Market Update & Important Indicators
U.S. stocks rose Tuesday, extending a rally that propelled the S&P 500 to its biggest three-day advance of the year. After several weeks of world news dominating trading in U.S. markets, corporate earnings started to play a slightly bigger role on Tuesday. Earnings for S&P 500 companies are forecast to slip 4.5% in the second quarter, according to FactSet. That would mark the first fall since the third quarter of 2012. Investors Tuesday also digested retail sales, which unexpectedly fell 0.3% in June from the prior month, the Commerce Department said.European stocks climbed Tuesday, extending gains into a fifth consecutive session. A stocks rally that began late last week on anticipation of a Greek bailout deal has continued after European leaders announced they had hammered out an agreement with Athens on Monday. The pace of gains in Europe slowed Tuesday after a sharp rally during the previous session, as investors waited to see whether the Greek government would be able to push through stringent austerity measures necessary to secure a fresh bailout from international creditors.
A rebound in China fizzled Tuesday amid worries that Beijing would slow its market rescue to stem stock selling, while the rest of the region gained after Greece secured a bailout deal. In Hong Kong, shares likewise snapped a three-day streak of gains with the Hang Seng Index down 0.4% and a gauge of Chinese companies listed on the city's stock exchange down 1.2%. A measure of Hong Kong-listed energy stocks fell 1.7% after Iran and six world powers reached a deal that aims prevent Iran from producing nuclear weapons in exchange for relief from sanctions. The agreement could lead to higher oil exports from the country to an already oversupplied global oil market.
Copper futures closed lower on the London Metal Exchange on Tuesday, as a slightly firmer dollar pressured prices. Other base metals on the LME followed suit. Gold is steady, trading at $1,156/oz. The AUD is buying US$0.745
In This Issue
Sandfire Resources (SFR) | BUY
Sandfire Resources (SFR) has intercepted more massive sulphides at the Monty Prospect in hole TLDD0005 (hole 5). The hole intercepted 9.2m containing visible chalcopyrite from 426m, similar to that observed in hole TLDD0004A (hole 4A) which returned 16.5m @ 19.8% Cu and 2.1g/t Au. Although the true width of the mineralisation is yet to be determined, stratigraphic dip on the core indicates that the mineralisation in hole 4A may be ~7m thick. While it appears as though mineralisation is thinning towards hole 5, Argonaut estimates that there could already be 250kt of ore between the two intercepts (with mineralisation still open). We also estimate $30-40m capex would be required for underground infrastructure to the top of the intercepted mineralisation and a haul road to the existing DeGrussa plant 10km away.
Resolute (RSG) | SPEC BUY
Resolute Mining’s (RSG) hidden assets, including an estimated ~5-6Mt stockpile @ ~2g/t (~2.5-3.0 years of feed) and ~25koz excess gold in circuit, appear to be under-appreciated by the market. These assets will ensure the delivery of strong cash flow in coming Qs (June Q FCF ~A$29m), given the associated mining costs have already been spent. Based on Argonaut’s projection and assumptions, monetising these assets (see below) over a longer period of time will allow the Company to build up sufficient cash to service its debt repayment requirement in CY16 and be in a position to fund the Syama Underground Project (Argonaut assuming a modest A$50m facility). The stock offers significant leverage to the gold price with scalable, unhedged production and long life assets. Longer term, RSG can become a serious contender in the ~400koz pa gold space, underpinned by production from Syama and Bibiani. Argonaut increases its valuation to A$0.45 (was A$0.40) and upgrades the stock to a SPECULATIVE BUY (was HOLD).
Pacifico (PMY) | SPEC BUY
Pacifico Minerals (PMY) intersected copper mineralisation (assay pending, see below) at its Borroloola West Project in the Northern Territory (earning 80% from Sandfire Resources, SFR). The program tested a sparsely drilled target, confirming the geological model. Although early stage, this target could have scale given a strike length of ~1.0km. Importantly, a “bullseye” EM anomaly, located ~2.5km SE of this prospect remains untested and will likely be followed up as a priority target in the next program. PMY has also completed a significant amount of soil and underground channel sampling at its Berrio project in Colombia, targeting a prospective contact. Following a deal with AngloGold in early CY15, PMY’s tenement package now covers a ~14km strike length (6.2km mapped, 7.8km projected) of the contact. A potential reconnaissance drilling program could commence in H2 CY15. SPEC BUY maintained.
Recent Contacts & Presentations
Resolute (RSG), Rift Valley (RVY), Pacifico (PMY), Kingsgate (KCN), Troy (TRY), Tox Free Solutions (TOX), GR Engineering (GNG), Austal (ASB), Northern Star (NST), Sandfire (SFR), Regis (RRL), Orbital (OEC), Alexium (AJX), Rewardle (RXH), Saracen (SAR), Sino Gas & Energy (SEH), Dacian (DCN), Buru Energy (BRU), Carnarvon Energy (CVN), Otto Energy (OEL), Empire Oil & Gas (EGO), Pura Vida Energy NL (PVD), High Peak Royalties (HPR), Carnarvon Petroleum (CVR)