SP Angel Morning View -Today’s Market View, Monday 19th August 2024

Gold hits new all-time-high as China boosts bullion import quotas

MiFID II exempt information – see disclaimer below

Cornish Metals* (CUSN LN) – Drilling results from exploration south of the South Crofty mine

Hummingbird Resources (HUM LN) – $25m Coris Bank debt refinancing

Kavango Resources* (KAV LN) – Soil geochemical anomaly at Hillside gold project, Zimbabwe

Neometals (NMT AU) – US$3m equity placing

Gold – Gold spiked to $2,521.28/oz this morning – a new all-time-high as China boosts bullion import quotas

• Prices climbed sharply on Friday afternoon, jumping from $2,450/oz to $2,505/oz spiking to a peak at 6am this morning in Beijing.
• The US dollar weakened as 10-year US Treasury yields slid below 3.9% again.
• The PBoC has given new gold import quotas to Chinese banks, triggering speculation of a renewed wave of buying (Reuters).
• The PBoC are also trying to limit a major rally in Chinese government bonds, naming and shaming buyers.
• Chinese 10-year yields fell to record lows last week, with institutions rushing to buy over concerns of growth slowdown and deflation.
• Regional banks are being encouraged to invest cash into the economy rather than parking it into bonds.
• As a result, Chinese buyers are seeking alternative safe haven protection, with gold an obvious candidate.
• Meanwhile, The Fed is set to provide more guidance over potential rate cuts at Jackson Hole symposium this week.
• Fed’s Daly told the FT yesterday that ‘it is time to consider adjusting borrowing costs.’

Copper ($9,220/t) strengthens whilst Escondida strike averted

• Copper prices have rebounded alongside the lower dollar, climbing to $9,220/t.
• The move comes despite BHP and Escondida union workers reaching an agreement over pay, averting a strike that was expected to hit global supply.
• China announced July copper output rose 7% yoy in July to 1.1mt.
• WoodMac has released a new report suggesting that copper demand is expected to rise 75% to 56mt by 2050.
• The report highlights that China has boosted smelter capacity by 11mt since 2019, 80% of global additions.
• Ex-China smelting capacity is near unchanged over the past 20 years, highlighting Western vulnerabilities to refined copper product access.
• Exports of refined copper products fell 40% mom in July from China at 141kt, still double last year’s level.

Iron ore slump continues amid China steel industry rout

• 62% Fe iron ore prices fell to $91/t this morning, down 10% since last week.
• An acceleration in the downtrend was triggered by major steelmaker Baowu warning of a long and harsh winter for Chinese steel.
• The property sector remains in the doldrums, with 48m presold homes still unbuilt.
• China steel production fell 9% mom in July to 83mt, with mills suffering from negative margins.
• Reports suggest that average steel margins in China have been weaker than any other 12 month period since 2016.
• Fortescue head Andrew Forrest sees $80/t as the ‘natural floor’ for iron ore, given parts of the cost curve that would become unprofitable at such levels.
• Forrest is looking to boost Fortescue’s exposure to higher premium markets, taking advantage of the transition to green steel. 

Australian spodumene producers call for royalty relief amid price slump

• Lithium prices continue to fall, with spodumene prices slumping to $830/t for delivery in China.
• The West Australian reports that discussions are progressing with the State Government and several miners for royalty relief.
• China continues to pump out concentrate from Africa and domestic sources, likely at uneconomic levels, to boost stockpiles.
• Inventories remain buoyant, limiting spot buying appetite.
• The WA government introduced 50% royalty rebate on nickel sales earlier this year.
• Rebates were previously introduced for lithium miners in 2020 when spodumene prices hit $400/t.

Antimony – China preserving its antimony for domestic use as local mine supplies run low

• Western manufacturers are rightly concerned over new Chinese export restrictions on Antimony which are due to start on 21 September
• The west has effectively enjoyed super low antimony and other specialist materials prices as China ramped up production to meet future domestic demand growth.
• Chinese industry appears generally focussed on producing and selling a maximum amount of processed materials and manufactured products at the cheapest possible prices.
• This runs counter to the ambitions of many western manufacturers to produce less for sale at their maximum possible price.
• Is it China’s fault that the West is unable to compete on price and is it China’s fault that the Western world is often unwilling and sometimes unable to build processing capacity.
• Financing and building mines in the west is difficult but financing and building smelters is virtually impossible given the growth of low-cost competition in China alongside their substantial skills base.
  • TriStar (private) which as an antimony roaster project in Oman is on hold for technical reasons
  • ZincOx which built a furnace for the processing of EAFD in South Korea was taken over by Korea Zinc. We believe this process now works.
  • International Ferro Metals built the most environmentally friendly ferrochrome smelter in the world but could not compete with lower prices from far dirtier smelters in China.
    • The smelter is now owned by Hernic
• Made in China is very often cheaper because of lax environmental standards not to mention their disregard for health and safety.
• The west is better at geology and also at responsible mining but is persuaded to sell into China for processing where emissions and toxic waste products are less of an issue.
• The West will need to wean itself off Chinese raw materials and suffer higher prices if it is to stimulate the processing of critical commodities before they reach China.

Philippines to fast-track ‘world’s largest’ solar storage project

• The Philippines government’s Board of Investments has issued a ‘green lane’ endorsement certificate to Terra Solar Philippines for its ‘Terra Solar’ energy project, which includes a 3.5GW of solar PV plant with a battery energy storage system of 4.5GWh capacity.
• The ‘green lane’ certification for the clean energy project will enable the developers to acquire permits and departmental clearances easily and quickly, since the project would be identified as a ‘strategic investment’ in line with the country’s national developmental plans
• The planned project will cost $3.2bn and span 3,500 hectares, with the developer claiming the project to be the world’s largest of its kind, in terms of solar-battery storage combined capacity.

Scottish rocks show how planet transitioned into Snowball Earth

• Geologists have discovered a sequence of rocks which mark the transition period into Snowball Earth
• Rocks of 662-720 million years old show the complete record of the transition from a warn tropical environment into Snowball Earth where giant glaciers surrounded our planet.
• the Garvellachs rocks may be awarded a rare “golden spike” to mark the transition from the Tonian period of 720m-1bn years ago to the Cryogenian period at 635-720m years.
• Heavy glaciers eroded almost all of the world’s rock from this period with the Garvellachs rocks as the only known rock sequence to have survived this period.
• The rocks show the cooling of cyanobacterial life marking the end of a billion years of a temperate climate.

Economics

UK – Property prices dropped 1.5%mom to an average of ~£368k during a historically seasonally weak month of August.

• On a positive side, buyers’ interest is reported to have picked during the month following a central bank decision to cut rates.
• Number of people contacting estate agents increased by 19%yoy, up on a 11% increase recorded in the previous month.
• Rightmove House Prices (%mom, Aug/Jul/Est): -1.5/-0.4/NA
• Rightmove House Prices (%mom, Aug/Jul/Est): 0.8/0.4/NA
• UK energy price cap forecast to rise 9%

Israel/Hamas – US Secretary Antony Blinken flew to Israel on Sunday in a push to secure a deal between Hamas and Israel and freeing the hostages.

• Discussions have been stepped up in an effort to avoid a further escalation in the conflict as Iran and Hizbollah threatened with a retaliation for the assassination of two senior militants last month.
• A meeting in Cario between the US, Qatar and Egypt is planned for later in the week.

Ukraine – Germany refuses to approve request for new aid by Ukraine

• The German government plans to halt new military aid for Ukraine as part of the ruling coalition’s cut spending.
• The report follows a German arrest warrant for a Ukrainian diver who is alleged to have blown up the Russian/German Nord Stream gas pipeline.

Currencies

US$1.1042/eur vs 1.0982/eur previous. Yen 145.76/$ vs 149.01/$. SAr 17.834/$ vs 17.942/$. $1.296/gbp vs $1.288/gbp. 0.669/aud vs 0.663/aud. CNY 7.142/$ vs 7.174/$.

Dollar Index 102.07 vs 102.91 previous

Precious metals:         

Gold US$2,504/oz vs US$2,453/oz previous

Gold ETFs 82.3moz vs 82.3moz previous

Platinum US$957/oz vs US$955/oz previous

Palladium US$946/oz vs US$949/oz previous

Silver US$29.10/oz vs US$28.15/oz previous

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

Base metals:   

Copper US$ 9,216/t vs US$9,128/t previous

Aluminium US$ 2,397/t vs US$2,355/t previous

Nickel US$ 16,610/t vs US$16,255/t previous

Zinc US$ 2,803/t vs US$2,780/t previous

Lead US$ 2,061/t vs US$2,030/t previous

Tin US$ 32,205/t vs US$31,870/t previous

Energy:           

Oil US$79.3/bbl vs US$80.8/bbl previous

• The Baker Hughes rig count fell by 2 units w/w to 586 rigs last week (-56 or 9% y/y), with oil rigs down 2 to 483 units (-37 y/y) and gas rigs up 1 to 98 units (-19 y/y), as the Texas rig count lost 3 to 273 units (-39 y/y).
• The US Department of the Interior is providing $775m in Phase 2 funding for 21 states to clean up orphaned oil and gas wells and well sites, which should eliminate methane leaks and reduce groundwater risks.

Natural Gas €39.1/MWh vs €39.5/MWh previous

Uranium Futures $81.2/lb vs $81.3/lb previous

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$91.2/t vs US$94.1/t

Chinese steel rebar 25mm US$480.3/t vs US$484.6/t

Thermal coal (1st year forward cif ARA) US$130.9/t vs US$129.8/t

Thermal coal swap Australia FOB US$152.0/t vs US$152.0/t

Coking coal Dalian Exchange futures price US$187/t vs US$187.1/t

Other:  

Cobalt LME 3m US$24,900/t vs US$26,000/t

NdPr Rare Earth Oxide (China) US$53,903/t vs US$53,112/t

Lithium carbonate 99% (China) US$9,731/t vs US$9,688/t

China Spodumene Li2O 6%min CIF US$830/t vs US$830/t

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

China Tungsten APT 88.5% FOB US$330/mtu vs US$327/mtu

China Graphite Flake -194 FOB US$462/t vs US$462/t

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

Europe Ferro-Vanadium 80% 24.8/kg vs US$24.8/kg

China Ilmenite Concentrate TiO2 US$321/t vs US$320/t

China Rutile Concentrate 95% TiO2 US$1,393/t vs US$1,401/t

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

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

Germanium China 99.99% US$2,225/kg vs US$2,195/kg

China Gallium 99.99% US$445/kg vs US$445/kg

Battery News

BEVs make up 92% of monthly new vehicle registrations again in Norway

• In July, 91.9% of all new vehicle registrations in Norway were BEVs, up from 81.7% in July 2023. (The Driven)
• Only 45 petrol cars were sold in July, marking one of the lowest months for non-hybrid petrol car registrations in Norway.
• Hybrids and PHEVs made up just 4.8% of sales, down from 14% last year, largely due to the removal of a registration tax exemption for PHEVs in January 2024.
• Norway saw 82% of new car sales being EVs in 2023, with the Norwegian EV Association expecting EVs to make up 95% of new vehicle sales in 2024.
• The sharp increase in BEV adoption and decline in PHEV sales highlight the significant impact of policy changes on vehicle registration trends.

Hyundai set to introduce new battery management system amid fire concerns in South Korea

• Hyundai and Kia have introduced a safer battery management system (BMS) to enhance the safety of their EVs amid rising fire concerns in South Korea. (The Korea Times)

• Concerns has spread following a number of high profile EV fires in recent months.
• Hyundai Motor and Kia said there had been no fire incidents due to overcharging their EVs and disclosed the battery makers for their lineups.
• The automakers also announced they are making extensive efforts across hardware and software to ensure utmost safety.
• The BMS monitors critical factors like voltage deviations, insulation resistance, temperature, and charging conditions to ensure safe operation.
• If the system detects malfunctions, it can initiate vehicle safety protocols and send alerts to remote support centres, which then notify customers automatically.
• The BMS closely coordinates with charging controllers to prevent overcharging, significantly reducing the risk of related issues.

Lynk & Co sees 10,000 pre-orders of first EV in 24 hours

• Lynk & Co’s first battery electric vehicle, the Z10, received over 10,000 pre-orders within 24 hours of the start of pre-sales on August 15^th. (CNEVPOST)
• The Z10 will be officially launched on September 5, with pre-sales starting at RMB 215,800 ($30,120).
• The Z10 is a mid-to-large-size electric sedan available in five variants, offering both 400V and 800V platforms to cater to different customer needs.
• The Z10 offers a dual-motor variant with a 0-100km/h acceleration in 3.5 seconds and comes with battery options of 75kWh and 95kWh, providing a range between 602km and 806km.
• The model’s varied offerings target both urban commuters and long-distance travellers, emphasising flexibility in charging and performance.

US EV sales stagnate in H1 2024 despite discounts

• US EV sales growth slowed to just 6.8% in the first half of 2024, a significant drop from the nearly 50% growth seen in 2023, despite dealerships offering steep discounts. (ecns.cn)
• US consumers remain hesitant on EVs due to concerns about battery life, limited charging infrastructure, and higher prices compared to traditional vehicles.
• In contrast, China’s EV and hybrid sales soared, making up 51% of all vehicle sales in July.
• The US lags behind China in EV infrastructure, with only 61,000 charging stations nationwide, compared to China’s 10.24m charging units by mid-2024.
• US dealers are also facing oversupply, with an average of 125 days’ worth of EV inventory, and are often forced to sell at a loss as they prepare for new 2025 models.

BYD plans new plant in Karachi

• The battery giant has announced plans to open a car production plant in Pakistan, where it will also start selling three models through a partnership with Mega Motors.
• Mega Motors is a unit of Pakistan’s largest private utility Hub Power Co Ltd, known as Hubco.
• Hubco will setup fast-charging stations across major cities, motorways and highways to enhance Pakistan’s charging infrastructure.

Company News

Cornish Metals* (CUSN LN) 7.2p, Mkt Cap £37m – Drilling results from exploration south of the South Crofty mine

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• Cornish Metals has released the results of the final eight drillholes of its 14-hole drilling programme of 8,993m investigating ground located around 1km south of its South Crofty mine and including the recently identified ‘Wide Formation’ structure and “tin mineralisation associated with the Great Flat Lode and the Great Flat Lode Splay identified earlier in the programme”.
• The company confirms that drilling has confirmed the extent of the ‘Wide Formation’ “over a strike length of over 2,500m and a downdip extent of at least 800m, with true thicknesses ranging from approximately 2m to 10m … [and that the] … structure remains open at depth and along strike”.
• Today’s announcement highlights the intersection of the ‘Wide Formation’ over a width of 10.55m at an average grade of 0.19% tin including a zone of 1.49m grading 0.72% Sn in hole CB23_012.
• As well as ‘Wide Formation’ intersections, the latest drilling has identified “a new structure interpreted as the eastern extension to Great Condurrow Mine’s Main Lode” with hole CB23-011 intersecting 2.11m at an average grade of 0.58% tin and 5.48% copper in what is thought to be the continuation of the structure east of a major structural discontinuity known as the ‘Great Crosscourse’.
• Cornish Metals says that “Further drilling will be necessary to fully quantify the prospectivity of this target and to confirm the geometry of the zone. However, the location of this intercept proximal to the Wide Formation and South Crofty mine, is considered significant and confirms exploration potential of the Carn Brea district”.
• The drilling has also “continued to intersect multiple steeply dipping high-grade tin zones, mainly located between the Great Flat Lode and the Wide Formation” known locally as ‘Droppers’ including intersections of:

• • 1.56m at an average grade of 0.76% tin in hole CB23-010; and
  • 2.07m averaging 0.85% tin in hole CB23-012 which also intersected a further 1.97m at an average grade of 0.66% tin.

• Commenting on these steeply dipping mineralised structures the company says that “it is possible to confirm continuity of individual structures between drill holes. From the intercept pattern, an E-W trending ‘corridor’ has been identified where these structures are interpreted to occur, representing a priority exploration target to be confirmed with future drilling”.
• Cornish Metals says that its priority targets among these steeply dipping structures “are areas where these structures are interpreted to intersect both the Great Flat Lode and the Wide Formation. These intersection points represent areas of greater fracturing and therefore increased potential for high grade tin mineralisation”.
• Commenting on the success of the programme, Interim CEO, Ken Armstrong, said that the drilling “has validated the Wide Formation as a new, large-scale, tin-bearing exploration target that is potentially accessible from the underground workings at South Crofty”.
• He also said that “the discovery of polymetallic tin and copper mineralisation within the interpreted extension of the Great Condurrow Mine’s Main Lode further demonstrates the exploration potential of the South Crofty area”.

Conclusion: Cornish Metals’ success in identifying additional mineralisation south of the South Crofty mine is particularly impressive in an area with such a long mining history.  We look forward to further exploration in the area and to the results of the latest work being reflected in a future revision to the mineral resource estimate.

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

Hummingbird Resources (HUM LN) 7.5p, Mkt Cap £57m – $25m Coris Bank debt refinancing

• The Company refinanced US$25m of debt with Coris Bank.
• New facility will be used to repay existing debt to Coris Bank, bears a 12% interest and is repayable over three tranches in 24 months beginning 2H25 following a 12 month grace period.

Kavango Resources* (KAV LN) 1.5p, Mkt Cap £22m – Soil geochemical anomaly at Hillside gold project, Zimbabwe

• Kavango Resources reports that gold-in-soil geochemical sampling at the Prospect 4 site in its Hillside project in Matabeleland, southern Zimbabwe has identified an anomaly covering around 1.5km².
• The company says that the “Anomalous gold values appear to be closely associated both with the E-W trending shears favoured by the artisanal and historical miners, and also the SSW – NNE trending structures interpreted from geophysics”.
• The company also confirms that the anomalous values are “open to the W and E” and that the “assay results confirm a larger mineralised system presently being worked only locally by the artisanal miners. They also indicate the possible presence of additional potential gold bearing structures not yet tested or worked”.
• Follow-up work is expected to include geophysical induced polarisation work and drilling using a rig which is currently drilling at the Prospect 3 site.
• CEO, Ben Turney, confirmed that the company was “already enthusiastic about the chances of near-term mining at Prospect 4, when Hole SKDD001 intersected 2.53m @ 29.08g/ t gold from 97.47m depth. Today’s soil sample assays confirm the wider potential for a possible minable gold ore body around this target”

Conclusion: Identification of a promising gold-in-soil geochemical anomaly at Prospect 4 will be followed up by additional geophysical work and by drilling to follow-up the earlier results from hole SKDD001.

*An SP Angel Analyst holds shares in Kavango

Neometals (NMT AU) A$52m, Mkt Cap A$0.08 – US$3m equity placing

• Existing shareholder, William Robert Richmond, is investing US$3m (A$4.5m) in new equity at A$0.068/share.
• Proceeds will be used to continue development of the flagship Lithium-ion Battery Recycling business through the industrial validation phase.
• Net cash balance will be A$9.3m post completion.
• The Company is developing a portfolio of processing technologies to recycle and recover critical materials.
• In particular, the team developed a proprietary process for the recovery of critical elements from end of life lithium ion batteries including spent consumer electronic batteries (LCO cathodes) and nickel rich EV and stationary storage batteries (NMC cathodes).
• The Company along with its 50/50 JV partner Germany Company SMS Group is building a 2,500tpa recycling plant for Mercedes-Benz.

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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