Market Update & Important Indicators
U.S. stocks were little changed Wednesday amid uneventful testimony from Federal Reserve Chairwoman Janet Yellen. Ms. Yellen started testifying before the House Financial Services Committee and indicated the central bank is moving toward raising interest rates later this year as the economy has improved. U.S. government bonds pulled back as investors took some chips off the table following Tuesday's rally. The Dow advanced 0.1% to 18,225 and the S&P 500 lost 0.1% to 2,114.
European stocks dipped from seven-year highs after U.S. Federal Reserve Chairwoman Janet Yellen laid the groundwork for interest rate rises later this year. The Stoxx Europe 600 index was 0.3% lower in early afternoon trading, having climbed to its highest close since late 2007 on Tuesday after an agreement on a four-month extension to Greece's bailout. Germany's DAX index was down 0.2%, while the U.K.'s FTSE 100 slipped 0.2%, having climbed to an all-time high on Tuesday for the first time in more than 15 years.
Stocks in Asia finished mixed. The Hang Seng was up 0.1% at 24,778, after a preliminary reading showed expansion in Chinese manufacturing activity during February. HSBC Holdings PLC said Wednesday its China Manufacturing Purchasing Managers' Index rose to 50.1 in February compared with a final reading of 49.7 in January. A reading below 50 indicates a contraction in manufacturing activity from the previous month, while a reading above 50 indicates expansion. The bank releases its final PMI data Monday. The Shanghai Composite Index was down 0.6% at 3,229. In Japan, the Nikkei Stock Average ended down 0.1% at 18,585, after rising for five consecutive trading days and hitting a series of 15-year highs.
Copper futures fell in thin trade Wednesday on the London Metal Exchange despite upbeat economic numbers out of China. The latest manufacturing gauge in China, the world's biggest copper consumer, showed a modest improvement in February. Lead showed soft performance, down 1.4% to US$1,733/t. Gold rose 0.3% to US$1,204.8/oz and WTI crude stepped up 3.7% to US$50.39/bbl. The AUD is buying US$0.789.
In This Issue
Doray (DRM)
Doray Minerals (DRM) announced a high grade maiden Resource at Suzie (123koz @ 8.1g/t), taking the total inventory at Andy Well to 572koz @ 10.1g/t. Suzie is initially expected to support another high grade open pit and engineering evaluation work is underway. Importantly, the Suzie maiden Resource highlights the potential for further mine life extensions, with each additional year adding ~12c to Argonaut’s valuation. Our recent site visit to DRM’s Andy Well mine confirmed the better dilution controls following the adoption of the reverse Avoca mining method and the high grade Stage II open pit will ensure strong FCF generation in the subsequent Qs. The successful bid for Mutiny Gold (MYG) will see DRM’s production profile double, increasing the stock’s investment appeal and addressing queries over Reserve / mine life. The acquisition is accretive on several fronts and improves on DRM’s liquidity.
Northern Star (NST)
Argonaut’s site visit to Kundana / Kanowna confirmed lean and seasoned operations at both sites. Our outlook on Kundana’s ability to deliver additional mine life extensions has significantly improved following the site visit. The Company recently reported an impressive underlying FCF of A$107m for H1 FY15, and doubled its interim dividend to 2c. NST’s A$50m exploration program remains a key differentiator and will keep delivering tangible results and translate to Resource / Reserve upgrades. Whilst acknowledging the recent share price appreciation, NST is the go-to name in the ASX gold space given scale, cash flow, yield, liquidity and exploration momentum.
Pacific Energy (PEA)
Although PEA’s 1H result was softer than we expected, our positive view of the Company’s future prospects in unchanged.
MMA Offshore (MRM)
We review and scale back our earnings expectations in a challenging, lower oil price environment.
Recent Contacts & Presentations
Northern Star (NST), Saracen (SAR), Doray (DRM), Troy (TRY), Resolute (RSG), Gold Road (GOR), Regis (RRL), Independence Group (IGO), Energia Minerals (EMX), Rewardle (RXH), Doray (DRM), Alexium (AJX), Orbital (OEC), IMF Bentham (IMF), Metals X (MLX), Pura Vida (PVD), Image Resources (IMA), Tangiers (TPT), ABM Resources (ABU), Centaurus (CTM), Imdex (IMD), Rox (RXL), Pacific Energy (PEA), MMA Offshore (MRM), Tox Free (TOX)
Please read Argonaut's Important Disclaimers & disclosures
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