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02 October 2018 07:42 AM
Overseas Market ReportCurrent
Level
PreviousChangeDaily %
Change
Monthly %
Change
Dow Jones Industrial Average26,65126,458193.000.732.64
S&P 5002,9252,91411.000.360.80
NASDAQ8,0378,046-9.00-0.11-0.89
FTSE 100 Index7,4967,510-15.00-0.190.85
DAX 3012,33912,24792.000.75-0.20
CAC 40 Index5,5075,49313.000.241.85
Nikkei 225 (Japan)24,24624,120126.000.526.04
HKSE27,78927,71673.000.26-0.36
SSE Composite Index2,8212,79230.001.063.53
S&P/TSX Composite Index16,10416,07331.000.19-0.97
NZ 509,3249,327-3.00-0.030.12
US Volatility (Vix)12
Overseas Market Report

US sharemarkets were mixed on Monday. Investor sentiment was boosted by the new US-Mexico-Canada trade agreement (USMCA). Shares in Tesla rose by 17.4%. Reuters notes that "signs it had met targets for quarterly production numbers added to relief at Chief Executive Elon Musk's settling a lawsuit with regulators that could have forced him out." The Dow Jones index finished higher by 193points or 0.7% after being up 280 points in early trade. The S&P 500 index was up 0.4% but the Nasdaq lost 14.5 points or 0.2%.

Global oil prices rose by almost 3% on Monday to 4-year highs. There was optimism about prospects for the global economy on the new US-Mexico-Canada trade deal. But there remains the on-going concern about global oil supplies when US sanctions against Iran take force on November 4. Reuters notes that US President Donald Trump spoke to Saudi King Salman on Saturday on ways to maintain sufficient supply. Brent crude rose by US$2.26 or 2.7% to US$84.98 a barrel and the US Nymex price rose by US$2.05 or2.8% to US$75.30 a barrel.

Base metal prices were mixed on the London Metals Exchange on Monday. Zinc, aluminium and tin rose by up to 1.5% while other metals fell by up to 0.8%.

The gold futures price fell by US$4.50 an ounce or 0.4% to $1,191.70 an ounce. The spot gold price was trading near US$1,190 an ounce in late US trade. Iron ore was unchanged at US$69.50 a tonne.

CommoditiesCurrent
Level
PreviousChangeDaily %
Change
Monthly %
Change
Oil Brent84.9882.732.252.729.76
Oil - West Texas crude75.5475.300.240.328.22
Gold Spot $/OZ1,190.001,189.001.200.10-0.93
Silver Spot $/OZ14.5014.500.000.17-0.19
Iron Ore65.3065.000.300.385.32
Thermal Coal Newcastle114.60114.200.400.39-2.88
Coking Coal FOB ECP AUS0.000.000.000.000.00
Aluminium ($US/t)2,0712,04823.001.14-1.44
Copper Mar-18 ($US/lb)2.792.790.000.005.23
Lead ($US/t)2,0162,023-7.00-0.33-2.02
Nickel ($US/t)12,40612,507-101.00-0.81-2.38
Zinc ($US/t)2,7002,65841.001.549.66
Tin ($US/t)18,97018,860110.000.58-0.43
Uranium ($US/lb)27.0028.000.00-0.183.78
Australian Market ReportCurrent
Level
PreviousChangeDaily %
Change
Monthly %
Change
ASX All Ords6,2936,326-33.00-0.52-2.10
S&P/ASX 2006,1726,208-35.00-0.57-2.33
ASX 24 Futures6,167
Australian Market Report

Monday 1 October - close. The local sharemarket has kicked off the new week and new month in negative territory, held down by heavy falls from the banks. Trading volumes were light, with many states marking the Labour Day public holiday. The ASX200 closed down 35 points or 0.6% to 6,172.3, while the broader All Ordinaries index was down 33 points, or 0.5 per cent, higher at 6292.6 points.

Ashanti Headlines

Base Resources (BSE.ASX, 26cps, m.cap A$293m with 1.13b SOI, Cash US$29.7m, Mineral Sands Producer)

Ashanti Capital conducted a non-deal roadshow with Tim Carstens from Base Resources (ASX:BSE), presenting for two days in Hong Kong and one in Singapore. The company was extremely well received by a number of institutional and family office investors. 

Based on the roadshow presentations, the key points of opportunity include;

  • Pure mineral sands exposure, uniquely positioned given strong cash flows in Kenya and development upside in Madagascar
  • FY18 EBITDA up 32% to US$109m, brokers expect Base to generate US$125m EBITDA FY18 from Kwale operations in Kenya
  • Kwale recently optimized: +60% increase in mining rate and spiral capacity, significant decrease in mining costs (hydro mining)
  • Focus of market is Kwale mine extension, key data points expected Nov 18 (Kwale South) and Feb 19 (North Dune)
  • Company see’s positive current pricing for Rutile and Zircon (c.75% earnings), flatter outlook for ilmenite 
  • Investors understood relevance of outstanding safety and community track record in Kenya, providing good lead through to Madagascar 
  • Toliara is a world class project, expected to show stronger economics that Kwale but with 40+ year mine life
  • Continued work on the project continues to surprise on upside, Ranobe project acquired for US$92m
  • PFS on Toliara expected to be delivered January 2019, first time the market get to understand the project economics

Base Resources (ASX:BSE) is undervalued on most metrics, the company understands the market wants to know three key points. What is the mine life at Kwale, what are the project economics on Toliara and how will Toliara be funded? Answers to each of these questions will be provided by early next year, providing an opportunity to buy in the mid 20c range, Base Resources raised c.A$100m at25.5c in December 2017. Since this capital raising, Base has paid down project debt (1/10/18), optimized operations at Kwale and continued resource definition/exploration in Kenya. The company expects to have zero net debt by the end of 2018 with a clearer picture on Toliara is due for Q1, this quarter may be the last opportunity for Base Resources to trade undervalued, production from Toliara has the potential to adjust global supply points for minerals sands. 

Please contact the desk on +61 8 6169 2668 should you wish to discuss further.


Have a question? admin@ashanticapital.com.au

ERA Communications