SP Angel Morning View -Today’s Market View, Monday 10th July 2023

Weak Chinese inflation data fuels speculation for more stimulus

MiFID II exempt information – see disclaimer below

Beowulf Mining* (BEM LN) – Mikael Schauman appointed to the Board as Non-Executive Director

CAA Mining (private) – Moab Minerals considering 100% acquisition of CAA Mining lithium assets in Ghana

Galantas Gold* (GAL LN) – ~18m at 2.87% Cu, 0.77g/t Au and 0.46% Zn intersected at Gairloch

Great Western Mining* (GWMO LN) – Nevada exploration update

Gold prices rise on elevated Chinese premiums and weaker US dollar

• Gold sold for $6-15/oz premiums in China according to the Business Recorder.
• Renewed interest in gold is being driven by the potential for further de-dollarisation of the global economy and concerns over the US and global banking sector.
• The prospect of further rises in US interest rates is driving concern over the potential for further collapse in the banking sector.
• Each further rise in US interest rates reduces the value of short term government bonds held as banking reserves and raises the potential for further bank collapse or bailout.
• Reduced demand in India is tempering the rise in gold prices with heavy rain in India and reduced demand for gold jewellery after the Indian wedding season.

Economics

US – New jobs growth slowed down in June, although, robust increase in wages is likely to see Fed voting in favour of a 25bp rate hike this month (26 July).

• Commenting on the data, Fed President Austan Goolsbee, a voting FOMC member, said “the job market is outstanding, and is getting back to a balanced sustainable level”.
• “I haven’t seen anything that says that’s wrong” Goolsbee added on FOMC forecasts for two more hikes this year.
• Markets took a dovish view of the data with shorter term bond yields (2y) pulling back along with the US$, although, US equities also finished lower for the day.

Friday’s payroll numbers indicate ongoing reshoring of manufacturing but prompt US dollar fall

• NFPs: 209k v 306k (revised from 339k) May and 230k est.
• Unemployment Rate: 3.6% v 3.7% May and 3.6% est.
• Private nonfarm payrolls added 149k in June vs 259k
• Manufacturing payrolls rose 7k in June vs -2k in May – Semiconductor restrictions into China may be accelerating the effect here
• Government payroll rose 60k in June from 47k in May
• Participation rate remained steady at 62.2%,
• Average hours worked improved slightly to 34.4 in June vs 34.3 in May
• Average weekly earnings also improved to 4.4% yoy in June vs 4.3% yoy in May

China – Headline and core inflation numbers slowed down further in June pointing to a weakening growth momentum.

• CPI dropped to 0.0% last month while core measure slowed to 0.4% from 0.6% in May.
• On the brink of deflation, the economy is in need of more stimulus, many commentators suggest following the release of inflation data.
• CPI (%yoy): 0.0 v 0.2 May and 0.2 est.
• PPI (%yoy): -5.4 v -4.6 May and -5.0 est.

• US Treasury Secretary, Janet Yellen, called for market reforms in China and criticised the world’s second-largest economy for its recent ‘punitive’ actions against US companies and export controls on some critical minerals.

Shenzhen office occupancy falls on worsening economic activity

• Office vacancies rose by 24.5% as financial services companies either moved or closed.
• We saw an article suggesting that China’s population might not be as large as the 1.46bn indicated on Worldometer..

Eurozone Sentix falls to -22.5 from -17 as energy concerns dampen sentiment further than previously expected.

India – Tomato prices hit record level due to extreme heatwave and heavy rains.

Turkey – continues to block Sweden in its application to join NATO due to Sweden’s housing of Turkish dissidents.

Ukraine – Ukraine also asking NATO leaders to move towards Ukrainian membership of NATO.

• We expect a bunch of alleged Russian sympathisers such as Helmut Kohl, Bernard Schroder and former Chancellor Merkel to somehow object.

Currencies

US$1.0951/eur vs 1.0880/eur last week. Yen 142.39/$ vs 143.43/$. SAr 18.837/$ vs 19.102/$. $1.280/gbp vs $1.274/gbp. 0.665/aud vs 0.662/aud. CNY 7.235/$ vs 7.243/$.

Dollar Index 102.42 vs 103.06 yesterday

Commodity News

Precious metals:

Gold US$1,925/oz vs US$1,919/oz last week

   Gold ETFs 92.2moz vs US$92.4moz last week

Platinum US$912/oz vs US$909/oz last week

Palladium US$1,243/oz vs US$1,232/oz last week

Silver US$23.10/oz vs US$22.86/oz last week

Rhodium US$4,000/oz vs US$4,000/oz last week

Base metals:   

Copper US$ 8,317/t vs US$8,229/t last week

Aluminium US$ 2,148/t vs US$2,131/t last week

Nickel US$ 20,725/t vs US$20,918/t last week

Zinc US$ 2,357/t vs US$2,365/t last week

Lead US$ 2,054/t vs US$2,064/t last week

Tin US$ 28,040/t vs US$27,633/t last week        

Energy:           

Oil US$77.8/bbl vs US$77.0/bbl last week

• Crude oil prices strengthened over the weekend following a fire at the Pemex-operated Nohoch A oil platform at the Bay of Campeche in the Gulf of Mexico, which has impacted production at the giant Cantarell Field.
• The US Baker Hughes rig count was up 6 units to 680 rigs last week (-72 or 10% y/y), with oil rigs down 5 to 540 units and gas rigs up 11 to 135 units. The frac spread count reportedly fell 5 units w/w to 272 (-13 y/y).
• Thyssenkrupp Nucera, a JV between the Thyssenkrupp and De Nora industrial groups that designs technology to produce hydrogen via alkaline water electrolysis, raised €606m on Friday in Germany’s largest YTD23 IPO.

Natural Gas US$2.654/mmbtu vs US$2.637/mmbtu last week

Uranium UXC US$55.65/lb vs US$55.60/lb yesterday

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$107.5/t vs US$109.6/t

Chinese steel rebar 25mm US$520.5/t vs US$525.5/t

Thermal coal (1st year forward cif ARA) US$120.0/t vs US$118.0/t

Thermal coal swap Australia FOB US$140.3/t vs US$150.5/t

Coking coal swap Australia FOB US$226.0/t vs US$226.0/t

Other:  

Cobalt LME 3m US$33,420/t vs US$33,420/t

NdPr Rare Earth Oxide (China) US$61,852/t vs US$61,767/t

Lithium carbonate 99% (China) US$41,811/t vs US$71,753/t

China Spodumene Li2O 5%min CIF US$4,090/t vs US$4,090/t

Ferro-Manganese European Mn78% min US$1,101/t vs US$1,103/t

China Tungsten APT 88.5% FOB US$315/t vs US$315/t

China Graphite Flake -194 FOB US$705/t vs US$715/t

Europe Vanadium Pentoxide 98% 7.5/lb vs US$7.5/lb

Europe Ferro-Vanadium 80% 32.25/kg vs US$32.25/kg

China Ilmenite Concentrate TiO2 US$302/t vs US$302/t

Spot CO2 Emissions EUA Price US$92.1/t vs US$92.3/kg

Brazil Potash CFR Granular Spot US$335.0/t vs US$320.0/kg

Company News

Beowulf Mining* (BEM LN) 1.55p, Mkt Cap £18m – Mikael Schauman appointed to the Board as Non-Executive Director

• Beowulf Mining report Mikael Schauman has been appointed to the Board as a Non-Executive Director.
• Mikael Schauman started his career at Boliden moving on to senior management positions with Lundin Mining with sole responsibility for Lundin’s commercial organisation and world-wide sales.
• Mikael actively contributed to growth within Lundin Mining through M&A and through development of Lundin’s ESG sustainability work.
• Mikael joins Ed Bowie who will become Beowulf’s new ceo in the next few weeks.
• We look froward to the new team working towards the development of the Grafintec graphite mining and processing and Kallak iron ore mining assets.

*SP Angel acts as Nomad and Broker to Beowulf Mining

CAA Mining* (private) 27.5p, Mkt cap £5.2m implied – Moab Minerals considering 100% acquisition of CAA Mining lithium assets in Ghana

• Malcolm Day, md, of Moab Mining is reported to be considering a 100% acquisition of CAA Mining’s lithium assets in Ghana.
• Day says “we are looking at increasing out investments in CAA Mining in the next few months”. “We’[d] like to increase [our stake] to 100%.” (The Africa Report)
• Moab recently acquired a 15% stake in CAA Mining for US$1m (£750,000)
• Earn in: CAA Mining is party to an earn-in agreement to acquire up to 85% of Lithium Resources Ghana Ltd., which holds six prospecting licences covering an area of 730km2 in the south of Ghana for $8m.
• CAA Mining are currently auger drilling to test for spodumene and indicator minerals under relatively shallow cover.
• Drilling: The Auger drilling program will be shortly followed with an RC drilling program to test for lithium grade and depth.
• CAA Mining’s licenses are to the north and east of Atlantic Lithium’s Ewoyaa project on which Atlantic recently published a highly encouraging DFS.
• The licenses are close to the town of Mankessim on the main coastal road connecting Accra to Takoradi giving the prospects good access to infrastructure.
• Livista Ghana: CAA Mining also hold shares in Livista Ghana, the lithium refinery company which is in planning for a lithium refinery in Germany and is considering a site for lithium processing in Ghana. CAA Mining hold 10% of Livista Ghana. Livista hold around 8.64% of CAA Mining.
• Cash: CAA Mining currently  have around £1m of cash in the bank following the issuance of £750,000 worth of shares to Moab for 27.5p/s.
• CAA Mining have invested $0.5m to date into exploration and preparatory infrastructure on licenses
• CAA Mining is run by Douglas Chikohora, a geologist who formerly worked with Cluff Gold.
• Ghana: The government of Ghana is highly supportive of its mining industry with a significant proportion of the population involved in gold mining.
• Mineral exports make up around 36% of Ghana’s total official exports in 2021 though we understand much gold has been smuggled to Dubai.
• Refining: Lithium refining is more complex and specialised than for gold with refining processes adjusted to match the specific metallurgical characteristics of each lithium feedstock.
• The faster Ghana moves into lithium mining, the more secure its position will be with new Western refineries going forward.

Conclusion: Ghana is moving quickly towards the mining and provision of lithium for refining. Atlantic Lithium is backed by Piedmont which is forecast to produce 30,000t of Lithium Hydroxide in 2026 and 60,000tpa in 2027.

Moab’s investment is expected to enable CAA Mining to continue with the prospecting campaign and present results from its tests around September.

*The analyst holds shares in CAA Mining. Two SP Angel analysts recently visited CAA’s licenses in Ghana

*CAA Mining is a private company. The share price indicated reflects the company’s last placing for $1m at 17.5p

Galantas Gold* (GAL LN) 16p, Mkt Cap £17m – ~18m at 2.87% Cu, 0.77g/t Au and 0.46% Zn intersected at Gairloch

• The Company released results from the first of four exploration drill holes completed at the newly acquired Gairloch Project in Scotland.
• Hole 23-GL-01 intersected 17.9m at 2.87% Cu, 0.77g/t Au, 0.46% Zn along with some cobalt and silver.
• The hole included 1.7m at 5.08% Cu, 0.46g/t Au and 0.35% Zn.
• Tru width is estimated at 17.7m.
• Mineralisation is observed within a quartz carbonate rick unit sandwiched between hornblende shist.
• The sulphide mineralisation was predominantly massive and semi-massive pyrrhotite and chalcopyrite.
• Two more of the six drillhole programme are planned testing historical intersections as well extensions at the Kerry Road VMS gold-copper-zinc deposit.

Conclusion: First exploration hole at the Kerry Road VMS gold-copper-zinc deposit testing historic results and extensions to the mineralisation returned high grade, wide and close to surface polymetallic intersection. These are exciting drilling results and we are looking forward to results from the remaining completed three drill holes as well as two more planned.

*SP Angel act as Broker to Galantas Gold

Great Western Mining (GWMO LN) 0.09p, Mkt Cap £4m – Nevada exploration update

• The Company released an update on exploration programme at its precious and base metals claims in Nevada.
• At Rhyolite Dome, the team collected a series of surface samples with anomalous gold results including a number of samples with grades of up to 0.187g/t.
• The plan is to follow up reconnaissance work with 146 new samples during the course of the summer.
• At OMCO, recovery issues recorded at the twin diamond core drillhole testing mineralisation intersected in the OMRC015 (2022) including 1.5m at 8.1g/t that was believed to be an extension of the abandoned OMCO gold mine.
• Poor ground conditions are believed to be due to profoundly shattered and tectonised nature of the OMCO fault.
• Separately, the team bulk sampled further surface dumps at Olympic Gold Project including:
  • 5.88g/t in a 13.9kg sample from a 60m3 heap;
  • 1.41g/t in a 11.2kg sample from a 120m3 heap.
• The team will resample heaps to check how representative the sample was and add the material to the inventory for potential future processing.
• At Jack Springs, the team soil sampled the M5 prospect in the southeastern part of the Jack Springs claim with results showing anomalous gold as well as significant silver in one of samples.
• The plan is to expand the soil sampling programme with 165 new samples planned.
• At Rock House Group, the team completed two east-west orientated soil traverses earlier this year filling in grid gaps around most anomalous areas with 12 of 16 samples returning gold concentrations of >36ppb.
• A follow up programme for 350 samples is planned.
• At M2 Copper Prospect, the team is planning a 1-3 drill hole programme testing extensions to the existing mineral resource of 4.3mt at 0.45%.
• Additionally, an RC hole is planned at Mineral Jackpot to follow up a successful hole drilled in 2022.

Conclusion: The team is actively progressing with target identification and follow up reconnaissance work across its precious and base metals license areas in Nevada.

*SP Angel act as Broker to Great Western Mining, an SP Angel Analyst has visited Great Western’s Nevada claim blocks

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

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*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.

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