SP Angel Morning View -Today’s Market View, Monday 7th August 2023

Gold and uranium rise as Niger rejects French and ECOWAS intervention

MiFID II exempt information – see disclaimer below

Celsius Resources* (CLA LN) – Exploration permit awarded for the Botilao prospect

Gemfields Group (GEM LN) – Moves to expand processing capacity at Montepuez

Greatland Gold (GGP LN) – Presentation on WA development and exploration projects

Liontown Resources (LTR AU) – Liontown explore downstream lithium hydroxide plant with Japan’s Sumitomo

PYX Resources (PYX LN) – Indonesian Government eases export restrictions on ilmenite and rutile

Gold ticks higher on US labour data as Treasury sell-off subsides

• Spot gold prices climbed from lows of $1,931/oz on Friday to $1,945/oz following US nonfarm payrolls.
• The data showed fewer jobs added than expected in July, with average hourly earnings rising 0.4% to 4.4% yoy.
• Importantly, job gains in May and June were both revised lower, removing pressure on the Fed to hike another 25bp in September.
• US Treasury yields slid 17bp from their November 2022 highs, sliding down to 4.03% before recovering somewhat to 4.09% today.
• Investor focus turns to US CPI due on Wednesday, where a slight uptick is expected as a result of rising crude prices and seasonal base effects.

Copper rally falters as demand weakens in China following tightened July supply

• Copper prices failed to sustain their rally last week which pushed the metal up to $8,850/t last week, with prices sliding back to settle around $8,500/t.
• There was a moment of supply tightness last week, with China spot premiums climbing to the highest in a month.
• SMM forecast august refined production to hit a record high of 986kt following a beat last month of 926kt.
• Smelters are ramping up activity on higher TCRC charges, a sign of well-supplied concentrate markets.

Uranium – Niger coup leaders ignore ultimatum as uranium supply concerns mount

• Niger coup leaders rejected calls from the West African regional bloc to reinstate the removed president.
• The ECOWAS is considering the authorisation of military intervention.
• President Mohamed Bazoum is currently imprisoned.
• Niger is France’s second largest supplier of uranium.
• Supporters have been seen waving Russian flags when showing their support for the coup.
• Uranium prices have started to move in the spot market with the UXC price rising 0.18% to $56.25/lb last week but remains well off the $140/lb seen in 2007.

Malaria – GSK discover mosquito gut bacteria which may help to eradicate Malaria

• The bacteria occurs naturally and cuts the parasite lode within the mosquito and may reduce transmission to mammals.
• The bacteria does not kill the insect, affect it’s ability to reproduce and is believed to be environmentally safe.
• Feeding traps and water courses could be laced with the bacteria which could also be used to form coatings in high-risk areas.

Diamonds – GIA evaluated 4ct ring made from a single LGD ‘Lab-Grown Diamond’

• The ‘GIA ‘Gemological Institute of America’ has evaluated a 4ct ring carved from a single LGD (Rapaport).
• The ring was cut from a 8.45ct LGD grown through chemical vapor deposition and highlights creativity from larger and relatively cheap LGDs.
• Consumers might also be interested to know that the PLA ‘Peoples Liberation Army’ of China is a major producer of LGDs through NORINCO.
• Norinco produces military equipment for the PLA and manufacturers LGDs for guided missiles radar, laser weapons etc…
• We suspect profits from LGDs are reinvested into military research.
• Norinco remains under US sanctions in relation to sale of missile related goods to Iran and the import of firearms and munitions into the US.
• Biden recently expanding the scope of these sanctions due to Norinco’s shipping of assault rifles and drone parts to Russia in December last year.

Conclusion: some recipients might not be so impressed to think their diamond jewellery has helped fund the PLA and munitions into Iran and Russia.

VOX Markets:  

31/07/2023: https://audioboom.com/posts/8341813-john-meyer-on-lab-grown-diamonds-bushveld-minerals-power-metals-res-wh-ireland

24/07/2023: https://audioboom.com/posts/8338437-john-meyer-on-improved-liquidity-plus-cornish-metals-beowulf-rainbow-rare-earths-solgold-sove

*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.

Economics

US – Mixed labour data was released on Friday with payrolls coming in below expectations, although, growth in wages continued strong in July

• Nevertheless, bond yields pulled back on Friday with shorter term rates (2y) dropping more than 10bp to below 4.8%.
• NFPs: 187k v 185k June (revised from 209k) and 200k est.
• Unemployment Rate: 3.5% v3.6% June and 3.6% est.
• Labour Force Participation Rate: 62.6% v 62.6% June and 62.6% est.
• Private employment was 172k in July vs 128k in June
• Manufacturing employment fell 2k in July vs 6k in June
• Government employment 15k in July vs 57k), as
• Av Hourly Earnings (%mom): 0.4% v 0.4% June and 0.3% est.
• Av Hourly Earnings (%yoy): 4.4% v 4.4% June and 4.2% est.
• Average weekly hours worked were 34.3 in July vs 34.4), as
• Global Supply Chain Pressure Index in Jul -0.9 in July vs -1.14 in June (NY Fed Reserve)
• The index uses a series of metrics to summarise the working of the global supply chain using cross border transportation costs, container charges, air transportation rates, country PMIs. The higher the index the greater the stress.

China – The PRC is investigating trades into the use of low-cost finance and subsidies to finance commodity trades using cheap US dollars

• The traders then loan the rights of the metal, to on-shore entities in China which use the metal in storage as collateral for cheap loans.
• More fraud using metal for multiple loans may come to light as these lending mechanisms come to light.
• In theory this might spook the market if metal has to be sold as part of the recovery of collateral that has been lent to multiple parties as happened with the Fanya Metal Exchange which collapsed in 2015 and Qingdao metal warehousing scandal in 2014.

Germany – Industrial production contracted faster than expected in June as manufacturing continued to struggle with waning global growth and tighter financing conditions

• Industrial production ex energy and construction was down by 1.3%mom while construction fell 2.8% at the end of Q2/23.
• More up to date data in the form of manufacturing PMI and IFO business sentiment point to further deterioration in the sector.
• Industrial Production (%mom): -1.5 v -0.1 May (revised from -0.2) and -0.5 est.
• Industrial Production (%yoy): -1.7 v 0.0 May (revised from 0.7) and -0.2 est.
• Construction PMI 41.0 in July vs 41.4 in June – Why build when the Russians might steal it off you phase II of their new European expansion?

EU  – Construction PMI 43.5 in July vs 44.2 in June

UK – Property prices recorded a fourth consecutive drop in July driven by higher mortgage rates, Halifax data showed.

• The average house value dropped 0.3%mom and 2.4%yoy in July to ~£285k.
• The data matches findings from a rival lender Nationwide that showed that prices were down 3.8% from a year earlier marking the strongest drop since 2009.
• “The continued affordability squeeze will mean constrained market activity persists, and we expect house prices to continue to fall into next year,” Halifax commented on the data.
• Construction PMI 51.7 in July vs 48.9 in June

Niger – The military junta closed the nation’s airspace as the Economic Community of West African States deadline for reinstatement of the deposed government expired yesterday.

• The ECOWAS demanded militaries reinstated the elected Mohamed Bazoum government threatening to take “all measures necessary” including the use of force should calls be rejected.
• Earlier, military governments at Burkina Faso and Mali warned that any military intervention against Niger’s coup leaders would be considered a “declaration of war” against their nations.

Mongolia – US to support Mongolia in exporting rare earths in bid to diversify supply

• Reuters reports US and Mongolian officials met this week to explore routes for Mongolia to access global rare earth market demand.
• The US will also explore ways to support Mongolia’s rare earth mining industry.
• Mongolia’s Prime Minister met with Kamala Harris last week.

Currencies

US$1.0987/eur vs 1.0917/eur last week. Yen 142.16/$ vs 143.30/$. SAr 18.503/$ vs 18.548/$. $1.273/gbp vs $1.270/gbp. 0.658/aud vs 0.653/aud. CNY 7.193/$ vs 7.194/$.

Dollar Index 102.23 vs 102.48 last week.

Commodity News

Precious metals:

Gold US$1,937/oz vs US$1,933/oz last week

Gold ETFs 91.1moz vs 91.1moz last week

Platinum US$930/oz vs US$919/oz last week

Palladium US$1,262/oz vs US$1,253/oz last week

Silver US$23.59/oz vs US$23.47/oz last week

Rhodium US$4,100/oz vs US$4,100/oz last week

Base metals:

Copper US$ 8,545/t vs US$8,584/t last week

Aluminium US$ 2,235/t vs US$2,212/t last week

Nickel US$ 21,312/t vs US$21,860/t last week

Zinc US$ 2,503/t vs US$2,495/t last week

Lead US$ 2,150/t vs US$2,149/t last week

Tin US$ 27,700/t vs US$28,080/t last week

Energy:           

Oil US$86.3/bbl vs $85.3/bbl last week

• Crude oil prices spiked briefly this morning on news of a drone attack on a Russian tanker but are broadly flat after an online meeting on Friday between key OPEC nations recommended no changes to its supply policy.
• The US Baker Hughes rig count was down 5 units to 659 rigs last week (-105 or 14% y/y), with oil rigs down 4 to 525 units (-73 y/y) and gas rigs flat at 128 units (-33 y/y), and the Permian Basin reported as losing 5 units.
• BP’s CEO reportedly plans to develop the Morgan and Mona offshore wind farm projects (50% WI) in the Irish Sea that have a combined 3GW potential generating capacity without seeking subsidies/contracts from the UK Government, saying that the Company’s strategy is built around using the green electrons for its own use.

Natural Gas US$2.599/mmbtu vs US$2.567/mmbtu last week

Uranium UXC US$56.25/lb vs US$56.15/lb last week

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$105.1/t vs US$102.1/t

Chinese steel rebar 25mm US$527.4/t vs US$534.4/t

Thermal coal (1st year forward cif ARA) US$115.0/t vs US$115.0/t

Thermal coal swap Australia FOB US$142.0/t vs US$137.8/t

Coking coal swap Australia FOB US$236.0/t vs US$236.0/t

Other:  

Cobalt LME 3m US$33,420/t vs US$33,420/t

NdPr Rare Earth Oxide (China) US$65,573/t vs US$65,479/t

Lithium carbonate 99% (China) US$35,850/t vs US$35,798/t

China Spodumene Li2O 6%min CIF US$3,710/t vs US$3,710/t

Ferro-Manganese European Mn78% min US$1,045/t vs US$1,054/t

China Tungsten APT 88.5% FOB US$310/mtu vs US$310/mtu

China Graphite Flake -194 FOB US$675/t vs US$675/t

Europe Vanadium Pentoxide 98% 7.6/lb vs US$7.6/lb

Europe Ferro-Vanadium 80% 31.85/kg vs US$31.85/kg

China Ilmenite Concentrate TiO2 US$313/t vs US$312/t

Spot CO2 Emissions EUA Price US$92.4/t vs US$91.1/t

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

Battery News

UK car sales continue to grow on strong EV demand

• The UK has seen the 12^th consecutive month of growth when it comes to new car registrations.
• 143,921 new cars were registered in July – 28.3% yoy increase.
• Battery EVs (87.9%), Plug-in Hybrid Electric Vehicles (79.1%) and Hybrid Electric Vehicles (18.9%) all saw significant yoy growth.
• The UK government’s proposed zero-emission vehicle target requires 22% of a manufacturer’s car sales to be BEVs starting next year.
• The Society of Motor Manufacturers and Traders (SMMT) expects BEVs to snare 22.6% share of new vehicle sales in 2024.

BYD to exceed 3m NEVs in 2023?

• 2023 sales projections suggest potential sales exceeding 3m units.
• BYD recorded sales of 261,105 passenger plug-in car sales in July, following sales in June of 251,685 units.
• July sales represent a 61% increase yoy – despite impressive figures, this is BYD’s slowest growth since 2020.

Company News

Celsius Resources* (CLA LN) 0.95p, Mkt Cap £28m – Exploration permit awarded for the Botilao prospect

(Celsius has agreed to sell a 30% economic ownership of MCB copper mine for US$43m implying a valuation of >$143m on consummation of the deal)

Click Link for SP Angel research report PDF note – MCB project NPV@8% US$463m, IRR of 34.3%

• The Philippines Mines & Geosciences Board has awarded Celsius Resources a two-year exploration permit to progress its ~948km² Botilao copper/gold prospect in the Philippines.
• The prospect which is located around 2km southwest of the company’s existing Maalinao-Caigutan-Biyog Copper-Gold (“MCB”) project, approximately 320km north of Manila.
• Exploration during the 1970s by Lepanto Consolidated Mining, including geochemical sampling “along exploratory tunnels” and diamond drilling is reported to have identified “two (2) major mineralisation zones striking northeast. Drilling and exploration tunnel works were concentrated around Botilao Creek, south of Pasil River. The report indicated tunnel samples with copper grades up to ~1%”.
• Celsius Resources’ initial exploration plan will include “geochemical sampling, mapping of different rock types or lithologies in the area … [and] … will be conducted to characterise and delineate mineralised or altered zones”.
• In parallel, the company expects to conduct an “Environmental Work Program which outlines environmental protection and enhancement activities during the exploration period, as well as a Community Development Program consisting of socio-economic projects which will be identified in consultation with the host community”.
• Geological insights gained through the exploration of the nearby MCB project should help guide exploration and “Detailed mapping will focus on identified mineralised outcrops to ensure proper understanding of the classification and controls of mineralisation”.
• Managing Director, Peter Hume, said that similarities with the “mineralisation style and grades… [encountered at the MCB project]… will be confirmed once we progress the exploration”.
• He commented that “this Prospect, once developed, will bring additional value to Celsius’ portfolio and complement the MCB Project”.
• Celsius remains committed to discussions with Silvercorp Metals with ongoing negotiations on key commercial aspects ahead of a legally binding agreement on Silvercorp’s offer for the MCB copper project.

Conclusion: The proximity to the better understood MCB project and the history of substantial exploration work by the major Philippines producer, Lepanto Mining during the 1970s highlights the exploration potential of the Botilao project area. We look forward to results from Celsius Mining’s exploration as the programme progresses.

*SP Angel acts as broker to Celsius Resources.

Gemfields Group (GEM LN) 15.75p, Mkt Cap £192m – Moves to expand processing capacity at Montepuez

• Gemfields reports that it has signed a legally binding agreement to build a second processing plant at its Montepuez ruby mine in Mozambique’s Cabo Delgado province.
• The new plant, which “will triple MRM’s processing capacity from the existing 200 tonnes per hour to 600 tonnes per hour” is expected to cost “approximately USD 70 million … funded by cash resources and debt, is expected to become operational during the first half of 2025”.
• Outlining the profile of the capital expenditure, today’s announcement indicates that “it is estimated that 30% of this cost will fall in 2023 and 60% in 2024, with the remainder being paid in 2025”.
• In addition, the company “expects a modest expansion of its mining fleet through 2025, with notable additional capacity being added in 2026”.
• Welcoming the investment and the continuing support of Mozambique’s Government General Manager, Prahalad Kumar Singh, commented that “This investment constitutes the single-largest investment ever made by the Gemfields Group”.
• He also acknowledged the commitment of “all of our stakeholders, including our hard-working team and our partners at Mwiriti Limitada” as well as the local community.

Greatland Gold (GGP LN) 7.15p, Mkt Cap £350m – Presentation on WA development and exploration projects

• In a presentation to the ‘Diggers & Dealers’ conference in Australia, Greatland Gold has provided a progress report on the 30% owned Havieron project and on its exploration projects elsewhere within the Paterson region of Western Australia.
• The presentation is available on the company’s website at 2023.08.07 – Greatland – Diggers & Dealers Presentation (greatlandgold.com)
• At Havieron, where Newcrest Mining has earned a 70% interest and is managing development, the underground exploration decline has now completed “1,776m of the total 2,800m of decline development required to reach base of Permian cover” which overlies the current ‘Probable’ ore reserve of 25mt grading 3.0g/t gold (2.4moz contained gold) and 0.44% copper (109,000t of contained copper).
• The presentation describes the growth potential of Havieron where more than 80,000m of resource expansion drilling since the March 2022 resource estimate has identified additional extensions to the SE Crescent Zone as well as bulk-mining opportunities within the Northern and Eastern Breccia Zones.
• The company highlights the historic resource growth which saw a 50% growth on a gold equivalent basis from 4.2moz in the December 2020 maiden estimate to 6.5m equivalent oz in the March 2022 estimate.
• Describing its regional exploration operations over tenements totalling more than 2,500km², Greatland Gold confirms that Newcrest Mining has assumed management of the 49% owned Juri JV on 1^st July while explaining that assay results are awaited from drilling at the wholly owned Scallywag project west of Havieron and that an initial 5-holes programme of reverse-circulation drilling has been completed (assays awaited) at the Paterson South project where it is farming in to a 75% interest in Rio Tinto’s holding covering more than 1,500km².
• Within the Paterson South project area, the presentation highlights the Budjidowns project area north of Havieron where priority targets at Decka, Stingray and Atlantis exhibit “magnetic anomalies which are larger than Havieron and … [beneath] … shallower cover”.
• Commenting that all of the three targets are “significantly underexplored”, Greatland Gold explains that the Decka prospect “contains a strong bedrock conductor” and that “Both Decka and Stingray sit on a north-east trending gravity anomaly, which could be interpreted as a fluid pathway”.

Liontown Resources (LTR Au) A$2.74, Mkt Cap A$6bn – Liontown explore downstream lithium hydroxide plant with Japan’s Sumitomo

• Liontown Resources have provided an update at the Diggers and Dealers conference in Kalgoorlie.
• The Company states that it is exploring a JV with Japan’s Sumitomo to explore downstream lithium supply chain opportunities.
• The partnership is considering using Liontown’s spodumene to provide a lithium hydroxide plant in Japan.
• Liontown has also sanctioned the direct shipping ore project from Kathleen Valley, with first DSO shipment expected end of this year.
• The Company expects Kathleen Valley first production in mid-2024, in line with CAPEX estimates.
• Underground mining services and structural/mechanical piping contracts expected to be signed in September quarter.
• Liontown rejected a A$5.5bn offer from Albemarle earlier this year.
• Kathleen Valley holds an MRE of 156mt @ 1.4% li20.

PYX Resources (PYX LN) 22.4p, Mkt Cap £99m – Indonesian Government eases export restrictions on ilmenite and rutile

• PYX Resources, which describes itself as “the world’s third-largest publicly listed zircon producer by zircon resources” reports that the Indonesian Ministry of Trade has announced an easing of export restrictions “allowing Indonesian Mineral Sands companies to export Ilmenite and Rutile as a Non-Metal commodity, the same as Zircon”.
• The amended regulations allow for “the export of Ilmenite and Rutile as Non-Metal with a minimum grade of TiO₂ ≥ 45% for Ilmenite and TiO₂ ≥ 90%”.
• The company says that it now expects to be awarded “the export license of Titanium dioxide, from the Trade Department, imminently”.
• Welcoming the easing of the export restrictions, Chairman and CEO, Oliver Hasler, said that the “law change will allow us to contribute to the development of international supply chains and generate increased revenue and profitability for our business. We are grateful to the Government of Indonesia for recognising the potential of our products and supporting the growth of our operations”.
• According to the company’s website, PYX’s deposits at Mandiri and Tisma in Kalimantan contain an inferred resource of 126.3mt with an average heavy minerals content of 7.43%, odf which 64% is zircon, at Mandiri and an inferred resource of 137mt at Tisma with an average heavy minerals content of 4%of which 82% is zircon 8.5% ilmenite and 2% rutile.
• The website also confirms that “Mandiri produced more than 11,000 Mt of zircon since it began operating in August 2015. With a current capacity of 1,500 tons per month (18,000 tpa), it has been mostly producing 65.5 grade zircon.”

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.

DISCLAIMER

This note is a marketing communication and comprises non-independent research. This means it has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of its dissemination.

This note is intended only for distribution to Professional Clients and Eligible Counterparties as defined under the rules of the Financial Conduct Authority and is not directed at Retail Clients.

This note is confidential and is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published in whole or in part, for any purpose.

This note has been issued by SP Angel Corporate Finance LLP (‘SPA’) to promote its investment services. Neither the information nor the opinions expressed herein constitutes, or is to be construed as, an offer or invitation or other solicitation or recommendation to buy or sell investments. The information contained herein is based on sources which we believe to be reliable, but we do not represent that it is wholly accurate or complete. All opinions and estimates included in this report are subject to change without notice. It is not investment advice and does not take into account the investment objectives and policies, financial position or portfolio composition of any recipient. SPA is not responsible for any errors or omissions or for the results obtained from the use of such information. Where the subject of the research is a client company of SPA we may have shown a draft of the research (or parts of it) to the company prior to publication to check factual accuracy, soundness of assumptions etc.

Distribution of this note does not imply distribution of future notes covering the same issuers, companies or subject matter.

Where the investment is traded on AIM it should be noted that liquidity may be lower and price movements more volatile.

SPA, its partners, officers and/or employees may own or have positions in any investment(s) mentioned herein or related thereto and may, from time to time add to, or dispose of, any such investment(s).

SPA is registered in England and Wales with company number OC317049.  The registered office address is Prince Frederick House, 35-39 Maddox Street, London W1S 2PP.  SPA is authorised and regulated by the UK Financial Conduct Authority and is a Member of the London Stock Exchange plc.

MiFID II – Based on our analysis we have concluded that this note may be received free of charge by any person subject to the new MiFID II rules on research unbundling pursuant to the exemptions within Article 12(3) of the MiFID II Delegated Directive and FCA COBS Rule 2.3A.19.

A full analysis is available on our website here http://www.spangel.co.uk/legal-and-regulatory-notices.html. If you have any queries, feel free to contact our Compliance Officer, Tim Jenkins (tim.jenkins@spangel.co.uk).

SPA research ratings – Based on a time horizon of 12 months: Buy = Expected return of more than 15%, Hold = Expected return between -15% and +15%, Sell = Expected return of less than 15%