Morning Notes

15/05/2017 Argonaut Morning Note

Market Update & Important Indicators:

U.S. stocks edged lower Friday, as the latest batch of U.S. economic data fell short of expectations. The lacklustre readings follow a string of soft first-quarter data. Investors have largely brushed off signs of weak economic growth in 2017 on the rationale that the first few months of the year tend to be slow and corporate earnings have been stronger than expected. U.S. stocks are hovering close to record highs, while volatility has fallen to historical lows. The Dow Jones Industrial Average fell 23 points, or 0.1%, to 20897. The S&P 500 dropped 0.2%, and the Nasdaq Composite edged up 0.1%. The stocks that climbed were defensive plays. Utilities were the best performers in the S&P 500 on Friday, up 0.5%. The U.S. gold price rose 0.2% to 1,227.70 US$/oz. Earlier Friday, retail sales improved slightly less than anticipated in April, according to the Commerce Department, and a closely watched measure of underlying U.S. inflation came in soft, the Labor Department said. When excluding food and energy prices, the consumer-price index, rose 1.9% in April from the prior year, the first time it's been below 2% since October 2015.

The Stoxx Europe 600 index ended up 0.3% at 395.63, with telecom and health care doing the heavy lifting. Investors had a fresh round of corporate updates to consider on Friday, as well as economic data. Germany's quarterly gross domestic product revved up, but industrial production declined in the Eurozone in March. The pan-European benchmark on Thursday fell 0.6%, pulling back from a 21-month high. The index gained 0.3% for the week, which kicked off Monday with a small decline in European bourses after centrist and independent Emmanuel Macron won France's presidential election on Sunday. European equities had pushed higher ahead of the vote on signs Macron would defeat far-right candidate Marine Le Pen, with French shares hitting a nine-year high. France's CAC 40 PX1, +0.41% has jumped more than 11% this year.

Stock markets were broadly lower in Asian trading hours, tracking weakness in Europe and the U.S. on Thursday. Japan's Nikkei Stock Average fell 0.4% Friday as the yen strengthened modestly against the dollar, but gained 2.3% for the week. South Korea's Kospi was off 0.5% after reaching a record high. Hong Kong's Hang Seng Index inched higher for a fifth consecutive trading day 0.1% while the Shanghai Composite rose 0.7%, led by gains in insurance, aviation and automotive shares.

Banking shares weighed on the Australian stock market on Friday, as investors continued to digest the government's plans for a levy on the liabilities of the country's biggest lenders. Bank executives have argued against the federal move to raise 6.2 billion Australian dollars (US$4.57 billion), saying they weren't consulted and that any taxes would ultimately get picked up by shareholders or borrowers. Analysts estimated the levy could cut the big banks' earnings by up to 6% a year, unless they can offset it by raising lending rates and cutting costs. With most industry sectors weaker for the day, the S&P/ASX 200 fell 41.4 points, or 0.7%, to settle at 5836.9.

The London Metal Exchange's three-month copper contract closed up 0.3% at $5,560/t. The other base metals finished mixed on Friday. Aluminium prices rose 0.9% to 1,886/t, whilst tin prices 0.2% at 19,975/t. Lead prices fell 2.3% to 2,120/t, nickel prices fell 0.2% to 9,276/t whilst zinc prices fell 1.4% 2,550/t.

In this Issue:

Millennium Minerals (MOY) | Expanding production and mine life | Spec Buy
Market Cap $170m | Current Price $0.20

Millennium Minerals (MOY) operates the Nullagine Gold Mine, located in the Pilbara region of Western Australia. FY17 guidance is 80-85koz at an all-in sustaining cost (AISC) A$1,190-1,220/oz. Whilst the current short reserve life (~2 years) is acknowledged, the investment case is becoming more compelling as MOY demonstrates the potential for mine life extension and production upside via a proposed sulphide flotation treatment option. We see strong potential for a number of near term catalysts shown below which would serve to back-fill value from an extended mine life and lower costs by targeting resources into the fresh rock. MOY has $27.7m in cash and baseline studies are progressing to determine the viability of treating fresh ore sources. Exploration remains a strong area of growth with $22m budgeted for 2017 with a focus on resource to reserve conversion and testing the oxide and sulphide potential along the 40km of strike extent at Nullagine. Argonaut assigns a Speculative Buy and target price of $0.33ps.

Recent Contacts & Presentations:

Apollo Minerals Ltd (AON), Ironbark Zinc Ltd (IBG), Sovereign Metals Ltd (SVM), Pilbara Minerals Ltd (PLS), Laconia Resources Ltd (LCR), Hazer Group Ltd (HZR), Transerv Energy Ltd (TSV), Ausquest Ltd (AQD), Quintis Ltd (QIN), Paradigm Biopharma Ltd (PAR), Pharmaust Ltd (PAA), Strandline Resources Ltd (STA), PharmaNet Group (PNO), Emerald Resources NL (EMR), Echo Resources (EAR), Investigator Resources Ltd (IVR), Beadell Resources Ltd (BDR), Pantoro Ltd (PNR), Botanix Pharmaceuticals Ltd (BOT), Resolute Mining Ltd (RSG), Hotcopper Holdings Ltd (HOT), Prairie Mining Ltd (PDZ) Vital Metals Ltd (VML), Red River Resources Ltd (RVR)

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