SP Angel Morning View -Today’s Market View, Friday 23rd August 2024

Gold prices ($2,497/oz) recover as traders wait for Powell’s comments for Fed rate cut guidance

MiFID II exempt information – see disclaimer below

Asiamet Resources (ARS LN) – CAPEX reductions at BKM as project optimisation continues

Bluejay Mining* (JAY LN) – Placing raises £1.75m of funds for further exploration in Greenland and Finland

Thor Explorations* (THX LN) – Q2 financial results as costs fall but production guidance lowered

Gold prices ($2,497/oz) recover as traders wait for Powell’s comments for Fed rate cut guidance

• Gold has shrugged off a minor sell-off in Treasuries yesterday, following some more hawkish Fed comments.
• Schmid, Fed President for Kansas, calmed some optimism over a 50bp rate cut in September.
• US 10 year yields rose to 3.85%, having hit yearly lows of 3.77% following the BLS revisions.
• Powell’s comments today will be closely watched for indications of more aggressive rate cuts, with the market currently expecting a 25bp cut in September.
• The dollar remains weak against a basket of currencies, with traders taking advantage of higher yields elsewhere.

Copper steady as Codelco accused of tailings compliance breaches

• Copper continues to hover around $9,230/t, having been relatively flat over the past week.
• Codelco is being accused of tailings compliance breaches by Chile’s environmental regulator, given 10 days to respond.
• Teck may be facing supply disruptions from the Canadian National Railway strike, with 9,000 unionised workers striking.
• Copper shipments continue via the Lobito railway, with the first US shipment loaded with DRC cathodes.

Lithium – Nine times increase in lithium demand projected by 2040 by Benchmark

• Lithium demand looks set to increase by nine times according to Benchmark Minerals.
• Current estimates see lithium mining capital spend to rise by just 3x to $1.6tn in 2040 from $567bn in 2030
• Recyclers may struggle to source projected supplies of spent EV lithium-ion battery packs as auto manufacturers take command of used batteries for in-house purposes.
• Local area grid instillations will take up large numbers of ‘used’ EV battery packs giving a second life before scrappage delaying the recovery of metals from this source.
• Benchmark estimate demand for recycled materials will increase 26 times by 2040 with total capex rising to $157b from $26 bn
• Benchmark also see capex by mid-stream processors rising to to $157bn in 2040 from $48bn in 2030 with new cathode development rising to $157bn from $48bn in 2030.
• The quantum of this capex is investment in manufacturing facilities once new and more advanced cathode chemistries have been developed.

Conclusion:  We note that most grid battery instillations have been Li-ion based battery chemistries due to their lower-cost and fast reaction times.

While the scale of the increase in lithium demand in Benchmark’s forecasts look significant we suspect they have been cautious in their estimation.

We see substantially stronger demand coming through from solar energy suppliers who are keen to store energy when prices are low and then feed this power into the grid when prices are higher. Li-ion battery instillations gives the flexibility and fast reaction times needed to capture higher prices when demand spikes.

Falling battery costs key to India’s coal phase-down and renewable energy transition by 2032

• A recent report by Ember and TERI highlights the pivotal role that declining Battery Energy Storage System (BESS) costs will play in the phase-down of coal power in India. (The Economic Times India)
• India could avoid building new coal plants and could limit its coal capacity to planned levels by 2032 if the cost of battery-storage systems drops by 15% annually, according to the report.
• Currently 75% of India’s power generation comes from coal and to meet 2070 net-zero targets, the country needs to move to renewable power.
• The higher cost of BESS will hinder storage growth once sustained renewable energy expansion once India’s solar share in the power mix crosses 25% – currently, solar accounts for around 7% of India’s total power generation.
• If the battery costs fall faster, the power sector could rely more on renewable energy, meeting 83% of the electricity demand during the day by 2032.
• However, during non-solar hours, renewable energy might only cover 38% of the demand due to the current storage limitations.

Economics

US – Jerome Powell will be speaking at the annual Jackson Hole research conference likely to highlight progress on taking inflation down towards the 2% long term target and reiterating that rates will be coming down in absence of any surprises.

Japan – So called “core core” CPI that excludes volatile food and energy costs fell to 1.9% in July.

• Markets are seeing a very low chance of a hike in September or October and a 70% probability of an increase in December, Reuters reports.
• Governor Ueda said earlier on Friday that the central bank still plans to raise interest rates if the economy and inflation perform in line with expectations.

UK – Consumer sentiment came in little changed holding up at a 34-month high in August according to GfK data.

• The GfK Consumer Confidence Index was steady at -13 versus a Reuters estimate of -12.
• “This more positive outlook may be due to a mortgage-friendly interest rate cut at the beginning of August, and hopes of more to come,” GfK said commenting on the data.
• Ofgem, an energy market regulator, is set to lift energy price cap by 10% for the period between October and December.
• This is fhte first increase in the cap since January and will bring a typical household gas and electricity bill to£1,717pa, up from current £1,568.

Uranium – Kazatomprom, the world’s largest uranium producer, cut its 2025 production guidance by 17% to 25,000-26,500tU, down from 30,500-31,500 guided previously.

• That marks a 12% growth on 2024 guidance for 22,500-23,500tU.
• A revision is attributed to lower production at the Budenovskoye JV due to delays in the construction of surface facilities and infrastructure as well as the effect of limited access to sulphuric acid throughout the year.
• The Company has not provided 2026 guidance amid production outlook uncertainty with new guidance to be available no earlier than a year from now.

Currencies

US$1.1121/eur vs 1.1135/eur previous. Yen 145.84/$ vs 145.14/$. SAr 17.960/$ vs 17.927/$. $1.313/gbp vs $1.309/gbp. 0.673/aud vs 0.675/aud. CNY 7.137/$ vs 7.134/$.

Dollar Index 101.38 vs 101.18 previous

Precious metals:         

Gold US$2,496/oz vs US$2,508/oz previous

Gold ETFs 82.6moz vs 82.6moz previous

Platinum US$955/oz vs US$961/oz previous

Palladium US$941/oz vs US$953/oz previous

Silver US$29.35/oz vs US$29.42/oz previous

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

Base metals:   

Copper US$ 9,200/t vs US$9,259/t previous

Aluminium US$ 2,492/t vs US$2,511/t previous

Nickel US$ 16,780/t vs US$16,780/t previous

Zinc US$ 2,900/t vs US$2,865/t previous

Lead US$ 2,089/t vs US$2,090/t previous

Tin US$ 32,900/t vs US$32,790/t previous

Energy:           

Oil US$77.6/bbl vs US$76.1/bbl previous

• US Henry Hub natural gas prices fell after the EIA reported a 35bcf w/w build to 3,299bcf (+28bcf exp) for US inventories, with storage levels 7.2% above last year and 12.6% above the 5-year average.
• British energy regulator Ofgem raised its price cap on household energy bills by 10% from 4Q24 to an annual level of £1,717, which it blamed on an anticipated increase in wholesale energy prices this winter.

Natural Gas €36.5/MWh vs €37.3/MWh previous

Uranium Futures $79.9/lb vs $79.9/lb previous           

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$97.0/t vs US$99.0/t

Chinese steel rebar 25mm US$475.6/t vs US$478.3/t

Thermal coal (1st year forward cif ARA) US$125.5/t vs US$124.5/t

Thermal coal swap Australia FOB US$146.3/t vs US$146.3/t

Coking coal Dalian Exchange futures price US$178/t vs US$186.1/t

Other:  

Cobalt LME 3m US$24,300/t vs US$24,900/t

NdPr Rare Earth Oxide (China) US$54,853/t vs US$54,732/t

Lithium carbonate 99% (China) US$9,878/t vs US$9,951/t

China Spodumene Li2O 6%min CIF US$780/t vs US$780/t

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

China Tungsten APT 88.5% FOB US$333/mtu vs US$333/mtu

China Graphite Flake -194 FOB US$457/t vs US$462/t

Europe Vanadium Pentoxide 98% 4.7/lb vs US$4.7/lb

Europe Ferro-Vanadium 80% 24.8/kg vs US$24.8/kg

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

China Rutile Concentrate 95% TiO2 US$1,394/t vs US$1,395/t

Spot CO2 Emissions EUA Price US$72.4/t vs US$72.4/t

Brazil Potash CFR Granular Spot US$295.0/t vs US$295.0/t

Germanium China 99.99% US$2,395/kg vs US$2,365/kg

China Gallium 99.99% US$445/kg vs US$445/kg

Battery News

Hyundai surpasses Ford and GM in US EV sales, second behind Tesla

• Hyundai Motor Group (HMG), encompassing Hyundai, Kia, and Genesis, secured 10% of US EV sales in H1 2024, surpassing Ford (7.4%) and GM (6.3%), positioning itself as the second-largest EV seller after Tesla (InsideEVs).
• HMG’s success is attributed to launching affordable and desirable EVs, such as the Kia EV9 and Hyundai Ioniq 5 N, with few direct competitors in the market.
• Despite its current success, HMG faces increasing competition from GM and Ford, which are launching new EV models and offering competitive incentives to attract buyers.
• To maintain competitiveness after losing federal tax credit eligibility, HMG has offered significant discounts and lease offers, such as $7,500 off the Ioniq 6, aiming to convert new buyers into loyal customers.

Xpeng projects over 35% sales growth on back of new tech investments

• Chinese EV maker Xpeng anticipates a 35.7% to 49% increase in vehicle deliveries for Q3 2024, expecting to sell 41,000 to 45,000 units, up from 30,207 in Q2. (South China Morning Post)
• Xpeng reported a Q2 net loss of 1.28 billion yuan ($179.2m), a 6.6% improvement from Q1, outperforming analyst expectations.
• Q2 revenue grew by 23.8% from Q1, reaching 8.1 billion yuan.
• CEO He Xiaopeng credits the growth to investments in AI, self-driving technology, and digital cockpits, which are expected to continue to drive sales.
• Xpeng plans to launch several new models and facelift versions over the next three years to capitalise on a “strong product cycle.”
• Xpeng expanded its self-driving system, X NGP, nationwide in China, becoming the first local automaker to offer such technology across the country, ahead of Tesla’s anticipated Full Self-Driving software.

Australia spending big on advertising to push EV adoption

• Latest data published by data analytics leader Nielsen has shown the expenditure on advertising in the Australian automotive market is up 8% yoy.
• Spend on EV advertising has skyrocketed by 711% since 2021, from $8.2m in FY 2021 to $66.5m in FY 2024, driven by growing consumer interest.
• 985,000 Australians, a 4.2% increase over the last year, indicated that their next car purchase would likely be an EV.
• The top 10 automotive ad spenders for FY24 include major brands like Toyota, Hyundai, Mitsubishi, Kia, and Nissan.
• The top five EV models by ad spend in Australia for FY24 are Kia EV9, Toyota BZ4X, Nissan X-Trail SUV, Polestar 2, and Kia EV6 GT.

BYD weighs up state incentives for EV plant Mexico

• The Chinese EV and battery maker has narrowed its list of finalists for the location of a manufacturing plant in Mexico down to three states and is reviewing a range of proposed incentives from them. (Reuters)
• BYD’s Mexico director general, told Reuters that the company was reviewing the latest proposals by the candidate states, which have offered “many benefits” including fiscal, land, management and preferential pricing incentives.
• Mexico’s federal government is being put under pressure from the US to prevent Chinese EV makers from circumventing recent tariff increases by building local factories in North America.

Company News

Asiamet Resources (ARS LN) – 1.28p, mkt cap £32.4m – CAPEX reductions at BKM as project optimisation continues

• Asiamet reports an update on their BKM copper project in Indonesia.
• Initial CAPEX savings estimated over $26m.
• The Company see pre-production CAPEX savings of between $50-80m from the 2023 Feasibility Study estimate of $235m.
• The $50-80m in savings is expected to result from revised equipment selection, reduced bulk earthworks and simplifying the flowsheet.
• The Company will look to complete a limestone resource definition drilling programme having secured an environmental permit.
• Limestone will be used in the neutralisation process of acid in the copper leaching process.
• They also highlight ‘strong interest’ from power equipment suppliers for the Biomass Power Station.

Bluejay Mining* (JAY LN) 0.32p, Mkt cap £8.4m – Placing raises £1.75m of funds for further exploration in Greenland and Finland

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

• Bluejay Mining reports the placing of £1.75m of stock at 0.3p/s.
• The placing becomes effective by no later than 8.00am on 6 September.
• Funds are to be used for:
• Disko: Preparation for Disko 2025 fieldwork as well as stakeholder engagement;
  • KoBold metals may or may not return to the Disko project where they collected substantial geophysical and sampling data two years ago
  • We note the KoBold team are very busy on a number of projects in Zambia at present
• Industrial gas: Preparation for White Flame Jameson Environmental Impact Assessment and drilling consultation;
  • White Flame Energy holds 100% of three potentially large-scale industrial gas, natural gas and liquid hydrocarbon rich exploration and exploitation licences, onshore, East Greenland.
• Industrial gas (hydrogen): Resampling and partner engagement at the Company’s Outokumpu industrial gas asset in Finland;
  • The team are going over historic data with gas showings from the Finish Geological Survey with a view to drilling for industrial gasses including hydrogen.
• Thule Copper (underneath Dundas) Site surveys and regional sampling at the Company’s Thule Copper project;
  • The Thule Basin hosts the first-order controls required for sedimentary copper deposits and mineralisation observed within several geological units across the basin.
  • Encouraging ore-grade samples of mineralisation locally exceeding 10% copper have been identified”
  • Bluejay’s camp on the Dundas project at (Moriusaq) will serve as a basecamp for work on the expanded licence area and is close BHP’s Camelot Project.
  • Management plan to run a helicopter-supported geological reconnaissance program to support its work on the license through the 2024 field season.
  • Reconnaissance of the Thule Group and underlying basement shows at least 15 sills form a sill system that dominates the landscape in southern Steensby Land.
    • Ilmenite Tonnages Calculated for Steensby Land Sill Complex
    • 17 Gt – Ilmenite contained in sills prior to erosion
    • 10 Gt – Ilmenite remaining in sills after erosion
    • 7 Gt – Ilmenite available for sedimentation
• Copper, zinc, gold, silver VMS exploration: Continued maintenance and engagement on Hammaslahti a historical state-owned copper mine in Finland; and
  • We believe the Hammaslahti license area is prospective for remobilised VMS style pods of mineralisation.
• G&A: General corporate and working capital purposes.
  • Salaries, flights, general expenses etc…

*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.

Thor Explorations* (THX LN) 17.5p, Mkt cap £110m – Q2 financial results as costs fall but production guidance lowered

• Nigerian gold producer Thor reports 2Q24 financial results.
• The Company sold 23.6koz at an average price of $2,309/oz over the quarter.
• AISC reported at $802/oz, with Segilola seeing lower cost medium and high-grade stockpiled ore averaging 3.42g/t.
• Revenue of $54m generated, 1H24 saw $87m generated.
• EBITDA over the quarter at $38m, over the first half of $61m.
• Net profit of $28m for the quarter an $40m for the half year.
• Net debt of $2.7m, having paid down $8m to the senior debt facility.
• Guidance revised lower to 90koz from 95-100koz, whilst AISC revised down to $900-1,000/oz vs previous guidance of $1,100-1,200/oz.
• Segilola production saw 174kt of ore processed over the quarter, with recoveries at 94.6% from grades of 3.42g/t Au.
• Stockpiles increased 37% to 1.2mt of ore at 1g/t Au.
• Plant upgrades supported drawdown of gold in circuit.
• Exploration at Segilola continues, with 12,000m worth of drilling beginning, results expected September 2024.
• At Douta in Senegal, a PFS is expected following metallurgical results and an updated MRE in 4Q24.
• For lithium, 15 drill holes were completed in Oyo State, over 1,121m with no mineralisation results of note.
• Thor is now planning a drill programme at its Komu lithium targeted, expected to start this quarter.

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

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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35-39 Maddox Street London

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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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