SP Angel Morning View -Today’s Market View, Monday 9th October 2023

Gold climbs on Hamas invasion of Israel as US bond yields climb

MiFID II exempt information – see disclaimer below

Chaarat Gold (CGH LN) – CEO resignation and Kapan sale completion

Cornish Metals* (CUSN LN) –– X-Ray ore sorting exceeds optimistic expectations on South Crofty tin ore in the UK

Critical Metals Plc (CRTM LN) – Offtake agreement with OM Metal and Resources S.A.R.L

Critical Minerals (CMRS LN) – Apology to Critical Metals Plc

GreenRoc Mining* (GROC LN) –Grant from UK Automotive Transformation Fund

Panthera Resources Plc (PAT LN) – Assay results from Kalaka drilling in Mali

IGTV:  New lower lows in base metals keep coming – why? https://youtu.be/1KWgI2HTUGw?si=VlVfQtpW-mrI7slD

           Copper will still move up despite a gear shift down in carbon-zero targets  https://youtu.be/jbywf2hmEU8?si=yxJcwGiE1_V121Ok

VOX:  06/10/23:  https://audioboom.com/posts/8379837-john-meyer-on-diamond-price-weakness-petra-anglo-asian-bushveld-power-metal-resources

           29/09/23:  https://audioboom.com/posts/8375969-john-meyer-on-china-s-property-implosion-plus-atlantic-lithium-bushveld-sovereign-metals

*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.

Bond market yields drive gold prices higher on bond market sell off. Hamas invasion of Israeli stokes geopolitical tension

• Investors have been dumping longer-dated US government bonds in recent weeks
• Yields on long-dated US Treasuries rise to highest level since financial crisis with 10-year yields testing 4.8%.
• The move has the potential to destabilise more banks in the way Silicon Valley Bank collapsed.

• Gold prices bounced from seven-month lows, with spot prices climbing to $1,850/oz.
• The move followed an escalation in tensions between Hamas and Israel, with Netanyahu declaring war on Gaza after a surprise attack from Hamas forces.
• The suspected involvement by Iran adds to concerns over a wider Middle Eastern conflict.
• Yields on Friday rallied sharply following a major beat in the US non-farm payrolls, which showed a revival in hiring and some retrospective revisions higher.
• Average hourly earnings are cooling, however the market repriced expectations of a hike in December to 42% and 29% change for November.
• However, Treasury yields ended the day flat on Friday, providing a key floor to gold prices following a sustained sell-off through September.
• The dollar rally looks to have cooled, adding to the positive tailwinds behind gold since Friday.
• Focus turns to US CPI data due on Thursday, alongside Fed minutes and Michigan consumer sentiment survey.

Copper prices bounce on sustained Chinese demand

• LME copper prices climbed over $8,100/t, supported by a weaker dollar and ample Chinese demand.
• Despite a slowdown in the property market / construction industry, Chinese demand for home appliances, EVs, solar and wind power has provided sustained orders for copper products.
• CRU expect Chinese copper consumption to grow 5.7% this year vs 1.8% in 2022.
• However, surpluses are expected next year as refined production from China ramps up and mine production increases from DRC, Peru and Chile.
• China has increased imports for copper concentrates by around 10% this year mainly from Mongolia, Mexico, Peru and Kazakhstan.
• Refining costs have been contained through lower domestic sulphuric acid prices
• We also reckon the SRB ‘State Reserve Bureau’  and many copper consumers are looking to restock, particularly on recent positive manufacturing PMI data.

Economics

US – Hamas’ attack on Israel over the weekend leaving more than 700 Israelis dead, mostly civilans, see demand for safe haven assets increase, Bloomberg reports.

• The US$, US Treasuries and gold are up this morning on concerns over a wider conflict.
• Israel armed forces are in the process of regaining control over most areas breached by militants on Saturday with expectations for the start of Gaza ground invasion in coming days.
• Separately, labour numbers released late last week beat estimates translating into a volatile trading on Friday.
• Next key set of economic data comes Thursday with headline and core CPI numbers expected to show a slight deceleration in the pace of consumer prices’ growth.
• NFPs: 336ko v 187k August and 170k est.
• Unemployment Rate: 3.8% v 3.8% August and 3.7% est.
• Av Hourly Earnings (%mom): 0.2 v 0.2 August and 0.3 est.
• Av Hourly Earnings (%yoy): 4.2 v 4.3 August and 4.3 est.

China – Holiday data underperform official estimates adding evidence to a weaker than anticipated post-Covid economic recovery.

• Travelling and consumer spending over the Golden Week climbed strongly on the previous year when the nation was implementing Covid controls but was only marginally higher compared to pre-Covid 2019 and lower than authorities hoped for.
• 826m domestic trip and CNY753bn in spending was recorded over the eight day holiday break that concluded on Friday compared to nearly 900m and CNY783bn forecast.
• Home sales over Golden Week, a key time for property developers, also declined from last year.

President Xi Jinping to meet US Senate majority leader

• The move is seen as a strong signal that Xi may attend the APEC summit in San Fransisco.
• Wang Yi, China’s foreign minister recently discussed a possible summit meeting with Jake Sullivan, a White House Security Adviser.
• The move indicates a willingness for the US and China to start to settle their differences with China looking more consolatory.
• Signs of ‘Dual Circulation’ policies increasing consumption of white goods with certain cities thought to be offering incentives
• We suspect this is typical of the way ‘patronage’ politics works where the better behaved communist leaders are allowed to hand out benefits.
• The issue of discount vouchers for consumers goods may also be used to appease regions where there is growing unrest.

Germany – Industrial production pulled back for a fourth month in August with declines led by construction and energy.

• The data comes hardly as a surprise given sub 40 manufacturing readings released earlier for both August and September as the economy struggles with high borrowing costs and inflation.
• Industrial Production (%mom): -0.2 v -0.6 July (revised from -0.8) and -0.1 est.
• Industrial Production (%yoy): -2.0 v -1.7 July (revised from -2.1) and 1.5 est.

ECB – President Christine Lagarde reiterated the central bank’s commitment to bring inflation down to 2% target during an interview last week.

• Expectations are currently that the ECB will leave rates unchanged at current levels at two coming meetings this year after hiking borrowing costs for ten consecutive times.
• “The ECB’s key interest rates have reached levels that, if maintained for a sufficiently long time, will contribute in a decisive way to bringing inflation toward our target as soon as possible,” she said, repeating her institution’s most recent policy stance.

Israel – The currency is off nearly 2% this morning following deadly events over the weekend with the central bank announced a $30bn FX injection to soften a drop in the shekel.

• The shekel is trading around 3.9 this morning marking the lowest level since 2016.

UK – Metro Bank secures £925m rescue funding from Colombian billionaire

• Jaime Gilinski Bacal has taken control of Metro Bank in a deal which involves a £150m equity raising at 30p/s.
• The stock closed at 30p/s last week

Currencies

US$1.0529/eur vs 1.0543/eur previous. Yen 149.15/$ vs 148.89/$. SAr 19.424/$ vs 19.460/$. $1.218/gbp vs $1.219/gbp. 0.635/aud vs         0.636/aud. CNY 7.296/$ vs 7.298/$.

Dollar Index 106.50 vs 106.48 previous.

Commodity News

LME Week kicks off in London

• Chinese traders should be back in action after their Golden Week holiday.

Precious metals:

Gold US$1,849/oz vs US$1,819/oz previous

Gold ETFs 87.2moz vs 87.4moz previous

Platinum US$885/oz vs US$860/oz previous

Palladium US$1,155/oz vs US$1,141/oz previous

Silver US$21.68/oz vs US$21/oz previous

Rhodium US$4,100/oz vs US$4,100/oz previous

Base metals:

Copper US$ 8,107/t vs US$7,932/t previous

Aluminium US$ 2,247/t vs US$2,236/t previous

Nickel US$ 18,590/t vs US$18,425/t previous

Zinc US$ 2,526/t vs US$2,498/t previous

Lead US$ 2,157/t vs US$2,149/t previous

Tin US$ 25,110/t vs US$24,495/t previous

Energy:

Oil US$87.3/bbl vs US$84.0/bbl previous

• Crude oil prices surged higher following the outbreak of hostilities in Israel with Hamas.
• The US Baker Hughes rig count was down 4 units to 619 rigs last week (-143 or 19% y/y), with oil rigs falling by 5 to 497 units (-105 y/y) and gas rigs up 2 to 118 units (-40 y/y), including a 5 unit drop in the Permian (309).
• The SPA Energy team has transferred to Cape Town for the Africa Oil Week conference, please feel free to contact us if you would like to catch up over a coffee while we are in town (other beverages are available).

Natural Gas €41.000/MWh vs €36.450/MWh previous

Uranium UXC US$72.75/lb vs US$72.75/lb previous

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$114.8/t vs US$114.6/t

Chinese steel rebar 25mm US$540.0/t vs US$540.3/t

Thermal coal (1st year forward cif ARA) US$118.5/t vs US$116.8/t

Thermal coal swap Australia FOB US$141.5/t vs US$140.0/t

Coking coal swap Australia FOB US$321.0/t vs US$321.0/t

Other:  

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

NdPr Rare Earth Oxide (China) US$71,274/t vs US$71,252/t

Lithium carbonate 99% (China) US$21,040/t vs US$21,033/t

China Spodumene Li2O 6%min CIF US$2,230/t vs US$2,290/t

Ferro-Manganese European Mn78% min US$1,021/t vs US$1,023/t

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

China Graphite Flake -194 FOB US$645/t vs US$645/t

Europe Vanadium Pentoxide 98% 6.6/lb vs US$6.6/lb

Europe Ferro-Vanadium 80% 29.25/kg vs US$29.25/kg

China Ilmenite Concentrate TiO2 US$316/t vs US$316/t

Spot CO2 Emissions EUA Price US$83.6/t vs US$83.7/t

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

Battery News

China’s NEV wholesale sales at record 830,000 units, CPCA estimates show

• As we believed, from early figures, China NEV sales continued to grow in September.
• The China Passenger Car Association (CPCA) now forecast September sales to reach 830,000, up 4% from August and 23% yoy.
• In the January-September period, China’s wholesale sales of passenger NEVs were 5.92m units, up 36% yoy, according to preliminary estimates.
• In China, NEVs include battery electric vehicles, plug-in hybrids and fuel cell vehicles.

UK new car market grows 21% for September

• September saw 272,610 new car registrations, up 21% yoy
• Registrations were buoyed by large fleets, up 40.8% yoy and plug-in hybrids, up 50.9% yoy
• It is the 14^th consecutive month of growth in car registration in the UK
• Private battery EV registrations fell 14.3%.

Hyundai and Kia become latest to adopt Tesla’s NACS charging system

• Hyundai has announced that its brands will adopt the NACS charging system
• Hyundai and Kia EVs with NACS ports will be able to access more than 12,000 Tesla Superchargers.
• Tesla’s network is coveted by other automakers as it is the largest network across the US, with many of its charging stations in prime locations.

Renault and Volvo to develop electric vans

• The two automakers will partner with shipping CMA CGM to develop a new generation of electric vans for production in 2026.
• Renault and Volvo signed binding agreements and will initially each hold a 50% equity stake and invest €300m over the next three years.
• Last-mile deliveries account for an estimated 8% of global greenhouse gas emissions.

Company News

Chaarat Gold (CGH LN) 3.9p, Mkt Cap £27m – CEO resignation and Kapan sale completion

• Mike Fraser is stepping down as CEO and a director of the Company with an immediate effect after the Board agreed to waive his six-month notice period.
• Until the appointment of a successor, the Executive Chairman, Martin Andersson, and the CFO, David Mackenzie, will lead the Company.
• Separately, the Company announced that its completed the sale of its 100% interest in operating polymetallic Kapan Mine in Armenia.
• Total consideration was $55.4m including $5.0m paid in cash and the balance representing intra Group payables owed by the Company to the operating subsidiary.
• Chaarat’s net debt came down to ~$33.0m following a reduction in Kapan related liabilities and after accounting for cash proceeds from the transaction.

Cornish Metals* (CUSN LN) – 10.99p, Mkt cap £60m – X-Ray ore sorting exceeds optimistic expectations on South Crofty tin ore in the UK

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• Cornish Metals have been running test work on X-Ray Transmission ‘XRT’ ore sorting on ores from the South Crofty tin mine in Cornwall.
• XRT was initially developed for the diamond industry but has also proven highly effective on other mineralised ores.
• X-Rays penetrate into the ore highlighting mineralised fragments enabling the separation of non-mineralised rock.
• Improving energy and capital efficiency in the process plant can also enable a reduction of the cut-off grade effectively increasing the scale of the resource.
• HLS ‘Heavy Liquid Separation’ is also being trialled with positive results.
• Results:
  • XRT shows 55% mass rejection while losing under 3% of the metal within a specific size range
  • HLS shows a 50% mass rejection at under a 5% metal loss within a different size fraction
• Feasibility Study progress:
• Management have been busy working on the engineering design of the shafts to be used and on the proposed mining meths and stope design.
• Phase 1 of the metallurgical test program sounds good and confirms previous operational results from when the mine was last working in the 1990s.
• Much of the design work required for the mine and processing plant is also underway as required for the FS and for the move to construction.
• See updated presentation at: https://cornishmetals.com/investors/presentations.
• Conclusion: Improving ore recovery while discarding 55% of the waste material at the front of the process plant has potential to add substantial value to the project. XRT should enable the processing of more ore, with lower energy, more cost effectively through a smaller scale and lower capex plant.

*SP Angel acts as Nomad and Broker to Cornish Metals. An SP Angel analyst formerly worked in the South Crofty tin mine in the 1980s and holds shares in Cornish Metals.

Critical Metals Plc (CRTM LN) 18p, Mkt cap £11m – Offtake agreement with OM Metal and Resources S.A.R.L

• Critical Metals reports an update on its Molulu copper project in the DRC.
• Critical Metals has entered an offtake agreement with OM Metal and Resources S.A.R.L.
• The Company will sell 20kt of copper oxide from the Molulu copper/cobalt project.
• Molulu is an historically producing copper/cobalt asset in the Katangan Copperbelt.
• The agreement runs from 4^th October 2023 to 31^st December 2023, with an option for renewal.
• The Group guides towards a US$91/t of copper ore using a copper price of $8,000/t and an acid soluble grade of 3%.
• Critical Metals reports that the buying group has taken delivery of the first load of ore.
• Going forward, Critical Metals is targeting first phase production of 10kt/month of oxide ore.
• The Company is also executing a diamond drilling campaign at Molulu in both the oxide and sulphide zones.

*We retract a statement made on Thursday 05^th October regarding Critical Metals. The comment was made in reference to Critical Mineral Resources (CMRS) and their Anzar Project in Morocco. We apologise for any confusion.

Critical Minerals (CMRS LN) – Apology to Critical Metals Plc

• We recently attributed a comment on Critical Minerals Resources (CMRS) project in Morocco to Critical Metals Plc.
• We apologise for the confusion, but to be fair, the names are very similar and we would not be surprised if other shareholders and traders were caught out with the similarity in the names.

GreenRoc Mining* (GROC LN) 3.71p, Mkt Cap £5.4m –Grant from UK Automotive Transformation Fund

• GreenRoc report the award of a ~£250,000 grant from the UK Automotive Transformation Fund.
• The funding is for:
  • Feasibility Study work towards a UK graphite spheronisation process plant for active Li-ion anode material.
• The plant would produce a coated spherical purified graphite (cSPG) active anode material from graphite concentrate from Amitsoq in Greenland.
• We  believe Amitsoq could, in time, become a strategic supplier of Li-ion anode material to UK and European Li-ion battery manufacturing plants.
• China currently produces around 61% of global natural graphite and 98% of the final processed anode material for Li-ion batteries.
• China banned the export of graphite material to Sweden for Li-ion batteries in 2020. There was no formal sanction but Chinese graphite producers were suddenly unable to export as Chinese regulators refused to issue licenses for the supply of graphite to Sweden.
• The move is seen as an attempt to deliberately disrupt the development of Li-ion Gigafactories in Sweden and to potentially hold back the European Li-ion battery supply chain.
• GreenRoc recently published Resource Estimate and parameters for the upcoming PEA:
  • 400,000t of ore output for
  • ~80,000t of graphite concentrate
  • 1.26mt of Measured Resource @ 22.05% Cg,
  • 6.12mt Indicated Resource @ 21.04% Cg from 2.04mt – a 200% increase over the 2022 MRE,
  • 15.67mt Inferred Resource @ 20.04% Cg from 6.24mt – a c.150% increase over the 2022 MRE,
  • Total: 23.05mt grading 20.41% Cg at a cut-off grade of 0% Cg JORC inferred.

Conclusion:  The reopening of GreenRoc’s Amitsoq graphite mine would enable the strategic production of graphite within Europe to support the growth of the electric vehicle industry and the development of Li-ion batteries to support household and grid storage.

Li-ion battery cell costs are forecast to fall below <$100/kWh for battery plants of >10GWh due to efficiencies of scale for NCM 811 Li-ion batteries according to SC Insights. This attainment is no less significant than Roger Bannister running a three-minute mile from an EV perspective.

*SP Angel acts as broker to GreenRoc Mining

Panthera Resources Plc (PAT LN) 8p, Mkt cap £12m – Assay results from Kalaka drilling in Mali

• Panthera reports the results from its recent drilling programme at the Kalaka Project in Mali.
• Panthera holds a 40% interest in Kalaka alongside DFR Gold.
• The programme constituted 8 RC holes over 705 meteres.
• Results included:
  • 60m @ 0.31g/t Au from 18m.
  • 31m @ 0.2g/t Au from 30m
  • 60m @ 0.31g/t Au from 4m
  • 76m @ 0.53 g/t Au from 6m
  • 74m @ 0.38g/t Au from 4m.
• The Company reports the programme was interrupted due to heavy rain, limiting exploration at the northern, untested targets.
• The Project lies between the Morila and Syama gold mines.

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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