SP Angel Morning View -Today’s Market View, Monday 8th January 2024

Uranium spot price holds over $90/lb as production cuts meet ETF and utility buying

MiFID II exempt information – see disclaimer below

Aterian Plc* (ATN LN) – Acquisition of copper and lithium licences in Botswana

Celsius Resources (CLA LN) – Sagay project application

First Quantum (FM CN) – Jiangxi eyeing First Quantum’s Zambian operations, Reuters reports

Uranium spot price holds over $90/lb as production cuts meet ETF buying

• The uranium price has now held around $90/lb in the spot market since the end of November.
• Cameco reports a long-term price of $68/lb.
• Supply is yet to ramp up, with uranium prices seeing sharp rises after Cameco reported a 1.7mlb production miss in September.
• The Saskatoon uranium producer lowered production guidance from its McArthur, Cigar Lake and Key Lake operations.
• ETFs are adding to supply pressure, with Sprott looking to buy 9mlb in physical supply this year.
• The Sprott ETF is issuing an additional $1bn in unit trusts via a base shelf prospectus to continue purchasing uranium.
• Kazakhstan produces c.45% of global uranium production, with supply exposed to sanctions owing to Russian ownership stakes.
• Kazatomprom has promised a 2025 production increase to between 30.5kt-31.5kt on the back of ‘a long-awaited historical shift in the uranium market.’
• The surging spot price comes at a time when utility demand is accelerating rapidly. Utility demand hit the highest since 2012.
• China currently has 21 nuclear reactors under construction, planning to add an additional 70.
• 22 nations have recently committed to a trebling of nuclear capacity by 2050.

Gold prices hold lower following volatile Treasury moves

• Gold prices have fallen to $2,028/oz after a sharp move in US Treasury yields on Friday.
• 10-year yields spiked to 4.7% following nonfarm payroll data, climbing to the highest in three weeks.
• Yields have subsequently retraced to 4.25%, as traders continue to expect rate cuts in 1H24.
• the dollar has held higher despite cooling yields, weighing on gold prices.
• Focus turns to this week’s CPI data, due on Thursday.

Iron ore rally cools as portside inventories rise and demand remains muted

• Iron ore prices on the 62% China benchmark slid to $138/t having held around $141/t last week.
• Prices had been supported on additional Beijing monetary support, with the PBoC enabling CNY350bn (US$49bn) in supplementary lending in December.
• Hot metal output continues to fall, however, with daily production falling for 10 days in a row, down 1.2% yoy same period. (MySteel)
• Coking coal and coke prices down 4.1% and 3.5% respectively this morning.

Spodumene prices continue to decline, marginal producers mothball operations

• Spodumene prices have fallen to $1,060/t, whilst lithium carbonate prices have stabilised around $12,000/t.
• Spodumene prices had hit $8,000/t this time last year, providing elevated cash flows to operators such as Pilbara and MinRes.
• Higher-cost producers have begun to slash production, with Core Lithium announcing a halt to mining operations amid challenging market conditions.
• Sayona Mining announced a strategic review of operations at its North American Lithium project in November – the project had previously been shuttered in 2019 on liquidity issues.
• Focus will turn to Chinese lepidolite production as a swing supplier, with analysts suggesting the current pricing environment is unsustainable for higher-cost lepidolite production.

Economics

US – Strong labour numbers saw Treasury yields climbing Friday afternoon only for those moves to get reversed after a services industry sentiment index came in mellow estimates with an employment subindex showing a sharp contraction.

• Secretary of State Antony Blinken is in the Middle East this week in a fourth extended visit to the region since the Israel/Hamas war broke out.
• Blinken warned the Israel/Hamas war could “easily” turn into a full blown regional conflict.
• “This is a conflict that could easily metastasize, causing even more insecurity and even more suffering,” Blinken said in Qatar yesterday.
• He’s scheduled to go to Saudi Arabia, Israel, the West Bank and Egypt next.
• Earlier, the US and its allies warned Yemen based Iran backed Houthi militants to halt their attacks on ships in the Red Sea or face retaliation.
• Houthis have been targeting ships in the Red Sea since November in support of Hamas leading to major shipping companies diverting traffic from Suez Canal to the longer and costlier route around the Cape of Good Hope.
• Suez canal handles ~12% of global trade, according to Reuters.
• NFPs: 216k v 173k (revised from 199k) November and 175k est.
• Unemployment Rate (%): 3.7 v 3.7 November and 3.8 est.
• Av Hourly Earnings (%mom): 0.4 v 0.4 November and 0.3 est.
• Av Hourly Earnings (%yoy): 4.1 v 4.0 November and 3.9 est.

China – Regulators removed a ban on net selling of stocks by mutual funds after the rule was introduced late last year aimed at limiting selling pressures in the market.

• People familiar with discussions regarding the change said the policy is likely to do with growing redemptions on funds.

Germany – Trade surprised on the upside this morning

• A rebound in overseas shipments was largely driven by EU countries (+5.4%) compared to a 1.8%mom increase in exports outside the EU.
• Exports (%mom): 3.7 v -0.4 (revised from -0.2) October and 0.5 est.
• Imports (%mom): 1.9 v -1.1 (revised from -1.2) October and 0.4 est.
• Factory Orders (%mom): 0.3 v -3.8 (revised from -3.7) October and 1.1 est.

Currencies

US$1.0943/eur vs 1.0911/eur previous. Yen 144.43/$ vs 145.06/$. SAr 18.753/$ vs 18.769/$. $1.271/gbp vs $1.267/gbp. 0.670/aud vs 0.669/aud. CNY 7.159/$ vs 7.158/$.

Dollar Index 102.39 vs 102.67 previous.

Commodity News

Precious metals:

Gold US$2,031/oz vs US$2,042/oz previous

Gold ETFs 85.2moz vs 85.3moz previous

Platinum US$959/oz vs US$949/oz previous

Palladium US$1,015/oz vs US$1,031/oz previous

Silver US$23.02/oz vs US$23/oz previous

Rhodium US$4,400/oz vs US$4,400/oz previous

Base metals:

Copper US$ 8,428/t vs US$8,460/t previous

Aluminium US$ 2,261/t vs US$2,265/t previous

Nickel US$ 16,385/t vs US$15,935/t previous

Zinc US$ 2,533/t vs US$2,544/t previous

Lead US$ 2,082/t vs US$2,060/t previous

Tin US$ 24,505/t vs US$24,140/t previous

Energy:

Oil US$78.1/bbl vs US$77.9/bbl previous

Natural Gas €33.2/MWh vs €32.6/MWh previous

Uranium UXC US$91.00/lb vs US$82.30/lb previous

Bulk:

Iron Ore 62% Fe Spot (cfr Tianjin) US$138.6/t vs US$141.1/t

Chinese steel rebar 25mm US$578.3/t vs US$578.9/t

Thermal coal (1st year forward cif ARA) US$102.5/t vs US$98.3/t

Thermal coal swap Australia FOB US$131.7/t vs US$130.3/t

Coking coal swap Australia FOB US$317.0/t vs US$317.0/t

Other:

Cobalt LME 3m US$29,135/t vs US$29,135/t

NdPr Rare Earth Oxide (China) US$58,804/t vs US$58,819/t

Lithium carbonate 99% (China) US$12,082/t vs US$12,085/t

China Spodumene Li2O 6%min CIF US$1,060/t vs US$1,090/t

Ferro-Manganese European Mn78% min US$1,067/t vs US$1,064/t

China Tungsten APT 88.5% FOB US$305/mtu vs US$305/mtu

China Graphite Flake -194 FOB US$600/t vs US$600/t

Europe Vanadium Pentoxide 98% 6.0/lb vs US$6.0/lb

Europe Ferro-Vanadium 80% 27.05/kg vs US$26.75/kg

China Ilmenite Concentrate TiO2 US$315/t vs US$315/t

Spot CO2 Emissions EUA Price US$81.7/t vs US$81.4/t

Brazil Potash CFR Granular Spot US$302.5/t vs US$290.0/t

Battery News

BT to turn street cabinets into EV charging points

• The telecom group will convert street cabinets, that traditionally house cabling, into EV charging stations.
• The project could lead to 60,000 new EV charging points across the UK – there are currently public 53,906 EV charging points across the UK.
• BT announced the first unit will be installed at a cabinet in East Lothian, Scotland, and that it will roll out further trials across Britain in the coming months. (Reuters)
• Lack of charging options is one of the leading reasons that drivers are delaying the move to EVs – 38% saying they would have an EV already if charging were less of an issue.

Evergrande’s EV unit Vice Chairman detained

• China Evergrande New Energy Vehicle Group announced its Vice Chairman Liu Yongzhuo has been detained and is under criminal investigation.
• The company did not reveal any further details as to why Liu was arrested, citing only he was under suspicion of ‘illegal crimes.’
• The automaker’s shares, which were suspended from trade in the morning session pending the statement, fell as much as 23%.
• Liu’s detainment could also hurt parent company, China Evergrande Group – the property developer has $23bn in offshore debt and $300bn in total liabilities.
• Evergrande NEV had lofty ambitions of making a million vehicles a year by 2025, but it sold just over 760 units of the Hengchi 5, its only EV model on the market, in H1’23.

Company News

Aterian Plc* (ATN LN) 0.94p, Mkt Cap £9m – Acquisition of copper and lithium licences in Botswana

• Aterian announces it has acquired a 90% interest in Atlantis Metals through a Share Purchase Agreement.
• Atlantis holds four licences over 3,516km² in Botswana.
• One licence covers 999km² in the Kalahari Copperbelt, lying 50km east of Khoemacau Copper’s 92.9mt copper deposit grading 2% Cu and 21g/t Ag.
• The Khoemacau mine was recently bought by China’s MMG for $1.9bn and is looking to ramp production up to 130ktpa Cu and 5mozpa Ag.
• The exploration licence will target sediment-hosted copper deposits over the NE-trending Meso/Neoproterozoic belt stretching along the Kalahari Craton.
• Aterian will also secure three lithium brine exploration licences covering 2,517 km^2, also in Botswana in the prospective Sua Pan area of the Makgadikgadi Pans region.
• The brine licences lie in a zone recently declared a ‘Lithium Zone’ by the Botswana Ministry of Mines, with historical samples at Sua Pan showing values of 103mg/l Li, 117mg/l Li and 223mg/l Li.
• Aterian will acquire the licences for responsibility for funding exploration activities, with the vendor retaining a 10% interest. The vendor is a Bostwana citizen and professional geologist.
• US$80k in fees will be payable within 12 months following the execution of the SPA.
• Going forward, Aterian will start early exploration work with data collection and desktop reviews for more concentrated target generation.

*SP Angel acts as Broker to Aterian Plc

Celsius Resources (CLA LN) 0.63p, Mkt Cap £14m – Sagay project application

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

BUY

• Celsius Resources reports that it has submitted documents, including exploration, project feasibility, social impact and environmental reports confirming the technical and financial viability of its Sagay copper/gold project on Negros island in the Philippines to the regulatory authorities.
• The documents support an application to the Philippine authorities for a ‘Declaration of Mining Project Feasibiliy’ (DMPF) to “develop the Sagay Project into a productive mine that would not only bring value to our stakeholders and shareholders, but also showcase our commitment to sustainable and responsible mining practices”.
• The Sagay project hosts a mineral resource of 302mt at an average grade of 0.41% copper and 0.11g/t gold “of which 15 million tonnes @ 0.45% copper and 0.11g/t gold is classified as Indicated and 287 million tonnes @ 0.41% copper and 0.11g/t gold is classified as Inferred”.
• Celsius Resources explains that the “DMPF application, supported by an Environmental Compliance Certificate, are a key requirement towards the achievement of a mineral permit with the Philippine Government for an exclusive right to conduct mining operations within the tenement … [and the company undertakes to provide] …. Further updates … to share holders as the Company moves through the approval process”.
• In addition to Sagay, the company is also progressing development of its Maalinao-Caigutan Biyog Copper-Gold Project (MCB) project, also in the Philippines, where it plans a 2.3mtpa underground mining operation producing copper/gold concentrates over a 25-year mine life.

First Quantum (FM CN) C$12.7, Mkt cap C$8.8bn – Jiangxi eyeing First Quantum’s Zambian operations, Reuters reports

• Reuters reported on Friday that Chinese state-owned Jiangxi has approached management over a potential asset sale.
• Jiangxi already owns 18% of the outstanding share capital of First Quantum, and has added to its position since the Cobre Panama shutdown.
• Reuters’ sources suggest no agreement has been made to date.
• The rumours follow suggestions that Mark Bristow’s Barrick is eyeing a takeover of First Quantum as a whole
• The Company is set to outline how it plans to service its current debt load without Cobre this month

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%”

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The SP Angel team also ranked 1st in Palladium, 3rd in Tin and 5th in Silver in the fourth quarter of 2020

Analysts

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Sales

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

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