Morning Notes

17/03/2017 Argonaut Morning Note

Market Update & Important Indicators:

Stocks retreated intraday, weighed down by declines in shares of health-care and energy companies. The pullback left all but two of the S&P 500's 11 sectors in negative territory for the day. Some investors said it wasn't surprising to see a pause with stocks trading near all-time highs and at higher-than-average valuations. "The markets have priced in a lot of very good news-better economic growth, a big fiscal package, deregulation and lower taxes," said Michael Arone, chief investment strategist at State Street Global Advisors. The Dow Jones Industrial Average lost 40 points, or 0.2%, to 20910. The S&P 500 edged down 0.3%, and the Nasdaq Composite fell 0.1%. The U.S. gold price bucked the trend rising 0.5% at 1,225.80 US$/oz. Shares of health-care companies were the worst performers in the S&P 500. Earlier, the House Republican health plan, the main element in the effort by Republicans to replace most of the Affordable Care Act, advanced in Congress by a narrow vote.

European stocks leapt to their strongest levels in more than a year, buoyed by a rally in mining shares, and after Dutch voters rebuffed Geert Wilders's far-right party in a general election. The Stoxx Europe 600 index climbed 0.7% to end at 377.73, its highest close since December 2015, FactSet data showed. The pan-European index on Wednesday finished up by 0.4%. Germany's DAX 30 index rose 0.6% to 12,083.18, and France's CAC 40 added 0.6% at 5,013.38.

Japanese stocks initially came under pressure as the yen strengthened against the dollar and government bond yields fell, pressuring export-reliant stocks and life insurers who invest heavily in government bonds. The index recovered to trade up 0.1%, however, as the Bank of Japan held its own accommodative policies steady. Shares elsewhere in the Asia-Pacific region were solidly higher as investors digested news from the Federal Reserve. Korea's Kospi index rose 0.8%, hitting levels last seen in April 2015, and Hong Kong's Hang Seng Index gained 2.1% to end at its highest since August 2015. The Shanghai Composite Index added 0.8% as China raised a suite of key short-term interest rates for the second time since late January. Analysts said the moves underscore Beijing's sense of urgency to prevent capital outflows from accelerating and desire to keep risks in its financial system from generating crises in a weak economy.

A jump in resources stocks drove a third-straight day of gains for the Australian equity market, its longest positive streak in almost five weeks. After a volatile session, a late rally lifted the S&P/ASX 200 to an increase of 11.8 points, or 0.2%, to 5785.8. The materials sector jumped 2.5%, extending Wednesday's push, after the spot price for iron ore rose overnight following stronger-than-expected economic data out of China, Australia's biggest export market and the world's top consumer of the steelmaking ingredient. Energy stocks also advanced as crude-oil prices extended gains in Asian trading after an unexpected drop in U.S. stockpiles lifted sentiment, which has been weakened of late by worries about the global supply glut.

The London Metal Exchange's three-month copper contract closed up 0.77% at $5,909/t. The other base metals were mainly higher Thursday. Aluminium prices rose 0.7% at 1,887/t, zinc prices rose 0.8% at 2,811/t, nickel prices rose 0.2% at 10,162/t and tin prices rose 1.4% at 20,212/t. Lead finished the day flat at 2,231/t.

In this Issue:

Metro Mining (MMI) | Compelling BFS for Bauxite Hills | BUY
Market Cap $103m | Current Price $0.15 | Target Price $0.44

Metro Mining has released an updated Bankable Feasibility Study (BFS) for the Bauxite Hills project in Queensland, Australia. The direct shipping bauxite ore (DSO) project boasts annual EBITDA of $145mpa, a $601m NPV10 and an 81% IRR. This is the first study to incorporate the newly acquired Gulf Alumina tenements which effectively double the Ore Reserve and give access to established haul roads and a cleared barge loadout site. In comparison to the January 2016 Pre-Feasibility Study (PFS), steady state mining has increased from 4Mtpa to 6Mtpa, total delivered cash operating costs have declined ~$3.00/t to $34.70 and initial development capex declined from $40.1m to $35.8m. A key change to the initial study is an additional $36.7m capex in years 2-3 for expansion capex to take the project from 2Mpta to 6Mtpa. BUY recommendation with a $0.44 target price.

Recent Contacts & Presentations:

Troy Resources Ltd (TRY), Hazer Group Ltd (HZR), Berkeley Energia Ltd (BKY), Sovereign Metals Ltd (SVM), Kin Mining (KIN), Vital Metals Ltd (VML), Mincor Resources (MCR), Dacian Gold (DCN), 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)

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