SP Angel Morning View -Today’s Market View, Friday 19th April 2024

Copper prices to break $10,000/t as negative Tc/Rcs highlight smelter scramble for material

MiFID II exempt information – see disclaimer below

Bluejay Mining* (JAY LN) – Corporate strategy evolves to include helium, industrial gasses, and hydrocarbons

Kavango Resources* (KAV LN) – Drill program to test Karakubis project in the Kalahari Copper Belt

Pensana (PRE LN) – FSDEA bridge loan extension update

Pilbara Minerals (PLS AU) – March quarter prices average $930/SC6 before recovering to~$1,200 by quarter end

Copper $9,830/t – 50,000t of copper concentrates just sold at a negative TC/RC of –$18/t / -1.8c/lb

• Unconfirmed reports of negative Treatment and Refining charges in the copper market imply that one or more smelters are so desperate for copper concentrates they will take losses to secure material.
• The pricing may also imply a substantial deficit is coming at us in the copper market.
• It is also quite possible that a couple of smelters might have to close due to a scarcity of available concentrates
• We speculate: if a Chinese smelter had sold copper ahead into the futures market, it might need to ensure it produces copper, even at a loss, to avoid having to buy metal back in the market.
• News yesterday on the closure of a number of copper mines in the DRC following the seizure of lorries carrying copper concentrate which were also found be to be loaded with Uranium may be a factor.
• Pricing: We see copper prices breaking through $10,000/t as the market starts to appreciate the significant of a smelter paying negative Tc/Rc rates

Gold – $2,385/oz – Prices driven higher in by Chinese buying

• The rise and rise of gold prices appears to have confounded many experts who expected the metal to have a relatively short run.
• Ross Norman of Metals Daily has identified the SHFE ‘Shanghai Futures Exchange’ as a principal driver in the latest run in gold prices.
• Daily turnover on the SHFE doubled and then doubled again to ~$40bn/d overtaking the London LBMA and NY CME exchanges.
• SHFE gold volume turnover has increased from around 200,000 to nearly 1.2m this year. The last time the SHFE saw this level of activity was in 2019.
• We also believe number of private investors may be buying gold due to a loss of confidence in:
  • PRC State banks
  • All other banks
  • All other financial institutions
  • Currency – PBoC is reported to have substantially intervened to support the currency in recent weeks but may allow some devaluation to aid export sales
    • The PBoC recently drained around US$10bn of cash from the banking system
  • Property – property is for living in and not for speculation according to the CCP and you don’t want to cross the China state in such matters
  • Property prices are falling with another Chinese property company reported to be in trouble. Vanke is looking to “resolve liquidity pressure and short-term operational difficulties”
    • The Chinese state has described Evergrande as the world’s largest ever property fraud with CSRC saying the firm inflated revenue by US$80bn.
  • Equities – the state has also recently intervened to support markets with bans on short selling etc…
• While the buying of gold by central banks has supported prices this is not seen as sufficient to drive prices as far as they have gone.
• The buying of gold is a good default for private investors who appear to have few other safe-haven options in China for their healthcare and retirement.

Rio Tinto and Manara Minerals, a Saudi state backed fund, are looking at bidding for a stake in First Quantum Minerals Zambian copper assets.

• Japanese trading houses including Mitsui and Sumitomo are also reported to have been interested, Mining.com writes.
• First Quantum is open to selling as much as 30% of its Zambian mines should an interesting offer arrive with first round bids expected in the coming weeks, according to people familiar with discussions.
• The Company is working on fixing its balance sheet after suspension of Cobre Panama last year driven by public protests.
• Presidential elections are due early May in Panama with markets watching closely over potential outcome of the vote with polls indicating a tight race.
• Among five frontrunners, three are reported to have promised to continue with the plans to close the Cobre Panama, one pledged to carry a referendum and another one has not formally indicated his intentions.

Electric trucks and buses see massive sales growth in Europe

• According to a report by the International Council on Clean Transportation, sales of fully electric trucks and buses are growing rapidly in Europe.
• In 2023, 11,000 zero-emission heavy-duty vehicles were sold in Europe, more than double the number sold in 2022.
• 18% of all buses and coaches sold in the EU in 2023 were electric, with city transit buses leading the way at 43% electric in Q4 2023.
• Light and medium-duty electric truck sales increased by 200% yoy in 2023, with the Ford E-Transit being the leading zero-emission model.
• Around 2,600 heavy-duty electric trucks were sold in 2023, up from 820 in 2022.
• Volvo Group (Volvo Trucks and Renault Trucks) produced 70% of all electric heavy-duty trucks sold in Europe in 2023.
• Adoption varies across EU countries, with some like Luxembourg, Ireland, and Denmark achieving 100% electric bus purchases, while others like Germany lagged behind.

Two-thirds of UK’s fleet vehicles could be switched to electric

• According to a new study by commercial fleet tracker, Geotab, up to two-thirds of vehicles used by UK businesses could be replaced with electric models.
• The study found that 63% of cars and 66% of vans could transition to electric powertrains without compromising their operational needs.
• The study highlights the significant potential for fleet electrification, which could reduce emissions and operating costs for businesses.
• However, barriers such as higher upfront costs, charging infrastructure availability, and vehicle supply issues still need to be addressed.

Economics

Israel/Iran – Safe haven assets jumped up overnight on reports of Israel launching a retaliatory strike on Iran.

• An explosion was reported in early hours on Friday in Iran’s third largest city, Isfahan, that is believed to be one of several launch sites for Iran’s attack on Israel nearly a week ago.
• No nuclear facilities were damaged during the strike.
• Flights over the city as well as in Tehran and Shiraz were temporarily suspended with restrictions eased shortly after.
• Oil prices and US$ jumped on reports of an initial strike but later paired back gains as the attack was far rom extensive.
• Market concerns were also tamed by a senior Iranian military official who said the Tehran had already responded to Israeli threats
• Neither the Iranian nor Israeli government has confirmed there was a strike by Israel, Bloomberg writes.

UK – Retail sales numbers disappoint in March highlighting fragile consumer confidence.

• Retail Sales (%mom): 0.0 v 0.1 (revised from 0.0) February and 0.3 est.
• Retail Sales ex Auto Fuel (%mom): -0.3 v 0.3 (revised from 0.2) February and 0.3 est.

Saudi Arabia – State fund is considering investing $1bn for a minority in the $7bn Reko Diq copper and gold project in Pakistan.

• Manara Minerals may announce a preliminary agreement on the transaction terms within weeks, Bloomberg reports.
• Barrick holds a 50% interest in the project with the balance owned by the state including 10% free carried interest.
• Earlier, Barrick said that it is not looking to dilute its stake in the project but “would not mind” if Saudis bought out the equity of the Pakistan government, Mining.com writes.
• Reko Diq is one of the largest undeveloped copper gold projects hosting ~5bnt at 0.4% Cu and 0.2g/t gold for 21mt and 36moz in situ metal contained in total resource.

UK – Geologists not included on approved list of immigration skills

• It’s hardly surprising that the UK government has not included geologists as a key skill for UK immigration purposes
• While the UK quite likes mining, we suspect the government would prefer to export this particular skill set to far-flung parts of the world.
• Mining scientists and engineers wishing to work in the UK will have to earn >£38,700 for a visa to remain in the UK.

India – Tata plans Jaguar Land Rover EV imports to India following introduction of new policy

• Tata Motors, has plans to import its Jaguar Land Rover (JLR) luxury EVs to India thanks to a new government policy that lowers import taxes for companies agreeing to set up local manufacturing.
• .The policy announced in March cuts import taxes to 15% from as high as 100% on some EV models if a carmaker invests at least $500m and sets up a domestic factory within three years.
• Tesla is also expected to start importing its cars to India and make an investment in the country – Elon Musk is meeting Prime Minister Modi next week.

Gina Rinehart is acquiring an 80% stake in Linderos, Ecuador for up to US$120m

• Gina Rinehart is reported to be raising her stake in the Linderos project in Ecuador for US$120m

Currencies

US$1.0653/eur vs 1.0681/eur previous. Yen 154.53/$ vs 154.27/$. SAr 19.146/$ vs 18.993/$. $1.245/gbp vs $1.247/gbp. 0.643/aud vs 0.645/aud. CNY 7.238/$ vs 7.239/$.

Dollar Index 106.00 vs 105.83 previous.

Precious metals:         

Gold US$2,380/oz vs US$2,376/oz previous

Gold ETFs 81.5moz vs 81.5moz previous

Platinum US$941/oz vs US$940/oz previous

Palladium US$1,037/oz vs US$1,034/oz previous

Silver US$28.37/oz vs US$28/oz previous

Rhodium US$4,750/oz vs US$4,725/oz previous

Base metals:   

Copper US$ 9,830/t vs US$9,687/t previous

Aluminium US$ 2,582/t vs US$2,608/t previous

Nickel US$ 18,135/t vs US$18,450/t previous

Zinc US$ 2,778/t vs US$2,846/t previous

Lead US$ 2,175/t vs US$2,184/t previous

Tin US$ 33,565/t vs US$33,825/t previous

Energy:           

Oil US$87.5/bbl vs US$87.4/bbl previous

• Crude oil prices have settled back following a temporary spike accompanying reports of an Israeli military strike in Iran, which is believed to have caused limited damage.
• European energy prices were stable on reports that EU natural gas storage levels rose 1.2% w/w to 62.1% full (vs 43.2% 5-Yr average), with Germany 69% full and aggregate storage at 703TWh.
• US natural gas prices fell after the EIA reported a 50bcf w/w build to 2,333bcf, with storage levels 22.2% above last year and 36.4% above the 5-year average following the end of the winter heating season.
• Perenco will pay Petrobras up to $10m to acquire the idled Cherne and Bagre fields, which are located in the shallow waters of Brazil’s Campos basin. The fields were producing through the PCH-1 and PCH-2 platforms before being mothballed in 1Q20 due to low oil prices and high lifting costs.
• The US Treasury has called on E&Ps to wind down their operations in Venezuela within 45 days that were previously authorised and supported by General Licence 44, though it will consider specific license requests.

Natural Gas €32.6/MWh vs €30.7/MWh previous

Uranium Futures $89.3/lb vs $89.3/lb previous

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$116.4/t vs US$116.4/t

Chinese steel rebar 25mm US$515.2/t vs US$515.1/t

Thermal coal (1st year forward cif ARA) US$120.3/t vs US$120.3/t

Thermal coal swap Australia FOB US$139.5/t vs US$139.5/t

Hard Coking Coal Australia FOB US$326.0/t vs US$326.0/t

Other:  

Cobalt LME 3m US$27,830/t vs US$27,830/t

NdPr Rare Earth Oxide (China) US$53,327/t vs US$53,044/t

Lithium carbonate 99% (China) US$15,128/t vs US$15,126/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$329/t vs US$329/t

China Rutile Concentrate 95% TiO2 US$1,416/t vs US$1,416/t

Spot CO2 Emissions EUA Price US$68.9/t vs US$68.9/t

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

Battery News

UK BEV sales set to hit 414,000 mark in 2024

• According to a report by Cap HPI, sales of BEVs in the UK are projected to surpass 414,000 units in 2024.
• The analysis identified a significant shift in the BEV market, with a decline in upper-medium vehicles (from 45% to 30% of sales) and an increase in smaller cars (from 20% to 30%).
• BEV registration shares are starting to align with the overall market, indicating a normalisation of the BEV segment.
• Factors influencing BEV adoption include pricing, residual values, charging infrastructure rollout, and taxation policies.
• The report forecasts continued growth in alternative fuel vehicle sales, exceeding new petrol registrations, driven by government interventions.

Company News

Bluejay Mining* (JAY LN) 0.32p, Mkt cap £4.8m – Corporate strategy evolves to include helium, industrial gasses, and hydrocarbons

(Bluejay Mining holds 100% of the Hammaslahti and Enonkoski projects and all its Greenland prospects)

• Bluejay Mining report the evolution of its corporate strategy to include helium, industrial gasses and hydrocarbons.
• The recently reconstituted board has identified its strategic assets as:
  • Disko – Nuussuaq, nickel exploration jv with KoBold Metals in Greenland. Anglo American has pegged ground around Bluejay’s claims.
    • KoBold Metals spent >$12m collecting substantial data for their AI modelling systems but are currently busy drilling the Mingomba copper resource in Zambia
    • Rod Mcillree is particularly keen to test the targets generated by KoBold’s AI computer systems in the area.
  • Dundas – The high-grade ilmenite project in Greenland is back on with the reinstatement of its 117mt JORC resource grading 6.1% ilmenite.
    • We believe the resource is larger and probably of higher grade particularly if the team ever finish drilling in the Iterlak Delta area.
    • While the ilmenite is of good quality and is relatively easy to ship to Canada, the US or to China if the Northwest passage opens.
  • Hammaslahti – copper, zinc and potential for other metals in Finland.
    • The team plan to drill potential repeating structures and have signed up to work with AIMEX, Artificial Intelligence in Mineral Exploration, project as an Industry Collaborator.
    • AIMEX is a consortium of the GTK ‘Geological Survey of Finland’, the University of Turku, and the Finnish Environment Institute and has €5.6m of funding from Business Finland.
    • The AI system will integrate a broad spectrum of essential factors, such as mineral resource assessments, economic considerations, natural conservation areas, and land use constraints.
  • Kangerluarsuk – high-grade zinc samples at surface in Greenland indicate strong potential for some form of discovery. Everyone seems to agree on this.
• Helium, industrial gasses, and hydrocarbons:  “Any new acquisition in the industrial gas sector, should it occur, would be a valuable addition to the companies portfolio of significant mineral assets.”
• While the drilling rigs and techniques differ from hydrocarbons to hard rock minerals, many of the permitting and logistics issues are similar enabling management to use their time and energy more productively
• Finland: The Company is the process of rationalising its current Finland portfolio for further cost savings, and expects to be able to update the market on this shortly.

Conclusion:  Management appear aware of exploration opportunities in gasses and hydrocarbons and appear keen to use Bluejay as a platform for the exploration and potential development of such assets.

This represents a new direction for Bluejay while preserving potential value inherent within Disko, Dundas, Hammaslahti and Kangerluarsuk.  We expect the team to continue to make progress on all fronts.

*SP Angel acts as nomad and broker to Bluejay Mining. The analyst has visited Dundas in Greenland and the Hammaslahti and Enonkoski projects in Finland.

Kavango Resources* (KAV LN) 1.05p, Mkt Cap £14m – Drill program to test Karakubis project in the Kalahari Copper Belt

• Kavango Resources report the tendering for the first phase of drilling on the Kalahari Copper Belt Karakubis project, Botswana.
• Management plan to drill 5,000m of diamond core on the Karakubis project in western Botswana targeting the shallower Kara Anticline for copper mineralisation.
• Target generation follows the analysis of AEM ‘Airborne Electro Magnetic’ and IP ‘Induced Polarisation’ surveys, and a new interpretation of the former ENRG licences which were not previously drilled.
• The drill program should see 10-15 diamond core holes from May to September with assays due along the way.
• Karakubis hosts three of the domal features which look similar to structures along strike from Sandfire’s Motheo Copper Mine.
• “The D’Kar Formation and Ngwako Pan Formation contact is known to host the majority of copper/silver mineralisation across the Kalahari Copper Belt.”

• Kavango are also working towards gold production from the Nara Gold tailings in Zimbabwe.

*The SP Angel Analyst holds shares in Kavango

Pensana (PRE LN) 22p, Mkt Cap £61m – FSDEA bridge loan extension update

• The Company remains in discussions with the Angolan Sovereign Wealth Fund regarding an extension of the US$15m loan facility.
• The team will update the market once all arrangements are finalised.
• The facility was meant to provide capital while the Company is working on closing the ~$220m funding for the Longonjo REE project in Angola and was due for repayment today.
• The Company drew down on ~$5m of the facility as of YE23.

Pilbara Minerals (PLS AU) A$3.8, Mkt Cap A$11.5bn – March quarter prices average $930/SC6 before recovering to~$1,200 by quarter end

• Production and sales were up slightly at 179.0kt (+2%qoq) and 165.1kt (+3%).
• Realised prices came down during the quarter hitting lows in January before recovering towards quarter end.
• Realised prices averaged US$804/t (-28%) for SC5.3 CIF China, equivalent to $927/t CIF China for SC6.
• The Company reports the pre-auction sale of 5kt at $1,106/t SC5.5 in March, equivalent to ~$1,210/t SC6.
• Cash costs were little changed at US$519/t on CIF basis (-1%qoq) as higher processing costs due to deployment of mobile ore sorting equipment were compensated by lower royalty costs due to a drop in realised prices.
• P680 project remains on schedule and budget with crushing and ore sorting facility planned for commissioning in June quarter and a ramp up through the September quarter.
• P1000 also continues to progress on plan with first ore targeted for March quarter next calendar year.
• PFS on expansion past 1mtpa in concentrate production is ongoing and is planned to be released in June quarter.
• Closing cash balance amounted to A$1.8bn, down A$362m on December 2023 reflecting lower spodumene prices and continued capex spending on P680 and P1,000 projects.

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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*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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