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Commodities back leading the way

Deloitte WA Index

11 October 2016: The Deloitte WA Index strengthened during September as the market capitalisation of Western Australian listed companies increased by 4.3% to close the month at AU$155.3bn.

Deloitte Clients & Markets Partner - Western Australia, Tim Richards, said the heavy weighting of the WA Index towards commodity based stocks ensured the Index succeeded under rising commodity prices even in the face of a strained financial sector.

“Despite a month of financial stock turmoil stemming from Deutsche Bank’s financial uncertainty, the WA Index has achieved its fourth consecutive month of gains. The Index was bolstered by rising commodity prices such as the extraordinary growth in coking coal which saw companies with exposure to coal assets, including South 32 Limited locally, enjoying share price gains.”

Among the major Index players in September:

  • South32 Limited’s market capitalisation rose by AU$2.6bn (25.5%) largely as a result of a sharp turnaround in coking coal prices which shot up by 45.1% during September. Corresponding to the rising coal price, South32’s share price climbed off the back of forecasts for the company’s 2017 EBITDA reaching a potential $US2.3bn, up from initial expectations of $US1.4bn should current spot prices be sustained
  • Western Areas Limited’s market capitalisation rose by AU$112m (16.6%). The nickel miner’s shares rose off the back of a 7.7% increase in nickel prices, following the announcement of 20 mines in the Philippines being recommended for closure in the aftermath of in-country environmental audits
  • Northern Star Resources Limited’s market capitalisation rose by AU$364m (15.0%) following recent progressions in the sale of its Plutonic gold mine to Billabong Gold Pty Ltd. Through the sale, Northern Star achieved an attractive sales price which included the potential to become a significant shareholder in Billabong Gold, enabling continued exposure to Plutonic’s future success.

Key commodities surveyed during September included:

  • Coking coal increased by 45.1% to AU$186.30 per tonne at the end of September, as Chinese supply dropped after government policy mandated a reduction in operating days
  • Nickel rose by 7.7% to US$10,528.00 per tonne as a consequence of suspended production in three-quarters of Filipino nickel mines following government environmental audits
  • Copper increased by 5.5% finishing at US$4,848.00 per tonne as a power outage in South Australia brought production to a standstill at several prominent copper mines
  • Lead rose by 13.5% to its highest price in 16 months closing at US$2,120.75 per tonne supported by stabilising copper prices and restricted output over the previous year
  • Palladium increased by 7.1% to US$722.00 per troy ounce at 30 September as industrial demand rose
  • Conversely, the price of platinum retreated 2.9% to US$1,036.40 per troy ounce driven by investor caution following a breakdown in union negotiations in South Africa
  • Crude oil declined by 4.7% during the month to US$46.30 per barrel. The commodity experienced a volatile month as investors speculated around the likelihood of OPEC agreeing to limit production, with a deal finally reached toward the back end of the month.

In the main, the equity market surveyed posted stable results during September:

  • The All Ordinaries remained steady, falling by 0.1%. The market was strengthened by surging energy stocks off the back of rising prices, however this growth was more than offset by declining financial stocks amid concerns about Deutsche Bank’s financial future
  • Similarly, the S&P 500 fell by 0.1% during the month. The index suffered under tumbling Deutsche Bank shares with the company facing a US$14bn fine from the US Department of Justice for miss-selling mortgage backed securities
  • The FTSE 100 rose by 1.7% largely attributable to recovering metals prices which lifted mining and energy related stocks
  • The Nikkei posted the biggest loss with a drop of 2.6% after fears concerning the stability of Deutsche Bank adversely affected financial shares. Weakening oil prices and the steadfast strength of the Yen also contributed to the decline.

Top Deloitte WA Index Movers and Shakers in September included:

  • Syntonic Limited (SYT)’s share price surged following the signing of an agreement with Verizon to enable Syntonic’s ‘Freeway’ (a platform which provides free mobile internet access through advertisers sponsoring the data) on Verizon’s FreeBee Perks platform. The deal provides almost 100 million US Android subscribers access to Freeway, and has enabled Syntonic to boast a 100.0% increase in market capitalisation from AU$56.5m to AU$112.9m
  • Brainchip Holdings Ltd (BRN), which completed its acquisition of Spikenet Technology SAS, an artificial intelligence company. Investor interest soared and Brainchip posted a 90.2% increase in market capitalisation from AU$88.0m to AU$167.4m following an announcement of a strategic alliance with Advisian (global advisory firm) to explore the development of products that use Brainchip’s Spiking Neuron Adaptive Processor (SNAP) technology
  • Alkane Resources Limited (ALK), which posted a 67.6% increase in market capitalisation from AU$146.5m to AU$245.6m. With gold prices only marginally increasing by 1.0% during September, Alkane’s growth stemmed largely from its Dubbo Zirconia project with a recent announcement of a deal on zirconium marketing with Minchem in the UK sparking investor enthusiasm.

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