SP Angel Morning View -Today’s Market View, Monday 3rd July 2023

Copper rises despite China Caixin manufacturing PMI showing an ongoing slowdown

MiFID II exempt information – see disclaimer below

Alien Metals (UFO LN) – Alien takes on US$1m convertible to cover short term funding requirements

Anglo American (AAL LN) – In-principle agreement on Botswana diamond licences and rough diamond sales

Caledonia Mining (CMCL LN) – Quarterly dividend maintained

Eurasia Mining* (EUA LN) – Monchetundra DFS approval, Board changes and FY22 accounts

Empire Metals* (EEE LN) – Further details on high-grade titanium footprint at Pitfield

Keras Resources* (KRS LN) – Payment for Diamond Creek organic phosphate mine delayed due to administrative issue

Power Metal Resources* (POW LN) – Consulting agreement for Saudi Arabia and Oman opportunities

Savannah Resources* (SAV LN) – BUY, 22.6p – Project Barroso upcoming development milestones

Shanta Gold (SHG LN) – New five-year plan guides for +100kozpa from 2024

Gold bounces from lows on weaker US consumer spending and slowing inflation

• Gold prices bounced from sub-$1,900/oz levels last week to hold around the $1,920/oz.
• The move follows a volatile repricing of US Treasuries, with a sharp sell-off last week on the back of stronger US employment data pushing 10-year yields to 3.87%.
• Shorter term rates jumped higher, with the two-year climbing to 4.95% after a July 25bp hike was priced at 87% likelihood by the market.
• Higher rates reduce gold’s appeal to investors.
• Friday saw the release of US PCE data, which showed inflation falling to 4.6% yoy vs 4.7% in April.
• Consumer spending data showed the US household is cutting back on manufactured goods purchases, suggesting the rapid rate hikes may be finally seeping into the US consumer’s spending habits.

Base metals edge higher on China stimulus comments despite global growth concerns

• Copper up 1.7% to $8,327/t, aluminium up 0.7%, zinc up 1.1%, lead up 1.2%, nickel up 1.3% in Chinese markets.
• Slowing China factory activity is supporting expectations of a fresh round of stimulus following disappointment so far.
• China’s central bank stated over the weekend that its monetary policy would be implemented in a ‘precise and forceful manner’.’
• The Chinese equity markets have rallied 2.5%, suggesting that investors expect stimulus to be more consumption-targeted as opposed to historical construction-focused measures.
• Tourism stocks are rallying 5%, automobiles up 3.7% and consumer staples are also rallying in China.

Economics

China – Caixin Manufacturing PMI fell to 50.5 in June from 50.9 in May

• The market awaits stimulus that might not come given China’s regional and corporate debt issues

Eurozone – Manufacturing PMI finalised at 43.4 vs 44.8 in May as economy is hit by ECB rate rises

Switzerland – CPI slowed to 1.7% from 2.2%

Currencies

US$1.0881/eur vs 1.0864/eur last week. Yen 144.81/$ vs 144.65/$. SAr 18.784/$ vs 18.812/$. $1.267/gbp vs $1.264/gbp. 0.664/aud vs 0.663/aud. CNY 7.254/$ vs 7.257/$.

Dollar Index 103.17 vs 103.33 last week

Commodity News

Precious metals:

Gold US$1,923/oz vs US$1,907/oz last week

Gold ETFs 92.8moz vs 92.8moz last week

Platinum US$904/oz vs US$901/oz last week

Palladium US$1,223/oz vs US$1,245/oz last week

Silver US$23.03/oz vs US$22.47/oz last week

Rhodium US$4,600/oz vs US$4,600/oz last week

Base metals:

Copper US$ 8,327/t vs US$8,233/t last week

Aluminium US$ 2,158/t vs US$2,154/t last week

Nickel US$ 20,595/t vs US$20,795/t last week

Zinc US$ 2,375/t vs US$2,370/t last week

Lead US$ 2,093/t vs US$2,064/t last week

Tin US$ 26,787/t vs US$26,800/t last week

Energy:

Oil US$75.1/bbl vs US$74.5/bbl last week

• Crude oil prices edged above $75/bbl Brent and $70/bbl WTI over the weekend on renewed hope that evidence would emerge for crude demand growth and inventory drawdown in the latter half of the year.
• US Baker Hughes rig count was down 8 units to 674 rigs last week (-76 or 10% y/y), with oil rigs down 1 to 545 units and gas rigs down 6 to 124 units, and the EIA reporting record gas production of 102.2bcf/d in April.
• Reliance Industries and BP confirmed the start-up of the MJ field on Block D6 in the offshore India KG Basin, which is expected to add over 400mmcf/d and 25kboe/d condensate at peak production.

Natural Gas US$2.728/mmbtu vs US$2.683/mmbtu last week

Uranium UXC US$56.20/lb vs US$56.20/lb last week

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$112.6/t vs US$113.9/t

Chinese steel rebar 25mm US$525.9/t vs US$523.4/t

Thermal coal (1st year forward cif ARA) US$118.0/t vs US$118.0/t

Thermal coal swap Australia FOB US$145.5/t vs US$145.0/t

Coking coal swap Australia FOB US$233.0/t vs US$237.0/t

Other:  

Cobalt LME 3m US$31,380/t vs US$29,525/t

NdPr Rare Earth Oxide (China) US$62,818/t vs US$64,567/t

Lithium carbonate 99% (China) US$41,764/t vs US$41,779/t

China Spodumene Li2O 6%min CIF US$4,090/t vs US$4,090/t

Ferro-Manganese European Mn78% min US$1,103/t vs US$1,119/t

China Tungsten APT 88.5% FOB US$315/mtu vs US$315/mtu

China Graphite Flake -194 FOB US$725/t vs US$735/t

Europe Vanadium Pentoxide 98% 7.4/lb vs US$7.4/lb

Europe Ferro-Vanadium 80% 31.75/kg vs US$31.75/kg

China Ilmenite Concentrate TiO2 US$302/t vs US$302/t

Spot CO2 Emissions EUA Price US$90.6/t vs US$91.3/t

Brazil Potash CFR Granular Spot US$310.0/t vs US$310.0/t

Battery News

Company News

Alien Metals (UFO LN) – 0.36p, Mkt cap £19m – Alien takes on US$1m convertible to cover short term funding requirements

• Alien Metals has taken on a US$1m convertible facility from Bennelong Resource Capital which already holds 6.34% of Alien Metals.
• The funds are to be drawn down in two tranches of US$0.5m
• The funds have been secured to meet immediate funding needs.
• Management state “in the event the warrants are exercised over a 12-to-36-month period it could raise a further US$1 million, bringing total funding of up to US$2m over the relevant period.” These funds are to be used for medium term capital needs.
• Alien are paying a commitment fee of 3% and an establishment fee of US$10,000 alongside 10m commitment warrants.
• The commitment warrants have a strike price 0.5198p/s and run for a three-year term from issue.
• Interest is at 8%
• The convertible converts at the lower of:
  • 0.3356p/s
  • or a 15% discount to the 10-day VWAP prior to conversion
  • or the price offered in any placing for equity capital.
• There is also a 2% withdrawal fee, if Alien Metals decide to withdraw from the scheme
• Alien holds 90% of the Brockman and Hancock Ranges high-grade DSO iron ore projects.
• Alien Metals also holds 100% of the Munni Munni PGM and gold project in the West Pilbara.
• Rod McIllree, former, CEO and Chairman at Bluejay Mining resigned as an executive director from Alien Metals on 30 June.
• Guy Robertson was appointed as executive Chairman on 26 April.

Anglo American (AAL LN) 2,287p, Mkt Cap £30bn – In-principle agreement on Botswana diamond licences and rough diamond sales

• Anglo American has announced an agreement, in principle, with Botswana for a 25-year extension to Debswana’s mining licences until 2054 and a ten-year agreement for the sales of rough diamond production.
• Debswana is a 50:50 joint venture between Anglo American’s De Beers and the Botswana Government and operates four mines at Jwaneng, Damtshaa, Letlhakane and Orapa.
• In 2022, the Botswana operations contributed approximately 24m of the ~35m carats produced by De Beers which is expecting to produce between 30-33m carats in 2023.
• An announcement from De Beers says that there will be “a transition to increasing the share of Debswana supply sold via Okavango Diamond Company (ODC) to 50 per cent over the duration of the agreement. From the start of the new contract period ODC will receive 30 per cent of Debswana production, progressively increasing to 50 per cent by the final year of the contract, ensuring a sustainable transition path for both partners”.
• The statement from De Beers also says that it will accelerate “Botswana’s economic diversification through the creation of a multi-billion Pula Diamonds for Development Fund, with an upfront investment by De Beers of BWP 1 billion (c. $75 million) and further contributions over the next 10 years that could total up to BWP 10 billion (c. $750 million) – which will aim to create substantial additional value to the Botswana economy”.
• Al Cook, CEO of the De Beers Group, commented that the “transformative agreement reflects the aspirations of the country, secures the future of our Debswana joint venture, and reaffirms De Beers’ leadership position for the long-term. The agreement represents our commitment to deliver investments in Botswana’s diamond production, Botswana’s diamond value chain, Botswana’s knowledge-based economy and, above all, the people of Botswana”.

Caledonia Mining (CMCL LN) 952.5p, Mkt Cap £183m – Quarterly dividend maintained

• Caledonia Mining has declared a quarterly dividend of 14US¢/share. Payment is due on 28^th July.
• The latest quarterly dividend maintains the level at 14US¢/share first announced in October 2021.
• Commenting on recent developments, CEO, Mark Learmonth, explained that over the last 18 months Caledonia Mining has “seen much change in the shape of the business: we have acquired three new gold projects in Zimbabwe and we commissioned the 12MWac solar plant which provides about a quarter of Blanket’s average daily electricity requirements”.
• He highlighted the exciting “opportunity that we have to evolve the business; as we pursue our strategy to become a multi-asset, Zimbabwe-focused gold producer”.
• We comment that as a consistent dividend payer, Caledonia Mining is one of a comparatively select group AIM listed mining companies.

*SP Angel mining analysts have visited Caledonia’s mining operations in Zimbabwe

Eurasia Mining* (EUA LN) 2.9p, Mkt Cap £87m – Monchetundra DFS approval, Board changes and FY22 accounts

• The Company announced approval of the Monchetundra DFS by Russian authorities (Rosnedra) paving the way for the start of development works.
• The team decided to postpone development works given the ongoing sale process of its Russian assets allowing potential new owners to implement own development plans.
• With the focus now on the sale process, James Niewenhuys, a mining, processing and EPC specialist, will be stepping down as CEO with immediate effect.
• Additionally, Konstantin Firstov, the project manager at Kola, has been promoted to a Country Manager and will oversee the ongoing discussions regarding the sale process.
• Christian Schaffalitzky, Executive Chairman, will also take on additional executive responsibilities.
• The Company also released FY22 accounts this morning.
• The Company recorded a £7.2m loss during the year (FY21: -£3.1m) on the back of no PGM concentrate sales from West Kytlim as the team stockpiled the product due to strong cash position and the expectation of improving prices in the future.
• Closing cash currently (as of 29 Jun/23) stands at £1.7m, down from £3.0m as of Mar/23, with a total of £4.1m (net of VAT) in unsold PGM concentrate.
• The Company is debt free apart from £0.3m in lease liabilities as of YE22.
• The team is reported to be in negotiations with a number of parties to realise concentrate stockpiles in the near future with proceeds to fund current mining season

*SP Angel act as Nomad and Broker to Eurasia Mining

Empire Metals* (EEE LN) 1.8p, Mkt Cap £9m – Further details on high-grade titanium footprint at Pitfield

• Empire reports further details on its titanium discovery at the Pitfield Project in WA.
• The Company reports that a review of historical geochemical data suggests TiO2 enrichment over 1% extends over 40km of the magnetics anomaly.
• This was enabled through a review of the Cozinc Riotinto of Australia sample database, which showed levels of TIO2 in stream sediment, soil and auger samples.
• Empire believes the project has the potential to ‘become one of the largest primary titanium mineral sources discovered globally.’
• To date, Empire has drilled less than 2% of the regional magnetics anomaly which covers 40km by 8km.
• Empire is currently conducting TIO2-specific geochemical studies to define the nature of the mineralisation and the mineralogical residence of TiO2.
• Empire has £1.8m in cash as of 19^th June 2023, and states their focus is 100% targeted on building on the drilling at Pitfield.

Conclusion: Empire continues to progress the Pitfield project and the digitisation of the CRA review supports their assumptions of more expansive TIO2 mineralisation across the project area. We note that there is a diminishing number of economic titanium dioxide projects, with Base Resources coming to the end of production at its Kwale mineral sands project.

*SP Angel acts as nomad and broker to Empire Metals. The analyst holds shares in Empire.

Keras Resources* (KRS LN) 4.15p, Mkt cap £3.3m – Payment for Diamond Creek organic phosphate mine delayed due to administrative issue

(Keras holds 100% of the Diamond Creek phosphate mine in Utah, UASA. Keras also holds an 85% interest in Societé General des Mines for the Nayéga manganese project in Togo)

• Keras Resources reports that it has not been able to pay a US$0.8m cash payment and US$0.24m severance payment to the former ceo of Flacon Isle as part of the acquisition of the Diamond Creek phosphate mine.
• Keras has expected to receive funds from US$1.7m of funds from the Government of the Republic of Togo. The state has assured Keras that it will send the funds within seven days.
• Fortunately for Keras, it is permitted to make good the technical default within 30 days under their acquisition agreement.
• The Republic of Togo is taking on the Nayéga manganese project as Togolese strategic asset within Société Togolaise de Manganèse.
• Kerals will continue to assist with its intellectual knowledge on Nayéga and will continue to receive of 1.5% advisory fee on gross revenue from the Nayéga manganese mine for three years.
• Keras will also receive a 6.0% fee on gross revenue generated from the Nayéga mine for the provision of brokerage services for the lesser of 3.5 (three and a half) years or 900,000t of beneficiated manganese ore produced and sold from Nayéga”.

Conclusion:  We trust the Republic of Togo will make good on its promise to send funds to Keras within the next seven days and these funds will be used to settle the amounts owned to the former ceo and owner of the Diamond Creek phosphate mine in Utah, USA.

*SP Angel acts as nomad and broker to Keras

Power Metal Resources* (POW LN) 0.7p, Mkt cap £15.5m – Consulting agreement for Saudi Arabia and Oman opportunities

• Power Metal have initiated a consulting agreement with Jasper Consulting DMCC, a strategic consultant with focus in the Kingdom of Saudi Arabia and Oman.
• Power Metal is looking to take advantage of Saudi Arabia’s 2030 Vision Strategy, with a clear focus on mining investment and funding.
• Jasper Consultant will support POW in identifying relevant opportunities, negotiating and receiving exploration licence approval and securing co-development partners.
• Jasper will enable Power to build a presence in the region through its network of potential strategic partners and well-established presence in the region.

Conclusion: The Arabian Shield presents an exciting opportunity for POW given its underexplored nature. An agreement with Jasper Consultant will enable the Company to fast-track its exploration efforts in the region through their regional expertise and ability to navigate various regulatory exploration requirements. We look forward to future updates on the strategy.

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

Savannah Resources* (SAV LN) 4.8p, Mkt Cap £79m – Project Barroso upcoming development milestones

BUY – 22.6p

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• The Company updated on near term milestones in the Barroso Lithium Project development plan.
• The team made a series of requests for proposals to leading specialist providers for key tasks required under the second phase of the environmental permitting process (RECAPE) as well as main tasks required to complete the DFS.
• Both the environmental permitting process and the DFS are expected to be completed in H2/24, in line with previous guidance.
• The Company launched the process to license a new power line to connect the project to the national grid network that is reported to have sourced >70% of generated electricity from renewable sources YTD.
• This is the longest licensing process among the secondary licenses for the Project including licenses for construction and water usage and is expected to take ~24 months and be completed around mid-25.
• The team also is working on engaging a leading specialist engineering company to undertake the licensing requirements for the 17km bypass road to the Project.
• Additionally, the Company is expecting to confirm major service providers for resource and geotechnical drilling as well as market studies for spodumene concentrate and feldspar/quartz ceramic by-product in coming months.

Conclusion: The team is building up on a momentum following the key positive DIA decision and positive Scoping Study update released earlier engaging specialist service providers for licensing and design work required under the RECAPE and Project DFS. As previously guided, both are expected to be completed in H2/24.

*SP Angel acts as nomad and broker to Anglo Asian Mining

Shanta Gold (SHG LN) 9.4p, Mkt Cap £101m – New five-year plan guides for +100kozpa from 2024

• The Company released a five year production plan that includes contribution from the newly commissioned Singida operation.
• FY23 guidance is for 90-98koz (FY22: 65koz) including:
  • 66-72koz at $1,200-1,300/oz AISC at NLGM;
  • 24-26koz at $1,300-1,400/oz AISC at Singida (only 9m of production since commissioning in Mar/23).
• Group production is expected to ramp up to >100koz from 2024 onwards reflecting full year contribution from Singida.
• Singida AISC are expected to come down sub-$1,000/oz mark from 2025 onwards reflecting lower waste stripping costs and higher processed grades.
• Singida is estimated to produce 169koz over the five-year plan (~34kozpa on average) with a potential to extend the life of mine (7 years on current reserves) and potentially doubling processing capacities (from 1ktpd) benefiting from economies of scale allowing to reduce unit costs and drop the cutoff grade.
• Drilling is expected to start in Q3/23 with the team currently delineating potential targets through pit wall mapping and drill hole relogging with trenching ongoing.

Conclusion: The Company released an updated five-year plan incorporating newly commissioned Singida Gold Mine that is expected to contribute ~34kozpa taking group production to >100kozpa from 2024. The team has done well bringing the project into production on time with the team pointing further upside to the project from a potential life of mine expansion (resource conversion + new resources) and scale expansion (doubling mill capacity to 2ktpd).

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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