SP Angel Morning View -Today’s Market View, Thursday 27th June 2024

Commodity prices stagnate as US dollar strengthens ahead of US Presidential debate

MiFID II exempt information – see disclaimer below

Arc Minerals (ARC LN) – Final results highlights

Bushveld Minerals* (BMN LN) – Acacia selling 26m shares in the Company

Hummingbird Resources (HUM LN) – 2024 AGM statement and Kouroussa operations update

Kore Potash (KP2 LN) – OIA representative Board appointment

Lynas Rare Earths (LYC AU) – Heavy rare earth production in Malaysia

Power Metals Resources* (POW LN) – Drilling results from Molopo Farms, Botswana

Sheffield Resources (SFX AU) – Ramp up of ilmenite and zircon production

Vast Resources (VAST LN) – Debt repayment notice served

China enjoys unprecedented growth in plug-in car adoption

• Over 5 million plug-in cars were sold worldwide from January to May 2024, a 20% year-over-year increase.
• China led the growth with a 31% increase in sales for the January-May period and 36% growth in May alone, becoming the largest and fastest-growing plug-in car market.
• China holds over 50% of the global plug-in car market, while Europe and North America show slower growth.
• Europe saw only a 4% year-over-year growth, and the U.S. and Canada had a 5% increase. Both regions experienced declines in May: Europe by 9% and North America by 3%.
• European authorities plan to impose tariffs up to 38.1% on Chinese-made EVs, and the U.S. has increased tariffs from 25% to 100% on these vehicles.

Gold ($2,310/oz) holds lower as traders wait for today’s inflation data and Treasuries weaken

• Gold prices have held their lower recent level, dipping below $2,300/oz yesterday before recovering slightly.
• US Treasury yields gave back some gains, weakening to 4.33% on the 10 year having been as low as 4.22%.
• Traders are taking some risk off the table before the US PCE data due today, with sentiment dented by hawkish comments from central bankers.
• The US dollar continues to climb against a basket of currencies, weighing on gold prices.
• Consumer confidence in the US is weakening according to June data, and the housing market is suffering from weakening demand and increasing supply, threatening the construction sector.

Copper ($9,550/t) slides again as speculative optimism fades on China demand weakness

• Copper prices have ceded over $1,500/t in the past six weeks, as weak Chinese sentiment continues to weigh.
• Inventories remain elevated as Chinese fabricators struggle to pass on costs to downstream consumers.
• Supply continues to struggle to ramp up, with Codelco missing production targets in May by nearly 9%.
• Long term demand drivers remain in place, with both the West and China heavily investing in renewable power generation and electrification.
• Lundin Mining is boosting their stake in Caserones in Chile by 21% for $350m.
• Citi reports bullishness from hedge funds for copper following the correction at the SMM seminar.
• However, SHFE saw brokers slash net-long positions yesterday.

Economics

China – Industrial profits growth slows amid rising trade tensions with major trading partners.

• Earnings climbed 3.4%yoy in the first months of the year to May, down from 4.3% recorded in April.
• State owned companies performed worse posting a 2.4% drop in profits when compared to private sector counterparts that reported a 7.6% expansion.

Bolivia – A senior general has been arrested following a failed coup.

• Forces led by army chief General Juan Jose Zuniga tried to take control of the government of president Luis Arce to “restore democracy”.
• However, the coup ended in three hours as the president named a new army commander who immediately ordered the troops to stand down.

Currencies

US$1.0696/eur vs 1.0688/eur previous. Yen 160.52/$ vs 159.89/$. SAr 18.317/$ vs 18.290/$. $1.264/gbp vs $1.267/gbp. 0.667/aud vs 0.668/aud. CNY 7.269/$ vs 7.267/$.

Dollar Index 105.85 vs 105.52 previous.

Precious metals:         

Gold US$2,301/oz vs US$2,314/oz previous

Gold ETFs 81.0moz vs 80.9moz previous

Platinum US$1,008/oz vs US$995/oz previous

Palladium US$924/oz vs US$953/oz previous

Silver US$28.75/oz vs US$29/oz previous

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

Base metals:   

Copper US$ 9,507/t vs US$9,570/t previous

Aluminium US$ 2,500/t vs US$2,497/t previous

Nickel US$ 17,005/t vs US$17,245/t previous

Zinc US$ 2,928/t vs US$2,895/t previous

Lead US$ 2,187/t vs US$2,196/t previous

Tin US$ 32,060/t vs US$31,785/t previous

Energy:           

Oil US$85.2/bbl vs US$85.4/bbl previous

• Crude oil prices were stable despite the EIA reporting a large 3.6mb w/w build to crude and a 2.7mb build to motor gasoline stocks in the US, with domestic refinery utilisation falling by 1.3% w/w to 92.2%.

Natural Gas €33.9/MWh vs €35.1/MWh previous

Henry Hub Gas US$2.75/mmBtu vs US$2.72/mmBtu yesterday

• European energy prices were also flat as EU natural gas storage levels gained 1.7% w/w to 76% full (vs 65.8% 5-Yr average) with all countries above 66% full and aggregate storage now at 862TWh.
• Cedar LNG has taken FID on a $3.4bn floating LNG project in Canada, which has secured 20-year take-or-pay liquefaction tolling agreements with ARC and Pembina for 1.5mtpa each from expected start-up in late 2028.

Uranium Futures $83.5/lb vs $83.1/lb previous

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$107.0/t vs US$103.5/t

Chinese steel rebar 25mm US$523.1/t vs US$524.7/t

Thermal coal (1st year forward cif ARA) US$117.8/t vs US$118.8/t

Thermal coal swap Australia FOB US$132.3/t vs US$132.0/t

Hard Coking Coal Australia FOB US$249.0/t vs US$249.0/t

Other:

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

NdPr Rare Earth Oxide (China) US$49,801/t vs US$49,817/t

Lithium carbonate 99% (China) US$12,038/t vs US$12,041/t

China Spodumene Li2O 6%min CIF US$1,060/t vs US$1,060/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% 5.1/lb vs US$5.1/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$1,410/t vs US$1,411/t

Spot CO2 Emissions EUA Price US$65.9/t vs US$66.9/t

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

Battery News

Electric car sales in India to reach 1.3-1.5 lakh in FY25

• Electric car sales in India are projected to reach 130,000 to 150,000 units in FY25, following a 90% growth to 90,432 units in FY24, according to a CareEdge Rating report.
• The increase in electric car penetration is driven by government efforts to promote sustainable and efficient transportation.
• The shift to electric mobility includes not just cars but also trucks, e-rickshaws, and e-karts.
• The overall passenger vehicle (PV) industry in India is expected to see moderate volume growth of 3-5% in FY25 due to the high base effect of FY24, a shrinking order book, and subdued demand for entry-level variants.
• Strong demand for new model launches and SUVs, along with anticipated interest rate cuts in the second half of FY25, is expected to sustain sales momentum.
• The market for premium vehicles is predicted to thrive due to rising demand for luxury and high-end models, while entry-level variants may continue to face diminished demand.

Tesla China Registrations Surge With Q2 Nearly Done. Cybertruck Hit With Another Recall.

• Tesla’s insurance registrations in China rose 49% to 17,400 for the week of June 17-23, up from 11,700 the previous week.
• Tesla recalled 11,688 Cybertruck vehicles in the U.S. due to potential windshield wiper failure and 11,383 vehicles for improperly attached bed trim.
• A previous recall saw Tesla recall around 4,000 Cybertrucks in April due to an accelerator pedal issue.
• Analysts predict global Q2 deliveries of 443,000 vehicles, down 5% YoY but up 14.5% from Q1. Tesla will report Q2 deliveries on July 2.
• CEO Elon Musk expects 2024 deliveries to grow compared to 2023’s record 1.81 million. He anticipates a better Q2.
• TSLA shares gained 2.6% to 187.28 on Tuesday. In June, shares rose more than 5%. Despite recent gains, the stock remains below its 200-day moving average.

Major car brand could end UK production over EV fears as huge decision could be made ‘in less than a year’

• Stellantis, which includes brands like Citroen, Fiat, Peugeot, and Vauxhall, may halt UK car production unless the government boosts EV uptake.
• The UK Zero Emission Vehicle (ZEV) mandate requires 22% of new cars and 10% of new vans sold this year to be zero emissions.
• These targets will rise to 80% of new cars by 2030 and 100% by 2035.
• Brands face fines up to £15,000 per polluting vehicle sold over the limit, though credits can be purchased from compliant manufacturers.
• Maria Grazia Davino, Stellantis UK boss, emphasized the need for more support for EV adoption.
• The current stringent UK regulations are seen as more restrictive compared to the EU’s flexible approach, allowing hybrids and EVs to meet emissions targets.

Company News

Arc Minerals (ARC LN) 1.84p, Mkt cap £27m – Final results highlights

(Anglo American holds 70% of the jv with Unico Minerals Limited with Arc Minerals holding the other 30% through Unico Minerals.  Unico Minerals is a 67% jv with 33% held by Kopara Investments. Arc also holds 75% in Alvis-Crest (Proprietary) Limited which holds two licenses in the Kalahari Copper Belt, known as Virgo covering >210km2, around 10km south east the recently commissioned Khoemacau Copper in Botswana.)

• Arc Minerals has released its Annual report for the year ended December 2023.
• Best link to use is: https://www.arcminerals.com/investors/document-library/default.aspx
• The report reflects the financial and operational performance for the group through this period and highlights certain interesting events.
• Administrative expenses £5.067m in 2023 vs £3.500m in 2022.

• • Directors fees were £1.538m spread across four directors including payments for key management and £12k for Caleb Mulenga who resigned in March 2023
  • Professional fees inc. legal, accounting and exploration £1.006m
  • Fair value loss on investments eg Asiamet Resources Ltd and Tingo Inc.

• Gain on disposal of Handa Group £10.933m in 2023 – this is a non-cash gain which skews the results and in our view should not appear in the income statement

• • “The remaining investment, after the partial disposal of Handa, was fair valued as at the date of the disposal (See Note 13) and is subsequently measured using the equity method at year end.”
  • “Handa and Zaco will be appealing the decision of the Mining Licence Committee to reject the Mining Licence Applications and are engaging with the Mining Cadastre to have the appeal heard as soon as possible so that the applications can be reinstated and/or considered positively in accordance with the law.”
  • In short Arc might need to write down the uplift in value of some of the Handa Group licenses if their appeal is not upheld. We do believe Arc should be successful in their appeal.

• Distribution from subsidiaries £1.918m
• Share of loss from associates £0.691m
• Excluding the non-cash gain on the disposal of Handa Group Arc made a loss of £3,840 vs -£5.662m for 2022
• Casa Royalty which had been valued at US$45m has been assigned nil value due to a number of uncertainties including time to receipt, political instability in the DRC and gold prices.
• Sturec Resource Royalty:  Nil value. “As part of the transaction if before November 2024, the Šturec JORC Indicated and Measured Resource exceeds 1.5moz gold at >2.5g/t MetalsTech will pay Arc a further A$2 royalty per additonal ounce of gold. This royalty is capped at 7moz or A$11m.  Because of the general uncertainty about the size of the Sturec resource and the difficulties of operating in Slovakia the Company has not recorded the royalty in the accounts.”
• Short term investments: Shares held in Asiamet Resources Ltd (AIM:ARS) and Tingo Inc (OTC:TMNA) resulted in a Fair Value loss of £1.509m and an impairment of TMNA shares of £0.164m.
• Warrants: Arc Minerals had 11.815m warrants outstanding at end December 2023 plus another 229.777,77m warrants issued in March at 3p/s.
• Loans: “A relative of Rémy Welschinger made a loan to the Company which was unsecured and converted into equity in November 2023.”

• • Was this the 5,593,099 shares issued to creditors in lieu of payment at 2.932p/s in note 20. Share capital?

• Investment in associate:

• • “the Group submitted three mining license applications as part of preparing for completion of the JV with a subsidiary of Anglo American, being 33402-HQ-LML, 33403-HQ-LML and 33404-HQ-LML over the exploration licenses 23004-HQ-LEL and 19906-HQ-LEL.”
  • “All of the mining 16licence applications were approved and validated by the Mining Cadastre Department and, following submission of the subsequent requisite documentation, the Mines Advisory Committee (MAC) was expected to meet to review the finalised LML applications prior to issuance of the Mining Licenses.
  • As announced on 17 June 2024, the Mining Cadastre Department published the results of the MAC mee ng pursuant to which these applications and were rejected and Zaco Investments Limited’s application with respect to 23004-HQ-LEL was marked as deferred pending an information request.
  • As the applications were validly submitted and validated by the Zambian Mining Cadastre, the Company has been advised that Handa and Zaco will be appealing the decision of the Mining Licence Committee to reject the Mining Licence Applications and are engaging with the Mining Cadastre to have the appeal heard as soon as possible so that the applications can be reinstated and/or considered positively in accordance with the law..”

• Cash and cash equivalents at the year end were just £281,000 making the March funding absolutely necessary from a going concern perspective.

Conclusion:  Arc Minerals ran their cash to a dangerously low level at the year end requiring top-up funding. While this is not particularly unusual we are surprised to see a loan from a relative of Rémy Welschinger in November 2023 which was later converted into 5,593,099 shares at 2.932p. We are were also surprised to see holdings in Asiamet and Tingo which were written down in a Fair Value loss of £1.509m.

*The analyst holds shares in Kavango Resources

Bushveld Minerals* (BMN LN) 0.35p, Mkt Cap £6.9m – Acacia selling 26m shares in the Company

• Acacia Resources sold 26m shares according to the announcement released yesterday.
• Shares sold represent ~2x average daily volume traded.
• Acacia still holds ~130m shares representing 5.6% interest in the Company.
• Earlier this year, Acacia Resources has not settled its subscription for $3.5m in new shares from the Company with the team agreeing to delay the payment date to the end of 2024 in exchange for Acacia voting in favour of the Vanchem disposal deal

*SP Angel acts as Nomad and Broker for Bushveld Minerals

Hummingbird Resources (HUM LN) 8.2p, Mkt Cap £66m – 2024 AGM statement and Kouroussa operations update

• Mining operations at Kouroussa are ramping up in line with the updated operational plan.
• Kouroussa is reported to have produced 4koz in just over a month since operations were resumed mid May 2024 taking YTD to ~12koz.
• Mining operations restarted following a new agreement reached with Corica mining contractors after a two month suspension from mid March this year.
• Kouroussa is guided to reach commercial production in Q3/24.
• Q2/24 operational update is due late July.

Kore Potash (KP2 LN) 1.6p, Mkt Cap £69m – OIA representative Board appointment

• Amit Kamlesh Kumar Mehta is joining the Board as a Non Executive Director effective immediately.
• Mr Mehta is the Senior Manager in the Privat Equity team at Oman Investment Authority (OIA), the largest shareholder in the Company holding just over 15%.
• He looks after investments in the metals and mining, renewables and energy transition sectors with over 14 years in private equity and investment banking working across the New York and Middle East regions.
• Mr Mehta is replacing the previous OIA representative, Mr Sameer Oundhakar, who left the Board in Dec/22.

Lynas Rare Earths (LYC AU) A$5.95, Mkt cap A$5.6bn – Heavy rare earth production in Malaysia

• Lynas Rare Earths provides an update from their Malaysian Heavy Rare Earths production operation in Malaysia.
• The Company expects to produce Dysprosium and Terbium in 2025.
• The Company currently sells Dy and Tb alongside other HRE oxides from Mt Weld as a mixed HRE compound.
• Lynas is aiming to maximise value from the Mt Weld ore body.
• Lynas has been investing in solvent extraction circuits to separate the two metals.
• Lynas is also going ahead with pre-construction investments for their US Rare Earths Processing Facility.
• Both Malaysia and US operations will be able to support feedstocks from operations other than Mt Weld.

Power Metals Resources* (POW LN) 19p, Mkt cap £21m – Drilling results from Molopo Farms, Botswana

1. Power Metal Resources provides an update from their recent drilling at Molopo Farms.
2. The Company has drilled a diamond core hole to test a steeply dipping geophysical superconductor at target area T1-14.
3. The geologists believe the superconductor is a potential sulphide mineralised carbonaceous to graphitic mudstone at depths 760m-813m.
4. The Company has drilled a 833m hole, which they believe has intersected the superconductor.
5. The drilling intercepted a dominance of sulfur in the carbonaceous mudstones and, importantly, one sample returned anomalous nickel at 0.128% Ni.
6. The team suggests that the carbonaceous mudstones may be the source of sulfur, raising the potential for nearby nickel sulphide deposits.
7. Sulfur assays returned up to 3.46% S over 0.37m.

Conclusion: Power Metals continues their search for nickel sulphide mineralisation at Molopo Farms, intercepting their targeted superconductor anomaly with deep drilling. This has shown a prevalence of carbonaceous mudstones which the company believe may be associated with the formation of potential nickel sulphide deposits. Further exploration will be required but Power Metals continue to further their understanding of the structural and mineralogical geology of Molopo Farms.

*SP Angel acts as Nomad and Broker for Power Metals

Sheffield Resources (SFX AU) A$0.375, Mkt cap A$140m – Ramp up of ilmenite and zircon production

• Sheffield Resources provides an update on their Thunderbird mineral sands operation in WA, a 50/50 JV with Yansteel.
• The Company expects to mine 2.2mt of total ore in the June quarter, 20% higher than the 2022 BFS assumed.
• The increase is a result of modifications to the Dry Mining Unit.
• As a result, concentrate production expected to rise to 55kt ilmenite conc produced in June and 120kt for the quartr.
• Zircon concentrate production at 13kt for June and 33kt for the quarter.
• WCP and CUP recoveries are meeting the design plan.
• Short term receivables have increased as the transition to typical payment terms progressed, seeing Sheffield contributing A$7.5m.
• The JV expects the project to generate positive operating cashflows in the September quarter.

Vast Resources (VAST LN) 0.17p, Mkt Cap £2m – Debt repayment notice served

• The Company has been served a Notice of Acceleration and Enforcement from one of its creditors.
• The notice is in regards of $5.8m owed to Alpha.
• Should the Company be unable to pay the amount owed in three months (26 September), Alpha will have the right to enforce the security over Vast.
• Alpha and the Company are reported to remain in debt standstill discussions and with Vast expecting to refinance outstanding liabilities from potential restructuring finance discussed with other parties.

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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