Market Update & Important Indicators
U.S. stocks held their gains Wednesday after the Federal Reserve kept its benchmark lending rate steady and officials forecast fewer short-term interest rate increases in 2017 and 2018. The widely expected decision suggests the gains notched by stocks that pay out high dividends are likely to continue, while shares of financial institutions that could benefit from higher interest rates are likely to remain under pressure. Shares of utilities companies, which are the best performers in the S&P 500 in 2016, slipped 0.4%. Over the past week the sector is one of only two positive ones in the index, rising 0.6%. In the past week, the KBW Nasdaq Bank Index has fallen more than 5%, even as it rebounded 1.1% on Wednesday. Officials still project short-term interest rates will rise 0.5 percentage point by the end of 2016, yet forecasts imply Fed officials see their benchmark federal-funds rate rising more slowly in the years ahead.
The main benchmarks of Shanghai and Shenzhen finished higher, as local fund managers shrugged off MSCI Inc.'s decision not to include mainland shares in its widely tracked indexes. The Shanghai Composite Index jumped 1.6% to 2887.21, while the smaller Shenzhen Composite Index soared 3.1% to 1889.87. Over in Hong Kong, the Hang Seng Index had a choppy morning but managed to eke out a 0.3% gain. In Japan, the Nikkei Stock Average closed up 0.4% but investors continued to rush to haven assets, pushing Japanese government bond yields to fresh record lows. MSCI announced before Asian markets opened Wednesday that it would for a third time withhold mainland China A shares from its benchmarks, including the widely tracked MSCI Emerging Markets Index. About $1.5 trillion in assets follow this index, according to MSCI, and with some of that being from passively-managed funds.
Australian shares ended lower for the fifth straight session as fears that Britain might leave the European Union continued to weigh on investor appetite for equities. The S&P/ASX 200 ended the day down 56.2 points, or 1.1%, at 5147.1 points, Wednesday, its lowest close since April 18. Most industry subindexes ended in the red, with the materials sector down 1.4% and energy stocks 0.7% lower after oil prices continued their slide and iron-ore prices fell.
Copper futures closed much higher in London Wednesday, as the dollar weakened ahead of a decision on U.S. rates by the Federal Reserve and encouraged demand. The London Metal Exchange's three-month copper contract was up 2.5% at $4,636 a ton the PM kerb close, having hit a one-week high earlier in the session at $4,690 a ton. Most of the other base metals ended the day higher. Aluminium closed up 0.5% at $1,614 a ton, zinc was 1% higher at $2,027 a ton, nickel was up 1.8% at $8,997 a ton, and lead was up 0.8% at $1,689.
Thought of the Day:
Eyes on exploration
Open season on high impact targets
As the dry season sets in in northern Australia, a number of drilling rigs have been mobilised by ASX listed juniors and mid-caps. Argonaut highlights a number of high impact drilling campaigns either underway or due to commence shortly. In the case of Minotaur Exploration (MEP) and ABM Resources (ABU), drilling is being funded by mid cap partners farming into their projects. Marindi Metals (MZN) is currently undertaking its second drilling campaign at the Pilbara Base Metals project. Of key interest to Argonaut will be the oncoming hole to test the Titan prospect.
Buzz around Bumblebee: Independence Group (IGO: BUY, target price $3.30) has drill rigs on the ground ready to drill the Bumblebee prospect, part of the Lake Mackay project in the Norther Territory. IGO is earning 70% interest from ABU by making a $1m cash payment to ABU or subscribing for ABU shares to the value of $1.5 and sole funding an additional $6 million of exploration on the joint venture (JV). A 1,200m RC/diamond program is planned at Bumblebee to test a strong EM anomaly coincident with a geochemical anomaly and high grade polymetallic air-core intercepts (best intercept 7m 3.3g/t Au, 37.7g/t Ag, 3.2% Cu, 0.9% Pd, 1.3% Zn from 30m). Downhole electromagnetic (DHEM) surveys will be conducted on an ongoing basis to assist mineralisation vectoring.
Figure 1. Planned drilling at Bumblebee
OZ exploring with a bulls head:
OZ Minerals (OZL: HOLD, $5.15 target price) has entered into a JV on MEP’s Eloise project near Cloncurry, Queensland. OZL has an option to spend up to $10m over six years to earn 70% of the project. MEP will remain project manager. A drilling program is underway to test strong induced polarisation (IP) targets at the Bullwinkle and Olympus prospects. Bullwinkle looks to be an extension of the Artemis massive sulphide Cu/Au/Zn system and Olympus has coincident elevated Cu from overlying gossanous rock chips (up to 7% Cu).
Figure 2. Regional map of the Eloise project
The first hole into the Bullwinkle prospect is well underway with target depth expected to be reached later this week or next. OZL have shown uncharacteristic interest in this early stage exploration, and anecdotally, OZL CEO Andrew Cole has described it as some of the best geophysical targets he has seen for some time.
Figure 3. Planned hole at the Bullwinkle prospect showing the coincident IP anomaly
Figure 4. Planned hole at the Olympus prospect showing the coincident IP anomaly
Bullseye target for Marindi:
Marindi Metals (MZN) is preparing to drill the Titan prospect at the company’s 100% owned Pilbara Base Metals project in Western Australia. The greater project area is based around the crustal Prairie Downs fault which shows evidence of pervasive base metal rich fluid injection and currently hosts the Prairie Downs resource (3Mt @ 5% Zn, 2% Pb and 15g/t Ag). MZN recently announced that diamond hole PDD 447 into the Wolf prospect intercepted a 145m wide zone of Zn chlorite (baileychlore) with minor sulphides near the base of the hole.
Figure 5. MZN’s Pilbara Base Metals Project
An IP target was drilled at Titan in early-2015, and while no economics intercepts were recorded, it did show elevated base metals near surface. Recent interpretation of a historic gravity survey has shown an adjacent gravity anomaly, the tenor of which, indicates the likely presence of iron and/or metal sulphides. Argonaut understands MZN will commence several traverses of RC holes up to 250m depth to test the target, starting within a week.
Figure 6. Titan prospect showing the recently drilled diamond hole (PDP145) into a strong IP target and the proximal unexplained gravity anomaly
Recent Contacts & Presentations
Navitas (NVT), Gage Roads (GRB), Bionomics (BNO), Invigor Group (IVO), Marindi (MZN), Cardinal Resources (CDV), Galaxy Resources (GXY), Cooper Energy Limited (COE), Evolution Mining (EVN), LWP Technologies (LWP), Walkabout Resources (WKT), Minotaur Exploration (MEP)