Weekly review: Oil stocks fall while resources rise, Myer in trouble, Coles to begin trading on the ASX
WEEKLY MARKET REPORT
Australia’s share market managed a tepid recovery on Friday which faded as the day wore on, causing the main ASX 200 index to shed 3.2 per cent for the week.
By the close the ASX 200 was down 5 points to 5730 points after all of the US indices had finally risen to snap out of a lengthy losing streak.
Oil stocks down but resources giants rise
The embattled resources sector was the unlikely hero even though oil stocks continued to follow the oil price down the gurgler.
Woodside (ASX: WPL) disappointed, losing 4c to close at $33.02 and its smaller cousin Santos (ASX: STO) did the same, falling 4c a share to $6.17.
The good news for Santos is that the ACCC will not oppose its US$2.15 billion takeover of Quadrant Energy.
That decision was also a positive for Macquarie Group (ASX: MQG) which holds a 21.8 per cent stake in Quadrant Energy.
Following the ACCC approval, Macquarie said it now expects an increase of up to 15 per cent in net profit for this financial year and its shares rose 0.16 per cent or 19c to $119.00.
The big diversified miners did much better with BHP Billiton (ASX: BHP) up almost 1 per cent or 32c to $32.36 as is share buy-back documents were mailed to shareholders.
Rio Tinto (ASX: RIO) performed better still, adding almost 1.9 per cent or $1.47 to close at $79.31.
For the day the materials index was up a meagre 0.73 per cent and the IT sector was up 1.42 per cent but it was hard to find any other heroes as the early market recovery that followed Wall Street up melted in the afternoon sun as the weekend beckoned.
Myer in the doldrums
Beleagured retailer Myer (ASX: MYR) was placed in a trading halt as the department store operator deals with allegations that it has failed to keep the market informed after disastrous sales numbers were reported in the media.
Myer said it was “well aware of its continuous disclosure obligations’’ but the ASX will want some more reassurances before the stock begins to trade again.
Still on the retail front, all being well Coles shares should start to trade from November 21 after Wesfarmers (ASX: WES) shareholders approved the company’s demerger of the supermarket chain.
Wesfarmers shares lost 2.2 per cent or 98c to $44.39.
Lendlease finally recovers a little
Lendlease (ASX: LLC) closed up 2.3 per cent to $13.57 after reassuring shareholders at its annual meeting that its recent $350 million post-tax provision was conservative and will cover all known issues on three of its large engineering projects.
Lendlease shares lost almost 30 per cent in three sessions after the company made the initial shock announcement.
Small cap stock action
The small cap index ended in the red again this week, with the index pulled down 2.67% to close Friday at 2,611.
Despite the downward trend numerous small caps had noteworthy news out, including:
Lithium Australia (ASX: LIT)
Integrated lithium-ion battery technology developer Lithium Australia reported this week it has partnered with a battery researcher to develop anode materials that will enhance the performance of lithium-ion batteries.
Subject to finalisation, the agreement comprises a four-stage development and commercialisation strategy and will enable Lithium Australia to access superior battery management systems.
To begin testing, Lithium Australia will establish graphite/silicon anode development and testing facilities – making full use of its existing VSPC plant in Wacol.
Previous testing on prototypes revealed the potential for the graphite/silicon material to “significantly increase the energy density” of lithium-ion batteries.
FBR Ltd (ASX: FBR)
FBR Ltd is on the cusp of a “quantum leap” after successfully proving its Hadrian X construction robot could build a 180sq m house in less than three days.
The Hadrian X robot constructed a three-bedroom, two-bathroom home structure within three days, which FBR says is a technical milestone it set itself three years ago.
Once completed, a civil and structural engineering consultancy group verified the structure complied with relevant building standards.
“We now have the world’s only fully automated, end-to-end bricklaying solution, with a massive market waiting for it,” FBR chief executive officer Mike Pivac said.
Metalicity (ASX: MCT)
Mineral explorer Metalicity made headlines a few times this week starting with news it had pegged up copper ground in the renowned Paterson Province in WA’s Pilbara, near where Rio Tinto (ASX: RIO) is rumoured to have unearthed a major copper discovery.
Metalicity has applied for 2,166sq km of exploration licences in the province with the new tenements adjoining Rio’s land and covering a known copper corridor.
In addition to the Paterson Province ground, Metalicity has secured two option and sale agreements to acquire the Fraser Range and Biranup projects within the Albany Fraser Belt.
The projects cover 636sq km and are close to recently discovered nickel and copper deposits in the area.
Encounter Resources (ASX: ENR) and Independence Group (ASX: IGO)
Nickel miner Independence Group has put $1.8 million into Encounter Resources by purchasing 24 million ordinary shares at $0.075 each.
The holding in Encounter gives Independence Group until March 2020 to elect to enter an earn-in agreement where it can lock-in 70% of Encounter’s Yeena copper-cobalt project by spending $15 million on exploration over seven years.
From the $1.8 million investment, Encounter will use 80% of the funds to advance Yeena. A technical committee will be formed to plan the exploration activities.
The committee will be made up equally of Independence Group and Encounter members.
Peel Mining (ASX: PEX)
Long time mineral explorer, Peel Mining has finally been rewarded for its efforts after the company reported it had unearthed a “stunning” and “awe-inspiring” thick intersection containing high-grade zinc, as well as copper, silver, lead and gold.
The thick intersection was returned at the Southern Nights prospect within the company’s Wagga Tank project in NSW and totalled 18.2m at 40.3% zinc, 15.7% lead, 0.97% copper, 356g/t silver and 2.77g/t gold from 182m.
Peel said the intersection was the highest-grade zinc-rich find the company had recorded since it was incorporated.
The company is undertaking a 20,000m drilling campaign across Wagga Tank and plans to release a maiden JORC resource before mid-2019.
Alderan Resources (ASX: AL8)
Another company with a notable mineralisation find this week was Alderan Resources, which reported a 54m thick intersection containing copper, zinc, gold and silver.
The mineralisation was identified at Alderan’s Frisco project in the US Utah region and was 54m at 1.4% copper, 0.45% zinc, 0.19g/t gold and 20g/t silver from 46m.
Included in that intersection was 14m at 3% copper, 1.15% zinc, 0.22g/t gold and 28g/t silver from 82m.
Additionally, channel sampling was carried out at the project’s historic Massachusetts copper mine and revealed 72m at 0.77% copper, 0.3g/t gold and 12g/t silver. Further results are expected this month from ongoing drilling across the project.
The Food Revolution Group (ASX: FOD)
Food processing stock The Food Revolution Group has inked a memorandum of understanding with the world’s largest oil and gas conglomerate Sinopec regarding a distribution agreement where Sinopec will sell Food Revolution’s canola oil produced throughout China.
The companies will still decide on the final terms, but it is expected Sinopec will sell the canola productions through its 35,000 petrol and convenience stores in China.
According to Food Revolution, the deal was a result of its presence last week at China’s International Import Expo where Food Revolution provided samples and presented its products to the thousands of people who attended.
During its time at the expo, Food Revolution said it had received “significant interest” from many potential customers.
IPOs this week
Small Caps readers who want to view upcoming IPOs or see the stocks that have listed in 2018 and how they are performing can now do so.
The latest company to make its way onto the ASX this week was:
Hearts & Minds Investments (ASX: HM1)
Australian investment vehicle Hearts and Minds Investments joined the ASX on Wednesday after raising $500 million by issuing 200 million shares at $2.50.
Supporting the company’s IPO are well known cornerstone investors including Myer, Packer, Stoke families, Gonski, Cannon-Brookes, Ainsworth, Hamish Douglass, Gwinnett, Hadley, Jackson and Farquhar, Karedis, Lew, Lowy and the Paul Ramsay Foundation.
Hearts & Minds will allocate 40% of its portfolio based on recommendations from fund managers who present at the annual Sohn Hearts and Minds Investment Leaders Conference.
The remaining 60% portfolio investments will be made based on the highest conviction quarterly recommendations of five leading fund managers: Caledonia, Cooper Investors, Magellan Asset Management, Paradice Investment Management and Regal Funds Management.
Hearts & Minds’ investment strategy is to build a concentrated portfolio of the highest conviction ideas from leading fund managers as well as supporting Australia’s leading medical research institutes by providing financial funding through donations.
Since it started trading Hearts & Minds’ share price has bounced between a $2.47 low and a $2.62 high before ending the week at $2.57.
The week ahead
The Reserve Bank is the star of the show next week with the release of the minutes from the board’s November monetary policy meeting released on Tuesday, followed by a speech by RBA Governor Philip Lowe on Trust and Prosperity at the CEDA Annual Dinner in Melbourne.
While there are unlikely to be many surprises in either, market watchers will still be keen to see any nuances in the RBA’s approach to the Australian economy.
Other than that the data releases are fairly inconsequential, covering tourism, skilled internet job vacancies and the CBA’s ‘flash’ manufacturing and services’ gauge.
There is a little more on offer offshore with some housing related data in the US and ‘flash’ purchasing managers’ manufacturing indexes from developed economies including the US, Japan, UK and Eurozone.