SP Angel Morning View -Today’s Market View, Monday 14th October 2024

Gold regains ground as Russia pushes BRIC countries for de-dollarisation

MiFID II exempt information – see disclaimer below

Atalaya Mining (ATYM LN) – Q3 Operations Update

Oriole Resources* (ORR LN) – Drilling progress at Bibemi

Savannah Resources* (SAV LN) – Investor presentation

Vast Resources (VAST LN) – £750k equity raise

Gold ($2,660/oz) regains ground as Russia pushes BRIC countries for de-dollarisation

• Gold prices have climbed, despite rising US Treasury yields, with the 10 Year climbing back over 4.1%.
• The dollar has strengthened against a basket of currencies, with capital redirected to dollar-denominated bonds to take advantage of the higher yields.
• The recent rally has paralleled Russia’s increasing calls on BRIC countries for de-dollarisation.
• The group, which includes China, Iran, UAE and India, are set to meet in Kazan this month.
• Putin is calling for a ‘multicurrency system’, which reduces reliance on the dollar.
• The Kremlin’s report states that US interests ‘are not always aligned with the interests of other participants.’
• Russia is also pushing for centres of mutual trade for commodities including gold.
• the dollar accounted for 54% of foreign trade invoices in 2022.
• BRIC country central banks have been major buyers of gold since Russia’s invasion of Ukraine saw the US freeze dollar reserves.
• China, Brazil, India, Russia and China and Turkey have all seen notable gold reserve increases since 2021.
• Whilst BRIC central bank buying has been a consistent tailwind for gold, we expect the next leg higher will require the participation of Western ETFs.
• ETF inflows rose to $1.4bn in September, with investors looking to chase gold’s rally whilst also betting on lower real rates amid the start of the Fed cutting cycle.

Copper ($9,750/t) holds lower ground whilst iron ore climbs as China hints at further debt builds

• Copper prices have held lower, below the $10,000/t mark after China stimulus measures disappointed.
• Meanwhile, iron ore prices climbed over the weekend.
• China announced limited additional information regarding their strategy to shore up the property sector.
• However, Beijing highlighted the ability to raise debt, providing some encouragement.
• Copper rallied in China but weakened on LME, showing more optimism from Chinese traders.
• Additional debt ceilings would enable Chinese local government authorities to reignite development.
• China steel is improving, with blast furnace mill profitability rising in September on improved rebar prices.
• However, prices ticked down after the Autumn holiday, sliding $13/t.
• Coking coal prices have been rising with firmer demand from Chinese steelmakers.

China warns EU against separate EV price negotiations

• China has urged the EU not to conduct separate negotiations over the price of China-made EVs sold in the EU.
• “If the European side, while negotiating with China, conducts separate price commitment negotiations with some companies, it will shake the foundation and mutual trust of the negotiations … and be detrimental to advancing the overall negotiation process,” China’s Ministry of Commerce warned.
• The comments come after Brussels rejected a proposal from China, that EVs made in China were to be sold at a minimum price of €30,000 ($32,000).
• Beijing hoped the proposal would avert EU tariffs being imposed next month.

Alumina – Guinea – Suspension of bauxite by Guinea customs suggests may result in an increase in royalty payments

• Emirates Global Aluminium has suspended bauxite exports from it’s subsidiary, Guinea Alumina Corporation.
• Production at the group’s Al Taweelah alumina refinery in the UAE, which has 2mtpa capacity is so-far unaffected but is likely to see some disruption of exports do not resume soon.
• Alcoa closed its Kwinana refinery in Australia. Rio Tinto recently declared force majeure in Queensland refineries due to gas shortages.
• Aluminium prices continue to rise on potential disruption to metal supplies with China also limited in its alumina and bauxite supply due to environmental inspections.

 This is Why Gold is Rising and It Will Probably Continue:

• Podcast: https://audioboom.com/posts/8547593-john-meyer-this-has-one-of-the-lowest-risk-profiles-i-ve-seen-for-a-long-time

Economics

LME – China looking to expand trading and futures markets as part of its modernisation and stimulus measures

• China appears to be ramping up growth in its commodities, equities, bond and futures markets.
• The State Council released a document on Friday with support for the high-quality development of the futures market.
• There were 17 priority initiatives which included:
  • “We must steadily promote the opening up of futures markets.
  • Expand the opening of product futures markets in an orderly manner.
  • Study the inclusion of stock index futures and government bond futures into specific types of products.
  • Foreign futures exchanges are allowed to launch more financial products linked to domestic futures prices.
  • Strengthen regulatory capacity building in an open environment.” Following the above, what changes can we expect?
• China appears to be looking to increase its dominance and control of commodity markets, and maybe have some additional influence on pricing.
• Commodity traders always seem to make extraordinary returns and we feel sure more than a few Chinese groups will have their eye on increasing business in this area.
• We suspect there is also an element of’ “if you can’t beat ‘em, join ‘em”.

China – Mixed reaction from regional equities after Finance Ministry briefing over the weekend have not delivered a fresh headline figure for fresh fiscal stimulus that markets were looking forward to.

• Finance Minister Lan Foan told at a press conference that authorities will help local governments to address their debt problems, offer subsidies to people with low incomes, support the property market and replenish state banks’ capital among other things, Reuters reports.
• Bloomberg survey showed that investors were looking for a potential stimulus of as much as 2tn yuan in fresh fiscal support to be announced on Saturday, including potential subsidies, consumption vouchers and support for families with children.
• CSI 300 equity index was down 3.3% last week after reaching a two year high earlier on stimulus driven hopes while Hang Seng lost 6.6% over the same week after surging more than 30% in the previous three weeks.
• Markets are now turning to the next major policy briefing in the coming weeks from the Parliament committee that oversees the budget.
• Last October, the Standing Committee of the National People’s Congress approve additional sovereign debt and raised the budget deficit ratio, according to Bloomberg.
• September economic data released this morning and over the weekend underperform.
• Trade data came in weaker than expected which added to growth concerns amid lacklustre domestic consumer sentiment and struggling property market.
• Consumer inflation slowed while deflation among manufacturers persisted highlighting the need for monetary fiscal support that authorities seem to have taken onboard with a series measures announced over the last couple of weeks.
• Exports (%yoy, Sep/Aug/Est): 2.4/8.7/6.0
• imports (%yoy, Sep/Aug/Est): 0.3/0.5/0.8
• CPI (%yoy, Sep/Aug/Est): 0.4/0.6/0.6
• PPI (%yoy, Sep/Aug/Est): -2.8/1.8/-2.6

SpaceX successfully landed the Super Heavy booster rocket on first attempt at the Starbase site in Texas yesterday marking another major milestone in development of reusable rockets for Starship missions.

• Precision control and timing to land the 230-foot-tall booster back to the launch pad onto giant mechanical arms, nicknamed “chopsticks”, was extraordinary.
• The successful landing significantly reduces turnaround times between flights allowing missions to relaunch within days and potentially even hours.

Israel – The US is sending an advanced antimissile system to Israel along with American troops to operate it to bolster defences amid another Iran strike.

TD Bank, the second largest lender in Canada, agreed to pay US$3bn in fines pleading guilty to money laundering charges.

• US authorities also imposed a cap on the lender’s ability to take on new US deposits.
• The bank is said to have failed to monitor more than 90% of the transactions on its network with three money laundering gangs reported to have shifted more than $60m through its accounts in the four years to 2023, FT writes.

UK – Banks, Insurers, PE firms and tech companies write to The Times to say ‘now is the time to invest in Britain’

• “We are optimistic about the future of the economy, and believe it is time to invest in Britain,”
• The letter is signed by five of the world’s biggest banks alongside Aviva, L&G, Blackstone and KKR.
• The Labour leader is due to pledge to get rid of regulation that “needlessly holds back investment” and they will “do everything in my power to galvanise growth”.
• Labour is expected to announce investment deals worth billions in AI, life sciences and infrastructure at their pro-business summit today.
• The key banks are offering to support the government in achieving growth and greater prosperity if they are shielded from further regulation.
• In a world where money and executives move around the world with relative simplicity the government would do well to heed their views.

UK – Warm waters in the Gulf of Mexico suggest more storms are coming

• Florida was not hit as hard as some weather(men/persons) expected
• Is this a pre-run of worse to come?
• The Sahara saw its first flooding in ~50 year with a year’s worth of rain falling in two days in the south-east of Morocco.
• It is Flood Action Week in the UK as the Environment Agency urges people and businesses to sign up for flood warnings and to develop flood plans
• Our neighbours, just north of Oxford, next to the River Glyme, haven’t been able to step out of their drive without wellies for two weeks. A first to our knowledge.

Currencies

US$1.0928/eur vs 1.0940/eur previous. Yen 149.26/$ vs 148.80/$. SAr 17.422/$ vs 17.435/$. $1.307/gbp vs $1.306/gbp. 0.674/aud vs 0.674/aud. CNY 7.080/$ vs 7.070/$.

Dollar Index 103.03 vs 102.88 previous

Precious metals:         

Gold US$2,664/oz vs US$2,644/oz previous

Gold ETFs 83.4moz vs 83.4moz previous

Platinum US$984/oz vs US$976/oz previous

Palladium US$1,059/oz vs US$1,080/oz previous

Silver US$31.5/oz vs US$31.2/oz previous

Rhodium US$4,775/oz vs US$4,775/oz previous

Base metals:   

Copper US$9,750/t vs US$9,714/t previous

Aluminium US$2,617/t vs US$2,621/t previous

Nickel US$17,740/t vs US$17,645/t previous

Zinc US$3,103/t vs US$3,093/t previous

Lead US$2,075/t vs US$2,082/t previous

Tin US$32,875/t vs US$33,150/t previous

Energy:           

Oil US$77.8/bbl vs US$78.5/bbl previous

• Crude oil prices edged lower in early trading driven by data showing that China’s inflation rate had declined, raising concerns over future fuel demand growth.
• The US Baker Hughes rig count was up 1 unit to 586 rigs last week (-36 or 6% y/y), with oil rigs rising by 2 to 481 units (-20 y/y) and gas rigs down 1 to 101 units (-16 y/y), including a 6 unit increase in Texas to 285 rigs.
• Media reports that Chinese state-owned Sinochem plans to sell its overseas E&P assets, which includes licences in nine countries including production assets in Brazil, Colombia and the US.

Natural Gas €39.5/MWh vs €39.7/MWh previous

Uranium Futures $83.1/lb vs $83.4/lb previous

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$107.5/t vs US$105.8/t

Chinese steel rebar 25mm US$525.5/t vs US$515.6/t

HCC FOB Australia US$211.5/t vs US$209.0/t

Thermal coal swap Australia FOB US$148.3/t vs US$149.3/t

Other:  

Cobalt LME 3m US$24,300/t vs US$24,300/t

NdPr Rare Earth Oxide (China) US$61,030/t vs US$61,387/t

Lithium carbonate 99% (China) US$10,101/t vs US$10,184/t

China Spodumene Li2O 6%min CIF US$750/t vs US$750/t

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

China Tungsten APT 88.5% FOB US$340/mtu vs US$335/mtu

China Graphite Flake -194 FOB US$445/t vs US$445/t

Europe Vanadium Pentoxide 98% 4.6/lb vs US$4.6/lb

Europe Ferro-Vanadium 80% 24.55/kg vs US$24.55/kg

China Ilmenite Concentrate TiO2 US$319/t vs US$319/t

China Rutile Concentrate 95% TiO2 US$1,321/t vs US$1,323/t

Spot CO2 Emissions EUA Price US$63.9/t vs US$63.9/t

Brazil Potash CFR Granular Spot US$277.5/t vs US$277.5/t

Germanium China 99.99% US$2,875.0/kg vs US$2,825.0/kg

China Gallium 99.99% US$455.0/kg vs US$455.0/kg

Battery News

Hyundai India begins $3.3bn IPO

• Hyundai India will start taking orders for its $3.3bn initial public offering in Mumbai today, the company has said in regulatory filings.
• The deal will be the country’s largest ever share offering and world’s second biggest IPO in 2024.
• 260 companies having raised more than $9bn in India so far in 2024, according to LSEG data.
• Hyundai will not issue new shares in the IPO, in which its South Korean parent will sell up to 17.5% of its stake in the wholly-owned unit that will be valued at up to $19bn.

Renault’s bet on low-cost hybrid tech gives it advantage in fast growing market

• The French carmaker is gaining ground in Europe’s hybrid market following early bets on low-cost technology.
• In the first eight months of the year, sales of Renault hybrid models including the Clio and Captur were up 55% from the previous year, according to Renault preliminary figures, significantly above a 21.1% increase for the whole of the European Union.
• Sales meant that Renault were only behind Toyota in Europe’s hybrid market for total sales.
• Demand for hybrids is expected to continue to grow until the end of this decade, before electric vehicles take over, according to consultancies Dataforce and S&P Global.

Company News

Atalaya Mining (ATYM LN) 385p, Mkt Cap £550m – Q3 Operations Update

• Spanish copper producer Atalaya report production results for Q3.
• Company produced 11.9kt Cu, down from 11.6kt in 2Q24 and 12.5kt in 3Q23.
• Copper feed grade reported at 0.32% vs 0.33% last quarter and 0.38% same period last year.
• Recoveries reported at 84.4% vs 87% same period last year and 85.8% previous quarter.
• Average price realised of $4.13/lb.
• Net cash of €40.6m, down from €54.3m at the beginning of the year, reflecting continued capital investments and dividends repaid.
• CAPEX investments in waste stripping at San Dionisio, with permitting ongoing for final pit.
• Step out and infill drilling is expected to start at San Antonio later this year.
• The E-LIX plant Phase 1, which will produce copper cathodes and zinc metal from Riotinto copper concentrate is progressing.
• The Company expects the new 50 MW solar plant to be connected at the end of this month.
• Step out drilling is also being targeted at Proyecto Touro, Ossa Morena and Riotinto East.
• FY24 guidance expected towards the lower end of the 45-50kt Cu production target.

Oriole Resources* (ORR LN) 0.37p, Mkt cap £14m – Drilling progress at Bibemi

• Oriole report they have now drilled 3,742m at Bibemi, over 31 holes.
• The drilling forms part of their Phase Five diamond drilling programme over 7,060m across 62 holes.
• Company reports results from the Bakassi Zone 1 MRE target. See results here: CLICK FOR LINK
• Current drilling is intended to add ounces to the existing MRE, with management stating, ‘the results continue to support the case for resource expansion within the BZ1-MRE zone.’
• Intersections were reported within 50m of surface, whilst mineralisation is believed to be more strongly developed at the southern end of the BZ1-MRE, seeing wider mineralisation.
• Oriole is reducing the planned drilling at the northern end of the MRE zone, seeing faulting likely having offset mineralisation.
• This faulting is believed to raise the potential at the BZ1-NE target, which was potentially offset.
• Oriole continues to see potential for additional ounces nearer surface to be included in the updated MRE.
• Drilling has now commenced at BZ1-NE, with 18 holes currently planned.
• BZ1-NE sits outside of the current resource and has had minimal drilling to date.

*SP Angel acts as Broker to Oriole Resources

Savannah Resources* (SAV LN) 4.0p, Mkt Cap £85m – Investor presentation

BUY – 18.1p

• The Company released an updated corporate presentation reiterating progress and near term milestones at the Barroso Lithium Project in Portugal.
• A copy is available on the Company’s website: https://www.savannahresources.com/media/2juplhjn/savannah-presentation-october-2024.pdf
• The team is expecting to start Phase 2 drilling (~13,000m) this quarter as part of the ongoing Project DFS.
• The study will be released 2H25 paving the way for the FID and project funding both in 2026.
• Permitting is also expected to be completed 2H25 with construction potentially starting in 2026 and maiden production in 2027.
• The Company is well funded with £19.6m in the bank as of Sep24 and no debt on the balance sheet.
• The team highlighted attractive investment case with a series of major value catalysts in 2025-26 offered by the Barroso Project, the largest spodumene deposit in Europe benefiting from good infrastructure and strategic location next to a major EV end market.

*SP Angel acts as Nomad and Broker to Savannah Resources

Vast Resources (VAST LN) 0.1p, Mkt Cap £2.0m – £750k equity raise

• The Company raised £750k in new equity issuing 750m shares at 0.1p/sh.
• Placing price implies a 31% discount to the last closing price and ~19% discount to the 5-day VWAP.
• Funds raised will be used working capital needs amid ongoing reorganisation at Baita Plai and as the Company awaits payment for concentrate deliveries.

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

SP Angel                                                            

Prince Frederick House

35-39 Maddox Street London

W1S 2PP

*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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