Market Update & Important Indicators:
The Dow Jones Industrial Average edged higher intraday, extending gains after it closed above 20000 for the first time ever. Moves in major indexes were muted, with the S&P 500 flipping between slight gains and losses for much of the day after indexes surged to a trifecta of records in the previous session. While shares of financial companies ticked higher, putting the Dow industrials on course to post a fresh closing high, declines in shares of health-care and tech companies kept other broad indexes under pressure. Many investors say they remain optimistic but cautious about the path forward for U.S. stocks, as they weigh the potential benefits of regulatory rollbacks under President Donald Trump against the possibility of protectionist policies, which some have said could crimp corporate growth. Mr. Trump on Thursday sent Twitter messages putting pressure on Mexico to pay for a wall he wants built on the border.
European stocks finished at their highest level in nearly 13 months. The Stoxx Europe 600 index rose 0.3% to 367.50, rising for a third straight day and representing the highest close for the pan-European benchmark since Dec. 30, 2015, according to FactSet data. European stocks rose as the Dow Jones Industrial Average pushed further above 20,000 after climbing above that milestone for the first time ever in Wednesday's session.
Asian stock markets were broadly higher, tracking overnight gains on Wall Street, with the Dow Jones Industrial Average closing above 20,000 points for the first time. Japan's Nikkei Stock Average closed up 1.8%, while Hong Kong's Hang Seng Index rose 1.4% to hit a three-month high, following four straight sessions of gains. The Korea Kospi added 0.8% and Singapore's FTSE Straits Times Index was up 0.6%. The post-election equities rally in the U.S. has been spurred by hopes of fiscal spending, tax cuts and regulation rollback under the administration of U.S. President Donald Trump. Investors are upbeat that those expectations will soon be realized, given the speed with which Mr. Trump has been making executive orders just days into his administration, helping drive gains this week in the U.S. Markets in China, South Korea, Taiwan, and Vietnam will be closed on Friday, with China closed through to next Thursday.
The Australian stock market was closed on Thursday for the Australia Day National public holiday.
The London Metal Exchange's three-month copper contract closed down 1.43% at $5,857/t. All other base metals finished lower on Thursday. Aluminium prices fell 1.0% to $1,819/t, zinc prices fell 1.3% to $2,751/t, nickel prices fell 3.0% to $9,353/t, lead prices fell 3.1% to $2,330/t and tin prices fell 2.2% to 19,936/t.
In this Issue:
Salt Lake Potash (SO4) | Encouraging trench pump tests | SPEC BUY
Market Cap $88m | Current Price $0.61
SO4 has completed sustained pump tests on two trenches in the southern portion of Lake Wells to determine flow rates. On Argonaut calculations the lower rate is a comfortable 20% ahead of the Scoping Study assumption. With feasibility work ongoing at Lake Wells we expect considerable newsflow, and numbers to be tightened, over coming months.
Threat Protect (TPS) | Funding package key takeaway during quarter | SPEC BUY
Market Cap $20m | Current Price $0.026 | Valuation $0.030
TPS delivered 2Q17 revenue of $2.4m, higher than the $2.2m in 1Q17, although below the $2.5m revenue in 4Q16. The strategy and future performance is focused on leveraging the Company’s largely fixed cost Monitoring infrastructure through the acquisition of additional lines. Importantly, TPS negotiated a $10.5m funding package during the last quarter to back up the consolidation strategy.
Evolution Mining (EVN) | Producing in Ernest | BUY
Market Cap $3,804m | Current Price $2.26
Evolution Mining (EVN) delivered Dec Q production of 218koz which was above Argonaut’s estimate of 215koz. All-in sustaining costs (AISC) of A$900/oz were -15% lower qoq (A$1060/oz in Sept Q) thanks to operational improvements in most divisions. Standout performance came from a 13% production uplift at Cowal to 72koz and a 10% rise in output at Mungari to 42koz. EVN repaid a further $70m in debt ($90m in Sep Q), with no further debt obligations required until October 2017. Commencement of the Ernest Henry JV asset became effective from Nov 1 and achieved production of 14koz at an AISC of -A$(114)/oz, technically the lowest cost gold producing asset of an ASX gold company. The Cowal E42 resource drill-out for the Stage H cutback studies continued. A decision to proceed due in the March Q which could potentially push mine life out beyond 2032 from the current ~10-year mine life. Argonaut maintains a BUY recommendation and lifts our price target to A$2.67ps (A$2.52 prior).
Independence Group (IGO) | December Q Results | BUY
Market Cap $2,341m | Current Price $4.02 | Target Price $4.15
Independence Group (IGO) released December Q results. Tropicana was the standout performer hitting a record throughput rate of 7.6Mtpa and producing 121koz gold (100% basis) at $1,051/oz all-in sustaining costs (AISC) versus Argonaut’s forecast of 101koz at $1,240/oz. Jaguar was impacted by lower grades and poor ground conditions resulting in lower production and higher costs (8.3kt Zn and 0.9kt Cu at $1.08/lb vs Argonaut 9.9kt Zn and 1.7Kt Cu at $0.70/lb). Long performance was steady, producing 2.1kt Ni in ore at A$3.19/lb cash cost, in line with Argonaut’s forecast. Group unaudited NPAT for the Q was $10m and cash decreased to $109m (from $249 at September 30) after $71m free cash flow from operating assets, $71m debt repayments, $47m Nova development capex and $58m stamp duty on the Nova acquisition. Argonaut upgrades IGO to BUY from HOLD.
Northern Star Resources (NST) | Walking the path to 600kozpa | BUY
Market Cap $2,404m | Current Price $3.95
Northern Star (NST) delivered a strong Dec Q, producing 125koz @ AISC A$1,063/oz (+14% production, -3% on costs vs the Sep Q). Group production was boosted by the significant 25% rebound in production at Jundee to 54koz at an all in sustaining cost (AISC) of A$965/oz (-17% vs Sept Q). Free cashflow from operations was $33.1m (up from A$24m in Sep Q), but impacted by lower gold prices down $105/oz on the previous Q. NST continues to pursue growth ambitions to move to 600kozpa by FY18 from organic sources including resource development drilling and the acceleration of stockpile processing (currently 105koz and growing). We maintain our BUY recommendation and target price of $4.43ps.
Resolute Limited (RSG) | Making Hay whilst the sun shines | BUY
Market Cap $1,068m | Current Price $1.71
Resolute (RSG) delivered a strong Dec Q, producing 91koz (+15% Q-o-Q) at an all-in sustaining cost of A$835/oz (-29% Q-o-Q). The low-cost production was driven largely by significant cost improvements at Syama with sulphide operations producing 36koz at AISC A$687/oz (-34% cost reduction Q-o-Q) and Syama Oxide production of 26koz at AISC A$451/oz (-54% cost reduction Q-o-Q). Ravenswood plant re-configuration continued with the expansion to 2.8Mtpa. FY17 production YTD of 171koz is tracking well ahead of RSG’s stated FY17 guidance of 300-330koz. We expect a moderation in grade and in 2HFY17, but despite this we expect RSG to achieve the mid-range of stated guidance.
Recent Contacts & Presentations:
Syntonic Ltd (SYT), MZI Resources Ltd (MZI), Resolute Mining Ltd (RSG), Capricorn Metals Ltd (CMM), Eve Investments Ltd (EVE), Australian Mines Ltd (AUZ), Heron Resources Ltd (HRR), St George Mining Ltd (SGQ), Threat Protect Australia Ltd (TPS), Paringa Resources Ltd (PNL), The Gruden Group Ltd (GGL), Primary Gold Ltd (PGO), Vault Intelligence Ltd (VLT), Botanix Pharmaceuticals Ltd (BOT) Orthocell Ltd (OCC), Strandline Resources Ltd (STA) Dragontail Systems Ltd (DTS), ABM Resources Ltd (ABU), Acacia Coal Ltd (AJC), Troy Resources Ltd (TRY), Hazer Group Ltd (HZR), Berkeley Energia Ltd (BKY), Sino Gas & Energy Holdings Ltd (SEH), Sovereign Metals Ltd (SVM), Kin Mining (KIN)
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