SP Angel Morning View -Today’s Market View, Friday 24 May 2024

Copper stabilises following volatile trade as Chinese buyers hold off and inventories climb

EV Batteries outlive their cars as degradation concerns evaporate

MiFID II exempt information – see disclaimer below

Goldstone Resources* (GRL LN) – Suspension lifted after fundraising completed

Stellar Resources (SRZ AU) – A$10m raised to drill Heemskirk Tin Project

Sunrise Resources (SRES LN) – Update on Diatomite project royalty

Copper stabilises following volatile trade as Chinese buyers hold off and inventories climb

• Copper prices have now stabilised following a volatile short squeeze in the US, with the metal settling around $10,370/t.
• Copper has fallen c.5% from record highs after profit taking from the sharp rally driven by a concentrate shortage, speculative fervour and smelter capacity cuts in China.
• However, demand remains relatively weak in the metal’s largest market, with Chinese factories unable to pass on higher prices to their end users.
• China inventories at 290kt last week vs LME at 105kt and CME at 18kt, highlighting the divergence and subsequent short squeeze.
• Shanghai exchanges are yet to see a seasonal drawdown in copper inventories, suggesting demand is tepid.
• China refined imports up 17% yoy over the January-April period.
• China Yangshan premium, a gauge of refined import demand, is sitting at -$5/t, its lowest reading since records began in 2013.
• The FOMC minutes poured cold water on the recent metals rally, with base metals sliding across the board.
• The Fed noted that inflation progress to date is insufficient to cut rates, pushing back expectations and seeing bonds sell off.
• MMG is expecting to bring additional production online from Peru, with output expected to reach capacity between 350-400ktpa from Las Bambas.

China to boost cobalt reserves after price rout

• China is looking to buy record cobalt volumes for their state reserves, Bloomberg reports.
• The commodity stockpile authority is reportedly seeking to buy 15kt of refined cobalt.
• Cobalt prices weakened from highs of $83k/t to $27k/t today following an agreement between the DRC and CMOC enabled the sale of stockpiles concentrate.
• Benchmark reported a glut of 14.2kt in 2023, expecting a surplus to remain over the short term.
• The news supports our view that Chinese EV Li-ion battery manufacturers may be moving towards NCM battery chemistries which require cobalt.
• NCM gives better power density and range while LFP batteries are cheaper and heavier with less power density.

EV Batteries outlive their cars as degradation concerns evaporate

• Long-term EV owners are finding their batteries outlast their cars easing initial concerns about battery degradation.
• Surveys indicate newer EV buyers are overcoming initial anxieties on battery life, with 40% of previously concerned respondents changing their minds after experiencing EVs firsthand.
• Seattle-based Recurrent Motors Inc. found EV batteries retained at least 90% of their original range after over 160,000km of driving.
• A Canadian Automobile Association study showed battery degradation concerns dropped from 54% of EV owners before purchase to only 13% afterward.
• Darryl Kolewaski, owner of an all-Tesla taxi fleet in Kelowna, BC, reported only one battery replacement after 430,000km in six years, with significant cost and maintenance savings outweighing the replacement cost of C$13,000.

IEA report projects more than one in five cars sold this year will be electric

• In 2024, over 20% of cars sold will be electric, according to the IEA ‘International Energy Agency’.
• Q1 2024 saw EV sales equivalent to all of 2020’s total sales, with China, the U.S., and Europe leading, and emerging markets like Vietnam, Indonesia, Brazil, and Thailand also seeing rises in EV sales.
• Increased demand and supply of EVs are driven by investments in production and incentives for buyers, such as U.S. tax credits and China’s investment in battery production and charging infrastructure.
• Companies like Honda are investing heavily in EV production, with Honda pledging $11 billion for production in Canada. Major U.S. chains like Walmart, Target, and Subway are planning to build EV charging stations.

China eyes stakes in Zimbabwean state lithium assets

• Kuvimba Resources, state owned Zimbabwean miner, reports that its lithium assets have attracted interest from China.
• The Company has currently identified a 38mt resource at the Sandawana emerald mine previously operated by Rio.
• China has been sourcing various low grade ore from Zimbabwe, in addition to developing the Bikita and Arcadia mines in country.

121 Mining Investment Conference investment Leaders panel: https://youtu.be/OWEASjgXiME?si=ZPzQT-1SnUhXRo0g

IG TV: Gold and Copper. 10/04/2024: https://youtu.be/KuGSbDqWglk?si=-8iikkOHxbbLSnPZ

Sharepickers TV:  Everybody wants copper. 17/05/2024 podcast: https://audioboom.com/posts/8507288-john-meyer-everybody-wants-copper

         Video: https://www.youtube.com/watch?v=XfYNVjIiEs4

*SP Angel almost invariably acts as nomad or broker or nomad and broker to companies mentioned in the above videos and podcasts. We speak more about these companies as we have a good understanding of their business and can talk with a greater degree of confidence. As ever, however, it should be noted that our views do not take into account the circumstances and needs of any particular investor or investor type. So enjoy the talks, but please do your own research, including other companies not mentioned by us but operating in the same areas, and get professional advice where appropriate. SP Angel acts as Broker/Nomad or both for Anglo Asian Mining, Kodal Minerals, Power Metals Resources.

Economics

Eurozone – PMI Manufacturing rose to 47.4 in May from 45.7 in April ahead of market forecasts

• PMI Services unch at 53.3
• PMI Composite increased to 52.3 from 51.7 to a new 12-month high

• The Eurozone is showing firm recovery from the shock of Russia’s invasion of Ukraine and its impact on local energy prices and confidence.
• The ECB has signalled it expects to cut interest rates on 6 June.
• The signal will likely weaken the euro / dollar rate increasing the cost of imports and raising inflation
• ECB growth is now expected at 0.3% through Q2 avoiding recession and indicating potential 1% GDP growth for the full year.

UK – Retails sales volumes fall -2.3% – maybe it was the weather?

• The figures were substantially worse than expectation of -0.6%.
• Ongoing high mortgage rates are taking their toll on households where fixed rate deals are coming to an end.
• While domestic electricity prices have pulled back they still remain stubbornly high, though Fuse Energy are currently offering substantially better rates as a new supplier.
• Sales volumes also rose by 0.7% from January to end March

Currencies

US$1.0818/eur vs 1.0829/eur previous. Yen 157.04/$ vs 156.70/$. SAr 18.474/$ vs 18.377/$. $1.270/gbp vs $1.273/gbp. 0.660/aud vs 0.662/aud. CNY 7.245/$ vs 7.244/$.

Dollar Index 104.88 vs 104.67 previous.

Precious metals:

Gold US$2,339/oz vs US$2,360/oz previous

Gold ETFs 81.0moz vs 80.9moz previous

Platinum US$1,024/oz vs US$1,030/oz previous

Palladium US$967/oz vs US$987/oz previous

Silver US$31/oz vs US$30/oz previous

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

Base metals:

Copper US$10,381/t vs US$10,237/t previous

Aluminium US$2,619/t vs US$2,601/t previous

Nickel US$20,225/t vs US$20,075/t previous

Zinc US$3,051/t vs US$3,020/t previous

Lead US$2,290/t vs US$2,266/t previous

Tin US$33,510/t vs US$32,810/t previous

Energy:

Oil US$81.2/bbl vs US$81.8/bbl previous

Natural Gas €34.7/MWh vs €34.4/MWh previous

Henry Hub Gas US$2.70/mmBtu vs US$2.80/mmBtu yesterday

• US Henry Hub natural gas prices softened after the EIA reported a 78bcf w/w build to 2,711bcf (+85bcf exp), with storage levels declining w/w to 17.4% above last year and 28.8% above the 5-year average.
• Wood Group announced the Board had unanimously rejected a third cash offer of 220p/sh from Sidara on 23^rd may, concluding that it continued to significantly undervalue the Group and its prospects.
• National Grid announced plans to sell its Grain liquefied natural gas import terminal in Kent, which is currently undergoing expansion to increase LNG capacity to 1.2bcf from 2025.
• Equinor and the Troll partners in Norway have decided to invest over $1bn to further develop the gas infrastructure on the field, which will add ~0.7bcf/d to extend by around four years plateau production of 4.5bcf/d, which currently meets around 10% of Europe’s gas demand.

Uranium Futures $92.2/lb vs $91.8/lb previous

Bulk:

Iron Ore 62% Fe Spot (cfr Tianjin) US$123.2/t vs US$123.2/t previous

Chinese steel rebar 25mm US$539.2/t vs US$538.7/t

Thermal coal (1st year forward cif ARA) US$119.5/t vs US$120.0/t

Thermal coal swap Australia FOB US$140.3/t vs US$140.0/t

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

Other:  

Cobalt LME 3m US$27,150/t vs US$27,830/t

NdPr Rare Earth Oxide (China) US$53,560/t vs US$54,077/t

Lithium carbonate 99% (China) US$14,287/t vs US$14,296/t

China Spodumene Li2O 6%min CIF US$1,210/t vs US$1,210/t

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

China Tungsten APT 88.5% FOB US$365/mtu vs US$365/mtu

China Graphite Flake -194 FOB US$470/t vs US$470/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$321/t vs US$321/t

China Rutile Concentrate 95% TiO2 US$1,401/t vs US$1,402/t

Spot CO2 Emissions EUA Price US$75.4/t vs  US$68.9/t

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

Battery News

Stationary energy storage key priority in $22.7bn Future Made in Australia policy

• The Australian government announced a National Battery Strategy to enhance domestic battery manufacturing and critical minerals processing capabilities.
• The strategy is part of the $22.7bn Future Made in Australia policy, aimed at making Australia a globally competitive battery and battery materials producer.
• Key strategic opportunities identified include: stationary energy storage manufacturing, processing minerals to produce battery active materials, boosting battery research, and developing batteries for the transport sector.
• Federal Industry Minister Ed Husic emphasized the need for Australia to play a larger role in global battery production, noting that Australia has 45% of the world’s critical minerals but only accounts for 1% of global battery production.
• Prime Minister Anthony Albanese highlighted the global demand for batteries, projected to quadruple by 2030, and emphasized that Australia must be a significant player in this market.

Warwick-based Prova invests in ‘EV Health Checker’ creator ClearWatt

• Prova Investments has taken an equity stake in London-based EV software company ClearWatt.
• ClearWatt has developed a tool to measure the driving range and battery performance of second-hand EVs, providing crucial information for consumers and dealers.
• Richard Postins, founder of Prova Investments, emphasized the importance of used EVs in the UK’s transition to electrification.
• ClearWatt aims to revolutionize the second-hand EV market by providing clarity and certainty for consumers.
• ClearWatt’s flagship product, the EV Health Checker, is currently in its BETA testing phase.

Company News

Goldstone Resources* (GRL LN) 0.94-, Mkt Cap, £4.3m – Suspension lifted after fundraising completed

• Goldstone, currently progressing the Homase gold heap leach project in Ghana, has been resubmitted to trading on AIM.
• The Company has raised total gross proceeds of £834k, issuing 83.4m subscription shares, 52.8m conversion shares, 14.09 Director Fee Conversion shares and 7.5m adviser fee shares.
• Goldstone holds the Akrokeri-Homase project in Ghana, which hosts a JORC compliant resource of 602koz at an average grade of 1.77g/t.

*SP Angel acts as broker to Goldstone Resources

Stellar Resources (SRZ AU) – SUSPENDED– A$10m raised to drill Heemskirk Tin Project

• Stellar resources has received commitments to raise A$10m in equity at a 5% premium to 30-day VWAP.
• Stellar is planning to use the funds to complete Feasibility Studies on the Keemskirk Tin Project in Tasmania.
• The Project currently holds an MRE of 7.5mt at 1.04% Sn for 77.9kt Sn.
• Drilling will be completed to improve the resource category and test for potential extensions.
• A scoping study is currently due in 3Q24.
• Met test work will also be conducted.

Sunrise Resources (SRES LN) 0.064p-, Mkt Cap, £2.7m – Update on Diatomite project royalty

• Sunrise provides an update on its Crow Springs Diatomite Project in Nevada.
• The Company sold the Project to Dicalite Management for $150k recently.
• It has received 50% of the payment and expects to receive the remainder upon the submission of the Plan of Operations to the BLM.
• Sunrise will hold a royalty payment of $6/t of ore delivered to Dicalite’s processing plant.
• Management suggests potential royalty income within the next 12 months, depending on permitting.

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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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.

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