Shares digital

by Dan Coatsworth

Diamonds are the one commodity that make people behave in the most irrational manner,’ says Kalaa Mpinga, chief executive of Aim-quoted mining group Mwana Africa. Deep in negotiations with the Congolese government over re-capitalising the joint venture Miba diamond project, which used to produce ten million carats a year, Mwana is fighting a battle not unusual to the diamond industry.

The DRC government doesn’t want its 80% share diluted and Mwana is pulling its hair out to find a solution to please its partner and also secure the mine’s future, currently in need of $150 million for new mining fleet and struggling to produce less than one million carats a year.

Those involved in the diamond mining business firmly believe that the industry is going to be supported by rising selling prices, particularly the high quality, large gemstones. It should therefore come as no surprise to see governments – particularly in Africa, which accounts for around 65% of world diamond production – try to protect their participation in diamond mines.

‘Government intervention, be it in the form of higher taxes and royalties, increased ownership, or pressure to beneficiate in the host country, is increasing,' says RBC Capital Markets analyst Des Kilalea. 'All listed companies will have to adapt to this.'

Given its place as a sought-after luxury, diamonds continue to be highly attractive despite their association with conflict and violence. That negative reputation is slowly diminishing, leaving in place an industry eager to serve a new breed of customer in Asia who are enjoying wealth for the first time.

Like gold, diamonds are seen to be a long-term investment. The price of rough diamonds has risen by 20% so far this year as supplies fail to meet demand. Very few new mines are coming on stream and many existing mines are experiencing difficulties.

Luxury costs

Rio Tinto, BHP Billiton and De Beers are reportedly asking and getting ‘very high prices’ for their diamonds sales. This will be welcome news to the companies as they face lower output from their key mines. Rio’s two biggest assets, Argyle in Australia and Diavik in Canada, are facing lower production in the coming years as the company expands the ageing mines. De Beers is ‘pretty open about its own dwindling supplies’ says BMO analyst James Picton, who points towards the diamond giant abandoning a long-term contract with Russia estimated to be worth $800 million. Its sales slipped 3% in 2007 on flat production of 51.1 million carats. BHP’s Ekati mine in Canada accounts for 6% of the world’s rough diamond supply by value. As with Rio’s projects, Ekati is going from an open pit to underground mine, so volatile production is expected until the transition is completed.

The very real threat of a US recession doesn’t bode well for the diamond industry as the country has historically been one of the biggest customers. However, the negative impact may not be as severe as one might imagine. Speaking at an RBC conference in May, De Beers finance director Stuart Brown said: ‘We’re seeing differentials on pricing. 50% of our diamond jewellery market is in the US, which is the low-end of the market that is struggling. We’re going to see pressures there.’

The key point here is that low-grade, small diamonds are the most at risk. These are the products bought by everyday consumers. Value is still being derived from the larger, higher-quality diamonds bought by the more wealthy, who, one could argue, are less exposed to a recession. ‘We’ve seen the retail arm of of large diamond company in the US report 15% drop in sales. But overall sales in the group were up because it has international exposure,’ says BMO’s Picton, who says diamond demand in this situation came out of Asia and the Gulf, in particularly Saudi, Dubai and Kuwait. China, India, Thailand and Russia to some extent are among the new breed of diamond customer.

The industry may be relishing higher selling prices but there is no room for complacency. Mining costs continue to rise, so higher diamond prices don’t necessarily mean higher profits. Those producing little or no revenue are in a fragile place. Shares in junior diamond companies are falling fast as the City grows concerned about the ability to raise money in current weak market conditions to support working capital or expansion requirements. In the past six months, for example, Target Resources has fallen 38% to 13.75p, KimCor down 22% to 4.5p and Cape Diamonds slipping 67% to 10p.

While diamond companies as an investment have paid well on some occasions, timing is everything. Gem Diamonds floated on the main market in February 2007. Despite significant large diamond discoveries at the Letseng mine in Lesotho, Gem’s share price fell 25% between November 2007 and January 2008. Those who bought at the market bottom of 830.5p would now be sitting on around a 35% profit after the stock made a spectacular recovery.

RBC’s Kilalea argues that the diamond sector suffers from a lack of liquidity, due to the limited number of stocks. ‘It’s not that big a sector, globally,’ he says, noting the combined market cap of diamond companies is $6.5 billion. This includes $1.8 billion for NYSE-listed Harry Winston, $1.4 billion for Gem Diamonds and $660 million for TSX-listed Shore Gold.

An estimated 150 million carats are produced each year. Kilalea argues that 120 million carats come from unlisted companies. He includes BHP Billiton and Rio Tinto as, due to their broader mining interests, they can’t be traded solely on the basis of diamonds. He argues that De Beers cannot be considered a listed company, despite Anglo American owning 45% of the business. ‘Around 85% of the $13 billion diamond production is from unlisted companies. In comparison, all the platinum producers of substance are listed and enjoy much greater liquidity.’

Kilalea calculates that De Beers produces 50 million carats, Rio Tinto 32 million carats and BHP Billiton five million carats annually. Russia’s Alrosa produces around 40 million carats. It is rumoured to be seeking an IPO within the next year, with London seen as an obvious choice. ‘If Alrosa does choose the UK, there’s a lot of work to be done. I’m not sure how transparent their numbers are,’ says Kilalea.

The supply constraint on diamonds has created an opportunity for synthetic stones. Ambrian’s Salier believes they will have a ‘beneficial’ impact on the industry, extending the market but not acting in direct competition to traditional diamonds.

Alternative revenue streams are also being sought in cutting and polishing, as undertaken by Namakwa Diamonds and Petra Diamonds. Greater value can be derived by improving rough stones before selling. However, rough prices have recently risen at far greater speed than polished as the latter market has been plagued by excess supply. Diversified revenue streams can be of benefit should one part of the business encounter problems, which makes Namakwa and Petra particularly attractive investments. Even Gem Diamonds is looking at such benefits, having conducted trials with Matrix Diamond Technology which polished rough diamonds from Gem’s Letseng mine.

To boldly go

Finding a new diamond deposit is a tough business, which explains why there are far fewer exploration companies seeking this commodity type than, for example, the latest fad of coal or iron ore. Those that do make a discovery have the advantage of being able to sell parcels of diamonds from bulk sampling while they develop the project, to help with development funding.

However, grade and quality is still paramount to the success of the project. In the current climate and for the foreseeable future, the market wants to see large and good quality diamonds, particularly coloured stones, as they command a premium selling price.

It’s not an easy sector to understand as there isn’t a single spot price for diamonds. Each stone is judged on its own merits. Companies with alluvial diamonds trade on lower multiples than those with kimberlite mines. One similarity with the broader mining sector is that producers not only trade on higher multiples than explorers, but they are also the ones with more liquid stocks as investors currently don’t seem to have the appetite for higher risk exploration projects.

Nevertheless, everyone has the same reaction to the end product. ‘Our miners sometimes complain that no one appreciates what they do,’ says Nico Kruger, chief executive of Namakwa Diamonds. ‘I remind them that people always smile when they see the diamonds in person. You wouldn’t get that reaction if we were mining base metal.’

Sector Facts & Figures

No. of UK-listed companies with diamond exposure: 29

(Main market: 5)

(Aim: 24)

8 micro-caps (<£10m)

7 small-caps (£10m to £50m) (one is more focused on other commodities)

4 mid-caps (£50m to 100m) (two are more focused on other commodities )

10 large-caps (>£100m) (four are more focused on other commodities)

Main countries for diamond exploration and production: Angola, Australia, Botswana, Canada, CAR, DRC, Finland, Lesotho, Namibia, Russia, South Africa

Alluvial: diamonds found in water or riverbed sand and gravel

Kimberlite: host rock for diamond pipes

TOP ANALYSTS

Des Kilalea – RBC Capital Markets

On the inside track

There are many top-ranked analysts in the mining sector, but most specialise in base or precious metals. Finding a diamond expert is a tough job as the sub-sector is relatively niche, despite the end product being a desired luxury around the world. As Starmine’s leader board is dominated by metal analysts, we are going to bypass those rated as the best at predicting earnings and profile three individuals who really know a trick or two about diamonds.

Perhaps the best known in the City is Des Kilalea, part of a team of mining experts within RBC’s London office. He boasts an impressive 18 years as a mining analyst, covering all types of commodities and having a keen eye for diamonds.

Flash back to earlier in his career, Kilalea was based in Johannesburg writing research for a brokerage that eventually become JP Morgan South Africa. He found himself emerged in the diamond industry because De Beers so was dominant on the stock market until the late 1990s. ‘All major brokers used to have at least one analyst covering De Beers, as it was such a big liquid stock,’ he says.

Des’ job at RBC isn’t solely to look after diamond companies as he also specialises in broader mining firms on Aim. He believes the market is only currently interested in producing companies, given the nervous state of global economies, suggesting that Petra Diamonds is among those most likely to be on the radar of investors.

James Picton – BMO Capital Markets

A history boy

Thirty years in the business, James Picton is among the leading experts in London on diamonds. He was trained at a mining house that eventually became BHP Billiton, learning about mine appraisal, investment analysis and new concepts of mining such as seeking diamonds offshore.

He went on to work for several brokerages including the same JP Morgan outfit as RBC’s Des Kilalea and Investec. In the UK, he joined WH Ireland as a diamond analyst and then moved to BMO Capital Markets to help launch their London mining research office. ‘It is not easy to understand the diamond industry, which is why I like it,’ he says. ‘You are always learning something each day.’

BMO is starting to initiate coverage on UK-listed diamonds stocks, having already written up Petra Diamonds and now working on Gem Diamonds. ‘We like Petra. Its Koffiefontein mine is a good cash generator and people underestimate it. I am sure they will do a good job on developing the Cullinan mine. It could be a company maker for them.’

Picton says the industry is about to experience ten years of slow growth, compared with ‘huge increases over the past few decades’ from new mines increasing diamond supplies. ‘The US recession is starting to reduce diamond sales in that region but it coincides with the emergence of new markets that don’t seem to be affected by the credit crunch, like the Middle East and Asia,’ he adds.

Brock Salier - Ambrian

Man about town

You can’t beat on-the-ground experience when it comes to mining, as Brock Salier has shown. Since joining Fox-Davies two years ago and moving to his current position at Ambrian in December 2007, Dr Salier has quickly become one of the City’s most trusted experts on mining.

His career started out as a mine geologist including stints with Rio Tinto, Placer Dome and Great Central Mines covering diamond, nickel, uranium and gold projects. He then spent three years as a business consultant at Credo Group, covering utilities, energy and support services; and resources at Accenture before starting out as an analyst. Brock is enthusiastic about mining but is not one to be fooled.

For him, it is all about the economics and grade quality of the deposit. One of his greatest attributes is a widespread knowledge of the mining industry, across the spread of commodities. Name a company and Brock will have an opinion on it. In diamonds specifically, Kopane is his micro-cap favourite. ‘It is a simple recovery story. They had rubbish management and too much focus on the satellite pipe, which had nothing. Now there is better leadership and a solid asset in the main pipe.’ Firestone gets the nod among the mid-caps, credited for its fast exploration. As for Petra Diamonds, Salier is no longer convinced. ‘It was my favourite, but now BHP Billiton have pulled out of the joint ventures, there is a lot of risk. The loss of BHP’s technical expertise is going to hurt.’

BEST BUYS

Namakwa Diamonds – Small packages

Having sneaked on to the main market just before Christmas 2007 with an IPO that raised $185 million, Namakwa has a relatively low profile for a listed stock. This is starting to change as investors cotton on to its potential in the diamond industry.

Slightly different than its sector peers, Namakwa not only mines alluvial diamonds but also has a beneficiation arm including the cutting and polishing of diamonds (including third party products), distribution and marketing agreements to supply leading retailers including Harry Winston.

Around 80% of the diamonds it places into the retail market are high-quality stones, with China and India among the main end customers. ‘This side of business is recession proof,’ says chief executive Nico Kruger. The business will be generating cash by its year-end in August. Goldman Sachs forecasts a move into profit in 2009. There are some risks to the business worth considering. It wants to expand operations in the north west of South Africa, where it has four producing mines.

Namakwa is targeting 25,000 to 30,000 carats by August 2008, rising to 70,000 to 75,000 carats in 2009. ‘The energy problems from state energy provider Eskom are a nuisance, not a heart breaker,’ says Nico. Goldman Sachs thinks otherwise, believing that ramp up to 128,000 tonnes previously targeted for 2010 may be delayed until 2014.

Even taking this into account, the company still looks appealing as a diversified play on the diamond sector.

Pangea DiamondFields - Innovation rules

The alluvial diamond company will have three mines in commercial production by 2009. Five projects are already at the bulk sampling stage. The Cassanguidi preject in Angola has been at the pilot mining stage for some time where production is currently targeting 3,000 to 4,000 carats a month.

It has encountered problems with a partner unwilling to contribute its share of development funding and Pangea didn’t believe it was getting the best selling prices. Renegotiations are underway, so expect progress soon on moving towards commercial production.

Dimbi in the Central African Republic will soon start pilot mining, having been bulk sampling since mid 2007. Chief executive Rob Still is an expert in logistics which is lucky as the CAR desperately lacks infrastructure. Indeed, Still has already proved his reputation in the DRC by opening up access to the Longatshimo River project.

Rather than the standard route of shipping trucks and equipment around the West Coast of South Africa, Still has found a way into the DRC up through Angola with the hope of commissioning the mine in 2009. In South Africa, the Hart River project should have a resource based on bulk sampling by Q3. Investors should buy this stock for the combination of solid management and multiple project potential.

Firestone Diamonds – The people’s choice

Given that the share price has practically doubled so far this year in terrible market conditions, it is not hard to realise that Firestone is a popular choice among investors. There is still further to go, much further as it gets a better grip on the exact size and quality of the giant MK1 deposit, expected to start production in 2014.

Lying within the Tsabong project in Botswana, MK1 is estimated to contain 1.1 billion tonnes of kimberlite rock, grading 20 carats per hundred tonnes. This is still early stage prediction, but considerable exploration work is planned to firm up the confidence of this figure. An estimated $1.1 billion development cost won’t be an issue, says Brock Salier of Ambrian, commenting: ‘If you find a large diamond project, getting money is the least of your problems.’

Almost on the door step of African Diamonds and De Beers’ AK6 project, close to production, is Firestone’s BK11 kimberlite for which the company has high hopes, despite De Beers previously saying it was uneconomical. In South Africa, the Bonte Koe toll treatment joint venture with De Beers is running at full production of one million tonnes per year.

The share price has recently lost its momentum as traders take profit and the City grows restless over the release of new bulk sampling results, a key factor in judging Firestone’s potential. The information is due this quarter.

STEER CLEAR

KimCor Diamonds - Lacks the X factor

Undervalued? Perhaps, but this £12 million stock is swimming against the tide. The market doesn’t care that it has become a larger producer since buying Dwyka Resources’ diamond operations in 2007. The share price has more than halved in the past year, drifting on minuscule trading volumes.

There is little to suggest that this downward trend is going to change. As a business, it has some small but tidy assets. Just not enough to excite investors in weak markets. It has spent several months modifying plants to increase production rates. At the latest operations update, in April, KimCor said its SMI4 tailings plant was processing around 2,000 tonnes a day for an average six carats per hundred tonnes recovery.

Phase two expansion was due as Shares went to press, targeting 9,000 carats per month. The Newlands plant is set to process more kimberlite ore and the Nooitgedacht alluvial mine is beating recovery grade targets by 50%. It keeps issuing (mostly) positive trading updates, but the market is unimpressed. The Bellsbank project continues to struggle with water problems, and the mining and processing strategy is under review.

Another problem is that Dwyka Resources owns 48% of the stock. This restricts liquidity and it dampens any speculation (which there is) that KimCor will be taken over. Dwyka isn’t going to want full ownership as it is too busy with iron ore and other metal projects in Africa and now coal in the Philippines. It has already scaled back its holding from 50.09% to 48.2% to avoid having majority ownership.

If you want to invest in a diamond or gemstone company, it is always worth considering quality of assets and costs of production. In this case, market sentiment is equally as important. Sentiment can change, of course, but at the moment it says stay clear of KimCor.

Kopane Diamond Developments – Must try harder

Let it be clear from the start that Kopane could be a good company, but only in time. Under its former guise of European Diamonds, the company mucked around with a low-grade satellite pipe at Liqhobong and got nowhere with assets in Finland.

Unsurprisingly, the share price plummeted, falling from a high of 216.5p in March 2002 to 9.75p in November 2006. Action had to be taken to save the business. The Finnish assets were farmed out to Mantle Diamonds in a JV and Liqhobong’s main pipe ‘rediscovered’, with claims that the project has the potential for over $1 billion of recoverable diamonds. It all sounds too good to be true, which raises the question why Kopane is now raising £6 million at a mere 10p per share.

Having traded at around 25p when the restructuring was announced, the stock price has since more than halved. With further fund raising possible later in the year, now is not a good time to consider buying shares as more equity dilution is a certain. Wait for definitive feasibility study to be published later in 2008.

Cape Diamonds – Riddled with problems

The company has made a string of mistakes that represents everything Aim is trying to eradicate. Cape calls itself a producing company but a recovery of just 1,215 carats in the most recently reported period of July to December 2007 is not anything to get excited about.

It is planning to ramp up production of ore and has also won a contract to process tailings from the Frank Smith Mine. This all sounds encouraging, but the company’s biggest challenge is to rebuild shareholder trust. Cape hit rock bottom when its shares were suspended for the first half of 2007 over problems with the accounts. Progress has not been spectacular since. It lost £1.9 million during the latest reported interim period on a turnover of £300,000. Cape raised £2.85 million in a share placing in December 2007 at 30p each. That is someway off the £2.50 per share it raised money at May 2006’s IPO.

Three non-exec directors resigned in January 2007 and CEO Manie Silver finally left earlier this year after what has been a fiasco for shareholders who were led up the garden path. They were told two years ago that Cape had ‘the funds needed to boost diamond production to the levels required for the project to become self-financing’. Investors are still waiting for this magic to happen.

RISING STAR

Petra polishes it off

Having gained ownership of the world’s most famous mines can Petra fly higher?

Aim’s largest diamond producer has been significantly transformed over the past three years. ‘Three years ago we had a handful of fissure projects. We are now targeting one million carats a year production by 2010,’ says Petra Diamonds chief executive Johan Dippenaar, who has become a distinguished figure in the industry since Crown Diamonds, the business he used to run, merged with Petra in 2005.

In July, Petra should complete the acquisition of Cullinan, one of several De Beers assets it has bought in the past year or so that have historically yielded large, high-value stones. Having gained ownership of some of the world’s most famous mines, Petra’s days in the junior tier are long gone is it aims to become the next diamond major.

Cullinan currently yields one million carats a year, but Petra plans to revamp the production process as it has successfully done with Koffiefontein, another ex-De Beers mine. Judging by how quickly it has turned around Koffiefontein, the market should be quietly confident with Petra’s ability to replicate this process with other projects such as the Kimberley underground mine. This will restart production later in the year for diamond recoveries from 2009.

It is expecting 100,000 carats per year averaging $160 per carat for $16 million revenue. ‘We will hopefully have a fair sized stockpile by the time production starts, so we can hit the ground running. I also wouldn’t be surprised if we make substantial developments to the $160 per carat pricing,’ says Dippenaar.

Petra produced 180,000 carats in the year to June 2007 and should take this figure to over 400,000 in 2009. Investors have been enthusiastic about the business during its rapid growth period but sentiment has recently changed. Cynics are starting to question whether it can win with Cullinan, suggesting that if it wasn’t good enough for De Beers, why should Petra make it a success? BHP Billiton’s recent decision to pull out of a joint venture in Angola on the Alto Cuilo and Luangue projects made matters worse. Without the major’s financing and technical assistance, Petra is left to fund the project and handle exploration on its own. Around $20 million will be budgeted for the next 12 months’ work.

With around $57 million cash in the bank and Cullinan financing looking like it will come under $40 million, there is certainly enough money left for Angola exploration costs if you also consider available money from ongoing production. John Meyer, head of resources at Fairfax, suggests that other parties such as Gem Diamonds ‘might be looking over their shoulders’ and could be willing to take up the position as joint venture partner if the Angola projects prove to be as big as expected.

Brock Salier at Ambrian says Petra has ‘a lot to chew on for the next few years’, saying the Angola projects are at risk without BHP. ‘The NPV of these projects is enormous. Is it too much for them?’ asks Salier. James Picton at co-house broker BMO Capital Markets, says the negative market reaction to BHP’s departure has been overdone. ‘We think there will be a mine there. Petra will have to fund it all but they also get bigger ownership,’ he says. ‘Questioning why De Beers sold the other mines to Petra, well it is simply that they are trying to modernise the company. Cullinan looked too old to them. Just remember that De Beers don’t do everything right. They made more money in 1989 than a few years ago. Majors can make mistakes.’

Looking at Alto Cuilo without the market commentary, it stands to be one of the largest kimberlite exploration projects in many years. 77 kimberlites have been found so far. The removal of BHP from the equation means Petra can speed up development work.

There are a few other interests that could contribute to the money pot in the future. These include a joint venture with Stellar Diamonds – a subsidiary of Aim-quoted Mano River Resources – that is trial mining at the Kono project in Sierra Leone. In Botswana, there are a few discoveries but greater drilling work is needed. ‘You always feel you should give yourself a chance in Botswana,’ says Dippenaar on the country well known for its long-life and high-grade diamond mines.

Where next for Petra? There is talk about the possibility of leaving Aim, as joining the London main market would now be a logical step for the company in order to command a rating more in line with the larger diamond producers. ‘We are certainly looking at it, but there are different ways to go. Perhaps listing on another stock exchange like Toronto’s main board would be suitable,’ mulls the CEO.

30 second Petra Diamonds

• £186 million valuation

• Second largest diamond producer and employer in South Africa after De Beers

• Latest half-year results show $8.4 million pre-tax profit, up from $10.3

million loss a year earlier

• Developing good reputation for buying mines and improving production

• Has six producing mines (subject to acquisition

completion) in South Africa

•Has four exploration

projects in Angola, Sierra Leone and Botswana

• Owns Calibrated Diamonds – a cutting and polishing business in South Africa

CHARTING THE SECTOR

Diamond mining: a tale of two scales

One size does not fit all when looking at this part of the market: the large have prospered while the small have struggled

by Simon Griffin

Though not a sector with a formal index, using a market analysis package such as Sharescope, it is possible to create one from the stocks.

Constituents need consideration. Companies such as Anglo American, with its partial ownership of De Beers, BHP and Rio Tinto have significant diamond activities, though a small percentage of their total revenues and, as a partial play on the sector, merit inclusion.

The resulting capitalisation-weighted chart shows the sector up some five-fold over the past five years. But remove the skewing toward the larger companies, say placing £1,000 in each of the 30 stocks, and the minnows carry the same impact as the giant beneficiaries of the commodity boom. Then, over the past five years, the portfolio value would have declined by over two-thirds over some two years, with only two pure diamond plays showing positive returns in that time: Firestone Diamonds being the best, up 40%. This is perhaps predictable as many diamond miners operate on expectation rather than actual profitable production, the hope of a large strike being the ‘come on’ to investors awaiting a major overnight rerating to catapult their holdings.

Reality differs. Looking at the chart, the decline shows no sign of ending, though since early April it has plateaued for now. Chart followers should await a break above the 200-day average (23% above current levels) before seriously calling for a period of sustained gains. This does not mean individual diamond stocks might not shine brightly.

Petra Diamonds (PDL:AIM)

BUY - 100p

TARGET - 150p

STOP LOSS - 92p

The chart seems not to reflect apparently encouraging newsflow for Petra. Since the September 2002 16p low the shares have climbed some ten-fold to 2007 highs and over the past five years, remain up over 250%. Yet, since twice peaking at 166p last year, they have fallen to 94p low in late April, resulting in a break of the broad bull channel, on the chart since that 2002 bottom.

The weakness led to a test of support from congestion, which appeared late in 2004, 2005 and 2006 and pressured the 61.8% Fibonacci retracement of the final large bull move from 58p in February 2006 to 166p in March 2007.

This represents critical support, and a bounce early in May has tested resistance from the bear trendline drawn off highs seen last December and February and toyed with the declining 50-day average.

The failure to date to break this resistance points to a likely retest of 94p, where a break would keep the probability of a move to 76p and even a return to 58p, demanding a close stop on any long. But if 94p holds again, and a bounce can break through the trendline and 50-day average which will likely be near 100p, then an early test of resistance at 120p (also probably the declining 200-day average by then) looks likely, with 150p the subsequent target.

Firestone Diamonds (FDI:AIM)

BUY - 186p

TARGET - 252p

STOP LOSS - 164p

Mid-December weakness tested 93p and stopped out my end-October bullish call, with the shares at 113p, but for those who stuck with it, the shares subsequently broke my 165p target and briefly tested 200p in early May. This year alone they are still up some 71%.

The shares have recently made a new all-time high, breaking above their March 2005 peak, and also congestive resistance near 166p, which capped gains in the rest of 2005, 2006 and 2007, has also been despatched.

Often such moves see a post-breakout correction to test support from the old resistance level, so do not be surprised to see slippage back toward 166p in the near term, where the shares would also encounter support from their 50-day average, which historically the chart shows has been quite influential. Of course a move below this level would be bearish. However, longer term, the generally bullish patterns on the chart, hint at a very large upward-sloping triangle pattern that, with the breakout, alludes to a target of 252p.