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

Gold hit a new high as investors look towards rate cuts

MiFID II exempt information – see disclaimer below

Arkle Resources* (ARK LN) – Drilling at Stonepark Block

Endeavour Mining (EDV LN) – Commercial production at BIOX Expansion and Lafigue

Greatland Gold (GGP LN) – Retail offer raises an additional £6.7m

Kore Potash* (KP2 LN) – Interims

Premier African Minerals (PREM LN) – Update on the Zulu lithium project

Gold hit a new high of Gold US$2,573.48/oz as investors look towards rate cuts

• The move suggests that there is a change in financial markets and investors are moving money around
• Higher PPI and CPI figures are said to have dampened rate cut hopes but we suspect the Fed is itching to cut rates as it does not want to be blamed for a potential recession
• Maybe there is an increase in trade flows with the Yen carry trade or maybe out of the US dollar ahead of Fed rate cuts
• A weaker US dollar tends to raise gold prices.
• Further ECB cuts also look inevitable.
• Or more gold buying in China ahead of likely local rate cuts
• There may also be some reaction to Putin’s statement on reaction to the use of Western missiles against Russia

Miners turn higher as metals rise off low levels suggesting an end to the destocking seen over the summer

• We can see and feel a better mood in financial markets as we head towards the October witching hour
• China is looking for some begrudging stimulus from President Xi. Recently Xi has supported State and Parastatal companies over private enterprise.
• But private enterprise is a much larger employer and stimulus is needed to preserve jobs and social welfare / harmony.
• The Chinese state listens to its unions perhaps more so than our own Labour party, though our newly elected leaders appear to be playing to their union paymasters just now.
• China is still driving strong export growth driving industry with EV market access and Tariffs serving as a major issue to distract the masses and concern their leadership.
• We worry that China went overly large on its investment into Gigafactories and EVs just a bit ahead of its technical capabilities and we expect substantial consolidation to come.
• China may well opt to cut interest rates first before bringing out the big bazookas on stimulus funding
• US Fed officials have also signalled a number of rate cut which will likely serve to reduce rates around the world.
• Remember the US is carrying $35 trillion of debt which cost $956bn a year to maintain as of July representing 17% of total federal funding
• Halving interest rates will substantially reduce the massive cost of this debt burden in the US and around the world supporting whichever government comes to power.
• Halving rates will also help the next generation of property buyers get started supporting property prices and markets the world over.
• Increased property transactions will raise property tax revenue and this along with the inevitable increase in inheritance and CGT taxes will refill government coffers.

Copper – Prices continue to rise

• We expect restocking in China and elsewhere has seen off the bottom in this market
• Chinese unwrought copper imports fell in 5.3% in August vs July but are still higher 12.3% yoy at 415k but are still 3% higher for the year to date
• Concentrate and ore imports for base metals rose rose to 2.87mt in August and 3.2% ytd to 18.64mt so China is still buying plenty
• Codelco settled with unions at El Teniente
• BHP raised production by 29% at Escondida to 106,000t
• Collahuasi production fell 6% or 47kt
• Peru looks like it might not meet 3mt this year

Lithium – Restocking starts to lift prices as higher-cost lepidolite and spodumene mines close indicating potential end to destocking cycle

• We remain wary of the risk of gigafactory failures due issues of quality, cost and battery salability.
• Not every gigafactory will have the raw material and manufacturing know how and quality control necessary to build good quality batteries.
• Carbonate prices appear to have turned a corner rising to US$9,926/t vs US$9,896/t for 99% quality in China
• We note lithium carbonate prices are higher at 11,000-11,500/t in the US for 99.5% grade
• Benchmark see Spodumene prices at a three-year low at $818/t.
• Asian Metals show prices of US$740/t for spodumene Li2O 6%min CIF in China.

Bolivia state owned Yacimientos de Litio Boliviano signed a deal with Russia’s Uranium On for a $976m DLE facility for the naiton’s Salar de Uyni Lithium Project.

• Expectations are for the facility to run at 14ktpa LCE.
• Uranium One, a Rosatom subsidiary, is reported to use direct sorption technology with the plant expected to start in 2H25.

Economics

US – Equities climbed for a fourth consecutive day on Thursday closing at the highest level this month ahead of the Fed meeting next meeting.

• Soft labour market numbers and slowing inflation see the market expecting a 25bp cut with potential three more before year end.

China – The government will raise the retirement age for the first time since 1978 amid a shortage of workers as population ages.

• Pension age will increase to 63 from 60 for males and 55 from 50 for females (58 from 55 for white collar female workers).
• PwC was fined $62m and banned for six months from China related to auditing of the failed property developer Evergrande.
• The penalty exceeds the $31m fine and three month partial business ban issued on Deloitte for “serious audit deficiencies” related to the China Huarong Asset Management contract.

Eurozone – The central bank as expected brought the benchmark rate down by 25bps to 3.5% while avoiding any potential commitment on timing and the size of future cuts.

• The decision was unanimous and marks the second cut this year.
• “Our path, of which the direction is pretty obvious – a declining path – is not predetermined, neither in terms of sequence nor in terms of volume,” ECB President Christine Lagarde said at the press conference.
• In updated economic forecasts, the ECB slightly trimmed its GDP growth outlook to 0.8% (-0.1pp) for 2024 and 1.3% (-0.1pp) for 2025 on the back of weaker domestic consumption.
• Headline inflation estimates were left unchanged at 2.5% and 2.2% while core measure was marginally increased to 2.9% (+0.1pp) and 2.3% (+0.1pp).

Currencies

US$1.1075/eur vs 1.1007/eur previous. Yen 141.38/$ vs 142.87/$. SAr 17.748/$ vs 17.954/$. $1.313/gbp vs $1.304/gbp. 0.672/aud vs 0.668/aud. CNY 7.103/$ vs 7.124/$.

Dollar Index 101.13 vs 101.80 previous

Precious Metals

Gold US$2,573.48/oz vs US$2,515/oz previous

Gold ETFs 83.1moz vs 83.1moz previous

Platinum US$986/oz vs US$957/oz previous

Palladium US$1,051/oz vs US$1,024/oz previous

Silver US$30.0/oz vs US$28.8/oz previous

Rhodium US$4,825/oz vs US$4,825/oz previous

Base metals:   

Copper US$9,244/t vs US$9,226/t previous

Aluminium US$2,434/t vs US$2,415/t previous

Nickel US$16,125/t vs US$16,170/t previous

Zinc US$2,856/t vs US$2,846/t previous

Lead US$2,039/t vs US$2,023/t previous

Tin US$31,570/t vs US$31,325/t previous

Energy:           

Oil US$72.3/bbl vs US$71.6/bbl previous

• Crude oil prices continued to gently rebound from the sub-$70/bbl prices reached earlier this week, which were last seen over three years ago before the Russian invasion of Ukraine.
• US natural gas prices rose on GoM shutdowns as the EIA reported a 40bcf w/w build to 3,387bcf for US inventories, with storage levels decreasing w/w to 6.2% above last year and 9.6% above the 5-year average.
• The EU’s State of the Energy Union Report estimated that imports of Russian gas (pipeline & LNG) dropped from a 45% share of overall EU gas imports in 2021 to only 18% up to August 2024, with Norway (34%) and the US (18%) becoming the EU’s largest gas suppliers in 1H24.
• Scatec signed a USD-denominated 25-year power purchase agreement (PPA) with Egyptian Electricity Transmission Company for a 1GW solar and 100MW battery storage hybrid project in Egypt, and expects to reach financial close with lenders and start construction of the solar and BESS hybrid project in 1H25.

Natural Gas €35.7/MWh vs €35.7/MWh previous

Uranium Futures $80.0/lb vs $80.1/lb previous

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$92.7/t vs US$94.7/t

Chinese steel rebar 25mm US$472.7/t vs US$470.2/t

Thermal coal (1st year forward cif ARA) US$115.3/t vs US$117.3/t

Thermal coal swap Australia FOB US$134.0/t vs US$135.8/t

Coking coal Dalian Exchange futures price US$157/t vs US$170.8/t

Other:  

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

NdPr Rare Earth Oxide (China) US$58,216/t vs US$57,832/t – REEs – China exports fell 4.34%mom to 4,723t

Lithium carbonate 99% (China) US$9,926/t vs US$9,896/t

China Spodumene Li2O 6%min CIF US$740/t vs US$740/t

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

China Tungsten APT 88.5% FOB US$330/mtu vs US$330/mtu

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

Europe Vanadium Pentoxide 98% 4.6/lb vs US$4.6/lb

Europe Ferro-Vanadium 80% 24.55/kg vs US$24.55/kg

China Ilmenite Concentrate TiO2 US$320/t vs US$319/t

China Rutile Concentrate 95% TiO2 US$1,373/t vs US$1,369/t

Spot CO2 Emissions EUA Price US$72.4/t vs US$72.4/t

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

Germanium China 99.99% US$2,575.0/kg vs US$2,575.0/kg

China Gallium 99.99% US$445.0/kg vs US$445.0/kg

Battery News

Mercedes to build solid-state batteries with Factorial

• The companies are working on a solid-state battery that should drastically increase EV range and be ready for production by the end of the decade, the companies said.
• The new battery, dubbed Solstice, should extend EV range about 80% above today’s average, with an energy density of 450Wh/kg.
• Factorial, a relatively new battery startup, has already developed a quasi-solid-state battery that automakers including Mercedes are testing and should be in EVs on the road in 2026.
• Chief Technology Officer at Mercedes, Markus Schaefer, said that Factorial’s solid-state batteries could provide a 40% improvement in energy density over the German premium automaker’s high performance batteries today. (Reuters)

Material that extend EV battery life set for higher production

• Japanese chemical group Nippon Shokubai will build a $263m plant to produce a material that can lengthen the life of an EV battery by around 60%.
• The plant will produce lithium bis(fluorosulfonyl)imide (LiFSI), a newer type of lithium-ion battery electrolyte.
• LiFSI grants longer battery life than lithium hexafluorophosphate (LiPF6), a widely used electrolyte, but is harder to purify, adding to production costs.
• Nippon Shokubai sells LiFSI as an additive to LiPF6 in China, where LiFSI costs 20%-30% more than its counterpart.

VPI to invest €450m into battery storage projects in Germany

• The energy company, VPI, will invest up to €450m for the development of around 500MW of battery storage in Germany.
• In 2023, wind and solar combined accounted for around 40% of Gemany’s total electricity generation.
• Increasing renewables penetration still further will require a significant increase in battery energy storage technologies to help balance electricity supply and demand.
• With the investment, VPI expects to build ten battery storage projects in the next three to five years, targeting the north-east of the country, which has an abundance of wind power.

GM in talks to buy CATL EV batteries built in the US

• General Motors is in talks to buy electric vehicle batteries that would use technology from China’s CATL and be assembled at a new plant in the US.
• Ford already has plans to use CATL battery technology to build low-cost LFP batteries at its battery plant that is being built in Michigan.
• Despite countries working to keep Chinese influence out of the EV supply chain, it is looking likely that that will become more and more difficult.
• In Europe, this is also becoming evident, with Northvolt looking to shrink its operations and cut jobs.
• The European battery maker has also announced that it will buy cathode material from Asian suppliers.

Company News

Arkle Resources* (ARK LN) 0.3p, Mkt Cap £1.4m – Drilling at Stonepark Block

• Group Eleven commenced drilling at the Stonepark License Block (23.4% Arkle / 76.6% Group Eleven) in Limerick, Ireland.
• The programme is designed to test previously identified zinc mineralisation targets in 4-5 holes for a total of 1,700m.
• Drilling will focus on the Carrickittle West area in the southern part of the block of seven licenses.
• Targets include areas of brecciation and mineralisation seen in previous drilling, the Kilteely volcanic centre and the SW extensions of the Coonagh Castle Fault first intersected by Group Eleven, in 2022

*SP Angel are Nomad and Broker to Arkle Resources

Endeavour Mining (EDV LN) 1,742p, Mkt Cap £4.2bn – Commercial production at BIOX Expansion and Lafigue

• The Company announces commercial production at Sabodala-Massawa BIOX Expansion in Senegal and Lafigue Mine in Cote d’Ivoire.
• At the BIOX Expansion Project first gold pour was recorded 28 April and commercial production achieved 1 August.
• The plant operated in line with expectations running at over 2,580tpd during July and August equivalent to 80% of nameplate capacity with 94% plant availability.
• Metallurgical recoveries recorded were over 72% as the plant treated lower grade transitional ore during the ramp up.
• At Lafigue, first gold pour was recorded 28 June and commercial production declared 1 August.
• Operations run in line with expectations with throughput rates at 7,700tpd during July and August equivalent to 72% of nameplate capacity with 87% plant availability and recovery rates of over 95%.
• With the throughput rate, plant availability and recovery rates exceeding commercial production criteria over a period of at least 30 days the construction team handed over both projects to the operation’s team.

Greatland Gold (GGP LN) 4.98p, Mkt Cap £264m – Retail offer raises an additional £6.7m

• Following the announcement earlier this week that it had raised US$354m to help fund the purchase of the 70% stake in the Havieron project it does not currently own plus the nearby Telfer gold/copper mine from Newmont Mining, Greatland Gold reports that its retail offer has raised an additional £6.7m through the issue of a further ~140.7m shares at 4.8p/share.
• Havieron, which was discovered by Greatland Gold in 2018 beneath around 400m of cover, hosts a mineral resource of 131mt at an average grade of 1.7g/t gold and 0.21% copper with continuing drilling holding the possibility for expansion of the resource.
• Ore reserves, included within the resource, are 3mt at an average grade of 3.0g/t gold and 0.44% copper.
• Prior to Newmont’s acquisition of Newcrest, Newcrest was aiding in the joint development of a 2.8mtpa underground mine at Havieron “with average annual production of 258koz gold equivalent at a lowest quartile all-in sustaining cost (AISC) globally of US$818/oz in steady state (first 15 years) with a 20-year total mine life”.
• Greatland Gold’s development strategy is to integrate the long-established Telfer mine and Havieron, located 45km west, as a unified “mining and processing operation, to create a generational gold copper mining complex.”

Conclusion: Greatland Gold has raised additional funds from retail shareholders to consolidate its ownership of the Havieron deposit and acquire the Telfer mine and its facilities as a platform for integrated development.

Kore Potash* (KP2 LN) 2.2p, Mkt Cap £98m – Interims

• The Company released interim results this morning as the team continues discussions with Power Construction of China regarding finalisation of the Kola Potash Project EPC.
• The announcement follows 2Q24 quarterly results released earlier in July.
• To reiterate, the Company held a series of meetings with PowerChina with documentation reported to be currently with respective legal teams for finalisation to be followed by an official signing ceremony.
• All outstanding commercial points of the EPC are reported to have been agreed upon.
• Once the EPC is signed, the Summit Consortium represented by advisors, funding partners and engineering firms, is to provide the financing proposal for the full capex of the Kola Project within six weeks.
• Loss for the period amounted to US$0.5m (1H23: -$0.5m) reflecting largely administrative costs.
• FCF amounted to -$1.3m (1H23: -$2.6m) with $1.1m in capitalised project related costs.
• The Company had $1.0m in cash and no debt as of 2Q24 end with ~$1.3m raised in July to help cover working capital related costs during EPC negotiations.

*SP Angel acts as Nomad and Broker to Kore Potash

Premier African Minerals (PREM LN) 0.06p, Mkt Cap £19m – Update on the Zulu lithium project

• Premier African Minerals reports that the supplier of the flotation plant at its troubled Zulu lithium project in Zimbabwe has confirmed that “no additional fundamental changes to the currently installed plant equipment are necessary to achieve the intended recoveries and grade”.
• The supplier, “Enprotec has notified Premier that they anticipate completing all laboratory test work by the end of this week, at which point the lead time for restarting operations will be determined”.
• The company also confirms that it has been reviewing “the potential operating costs at Zulu with consideration of the impact of an enlarged float plant in due course to accommodate the surplus capacity on the front end of the plant”.
• Internal estimates “indicate that an enlarged float plant could result in a target mine gate production cost for spodumene concentrate of circa US$500 per ton”.
• Welcoming the progress and Enprotec’s efforts to improve the performance of the flotation plant CEO, George Roach, also explained that the company’s financial estimates do not “make any allowance for any potential revenue derived from Tantalum recovery or any other industrial mineral from the Zulu pegmatite”.

Conclusion: Today’s announcement indicates that the protracted technical issues relating to the performance of the Zulu project’s process plant may be nearing resolution. We look forward to confirmation of the timing for the operational restart.

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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*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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