Shares in Talvivaara rise as much as 70 percent asinvestors who had made the firm one of the most heavily shorted London-listedstocks rush to cover positions after the miner's shareholders agreed to pumpfresh cash into the company.
On Friday, Talvivaara's shareholders voted to raise 261 million euros ($341million) to help repair its balance sheet, which had been hit hard by a wastewater leak at the Sotkamo mine in November. The accident wiped 30 percent offthe stock's value and fueled the interest of short-sellers.
"Before they've come in and done this massive cash call, it was one of themost heavily shorted stocks in the market," Steve Asfour, head of trading at FoxDavies Capital, says. "They've had to do it a huge discount to make anyoneinterested. It could be an interesting recovery play."
Markit data shows 95 percent of the Talvivaara stock available to beborrowed from long-term owners, such as pension funds, was out on loan beforethe rights issue was announced.
Liberum maintain their 'buy' rating of the stock following the rights issueannouncement.
"The fully underwritten nature of the transaction and the fact that Solidium(the State owned investment company) and Varma are supportive should be takenwell by the market," analysts at Liberum say in a note.
Talvivaara is up 40 percent at 36.335p, easing off from its earlier peak.
"Following an initial relief rally, the share price has come off with thenickel prices (down 11 percent since Feb)," the note says.
"However with near term financial worries addressed we still expect moreshare price relief following the serious balance sheet stress."
Reuters messaging rm://alistair.smout.thomsonreuters.com@reuters.net