SP Angel Morning View -Today’s Market View, Friday 26th April 2024

Copper jumps over $10,000/t as BHP bid for Anglo highlights miners’ appetite for copper

MiFID II exempt information – see disclaimer below

Anglo American (AAL LN) – BHP’s overtures spurned

Aura Energy* (AURA LN) – Quarterly report as Tiris advances towards production

Empire Metals* (EEE LN) – Rationalisation of portfolio as Pitfield development accelerates

Ferro-Alloy Resources (FAR LN) – Q1 production results hit by flooding

Sayona (SYA AU) – Cash position slides whilst spodumene concentrate ramp up continues

Copper jumps over $10,000/t as BHP bid highlights miners’ insatiable appetite for copper

• Copper prices have extended yesterday’s gains to climb above $10,000/t for the first time in two years.
• The market is currently looking to supply shortages, with China TCRC fees at $0/t, suggesting a dearth of available concentrate following a massive smelter expansion rollout.
• BHP’s bid for Anglo yesterday highlighted the major’s desire for copper, with leading metal producers struggling to develop tier 1 assets to fit their portfolios.
• BHP would displace Freeport as the largest listed global copper producer if it can successfully acquire Anglo.

Iron ore holds higher despite production increases from BHP and Vale

• Iron ore prices are hovering just below $120/t for the 62% Fe China.
• Chile and Brazil have hiked tariffs on Chinese steel exports, boosting steel prices in South America.
• Supply growth continues, with Vale boosting output by 6% yoy in Q1 whilst BHP has boosted output by 3%.

Gold prices rise again to $2,348/t following brief setback

• Gold prices were driven higher again this morning reaching $2,351.8/oz in London trading.

BHP / Anglo – Is BHP limbering up for another attempt to merge with Rio Tinto

• BHP launched a hostile bid for Rio Tinto in February 2008 with the deal falling away as the SubPrime Crisis and collapse of Lehman Bros froze debt markets.
• Glencore also went into a tailspin at the time on concerns over its ability to refresh its huge short-term revolving credit facilities which it had use to finance the expansion of its business.
• This time BHPs offer for Anglo at US$43bn is much easier with BHP at US$115bn but BHP’s requirement for the disposal of Anglo’s South African assets also makes it easy for Anglo to reject the offer.
• It’s difficult to gauge how South Africa’s PIC ‘Public Investment Corporation’, Anglo’s largest shareholder will react to the idea of Anglo disposing of its stakes in Anglo Platinum and Kumba iron ore.
• Anglo currently holds 78.6% of Anglo Platinum and 69.7% in Kumba.
• While the PIC may see opportunity in allowing AmPlats and Kumba to cast off from Anglo, they may also prefer to hold the group together.
• AmPlats as it is known is struggling with falling platinum and palladium prices while Kumba FOB costs are around US$91/dmt (C1 $44/t) more than twice that of Rio and BHP iron ore from the Pilbara.
• The real value of combining the two groups is bolting the copper businesses together:

BHP

• • 2024  1,720,000 – 1,910,000t

Anglo guidance:

• • 2024  862,000t
  • 2025  690,000 – 750,000t
  • 2026  760,000 – 820,000t

• The combined entity would produce around 10% of global copper production triggering anti-monopoly concerns though pales in comparison with China which now accounts for around 50% of global refined copper production due to rapid expansion of its copper smelting industry.

Conclusion:  We expect to see competing offers for Anglo from China the US and possibly India.  Barrick Gold or Teck may be tempted to take a run at Anglo while Rio Tinto could also enter a bid as a way to protecting itself from a second attempt by BHP. It would also be wrong to rule out Glencore given the obvious synergies, although their hands remain full with their recent coal acquisition.

IG TV:  Gold and Copper. 10/04/2024:      https://youtu.be/KuGSbDqWglk?si=-8iikkOHxbbLSnPZ

Sharepickers TV:  Shortage of Copper. 19/04/2024:  https://www.youtube.com/watch?v=-LGCV1ccFOM

Podcasts: 19/04/2024  https://audioboom.com/posts/8493157-john-meyer-this-signifies-there-s-a-shortage-of-copper

    12/04/2024  https://audioboom.com/posts/8489836-john-meyer-dismisses-bulletin-board-rumours-of-dead-sheep-cows-in-mine-as-rubbish

*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. SP Angel acts as Broker/Nomad or both for Anglo Asian Mining, Kodal Minerals, Power Metals Resources.

Economics

US – Q1 GDP rises to 1.6% annualised vs 2.1% expectation and 3.4% seen in Q4

• The fall follows slowing consumer spending, exports, and government spending.
• Rising residential fixed investment and higher imports offset the fall.
• PCE ‘Personal consumption expenditures’ price index rose 3.4% vs 1.8%.
• PCE exc. food and energy rose 3.7% vs 2.0%.

Japan – Rates remain unchanged with ongoing bond buying in accordance with the BoJ March policy

• Tokyo CPI fell significantly to 1.6% in April vs 2.2% yoy.
• CPI core-core fell to 1.8% yoy,from 2.9% yoy excluding food and energy
• CPI Services fell to 1.6% yoy from 2.7% yoy partly due to a new Tokyo city policy making some education tuition free.
• Headline CPI fell to 1.8% yoy from 2.6% yoy.

Real GDP growth forecasts:

• Fiscal 2024 at 0.8% (downgraded from 1.2%).
• Fiscal 2025 at 1.0% (unchanged).
• Fiscal 2026 at 1.0% (new).

CPI core forecasts:

• Fiscal 2024 at 2.8% (upgraded from 2.4%).
• Fiscal 2025 at 1.9% (upgraded from 1.8%).
• Fiscal 2026 at 1.9% (new).

CPI core-core forecasts:

• Fiscal 2024 at 1.9% (unchanged).
• Fiscal 2025 at 1.9% (unchanged).
• Fiscal 2026 at 2.1% (new)..

Currencies

US$1.0729/eur vs 1.0716/eur previous. Yen 156.75/$ vs 155.65/$. SAr 19.045/$ vs 19.183/$. $1.250/gbp vs $1.250/gbp. 0.654/aud vs 0.652/aud. CNY 7.246/$ vs 7.247/$.

Dollar Index 105.69 vs 105.70 previous.

Precious metals:         

Gold US$2,344/oz vs US$2,322/oz previous

Gold ETFs 81.2moz vs 81.2moz previous

Platinum US$923/oz vs US$909/oz previous

Palladium US$990/oz vs US$1,003/oz previous

Silver US$27.70/oz vs US$27/oz previous

Rhodium US$4,725/oz vs US$4,725/oz previous

Base metals:   

Copper US$ 9,995/t vs US$9,861/t previous

Aluminium US$ 2,588/t vs US$2,585/t previous

Nickel US$ 19,400/t vs US$18,925/t previous

Zinc US$ 2,886/t vs US$2,834/t previous

Lead US$ 2,238/t vs US$2,211/t previous

Tin US$ 33,240/t vs US$32,000/t previous

Energy:           

Oil US$89.6/bbl vs US$88.2/bbl previous

• European energy prices were stable on reports that EU natural gas storage levels fell 0.2% w/w to 61.9% full (vs 45.1% 5-Yr average) following a cold snap in northern Europe, with aggregate storage at 701TWh.
• The EIA reported a 92bcf w/w build to 2,425bcf (+87bcf exp), with storage levels 22.1% above last year and 37% above the 5-year average, with US domestic dry gas production falling below 100bcf/d in April.
• Despite the US and EU exiting winter at high gas storage levels, TotalEnergies expects recovering Asian LNG demand and limited global capacity additions in 2024 to support prices above $11/mmBtu this coming winter.
• Petrobras shareholders voted in favour of a $4.3bn extraordinary dividend based on its FY23 results, after the Company’s management were able to convince the Brazilian government to approve a further distribution.
• The European Parliament consented to allow EU member countries to vote on exiting the 1998 Energy Charter Treaty, which allows energy companies to sue governments over policies that damage their investments.

Natural Gas €30.2/MWh vs €29.5/MWh previous

Uranium Futures $86.3/lb vs $88.0/lb previous

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$118.8/t vs US$119.2/t

Chinese steel rebar 25mm US$518.0/t vs US$517.9/t

Thermal coal (1st year forward cif ARA) US$117.9/t vs US$115.3/t

Thermal coal swap Australia FOB US$134.3/t vs US$135.5/t

Hard Coking Coal Australia FOB US$326.0/t vs US$326.0/t

Other:  

Cobalt LME 3m US$27,830/t vs US$27,830/t

NdPr Rare Earth Oxide (China) US$54,925/t vs US$53,953/t

Lithium carbonate 99% (China) US$15,111/t vs US$15,109/t

China Spodumene Li2O 6%min CIF US$1,240/t vs US$1,240/t

Ferro-Manganese European Mn78% min US$972/t vs US$972/t

China Tungsten APT 88.5% FOB US$330/mtu vs US$330/mtu

China Graphite Flake -194 FOB US$480/t vs US$480/t

Europe Vanadium Pentoxide 98% 5.0/lb vs US$5.0/lb

Europe Ferro-Vanadium 80% 26.25/kg vs US$26.25/kg

China Ilmenite Concentrate TiO2 US$328/t vs US$328/t

China Rutile Concentrate 95% TiO2 US$1,415/t vs US$1,414/t

Spot CO2 Emissions EUA Price US$64.4/t vs US$64.4/t

Brazil Potash CFR Granular Spot US$305.0/t vs US$305.0/t

Battery News

CATL launches LFP battery with 1,000km range

• Battery giant CATL has unveiled its new passenger vehicle battery called “Shenxing Plus” at the 2024 Beijing International Automotive Exhibition.
• The “Shenxing Plus” battery, uses lithium iron phosphate (LFP) chemistry and will deliver up to 1,000km range on a single charge.
• The battery also has 4C Superfast charging and can provide a range of 600km with just a 10 minute charge.
• CATL’s chief scientist, Wu Kai, stated that the pace of innovation determines industry leadership, and forward-thinking is essential for corporate innovation.
• CATL’s chief technology officer, Gao Huan, said over 50 new EV models are expected to be released within this year.

Honda to invest US$11bn in Canadian battery and EV production

• Honda Motor, plans to invest US$11bn in new EV and battery production plants alongside its existing facilities in Ontario.
• The announcement came from company executives and Canadian Prime Minister, Justin Trudeau.
• The investment is hoped to increase annual production capacity to around 240,000 EVs and 36GWh for batteries.
• Honda said it expects to contribute 60%-70% of the total investment, with the rest coming from JV partners and government subsidies.
• In the announcement, Honda also announced that it would work with steel giant POSCO to manufacture battery cathode materials.
• By handling everything from material development to vehicle assembly in Ontario – including bringing battery production in house and sourcing locally – Honda expects to reduce costs by more than 20% from current methods. (Reuters)

Reduction in storage battery costs to boost shift to renewables

• The International Energy Agency (IEA) forecasts that the total capital costs of battery storage will tumble by up to 40% by 2030.
• IEA Executive Director Fatih Birol states the cost of batteries has declined by 90% over the past decade, making the economics of renewables more favourable
• Birol emphasised that affordable storage solutions are crucial for integrating high shares of solar and wind power into energy systems.
• The IEA highlights the importance of policy support in fostering the development of energy storage technologies.
• The agency’s analysis suggests the transition to clean energy will be both a climate necessity and an economic opportunity due to the decreasing costs of storage technologies.

Turkey’s electric car sales surge eightfold in 2023, data shows

• In 2023, EV sales in Turkey surged eightfold to 68,700 units, up from 7,540 units in 2022.
• Of the 68,700 electric vehicles sold, 66,000 were battery electric vehicles (BEVs) and 2,700 were plug-in hybrid electric vehicles (PHEVs).
• The surge in EV sales increased their overall market share in Turkey to 10% in 2023, up from just 1.1% in 2022.
• The introduction of the TOGG T10X, Turkey’s first domestically manufactured electric car, in late 2023 further fuelled the growth in sales.
• The TOGG T10X became the fourth most popular car in Turkey by November 2023, with 20,000 units sold by the end of the year.
• The surge in EV sales aligns with Turkey’s record-breaking performance in the overall automotive industry, with over 1.2m vehicles sold in 2023, surpassing the previous record set in 2016.

EV Sales Growth Stalls in Europe

• The EU is still seeing positive growth in registrations of battery EV sales, but the pace of growth is slowing.
• In some major EU markets like Germany, there has been a notable drop in EV sales, which is attributed to the withdrawal of government purchase subsidies for EVs.
• Other roadblocks include charging infrastructure issues and uncertainty over country or EU plans to effectively ban the sale of new combustion engine cars.
• Despite the recent slowdown, the overall trend in the EU remains one of growing EV adoption, but the pace of growth has moderated compared to the rapid expansion seen in previous years.

Company News

Anglo American (AAL LN) 2,560p, Mkt Cap £34.2bn – BHP’s overtures spurned

• Anglo American has formally rejected BHP’s US39 $bn overtures saying that the “unsolicited, non-binding and highly conditional combination proposal … significantly undervalues Anglo American and its future prospects”.
• Chairman, Stuart Chambers, characterised BHP’s interest as “opportunistic” and said that BHP “fails to value Anglo American’s prospects”.
• Announcing the unanimous decision of its Board, Anglo American also says that BHP’s “Proposal contemplates a structure which the Board believes is highly unattractive for Anglo American’s shareholders, given the uncertainty and complexity inherent in the Proposal, and significant execution risks” which we infer may refer to BHP’s plan that the South African businesses of Kumba Iron and Anglo American Platinum as an initial step before merging the rest of its businesses.
• Mr. Chambers expressed confidence in Anglo American’s ability to “create significant value from its portfolio of high quality assets that are well aligned with the energy transition and other major demand trends”.
• Mr. Chambers also said that copper represents “30% of Anglo American’s total production, and with the benefit of well-sequenced and value-accretive growth options in copper and other structurally attractive products, the Board believes that Anglo American’s shareholders stand to benefit from what we expect to be significant value appreciation”.
• Potentially, issues surrounding the combination of the copper businesses of BHP and Anglo American may raise competition issues, attract regulatory scrutiny and, if a formal offer were to turn hostile, offer Anglo American part of a possible defence strategy.
• Anglo American continues to advise its shareholders “to take no action”.  Yesterday’s announcements came in response to press speculation and a formal offer has yet to be made.
• As one of the only major mining companies in London, the longer-term impact of a potential departure of Anglo American on the wider London mining scene could be profound.

Conclusion: Unsurprisingly, Anglo American has rejected BHP and until a formal offer is made shareholders are being advised to take no action.  These could be the first skirmishes in what may become a lengthy struggle.

Aura Energy* (AURA LN) 8.5p, Mkt Cap £65m – Quarterly report as Tiris advances towards production

• Aura Energy provides a quarterly report for the period to 31^st March 2024.
• The Company is progressing the Tiris Uranium Project in Mauritania whilst also advancing the Häggån Project in Sweden.
• Tiris holds a completed FEED study which confirms an NPV8 of US$366m, IRR of 34% post tax producing 2mlbpa of U308 over 17 years at an AISC of US$34.5/lb U308. CAPEX at US$230m.
• The Company has completed an extensional drill programme at Tiris, highlighting resource expansion potential, with the team progressing an updated MRE for Tiris.
• Aura held A$19m as of 31^st March following a successful equity placement, with an additional A$2m expected from a SPP.
• The Curzon offtake agreement was revised for Tiris from $44/lb to $75/lb, subject to FID by 31^st March 2025, with Aura due to pay a restructuring fee of US$3.5m to Curzon in cash or shares.
• In Sweden, the Company’s Häggån project holds a 2bnt polymetallic resource, including 800mlb U308.
• The Swedish government announced in 1Q24 it was considering overturning the ban on mining uranium, in place since 2018.
• The Inquiry is set to be presented on 15^th May 2024.
• Going forward, Aura expects to release final results from Tiris drilling, update the MRE, engage with project funding partners, boost offtake negotiations through Q2.
• Licensing activities at Häggån will also be progressed, in advance of an exploitation permit application.

*SP Angel acts as Nomad and Broker to Aura Energy

Empire Metals* (EEE LN) 7.8p, Mkt Cap £47m – Rationalisation of portfolio as Pitfield development accelerates

(Empire holds 70% of Pitfield, Century Minerals, which is run by two geologists holds the other 30%. One of these geologists works for Empire.)

• Empire has continued its assessment of its non-core assets.
• As a result of the review, Empirehas decided not to pursue the Stavely Project in Victoria.
• The move marks a further step in streamlining the Company’s portfolio as it accelerates its development of the Pitfield titanium project in Western Australia.
• The Company continues to drill out the asset as it works to deliver a JORC Exploration Target, an MRE and subsequently a demonstration plant on site.

*SP Angel acts as nomad and broker to Empire Metals

Ferro-Alloy Resources (FAR LN) 4.7p, Mkt Cap £24m – Q1 production results hit by flooding

• Ferro-Alloy provides their quarterly production results.
• The vanadium producer processed 669t of concentrate in Q1 vs 703t in Q4 and 194t in 1Q23.
• 81.6t of vanadium pentoxide produced over the period, vs 31 last year and 90.5 previous quarter.
• 7.1t of molybdenum produced vs 7.4 over the previous quarter.
• 33.4t of nickel produced vs 35.2 in Q4 and 9.7t year prior.
• Production was impacted by flooding in Kazakhstan, triggering transport delays and infrastructure issues at the site.
• The Company also reports one of the four roasting ovens required re-lining over the quarter.
• New cyclones have been installed intended to increase recoveries.
• Two additional drying ovens have been added, expected to be commissioned in May.

Sayona (SYA AU) A$0.33, Mkt Cap A$340m – Cash position slides whilst spodumene concentrate ramp up continues

• Sayona, which is ramping up the North American Lithium project in Quebec, provides their quarterly results.
• Concentrate production for the period rose to 40.4kt at an average grade of 5.4% Li20, up 13% qoq.
• Process plant utilisation at 73%, hindered by weather and tailings line blockages.
• Lithium recoveries at 67% for the quarter, expected to improve to target rate of 69%.
• Major capital projects at NAL substantially completed.
• Cash balance down 37% qoq to A$99m.
• Unit operating costs up 10% at A$1,536/t.
• Average selling price up 6% at A$999/t.

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

SP Angel                                                            

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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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