SP Angel Morning View -Today’s Market View, Friday 8th November 2024

Gold remains volatile as Treasury sell off eases after Fed cuts rates

MiFID II exempt information – see disclaimer below

Aldebaran Resources (ALDE CN) – $250m investment agreement with Rio Tinto’s Nuton

Bushveld Minerals* (BMN LN) – Quarterly production results

Cameco (CCO CN) – Quarterly results show increased production outlook

Wheaton Precious Metals (WPM LN) – Quarterly results show record quarterly cash flows

Gold ($2,690/oz) remains volatile as Treasury sell off eases after Fed cuts rates

• Gold prices bounced yesterday, climbing to $2,709/oz before paring gains overnight.
• The US Treasury sell-off appeared to cool as the Fed cut rates and Powell emphasised the employment half of his mandate.
• Powell cut rates to 4.5-4.75%, into a dramatic sell-off in US Treasuries, with the 10 year climbing to 4.45%.
• Yields have subsequently fallen as buyers take advantage of the higher yields, with the 10-year now sitting below 4.3%.
• Yields remain well above the previous Fed meeting, where the FOMC cut by 50bp.
• Russia reportedly added 0.7t (1%) of gold to its foreign reserves in September, whilst Chinese buying has seemingly slowed. (Bloomberg/Interfax)
• Western ETFs saw additions cool down five straight days, however a reversal in US Treasuries would see renewed buying on lower yields.

Copper ($9,500/t) pares gains as China stimulus disappoints

• Copper prices rallied hard yesterday amid continued post-eleciton volatility, rising to $9,700/t from $9,350/t.
• However, the ongoing China stimulus discussions seem to have disappointed, following a key policy meeting this week.
• Meanwhile, the dollar has held strong amid Trump’s re-election.

America has voted for Trump and the Liberal Left needs to get use to it

• The media was quick to criticise the Trump win with the words ‘a convicted felon has been voted in to the Whitehouse’
• American voters don’t see Trump is a bad guy, they see him as one of their own, a dedicated deal maker who does whatever it takes.
  • A ‘strong, brave, tough guy’ who will knock down anything anti-American and an anti-WOKE champion. John Wayne would be proud!
• Many believe the Left use WOKEism to push their liberal agenda to expand their control on the economy with ever larger government.
• America has voted to sweep this away, to ‘drain the swamp’ with Trump pulling the levers of government to exorcise the spiralling cost of the Administration.
• Few like Trump’s rhetoric but so many have voted for Trump the Republican’s now control Congress and the Senate so there will be less opportunity to frustrate Trumps initiatives.
• We expect Trump will take Biden’s IRA ‘Inflation Reduction Act’ and make it his own, just with a different name and probably more cash and more vigour.

China continues to work its way into American markets and eat away into their economy,

• • but China has over-leveraged to support massive construction in property and new technology and a significant proportion of this is never going to pay back.
  • hence today’s CNY10tn in stimulus to refinance local government ‘hidden debt’ – we see this as just one of many necessary stimulus fixes.
  • This is no bazooka, as savings from retiring interest debt is likely to be relatively modest.
  • This stimulus keeps the wheels the economy and hopefully ensures 5% GDP growth.
  • China is enjoying strong exports, at 27m highs, with exports likely being frontloaded to get ahead of Trump’s tariffs.
  • China is seen likely holding off on further stimulus measures before Trump confirms his new tariffs.

The Fed is looking to cut interest rates which would normally weaken the US dollar.

• But, Trump is perceived to be good for the US dollar which is good for lowering import costs and will help the Fed cut rates.
• This should help Trump borrow more to fund his spending plans despite Russia, China and Iran looking to disrupt the dominance of the US dollar and US ability to fund its expansion.

Elon Musk is probably the greatest entrepreneurial engineer of our generation. He is the Isambard Kingdom Brunel of our era and he is on the winning side.

• Musk is landing rockets on their tail fins and getting ready to send missions to Mars, just think what he can do with the American economy!
• Many people might not like Trump and even more people don’t like his rhetoric but the American people have voted and we must respect their vote and work with the outcome.
• If Elon Musk is advising on how to spend the cash then the US economy may return to the Moon sooner than expected.

Conclusion:  Trump is likely to drive new project infrastructure and related jobs but slow the adoption of EVs.

Tariffs are anti-globalisation which in theory reduces demand but US Tariffs on EVs are forcing China to stimulate new markets into EV adoption causing greater metal consumption.

China’s stimulus feels negative as it suggests there are greater financial woes to resolve. China needs to stimulate consumption to counteract the prospect of higher US Tariffs which probably required greater home ownership, consumer confidence and welfare care.

Economics

US –The Fed cut rates by 25bp, as expected, in a unanimous vote taking the rate into a 4.50-4.75% range.

• Fed Governor Michelle Bowman who voted against the 50bp cut in September supported the smaller cut this month.
• The central bank has not reacted to election results maintaining tis outlook for further cuts if data performs in line with expectations.
• Estimates are for the Fed to cut by another 25bp in December and 100bp through 2025.
• 10y Treasury yields pulled back on the announcement and currently trade around 4.3%, the level seen on the day pre-election.

China – The government announced a CNY 10tn ($1.4tn) fiscal stimulus programme this morning.

• Authorities are raising debt ceiling for local governments allowing to issue an additional CNY 6tn in special bonds over three years to raise funds to swap hidden debt.
• Additionally, the government will allocate already approved special bon issuance for CNY 4tn to be used over five years to swap hidden debt.

UK – The BOE cut rates by 25p to 4.75% despite Andrew Bailey admitting that latest government budget initiatives are inflationary and would push up inflation by nearly 0.5ppp to a peak of 2.8%.

• The central bank endorsed a further four 25bp rate reductions to 3.75% by the end of next year, Bloomberg writes.

Currencies

US$1.0780/eur vs 1.0766/eur previous. Yen 152.54/$ vs 153.91/$. SAr 17.416/$ vs 17.525/$. $1.296/gbp vs $1.293/gbp. 0.665/aud vs 0.663/aud. CNY 7.164/$ vs 7.160/$.

Dollar Index 104.58 vs 104.72 previous

Precious metals:         

Gold US$2,691/oz vs US$2,662/oz previous

Gold ETFs 83.7moz vs 83.7moz previous

Platinum US$990/oz vs US$981/oz previous

Palladium US$1,018/oz vs US$1,029/oz previous

Silver US$31.5/oz vs US$31.1/oz previous

Rhodium US$4,675/oz vs US$4,675/oz previous

Base metals:   

Copper US$9,565/t vs US$9,518/t previous

Aluminium US$2,688/t vs US$2,659/t previous

Nickel US$16,495/t vs US$16,460/t previous

Zinc US$3,035/t vs US$3,049/t previous

Lead US$2,043/t vs US$2,052/t previous

Tin US$31,765/t vs US$31,800/t previous

Energy:           

Oil US$74.8/bbl vs US$74.9/bbl previous

• US Henry Hub prices moved lower as the EIA reported a 69bcf w/w build to 3,932bcf, with US gas storage levels climbing w/w to 4.2% above last year and 5.8% above the 5-year average.
• Media reports that China’s monthly oil imports in October fell 9% y/y to 44.7mt, with YTD24 imports down 3% y/y, as a stuttering economy and trucking fuel switching from diesel to LNG weighs on crude demand.

Natural Gas €42.3/MWh vs €40.8/MWh previous

Uranium Futures $76.6/lb vs $77.2/lb previous

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$102.4/t vs US$105.7/t

Chinese steel rebar 25mm US$527.4/t vs US$529.2/t

HCC FOB Australia US$207.5/t vs US$209.0/t

Thermal coal swap Australia FOB US$142.2/t vs US$141.5/t

Other:  

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

NdPr Rare Earth Oxide (China) US$59,114/t vs US$59,286/t

Lithium carbonate 99% (China) US$10,190/t vs US$10,125/t

China Spodumene Li2O 6%min CIF US$760/t vs US$760/t

Ferro-Manganese European Mn78% min US$985/t vs US$985/t

China Tungsten APT 88.5% FOB US$340/mtu vs US$340/mtu

China Graphite Flake -194 FOB US$440/t vs US$440/t

Europe Vanadium Pentoxide 98% US$4.7/lb vs US$4.6/lb

Europe Ferro-Vanadium 80% US$25.1/kg vs US$24.55/kg

China Ilmenite Concentrate TiO2 US$312/t vs US$312/t

China Rutile Concentrate 95% TiO2 US$1,166/t vs US$1,180/t

Spot CO2 Emissions EUA Price US$62.6/t vs US$62.6/t

Brazil Potash CFR Granular Spot US$277.5/t vs US$277.5/t

Germanium China 99.99% US$2,875.0/kg vs US$2,875.0/kg

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

Battery News

DoE finalises $475m loan for battery recycling firm Li-Cycle

• The US Department of Energy has finalised a $475m loan for Li-Cycle Holdings, to give the metals recycler a financial lifeline to build a New York battery processing facility.
• The project is seen as a key outgoing for Joe Biden’s vision for a domestic EV supply chain.
• The plant, which would be one of the largest US sources of the battery metal lithium, will cement a key part of Biden’s climate agenda, ensuring the company receives government financial support regardless of any steps that President-elect Donald Trump may take when he assumes office in January.
• Li-Cycle is aiming to produce 8,250 metric tons of lithium carbonate per year at the facility, as well as 72,000 metric tons of mixed hydroxide precipitate.

CATL ramps up bet on all solid-state batteries and begins sample validation tests

• According to local reports, battery maker CATL has entered the trial production of 20Ah samples of its all solid-state battery material, indicating that it has finalised an initial battery chemistry.
• CATL’s current chemistry can achieve an energy density of 500Wh/kg for lithium ternary batteries, an improvement of more than 40% over existing batteries, but charging speed and cycle life have yet to meet expectations.
• 20Ah is the capacity of a single cell of the soft-pack batteries currently used in EVs.

Company News

Aldebaran Resources (ALDE CN) C$1.8, Mkt Cap C$304m – $250m investment agreement with Rio Tinto’s Nuton

• Aldebaran Resources have entered into an option to JV agreement with Nuton Holdings, a Rio Tinto venture, on the Altar Copper Porphyry Project in Argentina.
• The agreement is for staged US$250m investment for a 20% indirect interest in the Altar project including:
  • $10m upfront payment;
  • $20m in 4Q24 on a release of an updated MRE;
  • $30m in 2Q/3Q25 on publication of a PEA that includes Nuton processing technology;
  • $190m final payment on publication of PFS expected in 2H26.
• Altar is currently owned by Peregrine Metals where Aldebaran holds a 60% interest and is in the process of completing an earn in of additional 20% from Sibanye-Stillwater that holds the balance with an earn in expected to be finalised 4Q24.
• On completion of the $250m investment, Altar will be owned by Aldebaran (60%), Sibanye-Stillwater (20%) and Nuton (20%).
• If Nuton elects not to proceed after the issuance of the MRE, PEA or PFS, the Option Agreement will be terminated, Aldebaran will retain its 80% interest in the project.
• The project hosts 1.2Bt at 0.43% copper and 0.09g/t gold in Measured and Indicated resource (0.3% CuEq COG).
• Additionally, 189mt at 0.42% and 0.06g/t is hosted within the Inferred category.
• The Nuton process is studying the potential for a bio heap leaching of sulphide copper mineralisation allowing to produce copper cathodes and save on capex, lower environmental footprint (no tailigns) and use less water (30% less).
• The process is reported to potentially deliver up to 85% recoveries.

Bushveld Minerals* (BMN LN) 0.4p, Mkt Cap £9.5m – Quarterly production results

• The Company reports quarterly and nine month production results as vanadium prices remain weak.
• Group production stood at 855mtV for the quarter, down 14.5%yoy and 2,546mtV over the nine month period, down 8.5%yoy.
• Cash costs for the quarter at US$27.5/KgV, up 4%yoy, and US$27.8/KgV, up 5%yoy.
• Vametco produced 485mtV, down 11.6%qoq and 11.1%yoy.
• Vametco production cash costs at US$30.9/KgV, down 5.7%qoq and up 16.7%yoy.
• Production rates impacted by a kiln cooler maintenance shutdown in August, whilst cashflow challenges ‘impacted overall performance.’
• Costs higher on lower production, higher maintenance costs and raw material costs.
• Vanchem saw total production of 370mtV, up 28%qoq but down 16%yoy.
• Vanchem production cash costs stood at US$23.1/kgV, up 37%qoq but down 13%yoy for the quarter.
• Vanchem is no longer part of the group following the final sales agreement entered on 31^st October 2024 and completed 7^th November 2024.
• Management is ‘actively engaging with various stakeholders to explore options to address its liquidity problems,’ expecting to provide updates ‘in due course.’
• Cost cutting initiatives are expected to save US$8-10mpa by the end of 2025.
• Bushveld sold Lemur over the period, relieving it of a US$2.5m debt obligation to DBSA.
• Regarding the 10^th September announcement, Bushveld is reducing labour costs at both Vametco and Head Office in line with the Section 189 Act.
• The Company is prioritising sales into higher value markets, such as Nitro Vanadium and North American, amid the weak pricing environment.

Conclusion: Bushveld has initiated a controlled shutdown at Vametco amid liquidity constraints driven by weak global vanadium prices. Management is working to shore up the balance sheet with the sale of Vanchem and Lemur, with the strategy focused on Vametco as the core producing asset. The Company is engaging with stakeholders to address their current liquidity problem.

*SP Angel act as nomad and broker to Bushveld Minerals

Cameco (CCO CN) C$74, Mkt Cap C$32bn– Quarterly results show increased production outlook

• Canadian uranium miner Cameco reported C$308m in Adj.Ebitda over the quarter, up 32%yoy.
• Company produced 4.3mlb over the period, up 43%yoy, with 7.3mlb sold, up 4%yoy.
• Average realised price reported at US$60/lb vs US$53/lb same period last year.
• Total production cost for uranium reported at C$40/lb, down 11%yoy.
• Combined produced and purchased costs were C$60/lb, up 16%yoy.
• Cameco held C$197m in cash and C$1.3bn in debt, with a C$1bn undrawn credit facility.
• Aiming to strengthen balance sheet with debt reduction following Westinghouse acquisition.
• Production outlook for 2024 guided at 37mlb (36mlb previous), with the increase reflecting ‘positive market momentum and to meet our commitments under our long-term contracts.’
• Key Lake mill run rate improvements are supporting the increase.

Wheaton Precious Metals (WPM LN) 5,040p, Mkt Cap £29bn– Quarterly results show record quarterly cash flows

• Streaming and royalty company Wheaton reports results from the September quarter.
• The Company produced 144.2koz AuEq, down 2%yoy.
• Gold equivalent ounces sold up 10%yoy to 122.7koz.
• Revenue up 38%yoy to $308m, with operating cash flows up 49%yoy to $254m.
• Average cash costs down to $437/GEO vs $445/oz same period last year.
• Company held $694m in cash and holds an undrawn $2bn RCF to fund outstanding commitments and known contingencies.
• The Company retains guidance at to 325-370koz Au, 18.5-20.5moz Ag for 550-620koz GEO.
• Production expected to rise 40% to 2028 to 800koz GE), then 850koz GEO in 2029-2033.
• Over the quarter, Wheaton signed streaming agreements with Montage Gold* for their Kone Gold Project financing in Cote d’Ivoire and amended their agreement with Rio2* over the Fenix heap leach project in Chile.

*An SP Angel analyst holds shares in Montage and Rio2

 LSE Group Starmine awards for Q3 commodity forecasting:

No.1 in Precious Metals: SP Angel mining team awarded No 1. ranking for Previous Metals forecasting in LSEG Quarterly Starmine Award for Reuters Polls Q3 2024

No.2 in Base Metals: SP Angel mining team awarded No 2. ranking for Base Metals forecasting in LSEG Quarterly Starmine Award for Reuters Polls Q3 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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