SP Angel Morning View -Today’s Market View, Monday 12th February 2023

Metals pause as China breaks for new year and investors eye delays to US rate cuts

MiFID II exempt information – see disclaimer below

Amaroq Minerals (AMRQ LN) – £30m equity raise to accelerate development at Nalunaq and expand exploration

Bluejay Mining* (JAY LN) – Bluejay appoint new senior geologist as management cut £1.3mpa of payroll costs

Glencore (GLEN LN) – Koniambo nickel to go on care and maintenance

Tertiary Minerals* (TYM LN) – Additional funding for exploration in Zambia & Nevada

China Lunar New Year 10 February – 24 February – ‘The year of the Dragon’

• China started its lunar new year celebrations on Saturday
• Jewellers are reported to have stocked up on dragon-themed gold jewellery with gold jewellery sales expected to rise 30% this year.
• The ‘Dragon Baby’ rush could drive gold prices to new highs if the nation decided to invest in this direction
• Government officials are hoping the influence of year of the Dragon which is revered for its power, strength, good luck and wisdom will encourage couples to raise the birth rate.
• The last year of the dragon saw a 38% rise in new births to 91,600 in 2012 (SCMP)

Livestock carrier Cattle Force is reported to have found a creative way to reduce risks of Houthi rebels attack in the Red Sea, Bloomberg writes.

• The ship is said to have changed its destination signal from an Iraqi port to ‘All Crew Muslims’ as it approached the narrow Bab el-Mandeb Strait off Yemen’s coast.
• Once safely passing through the straight on Monday morning, it switched back to Iraq’s Umm Qasr, according to tracking data analysed by Bloomberg.
• Commercial ships are reported to have previously signalled destinations like “No relation to Isral” to avoid targeting by Houthi militia.

Cape Town – 121 / Indaba – Busiest ever 121 conference in Cape Town with new money definitively looking for new ideas

• Well done to the 121 team in Cape Town. The event ran smoothly with >700 investors said to have attended meetings with ~108 companies
• Our own investor meeting schedule was ~150% full causing meetings to spill over into the rest of the week.
• Brokers were thin on the ground with reduced attendances highlighting the state of financial markets and the ongoing impact of reduced commissions from MiFID II and increased costs of the FCA’s new ICARA regulation.
  • These regulations are seriously eroding the UK’s ability to win business in critical overseas markets such as the Cape Town Indaba.
• Sickness: Unfortunately, very high levels of sickness were evident ‘again’ – largely blamed on worsening water quality and poor hygiene due to Loadshedding.
• Stage 3 and 4 Load shedding continue in Cape Town causing interruption to the cities water treatment and sewerage disposal.
  • “The South African Water Chamber (SAWC) warned last year that continuous blackouts are negatively affecting the water that can be pumped into reservoirs and purified.” (https://h2o.co.za/)
  • “Around 6% of South Africa’s total energy consumption is dedicated to water purification and transportation and when electricity is unavailable due to load-shedding, there is no power to pump sewage out of urban areas, which leads to a major public health problem.”
  • “Sewage works are discharging inadequately treated sewage effluent into water courses that may eventually become the source water for our bulk drinking water treatment systems.”
• Indaba: A quick tour of the mining Indaba shows how the event has grown since its inception in 1994. Huge country stands align next to giant machinery and other services companies interspersed with the occasional mining company.
• The junior explorers section looks like it was made out of the leftover chipboard from the other displays but allows access to a range of early-stage and start-up companies with a useful meeting area.
• The Investor Battlefield Exploration winner was Alpha Exploration led by Matt Grainger against Chilwa Minerals, Adavale Resources, Elevate Uranium and Sanu Gold.
• We note Chilwa Minerals is close by Sovereign Metals* which hosts the world’s largest and probably most valuable Rutile deposit in the world. Sovereign is working with Rio Tinto on defining a Feasibility Study on the project.
• We are busy collating feedback from our investor and company meetings for further analysis.

*SP Angel acts as Nomad and broker to Sovereign Metals

Economics

US – Lorie Logan, a voting FOMC member and Dallas Fed President, said that the central bank is not in a position to urgently cut rates and needs to time to assess incoming economic data.

• “We need to take time here to continue to look at the data and evaluate incoming data,” Logan said Friday.
• “I’m really not seeing any urgency to make any additional adjustments to rates at this time while we get a better understanding and build our confidence whether the progress that we’ve seen in inflation will be sustained over the medium run.”
• Comments are in line with other Fed officials who are trying to calm market expectations on timing of the first rate cut down.
• Markets to watch closely inflation numbers due Tuesday with estimates for both headline and core measures to have continued to slowdown.
• Estimates are for CPI and core CPI to come in at 2.9% and 3.7% in January, down from 3.4% and 3.9% in the previous month.
• S&P 500 closed above 5,000 level first the first time ever on Friday on good earnings and expectations for lower borrowing costs.
• With 2/3s of companies having reported their earnings, some 80% of index companies beat estimates, exceeding the 10-year average of 74%, according to Bloomberg.

Germany – Commercial property market registered the sharpest drop in two decades in Q4/23.

• The market struggles amid high borrowing costs as well as sluggish return-to-office trends post Covid pandemic.
• Prices for office buildings dropped 13%yoy during the quarter taking the decline for the year to more than 10%.
• Outlook remains negative with further declines expected in 2024.

UK – Labour earnings are expected to grow at a slower pace for the first time since pandemic, according to the Chartered Institute of Personnel and Development data.

• Wages are expected to increase 4%, down from 5% expected previously, according to January survey.

Currencies

US$1.0790/eur vs 1.0775/eur previous. Yen 149.02/$ vs 149.53/$. SAr 19.014/$ vs 19.013/$. $1.264/gbp vs $1.263/gbp. 0.653/aud vs 0.650/aud. CNY 7.194/$ vs 7.194/$.

Dollar Index 103.97 vs 104.14 previous.

Commodity News

Precious metals:

Gold US$2,020/oz vs US$2,031/oz previous

Gold ETFs 83.5moz vs 83.7moz previous

Platinum US$879/oz vs US$887/oz previous

Palladium US$866/oz vs US$882/oz previous

Silver US$22.89/oz vs US$23/oz previous

Rhodium US$4,350/oz vs US$4,400/oz previous

Base metals:

Copper US$ 8,177/t vs US$8,202/t previous

Aluminium US$ 2,221/t vs US$2,213/t previous

Nickel US$ 15,970/t vs US$16,020/t previous

Zinc US$ 2,295/t vs US$2,305/t previous

Lead US$ 2,045/t vs US$2,039/t previous

Tin US$ 26,900/t vs US$25,905/t previous

Energy:

Oil US$81.5/bbl vs US$81.5/bbl previous

Natural Gas €26.8/MWh vs €27.3/MWh previous

Uranium Futures $101.9/lb vs $99.5/lb previous

Bulk:

Iron Ore 62% Fe Spot (cfr Tianjin) US$127.5/t vs US$128.3/t

Chinese steel rebar 25mm US$569.9/t vs US$569.9/t

Thermal coal (1st year forward cif ARA) US$93.8/t vs US$94.8/t

Thermal coal swap Australia FOB US$125.2/t vs US$123.5/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$28,550/t

NdPr Rare Earth Oxide (China) US$55,466/t vs US$55,464/t

Lithium carbonate 99% (China) US$12,303/t vs US$12,302/t

China Spodumene Li2O 6%min CIF US$1,000/t vs US$1,000/t

Ferro-Manganese European Mn78% min US$1,063/t vs US$1,061/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$66.0/t vs US$65.9/t

Brazil Potash CFR Granular Spot US$290.0/t vs US$292.5/t

Battery News

Tesla continues to win big as other automakers struggle to meet emissions standards

• Elon Musk’s Tesla generated $1.79bn in regulatory credit over 2023.
• Governments around the world introduced incentives offering tax credits for companies producing and selling EVs to offset carbon emissions.
• Tesla, who only produce EVs, earn credits which they are then able to sell to other automakers whose new-vehicle fleets exceed emissions limits set by various authorities.
• Since credits were introduced in 2009, Tesla have generated $9bn.

Government pledges £381m for charge point roll out

• The Local Electric Vehicle Infrastructure (LEVI) Fund will offer £381m given to local authorities across the country, as well as grants of up to £2500 per unit to state schools to support the construction of charging locations.
• The plans are to support the nationwide transition towards EV use and accompany recent laws mandating transparent pricing at charge points.
• There are currently 53,000 charge points installed in the UK.

Company News

Amaroq Minerals (AMRQ LN) 73p, Mkt Cap £193m – £30m equity raise to accelerate development at Nalunaq and expand exploration

• The Company is raising £30m at 74p in new equity to accelerate development at the flagship Nalunaq Gold Project and gold/strategic minerals exploration in Southern Greenland.
• Majority of net proceeds (~£13.5m) is planned to be directed towards development of new mining areas to match processing and mining capacities.
• In particular, the team is looking to accelerate development of the Target Block that together with the Mountain Block will allow mining operations to deliver 300tpd of ore and run the processing plant at capacity.
• The Mountain Block can only deliver 100tpd to the process plant.
• Trial 100tpd mining is expected to start later this year along with preparations for a phased ramp up to 300tpd.
• Additionally, the Company is looking to start preparatory and development works at the South & Valley Blocks including de-watering of existing workings and underground mapping and exploration.
• Processing plant related investment accounts for ~£11m of proceeds including the installation of the flotation circuit helping to increase gold recoveries to 94% from 79.5% as well as the dry stack tailings facility.
• The balance of funds raised to be on exploration across Vagar, Nanoq and Gardaq JV licenses.
• The Company also recently commenced the public consultation process for the draft EIA and SIA report on Nalunaq and is expected to close the consultation process by 1 March 2024.

Bluejay Mining* (JAY LN) 0.38p, Mkt cap £5.6m – Bluejay appoint new senior geologist as management cut £1.3mpa of payroll costs

(Bluejay Mining holds 100% of the Hammaslahti and Enonkoski projects and all its Greenland prospects)

• Olga Solovieva appointed as BlueJay’s Senior Geologist
  • Ms Solovieva is both a Geologist and GIS specialist with significant practical experience both in office and field environments.
  • Olga has a strong background from both the mineral and hydrocarbon background on handling, processing and visualization of geological and spatial data.
• Bluejay Mining cut £1.3m off payroll costs
  • Employee and contractor numbers cut by 80%
  • Directors costs cut by 70%
• Further related administrative cost savings will results from these costs.
• Firing: Bluejay reported late Friday, the company had fired their VP Exploration after discovering he had set up a competing business which intended to operate in Greenland.
• The company plan to take legal action, as required, to safeguard stakeholder interests.
• Kevin Sheil, the former head of Corporate Development and Strategy has also left the company
• Funding: General Meeting approved the raising of £1.2m in equity funding at 0.4p/s including a £150,000 contribution from the board of directors.
• Disko Nuussuaq: Bluejay have reaffirmed their commitment to the ongoing work program on the Disko Nuussuaq joint venture with KoBold Metals.

Conclusion:  The new managing director, eric Sondergaard and Rod McIllree are working to pull Bluejay back on track and remain focussed on the potential for a scale nickel discovery Disko Nuussuaq project.

KoBold Metals is using AI to work through mountains of data recently collected from the project to determine were best to do follow-up exploration and drilling.

*SP Angel acts as nomad and broker to Bluejay Mining. The analyst has visited Dundas in Greenland and the Hammaslahti and Enonkoski projects in Finland.

Glencore (GLEN LN) 389p, Mkt Cap £47bn – Koniambo nickel to go on care and maintenance

• The Company is putting Koniambo nickel operation in New Caledonia on care and maintenance and starts a process to find a buyer for its 49% stake.
• High operating costs and weak nickel market conditions are reported to have been behind the decision.
• The Company estimates it has invested more than $4bn since a merger with Xstrata in 2013 without ever realising a profit.

Tertiary Minerals* (TYM LN) 0.08p, Mkt Cap £2.2m – Additional funding for exploration in Zambia & Nevada

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• Tertiary Minerals reports that it has raised an additional £375,000 through the issues of approximately 469m shares at a price of 0.08p/share.
• Executive Chairman, Patrick Cheetham, “has subscribed £20,000 for 25,000,000 Placing Shares … [taking his beneficial interest in Tertiary Minerals, including shares held by his wife, to] … approximately 1.80%”.
• We estimate that the additional shares, which were issued at “a 15.8% discount to the closing market bid price on Friday 9 February 2024” represent around 18% of the enlarged company.
• The company confirms that the “net funds raised will be applied to exploration activities at the Company’s projects in Zambia and Nevada and working capital”.

*SP Angel acts as Nomad and Broker to Tertiary Minerals

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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