SP Angel Morning View -Today’s Market View, Friday 21st June 2024

Gold prices push higher as yields slide on Fed rate cut hopes

MiFID II exempt information – see disclaimer below

Andrada Mining (ATM LN) – Operating Results

Pilbara Minerals (PLS AU) – Expansion plans to double spodumene production

Strategic Minerals* (SML LN) – Results highlight recovery of sales at Cobre magnetite mine in the US

Tertiary Minerals* (TYM LN) – Drilling progresses at Konkola as second hole planned.

VALE S A* (VALE US) – Base metal plans show potential for 900ktpa copper in 2030s

Gold prices($2,366/oz) push higher as yields slide on Fed rate cut hopes

• Gold prices have jumped to $2,367/oz, near two week highs.
• US Treasury yields have fallen this morning, with the benchmark 10 year down 4bp to 4.23%.
• Focus turns to today’s US PMIs which should give more of a clue over rate cut potential.
• Week retail sales this week showed slowing consumer appetite, with inflation falling towards the Fed’s target.
• Continued conflict in the Middle East may also be driving investors to safe haven assets.

Copper ($9,750/t) weakens as dollar strengthens and stockpiles continue to climb

• Copper has cooled from a recent short term rally, easing back to $9,750/t having touched $9,900/t.
• The dollar has strengthened despite lower Treasury yields, with a number of global currencies weakening against the Greenback as cutting cycles get underway.
• LME stockpiles hitting September highs, up 14% as South Korea and Taiwan see deliveries into weak demand.

Iron ore ticks higher as traders wait for direction from CCP

• Iron ore prices have slowly rebounded from recent lows below $100/t, with the 62% Fe China benchmark now up to $107/t.
• China’s CCP is set to meet for the Third Plenum in July, which will highlight planned policies.
• Steel margins have marked marginal improvements in Cina, following lower coke prices.
• Steel consumption is weak in China, however, weighed down by high temperatures and heavy rainfall.

Economics

Eurozone – Business sentiment weakens on the back of political uncertainty in France and a contracting manufacturing sector in Germany.

• New Eurozone tariffs on Chinese goods as well as risks of retaliation must also weigh on sentiment.
• In Germany, a sharp drop in new manufacturing business orders offset a modest increase recorded in services.
• Employment dropped for the first time in three months.
• Price cuts were reported for the manufacturing sector while services inflation remained well above its historical averages while picking up from the previous month.
• “The HCOB Composite Output Index is mainly dragged down by manufacturing production… if you use the composite index for a simple regression to estimate GDP in the second quarter, you now get a marginal decline in economic output instead of our prior estimate of slight growth,” flash PMI report read.
• In France, both manufacturing and services remained in contraction suggesting that a pickup in April is now offset by two consecutive months of falling business activity.
• New orders were down while employment growth east to a three month low.
• On a positive note, inflation rate is reported to have eased to its weakest since February 2021.
• “The French economy likely grew by 0.1% in the second quarter of 2024… for the third and fourth quarter, we expect a GDP boost from the Olympics taking place in July and August in France,” PMI report said.
• Eurozone Flash Manufacturing PMI (Jun/May/Est): 45.6/47.3/47.9
• Eurozone Flash Services PMI (Jun/May/Est): 52.6/53.2/53.4
• Eurozone Flash Composite PMI (Jun/May/Est): 50.8/52.2/52.5
• Germany Flash Manufacturing PMI (Jun/May/Est): 43.4/45.4/46.4
• Germany Flash Services PMI (Jun/May/Est): 53.5/54.2/54.4
• Germany Flash Composite PMI (Jun/May/Est): 50.6/52.4/52.7
• France Flash Manufacturing PMI (Jun/May/Est): 45.3/46.4/46.8
• France Flash Services PMI (Jun/May/Est): 48.8/49.3/49.9
• France Flash Composite PMI (Jun/May/Est): 48.2/48.9/49.4

UK – The central bank left rates flat at a 16-year high of 5.25%, in line with expectations.

• Two of the nine members voted for a rate cut and at least other three including Governor Andrew Bailey indicated that the decision to hold rates unchanged was “finely balances”, according to minutes of the MPC meeting.
• Markets are currently assigning a more than two in three chance of rate cut at the next meeting in August suggesting new Labour government is likely to bear benefits of lower rates just a month after elections.
• Consumer spending climbed more than expected as indicated by stronger retail sales in May.
• Retail Sales (%mom, May/Apr/Est): 2.9/-1.8(revised from -2.3)/1.8
• Retails Sales (%yoy, May/Apr/Est): 1.3/-2.3(revised from -2.7)/-0.6

Japan – Headline inflation climbed in May hitting 2.8% and marking a 26^th month that the gauge was above the central bank 2% target.

• Meanwhile, core measure that excludes food and energy pulled back last month.
• The central bank will hold its policy meeting next month with Governor Kazuo Ueda saying that there is a good chance of a hike contingent on economic and financial conditions.
• CPI (%yoy, May/Apr/Est): 2.8/2.5/2.9
• CPI ex Food and Energy (%yoy, May/Apr/Est): 2.1/2.4/2.2

Currencies

US$1.0696/eur vs 1.0734/eur previous. Yen 158.87/$ vs 158.16/$. SAr 17.980/$ vs 17.991/$. $1.265/gbp vs $1.272/gbp. 0.666/aud vs 0.667/aud. CNY 7.261/$ vs 7.260/$.

Dollar Index 105.65 vs 105.34 previous.

Precious metals:         

Gold US$2,356/oz vs US$2,343/oz previous

Gold ETFs 80.6moz vs 80.8moz previous

Platinum US$981/oz vs US$990/oz previous

Palladium US$928/oz vs US$919/oz previous

Silver US$30.27/oz vs US$30/oz previous

Rhodium US$4,700/oz vs US$4,625/oz previous

Base metals:   

Copper US$ 9,748/t vs US$9,833/t previous

Aluminium US$ 2,510/t vs US$2,514/t previous

Nickel US$ 17,205/t vs US$17,490/t previous

Zinc US$ 2,858/t vs US$2,870/t previous

Lead US$ 2,202/t vs US$2,190/t previous

Tin US$ 32,750/t vs US$33,040/t previous

Energy:           

Oil US$85.6/bbl vs US$85.2/bbl previous

Natural Gas €34.4/MWh vs €35.3/MWh previous

Uranium Futures $84.8/lb vs $85.7/lb previous

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$106.9/t vs US$106.6/t

Chinese steel rebar 25mm US$530.2/t vs US$531.7/t

Thermal coal (1st year forward cif ARA) US$125.8/t vs US$119.8/t

Thermal coal swap Australia FOB US$135.0/t vs US$134.8/t

Other:  

Cobalt LME 3m US$27,150/t vs US$27,150/t

NdPr Rare Earth Oxide (China) US$49,924/t vs US$49,929/t

Lithium carbonate 99% (China) US$12,326/t vs US$12,327/t

China Spodumene Li2O 6%min CIF US$1,080/t vs US$1,080/t

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

China Tungsten APT 88.5% FOB US$350/mtu vs US$350/mtu

China Graphite Flake -194 FOB US$470/t vs US$470/t

Europe Vanadium Pentoxide 98% 5.2/lb vs US$5.2/lb

Europe Ferro-Vanadium 80% 26.85/kg vs US$26.85/kg

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

China Rutile Concentrate 95% TiO2 US$1,412/t vs US$1,412/t

Spot CO2 Emissions EUA Price US$69.4/t vs US$69.4/t

Brazil Potash CFR Granular Spot US$310.0/t vs US$310.0/t

Battery News

EU sees slow in EV demand

• Sales of new battery-electric cars in the EU fell by 12% in May compared to the previous year, with Germany experiencing a 30% decline.
• The EU imposed provisional duties of up to 38.1% on China-made EVs starting in July to protect domestic automakers.
• Tesla’s Model 3 sales dropped by 34.2% in the EU in May, and the company expects to increase prices for China-made Model 3s due to the new EU duties.
• The current EV market stagnation is expected to improve by 2025 with the introduction of new EU car emission targets.
• The market share for fully electric cars fell to 12.5% from 13.8% in May 2023, while the share for hybrids rose to 29.9% from 25%.
• Volkswagen saw a 1.6% rise in EU registrations in May, while Stellantis and Renault experienced declines of 6.9% and 5.4% respectively. Toyota’s sales increased by 13%.

Greece aims at tenfold increase in electric taxis in Athens by 2026

• Greece aims to increase the number of electric taxis in Athens tenfold by 2026 to promote climate-friendly electromobility.
• Currently only 100 out of 13,661 taxis in Athens are electric, with the goal being to have over 1,000 electric taxis in Athens within the next 18 months.
• Until next year taxi drivers can receive subsidies of up to €22,500, amounting to about 40% of the cost of a new electric taxi.
• Taxi drivers can own a new electric car within months by paying a monthly fee combined with the state subsidy, with vehicle options from seven manufacturers, including Chinese BYD.

China’s Gotion, partner InoBat to build Slovakian EV battery plant

• China’s Gotion High Tech and Slovak partner InoBat will invest €1.2bn to build an EV battery plant in Slovakia.
• The consortium will receive €150m in subsidies and €64m in tax breaks.
• The plant will produce EV batteries with an initial annual output of 20GWhs.
• Production is set to begin at the start of 2027, reaching full capacity by mid-2027.
• This will be the second largest investment in Slovakia’s history and supports the country’s automotive sector transition to EVs.
• The investment aligns with European efforts to boost the EV battery industry and reduce reliance on Asian battery makers.

Range Rover Electric waitlist doubles to over 38,000

• The first all-electric Range Rover SUV is set release later this year, with a waitlist that has grown to nearly 38,000, doubling over the past four months.
• Described as the “quietest and most refined Range Rover ever created,” the vehicle is equipped with a new EV propulsion system and advanced traction control for better performance on low grip surfaces and in winter conditions.
• It is capable of operating all-terrain, all-weather, and all-surface, and can tackle 33.5 inches of water, surpassing competitors like the GMC Hummer EV (32 inches) and Toyota Land Cruiser (27.5 inches).

Hydrogen fuel cell technology could change the automotive field as BEV adoption stagnates

• Over 1.5m hydrogen-powered vehicles could be on the roads by 2030 according to a joint government-industry study.
• Hyundai has released the Nexo SUV and BMW plans to deliver hydrogen cars by 2025. Hydrogen vehicles offer a driving experience similar to EVs without range anxiety.
• Hydrogen fuel cell technology could transform the light commercial vehicle market, allowing trucks to travel longer distances and operate in clean air zones without additional fees.
• Efficient and green hydrogen production is still under development, with most current hydrogen production falling under less eco-friendly methods.
• The UK currently has only 11 hydrogen fuelling stations, with six open to the public.
• Expansion of this infrastructure is key to drive hydrogen vehicle adoption.

Ford losing money on trucks

• The U.S. EV market growth has significantly slowed, posing financial challenges for automakers like Ford.
• Ford has invested heavily in EV development and battery factories. Its EV unit, Ford Model e, reported a $1.32bn loss in Q1 2024, alongside a 20% decline in wholesale units and an 84% drop in revenue compared to the previous year.
• High battery costs are a major factor in these losses. Ford emphasised that scaling EV production is essential for cost reduction, but achieving scale is challenging.
• Ford’s traditional ICE vehicle business, Ford Blue, made $905m in Q1 2024, while the commercial vehicle unit, Ford Pro, gained $3bn.
• To manage EV losses, Ford is reducing battery orders, scaling down its Marshall, Michigan battery factory, cutting $12 billion in EV spending, delaying new EV launches, and downsizing battery factories.
• Ford has reversed its commitment to go all-electric in Europe by 2030, indicating it will continue selling ICE vehicles if there is demand.
• Despite cost reduction efforts, Ford anticipates Model e unit losses could reach up to $5.5bnThe company has lowered EV prices to remain competitive, particularly against Tesla.

Company News

Andrada Mining (ATM LN) 4.4p, Mkt cap £67m – Operating Results

• Andrada Mining provides operational update for the period to 31 May 2024.
• Andrada operates the Uis Mine in Namibia, which processed 238kt of ore over the period, up 10% yoy.
• Feed grade in the period stood at 0.141% Sn, down 7% yoy but up 3% qoq.
• 364t of tin concentrate produced over the period, with contained tin at 223t.
• Tin recovery fell 1% yoy and 4% qoq to 69%.
• C1 costs up 20% to $18,900/t on a yoy basis, up 16% qoq.
• Increase in costs reflect plant outages that have now been rectified.
• Orion royalty rate expected at 5% until 2,600tpa of tin concentrate production rate is achieved.
• Strip ratio lowered by the Company’s push-back initiative.
• AISC at $28.7k/t, up 35% yoy and 4% qoq.
• Tin price achieved at $30.8k/t, up 23% over the period.
• 865kg of tantalum in concentrate produced over the period.
• Management has utilised the lithium pilot plant for bulk sampling programmes over the period, whilst exploring commercial petalite production for off-takers.
• Cash at 31^st May was £12m., down from £17.5m as ore stockpiles increased before the plant capacity expansion is completed.
• Hedging agreement fixed at $33k/t tin, covering c.30% of production.
• The Company expects to conclude the “7.6m funding agreement with Bank Windhoek by Q3.

Pilbara Minerals (PLS AU) A$3.11, Mkt Cap A$9.6bn –  Expansion plans to double spodumene production

• Pilbara Minerals today provides the outcomes of its P2000 PFS.
• The Company has been exploring a route to 2mtpa spodumene concentrate production grading 5.2% Li20.
• The PFS results suggest a CAPEX of $1.2bn for a new flotation plant (+-20% accuracy) with a 5mtpa ore processing throughput.
• Using US$1,300/t SC5.2%, the study generates an NPV8 of A$2.6bn and an IRR of 55^.
• 10 year unit operating costs forecast at A$550-650/t FOB.
• The plan reduces the LOM to 23 years, although PLS believes there remains room for future exploration upside and resource conversion.
• At current spot prices, the NPV reduces to A$900m.

Conclusion: Pilbara Minerals continue to expand spodumene production and today’s plan highlights their ability to double capacity by 2028, when analysts forecast a return to deficits. It is reassuring to see major lithium players continue to invest in production whilst EV demand accelerates, despite current surpluses and subsequent weak prices.

Strategic Minerals* (SML LN) 0.15p, Mkt Cap £3m – Results highlight recovery of sales at Cobre magnetite mine in the US

• Strategic Minerals report results for 2023.

• Sales fell 36% (to to $1.6m  on the loss of a major client at Cobre in the US.
• Pre-tax loss was $9.082m in 2023 vs +$0.372m in 2022 including the $8.898m impairment for Leigh Creek.
• Pre-impairment loss was limited to $0.184m in 2023 vs +$0.372m in 2022.
• Net Cash generated from operating activities for 2023 was $0.598m in 2023 vs $0.775m in 2022
• Cash was $0.112m at end-2023 vs $0.341m at end 2022.

• Cobre (magnetite, USA):  The results highlight the resumption of sales since the major client suspended shipments from the Cobre mine in New Mexico, USA.
• While the suspension of magnetite sales reduced Strategic Mineral’s cash flow significantly, the company was able to continue to make progress albeit at a slow rate.

• Referring to the protracted arbitration claim against the receivers of CV Investments, Strategic Minerals confirms the receiver for CV Investments continued to work on securing assets but, currently, there is no clarity on the timing or amount to be paid. The receiver has previously indicated that they would not accept Southern Minerals Group’s substantial arbitrated award against CV Investments and were likely to use the fact that CVI’s funds arose from a fraud to rank SMG’s claim, along with other creditors, behind equity holders.
• SMG ‘Southern Minerals Group’ which operates the Cobre mine is selling a proportion of product to fertilizer companies, who seasonally increase demand in February and March , the recent six-year high sales in terms of tonnage is a good indication for the rest of the year. Management now believe sales are on track to be maintained at significantly higher levels than over the past three years and has acquired a new Caterpillar 320 Trackhoe to raise production.
• The SMG team have also agreed on a new larger committed sales volume, to be delivered through 2024 with sales starting in mid-January 2024.

• Management elected not to raise further funds in the market through this period.

• Leigh Creek Copper Mine: The asset is impaired due to a lack of funding to develop the project with a $8.898m impairment recorded. It is possible that higher copper prices might reinitiate interest in the project.
• Leigh Creek hosts a total resource of 3.6mt grading 0.69% copper containing 24,900t of contained metal. While this is a relatively small resource it may prove to have value in certain envoronments.
• Redmoor (tin, tungsten and copper project in the UK): Cornwall Resources completed its work on the Deep Digital Cornwall project, led by the Camborne School of Mines.
• The results of the findings were published in November with final payments from the European Regional Development Fund, through HM Ministry of Housing, Communities and Local Government was received in the first quarter of 2024.
• The team continue to seek grant funding from the Shared Prosperity Fund of the Council of Cornwall and the Isles of Scilly which involves a degree of negotiation.

• Recent relogging and additional sampling of ~3,800m of historic drill core from Redmoor has identified previously unrecognised mineralisation which may assist in upgrading the February 2019 ‘Inferred’ mineral resource of 11.7mt at an average grade of 0.56% tungsten trioxide, 0.16% tin and 0.5% copper reported as 1.17% on a tin equivalent basis or 0.82% in terms of tungsten trioxide equivalence.
• Plantation Vein 22 drill holes were drilled between 1967 and 1970 targetting a historical Tin-Tungsten (Sn-W) target followed by minor underground exploration of the lode in early 1970’s.
• Work here could lead to the identification of potential new targets.

*SP Angel acts as Nomad and Broker to Strategic Minerals

Tertiary Minerals* (TYM LN) 0.14p, Mkt Cap £3.5m – Drilling progresses at Konkola as second hole planned.

• Tertiary provides an update on current drilling progress at Konkola West, where KoBold is targeting deep dipping extensions of Mingumba.
• Today they announce that the hole has hit a downhole depth of 1,341m.
• They note that the hole is continuing in the hanging wall sequence, above the target horizon.
• Progress has been slightly slower than expected following the introduction of a new drill rig and variable ground conditions.
• Planning for a second hole is now underway.

*SP Angel acts as Nomad and Broker to Tertiary Minerals

VALE SA* (VALE US) $11.3, Mkt Cap $51bn– Base metal plans show potential for 900ktpa copper in 2030s

• Brazilian iron ore giant Vale provided an update on its copper and nickel expansion plans yesterday.
• The Company is planning to produce 375-410ktpa Cu in 2026 and 190-210ktpa Ni.
• They plan to boost this to 500ktpa Cu from 2028 and see potential to boost production to 900ktpa and 300ktpa for nickel in the 2030s.
• Longer term additions to come from Hu’u which could add 300-350ktpa and Alemao adding 60ktpa.
• Major capacity expansion to come from Salobo and Sossego alongside the Canadian operations.
• CAPEX to 2026 on base metals estimated at $1,150m.
• Copper AISC estimated at $3,500-4,000/t in 2026 and nickel at $11,500-13,500/t.

*A member of the SP Angel research team holds shares in VALE

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 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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