SP Angel Morning View -Today’s Market View, Tuesday 14th November 2023

Base Metals climb on reports of US$157bn construction stimulus in China

MiFID II exempt information – see disclaimer below

Atalaya Mining (ATYM LN) – Change of corporate domicile to Spain

Atlantic Lithium* (ALL LN) – Two new licenses granted close to Egyasimanku Hill spodumene pegmatite occurrence

Caledonia Mining (CMCL LN) – Maintaining 2023 production guidance and cutting cash outflows for Bilboes oxide operation as feasibility work completed for the sulphides

Calibre Mining (CXB CN) – Acquisition of Marathon to further diversify Calibre production base

Marathon Gold (MOZ CN)

Geothermal Engineering Ltd (Private) – Plans for UK’s first geothermal energy plant

Greatland Gold (GGP LN) – Start of drilling at the Ernest Giles project, WA

Great Western Mining* (GWMO LN) – Mill construction nears completion

Glencore (GLEN LN) – Acquisition of 77% of Teck’s steelmaking coal business at $6.93bn

Horizonte Minerals (HZM LN) – Cutting back Araguaia construction work to preserve cash as financing discussions continue

Kodal Minerals* (KOD LN) – Bougouni lithium resource rises 40% to 31.9mt grading 1.06% Li₂O

Iron ore rally cools as construction pessimism resurfaces on seasonal slowdown

• Iron ore prices are hovering around $127/t following a sharp move higher.
• Singapore futures have cooled slightly following new home sales data across major Chinese cities.
• Steel mills are continuing to run hot, although analysts are suggesting that inventories are now well stocked following a jump in output.
• Brazilian iron ore exports hit 1.75mtpd last week, vs 1.66mtpd same period last year.
• Steel prices have cooled slightly.
• We note Bloomberg’s report that China is considering $137bn in new funding to support the bedraggled property market. This may be the reason for iron ore’s recent surge.
• The report suggests that funds will be fed through banks to support households with home purchases.
• It is important to remember the reason for Xi’s efforts to reduce leverage in the construction sector with his three red lines policy was a result of a decade of speculative overbuilding, with China well-stocked with apartments.

Trafigura sees share price rise 188% as volatility reaps benefits

• Bloomberg reports Trafigura shares are up 188% on booming profits.
• Volatile energy prices in particular are supporting the trading house’s success.
• Trafigura buys back shares from employees as the primary form of remuneration.
• Trafigura paid out $3bn in H1 to employee shareholders.
• The windfall comes despite a struggling metals business, with top copper trader departing last week.

Gold jumps as US Treasury yields continue to whipsaw before CPI

• Gold prices jumped from recent lows yesterday of $1,930/oz to $1,947/oz today.
• The move followed a minor rally in US Treasuries, with 10-year yields touching 4.69% before rallying towards 4.6%.
• Key data today includes the US CPI drop, where shelter inflation is expected to cool whilst healthcare components are expected to add some upwards pressure.
• NFIB small business surveys are also due, with both gold and bond watchers keeping an eye on employers’ current sentiments to gauge the perplexing labour market.
• Gold’s war premium seems to be fading as Biden and Xi meet in San Francisco, providing hope of a cooling of China-US geopolitical tensions.

Economics

US – Inflation numbers will be watched closely this afternoon to assess outlook for Fed monetary policy.

• Estimates for inflation to slowdown to pullback to 0.1%mom/3.3%yoy in October, down from 0.4%/3.7% recorded the previous month.
• Core inflation is expected to stay put at 0.3%mom/4.1%yoy.

China – Credit growth slowed down considerably in October led by private sector.

• Weak borrowing demand from corporates highlights struggling economic conditions as companies are unwilling to commit to business investments, Blomberg reports.
• The data also highlighted continuing challenges in the property market with household loans down for the third consecutive month.
• Aggregate Financing (CNY bn): 1,850 v 4,123 September and 1,950 est.
• New Yuan Loans (CNY bn): 738 v 2,312 September and 655 est.
• M2 Money Supply (%yoy): 10.3 v 10.3 September and 10.3 est.

China launches world’s fastest internet at 1.2 terabit per second

• This is the equivalent of 150 Bolywood films a second and is three times faster than the fastest connection in the US.
• Queston is, will the censors behind the Great Chinese Firewall be able to keep pace with the rate of data transfer.

Germany

• ZEW Survey Expectations: 9.8 v -1.1 October and 5.0 est.
• ZEW Survey Current Situation: -79.8 v -79.9 October and -77.0 est.

UK – Pound is trading slightly higher this morning after payroll numbers showed a surprising increase in employment in October.

• Although, growth in core labour earnings (ex bonus) pulled back slightly, in line with estimates.
• Quarterly September numbers showed jobless rate remained unchanged at 4.2% from the previous month.
• Payrolled Employees Change (‘000): 33 v 32 September (revised from -11) and -17 est.
• 3m Weekly Earnings ex Bonus (%yoy): 7.7 v 7.9 September (revised from 7.8) and 7.7 est.

Portugal – The judge ordered all five people detained under corruption charges to be released including former PM chief of staff and a business consultant to former PM.

• Corruption and malfeasance charges were dropped leaving only accusations of influence peddling by public officials.
• Former Infrastructure Minister, Joao Galamba, and head of the environmental agency APA, Nuno Lacasta, who were named as formal suspects but were not detained previously are yet to appear before a court, Reuters reports.

Currencies

US$1.0701/eur vs 1.0692/eur previous. Yen 151.68/$ vs 151.85/$. SAr 18.738/$ vs 18.702/$. $1.229/gbp vs $1.224/gbp. 0.636/aud vs 0.637/aud. CNY 7.294/$ vs 7.294/$.

Dollar Index 105.62 vs 105.82 previous.

Commodity News

Precious metals:

Gold US$1,945/oz vs US$1,938/oz previous

Gold ETFs 87.0moz vs 87.1moz previous

Platinum US$872/oz vs US$849/oz previous

Palladium US$982/oz vs US$967/oz previous

Silver US$22.34/oz vs US$22/oz previous

Rhodium US$4,300/oz vs US$4,400/oz previous

Base metals:

Copper US$ 8,124/t vs US$8,107/t previous

Aluminium US$ 2,224/t vs US$2,212/t previous

Nickel US$ 17,195/t vs US$17,200/t previous

Zinc US$ 2,547/t vs US$2,564/t previous

Lead US$ 2,179/t vs US$2,186/t previous

Tin US$ 24,950/t vs US$25,100/t previous

Energy:

Oil US$82.7/bbl vs US$80.6/bbl previous

• Crude oil prices edged higher after the November OPEC Monthly Oil Report revised its world oil demand growth forecast for 2023 up marginally m/m to 2.5 mb/d, with non-OECD set to drive demand 2mb/d higher in 2024.
• Chevron has resumed gas production operations from the Tamar field in the Mediterranean Sea, which is located c.20km offshore from the Gaza Strip.
• Interactive Investor webcast: listen to SP Angel Energy analyst David Mirzai’s views on Commodity Prices and Energy Stocks

Natural Gas €47.300/MWh vs €46.000/MWh previous

Uranium UXC US$73.65/lb vs US$73.00/lb previous

Bulk:

Iron ore 62% Fe spot (cfr Tianjin) US$127.1/t vs US$126.5/t

Chinese steel rebar 25mm US$545.8/t vs US$544.6/t

Thermal coal (1st year forward cif ARA) US$110.5/t vs US$109.5/t

Thermal coal swap Australia FOB US$126.5/t vs US$130.0/t

Coking coal swap Australia FOB US$296.0/t vs US$296.0/t

Other:  

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

NdPr Rare Earth Oxide (China) US$69,965/t vs US$70,059/t

Lithium carbonate 99% (China) US$19,686/t v US$19,811/t

China Spodumene Li2O 6%min CIF US$1,760/t vs US$1,760/t

Ferro-Manganese European Mn78% min US$1,030/t vs US$1,030/t

China Tungsten APT 88.5% FOB US$295/mtu vs US$295/mtu

China Graphite Flake -194 FOB US$625/t vs US$625/t

Europe Vanadium Pentoxide 98% 6.2/lb vs US$6.2/lb

Europe Ferro-Vanadium 80% 26.25/kg vs US$26.25/kg

China Ilmenite Concentrate TiO2 US$311/t vs US$312/t

Spot CO2 Emissions EUA Price US$81.5/t vs US$81.4/t

Brazil Potash CFR Granular Spot US$337.5/t vs US$337.5/t

EV & Battery news

EV adoption in India on the rise

• EV sales in India grew 157% from FY2022 to FY2023
• The sharp increase has been encouraged by an increase in the number of models available in the country.
• The bulk of the EV sector in India is driven by two-wheelers, but larger, more luxury EVs are becoming more popular in the market.
• Tata Motors currently dominates the passenger car market with a 68.8% share.
• EV market share is expected to reach 13% by 2030, with companies like VW, Kia and Range Rover all expected to enter the Indian market by 2025.
• India is very serious about becoming a large player in the global EV market and has plans to invite bids for a $960m incentive program for EV battery production.
• The program will require winning bidders to set up advanced chemistry battery plants with a total output of 20GWh.
• The battery push comes as India is looking to increase adoption of less polluting transport.
• Prime Minister Narendra Modi’s administration is considering reducing import taxes for battery-powered models to woo Tesla and other global EV leaders, the Financial Times reported Monday.
• India also launched a $3.1bn incentive program, in 2021, to boost local EV production.

US and Indonesia to discuss potential EV minerals deal

• Indonesian President Joko Widodo will meet US President Joe Biden at the White House to discuss how to advance a potential minerals partnership aimed at stimulating trade of nickel. (Reuters)
• Indonesia began discussions with the US for a trade deal for critical minerals so that exports from the Southeast Asian country can be covered under the US Inflation Reduction Act (IRA).
• The new IRA requires that a certain amount of critical minerals in EV batteries be produced or assembled in North America or a free trade partner.
• Indonesia does not currently have a free-trade agreement with the US.
• The only US nickel mine, Eagle Mine in Michigan, is set to close in a few years, and the country has no nickel smelter.
• The Biden administration is concerned about environmental, social and governance standards in Indonesia and is examining how a deal might work, according to sources familiar with the matter.

BMW – BMW opens investigation into Bou Azzer cobalt mine in the south of Morocco

• Allegations suggest the mine has released arsenic into the environment with dangerous levels detected in water samples from a valley near the mine.
• Mine operator Managem has rejected allegations of pollution and labour safety issues.
• Current and former employees at the mine have reportedly claimed that Managem was breaching international standards for protecting workers.
• BMW signed a €100m cobalt supply contract with Managem in 2020 valued which runs till 2025.
• The automaker will receive 20% of the cobalt it needs for its EV batteries from Managem under this deal.

Joby demonstrates air taxis in New York, targeting 2025 launch

• Joby Aviation carried out an exhibition flight in New York, the city’s first-ever electric air taxi flight and the first time Joby has flown in an urban setting.
• When launched, the electric air taxi could transport passengers from JFK to downtown Manhattan in around 7 minutes.
• The craft will recharge in about five minutes, while passengers are unloading and boarding.

Company News

Atalaya Mining (ATYM LN) 295p, Mkt Cap £415m – Change of corporate domicile to Spain

• Following yesterday’s announcement of its intention to move its listing from London’s AIM Market to the LSE’s Official List, Atalaya Mining reports that it will also “re-domicile the Company by transferring its registered office from the Republic of Cyprus to the Kingdom of Spain”.
• The company explains that “the-domiciliation is being proposed as the incorporation in Cyprus no longer reflects the Company’s geographic and strategic focus, and therefore represents a legacy structure for the Company”.
• Shareholders will be asked to approve the proposal at an EGM to be held on 12^th December.  The EGM will also be asked to approve a change of the company’s name from Atalaya plc “to Atalaya Mining Copper, S.A.”

Conclusion: The change of domicile and name reflect the Spanish focus of the company’s operations and should not be controversial.

Atlantic Lithium* (ALL LN) 20.6p, Mkt Cap £126m – Two new licenses granted close to Egyasimanku Hill spodumene pegmatite occurrence

(Ewoyaa Ownership: 40.5% Atlantic, 40.5% Piedmont, 6% MIIF Sovereign Wealth fund, 13% government of Ghana)

STRONG BUY

• Atlantic Lithium report the granting of two new licenses in the eastern portion of the Company’s Cape Coast Lithium Portfolio in Ghana
• The new licenses are next to the historic Egyasimanku Hill spodumene pegmatite occurrence and around 40km east of the Ewoyaa lithium mining license.
• The new Bewadze and Senya Beraku prospecting licences will give Atlantic’s geological team more spodumene occurrences to evaluate for lithium in spodumene.
• The license award highlights Ghana’s support for new lithium and by-product feldspar mining.
• The licenses host coarse pegmatites as identified in work done by the Ghana Geological Survey but have not been drilled and offer potential to add to the planned mine at Ewoyaa.
• The development of additional lithium-in-spodumene mines in Ghana increases the business case supporting the future development of a lithium smelter and refinery along the coast at the port of Takoradi.
• Any new smelter will likely benefit from feedstock from the flexibility of a number of discrete near-by mines, where feedstock should have similar metallurgical characteristics.
• The two licenses at Bewadze and Senya Beraku cover 6.93km2 and 82.11km2, respectively, they also lie under the high-voltage transmission line which runs parallel to the N1 Accra-Takoradi highway.
• This powerline will be moved as part of the Ewoyaa mine development.
• Atlantic’s team have identified soil geochemistry and airborne radiometrics over the Apam East licence and Mankwadzi application which highlight a coincident north-east trending rubidium in soils with potassium radiometrics anomaly that is indicative of fractionated granitoids and/or pegmatite trends.
• The radiometrics anomaly continues into the Bewadze licence indicating the prospective nature of Bewadze with the terrain is seen as prospective for potential extensions of the Egyasimanku Hill pegmatites.
• Spodumene crystals of 1cm to 15cm in disseminated sub-parallel banding at Egyasimanku Hill occur along the south-west boundary Bewadze.
• Atlantic does not anticipate releasing any assay results for Egyasimanku Hill till the Mankwadzi application, which hosts the Egyasimanku Hill pegmatite occurrence, is granted.
• Atlantic’s current resource at Ewoyaa stands at: 35.3Mt @ 1.25% Li2O Ewoyaa Mineral Resource Estimate1 (“MRE” or the “Resource”) in hole GDD0093.
• Cash and cash equivalents were A$10.565m at end September as a result of the expenditure.

*SP Angel acts as Nomad to Atlantic Lithium. Two mining analysts from SP Angel recently visited the Ewoyaa mine site in Ghana and drove onto Takoradi to check the quality of the road to port. Our analysts also visited the Ministry of Minerals Commission and MIIF, the Ghana Minerals Income Investment Fund.

Caledonia Mining (CMCL LN) 902.5p, Mkt Cap £172m – Maintaining 2023 production guidance and cutting cash outflows for Bilboes oxide operation as feasibility work completed for the sulphides

• Following record quarterly gold production of 21,772oz from its Blanket gold mine in Zimbabwe, Caledonia Mining reports revenues of US$41.2m for the quarter (Q3 2022 – US$35.8m) bringing YTD revenue to US$107.7m (2022 – US$107.9m) and gross profit of US$14.1m for the quarter (Q3 2022 – US$15.6m) and US$30.9m on a YTD basis (2022 – US$50.5m).
• EBITDA of 15.5m during the quarter is “2.5 per cent lower than the $15.9 million in the third quarter of 2022”.
• Caledonia Mining confirms that with Blanket’s gold production during the first nine months of 2023 at 55,244oz it is maintaining its 2023 guidance range of between 75-80,000oz.
• Increased on mine production costs of US$928/oz (Q3 2022 – US$734/oz) reflect “the high cost per ounce at the Bilboes oxide mine, which has subsequently been placed on care and maintenance. On-mine costs at Blanket were $817 per ounce, an 11.3 per cent increase from the comparative quarter with the increase being due to higher labour and electricity costs”.
• The impact of Bilboes, which produced 1,151oz of gold during the quarter is also reflected in group costs on an all-in-sustaining (AISC) basis which rose to US$1,268/oz during the quarter and Caledonia Mining explains that the decision to put Bilboes on care & maintenance generates “a substantial reduction in monthly costs from approximately $1 million to approximately $200,000. After taking account of revenues arising from the sale of gold that will be extracted from the heap leach, Bilboes is expected to operate on a break-even basis for the remainder of the year”.
• Acknowledging that the performance of the Bilboes oxide operation “has been a disappointment” CEO, Mark Learmonth explained that “In due course, the remaining oxide material will be mined and processed alongside the sulphide ore … [but he confirmed that this] … outcome has no bearing on the viability of the much larger sulphide project which was the reason for acquiring Bilboes”.
• He confirmed that the company is continuing to “work on a revised feasibility study for the sulphide project at Bilboes which will consider updated commercial assumptions and will inform the most judicious way to commercialise the project with the objective of providing the best returns for investors”.
• At Blanket, Caledonia Mining is continuing its deep drilling targeting the Eroica orebody aimed at “further upgrading inferred mineral resources, thereby extending the life of mine” has “yielded encouraging results”.
• Mr.Learmonth said that the drilling results “indicate that there is additional mineralisation that may, in due course, be accessed using the current infrastructure and which should further extend the life of mine … [with the results showing that] … the Eroica ore body has better grades and widths than expected”.”

Conclusion: Following a record quarterly production at the Blanket mine Caledonia Mining is maintaining its 2023 production guidance.  Placing the oxide operation at Bilboes on care and maintenance will cut the cash outflows while the company completed its feasibility work for the larger sulphide resource.

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

Calibre Mining (CXB CN) C$1.20, Mkt Cap C$537m – Acquisition of Marathon to further diversify Calibre production base

Marathon Gold (MOZ CN) C$0.70, Mkt Cap C$286m

• The Company announced a definitive arrangement agreement to acquire Marathon Gold Corporation in an all stock deal.
• Under the agreement, Calibre will issue 0.6164 shares for each Marathon share implying a C$0.84/sh paid consideration or 32% premium to previous close.
• The transaction value Marathon at C$345m on a fully diluted basis.
• Following the acquisition, Calibre and Marathon will own 66% and 34% of the combined company, respectively.
• The transaction is subject to shareholder approvals, although, both Boards unanimously recommend that shareholders vote in favour of the deal.
• The deal is also subject to a C$17.5m termination fee.
• Separately, Calibre agreed to subscribe for 66.7m new shares in Marathon at C$0.60/sh for gross proceeds of C$40m as part of the private placement taking its stake in Marathon to 14.2%.
• Marathon Gold owns 100% in the Valentine Lake Gold Project located in Newfoundland and Labrador, Canada.
• Based on Dec/22 Feasibility Study, the project is envisaged an a conventional open pita and a 4mtpa milling operation delivering 195kozpa over 12 year life of mine.
• Capex is estimated at ~C$530m (ex ~C$71 in sunk capital and including $66m expansion in Year 4 post commissioning) with AISC targeted at US$1,046/oz.
• The project delivers NPV5% and IRR (both post tax) of C$648 and 22.4% using US$1,700/oz gold price.
• First production is targeted for Q1/25.
• Mineral Reserves estimated at 51.6mt at 1.62g/t for 2.7moz.
• Mineral Resources are reported at 85.4mt at1.84g/t for 5.05moz.

Geothermal Engineering Ltd (Private) – Plans for UK’s first geothermal energy plant

• Geothermal Energy Limited is seeking to raise at total of £600m to develop the UK’s first geothermal energy plant in Cornwall.
• The company has already “secured financing to produce geothermal power … [at] … its flagship United Downs site in Cornwall … [and is now looking for an additional] … £100-200m of debt and equity … [to] … to produce geothermal power at two more locations in Cornwall” and to “produce at least 1,000 tonnes of lithium at its … United Downs site”.
• “The geothermal electricity will be produced by using hot water from deep underground to create steam that drives a turbine, creating clean power”.
• Longer term, £600m of investment is required to “develop a total of five geothermal power plants by 2030 … [providing] … a total capacity of 25 megawatts of electricity, 100 megawatt hours of heat and 12,000 tonnes of lithium — enough heat and power for 70,000 homes and 250,000 electric cars”.
• Ryan Law, founder and chief executive of Geothermal Engineering Ltd, said: “Power is our fundamental business and lithium is great to add in the process.’ The huge challenge for geothermal power — and producing lithium as a byproduct — is the massive expense of drilling so deep compared with other sources of power”.
• “The company aims to produce about 100 tonnes per year of lithium in late 2024, rising to 1,000 tonnes as early as 2026. The UK is estimated to need 80,000 tonnes of lithium by 2030 to support an electric car industry”.
• Mr. Law said that “the company was studying whether to source its technology to extract the lithium from the brine from Koch Industries, the second largest privately held US company, or from Puritech, the Belgium subsidiary of China’s Sunresin”.

Greatland Gold (GGP LN) 9.45p, Mkt Cap £473m – Start of drilling at the Ernest Giles project, WA

• Greatland Gold reports that it has started diamond drilling at the wholly owned Ernest Giles gold exploration project in the prolific Yilgarn Craton of Western Australia.
• Initial drilling work comprises two holes, jointly funded “by the Government of Western Australia’s Exploration Incentive Scheme (EIS) drilling grant for up to A$220,000 (£115,000)” at the Meadows prospect which is located approximately 250km northeast of Laverton.
• Explaining that it is drilling the first two “angled diamond holes and oriented core at Meadows, considered critical for the geological understanding of the project” Greatland Gold says that they build on previous work which “included a program of 62,800m spaced vertical RC drillholes, largely focused on the Meadows prospect, in addition to airborne magnetics and ground gravity surveys”.
• The first of the two planned holes will target “two mineralised zones within the previous vertical RC hole ERC011 which returned values +1g/t Au” while the second, hole “targets the interpreted syenite (intrusive granitoid) body intersected in ERC014 which returned 18m @ 0.11g/t Au”.
• In addition, the current drilling will test the down-dip continuity of previously identified mineralisation and provide “geological and structural information to understand the setting and nature of gold mineralisation”.
• The company says that “follow up RC drilling program will be designed utilising the knowledge gained from the current drilling, to systematically target the best results of all drilling at Meadows to date. This work will commence in the 2024 calendar year”.
• Welcoming the start of the drilling, Managing Director, Shaun Day, explained that the Ernest Giles project “sits within an underexplored greenstone belt located north of the world-class Tropicana and Gruyere gold operations … [and] … represents an excellent exploration opportunity for Greatland and our shareholders”.

Conclusion: We await results from the early stage exploration drilling at the Ernest Giles project with interest.

Great Western Mining* (GWMO LN) 0.04p, Mkt Cap £2.2m – Mill construction nears completion

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• Great Western provides an update on its mill construction progress as part of its 50/50 JV, Western Milling.
• The mill is being designed to process easily accessible mine waste from historical high-grade mines.
• The Company reports that the gravity terraces, ramps, access roads, lay down area and containment areas are complete.
• Hydrocyclones, spirals and shaker tables are currently being installed.
• The base for the rod mill is outstanding and the rod mill will be installed at the final stage of instalment.
• The Group has built a laboratory near site for rapid sample testing during processing.
• Power will initially be provided by a generator following the extension of the three-phase power line.
• A well has been drilled for water access and water tanks have been installed.
• The Group has signed a Surface Use Lease Agreement.
• Double and triple containment facilities have been built in anticipation of the second phase, leaching operations.
• The material will initially be trucked by 20t and 40t trucks, both rented initially, although the group holds an option to purchase these.
• As regards permitting, the NDEP permit has been delayed by bottlenecks within the Nevada State department, expected imminently after an extended delay.
• A standard BLM ground disturbance permit is required, similar to those granted for drilling, is expected to be approved following similar administrative backlogs.

Conclusion: The administrative delays within the Nevada state department have been a source of frustration for both the Company and its shareholders when sourcing the necessary permits. However, the delays are considered to be passed and permit approval is due imminently. In the meantime, management has made both smooth and cost-effective progress in the construction of the processing mill, with the majority of equipment installed or ready for installation. We echo Management’s comments that, whilst the processing of waste material will generate revenue, the long-term ambition of Great Western is to build on their prospective exploration assets in the prime jurisdiction of Mineral County, Nevada.

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

Glencore (GLEN LN) 442p, Mkt cap £55bn – Acquisition of 77% of Teck’s steelmaking coal business at $6.93bn

• Glencore has entered into a binding agreement with Teck Resources for the acquisition of a 77% interest in Teck’s Elk Valley Resources.
• Glencore is paying US$6.93bn in cash on a cash free, debt free basis.
• Nippon Steel Corporation will increase their interest in Elk Valley to a 20% equity stake.
• Posco will take a 3% interest in EVR.
• The deal values EVR at $9bn.
• Elk Valley Resources produced 21.5mt of met coal in 2022 for an EBITDA of C$7.4bn.
• The Group has produced 17.3mt as of 30^th September for an EBITDA of C$3.7bn.
• Glencore has doubled down on its commitment to demerge its combined coal business.
• The demerger is expected to take 24 months from close once Glencore has ‘sufficiently delivered.’

Conclusion: Teck’s logic in spinning off the assets is driven by the desire for a multiple rerate towards a pure-play base metal producer, with copper the primary focus. Elk Valley provided $849m of the total $1,157m in EBITDA for Q3 of this year. QB2 has faced substantial cost inflation over the years of its development, although Teck expects to generate gross profit from the asset this quarter. Teck will use the proceeds to deleverage its balance sheet, develop its copper assets and return cash to shareholders.

Horizonte Minerals (HZM LN) 9.75p, Mkt Cap £50m – Cutting back Araguaia construction work to preserve cash as financing discussions continue

• Horizonte Minerals, which reported in October that it expected a capital cost overrun of at least 35% on its current US$537m budget and a delay of around six months to initial production at its Araguaia ferronickel project in Brazil has announced that it continues working with its senior lenders and cornerstone shareholders to resolve the project’s finances.
• While the discussions continue the company plans to “reduce construction activities at Araguaia, advancing only critical work streams while maintaining a strong focus on safety”.
• The company confirms that “As of 10 November 2023, the Araguaia Project had total liquidity sources of US$169 million comprised of US$131 million undrawn on the Senior Debt Facility (subject to satisfying drawdown conditions) and a cash position of US$38 million which should provide sufficient working capital to around mid-December 2023”.
• Horizonte Minerals says that “unless there are positive outcomes from conversations with suppliers, other cash preserving measures, or other financing solutions, which if successful should provide sufficient working capital until late Q1 24”.
• The company says that during the last seven days it has “has hosted a series of site visits during the last 7 days with key shareholders and lenders representatives … [which] … are undertaking their respective due diligence as part of a funding plan and expect to finalise their respective internal diligence processes in early Q1 2024 with funding completion targeted for late Q1 2024”.
• CEO, Jeremy Martin, said that while the financing discussion continue, “we have elected to focus capital and human resources on the critical work packages. This work is planned is to ensure that we are well-positioned to resume full construction activities post receipt of the funding to benefit stakeholders and our community alike”.

Conclusion: Financing discussions are continuing following news of a likely capital cost overrun of at least 35% for the Araguaia Project, announced in October.  All non-essential work on site is to be cut to help preserve cash ahead of a possible financial solution during Q1 2024.

Kodal Minerals* (KOD LN) 0.7p, Mkt Cap £118m – Bougouni lithium resource rises 40% to 31.9mt grading 1.06% Li₂O

(Kodal / Hainan jv deal long-stop date to 30 September 2023)

• Kodal Minerals reports a meaningful adds 10.6mt increase to the previous lithium resource at Bougouni in southern Mali.
• Recent drilling and evaluation increases the resource by 40% to 31.9mt grading 1.06% Li₂O from the last 2019 estimate done on the Ngoualana and Boumou deposits
• Kodal is preparing a two-stage development of the Bougouni project:
  • Stage 1:  DMS ‘Dense Media Separation’ processing of ore from Ngoualana
  • Stage 2: Flotation processing of ore from Boumou and Sogola-Baoulé
• JORC MRE ‘Mineral Resource estimates’:
  • Boumou: 13.1mt at 1.04% Li2O, an increase of 236% from the 2019 estimate (Boumou Resource reported using a 0.75% Li2O lower cut-off, no top cut-off)
  • Ngoualana: 6.7mt at 1.00% Li2O, an increase of 9% from the 2019 estimate – (Ngoualana MRE reported using 0.5% Li2O lower cut-off, no top cut applied)
• The update also improves confidence in the resource at Ngoualana ahead of mining for DMS processing:
  • Sogola-Baoulé: 12.2Mt at 1.1% Li2O – unchanged but may expand on the next phase of drilling
  • Boumou: prospect remains open along strike with further extension drilling planned to start within weeks
  • Ngoualana: resource is undergoing open pit optimisation and the mine design for stage 1 DMS processing.

Conclusion: Its great to see the expansion of the Bougouni lithium mining project and further expansion potential. Investors are also waiting for news on the arrival of the $117.75m committed from Hainan Mining.

*SP Angel acts as financial advisor and broker to Kodal 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

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

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

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