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

Metals fall as China cuts rates in response to local government refinancing

MiFID II exempt information – see disclaimer below

American Eagle Gold Corp (AE CN) – $29m Strategic investment from South32

EQ Resources (EQR AU) – Monthly production record at Barruecopardo and 5-year concentrate offtake agreement

Neometals (NMT LN) – Positive Eli Pilot Trial results

Oriole Resources* (ORR LN) – Final trenching results as drilling set to begin at Mbe

Power Nickel (PNPN CN) – Assay results from Lion Zone Discovery

Sunstone Metals (STM AU) – Expansion of Bramaderos prospect, Ecuador

Vulcan Energy Resources (VUL AU) – €100m in government funding

Gold ($2,594/oz) extends losses as traders unwind election-fuelled positioning

• Gold prices continue to fall after the election, with higher US Treasury yields and a subsequently higher dollar weighing on appetite.
• Traders had been ramping up speculative positioning into the election, with Trump’s decisive victory likely a sell-the-news event.
• Net long positions sat at over 900t, but remained below the 1,200t level during the Pandemic.
• Gold ETF are at pre-pandemic levels of 83moz, with strong equity markets likely limiting appetite for gold and the price weakness triggering rotations into SPY or Bitcoin.
• Before election positioning took hold, gold’s main drivers were Chinese demand and BRIC central bank buying.
• We would expect central bank buying to continue as the trend of foreign reserve diversification looks set to play out over several years to come given low levels of gold reserves currently.
• Chinese retail buying has slowed, with a weaker Yuan limiting international purchases and consumer sentiment remains weak.
• Chinese retail demand may be revived by Trump tariffs on Chinese goods, weighing on the yuan.
• The recent violent move lower however, is likely macro discretionary funds and CTAs (momentum-driven algorithmic funds) slashing positions as the strong rally came to an end.
• We see a potential reversal in the current US Treasury sell-off as providing a potential headwind to gold as ETF investors rotate out of money-market funds.
• However, the correlation between gold and real yields is likely less significant than previous years, with central banks the key driver.

Copper ($9,154/t) falls as strong dollar and weak Yuan weigh on wider metals complex

• Copper has been weakening since Beijing’s disappointing stimulus package, with the sell-off likely exacerbated by a sharp rally in the dollar.
• Processing fees are set to be negotiated this week for many copper majors, who are meeting in Shanghai.
• A huge expansion of Chinese copper smelters is weighing on fees, in a boon to miners.
• China refines c.50% of global copper supply, with a rapid expansion soaking up concentrate supplies.
• China refined production has risen 5% this year but remains a net importer of copper.
• Analysts warn China’s efforts to flood the market may create further consolidation of their global market share, with Western refiners unable to compete with China’s energy and labour costs, and state backing.
• Industry estimates expect TCRC charges to fall to $40/t, from $80/t this year. (Bloomberg)
• This would mark the lowest level since data began in 1992, with 2004 at $43/t. (CRU)
• India is also adding to smelter demand, whilst Indonesia is cracking down on concentrate exports to boost smelting in-country.
• China’s Nonferrous Industry Association has warned that the ‘industry should acknowledge the importance of self-discipline in controlling total quantity of production.’
• Meanwhile, MMC Norilsk is moving forward with plans to build a copper smelter in China. (Bloomberg)
• The smelter is expected to produce 500ktpa of refined copper, with concentrate shipped from Russia.
• The region already has a 600ktpa smelter owned by state-backed Jinchuan.
• China imported 165kt of refined Russian copper last year, down c.30%yoy amid sanctions.

Lithium prices edge higher as supply comes offline amid high inventories

• Spodumene prices are ticking up from $740/t, with SMM reporting $770/t for China and Fastmarkets at $825/t.
• SMM reports that Chinese lepidolite LCE production fell 21%mom as smelters in Jiangxi came offline.
• Chinese brine operations reportedly saw LCE production fall 3%mom, limiting smelting output.
• SMM notes a boost in refining production on ‘favourable downstream demand.’
• Spot transactions are reportedly improving too; however, high inventory levels are expected to limit major upside moves.
• Mysteel corroborate Shanghai Metals Market, reporting that LCE production is down 3.6%mom in China at 59kt.
• They report raw material shortages in Jiangxi, whilst the Qinghai salt lake output limited by seasonal effects.
• Consumers remain cautious while LFP battery makers are looking to hike fabrication charges.

China ‘Singles day’ sales event shows encouraging sings for consumer growth partly driven by discount coupons

Economics

US – Donald Trump is set to nominate two China hawks for his administration raising fears deterioration in already strained relations between two nations.

• Florida congressman Mike Waltz is expected to join as national security advisor.
• Florida senator Marco Rubio is seen to be new secretary of state.

TSMC notified its Chinese customers last week that it will no longer supply AI chips at advanced process nodes of 7 nanometres or smaller as of Monday.

• The move comes as Washington continues to limit Chinese access to advance chip manufacturing technologies.

China – The central bank cut the daily CNY renminbi rate to the lowest level since Sep/23

• The currency rate was set at 7.19, up 0.2% on Monday with trading allowed within 2% of the daily fixing rate. Today the CBY is trading at 7.236.
• The move comes amid investor disappointment over the size of the fiscal stimulus and the threat of higher trade tariffs of incoming new US administration.

Singles day sales reports robust growth with a record numbers of shoppers

• Alibaba report that 45 brands exceeded CNY 1bn in sales in online transactions (Reuters).
• JD.com also report an increase of >20% in online shoppers helped by a state subsidy scheme for new appliances launched in July (asiafinancial.com).
• Syntun, a data provider, estimates sales rose 26.6% to CNY 1.44tn vs a 2.1% increase to CNY 1.14tn a year ago probably due to an additional 10 days in the sales festival which started on 14^th October this year.
• Retailers have been subsidising discount coupons to stimulate sales encouraging consumers to buy more to unlock additional discounts.
• EV sales reached 1.026m vehicles in November 2023 with PEV sales rising 13.5% to 702,000 and PHEV sales up 89.5% to 323,000.
• We expect to see EV sales rise around 20% yoy for this November but with a lower rate of increase for PHEVs

China inflation fell to 0.3% yoy in October vs 0.4% yoy in September.

• Month-on-month showed a deflationary fall of -0.3% in October
• PPI fell to -2.9% in October vs -2.8% in September with producer prices falling for over two years.
• Manufacturers are now rushing orders and exports through to

CNY 10tn of (US$1.38tn) of local government debt refinancing

• State Council raised limit on local government debt by CNY 6tn (US$837bn) to CNY36tn
• China will also allocate CNY800bn pa in special-purpose bonds for local governments for five years adding a further CNY 4tn (US$0.55bn) to the refinancing.
• CNY 2tn of hidden debt from housing improvement projects in run-down areas due by 2029 and beyond will be paid in accordance with the original contracts.
• Total local government hidden debt due by 2028 is expected to fall to CNY 2.3tn from CNY 14.3tn while saving an estimated CNY 400bn (US$55bn) in interest.
• The refinancing of this debt should reduce the huge interest bill due on this debt without collapsing the Chinese financial system.
• The package is not stimulus but should enable the completion of many unfinished apartment blocks paving the way for more comprehensive support for the property market.

Trump merchandise boosts Chinese manufacturing

• Donald Trump is already benefitting Chinese manufacturing with a significant uplift in demand for Trump merchandise.
• It is nice to know that Trump can also ‘make Chinese merchandise great again’
• But will Trump impose a tariff on his own merch given a lack of low-cost US manufacturing
• Somehow, almost every political policy appears to have an unintended consequence.

UK – Employment fell by 5k in October following a 9k drop, although, wage growth proved be more resilient than forecast.

• Vacancies, a proxy for labour demand, continued to slide to 831k in the three months to October, down 9k from the previous month.
• Unemployment rate increased up to 4.3% in the three months to September, from 4.0% before and 4.1% forecast.
• Labour pay ex bonus remained elevated with a 4.8% reading recorded in September, down from 4.9% in August but higher than 4.7% expected.
• The pound is trading off against the US$ this morning.

Germany – Investor confidence pulls back in November amid political uncertainty after the coalition collapse, a series of bad economic data and the election of Donald Trump in the US.

• ZEW Survey Expectations (Nov/Oct/Est): 7.4/13.1/13.2
• ZEW Survey Current Situation (Nov/Oct/Est): -91.4/-86.9/-85.0

Currencies

US$1.0623/eur vs 1.0691/eur previous. Yen 153.91/$ vs 153.68/$. SAr 18.055/$ vs 17.621/$. $1.280/gbp vs $1.290/gbp. 0.654/aud vs 0.658/aud. CNY 7.236/$ vs 7.188/$. 

Dollar Index 105.75 vs 105.30 previous

Precious metals:         

Gold US$2,602/oz vs US$2,691/oz previous

Gold ETFs 83.5moz vs 83.7moz previous

Platinum US$954/oz vs US$990/oz previous

Palladium US$965/oz vs US$1,018/oz previous

Silver US$30.4/oz vs US$31.5/oz previous

Rhodium US$4,675/oz vs US$4,675/oz previous

Base metals:   

Copper US$9,175/t vs US$9,565/t previous

Aluminium US$2,551/t vs US$2,688/t previous

Nickel US$16,080/t vs US$16,495/t previous

Zinc US$2,943/t vs US$3,035/t previous

Lead US$2,025/t vs US$2,043/t previous

Tin US$29,950/t vs US$31,765/t previous

Energy:           

Oil US$72.0/bbl vs US$74.8/bbl previous

• Media reports that Iraq’s federal government passed a budget amendment last week that offers upstream operators in Kurdistan $16/bbl in remuneration for the estimated 400kb/d produced in the region.
• The Court of Appeal has overturned the District Court of The Hague’s 2021 ruling that Shell must reduce the worldwide aggregate net carbon emissions it reports across Scopes 1, 2 and 3 by net 45% by the end of 2030.

Natural Gas €43.0/MWh vs €42.3/MWh previous

Uranium Futures $76.8/lb vs $76.6/lb previous

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$100.4/t vs US$102.4/t

Chinese steel rebar 25mm US$517.2/t vs US$527.4/t

HCC FOB Australia US$208.0/t vs US$207.5/t

Thermal coal swap Australia FOB US$143.5/t vs US$142.2/t

Other:  

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

NdPr Rare Earth Oxide (China) US$58,600/t vs US$59,114/t

Lithium carbonate 99% (China) US$10,089/t vs US$10,190/t

China Spodumene Li2O 6%min CIF US$770/t vs US$760/t

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

China Tungsten APT 88.5% FOB US$340/mtu vs US$340/mtu

China Graphite Flake -194 FOB US$440/t vs US$440/t

Europe Vanadium Pentoxide 98% US$4.8/lb vs US$4.7/lb

Europe Ferro-Vanadium 80% US$25.6/kg vs US$25.05/kg

China Ilmenite Concentrate TiO2 US$309/t vs US$312/t

China Rutile Concentrate 95% TiO2 US$1,154/t vs US$1,166/t

Spot CO2 Emissions EUA Price US$66.6/t vs US$62.6/t

Brazil Potash CFR Granular Spot US$280.0/t vs US$277.5/t

Germanium China 99.99% US$2,875.0/kg vs US$2,875.0/kg

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

Battery News

Australian EV sales down 25% as consumers choose hybrids

• The latest sales data released by the Australian Automobile Association (AAA) paints a bleak picture for battery EVs.
• Quarterly sales of EVs were down 25% in the three months to September with market share down to 6.57%, the lowest since 2022.
• Petrol-powered vehicles also saw a continuing decline, with sales falling 9.16% in the quarter.
• Contrastingly, hybrid sales grew 3.3% and plug-in hybrids jumped 56%.

China solid-state battery initiative aims to transform global green energy

• China has plans to remain the dominant force in the global EV market despite attempts by western markets to reduce their influence by introducing high tariff rates on EVs made in China or containing Chinese-made batteries.
• The countries commitment to revolutionising battery technology is centred around the development of solid-state batteries.
• In order to accelerate the commercialisation of solid-state batteries, the China All-Solid-State Battery Collaborative Innovation Platform (CASIP) was launched to unify the country’s top battery manufacturers, government entities and research bodies and pool resources and expertise.
• The consortium includes industry giants like CATL and BYD, who are already leaders in producing lithium-ion batteries and are now pioneering projects to transition to solid-state solutions.
• Top-tier academic researchers and state agencies such as the Ministry of Science and Technology underscore the strategic importance China has placed on this initiative.

UK breakthrough in large-scale battery-grade lithium carbonate production

• Watercycle Technologies has produced more than 100kg of battery-grade lithium carbonate from UK-sourced brines.
• The company has successfully extracted over 100kg lithium carbonate from UK brines with >99.5% purity using proprietary Direct Lithium Extraction and Crystallisation (DLEC) technology at its pilot plant in Runcorn.
• The achievement demonstrates Watercycle’s ability to scale its processes for industrial applications, it said.

Tesla launches Supercharging incentive for European Model Y sales

• Tesla is set to offer 1 year of free charging at Tesla Superchargers if consumers take delivery of a Modey Y before the end of the year.
• Tesla is not new to introducing offers to drive sales towards the end of the year.
• Last year the automaker slashed $3,750 from the Model 3 and Model Y in the US in the last 10 days of the year, later doubling the offer to $7,500.

Company News

American Eagle Gold Corp (AE CN) C$0.92, Mkt cap C$122m – $29m Strategic investment from South32

• American Eagle reported yesterday that South32 has agreed to invest C$29m in a placing via the issue of 33.3m new shares at a 15% premium.
• The Company holds the NAK copper-gold porphyry project in British Columbia.
• The funds will be used for an expanded drilling programme.
• American Eagle has already agreed a strategic alliance with Teck Resources, who hold 15% in the Company.
• Drilling highlights include 302m at 1.09% CuEq within 606m at 0.74% CuEq.
• Mineralisation noted includes chalcopyrite, bornite and pyrite.
• The Company plans to drill 25,000m over 2025, having drilled 31,000m over the past three seasons.

EQ Resources (EQR AU) A$0.048/s, Mkt cap A$110m – Monthly production record at Barruecopardo and 5-year concentrate offtake agreement

• EQ Resources reports that its tungsten operation at Barruecopardo in Spain, which was acquired in January, has surpassed its September monthly production record of 10,136mtu (metric tonne units; equivalent to 10kg) of tungsten trioxide in concentrate with output of 11,007mtu in October.
• The company says that the “increases in production are primarily driven by the continuously improving recovery rates in the gravity plant” which rose to 61.8% compared to the 55.6% achieved in August placing the operation on a trajectory to achieve its targeted long-term rate of ~70% recovery.
• EQ Resources also reports that it has secured a five-year, A$30m, agreement to deliver tungsten concentrate to US based Elmet Technologies.
• Today’s announcement explains that “EQR and Elmet are jointly working on US Government funding opportunities linked to the US Defence Industrial Base Consortium (DIBC) to enhance critical materials supply and progress further downstream integration of EQR’s tungsten concentrate into the US tungsten supply chain”.
• The current price of the benchmark ammonium paratungstate (APT) product currently stands at around US$340/mtu compared to ~US$300/mtu at the beginning of 2024.

Conclusion: The achievement of a new monthly production record for the Barruecopardo tungsten mine in Spain may have been a factor in helping EQ Resources to secure a 5 year, A$30m offtake agreement to supply tungsten concentrate to Elmet Technologies in the US.

Neometals (NMT LN) 4.5p, Mkt Cap £36m – Positive Eli Pilot Trial results

• The Company announced results of the final electrolysis and crystallisation stages of the Eli process at the trial facility.
• The process is owned by Reed Advanced Materials (RAM), a 70/30 JV between Neometals and Mineral Resources (MIN Mkt Cap A$7bn).
• The process involves using electricity to convert lithium chloride into lithium hydroxide in a conventional chlor-alkali cell as opposed to a conventional use of large amounts for bulk chemical reagents to precipitate lithium out of solution.
• The electrolysis trial data supports the expected power consumption and membrane life assumptions
• Hydrodynamic testing confirmed the equipment can be applied to commercial-scale operation
• The lithium hydroxide catholyte from electrolysis was processed in the crystallisation trial to produce LHM final product.
• Analysis of produced LHM met target specifications with further sample products being produced for further evaluation by both Ram and supplier of the South American lithium chloride.
• The Company will now be seeking an industrial partner to advance technology in demonstration plant trials.

Oriole Resources* (ORR LN) 0.31p, Mkt cap £12m – Final trenching results as drilling set to begin at Mbe

• Oriole have now completed their trenching programme at Mbe, today releasing results from the Phase 2 infill programme at MB01-N and MB01-S.
• Highlights include:
  • 79m at 0.43g/t Au at the MB01-S target
  • 122m at 0.34g/t Au at the MB01-N target
• The team notes that the Phase 2 results correlate with the Phase 1 results, showing a 500m, N-S to NNE-SSW trending mineralised corridor at MB01-S.
• Some infill trenching at the MB01-S prospect was restricted by artisanal workings, but independent consultants expect the interval to ‘grade when drilled in fresh, in-situ rock.’
• MB01-N shows a NNW-SSE trending mineralised corridor over 450m.
• The Company also conducted quality assurance, quality control testing by re-assaying trench results from MBT004, which confirmed results.
• Analysis of the MB01 system suggests two fault and fracture sets which dictate the distribution of gold mineralisation.
• Mineralisation is believed ot be hosted in sulphide-rich quartz veins and veinlets within an altered felsic unit, which holds ‘wide envelopes of pervasive, lower-grade gold mineralisation.’
• The Company is now set to drill the licence package, with a fully funded diamond programme.
• Equipment is being mobilised to site, with the maiden programme set to begin in 4Q24.

*SP Angel acts as Broker to Oriole Resources

Power Nickel (PNPN CN) C$0.8, Mkt Cap C$150m – Assay results from Lion Zone Discovery

• Power Nickel report third set of assay results from two additional holes at the Lion Zone polymetallic target.
• Results include:
  • PN-24-072: 19.6m at 1.27g/t Au, 20.3g/t Ag, 2.53% Cu, 1.01g/t Pd, 2.42g/t Pt from 294m
  • PN-24-073: 29m at 0.25g/t Au, 5g/t Ag, 0.51% Cu, 1.52g/t Pd, 0.7g/t Pt from 355m
  • PN-24-074: 24m at 0.15g/t Au, 3,1gt Ag, 0.6% Cu,  0.02g/t Pd, 0.13g/t Pt, 0.11% Ni from 290m
  • PN-24-075: 19.2m at 0.14g/t Au, 5.45g/t Ag, 1% Cu, 0.53g/t Pd, 1.22g/t Pt from 322m.
• Company notes that true width corresponds to 60-80% of the downhole distance.
• The team are using downhole EM to support exploration at the Lion Zone prospect
• Drilling is currently focusing on 150m step outs.

Sunstone Metals (STM AU) A$0.008, Mkt cap A$36m – Expansion of Bramaderos prospect, Ecuador

• In an announcement to the ASX, Sunstone Metals reports that trenching of the Copete prospect in the Bramaderos exploration area in southern Ecuador has identified porphyry copper/gold mineralisation.
• Copete which is located “next to the Brama-Alba Resource and the large Melonal target” and expands the “Bramaderos cluster of gold-copper mineralised bodies at surface … [which] … now covers 2km x 1.8km, highlighting the potential for a large open pit operation”.
• The company explains that the “Copete target remains largely under-explored, with no drilling by Sunstone – but now with a coherent and wide mineralised trench intersection, a 3D modelled magnetic anomaly plunging to the SE plunging to the SE comparable to that seen at Brama, and mapped stockwork veining interpreted to represent the upper levels of an intact porphyry system”.
• Trench sample results reported in the announcement are:
  • 113m at an average grade of 0.51g/t gold0.07% copper and 1.2g/t silver in trench ML01 reported as 0.64g/t on a gold equivalent basis
• The intersection is contained within a wider 214m section at an average grade of 0.37g/t gold, 0.08% copper and 1.1g/t silver which is reported as 0.50g/t on a gold equivalent basis.
• Describing the Copete porphyry as “another exciting discovery”, Managing Director, Patrick Duffy, expressed confidence that it would not be the last discovery in the Bramaderos area which potentially could evolve into “a world class multi-decade mining opportunity”.
• The Bramaderos project currently hosts an ‘Indicated’ resource of 9mt at an average grade of 0.38g/t gold, 0.09% copper and 1.1g/t silver (reported as 0.53g/t gold equivalent) plus an ‘Inferred’ resource of 147mt at an average grade of 0.35g/t gold, 0.11% copper and 1.3g/t silver (reported as 0.53g/t gold equivalent).
• Today’s announcement also confirms that “Bramaderos along with the El Palmar project in northern Ecuador, is currently the subject of partnership discussions with third parties”.
• Resources at El Palmar contain an ‘Indicated’ tonnage of 5mt at an average grade of 0.42g/t gold, 0.81g/t silver and 0.15% copper (0.63g/t gold equivalent) and an ‘Inferred’ tonnage of 59mt at an average grade of 0.40g/t gold, 0.65g/t silver and 0.13% copper (0.59g/t gold equivalent).

Conclusion: Trenching results from Sunstone Metals’ Bramaderos project in southern Ecuador has identified mineralisation at Copete which expands the project footprint to 2km x 1.8km. We await further news as the exploration proceeds.

Vulcan Energy Resources (VUL AU) A$5.9, Mkt Cap A$977m – €100m in government funding

• The Company secured €100m from the German Federal Ministry of Economics and Climate Protection and the European Recovery and Resilience Facility.
• The funding is provided under the guidelines for federal funding for efficient heating networks enabling decarbonisation of district heating networks in Landau, Rheinland-Palatinate.
• The Company will produce heat generated from geothermal lithium bearing brines as part of the Phase One Lionheart Project.
• Planned 24 wells will be linked to the EnergieSudwest AG district heating network.
• Funding will be provided pro rata over total development spending including €22m 2026 and €78m in 2027.
• Phase One project funding process continues led by BNP Paribas with a debt structuring group including the European Investment Bank, Export Credit Agencies from Australia, France, Italy, and Canada, as well as major European banks ING, Unicredit, ABN-AMRO, and Natixis.

 LSE Group Starmine awards for Q3 commodity forecasting:

No.1 in Precious Metals: SP Angel mining team awarded No 1. ranking for Previous Metals forecasting in LSEG Quarterly Starmine Award for Reuters Polls Q3 2024

No.2 in Base Metals: SP Angel mining team awarded No 2. ranking for Base Metals forecasting in LSEG Quarterly Starmine Award for Reuters Polls Q3 2024

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

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

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

Analysts

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

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

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

Sales

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

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

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

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

SP Angel                                                            

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

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

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