All good miners know how to dig deep to find the best rewards. And Mick Davis, Xstrata’s chief, is not slow when it comes to tapping all available seams. As a deal with Anglo American now appears a poor prospect, City attention turned to Lonmin, whose shares rose 81p to £14.42 after RBC Capital Markets suggested the Anglo-Swiss mining group’s boss would take another look at the platinum miner.

RBC said that under new management things were starting to look better for Lonmin despite the problems it still faces with lower metal prices and currency changes.

The broker said that while Lonmin is taking steps to reduce losses and increase margins, the key factor differentiating the miner from other platinum group metals businesses was that a Takeover Panel restriction on a potential acquisition by Xstrata, which already holds a 25 per cent stake in the group, ends in early October.

With this in mind, and with an Anglo deal looking less likely, RBC said it expected Xstrata to be looking to make an offer for Lonmin towards the end of this year. As such, the broker has upgraded its rating on the stock to “outperform” and has raised the Lonmin price target to £23.50 from 950p.

Xstrata scrapped plans to buy Lonmin in October 2008 after failing to find a suitable financing package amid the financial crisis and many observers still doubt whether the group will be able to finance a potential deal, which would probably have to be done in shares.

Shares in Xstrata gained 38½p to 817½p and Anglo American added 53p to £19.44 as the sector rallied on stronger metal prices. Randgold Resources was the top riser, climbing 333p to £40.22, as the price of gold hit a six-month high, edging towards $1,000 an ounce as nervous investors continued to switch out of stocks on fears that the recent rally has run out of steam.

The increasingly negative sentiment towards shares was illustrated by the FTSE 100’s third consecutive losing session. The index closed 20.80 points lower at 4,797.75.

London Stock Exchange dropped 10½p to 778½p after Morgan Stanley said new growth initiatives and cost-cutting measures expected to be delivered by the group’s new chief executive were already reflected in its share price. Moreover, it believes revenues will fall by 9 per cent next year and be flat in 2011 as competition bites. It expects the LSE’s share of trading in FTSE 100 stocks to fall to only 40 per cent by 2012, against 80 per cent at the start of 2009.

Unilever, the branded consumer products group, fell 37p to £16.29 after upbeat results from McBride, its white label rival.

Diageo lost 15½p to 953p after Pernod Ricard, the drinks group’s French rival, warned of a tough year ahead.

Marks & Spencer rose 1¾p to 341¼p after Bernstein upgraded its rating on the retailer to “outperform”, citing positive trading going forward and management action on issues such as growth and marketing and the appointment of a new chief executive.

New York: Shares on Wall Street rose after a four-day decline but investors held off making significant moves before an important government report on unemployment that will be published today. The Dow Jones industrial average closed at 9,344.61 points, up 63.94.

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