Morning Notes

06/08/2018 Argonaut Morning Note

Market Update & Important Indicators

U.S. stocks rose, lifting the S&P 500 to its fifth consecutive weekly gain, after a string of upbeat earnings helped reassure investors that the market is on solid footing. The Dow Jones Industrial Average added 136.42 points, or 0.5%, to 25462.58. The S&P 500 was up 0.5%, to 25,436 while the Nasdaq Composite edged up 9.33 points, or 0.1%, to 7812.01. For the week, the Dow industrials rose less than 0.1%, the S&P 500 rose 0.5% and the NASDAQ advanced 1%. Stocks were steady after Labor Department data Friday showed U.S. nonfarm payrolls rose a seasonally adjusted 157,000 in July, less than the 190,000 that economists surveyed by The Wall Street Journal had expected. Still, over a broader period, job growth looks strong, analysts said-with the pace of hiring through the first seven months of this year rising from last year's average through July. Robust economic data and corporate earnings have helped keep investors relatively optimistic in recent months, even as global trade tensions have ratcheted higher. After reporting solid revenue and profit gains this week, Apple became the first U.S. company to surpass $1 trillion in market value. On Friday, Kellogg shares jumped $2.27, or 3.2%, to $72.15 after the cereal maker raised its full-year guidance Thursday, and Dish Network soared 4.34, or 15%, to 34.20 after posting better-than-expected results. The US gold price gained 0.5% to 1213.3 US$/oz.

The Stoxx Europe 600 index closed up 0.7% at 389.16, helped by a weak euro and pound, despite a small fall in the dollar in the wake of below-forecast U.S. jobs data. The U.K.'s FTSE 100 ended up 1.1%, Germany's DAX up 0.6% and France's CAC 40 up 0.3%. European semiconductor makers such as BE Semiconductor Industries, AMS AG and Siltronic AG climbed after a tech-driven rally on Wall Street, while U.K. packaging group Mondi topped gainers, rising 7.9%. Italy's FTSE MIB ended up 0.8% and Spain's Ibex 35 closed up 0.4%.

Trade worries have weighed down major indexes in recent sessions, sending most Asian indexes to weekly losses. The Shanghai Composite Index fell 1%, the largest one-week point and percentage decline since February. Hong Kong's Hang Seng was down 0.1%, while Japan's Nikkei edged 0.1% higher. Strategists at Deutsche Bank said in a note Friday. Despite Friday's gains, the Stoxx Europe 600 was set to end the week down. Trade fears have also weakened the Chinese yuan, sending it to 14-month lows against the dollar.

Faltering banks and miners weighed on Australia's stock benchmark today, capping its worst week since late March. After rising initially, the S&P/ASX 200 finished down 0.1% at 6234.8, putting the week's decline at 1%. The heavily weighted Big 4 banks fell 0.6-1.2% ahead of CBA's fiscal-year report on Wednesday and fell an average 2.7% this week. Australia's big miners also added to yesterday's fall after another move lower in metals prices. BHP Billiton dropped 1.6% to more than double the week's drop. Still, tech stocks rebounded 2.1% today after 4-straight declines as Apple hit fresh record highs in the US.

Base metal prices were mostly up on the London Metal Exchange. Nickel recorded a 1.7% gain to 13,456/t whilst tin rose to 19,675/t. The 3-month copper contract added 1.1% to 6,178/t, Zinc, the largest gainer, appreciated 2.0% to close at 2,675/t. Aluminium recorded a 0.4% decline to 2,002/t.

In this issue

Gold Road Resources (GOR) | Navigating the whey to production | BUY

Market Cap $565m | Current Price $0.65 | Target Price $0.99

Gold Road (GOR) recently announced a revised capital cost estimate of A$621m for the Gruyere Project in Western Australia. It’s the second time the capital cost has been revised since the original $507m capex announced in the 2016 Feasibility. The increases have been partly due to scope changes associated with larger infrastructure as well as force majeure and overall project design modifications. Whilst the cost blow-out was disappointing, the net exposure to GOR was relatively minor at ~$20m. Investors are discounting the stock on the premise of further capital cost blowout and extension to timelines to first production. Our recent site visit to Gruyere re-affirmed our view that the project is likely to produce first gold around the end March Q/early June Q and we have comfort that costs are likely to come in within the updated guidance. BUY, TP $0.99ps.

Recent Contacts & Presentations

Classic Minerals (CLZ), OZ Minerals (OZL), Saturn Metals (STN), Antipa Minerals (AZY), SRG Ltd (SRG) Bowen Coking Coal (BCB), Birimian (BGS), Breaker Resources (BRB), Galena Mining (G1A), Valmec (VMX),Bryah Resources (BYH), Calima Energy (CE1) Genesis Minerals (GMD), Agrimin (AMN), Magnetic Resources (MAU), Core Exploration (CXO), Marindi Metals (MZN), MOD Resources (MOD), Santos (STO), Adriatic Metals (ADT) Bio–Gene Technology (BGT), Walkabout Resources (WKT), Triton Minerals (TON), Calima Energy (CE1), Peel Mining (PEX), Catalyst Metals (CYL), Vault Intelligence (VLT), Doray Minerals (DRM), Nzuri Coppoer (NZC), Bowen Coking Coal (BCB), Phosphagenics Limited (POH) Great Boulder Resources (GBR), Orthocell (OCC), Northern Minerals (NTU), ABM Resources Ltd (ABU), Vital Metals Ltd (VML), Todd River Resources Ltd (TRT), Pacific Energy Ltd (PEA), Carnarvon Petroleum Ltd (CVN), Australian Mines Ltd (AUZ), Australian Finance Group (AFG), Paladin Energy Ltd (PDN), Cooper Energy Ltd (COE), Medibio Ltd (MEB), Botanix Pharmaceuticals Ltd (BOT), Salt Lake Potash Ltd (SO4)

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