SP Angel Morning View -Today’s Market View, Thursday 12th December 2024

Metals strengthen on improving China sentiment before key Beijing policy meeting

MiFID II exempt information – see disclaimer below

Adriatic Metals (ADT1 LN) – Operations and financing update as Vares progresses to commercial production

Amaroq Minerals (AMRQ LN) – Additional gold veins identified close to Nalunaq, Greenland

Botswana Diamonds (BOD LN) – Additional kimberlite targets identified in Botswana

Gemfields Group (GEM LN) – Ruby sales realise US$46m

Savannah Resources* (SAV LN) – Land access granted to start Phase 2 drilling

Syrah Resources (SYR AU) – Force majeure at Balama on Mozambique disruption triggers DOE loan default

Metals strengthen on improving China sentiment before key Beijing policy meeting

• Base metals strengthened overnight, with nickel up 2%, copper back over $9,200/t and tin and aluminium both rising.
• Focus has now shifted to the Central Economic Work Conference, which is expected to highlight further details on Beijing’s new looser monetary policy.
• Xi’s government is looking to shore up domestic consumption whilst tackling threats posed by Trump’s tariff imposition.
• Metals traders will be hoping for more decisive policy vs the current approach of tranches of stimulus measures over an extended period of time.

Gold holds over $2,700/oz as China’s Yuan continues to sell off

• Gold prices have steadied around the $2,715/oz mark, having climbed nearly $100/oz over the past 20 days.
• China’s Yuan has been weakening over deflationary concerns and weak domestic consumption, with the currency climbing to its lowest value against the dollar since August.
• The dollar index has been steady, whilst US Treasuries sold off in the wake of US CPI data which locked in an additional Fed rate cut in December.
• The bond market may be expressing concerns over the future path of lower inflation, with the 10 year now climbing back to 4.3%, having touched 4.13% in the wake of the US labour report.

Economics

US – The rate cut is now fully priced in with November inflation coming in with estimates.

• CPI (%mom, Nov/Oct/Est): 0.3/0.2/0.3
• CPI (%yoy, Nov/Oct/Est): 2.7/2.6/2.7
• Core CPI (%mom, Nov/Oct/Est): 0.3/0.3/0.3
• Core CPI (%yoy, Nov/Oct/Est): 3.3/3.3/3.3

Eurozone – The ECB is meeting with expectations for another 25bp cut marking a fourth one for the year.

Romania and Bulgaria join EU Schengen free movement area

• Austria recently lifted its opposition to border controls with Romania and Bulgaria.
• The move occurs at a time when certain member states are imposing new border controls.
• Austria, Denmark, France, Germany, Italy, Norway, Slovenia and Sweden maintain extended internal border checks.
• Hungary recently voted to lift land border controls.

Switzerland – The central bank in a surprising move cuts rates by 50bp to stem gains in the franc.

• Expectations for a quarter point decision.
• The franc pulled back against the Euro to the lowest since November 25.

Zimbabwe – Unconfirmed press report / rumour of 26% free carry

• The Zimbabwean minister of mines is out of the country at present and we expect the ministry to put out a statement to clarify and potentially counter the press report.
• We believe Zimbabwe is looking to encourage more mining and to emulate other nations which have succeeded in encouraging mineral development.

HK – 44% of business have negative economic outlook

• Survey by Hong Kong General Chamber of Commerce records 44% of business as having a negative economic outlook over the next 12 months (SCMP).
• The election of Trump has led to greater economic uncertainty driven by the threat of increasing Tariffs on goods into the US.
• 27.5% of HK businesses say they plan to increase investment in mainland China this year, outside of the Greater Bay Area vs 32.5% in 2023..
• The IMF see HK GDP at 1.8% next year with 8.9% growth in merchandise exports in 2024 off a low base in 2023.

UK – 70% jump in hospitalisation for flu this year

• Some 1,861 patients with flu were hospitalised every day last week. 3.5x higher yoy (SKY).
• The report does not indicate if Covid is a factor.

Currencies

US$1.0507/eur vs 1.0501/eur previous. Yen 152.57/$ vs 151.67/$. SAr 17.677/$ vs 17.854/$. $1.276/gbp vs $1.274/gbp. 0.641/aud vs 0.636/aud. CNY 7.263/$ vs 7.264/$.

Dollar Index 106.51 vs 106.61 previous

Precious metals:         

Gold US$2,718/oz vs US$2,692/oz previous

Gold ETFs 83.0moz vs 83.0moz previous

Platinum US$952/oz vs US$936/oz previous

Palladium US$995/oz vs US$967/oz previous

Silver US$32.3/oz vs US$31.7/oz previous

Rhodium US$4,575/oz vs US$4,575/oz previous

Base metals:   

Copper US$9,234/t vs US$9,191/t previous

Aluminium US$2,616/t vs US$2,594/t previous

Nickel US$16,165/t vs US$15,825/t previous

Zinc US$3,139/t vs US$3,119/t previous

Lead US$2,030/t vs US$2,063/t previous

Tin US$30,250/t vs US$29,795/t previous

Energy:           

Oil US$73.8/bbl vs US$72.4/bbl previous

Natural Gas €44.1/MWh vs €45.2/MWh previous

Uranium Futures $76.6/lb vs $76.5/lb previous

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$106.0/t vs US$105.4/t

Chinese steel rebar 25mm US$488.3/t vs US$488.1/t

HCC FOB Australia US$204.5/t vs US$205.0/t

Thermal coal swap Australia FOB US$133.5/t vs US$133.0/t

Other:  

Cobalt LME 3m US$24,300/t vs US$24,300/t

NdPr Rare Earth Oxide (China) US$56,516/t vs US$56,509/t

Lithium carbonate 99% (China) US$10,050/t vs US$10,049/t

China Spodumene Li2O 6%min CIF US$790/t vs US$790/t

Ferro-Manganese European Mn78% min US$985/t vs US$985/t

China Tungsten APT 88.5% FOB US$338/mtu vs US$338/mtu

China Graphite Flake -194 FOB US$440/t vs US$440/t

Europe Vanadium Pentoxide 98% US$5.0/lb vs US$5.0/lb

Europe Ferro-Vanadium 80% US$26.3/kg vs US$26.3/kg

China Ilmenite Concentrate TiO2 US$299/t vs US$299/t

China Rutile Concentrate 95% TiO2 US$1,108/t vs US$1,108/t

Spot CO2 Emissions EUA Price US$65.1/t vs US$65.1/t

Brazil Potash CFR Granular Spot US$290.0/t vs US$290.0/t

Germanium China 99.99% US$2,775.0/kg vs US$2,775.0/kg

China Gallium 99.99% US$430.0/kg vs US$430.0/kg

Battery News

UK has 1.3m EVs on the road, with 338,000 sold this year

• According to a report from ZapMap and data from the Society of Motor Manufacturers and Traders, the UK now has over 1.3m EVs on its roads.
• EVs now account for 3.94% of all vehicles in UK roads, up from 0.6% in 2020.
• 338,314 new EVs have been sold so far in 2024, an 18.7% share of new vehicle sales for the period.
• The same report highlighted that it was the UK charging network that was still a major gripe with EV owners.
• EV owners rated the charging network as 64% satisfactory, although 61% agree it is improving.
• The UK is trying to keep up with the demand – there are currently 72,594 public charging points spread across 36,316 locations, nearly double the number of points since 2020, and a 37% increase from last year.

BYD targeting 15% cost reduction with new blade battery 2.0

• BYD targets a 15% cost reduction for its second-generation blade battery, which will launch in the first half of 2025, a source told CarNewsChina.
• The blade battery 2.0 will have an energy density of up to 210Wh/kg and an 8C charge rate.
• C rate is a measure of how quickly a battery charges or discharges relative to its total capacity and in theory is the number of times the battery can fully charge in one hour.
• BYD plans to reduce the cost of the higher energy density version by 15% compared with the current version which has about 150Wh/kg energy density.

Company News

Adriatic Metals (ADT1 LN) 215p, Mkt cap £672m – Operations and financing update as Vares progresses to commercial production

• Adriatic, which holds the Rupice and Vares operation in Bosnia and Herzegovina, provides an update.
• The Company is now operating two active stopes in Rupice.
• Processing plant now operating 24/7, and total ore mined in 2024 to November-end was 129.2kt – additional 40kt expected in December.
• October-November saw 35kt milled, with recoveries as follows:
  • Ag – 95% (257g/t head grade)
  • Zn – 64% (7.8% head grade)
• Company retains guidance of 750-800kt for 2025 ore mined.
• Commercial production expected in December, extending through to January 2025.
• The Company reports the new Veovaca TSF is progressing, with first disposal expected January 2025 and no impact to production forecast.
• Current operating TSF will allow tailings deposition through to mid-1Q25.
• As regards financing, Company held US$23m in cash and US$8m in receivables/concentrate inventory at quarter end.
• Orion has agreed to reschedule first quarterly debt repayment of US$19m from 31^st December to 31^st March 2025.
• Additionally, Adriatic has signed a US$25m unsecured concentrate prepayment agreement with Trafigura at a lower interest rate than Orion’s facility.
• The Trafigura agreement is expected to be closed by year end, and Orion and Adriatic have agreed to cancel the additional US$25m loan facility announced in April.

Amaroq Minerals (AMRQ LN) 93p, Mkt Cap £335m – Additional gold veins identified close to Nalunaq, Greenland

• Amoroq Minerals reports that a recent reconnaissance sampling campaign on its Eagle’s Nest target, located within the Anoritooq licence area of the Nanortalik gold belt of southern Greenland has identified two gold bearing quartz veins.
• Eagle’s Nest is located around 30km from the company’s mine development at Nalunaq, which produced its first gold last month, and the identification of these veins aligns “with Amaroq’s strategic focus on developing satellite targets to support operations at the newly commissioned Nalunaq processing facility”.
• Grades of up to 54.5g/t gold have been detected in the samples which come from “Two distinct sub-parallel gold veins identified within a collective width of between 10-15m with a downdip extent of 105m … [which] … are believed to be the source of multiple +10g/t Au float samples identified in prior exploration”.
• Initial suggestions are that the mineralisation is similar in character to that present at Nalunaq.
• “Eagle’s Nest is one of nine satellite targets … [close] … to Nalunaq … [which] … Amaroq plans to incorporate … into its comprehensive exploration strategy for 2025, targeting further delineation of the identified gold veins”.
• James Gilbertson, VP Exploration, said that “The discovery of high-grade gold veins, combined with the geological similarities to the Nalunaq mine, positions Eagle’s Nest as a strategically significant target in our portfolio”.

Conclusion: Reconnaissance exploration has identified gold-bearing veins within 30km of the Nalunaq development.  We look forward to results from the 2025 exploration campaign.

Botswana Diamonds (BOD LN) 0.21p, Mkt Cap £2.4m – Additional kimberlite targets identified in Botswana

1. Botswana Diamonds reports that it has identified seven new kimberlite targets and describes one of these as “of extremely high interest”.
2. The new targets result from the analysis of “the Company’s extensive owned database with other comprehensive open-source databases … [including] … over 375,000 kms of airborne geophysical and other data, covering many decades of work in Botswana. Data utilised includes geophysics, geological, structural, geochemistry and satellite data” using artificial intelligence techniques.
3. The AI also “discovered new compelling polymetallic targets in areas currently unlicenced. Work is ongoing on these new areas of interest which now focuses on four main deposit types and eleven sub types. These deposit types include elements such as gold, copper, silver, nickel, zinc and PGMs”.
4. Describing the identification of the previously unknown targets as “a major achievement … [Chairman, John Teeling, highlighted] … one anomaly which has a signature that outranks all of the others and is of particular interest to the Company”.

Conclusion: Innovative AI techniques have highlighted additional kimberlite and other targets in Botswana.  We look forward to results from follow-up exploration.

Gemfields Group (GEM LN) 7.75p, Mkt Cap £91m – Ruby sales realise US$46m

• Gemfields reports that an online auction sale of mixed quality rubies, held in Bangkok between 25^th November and 11^th December realised US$46.2m.
• The company confirms that 97 (143,613 carats) of the 102 lots (167,865 carats) offered were sold at an average price of ~US$322/carat.
• Commenting that “Despite ongoing economic challenges in China and geopolitical turbulence worldwide, the results of this auction represent a positive outcome under the current market conditions. These results reaffirm the stability of demand for Gemfields’ rubies, with prices for fine-quality aligning well with the limited supply of these rare and precious gemstones”, Adrian Banks, Managing Director of Product & Sales, said that “While we did observe some softer prices and thinner bidding, the average price per carat reached a record high for our mixed-quality ruby auctions”.

1. He also commented that “Mozambique poses a number of material operating challenges at present, including as a result of the contested election, the arising civil unrest and the associated supply chain and logistics interruptions … [and confirmed that] … Gemfields’ priority remains the safety and security of our employees and contractors”

Savannah Resources* (SAV LN) 4.3p Mkt Cap £92m – Land access granted to start Phase 2 drilling

BUY – 18.1p

• The Company secured a land access to launch Phase 2 drilling at the Barroso Lithium Project, Portugal.
• Drilling to be conducted as part of the ongoing DFS work.
• The team reiterated guidance for completion of the DFS and environmental licensing process in 2H25.
• Separately, the Company reports the launch of the government led initiative to develop the nation’s critical raw material resources sector.
• The Portuguese Government’s European Regulation of Critical Raw Materials Working Group (GT-REMPC) is planning a number of key initiatives to be implemented from 1Q25 onwards including:
  • Granting Project of National Interest status to strategic projects;
  • The Agency for Investment and Foreign Trade of Portugal (AICEP), the Portuguese Development Bank (BPF) and the Agency for Competitiveness and Innovation (IAPMEI) are to provide financial support to develop the sector;
  • Lithium, copper and gold licenses’ tenders.

Conclusion: Land access is welcome news as the team is now able to start phase two drilling programme progressing DFS work on course for completion in 2H25, in line with previous guidance. Additionally, it appears that fiscal support is gaining pace behind the nation’s critical raw materials sector as the team is moving the project closer to FID and funding stages.

*SP Angel acts as Nomad and Broker to Savannah Resources

Syrah Resources (SYR AU) A$0.19, Mkt Cap A$200m – Force majeure at Balama on Mozambique disruption triggers DOE loan default

• Syrah reported overnight that it had declared force majeure at Balama.
• Balama was witnessing ‘illegal protest actions’ amid wider national protests over the October general election.
• Syrah reports disruption to the ‘movement of people and supplies, site access and plant operations.’
• Company notes a continued deterioration of the situation in Mozambique, and states it is ‘unable to undertake a production campaign at Balama in the December quarter.’
• Syrah states that these events and the duration of their impact ‘have triggered events of default in the Company’s loans with US IDFC and US DoE.’
• Syrah is engaging with both organisations.

LSE Group Starmine awards for Q3 commodity forecasting:

No.1 in Precious Metals: SP Angel mining team awarded No 1. ranking for Previous Metals forecasting in LSEG Quarterly Starmine Award for Reuters Polls Q3 2024

No.2 in Base Metals: SP Angel mining team awarded No 2. ranking for Base Metals forecasting in LSEG Quarterly Starmine Award for Reuters Polls Q3 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 employees may have previously held, or currently hold, shares in the companies mentioned in this note.

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