SP Angel Morning View -Today’s Market View, Friday 8th September 2023

Atlantic Lithium sign positive non-binding HoT with Ghana sovereign wealth fund

MiFID II exempt information – see disclaimer below

Atlantic Lithium* (ALL LN) – Ghana Sovereign Wealth Fund to buy 6% of Ewoyaa for US$27.9m alongside $5m placement at 41p/s

Greatland Gold (GGP LN) –Update on Newmont-Newcrest merger and implications for Havieron JV

Power Metal Resources* (POW LN) – Strong helium anomaly at Perch River raises potential for uranium discovery

Copper continues to suffer under strong dollar and weak demand outlook

• Copper prices weakened to $8,250/t as metals markets see risk off attitude.
• The dollar is headed for its best week in the past nine years.
• A stronger dollar weighs on China’s ability to buy metals on international exchanges, especially considering the renminbi’s recent weakness.
• Peru’s copper production rose 17.7% yoy in July, rising to 230kt for the month.
• The jump followed improving performance from Freeport’s Cerro Verde and the Macrobre project operated by Minsur.

Iron ore slides as Beijing looks to increase controls over pricing after rally

• Singapore iron ore prices fell to $113/t following a meeting between Beijing officials and steelmaking producers.
• The Government is cracking down on speculative price movements again following a 14% rally in August.
• Analysts are expecting a rise in steel demand as China approaches a busy construction season between now and the end of October.
• Coking coal and coke fell 4% and 3.5% respectively.
• Rebar prices down 2%, HRC down 2% and wire rod prices down 5%.

Zambian president heads to China to continue debt restructuring negotiations

• Haikande Hichilema is visiting China on Sunday to look to restructure >60% of its $6.3bn national debt.
• China’s Export-Import Bank is Zambia’s largest creditor, with a 2020 default triggering a wave of restructurings.
• A deal was struck in June, with Sunday’s visit set to formalise agreement.
• Zambia continues to prioritise copper mining as its primary source of national revenue to help reduce its large debt burden.

Eeconomics

China – Trade surplus fell to US$68.36bn vs US$80.6bn in July

• Exports fell -8.8% yoy in August vs a fall of -14.8% yoy July
• Imports fell -7.3% yoy in August vs -12.4% yoy in July

Philippines – Nickel pig iron output rose 40%in H1 yoy to 17mt

North Korea – New nuclear attack submarine

• The press speculates the submarine may be capable of carrying nuclear ballistic missiles
• We doubt if North Korea is capable of making a sub that will function for any great time and successfully launch ballistic missiles.

Currencies

US$1.0717/eur vs 1.0712/eur previous. Yen 147.25/$ vs 147.52/$. SAr 19.102/$ vs 19.237/$. $1.248/gbp vs $1.247/gbp. 0.640/aud vs 0.638/aud. CNY 7.348/$ vs 7.326/$.

Dollar Index 104.90 vs 104.92 previous.

Commodity News

Precious metals:

Gold US$1,926/oz vs US$1,918/oz previous

Gold ETFs 89.6moz vs 90moz previous

Platinum US$908/oz vs US$908/oz previous

Palladium US$1,225/oz vs US$1,205/oz previous

Silver US$23.07/oz vs US$23/oz previous

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

Base metals:

Copper US$ 8,271/t vs US$8,344/t previous

Aluminium US$ 2,176/t vs US$2,191/t previous

Nickel US$ 20,415/t vs US$20,250/t previous

Zinc US$ 2,448/t vs US$2,454/t previous

Lead US$ 2,219/t vs US$2,230/t previous

Tin US$ 25,680/t vs US$26,110/t previous

Energy:

Oil US$89.7/bbl vs US$90.3/bbl previous

Natural Gas US$2.617/mmbtu vs US$2.513/mmbtu previous

Uranium UXC US$60.75/lb vs US$58.50/lb previous

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$113.4/t vs US$116.3/t

Chinese steel rebar 25mm US$529.4/t vs US$530.8/t

Thermal coal (1st year forward cif ARA) US$120.3/t vs US$121.5/t

Thermal coal swap Australia FOB US$160.0/t vs US$162.0/t

Coking coal swap Australia FOB US$275.0/t vs US$261.0/t

Other:  

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

NdPr Rare Earth Oxide (China) US$71,444/t vs US$71,661/t

Lithium carbonate 99% (China) US$26,196/t vs US$26,276/t

China Spodumene Li2O 6%min CIF US$2,760/t vs US$2,780/t

Ferro-Manganese European Mn78% min US$1,034/t vs US$1,034/t

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

China Graphite Flake -194 FOB US$650/t vs US$650/t

Europe Vanadium Pentoxide 98% 6.9/lb vs US$6.9/lb

Europe Ferro-Vanadium 80% 30.85/kg vs US$30.85/kg

China Ilmenite Concentrate TiO2 US$310/t vs US$311/t

Spot CO2 Emissions EUA Price US$88.6/t vs US$89.1/t

Brazil Potash CFR Granular Spot US$355.0/t vs US$355.0/t

Battery News

Tesla Shanghai produces two millionth vehicle

• Tesla’s Shanghai factory went into operation at the end of 2019 and saw its one-millionth mass-produced vehicle roll off the line in August 2022.
• The second million has taken only a year to produce.

BP launches largest EV charging station in UK

• On Thursday, BP launched Britain’s largest EV charging hub, near Birmingham, capable of serving up to 180 cars.
• The hub includes 30 ultra-fast 300kW charging stations, which can add 100 miles of driving range in 15 minutes, as well as 150 7kw slow-charging points.
• BP Pulse uses 100% renewable power at its charging stations.

Chinese automakers call for greater cooperation in global EV transition

• China’s EV industry leaders including policy adviser and ‘father of EVs’ Wan Gang and the heads of carmakers BYD and Nio and battery maker CATL have called for stronger global cooperation and standardisation in policy to ease the technological transition.
• Speaking at the World New Energy Vehicle Congress (WNEVC) in Munich, the executives cited differences in policy, industrial foundations and the level of technological development were leading to a growing disparity in EV growth across global regions.
• Automakers BYD, Xpeng, Leapmotor and SAIC have all called for greater cooperation with Germamn automakers.

Company News

Atlantic Lithium* (ALL LN) 25p, Mkt Cap £152m – Ghana Sovereign Wealth Fund signs non-binding heads of terms to buy 6% of Ewoyaa and the wider Ghana portfolio for US$27.9m alongside $5m placement at 41p/s

STRONG BUY from Buy

(Piedmont can earn into up to 50% of the Ewoyaa lithium project through the expenditure of around 70% of the project capex)

• This is a refreshingly good day for mining in Ghana as well as a good day for Atlantic Lithium.
• Negotiations with MIIF, the Minerals Income Investment Fund have progressed with the singing of non-binding heads of terms for a direct ‘contributing’ investment of US$27.9m into 6% of Atlantic’s Cape Coast portfolio including the Ewoyaa project.
• The term ‘contributing’ is all important as it tells us that Ghana is not demanding something for nothing, as some other African nations are wont to do.
• MIIF is also investing US$5m directly into Atlantic Lithium by way of a share placing at 21p/s and are subject to a series of lock-up dates.
• If MIIF does not contribute to its share of the funding the MIIF fund will be diluted down.
• Options: MIIF are also taking warrants at a 40% premium to the subscription price of 21p/s on a two-for-one basis with an 18-month term indicating that they expect to make a profit on the stock over a relatively short period.
• The total investment is $32.9m
• MIIF is effectively buying into five Ghanian subsidiaries and is committing to stand its corner as a partner with Atlantic Lithium.
• This very much better than we had expected and shows MIIF to be working and acting as a true Sovereign Fund.
• Director: MIIF also get to place a director at the Ghanaian subsidiary level and have a right to bid for Ewoyaa’s available offtake.
• Piedmont currently has a first right to acquire up to 50% off the offtake leaving the other 50% up for grabs.
• Ghana press: Statements in the Ghana press had led investors to expect potential changes to mineral legislation in Ghana through rising royalties, free carry stakes, a potential ban on the export of DSO and concentrate material.
• We are pleased to see none of this in today’s statement.
• Mining license: We believe today’s deal with MIIF is a precursor to the award of the mining license by the MinCom, the Minerals Commission.
• Capex:  US$185m for Eowyaa DMS and second state flotation plant
• Piedmont is contributing an initial $70m to the development of Ewoyaa and is likely to raise its investment if required due to its pressing need for spodumene concentrate.
• Offtake: We believe Atlantic can use offers for offtake to potentially fund its share of the capex for the Ewoyaa project and reckon their remaining 50% share could command >US$100m in the market due to ongoing strong demand for spodumene concentrates.
• Production: 350,000tpa SC6% spodumene concentrate from 2025.
• Non-binding agreement: We have met with the MIIF team at their offices in Ghana. They are very professional, and we would be surprised if the non-binding agreement did not come to fruition. Having said that, nothing is ever concluded till final signatures are in place.
• Ghana government: While the MIIF fund is not the Government of Ghana it does represent the nation from a financial perspective. We would expect a degree of coordination between the wishes of the government and the MIIF fund and we view today’s deal as declaring that Ghana is open for business for battery metals mining and exports.
• While the government always retains the option to impose new rules and regulations, we see MIIF as having done much of the financial negotiation with the Government’s Minerals Commission focussing on other more practical and strategic matters.
• Future exploration and development: Having MIIF as a partner is a hugely symbolic step towards a new and ongoing partnership with the government to the benefit of both parties and feels like a rare statement of practical support towards a Western company operating in Africa.
• MIIF’s 6% partnership in the ‘Cape Coast’ licenses including the licenses within ‘Joy Transporters’ indicates to us that MIIF wishes to support further exploration and development for lithium.
• Edward Nana Yaw Koranteng, CEO at MIIF states:
  • “The Minerals Income Investment Fund of Ghana is a minerals sovereign wealth fund with an underlying objective of supporting the growth of mining in Ghana and providing a de-risking option for investors in the mining space in Ghana. The investment in Atlantic Lithium underscores this underlying objective and is indeed a watershed moment as this is our first investment in the lithium space globally. The Ewoyaa project is world class, with huge prospects in the other tenements under Atlantic Lithium.
  • “The acquisition of a 6% contributing interest in the Company’s Ghanaian subsidiaries will support the funding of ongoing capital and exploration expenditure requirements across Ewoyaa and the broader Atlantic Lithium portfolio. This is just our initial investment in Atlantic Lithium and its Ghanaian subsidiaries. We hope to later invest in the value chain and the development of other by-products, such as feldspar, in line with the Government of Ghana’s critical minerals policy.
  • “Our investment highlights Ghana as arguably the best mining investment destination in Africa in view of the options MIIF provides to investors. For us at MIIF, this is the start of a partnership with Atlantic Lithium beyond Ghana. We are confident that this initial investment will enhance and accelerate Ghana’s efforts as an African critical minerals hub and to establish the country’s position in the global EV supply chain.”

Recommendation: We are raising our recommendation to Strong Buy from Buy. Today’s news is very much better than we had expected given recent speculation and statements in the Ghana press.

The deal with MIIF goes a long way to de-risking the project in our view and we expect Atlantic to receive its mining license in short order and for construction to start relatively quickly

*SP Angel acts as Nomad to Atlantic Lithium. Two mining analysts from SP Angel recently visited the Ewoyaa mine site in Ghana and drove onto Takoradi to check the quality of the road to port. Our intrepid analysts also visited the Ministry of Minerals Commission and MIIF, the Ghana Minerals Income Investment Fund.

Greatland Gold (GGP LN) 6.45p, Mkt Cap £324m –Update on Newmont-Newcrest merger and implications for Havieron JV

• Greatland Gold provides an update on the takeover of its JV partner Newcrest by Newmont Corp.
• The Havieron Project currently holds a JV between Greatland and Newcrest split 30/70% respectively.
• As a result of an upcoming Newcrest shareholder meeting, the Company has provided an independent assessment of its assets by Grant Samuel and Associates.
• The report suggests a hypothetical valuation for a combination of Telfer and 70% of  Havieron at £500-600m using a 6.5-7.5% nominal discount rate.
• Greatland highlights that this valuation includes ‘significant closure costs and other liabilities associated with Telfer which Greatland has no exposure to.’
• The Company also highlights the Grant Samuel assessment only incorporates drilling results to November 2021.
• The report highlights that Newcrest’s decision not to exercise a 5% option in Havieron in August 2022 sets an implied notional ceiling to the project’s value at $1.2bn.
• Greatland has subsequently added 1.9moz Au and 50kt Cu to its mineral resource, suggesting this $1.2bn ‘ceiling’ may be undervaluing the asset now.
• The Grant Samuel model forecasts a total gold production of 4,256koz over LOM and 184kt Cu produced for a total CAPEX spend of $1.3bn in its optimistic scenario.
• the JV continues to progress the feasibility study for Havieron.

Power Metal Resources* (POW LN) 0.76p, Mkt cap £16m – Strong helium anomaly at Perch River raises potential for uranium discovery

• Power Metal provides an update on its Perch River Uranium Project in the Athabasca Basin, Canada.
• The Company reports the discovery of a ‘significant helium anomaly.’
• The anomaly stems from hyperspectral data analysis from satellite data.
• Several helium anomalies were discovered, however one very strong reading is giving the team confidence of uranium mineralisation.
• POW has now directed the crew to prioritise the anomaly by conducting high-resolution soil sampling over the grid.
• Dr Neil Pendock, who conducted the remote sensing work, suggests that the anomaly is encouraging owing to helium being a daughter product of radiogenic decay.
• World-class uranium deposits, including Cameco’s Millenium deposit, also in the Athabasca Basin, show helium enrichment.
• Whilst Dr Pendock considers it unlikely, the anomaly could also suggest a leakage from a hydrocarbon reserve below, potentially trapped alongside natural gas.

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

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%”

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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

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Grant Barker – Grant.Barker@spangel.co.uk – 0203 470 0471

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