SP Angel Morning View -Today’s Market View, Friday 27th September 2024

Copper breaches $10,000/t as traders ramp up bullish positions in hopes of China resurgence

Gold ($2,660/oz) holds ground as China continues to stimulate and traders look to PCE

MiFID II exempt information – see disclaimer below

Arkle Resources* (ARK LN) – Interim results

Condor Gold* (CNR LN) – Interim results disclose continuing interest in sale of La India while asserting the intention to secure a fair price

Eurasia Mining* (EUA LN) – Interims highlight a reduction in cash burn with sale process ongoing

Greatland Gold (GGP LN) – Telfer restart update

Hummingbird Resources (HUM LN) – New $20m loan facility, operational update and strategic review

SolGold* (SOLG LN) – Accelerating project development at Cascabel

Gold ($2,660/oz) holds ground as China continues to stimulate and traders look to PCE

• Gold prices have been bouncing off new highs over $2,670/oz, but have stabilised around their new level of $2,660/oz.
• US Treasury yields continue to hold above recent lows of 3.6%, climbing to 3.8% this week.
• Focus today is on US PCE data, with gold traders looking for further clues on the November Fed cut, with rising calls for an additional 50bp.
• China continues to stimulate, with retail buyers likely buying gold as a safe haven asset as the economy continues to deteriorate under Xi.
• Silver buying is also gaining traction, up 3% over the last 24 hours and now up 37% ytd.

Copper breaches $10,000/t as traders ramp up bullish positions in hopes of China resurgence

• Copper has been the beneficiary of a bullish metals momentum in the wake of China’s emergency meeting this week.
• The metal has rallied alongside other base metals zinc and lead, whilst iron ore is also pushing above $100/t.
• Currently sitting at $10,035/t, copper is benefiting from Beijing’s efforts to restore confidence in the flailing Chinese economy.
• Inventories have been sliding and import premiums rising, suggesting there is some restocking in advance of the Autumn holiday.
• Copper equities have rallied sharply, with Freeport up nearly 8% yesterday.
• Aurubis reports it is keeping its premium at $228/t for European copper, suggesting decent continental demand.

Chinese EV makers ramp up efforts to beat Tesla in autonomous driving race

• Counterpoint Research has estimated that about 1m EVs in China will meet the Level 3 (L3) autonomous driving standard in 2026, and the mainland carmakers will continue to play an important role globally in designing and building self-driving cars. (SCMP)
• Up to 15% of all new EVs on the mainland will have L3 at least by 2026, according to Li Zhenyu, Baidu’s vice-president and head of Apollo intelligent driving business division.
• L3 cars have environment detection capability and can make informed decisions, such as accelerating past a slow-moving vehicle, according to standards for autonomous driving set by US-based SAE International – drivers are still required to intervene under certain circumstances.
• Top Chinese EV makers, such as BYD and Li Auto, have all launched new models fitted with advanced driver assistance systems (ADAS) software with L3 capability – however, Beijing has yet to approve the use of L3 and higher autonomous-driving systems.
• Sales of pure electric and hybrid cars in China accounted for 65% of the global total in the first half of this year, according to the China Passenger Car Association.
• Tesla’s Full Self-Driving (FSD) software has been in use in various countries globally, but has yet to be approved for use in China – it expects to start testing in early 2025.
• Tesla currently charges $8,000 to install FSD on top of a $99/month subscription – Chinese automakers offer their ADAS technology for free.
• Last month Jiyue, a premium EV maker backed by Chinese search-engine giant Baidu, began taking orders for its second model, Jiyue 07, that features a high level of autonomy.
• The vehicle uses the Apollo 2.0 system, developed by Baidu, which meets the L4 standard of automation.
• Automated driving is viewed by automakers as the next step in securing further dominance in the highly competitive industry.

Tesla poised for record-breaking quarterly sales in China

• Tesla is expected to achieve its highest-ever quarterly sales in China.
• Projections now range from 459,000 to 480,000 units, up from previous estimates, driven by strong performance in China amidst weak sales in the US and Europe.
• Tesla’s upcoming Robotaxi event, on 10^th October, is anticipated to boost investor confidence and stock performance.
• Tesla’s stock has risen 33% since August, as economic conditions in China improve and interest rate concerns ease.

Video: This is Why Gold is Rising and It Will Probably Continue: https://www.youtube.com/watch?v=EsA7ICSVku8

• Podcast: https://audioboom.com/posts/8547593-john-meyer-this-has-one-of-the-lowest-risk-profiles-i-ve-seen-for-a-long-time

Economics

US – Markets are awaiting PCE data with expectations for a further slowdown in the headline measure.

• Core PCE is expected to remain relatively little changed.
• PCE (%mom, Aug/Jul/Est): NA/0.2/0.1
• Core PCE (%mom, Aug/Jul/Est): NA/0.2/0.2
• PCE (%yoy, Aug/Jul/Est): NA/2.5/2.3
• Core PCE (%yoy, Aug/Jul/Est): NA/2.6/2.7

Port of Los Angeles forced to close following lithium battery fire

• A trailer carrying large lithium-ion batteries overturned on a highway in Los Angeles late on Thursday, sparking a fire, closing part of a freeway and terminals at the Port of Los Angeles.
• The Los Angeles Fire Department (LAFD) will let the fire burn out instead of trying to use water and expect the fire to burn for at least another 24 to 48 hours.
• Lithium battery fires are dangerous because they can spread rapidly, be difficult to put out and release toxic gas that can be lethal in confined spaces.
• They also cannot be managed in the same way as fires in ICE vehicles and fire services require special training to tackle them.

China – Real estate and technology companies are on course for their best week on record on announcements of fiscal and monetary stimulus.

• The Hang Seng Mainland Properties index was up nearly 30% this week.
• The Hang Send Tech Index was up more than 20% for the week.

Mining shares rise on new Chinese stimulus measures

• The CCP announced this week a raft of stimulus measures with indications of more to come.
• The move is in reaction to slowing industrial growth which fell 0.5% for the first eight months of the year and a loss of confidence..
• US, Canadian and EU tariffs on Chinese EVs must be of great concern to the CCP with huge investment into EV manufacturing and its supply chain.
• It is interesting that China thinks the West should buy its products while it supports Russia, the war against Ukraine and threatens Taiwan.
• Weak confidence in the economy in China is another major problem holding back consumption and the property market.
• Stimulus includes:
  • PBoC 50bp rate cut + guided to another 20-50bp cut by year-end.
  • Short-term seven-day RRP rate lowered to 1.5% from 1.7%.

• Long-term special treasury bonds and local government special bonds to enable greater government investment.
• Measures add $142bn in liquidity to the banking system.
• Property: white-list project loans to be increased with new projects to be started on spare land
• Mortgage downpayments for second homes to 15% from 25%.
• PBoC to support local authorities in buying unsold properties from developers in default.
• Local authorities to encourage construction of better properties eg. Not just flats for one-child policy families. Eg larger flats for bigger families.
• PBoC looking to reduce mortgage rates for housing
• Social security: Development of more social security, insurance, wealth management to help pensions and pensioners.
• The state is looking to help with childcare, education, health and retirement, more measures to come.
• Banking: M&A support and protection for smaller investors.
• $71bn released to help brokers and insurance companies buy equities $43bn to support share buybacks and support pensions.

Conclusion: More support is on the way and maybe China will move to become as socialist as France – well maybe one day!

Japan – A former defence minister Shigeru Ishiba is to become the next PM after beating economic security minister Sanae Takaichi following a second round runoff vote.

• A special session of parliament is scheduled for Tuesday to vote Ishiba into the office.
• Ishiba is replacing Fumio Kishida who held PM position since October 2021.
• Former PM announced in August that he is going to step down over a series of scandals that saw the ruling party ratings hitting record lows, Reuters reports.
• Next general elections are expected in the next 13 months.

France

• Preliminary CPI (%mom, Sep/Aug/Est): -1.2/0.6/-0.8
• Preliminary CPI (%yoy, Sep/Aug/Est): 1.5/2.2/1.9

Spain

• Preliminary CPI (%mom, Sep/Aug/Est): -0.1/0.0/0.0
• Preliminary CPI (%yoy, Sep/Aug/Est): 1.7/2.4/1.9
• Core CPI (%yoy, Sep/Aug/Est): 2.4/2.7/2.8

Mali – Government negotiates lithium licenses for solar power plant

• Uranium One, a subsidiary of Rosatom appears to have signed to develop a new lithium project in the South of Bougoula.
• Rosatom is likely to start construction of a 200MW solar plant in near Bamako quite soon.
• Mali appears to host particularly good quality pegmatites hosting spodumene with low impurities and relatively high grade.
• We understand this material is preferred by Chinese refiners for the production of Lithium hydroxide for high-power NCM and related battery chemistries.
• Cheaper and lower power density LFP batteries tend to use refined lithium carbonate which most often comes from brine producers in the Atacama, Chile.

Unintended consequences

• We gain a perverse enjoyment from spotting the unintended consequences of government policies.
• Today the South China Morning Post highlights the impact of a US policy, the China Initiative launched in 2018 to investigate Chinese seientists working in the US.
• The US DoJ investigated thousands of scientists suspected to be hiding Chinese connections but was then later scrapped in 2022.
• We suspect the investigations were unpleasant and intrusive.
• As a result the number of ethnic Chinese scientists leaving the US has increased 75% with most returning to China to continue their research.
• While we agree with limiting commercial and scientific espionage, it is the manner of the investigation that we suspect was a problem.
• Far better, perhaps, to have persuaded the scientists to become loyal to life in the US.

Risk vs reward

• Recently scientists at CERN spent a decade waiting to observe a 1.3 in 10 billion event where a subatomic particle called a kaon decays and splits into a pion. Normally kaons decay into different products.
• The problem is that they should have waited much longer to see this event.
• Alternatively they could wait for the UK government to cut taxes or the EU to sign a cooperative trade deal, but we see that as a rarer event

Currencies

US$1.1132/eur vs 1.1149/eur previous. Yen 143.26/$ vs 145.13/$. SAr 17.197/$ vs 17.161/$. $1.336/gbp vs $1.335/gbp. 0.688/aud vs 0.686/aud. CNY 7.014/$ vs 7.020/$.

Dollar Index 100.72 vs 100.94 previous

Precious Metals

Gold US$2,665/oz vs US$2,661/oz previous

Gold ETFs 83.5moz vs 83.5moz previous

Platinum US$1,002/oz vs US$1,004/oz previous

Palladium US$1,030/oz vs US$1,060/oz previous

Silver US$31.7/oz vs US$32.0/oz previous

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

Base metals:   

Copper US$10,037/t vs US$9,886/t previous

Aluminium US$2,639/t vs US$2,552/t previous

Nickel US$16,885/t vs US$16,805/t previous

Zinc US$3,092/t vs US$3,031/t previous

Lead US$2,136/t vs US$2,119/t previous

Tin US$32,295/t vs US$32,200/t previous

Energy:           

Oil US$71.4/bbl vs US$71.7/bbl previous

Natural Gas €37.3/MWh vs €37.0/MWh previous

Uranium Futures $81.7/lb vs $80.8/lb previous

Bulk:    

Iron Ore 62% Fe Spot (cfr Tianjin) US$101.6/t vs US$98.9/t

Chinese steel rebar 25mm US$488.4/t vs US$485.6/t

Thermal coal (1st year forward cif ARA) US$121.3/t vs US$120.0/t

Thermal coal swap Australia FOB US$143.8/t vs US$141.3/t

Other:  

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

NdPr Rare Earth Oxide (China) US$60,597/t vs US$60,542/t

Lithium carbonate 99% (China) US$10,337/t vs US$10,043/t

China Spodumene Li2O 6%min CIF US$740/t vs US$740/t

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

China Tungsten APT 88.5% FOB US$335/mtu vs US$335/mtu

China Graphite Flake -194 FOB US$445/t vs US$445/t

Europe Vanadium Pentoxide 98% 4.6/lb vs US$4.6/lb

Europe Ferro-Vanadium 80% 24.55/kg vs US$24.55/kg

China Ilmenite Concentrate TiO2 US$322/t vs US$321/t

China Rutile Concentrate 95% TiO2 US$1,347/t vs US$1,360/t

Spot CO2 Emissions EUA Price US$62.9/t vs US$62.9/t

Brazil Potash CFR Granular Spot US$285.0/t vs US$285.0/t

Germanium China 99.99% US$2,775.0/kg vs US$2,725.0/kg

China Gallium 99.99% US$455.0/kg vs US$455.0/kg

Battery News

Korean EV market shifts to compact models amid global sales slowdown

• Korean domestic EV sales show a strong shift towards compact models, with sales increasing by 130.4% to 19,103 units in the first eight months of 2024.
• Sales of large EVs in Korea have dropped significantly, down 70.3% to 2,477 units.
• In contrast, exports of large EVs have grown by 128.9% to 23,078 units, while compact EV exports have decreased by 46.7% to 38,014 units.
• Korean automakers Hyundai and Kia are adjusting their strategies, focusing on compact EVs like the Hyundai Kona Electric and Kia Niro EV for the domestic market.
• For export markets, especially in North America, they are promoting larger EVs, such as the Kia EV9.

BYD broke sales records in August amid struggles for other Chinese automakers

• BYD delivered 370,854 vehicles in August 2024, a 30% increase yoy.
• BYD dominated China’s top-selling car list, with 6 of its models holding the top positions.
• Other Chinese automakers like Changan, GAC, and FAW experienced success, but Great Wall and Geely struggled.
• Nio delivered 20,176 vehicles in August, maintaining over 20,000 units for four consecutive months.
• Xpeng achieved 14,036 deliveries, its best month in 2024, with the launch of the budget-friendly Mona M03.
• Zeekr saw a slight decline in sales but plans to launch a more affordable SUV to compete with Tesla.
• Xiaomi delivered over 10,000 cars for the third month in a row and aims to hit 100,000 units by November.
• August saw a 1.1% overall drop in vehicle sales in China, but NEV sales surged by 43%, making up 53.5% of total sales.

Battery maker SK On opens retirement program amid EV slowdown

• The battery unit of Korea’s chip-to-construction conglomerate SK Group, SK On, will offer a retirement program to its employees to ride out the slowdown in EV sales.
• SK On has decided to adopt “efficiency measures” to reduce its workforce and stay competitive against challenging EV market conditions, people familiar with the matter told Yonhap News Agency.
• According to a spokesperson, the measures “are aimed at establishing a lean, agile workforce, so that we can better navigate shifting EV market conditions.”

Company News

Arkle Resources* (ARK LN) 0.27p, Mkt Cap £1.5m – Interim results

• Arkle Resources report interim results, as they continue to progress their portfolio of exploration assets in Ireland, Botswana, and Zimbabwe.
• In Botswana, lithium exploration is accelerating, with the Company exploring for brine potential in the Makgadikgadi Salt Pans.
• The team is currently conducting an auger campaign and will assay up to 50l of brines for lithium.
• In Ireland, Arkle holds a 24% interest in seven licences at the Stonepark area of Limerick, adjacent to the Pallas Green zinc asset.
• The Company’s partner, Group Eleven, is currently conducting a 1,700m drilling programme due for completion this year.
• Arkle is also planning geochemical exploration at their lithium pegmatite targets at the Aughrim prospect.
• In Zimbabwe, Arkle holds lithium prospectivity in lepidolite and spodumene targets, and has conducted initial ground exploration surveys.
• €170k in cash reported at the 30^th June.

*SP Angel are Nomad and Broker to Arkle Resources

Condor Gold* (CNR LN) 21p, Mkt Cap £43m – Interim results disclose continuing interest in sale of La India while asserting the intention to secure a fair price

(Condor Resources holds 100% of the La India gold mining project)

CLICK FOR PDF

• Condor Gold reports a loss of £0.52m for the six months to 30^th June (2023 – £0.97m) loss) and a closing cash balance of £1.08m.
• The company takes the opportunity to confirm that there “continues to be significant interest in the sale of the Company’s assets” which was announced in in November 2022 and that it “remains in discussion with a number of interested parties”, including some new candidates.
• Commenting on the sales process against the background of a 35% increase in the gold prices “since the lows of 2023”, the Chairman, Jim Mellon, confirmed that eight companies have concluded non-disclosure agreements (NDAs) and Condor Gold has received “five non-binding offers received and three site visits … [have been] … completed”.
• The Chairman said that while “none of the non-binding offers have progressed to firm proposals to date, the Company is in discussions with several gold producers … [and the] … Board is optimistic that a sale will be concluded in the near future”.
• Condor Gold reiterates previous comments on the scarcity of fully permitted, development-ready 150koz pa gold projects with full feasibility studies, secure land tenure and key items of equipment already secured.
• In this context, Mr. Mellon confirms that Condor Gold is “very aware of the value of our assets and will not allow them to go at anything other than a fair price”.

• The company’s 2022 Feasibility Study for the development of an open-pit mine at La India showed that, at a gold price of US$1,600/oz (currently ~US$2,400/oz), an initial capital investment of US$105.5m generates an after-tax NPV5% of US$86.9m and IRR of 23% from a project producing an average of over 81,000oz of gold annually for the first six years of an 8.4year mine life.
• Sensitivity analysis disclosed by the company in September 2022 indicated that at a higher gold price of US$2,000/oz, still well below current levels, post-tax NPV_5% increases by around 2.4x, to US$205.2m generating an IRR of 43%.
• La India also offers underground mining potential and additional gold exploration opportunities in the broader area around the planned open-pit mine.

• The company also highlights the July fundraising efforts which added a further £220,000 through the exercise of options and which saw Mr. Mellon, increase his holding to 26.1% and the CEO, Mark Child also raise his interest in the company to ~2.4%.

Conclusion: Condor Gold’s protracted sale of its development-ready gold assets in Nicaragua is continuing to attract wide interest and with high current gold prices the company indicates that it hopes to conclude a sale in the ‘near future at a ‘fair price’.  Interest from multiple potential buyers may help spur competition in the sale price.  We await developments with interest.

*SP Angel acts as a broker to Condor Gold

Eurasia Mining* (EUA LN) 2.1p, Mkt Cap £60m – Interims highlight a reduction in cash burn with sale process ongoing

• No revenues recorded during the period as the team continues to work on disposal of its Russian assets.
• Assets include the West Kytlim operating mine, the Monchetundra Project mining license, the NKT brownfield project and the entitlement to the Nyud brownfield project.
• Produced PGM concentrate remains stored in a secure facility as the Company is considering available options to realise its value.
• Loss for the period came in at £0.6m (1H23: -£7.4m) most of which attributed to general administrative costs.
• Net CFO amounted to -£0.1m (1H23: -£0.6m).
• Capex was £1.0m (1H23: £1.7m).
• Closing cash balance stood at £0.2m (FY23: £1.3m) and £0.2m in debt most of which are leases (FY23: £0.2m).
• Post reporting period, the Company agreed a £2.5m convertible loan facility with Sanderson.
• Under the agreement, the facility will be drawn in a series of tranches on certain milestones being achieved.
• The first £1.0m should have been made available earlier this month on restoration of trading on AIM.

*SP Angel act as Nomad and Broker to Eurasia Mining

Greatland Gold (GGP LN) 7.2p, Mkt Cap £1.3m – Telfer restart update

• Greatland provides an update on its progress at Telfer, following its acquisition of the 70% stake in Havieron and related assets.
• The Company notes that ‘significant progress’ has been made regarding the Telfer Tailings Storage Facility 8.
• Newmont has reportedly completed the necessary works for continued use of TSF8.
• Telfer reportedly restarted processing operations on 23th September 2024 with the use of TSF8.
• Whilst conditions are yet to be met in full, the Company expects the acquisition to be completed in 4Q24.

Hummingbird Resources (HUM LN) 6.7p, Mkt Cap £53m – New $20m loan facility, operational update and strategic review

• The Company secured a loan facility of US$30m from CIG SA including a new $20m loan and a consolidation of a previously announced $10m short term loan.
• The loan is unsecured, carries a 14% interest with an initial maturity of December 2024.
• At Kouroussa, the Company reports a delay to commercial production on lower than forecast mining volumes, delayed pit stagin and processing plant optimisation.
• Commercial production is now expected in 4Q24, a revision to previously targeted 3Q24.
• On a Group wide corporate and strategic review process:
  • The Company is bringing in third party consultants to review its corporate structure with a view to identify cost efficiencies and improvements in governance including Board and management changes.
  • Dan Betts, CEO and Interim Executive Chairman, will transition to the role of Executive Chairman with a search for a new CEO launched.
  • The team is brining in an experience mining professional to manage operational delivery and ramp up at Kouroussa.
  • The Company is looking at potentially divesting its non core assets including the Dugbe Gold Project in Liberia (HUM holds 53% in Pasofino, an owner of Dugbe)
• Oumar Toguyeni will be joining the Board as Non Executive Director representing the Company’s largest investor, Nioko Resources (~~42% interest).

SolGold* (SOLG LN) 10.3p, Mkt Cap £327m – Accelerating project development at Cascabel

CLICK FOR PDF

• SolGold’s Annual Report for the year to 30^th June shows a loss of US$60.3m (2023 – US$50.4m loss) and a closing cash balance of US$6.0m.
• The company describes FY2024 as “a pivotal year for SolGold” as it progresses the development of its Cascabel project in Ecuador delivering an updated pre-feasibility study (PFS) in March 2024 and securing US$750m of phased finance via a gold streaming agreement.
• The US$750m streaming finance represents almost half of the revised pre-production US$1.55bn capital investment described in the 2024 revised PFS.
• Solgold also highlights the “landmark agreement with the Ecuadorian government granting the right to develop and operate the Cascabel Project for 33 years” with a provision for extension of the rights through renewal.
• The company’s pre-feasibility study describes an underground block-caving operation with an initial 28-year mine life generating an after-tax NPV_8% of US$3.2bn and IRR of 24% from the production of an average of 123,000tpa of copper, 277,000ozpa of gold and 794,000ozpa of silver.
• Looking forward, Solgold continues to optimise the technical studies and work on securing the “necessary permits for development” while exploring “additional conditional financing opportunities to secure the remaining capital needed to make Cascabel a turn-key project”.
• Commenting on its broader portfolio of projects in Ecuador, Solgold is assessing “strategic opportunities for joint ventures or partnerships … while strongly focusing on Cascabel as the cornerstone of its growth strategy”.
• CEO, Scott Caldwell thanked “our dedicated team, partners, the Ecuadorian government, and local communities for their continued support as we work toward responsible development” at Cascabel.

Conclusion: Solgold highlights FY 2024’s delivery of a revised PFS for the Cascabel project and the streaming finance agreement as major advances in a year which also saw the award of mine development rights for the project.  We look forward to news as the project development accelerates.

*SP Angel acts as broker to Solgold

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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