Cadence Minerals’ shares spike as “once in a lifetime” iron ore project receives approval
Since evolving from Rare Earth Minerals in early 2017, AIM listed Cadence
Minerals (LON:KDNC) has offered investors a proposition largely based on investments into selected lithium and base metal projects around the globe.
Taking cornerstone stakes in projects such as the Cinovec Lithium and Tin
Project in the Czech republic and Macarthur Minerals’ Lake Giles Iron Project in
Western Australia has provided Cadence with opportunities to invest into
acquiring assets directly.
The Company initially acquired lithium assets in Argentina and Australia, but when the iron ore supply squeeze in late 2018 threw up an opportunity to acquire the Amapá iron ore project in Brazil, Cadence management and its core investors jumped in with both feet.
Formerly owned by Anglo American (AAL) and Cliffs Natural Resources, the Amapá iron ore project is a large-scale iron open pit ore mine with associated rail, port and beneficiation facilities. Based in Northern Brazil close to the Atlantic, Amapá commenced operations in December 2007, and prior to its sale in 2012 due to a collapse in iron ore prices, Anglo American valued its 70% stake at $462m. Back then the mine was selling ore globally to Europe, USA and China.
With approx 1.4 million tonnes of iron ore stockpile sitting ready for shipment at
the port, Cadence CEO Kiran Morzaria set up a joint venture company Pedra Branca Alliance Pte Ltd (PBA) with Singapore based commodities group IndoSino Pte Ltd to acquire DEV, the Amapá holding company.
A judicial restructuring plan submitted by PBA was approved, which saw Cadence, through PBA, acquire a 27% stake in the Amapá iron ore project for just $6m. And following extensive work with the judicial trustee and creditors committee, a landmark ruling was today delivered by the Commercial Court of São Paulo, approving the shipment of the iron ore stockpiles. The net proceeds of the iron ore sales will be used to pay labour and small creditors, and to bring the Amapá iron ore project back into production.
“Opportunities such as this come along once or twice in a lifetime,” says Morzaria.
“To start a project on the scale of Amapá would require little short of $1bn capex.
We (Cadence) will own 27% of a project, which when recommissioned should
generate over $136m EBITDA per annum for at least 14 years, plus we will have
the right and first refusal to acquire up to 49%.”
Rehabilitation of the mine, railway and port is expected to be completed by 2021,
with first new production in 2022. A production ramp up will see 5.3 million
tonnes of iron ore produced per annum by 2024.
More significantly, mine net revenues after shipping is forecast to be
approximately $265m per annum, with EBITDA of approx $136m per annum
based on a conservative iron ore price of $61 per tonne. Currently iron ore prices
are around $84 per tonne.
Of course there is another benefit in rehabilitating the Amapá mine. The local
economy will be rejuvenated, creating hundreds of jobs and employment opportunities, along with new funding for local schools and hospitals.
“Previously Amapá’s output amounted to a sizeable chunk of the local economy,”
adds Morzaria.
“Bringing the mine back to life will provide a huge boost to the region.”
AIM listed Cadence currently trades on an asset backed market cap of just £7m. Given this, the opportunity and the numbers are hugely impressive and will be completely transformational once the mine is close to re-opening.
To echo Morzaria’s words, for a micro cap mining company, Amapá surely is a once in a lifetime opportunity.
More than 1.2 million mortgage payment holidays offered amid COVID-19
New data revealed on Tuesday that lenders have offered over 1.2 million mortgage payment holidays in order to help support those struggling financially amid the COVID-19 crisis.
In the UK, one in nine mortgages are now subject to a payment holiday, according to UK Finance.
For the average mortgage holder, the payment holiday amounts to £260 per month of suspended interest payments, UK Finance said in a statement.
It was announced just under a month ago that mortgage lenders would provide support to those hit by the financial implications of the illness outbreak.
In the two weeks between 25 March and 8 April, the amount of mortgage payment holidays in place has more than tripled.
“Mortgage lenders have been working tirelessly to help homeowners get through this challenging period,” Stephen Jones, UK Finance CEO, commented.
“The industry has pulled out all the stops in recent weeks to give an unprecedented number of customers a payment holiday, and we stand ready to help more over the coming months,” the CEO added.
Stephen Jones continued: “We understand that the current crisis is having a significant impact on household finances for people across the country. Lenders have a number of options available to help, and payment holidays aren’t always the right solution for everyone. We would therefore encourage any mortgage customers concerned about their financial situation to check with their lender so they can find out more information on the support available and how to apply.”
Additionally, Robin Fieth, Building Societies Association CEO, also commented: “We know that this is a difficult time for many homeowners with a mortgage and building society staff have been working hard to offer individuals the right solution. For almost quarter of a million so far, that has been a three month payment holiday offering a much needed breathing space to families whose household income is under severe pressure during the current crisis.”
Heathrow passenger numbers fall
Heathrow saw its passenger numbers decline in March as the UK entered lockdown in order to help contain the spread of COVID-19.
Passenger numbers at the London airport dropped by 52% last month, when compared to the same period a year earlier.
Many nations have been placed under lockdown to help fight the spread of the illness, restricting travel and movement.
Stricter lockdown measures were introduced in the UK at the end of March to limit non-essential travel.
As there is little certainty over how long the crisis will last, Heathrow expects passenger demand in April to drop by more than 90%.
“Heathrow moved to single runway operations on April 6th, and over the coming weeks will consolidate operations into Terminals 2 and 5 only. The move will protect long-term jobs at the airport by reducing operating costs, helping Heathrow to remain financially resilient,” the airport said in a statement.
Heathrow is using any available capacity to prioritise cargo flights with the transportation of medical supplies.
“The airport is well-placed to receive time-critical and temperature-sensitive medical supplies, such as ventilators, medicines and COVID-19 testing kits,” it continued.
The airport donated 6,000 face masks last week to the NHS teams working at Thames Valley Air Ambulance and Hillingdon Hospital.
CEO John Holland-Kaye commented: “Heathrow continues to serve the nation by keeping vital supply lines open, and helping people get home.”
“Now is the time to agree a common international standard for healthcare screening in airports so that when this crisis recedes, people can travel with confidence and we can get the British economy moving again,” the CEO continued.
The aviation industry has been hit particularly hard by the virus as travel restrictions have been put in place in order to contain the outbreak of the illness.
Flybe (LON:FLYB) collapsed at the beginning of March, with the immediate crash of the airline blamed on COVID-19 related impacts.
Next reopens online business
Next (LON:NXT) announced on Tuesday that it has reopen its online business after putting measures in place to protect employees from COVID-19.
Shares in the British retailer were up during trading on Tuesday.
Next had temporarily closed its online business at the end of March, alongside its warehousing and distribution operations.
Next said on Tuesday that it has since put in place “very extensive additional safety measures”.
It will reopen its online businesses in a “very limited way,” Next announced.
The British retailer has prioritised which categories it will offer; only those most needed such as children’s clothing and selected small home items will be available.
“Other product ranges may be added at a later date,” Next said.
The decision was made after having consulted with colleagues and the company’s recognised union USDAW.
“Operations will start with support from colleagues who are willing and able to safely return to work,” the company commented.
“The idea is to begin selling in low volumes, so that we only need a small number of colleagues in each warehouse at any one time, helping to ensure rigorous social distancing is complied with.”
The British retailer continued: “To achieve these limited volumes, Next will only allow customers to order the number of items that it believes can be picked safely on any given day. At that point we will then stop taking orders and convert the website to ‘browse only’ until the following morning.”
Many nations have been put on lockdown in an attempt to contain the spread of the illness.
In the UK, the government announced strict social distancing rules in March in order to help the fight against the virus.
Shares in Next plc (LON:NXT) were up on Tuesday, trading at +0.15% as of 11:50 BST.
AstraZeneca share price jumps as COVID-19 drug testing begins and lung cancer trial yields positive results
Shares in UK-based AstraZeneca (LON:AZN) jumped on Tuesday morning after the drug company said it was to begin testing a treatment for COVID-19.
In further promising news, AstraZeneca said it progressed a lung cancer drug trial early due to high efficacy of the drug Tagrisso.
The AstraZeneca share price was up over 6% higher in early trade on Tuesday morning.
COVID-19 treatment
The Cambridge-based pharmaceutical giant said it was to begin clinical trials on Calquence to access effectiveness in treating patients with COVID-19. The drug is already approved for the treatment of chronic lymphocytic leukaemia which has helped AstraZeneca push forward with trials for COVID-19 patients in record time. It is thought Calquence will reduce the inflammation of the lungs caused by the body’s immune system response as it fights the COVID-19 infection. José Baselga, Executive Vice President, Oncology R&D at AstraZeneca said “with this trial we are responding to the novel insights of the scientific community and hope to demonstrate that adding Calquence to best supportive care reduces the need to place patients on ventilators and improves their chances of survival. This is the fastest launch of any clinical trial in the history of AstraZeneca.”Lung cancer trials
In addition to the commencement of COVID-19 trials, AstraZeneca announced encouraging results from a clinical trial of lung caner drug Tagrisso. The Phase 3 trial will be taken to the next stage of unblinded trials early due to strong levels of efficacy in a trial of Tagrisso in 682 patients. Patients in the study were given 80mg oral doses of Tagrisso once daily and the success of the trial means AstraZeneca can accelerate the trial by as much as two years. If successful, Tagrisso has the potential to become a multi-billion pound drug for AstraZeneca and will answer many questions about the strength of Astra’s drug pipeline. The AstraZeneca share price was up 5.2% to 7,502p on Tuesday morning following the results having faded from sessions highs.Gilead COVID-19 treatment improves two thirds of patients in study
Gilead’s drug Remdesivir has been found to produce positive effects in two thirds of patients involved in a compassionate study into the treatment of COVID-19.
Since the first reports of coronavirus spreading through China, pharmaceutical companies have been conducting trails for possible treatments and vaccines.
With the slim likelihood of a vaccine being found and tested to the degree it can be used on entire populations this year, drugs to treat infected patient are the next best option to fight COVID-19.
There are hundreds of tests ongoing currently ongoing globally, however over the weekend we have learnt of promising results from one of the first companies to beginning testing in China.
Gilead Sciences (NASDAQ:GILD) is a US-listed company that began its involvement with Coronavirus with a free shipment of the drug Remdesivir to China in January.
Remdesivir was initially developed by Gilead to treat Ebola and has been tested on other types of viral disease.
There were early reports of mildly positive results in patients with COVID-19 that received Remdesivir and further studies were commissioned, one of which we have just received results from.
Early results of this trial were reported over the easter weekend and highlighted a positive response in a two thirds of 53 patients involved in the trial.
The trial involved patients who were seriously ill with 30 of the patients on oxygen ventilators. 17 of these 30 came off ventilation after 10 days of Remdesivir treatment.
However, the results should be treated with caution due to the small sample size of the study that was conducted on a compassionate basis.
Remdesivir will now undergo further extensive clinical trials to test for efficacy and safety.
“Currently there is no proven treatment for COVID-19. We cannot draw definitive conclusions from these data, but the observations from this group of hospitalized patients who received remdesivir are hopeful,” said Jonathan D. Grein, MD, Director of Hospital Epidemiology, Cedars-Sinai Medical Centre.
“We look forward to the results of controlled clinical trials to potentially validate these findings.”
Gilead is among hundred of companies conducting trials of COVID-19 treatments, none of which have yet yielded a fully licensed and approved drug.
FTSE 100 rises as bargain hunters pick up beaten down shares
The FTSE 100 closed higher on Thursday as investors picked up bargains among the most heavily hit shares in the FTSE 100.
Earlier in the week, travel shares rallied sharply as news of a slowdown in the number of coronavirus cases caused some optimism among investors.
On Thursday it was the turn of the retailers and advertising companies to enjoy some attention from investors as Next, ITV and JD Sports all rose more than 7%.
Housebuilder shares were also higher with Taylor Wimpey up 7% and Barratt Developments rising 5%.
Just Eat was the top riser after its newly acquired takeaway.com reported a significant jump in revenue. Food delivery companies are one of the sectors that have seen steady demand through the spread of coronavirus and even enjoyed spikes in demand.
Hopes that the coronavirus crisis would soon peak have increased this week as epicentres in Italy and Spain had seen the number of new cases decline.
Later in the session markets received the latest instalment of stimulus from the United Sates in the form of a $2.3 trillion stimulus package from the the Federal Reserve.
The move was a surprise to investors who thought the Fed had spent its ammunition with previous rounds of stimulus.
“The Federal Reserve and the U.S. government are willing to go to extreme lengths to support the economy and that has been far beyond my expectations,” said Dev Kantesaria, founder of US hedge fund Valley Forge Capital Management.
The FTSE 100 closed the week at 5,842, up 2.9% on the day.
The Federal Reserve unleashes $2.3 trillion additional stimulus
The Federal Reserve has unleashed another round of stimulus on the US economy to help prop up the financial system as the coronavirus lockdown hits the economy.
Jereme Powell, Chair of the Federal Reserve, announced a $2.3 trillion package targeted at businesses ahead of the easter weekend.
The latest round of stimulus was a lot more broad in terms of the assets they were prepared to buy meaning their would be greater scope to purchases lower rated bonds.
The Fed also promised an increase to the Main Street Lending Program for businesses from $75 billion to $400 billion.
The announcement also came just after another huge rise in jobless claims in the United States.
6.6 million individual register as unemployed and applied for benefits in the last week meaning in the past three week 16 million workers in the United States have lost their jobs.
Connor Campbell, Financial Analyst at Core Spreads, highlighted the timing of the announcement which could be designed to stabilise market before market close for a long weekend.
“In an expertly timed intervention, not long after that jobs data the Federal Reserve revealed its latest stimulus package. With Jerome Powell stating that the central bank will ‘forcefully, proactively and aggressively’ protect and bolster the US economy, the Fed unveiled another $2.3 trillion in loans aimed at small and mid-size businesses,” Connor Campbell said.
“The move partially explains why the markets have somewhat taken the jobs data in their stride in these last few weeks – the worse the numbers were, the more likely the Fed was to act.”
The announcement had a positive impact on markets with the S&P 500 breaking above 2,800 for the first time in about a month.
Investors had previously questioned whether the Federal Reserve had run out of ammunition with their previous round of stimulus. Today highlights that wasn’t the case as the Fed said they were prepared to provide stimulus for as long as the economy needed it.FED’S POWELL SAYS THE FED CAN KEEP PROVIDING SUPPORT TO ECONOMY AS LONG AS NEEDS ARISE, NO LIMIT TO HOW LONG THEY CAN DO IT
— *Walter Bloomberg (@DeItaOne) April 9, 2020
The Lloyds share price offers better value than these FTSE 100 peers
The Lloyds share price (LON:LLOY) has been heavily hit during the coronavirus pandemic selloff. Lloyds shares were down over 50% from 2020 highs to the lowest levels around 27p.
On the face of it, this has presented a buying opportunity for investors seeking to allocate capital to shares trading at multi-year lows.
However, investors must assess the fundamentals of Lloyds compared to peers to gauge relative valuation.
Factors such as the coronavirus lockdown, government stimulus and low interest rates are having a significant impact on Lloyds shares, but it is important to compare how these factors have impacted other companies.
On an earnings basis, Lloyds provides some of the best value among FTSE 100 shares but not UK banks. With a historical PE Ratio of 9.53x, Lloyds is better value than HSBC, who trade at 14.36x but more expensive than the best of the UK banks.
However, Lloyds trades at a higher valuation than Barclays and RBS whose historical PE Ratios are 6.8x and 4.59x, respectively.
*Profit attributable to ordinary shareholders
Lloyds’ multiple premium to most other UK-listed banks means it is far from the best value pick of the sector and other banks could offer better upside if they were to rally to match Lloyds valuation on an earnings basis.
Earnings multiple’s are of course not the only factor the market takes into consideration. Factors such as capital ratios and geographical exposure have a large influence on banking shares in particular.
Lloyds is one of the most heavily traded UK shares which tends to make it a ‘go-to’ share for individual investors, which may also explain the higher valuation than its banking peers.
However, due to their sharp fall, the Lloyds share price still offers better value than many household name shares such as Tesco, Royal Dutch Shell and Vodafone, who all have PE Ratios well above 10.
Lloyds share price
Lloyds is currently trading 33p meaning the company has a historical PE Ratio of 9.5x based on FY 2019 earnings attributable to ordinary shareholders. Earnings multiples are likely to be the most prominent valuation metric used by investors during a UK recession. With the Lloyds dividend recently scrapped on instruction by the Bank of England, Lloyds ordinary shares are no longer proving a yield so it is difficult to value the company based on investor income using models such as the dividend discount model. It must be noted that earnings for Lloyds and their peers are going to be destroyed during the coronavirus-induced recession but investors will be looking forward to an economic recovery and a return to normal earnings. With this in mind, it is viable to use historic earnings as a gauge of future earnings, when assessing valuation of Lloyds and other UK banks.
UK Banks
On an earnings basis, Lloyds provides some of the best value among FTSE 100 shares but not UK banks. With a historical PE Ratio of 9.53x, Lloyds is better value than HSBC, who trade at 14.36x but more expensive than the best of the UK banks.
However, Lloyds trades at a higher valuation than Barclays and RBS whose historical PE Ratios are 6.8x and 4.59x, respectively.
| Company | Share Price (P) | Market Cap (£m) | 2019 FY Profit* (£m) | PE Ratio |
| LLOY | 33.28 | 23,443 | 2,459 | 9.53 |
| BARC | 96.5 | 16,735 | 2,461 | 6.80 |
| RBS | 118.9 | 14,382 | 3,133 | 4.59 |
| HSBC | 420.9 | 85,721 | 5,969 | 14.36 |
| STAN | 451 | 14,252 | 2,303 | 6.19 |
Royal Dutch Shell share price pounced on by Saudi wealth fund
The recent drop in the Royal Dutch Shell share price (LON:RDSB) has proved too irresistible for the Saudi Arabian Public Investment Fund (PIF), who have bought a stake in the London-listed oil major.
The Wall Street Journal broke news of the purchase of Shell shares by the Saudi Arabia wealth fund on Wednesday.
The Shell stake was among a tranche of investment in European oil companies that include Total, Eni, Equinor and Royal Dutch Shell.
The exact amount of the investment in Royal Dutch Shell shares is not know but it is thought a total of $1 billion was invested in Royal Dutch Shell, Total and Eni.
The PIF is reported to have taken a $200 million stake in Norwegian national oil company Equinor.