SP Angel Morning View -Today’s Market View, Monday 15th April 2024

Copper prices hold higher as China processing fees fall below $0/t amid low feedstock availability

MiFID II exempt information – see disclaimer below

Horizonte Minerals (HZM LN) – Refinancing efforts stall on investor concerns over nickel market weakness

Kavango Resources* (KAV LN) – Drilling results from the Hillside gold prospect, Zimbabwe

Kore Potash* (KP2 LN) – Options granted to new CEO and CFO

Piedmont Lithium (PLL AU) – Mining Permit granted for Carolina Lithium Project

Savannah Resources* (SAV LN) – FY23 results highlight Barroso project development milestones

Sovereign Metals* (SVML LN) – Initiative aims to triple crop yields in sustainable farming programme in Malawi

Talga (TLG AU) – FEED results from Vittangi Anode Plant

Copper prices hold higher as China processing fees (Tc/Rcs) fall below $0/t amid low feedstock availability

• Copper prices are holding around the $9,500/t having rallied nearly $1,000/t since March.
• Concentrate availability has been tightening following the removal of Cobre Panama from the market, seeing TCRC fees crater for Chinese smelters.
• Hedge funds are ramping up speculative wagers, with bullish bets on the LME climbing to six year highs, and New York also seeing rising bullishness.
• Demand in China, however, remains weak for refined metal, suggest end user appetite has yet to pick up.
• Contango levels are at 30-year highs, suggesting there is ample refined product available.
• Shanghai and LME inventories are also buoyant.
• Production output is also slowing from Anglo and Codelco, who have both struggled with LatAm production amid grade decline.
• However, low TCRCs have historically pushed metal prices higher, with smelter capacity coming offline in uneconomic environments. 

Metals volatile as Russian metal banned from delivery on LME

• Aluminium and nickel jumped 9% today as traders bet on higher prices following UK and US sanctions on Russian metal delivery.
• Prices subsequently eased with both now up c.3% from Friday.
• Old Russian metal is still allowed to be delivered, however, raising concerns over a potential flood.
• Russia produces 5% of global aluminium. 4% of global copper and 6% of global nickel.

Gold $2,350/oz prices ease from record highs as tensions escalate in the Middle East

• Spot gold has settled around the $2,350/oz mark, having cooled from recent highs of $2,400/oz.
• Friday saw gold prices ease from recent highs as traders took profits following a sustained run through the past two weeks.
• Rate cut expectations have been scaled back, with ETFs in the US seeing outflows as funds rotate into higher US Treasury yields.
• Chinese ETFs have been fuelling buying alongside their Central Bank, with individuals looking to seek protection against depreciating property and equity assets.
• Tensions between Iran and Israel escalated over the weekend, likely providing support to gold prices as investors seek haven assets.

BYD leads China NEV Exports with 130% growth in Q1

• BYD exported 99,000 new energy vehicles (NEVs) in Q1 2024, up 130% yoy.
• This made BYD the top exporter of NEVs from China, surpassing Tesla’s exports of 88,000 vehicles from its Shanghai plant during the same period.
• BYD is ramping up vehicle exports and overseas production to strengthen its position as a global EV industry leader.
• With rising EV demand globally, BYD aims to capitalise on its cost advantages and diverse product lineup to gain further market share overseas.

Recent report claims China gave BYD $3.7bn to ‘win’ the EV race

• A study by Germany’s Kiel Institute for the World Economy found that Chinese EV maker BYD received at least $3.7bn in direct government subsidies from China.
• The subsidies to BYD are part of China’s push to lead the world in EVs and clean technology.
• The study claims BYD receives significantly higher purchase premiums for EVs in China compared to other domestic or foreign automakers.
• The European Union launched an investigation in October 2023 into suspected Chinese subsidies for EVs that may disadvantage European manufacturers.
• The UK is considering a similar formal investigation into these subsidies.
• BYD reported over 80% rise in net profit in 2023 and has shown no signs of slowing down its EV production and sales.

EVs – Stronger than expected demand for EVs from developing nations

• We have been surprised and impressed by the adoption of EVs by developing nations.
• India and Indonesia are moving very fast to replace horrendous ICE pollution in their cities with Electric bikes, trikes, rickshaws and all manner of vehicles.
• Their authorities are going to have to move fast to upgrade and rewire the multitude of cables that will power all these electric vehicles.

IG TV:              Gold and Copper. 10/04/2024:      https://youtu.be/KuGSbDqWglk?si=-8iikkOHxbbLSnPZ

Sharepickers TV:  Gold, copper, Cornish Metals, Cleantech Lithium, Strategic Meinerals, Aura Energy, Atalaya, Goldstone & Kavango. 12/04/2024:  https://www.youtube.com/watch?v=cVrkFRs-0Yk

Podcast: 12/04/2024  https://audioboom.com/posts/8489836-john-meyer-dismisses-bulletin-board-rumours-of-dead-sheep-cows-in-mine-as-rubbish

                            05/04/2024  https://audioboom.com/posts/8484406-john-meyer-anglo-asian-gileon-kodal-power-rainbow-shanta-gold-lithium-copper

*SP Angel almost invariably acts as nomad or broker or nomad and broker to companies mentioned in the above videos and podcasts. We speak more about these companies as we have a good understanding of their business and can talk with a greater degree of confidence. As ever, however, it should be noted that our views do not take into account the circumstances and needs of any particular investor or investor type. So enjoy the talks, but please do your own research, including other companies not mentioned by us but operating in the same areas, and get professional advice where appropriate. SP Angel acts as Broker/Nomad or both for Anglo Asian Mining, Kodal Minerals, Power Metals Resources.

Economics

US – Equity futures are trading higher this morning as Israeli war cabinet seems to have decided not to respond to Iran’s massive air strike over the weekend.

• Oil prices are also trading lower on Friday close.
• Markets were concerned by the risk of an escalating strike and counter strike cycle in the Middle East further expanding and dragging more parties into the regional geopolitical conflict.

China – Credit expansion to slow with banks extending less loans than expected in March, Bloomberg reports.

• The data points to a continuing weakness in borrowing demand with the central bank avoiding further monetary policy easing.
• Banks lent 3.1tn yuan in new loans last month, less than 3.6tn forecast by economists and marking the lowest pace of growth since data began in 2003.
• Q1 GDP number are out tomorrow that should provide more data points on the state of the economy with estimates for the headline number to slowdown to 4.8% from 5.0% in Q4/23.

Much talk about Chinese manufacturing overcapacity

• Not so much news on loss-making production, even despite effective government subsidies
• China is working hard to provide low-cost energy to local manufacturers.
• State programs to build thermal coal, hydropower, wind and solar plants have reduced power costs across the nation at a time when European energy costs have soared.
• China is also building a huge fleet of nuclear power stations to supplement existing power capacity with 24 nuclear reactors under construction.
• China may be planning >150 new nuclear reactors costing $440bn according to Bloomberg in 2021.
  • Europe has 167 nuclear reactors with 56 in France.
  • Remember French commandos sank Greenpeace’s Rainbow Warrior. We suspect this action has saved the French economy many times.
  • The US has 93 nuclear reactors with capacity of 91.5GW.
• A combination of low labour and low power costs along with more modern and efficient infrastructure means China’s manufacturers should be able to undercut western nations without further subsidy.
• Furthermore, China Inc. has encouraged its industry to capture as much of the supply chain as is required to feed its manufacturing ambitions.
  • Aircraft, trains, lorries etc..China has excess capacity in aluminium, steel, zinc etc..(smelting local and imported concentrates)
  • EVs – they bought lithium and cobalt and copper mines and smelt the concentrates in China
  • Solar panels – China grows the crystals for polycrystalline cells etc..
• China’s economy looks like the MBA textbook on Alcoa where the company controls the whole supply chain from ore to window frames and other finished products.
  • Electrical machinery and equipment ($804bn in 2021) are China’s largest export category
  • Computers comes in second at ($492bn)
  • Furniture, Bedding, Lighting, Signs & Prefabricated Buildings ($126.3bn)
  • Plastics & Plastic Articles ($118.1bn)
• China is so focused on the value of its exports and controlling related supply chains it appears to pay little attention to much else

Chinese state companies look set to become China’s largest house builders with huge projects for social housing for low-income workers and families

• China is spending some CNY4tn on social housing and other state buildings (S&P Global)
• The state is also buying properties at the local level with the city of Zhengzhou buying 10,000 units for redevelopment into social housing units.

Israel / Iran – Retaliation potential to cause regime change in Iran

• Israel has vowed to retaliate for the >300 missiles and drones fired into its territory by Iran, Hamas, Hezbollah and others.
• The attack included 185 explosive drones, 36 cruise missiles and 110 ballistic missiles in a salvo that could have killed thousands and destroyed most of Israel’s infrastructure.
• Iran has been threatening to annihilate Israel for many years and it is only a matter of time before Iran develops its nuclear arsenal.
• The hard-line Netanyahu government will, almost inevitably, hit back at Iran in an attempt to slow its nuclear program, change its regime and reduce the capacity of the Iranian Revolutionary Guard.
• Members of the Israel cabinet are reported to be pushing for a powerful retaliatory strike as a deterrence, though the US has stated it will not help Israel retaliate against Iran.
• We suspect the retaliatory attack will come sooner rather than later.

Myanmar – Junta is losing battles in certain states

The term “batsman” has been replaced by “batter” by the MCC

• Is this a sign that the MCC are going WOKE?
• Can’t help but be reminded by Brian Johnston’s great commentary. “The batsman’s Holding, the bowlers Willey”
• Not sure what pronouns the MCC might advise for that these days.

Aluminium – Rusal states new sanctions will not hit its ability to supply aluminium and can still provide hedging services (Reuters)

Currencies

US$1.0654/eur vs 1.0676/eur previous. Yen 153.92/$ vs 153.27/$. SAr 18.850/$ vs 18.718/$. $1.247/gbp vs $1.251/gbp. 0.648/aud vs 0.651/aud. CNY 7.239/$ vs 7.237/$.

Dollar Index 105.98 vs 105.68 previous.

Precious metals:         

Gold US$2,356/oz vs US$2,396/oz previous

Gold ETFs 81.7moz vs 81.7moz previous

Platinum US$975/oz vs US$999/oz previous

Palladium US$1,048/oz vs US$1,069/oz previous

Silver US$28.46/oz vs US$29/oz previous

Rhodium US$4,725/oz vs US$4,725/oz previous

Base metals:   

Copper US$ 9,476/t vs US$9,469/t previous

Aluminium US$ 2,584/t vs US$2,491/t previous

Nickel US$ 18,245/t vs US$18,055/t previous

Zinc US$ 2,799/t vs US$2,810/t previous

Lead US$ 2,173/t vs US$2,176/t previous

Tin US$ 32,740/t vs US$32,610/t previous

Energy:           

Oil US$89.7/bbl vs US$90.6/bbl previous

• Crude oil prices edged lower following a direct Iranian attack on Israeli targets over the weekend, as the IEA lowered its world oil demand growth by 0.1mb/d to 1.2mb/d in 2024.
• The US Baker Hughes rig count was down 3 units to 617 rigs last week (-134 or 18% y/y), with oil rigs down 2 to 506 units (-84 y/y) and gas rigs down 1 to 109 units (-49 y/y), with the Canadian rig count up 5 to 141 rigs.

Natural Gas €30.1/MWh vs €30.0/MWh previous

Uranium Futures $89.7/lb vs $89.1/lb previous

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$111.6/t vs US$108.6/t

Chinese steel rebar 25mm US$513.5/t vs US$513.6/t

Thermal coal (1st year forward cif ARA) US$122.0/t vs US$121.3/t

Thermal coal swap Australia FOB US$133.5/t vs US$132.0/t

Other:  

Cobalt LME 3m US$27,830/t vs US$28,550/t

NdPr Rare Earth Oxide (China) US$53,049/t vs US$52,506/t

Lithium carbonate 99% (China) US$15,127/t vs US$15,130/t

China Spodumene Li2O 6%min CIF US$1,240/t vs US$1,240/t

Ferro-Manganese European Mn78% min US$972/t vs US$972/t

China Tungsten APT 88.5% FOB US$320/mtu vs US$320/mtu

China Graphite Flake -194 FOB US$490/t vs US$490/t

Europe Vanadium Pentoxide 98% 5.0/lb vs US$5.0/lb

Europe Ferro-Vanadium 80% 26.25/kg vs US$26.25/kg

China Ilmenite Concentrate TiO2 US$329/t vs US$330/t

China Rutile Concentrate 95% TiO2 US$1,430/t vs US$1,430/t

Spot CO2 Emissions EUA Price US$68.9/t vs US$62.1/t

Brazil Potash CFR Granular Spot US$305.0/t vs US$305.0/t

Battery News

2023 EV battery market growth exceeds that of EVs – Chinese dominance continues

• Global battery installed capacity for passenger EVs grew by 44% yoy in 2023, outpacing the 38% growth in overall EV sales.
• The increase was driven by higher average battery capacity per vehicle, as automakers prioritise expanding driving range, especially for mid-to-high-end EVs.
• Chinese battery makers accounted for over two-thirds of the world’s EV battery capacity in 2023, with CATL and BYD being the main beneficiaries.
• In the short term, automakers are likely to shift towards more cost-effective EVs using cheaper Chinese lithium iron phosphate batteries.
• Double-digit EV growth is still forecast across all regions in 2024, which will sustain demand for batteries.
• However, potential efforts to limit Chinese battery growth in Europe and the US, along with further battery cost reductions from technological breakthroughs, could open up growth opportunities for non-Chinese suppliers in the long run.

VW To Spend $2.68bn for Chinese hub for faster EV development

• Volkswagen Group is investing €2.5bn ($2.68bn) into its production and innovation hub in Hefei, China to accelerate EV development.
• The investment confirms VW’s collaboration with Chinese EV maker Xpeng to develop two new EV models, with the first one launching in 2026.
• The Hefei site will serve as a strategic innovation hub for the Chinese market, adopting local technologies and reducing development times by over 30%.
• Volkswagen aims to offer more than 30 all-electric models across China by 2030 under its “In China, for China” strategy.
• The localisation strategy focuses on designing products specifically for Chinese customers at a faster pace, dubbed “China Speed.”

US has issued $580m in advanced EV tax rebates for 2024

• The US government has reimbursed auto dealers for more than $580min advance point-of-sale consumer EV tax credit payments since 1^st January 2024 the Treasury said.
• Before 2024, US auto buyers could only take advantage of the new EV credit of up to $7500 or the $4000 used EV credit when they filed tax returns the following year.
• From 1^st January consumers are able to transfer the credits to the dealer at the time of sale.
• The Treasury has said that more than 85,000 time of sale tax reports for new EVs have been filed, with over 90% of those including advanced payment requests for $7500.
• Around 15,000 time of sale reports were for used EVs, with about 75% including advanced payments requests for $4,000.

Company News

Horizonte Minerals (HZM LN) 0.53p, Mkt Cap £1.4m – Refinancing efforts stall on investor concerns over nickel market weakness

• Horizonte Minerals reports that its efforts to restructure project debt and secure funding to complete the Araguaia ferronickel project in Brazil have been unsuccessful.
• The company confirms that, despite “an extensive engagement and global roadshow where over 150 parties, including over 39 which entered into non-disclosure agreements … the Company has been unable to secure the full financing needed to complete the project at this time”.
• Today’s announcement says that the “majority of investors who conducted detailed due diligence on the Project, after signing NDA’s, cited the unfavourable nickel market environment as the reason for declining to pursue the opportunity further”.
• Horizonte Minerals says that “Discussions with secured creditors, and existing and new potential investors on alternative scenarios will continue to be held with a view to a potential restructuring solution to attempt to achieve some recovery value to our creditors”.
• Interim CEO, Karim Nasr, said that the “Board and management are extremely disappointed by the results of our effort to attract financing into the Company. While we received commendation on the quality of the project and of the comprehensive work put together by the Company’s team, and supportive attitude of the Company’s creditors and Cornerstone Shareholders, the lack of prospects in a recovery of the Ferro-Nickel market considering Indonesian supply dynamics have impeded the confidence of investors in earlier stage projects with high capital intensity, including Horizonte”.
• The company says that discussions with “secured creditors, and existing and new potential investors on alternative scenarios will continue to be held with a view to a potential restructuring solution to attempt to achieve some recovery value to our creditors”.
• Options under consideration include “raising financing at the subsidiary level, or disposing of the Project whilst in care and maintenance, thereby maintaining the prospect of the Project as a going concern … [or] … liquidation of the assets of the Project”.
• Horizonte Minerals’ woes stem from escalation of the project costs which were announced in October to be running 35% higher than original US$537m estimate and have subsequently been reported to be even higher than that with an announcement in February showing that ~$454m was needed to see the project through to maiden production implying a total project cost of over US$1bn, approximately 87% higher than the pre-October 2023 estimate of $537m.
• Although project costs can and do escalate, we wonder how such major increases went undetected long enough to have brought the Araguaia project to this state.

Conclusion:  We are not surprised to see this attempt to restructure and refinance the project fall.  The 35% rise in capital costs as highlighted on 2^nd October 2023 damaged confidence in the project and while capex estimates for many projects have been volatile since the start of Covid we suspect the Araguaia capex may have been previously underestimated.  Weaker nickel markets resulting from a rise in Indonesian supply are also cited as reasons for the lack of further investor and lender support to complete Araguaia.

Kavango Resources* (KAV LN) 1.1p, Mkt Cap £13.4m – Drilling results from the Hillside gold prospect, Zimbabwe

• Kavango Resources has reported drilling results from the Hillside 4 gold prospect in Matabeleland, southern Zimbabwe.
• The company reports that hole SKDD-001, described as a “scoping hole sited to target mineralisation in a steeply dipping shear zone below artisanal workings” has intersected gold mineralisation, including “visible gold” including 2.53m at an average grade of 29.08g/t gold from a depth of 97.47m
• The company says that the hole has “identified three further potential shear zones, parallel to the one being worked by artisanal miners … [and that an] … Induced Polarisation (IP) survey identified three further potential shear zones, parallel to the one being worked by artisanal miners”.
• Chief Executive, Ben Turney, described future mining potential at Prospect and said that “We now need to test this potential with swift and methodical follow-up exploration. We are particularly looking forward to testing the additional three shear zones we believe we’ve identified here”.
• Kavango Resources also says that “Results are pending on four other holes drilled across three other Hillside prospects”.

Conclusion: Initial drilling at Hillside Prospect has encountered visible gold and is being followed up to gain an appreciation of the mining potential. We await results from the follow-up exploration and results from holes where assay results are awaited.

An SP Angel Analyst holds shares in Kavango

Kore Potash* (KP2 LN) 0.49p, Mkt Cap £21m – Options granted to new CEO and CFO

• The Company granted option to its new CEO, Andre Baya, and CFO, Andrey Maruta.
• Andre Baya was issued 20m options at an exercise price of 1p, ~100% premium to current share price, vesting over three years from today and exercisable as long as he remains an employee of the Company.
• Andrey Maruta was granted 15m options on nearly same terms with the exception that options started to vest from 12 April 2024.

*SP Angel acts as Nomad and Broker to Kore Potash

Piedmont Lithium (PLL AU) A$0.28, Mkt Cap A$532m – Mining Permit granted for Carolina Lithium Project

• Piedmont has received a mining permit for the construction, operation and reclamation of their Carolina Lithium Project.
• The Company had submitted their application in 2021.
• Construction of the project is dependent on a county rezoning process, alongside necessary financing, with management citing the DoE as a potential funding source.
• The Carolina project suggests an integrated spodumene mine alongside a lithium hydroxide conversion facility.
• The Project’s BFS suggests 30ktpa LHM capacity, from 242ktpa SC6 feedstock.
• The spodumene asset holds a resource of 44mt at 1.08% Li20.
• The 2021 BFS suggests OPEX of $4,400/t LIOH, CAPEX of $1bn.
• The Project study generated a post-tax NPV8 of $2bn using $18,000/t battery quality lithium hydroxide price assumptions, and a $900/t spodumene price.

Savannah Resources* (SAV LN) 3.4p, Mkt Cap £62m – FY23 results highlight Barroso project development milestones

• FY23 results released this morning highlight a number of important milestones the team delivered on during the year at the Barroso Lithium Project in Portugal.
• The project secured a positive DIA in May following a revised Environmental Impact Assessment earlier in March.
• Following a successful completion of the DIA environmental permitting stage, the team released an updated Barroso Scoping Study confirming attractive project economics having adjusted operating and capital costs for inflation and design changes as well as higher spodumene prices.
• The project is designed as a conventional open pit and flotation operations running at ~190kt SC5.5 and $409/t in AISC (post $132/t in by product revenues) over 14 year mine life delivering $953m and 77% in post tax NPV8 and IRR (~$1,460/t SC5.5 price assumption).
• The study also includes ~$50m in sustaining capex and ~$100m in rehabilitation costs covering environmental restoration expenses addressing all the feedback gathered during the DIA permitting process.
• The Company accelerated project development works in H2/23 with a view to progress DFS and the next stage in the permitting process (RECAPE) with the former expected to be completed by the end of the year with RECAPE following shortly afterwards.
• A two phase drilling programme (13,500m over 230 holes) was initiated in October to infill the existing resource and collect samples for DFS related work including mine and process plant design.
• The Company has so far completed just under half of the planned drilling (>5,500m).
• Additionally, the team stepped up its community engagement programme to address all potential concerns from local stakeholders and provide accurate information on the revised design of the project.
• The team remains in regular contact with all relevant Portuguese ministries and government agencies.
• Despite getting hit by negative sentiment late last year on the back of state prosecutors’ investigation into allegations over corruption in granting licenses for lithium, hydrogen and data centre projects, the team has been fully cooperating with the authorities while also having carried its own independent review that confirmed the Company’s good standing on its licenses; state environmental agency also backed its previously issued positive DIA in a separate statement.
• As project progressed to DFS and permitting completion stages the team initiated a Strategic Partnering Process in July to assist the Company with project funding.
• The process is now in the second phase with a shortlist of potential partners carrying further due diligence on the project.
• Emanuel Proenca joined the Company as CEO in September replacing Dale Ferguson who is now acting as Technical Director after having served as Interim CEO since Jule 2022.
• Financially, the Company recorded a net loss of £3.6m (FY22: £2.9m) mostly reflecting £3.5m in admin costs, little changed from the previous year (FY22: £3.5m).
• FCF amounted to -£4.5m (FY22: -£6.7m) reflecting £1.6 in capitalised costs incurred at the Barroso Lithium Project.
• Balance sheet remained strong with £9.7m in cash and no debt as of year end (FY22: £7.2m cash, no debt) including £6.5m in proceeds from an equity raise completed in July.

Conclusion: The Company reported on a strong progress in de risking the Barroso Lithium Project in 2023 having secured a positive DIA that allowed the team to move forward with DFS and further permitting work. The Company is well capitalised allowing it to move forward with FS and permitting related work as well as progressing strategic partner selection process in parallel. Barroso remains one of the most attractive lithium development projects, hosting the largest spodumene resource in Europe, that we would expect to significantly rerate once permitting is secured paving the way for FID, funding and start of construction.

*SP Angel acts as Nomad and Broker to Savannah Resource

Sovereign Metals* (SVML LN) 24.5p, Mkt Cap £135m – Initiative aims to triple crop yields in sustainable farming programme 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 with an option to increase it to 19.99% within 12 months from 17 July 2023)

STRONG BUY – Valuation 55p

• Sovereign Metals is proving how well organised and listed mining companies often bring great benefit to local communities in developing regions.
• Management’s new sustainable farming initiative and conservation farming programme is designed to improve local livelihoods by enabling better farm yields. By smallholder farmers.
  • 90 participants within the Kasiya project area are being trained in low-input-cost, high-yield sustainable farming techniques.
  • Another 300 farmers will be added during the 2024 planting season.
• The Programme is already yielding larger cobs and higher cob-counts for all the 90 participating farmers with yields showing >3.2t / hectare, more than three times conventional crop yields.
• The work is particularly important this year with Malawi crop yields expected to be 22.5% lower than average due to drought brought on by the El Niño weather phenomenon.
• El Niño is driving higher levels of food insecurity this year with 4.4m people 22% of the population facing crisis levels of food shortages according to ‘Save the Children’
• Malawi recently followed Zambia in declaring a state of disaster in 23 out of 28 districts with the president urgently asking for >$200m in humanitarian assistance.
  • USAID estimates >20m people in southern Africa will need food aid in early 2024, partly due to the El Niño effect (AP).
  • WFP and USAID have already launched a program to feed 2.7m people in rural Zimbabwe facing food shortages.
  • Oxfam reckons >6m people in Zambia are now facing acute food shortages and malnutrition, with the next crop growing season a year away.
• Cyclone Freddy killed hundreds in Malawi last year in a succession of strong cyclones which damaged farms and crops across southern Africa in recent years.
• The Malawi government estimates ~44% of Malawi’s corn crop has failed or is affected with 2m households directly impacted with 20m people needing ~600,000t of food aid.
• Sovereign Metals will quantify how their farming programme Increases in yields through the harvest starting in May with higher yields expected despite the El Niño drought.
• Their team previously ran programs for First Quantum Minerals in Zambia helping crops to increased 67% from 6,000- 10,000t of maize from 2020-2022 with over 7,000 farmers now in the program.
• Conservation farming as a system aims to protect soil from erosion and degradation and increase crop yields using three main principles:
  • 1)   minimum soil disturbance, such as no-till farming,
  • 2)   maintenance of a permanent soil cover, such as cover crops or crop residues and
  • 3)   diversification of plant species, such as crop rotation.
• “This is a highly important program for Malawi with maize making up two-thirds of national calorie intake, with nine out of ten farming households producing maize, devoting over 70% of their land to growing it. Sovereign has already identified the next season’s farmers, with the Program being scaled up from 90 to 300 farmers in the 2024/2025 agricultural season. This quantity of farmers will prove that the program successfully increases agricultural production in a sustainable manner, during Sovereign’s upcoming Definitive Feasibility Study. Sovereign plans to roll out Conservation Farming as its cornerstone livelihood restoration and improvement project for the Kasiya Project in the medium to long term..”

Conclusion:  The work done by Sovereign, First Quantum and other listed and responsible mining companies is hugely important to rural communities. The local population can’t eat the rutile or graphite in the ground at the Kasiya project but they can eat the produce from the sustainable farming initiative and will benefit from increased education, healthcare and jobs created by the company.

*SP Angel act as Nomad and broker to Sovereign Metals

Talga (TLG AU) A$0.78, Mkt Cap A$300m –FEED results from Vittangi Anode Plant

• Talga reports results from its integrated Vittangi Anode Project in Sweden, aiming to produce 19.5ktpa Talnode product.
• The Company has been working to optimise its Refinery alongside customer requirements, supporting offtake negotiations.
• CAPEX updated to US$596m (excluding US$42m contingency) vs previous estimate of US$484m excluding a $44m contingency and $44m refinery building.
• Talga sees the updated capital requirements as accurate to a +-10% level.
• Energy requirements have reportedly fallen 23% with the FEED update.
• Talga owns the VIttangi project, which holds an MRE of 35mt at 24% Cg with 8.3mt Graphite.
• The Project now requires final permitting, with management describing it as ‘shovel ready.’
• Construction and commissioning is expected to take 18-24 months.
• Talga is in discussion with various European commercial banks and credit agencies, targeting 60% debt supported by EU grant funding.

Conclusion: Inflationary pressures continue to persist in the mining and refining sector, with Talga reporting a pre-contingency CAPEX increase of 22% from the 2021. The Project is targeting initial production of 19.5ktpa of Talga’s Talnode product aimed at the EV anode market.

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.

DISCLAIMER

This note is a marketing communication and comprises non-independent research. This means it has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of its dissemination.

This note is intended only for distribution to Professional Clients and Eligible Counterparties as defined under the rules of the Financial Conduct Authority and is not directed at Retail Clients.

This note is confidential and is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published in whole or in part, for any purpose.

This note has been issued by SP Angel Corporate Finance LLP (‘SPA’) to promote its investment services. Neither the information nor the opinions expressed herein constitutes, or is to be construed as, an offer or invitation or other solicitation or recommendation to buy or sell investments. The information contained herein is based on sources which we believe to be reliable, but we do not represent that it is wholly accurate or complete. All opinions and estimates included in this report are subject to change without notice. It is not investment advice and does not take into account the investment objectives and policies, financial position or portfolio composition of any recipient. SPA is not responsible for any errors or omissions or for the results obtained from the use of such information. Where the subject of the research is a client company of SPA we may have shown a draft of the research (or parts of it) to the company prior to publication to check factual accuracy, soundness of assumptions etc.

Distribution of this note does not imply distribution of future notes covering the same issuers, companies or subject matter.

Where the investment is traded on AIM it should be noted that liquidity may be lower and price movements more volatile.

SPA, its partners, officers and/or employees may own or have positions in any investment(s) mentioned herein or related thereto and may, from time to time add to, or dispose of, any such investment(s).

SPA is registered in England and Wales with company number OC317049.  The registered office address is Prince Frederick House, 35-39 Maddox Street, London W1S 2PP.  SPA is authorised and regulated by the UK Financial Conduct Authority and is a Member of the London Stock Exchange plc.

MiFID II – Based on our analysis we have concluded that this note may be received free of charge by any person subject to the new MiFID II rules on research unbundling pursuant to the exemptions within Article 12(3) of the MiFID II Delegated Directive and FCA COBS Rule 2.3A.19.

A full analysis is available on our website here http://www.spangel.co.uk/legal-and-regulatory-notices.html. If you have any queries, feel free to contact our Compliance Officer, Tim Jenkins (tim.jenkins@spangel.co.uk).

SPA research ratings – Based on a time horizon of 12 months: Buy = Expected return of more than 15%, Hold = Expected return between -15% and +15%, Sell = Expected return of less than 15%