SP Angel Morning View -Today’s Market View, Tuesday 30th July 2024

Metals price becalmed as China politburo pledges greater support

MiFID II exempt information – see disclaimer below

Adriatic Metals (ADT1 LN) – Q2 operational update as ramp up continues

Artemis Resources (ARV LN) – Quarterly report focusses on early-stage lithium exploration results in WA

Aterian plc* (ATN LN) – Aterian invited to negotiate for larger land package in Rwanda

Atlantic Lithium* (ALL LN) – Total JORC resource rises to 36.8mt at 1.24% Li2O as Atlantic maintain target for commissioning at H1 2026

Filo Corp* (FIL CN) –C$4.1bn acquisition by BHP and Lundin Mining and formation of regional JV

Glencore (GLEN LN) – 1H24 production results as Teck acquisition closes

Kavango Resources* (KAV LN) – Geophysics highlights scale of the Karakubis project, Botswana

Xtract Resources (XTR LN) – Drilling plans for NW Zambia

Iron ore weakens as China stockpiles jump on weak steel mill margins

• 62% Fe China iron ore prices continue to hover around $100/t, suffering from weak domestic demand.
• Iron ore port inventory saw the highest rise since March, with inventory now at the highest level since April
• Iron ore inventory has now risen 25/29 weeks this year.
• Steel prices are sliding to April lows, with new quality standards expected to weigh on prices.
• The collapse of stainless steelmaker Jiangsu Delong is weighing on the Chinese sector, with trader Xiamen Xiangyu sliding to 2020 lows.
• Jiangsu holds annual steel capacity of 10mt.

Copper – Unions at Escondida reject ‘final pay offer’

• But then, whenever were ‘final pay offers’ really final
• We suspect they will shuffle the chairs around and find a new seating plan that makes it look like the Unions have worked hard for their money.

Spence copper mine in Chile celebrated three months of fully autonomous mining with 80mt of material moved during the period without any safety incident.

• Komatsu that supplied mining equipment said that Spence machinery was the largest autonomy fleet operating in Latin America.
• The transition that began in 2022 allowed the BHP to reduce exposure to mining risks by up to 90% reducing downtime and as a consequence improving operations’ competitiveness.
• More efficient and lower cost operation is also likely to allow to extend the life of mine.
• The mine produced ~250kt of copper last year.

Diamonds – NY diamond dealer indicted for swapping Lab-Grown synthetics for natural diamonds

• A NY diamond dealer has been charged with stealing from diamond merchants by replacing $460,000 worth of natural diamonds with synthetic stones (Rapaport).
• The NY dealer allegedly swapped two natural gems during a viewing with LGD equivalents he had previously cut to match.
• The natural diamonds were valued at $185,000 and $75,000.
• The dealer also forged the GIA ‘Gemological Institute of America’ laser inscriptions
• It is reported the dealer also carried out the same hoax with a different dealer for a diamond worth $200,000.

SP Angel rankings LSEG StarMine Award for most accurate forecasting in Reuters polls:

• No1 – Q2 Precious Metals and No2 – Q2 Base Metals. Our forecasting uses HI – not AI

SharePickers: Video: This has One of the Lowest Risk Profiles I’ve Seen For a Long Time: https://www.youtube.com/watch?v=0sT6ZZpMt6M

•         Podcast: https://audioboom.com/posts/8547593-john-meyer-this-has-one-of-the-lowest-risk-profiles-i-ve-seen-for-a-long-time

Economics

US – Markets are rangebound ahead of a series of central bank announcements, key employment data and earnings results.

• The Fed is expected to leave rates unchanged with an announcement due tomorrow.
• Microsoft will publish its earnings after the close today followed by Meta on Wednesday, Apple and Amazon Thursday.

China – Politburo offers support indicating increasing macro support for emerging sectors and domestic demand

• The government has pledged unwavering support to maintain growth of 5% (SCMP)
• China managed 5% yoy GDP growth in H1 with growth slowing in Q2 to 4.7% yoy.
• The authorities are offering to increase home buying with greater affordable housing to soak up excess housing stock.

Thousands evacuated as flooding from Typhoon Gaemi bursts dykes in Hunan province

• Dykes were breached three times following heavy rain from typhoon Gaemi causing a tributary of the Xiang River to overflow.
• 15 people were killed after a landslide swept away a guest house in Hengyang city.
• We suspect ground floor apartments might not be selling that well in the city.

DRC – Chinese companies agree to increase infrastructure investment to US$7bn from US$3bn

• Sinohydro Corporation and China Railway Group have agreed to invest up to US$7bn as part of their revised Sicomines copper and cobalt jv with Gecamines (SCMP).
• The new agreement replaces the previous US$3bn of infrastructure funded via mine revenues and US$3bn capex in return for a 68% jv stake in the Sicomines jv.
• Under the new deal, the companies agreed to increase their spending on infrastructure from US$3bn to US$7bn.
• Chinese companies have started three major road projects in the DRC
• The first is a US$300m ring road in Kinshasa to link to the Southwest and southeast ring roads.
• The ring road project will cross four communities of Kinshasa – home to more than 17 million people – and is expected to take three years to complete. It is a priority infrastructure project under the renegotiated deal..
• The ring roads will connect >17m people.
• A second project will upgrade the 900km Mbuji Mayi-Nguba Road which is part of the N1 National Road linking Kinshasa and Lubumbashi.
• The third project is to upgrade of the 230km Kananga-Kalamba Mbuji Road which will carry minerals to Angola for connection to ports.
• It will be interesting to hear how many DRC nationals will be employed on these road contracts of if the Chinese contractors will stick to using Chinese nationals for the construction.

Japan – The central bank started its two day meeting with expectations for the BOJ to provide a detailed plan for quantitative tightening following years of massive stimulus.

• Market estimates are for the central bank to avoid an interest hike at today’s meeting, though.

Eurozone – Mixed regional GDP data released this morning.

• Germany reported worse than expected numbers with the economy slipping into a contraction in Q2/24.
• France and Spain beat estimates while Italy came in line with forecasts.
• Regional inflation in Germany generally picked up in July with a nationwide reading due later today suggesting the economy is stagflating.
• Uneven growth presents a challenge for the central bank that took a “wait and see” approach following a rate cut in June, Bloomberg reports.
• Germany GDP (%qoq, Q2/Q1/Est): -0.1/0.2/0.1
• France GDP (%qoq, Q2/Q1/Est): 0.3/0.3(revised from 0.2)/0.2
• Italy GDP (%qoq, Q2/Q1/Est): 0.2/0.3/0.2
• Spain GDP (%qoq, Q2/Q1/Est): 0.8/0.8/0.5

UK – BoE likely to cut rates ahead of US following Canada’s two interest rate cuts

• Now the Fed has signalled rate cuts are likely in September the BoE seems likely to act to avert more pain with householders in the UK.
• Anyone who bought property with a hefty mortgage in the past two years has been suffering an extended period of financial pain.
• The BoE is keen to avert rising foreclosures and the potential for trouble in the property market and the Governor may well feel compelled to reduce that risk.

Israel – Hezbollah has gained Israel’s attention with murderous missiles

• The conflict has the potential to move towards and potentially through Lebanon as it has done through Gaza.

Ethiopia – The IMF agreed to lend Ethiopia $3.4bn over four years as part of an economic reform and a broader external debt restructuring.

• The agreement allows the nation to draw on around $1bn immediately.
• The government will need to enact a series of reforms in return including gradually unwinding fuel and fertiliser subsidies.
• The national currency is reported to have dropped 23% yesterday on the announcement that the central bank will allow the birr to trade freely.
• Ethiopia has around $28.4bn in external debt that it was trying to restructure since 2021 with the country having defaulted on a Eurobond payment in December last year.

Currencies

US$1.0825/eur vs 1.0850/eur previous. Yen 154.99/$ vs 153.50/$. SAr 18.384/$ vs 18.295/$. $1.286/gbp vs $1.285/gbp. 0.656/aud vs 0.655/aud. CNY 7.256/$ vs 7.254/$.

Dollar Index 104.29 vs 104.34 previous

Precious metals:         

Gold US$2,390/oz vs US$2,391/oz previous

Gold ETFs 82.5moz vs 82.6moz previous

Platinum US$955/oz vs US$945/oz previous

Palladium US$906/oz vs US$905/oz previous

Silver US$27.94/oz vs US$28/oz previous

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

Base metals:   

Copper US$ 9,023/t vs US$9,048/t previous

Aluminium US$ 2,242/t vs US$2,268/t previous

Nickel US$ 15,805/t vs US$15,725/t previous

Zinc US$ 2,647/t vs US$2,669/t previous

Lead US$ 2,044/t vs US$2,083/t previous

Tin US$ 29,070/t vs US$29,560/t previous

Energy:           

Oil US$79.5/bbl vs US$81.4/bbl previous

• Crude oil prices fell further as market concern over poor Chinese demand data continues to outweigh sentiment over potential supply disruptions from geopolitical tensions in Venezuela and the Middle East.
• The UK Government has raised the Energy Profit Levy, taking the headline tax rate for the sector to 78%, further extended the levy to 31 March 2030 and removing the EPL’s investment allowance. It also signalled further reductions in capital allowances.

Natural Gas €33.7/MWh vs €32.5/MWh previous

Uranium Futures $82.3/lb vs $82.4/lb previous

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$101.2/t vs US$101.5/t

Chinese steel rebar 25mm US$502.5/t vs US$503.8/t

Thermal coal (1st year forward cif ARA) US$118.0/t vs US$147.3/t

Thermal coal swap Australia FOB US$139.5/t vs US$139.0/t

Coking coal Dalian Exchange futures price US$199/t vs US$203.4/t

Other:  

Cobalt LME 3m US$26,625/t vs US$26,625/t

NdPr Rare Earth Oxide (China) US$50,099/t vs US$50,108/t

Lithium carbonate 99% (China) US$11,233/t vs US$11,235/t

China Spodumene Li2O 6%min CIF US$940/t vs US$950/t

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

China Tungsten APT 88.5% FOB US$325/mtu vs US$325/mtu

China Graphite Flake -194 FOB US$465/t vs US$470/t

Europe Vanadium Pentoxide 98% 4.9/lb vs US$4.9/lb

Europe Ferro-Vanadium 80% 25.95/kg vs US$25.95/kg

China Ilmenite Concentrate TiO2 US$315/t vs US$315/t

China Rutile Concentrate 95% TiO2 US$1,385/t vs US$1,385/t

Spot CO2 Emissions EUA Price US$66.4/t vs US$66.4/t

Brazil Potash CFR Granular Spot US$297.5/t vs US$297.5/t

Germanium China 99.99% US$2,105.0/kg vs US$2,095.0/kg

China Gallium 99.99% US$435.0/kg vs US$435.0/kg

Battery News

Samsung’s new EV battery promises 965km range and 9-minute charge time

• Samsung and LG are continuing to advance EV battery technology with their new solid-state batteries, promising longer ranges, faster charging, and extended lifespans.
• Samsung’s latest solid-state battery offers a range of over 965km and can be charged in just 9 minutes, targeting high-end luxury EV models initially due to high costs.
• Samsung is also developing cost-effective lithium iron phosphate and cobalt-free batteries.
• LG plans to mass-produce sulphide-based solid-state batteries by 2030, focusing on premium markets with innovations like dry electrodes and cell-to-pack structures.

EV newcomer Xiaomi completes speedy ramp up and expects to hit 100k production target early

• Xiaomi Automobile, the EV division of Chinese tech giant Xiaomi Inc., is rapidly progressing in the EV market (Electrek).
• Xiaomi launched its first BEV model in late 2023, receiving over 50,000 orders within the first half an hour.
• The company had an original production target of 60,000 units for 2024, but has increased production to meet demand and is now on track to produce 100,000 units by November.
• Xiaomi plans to expand its sales, service, and delivery infrastructure across China, indicating significant growth ambitions in the EV sector.

Lohum and Stride Green partner to guarantee residual value of EV batteries

• Lohum and Stride Green have partnered to guarantee the residual value of EV batteries, aiding the financing of EVs (ManufacturingTodayIndia).
• This alliance allows Stride Green’s partners to access innovative battery recycling and reuse solutions from Lohum, ensuring fair valuation of batteries at the end of their life.
• This initiative supports the clean energy transition and reduces the demand for new raw materials.

VW-Rivian JV given all clear by German antitrust body

• Germany’s Volkswagen and US electric car maker Rivian Automotive can form a joint venture according to the German competition authority.
• The approval comes just one month after the partnership was officially announced, with the Bundeskartellamt clearing both the plans for a software joint venture (JV) and the proposed investment into Rivian by VW.
• VW will invest $5bn into the US EV maker to provide funding for Rivian to develop its less expensive and smaller R2 SUVs that are set to roll out in early 2026 and its planned R3 crossovers.

Umicore suspends construction of $2.76bn battery materials plant in Ontario

• Umicore has paused the construction of its $2.76bn battery materials plant in eastern Ontario, citing reduced growth expectations in the EV market.
• The project, which had secured $551.3m from the federal government and up to $424.6m from the Ontario government, was intended to produce cathode active materials and precursor cathode active materials.
• The facility, initially projected to start production in 2026 and create about 600 jobs, is now under strategic review, with further updates expected in the first quarter of the next year.

Company News

Adriatic Metals (ADT1 LN) 160p, Mkt cap £522m – Q2 operational update as ramp up continues

• Production ramp up continues, with underground development up 31% qoq.
• Nameplate production expected this year, following transition to owner-operator process.
• Report notes stoping to commence in August once final permitting is approved.
• Company is testing a resin technology to approach poor rockmass.
• Plant operating as expected, with concentrates produced over 2,500g/t Ag and c.50% Zn.
• 257t of silver-lead concentrate and 128t of zinc conc sold in 2Q24.
• Studies underway to assess potential to boost throughput to 1.3mtpa, with results expected 3Q24.
• The Company continues to drill the southern extremities of Rupice as part of their exploration campaign.
• Cash at 30^th June reported at $60m, following a $50m equity raising to bolster the balance sheet into production ramp up.
• $120m of debt drawn down from Orion, with first debt repayment scheduled in December.
• Company doesn’t anticipate impact on production from tree felling permitting complications, using the current tailings facility and assessing alternate location potential.

Conclusion: Adriatic’s ramp up continues to suffer from overhanging concerns of future tailings storage. The Company is ‘engaging with all levels of Government’ to resolve the issue, with tailings capacity expected to run out by 1Q25 without a resolution. In the meantime, Adriatic is assessing multiple alternative options whilst negotiating varied rock conditions as it continues to develop underground. The plant seems to be operating as planned and we look forward to the Ausenco report on potential for upgrading throughput due this quarter.

Artemis Resources (ARV LN) 0.53p, Mkt Cap £10m – Quarterly report focusses on early-stage lithium exploration results in WA

• In its quarterly report for the 3 months to 30^th June, Artemis Resources has highlighted rock chip sampling from its Karratha lithium project in WA as well as gold exploration results.
• The completion of early stage reconnaissance at the lithium project “confirmed the high-grade strike at Mt Marie and will lead to further exploration work to uncover the extent of the mineralisation” with rock chip samples from Mt Marie yielding results in excess of 3% Li₂O with lower grade results of around 0.5% Li₂O from the Osborne East project.
• A review of the gold potential has identified “multiple targets” with samples from the Orpheus Zone at the Nickel River Hill project “of 6.93 Au g/t in rock chips which include a peak copper assay of 10.85% Cu”.
• Commenting on its financial position, Artemis Resources says that at “30^th June 2024, Artemis had ~$0.5 million in cash, and received a further $1.6 million subsequent to quarter end from the capital raise”.

Conclusion: Early-stage reconnaissance rock-chip sampling has yielded encouraging results from the Karratha project and we look forward to the results of follow-up exploration work.

Aterian plc* (ATN LN) 61p, Mkt Cap £6m – Aterian invited to negotiate for larger land package in Rwanda

(Rio Tinto jv has the option to invest US$7.5m in two stages to earn up to 75% in the HCK lithium and tantalum hard rock prospect in Rwanda)

(Aterian holds a 70% interest in Kinunga Mining Limited which holds the HCK licence  alongside HCK Mining Company Limited which has a 30% interest.

• Aterian report that their Rwandan subsidiary, Eastinco has been asked by Rwanda to negotiate terms for a much larger mineral exploration licence for the Musasa project area in Rwanda.
• Musasa shows prospectivity for lithium, tantalum, niobium, tungsten and tin.
• Eastinco will exercise its option to acquire the 15% minority partner interest from Kuaka Cooperative in return for the provision of mineral processing assistance and equipment.
• Kuaka are a jv partner in the Musasa project. Eastinco has also sent a jv termination notice to its partner, Dynasty Construction which failed to renew the exploration license.
• The government of Rwanda recently partnered with Rio Tinto Minerals Development Limited to collaborate in mineral exploration activities and potential mineral development and mining operations for lithium, tin, tantalum, tungsten and associated metal deposits in Rwanda.
• Eastinco’s license area will expand to 3,100ha in a highly prospective region close to the DRC.
• The Musasa licence will now be 100% held by Aterian plc’s wholly-owned subsidiary company, Musasa Mining Limited.

Aterian currently have three projects in Rwanda:

• • HCK – 70% interest held by Eastinco, 30% held by 3^rd party HCK Mining.
  • Dynasty – 50% interest held by Eastinco and 50% held by Dynasty Construction
  • Musasa – 85% interest held by Eastinco and 15% held by Kuaka Cooperative

• Rio Tinto Exploration have an option to include any of the three into the JV exploration programme.  Thus far only HCK is participating.
• The jv with Dynasty is being terminated with Aterian making a new application to hold 100% of the licence.
• Aterian will hold 100% of Musasa Mining Ltd which holds the licence held by Eastinco and Kuaka.

Conclusion:  Aterian continue to expand their exploration activities and license areas in Rwanda, Morocco and Botswana. Management are looking to progress exploration in Rwanda with support and assistance from Rio Tinto. Historically, tin and tantalum has been mined in Rwanda on a relatively small scale. Modern exploration may enable the development of some larger and more safely run mines with better ESG credentials and royalty revenues for the government.

*SP Angel acts as Broker to Aterian Plc

Atlantic Lithium* (ALL LN) 18.54p, Mkt Cap £120m – Total JORC resource rises to 36.8mt at 1.24% Li2O as Atlantic maintain target for commissioning at H1 2026

(Ewoyaa Ownership:  Atlantic 62.9% falling to 40.5% if Piedmont fund their share of Ewoyaa, Piedmont 18.2% rising to 40.5% on project funding, MIIF Sovereign Wealth fund 6%, Ghana 13%)

(Piedmont are contracted to pay $70m + 50% of the total Capex to raise their stake to 40.5%. Total cost would be $135m to Piedmont on a $200m capex.)

• Atlantic Lithium report an increase at the Dog Leg target taking the total JORC MRE to 36.8mt grading 1.24% Li2O.
• Higher confidence JORC resources now total 81% of the total MRE with:
  • 3.7mt @ 1.37% Measured,
  • 26.1mt @ 1.24% Indicated,
  • 7.0mt @ 1.15% Inferred.
• Additional drilling at ’Dog Leg’ shows a shallow-dipping, near-surface mineralised pegmatite with a true thickness of up to 35m which has added another 890,892t to the resource total.
• The press release contains substantial supporting charts and data including a cross-section of the Ewoyaa resource.
• The company also released its quarterly activities and cash flow report for the quarter ending 30 June.
• Project development, Permitting  (EPA ‘Environmental Protection Agency’ public hearing):
  • Following the completion of the second hearing, the Company awaits feedback from the EPA; both with regards to queries raised by members of the Project-affected communities during the hearing and to the Draft Mine and Process Environment Impact Statement (“EIS”), which the Company submitted to the EPA in May 2024.
  • Feedback will then be incorporated into the Company’s final EIS, which will be resubmitted to the EPA, as required for the grant of the EPA permit.
  • Only following the grant of the EPA permit can the Company obtain the other permits it requires.
  • A proactive approach has been undertaken by the Company, with internal preparations well underway, to ensure that the Company can complete these steps and meet all regulatory requirements in line with the permitting schedule for the Project.
  • To expedite the grant of the Mine Operating Permit and associated approvals, the Company has finalised its draft Mine Operating Plan and Emergency Response Plan, adhering to the guidance and support provided by the Minerals Commission.
  • Comprehensive crop and land surveys for compensation purposes have also been completed, enabling land acquisition ahead of breaking ground at the Project.
  • All supplementary permits, including those for water use and explosive procurement and utilisation, are also progressing as anticipated, enabling their completion upon receipt of the EPA Permit.
• Modular DMS Processing
  • “the Board believes it to be more prudent to conserve cash and focus on delivery of the main DMS processing plant, rather than committing it to delivering the modular DMS unit.”
• Production:
  • “Subject to the Mining Lease being ratified by parliament in line with the current schedule for the development of the Project, the Company remains on track to commission the main DMS plant at Ewoyaa in H1 2026, as detailed in the DFS.”
• Parliament ratification process
  • “Post-period end, the Company received notification that the Mining Lease in respect of the Project, granted by the Government of Ghana through the Ministry of Lands and Natural Resources to the Company’s subsidiary Barari DV Ghana Limited in October 2023, had been submitted to Ghana’s parliament to undergo the necessary processes in order for parliament to ratify the Mining Lease.”
  • “The Company currently awaits the ratification of the Mining Lease, which is required for the Company to advance the Project towards construction and operation, and continues to undertake activities on the critical path to deliver the main DMS processing plant.”
• Other exploration: Management highlight the start of field work at Beraku to the east of the Cape Coast lithium portfolio.
• A full list of the exploration tenements and their term are included in the quarterly report with the Mankessim Mining Lease term at 15 years.
• The team have completed sterilisation drilling over the proposed process plant site.
• Edward Nana Yaw Koranteng, ceo of the MIIF ‘Minerals Income Investment Fund’ has been appointed as an NED following their US$5m investment.
• Offtake:  “The Company has progressed negotiations on key agreements as part of the ongoing competitive offtake partnering process for spodumene concentrate produced at Ewoyaa to secure funding expected to sufficiently cover the Company’s allocation of the development expenditure for the Project.”
• Cash: A$12.7m (£6.5m).
• Ghana listing:  Atlantic Lithium shares were listed on the Ghana Stock Exchange in June

*SP Angel acts as Nomad to Atlantic Lithium. Two mining analysts from SP Angel recently visited the Ewoyaa mine site in Ghana and drove onto Takoradi to check the quality of the road to port. Our analysts also visited the Ministry of Minerals Commission and MIIF, the Ghana Minerals Income Investment Fund

Filo Corp* (FIL CN) C$29.4, C$2.41bn –C$4.1bn acquisition by BHP and Lundin Mining and formation of regional JV

• Last night Filo Corp announced a binding agreement with BHP and Lundin Mining to acquire the outstanding shares of Filo Corp.
• The consideration is for C$33/share, with Filo shareholders offered a choice between cash or 2.3578 Lundin Mining shares.
• The total cash consideration will be capped at C$2.77bn, or 68% of the aggregate total consideration, whilst the total share consideration will be capped at 92.1m Lundin mining shares.
• BHP will pay C$1,908m in cash and Lundin will pay C$859m in cash and up to C$1,289 in Lundin Mining shares.
• The offer represents a 12% premium to yesterday’s closing price.
• The deal is subject to Filo shareholder approval, alongside court and TSX/regulatory approvals.
• The Group expect the deal to close in 1Q25.
• BHP and Lundin Mining have agreed to subscribe for 3.5m new shares at C$33/share to provide interim financing to Filo.
• BHP and Lundin will hold a 50/50 stake in the JV once completed.
• Lundin and BHP will also form a JV that holds both Filo del Sol and Lundin’s 100% owned Josemaria copper-gold project.
• The JV will see Lundin sell a 50% stake in Josemaria for US$690m in cash, also expected to close in 1Q25.
• Josemaria’s 2020 Feasibility study showed potential to produce up to 276ktpa CuEq.

Conclusion: BHP and Lundin Mining have secured a district-scale copper development opportunity in Filo del Sol, with the two parties forming a 50/50 JV to develop Josemaria and Filo, which lie 11km apart in the San Juan region of Argentina. Filo is a large copper-gold-silver porphyry system with an existing oxide resource. The Company will continue to drill the asset for an initial sulphide resource, with the deal expected to close at the beginning of 2025.

*A member of the SP Angel research team holds shares in Filo Corp

Glencore (GLEN LN) 415p, Mkt Cap £51bn – 1H24 production results as Teck acquisition closes

• Glencore report production results for the first six months of 2024.
• The Company produced 463kt of copper in 1H24 vs 488kt same period last year.
• 16kt of cobalt produced vs 22kt same period last year, following a slowdown at Mutanda.
• Zinc production fell 4% yoy and nickel production fell 5%, after Koniambo placed on care and maintenance.
• Lead production at 88kt, up 1% yoy.
• Ferrochrome production down 16% yoy to 600kt.
• Coal production at 50.6mt down 7% yoy on scheduled mine closures and longwall moves in Australia, alongside rail constrains in South Africa.
• Company maintains guidance across the board, bar steelmaking coal which has increased to 19-21mt vs 7-9mt previously, factoring in the acquisition of Teck’s steelmaking coal division.
• However, the Company has raised its FY24 unit cost guidance from $1.5/lb to $1.63/lb following lower TCs and lower cobalt volumes and price realisaitons.
• Zinc unit cost guidance revised from $5c/lb to $19c/lb on lower TCs on metallurgical asset credits.
• FY24 steelmaking coal FOB unit cash costs guided at $130/t, with thermal coal FOB unit cash costs guided at $69/t.
• Glencore realised average steelmaking coal prices of $255/t in 1H24 and $103/t for thermal coal.
• Glencore anticipates a decision on their potential coal demerger next week.

Kavango Resources* (KAV LN) 1. 43p, Mkt Cap £22m – Geophysics highlights scale of the Karakubis project, Botswana

• Following its announcement earlier this week that initial drilling at its Karakubis project in the Kalahari Copper Belt in Botswana had identified “the presence of a copper-silver mineralising system”, Kavango Resources reports that geophysical interpretation has highlighted “over 90” promising targets.
• The geophysical work based on airborne electromagnetic data supported by gravity information and a continuing induced polarisation survey is helping to “discriminate faults, folds and possible lithologies” capable of hosting the copper/silver mineralisation which characterises the Kalahari Copper Belt.
• Economic mineralisation in the Kalahari Copper Belt is typically hosted by the contact zone between the D’Kar and Ngwako Pan Formations in structurally controlled settings described as ‘trap sites’ and today’s announcement says that Kavango Resources has found multiple sites within data covering “about one quarter of Karakubis”.
• The company plans to use the balance of its current 5,000m drilling programme to “assess as many of … [the 10 priority targets within the 90 targets shown so far by the geophysics] … as possible”.
• Welcoming the encouragement from the early stage exploration results, CEO, Benn Turney, described the Karakubis project as “an extremely large project that appears increasingly prospective for large-scale copper deposits”.

Conclusion: Early stage exploration at Karakubis have shown that the project area hosts mineralisation similar to that known elsewhere in the Kalahari Copper Belt.  The large number of targets generated by the geophysics will require disciplined exploration to focus on the most promising targets without dissipating the focus.  We look forward to results as the programme progresses.

*An SP Angel Analyst holds shares in Kavango

Xtract Resources (XTR LN) 0.8p, Mkt Cap £6.7m – Drilling plans for NW Zambia

• Xtract Resources has outlined its plans to progress exploration of its licences in northwest Zambia in the geological Western Foreland and Fold & Thrust Belt domains which hosts the Kamoa Kakula deposit in the DRC.
• Executive Chairman, Colin Bird, said that “we have identified initial drill targets which we expect to commence drilling before the end of the third quarter this year”.
• The selection of initial drilling sites follows detailed geological mapping of prospective lithologies and following up “surface artisanal mining activity and other copper showings”.
• Mr. Bird said that the “Field work greatly added to our previous information base, and we are optimistic about our targets and the general licence area”.

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                                                            

Prince Frederick House

35-39 Maddox Street London

W1S 2PP

*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.

DISCLAIMER

This note is a marketing communication and comprises non-independent research. This means it has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of its dissemination.

This note is intended only for distribution to Professional Clients and Eligible Counterparties as defined under the rules of the Financial Conduct Authority and is not directed at Retail Clients.

This note is confidential and is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published in whole or in part, for any purpose.

This note has been issued by SP Angel Corporate Finance LLP (‘SPA’) to promote its investment services. Neither the information nor the opinions expressed herein constitutes, or is to be construed as, an offer or invitation or other solicitation or recommendation to buy or sell investments. The information contained herein is based on sources which we believe to be reliable, but we do not represent that it is wholly accurate or complete. All opinions and estimates included in this report are subject to change without notice. It is not investment advice and does not take into account the investment objectives and policies, financial position or portfolio composition of any recipient. SPA is not responsible for any errors or omissions or for the results obtained from the use of such information. Where the subject of the research is a client company of SPA we may have shown a draft of the research (or parts of it) to the company prior to publication to check factual accuracy, soundness of assumptions etc.

Distribution of this note does not imply distribution of future notes covering the same issuers, companies or subject matter.

Where the investment is traded on AIM it should be noted that liquidity may be lower and price movements more volatile.

SPA, its partners, officers and/or employees may own or have positions in any investment(s) mentioned herein or related thereto and may, from time to time add to, or dispose of, any such investment(s).

SPA is registered in England and Wales with company number OC317049.  The registered office address is Prince Frederick House, 35-39 Maddox Street, London W1S 2PP.  SPA is authorised and regulated by the UK Financial Conduct Authority and is a Member of the London Stock Exchange plc.

MiFID II – Based on our analysis we have concluded that this note may be received free of charge by any person subject to the new MiFID II rules on research unbundling pursuant to the exemptions within Article 12(3) of the MiFID II Delegated Directive and FCA COBS Rule 2.3A.19.

A full analysis is available on our website here http://www.spangel.co.uk/legal-and-regulatory-notices.html. If you have any queries, feel free to contact our Compliance Officer, Tim Jenkins (tim.jenkins@spangel.co.uk).

SPA research ratings – Based on a time horizon of 12 months: Buy = Expected return of more than 15%, Hold = Expected return between -15% and +15%, Sell = Expected return