SP Angel Morning View -Today’s Market View, Friday 10th May 2024

Gold pushes higher as rate cut optimism resurfaces as the labour market cools

MiFID II exempt information – see disclaimer below

Amur Minerals* (AMC LN) Suspended – Final Results as RTO nears completion

Anglo American (AAL LN) – Shareholders open to sweetened offer from BHP

Kavango Resources* (KAV LN) – Assays from Hillside Prospect

Mkango Resources* (MKA LN) – Management renumeration restructuring

Piedmont Lithium (PLL US) – Q1 Results as nameplate capacity targeted for H2

Savannah Resources* (SAV LN) – FLASH NOTE– Major rerating catalysts due over the next 12 months

Gold pushes higher as rate cut optimism resurfaces as labour market cools

• Gold prices have resumed their upward trend, with prices up 3% this week to $2,374/oz in the spot market.
• Yields have marched lower, moving to below 4.5% having hit 4.75% recently on the 10 year.
• This has eased the dollar’s momentum, with the greenback sliding this week.
• Rate cut hopes have resurfaced after the NFP miss last week, compounded by a rise in unemployment benefit claims reported yesterday.
• Key inflation data will be watched closely next week, with PPI and CPI data due.

Economics

US – Soft weekly jobless numbers released Thursday helped rates and the US$ lower strengthening risk sentiment.

• The highest reading in nearly nine months supported the case for rate cuts.
• April inflation numbers are expected to be released next week with market expectations for a gradual slowdown in headline and core CPIs to 3.4% and 3.6%, respectively, down from 3.5% and 3.8% in March.
• San Francisco Fed President May Daly, a voting FOMC member, said that it may take “more time” to return inflation to the central bank’s 2% target.
• “We are restrictive, but it might take more time to just bring inflation down,” Daly said Thursday.
• “There’s considerable now uncertainty about what the next few months of inflation will be and what we should do in response.”

UK – The economy posted stronger than expected growth in Q1/24 with the first quarterly increase in three quarters implying exit from recession.

• The announcement represents a welcome bit of news for the ruling Conservative Party that is widely expected to lose general elections due later this year.
• Household consumption recovered during the quarter, although, major contribution came from a sharp drop in imports during the period helping net trade balance.
• Separately, the central bank left rates unchanged at 5.25%, in line with expectations, yesterday while signalling rate cuts “over the coming quarters”.
• A 25bp cut “is neither ruled out nor a fait accompli” Governor Andrew Bailey said during the press conference.
• Markets are fully pricing a rate cut as early as August with a more than 60% chance of cut coming earlier in June.
• Investors will be closely watching two set of inflation and labour data before the next vote on June 20.
• GDP (%qoq, Q1/Q4/Est): 0.6/-0.3/0.4
• GDP (%yoy, Q1/Q4/Est): 0.2/-0.2/0.0

Currencies

US$1.0783/eur vs 1.0732/eur previous. Yen 155.68/$ vs 155.84/$. SAr 18.420/$ vs 18.526/$. $1.254/gbp vs $1.248/gbp. 0.662/aud vs         0.658/aud. CNY 7.224/$ vs 7.226/$.

Dollar Index 105.25 vs 105.67 previous.

Precious metals:         

Gold US$2,369/oz vs US$2,313/oz previous

Gold ETFs 80.6moz vs 80.6moz previous

Platinum US$991/oz vs US$983/oz previous

Palladium US$983/oz vs US$954/oz previous

Silver US$28.60/oz vs US$28/oz previous

Rhodium US$4,725/oz vs US$4,725/oz previous

Base metals:   

Copper US$ 10,065/t vs US$9,862/t previous

Aluminium US$ 2,585/t vs US$2,557/t previous

Nickel US$ 19,120/t vs US$18,755/t previous

Zinc US$ 2,950/t vs US$2,875/t previous

Lead US$ 2,248/t vs US$2,220/t previous

Tin US$ 33,070/t vs US$32,265/t previous

Energy:           

Oil US$84.5/bbl vs US$84.2/bbl previous

Natural Gas €31.0/MWh vs €30.7/MWh previous

• US Henry hub gas prices continued to rise after the EIA reported a 79bcf w/w build to 2,563bcf, with storage levels falling slightly to 21% above last year and 33.3% above the 5-year average.

Uranium Futures $93.4/lb vs $93.2/lb previous            

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$115.1/t vs US$114.6/t

Chinese steel rebar 25mm US$534.8/t vs US$533.5/t

Thermal coal (1st year forward cif ARA) US$113.0/t vs US$112.0/t

Thermal coal swap Australia FOB US$142.7/t vs US$145.5/t

Hard Coking Coal Australia FOB US$326.0/t vs US$326.0/t           

Other:  

Cobalt LME 3m US$27,830/t vs US$27,830/t

NdPr Rare Earth Oxide (China) US$56,201/t vs US$56,188/t

Lithium carbonate 99% (China) US$14,881/t vs US$15,016/t

China Spodumene Li2O 6%min CIF US$1,230/t vs US$1,240/t

Ferro-Manganese European Mn78% min US$972/t vs US$972/t

China Tungsten APT 88.5% FOB US$343/mtu vs US$340/mtu

China Graphite Flake -194 FOB US$475/t vs US$480/t

Europe Vanadium Pentoxide 98% 5.1/lb vs US$5.1/lb

Europe Ferro-Vanadium 80% 26.35/kg vs US$26.35/kg

China Ilmenite Concentrate TiO2 US$326/t vs US$326/t

China Rutile Concentrate 95% TiO2 US$1,405/t vs US$1,405/t

Spot CO2 Emissions EUA Price US$69.6/t vs US$69.6/t

Brazil Potash CFR Granular Spot US$305.0/t vs US$305.0/t

Battery News

US poised to unveil new tariffs on Chinese EVs

• The US government is set to impose new, targeted tariffs on some key sectors, including Chinese EVs, batteries and solar equipment, as soon as next week (Bloomberg)
• Biden’s administration is expected to maintain current levies, and focus on targeting key strategic sectors, rather than increasing levies across-the-board.
• Reuters reported yesterday that the US could take “extreme action” by banning Chinese connected cars or imposing restrictions on them.
• Relatively few Chinese-made EVs have been imported into the US due to looming geopolitical concerns.

BYD sodium battery joint venture progressing

• The battery maker is progressing well with its sodium-ion battery joint venture as it pushes for the commercialisation of lower-cost batteries.
• BYD signed the agreement with Huaihai Holding Group in November 2023.
• The joint venture is 51% owned by BYD’s battery unit FinDreams, with local conglomerate Huaihai holding the remaining 49%.
• The JV’s scope of operations will include battery manufacturing and sales, recycling and utilisation of used batteries.
• The project is expected to receive RMB 10bn (US$1.38bn) and a planned annual capacity of 30GWh.

Nio sees 500,000^th EV roll off production line

• Nio’s 500,000th mass-produced vehicle was an ES8, built at NeoPark in Hefei, Anhui province.
• Nio was founded in November 2014, and its first production vehicle was also an ES8, which was released on December 16, 2017.
• The automaker saw its 100,000^th EV roll off the line in April 2021, and its 200,000^th a year later in April 2022.
• The company’s 300,000th vehicle rolled off the line on December 2022, and was delivered in February 2023.
• In November 2023, Nio delivered its 400,000th vehicle.

Tata Motors launches Ace EV1000 for last-mile mobility

• The mini-truck offers a 1 tonne payload with a range of 161km on a single charge.
• It is powered by a 27kW (36hp) motor with 130Nm of peak torque.
• Vinay Pathak, Vice President at Tata Motors Commercial Vehicles said they are “confident that the Ace EV 1000 will contribute to a greener future while delivering superior value and low cost of ownership.”

Company News

Amur Minerals* (AMC LN) Suspended – Final Results as RTO nears completion

• Amur Minerals provide their audited final results for the year to 31^st December 2023.
• The Company sold its Kun Manie nickel asset for a total consideration of $35m.
• This enabled a one-time special dividend of 1.8p/share.
• Amur holds $4.4m in cash cat the time of reporting, with no debt.
• Amur is now working towards the completion of the previously announced RTO.
• Amur has signed a heads of terms agreement to acquire a UK-based healthcare firm working on innovative drug delivery technology.
• The Target is working on technology to enhance the efficacy of cancer treatments through localised chemotherapy delivery.
• The final steps of the RTO process are nearing an Amur expects an AIM Admission Document to be published this month.

*SP Angel act as Nomad and Broker to Amur Minerals

Anglo American (AAL LN) 2,781p, Mkt Cap £34bn – Shareholders open to sweetened offer from BHP

• Shareholders representing a 15% ownership of Anglo have told the FT they would be open to a sweetened offer in principle.
• The Chair of 8.4% shareholder PIC has told the FT that the fund would ‘look favourably on a higher offer.’
• Concerns have been raised over BHP’s condition of spinning out Kumba and Amplats, with shareholders demanding an additional premium for the complication.

Kavango Resources* (KAV LN) 1.3p, Mkt Cap £20m – Assays from Hillside Prospect

• Kavango Resources provides assay results from their Prospect 3 Gold Project in Zimbabwe.
• The hole was intended to target mineralisation lying below various artisanal workings on site.
• Kavango drilled the hole to a depth of 301m, intersecting several shear zones of gold bearing quartz veins and sulphide mineralisation.
• Highlights from hole NSDD001 include:

• • 5m at 1.68g/t Au from 97m
  • 1m at 2.14g/t Au from 148m
  • 1m at 3.1g/t au from 156m.
• The Company now believes the deformation zone between Prospects Two and Three runs over 600m in width.
• The tea is now looking to use ground IP to identify the extent of the geophysical anomalies to further their understanding of the broad shear zone.
• Further drilling is being planned to gauge potential continuity between Prospects 1 and 2.

An SP Angel Analyst holds shares in Kavango

Mkango Resources* (MKA LN) 6.7p, Mkt Cap £18m – Management renumeration restructuring

• The Company reviewed compensation arrangements to conserve additional working capital to advance its portfolio of assets.
• Executive management salaries were reduced by 25-50% from April 2024 through to September 2024.
• Non executive directors have foregone their renumeration from 1 January 2024.
• 4.0m new RSUs were issued, in line with the RSU plan adopted by the Company in Oct/23, to William Dawes (1.5m), Alexander Lemon (1.5m) and Robert Sewell (1.0m) with units exchangeable, on vesting, for one common share.
• RSUs issued to William Dawes and Alexander Lemon will not vest until first commercial sales of recycled NdFeB using patented HPMS technology at Tyseley Park.

*SP Angel acts as nomad and broker to Mkango Resources

Piedmont Lithium (PLL US) $13.4, Mkt Cap $262m – Q1 Results as nameplate capacity targeted for H2

• Piedmont Lithium, which is ramping up the NAL spodumene project in Quebec, report their Q1 results.
• The Company sold 15.5kt worth of concentrate over the period, at 5.5% Li20 for an average price of $865/t.
• Realised cost of sales reported at $800/t, which includes the contribution from their offtake with Sayona.
• Piedmont holds offtake rights over Sayona with a floor price of $500/t and a ceiling price of $900/t.
• Adjusted EBITDA of ($12.4m) with cash position of $71.4m at the end of the period.
• The Company sold their stake in Sayona Mining over the period, alongside a portion of their stake in Atlantic Lithium*.
• Recoveries at NAL reportedly hitting record levels at 69%, over the 67% target.
• The Company expects to reach steady state production in the second half of this year.
• Piedmont also received their permit for construction of the Caroline Lithium Project, with funding discussions ongoing.

*SP Angel acts as Nomad and Broker to Atlantic Lithium

Savannah Resources* (SAV LN) 3.5p, Mkt Cap £64m – Major rerating catalysts due over the next 12 months

BUY – 20.8p (from 21.1p)

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• We release an earnings update ahead of what we expect to be a busy 12m period as the team delivers on a series of value accretive catalysts.
• Barroso FS is due by YE24 with the team having now completed just under half of the 13,500m drilling campaign, mostly focused on an infill programme of the existing 28.0mt at 1.05% MRE (~65% M&I) to deliver a maiden reserve estimate.
• Submission of the compliance report required to complete permitting is expected shortly after FS completion with environmental authorities having 50 business days to provide the decision that we expect in Q1/Q2 CY25.
• Strategic partner search launched mid-23 post positive DIA decision is now in the 2nd phase with a shortlist of interested parties carrying out further due diligence.
• FID, funding and construction remains targeted for CY25.
• Independent legal review carried after Public Prosecutor’s ‘Operation Influencer’ investigation announcement found no legal wrongdoings that could lead to legal liabilities in the future, with results acting as a confirmation of the Company’s strong legal standing that should reassure potential partners and investors (well known Portuguese business and media figure, Mario Ferreira, has reported 5% stake post legal review announcement).
• Among 30+ spodumene development/production assets, Barroso ranks well on opex (SPA estimate $424/con (ex by-products credits) vs $538/con average) and capital cost intensities ($187/t throughput v $246/t average) for a good size operation supplying ~190ktpa (~25ktpa LCE) BG SC5.5 over ~14y life of mine.
• Savannah continues to trade at a discount to the median of our selected spodumene producers/developers/explorers pointing to ~100% and ~70% upside on absolute and relative basis. Recent M&A transaction multiples for spodumene projects (>$300/t contained LCE) imply an even a higher premium (3.5x) compared to Company’s current ~$90/t value.
• Hitting $1,000/SC6.0 CIF China in February on the back of destocking across battery cell manufacturers as well as a strong supply response, spodumene prices have recovered some lost ground, currently trading at $1,240/t on continuing strong EV sales and expected restocking.

Valuation: We reiterate our BUY recommendation and 20.8p valuation based on the latest Scoping Study (Jun/23) largely unchanged from previous estimates apart from adjustments to net cash position. We continue to apply flat $1,500/SC5.5 FOB Leixoes (~$1,900/SC6.0 CIF China) equivalent to ~$20,000/t BG LCE within the latest consensus range estimates of $19,000-28,000/t. We adjust Barroso NPV8% (post tax) of $836m by 0.6x risk factor that we expect to revise as the Company delivers on a set of near term milestones

*SP Angel acts as Nomad and Broker to Savannah Resources

No.1 in Base Metals: SP Angel mining team awarded No 1. ranking for Base Metals forecasting in LSEG Quarterly Starmine Award for Reuters Polls 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

SP Angel                                                            

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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%