Market Update & Important Indicators
U.S. stocks rose as a rally in oil prices ignited gains in energy shares. Energy stocks rose the most in the S&P 500, gaining 1.5%. Those shares turned higher along with oil prices after an unexpected and sharp decrease in U.S. distillate stockpiles.
Investors were also looking ahead to the European Central Bank's April meeting on Thursday. While few expect policy makers to announce new moves after the central bank's comprehensive easing package last month, the meeting will be closely watched for any comments on the exchange rate and details of the bank's corporate-sector purchase program. The Stoxx Europe 600 rose 0.4%.
Chinese stocks fell sharply, in a volatile session that sent the country's main benchmark tumbling in the morning before a surge in blue chips led a recovery in the last half hour of trading. Investors in China had been enjoying a period of stability with Shanghai gliding higher starting late January and the Chinese yuan stabilizing. But then came Wednesday's jolt: The Shanghai benchmark took a sudden dive about one hour into trading and by early afternoon was down as much as 4.5%. A late-day rebound in financials wasn't enough to lift the benchmark above 3000, a level considered psychologically important for local traders.
The Nikkei Stock Average closed up 0.2%. Japan shares were up for the second day as worries about the impact from earthquakes last week eased. Stocks in Hong Kong mirrored their mainland counterpart, falling in the morning before a slight lift in the afternoon narrowed the Hang Seng Index's loss to 0.9%.
Australian shares were again buoyed by rising commodity prices. Finishing in the middle of the day's trading range, the S&P/ASX 200 added 27.2 points, or 0.5%, to 5216.0. The index has risen in six of the last seven sessions and is up 2.6% so far this month as it continues to recover from mid-February lows.
Oil Search helped lead the energy sector higher, rising 4.9%, as most analysts reacted positively to record first-quarter production, reported the day before. Santos and Origin Energy added 3.2% and 2.4%, respectively, but Woodside Petroleum fell 1.6% after it reported a 30% slump in first-quarter sales revenue despite a modest rise in production on a year earlier due to weaker oil and gas prices for the period.
The country's three major iron-ore producers were all higher as prices for the steel-making commodity continued to rally, climbing another 3.2% on Tuesday to a six-week high at US$61.80 a metric ton, according to the Steel Index. BHP Billiton rose 3.4% after it reported mixed quarterly production including a fall in shipments of iron ore and said it expected to produce less iron than expected for the fiscal year. Rio Tinto, which a day earlier said its quarterly shipments were sharply lower, gained 4.1% and Fortescue Metals Group added 4.2%
Copper futures closed higher in London, rising in line with oil prices. The London Metal Exchange's three-month copper contract was up 0.9% at $4,981 a metric ton at the PM kerb close, having hit a four-week high earlier in the session at $4,985 a ton. Among the other base metals, aluminum was up 2.2% at $1,617 a ton, zinc was up 0.2% at $1,925 a ton, nickel was up 0.5% at $9,295 a ton, lead was up 0.6% at $1,771 a ton and tin was up 0.3% at $17,240 a ton.
In This Issue
St Barbara (SBM) | Another Q, another upgrade| BUY
Market Cap $1128.8m | Current Price $2.28 | Valuation $2.60
St Barbara (SBM) delivered another better than expected Q, producing 91.6koz (previously announced) @ AISC A$947/oz. The strong results saw the third consecutive production guidance upgrade and costs guidance lowered in FY16. Normalised FCF (adjusted for interest costs and working capital) was A$61m, or ~A$665/oz, which is likely to be one of the highest amongst ASX gold producers. SBM provided an update on the ongoing Materials Handling Study (see below). The low capex (~A$65m) trucking & ventilation option is low risk and can be easily internally funded. BUY maintained. We upgrade our target price to A$2.60 (was A$2.30) factoring in expected production from 1,800m to 2,000 metre below surface (mbs) via trucking and ventilation shafts.
Cradle Resources (CXX) | Positive Definitive Feasibility Study| SPEC BUY
Market Cap $34.4m | Current Price $0.27 | Valuation 0.48
Cradle Resources (CXX) released a Definitive Feasibility Study (DFS) for the Panda Hill Niobium Project in Tanzania (JV: CXX 50%, Tremont Investments 50%) highlighting a 30 year project, generating average EBITDA of US$112mpa, a NPV10 of US$404m and 27% post tax IRR. The JV is progressing offtake and finance agreements with development forecast to commence in late-2016 then commissioning in mid-2018. Niobium, which is primarily used as a hardening and lightening alloy in steel, is a growth commodity with 6% CAGR consumption over the last 10 years. Argonaut believes CXX has high corporate appeal given the limited number of niobium mines and no other development project as advanced as Panda Hill. Argonaut maintains SPEC BUY recommendation with $0.48 price target.
Recent Contacts & Presentations
Red 5 (RED), Medusa Mining (MML), Saracen Mineral Holdings (SAR), Paradigm BioPharmaceuticals (PAR), Pilbara Minerals (PLS), Energia Minerals (EMX), Deep Yellow (DYL), Paladin Energy (PDN), Kidman Resources (KDR), Dakota Minerals (DKO), West Africa Resources (WAF), Finders (FND), Credo Resources (CRQ) , Orthocell (OCC), Capricorn Metals (CMM), Gold Road Resources (GOR), SRG (STS), Reward (RWD), Agrimin (AMN), Decimal (DSX), SRG Limited (STS), Peet (PPC)
