Market Update & Important Indicators
U.S. stocks gained Friday, sending the S&P 500 index to a record closing high. The S&P 500 rose 0.5% to 2175.03, topping Wednesday's record. The Nasdaq Composite gained 0.5% and the Dow Jones Industrial Average climbed 0.3%, a day after breaking a nine-day winning streak that took it to record highs. This week about 5.9 billion shares have changed hands a day. That's roughly 1.7 billion fewer shares than has been typical so far this year and the slowest week since the end of December. Traders have attributed the light trading volumes to summer market malaise after a busy few weeks when stocks tumbled after the U.K. voted to leave the European Union and then sharply rebounded to new records. The Dow remains up 8% through Thursday's close from its post-Brexit lows in late June, bolstered both by encouraging economic news and quarterly results that have largely exceeded expectations.
European stocks lost ground after some of the first economic data since the U.K.'s Brexit vote came in unexpectedly strong for the eurozone, but worse than anticipated for Britain. The Stoxx Europe 600 index fell 0.1% Friday but closed the week up 0.7%. Data showed the U.K. economy likely contracted in July as businesses cut output and payrolls. A measure of private-sector activity in the U.K. fell to its lowest level since early 2009.
Asian shares ended lower on Friday as central banks poured cold water on traders' easing hopes. Japan's Nikkei Stock Average fell 1.1% even as the yen weakened against the dollar. Elsewhere, South Korea's Kospi edged down 0.1%, Hong Kong's Hang Seng Index slipped 0.2%, and China's Shanghai Composite lost 0.9%. Despite Friday's decline, the Nikkei was still up 0.8% for the week. The Hang Seng Index, dominated by property stocks, gained about 1.4% in the week as investors bet that Hong Kong's sinking property market had bottomed. In China, shares fell by the most in a month Friday as traders took profit on a recent blue-chip rally.
Australian shares fell on low trading volumes, as investors largely stayed on the sidelines ahead of crucial economic data next week that could trigger a fresh round of monetary stimulus. The S&P/ASX 200 closed 0.3% lower at 5498.2, dashing market hopes that a nearly two-weeklong rally might continue. The index had risen on 10 out of the past 11 trading days, fuelled by speculation the Australian central bank might soon cut interest rates from the 1.75% record low. Inflation data for the June quarter due Wednesday are expected to show weaker-than-expected growth in consumer prices, making a rate cut in August increasingly likely.
Copper futures closed lower in London on a stronger dollar and profit-taking. The London Metal Exchange's three-month copper contract was 1.13% lower at $4,920/t Friday at the PM kerb close. Other base metals were also down. Aluminium was down 0.6% at $1,596/t, zinc was down 0.4% at $2,240/t, nickel was down 3.3% at $10,375/t, lead was down 1.2% at $1,828/t, and tin was down 0.5% at $17,730/t.
In this Issue
OZ Minerals (OZL)| Cash continues to build | HOLD
Market cap $1,964m | Current Price $6.50 | Valuation $6.15
OZ Minerals (OZL) released June Q results with production of 27.4kt copper and 30.0koz gold in concentrate, below Argonauts’ forecasts of 31kt copper and 32koz gold. Prominent Hill was impacted by a planned outage and unplanned repairs to the SAG mill which resulted in a 10% reduction in plant availability. Despite the lower production, total cash costs declined 4% to US$0.87/lb (vs Argonaut forecast US$0.90/lb). During the Q, OZL announced PYBAR Mining Services as the party to construct the Carrapateena decline which is due to commence in August. The Company increased its cash balance to $564m (from $533m at March 31) after exploration and the ongoing share buy-back. Argonaut upgrades OZL to a HOLD recommendation with a revised target price of $6.15 (previously SELL at $5.25). The key change to our valuation in the incorporation of the 4Mtpa Carrapateena case (increasing our valuation of this asset from ~$200m to $378m). We apply a 30% discount to Carrapateena, accounting for development risk. Our valuation also incorporates higher production and lower capex, bringing our assumptions largely in-line with the Company’s long term guidance.
Recent Contacts & Presentations
Department 13 (D13), Peak Resources (PEK), Fortescue Metals (FMG), Paradigm Biopharma (PAR), Peel Mining (PEX), Ausgold Limited (AUC), Gascoyne Resources (GCY), Metro Mining (MMI), Pacific Energy (PEA), Novatti Group Ltd (NOV), Hammer Metals Ltd (HMX), Helix Resources Ltd (HLX), Saracen Mineral Holdings Ltd (SAR), Merdeka Copper Gold (MDKA: IJ), Monument Mining (MMY.V: TSX), Apollo Consolidated (AOP), Botanix Pharmaceuticals (BOT)
Please read Argonaut's Important Disclaimers & disclosures