Market Update & Important Indicators:
U.S. stocks fell as disappointing earnings results dampened investor hopes for a rebound in corporate performance. A pair of companies led declines after announcing weaker-than-expected results. Companies in the S&P 500 are expected to report an earnings decline for the sixth consecutive quarter, according to analysts polled by FactSet. "We're hoping to see improvement this earnings season. It's not where you want to start," said Jeff Carbone, co-founder of Cornerstone Financial Partners.
European stocks ended in the red, but luxury shares were solidly higher. The Stoxx Europe 600 ended down by 0.5% at 340.17, the fourth loss in five sessions. All but the consumer goods sector slumped. Oil shares lost the most ground, with oil prices falling further after the International Energy Agency said OPEC boosted its output to a record 33.64 million barrels a day in September. On Monday, crude-oil futures leapt to their highest in more than a year after Russian President Vladimir Putin and Saudi Arabia's energy minister made upbeat comments on the possibility of an oil production deal.
Asian markets were mixed Tuesday, weighed down by the prospect of rising U.S. interest rates and a debt-for-equity swap in China that could hit bank profits. Earlier in the day, rising crude oil prices and weaker local currencies helped boost Asian share markets. But by the end of Asian trading, the picture had changed. Hong Kong's Hang Seng Index reversed early gains to close 1.4% lower. The Nikkei Stock Average closed up 1% led by exporters that benefited from a weaker yen, and the Shanghai Composite Index ended up 0.6%, building on Monday's 1.5% rise, as Chinese investors returned from a week-long national holiday. China's domestic shares extended their rally Tuesday over hope that a debt-for-equity swap–announced Monday by China's cabinet–would address the country's mounting bad corporate debt. Property stocks also hit the Hang Seng Index, with the property subindex down 2.8%, after a string of Chinese cities announced new housing purchase restrictions to cool the overheated property market.
An overnight jump in oil prices led to a surge in energy stocks which helped Australia's equities market to post a modest gain Tuesday, even as bank shares faded. It was a second straight modest advance for the S&P/ASX 200, which finished up 4.4 points, or 0.1%, at 5479.8. The energy sector rallied 2.3%, while the basket of materials stocks was up 0.9%. Dragging on the market, the major banks edged lower following gains over the past three sessions. Oil prices remained supported in Asian trade by news that Russia was prepared to support international efforts to limit output, raising hopes for coordinated action to curb the global supply glut. The Organization of the Petroleum Exporting Countries last month reached a tentative agreement in Algiers to cut output to between 32.5 million and 33 million barrels a day. Further details are set to be discussed at the cartel's meeting in Vienna in November.
On the London Metal Exchange, copper for delivery in three months was down 0.75% at $4,812/t. Other base metals were mainly down overnight. Aluminium was down 0.7% at $1,676/t, zinc was down 3.4% $2,235/t, lead was down 2.6% at $2,032/t, tin was down 1.5% at $19,879/t and nickel was down 0.9% at $10,379/t.
In this Issue:
Saracen Mineral Holdings (SAR) | Thunder rolling in | HOLD
Market Cap $992m | Current Price $1.23 | Target Price $1.12
Saracen Mineral Holdings (SAR) has previewed September Q results with 61.5koz gold production, below Argonaut’s forecast of 65koz. This was split by 34.1koz at Carosue Dam and 27.3koz at Thunderbox. Thunderbox continues to ramp-up, reaching a production rate of ~140kozpa for the month of September (vs FY18 forecast production of 130koz). SAR’s aggressive exploration campaign kicked off, with $8.5m during the Q (vs a total FY17 budget of $42m). At September 30, SAR had $42.5m cash and bullion and negligible debt (vs $40.3m at June 30). Argonaut increases its valuation to $1.12 and upgrades SAR to a HOLD (previously SELL at $0.96).
Dacian Gold (DCN) | Doors opening to the corridors | BUY
Market Cap $449m | Current Price $3.34 | Target Price $4.00
Dacian Gold (DCN) released exploration results from regional Jupiter targets and the Callisto prospect. At Jupiter, regional aircore drilling of magnetic anomalies along the Corridor A and B trends returned intercepts of 4m @ 3.0g/t and 8m @ 2.2g/t. At the Europa prospect, directly east of Jupiter, diamond drilling intercepted 4.5m @ 6.7g/t. While no significant mineralisation was intercepted from Callisto drilling, a large alteration zone and the presence of sulphides bodes well for a deeper gold-bearing system. DCN is set to maintain a high impact drill program whilst completing the Mt Morgans Definitive Feasibility Study (DFS), which is due for release in the current quarter. BUY maintained.
Salt Lake Potash (SO4) | Re-initiation | SPEC BUY
Market Cap $56m | Current Price $0.42
SO4 is progressing a Pre-Feasibility Study (PFS) following encouraging Scoping Study (SS) results for the Lake Wells Sulphate of Potash (SOP) Project. Organic production of SOP from brines is highly appealing given strongly growing global demand for this speciality fertiliser, and low costs. It could become a significant new industry in Australia and, with promising SS opex and capex numbers, we re-initiate (new analyst) with a Spec Buy call.
Recent Contacts & Presentations:
Antipa Minerals Ltd (AZY), Vault Intelligence Ltd (VLT), Noxopharm Ltd (NOX), Gage Roads Brewing Co. (GRB), West African Resources (WAF), Cedar Woods Properties Ltd (CWP), Sino Gas & Energy Holdings Ltd (SEH), Salt Lake Potash Ltd (SO4), Kalina Power Ltd (KPO), Austal Limited (ASB), Agrimin Ltd (AMN), Stavely Minerals Ltd (SVY), MGC Pharmaceuticals Ltd (MXC), Vital Metals Ltd (VML), Tox Free Solutions Ltd (TOX), Swick Mining Services Ltd (SWK), Davenport Resources Ltd (DAV), Orthocell Ltd (OCC), BC Iron Limited (BCI), ALT Resources Ltd (ARS), Gascoyne Resources Ltd (GCY), Dacian Gold (DCN)
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