Friday tips round-up: Aviva, London Mining

8th Nov 2013 07:50

Despite all of the guarded words from Aviva's Chief Executive, Mark Wilson, yesterday, there are signs that the company's fortunes have turned around, as has its share price. Aviva's problem, Wilson maintained, had never been one of making money. It has been that it gets clogged up in costs, expenses, regulatory capital requirements, and other stodge that means too little gets handed back to the group as a dividend. Last year, for example, 48 per cent of profits per business line were remitted to the group, compared with 80 ?per cent or so for rivals such as the Prudential. At 2.28bn pounds costs have also come down, operating expenses were down by 10 per cent from 2011 levels for the first nine months of the year. The amount of operating cash generated over the period held steady at £1.3bn. We will not know until the end of the year how much of that gets funnelled to the group, but Mr Wilson told analysts that it would be higher than 48% and that his plan was to move towards 80% over the next few years. The big change will come when he decides that cash-flow generation and growth are sufficiently strong that the dividend can start rising again. If you believe he can do it, buy before then, The Times Tempus says. London Mining is successfully ramping up iron-ore production from its Marampa mine in Sierra Leone. Third quarter output reached 948,000 wet metric tonnes (wmt), over twice the previous year's level. Now management is targeting production of 5.4m wmt next year, while the cost base remains stable at about $47 per wmt. That has meant a turnaround in operating profits from the Marampa mine. Those stood at $10.2m at the interim stage of the year, up from a loss of $5.6m during the same stage last year. In parallel, fears of slowdown in steel output from China have so far proved unfounded. As well, the company has also carried out a study on the Marampa mine which revealed that it can produce at a rate of 6m tonnes of iron ore at an average cost of about $40 per wmt for the next 40 years. The company still represents a high-risk pure play on the price of iron ore. However, the shares trade at a discount to net assets at 141p per share and with production on track: 'Buy', says The Daily Telegraph's Questor team. Please note: Digital Look provides a round-up of news, tips and information that is impacting share prices and the market. Digital Look cannot take any responsibility for information provided by third parties. This is for your general information only as not intended to be relied upon by users in making an investment decision or any other decision. Please obtain a copy of the relevant publication and carry out your own research before considering acting on any of this information.