Market Update & Important Indicators
U.S. stocks fell on Tuesday as the dollar rose to a nearly 12-year high against the euro and bond yields in Europe hit record lows. Barnes & Noble fell 9.1% as its fiscal third-quarter earnings fell short of expectations amid a sharply higher income tax expense. American Airlines Group Inc. shares fell 1.1 % as the airline said passenger traffic declined in February. Rival airline United Continental Holdings Inc.'s shares also declined, down 2.1%, as its capacity fell slightly in February from the year-ago period while passenger traffic was unchanged. The dollar rose to new multiyear highs against developed-market currencies on Tuesday, fuelled by higher expectations for a midyear rise in U.S. interest rates.
Stocks in Hong Kong ended lower Tuesday, marking their longest losing streak in six months on signs of deflationary pressure in China, while in Japan, investors took profits on the market's recent run up to a near 15-year high. Hong Kong's Hang Seng Index lost 0.9% to 23896.98, its sixth straight day of losses, after China's consumer inflation accelerated in February, but not enough to dispel policy makers' worries over possible deflation. In Japan, the Nikkei Stock Average ended down 0.7% at 18665.11, extending Monday's 1% decline, which had been the index's largest one-day percentage decline in more than a month.
Copper futures closed lower on the London Metal Exchange on Tuesday, as poorer-than-expected producer data out of China and a stronger dollar put pressure on prices, with most other base metals following suit. Brent crude dipped 3.7% to $56.39/bbl, while gold inched down 0.4% to $1,162/oz. The AUD is buying US$0.76.
In This Issue
Saracen’s (SAR) recent high grade drilling results from Red October (RO) continue to highlight clear potential for mine life extensions. After factoring in another year of production from RO (to 2.5 years), our valuation increases to 53c (was 50c). The Company’s high impact exploration program is gathering momentum with results from Karari expected in the coming weeks. A successful extensional drilling campaign at Karari will support boosted production potential at Carosue Dam (to >200koz pa) and lower LOM costs, which should translate to significant share price appreciation. Argonaut’s recent site visit to SAR’s Carosue Dam mine confirmed the Company is on track to beat its FY15 guidance of 145-155koz (Argonaut forecast 170koz). With substantial capital works completed and lower cost ounces being delivered, SAR’s balance sheet will be significantly strengthened in the near term.
ABM Resources (ABU)
ABM Resources (ABU) is commencing an exploration program in April, including 10km of drilling and 3km of trenching, targeting high priority near mine targets. Several of these targets (Vampire, Bandit South, Old Glory) had early stage exploration work which demonstrated the potential for very high grade vein systems similar to Old Pirate. A successful program will likely deliver upside to the Company’s production guidance (50-60koz @ AISC A$750-870/oz), given spare capacity (~90ktpa) in the Coyote processing facility. Following a deal with Tanami Gold (TAM) in July CY14 to lease the Coyote plant and equipment, the Company is fast tracking production of the Old Pirate deposit with first gold anticipated mid-CY15.
Recent Contacts & Presentations
Fertoz (FTZ), Atrum (ATU), Doray (DRM), Perseus (PRU), Avanco Resources (AVB), RTG Mining (RTG), Helix Resources (HLX), Rift Valley Resources (RVY), Saracen (SAR), Anova Metals (AWV), West African Resources (WAF), Commodities Group (COZ), Pioneer Credit (PNC), Matrix (MCE), Austal (ASB), Ausdrill (ASL), TFS Corporation (TFC), Gage Roads (GRB), Austin Engineering (ANG)