German auto manufacturer given notice by Chinese graphite supplier
MiFID II exempt information – see disclaimer below
Azure Minerals (AZS AU) – Gina Rinehart takes 18% stake as Australian spodumene nationalism intensifies
Bezant Resources (BZT LN) – Updated MRE at Hope & Gorob in Namibia
Chaarat Gold (CGH LN) – Convertible Loan maturity extension
Kodal Minerals* (KOD LN) – Kodal and Hainan confirm the completion of the transaction under which Hainan is investing $117.75m in Kodal to finance construction of the Bougouni lithium mine in Mali
Orosur Mining* (OMI LN) – Chinese firms to support development of Nigerian lithium processing plant, Bloomberg reports
German auto manufacturer given notice by Chinese graphite supplier
- Yesterday we heard from a graphite company that it had been contacted by a major German automotive manufacturer in relation to the supply of graphite
- The company had previously been in discussions with the German group but these discussions had previously failed to reach a conclusion.
- The call from the German group follows news last Friday that China is going to require and restrict the issue of licenses for the export of high-grade graphite out of China.
- The ban appears aimed at impeding the development of Gigafactories outside of China and giving Chinese EV manufacturers an strong advantage in global markets.
- LG and POSCO both say they are trying to source more graphite as soon as possible, ahead of the ban, to build stockpiles.
- Syrah expect ex-China buyers to ramp up purchases outside of China, though Syrah do not supply anode grade graphite as yet.
- Even the threat of banning high-grade anode-quality graphite would disrupt financing for ex-China gigafactories though a total ban will hold back Li-ion production outside China for some time given China’s ~90% dominance of the graphite anode material market.
- A total ban will see billions of dollars’ worth of gigafactories and EV factories standing idle and thousands of redundancies.
- These factories will also not be able to take in other battery materials such as lithium, high-purity manganese, nickel oxyhydroxide, cobalt etc…though we expect Chinese demand to continue to exceed available supply in lithium and high-purity manganese for now.
Gold presses higher as Treasury yields shrug off US GDP growth acceleration
- Gold prices pushed up to $1,987/oz, following further bets that the US is done hiking rates, despite a bumper GDP print.
- The US recorded fastest growth since 2021 at 4.9%.
- However, inflation readings came in cooler than expected at 2.4%, supporting bets that the Fed may ease off ion its rate hikes.
- Janet Yellen now sees a soft landing for the US economy, with strong labour-force participation, consumer spending strength and easing inflation.
- Gold prices continue to enjoy a war premium from the tensions in the Middle East, despite signs of de-escalation in recent days as the IDF delays a full-scale operation in Gaza.
| Dow Jones Industrials | -0.76% | at | 32,784 | |
| Nikkei 225 | +1.27% | at | 30,992 | |
| HK Hang Seng | +1.93% | at | 17,374 | |
| Shanghai Composite | +0.99% | at | 3,018 |
Economics
US – The economy expanded at the fastest pace in nearly two years in Q3/23 supported by consumer spending in a sign that that the US may avoid a hard landing after all.
- Personal spending increased 4.0%qoq (annualised), up from 0.8% recorded in the previous quarter.
- Additionally, a separate report showed that the measure of underlying inflation slowed down considerably during the quarter that in turn led to a pull back in Treasury bond yields yesterday afternoon.
- GDP (%qoq, annualised): 4.9 v 2.1 Q2/23 and 4.5 est.
- Core PCE (%qoq, annualised): 2.4 v 3.7 Q2/23 and 2.5 est.
China – China sees seeks common ground in new policy paper on how to work with its near-Asian neighbours
- Unfortunately, the reunification of Taiwan remains firmly on the CCP agenda along with firm opposition of activities towards Taiwan’s independence.
- Chinna says it wishes to ensure peace and stability across the Taiwan Strait and uphold peace and prosperity in the region, though the current stand-off between the two sides may create anything but peace in these waters.
- Taiwan is seen as a particularly difficult island to invade and Russia’s defeat in its attempt to take over Kyiv in Ukraine may have made the CCP think twice about an invasion across the Taiwan Strait.
- China is working to cement economic ties and trade within the Asian region and is probably looking to persuade its near neighbours to buy more Chinese goods, particularly Electric Vehicles
- China appears to be preparing to smooth relations with the US over the APEC ‘Asia-Pacific Economic Cooperation’ Summit next month. Lets hope they don’t fly a CCP weather balloon over the summit.
- The situation makes us wonder if China has, to some extent, bet the farm on huge expenditure in the development of gigafactories, electric vehicles and the mines to supply them.
- China’s reasoning for its massive push into Electric Vehicle manufacturing:
- To reduce dependence on oil imports – China is always looking to become more self-sufficient.
- EVs are value-added manufacturing which will help lift the supply chain in terms of value added manufacturing.
- China has the chance to muscle its way into the global automotive market through rapid state-subsidised growth in this sector
- EVs are environmentally superior in cities
- Modern EVs, loaded with technology, offer the CCP more control over potential dissent in the general population.
- As always, we watch to see what China really intends to do, more than listening to what it says.
ECB – In line with expectations, the central bank left rates unchanged for the first time in more than a year amid signs of slowing inflationary pressures.
- The Governing Council opted for “higher for longer” strategy to bring inflation down to 2% target, although, further hikes remain contingent on incoming economic data.
- “Having a discussion on cuts is totally, totally premature… the fact that we are holding doesn’t mean to say that we will never hike again,” President Lagarde commented on the decision.
- Commenting on the outstanding inventory of bond holdings, the ECB reiterated the existing end-2024 cutoff to stop reinvestments from its pandemic emergency purchase programme (PEPP).
- Markets viewed the announcement as largely dovish with two year German yields and Italy-Germany spreads pulling back on the news.
- Refinancing Rate: 4.5% v 4.5% previously.
- Lending Rate: 4.75% v 4.75% previously
- Deposit Rate: 4.00% v 4.00% previously
Spain – Economic growth slowed down last quarter as a drop in investment offset a boom in tourism, Bloomberg reports.
- Germany, France and Italy are expected to report next week.
- GDP (%qoq): 0.3 v 0.4 Q2/23 (revised from 0.5) and 0.2 est.
- GDP (%yoy): 1.8 v 2.0 Q2/23 (revised from 2.2) and 1.7 est.
Russia – Putin meeting Hamas and Iran in Moscow
- Putin may be looking to negotiate the release of dozens of Russian citizens held by Hamas or he may have some other agenda.
- Russia has close diplomatic relations with Israel and many Russian oligarchs use Israeli passports.
- Whatever the outcome we can be sure that Putin will use the situation to support his war in Ukraine and cause trouble for the West.
Currencies
US$1.0560/eur vs 1.0540/eur previous. Yen 150.20/$ vs 150.56/$. SAr 18.928/$ vs 19.226/$. $1.212/gbp vs $1.208/gbp. 0.633/aud vs 0.630/aud. CNY 7.318/$ vs 7.319/$.
Dollar Index 106.61 vs 106.78 previous.
Commodity News
Precious metals:
Gold US$1,988/oz vs US$1,987/oz previous
Gold ETFs 86.7moz vs 86.6moz previous
Platinum US$911/oz vs US$903/oz previous
Palladium US$1,142/oz vs US$1,119/oz previous
Silver US$22.80/oz vs US$23/oz previous
Rhodium US$4,400/oz vs US$4,300/oz previous
Base metals:
Copper US$ 8,037/t vs US$7,981/t previous
Aluminium US$ 2,202/t vs US$2,215/t previous
Nickel US$ 18,130/t vs US$18,125/t previous
Zinc US$ 2,446/t vs US$2,458/t previous
Lead US$ 2,102/t vs US$2,077/t previous
Tin US$ 24,910/t vs US$25,025/t previous
Energy:
Oil US$89.4/bbl vs US$90.0/bbl previous
- Crude oil prices edged higher on reports that the US military had struck pro-Iranian targets in eastern Syria.
- US natural gas contracts rolled forward to December as the EIA storage report detailed a 74bcf build to 3,700bcf last week, with w/w storage levels at 9.2% above last year and 5.2% above the 5-year average.
- Finnish authorities have named the Chinese-owned container carrier NewNew Polar Bear as the prime suspect in damaging he Baltic-connector Finland-Estonia gas pipeline and two telecom cables earlier this month.
Natural Gas €51.200/MWh vs €50.300/MWh previous
Uranium UXC US$73.00/lb vs US$72.75/lb previous
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$117.1/t vs US$117.4/t
Chinese steel rebar 25mm US$533.7/t vs US$533.6/t
Thermal coal (1st year forward cif ARA) US$133.0/t vs US$133.0/t
Thermal coal swap Australia FOB US$134.4/t vs US$134.0/t
Coking coal swap Australia FOB US$325.0/t vs US$325.0/t
Other:
Cobalt LME 3m US$33,420/t vs US$33,420/t
NdPr Rare Earth Oxide (China) US$69,831/t vs US$69,818/t
Lithium carbonate 99% (China) US$21,250/t vs US$21,519/t
China Spodumene Li2O 6%min CIF US$2,010/t vs US$2,010/t
Ferro-Manganese European Mn78% min US$1,019/t vs US$1,017/t
China Tungsten APT 88.5% FOB US$300/mtu vs US$300/mtu
China Graphite Flake -194 FOB US$630/t vs US$630/t
Europe Vanadium Pentoxide 98% 6.2/lb vs US$6.2/lb
Europe Ferro-Vanadium 80% 26.25/kg vs US$26.25/kg
China Ilmenite Concentrate TiO2 US$314/t vs US$314/t
Spot CO2 Emissions EUA Price US$83.3/t vs US$83.1/t
Brazil Potash CFR Granular Spot US$340.0/t vs US$340.0/t
EV and Battery News
Amazon largest corporate buyer of renewable energy globally
- Amazon is the largest corporate buyer of renewable energy globally, a title which it has held since 2020.
- The company’s energy capacity grew by 8.3GW over 2022, through 133 new projects in 11 countries. Amazon’s portfolio is now more than 20GW.
- Purchases last year have brought the company closer to powering its operations with 100% renewable energy by 2025, five years ahead of its original 2030 target.
- The company has continued to add projects to its portfolio across 2023, with 25 new renewable energy projects secured.
- Amazon now has 401 projects globally, including 164 wind farms and solar farms, and 237 rooftop solar projects on Amazon facilities.
- Once operational, Amazon’s global renewable energy projects are expected to generate 56,881GWh of clean energy each year.
Demand for electric pickup trucks continue to decline
- Recent sales trends indicate a decline in demand for electric pickup trucks from various automakers, including Ford, General Motors (GM), Rivian, and Tesla.
- Ford’s F-150 Lightning initially saw strong sales but has since declined by 46% year over year, leading the company to take measures to address the drop in demand.
- GM’s plans to convert its Orion Assembly plant for Chevrolet Silverado EV and GMC Sierra EV production have been delayed to late 2025, reflecting a shift in EV demand.
- Rivian’s approach targets coastal and higher-income buyers focused on recreational activities, gaining traction in a niche market.
- Tesla’s Cybertruck, although anticipated by its dedicated customer base, might face challenges in mass adoption, as traditional truck buyers are not inherently EV buyers.
- Ram is preparing to launch the 2025 Ram 1500 REV with impressive specifications, including a range of up to 500 miles and innovative charging capabilities.
Jaguar Land Rover to build electric Defender
- The automaker will produce an electric version of its signature Defender vehicle as part of plans to launch nine fully electric models by 2030.
- The British carmaker, which is owned by India’s Tata Motors, said earlier this year it will invest £15bn over the next five years to develop EVs
- The new electric Defender will be made at JLRs plant in Nitra, Slovakia, where the current Defender is made.
- JLR has announced plans to produce six Range Rover and Jaguar electric models in the UK by 2030 at its plants in Solihull and Halewood.
Indonesian government mulls further incentives for EV manufacturers
- The Indonesian government is considering providing further incentives to attract EV companies to establish manufacturing plants in the country.
- Indonesia aims for automakers to produce at least 40% of the content of EVs locally to boost domestic industrial development and job creation.
- Incentives are being planned for electric car and motorbike manufacturers, with a focus on electric cars due to the existing presence of electric two-wheeler makers in the country.
- The government recognizes the inevitability of the EV industry and believes a robust regulatory framework is essential for its growth in Indonesia.
- VKTR Mobility is already supplying electric buses to TransJakarta, emphasizing the need for government support, including incentives and favourable regulations, to create jobs and drive the industry forward.
- Industry Ministry data shows that Hyundai’s Ioniq 5 and Wuling’s Air EV both meet the 40% local content requirement.
- In 2022, wholesale of battery EVs in Indonesia saw a significant increase, totalling 10,327 units, compared to 687 units sold in the previous year.
Ola Electric raises $385m from Temasek and State Bank of India
- EV manufacturer Ola Electric has raised $385m in a funding round involving equity and debt from Temasek-led investors and State Bank of India.
- The funding will be used to expand Ola’s EV business and establish India’s first lithium-ion cell manufacturing facility in Krishnagiri, Tamil Nadu.
- The lithium-ion cell manufacturing facility will have an initial capacity of 5GWh in phase I, which will be scaled up to 10GWh at full capacity.
- Ola Electric recently introduced a motorcycle lineup, set to be launched by the end of the next year.
- The company’s valuation stands at approximately $5.4 billion post-allotment, a significant increase from $5 billion in January the previous year.
- Ola Electric has raised over $1 billion in equity and debt, with SoftBank being the largest external stakeholder at 23.6%, followed by Tiger Global, Matrix, and others.
Company News
Azure Minerals (AZS AU) A$3.5, Mkt Cap A$1.6bn – Gina Rinehart takes 18% stake as Australian spodumene nationalism intensifies
- Azure filed a report stating Gina Rinehart’s Hancock Prospecting has taken an 18.3% stake in Azure Minerals.
- The Company announced the day before that it is being taken over by SQM for A$1.6bn.
- Gina recently caused Albemarle to walk away from their $4.2bn offer for Liontown Resources, which holds the Kathleen Valley spodumene project.
- Azure holds the Andover project, which is pre-resource but expects to deliver a maiden MRE next quarter between 100-240mt @1-1.5% Li20.
- High iron ore prices have bolstered Gina’s coffers, with the Roy Hill mine paying out A$2bn worth of dividends to the company in recent months.
- The Australian Financial Review reports Roy Hill paid out A$800m worth of dividends in October to date.
- Gina has suggested she is looking for a partnership role alongside SQM as they develop the giant Andover project.
- Hancock released a statement that ‘consistent with early-stage projects that are pre-resource… Andover… has a long path and significant risks to navigate before its ultimate potential is unknown.’
Conclusion: M&A activity in the hard-rock lithium sector continues to intensify as cash-rich majors look to take advantage of depressed stock prices following the recent weakness of spodumene and carbonate prices. However, if Gina continues her efforts to block and complicate acquisitions of Western Australian deposits, the likes of SQM and Albemarle may start to look elsewhere for their spodumene. We advise them to explore Portuguese and Ghanaian options, where Savannah Resources* and Atlantic Lithium* are developing their respective Barroso and Ewoyaa projects.
*SP Angel acts as Nomad and Broker to Savannah Resources and Nomad to Atlantic Lithium
Bezant Resources (BZT LN) 0.033p, Mkt cap £2.5m – Updated MRE at Hope & Gorob in Namibia
- Bezant provides an updated Mineral Resource Estimate on its 70%-owned Hope & Gorob project.
- The MRE is released under JORC in the Indicicated and Inferred categories.
- Resource for Hope: (Indicated & Inferred)
- Total Open Pit
- 430kt @ 1.3% Cu for 5,600t + 4.2koz Au and 58koz Ag.
- Total Underground:
- 3.75mt @ 1.7% Cu for 66kt Cu + 51koz Au and 760koz Ag.
- Total Resource:
- 4.2mt @ 1.7% Cu for 71kt Cu
- Total Open Pit
- Resource for Gorob (Inferred)
- Open Pit:
- 800kt @ 1.1% Cu for 8,700t Cu
- Underground
- 5.1mt @ 1.2% Cu for 58.7kt Cu
- Subtotal Gorob Resource:
- 5.9mt @ 1.2% Cu for 67.4kt Cu.
- Open Pit:
- Total Indicated and Inferred MRE including Hope, Gorob, Vendome and Anomaly:
- Open Pit:
- 2.4mt @ 1% Cu for 24.6kt Cu.
- Underground:
- 12.8mt @ 1.3% Cu for 165.7kt Cu, 69koz Au, 760koz Ag.
- Total Indicated and Inferred:
- 15.2mt @ 1.2% Cu for 190kt Cu, 75.2koz Au, 818koz Ag.
- Open Pit:
- Going forward, the team are looking to increase the size of the practically open pittable resource for an additional 0.7-1mt, ‘postulating that an open pit could support five years mine life at an annual rate of 500ktpa.’
- The AMS consultants also suggest that the resource has potential for expansion from drilling untested areas and boosting the gold credit.
- Metallurgical testwork is ongoing.
Chaarat Gold (CGH LN) 3.9p, Mkt Cap £28m – Convertible Loan maturity extension
- The Company extended the maturity of its secured convertible loan notes from 31 October 2023 to 31 July 2024.
- The convertible bond interest of 20% will be capitalised and added to the principal amount with notes convertible at ~31p (using 1.3 USD GBP exchange rate).
- Total amount outstanding under the convertible debt is estimated at $34.3m as at 31 October.
- Repayment of the principal and accrued interest will be due on the earlier of the extended maturity or the Final Investment Decision regarding the Tulkubash project in Kyrgyzstan.
Kodal Minerals* (KOD LN) 0.67p, Mkt Cap £112m – Kodal and Hainan confirm the completion of the transaction under which Hainan is investing $117.75m in Kodal to finance construction of the Bougouni lithium mine in Mali
(Kodal / Hainan jv deal long-stop date to 30 September 2023)
- Hainan Mining has agreed to transfer the $117.75m previously agreed to Kodal Minerals for the construction of the Bougouni lithium project in Mali subject to certain warranties and indemnities.
- While the license transfer is delayed we believe license will be transferred in accordance with the mining code under which it was first agreed with Kodal.
- Hainan Mining has agreed to complete the transaction and transfer the funds and Kodal can now start ordering long lead items and accelerate the construction of the spodumene concentrate plant.
- The deal involves the transfer of the Bougouni and Sogola-Nord concessions into a new joint venture company which is 49% Kodal and 51% Hainan.
- The $117m of funds will enable Kodal to order long-lead items.
- “Kodal has agreed warranties and indemnities up to US$100m in relation to the waiving of these conditions precedent for the transfer of the Bougouni mining licence and the Sogola-Nord concession. The warranties and indemnities cover the period from Completion (as defined below) to the point of transfer of the licence and the concession, with a two year period for claims to be made. Kodal will warrant the good standing of the licence and concession at the time of transfer.”
- Infrastructure development is already underway upgrading roads for access in preparation for the mine and plant construction.
- Plant engineering designs are being finalised along with mine design and site optimisation.
- The Kodal recently met with the Director General of the Mali DNGM and has submitted formal Notification for a phased development of the Bougouni project including:
- Phase 1 – DMS ‘Dense Media Separation plan at Ngoualana for faster production of spodumene concentrates,
- DMS plant design close to completion for US$100m funding drawdown
- Phase 2 – flotation plant development for better resource recovery and longer mine life.
- Including: large-scale flotation design review and metallurgical testing to support the expansion of the Boumou deposit alongside the existing 12.2Mt @ 1.10% Li2O resource at Sogola-Baoulé.
- Phase 1 – DMS ‘Dense Media Separation plan at Ngoualana for faster production of spodumene concentrates,
Conclusion: We are hugely pleased to see confirmation of the funding for the Bougouni project from Hainan Mining. Management can now start working with certainty towards the construction of the process plant and mine development.
*SP Angel acts as financial advisor and broker to Kodal Minerals
Orosur Mining* (OMI LN) 1.9p, Mkt Cap £3.9m – Chinese firms to support development of Nigerian lithium processing plant, Bloomberg reports
- Bloomberg reports that three firms, Ganfeng, Tianqi and Ningde Era are investing $250m in a Nigerian lithium processing plant.
- However, these companies supposedly have nothing to do with their dopplegangers listed on Shenzhen and HK. We are not so sure.
- A ceremony was held on 12th October for the start of construction of the facility, which plans to refine 18kt/day of lithium ore.
- Ningde Era is apparently the literal translation of the Chinese characters CATL to English.
- Nigeria is in its infancy for lithium exploration, with geolists seeing the Southern region as bearing similarities to the pegmatite fields of Brazil, where Sigma have begun production.
- Orosur recently announced its intention to3 begin lithium exploration in Nigeria.
- The Company has signed an exploration JV with a Nigerian company Jurassic Mines.
- Orosur holds the right to earn up to 70% equity in the Project via two phases:
- Phase 1 – the Orosur subsidiary can earn 51% equity via a $3m spend over three years
- Phase 2 – An additional $2m investment will take the Orosur ownership to 70% equity.
- Over the past 12 months, Orosur has been leveraging its management’s relations in Nigeria to acquire several interests in Nigeria’s lithium pegmatite districts.
- The Group has mobilised a team of geologists to begin preliminary reconnaissance work immediately.
- The Project currently covers 322km2 over four licences on Nigeria’s primary pegmatite belt.
- The prospects lie over lithostructural corridors with known lithium pegmatite mineralisation on a regional scale.
- A wide-scale mapping programme in 2018 by the Nigerian Ministry of Mines and Steel Development has highlighted the substantial lithium pegmatite potential in country, with a dominance of pegmatites noted in the south.
- Nigeria is supportive of the development of a larger mining industry as it looks to diversify its economy’s reliance on oil production.
- The Company believes that its target areas bear similarities to the prolific pegmatite fields in northeastern Brazil.
- Artisanal miners currently exploit lithium-bearing minerals in Nigeria for high-value gemstones and tantalum.
*SP Angel acts as Nomad and Broker to Orosur Mining
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Analysts
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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.
| Sources of commodity prices | |
| Gold, Platinum, Palladium, Silver | BGNL (Bloomberg Generic Composite rate, London) |
| Gold ETFs, Steel | Bloomberg |
| Copper, Aluminium, Nickel, Zinc, Lead, Tin, Cobalt | LME |
| Oil Brent | ICE |
| Natural Gas, Uranium, Iron Ore | NYMEX |
| Thermal Coal | Bloomberg OTC Composite |
| Coking Coal | SSY |
| RRE | Steelhome |
| Lithium Carbonate, Ferro Vanadium, Tungsten, Spodumene, Ferro-Manganese, Graphite | Asian Metal |
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