SP Angel Morning View -Today’s Market View, Wednesday 13th March 2024

Nickel shows signs of life as Indonesian exports slide on permit approval delays

MiFID II exempt information – see disclaimer below

Anglesey Mining (AYM LN) – Assay results from drilling at Parys Mountain

Anglo American (AAL LN) – Expecting a gradual recovery in rough diamond demand in 2024

Anglo Asian Mining* (AAZ LN) – Sustainability Committee established

Cora Gold (CORA LN) – convertible loan notes repayment

Great Southern Copper (GSCU LN) – Scout drilling results from the Teresita and Abundante prospects, Chile

Liontown Resources (LTR AU)– A$550m debt facility supports continued development of Kathleen Valley Lithium Project

Power Metal Resources* (POW LN) – Disposal of Victoria gold interest to JV partner

Sovereign Metals* (SVML LN) – Interims highlight Kasiya development progress and Rio Tinto investment

Syrah Resources (SYR AU) – Equity raise to support AAM ramp up amid constrained Balama sales demand

Nickel shows signs of life as Indonesian exports slide on permit approval delays

• Nickel hit four-month highs, climbing to $18,500/t.
• The metal has been supported by slower permit approvals by government officials for mining in Indonesia.
• China is also considered to have cooled its destocking period which helped weigh on prices last year.
• Supply remains buoyant, however, with Indonesia boosting output c.30% yoy as laterite products continue to flow to China.

Iron ore holds lower as Chinese steel mills cut output and inventories rise

• Iron ore continues to hold below $110/t in China, having suffered a near 25% fall since January.
• Chinese steel analysts remain downbeat, with reports suggesting 11 major steel mills have slashed prices, with margins expected to remain thin for the foreseeable future.
• However, China iron ore imports and consumption stood at record highs last year, with steel exports to India and Southeast Asia offsetting weakness in China’s property sector.
• Caixin reports steel production in steel hub Yunnan province has started to decline amid rising costs.
• Major Chinese steel mills saw profits fall 12% last year.

US looks to boost deep sea mining interests with new bill

• The WSJ reports a new US bill intended to advance ‘American interests in deep-sea mining.’
• Two Republican lawmakers are reportedly proposing the ‘Responsible Use of Seafloor Resources Act of 2024.’
• Shares in TMC, which holds rights over three nodule contract areas in the Pacific, jumped 30% on the news.

Gold pares gains on hotter-than-expected US CPI data

• Gold prices have eased to $2,150/oz, down from highs of $2,190/oz.
• The move followed a bounce in US Treasury yields after the US CPI report, which showed another sticky inflation reading.
• The reading is likely to add pressure to the Fed to offer a more hawkish tone than seen at Powell’s hearing earlier this month and the dovish focus of the December meeting.

Economics

US – US$ index and bond yields climbed on stronger than expected inflation data released yesterday.

• Both headline and core measures came ahead of market estimates with investors revising their expectations on first rate cut timing.
• Surprisingly, US equity markets were little affected with both S&P 500 and Nasdaq closing higher on the day.
• CPI (%mom):0.4 v 0.3 January and 0.4 est.
• Core CPI (%mom): 0.4 v 0.4 January and 0.3 est.
• CPI (%yoy): 3.2 v 3.1 January and 3.1 est.
• Core CPI (%yoy): 3.8 v 3.9 January and 3.7 est.

UK – The economy registered modest growth in January in line with estimates after falling into a technical recession in H2/23.

• Growth was driven by services and construction compensating for a drop in industrial production.
• The data suggests the economy may print a positive GDP reading Q1/24 in a boost to Conservatives ahead of general elections.
• The pound is trading slightly down this morning with GDP numbers doing little in terms of revising expectations for a rate cut in August.
• GDP (%mom): 0.2 v -0.1 December and 0.2 est.
• GDP (%3m/3m): -0.1 v -0.3 December and -0.1 est.

Ukraine/Russia – Ukrainian drones hit Russia’s largest oil refinery in Ryazan, ~200km southeast of Moscow, operated by Rosneft.

• The facility has a capacity of 17.1mt per annuum or ~340kbbl per day.
• t’s the second casualty of Ukrainian strikes that have damaged facilities accounting for more than 10% of Russia’s oil-processing capacity in the past two days, Bloomberg reports.

Argentina

• CPI (%mom): 13.2 v 20.6 January and 15.0 est.
• CPI (%yoy): 276.2 v 245.2 January and 282.1 est.

Currencies

US$1.0931/eur vs 1.0930/eur previous. Yen 147.70/$ vs 147.68/$. SAr 18.689/$ vs 18.688/$. $1.280/gbp vs $1.280/gbp. 0.661/aud vs 0.661/aud. CNY 7.194/$ vs 7.194/$.

Dollar Index 102.93 vs 102.93 previous.

Commodity News

Gold US$2,159/oz vs US$2,177/oz previous

Gold ETFs 81.9moz vs 81.9moz previous

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

Palladium US$1,056/oz vs US$1,027/oz previous

Silver US$24.23/oz vs US$24/oz previous

Rhodium US$4,525/oz vs US$4,500/oz previous

Base metals:   

Copper US$ 8,739/t vs US$8,648/t previous

Aluminium US$ 2,274/t vs US$2,257/t previous

Nickel US$ 18,495/t vs US$18,355/t previous

Zinc US$ 2,579/t vs US$2,575/t previous

Lead US$ 2,156/t vs US$2,139/t previous

Tin US$ 27,560/t vs US$27,660/t previous

Energy: 

Oil US$82.3/bbl vs US$82.6/bbl previous

• Crude oil prices were broadly unchanged after the EIA increased forecast average FY24 US production by 0.1mb/d to 13.19mb/d and the API reported a 5.5mb w/w draw to US crude stocks (+0.4mb build exp).
• European energy prices are also rangebound with French nuclear reactor operating levels reported flat w/w at 69% of 61.4MW capacity and Gazprom reporting stable supply of 42.4mcm/d (~1.5bcf/d) via the Ukraine.
• NewMed Energy announced the suspension of talks with BP and ADNOC to acquire 50% of its equity due to “uncertainty in the external environment” caused by the ongoing war in Gaza.
• CNX announced a $50m (-9%) reduction to the 2024 capex budget, which removes 80mmcf/d (-5%) from the previously guided average FY24 production forecast due to weak near-term North American natural gas prices.
• E.ON announced plans a 30% increase in planned investments across Europe (70% in Germany) from €33bn to €42bn for the years 2024 to 2028, focusing on energy networks and energy infrastructure solutions.

Natural Gas €25.3/MWh vs €24.9/MWh previous

Uranium Futures $89.0/lb vs $90.5/lb previous

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$108.8/t vs US$107.8/t

Chinese steel rebar 25mm US$556.2/t vs US$558.9/t

Thermal coal (1st year forward cif ARA) US$105.3/t vs US$105.3/t

Thermal coal swap Australia FOB US$131.0/t vs US$133.5/t

Other:  

Cobalt LME 3m US$28,550/t vs US$28,550/t

NdPr Rare Earth Oxide (China) US$48,372/t vs US$48,367/t

Lithium carbonate 99% (China) US$14,942/t vs US$14,566/t

China Spodumene Li2O 6%min CIF US$1,120/t vs US$1,090/t

Ferro-Manganese European Mn78% min US$985/t vs US$985/t

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

China Graphite Flake -194 FOB US$535/t vs US$540/t

Europe Vanadium Pentoxide 98% 5.6/lb vs US$5.7/lb

Europe Ferro-Vanadium 80% 27.25/kg vs US$27.45/kg

China Ilmenite Concentrate TiO2 US$327/t vs US$327/t

Spot CO2 Emissions EUA Price US$55.4/t vs US$55.1/t

Brazil Potash CFR Granular Spot US$297.5/t vs US$297.5/t

Battery News

Germany sees slow start for EV sales in 2024

• 36,868 EVs were registered in Germany in January, up 42% yoy, but down 9% from January 2022.
• January 2023 sales were easy to surpass as sales tanked due to the end of PHEV subsidies.
• EVs accounted for 17% of Germany’s new car deliveries in January, 5% below its share in January 2022.

EV ownership to save consumers thousands over ICE counterparts

• Atlas Public Policy on behalf of the Natural Resource Defence Council (NRDC) have published a new report highlighting that owning an EV over an ICE vehicle will save owners money.
• The study compared five 2024 EV models against their popular gasoline ICE counterparts based on their total cost of ownership.
• Total Cost of Ownership (TCO) was calculated over the 7-year average ownership period of a vehicle and includes original purchase price, fuel, maintenance, insurance, taxes and fees, minus the expected resale value.

• • Compact Sedan: ICE 7y-TCO $42,348 vs EV 7y-TCO $31,768.   $10,581 saving.
  • Compact SUV: ICE 7y-TCO $44,209 vs EV 7y-TCO $37,110.   $7099 saving.
  • SUV: ICE 7y-TCO $48,286 vs EV 7y-TCO $43,925.    $4361 saving.

New production methods to make BEV production cheaper than ICE vehicles by 2027

• According to research firm Gartner, BEVs will be cheaper to produce on average than those with internal combustion due to new manufacturing processes.
• As automakers strive to produce lower-cost BEVs, they have quickly developed new technologies, like Tesla’s Gigacasting, to pave the way for cheaper production.
• These new developments have simplified and accelerated production and centralised vehicle architecture which have all led to lower costs.

Company News

Anglesey Mining (AYM LN) 1.35p, Mkt Cap £5.7m – Assay results from drilling at Parys Mountain

• Anglesey Mining, which, in February, reported the intersection of visible sulphide mineralisation over an interval of 107m in its infill hole NCZ-002 at Parys Mountain, has now released assay results for the hole’s intersection of the Northern Copper Zone (NCZ).
• The company highlights two mineralised intersections in hole NCZ-002:

• • A 65m wide zone at an average grade of 0.9% copper, 0.1% lead, 4.2g/t silver and 0.17g/t gold (reported as 1.0% on a copper equivalent basis) from a downhole depth of 426m; and
  • A deeper, 31.5m wide, zone at an average grade of 1.4% copper, 3.5g/t silver and 0.44g/t gold from a depth of 508.5m

• Each of these intersections contain higher grade zones and the company says that the results “demonstrate good continuity with previous drilling results and further support the integrity of the geological model and drill targeting”.
• A third drillhole, NCZ-003, is currently at a depth of “around 450 metres … targeting the up-dip area above historical hole H17A and could potentially provide additional information relating to the key lithology Rhyolite B, which included an intersection of 9.2m @ 2.7% CuEq in drill hole A15”.
• Anglesey Mining confirms that it “is targeting a resource update on the NCZ, with the aim of converting a significant portion of the Inferred Resource into the higher confidence Indicated category” which can be used as the basis of a mineral reserves estimate under JORC guidelines.
• The current resource estimate for Parys Mountain is “5.3 million tonnes at over 4.0% combined base metals in the Measured and Indicated categories and 10.8 million tonnes at over 2.5% combined base metals in the Inferred category”.

Conclusion: Infill drilling at Parys Mountain is confirming the geological interpretation and laying the basis for a forthcoming revision to the mineral resources estimates.  We await the results from the current drillhole and the new resources estimate with interest.

Anglo American (AAL LN) 1,858p, Mkt Cap £25bn – Expecting a gradual recovery in rough diamond demand in 2024

• Anglo American reports that, provisionally, the second De Beers sales cycle of 2024 realised US$430m and that the previously reported provisional sales of US$370m for the first sales cycle of 2024 have now been confirmed at the higher level of US$374m.
• Provisionally, after the first two sales cycles of 2024 sales of US$804m are approximately 15% lower than the US$951m achieved at the same stage in 2023.
• Al Cook, CEO of the De Beers Group, welcomed “a further increase in demand for De Beers rough diamonds during the second sales cycle of 2024”.
• He cautioned that “ongoing economic uncertainty in the US has led to retailers restocking conservatively after the 2023 holiday season. Consumer demand for diamond jewellery is growing in India but remains sluggish in China” and said that the “recovery in rough diamond demand will be gradual as we move through the year”.

Anglo Asian Mining* (AAZ LN) 55p, Mkt Cap £62m – Sustainability Committee established

BUY

• The Company establishes a Sustainability Committee to ensure adherence to responsible development and mining practices.
• The initiative reflects team’s dedication to operational safety, sustainable practices, environmental stewardship and community engagement.

*SP Angel acts as nomad and broker to Anglo Asian Mining

Cora Gold (CORA LN) 1.9p, Mkt Cap £9m – $13.0m convertible loan notes repayment

• The Company repaid $13.0 worth of outstanding convertible loan notes as instruments matured on 12 March 2024.
• In line with agreement, the Company paid 5% premium to the total amount outstanding.
• Earlier in February the Company converted $2.3m worth of loan notes into new shares at $2.8c per share.
• The Company is now debt free with ~$2.9m in cash on its balance sheet.
• The team is awaiting suspension of the current moratorium on new mining permits and is planning to apply for the license once it is lifted.

Great Southern Copper (GSCU LN) 2.65p, Mkt Cap £9.3m – Scout drilling results from the Teresita and Abundante prospects, Chile

• Great Southern Copper reports early-stage results from its scout, reverse-circulation (RC) drilling programme at the Teresita and Abundante prospects located within its Especularita project area in Chile.
• The recently completed drilling comprised 15 RC holes totalling 1,018m including 534m (9 holes) at Teresita and 484m (6 holes) at Abundante to follow up targets identified by surface geological mapping and geochemical rock chip sampling.
• Among the results highlighted in today’s announcement are

• • An intersection of 20m at an average grade of 0.57g/t gold, 5.48g/t silver and 0.43% copper from a depth of 35m in hole ESP23-RC010 at Teresita: and
  • 17m at an average grade of 0.52% copper from a depth of 24m in hole ESP23-RC002at Abundante.

• The company confirms that it will “await the final results of the scout drilling before making definitive plans for follow-up exploration at Teresita and Abundante” but says that the results have “confirmed the IRGS … [Intrusion-related gold system] … model type for mineralisation at Teresita where high-grade gold and copper is hosted in quartz-sulphide veins that are over-printed near surface by late-stage carbonate veining”.
• CEO, Sam Garrett, welcoming the results which “have exceeded our expectations and, more importantly, confirm the target models that we have developed from our surface exploration work to date” said that “the same style of IRGS mineralisation has been discovered at the Victoria prospect … [and the results] … indicate that GSC’s Especularita project hosts at least two of these large-scale, high-grade IRGS systems”.

Conclusion: Initial scout drilling results provide encouragement that the Especularita project may host large scale mineralised systems. We await news of the company’s follow up exploration plans when the full scout drilling results have been received and assessed.

Liontown Resources (LTR AU) A$1.4, Mkt cap A$3.5bn – A$550m debt facility supports continued development of Kathleen Valley Lithium Project

• Australian spodumene developer has raised A$550m in a new debt facility for the development of its Kathleen Valley Lithium Project.
• The Company had previously seen its debt package withdrawn on estimates of lower-for-longer spodumene prices.
• Management states the funding will ensure the ramp up to 3mtpa base production capacity.
• The Company will also look to provide a review update on its 4mtpa expansion.
• Additional debt funding will be sought for an expansion.
• First production remains on schedule for middle of 2024.
• The Facility will be used to refinance the Ford Facility, fund Kathleen Valley costs, interest and working capital requirements.
• The facility matures on 31^st October 2025 and is senior secured. Interest is capitalised up to A$40m capitalisation sublimit.

Conclusion: The facility buys Liontown time to ramp up Kathleen Valley spodumene mine following the withdrawal of a A$760m facility a few months ago. Rising lithium prices have supported Kathleen Valley’s prospects, although a strategic review of operations is ongoing and expected to be released in June.

Power Metal Resources* (POW LN) 0.82p, Mkt cap £18m – Disposal of Victoria gold interest to JV partner

• Power Metal Resources announces it has agreed Heads of Terms with Red Rock Resources to transfer ownership of their New Ballarat Gold assets.
• The HoT agreement will see POW dispose of its 49.9% interest in the asset, alongside POW’s interests in loans to both NBGC and RRAL, for consideration up to £1.5m.
• The £1.5m consideration is payable upon certain milestones, with six tranches of £250k payments due upon various considerations.
• The first tranche will be due six months following execution of the HoT, in the form of convertible loan notes or cash should conversion not be undertaken within six months.
• A subsequent tranche will be due in 167m RRR shares at 0.15p and an equal number of warrants exercisable at 0.25p over a 3 year expiry.
• £250k will be payable in cash upon two months of completion.
• A subsequent £250k tranche will be payable in RRR shares nine months after completion, alongside warrants at a 50% premium.
• £250k shares will then be payable on the declaration of a JORC/equivalent resource of a 20kGEO resource, either paid in shares of cash.
• Another £250k tranche will be payable on the delivery of a 200kGEO resource, also either in shares or cash.
• POW will retain a Gross Production Royalty of 0.75%.

Conclusion: Power Metals has continued their opportunistic approach to value crystallisation from their large portfolio of early-stage exploration assets. Management believes the disposal will enable POW to focus its ‘managerial, operational and financial resources on retained high value business interests.’ We concur and the injection of £250k cash from the disposal, alongside RRR stock or cash payments up to $1.25m, further reinforces POW’s balance sheet and provides optionality in case of positive exploration results.

*SP Angel acts as Nomad and Broker for Power Metal Resources

Sovereign Metals* (SVML LN) 24.0p, Mkt Cap £138m – Interims highlight Kasiya development progress and Rio Tinto investment

(Sovereign currently holds 100% of the Kasiya project. The government has a right to a 10% free carry in the project)

STRONG BUY – Valuation 55p

• Interims highlight the release of the Kasiya Rutile/Graphite Project PFS in September and a ~A$41m Rio Tinto equity investment in July.
• PFS delivered attractive project economics including $1.6bn and 28% NPV8 and IRR (both post tax).
• Kasiya is the world’s largest rutile deposit with more than double the contained rutile compared to the nearest rutile peer.
• The project hosts 1.8Bt at 1.0% rutile for 17.9mt natural rutile (in-situ) and 24.4mt graphite.
• Maiden reserves released with the PFS were estimated at 538mt for a 25y life of mine representing only 30% of total resource and strong potential to further expand scale of the project.
• Rio Tinto acquired an initial strategic interest of 15% for a $40.6m investment with an option to increase it to 19.99% within 12 months.
• The Company are currently conducting various test work programmes and field activities as they look to optimise the asset following the encouraging PFS.
• The team is conducting product qualification and test work on graphite samples for a potential supply into anode market de-risking Kasiya co-product revenue stream.
• Frank Eager was promoted to MD and CEO from his previous role as GM in Malawi replacing Dr Julian Stephens who moved to a NED role.
• Loss during the period amounted to A$7.0m (H1/FY23: -A$8.5m) with A$5.0m accounting for expensed exploration costs (H1/FY23: -A$5.8m).
• Closing cash balance stood at A$39.4m with no debt as of Dec/23.

*SP Angel act as Nomad and broker to Sovereign Metals.

Syrah Resources (SYR AU) A$0.7, Mkt cap A$475m – Equity raise to support AAM ramp up amid constrained Balama sales demand

• Natural graphite producer Syrah Resources announces it is raising US$65m in an underwritten placement, alongside a 1 for 10.2 pro rate accelerated non-renounceable entitlement offer.
• Shares will be issued at A$0.55/share, a 21% discount to closing price yesterday.
• The A$98m raise will be split $61m placement and $37m non-renouncement entitlement offer.
• AustralianSuper will take up its pro-rate entitlement, taking its equity stake in Syrah over 30%.
• AusSuper will also convert their Series 1 and 3 notes at a revised conversion price of A$0.6688/share.
• The raise will boost Syrah’s cash position to US$148m.
• Syrah’s Series 1 and 3 notes were maturing in October 2024, with a potential redemption requirement of up to A$122m.
• Syrah will use the funds to fund operating costs from the Vidalia anode facility and ‘operational reserve accounts associated with the DOE loan.’
• The Company will also use funds to support Balama’s working and sustaining capital requirements.
• Funds will also be used to progress towards FID on the Vidalia anode material plant’s 45ktpa expansion.
• Balama production continues to be curtailed, with the Company reporting constrained demand from Chinese anode customers following export controls.
• Natural graphite fine prices are reportedly pressured by ‘uncertainty in export licencsing implementation.’
• Syrah is targeting production volumes of 10ktpm on average, subject to customer demand and price levels. (Production in 4Q24 was 20kt)
• Syrah reported an average sales price of US$490/t in Q4 vs C1 costs of US$534/t.
• The Company is targeting majority sales to ex-China consumers by 2026,.

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                                                            

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35-39 Maddox Street London

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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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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%