Ex-RBS boss Fred Goodwin under scrutiny in court hearing

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Today’s edition features:

  • Hummingbird Resources (HUM.L)
  • Prairie Mining (PDZ.L)
  • Quadrise Fuels International (QFI.L)

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"It’s hard to upset the markets for long these days. The three principal US indices ended the week rebounding from Wednesday’s setback. Despite this having pushed global stocks into their biggest decline since September, the Dow Jones benchmark index eventually declined just 0.4% over the five trading days. Indeed, US equities are firmly in their second longest bull run ever and are closing in on the nine-and-a-half year record they set during the 1990s. Even last week’s turmoil in Washington is being pushed to the back of investors’ minds, who today instead will focus on the President’s apparently highly successful visit to Saudi Arabia, from where he collected a wide range of contacts, including military ones, said to total over US$390bn value, while also proposing concerted action with the Muslim state against international terrorism and religious extremism. So, even if the ‘Trump Trade’ is fading and something as unlikely as his impeachment were to gain momentum, Congress understands that it will eventually be forced to deliver some, possibly diluted, form of his pro-growth, low-tax, deregulated promises to the electorate. Not that this is just a US equity party, far from it. Not surprising perhaps, given ultra-low interest rates globally and continuing unprecedented government stimulus, 2017 is set to be the first year in 13 that every one of the globe’s major equity regions enjoys positive cash inflows. Only the injection of a modicum of doubt regarding June FOMC meeting outcome meant that it was just the US$ that chose not to join the celebrations, closing the week down 2.4% against a resurgent Euro and 1.9% against the Yen. Asian stocks nevertheless started the new week on an upbeat note today, building on last week’s gains as political concerns go of the boil. The Nikkei rose convincingly, albeit well off session highs, and the Hang Seng rose to a new 22-month closing high, while banks and miners staged a recovery S&P/ASX 200, leaving just the unpredictable Shanghai Composite nursing modest losses. The pan-European STXX 600 gained 0.6% on Friday, while recovery amongst its heavily-weighted miners and oils lifted the FTSE100 almost as much as it pushed toward its all-time high once again. This momentum may be carried into today’s European session as crude prices continued to climb first thing this morning, taking futures to their highest levels in more than a month ahead of Thursday’s OPEC meeting. Today is a quiet day one for European macro releases, with nothing significant expected from either the UK or EU, although Eurozone Finance Ministers meet to discuss Greece’s economic adjustment program ahead of Thursday’s ECOFIN meeting. The US is scheduled to provide just its Chicago Fed National Activity Index for April. As far as UK corporates due to publish earnings or trading updates are concerned, there is just McKay Securities (MCKS.L). Other than keeping a wary eye on North Korea’s wild-child, Kim Jong-un, as he heralds his latest ballistic missile launch, London equities are set to open in a good mood this morning, with the FTSE-100 seen rising more than 30 points in early trade."
– Barry Gibb, Research Analyst



Markets

Europe
The FTSE-100 finished Friday’s session 0.46% higher at 7,470.71 whilst the FTSE AIM All-Share index was up 0.54% at 976.87. In continental Europe, the CAC-40 finished up 0.66% at 5,324.40 whilst the DAX was 0.39% higher at 12,638.69.

Wall Street
In New York on Friday, the Dow Jones rose 0.69% to 20,804.84, the S&P-500 added 0.68% to 2,381.73 and the Nasdaq gained 0.47% to stand at 6,083.7.

Asia
In Asian markets this morning, the Nikkei 225 had risen 0.45% to 19,679.58, while the Hang Seng firmed 0.94% to 25,412.26.

Oil
In early trade today, WTI crude was up 0.79% to $50.73/bbl and Brent was up 0.8% to $54.04/bbl.


Headlines

Ex-RBS boss Fred Goodwin under scrutiny in court hearing
Former Royal Bank of Scotland boss Fred Goodwin is set to come under scrutiny in court for the first time since the bank’s near-collapse in 2008. Some 9,000 people who lost money on shares are demanding £520m in compensation from the bank and four former directors, including Mr Goodwin. They say they were misled over the bank’s financial health in the run up to its £45bn government bailout. The bank and former directors deny any wrongdoing. Mr Goodwin, who was stripped of his knighthood in 2012, oversaw the multi-billion-pound deal to buy Dutch rival ABN Amro at the height of the financial crisis in 2007, which led to the RBS bailout. The case at London’s High Court is expected to last 14 weeks and centres on the rights issue aimed at funding the deal which asked existing shareholders to pump £12bn into the bank in exchange for discounted extra shares.

Source: BBC News



Company news

Hummingbird Resources (HUM.L, 23.75p) – Speculative Buy
Hummingbird Resources, the gold exploration and development company with assets in Mali and Liberia, announced today a construction update from the Company’s Yanfolila mine in Mali. The ball mill has been delivered and the contract mining fleet has been mobilised and arriving on site. All aspects of construction continue to progress on budget and on time with the first gold pour expected before the end of 2017.

Our view: We continue to be encouraged with the pace of progress being made at the Yanfolila as the project remains on time and within budget. We look forward to further updates as pre-production mining is planned to commence in Q3 2017. We also note that once Yanfolila is in production, operating costs (AISC) are expected to be US$695/oz with 132,000oz of gold produced in the first full year’s production. We maintain a Speculative Buy rating on the stock.

Beaufort Securities acts as a corporate broker to Hummingbird Resources plc

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Prairie Mining (PDZ.L, 30.50p) – Buy
On Friday shares in Prairie increased c.12% after the CEO of Polish coal major JSW said it is in acquisition mode. An article in Parkiet, the Polish version of the FT, covered the story and added that Prairie’s coking coal property Debiensko is one of JSW’s potential targets.

Our view: It is no surprise that Prairie’s projects are attracting interest. Both Debiensko and Jan Karski are large coking coal projects in a coal friendly jurisdiction, and close to Central Europe’s steel industry which imports the majority of its coking coal requirements. As a result they both have European strategic value. As far as we understand Prairie is not in discussions with JSW (there has been no comment from Prairie). Prairie will continue to develop Debiensko towards production knowing that a hard coking coal project, in a region which imports from Australia, has various financing options. For example steel producers often invest directly in coking coal mines to secure offtake. We maintain our BUY recommendation.

Beaufort Securities acts as Retail Investment Advisor to Prairie Mining plc

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Quadrise Fuels International (QFI.L, 4.50p) – Hold
On Friday, the emerging supplier of MSAR emulsion technology and fuel, enabling a low-cost alternative to heavy fuel oil (one of the world’s largest fuels markets, comprising over 450 million tonnes per annum) in the global shipping, refining and power generation markets, announced an update on the provision of the Interim Letter of No Objection from Wärtsilä. It has been advised by Maersk that Wärtsilä is expecting to deliver the Interim LONO to Maersk by the end of May 2017 and that Maersk will then provide this to QFI.

Our view: Quadrise continues to work with Maersk to progress the release of Wärtsilä’s interim inspection report and to clarify Maersk’s previously confirmed intention to work collaboratively with QFI to progress the commercialisation of MSAR to the wider global marine industry. QFI continues to believe that the marine industry will ultimately acknowledge and adopt the use of exhaust gas scrubbers and high sulphur heavy fuel as the most economic compliance option for the International Maritime Organisation’s 2020 sulphur limit environmental legislation and that Marine MSAR will enable operators to obtain additional economic and environmental advantages over the use of heavy fuel oil. As noted in the Company’s announcement of 7 April 2017, the commercialisation of Marine MSAR is now being focused on other operators and the Company is actively working on this and the Interim LONO will further support these efforts. Trouble is that patient investors now need to understand that they will now almost certainly have to wait much longer than expected earlier this year and possibly be call upon to stump up more short-term funding in order to keep their hopes alive. The Saudi opportunity is still intact, but realistically nothing is likely to be forthcoming from here until the two or more-year IPO process has completed. In the expectation of this, Beaufort cut its recommendation from Buy to Hold back in March, with a view to getting involved again only when timing is more certain and the balance sheet provides sufficient visibility. Hold Quadrise Fuels International.

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To read Beaufort’s full research archive click here

Compiled by:
Barry Gibb, Kazunaga Senga, Sheldon Modeland, Charles Long & Ben Maitland
(t) +44 (0) 207 382 8384
(e) info@beaufortsecurities.com


Weekly diary


Click here to see all this week’s planned corporate and economic announcements.


Recommendations
During the three months to end-April 2017, the number of stocks on which Beaufort Securities published recommendations was 216, and the recommendations were as follows: Buy – 73; Speculative Buy – 118; Hold – 22; Sell – 3.

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