Market Update & Important Indicators:
A climb in technology shares helped push U.S. stocks higher Monday ahead of another busy week of corporate earnings. Technology stocks in the S&P 500 rose 0.9%, adding to a roughly 16% yearly gain. The U.S. gold price declined 0.9% for the day finishing at 1,256.10 US$/oz. The gains in technology heavyweights come as investors are analysing signs of lethargic domestic growth. U.S. factory activity decelerated in April, the Institute for Supply Management said Monday, while Americans' spending was flat in March for the second consecutive month, according to the Commerce Department. Friday's gross domestic product figures, a general measure of national output, showed the slowest pace of expansion in three years. While U.S. earnings have pleased investors, there have been "pockets of weakness" in some hard data, said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management. Investors found some relief Sunday night as U.S. lawmakers averted a government shutdown. Federal Reserve officials, meanwhile, are likely to keep interest rates steady at their policy meeting this week and drill down into details about when and how to reduce their large holdings of mortgage and Treasury securities. The Federal Reserve's preferred measure of inflation, the personal-consumption expenditures price index, is expected later in the global day, and was expected to show little change in consumer costs in March.
Most European markets were closed for May Day and the U.K.'s early May bank holiday. The Stoxx Europe 600 slipped 0.1%. European stocks posted mild losses Friday, with investors pushing up both the euro and the pound against the dollar following top-tier economic data for the Eurozone and the U.K.
Many markets in Asia were closed for a holiday. Japanese equities kicked off the week with an earnings-related boost, leading gains in the Asia-Pacific. The Nikkei Stock Average ended 0.6% higher on the first of two trading days this week markets will break for a holiday Wednesday through Friday. In Japan, the market was further buoyed by a weakening local currency. The dollar was at Yen111.88, hitting a four-week high, compared with Yen 111.37 when Tokyo markets closed on Friday.
A seventh straight session of gains for Australian shares took the market to a two-year closing high Monday, as the major banks led broad gains ahead of earnings season. Australia & New Zealand Banking's first-half numbers, due before the market opens Tuesday, will get the ball rolling, with results from the other big lenders expected over the coming days. Although there are still worries among investors over capital needs and the housing market in Australia, the banks are widely expected to have benefited from relatively low numbers of soured loans and gains in home-loan rates. Traders had expected a cautious start to the week after the market's recent gains and ahead of central bank policy meetings in Australia and the U.S., as well as the coming second round of the French presidential election. After a late surge, the S&P/ASX 200 finished 32.3 points, or 0.6%, higher at 5956.4–its highest close since April 2015.
The London Metal Exchange's three-month copper contract closed down 0.37% at $5,714/t. The other base metals finished mixed on Monday with several metal prices remaining unchanged. Aluminium prices rose 1.4% at 1,930/t, whilst lead prices declined 0.2% at 2,280/t. Nickel, tin and zinc prices all remained flat for the day’s trading.
In this Issue:
Dacian Gold (DCN) |Cameron Well results show promise | BUY
Market Cap $341m | Current Price $1.70| Valuation $3.00
Dacian Gold (DCN) has announced positive drill results from its first pass program at Cameron Well. Initial results show a broad blanket of shallow mineralisation across the ~2,500m2 diameter Syenite Complex. Best results from the first 319 holes of the planned 589-hole program included 14m @ 1.1g/t (from 44m), 8m @ 3.3g/t (from surface) and 2m @ 4.9g/t (from 38m with visible gold present). Over 44% of holes intersected mineralisation >0.1g/t and 80 of the holes ended with anomalous gold mineralisation at end of hole. All holes were designed to test the oxide profile above bedrock with deeper RC/Diamond core testing scheduled to be carried out once the initial aircore program is completed in May. Importantly, a larger proportion of the program over the Syenite is still yet to infill the new zones of anomalism. BUY maintained.
Doray Minerals (DRM) |Still treading water | HOLD
Market Cap $105m | Current Price $0.30| Valuation $0.38
Doray Minerals (DRM) delivered March Q production at Andy Well of 13,042oz at an all-in sustaining cost (AISC) of $1,498/oz (vs $1,589/oz in Dec Q, -6%). This was in line with forecasts and we expect DRM to achieve its revised FY17 guidance of 100-110koz and 4200t Cu. High costs remain at Andy Well and the Company continues to focus on minimizing stope dilution and grade improvement which is having an incremental effect. At the same time, extensional drilling is underway for longer term growth. Deflector performed well with processing plant performance increasing by 24%, however production fell by 25% Q-o-Q to 11,455oz Au (vs 15koz in Dec Q,) and 1,438t of Cu. This was largely expected as the mine moved out of the oxide/transitional ores and into fresh rock mining and processing. Importantly DRM’s cash and gold position has risen to $31.9m (vs A$24.7m in Dec Q,+30%) thanks to the part sale of the copper gold middlings which generated $10.75. DRM reduced its debt to $63.5m after repayments of $6m. We continue to believe DRM is yet to turn a corner, and further work is required before we will see lower costs and improved production which could be achieved in the 1HFY18. Maintain HOLD.
Orthocell (OCC) | March quarterly update | SPEC BUY
Market Cap $42.1m | Current Price $0.415
Whilst market sentiment has soured slightly due to delays in European CE Mark approval for CelGro, we are confident that the CE Mark is forthcoming and that there exists substantial value in OCC’s array of technologies and devices. Spec buy maintained.
Threat Protect (TPS) | Mixed Quarterly | HOLD
Market Cap $22m | Current Price $0.028 | Valuation $0.030
Improved Monitoring revenue in the March 2017 quarter positively impacted segment GP margins, highlighting the benefits to be gained from increased utilisation of the largely fixed cost base infrastructure. This was not reflected in cash flow however, with acquisition-related effects partly responsible for a $0.6m operating cash outflow and the closing cash balance of $0.5m. Although we expect this to improve in 4Q17, we downgrade to hold given the current cash position and a share price close to our $0.03 valuation (which is unchanged from prior).
Vault Intelligence (VLT) | Cost pressures | HOLD
Market Cap $21m | Current Price $0.030 | Valuation $0.035
Operationally VLT is progressing well, signing up new customers, boosting partnerships, and passing the 1 million user mark in the latest quarter. However it takes time and money to build up sales under a SaaS model, with increased costs in particular detracting from near-term performance. While we remain positive on the applicability of the software in the workplace and the Company’s longer term potential, we downgrade to Hold (from Spec Buy) on the basis of a lower valuation of $0.035 (prior $0.047) and our view of increased forecasting risk.
Recent Contacts & Presentations:
St George Mining Ltd (SGQ), Venturex Resources Ltd (VXR), Creso Pharma Limited (CPH), Sino Gas & Energy Holdings Ltd (SEH), Orecorp Limited (ORR) Doray Minerals Limited (DRM), Capricorn Metals Ltd (CMM) Independence Group (IGO), Cardinal Resources Limited (CDV), Metal Bank Ltd (MBK), MOD Resources Ltd (MOD) Quintis Ltd (QIN), Regis Resources Ltd (RRL), Apollo Minerals Ltd (AON), Ironbark Zinc Ltd (IBG), Sovereign Metals Ltd (SVM), Pilbara Minerals Ltd (PLS), Laconia Resources Ltd (LCR), Hazer Group Ltd (HZR), Transerv Energy Ltd (TSV), Ausquest Ltd (AQD), Quintis Ltd (QIN), Paradigm Biopharma Ltd (PAR), Pharmaust Ltd (PAA), Strandline Resources Ltd (STA), PharmaNet Group (PNO)