SP Angel Morning View -Today’s Market View, Monday 3rd June 2024

Copper continues to slide as short-squeeze unravels and inventories climb

MiFID II exempt information – see disclaimer below

Beowulf Mining* (BEM LN) – Positive stakeholder engagement at Kallak as EIA/PFS workstreams accelerate

Bushveld Minerals* (BMN LN) – Shareholders approve Vanchem sale and SA competition authorities clear Mokopane transaction

Caledonia Mining (CMCL LN) – Bilboes project PEA

Condor Gold* (CNR LN) – Grant of Options

Kenmare Resources (KMR LN) – Fatality at Moma ilmenite mine in Mozambique

Keras Resources* (KRS LN) –– Keras reports commissioning of its integrated milling and granulator plant, Utah, USA

Orosur Mining* (OMI LN) –  Progress in Colombia as Anzá discussions extended

Power Metal Resources* (POW LN) – Subscription agreement and entry of JV discussions for Uranium portfolio

Copper price ($10,102/t) continues to slide as short squeeze unravels and inventories climb

• Copper prices are ticking up to $10,100/t having hit recent lows of $10,062/t following a decline.
• The recent short squeeze seems to have calmed, with COMEX deliveries arriving as traders look to satisfy delivery obligations.
• Many observers reckon China’s SRB are actively placing physical copper into the market to suppress prices.
• Aluminium has also fallen, down c.2% overnight.
• Shanghai has continued to build inventories, despite June being a historically strong demand period for Chinese base metals.
• However, Chile is struggling to ramp up production, with monthly output down 1.5% yoy and 6.7% mom.

Gold price ($2,325/oz) weakens despite cooler inflation data as focus turns to US labour

• Gold prices have weakened, touching $2,315/oz before regaining some ground.
• The metal’s sell-off came despite inflation data in-line with expectations.
• US Treasuries have seen a bid following the data, with US 10-year yields falling from recent highs of 4.63% last week to 4.48% today.
• Non-farm payroll data due on Friday is expected to provide a catalyst to both Treasuries and gold, with a miss expected to support bullion as traders consider rate cut potential.

121 Mining Investment Conference investment Leaders panel: https://youtu.be/OWEASjgXiME?si=ZPzQT-1SnUhXRo0g

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 – Little change in the pace of inflation in April, in line with expectations, brought some relief to investors with S&PP500 closing higher.

• Sovereign bond yields also pulled back with benchmark 10y trading sub 4.5% after hitting over 4.6% last week.
• PCE (%yoy, Apr/Mar/Est): 2.7/2.7/2.7;
• Core PCE (%yoy, Apr/Mar/Est): 2.8/2.8.2.8.

China – Private manufacturing sector growth accelerates to the strongest in nearly two years in May, Caixin PMI data showed.

• That marked the seventh consecutive monthly improvement in the state of the manufacturing sector.
• Stronger growth was led by rising new orders.
• Although, final goods prices were little changed suggesting demand remains weak while firms were hesitant to add to their headcount with employment pulling back, albeit at a slower rate compared to April.
• Caixin Manufacturing PMI (May/Apr/Est): 51.7/51.4/51.6.

Japan – Toyota, Mazda, Yamaha suspend six models after irregularities found

• Transport ministry to conduct inspections over certification misconduct (Nikkei Asia)
• Toyota testing scandals underscore rising stakes around emissions
• Toyota to invest $13bn in EVs, AI and supply chain

Eurozone – Manufacturing PMI rose to 47.3 in May from 45.7 in April

• Greece led the charge with Manufacturing PMI at 54.9
• Spain came in at 54.0
• Holland rose to 52.5
• France also rose to 46.4
• Austria was 46.3.
• Italy 45.6
• Germany 45.4 continues to record the lowest PMI among the four major Eurozone economies.

UK – Manufacturing PMI rose to 51.2 in May from 49.1 in April marking the highest reading since July 2022.

• The move marks a strong recovery in UK manufacturing with production and new business levels both rising at fastest rates since early 2022.

Turkey – Inflation hits over 75% in May matching latest central bank projections for growth in prices to have peaked last month.

• Whether prices will follow projections on the way down remains to be seen and if that would be enough to see monetary authorities cutting rates.
• Policymakers expect inflation to end the year at 38%, Bloomberg writes.
• The central bank rate currently stands at 50% following the 5pp hike in March.

South Africa – The ANC secures just over 40% in general elections down from 57.5% in 2019.

• With 159 seats in the 400 seat National Assembly, the ANC is looking for a partner to for a minority government.
• The main opposition Democratic Alliance secured 87 seats while the party led by a former ANC and national president, Jacob Zuma, won 58 seats just five months after its launch.
• The rand is down ~2% and the stock exchange index is off 1.3% from pre elections levels (Tuesday) last week.
• Sovereign bond yields are trading 10bp higher in the respective period.

Currencies

US$1.0848/eur vs 1.0798/eur previous. Yen 157.22/$ vs 156.94/$. SAr 18.860/$ vs 18.657/$. $1.273/gbp vs $1.270/gbp. 0.664/aud vs 0.660/aud. CNY 7.246/$ vs 7.248/$.

Dollar Index 104.65 vs 105.04 previous.

Precious metals:         

Gold US$2,325/oz vs US$2,334/oz previous

Gold ETFs 80.8moz vs 80.6moz previous

Platinum US$1,033/oz vs US$1,031/oz previous

Palladium US$909/oz vs US$946/oz previous

Silver US$30.14/oz vs US$31/oz previous

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

Base metals:   

Copper US$ 10,057/t vs US$10,204/t previous

Aluminium US$ 2,647/t vs US$2,743/t previous

Nickel US$ 19,475/t vs US$20,110/t previous

Zinc US$ 2,948/t vs US$3,046/t previous

Lead US$ 2,278/t vs US$2,283/t previous

Tin US$ 32,380/t vs US$33,440/t previous           

Energy:           

Oil US$81.2/bbl vs US$83.4/bbl previous

WTI Oil US$77.0/bbl vs $77.7/bbl yesterday

UK NBP Futures 86p/therm vs 84p/therm yesterday

TTF Dutch Futures €36/MWh vs €35/MWh yesterday

Henry Hub Gas US$2.69/mmBtu vs US$2.55/mmBtu yesterday

• Crude oil prices were stable after Sunday’s OPEC+ meeting decided to prolong cuts of 3.66mb/d by a year until the end of 2025 and extend additional cuts of 2.2mb/d by three months until the end of September.
• The US Baker Hughes rig count was flat at 600 rigs last week (-96 or 14% y/y), with oil rigs down 1 to 496 units (-59 y/y) and gas rigs up 1 to 100 units (-37 y/y), as Canada gained 8 rigs to 128 units (+31 y/y).
• Hunting , the UK-listed oil field services player, is up strongly in early trading after announcing a further $86m OCTG pipeline order from Kuwait Oil Company that increases the Group’s sales order book to a record $751m.
• Saudi Aramco completed a $12bn share sale on Sunday lunchtime following strong investor demand.

Uranium Futures $88.8/lb vs $90.3/lb previous           

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$118.2/t vs US$120.5/t

Chinese steel rebar 25mm US$540.9/t vs US$541.2/t

Thermal coal (1st year forward cif ARA) US$126.8/t vs US$122.5/t

Thermal coal swap Australia FOB US$141.0/t vs US$140.0/t

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

Other:  

Cobalt LME 3m US$27,150/t vs US$27,150/t

NdPr Rare Earth Oxide (China) US$50,925/t vs US$51,880/t

Lithium carbonate 99% (China) US$14,008/t vs US$14,281/t

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

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

China Tungsten APT 88.5% FOB US$360/mtu vs US$360/mtu

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

Europe Vanadium Pentoxide 98% 5.2/lb vs US$5.2/lb

Europe Ferro-Vanadium 80% 26.85/kg vs US$26.85/kg

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

China Rutile Concentrate 95% TiO2 US$1,415/t vs US$1,400/t

Spot CO2 Emissions EUA Price US$73.9/t vs US$73.9/t

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

Company News

Beowulf Mining* (BEM LN) 0.8p, Mkt cap £15m – Positive stakeholder engagement at Kallak as EIA/PFS workstreams accelerate

Valuation: 5.4p/sh Price Target, BUY

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• Beowulf provides an update on its Kallak Iron Ore Project.
• The Company engaged with a delegation from UNESCO, discussing Kallak’s development and the Laponia World Heritage Site.
• Stakeholder engagement meetings have been initiated, with local landowners and Sami villages.
• Hydrogeology test-work has started and a ramp-up in activity is expected over the next few weeks, with baseline studies for the EIA ongoing.
• As regards technical progress, met-test work is nearing completion and open-pit geotechnical analysis is underway.
• The Company plans an in-fill drilling programme this summer to upgrade the Inferred resource to Measured and Indicted.
• Tailings management facility studies are also progressing.
• Permitting is progressing alongside the Environmental Impact Assessment, with the Supreme Administrative Court decision expected over the coming weeks.

Conclusion: This is a positive update from Beowulf who are engaging with local stakeholders to support their permitting process as they work to deliver the EIA. The Company’s in-fill drilling programme this summer should provide additional confidence in the resource and support the upcoming PFS. The Supreme Court’s decision over the Exploitation Concession grant should provide further confidence from future strategic/financing partners.

*SP Angel acts as Nomad and Broker to Beowulf Mining

Bushveld Minerals* (BMN LN) 0.7p, Mkt Cap £16m – Shareholders approve Vanchem sale and SA competition authorities clear Mokopane transaction

• Shareholders approve the sale of 100% in Vanchem to SPR for $40.6m.
• The sale provides additional capital to maintain operations at Vametco while reducing working capital requirements for the Group.
• The deal includes $20.6m in initial consideration most of which will set be off against provided working capital (up to ~$17.1m) as well as $15-20m in deferred payment with a minimum of $5mpa over the three years following completion date and up to a total of $20m subject to Vanchem free cash flow generation over the respective period.
• Separately, the Company announced on Friday that competition authorities approved the previously proposed sale of the Group’s interest (64%) in the Mokopane Vanadium Project.
• The Competition Commission of South Africa approved the $3.7m sale of the stake with the transaction remaining conditional on completion of Vanchem sale as well as consent of the Minister of Mineral Resources and Energy.

Conclusion: Deal shareholder approval is a positive news providing the Group with necessary working capital funding in a challenging vanadium price environment.

*SP Angel act as nomad and broker to Bushveld

Caledonia Mining (CMCL LN) 825p, Mkt Cap £158m – Bilboes project PEA

• Caledonia Mining has announced a summary of the highlights of a Preliminary Economic Assessment (PEA) for its Bilboes gold project located around 75km north of Bulawayo in Zimbabwe.
• Over an initial ten year mine life, Bilboes is expected to produce ~1.5moz of gold at an overall, all-in-sustaining cost averaging US$968/oz from a revised pit design intended “to reduce upfront capital”.
• The announcement highlights that, at a gold price of US$1,884/oz, capital investment of US$403m generates an after-tax NPV_10% of US$309m and an IRR of 34%.
• We note that the project uses a conservative gold price assumption and that sensitivity analysis presented in today’s announcement indicates that at a gold price of US$2,200/oz the project’s after-tax NPV_10% increases to US$484m.
• The PEA updates previous work by the previous owners of the project and incorporates Caledonia Mining’s work since in acquired the project in January 2023 including the modular development of tailings storage capacity “to reduce the initial capital expenditure and therefore improve the economic returns”.
• Caledonia Mining explains that the “work that has been carried out to date in respect of the revised approach to the TSF is to the level of a preliminary economic assessment and not to the level of a feasibility study”.
• “Over the course of the next 9 months, the Company intends to upgrade the confidence level of the study in respect of the TSF so that the entire body of work on the Project may be classified as a feasibility study which will be published in due course”.
• Chief Executive, Mark Learmonth, explained that the “peak funding requirement for the Project is expected to be approximately $309 million, with a sizable proportion funded through debt … [and that Caledonia Mining has] … had highly positive engagements with prospective debt providers and we now propose to re-engage with these providers in parallel with the process of preparing the New Feasibility Study”.

Conclusion: Development of Bilboes is an important element of Caledonia Mining’s plans to build on the refurbished Blanket mine and expand its gold production rate to over 200,000oz pa.  We look forward to the publication of the PEA for further insight into the project.

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

Condor Gold* (CNR LN) 27.5p, Mkt Cap £56m – Grant of Options

(Condor Resources holds 100% of the La India gold mining project)

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• Condor Gold reports that a total of 4.9m share options, representing approximately 2.4% of its issued share capital, have been granted to directors, employees and consultants.
• The options are exercisable at a price of 28p/share over a five year period from 29^th May.
• Condor Gold’s principal asset is a permitted gold development project at La India in Nicaragua which hosts a 1moz ‘Indicated’ resource and an additional ‘Inferred’ resource of over 1.1moz.
• A 2022 Feasibility Study for the development of an open-pit mine at La India showed that, at a gold price of US$1,600/oz (currently ~US$2,300/oz), an initial capital investment of US$105.5m generates an after-tax NPV5% of US$86.9m and IRR of 23% from a project producing an average of over 81,000oz of gold annually for the first six years of an 8.4year mine life.
• Sensitivity analysis disclosed by the company in September 2022 indicated that at a higher gold price of US$2,000/oz, post-tax NPV_5% increases by around 2.4x, to US$205.2m generating an IRR of 43%.
• La India also offers underground mining potential and additional gold exploration opportunities in the broader area around the planned open-pit mine.
• In November 2022, Condor Gold announced that “now is the right time to sell the assets of the Company to a gold producer with mine building expertise, thus ensuring a new mine at La India, a significant investment in the local area and a regeneration of the local communities” and the company has subsequently described a number of interested parties visiting the site under the terms of non-disclosure agreements.
• In its recent 2023 annual report Condor Gold confirmed a “significant interest in the sale of the Company’s assets…  and … [that] … the Board is optimistic that a resolution should be concluded in the near future”.

*SP Angel acts as a broker to Condor Gold

Kenmare Resources (KMR LN) 373.5p, Mkt Cap £333m – Fatality at Moma ilmenite mine in Mozambique

• Kenmare Resources reports a fatality at the moma mineral sands mine in Mozambique.
• The excavator operator was working for a contractor and was killed during the night shift while working on a new dry mining area.
• Dry mining is used to supplement feedstock in stead of the establishment of new ponds for dredging for the Wet Concentrator Plant ‘A’.
• Kenmare have suspended all mining and processing operations for a safety stand-down and for employees to be briefed.
• The police and mine management are investigating how the incident occurred and are in close contact with Ministry officials.
• The Mine has resumed full operation, except for WCP A’s dry mining operations, which remain suspended to allow further investigations to continue.

Conclusion: Listed western mining companies generally have excellent track records on health and safety for employees and their contractors.

The application of modern, well considered and rigorous safety standards are headline priorities for these companies which makes it all the more shocking when a contractor or employee is killed or injured at site. Particular attention is paid to safety with the use of large-scale and heavy equipment.

Keras Resources* (KRS LN) – 3.75p, Mkt cap £2.94m – Keras reports commissioning of its integrated milling and granulator plant, Utah, USA

(Keras holds 100% of the Diamond Creek phosphate mine in Utah, USA)

• Keras Resources report substantial progress in the assembly of its new integrated milling and granulator plant at its new Delta processing facilities.
• The plant is now energising its motors for start-up sequencing  along with the set-up of other instrumentation under no-load conditions.
• See video on twitter feed: https://twitter.com/kerasplc
• All equipment is now installed just four months from the start of the Phosul Utah jv.
• Wet commissioning will start in the next two weeks under load conditions with granulator binder fluids.
• Commissioning will first test granulation using Falcon Isle rock phosphate before introducing additional material to make Phosul® organic phosphate.
• Plant capacity is for 5tph with a 520t/month running a single shift operation.
• The plan is for the plant to work towards moving to a double shift operation in Q4 for around 920tpm of saleable bulk Phosul® granules.
• Phosul® consists of 80% of 50 mesh ore from Keras’ Falcon Isle Diamond Creek mine.
• Falcon Isle currently holds ~4,250tons of 50 mesh product which will cover the operation through 2024 with all mining and crushing costs already expensed.
• The Phosul jv should consume ~10,500tpa of 50 mesh phosphate when running at steady state.
• Keras’ Diamond Creek can produce ~25,000tpa of rock phosphate.
• Keras recently restructured it’s short-term debt of US$900,000 incurred through the acquisition of the remaining 49% of Falcon Isle Resource Corp into a US$1,525,000 four-year loan and convertible loan, with US$1,325,000 of new cash funds and US$200,000 in capitalised Directors outstanding fees.  (see RNS on 28/05/24)

• Phosul® granules are currently selling for $40 for a 25lb bag or $75 / 50lb bag on Amazon in the US.

• Manganese:  The Government of Togo are working towards the restart of mining at the Nayega manganese mine in Togo.
• Keras has an agreement whereby it should earn a “1.5% royalty advisory fee plus 6.0% of gross revenue generated from the Nayéga mine for the lesser of 3.5 years or 900,000t of beneficiated manganese ore produced and sold from Nayéga”.
• The deal with the Togo government should give nearly $0.9m a year at a price of $3.5/dmt for manganese and production of 7,480tpa equating to some $2.6m over three years.
• Manganese ore prices for 38%min FOB South Africa are steady at 3.47-3.62/dmtu.

Conclusion:  Good to hear of such rapid progress in the assembly and commissioning of the process plant at Delta. We look forward to news on the wet commissioning of the plant and sales of Phosul® organic phosphate going forward.

*SP Angel acts as nomad and broker to Keras

Orosur Mining* (OMI LN) 4.2p, Mkt Cap £8.3m –  Progress in Colombia as Anzá discussions extended

• Orosur provide an update on their Colombian progress, where they are in discussions with a Newmont/Agnico Eagle JV to retake control of the Anzá project.
• As announced on March 25^th Orosur is proposing a 1.5% NSR and deferred cash payments for the asset – both dependent on future production at the pre-Resource asset.
• Today the Company announces that negotiations are progressing towards documentation finalisation, with discussions extended until June.
• In the meantime, Orosur has been conducting planning and community consultations in the event of reassumed operatorship of the Project.

*SP Angel acts as Nomad and Broker to Orosur Mining

Power Metal Resources* (POW LN) 19.2p, Mkt cap £21m – Subscription agreement and entry of JV discussions for Uranium portfolio

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• Power Metal Resources provides an update on their Uranium portfolio in Canada.
• The Company has signed a legally binding subscription agreement with ACAM LP for a gross £2m investment in Power Metal via loan notes and warrants.
• ACAM is backed by Louis Bacon of Moore Capital Management and has stakes in Amaroq Minerals’
• POW has also entered an eight-week exclusivity period to form a uranium-focused JV across POW’s entire uranium portfolio.
• Subscription Agreement
  • ACAM will purchase notes with attaching warrants for £2m.
  • The attaching warrants are exercisable at 15p/share.
  • The Notes have a five year term and bear an interest of 10% pa.
  • POW can pay the notes through either cash or the issuance of new shares.
  • The Company can settle interest in shares or cash.
  • 20% of any future equity financing proceeds will be used to redeem the notes for cash.
  • Any asset sale over £300k with require POW to redeem notes for cash.
  • POW can redeem the notes at any time without fee or penalty.
• Non-Binding Term Sheet for Uranium-focused JV
  • The Company and ACAM are exploring options for a uranium-focused JV over POW’s entire uranium licence portfolio.
  • The Group have entered an eight-week exclusivity period.
  • ACAM is set to make an initial equity investment of £10m into the Uranium subsidiary for a 70% majority interest.
  • The agreement also suggests POW may receive an additional cash payment of £4m, on a sale transaction by ACAM.
  • The funding would provide at least five drilling programmes.
• If the JV agreement is signed, POW expects to cancel its Uranium Energy Exploration IPO, paying the £500k fee cost through the note proceeds.
• They expect to use the remaining note proceeds for general corporate purposes.

Conclusion: Today’s announcement is an exciting development for POW as they continue to execute on their portfolio value crystallisation strategy. The Subscription Agreement reinforces the balance sheet with cash and further upside from warrants. The Joint Venture agreement, however, provides POW with the opportunity to well-financed exploration, including a minimum of five ‘high impact drilling programmes’ at their highly prospective Athabasca Basin uranium licence portfolio. We look forward to further updates from the JV discussions.

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

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                                                            

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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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