SP Angel Morning View -Today’s Market View, Friday 24th March 2023

Gold tests $2,000/oz level on credit crunch concerns

MiFID II exempt information – see disclaimer below 

Atlantic Lithium* (ALL LN) – Directors take advantage of share price pull back after erroneous short selling report

Celsius Resources* (CLA LN) – Celsius issues 8.5m new shares to Lind Partners at A$0.014c (0.76p)

Caledonia Mining (CMCL LN) – Record production drives revenues and cash generation at the Blanket mine; $13m equity raise to develop portfolio of assets in Zimbabwe

GreenRoc Mining* (GROC LN) – Annual results statement highlights progress in testing Amitsoq graphite and ERMA support for the project in Greenland

Phoenix Copper* (PXC LN) – Update on copper bonds and $2m loan facility agreement

IGTV:   23/03/23: Mining in a banking crisis – how does it work? https://www.youtube.com/watch?v=DiL9Ea88o-w

VOX Markets Podcast:  10/03/2023:  https://audioboom.com/posts/8261642-john-meyer-is-china-s-growth-ambitions-believable-plus-amur-atlantic-lithium-cornish-metals

ii Interactive Investor:  Indaba interviews:       Battery Metals – Four Stocks – https://www.youtube.com/watch?v=8fwy6PXUe6s&t=5s

• Battery Metals Market – https://www.youtube.com/watch?v=nfdOAUO46tw&t=3s
• Gold – Four Companies – https://www.youtube.com/watch?v=2mVzyw4heDQ&t=3s

*SP Angel almost invariably acts as nomad or broker or nomad and broker to companies mentioned in the above videos and podcasts. We speak more about these companies as we have a good understanding of their business and can talk with a greater degree of confidence. As ever, however, it should be noted that our views do not take into account the circumstances and needs of any particular investor or investor type. So enjoy the talks, but please do your own research, including other companies not mentioned by us but operating in the same areas, and get professional advice where appropriate.

Gold holds higher ground as traders see end of Fed rate hike road

• Spot gold prices made another attempt at breaking through $2,000/t last night, touching $1,999/oz before settling lower.
• Bullion is seeing consistent inflows as US Treasury yields slide, with comments from Powell on Wednesday suggesting a pause may be due.
• The market is currently pricing in several rate hike cuts this year, as elevated rates hit bank bond portfolios.
• A weaker dollar, which has fallen nearly 1.5% this week against a basket of currencies, is supporting gold’s rally.

Copper extends gains on weak dollar, rising Chinese demand

• Copper prices have rallied 5.7% this week touching $9,100/t overnight.
• The move follows consistent inventory draws over the week as manufacturing activity begins to climb in China.
• A weaker US dollar is also supporting greenback-denominated metals.
• The metal is also being supported by bets that the Fed’s rate hike schedule is nearing its final stages.

Iron ore slumping as steel demand disappoints from China

• Iron ore is set to see its worst week since October having fallen $10/t to $118/t this morning.
• Stockpiles of steel at Chinese mills have been climbing this month, as construction starts continue to disappoint.
• China is approaching peak construction, and weaker iron ore prices present an ominous sign for the steel-ingredient’s bulls
• Beijing is also using its regulatory might to crackdown on iron ore speculators, adding further pressure to prices.

LME reports no more bags of stones in warehouse nickel and Chinese imports slump

• The London Metal Exchange has conducted a review of bagged nickel underlying its contracts following fraudulent cases over the past month.
• Bags supposedly containing nickel in Rotterdam had, in fact, been full of stones.
• The exchange is confident its current metal checking protocol is ‘robust in identifying potential irregularities.’
• The LME is also looking forward to resuming trading Asian daytime nickel contracts on Monday following last year’s unprecedented short squeeze.
• China is seeing record low levels of refined imports, down 85% mom for Feb, as domestic producers ramp up.
• Smelters using Indonesian feedstock are expected to ramp up output by 39% to 245,900t in 2023. (Mysteel)

 Economics

US – Banks drew on $165bn from the Federal Reserve lending facility in the week to March 22 highlighting lenders’ concerns over available interbank liquidity, Bloomberg reports.

• This compares to $165bn borrowed in the previous week.
• Amounts held in money market funds climbed to a record high of $5.1tn, up on $5.0tn held in the week to March 15, with total inflows over the last week at $238bn.
• $121bn in inflows in the week to March 15 was the largest since April 2020 when concerns about the economic fallout from the coronavirus pandemic sent investors searching for safe haven assets.
• Demand for high quality and liquid assets shot up in the wake of increased banking system crisis contagion.

Eurozone – Growth in the Eurozone continued to pick up hitting the highest level in 10 months driven exclusively by the services sector.

• “Growth has been buoyed since the lows of late last year as recession fears and energy market worries fade, inflation pressures ease and the unprecedented supply chain delays seen during the pandemic are replaced with record improvements to supplier delivery times,” S&P Global commented on the data.
• New orders dynamics were very different between two sectors as services reported the steepest increase in new work since last May while manufacturing orders fell.
• Employment growth picked up to a nine month high with the measure for services climbing to a ten month as firms picked up hiring to match rising demand.
• Inflation moderated in March, although, stubborn inflationary pressures are reported to be primarily fuelled by the service sector and rising wage costs suggesting policymakers will need to continue tightening the policy moving forwards.
• Manufacturing PMI: 47.1 v 48.5 February and 49.0 est.
• Services PMI: 55.6 v 52.7 February and 52.5 est.
• Composite PMI: 54.1 v 52.0 February and 52.0 est.

Germany

• Manufacturing PMI: 44.4 v 46.3 February and 47.0 est.
• Services PMI: 53.9 v 50.9 February and 51.0 est.
• Composite PMI: 52.6 v 50.7 February and 51.0 est.

France

• Manufacturing PMI: 47.7 v 47.4 February and 48.0 est.
• Services PMI: 55.5 v 53.1 February and 52.5 est.
• Composite PMI: 54.0 v 51.7 February and 51.5 est.

UK – Strong retail sales reported this morning returning to the their pre-pandemic levels, Bloomberg writes.

• The data suggests the consumer may be weathering the cost of living crisis better than expected.
• Although, sales were reported at their strongest in stores that offered heavy discounts while spending on eating out and takeaways pulled back.
• Additionally, a separate report tracking consumer sentiment showed people maintained a pessimistic outlook in March, albeit less so than a month ago.
• BOE Governor Andrew Bailey highlighted that rates will have to go up again if inflation persists.
• The central bank raised rates by 25bp to 4.25% on Thursday after latest inflation report showed a pick up in the CPI rate coming in stronger than expected.
• Retail Sales (%mom): 1.2 v 0.5 January and 0.2 est.
• Core Retail Sales (%mom): 1.5 v 0.4 January and 0.2 est.
• GfK Consumer Confidence: -36 March and -38 February and -36 est.
• Manufacturing PMI fell to 48.0 in March from 49.3.
• Services PMI fell to 52.8 from 53.5
• Composite PMI fell to 52.2 from 53.1

South Africa – Good news, ESKOM has periods of zero load shedding over weekend

• Maybe it was the weather, or maybe it was something to do with the weekend but ESKOM had a period of no load shedding over the weekend.
• The Daily Maverick speculates that ESKOM might have been playing politics by supporting power generation ahead of Julius Malema’s EFF day of action last Monday.
• ESKOM reports that six power plants reached an energy availability of 70% for the first time in a year indicating that Load Shedding should reduce (Daily Maverick).
• Electricity Minister Kgosientsho Ramokgopa has been touring Eskom’s power plant. The minister claims that corruption was not the problem at Eskombut that technical issues kept tripping up plants.
• There is much news/speculation on criminal groups supplying and feeding stone and pieces scrap metal into coal fired furnaces causing poor performance and breakages at Eskom plants.
• The well documented poisoning of the Eskom CEO the day after he resigned from his position also suggests that criminal groups have much to lose from being ousted from Eskom supply chains.
• Eskom is introducing a 18.65% tariff increase from 1^st April for Eskom’s standard tariff customers. A 18.49% Municipal tariff increase of is effective on 1 July.

Switzerland – hikes rates 50bp and signals further tightening is possible

The Great Inflation and the Weimar Republic – https://www.bbc.co.uk/sounds/play/m001k7ll

• We thoroughly recommend listening to the following excellent radio 4 program on How has the experience of hyperinflation in Germany in 1923 shaped the past 100 years?
• A hundred years ago, Germany was in the grip of the worst hyperinflation the world has ever seen. Nothing before or since has matched the speed and precipitous fall of the Reichsmark.
• It lost 99.9% of its post-war value in 1923, and this unimaginable loss of confidence in the currency left the German government and population reeling.
• The consequences of 1923 were not just misery, suffering and starvation but also a moral degeneration – the excesses of the tail-end of the Weimer Republic and the political catastrophe which followed.
• The deutschmark became the symbol of stability, pride and confidence for a nation who couldn’t celebrate its war heroes or recent history. How have generations of German policy makers, with their abhorrence of debt and stringent adherence to sound money, influenced European Union fiscal and social policy?

Currencies

US$1.0789/eur vs 1.0895/eur yesterday. Yen 130.13/$ vs 131.13/$. SAr 18.160/$ vs 18.128/$. $1.225/gbp vs $1.231/gbp. 0.667/aud vs 0.673/aud. CNY 6.863/$ vs 6.828/$.

Dollar Index 102.82 vs 102.15 yesterday.

Commodity News

Precious metals:

Gold US$1,988/oz vs US$1,976/oz yesterday

Gold ETFs 92.9moz vs US$92.9moz yesterday

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

Palladium US$1,415/oz vs US$1,464/oz yesterday

Silver US$23.12/oz vs US$22.86/oz yesterday

Rhodium US$8,300/oz vs US$8,300/oz yesterday

Base metals:   

Copper US$ 9,021/t vs US$8,956/t yesterday

Aluminium US$ 2,353/t vs US$2,306/t yesterday

Nickel US$ 23,325/t vs US$22,550/t yesterday

Zinc US$ 2,923/t vs US$2,882/t yesterday

Lead US$ 2,120/t vs US$2,118/t yesterday

Tin US$ 25,000/t vs US$23,900/t yesterday

Energy:           

Oil US$75.5/bbl vs US$76.4/bbl yesterday

• Crude oil prices fell following comments from US Energy Secretary Jennifer Granholm that refilling the Strategic Petroleum Reserve (SPR) was unlikely to start in 2023 despite the current sub-$70/bbl price environment.
• The US EIA storage report detailed a draw of 72bcf (75bcf exp) to 1,900bcf last week, with storage levels now 36.1% above last year and 22.7% above the 5-year average, with LNG exports averaging 13.1bcf/d in March.
• Reuters reported that the CFOs of the commodity traders Trafigura, Vitol, Gunvor, Mercuria and Castleton have said they don’t expect a finance squeeze due to the banking crisis, particularly as commodity prices have dropped.

Natural Gas US$2.161/mmbtu vs US$2.240/mmbtu yesterday

Uranium UXC US$50.20/lb vs US$52.00/lb yesterday

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$118.1/t vs US$121.1/t

Chinese steel rebar 25mm US$612.9/t vs US$620.6/t

Thermal coal (1st year forward cif ARA) US$134.5/t vs US$134.5/t

Thermal coal swap Australia FOB US$186.0/t vs US$181.5/t

Coking coal swap Australia FOB US$340.0/t vs US$340.0/t           

Other:  

Cobalt LME 3m US$34,180/t vs US$34,180/t

NdPr Rare Earth Oxide (China) US$82,182/t vs US$82,779/t

Lithium carbonate 99% (China) US$33,295/t vs US$34,503/t

China Spodumene Li2O 5%min CIF US$4,830/t vs US$4,930/t

Ferro-Manganese European Mn78% min US$1,333/t vs US$1,345/t

China Tungsten APT 88.5% FOB US$325/mtu vs US$325/mtu

China Graphite Flake -194 FOB US$790/t vs US$790/t

Europe Vanadium Pentoxide 98% 9.6/lb vs US$9.6/lb

Europe Ferro-Vanadium 80% 39.25/kg vs US$39.75/kg

China Ilmenite Concentrate TiO2 US$345/t vs US$346/t

Spot CO2 Emissions EUA Price US$95.4/t vs US$94.1/t

Brazil Potash CFR Granular Spot US$455.0/t vs US$455.0/t

Company News

Atlantic Lithium* (ALL LN) 26p, Mkt Cap £157m – Directors take advantage of share price pull back after erroneous short selling report

• Atlantic Lithium report the purchase of shares by a number of directors.
• The directors appear to be taking advantage of the fall in the company share price as a result of a short seller report aimed at Piedmont Lithium, Atlantic’s partner in the Ewoyaa project in Ghana.
• Piedmont has pledged US$103m towards the development of the Ewoyaa lithium project.
• Management are waiting on final approvals for a mining licensee on the Ewoyaa project and appear to have strong local support from the Minerals Commission and, MIIF, the Ghana Sovereign Wealth fund.
• Len Kolff the Interim CEO has bought 23,508 shares brining his stake up to 0.5% of the company
• Amanda Harsas, the finance director and company secretary has also bought 766,629 shares brining her stake to 0.25% of the company.
• The aggregate value of the stock purchases is £210,676 at 26.66p/s.
• Atlantic’s recent PFS shows a Post-tax NPV8 of US$1.33bn and an IRR of 224% assuming a spodumene price of $1,359/dmt SC6% in the short term with US$1,200/dmt long term pricing
• Spodumene prices for SC5% min are currently at US$4,830/t CIF

Conclusion:  We recommend investors take the hint and join Len and Amanda in backing Atlantic in their drive to become Ghana’s first lithium producer.

*SP Angel acts as Nomad to Atlantic Lithium

Celsius Resources* (CLA LN) 0.87p, Mkt Cap £16.3m – Celsius issues 8.5m new shares to Lind Partners at A$0.014c (0.76p)

(Celsius has agreed to sell a 30% economic ownership of MCB copper mine for US$43m implying a valuation of >$143m on consummation of the deal)

Click Link for SP Angel research report PDF note – MCB project [email protected]% US$463m, IRR of 34.3%

• Celsius Resources reports the issuance of 8.5m new shares to Lind Partners at A$0.014c (0.76p).

*SP Angel acted as broker to Celsius Resources with respect to its AIM IPO.

Caledonia Mining (CMCL LN) 1,155p, Mkt Cap £199m – Record production drives revenues and cash generation at the Blanket mine; $13m equity raise to develop portfolio of assets in Zimbabwe

• Annual revenue hit a record high of $142m (2021: $121m) reflecting record annual production at the Blanket Mine of 80.8koz (2021: 67.5koz).
• Average gold price realised was little changed at $1,772/oz (2021: $1,766/oz).
• AISC were well controlled averaging $878/oz (2021: $856/oz).
• EBITDA came in at $50.4m (2021: $46.4m).
• EBIT and PAT was $40.3m and $22.9m, respectively (2021: $38.4m and $23.1m).
• Net CFO amounted to $42.6m (2021: $30.9m).
• FCF came in at -$1.5m (2021: -$6.9m)
• Closing net debt stood at $5.9m (2021: $16.0m net cash).
• New solar power plant connected to the Blanker mine now accounts for ~27% of electricity needs helping with the cost and sustainability of power supply.
• In Q4/22, the Company completed the acquisition of the Motapa Project, a property contiguous to the Bilboes Gold Project.
• All share acquisition of the Bilboes Gold Project was closed in Q1/23.
• 2023 guidance is for 87.5-97.0koz including 75.0-80.0koz from Blanket and 12.5-17.0koz from oxide operation in Bilboes.
• The Company is planning to raise $13m from new equity (at £11.15/sh) with net proceeds to cover FS related work at Bilboes as well as exploration at Motapa and Maligreen.

GreenRoc Mining* (GROC LN) 3.44p, Mkt Cap £4.6m – Annual results statement highlights progress in testing Amitsoq graphite and ERMA support for the project in Greenland

• GreenRoc Mining report results for the year ended November 2022.
• The company reports no sales due to early stage of the Amitsoq project development.
• Administration expenses rose to £1.03m from £305,000 a year earlier when Greenland exploration was locked down due to covid.
• Administration costs were split £534,000 to staff costs. £162 for professional fees, £171,000 for office and travel expenses and £163,000 for services fees to the parent company Alba Minerals run by GreenRoc Chairman, George Frangeskides.
• The group capitalised £2.1m of exploration and evaluation costs in the accounts.
• Highlights in the year were:
• Bulk sample: a ~700kg bulk sample was collected in the old mine adits and is being processed by UFR-FIA in Freiberg, to work out the best process route and produce samples for test work and marketing.
• The ability to so easily extract a representative sample at low cost is a valuable benefit for a junior mining company.
• Management are using samples to engage with graphite processors and EV Li-ion battery manufacturers for the development of battery anodes from Amitsoq graphite material.
• ProGraphite: report on purification shows 99.97% purity shows the material to be suitable for battery grade material using a leaching process at 250°C.with results showing relatively low levels of Fe, Cu and Cr at 15.4ppm, 0.8ppm and 0.2ppm.
• ERMA letter: the European Raw Materials Alliance expressed: “GreenRoc’s graphite resource is of global importance and… will enable the European Union to achieve a certain level of independence for the electrical vehicle supply chain.  
• European Raw Materials Alliance has approved the Amitsoq Graphite project and will engage to support its development and financing to produce these critical raw materials for the benefit of the European Union goals”.
• The support letter followed to the ERMA board on project technicalities and market analyses before admitting the Amitsoq project ERMA support.
• Amitsoq: JORC Inferred Mineral Resource to be 23.05mt grading 20.41% Gc ‘Graphitic Carbon’ with a total graphite content of 4.71mt including:
  • 1.26mt of Measured Resource,
  • 6.12mt Indicated Resource from 2.04mt – a 200% increase over the 2022 MRE,
  • 15.67mt Inferred Resource from 6.24mt to – a c.150% increase over the 2022 MRE,
  • Total: 23.05mt grading 20.41% GC at a cut-off grade of 0% Gc.
• The LGL ‘Lower Graphite Layer’ contains some 16.88mt, @ 21.51% for 3.634mt of contained graphite representing >77% of the total resource with the rest in the UGL ‘Upper Graphite Layer’.
• The team completed a second phase drilling programme at Amitsoq last September 2022, with:
  • 19 holes drilled for a total of 2,844m, every hole intersecting significant graphite layers
  • Drilling more than doubling the deposit footprint and returning exceptionally high grades

Conclusion:  GreenRoc’s Amitsoq project has potential to become an important producer of graphite anode material for the fast growing European Li-ion EV battery materials industry. Management will hopefully capture a greater share of value within the graphite anode production chain than normally seen in the simple supply of mined graphite material.

*SP Angel acts as broker to GreenRoc Mining.

Phoenix Copper* (PXC LN) 32p, Mkt Cap £40m – Update on copper bonds and $2m loan facility agreement

• Phoenix provides an update on its intended placing of $80m worth of corporate copper bonds to fund the development of the Empire mine in Idaho.
• The Company has met with a number of parties and has updated the terms of the coupon in line with market conditions.
• The copper price coupon will now be set at a minimum of 8.5% pa at a $3.6/lb or lower average monthly closing copper price.
• For every $0.10/lb increase in the copper price, the coupon will increase by 0.15%.
• The coupon will be subject to a maximum of 20% pa at a $11.27/lb or higher copper price.
• The bonds are yet to be issued, although the Phoenix team remains confident of a successful placing.
• In the meantime, the Company has agreed a $2m loan facility with Riverfort Global Opportunities PCC.
• The funds will be utilised for operational working capital as the 2023 exploration season approaches.
• The short-term $2m loan facility is unsecured and has an initial three-month term, paying a fixed 4% coupon.
• Phoenix will be able to extend the facility beyond the three-month period for an additional nine months, paying a 1% interest per month.
• However, if an extension is agreed, Riverfort Global will be entitled to convert any principal or other amount outstanding into ordinary Phoenix shares at a price equal to a 10% discount to the lowest VWAP in the 10 days prior to conversion.
• Phoenix will issue Riverfort Global 2,000,000 warrants over Ordinary Shares at an exercise price of 42 which will remain valid for three years.
• The imminent 2023 exploration season will prioritise a 60-hole drilling programme at the prospective Navarre Creek gold zone whilst also drilling out the existing Empire Mine claim blocks.
• The Company states it holds ‘sufficient sterling working capital to cover corporate overheads’ through to 2024

*SP Angel acts as nomad to Phoenix Copper

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 – [email protected] – 0203 470 0490

Simon Beardsmore – [email protected] – 0203 470 0484

Sergey Raevskiy –[email protected] – 0203 470 0474

Sales

Richard Parlons –[email protected] – 0203 470 0472

Abigail Wayne – [email protected] – 0203 470 0534

Rob Rees – [email protected] – 0203 470 0535

Grant Barker – Grant.Barker@spangel.co.uk – 0203 470 0471

SP Angel                                                            

Prince Frederick House

35-39 Maddox Street London

W1S 2PP

*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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