SP Angel Morning View -Today’s Market View, Friday 4th October 2024

Gold ($2,660/oz) rallies again as Middle East tensions escalate

MiFID II exempt information – see disclaimer below

East Star Resources (EST LN) – £1.2 equity raise

Kavango Resources* (KAV LN) – Update on Karakubis Project

Oriole Resources* (ORR LN) – Flash Note – Wide and abundant gold in Mbe trenching

Versarien* (VRS LN) – Pipeline grows to £4.7m from £1.6m yoy

Gold ($2,660/oz) rallies again as Middle East tensions escalate

• Gold prices rose $20/oz yesterday, touching $2,667/oz this morning.
• Prices have been reignited after tensions escalated in the Middle East, with Biden suggesting a strike on Iran’s oil facilities may be coming.
• Stronger-than-expected labour data this week is weighing on US Treasuries, with US 10 year yields rising to 3.85%.
• Focus now turns to Israel/US/Iran’s next steps, alongside today’s US NFP report which will likely go some length to guide the Fed’s November 25/50bp cut decision.

Copper ($9,940/t) eases on surplus expectations whilst China bullishness continues

• Copper prices eased to $9,940/t, having neared $10,200/t earlier this week.
• Base metals have been supported by rising optimism from China following Beijing’s larger-than-expected stimulus measures.
• However, warnings have been reiterated of surpluses next year on the back of rising supply from Mongolia and the DRC.
• Iron ore is up 20% over the past week, as traders look to a potential sea change in Xi’s policy of reducing property leverage.

UK government urged to halve VAT on EVs

• Automakers have urged the chancellor to cut VAT on new EVs and charging points in an attempt to reignite the EV market.
• In an open letter to the chancellor, the Society of Motor Manufacturers and Traders (SMMT) said that the EV share of the market was “barely moving” and that car manufacturers were likely to miss the targets for zero-emission vehicle sales set by the government.
• There were a record 56,362 battery electric vehicle (BEV) registrations in September, pushing up their share of the market since the start of the year to 17.8%.
• Forecasts estimate that figure will reach 18.5% by the end of the year – still below the government’s mandated 22%.
• In the letter, SMMT called for VAT on new EV purchases to be cut in half for the next three years, which the trade body suggested could cost the exchequer about £7.7bn by the end of 2026.
• SMMT also called for the government to delay the introduction of road tax on EVs set to come in in 2025.

Economics

US – NFPs to be released later today with numbers to be closely in relation to the pace of the monetary policy easing the Fed commenced in September.

• Estimates for the economy to have added 150k jobs in September, up from 142k in August.
• Pay growth is expected to be little changed at 0.3%/3.8% (%mom/%yoy) compared to 0.4%/3.8% the previous month.
• US dock workers and port operators reached a tentative deal to suspend the strike on the US East Coast and Gulf Coast.
• The deal includes a wage increase of >60% over six years from current $39ph to $63ph.
• The strike saw the largest work stoppage of its kind in almost half a century blocking unloading container ships from Maine to Texas.
• The union and the port operators said that they would extend the existing contract and return to work until January 15 while coming back to discussions to negotiate all outstanding issues later.
• Biden administration sided with the union pressuring port employers to raise their offer to secure a deal and citing the shipping industry’s bumper profits since Covid, Reuters reports.

Israel – Military are intensifying air strikes targeting Hezbollah strongholds raising risks of retaliation from Iran.

• Oil prices and the US$ climbed amid talks between US administration and Israel on potential strikes of oil infrastructure facilities in Iran.
• Israeli Prime Minister Benjamin Netanyahu said Iran “will pay a heavy price” for Tuesday’s attack, which saw at least 180 ballistic missiles fired at Israel.

UK – BoE Governor tries to repeat Liz Truss success on collapsing the Pound

• Sterling heads for largest fall in 18 months following hint on more activist rate cuts
• The fall comes as oil prices surged to $78/bbl
• The UK has been enjoying a stronger currency reducing inflation through cheaper imports.
• Unfortunately, the Governor’s comments on further rate cuts sent Sterling into reverse against the US dollar.
• The BoE Chief Economist is backtracking as best he can by urging caution over interest rates cuts.
• Maybe one day the BoE will get the hang of how to manage its signalling to the market

Hungary tries to veto EU tariffs on Chinese EVs

• The Hungarian Foreign Minister has revealed that the country will veto the EU’s proposed tariffs on Chinese made EVs.
• Posting on his official Facebook page, Foreign Minister Peter Szijjarto branded the EU’s tariffs “harmful and dangerous.”
• The EU proposed tariffs can be blocked if a qualifying majority of 15 member nations, representing 65% of the EU population vote against it.
• France, Greece, Italy and Poland have all voiced plans to vote in favour which would mean it would be impossible to meet the requirements to avoid the tariffs.
• Hungary has joined Spain and Germany as countries that have openly opposed the tariffs.
• While writing this comment, the EU has voted for tariffs on Chinese EVs.

Ghana debt restructuring enables exit from default

• Ghana is set to exit a debt default after bondholders agreed to reduce the package by >$4bn over the next two years.
• Ghana had defaulted during the wake of the Covid-19 Pandemic
• The country is set to be out of corporate default by their December elections.
• IMF forecasts Ghana’s gross public debt is set to fall below 80% of GDP in 2025, vs 100% in 2022.

Currencies

US$1.1032/eur vs 1.1034/eur previous. Yen 146.19/$ vs 146.40/$. SAr 17.453/$ vs 17.308/$. $1.315/gbp vs $1.316/gbp. 0.684/aud vs 0.687/aud. CNY 7.019/$ vs 7.019/$

Dollar Index 101.86 vs 101.82 previous

Precious metals:         

Gold US$2,661/oz vs US$2,649/oz previous

Gold ETFs 83.4moz vs 83.4moz previous

Platinum US$1,007/oz vs US$995/oz previous

Palladium US$1,014/oz vs US$996/oz previous

Silver US$32.1/oz vs US$31.5/oz previous

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

Base metals:   

Copper US$9,933/t vs US$10,027/t previous

Aluminium US$2,659/t vs US$2,681/t previous

Nickel US$17,840/t vs US$18,280/t previous

Zinc US$3,153/t vs US$3,168/t previous

Lead US$2,155/t vs US$2,141/t previous

Tin US$33,825/t vs US$33,865/t previous

Energy:           

Oil US$78.1/bbl vs US$74.9/bbl previous

• Crude oil prices have surged higher this week on fears of an escalation in hostilities between Israel and Iran, offset by the resumption of over 0.5mb of shut-in oil production in Libya.
• The EIA reported US inventory builds of 3.9mb to crude (-1.5mb draw exp) and 1.1mb to gasoline stocks, with refinery utilisation falling to 87.6% as hurricane caused disruption across the Gulf of Mexico region.
• The EIA reported a 55bcf w/w build to 3,547bcf (+57bcf exp) for natural gas stocks, which is below the seasonal average and enabled storage levels to fall w/w to 3.7% above last year and 5.7% above the 5-year average.
• The UK Government announced up to £21.7bn of Carbon Capture, Utilisation & Storage (CCUS) funding over 25 years to the Track 1 approved cluster sites located in Teesside (ECC) and Merseyside (HyNet).

Natural Gas €39.9/MWh vs €38.4/MWh previous

Uranium Futures $82.4/lb vs $82.2/lb previous

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$108.8/t vs US$109.1/t

Chinese steel rebar 25mm US$494.9/t vs US$494.9/t

Thermal coal (1st year forward cif ARA) US$123.5/t vs US$121.5/t

Thermal coal swap Australia FOB US$142.3/t vs US$141.4/t

Other:  

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

NdPr Rare Earth Oxide (China) US$60,980/t vs US$60,980/t

Lithium carbonate 99% (China) US$10,330/t vs US$10,330/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$321/t vs US$321/t

China Rutile Concentrate 95% TiO2 US$1,346/t vs US$1,346/t

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

Brazil Potash CFR Granular Spot US$282.5/t vs US$282.5/t

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

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

Battery News

VW ID.7 achieves almost 800km range on single battery charge

• An all-electric VW ID.7 with an 86kWh battery has achieved a range of 794km on a single charge.
• The vehicle was being driven by a ‘hypermiler’ expert in energy-efficient driving, however, the range achieved did significantly exceed the vehicles max. Worldwide Harmonised Light Vehicle Test Procedure (WLTP) range of 709km.
• We are continually seeing range records broken with the newest EV batteries and efficient vehicle electronics.
• With semi-solid-state batteries being introduced in high-end vehicles now and solid-state batteries on the horizon, it won’t be long until we be seeing even greater ranges in EVs.

US offers EVgo conditional $1.05bn loan for EV chargers

• The US Government has offered EVgo (EVGO.O), a conditional loan guarantee of up to $1.05bn to expand public electric vehicle-charging infrastructure across the country, targeting marginalised urban communities.
• The loan guarantee from the Loan Programs Office (LPO) at the Department of Energy will support EVgo’s deployment of about 7,500 public charging stations with high power chargers that can power two EVs simultaneously at nearly 1,100 stations.
• The EVgo chargers, to be built over five years, will complement a federal program created in 2021 that aims to put chargers every 50mi on highways.
• Charging infrastructure has long been a barrier to mass EV adoption and the government has been criticised for the slow roll out of a national EV charging infrastructure.

Tesla sales were up for the first time in 2024 in Q3, at 462,890 vehicles, following a disappointing H1 which saw the company lose ground in its EV dominance to Chinese automakers and so-called legacy automakers.

• Tesla sales were down 8.5% yoy in Q1, and down 6.6% yoy in Q2.
• The automaker has sold 1,293,656 vehicles ytd and is not looking likely that the automaker will reach its 2023 yearly sales total of 1,808,581 vehicles.
• Australia has seen significant downturn in sales, with total sales ytd down 19.1%.
• Increased competition from Chinese EV makers has seen Tesla lose its spot as the number one global EV manufacturer to BYD.

Tesla Cybertruck sales double in last few months, but suffer another recall

• Thanks to another recall for Cybertrucks, in a notice posted on the National Traffic Safety Administration website, there have been 27,185 Tesla Cybertrucks sold.
• In an earlier recall in June, only 11,700 Cybertrucks had been sold.
• 5,175 Cybertrucks were sold in July alone according to data from S&P Global Mobility.
• Tesla is recalling all Cybertrucks, which first went out for delivery in November 2023, due to the delayed boot-up of the vehicle’s rear-view camera, which could affect the driver’s rearview and increase the risk of a crash, the NHTSA notice said.

Company News

East Star Resources (EST LN) 1.0p, Mkt Cap £3m – £1.2 equity raise

• The Company raises £1.2m through an equity placing of ~101m new shares at 1.15p.
• Funds will be used to advance the Verkhuba Copper Project as well as drill test high impact targets in the Rudny Altai VMS Belt, Kazakhstan.
• The management is planning to infill drilling programme as well as metallurgical and engineering studies to understand potential economics of the Verkhuba Project.
• Maiden JORC compliant resource was released in April this year estimating 20.3mt at 1.16% Cu, 1.54% Zn and 0.27% Pb (all Inferred).
• The Company reported a cash balance of £0.4m and no debt as of 1H24 after having spent £0.3m in exploration during the period.

Kavango Resources* (KAV LN) 1p, Mkt Cap £16m – Update on Karakubis Project

• Kavango Resources provides an update from their copper exploration programme in Botswana’s Kalahari Copper Belt.
• The Company has drilled five holes and analysis suggests ‘the same stratigraphic sequences’ as Sandfire’s Motheo and MMG’s Zone 5 deposit.
• Core analysis also suggests functioning structural ‘trap-sites’ and hydrothermal alteration.
• pXRF analysis also suggests copper, silver, lead and zinc mineralisation.
• Hole KCBDD006 returned
  • At 320m, bornite was recorded with a pXRF reading hitting 1.28% Cu.
  • At 541m of chalcopyrite was noted in a quartz vein with pXRF readings of 32% Cu
• The exploration team is now conducting geophysical surveys to delineate drill targets for future campaigns.
• The five holes account for 2,838m/5000m of the current programme.
• The team notes the stratigraphy intersected in the current drilling programme varies from the surrounding region, but with similar sedimentary cyles seen at Sandifre’s Motheo and MMG’s Zone 5.
• Geophysical surveying will also be used to better understand the structural setting, including IP to a depth of 1,200m and Controlled Source Audio MagnetoTelluric data.
• Going forward, Kavango will complete the ongoing KCBDD007 hole, before focusing on geophysics and magnetotellurics. They will then continue the Phase 1 drilling programme.

Conclusion: Kavango is taking a methodical and sophisticated approach to better their understanding of the Karakubis area through a combination of drilling and geophysics. The Company is aiming to distinguish sedimentary cycles within the stratigraphy, whilst also identifying the main structural components of the area. Encouragingly, the Company notes the presence of copper sulphides alongside pathfinder minerals in veins.

*An SP Angel Analyst holds shares in Kavango

Oriole Resources* (ORR LN) 0.34p, Mkt cap £12.8m – Flash Note – Wide and abundant gold in Mbe trenching

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• We have prepared an update note on Oriole’s recent trenching success at Mbe in Cameroon.
• The Company has now returned wide and extensive gold mineralisation at surface, including:
  • 50m at 1.1g/t Au (inc. 20m at 2.2g/t Au.
  • 51m at 1g/t Au, 32m at 1.3g/t Au
  • 88m at 0.7g/t Au, 30m at 1.2g/t Au, 48m at 1.23g/t Au.
• Oriole is free-carried at Mbe whilst BCM International earns up to 50% of the project through £4.5m in exploration expenditure.
• Drilling is being planned for the upcoming field season.
• African orogenic, quartz sulphide vein gold discoveries are often presaged by positive trenching results, with WIA Gold’s recent Namibian discovery Kokoseb yielding 18m at 2g/t Au and 2m at 0.89g/t Au. Similarly, Predictive Discovery’s Bankan project, with similar geology to Mbe, yielded trenching results of 92m at 1.7g/t Au.
• We also comment on a recent meeting with the Mining Minister for Cameroon, which highlighted the Country’s pragmatic approach to supporting the mining industry, with an emphasis on fast-tracking exploration and development projects.

Conclusion: Trenching at both MB01-S and MB01-N has now returned highly encouraging results at promising grades (highs of 12.6g/t Au over 2m) and widths (i.e. 51m at 1g/t Au). Results will now guide a maiden drilling programme, which will start in the 2024/25 field season. Although it is too early to suggest a valuation for Mbe, we highlight in the note a range of gold developer EV/Resource multiples and their implications for Oriole, which underlines the significant rerate potential should drilling justify management’s belief that Mbe holds multi-million-ounce potential.

*SP Angel acts as Broker to Oriole Resources

Versarien* (VRS LN) 0.059p, Mkt Cap £1.6m – Pipeline grows to £4.7m from £1.6m yoy

• Versarien tells us that its product pipeline of opportunities has grown to £4.7m from stood at £1.6m yoy.
  • £1.6 m of commercial opportunities,
  • £3.1 m of grants
  • Versarien has also submitted a proposal as part of a consortia for a Chips Joint Undertaking (Chips JU) grant
  • Two European Innovation Council Pathfinder applications are underway.
• Advanced materials development: using Versarien’s manufacturing-light operations and technology licensing for graphene and related materials in:
  • Construction,
  • Leisure
• 2D inks Graphinks™: potential to re-align to other sectors using functional 2D inks Graphinks™
  • Graphene-based thermoplastic,
  • thermoset and elastomer compounds and masterbatches (Polygrene™).
• Construction: New equipment due in November for in-house construction testing to accelerate developments of graphene-based admixtures (Cementene™) and quality control of 3D printed products.
  • 3D construction printing (“3DCP”) contract with Building For Humanity CIC, worth an initial £200,000 for the construction of the first of five housing blocks and a community hub in Accrington.
    • On-site 3DCP activities will likely start in 2025.
  • Feasibility study for a cultural project to be built using 3DCP technology.
  • Balfour Beatty contract to develop graphene enhanced 3DCP materials and products.
• Leisure:
  • Graphene-Wear™ ink sales with 14 companies to supply Graphene-Wear™ inks for use in textile products in:
    • Europe
    • South Korea,
    • South America with sales partner GoToGym
    • Trials with several companies for fabric and wearer trials with Graphene-Wear™ garments.
  • Graphene-Wear™ footwear:  
    • Outsole rubber compounds further improved for Flux Footwear, in the USA. Enhanced curing rates to enable larger volume production and diversifying the Group’s offering to more applications.
• Technology Licencing with:
  • Montana Química LTDA in Brazil – Versarien is supplying graphene materials to Montanna in Brazil and meeting Montana’s clients in-person. Also attending the Graphene Forum 2024 hosted at SENAI CIMATEC.
  • Other discussions with third parties are also ongoing for technology licensing.
• R&D Updates. UK R&D staff now based at:
  • Cambridge University Graphene Centre
  • Nanotechnology and Integrated Bioengineering Centre, Ulster University
  • Membership of the Graphene Engineering Innovation Centre at the University of Manchester as a Tier 2 partner for sixth year.
• Cambridge Graphene Limited (“CGL”)
  • Ongoing work in the Digital Roads of the Future project at the University of Cambridge.
  • Developing geopolymers for rigid pavement production, using clay waste with reclaimed asphalt pavement and crushed concrete.
  • INNPRESSME project ‘Bioguard’ to further improve Graphinks™ by developing hybrid graphene/silver/cellulose ink formulations with significantly enhanced electrical conductivity with European partners CIDETEC and CEA.
  • Near-field communication antennas capable of temperature sensing were printed on biodegradable paper substrates as a key demonstrator.
  • Results to be presented by Versarien at the ‘Pitch Perfect and Boost the European Bioeconomy’ event in Brussels in December 2024.
• 2-DTech Limited (“2DT”)
  • Role in Horizon Europe project ‘ICARE’ by developing protocols and supplying graphene materials used in products like mortars, concretes (including 3D printable materials), and rubber goods (tyres, footwear)
  • in order to support the understanding of graphene’s life cycle and the potential exposure routes and toxicology to end users.  This important project aims to create new systems that assess and predict the impacts of nanomaterials on brain health, preventing neurotoxicity.
• Gnanomat (“GNA”)
  • Launching new business line in functional printing to bring 1tpa of Gnanomat functional inks to market with support of ICEX Trade and Investment grant.
  • Initial focus on developing new products for printed electronics,
  • Other applications: electromagnetic interference (EMI) shielding, sensing, and security.
  • Established co-development contracts with IRPC in Thailand and CBMM in Brazil. Looking for further collaborations and commercially funded R&D projects.
• Korea
  • CVD graphene activity in Korea through partnerships and collaborations with MCK Tech Co. Ltd
  • GrapheneLab collaboration.  GrapheneLab is an existing investor.
• Exhibiting at:
  • The NEC, Birmingham – UK Construction Week 2024 (UKCW2024)
  • Highways UK and exhibiting alongside Keyline Civils Specialist as a ‘Featured Supplier’.
  • Versarien CEO to speak at “Carbon Korea 2024” in Seoul in October alongside exhibiting with MCK Tech.
  • CEO to attend the ‘International Standardization of Advanced Materials Forum’ hosted by the Korea Carbon Industry Promotion Agency.

Conclusion:  Versarien appears to be making good progress. The company is working on applications for further grant funding and for some new commercial contracts. Graphene ink sales continue to grow in key regions and the team

*SP Angel acts as Nomad and Broker to Versarien

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                                                            

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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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