SP Angel Morning View -Today’s Market View, Monday 5th June 2023

Lithium demand outlook improves as China considers extending EV tax subsidies

MiFID II exempt information – see disclaimer below

Andrada Mining (ATM LN) – Commencement of OTCQB trading

Conroy Gold and Natural Resources (CGNR LN) – Channel sampling extends mineralised zone in Co Armagh

Greatland Gold (GGP LN) – Disposing of Tasmanian exploration licences

Sunrise Resources (SRES LN) – £200,000 capital injection from US investor

Gold – $1,942/oz – Prices slides as dollar and Treasury yields climb higher on US payroll strength

• Gold prices weakened to weekly lows this morning on the back of a surprise jump in US employment data.
• US nonfarm payrolls increased by 339k jobs in May, vs a 190k forecast by economists.
• The strong beat further highlights the strength of the American economy, despite concerns of recession brewing.
• Unemployment, however, climbed to a seven-month high of 3.7%.
• The market now sees a 78% change of the Fed leaving the current rate of interest unchanged at its FOMC meeting next week.
• Gold also weakened on the back of reduced haven demand after Biden pushed the debt ceiling deal through both the House and Senate.

Copper rally cools as China stockpiles climb and consumption data disappoints

• Copper prices continue to hover around the $8,200/t mark as traders lose faith in China’s property sector.
• Surging copper inventories in Shanghai are also weighing on prices following their rally last week.
• Copper saw its first weekly rise in seven weeks, sliding to a six-month low at the end of May near $7,900/t.

Iron ore rebounds to six week high as traders bet on stimulus measures

• Iron ore prices rallied to $108/t on the Dalian exchange and the same in Singapore, their highest since mid-April.
• China is reportedly eyeing potential stimulus measures to shore up its economy, as data continues to disappoint to the downside on property construction and sales.
• China’s Caixin PMI highlighted positive new order data, sitting at the highest level since April 2021.
• 16 steel mills are reportedly hiking steel prices going forward. (Mysteel)
• Full year steel production for 2023 is expected to come in lower than 2022.
• Steel rebar prices climbed 2.5%, HRC up 2.4% and coking coal and coke up 1% and 1.8% respectively.

China to extend EV tax exemption policy to boost expanding industry

• CCTV reported over the weekend that China is planning to extend and optimise its NEV purchase tax exemption policy.
• The tax exemption policy was set to expire this year, with Bloomberg suggesting the policy may be extended for another four years.
• The Government body is also looking to boost charging infrastructure and battery recycling systems

US department of Energy chart highlights growing importance of critical raw materials for economic development

• It is interesting to see the analysis of critical materials by the US DoE
• Lithium and nickel become increasingly high risk from 2025 (See pages 22 and 23)
• Rare Earth supply is also increasingly critical, as Chinese manufacturers will want to use all its domestic supply at home.
• https://www.energy.gov/sites/default/files/2023-05/2023-critical-materials-assessment.pdf.

Economics

US – The labour market remains strong with latest NFPs and unemployment data coming in better than expected in May.

• Markets increased their bets of the Fed hiking rates by the end of July on the back of the report but overall expectations are the central bank is likely to stay put at the meeting mid June.
• NFPs (‘000): 339 v 294 (revised from 253) April and 195 est.
• Unemployment Rate: 3.7% v 3.4%% April and 3.5% est.
• Av Hourly Earnings (%mom): 0.3 v 0.4 (revised from 0.5) April and 0.3 est.
• Av Hourly Earning (%yoy): 4.3 v 4.4 April and 4.4 est.
• US dollar remains resilient despite lower expectations for an interest rate rise in June

China – Caixin PMI services rose to 57.1 in May from 56.4 as economy recovers from lockdowns, Covid-19 infections and the flu.

• The rise in activity in the services sector follows that seen on reopening in the West.
• We wonder if they have a ‘Wok out to help out’ scheme in place
• The strong survey result is in contrast with weak official manufacturing PMI data which showed contraction last week.
• Caixin Manufacturing PMI (released last week) rose to 50.9 in May from 49.5 in April
• Caixin Composite PMI: 55.6 v 53.6 April.
• The Caixin PMI surveys around 650 private and state-owned services companies while the official PMI surveys 4,300 companies.
• Official PMI figures are lower but may be less trusted in the current environment.

Japan – PMI Services PMI hit a record 55.9 in May as Q2 growth accelerates vs 55.4 in April

• PMI Composite rose to 54.3 in May vs 52.9 in April
• Expect strong Q2 GDP growth on top of the 1.3% GDP growth seen in Q1.
• Japanese equities hit new 33-year high

Germany – Exports jumped unexpectedly in April helped by increased shipments to China, although positive momentum is not expected to last.

• Shipments to China were up 10.1%yoy while exports to the US and rest of the EU increased 4.7% and 4.5%, respectively.
• Exporters’ sentiment is reported to have dropped in May to the lowest level since Nov/22, according to the Ifo numbers.
• Exports (%mom): 1.2 v -6.0 (revised from -5.2) March and -2.5 est.
• Imports (%mom): -1.7 v -5.5 (revised from -6.4) March and -1.0 est.

Switzerland – CPI rose 0.3% in May vs to 2.2% yoy vs 2.6% yoy a year earlier

• Core CPI (excluding fresh and seasonal products, energy and fuel) rose 0.2% mom.
• Domestic products prices climbed 0.3% mom.
• Imported products prices rose 0.1% mom.
• Domestic products prices slowed to 2.4% yoy from 2.6% yoy.
• Imported products prices pulled back to 1.4% yoy from 2.4% yoy.

UK – The central bank is considering changes to the deposit guarantee scheme to better protect deposits in failing smaller banks, Bloomberg reports.

• BOE is working on potentially increasing the £85k insurance threshold and ensuring more pre-funding of its deposit guarantee scheme.
• The guarantee programme may potentially advance capital to a failed bank so that it would remain solvent until it was sold or shut.

Turkey – Inflation continued to pull back in May reflecting lower energy prices and high base effect.

• The rate came in at 39.6%yoy, down from 43.7% in April.
• Prices were up only 0.04%mom.
• The Turkish statistics bureau used an average gas price increase of zero in its calculations on the government decision to subsidise energy bills ahead of elections, FT reports.
• Lira continued its runaway slide against the US$ now trading above the 21 level.

Currencies

US$1.0686/eur vs 1.0669/eur yesterday. Yen 140.44/$ vs 139.86/$. SAr 19.463/$ vs 19.863/$. $1.239/gbp vs $1.242/gbp. 0.659/aud vs 0.649/aud. CNY 7.120/$ vs 7.119/$.

Dollar Index 104.28 vs 104.40 yesterday.

Commodity News

Precious metals:

Gold US$1,942/oz vs US$1,977/oz yesterday

Gold ETFs 94.1moz vs US$94.2moz yesterday

Platinum US$1,010/oz vs US$1,015/oz yesterday

Palladium US$1,437/oz vs US$1,396/oz yesterday

Silver US$23.41/oz vs US$23.88/oz yesterday

Rhodium US$6,400/oz vs US$6,650/oz yesterday

Base metals:   

Copper US$ 8,211/t vs US$8,286/t yesterday

Aluminium US$ 2,251/t vs US$2,306/t yesterday

Nickel US$ 20,875/t vs US$21,600/t yesterday

Zinc US$ 2,280/t vs US$2,307/t yesterday

Lead US$ 2,027/t vs US$2,015/t yesterday

Tin US$ 25,650/t vs US$25,810/t yesterday

 Energy:           

Oil US$77.6/bbl vs US$75.1/bbl yesterday

• Crude oil prices strengthened following Saudi Arabia’s voluntary decision to reduce its oil production by a further 1mb/d to 9mb/d from July, with OPEC+ extending their own reduced quota levels into 2024.
• The US Baker Hughes rig count was down 15 units to 696 rigs last week (-31 y/y), with oil rigs accounting for all 15 losses and falling to 555 units while gas rigs were unchanged at 137 units.

Natural Gas US$2.218/mmbtu vs US$2.180/mmbtu yesterday

Uranium UXC US$54.60/lb vs US$54.60/lb yesterday

Bulk:

Iron ore 62% Fe spot (cfr Tianjin) US$104.6/t vs US$102.2/t

Chinese steel rebar 25mm US$527.8/t vs US$515.8/t

Thermal coal (1st year forward cif ARA) US$96.0/t vs US$98.0/t

Thermal coal swap Australia FOB US$134.5/t vs US$131.0/t

Coking coal swap Australia FOB US$225.0/t vs US$224.0/t           

 Other:  

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

NdPr Rare Earth Oxide (China) US$68,813/t vs US$69,806/t

Lithium carbonate 99% (China) US$41,077/t vs US$40,626/t

China Spodumene Li2O 6%min CIF US$4,030/t vs US$4,030/t

Ferro-Manganese European Mn78% min US$1,266/t vs US$1,275/t

China Tungsten APT 88.5% FOB US$323/mtu vs US$323/mtu

China Graphite Flake -194 FOB US$760/t vs US$760/t

Europe Vanadium Pentoxide 98% 7.1/lb vs US$7.1/lb

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

China Ilmenite Concentrate TiO2 US$310/t vs US$314/t

Spot CO2 Emissions EUA Price US$82.1/t vs US$83.0/t

Brazil Potash CFR Granular Spot US$345.0/t vs US$355.0/t

Battery News

Queensland draft bill legislates 80% renewable target by 2035

• Queensland, Australia’s most coal-reliant state, has released a draft bill that legislates an 80% renewable target by 2035.
• The plan, published on Saturday, calls for the construction of 22GW of new wind and solar parks, along with grid-scale battery and pumped hydro storage facilities.
• The bill would require AUD $62bn of investment to convert thermal electric production sites into hubs for green power and green hydrogen production.
• Before reaching 80% by 2035, the share of renewables is aimed to reach 50% by the end of the decade and 70% by 2032.

Company News

Andrada Mining (ATM LN) 5.95p, Mkt cap £92m – Commencement of OTCQB trading

• Andrada Mining reports that its shares will start trading today on OTCQB which is expected to broaden its investor base and attract US retail investment.
• CEO, Anthony Viljoen described the trading on OTCQB as a “key step in Andrada’s strategy to broaden the Company’s investor base by making its shares more accessible to the North American institutional and retail investors …[which he said] … is known for its understanding of, and strong appetite, for mining companies, particularly in lithium equities”.
• The company also describes progress on its debt facilities confirming that it executed the contractual agreement with the Development Bank of Namibia for its previously announced N$100m (US$5.5m) facility on 2^nd June.
• “The conclusion of the US$25m funding facility with Orion Global Resource Fund … [announced in September 2022] … remains subject to the finalisation of an intercreditor agreement between Orion and the senior lenders DBN and Standard Bank”.

 Conroy Gold and Natural Resources (CGNR LN) 17.5p, Mkt Cap £7.4m – Channel sampling extends mineralised zone in Co Armagh

• Conroy Gold reports that a programme of bedrock channel sampling at its Mines Royal option site near Newtownhamilton in Co Armagh has shown that quartz bedrock mineralisation extends around 100m further to the northeast from the channel sampling reported in February 2023 which included an assay of 123g/t gold in a quartz breccia.
• The sampling “programme is being carried out in conjunction with the Company’s joint venture partner, Demir Export” and included the observation of visible gold.
• The company says that the recent work included an “eighteen metre length exposure of quartz breccia was identified and interpreted as a continuation of the structure identified previously in outcrop and trenching. Channel sampling consisting of one metre length samples was conducted over this exposure”.
• Among the five results of over 0.3g/t gold highlighted today are single metre long samples ranging between 0.3g/t gold to 6.5g/t gold which extend “the strike of the gold bearing quartz breccia zone to over 135m in length”.

Greatland Gold (GGP LN) 7.8p, Mkt Cap £394m – Disposing of Tasmanian exploration licences

• Greatland Gold reports it has reached agreement with Flynn Gold for the disposal of the Firetower and Warrentinna exploration licences in Tasmania although Greatland Gold will retain a 1% Net Smelter Royalty on any future production.
• Greatland Gold “was paid A$100,000 by Flynn Gold … [in shares for an option to acquire the licences and] Flynn Gold has now exercised the Option to purchase the Tasmanian Tenements”.
• Flynn Gold will now make staged payments with an initial A$200,000 in shares and a deferred consideration of two tranches each oh A$500,000 plus the NSR.  The first tranche is payable “upon the definition of a JORC-compliant Mineral Resource of at least 500,000 ounces of gold … [with the second due] … upon the issue of a permit to mine by Mineral Resources Tasmania in respect of any part of the Tasmanian Tenements”.
• Commenting on the transaction, Managing Director, Shaun Day, explained that it allows Greatland Gold to “realise immediate value from these tenements which are outside of our core focus locations while maintaining ongoing exposure to the upside potential of this prospective ground”.
• He also said that “This is a particularly pleasing outcome at a time that Greatland is accelerating its exploration efforts within the Paterson Province”.

Conclusion: Disposal of exploration tenements in Tasmania underlines the commitment to its projects in the Paterson ranges of WA where Greatland Gold is working with Newcrest Mining on the Havieron and Juri projects and recently reached a farm-in agreement with Rio Tinto on the Paterson South project.

Sunrise Resources (SRES LN) 0.1p Mkt Cap £4m – £200,000 capital injection from US investor

• Sunrise Resources reports that it expects to receive £200,000 within the next week in the form of a Second Convertible Security from US based institutional investor, Towards Net Zero.
• The investment from Towards Net Zero is the second phase of a £480,000 investment announced in November 2022.
• The Second Convertible Security has a 24 months term and “will not be subject to quarterly repayments … [and is convertible at a price] … equal to the Market Price (being 98% of the average of five daily volume-weighted average prices of the shares on AIM during a specified period preceding the relevant conversion”.
• Towards Net Zero, is described as focussing on the green economy.
• At the time of the original announcement in November, Sunrise Resources said that the “funds raised will be applied to the further development and exploration of the Company’s projects and general working capital purposes”.

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 – [email protected] – 0203 470 0490

Simon Beardsmore – [email protected] – 0203 470 0484

Sergey Raevskiy –[email protected] – 0203 470 0474

 Sales

Richard Parlons –[email protected] – 0203 470 0472

Abigail Wayne – [email protected] – 0203 470 0534

Rob Rees – [email protected] – 0203 470 0535

Grant Barker – Grant.Barker@spangel.co.uk – 0203 470 0471

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