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Gold shines on the west
Deloitte WA Index
9 March 2016: The Deloitte WA Index fell during February, with the market capitalisation of Western Australian listed companies decreasing by 1.1% and closing the month at AU$118.0bn.
Deloitte Clients & Markets Partner Western Australia, Tim Richards, said the month yielded strong commodity results with gold, iron ore and crude oil prices all moving in the right direction.
“Interestingly, pure play gold companies continue to shine among the WA Index as the gold safe haven strategy plays its part within investor portfolios. Since June 2015, we have observed the aggregate market capitalisation of these companies increase by 67.9%, with February alone providing gains of 29.2%,” he said.
February also marked the end of the half-yearly reporting season. Among the winners was South32 Limited following the announcement of their half-year results, with investors shifting focus to resources companies as commodities gained ground during the month.
Among major Index players:
- Mineral Resources Limited’s market capitalisation rose by AU$383m (55.3%) during the month following the release of strong half-year results and the announcement of an increased dividend.
- Saracen Mineral Holdings Limited’s market capitalisation increased by AU$202m (35.4%) as a result of the rising gold price and increased production following the first gold pour at its Thunderbox project in mid-February.
- Northern Star Resources Limited’s market capitalisation grew by AU$565m (31.8%) following a strong result for the first half of FY16, as well as an increased dividend. Investors were also factoring in forecast strong financial performance based on management’s production guidance of 700,000 ounces a year over the next two years.
Key commodities surveyed during February included:
- Iron ore, which had the biggest increase for the month, rising 15.4% to finish the month at US$49.4 per tonne. Prices advanced closer to US$50 per tonne as Chinese mills restocked after February's Lunar New Year break.
- Gold increased 10.4% as investors turned to the safe haven asset given volatility in equity markets, and as holdings in exchange-traded funds rose to its highest level since October 2014.
- Crude Oil rose by 5.2% to close at US$36.3 per barrel, following news that Saudi Arabia and Russia had agreed to freeze oil output at January 2016 levels. The move by the world’s two largest producers is a big step forward being the first significant cooperation between OPEC (Organization of Petroleum Exporting Countries) and non-OPEC producers in 15 years.
- Platinum similarly increased by 6.7% to close the month at US$924 per ounce. The metal was helped by strong car sales figures in Europe rising by almost 6% in January.
Equity markets surveyed posted mixed results for the month of February:
- The All Ordinaries fell 2.2%. The big four banks took the biggest hit, collectively wiping AU$35.6bn from the market. Investors also grew anxious over dividend cuts alongside the RBA’s decision to keep the cash rate on hold.
- The FTSE 100 rose by 3.1%, again largely impacted by expectations of monetary easing which motivated traders to purchase commodity stocks. The market was also bolstered with investors turning their attention to the G20 summit in Shanghai with global growth expected to be on the top of the agenda.
- The S&P 500 decreased by 0.4%, with banks and health care stocks fronting the retreat. Poor manufacturing data and uncertain expectations surrounding the upcoming Federal Reserve meeting in March dissolved February gains.
- The Nikkei continued to slide, decreasing by 4.1% with a combination of a strong Yen and weak investor sentiment continuing to plague Japan’s manufacturing sector.
Top Deloitte WA Index Movers and Shakers in February included:
- 88 Energy Limited (88E) posted a 584% increase in market capitalisation from AU$18m to AU$127m. This follows the release of a positive evaluation update from its Icewine #1 well in Alaska indicating a wealth of resources consistent with the company’s expectations.
- Millennium Minerals Limited (MOY) posted a 176% increase in market capitalisation from AU$36m to AU$100m. The company’s share price increased due to the higher gold price, coupled with the final loan repayment which was ahead of schedule and left the company debt-free.
- Dacian Gold Limited (DCN) posted a 101% increase in market capitalisation from AU$104m to AU$209m. The increase followed positive results from drilling activity, which continues at its Mt Morgans Project near Laverton, WA.
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