Monday, September 24, 2012

Petra Diamonds glitters on rough day for miners

On a weak day for the wider mining sector, Petra Diamonds was on glittering form as investors shrugged off news of a full-year loss at the FTSE 250 group.
The rough diamond supplier, which operates seven South African mines, climbed 8.3 – or 7.6pc – to 118p, the biggest riser on the mid-cap index, after reporting a 44pc rise in full-year revenues and forecasting an increase of about 30pc in production next year. The shares advanced even though the group posted a loss after tax of $2.1m (£1.3m), with profits hurt by foreign exchange movements.
Analysts noted the group managed to meet its latest guidance despite the recent weakness in diamond markets. Chief executive Johan Dippenaar told Bloomberg he was seeing “some green shoots” in the market after prices dropped earlier this year.
However, while investors couldn’t resist the lure of precious gems, overall it was a poor session for the miners, which were once again hurt by economic concerns and analyst downgrades.
ENRC fell 13.9 to 330.6p, the worst-performer on the blue-chip index, and Evraz slipped 10.4 to 261½p. That weighed on the wider FTSE 100, which shed 13.78 points to 5,838.84, while the mid-cap FTSE 250 lost 46.92 to 11,903.11.
JP Morgan said global growth, in particular China, would be the key factor for miners, rather than quantitative easing in the US.
“Until more clarity emerges around the Chinese growth picture and potential stimulus measures, which we suspect will not come until later in the year after the leadership changeover in mid-October, we suspect QE3 will provide a floor for the sector but not necessarily drive substantial forward momentum,” the bank said.
JP Morgan added that Anglo American, down 50½p at £18.87½, as well as Kazakhmys, 15 lower at 714p, were companies to avoid.
Anglo American was also put under pressure by Bank of America Merrill Lynch, which cut its recommendation on the miner to “neutral” from “buy” because of the disruption at its South African platinum operations. The miner had set today’s night shift as the deadline for striking workers to return to their posts.
Rio Tinto lost ground too as broker Citigroup downgraded the miner to “neutral” from “buy”, arguing that the “long term outlook for Chinese steel consumption has become increasingly uncertain”. The company declined 61p to £29.80.

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