SP Angel Morning View -Today’s Market View, Friday 6th October 2023

Copper prices bounce from May lows as China volumes remain muted on holidays

MiFID II exempt information – see disclaimer below

Asiamet Resources (ARS LN) – BKM Project update as copper offtake discussions progress

Aston Bay Holdings (BAY CN) –Aston Bay closes C$2.5m placement

KEFI Gold and Copper* (KEFI LN) – Tulu Kapi Project regulatory update

Petra Diamonds (PDL LN) – Petra advances diamond tender in response to two-month diamond import moratorium in India

Power Metal Resources* (POW LN) 0.65p, Mkt cap £13m – Geophysics at Molopo Farms provides further drill targets

Serabi Gold (SRB LN) 27.6p, Mkt Cap £21m – Resource estimate increase for Palito Complex

Vast Resources (VAST LN) – £1.8m equity raise

IGTV: New lower lows in base metals keep coming – why? https://youtu.be/1KWgI2HTUGw?si=VlVfQtpW-mrI7slD

          Copper will still move up despite a gear shift down in carbon-zero targets  https://youtu.be/jbywf2hmEU8?si=yxJcwGiE1_V121Ok

VOX: 29/09/23:  https://audioboom.com/posts/8375969-john-meyer-on-china-s-property-implosion-plus-atlantic-lithium-bushveld-sovereign-metals

          22/09/23:  https://audioboom.com/posts/8372001-john-meyer-discusses-heat-pumps-the-energy-transition-plus-bluejay-jay-kodal-kod-savannah-sav

*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.

Copper prices bounce from May lows as China volumes remain muted on holidays

• Copper prices have climbed above $7,900/t following a slump to $7,890/t.
• The price has been hit by higher yields and a higher dollar.
• Inventories are high and downstream margins in China are weak, weighing on price sentiment.

Gold holds around March lows as traders look to US Jobs data

• Gold prices remain around the $1,820/oz mark, having fallen over $100/oz the past fortnight.
• Gold prices have been hit by a major repricing in the US Treasury market, with long-duration yields pushing past 2007 highs.
• Today’s non-farm payrolls are expected to come in at +170k, however a beat to this will add further pressure to gold prices whilst a miss may provide some needed relief for the bullion bulls.

China steel margins slide on elevated iron ore prices and weak demand

• HRC Chinese steel margins are reportedly hovering $9/t.
• Steelmaking margins are being hit by elevated iron ore prices, which are holding around $120/t.

India could become $1 trn export-led automotive hub by 2035

• India aims to become a $1 trillion export-led automotive hub by 2035, says a report by consulting firm Arthur D Little.
• India is the fourth-largest global automotive market, generating $250 billion in FY23 and contributing 7.3% to the national GDP, trailing behind Germany, Japan, and South Korea.
• Current investments required for this transformation are estimated to be between $100 billion and $150 billion, focusing on platform development, manufacturing infrastructure, and ER&D centers.
• The report emphasizes the key role of local Original Equipment Manufacturers (OEMs) in realizing this vision.
• Around 40-50% of the $1 trillion opportunity might be software-related, with an estimated $500 billion catering to the domestic market across various segments.
• EVs could dominate domestic sales by 2035. India might see 12-15% penetration of four-wheeler EVs and nearly complete electrification of three-wheelers by 2030.

US electric vehicle to soar past 1.4 million units

• US EV sales are expected to surpass 1.4 million units by December 2023, marking a record-breaking achievement.
• In the first three quarters of 2023, EV sales experienced a significant surge, increasing by 50.9% compared to the same period in the previous year.
• Data from carmakers and registrations revealed that 875,798 EVs were sold from January to September 2023.
• September alone saw a remarkable sales figure of 229,812 EVs, driving the national EV market share from 7.2% to 7.5%.
• This growth represents a substantial improvement over 2022 when the market share was slightly over 5%.
• In 2022, total US EV sales reached approximately 918,500 units, indicating a significant increase in 2023.
• The ongoing union strike against major carmakers, leading to increased demand for Teslas and other EVs, could further accelerate the pace of EV sales.

Economics

US – NFPs day with markets to watch closely US labour numbers at the time when policymakers assess the effects of the rate rises so far and to what extent tight monetary policy should be maintained.

• Estimates for NFPs to come in at 170k, down from 187k in August.
• Labour earnings are forecast to average 0.3%mom/4.3%yoy, little changed from 0.2%/4.3% recorded in July.
• In addition, inflation data is due next week with expectations for pullback in headline numbers.

China – The nation is returning back to work next week after celebrating Golden Week from 01 October.

Germany – Factory orders bounce back in August following a sharp drop in the previous month representing a rare piece of positive economic news.

• Reports released earlier this week showed that manufacturing sector remained deep in contraction in August-September while overseas shipments also continued to fall over the last two months.
• Factory Orders (%mom): 3.9 v -11.3 July (revised from -11.7) and 1.5 est.
• Factory Orders (%yoy): -4.2 v -10.1 July (revised from -10.5) and -7.9 est.

UK – Property prices recorded a sixth consecutive decline in September, Halifax reports.

• The average price of a home dropped 0.4%mom and 4.7%yoy to ~£279k.
• Market commentators expect prices to fall around 10% from their peak in August last year implying the correction may be halfway through.
• Declines have been limited by increases in wages seeing the house price to income ratio at 6.2, the lowest level since June 2020, Halifax said.

Currencies

US$1.0543/eur vs 1.0503/eur previous. Yen 148.89/$ vs 148.97/$. SAr 19.460/$ vs 19.408/$. $1.219/gbp vs $1.214/gbp. 0.636/aud vs         0.634/aud. CNY 7.298/$ vs 7.298/$.

Dollar Index 106.48 vs 106.75 previous.

Commodity News

Precious metals:

Gold US$1,819/oz vs US$1,821/oz previous

Gold ETFs 87.4moz vs 87.5moz previous

Platinum US$860/oz vs US$866/oz previous

Palladium US$1,141/oz vs US$1,172/oz previous

Silver US$20.94/oz vs US$21/oz previous

Rhodium US$4,100/oz vs US$4,100/oz previous

Base metals:

Copper US$ 7,932/t vs US$7,903/t previous

Aluminium US$ 2,236/t vs US$2,230/t previous

Nickel US$ 18,425/t vs US$18,610/t previous

Zinc US$ 2,498/t vs US$2,480/t previous

Lead US$ 2,149/t vs US$2,111/t previous

Tin US$ 24,495/t vs US$24,035/t previous

Energy:

Oil US$84.0/bbl vs US$86.2/bbl previous

Natural Gas €36.450/MWh vs €38.500/MWh previous

Uranium UXC US$72.75/lb vs US$70/lb previous

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$114.6/t vs US$115.4/t

Chinese steel rebar 25mm US$540.3/t vs US$540.3/t

Thermal coal (1st year forward cif ARA) US$116.8/t vs US$118.0/t

Thermal coal swap Australia FOB US$140.0/t vs US$144.5/t

Coking coal swap Australia FOB US$321.0/t vs US$321.0/t

Other:  

Cobalt LME 3m US$33,420/t vs US$33,420/t

NdPr Rare Earth Oxide (China) US$71,252/t vs US$71,252/t

Lithium carbonate 99% (China) US$21,033/t vs US$21,033/t

China Spodumene Li2O 6%min CIF US$2,290/t vs US$2,290/t

Ferro-Manganese European Mn78% min US$1,023/t vs US$1,019/t

China Tungsten APT 88.5%posi FOB US$305/mtu vs US$305/mtu

China Graphite Flake -194 FOB US$645/t vs US$645/t

Europe Vanadium Pentoxide 98% 6.6/lb vs US$6.6/lb

Europe Ferro-Vanadium 80% 29.25/kg vs US$29.25/kg

China Ilmenite Concentrate TiO2 US$316/t vs US$316/t

Spot CO2 Emissions EUA Price US$83.7/t vs US$83.9/t

Brazil Potash CFR Granular Spot US$345.0/t vs US$345.0/t

Battery News

India could become $1 trn export-led automotive hub by 2035

• India aims to become a $1 trillion export-led automotive hub by 2035, says a report by consulting firm Arthur D Little.
• India is the fourth-largest global automotive market, generating $250 billion in FY23 and contributing 7.3% to the national GDP, trailing behind Germany, Japan, and South Korea.
• Current investments required for this transformation are estimated to be between $100 billion and $150 billion, focusing on platform development, manufacturing infrastructure, and ER&D centers.
• The report emphasizes the key role of local Original Equipment Manufacturers (OEMs) in realizing this vision.
• Around 40-50% of the $1 trillion opportunity might be software-related, with an estimated $500 billion catering to the domestic market across various segments.
• EVs could dominate domestic sales by 2035. India might see 12-15% penetration of four-wheeler EVs and nearly complete electrification of three-wheelers by 2030.

US electric vehicle to soar past 1.4 million units

• US EV sales are expected to surpass 1.4 million units by December 2023, marking a record-breaking achievement.
• In the first three quarters of 2023, EV sales experienced a significant surge, increasing by 50.9% compared to the same period in the previous year.
• Data from carmakers and registrations revealed that 875,798 EVs were sold from January to September 2023.
• September alone saw a remarkable sales figure of 229,812 EVs, driving the national EV market share from 7.2% to 7.5%.
• This growth represents a substantial improvement over 2022 when the market share was slightly over 5%.
• In 2022, total US EV sales reached approximately 918,500 units, indicating a significant increase in 2023.
• The ongoing union strike against major carmakers, leading to increased demand for Teslas and other EVs, could further accelerate the pace of EV sales.

Company News

Asiamet Resources (ARS LN) – 1p, mkt cap £26m – BKM Project update as copper offtake discussions progress

• Asiamet provides an update on its BKM copper project in Central Kalimantan, Indonesia.
• Grant Samuel is in discussions with a lead bank for financial modelling and valuation metrics.
• The Company reports it has received term sheets from a metals trading group for copper cathode offtake financing – this is dependent on due diligence.
• The Company is also progressing discussions with other trading groups.
• Asiamet is also working with SRK for a report on its recent site visit for potential debt financing.
• A Project execution partner is expected to be decided on this quarter.
• Asiamet’s BKM Project holds an NPV8 of US$163m and $1.9/lb cash costs and a total $235.4.

Aston Bay Holdings (BAY CN) C$0.035, Mkt cap C$5.4m –Aston Bay closes C$2.5m placement

• Aston Bay Holdings has closed a C$2.5m placement to help fund work on its gold projects in Virginia.
• The company has a joint venture agreement with American West Metals which is busy drilling the Storm copper project in Nanavut, Canada.
• Aston Bay is free carried until American West makes a decision to mine on the completion of a Bankable Feasibility Study.
• Aston Bay also gets a 2% NSR if its interest is diluted to below 10%.
• Recent results from American West show:

1. 1. 76m @ 2% Cu from 32.4m
   2. Inc. 48.6m @ 3% Cu from 32.4m
   3. and inc. 20m @ 6.2% Cu from 40.8m
2. Hole “ST23-02 intersected a 24m thick interval of copper sulphides at depth with copper values up to 2.7% Cu, indicating the potential of the deeper system to host high-grade mineralisation”

KEFI Gold and Copper* (KEFI LN) 0.64p, Mkt Cap £32m – Tulu Kapi Project regulatory update

• The Company received a formal confirmation from the national central bank in Ethiopia waving the project form foreign exchange and capital controls.
• With all matters of principle for the Tulu Kapi Gold Project having now been resolved, lenders can now proceed with final credit approval for the $190m secured loan.
• Following credit approval, the social performance and procurement teams will be engaged for all final details to be included into detailed definitive documents to be signed off by all parties of the funding consortium.
• The team expects construction start this quarter.

Conclusion: The project hits another major milestone setting it on course for the start of development works later this quarter.

*SP Angel acts as Nomad and Broker to KEFI Gold and Copper

Petra Diamonds (PDL LN) 62.5p, Mkt Cap £121m – Petra advances diamond tender in response to two-month diamond import moratorium in India

• Petra Diamonds reports initial tender results for 344,554 carats representing 75% of the total volume at US$30.2m.
• The results show an average sales price of US$88/ct and are just 16-18% lower than prices seen in the first tender of the new fiscal year.
• We believe prices in the open market are down 30-50% this year indicating a relatively good sale for Petra.
• This is a remarkable achievement given the state of the diamond mining industry which is struggling to compete with cheap Lab Grown Diamonds.
  • ‘The sale of the remaining 25% of the volume of Tender 2 is scheduled to close on or around 11 October 2023 and the full sales results of Tender 2 will be released shortly thereafter.’
• The Indian government has imposed a two-month moratorium starting 15 October on rough diamond imports to help protect its cutting and polishing industry.
• They cite slowing demand for cut and polished diamonds in the US and China, though the US built up significant inventory ahead of the holiday season and possibly won’t buy much from the manufacturers till they see where the economy is going.
• Indian diamond cutters and polishers now handle nine out of 10 of the world’s diamonds.
• LGD ‘Lab Grown Diamonds’ are having a severe impact on the world’s mined diamond supply chain.
• Rapaport, the world’s pre-eminent diamond pricing service, estimate the cost of a mined 2ct H/VS2 diamond at ~$15,000 vs an LGD at around $430
• So jewellers are opting to sell consumers cheaper LGDs at vastly higher margins leaving diamond miners with lower prices and vastly reduced demand.
• DeBeers and Alrosa have already cut sales to help protect the diamond market where confidence is key in the face of new competition from LGDs

Conclusion:  Petra is doing better than we would have expected given the rise in global sales of LGDs though we do not believe there is any structural deficit in the market but rather an excess of oversupply. The world’s mined diamond marketing industry is going to have to work really hard to recover demand for mined diamonds but where the industry ends up is anyone guess from here.

Power Metal Resources* (POW LN) 0.65p, Mkt cap £13m – Geophysics at Molopo Farms provides further drill targets

• Power Metal provides an update on exploration at the Molopo Farms prospect in Botswana, where the Company is exploring for massive sulphide mineralisation.
• Previous drilling at Molopo Farms over the 2022/23 failed to intercept meaningful nickel mineralisation.
• However, the Company has subsequently engaged geophysicists for inversions of widely spaced AMT surveys taken in 2020.
• This measures wider ranges of conductivities vs airborne/ground EMs and enables deeper readings.
• This work has provided POW with two strong conductors with a very strong dipping conductor over several kilometres.
• The dipping conductor is believed to be co-incident with the keel of the feeder zone intrusion.
• Power Metal now sees this new target as ‘high priority’ for further exploration and drilling.
• The Company sees the second target as sedimentary, which might explain the false ‘targeting’ during the previous drilling campaign.

Conclusion: Power Metal now sees Molopo Farms as holding further potential for nickel exploration given the recent discovery of a steeply dipping conductor that was not drill tested over last year’s programme. The thesis that the previously tested anomaly was in fact a flat-lying sedimentary bed goes far to explain the relatively disappointing assay results at Molopo Farms. We look forward to further details on the planned drilling programme targeting a potential ultramafic intrusion hosting massive sulphides.

*SP Angel acts as Nomad and Broker for Power Metal Resources

Serabi Gold (SRB LN) 27.6p, Mkt Cap £21m – Resource estimate increase for Palito Complex

• Serabi provides an increased Mineral Resource Estimate for its Palito Complex, which includes the Sao Chico satellite deposit.
• The Measured and Indicated category shows 377.8koz of contained gold, up 50% vs December 2021.
• The 1,166.3kt resource holds an average in-situ grade of 10g/t.
• There is also an additional 153.9koz au in the inferred category from an average grade of 7g/t.
• Average reported grade for the M&I resource up 93% from 5.23g/t.
• The Mineral Resource estimate lies under NI 43-101 conditions.
• Management expects reserve estimate to increase.

*An SP Angel analyst has visited the Serabi’s gold mining operations in Brazil

Vast Resources (VAST LN) 0.21p, Mkt Cap £7m – £1.8m equity raise

• The Company raised ~£1.8m at 0.19p to fund working capital and development plans at the polymetallic Baita Plai operation.
• The team announces the start of commercial production at the lead/zinc concentrate at Baita Plai.
• Infill and step out drilling and underground development are ongoing at Baita Plai.
• Separately, the team is reporting the first shipment of the lead/zinc concentrate to Trafigura was completed this week at the operation in Tajikistan.
• The team reports that based on its current expectations the Company is not envisaging “further equity funding for the foreseeable future”.

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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