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Fresnillo lifted by silver price recovery, as FTSE jumps 4% and adds £53bn

As stock markets roared ahead on hopes of a solution to the Greek and Eurozone crisis, despite conflicting signals from EU officials and politicians, mining shares were among the main beneficiaries.

Fresnillo, the Mexican precious metals specialist, jumped 157p to £16.81 following a recovery in the silver and gold prices and an upgrade from analysts at Citigroup. Citi said:

The recent 20% fall in the Fresnillo price has resulted in the group falling below our target price and today we upgrade from sell to hold primarily on the basis of that share price move.

We see the immediate future of Fresnillo as bright because it has a healthy string of greenfield and brownfield expansions in the years ahead. It also looks to be the UK precious metal producer with the most potential in the time frame of 10-30 years ahead, because of the quality and nature of its reserves. Fresnillo has re-iterated its long-term objective of producing 65m ounces per annum of silver and 400,000 ounces per annum of gold by 2018 (2010 was 38.6m ounces of silver and 369,000 ounces of gold). However, the current share price has discounted these admirable qualities.

As base metals also regained some lost ground, Vedanta Resources rose 126p to £11.96 and Antofagasta added 102p to £10.52.

Elsewhere BG was boosted by revived takeover talk, up 77p to £12.21, valuing the business at more than £40bn. Possible predators included Royal Dutch Shell, Exxon Mobil, India’s Oil and Natural Gas Corporation and China’s CNOOC. Earlier this month there were suggestions BG could sell a minority interest in its Brazilian business, perhaps to the Chinese.

Overall global markets were flying as investors bet on a successful bailout package for Greece. With not a single loser, the FTSE 100 finished 204.68 points higher at 5294.05, a 4% increase. This added £53bn to the value of Britain’s top companies, and was the biggest one day rise since May 2010. Wall Street was nearly 2.5% higher by the time London closed, while German and French markets soared around 5%. Angus Campbell, head of sales at Capital Spreads, said:

Little by little investors are becoming more optimistic that discussions to resolve the European debt crisis will turn into actions that will actually prevent the contagion of the debt crisis. The bullish move higher shows that there’s a real feeling within the market that even if Greece does fail to pay back its debts a domino effect of defaults amongst peripheral states can be averted.

But Joshua Raymond, chief market strategist at City Index, warned:

There are likely to be two phases of the rally we are seeing in equity markets this week.

The first phase, which we are in right now, is based on optimism and relief that Europe’s leaders finally recognise the danger that is engulfing stock markets and economy’s in the region and is prepared to implement strong and co-ordinated actions to contain contagion of debt and beef up bank liquidity within the region.

The second phase will come when the market actually see’s what actions are being planned and assesses whether they are both credible and realistic. Considering that today we have seen a firm quashing of earlier speculation that the European Financial Stability Facility (EFSF) will be increased to €2trn what we may actually see in terms of a rescue plan remains particularly clouded.

International Personal Finance, the emerging markets lender, led the FTSE 250 higher, up 28.8p to 225.3p after JP Morgan Cazenove moved its recommendation from underweight to neutral in the wake of its 27% decline since August:

The fall in IPF’s share price has pushed the valuation to a level which we believe is too low. After substantial underperformance against both the market and Provident Financial in recent weeks, we move our recommendation back to neutral from underweight.

Imagination Technologies added 27p to 450p after Goldman Sachs issued a buy note on the chip designer, suggesting that it should benefit from forthcoming launches from Apple and Google’s Android operating system.

Lower down the market life sciences company ValiRx rose nearly 3% to 0.59p after Singapore’s Volition announced plans for a listing on America’s OTC Bulletin Board, with ValiRx holding .1m worth of its shares.

Finally WSP climbed 14.5p to 241.5p after the consultancy group’s broker RBS issued a buy note with a 380p price target, following the £230m takeover of UK rival Halcrow by America’s CH2M Hill. RBS said:

This underlines the ongoing consolidation activity in the fragmented UK engineering consultant space. WSP is an obvious possible takeover target for an international engineering consultant seeking to gain strong market positions in various European economies such as Sweden and the UK, with strong niche positions in Australia, US, South Africa and the Middle East. © 2011 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds