The S&P/ASX 200 Index (ASX: XJO) edged higher last week as coronavirus restrictions began to ease. The market was led by the miners which offset falls in other sectors, leading the ASX 200 up 0.25% higher over the week.
It's now been 8 weeks since the market bottomed in March. Since then, the ASX 200 has risen 18% but remains 24% down from its February high (at the time of writing). Tension between a potential quick recovery and uncertain outlook for corporate earnings means the ASX 200 has remained relatively unchanged over the past month.
Both the GFC and dotcom crash saw multiple bear market rallies. The coronavirus crisis has only provoked one bounce so far, despite being a more significant economic shock. Higher commodity prices saw miners lead last week's gains, with iron ore prices seeing a sustained rise since the start of the month as Chinese production resumes.
Pilbara Minerals Ltd (ASX: PLS)
Pilbara Minerals led the gainers last week with a 19.5% share price rise. Shares in the lithium miner closed last week at 24.5 cents. Lithium prices plummeted last year, which saw shares in Pilbara Minerals decline throughout the year from a high of $1.18 in 2018.
Lithium is an integral component of batteries for electric vehicles. As electric vehicle purchases have risen, so has the demand for batteries, fuelling lithium demand. New mines and increased production brought a glut of lithium to the market hammering prices last year. Supply is expected to grow threefold by 2025.
Despite this, some predict that as momentum builds demand could outstrip supply. According to some forecasts for electric vehicle penetration, lithium demand is set to increase 10-fold over the next decade. Pilbara Minerals has a multi-stage expansion program planned to unlock deposits at its Pilgangoora Project.
The company is currently moderating production in response to soft market conditions. Resumption of economic activity in China and an extension of China's electric vehicle subsidy program are expected to boost the lithium-ion battery sector and improve market conditions in the medium to long term.
Southern Cross Media Group Ltd (ASX: SXL)
Shares in Southern Cross Media Group gained 18.5% last week to finish the week at 16 cents. While Southern Cross Media shares were among the best performers last week, they have been among the worst over the past year – Southern Cross shares are currently down 80% on a year ago. The broadcaster has suffered over the past year as advertising markets took a turn for the worse.
Southern Cross Media reported a 10% decline in advertising revenue for the 9 months to 31 March. Q4 FY20 and Q1FY21 advertising revenues are expected to be materially impacted by COVID-19 and be down 30% or more on prior corresponding periods. But with the major fall in the share price some are speculating Southern Cross Media is undervalued, arguing it will be well-placed to benefit when advertising markets recover.
The broadcaster recently undertook a $169 million equity raising using proceeds to pay down debt. Net debt was $161.8 million at 4 May including all proceeds of the equity raising. Southern Cross has estimated that bad and doubtful debt provisions for H2FY20 could reach $5 million.
Positive earnings were recorded in April with revenue declines partially offset by operating cost reductions. The broadcaster is eligible for the JobKeeper Allowance for approximately 1,750 employees – this subsidy has been included in operating cost reductions for April. As a result, the broadcaster broke even in April on an earnings before interest, tax, depreciation and amortisation (EBITDA) less capex basis.
Resolute Mining Limited (ASX: RSG)
Resolute Mining Group Limited shares closed last week up 14.2% at $1.085. The safe haven gold miner benefitted from an increase in the gold price last week which moved above $2,700 an ounce. Resolute operates mines in Mali and Senegal.
In 2020, Resolute has provided production guidance of 430,000 ounces of gold at an all-in sustaining cost (AISC) of US$980 an ounce. In the March quarter 100,763 ounces of gold were poured at an AISC of US$1,007 an ounce.
In March, Resolute announced the sale of its Ravenswood mine in Queensland. The company received $100 million upfront for the sale consisting of $50 million in cash and $50 million in promissory notes which earn a 6% coupon. There is potential for up to $200 million in additional payments, which depend on the average gold price and investment outcomes of Ravenswood.
In the announcement, CEO John Welborn said the sale maximises value for shareholders and "enables us to focus our attention and energy on our African portfolio and the abundant opportunities for further growth and value creation."
Saracen Minerals Holding Limited (ASX: SAR)
Shares in Saracen Minerals Holdings gained 13.2% over the course of last week to finish the week at $5.05. Saracen was another gold miner that benefitted from the rising gold price and move to safe haven assets.
In the March quarter, Saracen produced 158,133 ounces of gold at an AISC of $1,133 an ounce. Coronavirus had a minimal impact on March quarter production. Although it is unclear whether there will be an impacts in the June quarter, Saracen has maintained its FY20 guidance of 500,000 ounces of gold.
In the 9 months to 31 March 2020 Saracen produced 374,684 ounces of gold at an AISC of $1,081 an ounce. The company has large ore stockpiles exceeding 1.7Moz, which will help insulate the business should mining be restricted by COVID-19 impacts.
St Barbara Ltd (ASX: SBM)
St Barbara shares gained 11.9% last week to close the week at $2.92. Another gold miner on the list, St Barbara has assets in Western Australia, Papua New Guinea, and Canada.
In the March quarter, St Barbara produced 92,000 ounces of gold at an AISC of $1,405 an ounce. The miner sold 99,000 ounces of gold at a realised gold price of $2,123 an ounce.
In the financial year to date, St Barbara has produced 273,000 ounces of gold at an AISC of $1,396 an ounce, and sold 277,000 ounces of gold at a realised gold price of $2,015 an ounce.
