MARKET REPORT: Rio Tinto mulls Canada venture as it plans to swallow the rest of Turquoise Hill Resources
Canada has not been a happy hunting ground for mining giant Rio Tinto.
Investors must still remember its disastrous £23billion acquisition of aluminium giant Alcan in 2007, a bruising top-of-the-market deal when Rio itself was under pressure from industry rivals to either get bigger or be bought.
It effectively led to the sacking of boss Tom Albanese, who made way for Sam Walsh. He has bided his time before considering venturing back into the country, but apparently is now lining up a bid for the outstanding 49.2 per cent stake in Vancouver-based mineral exploration and development company Turquoise Hill Resources, formally known as Ivanhoe Mines, it does not already own.
Canadian deal: Sources suggest Rio Tinto could swallow the rest of Turquoise it does not already own
Up more than 10 per cent in the previous two session amid growing speculation a deal could be on the cards, Turquoise’ shares advanced 0.13 per cent more to $4.09 on talk Rio is ready to pounce with a cash offer of around $8 a share.
Rio owns 50.8 per cent of Turquoise, which holds 66 per cent of the huge Oyu Tolgoi copper and gold mine. Progress on the $6billion second stage of Oyu Tolgoi has been frozen because of Rio’s inability to strike an agreement with the Mongolian government.
But sources now suggest a deal could be announced within the next few weeks and could coincide with Rio swallowing the rest of Turquoise.
Billionaire entrepreneur Robert Friedland, a major player in the junior mining industry, holds 3 per cent of Turquoise and has been against selling out to Rio Tinto, that is up until now. Rio’ shares advanced 41.5p to 331.5p.
Punters chased India-focused oil refiner Essar Energy 7.85p or 11.69 per cent higher to 75p on hot gossip that the Indian billionaire Ruia Brothers, who already own 78 per cent of the equity, are on the verge of increasing their offer for the minority to 86p a share. Their original offer of 70p a share was treated with the contempt it deserved.
Remember, the Ruia Bros floated a 23.2 per cent stake in the company at 420p a share four years ago, raising a mouthwatering £1.2billion in the process. Essar fell out the Footsie in 2012.
Impressive trading statements from constituents Aviva, 37.9p better at 504p, and Aggreko, 55p up at 1628p, helped the Footsie make early progress but gains were pared on disappointment with European Central Bank President Mario Draghi’s failure to commit to further liquidity measures in the short term.
Both the ECB and the Bank of England yesterday kept interest rates on hold at record lows of 0.5 per cent and 0.25 per cent respectively. The Footsie closed 13.07 points up at 6,788.49 and the FTSE 250 57.40 points higher at 16,671.75.
Wall Street closed 61.71 points higher at 16,421.89 on easing tensions in the Ukraine and news that weekly applications for US unemployment insurance fell to 323,000, the lowest in three months.
Fund manager Schroders jumped 137p to 2727p following a better-than-expected 24 per cent gain in full-year pre-tax profits to £447.5million and a 35 per cent hike in the dividend to 58p a shsre. Assets under management came slightly above consensus at £263billion.
Disappointing trading news dragged engineer IMI 67p lower to 1481p. The 35.3p dividend announced was below Canaccord Genuity’s forecast of 35.8p. Analyst Harry Philips has a target price of £18 and says new chief executive Mark Selway has a strategic review in progress with the conclusion set to be presented with the interims in August.
Oil and gas services group Kentz rose 18p to 768.5p on the back of a contract win in Mozambique worth an estimated £90million. Balfour Beatty slumped 23.8p to 297.6p after the struggling infrastructure group said 2013 results were ‘disappointing’ with pre-tax profits down 32 per cent at £187million because of difficult conditions in UK consruction and a downturn in Australian mining.
A positive trading update and 2p a share special dividend payment lifted photobooth and vending machines group Photo-Me International 8p to 148p. FinnCap has raised its April 2014 pre-tax profit forecast by 3 per cent to £30million and has retained its 165p price target.
Meat retailer Crawshaw, with 20 butcheries and two distribution centres across the UK, shot 6.25p or 23 per cent higher to 33.25p after forecasting that annual profits would beat analysts’ expectations after a strong end to the year and excellent Christmas trading. Consensus forecasts were for profits of £0.8million for the year, up from £0.25million year on year. Analysts have now pencilled in profits of £1million.
After announcing several contract wins including a key marketing partnership with a big German mobile operator, Regenersis jumped 37p to 377p. Panmure Gordon reiterated its buy stance and lifted its target price to 423p.
West African gold miner Avocet Mining shed 1.75p to 10.75p after swinging to an annual loss of £45.99million, compared with a profit of £18.27million a year earlier.
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