SP Angel Morning View -Today’s Market View, Wednesday 20th December 2023

Gold and copper push higher, dollar weakens as more Fed officials point to rate cuts

MiFID II exempt information – see disclaimer below

Adriatic Metals (ADT1 LN) – Updated Rupice ore reserves

Anglo American (AAL LN) – Signs of market balance returning to the rough diamond market

Antofagasta (ANTO LN) – Approval of a second concentrator at the Centinela mine

Arkle Resources* (ARK LN) – Target vein found in gold drilling in Donegal

Atlantic Lithium* (ALL LN) – Jonathan Henry appointed as NED

Bluejay Mining* (JAY LN) – Management changes reinstate Rod Mcillree as a director to the board

Conroy Gold and Natural Resources (CGNR LN) – Step-out drilling at Clay Lake extends known mineralisation in the Orlock Bridge trend

Critical Mineral Resources PLC (CMRS LN) – Christopher Lambert, Chairman, has left the Board of Directors with immediate effect

G2 Goldfields  (GTWO CN) – Strategic investment from AngloGold Ashanti to progress Oko Gold Project, Guyana

Horizonte Minerals (HZM LN) – Progress report on Araguaia project, Brazil

Shanta Gold (SHG LN) – 13.5p recommended cash offer

Skeena Resources (SKE CN) – Franco Nevada funding for development of the Eskay Creek Gold-Silver Project

Gold M&A activity accelerates as prices hold above $2,000/oz

• Shanta’s announced £142m acquisition today follows a series of recent gold takeovers.
• OreCorp is currently under offer from Silvercorp whilst Perseus has been acquiring a minority stake.
• Dundee announced this week it is buying Osino Resources, which holds the Twin Hills Project in Namibia, for C$287m.
• Fortuna bought Chesser Resources earlier this year to develop their Diamba Sud Gold Project.
• We imagine more deals to follow given the depressed multiples of producing miners at current gold prices.
• Newmont acquisition of Newcrest in February for $19bn, BHP acquisition of Oz Minerals for for $6.4bn.

Gold ($2,038/oz) Gold prices pushes higher as more Fed officials point to rate cuts

• Gold prices have climbed again to $2,040/oz yesterday, holding firm overnight.
• Fed official Barkin noted yesterday that the Fed would look to cut if inflation continues its downward trend.
• The comments pushed US Treasuries higher, with the 10-year falling below 3.9% again this morning.
• Focus shifts to PCE data, which will provide gold’s next notable catalyst.

Graphite exports from China jumped in lead up to ban

• Bloomberg reports China graphite exports tripled to 45.7kt of natural flake products in December.
• Exports had previously averaged 17kt on a monthly basis this year.
• Synthetic graphite sales, which do not face the same controls, climbed to 55kt vs the 46kt average.
• Graphite prices have risen slightly this month, c.2% across the board, but remain down 27% ytd.
• We would expect the final flood of supply from China in November to dry up into Q1, presenting an opportunity for a sustained rally in prices.

EU passenger vehicles sales near 50% for 2023

• According to data from the European Automotive Manufacturers Association (ACEA), electrified vehicles accounted for 47.6% of passenger vehicle sales in EU as of November (up from 43% same period 2022)
• New-car registrations in the EU increased 6.7% in November, the 16th consecutive month of growth, with a 13.3% increase in the registration of EVs yoy.
• Sales breakdown for passenger vehicles in EU, Jan-Nov 2023:
  • Battery electric: 14.2% (11.1% in 2022)
  • Plug-in hybrid: 7.7% (9.0% in 2022)
  • Hybrid electric: 25.7% (22.9% in 2022)
  • Petrol: 35.7% (37.2% in 2022)
  • Diesel: 13.7% (16.8% in 2022)
  • Other (fuel cell, natural gas, LPG, etc.): 3.0% (3.0% in 2022)

Economics

Germany – Sovereign bond yields dropped as producer price inflation print came in below market expectations.

• PPI was down 7.9%yoy compared to a 7.5% fall forecast by Reuters.
• The drop was attributed to high base in 2022 with lower energy prices accounting for a large share of the decline.
• 10y yields dropped below the 2% mark for the first time since early 2022.

UK – The pound is sliding back after released data showed inflation slowed to the weakest level since late 2021.

• The data puts pressure on the central bank to consider rate cuts in 2023, the narrative that the BOE pushed against during the last policy meeting.
• Headline inflation slowed to 3.9%yoy in November, down from 4.6% in October and below 4.4% forecast by Reuters.
• Core inflation came in at 5.1%, down from 5.5% and also below market estimates.
• The central bank voted to leave rates unchanged at 5.25% this month quoting sticky inflationary pressures.
• Markets are now fully pricing in a 25bp rate cut as early as May next year.

Currencies

US$1.0968/eur vs 1.0934/eur previous. Yen 143.54/$ vs 144.49/$. SAr 18.264/$ vs 18.520/$. $1.266/gbp vs $1.267/gbp. 0.677/aud vs 0.672/aud. CNY 7.134/$ vs 7.145/$.

Dollar Index 102.25 vs 102.57 previous.

Commodity News

Precious metals:

Gold US$2,038/oz vs US$2,028/oz previous

Gold ETFs 85.6moz vs 85.9moz previous

Platinum US$963/oz vs US$951/oz previous

Palladium US$1,210/oz vs US$1,196/oz previous

Silver US$24.10/oz vs US$24/oz previous

Rhodium US$4,425/oz vs US$4,425/oz previous 

Base metals:

Copper US$ 8,651/t vs US$8,510/t previous

Aluminium US$ 2,260/t vs US$2,275/t previous

Nickel US$ 16,845/t vs US$16,565/t previous

Zinc US$ 2,603/t vs US$2,557/t previous

Lead US$ 2,086/t vs US$2,060/t previous

Tin US$ 25,340/t vs US$25,135/t previous

Energy:

Oil US$79.7/bbl vs US$77.8/bbl previous

• Crude oil prices rose despite the API reporting a 0.94mb build to US crude stocks last week (2.2mb draw expected), as the market factored in a higher geopolitical risk premium due to the Red Sea shipping attacks.
• The EU announced plans to support members when the contract for the transit of 40bcm/year (c.3.9bcf/d) of Russian natural gas via Ukraine comes to an end in December 2024.

Natural Gas €33.7/MWh vs €33.4/MWh previous

Uranium UXC US$82.30/lb vs US$81.45/lb previous

Bulk:

Iron Ore 62% Fe Spot (cfr Tianjin) US$133.1/t vs US$133.2/t

Chinese steel rebar 25mm US$581.7/t vs US$581.2/t

Thermal coal (1st year forward cif ARA) US$97.5/t vs US$99.5/t

Thermal coal swap Australia FOB US$139.5/t vs US$141.0/t

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

Other:

Cobalt LME 3m US$29,135/t vs US$29,135/t

NdPr Rare Earth Oxide (China) US$62,094/t vs US$62,846/t

Lithium carbonate 99% (China) US$12,405/t vs US$12,387/t

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

Ferro-Manganese European Mn78% min US$1,053/t vs US$1,050/t

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

China Graphite Flake -194 FOB US$610/t vs US$610/t

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

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

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

Spot CO2 Emissions EUA Price US$76.4/t vs US$76.1/t

Brazil Potash CFR Granular Spot US$310.0/t vs US$310.0/t

EV & Battery news

WeLion to begin supply of semi-solid-state batteries to Nio in April 2024

• It has been reported by local media outlet Jiemian that will supply its 150kWh semi-solid-state battery to EV maker Nio.
• The report comes following the livestreamed test run earlier this week, where the Nio ETZ sedan achieved 1044km on a single charge (with 3% battery remaining).
• The 150kWh semi-solid-state battery pack, utilizes a cell-to-pack structure that integrates the battery cells directly into the pack, eliminating the need of traditional modules, resulting in higher energy density

Company News

Adriatic Metals (ADT1 LN) 172p, Mkt cap £513m – Updated Rupice ore reserves

• Adriatic provides a reserve update for its Rupice deposit in Bosnia and Herzegovina.
• Contained ore reserves have increased 89% to:
  • 13.8mt @ 187g/t Ag, 5.2% Zn, 3.3% pb, 1.4g/t Au, 0.5% Cu and 0.2% Sb.
  • Contained ounces of 83moz Ag, 723kt Zn, 457kt Pb, 640koz Au, 64kt Cu and 24kt Sb.
• An additional MRE update at Rupice and Rupice NW is expected in 1H24 on continued exploration drilling.
• The reserve update is categorised in the ‘probable’ definition.
• The increase is predominantly a result of additional tonnage drilled at Rupice Northwest and is expected to support an extended LOM of 18 years.
• The deposit will now support an annual throughput capacity of 800ktpa through to 2041.

*An SP Angel mining analyst has visited Adriatic Metals operations in Bosnia

Anglo American (AAL LN) 1,916p, Mkt Cap £25bn – Signs of market balance returning to the rough diamond market

• Anglo American reports that, provisionally, the tenth and final De Beers sales cycle of 2023 realised US$130m and that the previously reported provisional sales of US$80m for the ninth sales cycle have now been confirmed at the higher level of US$86m.
• We estimate that the outcome of the tenth sales cycle brings 2023 sales, subject to final confirmation of the final sales cycle of the year, to US$3.6bn (2022 – US$5.8bn).
• Al Cook, CEO of the De Beers Group, explained that it “continued to offer lower levels of rough diamond supply, in line with current demand … [although he also said that] … we are seeing signs that the diamond industry is regaining its balance between wholesale supply and demand”.
• Mr. Cook noted that “Polished diamond prices look to have stabilised as inventory levels have decreased, though we expect improvements in rough diamond trading conditions to be gradual”.
• His comments are consistent with comments last week from Petra Diamonds that it was seeing a return of some stability to the rough diamond market as a result of “actions taken by major producers to curb supply and the two-month Indian moratorium that comes to an … together with strengthened retail sales in the US”.

Antofagasta (ANTO LN) 1,695p, Mkt Cap £16.6bn – Approval of a second concentrator at the Centinela mine

• Antofagasta reports the approval of a second concentrator plant at its Centinela mine in Chile.
• The new 95ktpd concentrator plant, expected to cost US$4.4bn, adds an additional 170,000tpa of production, on a copper equivalent basis, from 2027 “significantly progressing us towards our long-term ambition of 900,000 tonnes of profitable copper production. Importantly, it will also reduce net cash costs and unlock significant value in the Centinela District’s two billion tonne ore reserve”.
• The new plant is expected to produce 144,000 tonnes of copper, 130,000 oz of gold and 3,500 tonnes of molybdenum annually over a 36-year mine life, reducing cash costs and advancing Centinela “to become one of the top 15 copper mines in the world by output”.
• “The second concentrator will source ore initially from the recently opened Esperanza Sur pit and later from the Encuentro pit”.
• Antofagasta says that it intends to finance the development through “a combination of direct funding from Centinela’s shareholders (Antofagasta plc and Marubeni Corporation, representing approximately 40% of total funding), and project finance provided by lenders” and that it expects to complete definitive funding arrangements “during Q1 2024”.
• Describing the expansion at Centinela as “a key element of our profitable growth strategy”, CEO, Ivan Arriagada, commented that “the medium to long-term outlook is that the world is facing a significant shortage of copper, with electrification and the energy transition driving rising demand … [and that the new plant] … is a clear opportunity to provide additional copper from our existing resource base”.
• He stressed the new plant’s environmental credentials saying that it would use “100% renewable electricity and raw sea water to reduce our environmental footprint, and as a project, represents a demonstration of our purpose of developing mining for a better future”.

Conclusion: Antofagasta’s development of additional capacity at Centinela adds an additional 144,000tpa of copper production at a time when demand is under challenge.  Initial production in 2027 is expected to place Centinela among the world’s 15 largest copper mines.

*An SP Angel mining analyst has previously visited a number of Antofagasta’s copper mines

Arkle Resources* (ARK LN) 0.45p, Mkt Cap £2.5m – Target vein found in gold drilling in Donegal

• Arkle Resources provides an update from its drilling programme in Donegal.
• The Company has drilled 220m over four holes.
• It reports that the targeted vein bearing structure has been identified visually in each hole.
• The Company has now permitted additional drill holes, which it will look to target on successful assay results.

*SP Angel are Nomad and Broker to Arkle Resources

Atlantic Lithium* (ALL LN) 21.55p, Mkt Cap £131m – Jonathan Henry appointed as NED

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

• Atlantic Lithium report the appointment of Jonathan Henry appointed as non-executive director.
• Mr Henry replaces Len Kolff who has stepped down from his role as Independent NED to focus on his geological and ESG work in Ghana as head of business development
• Jonathan Henry is currently Non-Executive Chairperson at Giyani Metals Corporation having stepped back from the role of Executive Chairperson in May.
• He is also a supply chain advisor to Graphene Star, a private company making Li-ion battery composite materials, graphene-enhanced paints and other graphene composite materials
• Henry was formerly Chairperson at Ormonde Mining plc and a NED at TSX-V-listed Ashanti Gold Corporation, President, Director and Chief Executive Officer at Gabriel Resources and formerly CEO at Avocet Mining PLC.

*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.

Bluejay Mining* (JAY LN) 0.47p, Mkt cap £5m – Management changes reinstate Rod Mcillree as a director to the board

(Bluejay Mining holds 100% of the Hammaslahti and Enonkoski projects)

• Bluejay reports the reappointment of Roderick McIllree to the board as a non-executive director.
• Mcillree led the company from its formation in 2013 when Centurion Resources acquired the Finnish mineral assets of FinnAust Mining (Western Areas) in a reverse takeover.
• FinnAust changed its name to Bluejay Mining in 2017 with the original Bluejay Mining holding the Dundas (Pituffik) ilmenite project in Greenland.
• Rod McIllree is a Fellow of the Australian Institute of Mining and Metallurgy and previously served as CEO and also as Executive Chairman of Bluejay between 2015 to mid-2022.
• Rod has worked in Greenland for around 20 years building important extensive contacts within local communities. McIllree is also a London based trained Economic Geologist.
• Bluejay also reports the appointment of Troy Whittaker as a NED and also as Chief Operating Officer
• Whittaker has >20 years working on international project evaluation, development and operation substantial assets across a range of commodities. Whittaker was at Fortescue Metals and Anglo-American.
• Eric Sondergaard has been appointed as Managing Director
• Rob Edwards, Bo Stensgaard and Peter Waugh have all stepped down from the board with immediate effect.
• Bo Stensgaard will remain as an employee of the Company.
• Mike Hutchinson, a NED and former Chairman has been appointed Non-Executive Chairman.
• Harry Ansell has also been appointed as a non-executive director
• Rob Edwards and Bo Stensgaard are reported to be leaving on good terms.
• “In due course, the new Board will update shareholders regarding the implementation of a new strategy that will focus solely around developing the Disko magmatic massive sulphide project in Greenland.”

Conclusion:  Bluejay Mining has been through an interesting period of project evaluation and analysis. We look forward to seeing the realisation of new value in Greenland and Finland following further work on the existing portfolio.

*SP Angel acts as nomad and broker to Bluejay Mining. The analyst has visited the historic Enonkoski mine site and holds shares in Bluejay Mining

Conroy Gold and Natural Resources (CGNR LN) 15p, Mkt Cap £6.9m – Step-out drilling at Clay Lake extends known mineralisation in the Orlock Bridge trend

• Conroy Gold reports that step-out drilling at its Clay Lake prospect in Co Armagh has intersected gold mineralisation at shallow depths.
• Clay Lake is in the northern eastern section of the 65km long Orlock Bridge gold trend in the Longford- Down Massif in Ireland and exploration is “being carried out in conjunction with the Company’s joint venture partner, Demir Export”.
• Among the results reported in today’s announcement the company highlights:
  • An 80m wide intersection at an average grade of 0.8g/t gold from a depth of 33.0m in hole CGA-22-004, including a 9m wide section averaging 1.0g/t from 54m depth; and
  • A 32m wide intersection at an average grade of 0.7g/t gold from 105m depth in hole CGA-22-003
• Conroy Gold says that the “80.0 metre intersection in the second drill hole is c.100m to the southwest of where the Company intersected 100.0 metres at 0.6 g/t gold, at a depth of 26.4 metres, which is believed to be the longest continuous gold intersection in the British Isles”.
• The company also says that the “continued intersection of wide zones of gold mineralisation in the very large Clay Lake gold target extends for 3km in length, and is in many areas 2km in width, and as such indicates its potential for high tonnage and overall gold content”.
• We wonder why, given the nomenclature of the holes which suggests that they were drilled in 2022, the assays have taken so long, and we speculate that the relatively low grades reported were not readily apparent until subjected to laboratory analysis. If this is the case, we commend the insight of the geologists in assaying what may have appeared comparatively uninteresting core.

Critical Mineral Resources PLC (CMRS LN) 2.60p, Mkt cap £1.31m – Christopher Lambert, Chairman, has left the Board of Directors with immediate effect

• Christopher Lambert, Chairman, has left the Board of Directors with immediate effect.
• “As the board considers his replacement it is pleased to announce the appointment of Noureddine Sabraoui, the Company’s General Manager, as Chief Operating Officer with immediate effect.”
• Noureddine is a geologist with extensive experience in the region and in the Moroccan mining industry
• Noureddine has also run his own geological and mining services business and he co-founded the Moroccan Association of Mining Companies.

G2 Goldfields  (GTWO CN) 0.76p, Mkt cap C$138m – Strategic investment from AngloGold Ashanti to progress Oko Gold Project, Guyana

• G2 Goldfields reported yesterday it has received a strategic investment from AngloGold Ashanti.
• AGA will be issued 24.5m shares at C$0.9/share for gross proceeds of $22m.
• The funds will be used to progress the Oko Gold Project in Guyana.
• Oko holds an MRE of:
  • 3.3mt @ 9.25g/t Au for 974koz in the inferred category and,
  • 0.8mt @ 8.6g/t Au for 220koz in the indicated category.
• G2 previously developed the Aurora mine before selling it to Zijin Mining in 2020 for $238m.
• Guyana has been under pressure recently from Venezuela’s Maduro, although annexation concerns seem to have cooled.

Horizonte Minerals (HZM LN) 7.95p, Mkt Cap £21m – Progress report on Araguaia project, Brazil

• Yesterday afternoon, Horizonte Minerals announced that demobilisation measures to help conserve cash at its Araguaia ferronickel project in Brazil are now well advanced in response to the cost overrun, announced in October.
• The company confirms that critical work on “the Water Storage Reservoir and the 230kV powerline, both critical components of Rotary Kiln Electric Furnace (RKEF) operations” is continuing.
• Horizonte Minerals says that it has cash of US$42m “of which US$19 million is held in secured accounts relating to Araguaia’s project financing and US$16 million is segregated for the development of Vermelho, with the balance of US$7 million spread amongst other entities for the ongoing running of the Group” and that it expects this to “last until the end of January 2024”.
• The company, which restructured its Board at the end of November in response to the overrun, says that “Positive discussions remain ongoing between lenders and cornerstone shareholders with regard to commercial terms for an interim financing solution to extend this period”.
• Horizonte Minerals says that it is “focussed on minimizing the impacts of the deceleration and demobilization of construction activities on site, as well as taking the necessary actions to secure a safe and sustainable resumption of construction activities following the slow down”.

Shanta Gold (SHG LN) 13p, Mkt Cap £137m – 13.5p recommended cash offer

• The Company agreed terms of a recommended cash acquisition by Saturn Resources, a wholly owned subsidiary of ETC Holdings (Mauritius).
• The offer is for 13.5p valuing equity at £142m and representing a 7% premium to the previous closing price and 23% premium to 3m average.
• The offer was recommended by Independent Directors of the Company.
• Ketan Patel, a long standing investor and NED of the Company as well as a Director of bidding Saturn Resources and ETC Holdings, along with parties associated with the bidder hold ~45m shares in the Company, representing ~4% of outstanding share capital.
• In total, the acquirer is reported to have received a letter of intent to vote in favour of the deal representing ~18% of outstanding share capital including two largest shareholders (holding ~8.3% each).
• Commenting on the rationale behind the offer, Ketan Patel mentioned low valuations that may cause increased dilution when it comes to growth development funding as well as low liquidity of the stock.
• ETC Holdings is an investing company with assets in a diverse range of industries, primarily through its controlling shareholding in ETC Group (ETG).
• ETG is a multi-billion USD-revenue global conglomerate with expertise across multiple industries, encompassing agricultural inputs, logistics, merchandising and processing of agricultural commodities, supply chain optimisation, digital transformation, metals and energy.
• ETG has operations in over 40 countries, employing in excess of 7,000 people and owning over 400 warehousing, processing and distribution centres.
• Expectations are for the deal to become effective in H1/24.

Skeena Resources (SKE CN) 6.4p, Mkt cap C$571m – Franco Nevada and C$10m flow through funding for development of the Eskay Creek Gold-Silver Project

• Skeena announced earlier this week that it has agreed a funding package with Franco-Nevada Corporation.
• Franco will provide a financing package of C$81m for a 1% NSR royalty on Eskay Creek valued at C$56m.
• Franco will also provide C$25m funding via an unsecured Convertible Debenture package. These will carry an interest rate of 7% and mature in December 2028, with a conversion price of C$7.7.
• After the deal, FN will hold a 2.5% NSR on Skeena’s Eskay Creek properties.
• Skeena recently released a new DFS for Eskay Creek showing a post-tax NPV5 of C$2bn using US$1,800/oz Au for an IRR of 43%.
• Yesterday the Company announced an equity placing of C$10.4m at C$8.53/share.

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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