SP Angel Morning View -Today’s Market View, Friday 9th August 2024

Copper prices climb on cooling US recession fears

MiFID II exempt information – see disclaimer below

First Tin (1SN LN) – Permitting process starts for Taronga project, NSW

Galileo Resources (GLR LN) – Drilling plans for the Shinganda copper project, Zambia

Hummingbird Resources (HUM LN) – Lower production, reduction in guidance and refinancing talks

Largo Resources (LGO CN) – Lower vanadium prices continue to weigh on primary producers

Economics

US – Better than expected jobless numbers helped the risk sentiment yesterday following weak employment data released last week fuelled speculation of a hard landing.

• S&P 500 and Nasdaq closed 2.3% and 2.9% up on Thursday narrowing weekly losses down to -3.7% and -5.3%.
• Key data markets to follow would be now July CPI and retail sales due next week.
• Weekly Jobless Claims (Latest/Previous/Est): 233k/250k(revised from 249k)/240k

China – Consumer prices climb more than expected in July largely driven by seasonal factors.

• Core CPI that excludes food and energy came in at 0.4%, the lowest since January, pointing to remaining challenges in the consumer demand.
• CPI (%mom, Jul/Jun/Est): 0.5/0.2/0.3
• PPI (%mom, Jul/Jun/Est): -0.8/-0.8/-0.9

Currencies

US$1.0924/eur vs 1.0936/eur previous. Yen 147.12/$ vs 145.73/$. SAr 18.304/$ vs 18.432/$. $1.277/gbp vs $1.269/gbp. 0.660/aud vs 0.655/aud. CNY 7.174/$ vs 7.162/$.

Dollar Index 103.16 vs 102.98

Precious metals:         

Gold US$2,426/oz vs US$2,397/oz previous

   Gold ETFs 82.2moz vs 82.7moz previous

Platinum US$934/oz vs US$925/oz previous

Palladium US$933/oz vs US$894/oz previous

Silver US$27.53/oz vs US$26.80/oz previous

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

Base metals:   

Copper US$ 8,886/t vs US$8,727/t previous

Aluminium US$ 2,309/t vs US$2,265/t previous

Nickel US$ 16,405/t vs US$16,110/t previous

Zinc US$ 2,706/t vs US$2,578/t previous

Lead US$ 2,014/t vs US$1,944/t previous

Tin US$ 31,700/t vs US$29,800/t previous

Energy:           

Oil US$79.1/bbl vs US$77.9/bbl previous

Natural Gas €40.3/MWh vs €38.8/MWh previous

Uranium Futures $81.5/lb vs $81.4/lb previous

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$99.2/t vs US$101.0/t

Chinese steel rebar 25mm US$494.1/t vs US$496.7/t

Thermal coal (1st year forward cif ARA) US$126.0/t vs US$126.0/t

Thermal coal swap Australia FOB US$149.0/t vs US$145.0/t

Coking coal Dalian Exchange futures price US$195/t vs US$194.9/t

Other:  

Cobalt LME 3m US$26,500/t vs US$26,500/t

NdPr Rare Earth Oxide (China) US$51,925/t vs US$52,011/t

Lithium carbonate 99% (China) US$10,106/t vs US$10,263/t

China Spodumene Li2O 6%min CIF US$910/t vs US$920/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$465/t

Europe Vanadium Pentoxide 98% 4.7/lb vs US$4.7/lb

Europe Ferro-Vanadium 80% 25.2/kg vs US$25.2/kg

China Ilmenite Concentrate TiO2 US$320/t vs US$320/t

China Rutile Concentrate 95% TiO2 US$1,401/t vs US$1,403/t

Spot CO2 Emissions EUA Price US$67.6/t vs US$67.6/t

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

Germanium China 99.99% US$2,145/kg vs US$2,145/kg

China Gallium 99.99% US$440/kg vs US$440/kg

Battery News

China sees EV, hybrid sales reach 50% in July

• Sales of new energy vehicles (NEVs) were up 37% yoy in July, accounting for a record 50.7% of car sales (China Passenger Car Association)
• NEV sales accounted for just 7% of total vehicle sales in China three years ago, but heavy investment in EV supply chains has seen the domestic EV industry explode.
• Electric and hybrid vehicle sales in the US, by comparison, accounted for around 18% in Q1 2024.
• Overall domestic sales fell 3.1% in the month, the fourth consecutive month of declines with weak consumer confidence as the economy struggles to recover amid the prolonged crisis in the property market.
• The continued weakness in the auto market prompted China’s state planning agency to announce in late July that cash subsidies for vehicle purchases would be doubled, up to 20,000 yuan ($2,785) per purchase, and would be retroactive to April when the subsidies were first introduced.

South Korea to hold emergency meeting after EV fires concerns

• South Korea’s environment ministry said on Thursday it plans to hold an emergency meeting next week to discuss recent fires involving EVs.
• The move comes as analysts warn that authorities and the EV industry need to find ways to allay public worries on safety in a sector already suffering a slowdown in sales.
• Separately, the Chosun Ilbo newspaper cited an unnamed transport ministry official saying that the country has plans to require EV makers to disclose the brand of batteries in cars.
• Last week, a Mercedes-Benz electric sedan with batteries made by Chinese company Farasis Energy caught fire in the underground garage of an apartment in the South Korean city of Incheon, according to media reports.
• The blaze took more than eight hours to extinguish and damaged about 140 cars and 23 people were hospitalised due to smoke inhalation.

Xpeng AeroHT raises US$150m for flying car production

• The unit of Chinese EV maker Xpeng, has raised US$150m to fun development and production of a flying car in Guangzhou.
• The fundraiser announcement comes just a month after AeroHT disclosed the US$200,000 price for the vehicle which it plans to begin taking pre-orders for in the fourth quarter
• The company has also announced a second round of fundraising as it prepares to build the manufacturing facilities for the vehicle.

Company News

First Tin (1SN LN) 4.75p, Mkt Cap £15.6m – Permitting process starts for Taronga project, NSW

• First Tin confirms that it has formally lodged its scoping study for the Taronga tin project with the state authorities in New South Wales which “represents the formal commencement of the NSW permitting process”.
• The company confirms that the study “outlines the key components of the Taronga project including the layout, infrastructure placement, personnel requirements, proposed transport routes … [and that it] … will be used by various NSW Government departments and regulatory agencies to specify the… requirements for inclusion in Taronga’s Environmental Impact Statement”.
• First Tin says that many of the EIS components are “at isre substantially advanced, including extensive surveys for Aboriginal cultural heritage, flora and fauna.  It is thus … [it is] …expected that, once the SEARs are provided, the EIS can be rapidly progressed, allowing for it to then be lodged by the end of calendar 2024”.
• CEO, Bill Scotting, described the “lodgement … [as a] … key step in the permitting process for Taronga   … [and said that since the] … completion of our DFS, permitting alongside DFS optimisation work has been the principal focus of the team in Australia and we are excited to now be in a position to soon lodge the EIS and apply for Development Approval.”
• In May, the company described the highlights of its DFS for Taronga which is expected to produce an average of 3,600tpa of tin in concentrate over a 9 year mine life.
• Using a conservative base case tin price of US$26,000/t, the study shows that pre-production capital expenditure of US$116m generates a pre-tax NPV_8% of A$143m (~US$94m) and IRR of 24% and an after tax NPV_8% of A$98m (~US$65m) and IRR of 20%.
• The study shows life of mine on-site operating costs of US$ of US$9.26/t treated, US$12.22/t on an all in sustain cost basis (AISC) plus depreciation equivalent to US$2.70/t treated equating to US$15,843/t of tin produced on an ASIC basis which First Tin describes as “firmly in the lower half of production costs worldwide and close to the lowest quartile”
• Earlier this week, First Tin announced metallurgical test results which indicated that recovery rates better those used in the DFS may be achievable “with slight modifications to the current process plant design”.

Conclusion: First Tin has started the formal permitting approvals process at Taronga.

Galileo Resources (GLR LN) 1.15p, Mkt Cap £13.1m – Drilling plans for the Shinganda copper project, Zambia

• Galileo Resources reports that it will start a 30-hole, 2,400m Phase 3 reverse-circulation (RC) drilling campaign at its Shinganda copper project later this month.
• The programme aims to test for shallow copper mineralisation along a total 10km strike length “on the Shinganda Main Fault and Splay structures … [and] … define a substantial resource of supergene mineralisation ranging up to 2% CuEq grade at shallow depths”.
• Drilling, which may be extended if early results provide sufficient encouragement, follows earlier drilling which included intersections of “50.3m @ 1.77% CuEq from 21m depth in Galileo hole SDDD002 and 17m @ 2.00% CuEq from 7m depth in historic Vale hole DH0004”.
• Recent geophysical modelling of airborne magnetic data has also been integrated into the planning of the Phase 3 campaign.
• Executive Chairman, Colin Bird, explained that the “Shinganda exploration area has met all our expectations and still presents a number of mineral styles to be explored. We have however homed in on zones of clearly defined, structurally controlled copper-gold bearing iron carbonate alteration close to surface with significant strike potential”.

Conclusion: We await results from the next phase of drilling at the Shinganda prospect as the exploration progresses.

Hummingbird Resources (HUM LN) 6.8p, Mkt Cap £55m – Lower production, reduction in guidance and refinancing talks

• 2Q24 production amounted to 19.9koz (1Q24: 22.9koz) taking 1H24 output to 42.7koz.
• Yanfolila production totalled 12.1koz in 2Q24 (1Q24: 17.0koz) and 29.1koz (1H23: 51.2koz).
• Lower production has been driven by lower volumes of mined higher grade material with the processing plant treating higher share of lower grade stockpiled ore.
• Processed grade fell to 1.31g/t in 2Q24, down from 1.61g/t the previous quarter and 2.41g/t last year.
• The Company expects grades to start to pick up in 2H24.
• Kouroussa production remains in a ramp up stage delivering 7.8koz in 2Q24
• The operation reached 1.2kozpw production rate in July with ~4.8koz produced during the month
• Commercial production is expected to be achieved in late 3Q24.
• 2Q24 AISC averaged $2,598/oz (1Q24: $1,753) on the back of lower production.
• Yanfolila gold sales amounted to 12.5koz at an average realised gold price of $2,075/oz.
• Kouroussa gold sales and AISCs will be provided once the operation reaches commercial production.
• Group adjusted EBITDA came in at -$13.5m during the quarter taking 1H24 to -$8.9m (1H23: $33.1m).
• 2024 guidance was reduced to 65-75koz at $1,600/oz AISC at Yanfolila (75-85koz at $1,500/oz before) and reinstated to 50-70koz at $1,400/oz AISC at Kouroussa.
• The Company had $0.4m in cash, $3.4m in gold inventory and $153.9m in debt as of quarter end.
• The team is in negotiations with its lender Coris Bank to refinance existing debt deferring the repayment period to 2H25 with details to be provided in the coming days.
• Additionally, the Company is exploring several non-equity financing options to help with working capital as Kouroussa operations ramp up.
• During the quarter the Company secured a $10m short term loan with Nioko Resource, the largest shareholder in the Company with a >40% interest.

Largo Resources (LGO CN) C$2.6, Mkt Cap C$169m – Lower vanadium prices continue to weigh on primary producers

• Revenues amounted to US$28.6m (2Q23: $53.1m) including $26.2m generated from vanadium sales and $2.4m from ilmenite.
• A decline in sales was driven by weaker vanadium prices and lower sales volumes.
• V2O5 equivalent sales totalled 1.8kt (2Q23: 2.6kt) at an average realise price of $6.46/lb (2Q23: $9.42/lb).
• Cash operating costs averaged $6.45/lb during the quarter (2Q23: $5.67/lb).
• Net loss amounted to -$14.5m (2Q23: -$6.0m).
• The Company held $35.8m in cash and $84.7m in debt as of quarter end.
• Commenting on the market, the Company reports vanadium demand remained soft in 2Q24 on the back of weakness in the Chinese and European steel industries.
• The Company drew attention to new Chinese rebar quality standards that come into effect on September 25 becoming enforceable and replacing voluntary guidelines that were in place from 2018.
• New standards are expected to significantly increase vanadium demand in the steel sector.

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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