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14 February 2019 07:45 AM
Overseas Market ReportCurrent
Level
PreviousChangeDaily %
Change
Monthly %
Change
Dow Jones Industrial Average25,54325,426118.000.466.83
S&P 5002,7532,7458.000.306.60
NASDAQ7,4207,4156.000.087.45
FTSE 100 Index7,1917,13358.000.814.90
DAX 3011,16711,12641.000.372.87
CAC 40 Index5,0745,05618.000.356.54
Nikkei 225 (Japan)21,14420,864280.001.343.85
HKSE28,49828,171326.001.168.36
SSE Composite Index2,7212,67249.001.847.31
S&P/TSX Composite Index15,62715,642-15.00-0.104.35
NZ 509,3429,3338.000.094.16
US Volatility (Vix)16
Overseas Market Report

US sharemarkets were higher on Wednesday. Investors watched news on the US-China trade talks. Treasury Secretary Steven Mnuchin described the talks as "so far, so good". The South China Morning Post also reported China’s President Xi Jinping “is scheduled to meet” key members of the US trade talks delegation, including US Trade Representative Robert Lighthizer and Treasury Secretary Mnuchin, in Beijing on Friday. Shares in Activision Blizzard rose 7% after the videogame maker announced a share buyback plan and job cuts. The Dow Jones index was higher by 117.5 points or 0.5%. The S&P500 index was up by 0.3%. And the Nasdaq index was higher by 6 points or 0.1%.

Global oil prices rose by as much as 1.9% on Tuesday. Investors were still encouraged by news that Saudi Arabia plans to cut production further in March. But tempering gains was data from the US Energy Information Administration showing that crude oil stocks rose to 15-month highs in the latest week. The International Energy Agency also expects output to outstrip demand this year. Brent crude rose by US$1.19 or 1.9% to US$63.61 a barrel and the US Nymex price rose by US80 cents or 1.5% to US$53.90 a barrel.

Base metal prices rose by up to 0.9% on Wednesday with tin doing the best. But lead was down by 0.5% while zinc fell 0.3%.

The gold futures price rose by US$1.10 an ounce or 0.1% to $1,315.10 an ounce. The spot gold price was near US$1,307 an ounce in late US trade. Iron ore fell by US$1.00 or 1.1% to US$86.45 a tonne.

CommoditiesCurrent
Level
PreviousChangeDaily %
Change
Monthly %
Change
Oil Brent63.6162.421.191.915.18
Oil - West Texas crude53.9353.900.030.066.77
Gold Spot $/OZ1,308.001,306.001.400.111.24
Silver Spot $/OZ15.6015.600.000.18-0.33
Iron Ore88.1088.50-0.50-0.5120.96
Thermal Coal Newcastle95.7095.700.000.05-2.40
Coking Coal FOB ECP AUS0.000.000.000.000.00
Aluminium ($US/t)1,8331,8321.000.031.10
Copper Mar-18 ($US/lb)2.782.770.400.165.41
Lead ($US/t)2,0082,019-11.00-0.530.99
Nickel ($US/t)12,32412,328-4.00-0.037.97
Zinc ($US/t)2,5932,602-9.00-0.343.80
Tin ($US/t)21,15320,970183.000.873.79
Uranium ($US/lb)29.0029.000.000.00-0.35
Australian Market ReportCurrent
Level
PreviousChangeDaily %
Change
Monthly %
Change
ASX All Ords6,1626,14022.000.365.64
S&P/ASX 2006,0856,06421.000.355.39
ASX 24 Futures6,034
Australian Market Report

Wednesday 13 February - close. Falls by market giants CSL and Commonwealth Bank have caused the Australian sharemarket to finish in modestly negative territory. The benchmark S&P/ASX200 index closed down 15.5 points, or 0.25 per cent, at 6,063.6 points at 1615 AEDT on Wednesday, while the broader All Ordinaries was down 8.6 points, or 0.14 per cent, at 6140.1. 

Ashanti Headlines

Independence Group NL (IGO.ASX, 474cps, m.cap A$2,798.9m with 590.5m SOI, Cash $208.1m, Diversified / Base Metals Producer)

IGO presented their 2H19 results to our desk yesterday. The Company achieved record production at Nova and Tropicana and is on track to make full year guidance after delivering 1H19.

Financials

  • 1H result was the first report post rationalisation of Jaguar and Long. Happy that rev and earnings numbers remained consistent HoH.
  • Strong Cash Position has seen the company change dividend policy to FCF metrics rather than profit. The lack of franking credits over the next few years increases the likelihood that the company will look at a share buyback over capital returns.
  • Mgmt are comfortable with how both operations are performing and are expecting another strong qtr of production. 
  • 1H19 financials:
    • underlying EBITDA A$131M
    • cash A$208M and debt A$114M
    • Fully franked FY18 final dividend of 2 cents paid, Fully franked FY19 interim dividend of 2 cents to be paid 1 March 2019

Tropicana

  • Tropicana continues to be one of the best earning gold assets in Aus. EBITDA margins of 64% are best in class. 
  • Cost out will continue as AGG.ASX continues to push high grade through the mill and recoveries have been enhanced (+2%) by the addition of a second ball mill. Throughput of up to 8.4mt/ann now possible. 
  • AISC are expected to continue to fall over the next 2 years.
  • Grade profile to continue as a drop off in grade from the open pits in 2021 is off-set by U/G mining from Boston Shaker. 
  • Company likes having Tropicana in the portfolio (given quality and cash generation)
  • Plenty of opportunities remain at Tropicana with nearfield exploration, mill optimisation and underground options.

Nova

  • Maintain guidance of 27-28kt of Ni for FY19. Higher head grade of 2.5% Ni is expected to continue for next 2-3 years (function of current mining area).
  • Despite a softening in bi-product commodity prices, AISC remain at top end of guidance (a good achievement). Reason for cost out was increased copper recovery at Nova and mill optimisation. 
  • If copper and cobalt prices were to rally, there is potential for Nova to outperform cost guidance. 
  • Development capital and grade control is all but complete for LOM, so C1 costs are essentially going to be AISC. 
  • IGO are set to commence drill testing of high priority targets around Nova this qtr. Company has been systematic in the way it has explored the region and excited to finally put drill holes into the targets. 

Off-Take and Downstream

  • PFS on the downstream sulphate plant is expected to now be released in April. IGO have completed more test-work than initially anticipated (a good thing). Pilot scale plant has allowed samples to be sent to potentials     partners/end users.
  • Off-take with BHP ends at the end of CY19 so we expect off-take discussions to heat up/potentially be announced in the 3Q of CY19. 
  • If IGO pursue a down-stream plant, Dec-21 is earliest possible start date so the company will need to renegotiate at least 2 years of off-take for Nova concentrate this year. 
  • Regardless of whether IGO goes down the Sulphate route, it will strengthen its position when dealing with potential concentrate off-takers.
  • IGO very confident in the outlook for Ni with market fundamentals continuing to improve. 

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


Have a question? admin@ashanticapital.com.au

ERA Communications