SP Angel Morning View -Today’s Market View, Friday 20th September 2024

Gold hits new high as Fed rate cut weakens US dollar

Copper and iron ore strengthen as stronger Yuan supports Chinese restocking

MiFID II exempt information – see disclaimer below

AMG Cricital Materials (AMG NA) – Opening of the LiOH refinery

BeMetals* (BMET CN) – Steady progress on drilling of Pangeni project in Zambia

Cleantech Lithium (CTL LN) – ASX listing delayed

Ioneer Ltd (INR AU) – Environmental Impact Statement pubished for Nevada lithium boron project

Mithril Silver and Gold (ASX: MTH) – High grade gold and silver identified in 33m intersection from surface in Mexico 

Zinnwald Lithium (ZNWD LN) – Interim Results

Gold hits new $2,613/oz high following FOMC rate cut

• Gold prices gave up their traditional correlation with US Treasury yields, rising to record highs whilst the government bonds sold off.
• Gold whipsawed initially after Fed’s presser, but has since regained ground and pushed past record levels at $2,610/oz.
• The 10-year yield rose from 3.6% to 3.72% after traders took profits made in the run up to the 50bp cut.
• Hedge funds are ramping up bullish bullion positions, with COMEX gold futures nearing four year high long levels.
• Bloomberg reports high prices are weighing on Asian retail appetite, with Chinese jewellery seller Chow Tau Fook sliding to four year lows – we suspect weak household economic strength is also weighing.
• Central banks have been key buyers in this rally, with recent reports suggesting that Saudi has been boosting holdings.
• Interestingly, the Chinese gold premium has been sliding, suggesting fading demand from retail speculators.

Copper and iron ore strengthen as stronger Yuan supports Chinese restocking

Has China been waiting for the Fed to cut rates, leading to a stronger Yuan before restocking commodity inventories?

• Industrial metals strengthened, with copper holding the $9,550/t mark and iron ore climbing from recent $90/t lows.
• The yuan has been strengthening against the dollar since July, as Fed easing and patient PBoC stimulus approaches persist.
• The PBoC has so far failed to cut its main policy and benchmark lending rates today leading to further strength in the Yuan and greater buying power for commodity buyers.
• Copper inventories have been ticking lower recently, whilst the Yangshan premium has risen, suggesting improving appetite for imports.
• Shipping rates are suggesting a jump in iron ore buying from Australia and Brazil to China.
• China stimulus rumours continue, with today’s rate decision unlikely to satisfy commodity bull expectations.

Global solar power on track for record breaking year

• Global solar installations are set to beat most industry forecasts, with 593GW expected to be added by the end of 2024, according to energy think tank Ember.
• Ember’s analysis aligns closely with forecasts from BloombergNEF,but is almost 200GW higher than the IEA main case outlook from January 2024.
• SolarPower Europe has also increased its 2024 global forecast from 401GW (made in June 2023) to 544GW.
• China, the US, India, Germany and Brazil will account for 75% of global solar additions in 2024 according to 2024.
• Among the leaders in solar growth, China continues to dominate and is expected to install 334GW of solar capacity, 56% of global capacity additions for 2024.

India continues to see robust EV growth, set to become major power consumer

• India had around 4m EVs on the road in March 2024, and saw around 1.6m EVs sold in in 2023.
• The Indian government has set an ambitious task of 30% EV penetration by 2030.
• India’s power consumption is expected to top 100TWh by 2030, with EVs playing a significant role in that.
• Union Minister for Ministry of Heavy Industries, HD Kumaraswamy said that India will ensure sufficient charging infrastructure to support the mass adoption of EVs across the country.
• The Ministry has plans to install over 10,000 public charging stations under its FAME-II scheme.
• Ahead of the launch of its first EV in January 2025, automaker Maruti Suzuki plans to install 25,000 EV chargers.

SharePickers: Video: This is Why Gold is Rising and It Will Probably Continue: https://www.youtube.com/watch?v=EsA7ICSVku8

• Podcast: https://audioboom.com/posts/8547593-john-meyer-this-has-one-of-the-lowest-risk-profiles-i-ve-seen-for-a-long-time

Economics

US – Weekly jobless claims came in lower than expected on Thursday with a less volatile four week average coming in at the lowest since early summer.

• Lower than expected unemployment numbers added to pro risk sentiment yesterday with S&P500 hitting new highs.
• Jobless Claims (‘000, Sep 14/Previous Week/Est): 219/(231 revised from 230)/230

Japan – The BOJ voted to leave rates at 0.25% while leaving a door open for hikes in the future.

• The central bank highlighted benefits from appreciating yen on inflation outlook.
• The move was largely anticipated as policymakers are monitoring the impact of a rate increase in July.
• Markets not expecting a hike before year end slightly favouring odds of a move in January-March.
• Inflation data released this morning showed a pick up in the headline measure as well as a slight increase in the core measure, in line with estimates.
• Core measure has been coming down lately and is currently around the 2.0% level, down from over 4% recorded in 2H23.
• The yen is weaker this morning trading around 143.75.
• CPI (%yoy, Aug/Jul/Est): 3.0/2.8/3.0
• CPI ex Food and Energy (%yoy, Aug/Jul/Est): 2.0/1.9/2.0

Germany – The economy is expected to narrowly avoid recession in 3Q24 according to Bloomberg survey registering no growth instead.

• The survey forecasts stagnation, a downgrade to previous estimates for a 0.2% expansion and following a -0.1% reading recorded in 2Q24.
• Eurozone, meanwhile, is expected to post a 0.3% growth.

UK – The central bank, in line expectations, left rates unchanged at 5.0% yesterday.

• The MPC voted 8-1 to keep rates on hold as policymakers agreed that more evidence of further slowdown in inflation needed before another cut.
• Policymakers remained of the view that labour market continues to be tight.
• The central bank unanimously voted to reduce its portfolio of bonds by a further £100bn over the course of the year to October 2025 deciding to keep the pace of the so-called quantitative tightening unchanged.
• The pound gained against the US$ following the Fed announcement to cut by 50bp earlier this week.
• Consumer sentiment disappointed in September diving by the most in two and a half years amid fears of more tax increases to be announced.
• “Following the withdrawal of the winter fuel payments, and clear warnings of further difficult decisions to come on tax, spending and welfare, consumers are nervously awaiting the Budget decisions on Oct 30,” GfK commented on the data.
• GfK Consumer Confidence (Sep/Aug/Est): -20/-13/-13
• Retail Sales (%mom, Aug/Jul/Est): 1.0/0.7(revised from 0.5)/0.4
• Retail Sales ex Auto Fuel (%mom, Aug/Jul/Est): 1.1/1.0(revised from 0.7)/0.5

Sterling continues to strengthen following BoE decision to hold rates at 5%

• The BoE has decided to focus on lowering inflation over easing pain for mortgage holders causing Sterling to strengthen.
• Question is, will the decision to hold rates now inflict sufficient pain on the UK economy to reduce inflation ahead of the November interest rate decision.
• We suspect the decision was strongly influenced by recent pay settlements with the Rail unions and junior doctors with expectations for further handouts from the Labour government.
• Maybe the union for early release prisoners will also get an inflation-busting pay rise?

Currencies

US$1.1174/eur vs 1.1143/eur previous. Yen 143.36/$ vs 142.23/$. SAr 17.539/$ vs 17.470/$. $1.333/gbp vs $1.325/gbp. 0.682/aud vs 0.682/aud. CNY 7.052/$ vs 7.068/$.

Dollar Index 100.58 vs 100.71 previous

Precious metals:         

Gold US$2,607/oz vs US$2,579/oz previous

Gold ETFs 83.3moz vs 83.4moz previous

Platinum US$991/oz vs US$987/oz previous

Palladium US$1,090/oz vs US$1,076/oz previous

Silver US$31.2/oz vs US$31.1/oz previous

Rhodium US$4,750/oz vs US$4,700/oz previous

Base metals:   

Copper US$9,568/t vs US$9,496/t previous

Aluminium US$2,541/t vs US$2,549/t previous

Nickel US$16,465/t vs US$16,390/t previous

Zinc US$2,931/t vs US$2,915/t previous

Lead US$2,089/t vs US$2,058/t previous

Tin US$32,305/t vs US$31,865/t previous

Energy:           

Brent Oil US$74.6/bbl vs $74.3/bbl yesterday

WTI Oil US$70.8/bbl vs $70.6/bbl yesterday

UK NBP Futures 82p/therm vs 87p/therm yesterday

TTF Dutch Futures €34/MWh vs €36/MWh yesterday

Henry Hub Gas US$2.35/mmBtu vs $2.31/mmBtu yesterday

• US natural gas prices edged higher as the EIA reported a 58bcf w/w build to 3,445bcf (+53bcf exp) for US inventories, with storage levels decreasing w/w to 6.0% above last year and 8.6% above the 5-year average.
• LNG Canada has reportedly confirmed it has begun supplying natural gas to its LNG export terminal in British Columbia, with the first LNG cargo from the facility still expected to be exported in mid-2025.
• The Morning Energiser will now be taking an extended break to re-energise with some hiking in Spain, likely resuming daily commentary on Friday 4th October.

Natural Gas €34.0/MWh vs €35.7/MWh previous

Uranium Futures $79.3/lb vs $79.5/lb previous

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$91.8/t vs US$92.6/t

Chinese steel rebar 25mm US$480.8/t vs US$478.6/t

Thermal coal (1st year forward cif ARA) US$113.3/t vs US$115.9/t

Thermal coal swap Australia FOB US$136.8/t vs US$135.3/t

Coking coal Dalian Exchange futures price US$173/t vs US$172.7/t

Other:  

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

NdPr Rare Earth Oxide (China) US$58,995/t vs US$58,647/t

Lithium carbonate 99% (China) US$9,998/t vs US$9,975/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$323/t vs US$322/t

China Rutile Concentrate 95% TiO2 US$1,383/t vs US$1,380/t

Spot CO2 Emissions EUA Price US$63.4/t vs US$63.4/t

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

Germanium China 99.99% US$2,625.0/kg vs US$2,625.0/kg

China Gallium 99.99% US$455.0/kg vs US$445.0/kg

Battery News

South Korean imports of Chinese EVs surges 848% in 2024

• Import value of Chinese-made EVs to South Korea surged by 848% from January to July 2024, totalling $848m. (BusinessKorea)
• China is now the top import country for EVs in South Korea, accounting for 65.8% of the total import value, surpassing Germany, the US and the U.K.
• Previously, Chinese EV imports were primarily commercial vehicles like buses, but this shifted with the import of Tesla cars from Shanghai’s Gigafactory.
• The rise of low-cost Chinese EVs, including upcoming imports from BYD, is expected to increase competition in the South Korean market.
• South Korea’s global market share of EVs dropped to 9.6% in 2024, down from 10.4% in 2023.
• The Korea Institute for Industrial Economics and Trade stresses the need for innovation in production and supply chain efficiency to compete with China’s price advantage.

BYD’s $10,000 Seagull EV is top selling car in China

• BYD’s Seagull EV was the top-selling car in China in August, with nearly 41,000 units sold.
• The Seagull is BYD’s cheapest electric vehicle, priced under $10,000 in China, and has been the top pure electric car for six consecutive months.
• BYD sells the Seagull internationally as the Dolphin Mini, priced around $20,000 in Brazil and Mexico.
• The Seagull is expected to launch as one of the most affordable EVs in Europe, starting under €20,000, but BYD has no current plans to launch passenger EVs in the US.
• BYD is leveraging its battery production expertise and supply chain to increase global market share, particularly in regions like Southeast Asia, Europe, and Canada.

Company News

AMG Cricital Materials (AMG NA) €16, Mkt Cap €524m – Opening of the LiOH refinery

• The Company opened the first European lithium hydroxide refinery commissioning the first of five modules in Germaany (Mining.com).
• The facility converts technical grade LiOH into battery grade material with the first module running at 20ktpa LiOH, equivalent of 500k EVs.
• The plan is to expand the facility to five modules for a total production capacity of 100ktpa.
• 20ktpa is already under MOUs with a number of cathode active materials manufcaturers.
• Additionally, the Company is carrying engineering studies for facilities to convert spodumene concentrate into technical grade carbonate and hydroxide ahead of a follow on conversion into battery grade LiOH to go into battery cells.
• AMG put $20m in Savannah Resources (SAV LN*) in June this year taking a ~16% stake in the lithium developer that is currently working on the FS for the hardrock Barroso Lithium Project in Portugal.
• The Company is also running a hardrock lithium mine in Brazil expanding production from 90ktpa to 130ktpa SC which is planned to be feed for a future integrated LiOH production facility

*SP Angel acts as Nomad and Broker to Savannah Resources

BeMetals* (BMET CN) – C$0.08, Mkt cap C$17m – Steady progress on drilling of Pangeni project in Zambia

• BE Metals are busy drilling their Pangeni Copper Project in Zambia with two of the planned diamond core holes completed.
• A further 2,000m of shallow aircore has also been drilled out of a 5,000m program.
• Results are expected to start in late October / early November along with the requisite geological analysis.
• While we always want to see a new discovery, the team is also keen to identify pointers towards the next structural accumulation of copper and cobalt [delete gold].
• The team are looking for stratigraphic and structural traps where sediment hosted copper should have accumulated from copper-rich fluids.
• The team have already identified underground geological pathways of copper fluids.
• Geologists are busy mapping the structural geology in each core hole to gives an indication of orientation and a prediction of the fertile structures and copper pathways.
• The team then map the sulphide zonation patterns so they can vector around and extend the system.
• Previous results include:

• Recent results include:

• • 16.16m grading 0.74% copper and 533ppm cobalt from 302.21m

• • • Inc. 5.50m averaging 0.93% copper and 701ppm cobalt from 312.00m depth;

• • 23.20m grading 0.54% copper and 263ppm cobalt from a depth of 275.80m

• • • inc. 7.90m grading 0.92% copper and 453ppm cobalt from 275.80m depth;

• • 14.78m grading 0.42% copper and 62ppm cobalt from a depth of 200.00m

• • • Inc. 4.88m averaging 0.65% copper and 63ppm cobalt from 208.03m depth;

• BE Metals recently raised C$4.8m of stock at C$0.10/s plus a warrant at an exercise price of C$0.18/s supported by B2Gold for C$2.2m of the placing to increase to a 24.5% stake.
• The majority of the funds are dedicated to the current drilling campaign.

Conclusion: Management are focussed on extending the discovered copper mineralization at the D-Prospect to the southwest, and northeast. There is also additional exploration drilling at other priority targets in close proximity to the D-Prospect.

*SP Angel formerly acted as UK broker to BE Metals. An SP Angel analyst holds shares in BE Metals

Cleantech Lithium (CTL LN) 15p, Mkt Cap £22m – ASX listing delayed

• ASX representatives informed the Company that its dual listing on ASX approval process will be extended.
• The delay is attributed to procedural matters.
• The Company filed an application for admission on 16 August and is looking to raise up to A$20m in new equity.

Ioneer Ltd (INR AU) A$0.18, Mkt Cap A$444m – Environmental Impact Statement pubished for Nevada lithium boron project

• Ioneer announces the BLM has completed their Environmental Impact Statement for the Company’s Lithium Boron Project, Nevada.
• The Company provides an updated project timetable, anticipating FID in December 2024 followed by commercial production in 2028.
• Sibanye holds the option to acquire a 50% interest in the Project.
• Ioneer has received conditional debt financing commitments for up to $700m from the US Energy Loan Programs Office.
• Ford, Toyota and Panasonic hold offtake agreements with the Company alongside Korea’s EcoPro.
• The Rhyolite Ridge 2020 DFS assumes:
  • 2.5mta processing capacity to produce 22ktpa Li and 174ktpa B
  • AISC of $2.5k/t
  • Post-tax NPV8 of $1.3bn using LCE price assumptions of $11,740/t
  • 26 year LOM.

Mithril Resources (MTH AU) A$0.37, Mkt cap A$38m – High grade gold and silver identified in 33m intersection from surface in Mexico 

• Mithril Silver and Gold shares rose 81% in Australia today on high grade gold and silver intersections at its Copalquin project in Mexico
• The company report an intersection of 144g/t gold and 1,162g/t silver
• At the Target 1 area, five holes were drilled to test the mineralisation along strike from the El Cometa historic mine on the eastern side of the area.
• Hole CDH-159:
  • 33.00m @31.8 g/t gold, 274 g/t silver from surface, including:
    • 7.00m @ 144 g/t gold, 1,162 g/t silver from 18m
    • 2.00m @ 495 g/t gold, 3,765 g/t silver from 20m
    • 1.00m @ 26.9 g/t gold, 201 g/t silver from 28m
• The intercept includes a zone of lower grade material from surface plus a very high-grade zone from 16m down hole
• Starting from surface and grades up to 495g/t gold & 3,765g/t silver
• Target 1 has a total resource of 2,416,000t grading 4.80 g/t gold, 141 g/t silver for 373,000oz gold plus 10,953,000oz silver using a cut-off grade of 2.0 g/t AuEq
• There are >100 historic underground gold-silver mines and workings within the 70km² mining concession
• Copalquin is located within the Sierra Madre Trend in Durango State which is home to five of the world’s top ten producing silver mines
• 28.6% of the resource tonnage is classified as indicated
• exploration accelerating in 2024-2025, with aim to at least double Target 1 resource in 2024
• The Company is led by a proven management team covering all disciplines of precious metals exploration and mining, with successes in Mexico that delivered sizable shareholder returns.

Conclusion: The Sierra Madre trend is known for its high-grade intercepts. We will look for the potential of this project to continue to grow. Sierra Madre Gold and Silver Ltd. acquired the Guitarra mine for US$35m last year with 3.8mt indicated grading 0.96g/t gold and 220g/t silver and 4.1mt inferred grading 0.52g/t gold and 153g/t silver.

Zinnwald Lithium (ZNWD LN) 8.4p, Mkt Cap £40m – Interim Results

• Zinnwald, which is progressing the German Zinnwald Lithium Project, reports six month results to 30^th June 2024.
• The Company is working on metallurgical processing, and currently envisages a Phase 1 production profile of 16-18ktpa LiOH.
• Company is currently advancing a pre-feasibility study and is applying for strategic designation under the EU Critical Minerals Act.
• The PFS is due in 1Q25.
• The MRE holds M&I resources of 193.5mt at 0.478% Li2O for 2.3mt LCE and inferred resource of 33.3mt at 0.461% Li2O for 379kt LCE.
• The mineralisation is hosted in zinnwaldite, similar to Cinovec’s Czech resource.
• Regarding processing, testing is currently underway on both pyro and hydrometallurgy, anticipating a sulphide roast process.
• Current focus is on the Metso Alkaline Leach process, intended to boost recoveries and lower energy usage.
• Company reports a cash balance of €8.1m as of today.

Conclusion: Given the unproven processing route for Zinnwaldite, the Company is boosting its metallurgical test programme in advance of the DFS.

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

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