SP Angel Morning View -Today’s Market View, Monday 5th February 2023

Metal prices drop as a revision to US Fed rate cuts timing drives US$ higher

MiFID II exempt information – see disclaimer below

Atlantic Lithium* (ALL LN) – Good grades over wide intersections in stepout drilling at Ewoyaa

Beowulf Mining* (BEM LN) – Kallak Project director appointment

Bushveld Minerals* (BMN LN) – FY23 operations in line with targets with FY24 guidance temporarily suspended

Cornish Metals* (CUSN LN) – Carn Brea South drilling confirms Wide Formation exploration model and discovers new high grade structures

Empire Metals* (EEE LN) – Resource and metallurgical drilling to start at Pitfield discovery

Economics

US – Markets are increasingly repricing the start of the rate cutting cycle following expectations beating employment numbers released last Friday.

• US treasury yields continue to trend higher following a jump on Friday with more policy sensitive 2y rates up more than 20bp since Thursday.
• 10 year yields are trading just below 4.1%.
• Odds of the first rate cut in May went from being nearly fully priced in to a ~60% chance.
• The US$ is up this morning trading the strongest since November.
• In addition, CBS aired 60 Minutes interview with Jerome Powell over the weekend (recorded last Thursday) where Fed Chairman reiterated the message that the central bank may have to wait beyond March to cut interest rates.
• NFPs (‘000): 353 v 333 (revised from 216) December and 185 est.
• Unemployment Rate: 3.7% v 3.7% December and 3.8% est.
• Av Hourly Earnings (%mom): 0.6 v 0.4 December and 0.3 est.
• Av Hourly Earnings (%yoy): 4.5 v 4.3 (revised from 4.1) December and 4.1 est.

China

• Caixin Manufacturing PMI (released last Thursday): 50.8 v 50.8 December and 50.8 est.
• Caixin Services PMI: 52.7 v 52.9 December and 53.0 est.
• Caixin Composite PMI: 52.5 v 52.6 December.

Currencies

US$1.0782/eur vs 1.0876/eur previous. Yen 148.48/$ vs 146.65/$. SAr 18.947/$ vs 18.649/$. $1.262/gbp vs $1.276/gbp. 0.651/aud vs 0.659/aud. CNY 7.198/$ vs 7.180/$.

Dollar Index 104.01 vs 103.01 previous.

Commodity News

Precious metals:

Gold US$2,024/oz vs US$2,055/oz previous

Gold ETFs 83.9moz vs 83.9moz previous

Platinum US$894/oz vs US$916/oz previous

Palladium US$934/oz vs US$964/oz previous

Silver US$22.49/oz vs US$23/oz previous

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

Base metals:

Copper US$ 8,443/t vs US$8,469/t previous

Aluminium US$ 2,226/t vs US$2,229/t previous

Nickel US$ 16,145/t vs US$16,310/t previous

Zinc US$ 2,434/t vs US$2,465/t previous

Lead US$ 2,133/t vs US$2,147/t previous

Tin US$ 25,100/t vs US$25,645/t previous

 Energy:

Oil US$77.5/bbl vs US$79.1/bbl previous

• Crude oil prices tumbled on Friday on potential Israeli Hamas ceasefire talks and have not recovered in early trading despite US military strikes in the Middle East over the weekend.
• The US Majors both outlined aggressive production ramp-ups in the Permian Basin during 2024, with Exxon guiding 7% y/y growth to 650kboe/d and Chevron targeting 10% y/y growth and to surpass 1mboe/d in 2025.
• The US Baker Hughes rig count was down 2 units to 619 rigs last week (-140 or 18% y/y), with oil rigs flat at 499 units (-100 y/y) and gas rigs down 2 to 117 units (-41 y/y) including 2 rigs removed from the Haynesville.

Natural Gas €29.8/MWh vs €28.8/MWh previous

Uranium Futures $106.3/lb vs $106.4/lb previous

 Bulk:

Iron Ore 62% Fe Spot (cfr Tianjin) US$125.8/t vs US$130.7/t

Chinese steel rebar 25mm US$569.6/t vs US$571.8/t

Thermal coal (1st year forward cif ARA) US$93.8/t vs US$94.0/t

Thermal coal swap Australia FOB US$119.0/t vs US$117.0/t

Coking coal swap Australia FOB US$309.0/t vs US$312.0/t

 Other:

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

NdPr Rare Earth Oxide (China) US$55,434/t vs US$55,573/t

Lithium carbonate 99% (China) US$12,295/t vs US$12,048/t

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

Ferro-Manganese European Mn78% min US$1,062/t vs US$1,071/t

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

China Graphite Flake -194 FOB US$580/t vs US$585/t

Europe Vanadium Pentoxide 98% 5.8/lb vs US$5.8/lb

Europe Ferro-Vanadium 80% 27.85/kg vs US$28.45/kg

China Ilmenite Concentrate TiO2 US$320/t vs US$320/t

Spot CO2 Emissions EUA Price US$66.4/t vs US$67.0/t

Brazil Potash CFR Granular Spot US$292.5/t vs US$292.5/t

 Battery News

Volvo to sell Polestar shares to parent company Geely

• The Swedish automaker will pull funding to the EV maker as its latest financials showed profits were being dragged down Polestars lossmaking.
• Volvo, who own 48% of Polestar will look to offload its shares to parent company Geely.
• Polestar was a spin out of Volvo and listed in 2022.
• Shares have fallen 84% on investor worries with the global slowdown of EV sales.

BYD to build EV charging points in Brazil with energy firm Raizen

• BYD has entered a strategic partnership with Shell’s Raízen Power with plans to build BYD-Shell EV charging hubs in eight major Brazilian cities.
• The partnership plans to build 600 new DC charging piles in Brazil, adding 18MW of installed charging capacity.
• BYD and Shell signed a global strategic agreement in 2022 to enhance the charging experience of BYD EVs.
• The companies started the partnership in China and Europe and are now looking to expand globally.

 Company News

Atlantic Lithium* (ALL LN) 20p, Mkt Cap £132m – Good grades over wide intersections in stepout drilling at Ewoyaa

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

• The Company released assay results from its ongoing 29,500m drilling programme at the DFS level Ewoyaa Lithium Project in Ghana.
• Assays refer to ~7,200m of stepout RC drilling completed through 2023/24.
• A number of high grade and wide intersections are reported at the new Dog-Leg target, Okwesi, Anokyi and Ewoyaa-South 2 deposits outside the current 35.3mt at 1.25% L2O MRE.
• Selected intersections include:
  • GRC1020: 83m at 1% Li20 from 36m (Dog Leg)
  • GRC1017: 47m at 1.05% Li2O from 87m (Dog Leg)
  • GRC0996: 24m at 1.21% Li2O from 29m (Ewoyaa South 2)
  • GRC0994: 11m at 1.9% Li2O from 105m (Okwesi)
  • GRC1023: 24m at 0.81% Li2O from 159m (Dog Leg)
  • GRC1020: 21m at 0.87% Li2O from 139m (Dog Leg)
  • GRC0989: 12m at 1.49% Li2O from 108m (Okwesi)
  • GRC0983: 12m at 1.34% Li2O from 38m (Ewoyaa South 2)
  • GRC1000: 9m at 1.68% Li2O from 22m (Ewoyaa South 2)
• Estimated true widths of intersections reach up to 35m.
• New mineralisation has been identified at the Dog Leg target in wide and close to surface intersections.
• Additionally, mineralisation was extended outside of the current MRE along strike for an additional 120m at the Eqoyaa South 2 deposit and along strike and at depth at the Okwesi deposit.
• Drilling is to resume shortly with a focus on 3,000m of plant site sterilisation programme ahead of start of development works.

Conclusion: Latet assay results from the ongoing infill and stepout drilling programme return good grades over wide intervals outside of the current MRE. The project has already >10 year life of mine delivering attractive returns benefiting from good access to infrastructure and coarse nature of spodumene mineralisation with latest results offering further confidence for further expansion of the Ewoyaa Lithium Project mineral inventory.

*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.

Beowulf Mining* (BEM LN) 2.1p, Mkt Cap £23m – Kallak Project director appointment

• The Company signs up a Project Director for the Kallak Iron Ore Project who is planned to start on 1st May 2024.
• The Company is not disclosing the name at this point due to commercial sensitivities.
• “I am delighted that we have been able to attract such a high-calibre individual to take over the lead role in advancing Kallak… The individual has an excellent academic and professional track record, which perfectly matches the needs of the Company,” CEO Ed Bowie commented on the announcement.
• New director will be responsible for progressing the project through the environmental and technical studies.

*SP Angel acts as Nomad and Broker to Beowulf Mining

Bushveld Minerals* (BMN LN) 1.3p, Mkt Cap £26m – FY23 operations in line with targets with FY24 guidance temporarily suspended

• Q4/23 production amounted to 925mtV at average operating cash cost of (C1) $27.3kgV (Q3/23: 1,000mtV at $26.5/kgV).
• FY23 production totalled 3.7ktV at C1 cash cost of $26.6/kgV (FY22: 3.8ktV at $27.7/kgV), in line with annual guidance of 3.7-3.9ktV at $26.6-26.9/kgV.
  • 2.3ktV at $25.5/kgV at Vametco (FY22: 2.7ktV at $23.7/kgV) reflecting constraints at the barren dam and Sulphate Recovery Plant;
  • 1.4ktV at $27.9/kgV at Vanchem (FY22: 1.1ktV at $37.2/kgV) marking highest annual production since unit acquisition in 2019 despite power supply, feed and other challenges during the year.
• FY23 sales were 4.1ktV (FY22: 3.6ktV) driven by destocking.
• FY24 guidance has been suspended and is expected to be provided with Q1/23 operational update given working capital limitations as the Company awaits the transfer of Southern Point Resources part of the equity raise.
• SPR provided a $2m loan late January as the group worked to complete the $12.5m transfer which it guided to be paid no later than the 28 February.
• The Company had to suspend critical suppliers’ payments and postpone some maintenance projects in the meantime.
• Production in January was 267mtV reflecting working capital constraints including:
  • 142mtV at Vametco with a 25d kiln maintenance in progress (expected to be back online mid-February) and another 10d maintenance shutdown expected in Q3/24;
  • 125mtV at Vanchem due to working capital constraints.
• Market prices continued to pull back amid global growth outlook uncertainty with US/London/China prices averaging $31.6/$26.6/$24.2 per kgV during Q4/23 (Q3/23: $36.0/$31.5/$31.0 per kgV, respectively).
• The Company continued to prioritise sales into higher margin markets (aerospace, specialty alloys, chemicals; North America).
• Robbie Taylor joined the Company as non-board interim Finance Director bringing over 27 years of experience as a finance executive in various sectors.
• The Group completed $47.1m Orion convertible loan refinancing last week alleviating one of the major liquidity pressures on its balance sheet.

Conclusion: FY23 production comes within guidance with unit costs helped by performance at Vanchem that reported the strongest annual output since unit acquisition in 2019 as well as a depreciation in SA rand (-11%yoy). On a downside, FY23 is off to a weak start with monthly production rates running significantly below previously targeted rates (200mtV at Vametco and 180mtV at Vanchem) due to working capital constraints as the Group awaits the transfer of $12.5m from Southern Point Resources. The team is expecting to provide FY24 guidance once funding comes through.

*SP Angel act as nomad and broker to Bushveld Minerals

Cornish Metals* (CUSN LN) 10.9p, Mkt Cap £54m – Carn Brea South drilling confirms Wide Formation exploration model and discovers new high grade structures

BUY – 48p/s

CLICK FOR PDF

• The Company released assays from the first six drill holes of the ongoing 9,000m campaign at the Carn Brea South target area at the South Crofty Tin Project area.
• The programme is designed to the geometry and continuity of the tin mineralisation within the Wide Formation running parallel and below the Great Flat Lode.
• Wide Formation is estimated to extend over an area measuring 2,500m along strike (northeast to southwest) and 525m downdip to the southeast.
• Drilling to date intersected the Great Flat Lode and Wide Formation structures where expected confirming continuity of the structure over a ~1,600m strike length, 525m down dip and withs of 1.8-4.8m.
• Drilling also intersected a new mineralised structure running just below the Great Flat Lode (named the Great Flat Lode Splay) and a number of high grade steeply dipping tin zones between the Great Flat Lode and the Wide Formation.
• Wide Formation selected intersections:
  • 1.21m grading 0.87% Sn from 703m in CB23_004
  • 1.90m grading 0.83% Sn from 550m in CB23_006
• Great Flat Lode Splay selected intersections:
  • 3.38m grading 1.01% Sn from 227m in CB23_002
  • 1.00m grading 1.56% Sn from 259m in CB23_004
• New tin zones intersected in between of the Great Flat Lode and the Wide Formation:
  • 0.30m grading 7.48% Sn from 442m and 3.09m grading 1.21% Sn from 608m in CB23_001
  • 1.21m grading 1.83% Sn from 528m in CB23_004
  • 3.06m grading 0.93% Sn from 351m in CB23_005
  • 1.17m grading 0.62% Sn from 152m in CB23_006
• A 14 hole (9,000m) drilling programme started in Q3/23 with two drill rigs currently on site testing the Wide Formation along strike.

*SP Angel acts as Nomad and Broker. The SP Angel analyst formerly worked in the South Crofty tin mine in the 1980s and holds shares in Cornish Metals.

Empire Metals* (EEE LN) 10.1p, Mkt Cap £62m – Resource and metallurgical drilling to start at Pitfield discovery

(Empire holds 70% of Pitfield, Century Minerals, which is run by two geologists holds the other 30%. One of these geologists works for Empire.)

• The Company launches exploration and resource drilling at the Pitfield Project in Western Australia.
• Drilling is comprised of 40 RC drillholes (6,000m) and four diamond drillholes (800m) as the team is focused on collecting data for a maiden MRE and processing flowsheet design.
• The programme will start this month and scheduled over a ten-week campaign.
• Diamond drilling to start in February and test two known zones of thick, shallow sandstone rich beds hosting higher grade TiO2 mineralisation.
• Collected samples will be used for mineralogical and metallurgical studies to identify optimal flowsheet design.
• The team is also expecting to build a pilot treatment plant in 2025 as part of an accelerated development plan.
• Reverse circulation drilling to start in March to both infill drill two known areas of mineralisation for resource evaluation work as well as step out and test other targets within the license area.
• Additionally, the Company reports it secured approval for exploration funding from the WA state Exploration Incentive Scheme (EIS) for an initial value of up to A$110k to be used for diamond drilling campaign.
• State backing serves as a recognition from authorities of the importance of the project with titanium listed as a critical mineral by the Australian Government.
• The team is planning to reapply for additional funding under the EIS that is awarded on a six monthly cycle.

*SP Angel acts as nomad and broker to Empire Metals

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

SP Angel                                                            

Prince Frederick House

35-39 Maddox Street London

W1S 2PP

*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.

DISCLAIMER

This note is a marketing communication and comprises non-independent research. This means it has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of its dissemination.

This note is intended only for distribution to Professional Clients and Eligible Counterparties as defined under the rules of the Financial Conduct Authority and is not directed at Retail Clients.

This note is confidential and is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published in whole or in part, for any purpose.

This note has been issued by SP Angel Corporate Finance LLP (‘SPA’) to promote its investment services. Neither the information nor the opinions expressed herein constitutes, or is to be construed as, an offer or invitation or other solicitation or recommendation to buy or sell investments. The information contained herein is based on sources which we believe to be reliable, but we do not represent that it is wholly accurate or complete. All opinions and estimates included in this report are subject to change without notice. It is not investment advice and does not take into account the investment objectives and policies, financial position or portfolio composition of any recipient. SPA is not responsible for any errors or omissions or for the results obtained from the use of such information. Where the subject of the research is a client company of SPA we may have shown a draft of the research (or parts of it) to the company prior to publication to check factual accuracy, soundness of assumptions etc.

Distribution of this note does not imply distribution of future notes covering the same issuers, companies or subject matter.

Where the investment is traded on AIM it should be noted that liquidity may be lower and price movements more volatile.

SPA, its partners, officers and/or employees may own or have positions in any investment(s) mentioned herein or related thereto and may, from time to time add to, or dispose of, any such investment(s).

SPA is registered in England and Wales with company number OC317049.  The registered office address is Prince Frederick House, 35-39 Maddox Street, London W1S 2PP.  SPA is authorised and regulated by the UK Financial Conduct Authority and is a Member of the London Stock Exchange plc.

MiFID II – Based on our analysis we have concluded that this note may be received free of charge by any person subject to the new MiFID II rules on research unbundling pursuant to the exemptions within Article 12(3) of the MiFID II Delegated Directive and FCA COBS Rule 2.3A.19.

A full analysis is available on our website here http://www.spangel.co.uk/legal-and-regulatory-notices.html. If you have any queries, feel free to contact our Compliance Officer, Tim Jenkins (tim.jenkins@spangel.co.uk).

SPA research ratings – Based on a time horizon of 12 months: Buy = Expected return of more than 15%, Hold = Expected return between -15% and +15%, Sell = Expected return of less than 15%