Deloitte WA Index: Clean Sweep

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Deloitte WA Index: Clean Sweep

Deloitte WA Index

The Deloitte WA Index maintained a positive trend during August as the market capitalisation of Western Australian listed companies increased by 3.8% to close the month at AU$162.9bn.

12th September 2017:  The Deloitte WA Index maintained a positive trend during August as the market capitalisation of Western Australian listed companies increased by 3.8% to close the month at AU$162.9bn.

Deloitte Clients & Markets Partner -Western Australia, Tim Richards, said: “The WA Index has benefited from the positive trend in commodity prices across the board this month with boosted Chinese demand and supply restrictions being the key drivers.

“Strengthening commodity prices helped the WA Index achieve its third consecutive month of gains. Major players in the Index enjoyed growth in August, stemming not only from rising commodity prices, but also as a result of growth in the financial year just passed, evidenced through a strong earnings season.”

Among the major Index players in August:

  • Mineral Resources Limited’s market capitalisation increased by AU$472.0m (20.5%) since 31 July 2017, as the 2017 net profit after tax of AU$201m showed great contrast to a AU$26m net loss from the previous year. Future excitement for the company stems from forecasted earnings growth to be driven primarily from increased output from the Mount Marion and Wodgina lithium mines in WA
  • Northern Star Resources Limited has seen market capitalisation increase by AU$489m (18.4%) off the back of reported EBITDA of AU$461.3m, up 16% from last year, after producing 567,578 ounces of gold at an average cost of AU$1,032 an ounce
  • Western Areas Limited’s market capitalisation increased by a robust AU$90m (13.9%) during the month, after returning to profitability and planned increased exploration spend in the coming year. The company delivered a net profit of AU$19.3m for the year ended 30 June 2017, a marked turnaround from their AU$29.8m loss in FY16.

Key commodities surveyed during August:

  • Coking coal increased by 16.0% to AU$189.00 per tonne at the end of August, off the back of increased near-term price forecasts, as renewed Chinese steel demand and restricted supply bolster enthusiasm
  • Nickel rose by 13.3% to US$11,520.00 per tonne as supply concerns around reduced output from the Philippines (the largest exporter of the metal globally) pushed prices higher
  • Copper increased by 6.4% gaining from the weaker US dollar and China’s stricter environmental measures as a potential ban on copper scrap metal could be implemented by the end of the year
  • Aluminium increased by 9.1% during the month as a crackdown on illegal operations in the Chinese provinces of Shandong and Xinjiang significantly reduced supply
  • Iron Ore continued its rebound, increasing by 5.4% to US$78.00 per tonne. The commodity strengthened as Australia’s top three exporters announced their plan to contribute 170 million metric tons of capacity (~US$10bn) in order to boost exports and continue to fuel China’s demand.

The equity markets surveyed posted mixed results during August:

  • The All Ordinaries remained steady, recording no movement during August. The market weakened as North Korea’s firing of a missile over Japan put investors on edge, however this was offset by strengthening commodity prices[1]
  • The US S&P 500 rose 0.1% during August, indicating a resilient Wall Street despite rising tensions between the US and its Asian allies, as well as Hurricane Harvey, which has devastated the Gulf Coast region in Texas
  • The FTSE 100 moved 0.8% higher during the month, off the back of a weaker pound against the dollar and driven by upbeat readings on US job openings. The pound slumped after the figure was released, and helped the FTSE edge higher
  • The Nikkei posted a 1.4% decline, with geopolitical concerns being of the utmost influence during the month. Demand for traditional safe-haven assets rose following the latest incident regarding North Korea’s missile launch, with demand for gold and the Japanese yen picking up in the aftermath of the launch.

The top Deloitte WA Index movers and shakers in August included:

  • MacMahon Holding Limited’s market capitalisation rose by AU$194.6m (96.5%) following a successful transaction with Indonesian miner AMNT, in which 954 million fully paid ordinary shares were issued as consideration for the acquisition of mobile equipment. The transaction will enable MacMahon to become the life-of-mine mining services provider at the Batu Hijau copper-gold mine in Indonesia, with US$2.9 bn expected revenue over its 14 year life, and US$1.8bn expected revenue over the first five years from commencement of full operations
  • Alderan Resources Limited’s market capitalisation climbed AU$69.1m (91.4%) off the back of exciting announcements made during the month boosting investor interest. A review of historical channel sampling results from the historic Cactus mine in Utah confirmed strong results for the copper miner. The company recently acquired further leases and claims north of Cactus with drilling expected to commence in September once all surveys have been complete
  • Argosy Minerals Limited’s market capitalisation increased AU$56.73 (89.9%) during August. The company announced funding to complete Stage 2 construction pond works at the Rincon Lithium Project, which is expected to fast-track production of battery-grade lithium carbonate equivalent product to see Argosy become the second ASX-listed lithium producer. Additionally, the company executed a binding investment and off-take agreement with fast-growing Chinese battery company Qingdao Qianyun High-tech New Material Co Ltd.

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