Relief over debt deal is short-lived

David Hellier
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It didn’t take long for the relief caused by Sunday evening’s US debt plan to dissipate. First, there’s the dawning realisation that the plan itself, passed by the House late last night, is unlikely to help the US avoid some sort of debt downgrade. Nor is it likely to repair the wounds caused by weeks of wrangling between US lawmakers.

Then there were disappointing economic figures on both sides of the Atlantic that indicate tough times are ahead, regardless of whose economic policies are most in vogue.

Throw into the mix much renewed nervousness around the Eurozone and there can be no surprise that the euphoria of global markets yesterday morning was short-lived.

In the UK, the latest disappointment in manufacturing stats will surely put more pressure on chancellor George Osborne to try to revive economic growth. While some are looking towards the revival of quantitative easing, others look to supply-side measures including tax cuts to get the economy moving forwards again.

Although perhaps not the most significant lever, the 50p tax rate continues to cause much debate and in recent days the call for its scrapping from London Mayor Boris Johnson has provoked a lively debate.

On page 8 we present two views on the issue; one from a conservative MP who feels its scrapping is vital if we are to energise the entrepreneurial spirit that will help move the UK forwards; and another from a former aide to Gordon Brown who defends it.

Giving people a second chance is not just the prerogative of David Cameron, it seems. Occasionally even the normally harsh City can be a forgiving place too, which is a good thing as far as African Minerals is concerned, a company that specialises in extracting iron ore from Sierra Leone.

African Minerals is chaired by the entrepreneur Frank Timis, who was chairman of Regal Petroleum when it was fined £600,000 by London’s junior stock market AIM for failing on 11 separate occasions to “take reasonable care to ensure its announcements were not misleading, false or deceptive and didn’t omit material information”.

As well as being the executive chairman of African Minerals, Timis is the second largest shareholder with a 12 per cent stake, but that hasn’t stopped the likes of BlackRock, M&G and Capital from backing the group. Indeed his presence is what pulls most of those investors there. Also, only last week the blue-chip Deutsche Bank became the group’s nominated adviser. Deutsche, who declined to comment, was impressed by recent additions to the group’s board.

Yesterday shares in the group spiked by around seven per cent to hit an all-time high of 663p after it announced a deal in which the Chinese Shandong Iron & Steel Group will invest $1.5bn in an iron ore project. AIM-listed African Minerals is now worth around £2.2bn, not far short of the market capitalisation of a FTSE-100 company.

Analysts from the likes of Deutsche and Bank of America Merrill Lynch weighed in with buy notes yesterday.

Timis has a record for making huge sums of money for shareholders in some deals, while other ventures such as Regal Petroleum have ended less successfully for him and those who have backed him.

But there is always an exciting ride along the way.