SP Angel Morning View -Today’s Market View, Friday 30th June 2023

Chinese PMI disappoint highlighting the need for government stimulus

MiFID II exempt information – see disclaimer below

Bluejay Mining* (JAY LN) – Bluejay Chairman highlights focus on Hammaslahti copper mine

Beowulf Mining* (BEM LN) – Extension of Site Reservation for GigaVaasa approved

Endeavour Mining (EDV LN) – Kinross reported to reject Endeavour’s takeover approach (Bloomberg)

Kodal Minerals* (KOD LN) – Bougouni Lithium Project Funding Package funding extended to end August

Wishbone Gold* (WSBN LN) – Cottesloe drilling attracts WA Government grant support

Markets continue to sell down as investors deleverage into summer

• We are seeing unusual and overextended falls in good quality stocks as investors sell into available liquidity.
• Reports of investor deleveraging are exacerbating downward moves but are also likely to be short lived.
• Market makers are often quick to sell ahead of distressed sellers and are often thought to be seen closing their short positions at the end of the day
• Good quality stocks are often sold off harder than their less liquid counterparts and make the best recovery plays.
• First Quantum Minerals was sold down to under C$3/s in November 2008 to recover to C$16 a year later.
• Many other quality stocks will be at near-low levels in the current environment.
• Lithium stocks appear to be particularly hard, perhaps due to a degree of leveraged money in the shares.
• Atlantic Lithium* shares fell to 24.5p/s yesterday recovering to 25p/s on the close despite having issued a good quality DFS study within good time.
• Kodal Minerals* shares fell to 0.49p/s this morning on the extension of the long-stop date for the Hainan Mining funding.
• We believe the funding will come through and the delay is purely due to the recent and rather sudden departure of the Minister of Mines in Mali due to nationwide power cuts.
• The Mali EDM has been selling power at a loss from thermal power stations while running up debts despite the commissioning of a new 140MW hydropower plant last year at Gouina.

*SP Angel act as Nomad and broker to Atlantic Lithium and as broker to Kodal Minerals

Clear skies in China further evidence of subdued economic recovery

• Air quality in China monitored by various trackers are showing China is struggling to return to pre-pandemic activity levels.
• Shenzhen, China’s tech hub, is showing better readings in June 2023 than in June 2019, as the city struggles to ramp up following the extended lockdown period last year.
• Weekends are noted as being especially clear, suggesting consumer discretionary spending remains weak.
• Alternatively, and a more positive note, it may point to the rise in EV adoption.

Gold breaches $1,900/oz as bond sell-off intensifies on strong US data

• Gold prices touched $1,895/oz yesterday before bouncing back to hover between $1,905-10/oz.
• The sharp move lower yesterday followed the release of US unemployment insurance at 239k vs 265k expected by economists.
• A stronger US economy has helped support Treasury yields, with the 10-year jumping 15bp yesterday to 3.86%. Short duration Treasuries climbed to near 5%.
• The data supported Powell’s comments this week that two more hikes may be necessary to quell inflation as the US economy continues to motor.
• Futures are now pricing in an 84% chance of a 25bp hike in July and a 50% chance of a hike in September.
• Keep an eye on today’s US PCE data to provide some more guidance to both gold and Treasury yields.

Iron ore defies China pessimism in best monthly performance this year

• Iron ore prices have extended gains to $113/t on the Dalian market and $109/t on the Singapore market.
• The steelmaking ingredient is up c. 14% in June.
• Scrap supply of steel has disappointed, and molten iron output is rising recently.
• Coking coal and coke up 2.2% and 2% respectively overnight.
• However, China steelmakers have stated they are ‘not optimistic’ over demand going forward, with a representative of steel giants noting ‘the peak inflection point for steel demand has emerged, while the problems of insufficient end-user consumption and oingoing thin margins are particularly prominent.’

Zambia – Mopani losses climb as Zambian state courts bidders

• Mopani’s annual report showed output fell to 72.7kt vs 87.6kt in 2021.
• Losses rose to $298m last year vs -$74.2m in 2021.
• Zijin Mining and Sibanye Stillwater are currently considered the two front runners in Rothschild & Co’s search for a buyer.
• Glencore holds offtake rights over Mopani’s copper sales until its debt package is repaid.
• The Company is looking to ramp up output to >200kt, requiring an additional $300m alongside a $150m financing to sustain operations.

Melbourne Mining Club dinner – London

• Over 500 mining entrepreneurs and financiers crammed the City of London Guildhall for the Melbourne Mining Club dinner last night.
• Glencore, CEO, Gary Nagle gave impressive and polished series of answers to some particularly harsh questioning by Leslie Hook from the FT.
• However, our overriding conclusion from the talk is that Glencore is principally focused on profit and maybe a little less on improving its environmental performance.
• Nagel formerly ran the Ferroalloys business for Glencore, a relatively filthy business at the best of times.
• We would be interested to learn more of the efforts Nagle made to clean up the heinous emissions of their ferrochrome smelters in South Africa though we note that the Glencore Merafe Lion ferrochrome smelting complex is/has been modified to convert residual and flare gasses into carbon-neutral electricity.
• To give Nagle credit, it has been particularly tough to run smelters in the face of low-cost Chinese competition.

Economics

China – Growth momentum waned in June with manufacturing remaining in contraction and other sectors failing to register in the pace of expansion.

• The data supports calls for more policy stimulus.
• The central bank cut policy rates this month for the first time in nearly a year, while authorities were earlier reported to have been considering a series of stimulus measures to complement the monetary policy response.
• Manufacturing PMI: 49.0 v 48.8 May and 49.0 est.
• Services PMI: 53.2 v 54.5 May and 53.5 est.
• Composite PMI: 52.3 v 52.9 May.

Germany – Inflation picked up this month, in line with estimates, with core gauge likely to have followed suit, Bloomberg reports.

• Stronger inflation is likely to see two further 25bp hikes in July and September, before the hiking cycle comes to an end, inhouse Bloomberg estimates suggest.
• CPI (%mom, EU Harmonised): 0.4 v -0.2 May and 0.4 est.
• CPI (%yoy, EU Harmonised): 6.8 v 6.3 May and 6.8 est.

France – Inflation pulled back in June, although, the focus is likely to be on the core measure focusing on less volatile inflation drivers.

• Separately, more than 600 people are reported to have been arrested following three days of protests on a killing of a teenager by the police in a Paris suburb.
• CPI (%mom, EU Harmonised): 0.2 v -0.1 May and 0.2 est.
• CPI (%yoy, EU Harmonised): 4.5 v 5.1 May and 4.6 est.

UK – Property prices came in better than expected in June, according to the latest data from Nationwide.

• Prices were down 3.5%yoy, little changed from a -3.4% drop in the previous month and better than -4% expected by analysts.
• Nevertheless, Nationwide is expecting rising borrowing costs to “exert a significant drag on housing market activity in the near term”.

Currencies

US$1.0864/eur vs 1.0918/eur yesterday. Yen 144.65/$ vs 144.58/$. SAr 18.812/$ vs 18.687/$. $1.264/gbp vs $1.264/gbp. 0.663/aud vs 0.662/aud. CNY 7.257/$ vs 7.241/$.

Dollar Index 103.33 vs 103.05 yesterday

Commodity News

Precious metals:

Gold US$1,907/oz vs US$1,905/oz yesterday

Gold ETFs 92.8moz vs 92.8moz yesterday

Platinum US$901/oz vs US$920/oz yesterday

Palladium US$1,245/oz vs US$1,253/oz yesterday

Silver US$22.47/oz vs US$22.76/oz yesterday

Rhodium US$4,600/oz vs US$5,000/oz yesterday

Base metals:

Copper US$ 8,233/t vs US$8,255/t yesterday

Aluminium US$ 2,154/t vs US$2,168/t yesterday

Nickel US$ 20,795/t vs US$20,005/t yesterday

Zinc US$ 2,370/t vs US$2,377/t yesterday

Lead US$ 2,064/t vs US$2,071/t yesterday

Tin US$ 26,800/t vs US$26,170/t yesterday

Energy:

Oil US$74.5/bbl vs US$73.8/bbl yesterday

• Centrica has boosted gas storage at the UK’s offshore Rough storage facility from 30bcf to 54bcf, which represents 50% of the UK’s total gas storage capacity of 12 days average demand.
• US natural gas prices rose as the EIA storage report detailed a lower than usual 76bcf build to 2,805bcf last week, with storage levels now 25.3% above last year and 14.6% above the 5-year average.

Natural Gas US$2.683/mmbtu vs US$2.677/mmbtu yesterday

Uranium UXC US$56.20/lb vs US$56.50/lb last week

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$113.9/t vs US$114.2/t

Chinese steel rebar 25mm US$525.9/t vs US$523.4/t

Thermal coal (1st year forward cif ARA) US$118.0/t vs US$118.0/t

Thermal coal swap Australia FOB US$145.5/t vs US$145.0/t

Coking coal swap Australia FOB US$233.0/t vs US$237.0/t

Other:  

Cobalt LME 3m US$31,380/t vs US$29,525/t

NdPr Rare Earth Oxide (China) US$62,818/t vs US$64,567/t

Lithium carbonate 99% (China) US$41,764/t vs US$41,779/t

China Spodumene Li2O 6%min CIF US$4,090/t vs US$4,090/t

Ferro-Manganese European Mn78% min US$1,103/t vs US$1,119/t

China Tungsten APT 88.5% FOB US$315/mtu vs US$315/mtu

China Graphite Flake -194 FOB US$725/t vs US$735/t

Europe Vanadium Pentoxide 98% 7.4/lb vs US$7.4/lb

Europe Ferro-Vanadium 80% 31.75/kg vs US$31.75/kg

China Ilmenite Concentrate TiO2 US$302/t vs US$302/t

Spot CO2 Emissions EUA Price US$90.6/t vs US$91.3/t

Brazil Potash CFR Granular Spot US$310.0/t vs US$310.0/t

Company News

Bluejay Mining* (JAY LN) 1.86p, Mkt cap £20m – Bluejay Chairman highlights focus on Hammaslahti copper mine

(Bluejay Mining holds 100% of the Hammaslahti project)

• Bluejay Chairman issues video explaining reasons for focus on the Hammaslahti E-lode.
• https://www.youtube.com/watch?v=_3RKOY9rsLU
• Hammaslahti formerly produced a total of 7mt grading 1.16% copper, 1.55% zinc, 0.59 g/t gold and 5.2 g/t silver.

*SP Angel acts as nomad and broker to Bluejay Mining. The analyst has visited the historic Enonkoski mine site and holds shares in Bluejay Mining

Beowulf Mining* (BEM LN) 1.65p, Mkt Cap £19m – Extension of Site Reservation for GigaVaasa approved

• Beowulf announces that is wholly owned Finnish subsidiary, Grafintec, has received approval for the extension of the advance reservation for Plot 1 Block 3017 in the Giga Vaasa area.
• Grafintec is looking to establish graphite anode material production, and the advance reservation in the Giga Vaasa is a key step for this.
• The reservation is valid from 28 July 2023 to 31 January 2024 but the Company will hold the right to extend this further.
• Grafintec is currently progressing the preliminary stage of the process  design to PFS stage for the graphite anode materials plant, expected to be released in Q3 2023.
• The Environmental Impact Assessment is also currently underway.
• The Company will look to release an update on the first stage of the process design in July.

*SP Angel acts as Nomad and Broker to Beowulf Mining

Endeavour Mining (EDV LN) 1,831p Mkt Cap £4.65bn – Kinross reported to reject Endeavour’s takeover approach (Bloomberg)

• Bloomberg reports Endeavour has made a bid for Kinross Gold, which has supposedly been rejected.
• The bid was reportedly offered in a combination of cash and shares, with both companies trading around the $5.9bn Mcap size.
• The move continues a theme of consolidation in the gold sector, following Newmont’s momentous $19bn acquisition of Newcrest earlier this year.
• Kinross was forced to sell its Russian assets this year, but continues operating in US, Canada, Brazil, Mauritania, and Chile.
• Endeavour has been on a shopping spree in recent years, buying Teranga and Semafo in 2020 to bolster its West African presence.

Kodal Minerals* (KOD LN) 0.49p, Mkt Cap £83m – Bougouni Lithium Project Funding Package funding extended to end August

Kodal extends long-stop date to 31 August 2023

• Kodal Minerals as approved the extension of the long-stop date for Hainan Mining to fund construction of the Bougouni project to end August.
• Kodal states they have “made significant progress with the re-structure of the subsidiary companies in the UK and Mali. However, certain condition precedents, as outlined in the Company’s announcement on 31 May 2023, remain to be completed in Mali. Kodal remains in regular contact with the local Government to satisfy these outstanding condition precedents. Hainan and Xinmao have confirmed that all approvals obtained from the Chinese Government authorities remain valid and are ready to complete the transaction as and when the outstanding condition precedents are satisfied.”
• The two parties are said to remain fully committed to completing the transaction.
• We believe the delay is purely due to the recent and rather sudden departure of the Minister of Mines in Mali.
• Mali’s Minister of Mines, Energy and Water Lamine Seydou Traore resigned due to an unprecedented lack of electricity, according to a report by Mali’s state-run Office de Radiodiffusion Television Nationale du Mali (Dow Jones).
  • “Traore’s resignation comes amid unwanted nationwide power cuts, which have been swelling disgruntlement in the country.”
  • ORTM reported that Junta leader Assimi Goita accepted the resignation and appointed the country’s present Minister of Economy and Finance Alousseni Sanou as interim at the ministry of mines, energy and water.
• The Mali EDM is reported to have been selling power at a loss from thermal power stations while running up debts despite the commissioning of a new 140MW hydropower plant last year at Gouina.

*SP Angel acts as financial advisor and broker to Kodal Minerals

Wishbone Gold* (WSBN LN) – 1.6p, Mkt Cap £3.24m – Cottesloe drilling attracts WA Government grant support

• Wishbone reports its annual results for the year ended 31^st December 2022.
• The Company has three primary exploration targets alongside three minor prospects.
• Red Setter is the Company’s primary target, owing to its analogous properties to Newcrest’s Telfer Mine as judged by Expert Geophysics. Telfer sits 13km away from the target.
• 2022 saw Wishbone receive the necessary Heritage Clearance surveys at Red Setter and Cottesloe, enabling exploration.
• Drilling at Red Setter saw grades of gold and copper returned.
• Magnetic modelling was completed over the Anketell project.
• RC drilling at Wishbone II and IV saw coper and gold mineralisation returned over multiple holes.
• Wishbone is well capitalised with £1.46m in cash and cash equivalents at the end of the period.

SP Angel Acts as Broker to Wishbone Gold

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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