SP Angel Morning View -Today’s Market View, Friday 1st September 2023

Copper prices climb on positive Chinese PMI data with focus shifting to US non farm payrolls

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Ironveld Plc (IRON LN) – Renewed terms on DMS Magnetite JV as cashflow prospects accelerate

Lifezone Metals (LZM N) – Lifezone presses ahead with support of BHP on Kababga nickel project in far east of Tanzania

Trident Royalties (TRR LN) – Sonora Lithium Royalty

ZCCM Investments Holdings (ZCCM-IH) – Half Year Trading Statement as Sibanye moves in on Mopani

Sarn Helen Gold (Private, full EIS tax relief) – Exploring for Gold in Wales and Scotland

www.sarnhelengold.wales

• Sarn Helen holds five Crown Option Agreements covering over 1,200sqkm in Wales around the historic Dolaucothi Gold Mineand in Peeblesshire, Scotland.
• The Sarn Helen team is led by geologist, Mike Armitage, formerly of SRK.
• Analysis is ongoing on soil and stream sediments, panning, mapping and rock chip sampling along with 120m of core from three historic boreholes.
• Three potential drill targets have been identified near to the Dolaucothi mine:
  • Target 1. Soil samples with grades of up to 0.9g/t over a 500m strike length.
  • Target 2. Outcropping rock chips up to 6.16g/t.
  • Target 3. High grade soil samples >1g/t.

• Rock chip samples collected in Peeblesshire have graded up to 7.95g/t Au.

• Management are looking for £150,000-200,000 to fund field and laboratory-based work to end Q2 2024 for targets to justify a drilling programme in 2025.

*SP Angel’s role is limited to making introductions and interested parties should be aware that investment in a private company can present certain risks not present in listed companies (e.g. limited or no liquidity and no rules compelling disclosure of information to investors). This offer is open to professional investors only and is not offered to retail investors.

Copper prices jump on positive Chinese data as demand improves

• Copper prices rallied past $8,500/t.
• The move followed the release of positive Caixin China factory data, which showed expansion in August.
• A move from the PBoC to prop up the yuan by cutting FOREX RRR requirements by 2% has also supported copper prices.
• A weak yuan through august has been weighing on Chinese domestic buying ability for international copper products.
• A sliding dollar is also supporting the copper price.

Aurubis suffers multi-million-dollar loss following copper theft

• Aurubis suspects an organised theft ring has been involved in robbing stored copper products from the Company.
• Aurubis had alerted concerns over the ‘considerable discrepancies’ in inventories in June.
• The Company has issued a profit warning as a result of the criminal activity.

Economics

US – Nonfarm payroll numbers are out later today following inflation data released on Thursday that came in line with estimates with expectations for the Fed to keep rates unchanged at the coming September policy meeting.

China – The central bank is cutting FX reserve requirements for local banks in an effort to support the depreciating currency that lost more than 5% against the US$ to date.

• FX reserve requirements for banks will be lowered to 4% from 6% with effect from September 15 “in order to improve the capacity of financial institutions to use foreign exchange funds”.
• The move is estimated to release around $16bn of US$ liquidity, FT cites Standard Chartered.
• The news follows earlier announcements that regulators will cut minimum downpayments requirements for first and second home buyers and reduce mortgage rates.
• Foreign investors sold a record $12bn worth of Chinese stocks in August as official support measures failed to arrest a slowdown in growth momentum, FT writes.

Caixin: Manufacturing PMI: 51.0v 49.2 July and 49.0 est.

• Caixin manufacturing PMI tracking primarily performance of private businesses climbed to the highest in six months in August with firms citing firmer market demand.
• Both output and new business orders increased while the sector added new jobs at the fastest pace since Mar/10.
• Domestic demand was the primary driver of better headline numbers with overseas new orders continuing to pull back albeit at a slower pace.

Official NBS Manufacturing PMI rose slightly to 49.7 in August vs 49.3 in July (NBS)

• Nonmanufacturing PMI 51.0 in August vs 51.5 in July
• Composite PMI 51.3 in August vs 51.1 in July

US talks with China – Gina Raimondo, US commerce secretary, visited China with backing from Biden and US officials to restore lines of communication

• We wondered why the US just had more talks with China and believe the visit was to reduce the chance of miscalculation between the two superpowers.
• The US is concerned at China’s increasingly aggressive overseas posture, its use of US technology in its military and recent raids on foreign-owned businesses. (NY Times)
• Maybe the US is also establishing new lines of communication as authorise weapons exports for the defense of Taiwan
• There is nothing like winding up the CCP leadership over Taiwan but we feel sure the Pentagon has thought it all through, though we are not sure anyone can guess the outcome even through the most detailed of scenario analyses.
• Biden recently signed an executive order banning new American investment into China in key technology industries that could be used to enhance Beijing’s military capabilities.
• Persistent Chinese including intellectual property theft, patent protection and the inability of Visa and Mastercard to receive final approval for access to the Chinese market are sore points that need to be addressed.
• China has failed to meet promises made in 2001 as part of its entry into the WTO to allow American losing a WTO case 2012 but 22 years later, Visa and Mastercard still do not have equal access to the Chinese market.
  • “For more than three decades, commerce secretary visits to China followed a familiar script. The visiting American official would call on China to open its markets to more American investment, and to allow more equal competition among foreign and local companies. Then the commerce secretary would attend the signing of contracts for exports to China.”
• China has consistently sold $3 to $4 / year of goods to the US for each dollar of goods it has purchased exacerbating the trade imbalance.
• The recent weakness in the Chinese economy may create some opening for compromise though we hold out little hope for Visa and Mastercard.
• If China continues to impede US trade and security requests and the Taiwan situation escalates the global economy could be in for a bumpy ride.

UK – A drop in property prices accelerated in August to the fastest pace since July 2009, according to Nationwide data.

• UK house prices were down 5.3%yoy v 3.8%yoy in July with the average property price at £259k, down from a recent peak of £274k in Auguust last year.
• Central bank data released earlier showed mortgage approvals were down 10% between June and July while average mortgage rates climbed to the highest level since 2008.

UK Energy companies are to be barred from trading to inflate customer bills in the UK

• UK power utilities are to be banned from trading practices that inflate customer bills (The Times).
• The practice of inflating prices charged to the network for wind, solar, gas and other power generation is to be banned with generators facing potential fines of up to 10% of their revenues.
• Several energy companies are alleged to have intentionally exacerbated electricity prices through the winter of 2021-22.
• Generators are reported to have stopped generating early in an afternoon to cause prices to peak later in the day when they would resume production.
• A Bloomberg investigation reckons certain generators made >£500m using this trading practice over four years
• Ofgem says costs tripled in the 2021-22 winter with £60m on one day in November 2021 and total balancing costs to consumers for the 2021-22 financial year hit £3.1bn

Currencies

US$1.0849/eur vs 1.0907/eur yesterday. Yen 145.48/$ vs 145.95/$. SAr 18.786/$ vs 18.692/$. $1.267/gbp vs $1.271/gbp. 0.646/aud vs 0.648/aud. CNY 7.263/$ vs 7.290/$.  Dollar Index 103.62 vs 103.23 yesterday.

Commodity News

Precious metals:

Gold US$1,941/oz vs US$1,945/oz yesterday

Gold ETFs 89.8moz vs US$89.8moz yesterday

Platinum US$976/oz vs US$978/oz yesterday

Palladium US$1,229/oz vs US$1,232/oz yesterday

Silver US$24.51/oz vs US$24.51/oz yesterday

Rhodium US$4,100/oz vs US$4,100/oz yesterday

Base metals:

Copper US$ 8,525/t vs US$8,442/t yesterday

Aluminium US$ 2,241/t vs US$2,215/t yesterday

Nickel US$ 20,630/t vs US$20,600/t yesterday

Zinc US$ 2,479/t vs US$2,429/t yesterday

Lead US$ 2,266/t vs US$2,186/t yesterday

Tin US$ 25,715/t vs US$25,600/t yesterday

Energy:

Oil US$87.0/bbl vs US$85.9/bbl yesterday

• Crude oil prices continued their rise this week as Russia agreed with its OPEC+ partners to reduce exports by 0.3mb/d during September, down from the 0.5mb/d reduction agreed for August.
• U S natural gas prices were flat as the EIA storage report detailed an 32bcf build to 3,115bcf last week, with storage levels decreasing to 18.4% above last year and 8.7% above the 5-year average.
• Santos has agreed a sale of up to 5% of PNG LNG (currently 42.5%), which has 8mtpa gross annual LNG capacity, to state-controlled Kumul Petroleum (17% WI) for c.$1.4bn in cash and assumed project finance debt.
• BW Energy has entered into an agreement for an up to $80m prepayment facility with a leading commodity trader, which will be used to finance the acquisition of the Golfinho field, the FPSO Cidade de Vitória and field-related investments.

Natural Gas US$2.755/mmbtu vs US$2.790/mmbtu yesterday

Uranium UXC US$58.25/lb vs US$58.25/lb yesterday

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$113.5/t vs US$114.9/t

Chinese steel rebar 25mm US$534.5/t vs US$533.1/t

Thermal coal (1st year forward cif ARA) US$126.0/t vs US$128.8/t

Thermal coal swap Australia FOB US$159.5/t vs US$158.0/t

Coking coal swap Australia FOB US$261.0/t vs US$260.0/t

Other:  

Cobalt LME 3m US$33,420/t vs US$33,420/t

NdPr Rare Earth Oxide (China) US$68,841/t vs US$68,590/t

Lithium carbonate 99% (China) US$26,917/t vs US$26,819/t

China Spodumene Li2O 6%min CIF US$2,960/t vs US$3,010/t

Ferro-Manganese European Mn78% min US$1,047/t vs US$1,053/t

China Tungsten APT 88.5% FOB US$310/mtu vs US$310/mtu

China Graphite Flake -194 FOB US$655/t vs US$655/t

Europe Vanadium Pentoxide 98% 7.1/lb vs US$7.3/lb

Europe Ferro-Vanadium 80% 31.25/kg vs US$31.25/kg

China Ilmenite Concentrate TiO2 US$313/t vs US$309/t

Spot CO2 Emissions EUA Price US$90.5/t vs US$91.2/t

Brazil Potash CFR Granular Spot US$355.0/t vs US$355.0/t

Battery News

Biden Administration commits US$15.5bn to upgrade automaker factories for EV production

• Most of the $15.5bn will go to automakers and suppliers to retool their plants to produce electric, hybrid and hydrogen fuel cell vehicles.
• A total of $12bn ($2bn in grants and $10bn in loans) will directly support automotive manufacturing conversion projects for light-, medium- and heavy-duty EVs.
• The remaining $3.5bn will go toward expanding domestic manufacturing of batteries for EVs and the nation’s grid, as well as battery materials and components that have historically been imported from other countries.

Nissan reusing the batteries from old Leaf EVs to make portable power sources

• Batteries in older Nissan Leaf EVs are getting a second life as portable power sources that can be used as portable power units or deliver emergency power.
• Nissan has sold more than 650,000 Leaf EVs and their batteries often retain a charging capacity longer than the car’s life span.
• Nissan says it is using the old batteries in portable power sources it developed with electronics maker JVCKenwood Corp. and 4R Energy Corp.
• A Nissan Leaf uses 48 battery modules and the portable power stations contain two modules.
• Nissan test the batteries in Leafs after their owners stop driving them, and reuse those that can still hold a charge.

Company News

Ironveld Plc (IRON LN) 0.3p, Mkt cap £11m – Renewed terms on DMS Magnetite JV as cashflow prospects accelerate

• Ironveld provides an update with its JV partner Pace.
• The JV has reached terms with Sable Exploration and Mining to amend certain terms to the agreement.
• The JV is currently building a DMS magnetite operation over Ironveld’s mining area, with Ironveld supplying ore to the plant.
• Ironveld would be required to supply ore at a ‘cost plus’ basis.
• New negotiations between the two parties will now see Sable advance £650k to establish a quick start 10kpm capacity plant to fund future capacity expansions.
• Sable will first see its capital loan repaid from 70% of the plant’s profits.
• Following the repayment of the capital loan, Sable will retain a 50% of the project whilst the JV between Ironveld and Pace will hold 50%
• The alterations reflect the provision by SEAM and Pace of numerous offtake customers to the JV, ‘double the level envisaged in early 2023.’
• The statement suggests that the percentage change will have ‘negligible effects’ on cashflow due to Ironveld.
• Ironveld will continue to hold the option to sell ore and fines to the plant, and positive cashflow is anticipated sooner than previously expected.
• The plant is expected to be installed over the next month, with sales a month to six weeks following.

Lifezone Metals (LZM N) US$14.3, US$1.1bn – Lifezone presses ahead with support of BHP on Kabanga nickel project in far east of Tanzania

• Lifezone Metals, which is looking to develop the 58mt Kabanga nickel resource in Tanzania with support from BHP started trading on the NYSE on 6, July.
• Kabanga is one the world’s largest, highest grade, undeveloped nickel sulphide deposits with copper and cobalt by-product credits expected to reduce cash operating costs to the low end of global cost & emissions curves.
• Funding: The IPO raised ~$86.6m including ~$70.2m from PIPE investors and ~$16.4m of cash held in trust net of redemptions.
• Resource: 58mt @ 2.57% nickel, 0.34% copper and 0.18% cobalt (3.28% Nickel eq.).
• Barrick and Glencore previously invested ~US$293m into drilling & feasibility studies based on ~583km of drilling.
• Target production: ~40,000-60,000tpa of refined Class 1 nickel and LME-grade copper and cobalt.
• First ore is expected to be mined in 2026.
• DFS for the mine and refinery is due for completion in H2 2024.
• BHP holds a 1.9% stake in Lifezone and a 14% stake in the Kababga project following investment of USD100m in Kabanga since December 2021.
• BHP also holds a royalty for use of its hydromet IP.
• Hydromet eliminates SO2 emissions and reduces CO2 emission by up to 73%
• The Government of Tanzania holds a free-carry 16% stake in Kabanga following agreement on a mining licence and framework agreement.
• Lifezone retains 40% of metal marketing rights which could be used to for project financing.
• Management are also looking to rehabilitate the former Buzwagi gold mine site, into a hydrometallurgical base metal refinery with the site.

Conclusion: Lifezone is working on a large and ambitious hydrometallurgical project in the far east of Tanzania. While we are big fans of the development and use of hydrometallurgical refineries its application in Tanzania raises logistical challenges which will need much support.

Trident Royalties (TRR LN) 39p, £117m – Sonora Lithium Royalty

• The Company reports on the announcement made earlier by Ganfeng regarding the Sonora Lithium Project in Mexico.
• Ganfeng announced that the General Directorate of Mines in Mexico issued a formal notice to its local subsidiaries that nine lithium licences comprising the Sonora Lithium Project were cancelled.
• Ganfeng argued that cancellation of licenses violate both Mexican and international laws and that the Company was in compliance with all regulations.
• Ganfenf and its Mexican subsidiaries have filed administrative review recourses before the Secretary of Economy against the aforementioned resolutions.
• Trident together with its JV partner (50/50 JV) Marmottes Capital is in agreement with Ganfeng allowing it to acquire a 3.0% Gross Revenue Royalty (1.5% attributable to Trident).
• Under the agreement, Trident has an option to walk away from acquisition of the royalty in case there are material changes in Mexico’s regulatory regime, thus, limiting its potential risks.
• Should Trident elect to exit the JV, the repayment date of an initial loan made by Trident to Ganfeng local subsidiary of $2.5 million is due six months from notification of termination of the agreement.
• Trident is remaining supportive of the project for now saying that it “will continue to monitor the situation carefully and, at the present time, intend to maintain our rights in respect of the asset”.

ZCCM Investments Holdings (ZCCM-IH) €1.35, Mkt cap €85m – Half Year Trading Statement as Sibanye moves in on Mopani

• Zambian state-backed mining company ZCCM-IH provides a trading update for the half year ending 30^th June 2023.
• The Company reports an earnings per share expected to be 194.85% lower at losses of $126m vs losses of $48m in the same period 2022.
• ZCCM points to a weak performance by Mopani Copper Mines, which suffered losses of $210m on lower copper production, higher costs, and heavy finance costs.
• Mopani recorded financing costs of $80m vs $32m in same period last year.
• As regards the sale process of Mopani, Reuters reported on Wednesday that Sibanye Stillwater is bringing in a Chinese investor to partner its bid for Mopani.
• Zijin mining is competing with Sibanye for the operations.
• ZCCM is shackled by the 2021 deal with Glencore, who sold them a 73% interest in Mopani in a $1.5bn debt-funded deal, with Glencore retaining offtake rights.

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 employees may have previously held, or currently hold, shares in the companies mentioned in this note.

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