SP Angel Morning View -Today’s Market View, Friday 8th December 2023

Chinese New Energy Vehicle market share exceeded 40% in November

Metals pause ahead of key US jobs figures

MiFID II exempt information – see disclaimer below

Anglo American (AAL LN) – Updated production guidance and cut in CAPEX expectations

Arras Minerals Corp (ARK CN) – Exploration agreement with Teck in Kazakhstan

Founders Metals (FDR CN) – High-grade intercepts in Suriname

SolGold* (SOLG LN) – Announcement of a second exploration target close to Cascabel so far in December

Technology Minerals (TM1 LN) – Trench sampling program at Leinster lithium project confirms 1.8m wide pegmatite

Vast Resources (VAST LN) – MoU extended to 15 January on Aprelevka Gold Mines in Tajikistan

Chinese New Energy Vehicle market share exceeds 40% in November

• Total new energy vehicles (NEV) sales in China reached 841,000 in November.
  • Battery EVs accounted for 552,000 sales
  • Plug-in hybrid EVs accounted for 289,000 sales
• This is the first time that monthly sales have exceeded 800,000 in a month.
• Market penetration also exceeded 40% for the first time.
• China uses the term NEV to include plug-in EVs, battery EVs, plug-in hybrid EVs and fuel cell vehicles.

Iron ore extends gains as traders optimistic for 2024

• Iron ore rallied 3% last night to $134.7/t in China.
• China exports slowed in November, suggesting factories are ramping up purchases of steel goods.
• A stronger yuan is also supporting buyers in the international market.
• Steel mill margins are climbing, adding further support to buyers’ appetite.
• Vale has kept production guidance steady for 2024, with Anglo trimming iron ore guidance for 2024.
• Steel prices are rallying between 2.2% and 3.5%, with coking coal prices also rising.

Economics

US – Labour data is out later today providing more evidence on the state of the labour market ahead of the FOMC meeting next week.

• Estimates are for a 183k reading, up from 150k in October.
• Wages are expected to have grown 0.3%mom/4.0%yoy, compared to 0.2%/4.1%.

China – Politburo vowed to strengthen fiscal response to boost local demand while calling for a flexible and targeted monetary stimulus.

• The meeting is one of a series that will shape growth and policy targets in the coming year with numeric goals traditionally released in March, Bloomberg reports.

Japan – Revised GDP numbers for Q3/23 showed a deeper than initially thought contraction on the back of weaker consumer spending and stronger destocking.

• Quarterly GDP fell 0.7%qoq (-2.9%qoq annualised) compared to previous estimates for a -0.5%qoq reading.
• Consumer spending was revised 0.2pp lower to -0.2%qoq.
• Higher destocking suggests that support for growth from stock rebuilding after supply chains recovered are past us, Bloomberg wrote.
• Weak data will also provide some comfort for the BOJ that has been defending its loose monetary policy stance lately.

UK – Inflation expectations over the next 12 months dropped to a two year low as tight monetary conditions cool the economy down.

• Inflation is expected to average 3.3% over the coming year, down from 3.6% estimated previously in August.

India – Central bank left rates unchanged at 6.5% marking a fifth consecutive pause, in line with estimates.

• Latest RBI economic growth and inflation forecasts are for GDP to expand 7%, a 0.5ppp revision, in FY24 (March YE) and inflation to average 5.4%, 1.4ppp over 4% target and unchanged from previous estimates.

Currencies

US$1.0779/eur vs 1.0778/eur previous. Yen 144.14/$ vs 145.24/$. SAr 18.800/$ vs 18.975/$. $1.257/gbp vs $1.257/gbp. 0.661/aud vs 0.656/aud. CNY 7.160/$ vs 7.150/$.

Dollar Index 103.76 vs 103.87 previous.

Commodity News

Precious metals:

Gold US$2,029/oz vs US$2,033/oz previous

Gold ETFs 86.1moz vs 86.1moz previous

Platinum US$916/oz vs US$897/oz previous

Palladium US$980/oz vs US$953/oz previous

Silver US$23.79/oz vs US$24/oz previous

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

Base metals:

Copper US$ 8,359/t vs US$8,305/t previous

Aluminium US$ 2,151/t vs US$2,152/t previous

Nickel US$ 16,700/t vs US$16,435/t previous

Zinc US$ 2,412/t vs US$2,427/t previous

Lead US$ 2,022/t vs US$2,017/t previous

Tin US$ 24,380/t vs US$24,630/t previous

Energy:

Oil US$75.5/bbl vs US$74.9/bbl previous

Henry Hub Gas US$2.59/mmBtu vs US$2.52/mmBtu yesterday

• European energy prices were steady as EU natural gas storage levels fell 3.8% w/w to 92.7% full (vs 82.8% 5-Yr average), with all countries reporting levels above 90% full and aggregate storage at 1,057TWh.
• US natural gas prices rose as the EIA storage report detailed a large 117bcf w/w draw to 3,719bcf last week (vs -106bcf draw exp), with storage levels now 7.3% above last year and 6.7% above the 5-year average.
• We note that this week EU carbon allowances have traded below €70/t for the first time in over 12 months as the step-change in European energy prices over the last two years continues to impact industrial activity on the mainland, reflected in industrial gas demand falling by c.17% from prior levels.

Natural Gas €41.3/MWh vs €40.6/MWh previous

Uranium UXC US$81.45/lb vs US$81.0/lb previous

Bulk:

Iron Ore 62% Fe Spot (cfr Tianjin) US$134.7/t vs US$132.5/t

Chinese steel rebar 25mm US$578.5/t vs US$578.5/t

Thermal coal (1st year forward cif ARA) US$112.0/t vs US$111.0/t

Thermal coal swap Australia FOB US$149.0/t vs US$141.3/t

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

Other:

Cobalt LME 3m US$32,700/t vs US$33,420/t

NdPr Rare Earth Oxide (China) US$64,804/t vs US$66,012/t

Lithium carbonate 99% (China) US$12,640/t vs US$12,657/t

China Spodumene Li2O 6%min CIF US$1,380/t vs US$1,380/t

Ferro-Manganese European Mn78% min US$1,035/t vs US$1,035/t

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

China Graphite Flake -194 FOB US$615/t vs US$620/t

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

Europe Ferro-Vanadium 80% 25.75/kg vs US$25.25/kg

China Ilmenite Concentrate TiO2 US$314/t vs US$314/t

Spot CO2 Emissions EUA Price US$75.1/t vs US$75.0/t

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

EV & Battery news

US solar set for slower growth after record 2023

• The US is expected to have added 33GW of solar capacity in 2023, up 55% yoy.
• Solar power accounted for 48% of all new electricity-generating capacity added to the US grid across the first three quarters of 2023.
• Growth is expected to slow to around 10% in 2024 on the back of new policies and higher interest rates across the US.
• Solar capacity in the United States is expected to reach 377GW by 2028, compared with 161GW now.

Company News

Anglo American (AAL LN) 2,103p, Mkt Cap £25.6bn – Updated production guidance and cut in CAPEX expectations

• Anglo American provides a performance update and its CAPEX expectations for the next three years.
• 2023 production increased by c.3% on Quellaveco’s ramp up and strong iron ore production.
• Unit costs up 5% on mining inflation and production impacts.
• Anglo expects copper unit costs to fall by 5% to $1.57/lb in 2024, PGMs to fall by 6% to $920/oz for their specified basket and iron ore to fall by 3% to $37/t.
• CAPEX for 2023 expected to be $5.8bn, allocating predominantly to Quellaveco.
• Anglo will cut CAPEX expenditures over between 2023-25 by $1.8bn vs most recently published guidance.
• 2024 production is expected to fall by 4%, with a focus on minimising unit costs.
• Copper production is expected to slide in 2025 on weaker Collahuasi grades before recovering in 2026.
• 2024 CAPEX expected at c.$5.7bn, $800m lower than previously reported.
• An additional production decrease of c.3% is expected in 2025, partly a result of maintenance plans.
• 2025 CAPEX has been cut by $0.4bn.
• Production in 2026 is expected to increase by c.4%, on the back of Quellaveco and increased iron ore and met coal output.
• Additional expenditure on Woodsmith beyond 2024 will be subject to the Board’s approval.

Conclusion: The predominant theme for Anglo American currently is its focus on capital discipline and lowering unit costs. The Company has been investing heavily in major development projects Woodsmith and Quellaveco. The $1.8bn CAPEX cut reflects trimming iron ore operations at Kumba, SA, and reducing Los Bronces to one plant. Lower production guidance in 2024 and 2025 has disappointed the market today, following disruptions this year in South Africa and lower PGM and diamond prices.

Arras Minerals Corp (ARK CN) C$0.24, Mkt Cap C$17m – Exploration agreement with Teck in Kazakhstan

• Arras Minerals has signed an agreement with Teck Resources for exploration in the Bozshakol-Chingiz Magmatic Arc, Kazakhstan.
• Teck will fund exploration work through 2025 through a US$5m exploration package.
• They will subsequently have the option to select four key projects, funding up to US$47.5m for the right to earn up to a 75% interest in each project.
• Arras will act as manager for the initial two-year generative program.
• Arras’ land package lies near Rio Tinto and Fortescue’s copper-focused exploration licences on the same magmatic belt.

Founders Metals (FDR CN) C$1.34, Mkt Cap C$75m – High-grade intercepts in Suriname

• Founders Metals reports additional drill assay results from its Antino Gold Project in Suriname.
• Founders has drilled 10,000m in 2023 and is conducting a 30,000m drilling programme in 2024.
• Yesterday’s gold assay highlights include:
  • 23GG001: 6m at 4.47g/t from 41m, 9m at 23g/t from 125m, 6m @ 95g/t from 152m and 1m from 153m at 435g/t Au.
• Assays earlier this week yielded highlights of:
  • FR038 : 7.6m at 4.5g/t Au from surface, 9m at 3g/t Au from 63m and 13m at 14g/t Au from 77m.
  • FR040: 8m at 12.3g/t Au from 78m.
• The Company will announce its 2024 exploration strategy in the coming weeks.

SolGold* (SOLG LN) 8.12p, Mkt Cap £238m – Announcement of a second exploration target close to Cascabel so far in December

• Following the announcement earlier this month of a new exploration discovery approximately 8km north of its Cascabel project in Ecuador at La Florida, Solgold has now announced the identification of a fourth porphyry copper target in its Espejo Project 20km NE of Cascabel.
• The new target was identified from “geological mapping of rock types, alteration, and sulphide minerals and by multi-element soil geochemistry with rock geochemistry”.
• Solgold’s geological team and its advisors believe that the “under-explored Toachi Fault zone in the NECO … [Northern Ecaudor Cordillera Occidental] … trend is a highly prospective area for the discovery of significant Cu, Cu-Au, and Cu-Mo porphyry deposits, alongside high-grade epithermal Ag and Au-Ag deposits”.
• Recent exploration of a 2km x 1.5km area known as ‘Anomaly 4’ has identified “classic porphyry geochemical zonation, alteration, and mineralisation patterns, along with evidence of related epithermal and skarn Au-Ag systems” and the company has announced assays from rock sampling in the area including:
  • Results from multi-minerals skarns of 4.15g/t gold, 77.8g/t silver and 2.63% copper; and
  • A second skarn sample grading 34.5g/t gold and 38.7g/t silver; as well as
  • A 10.5g/t gold assay from a magnetite pyrite skarn; and
  • Results from epithermal quartz veins of 36.8g/t gold
• Solgold explains that the “mineralisation discovered at Espejo suggests that anomalies 1-4 represent a cluster of porphyry systems warranting drill testing”.
• CEO, Scott Caldwell, welcomed the “recent identification of another high-potential target at the Espejo Project” adding to the La Florida discovery at Blanca Nieves and thanked the exploration team for their “exceptional work”.
• He said that “As we look ahead to 2024, we are filled with energy and optimism about the opportunities that lie before us. With the team’s continued dedication and our shareholders’ support, SolGold is well-positioned to explore these new frontiers and drive further growth”.

Conclusion: The announcement of a second discovery of a new exploration target close to Cascabel within recent weeks indicates the potential of large scale of mineralising events close to Solgold’s Cascabel project area.  Although both discoveries are still at an early-stage, Solgold will be able to deploy the deep insights into the local geology acquired at Cascabel and elsewhere in Ecuador to accelerate its exploration and we look forward to further news as the programme develops.

*SP Angel acts as Financial Advisor to SolGold

Technology Minerals (TM1 LN) 1.05p, Mkt Cap £16m – Trench sampling program at Leinster lithium project confirms 1.8m wide pegmatite

(Global Battery Metals currently holds 55% in Leinster with 45% held by Technology Minerals Plc. Global Battery Metals can earn into 90% on exercise of a third option with $1m of expenditure and payment of €200,000 in cash or shares)

• Technology Minerals reports the identification of a 1.8m wide pegmatite dike at 1-2m depth in trenching in Knockeen, southern Ireland.
• Samples have been collected at 1m intervals and sent for laboratory analysis at ALS in Ireland to check to check for lithium content.
• Management interpret the pegmatite to be the same structure as intersected at 30m depth in drill hole 23-1597-02 and at 60m depth in drill hole 23-1597-03.
• The drilling follows up on surface sampling from last December where Grades as high as 3.75% Li2O / 17,000 ppm Li were uncovered.
• The dike is one of up to seven spodumene bearing dikes intersected in the drilling in 24 separate intercepts in nine diamond cored drill holes.
• The trench was fully permitted through the Geoscience Regulation Office (GSRO) of the Department of Environment, Climate and Communications.
• Global Battery Metals Ltd completed its inaugural first phase of 2,022m of drilling at Knockeen in October.
• All nine holes are reported to have successfully intersected lithium bearing Lithium LCT Pegmatites with samples analysed by ALS.

Conclusion: While the presence of lithium in spodumene is significant, with spodumene preferred by lithium processors, drilling will need to demonstrate economically mineable widths for opencast mining before confirmation of project value.

Vast Resources (VAST LN) 0.2p, Mkt Cap £7m – MoU extended to 15 January on Aprelevka Gold Mines in Tajikistan

• Vast Resources has extended its MoU with Central Asian Minerals and Resources (CAMR) in relation to the potential acquisition of the Aprelevka gold/silver mine.
• Vast is looking to acquire CAMR’s interest in Guld International Minerals which holds a 49% stake in the mine with the Government of Tajikistan holding the 51% balance.
• Aprelevka holds four active mining licences located along the Tien Shan Belt that extends through Central Asia, currently producing approximately 11,600oz of gold and 116,000 oz of silver per year.
• The mine has running at >25kozpa before production pulled back in later years with management considering options to ramp up run rates back up to 27kozpa gold and 250koz silver.
• Non JORC mineral resources are estimated at 4.7mt at 2.6g/t for 398koz at existing mines and 4.9mt at 2.1g/t for 329koz at adjacent licenses.
• Aprelevka booked $16.0m in revenues last year and reported a $0.8m loss during the period.
• Bay Square engaged Vast to carry due diligence on Aprelevka and negotiate the acquisition of Gulf as well as manage mining and development activities at the mine post transaction for a five year period.
• In return, Vast will be entitled for a 10% share of EBITDA that Gulf receives from its 49% interest in Aprelevka.
• The Company will also have the right at any time from the start of 2025 until the end of the five year management period to convert its earnings share entitlement into a 10% interest in Gulf and to acquire up to 20% of the share capital of Gulf at market value at the time of acquisition.

*An SP Angel analyst has formerly visited the Aprelevka Gold Mine in Tajikistan

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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