Closing Bell: Resources reboot puts fresh socks on small cap index
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The Emerging Companies (XEC) index is tracking higher on Wednesday, up 1.4% buoyed by strength in the energy and materials sector as confidence builds on a post-lockdown pop in demand out of China. The ASX200 (XJO) has ended the session 0.3% higher.
At a briefing this afternoon, Sydney time, officials in Shanghai reported a third straight day of no new community COVID-19 infections.
That’s on the money for a crucial milestone authorities believe will lead to a phasing out of the city’s super-harsh lock up rules which have scuttled mobility, smashed economic growth and every day life on total hold in the financial megalopolis. The city has been a bleak place with tens of millions of people locked in for weeks on end amid a few signs the outbreak is slowly under control.
But with Beijing reporting cases and now its key satellite port city of Tianjin – as well as more distant outbreaks – China is locked in a total death race to get the spread under control before the key autumn National People’s Congress which will most likely endorse Xi Jinping’s presidency for an unheard of third term. Until then, there’s no going back on the policy Xi has wedded himself to.
At home, the Reserve Bank minutes for its May meeting flagged a bit more of the iron first then the velvet glove if the “inflation psychology in Australia were to shift in an enduring way” leading to the likely imposition of more rate increases..
That’s in line with the view of Capital Economics lead economist, Ben Udy who says CE now expects the RBA to raise the cash rate at every single meet this year.
And over in India, the state-run insurer Life Insurance Corporation of India (LIC) fell hard and fast on it’s debut in Mumbai despite a record iIPO which priced at the top of the range and was just about three times oversubscribed.
Macquarie rates LIC neutral with a price target of 1000 rupees, as the share price fell circa 10% before retracing some of those losses. The initial public offer delivered a kitty of US$2.7 billion, with sovereign funds out of Norway and Singapore, joining the rush alongside literally millions of mum and dad investors.
(Stocks highlighted in yellow rose after making announcements during the trading day).
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Up somewhere around 80% is Havilah Resources (ASX:HAV). That’s after hungry mid-tier player Oz Minerals (ASX:OZL) announced plans to pay HAV up to $405m for the flagship 1.1Mt copper, 3.1Moz gold, and 23,200t cobalt ‘Kalkaroo’ project in South Australia.
HAV has signed up to a binding term sheet with OZL to potentially sell its Kalkaroo copper-gold project for $205 million.
On top of that, $65m could be paid upon a 30% uplift in Kalkaroo’s resource estimate, as well as “a copper price linked contingent payment in each year of production up to a maximum cumulative amount of $135 million”.
That’s $405m all up.
OZ Minerals has 18 months to decide whether it will acquire the project.
Kalkaroo is at pre-feasibility study stage and is potentially one of Australia’s largest undeveloped open pit copper-gold deposits, right next to OZL’s existing operations.
Meanwhile, Reuben says that the companies will form an exploration alliance to hunt for more giant deposits across HAV’s South Australian tenure, paid for by OZL.
“Under the Strategic Alliance, OZ Minerals will pay Havilah $1 million per month during the Option and Alliance Period, with 50% of the payments directed towards Havilah identifying and advancing nearby exploration opportunities within the Curnamona Province,” OZL says.
“Including the monthly payment, OZ Minerals expects to spend up to $76 million during the Option and Alliance Period to undertake studies and for exploration activities at the Kalkaroo project and on alliance activities.”
The HAV board has unanimously recommended shareholders vote in favour of the offer.
Over in beautiful Alaska, Felix Gold(ASX:FXG) has this week grabbed a whack more ground inside the “world class” Fairbanks Mining District of Alaska, where historical gold production exceeds 16Moz.
It now holds four key projects across over 392km2 of tenure in the heart of this gold district.
The acquisition of this new project has been a major priority over the past 12 months and represents a significant milestone, the company says.
It’s already been quite a wild week for Step One Clothing (ASX:STP), with shareholder confidence taking a real hit after management confirmed the company would miss its prospectus forecasts.
FY22 earnings (EBITDA) in the range of $7-8.5m and sales growth of 15-20% are now expected. Both are materially lower than previous guidance of $15m for earnings and 21-25% revenue growth.
The stock fell heavily on Monday and has recouped some 30% on Tuesday.
While it’s a long road back, the analysts at Morgans expect the firm to remain profitable and cash generative, although they slashed the Step One price target by over 70% to $0.60 from $2.40.
(Stocks highlighted in yellow fell after making announcements during the trading day).
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Hot Chili Limited (ASX:HCH) has fired off a National Instrument 43-101 Technical Report to the Canadian Securities Administrators in support of recent news of a significant increase in the company’s copper and gold mineral resource estimates at Costa Fuego.
Aussie boffins Electro Optic Systems Holdings (ASX: EOS) have secured Federal and NSW Government dollars to team up with Nova Systems, Gilmour Space and UTS Tech Central to establish the Australian Satellite Manufacturing Hub, where the companies plan to build expensive under-500kg things to throw into space.
Western Australia’s Pursuit Minerals Limited (ASX:PUR) says it’s finalised the sale of its northern hemisphere operations to focus on its local Commando and Warrior projects. Pursuit locked in a stock and cash deal with UK outfit Kendrick Resources for its interests in Norway, Sweden and Finland.
Ecommerce stock Harris Technology (ASX:HT8) was the first company to reveal how well it did on Amazon Prime Day The company reported $429,963 in sales, which was 32 per cent higher than last year’s result.
Medical imaging company Singular Health Group (ASX:SHG) formally launched its blockchain-based Medical File Transfer Protocol. It will deliver 3D patient-specific visualisations direct to people’s personal PCs and utilise blockchain (as well as private cloud infrastructure) to record a ledger of transactions and preserve user anonymity.
Scaffolding provider Acrow Formwork & Construction Services (ASX:ACF) gave a trading update in which it reiterated its guidance of $106 million revenue and a $8.7 million-$9.5 million profit for FY21. Acrow also announced it secured an industrial services contract for Visy’s paper mill at Tumut.
Forensic data company Nuix (ASX:NXL) told shareholders a search warrant was executed at its office “in relation to an investigation into the affairs of an individual”. The company said it understood that the investigation did not relate to any allegation of wrongdoing by the company
Next Science (ASX:NXS) entered into negotiations with a company suing it for global commercial exclusivity rights over its bacteria killing solution XPerience. However, Next Science says if those broke down and a legal fight resumed it would defend itself.
Wiseway Group (ASX:WWG) – trading halt, pending the release of an ASX announcement regarding a pro-rata non-renounceable entitlement offer
State Gas (ASX:GAS) – trading halt, pending an announcement regarding details of new acreage
Clime Investment Management (ASX: CIW) – trading halt, pending an announcement by CIW in relation to a proposed material acquisition
Krakatoa Resources (ASX: KTA) – trading halt, pending the announcement of a material exploration target at the 100% owned Mt Clere REE Project