SP Angel Morning View -Today’s Market View, Thursday 21st December 2023

Metals rise on China state bank rate cuts

MiFID II exempt information – see disclaimer below

Ariana Resources (AAU LN) – Resource drilling at Tavsan project, western Turkey

Atalaya Mining (ATYM LN) – Timetable on transition to London’s Official List

EQ Resources (EQR AU) – FIRB approval helps clear the way for the acquisition of Barruecopardo

First Quantum (FM CN) – Management emphasises commitment to Panama despite disruption

Galantas Gold* (GAL LN) – $2.6m raised

Greatland Gold (GGP LN) – Continuing resource growth at Havieron

Hummingbird Resources (HUM LN) – Operations update and fundraising progress

Tertiary Minerals* (TYM LN) 0.14p, Mkt cap £3m – Flash Note – BUY – Drilling Funded at Konkola West Copper Project

SolGold* (SOLG LN) – AGM results as publication of Cascabel pre-feasibility study expected in early Q1 2024

Iron ore prices push higher on disappointing Australia exports and pre-holiday restocking

• Iron ore prices have rebound to $135/t for 62% Fe on reports of steel mill restocking.
• Low inventories persist and steelmakers are reportedly replenishing stocks in advance of the Lunar New Year slowdown in February.
• Concerns over another Chinese default, namely Longfor Group, have calmed after the developer paid a creditor unexpectedly.
• Australian iron ore exports from Port Hedland fell to 45mt in November vs 47mt in October.
• A major Chinese state publication, Securities Times, suggested that Beijing is likely to add fiscal stimulus come the new year, although nothing concrete has been announced to date.

China boosts coal funding as Western backers dry up

• BloombergNEF reports $120bn worth of financing for coal projects in 2022.
• China accounted for 76% of this, with the US funding $10bn worth and $3bn for India and Germany respectively.
• China’s coal output hit 4.5bnt last year, with this year’s output climbing 3.5% above 2022 levels.
• Australia anticipates China’s increased domestic supply will see imports fall to 221mt vs current 302mt levels.

China EV prices continue to slide on increased competition

• Chinese automakers are expected to introduce 158 new models in 2024, 80% of which are EVs.
• Prices have fallen on lower battery material costs, lithium specifically, alongside increased competition.
• BYD and Li Auto are dominating market share.

Economics

US – US considers raising tariffs on Chinese Goods, including EVs

• The US government is discussing raising tariffs on some Chinese goods, including EVs according to a report in the Wall Street Journal.
• Chinese EVs currently entering the US are already subject to a 25% tariff.
• Chinese EV makers have largely avoided the US when expanding overseas, because of US trade protection laws and geopolitical risks, focusing instead on Europe, Southeast Asia, and South America.
• A further raise in tariffs will likely deter Chinese automakers further.

China – 10-year government bond futures jump

• China state-owned banks are reported to be cutting deposit rates tomorrow according to state-backed media
  • 1-year rate 10bp cut to 1.45%
  • 2-year rate 20bp cut to 1.65%
  • 3-year cut 25bp to 1.95%
  • 5-year cut 25bp to 2.00%.
• Second-hand home sales rose 25.7% in the Shanghai area last week vs a week earlier.
• Average daily sales of new home in Beijing rose 122.4% to 282 and 40.9% in Shanghai to 453
• Sales areas also rose 100.6% in Beijing and 45.8% in Shanghai
• SMEE ‘Shanghai Micro Electronics Equipment Group Co.’ develops 28nm chipmaking equipment according to investor Shanghai Zhangjiang Hi-Tech Park Development Co.
• The firm later amended that post to remove references to 28nm to say SMEE is committed to building advanced lithography machines.

Taiwan – China to end tariff concessions on imports of 12 Taiwan chemicals

• The move is said to follow Taiwan restrictions on products from mainland China

Italy – PPI  -16.3 yoy November vs -12.4% yo )

– Italian PPI (M/M) Nov: -1.2 (prev 2.2%)

Shipping – >100 ships have been rerouted around the Cape adding another 10 days to two weeks to their route.

• Container Freight from China to Rotterdam climbs 17% to $1,400/FEU from $1,200/FEU at the beginning of December
• COSCO Shipping, OOCL, Evergreen and Ocean Network Express appear to have suspended cargo loading for shipping through the Red Sea.
• Only one container ship is reported to be left in the Red sea.
• Disruptions in the Red Sea follow congestion in the Panama Canal which has pressured dry bulk rates to the upside.

DRC elections extended as opposition anger threatens instability

• The Democratic Republic of Congo elections have been extended into a second day as opposing candidates have questioned the electoral process.
• Former minister Olivier Kamitatu has described the elections as ‘ridiculous, grotesque and tragic.’
• There have been reports of major delays in vote counting.
• Opposition members have called for a new election under a reconstituted electoral commission.
• The incumbent government called for people ‘not to believe the rumours spreading on social media intended to disturb the ongoing electoral process.’ (Bloomberg)

Iceland – volcanic eruption blasts 100m high waves of lava

• One Volcanologist reckons the eruption could die out by weekend while others reckon more eruptions are likely over many years.
• Engineers are working to redirect lava flows away from from the local geothermal power plant which supplies much of the island.
• More vents are expected to open as the eruption continues with experts expecting very little warning of the opening of new vents.
• Three out of five vents remain active as lava flows from the mantle. The giant lava filled rift gives a good view of the formation of new tectonic plate.

Currencies

US$1.0951/eur vs 1.0968/eur previous. Yen 143.20/$ vs 143.54/$. SAr 18.227/$ vs 18.264/$. $1.264/gbp vs $1.266/gbp. 0.674/aud vs 0.677/aud. CNY 7.145/$ vs 7.134/$.

Dollar Index 102.33 vs 102.57 previous.

Commodity News

Precious metals:

Gold US$2,036/oz vs US$2,041/oz previous

Gold ETFs 85.4moz vs 85.6moz previous

Platinum US$966/oz vs US$963/oz previous

Palladium US$1,203/oz vs US$1,210/oz previous

Silver US$24.30/oz vs US$24/oz previous

Rhodium US$4,425/oz vs US$4,425/oz previous

Base metals:

Copper US$ 8,549/t vs US$8,651/t previous

Aluminium US$ 2,233/t vs US$2,260/t previous

Nickel US$ 16,695/t vs US$16,845/t previous

Zinc US$ 2,547/t vs US$2,603/t previous

Lead US$ 2,071/t vs US$2,086/t previous

Tin US$ 25,080/t vs US$25,340/t previous

Energy:

Oil US$79.9/bbl vs US$79.7/bbl previous

• Crude oil prices edged lower after the EIA reported a 2.9mb w/w US crude build, together with a 2.7mb build to gasoline and 1.5mb build to distillate stocks as refinery utilisation surged 2.2% w/w to 92.4%.
• European energy prices edged lower as EU natural gas storage levels fell 2.1% w/w to 88% full (vs 76.5% 5-Yr average), with Germany reporting levels above 90% full and aggregate storage at 1,002TWh.

Natural Gas €35.3/MWh vs €33.7/MWh previous

Uranium UXC US$82.30/lb vs US$81.45/lb previous

Bulk:

Iron Ore 62% Fe Spot (cfr Tianjin) US$134.7/t vs US$133.2/t

Chinese steel rebar 25mm US$580.7/t vs US$581.2/t

Thermal coal (1st year forward cif ARA) US$98.5/t vs US$97.5/t

Thermal coal swap Australia FOB US$138.5/t vs US$139.5/t

Coking coal swap Australia FOB US$322.0/t vs US$322.0/t

Other:

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

NdPr Rare Earth Oxide (China) US$61,574/t vs US$62,094/t

Lithium carbonate 99% (China) US$12,105/t vs US$12,405/t

China Spodumene Li2O 6%min CIF US$1,340/t vs US$1,380/t

Ferro-Manganese European Mn78% min US$1,057/t vs US$1,050/t

China Tungsten APT 88.5% FOB US$305/mtu vs US$300/mtu

China Graphite Flake -194 FOB US$610/t vs US$610/t

Europe Vanadium Pentoxide 98% 6.1/lb vs US$6.1/lb

Europe Ferro-Vanadium 80% 26.25/kg vs US$26.25/kg

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

Spot CO2 Emissions EUA Price US$75.4/t vs US$76.1/t

Brazil Potash CFR Granular Spot US$310.0/t vs US$310.0/t

EV and Battery news

UK continues to gain offshore wind investment

• Over the last few weeks successive announcements could see world’s largest offshore wind farms built in British waters.
• Early in December, RWE announced that UAE state-controlled Masdar would acquire 49% of the Dogger Bank project in the North Sea.
• The combined wind farm would have a maximum capacity of 3GW, comprise an estimated £11bn investment and create up to 3,000 jobs.
• Construction could begin as early as 2025.
• The deal was unveiled at the COP28 climate summit in the UAE, where Rishi Sunak hailed it as “a huge boost for UK renewables, creating more jobs, helping to power three million homes and increasing our energy security”.
• Following that announcement, Orsted have also revealed that it will continue to push on with its £8bn development of Hornsea Three, after it had previously said it might pull the plug due to soaring costs.
• Hornsea Three will comprise about 200 wind turbines about 75 miles off the coast of Norfolk, with a total capacity of up to 2.9GW, making it the world’s biggest single offshore wind farm.
• These sites will make a significant contribution to the UK government’s goal of 50GW of offshore wind operational by 2030, up from about 14GW today.

Honda recalls 100,000 hybrid vehicles over fire risks

• Honda US will recall approx. 106,000 CR-V hybrid vehicles due to risk of fire caused by battery cables overheating.
• Honda dealers across the US will recall vehicles and replace faulty battery cables.

Company News

Ariana Resources (AAU LN) 2.15p, Mkt Cap £24.1m – Resource drilling at Tavsan project, western Turkey

• Ariana Resources has reported results from resource infill and extension drilling at its 23.5% owned Tavsan project located around 130km by roead from its Kiziltepe mine in western Turkey.
• The company has drilled 8,994m in 104 holes since it announced an updated mineral resource estimate of “6.6 Mt at 1.44 g/t Au and 5.26 g/t Ag for 307,000 oz Au and 1.1 million oz Ag” in November 2022.
• The November 2022 estimate classes ~83% within the ‘Measured & Indicated’ resource levels and “includes a high-grade domain of 1.1 Mt at 2.74 g/t Au and 4.89 g/t Ag for 96,000 oz Au and 171,000 oz Ag”.
• Among the results of the drilling since the 2022 estimate Ariana Resources highlights:
  • A 12.10m wide intersection at an average grade of 2.52g/t gold and 9.38g/t silver from a depth of 114.6m in hole TAV-023-23; and
  • An 11.00m wide intersection at an average grade of 2.18g/t gold and 5.00g/t silver from a depth of 137.3m in hole TAV-027-23; and
  • A 23.62m wide intersection at an average grade of 3.54g/t gold and 4.56g/t silver from a depth of 102.1m in hole TAV-025-23; and
  • An 8.80m wide intersection at an average grade of 2.41g/t gold and 5.24g/t silver from a depth of 45.3m in hole TAV-020-23.
• Indicating that the company expects to drill a further 5,000m, “particularly in the North Zone and North Zone Extension” in the continuing campaign at Tavsan, Managing Director, Dr. Kerim Sener, said that Ariana Resources is “currently working on revisions to our geological model based on the new data, which will ultimately contribute to a revised Mineral Resource Estimate”.
• He said that the revised resource estimate “will be used to update production and development plans during Q1 2024, and we remain on track for first gold from Tavsan during Q2 2024”.
• Dr. Sener also said that some of the deeper drilling had shown “high grades over c.10m intervals, which is highly encouraging and suggests that there may be further depth continuity to parts of the Tavsan deposit than previously indicated”.
• As well as the resource estimation and development planning, “Future work on the project will include geophysical Induced Polarization/Resistivity studies, isotope analysis and geochronology of mineralised samples” as Ariana Resources builds its understanding of the structural geological setting and metallogeny at Tavsan.

Conclusion: We look forward to the results from drilling over the last year being incorporated into the resources estimate at Tavsan and forming part of the development plan.  Continuing drilling may also add insight into the depth potential of the mineralisation.

Atalaya Mining (ATYM LN) 366p, Mkt Cap £520m – Timetable on transition to London’s Official List

• Following the 1 November announcement of its intention to apply for a premium-listing on the LSE’s Official List, Atalaya Mining reports that “Admission will no longer occur before the end of December 2023 as originally anticipated and the Company now expects that Admission will not take place before the release of its 2023 annual financial results”.
• The company explains that although it “continues to progress the application process … Admission remains subject to a number of conditions including the approval by the FCA of a prospectus”.
• Earlier this month, the company confirmed that it had received the necessary regulatory approvals to transfer its formal domicile from Cyprus to Spain.

EQ Resources (EQR AU) A$0.055, Mkt Cap A$88m – FIRB approval helps clear the way for the acquisition of Barruecopardo

• EQ Resources. which announced a binding agreement with the investment company, Oaktree Capital, to acquire the Barruecopardo tungsten mine in Salamanca Province in August, reports that Australia’s Foreign Investment Review Board (FIRB) “has issued a ‘no objection notification’ for the $25 million investment in EQR by funds managed by Oaktree Capital Management”.
• The company confirms that “EQR and Oaktree are working through remaining formalities to close the transaction still ahead of year end”.
• EQ Resources confirms that “FIRB approval represents a key condition precedent under the sale and purchase agreement entered into between EQR and Oaktree”.
• Oaktree’s A$25m investment will be deployed to repay Saloro’s debt and for additional capital investment at Barruecopardo and for working capital.
• Today’s announcement confirms that EQ Resources is “making good progress at the Barruecopardo operations as well, improvements in the processing technologies and production output are a result of the lessons learned at … [the company’s Australian tungsten operation at] … Mt Carbine”, including X-Ray sorting technology and the installation of improved recovery of ‘fines’ in the process plant.
• The historic Barruecopardo mine was reopened in 2019 “after nearly 40 years of shutdown” and is currently producing “approximately 140 tons/month of high-grade (>65% WO3) tungsten concentrate, with various minor plant expansion projects ongoing for higher recovery and throughput”.
• With world supply dominated by China, tungsten features as a critical mineral commodity in a number of jurisdictions including the US, EU, Australia and Japan.  The emergence of a sizeable western world producer is likely to be a welcome development for intermediate processors and end-users in these areas.

Conclusion: FIRB approval is an important milestone in the further development of the Barruecopardo tungsten mine.

First Quantum (FM CN) C$10.37, Mkt cap C$7.2bn – Management emphasises commitment to Panama despite disruption

• Tristan Pascall, FQM’s CEO, stated in an interview with Bloomberg that they ‘want to be part of the solution in the long run in Panama.’
• The Company has reinforced its commitment closing the mine in line with the Government’s instructions.
• However, they have filed two notices of arbitration.
• First Quantum will issue a plan in the new year regarding its plans to negotiate debt covenants dependent on Cobre Panama’s revenue streams.
• Cobre Panama supplies c.1.5% of global copper supply, and analysts are raising concerns over global concentrate supplies.

Galantas Gold* (GAL LN) 14p, Mkt Cap £16m – $2.6m raised

• The Company closed its private placement raising US$2.6m through unsecured convertible notes.
• Each note is convertible into common shares at US$0.255 (~20p) and matures on December 20 2026.
• Interest is 10%, payable in cash annually on December 31 with the rate adjustable by 1pp for each $100/oz increase in a gold price above $2,000/oz.
• Ocean Partners (3% shareholder) and Melquart (25%) each subscribed for US$875k of notes.
• Additionally, the Company is in discussions with its lenders to exchange US$2.7m worth of debt into equivalent amount of convertible notes with the deal expected to be completed before year end.
• Proceeds will be used for exploration and development at Omagh and Gairloch, working capital and for general corporate purposes.

Conclusion: Raised funds and a potential debt refinancing eases pressure on the balance sheet and provides capital to progress its gold and base metals portfolio of projects in Ireland and Scotland.

*SP Angel acts as Broker to Galantas Gold

Greatland Gold (GGP LN) 8.9p, Mkt Cap £457m – Continuing resource growth at Havieron

• Greatland Gold has updated the mineral resources estimate for its 30% owned, flagship, Havieron project in the Paterson region of WA.
• The new estimate, which incorporates around 93,000m drilled since the previous, March 2022, estimate shows an overall ‘Indicated & Inferred’ resource of 131mt at an average grade of 1.7g/t gold and 0.21% copper containing 7moz of gold and 275kt of copper, reported as a total of 8.4moz on a gold equivalent basis.
• Approximately 60% (5m gold equivalent oz) is classified as ‘Indicated’ (50mt at an average grade of 2.6g/t gold and 0.33% copper) with the balance ‘Inferred’.
• The new estimate represents a 29% increase in the resource in terms of equivalent gold content compared to the previous estimate of 92mt at an average grade of 1.9g/t gold and 0.24% copper of which the indicated resource stands at 35mt at an average grade of 2.8g/t gold and 0.42% copper with the balance classified as inferred.
• The company says that the new estimate “includes a 32% increase in contained gold equivalent metal in the higher confidence Indicated MRE category, which can now be considered in the updated Ore Reserve Estimate that will be part of the Feasibility Study”.
• Greatland Gold confirms that it has now confirmed continuity of mineralisation between “the Eastern Breccia and main Havieron Breccia domains with the definition of a new high grade ‘Link Zone’”.
• The company has been steadily growing the resource base at Havieron with the new estimate’s 28% increase in the contained gold building on the previous estimate which increased the resource content by around 53% compred to the previous, February 2021, estimate.
• Managing Director, Shaun Day, confirmed the resource growth, saying that “the total gold equivalent Mineral Resource content having increased from 4.4M oz in the October 2021 MRE, to 6.5M oz in the March 2022 MRE, and now to 8.4M oz in 2023”.

Conclusion: Continuing resource growth at Havieron bodes well for the future feasibility study as exploration demonstrates continuity between mineralisation previously believed to be discrete zones.

Hummingbird Resources (HUM LN) 9.8p, Mkt Cap £66m – Operations update and fundraising progress

• Yanfolila production in 11 months this year amounted to 78.2koz at $1,340/oz AISC.
• FY23 Yanfolila guidance reiterated at 80-90koz at US$1,500/oz AISC.
• Kouroussa production is forecast to come in at ~5.0koz this year as operations struggle to ramp up due to delays in accessing higher grade zone as mining underperforms.
• Higher grade area of the Koekoe deposit is expected to be reached early next year and operations to ramp up to full commercial production in Q1/24.
• FY24 guidance will be provided together with Q4/23 operational update in January 2024.
• The decided to hedge some of its gold sales as the Company is aiming to significantly deleverage the balance sheet.
• The Company hedged ~44.5koz at an average price of over $2,000/oz.
• Separately, the team reported on the progress of recently announced placing of up to $30m at 11.3p.
• The Company is estimating that a total of $32.7m is expected to be raised assuming $5.0m rights issue is taken up in full.
• The placing is conditional on shareholder approval scheduled for 10 January 2024.
• Proceeds of the fundraise are to be directed towards exploration ($5m), Dugbe Gold Project development ($2m) with the balance to be used at Yanfolila/Kouroussa as well as deleveraging the balance sheet.
• The Company held $144m in net debt as of H1/23 or 1.9x to annualised H1/23 EBITDA.

Tertiary Minerals* (TYM LN) 0.14p, Mkt cap £3m – BUY – Drilling Funded at Konkola West Copper Project

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• Tertiary Minerals’ 96% owned subsidiary, TMZ, has signed a definitive earn-in with KoBold Metals.
• Upon regulatory approval, KoBold will be committed to drill a minimum of two holes for a total of 2,000m within 14 months.
• This Stage 1 drilling programme must start no later than May 2024 – the first drill site has been selected.
• Should KoBold wish to increase its ownership in the JV to 70%, it will be required to spend US$6m in cumulative expenditure on exploration over a four-year period, diluting TMZ’s interest to 20%. Mwashia will retain a 10% carried stake.
• KoBold, a start-up backed by mining majors including BHP and Rio Tinto alongside entrepreneurs including Bill Gates and Warren Buffett, utilises novel exploration technology and software to generate discoveries.
• The Company is currently spending $150m on exploration in and around the Mingomba project, contiguous to Tertiary’s Konkola West.

Conclusion: This is a major development for Tertiary’s Zambian copper story. KoBold Metals provides both deeper pockets and a strong technical team that will enable deep diamond drilling warranted at Konkola West.

KoBold is now established in Zambia and has been active in the recent field season drilling out the Mingomba Copper Deposit adjacent to Konkola West. Drilling will target similar, deep-dipping high grade copper ore-shale visible at Konkola, Lubambe and Musoshi.

Zambia is looking to boost copper production to 3mt by 2032 and Tertiary’s deal with KoBold helps progress them towards contributing to those ambitions.

*SP Angel acts as Nomad and Broker to Tertiary Minerals

SolGold* (SOLG LN) 8.48p, Mkt Cap £253m – AGM results as publication of Cascabel pre-feasibility study expected in early Q1 2024

• Solgold has announced the results of polling at its AGM in Brisbane on 20^th December.
• These include the election of a new director, Mr. Adrian van Barneveld as a director which passed with 99.55% votes in favour.
• Former directors, Mr. Liam Twigger and James Clare did not offer themselves for re-election and consequently cease to hold office as directors.
• CEO, Scott Caldwell, welcomed Mr. van Barneveld to the Board and thanked Messrs Twigger and Clare “for their many years of service as directors of the Company”.
• Mr. Caldwell noted “that resolutions in relation to the disapplication of pre-emption rights were not passed and I look forward to working with shareholders to better understand their views”.
• Earlier this month, Solgold indicated that it expects to release a pre-feasibility study describing a phased development of its Cascabel project in Ecuador “early in the first quarter of 2024”.

*SP Angel acts as Financial Advisor to SolGold

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 employees may have previously held, or currently hold, shares in the companies mentioned in this note.

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