SP Angel Morning View -Today’s Market View, Monday 11th March 2024

Copper prices are strong as Codelco output slides and concentrate supply dwindles

MiFID II exempt information – see disclaimer below

East Star Resources (EST LN) – Resource estimate for Vekhuba expected within ~1 month

Ferrexpo (FXPO LN) – Update on Ukraine subsidiary

Gabriel Resources (GBU CN) – Arbitrage trial loss

Golden Metal Resources (GMET LN) – Strategic investor injects £750,000

Great Western Mining* (GWMO LN) – Placing to support copper porphyry exploration in Mineral County, Nevada

Mkango Resources* (MKA LN) – HyProMag USA update

Copper prices strong as Codelco output slides and concentrate supply dwindles

• Copper prices are holding higher around the $8,600/t mark.
• Chilean state giant Codelco reported production output in January fell 16% yoy to 107kt.
• Efforts to expand production continue to suffer from delays and rising costs.
• Escondida, however, boosted output to 97.5kt over the same period.
• Shanghai copper inventories remain buoyant, up nearly 7x this year as the property sector downturn continues to weigh on metals demand.
• Bloomberg reports Escondida’s TCRCs have reportedly fallen to $12/1.2c to Chinese smelters, with a trader reporting $3/0.3 suggesting concentrate supplies are ample and smelter capacity remains competive.
• Chinese copper smelters continue to explore options, with processing cuts being considered.

China lithium production slides in February as lepidolite producers come offline

• SMM reports China’s lithium carbonate output fell 17% mom to 32kt. The figure was up 5.4% yoy
• Carbonate spot prices have rallied c.3% in Cina to $16,000/t.
• China lepidolite production has reportedly fallen 33% mom, however, the Lunar New Year is expected to have played a role, with analysts expecting a rebound this month.
• Both cost and environmental concerns have been playing a role, with authorities reportedly concerned over the large waste volumes required from lepidolite production.
• China has been boosting carbonate imports on the international market, predominantly from Chile.

Gold jumps again on US employment data revisions

• Gold prices extended gains on Friday, hitting $2,192/oz before settling around the $2,180/oz mark.
• The 10-year held around 4.07% following the NFP release, sliding to its lowest level since mid-Feb.
• The dollar has also cooled to near two-month lows on more dovish Fed commentary.
• Momentum-driven CTAs continue to add amid the rally, with more retail-targeted ETFs yet to see sustained inflows.
• Central banks, continue to buy, with China adding to gold reserves for a 16^th month.

Economics

US – Soft employment numbers released on Friday led the US$ index lower amid falling sovereign bond yields and rising expectations for the first rate cut coming sooner.

• The economy added 275k new jobs in February beating market estimates for a 200k reading, albeit, a downwards revision to the previous month’s numbers (229k v 353k estimated previously) meant headline numbers were net short of expectations.
• Labour earnings growth also slowed down to 0.1%mom v 0.2%mom expected from 0.5%mom (revised from 0.6%mom) in January.
• Unemployment rate picked up 0.2pp to 3.9%.

China – Consumer inflation picked up more than expected in February marking the highest level in 11 months helped by Lunar New Year timing.

• Consumer goods and services prices climbed 0.7%yoy compared to 0.3%yoy forecast and a 0.8%yoy drop in January, Reuters reports.
• Prices dropped in January die to a higher base in 2023 as the Lunar New Year arrived earlier that month and helped spending higher.
• Producer prices remained in deflation with the pace of price declines accelerating in February to 2.7%yoy compared to a 2.5% decline in January.

Portugal – General elections carried yesterday delivered a victory to the centre-right Democratic Alliance (AD) replacing Solicalist Party (PS) as the largest party in the 230-seat legislature.

• AD is reported to have secured 79 seat compared to 77 for PS.
• This compares to 117 seats, an absolute majority, held by PS following a victory in 2022.
• Most of PS lost votes were picked up by far right Chega that won 48, nearly four times its representation in the parliament following last elections.
• Snap elections were triggered by the socialist PM, Antonio Costa, resigning in November amid corruption allegations, although he was never named as a suspect.
• AD will now be looking to form a minority government.
• AD leader Luis Montenegro previously refused to negotiate with Chega regarding a potential alliance, Reuters reports.

Currencies

US$1.0945/eur vs 1.0936/eur previous. Yen 146.81/$ vs 147.88/$. SAr 18.711/$ vs 18.653/$. $1.284/gbp vs $1.282/gbp. 0.662/aud vs 0.664/aud. CNY 7.184/$ vs 7.192/$.

Dollar Index 102.68 vs 102.85 previous.

Commodity News

Gold US$2,181/oz vs US$2,165/oz previous

Gold ETFs 82moz vs 82moz previous

Platinum US$922/oz vs US$918/oz previous

Palladium US$1,032/oz vs US$1,039/oz previous

Silver US$24.36/oz vs US$24/oz previous

Rhodium US$4,500/oz vs US$4,500/oz previous

Base metals:   

Copper US$ 8,584/t vs US$8,679/t previous

Aluminium US$ 2,236/t vs US$2,261/t previous

Nickel US$ 17,990/t vs US$18,060/t previous

Zinc US$ 2,530/t vs US$2,552/t previous

Lead US$ 2,110/t vs US$2,135/t previous

Tin US$ 27,520/t vs US$27,735/t previous

Energy:           

Oil US$82.1/bbl vs US$83.7/bbl previous

Natural Gas €26.3/MWh vs €26.6/MWh previous

• The US Baker Hughes rig count was down 7 units to 631 rigs last week (-124 or 16% y/y), with oil rigs down 2 to 504 units (-86 y/y) and gas rigs down 4 to 115 units (-38 y/y) as 8 rigs were removed from Texas (-75 y/y).
• Petrobras’ share price slumped over 10% on Friday after an expected $3-4bn extraordinary dividend on top of the base pay-out (~7.2% annualised yield) did not materialise for investors, triggering consensus revisions.
• Saudi Aramco reported FY23 production of 12.8mboe/d (84% oil) generating net income of $121bn and $101bn free cash flow, with plans to reduce planned spending to $48-58bn on investments in 2024 and increase the quarterly cash dividend by 20% y/y to $31.1bn (~6% annualised yield) this year.
• RenewableUK announced the UK’s onshore wind capacity now exceeded 15GW from 2,631 projects, with 63% of capacity in Scotland following the de facto ban introduced in 2015 on new English onshore wind farms.

Uranium Futures $91.3/lb vs $91.3/lb previous

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$115.8/t vs US$117.4/t

Chinese steel rebar 25mm US$559.1/t vs US$561.4/t

Thermal coal (1st year forward cif ARA) US$107.3/t vs US$107.5/t

Thermal coal swap Australia FOB US$136.5/t vs US$137.8/t

Other:  

Cobalt LME 3m US$28,550/t vs US$28,550/t

NdPr Rare Earth Oxide (China) US$48,733/t vs US$49,358/t

Lithium carbonate 99% (China) US$14,251/t vs US$14,112/t

China Spodumene Li2O 6%min CIF US$1,070/t vs US$1,070/t

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

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

China Graphite Flake -194 FOB US$540/t vs US$540/t

Europe Vanadium Pentoxide 98% 5.7/lb vs US$5.7/lb

Europe Ferro-Vanadium 80% 27.45/kg vs US$27.45/kg

China Ilmenite Concentrate TiO2 US$326/t vs US$323/t

Spot CO2 Emissions EUA Price US$56.9/t vs US$58.1/t

Brazil Potash CFR Granular Spot US$297.5/t vs US$290.0/t

Battery News

Renewable energy companies to get more cash for green power generation near towns and cities

• A new scheme, to be formally announced on Tuesday by Energy Secretary, Claire Coutinho, will see developers awarded with more cash to build wind turbines and solar farms near towns and cities in a bid to get more power generation near to where it is needed.
• Renewable energy companies will also be allowed to charge customers for power if it is generated near to where it is used.
• It is hoped that the scheme will trigger a rush to build wind and solar infrastructure on farmland around cities.
• The UK will be divided into about half a dozen generating zones so that onshore wind and solar farms in the Home Counties could be paid more for their power than those in more sparsely populated areas like Scotland, for example.
• A key aim of the scheme is to halt an increase in ‘constraint payments’ – where wind and solar farms are paid to turn off their generators to stop them overloading the grid at peak times.
• This has become a problem when energy companies build wind farms in remote northern locations with insufficient grid connections to carry their power south.

China EV sales slow in first two months of 2024

• The China Association of Automobile Manufacturers (CAAM) latest sales figures show that EV sales in China have fallen further in February as the slow start to the year continues.
• February NEV sales were 477,000 units, down 9.2% yoy and down 34.6% from January.
  • BEV sales were 294,000 units, down 21.8% yoy and 33.93% from January.
• The start of the year is often the slowest period for sales as it coincides with Lunar New Year (10^th-17^th February 2024)

Indonesia to mass produce EV batteries from April

• The Indonesian Ministry of Investment has said that the country will be ready to mass produce EV batteries from April 2024.
• The batteries will be built Hyundai LG Industry Green Power, a joint venture between Hyundai Motor Group and LG Energy Solution.
• Indonesia will become the first battery cell producer in Southeast Asia.

Rivian to delay billion-dollar factory in Georgia

• Rivian will postpone the construction of it new $5bn EV plant in Georgia, US, until further notice.
• The new plant was to be built to produce the its new cheaper R2 electric SUV.
• The R2 will now be built at the company’s existing plant in Illinois instead.
• Rivian produced 57,000 EVs in 2023 and the new plant was expected to produce 400,000 vehicles a year.

AC in cars to run on solar power in future

• The automotive industry is witnessing a transformative shift with the advent of solar-powered car air conditioning systems.
• Solar-powered air conditioning systems are highly energy-efficient, utilising clean and renewable solar energy to cool the vehicle’s interior.
• Using photovoltaic cells to power the air conditioning system would be a significant advantage for electric cars as it will help to extend the range of EVs.

Company News

East Star Resources (EST LN) 1.7p, Mkt Cap £3.7m – Resource estimate for Vekhuba expected within ~1 month

• East Star Resources has issued a progress report on its exploration of the Verkhuba copper deposit in Kazakhstan.
• The company explains that it has updated its mineral resource model for the deposit, which is located in the Rudny Altai Volcanic Massive Sulphide Belt of Kazakhstan, to incorporate field work undertaken over the last year including geological mapping, topographic and LIDAR surveys and drilling work.
• East Star Resources has now “instructed … [its consultants] … AMC to undertake the work required to produce a maiden JORC Inferred resource. This work is expected to take around one month and will be ready prior to the commencement of the 2024 field season”.
• Commenting on the progress, CEO, Alex Walker, said that East Star Resources believes “Verkhuba is an attractive copper deposit due to its initial open pit potential and proximity to existing processing infrastructure in the region, which could enable us to get into production quickly and with a much lower capital requirement”.
• Mr. Walker confirmed that drilling “in the upcoming season will focus on further resource definition to convert the open pit area to JORC Indicated status as well as further testing the continuity of the underground ore bodies to assess development potential. We expect this to precede either a scoping study or a pre-feasibility study to demonstrate the low-cost development potential of the Verkhuba deposit”.
• He also explained that the company’s other exploration targets in the region are “well poised to deliver discoveries … at a time when the global economy is beginning to run critically short of copper supply”.

Conclusion: We look forward to the results of the resource estimation at Verkhuba and of the continuing exploration in Kazakhstan.

Ferrexpo (FXPO LN) 62p, Mkt Cap £373m – Update on Ukraine subsidiary

• Ferrexpo provides an update from its Ukrainian subsidiary.
• A court hearing has been scheduled to decided whether to proceed with creditor proection proceedings over the FFM subsidiary and an outstanding debt claim for c.$58k.
• The subsidiary is seeking an extension of payment terms given restrictions over their bank accounts in Ukraine.
• Ferrexpo’s operations remain unaffected.

Gabriel Resources (GBU CN) C$0.9, Mkt Cap C$901m – Arbitrage trial loss

• The Company lost an arbitration case against the Romanian Government relating to its investments in the Rosia Montana gold and silver mining project.
• The Company was seeking US$4.4bn in damages from the state after the project was suspended in 2014 after the government withdrew its support amid country wide protests.
• The dispute was taken to the World Bank’s International Centre for Settlement of Investment Disputes in 2015.
• The Company was also ordered to pay the state US$10m in legal fees and expenses incurred during the arbitration.
• The Company is speaking with its legal advisers evaluating further options.

Golden Metal Resources (GMET LN) 15.5p, Mkt Cap £12.2m – Strategic investor injects £750,000

1. Golden Metal Resources reports that a single new investor has subscribed for a total of £750,000 of new shares priced at 15p/share.
2. The new shares, which represent approximately 5.5% of the enlarged company were placed at “a premium of 5.3% to the closing market mid-price of the ordinary shares of the Company on 8 March 2024”.
3. The new investor received warrants to purchase an additional share at a price of 25p over the next two years on the basis of one purchase warrant for every two shares issued in the subscription announced today.
4. The new funds will help advance exploration at the company’s Garfield project in the Walker Lane Belt of Nevada as well as at the company’s Pilot Mountain tungsten project including “diamond drilling of key exploration and resource infill targets”.

Conclusion: Additional funding from a strategic investor should help accelerate the company’s exploration in Nevada.

Great Western Mining* (GWMO LN) 0.047p, Mkt Cap £2.6m – Placing to support copper porphyry exploration in Mineral County, Nevada

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• Today Great Western reports it has raised £0.7m in gross proceeds through an equity raise.
• The raise was issued at a subscription price of 0.0435/shr.
• Funds will be used to continue to explore the recently identified West Huntoon copper porphyry target.
• This will include drill target generation through geophysics.
• Funds will also be used for additional exploration at the Company’s various precious metals targets, including West Huntoon and the Rhyolite Dome prospect.
• Working capital will also be used for the recently built processing mill, where, upon final environmental consent, GWM will begin processing precious metal waste heaps.

*SP Angel act as Broker to Great Western Mining, an SP Angel Analyst has visited Great Western’s Nevada claim blocks.

Mkango Resources* (MKA LN) 6.3p, Mkt Cap £15m – HyProMag USA update

• HyProMag USA, a 50/50 JV between CoTec and Maginito (~80/20 Mkango/CoTec) engaged Canada based BBA USA Inc. and US-based PegasusTSI Inc. to complete to complete a feasibility study on the US REE recycling project.
• The study is expected to be completed in H2/24 supporting the FID.
• CoTec funds the study and will cover development works in the form of a shareholder loan essentially carrying JV to first production.
• Maiden revenues are targeted for 2025/26.
• The plan is to start off with three HPMS vessels recovering rare earth magnets from end of life equipment feeding a one magnet manufacturing facility based in Texas.
• The joint venture is planning to apply for US grants and is seeking partnerships to secure NdFeB containing feed supply.

Conclusion: HyProMag USA launched preparations for the FS due to completed later in the year ahead of the final investment decision. The project using patented Hydrogen Processing of Magnet Scrap (HPMS) process has already been significantly de-risked with the technology tested in the University of Birmingham and used at an operating unit at Tyseley Energy Park, UK. The technology has also been recognised the Minerals Security Partnership, a government led initiative represented by 14 governments (including the US, UK, EU, Japan among others), aimed at supporting publich and private investments into critical minerals’ supply chain.

*SP Angel acts as nomad and broker to Mkango 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%”

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

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+SP Angel employees may have previously held, or currently hold, shares in the companies mentioned in this note.

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