Market Update & Important Indicators
U.S. stocks rallied after the Labor Day holiday, with the Dow adding 390 points, or 2.4%, to 16,493 and the S&P 500 climbing a similar amount to close at 1,969. Tuesday's rally brought the Dow closer to erasing its losses in August, when it fell 6.6%. The dollar fell against most other currencies, after last week's U.S. employment data gave a mixed picture of the labor market, raising doubts over whether the Federal Reserve will lift rates this month. U.S. nonfarm payrolls data for August, reported on Friday, showed employment growth slowing in August, even as the unemployment rate fell more than expected owing to a smaller labor force.
In Europe the pan-European Stoxx Europe 600 index ended 1.2% higher, giving back some of its earlier gains. Germany's DAX climbed 1.6% and France's CAC-40 advanced 1.1%. The U.K.'s FTSE 100 gained 1.2%. The eurozone economy grew more rapidly than previously estimated in the three months to June, the European Union's statistics agency said. Eurostat also raised its estimate for growth in the first three months of the year. Last week, the European Central Bank signaled it was prepared to expand its stimulus measures.
Japanese stocks fell to a seven-month low after weak Chinese trade data stoked concerns about a further slowdown in the world's second-largest economy. The Nikkei Stock Average finished down 2.4% at 17,427, its lowest level since February and off 0.1% year-to-date. Shares in Southeast Asia also fell steeply, and several currencies hit multiyear lows. But the Shanghai Composite Index recovered in the afternoon to close up 2.9%, lifting shares in Hong Kong by 3.3%. China reported August exports were down 5.5% from a year earlier in dollar terms, after a drop of 8.3% in July, data from the General Administration of Customs showed Tuesday.
Copper closed up 3.9% in London, after gaining on news that Glencore PLC is cutting supply and Chinese demand for the metal remained stable in August. Other base metals followed, with nickel up 2.5% and zinc up 2.4%. Iron ore tacked on 1.0% to $57.42/t, while Brent crude rebounded strongly by 4.0% to 49.52/bbl. Gold was flat at $1,121/oz.
In This Issue
TFS Corporation (TFC) | BUY
FY15 was a very positive year for TFC. Plantations are being de-risked with each successful harvest, while the development of pharma products has deepened TFC’s end markets (reflected in heartwood and oil prices). TFC is way ahead of competition when it comes to Indian Sandalwood plantations and we expect it will reap significant financial rewards from its vertical integration strategy. Buy on a $2.85 valuation (prior $2.65).
Sandfire Resources (SFR) | BUY
Sandfire Resources (SFR) released further assay results for ongoing drilling at the Monty discovery, part of the broader Doolgunna Project. Diamond holes TLDD0009 and TLDD0010 (holes 9 and 10 respectively) were drilled up-dip of previous intercepts and returned high grades over solid widths. Key intercepts included (depths are downhole and not true widths); 7.9m @ 8.3% Cu and 2.4g/t Au from 363m in Hole 9 and 10.5m @ 18.9% Cu and 3.1g/t Au from 360m in hole 10.
Argonaut’s revised estimate for metal value in ground is ~$350m gross (applying US$2.50/t Cu price) or ~$140m net (applying a US$1.00/lb cash margin). We have applied ~250m strike/plunge, 110m dip, 7m width, 3.8 /cm3 density and ~6.4% Cu Eq. grade (allowing for dilution). While we recognise our width, density and grade are broad assumptions, the estimated tonnage of ~730kt is modest, equating to less than half a years feed for the 1.5Mtpa DeGrussa plant. Further strike/plunge extensions, fault offsets and/or repeated mineralisation zones will be required to build an economic inventory.
OBJ Limited (OBJ) | SPEC BUY
• OBJ has expanded beyond skincare for the first time by signing a new work plan with Proctor & Gamble (P&G) targeting the shaving market. The work plan sets out a programme to quantify opportunities for OBJ’s magnetic microarray technology in men’s and women’s shaving products. It is early days, but the market potential is huge.
• In other news:
• Further validating OBJ’s technology, P&G also released results from a second major human clinical trial that showed OBJ’s technology delivered substantial statistical improvements in key skin barrier functions and skin health indices
• OBJ has demonstrated its Dynamically Configurable Emulsion (DCE) technology to a number of key P&G brands which expressed interest in the new technology
We continue to find attraction in OBJ’s partnership with big global companies like P&G, its broadening technology base, and the wider potential application opportunities. We expect to see continued positive news-flow as OBJ moves closer to commercialisation.
Recent Contacts & Presentations
AWE Limited (AWE), Ausdrill (ASL), GR Engineering (GNG), Medusa (MML), Resolute (RSG), Rift Valley (RVY), Troy (TRY), Northern Star (NST), Sandfire (SFR), Regis (RRL), Saracen (SAR), Sino Gas & Energy (SEH), Dacian (DCN), Buru Energy (BRU), Carnarvon Petroleum (CVN), Otto Energy (OEL), Empire Oil & Gas (EGO), FAR Limited (FAR), Central Petroleum (CTP), Senex Energy (SXY)