Market Update & Important Indicators:
U.S. stocks started the month higher as oil prices stabilized after two sessions of declines. Energy shares have weighed on major stock indexes so far this week, as U.S.-traded crude oil fell on investor expectations of production cuts by the Organization of the Petroleum Exporting Countries and other major producers. The price of crude oil rose 1.3% to $48.95 a barrel after data released by the Energy Information Administration showed U.S. crude-oil inventories fell much more than expected for the most recent week. For the week the price of oil remains 1.4% lower. The Dow Jones Industrial Average intraday gained 120 points, or 0.6%, to 21129. The S&P 500 and the Nasdaq Composite gained 0.6%. Energy stocks in the S&P 500 rose 0.8% in recent trading, though they are down 0.9% so far this week. Also falling was the U.S. gold price which shed 0.3% to finish at 1,265.40 US$/oz. Stock moves have been fairly muted in recent sessions as the first-quarter earnings season has mostly concluded. The monthly average of the VIX, or Wall Street's "fear gauge," in May was the lowest since 2006 and the second lowest in history.
European stocks closed higher, breaking a five-day losing streak as investors welcomed a rally in oil prices and continued to follow developments in the U.K. election campaign. The Stoxx Europe 600 index gained 0.4% to finish at 391.66, after closing at the lowest level in almost two weeks on Wednesday. The positive trading mood in Europe came "with focus on Thursday remaining on the U.K. election, as well as the latest oil inventory data from EIA and a raft of other data from around the globe," Craig Erlam, senior market analyst at Oanda, said in a note. Oil prices rallied after a report late Wednesday from the American Petroleum Institute showed U.S. crude supplies fell a more-than-expected 8.7 million barrels last week.
Asian stocks finished mainly higher, though there remained a broader lack of direction as June began. China was a noted outlier, with late selling resulting in a 1.9% slide for the Shenzhen Composite (the Shanghai Comp fell but 0.5%). Weighing there was a manufacturing-PMI reading falling out of expansion territory. While South Korea stocks eased amid so-so data there, Taiwan and Hong Kong rebounded. The upside standout was Japan, with the Nikkei logging its 12th-straight start-of-month gain in rising 1.1%.
Australian shares rose modestly for a third-straight day despite being held back by banks and resources companies. Ending near the session high, the S&P/ASX 200 gained 13.5 points, or 0.2%, to 5738.1 thanks to strength in utilities, property trusts, industrials and health care stocks. Yet after recovering the previous two days, the major banks again weakened to build on May's sharp losses as uncertainty has grown over a new tax on the liabilities of the biggest lenders and regulatory capital requirements. Big mining stocks retreated with a further decline in Chinese steel and coal commodities, with iron ore down sharply after slumping 15% over the last five sessions.
The London Metal Exchange's three-month copper contract closed 0.3% higher on Thursday at $5,699/t. The other base metals finished mostly lower overnight. Aluminium prices fell 0.1% to 1,924/t, lead prices fell 0.5% to 2,089/t, nickel prices dropped 1.4% to 8,793/t, whilst zinc prices shed 1.1% at 2,557/t. Tin prices bucked the trend rising 0.6% to 20,550/t.
In this Issue:
Gold Road Resources (GOR) | 5 Reasons to Buy Gold Road | BUY
Gold Road (GOR) has commenced early works for the construction of the Gruyere Gold Project (Gruyere). The stock has been largely range-bound despite the announcement of the positive Feasibility (Nov 2016), the announcement of Gold Fields (GF) 50% JV and a further 10% equity purchase by GF at 86cps. Arguably, GOR still has ~18 months until first production, but we see five reasons to buy GOR including i) construction commencing in partnership with Gold Fields, ii) the upsizing of the project to 8.5Mtpa to lift early production >300kozpa, iii) Our analysis of the peer group NAV’s suggests that GOR’s Gruyere project is similar in production, costs and mine life to EVN’s Cowal asset, yet the stock continues to trade at less than half of the value, iv) value accretion occurs in the investment sweet spot during the construction period ahead of production; and v) maintaining a significant 100% owned exploration package with an aggressive $30m spend in CY17/18. Maintain BUY with a revised target price of $1.02ps (prior $1.10ps).
Recent Contacts & Presentations:
Zenith Energy Ltd (ZEN), Blackham Resources Ltd (BLK), Top End Minerals Ltd (TND), Northern Star Resources Ltd (NST), Xanadu Mines Ltd (XAM), Dacian Gold (DCN), Egan Street Resources Ltd (EGA), Alice Queen Ltd (AQX), Paringa Resources Ltd (PNL), AWE Limited (AWE), Saracen Mineral Holdings Ltd (SAR), Red River Resources Ltd (RVR), Vital Metals Ltd (VML), Prairie Mining Ltd (PDZ), Hotcopper Holdings Ltd (HOT), Resolute Mining Ltd (RSG), Botanix Pharmaceuticals Ltd (BOT), Pantoro Ltd (PNR), Beadell Resources Ltd (BDR), Investigator Resources Ltd (IVR), Echo Resources (EAR), Emerald Resources NL (EMR), PharmaNet Group (PNO)
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