Market Update & Important Indicators:
Gains in Boeing's shares helped offset Apple's losses in the Dow Jones Industrial Average during choppy trading Wednesday. Corporate earnings have driven some of the largest moves in stocks over the past week. More than a third of S&P 500 companies have reported quarterly results, according to FactSet, with energy, industrial and technology companies posting the weakest earnings growth so far. Elsewhere, share markets were hit by weak U.S. earnings from companies including Under Armour and Whirlpool. The disappointing news sent the Nasdaq down 0.5% on Tuesday, while the Dow Jones Industrial Average was off 0.3%. Additionally, consumer-confidence data out of the U.S. suggested that households there remain cautious in a year of lagging growth and looming presidential elections. The U.S. Conference Board said Tuesday its index of consumer confidence dropped to 98.6 in October from 103.5 in September. Economists surveyed by The Wall Street Journal had expected 101.2.
Elsewhere around the globe, stocks mostly fell. The Stoxx Europe 600 index pulled back 0.4% and the U.K.'s FTSE 100 index dropped 0.8%. The British pound bounced back against the dollar, rising 0.4% to $1.2231 after falling Tuesday.
Shares in Asia were broadly lower Wednesday, tracking declines on Wall Street that followed disappointing earnings reports and weak economic data. Korea's Kospi ended 1.1% lower, New Zealand's NZX 50 finished down 1.5%, Hong Kong's Hang Seng Index was last down 1.0%, and the Shanghai Composite Index was off 0.5%. The Nikkei Stock Average in Japan was the only major market to end higher, rising 0.2% after early losses.
Broad selling dragged Australia's equities market to a five-week low Wednesday, with consumer, energy and bank stocks particularly hard hit. News of stronger-than-expected inflation in the third quarter, cooling talk of further interest rate cuts in Australia, offered no support for the market though it buoyed the local currency. Notching up its sharpest fall in a little over six weeks, the S&P/ASX 200 dropped 83 points, or 1.5%, to 5359.8–its lowest close since September 21. The four biggest banks, among the largest shares in the ASX 200, collectively knocked almost 15 points from the index a day ahead of annual results from National Australia Bank early Thursday and numbers from two of the other lenders over the coming weeks. The results are expected to confirm the headwinds to revenue growth and rise in bad debts from low levels, and will be closely watched by investors for signals that will weigh on dividend payouts. Oil and gas stocks, meanwhile, were weighed by a fall in oil prices following sharp growth in U.S. crude inventories and heightened prospects a deal to cut production proposed by the Organization of the Petroleum Exporting Countries will falter.
The London Metal Exchange's three-month copper contract closed up 0.1% at $4,740/t. Aluminium prices rose 0.6% to $1,672/t, tin rose 0.6% to $20,665/t, and nickel rose 0.3% to $10,224/t. Zinc fell 1.1% to $2,329/t, and lead fell 0.2% to $2,034/t.
In this Issue:
Gage Roads (GRB) | Re-initiation – Well-crafted strategy | BUY
Market Cap $32m | Current Price $0.037 | Valuation $0.061
The 5-year “Returning to Craft” strategy, supported by a recent $10.1m capital raising, positions GRB to pursue its 2021 target of $1/litre EBITDA on annual production of at least 11m litres. By this time GRB anticipates 70% of sales will be high quality, high margin proprietary brands (up from 14% in FY15 and 25% in FY16). It will be driven by significant marketing investment in the coming years and tailwinds from a growing craft beer market. The ability now to access all channels to market augurs well for a business already the country’s largest independent craft beer brand. We re-initiate with a Buy call.
Important Disclosures: Argonaut acted as the Lead Manager & Underwriter to the Placement & Entitlement Offer to raise $10.1M in August 2016 and received fees commensurate with this service. Argonaut holds or controls 15M GRB Options exercisable at $0.07 on or before 14 October 2019.
Independence Group (IGO) | First concentrate from Nova | HOLD
Market Cap $2,435 | Current Price $4.26 | Valuation $3.88
Independence Group (IGO) released September Q results with 30koz gold from Tropicana (IGO 30% attributable basis), 2.2kt Ni in ore from Long and 10.3kt Zn and 1.9kt Cu from Jaguar (vs Argonaut forecast of 30koz gold, 2.1kt Ni, 9.9kt Zn and 1.7kt Cu). Total cash generation was $203m, incorporating a $282m equity raising, $45m development capex on Nova and a $12m dividend payment. The unaudited NPAT was $10m. Free cash generation from Tropicana and Jaguar was down Q-on-Q due to increases in saleable products (FCF $4.8m and -$10.8m respectively). Long’s free cashflow doubled to $9.5m on higher production and lower costs. At 30 September, IGO had $249m cash and $271m debt. The Company also announced first Ni and Cu concentrate production from the Nova mine. The project was completed four weeks ahead of schedule and remains on budget with $95-100m capex remaining.
St George Mining (SGQ) | Nickel Crusader | SPEC BUY
Market Cap $32.5m | Current Price $0.14
St George Mining (SGQ) has reported several high grade, shallow massive nickel-copper sulphide intercepts from its Mt Alexander Project in Western Australia. The project is located south-southwest of the nickel and gold endowed Agnew-Wiluna belt. Better intercepts to date include 4.0m @ 5.1% Ni & 1.6% Cu and 4.3m @ 4.3% Ni & 2.0% Cu. A standout feature of Mt Alexander is the 100% success rate of EM, whereby all EM anomalies have returned nickel sulphides when drilled. High Cu, Co and PGE credits result in 6-10% Ni Eq. grades. SGQ also has the East Laverton project at the southern end of the Laverton Greenstone Belt. While this project is very early stage, the geological and structural setting is highly prospective for gold and base metal mineralisation.
Recent Contacts & Presentations:
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), Noxopharm Limited (NOX), Botanix Pharmaceuticals Ltd (BOT), Emerald Resources NL (EMR)