SP Angel Morning View -Today’s Market View, Thursday 10th October 2024

Tin inventories expected to tighten as Chinese refined production slides on ore shortages

MiFID II exempt information – see disclaimer below

American West Metals (AW1 AU) – A$7.0m equity raise

Anglo Asian Mining* (AAZ LN) – Q3 operations update

Cornish Metals* (CUSN LN) – Preparation for project financing for restart of South Crofty tin mine in Cornwall

Metals Acquisition Corp (MTAL US) – Equity raise to de-lever balance sheet following copper acquisition

Tharisa (THS LN) – Production results as chrome prices rise

Tirupati Graphite (TGR LN) – Funding update

Nickel prices steady as surplus persists and battery technology changes

• Nickel prices have oscillated around current levels for the past year, sitting at $17.4k/t.
• Indonesia continues to flood the market, with Chinese battery manufacturers preferring to buy Indonesian intermediate products over Class 1 sulfate feedstock.
• LME inventories have been rising over the past year, putting pressure on prices.
• Rising LFP battery demand has weighed on nickel demand, with BloombergNEF slashing their 2030 nickel-sulfate demand forecasts by 240kt as a result.
• China and Indonesia are expected to account for 80% of new capacity additions over the next three years.
• Indonesia is expected to add c.450kt new refined capacity over the next three years, boosting supply by 25%. (Bloomberg Intelligence)
• Stainless teel demand is expected to persist as the dominant driver of nickel appetite.
• European industrial production has been weak, weighing on the region’s appetite for stainless steel, although this is expected to improve.

Tin inventories are expected to tighten as Chinese domestic tin ingot production slides on ore shortages

• Chinese refined tin production fell in September according to the Shanghai Metals Market due to a fall in ore supplies from Myanmar.
• Smelters are moving to earlier than planned stoppages for maintenance due to limited feedstock helping tin prices higher.
• Recovery rates are also reportedly to be falling as smelters process lower-grade ores and tailings to fill the gap.
• Shanghai Metals Market notes that ‘recent procurement of tin concentrate and scrap has been challenging, with current production declining month by month.’
• The survey suggests that Chinese tin ingot production is set to decline in October, and ‘may persist until the end of the year.’

We recommend: Cornish Metals* as a key tin project development company. *SP Angel acts as Nomad and broker to Cornish Metals

UK sees best September on record for BEV registrations

• BEV sales hit a new record volume for any month in September, up 24.4% to 56,387 units, achieving a 20.5% share of the overall market. (Society of Motor Manufacturers and Traders)
• BEV growth was driven by fleet sales, which accounted for 75.9% of registrations for the vehicle type.
• PHEVs grew faster than any other fuel type in the month, up 32.1% and taking an 8.9% share of the market.
• There was also a continued large-scale decline of ICE vehicles, which feel just short of double digits to a decline of 9.3% for petrol and 7.1% for diesel.
• The fuel types are now only 56.4% of the market total, having been 85-90% just five years ago.

 This is Why Gold is Rising and It Will Probably Continue:

• Podcast: https://audioboom.com/posts/8547593-john-meyer-this-has-one-of-the-lowest-risk-profiles-i-ve-seen-for-a-long-time

Economics

US – The US$ index is extending gains with Treasury yields climbing as investors are revising down their expectations for more than two rate cuts before year end.

• CPI data is out later today with expectations for further signs of disinflation in both headline and core measures in September.
• Markets are currently pricing in two 25bp cuts in November and December.
• Fed officials in their public comments from 50bp move in September have been leaning towards more gradual cuts moving forwards.

China – China’s top economic planner, the NDRC Chairman, Zheng Shanjie says China will front-load CNY100bn (US$14.1bn) from the 2025 central budget

• The planner is also due to release a list of strategic construction projects (SCMP).
• Regional equities climbed on reports of the PBOC setting up a swap facility to provide liquidity to institutional investors to buy stocks, according to Bloomberg.
• Investors are looking forward to the press conference this Saturday with Finance Minister to speak on its fiscal stimulus.

Japan – Deputy BOJ Governor Ryozo Himino said the central bank will raise rates further if the economy performs in line with its outlook.

• “The policy board will carefully assess incoming data, the evolving outlook, and the balance of risks at each meeting. We are not on a preset course.”
• Comments come in a slight contrast to latest public rhetoric from the newly installed PM Shigeru Ishiba who argued that it is not the right time for a rate hike.
• PPI rises 2.8% yoy in September from 2.6% in August.
• Import costs fell 2.6% in September vs a 10.7% rise in July.

Germany – A rare piece of positive economic news released this morning showing a pick up in retail sales growth in August.

• Retail Sales (%mom, Aug/Jul/Est): 1.6/1.5/NA
• Retail Sales (%mom, Aug/Jul/Est): 2.4/1.8/NA

Israel – The government reiterated its intention to retaliate against Iran following the latest missile attack carried by Tehran.

• Iran said that any retaliation will be met with a response.
• PM Benjamin Netanyahu and US President Joe Biden spoke yesterday for the first time in over a month.

UK – Press speculation on the potential removal of inheritance tax breaks from AIM market shares

• The new Labour government has suggested that it will raise additional funding from Inheritance Tax in the forthcoming budget on 30^th October.
• AIM share are currently subject to IHT relief if they have been held for more than 2 years.
• If the UK government scraps the relief it will likely lead to some fund outflows where funds are looking for forms of IHT relief.
• We suspect this will have a greater impact on larger and more liquid AIM companies, particularly dividend paying equities.
• If the IHT relief is removed, we do not see any particular impact on the junior explorers and project developers.
• The new Labour government claims it is business friendly and we hope will help to stimulate new growth in the UK through incentives for entrepreneurs.
• While newspapers love dramatic headlines reality is so often far less dramatic and we suspect ‘the sky will not fall in on our heads’.

Currencies

US$1.0934/eur vs 1.0964/eur previous. Yen 149.11/$ vs 148.45/$. SAr 17.625/$ vs 17.612/$. $1.308/gbp vs $1.308/gbp. 0.673/aud vs 0.673/aud. CNY 7.071/$ vs 7.064/$

Dollar Index 102.89 vs 102.65 previous

Precious metals:         

Gold US$2,614/oz vs US$2,614/oz previous

Gold ETFs 83.5moz vs 83.5moz previous

Platinum US$964/oz vs US$955/oz previous

Palladium US$1,055/oz vs US$1,024/oz previous

Silver US$30.6/oz vs US$30.6/oz previous

Rhodium US$4,750/oz vs US$4,725/oz previous

Base metals:   

Copper US$9,686/t vs US$9,756/t previous

Aluminium US$2,555/t vs US$2,561/t previous

Nickel US$17,325/t vs US$17,725/t previous

Zinc US$3,015/t vs US$3,054/t previous

Lead US$2,063/t vs US$2,079/t previous

Tin US$32,655/t vs US$32,835/t previous

Energy:           

Oil US$76.9/bbl vs US$78.0/bbl previous

• Crude oil prices edged lower after the EIA reported US inventory builds of 5.9mb to crude, offset by draws of 6.3mb to gasoline and 3.1mb to diesel stocks, with refinery utilisation falling to 86.7% on hurricane disruption.
• ExxonMobil’s Global Outlook to 2050 report projects that while electricity use will grow by 80% by 2050, oil and natural gas will continue to make up more than 50% of the world’s energy mix in 2050.
• The UK Energy Minister announced plans to allow developers of long duration energy storage projects to apply for “cap and floor” contracts, which provide a guaranteed minimum income in return for a limit on revenues.

Natural Gas €38.4/MWh vs €38.6/MWh previous

Uranium Futures $83.5/lb vs $83.3/lb previous

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$105.2/t vs US$105.1/t

Chinese steel rebar 25mm US$510.9/t vs US$506.8/t

Thermal coal (1st year forward cif ARA) US$122.5/t vs US$126.0/t

Thermal coal swap Australia FOB US$146.3/t vs US$149.8/t

Other:  

Cobalt LME 3m US$24,300/t vs US$24,300/t

NdPr Rare Earth Oxide (China) US$61,583/t vs US$61,725/t

Lithium carbonate 99% (China) US$10,394/t vs US$10,405/t

China Spodumene Li2O 6%min CIF US$740/t vs US$740/t

Ferro-Manganese European Mn78% min US$985/t vs US$985/t

China Tungsten APT 88.5% FOB US$335/mtu vs US$335/mtu

China Graphite Flake -194 FOB US$445/t vs US$445/t

Europe Vanadium Pentoxide 98% 4.6/lb vs US$4.6/lb

Europe Ferro-Vanadium 80% 24.55/kg vs US$24.55/kg

China Ilmenite Concentrate TiO2 US$319/t vs US$319/t

China Rutile Concentrate 95% TiO2 US$1,322/t vs US$1,324/t

Spot CO2 Emissions EUA Price US$62.9/t vs US$62.9/t

Brazil Potash CFR Granular Spot US$277.5/t vs US$277.5/t

Germanium China 99.99% US$2,825.0/kg vs US$2,825.0/kg

China Gallium 99.99% US$455.0/kg vs US$455.0/kg

Battery News

Tesla’s Chinese-made EV sales grow 19.2% yoy in September

• Sales of Tesla’s China-made EVs were up 19.2% in September from a year earlier, according to data from the China Passenger Car Association (CPCA)
• Deliveries of China-made Model 3 and Model Y vehicles, which are exported to various markets including Europe, were up 1.9% from the previous month.
• Tesla sold more than 72,000 EVs in China’s domestic market, up 66% yoy, and its best month of sales this year.

China’s Chery Auto assembling auto’s in Russian plants vacated by Western automakers

• Chinese carmaker Chery has started assembling cars in Russia for sale in the country at three factories vacated by Western rivals including Volkswagen and Mercedes. (Reuters)
• Chinese carmakers now have more that half of the Russian car market in terms of sales after Western automakers abandoned the country following the invasion of Ukraine.
• Chery, which makes up almost a fifth of Russia’s passenger car sales, is importing nearly finished cars and completing the assembly in three Russian factories, five people told Reuters.
• The automaker has said in a written statement it supplies the Russian market with passenger cars, but does not plan to build or buy its own factories there.

BMW China Sales fall 30% in Q3 to just 147,691

• The fall depressed BMW’s overall sales by 13% past quarter.

Honda recalls 2 million vehicles over steering issue

• Honda Motor has announced a recall of 2 million cars and SUVs in North America over an issue that can make steering more difficult and increase the risk of a crash.
• The recall includes 2022 to 2025 models of the Civic and Civic Type R, CR-V, HR-V, Acura Integra and Integra Type S vehicles.

VW to aim for 8 new EV models by 2027

• Volkswagen is looking to win back market share with the introduction of eight new affordable EV models to be rolled out by 2027. (Reuters)
• “We have to produce our vehicles profitably and put them on the road at affordable prices,” CEO of VW Passenger, Thomas Schaefer, told publication auto und sport.
• VW sales have suffered this year, with the company also losing its brand lead in Germany as sales slumped.
• Demand for EVs has slowed on weakening customer confidence due to high costs and lack of charging infrastructure.
• Chinese EV makers have also begun a push into other markets, including Europe, offering more affordable models than legacy automakers.
• New tariffs introduced on imports of Chinese EVs into Europe may see the charge halted, but many of the Chinese manufacturers are looking to open factories in Europe which could help circumvent the tariffs.

Company News

American West Metals (AW1 AU) A$0.1, Mkt Cap A$57m – A$7.0m equity raise

• The Company raised A$7.0m issuing ~78m shares at A$0.09 to progress exploration and PFS related work at the Storm Copper Project, Nunavut.
• Proceeds will be used to upgrade the mineral resource (expected late CY24), PEA/PFS level studies (exp early CY25) as well as further exploration planned for 2025.
• Placing price implies a ~18% discount to the closing price on 30 September before trading in stock was temporarily suspended.
• Storm maiden MRE was released early 2024 estimating 17.5mt at 1.2% Cu and 3.4g/t Ag in total resource including 4.9mt at 1.3% Cu in Indicated category.
• The Company holds an 80% interest in the project with the balance 20% owned by Aston Bay Holdings.

Anglo Asian Mining* (AAZ LN) 115p, Mkt Cap £131m – Q3 operations update

BUY – 308p

• Q3 production amounted to 3.0koz GE (3Q23: 5.3koz).
• 9M production totalled 8.3koz GE (3Q23: 28.7koz).
• Agitation leaching plant resumed production in September treating 18kt at 2.0g/t and contributing 0.6koz to total production.
• Heap leaching operations accounted for the balance ~2.3koz.
• Mostly all of production came in the form of gold/silver dore as flotation plant remained on care and maintenance during the quarter awaiting restart in November.
• Gold bullion sales were 3.2koz at an average realised price of $2,497/oz (3Q23: 2.9okz at $1,949/oz).
• No concentrate sales were recorded during the period.
• First lift of the tailings dam wall by 2.5m at Gedabek remains on track for completion in November.
• The Company reiterated first production from Gilar in December.
• FY24 guidance remains unchanged for 15.0-19.5koz GE.
• Net debt stood at $14.0m (1H24: $12.0m) including $8.1m in cash and $22.1m in outstanding debt.

Conclusion: Neutral quarterly update with the Company reiterating previously provided guidance including flotation circuit restart in November, maiden production at Gilar in December and FY24 production guidance for 15.0-19.5koz. We expect strong growth momentum from 4Q24 onwards as operations resume normal run rates and Gedabek processing complex treats higher grade ore from Gilar. Beyond that next significant growth catalyst is a restart of a brownfield Demirli copper mine (~20ktpa Cu) in FY26.

*SP Angel acts as nomad and broker to Anglo Asian Mining

Cornish Metals* (CUSN LN) 7.4p, Mkt Cap £39m – Preparation for project financing for restart of South Crofty tin mine in Cornwall

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• Cornish Metals report preparations for project funding for the restart of the South Crofty tin mine in Cornwall.
• Don Turvey, the new CEO, reports the formal start of the project finance process and appointment of Endeavour Financial to help secure project financing for the construction of the South Crofty mine.
• Enhanced PEA financials published 1 May 2024:
  • Tin price assumption: US$31,000/t
  • Capex: US$177m
  • Post-tax NPV_8% US$201m, pre-tax US$264m
  • IRR of 29.8% post-tax and 33.4% Pre-tax
  • Payback within 3 years.
  • Production: 4,728 t tin in concentrate from years 2 to 6
  • Grade 0.94% mined
  • Cash costs of US$12,705/t for life of mine
  • AISC $13,661 /t payable tin.
  • EBITDA US$83mpa from years 2–6 average.
  • Mining rate rises to 500ktpa from 350ktpa in the 2017 PEA. Total LOM tonnes mined 5,955,000t
  • Processing 250,000tpa @ 1.83% tin due to pre-concentration technology
  • Recovery: 87.8%
• Tin market: Tin inventories are expected to tighten as Chinese domestic tin ingot production slides on ore shortages.

• Chinese refined tin production fell in September according to the Shanghai Metals Market due to a fall in ore supplies from Myanmar.
• Smelters are moving to earlier than planned stoppages for maintenance due to limited feedstock helping tin prices higher.
• Recovery rates are also reportedly to be falling as smelters process lower-grade ores and tailings to fill the gap.
• Shanghai Metals Market notes that ‘recent procurement of tin concentrate and scrap has been challenging, with current production declining month by month.’
• The survey suggests that Chinese tin ingot production is set to decline in October, and ‘may persist until the end of the year.’

Conclusion:  While the start of the project finance initiative is positive news the team will likely need to upgrade the PEA to satisfy lenders that sufficient work has been done on evaluating the risks and returns on the redevelopment of mine. Previous announcements indicate a formal construction decision on project financing in 2025. We look forward to seeing further details firming up the PEA estimates next year.

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

Metals Acquisition Corp (MTAL US) $12.6 Mkt Cap $877m – Equity raise to de-lever balance sheet following copper acquisition

• Metals Acquisition, a SPAC formed to buy Glencore’s CSA mine, has raised US$103m in new equity.
• The Company will use the funds to retire the existing Mezzanine Debt Facility.
• They also state the potential to ‘pursue inorganic growth opportunities.’
• The raise was conducted at a 14% discount to the Tuesday closing price.
• The Company is targeting production of 50.5kt Cu by 2026, up from 40.5kt forecast in 2024.
• CSA mine life has been extended to 2034, through drilling.
• EBITDA in 1H24 reported at $91m, producing 19.7kt Cu.
• Current reserves stand at 14.9mt Cu at 3.3% Cu for 494kt contained.

Tharisa (THS LN) 68p Mkt Cap £209m – Production results as chrome prices rise

• Tharisa, integrated chrome and PGM producer in South Africa, reports production results for the quarter to 30^th September and full year.
• Tonnes mined stood at 1.29mt, up 2% qoq. Annually, tonnes mined at 4.6mt vs 4.2mt in 2023.
• 6E PGMs produced up 0.5% qoq to 37koz, and 145koz for the year. (145koz 2023).
• PGM metal basket price down 1.5% qoq at $1,370.
• 2024 basket price down yoy to $1,362/oz from $1,892/oz.
• Chrome concentrate production up 4% qoq to 427kt. (1.7mt for the year vs 1.58mt 2023).
• Chrome concentrate price at $314/t, up 1.6% qoq. ($299/t FY24 vs $263/t 2023).
• Operationally, PGM feed grade fell yoy from 1.64g/t to 1.6g/t, whilst recoveries rose from 66.5% to 67%.
• Chrome ROM grade rose from 17.8% 2023 to 18.4%.
• Chrome recovery rose from 67.6% 2023 to 68.3%.
• Cash balance reported at $218m, up from $190m June 30^th, with debt at $109m.
• $5m shares repurchased over the period.
• Production guidance for 2025 at 140-160koz PGM 6E, and 1.65-1.8mt chrome concentrates.
• PGM Market Update
  • PGM prices expected higher over next 12-24 months on production output shortcomings
  • Delays to destocking weighing on prices, whilst demand remains firm.
  • Hybrid drivetrains supporting longer term demand forecasts.
• Chrome Market Update
  • Stainless steel growth demand supporting prices.

Tirupati Graphite (TGR LN) SUSPENDED – Funding update

• Tirupati provide an update from on their graphite operations in Madagascar.
• The Company reports operations at Vatomina ‘continued intermittently’ through August.
• Production hit 620t, with product exceeding 96% TG.
• Company generated $660k in revenues, selling at an average price of $892/t.
• Tirupati reports that it continues to progress financing discussions to address both working capital needs and longer term financing.
• They are advancing a term sheet for investment to enable steady state production of 2000-2400tpm.
• Company is also in discussions with a ‘Middle East Sovereign Fund’ to develop the Montepuez project.
• Annual accounts will be delayed to 31^st December 2024, with the audit reportedly ‘substantially completed.’

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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35-39 Maddox Street London

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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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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