Market Update & Important Indicators:
U.S. stocks came under selling pressure in afternoon trade Monday, as rising bond yields weighed on Wall Street sentiment. The closely watched yield on the 10-year Treasury note climbed, approaching a psychologically important 3% level. The Dow Jones Industrial Average fell 0.1%, and the S&P 500 index was stable. Technology and consumer staples shares were notable declines, down 0.7% and 0.5%, respectively. The Nasdaq Composite Index shed 0.3%. Bond yields, which are reflecting a rise in inflation expectations, were on the march higher Monday, a continuation of gains logged last week. While strong earnings results should keep stocks underpinned in the short term, investors should not "drop their guard" given the charge higher for U.S. bond yields, said Konstantinos Anthis, head of research at ADS Securities. The US gold price fell overnight by 0.8% to finish at 1324.20 US$/oz.
The Stoxx Europe 600 index closed up 0.4% at 383.18, helped by easing political tensions and the prospects of strong corporate earnings. Falls in the euro against a broadly firmer dollar to its lowest since early March also help European stocks. Germany's DAX ended up 0.3%, France's CAC 40 up 0.5% and the U.K.'s FTSE 100 up 0.4%. Italy's FTSE MIB outperformed, up 0.6%, while Spain's IBEX 35 ended up 0.4%.
Asian stock markets mostly inched lower Monday following a decline in U.S. equities late last week. Japan's Nikkei Stock Average edged down 0.3% and Hong Kong's Hang Seng fell 0.5%. Chinese small-caps and Taiwanese stocks were weak. The U.S.'s move last week to ban American companies from selling products to Chinese telecommunications-equipment giant ZTE weighed down technology shares there. However, trading volume in Hong Kong and China was lighter than normal ahead of a possible trade breakthrough between the U.S. and China. U.S. Treasury Secretary Steven Mnuchin may visit Beijing to talk trade.
Australian stocks have been the day's best performer in Asia-Pacific, where modest declines were generally seen. Banks and miners helped push the S&P/ASX 200 to fresh 1-month highs as it ended up 0.3% at 5886 following Friday's pull back. NAB led the major lenders, though wealth manager AMP shed a further 3% following last week's 10% slide as potential class-action lawsuits swirl. Meanwhile, the big iron-ore producers rose more than 1%, with Rio Tinto notching its highest close since mid-February. Energy stocks were weaker as crude futures steadied after recent gains. The commodities' gains have helped the ASX 200 outperform of late.
Base metals were down overnight. The 3-month copper contract moved down 0.8% to finish at 6,899 US$/t, while lead lost 2% to finish at 2,310 US$/t. The London Metal Exchange’s tin price lost 3.2% overnight to finish 21,340/t, and the nickel price fell 3.8% to 14,208/t. The biggest losses were seen in the aluminium price, which declined 7.5% to 2,297/t. This is after the United States gave American customers of Rusal (Russia’s biggest aluminium producer) more time to comply with sanctions.
In this issue:
Evolution Mining (EVN) | Peaking on performance and price | HOLD
Market Cap $5200m| Current Price $3.08 Target Price: $3.01
Evolution Mining (EVN) delivered March Q production of 191koz (+2% vs Dec Q 186koz QoQ) in line with Argonaut’s estimates of 191koz. All-in sustaining costs (AISC) of A$768/oz were -2% lower QoQ (A$784/oz in Dec Q). Standout performance came from the Ernest Henry (EH) asset with 23koz at AISC of negative -$510/oz (including by-product credits). Group operating mine cashflow of $175m (Mar Q $205m) and net mine cashflow of $111.4m (Dec Q $134.2m) were lower than expectations as a result of delayed shipments from Mt Carlton and Cowal and will be realised in the June Q. Group ore reserves increased to 7.1Moz (net of depletion) representing ~9 years of mine life on current production rates. We now forecast production at the mid-point of the revised 790-805koz FY18 production guidance. We revise our target price upwards to $3.01ps ($2.66 prior) and maintain our HOLD recommendation after recent share price strength.
Xanadu Mines (XAM) | High conversion rate of target to discovery | SPEC BUY
Market Cap $115m | Current Price $0.20
Xanadu Mines (XAM) has continued its exploration success with the discovery of four additional mineralised porphyry systems within its Kharmagtai copper/gold project in Mongolia. To date, XAM has defined at least eight mineralised porphyry centres, demonstrating an outstanding strike rate on the 19 prospective targets identified on the project. Most recently, drilling at the Zaraa prospect returned 316m at ~0.4% Cu Eq. We believe Khamagtai has high corporate appeal to mid to large cap base metal/diversified producers given its world class porphyry locality (hosting RIO’s Oyu Tolgoi deposit) and the scale of the mineralised system with complete, intact porphyries from surface.
Recent Contacts & Presentations:
Global Energy Ventures (GEV), Advanced braking technology (ABV), Fortescue Metals Group (FMG), Helix Resources (HLX), Pantoro Limited (PNR), Alt Resources Ltd (ARS), Coziron Resources Ltd (CZR), 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)
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