Premier African Minerals shares sank on Friday after issuing an update on the Zulu lithium project.

Company updates that include the word ‘challenges’ are rarely good. Premier African Minerals issued such an update on their Zulu lithium project on Friday, and shares closed considerably weaker.

Investors have been on tenterhooks awaiting an update from the project as the first production target under a recently revised offtake agreement looms.

The RNS issued at 2.30pm on Friday was not the one many had hoped for. 

Friday’s update suggests the first 1,000 tonne production deadline at the end of November is going to be missed.

The company said whether they meet this deadline ‘will be largely dependent on the resolution of the ongoing commissioning and optimisation issues.’

To issue such a statement at this stage of production optimisation signals deep concern at Premier African Minerals or their contractor Stark that the first production target will be missed.

Investors may have been perturbed to learn they will be further diluted by the issuing of $2.5m in newly issued shares to contractor Stark, who is yet to bring the production plant up to the required standard. 

Premier African Minerals did say the plant was producing lithium concentrate of the prescribed specification – but stopped short of sharing the actual lithium grades.

If Premier African Minerals fails to ship a minimum of 1,000 tonnes per month at the required specification by the end of November, their partner Canmax has the right to receive penalty payments from Premier African Minerals. 

Should Premier be unable to make cash payments to meet these penalties, they must issue Canmax with newly issued shares in Premier African Minerals.

The stakes are high.

Investors will be growing increasingly concerned about the viability of the Zulu plant and the competence of management. In addition, the emergence of contradictory statements on X, formerly Twitter, made by the Stark CEO will increase uncertainty.

Just hours after Premier African Minerals announced Zulu was experiencing ‘optimisation issues’ and ‘material flow challenges’, Stark CEO Geoffrey Madderson said “there is no issue on the plant.”

Madderson posted: “Guys, relax. There is no issue on the plant. The plant is running well and the next big steps are the new large mill to bring to 100% of nameplate. 37.5t per hour to float.”

Someone has released a mistruth. Either Premier African Minerals’ Nomad has signed off a factually incorrect RNS, or the Stark CEO has made an incorrect assertion in a social media post.

Time will tell.

The FTSE 100 was broadly flat on Friday after markets fielded October’s US jobs report, which missed analyst estimates but supported the Federal Reserve keeping rates on hold again in December.

The FTSE 100 was trading down just 2 points to 7,444 at the time of writing as the jobs report helped erase losses.

The US economy added 150,000 jobs in the month of October, missing economist estimates of 180,000 jobs added. The Federal Reserve will be pleased to see average hourly wage growth slip to 4.1% from 4.3%.

US bond yields sank in the immediate reaction to the release. US 10-year yields fell to 4.56% after touching 5% just last week. This will be supportive of equity markets for the rest of the session if the declines hold.

S&P 500 futures were 0.4% higher.

The US jobs report comes after a busy week for central banks in which both the Federal Reserve and Bank of England kept rates on hold. However, both signalled they would react to economic conditions and did not rule out further rate hikes.

Today’s jobs report does not provide any reason for the Federal Reserve to hike rates again in the short term, but it is not weak enough to bring rate cuts back into the narrative.

FTSE 100 movers

Ocado was the FTSE 100’s top gainer on Friday as it continued the rebound from a catastrophic sell-off. Sainsbury’s earnings this week will help sentiment around Ocado’s shares as hopes of a bid from Amazon fizzle out.

Sainsbury’s itself was also stronger again after reporting rising sales and healthy margins earlier this week.

The leisure sector was heavily hit on Friday as interContinental Hotels shed 3% and Whitbread fell 2.4%.

On Thursday, the tech giant Apple reported a 1% revenue dip to $89.5 billion (£73.3 billion) for the three months ending September 30, compared to the same period last year.

The company reported $23 billion in profits, driven by record iPhone sales over the past three months. The latest iPhone 15 came out in September and has been aiding Apple’s sales.

Apple’s shares are down 3% at the time of writing in the pre-market.

Apple sales have been dipping for four quarters, raising concerns about demand for its products and services.

Sales for Macbooks, Mac computers, and iPads dropped following a surge in interest after the lockdown.

Mac computers, for instance, fell to $7.6 billion for the quarter, a drop from $11.6 billion the previous year.

According to Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, “uncertain economic conditions, higher-for-longer narratives, and a slump in China have created a potent force, and not a good one for the likes of Apple. Convincing people to upgrade a loftily-priced iPhone at a time of year that’s already tough on wallets in the current climate just became a much harder task indeed.”

However, Apple Chief Executive Tim Cook said that despite current shortages in sales, the team believes “that later this quarter, we’ll reach a supply-demand balance” .

Ocado shares have been on a tear this week, with the food technology company topping the FTSE 100’s top gainers for the past few trading sessions.

The Ocado share price was again the top riser at the time of writing on Friday, with gains of over 4%.

We look at the factors driving recent price action in Ocado shares as the stock rebounds from the 460p mark.

Interest Rates

Although Ocado is predominately associated with its premium grocery delivery service, the company is viewed by many market participants as a technology company. Ocado has developed proprietary technology concerned with the distribution of groceries, which is used by their delivery service and third-party supermarkets.

Ocado’s Customer Fulfilment Centres (CFC) improve the way grocery companies prepare and organise deliveries ready for distribution using artificial intelligence and robots.

This side of the business has earned Ocado the label of a ‘tech stock’ in some quarters, meaning the company trades in a similar fashion to US tech giants like Meta, Apple and Amazon.

The hiking cycle increased the risk-free rate and made technology-focused equities less attractive over the past 18 months. Those with lofty valuations, including Ocado, were punished.

After the Federal Reserve and the Bank of England both kept interest rates on hold this week, technology shares have received a bid as investors position for the end of the hiking cycle and a period more favourable for tech stocks. This can explain the rally in Ocado shares this week.

Ocado is oversold

Ocado shares entered oversold territory in late October and built a base around 460p. Having found support after shares halved from July highs in the region of 950p, the stock just needed a catalyst to spark a bounce.

Such a catalyst was found in interest rate decisions this week and a general uptick in the technology sector.

Strong Sainsbury’s Earnings

Sainsbury’s earning update released this week will have encouraged Ocado investors. Sainsbury’s, seen as one of the premium supermarkets, has managed to increase sales by offering lower-priced groceries and running offers to attract shoppers.

Ocado shareholders will be hoping Ocado’s efforts to attract customers and increase basket sizes by competing on pricing through special offers will have a similar impact.

The latest data from Kantar showed the joint venture between Marks & Spencer and Ocado enjoyed a 9.6% uplift in sales in the four weeks to 1st October as market share increased to 1.7% from 1.6%.