SP Angel Morning View -Today’s Market View, Tuesday 12th March 2024

Major Chinese copper smelter supports calls for production cut

MiFID II exempt information – see disclaimer below

Andrada Mining (ATM LN) – Progress report from the Uis mine, Namibia

Arc Minerals (ARC LN) – Arc placing to fund a potential off-market buyback of shares from a significant overseas shareholder.

Ariana Resources (AAU LN) – Latest resource drilling at Tavsan shows depth potential

Core Lithium (CXO AU) – Impairment and management resignation

Power Metal Resources* (POW LN) – Update on Saudi Arabian venture

Savannah Resources* (SAV LN)– Infill drilling at Pinheiro return best grades seen at Barroso to date

SolGold* (SOLG LN) – Publication of updated pre-feasibility study for Cascabel

Iron ore prices hold lower after sell-off on unabating China property downturn

• Iron ore prices are hovering around $108/t on the 62% Fe China benchmark.
• Iron ore is down nearly 25% since the beginning of the year, as steel prices remain depressed and inventories jump.
• State-backed developer China Vanke was downgraded by Moody’s, citing funding uncertainties amid sliding home sales.
• The NPC conference has disappointed, with limited stimulus measures failing to support optimistic sentiment from traders.
• Iron ore stockpiles have jumped to their highest levels in a year.
• Contracted sales are down nearly 60% yoy from the top 100 developers, in February having fallen a combined 50% over 2022 and 2023 for the January/February period. (Bloomberg)
• Vanke is looking needs to source $2.1bn to meet creditor obligations over the next few months.
• Bank financing remains limited given the decline in contracted sales.
• Hunan Steel has reportedly called for government support for high-end steel as domestic demand outlook weakens.

 Major Chinese copper smelter supports calls for production cut

• China Copper, one of the Country’s major smelters, has joined calls for production cuts.
• The Company is also reportedly looking to boost investment in copper exploration/development as concentrate concerns mount.

 Gold halts rally after nine-day climb past record highs

• Gold prices have eased below $2,180/oz, but still sit at all time highs following a 7% rally.
• CPI expectations are due today, with a hotter-than-expected print expected to weigh on gold’s recent momentum.
• The 10-year yield has risen to 4.1%, with the dollar index holding its lower levels.

 Lithium prices rise again as data shows sliding output from China

• Spodumene prices have risen again to $1,090/t in China.
• MySteel reports that carbonate production fell 4% wow to 7,200t.
• Smelter inventory is reportedly down 7.5% in China, with total China inventory down 1%.
• Trader inventory has risen 3%, suggesting an interest in stockpiling inventory.
• We note MySteel’s data suggests trader inventory grade is sliding, with only 47% of inventories grading over 4%.
• Ken Brinsden of Patriot suggest this implies a rising percentage of ore coming from Africa.

Bolivia looks to raise bond financing for lithium projects

• Bloomberg reports Bolivia is eying a bond issuance of up to $1bn for lithium extraction.
• The Economy Minister believes they will be able to access financing for ‘green bonds.’
• Bolivian salt brines suffer from high magnesium concentrations, with commercial extraction yet to be managed.

Economics

US – Inflation numbers are due later today with estimates pointing to a slowdown in the core measure.

• Headline and core CPIs are expected to come in at 0.4%/0.3%mom and 3.1%/3.7%yoy in February, compared to 0.3%/0.4%mom and 3.1%/3.9%yoy in the previous month.
• New York gauge of inflation expectations increased to the highest level in six months in February, according to the New York Fed.
• Expectations climbed 0.3pp and 0.4pp to 2.7% and 2.9% for three an year horizons, respectively.

Japan – The yen is rangebound this morning trading around the 147 level ahead of the central bank monetary policy decision inn a week (19 March).

• Speculation of a potential rate hike has been driving the currency higher lately with the outcome of the meeting currently too close to call, Bloomberg quotes people familiar with discussions.

UK – The pound pulled back against the US$ sliding sub 1.28 level as growth in labour earnings slowed more than expected in January.

• The data drove expectations for a total of three 25bp rate cuts this year slightly higher with 10y gilt yields trading lower this morning.
• Av Weekly Earnings (%yoy, 3m): 5.6 v 5.8 December v 5.7 est.
• Av Weekly Earnings ex Bonus (%yoy, 3m): 6.1 v 6.2 December and 6.2 est.
• Employment Change (3m): -21k v 72k December and 5k est.

Ukraine/Russia – Ukraine launched the most wide-ranging drone attack in Russia in recent months targeting infrastructure sites, FT writes.

• More than two dozen drones were reported over central Russia with Russia’s defence ministry claiming to have intercepted most of them.
• Two major energy infrastructure have been hit including one of Russia’s largest oil refineries.
• Separately, US CIA head said that Ukraine is set to lose “significant ground in 2024” to Russia if the US Congress does not approve additional military support fr the country.
• Assuming assistance is provided, the CIA suggested that Ukraine could “hold its own” through 2024 and early 2025.

Argentina – The central bank unexpectedly cut its benchmark rate by 20pp to 80%.

• Inflation data is due later today with expectations for the headline measure to accelerate to over 280% in February, up on 254% recorded in January.
• The move contrasts with IMF recommendations following its most recent review of the nation’s US$44bnn programme concluding that “going forward, the authorities agreed that the monetary policy stance would need to be tightened to support money demand and disinflation”.

Currencies

US$1.0924/eur vs 1.0945/eur previous. Yen 147.37/$ vs 146.81/$. SAr 18.615/$ vs 18.711/$. $1.278/gbp vs $1.284/gbp. 0.662/aud vs         0.662/aud. CNY 7.174/$ vs 7.184/$.

Dollar Index 102.91 vs 102.68 previous.

Commodity News

Gold US$2,177/oz vs US$2,181/oz previous

Gold ETFs 81.9moz vs 82.1moz previous

Platinum US$932/oz vs US$922/oz previous

Palladium US$1,028/oz vs US$1,032/oz previous

Silver US$24.44/oz vs US$24/oz previous

Rhodium US$4,500/oz vs US$4,500/oz previous 

Base metals:   

Copper US$ 8,654/t vs US$8,584/t previous

Aluminium US$ 2,259/t vs US$2,236/t previous

Nickel US$ 18,355/t vs US$17,990/t previous

Zinc US$ 2,576/t vs US$2,530/t previous

Lead US$ 2,139/t vs US$2,110/t previous

Tin US$ 27,660/t vs US$27,520/t previous 

Energy:           

Oil US$82.6/bbl vs US$82.1/bbl previous

Natural Gas €24.9/MWh vs €26.3/MWh previous

Uranium Futures $90.5/lb vs $91.3/lb previous

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$107.8/t vs US$115.8/t

Chinese steel rebar 25mm US$558.9/t vs US$559.1/t

Thermal coal (1st year forward cif ARA) US$105.3/t vs US$107.3/t

Thermal coal swap Australia FOB US$133.5/t vs US$136.5/t

Other:  

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

NdPr Rare Earth Oxide (China) US$48,367/t vs US$48,733/t

Lithium carbonate 99% (China) US$14,566/t vs US$14,251/t

China Spodumene Li2O 6%min CIF US$1,090/t vs US$1,070/t

Ferro-Manganese European Mn78% min US$985/t vs US$985/t

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

China Graphite Flake -194 FOB US$540/t vs US$540/t

Europe Vanadium Pentoxide 98% 5.7/lb vs US$5.7/lb

Europe Ferro-Vanadium 80% 27.45/kg vs US$27.45/kg

China Ilmenite Concentrate TiO2 US$327/t vs US$326/t

Spot CO2 Emissions EUA Price US$55.1/t vs US$56.9/t

Brazil Potash CFR Granular Spot US$297.5/t vs US$297.5/t 

Battery News

Volvo invests in UK start-up Breathe Battery Technologies for faster charging technology

• Volvo Cars have invested in Breathe Battery Technologies to use their software that could improve charging rates by 30%. (Reuters)
• Breathe’s technology will be available in the next two or three years for Volvo’s next generation EVs.
• Breathe has developed an algorithm-based charging software that provides greater visibility on the health of individual cells within the battery pack, allowing the EV to charge at full power while maintaining safety and without altering battery chemistry.
• Faster charging times is seen by automakers as one of the keys to convincing consumers to make the switch to electric.
• Breathe has another technology that is currently used in Oppo smartphones that makes batteries more durable and perform at peak levels for longer.

Australia sees plug-ins sales reach 10% share in February

• Of the 105,023 vehicles sold in Australia in February 2024, plug-in vehicles saw market penetration of 10.6%

• • 10,111 battery electric vehicles
  • 976 plug-in hybrid SUV
  • 58 PHEV passenger cars

Giga Berlin back online after weeklong power outage

• The gigafactory had been offline for a week following an arson attack on a nearby power pylon
• The outage began on March 5 at the site in Gruenheide.
• Activists from the far-left Vulkangruppe claimed responsibility for the attack.

Company News

Andrada Mining (ATM LN) 5p, Mkt cap £79m – Progress report from the Uis mine, Namibia

• Andrada Mining has issued a progress report on the expansion of tin, tantalum and lithium concentrate production capacity at the Uis mine in Namibia.
• Funded by Orion Resource Partners, implementation of the mine’s ore-sorting circuit is underway as the mine seeks to increase tin concentrate output to 2,600tp from 1,500tpa. The company explains that the “Ore sorting augments the Continuous Improvement II programme (“CI2”) which is fully funded by the Development Bank of Namibia“ and that the expanded production “is anticipated to increase revenue by up to 75% and continue to reduce the AISC of the mining operations”.
• The company confirms that it has completed optimisation of the tantalum concentrate circuit and that it expects to ship its first concentrate in March with concentrate production of “48 tonnes per annum (“tpa”) at current run rate and expected to increase to 83 tpa after the implementation of the ore sorting circuit”.
• Tantalum is expected to contribute between 3-5% to mine revenue.
• Andrada Minig also confirms that the “lithium pilot plant has consistently produced technical grade petalite concentrate since the fourth quarter of 2023” and that it is building stockpiles of product in support of potential sales to “the specialty glass and ceramics market that is quoted as a premium to the battery market currently”.
• “Further development test work for supplying the lithium battery market is also ongoing” with initial modelling indicating “an initial production of 30 000 tpa (from 1.7 million tonnes per annum (“mtpa”) Run-Of-Mine (“RoM”)) of technical grade petalite concentrate”.
• Commenting on progress, CEO, Anthony Viljoen, confirmed that the “expansion of tin production will enable Andrada to align with its royalty obligations, whilst the commercial production of tantalum will fulfil a supply agreement with Afrimet”.
• He also welcomed the progress in producing a petalite lithium concentrate and described how “integration of petalite production will create further value for our shareholders and solidify our position as a key producer in the technology metals industry”.
• Mr. Viljoen also confirmed that exploration drilling is continuing “to expand the size and scope of the mineral resources … [and] … to facilitate the transition of projects from exploration to development and, ultimately, production”.

Conclusion: Implementation of tin and tantalum production expansion underway as the ore-sorting circuit optimisation completes while lithium concentrate stocks build up.

Arc Minerals (ARC LN) 1.8p, Mkt cap £22m – Arc placing to fund a potential off-market buyback of shares from a significant overseas shareholder.

• Arc Mineral report the raising of around £4.1m of cash at 1.8p/s representing a 5.3% discount to the closing price on 8th March.
• The offer also includes one new warrant for each new share issued effectively raising the discount substantially.
• The warrants are exercisable at 3p/s.
• Proceeds are to be used to prop up the Company’s cash position which has been running on fumes and potentially pay for some licenses in Botswana.
• Management are also looking to potentially use the funding for an off-market acquisition of shares held by an institutional fund which is, allegedly, being forced to sell its shares in Arc due to pressure from its trustees.

Conclusion: Investors may naturally feel aggrieved by the knowledge that the directors effectively converted their share options, when the share price was substantially higher, with the gain on the option conversion now sitting on the balance sheet as a debt owed to Arc Minerals, while shares are being issued along with warrants at a new three-year low. While buying out the institutional fund may help to stabilise the market, we believe the 3p/s warrants will serve as another overhang in the market.

Ariana Resources (AAU LN) 2.05p, Mkt Cap £23.5m – Latest resource drilling at Tavsan shows depth potential

• Ariana Resources reports that its drilling programme at its 23.5% owned Tavsan project in western Turkey has been completed following 10,286m of drilling in 112 holes.
• The company confirms that “Resource and Reserve updates are underway following the latest results”.
• Tavsan currently hosts “a JORC Measured, Indicated and Inferred Resource of 307,000 ounces gold and 1.1 million ounces silver” within 6.6mt at an average grade of 1.44g/t gold and 5.26g/t silver.
• Among the assay results highlighted from final batch of drill samples are:

• • An intersection of 12.6m at an average grade of 4.61g/t gold and 6.11g/t silver from a depth of 214.9m in hole TAV-DO54-23; and
  • 9.1m at an average grade of 2.99g/t gold and 7.25g/t silver from a depth of 69.4m in hole TAV-DO53-23; and
  • 8.3m at an average grade of 2.61g/t gold and 1.63g/t silver from a depth of 55.9m in hole TAV-DO50-23.

• Ariana Resources confirms that “Mine construction is continuing to advance well and the Company looks forward to declaring the first production from Tavsan in the coming months”.
• Managing Director, Dr. Kerim Sener, described the latest results from Tavsan as “some of the most exciting we have ever released” and said that “High-grade mineralisation not only occurs on extensions of the North Zone near surface, but most intriguingly is now identified in the deep drilling on the project … [suggesting that] … there may be other laterally extensive high-grade structures developed along other thrust-planes beneath the main zone of mineralisation at Tavsan”.
• Dr. Sener explained that the deeper drilling was intended to “test this hypothesis, and these results confirm our understanding of this potential”.
• Epithermal mineralisation at Tavsan is described as “located along the thrust contact between Jurassic-Cretaceous massively bedded limestone and an overlying Upper Cretaceous multi-lithic ophiolite sequence” with “mineralised jasperoid developed along the thrust contact … on a ten-metre scale, but broadly … [following] … the gentle topography … In the vicinity of a NE-SW trending fault zone”.
• He also confirmed that ore grading more than 3g/t gold from the main pit at Tavsan is being stockpiled to provide feed for initial gold production at the mine.

Conclusion: As the Tavsan mine gears up for initial production, recent drilling suggests deeper mineral potential which could eventually expand the mineral resource base.

Core Lithium (CXO AU) A$0.22, Mkt Cap A$470m – Impairment and management resignation

• Core’s interim results show a cash burn A$77m over the period, reducing reserves to A$125m.
• An impairment of A$120m was reported over the Grants project.
• Core also suffered the resignation of their Chief Executive Gareth Manderson and an independent director, Andrea Hall.
• The Company expects stockpiles to run dry in July, with the Core advising the processing contractor it’s services would cease around then.
• Core had been producing at a unit cost of US$1,274/t over the HY24 period, at an average grade of 4.8%, vs an SC6 price of US$850/t when reported at 31^st December.
• Management notes improving recoveries from 50% to 63% highs, but sees Core’s operations requiring improved market conditions to enable a resumption of operations.

Power Metal Resources* (POW LN) 0.92p, Mkt cap £20m – Update on Saudi Arabian venture

• Power Metal Resources provides an update on its recent activities in Saudi Arabia.
• The Company’s subsidiary, Power Arabia, signed an MoU with the Ministry of Investment in January.
• Subsequently, POW has signed several binding MoUs for potential JVs on existing exploration licences in the Gulf region.
• Groundwork is expected to begin on several licences, dependent on execution, in Ramadan.
• Power Arabia is going through pre-IPO financing before looking to list on the London markets when ready.

Conclusion: Power Metals has shown strong initiative to take advantage of Saudi Arabia’s renewed interest in metals exploration as it looks to diversify from its oil income. Power Arabia, whilst in its early stages, is in discussions with several JV opportunities and we look forward to further updates in April, following the Ramadan and Eid periods. Management’s strategy to extract value from its subsidiaries is proving successful to date, and Power Arabia is expected to reflect a continuation of that.

*SP Angel acts as Nomad and Broker for Power Metal Resources

Savannah Resources* (SAV LN) 2.3p, Mkt Cap £42m – Infill drilling at Pinheiro return best grades seen at Barroso to date

BUY – 21.1p

• The Company released drilling results from the ongoing infill programme at the Barroso Lithium Project in Portugal.
• Drilling intersected rich spodumene mineralisation at the Pinheiro deposit (2mt at 1.00% Li2O, ~7% of total MRE) returning highest grades to date from the project.
• Selected intersections included:

• • 76m @ 1.85% Li2O from 24m in 24PNRRC024 including 39m @ 2.21% Li2O from 38m and 10m @ 2.28% Li2O from 80m.
  • 46m @ 1.65% Li2O from 84m in EX7 (hydrogeological hole) including 14m @ 2.15% Li2O from 97m.
  • 85m @ 1.45% Li2O from 45m in EX9 (hydrogeological hole) including 39m @ 2.15% Li2O from 59m.

• Results received are from five exploration and two hydrogeological holes.
• Results from the sixth RC hole as well as two diamond drillholes completed for metallurgical sampling are currently outstanding.
• RC holes were orientated at oblique angles to the dip of the mineralisation due to access and topographical limitations.
• Hydrogeological holes were drilled vertically around 150m below surface confirming extension of mineralisation at depth, although, both ended in mineralisation given primary purpose of drilling was hydrogeological data collection.
• Two RC holes testing northern extension of the orebody missed the mineralisation suggesting that pegmatite veins are trending northwest rather than north-south as interpreted previously.
• Diamond drillholes were completed at a more orthogonal angles and are expected to be more representative of true widths of the mineralisation that is estimated to be 25-35m wide.

Conclusion: Infill drilling at Pinheiro returned highest grades seen at the Barroso Lithium Project to date that potentially may lead to an upwards revision to resource grades as the team is aiming to convert 2.0mt 1.00% Li2O total resource (all inferred) into higher category and ultimately into reserves. In addition to infill drilling, the team is progressing hydrogeological and metallurgical drilling as FS related work continues at pace.

*SP Angel acts as Nomad and Broker to Savannah Resources

SolGold* (SOLG LN) 8.6p, Mkt Cap £246m – Publication of updated pre-feasibility study for Cascabel

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• Solgold has now filed the revised pre-feasibility study for its Cascabel underground copper/gold project in Ecuador with the Canadian repository, SEDAR.
• Highlights of the study were released in February showed an underground block-caving operation with an initial 28-year mine life generating an after-tax NPV_8% of US$3.2bn and IRR of 24% from the production of an average of 123,000tpa of copper, 277,000ozpa of gold and 794,000ozpa of silver from a pre-production investment of US$1.55bn.
• Following a two-year ramp-up, the new, phased, mine plan builds to producing 12mtpa of high-grade ore averaging 1.5% on a copper equivalent basis with a doubling of the production rate to 24mtpa in year 6.
• We note that this phased approach is more nuanced than previous development plans which envisaged a mining rate of 25mtpa in the earlier, March 2022 pre-feasibility study and of 50mtpa In the Preliminary Economic Assessment of March 2019.
• The February announcement described a net cash cost, including the by-product credits from gold and silver, an average cost of copper production over the mine’s life of US$0.25/lb with life-of-mine costs on an all-in-sustaining (AISC) basis of US$0.69/lb.
• Sustaining capital costs over the mine’s life amount to an additional US$2.57bn.
• The mine plan is based on a revised mineral resource and reserve estimate containing 3.01bn tonnes of ‘Measured and Indicated’ resource at an average grade of 0.35% copper, 0.28g/t gold and 0.94g/t silver (reported as 0.52% on a copper equivalent basis).
• The resource includes a ‘Proven and Probable’ ore reserve of ~540mt at an average grade of 0.60% copper, 0.54g/t gold and 1.6g/t silver containing 3.2mt of contained copper, 9.4moz of gold and 28moz of silver with 85% of the reserve tonnage falling within the high-confidence, ‘Proven’ classification of the CIM reporting codes.
• The February release showed that the phased approach to development had achieved a US$1.2bn saving in the cost of pre-production expenditure and around US$0.75bn of savings in the life of mine capital cost compared to the earlier, March 2022, study, helping to deliver an enhancement of ~10% in project NPV.
• The study released today was prepared by the consultants, SRK, and consists of over 300 pages of technical detail and economic analysis which will provide significant insight into the project

Conclusion: We welcome the opportunity to examine the details of Solgold’s revised pre-feasibility study, incorporating a phased development approach and new mineral resource and reserve estimate at Cascabel’s Alpala deposit.

*SP Angel acts as broker to Solgold

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

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

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

Analysts

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

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

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

Sales

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

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

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

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

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

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

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