ after the company announced interim results, reiterating its bullish stance. It believes first oil will be welcomed as will the revenue it brings, but in its opinion the main driver for the stock price will be proving the reserves across Gulf Keystone’s four blocks.
Gold miner Centamin Egypt (LON:CEY, TSX:CEE) cut its production guidance for the current year, while also anticipating higher cash costs per ounce in the current quarter. The news did not worry DS&C unduly, saying the group has been working through a series of technical issues, which it pointed out were not uncommon not uncommon in the start-up phase of a major gold mine. The broker found it more important to point out that the longer term expansion projects remain on track and the company reiterated its 2012 target of 500,000 ounces of gold.
Fairfax went one further, saying Centamin has done well to achieve so much in the time given. The company have a good team in place and gold production should continue to increase. “The question now is, can the mine expand further to 500,000ozpa or will something more like 400,000ozpa be its limit,” Fairfax added.
Collins Stewart was less upbeat, noting that, with a premium valuation, Centamin remains exposed during the ramp up phase as the company’s ability to hit production targets has been untested until now. “The downgrade is negative, and we expect the share price to weaken today on the news, though the longer term plans remain.” It retains its ‘Buy’ recommendation on the stock. However any further shortfalls risk eroding the market’s confidence in the longer term production levels.
Fairfax commented on Petropavlovsk’s (LON:POG) decision last Friday to proceed with an IPO of the group's Non-Precious Metals Division on the Hong Kong Stock Exchange. Fairfax expects the IPO to be well supported by influential groups in the region, and the sale of stock in the new division to some key investors earlier in the year “underpins the valuation which could rise significantly on IPO.”
Bank of America Merrill Lynch reiterated its ‘Buy’ stance on Tullow Oil (LON:TLW) after the group confirmed this morning that the Owo-1 well has in fact tapped a major new oil fierd in the Deepwater Tano licence offshore Ghana. BoAML is raising its NAV/PO by 60p to a total of 1,785p, reflecting the Owo discovery, the uplift in the value of the barrels and the de-risking of the Oniyina/Wawa prospects.