SP Angel Morning View -Today’s Market View, Monday 15th January 2023

Gold strengthens on Middle East tension and sustained Fed rate cut wagers

MiFID II exempt information – see disclaimer below

Anglo Asian Mining* (AAZ LN) – Weak FY23 production reflects temporary suspension at Gedabek

Oriole Resources* (ORR LN) – Updated Bibemi JORC Resource

Firering Strategic Minerals Plc (FRG LN) – RC Drilling Programme started at Atex lithium target

MetalsTech* (MTC AU) – MetalsTech Receives First Offer for Sturec Gold Mine in Slovakia

Pilbara Minerals (PLS AU) – Additional offtake agreed with Ganfeng

Thor Explorations (THX LN) – Confirmation of 2023 production and 2024 guidance for Segilola as PFS progresses for Douta

Iron ore prices continue to normalise as inventories rise and China data disappoints

• Iron ore prices fell below $130/t as it heads for a weekly fall, down 5.5%.
• Consumer prices in China continue to decline, with factory gate prices also on the slide.
• Iron ore demand remains weak as steelmakers suffer from thin margins and inventories have climbed.
• Analyst suspect the much-anticipated restocking period through to Lunar New Year may disappoint forecasts, weighing on iron ore prices.
• An expected rate cut from the PBoC failed to materialise, further weighing on growth and metals sentiment.

Gold prices strengthen on Middle East tension and sustained Fed rate cut wagers

• Spot gold prices are hovering around the $2,055/oz mark, where they have been rangebound for the past month.
• The move higher has held following Powell’s dovish pivot at the November meeting.
• This has held US Treasuries around the 3.95% level for the 10-year, weighing on the dollar and supporting gold prices.
• Tension in the Middle East is also adding to gold’s ‘war premium’, with the US intercepting Houthi missiles targeting its vessels this morning.

Norway – Norway becomes first country to approve commercial deep-sea mining for minerals.

• The Norwegian parliament approved the mining of minerals over Norway’s extended continental shelf in the Arctic Ocean.
• While there are no immediate plans on the issue of sub-sea mining licenses a president has been set.
• The ISA, the UN International Seabed Authority will meet this year to finalise rules with a final vote set for 2025.
• The technical and commercial challenges of deep-sea mining mean that few projects are likely to work at current commodity prices based on our previous analysis of deep-water mining trials.

Copper – TC/RC’s fall to US$48.2 vs US$80 benchmark.

Economics

US – A US fighter aircraft shot down an anti-ship missile fired at a US navy vessel in the Red Sea on Sunday.

• The missile is reported to have been launched from territory controlled by Houthi rebels in Yemen.
• US primaries start today with Iowa Republican party members expected to be the first to choose their candidate for the 2024 presidential election.
• Donald Trump is commanding a dominant lead in the polls of nearly 30 points over his rivals former UN ambassador Nikki Haley and Florida governor Ron DeSantis.
• Fed study shows US credit card delinquencies continue to rise with >10% of card holders making the minimum payment
• The move is thought to reflect lower Covid support and related savings from lockdowns.

China – The central bank left medium term lending facility rate on hold at 2.5% despite latest economic data pointing to slowing growth and deflation.

• Expectations for a 10bp cut.

Taiwan – Lai Ching-te won presidential elections over the weekend securing 40% of the vote securing third presidential term for the ruling Democratic Progressive Party (DPP).

• DPP supports Taiwan’s separate identity and rejects China’s territorial claims, Reuters reports.
• Nevertheless, the ruling party lost its majority in parliament.

Argentina – Inflation rose 25.5% in December vs 12.8% a year ago

• Inflation now running at 211%pa vs 161% a year ago

Currencies

US$1.0958/eur vs 1.0977/eur previous. Yen 145.37/$ vs 144.96/$. SAr 18.643/$ vs 18.586/$. $1.275/gbp vs $1.278/gbp. 0.667/aud vs 0.671/aud. CNY 7.172/$ vs 7.162/$.

Dollar Index 102.44 vs 102.25 previous.

Commodity News

Precious metals:

Gold US$2,058/oz vs US$2,039/oz previous

Gold ETFs 84.6moz vs 84.7moz previous

Platinum US$918/oz vs US$924/oz previous

Palladium US$989/oz vs US$999/oz previous

Silver US$23.28/oz vs US$23/oz previous

Rhodium US$4,450/oz vs US$4,450/oz previous

Base metals:

Copper US$ 8,334/t vs US$8,432/t previous

Aluminium US$ 2,208/t vs US$2,242/t previous

Nickel US$ 16,240/t vs US$16,395/t previous

Zinc US$ 2,538/t vs US$2,515/t previous

Lead US$ 2,095/t vs US$2,098/t previous

Tin US$ 24,700/t vs US$24,815/t previous

Energy:

Oil US$79.3/bbl vs US$77.2/bbl previous

Natural Gas €31.6/MWh vs €30.3/MWh previous

Uranium UXC US$92.50/lb vs US$92.50/lb previous

Bulk:

Iron Ore 62% Fe Spot (cfr Tianjin) US$129.2/t vs US$134.2/t

Chinese steel rebar 25mm US$575.3/t vs US$576.4/t

Thermal coal (1st year forward cif ARA) US$104.0/t vs US$100.5/t

Thermal coal swap Australia FOB US$127.5/t vs US$126.5/t

Coking coal swap Australia FOB US$317.0/t vs US$317.0/t

Other:

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

NdPr Rare Earth Oxide (China) US$55,631/t vs US$55,638/t

Lithium carbonate 99% (China) US$12,060/t vs US$12,077/t

China Spodumene Li2O 6%min CIF US$1,000/t vs US$1,000/t

Ferro-Manganese European Mn78% min US$1,068/t vs US$1,070/t

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

China Graphite Flake -194 FOB US$600/t vs US$600/t

Europe Vanadium Pentoxide 98% 6.0/lb vs US$6.0/lb

Europe Ferro-Vanadium 80% 28.75/kg vs US$28.25/kg

China Ilmenite Concentrate TiO2 US$317/t vs US$318/t

Spot CO2 Emissions EUA Price US$76.0/t vs US$76.2/t

Brazil Potash CFR Granular Spot US$295.0/t vs US$302.5/t

Company News

Anglo Asian Mining* (AAZ LN) 54p, Mkt Cap £61m – Weak FY23 production reflects temporary suspension at Gedabek

BUY

• FY23 production came in at 31.8koz GEOs, in the mid range of the revised guidance of 30.0-34.0koz (FY22: 57.6koz).
• Lower production is attributed to temporarily suspended agitation leaching and flotation in H2/23 as environmental audit required suspension of tailings deposition.
• FY23 production comprised of:
• 21.8koz gold (FY22: 43.1koz);
• 2.1kt copper (FY22: 2.5kt);
• 53.2koz silver (FY22: 182.0koz).
• Q4/23 production was exclusively in the form of dore from heap leaching operations as well as precipitated high grade SART concentrate.
• No new material was stacked on heaps during the quarter with gold continuing to leach from previously processed ore.
• Q4/23 production totalled 3.1koz GEOs (Q4/22: 14.5koz GEOs) most of which is gold in dore (3.0koz).
• Q4/23 gold sales amounted to 2.4koz at an average price of $2,004/oz.
• As previously announced, the team agreed protocol for resumption of operations with the government.
• Mining operations at the Gedabek open pit resumed in December.
• Flotation plant is expected to restart in Q2/24.
• Gilar underground development works continue with first production planned for Q3/24.
• Net Debt stood $10.3m as YE23 (Sep/23: $1.6m net cash) including $10.3m in cash and £20.6m in outstanding bank debt.
• In addition, the Company held $7.1m in inventory as of YE23 ($6.9m in gold/silver bullion and $0.2m in copper concentrate).
• The team also in discussion with Caterpillar regarding a refinancing of $3.7m paid for the new mining fleet under the vendor financing programme to further strengthen liquidity position.

Conclusion: FY23 has been a challenging period with majority of operations having remained through H2/23 translating into a nearly 40% drop in output from previously anticipated production levels and the Company finishing the year with $10.3m in net debt. The team focused on reducing cash burn and liquidity management during the period minimising mining activity with gold produced mostly through leaching existing heaps. Having completed environmental audit and agreed operations resumption protocol with the government the Company is expecting tailings dam deposition to resume in Q2/24 allowing to restart flotation plant. Importantly, high grade Gilar underground mine development continued with the team expecting first high margin ounces produced in Q3/24

*SP Angel acts as Nomad and Broker to Anglo Asian Mining

Oriole Resources* (ORR LN) 0.26p, Mkt cap £10.4m – Updated Bibemi JORC Resource

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• Oriole has provided an update on its 82%-owned Bibemi Gold Project in Cameroon.
• The Company has prepared an updated pit-constrained gold resource for Bibemi to reflect structurally higher gold prices.
• The updated JORC Resource is estimated at:

• • 5.1mt in the inferred category at 2.3g/t Au for 375koz. (308.24koz Attributable to Oriole)/
  • The pit-constrained resource reflects a defined limit within a $2,000/oz gold price pit shell.
• The Resource has been modelled to a depth of 263m below surface using a cut-off grade of 0.45g/t.

Conclusion: Oriole has updated their Maiden JORC Resource at Bibemi to reflect higher longer-term gold price expectations. The team is confident there remains ample room for expansion at the orogenic gold project, with BCM currently funding exploration activities to add ounces to the project. The current resource reflects only one of four prospects at the project, and the Group is currently processing geophysics data to support a new drill programme at the asset. We look forward to updates regarding drill target delineation soon.

*SP Angel acts as Broker to Oriole Resources

Firering Strategic Minerals Plc (FRG LN) 4.7p, Mkt cap £4.6m – RC Drilling Programme started at Atex lithium target

• Firering announces it has started its 3,000m RC programme at Atex.
• Atex is the Company’s flagship lithium exploration asset in Côte d’Ivoire.
• Previous drilling identified 64m @ 1.24% Li2O.
• The drilling programme is expected to be completed in between four to six weeks, with assays expected in late 1Q24.
• The Programme will target fresh pegmatites lying below weathered pegmatites discovered through auger drilling and surface exploration efforts.

MetalsTech* (MTC AU) – A$0.22, Mkt cap A$42m – MetalsTech Receives First Offer for Sturec Gold Mine in Slovakia

• MetalsTech reports it has received a non-binding offer from Canadian private equity group ‘Trans Metal Fund’ to acquire all the issued capital of Ortac Resources Limited which is wholly owned by MetalsTech.
• The offer is:
  • US$36m in cash (~A$53.6m) on completion
  • US$20m cash payable upon receipt of an underground mining activity permit.
  • US$25m deferred lump sum cash payment in lieu of a retained royalty following the restart of commercial production at Sturec
  • Total offer of US$81m (~A$120.7m)
• Trans Metal Fund currently manages approximately US$500m in total assets, including two large-scale operating polymetallic mines in Canada
• MetalsTech make no comment in respect of the offer other than to advise that it is considering all its options and prudently navigating the very strong interest that has been generated from the strategic process being undertaken by Minmetals Securities Co., Ltd

Conclusion: It is rare to see such an offer for a project which has struggled with permitting for so many years. We suspect more will emerge on further investigation.

*SP Angel previously acted for Ortac. SP Angel analysts have visited the Sturec Gole mine in Slovakia

Pilbara Minerals (PLS AU) A$3.6p, Mkt cap A$10.8bn – Additional offtake agreed with Ganfeng

• Pilbara Minerals reports it has amended its offtake agreement with Ganfeng for the supply of spodumene concentrate.
• The original agreement stood at 160ktpa of spodumene concentrate from Pilgangoora.
• The amended agreement increases total allocation to Ganfeng to up to 310ktpa of the next three years.
• 310kt will be supplied in CY24, increased from 150kt.
• CY25 will see Pilbara supply between 260-310kt, same as CY26.
• Supply will be sold at prevailing market prices.
• Pilbara’s management suggests that the amended agreement preserves ‘optionality for the Company as they assess long-term downstream opportunities in line with their growth strategy.’
• The stock fell 4.5% on the deal as spodumene prices remain depressed and Goldman Sachs downgraded their Pilbara price target to A$3.2/share.

Thor Explorations (THX LN) 14.25p, Mkt cap £88m – Confirmation of 2023 production and 2024 guidance for Segilola as PFS progresses for Douta

• Thor Explorations reports that Q4 gold production of 21,798oz at its Segilola mine in Nigeria brings 2023 gold production to 84,609oz
• The company expects to produce between 95-100,000oz in 2024 at a cost in the range US$1,100-1,200/oz on an all-in-sustaining cost basis.
• Production during 2023 resulted from treating ~1.01mt of ore at an average grade of 2.79g/t with an average recovery of 93.5%.
• President & CEO, Segun Lawson described 2023 as “projected to be the most operationally challenging year in the Segilola mine plan” during which “the successful completion of the west wall push back … positioned the mine very strongly for the coming years”.
• The impact of the push-back is reflected in the movement of almost 20mt of waste during the year and the recovery of ~1.2mt of ore at an average grade of 2.32 g/t gold.
• Today’s announcement also describes progress on exploration projects in Nigeria, at the company’s ‘Central’ and ‘Southern’ prospects close to Segilola as well as its ‘Newstar’ lithium project and its Douta gold exploration project in Senegal.
• Stream sediment sampling in the ‘Central’ prospects located 22km north of the mine has concentrated on the Ijarigbe prospect where “Initial follow up geochemical soil sampling has returned values of up to 9.40g/tAu”.
• Work on the ‘Southern’ prospect 23km south of the mine, reverse-circulation drilling of geochemically derived targets “included 7 metres grading 25.98g/tAu in the near-surface weathered horizon. Additional drilling located primary bedrock mineralisation grading 8 metres at 30.19g/tAu” where the company suggests “that the geological controls relate to a steeply-dipping north-easterly trending zone within a biotite gneiss sequence”.
• Thor Explorations confirms that it is continuing exploration “of the general area” and Mr.Lawson confirmed that drilling was expected during the first half of 2024 “aimed at increasing the Segilola mine life”.
• Lithium exploration over a 600km² project area in the “Oyo State, Kwara State and Ekiti State Lithium Project Areas” in Nigeria has “focussed on the Oyo and Ekiti areas with surface geochemical programs and shallow drilling undertaken” with “Widespread pegmatite occurrences … located in the Ekiti area”.
• Exploration in Senegal focussed on the 70%-owned Douta project located around 4km east of the Massawa mine in the Kenieba inlier and the company reports that although “No drilling activities took place during the Quarter … assays from drilling completed in the previous quarter were received” including mineralised intersections of:
  • 11m at an average grade of 1.19g/t gold from a depth of 93m in hole DTRC-870; and
  • 16m at an average grade of 2.26g/t gold from 28m depth in hole DTRC-871; and
  • 6m at an average grade of 5.21g/t gold from 120m depth in hole DTRC-903; and
  • 13m at an average grade of 0.99g/t gold from 118m depth in hole DTRC-907
• Mr. Lawson confirmed that the company is working on a Preliminary Feasibility Study for the Douta project with the “current focus … on the metallurgy and the process flowsheet, and we expect to update the market with an updated resource estimate and, subsequently, a Preliminary Feasibility Study in Q1 2024”.

Conclusion: Production of ~85,000oz at Segilola is expected to increase to 95-100,000oz in 2024 following completion of a major pit-wall push back. The company is also expecting completion of mineral resources estimates and a PFS on its Douta project in Senegal during Q1 2024.

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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