WA Index

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WA Index

Issue 186 | June 2019

Welcome to the 186th edition of the Deloitte WA Index, a monthly review of Western Australian stocks and indices.

The market capitalisation of Western Australian listed companies increased by 3.7% to close the month at $186bn for May 2019. Improvements in gold and iron ore prices bucked the trend of an unfavourable month for other commodities, aiding local companies in these sectors and helping grow the WA Index this month.

Download the list of WA’s top 100 listed companies, as of 31 May 2019, explore the sections below and if you do not currently receive our WA Index, please register to be added to our distribution list.

Highlights:

If you have any questions in relation to the Deloitte WA Index please contact Dave Andrews.

As of 31 May 2019

Commodity review

With the exception of iron ore and gold, commodities retreated this month

  • LNG prices fell by 15% to a closing price of US$4.5/mmbtu. The decrease is due to the lack of demand for LNG in the market from a result of a mild winter in Asia. The US-China trade war is also contributing to the decline.
  • Platinum saw an 11% decrease to a closing price of US$791/Troy OZ at the end of the month. A slowdown in car sales in major markets, including United States and China is contributing to the decline.
  • Crude oil (Brent) prices fell to a closing price of $64.92/BBI, down 11% from last month and an overall drop from nearly 20% since the 2018 peak in April. Prices have been decreasing due to an overall economic slowdown, specifically a slowdown from Germany and China. Economic concerns due to the US-China trade war, also contributed to the decrease in Brent crude oil price.
  • Copper saw a decrease in price of 9% for the month May to US$5,806/MT. The price currently sits at its lowest point since January 2019, as trade tensions between the US and China continue to flare. Weaker production and exports of the metal from China this month also contributed.
  • Coking Coal prices were subject to a 9% downturn over the month to US$175/MT. This price shift is primarily due to the anticipation of increasing domestic coke prices in China, and rising seaborne supply putting negative pressure on the global market price.
  • Iron Ore prices bucked the trend, increasing 9% this month from US$95/MT to US$103.5/MT. This rise in price is primarily attributable to the continued demand for steel production in China. The threat of a second dam collapse this year at a Vale mine in Brazil potentially poses further issues for the supply of the commodity, with Brazil being a major exporter of Iron Ore.

Commodity and Precious Metal Prices
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Performance of WA Index and global indices

Performance of WA Index and global indices
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Global indices fell across the board during the month of May, with the exception being the All Ordinaries, which experienced a slight growth of 1.1%. The continued trade war between the US and China was the primary driver of negativity this month, with the US opting to increase its tariffs on Chinese imports from 10% to 25%. Further, the US announced a 5% tariff on all Mexican imports from June 10, with the possibility of the tariff to increase by 5% per month depending on Mexico’s emigration policies. Commodities across the spectrum have felt the pressure of these tariffs, and demand is expected to be impacted if the tariffs are not lifted in the near future.

The All Ordinaries was able to offset these events with the help of strong growth in the iron ore price during the period. The likes of Rio Tinto and Fortescue Metals Group reaped the rewards of this price rise, enjoying growth of 5.93% and 10.27%, respectively.

WA Index movement

WA Index movement
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  • Liontown Resources had an exceptional month with a 293% rise in market capitalisation to $160.48m. The company raised $7.9m in capital by the end of the quarter through the issue of 100,000 of ordinary shares at $0.035, which will go towards expanding its Kathleen Valley Lithium Project. The project’s latest drilling program has seen successful progress, with results showing increased high-grade lithium deposits and the potential for larger pits, allowing for future growth.
  • AVZ Minerals grew its market capitalisation by 110% during the month. This substantial increase comes off the back of the company releasing the results of its scoping study on its Lithium and Tin ‘Manono project’ in the DRC of which AVZ holds a 60% share.
  • Greenland Minerals saw a sharp increase in its market capitalisation in the month of May, increasing 78% to $147m. This is in response to an announcement from the company with respect to reductions in operating costs for its Kvanefjeld project. The announcement, which was compared to the results of a study undertaken in 2016, highlighted an 8% increase in rare earth recoveries (up to 94%), and a 40% reduction in annual operating costs.

Major index players in May 2019
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Commodity Review

Top performers of the month

Western Australian top performers over the past month by growth in market capitalisation

Top performers of the month
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The top Deloitte WA Index Movers and Shakers in May were:

  • Lynas Corporation experienced robust market capitalisation growth over the period of 55% to $2.04b. Early May saw the company’s share price decrease due to concerns of environmental regulatory compliance in Malaysia. However, there was an appreciation in the share price on the back of the announcements of a joint venture with Blue Line Corporation and the since rejected Wesfarmers takeover offer for $2.25 per share, which saw Lynas stock closing the month 36% higher than the offer price. The market saw the value that this JV is expected to create, as Lynas Corporation’s Rare Earth metals extraction expertise is paired with Blue Line Corporation’s extensive processing capabilities.
  • Northern Star Resources market capitalisation increased 19% in May, from $5.24b to $6.21b. This comes as a result of the company announcing strong HY 1 2019 financial results, including a 10% EBITDA improvement and a 33% interim dividend increase.
  • Pilbara Minerals market capitalisation grew to $1.33b (18%) by the end of May following the release of details for its lithium and tantalum production centre at the Pilgangoora project. The company highlighted increases in the production and sales of Spodumene and Tantalie over FY19, as well as proposed plans for the Stage 2 (5Mtpa) and Stage 3 (7.5Mtpa) site expansions and the proposed Joint Venture with POSCO.

Top performers of the month

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If you have any questions in relation to the Deloitte WA Index please contact Dave Andrews.

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