Market Update & Important Indicators
China's devaluation of its currency jolted U.S. stocks Tuesday. The Dow Jones Industrial Average erased the previous session's gains. The Nasdaq Composite and S&P 500 also fell. Shares of miner Freeport McMoRan lost 13.3% to $10.10, while Alcoa shares dropped 6.2%, trading at $9.46. Caterpillar fell 3.2% to $77.61. Shares of Apple dropped 5.2% to $113.44. China is a major market for Apple products. Shares of companies that export to China, including luxury-goods firms, car makers and mining companies, came under the most intense pressure.
The pan-European Stoxx Europe 600 index closed 1.6% lower. In Europe, shares in LVMH Mot Hennessy Louis Vuitton SE fell 5.4% and Gucci owner Kering SA was 3.9% lower. Car maker BMW AG lost 4.3% and Daimler AG fell 5.2%, dragging Germany's export-heavy DAX index to a 2.7% decline.
Stock markets across Asia fell, after China's central bank devalued its tightly controlled currency. Losses in the currency market knocked down stocks across most of the region, though China's main market ended flat. Indonesia's JSX tumbled 2.7%, Taiwan's Taiex fell 0.9% and South Korea's Kospi fell 0.8%. The Nikkei Stock Average closed 0.4% lower. The Hang Seng Index in Hong Kong edged up 0.1%, while the Shanghai Composite Index finished at 3927.91 after wavering between gains and losses earlier in the day. The latter market has continued to stabilize from its massive selloff from mid-June.
LME metals closed at multi-year lows in London, as the surprise devaluation of the yuan by the People's Bank of China reaffirmed fears about the country's economy while making metals more expensive for the world's biggest consumer of metals. Gold advanced to $1,109/oz. The AUD is buying US$0.73.
In This Issue
Gold Road | SPEC BUY
A deep diamond hole successfully intersected the Gruyere porphyry ~1,100m below surface. Although grade and width are not known at this stage, the porphyry appears mineralised and is visually similar to typical Gruyere mineralisation. First assays are expected in September, which could demonstrate potential endowment well in excess of the 5.5Moz defined to date.
Northern Star | HOLD
Northern Star (NST) delivered a Resource / Reserve update that exceeded Argonaut’s expectation. A successful FY15 exploration program has expanded Group Reserves to 1.5Moz (was 1.2Moz at 30th June 2014) after depletion of ~622koz (mined). In FY16, Argonaut’s assessment demonstrates a high probability for NST to replenish or add Reserves. Given conducive geology and dedicated exploration budgets, key contributors will likely be Central Tanami and Kalgoorlie. Drill testing of large conceptual targets at Jundee is expected to commence in earnest in FY17, and a significant discovery would materially improve Argonaut’s view on the stock. Our recent site visit to the Paulsens and Kundana mines confirmed lean and efficient operations. Compared to our site visit in March, the Kundana operation appears to have been better integrated. Despite having already achieved industry leading costs, Argonaut was impressive by NST’s continued drive for operational improvement and cost reductions. The Company’s FY16 guidance of 535-570koz @ AISC A$1,050-1,100/oz was in-line with Argonaut’s previous estimate of 565koz @ A$1,136/oz.
Paladin Energy (PDN) | SPEC BUY
John Borshoff, founder, MD and CEO of Paladin Energy (PDN), has agreed to step down from his role. With almost 22 years at the helm he drove the development two mines during the uranium reconnaissance of 2006-2011, which was halted by the Japanese Fukushima incident. Post-Fukushima, Mr Borshoff was criticised for maintaining an over-bullish standpoint on a uranium price recovery. Investment banker and Resource executive Alexander Molyneux has been appointed interim CEO. Spec Buy maintained with a revised target price of $0.35 (previously $0.45).
Recent Contacts & Presentations
Evolution (EVN), Austal (ASB), Resolute (RSG), Pacifico (PMY), Kingsgate (KCN), 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), Pura Vida Energy NL (PVD), High Peak Royalties (HPR), Karoon Gas (KAR), Austex Oil (AOK), Central Petroleum (CTP), Senex Energy (SXY), Newmont, Coventry (CYY)