A number of mining companies have been lifted by a note from Goldman Sachs.
The bank has repeated its buy recommendation on Kazakhmys - up 6.5p to 228.25p - and Xstrata - 10p higher at 575.5p - and moved from sell to neutral on Vedanta Resources, up 2p to 545p. The bank said:
"Overall, we believe that the platinum stocks remain expensive, and that Kazakhmys and Xstrata are the most attractive stocks in our coverage (despite our expectation that Xstrata will breach its 3 times net debt/EBITDA covenants in the second half of 2009). Both have high earnings sensitivity to the copper price, the metal that we believe has the tightest fundamentals at present.
"We remain sellers of the platinum producers; to date we have not seen the
production cuts we believe are necessary to avoid substantial surpluses. [But] we upgrade Vedantal, believing concerns over its spending plans are now largely priced in."
Platinum specialist Lonmin is down 20p at 847p.
Among the sector's minnows, Avocet Mining is down 2.5p at 73.5p after it announced a fall in third quarter gold production, compared to the previous three months. In a note he has delighted in calling Scooby Doup, analyst Charles Kernot at Evolution Securities said:
"Like one of the ghouls in Scooby Doo, Avocet is making the right noises, but still appears to lack the ability to execute. Production was in line with expectations but costs remained exceedingly high and will continue to squeeze the company's profit and loss account. At last, however, the group has found some new gold at the Doup project which is only 25km from the North Lanuto peration. This could offer operating synergies but we caution that the company still needs to investigate an appropriate process route to extract the gold. If this cannot be achieved it would kill the project.
"Avocet has long been a jam-tomorrow company but, with the work undertaken over the past year, we believe that 2010 could see it attain its promise. It has the cash to ensure its continued existence over this period which provides some security. However, there remain risks and so we retain our 95p target price and recommendation."
