SP Angel Morning View -Today’s Market View, Thursday 11th January 2023

Metals steady as focus turns to US for key inflation data and rate guidance

MiFID II exempt information – see disclaimer below

Bushveld Minerals* (BMN LN) – SPR equity investment update

Castillo Copper (CCZ LN) – Disposing of NSW exploration licences

CZR Resources (CZR AU) – Sale of flagship Robe Mesa iron ore project for A$102m

Ferrexpo – (FXPO LN) – Q4 production lower on logistic constraints

Gem Diamonds (GEMD LN) – Large white diamond from Letšeng

Lucara Diamonds (LUC CN) – Karowe mine yields 166 carat diamond

Rainbow Rare Earths (RBW LN) – Rare Earth Oxide separation work begins in Florida

Shanta Gold (SHG LN) – NLGM drilling results

Tharisa (THS LN) – Record quarterly chrome production and FY24 guidance reiterated

VOX Markets:  

09/01/2024: What’s your exposure to clean energy? (youtube.com)

• 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. SP Angel acts as Broker/Nomad or both for Aterian, Bluejay and Aura Energy. An SP Angel Analyst holds shares in Bluejay Mining Plc.

Iron ore sees largest drop since October as demand slides on cooling restocking

• Iron ore prices fell over 5% to $132/t on the 62% Fe benchmark in China.
• Analysts suggest restocking ahead of the Lunar New Year has cooled, quashing the 18-month highs made earlier this month.
• Speculative positions are reportedly de-grossing, having been heavily long over the past month. (Bloomberg)
• Steel mill maintenance is reportedly increasing in China as weak margins on elevated iron ore prices are weighing on production appetite.
• Downstream demand remains weak, with inventories rising.

Economics

Currencies

US$1.0980/eur vs 1.0939/eur previous. Yen 145.39/$ vs 144.92/$. SAr 18.643/$ vs 18.673/$. $1.277/gbp vs $1.271/gbp. 0.672/aud vs 0.670/aud. CNY 7.161/$ vs 7.171/$.

Dollar Index 102.25 vs 102.55 previous.

Commodity News

Precious metals:

Gold US$2,033/oz vs US$2,036/oz previous

Gold ETFs 84.8moz vs 84.9moz previous

Platinum US$928/oz vs US$935/oz previous

Palladium US$1,014/oz vs US$987/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$8,374/t previous

Aluminium US$ 2,245/t vs US$2,256/t previous

Nickel US$ 16,445/t vs US$16,175/t previous

Zinc US$ 2,527/t vs US$2,535/t previous

Lead US$ 2,117/t vs US$2,078/t previous

Tin US$ 24,620/t vs US$24,330/t previous

Energy:

Oil US$77.2/bbl vs US$77.7/bbl previous

• Crude oil prices were flat after the EIA reported a 1.3mb w/w US crude build, together with large seasonal builds of 8.0mb to gasoline and 6.5mb to distillate stocks as refinery utilisation fell 0.6% w/w to 92.9%.
• European energy prices edged lower as EU natural gas storage levels fell 4.1% w/w to 82.6% full (vs 70.4% 5-Yr average), with Germany reporting levels above 87% full and aggregate storage at 942TWh.
• French nuclear reactor operating levels were reported increasing 4.7% w/w to 81.4% of 61.4MW capacity and Gazprom reporting a stable supply of 41.4mcm/d (~1.5bcf/d) via the Sudzha gas pumping station in Ukraine.
• The new $20bn 650kb/d Dangote refinery and petrochemical complex in Nigeria has received its initial 6mb crude oil supply and plans to commence commercial production of finished products by end-January, which is designed to run on local and other light crudes and meet over 100% of Nigeria’s domestic requirements.

Natural Gas €30.3/MWh vs €31.0/MWh previous

Uranium UXC US$92.50/lb vs US$91.00/lb previous

Bulk:

Iron Ore 62% Fe Spot (cfr Tianjin) US$132.6/t vs US$137.5/t

Chinese steel rebar 25mm US$577.1/t vs US$576.7/t

Thermal coal (1st year forward cif ARA) US$103.0/t vs US$103.5/t

Thermal coal swap Australia FOB US$132.0/t vs US$134.5/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$56,146/t vs US$56,197/t

Lithium carbonate 99% (China) US$12,081/t vs US$12,062/t

China Spodumene Li2O 6%min CIF US$1,000/t vs US$1,000/t

Ferro-Manganese European Mn78% min US$1,070/t vs US$1,067/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% 27.75/kg vs US$27.25/kg

China Ilmenite Concentrate TiO2 US$318/t vs US$317/t

Spot CO2 Emissions EUA Price US$76.2/t vs US$77.8/t

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

Battery News

Global EV sales increased 31% in 2023

• Global sales of fully electric and plug-in hybrid vehicles rose 31% in 2023, down from 60% growth in 2022. (Rho Motion)
• Fully electric EVs accounted for 9.5m of the 13.6m EVs sold globally in 2023, with PHEVs accounting for the rest.

SK On consider mass production of LFP batteries for automakers in 2026

• The South Korean battery maker is considering plans to start mass producing lithium phosphate (LFP) batteries in 2026 as it looks to deliver a low cost battery chemistry favoured by Chinese automakers. (Reuters)
• Automakers are looking to make use of cheaper battery chemistries, such as LFP, to cut costs and make EVs more affordable and avoid supply chain concerns around materials like cobalt.

Company News

Bushveld Minerals* (BMN LN) 2.3p, Mkt Cap £48m – SPR equity investment update

BUY – Under Review

• The Group issued SPR with a letter of demand following the late payment of $12.5m regarding the recently closed equity placing.
• The delay is reported to be related processing delays during the Christmas and new year holidays.
• The SPR confirmed that funds will be paid in this week.

*SP Angel act as nomad and broker to Bushveld Minerals

Castillo Copper (CCZ LN) 0.33p, Mkt Cap £4.3m – Disposing of NSW exploration licences

• Castillo Copper, which, following management changes last year, has been conducting a strategic review of its asset portfolio, reports the sale of two exploration licences near Broken Hill, New South Wales.
• The company is selling the licences to Rimfire Pacific Mining for shares valued at A$150,000 with a provision for a further A$150,000 in shares if Rimfire’s 5-day VWAP “is greater than $0.0279, which is 50% above the Consideration Shares Issue Price”.
• All shares issued in the transaction will be subject to “a 6-month escrow period”.
• The tenements being sold “cover the same sequence of Proterozoic age deformed and metamorphosed gneiss, psammite, and amphibolite units that host … [Castillo Copper’s] … Bald Hill cobalt sulphide mineralisation” located 30km west of Broken Hill.
• Chairman, Ged Hall, welcomed the agreement as part of Castillo Copper’s “streamlining” of its asset portfolio and said that it would “allow Castillo to focus on the development of our portfolio of assets, while still retaining interest in the Broken Hill Project”.
• Previous announcements from the company have highlighted the potential of its projects in north-west Queensland and in Zambia.

CZR Resources (CZR AU) A$0.3, Mkt cap A$70m – Sale of flagship Robe Mesa iron ore project for A$102m

• CZR has entered into a binding Share Sale Agreement to sell its 85% interest in the Robe Mesa project to Shenzhen-based SNIC.
• CZR will receive A$102m in cash for its 85% interest in Robe Mesa, valuing the project at A$120m.
• The offer represents a 130% premium to CZR’s 90-day VWAP.
• CZR will retain an exploration portfolio, including the its Croyden gold project down strike from De Grey’s Hemi asset and the Buddadoo vanadium-titanium project.
• A$81m will be paid on completion of the agreement, and $20.4m will be paid either on first shipment or by the 30^th June 2025.
• The Robe Mesa DFS, released in October 2023, had highlights including:
  • C1 cash costs of A$49/t FOB – DSO method.
  • 3.5mtpa production, increasing to 5mtpa over an initial 8yr mine life.
  • NPV8 of $256m at $90/t Fe for an IRR of 62%.
  • CAPEX at A$130m (CZR share)

Ferrexpo – (FXPO LN) 0.78p, Mkt cap £456m – Q4 production lower on logistic constraints

• Ferrexpo reports production results from its operations in Ukraine.
• Production fell 50% qoq to 677kt of commercial tonnes and concentrate. Full year production down 33% to 4,152kt.
• Pellet production stood at 627kt for the quarter whilst concentrate production stood at 50kt, down 50% and 49% respectively.
• The Company is operating between one and two pelletising lines, keeping product output quality flexible dependent on customer demand and logistics.
• However, Ferrexpo is targeting the production of higher grade pellets grading over 65% Fe.
• Total iron ore pellet production includes 577kt from the Company’s own ore.
• Net cash position stood at US$109m as of 31^st December (no debt), down from $131m as of 30^th July 2023.

Gem Diamonds (GEMD LN) 12.6p, Mkt Cap £18m – Large white diamond from Letšeng

• Gem Diamonds reports the recovery of a 295-carat type II white diamond from its 70%-owned Letšeng mine in Lesotho.
• The mine has an established track record of producing large, high-value white diamonds which the company says makes “it the highest dollar per carat kimberlite diamond mine in the world”.
• The mine yielded 4 diamonds larger than 100 carats in 2022 and, we believe, produced a further 4 of these large stones in 2023.
• Notable previous discoveries of large diamonds at Letšeng include the 1,109 carat ‘Lesedi La Rona’, discovered in 2017 and thought to be the world’s second largest diamond as well as the 910 carat ‘Lesotho Legend’ recovered in 2019, and understood to be the fifth largest gem quality diamond ever discovered, which realised US$40m when sold in Antwerp.

Lucara Diamonds (LUC CN) C$0.39, Mkt Cap C$178m – Karowe mine yields 166 carat diamond

• Lucara Diamonds has announced the recovery of a 166 carat Type IIa diamond from its wholly-owned Karowe mine in Botswana.
• The diamond was recovered from “direct milling of ore sourced from the M/PK(S) unit of the South Lobe” at Karowe where a 1,080 carat Type IIa white diamond was recovered during the September quarter last year.
• Welcoming the recovery of the latest large diamond from Karowe, CEO, William Lamb, said that it “is the 328th stone over 100 carats since we commenced mining in 2012”.

Rainbow Rare Earths (RBW LN) 11.8p, Mkt cap £74m – Rare Earth Oxide separation work begins in Florida

• Rainbow provides an update on its partner K-Tech’s REO separation process in Florida.
• The back-end pilot plant is using continuous ion exchange and continuous ion chromatography to separate REOs.
• Bench scale testwork has showed positive separation results, with the Group now looking to repeat these results through continuous operation.
• Initial separated oxides are set to be NdPr, with delivery expected in the coming weeks.
• The Group will then aim to deliver Dy and Tb separated oxides.
• Whilst the back-end plant is being established in Florida, the front-end pilot plant has successfully completed two campaigns in Johannesburg, operated by Mintek.
• These have delivered c.5.75kg of a mixed rare earth carbonate, with five batches now shipped to K-Tech in Florida to date.
• The Johannesburg front-end plant is set to begin continuous operations from Monday 15^th.
• Rainbow is working with K-Tech to optimise an optimal mixed carbonate product to deliver to the Florida plant.
• Management notes that this additional processing step to increase the feedstock’s grade and reduce throughput does not ‘add any significant capital or operating expenditure.’
• Piloting process has shown a 50% reduction in energy requirements vs the PEA through improved leaching temperature conditions.
• Two key reagents are reportedly being successfully regenerated, also reducing OPEX requirements.

Conclusion: This is a positive update from Rainbow which, despite various delays, has successfully delivered a mixed rare earth carbonate to the K-tech CIX and CIC circuits. Continued optimisation of the front-end plant in Johannesburg is showing energy intensity reductions and efficiency improvements vs the PEA.

Shanta Gold (SHG LN) 13p, Mkt Cap £137m – NLGM drilling results

• The Company released NLGM drilling results conducted in 2023.
• Assays include infill drillholes at Elizabeth Hill,  BC North and Black Tree to extend the life of mine as well as testing maiden exploration target at Jamhuri West.
• At Elizabeth Hill 20 drill holes (~3,800m) were completed testing down dip extensions.
• Selected intersections include:
  • 11.6m at 39.05g/t from 203.0m including 2.0m 199.14g/t from 206.9m;
  • 11.2m at 1.74g/t from 193.6m;
  • 10.0m at 2.03g/t from 156.0m
• At BC North three holes (~200m) were completed in 2023 testing mineralisation continuity with results from one currently available.
  • 15.1m at 7.49g/t from 16.1m including 1.4m at 42.00g/t from 23.2m.
• At Black Tree Hill 24 RC holes (~2,200m) were completed focusing the western extension of the structure.
  • 5.0m at 5.19g/t from 11.0m including 1.0m at 17.73g/t from 14.0m;
  • 3.0m at 2.61g/t from 23.0m including 1.0m at 6.04g/t from 24.0m;
  • 2.0m at 4.26g/t from 21.0m including 1.0m at 6.10g/t from 22.0m.
• At Jamhuri West, located 0.7km west of the NLGM processing plant, 47 RC holes (~4,200m) were drilled to test ~250m of strike.
• The ongoing exploration drilling at Jamhuri West suggests the potential for the extension of the mineralised structures to the east towards Jamhuri pit.
  • 10.0m at 3.39g/t from 98.0m including 3.0m at 5.52g/t from 100.0m;
  • 8.0m at 6.53g/t from 40.0m including 3.0m at 10.66g/t from 42.0m.
• Mineralisation at Elizabeth Hill, Luika, Jamhuri West, and Black Tree Hill remains open at depth.

Tharisa (THS LN) 63p, Mkt Cap £190m – Record quarterly chrome production and FY24 guidance reiterated

• December quarter production amounted to 35.7koz PGMs (+16.3%qoq) and 462.8kt chrome concentrates (+11.9%qoq).
• Higher production was driven by increased plant throughput (1.4mt +8.7%qoq) as well as stronger processed grades and recoveries.
• PGM basket and average metallurgical grade chrome concentrate prices were little changed at $1,344/oz (+1%qoq) and $291/t (-%qoq).
• Market sentiment wise, the Group reports strong demand in the chrome sector in the lead up to Chinese New Year period (10 Feb 2024) while PGMs price pressures are seen weighing on mining in South Africa with some operations struggling driven by (perceived) excess inventory in the PGM pipeline.
• Net debt stood at ~$95m (Sep23: ~$127m) including $127m in debt and $222m in cash.
• FY24 (Sep YE) production guidance reiterated at 145-155koz PGMs and 1.7-1.8mt chrome concentrates.

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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