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

Lithium market turns as Lepidolite producers shut down

MiFID II exempt information – see disclaimer below

Beowulf Mining* (BEM LN) – Annual Report shows progress at Kallak and Grafintec, new licences secured

Blackstone Minerals (BSX AU) – Australian Ambassador describes Ta Khoa nickel refining and mining project as globally significant

East Star Resources (EST LN) – JV for sediment-hosted copper exploration in Kazakhstan

Empire Metals* (EEE LN) – New drilling programme to further develop economic potential at Pitfield Titanium Project

Galileo Resources (GLR LN) – Increasing its interest in Zimbabwe exploration projects

Resolute Mining (RSG LN) – Cost reduction campaign delivers stronger financial performance in 2023

South32 (S32 LN) – Sale of Illawarra met coal to fund zinc and copper development projects

Thor Energy (THR LN) – Drilling results from the Uravan belt, Colorado

Lithium – SQM sees lithium prices staying subdued following recent bounce from lows

• SQM, the world’s second-largest producer, posted their Q4 report, which showed an 82% decline in profits.
• The Company noted an oversupply of lithium products and battery materials following a considerable rollout in 2022/2023.
• They expect sales volumes will increase slightly from their own projects, with relatively stable prices.
• Albemarle expects a 30% rise in EV demand this year, noting that prices are unsustainably low at the minute.
• Analysts in Singapore note that 52% of lepidolite producers are currently under water in China, supporting our bullish thesis on lithium at this level of the cost curve.

Gold prices hover as traders wait for key inflation data this afternoon

• Gold prices are holding around the $2,040/oz mark following yesterday’s US GDP data.
• The strength in gold prices has been surprising given the recent sell off in US Treasuries.
• There has been a repricing in the US Treasury market, following optimisitic expectations of Fed rate cuts in March after Powell’s December speech.
• The 10 year has climbed to 4.3%, having hit 3.8% in December.
• The rise in yields has followed several hot inflation metrics, cooling hopes of a rate cut in March.
• Focus now turns to PCE data today, a key metric used by the Fed to gauge inflationary pressures.

Economics

US – Inflation numbers are due later today offering a further data point for monetary authorities to work with ahead of the next FOMC policy meeting (March 19-20).

• PCE (%mom): 0.3 v 0.2 December;
• PCE (%yoy): 2.4 v 2.6 December;
• Core PCE (%mom): 0.4 v 0.2 December;
• Core PCE (%yoy): 2.8 v 2.9 December.

China – China signals more fiscal pump-priming for the economy (SCMP)

• The 24-member Chinese politburo has vowed to make the policy environment ‘transparent and predictable’ in its session today in reaction to weak business and consumer confidence.
• The CCP leadership is signalling that it intends to double down on more fiscal instruments to support the economy.
• The Politburo, has also committed to improve the consistency of policies and make the policy environment “transparent and predictable” according to the state’s Xinhua news agency.
• The idea is to give more clarity and certainty to recent and new stimulus measures reversing a degree of fiscal austerity, debt and corruption clampdowns.
• China appears to be reversing moves to restrict entrepreneurial wealth creation as seen in the detention of Jack Ma, creator of Alibaba though many are not sure how long the CCP will re-embrace ‘capitalism’ for.
• We expect the CCP state to use China’s strong entrepreneurial spirit to restore growth but will likely revert to promoting state-led enterprise once the current crisis is over under the leadership of President Xi.
• President Xi is pushing ‘disruptive innovation’ and technology self-reliance which, we suspect, is best led by a number of tech entrepreneurs than state-led companies, particularly when it comes to semiconductors and AI.

Japan – The yen strengthened through the 150 mark for the first time in about a week on BOJ board member hawkish comments.

• “There are uncertainties for Japan’s economy but my view is that the price target is finally coming into sight,” Hajime Takata said.
• Japan is “at a juncture for a shift in the entrenched belief that wages and inflation won’t rise”.
• Markets are pricing in a 34% chance of a rate hike at the March 18-19 meeting, up from 21% before comments, Bloomberg reports.
• The yen is trading at 149.8 this morning.

Eurozone – Headline inflation seen pulling back in France and Spain in February with German data due later today.

• In a welcome sign to monetary policy authorities, services inflation is also seen coming down, albeit, at a slower pace.
• Services inflation in France was down at 3.1% from 3.2% in January, compared to a 0.3% reading for goods inflation compared to 0.7% the previous month.
• Core inflation in Spain also slowed down to 3.4% from 3.6% in January, although, again not as fast as headline CPI numbers would suggest.
• France CPI (%mom, EU Harmonised): 0.9 v -0.2 January and 0.8 est.
• France CPI (%yoy, EU Harmonised): 3.1 v 3.4 January and 3.1 est.
• Spain CPI (%mom, EU Harmonised): 0.4 v -0.2 January and 0.2 est.
• Spain CPI (%yoy, EU Harmonised): 2.9 v 3.5 January and 2.8 est.

Germany – Unemployment picked up more than expected through February highlighting ongoing economic challenges.

• Unemployment Change (‘000): 11.0 v 1.0 (revised from -2.0) January and 5.0 est.
• Unemployment Rate: 5.9% v 5.9% (revised from 5.8%) January and 5.8% est.

Olaf Scholz tells world that British soldiers are on the ground in Ukraine and are helping Ukrainians fire Storm Shadow missile

• Scholz’s government also appears to be refusing to supply Taurus missiles to Ukraine as it might require German support in firing.
• There is some concern that Putin might elect to Nuke a western city in retaliation. Thanks to Scholz for putting the UK directly into the firing line.
• We have reason to believe that Germany may be doing more to help Ukraine than they are letting on and are perhaps more aware of the risks of crossing Putin than UK politicians.

Switzerland – Swiss GDP grows 0.3% qoq in Q4 ahead of 0.1% expectation

• A -2.5% reduction in investment in equipment has dragged the economy down along with a -0.3% fall in construction investment and a -0.2% decrease in the construction sector.
• Personal consumption rose 0.3%, driven by housing, health, mobility, and overseas travel.
• Retail spending fell -0.3% with trade also -1.0% lower
• Imports of goods and services rose 0.7% after adjustment for sports events.

UK – Mortgage approvals climb to the highest level since October 2022 on lower borrowing costs.

• Approvals increased to 55.2k last month, up on 51.5k in December and beating estimates for 52.0k.
• BOE “effective” mortgage rate, the actual interest paid, dropped 9bp to 5.19% in January, FT writes.

Ghana – Ghana to produce ~4.5moz pa of gold according to President Nana Addo Dankwa Akufo-Addo in his state of the nation speech

• Gold production is set to rise to ~4.5moz pa on production from three new large-scale mines in the Ahafo, Upper-East and Upper-West Regions.
• The reduction in withholding tax on unprocessed gold to 1.5% from 3% has led to a 900% increase in declared gold exports from the small-scale sector.
• Ghana now has a gold 400kg pa gold refinery in-country and is negotiation for an LBMA certificate.

Russia – Putin tells NATO countries they risk nuclear conflict if they send troops to Ukraine

• The US and its key European allies said this week they have no plans to send ground troops to Ukraine.
• While this statement does not include other military personnel who are often used for training we suspect the semantics may be lost of President Putin.
• “They should eventually realise that we also have weapons that can hit targets on their territory. Everything that the West comes up with creates the real threat of a conflict with the use of nuclear weapons, and thus the destruction of civilisation,” said Putin at his annual state of nation address.

Currencies

US$1.0844/eur vs 1.0818/eur previous. Yen 149.79/$ vs 150.76/$. SAr 19.224/$ vs 19.195/$. $1.266/gbp vs $1.264/gbp. 0.651/aud vs 0.650/aud. CNY 7.194/$ vs 7.199/$.

Dollar Index 103.79 vs 104.11 previous.

Commodity News

Precious metals:         

Gold US$2,037/oz vs US$2,037/oz previous

Gold ETFs 82.5moz vs 82.5moz previous

Platinum US$891/oz vs US$891/oz previous

Palladium US$961/oz vs US$961/oz previous

Silver US$22.64/oz vs US$23/oz previous

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

Base metals:   

Copper US$ 8,498/t vs US$8,498/t previous

Aluminium US$ 2,199/t vs US$2,199/t previous

Nickel US$ 17,295/t vs US$17,295/t previous

Zinc US$ 2,447/t vs US$2,447/t previous

Lead US$ 2,108/t vs US$2,108/t previous

Tin US$ 26,170/t vs US$26,170/t previous

Energy:           

Oil US$82.8/bbl vs US$82.8/bbl previous

• Crude oil prices are broadly flat after the EIA reported a smaller than expected 4.2mb w/w US crude build, offset by a 7.5mb products draw, as refinery utilisation remained low at 81.5% due to seasonal maintenance and the continued outage at BP’s 435kb/d Whiting refinery in Indiana.
• European energy prices remain were flat as EU natural gas storage levels fell just 1.8% w/w to 63.1% full (vs 46.4% 5-Yr average), with only France reporting levels below 55% full and aggregate storage at 719TWh.

Natural Gas €23.6/MWh vs €23.6/MWh previous

Uranium Futures $94.9/lb vs $94.9/lb previous

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$113.6/t vs US$113.6/t

Chinese steel rebar 25mm US$568.6/t vs US$568.6/t

Thermal coal (1st year forward cif ARA) US$91.0/t vs US$91.0/t

Thermal coal swap Australia FOB US$128.0/t vs US$128.0/t

Coking coal swap Australia FOB US$307.0/t vs US$307.0/t

Other:  

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

NdPr Rare Earth Oxide (China) US$52,096/t vs US$52,096/t

Lithium carbonate 99% (China) US$12,434/t vs US$12,434/t

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

Ferro-Manganese European Mn78% min US$1,070/t vs US$1,070/t

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

China Graphite Flake -194 FOB US$560/t vs US$560/t

Europe Vanadium Pentoxide 98% 5.8/lb vs US$5.8/lb

Europe Ferro-Vanadium 80% 27.55/kg vs US$27.55/kg

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

Spot CO2 Emissions EUA Price US$57.7/t vs US$57.7/t

Brazil Potash CFR Granular Spot US$285.0/t vs US$285.0/t

Battery News

AutoFlight complete first eVTOL demonstration flight in China

• The electric vertical take-off and landing (eVTOL) aircraft, dubbed the ‘air taxi’ completed its first inner-city demonstration flight.
• The eVTOL travelled from Shenzhen to Zhuhai, taking 20mins to make the 55km trip.
• With a maximum range of 250km, the electric-powered Prosperity is capable of carrying five people with a cruise speed of up to 200kph.

Aston Martin delays first EV model as consumer demand lowers

• Aston Martin will postpone the market launch of its first electric car by a year, citing low customer demand.
• The EV will now launch in 2026 as opposed to the planned 2025.
• Aston Martin has a supply deal with Lucid Motors for the supply of electric drives.
• The company had previously announced that it would fully focus on hybrid and EVs from 2026.

Apple to end autonomous EV project after almost ten years

• It has been reported that Apple is planning to shut up shop on its EV venture that has been in the pipeline for nearly a decade. (Bloomberg)
• It is believed that many staff who had been working on the project are being moved to work on generative AI projects.
• Little has been unveiled about the project since it was first rumoured to the extent that it was unknown whether Apple were building an autonomous vehicle or just the technology to power it.

Company News

Beowulf Mining* (BEM LN) 1.2p, Mkt Cap £14m – Annual Report shows progress at Kallak and Grafintec, new licences secured

• Beowulf, which is developing the Kallak iron ore project and the Grafintec Anode Materials plant in Scandinavia, reports their annual results for 2023.
• The company reports today it has just secured an exploration permit of c.24km^2,, which lies directly south of the Kallak project.
• Management are in the process of completing the Environmental Impact Assessment for Kallak, which will support an optimised PFS.
• The team continue to work with stakeholders in the Kallak region, and the Government has reiterated their support for the project and decision to issue the Exploitation Concession.
• The permit had previous drilling showing iron content of 25% averages, alongside a four km magnetic anomaly.
• Graphite anodes (Finland): the Company has successfully delivered a PFS for the GAMP project, which included only the final coating stage of high-value CSP Graphite products.
• The PFS shows $242m NPV8 producing 20ktpa CSPG over 10 years for $117m CAPEX.
• Management are now working on the EIA for the project alongside bench-scale testwork.
• Beowulf is now looking to build on the initial PFS for the GAMP project through including spheronisation and purification in the plant. This updated PFS reflects changing market dynamics and is expected to be completed this year.
• In Kosovo, Beowulf has completed low-cost exploration work at the Vardar prospects, targeting the Shala East and Shala West licences.
• Beowulf ended the 2023 calendar year with £0.9m in cash, having raised £6.4m gross in 1Q23 to repay a bridging loan.
• Beowulf announced last week it intends to complete a preferential rights issue of SDRs, alongside a UK retail offer, of up to £7.5m.
• Use of funds will be directed towards the Kallak PFS and EIA, alongside the updated GAMP PFS and EIA.
• Underwriters involved in the rights issue have also provide a short-term bridging loan of £0.75m to the Company to support the continuation of project development before the raise.
• Beowulf has secured underwriting commitments of c.£3.75m for the rights issue and management intend to commit to the issue. The Subscription period is expected between 13-27^th March.

*SP Angel acts as Nomad and Broker to Beowulf Mining

Blackstone Minerals (BSX AU) A$0.058, Mkt cap A$28m – Australian Ambassador describes Ta Khoa nickel refining and mining project as globally significant

• The Australian Ambassador has described the Ta Khoa nickel refining and mining project in Vietnam as globally significant and has a role in the global net zero transition.(theinvestor.vn)
• The comment was made at the opening of the new Blackstone Mining Information Centre.
• Blackstone Minerals formerly built and operated a nickel mine in Son La from 2013 to 2016.
• The company will now construct a larger concentrator, refinery and precursor facility to process ore from the Ta Khoa project.
• Target production: 150,000tpa of nickel, cobalt, manganese precursor cathode active material equivalent to 420,000 of nickel sulfate.
• In October 2023, Blackstone Minerals confirmed that it would continue preparing for the auction of concessions at the Dong Pao mine, the largest rare earths reserve in Vietnam, despite the recent arrest of its Vietnamese partner.

East Star Resources (EST LN) 1.65p, Mkt Cap £3.6m – JV for sediment-hosted copper exploration in Kazakhstan

• East Star Resources reports that it has formed a joint-venture to explore for sediment-hosted copper deposits in Kazakhstan.
• The company’s partner in the exploration, Getech Group, is described as “a world-leading locator of subsurface resources” and the joint-venture plans to use “combined geological data, advanced algorithms, and expertise … [to target] … basins prospective for sediment-hosted copper”.
• Field examination of the most prospective targets is expected to take place at “the start of the field season in Kazakhstan around April 2024”.
• CEO, Alex Walker, said that “Sediment-hosted copper deposits account for around 20% of global copper production. These types of discoveries have the potential to become Tier-1 deposits which are sought after by global mining majors”.
• Richard Bennett of Getech said that collaboration with East Star Resources “presents us with significant upside potential and minimal risks. In the event of a successful exploration campaign, we obtain a 5% stake in one or more mining assets … [and confirmed that] … we are progressing other similar transactions where we are looking to leverage our data and expertise to secure asset participation in promising locations”.

Conclusion: East Star Resources is part of a relatively early stage exploration programme for sediment hosted copper in Kazakhstan.  Initial field examination of priority targets is expected in April. We await further news.

Empire Metals* (EEE LN) 10.3p, Mkt Cap £62m – New drilling programme to further develop economic potential at Pitfield Titanium Project

(Empire holds 70% of Pitfield, Century Minerals, which is run by two geologists holds the other 30%. One of these geologists works for Empire.)

• The Company provides an update from its Pitfield Titanium Project in Western Australia.
• Empire announces plans to begin a diamond drilling programme over 800m for resource evaluation work.
• In addition to the diamond holes, 6,000m of RC metres over 40 holes will also be completed.
• Empire are exploring options to evaluate two areas for potential shallow, open pit mining.
• Diamond drilling will provide core for mineralogical analysis and met testwork to support the economic assessment of the project.
• The diamond programme will be completed over four angled, 200m holes.
• The RC drilling will delineate two higher-grade zones, also testing new targets over the magnetics anomaly.
• In addition to the drilling programme, Empire announces it has issued 6.5m options at 14p and 2m options at 18p to ‘attract and retain high-calibre personnel.’
• The options are issued to various employees and contractors of the Group.

Conclusion: Empire is well-funded through a £3m placement completed in January. The Company is looking to progress the development of the Pitfield titanium project. Diamond core drilling will be completed to support metallurgical test work crucial to the economic development of the deposit further down the line. Meanwhile, RC drilling will target two higher-grade zones for resource delineation over two possible shallow open pit targets.

*SP Angel acts as nomad and broker to Empire Metals

Galileo Resources (GLR LN) 1.15p, Mkt Cap £13.4m – Increasing its interest in Zimbabwe exploration projects

• Galileo Resources reports that it has secured an additional 51% interest in BC Ventures, which owns the Kamativi lithium project and two gold exploration licences near Bulawayo.
• The increased stake, which results from “spending $1.5million on exploration and evaluation of the Projects” increases Galileo Resources’ interest to 80%.
• “The Company has recently applied to the Zimbabwe authorities for a further three-year renewal of all three exploration licences to 12 March 2027”.
• Executive Chairman, Colin Bird, said that “we are delighted with our initial progress at the Kamativi Lithium/Tin project, which has huge potential for the discovery of lithium and/or tin.  The Bulawayo project also has indicated good potential for near surface and deeper gold discoveries”.
• Mr. Bird said that Galileo Resources is looking forward to “advancing all our projects in Zimbabwe and maintain our conviction that Zimbabwe has high prospectivity for new discoveries in most of the new age metals currently being sought globally”.

Conclusion: Increasing its interest in BC Ventures indicates that Galileo Resources has received encouragement from its US$1.5m of exploration spending on the Zimbabwean projects.  We await further news with interest…

Resolute Mining (RSG LN) 16.65p, Mkt Cap £354m – Cost reduction campaign delivers stronger financial performance in 2023

• Resolute Mining reports increased EBITDA and after-tax profit in its 2023 results published today.
• Revenues declined by ~3% to US$631.1m (2022 US$651.1m) but the benefits of the company’s cost reduction initiatives saw EBITDA increase by ~US$US$13m (9%) to US$161.6m (2022 US$148.2m) and after tax profit of US$182.7m (2022 US$34.7m loss).
• Lower debt levels saw a reduction in finance costs to US$11m (2022 – US$15m) and US$55m in principal repayments during the year saw 31^st December net cash of US$14m (31^st December 2022 – net debt of US$31.6m).
• Cash flow before financing US$53.8m but after investment of US$68.9m funded the debt repayment.
• The financial results reflect the sale of 329,061oz of gold for an average price of US$1,920/oz and production costs of US$1,469/oz on an all-in-sustaining (AISC) cost basis.
• The Syama mine in Mali generated US$401.6m (~64%) of Resolute Mining’s revenue and US140.4m (~61%) of the gross profit with the balance generated by the Mako mine in Senegal.
• Production costs at Syama declined by almost US$25m during the year to US$261.2m (2022 – US$285.9m) while those at Mako were ~US$7m lower at US$136.5m (2022- US$148.0m).

Conclusion: The fruits of Resolute Mining’s cost saving campaigns are reflected in a 2022 after tax loss reversing to deliver a US$183m profit in 2023

South32 (S32 LN) 150p, Mkt Cap £6.6bn – Sale of Illawarra met coal to fund zinc and copper development projects

• South32 have announced the sale of their Illawarra Met Coal assets to Golden Energy Resources and M Resources.
• GEAR is backed by Indonesian investors.
• The Company will receive $1bn as an upfront cash consideration at the date of completion, alongside a deferred cash position payable in 2030.
• Additionally, South32 will receive a contingent payment of $350m linked to revenue of met coal sold from the asset.
• South32 generated 23% of its 1HFY24 EBITDA from metallurgical coal.
• The Company plans to invest the proceeds into zinc and copper projects, two metals it considers ‘critical in the transition to a low-carbon future.’
• South32 recently issued its FID for the Hermosa project, which showed a 12% post-tax IRR using zinc prices 40% higher than spot.

Conclusion: South32’s decision to divest their metallurgical coal assets is reflective of recent developments at BHP and Teck, who have both sold off cash generating coal assets to invest in energy transition metals. South32 is taking a bold bet on zinc going forward, with the Company anticipating declining ore grades, lack of new discoveries and diminishing Chinese supply to support a rally in prices going forward. They note a 3mt production gap from 2031, when they expect their Hermosa project to begin production.

Thor Energy (THR LN) 1.5p, Mkt Cap £4.2m – Drilling results from the Uravan belt, Colorado

• Thor Energy has reported results from its recently completed reverse-circulation (RC) drilling programme at its wholly-owned Wedding Bell and Radium Mountain projects in the Uravan belt of south-west Colorado.
• Among the results highlighted in today’s announcement are:

• • A6.1m wide intersection at an average grade of 0.06% U₃O₈ and 0.90% V₂O₅ from a depth of 82m in hole 23WBR-011 and
  • A 3m wide intersection at an average grade of 0.06% U₃O₈ and 0.5% V₂O₅ from a depth of 67m in hole 23WBR-016; and
  • A 1.2m wide intersection at an average grade of 0.11% U₃O₈ and 0.37% V₂O₅ from a depth of 90.8m in hole 23WBR-019; and
  • A 4.9m wide intersection at an average grade of 0.12% U₃O₈ and 0.63% V₂O₅ from a depth of 82m in hole 23WBR-020; and
• The company describes vanadium mineralisation forming “broad zones adjacent to the uranium mineralisation, with an average vanadium-to-uranium ratio of 10:1, which is typical of the Uravan Mineral Belt”.
• As well as the results from the Wedding Bell and Radium Mountain prospects, drilling at the Groundhog prospect “comprising seven drillholes was designed to test areas along strike of historic mine workings predominately in the second and third sandstone rim (above 100m depth). 23WBRA020 returned the highest uranium and vanadium intercepts of 0.91m @ 0.69% eU₃O₈ uranium (downhole gamma) and 0.6m @ 0.62% U₃O₈ uranium (assay) and 1.8% V₂O₅ vanadium within a grey reduced sandstone”.
• “Drilling at Rim Rock Mine area (seven drillholes) has identified high-grade zones of up to 0.32% eU₃O₈ uranium and up to 1.8% V₂O₅ vanadium adjacent to, as well as along strike from the historic workings”.
• Thor Energy confirms that “Preparations have commenced for 2024 resource drilling (infill and extension) at Rim Rock and Groundhog mine areas, with additional prospects also to be assessed for drilling including Edna May and Babe Ruth/Diana Mine areas”.
• Managing Director, Nicole Galloway Warland, said that the results “confirm the high-grade nature of the Saltwash style sandstone uranium systems, within the prolific Uravan Mineral Belt”.
• She also explained that “Preparations are now underway for a larger RC program and diamond drilling at Groundhog and Rim Rock prospects, chasing high-grade mineralisation along strike, as well as infill drilling for Resource definition”.

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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