Market Update & Important Indicators:
U.S. stocks declined intraday as a round of lukewarm corporate earnings reports and renewed trade tensions weighed on sentiment. The Dow Jones Industrial Average fell 96 points, or 0.4%, to 25104. The S&P 500 shed 0.2%, and the technology-heavy Nasdaq Composite dropped 0.2%. The S&P's financial sector was the weakest of the 11 sectors in the broad index, falling 1.2%. Shares of big U.S. banks had risen over much of the past week after the firms posted results that generally beat market expectations. But reports from American Express, Bank of New York Mellon and Travelers weren't received as favourably. American Express fell 2.8%, despite reporting strong card-member spending and loan growth. Bank of New York slumped 5.7% after posting weaker-than-expected revenue, and Travelers dropped 3.5% as weather-related catastrophes dented its bottom line. Shares of Wells Fargo, meanwhile, were little changed after The Wall Street Journal reported the bank is in the process of refunding tens of millions of dollars in charges added to customers' accounts without their full understanding. The US gold price was down 0.4% at 1222.3 US$/oz.
The Stoxx Europe 600 index closed down 0.2% at 386.18, pulled lower by a fall on Wall Street, with analysts noting simmering trade tensions between the U.S. and the EU. U.S. President Donald Trump said the EU's $5 billion antitrust fine on Google is evidence that the bloc has "taken advantage of the U.S.," while the EU has threatened to retaliate against U.S. plans for tariffs on EU car exports. Germany's DAX index and France's CAC 40 both ended 0.6% lower, while Italy's FTSE MIB and Spain's IBEX 35 ended down 0.4% and 0.3% lower, respectively. The U.K.'s FTSE 100 index outperformed, however, ending up 0.1% following a sharp fall in the pound after weak U.K. retail sales data.
On Wednesday, a few Asian stock markets faded in the afternoon to finish lower. There were more of them in the next session as early strength again failed to last. New inclusions were Japan — ending a four-day winning streak — and Taiwan. Meanwhile, the Shanghai Composite logged a fifth-straight drop as Chinese equities logged some of the region's biggest declines, especially small caps. But Southeast Asia again was resolute, with gains absent the 0.85% drop in the just-closed Philippines. The Shanghai Composite dropped 0.5%, Hong Kong's Hang Seng was down 0.4% and Japan's Nikkei fell 0.1%.
Unlike other Asia Pacific stock markets which faded in the afternoon, Australia didn't. Logging a second-straight gain, the S&P/ASX 200 advanced 0.3% to 6262.7 as mining-services firm Cimic surged 17% following its latest results. Meanwhile, the major banks logged a third-consecutive advance. But the energy sector was capped by a 0.9% fall in Woodside and a 0.5% drop in Oil Search following its second quarter production reports the past day-plus. Metals firm South32, though, climbed 2% to outpace other materials stocks on record production by its Australian manganese operations.
Base metal prices were mostly down on the London Metal Exchange. Aluminium declined 0.6% to 2,042/t, as the 3-month copper contract lost 1.4% to 6,040/t. Zinc was 1.5% lower to close at 2,592/t. Larger falls were recorded in lead that lost 2.5% to end at 2,097/t, and nickel retreating 2% to 13,249/t.
In this issue:
OZ Minerals (OZL) | June Q Results | BUY
Market Cap $2,901 | Current Price $9.33 | Target Price $9.60
OZ Minerals (OZL) reported June Q production results of 27.1kt Cu and 28.1kt Au below Argonaut’s forecast of 30kt Cu and 38kt Au. During the period, Prominent Hill made the transition from open pit mining to stockpile reclamation resulting in a significant decrease in AISC from US$1.36/lb to US$1.17/lb. OZL’s balance sheet remains strong with $454m cash (vs $646m at March 30) after $78m investment into Carrapateena development, $201m cash payment for the Avanco Resources (AVB) acquisition and a $100m tax expense. The AVB takeover is all-but complete with OZL controlling 97.7% of outstanding shares at June 30. BUY recommendation maintained.
Evolution Mining | Strong finish but capex headwinds await… | HOLD
Market Cap $5,332m | Current Price $3.01 | Target Price $3.03
Evolution Mining (EVN) delivered March Q production of 202koz (+6% vs March Q 191koz) above Argonaut’s estimates of 193koz. All-in sustaining costs (AISC) of A$846/oz were 10% higher QoQ (A$768/oz in March Q). Standout performance came from the Ernest Henry (EH) asset with 24koz at a record low AISC of negative -$823/oz (including by-product credits) and generating net mine cash-flow of A$59.4m for the Q. Group operating mine cash-flow of $221m (+26% vs Mar Q $175m) and net mine cash flow of $136m (+22% vs March Q $111.4m) were higher than Argonauts forecasts as a combination of record-low costs at EH and improved production. FY18 production of 801koz came in at the upper end of 790-805koz guidance (vs Argonaut 794koz), however operating mine cash flow came in at $812m, well above our forecast as a result of significantly lower AISC which saw the full year come in at A$797/oz, -6% lower than Argonaut forecasts and well below the FY18 A$820-870/oz guidance.The stock remains in line with our valuation. HOLD recommendation maintained.
Recent Contacts & Presentations:
Bowen Coking Coal (BCB), Birimian (BGS), Breaker Resources (BRB), Galena Mining (G1A), Valmec (VMX),Bryah Resources (BYH), Calima Energy (CE1) Genesis Minerals (GMD), Agrimin (AMN), Magnetic Resources (MAU), Core Exploration (CXO), Marindi Metals (MZN), MOD Resources (MOD), Santos (STO), Adriatic Metals (ADT) Bio–Gene Technology (BGT), Walkabout Resources (WKT), Triton Minerals (TON), Calima Energy (CE1), Peel Mining (PEX), Catalyst Metals (CYL), Vault Intelligence (VLT), Doray Minerals (DRM), Nzuri Coppoer (NZC), Bowen Coking Coal (BCB), Phosphagenics Limited (POH) Great Boulder Resources (GBR), Orthocell (OCC), Northern Minerals (NTU), ABM Resources Ltd (ABU), Vital Metals Ltd (VML), Todd River Resources Ltd (TRT), Pacific Energy Ltd (PEA), Carnarvon Petroleum Ltd (CVN), Australian Mines Ltd (AUZ), Australian Finance Group (AFG), Paladin Energy Ltd (PDN), Cooper Energy Ltd (COE), Medibio Ltd (MEB), Botanix Pharmaceuticals Ltd (BOT), Salt Lake Potash Ltd (SO4), Golden Mile Resources Ltd (G88), NTM Gold Ltd (NTM), Ausmex Mining Group Ltd (AMG), Matrix C&E Ltd (MCE), Austal Ltd (ASB), Decmil Group Ltd (DCG), Ventnor Resources Ltd, Ausdrill Ltd (ASL), Alice Queen Ltd (AQX), PNX Metals Ltd (PNX), Alliance Resources Ltd (AGS), Myanmar Metals Ltd (MYL), Primary Gold Ltd (PGO), Sino Gas & Energy Holdings Ltd (SHE)