SP Angel Morning View -Today’s Market View, Friday 30th August 2024

Gold continues to bounce off all-time highs before US inflation data

MiFID II exempt information – see disclaimer below

Alba Mineral Resources (ALBA LN) – Initial blast at Llechfraith imminent

Andrada Mining (ATM LN) – Tin production increases as lithium strategic review ongoing

Beowulf Mining* (BEM LN) – Half year results highlight well-funded position for project development

Mkango Resources* (MKA LN) – Interim results

Strategic Minerals* (SML LN) – Confirmation of Board appointments

Tertiary Minerals* (TYM LN) – Update on Fluorspar project

Gold ($2,524/oz) continues to bounce off all time highs before US inflation data

• Gold has been holding steady around the $2,520/oz mark for around 10 days now.
• US Treasuries have been fairly stable, although they weakened yesterday following a revision to GDP data.
• 10 year yields have climbed 10bp to 3.86%, having hit lows of 3.76% this month.
• Gold has been buoyed by a rally in Treasuries following a weak NFP report last week, which saw the 10 year fall from 4.3% to 3.77% as traders adjusted rate cut expectations.
• The dollar sold off as a result, with the benchmark index sliding from 106 to 100.5, before paring some losses.
• US PCE data is due this afternoon, however, the market’s primary focus will likely be on next week’s NFP for further signs of labour market cooling.
• The FOMC decision on the 18^th is still under debate, with the market currently pricing a 33% chance of a 50bp rate hike.
• Expect a market shift to 50bp in September to be supportive of gold, likely triggering a rally in US Treasuries and further ETF buying.

Economics

US – July PCE numbers are due later today with a quicker than expected disinflation likely to see the US$ lower and raise speculation for faster unwinding in the restrictive monetary policy.

• Estimates are for headline and core PCE to come in at 2.5% and 2.7% in July compared to 2.5% and 2.6% in the previous month, respetviely.

Biden administration is considering using federal funds to support US critical minerals projects amid an inflow of cheaper Chinese materials, Bloomberg reports.

• Department is looking at setting the floor price subsidising miners when prices fall below the threshold for US produced materials.

Japan – A mixed set of results out this morning with inflation coming in stronger than expected including core measure with retail sales growth down and unemployment rate picking up.

• The currency is little changed this morning trading at the 145.0 level.
• Tokyo CPI (%yoy, Aug/Jul/Est): 2.6/2.2/2.3
• Tokyo CPI ex Food and Energy (%yoy, Aug/Jul/Est): 2.4/2.2/2.2
• Retail Sales (%mom, Jul/Jun/Est): 0.2/0.6/0.4
• Retail Sales (%yoy, Jul/Jun/Est): 2.6/3.8(revised from 3.7)/2.8
• Jobless Rate (Jul/Jun/Est): 2.7/2.5/2.5

Germany – Preliminary inflation numbers for August showed a sharper than expected drop in the headline rate.

• ECB will be announcing the policy rate on September 12 with a 25bp cut fully priced in now and markets expecting 2-3 cuts this year.
• CPI (%mom, Aug/Jul/Est): -0.2/0.5/0.0
• CPI (%yoy, Aug/Jul/Est): 2.0/2.6/2.2

Currencies

US$1.1078/eur vs 1.1128/eur previous. Yen 144.96/$ vs 144.83/$. SAr 17.718/$ vs 17.715/$. $1.317/gbp vs $1.322/gbp. 0.680/aud vs 0.681/aud. CNY 7.091/$ vs 7.112/$.

Dollar Index 101.33 vs 100.98 previous

Precious metals:         

Gold US$2,520/oz vs US$2,517/oz previous

Gold ETFs 82.8moz vs 82,797,707.1moz previous

Platinum US$945/oz vs US$945/oz previous

Palladium US$986/oz vs US$958/oz previous

Silver US$29.48/oz vs US$30/oz previous

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

Base metals:   

Copper US$ 9,318/t vs US$9,278/t previous

Aluminium US$ 2,490/t vs US$2,481/t previous

Nickel US$ 17,060/t vs US$17,020/t previous

Zinc US$ 2,914/t vs US$2,890/t previous

Lead US$ 2,046/t vs US$2,070/t previous

Tin US$ 32,545/t vs US$32,560/t previous

Energy:           

Oil US$80.3/bbl vs US$78.8/bbl previous

Natural Gas €39.0/MWh vs €38.7/MWh previous

Uranium Futures $79.5/lb vs $79.2/lb previous

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$101.7/t vs US$101.0/t

Chinese steel rebar 25mm US$476.6/t vs US$475.5/t

Thermal coal (1st year forward cif ARA) US$125.3/t vs US$127.0/t

Thermal coal swap Australia FOB US$143.3/t vs US$144.0/t

Coking coal Dalian Exchange futures price US$173/t vs US$187.3/t

Other:  

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

NdPr Rare Earth Oxide (China) US$56,763/t vs US$56,474/t

Lithium carbonate 99% (China) US$10,083/t vs US$9,987/t

China Spodumene Li2O 6%min CIF US$770/t vs US$770/t

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

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

China Graphite Flake -194 FOB US$447/t vs US$447/t

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

Europe Ferro-Vanadium 80% 24.75/kg vs US$24.75/kg

China Ilmenite Concentrate TiO2 US$324/t vs US$323/t

China Rutile Concentrate 95% TiO2 US$1,389/t vs US$1,400/t

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

Brazil Potash CFR Granular Spot US$292.5/t vs US$292.5/t

Germanium China 99.99% US$2,545.0/kg vs US$2,545.0/kg

China Gallium 99.99% US$445.0/kg vs US$445.0/kg

Battery News

Nio sees 70% of buyers opt for BaaS battery rental since March

• Nio’s deliveries have grown significantly over the past few months, and the tweaks to its BaaS (battery as a service) service have been a significant driving force. (CNEVPost)
• Since the new BaaS policy was released in March, more than 70% of users have opted for the battery rental service.
• The changes made make it easier for car owners to buy out batteries in the future while lowering the cost of monthly battery rentals.
• The benefit of renting batteries is that owners are, in effect, handing over the responsibility of maintaining an EV’s most valuable component to Nio.
• “Nio owners who lease batteries pay the equivalent of the cost of gasoline for a fuel-efficient vehicle each month, but can use the vehicle worry-free without concern about what it will cost at the end of the battery’s life cycle,” said Qin Lihong, CEO of Nio.

Hyundai targeting 30% rise in sales by 2030

• Hyundai Motor is targeting annual global sales of 5.55m vehicles by 2030, up 30% from 2023 figures. (Reuters)
• Hyundai kept its EV sales target of 2m units annually by 2030, but raised its hybrid sales goal by 40% to 1.33m units by 2028, as it laid out its medium- to long-term strategy at an investor day.
• The automaker plans to double its hybrid lineup to 14 models as it expected a surge in hybrid demand, especially in North America.
• Hyundai’s shift to hybrids follows rivals Toyota and Ford.

Tesla approach Canada over 100% tariffs on Chinese-made EVs

• Tesla has reportedly sought special treatment in Canada to avoid facing high additional tariffs on its China-made EVs.
• Prior to Canada’s announcement this week that it would impose 100% tariffs on China-made EVs, Tesla had approached Ottawa and asked for a lower tariff on its vehicles, according to a Reuters report, citing a Canadian government source.
• Currently, the tariff applied to Chinese-made EVs exported to Canada is 6.1%. which would rise to 106.1% when the new tariffs are introduced.

ChargePoint adds AI to identify charger issues and improve uptime for EV owners

• The EV charging network will introduce AI  to expedite the diagnosis and repair process of downed chargers.
• ChargePoint describes the new AI-powered driver support tool as the first of its kind in the EV charging industry, and it will help improve uptime and dependability issues across the network.
• ChargePoint recently installed its 1 millionth charging port globally and is working on expanding its infrastructure.
• EV drivers who encounter a nonfunctional charging station can report the issue and submit photos via an updated “report a problem” feature in the ChargePoint app, which will then use the new AI system to identify the issue and dispatch operators.

Company News

Alba Mineral Resources (ALBA LN) 0.04p, Mkt cap £4.1m – Initial blast at Llechfraith imminent

• Alba Mineral Resources has confirmed that, as expected and previously announced, it has completed its first underground blast on No.4.5 level in the Llechfraith section of its Clogau St David’s mine in North Wales.
• Material from the blast “will be removed to surface in due course and processed … [and the company says that the] … next sequence of blasts is expected to proceed at No.5 Level” although Alba does not intend to report on each individual blast after the inaugural one announced today.
• Executive Chairman, George Frangeskides, said that the company believed that this was “the first blast to have taken place at Clogau since the 1980s“.
• In today’s announcement the company also reviews progress during the 6 months ending 31^st May and highlights:
  • Dewatering of the old mine workings at Lllechfraith to the No 4 Level; as well as
  • Underground sampling work retrieving over 40 samples yielding some grades of over 100g/t gold in composite samples; and
  • Completion of an airborne geophysical survey “ver Alba’s key regional gold targets across the Dolgellau Gold Belt“.
• The company also announces the appointment of former mine manager at the Cononish mine in Scotland, Kobus Byleveldt, as Mine & Operations Manager at Clogau.  He is described as having “more than 26 years of mining and management experience within the gold mining sector in South Africa and Scotland”.

Conclusion: The first underground blast at the historic Clogau St David’s mine in North Wales for approximately 40 years is a landmark event in Alba Mineral Resources’ efforts to refurbish the mine.

Andrada Mining (ATM LN) 3.4p, Mkt cap £56m – Tin production increases as lithium strategic review ongoing

• Andrada reports revenue of £18m for the year ending 29^th February 2024, as tin production increases.
• Tin concentrate tonnage up 54% to 1.5kt yoy.
• All in sustaining tin costs at $26,223 vs $24,939/t for the prior period.
• Gross profit reported at £1.7m vs a loss of £0.7m over the same period last year.
• Company has constructed a bulk sample processing facility and tantalum circuit as it looks to progress its lithium assets.
• Tin price hedge instrument at $33k/t concluded alongside a NAD175m funding facility with Bank Windhoek.
• Cash position at £10m.

Beowulf Mining* (BEM LN) 23p, Mkt cap £9m – Half year results highlight well-funded position for project development

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• Beowulf reports their financial results for the period to 30^th June 2024.
• The Company is progressing a dual pronged project development strategy, with their high-grade Gállok iron ore project and their Graphite Anode Materials Plant.
• Both projects are being taken to PFS and permitting phases by Beowulf, intended to further derisk each asset and open discussions for strategic partnerships.
• Gállok Iron Ore Project,
  • the Company has appointed Dmytro Siergieiev as Project Director to support the development of Gállok.
  • Focus at Gállok currently is on PFS delivery and permitting, with trade-off studies currently underway to optimise the project economics.
  • Regarding permitting, the Swedish Supreme Administrative Court has reiterated its decision to grant Gállok its Exploitation Concession.
• Grafintec Graphite Anode Materials Plant
  • The Company is working on adjusting its PFS for the project to include a more complete CSPG process to sell into the lithium ion battery anode industry.
  • Test-work is ongoing on the new PFS and results are expected by the end of this year.
  • Beowulf will then use the PFS results to progress a DFS before beginning funding discussions for potential production in 2027.
• Vardar Minerals, Kosovo
  • Beowulf has consolidated 100% ownership of Vardar, their base and precious metals exploration Company in Kosovo.
  • Licence applications are pending and are expected to be granted in the coming months.
  • Exploration to data has shown positive chip samples at Shala East of up to 3.84g/t Au, 5.5% Zn and 117g/t Ag.
• The Company held a healthy cash position at the time of reporting at £2.7m.

Conclusion: Beowulf continues to progress their two strategic European assets, Gállok iron ore and the Grafintec GAMP, which are both strategically positioned to support the inevitable green transition in steelmaking and battery technology. Management’s focus is on derisking their assets through engineering and permitting studies. We continue to see Beowulf as undervalued, with a blended and heavily discounted NAV of US$149m. See our note linked above for further details.

*SP Angel acts as Nomad and Broker to Beowulf Mining

Mkango Resources* (MKA LN) 6.3p, Mkt Cap £14m – Interim results

• Loss for the 1H24 amounted to US$1.7m (1H23: -$1.6m) mostly reflecting $1.6m in G&A costs ($1.6m).
• As the Company focuses on the recycling business with upstream and midstream parts of the Group going through a strategic review process, the team guides for a 35% reduction in ongoing operating costs.
• G&A costs were down 35%qoq and 39%yoy in 2Q24.
• FCF came in at -$1.7m (1H23: -$2.3m) including $0.6m in capitalised costs.
• 1H24 closing cash balance stood at $0.3m with $3.7m in debt most of which is represented by deferred contingent consideration for the HyProMag acquisition that can be paid for using Mkango shares.
• Post reporting period the Company conditionally raised £1.25m in new equity issuing a further 25m warrants (exercisable at 7p) with proceeds to be used for equipment for the HPMS recycling facility at Tyseley Energy Park, UK, and Germany.
• Separately, the team secured €200k in EIT Raw Materials funding to optimise the chemical and physical properties of the MREC sourced from Songwe Hill in Malawi.
• Additionally, HyProMag GmbH is participating in the €8m grant funded GREENE project with HyProMag Germany (~64% MKA interest) to receive €350k to advance its proprietary NeoLeach technology used to upgrade products from its HPMS process.
• The Company agreed the Mining Development Agreement (MDA) with the Malawi government outlining fiscal terms for the Songwe Hill Rare Earths Project in Malawi.
• The team continues its strategic review of both upstream and midstream businesses including Songwe Hill and Pulawy Rare Earths Separation Project in Poland.
• Commissioning of the commercial scale short loop HPMS facility in the UK with maiden sales of NdFeB are targeted for 1Q25.
• HyProMag Germany that is developing HPMS based technology REE recycling facility in Germany is targeted for 2025.
• FS work on the HyProMag USA JV with CoTec is ongoing.
• US recycling facility FS completion is targeted for YE24 followed by a production decision in 1H25 and potential maiden revenues in 2H26.

*SP Angel acts as nomad and broker to Mkango Resources

Strategic Minerals* (SML LN) 0.2p, Mkt Cap £4.0m – Confirmation of Board appointments

• Strategic Minerals has confirmed that Mr. Charles Manners as a director and Chairman and Mr Mark Burnett have been appointed as directors of the company with effect from 1^st September, as previously announced.
• Mr. Manners, previously described as “the beneficial holder of approximately 4.8% of the Company’s issued share capital … [who] … has been the largest shareholder in SML for a number of years” is to be “elected Chairman at the next Company Board meeting to be held in the first half of September 2024”.
• Managing Director, John Peters, said that “We look forward to working with both Mark and Charles and the diversity and insights these seasoned investors will bring to the Board”.
• The appointments follow the retirement of former Chairman, Alan Broome, after nine years service, which was announced in July.

*SP Angel acts as Nomad and Broker to Strategic Minerals

Tertiary Minerals* (TYM LN) 0.08p, Mkt Cap £2.1m – Update on Fluorspar project

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• Tertiary provides an update on their Storuman fluorspar project.
• The Company stated yesterday that the Swedish Mining Inspectorate has refused Tertiary’s application for a mining concession on their Storuman Project, first submitted in 2014.

Conclusion: The Storuman fluorspar project is a legacy asset of Tertiary’s, and we do not see yesterday’s decision as having a material impact on the Company’s current strategy of copper exploration in Zambia. As Tertiary’s CEO states, ‘this project risks becoming a distraction for the Company.’ Tertiary is now fully funded for a drilling programme in Zambia and Nevada. They have several high priority anomalous targets yet to be drilled and encouraging intersections have the potential to be transformative for the Company. We look forward to exploration updates going forward.

*SP Angel acts as Nomad and Broker to Tertiary Minerals

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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