Market Update & Important Indicators
U.S. stock indexes held steady Wednesday, on course to close at records, after the Federal Reserve left short-term interest rates unchanged and indicated it would likely act soon to begin shrinking its bond portfolio. Fed officials voted unanimously to leave their benchmark rate unchanged–a decision that was widely expected by investors and analysts ahead of Wednesday afternoon. With the Fed's commentary suggesting the central bank will keep rates low for the time being, investors say U.S. stocks should keep eking out gains, provided that corporate earnings continue to be supportive. Roughly a third of the S&P 500 has reported results so far, with 75% of the companies beating earnings estimates as of Wednesday morning, according to FactSet. The U.S. gold price traded higher overnight, adding 0.8% to finish at 1,260.10 US$/oz.
Stocks across Europe finished higher Wednesday, as investors sifted through the latest round of corporate earnings reports ahead of the Federal Reserve's policy decision. The Stoxx Europe 600 gained 0.5% to end at 382.74, after the benchmark on Tuesday advanced 0.4%. Oil stocks got a lift from crude futures, which were adding to their weekly gain as U.S. government data showed a drop in American supplies for a fourth week in a row. Meanwhile, the euro bought $1.1631, down from $1.1649 late Tuesday in New York, as the dollar advanced against major rivals ahead of the Fed's policy update later Wednesday.
Stocks in Asia moved higher Wednesday ahead of a closely watched announcement from the Federal Reserve. In Japan, a rebounding dollar and Tuesday's climb in Treasury yields — both a sign of increased risk appetite — helped the Nikkei Stock Average gain 0.5% after three straight days of declines. Hong Kong's Hang Send index rose 0.3%, supported by the energy and basic materials sectors.
A second straight day of solid gains, led by resources companies, propelled Australian shares to their highest finish in three weeks on Wednesday. The buying came as the local currency retreated against the U.S. dollar, squeezed by data showing consumer-price inflation was muted in the second quarter. It also came after Reserve Bank of Australia Gov. Philip Lowe suggested the central bank was comfortable with interest rates staying at record lows. The S&P/ASX 200 rose 50 points, or 0.9%, to close at 5776.6. Only consumer-discretionary stocks and utilities failed to move higher. It was the strongest one-day gain in two weeks. Energy stocks advanced as crude oil built on an overnight rally in Asian trading, bolstered by expectations U.S. inventories have fallen sharply since last week. Mining companies also notched a strong session as Chinese iron-ore futures rose on renewed confidence in demand and prices for base metals improved. The major banks, among the biggest stocks in the local market, also lent their weight to the push higher. Sentiment toward the sector improved last week after the cloud of possible dilutive capital raisings was lifted when the industry regulator introduced fresh capital benchmarks that analysts say won't prove too onerous.
The London Metal Exchange's three-month copper contract gained 1.6% overnight to close at $6,298/t. The other base metals finished mostly higher. Lead prices lost 0.2% to 2,290/t, nickel prices rose 0.4% to 9,995/t, tin prices closed flat at 20,500/t, zinc prices fell 1.1% to 2,804/t, whilst aluminium prices rose 0.6% to 1,921/t.
In this issue
Independence Group (IGO) | Honey I shrunk the resource | HOLD
Mkt Cap $1,860 | Current Price $3.17 | Target Price $3.30
Independence Group (IGO) released several items including; i) a resource downgrade to Nova, ii) Jaguar value enhancement options and iii) the June Q production results. Most notable was a 15% reduction to the Nova/Bollinger resource following an intensive grade control drilling program. On a more positive note, IGO outlined a series of options to extend the mine life of the Jaguar project and improve metals recoveries. The June Q contained a mixed bag of results with an 11% QoQ increase of gold production at Tropicana, higher QoQ production at Jaguar, but a miss of FY17 guidance and steady production at Long. Unaudited Revenue, EBITDA and NPAT for FY17 were $421m, $151m and $17m respectively. Downgrade to HOLD with a $3.30 target price (from BUY at $3.80).
OZ Minerals (OZL) | Production strong, but a wall of worry| BUY
Mkt Cap $2,437 | Current Price $8.16 | Target Price $8.20
OZ Minerals (OZL) released June Q production of 28.1kt copper and 32.1koz gold at an all-in sustaining cost (AISC) of US$1.15/lb (vs 25.1kt Cu, +12% and 26.1koz Au, +23% at US$1.35/lb for the March Q). Production rebounded after a rain affected Q1 CY17 and is on track to meet CY17 guidance of 105-115kt copper and 115-125koz gold. Of concern was the mention of a potential pit stability risk in the south wall of the Malu open pit. In 2012/2013, a failure in the upper south wall disrupted production and severely impacted the profitability of the mine. OZL retains a strong balance sheet with a $31m increase in cash QoQ (no debt) after $22m for Carrapateena development, a $20m addition to ore inventory and a $69m tax payment. BUY maintained with a $8.20 price target.
Western Areas (WSA) | Magnificent Seven | BUY
Mkt Cap $642 | Current Price $2.36 | Target Price $2.70
Western Areas (WSA) continued its impressive streak of stable production and low costs with June Q production of 6.0kt Ni in concentrate at C1 costs of $2.42/lb (before payability), broadly in line with Argonaut’s forecast of 6.1kt Ni at $2.45/lb. WSA finished FY17 with 26.0kt Ni at $2.38/lb, at the upper end of production guidance (25-26kt) and at the lower end of cost guidance ($2.35-2.50/lb). The Company strengthened its balance sheet to $140.3m cash (no debt), following the sale of its remaining interest in Bluejay mining Plc for $26.8m. BUY recommendation maintained with a $2.70/sh target price.
Recent Contacts & Presentations
Orbital Corporation Ltd (OEC), 4Ds Memory Ltd (4DS), Kin Mining NL (KIN), Pharmaust Limited (PAA), Botanix Pharmaceuticals Ltd (BOT), Dimerix Ltd (DXB), Metro Mining Ltd (MMI), Paringa Resources Ltd (PNL), Independence Group NL (IGO), MZI Resources Ltd (MZI), Transerv Energy Ltd (TSV), Emmerson Resources Ltd (ERM), Antipa Minerals Ltd (AZY), Echo Resources Ltd (EAR), Sovereign Metals Ltd (SVM), Calidus Resources Ltd (CAI), Great Boulder Resources Ltd (GBR), Finders Resources Ltd (FND), Bionomics Ltd (BNO), Threat Protect Australia Ltd (TPS), Ramelius Resources Ltd (RMS), Zenith Energy Ltd (ZEN), Blackham Resources Ltd (BLK)
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