Analysts at Morgan Stanley have lifted their long-term outlook for the aluminium price.

ASX shares with exposure to aluminium include Alumina Limited (ASX: AWC) and Rio Tinto Limited (ASX: RIO), South32 Ltd (ASX: S32) and Capral Limited (ASX: CAA).

Let’s take a look in more detail at the outlook for aluminium.

Improved aluminium outlook

Aluminium is a lightweight silver metal used in transportation, construction, power lines, electric vehicles and consumer goods.

Morgan Stanley has improved its aluminium price prediction for the long term, according to The Australian.

The broker has lifted its forecast for aluminium by 17% to US$2,525 per tonne. Analysts said:

Our new bottom-up modelling suggests 2030 copper and aluminium demand could be 24 per cent and 26 per cent higher than current levels.

On a 6-12 month view, we prefer aluminium, but on a medium-term view, we think the copper thesis looks more robust

The aluminium price climbed 1.6% to US$2308 per tonne overnight. Explaining this movement in a research note today, ANZ Australian economics head David Plank said “aluminium gained amid speculation of wide cuts to Chinese output”. He added:

Some aluminium smelters in Yunnan may cut capacity by 20-30%, according to Shanghai Metals Market.

That follows orders from the local electricity authority to cut 10% of production since the weekend. This is added to supply issues in Europe, where soaring energy costs are
forcing smelter closures.

Rio Tinto is a major global aluminium producer. South32 is an aluminium producer with operations in South America, Australia and South Africa. Capral is a major Australian aluminium manufacturer and distributor. Alumina has a 40% stake in Alcoa World Alumina and Chemicals (AWAC).

Rio Tinto achieved gross product sales of US$7.796 billion from aluminium in FY22. The company achieved an average realised aluminium price of US$3,808 per tonne, 45% higher than the previous financial year.

Share price snapshot

The Alumina share price is down 23% year to date, while South32 shares have shed 3%. Rio Tinto shares have lost 8% year to date, while the Capral share price has fallen 18%.

For perspective, the S&P/ASX 200 Materials Index (ASX: XMJ) has slid 6% year to date.

The post Morgan Stanley just boosted its outlook for aluminium. Here’s which ASX shares have exposure appeared first on The Motley Fool Australia.

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• Here are the 3 most heavily traded ASX 200 shares on Thursday
• Why Lake, Pushpay, South32, and Tyro shares are dropping
• How big will the Rio Tinto dividend be in 2023?
• Why a leading fund manager rates these 2 ASX 200 mining shares as buys
• Why is the South32 share price sinking 7%?

Motley Fool contributor Monica O’Shea has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The S&P/ASX 200 Materials Index (ASX: XMJ) is in the red today, but one ASX mining share is soaring higher.

The Desert Metals Ltd (ASX: DM1) share price soared 62% in earlier trade today to 67.3 cents before pulling back. The company’s share price is now trading at 46.5 cents, a 12% gain.

Let’s take a look at why ASX mineral explorer Desert Metals is having such a good day.

Significant rare earth discovery

Investors are buying up Desert Metals shares on the back of assay results from recent drilling. The company is exploring the Innouendy project in Western Australia.

Assay results confirmed a “significant clay-hosted rare earth discovery”. The total rare earth oxide (TREO) intersections appeared thick and continuous.

New TREO intersections include:

• 8 metres (m) at 2734 parts per million (ppm) from 24m (including 3m at 4104ppm) at hole 80
• 17m at 1347ppm from 28m (including 8m at 2085, including 4m at 2791) at hole 130
• 8m at 1429ppm from 20m (including 4m at 2040ppm) at hole 138

Commenting on the results, managing director Rob Stuart said:

This is a great result for the company to confirm a significant rare earth discovery at an early stage in the exploration programs at the Innouendy Project.

The mineralisation assayed to date is showing encouraging grades over significant widths from close to surface.

Desert Metals is expecting to see further assay results in coming weeks. After these results are received, the company will conduct a further expanded drill program.

Desert Metals share price snapshot

The Desert Metals share price has soared 45% in the past year, while it is up 29% year to date.

This ASX mining share has a market capitalisation of about $22 million based on the current share price.

For perspective, the S&P/ASX 200 Materials Index (ASX: XMJ) has fallen 3.6% in the past year.

The post Guess which ASX mining share just soared 62% on a ‘significant rare earth discovery’ appeared first on The Motley Fool Australia.

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• 3 ASX mining shares rocketing by more than 14% on Thursday

Motley Fool contributor Monica O’Shea has no position in any of the stocks mentioned The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Pilbara Minerals Ltd (ASX: PLS) share price is coming under selling pressure on Friday.

During market open, the lithium producer’s shares kicked off at $4.55, before briefly rising to an intraday high of $4.57.

However, bearish sentiment weighed on the share sending it back down to $4.55, a loss of 2.99%.

Let’s take a look at what is causing Pilbara Minerals shares to sink today.

What’s driving Pilbara Minerals shares lower?

After rising to a record high of $4.795 yesterday, the Pilbara Minerals share price is cooling off.

This comes after Wall Street digested the mixed batch of economic data that came out of the US.

The reports showed that retail sales were moderating while the manufacturing sector experienced a slight gain in production.

On the other hand, jobless claims dropped for the fifth week in a row as businesses struggled to fill millions of job positions.

Subsequently, this led the Dow Jones Industrial Average Index (DJX: .DJI) to continue its descent by another 0.56% overnight.

The tech-heavy NASDAQ-100 (NASDAQ: NDX) and S&P 500 Index (SP: .INX) dropped 1.71% and 1.13%, respectively.

Despite hitting the brakes today, Pilbara Minerals shares have rocketed 40% in the past month.

Another reason why could be the relative strength index (RSI) which hit 87 on 13 August and stayed around that level for the past two days.

The RSI is a momentum oscillator that is used to assess the strength or weakness of a share price. Normal levels range between 30 and 70, but anything outside this tells us if the share price is cheap or expensive.

In this instance, when the RSI touched 87, Pilbara Minerals shares were considered to be overbought by investors. Hence, this caused a retracement in the RSI as well as the share price today.

Currently, the RSI for Pilbara Minerals shares stands at 73 (still within the acceptable range below the sell signal).

About the Pilbara Minerals share price

Regardless of today’s decline, the Pilbara Minerals share price has rocketed by 95% over the past 12 months.

It’s worth noting that the company’s shares reached as low as $1.975 on 14 June before storming to record levels 3 months later.

Based on the current price, Pilbara Minerals presides a market capitalisation of roughly $14 billion.

The post Why is the Pilbara Minerals share price in reverse today? appeared first on The Motley Fool Australia.

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More reading

• Here are the 3 most heavily traded ASX 200 shares on Thursday
• Back baby! 5 ASX lithium shares smashing all-time highs today
• Pilbara Minerals share price rebounds, wiping all of Wednesday’s losses
• The Vulcan share price sank 7% today in ASX sea of red
• Here are the 3 most heavily traded ASX 200 shares on Wednesday

Motley Fool contributor Aaron Teboneras has positions in Pilbara Minerals Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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ASX lithium share Kairos Minerals Ltd (ASX: KAI) is having a smashing week.

Despite falling 8.5% in intraday trading today, the Kairos Minerals share price is up a whopping 43% since the closing bell last Friday.

At the current price of 4.3 cents per share, that gives the ASX small-cap lithium share a market cap just north of $84 million.

So, why the big share price leap?

What’s piquing ASX investor interest?

Kairos isn’t strictly an ASX lithium share. The company also explores for gold.

However, it’s worth noting that the company’s announcement on 30 August that its Mt York gold resource in Western Australia had increased by 26% failed to lift the share price.

As for the 43% share price gain over the past week, we suspect that’s related to its lithium project, the Lucky Sump spodumene prospect, located in WA’s Pilbara.

In what was labelled a non-price sensitive announcement last Thursday, the miner reported it’s set to commence drilling at the prospect, where pegmatite samples containing up to 1.91% lithium oxide were uncovered during earthmoving activities.

On Wednesday this week, the ASX lithium share responded to the ASX price and volume query it had received following the huge run higher.

Kairos said it was not aware of any unannounced information which, if known by some in the market, would explain the big leap in its share price.

Citing its previous ASX releases, Kairos stated:

The company is currently actively exploring at its Mt York Project, Pilbara WA, where high-grade lithium assays have confirmed the significance of spodumene-bearing pegmatite at the company’s Lucky Sump prospect.

Drilling is set to start at the Lucky Sump spodumene prospect aimed at following up the high-grade pegmatite samples discovered just 4km from Pilbara Minerals’ Pilgangoora lithium-tantalum mine.

The ASX lithium and gold share also mentioned the 26% increase in its gold resource at Mt York, “demonstrating that Mt York is a top-shelf WA gold project with genuine scale and ongoing growth potential”.

How has this ASX lithium share performed longer-term?

The Kairos share price is up 53% in 2022, compared to a 12% loss posted by the All Ordinaries Index (ASX: XAO).

The post Why is this small-cap ASX lithium share rocketing 43% in a week? appeared first on The Motley Fool Australia.

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• 3 ASX mining stocks surging over 20% today

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Sayona Mining Ltd (ASX: SYA) share price is sliding 5.47% into the red on Friday and now trades at 30.3 cents apiece.

Investors look to be winding back exposure to Sayona today following a company announcement, although, also noteworthy are the moves within broad indices today.

The S&P/ASX 300 Metals and Mining Index (ASX: XMM) is also in the red, down 2.22%. Meanwhile, the benchmark S&P/ASX 200 Index (ASX: XJO) is down 1.47%.

What did Sayona announce?

The company advised that it remains on track for the planned restart of spodumene production at its North American Lithium (NAL) operation in Canada for the 1st quarter of 2023.

The release also notes that permitting applications are 95% complete and procurement is 94% completed, and most procurement items are already on site.

Sayona also mentioned the project’s budget has wound back to $95 million Canadian Dollars, down from a previous $97.75 million.

It also has around 70 on-site staff, whilst the company looks to continue building out its management outfit for the site.

Speaking on the results, Sayona’s managing director, Brett Lynch said:

We are delighted to see the continued progress towards the recommencement of lithium (spodumene) production at NAL in Q1 2023. Our project team has overcome potential challenges due to proactive forward planning and the early ordering of critical long‐lead equipment items, while the near completion of permitting and procurement puts us in an excellent position.

Regarding the company’s recent inclusion in the benchmark ASX 200 index, Lynch added:

Our recent achievements have been recognised by investors, as seen by our promotion to the S&P/ASX 200 index, and I would like to thank shareholders for their continued support.

Sayona shares recently thrust towards previous 52-week highs after a tremendously strong rally from the July bounce in equities.

The Sayona share price reached a peak of 35.5 cents on 13 September before turning sharply and tracing back down to its current levels.

And despite the wide-stretched volatility seen in the chart below, the Sayona Mining share price has still clipped a 132% gain this year to date.

The post Why is the Sayona Mining share price diving 5% on Friday? appeared first on The Motley Fool Australia.

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More reading

• Why is the Sayona Mining share price tumbling 6% on Wednesday?
• Investors are obsessed with ASX lithium shares, but what about this other critical battery metal?
• Why is the Sayona Mining share price soaring 8% on Monday?
• 4 ASX lithium shares that have rocketed more than 100% in 2022
• Do Sayona Mining shares pay dividends?

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The De Grey Mining Limited (ASX: DEG) share price is down 7.31% today.

De Gray shares peaked at the open today at a high of $1.08, before tumbling to a low of 99.5 cents at midday. At the time of writing, shares of the gold explorer trade for $1.015.

The S&P/ASX All Ordinaries Gold Index (ASX: XGD) is down, too, at a 4.34% loss.

Meanwhile, other ASX gold shares also have a rough end to the week.

Gold Road Resources Ltd (ASX: GOR) is down 6.2%, and Ioneer Ltd (ASX: INR) is down 1.14%.

There are no announcements from the company today to make sense of the sell-off in its share price. But some developments have emerged over the last week. Let’s investigate what happened.

What’s going on with De Grey shares?

According to Markets Insider, the spot price for gold has declined 2.53% over the past week. But the spot price has recovered by a modest 0.16% today.

Yesterday, gold reached a seven-week low in US trading. The price of silver suffered, too, with the precious metals competing for investor capital amid a stronger US dollar and soaring yields on treasury bills, as reported by Kitco.

Some positive developments occurred for De Grey, too, over this time, including making an investor presentation at the precious metals summit conference in Beaver Creek, Colorado, on Thursday.

Some highlights from the report were that De Grey’s Mallina site has the potential to be one of Australia’s top five gold mines for FY22 production volumes. Further, it claims to have one of the world’s largest undeveloped gold projects.

On Monday, the De Grey share price shot up to a four-month high.

De Grey share price snapshot

The De Grey Mining share price is down 15.42% year to date. Meanwhile, the S&P/ASX 200 Index (ASX: XJO) is down 11.05% over the same period.

The company’s market capitalisation is $1.54 billion.

The post De Grey Mining down 7% amid struggling gold prices appeared first on The Motley Fool Australia.

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More reading

• Why did the De Grey share price leap 5% to a 4-month high today?
• Here are the top 10 ASX 200 shares today
• 3 ASX 200 mining shares going great guns on Monday
• Here are the 10 most shorted ASX shares
• Here are the top 10 ASX 200 shares today

Motley Fool contributor Matthew Farley has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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ASX, energy, metals and mining shares have underperformed the broad indices today, with investors winding back exposure following a period of strong gains.

The S&P/ASX 300 Metals and Mining Index (ASX: XMM) is down 2.26% at the time of writing, while the benchmark S&P/ASX 200 Index (ASX: XJO) has slipped 1.3%.

The Lynas Rare Earths Ltd (ASX: LYC) share price is no exception and is currently down 4.4%, now trading at $7.87 apiece despite no news.

What’s up with the Lynas share price?

Losses have extended into today’s session for Lynas from the broad selling pressure mentioned above, but also what appears a continuation of a downtrend that started on Tuesday.

Chief to the downside was a company announcement detailing disruptions to the water supply of one of its sites in Malaysia.

Lynas advised that between July and August 2022, water supply from the Malaysian local supplier was “unpredictable and on most days below the level required to run all 4 kilns”.

The rare earths player had employed a number of tactics to mitigate the uncertainty, namely sourcing alternative water sources and trucking external water in.

The ASX mineral explorer initially expected the supply disruption to resolve and normal water supply resume during September.

If true, this “would have enabled the shortfall from July and August to be mitigated,” it said. However:

Following a catastrophic equipment failure in early September, PAIP has not supplied any water
for seven days.

This issue is affecting all users in the Kuantan area, including residential customers… PAIP has now provided an update that the current situation of zero supply is expected to continue for at least the next week.

As a result of the disruption, Lynas estimates the water supply from PAIP will remain uncertain and unpredictable until the end of this month.

“Whilst Lynas’ alternative strategies will support some continued production during September, it will fall short of the level achieved in July and August 2022,” the company said.

After a choppy year on the chart, the Lynas share price is down 22.6% this year to date, having sunk another 20% this past month.

In the past 12 months, Lynas shares have clipped a 1.3% gain.

The post Lynas share price tumbles again, down 10% this week appeared first on The Motley Fool Australia.

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More reading

• The Lynas share price is sinking 5% amid market mayhem
• Why is the Lynas share price so volatile on Tuesday?
• Down 20% in 2022, is the Lynas share price too cheap to ignore?
• Why is the Lynas share price surging higher on Tuesday?
• Should investors ‘buy the dip’ in Lynas shares right now?

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

A Coinbase (NASDAQ: COIN) executive just explained the best part of the long-awaited Ethereum (CRYPTO: ETH) Merge. Coinbase COO Emilie Choi pointed out Ethereum’s most exciting strength — and how the platform upgrade shines a spotlight on this quality.

The Merge is in the books now, and cryptocurrency investors should keep an eye on how Ethereum executes its move from a proof-of-work (PoW) platform to a proof-of-stake (PoS) system. In Choi’s view, the journey is more important than the destination.

What is The Merge?

Around 2:40 a.m. ET on Thursday, Ethereum started merging its digital ledger with a new system, formerly running as a testing network known as the Beacon Chain. Ethereum’s developers and blockchain node operators had executed a couple of mergers on smaller test networks, and all signs pointed to a successful platform upgrade on Ethereum’s main network.

As expected, The Merge went off without a hitch. Leading crypto-trading platforms such as Coinbase, Kraken, Binance, and Robinhood Markets paused transactions for Ethereum and Ether-based tokens for a few hours, giving the technology update time to roll out. Today, Ethereum’s transactions are validated by a much faster system that requires just 0.05% of the electric power that the old PoW platform consumed.

This game-changing move has been in the works for six years, and also sets the stage for three more rounds of important network upgrades. Ethereum co-founder Vitalik Buterin considers Ethereum’s functionality to be 55% complete after The Merge, leaving plenty of room for further improvements.

What Choi said

That’s where Emilie Choi comes in. Choi delivered this crucial insight at the annual Goldman Sachs Communacopia + Technology Conference earlier this week:

“I think the most important thing that [The Merge] represents is that there can be continued sustained technological development done by decentralized communities at scale,” she said. “To me, that’s the most important kind of takeaway about the Ethereum merge.”

This is important. Like Buterin, Choi expects Ethereum to get better over time. This platform was designed with long-term flexibility in mind, allowing Ethereum to overcome expected challenges and uncharted surprises via platform updates. The Merge was a fantastic example of this capability, proving that the network can undergo truly fundamental changes without breaking the crypto platform.

The next few updates will continue to lower transaction costs and boost execution speeds. They will also introduce a work-sharing feature known as sharding, improve Ethereum’s security model, and expand the system’s scalability. In the long run, Ethereum will evolve to take advantage of improvements in computing systems. For example, the Ethereum network of 2030 might secure and validate its transactions with quantum computing systems.

What’s good for the Ethereum goose may not be right for the Bitcoin gander

Every cryptocurrency indeed has some capacity for platform upgrades, but the Ethereum community takes this quality more seriously than most of its peers. Bitcoin (CRYPTO: BTC) has barely changed since its launch in 2009, apart from a few tweaks to tackle unexpected security issues. The unchanging nature of Bitcoin is an advantage because its holders can trust that the long-term supply is limited to 21 million coins.

However, the largest cryptocurrency should probably consider switching from PoW to PoS (or another validation system with lower computing and power requirements) someday. That change took years of planning and testing in the more flexible Ethereum community. Will we see a proof-of-stake version of Bitcoin in this decade? Probably not.

So the two leading crypto names are walking down strikingly different paths. One size does not fit all cryptocurrencies, and that’s quite all right. Each digital coin was designed with a unique set of features and long-term goals, and those fundamental differences will always drive their development. In Ethereum’s case, an openness to new ideas is the name of the game and investors should embrace that attitude.

The Merge showed us that even ambitious platform changes can take place without a hitch. As Choi said — and Buterin would surely agree — sustained development is the secret sauce in Ethereum’s recipe for success.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Ethereum’s merge spotlights a key strength, says Coinbase exec appeared first on The Motley Fool Australia.

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More reading

• 5 reasons I wouldn’t touch Shiba Inu with a 10-foot pole
• Why Ethereum is diving today
• Will the Ethereum Merge leave the crypto at greater risk of hacking?
• Why did the Bitcoin price just dip below US$20,000?
• Why you should buy Block stock (and it’s not Bitcoin)

Anders Bylund has positions in Bitcoin, Coinbase Global, Inc., and Ethereum. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Bitcoin, Coinbase Global, Inc., and Ethereum. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The Aristocrat Leisure Limited (ASX: ALL) share price has managed to avoid the market selloff on Friday.

In afternoon trade, the gaming technology company’s shares are up 0.5% to $34.39.

Why is the Aristocrat share price pushing higher?

Investors have been bidding the Aristocrat share price higher today after the company was the subject of a couple of bullish broker notes.

One of those notes came out of Morgan Stanley and saw its analysts put an overweight rating and $45.00 price target on the company’s shares.

Based on the current Aristocrat share price, this implies potential upside of 31% for investors over the next 12 months.

The broker sees a big opportunity for the company in the i-gaming market and believes it has the balance sheet strength for major M&A or capital management activities.

Who else is bullish?

Another bullish broker note came out of Goldman Sachs this morning.

According to the note, the broker has retained its buy rating and $43.00 price target on Aristocrat’s shares. This implies potential upside of 25% for investors.

Its analysts note that the company’s digital business is outperforming the market despite recent weakness. This has led to the broker revising “group earnings by +2.3% and +0.4% in FY22/23e.”

Outside this, Goldman continues to see plenty of value in the Aristocrat share price thanks to its very positive growth outlook. This is underpinned by its development pipeline, the recovery in land-based demand, and its strong balance sheet.

The broker commented:

We maintain our Buy rating on ALL based on the strong D&D commitment and pipeline support for future growth, well diversified digital business, leverage to the rapidly recovering land-based business as well as strength in their balance sheet.

The post Aristocrat share price defies the selloff thanks to bullish brokers appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Atlas Arteria Group (ASX: ALX) share price is down 14.85% today.

Shares of the toll road operator trade for $6.65. Earlier today, shares dipped to an intraday low of $6.38, and peaked late morning at an intraday high of $6.75.

The S&P/ASX 200 Industrials Index (ASX: XNJ), of which Atlas Arteria is a part, is only down 1.87%. So, what’s going on?

The company made a significant announcement today, so, let’s investigate what happened.

What’s going on with the Atlas Arteria share price?

This morning the company announced the completion of its institutional component of entitlement offering for new ALX securities. This offer raises a total of $2.5 billion from the settlement of 403.5 million stapled securities which it expects to issue on 26 September.

Using the funds, Atlas Arteria will acquire a 66.67% stake in the Skyway Concession company. This includes partial ownership of the Chicago Skyway, where some red flags are being raised, according to insiders and commentators.

An audit will be completed for the bridge if the intended acquisition moves ahead. The company notes “there is a risk that these post-completion audits may identify the need for capex expenditure beyond what has been budgeted,” as reported by The Australian.

Skyway Concession company acquisition lampooned

Atlas Arteria’s biggest shareholder, IFM Investors, are critics of the deal. IFM’s head of infrastructure Kyle Mangini and executive director Aaron McGovern describing the deal as “significantly value destructive”, stating:

We do not believe the company could construct any credible set of parameters or assumptions in order to justify the pursuit of the Chicago Skyway acquisition.

Macquarie analysts also agree with some parts of IFM’s evaluation of the deal, focusing on the weakness of the Chicago Skyway.

The analysts said:

Traffic has been a material disappointment on the road. There once was expectation of growth, but this never eventuated and ultimately traffic is down 20 per cent on 2005 and 2.5 per cent on 2016. Core issues we think are population growth is weak, there is an alternative corridor and users are more price-elastic than normal roads.

However, the Macquarie analysts also said that “strategically, the acquisition gives Atlas scale”. And noted, “that strategic gain is at the expense of the dividend and dividend growth”.

Atlas Arteria dividends will continue in FY22 and FY223

Despite the possible long-term weaknesses of its dividend, the company said it would continue its hefty 40 cents per share dividend in the immediate future for FY22 and FY23.

My Fool colleague Brooke notes that the company has “considerable debt capacity,” with future dividends likely paid out of capital releases.

The company notes its dividend is “sustainable” after acquiring a stake in Skyway Concession.

Atlas Arteria share price snapshot

The Atlas Arteria Group share price is down 3.9% year to date. That’s considerably better than the S&P/ASX 200 Index (ASX: XJO), which has lost 9.3% over the same period.

The company’s market capitalisation is $7.48 billion.

The post Why did the Atlas Arteria share price just dive 16%? appeared first on The Motley Fool Australia.

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More reading

• Atlas Arteria share price remains on ice amid $3 billion cap raise
• Atlas Arteria share price halted amid $2.9 billion acquisition
• Why is the Atlas Arteria share price hitting the headlines on Monday?
• Atlas Arteria share price drives higher on record dividend guidance
• Here are the top 10 ASX 200 shares today

Motley Fool contributor Matthew Farley has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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