Market Update & Important Indicators
U.S. stocks finished slightly lower on Tuesday, with market attention turned to corporate results. First-quarter earnings are expected to decline due to a stronger dollar and its effect on profits at large multinational companies, and weaker commodity prices and their impact on energy companies. Earnings season unofficially begins this week, when Alcoa Inc. reports results after the stock market closes Wednesday. The dollar rose against the euro and the yen for a second straight day, undoing the damage a weak U.S. jobs report wrought, as investors returned to their outlook for a stronger U.S. economy and higher interest rates.
European stocks closed a positive session Tuesday, following U.S. markets as they largely shrugged off last week's weak jobs data, while the dollar sprang back after Friday's swoon. The Stoxx Europe 600 closed 1.76% higher as markets traded again after the long Easter holiday weekend. European shares took their cue from Wall Street, where markets gained Monday despite March nonfarm payrolls showing the weakest pace of hiring in 15 months. Stocks were given an additional boost by the latest signs that the economic recovery in the eurozone is gathering pace. Data Tuesday showed the fastest expansion in private sector activity for 11 months, despite slight downward revisions to initial estimates.
Asian shares ended mostly higher Tuesday following a rise on Wall Street overnight, with many investors shrugging off Friday's U.S. jobs data as they returned from holiday. Decisions by central banks in Australia and India to stand pat on monetary policy rattled local markets, however.
Copper futures closed higher on the London Metal Exchange Tuesday on market optimism heading into the typically strong second quarter. Nickel was down 3.7%. Gold is trading at 1,209/oz and Brent crude at 59.10/bbl. The AUD is buying US$0.764.
In This Issue
Beadell (BDR) | SPEC BUY
Beadell Resources (BDR) released an updated Reserve statement for Tucano. As anticipated (see Argonaut note “Real Benefits” dated 18th March), overall inventory fell from 1.7Moz to 1.3Moz, reflecting the removal of deeper ounces and iron ore by-product credits. The updated Reserve is more robust, featuring a conservative gold price assumption of US$1,050/oz (was US$1,200/oz), a lower strip ratio (6.0:1, v 10.3:1), and increased certainty related to the removal of iron ore credits. The Company is expected to benefit from a depreciating Brazilian Real and a transition to contract mining by Maca (MLD). However, Argonaut notes BDR’s CY15 production profile is weighted towards H2. CY15 sales guidance of 170-190koz was maintained. This updated guidance is softer than anticipated, incorporating ~20koz from Duckhead. Factoring in a shorter mine life and softer than anticipated CY15 guidance, we reduce our valuation to $0.38 (was $0.45). Speculative Buy recommendation maintained.
Empire Oil & Gas | BUY
On 26 March 2015 EGO announced a $15.7m capital raising at 0.5cps comprising a $5.5m placement and a $10.2m fully underwritten 1 for 4 rights issue. The placement and rights offer will have a free attaching 1:4 option, exercisable at 0.009ps expiring on 29 April 2018. Successful completion of the capital raising will fund the airborne geophysical survey, the drilling and completion of the Red Gully North (EP389) well, repay the short term ERM credit facility and provide working capital. The placement and entitlement offer will increase the amount of shares on issue to ~10.3 billion. Due to the dilutive nature of the issue (0.5cps) our target price reduces from 0.86cps to 0.77cps. We remain positive on EGO.
Recent Contacts & Presentations
Saracen (SAR), Beadell (BDR), Fertoz (FTZ), Atrum (ATU), Doray (DRM), Austal (ASB), TFS Corporation (TFC), Buru Energy (BRU), Carnarvon Energy (CVN), Otto Energy (OEL), Empire Oil & Gas (EGO), Pura Vida Energy NL (PVD), Migme (MIG), Vmoto (VMT)
Please read Argonaut's Important Disclaimers & disclosures
Log in to the client area below to download the full Morning Note PDF