Deloitte WA Index: Return to Strong Growth
The Deloitte WA Index grew strongly during October as the market capitalisation of Western Australian listed companies increased by 3.4% to close the month at AU$167.5bn.
9 November 2017: The Deloitte WA Index grew strongly during October as the market capitalisation of Western Australian listed companies increased by 3.4% to close the month at AU$167.5bn.
Deloitte Clients & Markets Partner - Western Australia, Tim Richards, said: “The WA Index has returned to positive growth following a retraction in line with the All Ordinaries Index in September. The commodity stock-heavy WA Index has noticeably benefitted from the global demand for lithium as investors look to claim their stake in what has been coined the upcoming lithium boom.”
“In the context of a global economy trending towards electric cars in the eye of sustainability, the demand for lithium could very likely spell boom time for the Western Australian economy. Current levels of demand have led to exponential increases in the share price of what were once penny stocks on the WA Index. Whether or not bullish demand for lithium will be outstripped by its supply will play a pivotal factor in the longevity of sustainable growth in the WA Index for years to come.”
Major index players in October:
- Galaxy Resources Ltd continues to thrive amid the global-scale hype surrounding lithium and the future role it is expected to play in sustainable energy. Bullish demand and positive forecasts for lithium has seen Galaxy’s share price reach a yearly high of $4.20, with market capitalization increasing by AU$344m (32.7%) in the month of October alone. Galaxy reported strong results for the quarter ended 30 September 2017, which included positive cash flows of $17.0m in tandem with noteworthy increases in production and lithium concentrate sales to the value of 43% and 39%, respectively
- Pilbara Minerals Ltd’s market capitalisation increased by AU$320m (32.4%) upon the finalisation of a binding lithium off-take deal with one of China’s largest automotive manufacturers; Great Wall Motor Company. The lithium and tantalum producer is set to further benefit from Great Wall’s $28 million equity investment in Pilbara, with the proceeds set to assist with completion of Stage 1 of its Pilgangoora project development. Pilbara received the final environmental tick of approval needed to complete construction and facilitate ongoing operations for this project as it edges closer to becoming one of the world’s next significant lithium producers
- Independence Group NL saw its market capitalisation increase by AU$323m (15.9%) during the month having put pen to paper on a joint venture agreement with Rumble Resources Ltd on its highly prospective Fraser Range projects. The leading base metal and gold miner is set to earn 70% equity in Rumble’s 100% owned Fraser Range tenements. October also saw the granting of an additional 3,245km2 of Lake Mackay JV tenements, from which the Group and its JV partner in ABM Resources NL will be permitted to extend exploration from 1 to 13 tenements.
Key commodities surveyed during October:
- Crude oil rose by 5.0% to US$60.44 per barrel, bolstered by Saudi Crown Prince Mohammed Bin Salman’s backing of an extension of OPEC output cuts beyond March 2018. Production in the US has also fallen sharply in the wake of the Gulf of Mexico being hit by Hurricane Nate
- Nickel led most base metals in terms of performance by strengthening 11.7% to US$11,630.50 per tonne. A positive wave of sentiment has driven the price per tonne higher, as it is expected that demand from electric-vehicle batteries will offer opportunities for price growth
- Iron ore continued to fall through October, dropping by 3.7% to US$60.00 per tonne, as concerns grow regarding Beijing’s winter smog crackdown on steel mills weakening demand for the commodity
- Copper regained ground from September by rising 6.3% to US$6,839.00 per tonne at the end of the month, based on expectations of strong demand and continued restrictions on polluting mines and smelters in China, the world’s biggest consumer
- Coking coal fell by 3% during the month to finish on US$159.00 per tonne, with investors worried about the impact steel production limits in China would have on winter demand.
The equity markets surveyed posted strong results during October:
- The All Ordinaries experienced a solid month, having increased by 4% on the back of strong performance in the banking and mining sectors. CBA, Westpac and NAB all added between 3-4%; ANZ saw lower growth at 1.1% whilst Macquarie jumped up 8.2%. The big miners saw healthy growth, with BHP and Rio Tinto up 3% and 4.4% in October, respectively. In contrast Fortescue Metals Group lagged badly in the month, falling 9.7% due to its exposure to weakening iron ore. Increased confidence in the local market has enticed investors back into the market with the Australian market finally responding to the now widely recognised broadening in the global recovery
- Large tech stocks were the primary drivers behind the US S&P 500 closing 2.2% up at the end of October, with more than half of the month’s solid gains attributable to just five tech stocks. Gradual improvements in inflation, consumer and business confidence in conjunction with tax reform have all further propelled the S&P 500 to its longest string of weekly gains since 2014
- October saw the FTSE 100’s best monthly performance since May 2017, having risen by 1.6% amidst ravenous global appetite for equities. The index was bolstered by strong earnings updates, led by oil major BP which gained 2.2% and posted a third quarter profit figure double of what was achieved in Q3 of 2016. A share buyback is to follow later in the year
- Of most significance was the 8.1% increase in The Nikkei, with Japanese stocks scaling to a 21 year high at the close of October with thanks largely due to the booming profits of Japanese exporters. The Japanese Yen hit a three-month low against the US Dollar, providing a lift to the Japanese exporter shares. These stock market highs reflect a global rally, echoing gains experienced throughout international equity markets.
The top Deloitte WA Index Movers and Shakers in October included:
- The share price of Australian Mines Ltd skyrocketed by more than 600% during October. Despite an ASX price and volume query, Managing Director Benjamin Bell outlined that the diversified metals explorer’s market capitalisation had exceeded the threshold of AU$100m required by some London-based funds to invest in a company. As a result, these large institutional investment funds have been buying into Australian mines prior to the commencement of the Company’s UK roadshow in anticipation of continued price increases
- As illustrated by its latest results, the potential for the Manono Lithium Project to become the largest hardrock source of lithium in the world has led AVZ Minerals Ltd’s share price to double during October to $0.38 at the end of the month. Earlier in the month the company signed a Memorandum of Understanding for potential investment and off-take opportunities, with Shanghai Greatpower Industry Co. Ltd, an integrated commodity group focus on sourcing and producing battery raw materials and products for the Chinese battery sector
- Following on from the landmark announcement of “Witwatersrand-style” and “conglomerate-hosted” gold discoveries in the Pilbara Region in July, more than 33 million Artemis Resources Ltd shares have changed hands with the junior miner’s share price rising to a closing high of AU$1.31. October saw an AU$12m capital raising to fund Pilbara exploration, with diamond drilling at Purdy’s Reward underway and large diameter drilling expected to commence towards the end of this month.