Market Update & Important Indicators
US stocks have sunk deep into the red as weak Chinese factory data and US home sales numbers outweighed Amazon's unexpected blockbuster swing into profit. The Dow Jones Industrial Average on Friday shed 163.39 points (0.92%) at 17,568.53. The broad-based S&P 500 dropped 22.50 (1.07%) to 2,079.65, while the tech-rich Nasdaq Composite Index lost 57.78 points (1.12%) at 5,088.63. New home sales ran at an annual pace of 482,000 units in June, and May's rate was cut to 517,000 units from the original report of 546,000. The preliminary reading of Caixin's Purchasing Manager's Index (PMI) came in at 48.2 in July, the weakest reading since 48.1 in April 2014.
European stocks fell as poor data out of China sent a chill through markets about the prospects of a global economic recovery. London's benchmark FTSE 100 index of top companies shed 1.13% to end Friday at 6,579.81 points, the CAC 40 in Paris retreated 0.58% to 5,057.36 points, and Frankfurt's DAX 30 fell 1.43% to 11,347.45 points. The euro slipped to $US1.0967 from $US1.0985 late in New York on Thursday.
Asian markets mostly fell following more downbeat Chinese data and another sell-off on Wall Street. Tokyo shed 0.67%, or 139.42 points, to end at 20,544.53, Sydney fell 0.43%, or 24.2 points, to close at 5,566.1 and Seoul was 0.93% lower, giving up 19.11 points to 2,045.96. Hong Kong fell 1.06%, or 270.34 points to 25,128.51 and Shanghai reversed morning gains to fall 1.29%, or 53.01 points, to 4,070.91. Shanghai's losses follow a six-day rally in response to measures to protect the market after a month-long plunge.
The Australian market looks set to open lower after falls on US and European markets following disappointing US home sales and China factory output data. At 0750 AEST on Monday, the September share price index futures contract was down 49 points at 5,467.
In Australia, the market on Friday closed lower for a third straight day, following a weak lead from Wall Street and pessimistic manufacturing data from China. The benchmark S&P/ASX200 index was down 24.2 points, or 0.43%, at 5,566.1. The broader All Ordinaries index lost 22.2 points, or 0.44%, to 5,556.8.
CEDA has a panel discussion on the future workforce while the Self-Managed Super Fund Association and the National Australia Bank's report into SMSF sector is due out. In equities news and iiNet has a scheme meeting for a vote on the proposed TPG takeover, Atlas Iron is expected to release June quarter production results.
Oil prices have fallen for a third straight day as ample crude supplies continued to pressure sentiment and a sharp drop in Chinese manufacturing renewed concerns about demand. US benchmark West Texas Intermediate (WTI) for September delivery fell 31 cents to $US48.14 ($A65.45) on Friday, the lowest level since late March. Brent N crude for September, the global benchmark, closed at $US54.62 a barrel in London trade.
Metals on the LME were mixed. Zinc and Nickel posted the largest losses, down 1.6% and 1.2% to US$1,946/t and US$11,252/t respectively whilst Tin rose 3.2% to US$15,454/t. Gold was up, rising 0.8% to US$1099/oz. Brent fell sharply to US$54.62 /bbl. The AUD/USD is trading at 0.728
In This Issue
Doray (DRM) | BUY
Doray Minerals (DRM) delivered a record Q at Andy Well, producing 28.2koz (previously announced) @ AISC A$1,027/oz (v Argonaut forecast 26koz @ A$936/oz). FCF generation was ~A$6.8m (or ~A$250/oz). The production figures exceeded Argonaut’s estimate and puts the Company at the top end of its upgraded FY15 guidance. FY16 guidance is set at 78-85koz (in-line). However, costs and cash flow performances were lower than our expectations. The high grade Stage 2 open pit and the Suzie open pit are expected to extend well into the September Q, reducing costs and enhancing production. Recent drilling results at Andy Well suggest tangible Reserve replenishment in the upcoming Reserve update. Argonaut’s valuation reduces to A$0.75 (was A$0.80) following an increase in the capex estimate of Deflector. BUY maintained. Whilst DRM remains cheap on absolute and relative basis, Argonaut is cognisant of the near term funding requirement for Deflector (expecting mostly debt).
Kibaran Resources (KNL) | SPEC BUY
Kibaran Resources (KNL) released a positive Bankable Feasibility Study (BFS) for the Epanko graphite project in Tanzania. The study supports the case for a scalable 440ktpa plant producing 36ktpa of high quality graphite concentrate. Argonaut believes KNL will be amongst the first of the bidding graphite developers to achieve production having attained a mining licence, major environmental approvals and secured off-take agreements. Epanko is differentiated from most of its peers by exceptional graphite purity with a high distribution of large flake making it attract to a broad range of carbon end uses. Argonaut applies a SPEC BUY recommendation to KNL.
Recent Contacts & Presentations
Resolute (RSG), Rift Valley (RVY), Pacifico (PMY), Kingsgate (KCN), Troy (TRY), Tox Free Solutions (TOX), GR Engineering (GNG), Austal (ASB), Northern Star (NST), Sandfire (SFR), Regis (RRL), Saracen (SAR), Sino Gas & Energy (SEH), Dacian (DCN), Buru Energy (BRU), Carnarvon Petroleum (CVN), Otto Energy (OEL), Empire Oil & Gas (EGO), Pura Vida Energy NL (PVD), High Peak Royalties (HPR), Karoon Gas (KAR), Austex Oil (AOK), UIL Energy (UIL), Tlou Energy (TOU), FAR Limited (FAR), Cooper Energy (COE), Central Petroleum (CTP), Senex Energy (SXY)
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