Market Update & Important Indicators
Global stock markets were mixed Thursday as investors focused on the latest batch of corporate earnings and digested a weaker-than-expected reading for second-quarter U.S. gross domestic product. U.S. stocks were dragged lower after the Commerce Department said Thursday that U.S. economic output in the second quarter expanded at an annual rate of 2.3%. Economists surveyed by The Wall Street Journal had expected the rate of growth to be 2.7%. However, both the Dow and the S&P 500 finished the days trading relatively flat.
Australian stocks advanced for a second straight day Thursday, echoing gains in European and U.S. shares as markets in China showed signs of settling following recent sharp selling. The ASX 200 rose 0.8% to 5,670.
Chinese shares finished lower Thursday, swinging wildly in the last hour of trading, and extending a pattern of intraday volatility that started with mid-June's selloff. Earlier this week, China's stock regulator said it would continue to support the market, though authorities don't disclose the pace of buying, or the total amount that they have bought up in stocks. The Shanghai fell 2.2%, while Hong Kongs Heng Seng dropped 0.5%.
Metals were down across the board on the LME. Copper fell 1.2% to US$2.38/lb and nickel lost 2.0% to US$4.98/lb. Gold was also down, dropping 0.8% to US$1,088/oz.
In news over night, Oceana Gold (OGC) announced the acquisition of Canadian listed Ramarco Minerals for C$898m (closing price). The market showed disapproval for the deal with Oceana’s TSX listing dropping 20%. A second deal announced overnight included Barrick Gold Corp., who agreed to sell a 50% in its Zaldivar copper mine in Chile to Antofagasta for $1.01B as it moves to pay down its debt amid falling gold prices.
Kalgoorlie Diggers and Dealers 3rd to 5th August
Argonaut will be attending eight site visits through the course of the week.
In This Issue
AWE Limited | AWE | Q2-A good end to a hard year | BUY TP A$2.09/ps
AWE Limited (AWE) released its Q4 FY2015 results with total production at the top end of guidance with 5.1 mmboe, (Argonaut forecast 4.9 mmboe), mainly due to the better than expected Pateke-4H tie in well. Sales revenue of A$284m (Argonaut forecast A$283) was slightly below guidance mainly due to lower oil prices. Capex and Expex spend were within guidance at A$63.7m and A$240m respectively, and within Argonaut estimates of A$68m and A$255m. Cash reduced to A$47m with debt drawn to A$170m from AWE’s $400m facility.
During the year AWE had positive news flow coming from the successful tie-in of the Pateke-4H well, significant increase in Sugarloaf 1P & 2P reserves, successful tie in of the Yolla-6 development well (with Yolla 5 expected to be connected shortly) and the Lengo FEED progress. In addition, the Perth Basin exploration program was a glowing success with the Irwin-1 gas discovery of 149 Bcf of gross 2C Resources and the Waitsia discovery now more than certain to exceed its initial 290 Bcf estimates. Whilst there was a slight downside with the Yolla volume downgrade (~5.5 mmboe) AWE finishes the year with clear sight to achieve its strategy target of 10 mmboe pa production within 5 years.
Dacian Gold (DCN) | SPEC BUY
Dacian Gold (DCN) updated its Resource (excluding heap leach material) at Jupiter to 1.0Moz @ 1.3g/t (was 698koz @ 1.5g/t), incorporating a re-interpretation of the Doublejay Resource and additional drilling results from Heffernans (see below). Total project inventory (excluding heap leach material) increases to 2.4Moz @ 2.2g/t (see breakdown in Table 1, Page 2). The Mt Morgans project is moving rapidly towards the 3Moz mark, with a Resource update expected at the Westralia deposit. The project has the potential to become a >150koz producer, developed as a standalone or toll-treating operation. Given the sizable inventory and proximity to infrastructure, the asset is also likely to attract corporate attention with further development. DCN is one of Argonaut’s preferred gold development stocks given exposure to AUD denominated costs, exploration upside and proven management. Speculative Buy maintained.
Panoramic Resources (PAN) | BUY
Panoramic Resources (PAN) released June Q results with group production of 4.6kt Ni in concentrate/ore (previously announced), down 3% Q-on-Q. Cash costs increased 5% to A$6.32/lb, mainly driven by lower production and high mining costs at Lanfranchi. Savannah had record annual production with 8.7kt Ni in concentrate. H1 FY16 will be defined by Resource definition of new orebodies at both mines and a hiatus of mining at Lanfranchi. H2 FY15 should see the initiation of mining from the high grade Lower Schmitz orebody at Lanfranchi. Cash outflow for the Q was $7m, with cash and receivables at $65m (debt $2.9m).
Sino Gas and Energy (SEH) | BUY
Sino Gas (SEH) released its Q2 2015 report capping off an operationally successful quarter. The Company finalised the installation and equipment tie in phase of wells for the Linxing (LX) gathering station, however the first gas date shifted by one month to August due to heavy rain. Positively Sanjiaobei (SJB) recorded an average production rate of 4.3mmscf/d. In addition, SEH drilled a total of 13 wells comprising two exploration, 10 vertical development and one horizontal with five production tests performed with results within the expected range. The vertical TB-27 well was a standout with a 1.8mmscf/d flow rate from an unfracced reservoir. Importantly, the Company addressed in detail the significant market concerns arising from 1) Gas offtake volumes lagging behind installed capacity 2) the lag in transfer of revenue from its PSC partners to SGE and 3) China gas.
Recent Contacts & Presentations
Resolute (RSG), Pacifico (PMY), Kingsgate (KCN), Troy (TRY), Northern Star (NST), Sandfire (SFR), Regis (RRL), Saracen (SAR), Sino Gas & Energy (SEH), Dacian (DCN), Buru Energy (BRU), Carnarvon Petroleum (CVN), Otto Energy (OEL), Empire Oil & Gas (EGO), Pura Vida Energy NL (PVD), High Peak Royalties (HPR), Karoon Gas (KAR), Austex Oil (AOK), Central Petroleum (CTP), Senex Energy (SXY), Newmont, Coventry (CYY)