FTSE in-depth: Coal of Africa stoked by talks

By GEOFF FOSTER FOR MAILONLINE
Updated: 03:21 EDT, 1 March 2011

Some spicy Indian takeover talk stoked up a good demand for Coal of Africa, sending shares of the coal mining and development company 6.50p or 7.62% higher to 91.75p.

Foster: Disappointing results from HSBC and Primark owner AB Foods left the friendless Footsie lower.

Speculators responded to hot gossip that India's International Coal Ventures consortium could be lining up a 165p a share cash offer for the company.

It is known to be looking to acquire overseas coal assets to meet rising demand for the key raw material in Asia's third-largest economy. Citigroup is rumoured to have been brought in as an adviser on the deal.

The State consortium has plenty of financial clout and recently hit the headlines by countering Rio Tinto's $39bn bid for Riversdale before walking away. Coal of Africa would be a much smaller mouthful.

Rumours of possible Indian interest coincides with talk too that Coal of Africa will soon confirm it will be able to resume work on its Vele colliery project in South Africa, after delays due to government opposition to the development from the Department of Water and Environmental Affairs.

Its shares have been hit by compliance issues in South Africa since rising strongly last September after gaining approval for its farm swap initiative with Rio Tinto in the Makhado colliery coal project.

Disappointing results from banking giant HSBC (33.10p down at 678.00) and Primark owner AB Foods (60.50p lower at 966.50p) and continuing Middle East tension left the friendless Footsie 7.19 points easier at 5,994.01.

Wall Street featured an early gain of 92 points as the oil price eased below $112 a barrel after reassurances about supply from Saudi Arabia. St Louis Federal Reserve President James Bullard also pleased the bulls. He said there is no chance that the Fed will end its programme of stimulating the economy.

Essar Energy took top Footsie billing at 517.00p, up 17.40p. Buyers filled up with stock on hearing the group plans to supply petrol to the UK market from its recently acquired Cheshire oil refinery.

News of increasing margin pressure at discount company Primark sent a chill through other major clothing retailers. Next shed 48.00p to 1,976.00p and Marks & Spencer closed 4.60p off at 346.40p.

With the price of petrol set to rise even further in the short-term, surely Halfords, 3.50p off at 387.50p, will be selling a lot more bikes.

But at the same time the hike could affect the car maintenance side of the business and with that in mind, Oriel Securities downgraded the stock to reduce from hold. Oriel says the macro-economic headwinds will affect all retailers but Halfords has a large number of stores in the more economicallytroubled areas of the UK and will not be immune to wider problems.

Aero engineer Rolls-Royce rose 5.00p to 617.00p on a Galvan Research recommendation.

Recent 2010 results were better than expected and the group has since won a major £1.4bn Emirates support deal.

BP, the oil giant, closed down 0.05p at 494.7p despite news that director Iain Conn bought 155,695 shares at 491p a pop.

Overweight bears continued to claw big chunks out of Centamin Egypt. Already down from 175p in January on the troubles in Egypt, the shares were sold down further to 116.75p before closing at 118.50p.

Responding to media reports regarding the possible restriction of gold exports from Egypt, the company said it has received no formal or informal notice from the Ministry of Petroleum and Mineral Resources or any other official or unofficial agency within Egypt to curtail, restrict or prohibit any regular gold shipments from the company's operation.

Avocet Mining advanced 8.25p to 224.25p following encouraging drilling results from the Kodieran Prospect in Guinea and confirmation that the sale of the South East Asian assets is due for completion in the second-quarter of 2011.

Following an update on the proposal to split the group into separate iron and gold companies, African Aura Mining climbed 17p to 291p. African Aura is to be renamed Afferro Mining to develop the iron portfolio and Aureus Mining will develop the gold portfolio.

An EGM will be held on April 5 2011 for shareholders to approve the restructuring and D-Day is expected to be April 13.

Gold exploration and development company Stratex International firmed 3.17% to 8.13p after identifying gold mineralisation at the newly acquired Blackrock licence, located 260km from its flagship Megenta discovery in Turkey. Fox Davies Capital's target price is 10p.

Better-than-expected full year figures helped Staffline edge up 1.50p to 190.50p.