SP Angel Morning View -Today’s Market View, Monday 3rd April 2023

Gold pulls back as yields climb on a surprise OPEC+ oil production cut

MiFID II exempt information – see disclaimer below

Anglesey Mining (AYM LN) – New MRE for Parys Mountain

Aura Energy* (AURA LN) – Swedish Government’s stance on uranium mining unchanged by private member’s motions in Parliament as company confirms priority of its Tiris project in Mauritania

Caledonia Mining (CMCL LN) – Quarterly dividend maintained

East Star Resources (EST LN) – Drilling results from Talairyk rare-earths project, Kazakhstan

Great Southern Copper (GSCU LN) – Rock-chip sampling from the Victoria prospect at Especularita, Chile

KEFI Gold and Copper* (KEFI LN) – Maiden Al Godeyer MRE

Kodal Minerals* (KOD LN) – BUY 0.7p – Exploration results point to further growth in the MRE as Bougouni advances to the start of development works

Tungsten West (TUN LN) – 6p, Mkt cap £19.4m – Additional fundraising to help take Hemerdon back to production

Economics

US – Friday PCE data showed a faster than expected slowdown in inflation in February in a welcome news to the central bank that reiterated its commitment to slowing inflation down at the March meeting.

• Reassuringly, core measure also came down during the month, although, remained at historically elevated levels on absolute basis.
• Sovereign bond yields dropped and equity indices closed higher on Friday hoping for the Fed to ease on monetary tightening.
• Yields jumped back up this morning on the news of a surprise OPEC+ oil production cut.
• PCE (%mom): 0.3 v 0.6 January and 0.3 est.
• PCE (%yoy): 5.0 v 5.4 January and 5.1 est.
• Core PCE (%mom): 0.3 v 0.6 January and 0.4 est.
• Core PCE (%yoy): 4.6 v 4.7 January and 4.7 est.

China – Caixin manufacturing PMI tracking performance of private businesses pulled back in March hitting neutral level down from an eight month high of 51.6 in February.

• New orders climbed but only marginally with overseas demand fell back into decline weighed down by strong inflation, higher borrowing costs and concerns over a potential recession.
• Employment deteriorated returning back into a contractionary territory after briefly recording an increase for the first time since Mar/22 in February.
• Inflationary pressures remained modest.
• “In a nutshell, the economy saw a marginal slowdown of recovery in March as the expansion in both manufacturing supply and demand significantly weakened from the previous month,” Caixin commented on the data.
• The data suggests post-reopening recovery is led mainly by the services sector on better consumer spending and a pickup in construction.
• Caixin Services PMI is expected to be released later this week with forecasts for a 55.0 reading in March.
• Caixin Manufacturing PMI: 50.0 v 51.6 February and 51.4 est.

Turkey – Inflation comes in at 50.5% in March.

• Prices for food and non alcoholic beverages increased 67.9%.
• The data arrives a month after the central bank decided to hold rates unchanged at 8.5% in an effort to support the economy following a deadly earthquake.
• Meanwhile, latest opinion polls point to heavily contested presidential and general elections on 14 May.
• Results from a number of polls show that the opposition National Allaince including six parties is leading with 42.2% while Erdogan’s People’s Alliance set to come in at 40.6%.
• In presidential elections polls, Kemal Kilicdaroglu is ahead of Erdogan by 2.5pp.

Currencies

US$1.0835/eur vs 1.0883/eur last week. Yen 133.50/$ vs 133.13/$. SAr 17.910/$ vs 17.833/$. $1.232/gbp vs $1.237/gbp. 0.669/aud vs 0.668/aud. CNY 6.888/$ vs 6.870/$.

Dollar Index 102.74 vs 102.39 last week.

Commodity News

Precious metals:

Gold US$1,960/oz vs US$1,975/oz last week

   Gold ETFs 93.2moz vs US$93.3moz last week

Platinum US$990/oz vs US$985/oz last week

Palladium US$1,468/oz vs US$1,487/oz last week

Silver US$23.74/oz vs US$23.71/oz last week

Rhodium US$7,400/oz vs US$8,000/oz last week

           Base metals:   

Copper US$ 8,944/t vs US$8,873/t last week

Aluminium US$ 2,421/t vs US$2,376/t last week

Nickel US$ 23,780/t vs US$22,945/t last week

Zinc US$ 2,900/t vs US$2,898/t last week

Lead US$ 2,118/t vs US$2,122/t last week

Tin US$ 25,895/t vs US$25,485/t last week

           Energy:           

Oil US$84.1/bbl vs US$78.7/bbl last week

• Crude oil prices gapped higher this morning after a Saudi-led OPEC coalition unexpectedly announced a further cut in production by 1.16mb/d and Russia said it would maintain its own 0.5mb/d cut until YE23.
• The US Baker Hughes rig count was down 3 units to 755 rigs last week (up 92 y/y), with oil rigs down 1 to 588 units and gas rigs down 2 to 160 units, resulting in the first quarterly drop since 2020.

Natural Gas US$2.066/mmbtu vs US$2.107/mmbtu last week

Uranium UXC US$50.35/lb vs US$50.35/lb last week

Bulk:

Iron ore 62% Fe spot (cfr Tianjin) US$124.3/t vs US$125.9/t

Chinese steel rebar 25mm US$613.5/t vs US$618.4/t

Thermal coal (1st year forward cif ARA) US$142.0/t vs US$134.5/t

Thermal coal swap Australia FOB US$192.0/t vs US$188.5/t

Coking coal swap Australia FOB US$320.0/t vs US$320.0/t

           Other:  

Cobalt LME 3m US$34,930/t vs US$34,930/t

NdPr Rare Earth Oxide (China) US$75,853/t vs US$76,060/t

Lithium carbonate 99% (China) US$28,091/t vs US$28,895/t

China Spodumene Li2O 5%min CIF US$4,610/t vs US$4,610/t

Ferro-Manganese European Mn78% min US$1,338/t vs US$1,344/t

China Tungsten APT 88.5% FOB US$325/mtu vs US$325/mtu

China Graphite Flake -194 FOB US$790/t vs US$790/t

Europe Vanadium Pentoxide 98% 9.4/lb vs US$9.4/lb

Europe Ferro-Vanadium 80% 37.75/kg vs US$37.75/kg

China Ilmenite Concentrate TiO2 US$345/t vs US$346/t

Spot CO2 Emissions EUA Price US$95.2/t vs  US$95.1/t

Brazil Potash CFR Granular Spot US$420.0/t vs US$450.0/t

 Battery News

Company News

Anglesey Mining (AYM LN) 2.25p, Mkt Cap £6.4m – New MRE for Parys Mountain

• Anglesey Mining has announced an updated mineral resources estimate for its historic Parys Mountain site in Anglesey.
• The new estimate, which includes a portion of the resource classified as ‘Measured’ under the JORC guidelines for the first time in the project’s history, totals 16.06mt at an average grade of 0.98% copper, 1.33% zinc, 0.71% lead, 15g/t silver and 0.17g/t gold.
• Approximately 8% of the resource tonnage, 1.3mt at an average grade of 0.33% copper, 2.32% zinc, 1.28% lead, 33g/t silver and 0.43g/t gold is classed as ‘Measured’ with a further 25% (3.98mt average grade of 0.37% copper, 2.39% zinc, 1.29% lead, 27g/t silver and 0.23g/t gold) classed as ‘Indicated’.
• The balance of 10.79mt (67%) at average grade of 1.29% copper, 0.81% zinc, 0.43% lead, 9g/t silver and 0.11g/t gold is ‘Inferred’.
• The new estimate replaces the pre-existing, January 2021 estimate, of 16.9mt at an average grade of 1.0% copper, 1.5% zinc, 0.8% lead, 17g/t silver and 0.2g/t gold.
• Approximately 58% of the new estimated resource tonnage is located within the ‘Northern Copper Zone’ which contains 9.38mt at an average grade of 1.27% copper, 0.38% zinc, 0.24% lead, 5g/t silver and 0.1g/t gold with a further 36% of the tonnage, 5.72mt at an average grade of 0.36% copper, 2.30% zinc, 1.24% lead, 28g/t silver and 0.28g/t gold contained within the Morfa Du Zone.
• The balance of the overall resource lies within the Garth Daniel (2%) and Deep Engine Zones (4%).
• The company says that it believes that the Northern Copper Zone has potential “to significantly increase the current modelled mineralisation envelope with some additional drilling to confirm some of the historical intersections and infill to lift the level of confidence … [and that] … Recent work also suggests the potential to extend the high-grade Garth Daniel shoot both up and down dip and along strike – perhaps connecting with the remaining eastern leg of the Deep Engine Zone”.

• Anglesey Mining plans to “Re-optimise the underground development with initial focus on the Morfa Du Zone” as well as incorporating current metallurgical testing to upgrade the “2021 PEA to a Pre-Feasibility Study”.

• Chief Executive, Jo Battershill, said that the “grade-tonnage curve gives us a high-level of confidence that a robust economic development is achievable at Parys Mountain, especially given metallurgical testwork has demonstrated the ore could be successfully up-graded through pre-concentration methods that reject up to 40% of the mined volumes”.

Conclusion: We look forward to a pre-feasibility study incorporating the updated MRE for Parys Mountain, although with around two-thirds of the resource still only at the inferred level and multiple mineralised zones identified we suspect that much detailed geological work lies ahead.

Aura Energy* (AURA LN) 13p, Mkt Cap £65m – Swedish Government’s stance on uranium mining unchanged by private member’s motions in Parliament as company confirms priority of its Tiris project in Mauritania

(Aura holds 85% of the Tiris Uranium Project, Mauritania)

• Aura Energy has commented on reports that the Industry Committee of Sweden’s Parliament have “voted to reject a number of private members’ motions that were supporting an immediate lifting of the current ban on uranium mining in Sweden” where the company’s Häggån Project hosts a both uranium and vanadium.
• “Aura Energy understands that the rejection of the motions by the Industry Committee does not represent any change of policy or direction by the Government, which has repeated its support to lift the ban on uranium mining”.
• Sweden’s “ban on exploration, mining and processing of uranium in Sweden came into effect on 1 August 2018 under the previous government”.
• Although the company continues it efforts to move Häggån forward it confirms that its primary focus is to progress the Tiris uranium project in Mauritania where it recently announced increased mineral resources and plans to upgrade production rates from the 800,000lbs of U3O8 annually to 2mlbs pa.
• A Final Investment Decision on Tiris is expected later this year.

Conclusion: Infill drilling last year has increased the mineral resources and reserves at Tiris and underpinned an expanded production rate which enhances economic returns compared to the previous, 2021, assessment. We look forward to the Final Investment Decision on Tiris later this year.

*SP Angel acts as Nomad and Broker to Aura Energy

Caledonia Mining (CMCL LN) 1205p, Mkt Cap £210m – Quarterly dividend maintained

• Caledonia Mining has declared a quarterly dividend of 14US¢/share maintaining the increased level which was announced in October 2021. Payment is due on 28^th April.
• CEO, Mark Learmonth, explained that the total 56¢ dividend for 2022 was “a 12% increase on the 50 cents per share in 2021”.
• He also emphasised that quarterly dividends are “an important part of the Company’s strategy and we believe sets us apart from our peer group”.
• We comment that as a consistent dividend payer, Caledonia Mining is one of a comparatively select group AIM listed mining companies.

*SP Angel mining analysts have visited Caledonia’s mining operations in Zimbabwe

East Star Resources (EST LN) 3p, Mkt Cap £5.6m – Drilling results from Talairyk rare-earths project, Kazakhstan

• East Star Resources has announced results from a programme of reverse-circulation (RC) drillholes at its Talairyk rare-earths project in East Kostanay, Kazakhstan.
• The company reports results from 13 holes (473m) from a 1,001m, RC drill programme of 30 holes undertaken in October 2022 “at the southwestern area of the Talairyk REE project to confirm historical reports of REEs in kaolinitic clays (regolith) at the project”.
• The results reported today average “934.4 ppm … [Total Rare Earth Oxides including yttrium oxide ] … with the highest-grade result of 2m at 6,127 ppm TREO from 8 m in DH TLR_010”.
• Many of the individual results reported in today’s announcement are from or close to surface and some include relatively wide intersections of, for example, 44m at an average grade of 1,122ppm TREO from surface in hole TLR-017, 52m averaging 705ppm TREO from surface in hole TLR-018 and 29m averaging 2,193ppm TREO from 1m depth in hole TLR-010.
• The company says that it will “shortly commence a five-stage sequential leach analyses of at least eight samples selected from drill intercepts across the deposit. These samples will undergo three sample splits to test” a range of leaching technologies to “indicate a potentially economic leaching process”.
• “East Star will immediately begin planning the next phase of exploration drilling intended to convert the Talairyk deposit to a JORC-compliant Mineral Resource Estimate and test more than 12 km of potential strike within the licence areas”.
• CEO, Alex Walker, said that the drilling results “demonstrate high grade intersections and validate the historical reports on the Talairyk REE project and provide a strong indication of an REE deposit of consequential size and grade”.
• Mr. Walker said that the leach testing and additional resource drilling “will form the basis of a scoping study to define potential project economics”.

Conclusion: East Star Resources is planning leaching tests to establish possible processing routes for the near-surface rare-earth prospect at Talairyk and also planning additional mineral resource drilling.

Great Southern Copper (GSCU LN) 1.25p, Mkt Cap £2.7m – Rock-chip sampling from the Victoria prospect at Especularita, Chile

• Great Southern Copper reports high copper and gold assays from rock-chip samples at the Victoria prospect in its Especularita exploration project in Chile.
• Highlighting peak sample results of 6.9% copper and 1.85g/t gold from outcrops of breccia veins, the company says that it collected “Thirty-six rock chip samples were collected from outcrop and mine dump material across the prospect area with 50% of samples assaying over 0.3% Cu and 25% over 1% Cu”.
• The company says that “mapping to locate the potential source of the high-grade copper mineralisation has identified outcrops of structurally-controlled vein-breccia in multiple locations over an area of approximately 1000 x 600 m. In several locations the mineralized structures are identified by the presence of artisanal mine workings”.
• The breccia veins are reported to “strike in a NNE-NE orientation over a distance of up to 400m and vary in outcrop width from 3 to 20m”.
• CEO, Sam Garrett confirmed that the company has “exploration teams working on three prospects within our Especularita Project area – Victoria, Teresita and Aurelia – as well as a reconnaissance team collecting stream sediment samples across the entire project footprint”.

Conclusion: Early-stage exploration at the Victoria prospect has shown copper and gold mineralisation and evidence of artisanal mining. The company will need to build on the early results to establish the scale of the opportunity and refine its geological understanding. We await the company’s plans for the next stage of its exploration with interest.

KEFI Gold and Copper* (KEFI LN) 0.78p, Mkt Cap £31m – Maiden Al Godeyer MRE

• The Company released a maiden Mineral Resource Estimate on the Al Godeyer polymetallic project, part of the Hawiah Complex, in Saudi Arabia.
• An open pit constrained MRE is estimated at 1.4mt at 0.6% Cu, 0.5% Zn, 1.4gpt Au and 7gpt Ag (all Inferred).
• Of that ~0.2mt is hosted within oxide zone, ~0.3mt within the transition zone and the balance (~0.9mt) is primary.
• The mineralization remains open at depth and along strike with further drilling planned for this year to test extensions and grow the MRE as well upgrade confidence level of the resource.
• Additionally, the team will carry metallurgical testwork.
• The deposit is located ~12km away from a potential Hawiah processing facility and is considered as a bolt on project of a larger Hawiah project.
• Hawiah currently hosts a MRE of 29.0mt at 0.9% Cu, 0.9% Zn, 0.7gpt Au and 10gpt Ag including an open pit domain for 11.1mt at 0.9% Cu, 0.8% Zn, 0.8gpt Au and 10gpt Ag.
• Separately, the Company is reporting development of Jibal Qutman continues on schedule with construction works planned to start by the end of 2023.
• The team is finalizing the DFS that will pave the way for the mining license application and launching funding discussions in H2/23.

Conclusion: The Company released a maiden MRE on the Al Godeyer polymetallic project in little over a year after first identifying the target. As of now, the open pit MRE is small to justify a potential standalone operation but is considered to feed into a larger Hawiah complex (12km away). The mineralization  remains open at depth and along strike with further drilling planned for 2023 to test those extensions.

*SP Angel act as Nomad to KEFI Gold and Copper

Kodal Minerals* (KOD LN) 0.41p, Mkt Cap £70m – Exploration results point to further growth in the MRE as Bougouni advances to the start of development works

BUY – Target 0.7p

• The Company released an update on engineering, exploration drilling and permitting progress at the Bougouni Lithium Project.
• The Company completed ~6,400m of drilling comprised of 41 RC and 18 diamond drillholes.
• Drilling focused on both infill and metallurgical and geotechnical holes at Ngoulana as well as step out drilling at the Kola, Bougouni South and Boumou prospects.
• First results from laboratory samples of step out holes show good grades and intersections including:
  • 18m at 1.31% Li2O from 42m and 8m at 1.55% Li2O from 77m (KODGW001) at the Ngoualana prospect;
  • This was a groundwater testhole to the NW of the proposed pit with additional drilling now planned to test this area.
  • 8m at 1.50% Li2O from 29m (KLRC185) at the Kola prospect;
  • 9m at 1.47% Li2O from 29m (LRC186) at the Kola prospect.
  • Drilling at Kola targeted a coarse grained outcropping pegmatite vein with a number of RC holes confirming close to surface high grade minersalisation.
• No assay results from drilling at Bougouni South (~1,000m of drilling) and Boumou (~1,300m) prospects are currently available but early indications show intersections of multiple pegmatite veins.
• In particular, drilling extended strike of known pegmatite veins to over 500m at Bougougni South and to 750-1,000m at the Boumou prospect offering potential to further grow the resource.
• The team continued with engineering studies for the DMS plant option aimed at accelerating development to first production.
• A change in design application for approval by the Mines Ministry has been draftd and is currently undergoing legal review.
• The mining tender process is ongoing with eight mining contractors included in the tender list with formal tenders due in early Q2/23.
• Hainan Mining submitted applications for an investment in Bougouni and Kodal to Chinese authorities (NDRC and the Department of Commerce) confirming that a review is going well and the approval remaining on schedule.

Conclusion: Initial results from drilling at and around known prospects show good potential to grow the mineral inventory. Regulatory approvals for a change in Bougouni design are being applied for while Hainan Mining updated on the course of their project and Company investment with Chinese authorities that is reported to be progressing on schedule.

*SP Angel acts as financial advisor and broker to Kodal Minerals.

Tungsten West (TUN LN) – 6p, Mkt cap £19.4m – Additional fundraising to help take Hemerdon back to production

• Tungsten West has announced that it is raising £5m of interim funding via a Convertible Loan Note to help resume production at the Hemerdon tungsten mine in Devon.
• The notes will be convertible into shares at the lower of either 3p/share or “a 50% discount to the offer price of any equity raise” and have a 364-day term.
• The company says that “Lansdowne, an existing 9.41% shareholder in the Company, has signed a binding term sheet to subscribe for in aggregate £3 million CLNs, on behalf of itself and certain funds managed by it” and that “Discussions with other shareholders and investors in connection with the Fundraising are at an advanced stage with the intention of seeking additional commitments for the Minimum Funding Amount as soon as possible”.
• In addition to the loan note, Tungsten West is seeking an additional £2m equity funding via an open offer priced at 3p/share representing “a discount of 72.1 per cent. to the closing middle market price of 10.75 pence per Ordinary Share on 31 March 2023” on the basis of one share for every 2.7 shares held .
• Tungsten West says that “The funds raised from the Placing will not be sufficient to see the Company through to cash generation. The intention of this Placing is to fund the business through the planning and permitting process and completion of the required Project funding”.
• Tungsten West says that the additional funds are required as a results of “severe inflationary increases in both operating expenditure (“OPEX”) and capital expenditure (“CAPEX”)”
• “On completion of the Placing, Mark Thompson will step down from the Board as Executive Vice Chairman”.  This follows the retirement of non-executive directors, Francis Johnstone and Grace Stevens from the Board which was announced in March.

No.1 in Copper:  “The winner of the 2020 Fastmarkets Apex contest for copper was the team at SP Angel comprising John Meyer, Sergey Raevskiy and Simon Beardsmore, with an accuracy score of 93.8%”

No1. In Gold:  “SP Angel’s trio took the top spot for the gold price prediction throughout the year, with an accuracy score of 97.59%”

The SP Angel team also ranked 1st in Palladium, 3rd in Tin and 5th in Silver in the fourth quarter of 2020

Analysts

John Meyer – John.Meyer@spangel.co.uk – 0203 470 0490

Simon Beardsmore – Simon.Beardsmore@spangel.co.uk – 0203 470 0484

Sergey Raevskiy –Sergey.Raevskiy@spangel.co.uk – 0203 470 0474

Sales

Richard Parlons –Richard.Parlons@spangel.co.uk – 0203 470 0472

Abigail Wayne – Abigail.Wayne@spangel.co.uk – 0203 470 0534

Rob Rees – Rob.Rees@spangel.co.uk – 0203 470 0535

Grant Barker – Grant.Barker@spangel.co.uk – 0203 470 0471

SP Angel                                                            

Prince Frederick House

35-39 Maddox Street London

W1S 2PP

*SP Angel are the No1 integrated nomad and broker by number of mining brokerage clients on AIM according to the AIM Advisers Ranking Guide (joint brokerships excluded)

+SP Angel employees may have previously held, or currently hold, shares in the companies mentioned in this note.

DISCLAIMER

This note is a marketing communication and comprises non-independent research. This means it has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of its dissemination.

This note is intended only for distribution to Professional Clients and Eligible Counterparties as defined under the rules of the Financial Conduct Authority and is not directed at Retail Clients.

This note is confidential and is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published in whole or in part, for any purpose.

This note has been issued by SP Angel Corporate Finance LLP (‘SPA’) to promote its investment services. Neither the information nor the opinions expressed herein constitutes, or is to be construed as, an offer or invitation or other solicitation or recommendation to buy or sell investments. The information contained herein is based on sources which we believe to be reliable, but we do not represent that it is wholly accurate or complete. All opinions and estimates included in this report are subject to change without notice. It is not investment advice and does not take into account the investment objectives and policies, financial position or portfolio composition of any recipient. SPA is not responsible for any errors or omissions or for the results obtained from the use of such information. Where the subject of the research is a client company of SPA we may have shown a draft of the research (or parts of it) to the company prior to publication to check factual accuracy, soundness of assumptions etc.

Distribution of this note does not imply distribution of future notes covering the same issuers, companies or subject matter.

Where the investment is traded on AIM it should be noted that liquidity may be lower and price movements more volatile.

SPA, its partners, officers and/or employees may own or have positions in any investment(s) mentioned herein or related thereto and may, from time to time add to, or dispose of, any such investment(s).

SPA is registered in England and Wales with company number OC317049.  The registered office address is Prince Frederick House, 35-39 Maddox Street, London W1S 2PP.  SPA is authorised and regulated by the UK Financial Conduct Authority and is a Member of the London Stock Exchange plc.

MiFID II – Based on our analysis we have concluded that this note may be received free of charge by any person subject to the new MiFID II rules on research unbundling pursuant to the exemptions within Article 12(3) of the MiFID II Delegated Directive and FCA COBS Rule 2.3A.19.

A full analysis is available on our website here http://www.spangel.co.uk/legal-and-regulatory-notices.html. If you have any queries, feel free to contact our Compliance Officer, Tim Jenkins (tim.jenkins@spangel.co.uk).

SPA research ratings – Based on a time horizon of 12 months: Buy = Expected return of more than 15%, Hold = Expected return between -15% and +15%, Sell = Expected return of less than 15%