All That Investors Need To Know About Resource Stocks On ASX

  • Jun 03, 2019 AEST
  • Team Kalkine
All That Investors Need To Know About Resource Stocks On ASX

The S&P/ ASX 200 nose-dived today after registering an opening of A$6396.90; the index plunged significantly by 1.19 per cent to settle at A$6320.5 (as on 03rd June 2019). With the benchmark index ending in the red, 156 stocks closed the day in the red while only 40 stocks closed the day’s trade in the green.

S&P/ ASX 200 (AXJO) Daily Chart (Source: Thomson Reuters)

The traders and investors are eyeing on the resources sectors as the commodities market is making a sharp move, which in turn, pulling strings on resources stocks on the Australian Securities Exchange.

Iron ore Sector:

The iron ore prices are moving downside from the previous week, which in turn, exerting pressure on iron ore players along with their subsequent fundamentals.

Share prices of giant iron ore players such as Rio Tinto (ASX: RIO) and BHP Billiton (ASX: BHP) are moving down on ASX. However, apart from the falling iron ore market, the prospects of potash are also influencing the share prices of these companies.

EY-Global is due to conduct an audit of BHP in July 2019, and a market analyst had estimated a billion-dollar impairment over BHP’s Jansen potash project, while Rio Tinto is progressing gradually over its potash interest, which could be in production within five years.

The Chief Executive Officer of BHP- Andrew Mackenzie mentioned that the company has over-invested on Jansen with US$2.6 billion investment in the year 2013, and the decision to invest US$5.3 billion further in the project is explicitly looming the management amid lower than predicted prices of the fertiliser ingredient (potash) in the last six years.

The company estimates that the potash demand would reach 2 million tonnes a year by 2020 with further growth predicted to continue; however, at a slower than expected pace.

Energy Sector:

The crude oil prices are moving down amid global growth concerns as the United States president Donald Trump tariff war is extending its reach with China, Mexico, already in the basket of the high tariff.

With falling crude oil prices and a slowdown in demand of oil in the international market, a major wall street investment banker has downgraded the rating on significant energy player AGL Energy Limited (ASX: AGL) from Buy to Neutral amid plant reliability concerns and regulatory overhangs. The company recently cleared its plan to acquire Vocus Group.

The share prices of the company dropped significantly from the level of A$23.000 (Day’s high on 10th May 2019) to the present low of A$20.080 (as on 03rd June 2019).

Gold Sector:

Gold prices are on a bull run amid uncertainty in the global market, and the gold miners such as Gold Road Resources (ASX: GOR) are enjoying and encashing the opportunity; however, the fundamentals aspects of specific gold miners such as St Barbara (ASX: SBM) is exerting pressure on its share prices on ASX.

In a recent update, the company mentioned that it is revising its production guidance for FY19, which in turn, led a leading investment bank to keep a neutral rating on the company instead of buy rating.

As per the street estimates, the production loss at Gwalia operation amid some technical issues is least likely to hamper the company.

Despite a recovery in gold prices, the share prices of the company plunged from the level of A$3.738 (Day’s high on 22nd March 2019) to the level of A$2.480 (Day’s low on 31st May). A drop of 33.65%.

Mineral Sector:

The rutile and Zircon market are currently lacking supply, and the global demand is steady; however, the share prices of significant rutile and Zircon provider on ASX – Iluka Resources Limited (ASX: ILU) is nosediving from past two trading sessions.

The prices recently fell from the level of A$9.980 (Day’s high on 30th May 2019) to the present level of A$9.530 (as on 03rd June). However, the share prices of the company have improved drastically from the level of A$8.160 (Day’s low on 6th May 2019) to the present level of A$9.530.

Despite the recent gain along with tighter rutile supply in the global market, a leading research firm downgraded the rating on the company from Buy to Hold.


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