SP Angel Morning View -Today’s Market View, Wednesday 10th July 2024

Gold prices rise to $2,373/oz as Fed lines up rate cut and US dollar starts to slide

MiFID II exempt information – see disclaimer below

Ariana Resources (AAU LN) – Increased MRE at Dokwe may support increased production over a longer mine-life

Artemis Resources (ARV LN) – Lithium soil geochemical anomaly over the Osborne pegmatite, WA

Bluebird Merchant Ventures (BMV LN) – Board restructuring and progress on jv strategy towards production

Caledonia Mining (CMCL LN) – Blanket delivers better than expected H1 production to stay on track to achieve 2024 guidance

Capital Metals (CMET LN) – Resource drilling plans in Sri Lanka

Galantas Gold* (GAL LN) – Proposed solar power facility

Ganfeng Lithium (002460 HK) – Profit warning as depressed lithium prices continue to weigh on earnings

Griffin Mining (GFM LN) – Q2 Production as zinc and gold prices coincide with record output  

KEFI Gold and Copper* (KEFI LN) – Tulu Kapi project update

Tharisa Plc (THS LN) – Quarterly production as PGM prices remain depressed

Gold ($2,373/oz) climbs as US Treasury rally resumes following Powell comments

• Gold prices have rallied, bouncing off their NFP levels of $2,350/oz, up $23/oz this morning.
• The metal has been supported as US Treasury yields slid again following Powell’s comments, back below 4.3% on the 10 year.
• Focus turns to CPI data tomorrow, with traders currently expecting two hikes this year.
• ETFs continue to add gold holdings as yields slide but remain net sellers this year.
• We continue to see ETF buying as gold’s next major catalyst amid a lower rate environment following China’s decision to sit out of purchases in recent months.
• This thesis remains vulnerable to an uptick in inflation data, making this week’s inflation data crucial for short term bullion traders.
• Unemployment is rising in North America, with Canada’s unemployment rate rising to 6.3%, whilst the US rate rose above 4% to 4.1%.

Copper prices ($9,830/t) slide as Russia and China collaborate on smelting

• Copper prices have lost ground from their $9,950/t levels. LME inventories up 4,450t.
• Nornickel is in talks with China Copper (Chinalco) to move its smelting base to China following the West’s ban on Russian metal in exchange warehouses (Reuters).
• The new arrangement appears designed to simply move the smelting arrangements and is not promoted as producing anymore copper. Nornickel produced 425,400tpa of copper in Russia last year.
• SMM reports smelters are returning to action in China following summer maintenance through June.
• Codelco is reportedly eyeing a 10% stake in Teck’s recently developed QB2 mine.
• QB2 is set to produce 310ktpa Cu.

Zinc TC fall to US$40/t in the spot market with lower treatment charges for lower quality zinc concentrates as smelters compete for feedstock

Shipping – Container rates rise 10% on last week as ongoing threat of Houthi air strikes continue to force shipping to route around the Cape

• The Composite Benchmark Container rate $5,868 per 40ft container vs an average $4,100 average for the past five years
• The extra time and increasing processing of copper, zinc and other concentrates in China is impacting prices on the LME and Comex
• A potential shortage of suitable containers along with other logistics issues
• We note the Port of Baltimore fully reopened on 11 June, 11 weeks after the Baltimore bridge collapse

Economics

 US – Jerome Powell said the US jobs market “cooled considerably” strengthening speculation the Fed will cut rates later this year.

• Addressing the Congress Fed Chair was careful not to offer a timeline for interest rate cuts with markets expecting the first to come in September.
• “The latest data show that labour-market conditions have now cooled considerably from where they were two years ago—and I wouldn’t have said that until the last couple of readings,” he said.
• Treasury Secretary Janet Yellen echoed Powell comments saying that the labour market was no longer driving inflation in the US.
• Biden gives good speech at NATO summit but, for many, we have the feeling the damage is already done

China – Inflation slowed more than expected pointing to a weakening consumer demand.

• Food prices remain one of the main drags on inflation with a 2.1% drop although other categories have reported weaker data as well.
• Services sector inflation slowed again to a 0.7%yoy reading, down from 0.8% recorded through March to May.
• PPI (%yoy, Jun/May/Est): -0.8/-1.4/-0.8
• CPI (%yoy, Jun/May/Est): 0.2/0.3/0.4

Ministry of Ecology and Environment looking into potential to allow import of certain copper and aluminium scrap.

• Scrap used to be a significant source for local refiners but was largely barred on the grounds of importing pollution.
• Now China is struggling to import sufficient concentrates for its new smelters the ministry is looking to overturn its ban on certain scrap imports

UK- Bellway makes £700m offer to buy Crest Nicolson as Labour government ramps up rhetoric on new housebuilding

• Crest Nicholson had previously rejected an offer of £650m in one of UK’s largest housebuilding deals.
• The new Labour government have pledges to sweep away impediments to planning on green-belt and other land promising to stimulate new housing development.

Currencies

US$1.0823/eur vs 1.0824/eur previous. Yen 161.40/$ vs 160.87/$. SAr 18.055/$ vs 18.080/$. $1.280/gbp vs $1.281/gbp. 0.675/aud vs 0.674/aud. CNY 7.276/$ vs 7.272/$.

Dollar Index 105.07 vs 105.02 previous.

Precious metals:         

Gold US$2,375/oz vs US$2,359/oz previous

Gold ETFs 81.5moz vs 81.5moz previous

Platinum US$992/oz vs US$1,005/oz previous

Palladium US$989/oz vs US$1,019/oz previous

Silver US$30.97/oz vs US$31/oz previous

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

Base metals:   

Copper US$ 9,855/t vs US$9,940/t previous

Aluminium US$ 2,483/t vs US$2,532/t previous

Nickel US$ 17,100/t vs US$17,325/t previous

Zinc US$ 2,926/t vs US$2,962/t previous

Lead US$ 2,190/t vs US$2,225/t previous

Tin US$ 34,365/t vs US$34,370/t previous

Energy:           

Oil US$84.1/bbl vs US$85.5/bbl previous

Natural Gas €31.5/MWh vs €32.2/MWh previous

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

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$109.3/t vs US$108.2/t

Chinese steel rebar 25mm US$514.8/t vs US$515.5/t

Thermal coal (1st year forward cif ARA) US$110.4/t vs US$112.9/t

Thermal coal swap Australia FOB US$135.0/t vs US$135.0/t

Coking coal Dalian Exchange futures price US$212/t vs US$214.7/t

Other:  

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

NdPr Rare Earth Oxide (China) US$49,617/t vs US$49,575/t

Lithium carbonate 99% (China) US$12,026/t vs US$12,033/t

China Spodumene Li2O 6%min CIF US$1,010/t vs US$1,010/t

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

China Tungsten APT 88.5% FOB US$340/mtu vs US$340/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% 26.75/kg vs US$26.75/kg

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

China Rutile Concentrate 95% TiO2 US$1,395/t vs US$1,396/t

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

Brazil Potash CFR Granular Spot US$307.5/t vs US$307.5/t

Battery News

Chinese EV sales top 1m again following slow start to 2024

• China’s new energy vehicle (NEV) sales climbed to 1,049,000 in June as the rebound in sales continued.
• It’s the third time China’s NEV sales have exceeded 1m units in a single month, after November and December 2023, signalling a further recovery from the weak performance at the beginning of the year.
• Sales figures are the wholesale sales of automakers, including sales in China and exports to overseas markets. NEVs include battery electric vehicles (BEVs), plug-in hybrid electric vehicles (PHEVs), and fuel cell vehicles.
• BYD is still the dominant player in the Chinese market with a 32.7% share of June sales. Tesla held second place with 6.9%

Canberra trial shows EVs can provide backup power to grid in blackouts and emergencies

• 16 EVs in Canberra provided backup power to the grid within six seconds of a major power station outage in Victoria, Australia.
• The trial, called Realising Electric Vehicles to Grid Services (Revs), used 51 Nissan Leaf cars to test EVs’ potential in stabilising the national electricity market.
• The study showed EVs could help manage grid instability during emergencies.
• The Australian Energy Market Operator anticipates a significant rise in EV adoption by 2050, with models featuring vehicle-to-grid capabilities.
• Current vehicle-to-grid technology is hindered by the lack of supportive standards and grid codes.

One in every two Volvo cars sold in Singapore now electric

• EVs now make up 56% of Volvo Cars Singapore’s total sales, a significant increase from 40% in 2023.
• Volvo Cars Singapore achieved a 36% growth in sales as of June 2024.
• The fully electric Volvo EX30 has been a key driver of this growth.
• The Volvo EX30, the brand’s smallest fully electric SUV, has the smallest carbon footprint among Volvo models.
• The EX30 has won over 20 awards, including the Red Dot Award for Best of the Best Product Design 2024 and the World Urban Car award.
• This sales performance aligns with Volvo’s goal of 50% global sales consisting of fully EVs by 2025 and aiming for fully electric sales by 2030.

EV battery prices are falling as true solid-state cell costs are projected to match batteries with 5% liquid electrolyte

• The cost of battery-grade lithium carbonate has dropped significantly, leading to lower EV battery prices.
• The oversupply of battery materials and battery cells in China has helped to further reduce manufacturing costs for EVs.
• Lower battery costs enhance the market viability of solid-state batteries, which are more compact, safe, and fast-charging than current batteries.
• Sunwoda’s research suggests that by 2026, true solid-state batteries will reach the cost level of current EV packs with 95% solid and 5% liquid electrolyte.
• Semi-solid cells are currently four times more expensive than LFP batteries, at CNY 2/Wh.
• True solid-state batteries will likely be reserved for premium EVs when they reach competitive price points.

Vehicle recalls affecting EV makers

• Lucid Group will recall about 5,251 of its 2022/2023 Air luxury sedans due to a software error that could cause a loss of power, according to the US National Highway Traffic Safety Administration.
• The EV maker will also recall about 7,506 of its 2022-2024 Air luxury sedans due to an issue with a coolant heater that could fail to defrost the windshield.
• The company had reported Q2 deliveries above market expectations on Monday, as price cuts helped boost demand for its luxury electric sedans.
• Fellow start-up Fisker, who recently filed for bankruptcy, is recalling 11,308 of its Ocean electric SUVs due to a water pump issue that can cause loss of power.
• The announcement comes two weeks after the company’s third recall in June, recalling 12,000 Ocean SUVs following an issue with external door handles sticking and failing to open.
• It is not just EV startups who are being affected by EV recalls, Jeep is facing a recall query into 94,275 Jeep Wrangler 4xe hybrid SUVs, over a loss of motive power.

Company News

Ariana Resources (AAU LN) 2.25p, Mkt Cap £39m – Increased MRE at Dokwe may support increased production over a longer mine-life

• Following its recent revised JORC (2012) compliant mineral resource estimate (MRE) for the recently-acquired Dokwe project in Zimbabwe, which reported an overall resource of 1.83moz of gold, Ariana Resources has revised its pit shells for Dokwe Central and Dokwe North.
• The newly optimised pits show a 16% higher in-pit ‘Measured & Indicated’ gold resource of 1.2moz within 29.6mt at an average grade of 1.33g/t.
• The revised pit optimisations assume a gold price of US$2,000/oz (previously US$1,650/oz) which allows larger pits to access “more of the Resources” and incorporate anticipated mining losses of 5% and dilution at the same level with recovery rates of 89% and plant throughput of 1.5mtpa.
• Ariana Resources says that the resource increase justifies “the examination of an expanded mining scenario of 75,000 to 100,000 ounces production over 10 to 15 years as part of the Definitive Feasibility Study of Dokwe”.
• The Pre-Feasibility Study “proposed 60,000oz per annum production rate and a 12-year mine life”.
• Welcoming the results of the revised pits, Managing Director, Dr. Kerim Sener, said that “we are considering the development of the Dokwe Project in two stages, with Dokwe Central potentially being mined during the early years of the operation and Dokwe North taking over in future years”.
• Dr. Sener also described the exploration potential including “several as yet untested gold geochemical anomalies … [which] … remain to be drilled and extensions of known structures further explored”.
• The global resource estimate at Dokwe, announced last month, shows 55.9mt at an average grade of 1.02g/t gold including ~13.8mt of ‘Measured’ resources at an average grade of 1.35g/t (599koz) and ~20.1mt of ‘Indicated’ resources at an average grade of 1.15g/t (742koz) and an ‘Inferred’ resource of ~22mt at a grade of 0.69g/t (490koz).

Conclusion: The recent MRE for Dokwe, coupled with increased gold prices has delivered a 16% increase in in-pit resources and may allow higher gold production over a longer mine life than envisaged at the pre-feasibility stage.  We look forward to the outcome of the Definitive Feasibility Study for Dokwe.

Artemis Resources (ARV LN) 0.63p, Mkt Cap £11m – Lithium soil geochemical anomaly over the Osborne pegmatite, WA

• Artemis Resources has reported a geochemical lithium-in-soil anomaly over the Osborne pegmatite southwest of Port Hedland WA.
• The anomaly, based on a follow-up sampling programme comprising 916 samples taken on a 50mx200m grid, extends over a strike length of ~4km and widths of up to 1.3km.
• The company says that “the peak soil assays are not aligned with the mapped outcropping pegmatite occurrences … and appears not to be related to topographical effects which may suggest increased mineralisation from that previously considered present”.
• Artemis Resources says that it “considers that the lithium soil trends are now sufficiently defined to allow initial drill testing of the higher-grade zones aimed at identifying associated pegmatite bodies. While some lithium soil trends have been partially cleared by previous heritage surveys, additional surveys will be planned to ensure all targeted areas are covered”.

Conclusion: Early-stage soil geochemical sampling has defined a lithium anomaly over the Osborne pegmatite and the company plans initial drill-testing.

Bluebird Merchant Ventures (BMV LN) 1.64p, Mkt Cap £12m – Board restructuring and progress on jv strategy towards production

• Bluebird Merchant Ventures report the restructuring of the board with Charles Barclay and Clive Sinclair-Poulton stepping aside.
• Aiden Bishop will become interim CEP and Colin Patterson will move to a NED role.
• Bishop was instrumental in signing the jv with the new South Korean and Filipino partners and the move to a new jv business model to bring in new investment and reduce risk.
• Gubong 40% (South Korea) is moving towards production with a consortium of S Korean businessmen investing US$5m to acquire 60%.
  • KORES, the Korea Resources Corporation estimated 2.34mt grading ~7.3g/t gold with potential for 1moz gold in-situ + ~300,000oz from satellite ore bodies.
• Kochang 100%  (South Korea) the board are looking for a similar jv to that at Gubong
  • Kochang is reported to have produced  ~110,000 oz of gold and 5.9 million oz of silver between 1961 and 1975.
  • With potential for a further  550,000-700,000t grading between 5.2-6.6 g/t gold, and 27.3-34.8 g/t silver.
  • Kochang now has a Mountain Use permit with an estimated 6-9 month development time to trial mining.
• Batangas 40% (Phillipines): a local partner is investing US$2m to secure 60% ownership
  • JORC resource of 440,000oz inc. an ore reserve of 128,000oz inc. silver credits
  • Some $20m has been invested with 14km of identified mineralised structures
• Bluebird management have personally invested around US$2m into advancing the three key projects within Bluebird
• The team see potential for 100,000ozpa of gold production along with >1.5moz of mineable gold at the two historic Korean mines.

Conclusion:  Its good to see progress at Bluebird Merchant Ventures. We expect the new involvement of the local jv team to make good progress towards gold and silver production.

Caledonia Mining (CMCL LN) 790p, Mkt Cap £151m – Blanket delivers better than expected H1 production to stay on track to achieve 2024 guidance

• Caledonia Mining reports Q2 gold production of 20,773oz at its Blanket mine in Zimbabwe, bringing H1 output to 37,823oz – an increase of 13% over production in H1 2023.
• The company reconfirms its previously announced 2024 production guidance in the range 74-78,000oz.
• Chief Executive, Mark Learmonth, commented that H1 production from the mine “was excellent and has exceeded our expectations”.

*SP Angel mining analysts have visited Caledonia’s mining operations in Zimbabwe

Capital Metals (CMET LN) 1.83p, Mkt Cap £5.9m – Resource drilling plans in Sri Lanka

1. Capital Metals reports that, following the securing of the required regulatory approvals. It plans to start drilling on its Eastern Minerals sands project in Sri Lanka.
2. The programme aims to extend the current mineral resource of 17.2mt containing 17.6% Total Heavy Minerals (THM) with aircore drilling to the base of the alluvium and towards the west in areas not currently included in the estimates.
3. Drilling is also directed at “Resource/reserve confirmation for final mine design and production scheduling – initially targeting the first 12 months of production”.
4. Capital Metals says that its minimum objective is to “progressively increase the resource to twice its current volume”.
5. The company also explains that the previous drilling was limited by the depths achievable by hand auger drilling and that by using aircore for the new programme “Multiples of the current MRE are possible when drilling to the alluvial basement with an average anticipated depth of 10 metres compared to the current average of 1.6 metres for the MRE”.
6. Executive Chairman, Greg Martyr, explained that the “economics estimated in the 2022 Preliminary Economic Assessment have already demonstrated a high margin operation. We are very excited to finally be in a position to test the upside with a view to expanding the Project’s current 10-year mine life and throughput, with the subsequent result of materially enhancing the NPV of the Project”.

• Today’s announcement also confirms that Capital Metals has “commenced work on a detailed submission on the feasibility of mining below the groundwater table, which is permissible in most beach mineral sands projects globally and has already taken place elsewhere in Sri Lanka. Discussions are advancing with the relevant authorities in Sri Lanka in this regard”

Galantas Gold* (GAL LN) 7.5p, Mkt Cap £9m – Proposed solar power facility

• The Company agreed in principle to a proposal to develop a solar power facility at the Cavanacaw Gold Mine in Northern Ireland.
• The agreement is with G&F Phelps, a ~5% shareholder and on of Company’s lenders (C$6.2m outstanding as of YE23).
• Under the terms, G&F Phelp will be renting rehabilitated land comprised of former tailings cells and a filled southern section of the former open pit.
• G&F Phelps is expected to provide the majority of capital required for the project and recouping the cost from the power generated and supplied to the Company.
• The proposal is subject to a detailed cost study, impact assessment and planning permission from authorities.
• The project is for a 2MW facility with an onsite battery storage.

*SP Angel acts as Broker to Galantas Gold

Ganfeng Lithium (002460 HK) CNY28, Mkt Cap CNY50bn – Profit warning as depressed lithium prices continue to weigh on earnings

• China lithium major Ganfeng reports a preliminary estimate for the six months ending June 2024.
• The Company anticipates a net loss to shareholders of RMB760-1,250m vs a profit of RMB5,850m for the same period last year.
• Net loss having deducted non-recurring profit expected at RMB100-200m. vs RMB4,113m last year.
• The Company suggests that a write down in the value of their Pilbara Minerals shareholding is a partial factor, alongside the downturn in the wider lithium industry.
• Operating results have been hit by prices of lithium salts and lithium batteries.
• Shares rallied following the announcement, suggesting the potential for a return to earnings after the impairment losses.

Griffin Mining (GFM LN) 158p, Mkt Cap £290m – Q2 Production as zinc and gold prices coincide with record output  

• Griffin Mining, which operates the Caijiaying Mine in China, provides Q2 results for the period to 30^th June 2024.
• The Company increased yoy quarterly throughput by 9.5%, processing 408.5kt over the period.
• The Company produced 6koz Au in concentrate, 14.8kt Zn in concentrate and 93koz Ag in concentrate.
• Average zinc price received over the period was $2,525/oz, average gold price received was $2,293/oz and average silver price received was $25.7/oz.
• The Company retains throughput guidance of 1.5mtpa and expects Zone II to come into production in 2025.
• The Company continues to invest in underground development work.

KEFI Gold and Copper* (KEFI LN) 0.6p, Mkt Cap £39m – Tulu Kapi project update

• The Company updates on the status of the Tulu Kapi Gold Project in Ethiopia.
• Private onsite and government offsite security systems are being installed.
• Site inspections confirm progress as expected.
• Final confirmations for fixed price lump sum components are being sought which is a precondition for signing all project financing definitive documentation.
• The team and the lenders are in regular contact with relevant government officials to resolve the remaining few administrative issues.
• The $320m full project funding package remains unchanged.
• The Company reiterated guidance for a financial close of the project funding and start of construction works in October this year.

*SP Angel acts as Nomad and Broker to KEFI Gold and Copper

Tharisa Plc (THS LN) 83p, Mkt Cap £250m – Quarterly production as PGM prices remain depressed

• Tharisa report their quarterly results for the period to 30^th June 2024.
• The Company saw chrome production increase to 410kt vs 403kt in the previous quarter.
• Mining increased 22% to 1,262kt and milling increased 1.3% to 1,396kt.
• PGM recoveries reported at 68.5% vs 63% in previous quarter despite lower grades.
• PGM basket price rose 3.6% to $1,391/oz.
• Met grade chrome concentrate prices rose 8% to $309/t vs $286/t on a 42% basis in the previous quarter.
• Cash position increased to $190m vs $185m previously.
• Net cash at $92m vs $71m previously.
• Production guidance retained at 145-155koz PGM on a 6E basis and 1.7-1.8mt chrome concentrate.
• Management expects further improvements to mining performance following structural improvements.
• They note that the Karo Platinum project is progressing well with ‘funding solutions progressing according to plan.’
• Management also suggests that the ‘bottom of the market’ for PGM prices has passed, but they remain rangebound whilst chrome prices are improving on lower inventories.

No.1 in Base Metals: SP Angel mining team awarded No 1. ranking for Base Metals forecasting in LSEG Quarterly Starmine Award for Reuters Polls Q1 2024

No.1 in Copper:  “The winner of the 2020 Fastmarkets Apex contest for copper was the team at SP Angel comprising John Meyer, Sergey Raevskiy and Simon Beardsmore, with an accuracy score of 93.8%”

No1. In Gold:  “SP Angel’s trio took the top spot for the gold price prediction throughout the year, with an accuracy score of 97.59%”

The SP Angel team also ranked 1st in Palladium, 3rd in Tin and 5th in Silver in the fourth quarter of 2020

Analysts

John Meyer – John.Meyer@spangel.co.uk – 0203 470 0490

Simon Beardsmore – Simon.Beardsmore@spangel.co.uk – 0203 470 0484

Sergey Raevskiy –Sergey.Raevskiy@spangel.co.uk – 0203 470 0474

Sales

Richard Parlons –Richard.Parlons@spangel.co.uk – 0203 470 0472

Abigail Wayne – Abigail.Wayne@spangel.co.uk – 0203 470 0534

Rob Rees – Rob.Rees@spangel.co.uk – 0203 470 0535

Grant Barker – Grant.Barker@spangel.co.uk – 0203 470 0471

SP Angel                                                            

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*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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