Market Update & Important Indicators
U.S. stocks pared their sharpest losses Tuesday, as a selloff in commodities abated and investors kept an eye on the latest turns in a last-minute push to keep Greece in the eurozone. Investors continued to track developments in Europe, where earlier Tuesday European policy makers expressed mounting frustration with Greece's government after the Greeks came empty-handed to a meeting of finance ministers. Officials had expected to discuss a new financing proposal from Athens. In the coming weeks, investors will turn their focus to second-quarter earnings reports from U.S. companies. The earnings season unofficially kicks off Wednesday afternoon with Alcoa Inc.'s second-quarter report. Quarterly profits for S&P 500 companies are forecast to decline 4.5% for the quarter, according to FactSet. That would mark the first decline since the third quarter of 2012.
Frustration at an apparent lack of progress in last ditch-efforts to keep Greece in the eurozone jolted markets Tuesday, with stocks falling sharply for a second day and safe-harbor assets rallying. The euro fell to a five-week low against the U.S. dollar and was recently down 1.0% at $1.0955. Bond markets showed signs of stress. Prices of German debt, seen as a haven by investors, climbed. The yield on Germany's 10-year benchmark bond fell 0.14 of a percentage point to 0.63%, also a five-week low. Yields fall as bond prices rise.
Chinese stocks fell Tuesday, casting doubt on the government's ability to stem the slide. Over the weekend, Beijing took its most aggressive action yet to boost its markets, suspending initial public offerings and lending cash to investors to buy stocks. China's brokers vowed to buy shares until the Shanghai Composite hits the 4500 level. Some analysts attribute Tuesday's losses in China to margin calls, when brokerages call in money owed by investors who borrowed to buy shares.
Copper, nickel, aluminium and tin all fell to six-year lows on Tuesday, as the slide on China's stock market triggered sharp selling on the London Metal Exchange. Brent added 0.5% to $56.85/bbl. Gold was down 1.3% to $1,154/oz.
In This Issue
Saracen (SAR) | BUY
As anticipated, Saracen Mineral (SAR) delivered record June Q production of 46.5koz (v Argonaut forecast 45koz) and record FY15 production of 167.5koz, exceeding its guidance of 145-155koz. Cash and bullion increased to A$44.9m (was A$30.2m at 31st March). The Company’s FY16 guidance for Carosue Dam is set at 150-160koz @ A$1,025-1,075/oz, which Argonaut expects SAR to exceed. The stock is well positioned on the operational front with continued strong production and cash build heading into FY16. The delineation of high grade, wide orebodies proximal to a processing plant highlights a highly promising near-mine exploration opportunity. Longer term, Argonaut envisages the Carosue Dam operation transitioning into predominantly underground operations, with a centre of gravity around the Whirling Dervish‐Karari trend. BUY recommendation and A$0.60 valuation maintained.
Tox Free Solutions (TOX) | HOLD
On review we have made small downward adjustments to our near-term, normalised, pre-tax earnings forecasts, and increased the 2H15 tax rate as per guidance. Longer term expectations are unchanged. While earnings performance has been unpredictable during a challenging period, we have a positive longer term view of this quality business. In the current environment we maintain a hold call on a valuation of $3.10 (prior $2.85).
Panoramic Resources (PAN) | BUY
Panoramic Resources released preliminary June Q results with group production of 4.6kt Ni in concentrate/ore, down 3% Q-on-Q and below Argonaut’s forecast of 5.0kt. Savannah performed well with record mill throughput of 83.7kt, finishing the year within budget. Production at Lanfranchi was impacted by unscheduled rehabilitation work and seismic activity. FY15 production was 19.3kt Ni in concentrate/ore, just below revised guidance of 19.5kt. Costs were not released.
Recent Contacts & Presentations
Tox Free Solutions (TOX), GR Engineering (GNG), Austal (ASB), Northern Star (NST), Sandfire (SFR), Western Areas (WSA), Panoramic Resources (PAN), Regis (RRL), RMG (RMG), Renaissance (RNS), Red 5 (RED), Orbital (OEC), Alexium (AJX), Rewardle (RXH), Saracen (SAR), Sino Gas & Energy (SEH), Dacian (DCN), Buru Energy (BRU), Carnarvon Energy (CVN), Otto Energy (OEL), Empire Oil & Gas (EGO), Pura Vida Energy NL (PVD), High Peak Royalties (HPR), Carnarvon Petroleum (CVR)