SP Angel Morning View -Today’s Market View, Monday 11th September 2023

Copper prices rise as PBoC rescues Yuan from collapse

MiFID II exempt information – see disclaimer below

Cobra Resources (COBR LN) – Ionic rare earth mineralisation shown at Boland, South Australia

First Tin (1SN LN) – Positive crushing testwork for Taronga Tin Project

Golden Metal Resources (GMET LN) – Review of historical data identifies a geophysical anomaly over lithium brine targets in Kibby Valley Basin, Nevada

Bushveld Minerals*(BMN LN) – Bushveld enter into binding term sheet for US$69.5-US$77.5m for working capital and investment

Ferro-Alloy Resources (FARF LN) – H1 results as expansion plans advance and raw-material supply improves

Premier African Minerals (PREM LN) – Regulatory approval for additional funding from Canmax

Rainbow Rare Earths (RBW LN) – Supply agreement with Less Common Metals offers potential to expand Western supply chain

Scotgold Resources (SGZ LN) Suspended – Review of Cononish identifies significant funding requirement and triggers share suspension

Tantalex Lithium Resources (TTX CN) – Glencore backs Manono tailings project, DRC with capex financing and offtake term sheet

Copper prices tick higher as yuan strengthens on Beijing intervention

• Copper prices have bounced off recent lows to $8,375/t.
• The move a jump in the yuan, which strengthened from 16-year lows with a tighter trading cap.
• Additional cities continue to lift home buying curbs, whilst Chinese lending reports showed a slight improvement in August.
• Copper inventories in Shanghai continue to build, now at 55kt.

Gold prices strengthen as bonds weaken ahead of key US inflation data

• Spot gold prices have strengthened to $1,927/oz following a sell-off in US Treasuries.
• A weaker dollar is also supporting gold prices.
• CPI data is due on Wednesday for the US, with traders expected to keep a keen eye on its implications for the Fed’s next rate decision this month

China new energy vehicle sale up 8.46% mom to record 846,000

• After a brief decline in July sales, China’s new energy vehicle (NEV) sales rebounded to a record high, 846,00 units.
• China’s NEV now hold a 36% share of the vehicle market, and with current trajectory this will be over 40% by the end of 2023 (CleanTechnica).

Economics

China

• CPI mom 0.3% vs 0.2% in July
• CPI yoy 0.1% vs -0.3% in July
• PPI -3% vs -4.4% July

Italy

• Industrial production mom down -0.7% vs -0.3% expected.
• Industrial production down 2.1% yoy vs -1.7% expected.

Morocco – 6.8 earthquake kills >2,100 and injures >2,400

• Our deepest sympathies to the affected families.
• Having travelled and trekked through the Atlas Mountains and surrounding areas and enjoyed the hospitality of the people in this region we offer our deepest sympathies for those affected.

Currencies

US$1.0734/eur vs 1.0717/eur previous. Yen 146.04/$ vs 147.25/$. SAr 18.937/$ vs 19.102/$. $1.252/gbp vs $1.248/gbp. 0.644/aud vs 0.640/aud. CNY 7.292/$  vs 7.348/$.  Dollar Index 104.56 vs 104.90 previous.

Commodity News

Precious metals:

Gold US$1,929/oz vs US$1,926/oz previous

Gold ETFs 89.3moz vs 90moz previous

Platinum US$905/oz vs US$908/oz previous

Palladium US$1,210/oz vs US$1,225/oz previous

Silver US$23.13/oz vs US$23/oz previous

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

Base metals:

Copper US$ 8,362/t vs US$8,271/t previous

Aluminium US$ 2,205/t vs US$2,176/t previous

Nickel US$ 20,300/t vs US$20,415/t previous

Zinc US$ 2,468/t vs US$2,448/t previous

Lead US$ 2,244/t vs US$2,219/t previous

Tin US$ 25,610/t vs US$25,680/t previous

Energy:

Oil US$90.5/bbl vs US$89.7/bbl previous

Natural Gas US$2.545/mmbtu vs US$2.617/mmbtu previous

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

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$114.2/t vs US$113.4/t

Chinese steel rebar 25mm US$533.9/t vs US$529.4/t

Thermal coal (1st year forward cif ARA) US$122.0/t vs US$120.3/t

Thermal coal swap Australia FOB US$160.5/t vs US$160.0/t

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

Other:  

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

NdPr Rare Earth Oxide (China) US$72,339/t vs US$71,444/t

Lithium carbonate 99% (China) US$25,576/t vs US$26,196/t

China Spodumene Li2O 6%min CIF US$2,730/t vs US$2,760/t

Ferro-Manganese European Mn78% min US$1,036/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% 6.8/lb vs US$6.9/lb

Europe Ferro-Vanadium 80% 30.75/kg vs US$30.85/kg

China Ilmenite Concentrate TiO2 US$312/t vs US$310/t

Spot CO2 Emissions EUA Price US$86.8/t vs US$88.6/t

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

Battery News

BMW to make multimillion pound investment for electric Mini production in UK

• BMW will make a multimillion-pound investment in its electric Mini production in Britain, according to business minister Kemi Badenoch
• The government did not give a figure for the announcement but said it would bring total investment into the automotive sector to over £6bn in recent years.

Chinese battery maker Gotion to establish $2bn plant in Illinois

• Gotion High-tech, who are backed by VW, will build an EV battery production facility in the US, where the company also previously announced plans to build a battery materials facility.
• The plant will focus on lithium-ion battery cell and pack production and energy storage system integration and is expected to produce 10GWh battery packs and 40GWh cells when completed.
• In October 2022, Gotion chose to build its $2.36bn battery component manufacturing plant in Michigan.
• Gotion expects to produce 150,000 tons of cathode material annually at the Michigan facility.

Company News

Cobra Resources (COBR LN) 1.21p, Mkt Cap £6m – Ionic rare earth mineralisation shown at Boland, South Australia

• Cobra provides a metallurgical update for its Boland project in Wudinna, South Australia.
• The Company suggests that results show ionic rare earth mineralisation, causing them to acquire to additional land applications.
• ANSTO results show recoveries of desorption leaching over 30 minutes using ammonium sulphate.
• Testing showed maximum extractions of 58% MREO and 65% HREO.
• The company suggests that low acid consumption of 6-30kg/t will provide positive economic metrics when exploring processing options.
• Cobra is now planning to drill sonic core holes at Boland for a maiden ionic REE resource and to better understand the nature of the mineralisation.
• Historic drill samples and paleo-channel testing will also be completed to further develop the asset.

First Tin (1SN LN) 7.15p, Mkt Cap £19m – Positive crushing testwork for Taronga Tin Project

• First Tin reports crushing pre-concentration testwork results for its Australian Taronga project.
• The tests used bulk samples taken from an adit from the North Pit mineralisation.
• The results show that cassiterite can be separated through coarse crushing to 12mm and screening at 2.8mm.
• The <2.8mm fraction is subsequently sent to the plant, reducing mass sent to plant whilst increasing tin grades.
• Taking a higher-grade sample of 0.18% Sn, sub-2.8mm fractions returned 85% tin in 54% of the mass, upgrading the fraction from 0.18% Sn to 0.30% Sn.
• With the low-grade sample of <0.10% Sn, <2.8mm fractions returned 84% tin in 58% of mass.
• The Company now sees that 79% of the tin in 27% of the mass grading 0.63% is available to be sent for further processing.
• Management suggests that the simple crushing and screening upgrade will enable a lower opex and capex operation, increasing the viability of the Taronga deposit for processing.

Golden Metal Resources (GMET LN) 10.25p, Mkt Cap £8.6m – Review of historical data identifies a geophysical anomaly over lithium brine targets in Kibby Valley Basin, Nevada

(Power Metal Resources (POW LN) 0.73p, Mkt cap £15m holds 62% of Golden Metal Resources)

1. Golden Metal Resources reports that a review of historical magneto-telluric (MT) geophysical data from 2018 has identified a “distinct conductive … brine aquifer linked anomaly totalling circa 10km², of which approximately 3.1km² is now covered by … [its wholly-owned Kibby North and Kibby South] … Lithium Properties”.
2. Today’s announcement says that “Two widely spaced drill holes outside the Lithium Properties subsequently … demonstrated that the MT anomaly is coincident with significant lithium brine mineralisation including intervals containing up to 924 ppm lithium (Li) with greater than 300ppm Li over thicknesses in excess of 450m”.
3. One of the historic drillholes (KM22-02) “is located only 250m from the Golden Metals Kibby South licence boundary … intersected lithium mineralisation averaging 558ppm Li (and a high of 860 ppm Li) over 169m from the top of the aquifer at 365m, with open lithium mineralisation continuing to the bottom of the hole, averaging 379 ppm Li over 451m, from drill core assays”.
4. The company confirms that “Brine water sampling analyses from the hole correlated with the core assay samples with total dissolved lithium content increasing exponentially with depth to a peak of 27 mg/L at 549m”.
5. Expressing confidence that the lithium brine is likely to extend into its licence area, Golden Metal Resources says that it will “be the subject of expedited follow-up exploration”.
6. The prospective lithium areas in the Kibby Valley Basin are located around 5km east of Golden Metals Resources’ Pilot Mountain project, which is evaluating a tungsten opportunity, and “less than 60km north of the prolific Clayton Valley Basin which hosts the Silver Peak Lithium Mine, owned and operated by Albemarle Corp”.

Bushveld Minerals*(BMN LN) 2.4p, Mkt Cap £37m – Bushveld enter into binding term sheet for US$69.5-US$77.5m for working capital and investment

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• Bushveld Minerals report the signing of a binding term sheet on a potential US$69.5-US$77.5m of investment subject to conditions precedent.
• The proposed investment by Southern Point Resources with inter-conditional transactions should provide:
  • $8.1m of immediate working capital and expansion capital secured against Vanchem for Vanchem,
  • the opportunity to fully or partially retire certain existing financing instruments,
  • an equity investment from SPR into Bushveld Minerals,
  • a marketing and working capital solution to replace the Group’s existing arrangements as and when they expire over the coming 5-17 months and
  • the opportunity to recommission Vanchem’s Kiln-1 which should reduce overall costs.
• SPR ‘Southern Point Resources’ which represents a series of businesses in South Africa and proposes:
  • SPR buy of 50% of the shares in the Vanchem vanadium plant,
  • 64% equity interest in the Mokopane project, for a total of ~US$25m,
  • ~US$12.5m equity investment by SPR into the Company, at the same equity price as the Orion Mine Finance agreement,
  • ~US$25-30m medium-term trade finance working capital facility
  • SPR will take over all marketing and sales of vanadium and other products
    • some existing marketing arrangements expire end-December and some existing marketing arrangements will be extended to end-2024.
  • US$7-10m potential future commitment to recommission Kiln-1 at Vanchem.
• Working capital increase:  cost inputs have ‘risen significantly’ with higher production at Vanchem creating a need to increase working capital due to the production pipeline and time to sales.
• SPR have stated their commitment to support Bushveld in their management of Vanchem.
• SPR which holds an interest in Highveld Robust Steel could see significant synergies through the supply of vanadium-rich slag to Vanchem for processing at much lower cost along with higher output rates vs run of the mine ore with Bushveld sharing in the benefits of the optimisation.
• Mokopane: SPR is also undertaking to “develop Mokopane in the near term, reducing the Company’s feedstock risk and input costs via an irrevocable life of mine supply agreement.”
• Key terms:
  • ~ US$8.1m interim working capital facility available on consent from existing Bushveld funders and consent from existing offtakers.
  • US$25m for 50% stake in Vanchem and sale of Bushveld’s 64% stake in Mokopane with:
    • US$12.5m on closing of the 50% Vanchem sale,
    • US$10m on maturity of the ~US$8.1 million) interim working capital facility,
    • US$2.5m on a contingent basis if the Mokopane sale closes within one year.
  • US$12.5m in new equity investment into Bushveld by SPR at same share price as that agreed with Orion for the conversion of its restructured convertible loan note.
  • SPR gets to nominate one non-executive director to the Bushveld board.
  • Three-year Marketing and sales appointment of SPR replacing sales arrangements as they expire over the coming 5-17 months.
  • US$7-10m potential future investment into Vanchem by SPR for the recommissioning of Kiln-1 to increase output, subject  to  feasibility  studies.
• Orion Convertible Loan Note restructuring: Management hope to close the transaction before the November due date.
• Vanchem: The book value of Vanchem in the Company’s accounts was US$62.2m at end-December 2022.
  • ‘The proposed disposal of a 50% interest is estimated to result in a book value loss of US$9.8m.’
• Mokopane:  The book value of Mokopane was US$53.5m at end-December 2022.
  • ‘The proposed disposal of the Company’s interest in Mokopane is estimated to result in a book value loss of US$49.8 million’.

Conclusion: SPR know the benefits of combining the supply of vanadium slag from their Highveld furnaces with Vanchem.  We expect the resulting synergies to more than cover the costs of the transaction while the reorganisation of trading and working capital facilities should also work to the benefit of Bushveld.

*SP Angel act as nomad and broker to Bushveld Minerals

Earnings forecasts below to be revised to account for today’s announcement

Ferro-Alloy Resources (FARF LN) 8.75p Mkt Cap £41m – H1 results as expansion plans advance and raw-material supply improves

• Vanadium producer and developer Ferro Alloy provides its interim results for the period to 30^th June 2023.
• The Company reported a loss of $1.5m for the period on reduced raw material flow to the processing plant.
• The Company continues to progress a feasibility study for the Balasausqandiq deposit in Southern Kazakhstan, expecting Stage 1 completion in April 2024.
• The deposit holds a resource of 33mt @ 0.62% V205.
• Met-test work is nearing completion, and the company is waiting for drilling results on three other ore bodies at the project.
• At the processing plant, the Company has flipped to natural gas from diesel for several roasting ovens..
• Moly recoveries have increased to c.90%.
• Q2 saw improving raw material supply for processing.
• The Company expects full production from the middle of this month.
• Ferro-Alloy launched a bond offering in July 2023 to strengthen the balance sheet and provide working capital.

Premier African Minerals (PREM LN) 0.4p, Mkt Cap £94m – Regulatory approval for additional funding from Canmax

• Premier African Minerals reports that the Chinese regulatory authorities have approved the investment of a further £5m by Canmax into the Zulu lithium project in Zimbabwe.
• The additional investment, which was first announced on 30^th August, will provide finance to “support the ongoing optimisation of the plant at Zulu … [as well as ] … to meet the costs associated both with the interim mill installation that is expected to see production at 1,000 ton per month of spodumene from November 2023, the installation of a thickener and larger ball mill that is expected to see the plant achieve design throughput from Q1 2024”.
• Canmax will subscribe for an additional ~1.43m shares at a price of 0.35p/share taking its interest in Premier African Minerals to 17.4%.

Conclusion: Chinese regulators have approved additional funding to Premier African Minerals’ by its largest shareholder and offtake partner.  The investment is intended to help the delayed Zulu lithium project achieve its design throughput by Q1 2024.

Rainbow Rare Earths (RBW LN) 171p, Mkt cap £102m – Supply agreement with Less Common Metals offers potential to expand Western supply chain

• Rainbow Rare Earths has signed a strategic supply agreement to provide rare earth oxides to LCM ‘Less Common Metals’ in the UK.
• LCM is the only rare earth metal and alloy manufacturing facility in the UK and one of the only facilities in the Western world
• LCM produces a range of rare earth products for rare-earth magnets including isotropic bonded NdFEB powders and anisotropic bonded NdFEB powders. ‘Anisotropic magnetic powders can be used to produce bonded magnets with maximum energy products twice that of the isotropic bonded magnets.’
• Rainbow plans to supply LCM with rare earth elements designated as critical minerals due to their essential role in the green energy transition
• The plan is for LCM to transform Rainbow’s separated rare earth oxides into the complex alloys and metals required for magnet production
• Close co-operation will be required between Rainbow its technology partner K-Tech and LCM to optimise the production and supply chain for the manufacturer of quality REE alloys
• LCM also produces specialised strip-cast alloys and all of the required rare earth metals for high-performance Nd iron boron magnets.
• ‘LCM’s expertise in the commercial production of neodymium metal and neodymium praseodymium alloy is unique in the Western world’.
  • “Volumes will be driven by LCM’s requirements for its expanded facilities, constrained by Phalaborwa’s total productive capacity, and pricing will be as per published rare earth oxide prices at that point in time.”

Scotgold Resources (SGZ LN) Suspended, Mkt Cap £10m –Review of Cononish identifies significant funding requirement and triggers share suspension

• Scotgold Resources reports that its 3^rd party review of the 12 month mine plan for the struggling Cononish mine has delivered its initial findings.
• The review concludes that there are “no fatal flaws” in the Mineral Resource Estimate (MRE) or in the grade control modelling initial review of the draft mine plan and cash-flow forecasts “indicate that to deliver to the plan, a significant capital investment is required”.
• A mining plan for the period to 2025, still currently under review, “is clear that Cononish needs significant new funding in order to increase ore production to a level which would achieve sustained profitability. The underground work envisaged includes significant development, a drilling programme and further upgrades to power and ventilation”.
• Scotgold is “actively seeking additional financing and discussions are in an advanced stage and, should they materialise, are expected to provide sufficient funding for the Company to continue as a going concern … [although the company cautions that the] … outcome of the funding discussions is highly uncertain and if the Company cannot conclude a significant fundraise, it will cast material uncertainty for the Company to continue as a going concern”.
• Commenting on the immediate financial situation at Cononish, Scotgold says that it “has been managing its creditors including debt providers … [but it points out that] … One unsecured creditor has (recently) demanded full payment of outstanding interest, and although the Company has sufficient funds to make this payment, it does not believe that to do so would be in the best interest of all stakeholders. As such an event of default is possible if such creditor does not agree to a new payment plan. In the event of default there is a material risk the business could be placed into administration in the next few weeks”.
• While the “Board … continues to explore its options and pending clarification of its financial position, trading in the Company’s shares on AIM will be suspended with effect from 7.30 a.m. on 11 September 2023”.

Tantalex Lithium Resources (TTX CN) C$0.1, Mkt Cap C$55m – Glencore backs Manono tailings project, DRC with capex financing and offtake term sheet

• Glencore and Tantalex has reached an agreement for the funding of the Manono Lithium Tailings Project.
• The term sheet revolves around a secured financing facility over three tranches.
• The first tranche will provide $2m once a marketing offtake agreement is made.
• The second tranche will see Glencore provide $3m on approval of the Project’s PEA.
• The third tranche will see Glencore provide 1/3^rd of total CAPEX required to build the project.
• The transaction remains conditional on a due diligence on Glencore’s part.
• A 1.5% Commitment Fee is to be deduced from the prepayment on each disbursement.
• Manono holds a 5.46mt MRE @ 0.72% Li2O Measured and Indicated and 6.63mt @ 0.49% Li2O.
• The lithium is held in spodumene mineralisation.

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 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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