Market Update & Important Indicators:
U.S. stocks retreated after the White House briefing on its tax plan revealed few new details other than what was previously leaked to the press. Stocks initially edged higher on the White House's proposal for what it says will be big tax cuts, sending the S&P 500 up 0.4% from 0.3%. But by the end of the press conference the gains faded and the index was up 0.2%. The U.S. gold price bucked the trend rising 0.4% to 1,269 US$/oz. Financial stocks in the S&P 500 initially climbed to 0.9% in the early moments of the briefing, up from 0.6% previously, but in recent trading those gains had disappeared and the sector was up 0.4%. Expectations for lower taxes under the new administration have helped U.S. stocks climb since November. Improving corporate earnings have also supported shares.
European stocks ended a choppy session in positive territory on Wednesday, building on the previous days' rally as investors waited for U.S. President Donald Trump's tax-revamp plan. The Stoxx Europe 600 added 0.5% to close at 388.73, ending at the highest level since August 2015. On a broader scale, investors are waiting to hear more about the Trump administration's tax reform and reduction package later Wednesday. His proposal is expected to include cutting the corporate tax rate to 15% from 35%. Equity markets worldwide since November have been bolstered by expectations for Trump-backed tax policies in the U.S., the world's largest economy.
Equities in Asia extended this week's gains with analysts pointing to currency tailwinds, optimism following the first round of the French election, upbeat earnings and the growing prospect of a U.S. tax overhaul. Japan's Nikkei Stock Average rose 1.1% as the yen continued to move back from last week's multi-month highs against the dollar. A weaker yen makes it cheaper for Japanese exporters to ship their goods around the globe. Shares of financials also rose across Asia. Japan's Topix bank subsection rose 2.1%. Hong Kong's Hang Seng climbed 0.4%. Stocks also rose for a second session in mainland China, continuing to rebound from Monday's decline. The Shanghai Composite edged up 0.1%.
A further advance by major banks amid broad gains for Australian stocks Wednesday helped lift the market for a fourth straight session to a two-week high. A positive finish for stocks on Wall Street, helped by upbeat earnings reports, offered a strong lead for the local market as it played catch-up after being closed Tuesday for a public holiday. Every industry sector rose except for materials shares, which slipped slightly as gold stocks weighed. The S&P/ASX 200 closed up 40.2 points, or 0.7%, at 5912.0. The four biggest banks collectively added about 13 points to the index. For the day, 2.76 billion shares were traded with a value of 6.78 billion Australian dollars (US$ billion), Commonwealth Securities said. The major banks have been moving steadily higher since the U.S. election, which raised expectations of global inflation and increased interest rates.
The London Metal Exchange's three-month copper contract closed up 0.16% at $5,715/t. All other base metals finished mostly higher on Wednesday. Lead prices rose 0.9% to 2,189/t, zinc prices rose 0.9% at 2,615/t aluminium prices rose 0.1% at 1,956/t, whilst tin prices rose 1.5% at 19,965/t. Nickel prices bucked the trend falling 1.0% at 9,180/t.
In this Issue:
Independence Group (IGO) | March Q Results: A mixed bag | BUY
Market Cap $1,895m | Current Price $3.12 | Target Price $4.00
Independence Group (IGO) delivered March Q results with mixed performance across its four key assets. Tropicana (IGO 30%, Anglo Gold 70%) gold production was down 18% Q-on-Q to 99.9koz, as a result of planned lower head grades. Long Nickel performed well with 2.1kt Ni in concentrate (in line with the December Q) at $3.20/lb cash cost, tracking well below the guidance range of $3.50-3.90/lb. Jaguar was impacted by ventilation issues and bridging of stopes which resulted in lower head grades and decreased Q-on-Q metal production. Nova underground development appears to be back on track after falling six weeks behind schedule in late-2016 / early-2017. Group cash decreased from $109m to $69m and debt drawn remained at $200m. IGO retains $200m undrawn debt.
Strandline Resources (STA) | RIO JV validates strategic landholding| SPEC BUY
Market Cap $17m | Current Price 0.7¢ | Target Price 3.0¢
The quality and strategic nature of Strandline Resources’ (STA) landholding in Tanzania has been validated by a US$10.75m (A$14.5m) earn-in by Rio Tinto (Rio). RIO has entered into a staged earn-in agreement for up to a 75% stake in STA’s southern tenements, prospective for mineral sands deposits. Importantly, this agreement excludes the Company’s northern tenements which host the Fungoni and Tanga projects and the Mafia and Bagamoya prospects. In effect, STA has monetised early stage prospects for an amount equivalent to its enterprise value (~$14.7m on the last close), whilst maintaining a 100% interest in core assets. STA will continue to generate strong newsflow through 2017 with a Definitive Feasibility Study (DFS) on the Fungoni Project due Q2/Q3 CY17, ongoing exploration results and anticipated resource expansion from the Tanga Hub. We believe the Company is well positioned to benefit from a recovering mineral sands sector, which has seen both TiO2 and zircon prices rise ~US$50/t year to date. Argonaut maintains a SPEC BUY recommendation with an increased 3.0¢ target price (from 2.8¢).
Western Areas (WSA) | March Q Results | BUY
Market Cap $591m | Current Price $2.15 | Target Price $2.80
Western Areas (WSA) delivered March Q results with 5.7kt Ni in concentrate, beating Argonaut’s forecast of 5.5kt. C1 cash costs of $2.23/lb (before payability) were the lowest since the June Q 2015, benefitting from a program of ore sorting of lower grade Flying Fox stockpiles. WSA is on track to meet the upper end of the revised FY17 production guidance range of 22-23kt Ni and the lower end of cost guidance of $2.35-2.50/lb. Argonaut maintains a BUY recommendation and a $2.80 target price.
Recent Contacts & Presentations:
Metro Mining Ltd (MMI), Tox Free Solutions Ltd (TOX), St George Mining Ltd (SGQ), Venturex Resources Ltd (VXR), Creso Pharma Limited (CPH), Sino Gas & Energy Holdings Ltd (SEH), Orecorp Limited (ORR) Doray Minerals Limited (DRM), Capricorn Metals Ltd (CMM) Independence Group (IGO), Cardinal Resources Limited (CDV), Metal Bank Ltd (MBK), MOD Resources Ltd (MOD) Quintis Ltd (QIN), Regis Resources Ltd (RRL), Apollo Minerals Ltd (AON), Ironbark Zinc Ltd (IBG), Sovereign Metals Ltd (SVM), Pilbara Minerals Ltd (PLS), Laconia Resources Ltd (LCR), Hazer Group Ltd (HZR), Transerv Energy Ltd (TSV), Ausquest Ltd (AQD), Quintis Ltd (QIN), Paradigm Biopharma Ltd (PAR), Pharmaust Ltd (PAA)