SP Angel Morning View -Today’s Market View, Monday 24th June 2024

Iron ore prices hold despite weak China property construction data

MiFID II exempt information – see disclaimer below

Anglo Asian Mining* (AAZ LN) – Well attended AGM highlights strong organic growth pipeline with Demirli Cu/Mo mine resumption in the spotlight

Ariana Resources (AAU LN) – Positive detectORE results at Dokwe

Great Western Mining* (GWMO LN) – Geophysical survey results support copper porphyry potential

Kore Potash* (KP2 LN) – EPC discussions update

Jubilee Metals Group (JLP LN) – Zambian copper strategy

Mkango Resources* (MKA LN) – HyProMag USA Board appointment

Savannah Resources* (SAV LN) BUY, Target price 18.3p – New Chairman and other changes to the Board

Iron ore prices hold at ~US$107.0/t despite weak China property construction data

• China iron ore prices for 62% continue to hover around the $107/t mark.
• China property starts in May hit lows when adjusted for seasonality, nearing 2006 lows.
• Inventory levels still at two-year highs in China.
• However, Chinese steelmakers continue to invest in iron ore supply, with China Baowu buying its stake in Simandou from Winning.

Copper prices ($9,680/t) weaken as LME inventories take Chinese excess supply

• Copper has been rangebound for the past couple of weeks, bouncing around the $9,900-9600/t band.
• China is exporting excess inventories into the LME, as weak demand is pushing exports to decade highs.
• Codelco has reported a train crash at El Teniente, adding to weak exports from Chile which hit 2005 lows in April.
• Bloomberg reports traders in China are struggling to sell into the fabricator market, who are pulling back on purchases.

China calls for EU to scrap EV tariffs

• China has called on the EU to scrap preliminary tariffs on Chinese-made EVs, as new trade talks begin.
• Provisional EU duties of up to 38.1% on imported Chinese-made EVs are set to kick in by July 4 while the bloc investigates subsidies to Chinese EV makers.
• China has repeatedly called for the tariffs to be removed and for talks to reopen to prevent a tariff war like it has experienced with the US.
• According to the Global Times “The EU’s increasingly protectionist moves will trigger countermeasures from China, and an escalation in trade frictions would only lead to “lose-lose” results for both sides”
• While we sympathise with US and European car makers which are faced with new, lower cost, competition we feel the raising of tariffs to such high levels is unhelpful for global trade and is unfair on consumers.
• It might be better for EU and US politicians to focus on how to help reduce energy and other input costs along with restrictive working practices.
• Western manufacturers need to face and match their competition rather than hide behind tariff barriers.
• Chinese politicians appear better focussed on supporting industry through the development of low-cost and sometimes renewable power sources.
• The Chinese government is also seen working to reduce input costs and control inflation.

China’s EV manufacturers received $231bn in aid over 15 years, finds study

• China’s EV industry received at least $231bn in government subsidies and aid between 2009 and 2023, according to research from the Center for Strategic and International Studies.
• Over half of the support came from sales tax exemptions, with the rest from buyer rebates, infrastructure funding, government procurement of EVs, and R&D support programs.
• The EU announced increased tariffs up to 48% on Chinese EVs, the US quadrupled tariffs, and Canada is preparing new tariffs to counteract these subsidies.
• The study criticises Western automakers and governments for not responding aggressively enough to the challenge posed by the improved quality and competitiveness of Chinese EVs.

Economics

US – PMI rises slow as ongoing high interest rates slow the pace of growth

• PMI Manufacturing rose to 51.7 in June from 51.3 in May
• PMI Services to also rose to 55.1, a 26-month high from 54.8 in May.
• PMI Composite also edged higher to 54.6 from 54.5
• US GDP growth is expected at between 2-3% as reshoring combined with the government IRS and other stimulus schemes support growth through the higher interest rate environment.
• Much of the funding for Ukraine is for US weapons funding US military companies replacing stock which was nearing the end of its normal shelf life.
• This funding provides a degree of stimulus to the US economy.
• Ongoing jobs growth with 272,000 jobs added in May combined with lower inflation at 3.3% for the 12-months to end May gives the Fed room to maintain higher interest rates for longer if it chooses.

Japan – The yen is getting closer to the 160 mark despite ‘verbal intervention’ from Finance Minister Suzuki and Vice Finance Minister Kanda.

• Authorities warned markets that the government is standing ready to intervene in currency markets 24h a day if necessary, Bloomberg reports.
• “If there are excessive currency fluctuations, it has a negative impact on the national economy,” said Vice Finance Minister said.
• “In the event of excessive moves based on speculation, we are prepared to take appropriate action.”

BoJ considering further rate rises on potential for further inflation and currency depreciation

• The BoJ is considering reducing the amount of Japanese government bonds bought to better enable interest rates to trade more freely

Germany – German business confidence continues to fall

• Ifo Business Climate index fell to 88.6 in June from 89.3 in May

• • Ifo Manufacturing fell to -9.2 from -6.5
  • Ifo Services rose to 4.2 from 1.8
  • Ifo Trade fell to -23.5 from -17.
  • Ifo Construction fell to -25.0 from -25.6.

• The index is 1.1pts lower than expectations at 89.7.
• The Current Assessment index remained unchanged at 88.3 but was also below its 88.4 estimate
• The Expectations Index fell to 89.0 from 90.3 again below its 91.0. expectation
• German companies recently reduced their use of short-term work practices with 18.8% of manufacturing companies planning of introducing short-time work over the next three months

France – First round of French general elections is due this Sunday followed by the second round on 7 July.

• President Macron’s Ensemble is trailing its far right and leftwing rivals Heading into elections.
• 10y bond spreads over Germany sovereign debt shot to the highest since 2012 following Macron’s decision to call snap elections.

UK – Manufacturing sector continues steady growth as services take a hit from the rising cost of living

• Manufacturing PMI slightly increased to 51.4 in June, a new 23-months high from 51.2 and higher than the 51.0 est.
• Services PMI fell to 51.2 from 52.9 as high interest rates and inflation batter sales. This was sharply lower than the 53.2 expectation and saw a seven-month low.
• Services inflation remains at 5.7%
• Composite PMI fell to 51.7 from 53.0 another seven-month low.
• UK GDP is growing at around 0.1% due to uncertainty over CGT and other tax rises from an almost certain Labour government.
• BBC Verify appear to indicate that none of the leading political parties are able to balance the books according to their Manifesto pledges.
• The market appears to be expecting Capital Gains Tax to rise to a potential 45%. We suspect there will be little or no relief either.

Currencies

US$1.0710/eur vs 1.0696/eur previous. Yen 159.66/$ vs 158.87/$. SAr 18.062/$ vs 17.980/$. $1.265/gbp vs $1.265/gbp. 0.665/aud vs 0.666/aud. CNY 7.262/$ vs 7.261/$.

Dollar Index 105.34 vs 105.65 previous.

Precious metals:

Gold US$2,330/oz vs US$2,356/oz previous

Gold ETFs 80.6moz vs 80.6moz previous

Platinum US$1,006/oz vs US$981/oz previous

Palladium US$940/oz vs US$928/oz previous

Silver US$30.03/oz vs US$30.27/oz previous

Rhodium US$4,700/oz vs US$4,700/oz previous

Base metals:

Copper US$9,685/t vs US$9,748/t previous

Aluminium US$2,509/t vs US$2,510/t previous

Nickel US$17,166/t vs US$17,205/t previous

Zinc US$2,846/t vs US$2,858/t previous

Lead US$2,193/t vs US$2,202/t previous

Tin US$33,800/t vs US$32,750/t previous

Energy:

Brent Oil US$85.2/bbl vs $85.6/bbl last Friday

WTI Oil US$80.6/bbl vs $81.2/bbl last Friday

UK NBP Futures 78p/therm vs 80p/therm last Friday

TTF Dutch Futures €34/MWh vs €34/MWh last Friday

Henry Hub Gas US$2.70/mmBtu vs US$2.72/mmBtu last Friday

• US Henry Hub natural gas prices edged lower as the EIA reported a 71bcf w/w build to 3,045bcf, with storage levels declining w/w to 12.7% above last year and 22.6% above the 5-year average.
• The US Baker Hughes rig count fell by 2 units w/w to 588 rigs last week (-94 or 14% y/y), with oil rigs down 3 to 485 units (-61 y/y) and gas rigs flat at 98 units (-32 y/y) as Texas lost 3 units to 282 rigs (-63 y/y).
• Lhyfe announced a grant from Sweden of c.€11m for its 10MW green hydrogen project in Trelleborg, which will deliver up to 4 tons of green hydrogen per day to local mobility and industry customers from 2027. The grant represents about 40% of the total estimated investment in the project.

Natural Gas €33.8/MWh vs €34.4/MWh previous

Uranium Futures $85.7/lb vs $84.8/lb previous 

Bulk:

Iron Ore 62% Fe Spot (cfr Tianjin) US$107.0/t vs US$106.9/t previous

Chinese steel rebar 25mm US$530.2/t vs US$531.7/t

Thermal coal (1st year forward cif ARA) US$125.8/t vs US$119.8/t

Thermal coal swap Australia FOB US$135.0/t vs US$134.8/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$27,150/t

NdPr Rare Earth Oxide (China) US$49,924/t vs US$49,929/t

Lithium carbonate 99% (China) US$12,326/t vs US$12,327/t

China Spodumene Li2O 6%min CIF US$1,080/t vs US$1,080/t

Ferro-Manganese European Mn78% min US$995/t vs US$995/t

China Tungsten APT 88.5% FOB US$350/mtu vs US$350/mtu

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

Europe Vanadium Pentoxide 98% 5.2/lb vs US$5.2/lb

Europe Ferro-Vanadium 80% 26.85/kg vs US$26.85/kg

China Ilmenite Concentrate TiO2 US$313/t vs US$313/t

China Rutile Concentrate 95% TiO2 US$1,412/t vs US$1,412/t

Spot CO2 Emissions EUA Price US$69.4/t vs US$69.4/t

Brazil Potash CFR Granular Spot US$310.0/t vs US$310.0/t

Battery News

Electric car sales fall in Europe while hybrids rise

• Sales of new electric cars in Europe fell in May, dropping from 13.8% of the market in May 2023 to 12.5%.
• The market share of hybrid electric vehicles increased from 25% to nearly 30%.
• The combined share of petrol and diesel cars fell to just under 50%.
• Sales of battery electric cars rose in France and Belgium but continued to fall in Germany, where purchase incentives ended in late 2023.
• The decline in EV sales is attributed to a lack of affordable models and manufacturers focusing on larger, premium electric vehicles for higher profit margins.

BYD nears huge Mexico EV plant deal with 50,000 sales in sight this year

• BYD is continuing to rapidly expand its global presence and is close to finalising a deal for a large EV plant in Mexico.
• The company has established itself as an EV leader in Thailand, Israel, and Australia, and is now increasing its footprint in South America.
• BYD began constructing a manufacturing plant in Brazil earlier this year, set to produce popular models like the Dolphin, Dolphin Mini (Seagull), and Yuan Plus.
• Sales surged in Brazil after launching the $20,000 Seagull in March – in Q1 2024, BYD led EV sales in Brazil with nearly 15,000 of the total 36,090 EVs sold.
• Mexico is seen as a key market for BYD and could serve as an export hub to other regions. Other automakers like Kia, BMW, Stellantis, and Tesla are also investing in EV production in Mexico.
• BYD expects to sell 50,000 vehicles in Mexico this year.
• Despite potential tariffs from the EU and Canada on Chinese EV imports, BYD continues to expand globally, with local production in Mexico expected to lower prices and increase profits.

Nissan halts production at Changzhou plant 

• The automaker halted production at its Changzhou plant at the end of last week.
• Nissan’s total production capacity in China is 1.6m vehicles, with the Changzhou plant accounting for 8%

Chinese automakers retain grip over Southeast Asia’s booming electric car market

• EV sales in Southeast Asia more than doubled in Q1 ‘24 yoy.
• Sales of ICE cars slid by 7% during the same period.
• Over 70% of EV sales in the region are from Chinese brands, led by BYD.
• Thailand accounted for 55% of all Southeast Asia’s EV sales in the first quarter, with EV sales growing by 44% compared to last year.
• Vietnam experienced more than 400% growth in BEV sales, contributing to nearly 17% of regional sales.

Hyundai to build top-selling EV model at Georgia factory

• Hyundai’s new EV assembly plant in Georgia, USA, known as the Metaplant, began test production in May 2023.
• The plant will manufacture Hyundai’s popular IONIQ 5 model when full production begins later in 2024.
• Designed to operate 24/7, the plant will have production capacity of 300,000 vehicles annually, with potential expansion to 500,000.
• The $7.6bn project is the largest economic development in the state’s history, expected to create 40,000 jobs and generate $4.6bn in annual incomes.
• The decision to produce the IONIQ 5 at the plant was driven by high buyer demand, with sales up 43% in 2024.
• The plant will also manufacture other EV models for Hyundai, Kia, and Genesis, and may produce hybrid models.

Company News

Anglo Asian Mining* (AAZ LN) 78p, Mkt Cap £89m – Well attended AGM highlights strong organic growth pipeline with Demirli Cu/Mo mine resumption in the spotlight

BUY

• The Company delivered a detailed presentation on the status of operations and reiterated strong organic growth plans with Group production shifting increasingly towards copper during a well-attended AGM last week.
• At Gedabek, sign off for the start of construction works on raising the tailings dam wall is expected imminently which is to be completed in two stages (Stage 1 two months, Stage 2 six months) providing additional three years of operation at Gedabek. Management are also planning to identify and build a second tailings facility to support further growth.
• Gilar; underground development is ~65% complete to access high grade zone of the deposit with FY24 target for 10koz AuEq in maiden production from the underground mine.
• Lower zone (Zone 4) hosts higher grade mineralisation estimated at 2.4mt 1.5% Cu and 1.8g/t Au with development expected to reach it in November 2024.
• Xarxar; the team is engaged in collecting further data for final MRE including geotechnical, hydrogeological and metallurgical sampling drilling with results to be used for engineering and design studies.
• Garadag; management are working with Mining Plus, geological consultants, to finalise JORC compliant MRE on AzerGold data that is expected to be released later this year.
• Demirli;, brownfield copper asset to be operated under the same production sharing agreement as Anglo Asian’s other mines with the government.
• Management recently visited the Demirli copper/molybdenum operations with the AGM presentation featuring photos of existing open pit, flotation plant, key infrastructure and tailings facilities.
• Resumption of mining at the brownfield Demirli operations is due to start copper and molybdenum concentrate production in 9-12 months once access is granted (~3m) and the management completes the baseline study.
• Additionally, the team will be looking at carrying a short shallow RC drilling programme to grade control near term mining inventory prior to resuming operations.
• The team will be looking at documenting the current state of the tailings storage facility (upstream design, although, visual inspection by the team suggested good condition) required to limit any potential liability with authorities regarding historical production carried by previous operators.
• The government is supportive of the Company resuming operations as soon as practically possible generating employment and tax related benefits within the region.
• Scale wise, the Company reports Demirli operations features 6.8mtpa flotation circuit that may potentially produce >20ktpa copper (pre PSA) which would be on par with best years recorded at Gedabek.
• The deposit is estimated to potentially host 58mt at 0.41% for ~240kt (internal estimates based on available block model, 0.2% Cu COG and $9,000/t copper price).
• In a nutshell, Demirli appears to be highly value accretive reflecting its brownfield status including low capital intensity and fast delivery of first production on resumption of operations.
• The scale of operation suggests the Company will need to significantly grow staff levels, although, strong track record of the team as operators in the region lends confidence the task will be well managed.
• Demirli is set to become the first significant organic growth catalyst in the Group portfolio adding to copper exposure and likely to be immediately FCF accretive helping with funding of Xarxar (~10ktpa Cu) and Garadag (~20ktpa) greenfield copper development projects.
• It is worth highlighting that the Group medium term target to become >35ktpa CuEq producer by 2029 has not previously included contribution from Demirli offering further upside to organic growth targets.

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

Ariana Resources (AAU LN) 2.3p, Mkt Cap £26.4m – Positive detectORE results at Dokwe

• Ariana has been exploring gold analytical testing using detectORE technology.
• The Company has used the technology, which generates analytical results within 15 hours, at the Dokwe site.
• Ariana is setting up laboratories with the technology in Zimbabwe and Turkiye.
• The analytical results showed gold correlations of 0.72 to 0.99 R2 with conventional fire assays.
• The Company also reported their annual results, which showed a cash and gold bullion balance of £4.1m.
• They are working to advance Dokwe to feasibility stage this year and will look to dual-list on ASX.

Great Western Mining* (GWMO LN) 0.05p, Mkt Cap £3.2m – Geophysical survey results support copper porphyry potential

• Today Great Western announces results from their West Huntoon induced polarisation and resistivity surveys at their West Huntoon project, Nevada.
• The Company has been targeting the recently discovered porphyry potential having identified various related textures over an unmapped area of granite.
• Great Western’s recently completed IP survey over the target has highlighted two anomalies which relate to the known surface features.
• One anomaly shows a strike over 1400m and coincides with surface copper mineralisation and previously identified copper-in-soils.
• This anomaly strengthens and plunges to the southwest.
• A second IP anomaly lies 350m to the northwest and extends towards surface, also relating to stronger areas of copper-in-soil anomalism.
• A third anomaly lies to the northeast, under the Huntoon Valley sediments with a strike of 1400m. This provides a new prospective area on the project.
• Importantly, the first and second anomalies are open and increase in strength towards that direction, providing further scale potential as GWM looks to generate drill targets.
• Following the IP survey, Great Western has now staked an additional 13 claims to support further exploration programmes.

Conclusion: These are encouraging results from Great Western’s geophysics programme, which has sought to identify the potential scale of the West Huntoon copper porphyry target. Two anomalies relate to known surface features whilst a third provides a new, stronger target where the mountains meet the valley floor. All of the targets are open and highlight the scale and optionality of the West Huntoon project, which remains significantly underexplored.

*SP Angel act as Broker to Great Western Mining, an SP Angel Analyst has visited Great Western’s Nevada claim blocks.

Kore Potash* (KP2 LN) 1.2p, Mkt Cap £52m – EPC discussions update

• The Company reports that Kola EPC contract discussions with PowerChina remain ongoing and signing of final documentation is expected to take place post previously guided Q2/24.
• The team is set to hold another meeting with PowerChina in early July to discuss terms of the contract.
• Additionally, PowerChina expressed interes in operating the mine post construction with the Company now expecting to receive a draft operating proposal in July 2024.
• The Company highlighted the need to raise additional working capital funding for the period up to signing full EPC documentation.

*SP Angel acts as Nomad and Broker to Kore Potash

Jubilee Metals Group (JLP LN) – 7.4p, Mkt cap £220m – Zambian copper strategy

• Today Jubilee announces their ‘Integrated Copper Strategy’ in Zambia, acquiring two additional copper resources.
• The Company has secured an additional off-take agreement for low grade stockpiled material to process at Roan.
• Commissioning and ramp up at Roan is expected in July, upgrading the low grade material in advance.
• Jubilee has also acquired two operating open-pit copper operations to feed the Sable refinery.
• Jubilee is aiming t hit 16ktpa of Cu from Sable.
• The two acquisitions include Project M, grading 3-4% and delivering 25ktpa over a LOM of eight years.
• Project G is an operating open pit mine aiming ramp up to 20ktpm of material also grading 3-4% Cu over eight years.
• Jubilee will pay a combination of shares and cash for the two assets.

Mkango Resources* (MKA LN) 6.3p, Mkt Cap £17m – HyProMag USA Board appointment

• Linda Lourie is appointed as an Advisory Board Director to HyProMag USA effective immediately.
• Linda Lourie is currently a Principal with WestExec Advisors, the Washington Circle Advisory Group, LLC, a Member of the U.S. Export-Import Bank’s Advisory Subcommittee on Strategic Competition with the People’s Republic of China (PRC), and serves as Commissioner on the Atlantic Council’s Commission on Software-Defined Warfare, among other affiliations.
• Linda was previously the Assistant Director for Research and Technology Security in the White House Office of Science and Technology Policy.
• She has also served as Department of Defense Associate General Counsel and the General Counsel of the Defense Innovation Unit
• New appointment strengthens the US JV focused on establishing a sustainable low cost source of permanent magnets and is expected to assist in securing US government funding as well as long term commercial relations in the US market.
• FS related work is reported to be making good progress and remains ongoing.
• HyProMag USA is a 50/50 JV between Maginito (79.4% owned by Mkango) and CoTec engaged in rolling out patented HyProMag recycling technology in the US.

*SP Angel acts as nomad and broker to Mkango Resources

Savannah Resources* (SAV LN) 4.3p, Mkt Cap £93m – New Chairman and other changes to the Board

BUY – 18.3p

• Matthew King steps down as Chairman following nine years with the Company following the AGM.
• Rick Anthon will be joining the Company as new Chairman from June 25 as the team gears up development works on course to FS finalisation and completion of the permitting process.
• Mr Anthon is a qualified lawyer with over 30 years’ experience and most recently was the director of Corporate Development at Allkem having worked at Orocobre from its initial IPO through to a merger with Galaxy creating Allkem and ultimately joining up with Livent in a A$16bn deal to form Arcadium Lithium.
• He brings a wealth of experience in the lithium sector having been involved in both brine and hard rock projects as well as having worked on a series of corporate deals including partnering with Toyota Tsushu Limited to develop the Olaroz Lithium Facility and the Naraha Lithium Hydroxide Plant
• Separately, Ms Mary Jo Jacobi (NED) and James Leahy (NED) will be stepping down from the Board.
• Diogo da Silverira (NED) has been appointed as Deputy Chair.
• AMG is yet to nominate an additional director following the announced £16m equity investment in the Company.
• The Company reports cash position of over £21m carrying the Barroso Lithium Project through to a Final Investment Decision.

Conclusion: New Board appointment strengthens lithium sector expertise of the Company with the team now fully funded to see the project through to the Final Investment Decision (mid-2025 exp).

*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

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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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