Market Update & Important Indicators
The S&P 500 touched an intraday record Monday, topping levels last visited more than a year ago in a reflection of investors' bets that the U.S. economy remains a pocket of solidity in a troubled world. A better-than-expected jobs report Friday was the latest boost to the S&P 500, which has gained more than 16% since falling to a yearly low in February. Stocks have been bolstered by signs of strength in the U.S. economy, a recovery in oil prices and the Federal Reserve's cautious stance toward raising interest rates. At the same time, central banks are continuing extraordinary efforts to promote growth and inflation that have helped send government bond yields to historic lows.
Japanese stocks on Monday posted the biggest daily gain in more than four months, erasing last week's losses triggered by Brexit fears. Japan's Nikkei Stock Average ended up 4% amid rising hopes for a fresh fiscal stimulus package that would lift the world's third-largest economy. The move was the best one-day gain for Japanese stocks since March 2, when the benchmark rose 4.1%. Elsewhere in the region, Korea's Kospi rose 1.3%, Hong Kong's Hang Seng Index gained 1.6% and China's Shanghai Composite Index edged up 0.2%. Shares in Japan rose after Prime Minister Shinzo Abe's ruling coalition, led by his Liberal Democratic Party, on Sunday increased its control of the upper house. Meanwhile, Chinese stocks rose, led by materials and mining shares, despite the yuan staying near last Thursday's five-and-a-half-year low against the U.S. dollar. The divergence is a contrast to last August, when stocks around the world plunged after Chinese authorities weakened the yuan.
Broad gains drove the strongest jump by Australia's stock market in two months, putting it back in positive territory for 2016. On the heels of a lackluster week for local stocks amid the uncertainty of a close-run federal election and the fallout from Britain's vote to exit the European Union, the market took its lead Monday from a solid finish to last week for U.S. stocks on the back of refreshed confidence in the state of the American job market. Although vote counting continued and the shape of the new government remained unclear, Prime Minister Malcolm Turnbull on Sunday declared victory a week after ballots were cast. The S&P/ASX 200 climbed 106.6 points, or 2%, to finish at 5337.1, led by a 2.9% rise in the materials subindex and 2.5% gain in the basket of financials stocks.
Copper closed higher Monday on rising expectations of government stimulus from China, the world's top consumer. The London Metal Exchange's three-month copper contract closed up 0.8% at $4,750/t the PM kerb close. Other base metals were mixed. Aluminium was down 0.8% at $1,654/t, zinc was down 0.1% at $2,136/t, nickel was up 1.7% at $10,005/t, and lead was up 0.2% at $1,814/t.
In this Issue
Metro Mining (MMI) | Strategic cornerstone investment| SPEC BUY
Market cap $38m | Current price $0.09 | Valuation $0.26
Metro Mining (MMI) has received a strategic cornerstone investment from private equity group Greenstone Resources. Greenstone will invest $8.9m for a 19.9% stake. The investment is priced at 8.5¢/sh, a 27% premium to MMI’s last closing price. Greenstone has indicated willingness for a follow-on investment of up to US$20m to support the financing of Bauxite Hills. In 2016 MMI has achieved key milestones having secured Native Title and Land Access, delivered a Revised Positive Feasibility Study with expanded production, attained a transhipment contract, submitted its Environmental Impact Statement (EIS), and acquired a strategic 22% stake in its neighbour Gulf Alumina.
Independence Group (IGO) | Soft June Q – buoyed by nickel tailwinds | HOLD
Market cap $2,146m | Current Price $4.12 | Valuation $3.60
Independence Group (IGO) previewed June Q and FY16 production. All three assets were below Argonaut’s June Q expectations with 28.7koz gold at Tropicana (IGO 30% attributable basis), 8.9kt zinc and 3.2kt copper at Jaguar and 2.0kt nickel at Long versus our forecasts of 32koz gold, 9.7kt zinc, 2.2kt copper and 2.3kt nickel. Tropicana and Jaguar both achieved production guidance, while Long just missed the lower end of the 8.5-9.0ktpa nickel in ore range. Copper output at Jaguar staged a strong comeback to beat guidance after head grades increased 132% Q-on-Q to 2.9%. Mining at Long was impacted by paste fill issues in April. Costs and net cash were not reported.
GR Engineering (GNG) | Opportunity knocks | BUY
Market Cap $187m | Current Price $1.225 | Valuation $1.250
GNG has won a $36m EPC contract with Auctus Resources. It commences immediately, helping bridge a gap until a large opportunity pipeline is potentially converted in 2017. This work is yet to be won but in our view GNG is well positioned. The Company has been a standout performer in the EPC space in recent times and could surprise to the upside over the next couple of years. Buy call maintained.
Recent Contacts & Presentations
Venturex (VXR), Dacian Gold (DCN), Cudeco (CDU), Resolute Mining (RSG), Echo Resources (EAR), Altech Chemicals (ATC), TFS Corporation Limited (TFC), Noxopharm (NOX), OBJ Limited (OBJ), Kibaran (KNL), Department 13 (D13), Peak Resources (PEK), Fortescue Metals (FMG), Paradigm Biopharma (PAR), Botanix (BOT), Peel Mining (PEX), Ausgold Limited (AUC)