Market Update & Important Indicators:
U.S. stocks fell Monday, putting the Dow Jones Industrial Average on track for its longest losing streak since 2011 as doubts mounted about the Trump administration's ability to deliver on pro-business policies. Government bonds and gold strengthened, while the dollar fell as some investors said political uncertainty was deflating a post-election rally that pushed the Dow to record highs earlier this month. On Friday afternoon, House Republican leaders abandoned a bill to repeal Obamacare amid a lack of support, raising doubts about the likely success of other complex legislative efforts, including a tax overhaul and infrastructure spending. If the Dow closes lower Monday, it would mark the eighth straight declining session. The last time the blue-chip index fell for eight consecutive days was in late July and early August 2011. Financial shares were the biggest decliners in the S&P 500 Monday, falling 0.9%. Some health-care stocks rose after it became clear that the Affordable Care Act was staying in place for now. Bucking the trend for commodities was the U.S. gold price which rose 0.9% to 1,253.80 US$/oz.
European stocks finished in the red Monday, alongside a slide for global equities, as investors continued to worry the Trump administration will not be able to push through its reforms. The Stoxx Europe 600 index lost 0.4% to end at 375.01, though it finished above its session lows. On Friday, the pan-European benchmark dropped 0.2% to end 0.5% lower for the week, as it became clear U.S. President Donald Trump was running into difficulties getting approval for his repeal of Obamacare. That sparked concerns Trump will struggle to follow through on other election promises, such as corporate tax cuts, the prospect of which has helped drive a recent rally in stocks world-wide. Republican leaders ended up pulling their health-care bill from a House of Representatives vote late Friday, and analysts said that helped spark selling in global stocks on Monday.
Japan's Nikkei Stock Average dropped 1.4% to its lowest levels since early February as the yen strengthened. Infrastructure stocks, which rose in anticipation of a Trump-driven increase in spending, were among Monday's largest decliners in Japan, while shares of insurers who invest heavily in government bonds also came under pressure. Most other stock markets in Asia logged modest declines, with indexes in Hong Kong down 0.7% and shares in Shanghai down 0.1%.
Australia's stock market ended Monday in the red as jitters over President Donald Trump's ability to enact his corporate-friendly agenda hit commodity prices and dragged global markets lower. The S&P/ASX 200 ended down 0.1% or 6.8 points at 5746.7. Other regional bourses, including New Zealand's share market, also declined. Investors have become concerned over the fate of Trump's pro-business economic agenda after his administration and congressional Republicans failed to pass a health-care bill to replace the Affordable Care Act. Still, a consequent jump in the price of gold, a perceived safe-haven asset, lifted the country's band of precious-metal producers.
The London Metal Exchange's three-month copper contract closed down 0.76% at $5,760/t. All other base metals finished lower on Monday. Aluminium prices fell 0.4% at 1,921/t, zinc prices fell 2.5% at 2,742/t, lead prices dropped 2.5% at 2,285/t, tin prices fell 1.8% at 19,520/t, whilst nickel prices also finished down 1.1% at 9,703/t.
In this Issue:
Independence Group (IGO) | Value now, great 2019 vintage | BUY
Market Cap $2,159m | Current Price $3.62 | Target Price $4.12
The ramp-up of Independence Group’s (IGO) flagship Nova nickel/copper mine was recently set back ~3 months following underground contract mining issues. Argonaut believes management have taken sufficient action to get the mine back on track and limit further project delays. We see the subsequent 10% drop in the stock’s price as a buying opportunity and take the view that upcoming positive newsflow and significant EBITDA growth out to 2019 will support strong share price performance. The Company is set to release results of the Long Island Study for Tropicana (IGO: 30% Anglo Gold 70%) mid-year which should see the life of this asset extended out to 2027-2030. Nova is due to be fully ramped-up in Q3 CY17 and the majority of life-of-mine (LOM) underground development will be installed by mid-CY18, at which time, project cashflow will expand considerably. This is set to coincide with the highest production and lowest cost year of the Tropicana mine life. This will lead to considerable EBITDA growth out to FY19. Upgrade to BUY (from HOLD) with a $4.12 target price.
West African Resources (WAF) | Mini to M-class | BUY
Market Cap $106m | Current Price $0.22 | Target Price $0.44
West African Resources (WAF) is a well-funded emerging gold producer progressing the development of wholly owned 2Moz Sanbrado Gold Project in Burkina Faso. WAF acquired the project in 2014 and completed an open pit feasibility study in February 2017. The Company is advancing towards a number of milestones over the coming months including the completion of an optimisation study aimed at enhancing project economics. Sanbrado’s strategic proximity to a number of advanced projects increases potential for regional consolidation. Argonaut initiates coverage of WAF with a BUY recommendation and a $0.40ps target price.
Recent Contacts & Presentations:
Leaf Resources Ltd (LER), Alchemy Resources Ltd (ALY), MZI Resources Ltd (MZI), Seafarms Group Ltd (SFG), Marindi Metals Ltd (MZN), Rift Valley Resources Ltd (RVY), Botanix Pharmaceuticals Ltd (BOT), Thundelarra Ltd (THX), DTI Group Ltd (DTI) OpenDNA Limited (OPN), 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)