LONDON MARKET OPEN: Fresnillo drops on 2022 production warning

(Alliance News) - Stock prices in London opened sharply higher on Wednesday ahead of a US Federal Reserve rate decision later in the day and following hefty selling at the start of the week, but miner Fresnillo sank after warning production for 2022 is likely to take a hit.

The FTSE 100 index was up 102.94 points, or 1.4%, at 7,473.60 early Wednesday. The mid-cap FTSE 250 index was up 223.29 points, or 1.1%, at 21,879.00. The AIM All-Share index was up 6.62 points, or 0.6%, at 1,090.83.

The Cboe UK 100 index was up 1.3% at 742.32. The Cboe 250 was up 1.3% at 19,568.71, and the Cboe Small Companies up 0.4% at 15,252.05.

In mainland Europe, the CAC 40 stock index in Paris was up 1.1%, while the DAX 40 in Frankfurt was up 1.2%.

"The UK has certainly not escaped the pressures currently being experienced on a global scale, but it has been rather less susceptible to the volatility which has dominated market sentiment so far, partly due perhaps to its limited exposure to the likes of big tech. Following a decent open driven by a broad mark-up of oil and travel-related stocks, the UK's premier index remains ahead, having added 1.2% in the year to date," said interactive investor's Richard Hunter.

In the FTSE 100, travel-related stocks were the best performers. International Consolidated Airlines was up 5.1%, InterContinental Hotels up 4.5%, and Whitbread up 3.9%.

Oil majors BP and Shell 'A' and 'B' were up 3.1%, 3.0% and 2.8% respectively - tracking spot oil prices higher. Shell formally adopted its new name Shell PLC, dropping the 'Royal Dutch' moniker.

Brent oil was quoted at USD88.66 a barrel on Wednesday morning, up sharply from USD87.57 late Tuesday.

At the other end of the large-caps, Fresnillo was by far the worst performer, down 14%, after the Mexican precious metals miner posted disappointing production numbers.

For 2021, Fresnillo delivered attributable silver production of 53.1 million ounces, which was below guidance of 53.5 million to 59.5 million ounces. The company said output was below guidance due to lower grades and less ore at the Saucito and Fresnillo mines.

Fresnillo reported 2021 gold production of 751,200 ounces, down 2.4% on 2020 but ahead of guidance of 675,000 to 725,000 ounces of gold. It attributed the lower gold production to lower ore grades at Cienega and at San Julian Veins.

Looking ahead, Fresnillo forecasts 50.5 million to 56.5 million ounces attributable silver - including Silverstream - in 2022. Fresnillo also guided for 600,000 to 650,000 ounces attributable gold production in 2022. Both are down on 2021.

Fresnillo said the 2022 guidance is in light of the ongoing and new operational challenges caused by the virus pandemic and its resulting effects on workforce availability, as well as the implementation of the new labour laws that limit use of contractors.

In the FTSE 250, Playtech was the worst performer, down 2.0%. The gambling software firm said its board continues to recommend that shareholders vote in favour of the takeover offer from Australia's Aristocrat Leisure.

"Whilst Playtech has made significant strategic and operational progress and is in a strong position for the future, Aristocrat's proposal provides an attractive opportunity for shareholders to accelerate the delivery of Playtech's longer-term value," the company said.

Playtech was responding to a report by Sky News late Tuesday that the company is considering a break-up of the business if a group of Asian-based shareholders block the takeover by Aristocrat. A shareholder vote on the deal is scheduled for Wednesday next week.

National Express shares were up 3.4% and Stagecoach shares up 0.6%, even as the UK Competition & Markets Authority served an initial enforcement order in relation to the planned merger between the two public transport operators.

Noting the announcement, Stagecoach said the CMA indicated that the purpose of the order is to maintain the businesses in their current shape whilst it commences its review of the merger.

As such, the order will delay completion of the proposed sale of the marketing, retail and customer service activities of Stagecoach's inter-city coach businesses to ComfortDelGro Corp beyond February 28.

Stagecoach said that both its board and that of National Express continue to believe the Stagecoach inter-city coach business sale represents a "comprehensive solution" to any competition concerns that might arise from their overlapping coach operations.

In Asia on Wednesday, the Japanese Nikkei 225 index closed down 0.4%. In China, the Shanghai Composite ended up 0.7%, while the Hang Seng index in Hong Kong finished flat. Financial markets in Sydney were closed on Wednesday for Australia Day.

The pound was quoted at USD1.3502 early Wednesday, up from USD1.3491 at the London equities close Tuesday.

The euro was priced at USD1.1298, higher against USD1.1279. Against the yen, the dollar was trading at JPY113.93, unmoved from JPY113.92.

Gold stood at USD1,849.07 an ounce, slightly higher against USD1,846.58 late Tuesday.

Wednesday's economic calendar is headlined by interest rate decisions from the US Federal Reserve at 1900 GMT and press conference from Chair Jerome Powell at 1930 GMT. Ahead of that, the Bank of Canada's announces policy at 1500 GMT.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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