SP Angel Morning View -Today’s Market View, Thursday 29th August 2024

Ganfeng joins lithium majors in delaying growth projects as supply glut continues

MiFID II exempt information – see disclaimer below

Galantas Gold* (GAL LN)– Interim results

Gem Diamonds (GEMD LN) – Positive turnaround in H1 prompts upward revision of 2024 guidance

Kavango Resources* (KAV LN) – Financing initiative for exploration projects in Zimbabwe

Mkango Resources* (MKA LN)– Participation in grant funded GREENE Project

Resolute Mining (RSG LN) – Half year results show return to net cash supported by Syama

Serabi Gold (SRB LN)– Progress at Coringa as higher gold prices and increased gold output enhances financial performance

South32 (S32 LN) – Aluminium division weighs on profits as Hermosa development ramps up

Ganfeng joins lithium majors in delaying growth projects as supply glut continues

• Ganfeng reported plans to control spending on growth projects going forward, preferring to invest in optimisation.
• The Company reported a loss of $107m yoy.
• Ganfeng will continue to acquire resources, but development will be dependant on market supply demand dynamics.
• Major Australian hard rock producer MinRes is also slowing growth projects for its spodumene operations in light of weaker prices.

Copper ($9,225/t) slides as dollar strengthens whilst Jiangxi warns of ore shortage

• Copper prices fell close to $200/t yesterday, amid a wider metals sell off on a dollar rebound.
• The dollar has been falling steadily over the past two months, but rebounded yesterday, pressuring metals.
• Jiangxi warned that soaring smelter capacity is pressuring processing fees with limited concentrate availability.
• The major Chinese producer sees a ‘rising certainty’ that mine supply constraints will persist. (Bloomberg)
• First Quantum is seeking damages from the Panama government for stockpiled concentrate at Cobre.
• Panama states they are ‘working diligently with all the issues related with the mine, ensuring the best interests of Panama and Panamanians are protected.’ 

Iron ore holds above $100/t as Vale doubles down on production objectives

• Iron ore prices are holding over $100/t for the 62% China Fe index, having fallen below $92/t this month.
• Steel mills continue to struggle with profitability, with maintenance plans reportedly extending into September.
• Vale’s Chair has emphased the Brazilian company’s commitment to growth, stating their ‘main objective is production.’

Economics

US – Nvidia shares pulled back in late trading on Wednesday despite reporting better than expected quarterly results.

• Selling may be attributed to current quarter outlook falling short of some ambitious forecasts as well as delays to the delivery of new Blackwell chips.
• Nevertheless, the Company said that its current generation Hopper chip demand remained strong and Blackwell is expected to generate several billion dollars in revenue this year.
• The Company generated $30bn in sales in July quarter, up 122%yoy and ahead of analysts’ estimates for $28.7bn.
• October quarter is guided to come in at $32.5bn, plus or minus 2%, only just ahead of market consensus.

Atlanta President Raphael Bostic, a voting FOMC member, said it “may be time” to cut rates but he would additional data to confirm it.

• “I don’t want us to be in a situation where we cut and then we have to raise rates again,” Bostic said yesterday commenting on the monetary policy outlook.
• “So, if I’m going to err on one side, it’s going to be waiting longer just to make sure that we don’t have that up and down.”
• President acknowledged progress on bringing inflation lower and weaker than expected employment numbers coming in lately.
• Fed Chairman earlier last week said that the “time has come” for officials to cut rates with markets continuing to forecast four cuts before year end.

Japan – The government raised its monthly economic projections for the first time in 15 months driven by a recovery in consumption.

• The Cabinet Office said in its August report that the economy is recovering at a moderate pace, and only parts of it are stalling, Bloomberg writes.
• That compared to July report that guided for a more widespread pause.
• Consumer spending was upgraded for the first time in over a year on the back on strong wage growth and PM Fumio Kishida’s tax rebates.

Spain – Inflation slowed more than forecast in August on the back of the fall in fuel prices.

• Core measure also came down although remained above headline measure on absolute basis.
• CPI (%mom, Aug/Jul/Est): 0.0/-0.7/0.2
• CPI (%yoy, Aug/Jul/Est): 2.4/2.9/2.5
• Core CPI (%yoy, Aug/Jul/Est): 2.7/2.8/2.6

Currencies

US$1.1128/eur vs 1.1153/eur previous. Yen 144.83/$ vs 144.44/$. SAr 17.715/$ vs 17.793/$. $1.322/gbp vs $1.324/gbp. 0.681/aud vs         0.679/aud. CNY 7.112/$ vs 7.129/$.

Dollar Index 100.98 vs  100.79 previous

Precious metals:         

Gold US$2,517/oz vs US$2,510/oz previous

Gold ETFs 82.8moz vs 82.8moz previous

Platinum US$945/oz vs US$948/oz previous

Palladium US$958/oz vs US$966/oz previous

Silver US$29.60/oz vs US$30/oz previous

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

Base metals:   

Copper US$ 9,278/t vs US$9,326/t previous

Aluminium US$ 2,481/t vs US$2,523/t previous

Nickel US$ 17,020/t vs US$17,025/t previous

Zinc US$ 2,890/t vs US$2,905/t previous

Lead US$ 2,070/t vs US$2,101/t previous

Tin US$ 32,560/t vs US$33,015/t previous

Energy:           

Oil US$78.8/bbl vs US$79.4/bbl previous

Natural Gas €38.7/MWh vs €39.4/MWh previous

Uranium Futures $79.2/lb vs $81.5/lb previous

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$101.0/t vs US$101.5/t

Chinese steel rebar 25mm US$475.5/t vs US$474.3/t

Thermal coal (1st year forward cif ARA) US$127.0/t vs US$128.0/t

Thermal coal swap Australia FOB US$144.0/t vs US$146.8/t

Coking coal Dalian Exchange futures price US$187/t vs US$195.0/t

Other:  

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

NdPr Rare Earth Oxide (China) US$56,474/t vs US$56,744/t

Lithium carbonate 99% (China) US$9,987/t vs US$9,890/t

China Spodumene Li2O 6%min CIF US$770/t vs US$770/t

Ferro-Manganese European Mn78% min US$995/t vs US$1,110/t

China Tungsten APT 88.5% FOB US$333/mtu vs US$333/mtu

China Graphite Flake -194 FOB US$447/t vs US$447/t

Europe Vanadium Pentoxide 98% 4.7/lb vs US$4.7/lb

Europe Ferro-Vanadium 80% 24.75/kg vs US$24.75/kg

China Ilmenite Concentrate TiO2 US$323/t vs US$322/t

China Rutile Concentrate 95% TiO2 US$1,400/t vs US$1,399/t

Spot CO2 Emissions EUA Price US$72.4/t vs US$80.7/t

Brazil Potash CFR Granular Spot US$292.5/t vs US$292.5/t

Germanium China 99.99% US$2,545.0/kg vs US$2,145.0/kg

China Gallium 99.99% US$445.0/kg vs US$440.0/kg

Battery News

Volkswagen to revise EV battery targets

• Volkswagen’s goal of building 200GWh of battery capacity is under review as the company monitors fluctuating consumer demand.
• Thomas Schmall, CEO of VW’s battery division, PowerCo, emphasised that battery plans must align with market demand, stating targets are “not set in stone.”
• The company’s original goal, set in 2021, was to build 240GWh of battery capacity by 2030, of which 200GWh would be build by PowerCo.
• PowerCo’s three announced plants in Spain, Canada and Germany have a combined capacity of up to 170GWh, and it remains up in the air as to whether these capacities could be expanded or PowerCo could look to build an additional battery facility.
• Despite an increase in overall vehicle deliveries in early 2024, EV sales saw a slight decline.
• Volkswagen reported a rise in internal combustion engine vehicle sales, offsetting the drop in EV deliveries.
• The company remains confident in future EV growth, supported by 30 new model launches across all drive types.
• Volkswagen leads UK car sales in 2024, with 97,598 units sold and an 8.46% market share.

China’s GAC to produce an EV every 53 seconds

• Chinese automaker GAC’s new factory in Changsha has an annual output of 200,000 vehicles, producing one car every 53 seconds. (CNEVPost)
• In its first month, the factory produced 9,000 electric cars, with full capacity expected by early 2025.
• GAC is using advanced AI technologies, cutting troubleshooting time by 25% and saving 30% of production space.
• A “smart” logistics system enhances component delivery accuracy by 40% and reduces vehicle delivery time by 25%.
• With three factories in China, GAC’s total production capacity will reach 600,000 units per year when the new plant is fully operational.
• Despite its advancements, GAC’s production speed still trails behind Ford and Tesla, which produce vehicles in 49 and 40 seconds respectively.

US EV sales rebound led by hybrids

• According to the US Energy Information Administration (EIA), US electric and hybrid vehicle rebounded as sales increased by 1% from Q1 to Q2 2024 after a previous decline, with hybrids leading the growth.
• Hybrid electric vehicle sales surged by 30.7% yoy, contributing significantly to the overall increase.
• Hybrid sales accounted for 8.6% of light-duty vehicle sales in Q1 2024 and 9.6% in Q2 2024.
• Battery electric vehicle sales in Q2 accounted for 7.1% of light-duty vehicle sales, consistent with Q2 2023 figures.
• Average BEV prices dropped from $57,405 in January to $56,371 in June, reducing the price gap between BEVs and average light-duty vehicles.
• Tesla’s market share fell to 48.9% in Q2, its lowest since 2017, with Ford, Chevrolet, Hyundai, and Kia gaining ground.
• Ford’s EV sales rose by 31% yoy in July, marking six consecutive months of growth.

Chinese EV makers BYD and Li Auto report higher earnings, narrower margins

• China’s only profitable EV makers, BYD and LiAuto have rebounded from sub-par Q1 performances, with BYD’s Q2 earnings nearly doubling. (South China Morning Post)
• BYD, earned 9.1 billion yuan (US$1.28 billion) for the three months ending June, up 98.4% from the Q1 and 32.8% yoy.
• First-half profit of 13.6 billion yuan fell short of a consensus analyst forecast of 17.9 billion yuan in a Bloomberg survey.
• Li Auto said its Q2 profit jumped 86.2% from the previous three months to 1.1 billion yuan, just exceeding a forecast of 1.06 billion yuan in the Bloomberg survey.
• In Q1 2024, its profit had plunged 90% from Q4 2023 to 591 million yuan.

Company News

Galantas Gold* (GAL LN) 6.8p ,Mkt Cap £7.8m – Interim results

• The Company released unaudited interim financial results for 1H24.
• No revenues given no commercial sales of gold were reported during the period.
• Net loss amounted to C$2.2m (1H23: -C$2.7m) mostly reflecting C$2.7m in G&A costs (1H23: C$2.4m).
• FCF came in at -C$2.6m (1H23: -C$3.8m) reflecting lower spend on exploration and mine development at the Omagh Mine and Gairloch Project.
• Net debt stood at C$18.1m including C$0.4m in cash and C$11.4m in short term liabilities.

*SP Angel acts as Broker to Galantas Gold

Gem Diamonds (GEMD LN) 15.45p, Mkt Cap £18.9m – Positive turnaround in H1 prompts upward revision of 2024 guidance

• Gem Diamonds reports an attributable profit of US$2.1m for the six months to 30^th June reversing the US$1.0m loss recorded for the first six months of 2023.
• The profit and the underlying EBITDA of US$19.1m (2023 – US$8.4m) reflect the recovery of 55,873 carats (2023 – 50,601 carats) from the processing of 2.5mt of ore (2023 – also 2.5mt).
• The company also reports a reduction in net debt with a closing balance of US$8.4m compared to the 31^st December 2023 level of US$21.3m.
• Gem Diamonds comments that the “diamond market remains under significant pressure which has negatively impacted prices achieved during the Period. An increase in both the number of larger than 100 carat diamonds and overall diamond recoveries aided in offsetting the market impact on prices” which averaged US$1,366/carat (H1 2023 – US$1,373/carat).
• “Improved operational performance” leads the company to revise its full year guidance upwards to a range of 98-101,000 carats recovered (formerly 88-92,000 carats) and for sales of 100-103,000 carats.
• Explaining the positive revision to guidance, CEO, Clifford Elphick, commented that the “pressure on the global diamond market persists which negatively impacted the revenue generated during the Period. We have, however, had great success in improving our operational outputs and cost containment which mitigated the market impact on diamond prices. In line with the improved performance, we have revised our guidance for 2024”.
• In addition, we are grateful to one of our readers for pointing out that in our report, yesterday, of the discovery of a 129.71 carat Type II white diamond at Gem Diamond’s Letšeng mine in Lesotho we incorrectly attributed Letšeng as the source of the 1,109 carat ‘Lesedi La Rona’ diamond which was actually found at the Karowe mine in Botswana.
• We apologise for the error and in particular to both Gem Diamonds and to Lucara Diamonds, the owner of the Karowe mine and welcome the opportunity to correct this inadvertent mistake.
• Conclusion: Improved operational performance prompts Gem Diamonds to revise its production and sales guidance upwards despite the continuing price pressures in the rough diamond market.

Kavango Resources* (KAV LN) 1.43p, Mkt Cap £19m – Financing initiative for exploration projects in Zimbabwe

• Kavango Resources reports the initiation of its ‘Capital Investment & Financing Programme’ which will help to progress its portfolio of projects in Zimbabwe.
• The Programme “will comprise staged capital raises for investment into specific value-generating projects” mainly to help “define mineable gold resources and acquire plant and equipment for larger-scale production”.
• As a first step, “Kavango has issued a £2million convertible loan note (the “CLN”) to Purebond Limited, its major shareholder”.
• Initially the focus will be directed at the Hillside Gold project in Matabeleland “which Kavango believes has potential to host one or more mineable ore bodies … [and where the initial objective is to define] … a resource of at least 10,000 oz of gold defined within the top 100 m … with a further resource of at least 5,000 oz of gold defined in the next 50 vertical metres below”.
• “Assuming Kavango meets its exploration targets at Hillside, Kavango Mining intends to commission a 100t/d gold processing plant … [and] … Kavango aims to commence gold production at the Production Plant in Q2 2025”.
• In addition, “Kavango will acquire a 45% stake in Equity Drilling for US$22,500, the Company’s drill partner in Zimbabwe … [and the company says that it] …. has identified a commercial opportunity to build a supply chain to service metals exploration companies in Zimbabwe”
• Chief Executive, Ben Turney, explained that the “rapid progress and achievements Kavango is making in Zimbabwe …[prompted the initiation of] … the first phase of our Capital Investment & Financing Programme”.

Conclusion: Progressing the Hillside gold prospect is the first project identified for funding from Kavango Resources’ new ‘Capital Investment & Financing Programme’ in Zimbabwe.  We look forward to further news as the exploration programme develops.

*An SP Angel Analyst holds shares in Kavango

Mkango Resources* (MKA LN) 6.4p, Mkt Cap £17m – Participation in grant funded GREENE Project

• HyProMag GmbH, a 80% owned subsidiary of HyProMag, will participate in the €8m grant funded GREENE Project.
• The project is funded by the European Commission’s Horizon Europe Programme focused on developing new more efficient permanent magnet materials.
• The project will involve 15 European partners including leading material scientists, magnet manufacturers and recyclers, lifecycle analysis experts and end user representatives.
• HyProMag GmbH will receive ~€350k to advance its proprietary NeoLeach technology used to upgrade products from its HPMS process.
• Mkango holds a 64% indirect interest in HyProMag through a 80% interest in Maginito that in turn owns a 100% interest in HyProMag.

*SP Angel acts as nomad and broker to Mkango Resources

Resolute Mining (RSG LN) 33p, Mkt Cap £745m – Half year results show return to net cash supported by Syama

• Resolute produced 167koz Au over the first half, down slightly yoy but in line with expectations.
• Revenue over the period at $342m vs $330m same period last year, with average realised gold price of $2,170/oz.
• EBITDA at $116m vs $101m same period last year, OPEX down 2% whilst gold sold down 9%.
• Net profit after tax of $33.4m, down from $88m
• AISC for the period at $1,442/oz vs $1,469/oz 1H23 – management expects this to continue to fall into H2.
• CAPEX guidance retained at $115-145m, with CAPEX + exploration expenditure at $44.3m for the period.
• Net cash up to $97m, cash and bullion at $143m. The company paid a final $25m loan facility, and holds $48m in in-country overdraft facilities.
• Syama AISC rose from $1,418/oz to $1,502/oz qoq.
• Syama sulphide grade and tonnage is expected to decrease in 3Q24 on rainy season constraints, before ramping up again.
• Syama processed oxide tonnage is also expected to be lower this quarter, before increasing into 4Q24.
• Mako is expected to see AISC meet full year guidance of $1,100-1,200/oz.
• FY24 production guidance retained at 345-365koz Au with AISC of $1,300-1,400/oz.
• Management highlights the SSCP project progresses well, supporting 4mtpa of higher-grade sulphide ores from 2.4mtpa to be fed through Syama by mid-2025.
• Company expects to release an MRE for Tomboronkoto and their Mansala Prospect in Guinea this quarter.
• Resolute expects a further A$20m to be paid from Ravenswood by 30^th September 2024.

Serabi Gold (SRB LN) 69p, Mkt Cap £52m – Progress at Coringa as higher gold prices and increased gold output enhances financial performance

1. Reporting results for the three and six months ending 30^th June, Serabi Gold reports an after-tax profit of US$9.2m (2023 – US$5.0m) and a closing cash balance of US$12.0m.
2. The results reflect H1 production of 18,010oz of gold (2023 – 16,524oz} at a cash cost of US$1,401/oz (2023 -US$1,258/oz) and of US$1,782/oz (2023 -US$1,519/oz) on an all-in-sustaining cost (AISC) basis.
3. Operational H1 revenues of US$42.2m (2023 – US$30.5m) benefitted from both the increased output and higher gold prices of US$2,209/oz (2023 – US$1,940/oz).
4. Operationally, the company confirms that the “ore sorter for Coringa has now been delivered to site and the ground works required for installing the crushing plant and the related infrastructure for the ore sorter are progressing well with the intention that the plant can be operational during the fourth quarter of this year” providing the opportunity to treat lower grade ore which has previously been stockpiled.
5. CFO, Clive Line, described “another period of good financial performance … [with] … EBITDA of $8.3 million for the latest quarter is up 76 per cent on the first quarter of 2024 and has resulted in a year-to-date EBITDA of 13.0 million, which in turn is a 96 per cent improvement compared with the first six months of 2023”.
6. Mr. Line said that the “main ramp has almost reached the next planned 155m level which will be opened in September … [and] … with three and soon to be four development levels ahead of production, the mine is in a very healthy position for the planned future production expansion”.
7. Serabi Gold has previously issued production guidance of 38-40,000oz of gold for FY2024.

Conclusion: Serabi Gold reports improved H1 financial performance as it advances its Coringa mine development.

*An SP Angel analyst has visited the Serabi’s gold mining operations in Brazil

South32 (S32 LN) 159p, Mkt Cap £7bn – Aluminium division weighs on profits as Hermosa development ramps up

• South32 reports full year results to 30^th June 2024.
• The Company generated $5.5bn in revenues, a loss before tax of $735m, post-tax loss of $205m.
• Underlying EBITDA reported at $1,800m, down 29%.
• Alumina production flat at 5.1mt, generating EBITDA of $364m, with alumina prices rising 1% and caustic soda prices falling.
• Aluminium production at 1.1mt, with EBITDA falling $115m to $121m for FY24, weighed by lower prices and higher energy costs.
• Copper production down 15% to 74kt over the year, expected to increase 15% in FY25.
• Zinc production up 10% to 285kt, expected to fall 12% in FY25.
• Zinc EBITDA up $76m to $289m.
• Hermosa CAPEX for FY24 at $372m, $600m expected in FY25.
• Nickel EBITDA fell to $96m from $150m yoy, with the Company conducting a strategic review over Cerro Matoso.
• Manganese EBITDA down $187m to $182m, following Cyclone Megan impacts.
• CAPEX guided at $125m for FY25 for mine, wharf and bridge repairs.
• South32 expects to reschedule wharf operations in Q3 FY25, with sales volumes expected to increase over 4Q25.
• South32 have sold Illawara met coal for a cash consideration of up to $1.7bn, also selling down 50% stake in Eagle Downs.
• Free cash outflow of $80m recorded over the period, net debt of $762m (down $329m).
• Illawara proceeds expected to reinforce balance sheet and fund CAPEX on Hermosa and other projects.

No.1 in Base Metals: SP Angel mining team awarded No 1. ranking for Base Metals forecasting in LSEG Quarterly Starmine Award for Reuters Polls Q1 2024

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

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

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

Analysts

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

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

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

Sales

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

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

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

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

SP Angel                                                            

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*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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