SP Angel Morning View -Today’s Market View, Wednesday 30th August 2023

China cutting mortgage rates to support slowing economic growth

MiFID II exempt information – see disclaimer below

Sarn Helen Gold (Private, full EIS tax relief) – Exploring for Gold in Wales and Scotland

www.sarnhelengold.wales

• Holds five Crown Option Agreements covering over 1,200 square kilometres of ground, 4 in Wales, in Carmarthenshire, around the historic Dolaucothi Gold Mine – the only gold mine in Roman Britain, Pembrokeshire plus 1 in Peeblesshire, Scotland
• The team led Mike Armitage, ex SRK, is as Welsh as a cawl stew and considered indigenous to the land of Cymru.
• Analysis is ongoing on soil and stream sediments, panning, mapping and rock chip sampling along with 120m of core from three historic boreholes.
• Three potential drill targets have been identified near to the Dolaucothi mine:
  • Target 1. Soil samples with grades of up to 0.9g/t over a 500m strike length.
  • Target 2. Outcropping rock chips up to 6.16g/t.
  • Target 3. High grade soil samples >1g/t.

• 3D modelling of historic drilling suggests the mineralisation at Dolaucothi may be geologically similar and have similar structural controls to the gold mineralisation at Bendigo, Australia
• Independent expert analysis of gold grains collected from steams in Pembrokeshire indicate a local source.
• Rock chip samples collected in Peeblesshire have graded up to 7.95g/t Au.

• The Company is looking for £150,000-200,000 to fund field and laboratory-based work to end Q2 2024 aimed at identifying sufficient targets to justify a drilling programme in 2025.
• 2023 marks a century of Welsh gold being used by members of the British Royal Family to create their wedding rings. Welsh gold is expected to sell at a premium. No gold has however been mined in Wales this century.

Please reply to this email if you wish to know more about Sarn Helen Gold

*SP Angel’s role is limited to making introductions and interested parties should be aware that investment in a private company can present certain risks not present in listed companies (e.g. limited or no liquidity and no rules compelling disclosure of information to investors). This offer is open to professional investors only and is not offered to retail investors.

Alien Metals (UFO LN) – Crushing and screening contractor for the Hancock Iron Ore project

Anglo American (AAL LN) – Continuing caution among rough diamond purchasers at De Beers seventh sales cycle

Bradda Head (BHL LN) – Ian Stalker steps in as interim CEO at Bradda Head

Eramet SA (ERA FP) – Suspension of operations in Gabon as coup concerns intensify

Firering Strategic Minerals (FSG LN) – Successful commissioning at Zambian Lime Plant

Premier African Minerals (PREM LN) – Additional conditional funding from Canmax

European car sales up 15% in July, EVs up 61%

• European new car registrations jumped 15.2% in July, the 12^th consecutive month of growth as the auto industry recovers from pandemic-related supply chain issues.
• EV sales jumped 60.6%, continuing a rise buoyed by subsidies in several European Union countries.
• Full EVs accounted for 13.6% of all new car sales, up from under 10% in July 2022.

Copper holds ground as dollar rally cools and demand picks up

• Copper prices are holding around the $8,425/t mark, retaining gains made last week.
• The move follows a sliding dollar, which weakened on the back of disappointing US jobs data yesterday.
• Yangshan import premiums, which highlight Chinese import demand for refined product, have hit their highest since December 2022.
• Guangzhou announced a swathe of mortgage curb easing, whilst several state-owned banks are expected to cut interest rates to further support the Chinese property sector.
• The Hang Seng mainland index jumped 3.3% following the announcement.

Gold prices hit three-week highs as US Treasury yields slide on disappointing labour data

• Spot gold climbed to its highest level since the first week of August at $1,936/oz.
• The move followed JOLTs Job Openings data from the US, with 8.83m jobs reported vs 9.465m expected, alongside a revision from the previous.
• The disappointment fuelled a rally in US Treasuries, with the 10-year climbing to 4.117% having held 4.35% last week.
• The rally coincided with rate cut expectations being brought forward from July to June of 2024.

Economics

US – Equity indices jumped yesterday on the back of soft job openings and consumer sentiment reports as investors raised expectations for a policy shift in H1/24.

• Job openings, a proxy for labour demand, dropped by more than expected to a more than two year low in a sign of a cooling jobs market.
• Bets over an expected start of rate cuts were brought forward to June from July next year.
• 10y yields pulled back more than 10bp to a low of 4.11% yesterday afternoon.
• Expect a volatile trading week with both July inflation data and August payrolls out Thursday and Friday, respectively.
• JOLTS Job Openings: 8,827k v 9,165k June (revised from 9,582k) and 9,500k est.
• Conference Board Consumer Confidence: 106.1 v 114.0 July (revised from 117.0) v 116.0 est.

Hurricane Ida strengthens to Category 4

• It’s going to get very wet in Florida. Basement apartments going cheap.

China – Largest banks are preparing to cut interest rates on existing mortgages to support consumer spending and property sector sentiment, according to Bloomberg.

• Lower mortgage rates will affect only loans on first homes that accounted for 80% of new home loans last year.
• JPMorgan estimates the annualised rate on new mortgages stands at ~4.2% or 60bp lower than the outstanding loans.
• Bloomberg Economics estimate cuts in mortgage rates will be equivalent to a 5-10bp cut in the policy rate boosting GDP growth by 0.1-0.2pp.
• The government asked two of the nation’s largest financial services firms to examine the books of Zhongrong International Trust, a struggling asset manager, Bloomberg reports.
• Citic Trust and CCB Trust, an entity backed by China Construction Bank, are reported to have been involved.
• A similar examination by Citic of Hhuarong Asset Management led to a $6.6bn bailout of the bad debt manager in 2021.

Germany – Regional inflation numbers released this morning point to an acceleration in the pace of consumer prices growth in August.

• The data points to increasing risks of a stagflation.
• Nationwide numbers are due later this afternoon with expectations for a 0.3%mom/6.3%yoy reading versus 0.5%mom/6.5%yoy estimated.

Spain – Headline inflation picked up in line with expectations in August with a core measure coming in slightly stronger than forecast.

• The data suggests the central bank is likely to maintain tightening cycle with a 25bp hike in September currently expected by investors.
• CPI (%mom): 0.5 v -0.1 July and 0.5 est.
• CPI (%yoy): 2.4 v 2.1 July and 2.4 est.
• Core CPI (%yoy): 6.1 v 6.2 July and 6.0 est.

UK – Home sales are on course for the worst year since 2012 this year as a surge in mortgage rates cools down demand.

• Residential transactions are set to drop over 20% from 2022 led by a 28% projected decline in mortgaged sales, Zoopla estimates.

Australia – CPI eased more than expected in July supporting the case for the central bank to extend a pause in tightening at next week’s policy meeting.

• The Australian dollar and the yield on policy sensitive three year bonds pulled back on the back of the news.
• Inflation picked at >8% at the start of the year and has been on a falling trend since then.
• The central bank voted to leave rates unchanged at 4.10% in August after raising them by 4pp since May 2022.
• CPI (%yoy): 4.9 v 5.4 June and 5.2 est.

Gabon – President Ali Bongo deposed in Gabon by army officers

• President Ali Bongo has been ousted in Gabon by a group of army officers who have annulled the results of Saturday’s election.
• The officers claim the election which returned Ali Bongo to power was fraudulent – why leave these things to chance?
• Opposition rival Albert Ondo Ossa claims that many polling stations had ballot papers which were missing his name but with other candidates which had withdrawn from the election.
• The move marks eighth coup in a former French colony in Africa over the past three years.
• Foreign media had been banned from Gabon to cover the election and all borders are closed till further notice.
• The Bongo family have held power for around 56 years.
• The officers claim to be from the ‘Committee of Transition and the Restoration of Institutions’ representing security and defence forces in Gabon.
• All parts of Gabon’s defence and security forces are reported to be involved though some resistance is expected.
• The last coup in 2019 failed resulting in rebel soldiers going to prison.
• Eramet mines manganese in Gabon though the major export by far is oil.
• Around 90% of Gabon is covered in Equatorial rainforest sometimes known as the lungs of Africa, making logging a major business for the nation.

Grey tsunami to hit the mining industry according to the Colorado Schol of Mines

• The mining industry is facing a critical skills gap, compounded with the so-called ‘grey tsunami’ impending with regard to the amount of retirements anticipated according to the Colorado Schol of Mines (Mining.com).
• The House Committee on Natural Resources is considering the Mining Schools Act of 2023, which would establish a grant program for recruitment and research projects.
• Lengthy permitting times combined with strong opposition to anything remotely environmentally contentious is putting off a new generation of mining engineers and entrepreneurs.
• Chinese funding is also making it a condition that universities should not run courses on mining and mineral technology (anecdotal evidence).
• The Nuclear industry also faces a similar if not worse situation after the damage done by successive campaigns against the nuclear industry. Greenpeace briefly dropped its opposition to nuclear power due to CO2 concerns.

Alien hunter’ claims to have found material from outside solar system

• A controversial Harvard astrophysicist claims to have found material that “originated from outside the solar system” for the first time in history.
• Professor Avi Loeb recovered fragments of meteoroid IM1, from the Pacific Ocean in June to determine whether they could prove an extraterrestrial artefact crashed there in 2014.
• Prof Loeb has released the first analysis of 700 small metallic objects, or spherules, uncovered from the seafloor that they believe are fragments of IM1.
• He has claimed that their compositions do not match any natural or man-made alloys “or other natural meteorites in the solar system”.
• It will be really interesting to see if Prof Loeb has discovered some form of new extra-terrestrial alloy or if he has simply dredged up some terrestrial nodules off the sea bed. We can’t wait for the results!

Currencies

US$1.0872/eur vs 1.0829/eur yesterday. Yen 146.34/$ vs 146.38/$. SAr 18.543/$ vs 18.442/$. $1.264/gbp vs $1.264/gbp. 0.647/aud vs 0.645/aud. CNY 7.292/$ vs 7.288/$.

Dollar Index 103.60 vs 103.98 yesterday.

Commodity News

 Precious metals:

Gold US$1,936/oz vs US$1,924/oz yesterday

Gold ETFs 89.7moz vs US$89.7moz yesterday

Platinum US$979/oz vs US$972/oz yesterday

Palladium US$1,242/oz vs US$1,256/oz yesterday

Silver US$24.59/oz vs US$24.31/oz yesterday

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

Base metals:

Copper US$ 8,421/t vs US$8,428/t yesterday

Aluminium US$ 2,170/t vs US$2,172/t yesterday

Nickel US$ 20,600/t vs US$20,730/t yesterday

Zinc US$ 2,440/t vs US$2,434/t yesterday

Lead US$ 2,183/t vs US$2,146/t yesterday

Tin US$ 25,355/t vs US$25,345/t yesterday

Energy:

Oil US$85.8/bbl vs US$84.4/bbl yesterday

• Oil prices improved on the back of the API reporting a large 11.5mb w/w draw (-2.9mb expected) in US crude inventories and market fretting as hurricane Idalia moves over the Gulf of Mexico towards landfall in Florida.
• European energy prices edged lower after Australian unions said their members would be participating in rolling stoppages, bans and limitations at Chevron’s LNG facilities from 7^th September, rather than an outright walkout.

Natural Gas US$2.668/mmbtu vs US$2.558/mmbtu yesterday

Uranium UXC US$58.25/lb vs US$58.25/lb yesterday

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$112.9/t vs US$112.7/t

Chinese steel rebar 25mm US$533.5/t vs US$512.1/t

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

Thermal coal swap Australia FOB US$161.3/t vs US$159.0/t

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

Other:  

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

NdPr Rare Earth Oxide (China) US$68,570/t vs US$68,606/t

Lithium carbonate 99% (China) US$27,085/t vs US$27,648/t

China Spodumene Li2O 6%min CIF US$3,010/t vs US$3,040/t

Ferro-Manganese European Mn78% min US$1,049/t vs US$1,045/t

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

China Graphite Flake -194 FOB US$667/t vs US$667/t

Europe Vanadium Pentoxide 98% 7.4/lb vs US$7.5/lb

Europe Ferro-Vanadium 80% 31.55/kg vs US$31.75/kg

China Ilmenite Concentrate TiO2 US$309/t vs US$309/t

Spot CO2 Emissions EUA Price US$92.1/t vs US$93.5/t

Brazil Potash CFR Granular Spot US$355.0/t vs US$355.0/t

Battery News

Vietnamese EV car maker, VinFast jumps to third-largest capitalisation of any auto manufacturer

• The VinFast IPO hit the streets on 15 August and has since risen to US$190bn
• VinFast delivered 11,300 vehicles in H1 vs Tesla which delivered 889,000 and BYD which delivered 1.26m
• The automaker expects to sell 50,000 EVs this year compared to Tesla’s 1.8m projection and Toyota’s 1.5m per year by 2026.
• VinFast started construction on a new US$4bn factory in North Carolina in July aiming for production from 2025 of 150,000pa vehicles.

Paris to be e-scooter free from Friday

• Paris will become one of the only cities in Europe with an outright ban on rented e-scooters this week.
• A referendum held in April gave Parisians the choice about rental e-scooters in the city – 90% of Parisians voted against them.
• Despite previously expressing hopes for a last-minute reprieve, the three firms with e-scooter operating licenses in the French capital, Lime, Dott and Tier, will have removed their scooters, by the 1^st September deadline.

Company News

Alien Metals (UFO LN) – 0.17p, Mkt cap £10.5m – Crushing and screening contractor for the Hancock Iron Ore project

• Alien Metals reports that its’ wholly-owned Iron Ore Company of Australia (IOCA) has selected a crushing and screening contractor for its Hancock Iron Ore project, near Newman in the Pilbara region of WA.
• The selected contractor, Rapid Crushing, is described as “one of the largest, privately and independently owned crushing contractors in Australia … [and has] … previously worked with Pilbara Iron Ore giants, Fortescue Metals Group”.
• Today’s announcement says that crushing and screening has been secured “at a fixed price per tonne produced … and is consistent with the assumptions made by the Scoping Study to deliver a C1 cost of approximately US$60/t”.
• “The award of this contract remains subject to the completion of a positive Definitive Feasibility Study (“DFS”), approvals, funding and the Board making a final investment decision”.
• The company announced the start of its DFS work earlier this month.
• The company’s website describes a JORC compliant resource of “9.1Mt @ 60.3% Fe DSO … [Direct Shipping Ore] … of which 1.9Mt @ 60.2% Fe is the Maiden Ore Reserve”.  7.4mt of the resource is classified as ‘Inferred’ at an average grade of 60.1% iron with the remaining 1.7mt, at a grade of 61.0% iron, classed as ‘Indicated’.
• We comment that, with the DFS work only just started and with around 80% of the mineral resource still only at the JORC ‘Inferred’ level, Alien Metals will need to complete additional drilling and resource assessment work as part of its DFS suggesting that the investment decision may not yet be imminent.
• Mining is planned at a rate of 1.2mtpa although this “is likely to be extended given ~80-% of tenement is unexplored” and capital requirements are expected to be ~US$20m.
• The company’s website also describes the project as having “a near 1:1 strip ratio and minimal processing requirements”.

Anglo American (AAL LN) 2,112p, Mkt Cap £28bn –Continuing caution among rough diamond purchasers at De Beers seventh sales cycle

• Anglo American reports that, provisionally, the seventh De Beers sales cycle of 2023 realised US$370m and that the previously reported provisional sales of US$410m for the sixth sales cycle have now been confirmed as US$411m.
• The outcome of the seventh sales cycle brings the year-to-date sales to approximately US$3.2bn, which we estimate is around 27% lower than the US$4.4bn of sales achieved during the first seven sales cycles of 2022 and, we believe, the lowest level at this stage of the year since 2019 (US$2.9bn).
• Al Cook, CEO of the De Beers Group, commented that the “prevailing economic environment … [had led to] … softer end client demand for diamond jewellery in key consumer markets, and the traditionally lower levels of midstream trading during the summer period, Sightholders continued to take a prudent approach to their purchasing during the seventh sales cycle of the year”.

Bradda Head (BHL LN) 3.8p, Mkt Cap £15m – Ian Stalker steps in as interim CEO at Bradda Head

• Bradda Head Lithium Limited reports the resignation of Charles FitzRoy as CEO and board director.
• Ian Stalker, the current Chairman will also assume the role of interim CEO.
• Fitzroy oversaw the Bradda Head IPO and the raising of £10m in fresh equity-capital in Spring of 2022 alongside US$8m in royalties with US$24m raised towards the progression of assets within Bradda Head’s portfolio of lithium assets.

Conclusion:  Bradda Head have a disparate set of lithium bearing assets.

It is possible that the lithium-in-clay assets in Arizona might prove to have some worth with recent grades of 88.7m @ 903ppm Li and 75m @ 983ppm Li.

It is possible the lithium-bearing brines in Nevada might also come good but in the current market environment most lithium processors are looking for Spodumene SC5 to SC6 concentrates.

Yes, Bradda Head report some spodumene in the rock at San Domingo in Arizona but the company looks to be a long way off proving a mineable resource due to the relatively short / skinny lithium-bearing intersections.

Eramet SA (ERA FP) €60, Mkt Cap €1.75bn – Suspension of operations in Gabon as coup concerns intensify

• Eramet has told Reuters that it has suspended operations at Comilog and, with the Setrag train transport also suspended.
• Eramet is the world’s largest producer of high-grade manganese ore on the back of its Moanda mine in Gabon.
• The coup in Gabon has intensified, with military officials announcing on live television that they had taken control following the electoral victory of sitting president Ali Bongo.
• Moanda is the world’s largest manganese mine.

Firering Strategic Minerals (FSG LN) 7.6p, Mkt Cap £6.5m – Successful commissioning at Zambian Lime Plant

• Firering announces the successful commissioning of the crushing system at the Zambian Lime plant owned by Limeco.
• The commissioning of the crushing system will enable the production of aggregates, alongside the finalisation of design work before the commissioning of the lime kilns.
• Firering has an option to acquire 28.33% of Limeco, with the project expected to deliver cashflow over the next 12-24 months.
• The crushing system has a throughput of 500tpha of limestone.
• First aggregate sales are expected shortly, with production expected to ramp up too.
• Limeco has a 250kt stockpile of wast rock available for aggregate production.
• As regards the kilns, final design work has been completed for eight kilns.
• First two kilns are expected to be commissioned next quarter.
• There are 150kt of limestone stockpiles for quicklime production, with the quarry supporting this with an in-situ resource of 74mt @ 95.3% CaCO3.

Premier African Minerals (PREM LN) 0.45p, Mkt Cap £105m – Additional conditional funding from Canmax

• Premier African Minerals has announced that its largest shareholder, Canmax, has conditionally agreed to subscribe for a further £5m shares at a price of 0.35p/share to help fund “the ongoing Zulu Lithium and Tantalum Project … Pilot Optimisation where the Company is targeting revenue generating production by November 2023”.
• The transaction is conditional on “written confirmation that Canmax has received all applicable outbound direct investment approvals and/or registrations from and/or with competent Chinese administrative authorities with respect to the Subscription” within 15 business days.
• “Canmax… is listed on the Shenzhen Stock Exchange …with a market capitalisation of ¥22.9 Billion (£2.1billion)”.
• Proceeds of the recent fundings will be used to “support the ongoing optimisation of the plant at Zulu … [as well as ] … to meet the costs associated both with the interim mill installation that is expected to see production at 1,000 ton per month of spodumene from November 2023, the installation of a thickener and larger ball mill that is expected to see the plant achieve design throughput from Q1 2024”.
• The release today follows the announcement, last week, of a £4m placing, also priced at 0.35p/share and disclosure that contractors had agreed to “collectively accept payment of a limited number of future invoices until the end of December 2023” in shares.
• If it proceeds, the subscription announced today takes Canmax’s interest in the company to 17.4%.
• Canmax holds offtake rights for production from the Zulu lithium project where, earlier this year, completion of a 40tph pilot plant suffered construction delays and was reported to require modifications to achieve its design performance.

Conclusion: Additional funding, provided by Premier African Minerals’ largest shareholder and offtake partner is intended to help the delayed Zulu lithium project achieve its design throughput by Q1 2024.

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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