Mining sector drives WA & QLD stocks further upwards

The market capitalisation of Western Australian listed companies which comprise the Deloitte WA Index closed at $153.6 billion for November, an increase of 5.7 per cent for the month.
“The mining and iron & steel sectors contributed strongly to the growth in the value of West Australian listed companies, delivering a combined increase in market capitalisation of $5.4 billion during November” said Keith Jones, managing partner of Deloitte in Western Australia.
Within the mining sector, the market capitalisation of Aquila Resources increased by $1.4 billion for the month. The increase follows the November announcements that the Chinese regulatory approvals for Baosteel’s investment in Aquila had been obtained and that the placement of shares was finalised. China’s largest steel mill, Baosteel, has invested $285.6 million in Aquila via a placement of 43.9 million shares. This investment was to facilitate the fast tracking of the development of Aquila’s key iron ore materials projects.
Fortescue Metals has also continued to recover value within the iron and steel sector. The retail sector, dominated by Wesfarmers, has contributed strongly to the growth in November.
Movers and shakers during November within the Deloitte WA Index included Aquila Resources Limited, Resolute Mining Ltd and Cash Converters International Ltd, with the market capitalisation of each company increasing by 79.09 per cent, 61.54 per cent and 55.55 per cent, respectively.
Following a trading halt in November, the increase in market capitalisation for Resolute Mining was attributed to the recent upward gold movement in the USD gold price and the continued ramp up of the Syama gold mine in Mali.
The major world indices performed well in November, with the exception of the Nikkei which experienced a decline of 6.87 per cent for the month. US S&P 500 experienced the largest gain of 5.34 per cent, followed by the FTSE 100 and Australian All Ordinaries, with increases of 3.33 per cent and 1.48 per cent, respectively.
Commodity movements showed mixed movements in November. The prices of palladium and silver rose, increasing by 12.56 per cent and 11.37 per cent, respectively. The price of gold has strengthened for the third month in a row to US$1,170 an ounce, an increase of 11.88 per cent as the US dollar continues to weaken and investors show their preferences to gold as an investment. Some analysts have predicted that the gold price will reach US$2,000 an ounce if the US Dollar continues to weaken. Uranium and nickel demonstrated the largest declines for the month, falling by 14.00 per cent and 12.01 per cent respectively.

During the month of November, the Deloitte Qld Index increased by 1.6 per cent or $988 million. The ASX All Ordinaries increased by 1.5 per cent over the same period.
The largest increases in market capitalisation in November came from Lihir Gold Limited (LGL), Macarthur Coal Limited and PanAust Resources Limited.
LGL increased $1.3 billion in market capitalisation during November, or 18.0 per cent. LGL were the beneficiaries of the surging gold price throughout November, which increased 11.8 per cent. During November, the gold price faced further upside pressure when the Reserve Bank of India purchased 200 metric tonnes of gold from the International Monetary Fund to help manage foreign exchange reserves. Investors also responded positively to news that Australia had overtaken South Africa as the second largest producer of gold by volume; China is currently the largest producer.
LGL closed the month on $3.60 per share, and remained at number two on the Deloitte Qld Index.
Macarthur increased $181 million in market capitalisation (8.3 per cent) during November. Macarthur had a positive month despite the announcement that first half FY10 profit will likely be a fraction of the previous corresponding period’s profits, due largely to lower export prices and the exceptionally strong Australian Dollar. Investors were bullish on Macarthur’s export prospects due to a growing consensus that the traditional metallurgical coal markets of Europe and Asia are increasing steelmaking capacity. Contract price negotiations are on the horizon and the market appears to be pricing in an increase in price for hard coking coal.
Infrastructure bottlenecks within the Goonyella supply chain are limiting supply whilst adding upside pressure to shipping prices. As Australia makes up the vast majority of Chinese coking coal imports, these factors are expected to bode well for Australian suppliers. Macarthur also faced a significant amount of uncertainty throughout November regarding the fate of the Federal Government’s Emissions Trading Scheme, and the effect that legislation might have on profits.
Macarthur finished the month at $9.30 per share, and closed at seven on the Deloitte Qld Index.
PanAust increased $147 million in market capitalisation or 10.5 per cent during November. As a copper and gold producer, PanAust’s share price received the benefits of rising gold and copper prices, with the metals rising 11.8 per cent and 3.0 per cent respectively during November.
Chinese year-to-date copper imports have increased 167.0 per cent on the same period in 2008, due to demand from the Chinese Government’s stimulus efforts.
Further downside movements in the USD, as well as uncertainty on the future of the US economy, will likely support commodity prices in the near term. PanAust announced record production volumes at the Phu Kham copper mine in Laos during November. PanAust closed the month at $0.53 per share, and is ranked 11th on the Deloitte Qld Index.

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