SP Angel Morning View -Today’s Market View, 11th October 2023

Gold prices gain on increased expectations of the Fed pausing rate hikes

MiFID II exempt information – see disclaimer below

Amaroq Minerals (AMRQ LN) 57p, Mkt Cap £150m – Drilling results from Nalunaq project in Greenland

GreenRoc Mining* (GROC LN) 3.6p, Mkt Cap £5.2m – GreenRoc appoints new independent NED. Jim Wynn steps down as FD

Power Metal Resources* (POW LN) 0.68p, Mkt cap £14m – Uranium update from Athabasca exploration

Sovereign Metals* (SVML LN) 21.45p, Mkt Cap £121m – Sovereign presentation highlights world-class credentials of Kasiya rutile and graphite rorject

Strategic Minerals* (SML LN) 0.17p, Mkt Cap £3.4m – MoU signed to promote Redmoor tungsten to the nuclear fusion industry

IGTV:  New lower lows in base metals keep coming – why? https://youtu.be/1KWgI2HTUGw?si=VlVfQtpW-mrI7slD

           Copper will still move up despite a gear shift down in carbon-zero targets  https://youtu.be/jbywf2hmEU8?si=yxJcwGiE1_V121Ok

VOX:  06/10/23:  https://audioboom.com/posts/8379837-john-meyer-on-diamond-price-weakness-petra-anglo-asian-bushveld-power-metal-resources

           29/09/23:  https://audioboom.com/posts/8375969-john-meyer-on-china-s-property-implosion-plus-atlantic-lithium-bushveld-sovereign-metals

*SP Angel almost invariably acts as nomad or broker or nomad and broker to companies mentioned in the above videos and podcasts. We speak more about these companies as we have a good understanding of their business and can talk with a greater degree of confidence. As ever, however, it should be noted that our views do not take into account the circumstances and needs of any particular investor or investor type. So enjoy the talks, but please do your own research, including other companies not mentioned by us but operating in the same areas, and get professional advice where appropriate.

Weak dollar lifts copper but Codelco lowers premiums on weak China demand

• Copper prices are holding steady over $8,000/t on a weaker dollar as US yields slide.
• However, Codelco is reportedly slashing premiums for Chinese buyers to $90/t, 36% below than this year. (Reuters)
• Analysts state that this was owing to weak demand in China and cheap shipping costs compared to Europe.
• The ICSG expects a 467kt surplus in 2024 as major projects in Peru and the DRC ramp up supply.
• However, copper remains fundamentally undersupplied over the longer term as the energy transition accelerates and grade decline and environmental concerns limit greenfield project development.

Gold strengthens as Fed officials anticipate end of hiking cycle, weighing on rates

• Spot gold prices have pushed above $1,865/oz this morning after the Dollar fell to a September 29 low.
• The US 10-year yield slid below 4.6% having hit 2007 lows of 4.85% last week.
• Sliding real yields, as inflation moderates, are expectated to fuel a rally in gold prices, supported by a risk premium on the back of rising middle eastern tensions.
• CPI data due tomorrow will be a key catalyst for gold prices following today’s PPI numbers.

Economics

US – Neel Kashkari, Minneapolis Fed President and a voting member on the FOMC, doubted that an increase in long term rates would lessen the need for further rate hikes, Bloomberg reports.

• It all depends upon drivers behind the move, he said.
• “It’s certainly possible that higher long-term yields may do some of the work for us in terms of bringing inflation back down,” Kashkari said Tuesday.
• “But if those higher long-term yields are higher because their expectations about what we’re going to do has changed, then we might actually need to follow through on their expectations in order to maintain those yields,” he added.
• Kashkari said he will need to see more economic evidence including inflation, labour numbers and wage data for him to be “comfortable that we’ve (the Fed) actually done enough”.
• Comments follow up on dovish rhetoric from other FOMC members suggesting that the recent increase in market yields may see the Fed pause further monetary tightening decisions.
• Fed Vice Chair Philip Jefferson on Monday said that he would “remain cognizant of the tightening in financial conditions through higher bond yields” in assessing “the future path of policy.”
• San Francisco President Mary Daly, a non voting FOMC member, also said earlier that a recent rise in bond yields may mean the central bank “doesn’t have to do as much”.
• 10 year yields hit the highest level since mid 2000s of 4.8% earlier this month before pulling back since then and currently hovering around 4.5-4.6%.

UK – Starting salaries for temporary workers climbed at the weakest pace in two and a half years in September in a sign of a cooling labour market, according to a survey from KPMG and the Recruitment and Employment Confederation.

• A slowdown in the pay was attributed to successive interest rate hikes by the Bank of England to tame inflation.

Argentina – Black market currency exchange rate hit a record 1,040 pesos per dollar as Argentines rushed to buy the US$ before the October 22 presidential elections, Bloomberg writes.

• The rate, called locally as the “dollar blue”, was almost half that level as early as July and traded around 800 only last week.
• Javier Milei, a frontrunner in coming elections, advocated for the dollarisation of the economy and recommended Argentines save in the US$.
• Separately, Sergio Massa, an Economy Minister and the incumbent party’s presidential candidate, proposed to cut taxes and increase government spending in an effort to win more votes.

Israel – The country mobilised 300k reservists ahead of a ground operation in Gaza with death toll rising to more than 2k people in Israel and Palestine.

Argentina – The government is planning to finalise details on a potential increase in lithium taxes by October 30, the West Australian reports.

• Governors of nation’s major lithium provinces including Jujuy, Salta and Catamarca met in September with federal Mining Undersecretary Fernanda Avila to discuss the measures.

Currencies

US$1.0609/eur vs 1.0558/eur previous. Yen 148.85/$ vs 149.05/$. SAr 18.943/$ vs 19.305/$. $1.228/gbp vs $1.222/gbp. 0.642/aud vs 0.640/aud. CNY 7.299/$ vs 7.295/$.

Dollar Index 105.78 vs 106.23 previous.

Commodity News

Precious metals:

Gold US$1,864/oz vs US$1,857/oz previous

Gold ETFs 87.0moz vs 87.0moz previous

Platinum US$892/oz vs US$889/oz previous

Palladium US$1,185/oz vs US$1,144/oz previous

Silver US$22.00/oz vs US$22/oz previous

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

Base metals:

Copper US$ 8,113/t vs US$8,018/t previous

Aluminium US$ 2,225/t vs US$2,232/t previous

Nickel US$ 18,625/t vs US$18,835/t previous

Zinc US$ 2,487/t vs US$2,460/t previous

Lead US$ 2,112/t vs US$2,107/t previous

Tin US$ 24,805/t vs US$24,745/t previous

Energy:

Oil US$88.2/bbl vs US$87.2/bbl previous

Natural Gas €46.450/MWh vs €47.000/MWh previous

Uranium UXC US$72.75/lb vs US$72.75/lb previous

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$111.5/t vs US$111.2/t

Chinese steel rebar 25mm US$540.5/t vs US$541.2/t

Thermal coal (1st year forward cif ARA) US$129.0/t vs US$124.3/t

Thermal coal swap Australia FOB US$148.0/t vs US$141.5/t

Coking coal swap Australia FOB US$321.0/t vs US$321.0/t

Other:  

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

NdPr Rare Earth Oxide (China) US$72,884/t vs US$73,032/t

Lithium carbonate 99% (China) US$21,029/t vs US$21,052/t

China Spodumene Li2O 6%min CIF US$2,230/t vs US$2,230/t

Ferro-Manganese European Mn78% min US$1,029/t vs US$1,024/t

China Tungsten APT 88.5% FOB US$300/mtu vs US$305/mtu

China Graphite Flake -194 FOB US$645/t vs US$645/t

Europe Vanadium Pentoxide 98% 6.6/lb vs US$6.6/lb

Europe Ferro-Vanadium 80% 29.25/kg vs US$29.25/kg

China Ilmenite Concentrate TiO2 US$316/t vs US$316/t

Spot CO2 Emissions EUA Price US$84.2/t vs US$83.8/t

Brazil Potash CFR Granular Spot US$345.0/t vs US$345.0/t

Battery News

Mercedes-Benz reports strong growth in EV sales in Q3

• The company sold 61,600 battery electric vehicles in Q3, a 66% increase YoY, and 3,700 EQS SUVs, up 162% YoY.
• Mercedes-Benz nearly doubled its passenger car EV sales in the first nine months of the year.
• Overall sales slightly decreased by 4% to 510,600 units in Q3, mainly due to decreased sales of top-end products (down 11% to 69,900 units).
• Sales in China remained robust, with the G-Class and Mercedes-Maybach setting new records, increasing by 35% and 30% respectively.
• The S-Class also showed strong performance in the Chinese market with a 9% growth and a market share of over 50% within its segment. However, globally, S-Class sales declined by 18% in Q3.

Commercially available ‘flying-car’ will be on sale soon

• Pivotal, formerly known as Opener, has developed Helix, a single-seat electrically powered vertical-take-off-and-landing (eVTOL) aircraft.
• Helix is designed for personal use and can be piloted without a pilot’s license over non-built-up areas in compliance with the US’ microlight aircraft rules.
• Priced at $190,000, Helix is set to be available for orders next year, with deliveries starting in June.
• Helix has a top speed of 100 kph and a range of 30 km. Charging takes 4½ hours from the mains but can be reduced to 75 minutes with a high-power system.
• While not reaching Jetsons-level futuristic capabilities, Helix represents a step toward personal aerial mobility.

Indonesia at crossroads as it weighs up EV industry direction

• ASEAN nations are competing in the growing EV industry, with Thailand, Malaysia, and Vietnam making strategic investments in EV infrastructure and research.
• Indonesia has introduced tax incentives, reduced import tariffs on EV components, and streamlined regulations to boost its EV sector.
• Its success in the EV sector could set an example for other developing nations, but it requires balancing economic progress with responsible resource management.
• Indonesians have held reservations about personal EV use due to high costs and sparse infrastructure, but there has been growing interest in EVs for public transport.
• Indonesia’s abundance of nickel reserves positions it as a key player in battery production, with approximately 25% of the world’s nickel reserves within its borders.
• Challenges include environmental issues and labour disputes related to nickel mining, questions about aligning EV ambitions with renewable energy transition, and the need for nationwide EV policies and infrastructure.

Tesla Cybertruck fetches $400k at auction

• A low-VIN 2024 Tesla Cybertruck has been sold at auction for $400,000.
• The event allowed participants to bid for the vehicle, with speculations high due to the event’s exclusive nature, costing $1,750 per person.
• Despite the high bid, the Cybertruck’s price was considerably lower than other notable EVs auctioned for charity, such as the GMC Hummer EV pickup truck that sold for $2.5m and the GMC Hummer EV SUV that sold for $500,000.
• It’s unclear if the auctioned Cybertruck was VIN 001, as Tesla only described it as a “low-VIN” unit. Tesla CEO Elon Musk has been known to keep some VIN 001 vehicles in the past.

Groundbreaking motor could revolutionise EV manufacturing

• A motor developed last year, by a 17-year-old from Florida, could reduce the need for rare-earth minerals for EV engines.
• Robert Sansone developed a modified synchronous reluctance motor, which doesn’t rely on rare-earth materials but traditionally lacked power for EVs.
• Traditional motors use magnets on the rotor, while synchronous reluctance motors use a steel rotor and air gaps to generate torque without magnets.
• Sansone’s innovation involves adding a magnetic field to the motor, which significantly boosts torque production.
• His 15th prototype proved successful, delivering 39% greater torque and 31% greater efficiency at 300 RPM.
• Rare-earth materials are costly and environmentally harmful due to difficult extraction methods, while copper is a more sustainable and affordable alternative.

VinFast reports $623 million net loss despite EV sales of $342 million

• VinFast, the Vietnamese EV maker, reported a net loss of $623 million in Q3 2023, a 33.7% increase compared to the same period in 2022 and 19.7% higher than Q2 2023 losses.
• Despite the losses, VinFast recorded a total revenue of $342 million for the end of September 2023, marking a 159.3% increase from September 2022 and a 3.8% rise from Q2 2023.
• Most of the revenue came from EV sales, with VinFast delivering over 10,000 vehicles in Q3 2023 and experiencing increased sales in North America, particularly in Canada.
• VinFast fell short of its goal to deliver 50,000 cars in 2023, selling only 21,000 vehicles as of September.
• The company made its Nasdaq debut in August, initially valued as much as Ford and GM combined. However, its stock dropped by 36.7% after releasing 46 million ordinary shares that were previously locked up.
• In addition to EVs, VinFast sold 28,220 e-scooters in Q3 2023, an increase from 18,000 in Q2 2023.

VW to build €1.7bn battery factory in Poland

• The €1.7 billion facility will produce cathode active materials or EV batteries and will be located in the southwestern town of Nysa.
• Construction of the planned new factory will begin as soon as relevant permits are obtained and the plant is expected to create around 900 new jobs.
• Poland still relies on coal to produce around 70% of its electricity, by far the highest figure in the European Union.
• The government has ambitious plans to produce 75% of power from renewables and nuclear by 2040.
• “We are pleased that this is an investment supporting Poland’s sustainable economic and energy transformation towards zero emissions,” Development Minister Walderma Buda said.

Texas implements $200 annual surcharge for EV owners

• EV owners in Texas are now required to pay a $200 annual surcharge, enforced from 1^st September, to compensate for lost revenue from gas taxes.
• The fee contributes to road construction and repairs, addressing the decline in funding due to the increasing popularity of EVs
• New EV owners in Texas must pay an upfront fee of $400, covering two years of registration before hitting the road.
• Texas lost an estimated $200 yearly in federal and state taxes on gas for every gas-fueled vehicle replaced by an electric one.
• The fee is expected to generate at least $38m in revenue and is implemented in 33 states, with varying charges ranging from $50 (Colorado, South Dakota, Hawaii) to $255 (Washington).

Company News

Amaroq Minerals (AMRQ LN) 57p, Mkt Cap £150m – Drilling results from Nalunaq project in Greenland

(Formerly AEX Gold (AEXG LN))

• Amaroq reports drilling results from its Nalunaq project in Southern Greenland.
• Results include:
  • NAL2301: 0.35m @ 0.64g/t from 246m
  • NAL2302: 0.5m @ 2.45g/t from 209m
  • NAL2303: 0.91m @ 1.34g/t from 241m
  • NAL2305: 0.46m @ 182g/t from 240m
• Amaroq sees the high grade intercept as an extension of the high-grade zone currently sitting within the mine plan.
• The company is progressing their targets of ‘expanding our Mineral Resource at Nalunaq toward 1moz.’
• The programme consisted of 1.7km worth of diamond core drilling over 6 drill holes, intended to test the Mountain Block grade up-dip.
• Gold grades at Nalunaq go as high as 5,240g/t. It was previously mined in 2004-2013 for c.360koz.
• It holds an exploration target of 2moz Au and a CIM MRE of 355kt @ 28g/t for 230koz.

GreenRoc Mining* (GROC LN) 3.58p, Mkt Cap £5.2m – GreenRoc appoints new independent NED. Jim Wynn steps down as FD

• GreenRoc Mining has appointed Andrew Panteli as a new independent Non-Executive Director.
• GreenRoc has also appointed Ben Proffitt of Silvertree Partners to its senior management team to oversee the accounts.
• The departure of Jim Wynn is a significant loss which will be difficult to make up with an outsourced finance group.
• Wynn has decided to focus on his full time role as Finance Director at Emmerson PLC which is developing the Khemisset Potash project in Morocco.
• GreenRoc recently reported the award of a ~£250,000 grant from the UK Automotive Transformation Fund for Feasibility Study work towards a UK graphite spheronisation process plant for active Li-ion anode material.
• We look forward to details of the forthcoming PEA on the Amitsoq project .

*SP Angel acts as broker to GreenRoc Mining

Power Metal Resources* (POW LN) 0.68p, Mkt cap £14m – Uranium update from Athabasca exploration

• Power Metal Resources provides an update on its Uranium Portfolio in the Athabasca Basin.
• Radon gas sampling has been completed at Tait Hill and Soaring Bay, with Tait Ill bearing showing similarities to the Rossing Uranium Deposit in Namibia.
• POW now sees the Tait Hill as a ‘large target for future exploration.’
• Soaring Bay showed elevated radon results over a 3km zone, noting that three targets showed ‘very high’ radon results.
• Additional geochemistry has been undertaken at Tait Hill and Soaring Bay, alongside the recently discovered Perch River helium anomaly.
• Assay results are now due for the three projects mentioned above.
• The Company is also completing drone based magnetic geophysics surveys over the Clearwater, E-12 and Cook Lake projects.

Conclusion: Power Metal continues its busy exploration programme in the Athabasca Basin and has now generated a number of prospective uranium targets through geochemistry and satellite remote sensing.

*SP Angel acts as Nomad and Broker for Power Metal Resources

Sovereign Metals* (SVML LN) 21.45p, Mkt Cap £121m – Sovereign presentation highlights world-class credentials of Kasiya rutile and graphite rorject

• Sovereign Metals report the publication of a new presentation detailing results from the new Kasiya Pre-Feasibility Study.
• The presentation highlights the production of two significant revenue streams from the Kasiya project.
• Rio Tinto jv brings funding as well as expertise from the world’s largest Titanium slag producer with output of 1.2mtpa of titanium dioxide last year.
• Rutile prices are expected to rise next year as global rutile production falls with no other new rutile mines approved to our knowledge.  (Base’s Toliara project appears to be on indefinite hold)
• Synthetic rutile involves the generation of >30 times as much CO2 generation as rutile from Kasiya making this an environmentally beneficial and preferential mine from a global warming perspective.
• Rio Tinto recently set up a new Battery Minerals Division in 2021 with a new end-to-end battery lab due to become operational in November.
• Rios has a number of MoUs with major OEMs driving its interest in the battery materials space.
• Sovereign stress strong support from the government of Malawi which is committed to focussing on agriculture, tourism and mining.
• Kasiya should be the world’s lowest cost rutile producer in the mineral sands sector by some margin particularly when including co-product credits from graphite sales.
• The project also has the potential to become the world’s lowest cost graphite project due to the simplicity of recovering the graphite while mining the rutile.
• Management are investigating the use of low-cost ‘hydro’ mining using high-pressure water hoses to wash down the rutile and graphite from the sedimentary formation.
• The current plan is to wash some 12mtpa of ore from four pits to an average depth of 15m. The production throughput rate should then double to 24mtpa in stage 2.
• The company are looking at developing large scale renewable power for the mine with 96.6% power generation from solar and hydro.
• Cash position £24m (A$46m).
  • http://sovereignmetals.com.au/company-presentations/

*SP Angel act as Nomad and broker to Sovereign Metals. Investors should note, there is still much to know about the Kasiya Rutile-graphite deposit and while Rio Tinto’s confidence in the project is a major step forward in de-risking the project it is not a complete cast-iron guarantee of success.

Strategic Minerals* (SML LN) 0.13p, Mkt Cap £3.6m – MoU signed to promote Redmoor tungsten to the nuclear fusion industry

• Strategic Minerals reports the signing of a Memorandum of Understanding with Oxford Sigma and SML’s subsidiary Cornwall Resources.
• Oxford Sigma is a nuclear fusion technology company from the UK.
• The MoU will explore options for collaboration, exploration, development, promotion of tungsten to the fusion industry.
• 90% of global tungsten supply is dominated by three actors: China, Vietnam and Russia.
• Tungsten is considered crucial to fusion energy owing to its use as in radiation shielding.
• Fusion energy requires an ample supply of tungsten, with the Company suggesting each fusion reactor requires between 100-5,000t of tungsten.
• Redmoor has a 4.5mt MRE @ 0.37% WO3 in the inferred category.
• The MoU has been signed for an initial 5-year period.

Conclusion: Today’s announcement marks a major development for Strategic Minerals. The opportunity to tap into the nuclear fusion industry through an MoU with Oxford Sigma is an exciting one given the current supply/demand dynamics of tungsten and the improving sentiment towards mining in Cornwall.

*SP Angel acts as Nomad and Broker to Strategic Minerals

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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