SP Angel Morning View -Today’s Market View, Tuesday 11th April 2023

US dollar falls as IMF warns on return of Ultra-low interest rates

MiFID II exempt information – see disclaimer below

BlueRock Diamonds* (BRD LN) – 2.25p, Mkt cap £0.9m – Business Rescue Practitioners in discussions with three parties expressing interest in acquiring the Kareevlei Diamond Mine

Caledonia Mining (CMCL LN) 1,325p, Mkt Cap £232m – Well supported Zimbabwe placing raises US$5.8m

Oriole Resources* (ORR LN) 0.14p, Mkt cap £4m – CLICK FOR PDF –  Potential $1m in gold exploration financing for Eastern CLP licences

Galantas Gold* (GAL LN) 24p, Mkt Cap £26m – Step out drilling programme

Newmont Goldcorp Corp (NEM US) US$51, Mkt Cap US$40.6bn – Newmont increases offer for Newcrest as gold mining M&A continues to heat up

PolyMet (PLM US) US$2, Mkt Cap US$208m – Successful $195m raise through rights offering as Glencore increases stake

Rambler Metals and Mining* (RMM LN) Suspended – Transamine payment dispute precipitates insolvency

IGTV:   23/03/23: Mining in a banking crisis – how does it work?  https://www.youtube.com/watch?v=DiL9Ea88o-w

VOX Markets Podcast:  24/03/2023: https://audioboom.com/posts/8269467-john-meyer-why-gold-is-rallying-plus-atlantic-lithium-celsius-resources

• 10/03/2023:  https://audioboom.com/posts/8261642-john-meyer-is-china-s-growth-ambitions-believable-plus-amur-atlantic-lithium-cornish-metals

ii Interactive Investor:  Battery Metals – Four Stocks – https://www.youtube.com/watch?v=8fwy6PXUe6s&t=5s

• Battery Metals Market – https://www.youtube.com/watch?v=nfdOAUO46tw&t=3s
• Gold – Four Companies – https://www.youtube.com/watch?v=2mVzyw4heDQ&t=3s

*SP Angel almost invariably acts as nomad or broker or nomad and broker to companies mentioned in the above videos and podcasts. We speak more about these companies as we have a good understanding of their business and can talk with a greater degree of confidence. As ever, however, it should be noted that our views do not take into account the circumstances and needs of any particular investor or investor type. So enjoy the talks, but please do your own research, including other companies not mentioned by us but operating in the same areas, and get professional advice where appropriate.

Gold whipsaws after US labour data on Friday as traders await Wednesday’s inflation print

• Gold sold off on Friday after US Non-farm payrolls came in higher than expectations, sliding to lows of $1,987/oz before bouncing back over $2,000/oz.
• The volatility reflects moves in both US Treasury yields and the dollar, with US10yr yields climbing 20bp last week before sliding 10bp this morning.
• Similarly, the dollar bounced off lows this morning, climbing over 50bp since lows hit on the fourth of April.
• China is continuing to buy bullion for its central reserves, adding holdings for a fifth month as it reduces exposure to the Dollar.
• Central banking buying has been a major tailwind in gold’s acceleration to $2,000/oz over the past year.
• Focus now turns to the US CPI data release on Wednesday, with inflation remaining well above the Fed’s 2% target.
• Gold has enjoyed a rally supported by cracks in the global banking sector and the downfall of Credit Suisse, SVB and Signature.
• Traders have been betting that Powell and the Fed will be limited in their ability to hike rates further and add additional strain to the financial sector.
• In addition to concerns over the financial system, the US economy is showing signs of slowing in last week’s manufacturing PMI, further encouraging smaller/fewer rate hikes, weighing on Treasury yields and lifting gold prices.
• Expect a marked slowdown in CPI data on Wednesday to add fuel to Gold’s rally, or, alternatively, a hotter-than-expected reading to temper gold-buyers’ enthusiasm in the short term.

US dollar falls as IMF warns on return of Ultra-low interest rates

• The IMF report that higher interest rates are likely to be ‘temporary’ once high inflation is brought under control following a UN report which indicates post-pandemic inflation is more likely to be a short-term issue rather than a long-term feature of the post-covid economy due to an ageing population and lower productivity.
• Mortgage borrowing rates fell by relatively small percentages last week in the UK giving some optimism to new house buyers.
• Ultra-low interest rates are said to be set to return according to the IMF
• While this is a very welcome ‘good news’ story from the IFM for homeowners, a return to ultra-low interest rates may be more due to adverse economic conditions than a simple fall in low interest rates

World’s largest Uranium miner Kazatomprom looks to ramp up production as nuclear demand rises

• Kazakh state firm Kazatomprom announces it is ‘preparing our reserves for production, so we will be able to respond to market requests.’
• Analysts note Eastern European demand is rising as nuclear plants look to slash reliance on Russia.
• The World Nuclear Association notes a 16% increase in reactor capacity last year, with demand expected to jump 30% by 2030.
• Kazakhstan produces over 40% of global uranium supplies.

Economics

China plans $1.8tn in infrastructure spending plans to boost economy, Bloomberg

• Bloomberg reports that Chinese state governments are planning a 17% increase in infrastructure, energy generation and industrial park investment for 2023.
• Provincial spending plans look to shore up the weakened economy by stimulating infrastructure investment.
• China’s consumer spending remains a primary concern for economists, with major infrastructure stimulus so far unable to encourage a major shift in consumer sentiment.
• Signs of life are appearing in the property sector, however, with Chengdu seeing property prices jump 8.6% for new builds yoy and 9.2% for second-hand homes.

China reports weak inflation in March highlighting a potential weakness in consumer spending recovery.

• The measure came in below estimates and significantly below official targets for ~3%.
• Muted inflation may see authorities opting for more fiscal and monetary support.
• CPI (%yoy): 0.7 v 1.0 February and 1.0 est.
• PPI (%yoy): -2.5 v -1.4 February and -2.5 est.

China authorities to inspect 30 state owned enterprises and five financial institutions in expansion of anti-corruption drive

• The authorities are also to inspect the Chinese General Administration of Sport

Australia/China – China to review barley import tariffs in a sign of improving trading relations with Australia, FT reports.

• Australia has suspended a complaint to the WTO over Chinese tariffs of up to 80% on its barley after Beijing said it will launch an investigation into a dispute.
• Tariffs have been introduced in May/20 when ~A$20bn worth of Australian exports including coal, wine, lobsters, and cotton were affected by Chinese sanctions.

G7 nations are arguing over the timeline for a complete phase out of domestic coal generated power ahead of next weekend’s summit of top energy and environmental ministers, Bloomberg writes.

• The UK, backed by France, suggested to set a 2030 deadline while the EU, the US and Japan suggested a more flexible end date.
• Germany suggested to phase out domestic unabated coal power generation “ideally by 2030” or “in the 2030s”.
• The US, Japan and Germany currently run at >20% of power generated from coal compared to single digits in the UK, Italy, Canada and France.

Western Australia braces for largest cyclone in almost a decade

• Meteorologists expect a cyclone to develop from a tropical low this evening, expected to be Western Australia’s largest since 2013.
• Vessels at major iron ore and commodity Port Headland are set to be cleared from the inner harbour on Wednesday.
• BHP and Fortescue’s shipments are set to be disrupted as a result.

Indonesia tin exports jump 50% in March

• Indonesia increased tin exports to 4,784t, up 50% mom.
• Exports to India climbed 94% and 12.4% to China.
• The ramp up follows delays in export licences that have subsequently been resolved.
• The market is also seeing inbound tin from the San Rafael mine in Peru returning to production.

Currencies

US$1.0906/eur vs 1.0908/eur last week. Yen 131.42/$ vs 131.24/$. SAr 18.220/$ vs 18.111/$. $1.246/gbp vs $1.248/gbp. 0.669/aud vs 0.671/aud. CNY 6.877/$ vs 6.877/$.

Dollar Index 101.95 vs 101.83 last week.

Commodity News

Precious metals:

Gold US$2,001/oz vs US$2,017/oz last week

Gold ETFs 93.3moz vs US$93.2moz last week

Platinum US$1,006/oz vs US$1,011/oz last week

Palladium US$1,439/oz vs US$1,427/oz last week

Silver US$24.98/oz vs  US$24.94/oz last week

Rhodium US$8,000/oz vs US$7,850/oz last week

Base metals:   

Copper US$ 8,849/t vs US$8,857/t last week

Aluminium US$ 2,325/t vs US$2,350/t last week

Nickel US$ 23,120/t vs US$22,490/t last week

Zinc US$ 2,774/t vs US$2,803/t last week

Lead US$ 2,095/t vs US$2,114/t last week

Tin US$ 23,755/t vs US$24,535/t last week

Energy:           

Oil US$84.9/bbl vs US$84.6/bbl last week

• Crude oil prices were broadly unchanged over the Easter weekend as the market waits for more data to better understand the global demand and supply dynamics at work.
• The US Baker Hughes rig count was down 4 units to 751 rigs last week (+62 y/y), with oil rigs down 2 to 586 and gas rigs down 2 to 158 units. The frac spread count was up 5 units to 295 completion crews (+22 y/y).
• The US EIA storage report detailed a draw of 23bcf to 1,830bcf last week, with storage levels now 31.9% above last year and 19.5% above the 5-year average.

Natural Gas US$2.160/mmbtu vs US$2.134/mmbtu last week

Uranium UXC US$50.35/lb vs US$50.35/lb last week

Bulk:

Iron ore 62% Fe spot (cfr Tianjin) US$116.9/t vs US$117.5/t

Chinese steel rebar 25mm US$591.5/t vs US$601.9/t

Thermal coal (1st year forward cif ARA) US$142.0/t vs US$142.0/t

Thermal coal swap Australia FOB US$205.0/t vs US$209.0/t

Coking coal swap Australia FOB US$286.0/t vs US$286.0/t

Other:  

Cobalt LME 3m US$34,930/t vs US$34,930/t

NdPr Rare Earth Oxide (China) US$74,805/t vs US$77,365/t

Lithium carbonate 99% (China) US$26,508/t vs US$27,412/t

China Spodumene Li2O 5%min CIF US$4,590/t vs US$4,610/t

Ferro-Manganese European Mn78% min US$1,345/t vs US$1,347/t

China Tungsten APT 88.5% FOB US$323/t vs US$325/t

China Graphite Flake -194 FOB US$785/t vs US$785/t

Europe Vanadium Pentoxide 98% 9.2/lb vs US$9.3/lb

Europe Ferro-Vanadium 80% 37.05/kg vs US$37.25/kg

China Ilmenite Concentrate TiO2 US$345/t vs US$345/t

Spot CO2 Emissions EUA Price US$102.0/t vs US$102.4/kg

Brazil Potash CFR Granular Spot US$420.0/t vs US$420.0/t

Company News

BlueRock Diamonds* (BRD LN) – SUSPENDED – Business Rescue Practitioners in discussions with three parties expressing interest in acquiring the Kareevlei Diamond Mine

• Creditor meeting with Business Rescue Practitioners reports the assets of Kareevlei are unlikely, in a liquidation, to realise sufficient proceeds to settle the debt owed to the contractor, Teichmann South Africa.
• The Practitioners reckon Kareevlei can “only be rescued if its debt is extinguished or brought to a manageable level, capital is invested to comply with the conditions of the mining license and to upgrade the plant, working capital funding is obtained, and that the mine is owner-managed and operated.”
• The Kareevlei diamond mining operations are currently restricted to the processing of stockpile material (~18 days’ worth of processing) with no mining activity since the start of the Business Rescue process.
• The Business Rescue Practitioners ‘BRPs’ asked Bluerock to provide all or part of the ZAR 150m (~£6.6m) needed to recapitalise the mine and for working capital.
  • “The Board has considered and explored the possibility of the Company being able to raise sufficient further finance to fund Kareevlei and has concluded that it is unlikely to be able to do so at the current time. Accordingly, the Company has notified the BRPs that it is unable to contribute any further funding to Kareevlei.”
  • The BRPs exercised their rights to suspend the obligations of Kareevlei. The impact on the Company is the immediate suspension of the Management Agreement and Loan Agreements under which interest accrues on outstanding balances. As a consequence, the Company has no source of income from Kareevlei.
  • The BRPs, at the second meeting of creditors held on 24th March 2023, reported that they were in discussions with three parties that had expressed an interest in acquiring the Kareevlei Diamond Mine, either through purchasing the shares in Kareevlei or the assets and business of Kareevlei.
  • The business rescue plan has not been finalised as the outcome of these discussions is material to the final assessment of the BRPs regarding the ability to either rescue or liquidate Kareevlei.”
• Trading Update: Sales of $1.550m from 2,350cts were produced in the four weeks to 4th March including three diamonds which were sold for $393,888, $342,000 and $57,888.
• “The Board has explored numerous options to minimise the potential loss to stakeholders. In the absence, however, of any distribution from Kareevlei or new capital being raised it is unlikely that the Company can be considered to be a going concern. The absence of certainty about Kareevlei in the near future, either from the business rescue plan or a viable offer to purchase its operations or assets, increases the uncertainty about the prospects for the Company.”

*SP Angel acts as nomad and broker to Bluerock Diamonds. The analyst holds shares in BlueRock Diamonds.

Caledonia Mining (CMCL LN) 1,325p, Mkt Cap £232m – Well supported Zimbabwe placing raises US$5.8m.

• Caledonia Mining reports that it has raised US$5.825m through the placing of approximately 424,000 shares at a price of US$13.74/share in Zimbabwe.
• The Zimbabwe placing follows the placing in London of around 782,000 shares, which, in conjunction with the shares reported in today’s announcement brings the total funds raised to “approximately US$16.566 million before expenses”.
• The company explains that the additional funds “together with the Company’s existing cash reserves and the future cash to be generated from its ownership of the producing and cash generative Blanket Mine and from the Bilboes oxide operation, will strengthen the Company’s balance sheet and provide the Company with working capital flexibility to accelerate planned work at the three new gold projects it is currently undertaking in Zimbabwe”.
• Caledonia Mining also confirms that it has “instructed the issue of a further 256,152 shares” relating to deferred payments for the Bilboes acquisition.
• CEO, Mark Learmonth, welcomed the “strong demand from new and existing institutional investors in Zimbabwe … [and said that] … Their support will help us accelerate our growth plans in Zimbabwe”.

Conclusion: Caledonia Mining has received support from Zimbabwean and London investors for plans to expand its operations.

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

 Oriole Resources* (ORR LN) 0.14p, Mkt cap £4m – CLICK FOR PDF –  Potential $1m in gold exploration financing for Eastern CLP licences

• Oriole Resources announces an update on its block of five Eastern CLP licences in central Cameroon.
• The Company, which holds a 90% interest in the five licences, will transfer its interest into a new holding company, ‘NewCo,’ to facilitate more direct, project-level investment.
• Oriole has signed a letter of engagement with a Canadian investment banking firm for US$1m worth of financing.
• Instead of issuing shares, Oriole will offer a 10% non-carried interest in NewCo.
• Whilst the licence package has lithium prospectivity, the investment will target exclusively gold exploration.
• Having released a JORC-inferred Resource at Bibemi late last year, Oriole have since focused on the CLP licence block, delivering high-grade rock chip sampling at Mbe up to 134g/tAu. Additionally, altered host rocks over strike returned grades up to 10g/t.
• The anticipated financing will be targeted at the team’s discovered Mbe strike which runs over 3km with a width of at least 70 metres.
• An additional 105 rock chip samples on the Ndom licence are currently under multi-element analysis, with results expected this Quarter.

Conclusion: Although the financing offer remains conditional, the Company expects completion in Q2-2023. This marks another exciting development in Oriole’s Cameroon story, with the proposed structuring of a spinout entity reducing dilution for Oriole’s shareholders at the Company level. The team has delivered promising results from the Eastern CLP package, with high-grade rock chip samples and encouraging geophysical data justifying the definition of priority drill targets. We await further updates with anticipation.

*SP Angel acts as Broker to Oriole Resources

Galantas Gold* (GAL LN) 24p, Mkt Cap £26m – Step out drilling programme

• The Company is expanding the step out drilling programme at the Omagh Gold Project in Northern Ireland.
• The team is planning to complete an initial 600m of diamond drilling from the underground testing the Kerr zone and down dip extensions of the Joshua Vein.
• The underground tunnel between the Kearny and Joshua vein will be used to drill ~300m north testing on strike extension of the Kerr vein surface exposure.
• Additionally, the programme will target down dip potential of a deep dilation zone where historical drilling (2012-13) returned wide high grade intersections (26.6m at 8.4gpt, 5.6m at 12.4gpt).

Conclusion: The team is leveraging up underground infrastructure to potentially grow the resource targeting new Kerr vein zone as well as down dip extensions at the Joshua vein.

*SP Angel act as Broker to Galantas Gold

Newmont Goldcorp Corp (NEM US) US$51, Mkt Cap US$40.6bn – Newmont increases offer for Newcrest as gold mining M&A continues to heat up

• Newmont’s new bid for Newcrest jumps 10.8% from the original 0.38/share of Newmont to a revised 0.4211, implying an aggregate value of A$32.87/share of Newcrest, a 16% premium to its last closing price.
• Newcrest shareholders will also receive a special dividend of $1.10 if the deal is approved.
• Newmont state the offer is best and final and are likely to receive exclusivity for its due diligence period over the next four weeks.
• The deal will nearly double Newmont’s reserve base if approved, with Newcrest’s shareholders receiving a strong premium to share prices pre-initial offer.
• Newcrest holds over 61moz in Au reserves and over 11mt in copper reserves.

PolyMet (PLM US) US$2, Mkt Cap US$208m – Successful $195m raise through rights offering as Glencore increases stake

• PolyMet announced yesterday that it has issued the full allotment of 92,606,635 common shares following a rights offering.
• Glencore acquired 87,798,370 common shares in the rights offering, taking its stake in PolyMet to 82% of the total outstanding common shareholding.
• The rights offering raises gross proceeds of $195m for the Company.
• The raise was intended to pay off PolyMet’s unsecured, secured, and convertible debt to creditor Glencore AG.
• In addition to paying down its Glencore-owed debt, PolyMet intends to ramp up its stake in NewRange Copper Nickel, its 50/50 JV with Teck.
• PolyMet plans to merge its NorthMet resource with Teck’s Mesaba resource under a single entity.

 Rambler Metals and Mining* (RMM LN) Suspended – Transamine payment dispute precipitates insolvency

• Following the 30^th March announcement of the cessation of its operations, Rambler Metals and Mining has now announced that “as a result of the dispute regarding payments due from Transamine Trading … no further funding will be made available to Rambler”.
• As a result, Rambler Mining’s directors have “concluded that the Company is now insolvent and resolved that the only feasible course of action is to place the Company into a Creditors Voluntary Liquidation (“CVL”)”.
• Rambler Metals and Mining concludes its statement today saying that “As the Company’s shares will have been suspended from trading for six months on 28 April 2023, the admission of Rambler’s ordinary shares to AIM will be cancelled on that date”.

Conclusion: Insolvency ends valiant efforts to rejuvenate mining and processing operations and develop the orebodies at the Ming Mine.

*SP Angel act as Nomad and Broker to Rambler Metals & Mining. An SP Angel analyst holds shares in Rambler Metals & Mining

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 – [email protected] – 0203 470 0490

Simon Beardsmore – [email protected] – 0203 470 0484

Sergey Raevskiy –[email protected] – 0203 470 0474

 Sales

Richard Parlons –[email protected] – 0203 470 0472

Abigail Wayne – [email protected] – 0203 470 0534

Rob Rees – [email protected] – 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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