SP Angel Morning View -Today’s Market View, Tuesday 2nd July 2024

EV manufacturers rally after upbeat delivery data

MiFID II exempt information – see disclaimer below

Amaroq Minerals (AMRQ LN) – US$35m Revolving Credit Facilities

Bezant Resources (BZT LN) – Mankayan project update

Chaarat Gold (CGH LN) – Board changes and refinancing update

CleanTech Lithium (CTL LN) – Results of Laguna Verde project PFS process plant location study.

Endeavour Mining (EDV LN) 1,731p, Mkt Cap £4.1bn – Lafigue commissioning, reports of a cyanide leak at Ity (presumably)

Gem Diamonds (GEMD LN) – Eighth large diamond recovered from the Letšeng mine this year

Liontown Resources (LTR AU) – US$250m convertible loan and an extension to an offtake with LG Energy Solution

URA Holdings (URAH LN) – Preliminary economics of the Gravelotte emerald project, South Africa

Nio and other EV manufacturers rally after upbeat delivery data

• Nio shares rose 2.9% on Monday after reporting strong EV delivery data for June and the second quarter.
• Nio delivered 21,209 EVs in June, a 98.1% increase from the previous year, including 11,581 SUVs and 9,628 sedans.
• Nio’s second-quarter deliveries totaled 57,373 EVs, a 143.9% increase from last year.
• Shares of other Chinese EV makers also increased: Li Auto Inc. up 4% and XPeng Inc. up 2.5%.
• Li Auto delivered 47,774 EVs in June (up 46.7% from last year) and 108,581 EVs in Q2 (up 25.5%).
• XPeng delivered 10,668 EVs in June (up 24%) and 30,207 EVs in Q2 (up 30.2%).
• U.S.-listed shares of BYD Co. Ltd. rose 0.6%; BYD sold 341,658 new-energy vehicles in June (up 35% from last year), including 145,179 battery-electric vehicles (up 13.2%) and 195,032 plug-in hybrids (up 57.9%).
• Tesla shares surged 4.6%, potentially achieving the longest win streak since July 2023, despite concerns about second-quarter delivery figures being lower than last year.

Blackrock acquisition of Preqin

• BlackRock’s acquisition of Preqin confirms and illustrates the direction of financial markets.
• The £2.55bn deal for the private markets valuation and information provider gives BlackRock a commanding position into the growth of ‘unquoted’ companies.
• BlackRock also acquired Global Infrastructure Partners in January for $12.5bn. GIP invests directly in infrastructure assets along with GIP Atlas, a SEC-registered investment adviser.
• Fund management fees have seen a race to the bottom with zero or near-zero fees on index and passive funds.
• The cost of increasing regulation and reporting requirements on funds is pushing managers into ‘unquoted’ companies
• Regulatory and administrative costs are also forcing more companies away from IPOs and listed markets.
• Valuations can be ‘managed’ away from regulatory oversight. This is particularly evident in the Pharmaceutical sector where valuations are shaped higher while fishing for M&A.
• Short selling, while sometimes aiding liquidity is seen as damaging listed equities with the growth of expert short sellers and death-spiral convertibles.
• Regulatory focus on reducing risk for portfolio managers continues to reduce the funds available growth companies.

Conclusion: BlackRock appear to be following the money and are moving into areas where greater returns and fees can be generated away from the regulatory cost and administration of public market regulators.

Indonesia – Government raises stake in Grasberg by 10% to 61% in a form of creeping nationalisation

• An unconfirmed report suggests Indonesia has signed to extend operations at the giant Grasberg copper mine by a further 20 years to 2061 with FCX
• We understand the government has insisted on a further 10% ownership taking its stake to 61%.
• We do not know if or how much the Indonesian government are paying for the stake.

Congo – Gecamines rejects Chemaf-Norin deal for permit on Mutoshi copper mine

• Gecamines is to oppose the sale of Chemaf Resources (Trafigura) to Norin Mining Ltd (China).
• Chemaf is running the Mutoshi copper project in Katanga, DRC
• Chemaf says the sale would enable it to repay debt and creditors, eg $600m to Trafigura loaned in 2022.
• Chemaf was carrying ~$690m of debt last September with ~$510m drawn on the Trafigura loan.
• We speculate the US authorities might have had a word.

Economics

Eurozone – Headline CPI continued to slowdown down in June, but only marginally, while core measure held up unchagnned.

• Earlier, ECB Governing Council members along with President Christine Lagarde suggested that another rate cut in July is unlikely as monetary authorities want to see more evidence of slowing inflation.
• CPI (%yoy, Jun/May/Est): 2.5/2.6/2.5
• Core CPI (%yoy, Jun/May/Est): 2.9/2.9/2.8

UK – Equity markets becalmed as nation prepares to go to the polls

• Small cap equities are particularly becalmed as investors shun risk ahead of a probable Labour victory.
• Expect a number of ‘bash-the-rich’ coupled with a bunch of ‘bash-everyone-else-with-some-money’ type policies.
• Expectations are for a substantial rise in CGT to 40% or 45%.
• Anything else which enjoys a reduced tax rate will likely be changed to higher income tax rates such as ‘carry’ on PE funds.
• State Comprehensive schools are being overwhelmed with applications for pupils from Public schools, hence Labour’s deferral of VAT on Public school fees.
• Some Public schools are thought to be enabling fees to be paid in advance to avoid the 20% VAT.
• We expect the nation to voice strong protest against the Conservative Party with substantial votes going to Labour and to the new Reform party.
• The first-past-the-post voting system means Reform may not win many seats in Parliament.

UK car production dips due to EV switch

• UK car production fell by 11.9% in May due to the transition to EVs.
• About 70,000 cars were built in the UK in May, with nearly 75% exported.
• Production for the UK market increased by 9.7% to 17,754 units but was offset by a 17.4% decline in export volumes.
• Electrified vehicle production (battery electric, plug-in hybrid, and hybrid) accounted for 26,475 units, or 38% of all output, up 3% from May 2023.
• The share of electrified vehicles is expected to grow as manufacturers invest in greener products to meet the UK’s net zero goals.

Currencies

US$1.0717/eur vs 1.0722/eur previous. Yen 161.68/$ vs 160.88/$. SAr 18.473/$ vs 18.069/$. $1.262/gbp vs $1.265/gbp. 0.665/aud vs         0.668/aud. CNY 7.271/$ vs 7.267/$.

Dollar Index 106.02 vs 105.87 previous.

Precious metals:         

Gold US$2,325/oz vs US$2,327/oz previous

   Gold ETFs 81.1moz vs 81.0moz previous

Platinum US$977/oz vs US$996/oz previous

Palladium US$979/oz vs US$977/oz previous

Silver US$29.26/oz vs US$29/oz previous

Rhodium US$4,625/oz vs US$4,650/oz previous

Base metals:   

Copper US$ 9,625/t vs US$9,599/t previous

Aluminium US$ 2,519/t vs US$2,525/t previous

Nickel US$ 17,395/t vs US$17,291/t previous

Zinc US$ 2,932/t vs US$2,938/t previous

Lead US$ 2,220/t vs US$2,224/t previous

Tin US$ 32,935/t vs US$32,739/t previous

Energy:           

Oil US$86.7/bbl vs US$85.0/bbl previous

• Crude oil prices moved higher on concerns that Hurricane Beryl may portend a serious hurricane season in the Gulf of Mexico this year that would lead to above average disruption to US production and refinery operations.
• Shell announced plans to to temporarily pause on-site construction work at its 0.82mtpa biofuels facility in the Netherlands to address project delivery and ensure future competitiveness given current market conditions.
• California Resources completed a $1.1bn all-stock combination with Aera Energy to create a 146kboe/d (79% oil) E&P that targets delivery of $150m in annual synergies from the combined entity within the next 15M.
• Scatec has signed a heads of terms in Egypt with Yara to develop and build up to 480MW of renewable energy and an up to 240MW electrolyser facility for production of renewable hydrogen, which is to be used as feedstock for production of up to 0.15mtpa of renewable ammonia at an existing ammonia production facility at Damietta.

Natural Gas €33.2/MWh vs €34.0/MWh previous

Uranium Futures $85.5/lb vs $85.7/lb previous

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$107.4/t vs US$106.3/t

Chinese steel rebar 25mm US$519.0/t vs US$521.8/t

Thermal coal (1st year forward cif ARA) US$112.8/t vs US$114.0/t

Thermal coal swap Australia FOB US$131.0/t vs US$133.0/t

Hard Coking Coal Australia FOB US$249.4/t vs US$249.4/t

Other:  

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

NdPr Rare Earth Oxide (China) US$50,060/t vs US$49,950/t

Lithium carbonate 99% (China) US$12,034/t vs US$12,040/t

China Spodumene Li2O 6%min CIF US$1,030/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$345/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$1,396/t vs US$1,397/t

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

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

 Battery News

Tesla China briefly hints at strong domestic sales in June 2024

• Tesla China showed strong domestic sales in June 2024, as observed on Weibo.
• Despite generally lagging behind 2023 figures, Tesla China’s new vehicle registrations rose in late June.
• The week ending June 23 saw 17,500 new vehicle registrations, the strongest week of the year so far.
• Tesla China is bolstering its sales team by rehiring staff previously laid off.
• Efforts to push vehicle deliveries at the end of Q2 included delivery blitzes of the reengineered Tesla Model 3 Performance.
• Morale among workers has been high, partly due to the return of Senior Vice President Tom Zhu to China.

China makes big strides in new energy vehicle development with innovation

• Leapmotor International, a joint venture between China’s Leapmotor and Stellantis, began operations, with plans to export electric models to Europe.
• Audi and SAIC Motor are developing a new platform for intelligent and electric vehicles.
• In 2023, China sold 9.49 million NEVs, representing over 60% of the global market, leading the world for nine consecutive years.
• China has built the world’s largest charging infrastructure network, with nearly 8.6 million charging facilities by the end of 2023.
• Technological advancements are ongoing, exemplified by Exeed’s extended-range vehicle driving over 2,100 kilometers without recharging.
• Jidu Auto launched an AI-powered electric vehicle, and Geely showcased the first AI digital chassis at a Beijing auto show.
• A significant portion of new vehicles in China are equipped with advanced driver assistance systems, navigation, and voice control.

Ola Electric poised for IPO debut, timing depends on the process: MD Bhavish Aggarwal

• Ola Electric received SEBI approval for a ₹7,250 crore IPO.
• The IPO includes a primary issuance of ₹5,500 crore and a secondary sale of ₹1,750 crore.
• The exact timing of the IPO depends on the completion of ongoing processes.
• Ola Electric’s discussions with investors focus on scaling operations and improving margins rather than valuation.
• Ola Electric is the first EV startup to receive IPO clearance from SEBI.
• Ola Electric, based in Bangalore, is a subsidiary of ANI Technologies, the parent company of Ola Cabs.
• There is speculation about a potential IPO for Ola Cabs, but no details have been confirmed.

Toyota develops hydrogen vehicle at Derbyshire plant

• Toyota’s Derbyshire plant developed a hydrogen-powered pickup truck, the Toyota Hilux.
• The hydrogen Hilux has a range of 373 miles (600 km) and can be refilled quickly, similar to a combustion engine vehicle.
• The vehicle emits only water, making it environmentally friendly.
• Ten prototypes have been built, with four being used at the Paris Olympics, sponsored by Toyota.
• Decisions on mass production will be made by Toyota in Japan, and it is expected to retail at a price similar to electric vehicles.

Company News

Amaroq Minerals (AMRQ LN) 65p, Mkt Cap £211m – US$35m Revolving Credit Facilities

• Amaroq Minerals reports the agreement of heads-of-terms for three revolving credit facilities, totalling US$35m, with Landsbankinn.
• The new financing, which “replaces the previously undrawn credit facilities”, consists of

• • A US$28.5m facility which “replaces the Company’s existing revolving credit facilities … [and will be used to complete] … the Nalunaq development” in southern Greenland; and
  • A “US$6.5 million facility with a margin of 7.5% per annum, available for general corporate purposes once all other facilities have been fully drawn”.

• Welcoming the restructuring of the company’s debt, CEO, Eldur Olafsson, said that “In addition to simplifying the structure of our debt package under one single agreement at more favourable rates, the new Facilities strengthen our liquidity and provide us with further financial flexibility for years to come”.
• He added that “With a long-term debt agreement now secured for general purposes, we are committed to maintaining a strong capital management plan as we progress the development of our cornerstone Nalunaq project in South Greenland towards First Gold this year”.
• In April this year, the company completed its first underground mining blast at Nalunaq having previously indicated that it “to mine first gold in 2024”.

Conclusion: The expansion and restructuring of its debt comes as Amaroq Minerals moves to produce its first gold at Nalunaq later this year.

Bezant Resources (BZT LN) 0.02p, Mkt cap £2.3m – Mankayan project update

• Bezant Resources draws attention to an announcement by Australian-based IDM International describing progress at the Mankayan copper/gold project in the Philippines.
• Bezant Resources sold the project, located north of Baguio City in Northern Luzon, to IDM in 2022 and currently owns ~19.4m IDM shares or 22.93% of the company.
• The announcement from IDM confirms the renewal of the project’s 25-year Mineral Production Sharing Agreement (MPSA) as well as completion of pre-feasibility drilling.
• Based on over 56,000m of drilling, Mankayan currently hosts “a JORC 2012 compliant mineral resource of 793Mt containing 2.8Mt of copper, 9.7M oz of gold and 21M oz of silver” at average grades of 0.35% copper, 0.38g/t gold and 0.8g/t silver and is described in IDM’s announcement as “one of the largest undeveloped copper-gold porphyry projects in the world”.
• The resources are reported at a cut-off grade of 0.25% on a copper equivalent basis with the overall resource grading 0.65% copper equivalent based on a copper price of US$2.80/lb (~US$6,170/t) and a gold price of US$1,800/oz.
• The announcement also describes progress on permitting and community relations issues including “extensive consultation with the community at large as well as the local governments (Barangays) and the recognised Indigenous Peoples”.
• Welcoming IDM’s progress, Bezant Resources’ Executive Chairman, Colin Bird, described Mankayan as “a Tier 1 asset … [and said that] … with the recognised copper shortfall there is a need to bring large copper projects like the Mankayan Copper Gold project into production to meet the copper supply shortfall being faced by global markets”.

Chaarat Gold (CGH LN) 1.4p, Mkt Cap £10m – Board changes and refinancing update

• Martin Andersson is stepping down from his role as Executive Chairman with immediate effect and will become a Non-Executive Director.
• The change has been requested by the Board to avoid a conflict of interest during negotiations over restructuring of debt.
• Labro Investments, a provider of working capital facility, a holder of a share of outstanding convertible loan notes as well as a substantial shareholder (~45% investor as of Dec/23), is controlled by Martin Andersson.
• Current convertible loan amount outstanding is ~$38.9m due 31 July with a further $2.3m due by 30 September under the Labro working capital facility.
• The Company has been in negotiations with representatives of the convertible loan note holders over recent weeks on a potential restructuring of the outstanding convertible loan notes and the provision of additional working capital, which depending on the terms may require agreement from shareholders and certain creditors (including Labro).
• Current cash balance is standing at ~$0.6m, sufficient to cover the Company’s operations for the next 4-6 weeks (excl any debt repayments).
• Discussion with Xiwang International are also reported to have only limited progress to date and are not expected to progress sufficiently before the 31 July repayment due date for convertible notes.
• Gordon Wylie, previously Senior Independent NED, will become Independent Non Executive Chairman.
• David Mackenzie has been promoted to become acting CEO from currently held CFO position.

CleanTech Lithium (CTL LN) 14.08p, Mkt Cap £22m – Results of Laguna Verde project PFS process plant location study.

• CleanTech Lithium reports results of the Laguna Verde project PFS process plant location study.
• Xi´an Lanshen New Material Technology Company is to provide the lithium processing plant design and equipment.
• Worley will manage the design, the balance of plant and infrastructure.
• Laguna Verde capacity is for 20,000tpa LCE lithium carbonate equivalent and is located near Copiapó 800km north of Santiago, Chile.
• A 6% lithium concentrate will be trucked from the project site to Copiapó further processing and carbonation. Copiapó is seen as having “well-developed infrastructure and better access to a skilled workforce”.
• Lanshen estimates ~70% of the operational workforce will be employed at the carbonation plant and the Copiapó location will allow for better diversity in employment including greater female participation.
• The Copiapó site also reduces the site footprint and environmental impact while reducing power, storage, camp and other plant facilities.

• • “The carbonation plant in Copiapó would eventually be expanded to also treat concentrated eluate from the Viento Andino project”

Endeavour Mining (EDV LN) 1,731p, Mkt Cap £4.1bn – Lafigue commissioning, reports of a cyanide leak at Ity (presumably)

• The Company reports first gold pour at the Lafigué mine achieved on budget ad ahead of schedule.
• Commercial production and subsequent ramp-up to nameplate plant capacity of 4.0Mtpa expected to be achieved in Q3/24.
• Lafigué is expected to run at between 90-110koz at $900-975/oz AISC in FY24 (Dec/ YE), with production increasing to approximately 200koz in FY25.
• The deposit hosts 49.8mt at 1.69g/t for 2.7moz in reserves and 47.8mt at 2.04g/t for 3.1moz in resources (inclusive of reserves).
• The project constructed by the inhouse team and is reported to have been commissioned 21 months after construction start and taken from discovery to production in less than eight years.
• The mine is the fifth project that was the Company delivered in West Africa in the last decade.
• Separately, Bloomberg reports that Endeavour is studying the damage from the leak of cyanide at what appears to be its Ity operation in Cote d’Ivoire.
• Early reports suggest that a broken valve leaked 3,000l of mud containing cyanide into a canal within the perimeter of the mine.
• Cyanide “didn’t leak into the Cavally River” as the Company too “immediate seps” to prevent the leak from polluting the river, Endevour’s country manager Laetitia Gadegbeku-Ouattara told reports in Abidjan.

Gem Diamonds (GEMD LN) 12.25p, Mkt Cap £17.1m – Eighth large diamond recovered from the Letšeng mine this year

• Gem Diamonds reports the recovery of a 123.2 carat Type II white diamond from its Letšeng mine in Lesotho.
• The recent discovery is the latest in a series of large diamonds from the mine which has yielded eight diamonds larger than 100 carats so far this year, most recently a 172.06 carat Type II white diamond announced in early June.
• Longer-term, Letšeng has an established history of producing large diamonds including the 1,109 carat ‘Lesedi La Rona’, discovered in 2017 and thought to be the world’s second largest diamond as well as the 910 carat ‘Lesotho Legend’ recovered in 2019, and understood to be the fifth largest gem quality diamond ever discovered, which realised US$40m when sold in Antwerp.

Liontown Resources (LTR AU) A$0.96, Mkt Cap A$2.2bn – US$250m convertible loan and an extension to an offtake with LG Energy Solution

• Liontown agrees a US$250m convertible with LG Energy Solution, one of the world’s largest producers of Li-ion batteries, as well an extension to the existing offtake.
• Convertible notes are due in five years, have a conversion price of A$1.80 and a coupon equal to a reference rate of SOFR.
• This brings total cash balance to A$501m with convertible notes to replace A$550m debt facility announced earlier in March that will be now cancelled.
• The Kathleen Valley is reported to be on budget to first production with A$120m remaining to be spend to complete construction and commissioning.
• First production is guided for end of July.
• The balance of funds will be used for additional liquidity during the ramp up to 3mtpa steady state production.
• Additionally, the Company agreed to extend the existing five year offtake agreement by an additional 10 years to a total of 15.
• Offtake includes a delivery of 100ktpa of SC6 in Y1, 150ktpa in Y2-Y5, 160ktpa in Y6 to Y10 and 140ktpa in Y11-Y15.
• This extension also includes a commitment to make up to an additional 250kt SC6 available to LG Energy Solution over the first 10 years of this 15y offtake term
• Liontown and LG Energy Solution also agreed to study potential for a new downstream lithium refinery processing Kathleen Valley concentrate into battery grade lithium chemicals.
• The refinery will potentially treat both LG Energy Solution offtake and new additional tonnes from a future 4mtpa expansion.

URA Holdings (URAH LN) 1.25p, Mkt Cap £4.0m – Preliminary economics of the Gravelotte emerald project, South Africa

• URA Holdings has released the results of an independent desk-based review, prepared on its behalf by the consultants ACA Howe, on the discounted cashflow model of its Gravelotte emerald mine in South Africa.
• Based on annual mine production ramping up from an initial 30,000tpa to 90,000tpa over the first 6 years of the projected 17 years mine life, ACA Howe estimate that capital investment of US$2.58m is expected to generate a pre-tax NPV_10% of US$22.39m and IRR of 76% based on a “conservative average of USD5 per carat” selling price.
• Modelling envisages exploitation of the current 29m carat ‘Inferred’ resource with “the conversion of approximately 8.5 million carats from the Cobra Pit and Discovery Main Exploration Targets, which are beneath the Inferred Mineral Resources described”.
• The announcement does not, however appear to detail yearly emerald production rates.

Conclusion: The consultants show attractive returns from the Gravelotte emerald project.  We caution that the use of ‘Inferred’ resources plus a portion of a still-to-be delineated ‘Exploration Target’ indicates the early-stage nature of the project and we expect that further work will be required to develop a more closely defined resource prior to development.

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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