New loans hit record high in January in China on policy support
MiFID II exempt information – see disclaimer below
Kore Potash* (KP2 LN) – PowerChina delivers the EPC proposal
Savannah Resources* (SAV LN) – Parish of Covas do Barroso legal case update
Strategic Minerals* (SML LN) – 2024 revenue guided for >$3.5m on increased sales
| Dow Jones Industrials | +0.13% | at | 38,726 | |
| Nikkei 225 | +0.09% | at | 36,897 | |
| HK Hang Seng | -0.83% | at | 15,747 | |
| Shanghai Composite | +1.28% | at | 2,866 |
Economics
US – Jobless claims fell for the first time in three weeks beating market estimates.
- Although, a less volatile four week average increased to just over 212k, the highest since late December.
- Jobless Claims (‘000): 218 v 227 (revised from 224) previous week and 220 est.
- Continuing Claims (‘000): 1,871 v 1,894 (revised from 1,898) previous week and 1,875 est.
China – Strong credit data released for January reflecting both seasonal pickup and monetary policy easing.
- The PBOC announced a surprising 50bp cut in RRR following two reductions in 2023.
- New Yuan Loans (CNY bn): 4,920 v 1,171 December and 4,500 est.
- Aggregate Financing (CNY bn): 6,500 v 1,940 December and 5,600 est.
Eurozone – The ECB is likely to cut rates in 2024 given good progress against inflation, Bank of France Governor Francois Villeroy said.
- Markets are expecting the first cut to come in April, although most policymakers appear to be leaning towards June, according to Bloomberg.
- Martins Kazaks, a Latvian central bank head, called market expectations for a rate cut at one of the next two meetings too aggressive.
- “At the moment, there are expectations that the rates could be cut in the spring, in March or April — I wouldn’t be optimistic,” he said.
- “I would be cautious and I would wait until the inflation story is over… Then we can safely breathe and those rates can be lowered step by step.”
Currencies
US$1.0775/eur vs 1.0777/eur previous. Yen 149.53/$ vs 148.81/$. SAr 19.013/$ vs 18.950/$. $1.263/gbp vs $1.263/gbp. 0.650/aud vs 0.651/aud. CNY 7.194/$ vs 7.196/$.
Dollar Index 104.14 vs 104.07 previous.
Commodity News
Gold prices are on course for a small weekly drop on signs that the Fed will delay rate cuts.
- Weekly jobless claims came in lower than expected adding to signs of buoyant labour market and providing another argument in keeping rates higher for longer.
- US inflation revisions are out later today that markets will be watching closely for clues on the progress of a general slowdown in inflationary pressures.
Iron ore prices dropped as trading slowed down ahead of China’s Lunar New Year break.
- The steel making ingredient traded 1.6% down at $126.5/t in Singapore, virtually unchanged for the week, Bloomberg writes.
Precious metals:
Gold US$2,031/oz vs US$2,031/oz previous
Gold ETFs 83.7moz vs 83.6moz previous
Platinum US$887/oz vs US$882/oz previous
Palladium US$882/oz vs US$887/oz previous
Silver US$22.62/oz vs US$22/oz previous
Rhodium US$4,400/oz vs US$4,400/oz previous
Base metals:
Copper US$ 8,202/t vs US$8,339/t previous
Aluminium US$ 2,213/t vs US$2,240/t previous
Nickel US$ 16,020/t vs US$16,105/t previous
Zinc US$ 2,305/t vs US$2,408/t previous
Lead US$ 2,039/t vs US$2,106/t previous
Tin US$ 25,905/t vs US$25,910/t previous
Energy:
Oil US$81.5/bbl vs US$79.5/bbl previous
- Crude oil prices climbed past $80/bbl ahead of the weekend, following increasing tensions in the Middle East after Israel rejected Hamas’ terms for a ceasefire in Gaza.
- US natural gas prices slumped to three-year lows as the EIA reported a smaller-than-usual 75bcf w/w draw to 2,584bcf, with storage levels jumping to 7.8% above last year and 10.6% above the 5-year average.
Natural Gas €27.3/MWh vs €28.2/MWh previous
Uranium Futures $99.5/lb vs $102.9/lb previous
Bulk:
Iron Ore 62% Fe Spot (cfr Tianjin) US$128.3/t vs US$124.7/t
Chinese steel rebar 25mm US$569.9/t vs US$569.7/t
Thermal coal (1st year forward cif ARA) US$94.8/t vs US$94.5/t
Thermal coal swap Australia FOB US$123.5/t vs US$123.3/t
Coking coal swap Australia FOB US$310.0/t vs US$310.0/t
Other:
Cobalt LME 3m US$28,550/t vs US$29,135/t
NdPr Rare Earth Oxide (China) US$55,464/t vs US$55,448/t
Lithium carbonate 99% (China) US$12,302/t vs US$12,299/t
China Spodumene Li2O 6%min CIF US$1,000/t vs US$1,000/t
Ferro-Manganese European Mn78% min US$1,061/t vs US$1,062/t
China Tungsten APT 88.5% FOB US$305/mtu vs US$305/mtu
China Graphite Flake -194 FOB US$565/t vs US$565/t
Europe Vanadium Pentoxide 98% 5.8/lb vs US$5.8/lb
Europe Ferro-Vanadium 80% 27.55/kg vs US$27.55/kg
China Ilmenite Concentrate TiO2 US$320/t vs US$320/t
Spot CO2 Emissions EUA Price US$65.9/t vs US$65.9/t
Brazil Potash CFR Granular Spot US$292.5/t vs US$292.5/t
Battery News
LG Chem to supply EV battery cathodes to GM in deal worth $18.6bn
- The petrochemicals giant has signed an agreement to provide General Motors with battery cathodes from 2026 to 2035.
- LG Chem said in a statement that it intends to provide over 500,000t of materials necessary for cathode production – enough for approx. 5m vehicles in that period.
- LG Chem is in the process of constructing a battery cathode plant in Tennessee which is scheduled to commence mass production in 2026.
- The NCMA cathode materials, produced at the Tennessee facility, are expected to predominantly serve Ultium Cells, a joint venture between LG Energy Solution and GM.
EU car sales up in 2023 boosted by EVs
- Despite a slight fall in December, the EU car market grew 13.9% in 2023, reaching a full-year volume of 10.5 million units. (European Automobile Manufacturers’ Association)
- Sales of EVs surpassed 1.5m units taking a 14.6% share.
- This surpassed diesel vehicles that saw sales of around 1.4m units, a 13.6% share.
- Petrol: 3.7m, 35.3% share
- Hybrid EVs: 2.7m, 25.8% share
- Battery EVs: 1.5m, 14.6% share
- Diesel: 1.4m, 13.6% share
- Plug-in Hybrid: 800,000, 7.7% share
- Other: 3% share
Company News
Kore Potash* (KP2 LN) 0.6p, Mkt Cap £24m – PowerChina delivers the EPC proposal
- PowerChina delivered the EPC proposal and draft EPC contract offer for the Kola Potash Project in Republic of Congo.
- PowerChina engaged five technical groups over the last five months to complete additional design and engineering work.
- pecific design areas included the underground mine, mineral processing jetty and transhipment operations, energy transportation and storage, conveyor systems and material handling.
- The Company is planning to discuss details of the proposal and targeting signing full EPC documentation by the end of April 2024.
- The Summit Consortium represented by advisors, funding partners and engineering firms, is then expected to provide the financing proposal for the full capex of the Kola Project within six weeks of EPC documentation terms finalisation.
- Former EPC proposal from 2022 estimated project capex at $1.8bn (excluding $60m in deferred capex during the ramp up period) with a 40m construction period for a 2.1mtpa MOP operation.
Conclusion: EPC draft delivered by PowerChina takes the Company one step closer to negotiating final terms of the contract that will lead to funding stage that is managed by the Summit Consortium that reiterated their willingness to provide a funding solution within six months of final EPC documentation agreement.
*SP Angel acts as Nomad and Broker to Kore Potash
Savannah Resources* (SAV LN) 1.9p, Mkt Cap £32m – Parish of Covas do Barroso legal case update
BUY – 21.1p
- The Company provided an update regarding the lawsuit filed by the Parish of Covas do Barroso against the Portuguese Environmental Agency (APA) and the Ministry of Environment and Climate.
- As part of the ongoing lawsuit that was launched in September last year, the Public Prosecutors Office (MP) was notified to give its opinion.
- MP comments that were published by the Portugues press were critical of the project.
- One of the points made related to the risk of the expansion of mining onto the Barroso Important World Agricultural Heritage System (SIPAM) violating government international commitments agreed with the UN to protect, support and increase the quality of life in the region.
- Separately, nation’s environmental agency (APA) put out an announcement regarding Prosecutor’s comments and the environmental impact assessment (DIA) on the Minsa do Barroso.
- The announcement supported its decision to grant the DIA to the Company and reiterated that the EIA was completed in accordance with all regulations.
- While APA said it is looking into Prosecutor’s comments, the agency highlighted that issues raised in the opinion were addressed by a multidisciplinary Assessment Committee during the review process as part of the conditional favourable DIA issued by the agency.
- The Company acknowledged MP comments that are part of the ongoing Court process and is ready to address all the concerns highlighted as soon as possible.
- In the meantime, the Company continues with its FS related work, all in line with existing issued permits.
- Savannah lawyers remain of the opinion that the lawsuit is without foundation.
Conclusion: While it is unfortunate to see critical comments from the Prosecutor’s office as part of the ongoing legal case launched by the Parrish of Covas do Barroso, the APA reply in support of its decision to grant favourable DIA should lend investors some confidence in the Company’s standing regarding the permitting process. We believe the team fully recognises the importance of good relations with all stakeholders and have no reason to doubt the Company’s willingness and diligence in remaining cooperative with authorities addressing any raised questions over the Barroso Project development.
*SP Angel acts as Nomad and Broker to Savannah Resources
Strategic Minerals* (SML LN) 0.25p, Mkt Cap £5m – 2024 revenue guided for >$3.5m on increased sales
- The Company signed a new client to take 5-7ktpa in 2024 on a take and pay basis.
- This is in addition to the previously announced 30kt order for this year.
- The team also reports of another potential new client that is looking for large volume shipments.
- Although, the Company suggested that existing orders may have operations already running at capacity.
- The Company expects sales to come over 50kt (2023: 18kt) generating more than $3.5m in sales (2023: $1.6m) on the back of agreed additional orders.
- Given higher production volumes and extended nature of creditor balances, the Company entered into a short term financing facility for A$100k with an individual investor,
- Unsecured bridge loan is repayable in two equal $50k tranches in May 2024 and October 2024 and carries a ~19%pa interest.
- Additionally, the Company issued its lender 10m warrants with an exercise price of 0.5p maturing 31 December 2025.
*SP Angel acts as Nomad and Broker to Strategic Minerals
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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
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
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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.
| Sources of commodity prices | |
| Gold, Platinum, Palladium, Silver | BGNL (Bloomberg Generic Composite rate, London) |
| Gold ETFs, Steel | Bloomberg |
| Copper, Aluminium, Nickel, Zinc, Lead, Tin, Cobalt | LME |
| Oil Brent | ICE |
| Natural Gas, Uranium, Iron Ore | NYMEX |
| Thermal Coal | Bloomberg OTC Composite |
| Coking Coal | SSY |
| RRE | Steelhome |
| Lithium Carbonate, Ferro Vanadium, Tungsten, Spodumene, Ferro-Manganese, Graphite | Asian Metal |
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