Market Update & Important Indicators
A deluge of earnings reports swung individual stocks but left major indexes little changed. In general, stocks haven't moved much lately, a worrying sign to some investors who wanted to see sustained momentum after major indexes repeatedly hit new highs earlier in July. Many investors had expressed hopes that a stream of stronger-than-expected corporate earnings would propel stocks further. Yet with more than half of S&P 500 companies having reported their second quarter results, the index has moved an average of 14 points between its daily low and daily high this month through Wednesday — its narrowest trading range since November 2014.
European stocks fell, as bank shares were dragged down and as investors grappled with a stream of corporate earnings reports from key companies such as Royal Dutch Shell and Adidas. The Stoxx Europe 600 fell 1% to close at 339.47, marking the first loss in four sessions. The pan-European index on Wednesday finished up by 0.4%, led by a surge in French equities. The topic of Brexit, or the U.K.'s pending exit from the European Union, has been a major theme in European earnings reports in the wake of the U.K.'s June 23 referendum. The impact of currency headwinds and low oil prices have also been areas of concerns for companies.
Shares in Japan dragged on Asian markets Thursday, as investors reined in their expectations for a stimulus package from the country's government. Meanwhile, worries in China about a possible clampdown on wealth management products also weighed on buying interest across the region. The Nikkei Stock Average fell 1.1%, deepening losses in the afternoon. Meanwhile, the Shanghai Composite Index pin-balled between positive and negative zones, and the Hang Seng Index closed down 0.2%. South Korea's Kospi was down 0.2%. The Bank of Japan started a two-day policy meeting Thursday and some investors expect it to team up with the government to announce more significant stimulus measures on Friday. Prime Minister Shinzo Abe already said Wednesday that he is preparing a Y28 trillion fiscal stimulus, much greater than previous expectations for a 10 trillion yen stimulus. In China, Shanghai shares closed up 0.1%, as the main benchmark appeared to stabilize after dropping as much as 3.6% in the previous trading session. Local media reported that China's banking regulator was moving to adopt a tougher stance on wealth management products, which may direct money out of stocks into lower risk investments, such as bonds.
Australian shares rose as strength in the mining sector offset falling energy stocks following a mixed performance by commodities overnight. The S&P/ASX 200 ended up 16.9 points, or 0.3%, at 5556.6 points, on Thursday as the banks also gained.
Copper futures closed higher in London on the back of a weaker dollar following Wednesday's decision by the Federal Reserve to leave interest rates unchanged. The London Metal Exchange's three-month copper contract was 0.96% higher at $4,896.5/t at the PM kerb close Thursday. Other base metals were also higher. Aluminium closed up 1.1% at $1,599/t, zinc was up 1.5% at $2,203/t, nickel was up 3.3% at $10,652/t, lead was up 0.3% at $1,792/t and tin was up 0.5% at $17,760/t.
In this Issue
Dacian Gold (DCN) | Westralia reveals higher quality ounces | BUY
Market cap $485.2m | Current Price $3.64 | Valuation $4.00
Dacian Gold (DCN) released an updated resource for the Westralia deposit, part of the Mt Morgans Gold Project in Western Australia, with 8.6Mt at 5.8g/t for 1.6Moz. While the increase in total contained gold is incremental (7% or 101koz), Measured and Indicated Resources increased by 176% and the overall grade received an uplift of 0.7g/t to 5.8g/t. With the updated resources for both Westralia and Jupiter now complete, DCN can now commence detailed mine design and scheduling ahead of the Feasibility Study, due late 2016. Argonaut is predicting a significant increase to gold production in the early years of the project, driven by a larger contribution of higher grade underground ore. We forecast 240koz to 255koz in the first two years of the mine life compared to the Scoping Study estimate of 200-207koz. Argonaut maintains a BUY recommendation with a revised target price of $4.00 (previously $3.60).
Resolute Mining (RSG) | Ramping up a pipeline of projects | HOLD
Market cap $542m | Current Price $1.56 | Valuation $1.28
Resolute (RSG) delivered 83koz @ AISC A$1107 during the June quarter, beating Argonaut’s estimate of 78koz Au. The balance sheet improved significantly during the quarter with net cash increasing to A$102m (from A$19m March Q). Underpinning strong financial performance was the significant uptick in Syama production to 61koz Au (from 53koz March Q. +15% q-o-q), principally due to a 25% ramp up in sulphide production. The Syama underground was approved to move the project to 250kozpa, Ravenswood extension was approved and Bibiani in Ghana showed positive feasibility outcomes. We have upgraded our target price to account for improved output and the increase in net cash, but we retain our HOLD recommendation due to share price appreciation.
Recent Contacts & Presentations
Metro Mining (MMI), Pacific Energy (PEA), Novatti Group Ltd (NOV), Hammer Metals Ltd (HMX), Helix Resources Ltd (HLX), Saracen Mineral Holdings Ltd (SAR), Merdeka Copper Gold (MDKA: IJ), Monument Mining (MMY.V: TSX), Apollo Consolidated (AOP), Botanix Pharmaceuticals (BOT), Sino Gas & Energy (SEH), 4DS Memory Ltd (4DS), Troy Resources (TRY), Gold Road Resources (GOR), Bionomics Ltd (BNO), Orthocell Ltd (OCC), Walkabout Resources Ltd (WKT), Migme Ltd (MIG), Syntonic Ltd (SYT), Berkeley Energia (BKY)
Please read Argonaut's Important Disclaimers & disclosures