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Rio Tinto (RIO), International Distribution Services (IDS), De La Rue (DLAR), Chapel Down (CDGP), new builds and Kosmos Energy (KOS)
Rio Tinto (RIO) surprised the mining world in October with its $6.7bn (£5.3bn) buyout of Arcadium Lithium (US:ALTM), confirming a bullish outlook for the battery metal. It’s not so much of a shock then that the miner has confirmed it will go ahead with the Rincon lithium project in Argentina, at a cost of $2.5bn. This comes after a pilot plant at the site tested the direct lithium extraction (DLE) process. Now, Rio will complete a 3,000-tonnes-per-annum starter plant next year before moving to a 57,000-tonne full size operation by 2028.
The lithium price has plunged on higher supply and slower growth in electric vehicle demand than forecast a few years ago. But Rio is charging ahead, and could get production from 75,000-tonnes a year (Arcadium’s output) to over 200,000 tonnes if its expansion plans all go ahead.
RBC Capital Markets analyst Kaan Peker said getting Rincon to full commercial production would not be easy. “Given the preliminary and novel nature of the project, there are significant risks; namely, we call out technology, which could have knock-on implications for capex, cost and project ramp-up,” he said. AH
Royal Mail fined for late deliveries – again
Royal Mail has been fined £10.5mn for poor delivery performance, in the latest blow to parent company International Distribution Services (IDS).
Communications regulator Ofcom said 74.7 per cent of first class mail and 92.7 per cent of second class mail was delivered on time in the year to March 2024, well short of the 93 per cent and 98.5 per cent targets.
“Royal Mail took insufficient and ineffective steps to try and prevent this failure, which is likely to have impacted millions of customers who did not get the service they paid for,” Ofcom concluded.
This is the second time Royal Mail has been fined since the pandemic. In November 2023, it had to pay £5.6mn – again for missing delivery targets. It was also fined £1.5mn in 2019.
IDS has agreed a £3.5bn takeover deal with Czech billionaire Daniel Křetínský, who wants to modernise the courier. In August, however, the government “called in” the transaction under the National Security and Investment Act and has yet to give the green light. JS
Read more: Royal Mail takeover probed over ‘national security’
De La Rue eyes 40 per cent stake sale
De La Rue (DLAR) is in talks to sell up to 40 per cent of its business to outside investors, according to a company statement.
Disruptive Capital GP Limited and Pension SuperFund Capital are considering whether to buy an equity stake of up to 40 per cent in the banknote printer, at £1.25 a share. The investment firms – which were both founded by financier Edi Truell – have up to 9 January to announce a firm intention to make a partial offer.
De La Rue is also in the process of selling its authentication business to technology company Crane NXT (US:CXT) and remains in “ongoing discussions” with other parties about the disposal of its currency division. JS
Read more: De La Rue under pressure as it awaits £300mn sale
Chapel Down hires new chief
English winemaker Chapel Down (CDGP) is bringing James Pennefather in as its new chief executive and is on the hunt for a new chief financial officer after incumbent Rob Smith resigned. Non-executive director Stewart Gilliland has also stepped back.
Pennefather was most recently chief executive of The Lakes Distillery Company until it was bought out by Nyetimber earlier this year. Before that, he worked at distiller William Grant & Sons, and Diageo. He replaces Andrew Carter, who is leaving to join brewer Timothy Taylor.
Shares in the company rose 6 per cent after it said full-year results would be in line with expectations, with a “strong” final quarter offering momentum as it heads into the new year.
The shares have still more than halved in value since the start of the year, though, following a plunge in September when it reported a 58 per cent decline in first half adjusted cash profit and a hike in net debt. MF
Government overhauls planning rules
The government is putting the onus on councils to deliver new homes as part of the revised National Planning Policy Framework (NPPF).
Some areas will have to build more than others, with areas with the “highest unaffordability” and “greatest potential for growth” seeing targets increase in order to achieve the combined goal of 370,000 homes. Ministers have also created a new category of grey belt to prioritise development within the green belt. However, they have given into concerns about the proportion of affordable housing required for green belt development, relaxing this to a minimum of 15 percentage points above the local target.
The NPPF will also introduce “golden rules” for greenbelt development, requiring developments to provide essential infrastructure.
Neil Jefferson, chief executive at the Home Builders Federation (HBF) said that further policy interventions would be needed to meet government housebuilding targets, such as support for first time buyers and a solution to the nutrient neutrality issues. “We also need to release the tens of thousands of unsold affordable homes provided by house builders as part of their planning permissions, that cash-strapped Housing Associations are not able to currently acquire,” he added. NV
Kosmos and Tullow discussing all-share tie-up
Kosmos Energy (KOS) and Tullow Oil (TLW) are in talks over an all-share buyout that would hand Kosmos, the larger of the two oil and gas companies, greater shares in West African production and offer a solution to Tullow’s continued debt headaches. Both companies have watched their share prices tumble this year, as lower oil and gas prices knocked earnings.
Kosmos and Tullow confirmed deal talks post-close on Thursday. An offer level has not been made public. Debt will be an important consideration – in addition to Tullow’s expected year-end net debt of $1.4bn (£1.1bn), Kosmos was sitting on net debt of $2.7bn at the end of September.
Kosmos and Tullow are co-owners of the Ten field in Ghana, and the combined group would own 77.6 per cent of the asset. Last week, Tullow said production was running ahead of guidance at 19,000 barrels of oil per day, compared to the full-year forecast of 17,000-18,000. It did cut guidance for free cash flow from from $200mn – $300mn to $150mn – $200mn, however, as a $70mn oil sale shifted into 2025. AH
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