Monday morning rally: ASX up 1.73% at lunch

Market Reports

by Lauren Hayes

The Australian market is enjoying a solid start to the trading week after US equities snapped their two-day losing streak and posted solid gains on more strong corporate earnings and falling bond yields. At lunch, the S&P/ASX 200 is 1.73 per cent or 115.70 points higher at 6,792.50, with all sectors trading in the green.

The SPI futures are pointing to a rise of 118 points or 1.77 per cent.

Best and worst performers

The best-performing sector is Materials, up 3.76 per cent. The sector with the fewest gains is Consumer Staples, up 0.65 per cent.

The best-performing stock in the S&P/ASX 200 is NOVONIX (ASX:NVX), trading 15.38 per cent higher at $2.55 following their positive announcement last week. It is followed by shares in Evolution Mining (ASX:EVN) and Gold Road Resources (ASX:GOR).

The worst-performing stock in the S&P/ASX 200 is New Hope Corporation (ASX:NHC), trading 4.85 per cent lower at $7.06. It is followed by shares in OZ Minerals (ASX:OZL) and Endeavour (ASX:EDV).

Asian markets

Shares in the Asia-Pacific have climbed in early morning trade Monday after US stocks soared on Friday following a Wall Street Journal report that some Fed officials are concerned about tightening policy too much.

The Kospi in South Korea has so far gained 1.46 per cent, and the Kosdaq has added 2.05 per cent. Japan’s Nikkei 225 this morning has climbed 1.14 per cent and the Topix is up 0.82 per cent. MSCI’s broadest index of Asia-Pacific is 0.7 per cent higher.

Authorities in Japan reportedly intervened in the forex market on Friday, causing the yen to strengthen sharply. But the currency continued to seesaw. Today in Asia, the currency briefly strengthened to 145-levels but was last at 148.27 per dollar.

Singapore, Malaysia and India’s markets are closed for a holiday today. Later this week, the Bank of Japan will meet, while Singapore is expected to release inflation data.

Crazy day in FX

The early focus in FX was on the big dollar rally, particularly against the yen. Dollar/yen, which recently pushed through the psychologically important 150 level, bumped right up against the 152 level earlier today before a massive reversal that sent the pair below 146.50 at one point. The move was widely chalked up to intervention by Japanese authorities, who have consistently been saying that sudden, one-sided moves are undesirable. However, as with a previous bout of intervention, lots of scepticism about effectiveness given lack of coordinated support and more importantly, the BoJ's adherence to YCC despite the global tightening cycle. A broader dollar reversal (DXY down nearly 2 per cent from earlier high at one point), likely exacerbated by very crowded long (and carry trade) positioning, also a function of somewhat less hawkish Fed headlines. Nick Timiraos’ article in the WSJ said Fed set to go for 75 basis points this month but could debate whether and how to signal for a less aggressive pace in December. In addition, Fed's Daly flagged some risk of overtightening in late-morning comments.

Fed's data dependence definition heading for more scrutiny

The Fed is seemingly nearing the end of its tightening cycle with 150 basis points to go to hit the terminal rate projection in the September dot plot, something increasingly seen as being able to be accomplished by the end of the year. There is a lot of uncertainty about what happens after that. Bullard, who recently reiterated his preference for frontloading, said hotter September CPI did not necessarily mean the Fed would need to take rates above the terminal projection. This fits with thoughts that a "softer pivot" in which the Fed moves to the sidelines to assess the impact of its tightening cycle may be enough to start shifting the pervasive negative sentiment around stocks. However, Kashkari highlighted the risk of rates going higher than 4.75 per cent in the absence of a peak in underlying inflation. He noted there’s no reason to pause tightening until that happens. This sets the stage for some heightened scrutiny on how the Fed may frame data dependence in the next few months, particularly given the difference from the higher frequency data.

Company news

Recharge Metals (ASX:REC) announced an update this morning on the company’s diamond drilling activities at the Brandy Hill South Project located within the Archaean Gullewa Greenstone Belt in Western Australia. The company has found further significant sulphide intercepts in Diamond Drilling at Brandy Hill South located in Western Australia. Both drill holes intersected zones of massive sulphides, blebby sulphides and disseminated sulphide mineralisation. Recharge Metals Managing Director Brett Wallace commented: “The Recharge team are very excited to once again intercept significant widths of mineralised zones where we had anticipated, based on the findings from downhole electromagnetic surveys. We have completed an additional two diamond holes, BHRCD029 and BHRCD030, which targeted DHTEM conductor (BHD026-2). Both holes intercepted extensive zones of massive, semi-massive to disseminated pyrite, chalcopyrite and pyrrhotite. We now look forward to completing the final diamond hole testing the remaining DHTEM conductor, and receiving the assay results from the first two diamond holes reported on the 14th August that had similar findings, as well as the assays from the eight pre-collars.” Shares are trading down 5.3 per cent to 18 cents.

Perth Basin energy company Norwest Energy NL (ASX:NWE) presented its Q3 report this morning. Quarterly highlights include that Ringneck 2D seismic confirmed significant new gas lead; preparations for drilling North Erregulla Deep-1 and Lockyer-2; a partnership with Pilbara Clean Fuels to pursue a mid-scale eLNG plant in Port Hedland and a quarter-end cash balance of $21 million. Shares are trading up 2 per cent to 5 cents.

Critical Resources (ASX:CRR) announced today assay results from the current diamond core drilling campaign at the company’s 100 per cent owned Mavis Lake Lithium Project. The assay results illustrate the continuity of high-grade lithium mineralisation within the Main Zone of Mavis Lake. Critical Resources’ Managing Director Alex Cheeseman said: “These intercepts are relatively close to the surface, with the main zone remaining open at depth, which we are yet to test. With the excellent results of the last few months, Mineral Resource Estimate works underway, and drilling continuing at Mavis Lake, we are extremely pleased with how the project is progressing as we move from exploration into development.” Shares are trading 1.4 per cent higher at 8 cents.

Ardiden (ASX:ADV) announced that it has entered into a binding agreement with Green Technology Metals (ASX:GT1) for the sale of its remaining 20 per cent interest in the Lithium Joint Venture over the Seymour Lake, Root Lake and Wisa Lake assets in northwest Ontario, Canada. The total consideration is up to A$18.5 million, consisting of upfront cash consideration of A$16 million, and a deferred consideration component of A$2.5 million, payable upon reaching a JORC Mineral Resource of 20Mt. Chairman Bruce McFadzean stated: “We are pleased with the Transaction, which will see Ardiden emerge as a well-capitalised entity with the funding required to aggressively explore our highly prospective Pickle Lake Gold Project. The Transaction is non-dilutive for existing Ardiden shareholders and recognises the value of our assets relative to our recent trading history.” Shares are trading 21.4 per cent higher at 1 cent.

Dreadnought Resources (ASX:DRE) announced this morning that assays have continued to confirm thick, high-grade REE mineralisation at Yin, within its 100 per cent owned Mangaroon Project in the Gascoyne Region of Western Australia. Dreadnought’s Managing Director, Dean Tuck, commented: “Yin continues to deliver exceptional REE results. With 91 of 120 holes reported, we remain on schedule to deliver our initial JORC resource at Yin in the December 2022 quarter. Importantly this initial JORC Resource will only cover ~3km of the interpreted ~16km of strike of Yin. RC Drilling of C1-C5 carbonatites and diamond drilling at Yin is progressing well with updates expected shortly.” Shares are trading 15 per cent higher at 12 cents.

Galan Lithium (ASX:GLN) announced today a substantial increase in its JORC (2012) reported Mineral Resource estimate for the Hombre Muerto West Project located in Catamarca Province, Argentina. The revised Mineral Resource estimate was completed by the Australian based team of leading independent geological consultants, SRK Consulting. The Mineral Resource increases 2.5 times to 5.8Mt contained lithium carbonate equivalent (LCE) @ 866 mg/l Li. In response, Galan’s Managing Director, Juan Pablo Vargas de la Vega stated, “This is a function not only of the size of the increase in resource, but also the big step-up in confidence classification that has been achieved. This potential is now set to be incorporated into our ongoing Definitive Feasibility Study (DFS) work, which is on track for completion during Q1 2023.” Shares are trading 16.1 per cent higher to $1.48.

Gascoyne Resources (ASX:GCY) advised this morning that it has received spectacular new assay results which confirm the scale and importance of the new high-grade Never Never gold discovery, located immediately north of its main operating pit at the Dalgaranga Gold Project in WA. Gascoyne Resources Managing Director Simon Lawson said: “Never Never is one of the most remarkable gold deposits I have ever seen. It’s very rare to see such a combination of high-tenor and high grade mineralisation over widths of this magnitude. Our geologists are super excited as we drill each hole and, with such amazing intercepts being delivered with each successive step-out, it is becoming increasingly clear that this is one of the most significant new gold discoveries anywhere in Australia.” Shares are trading 12.2 per cent higher at 23 cents.

Australian medical technology company LBT Innovations (ASX:LBT), a leader in medical technology automation using artificial intelligence, has announced the company has been awarded $1.5 million funding from the Australian Government’s Medical Research Future Fund (MRFF) initiative through MTPConnect’s Clinical Translation and Commercialisation Medtech (CTCM) program to support the development of a new smaller benchtop APAS instrument (APAS Compact). The APAS Compact will deliver LBT’s next automated culture plate reader, designed specifically for smaller or remote laboratories. Once completed, LBT will be able to offer laboratories a range of digital microbiology solutions that address the needs and workflows of all laboratories regardless of size. LBT Managing Director and CEO Brent Barnes said: “There remains a significant opportunity to disrupt microbiology and introduce automation at scale to optimise the culture plate workflow. This CTCM funding accelerates delivery of a key component of the Company’s Product Pipeline Strategy by adding a smaller, lower cost APAS® instrument that means we are able to offer digital microbiology solutions that meet the needs of all laboratories globally.” Shares are trading up 4 per cent to 8 cents.

Emerging sustainable battery materials producer Neometals (ASX:NMT) announced that The Regional State Administrative Agency for Southern Finland has granted an environmental permit for operation of a vanadium recovery plant and associated infrastructure (“Vanadium Recovery Project” or “VRP1”). The permit authorises, subject to a number of conditions, the production of approximately 9,000tpa of vanadium pentoxide. Neometals Managing Director Chris Reed said: “Congratulations to the Neometals and Critical Metals teams and consultants for achieving this significant milestone. Neometals is also grateful to the people and government of Finland for the significant support. The permit, of which the conditions are now outside public appeal, substantially de-risks the VRP1 project as we prepare to make key investment decisions." Shares are trading 10.7 per cent higher to $1.16.

Raiden Resources (ASX:RDN) reported this morning on the initial assay results from the recently completed Mt Sholl drilling program. Some highlights include: the first four drill holes confirm near-surface, broad zones of highgrade Ni-Cu-PGE sulphide mineralisation from the B2 deposit and that a massive, semi-massive and disseminated Nickel, Copper and PGE bearing sulphide mineralisation correlates well to assay results and the historical drilling. Mr Dusko Ljubojevic, Managing Director of Raiden, commented: “The consistency of the mineralisation across the sections to date is very encouraging and continues to support management’s view that Mt. Sholl has the potential to develop into Australia’s next exciting Nickel-Copper-PGE deposit.” Shares are trading up 12.5 per cent to 1 cent.

Shree Minerals (ASX:SHH) has today announced their project has received Programme of Work (POW) approval. The POW approval outlines that they can perform a RAB drilling planned to test the identified lithium pegmatite potential and gold anomalies, in the southern portion of the tenement E63/2046 as per the approved Conservation Management Plan. Shares are trading up 14.3 per cent to 1 cent.

Vulcan Energy Resources (ASX:VUL; FSE:VUL) announced this morning it has produced the highest grade, lowest impurity lithium hydroxide to date from its pilot plant, located at its commercially operational geothermal renewable energy plant, at its Zero Carbon Lithium Project. Managing Director and CEO Dr Francis Wedin commented: “As our DFS draws towards its conclusion, we are encouraged by these latest highest grades and lowest impurities recorded to date, from LiCl production from our pilot plant, with electrolysis conducted offsite. The embodied renewable heat within our brine means we are able to leverage sorption, a commercially proven process to extract lithium from brines that requires heat to work. Sorption is highly selective, which means that we can produce a very pure LiCl eluate. This in turn means we are able to use lithium electrolysis, a method of producing lithium hydroxide directly which by its nature produces a very pure product, in excess of the purity required for use in Electric Vehicle (EV) batteries, with minimal reagent usage.” Shares are trading up 11 per cent to $6.70.

Highfield Resources (ASX:HFR) announced this morning that it has received credit approvals from a syndicate of four international financial institutions acting as Mandated Lead Arrangers for senior secured project financing facilities of up to €321 million to fund the construction and development of its 100 per cent owned Muga Potash Project located in Spain. Ignacio Salazar, CEO, commented: "We are delighted to announce the credit approval of €321 million Debt facilities from BNP Paribas, ING, Natixis CIB and Societe Generale. This milestone represents the conclusion of an intensive and extensive due diligence process which included site visits by the MLAs and independent experts conducting environmental, social, technical, marketing and legal evaluations of the Project. With the preliminary works around the mine-gate getting finalised, securing project finance was an essential step to move the construction of the Project forward.” Shares are trading 10.7 per cent higher to 83 cents.

Breaker Resources NL (ASX:BRB) has today released its third quarter report. The report announced highlights of their Lake Roe Gold Project, Manna Lithium Project and Ularring Gold-Copper & Nickel-PGE Project. Out of Lake Roe Gold Project, the underground development strategy advances with completion of the Tura underground scoping study as one of several underground prospects -- stage 1 could produce 88,000oz at cash cost of A$1,087/oz and total cost of A$1,390/oz. Out of their Manna Lithium Project, the GL1 continues to drill at Manna with drill results returning good intercepts of spodumene to 150m depth in the initial discovery area. Out of their Ularring Gold-Copper & Nickel-PGE Project, work permits and access agreements have been finalised over some of the Ularring tenements. POWs were also granted over the tenement, targeting Ni-PGE and Cu-Au mineralisation. Shares are trading 2.1 per cent lower at 24 cents.

Commodities and the dollar

Gold is trading at US$1659.11 an ounce.
Iron ore is 1.8 per cent higher at US$93.00 a tonne.
Iron ore futures are pointing to a rise of 0.95 per cent.
One Australian dollar is buying 63.65 US cents.

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