Market Update & Important Indicators
The Dow Jones Industrial Average on Thursday dropped 195.01 points (1.08 per cent) to 17,840.52. The broad-based S&P 500 fell 21.34 (1.01 per cent) to 2,084.51, while the tech-rich Nasdaq Composite Index slumped 82.22 (1.64 per cent) to 4,941.42. Yelp plummeted 23.2 per cent after forecasting second-quarter sales of $US131-$US134 million ($A164-$A167 million), below Wall Street projections of $US138.4 million. Analysts also rapped the company for a weak performance in attracting users. Michael James, managing director of equity trading at Wedbush Securities, said government data showing consumer spending rose 0.4 per cent in March was "a little underwhelming" after Wednesday's "terrible" report on first-quarter economic growth. Tech stocks were especially weak, with Apple falling 2.7 per cent, and Facebook and Google both dropping 2.1 per cent.
European stocks have posted gains as the euro hit a nine-week dollar high on weak US data that dimmed the chances of a Federal Reserve interest rate hike in early summer. Markets had fallen sharply on the previous day after news that the world's biggest economy grew by just 0.2 per cent in the first quarter, well below the one per cent rate anticipated by analysts. But on Thursday, European equities were given a lift by eurozone data showing that the bloc has climbed out of four months of deflation. Frankfurt's DAX 30 index gained 0.19 per cent to 11,454.38 points while in Paris the CAC 40 was up 0.14 per cent at 5,046.49 points, ahead of the May 1 holiday weekend. Trading at both markets will resume on Monday. London's benchmark FTSE 100 index closed 0.21 per cent higher at 6,960.63 points. Friday is a business day in London, with markets shut only on Monday for a bank holiday.
Most Asian stock markets have slipped with US growth data falling well short of forecasts. Tokyo tumbled 2.69 per cent, or 538.94 points, to 19,520.01 as exporters were hit by the stronger yen, while Shanghai fell 0.78 per cent, or 34.97 points, to 4,441.65. Hong Kong shed 0.94 per cent, or 267.34 points, to 28,133.00, while Seoul fell 0.72 per cent, or 15.46 points, to end at 2,127.17.
At 0657 AEST on Friday, the June share price index futures contract was down four points at 5,753. Locally on Friday, RP Data Core releases its home Value Index for April and the Australian Industry Group's performance of manufacturing (PMI) index for April is due out. In Australia, the market on Thursday closed lower on reduced expectations of an interest rate cut next week and a drop in iron ore prices. The benchmark S&P/ASX200 was 48.6 points, or 0.83 per cent, lower at 5,790.0, while the broader All Ordinaries index was down 44.5 points, or 0.76 per cent, at 5,773.7.
Brent rose 1.4% to US$66.78/bbl. Metals on the LME were up across the board with Nickel and Copper posting the biggest gains, up 3.9% and 3.3% respectively. Gold was down, falling 1.7% to US$1184/oz. Iron ore fines fell 1.7% to US$56.18/t.
In This Issue
AWE Limited (AWE) | Q1 CY2015, Perth Basin takes the limelight | BUY
AWE Limited (AWE) released its Q1 CY2015 results with total production of 1.11 mmboe, down 6% Q-Q (in line with Argonaut forecast of 1.07 mmboe), mainly due to the planned facilities shut down for the Pateke-4H tie in well. Sales revenue was affected by lower production and significantly reduced oil prices (A$57.33/bbl v A$80.78.bbl) down 46% QQ to $41m. Cash reduced to $62m with debt drawn to $109m from AWE’s $300m facility.
During the Q AWE had positive news flow coming from successful tie-in of Pateke-4H well, increase in Sugarloaf production wells, drilling commencement of BassGas Yolla-5 & 6 development wells and Lengo FEED progress. In addition, the successful flow test of the Waitsia conventional gas field and Irwin-1 gas discovery in the Dongara/Wagina sands with further gas shows observed in the lower Carynginia Shale, Irwin River Coal, and the Kingia and High Cliff Sandstones re-affirmed the importance of the Perth Basin.
Doray | BUY
Doray Minerals (DRM) produced 21.3koz @ AISC A$1,214/oz, v Argonaut forecast of 23koz @ AISC A$1,033/oz. Net cash position (excluding MYG’s Sandstorm Loan Balance) at 31st March was A$10.1m (December Q A$4.7m). Adjusting for the effect of MYG acquisition (acquisition costs, MYG cash and debt), the normalised cash flow from Andy Well operation is estimated at ~A$7.0 m (~A$320/oz). The AISC this Q included pre-strip for Stage II open pit (in February). Argonaut’s recent site visit to DRM’s Andy Well mine and the Deflector project confirmed the Company is on track to become a ~160koz Au Eq, high grade Australian gold producer.
The Andy Well operation is delivering operational performance improvements (better dilution controls) following the adoption of the reverse Avoca mining. The high grade Stage II open pit (16.1g/t Reserve grade) will underpin the Company’s cost / cash flow in the near term. The Deflector project shares numerous similarities with Andy Well and DRM’s track record at constructing, commissioning and operating Andy Well significantly de-risks the operation. Argonaut maintains its BUY recommendation with a $0.80 valuation.
Recent Contacts & Presentations
Dacian (DCN), Saracen (SAR), Fertoz (FTZ), Atrum (ATU), Doray (DRM), Buru Energy (BRU), Carnarvon Energy (CVN), Otto Energy (OEL), Empire Oil & Gas (EGO), Pura Vida Energy NL (PVD), Migme (MIG), Vmoto (VMT), Pioneer Credit (PNC), Minemakers (MAK), MZI Resources (MZI), High Peak Royalties (HPR), Leaf Resources (LER), Austin Engineering (ANG), Ausdrill (ASL), Matrix (MCE), Austal (ASB), MMA Offshore (MRM), CTI Logistics (CLX), 99 Wuxian (NNW)