SP Angel Morning View -Today’s Market View, Monday 20th May 2024

Gold prices soar to >$2,450/oz as China debt and geopolitical fears drive prices

MiFID II exempt information – see disclaimer below

Beowulf Mining* (BEM LN) – Financial Results for Full Year 2023

Power Metal Resources* (POW LN) – Completion of Strategic Metals Extraction Deal

KEFI Gold and Copper* (KEFI LN) – Formal launch of the Tulu Kapi gold project, Ethiopia

Metals One plc (MET1 LN) – Raising £895,000 to acquire and progress the Black Schist project in Finland

Gold and silver soar as hedge funds boost bullish positions and geopolitical tensions persist

• Gold prices have soared to new all time highs, with spot prices hitting $2,440/oz having seen strong trade on Friday afternoon.
• Much of the move is seen as driven by Chinese investors who are limited in where else they feel safe in storing their cash.
• Gold appears to provide the safest of safe havens for Chinese investors who have been warned off property and are fearful of a collapse in the Yuan and local equities.
• Silver prices have outshone gold, with the metal rallying 3% today to $32/oz.
• Platinum and palladium are both green as well.
• Speculative positions in gold on COMEX have hit three-week highs as traders look to take advantage of strong momentum to the upside.
• Yields are little changed from last week, with the 10-year at 4.4% following its sharp move lower on US inflation data cooling.
• Optimism over rate cuts this year has resurfaced, giving gold bugs more confidence in the trade amid the prospects of lower yields towards the end of the year.
• The Iranian President’s helicopter fatal crash has also spooked global markets, pushing oil prices up. Israel has rejected claims of involvement.
• A Chinese oil tanker was hit by a Houthi missile in the Red Sea, adding to geopolitical tensions.
• Fear of a Chinese invasion of Taiwan.

Copper short squeeze continues despite disappointing China property stimulus measures

• A copper short squeeze currently unfolding has pushed prices to $10,950/t on the LME.
• COMEX, favoured by speculators, saw prices soar to $11,400/t.
• The CME group has now raised margin requirements to limit the sharp upward moves currently unfolding.
• The wide spread between exchanges has seen traders redivert cargoes to the US, although this is expected to take several weeks before delivery.
• Investor sentiment has hit frothy levels for copper as supply disruptions converge with bullish optimism over AI datacentre demand and renewable investments.
• Sprott has recently filed for a copper-backed ETF, which has fuelled further speculation of a squeeze similar to the one seen in Uranium caused by the same group.
• Hedge funds are seeing their most bullish positioning in copper since January 2018.
• The recent surge higher likely reflects CTA funds (momentum-driven algorithm funds) taking advantage of the move.
• Citi group suggest $25bn worth of speculative funds have hit LME and COMEX since February.
• LME future curve still sits in contango, suggesting demand for physical copper remains tepid.
• The market is seeing substantial investor interest in copper from North America driven by new AI data centres, green technologies, military and construction demand.

Nickel prices strengthen amid disruption in New Caledonia

• Nickel prices rallied 3% this morning to $21,737/t.
• Unrest in New Caledonia has hit Eramet’s output, now running at minimum capacity.
• Violent protests over voting rules have disrupted output.
• Additionally, Indonesia saw mine licence delays, limiting output from the world’s largest producer.

BHP / Anglo – BHP continues to consider Anglo takeover

• We suspect there may be a few behind-the-scenes discussions between executives at BHP and Anglo American.
• We also wonder if BHP might its attention towards other copper producers: Antofagasta, Ivanhoe Mining, Freeport, First Quantum, Filo Mining or Lundin Mining for copper.

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

Sharepickers TV:  Everybody wants copper. 17/05/2024 podcast:  https://audioboom.com/posts/8507288-john-meyer-everybody-wants-copper

         Video:       https://www.youtube.com/watch?v=XfYNVjIiEs4

*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 – Fed officials signal higher rates for longer

• The Fed officials reiterated the need for patience in achieving their 2% inflation target.
• Fed officials may not feel the need to cut rates while the economy continues to perform.
• We suspect China is waiting for the US to cut rates first before lowering its own due to currency / carry trade issues
• This may delay potential recovery in the Chinese property market.

EV Tariffs – US raises tariffs on Chinese EVs, Li-ion batteries and components to 25% from 7.5%.

• Tariffs also rise for graphite and permanent magnets to 25% from 0% in 2026.
• Tariffs for certain critical minerals will also rise to 25% from 0% this year.
• Tariffs on non-EV lithium-ion batteries rise to 25% in 2026 from 7.5%.
• Tariff rate for battery parts will also increase from 7.5% to 25% in 2024. Tariffs for natural graphite and permanent magnets will go from zero to 25% in 2026 and tariffs for certain critical minerals will go from zero to 25% in 2024.
• While the US does not import much in the way of Chinese EVs the move effectively prevents China from exporting surplus Li-ion batteries into the US.
• In the meantime Ford and Mercedes appear to be rolling back on their EV programmes and reverting to ICE driven vehicles particularly for heavier vehicles.
• We feel certain both companies will return to making EVs as motors become more efficient and as Li-ion power density improves. Eg offering more range and power.
• We believe the US will continue to buy Japanese and Korean batteries alongside its own.
• The US has invested nearly $20bn in grants and loans to help develop EV production in the US with ongoing tax credits from the IRA to encourage new EV chain developments.

China – Interest rates held for now despite property market woes

• One-year LPR ‘Loan Prime Rates’ remained at 3.45%
• Five-year LPR stayed at 3.95%.
• PBoC kept a key policy rate at 2.50% last week while rolling over maturing medium-term lending facilities.
• China announced another CNY 300bn for residential property stimulus overnight, although analysts have dismissed this as insufficient.
• Last week the PRC announced CNY1tn of new funding to help the property market
• Deposit requirements were cut with local authorities encouraged to acquire and finish property for sale to new buyers.
• We expect China to cut rates after the US alongside most other central banks.
• IP ‘Industrial Production‘ rose by an impressive 6.7% yoy in April
• FAI ‘Fixed Asset Investment’ rise 4.2% in April indicating some softening on new investment
• Retail Sales rise by a modest 2.5% yoy in April
• Real Estate Investment fell by -9.8% yoy from January to April
• China is struggling to contain the impact of collapse of two major property developers which have left thousands of unfinished properties in limbo.
• To compound the problem, many of these apartments have been sold with buyers supporting mortgages on properties they are not able to move into.
• Note, land was sold at discounted prices to CCP politicians who then on-sold the land for higher prices to property developers.
• This process enriched CCP officials and politicians though we have not yet seen this process blamed for the collapse of Evergrande, Country Garden and Shimao
• GDP growth has been substantially led by construction and the property sector in recent years representing a far greater proportion of GDP than in most other countries.
• China has moved to encouraging green technology industries to lead GDP growth through the development of EV manufacturing and control of the EV supply chain.
• If China is not able to develop new markets to take the massive increase in EV vehicle production this combined with property could precipitate a severe debt crisis.

Taiwan – China bans companies linked to arms sales into Taiwan

• China has also launched an anti-dumping probe into plastics imported from the US, Europe and Japan (Asia Financial).

ECB – June rate cut likely

• CPI 2.4% yoy in April
• CPI Core at 2.7% yoy.

EU – CPI 2.6% yoy

Iran – President killed in helicopter crash alongside foreign minister

• President Ebrahim Raisi was a hardline cleric who was seen as responsible for much of the nation’s stance on religious values.
• Houthi missile hits oil tanker heading for China

Bolivia – Shootout between gold cooperatives leaves one dead and two injured

• The incident highlights the dangers of working in Bolivia where mining related murders are not uncommon.

Currencies

US$1.0873/eur vs 1.0860/eur previous. Yen 155.66/$ vs 154.81/$. SAr 18.127/$ vs 18.183/$. $1.267/gbp vs $1.266/gbp. 0.669/aud vs 0.667/aud. CNY 7.231/$ vs 7.221/$.

Dollar Index 104.50 vs 105.27 previous.

Precious metals:         

Gold US$2,437/oz vs US$2,390/oz previous

Gold ETFs 80.7moz vs 80.7moz previous

Platinum US$1,088/oz vs US$1,058/oz previous

Palladium US$1,011/oz vs US$990/oz previous

Silver US$32.03/oz vs US$29.84/oz previous

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

Base metals:

Copper US$10,948/t vs US$10,558/t previous

Aluminium US$2,631/t vs US$2,601/t previous

Nickel US$21,524/t vs US$21,010/t previous

Zinc US$3,077/t vs US$2,980/t previous

Lead US$2,326/t vs US$2,287/t previous

Tin US$34,251/t vs US$34,230/t previous

Energy:

Oil US$84.2/bbl vs US$83.3/bbl previous

Natural Gas €31.3/MWh vs €30.4/MWh previous

Henry Hub Gas US$2.65/mmBtu vs US$2.50/mmBtu last Friday

• European energy prices were stable on reports that EU natural gas storage levels in the week to 18^th May jumped 3% to 66.8% full (vs 52.8% 5-Yr average), with aggregate storage now at 757TWh.
• The US Baker Hughes rig count rose by 1 unit to 604 rigs last week (-116 or 16% y/y), with oil rigs up 1 to 497 units (-78 y/y) and gas rigs flat at 103 units (-38 y/y), as Canada also dropped 2 rigs to 114 units (+29 y/y).
• Iberdrola has signed an agreement to acquire the 18.4% minority interest in its US subsidiary Avangrid for $2.6bn (~5.7x FY23 EBITDA), which will subsequently be delisted from the New York Stock Exchange.

Uranium Futures $91.3/lb vs $90.7/lb previous 

Bulk:

Iron Ore 62% Fe Spot (cfr Tianjin) US$117/t vs US$116/t

Chinese steel rebar 25mm US$538.5/t vs US$538.1/t

Thermal coal (1st year forward cif ARA) US$111.0/t vs US$114.0/t

Thermal coal swap Australia FOB US$140.5/t vs US$141.0/t

Hard Coking Coal Australia FOB US$326.0/t vs US$326.0/t

Other:

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

NdPr Rare Earth Oxide (China) US$55,421/t vs US$56,440/t

Lithium carbonate 99% (China) US$14,322/t vs US$14,714/t

China Spodumene Li2O 6%min CIF US$1,210/t vs US$1,230/t

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

China Tungsten APT 88.5% FOB US$365/mtu vs US$345/mtu

China Graphite Flake -194 FOB US$470/t vs US$470/t

Europe Vanadium Pentoxide 98% 5.1/lb vs US$5.1/lb

Europe Ferro-Vanadium 80% 26.35/kg vs US$26.35/kg

China Ilmenite Concentrate TiO2 US$325/t vs US$325/t

China Rutile Concentrate 95% TiO2 US$1,405/t vs US$1,405/t

Spot CO2 Emissions EUA Price US$68.4/t vs  US$68.4/t

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

Battery News

Company News

Beowulf Mining* (BEM LN) 0.75p, Mkt cap £15m – Financial Results for Full Year 2023

Valuation: 5.4p/sh Price Target, BUY

CLICK FOR PDF

• Beowulf announces their full year financial results for the period to December 31^st 2023.
• Beowulf is progressing the Kallak Iron Ore Project in Sweden.
• This includes preparing for the Environmental Impact Assessment, followed by a PFS.
• In Finland, the Company is progressing their Graphite Anode Material Plant, and is currently modifying the PFS to develop a full anode material plant.
• Completion of the GAMP EIA is expected this year, with the new PFS now initiated.
• The Company is also advancing their assets in Kosovo, where they hold prospective base metal targets on the Tethyan Belt.
• The is well funded for its busy work programme in 2024, having raised gross funds of £4.3m in April 2024.
• Beowulf announces today that it plans to conduct a share consolidation on a 1 for 50 basis.

*SP Angel acts as Nomad and Broker to Beowulf Mining

Power Metal Resources* (POW LN) 15.6p, Mkt cap £16m – Completion of Strategic Metals Extraction Deal

• Power Metal Resources announces it has completed the acquisition of 75% of GSA Environmental.
• POW is conducted Share Purchase Agreement for the privately-owned UK-based engineering technology provider.
• The Company is targeting operations in Saudi Arabia, extracting critical metals from power station ash, waste from refineries and spent catalysts.
• GSA holds MoUs with a Saudi Arabian Nickel-bearing fly ash and vanadium suppliers, with the aim to build treatment facilities in KSA.
• They are also exploring a demonstration scale plant in the UK for the processing of industrial waste for contained metal.
• GSA is backed by the UK Innovate fund.
• The Agreement with POW holds various considerations payable on the accomplishment of significant milestones. See the 29^th February announcement for more details. (LINK)

*SP Angel acts as Nomad and Broker for Power Metal Resources

KEFI Gold and Copper* (KEFI LN) 0.79p, Mkt Cap £42m – Formal launch of the Tulu Kapi gold project, Ethiopia

• Kefi Gold and Copper has announced that its Tulu Kapi gold project is now formally underway following the “deployment of dedicated site policing and the conditional confirmations that quickly ensued from all members of the Project’s finance syndicate”.
• The company outlines that until September 2024, it will be completing its preparations for “community resettlement” alongside further “Community consultations on social development plans”, recruitment and “Detailed engineering for procurement”.
• In parallel with the early on-site tasks, and monitoring of their progress, financing will focus on completion of the definitive documents and the “Drawdown of financing syndicate equity-risk capital October 2024 to mid-2025 followed by debt capital”.
• The debt component of the development finance includes “US$190 million secured debt from the development banks”.
• Following this initial phase, operational works are expected to include procurement and transport to site of plant, grade control drilling and preparation of a Definitive Feasibility Study on underground mining.
• Commenting that timing was “fortuitously coinciding with the improved conditions in Ethiopia and all-time high gold prices”, Executive Chairman, Harry Anagnostaras-Adams, said that “We can now proceed to safely complete our Early Works on schedule and satisfy all conditions precedent to drawdown full project finance … [and confirmed Kefi’s determination] … to ensure that Tulu Kapi preserves its standing as a showcase project for an important new business sector for Ethiopia”.

*SP Angel acts as Nomad and Broker to KEFI Gold and Copper

Metals One plc (MET1 LN)– 1.13p, Mkt cap £2.4 – Raising £895,000 to acquire and progress the Black Schist project in Finland

• Metals One reports that it has raised £895,000 through the issue of 89.5m new shares at a price of 1p/share allowing it to terminate the farm-in agreement with Gunsynd plc and progress further exploration of the project.
• Today’s announcement confirms that the July 2023 agreement with Gunsynd will be terminated with Metals One acquiring Gunsynd’s 6.25% interest in the project “for an aggregate consideration of £250,000 payable, at the discretion of the Company, either wholly or partly in cash or Ordinary Shares”.
• The shares issued represent approximately 27% of the enlarged company and Metals One confirms that the warrants “to subscribe for 1,500,000 Ordinary Shares in the Company … [issued to Gunsynd as part of the original agreement] … have been cancelled as part of the termination agreement”.
• The project hosts a JORC compliant ‘Inferred’ resource of 28.1mt at an average grade of 0.19% nickel, 0.1% copper, 0.01% cobalt and 0.38% zinc and is located in the Kainuu schist belt close to the Talvivaara mine.
• The company says that the additional funds will aid its efforts to expand the existing resource, particularly at the P5 target where it has an ‘Exploration Target’ of 16-24mt and help to “realise, in the longer term, a global resource in the order of 200 Mt to underpin a long-term producing asset”.
• A Scoping Study and updated mineral resource estimate are both expected later this year.

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

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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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