Market Update & Important Indicators:
US markets were closed overnight in observance of the Memorial Day public holiday. A political crisis in Italy put markets on edge Monday, with Italian stocks selling off sharply, renewing fears among investors in one of Europe's largest economies. Italy's benchmark stock index, the FTSE MIB, on Monday closed down 2.1% after losing as much as 2.3% in mid-afternoon trading, helping to drag down European stocks broadly. The Stoxx Europe 600 closed down 0.3% after losing as much as 0.7% during the day. Italian banks were especially hard hit. Banco BPM SpA was among the biggest losers on the Stoxx 600 Europe on Monday, having lost at least 6.3%. Plunging prices set off circuit breakers that halted trading briefly for banks BPM, BPER SpA, Unione di Banche Italiane SpA, FinecoBank Intesa Sanpaolo SpA, Banche Generali SpA, along with Italy's largest bank, UniCredit SpA. The suspensions were automatic and based on price fluctuations, the Italian Stock Exchange said. Italy was embroiled Monday in what some are calling a constitutional crisis after President Sergio Mattarella vetoed the appointment of a euroskeptic economy minister, recommended by a coalition of the populist 5 Star Movement and the League.
Party leaders from 5 Star called for Mr. Mattarella's impeachment in response. Mr. Mattarella has instead turned to International Monetary Fund veteran Carlo Cottarelli to form a government. Mr. Cottarelli said Monday he'd attempt to form a government, but he is likely to face resistance from the populist bloc, which enjoys a majority in parliament. The situation could lead to fresh elections focused squarely on the issue of Italy's participation in the euro. "It's difficult to see Mr. Cottarelli as the head of the transition government. Many parties won't give him a confidence vote," said Vincenzo Longo, a market analyst at IG Italia. Without a vote of confidence, Italy might head back to the polls as early as this summer, he said.
Pressure on Asian stocks eased Monday on political developments, as potential for a summit between U.S. President Donald Trump and North Korean leader Kim Jong Un revived. Japan's Nikkei 225 closed 0.1% higher, the Korea KOSPI index gained 0.8% and Hong Kong's Hang Seng rose 0.7%.
After posting its worst week in 2 months, Australian stocks fell further today as energy stocks continued to send the broader market lower. The S&P/ASX 200 dropped 0.5% to 6004, giving Malaysia's benchmark a run for its money in Asia-Pacific's worst performer today. Energy slid a further 2.9%, putting the slide since last Monday's latest 3-year high at 7.3%. That after oil slumped on Friday and is off some 2% further today. The materials sector fell 1.3% itself today, with BHP skidding 2.9% amid its energy exposure while Rio Tinto shed but 0.1%. Consumer staples lost 1.15% to reverse Friday's jump. But the IT sector rose 1% today.
The London Metals exchange was closed overnight in observance of the Spring Bank public holiday.
In this issue:
Fortescue Metals Group (FMG) | Eliwana is a go!| HOLD
Market Cap $14bn| Current Price $4.48 | Target Price $4.88
Fortescue Metals (FMG) has green-lit the Eliwana Project in Western Australia following Board approval this week. The project will include an additional 143km rail spur, a new 30Mtpa dry ore processing facility and associated infrastructure. Estimated capital costs for the project are US$1.275bn with production due to commence in December 2020. FMG will deploy capital in stages with the bulk of spending expected in FY20. Management had previously suggested construction could begin as early as July-August 2018. The news is positive and helps FMG sustain a long term run rate of 170Mtpa, however questions still remain for Eliwana Reserves (due August 2018), operating costs as well as the planned product integration. Maintain HOLD.
Independence Group (IGO) Jaguar Sale | HOLD
Market Cap $2,764 | Current Price $4.68 | Target Price $4.15
Independence Group (IGO) has entered into an agreement with CopperChem Limited, a wholly owned subsidiary of Washington H. Soul Pattinson, to sell its Jaguar asset for $73.2m. IGO will receive $25m upfront and a further $48.2m in deferred cash payments. The Company stated Jaguar no longer fits with its focus on high-quality, long life assets. Argonaut valued Jaguar at $147m, so we regard this transaction as non-accretive. Going forward, the Company has a strategy to focus on battery minerals to take advantage of what they term “a battery super-cycle”. Argonaut upgrades IGO to HOLD with a revised target price of $4.15.
Recent Contacts & Presentations:
Triton Minerals (TON), Calima Energy (CE1), Peel Mining (PEX), Catalyst Metals (CYL), Vault Intelligence (VLT), Doray Minerals (DRM), Nzuri Coppoer (NZC), Bowen Coking Coal (BCB), Phosphagenics Limited (POH) Great Boulder Resources (GBR), Orthocell (OCC), Northern Minerals (NTU), ABM Resources Ltd (ABU), Vital Metals Ltd (VML), Todd River Resources Ltd (TRT), Pacific Energy Ltd (PEA), Carnarvon Petroleum Ltd (CVN), Australian Mines Ltd (AUZ), Australian Finance Group (AFG), Paladin Energy Ltd (PDN), Cooper Energy Ltd (COE), Medibio Ltd (MEB), Botanix Pharmaceuticals Ltd (BOT), Salt Lake Potash Ltd (SO4), Golden Mile Resources Ltd (G88), NTM Gold Ltd (NTM), Ausmex Mining Group Ltd (AMG), Matrix C&E Ltd (MCE), Austal Ltd (ASB), Decmil Group Ltd (DCG), Ventnor Resources Ltd, Ausdrill Ltd (ASL), Alice Queen Ltd (AQX), PNX Metals Ltd (PNX), Alliance Resources Ltd (AGS), Myanmar Metals Ltd (MYL), Primary Gold Ltd (PGO), Sino Gas & Energy Holdings Ltd (SEH)