SP Angel Morning View -Today’s Market View, Monday 18th November 2024

Gold rallies after election sell-off triggered profit taking

MiFID II exempt information – see disclaimer below

Ariana Resources (AAU LN) – Progress report on Turkish operations

Bushveld Minerals* (BMN LN) SUSPENDED – Suspension of trading and turnaround specialist appointed

EQ Resources (EQR AU) – Acquisition of ferrotungsten plant in Vietnam

Guardian Metal Resources (GMET LN) – Tightening of Chinese export restrictions on tungsten

Power Metals Resources* (POW LN) – (Power Metals* holds a 45% stake in Guardian Metal Resources)

Resolute Mining* (RSG LN) – Resolute executes MoU Protocol setting out framework for discussions with Government of Mali

SolGold* (SOLG LN) – Progress report for 2024 and 2025 outlook

We are back in action after two days talking to companies and investors at the 121 Mining conference in London

• Apologies for our absence

Gold ($2,595/oz) rallies after election sell-off triggered profit taking

• Gold has found some strength into this week, up 1.4% this morning.
• Meanwhile, the US dollar index is showing signs of cooling, whilst US Treasury yields remain elevated.
• The 10 year is sitting at 4.44%, having risen consistently since the Fed 50bp rate cut in September.
• US Treasuries have sold off on renewed growth expectations, whilst inflation expectations have also picked up.
• Trump’s presumed inflationary policies, including heightened tariffs, are encouraging bearish bets on treasuries, with higher yields pushing gold down.
• ETF holdings have fallen in recent weeks as Western investors take profits.
• Central Bank buying is expected to continue next year, with tensions likely elevated between the Trump administration and Xi Jinping’s government.

Aluminium volatile as China removes tax relief to limit overcapacity

• Aluminium prices jumped $160/t over the weekend before paring gains, down 2.2% this morning.

• The volatility follows Beijing’s decision to cancel tax relief on exports, removing a 13% tax rebate on overseas sales of various base metals.
• Chinese aluminium smelters fell 5%.
• Beijing is likely looking to boost profitability of Chinese enterprises, with a current smelter glut creating overcapacity.
• The move also removed tax relief on copper products, although this is expected to be less impactful.
• Rebates have also been removed for Chinese solar panel exporters.

Iron ore slumps as China property construction remains weak and China steel output tepid

• Iron ore fell below $100/t, with the 62% Mysteel index sliding to $97/t.
• China steel output disappointed at 82mt vs 86mt expected.
• The Hang Seng property construction index is down 22% from October levels.

Lithium prices continue to climb as inventory slides

• Lithium carbonate and spodumene prices continue to edge higher from low bases.
• Mysteel reports total LCE inventories are down 1.7%wow.
• Prices weakened into Friday, but continued supply cuts are likely providing some support to the market.
• Mysteel reports carbonate production rose 3% in China over the weekend, with producers closing hedging positions into a stronger market.

Economics

Ukraine/Russia – The US allowed Ukrainian forces to use long range missiles to strike Russia in a policy shift before the end of Biden administration term.

• The decision follows the news of the deployment of thousands of North Korean troops fighting on Russian side and heavy new strikes by Moscow over the weekend.
• ATACMS systems have a range of up to 300km and are likely o be first used to target Russian and North Korean forces in the Russia’s Kursk region.
• Tomorrow marks the 1,000th day since Russia invaded Ukraine in February 2022.

Japan – BOJ Governor Kazua Ueda have not provided clear indication if rates are expected to go higher at the December meeting.

• “The timing for when we’ll adjust the degree of our monetary support will depend on the economic, price and financial outlook,” the governor said.
• The yen weakened against the US$ while chances of a hike at the December meeting were left largely unchanged at slightly over 50%.

Uranium – Prices jump taking uranium stocks higher on the news of Russia temporarily banning enriched uranium exports into the US.

• No details on restrictions or their duration were provided in the Friday statement.
• Utilities typically purchase material well in advance and the impact is unlikely to be immediate, although, the decision most definitely to implications for 2025, according to Mining.com.
• Russia controls nearly half of global capacity for enriched uranium production and accounted for 27% of US demand in 2023.
• Russia said the move followed the US decision to ban enriched uranium from Russia earlier in May with shipments to continue until 2028 under a system of waivers.

Iran – rumours of Ayatollah Ali Khamenei shut down by the Ayatollah’s office

• Rumours that the Ayatollah Ali Khamenei had fallen into a coma have been refuted by the Ayatollah’s office

Currencies

US$1.0543/eur vs 1.0623/eur previous. Yen 154.70/$ vs 153.91/$. SAr 18.144/$ vs 18.055/$. $1.262/gbp vs $1.280/gbp. 0.645/aud vs 0.654/aud. CNY 7.245/$ vs 7.236/$.

Dollar Index 106.64 vs 105.75 previous

Precious metals:         

Gold US$2,585/oz vs US$2,606/oz previous

Gold ETFs 83.0moz vs 83.7moz previous

Platinum US$953/oz vs US$948/oz previous

Palladium US$969/oz vs US$950/oz previous

Silver US$30.6/oz vs US$30.8/oz previous

Rhodium US$4,625/oz vs US$4,675/oz previous

Base metals:   

Copper US$9,009/t vs US$9,116/t previous

Aluminium US$2,636/t vs US$2,555/t previous

Nickel US$15,640/t vs US$15,915/t previous

Zinc US$2,974/t vs US$2,920/t previous

Lead US$1,984/t vs US$2,013/t previous

Tin US$28,950/t vs US$29,810/t previous

Energy:           

Oil US$71.4/bbl vs US$71.9/bbl previous

• European gas prices remain elevated after Russia’s Gazprom shut-off natural gas supplies (~18mmcf/d) to Austria’s OMV under a transit contract through the Ukraine, which was due to expire on January 1, 2025.
• The US Baker Hughes rig count was down 1 to 584 units last week (-34 or 5% y/y), with oil rigs down 1 to 478 units (-22 y/y) and gas at 101 units (-13 y/y), inclusive of the Woodford shale losing 2 rigs in aggregate.
• Chris Wright, CEO of the world’s second-largest fraccing services company Liberty Energy, has been nominated by president-elect Trump as the energy secretary under the new administration.

Natural Gas €45.4/MWh vs €43.2/MWh previous

Uranium Futures $82.6/lb vs $77.7/lb previous

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$99.3/t vs US$100.1/t

Chinese steel rebar 25mm US$506.8/t vs US$515.7/t

HCC FOB Australia US$204.3/t vs US$205.3/t

Thermal coal swap Australia FOB US$144.3/t vs US$144.0/t

Other:  

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

NdPr Rare Earth Oxide (China) US$57,973/t vs US$58,687/t

Lithium carbonate 99% (China) US$10,559/t vs US$10,381/t

China Spodumene Li2O 6%min CIF US$790/t vs US$780/t

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

China Tungsten APT 88.5% FOB US$343/mtu vs US$343/mtu

China Graphite Flake -194 FOB US$440/t vs US$440/t

Europe Vanadium Pentoxide 98% US$4.8/lb vs US$4.8/lb

Europe Ferro-Vanadium 80% US$25.6/kg vs US$25.55/kg

China Ilmenite Concentrate TiO2 US$307/t vs US$309/t

China Rutile Concentrate 95% TiO2 US$1,139/t vs US$1,156/t

Spot CO2 Emissions EUA Price US$64.9/t vs US$66.6/t

Brazil Potash CFR Granular Spot US$277.5/t vs US$280.0/t

Germanium China 99.99% US$2,865.0/kg vs US$2,865.0/kg

China Gallium 99.99% US$435.0/kg vs US$440.0/kg

Battery News

Northvolt, a Swedish battery manufacturer, considers filing for Chapter 11 protection from creditors or even bankruptcy as latest refinancing talks collapsed, according to FT.

• The Company is still trying to secure short term funding to keep operations, although, those have not been successful so far.
• Northvolt secured more than $15bn in funding previously in a drive to establish battery manufacturing supply chain but struggled to ram up production at its Swedish facility.
• Earlier BMW pulled a $2bn contract while the government ruled out a potential bail out of the Company using state funds.
• One of major Northvolt’s investors cited by FT said that an insolvency may be declared in coming weeks while admitting they have completely impaired their investment in the Company.

Labour says it will be flexible over EV rules

• Transport secretary Louise Haigh has said the new UK government will not relax EV targets, but that there could be more flexibility for manufacturers to achieve targets.
• Under the EV mandate, a proportion of new cars sold in the UK by a manufacturer must be electric – currently 22%, rising to 80% by 2030 and 100% by 2035.
• Companies that fail to reach this target will be fined £15,000 per vehicle.
• Haigh has said that the government want to work with the manufacturing sector about whether flexibilities in the current mandate are working.
• The FT revealed on Saturday that Nissan is set to warn ministers that  the UK’s auto industry has reached a “crisis point”, with jobs and investment at risk unless the government relaxes EV rules.

BYD reaches 10m milestone

• Chinese automaker BYD saw its 10 millionth NEV roll off the production line.
• The vehicle, a Z9 sedan from sub-brand Denza was delivered on 15^th November, the first day of the Guangzhou auto show.
• BYD built its first car, called the 316, in 2004, but the model was quickly cancelled because dealers thought it was unlikely to succeed.
• Four years ago, BYD’s sales were less than 30,000 per month, and currently the company is selling more than 500,000 units per month.
• The one millionth NEV was manufactured in May 2021, so the company has seen a meteoric rise in sales over the last three years.

Porsche recalls 16,000 Taycan EVs in China due to fire risk

• A short circuit may occur inside the power battery module of some of the vehicles included in this recall, which in extreme cases may lead to thermal runaway of the battery module, according to a company announcement.
• Porsche is advising users to limit their charging power to 80 percent before the recall is implemented in January 2025.
• It is the second time Porsche has had to recall select Taycan models in China.

Company News

Ariana Resources (AAU LN) 2.5p, Mkt Cap £46m – Progress report on Turkish operations

• Ariana Resources has provided a progress report on the Turkish operations of its 23.5% owned Zenit Madencilik at Kiziltepe, Tavsan and Salinbas.
• At Kiziltepe, described by Managing Director, Dr. Kerim Sener, as nearing “the end of its life” … [mining ] … “has been focused on the Banu vein … [and also at a slower rate at] … the other Kiziltepe pits, including Arzu South, Arzu North and Derya”.
• “Up to 30 September 2024, 2 million tonnes at 2.83g/t Au of ore has been mined from the Kiziltepe Sector, including Kepez North”.  The mine remains profitable and Dr. Sener explained that the 2mt of ore extracted to date was “almost double our expectations since mining commenced in early 2017”.
• At Tavsan, “0.5Mt ore mined to the end of Q3 2024 with an average grade of 2.2 g/t Au” helped build a 60,000t of ore (three months production) … [stockpile] … ready for processing by the end of Q3 2024”.
• Ariana Resources confirms that “Construction of the Tavsan heap-leach and processing plant is proceeding smoothly and remains on track for completion of major works in 2024”.
• At Tavsan, the company has completed more than 1,290m of drilling since September with a further planned campaign of ~8,000m.
• Dr. Sener explained that “With the positive developments being made across the portfolio in Türkiye, we were delighted to host representatives from the Zenit mining, exploration and construction teams on site at the Dokwe Project in Zimbabwe last month. Over recent weeks, we have shared our project data with Zenit as we explore opportunities to leverage their technical strengths with a view to involving them in support of the Dokwe Feasibility Study.”

Conclusion: Ariana Resources has summarised progress in Turkey and hinted that its Turkish operating expertise may be harnessed to assist with the feasibility work for its Dokwe gold project in Zimbabwe.

Bushveld Minerals* (BMN LN) SUSPENDED – Suspension of trading and turnaround specialist appointed

• The Company provides an update on their ongoing liquidity issues.
• Management states that discussions with various stakeholders ‘have not been successful in securing additional funds to address the Company’s liquidity position.’
• As a result, Bushveld has appointed a turnaround specialist to ‘achieve the best outcome for all stakeholders and affected persons.’
• Given the financial uncertainty, Bushveld has suspended trading on AIM.

*SP Angel act as nomad and broker to Bushveld Minerals

EQ Resources (EQR AU) A$0.053/s, Mkt cap A$114m – Acquisition of ferrotungsten plant in Vietnam

• EQ Resources, the operator of the Barruecopardo tungsten mine in Spain and the Mt. Carbine tungsten mine in Queensland reports that it has reached agreement to acquire the Tungsten Metals Group which operates the world’s largest, non-Chinese, ferrotungsten (FeW) plant in Vinh Bao, Vietnam.
• The plant, which has a “potential production capacity of 4,000tpa FeW … will allow for diversification and vertical integration of EQR’s upstream operations”.
• The plant was built in 2011 and, in “recent years … has mainly operated as a toll treatment facility for third-party customers, converting primary and secondary tungsten raw materials into high-quality FeW”.
• Today’s announcement explains that the Vinh Bao plant “represents >80% of FeW capacity installed outside of China and Russia”.
• EQ Resources says that its “scale and favourable cost structure in Vietnam, particularly with regards to electricity usage and cost of labour, the facility is regarded as one of the most competitive in the industry”.
• Subject to successful due diligence and shareholder approval, EQ Resources has secured Heads of Agreement to acquire 100% of unlisted Tungsten Metals Group and, “separately Mr. George Chen’s … interest … in Asia Tungsten Products … resulting in EQR obtaining a 100% ownership of TMG Group”.
• The company says that it assesses “the enterprise value of TMG Group is A$13.5 million … [and that it] … has agreed to issue an estimated 170 million new fully paid ordinary EQR shares (Consideration Shares) and make payment of A$2.5 million in cash … [funded] … through customer prepayments for FeW … while assuming TMG Group liabilities”.
• The company explains that “FeW pricing dynamics are partly decoupled from the tungsten concentrate market (currently being EQR’s sole product) and respective ammonium paratungstate (APT) markets, which are currently EQR’s main offtake industries. FeW prices over the recent 24 months have outperformed APT prices by approximately 19%”.
• CEO. Kevin MacNeill, said that the “Transaction aligns with EQR’s strategic initiatives to be the pre eminent western tungsten producer. Upon completion of the Transaction, EQR will have achieved a strategic diversification of products, customers and geography, and be proud 100% owner and operator of critical western tungsten operations on three continents. Additionally, EQR will have achieved vertical integration of our upstream operations”.
• Completion is expected 1H25, with the acquisition being valued at A$13.5m, paid in A$2.5m in cash and 170m new shares.

Conclusion: Securing a major ferrotungsten plant capable of treating both primary mined and recycled material provides EQ Resources with diversification within the global tungsten industry alongside its mined production from Spain and Queensland.  In the context of Chinese domination of global tungsten supply the transaction is likely to be welcomed by western consumers.

Guardian Metal Resources (GMET LN) 27.5p, Mkt Cap £28m – Tightening of Chinese export restrictions on tungsten

Power Metals Resources* (POW LN) 14p, Mkt cap £16m – (Power Metals* holds a 45% stake in Guardian Metal Resources)

• Guardian Metal Resources, which is working to progress the United States’ largest tungsten project at Pilot Mountain in Nevada and which recently secured an option to acquire another former tungsten mine in the State reports a tightening of Chinese export restrictions on key commodities including tungsten.
• The company says that “On 16 November 2024 Nikkei Asia (“Nikkei”), a Japan headquartered news company which is the sister company of the Financial Times, reported that, ‘China plans to tighten export controls on key “dual-use” technologies and items in two weeks, including raw materials and metals such as tungsten, graphite, magnesium and aluminium alloys used commonly in tech supply chains”.
• China dominates world tungsten supply controlling “more than 80% of the extraction and processing of global tungsten” and the US does not currently have its own mined source of production of the metal which is classed as a critical mineral in jurisdictions including the US, EU, Japan and Australia.

*SP Angel acts as Nomad and Broker for Power Metals

Resolute Mining* (RSG LN) 20.9p, Mkt Cap £443m – Resolute executes MoU Protocol setting out framework for discussions with Government of Mali

• Resolute Mining have signed a MoU Protocol to enable detailed discussions with the Mali Government over the long-term future of their operations in Mali.
• Resolute had previously signed a mining convention which ran till 2029
• The government is insisting Resolute should migrate Resolute’s gold mines in Mali to the 2023 Mining Code while maintaining the safety of Resolute’s employees.
  • “The Protocol also provides that all outstanding claims by the Government against the Company, including those related to tax, customs levies, maintenance and management of offshore accounts are settled.“
• Resolute has just paid an initial settlement payment of ~US$80m to the Government of Mali from existing cash reserves.
• A further US$80m will also be paid in the coming months from existing sources of liquidity.
• Further details on other elements of the Protocol and the impact of their implementation will be provided following further legal and financial analysis together with the finalization of documentation.
• Resolute is working towards the release of CEO, Terry Holohan and two other employees who are currently detained in a single cell together in the political wing of the Central Prison in Bamako.
• The trading halt on the ASX has been lifted.
• Other miners in Mali:
  • Ganfeng which recently acquired the Goulamina lithium mine from Leo Lithium were forced to pay
  • Barrick Gold are currently in negotiation with the junta over the Loulo gold mine having recently freed four of their employees who had been held in detention in Mali.
  • Kodal Minerals recently agreed terms to comply with the new 2023 Mining Convention. Kodal’s jv company are paying $15m in capital gains tax and will receive $4.3m from the Mali Government in return for 25% of the Bougouni lithium mine taking its stake to 35%. The mine is due to open in Late December or January.
  • Hummingbird has the Yanfolila gold mine in Mali which is also be subject to the new code. Hummingbird held a net bank debt of approximately US$135 million with Coris (including approximately US$90 million of which is secured against the Company’s assets). In addition, the Company has approximately US$20 million of unsecured debt to CIG, which initially matures on 31 December 2024, per the announcement on 27 September 2024. Hummingbird are currently in the process of selling its Pasofino Gold subsidiary which holds the Dugbe project in Liberia.
• Mali:
• Terrorists from the Sahel region of the Sahara continue to challenge the governments of Mali and Burkina Faso with increasing attacks since the French military withdrew protection in the region.
• Wagner has since moved into Mali and Burkina Faso offering protection but with severely depleted and poorly equipped forces. It is alleged that Wagner mercenaries were killed by Algerian forces as they crossed the boarder when chasing bandits across the border from Burkina Faso.
• Given Wagner’s depletion and failure to protect Mali against an attack in the summer against the Bamako airport and nearby barracks we wonder if the Mali junta are working to bolster its own armed forces for the protection of Mali against armed Islamist groups affiliated with Al-Queda in the Sahel.

Conclusion: The military junta which took over in 2020 is insisting mining companies conform to their new 2023 Mining Code requiring the government to hold up to 35% of each mining project.

While compensation is offered it is based on the proportionate cost of exploration or investment into the assets and is not based on the current estimated value of the assets.

Resolute Mining acquired the Syama gold mine in 2003 after its closure due to metallurgical issues. Terry Holohan joined resolute in 2021 turning the company’s fortunes around with his metallurgical expertise. We hope the junta understands the importance of maintaining good will and positive relations with the team who have restored the operations of Syama gold mine to profitability through their dedication, hard-to-find expertise and hard work.

*SP Angel analysts hold shares in Resolute Mining

SolGold* (SOLG LN) 7.53p, Mkt Cap £232m – Progress report for 2024 and 2025 outlook

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• Describing 2024 as a ‘transformative’ year, Solgold has issued a review of the highlights of the year’s achievements and an outlook for 2025.
• The company acknowledges the Exploitation Agreement with Ecuador’s government as “a pivotal step toward development” of its flagship, Cascabel project which published its Preliminary Feasibility Study in March.
• The Study describes the development of a core 540mt reserve, which is part of a significantly larger 3.2bt resource which is expected to start at a 12mtpa mining rate, doubling to 24mtpa after six years to produce an average of 123,000tpa of copper, 277,000ozpa of gold and 794,000ozpa of silver over an initial 28 years life.
• The phased development approach delivers meaningful capital cost savings compared to previous plans and using assumed long term metal prices of US$3.85/lb for copper, US$1,750/oz for gold and US$22.50/oz for silver delivers an after tax NPV8% of US$3.2bn and IRR of 24% from an initial pre-production investment of US$1.55bn.
• The company is examining “numerous opportunities to expand the scope of the resource and reserve at Cascabel and bring forward future cash flows via Tandayama-Ameríca deposit inclusion, improvements in mining and milling design and further optimising metallurgical recovery”.
• Solgold also describes the streaming agreement with Franco Nevada and Osisko, announced in July, which provided US$750m of investment “subject to achieving milestones … [and] … enabling effective resource allocation to advance and de-risk the Project and a sizable portion of development capital”.
• The company also comments on its exploration achievements during the year noting the identification of “a major porphyry target at the El Cielito Norte prospect on the Blanca-Nieves Project just 8 km northwest of Cascabel … [in a 2.2×2.5km area which is] … larger in extent than the Alpala system to the south at Cascabel”.
• Other exploration is preparing for future drilling at “the Florida site on the eastern side of Cielito Norte” showed high grade gold in channel samples, including “15m @ 7.46 g/t Au, including 2.2m @ 21.1 g/t Au”.
• Looking towards 2025, Solgold will be progressing further detailed investigations at Cascabel, including geotechnical drilling and analysis and “Near-surface drilling at the Tandayama-Ameríca deposit is planned for the near future to investigate a plan for earlier cash flow delivery” as well as advancing the permitting progress.
• Solgold confirms that it is continuing to evaluate “joint venture and spin-out options for non-core assets … [as it focuses] … on Cascabel while maximizing the potential of its broader exploration assets”.
• Commenting on the achievements of 2024 which provide a foundation for the future, CEO, Scott Caldwell, described excitement “about our strategic vision for the future” as Solgold advances development at Cascabel and its exploration portfolio in Ecuador.

Conclusion: The award of an Exploitation Permit for Cascabel and the securing of a US$750m streaming agreement provides Solgold with a secure base to progress development at Cascabel.

*SP Angel acts as broker to Solgold

 LSE Group Starmine awards for Q3 commodity forecasting:

No.1 in Precious Metals: SP Angel mining team awarded No 1. ranking for Previous Metals forecasting in LSEG Quarterly Starmine Award for Reuters Polls Q3 2024

No.2 in Base Metals: SP Angel mining team awarded No 2. ranking for Base Metals forecasting in LSEG Quarterly Starmine Award for Reuters Polls Q3 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

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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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