SP Angel Morning View -Today’s Market View, Thursday 24th August 2023

Nvidia sales growth lifts market despite slowdown in US manufacturing and services PMIs

MiFID II exempt information – see disclaimer below

Andrada Mining (ATM LN) – Improved operating performance overshadowed by lower tin prices

Horizonte Minerals (HZM LN) – Appointment of Operations Director at Araguaia

Lucara Diamonds (LUC CN) – Working capital facility

Tertiary Minerals* (TYM LN) – BUY – New presentation focusses on the projects in Zambia

Thor Explorations (THX LN) – Segilola plant exceeding nameplate capacity

China – Aluminium production rose 1.5% yoy to 3.48mt in July

• Aluminium output also rose 2.8% ytd to 23.62mt with rising hydropower dam levels bringing 1.4mtpa of capacity back on line.
• China now represents around 60% of global aluminium production.
• Nonferrous metals: China also saw a 4.2% yoy rise in the 10 nonferrous metals output to 6.03mt with a 7% ytd rise 42.32mt
• The stats indicate China’s ongoing growth across a broad range of commodities which also implies ongoing consumption growth of much of this metal.

Uranium – China is looking going to triple its nuclear power generation to150GW from 50GW by 2030.

• That’s over 10 nuclear power station startups per year.

Economics

US – Manufacturing PMI to 47.0 in August from 49.0 in July

• Services PMI fell to 51.0 from 52.3
• Composite PMI fell to 50.4 from 52.0
• We are surprised at the rate of the slowdown in the US following a degree of positive economic news.
• Sticky inflation may well cause the US Fed to hold rates at a relatively high level for longer despite the slowdown as higher rates are causing capital to flow out of China and other developing nations and back into US Treasuries.
• The ending of the war in Ukraine may be a signal for the Fed to lower rates though rebuilding large parts of Russian occupied Ukraine will be slowed by the millions of mines laid by Russian forces.

Nvidia drives NSDAQ higher as strong earnings

• Nvidia is looking for Q3 sales rising 170% yoy to US$16bn.
• Nvidia reckons investments in artificial intelligence are showing strong growth with surging interest.

China – President Xi misses scheduled speech at BRICS summit in Johannesburg

• We wonder what economic disaster Xi was having to address while missing his speech.
• Wang Yiming, Vice Chairman of the China Centre for International Economic Exchange blames the West for China’s economic troubles in yesterday’s Peoples Daily.
• There is no mention of how, free trade and capital investment from the West have helped China grow over the past 20 years.
• Yiming blames difficulties in the global economic recovery and a complex external environment.
• Yiming goes on to blame monetary tightening in the West for China’s currency devaluation and capital outflows, seems he forgot to mention China’s industrial espionage and threats against Taiwan have caused the US to restrict advanced semiconductor exports into China.
• Yes, Warren Buffet was and still is a major investor in BYD at just under 10% (from 20%, was worth US$20bn from a $234m investment. We wonder if Buffet may continue to make similar investments.
• China’s severe lockdowns and breakdown in logistics caused Western manufactures to realise how much they depended on Chinese components. For example, virtually every diode in the world was produced in China. These are small but critical components.
• Manufacturers who thought they had contingency plans in place in case of problems in China suddenly found their non-Chinese suppliers were still dependent on Chinese components.
• These manufacturers have been busy ensuring that a portion or possibly all their supply chain is now ex-China with some impact on demand for Chinese exports.
• Never mind what the politicians say, global manufacturing does not want to be ‘dependent’ on China in case it invades Taiwan, props up Putin or suffers some other event which causes its isolation.
• The impact of lower exports is now unveiling the ‘excesses’ of Chinese mismanagement and their propensity to gamble on growth without caution.
• We recommend Mr Yiming looks to address more domestic issues like pay and rations for factory workers who are unable to drive domestic consumption or buy the millions of unfinished apartments which Evergrande and Country Garden are so desperate to sell.

Russia – Will the killing of Prigozhin open the way to depose Putin?

• Did Putin sanction the shooting down of the plane carrying Prigozhin and others?
• Did Putin simply look the other way while others dealt with their internal enemy?
• Is Russia about to collapse into an internal power struggle as Ukraine slowly pushed Russian forces back towards Russia.
• Russian generals are not enjoying Putin’s war and the killing of Prigozhin may enable a change in their leadership.
• Russian people are not enjoying the loss of their sons and the economic hardship of sanctions.
• Russia is largely isolated from the Western world with no easy way back
• The arrival of six F16 jets into Ukraine is not a game changer but should help to swing the balance of power further towards Ukraine.

BRICS – New members

• Saudi Arabia, Iran, Ethiopia, Egypt, Argentina and the United Arab Emirates have been invited to join the BRICS union to champion the ‘Global South’.
• The inclusion of Iran will upset many nations and risks isolating the BRICS union from the West.
• If the world slows its oil consumption and oil prices collapse we wonder if the BRICS union might be so pleased to welcome their new members.
• Some 40 nations showed an interest in joining the BRICS union with 22 have formally asked to be admitted. The BRICS represent some 41% of global population and 26% of global GDP.
• The disparate group are reported to be largely motivated by a desire to level a global playing field which many consider works against them.
• There is little doubt that Russia and China are trying to break the dominance and power of the US dollar as the world’s major trading currency.
• While the dominance of the US dollar is of great benefit to the US, replacing the US dollar with other currencies will not resolve the corruption and mismanagement in their systems.

UK Grid constraints are pinch point for UK EV plans (FT)

• There is growing strain on the privately owned power distribution networks across Britain as businesses adapt to the government-mandated target of net zero emission by 2050.
• The decarbonisation of the UK economy is expected to double electricity consumption by 2050.
• Problems until now have mainly been on the supply side with new wind and solar farms struggling to get connections to the grid.
• Grid constraints are increasingly becoming bottlenecks on the demand side where businesses are looking for upgraded or new connections and delays are mounting.
• “Without an efficient national grid which supplies businesses with the energy capacity they need, as well as enough workers to fill empty jobs, the potential for growth will continue to be limited,” said Shevaun Haviland, director-general of the British Chambers of Commerce.

Currencies

US$1.0855/eur vs1.0868/eur yesterday.Yen 145.21/$ vs145.67/$.SAr 18.568/$ vs18.702/$.$1.270/gbp vs$1.276/gbp.0.646/aud vs0.643/aud.CNY 7.280/$ vs7.288/$.

Dollar Index 103.49 vs 103.45 yesterday.

Commodity News

Precious metals:

Gold US$1,921/oz vsUS$1,904/oz yesterday

Gold ETFs 89.9moz vs US$90.1moz yesterday

Platinum US$931/oz vsUS$929/oz yesterday

Palladium US$1,264/oz vsUS$1,265/oz yesterday

Silver US$24.14/oz vs  US$23.74/oz yesterday

Rhodium US$4,100/oz vsUS$4,100/oz yesterday

Base metals:

Copper US$ 8,405/t vsUS$8,422/t yesterday

Aluminium US$ 2,168/t vsUS$2,191/t yesterday

Nickel US$ 20,615/t vsUS$20,630/t yesterday

Zinc US$ 2,362/t vsUS$2,349/t yesterday

Lead US$ 2,183/t vsUS$2,168/t yesterday

Tin US$ 25,900/t vsUS$26,055/t yesterday

Energy:

Oil US$82.8/bbl vsUS$83.7/bbl yesterday

• Crude oil prices fell in thin trading with the wider markets even as the EIA reported a 6.1mb w/w US crude draw and ~1mb builds to gasoline and distillate stocks, with refinery utilisation stable at 94.5%.
• European energy prices fell ~20% on news that unions representing workers at Woodside’s North West Shelf LNG plant are considering a “strong offer”. Talks at two of Chevron’s Australian LNG facilities are still ongoing.
• EU natural gas storage levels rose 1.7% w/w to 91.6% full (vs 78.6% 5-Yr average), with both Germany and France each adding over 4.5TWh to lift overall storage to 1,041TWh.
• Equinor and its partners have inaugurated the world’s largest floating offshore wind farm, the Hywind Tampen development, whose 88MW output will supply the nearby the Snorre and Gullfaks oil and gas platforms.

Natural Gas US$2.474/mmbtu vsUS$2.555/mmbtu yesterday

Uranium UXC US$57.00/lb vs US$56.75/lb yesterday

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$111.0/t vsUS$111.0/t

Chinese steel rebar 25mm US$516.2/t vsUS$514.2/t

Thermal coal (1st year forward cif ARA) US$128.8/t vsUS$134.0/t

Thermal coal swap Australia FOB US$159.0/t vsUS$164.5/t

Coking coal swap Australia FOB US$252.0/t vsUS$252.0/t

Other:  

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

NdPr Rare Earth Oxide (China) US$67,858/t vsUS$68,603/t

Lithium carbonate 99% (China) US$27,816/t vsUS$27,784/t

China Spodumene Li2O 6%min CIF US$3,170/t vsUS$3,170/t

Ferro-Manganese European Mn78% min US$1,037/t vsUS$1,038/t

China Tungsten APT 88.5% FOB US$310/mtu vsUS$310/mtu

China Graphite Flake -194 FOB US$672/t vsUS$672/t

Europe Vanadium Pentoxide 98% 7.6/lb vsUS$7.6/lb

Europe Ferro-Vanadium 80% 31.75/kg vsUS$31.75/kg

China Ilmenite Concentrate TiO2 US$310/t vsUS$309/t

Spot CO2 Emissions EUA Price US$93.8/t vsUS$94.2/t

Brazil Potash CFR Granular Spot US$360.0/t vsUS$360.0/t

Battery News

Polestar reaches 150,000 vehicle production milestone

• The automaker’s first high-volume car, the Polestar 2, entered production in 2020 with a total of 150,000 vehicles have been produced by the company to date.
• There are 20,000 Polestar 2 vehicles on UK roads and the company was the fastest growing car brand over the first 7 months of 2023 – a 174% growth yoy.
• Polestar also announced in June that it would be adopting Tesla’s North American Charging Standard (NACS).

Geely EV branch Zeekr looking to gauge investment interest for potential IPO

• Zeekr, the premium EV branch of China’s Geely, is planning to engage with investors to gauge interest in a $1bn IPO in the United States.
• If successful, a $1bn IPO would stand as the most substantial US listing by a Chinese company in over two years, a record set by the ride-hailing titan Didi when it raised $4.4B in the middle of 2021.

Company News

Andrada Mining (ATM LN) 6.6p, Mkt cap £106m – Improved operating performance overshadowed by lower tin prices

• Andrada Mining reports a 34% increase in tin concentrate production from it Uis mine in Namibia during the year to 28^th February 2023 (FY 2022 – 780t) as process plant capacity expanded by 70%.
• Cash production costs decreased to US$19,762/t of contained tin (FY 2022 – US$21,839/t) and all-in sustaining costs “decreased to US$24 939 per tonne of contained tin (FY 2022: US$27 515) due to higher tonnage”.
• Despite the improved output and cost performance, EBITDA loss of £5.9m (FY 2022 – £2.6m loss) reflects the 34% reduction in tin prices from ~$39,000/t in FY 2022 to ~$25,000/t.
• The company confirms that infill drilling on the Lithium Ridge project started in January 2023 with a first-pass programme of reverse-circulation drilling “to investigate the subsurface continuation of lithium and tin mineralisation” starting in April.
• CEO, Anthony Viljoen, said that during FY 2023 Andrada Mining “achieved, and in certain instances surpassed, our operational milestones such as the successful expansion of the Uis Mine processing plant resulting in cost efficiencies. The 70% increase in production capacity enabled Uis to increase the tin concentrate output by 34% to 960 tonnes for the financial year”.
• He also commented that after the year-end “we have achieved additional significant milestones such as the production of the high purity, saleable petalite in May 2023 which has escalated the engagement with potential offtakers. In June 2023 we completed the lithium pilot plant construction thereby establishing Andrada as an emerging, potential lithium producer”.
• Looking ahead, he said that “As we progress in FY2024, the focus will be to expedite lithium development through the strategic process, the lithium pilot plant, and the extensive exploration programme”.

Horizonte Minerals (HZM LN) 135p, Mkt Cap £372m –Appointment of Operations Director at Araguaia

• Horizonte Minerals has appointed former Vale executive, Fernando Marino as Operations Director for its Araguaia project in Brazil.
• Mr. Marino “has over 35 years of experience in the resources industry, with a strong track record of ramping up and operating mining operations in Brazil” including as Vale’s Director of Operations at the Onça Puma ferronickel operation in Para State.
• Welcoming the appointment, CEO, Jeremy Martin, said that “Fernando’s extensive experience in commissioning, production ramp-up, and operating Brazilian nickel operations, coupled with over 20 years of stakeholder engagement experience in the Para state, will be invaluable at Araguaia”.
• The company recently confirmed that Araguaia is on schedule for initial metal production in Q1 2024.

Conclusion: The appointment of an experienced operations director with a track record of nickel expertise in the region should ease the transition from the construction and development phase into production at Araguaia.

Lucara Diamonds (LUC CN) C$0.41, Mkt Cap C$186m – Working capital facility

• Lucara Diamonds has confirmed the short-term extension of its $50m secured working capital loan facility.
• The largest shareholder, Nemesia, has “agreed to provide a liquidity support guarantee in favour of the Lenders of up to $15.0 million in aggregate (“Liquidity Guarantee”) to October 31, 2023, while discussions with the Lenders are ongoing”.
• Lucara “has agreed to issue 450,000 common shares as a fee upon execution of the Liquidity Guarantee and a further 450,000 common shares should the Liquidity Guarantee be called upon in the event the Company’s cash balance decreases below $10.0 million”.
• An additional fee of 7, 500 shares is payable monthly “for each $500,000 outstanding until the amounts borrowed are repaid”.
• CEO, William Lamb, expressed his appreciation for the lenders “willingness to grant an extension to the Company’s working capital facility … [and said that] … together with the support of our largest shareholder in providing the Liquidity Guarantee … [this flexibility] …  allows management to continue its focus on operations and the underground project”.

Tertiary Minerals* (TYM LN) 0.09p, Mkt cap £1.7m – BUY– New presentation focusses on the projects in Zambia

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• Tertiary Minerals has issued a new presentation PowerPoint Presentation (tertiaryminerals.com) describing its Zambian projects in what the company describes as “the world’s largest sediment-hosted stratiform copper province”.
• The company points to the Zambian Government initiatives to reform and reinstate provisions to offset mineral royalty payments against tax and says that it “anticipates that the fiscal environment for mining and exploration will continue to improve and re-establish Zambia as a primary destination for investors focused on copper”.
• The presentation describes progress with the Jacks project where it has now earned a 90% interest and where phase 1 drilling has intersected two copper bearing horizons over a strike length of 350m and where “Soil sampling has defined multiple copper-in-soil anomalies within a 20km strike length”.
• In the ‘Domes Region’ Tertiary Minerals describes its Mukai project as a priority and explains that it has a technical cooperation agreement with First Quantum Minerals, owner of the Sentinel and Enterprise mines in a similar stratigraphic setting, and which returned drill intersections including a 23m section averaging 0.6% copper at Tirosa.
• The agreement with First Quantum also includes the Mushima North iron-oxide-copper-gold (IOCG) prospect where historical drilling results from RST were re-assayed “returning ​ 33m grading 0.24% copper from 122m, including: 9m grading 0.43% copper from 140m, copper mineralisation to end of hole”.
• Tertiary Minerals explains that, based on historic exploration, geochemical and geophysical data, it has now identified six priority targets at Mushima North and will be following up exploration during 2023.
• Targets at Konkola West and Konkola Deep are said to have the “potential to host projected deep but unmined extensions of the Musoshi-Konkola deposits … [which] … have pre-mining endowment of >775 million tons of high-grade copper ore”.

Conclusion: Tertiary Minerals is committing much of its exploration effort to Zambia as exploration programmes get underway across their copper-prospective licence packages. Management is keen to highlight Tertiary’s ‘significant discount’ to listed juniors exploring in Zambia – a similar conclusion our recent Initiation Note, attached above, reached. We look forward to results from a potential drill porgramme at Jacks alongside the future target areas expected to be revealed by the ongoing soil sampling campaigns.

*SP Angel acts as Nomad and Broker to Tertiary Minerals

Thor Explorations (THX LN) 18.95p, Mkt cap £129m – Segilola plant exceeding nameplate capacity

• In its report for the 3 and 6 months to 30^th June, Thor Explorations says that the process plant at its’ Segilola gold mine in Nigeria is continuing to exceed the company’s expectations and is operating above nameplate capacity.
• Production of 23,078oz during the last quarter brings H1 gold output to 43,707oz and the company has “updated its production guidance to 85,000oz for the year”.
• Further enhancements to the plant are “being undertaken through the remainder of 2023”.
• Sales of 20,852oz of gold during the quarter and of 42,405oz during the half year generated quarterly revenue of $41.36m and $81.65m respectively.
• Costs on an all-in-sustaining (AISC) basis amounted to $1,230/oz sold for the quarter and $1.289/oz for the half.  Cost guidance (AISC) for the full year is “maintained at US$1,150 – US$1,350 per oz”.
• The company confirms that it expects to complete the preliminary feasibility study for its Douta project in Senegal during Q4 2023.
• Exploration effort is focussed within a 25km radius of the Segilola mine “with the key objective being to extend the life of mine”.

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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