Market Update & Important Indicators:
Gains in technology and industrial shares lifted U.S. stocks Monday, putting the S&P 500 on track for a third consecutive session of gains. Growth in corporate earnings and signs of economic strength have helped mitigate investors' recent concerns about the Trump administration's woes in recent sessions, some analysts said. That helped many view last week's drop as a buying opportunity. Of the 95% of S&P 500 companies that have reported results so far for the first quarter, 75% have beat earnings per share estimates, according to FactSet. Technology stocks in the S&P 500 rallied 0.9%. The sector suffered its worst day since Brexit during last week's selloff, which was spurred by fears the administration would fail to deliver corporate-friendly policies. News that Saudi Arabia and the U.S. were expected to agree to business deals and potential investments valued at $300 billion boosted a range of companies. The U.S. gold price continued its upward trend rising 0.4% to finish at 1,260.40 US$/oz.
European stocks logged modest gains Monday, aided in part by a merger deal in the chemicals industry. Relative calm on the U.S. political front helped as well, after troubles there last week weighed on regional benchmarks. Also on the radar Monday is a meeting of Eurozone finance ministers and the International Monetary Fund, and investors will watch whether they can agree to provide debt relief to Greece after the country agreed to new austerity measures. The Stoxx Europe 600 index moved up 0.2% to 392.27 after briefly dipping into negative territory. Only the technology sector was losing ground, while telecom and consumer services shares marched higher.
Asian stocks rose as last week's global worries about the U.S. political landscape continued to ease. Japan's Nikkei Stock Average climbed 0.5%, led by steel, energy and machinery companies. Data showed Japanese exports rose 7.5% in April, advancing for a fifth straight month. Hong Kong's Hang Seng Index rose 0.9%, on track for a 22-month closing high, while South Korea's Kospi gained 0.7%, above the closing record set earlier this month. Investors largely shrugged off further missile tests by North Korea over the weekend. Stocks in Shanghai and Shenzhen gave up early gains, however, amid fears of a regulatory clampdown over brokerages' shadow-banking business, and were last down 0.5% and 1.4% respectively.
Australian shares managed their strongest advance in six weeks Monday, buoyed by resources stocks that got help from a lift in commodity prices. A recovery by the big banks following three weeks of declines also lent weight to the day's push, snapping a run lower over the past three sessions. The S&P/ASX 200 finished 438 points, or 0.8%, higher at 5771.2; only the consumer and health-care sectors were excluded from the broad gains. The energy subindex notched up a 2.2% rise as crude-oil prices continued to climb in Asian trading ahead of a meeting of the Organization of the Petroleum Exporting Countries in Vienna on Thursday to discuss extending their agreement to cut production. The basket of materials stocks also saw a strong gain as Chinese iron-ore futures continued to rise.
The London Metal Exchange's three-month copper contract closed up 0.37% at $5,703/t. The other base metals finished mixed on Monday. Nickel prices rose 0.3% to 9,352/t, tin prices rose 0.4% at 20,640/t, whilst zinc prices rose 0.6% at 2,620/t. Aluminium prices fell for the day dropping 0.3% to 1,936/t whilst lead prices also fell 0.3% at 2,069/t.
In this Issue:
Saracen Mineral Holdings (SAR) | Cashflow Turnaround | BUY
Market Cap $811 |Current Price $1.07 | Target Price $1.22
Argonaut expects the June Q to be the turning point for Saracen Mineral Holdings (SAR). We believe the inflection point to positive cashflow has been achieved and free cash generation should increase out to FY20. Following a period of heavy investment into growth and exploration, key projects including a second decline into the Karari mine and pre-stripping of the Thunderbox A Zone are largely complete. As a result, production has lifted to the target 300kozpa run rate and AISC is forecast to decline from ~A$1,350oz in FY17 to A$950/oz in CY20. Upcoming newsflow in H2 CY17 will likely to include; positive cash in the June Q (Argonaut est. $5-10m), a significant reserve and resource upgrade across most operations, a revised group five-year plan, a bulk underground mining study at Thunderbox and further exploration success across the asset base. Argonaut upgrades SAR to BUY from HOLD with a revised target price of $1.22 (previously $1.05).
Recent Contacts & Presentations:
Dacian Gold (DCN), Egan Street Resources Ltd (EGA), Alice Queen Ltd (AQX), Paringa Resources Ltd (PNL), AWE Limited (AWE), Saracen Mineral Holdings Ltd (SAR), Red River Resources Ltd (RVR), Vital Metals Ltd (VML), Prairie Mining Ltd (PDZ), Hotcopper Holdings Ltd (HOT), Resolute Mining Ltd (RSG), Botanix Pharmaceuticals Ltd (BOT), Pantoro Ltd (PNR), Beadell Resources Ltd (BDR), Investigator Resources Ltd (IVR), Echo Resources (EAR), Emerald Resources NL (EMR), PharmaNet Group (PNO), Strandline Resources Ltd (STA)