Weekly review: rampant iron ore and recovering banks push market higher

Iron ore banks ASX May 2021 stock market
WEEKLY MARKET REPORT

Iron ore bursting through the record US$200 a tonne mark and renewed investor interest in the big banks were enough to see the ASX 200 record a winning week and come close to Wednesday’s 14-month peak.

The incredible price action for iron ore miners, banks and gold miners managed to overwhelm the move out of growth and technology stocks, with the ASX 200 up 0.3% on Friday and 0.8% for the week to 7080.8 points.

The incredible price action in iron ore saw a 4.9% rise to a record US$201.88 a tonne as Chinese demand after a three-day holiday turbocharged the share prices for BHP (ASX: BHP), Rio Tinto (ASX: RIO) and Fortescue (ASX: FMG).

BHP was up 0.58% to break the $50 mark at $50.09, Rio Tinto added 1.07% to $127.11 and Fortescue was up 0.97% to $22.97.

Gold also shines

Gold was also a really strong point for the market as the bullion price rose above US$1,800 an ounce, with companies including Newcrest (ASX: NCM), Northern Star (ASX: NST), Evolution (ASX: EVN), Regis (ASX: RRL), Perseus (ASX: PRU), and Silver Lake Resources (ASX: SLR) all up by as much as 4%.

Not to be left behind, the big banks were stronger after a week of fairly strong profit results with Commonwealth (ASX: CBA) one of the highlights, up more than 1% to reach $93.92.

Millionaire factory delivers once again

Another highlight was investment bank Macquarie (ASX: MQG) which pushed its profits up 10% to $3 billion for the full year and hiked its final dividend to $3.35 a share.

Macquarie’s announcements that it will exit coal by 2024 and remain in oil and gas under a new climate policy to lower emissions and revelations that chief executive Shemara Wikramanayake and head of commodities and global markets Nick O’Kane both earned above $20 million for the year saw the share price fall 0.35% to $158.45 after a strong run up to the profit announcement.

Travel up on good COVID-19 news

Travel companies were also stronger after NSW announced it had recorded no new COVID-19 cases, with Webjet (ASX: WEB) jumping a solid 7.4% to $4.78, Flight Centre (ASX: FLT) up 7.26% to $15.51, and Corporate Travel (ASX: CTD) rising 6.31% to $17.86.

However, all three remained lower for the week.

RBA says economic growth will be strong

Shares were also buoyed by a very bullish economic forecast from Australia’s Reserve Bank which expects growth of 9.25% in the year to June – up from the previous 7.75% – with underlying inflation expected to remain below 2% for the next two years and the jobless rate forecast to fall to 4.75% over the next year and 4.5% in the following year.

There were still some pockets of weakness in growth and defensive sectors with IT, utilities, health care and industrials all lower overall.

One prominent example was BNPL leader Afterpay (ASX: APT) which continued to shed value, down 4.1% on Friday and 18.9% for the week, as analysts noted US growth was slowing in April as competitors did better.

In individual stock news, shares in REA Group (ASX: REA) were 1.4% higher after an 8% jump in quarterly revenue as the Australian residential housing market remained very strong.

Pre-tax earnings jumped 13%.

Tabcorp (ASX: TAH) shares rose 1.6% after it revealed a new takeover offer for its Wagering & Media and Gaming Services businesses from Apollo Management for $4 billion.

Small cap stock action

The Small Ords index fell 1.12% this week to close at 3248.7 points.

May ASX 200 Small Ords Chart 2021
ASX 200 vs Small Ords

Small cap companies making headlines this week were:

QMines (ASX: QML)

Aspiring copper-gold miner QMines made its ASX debut this week after raising $11.5 million in an IPO.

The company is allowing investors exposure to the historic Mt Chalmers copper-gold project near Rockhampton in Queensland.

Mt Chalmers has a resource of 3.9Mt at 0.81g/t gold, 1.15% copper and 8.4g/t silver for 101,900 oz of contained gold, 44,900t of copper and 1.061Moz of silver.

Diamond drilling to update the resource was recently completed at the project, with QMines about to start a reverse circulation program to test extensions.

Boss Energy (ASX: BOE)

As its advances its plans to become a first-mover uranium miner, Boss Energy has confirmed it has all necessary permits in place to resume operations at its Honeymoon project in South Australia.

The company undertook a review of all required approvals to mine, process, store, transport and export uranium from Honeymoon.

It confirmed it has all these at hand and that an enhanced feasibility study into the mine’s restart will be completed “in the coming weeks”.

Classic Minerals (ASX: CLZ)

In what was described as a “major company defining moment”, Classic Minerals has secured the mining lease for its wholly owned Kat Gap gold project in WA.

The project has a current resource of 92,869oz of contained gold with continued “aggressive” drilling expected to result in a “significant” upgrade.

Meanwhile, the company also announced this week it had appointed Gillian King to its board as a non-executive director.

Ms King’s focus will be on indigenous human resources.

Red Sky Energy (ASX: ROG)

An independent evaluation of Red Sky Energy’s Killanoola-1DW-1 well has found 37m of potential net pay in addition to the 5m already confirmed.

Killanoola-1DW-1 is part of Red Sky’s Killanoola oil project in South Australia’s onshore Otway Basin.

Red Sky managing director Andrew Knox said the independent evaluation was “extremely encouraging” and that the company remained focused on re-starting production at Killanoola-1DW-1 as soon as possible to create cash flow.

Sacgasco (ASX: SGC)

Sacgasco is looking to meet California’s natural gas demand with its 66.67% owned onshore Borba 1-7 well.

Test work has been underway on the well since February and demonstrated a stable flow rate of 1.6 million cubic feet of gas per day.

Based on the data, Sacgasco now has from the test work, it expects a gas production rate of about 3MMcfpd.

Deep Yellow (ASX: DYL)

With a resource upgrade due later this month, Deep Yellow has completed the first phase of infill drilling at its Tumas uranium project in Namibia.

The program comprised 445 holes for 6,987m at the Tumas 3 East deposit, with almost half of all holes hitting mineralisation greater than 100ppm equivalent uranium.

Notable intersections were m at 997ppm equivalent uranium from 4m; 9m at 481ppm from 4m; 6m at 688ppm from 17m; 8m at 502ppm from 7m; and 4m at 754ppm from 17m.

The second phase of infill drilling will now begin at Tumas 3 Central and Tumas 3 West.

Deep Yellow ended the week with news it had added Andrew Mirco to its team.

Mr Mirco is joining the company as head of business development and is an experienced corporate finance and business development executive.

Altech Chemicals (ASX: ATC)

Aspiring HPA producer Altech Chemicals revealed the pre-feasibility study on building a HPA coating plant for battery materials was “progressing rapidly”.

The proposed plant is to be built in Saxony, Germany with a review confirming the suitability of the Schwarze Pumpe site for both the plant and office space for research and development work.

Additionally, input pricing for plant operating costs have been determined along with potential equipment supplies and construction service providers.

The study assumes the plant’s coating feedstock will come from Altech’s HPA facility in Johor, Malaysia once it is operational.

Anode battery material (graphite or silicon) will be sourced then coated using Altech’s proprietary nano layer coating technology.

Coated battery materials will then be shipped to end users.

The week ahead

We are in for a big week with the Federal Government’s budget on Tuesday set to dominate.

So far expectations are that Tuesday’s budget will deliver a better-than-expected deficit due to stronger growth and it is also likely to announce some significant spending commitments.

Other local releases to watch for include the NAB April Business survey, retail trade figures, consumer sentiment, wages and consumer inflation expectations plus some early figures on international travel since the travel bubble with New Zealand began.

Overseas the biggest announcement will be inflation data in both the US and China as economists look for increasing economic activity to eventually spill over into rising prices.

This week’s top stocks

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