SP Angel Morning View -Today’s Market View, Friday 1st March February 2024

Nickel prices rise as Indonesia accelerates supply restrictions

MiFID II exempt information – see disclaimer below

Bushveld Minerals* (BMN LN) – Outstanding funds update

Goldstone Resources* (GRL LN) – Corporate update

Horizonte Minerals (HZM LN) – Short term relief on interest repayments as the company tries to secure a long term financial solution

Oriole Resources* (ORR LN) – Second $450k payment received for Mbe earn-in

Power Metal Resources* (POW LN) – Acquisition of metals extraction interest

Sovereign Metals* (SVML LN) – Sovereign makes three key appointments in Malawi

Syrah Resources (SYR AU) – Binding offtake signed with Posco

UK car manufacturing output leapt 21% in January

• According to the latest figures from the Society of Motor Manufacturers and Traders (SMMT), production volumes rose 21% to 82,997 units, the best January performance since 2021.
• Production of battery electric (BEV), plug-in hybrid (PHEV) and hybrid (HEV) vehicles rose again by a combined 4.5% to 29,590 units to account for 35.7% of overall output.
• The bulk of production was for export (75.8%), with overseas shipments up 11.6% to 62,938 unit.
• Production for the domestic market commanded the biggest volume growth, up by an additional 7,863 units, up 64.5%.

Nickel prices hit two month high as concerns mount over Indonesia permit approvals

• Nickel prices have climbed to $17,450/t, having recovered from a 45% sell off into the year end.
• Analysts continue to expect a surplus following the massive roll out of laterite-based supply from Indonesia.
• Indonesian officials are limiting permit approvals for operators this year, with government now calling on officials to speed up approvals.
• Chinese demand is reportedly improving, with stockpiles lower than anticipated. (Bloomberg)
• Indonesian officials have stated they do not see prices rising far above $18,000/t.

Ecuador – Gina Rhinehart looks to Ecuador in $120m exploration drive

• Gina’s Hancock Prospecting is reported to have pledged $120m for a 49% in several mining prospects in Northern Ecuador. (West Australian)
• The Company is partnering with ENAMI, a state-backed mining company, which is exploring to the south of SolGold’s* Cascabel Project.
• The Partnership will hold six separate parcels of mining land.
• Gina’s foray into Ecuador follows an investment in Brazilian Rare Earths, which holds the Rocha de Rocha clay project in Bahia.

*SP Angel acts as Broker to SolGold Plc.  

Economics

US – Risk sentiment picked up and sovereign bond yields fell as Fed preferred inflation metric pulled back in January, in line with expectations.

• US monetary authorities continued to advocate for a patient approach to unwinding tight policy stance.
• “The economy is still strong, we expect to see positive growth and inflation to keep coming down,” Williams said on Wednesday.
• “So something like three rate cuts is a reasonable starting point when you think about it.”
• PCE (%mom): 0.3 v 0.1 (revised from 0.2) December and 0.3 est.
• PCE (%yoy): 2.4 v 2.6 December and 2.4 est.
• Core PCE (%mom): 0.4 v 0.1 (revised from 0.2) December and 0.4 est.
• Core PCE (%yoy): 2.8 v 2.9 December and 2.8 est.
• Personal income 1.0% in January vs 0.5% in December
• Weekly jobless claims 215k from previous 202k.
• GDP was 3.2% qoq in Q4 on the second estimate vs 4.9% in Q3
• Real consumer spending rising 3% qoq in Q4 vs 3.1% in Q3 – consumer spending is 70% of US economic activity.
• Durable goods -6.1% in January vs -0.3% in December
  • ex transport -0.3% in January vs -0.1% in December
• Richmond Fed manufacturing index -5 in February vs -15 in January
• Dallas Fed manufacturing index -11.3 in February vs -27.4 in January
• Kansas City manufacturing index 3 in February vs -17 in January

China – Official PMIs that is weighted toward large SOEs showed little change in the pace of expansion in February with manufacturing remaining in contraction for a fifth straight month while growth in services picked up during the month.

• The National People’s Congress that sets the growth target and macroeconomic policy starts next Tuesday.
• New property sales among 100 largest property developers dropped 60%yoy in February to CNY186bn ($25.8bn) following a 34%yoy in January, according to China Real Estate Information Corp.
• Manufacturing PMI: 49.1 v 49.2 January and 49.0 est.
• Services PMI: 51.4 v 50.7 January and 50.7 est.
• Composite PMI: 50.9 v 50.9 January.

China’s economy is struggling, with 30-year low GDP, low birth rates, and rising unemployment according to Huileng Tan at Business Insider.

• While certain sectors such as green industries and travel are thriving the author of the SCMP report reckons this is not enough to outweigh the drag of the ailing ones.
• They say China’s “financial markets are bleeding, the property market has gone up in smoke, local government debt appears alarming, and foreign investors are exiting in droves”.
  • “The list of high-profile executives in China that have been investigated, face exit bans, or have just gone missing, keeps growing
  • A slew of high-profile leaders have been targeted by China’s tightening regulations.
  • In recent months several executives have been barred from leaving the country through exit bans.“
• But tourism, catering and other services have picked up following the trend in the West for families to catch up on entertainment.
• Property: Falling property prices combined with a lack of funds to finish projects has stalled growth in the property sector which accounts for 25-30% of GDP
• EVs: China has invested heavily in its bid to become a global leader in EV manufacturing and to upgrade its economy towards high-tech, value-added manufacturing.
• But while BYD, Geely, NIO, SAIC and some others may look well placed, others are either collapsing or consolidating production as they compete for customers at ever lower price points.
• The winners appear to be the fully integrated companies who not only process the component materials but also manufacture the batteries and the balance of the battery pack as well as the motors and rest of the vehicle.
• BYD (16%) and CATL (37%) now appear to make ~53% of global Li-ion battery manufacturing leading LG at 14% and Panasonic at 6.5%.
• Reshoring: the interruption of supply chains during Covid caused many manufacturers to rethink and diversify the location of their component manufacturing.
• Trump and then Biden started the reshoring of manufacturing back into the West with the US preferred over Europe due to the war in Ukraine.
• We suspect economies are often led by a small number of national champions. The US is led by Apple, Microsoft, Boeing and Stellantis (GM) depending on how you view these things.
• Chinese growth may well be led by BYD, CATL as well as solar panel manufacturers Tongwei Solar and JA Solar going forward but will this be sufficient to maintain near 5% GDP growth going forward?

EV companies closing – Innovative Chinese EV car companies are closing 

• Apple announced the abandonment of its Apple Electric Vehicle
• HiPhi, one of the more interesting new EV manufacturers has closed production for six months
• Ford is reducing EV production due to falling sales

There are also plant closures relating to Internal Combustion Engine components with Marelli, owned by KKR looking to close its plant in Emilia Romagna, Italy which makes parts for Stellantis, Volkswagen Group and BMW.

Japan – The currency slipped back up above the 150 mark after BOJ Governor said price target is not already in sight tempering speculation that the central bank may rise rates as early as March.

• “We are not yet in a position to foresee the achievement of a sustainable and stable inflation target,” Ueda said on Thursday.
• “We will continue to seek confirmation whether the virtuous cycle between wages and price began to turn.”

Eurozone – Inflation is coming back down, albeit, not as fast as expected.

• Core inflation in particular proved to be stickier than expected suggesting the ECB may well need to delay the first rate cut.
• Markets are expecting just under four 25bp rate cuts this year.
• CPI (%yoy): 2.6 v 2.8 January and 2.5 est.
• Core CPI (%yoy): 3.1 v 3.3 January and 2.9 est.

Germany – Preliminary inflation rose 0.4% mom in February vs -0.2% mom in January and 2.5% yoy in January and 2.9% yoy in February

• GfK consumer confidence -29 for March vs -29.6 for February
• The figures highlight the cost of losing low-cost Russian gas and the collapse of diesel vehicle sales which much German industry was aligned to

France 0.8% (-0.2%), yoy 2.9% (3.1%).

India – GDP rose 8.4% yoy in Q4 vs 8.1% in Q3

Turkey – GDP rose 1% qoq in Q4 vs 0.3% in Q3 and 4% yoy in Q4vs 6.1% yoy).

Zambian President declares drought a national emergency

• HH has declared the current Zambian dry spell a national disaster and emergency.
• The drought is expected to continue through to March,and could trigger an electricity deficit of >500MW (13% of capacity).
• International donors will be called upon for help, as the Government looks to alter its 2024 budget.
• Corn prices have risen 76% yoy and inflation is at two-year highs of 13.5%.
• The Kariba dam is reportedly one third of its capacity vs last year.
• The copper sector is usually supported by the government, given its reliance on the mining revenues from the international market.

Bitcoin rises further to US$62,000 up 33% ytd and 17%

• US has approved Bitcoin ETF’s which lends a degree of respectability to the currency and enables investors to buy Bitcoin without worrying about having their cryptocurrency wallets stoles
• We believe Chinese nationals are mining and using bitcoin to circumvent currency controls
• We wonder if the new US ETFs mark the moment when Cryptocurrencies become mainstream currency for investment and trading.

Currencies

US$1.0813/eur vs 1.0818/eur previous. Yen 150.66/$ vs 150.76/$. SAr 19.232/$ vs 19.195/$. $1.264/gbp vs $1.264/gbp. 0.650/aud vs 0.650/aud. CNY 7.199/$ vs 7.199/$.

Dollar Index 104.12 vs 104.11 previous.

Commodity News

Precious metals:         

Gold US$2,040/oz vs US$2,037/oz previous

Gold ETFs 82.5moz vs 82.5moz previous

Platinum US$873/oz vs US$891/oz previous

Palladium US$940/oz vs US$961/oz previous

Silver US$22.54/oz vs US$23/oz previous

Rhodium US$4,400/oz vs US$4,425/oz previous

Base metals:   

Copper US$ 8,431/t vs US$8,498/t previous

Aluminium US$ 2,209/t vs US$2,199/t previous – Japan port premium rises 65% in Q2 to US$145/55.

Nickel US$ 17,475/t vs US$17,295/t previous

Zinc US$ 2,402/t vs US$2,447/t previous

Lead US$ 2,046/t vs US$2,108/t previous

Tin US$ 26,370/t vs US$26,170/t previous

Energy:           

Oil US$81.9/bbl vs US$82.8/bbl previous

• Crude oil prices edged higher on expectations that OPEC+ would agree to extend production cuts, which are starting to be reflected in physical markets.
• US natural gas prices were unchanged as the EIA reported a 96bcf w/w draw to 2,374bcf (-85bcf exp), with storage levels now 11.7% above last year and 26.5% above the 5-year average.

Natural Gas €25.5/MWh vs €23.6/MWh previous

Uranium Futures $94.5/lb vs $94.9/lb previous

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$115.8/t vs US$113.6/t

Chinese steel rebar 25mm US$566.8/t vs US$568.6/t

Thermal coal (1st year forward cif ARA) US$101.5/t vs US$91.0/t

Thermal coal swap Australia FOB US$132.5/t vs US$128.0/t

Other:  

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

NdPr Rare Earth Oxide (China) US$50,424/t vs US$52,096/t

Lithium carbonate 99% (China) US$13,405/t vs US$12,434/t

China Spodumene Li2O 6%min CIF US$1,040/t vs US$1,000/t

Ferro-Manganese European Mn78% min US$985/t vs US$1,070/t

China Tungsten APT 88.5% FOB US$305/mtu vs US$305/mtu

China Graphite Flake -194 FOB US$560/t vs US$560/t

Europe Vanadium Pentoxide 98% 5.8/lb vs US$5.8/lb

Europe Ferro-Vanadium 80% 27.55/kg vs US$27.55/kg

China Ilmenite Concentrate TiO2 US$323/t vs US$322/t

Spot CO2 Emissions EUA Price US$54.9/t vs US$57.7/t

Brazil Potash CFR Granular Spot US$285.0/t vs US$285.0/t

Battery News

Strata secures $559m in financing for 1GWh battery energy storage project

• The grid-scale energy storage solution provider, has secured $559m in financing from a consortium of leading financial institutions for the construction of its 255MW/1,020MWh Scatter Wash battery storage project in Phoenix, Arizona.
• Strata broke the ground for its 1GWh Scatter Wash battery storage complex earlier in January this year and expects to store enough electricity to power 50,000 Arizona homes during peak summer conditions for 20 years.

iPhone maker Foxconn unveils first EV at Geneva Motor Show

• Manufacturers in China have announced ventures into EVs over the last few years.
• iPhone maker Foxconn revealed its new Model B through venture Foxtron, a joint venture with Taiwanese automaker Yulon Motor Co.
• The Model B urban SUV has been built to compete with vehicles like the Kia Niro and VW ID.3.
• Electronics manufacturer Huawei launched its first EV towards the end of last year.
• China’s state planner and Ministry of Industry and Information Technology have tightened approvals for EV manufacturing licences so it has become more difficult for new automakers to gain approval to start production.

Rolls Royce to supply battery storage system to stabilise Latvian national grid

• Rolls-Royce has received an order from the Latvian transmission system operator Augstsprieguma tikls (AST) to supply a large-scale battery storage system to secure the Latvian power grid.
• RR will supply a 80MW/160MWh BESS at two sites.
  • 20MW/40MWh battery storage at the AST substation in Tume and a 60MW/120MWh battery storage at the AST substation in Rezekne.
• In 2025 Latvia and the other Baltic states are to synchronise their energy grids with the rest of continental Europe.

Company News

Bushveld Minerals* (BMN LN) 1.4p, Mkt Cap £29m – Outstanding funds update

• The Company received a further R65m (~$3.4m) from one of Southern Point Resources partners amid the delay in receiving latest equity raise placing proceeds.
• The interest free loan takes total amount loaned to ~$9.4m of committed $12.5m as SPR is working on securing funds from one of its partners.
• SPR said the outstanding balance will be paid no later than 14 March 2024.
• The Company will have enough funds to meet its working capital requirements assuming funds arrive by mid-March and before $25m in sale proceeds for its 50% stake in Vanchem and 64% interest in Mokopane are received from SPR.
• Additionally, the Company has not yet received $3.5m equity contribution from Acacia that was due to be settled by the end of February.
• Acacia asked for a two month extension to settle the investment that the Company denied with negotiations on resolving the issue as soon as possible are currently in progress.
• Funds relate to the $18.4m equity raise completed December last year with proceeds marked for working capital needs and sustaining capital investment at Vametco and Vanchem.

*SP Angel act as nomad and broker to Bushveld Minerals

Goldstone Resources* (GRL LN) SUSPENDED – Corporate update

• The Company continues funding discussions to cover working capital need and refinancing outstanding debt.
• The Board is expecting to provide a further update in the next 10 days.
• The Company currently has ~$0.5m in cash and $11.2m in outstanding liabilities including $4.8m in relation to the Gold Loan, $3.0m due under the convertible loan note with Blue Gold International (was due for repayment on 30 Nov/23) and a series of smaller creditors with ~$3.4m outstanding and most now overdue for repayment.
• The Company highlights any funding solution will be conditional on shareholder approval at a general meeting.
• Should the Company be unable to secure necessary funding it is likely it will be not able to continue as a going concern and AIM listing may be cancelled.

*SP Angel acts as broker to Goldstone Resources

Horizonte Minerals (HZM LN) 3.75p, Mkt Cap £10m – Short term relief on interest repayments as the company tries to secure a long term financial solution

• Horizonte Minerals reports that temporary waivers on interest payments granted by its lenders have been extended until 29^th March in order to facilitate refinancing and restructuring for the development of the Araguaia ferronickel project in Brazil.
• The company reports that “at 27 February 2024, the Company had a cash balance of US$24.8 million … which is currently expected to provide sufficient working capital until mid-April 2024”.
• Horizonte Minerals confirms that it is targeting a financial and restructuring solution by the end of Q2, and restates its 19^th February position that while “a strong focus remains on controlling costs … the Company expects that it will require an additional interim funding to implement such full funding solution”.
• The cash balance excludes “cash that is segregated for the development of the Vermelho Project”.
• The company cautions that it is unable to guarantee that a long term solution to the financial shortfalls revealed by substantial cost overruns on the project will be reached nor that its lenders will continue to extend their waivers on repayments.

Conclusion: Horizonte Minerals has secured the agreement of lenders to waive interest payments until 29^th March to aid in securing a long term financial solution to the shortfalls revealed by the cost overruns at Araguaia.  The company confirms that its working capital is probably sufficient until mid April.

Oriole Resources* (ORR LN) 0.3p, Mkt cap £12m – Second $450k payment received for Mbe earn-in

• Oriole Resources has received the second and final tranche from the signature payment from BCM International.
• BCM will now be granted a 10% stake in in the Project, with the possibility to earn up to 50% interest after $4m expenditure in exploration funding.
• Infill soil sampling has started and trenching is expected in 2Q24.

*SP Angel acts as Broker to Oriole Resources

Power Metal Resources* (POW LN) 0.85p, Mkt cap £19m – Acquisition of metals extraction interest

• Power Metal Resources announces it has signed binding heads of terms for a 75% stake in GSA Environmental Limited.
• GSAe is a private engineering technology provider developing metals extraction processes.
• The Group is exploring opportunities to extract key metals from sources such as power station ash, refinery waste and spent catalysts through hydrometallurgical techniques.
• GSAe currently has an MoU with a Saudi Arabian fly ash supplier.
• The Company generated a profit of £157k June-December 2023 and had net assets of £40k.
• POW will pay £75k in an initial consideration via the issue of new shares, based on a VWAP over past five days.
• An additional £75k will be payable via a share issue upon GSAe’s execution of a commercial agreement worth >£160k.
• Upon GSAe receiving a profit of >£450k, POW will pay an anniversary payment of £250k in cash or shares.
• $250k will then be payable a year later to GSAe if the Company generates a profit >£650k over the year. .
• A third anniversary payment of £350k will be payable upon the COmpan generating a profit of >£1m for that year.
• The Acquisition is conditional on a period of DD by POW, expected to be completed over the next 30 days.

Conclusion: The acquisition reflects Power Metal’s approach to continue to diversify its business and provides a cash generating asset to limit continuous shareholder dilution. Power Metals is currently exploring opportunities in Saudi Arabian and this acquisition marks their first move into the region. Power station ash will be targeted for metals extraction and will now form part of POW’s strategy to ‘become a major operator in the region.’

*SP Angel acts as Nomad and Broker for Power Metal Resources

Sovereign Metals* (SVML LN) 22.7p, Mkt Cap £132m – Sovereign makes three key appointments in Malawi

(Sovereign currently holds 100% of the Kasiya project. The government has a right to a 10% free carry in the project)

STRONG BUY – Valuation 55p

• Sovereign Metals reports the appointment of three new senior staff in Malawi for the advancement of the Kasiya rutile and graphite Project.
  • Mr Maxwell Kazako, Acting In-Country Manager. Mr Kazako has a strong background in human resources, general administration and government relations. He was formerly with First Merchant Bank and Malawian Airlines.
  • Ms Natasha Namisengo,  General Legal Counsel. Ms Namisengo is a qualified lawyer with a Bachelor of Laws (Hons) and is admitted to practice in the Supreme Court of Malawi.
    • Ms Namisengo has prior experience acting as legal counsel and in company secretary roles in Malawi.
  • Mr Pilirani Bangula, Legal Counsel and Compliance. Mr Bangula is a qualified lawyer with 12 years of experience as a legal practitioner, including five years specifically as in-house legal counsel.
    • Mr Bangula has wide-ranging experience in compliance, project oversight and risk management, contract negotiation, and policy drafting.
• Ms Tupoche Kayange has also been promoted to Lab manager. Ms Kayange has led the facility’s expansion and commissioning of new equipment for bulk sample testing.
• Sovereign now employs over 80 people in Malawi with >30% women.

Conclusion:  Sovereign is scaling up its operation in Malawi in preparation for full feasibility and bankable studies. The business looks like it is preparing for longer term operation in country to support the development and commissioning of the Kasiya mine. While the mine should be a relatively simple hydro-mining and rutile sorting operation, the scale of the process plant and the ability to extract graphite mean this will be a sizeable venture employing hundreds of local Malawian staff who will need to be trained and accommodated in Lilongwe and locally.

*SP Angel act as Nomad and broker to Sovereign Metals.  

Syrah Resources (SYR AU) A$0.7, Mkt cap A$464m – Binding offtake signed with Posco

• Syrah Resources announces it has signed a binding offtake agreement with Posco Future M.
• Syrah will supply Posco with natural graphite from Balama.
• Volumes will start at 2ktpm in the year following commissioning, with Posco holding the right to increase to 5ktpm from the second year.
• Prices will be negotiated on a quarterly basis based on independently reported price indices.
• The move reflects Syrah’s continued progress in negotiating offtake agreements with ex-China anode demand.
• Syrah is looking to sell at least 100ktpa fines to ex-China AAM customers from 2026.
• Posco is targeting 154ktpa natural graphite AAM production capability in 2026.

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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