Market Update & Important Indicators
U.S. stock indexes fluctuated between slight gains and losses Thursday, as materials, energy and financial shares declined. The moves paused a two-day rally that has lifted the Dow industrials and S&P 500 around 2%, buoyed by gains in the financial sector as investors grew increasingly comfortable with the prospect of the Federal Reserve raising interest rates. Energy shares in the S&P 500 reversed an early climb as crude prices fell back below $50 after topping the milestone amid signs of declining U.S. production and a slightly weaker dollar. Financial stocks in the S&P 500 also declined Thursday, dropping 0.5%. Utilities, telecommunications and consumer-discretionary shares climbed
European stocks logged a modest gain as energy shares got a brief boost from Brent crude futures, which extended their gains to touch the $50-a-barrel level. The Stoxx Europe 600 index gained 0.1% to 348.91. However, the stock benchmark lost some momentum after oil-and-gas and basic materials shares slumped into the close, with the oil-and-gas sector gauge finishing 0.3% lower. Earlier stocks had benefited from a rise in crude but relinquished those gains as crude futures retreated. Still, the Stoxx Europe 600 managed to close at its best level in 5 weeks after a three straight days of gains, as FactSet data showed.
Energy shares rose across Asia on Thursday as oil prices breached a key threshold, though concerns about a U.S. interest-rate increase capped share-price gains. Japan's Nikkei Stock Average ended up 0.1%, and Korea's Kospi slipped 0.2%. In China, the Shanghai Composite Index recouped losses to end up 0.3%. Hong Kong's Hang Seng Index ended 0.1% higher. Chinese stocks sank on worries about further yuan depreciation. Concerns were prompted by the authorities' move Wednesday to fix the yuan at its weakest level since March 2011.
Australian shares eked out a second straight session of gains, led higher by energy companies after Brent crude oil traded above US$50 a barrel for the first time since November. The S&P/ASX 200 closed up 0.3%, or 15.6 points, at 5388.1 on Thursday with mining stocks also mostly higher despite an official business survey pointing to a likely 32% drop in investment in the sector during the fiscal year ending June 2017.
Copper prices closed higher in London on Thursday on the back of a weaker dollar and rising oil prices. The London Metal Exchange's three-month copper contract was up 0.2% at $4,661 a ton at the PM kerb close, having hit a two-week high earlier in the session at $4,641 a ton. All the base metals were higher as the end of the week neared. Aluminium closed up 0.7% at $1,555.50 a ton, zinc was up 2.2% at $1,876 a ton, nickel was up 0.5% at $8,400 a ton, and lead was up 2.5% at $1,676 a ton.
In this Issue
Finders Resources (FND) | On the cusp of production | BUY
Market Cap $101.8m | Current Price $0.16 | Valuation $0.22
Finders Resources (FND) is anticipating first copper cathode production from the 25ktpa plant at its Wetar Project in Indonesia (72% FND) next week. Wet commissioning of the solvent exchange electro-winning (SX-EW) plant commenced today and nameplate production if forecast for early Q3 CY16. Wetar is set to produce ~28ktpa copper (including a 3ktpa demonstration plant) at an all-in sustaining cost of <US$1.50/lb. Development capex of US$132m is fully funded from secured debt and investment by subsidiary company partner Daewoo International (24% equity interest). FND currently has US$125m drawn debt and ~US$27m in cash and undrawn facilities. Buy recommendation and a $0.22/sh target price maintained.
Austin Engineering (ANG) | Recapitalisation | HOLD
Market Cap post cap raise $61m | Current Price $0.115 | Valuation $0.130
A capital raising underway will raise nearly $30m and allow ANG to pay off all senior debt. This significantly reduces the risks around excessive gearing and covenants, and will allow management to focus on operations rather than the balance sheet. This is encouraging, but it does come at a cost. Although our forecasts are little changed, with banks forcing the play the offer is steeply discounted and dilutes earnings per share. It suggests fair value around current levels and our hold call is maintained.
Recent Contacts & Presentations
Salt Lake Potash (SO4), Dakota Minerals (DKO), Cradle Resources (CXX), Saracen (SAR), Gold Road Resources(GOR), Regis Resources (RRL), Gascoyne Resources (GCY), Botanix (BNE), Sino Gas & Energy (SEH), Altura Mining (AJM), Navitas (NVT), Gage Roads (GRB), Bionomics (BNO), Invigor Group (IVO)