The gold miner came under heavy selling pressure today.
After losing more than 60pc of their value in 2012, following a cut to Avocet’s gold production target, the shares halved on Thursday. A downgrade to mineral reserve estimates at the Inata mine in Burkina Faso, west Africa, triggered the heavy fall, with Avocet disclosing that the gold reserve is likely to be between 35pc and 50pc lower than previously thought. Inata is its only operating gold mine.
As a result, Avocet said it needed to reduce the size of a gold production hedging deal with Macquarie Bank “substantially” and “as soon as possible”, adding that it would look at all of its funding options, including a rights issue. Investors took fright, and the shares tumbled 26½ to 25p, a drop of 51.5pc.
Still, Liberum Capital analyst Kate Craig suggested there may be some hope for shareholders as a “white knight acquisition” is now on the cards. Possible suitors include buyers from China, Canadian-listed miner Semafo (Other OTC: SEMFF - news) , or even FTSE 250 (FTSE: ^FTMC - news) -listed African Barrick Gold (LSE: ABG.L - news) , which on Wednesday disappointed its own investors with its production guidance for 2013.
Poor fourth quarter GDP data from Germany and France ensured the wider market moved lower, with the blue-chip FTSE 100 (FTSE: ^FTSE - news) down 31.75 points at 6,327.36 and the mid-cap FTSE 250 102.52 worse off at 13,500.47. After four consecutive days of gains, traders were not surprised that the benchmark index took a pause for breath.
Aberdeen Asset Management (Other OTC: ABDNF - news) was one of the biggest risers on the FTSE 100 with a 10.4 increase to 426.4p. The company said it was buying New York-based Artio Global Investors for about $175m (£112.9m), as well as purchasing a 50.1pc holding in private equity group SVG Advisers (SVGA) for £17.5m. Oriel Securities analyst Sarah Ing, who rates Aberdeen a “buy”, liked the look of the acquisitions and said “these deals will add further momentum to the business and will improve return on capital”.
SVGA is a subsidiary of FTSE 250-listed SVG Capital (Other OTC: SVGCF - news) , up 21.6 at 368.4p. The private equity investment group today posted a 16pc increase in net asset value per share in 2012 and said it would return £300m to investors over a three-year period.
FTSE 100 retailer Next (Other OTC: NXGPF - news) added 50p to £41.82 and Aim-listed online clothing group ASOS (Other OTC: ASOMY - news) gained 42p to £27.78, both spurred higher by upgrades to “overweight” from “neutral” at HSBC (LSE: HSBA.L - news) . The broker said Next, which derives 35pc of revenues from its online presence, and ASOS, which generates all of its sales on the internet, will benefit from the growth in shopping on mobile phones and tablet devices. N Brown (LSE: BWNG.L - news) , which gets just over half of its revenues from the internet, will gain from an increase in online purchases too HSBC already rated the company “overweight”, but lifted its target price to 430p from 420p. N Brown advanced 2.6 to 397.9p.
Falling furthest on the blue-chip index was engineer AMEC (LSE: AMEC.L - news) , down 82p or 7.3pc at £10.42 after reporting its results for last year. Investors were spooked by a dip in margin to 8pc from 9.2pc a year earlier, and a failure to extend its share buyback.
Pharmaceutical group Shire (LSE: SHP.L - news) slid 118p to £20.27 on the release of its fourth quarter numbers. One analyst speculated that news of the departure of Sylvie Gregoire, the head of Shire’s human genetic therapies business, may have flustered the market. However, the shares were under pressure even before the results were published at noon, with some suggesting that the approval of another generic competitor to Shire’s attention-deficit hyperactivity disorder drug, Adderall XR, by the US Food and Drug Administration may have weighed on the stock.
Cruise operator Carnival (LSE: CCL.L - news) was on the back-foot and slipped 75p to £25.00. The company, which is also listed in New York, said after trading finished in London on Wednesday that voyage disruptions and repair costs following a fire on the Triumph vessel would see earnings-per-share fall between 8 cents and 10 cents in the first half of its 2013 financial year.
But security company G4S (LSE: GFS.L - news) rose ½ to 284.3p after securing a two-year contract extension to continue providing services for the Medway Secure Training Centre in Kent. An upgrade to “buy” at Investec (LSE: INVP.L - news) also helped. Analyst Gideon Adler said that in the wake of the Olympics fiasco “concerns over exclusion from government outsourcing are overdone, and that the group is poised to benefit from a greater flow of programmes into 2013”.
On the mid-cap index, beleaguered coal group Bumi slumped 38.8 or 8.7pc to 406p following a strong run. Until today, the shares had surged 29.1pc this month on hopes its shareholders were closer to resolving a conflict over the firm’s future.
Outside the FTSE 250, news of a €260m (£223.8) rights issue for Finnish nickel producer Talvivaara , in the wake of a toxic waste water leak at its Sotkamo mine last November (Xetra: A0Z24E - news) , saw the shares dip 2¾ to 86½p in London. With a €77m convertible bond due to mature in May, analysts had expected the group to raise money and Liberum Capital scribbler Ben Davis said the move “provides breathing space to allow operations to return to profitability”.
There was action on Aim, with Colorado-based online advertising group Digital (Milan: DIB.MI - news) Globe Services rising on its first day of trading. Priced at 159p, the shares advanced to 167p today N+1 Singer handled the float, raising £13.1m for the company. Oil and gas explorer Frontier Resources International also declared its own intention to float on the alternative market. The Middle East and southern Africa-focused group said it was looking to raise as much as $20m in the share sale next month.