Top 2 Gold Producers To Follow – Saracen And Northern Star

Saracen Minerals Holdings (ASX: SAR)

Saracen Minerals Holdings Ltd (Saracen) is an Australian gold miner. Saracen has three main projects in Western Australia. These include the Carosue Dam Operation, the Thunderbox Operation and the joint venture operation of the KCGM super pit (50% interest). Saracen’s market capitalisation is A$6.2 billion.

Saracen announced on 27 March 2020 the company’s responses to COVID-19. Firstly, Saracen notes that COVID-19 has had minimal impacts on gold mining operations. Secondly, Saracen maintained its FY20 guidance of 500,000 ounces and FY21 guidance of over 600,000 ounces. Finally, Saracen has large ore stockpiles available for milling (more than 1.7Moz attributable) which will help insulate the business should mining be restricted.

During the March quarter 2020, Saracen’s production levels were sound with total gold production of 158,132oz at an all-in sustaining cost (ASIC) of A$1,133/oz.

The long-term outlook for Saracen is also positive. The recent acquisition of the KCGM Super Pit could allow Saracen to transition from a mid-tier to top-tier gold producer. The acquisition is estimated to more than double Saracen’s total gold production in the coming years.

Northern Star Resources Ltd (ASX: NST)

Northern Star Resources (Northern Star) is an Australian gold producer with projects located in the regions of Australia and North America. Northern Star has four Tier-1 assets that includes Jundee operations, Kalgoorlie operations (including Kanowna Belle, Kundana (the East Kundana Joint Venture – Northern Star’s interest: 51 per cent), Kalgoorlie Consolidated Gold Mines (KCGM) also known as the super pit) and Pogo operations. Northern Star has a market capitalisation of A$10.8 billion.

Northern Star announced on 26 March 2020 that it will withdraw its production and cost guidance for FY20. Movement restrictions in Western Australia and Alaska on employees and suppliers are causing a disruption to Northern Star’s operations. During the March quarter 2020, Northern Star’s production levels were in line with the previous quarter with total mined gold production of 250,399oz at an all-in sustaining cost (ASIC) of A$1,590/oz. Northern Star management also notes that the company cannot give production guidance for the June quarter, as the outlook surrounding COVID-19 is uncertain.

The long-term outlook for Northern Star is positive. Currently, Northern Star has four Teir-1 assets in Teir-1 locations delivering well over a million ounces a year (subject to change for FY20 due to impacts from COVID-19). Like Saracen, the main driver of the positive outlook for Northern Star is its 50% acquisition of the KCGM, which took financial effect from 1 January 2020. KCGM is one of the largest gold mines in Australia.

The gold price

All commodity producers benefit from the falling $A. Even though there has been a recent rally in the $US/$A exchange rate, the it remains at low level in the low to mid 60s. Gold producers such as Saracen and Norther Star are also benefiting from both a rising gold price of gold. The Gold price in $US dollar terms is currently around US$1,730 per ounce. If this operating environment continues where $US/A$ exchange rate remains low with an increase gold price, gold producers should see increases in revenue over time. Consequently, investors that want exposure to gold producing companies they could consider Saracen and Northern Star.


 

Disclaimer:

This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).
This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law, we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.
ASR has no position in any of the stocks mentioned.

Top 2 Health Companies For Long-Term Growth – CSL and Cochlear

CSL Ltd (ASX: CSL)

CSL Ltd (CSL) is a global company that develops and manufactures biopharmaceutical products mainly derived from blood plasma. It also develops and manufactures influenza vaccines. CSL’s key markets are the United States (48 per cent of revenue) and Europe (25 per cent of revenue), CSL’s market capitalisation is around $A139 billion and CSL is the largest company listed on the ASX.

 

CSL has been one of the strongest performing Australian companies since its public listing on the ASX in 1994. For example, the average annual growth in CSL’s share price has been over 25 per cent per annum since being publicly listed in 1994. Currently, CSL is ranked number 1 in global plasma therapies (a $US30 billion global industry and CSL has only two other global competitors) and number 2 in influenza vaccines (a $US6 billion global industry).

How is CSL performing in this economic environment?

CSL announced on 9 April 2020 an update on how COVID-19 is affecting the company’s operations. The most significant announcement is that CSL reaffirmed its profit guidance for FY20. FY20 profit guidance remains approximately US$2,110 million to US$2.170 million in constant currency terms. CSL notes that if exchange rates remain unchanged for the remainder of FY20, then this lowers this guidance by around US$100 million. In addition, CSL announced that the company has a strong balance sheet with approximately $1.1 billion available liquidity.

Regarding CSL operations, CSL management notes that plasma collections is expected to be impacted due to COVID-19 conditions.

However, in the current business environment, there is very strong demand for influenza vaccines and requests for IVIG has been elevated. There have been no interruptions in to CSL supply chain, and the Wuhan facility operations have recommenced.

What is the outlook for CSL?

The short-term and long-term outlook for CSL is positive. In the short-term, CSL has announced that FY20 profit guidance remains unchanged in constant currency terms (unlike several blue chips ASX listed stocks), and several of the company’s products will see an increase in demand to help battle COVID-19.

Looking forward over the medium to long-term the outlook for CSL is positive.

CSL has achieved economies of scale and has a very strong competitive position in both the plasma and influenza vaccine markets. Additionally, both industries have very high barriers of entry, reducing the likelihood of further competition in the future. An example of CSL’s competitive position is that it is the most efficient in the United States market at collecting plasma which enables it to keep its costs at industry best practice.

CSL is expanding production facilities located at Broadmeadows in Victoria and Kankakee in the United States as well as elsewhere. The Broadmeadows facility is expected to produce therapies with an estimated annual market value of A$850 million by 2026.

This expansion in production reflects growing demand partly stemming from the aging population and a growing proportion of the population having access to high technology medicine.

Cochlear Limited (ASX: COH)

Cochlear Limited (Cochlear) is a medical device company that designs, manufactures and supplies implantable hearing solutions. Cochlear has provided more than 550,000 implantable devices, helping people of all ages to lead full active lives. Cochlear has a market capitalisation of A$12.4 billion.

How is Cochlear performing in this economic environment?

Due to the spread of COVID-19, a growing number of health authorities are either recommending or enforcing elective surgery deferrals. This is resulting in substantial short-term negative impact on the number of implant surgeries undertaken. In mid-March, the US Surgeon General urged hospitals and healthcare establishments to consider suspending surgical procedures in order to reduce the strain on the healthcare system until the rate of infection of COVID-19 is under control. Cochlear expects these actions from authorities will impact surgeries in major markets, particularly in the US and Western Europe. However, Cochlear expects many of the delayed surgeries to be recommended once hospitals resume normal operations.

Cochlear is not able to provide earnings outlook and as a result Cochlear has withdrawn its earnings guidance for FY20.

In response to this challenging economic environment, Cochlear announced on 25 March 2020 a capital raising to enhance liquidity. The capital raising consisted of a A$800 million Institutional Placement and a non-underwritten Share Purchase Plan. Cochlear has obtained approved for an additional A$150 million bank facility from an existing lender and has suspended its dividend until trading conditions improve.

What is the outlook for Cochlear?

The short-term outlook for Cochlear is unfavourable. This is due to the significant impact COVID-19 is having on Cochlear business activities.
However, the long-term outlook for Cochlear remains positive. Cochlear is a global leader in hearing solutions that has a competitive position in several markets globally. Cochlear has an estimated 60% of global market share and in excess of 600,000 implants sold over the last 40 years. It is expected that most of the deferred surgeries will be recovered when it is safe to do so. After COVID-19 is contained, Cochlear expects strong growth in sales of cochlear implant units in developed markets driven by the recent launch of the Nucleus Profile Plus Series Cochlear implant. Cochlear also expects to release the new osseointegrated steady-state implant (OSIA) product later in FY20 to extend the Acoustics product portfolio.

Overall thoughts

CSL and Cochlear have both performed very well over a long period of time. Both companies have an international competitive advantage and are the leading global company in their field. Investors that want exposer to the health care industry over the long term could consider both CSL and Cochlear.


 

Disclaimer:

This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).
This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law, we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.
ASR has no position in any of the stocks mentioned.

ASX Ltd – Strong growth in trading volumes

ASX Ltd operates the Australian Stock Exchange (ASX) and the Sydney Futures Exchange (SFE), offering a full suite of services including listings, trading, clearing and settlement. The ASX Ltd operates largely as a monopoly business. ASX Ltd’s market capitalisation is around A$16 billion.

What are ASX Ltds’s year-to date activity figures?

ASX Ltd announced today that in the ten months to end-April 2020 the number of trades on the ASX increased by 34% and the total value of trades increased by 29% while the number of trades in futures and options contracts on the SFX are up by 6%.

This is important because growth trading volumes drives growth in ASX Ltd’s earnings. That said, trading volumes are typically high when there is increased market volatility as has been the case in recent months. Once market volatility drops, trading volumes will most likely drop to more normal levels.

ASX Ltd also announced today that the total number of listed entities on the ASX fell to 2008 at end-April 2020 compared with 2068 at end-April 2019. This drop has a small negative impact on ASX earnings.

Further, ASX Ltd announced that in the ten months to April 2020 companies have raised $63.7 billion is capital compared with $73.7 billion in the corresponding period last year (a fall of 14%). However, $13.8 billion in new capital was raised in April 2020, up 185% from April 2019. This reflects a number of large corporates raising new capital in April 2020 to strengthen their balance sheets due to the impact of COVID-19 on economic activity.

What is the market’s reaction to ASX Ltd’s announcement?

ASX Ltd’s shares are down slightly in a weaker overall market. ASX Ltd is currently trading at $83.22 compared to a 52 week high of $89.67 in February 2020. This represents a fall of 7.2% compared with a 25% drop in the ASX200 in the same period. ASX Ltd trades on a forward PE ratio in the low 30s and a dividend yield of around 3% (fully franked).


Disclaimer:

This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).
This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law, we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.
ASR has no position in any of the stocks mentioned.

Reserve Bank Of Australia Monetary Policy Decision

The Reserve Bank of Australia (RBA) Board met today (5 May 2020) and decided to reaffirm the targets for the cash rate and the yield on 3-year Australia government bonds of 25 basis points, including the other elements of the monetary package announced last month.

The RBA commented on several monetary decisions made in March and provided updates on these decisions.

Cash rate decision

The cash rate has been maintained in the lower bound of 0.25%. The RBA expects the cash rate to remain in this lower bound until the Australian economy reaches full employment (around 4% unemployment), or if the inflation rate surpasses the 2 – 3% inflation target range.

Quantitative easing

In March, the RBA decided to for the first time undertake an asset purchasing plan (Quantitative Easing) to purchase Australia government bonds to target the 3-year bond rate at 0.25% (in line with the current cash rate). The RBA as of today has purchased around A$50 billion of government bonds in the secondary market, including bonds issued by the states and territories. In addition, the RBA noted that the RBA is willing to continue this asset purchasing plan to keep the 3-year government bond rate at around 0.25% until Australia moves towards full employment and its inflation goal. However, it is likely the RBA will make smaller and less frequent purchases of government bonds if conditions improve.

Banking sector

The RBA is continuing to support credit and maintain low funding costs in the economy through the RBA’s daily open market operations. In addition, to further assist the smooth functioning of Australia capital markets, the RBA has decided to broaden the range of eligible collateral for these operations to include Australian dollar securities issued by non-bank corporations with an investment grade credit rating.

What is the outlook for the Australia economy?

The outlook for the Australian economy in the March and June quarters is very poor. The RBA announcement has provided some outlook on the Australian economy. The RBA Board baseline scenario is that output will fall around 10% over the first half of the year and by around 6% over the whole year. The Board’s baseline scenario for the unemployment rate is a peak of around 10% in the coming months and could still above 7% at the end of next year. The Board’s baseline scenario for inflation is 1% to 1.5% in 2021, with a gradual pick up from there.

Further, it is anyone’s guess what the size of the contraction could be in the March and June quarters 2020. The package of measures announced by the RBA in March is as comprehensive as it gets and is directed at providing liquidity to the Australian financial system and to stimulate the Australian economy. At this point, it is important to note that the monetary tools available to the RBA to stimulate economic activity have ran out. This is shown by this announcement, as there are no new monetary tools available to stimulate economic activity, simply maintaining the previous tools announced at the last meeting.

While these measures are a positive, it is unlikely to stimulate economic activity enough in the short-term to prevent a major downturn. It is up to the fiscal policy expansion to stimulate economic activity. The Federal Government has announced three stimulus packages totalling A$213.6 billion. It is unclear that these measures will do much in the short-term, as the virus has materially dampened economic activity. However, this may allow for a strong bounce back for the Australian economy once the Government allows a re-opening of day-to-day life. Finally, it is unclear yet to know the full impact these fiscal measures will have on the Australian Government’s budget, but it is reasonable to suggest that Australia will not see a fiscal surplus for some time. It is also important to note that all the state and territory governments are also providing a fiscal stimulus to their local economies. The combined size of the various fiscal packages is very large, yet this may only soften the downturn in economic activity in the short term rather than preventing the downturn from occurring.

 


Disclaimer:

This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).
This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law, we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.
ASR has no position in any of the stocks mentioned.