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Mining giant Rio Tinto rallied from an opening fall to trade 41½p dearer at 2101½p today after 12% shareholder Aluminum Corporation of China (Chinalco) indicated that it will be taking up its entitlement to the group's £8 billion 21-for-40 rights issue at 1400p.
That means Chinalco will pick up 63 million new shares, worth an estimated £880 million, in order not to see its stake diluted. It will also allow Chinalco to average out, seeing that it paid on average 6000p a share for its original stake.
Under the original agreement between the two companies, Chinalco would have injected $19.5 billion (£11.7 billion) into Rio, making it the biggest investment by the Chinese into a foreign company. But the deal ran into opposition from the Australian government and Rio shareholders, and was eventually abandoned in favour of a straightforward rights issue.
Rio also plans to form a joint smelting venture with rival BHP Billiton, which made an abortive offer of 6000p a share for Rio a couple of years ago. Chinalco has complained that such a move would create a monopoly.
Meanwhile, Anglo American, currently the target of an unwanted bid approach from Xstrata, fell 22p to 1782p. City speculators say Xstrata, down 4p at 682p, will have to sweeten its offer if it hopes to succeed with the bid. Jubilee Platinum jumped 10p to 46p after the company said it has entered talks which may have a material effect on the share price.
Shares posted their best gains of the day to coincide with the start to trading on Wall Street this afternoon. The FTSE 100 index rose 59.86 points to 4300.87 as the end of the second quarter drew near. The Dow was up 65.9 at 8504.3.
Lloyds Banking Group was among the best blue-chip performers, the shares adding 4.087p to 71.36p after Goldman Sachs upped its rating on the UK's biggest provider of mortgages from neutral to buy and added the shares to its prestigious Conviction Buy list.
Shareholders received a boost to the value of their portfolios when Goldman also increased its target price from 61p to 107p. It says Lloyds will report the lowest credit losses of all Europe's larger capitalised banks by 2011. It is also rated among the least expensive.
The UK taxpayer holds a 43% stake in Lloyds after the Government was forced to rescue it following heavy losses stemming from its takeover of HBOS last year. Goldman points out the UK banking sector has gone through unprecedented change, and the stock market appears to have viewed these changes as unambiguously negative given that they trade at less than one times tangible book value, compared with historical averages of three times.
Goldman takes a more upbeat line on the sector. It also views Barclays, up 9.05p at 277.15p, as neutral.
Insurer Admiral stood out with a rise of 30½p to 886½p after Credit Suisse raised its rating on the shares from neutral to outperform.
KBC Peel Hunt says the housing market still faces an uphill struggle with recovery hampered by a lack of mortgage finance and severely constrained lenders. Personal finances are also under pressure, with flat to negative wage growth plus a rising tax burden. It remains a seller of Barratt, 1½p firmer at 146p, Bellway, 2p cheaper at 620p, Berkeley, 15p lower at 801½p, Persimmon, ¼p lower at 347¾p, Redrow, 2½p cheaper at 193¼p, and Taylor Wimpey, ¼p off at 33p. Bovis, up 3½p at 367½p, is moved from sell to buy to join Galliford Try, 2¼p better at 49p.
More than 15% of Mercator Gold changed hands as the price dipped 0.25p to 2.625p. The Australian gold miner is back from the dead following a cave-in at its mine and the appointment of administrators to one of its subsidiaries. It has raised £850,000 after a placing of 42.5 million shares at 2p. A big seller has been cleared out.
A number of companies saw their shares suspended on AIM after they failed to meet the deadline for publishing the accounts. They included Inveresk at 1.625p, TEP Exchange (¼p), Altitude (8p), Westcity (8¾p), Equest Investments Balkans (270p), Amberley (2½p) and Cosentino Signature Wines (3¼p).
