Market Update & Important Indicators:
Health-care shares tumbled after President-elect Donald Trump criticized the drug industry in his first news conference since the election. The declines pressured major U.S. stock indexes, which rose early in the session, dipped into negative territory during the conference and were mixed in the afternoon. The slide came after Mr. Trump said the drug industry was "getting away with murder" and called for "new bidding procedures." Health-care stocks were among the worst performers in 2016 amid scrutiny over drug pricing. While U.S. stocks still seem poised for further gains in 2017 as corporate earnings resume growth and the economy strengthens, swings in individual stocks and sectors could become more common. Stocks have rallied to record highs several times since November as investors betting on business-friendly policies under Mr. Trump flooded shares of banks and industrial companies, while largely selling government bonds and driving up the dollar.
European stocks rose for a second straight day, but with drug makers capping gains after a late-session selloff following remarks by U.S. President-elect Donald Trump. The Stoxx Europe 600 ended 0.2% higher at 364.90, adding to a 0.1% advance from Tuesday. The pan-European index traded as high as 366.37 earlier in the day, but trimmed gains after Trump in his first full-scale press conference since July lashed out at the drug industry. The president-elect said that more bidding is needed on drug prices, implying legislation that could erode the sector's profitability.
Asian stock markets broadly rose Wednesday on encouraging economic data and an impending press conference by U.S. President-elect Donald Trump, which traders hoped may contain details of his stimulus program. Japan's Nikkei closed up 0.3%, Korea's Kospi rose 1.5% and Hong Kong's Hang Seng Index ended up 0.8%. Data arrived Tuesday that small-business optimism in the U.S. hit its best level since 2004.
A jump in mining stocks helped keep the Australian share market in positive territory Wednesday, countering a drop in banks after recent strong gains. Australian stocks, like the local currency, pared early gains as investors awaited the first news conference of the year from President-elect Donald Trump later in the global day. The S&P/ASX 200 finished up 10.8 points, or 0.2%, at 5771.5, reversing Tuesday's decline. The rise was driven by a 2.1% advance in the materials sector, with some support from energy and industrial stocks. Mining companies benefited from higher prices of iron ore, copper and other commodities in the wake of renewed optimism about the health of the global economy. Chinese government data on Tuesday showed producer prices rose 5.5% in December from a year earlier, adding to November's 3.3% increase. Iron ore climbed 3.2% on Tuesday to US$80.10/t, tracking a jump in Chinese futures, while copper rose to a four-week high after Chinese economic data helped reassure markets about demand from the world's biggest consumer of industrial metals.
The London Metal Exchange's three-month copper contract settled down 0.76% at $5,714/t. Other base metals were mainly lower Wednesday. Zinc prices fell 0.8% at $2,680/t, tin prices fell 0.1% at $21,145/t, nickel prices fell 4.1% at $10,127/t and lead prices fell 2.4% at 2,120/t. Aluminium bucked the trend rising 0.3% to 1,763/t.
In this Issue:
Paladin Energy (PDN) | Restructure: A chance for survival | HOLD
Market Cap $135 | Current Price $0.08 | Price Target $0.08
Paladin Energy (PDN) has announced a proposed balance sheet and capital restructure which entails new longer dated convertible bonds (CBs), secured bonds, converting debt to equity, raising new equity and a share consolidation. This restructure is in response to a decreased likelihood that PDN will complete the previously announced 24% sale of the Langer Heinrich mine (LHM) to CNNC for ~US$175m. Proceeds of this transaction were flagged to repay the US$212m CBs due April 2017. The restructure is highly conditional and requires support from existing bondholders, shareholders and Électricité de France (EdF), with whom PDN has a secured offtake arrangement. If successful, the restructure will be highly dilutive to existing shareholders, but positive, as the debt commitments will be pushed out and the Company will retain 75% of LHM. Argonaut assumes the successful restructure of the balance sheet and derives a pro-forma valuation of $0.08/sh (previously $0.20). We estimate pro-forma 7.7b shares on issue, before an anticipated 10 for 1 share consolidation. Argonaut downgrades PDN to a HOLD from SPEC BUY as the stock is trading in line with our revised valuation.
Saracen Mineral Holdings (SAR) | On track for 300koz pa in FY17 | HOLD
Market Cap $892 | Current Price $1.14 | Price Target $1.12
Saracen Mineral Holdings (SAR) release a preview for the December Q with group gold production of 66.2koz, up 8% Q-on-Q and broadly in line with Argonaut’s forecast of 65koz. Carosue Dam produced 37.7 and Thunderbox produced 28.5koz, up 10% and 4% respectively. With annualised production of 265kozpa, SAR is on track to exit FY17 at its target 300kozpa run rate. Argonaut maintains a HOLD recommendation with a $1.12 target price.
Recent Contacts & Presentations:
Emmerson Resources Ltd (ERM), Syntonic Ltd (SYT), MZI Resources Ltd (MZI), Resolute Mining Ltd (RSG), Capricorn Metals Ltd (CMM), Eve Investments Ltd (EVE), Australian Mines Ltd (AUZ), Heron Resources Ltd (HRR), St George Mining Ltd (SGQ), Threat Protect Australia Ltd (TPS), Paringa Resources Ltd (PNL), The Gruden Group Ltd (GGL), Primary Gold Ltd (PGO), Vault Intelligence Ltd (VLT), Botanix Pharmaceuticals Ltd (BOT) Orthocell Ltd (OCC), Strandline Resources Ltd (STA) Dragontail Systems Ltd (DTS), ABM Resources Ltd (ABU), Acacia Coal Ltd (AJC), Troy Resources Ltd (TRY), Hazer Group Ltd (HZR), Berkeley Energia Ltd (BKY), Sino Gas & Energy Holdings Ltd (SEH)
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