SP Angel Morning View -Today’s Market View, Monday 12th August 2024

Copper and iron ore rise as buyers take advantage of low prices

Surge in EV Sales exposes critical gaps in US charging infrastructure

MiFID II exempt information – see disclaimer below

Castillo Copper (CCZ LN) – Sampling to help identify drill targets at the ‘Big One’ prospect in Queensland

Cornish Metals* (CUSN LN) – Appointment of CEO

East Star Resources (EST LN) – Completion of soil sampling programme in Kazakhstan

Galan Lithium (GLN AU) – Rejection of EnergyX proposal

Great Western Mining* (GWMO LN) –Agreement with Bronco Creek Exploration to progress Eastside Project

Lucara Diamonds (LUC CN) – Q2 results describe weakness in the market for smaller stones

Sovereign Metals* (SVML LN) – Infill drilling at Kasiya rutile and graphite project in Malawi

Tertiary Minerals* (TYM LN) –  CEO interview shows continued progress in Zambia alongside JV partners

Thor Energy (THR LN) – Drilling permits for Colorado uranium projects

Copper prices ($8,960/t) strengthen as Shanghai inventories fall on restocking

• Copper prices have strengthened having fallen below $8,750/t last week.
• LME warehouses are swelling with inventory as China continues to ramp up exports into a weak domestic demand environment.
• LME stockpiles have climbed to four year highs, however, Shanghai copper stocks have fallen 15% over the past six weeks to 286kt.
• Lower shanghai inventories are boosting the Yangshan premium, which hit yearly highs.
• Chinese buyers are now likely taking advantage of lower prices after copper’s fall from recent record highs of $11,000/t.

Zambia / DRC – Zambia temporarily shutdown its border with the DRC in an alleged retaliation for the DRC decision to ban some beverage imports from Zambia.

• “We have decided to take precautions that we seal the borders for now,” Chipoka Mulenga, Zambia’s Minister of Commerce, Trade and Industry said on Saturday.
• The decision is likely to affect shipments of copper through the border from the Africa’s largest copper producer.

Iron ore strengthens above $100/t whilst rebar prices move lower

• 62% Fe iron ore index in China back to $101/t.
• The steelmaking ingredient has been hovering around the $100/t for some time now, with steel prices weak globally.
• Rebar prices have fallen 14% this year, holding at seven year lows.
• Traders are reportedly dumping inventory in advance of new rebar quality standards due to come into effect in September.
• Steelmaking margins in China are at nine year lows.

Surge in EV Sales exposes critical gaps in US charging infrastructure

• The US has seen huge growth in EV sales, with a 52% increase in 2023 alone, but the nation’s charging infrastructure is struggling to keep pace.
• The US has fewer than 50,000 public charging stations compared to over 150,000 gas stations, creating a significant barrier to EV adoption.
• A 2023 poll found that 80% of Americans view inadequate charging infrastructure as a key deterrent to purchasing an EV.
• ChargerHelp’s 2024 reliability report highlighted major issues such as low charger uptime, interoperability challenges, and inconsistent maintenance.
• The report recommends improving data accessibility, standardising maintenance protocols, and expanding technician training to enhance the reliability of the charging network.

UK sees strong growth in used EV sales

• The UK’s second hand EV market experienced significant growth in Q2 2024, with used BEV sales increasing by 52.6%, reaching a record market share of 2.4%
• This follows a 71% rise in Q1, marking six consecutive quarters of growth in the used car market.
• Despite new BEV sales declining, the used EV market’s expansion suggests that private demand remains strong, but hindered by high costs and limited charging infrastructure.
• The Society of Motor Manufacturers and Traders emphasises the need for reliable and affordable charging infrastructure across the UK to sustain this momentum and support the nation’s net-zero transport goals.
• The organisation’s Vision 2035 report highlights the potential for the UK automotive sector to drive £50bn in green growth, provided the right incentives and policies are in place.

Economics

US asks the crew at the USS Abraham Lincoln to accelerate the timeline for the arrival in the Middle East as the nation beefs up military presence ahead of a potential Iran strike on Israel.

• USS Abraham Lincoln was initially meant to replace the outgoing USS Theodore Roosevelt, but both ships will remain in the region now.
• The US is also sending a guided missile submarine into the area.

UK – Inflation to rise again following likely rise in July

• The market is looking for a 2.3% rise in inflation in the UK in July beating the 2% level seen over the previous two months.
• Ongoing jobs growth may help propel wages higher along with new settlements being agreed by the new government.
• Inflation in the service sector continues to run at a high rate with a 5.7% rise in June
• Many investors and businesses are waiting to see what comes in the November budget before firming up on investment plans.
• We suspect the BoE may struggle to agree on a second rate cut if inflation picks up as this will likely weaken Sterling further.
• The BoE is under pressure to cut rates with so many mortgages coming off fixed deals through the second half. According to uswitch:
  • “By Q3 2024, the percentage of UK mortgages on initial rates of <2% will represent just 6% of total mortgages up for renewal, whereas more than half (54%) will be mortgages between 2-2.5%.
  • The biggest jump is expected in UK mortgages with initial rates of over 2.5%. Prior to 2023, there were no mortgages that fell into this category. In Q1 2023, this rose to just under 5,000, representing around 1% of the total UK remortgages required in that quarter. By Q4 2024, this is forecast to exceed 111,000, and represent over one in three (39%) of all UK mortgages up for renewal.”
• Eg, The BoE is under great pressure to cut rates by Q4 to avert problems in the property sector and for households in general.

Russia – Russian forces fail to arrest the incursion of Ukrainian military forces in the Kursk region.

• Tens of thousands of people are being evacuated as Russia sends reinforcements in the region.
• In its sixth day of the offensive, Ukrainian forces have managed to establish their presence in the area ahead of what many expect the start of ceasefire discussions at some point later in the year or next.
• Ukrainians managed to reportedly capture a significant number of prisoners that can be used in future exchanges.
• Currently it is unclear if they will be able to keep the territory, although, the incursion has already delivered a blow to Russian forces’ morale with likely changes in senior command likely to follow.
• Also it remains to be seen if Russia will use the attack as an excuse to announce another round of mobilisation.

Serbia – Estimated 24,000-27,000 people were reported to fill streets of Belgrade protesting the grant of mining licenses for the Jadar lithium project.

• Activists demand legislators permanently ban the mining of lithium and boron in Serbia.
• Serbia reinstated Rio Tinto’s licenses for the project last month after ruling that the previous decision to block the project in 2022 was “not in line with the constitution and the law”.

Currencies

US$1.0923/eur vs 1.0924/eur previous. Yen 147.26/$ vs 147.12/$. SAr 18.249/$ vs 18.304/$. $1.277/gbp vs $1.277/gbp. 0.659/aud vs 0.660/aud. CNY 7.181/$ vs 7.174/$.

Dollar Index 103.18 vs 103.16 previous

Precious metals:         

Gold US$2,437/oz vs US$2,426/oz previous

Gold ETFs 82.3moz vs 82.2moz previous

Platinum US$934/oz vs US$934/oz previous

Palladium US$918/oz vs US$933/oz previous

Silver US$27.79/oz vs US$27.53/oz previous

Rhodium US$4,700/oz vs US$4,625/oz previous

Base metals:   

Copper US$ 8,916/t vs US$8,886/t previous

Aluminium US$ 2,314/t vs US$2,309/t previous

Nickel US$ 16,180/t vs US$16,405/t previous

Zinc US$ 2,769/t vs US$2,706/t previous

Lead US$ 2,062/t vs US$2,014/t previous

Tin US$ 31,580/t vs US$31,700/t previous

Energy:           

Oil US$80.1/bbl vs US$79.1/bbl previous

Natural Gas €39.8/MWh vs €40.3/MWh previous

Uranium Futures $81.4/lb vs $81.5/lb previous

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$100.1/t vs US$99.2/t

Chinese steel rebar 25mm US$493.6/t vs US$494.1/t

Thermal coal (1st year forward cif ARA) US$128.3/t vs US$126.0/t

Thermal coal swap Australia FOB US$150.5/t vs US$149.0/t

Coking coal Dalian Exchange futures price US$189/t vs US$194.9/t

Other:  

Cobalt LME 3m US$26,500/t vs US$26,500/t

NdPr Rare Earth Oxide (China) US$52,080/t vs US$51,925/t

Lithium carbonate 99% (China) US$10,096/t vs US$10,106/t

China Spodumene Li2O 6%min CIF US$890/t vs US$910/t

Ferro-Manganese European Mn78% min US$995/t vs US$995/t

China Tungsten APT 88.5% FOB US$327/mtu vs US$325/mtu

China Graphite Flake -194 FOB US$465/t vs US$465/t

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

Europe Ferro-Vanadium 80% 25.2/kg vs US$25.2/kg

China Ilmenite Concentrate TiO2 US$320/t vs US$320/t

China Rutile Concentrate 95% TiO2 US$1,399/t vs US$1,401/t

Spot CO2 Emissions EUA Price US$69.9/t vs US$67.6/t

Brazil Potash CFR Granular Spot US$295.0/t vs US$297.5/t

Germanium China 99.99% US$2,145/kg vs US$2,145/kg

China Gallium 99.99% US$440/kg vs US$440/kg

Battery News

Vietnam plans new subsidies for EV charging stations

• Vietnam is planning to subsidise electricity prices for EV charging stations, as part of its efforts to promote the use of EVs and meet its energy transition commitments.
• The subsidy scheme is due to be submitted to the central government by mid-September for approval, the government said in a statement over the weekend.
• Vietnam is targeting carbon neutrality by 2050 and is the home of EV startup VinFast.
• VinFast own and operate almost all of the 150,000 current charging points in the country.

EU executive confident that Chinese EV probe complies with WTO standards

• The European Commission is confident its investigation into state subsidies for Chinese EVs are compatible with World Trade Organization (WTO) rules and its probe will continue. (Reuters)
• China has requested a WTO consultation, arguing the EU investigation results and the provisional tariffs lacked factual and legal basis and seriously violated the global body’s rules.
• The Commission, which handles all trade issues for the 27-nation EU, is carefully studying all the details of Beijing’s request to the WTO and would react to the Chinese authorities in due course according to the WTO procedures.

India’s sees EV sales boom, driven by mid-size cities

• While EV sales are slowing in many global markets, India’s demand remains resilient, with a 39% increase in the first quarter of 2024 compared to the previous year (Bloomberg).
• Notably, mid-sized and second-tier cities in India are emerging as new growth centers for EV sales, outpacing larger metropolitan areas.
• High-speed electric two-wheeler and electric car sales in these cities have surged, driven by expanding automaker networks and a growing urban population.
• This trend suggests that India’s EV market is not just a rich-country phenomenon but is thriving due to affordable models and supportive policies.
• As the market grows, the need for public charging infrastructure and continued policy support will be crucial.

Company News

Castillo Copper (CCZ LN) 0.28p, Mkt Cap £3.6m – Sampling to help identify drill targets at the ‘Big One’ prospect in Queensland

• Castillo Copper has appointed a consultant, Global Ore Discovery, to assist in exploration of its ‘Big One’ prospect in its NW Queensland Copper Project.
• Global Ore Discovery is described as “a leading minerals and energy exploration consultancy with a team of multi-disciplinary geoscience and spatial information professionals”.
• The next phase in the exploration campaign will “commence with a comprehensive surface sampling program which, when reconciled with known geophysical anomalies, should identify fresh targets to test-drill that could extend known mineralisation”.
• Currently the ‘Big One’ deposit has an ‘Inferred’ mineral resource of 1.1mt at an average grade of 1.1% copper.
• Chairman, Ged Hall, explained that Castillo Copper’s “first priority is to complete a surface sampling campaign that should, once analysed and reconciled with known geophysical anomalies, identify targets for test drilling that can potentially extend known mineralisation”.

Conclusion: We look forward to results from the latest phase of exploration at the ‘Big One’ prospect and the possible definition of further drilling targets.

Cornish Metals* (CUSN LN) 6p, Mkt Cap £31m – Appointment of CEO

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• Cornish Metals reports the appointment of a new CEO, Ben Turvey, following the departure, in March, of the previous incumbent.
• Mr. Turvey is a mining engineer and former Billiton executive described as “an experienced mining executive with more than 40 years of experience in the sector, including senior management roles in production, project execution, business development, and minerals resource management”.
• Subject to approval of a UK work visa, Mr. Turvey will assume the role from 1^st September.
• Interim CEO, Ken Armstrong, will resume his NED role and “Patrick Anderson will return to the position of Non-Executive Chair of the Board”.

Conclusion: Cornish Metals is appointing a new CEO as it progresses towards resumption of tin production at the South Crofty mine in 2027.

*SP Angel acts as Nomad and Broker. An SP Angel analyst formerly worked in the South Crofty tin mine in the 1980s and holds shares in Cornish Metals

East Star Resources (EST LN) 2.3p, Mkt Cap £5.5m – Completion of soil sampling programme in Kazakhstan

• East Star Resources reports the completion of a 2,800-sample soil sampling programme to aid its porphyry copper exploration programme at its Ayagoz and Snowy licences in Kazakhstan.
• The company explains that “Multi-element Inductively Coupled Plasma Mass Spectrometry (“ICP-MS”) assays are underway”.
• The sampling, financially supported by BHP’s Xplor programme, is located within the “paleozoic Balkash-Ili volcanic arc … [which] … is known to host multiple copper and gold rich porphyry and skarn deposits with the best-known examples including Kounrad (~650Mt @ 0.59% Cu), located 145 km south of Snowy, and Aktogai-Aidarly (~2.5Bt @ 0.39% Cu), located some 80 km to the south of Ayagoz”.
• Technical Director, Chris van Wijk, explained that the sampling programme had been completed in less that 2 months, and said that the “geochemical results from these two programmes will dictate the follow-on work programme and provide information that will assist in targeting throughout the rest of this proven mineral belt”.

Conclusion: Target definition geochemical programme completed in Kazakhstan We await news when the assay work is completed.

Galan Lithium (GLN AU) A$0.12, Mkt Cap, A$59m – Rejection of EnergyX proposal

• Galan reports it will not proceed any further with the proposal from EnergyX announced last week.
• The Company also reports that they have shortlisted financing and partnerships for a definitive sales agreement and financing.
• Pond flow has been increased by up to 50% following new piing in the central northern part of the project.
• Pond 4 and Pond 5 earthworks are now 80% complete.
• The Company notes continued progress in permitting for Phase 2, with ‘strong provincial government support.’

Great Western Mining* (GWMO LN) 0.04p, Mkt Cap £3.4m –Agreement with Bronco Creek Exploration to progress Eastside Project

1. Great Western Mining has entered a pooling agreement with Bronco Creek Exploration.
2. Bronco Creek is a subdivision of EMX Royalty Corp, which holds cash flowing royalties including over Lundin Mining’s Caserones operation.
3. The Agreement regards the Company’s Eastside Mine Project.
4. Bronco Creek holds the adjacent ‘Tango Project.’
5. Together, Bronco Creek and Great Western will look to consolidate the Pooled Project in order to develop a primary porphyry target.
6. The area also holds prospectivity for quartz-sericite-pyrite alteration, boosting prospectivity for copper porphyry potential.
7. Benefits and liabilities will be shared 30/70 percent respectively between GWM and Bronco Creek.
8. This is not a formal JV, however, and both parties will own their own claims.

Conclusion: Great Western has a large block of exploration claims in Mineral County, Nevada and has been exploring options to accelerate their progress through strategic partnerships. Today’s agreement shows the potential in this strategy, with the Company pooling resources with a neighbouring claimant to advance the Eastside Mine project. EMX expects to generate c.$24.5m in revenue this year from its producing royalties.

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

Lucara Diamonds (LUC CN) C$0.295, Mkt Cap C$135m – Q2 results describe weakness in the market for smaller stones

• Reporting its results for the 3 months to 30^th June, Lucara Diamonds announces a net income of US$11.9m bringing the 2024 YTD figure to US$5.0m (2023 Q2 US$6.1m and H1 US$7.9m).
• The results reflect the sale of 76,387 carats during the quarter and H1 sales of 169,948carats (2023 Q2 – 72,717 carats and H1 166,091 carats).
• Production included the recovery of a 491 carat Type IIa diamond as well as “a 225.6-carat Type IIa diamond, followed by the recovery of a 109-carat Type IIa diamond”.
• The company reports progress on the development of the underground Karowe diamond mine in Botswana including sinking of both ventilation and production shafts .
• Commenting on the market for rough diamonds, Lucara Diamonds reaffirms its’ confidence in the long term outlook but says that “the market for the smaller size stones remains soft as demand is impacted by a weak Asian market and laboratory-grown diamonds”.
• “Demand for larger stones over 10.8 carats remains robust, as reflected in the Company’s sales. The G7 sanctions on Russian diamonds over one carat, effective March 2024, have caused some trade delays”.
• Commenting on the increasing emphasis on verification of the origin of diamonds, the company says that its production from Botswana “stands to benefit from this heightened focus on origin verification”.

Sovereign Metals* (SVML LN) 35p, Mkt Cap £203m – Infill drilling at Kasiya rutile and graphite project in Malawi

(Sovereign currently holds 100% of the Kasiya project. The government has a right to a 10% free carry in the project. Rio Tinto acquired an initial strategic interest of 15% for a $40.6m and have now exercised their option to raise their state to 19.8%)

STRONG BUY – Valuation 55p

• Sovereign Metals report the start of infill drilling on the Kasiya rutile and graphite project in Malawi.
• The drilling is to give better definition of the ore resource at Kasiya for the first seven to eight years of the proposed mine plan with 142m average spacing between drill holes.
• This will cover the southern part of the Kasiya mineral resource around the first proposed production pits.
• The drilling will use low-cost aircore and auger drilling and may also use some push tube and diamond core drilling.
• We expect the resource to show reasonably good consistency due to the basin environment due to the orogenesis and formation of the rutile and graphite within the Kasiya basin environment.
• The drill program has been designed by Sovereign and overseen by the Rio Tinto technical committee.
• The team are also digging several 3 metre deep pits to check the grade of the rutile in the upper layers and for geotechnical information.
• It will be interesting to see how the grades of the aircore and auger drilling reconcile with the push core, diamond drilling and test pits.

*SP Angel act as Nomad and broker to Sovereign Metals. The analyst has recently visited the Kasiya mine site.

Tertiary Minerals* (TYM LN) 0.1p, Mkt Cap £2.7m –  CEO interview shows continued progress in Zambia alongside JV partners

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• Tertiary’s CEO, Patrick Cheetham, provides an update on the Company’s recent Exploration Agreement with First Quantum Minerals.
• The Company has been working alongside First Quantum for several years via a technical/data sharing agreement.
• The Project under agreement, Mukai, lies adjacent to FQM’s Trident operation, which hosts the Sentinel mine.
• FQM’s Tirosa area, is believed to extend into Tertiary’s Mukai licence.
• Cheetham highlights the opportunity of a potential discovery to be integrated into the Sentinel mine plan.
• The Company is free carried to a fully permitted mine project, which leaves Tertiary in a position to either contribute or dilute into an NSR.
• Tertiary is also working alongside KoBold, at its Konkola West licence, where drilling is ongoing, and both parties are committed to complete the targeted drillhole.
• Konkola West holds potential for deep dipping extensions of the Mingomba deposit.

*SP Angel acts as Nomad and Broker to Tertiary Minerals

Thor Energy (THR LN) 0.85p, Mkt Cap £3.2m – Drilling permits for Colorado uranium projects

• Thor Energy has received approval to drill at its Wedding Bell and Radium Mountain exploration projects in southwest Colorado.
• The company says that its programme following up previous work may include investigation of strike extensions to the Rim Rock and Groundhog prospects and if the drilling is successful may “form part of any future mineral resource estimations”.
• Timing of the drilling work is not available in the announcement.

Conclusion: We await results from the proposed drilling at the company’s Colorado uranium projects.

No.1 in Base Metals: SP Angel mining team awarded No 1. ranking for Base Metals forecasting in LSEG Quarterly Starmine Award for Reuters Polls Q1 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

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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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