Morning Notes

17/05/2017 Argonaut Morning Note

Market Update & Important Indicators:

The Nasdaq Composite headed toward a fresh record close intraday, as shares of technology companies climbed in an otherwise downbeat session. The tech-heavy index has outperformed both the S&P 500 and the Dow Jones Industrial Average in 2017 as investors have piled into the shares of companies thought to benefit from U.S. economic growth. That's left the Nasdaq up about 14% this year, while the S&P 500 has gained 7.2% and the Dow industrials have risen 6.2%. Still, some investors and analysts caution that technology stocks, which have risen double-digit percentages in the S&P 500 in 2017, may be vulnerable to a pullback. Global fund managers say the Nasdaq has become the most crowded trade, Bank of America Merrill Lynch found in a survey. The Nasdaq Composite rose 0.3%, on course for its 33rd record close of the year. The Dow Jones Industrial Average fell 1 point, or less than 0.1%, to 20982 and the S&P 500 lost less than 0.1%. The U.S. gold price rose again for the day, finishing 0.5% higher at 1,236.70 US$/oz.

European stocks finished slightly lower, with declines in automobile shares and a rise in the euro drawing Germany's benchmark down from its previous record. The Stoxx Europe 600 index was down less than 0.1% to end at 395.91. The index on Monday ended up 0.1%, a second straight advance that kept the index around its highest level since August 2015. The pan-European index's recent gains have seen contributions from German and British blue chips, with the Germany's DAX 30 logging a record close Monday, and the U.K.'s FTSE 100 scoring one.

In Asia-Pacific markets, Chinese stocks ticked higher, with the Shenzhen A Share index up 2.1%. Korea's KOSPI index ended up 0.2%. Japan's Nikkei 225 index rose 0.3%, but closed just shy of the 20,000 mark, which it last reached in 2015. The Nikkei got to 19998.49 in the morning before pulling back along with some other Asian stock markets. The Nikkei finished at 19919.82. The FTSE Straits Times Index ended 1.1% lower at 3227.71. Property stocks were down as new private home sales slowed in April, with the number of units sold falling 12.6% from the previous month. The FTSE Bursa Malaysia index gave up earlier gains to close marginally lower. The 30-stocks benchmark index closed down 0.03% at 1,778.15 points. The JSX index dropped 0.7% to 5647.0, with 174 decliners and 139 gainers.

Australian shares perked up, with broad gains lifting the market in a choppy session. Resources stocks lent their weight to the push, as crude oil prices continued to advance in Asian trading on fresh expectations major oil-producing countries will extend their agreed output cut, and Chinese iron-ore futures showed further signs of stabilizing after a recent slump. That offset weakness in the financial sector, as National Australia Bank and Macquarie traded ex-dividend. Recovering from mid-session weakness, the S&P/ASX 200 rose 12.1 points, or 0.2%, to finish at 5850.5.

The London Metal Exchange's three-month copper contract closed down 0.04% at $5,611/t. The other base metals finished mixed on Tuesday. Falling for the day, lead prices shed 2.5% at 2,074/t, nickel prices dropped 1.2% and zinc prices fell 1.1%. Aluminium prices bucked the trend rising 1.0% to 1,921/t whilst tin prices finished flat at 20,051/t.

In this Issue:

West African Resources (WAF) | High grades running deep at M1| Buy
Market Cap $128m | Current Price $0.26

West African Resources (WAF) has released updated drill results from the M1 South deposit at Sanbrado in West Africa. The latest high grade intersections included 29.5m @ 20.7g/t Au and 22m @ 10.5g/t Au. Mineralisation in the southernmost shoot extends down to around 400m below surface with visible gold recorded in the last hole drilled. WAF has five rigs (a sixth arriving this month) drilling out the deeper portions of the main part of M1’s 350m strike extent which is twice the depth of the current reserve used in the Feasibility Study. Argonaut believes the high grades and significant depth extension will result in a significantly increased resource (currently ~300koz), but more importantly, the real value will come from the significant impact to the economics of the optimised Feasibility Study (FS). BUY, TP $0.40ps.

Recent Contacts & Presentations:

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), Saracen Mineral Holdings Ltd (SAR), AWE Limited (AWE), Paringa Resources Ltd (PNL)

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Argonaut Morning Note