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Beaufort Securities Breakfast Alert: Armadale Capital PLC and Kibo Mining PLC

Published: 04:08 22 Nov 2016 EST

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Armadale Capital PLC (LON:ACP)
Kibo Mining PLC (LON:KIBO)

"Chancellor Philip Hammond's first Autumn Statement, which is due tomorrow, now looks to be a rather unexciting event. Having abandoned Osborne's proposal to deliver a budget surplus by 2020, early hopes of him taking his foot right off the austerity pedal with a view to heading-out on a spending spree, pumping money broadly into infrastructure, corporate and other private incentives, appear to have been misplaced. Speaking on the BBC's weekend Andrew Marr Show, his tenor even reminded some of his predecessor, when stressing economic "credibility" was key, while reminding viewers that the UK's debt was still "eye-wateringly" large and that any plans must be "responsible". Indeed, the IFS even suggests Hammond should "prepare for more austerity" in the next parliament, given that debt as a share of national income has risen close to 90%. So, other than detailing the £1.3bn to target congested roads that has already been leaked (with key beneficiaries being Atkins (ATK.L), Breedon (BREE.L), Costain (COST.L), Hill & Smith (HILS.L) and Kier (KIER.L)), the Statement is likely to centre on existing major projects like HS2, Theresa May's extra £2bn investment in R&D and the already announced £3bn housing fund (potentially boosting the major housebuilders) plus £2bn loan fund to pay for 15,000 new homes by 2020, by which time corporation tax will also have been cut back to 17%. It seems rather unlikely that he will propose any increase of existing income tax allowances, raise the threshold for higher-rate payers or cut VAT. Anti-climax could be seen through a spate of profit taking following Sterling's recent rally. The US session by comparison closed with gains across the board yesterday as the S&P-500, Dow Jones and NASDAQ all hit new record highs. By the session close, however, Trump was telling the media he planned to stick with hi election pledge to quit the TPP on his first day, meaning the US will walk away from seven years of careful negotiation, which many see as effectively handing the baton to China who was not part of the original pact. Asia, however, took the news in its stride with all regional bourses making gains led by the Hang Seng and ASX as oil prices rallied as hopes of a production cut being agreed at next week's OPEC meeting rose, while even the Nikkei recovered early losses following news of the earthquake off its east coast Tuesday Morning. As a result, Europe looks to follow suit with broad gains being seen during early morning trade, despite ECB top officials warning that it is not yet ready to scale back its EUR1.7TR bond-purchase and stimulus programme; the FTSE-100 is seen opening up some 45 points. This morning's UK macro releases include Public sector finances and the CBI quarterly Distributive Trades Survey. UK corporates due to release earnings or trading updates include Babcock (BAB.L), CML Microsystems (CML.L), Compass Group (CPG.L), De La Rue (DLAR.L), Homeserve (HSV.L), Kingfisher (KGF.L) and Mitchells & Butler (MAB.L). Traders will also be keeping an eye open for any news later today, as David Davis, the Brexit secretary, meets with the EU's chief negotiator, Michel Barnier, in Brussels today in an effort to prepare for an 'orderly' exit."
- Barry Gibb, Research Analyst

Markets

Europe

The FTSE-100 finished yesterday's session 0.03% higher at 6,777.96, whilst the FTSE AIM All-Share index closed 0.34% up at 813.95. In continental Europe, the CAC-40 finished 0.56% better-off at 4,529.58 whilst the DAX was 0.19% higher at 10,685.13.

Wall Street

On Wall Street overnight, the Dow Jones gained 0.47% to 18,956.69, the S&P-500 added 0.75% to stand at 2,198.18 and the Nasdaq rose 0.89% to finish at 5,368.86.

Asia

In Asian markets this morning, the Nikkei 225 had risen 0.29% to 18,158.85 and the the Hang Seng gained 1.32% to 22,653.72.

Oil

In early trade today, WTI crude was up 3.94% to $47.49/bbl and Brent was up 1.37% to $49.57/bbl.

Headlines

Government pledges faster broadband funds
In Wednesday's Autumn Statement, Chancellor Philip Hammond will announce £400m ($500m) funding for a new Digital Infrastructure Investment Fund. Private investors will be asked to match the amount. The money will be aimed at fibre broadband providers who are looking to expand. The UK must move towards providing "fibre-to-the-property" broadband, rather than fibre to the roadside cabinet, the Chancellor will say. Currently only 2% of the UK has access to this "full-fibre" connection, offering download speeds of up to one gigabit per second, according to government figures. That is 35 times faster than the 28.9Mbps average UK speed internet connection according to Ofcom. Full-fibre provision is already offered by some independent broadband providers such as Hyperoptic, Gigaclear and B4rn, but to thousands rather than millions of customers. Trials of 5G, the next generation of mobile internet, will also continue, although there is no launch schedule yet. George Osborne laid out similar plans in his last budget in March 2016.

Company news

Armadale Capital PLC (LON:ACP, 4.00p) – Speculative Buy
Armadale Capital announced today the remaining assay results from its Mahenge Liandu graphite project in south-east Tanzania. The highly prospective Liandu project is located in an area of proven course flake, high-grade graphite resources and is adjacent to Kibaran Resources' (KNL.A) Epanko and Black Rock Mining's (BKT.A) Mahenge graphite projects. The remaining assay results from the 2016 Mahenge Liandu drill campaign confirm thick intersections of high-grade coarse flake graphite across the entire 2.5km mineralised strike length. Drill results returned an average grade of 9.3% Total Graphitic Carbon (TGC) from near or at surface. A JORC-compliant resource estimate is on-going and should be confirmed by the end of Q4 2016. Metallurgical testwork, to determine initial purity and flake size distribution, is continuing and is expected to be finalised by Q1 2017.

Our view: The high-grade assay results from Mahenge Liandu are encouraging as is the shallow depth of mineralisation. The company is looking to capitalise on the expected growth in the graphite market driven by increasing applications particularly in the energy storage market. We look forward to a maiden JORC compliant resource estimate and results from the metallurgical test work confirming initial purity and flake size. In the meantime, we maintain a Speculative Buy rating on the stock.

Kibo Mining PLC (KIBO.L, 7.12p) – Speculative Buy
Kibo Mining, the exploration and development company focused on energy and mineral projects in Tanzania, announced yesterday that has signed a Collaboration Agreement with General Electric International (GE) with respect to the development of the Mbeya Coal to Power Project (MCPP). This agreement follows the Memorandum of Understanding (MoU) announced on 16 September 2016 and provides details of the terms and conditions for a binding agreement. Under terms of the agreement, GE and its affiliates will supply equipment, technology and services to the MCPP power plant in addition to assisting and co-operating with Kibo to implement the project.

Our view: Yesterday's announcement is more positive news for Kibo given GE's technical expertise and reputation within the power sector. The interest and commitment GE continues to show in the MCPP is very encouraging indeed. We look forward to further details in the development of the MCPP power plant. In the meantime, we maintain a Speculative Buy on the stock.

 

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