SP Angel Morning View -Today’s Market View, Thursday 30th May 2024

Copper short squeeze fades as COMEX discount narrows

MiFID II exempt information – see disclaimer below

Arc Minerals (ARC LN) – IP survey results used to indicate drill targets in Kalahari in Botswana

Atalaya Mining (ATYM LN) – Board restructuring

Atlantic Lithium* (ALL LN) – Senya Beraku field work underway

Aura Energy* (AURA LN) – Oversubscribed share purchase plan

Galantas Gold* (GAL LN) – Quarterly earnings

Kavango Resources* (KAV LN) – Board appointments

Mkango Resources* (MKA LN) – Quarterly earnings

Orosur Mining* (OMI LN) – Encouraging exploration results show  gold and silver prospectivity in Argentina

Serabi Gold (SRB LN) – Robust Q1 financial performance

Copper ($10,204/t) short squeeze fades as COMEX discount narrows

• Copper prices have fallen 2.5% today to $10,230/t following a rebound to $10,550/t after hitting record highs of $11,000/t.
• The easing prices reflect a passing short squeeze triggered by limited inventories on COMEX.
• COMEX spreads hit record premiums in mid-May, as backwardation levels reflected a lack of physical copper.
• Some major trading houses were reportedly caught short, seeing panic buying and pushing copper prices to record levels.
• Speculative money chased the rally, with CTA funds also fuelling momentum.
• Whilst end user demand for copper remains relatively tepid, the recent price move highlights the vulnerability of global commodity markets to sudden price spikes. A sign of things to come?
• Copper remains in near record contango levels on the LME, pointing to ample physical supply.

Aluminium prices ($2,743/t) climb to two-year highs as alumina supply tightens

• Aluminium has hit 2022 highs near $2,800/t, having rallied from last year’s lows of $2,130/t.
• Alumina shortages have been triggered by lower output from China and disruption to Rio’s Australian assets.
• Analysts also note increased speculative flows, perhaps reflecting traders shifting focus from copper to aluminium.
• Japanese buyer premiums have increased 20% over the quarter, reflecting strong demand expectations over the longer term.

Gold prices ($2,334/oz) weaken on hawkish Fed

• Gold prices have extended losses to $2,333/oz, down 20bp, having fallen 1% yesterday.
• The move has followed a sharp rise in US Treasury yields, triggered by Fed comments on higher for longer rate prospects.
• The 10-year has risen to 4.6%, up from 4.35% at the middle of the month.
• Fed official Kaskhari stated yesterday that policymakers may even consider an additional rate hike to tackle inflation.
• The odds of a December rate cut have now been pushed down to 50% in traders’ expectations.
• PCE data on Friday and NFP data next week will likely prove major catalysts for gold in the short term.
• Swiss gold exports down 16% mom in April with sales to China down 49%.

Lithium – Albemarle auctions spodumene for $1,236/t

• Major lithium producer has conducted a 10,500t chemical grade spodumene auction and will auction an additional 16,200t tomorrow.
• The Company is aiming to gain more market transparency from the relatively opaque lithium sector.
• Downstream buyers are reportedly holding off on major purchases given elevated current inventory levels.
• Lithium product buying is historically weaker in H1 than H2, with many industry players considering the pricing bottom in the past.

Economics

Spain – Headline inflation slowed down in May, albeit, core measure remained stubbornly high.

• CPI (%mom, Mar/Apr/Est): 0.2/0.6/0.2;
• CPI (%yoy, Mar/Apr/Est): 3.8/3.4/3.7;
• Core CPI (%yoy, Mar/Apr/Est): 3.0/2.9/3.0.

South Africa – The ANC is set to lose its parliamentary majority in its worst electoral performance since end of apartheid in 1994.

• Preliminary results saw markets reducing SA risk exposure with the rand down as much as 2% , bonds trading lower and the benchmark stock index falling.
• President Cyril Ramaphosa will likely need to form a coalition raising concerns that he may choose the radical Economic Freedom Fighters or former President Jacob Zima’s uMkhonto weSizwe, Bloomberg writes.

Currencies

US$1.0798/eur vs 1.0854/eur previous. Yen 156.94/$ vs 157.11/$. SAr 18.657/$ vs 18.250/$. $1.270/gbp vs $1.277/gbp. 0.660/aud vs 0.666/aud. CNY 7.248/$ vs 7.248/$.

Dollar Index 105.04 vs 104.60 previous.

Precious metals:         

Gold US$2,334/oz vs US$2,353/oz previous

Gold ETFs 80.6moz vs 80.6moz previous

Platinum US$1,031/oz vs US$1,059/oz previous

Palladium US$946/oz vs US$973/oz previous

Silver US$31.49/oz vs US$32/oz previous

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

Base metals:   

Copper US$ 10,204/t vs US$10,548/t previous

Aluminium US$ 2,743/t vs US$2,773/t previous

Nickel US$ 20,110/t vs US$20,675/t previous

Zinc US$ 3,046/t vs US$3,138/t previous

Lead US$ 2,283/t vs US$2,345/t previous

Tin US$ 33,440/t vs US$34,170/t previous        

Energy:           

Oil US$83.4/bbl vs US$84.5/bbl previous

• Crude oil prices edged lower despite the API reporting an unexpected 6.5mb w/w draw to US crude stocks compared to expectations for a 1.9mb decline due to a jump in demand ahead of Memorial holiday.
• European energy prices were flat after EU natural gas storage levels gained 1.8% w/w to 69.3% full (vs 56.4% 5-Yr average), with Germany & Italy now above 70% full and aggregate storage now at 785TWh.
• Media reports that Shell and ExxonMobil are close to agreeing to sell their jointly owned gas fields in the UK Southern North Sea gas basin to Viaro Energy (private), which already produces c.30kboe/d. The sale of the Clipper and Leman Alpha field clusters is expected to be valued at c.$0.5bn and would enable tax synergies.
• ConocoPhillips has agreed an all-stock acquisition of Marathon Oil with an enterprise value of $22.5bn, which is expected to generate at least $500m of run rate cost and capital savings within the first full year following the expected completion in 4Q24, with ConocoPhillips also pledging to buyback over $20bn of shares by 4Q27.
• JAPEX has agreed to pay $380m to acquire a 15% equity interest in the 15.45mtpa Freeport LNG project in Texas, which the Company believes will secure long-term stable US cash flows, where country risk is low.

Natural Gas €33.8/MWh vs €34.2/MWh previous

Uranium Futures $90.3/lb vs $90.6/lb previous     

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$120.5/t vs US$120.0/t

Chinese steel rebar 25mm US$541.2/t vs US$540.9/t

Thermal coal (1st year forward cif ARA) US$122.5/t vs US$121.0/t

Thermal coal swap Australia FOB US$140.0/t vs US$139.5/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$27,150/t

NdPr Rare Earth Oxide (China) US$51,880/t vs US$52,494/t

Lithium carbonate 99% (China) US$14,281/t vs US$14,279/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$360/mtu vs US$365/mtu

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

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

Europe Ferro-Vanadium 80% 26.85/kg vs US$26.85/kg

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

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

Spot CO2 Emissions EUA Price US$73.9/t vs US$73.9/t

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

Company News

Arc Minerals (ARC LN) 1.85p, Mkt cap £26.6m – IP survey results used to indicate drill targets in Kalahari in Botswana

• Arc Minerals reports ‘encouraging’ results from an IP ‘Induced Polarisation’ survey over its PL135/2017 licence within the central structural corridor of the Kalahari Copper Belt in Botswana.
• The survey is being used to help determine certain targets for drilling along two distinct trends of high chargeability close to the interpreted redox contact.
• 3D Earth Exploration (Pty) Ltd ran the IP Survey with a total of 42.7 line km surveyed made up of 38.7km of Gradient IP and 4km of insight Section IP.
• The IP survey indicated two types of targets with the first potentially showing a redox boundary close to the contact between the D’Kar – Ngwako Pan contact.
• The second, deeper target is showing an anomaly of intense high chargeability and coincident low resistivity.
• The Arc team has also extended its filed applications over both the PL135/2017 and PL162/2017 licences which are due to expire later this year.
• Arc are mobilising a drilling contractor starting 17 June.
• We look forward to further news on progress by Anglo American’s drill crew and some analysis on the stratigraphic drill hole drilled before the rains and ground conditions stopped their drilling in Zambia.

Conclusion:  This is early stage exploration work which will likely require substantial drilling before any particular conclusions can be drawn.

We would refer investors towards Kavango* which we see as better established and further ahead in its exploration in the Kalahari and we believe has better prospects for discovery in the region.

*See Below

Atalaya Mining (ATYM LN) 421p, Mkt Cap £597m – Board restructuring

• Atalaya Mining has announced that, after serving as the company’s Chairperson for 10 years and as a director since 2010, Roger Davey is to stand down from chairing the company to be replaced by the Senior Independent Director, Neil Gregson.
• Mr. Davey “will continue as a Non-Executive Director of the Company until the end of 2024 after which he will retire”.
• Non – Executive Director, Kate Harcourt will replace Mr. Gregson as the Senior Independent Director.
• In addition, Atalaya Mining has announced that Carole Whittal, currently “CFO and Director of Yellow Cake plc” will join the Board as an Independent Non-Executive Director.
• CEO, Alberto Lavandeira, paid tribute to Mr. Davey’s service saying that his “deep industry knowledge and counsel have played an important role in establishing Atalaya in the strong position it is in today”.
• Welcoming Mr. Gregson to his new role, Mr. Lavandeira said that he “brings over 30 years of financial and industry knowledge … [and that he] …  embodies Atalaya’s core principles of integrity, honesty and ambition and will play a core role in the Company’s continued growth”.
• Mr. Lavandeira also congratulated Ms Whittal on her appointment and said that her “immense experience and expertise further strengthen Atalaya’s governance, M&A and financial credentials”.

Atlantic Lithium* (ALL LN) 24.41p, Mkt Cap £159m – Senya Beraku field work underway

(Ewoyaa Ownership: Atlantic 62.9% falling to 40.5% if Piedmont fund their share of Ewoyaa, Piedmont hold 18.2% rising to 40.5% on project funding, MIIF Sovereign Wealth fund 6%, Government of Ghana 13%)

• Atlantic Lithium report the start of geochemical soil sampling, rock chip sampling and geological mapping on the Senya Beraku license in the south of Ghana.
• Senya Beraku is 20km east of the known Egyasimanku Hill-Winneba spodumene pegmatite field and around 50km east of Atlantic’s Ewoyaa lithium resources.
• The team have identified weathered, coarse-grained pegmatite units in geological mapping but no spodumene mineralisation as yet.
• Rock chips samples to be submitted for assay by Intertek in Perth.
• Atlantic have the required permits to explore the license from the Minerals Commission and EPA ‘Environmental Protection Agency’  (“EPA”) including meetings with local authorities and communities covering the exploration activity.
• The Senya Beraku licenses were granted to Atlantic in November last year and cover 82.11sqkm of prospective tenure.

Conclusion:  The rapid move from license award to on-ground exploration reflects Atlantic’s partnership with the Ghana government and its sovereign wealth fund. While it is early days, the license has potential to open up a new area of operation for the company diversifying its potential resources and hopefully increasing its production potential.

Atlantic have a well-established team in Ghana with Libs and X-RF analysers for early stage exploration guidance. The process of using soil and rock chip sampling along with auguring is now well established for the discovery of pegmatite and identification of lithium-bearing spodumene in the region.

*SP Angel acts as Nomad to Atlantic Lithium. Two mining analysts from SP Angel visited the Ewoyaa mine site in Ghana and drove on to Takoradi to check the quality of the road to port. Our analysts also visited the Ministry of Minerals Commission and MIIF, the Ghana Minerals Income Investment Fund

Aura Energy* (AURA LN) 9.0p, Mkt Cap £70m – Oversubscribed share purchase plan

• Aura report the raising of ~A$2m in a heavily supported and oversubscribed share purchase plan.

• • “Funds raised will assist Aura for pre-development activities at the Tiris Uranium Project with FID expected in 2024 and production expected in 2026.
  • The raising will also support development of the Häggån Project in Sweden and provide additional working capital”

• Aura received applications for 19,325,000 shares to raise A$3,478,500 (before costs) under the SPP.
• The SPP was priced at A$0.18 (£0.0936) and includes three free attaching options for every four 4 SPP Shares to be issued. The SPP Options is exercisable at a price of A$0.30 (£0.156).
• Management will now scale back applications on a pro-rata basis.

Conclusion:  Its great to see such support for Aura’s work on its uranium project in Mauritania and polymetallic project in Sweden

*SP Angel acts as Nomad and Broker to Aura Energy

Galantas Gold* (GAL LN) 10p, Mkt Cap £11m – Quarterly earnings

• Loss for the year totalled C$0.7m (Q1/23: -$1.4m) including $0.4m in general and administrative costs ex finance related expenses (Q1/23: -$0.8m).
• FCF amounted to -$1.5m (Q1/23: -$1.9m) including $0.7m in capitalised exploration and project development costs (Q1/23: $2.1m).
• Closing cash balance stood at $1.3m with $17.6m owed in debt and convertible debentures as of Mar/24.
• The Company recently secured permission to drill ~1,000m from surface to test a northern extension of the Kearny Vein at the Omagh Gold Project.
• The programme will target dilation zones of higher grade and thicker mineralisation with a view to grow existing mineral resource.

*SP Angel acts as Broker to Galantas Gold

Kavango Resources* (KAV LN) 1.58p, Mkt Cap £25m – Board appointments

• Kavango Resources has appointed Donald McAlister and Alexandra Rose Gorman to its Board and announced that Peter Wynter Bee is to assume the role of Deputy Chairman.
• Mr. McAlister is described as having “years of experience of operating in Zimbabwe and raising funds for many projects” and has previously served as “Finance Director of Mwana Africa plc, Ridge Mining plc and Reunion Mining plc and has served on the Board of Bindura Nickel Corporation and Freda Rebecca Gold mine, both in Zimbabwe”.
• Ms Gorman is a qualified geologist currently working as a mining analyst in London.
• Kavango Resources confirms that “CEO, Ben Turney, has moved to Zimbabwe to lead the business there” and that as “part of the restructuring, Brett Grist and Jeremy Brett will step down from the Company’s board of directors with immediate effect. Brett will continue in his roles as Kavango’s Chief Operating Officer and Company Secretary, while Jeremy will continue to in his role as a Senior Geophysical Consultant to the Company”.
• Chairman, David Smith, thanked “both Brett and Jeremy for their contributions during their time spent on Kavango’s board. They have been instrumental in building the Company’s strong presence in Botswana and Zimbabwe”.
• Commenting on the changes Mr. Smith said that “we have decided to restructure the board with a more commercial and strategic focus”.

*An SP Angel Analyst holds shares in Kavango

Mkango Resources* (MKA LN) 6.2p, Mkt Cap £18m – Quarterly earnings

• Loss for the year amounted to US$1.0m (Q1/23: -$0.6m) reflecting ongoing operating costs of $1.0m (Q1/23: $0.9m).
• FCF totalled -$0.5m (Q1/23: -$1.5m) including 0.2$ spent on exploration and project development (Q1/23: $0.2m).
• Closing cash balance stood at $0.5m.
• The Company raised £750k in new equity post quarter end (April) including £150k coming from CEO, Will Dawes, to support development of its recycling business unit.
• New funds will be directed for the acquisition of additional equipment for the recently commissioned NdFeB permanent magnets recycling facility to transition to first commercial sales (est. H2/24) as well as for orders of long lead times for equivalent German facility unlocking additional grant funding.
• Outstanding debt amounted to $3.4m including ~$3.1m in funds contingently owed to vendors of HyProMag payable in cash or shares (Mkango’s discretion) once milestones are met.
• Works on FS for the HPMS operations in the US are ongoing with engineers engaged in March and results expected to be ready in H2/24.
• Commercial production of recycled NdFeB permanent magnets in the US is targeted for H1/26.
• The team completed a cost cutting programme to reduce ongoing operating costs by 35% as well as carrying a strategic review of its upstream (Songwe Hill Rare Earth Project, Malawi) and midstream (Pulawy Rare Earth Separation Project, Poland) business units amid weak rare earth market pricing environment.

*SP Angel acts as nomad and broker to Mkango Resources

Orosur Mining* (OMI LN) 4.5p, Mkt Cap £8.8m – Encouraging exploration results show  gold and silver prospectivity in Argentina

• Orosur provide an update on their El Pantano gold and silver project in Argentina.
• The Project lies 40km from Anglo Gold’s Cerro Vanguardia camp and covers 600km2 of contiguous licences.
• 80% of the licence is unexplored, with no drilling taking place across the entire package.
• Orosur has been conducting geological mapping and geochemical sampling, with follow up targeting now the next stage.
• The geology of the asset revolves around the Deseado Massif region, which consists of felsic volcanics and hosts substantial precious metal deposits, including Newmont’s Cerro Negro deposit.
• Work to date has identified a SE-NW trending rift system over a 20km x 6km strike, bearing similarities to nearby gold and silver deposits.
• Supportive geochemical anomalies, including As, Hg, Pb and Cu were recorded over the rift structure, raising the potential for low-sulphidation epithermal fluids associated with gold mineralisation.
• Going forward, Orosur has submitted applications for drilling permit approval and will work to identify targets.
• The Company will focus on the Anzá gold project in Colombia whilst the Argentine winter runs its course.

Conclusion: Argentina remains a highly prospective country for exploration and Orosur has worked to identify a promising rift structure prospective for precious metal mineralisation. The similarities El Pantano is showing geologically to Cerro Negro, which expects to produce 290koz this year at an AISC of $1,110/oz, is exciting and warrants further exploration work drilling when ready. We look forward to updates from both Argentina and Anzá as Orosur works to secure 100% of the asset from their Newmont/Agnico JV.

*SP Angel acts as Nomad and Broker to Orosur Mining

Serabi Gold (SRB LN) 63.5p, Mkt Cap £48m – Robust Q1 financial performance

1. Serabi Gold produced 9,007oz of gold during the 3 months ending 31^st March at a cash cost of US$1,461/oz and all-in-sustaining cost of US$1,859/oz (Q1 2023 – 8,055oz at a cash cost of US$1,281/oz and AISC of US$1,516/oz).
2. The increased AISC reflects an additional mine development cost of ~US$1.2m “compared to the first quarter of 2023, adding approximately $130 per ounce to the AISC for the quarter but this up-front investment is necessary to deliver the longer term production growth and in turn, reduce the long-term AISC”.
3. The sale of 9,290oz of gold during the quarter generated revenue of US$20.2m (Q1 2023 – US$13.4m) and doubled EBITDA to US$4.7m (Q1 2023 – US$2.3m).
4. Received gold price of US$2,081/oz showed a 10% improvement of the US$1,892/oz for Q1 2023.
5. After tax profits of US$3.6m compared to US$1.5m during Q1 2023.
6. Finance Director, Clive Line, described “a rewarding quarter of financial performance” which delivered a 103% increase in EBITDA “compared with the first quarter of 2023, but also a 37 per cent improvement on the last quarter of 2023”.
7. At Coringa, where the trial mining licence was extended for a further 3 years in January, Serabi Gold has “started the underground drill programme targeted to grow the Serra mineral resource through drilling the down plunge extensions of the current ore body, and accelerated the mine development programme”.
8. The company confirms that the ore-sorter is now on site at Coringa and that it is expected to be “operational for the fourth quarter of this year, processing some of the lower grade material that has been stockpiled at Coringa and boosting gold production in that last three-month period”.

Conclusion: Improving gold prices and increased production more than offset cost increases to deliver a doubling of Q1 EBITDA

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

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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35-39 Maddox Street London

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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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