SP Angel Morning View -Today’s Market View, Friday 13th December 2024

Gold and copper pull back as US dollar gains on stronger US Producer Price Index Inflation

MiFID II exempt information – see disclaimer below

Orosur Mining* (OMI LN) – Further high-grade, wide gold intercepts from Pepas, Colombia

Resolute Mining* (RSG LN) – Management update and Syama transition to 2023 Mining Code

Rio Tinto (RIO LN) – Commitment to invest US$2.5bn in Rincon for 60ktpa capacity

Gold ($2,668/oz) sells off as US producer inflation surprises to the upside

• Gold prices weakened sharply yesterday in the wake of US PPI inflation data which came in hotter than expected.
• The implication is that the Fed will feel inclined to maintain higher rates for longer.
• The 10 year rose to 4.33% having been as low as 4.13% after last week’s jobs report.
• This weighed on gold prices, pushing them down from $2,725/oz yesterday to $2,668/oz today.
• The dollar is also pressuring gold, with the Euro, Pound and Yen all weakening against the Greenback.
• We would expect the continued depreciation of the value of the Yuan against international currencies to trigger additional Chinese retail buying.
• However, for the next leg higher in gold’s rally, we expect the 10 year will need to fall below 4% to entice US ETF investors back in.

121 Mining Investment Conference – Investment Leaders – Alternative Finance Panel

• https://www.theassay.com/videos/panels-presentations/investment-leaders-panel-alternative-financing-strategies-whats-best-for-the-junior-market-at-this-moment/

Economics

US – Equities closed lower on Thursday following on higher than expected jobless claims report and stronger PPI reading.

• Unemployment claims were up at 242k from 225k the previous week.
• PPI climbed 0.4%mom in November, picking up from 0.3% recorded the previous month.
• A rate cut this month seems like a done deal now, although, only two more easings are priced in at this point for 2025.

China – CEWC ‘Central Economic Work Conference’ saw no big stimulus but unveiled more pronouncements to direct the economy

• Either the CCP don’t want to further enrich the rich through QE-style stimulus or they simply don’t have the spare cash or probably both.
• The CEWC indicated they would enable greater public expenditure next year
• ‘Dual Circulation’ is back on the agenda to boost consumption so expect vouchers and credits to stimulate buying of domestic appliances etc.. as a priority
• This will help to maintain production lines as well as enabling President Xi to point to increased domestic consumption.
• Officials are also planning towards raising the fiscal deficit target next year.
• So we expect more tinkering with the levers of the economy – and they do seem to be better at pulling levers than we are in the west!
• We expect more cuts to interest rates, the Reserve Requirement Ratio and Deposits on housing
• Xi’s focus has been on support for State run companies and industries
• The new focus is on private enterprise, particularly as it is a substantial employer, particularly in services.
• Local party officials have been hard on entrepreneurs since President Xi detained Jack Ma and other tech entrepreneurs. More recently they have been told to go easy on the private sector.

Switzerland – SNB cuts rates by 50bp to 0.5%

• Inflation remains low in Switzerland enabling the SNB to continue to cut rates
• New forecasts for 0.3% inflation next year are lower than the previous 0.6% and somewhat lower than inflation expected in Europe.
• The SNB expect GDP growth of 1% this year with 1-1.5% forecast for 2025

Eurozone – The ECB cuts rates by 25bp, in line with market expectations, in a unanimous vote amid weakening growth outlook.

• “The disinflation process is well on track,” President Lagarde told a press conference.
• “The element which has changed … is the downside risk, particularly downside risk to growth, which is more elaborate.”
• Deposit rate was lowered to 3% from 3.25%.
• “.I note that we are collectively rather comfortable with the financial markets’ interest rate forecasts for next year,” ECB policymaker and Bank of France head Fracois Villeroy said.

Industrial Production remains unchanged at 0.0% across the Eurozone in October

• Capital Goods IP rose by 1.7% but Intermediate Goods remained unchanged while energy production fell by 1.9%
• Durable and non-durable consumer goods fell hard by -1.8% and -2.3% in October dragging the overall IP back down to zero growth.

Germany – Exports drop more than expected in October in a sign of slowing overseas demand.

• Shipments were down 2.8%mom versus a 2.0%mom fall forecast by Reuters.
• Exports to EU countries were down 0.7%mom while shipments to other destinations were down 5.3% (US -14.2%, China -3.8%, UK -2.1%).

France – The precarious state of the French economy is causing concern in financial markets

• New prime minister to be appointed shortly. His main task will be to gain sufficient support to pass a new budget in difficult conditions.
• We expect any budget which passes to be inflationary which might not help the ECB reduce rates as planned.
• President Macron was partially elected on proposal to reform France’s infamous and substantial book of workers rights. Somehow this initiative appears to have been passed by.

Canada – considering export tariffs on a number of major commodities including oil, uranium and potash as a countermeasure to potential US tariffs.

UK – The economy unexpectedly contracted 0.1%mom for a second month in a row in October.

• Estimates were for a 0.1%mom increase on Reuters numbers.
• Services sector was flat, production contracted 0.6% and construction was down 0.4%.
• Sterling pulled back hitting 1.263 with the yield on 2y debt falling 2bp to 4.26%.
• The data represents challenges to the new Labour government and their manifesto commitment to “secure the highest sustained growth in the G7”.
• Last week the OECD revised its UK growth projections for 2024 to 0.9% from 1.1% expected in September.
• Separate report by GfK on consumer confidence showed sentiment remained low in November.

Russia/Ukraine – Russia launched another large scale attack on Ukraine’s energy infrastructure across the country.

• Kyiv is reported to face sever power shortages heading into the winter with more than half of its production capacity destroyed.

Syria – Russia is in negotiations to maintain two military bases in Syria

• These bases are important for logistics for Russia’s fleet into the Mediterranean and for aircraft flying into Africa.
• Eg Wagner mercenary operations in West Africa.
• Israel has already bombed a number of airbases and munitions depots so the Russian’s might not find much works on their return.

Bitcoin – BlackRock Investment Institute reckons giving Bitcoin a 1% to 2% weighting could replicate a similar profile risk as the seven key US tech stocks.

• While BlackRock might be smart enough to safeguard their crypto vaults many individuals have been less fortunate and have had crypto currencies stolen by hackers.
• The FBI reckon scammers have stoles around $5.6bn in the US last year (Bloomberg).
• Quantum computing in the wrong hands could simply accelerate the scale of the theft.
• While gold can still be stolen gold futures and physical gold feel like a lower risk investment from a theft and a pricing perspective

Currencies

US$1.0468/eur vs US$1.0507/eur previous. Yen 153.18/$ vs 152.57/$. SAr 17.864/$ vs 17.677/$. $1.263/gbp vs $1.276/gbp. 0.637/aud vs 0.641/aud. CNY 7.288/$ vs 7.263/$

Dollar Index 106.61 vs 106.51 previous

Precious metals:         

Gold US$2,672/oz vs US$2,718/oz previous.

Gold ETFs 83.0moz vs 83.0moz previous.

Platinum US$939/oz vs US$952/oz previous.

Palladium US$979/oz vs US$995/oz previous.

Silver US$31.2/oz vs US$32.3/oz previous.

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

Base metals:   

Copper US$9,101/t vs US$9,234/t previous.

Aluminium US$2,605/t vs US$2,616/t previous.

Nickel US$16,168/t vs US$16,165/t previous.

Zinc US$3,112/t vs US$3,139/t previous.

Lead US$2,009/t vs US$2,030/t previous.

Tin US$29,957/t vs US$30,250/t previous.

Energy:           

Oil US$73.5/bbl vs US$73.8/bbl previous.

• Crude oil prices were stable as the IEA reiterated forecasts for global oil demand growth to accelerate from 0.84mb/d in 2024 to 1.1mb/d next year, lifting consumption to 103.9mb/d in 2025. Non-OPEC+ supply is expected to rise by ~1.5mb/d in both years, led by the United States, Brazil, Guyana, Canada and Argentina.
• OPEC also trimmed its global oil demand growth forecasts by 0.2mb/d to 1.6mb/d in 2024 and by 0.3mb/d to 1.4mb/d in 2025, but still remain above IEA and EIA (0.9mb/d & 1.3mb/d) forecasts.
• This week, the EIA reported a US inventory draw of 1.4mb to crude, more than offset by builds of 5.1mb to gasoline and 3.2mb to diesel stocks, with refinery utilisation down 0.9% w/w to 92.4%.
• Henry Hub prices continued higher as the EIA reported a larger-than-usual 190bcf w/w draw to 3,747bcf (vs -170bcf exp), with gas storage inventories falling to 1.8% above last year and 4.6% above the 5-year average.
• European energy prices also fell as France’s nuclear generation rose to 51.9GW (85% of capacity), its highest level since 1Q20, with EDF also raising its 2024 nuclear output target to the top of its original 340-360TWh range.
• This week, EU natural gas storage levels fell by 3.3% w/w to 80.9% full (vs 83.1% 5-Yr average), with aggregate storage at 929TWh after large draws that reduced inventories by over 6TWh in both Germany and Italy.

Natural Gas €43.2/MWh vs €44.1/MWh previous.

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

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$105.0/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

EU will not change CO2 emissions rules amid pressure from EU political group

• The European Commission has said that it is not considering changing Europe’s CO2 emissions policies, despite pressure from EU political group, European People’s Party (EPP).
•  The EPP launched a campaign this week to put pressure on the EU commission to weaken its climate rules, adding to pressure from automakers and national governments.
• The EU Commission has said the climate rules are needed to meet Europe’s legally-binding emissions goals, and they provide a predictable investment environment for European companies.
• The EPP argues that the emissions targets do not help the EU’s car industry that is struggling with weak demand and strong competition from China.
• European automaker association, ACEA, has said the industry potentially faces up to €15bn in fines for failing to meet the 2025 targets, which it says would divert money from investments.

Gotion High-tech unveils plans for battery plants in Slovakia and Morocco

• Chinese battery maker, Gotion High-tech, has unveiled plans to build battery factories in Slovakia and Morocco as it looks to expand its international presence.
• The company plans to invest €1.2bn in a lithium battery plant in SLovakia, with an annual capacity of 20GWh.
• The Slovakian plant will be built by Gotion InoBat Batteries (GIB) EnergyX Slovakia, which is 80% owned by Gotion and the other 20% by local battery company InoBat Auto jsa.
• The plant is expected to start production in January 2027 and reach full capacity in June of the same year, according to a statement.
• The Moroccan plant is expected to be of a similar investment with a similar production capacity, but will be fully owned and operated by Gotion.

Company News

Orosur Mining* (OMI LN) 8p, Mkt Cap £17m – Further high-grade, wide gold intercepts from Pepas, Colombia

(Anzá 100% indirect ownership proposed)

• Orosur reports additional drill results from its ongoing programme at Pepas, part of the wider Anza project it recently reacquired from Agnico and Newmont.
• Orosur has received assays from hole PEP014, which returned:
  • 75m at 5.6g/t Au from surface, including;
    • 11.5m at 8.3g/t Au
    • 14m at 13.68g/t Au
• The hole entered similar mineralised tuffs to the previous holes and returned high-grade mineralisation through to the basement fault.
• To date, the Company has been working to identify the orientation and trend of mineralisation.
• PEP012 was intended to confirm previous results, whilst PEP013,14 and 15 were rotated eastward to test the assumed controlling trend of SE to NW.
• The Company sees a clearly defined basement fault as acting as a market bed to define this trend.
• Orosur has submitted assays from Hole PEP015 to the lab, with the hole reported to have intersected the basement fault where expected.
• Hole PEP016 is drilled on the same azimuth, but further to the SW, intended to test the structure down dip.

Conclusion: Orosur continues drilling at Pepas, delivering high-grade gold intercepts over wide lengths from surface. The programme has highlighted Orosur’s ability to move quickly and return assays within weeks. We see this as one of the most exciting gold exploration stories in London currently. There remains numerous questions that need answering with Pepas before step-out drilling begins. Hole 15 should provide some further insight into the orientation and nature of mineralisation. The Company has identified a clearly defined basement fault which provides a marker for the trend.

*SP Angel acts as Nomad and Broker to Orosur Mining

Resolute Mining* (RSG LN) 20.4p, Mkt Cap £450m – Management update and Syama transition to 2023 Mining Code

• Resolute Mining announce that Terry Holohan, CEO, will be taking a leave of absence from 13^th December to 31^st January 2025 to spend time with his family.
• Chris Eger, CFO, will take over as acting CEO, and Dave Jackson will become acting CFO.
• The Company will pay Mali’s Government the final US$30m settlement by the end of December.
• Company expects ‘strong operating cashflow’ from both Syama and Mako.
• Syama will migrate to the 2023 Mining Code in 2025, with corporate income tax rising to 30% from 25% and fuel duties exonerated.
• Royalties will be due on a sliding scale, with the rate at 10.5% whilst the gold price is over $2,500/oz.
• Mali will hold a 20% preference share in Syama.

*SP Angel analysts hold shares in Resolute Mining

Rio Tinto (RIO LN) 4,958p, Mkt cap £63bn – Commitment to invest US$2.5bn in Rincon for 60ktpa capacity

• Rio announced yesterday it has approved a US$2.5bn CAPEX commitment for Rincon in Argentina.
• The expenditure will see Rincon’s capacity at 60ktpa LCE, over a 40 year LOM.
• Construction is expected to begin mid-2025, with first production in 2028 followed by a three year ramp up period.
• Rincon is a DLE project and Rio expects it to be ‘in the first quartile of the cost curve.’

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 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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