Deloitte WA Index: The largest monthly growth in two years

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Deloitte WA Index: The largest monthly growth in two years

10 May 2018: The Deloitte WA Index experienced a month of growth in April 2018, as the market capitalisation of Western Australian listed companies increased by 6.5% to close out the month at AU$184.2bn.

Deloitte Clients & Markets Partner - Western Australia, Tim Richards, said: “The WA Index has steadily grown during April 2018, beyond the growth of the broader Australian and global markets. Acquisitions and equity raisings boosted this month’s top performers, along with strong quarterly results announcements and commodity prices bolstered amidst geopolitical tensions raising supply concerns.”

Major index players in April:

  • A successful month for South32 Limited (South32) saw its market capitalisation increase by 15.3% to AU$19.12bn at 30 April 2018, following the announcement of the exclusive option agreement entered into with Inca Mineral’s Greater Riqueza project in Peru, and a strong quarterly report. South32’s March quarter benefitted from strong commodity prices, with a US$477m increase in net cash, after returning US$85m to shareholders in their on-market share buy-back
  • Iluka Resources (Iluka) grew 12.2% to a market capitalisation of AU$4.95bn following advised strong market conditions in both zircon and high grade titanium dioxide. As a result, revenue increased 10% in the March 2018 quarter, and up 22% relative to the first quarter of 2017. Production has further contributed to this favourable result - total zircon, rutile and synthetic rutile production increased by 8% to 182,000 tonnes compared with the quarter to December 2017. Furthermore, net debt reduced by AU$75 million since December 2017
  • Independence Group’s (IGO) market capitalisation grew 12.4% to AU$3.03bn, as nickel prices surged during April, and IGO became Arrow Mineral’s (Arrow) largest shareholder with an 11% interest in the company. An encouraging March quarter showed strong cash generation due to high nickel prices, allowing for debt reduction and a dividend payment. Additionally, IGO invested $1m in Arrow through a private placement, with another $1.36m received in a second tranche equity raising enabling commitment to take place in significant drilling programmes at both the Strickland gold and Malinda Lithium projects.

Key commodities surveyed during April:

  • Aluminium prices climbed 11.8% during April to US$2,222.00/tonne as the global aluminium market reacted to the sanctions on Russia imposed by the US, alongside a falling US dollar
  • Nickel has surged to a three year high, increasing 4.4% to US$13,830.50/tonne at the end of April, also following the US sanctions on Russia and the ongoing conflict in Syria driving fears of supply shortages in the nickel market
  • Cobalt fell slightly by 5.4% to US$88,500.00/tonne as the market moderately corrected itself in April having achieved a near 10-year peak in the previous month
  • Iron ore prices increased 3.9% to US$66.50/tonne at the end of April, supported by China’s reduction of bank reserve requirements and key Australian mines reduced supply
  • The price of coking coal declined 7.8% to US$178/tonne as supply recovered from winter restrictions placed on steel production as Chinese authorities attempted to decrease air pollution
  • Crude oil prices increased by 6.5% to US$74.64/bbl due to concerns relating to supply disruption in the Middle East and Venezuela, along with robust demand
  • Key geopolitical developments has placed upwards pressure on global oil prices during April which has significantly affected global liquid natural gas (LNG) prices by 5.4% to US$7.40/mmbtu at 30 April 2018.

The equity markets surveyed saw strong results throughout April:

  • The FTSE 100 surged by 6.4% as sterling fell making the UK a more attractive marketplace to invest in equities following political concerns after Amber Rudd resigned as UK home secretary (Pro-EU), and housing secretary Sajid Javic (Pro-Brexit) was named her replacement. The Index was bolstered by M&A activity, led by the merger between Sainsbury’s and Walmart’s UK arm, Asda, which would create the largest UK grocery store chain
  • The S&P 500 rose by a modest 0.3% to 2,648 points following positive earnings reported by 80% of members in the index, surpassing analysts’ expectations. The market continues to be in a tug-of-war between the potentail for higher interest rates, inflation counterbalanced by the potential for higher earnings and revenue growth keeping gains to a minimum
  • The All Ordinaries experienced a solid month, having increased 3.5% while the financial stocks bounced back from adverse news from the banking royal commission, as investors saw opportunity for the undervalued banks. Additionally the Australian dollar fell during the month, with renewed political concerns in the Middle East and Chinese manufacturing data showed a moderate decline in April, making Australian exports more attractive for foreign investors
  • The Nikkei recorded a strong month with a 4.7% gain, as investor concerns were reduced around a US-China trade war, after an initial sparring of tariffs last month. There was an increase in investors’ risk appetites following a rebound of technology stocks as a result of substantial earnings and a drop in US treasury yields. Japan’s monetary policy remained steady, while industrial output rose 1.2% to beat forecasts and the jobless rate held at a flat 2.5% in line with expectations.

The top Deloitte WA Index Movers and Shakers in April included:

  • Jupiter Mines had a strong start on the ASX with the completion of its AU$240m initial public offering which included AU$225m institutional allocation and AU$15m allocation to the general public. The IPO was significantly oversubscribed, resulting in one of the largest IPOs in the metals and mining industry over the last decade, bringing Jupiter Mines to a market capitalisation of AU$750.11m at 30 April 2018
  • Tungsten Mining continued its positive momentum from the previous month, as its market capitalisation rose 61.5% to AU$355.85m following the announcement of a AU$20m placement to sophisticated and institutional investors with 75% commitments received, and funds to be used to accelerate development at its Mt Mulgine Tungsten project
  • Atlas Iron (Atlas) has had a prosperous month with a 50% increase in market capitalisation to $278.39m following an announcement that all shares in Atlas would be acquired by Mineral Resources (MRL) via a scheme of arrangement. Atlas shareholders will receive one new MRL share for every 571 Atlas shares held, equating to a 59% premium. Once the scheme is implemented Atlas shareholders will own approximately 8.2% of the total issued share capital of the combined group.

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