Market Update & Important Indicators
U.S. stocks finished flat on Tuesday, as the continued slide in oil prices fuelled investor concerns about global economic growth. Investors say the months-long decline raises worries about demand, since it comes alongside slowing growth in Asia and economic troubles in Europe. While lower oil prices are expected to help some consumer-focused shares, stocks of retailers fell sharply on Tuesday. Investors are closely watching fourth-quarter earnings reports to determine the implications of falling oil prices and sluggish international demand. The dollar traded at its highest level against the Canadian dollar since April 2009, as investors bet that the Bank of Canada would lower its expectations for economic growth as falling crude oil prices have hamstrung the country's energy sector.European shares hit fresh multiyear highs Tuesday, buoyed by expectations that the European Central Bank will this week venture into uncharted territory by launching a stimulus program aimed at spurring Europe's ailing economy back to health. The Stoxx Europe 600 ended the day up 0.8%–having earlier in the session hit a seven-year high–while London's FTSE 100 and France's CAC 40 added 0.5% and 1.2%, respectively. Germany's DAX 30 in early trade came close to eclipsing its all-time high scored Monday, but later erased some of those gains after figures from the country's ZEW institute showed that business sentiment in January rose more than expected.
China's Shanghai Composite Index rose 1.8% to 3173.05 on Tuesday, bouncing back from a sharp drop the previous day even as the country reported its weakest economic growth since 1990. Hong Kong's Hang Seng Index also closed higher Tuesday, up 0.9% at 23951.16 after the National Bureau of Statistics said China's economy grew 7.4% last year and 7.3% in the fourth quarter. Beijing targeted 7.5% growth for last year. Elsewhere in Asia, the Nikkei Stock Average rose 2.1% as the U.S. dollar traded at Yen118.23, from Yen117.81 late in Asia on Monday. A stronger dollar bodes well for Japanese exporters repatriating U.S. dollar revenue.
Base metals finished stronger overnight, with Lead up 2.7% and Nickle up 2.1%. Gold gained 1.1% to $1,294/oz and Brent crude closed at US$48.14/bbl.
In This Issue
Gold Road (GOR)
Gold Road (GOR) delivered an impressive 781m @ 1.3g/t from 22m intersection from the ongoing drilling campaign at Gruyere. The 3.8Moz deposit has the potential to be the next major gold development in Australia. Its potential scale (~200koz pa), geometry (~2:1 strip), long life (>10 years), and favourable metallurgical properties (>90%, including ~50% from gravity) combined with a low sovereign risk jurisdiction, will ensure the asset attracts market and corporate attention. A Scoping Study is anticipated imminently (scheduled for the March Q). The Company is well cashed up and catalyst rich, with a plethora of regional targets being tested in CY15.
Resolute Mining (RSG)
Resolute (RSG) delivered 70.5koz @ AISC A$1,150/oz, v Argonaut forecast of 72koz @ AISC A$1,220/oz. Normalised FCF is estimated at ~A$8m. Production guidance of 315koz was maintained and cost guidance was reduced to A$1,125/oz (was A$1,280/oz). The recent announcement to reduce waste stripping will result in an immediate saving of ~A$50m pa. However, medium term, the stock’s capex appears relatively onerous. Whilst acknowledging the Company’s relatively high production costs, longer term, Argonaut sees RSG as a serious contender in the ~400koz pa gold space, with a sizable production base underpinned by Syama and Bibiani.
Sirius Resources (SIR)
Sirius Resources (SIR) has announced a significant gold discovery at the Baloo prospect, in the north of the Polar Bear project. First pass air core drilling has intercepted long, wide spaced intervals with numerous high grade zones including 33m @ 3.81g/t. The first pass results highlight a large, in situ mineralised system which is within 10km of Metals X Ltd’s (MLX) Higginsville Gold mine.
Atlas Iron (AGO)
Atlas Iron (AGO) released December Q results with 3.8Mt shipped, up 23% Q-on-Q and above Argonaut’s forecast of 3.2Mt. AGO has managed to cut costs at almost the same pace as the falling iron ore price. Cash outflow remained high ($36m) as the Company reached effective completion on Mt Webber Stage 2. However, cash bleed is all but plugged with Argonaut’s CFR 62% equivalent breakeven price for CY15 down to ~US$68-70/dmt (previous estimate US$73/dmt). This follows further capex reductions and the realisation of lower operating costs due to mining efficiencies and cost out programs. At 31 December AGO had $169m cash and ~$339m debt.
Recent Contacts & Presentations
Northern Star (NST), Doray Minerals (DRM), Troy Resources (TRY), Gold Road Resources (GOR), Saracen Mineral Holdings Limited (SAR), Beadell Resources Limited (BDR), Resolute Mining Limited (RSG), RTG Mining (RTG), MACA Limited (MLD), Alexium International Group Limited (AJX), Decmil Group Limited (ACG), Pacific Energy Limited (PEA), Otto Energy Limited (OEL), Peninsula Energy Limited (PEN), Sandfire Resources NL (SFR), Atrum Coal (ATU)