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Fourth consecutive month of gains

Deloitte WA Index

10 March 2017: The Deloitte WA Index posted its fourth consecutive month of gains in February as the market capitalisation of Western Australian listed companies increased by 0.95% to close the month at AU$162.7bn.

Deloitte Clients & Markets Partner – Western Australia, Tim Richards, said:

“Steady growth in resource and mining stocks followed an optimistic reporting period and continued increases in iron ore prices. Despite these strong factors, investors remained cautious as the markets closed pending President Trump’s budget address to the US Congress, awaiting the implications of his announced policies.”

Among the major Index players:

  • Monadelphous Group Limited’s market capitalisation rose by AU$222.3m (22.8%) following a letter of intent received from Oil Search Limited for a $50m per annum, five-year services contract. Monadelphous shares were further boosted by the declaration of a dividend alongside their half-year results which suggested an optimistic outlook due to the stabilising environment in the resources and energy sector
  • Westgold Resources Limited’s market capitalisation increased by AU$135.6m (22.4%) after announcing a toll processing and purchase option agreement with RNC Minerals (RNC) at its South Kalgoorlie Operations (SKO). Westgold is set to receive either AU$4m in RNC shares as well as toll processing fees for the access granted, or the option for RNC to purchase SKO outright for AU$80m and award Westgold a 5% option fee in RNC shares
  • Austal Ltd’s market capitalisation grew AU$104.7m (18.8%) off the back of its half year results, delivering strong growth in underlying EBIT. Earnings from the US segment in particular increased significantly from the prior half-year, with orders in place standing at US$3.1bn globally.

Key commodities surveyed during February included:

  • Natural gas declined significantly in February, with the price falling 21.3% to AU$2.52/mmbtu at the end of the month due to an early end to the US winter resulting in stagnant demand
  • Iron Ore posted substantial growth with an increase of 10.8% to achieve a month end price of US$92.50 per tonne. The growth was driven by increased Chinese demand despite market expectations, with some analysts suggesting the nation may be stockpiling iron ore on speculative terms
  • Coal prices fell during the month. Prices fell by 13.4% to US$155.00/tonne due to uncertainty surrounding policies in China following recent production restriction and a current oversupply in the market
  • Gold continued its rally with an increase of 3.7% over the month to a price of US$1,256.64/troy ounce due to the weakening US dollar and decreasing interest rates
  • Nickel increased significantly during February (13.6%) to a close of US$10,926.50/tonne as mine closures in the Philippines were announced which will cut output from the world’s top ore supplier.

All equity markets surveyed increased during the month of February:

  • The All Ordinaries increased by 1.5% this month, following a predominantly optimistic reporting season for the largest companies on the ASX. Despite disappointing economic data, most sector indices increased during the month, principally mining and resources, but ran out of steam toward the end of the month as the market awaited President Trump’s speech to the US Congress
  • The S&P 500 had the strongest growth of equity markets surveyed in February, with a 3.7% increase, though analysts are concerned this growth was driven solely by the market’s momentum, not underlying value. However investors were not put off as the momentum continued with all but two primary sectors, as financials and energy stocks fell after significant post-election gains
  • The FTSE 100 followed, increasing 2.3% over the month, boosted by gains in some of the markets largest stocks. Unilever shares soared following Kraft’s confirmation of a merger proposal, Coca Cola HBC reported higher year-end profits, and AstraZeneca produced successful late-stage trials of its cancer drug. Furthermore, despite the uncertainty pending President Trump’s US Congress address after UK market close, anticipation of infrastructure and military spending increased share prices for several defence and aerospace contractors
  • The Nikkei remained steady overall for February, finishing 0.4% higher.

Top Deloitte WA Index Movers and Shakers in February included:

  • Summit Resources Limited’s market capitalisation soared by AU$83.9m (197.4%), with a sharp increase correlated to a rally in uranium prices increasing significantly from the low price prevailing at the end of 2016
  • Cardinal Resources Limited’s market capitalisation rose by AU$41.0m (52.9%) following encouraging drilling results at the Namdini Project, as well as an optimistic metallurgical update, with results from the next phase of test work expected to be sufficient to complete a feasibility study
  • Panoramic Resources Limited released its feasibility report for the Savannah mine at the start of the month, boosting its market capitalisation by AU$49.3m (43.4%). The report boasted a ten year mine life with strong nickel and copper production and minimal restart capital requirements given the existing site infrastructure.

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