SP Angel Morning View -Today’s Market View, Thursday 23rd May 2024

Copper and gold pull back as Fed pushes back rate cut expectations

MiFID II exempt information – see disclaimer below

Anglo American (AAL LN) – After 4th sales cycle 2024 sales approximately 17% below 2023 levels

BeMetals* (BMET CN) –– Latest Pangeni drilling results

BHP (BHP LN) – Third bid rejected by Anglo as negotiations begin

Botswana Diamonds (BOD LN) – Additional exploration licences in Botswana

Condor Gold* (CNR LN) – Injection of £500,000 through exercise of warrants

Cornish Metals* (CUSN LN) – Quarterly results confirm progress towards a decision on resumption of production at South Crofty

Greatland Gold (GGP LN) – Mt Egerton exploration licence awarded

Hummingbird Resources (HUM LN) – Exploration to upgrade Yanifolila resource

Kodal Minerals* (KOD LN) – Project construction on track for commissioning in Q4 with first shipment from China due in June.

Phoenix Copper* (PXC LN) –Results of early stage drilling at Navarre Creek

SQM (SQM US) – Earnings weaken but positive lithium outlook going forward

Copper falls as short squeeze fades and buyers slash orders on price escalation

• Copper prices fell from $11,000/t to $10,225/t yesterday as speculators closed bullish positions following a record short squeeze in the States.
• The move was predominantly driven by limited physical supply on COMEX, with a major arbitrage forcing shorts to cover positions.
• Limited available physical supply, deliverable on COMEX, added to the move.
• Codelco is delivering all available volumes to the States, which traders expect will alleviate supply constraints.
• Substantial speculative positioning has accumulated in copper over the past week, with net long positions hitting record levels.
• However, copper is expected to experience fundamental tightness over the medium to long term, with negative/single digit TCRCs reflecting limited concentrate availability (alongside smelter overexpansion).
• Fabricators, major downstream buyers of refined copper, have reportedly slashed orders and cut production amid elevated prices and weak end user demand.
• Henan Yuxing Copper told Bloomberg that orders for copper pipes used in air-conditioners etc had fallen 20-30% this month (peak season) as it struggles to pass on costs to customers.
• Fabricators in China are expected to cut capacity to 66% this month from 68% to account for weaker demand – the lowest rate since 2017. (SMM)
• Of 28 copper rod plants surveyed by Mysteel, 60% have reportedly cut or halted production.
• SHFE stockpiles are at their highest level on record, adjusted for seasonality.
• Whilst concentrate supply remains constrained, following CObre Panama coming offline and LatAm production cuts, Las Bambas is ramping up output by 100ktpa by next year.

Gold prices weaken as Fed minutes show hawkish-leaning FOMC

• Gold prices have sharply reversed, alongside copper, following their $2,450/oz levels met on Monday.
• Prices currently sit at $2,360/oz on the spot market.
• US Treasury yields have ticked higher amid hawkish commentary from the Fed, which showed a willingness to hold rates higher as inflation remains stubborn.
• Asian trading has been soft this week, with spreads weakening and volumes muted.
• We note strong Chinese buying has been taking place on Fridays and Mondays in this recent gold rally. We hope tomorrow might follow this trend.

EV Car Sales In India Reached 1Mn With 70% YoY Growth

• EV car sales in India reached nearly 1 million with a 70% year-on-year growth.
• The International Energy Agency reported a global rise in EV sales, with India showing a significant increase compared to 10% growth for total car sales.
• In Southeast Asia, countries like Thailand saw electric car sales increase more than fourfold, reaching about 90,000 vehicles and a 10% market share despite a decline in total car sales.
• Increased subsidies in both regions have facilitated EV demand growth, though India is expected to reduce subsidy levels in 2024.
• The demand for refined copper increased by 2.7% in 2023, driven by growing consumption in China and India, particularly in construction and electricity networks.
• In 2023, lithium demand rose by 30%, with increasing demand for nickel, cobalt, graphite, and rare earth elements in EVs.

Tungsten – HC Starck acquisition by MMC ‘Mitsubishi Materials Corporation’

• MMC has agreed to acquire all the shares of HC Starck Holding GmbH from MHT ‘Masan High-Tech Materials Corporation’ based in Vietman
• MMC is also expected to enter into a long-term agreement for APT and tungsten oxide offtake with MHT Group.
• HC Starck is a leading manufacturer of high-quality tungsten carbide powders and alloys in Europe, North America and China
• MMC are looking to become a leading tungsten products business focusing on cemented carbide cutting tools and is looking to grow its existing and significant tungsten recycling capacity.
• Tungsten APT prices continue to rise to US$365/mtu FOB from $305/mtu in March.
• We suspect MMC may look to further integrate its value chain in the tungsten business to include more tungsten offtake and potentially mining operations.

Economics

UK – Flash manufacturing PMI rises to 22-month high

• Manufacturing PMI rose to 51.3 from 49.1 in May well ahead of expectations for 49.2
• Services PMI dropped to 52.9 from 55.0 as confidence waned
• Composite PMI fell to 52.8 from 54.1.
• The figures suggest GDP growth of around 0.3% in Q2.

Currencies

US$1.0829/eur vs 1.0857/eur previous. Yen 156.70/$ vs 156.41/$. SAr 18.377/$ vs 18.132/$. $1.273/gbp vs $1.275/gbp. 0.662/aud vs 0.666/aud. CNY 7.244/$ vs 7.240/$

Dollar Index 104.88 vs 104.67 previous.

Precious metals:         

Gold US$2,360/oz vs US$2,416/oz previous

Gold ETFs 80.9moz vs 81.0moz previous

Platinum US$1,030/oz vs US$1,048/oz previous

Palladium US$987/oz vs US$1,019/oz previous

Silver US$30.32/oz vs US$32/oz previous

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

Base metals:   

Copper US$ 10,237/t vs US$10,696/t previous

Aluminium US$ 2,601/t vs US$2,709/t previous

Nickel US$ 20,075/t vs US$21,000/t previous

Zinc US$ 3,020/t vs US$3,127/t previous

Lead US$ 2,266/t vs US$2,351/t previous

Tin US$ 32,810/t vs US$34,180/t previous

Energy:           

Oil US$81.8/bbl vs US$81.8/bbl previous

Henry Hub Gas US$2.80/mmBtu vs US$2.63/mmBtu yesterday

• Crude oil prices edged lower after the EIA reported a 1.8mb w/w build to US crude offset by a 1mb draw to gasoline stocks, with refinery utilisation climbing 1.3% to 91.7%.
• European energy prices moved higher after OMV warned of a possible disruption to Russian gas flows following a court decision that could obstruct its payments to Gazprom.
• EU natural gas storage levels gained 1.5% w/w to 67.5% full (vs 53.8% 5-Yr average), with all countries now above 50% full and aggregate storage now at 765TWh.

Natural Gas €34.4/MWh vs €33.7/MWh previous

Uranium Futures $91.8/lb vs $92.2/lb previous

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$123.2/t vs US$121.5/t

Chinese steel rebar 25mm US$539.2/t vs US$538.7/t

Thermal coal (1st year forward cif ARA) US$119.5/t vs US$120.0/t

Thermal coal swap Australia FOB US$140.3/t vs US$140.0/t

Hard Coking Coal Australia FOB US$326.0/t vs US$326.0/t     

Other:  

Cobalt LME 3m US$27,150/t vs US$27,830/t

NdPr Rare Earth Oxide (China) US$53,560/t vs US$54,077/t

Lithium carbonate 99% (China) US$14,287/t vs US$14,296/t

China Spodumene Li2O 6%min CIF US$1,210/t vs US$1,210/t

Ferro-Manganese European Mn78% min US$972/t vs US$972/t

China Tungsten APT 88.5% FOB US$365/mtu vs US$365/mtu

China Graphite Flake -194 FOB US$470/t vs US$470/t

Europe Vanadium Pentoxide 98% 5.1/lb vs US$5.1/lb

Europe Ferro-Vanadium 80% 26.35/kg vs US$26.35/kg

China Ilmenite Concentrate TiO2 US$321/t vs US$321/t

China Rutile Concentrate 95% TiO2 US$1,401/t vs US$1,402/t

Spot CO2 Emissions EUA Price US$75.4/t vs  US$68.9/t

Brazil Potash CFR Granular Spot US$305.0/t vs US$305.0/t

Battery News

US electricity demand from EVs rises to new highs in early 2024

• U.S. electricity consumption from EVs rose over 50% in the first two months of 2024 compared to the same period in 2023.
• Total electricity use by EVs through February 2024 was 1.58 million MWh, up from 1.04 million MWh in early 2023.
• California was the top state for EV electricity consumption, with 2.58 million MWh, representing just under 34% of national demand.
• Other top states for EV electricity demand in 2023 included Florida, Texas, New York, and Washington.
• Battery electric vehicles accounted for nearly 72% of total EV electricity use, while plug-in hybrids accounted for 28.3%.
• Oklahoma saw the largest year-on-year growth in EV electricity demand, with a 74% increase.
• States with the lowest EV electricity demand were North Dakota, Wyoming, and South Dakota, due to limited public charging infrastructure and concerns about winter weather impacts on batteries.

EU new car sales rise nearly 14% yoy in April

• EU car market grew by 13.7% in April 2024, with new registrations totaling 913,995 units.
• Significant market increases in April: Spain (+23.1%), Germany (+19.8%), France (+10.9%), and Italy (+7.7%).
• Battery-electric car registrations rose by 14.8% to 108,552 units, maintaining ~12% market share. France (+45.2%) and Belgium (+41.6%) saw significant increases.
• Hybrid-electric car registrations increased by 33.1%, with notable growth in France, Spain, Germany, and Italy.
• Plug-in hybrid car registrations saw a modest rise of 3.7%, while Belgium experienced a decline of 17.6%.
• Petrol car sales increased by 7.3%, driven by gains in Spain, Germany, and Italy, but market share declined from 38.1% to 36%.

Honda Stands Firm on Full Electrification Efforts

• Honda reaffirms its commitment to 100% EV and fuel cell (FCEV) sales by 2040 in its new road map.
• The company plans to invest over $60 billion in electrification through 2030, focusing on battery technology.
• Notably, the company aims to achieve a reduction of over 20% in battery costs and an overall production cost decrease of 35%.
• Looking ahead, Honda sets ambitious targets for EV and FCEV adoption, aiming for them to comprise 40% of its global sales by 2030.

Company News

Anglo American (AAL LN) 2,679p, Mkt Cap £36bn – After 4th sales cycle 2024 sales approximately 17% below 2023 levels

1. Anglo American reports that, provisionally, the fourth De Beers sales cycle of 2024 realised US$380m (2023 – US$479m) and that the previously reported provisional sales of US$445m and for the third sales cycle of 2024 have now been confirmed at US$446m.
2. Provisionally, after the first four sales cycles of 2024 sales of US$1.6bn are approximately 17% lower than the US$2.4bn achieved at the same stage in 2023.
3. Al Cook, CEO of the De Beers Group, confirmed that “As expected, De Beers’ rough diamond sales in the fourth cycle of the year trended lower, in line with the seasonally slower second quarter and a quieter period of trading in India during the elections”.
4. He added, that, “Demand trends in the US are expected to be driven by short term macroeconomic issues but supported in coming years by a recovery in engagements as the after-effects of pandemic lockdowns fade”.

BeMetals* (BMET CN) – C$0.1, Mkt cap C$17m – Latest Pangeni drilling results

• In an announcement to the Canadian market yesterday, BeMetals reported further results from its drilling campaign at the Pangeni copper target in Zambia.
• President & CEO, John Wilton explained that “So far this year three of four drill holes from which results have been received have intersected significant zones of copper mineralization, which in several intervals have associated cobalt values”.
• Among the results highlighted in the announcement are:

• • An intersection of 16.16m at an average grade of 0.74% copper and 533ppm cobalt from a depth of 302.21m in hole D24-C1 described as “the southwestern most hole to have encountered copper mineralization in the Nkala Zone”.  The intersection includes 5.50m averaging 0.93% copper and 701ppm cobalt from 312.00m depth; and
  • An intersection of 23.20m at an average grade of 0.54% copper and 263ppm cobalt from a depth of 275.80m in hole D11-C3 including 7.90m averaging 0.92% copper and 453ppm cobalt from 275.80m depth; and
  • An intersection of 14.78m at an average grade of 0.42% copper and 62ppm cobalt from a depth of 200.00m in hole D22-C2 including 4.88m averaging 0.65% copper and 63ppm cobalt from 208.03m depth; and

• BeMetals explains that holes “D24-C1, D22-C2, D11-C3, and previously reported D22-C1 … all intersected the interpreted Ingwe Shoot of the Nkala Zone… with copper grades that approximate or exceed those of several large-scale copper mines in the Domes Region of the Zambian Copperbelt”.
• The company says that “copper grades in the Ingwe Shoot appear to be improving to the southwest and southeast, and additional drilling will be required to test for further extensions of the mineralization as well as to confirm grade continuity”.
• Mr. Wilton said that the continuing results from Pangeni give the exploration team increasing confidence that “we are on the verge of making the first new copper discovery in the Zambian Copperbelt in decades”.
• Future exploration is expected to include “a second and larger phase of core and aircore drilling later this year to accelerate expansion of the mineralized footprint at the D-Prospect”.
• The Pangeni prospect is located in the western part of the ‘Domes’ region of the Zambian Copperbelt covered by a relatively thin but extensive layer of Kalahari sand and approximately 130km southwest of First Quantum’s Sentinel mine.

Conclusion: The latest drilling results from Pangeni are helping to establish continuity of mineralisation in the Ingwe Shoot of the Nkala Zone and the company is planning further drilling later this year to accelerate the exploration programme.  We await the results with interest.

*SP Angel formerly acted as UK broker to BE Metals. An SP Angel analyst holds shares in BE Metals

BHP (BHP LN) 2,314p, Mkt Cap 117bn – Third bid rejected by Anglo as negotiations begin

• BHP submitted an ‘increased and final’ bid for Anglo American on the 20^th May, reported yesterday.
• The ratio of shares is deemed final at 0.886 BHP for each Anglo share (18% of the Combined company).
• The Company stuck to their guns in their demand for Anglo to spin out Anglo Platinum and Kumba, distributed to AAL shareholders.
• BHP suggests the offer represents a total value of £31.11/share, although the stock sold off on yesterday’s news by 4%.
• Importantly, Anglo has accepted the extension of the deadline, enabling negotiations between the two parties.

Botswana Diamonds (BOD LN) 0.35p, Mkt Cap £3.9m – Additional exploration licences in Botswana

1. Botswana Diamonds reports that it has secured four additional prospecting licences totalling ~2,332km² in the Kalahari region of Botswana.
2. The new licences are located close to the company’s advanced 3.5-hectare KX36 kimberlite pipe which hosts “resources of 17.9 million tonnes (“Mt”) at 35 carats per hundred tonnes (“cpht”) (indicated) and 6.7Mt at 36 cpht (inferred) at $65 per carat (“ct”)”.
3. They are also “in the same general area as Gem Diamonds Ltd’s Ghaghoo diamond mine”.
4. Chairman, John Teeling, said that the new licences are in an area “which we believe will be the next major diamond producing area in the country”.
5. He cautioned, however, that “Exploration is a long game, particularly diamond exploration, and we believe the industry is going through a structural change which will see the natural product, particularly from Botswana find its premium niche in world markets”.

Condor Gold* (CNR LN) 27.75p, Mkt Cap £56m – Injection of £500,000 through exercise of warrants

(Condor Resources holds 100% of the La India gold mining project)

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• Condor Gold reports that warrants have been exercised resulting in the issue of an additional 3.33m shares at a price of 15p/share and the raising of £500,000.
• The warrants are being exercised by Galloway Limited which is described as “a company wholly owned by Burnbrae Group Limited which is, in turn, wholly owned by Jim Mellon, Condor’s Chairman”.
• As a result of exercising the warrants, “Galloway Limited will hold 26.13%” of Condor Gold.
• Condor Gold’s permitted gold development project at La India in Nicaragua hosts a 1moz ‘Indicated’ resource and an additional ‘Inferred’ resource of over 1.1moz.
• A 2022 Feasibility Study for the development of an open-pit mine at La India showed that, at a gold price of US$1,600/oz (currently ~US$2,400/oz), an initial capital investment of US$105.5m generates an after-tax NPV5% of US$86.9m and IRR of 23% from a project producing an average of over 81,000oz of gold annually for the first six years of an 8.4year mine life.
• Sensitivity analysis disclosed by the company in September 2022 indicated that at a higher gold price of US$2,000/oz, post-tax NPV_5% increases by around 2.4x, to US$205.2m generating an IRR of 43%.
• La India also offers underground mining potential and additional gold exploration opportunities in the broader area around the planned open-pit mine.
• In November 2022, Condor Gold announced that “now is the right time to sell the assets of the Company to a gold producer with mine building expertise, thus ensuring a new mine at La India, a significant investment in the local area and a regeneration of the local communities” and the company has subsequently described a number of interested parties visiting the site under the terms of non-disclosure agreements.
• In its recent 2023 annual report Condor Gold confirmed a “significant interest in the sale of the Company’s assets…  and … [that] … the Board is optimistic that a resolution should be concluded in the near future”.

Conclusion: The injection of an additional £500,000 through the exercise of warrants by entities associated with its Chairman should bolster resources as Condor Gold progresses plans for the sale of its assets in Nicaragua.

*SP Angel acts as a broker to Condor Gold

Cornish Metals* (CUSN LN) 6.15p, Mkt Cap £36m – Quarterly results confirm progress towards a decision on resumption of production at South Crofty

Valuation under review

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• In its quarterly report for the three months to 31^st March 2024, Cornish Metals reports a loss of C$2.56m (3 months to 30^th April 2023 – C$0.21m loss) and a closing cash balance of C$17.0m.
• Over the quarter, a total of C$7.90m was invested including C$2.37m on plant & equipment, including  C$1m on “on new or replacement equipment for the mine, including the final payments for the permanent pumps for the underground pump station, cages and the new winders” as well as dewatering costs of C$1.3m and C$5.53m on exploration/evaluation assets.
• The company highlights the release of its Preliminary Economic Assessment (PEA) on the planned resumption of tin production at the historic South Crofty mine at the end of April which demonstrates that, at a tin price of US$31,000/t, production of ~49,310t of tin over a 14 year period generates an after-tax NPV_8% of US$201m and IRR of 29.8% from the investment of US$177m pre-production capital.
• The study shows a LOM cost of tin production of US$13,661/t on an all-in-sustaining (AISC) basis with pay-back of capital within 3 years.
• Cornish Metals describes progress at the mine-site including:

• • Continuing work on refurbishing the New Cook’s Kitchen (NCK) Shaft to “enable larger equipment to access the mine at an earlier stage in its re-development” and the company says that the “Winders and cages are now installed, fully commissioned and certified to allow for safe transport of equipment and workers within NCK shaft”; and
  • Continuing work on dewatering the mine and treating the water prior to discharge with the treated product exceeding “the standards permitted by the Environment Agency”; and
  • The purchase of additional land adjacent to the mine “providing the Company with direct access to all surface infrastructure as well as additional space for future site works, opportunities for potential operating cost savings, renewable energy initiatives and improved overall property security”.

• Interim CEO, Ken Armstrong, described completion of the PEA as “an important milestone for the Company … [which] … confirms the Project’s potential to be a low-cost and long-life tin mining operation … [and enables Cornish Metals] … to move forward with additional preparation work and progress towards a construction decision”.
• Looking ahead, the company confirms its objectives as it works towards “a potential construction decision” for South Crofty as:

• • Dewatering the mine and completing the shaft refurbishment by September 2025; and
  • “Advancing all stages of the Feasibility Study”; and
  • Continuation of engineering studies as well as “construction of the processing plant, refurbishment of underground facilities and other on-site early works”
  • Completing the current 9,000m, 14hole, drilling programme at the ‘Wide Formation south of the mine where the work completed to date confirms the continuity of the mineralisation “over a 1.6km strike length, a downdip extent of at least 525 meters and … [over] … thicknesses ranging from 1.8 meters – 4.8 meters”.

• The company confirms that a “follow-up exploration drill programme at the Wide Formation target will also continue subject to the receipt of satisfactory drill results”.

Conclusion: Cornish Metals is progressing the preparatory works for a resumption of production at the South Crofty mine across a range of engineering, mine rehabilitation and exploration workstreams ahead of a construction decision.

*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

Greatland Gold (GGP LN) 7.15p, Mkt Cap £370m – Mt Egerton exploration licence awarded

• Greatland Gold reports that it has been awarded a new 134km² exploration licence (the Woodlands licence) at its Mt Egerton gold/copper project located approximately 230km north of Meekatharra in the Gascoyne region of Western Australia.
• The “under-explored” project “includes a 25km strike length in a structurally complex geological setting which is potentially a very favourable mineralisation trap site”.
• Managing Director, Shaun Day, said that Greatland Gold’s “exploration team identified Mt Egerton as an excellent regional and local geological setting for the discovery of major gold and copper deposits”.
• He said that the award of the Woodlands licence “further enhances our excellent exploration portfolio with a new front in a highly prospective region of Western Australia”.

Hummingbird Resources (HUM LN) 9.5p, Mkt Cap £76m – Exploration to upgrade Yanifolila resource

• Hummingbird Resources provides an exploration update.
• Drilling has been ongoing at Yanfolila, targeting the Sanioumale West North Pit.
• Hummingbird is aiming to add to the operation’s current mine plan by upgrading inferred resources into indicated.
• 2,223m of RC drilled at SWN, over 34 holes.

• • 21m at 14.9g/t Au from 3m
  • 3m at 6.5g/t Au from 10m
  • 4m at 3.48g/t from 50m
  • 26m at 2.96g/t Au from 21m
  • 19m at 2g/t Au from 38m
  • 12m at 2.5g/t Au from 44m.
• The Company is aiming to update the historic SAMREC Resource at Kabaya South, which hosts 85koz at 1.3g/t.
• Hummingbird is relogging core and currently modelling an updated MRE for both deposits, due for completion 2H24.
• Exploration targeting and planning is ongoing for a programme in 3Q24, when the wet season passes.

Kodal Minerals* (KOD LN) 0.48p, Mkt Cap £96m – Project construction on track for commissioning in Q4 with first shipment from China due in June.

BUY – Target 0.97p

(Hainan Mining holds a 51% stake in KMUK which holds the Bougouni Lithium Project in Mali with Kodal holding 49%. The Mali government has the right to a free carry on 10% of the project and an option to acquire a 10% stake)

• Kodal Minerals reports progress on the road to construction of the Bougouni lithium project in Mali.
• DMS ‘Dense Media Separation’ plant is being made in China and should be shipped to West Africa on or around 5 June.
• Structural steelwork fabrication is also in progress and should be loaded onto the same ship.
• Mining contractors, Auxin Mining Services and Enterprise Générale Traoré et Fréres have already been mobilised with site clearing now complete.
• Concrete pouring for plant foundations and other construction works should start in early June.
• Civil construction works are being done by Bambara Resources SARL alongside GZB Mali, a Mali-based company with a China parent
• Bambara is expected to mobilise to the site to start work in early June.
• Diamond core and RC drilling continue to drill to extend the resource at Boumou within the granted mining licence area.
• Core and RC drill chipping show wide and deep intersections of pegmatites with coarse spodumene crystal offering potential to provide additional feedstock to the DMS plant.

• • 18 RC drill holes for 3,234m have been completed,
  • 3 diamond drill holes for 601m drilled.
  • “Logging of the drill holes indicates continuity of the pegmatite bodies over a strike length of 970m.”
  • “All assay results for the drilling are pending with 2,128 samples awaiting testing by ALS Global laboratories”

• Production: Stage 1 DMS production remains on schedule for Q4  this year with initial capacity at 125ktpa
• Capex remains within guidance of US$65m.
• Freight: A charter vessel is brining all major equipment, steelwork, supplies and reagents directly from China to the Port of Abidjan in a port-to-port shipment taking 21 days.
• The materials will be driven through the Côte d’Ivoire to Bougouni.
• Long lead items: “Manufacture of the crushing circuit and the DMS processing equipment is near completion with both suppliers on track to deliver all equipment and associated spares in early June 2024 to the port of Tianjin, China for consolidation prior to loading onto the dedicated cargo vessel.”
• Local labour: Bambara’s provision of local labour alongside GZB equipment, engineering technicians and on-site supervision should ensure compliance with Mali’s local content laws as set out in the country’s mining code.
• Land: management have completed the compensation process for land acquisition at the Ngoualana mine with agreements signed at the Bougouni local court in March.
• Kodal has built a new water dam, repaired the village water supply and donated two tractors to the Kola-Sokoura and Ngoualana villages.
• Funding: The Project is fully funded following receipt of US$117.5m of funds from Hainan Mining
• Presentation: https://kodalminerals.com/investors/corporate-documents/#presentations-tab

Conclusion:  It’s great to see such rapid progress towards construction at Bougouni and it will be great to see commissioning before the year end.

Drilling should extend the Bougouni resource towards 50mt including the new area being drilled at Boumou.

*SP Angel acts as financial advisor and broker to Kodal Minerals. The analyst holds shares in Kodal Minerals.

Phoenix Copper* (PXC LN) 19p, Mkt Cap £28m –Results of early stage drilling at Navarre Creek

Phoenix holds 80% of the Empire mining property in Idaho)

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• Phoenix Copper has announced results of its 28- hole reverse-circulation (RC) drilling programme on its Navarre Creek property located around five kilometres west of the Company’s flagship Empire mine copper oxide deposit in Idaho.
• The drilling intersected “a continuous zone of anomalous, low-grade gold mineralisation” in seven of the holes drilled. “The remainder of the 28 drill holes showed little to no significant gold mineralization”.
• In the successful holes, gold mineralisation ranged in thickness between 4.5m in hole NC23-04 and 22.9m in hole NC23-06 with grades in the range 0.04g/t – 0.10g/t gold and 0.43g/t – 1.09g/t silver.
• CEO, Ryan McDermott, explained that the drilling on the southwest part of its claim block (known as ‘Target Area1’) tested mineralisation in the Lehman Creek fault which, in view of its geochemical signature and “consistency along … strike”, the company interprets as “a conduit for gold-bearing fluids and at least one volcanic unit in the hanging-wall as a suitable host for mineralization”.
• He said that the “drilling results are representative of a relatively shallow, near-surface portion of the mineralized system”.
• “Target Area 2 tested a surface geochemical anomaly identified during previous field mapping and surface sampling in 2020. Target Area 3, holes NC23-12 – NC23-18, tested a gold-antimony geochemical anomaly identified during field mapping, and Target Area 4, holes NC23-19 – NC23-28, tested a jasperoid exposure identified during field mapping”.
• As previously reported, Mr McDermott, confirmed that the “drilling results in Target Area 1 were considered significant enough that we expanded the Navarre Creek claim block to the southwest by an additional 400 acres, bringing the total claim block size to 3,977 acres (16.09 km²)”.
• Holes “NC23-13 through NC23-16 … targeted an area with a gold-antimony surface anomaly identified during field work … [and] … returned anomalous low-grade silver and silver-antimony”.
• Mr. McDermott said that the four holes drilled in the Target 3 area have provided “a better understanding of the subsurface geology and mineral potential in that specific area”.
• Commenting on the drilling at Navarre Creek, which he described as “very much grassroots, very early-stage exploration” he said that “we are satisfied to initially encounter this low-grade mineralization early in the program as we continue to develop an understanding of the dynamics of the system and explore for more substantial quantities of mineralization”.
• Mr. McDermott also commented on progress of the feasibility work at the company’s Empire open-pit project following the completion of the US$80m copper bond announced last week.
• The new finds “will provide the Company with the opportunity to outfit the open pit operation with lower-cost, pre-owned equipment … [which]… is expected to have a material impact on overall initial and sustaining capex, as well as on certain aspects of the process design detail, construction logistics, and the overall equipment procurement schedule”.
• The “feasibility work … is now being updated accordingly”.

Conclusion: Twenty-five percent of the early-stage RC exploratory holes drilled at Navarre Creek intersected mineralisation and have triggered Phoenix Copper to expand its land holdings by a further 400 acres or around 10% towards the southwest.  We look forward to further results as the exploration advances and also to the revised feasibility assessment of the Empire open-pit project.

*SP Angel acts as Nomad to Phoenix Copper

SQM (SQM US) $47.5, Mkt Cap $14bn – Earnings weaken but positive lithium outlook going forward

• SQM revenue fell to $1.1bn in Q1 vs $2,3bn same period last year.
• The Company recorded a net loss of $870m, or $3/share. However, the Company paid a $1.2bn income tax expense over the period.
• Adjusted EBITDA was $403m.
• CAPEX expected for the year at $1.3bn, excluding $350m paid for Andover.
• 30% increase in lithium sales volume recorded.
• Increasing FY24 sales guidance.
• SQM has subsequently increased their sales volumes outlook into growing demand from China.
• Company notes strong demand growth since the beginning of the year, anticipating global lithium demand growth of 20% in 2024.
• Total installed capacity expected to grow from 220kt LCE in 2023 to 240kt LCE in 240 before ramping up to 305kt in 2025.
• Average sales price for LCE recorded at $12,600/t for Q1.

Conclusion: SQM’s results are closely monitored by lithium market participants given their dominant position in the supply chain. We take solace in the fact they are maintaining their production guidance, despite markedly lower prices generated in Q1. They note strong demand growth from China going forward, encouraging prospects of a restocking cycle following the cathode inventory reduction period witnessed in 2H23.

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                                                            

Prince Frederick House

35-39 Maddox Street London

W1S 2PP

*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.

DISCLAIMER

This note is a marketing communication and comprises non-independent research. This means it has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of its dissemination.

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Distribution of this note does not imply distribution of future notes covering the same issuers, companies or subject matter.

Where the investment is traded on AIM it should be noted that liquidity may be lower and price movements more volatile.

SPA, its partners, officers and/or employees may own or have positions in any investment(s) mentioned herein or related thereto and may, from time to time add to, or dispose of, any such investment(s).

SPA is registered in England and Wales with company number OC317049.  The registered office address is Prince Frederick House, 35-39 Maddox Street, London W1S 2PP.  SPA is authorised and regulated by the UK Financial Conduct Authority and is a Member of the London Stock Exchange plc.

MiFID II – Based on our analysis we have concluded that this note may be received free of charge by any person subject to the new MiFID II rules on research unbundling pursuant to the exemptions within Article 12(3) of the MiFID II Delegated Directive and FCA COBS Rule 2.3A.19.

A full analysis is available on our website here http://www.spangel.co.uk/legal-and-regulatory-notices.html. If you have any queries, feel free to contact our Compliance Officer, Tim Jenkins (tim.jenkins@spangel.co.uk).

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 of less than 15%

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