SP Angel Morning View -Today’s Market View, Friday 16th August 2024

Gold rebounds after stronger US retail sales weigh on rate cut hopes.

China to restrict Antimony exports

MiFID II exempt information – see disclaimer below

Anglesey Mining (AYM LN) – Environmental Impact Assessment Report Submitted

Galan Lithium (GLN AU) – A$1.1m raise

Sigma Lithium (SGML US) – Q2 Operational update

Gold ($2,463/oz) rebounds after stronger retail sales weigh on rate cut hopes

• Gold prices continue to rise as investors look to protect funds pending new trends for investment
• Prices fell yesterday following a beat in US retail sales data slumping to $2,437/oz before rebounding sharply to near record highs.
• The move comes despite higher US Treasury yields as the market reduced expectations of a 50bp hike in September.
• The dollar continues to languish as the Euro strengthens and the Yen holds higher levels.

• We understand Chinese investors are still buying gold for investment and are forsaking diamonds due to disappointing resale values
• The Indian harvest and wedding seasons historically saw new buying interest – they have done well over the years buying gold so why stop now?

Gold miners to report substantial increase in margins on rising gold prices. We recommend investors look at:

• • Anglo Asian Mining* – gold producer in Azerbaijan
  • Condor Gold* – gold project in Ecuador
  • Kefi Minerals* – Financing Ethiopian gold project
  • Goldstone*- gold production in Ghana
  • Great Western Metals*- forthcoming gold production in Nevada
  • Kefi Minerals plc* – gold project in financing in Ethopia and exploration in Saudi Arabia
  • Oriole Resources* – developing gold resources in Cameroon
  • Orosur Mining* – gold exploration in Colombia
  • SolGold plc* – Financing huge gold / copper project in Ecuador. BHP and Newcrest are shareholders

*SP Angel acts as advisor, nomad or broker.

Iron ore extends losses as China steel mill margins continue to suffer from low prices

• Iron ore has held below $95/t for the 62% Fe contract in China.
• Prices have rarely fallen below $100/t since 2020, with analysts suggesting that is the range higher cost magnetite producers need to continue production.
• However, port inventory continues to build, whilst rebar prices have fallen 16% this year.
• Bloomberg reports China steel mill production fell to 83mt last month, down 9% yoy as tight margins continue to weigh on the sector.

China is drawing in concentrates in all metals from around the world and is threatening to restrict refined metal exports to the rest of the world

China metal export restrictions:

• Gallium – restrictions started on 1 August 2023. Near 100% of global production. (Semiconductors and fibre optics)
• Germanium – 1 August 2023
• High-grade graphite – 1 December 2023. Near 100% of global production. (EV batteries(
• Antimony – 15 September 2024

China’s view is, that if they work on the smelting and refining of these metals then Chinese industry should get preferential access.

• The west is not investing much in these industries with very little forward strategic investment and planning.
• China’s strategic plan requires more than the world can currently supply in many metals so its forward planning has encouraged construction of smelters and refining.
• China sells surplus material overseas until it has a reason not to.
• That reason normally relates to domestic demand but has also been used to encourage manufacturers to build factories in China.
• Now that building manufacturing in China is a less popular option, export controls may also be used to restrict critical metals overseas.
• Sometimes the mere threat of export controls is enough to dissuade western manufacturers and financiers from building or expanding Western production.
• More restrictions will surely come

China is moving to further dominate and control metal output through smelting and refining

• Zinc concentrate Treatment Charges are now at around $60/t
• Lead concentrate TCs are near zero
• Copper concentrate TCs are $0- 5/t

Copper – Escondida mine strike in Chile

• Mine is still operating with contractors at a reduced level
• This is a long weekend for many Chileans following a public holiday yesterday and many taking the day off to extend the weekend
• Suspect strikers might blockade shipments if no settlement is reached
• Offer of a 2% wage increase plus a US$29,000 bonus for staff.
• Unions are looking to effectively connect bonuses with company profits

China to restrict Antimony exports from 15 September

• This is a serious move by China to start putting pressure on the West to enable ongoing access for Chinese goods into Western markets without punitive tariffs
• China is the world’s largest producer of antimony at 83,000t in 2023 (USGS) accounting for 48% of world supply
• Speciality metals prices have been generally suppressed by Chinese traders making it extremely difficult to fund new western production.
• We note speciality metals prices are also often cheaper in China than in Western markets due to export restrictions.
• As a result western investors are not currently funding much in mining and even less in smelting and refining, leaving the door open for China to dominate this sector.
• China appears to have an ongoing strategy for disrupting Western industry through restricting rare earths REEs and other speciality metals where it has near control or significant influence and we wonder which metals will be next for restrictions to the west?
• We note their controls also cover smelting and separation technology and machinery relating to ‘super-hard materials’
• We know a few brave metallurgical experts working on new processes and support their work where we can:
  • Clean Resources (Vinca Technologies) private – .
  • Ionic Rare Earths (IXR AU) – REE recycling to metal oxides in UK and REE mine in Uganda
  • Mkango* (MKA LN) – REE recycling to metal oxides in UK and REE mine in Malawi
  • Rainbow Rare Earths (RBW N) – Reprocessing of REE in phosphate waste in South Africa to REE metal oxides
  • TriStar⁺ (private) Antimony roaster project in Oman

*SP Angel acts as Nomad and Broker for Mkango Resources SP Angel was formerly nomad and broker to TriStar

Economics

US – Equity markets closed higher on Thursday on lower recession fears following better than expected retail sales numbers and robust Walmart earnings.

• S&P 500 has now recovered its August losses while Nasdaq was only 5 points off its July 31 close.
• Retail sales climbed 1.1%mom in July compared to a 0.3%mom increase expected.
• Walmart closed 6.6% higher after raising its annual profit forecast.
• “So far, we are experiencing a weaker consumer overall,” Walmart commented on its numbers.
• Markets sold off in the beginning of the month on the back of weaker jobs numbers and unemployment rate reporting a fourth consecutive increase hitting 4.3%.
• Jobless claims released yesterday came in lower on the previous week and market estimates suggesting the labour market remains in a relatively good place.

UK – Retail sales bounced in July following a contraction in the previous month helped by better weather.

• The Euros football championship and discounting by retailers also helped sales.
• Amount of goods purchased increased 0.5%mom, up on a 0.9% drop registered in June and in line with expectations, FT reports.

Russia/Ukraine – Russia kicked off talks over the exchange of prisoners captured by Kyiv during a counter incursion in the Kursk region.

• Discussions start 10 days after Ukraine successfully crossed the border in the Kursk region and captured 1,150sqkm of territory.

Israel/Hamas – Mediators from the US, Qatar and Egypt met Israeli delegation in the Qatari capital yesterday for another round of talks over a potential ceasefire agreement between Israel and Hamas in Palestine.

• Hamas is not directly participating in the talks.
• Many expect a ceasefire in Gaza to deescalate the conflict in the Middle East and dissuade Iran and Hezbollah from retaliatory action following 31 July assassinations of a top Hezbollah commander and Hamas political chief.

Currencies

US$1.0982/eur vs 1.1014/eur previous. Yen 149.01/$ vs 147.24/$. SAr 17.942/$ vs 18.031/$. $1.288/gbp vs $1.286/gbp. 0.663/aud vs 0.662/aud. CNY 7.174/$ vs 7.157/$.

Dollar Index 102.91 vs 102.56 previous

Precious metals:         

Gold US$2,463/oz vs US$2,456/oz previous

Gold ETFs 82.3moz vs 82.3moz previous

Platinum US$955/oz vs US$939/oz previous

Palladium US$949/oz vs US$944/oz previous

Silver US$28.15/oz vs US$27.99/oz previous

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

Base metals:   

Copper US$ 9,128/t vs US$9,043/t previous

Aluminium US$ 2,355/t vs US$2,343/t previous

Nickel US$ 16,255/t vs US$16,370/t previous

Zinc US$ 2,780/t vs US$2,727/t previous

Lead US$ 2,030/t vs US$2,035/t previous

Tin US$ 31,870/t vs US$31,590/t previous

Energy:           

Oil US$80.8/bbl vs US$80.1/bbl previous

• US Henry Hub natural gas prices were flat despite the EIA reporting a 6bcf w/w draw to 3,264bcf for US inventories, with storage levels declining w/w to 6.8% above last year and 13% above the 5-year average.
• BW LPG has agreed to acquire 12 modern Very Large Gas Carriers (VLGCs) from Avance Gas Holdings for a total consideration of $1.05bn in cash and shares, which will enhance scale and increase operational leverage.

Natural Gas €39.5/MWh vs €38.9/MWh previous

Uranium Futures $81.3/lb vs $81.4/lb previous

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$94.1/t vs US$95.2/t

Chinese steel rebar 25mm US$484.6/t vs US$488.7/t

Thermal coal (1st year forward cif ARA) US$129.8/t vs US$129.8/t

Thermal coal swap Australia FOB US$152.0/t vs US$151.0/t

Coking coal Dalian Exchange futures price US$187/t vs US$190.9/t

Other:  

Cobalt LME 3m US$26,000/t vs US$26,500/t

NdPr Rare Earth Oxide (China) US$53,112/t vs US$53,513/t

Lithium carbonate 99% (China) US$9,688/t vs US$9,850/t

China Spodumene Li2O 6%min CIF US$830/t vs US$850/t

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

China Tungsten APT 88.5% FOB US$327/mtu vs US$327/mtu

China Graphite Flake -194 FOB US$462/t vs US$462/t

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

Europe Ferro-Vanadium 80% 24.8/kg vs US$25.2/kg

China Ilmenite Concentrate TiO2 US$320/t vs US$321/t

China Rutile Concentrate 95% TiO2 US$1,401/t vs US$1,404/t

Spot CO2 Emissions EUA Price US$69.9/t vs US$69.9/t

Brazil Potash CFR Granular Spot US$295.0/t vs US$295.0/t

Germanium China 99.99% US$2,195/kg vs US$2,145/kg

China Gallium 99.99% US$445/kg vs US$440/kg

Battery News

UK’s 2024 zero emission mandate set to disrupt car market

• The UK mandates that 22% of new car sales must be zero-emission vehicles in 2024, with goals of 80% by 2030 and 100% by 2035. (Autocar)
• Automakers have set aside investment accordingly:
  • Nissan has allocated £3bn of investment for two new EVs
  • Tata motors will invest £4bn on a 40GWh giga-factory
  • BMW has invested £600m to develop Mini EVs at its plant in Oxford
  • Ford has invested £380m to develop a new EV drivetrain at Halewood
  • Stellantis Ellesmere Port plant has seen £100m investment to produce an electric van
• Amongst some industry experts it is thought that the ZEV mandate could cause major disruptions in the car market, possibly worse than the 2008 economic crash and the 2020 pandemic.
• In a rush to meet government mandates, automakers might push EV stock aggressively into fleet markets, potentially reducing consumer options and affecting traditional vehicle sales.
• Government-backed incentives for EV adoption have yet to be fully implemented, adding financial pressure on automakers.
• With the ZEV deadline approaching, automakers may reduce R&D budgets for ICE and PHEV vehicles, risking the quality and advancement of these technologies.

UK electric van sales drop 15% in July, raising concerns for zero emission targets

• UK sales of battery electric vans dropped nearly 15% in July 2024 compared to the same month last year, with only 1,415 units sold (Society of Motor Manufacturers and Traders).
• Electric vans accounted for just 5.1% of all new van sales in the UK since January, with a YTD decline of 7%.
• Electric car sales in the UK have grown, with a market share increase from 16.5% to nearly 19%, but electric vans lag significantly behind.
• The SMMT has downgraded its 2024 forecast for electric vans to a 6.6% market share.
• SMMT has called for greater investment in charging infrastructure and the introduction of grants and tax breaks to boost electric van adoption.
• Sales of large electric trucks and HGVs rose 30% in July, though they still represent a small fraction of the market at 0.6%.

Fleet drivers show interest in hydrogen cars

• A recent survey from Venson Automotive Solutions showed 37% of fleet drivers would consider both hydrogen or electric for their next vehicle.
• The research showed hydrogen fuel cell electric vehicles (FCEVs) have the potential to grow rapidly in popularity in the next few years, if the refuelling infrastructure can be suitably extended.
• Venson’s research also found 62% of respondents believe manufacturers should be investing the same amount of time and money in bringing hydrogen cars to UK roads, as they are with electric cars.
• Hydrogen vehicles have struggled to gain traction due to limited infrastructure – only 5,621 fuel-cell electric vehicles (FCEVs) were sold worldwide between January and June this year, according to new analysis from Korean consultancy SNE Research.
• This is a 34.1% drop from the same period last year and the second consecutive yoy decline in sales.

Toyota to go all-in on hybrid vehicles as EV demand slows

• Despite being one of the slowest legacy automakers to develop EVs, Toyota could be the first to completely move away from gasoline powered vehicles. (Reuters)
• The Japanese automaker is moving to convert its Toyota and Lexus line-up to hybrid-only models, according to two executives.
• “Going forward, we plan to evaluate, carline by carline, whether going all-hybrid makes sense,” David Christ, head of sales and marketing for Toyota in North America, told Reuters.
• The RAV4, the US’s best-selling SUV, already has hybrid variants that account for about half of sales and the automaker is likely to ditch the gasoline-only version.
• Currently Toyota’s North American line consists of two EVs, one fuel-cell vehicle and 31 other Toyota and Lexus models (8 are already hybrid-only and 8 are ICE versions only.
• The automaker’s hybrid strategy aims to solidify its already dominant position in a part of the market that has seen an uptick in demand as sales of full EVs slows, partly due to their high prices and charging infrastructure.
• Toyota believes its hybrid strategy will also give it unique advantages in complying with increasingly tough global carbon-emissions restrictions, Toyota executives and industry experts said.
• Toyota hasn’t set a deadline for producing an all-hybrid lineup, and certain models, such as pickups and economy cars, may take longer because of consumer price sensitivity on entry-level versions.

Company News

Anglesey Mining (AYM LN) 0.93p, Mkt Cap £4.3m – Environmental Impact Assessment Report Submitted

• Anglesey Mining, who are progressing the Parys Mountain copper project in North Wales, has submitted the EIA scoping Report to the Planning Service.
• The Scoping Report is the first stage of the EIA process, and the company has spent £300k and two years delivering it.
• the EIA will be refined as further engineering studies, economic analysis and stakeholder engagement is progressed.
• Parys Mountain will be entirely underground, with no plan for open pit extraction.
• The Company has outlined future surface infrastructure requirements including tailings storage facility, decline portal, ventilation shaft collars.
• Anglesey has submitted a new EIA scoping report owing to the addition of new resources from recent drilling campaigns, alongside technological advancements.

Conclusion: Anglesey Mining’s new team has made strong progress in advancing the Parys Mountain copper project, with the delivery of the EIA scoping report a key milestone. We look forward to further progress to come.

Galan Lithium (GLN AU) A$0.14, Mkt Cap A$70m – A$1.1m raise

• The Company raised A$1.1m at A$0.12 per share with Acuity Capital for working capital purposes.
• The raise was largely done at the level of the previous close and represents a 9% discount to the 15d VWAP.

Sigma Lithium (SGML US) $9.6, Mkt Cap $1.1bn – Q2 Operational update

• Brazilian spodumene producer Sigma reports Q2 operational results.
• The Company sold 52.6kt spodumene concentrate over the period.
• Average concentrate grade produced at 5.35%
• Sigma reports total revenues over the period of $45.9m, suggesting an average price/tonne of c.$870/t.
• Company reports CIF equivalent cash costs of $515/t vs 2024 guidance of $510/t.
• EBITDA reported at $8.6m and net income of negative $10.8m on non-operating currency adjustments.
• Cash balance as of August 14^th at $99m and debt at end of quarter of $219m.
• Going forward, Sigma will continue with Phase 2 plant expansion plans to boost annual concentrate production by 250kt.
• The expansion is expected to cost $100m in CAPEX, with all environmental requirements satisfied.

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

SP Angel                                                            

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35-39 Maddox Street London

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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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SPA research ratings – Based on a time horizon of 12 months: Buy = Expected return of more than 15%, Hold = Expected return between -15% and +15%, Sell = Expected return