Weekly review: miners drive market to five-week high
WEEKLY MARKET REPORT
Once again, the mining sector rescued the Australian share market, helping it to a six-week high after commodity prices turned upwards and US investors decided interest rate rises were on the way out.
The rising commodity prices led to an understandable rally among the big miners, with shares in BHP (ASX: BHP) almost cracking the $50 barrier, up 0.5% to $49.64 and Rio Tinto (ASX: RIO) shares jumping 1.1% to $122.29.
Fortescue Metals’ (ASX: FMG) shares headed in the opposite direction, down 0.5% to $22.80 as investors were perhaps worried by the apparent revolving door in the executive suites.
Banks were also stronger led by Commonwealth Bank (ASX: CBA), which rallied 1.3% to hit $106.50.
Inflation takes a backward step
There was also positive momentum across other market sectors, which all rose except for defensive consumer staples and utilities after US inflation data reduced concerns that there would be a series of hefty interest rates rises around the corner.
US inflation took its first backward step in more than a year with the CPI data for December showing annual inflation had fallen from 7.1% in November to 6.5%.
That may mean that we’re past peak inflation in the US, although the battle to get the inflation rate down will obviously continue for some time.
That positive momentum pushed the ASX 200 47.7 points or 0.7% higher to 7328.1 points, with energy and consumer discretionary sectors the biggest contributors.
That brought to an end a week in which the main index had rallied by an impressive 3.1%.
Coal shares jump on Chinese optimism
Optimism about China’s reopening and rumours the unofficial ban on Australian coal imports was ending also led to higher coal prices and big price rises in the sector with New Hope Corporation (ASX: NHC) up 5.1%, Yancoal (ASX: YAL) up 1.6% and Whitehaven Coal (ASX: WHC) up 0.5%.
There was also some positive action in the take-away space with shares in Domino’s Pizza (ASX: DMP) rising 4.5% to $71.80.
It wasn’t all good news with some of the big lithium names falling, including Pilbara Minerals (ASX: PLS) dropping 4.1% and Allkem (ASX: AKE) down 1.8%.
As you would expect in a rising commodities market, the Australian dollar was also doing well on Friday, closing in but not quite achieving the US70c mark.
Small cap stock action
The Small Ords index rallied 2.83% this week to close on 2968.4 points.
ASX 200 vs Small Ords
Small cap companies making headlines this week were:
Avecho Biotechnology (ASX: AVE)
Avecho Biotechnology has had its TPM-enhanced phytonadione injectable drug presented to the US Food and Drug Administration in a pre-investigational new drug (pre-IND) meeting by global company Athenex Pharmaceutical.
The feedback from the pre-IND meeting will define the amount of development work remaining before a new drug application is filed with the US FDA for formal review.
If the feedback is positive and the drug is deemed to be commercially feasible, Avecho and Athenex will proceed to a licensing agreement before development.
Azure Minerals (ASX: AZS)
Sociedad Química y Minera de Chile (SQM) will invest up to $20 million to acquire a 19.99% interest in Azure Minerals through a two-stage transaction.
The deal will be conducted via SQM’s wholly-owned subsidiary SQM Australia and is focused on the lithium potential of the Andover project in Western Australia’s Pilbara region, held in a joint venture between Azure (60% equity) and Creasy Group (40%).
SQM has made an initial $4.2 million investment in Azure by subscribing for 16.4 million shares at $0.2564 each, representing a premium of 13.9% to Azure’s last traded price of $0.225 per share on 6 January.
The investment will give Azure a cash balance of more than $25 million which will be used to accelerate lithium exploration across Andover.
Catalyst Metals (ASX: CYL)
In the merger and acquisition space, Catalyst Metals launched a $66 million takeover bid for Vango Mining and is in talks to acquire the Plutonic gold mine next to Vango’s Marymia project.
The combined Marymia-Plutonic projects would have almost 7Moz of contained gold in resources, with a 3Mtpa plant.
This is expected to providing Catalyst with cash flow, strong potential to grow production and mine life and generate growth through exploration.
The takeover will see Vango shareholders receive five Catalyst shares for every 115 Vango shares.
Vango’s directors have recommended the off-market scrip takeover bid.
LBT Innovations (ASX: LBT)
Australian medical technology company LBT Innovations will partner with global biopharmaceutical firm AstraZeneca for the full product development of its APAS Pharma artificial intelligence software.
The $1 million project will see LBT develop the Automated Plate Assessment System (APAS) analysis module for use by AstraZeneca in identifying microbial growth on settle plates used in sterility monitoring during drug manufacturing.
LBT’s APAS technology has been developed to improve data integrity through automation and eliminate issues arising from manual plate reading.
Once validated, the technology will automatically report negative results, providing improved quality control traceability of results to pharmaceutical laboratories.
Aruma Resources (ASX: AAJ)
Gold and lithium explorer Aruma Resources announced further high-grade lithium-rubidium intercepts from its recently drilled Mt Deans project in south-eastern Western Australia.
The company revealed results from the final batches of assays from a 21-hole, 1,409m second phase drilling program at Mt Deans, as well as results from seven re-assayed historical holes drilled by Tantalum Australia two decades ago.
Results confirmed and extended the lithium and high-grade rubidium intersected in multiple pegmatites in the company’s first phase of drilling in the central part of the area and a subsequent rock chip sampling program completed early in 2022.
The company said it may look to identify micaceous pegmatites with high-grade lithium-rubidium-caesium-potassium ore, which potentially could be processed using simple froth flotation/gravity circuits to produce a saleable lithium-potassium concentrate, with valuable rubidium and caesium by-products and possible tin and tantalum.
Power Minerals (ASX: PNN)
Power Minerals has confirmed significant lithium grade, aquifer thickness, and brine density results from its resource definition drilling at the Incahuasi salar within the Salta project in northwest Argentina.
The company completed an initial diamond drill hole in November, which intersected “highly positive” salar evaporite and semi-consolidated sedimentary lithologies to a depth of 339m before reaching basement rock.
Assays from that hole have delivered lithium content in brines averaging 197ppm from surface to approximately 300m depth.
Additionally, this week, Power made two key appointments to support its rapidly-developing lithium strategy at the Salta.
As well as advancing Incahuasi, Power also announced plans to launch a resource definition drilling campaign at the Rincon salar, which is also within the Salta.
The campaign aims to deliver a significant upgrade to the project’s existing global resource of 239,000t of contained lithium carbonate equivalent grading 313 milligrams per litre of lithium.
The week ahead
The continuing earnings reporting season in the US will keep feeding into the US, and by default, world share markets in the coming week as the damage or otherwise caused to corporate earnings is exposed for all to see.
While inflation might be easing, the impact of past inflation rises and a slowing economy will become apparent so there is a lot of potential to both disappoint or perhaps positively surprise investors.
Investors will also be looking at other data releases to confirm that the inflationary fall is the real deal.
The COVID situation in China is also something that investors will be keeping a close watch on, with the more recent signs showing that the reopening may not be slowing as much as had been anticipated.