SP Angel Morning View -Today’s Market View, Thursday 30th November 2023

China Steel PMI recovering as construction sectors looks for fresh stimulus

MiFID II exempt information – see disclaimer below

Arkle Resources* (ARK LN) – Drilling for gold begins at Inishowen Project

Ariana Resources (AAU LN) – Drilling update from Salinbas

Atlantic Lithium* (ALL LN) – AGM Statement summary

Bushveld Minerals* (BMN LN) – Equity raise

Endeavour Mining (EDV LN) – Upgraded MRE at Tanda-Iguela Project to 4.5moz

Greatland Gold (GGP LN) – Nickel exploration potential at Panorama project, WA

Mkango Resources* (MKA LN) – Q3 operational and earnings results

Serabi Gold (SRB LN) – Nine month profit on higher production, lower costs and improved prices

Tertiary Minerals* (TYM LN) – BUY – Zambia update and new presentation as JV agreement progresses alongside drill target identification

Lithium prices continue to slide as Chinese speculators ramp up shorts in Guangzhou

• Lithium carbonate prices slid to $15,000/t overnight, whilst spodumene prices inched lower to $1,480/t.
• Additional supply has come online as end-user demand slows into a cooling global economic growth environment.
• Guangzhou Futures Exchange, a new paper lithium trading platform in China, has seen a sharp rise in net short positions in lithium futures.
• The speculation has triggered spodumene mining majors such as Chris Ellison to describe the market as ‘manipulated.’
• Pilbara Minerals is the most shorted stock on the ASX, with 19% of the share capital sold short.
• At some point we imagine Chinese marginal lepidolite producers will be forced to slash production, providing a floor to lithium prices.

Gold holds steady ahead of key inflation data following sharp Treasury rally

• Gold prices are holding steady around $2,040/oz.
• US Treasuries have seen major buying, with yields sliding from 5% in October on the 10-year to 4.27% yesterday.
• This has provided a tailwind to gold prices, which move inversely to real yields.
• The sliding dollar, moving in conjunction with lower rates, has supported gold buying.
• Hedge funds have rushed to get long gold, and we expect a reversal in the dollar may provide a short-term headwind to gold prices.
• PCE will be the primary focus for today, with the Fed’s primary inflation gauge forecasting a 3.5% yoy increase and a 0.2% mom increase (vs 0.3% in September)
• Markets now price a rate cut at 46% chance by March.
• Central bank buying will be important for gold next year having supported it through higher rates in 2023. A combination of sustained central bank buying and lower real yields could present a compelling opportunity for 2024 gold bulls.

Economics

China – Manufacturing sector contracts for a second consecutive month in November suggesting more stimulus may be required, according to official PMI numbers.

• Services sector while posting a marginal expansion reported a further deterioration in growth momentum during the month.
• Manufacturing PMI: 49.4 v 49.5 October and 49.8 est.
• Services PMI: 50.2 v 50.6 October and 50.9 est.
• Composite PMI: 50.4 v 50.7 October est.
• Steel PMI rise to 48.2 from 45.6 October est.

Germany – Consumer spending cam in stronger than expected in October as indicated by latest retail sales numbers.

• Separately, latest employment data points to a deteriorating market with jobless rate unexpectedly climbing to the highest level in 2.5 years.
• Unemployment rate hit 5.9% in November, up from 5.8% the previous month.
• Inflation is also seen coming off faster than anticipated helped by lower energy and travel costs.
• Retail Sales (%mom): 1.1 v -0.1 September (revised from -0.8) and 0.4 est.
• Retail Sales (%yoy): -0.1 v -3.9 September ((revised from -4.6) and -1.9 est.
• Unemployment Change (‘’000): 22.0 v 31.0 October (revised from 30.0) and 20.0 est.
• CPI EU Harmonised (%mom): -0.7 v -0.2 October and -0.5 est.
• CPI EU Harmonised (%yoy): 2.3 v 3.0 October and 2.5 est.

France – Final GDP numbers revised lower with inflation coming off at pace leading markets increasingly expecting the first rate cut in the spring.

• CPI EU Harmonised (%mom): -0.3 v 0.2 October and 0.0 est.
• CPI EU Harmonised (%yoy): 3.8 v 4.5 October and 4.1 est.
• Final GD (%qoq): -0.1 v 0.1 estimated previously.

Israel – Israel and Hamas agreed to extend the ceasefire for at least another day allowing further exchange of hostages and prisoners.

• The six day agreement was initially planned to end 7am this morning.

Currencies

US$1.0943/eur vs 1.0991/eur previous. Yen 147.06/$ vs 147.40/$. SAr 18.731/$ vs 18.530/$. $1.269/gbp vs $1.270/gbp. 0.663/aud vs 0.663/aud. CNY 7.131/$ vs 7.125/$.

Dollar Index 102.91 vs 102.73 previous.

Commodity News

Precious metals:

Gold US$2,043/oz vs US$2,042/oz previous

Gold ETFs 86.2moz vs 86.6moz previous

Platinum US$932/oz vs US$938/oz previous

Palladium US$1,012/oz vs US$1,051/oz previous

Silver US$25.02/oz vs US$25/oz previous

Rhodium US$4,500/oz vs US$4,500/oz previous

Base metals:

Copper US$ 8,440/t vs US$8,452/t previous

Aluminium US$ 2,214/t vs US$2,210/t previous

Nickel US$ 16,835/t vs US$16,990/t previous

Zinc US$ 2,489/t vs US$2,528/t previous

Lead US$ 2,134/t vs US$2,142/t previous

Tin US$ 23,400/t vs US$23,560/t previous

Energy:

Oil US$83.9/bbl vs US$81.6/bbl previous

Natural Gas €40.000/MWh vs €42.500/MWh previous

Uranium UXC US$80.25/lb vs US$73.65/lb previous

Bulk:

Iron Ore 62% Fe Spot (cfr Tianjin) US$129.7/t vs US$128.4/t

Chinese steel rebar 25mm US$575.1/t vs US$575.6/t

Thermal coal (1st year forward cif ARA) US$107.8/t vs US$108.3/t

Thermal coal swap Australia FOB US$127.9/t vs US$127.9/t

Coking coal swap Australia FOB US$322.0/t vs US$326.0/t

Other:

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

NdPr Rare Earth Oxide (China) US$68,009/t vs US$68,770/t

Lithium carbonate 99% (China) US$15,074/t vs US$15,368/t

China Spodumene Li2O 6%min CIF US$1,480/t vs US$1,490/t

Ferro-Manganese European Mn78% min US$1,053/t vs US$1,058/t

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

China Graphite Flake -194 FOB US$620/t vs US$620/t

Europe Vanadium Pentoxide 98% 6.1/lb vs US$6.1/lb

Europe Ferro-Vanadium 80% 25.25/kg vs US$25.25/kg

China Ilmenite Concentrate TiO2 US$315/t vs US$315/t

Spot CO2 Emissions EUA Price US$76.4/t vs US$82.8/t

Brazil Potash CFR Granular Spot US$325.0/t vs US$325.0/t

Company News

Arkle Resources* (ARK LN) 0.45p, Mkt Cap £2m – Drilling for gold begins at Inishowen Project

• Arkle will begin a drilling programme at Inishowen, Donegal this week.
• The drilling will focus on a vein target discovered at the Meeneragh target, which held gold bearing outcrops.
• Previous drilling intercepted 3m @ 5/8g/t from 23m and 4.8m @ 5.5g/t in 2016.
• The programme will look to intercept the same vein along strike, and at varying depths.
• The Project targets geology similar to that hosted at Dalradian, where gold is hosted in mesothermal veins.

*SP Angel are Nomad and Broker to Arkle Resources

Ariana Resources (AAU LN) 2.45p, Mkt Cap £25.8m – Drilling update from Salinbas

• Ariana Resources reports the completion of a 61-hole infill and resource extension drilling programme totalling 5.928.8m within 23.5% owned upper Salinbas project area in north-eastern Turkey bringing the total to 101 holes (13.922m).
• The Salinbas drilling, which, weather permitting, is expected to continue through the winter, excludes the Ardala and Hizarliyayla areas and “focused in the Ardala area and on the zone between Ardala and Salinbas (AS Zone) since November 2021 … with the focus shifting to the Salinbas area for 2023, following the receipt of the necessary forestry permits”.
• Arian Resources, current resource estimate shows 1.5moz of gold and 7.9moz of silver within a combined ‘Measured, Indicated and Inferred’ 74.8m tonnes.  Around 96% of the resource tonnage is currently ‘Inferred’.
• The company describes two-fold objectives for its drilling at Salinbas comprising step-out exploration in conjunction with the “first phase of resource infill drilling”.
• Ariana Resources explains that the “majority of drilling completed to date at Salinbas has been drilled vertically, with 8 holes angled at between 45 and 70 degrees” with hole averaging around 90m depth and a maximum of 205m.
• Among the results highlighted in today’s announcement are:
  • An intersection of 6.5m at an average grade of 3.69g/t gold and 69.8g/t silver from a depth of 108.1m in hole SALH-092; and
  • An intersection of 7.2m at an average grade of 9.37g/t gold and 19.6g/t silver from a depth of 86.2m in hole SALH-093 including a 1.4m wide section, from 88.7m at an average grade of 35.02g/t gold and 69.8g/t silver; and
  • An intersection of 11.05m at an average grade of 1.56g/t gold and 11.8g/t silver from a depth of 85.35m in hole SALH-102.
• A map included in today’s announcement shows planned holes in the eastern part of the project area closer to the Ardala Porphyry Complex.
• Managing Director, Dr. Kerim Sener, expressed confidence that the “broader Salinbas Project area represents the opportunity to build on the existing 1.5 million-ounce gold resource through further exploration and drilling”.
• He explained that as well as the continuing drilling “we have recently initiated a deep induced polarization (IP)/Resistivity geophysical survey at Hizarliyayla, to better resolve potential drilling targets at depth”.

Conclusion: The infill drilling at Salinbas should eventually convert some of the current, largely ‘Inferred’ resource, to more robust classifications while exploration drilling provides an opportunity to expand the current 1.5moz resource envelope.

Atlantic Lithium* (ALL LN) 28.7p, Mkt Cap £176m – AGM Statement summary

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

STRONG BUY

• Keith Muller, CEO at Atlantic Lithium presented at the company AGM today
• Keith highlighted Atlantic’s focus on de-risking and adding value at Ewoyaa.
• Key milestones:
  • First Mining Lease issued for lithium in Ghana on Atlantic’s Ewoyaa Lithium Project.
  • Partner of choice for Ghana government on development of Ewoyaa
  • Government is keen to partner with and establish long-term lithium supply in Ghana
  • MIIF, Ghana’s sovereign wealth fund invested into a 6% stake in the Ewoyaa project
• Recruitment: Atlantic has taken on three new General Managers
  • Ahmed-Salim Adam joins as General Manager, Operations. He is an accomplished mining General Manager with >15 years’ experience in Ghana.
  • Andrew Henry joins General Manager, Commercial and Finance. Previously Andrew was at Allkem, a lithium chemicals company and also Newcrest Mining.
  • Simone Horsfall joins General Manager, People. Previously Simone was a senior human resources professional at AngloGold Ashanti and at 29Metals
• Looking ahead:
  • Maiden MRE ‘Mineral Resource Estimate’ for feldspar due this year
  • Feldspar Feasibility Study results due Q1 2024 – the production of feldspar could enable substantial job creation in the local ceramic industry
  • Downstream Conversion / Smelter Study, viability assessment due Q1 2024;
  • Drill results on 26,500m drill programme due Q2 2024 along with an updated MRE on the spodumene project due Q3 2024
  • Procurement contract awards for DMS plant and other elements of the mine construction
• DFS project economics indicate impressive margins even at these prices according to the DFS study:
  • Throughput: ~2-2.7mtpa, Total mined ore 30.6mt
  • Production ~300,000tpa of Spodumene concentrate (SC5.5 and SC6)
  • NPV8 post-tax: US$1.5bn
  • IRR: 105%
  • Revenue US$550mpa and $6.6bn life-of-mine, Free cash flow: US$2.4bn life-of-mine, EBITDA: US$316mpa
  • C1 Op costs US$377/t, AISC US$610/t
  • Capex: US$185m, Payback: 19 months
  • LOM: 12 years, LOM revenues increased to $6.6bn
  • Assumption US$1,587/t with $1,200/dmt long term pricing for SC6% FOB Ghana Port
• Resource: 35.3Mt @ 1.25% Li2O Ewoyaa Mineral Resource Estimate1 (“MRE” or the “Resource”) in hole GDD0093.
• Lithium price outlook:  underlying demand for lithium for use in EVs, remains strong.
• Low cost: Ewoyaa stands out as a low-cost project versus its peers
• Still required:
  • EPA approval,
  • Mining Lease ratification
  • Issue of the Mine Operating Permit.

*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.

Bushveld Minerals* (BMN LN) 2.4p, Mkt Cap £36m – Equity raise

BUY – Under Review

• The Company launched an accelerated bookbuild process to raise up to US$20m at 3p.
• The process is expected to be completed by noon today.
• Of the total, Southern Point Resources Partners (SPR) will be subscribing for at least US$12.5m with an option to increase to $20m.
• A number of directors indicated their intention to participate including Craig Coltman (CEO), Michael Kirkwood (Chairman) and Kevin Alcock (NED).
• In addition, the Company is planning to launch a retail offer on 01 December.
• The retail offer will be managed by PrimaryBid targeting to raise up to a further £2.0m at the same placing price of 3p and will run until 08 December.
• Completion and issue of the fundraise, SPR investment as well as Orion refinancing announced earlier are conditional on the General Meeting shareholders’ approval to be carried on or around 21 December.
• Use of proceeds ($43.5m in total including $25m SPR commitment for 50% interest in Vanchem and all of Company’s 64% interest in Mokopane) include:
  • Vametco
    • $12.6m sustaining capex;
    • $5.9m tailings facility expansion;
    • $0.8m other.
  • Vanchem
    • $11.7m sustaining capex;
    • $0.1m other.
  • $11.6m working capital and repayment of previously advanced interim working capital facility (~$8m)
  • $0.8m transaction fees
• Operationally, the Company reiterated production and cost guidance of 3.7-3.9ktV and $26.6-26.9/kgV for 2023.
• FY24 guidance is for 4.3-4.5ktV and $26.0-27.0/kgV.

Conclusion: The equity raise provides the necessary capital to strengthen operations at Vametco and Vanchem addressing existing bottlenecks and stabilise operations at more sustainable rates. Together with the Orion refinancing deal, the equity raise also improves Company’s balance sheet and alleviates immediate liquidity pressures. Both deals are subject to shareholder approval planned to be carried on or around 21 December. We are awaiting results of the raise and retail offer to update our earnings estimates.

*SP Angel act as nomad and broker to Bushveld Minerals

Endeavour Mining (EDV LN) 1,832p, Mkt Cap £4.5bn – Upgraded MRE at Tanda-Iguela Project to 4.5moz

• Endeavour provides an MRE update for its Côte d’Ivoire-based Tanda-Iguela project.
• The Company has now completed 226km of drilling at the project, 168km of which were drilled this year.
• The new resource stands at:
  • 71mt @ 1.97g/t Au for 4.5moz Au Indicated (300% increase from 2022 MRE)
  • 2.9mt @ 1.91g/t Au for 176koz Inferred.
• $50m has been spent on the property to date.
• The Company believes there remains room for additional exploration upside over the 3.3km Assafou trend, which remains open at strike and at depth.
• Endeavour has completed initial met testwork which has revealed gold recoveries averaging 94%.
• Satellite targets have been identified and additional exploration is underway.
• The Company expects to deliver a PFS in 2H24.

Greatland Gold (GGP LN) 10.85p, Mkt Cap £555m – Nickel exploration potential at Panorama project, WA

• Greatland Gold reports that a programme of soil and rock chip sampling at its Panorama project, located approximately 200km SE of Port Hedland, has identified an 800m long nickel anomaly hosted in the Dalton Suite ultramafic rocks which have potential to host nickel sulphide mineralisation.
• The company explains that although the area has not yet been drilled, a “detailed aeromagnetic survey assisted in mapping out the extents of the Dalton Suite and a follow up airborne electromagnetic survey highlighted 28 conductors, 12 of which are located within the Dalton Suite and may correlate to massive sulphides”.
• The company says that the area contains “Several untested highly prospective conductors sit within the 14km of unsampled Dalton Suite”.
• Managing Director, Shaun Day, expressed confidence that the “large extent of the prospective Dalton Suite ultramafics within our tenure, and the existence of coincident untested conductors … in the potential for a substantial nickel discovery at Panorama”.
• “Planning is underway to determine the follow up”.

Conclusion: Early stage exploration has identified nickel sulphide potential at the Panorama project.  We await results of follow-up exploration with interest.

Mkango Resources* (MKA LN) 11p, Mkt Cap £26m – Q3 operational and earnings results

• Net loss came in at -$3.2m during 9M23 (9M22: -$5.3m) predominantly reflecting general admin costs.
• The drop in the loss is attributed to lower Songwe Hill related costs following the completion of the DFS in Q3/22.
• Operating CF was -$2.8m during the period (9M22: -$5.1m).
• FCF (excluding HyProMag acquisition) amounted to -$3.2m (9M22: -$5.2m) funded through an equity placing earlier this year and CoTec inivestments.
• Closing cash balance stood at $2.3m with no debt and $2.7m in contingent consideration relating to consolidation of interest in HyProMag.
• Operationally, the team consolidated HyProMag interest during the quarter and firmed up its partnership with CoTec regarding a potential rollout of the technology in the US.
• The Company completed a Scoping Study on the roll out of HyProMag’s rare earth magent recycling technology in the US in October 2023 showing a potential for US$50m pa in revenue business assuming 500tpa NdFeB magnet production (@$100/kg price) and 35-40% EBITDA margins.
• The plan is to refine design parameters and narrow down project economics as part of the FS.
• HyProMag is currently developing a £4.3m short loop recycling facility with an initial capacity of 100tpa NdFeB at Tyseley Energy Park in Birmingham with first production planned for 2023.
• Additionally, HyProMag is developing a similar sized facility in Germany through its 90% owned (assuming HyProMag GmbH convertible loan conversion) subsidiary HyProMag GmbH with first production planned in 2024.
• At Songwe Hill, the team recently reported that a government delegation visited the site with Mines Minister confirming plans to sign the mining development agreement before YE23.

*SP Angel acts as nomad and broker to Mkango Resources

Serabi Gold (SRB LN) 36p, Mkt Cap £26m – Nine month profit on higher production, lower costs and improved prices

1. In its unaudited results for the nine months ending 30^th September 2023, Serabi Gold reports an after-tax profit of US$4.6m (2022 – Loss of US$0.9m) and EBITDA of US$8.8m (2022 – US$5.9m) and a closing cash balance of US$15.4m.
2. The result is generated by gold production of 25,262oz (2022 – 24,021oz) at a cash cost of US$1,253/oz (2022 – 1,662/oz) and all-in-sustaining costs of US$1,553/oz (2022 – US$1,662/oz).
3. The lower costs in conjunction with improved gold prices averaging US$1,940/oz sold (2022 – US$1,810/oz) benefitted results.
4. Serabi Gold is maintaining its full-year production guidance of 33,500-35,000oz.
5. Commenting on the results, CFO, Clive Line, said that “With the very recent news of a threefold increase in mineral reserves at the Palito Complex confirming the continued longevity of the mine, and on-going development of Coringa being funded from cash flow, the first nine months have been very rewarding and we look forward with optimism”.

Conclusion: Improved received gold prices, in conjunction with increased production volumes and lower costs have reversed last year’s nine-months loss of US$0.9m to a profit of US$4.6m.

*An SP Angel analyst has visited the Serabi’s gold mining operations in Brazil

Tertiary Minerals* (TYM LN) 0.12p, Mkt cap £2.5m – BUY – Zambia update and new presentation as JV agreement progresses alongside drill target identification

• Tertiary has published an updated presentation: CLICK FOR LINK
• The Company made good progress this field season, with soil sampling completed over all projects and drill targets identified at Jacks, Mukai and Mushima North.
• As regards Konkola West, Tertiary has signed a term sheet for an earn-in and JV agreement with a larger operator.
• The agreement is advancing towards definitive agreements and the two groups are identifying drill sites.
• Konkola West lies on the border of the Konkola mine, and Tertiary believes there is potential for deep, down dip extensions.

*SP Angel acts as Nomad and Broker to Tertiary 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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