SP Angel Morning View -Today’s Market View, Friday 12th April 2024

Gold jumps again, climbing to $2,400/oz as Chinese buying continues

MiFID II exempt information – see disclaimer below

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

CleanTech Lithium (CTL LN) – CEO resigns with immediate effect

Galan Lithium (GAL LN) – A$15m equity standby facility

Kavango Resources* (KAV LN) – Ground magnetic survey completed at Nara as drill results forthcoming

Premier African Minerals (PREM LN) – Additional £1m raised

Sierra Rutile (SRX AU) – DFS for Sembuhan rutile project

IG TV: Gold and Copper:  https://youtu.be/KuGSbDqWglk?si=-8iikkOHxbbLSnPZ

Sharepickers: Gold & Lithium; Anglo Asian, Gileon, Kodal, Power Metals, Rainbow, Shanta – Video:  https://www.youtube.com/watch?v=2VHsauhHZ0w

Podcast: https://audioboom.com/posts/8484406-john-meyer-anglo-asian-gileon-kodal-power-rainbow-shanta-gold-lithium-copper

*SP Angel almost invariably acts as nomad or broker or nomad and broker to companies mentioned in the above videos and podcasts. We speak more about these companies as we have a good understanding of their business and can talk with a greater degree of confidence. As ever, however, it should be noted that our views do not take into account the circumstances and needs of any particular investor or investor type. So enjoy the talks, but please do your own research, including other companies not mentioned by us but operating in the same areas, and get professional advice where appropriate. SP Angel acts as Broker/Nomad or both for Anglo Asian Mining, Kodal Minerals, Power Metals Resources.

Gold jumps again, climbing to $2,400/oz as Chinese buying continues

• Gold prices have climbed again overnight in another strong Asian trading session.
• Spot prices hit $2,400/oz before easing $5/oz.
• Geopolitical tensions continue to mount, with the WSJ reporting Israel is bracing for another assault following an air strike on an Iranian compound last week.
• Silver prices are also extending gains, despite the US dollar strengthening again.
• Precious metals have impressed analysts with their ability to shrug off higher real yields, with the US 10 year rising over 4.5% on this week’s hot CPI data.
• Bloomberg reports Chinese ETFs have seen huge inflows, with some up 40% since the end of March.
• Chinese investors are rushing to safe haven assets as their property sector continues to slump and their equity market fares little better.
• China’s Yuan remains under pressure, with the PBoC continuing to fix the currency onshore at 7.1 per dollar.

Iron ore strengthens again despite more weak data from China’s property sector

• Iron ore prices have climbed again to $109/t, having touched $111/t for the 62% Fe benchmark in China.
• Several bulge bracket banks have upped their growth expectations for China.
• Steel prices in China are also headed for gains.
• Top 100 developer contracted sales fell 46% in March yoy, vs a 60% decline in February and a 34% decline in January.
• Contracted sales now sit at an eight year low for Q1 at 864bn CNY, vs highs of 3076bn CNY in 2021.

Copper prices strengthen again as base metals rally despite high inventories

• Copper prices have pushed past $9,551/t this morning, hitting 15-month highs alongside a series of base metals.
• Zinc prices have rallied 16% over the past two weeks after TC fees were cut between Teck and Korea Zinc.
• Tin prices have also rallied to yearly highs, over $32k/t.
• Base metals have rallied across the board despite elevated inventory levels leaving many futures curves in contango, a traditional sign of ample physical supply.
• This year’s metals rally contrasts with the surge in 2021/2022, when many metals sat in backwardation on supply chain disruptions.

Tungsten – APT prices continue to rise on short supply

• European buyers are seen buying more intermediate tungsten products indicating the concentrate and scrap markets are relatively tight
• Long-term order quotations are seen rising in China with APT, tungsten concentrates and Sodium Tungstate prices rising
• Tungsten concentrate (65%) prices are now at CNY130,000-131,000/t
• APT (88.5%) in Europe is at US$320-330/t
• Sodium Tungstate prices are now at CNY142,000-144,000/t
• We suspect much of the price rise relates to supply issues across the Myanmar border where the Chinese military appear suspiciously active.
• We also believe growth in the retooling of European automotive factories for Electric Vehicles and for military equipment and munitions may also be driving demand higher.
• Russia has also been ramping up munitions supply to feed its war in Ukraine.
• As always, the Chinese appear to be profiting from the situation with Yunan Tin reporting Q1 profits up 346% yoy

Massive landslide triggered by improper mining at Bijela in Bosnia and Herzegovina.

• The landslide shows the devastating impact of improper mining
• https://eos.org/thelandslideblog/bijela-landslide-1

Economics

China – Trade underperforms expectations in March in a setback to awaited recovery.

• The effect of weak exports and imports will be seen next week when Q1 GDP numbers are released next Tuesday.
• Exports: -7.5 v 5.6 February and -1.9 est.
• Imports: -1.9 v -8.2 February and 1.0 est.

ECB – The central bank left benchmark rates unchanged for a fifth consecutive meeting on Thursday while highlighting that slowing inflation offers room for a potential rate cut.

• The deposit rate was left at a record high of 4%.
• “If the Governing Council’s updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission were to further increase its confidence that inflation is converging to the target in a sustained manner, it would be appropriate to reduce the current level of monetary policy restriction,” the ECB said Thursday.
• Comments and general expectations are seen diverging from the Fed rate outlook that see the European currency selling off against the US$.
• Eurozone inflation has been steadily pulling back coming in at 2.4% and 2.9% on headline and core measures in March, down from over 5% in the middle of last year.
• That compares to 3.5% and 3.8% recorded in March in the US.
• Markets are now pricing in just over three cuts this year with the first one potentially as early as June

Currencies

US$1.0676/eur vs 1.0742/eur previous. Yen 153.27/$ vs 153.10/$. SAr 18.718/$ vs 18.785/$. $1.251/gbp vs $1.256/gbp. 0.651/aud vs 0.653/aud. CNY 7.237/$ vs 7.237/$.

Dollar Index 105.68 vs 105.18 previous.

Precious metals:         

Gold US$2,396/oz vs US$2,338/oz previous

Gold ETFs 81.7moz vs 81.7moz previous

Platinum US$999/oz vs US$972/oz previous

Palladium US$1,069/oz vs US$1,060/oz previous

Silver US$29.05/oz vs US$28/oz previous

Rhodium US$4,725/oz vs US$4,725/oz previous

Base metals:   

Copper US$ 9,469/t vs US$9,405/t previous

Aluminium US$ 2,491/t vs US$2,472/t previous

Nickel US$ 18,055/t vs US$18,170/t previous

Zinc US$ 2,810/t vs US$2,768/t previous

Lead US$ 2,176/t vs US$2,176/t previous

Tin US$ 32,610/t vs US$32,155/t previous

Energy:           

Oil US$90.6/bbl vs US$90.6/bbl previous

• OPEC maintained its 2024 forecast for 2.2mb/d demand growth in the April monthly oil market report (MOMR), with the OECD projected to expand by around 0.3mb/d and the non-OECD by about 2.0mb/d, as Vitol’s CEO Russell Hardy also lifted his Company’s growth forecast for this year to 1.9mb/d.
• European energy prices neared their highest level in two months following Russian attacks on Ukraine’s power infrastructure and gas storage facilities.
• US natural gas prices fell after the EIA reported a 24bcf w/w build to 2,283bcf, with storage levels climbing to 23.5% above last year and 38.4% above the 5-year average following the end of the winter heating season.

Natural Gas €30.0/MWh vs €28.3/MWh previous

Uranium Futures $89.1/lb vs $88.0/lb previous 

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$108.6/t vs US$107.0/t

Chinese steel rebar 25mm US$513.6/t vs US$513.6/t

Thermal coal (1st year forward cif ARA) US$121.3/t vs US$117.5/t

Thermal coal swap Australia FOB US$132.0/t vs US$130.5/t

Other:  

Cobalt LME 3m US$28,550/t vs US$28,550/t

NdPr Rare Earth Oxide (China) US$52,506/t vs US$51,820/t

Lithium carbonate 99% (China) US$15,130/t vs US$15,131/t

China Spodumene Li2O 6%min CIF US$1,240/t vs US$1,240/t

Ferro-Manganese European Mn78% min US$972/t vs US$972/t

China Tungsten APT 88.5% FOB US$320/mtu vs US$320/mtu

China Graphite Flake -194 FOB US$490/t vs US$490/t

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

Europe Ferro-Vanadium 80% 26.25/kg vs US$26.25/kg

China Ilmenite Concentrate TiO2 US$330/t vs US$330/t

China Rutile Concentrate 95% TiO2 US$1,430/t vs US$1,430/t

Spot CO2 Emissions EUA Price US$62.1/t vs US$62.1/t

Brazil Potash CFR Granular Spot US$305.0/t vs US$305.0/t

Battery News

India saw EV sales double in 2023

• India’s EV sales almost doubled, to 96,000, in 2023, accounting for 2% of total passenger vehicle sales.
• The surge was driven by rising urban consumer interest, government initiatives, infrastructure development, and climate change concerns.
• Projections show EV sales in India rising 66% in 2024 to constitute 4% of total PV sales, fuelled by new entrants in the market and further subsidies.
• Tata Motors led India’s EV market in 2023 with over two-thirds share, but lost some ground to Mahindra, BYD, and MG Motor.
• Mahindra was the fastest-growing EV brand in 2023 with a 2476% increase, driven by its XUV400 electric SUV.
• BYD, despite being a premium brand, secured a top 5 position among EV makers in India with over 1500% growth in 2023.
• By 2030, EVs are expected to account for nearly one-third of India’s total PV sales.
• India also saw EV two-wheelers see significant growth, up 13% across 2023, to approx. 18m vehicles.

Global plug-in car sales increased 3% in February

• Global plug-in electric car sales increased by 3% yoy in February 2024. (EV-Volumes Data)
• In the first two months of 2024, over 1.9m plug-in cars were registered globally, a 30% increase yoy and 14% market share.
• BEVs accounted for around 1.2m units, up 23% yoy, with a 9% market share.
• PHEVs saw around 700,000 registrations, up 46% yoy, with a 5% market share.

LG Energy Solution sees reduced operating profit due to slow EV sales

• LG Energy Solution (LGES) reported a 75% drop in operating profit for Q1 2024 due to slow EV sales.
• The company’s sales also declined by 30% to $4.5bn in Q1 2024, compared to $6.4bn in the same period .
• Despite the slowdown, LGES is strengthening its battery portfolio by investing in NCMA and LFP battery technologies.
• The company has also partnered with Envirostream to recycle lithium-ion batteries as it looks to diversify its involvement in the  part of sustainability efforts.
• While facing short-term headwinds, LGES continues to prepare for long-term growth in the EV battery market.

Concern mounting over Europe’s sliding EV sales ahead of 2035

• The withdrawal of EV incentives and subsidies towards the end of 2023, particularly in Germany, has led to a nosedive in EV popularity across several European countries.
• EV market share in Europe has shrunk from 14.16% in 2022 to 12% or less since the start of 2024.
• Achieving the target of 100% zero-emission vehicle sales by 2035, up from the current 15%, is seen as a major challenge in just 10 years.
• Only two-thirds of EU member states have surpassed the 5% EV adoption “tipping point” considered necessary for mass adoption.

Mercedes EQS revealed with larger battery, over 800km range

• Mercedes-Benz has unveiled the newest version of its flagship EQS electric sedan, with a larger battery pack and increased range.
• The updated EQS will be available with a new 107.8kWh battery option, enabling a claimed WLTP range of over 800km.
• This extended range variant is expected to be badged as the EQS 680, with an estimated EPA range of around 1000km.
• Mercedes claims improved efficiency from aerodynamic enhancements and a new heat pump system for the climate control help to extend the range.
• The new EQS is expected to go on sale in late 2024 as a 2025 model year vehicle. Pricing details have not yet been announced.

Hydrogen Trucks to be trialled in UK by White Logistics

• White Logistics has partnered with Hydrogen Vehicle Systems (HVS) to conduct a trial of Hydrogen Fuel Cell Electric Vehicles for heavy goods vehicles (HGVs).
• The trial, set to begin in late 2025, aims to assess the potential of integrating zero-emission hydrogen HGV technology into White Logistics’ fleet.
• HVS is the UK’s first hydrogen fuel cell truck original equipment manufacturer and will provide the trial vehicles to White Logistics.
• The partnership covers collaboration on hydrogen electric vehicle technology, infrastructure, and refuelling equipment.

Company News

CleanTech Lithium (CTL LN) 12.50p, Mkt Cap £17.8m – CEO resigns with immediate effect

• Aldo Boitano, founder and ceo of CheanTech Lithium has resigned with immediate effect following revelations that he had borrowed funds against his stock in a scheme starting ahead of the November fund raising.
• Mr Boitano provided all his stock in CleanTech as security for a loan in a series of transfers without informing the market.
• Aldo Boitano’s has apologised for his actions in his letter of resignation.
  • “Mr Boitano will work with the Company as a consultant for an initial period to support the recently announced Special Lithium Operating Contract application procedure and relationships with the Chilean government and local communities.”
• Steve Kesler, executive chairman will continue as interim ceo.

Questions remain:  

• What is the name of the unnamed financial institution with which Mr Boitano entered into a loan agreement ?
• How much stock does Mr Boitano now own. Is the financial institution able to claim ownership of Mr Boitano’s stock ?
• Did the recent fall in CleanTech’s share price cause the lender to sell shares.
• Did the financial institution short the stock in the knowledge that it was likely to receive Mr Boitano’s CleanTech shares by enforcing security ?
• Has the financial institution sold stock from Mr Boitano or is it holding the shares ?
• Why were the stock transfers not disclosed to the market ?
• Did the stock transfer breach MAR ‘Market Abuse Regulations’ ?
• Will regulatory action be taken against Mr Boitano as a result of the failure to disclose the stock transfer and possible sale ahead of the November fund raising ?
• Who persuaded Mr Boitano to borrow funds from the unnamed financial institution ?
• Does the unnamed financial institution also offer ‘death spiral’ convertible loans ?

Galan Lithium (GAL LN) 0.39p, Mkt Cap £155m – A$15m equity standby facility

• The Company signed an At-The-Market Subscription Deed with Acuity Capital for A$15m of standby equity capital.
• The facility runs until 31 January 2029.
• The Company at its own discretion will be able to draw upon the facility and there is no requirement from Galan to use the facility that can also be terminated at any time at no cost or penalty.
• Once the Company chooses to drawdown on the facility, the share price will be the greater of the nominated floor price and up to a 10% to VWAP for a period of Galan’s choosing.
• The Company will issue 15m shares to Acuity Capital as a collateral for the facility that upon early termination or maturity of the facility will be bought back for no cash consideration.

Conclusion: The facility follows a ~A$21m equity raise (at A$0.46) earlier this year and provides flexibility as the team is finalising discussions over HMW Phase 1 funding including debt and prepayment facilities. The Company signed a term sheet with Glencore in November last year for a prepayment facility of US$70-100m and an offtake for 100% of Phase 1 lithium chloride production over five years with the facility subject to due diligence that is currently ongoing.

Kavango Resources* (KAV LN) 1p, Mkt Cap £14m – Ground magnetic survey completed at Nara as drill results forthcoming

• Kavango Resources provides an update from its exploration programme at its Nara Gold Project, Zimbabwe.
• The Company reports it has completed its ground magnetic survey over 85km of lines.
• This was intended to identify geological structures bearing association with gold mineralisation.
• Following the survey, Kavango has now identified a 200m wide likely shear corridor over a 5km strike, with several magnetic lows.
• The target zone hosts artisanal and historic workings, which also bear association with low magnetic lineaments.
• The survey also pointed to unknown magnetic lows running parallel to the historical workings and prospective areas of hydrothermal alteration.

Conclusion: Kavango continues to progress the Nara asset quickly, having acquired the licence package 10 months ago. A rig was mobilised to site in March and drilling results are expected in the coming weeks. The 200m x 5km corridor anomaly is exciting and additional drilling will be completed over the next six weeks.

An SP Angel Analyst holds shares in Kavango

Premier African Minerals (PREM LN) 0.19p, Mkt Cap £53m – Additional £1m raised

• The Company reports an additional equity raise of £1m on top of £2m announced yesterday.
• New equity will be issued at the same placing price of 0.17p.
• Additional capital will be directed to support ongoing mining operations at Zulu Lithium Project and general working capital.

Sierra Rutile (SRX AU) A$0.12 Mkt cap A$51m – DFS for Sembuhan rutile project

• Sierra Rutile, currently under takeover offer from a Gerald Group-backed entity, releases its Sembehun DFS.
• The mineral sands rutile project in Sierra Rutile shows a mine life of 14 years, 14.4mtpa mined and 175ktpa rutile produced on average.
• CAPEX estimate down 11% at $301m vs 2022 PFS.
• The study returns an NPV8 of $408m using a lt rutile price of $1,391/t and cash costs of $600/t.
• The study assumes recovery rates of 91.4% for rutile, with a 1.45% feed grade.
• Sustaining CAPEX assumed at $120m.
• Sembehun holds an MRE of 508mt at 1.1% rutile for 5.5mt contained, with reserves of 1.74mt at 1.46% rutile.

*An SP Angel mining analyst has previously visited Sierra Rutile’s rutile mine in Sierra Leone

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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