Issue 148 | September 2015

Analysis

WA Index

Issue 148 | September 2015

Welcome to the 148th edition of the Deloitte WA Index, a monthly review of Western Australian stocks and indices.

Download the list of WA’s top 100 listed companies, as of 31 August, explore the sections below and if you don’t 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 Adrian Kelly.

As of 31 August 2015

Commodity review

Commodities delivered mixed results as investor uncertainty and lower than anticipated growth rates coming out of China dominated the monthly rhetoric. Base metals such as nickel, tin and zinc experienced the more significant declines, while crude oil prices fell below the US$50 per barrel mark this month, an emotive threshold for many commentators.

Indonesia’s stance on ore exports appears to have provided little comfort to both nickel and tin producers this month, with both commodities continuing downward trends with nickel and tin retreating 8.7% and 12.1% respectively. Recent global data suggests that alternate supply sources appear to be more than satisfying subdued Chinese demand levels, meaning that restrictions on exports from Indonesia are having little impact on pricing.  That said, there does appear to be some optimism surrounding nickel, with deals concluded in recent months in relation to three Western Australian mines, instigated by Independence Group, Western Areas and Talisman Mining.

This weakened Chinese demand is particularly evident in the local construction and automotive industries, which has had a flow-on effect to zinc pricing, falling 5.5% for the month.

Crude oil prices experienced a decline of 7.3% to close at US$48.93 per barrel. There are continued concerns of a global oversupply, on the back of data showing an increase in the U.S active crude oil rig counts over the past few weeks indicating that over the long run, crude oil production might increase. Experts also cited the Chinese stock market crash as a contributor to softening demand given economic concerns mount in the second largest crude oil consumer.

August’s “Black Monday” marked the biggest slump in Chinese stocks for over eight years.  The plunge was only halted by the largest crude oil consumer, the U.S., who lifted confidence with growth rates substantially higher than projected for the second quarter.  However, it has yet to be seen which economy will lead the way, U.S. growth supporting China, or Chinese weakness shattering a fragile global economic rebound?

On a positive note, precious metal prices fared comparably well, as investors gravitated away from volatile equity markets and into safe haven assets. 

Gold outperformed its precious metal stablemates, silver and palladium, posting the biggest gain amongst commodities surveyed with a 3.3% climb as investors turned their focus to the safe haven asset, away from the continuous volatility in the equity market and U.S. dollar and the expectation of a possible increase in interest rates in the U.S. by the Federal Reserve.

Amongst the other precious metals, palladium experienced a decline of 6.1% this month while silver posted losses of 2.4%. The drop in palladium is mainly due to the oversupply from a surge in mine output and decreases to Chinese imports as the country struggles to revitalise domestic automotive sales.

Silver again experienced a tough month, with the decline driven by its usage as an industrial metal and somewhat following the fate of base metals prices.

Lead and aluminium experienced slight increases of 1.7% and 0.4% respectively bucking the base metal trend. Aluminium prices suffered a decline in the middle of the month however were able to bounce back due to the improvement of market sentiment affirming an increase in domestic demand in India. The increases to lead prices this month were mainly driven by speculative buying on rising spot demand, although we will now need to see if this is supported by longer term demand.

On the bulk commodities, Iron ore remained relatively stable this month posting a modest gain of 1.8% to close at US$56.5 per tonne. Iron ore was able to shrug off the fear of the Chinese market crippling global equity and commodity markets, although given the concerns surrounding Chinese economic performance volatility in iron ore prices has certainly not finished.

Lastly, uranium posted an increase of 2.1% during the month. The increase in uranium price is in response to global uranium production falling. Since April 2015, uranium has started to make a comeback when the first nuclear agreement between India and Canada’s largest uranium producer, Cameco Corp. penned, worth C$350m to supply 3,220 metric tonnes to power India’s reactors over the next five years. Significantly, uranium is the only commodity surveyed that has actually increased in price over the last 12 months.

Select above image to enhance the Commodity Prices
Select above image to enhance the Commodity Prices

Performance of WA Index and global indices

The Deloitte WA Index weakened during the month of August, with the market capitalisation of Western Australian (WA) listed companies which comprise the Deloitte WA Index decreasing by 6.0%, to close the month at AU$126.7bn. This was the lowest level in Deloitte WA Index since June 2013 at AU$125.6bn. Nationwide, the All Ordinaries’ performance was less than ideal, posting a bigger loss of 8% this month.   

Select above image to enhance the Performance of WA Index and global indices
Select above image to enhance the Performance of WA Index and global indices
Select above image to enhance the WA Index movement
Select above image to enhance the WA Index movement

Top performers of the month

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

Aquarius Platinum Limited  increased its market capitalisation by 34.6%, closing the month with a market capitalisation of AU$259m. AQP is ranked 34th in the WA Index as at 31 August 2015. The company, which is primarily a producer of platinum and palladium, had seen its share price rise with the release of preliminary results indicating record levels production at its operating mines.

Alexium International Group Limited increased its market capitalisation by 29.1%, closing the month with a market capitalisation of AU$238m. AJX is ranked 35th as at 31 August 2015. The chemicals development company had a busy month, announcing a number of major orders have been received for its fire retardant technologies.

Northern Minerals Limited increased its market capitalisation by 21.2% from AU$74m to AU$90m over the month. This resulted in Northern Minerals being ranked 80th in the WA Index as at 31 August 2015. The producer of heavy rare earth mineral dysprosium experienced a peak in share price in the middle of the month, following the signing of a Memorandum of Understanding with Jien Mining Pty Ltd for the proposed purchase of 50% of product from the company’s Browns Range Project.

Select above image to enhance the Top performers of the month
Select above image to enhance the Top performers of the month

Diggers & Dealers Special Edition 2015

This edition celebrates 15 years of the Deloitte WA Index and acknowledges the significant role the mining industry has played in the growth of the West Australian economy over this period.

The review of the past 15 years highlights the highs and lows of our state, and also illustrates some potential opportunities and threats that may be faced in the coming years. We also shine the spotlight on the mining companies that sit in the top 15 companies in the Deloitte WA Index by market capitalisation as at 30 June 2015.

If you don’t currently receive our WA Index, you can register to be added to our distribution list.

 

If you have any questions in relation to the Deloitte WA Index please contact Angela McIlroy.

Did you find this useful?