Market Update & Important Indicators
The S&P 500 approached a record high Tuesday, lifted by gains in energy shares and renewed confidence that the Federal Reserve won't disrupt equities markets. The Dow industrials touched 18000 Tuesday for the first time in more than a month, as the S&P 500 neared its record of 2130.82. Rising energy stocks have helped lift the major indexes in recent weeks as oil prices climbed back above $50 a barrel. Investors' belief that the Fed will take a cautious approach to raising rates also boosted the rally. Energy shares in the S&P 500 have rallied more than 10% in the past three months, while the materials sector has gained over 9%.
European stocks bounced higher Tuesday, recording a second straight gain, and its best daily percentage advance in two weeks, a day after Federal Reserve Chairwoman Janet Yellen offered guidance on U.S. monetary policy plans. The Stoxx Europe 600 tacked on 1.1% to close at 346.26, its strongest percentage increase in nearly two weeks, FactSet data showed. Tuesday's session marked the higher close since May 31. All sectors logged gains, led by oil and gas, basic materials and industrial shares. The index on Monday rose 0.3%, led by a rally among mining issues.
Shares rose throughout Asia Tuesday, buoyed generally by rising commodity prices and a stable oil price hovering at about $50 per barrel. And nowhere was that truer than in Hong Kong, where the main benchmark had its best day in nearly two weeks on Tuesday, coming close to hitting a fresh high for the year. The Hang Seng Index closed up 1.4%, the largest one-day gain since May 25. The jump pushed the benchmark closer to beating its April 21 peak level. A bullish commodities market, climbing oil prices and the delayed prospect of a U.S. interest-rate increase have propelled the rally. Elsewhere, Japan's Nikkei Stock Average ended up 0.6% and South Korea's Kospi closed up 1.3%. China's Shanghai Composite Index rose 0.1%
Australian shares edged higher Tuesday, paring gains after the central bank held interest rates steady and offered little to suggest further easing is imminent. The Reserve Bank of Australia maintained its key cash rate at a record-low 1.75%, as widely anticipated, although it disappointed some expectations it might point more directly at inflation or even indicate a bias toward cutting further. The bank last month surprised markets by trimming its policy rate a quarter of a percentage point after data showed the country suffered its first bout of deflation since the global financial crisis, although figures since then revealed the economy grew more quickly than anticipated in the first quarter. Rising for a third straight session, the S&P/ASX 200 closed the day 10.6 points, or 0.2%, higher at 5371.0.
Copper futures closed down in London Tuesday, as traders displayed nerves ahead of an economic data release from top consumer China. The London Metal Exchange's three-month copper contract was down 2.6% at $4,568 a ton at the PM kerb close, having hit a two-week low earlier in the session at $4,552 a ton. Among the other base metals, aluminium closed up 0.7% at $1,554 a ton, zinc was down 1.3% at $1,998 a ton, nickel was down 0.9% at $8,541 a ton, and lead was down 1.9% at $1,704 a ton.
Thought of the Day:
Is grade still King?
Summary
Argonaut examines the potential relationships between the head grade (Au g/t) and reported AISC of ASX gold miners during the March Q. Whilst this crude method is subject to various limitations, the initial results demonstrate the lack of clear relationships between grade and AISC margin, busting the myth that grade is king. Many other factors including the by-product credits, geometry of the orebody, method of extraction, energy and labour costs and hardness of ore should be factored in to derive a more reliable cost prediction.
Results
The results of the two populations are shown in the scatterplot below, with blue representing open pit mines and red representing underground mines. The goodness of fits (R2) are very low (<0.15) for both populations.
Figure 1: AISC margin v head grade, open pit (blue) and underground (red)
Source: Argonaut, Company report
Method
Argonaut compiled a list of gold mines with reported AISC and head grade from the respective company’s March Q report. Mines are classified as either open pit or underground, with operations featuring both removed from the dataset. No adjustments have been made to the reported AISC. The gold head grade is used when by-products are present, as opposed to a gold equivalent grade.
Recent Contacts & Presentations
Gascoyne Resources (GCY), Botanix (BNE), Sino Gas & Energy (SEH), Altura Mining (AJM), Navitas (NVT), Gage Roads (GRB), Bionomics (BNO), Invigor Group (IVO), Marindi (MZN), Cardinal Resources (CDV), Galaxy Resources (GXY), Cooper Energy Limited (COE), Evolution Mining (EVN)
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