SP Angel Morning View -Today’s Market View, Thursday 4th July 2024

Metals climb as dollar rally cools and traders look to China’s Third Plenum for policy support

MiFID II exempt information – see disclaimer below

Aura Energy* (AURA LN) – Optimisation team for FEED study for Tiris uranium project in Mauritania

East Star Resources (EST LN) – Interest in Verkhuba copper project in Kazakhstan

Endeavour Mining (EDV LN) – Ivorian government say Ity cyanide leak reached the Cavally River

Nickel Industries (NIC AU) – Update for June Quarter

Petra Diamonds (PDL LN) – Seventh sales tender results announcement highlights subdued diamond market to the end of the year

Tirupati Graphite (TGR LN) – Funding update

West African Resources (WAF AU) – A$150m equity raise to fund Kiaka to gold production

Metals climb as dollar rally cools and traders look to China’s Third Plenum for policy support

• Base and ferrous metals have climbed over the past 24 hours, with copper touching $9,893/t and iron ore climbing to $113/t in Singapore.
• Traders are betting that China’s Third Plenum in Beijing will introduce new policies to support the downbeat housing sector.
• Copper prices rallied despite Codelco reiterating guidance for 2024 and retaining the 1.7mtpa by 2030 target.
• LME inventories for copper have risen to their highest levels in 16 months, with contango still persistent.
• Iron ore port inventories have hit two-year highs and steel inventories in country are healthy.

Gold ($2,360/oz) holds higher ground after US Treasuries rally on growth concerns

• Gold prices have held their recent rally from lows of $2,298/oz to $2,360/oz today.
• The move follows a rally in US Treasuries, with the 10-year yield falling from 4.48% to 4.35% yesterday.
• The bond rally was supported by rising jobless claims, which are weighing on the consensus of a still-hot US labour market.
• The US ISM services sector survey showed a contraction at the fastest pace in four years yesterday.
• Focus turns to tomorrow’s non-farm payroll data, which is expected to provide further insight into the health of the US labour market.

Economics

US – Fed minutes largely reflected the consensus that the FOMC will need more evidence of slowing inflation before a rate cut.

• Although, notes showed members’ increasing caution with the labour market as the unemployment edged higher in recent months.
• Officials dialled back the number of rate cuts they expect this year to just one.
• Friday labour numbers are expected the economy added 190k jobs, down from 272k in May when payrolls topped forecasts, with the jobless rate holding steady at 4.0%; labour earnings growth is expected to pull back as well.
• S&P 500 hit its 33^rd record in 2024 with risky assets getting tailwind from worse than expected services sector data with the ISM Index showing the industry contracted at the fastest pace in four years.
• Inflation pressures slowed down and employment sub index showed a further softening in the labour market.
• ISM Services Index (Jun/May/Est): 48.8/53.8/52.7

UK – Polls are open for general elections with Labour set for a landslide win with FT forecasting the party taking 447seats, well over 326 needed for a majority.

• Conservatives are expected to win only 98 seats down from 365 secured in the last elections in 2019.
• Construction slowed more than expected in June with homebuilders blaming the weakest increase in new orders since February on uncertainty around the election.
• Construction PMI: (Jun/May/Est): 52.2/54.7/54.0

Labour expected to win convincing victory in UK election today

• Expect record low turnout due to general dissatisfaction with the general shoddy quality of UK MPs.
• Many voters will not forgive Boris Johnson for partying during Covid lockdown and particularly for failing to own up in Parliament.
• Liz Truss then tried to kick start the economy while ignoring advice from HM Treasury. She lasted less time than a lettuce.
• PM Rishi Sunak, who was chancellor under Boris Johnson has being trying to win back ‘Red Wall’ voters.
• Will the last energy bill payer to leave the country please turn the lights out? We hear Italy (Tuscany) is offering a particularly attractive taxation regime.

Japan – The Topix equity index hit an all time high after nearly 35 years.

Germany – Factory Orders (%mom, May/Apr/Est): -1.6/-0.6(revised from -0.2)/0.5

• Factory Orders (%yoy, May/Apr/Est): -8.6/-1.8(revised from -1.6)/-6.1

Brazil – Lula unveils record crop financing plan in bid for Brazilian farmers’ support

• President Lula hands out substantial support (~$72bn) to farmers in an attempt to win new support plus another US$14bn for family farmers.
• Agriculture accounted for around 24% of GDP (18% for crops) down from 29% in 2021

Zimbabwe – Sovereign Wealth fund paid $1.6bn for shares in mining company

• The Mutapa Investment Fund formerly known as the Sovereign Wealth Fund of Zimbabwe has so far refused to name the company. (Business Maverick)
• US$1.6bn equates to around 5% of Zimbabwe GDP.
• The Sentry, a US-based investigative group which tracks corruption has named Kuvimba Mining as the recipient
• Kuvimba owns a number of gold, lithium, nickel and platinum mines.
• The Sentry suggests Mutapa holds 65% of Kuvimba with 35% in private investor hands.
• The report indicates Matapa paid $1.6bn for 35% of the shares valuing Kuvimba Mining at US$4.6bn
• The Sentry also reports the Mutapa fund received $1.9bn in government loans to revive failing state-owned enterprises.
• The Sentry goes further to suggest that Kudakwashe Tagwirei, reported to be a financier of ZANU-PF owned up to 35% of Kuvimba via companies including Pfimbi Resources.

Morocco – Chinese firms eye Morocco as way to cash in on US electric vehicle subsidies

• Following the introduction of US tariffs on Chinese EVs to boost domestic EV production, Chinese manufacturers began investing in Morocco to capitalise on incentives.
• At least eight Chinese battery makers announced investments in Morocco since the Inflation Reduction Act, aiming to qualify for $7,500 credits for US car buyers.
• Investments are also being made in other US free trade partners like South Korea and Mexico, but Morocco has seen significant growth.
• Major investments include a $2bn joint venture by CNGR and Al Mada, and a $6.4bn project by Gotion High-Tech to build Africa’s first EV battery factory.
• Companies like LG Chem and Youshan are adjusting ownership structures to comply with US rules.
• Morocco has become a key player in the global EV supply chain, benefiting from its strategic trade position.
• The transition to EVs will continue to involve Chinese manufacturers for years, given their dominance in the battery supply chain.

Currencies

US$1.0791/eur vs 1.0756/eur previous. Yen 161.41/$ vs 161.86/$. SAr 18.421/$ vs 18.507/$. $1.275/gbp vs $1.269/gbp. 0.672/aud vs 0.668/aud. CNY 7.271/$ vs 7.273/$.

Dollar Index 105.29 vs 105.64 previous.

Precious metals:         

Gold US$2,354/oz vs US$2,342/oz previous

Gold ETFs 81.2moz vs 81.0moz previous

Platinum US$1,004/oz vs US$1,002/oz previous

Palladium US$1,015/oz vs US$1,032/oz previous

Silver US$30.33/oz vs US$30/oz previous

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

Base metals:   

Copper US$ 9,814/t vs US$9,812/t previous

Aluminium US$ 2,542/t vs US$2,539/t previous

Nickel US$ 17,195/t vs US$17,230/t previous

Zinc US$ 2,979/t vs US$2,966/t previous

Lead US$ 2,211/t vs US$2,217/t previous

Tin US$ 33,180/t vs US$33,035/t previous

Energy:           

Oil US$86.7/bbl vs US$86.5/bbl previous

• Crude oil prices edged higher after the EIA reported a large 12.2mb w/w draw to crude and ~2mb draws to both motor gasoline and distillate stocks in the US, with domestic refinery utilisation rising 1.3% w/w to 93.5%.
• European energy prices were flat as EU natural gas storage levels gained 1.9% w/w to 77.9% full (vs 67.9% 5-Yr average) with Germany already 81.9% full and aggregate storage now at 884TWh.

Natural Gas €32.3/MWh vs €33.3/MWh previous

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

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$113.1/t vs US$109.8/t

Chinese steel rebar 25mm US$517.7/t vs US$518.0/t

Thermal coal (1st year forward cif ARA) US$114.3/t vs US$112.8/t

Thermal coal swap Australia FOB US$134.0/t vs US$131.3/t

Coking coal Dalian Exchange futures price US$221.4/t vs US$221.8/t           

Other:  

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

NdPr Rare Earth Oxide (China) US$49,923/t vs US$50,252/t

Lithium carbonate 99% (China) US$12,034/t vs US$12,030/t

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

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

China Tungsten APT 88.5% FOB US$345/mtu vs US$345/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$1,395/t

Spot CO2 Emissions EUA Price US$69.6/t vs US$65.9/t

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

Battery News

GM to pay $146m fine due to excess emissions

• General Motors will have to pay a $145.8 million penalty and forfeit ‘carbon credits’ worth hundreds of millions of dollars after a US government investigation found excess emissions from approximately 5.9m GM vehicles between 2012-2018.
• The Environmental Protection Agency (EPA) has confirmed that GM will give up 50m metric tons of carbon allowances following the investigation.
• Separately, the National Highway Traffic Safety Administration has said the automaker pay $145.8m and cancel 30.6m fuel economy credits to resolve the issues.
• In a statement GM estimated probable loss to be around $450m, valuing the forfeited credits at around $300m.

UK set to miss EV sales targets by 2030 or 2035

• The UK is predicted to miss its EV sales targets for 2030 and 2035, with battery-electric models expected to make up only 44% of new vehicle sales by 2030 and 78% by 2035.
• ICE vehicles are still expected to constitute 24% of light vehicle sales in 2030 and about 10% by 2035, despite the impending ban on new petrol and diesel cars.
• The UK’s ZEV mandate requires 80% of new cars and 70% of new vans to be zero emission by 2030, with fines for automakers who miss these targets.
• Major barriers to EV adoption include cost, charging infrastructure, charging time, and battery life.
• France, Germany, and Italy are also expected to fall short of their EV targets.
• Hydrogen as a zero-emission fuel has potential but is currently not widely explored or invested in due to high costs.

BYD receives order for 160 electric buses from Azerbaijan

• BYD announced that is has won the Azerbaijani government’s electric bus procurement program, securing an order for 160 units of 12-meter K9UD electric buses.
• The automaker plans to ship these electric buses to Azerbaijan in batches starting this month, some of which will be in service during the 29th UN Climate Change Conference (COP29) to be held in November in the Azerbaijani capital, Baku.
• The K9UD bus is powered by a 422kW LFP battery with a range of 450km.
• BYD has deployed 80,000 electric buses globally to more than 400 cities in over 70 countries.

Indonesia Targets Production of 600,000 EV Units by 2030

• Indonesia aims to produce 600,000 EVs by 2030, announced by the Coordinating Minister for Maritime and Investment Affairs.
• This production target is expected to reduce emissions by up to 160,000 tons of CO2 annually.
• EV production could decrease fuel imports by 45m litres per year and save Rp131 billion in subsidies annually.
• Indonesia aims to become a global key player in the EV supply chain, leveraging its rich resources and advanced technology.
• President Joko Widodo inaugurated the PT Hyundai LG Industry Green Power EV battery factory in Karawang, West Java, on July 3, 2024. The factory is the first and largest in Southeast Asia.
• South Korea invested US$3.1bn in the EV battery factory, which has a projected capacity of 30GWh.

Company News

Aura Energy* (AURA LN) 7.22p, Mkt Cap £58m – Optimisation team for FEED study for Tiris uranium project in Mauritania

• Aura Energy has been busy pulling together a team of experts to move the Tiris uranium project forward towards a potential mine development decision
• New appointments:
  • Project EQ (Jan Booyse_ – experienced West African project director
  • Kenmore Mine Consulting – mine optimisation review
  • Lycopodium – to oversee an optimisation and project enhancement studies and reduce the $230m capex
  • Knight Piésold Consulting – to oversee water resource drilling in the Taoudeni Basin
  • Bruce Harvey – to review and update the ESG framework
• Potential to reduce Opex and Capex on further project optimisation and reconfiguration.
• The 35% (10.3mlbs U₃O₈) rise in M&I resources also give potential for future expansion:
  • 2.0mlbs pa U₃O₈ production capacity = US$ 230M development capital (Base Case)
  • 2.8mlbs pa U₃O₈ production capacity = US$ 83M expansion capital (from 2 to 2.8Mlbpa)
  • 3.5mlbs pa U₃O₈ production capacity = US$ 166M expansion capital (from 2 to 3.5Mlbpa)
• FEED ‘Front End Engineering Design’ economic study results:
  • NPV8 US$388m post tax
  • IRR 36% post tax
  • Payback 2.5 years
  • Capex $230m
• Lycopodium recently successfully re-commissioned Paladin Energy’s Langer Heinrich Mine in Namibia where the process plant has a very similar design and flow sheet.
• Resource: Tiris MRE 91.3mlbs U₃O₈ delivered at a discovery cost of only US$ 0.14 per lb U₃O_8.
  • Tris East: 76.6mlbs U₃O₈ contained within 162mt grading 215ppm U₃O₈ at the on 8,031 drill holes (15,262m). ~50% of tonnage is in M&I
  • Oum Ferkik: 14.6m lbs of U₃O₈ within 22mt grading of 294ppm U₃O₈ all Inferred.
• The new estimate is based on a total of 8,031 drillholes totalling 43,543m including 125 holes (748m) of large diameter (PQ size) core drilling.

Conclusion: Aura are enhancing the value of the Tiris project through the incorporation of newly identified resources at Tiris and Oum Ferkik. The new team of consultants will optimise the project to improve its potential value and financing prospects.

*SP Angel acts as Nomad and Broker to Aura Energy

East Star Resources (EST LN) 3.85p, Mkt Cap £7.4m – Interest in Verkhuba copper project in Kazakhstan

• East Star Resources reports that its plans to interest third-parties in its wholly-owned Verkhuba copper deposit in Kazakhstan have attracted “a number of verbal and written offers”.
• The company confirms that “the Board has not formally accepted an offer … [although] … the process of vetting counterparties has begun”..
• While it cautions that “there is no guarantee an offer will be accepted and agreement completed, it is the Company’s intention to finalise the process as soon as practicable”.
• In April, the company issued an inferred mineral resource estimate for the Verkhuba VMS deposit of 20.3mt at an average grade of 1.16% copper, 1.54% zinc and 0.27% lead.
• The company has several other exploration targets within the Rudny Altai mineral belt of Kazakhstan and in today’s announcement CEO, Alex Walker, said that the company’s “field teams have been working since early June, conducting mapping and litho-geochemical sampling over priority targets in the Rudny Altai VMS licences to ensure the best are selected for drill testing this year”.
• In the April release detailing the Verkhuba resource estimate Mr. Walker expressed the view that “East Star believes the value of Verkhuba alone significantly exceeds the current market capitalisation of the Company” and we speculate that funds realised by a sale of Verkhuba could be deployed to advance exploration of the company’s wider project portfolio in Kazakhstan.
• We also remind readers that the company’s 2024 porphyry copper exploration is backed by BHP’s Xplor scheme with a US$0.5m grant.

Conclusion: We await further news of third-party interest in Verkhuba and of any offer which may result as well as progress on the wider Kazakh exploration projects.

Endeavour Mining (EDV LN) 1,756p, Mkt Cap £4.3bn – Ivorian government say Ity cyanide leak reached the Cavally River

• The leak of mud containing cyanide happed on June 23 releasing 3,000l into a canal with in the perimeter of the Ity Gold Mine in Cote d’Ivoire, the Company said.
• The Ivorian Ministry of Environment said the leak reached the Cavally River.
• “The source of the pollution has been brought under control by the mining company, which pledged to provide nearby communities with drinking water until the cleanup is complete,” the statement from the government read.

Nickel Industries  (NIC AU) A$0.8 Mkt Cap A$3.5bn – Update for June Quarter

• Indonesian nickel producer Nickel Industries reports an update for the June quarter.
• The Company is forecasting US$75-80m for the period, hit by higher rainfall.
• Rainfall at the Company’s Hengjaya Mine was up 48% and 91% for the past two years’ same periods.
• Rainfall has weighed on delivery of concentrate to the Company’s processing operations, forcing them to drawdown lower grade ore from stockpiles.
• The Company has increased its equity stake in Excelsior Nickel to 44%, using cash reserves and existing facilities.
• Nickel Industries paid US$380, for the additional 16.5% interest, in cash.
• The payment will support the construction and commissioning of the nickel cathode and sulphate plants.
• The Company expects to boost their stake to 55% for a total of $1,265m invested by October 2025.
• Nickel Industries shareholder United Tractors has received FIRB approval to boost its interest beyond 20%.
• This was triggered after Nickel Industries sought to initiate a buyback of US$100m earlier this year.

Petra Diamonds (PDL LN) 38.2p, Mkt Cap £74m – Seventh sales tender results announcement highlights subdued diamond market to the end of the year

• Petra Diamonds has announced that its seventh diamond sales tender of FY 2024, realised US$38m from the sale of 337,064 carats bringing FYTD sales to 3,158780 carats realising US$366m (2023 – 2,329,817 carats realising US$324m).
• Average prices realised in the 7^th tender at US$111/carat were lower than the US$118/carat realised in the preceding 6th tender with YTD average prices of US$116/carat also lower than 2023’s YTD average of US$139/carat.
• Prices for production from the Cullinan mine were US$111/carat with the Finsch mine averaging US$93/carat and Williamson generating US$158/carat.
• Chief Executive, Richard Duffy, commented on “the continued softness in demand for coarser goods, specifically stones between 1 and 10 carats in size, exacerbated by seasonal weakness. We expect a subdued market through to the end of this calendar year”.

Tirupati Graphite (TGR LN) 8p Mkt Cap £5.5m – Funding update

• Tirupati Graphite has appointed financial advisors to support their funding arrangements.
• The Company reports that they are progressing engagements with investors in a non-dilutive manner.
• Musst and Vita-Connect have been engaged to raise £3m for working capital to support a run rate of 20ktpa.
• The advisors will also seek to source project finance from ‘Development Financial Institutions’ of £80m to boost production to 54ktpa.
• The Company is seeking ex-China funding.
• To date, Tirupati reports that initial due diligence has been completed by a strategic financier.
• They have also initiated discussions with another strategic partner alongside a Middle East Sovereign fund.
• The Company is also continuing their discussions for a refund of VAT from the Madagascar government of $2m and from Mozambique of $1.2m.

West African Resources (WAF AU) A$1.4 Mkt Cap A$1.4bn – A$150m equity raise to fund Kiaka to gold production

• West African Resources reports today they have firm commitments for the issue of equity worth A$150m.
• The company will issue shares at a price of A$1.37/shr, a 9% discount to the 10-day VWAP.
• The funds will be used to purchase owner mining fleet, owner mining workshop facilities and exploration rigs.
• The Company held A$484m in cash and unsold bullion before the raise.
• WAF is aiming to produce >420kozpa from 2025.
• Kiaka is expected to produce 234kozpa over a 20-year period.
• The company holds a 90% interest in the Burkina Faso mine.
• The mine holds a reserves of 164mt at 0.9g/t Au for 4.8moz using a $1,400/oz pit shell.
• Pre-production CAPEX at $447m.
• First production expected 3Q25.
• The mine expects to use an 8.4mtpa CIL + gravity plant for LOM recoveries of 90%.

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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