SP Angel Morning View -Today’s Market View, Friday 31st May 2024

Copper holds as speculative positions unravel following epic short squeeze

MiFID II exempt information – see disclaimer below

Amaroq Minerals (AMRQ LN) – Confirmation of Greenland’s first copper porphyry system

Kavango Resources* (KAV LN) – High priority copper targets identified through geophysics in Botswana

Perseus Mining (PRU AU) – Update on Nyanzaga Gold Project

Talga (TLG AU) – Vittangi expansion scoping study update

Copper ($10,125/t) holds as speculative positions unravel following epic short squeeze

• Copper prices have fallen c.3% over the past two sessions to settle around $10,125/t.
• The move reflects profit taking following a major rally to $11,000/t on limited physical availability in the States.
• The Chinese government has also hinted at cracking down on CO2 emissions from the smelting industry.
• The copper rally had taken physical players by surprise, given several demand indicators suggesting tepid buying and supply seemingly buoyant in main market China.

Gold ($2,344/oz) prices hover as Fed inflation gauge due this afternoon

• Gold prices have strengthened slightly to $2,344/oz as yields settle at their higher levels.
• The US 10-year yield has eased from recent highs of 4.6%, but remains well above mid-May levels following a hawkish narrative shift.
• Focus will be on today’s inflation data, with the US PCE forecast at 2.8% yoy and 0.3% mom.

Indonesian nickel contract to trade on LME

• The LME has approved a contract for Indonesian brand of refined nickel.
• Indonesia produced over half of the world’s nickel last year, with the new contract requiring a 99.8% pure nickel content.
• The LME is looking to boost liquidity for nickel following the 2022 short squeeze.

China banks on Solid State Li-ion batteries offering better range, faster charging, longer life and improved safety

• China is planning to invest >CNY 6bn (~ $830m) into R&D in solid-state Li-ion batteries to stay ahead in the race to dominate global EV markets.
• The six recipients of the funding are: CATL, BYD, FAW, SAIC, Geely and WeLion New Energy Technology which is backed by Nio.
• The plan is to start mass production of solid-state batteries in 2027 which feels like a fairly ambitious target given that testing on new chemistries will need to start in 2025 / 26.
• BYD is already offering a hybrid with a range of >2,000km which really just depends on the size of the fuel tank.
• China aims to overtake Japan in battery technology using its CASIP ‘China All-Solid-State Battery Collaborative Innovation Platform’.
• In effect the government is banging a few heads together and forcing competing companies to work as one on this project of national importance.
• This means whoever makes the critical breakthrough / breakthroughs will be forced to share their technology with the other five key companies.
• Ford and Mercedez appear to have postponed their rollout and development of electric drive trains into their ‘heavier’ vehicles indicating their tech is not yet ready for consumers.
• Companies outside China’s fund will have to work all the harder to keep pace with new battery innovation.
• Toyota already claims to have a solid-state Li-ion battery in development and is also targeting mass-production in 2027.
• Nissan also reckons it could start mass-production of solid-state battery EV by 2029.

IG TV: BHP-Anglo takeover tango may resume in six months:  https://www.ig.com/uk/news-and-trade-ideas/bhp-anglo-takeover-tango-may-resume-in-6-months-240530

Beat the street: US GDP; Best Buy; Anglo-BHP; Tesla:   https://www.ig.com/uk/news-and-trade-ideas/beat-the-street–us-gdp–best-buy–anglo-bhp–tesla-240530

121 Mining Investment Conference investment Leaders panel: https://youtu.be/OWEASjgXiME?si=ZPzQT-1SnUhXRo0g

*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 – Inflation data due later this afternoon will be closely watched by investors to assess the pace of disinflation.

China – Downbeat manufacturing PMI data was released this morning indicating the sector slipped into a contraction in May.

• Official manufacturing PMI fell to 49.5 this month missing estimates and coming off recent expansions in April and March.
• Services PMI came in at 51.1, slightly off on 51.2 in April.
• Composite PMI pulled back to 51.0 from 51.7.

IMF upgrade China GDP growth to 5% from 4.6%

• The IMF also see China GDP growing at 4.5% next year
• The organisation sees China GDO growth slowing to 3.3% in 2029
• IMF forecasts tend to start out cautious and to upgrade over time as initiatives to stimulate economic performance become clear.
• Most economists have forecast lower growth in China over the past 25 years to be surprised on the upside as the CCP and PBoC put new measures in place.

China government developing new ways to increase home buying

• We are often impressed by the creativity of the CCP in the levers they pull to implement government policy.
• We are now hearing more on their drive to develop greater home ownership.

• • Removal of floor in mortgage interest rates,
  • Reducing deposits
  • PBoC providing $42bn for the buying of excess inventory from developers to turn it into affordable housing.
• Shanghai, Shenzhen and Guangzhou slashed recently cut deposit requirements
• Negative equity: If property prices fall far then negative equity could cause political strife particularly if the ‘middle class’ feel they are being hard done by.
• Local communist officials who used to make a nice turn on the sale of land for development will need to find other ways to support their lifestyles.
• Local government which funded a significant portion of their income through land development sales are now struggling to sell much development land while the property crisis unfolds all but removing a significant source of funding at a time when local authorities are struggling to support significant debt.
• The challenge is for the government to persuade the Chinese people that it is better to buy than to rent.
• This will only happen when property prices fall to a level where people are willing to invest their savings into this less-liquid asset class.

Japan – Tokyo consumer inflation came in line with estimates with a 2.2% reading in May.

• Strong inflation increases chances for a BOJ hike at their next meeting on June 13-14.

EU – Authorities are providing €2bn in grant funding to STMicroelectronics, a French-Italian semiconductor company, to set up a chip plant in Sicily.

• Funding will be part of a total investment of €5bn in the project.
• The decision is in line with objectives of the 2023 European Chips Act, a €43bn plan to support semiconductor production in Europe and diversify sources of produced chips, FT reports.

Eurozone – Inflation came ahead of market expectations this morning with headline and core measures reported at 2.6% and 2.9%, respectively, in May.

UK – Business confidence rises to new decade high

• Lloyds Bank business index shows an 8pt increase to 50% in May.
• 62% of businesses surveyed expect output to rise up from 57%.
• Over half the companies expect to expand their workforce vs 15% who are looking to cut staffing
• Strong improvement in services and construction with 7 out of 12 regions expecting business to improve.

Property prices returned to growth in May following two consecutive months of contraction, Nationwide data showed.

• Prices climbed 0.4%mom taking the annual growth rate to 1.3%yoy.

Nigeria – New national anthem pushed through by president

• Enjoy: https://www.youtube.com/watch?v=5eRuNY1cLZQ.

Currencies

EUR1.0816/US$ vs 1.0798/US$ previous. $157.06/Yen vs 156.94/Yen. $18.875/SAr vs 18.657/SAr. GBP$1.270 vs GBP$1.270. AUD0.663 vs AUD0.660. $7.244/CNY vs $7.248/CNY.

Dollar Index 104.84 vs 105.04 previous.

Precious metals:         

Gold US$2,343/oz vs US$2,334/oz previous.

Gold ETFs 80.6moz vs 80.6moz previous.

Platinum US$1,031/oz vs US$1,031/oz previous.

Palladium US$957/oz vs US$946/oz previous.

Silver US$31.3/oz vs US$31.5/oz previous.

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

Base metals:

Copper US$10,158/t vs US$10,204/t previous.

Aluminium US$2,708/t vs US$2,743/t previous.

Nickel US$20,293/t vs US$20,110/t previous.

Zinc US$3,055/t vs US$3,046/t previous.

Lead US$2,293/t vs US$2,283/t previous.

Tin US$33,306/t vs US$33,440/t previous.

Energy:

Oil US$81.9/bbl vs US$83.4/bbl previous.

• Crude oil prices fell ahead of Sunday’s OPEC+ meeting despite the EIA reporting a larger-than-expected 4.2mb w/w draw to US crude offset by a ~2.5mb builds to both gasoline and distillate stocks, with refinery utilisation climbing 2.6% to 94.3%.
• US Henry Hub natural gas prices moved lower after the EIA reported an 84bcf w/w build to 2,795bcf (+78bcf exp), with storage levels declining w/w to 15.7% above last year and 26.5% above the 5-year average.
• Petrofac slumped a further c.30% in early trading after announcing FY23 results, which its auditor wouldn’t sign off on, including $570m of net debt at end-April. The Company is working to implement a financial restructure that is expected to include the conversion of a significant proportion of the ~$0.8bn existing debt into equity.
• Gazprom’s 2023 annual report revealed that gas production fell 14% y/y to 355.2bcm last year, which is 31% down on volumes of 514.8bcm in 2021.

Natural Gas €35.0/MWh vs €33.8/MWh previous.

Uranium Futures $90.6/lb vs $90.3/lb previous.

Bulk:

Iron Ore 62% Fe Spot (cfr Tianjin) US$118.0/t vs US$120.5/t

Chinese steel rebar 25mm US$541.2/t vs US$540.9/t

Thermal coal (1st year forward cif ARA) US$122.5/t vs US$121.0/t

Thermal coal swap Australia FOB US$140.0/t vs US$139.5/t

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

Other:  

Cobalt LME 3m US$27,150/t vs US$27,150/t

NdPr Rare Earth Oxide (China) US$51,880/t vs US$52,494/t

Lithium carbonate 99% (China) US$14,281/t vs US$14,279/t

China Spodumene Li2O 6%min CIF US$1,210/t vs US$1,210/t

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

China Tungsten APT 88.5% FOB US$360/mtu vs US$365/mtu

China Graphite Flake -194 FOB US$470/t vs US$470/t

Europe Vanadium Pentoxide 98% 5.2/lb vs US$5.2/lb

Europe Ferro-Vanadium 80% 26.85/kg vs US$26.85/kg

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

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

Spot CO2 Emissions EUA Price US$73.9/t vs US$73.9/t

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

Company News

Amaroq Minerals (AMRQ LN) 72.8p, Mkt Cap £238m – Confirmation of Greenland’s first copper porphyry system

• Amaroq Minerals have identified a potential mineralised system in the ‘South Greenland Copper Belt’.
• The system is defined by numerous copper showings and historical small scale operations running 150km from the Josva mine to a series of porphyry targets in the East.
• A review of results from Target West indicate potential for a copper-molybdenum porphyry / intrusion related body in the area.
• A further potential 17 new targets are also defined within the Johan Dahl Land area.
• Geophysical data show potential for further copper mineralisation at depth and across two newly defined targets.
• Five more copper-nickel sulphide targets have also been identified within the same mineral belt.
• Management are now working on plans for this year’s field exploration programs.
• Fortunately, the field season is normally longer in South Greenland than in the north.

Kavango Resources* (KAV LN) 1.5p, Mkt Cap £22m – High priority copper targets identified through geophysics in Botswana

• Kavango Resources provides an update from its exploration programme on the Kalahari Copper Belt Karakubis Copper Project.
• Geophysics have been conducted using Airborne ElectroMagnetics over the Block 1A of the Karakubis Project.
• This has identified a potential contact point between lower D’Kar Formation and Ngwako Pan Formation.
• This contact point has formed copper/silver deposits in the region.
• The Company will now conduct Induced Polarisation over five high priority targets to rank for drilling.
• Drilling is set to begin in June.

*An SP Angel Analyst holds shares in Kavango

Perseus Mining (PRU AU) A$2.35, Mkt Cap A$3.24bn – Update on Nyanzaga Gold Project

• Perseus provides an update on the Nyanzaga Gold Project in Tanzania that it recently acquired from OreCorp.
• The Company is starting Feasibility level studies on the project with the plan to release first MRE and Ore Reserves during 4Q24.
• FEED studies will be conducted in parallel, aimed to support an FID by year end, before first production 1Q27.
• Nyanzaga currently holds an MRE of 24.2mt at 3.64g/t Au for 2.9moz Au in M&I, alongside 5.8mt at 2.4g/t Au for 0.5moz Au in inferred.

Talga (TLG AU) A$0.6, Mkt Cap A$232m – Vittangi expansion scoping study update

• Vittangi update as Talga bids to boost its 19.5ktpa anode product plant.
• Talga is exploring options to boost its mining rate to 2mtpa to support a 425ktpa precursor concentrate output.
• The Company is exploring options to transition to underground mining, which holds the potential to boost the LOM to 40 years with a 600ktpa mining rate.
• Targeting completion of scoping study by 4Q24.
• Also aiming to boost exploration taret of 240-330mt at 20-30% Cg to MRE.

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                                                            

Prince Frederick House

35-39 Maddox Street London

W1S 2PP

*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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