SP Angel Morning View -Today’s Market View, Thursday 28th March 2024

Chinese copper smelters consider production cuts amid tight concentrate availability

MiFID II exempt information – see disclaimer below

Asiamet Resources (ARS LN) – Appointing partners for delivering key engineering aspects of the BKM project

Caledonia Mining (CMCL LN) – Costs dent 2023 financial results as deeper drilling at the Blanket mine demonstrates potential for extensions to mine-life

Europa Metals Limited (EUZ LN) – Outcome of the Toral mining licence awaited

First Tin (1SN LN) – Expecting tin demand to enter deficit from 2026

Kore Potash* (KP2 LN) – FY23 results reiterate Kola EPC contract completion and signing in Q2/24

Rainbow Rare Earths (RBW LN) – Interim results indicate company will need new funding in relatively short order

IGTV: Copper:  https://www.ig.com/uk/news-and-trade-ideas/beat-the-street–megacaps-and-chips-higher-ahead-of-us-data–tes-240326

https://www.ig.com/uk/news-and-trade-ideas/_copper-likely-to-stay-above–9-000–meyer-240315

Sharepickers – on Gold, Copper, Arc Minerals, Atlantic Lithium, Cornish Metals, Empire Metals & Sovereign Metals

Podcast: https://audioboom.com/posts/8477440-john-meyer-on-gold-copper-arc-atlantic-cornish-empire-sovereign.

Youtube: https://www.youtube.com/watch?v=PcmKx065aWw.

Chinese smelters considering a 5-10% cut to production in 2024 amid tight concentrate availability and falling treatment charges.

• Smelters made the proposal at quarterly meeting of the Copper Smelters Purchasing Team, known as CSPT, in Shanghai on Thursday, according to Bloomberg.
• Smelters will next discuss individually about exact scope of cuts.

Economics

US – Fed Governor Christopher Waller called recent stronger than expected inflation data “disappointing” and said that he wants to see “at least a couple months of better inflation data” before cutting, Bloomberg reports.

• “In my view, it is appropriate to reduce the overall number of rate cuts or push them further into the future in response to the recent data,” Waller said.
• “I see economic output and the labor market showing continued strength, while progress in reducing inflation has slowed,” Waller added.

China – Industrial profits climbed 10.2%yoy in the first two of the year in a sign of a recovering demand and stronger industrial output.

• Headline growth is also reflective of a low base from 2023 that recorded a 2.3% for full year driven by declines in the first seven months of the year.
• 29 of 41 main sectors recorded growth in earnings in January-February.
• Consumer goods makers posted a 12.9% increase in profits after earnings dropped 1.1% last year.
• Industrial Production (%yoy YTD): 10.2 v -2.3 January.

Germany – A mixed set of economic data released this morning including robust employment data for March and an unexpected drop in retail sales in February.

• Despite good employment numbers, economic environment remains challenging as highlighted by another negative reading in consumer spending.
• That was the fourth consecutive monthly decline.
• Retail Sales (%mom): -1.9 v -0.3 (revised from -0.4) January and 0.4 est.
• Unemployment Change (‘000): 4.0 v 12.0 (revised from 11.0) February and 10.0 est.
• Unemployment Rate: 5.9% v 5.9% February and 5.9% est.

UK – Final Q4 GDP numbers reiterated at -0.3% confirming a recession in H2/23 led by a drop in consumer spending and weak trading data.

• On a positive note, a drop in private consumption slowed down considerably pointing to some stabilisation in the largest driver of economic growth.

UK energy regulator has announced a £3.4 billion provisional funding package for a proposed subsea and underground electricity superhighway between Scotland and Yorkshire which could power up to 2 million homes.

• The Eastern Green Link 2 is a proposed 2GW high voltage electricity superhighway cable link between Peterhead in Aberdeenshire and Drax in North Yorkshire. Most of the cable will be under the North Sea.

Rosatom may build lithium storage factory in Bolivia according to TASS

• Let’s translate this. The people running Rosatom probably don’t much like living in Russia these days and while Bolivia is a dangerous basket case it’s not nearly as bad as being sent to the Ukrainian front.
• So someone at Rosatom has cooked up a plan to invest a ton of money into a Lithium project so they can move them selves, their friends and their families out of Russia just as soon as the ink is dry on the agreement.
• They even claim they may build a lithium storage factory. Sounds like an excuse to take yet more money out of Russia.
• Why no one can find spodumene in the vast expanse of Russia is anyone’s guess but its interesting that spodumene is found in many other parts of the world.
• Argentina has proved popular with Russians looking to avoid the Draft with easy entry for Russian’s and their families.

Currencies

US$1.0791/eur vs 1.0824/eur previous. Yen 151.37/$ vs 151.66/$. SAr 19.016/$ vs 18.965/$. $1.261/gbp vs $1.263/gbp. 0.649/aud vs 0.653/aud. CNY 7.228/$ vs 7.229/$.

Dollar Index 104.59 vs 104.38 previous.

Precious metals:

Gold US$2,196/oz vs US$2,181/oz previous

   Gold ETFs 82,133,128.3moz vs 82,225,923.0moz previous

Platinum US$896/oz vs US$906/oz previous

Palladium US$998/oz vs US$993/oz previous

Silver US$24.45/oz vs US$24/oz previous

Rhodium US$4,675/oz vs US$4,625/oz previous

Base metals:

Copper US$ 8,845/t vs US$8,838/t previous

Aluminium US$ 2,304/t vs US$2,293/t previous

Nickel US$ 16,715/t vs US$16,590/t previous

Zinc US$ 2,443/t vs US$2,422/t previous

Lead US$ 2,008/t vs US$2,008/t previous

Tin US$ 27,420/t vs US$27,330/t previous

Energy:

Oil US$86.6/bbl vs US$85.5/bbl previous

• Crude oil prices moved lower despite the EIA reporting w/w builds of 3.2mb to US crude and 1.3mb to gasoline stocks, with refinery utilisation levels increasing 0.9% to 88.7% as the maintenance season continues to taper.
• European energy prices were stable on reports that EU natural gas storage levels fell just 0.5% w/w to 58.9% full (vs 41.6% 5-Yr average), with Germany still 65% full and aggregate storage at 672TWh.
• SLB announced a NOK4.1bn (~$380m) deal to purchase a majority 80%-stake in Aker Carbon Capture in a new joint venture that will see the Company contribute its own carbon capture business to the combined entity.
• Lhyfe announced a targeted >10% EBITDA margin by 2026 via a new partnership model, which aims to bring in infrastructure funds at an earlier stage to fund the Company’s capex-intensive green hydrogen projects.

Natural Gas €27.8/MWh vs €27.5/MWh previous

Uranium Futures $88.6/lb vs $88.9/lb previous

Bulk:

Iron Ore 62% Fe Spot (cfr Tianjin) US$101.6/t vs US$104.4/t

Chinese steel rebar 25mm US$531.5/t vs US$533.9/t

Thermal coal (1st year forward cif ARA) US$118.5/t vs US$112.3/t

Thermal coal swap Australia FOB US$130.3/t vs US$129.0/t

Other:

Cobalt LME 3m US$28,550/t vs US$28,550/t

NdPr Rare Earth Oxide (China) US$48,700/t vs US$48,971/t

Lithium carbonate 99% (China) US$14,458/t vs US$14,456/t

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

Ferro-Manganese European Mn78% min US$975/t vs US$975/t

China Tungsten APT 88.5% FOB US$310/mtu vs US$310/mtu

China Graphite Flake -194 FOB US$490/t vs US$490/t

Europe Vanadium Pentoxide 98% 5.2/lb vs US$5.2/lb

Europe Ferro-Vanadium 80% 26.45/kg vs US$26.45/kg

China Ilmenite Concentrate TiO2 US$330/t vs US$330/t

China Rutile Concentrate 95% TiO2 US$1,446/t vs US$1,446/t

Spot CO2 Emissions EUA Price US$60.9/t vs US$61.9/t

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

Battery News

CATL and Yutong unveils new commercial battery with expected 15-year lifespan

• CATL and bus maker Zhengzhou Yutong have developed a commercial battery that the companies say has a 15-year, or 1.5m km, lifespan.
• The battery will be used in buses, light trucks and HGVs produced by Yutong Bus and Yutong Heavy Industries.
• According to the announcement, the battery experiences zero degradation in the first 1000 cycles.
• Yutong buses with CATL batteries are sold in more than 40 countries worldwide including the UK, France, Spain and Qatar.

Toyota global sales slide 7% in February

• Sales in China slumped 36% due to Lunar New Year celebrations.
• Sales numbers also took a tumble, down 33%, in Japan following a safety test scandal, with claims it rigged collision safety tests at its small car unit.
• Toyota did see sales increase in US and European markets, up 16% and 14% respectively.

BYD to slow plans for Vietnam EV factory

• According to the chairman of the company that runs the industrial park where BYD were expected to build the factory, the automaker has delayed the start of construction due to strategy changes and the slowdown in the EV market. (Reuters)
• BYD had agreed to purchase 100 hectares for the new facility, confirmed by Vietnam’s government in May 2023.
• The automaker is currently building an EV factory in Thailand and has recently signed an agreement to build factories in Indonesia.
• The company has set a sales target of 3.6m vehicles for 2024 – up 20% on last year’s record-breaking sales figures.

Company News

Asiamet Resources (ARS LN) – 0.6p, mkt cap £16m – Appointing partners for delivering key engineering aspects of the BKM project

• Following yesterday’s announcement of its options to develop biomass power for its BKM copper cathode project in Kalimantan, Asiamet Resources has provided a progress report on the wider engineering and project delivery plans for the project.
• Asiamet has responded to recommendations by the Independent Technical Expert appointed as part of its debt financing and now announced key partners to help deliver the BKM project with:
  • Rexline Engineering, which has “significant experience in delivering design and construction of … infrastructure in the Central Kalimantan coal industry” will “complete engineering design of the crushing and ore handling system and non-process infrastructure such as the main accommodation camp, site offices, workshop and warehouses”; and
  • The Beijing Research Institute of Mining and Metallurgy (BGRIMM) will “deliver engineering for the Solvent Extraction, Electrowinning, Water Treatment (“SX-EW”) and Reagent Preparation process infrastructure”; and
  • Asiamet Resources is “advancing discussions with a highly reputable contractor capable of delivering the project site earthworks, mine pre-production development, mine operations infrastructure and mining services at least for the first 5 years of the project life”; and
  • Is also “engaging with suitable partners capable of providing project management support updating key project execution deliverables such as project schedule, capex estimate and project execution planning”.
• CEO, Darryn McClelland, explained that Asiamet’s “approach to project execution for BKM has evolved” and now recognises benefits in “engaging early with our preferred project execution partners”.
• He said that “both Rexline and BGRIMM were instrumental in delivering low capital cost outcomes for the 2023 FS and I look forward to working with them on delivering Indonesia’s newest copper mine”.
• He confirmed the priority that Asiamet gives to “Effective project execution … [and said that] … Involving EPC partners early significantly reduces project execution risk”.

Conclusion: Asiamet is responding to the suggestions made by the Independent Technical Expert appointed as part of the debt financing to reshape its approach to the development of the BKM copper project by appointing partners to assume responsibility for delivering key components of the project.

Caledonia Mining (CMCL LN) 845p, Mkt Cap £162m – Costs dent 2023 financial results as deeper drilling at the Blanket mine demonstrates potential for extensions to mine-life

• As indicated in an announcement earlier this month, Caledonia Mining reports reduced operating profit and EBITDA during 2023 with operating profits of US$15.2m (2022 – US$40.3m) and EBITDA of US$29.7m (2022 – US$50.4m.
• The results reflect the production of 75,416oz of gold (2022- 80,775oz) at the Blanket mine in Zimbabwe but are most impacted by “higher production costs at Blanket” which rose to US$1,047/oz on mine (2022 – US$735/oz) with the lower EBITDA “primarily due to the Bilboes oxide mining cost of $13.1 million”.
• We imagine that rising inflation levels and currency weakness in Zimbabwe could have exacerbated any company specific factors experienced by Caledonia Mining.
• As previously announced, Bilboes has been placed on care and maintenance since 1^st October 2023.
• All-in- sustaining costs increased by ~65% “predominantly due to the higher on-mine cost per ounce … and an increase in sustaining capital expenditure following the classifying of capital expenditures on projects due to Blanket’s investment phase nearing its end”.
• The company confirms its 2024 production guidance range of 74-78,000oz of gold production and indicates that similar levels are expected in 2025.
• Caledonia Mining highlights the, previously reported, success of its deep drilling campaign at Blanket where it “is currently evaluating the continuity of the mineralised zones on the Blanket and Eroica ore bodies. Total drilling for 2023 was 13,280 metres and this, together with ongoing drilling, will be reflected in a revised mineral resource statement expected to be released in the second quarter of 2024”.
• CEO, Mark Learmonth said that the exploration results from Blanket are “highly” encouraging and showing “significantly better widths and grades than previously modelled” which should help to demonstrate the potential to extend the mine life when the new resources estimates become available.
• Mr. Learmonth also explained that “Caledonia’s vision has evolved over the last couple of years from being a relatively small operator of a single asset towards a strategy focussed on becoming a multi-asset, Zimbabwe focussed gold producer with an ambition to produce over 250,000 ounces of gold per annum”.
• In a separate announcement, Caledonia Mining has declared a quarterly dividend of 14US¢/share. Payment is due on 26^th April.
• The latest quarterly dividend maintains the level at 14US¢/share first announced in October 2021.
• We have commented in the past that as a consistent dividend payer, Caledonia Mining is one of a comparatively select group AIM listed mining companies and we are encouraged to see this now well-established trend continue.

Conclusion: Caledonia Mining has suffered the cost impact of rising inflation and currency weakness, however the decision to place the Bilboes oxide project on care & maintenance should help control future costs. Identification of wider than expected depth extensions to mineralisation Blanket is likely to be reflected in a forthcoming mineral resource update with potential to extend the mine life.

*SP Angel mining analysts have visited Caledonia’s mining operations in Zimbabwe

Europa Metals Limited (EUZ LN) 1.6p, Mkt Cap £1.5m –Outcome of the Toral mining licence awaited

• Europa Metals reports a loss of A$0.25m for the six months ending 31^st December 2023 (2022 – A$1.22m loss) and a closing cash balance of A$0.49m.
• The company highlights progress with its Toral zinc / lead /silver project in the Spanish region of Castilla y Leon and confirms that it has completed “All necessary studies … [and these have been] … lodged with the relevant authorities and departments within the Castille and Leon regional government” as part of its Mining Licence Application.
• “The Toral deposit currently has a JORC (2012) compliant indicated mineral resource estimate of approximately 7Mt @ 8.1% Zn Equivalent (including Pb credits), 5% Zn, 3.7% Pb and 29g/t Ag”.
• A 7,000m drilling campaign “is focused on a combination of confirmatory and infill drilling within the project’s known indicated resource area outlined to date, of approximately 7Mt @ 8.1% Zn Equivalent (including Pb credits), 5% Zn, 3.7% Pb and 29g/t Ag”.
• The mining plan “envisages a life of mine of 15 years, mining on average 700,000t of ore per year from underground” and the company confirms that “detailed environmental studies are now nearing completion which are required to finalise the formal submission of the Company’s mining licence application to the Mines Department of Castilla y León”.

Conclusion: We await the outcome of Europa Metals’ Mining Permit Application for its Toral project in Spain.

First Tin (1SN LN) 5.5p, Mkt Cap £15m – Expecting tin demand to enter deficit from 2026

• First Tin reports a loss of £2. 26m for the six months to 31^st December (2022 – £3.24m loss) and a comprehensive loss, after exchange translation adjustments of £2.82m (2022 – £3.12m loss).
• The company also reports a closing cash balance of £4.66m.
• First Tin confirms that work on the Definitive Feasibility Study (DFS) for its Taronga tin project in New South Wales is continuing based on an updated, and 240% larger,  mineral resource estimate of 133mt at an average grade of 0.1% tin of which 71.9mt at a grade of 0.12% tin is classified as ‘Measured & Indicated’.
• The company also confirms that the “DFS is now well advanced, with completion expected in the coming weeks”.
• DFS work has “showed that our Taronga tin deposit is amendable to low strip ratio (ca., 1:1) open pit mining, giving relatively low mining costs … [and a mineralogy which] … allows a simple processing flow sheet, with lower capital expenditure and operating costs”.
• In a December 2023 presentation on the company’s website, First Tin describes the Taronga deposit as the “fifth largest undeveloped tin reserve globally”.
• Regional exploration drilling around Taronga has “validated our thesis that Taronga is part of a broader tin district” with drilling results from the Tin Beetle prospect, located ~9km from Taronga showing mineralisation “over the 2.3km²area tested”.
• The company also describes progress at its Tellerhäuser project in Saxony, Germany where it is currently analysing “additional historic drilling data” derived from “previously inaccessible old Wismut uranium exploration drillholes discovered in archives”.
• When this analysis is completed, First Tin “expects to announce an update to the project’s MRE”.
• Elsewhere in Germany, First Tin is planning to evaluate the Gotteberg project, which, it says “has a large resource base and excellent mineral processing characteristics … over the next 12-24 months”.
• Commenting on its view of tin’s outlook, First Tin says that “demand for tin remains strong, with lower interest rates, stimulus efforts by the Chinese government, and the continuous transition to green energy, creating the conditions for a material supply ongoing deficit from 2026”.

Conclusion: First Tin is expecting tin to be in deficit by 2026 as it progresses its Taronga project in NSW and its German projects.  We look forward to the Taronga DFS, due over the next few weeks.

Kore Potash* (KP2 LN) 0.5p, Mkt Cap £21m – FY23 results reiterate Kola EPC contract completion and signing in Q2/24

• FY23 accounts highlight Kore development progress at the flagship FS stage Kola Project and an adjacent PFS stage DX Project in the Sintoukola Potash District, Republic of Congo.
• The focus remains on finalising of revised EPC contract terms for the Kola Project that should be followed by completion of project funding.
• PowerChina, a parent of SEPCO, delivered te EPC proposal in February this year building on five months of additional design and engineering work on the project.
• The team is planning finalise details of the contract in due course and target signing of full EPC documentation in Q2/24.
• Additional design and engineering reviews carried by PowerChina were estimated to cost more than $10m with Kore’s contribution having been capped at $5m.
• The Company completed two payments if $1.0m each in August and November last year.
• $0.8m of the remaining $3.0m is payable up to six weeks from the date the Company is presented with the final EPC draft and further $2.2 no later than 12 months of the signing of the EPC contract.
• Financially, the Company recorded a US$1.1m loss (FY22: -$1.5m) most of which is attributed to administrative costs.
• FCF amounted to -$7.0m (FY22: -$5.8m) including $5.8m (FY22: $4.6m) in capitalised costs spent on projects.
• Closing cash balance stood at $1.6m (FY22: $5.0m), no bank debt and $3.0m remaining owed to PowerChina for additional design and engineering work as of Dec/23.
• The cash balance excludes $530k raised in March with proceeds to be used to advance EPC contract and funding discussions.
• Upon signing the EPC contract, the Company is expecting to complete the financing proposal with Summit Consortium for the full capital cost of Kola within six weeks.

*SP Angel acts as Nomad and Broker to Kore Potash

Rainbow Rare Earths (RBW LN) 10p, Mkt cap £63m – Interim results indicate company will need new funding in relatively short order

• Rainbow Rare Earths report interim results today.
• Administration expenses remained steady at around US$1.5m with US$1.7m spent on operating activities and a larger US$7.8m in exploration and evaluation costs.
• The company raised $5.359 from financing through the period.
• Net cash & equivalents came in at $4m at end December.
• Management claim their Phalaborwa project will be the highest margin REE project in development today.
• Problem is the project is not yet in development as management are still working to confirm details and the validity of the two main stages of the process plant.
• While much work has been done in South Africa on the first part of the process producing 35g of mixed REE carbonate, we still feel uncertain over the upscaling and implementation of the K-Tech processing technology for the second stage of the process.
• The REE carbonate is now being tested in by K-Tech in Florida to see if they can separate the specific rare earth oxides.
• Results are expected in Q2 but we caution that 35g is around a third the size of your average chocolate bar and we would not want to plan a large scale plant on the back of such a small process sample.
• The team have received a $50m funding ‘commitment’ from the US DFC via TechMet Limited but we are unaware of the conditions to quality for this investment.
• We are aware that CIX ‘continuous ion exchange’ and CIC ‘ continuous ion chromatography’ processes are used on industrial scale in other industries and are environmentally preferable to processing methods used in China but these processes may take much time to perfect from a REE processing perspective.
• It’s good to see an off-take agreement for the sale of ~400-600,000tpa of gypsum by-product from the mining of the Phalaborwa project into the domestic market as this should add further revenue while reducing the tailings to be stored.
• REE pricing: Rare Earth Pricing have fallen hard over the past few years following stockpiling by various national agencies and thrifting by manufacturers:
  • NdPr Oxide prices in China are at US$48,700/t vs US$89,674/t vs US$89,536/t on 29 March 2020
  • Dysprosium Oxide prices FOB China are at US$251-256/kg having just recovered to where they were a year ago.
  • Terbium Oxide prices FOB China are at US$745-775/kg but remail well below the $1,200/kg seen a year ago

Conclusion: Rainbow are down to their last £4m in cash. Given their pilot plant work programs if Techmet are not able to release funds committed by the US DFC then we expect the company to look to raise new equity in relatively short order.

No.1 in Copper:  “The winner of the 2020 Fastmarkets Apex contest for copper was the team at SP Angel comprising John Meyer, Sergey Raevskiy and Simon Beardsmore, with an accuracy score of 93.8%”

No1. In Gold:  “SP Angel’s trio took the top spot for the gold price prediction throughout the year, with an accuracy score of 97.59%”

The SP Angel team also ranked 1st in Palladium, 3rd in Tin and 5th in Silver in the fourth quarter of 2020

Analysts

John Meyer – John.Meyer@spangel.co.uk – 0203 470 0490

Simon Beardsmore – Simon.Beardsmore@spangel.co.uk – 0203 470 0484

Sergey Raevskiy –Sergey.Raevskiy@spangel.co.uk – 0203 470 0474

Sales

Richard Parlons –Richard.Parlons@spangel.co.uk – 0203 470 0472

Abigail Wayne – Abigail.Wayne@spangel.co.uk – 0203 470 0534

Rob Rees – Rob.Rees@spangel.co.uk – 0203 470 0535

Grant Barker – Grant.Barker@spangel.co.uk – 0203 470 0471

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*SP Angel are the No1 integrated nomad and broker by number of mining brokerage clients on AIM according to the AIM Advisers Ranking Guide (joint brokerships excluded)

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

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