Market Update & Important Indicators:
Deal talks and earnings results sparked sharp moves in individual stocks Friday, while the broader market was steady. The S&P 500 was little changed on the day but notched a weekly gain. Major indexes have swung between relatively small losses and gains in recent sessions, and daily stock-trading volumes have been below the 2016 average. On Friday, the Dow Jones Industrial Average fell 0.1% to 18146. The S&P 500 slipped less than 0.1% and gained 0.4% for the week. The Nasdaq Composite rose 0.3% Friday. Earnings season has been driving much of the action in the U.S. stock market lately. Roughly a quarter of S&P 500 companies have reported so far, and earnings are on track to decline 0.3% from a year earlier, according to FactSet. That is an improvement from the 2.1% decline projected by analysts on Sept. 30.
European stocks finished flat Friday, with some indexes easing from multi-month highs as investors waded through corporate reports while they considered European Central Bank President Mario Draghi's hint toward the possibility of more monetary stimulus. The Stoxx Europe 600 index finished unchanged after zigzagging between small gains and losses throughout the session. Technology, telecom, financial and commodity shares moved up, while consumer shares, health care, utility and industrial issues fell. For the week, the Stoxx 600 ended higher by 1.3%.
A strong dollar sent Asian shares broadly lower on Friday, with the Nikkei reversing gains late in the session after an earthquake rocked Western Japan. The Nikkei Stock Average ended down 0.3%, erasing the 0.6% gains made earlier in the day, though the extent of damage caused by the magnitude 6.6 earthquake wasn't immediately clear. Even so, the Nikkei ended the week up nearly 2%, thanks to robust corporate earnings results and a weaker yen. Elsewhere in the region, Korea's Kospi fell 0.4% and Singapore's Straits Times Index was also off by 0.4%. In China, the yuan's weakness stoked fears of a renewed cash exodus, as was the case after Beijing depreciated the currency in August last year. At the same time, China's housing market continues to sizzle, with home prices rising in 63 of 70 cities in September from the previous month. Average new home prices rose 1.8% in September, versus a 1.3% gain in August. As a result, Chinese stocks were under pressure, with traders balancing yuan declines with the strong China housing price data. The benchmark Shanghai Composite Index, however, recovered in late trade to end up 0.2% while the Shenzhen Composite Index ended down 0.4%. Hong Kong's stock market was closed Friday as the city was shut down due to a typhoon.
Broad declines by energy shares and sharp falls among a few stocks weighed on the Australian equities market Friday, leaving it modestly lower for the week. Snapping a run higher the past three days, the S&P/ASX 200 finished down 0.2% at 5430.3. That left the index almost 0.1% lower for the week, after dropping 0.6% last week. After hitting a fresh one-year high Wednesday, oil has been retreating as traders consider the global supply glut.
On the London Metal Exchange, copper for delivery in three months was down 0.4% at $4,635/t. In the other base metals, aluminium rose 0.9% to $1,620/t, and tin rose 0.7% to $20,092/t. Zinc fell 1.0% to $2,248/t, nickel fell 1.7% to $9,918/t and lead fell 0.9% to $1,985/t.
In this Issue:
Doray Minerals (DRM)| Balancing cash, development and debt | HOLD
Market Cap $326m | Current Price $0.60 | Target Price $0.67
Doray Minerals (DRM) delivered Andy Well production of 14.9koz at all in sustaining cost (AISC) of A$1,432/oz (vs $1,542/oz Au in Jun Q, -7% q-o-q), was below Argonaut’s forecast of 17koz. High costs remain at Andy Well attributable to lower feed grade in both open pit (-12% q-o-q) and underground (-12% q-o-q), further complicated by the continued requirement for ground support at Andy Well. Deflector had its full first quarter of production recording positive cash flow, with 3,624oz of gold production and 883t of copper, with an additional 5,204oz of gold contained within a native copper concentrate. Deflector processing is now moving to transitional ores and the issues related to stope dilution appear to be having a positive effect on costs. Debt fell to A$74m after a $6m debt repayment and the cash position fell to $18.3m (from $39.8m in Jun Q). Maintain HOLD.
Fortescue Metals (FMG) | September Quarterly report – VLOC’s Ahoy | SELL
Market Cap $15.7bn | Current Price $5.12 | Target Price $3.81
Fortescue Metals (FMG) released Sept Q results with 43.8Mt shipped (vs 43.4Mt in Jun Q) at C1 costs of US$13.55 (vs UA$14.31/t in June Q, -5% q-o-q). Net debt reduced to US$4.2bn (from US$5.2bn, -19% q-o-q) after repaying US$700m in debt during the quarter, reducing gearing to 33%. FMG had US$1.8bn in cash at the end of the quarter. Sustaining capital was US$1.28/wmt (vs full year forecasts US$2.00/wmt) and the first Very Large Ore Carrier (VLOC) is due for delivery in mid-Q2FY17. SELL recommendation maintained and price target of A$3.81ps (from A$3.65).
OZ Minerals (OZL) | Pipeline focussed | HOLD
Market Cap: $1,771m | Current Price $5.82 | Target price $6.10
OZ Minerals (OZL) released September Q production with 28.7kt Cu and 28.5koz Au at US$0.71/lb C1 costs (vs Argonaut forecast of 30kt Cu and 32koz Au at US$0.78/lb). The Company’s cash balance declined $55m to $509m, primarily driven by an $81m increase in working capital. We are seeing a strong focus on growth from OZL, with Carrapateena rolling forward and numerous joint ventures (JV) progressing with ASX juniors. Of the exploration projects, Argonaut is highly encouraged by the recent mineralisation intercepted at the Eloise joint venture (JV) with Minotaur Exploration (MEP), in Queensland. We believe there is a high probability of success from further drilling.
Recent Contacts & Presentations:
Woods Properties Ltd (CWP), Sino Gas & Energy Holdings Ltd (SEH), Salt Lake Potash Ltd (SO4), Kalina Power Ltd (KPO), Austal Limited (ASB), Agrimin Ltd (AMN), Stavely Minerals Ltd (SVY), MGC Pharmaceuticals Ltd (MXC), Vital Metals Ltd (VML), Tox Free Solutions Ltd (TOX), Swick Mining Services Ltd (SWK), Davenport Resources Ltd (DAV), Orthocell Ltd (OCC), BC Iron Limited (BCI), ALT Resources Ltd (ARS), Gascoyne Resources Ltd (GCY), Dacian Gold (DCN), Orocobre Ltd (ORE), Alchemy Resources Ltd (ALY), Acacia Coal Ltd (AJC), Minotaur Exploration Ltd (MEP), Northern Minerals Ltd (NTU), Walkabout Resources Ltd (WKT), Antipa Minerals Ltd (AZY)