Market wrap: golden share market run driven by falling inflation

A golden run in the Australian share market has continued as gold miners joined in amid bullion prices nearing record highs.

That helped the ASX 200 to increase by 0.5% to a five-week high of 7361.6 points on Friday with the weekly rise of 2% capping off three weeks of gains.

Silver Lake Resources (ASX: SLR) was one of the better performers, with its shares up 6% to $1.33 as the price of gold closed in on its record high of US$2,075.47 an ounce set in August 2020.

Weak US data drives the bulls

Signs of weakness in US economic data was taken as a big positive by global markets, with European shares up and the Dow Jones index gaining 1.1%, the S&P 500 up 1.3% and the Nasdaq index 2% higher.

The US Producer Price Index, which measures business inflation fell by 0.5% in March with annual growth down 2.2% while unemployment claims spiked higher.

All of these indicators were taken by markets as proof that interest rate rises were coming to an end and happier times for share prices could be just around the corner.

Some of the other gold miners caught in the bullion updraft included Northern Star Resources (ASX: NST) with shares up 4.4%, Newcrest (ASX: NCM) shares gaining 1.9% and Evolution Mining (ASX: EVN) rising 3.1%.

Lack of Port Hedland cyclone damage helps iron ore

In other parts of the mining sector, there was relief that Cyclone Ilsa had cleared the world’s largest iron ore export hub of Port Hedland, with shipping movements to resume causing iron ore operators in the region to regain a little ground.

Fortescue Metals (ASX: FMG) shares added 1.3% to $22.43, while BHP (ASX: BHP) and Rio Tinto (ASX: RIO) both edged up 0.1%.

There were still some disappointments to deal with as Karoon Energy (ASX: KAR) announced it will extend the production suspension at its oil field in Brazil.

Karoon’s shares were down 5.4% as the company said the suspension to make repairs would extend into May with production now anticipated to be at the lower-end of guidance, while costs will test the upper reaches of guidance.

Shares in Bank of Queensland (ASX: BOQ) fell 0.9% on news it will undertake an Integrated Risk Program at a cost of $60 million and will also write-down $200 million of goodwill.

Other bank shares closed higher, with the financials sector second only to the healthy materials sector as one of the driving forces on the positive side of the ledger.

Small cap stock action

The Small Ords index rallied 2.81% this week to close at 2924.4 points.

Small cap companies making headlines this week were:

Omega Oil and Gas (ASX: OMA)

Impressing investors this week was Omega Oil and Gas, which hit a 293m interval of gas while drilling the Canyon-2 well, which is believed a continuation of major Shell’s Tasmania-1 discovery well.

At Canyon-2, Omega intersected 293m of gas and liquid hydrocarbon shows, which managing director Lauren Bennett said exceeded the company’s expectations.

The well is located within the Kianga Formation and upper Back Creek Group in Queensland’s Bowen Basin, which are highly prospective and have correlated with historical discoveries in the area.

Ms Bennett says the strong presence of gas over the sandstones and coals of the Kianga Formation and the upper Back Creek Group is encouraging and allows the company to proceed with casing, completion, and testing of the well.

Omega plans to install a 4.5-inch production casing before hydraulic stimulation and flow testing during the next phase.

Caravel Minerals (ASX: CVV)

Following an independent processing review, Caravel Minerals will expand initial production at its namesake copper project in Western Australia’s Wheatbelt region.

Lycopodium Minerals and Orway Mineral Consultants completed a review of the company’s metallurgical process flowsheet, which identified significant opportunities to enhance the project’s value.

As a result, a revised processing flowsheet has been developed.

The revised process flowsheet will be integrated into the definitive feasibility study, which is scheduled for delivery in H1 2024.

Proposed changes include increasing process plant capacity by 10% and the inclusion of a molybdenum recovery circuit.

The changes are expected to increase copper production, net cash flow, and net present value, while reducing costs and the project payback period.

Prospech (ASX: PRS)

Prospech has identified high-grade rare earths and hafnium over 4km of strike at its Jokikangas project in Finland.

A review of the project’s mineralisation database identified rare earth oxides in samples of diamond drill core within the Otanmaki area.

Additionally, magnetic anomalies were noted within the block, and offer interesting potential for rare earths and high field strength element mineralisation.

Prospech’s projects in Finland are believed to be prospective for rare earths, vanadium, and lithium-berrylium.

The Finnish Government is committed to fulfilling increasing European demand for locally supplied critical minerals. Prospech plans to accelerate exploration at its Finnish projects on the back of the Jokikangas results.

Nova Minerals (ASX: NVA)

Advanced explorer Nova Minerals has confirmed an increase in the global resource at its Estelle gold project in Alaska to 1.1 billion tonnes grading 0.3 grams per tonne gold for 9.9 million ounces of contained gold.

The resource is based on four deposits, where mineralisation remains open.

Within the updated resource is the “new super high-grade measured component from surface” at RPM North.

RPM North’s estimate comprises 180,000oz at 4.1g/t gold and is within a wider 340,000oz at 2.3g/t gold measured and indicated core.

The updated resource will allow for detailed mine planning, which will be incorporated into Estelle’s phase two scoping study, due for completion in Q2 2023.

Nova’s scoping study will be based on a mining scenario starting at the RPM measured and indicated core of 340,000oz of gold.

The company said there is real potential for the starter pit at RPM to yield a much higher gold resource. Nova is actively building a pipeline of deposits to increase Estelle’s life of mine, with more potential discoveries on the horizon.

Elmore (ASX: ELE)

Elmore has achieved “practical completion” of its purchase of the Peko iron ore project in the Northern Territory, which it had previously worked on as a contractor.

The company has now completed “all necessary undertakings and actions” to settle the share purchase agreements and associated requisite finance. Initial operations at Peko are focusing on producing a high-grade magnetite concentrate.

However, the company has plans to generate copper, cobalt and gold from a tailings deposit within the wider ground.

Elmore expects to begin producing cobalt through its new copper-cobalt plant before the end of the current half.

The week ahead

The coming week is going to be dominated by corporate profit numbers as the US reporting season swings into high gear.

High inflation is expected to have taken a decent bite out of profits with most analysts expecting the worst numbers since the peak of the pandemic in 2020.

Analysts will be keen to examine remarks from chief executives about how their companies have been performing with commentary from large banks about how active their lending has been seen as a good indicator of the damage that has been caused by the steep run up in interest rates.

Lower lending to business could worsen the slowdown in the economy and bring on a recession so those remarks could be crucial in predicting how bad the economic damage could be.

In Australia, there are a few things to watch for with household spending numbers, consumer confidence and the minutes from the last RBA Board meeting released.

Activity numbers on manufacturing and services are also out.

In China, a raft of numbers will be released including economic growth, retail sales, production, investment and unemployment.

In the US there are several sets of housing statistics to be released as well as purchasing manager indexes.

This week’s top stocks