• ASX200 finishes 3.4% lower for the week, small caps are 6% down
  • Energy stocks boom, east coast supply crashes
  • Southern Palladium lists, with extreme prejudice 

 

After ekeing out some surprise gains in the first week of June, the ASX200 has ended this week sharply lower, shedding some 3.5% as the major banks and tech stocks dragged then benchmark lower.

The losses return the benchmark to circa October 2020, when I totally missed the hit song below, but recently found and quite enjoy.

Energy stocks went nuts this week, no, wait, they shot the lights out, gaining 6.2%.

The RBA went and hiked that cash rate again this week – by a scarier than anticipated 0.5% taking it to 0.85% and leaving the central bank with all kinds of blinding lights, signalling there’s more rate hikes ahead.

 

AMP now expects the cash rate to rise to 1.5-2% by year-end and to peak at 2-2.5% by mid next year. The cash rate whisperer Dr Shane Oliver says greater sensitivity to higher interest rates will end up putting a cap on exactly how much the RBA ultimately needs to hike to get on top of this inflation business, but AMP believes it’ll be well below the average forecast market expectations for a cash rate of 4% or more.

A week of falling home prices and another very weak consumer confidence read already play into the theory that the RBA’s monetary tightening is already getting traction earlier than in past rate hiking cycles.

The troubles for China’s economy, at least do not extend to inflation:

The other big deal this week in Sydney has been the cost of energy, where wholesale electricity prices have gone up 3 x in Australia since early April and wholesale gas prices are 3-4 times above normal levels (with divergences skewed to the east coast).

How did this week’s IPOs perform?

Southern Palladium (ASX:SPD) debuted this week as if they’ve been debuting their whole lives.

The platinum group minerals (PGM) explorer and developer listed this morning with a $19m IPO at $0.50 – beginning public life with a market cap of around $45m and ending its first day at around $60m.

According to the incredible Emma Davies, who’s forgotten more about palladium than you or I will every know, SPD will acquire a 70% interest in private company Miracle Upon Miracle Investments on listing – which holds the Bengwenyama PGM project in South Africa.

It’s a project that currently has a JORC 2012 Inferred Resource of 18.80 million oz (3 PGE + gold) and CEO Johan Odendaal says that after the company’s second phase drilling, they could virtually double that resource.

“The first phase drilling will cover 25,000m and 63 boreholes on the shallower area of the project to bring some of the inferred resources and exploration target up to indicated,” he said.

That’s a likely kick off in the next four weeks to upgrade these resources and allow the start of a feasibility study, Emma says.

Palladium is a rare precious metal that is primarily used in vehicle parts such as catalytic converters.

Here’s how best to recover palladium from your old catalytic convertor a dodgy guide  co-written by the two dodgy ones above.

 

ASX SMALL CAP WINNERS:

Here are the best performing ASX small cap stocks for June 5 – June 10:

Swipe or scroll to reveal full table. Click headings to sort:

Well, we have a hands down winner this week. Pearl Gull Iron (ASX:PLG) the plucky tiny little iron ore explorer is now up 160% on no official news, driven by some outsized gains – on outsized volumes — over past two days.

PLG said ‘we don’t know why this is happening’ in response to a speeding ticket delivered yesterday from the ASX.

However, there is a resource due out this quarter on the flagship Cockatoo Island ‘Switch Pit’, where the company has been drilling into thick, high grade iron ore like ~57m grading 68.9% fe from ~80m.

That’s high. The benchmark grade often quoted is 62% fe – anything higher than this can attract a substantial price premium from buyers.

Aside from rare exceptions like Mount Gibson Iron’s (ASX:MGX) Koolan Island mine – right next door to Cockatoo — Australia doesn’t have many high grade hematite resources like those in Brazil or Africa.

Geological and resource modelling has now kicked off and expected to be delivered very soon.

“Once our resource work is complete, we look forward to updating the market with further plans for our high-grade iron ore project,” chairman Russell Clark said last month.

The $4.4m market cap minnow is still down 5% year-to-date. It had $1.1m in the bank at the end of March.

 

ASX SMALL CAP LOSERS:

Here are the best performing ASX small cap stocks for June 5 – June 10:

Swipe or scroll to reveal full table. Click headings to sort:

 

BikeExchange (ASX:BEX) 

I don’t really get it.  This morning the company revealed it’s hit another record month in Europe for monthly e-commerce transaction values and is on track for a record Q4 FY22, while the BEX restructuring and cost reduction plan announced in April 2022 is largely done with the benefits expected to be felt from Q1 FY23.

The company also says it got strong support to date from major shareholders and directors of the company for the Entitlement Offer announced in May.

According to Tim Boreham, BEX has been cycling through the conditions okay, with a 17% increase in March quarter customer receipts, but its performance is “muddied by seasonal factors and the recent 100% acquisition of now subsidiary Kitzuma which also launched a ready-to-ride consumer bike shipping services in North America”.

Anyway. It’s down this week.