SP Angel Morning View -Today’s Market View, Tuesday 12th September 2023

Iron ore rally resumes on positive China loan data and hopes of construction recovery

MiFID II exempt information – see disclaimer below

Anglo Asian Mining* (AAZ LN) – Micon draft environmental report on Gedabek tailings dam received

Horizonte Minerals (HZM LN) – Passing of founder and former Chairman

Ionic Rare Earths (IXR AU) – Ionic Technologies joins forces with Ford, LCM and BGS for UK supply magnet supply chain

Great Southern Copper (GSCU LN) – Regional stream sediment sampling at Especularita identifies follow-up targets

Great Western Mining* (GWMO LN) – CLICK FOR PDF – Positive update on mill construction as final concrete pour completed

KEFI Gold and Copper* (KEFI LN) – Ethiopia and East Africa attract gold investors as Kefi receives approval of ESIA for Tulu Kapi

Kore Potash* (KP2 LN) – Interim results

Savannah Resources* (SAV LN) – Management and Board appointments

Syrah Resources (SYR AU) – Conditional loan commitment to Balama of US$150m from the US Government

Tertiary Minerals* (TYM LN) – pXRF analysis at Mukai highlights encouraging copper anomaly

Western governments step up financing pace with loans and grants for graphite and REE companies

• Syrah Resources reports a US$150m conditional loan from the US government for the Balama project in Mozambique.
• The US International Finance Development Corporation provides loans for developing nations.
• Ionic Rare Earths also report today on a £1m grant from the UK government alongside a £750,000 direct cash injection into their Ionic Technologies business
• Today’s news highlights a gathering pace in government support to counteract Chinese dominance in the Rare Earth Element and graphite markets.
• Cornish Lithium are also receiving support from the UK government alongside Cornish Metals* which has received funding from Cornwall County Council..

*SP Angel acts as Nomad and Broker to Cornish Metals. An SP Angel analyst formerly worked in the South Crofty tin mine in the 1980s and holds shares in Cornish Metals.

Copper prices lack direction as traders look for clues from China and the US dollar

• Copper prices have been bouncing around the $8,350/t mark, touching $8,432/t overnight.
• Shanghai copper inventories have fallen 5,400t to 95,100t since Friday, with weak spot buying given elevated levels of backwardation, reducing buyer’s incentive to purchase physical stock.
• The Saganoseki copper plant is reportedly operating normally, despite rumours of a shutdown. The plant has 450ktpa of refined copper capacity.
• The smelter is supplied by Caserones, Los Pelambres, Escondida and Collahusi with 1.8mt of copper concentrates pa.
• A stronger dollar is weighing on base metal prices, with the yuan holding weak levels despite the PBoC’s intervention yesterday.

Iron ore rally resumes on positive China loan data and hopes of construction recovery

• Iron ore prices in Singapore pressed higher to $118.75/t, the highest level since March.
• The move tracked loan data from Chinese banks, which issued an increase of 346bn CNY in July for a total of 1.36tn CNY vs 1.2tn expected.
• The data points to stabilised household demand for mortgages.
• Coking coal is on a tear, up 5%, whilst coke is up 3%.
• Steel prices rally.

Gold loses momentum as US Treasury yields remain elevated as traders eye tomorrow’s CPI data

• Spot gold prices returned to sub-$1,920/oz levels following a persistently strong dollar.
• The dollar is at February highs, weighing on greenback-denominated bullion.
• US Treasury yields are holding their recent highs, as investors sell-off bonds over concerns of a rate hike later this year.
• The market is currently pricing in a 93% chance of a pause in September but is seeing a 42% chance of a hike in November.
• ETFs continue to sell gold holdings, reducing exposure for the seventh day in a row as retail eyes higher-yielding treasuries.
• Tomorrow’s CPI data is expected to show core CPI decrease to 4.3% from 4.7% in July yoy but to increase to 3.6% vs 3.2% in July in headline figures as higher oil prices feed into data.

Economics

China – Major bank bad debts rose 35% in 1H to US$ 290bn representing 1.8% of total loans – significantly better than expected

• We do wonder how China survives economically with bad debt levels rising and weaker exports to the West
• Is the man at the top, President Xi, spinning economic plates?
• How many companies are struggling and unable to repay their leveraged loans?
• Investors and the state were piling trillions of dollars of investment into China but those capital flows are now going the other way with the PBoC supporting the Yuan currency against strong outflows.
• The detention of Jack Ma and other tech entrepreneurs has caused many to reconsider where they locate their businesses and move funds offshore to protect against ‘random’ authoritarianism by the CCP where one misplaced comment could lose you your freedom, business and savings.
• When factory activity falls and products don’t sell, profits can turn to huge losses and social problems develop.
• China is diversifying its export destinations but probably at the expense of margins as non-western buyers work on smaller margins.
• We suspect Xi will continue to kick the can down the road for another few years but ultimately debt will be repaid?

US  – Light vehicle sales rose 18% yoy to 1.34m in August

Europe – Vehicle sales rose 8.8% yoy in July to 1.09m giving annual sales of 13.15m vehicles

UK – New UK car registrations slowed to 3.2% yoy in July vs 12.9% yoy in June

• Average earnings index + Bonus 8.5% vs 8.2% expected and 8.4% previous
• Employment change 3m/3m -207k vs -185k expected
• Unemployment rate at 4.3% for July vs 4.2% in June
• A rising unemployment rate and sliding job vacancies to below 1m for the first time in two years, weighing on the pound.

Germany – Wholesale Price Index

• Increased 0.2% mom vs -0.1% forecast

Spain – Core CPI at 6.1% yoy vs 6.2% in July

• Headline CPI at 2.6% vs 2.3% in July

Currencies

US$1.0726/eur vs 1.0734/eur previous. Yen 146.81/$ vs 146.04/$. SAr 18.899/$ vs 18.937/$. $1.250/gbp vs $1.252/gbp. 0.643/aud vs 0.644/aud. CNY 7.295/$ vs 7.292/$.

Dollar Index 104.67 vs 104.56 previous.

Commodity News

Precious metals:

Gold US$1,920/oz vs US$1,929/oz previous

Gold ETFs 89.2moz vs 89moz previous

Platinum US$903/oz vs US$905/oz previous

Palladium US$1,218/oz vs US$1,210/oz previous

Silver US$23.03/oz vs US$23/oz previous

Rhodium US$4,100/oz vs US$4,100/oz previous

Base metals:

Copper US$ 8,382/t vs US$8,362/t previous

Aluminium US$ 2,197/t vs US$2,205/t previous

Nickel US$ 20,035/t vs US$20,300/t previous

Zinc US$ 2,498/t vs US$2,468/t previous

Lead US$ 2,235/t vs US$2,244/t previous

Tin US$ 25,475/t vs US$25,610/t previous

Energy:

Oil US$90.8/bbl vs US$90.5/bbl previous

Natural Gas US$2.614/mmbtu vs US$2.545/mmbtu previous

Uranium UXC US$60.75/lb vs US$58.50/lb previous

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$117.9/t vs US$114.2/t

Chinese steel rebar 25mm US$534.0/t vs US$533.9/t

Thermal coal (1st year forward cif ARA) US$124.3/t vs US$122.0/t

Thermal coal swap Australia FOB US$161.0/t vs US$160.5/t

Coking coal swap Australia FOB US$275.0/t vs US$275.0/t

Other:  

Cobalt LME 3m US$33,420/t vs US$33,420/t

NdPr Rare Earth Oxide (China) US$73,338/t vs US$72,339/t

Lithium carbonate 99% (China) US$24,743/t vs US$25,576/t

China Spodumene Li2O 6%min CIF US$2,680/t vs US$2,730/t

Ferro-Manganese European Mn78% min US$1,035/t vs US$1,036/t

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

China Graphite Flake -194 FOB US$650/t vs US$650/t

Europe Vanadium Pentoxide 98% 6.7/lb vs US$6.8/lb

Europe Ferro-Vanadium 80% 30.25/kg vs US$30.75/kg

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

Spot CO2 Emissions EUA Price US$86.5/t vs US$86.8/t

Brazil Potash CFR Granular Spot US$355.0/t vs US$355.0/t

Battery News

Global price for Li-ion batteries drops to $98.20/kWh

• The global weighted average price for has dropped to $98.20 from a high of $146.40 in March 2022. (Benchmark)
• For EVs to reach price parity with ICE vehicles, battery pack prices need to reach $100/kWh – a corresponding cell price of ~$80/kWh
• In China, LCO battery cell prices have hit $100.10/kWh and $123.60/kWh across the rest of Asia.
• Low nickel prices have seen modelled prismatic NCM811 cell prices drop to $82.60/kWh.
• This is lower than $85.70/kWh for an equivalent LFP cell.

Mexico to receive $15bn in investments from Tesla and its suppliers

• A state governor in Mexico has said that Tesla and its suppliers would invest $15bn over the next two years in Tesla’s factory that is still under construction.
• In March, Elon Musk said his company would open a gigafactory in northern Nuevo Leon state, part of the electric carmaker’s push to expand its global footprint.
• Global automakers BMW, General Motors and Ford had all announced plans to begin or step-up EV production in Mexico’s automaking sector as the industry transitions away from cars powered by fossil fuels.
• Sources had previously said that Tesla planned to begin production in Mexico in 2025, but the company has not announced a start date for construction of its gigafactory or when output will come online. (Reuters)

Israel targets 30% EVs by 2030

• Israel’s Energy Minister has said that the country is expecting 30% of vehicles on the road to be electric by 2030.
• About 1.3m vehicles will be electric by 2030, up from 70,000 today (less than 2% of current vehicles on the road) the ministry said in an official forecast.

Updated comment: BMW to make multimillion pound investment for electric Mini production in UK

• BMW will invest £600m in the UK to make its Mini brand all-electric by 2030.
• From 2026, the German carmaker will make two electric models at its Mini plant in Oxford – the Mini Cooper 3-door and the compact crossover Mini Aceman.
• British business minister Kemi Badenoch declined to comment on the level of subsidy to be received by BMW for Mini production, but it has been widely reported by British media to be £75m.
• The investment is a further boost to Britain’s car industry after years of Brexit-related uncertainty – swelled by a £4bn investment from Tata Group for a battery gigafactory and £1bn from Nissan for an EV hub in Sunderland.

Company News

Anglo Asian Mining* (AAZ LN) 53.4p, Mkt Cap £61m – Micon draft environmental report on Gedabek tailings dam received

BUY – Under Review

• Anglo Asian report their receipt of a draft report by Micon International on their health, safety and environmental review of the Gedabek tailings dam.
• Anglo Asian Mining’s expert team are currently reviewing the report and expect the report to be finalised this week.

*SP Angel acts as nomad and broker to Anglo Asian Mining

Horizonte Minerals (HZM LN) 133p, Mkt Cap £359m – Passing of founder and former Chairman

• We are sorry to report the passing of David Hall, founder, and former Chairman of Horizonte Minerals.
• We knew and respected David for his geological insight, his entrepreneurial spirit and his dedication to the minerals industry.
• David’s shoes will be hard to fill in an industry which is facing an increasing skills gap due to a growing shortage of newly trained geologists and mining engineers

Ionic Rare Earths (IXR AU) A$.031p, Mkt Cap A$140m – Ionic Technologies joins forces with Ford, LCM and BGS for UK supply magnet supply chain

• Ionic Rare Earth’s recycling subsidiary, Ionic Technologies, has inked a partnership with Ford Technologies, Less Common Metals and the British Geological Survey.
• The group will look to produce high purity, separated and traceable rare earths to supply LCM with feedstock for NdFeB magnet production.
• Less Common Metals is a manufacturer of complex alloy systems and will produce alloys made from REOs to supply automakers for permanent magnet production.
• The magnets will ultimately be used by Ford for their EV production in the UK-based Hailwood facility which plans to produce around 500,000 units pa by 2026 requiring 600tpa of magnet raw materials.
• Ionic Technologies will also receive a £1m grant from the UK government to fund a feasibility study for the construction of a UK REE recycling plant.
• Ionic will receive a total of £2m in various forms of government support, including a direct cash injection of £750k.
• Ionic’s demonstration plant in Belfast has so far produced high purity REOs at 10tpa at >99.5% purity.
• The REO produced by Ionic is considered suitable for high specification magnet use for electric vehicles.
• Ionic Rare Earths acquired 100% of Seren Technologies in April 2022 receiving £1.7m in government grant funding in September to develop a demonstration scale magnet recycling plant in Belfast.
• Ionic paid US$1m in cash and 48m shares SEREN to give a combined value of US$2.5m of value plus a an entitlement of up to US$1.5m conditional on any license agreements for the use of SEREN technology.
• The UK-government-supported feasibility study for commercial REO production in Belfast will look to available feedstock in the UK, including wind turbines, EVs and other vehicles.
• Less Common Metals is involved with a number of EU based REE recycling projects and is seen as a key part of the permanent-magnet production chain.

Conclusion: Ionic is looking to commercialise magnet recycling in the UK and today’s announcement marks a major milestone in their progress to date. The opportunity presents management a route to value creation following the success of the demonstration plant, whilst they develop the Makuutu rare earths project in Uganda. Makuutu holds a reserve of probable 172.9 Mt at 848 ppm TREO, or 584 ppm TREO – CeO2 , and 30 ppm Sc2O3 and an NPV of US$406m for an IRR of 32.7%.

Great Southern Copper (GSCU LN) 3.05p, Mkt Cap £7.8m – Regional stream sediment sampling at Especularita identifies follow-up targets

• Great Southern Copper reports that regional stream sediment sampling at its Especularita project in Chile has shown promising evidence of “porphyry, high sulphidation epithermal and intrusive- related signatures and zonation patterns”.
• The company says that the sampling “has identified targets for follow-up prospect-scale Cu-Au exploration”.
• Today’s announcement also confirms the completion of a “drone-magnetic survey at Especularita which is designed to provide detailed coverage of the Company’s drill-ready targets at Teresita and Victoria and regional information for target generation” and that interpretation of the magnetic data is underway.
• CEO, Sam Garrett said that the stream sediment programme had been “very effective, and together with other regional datasets, is helping the Company complete reconnaissance-scale exploration across its large project footprint”.
• He said that “the Company will now commence a regional follow-up mapping and sampling campaign with the aim of delineating prospect-scale targets for scout drilling”.
• The 140km² Especularita project area lies within a “mineral field, centred at Especularita … over an area greater than 300 km² ” where Great Southern Copper “has found evidence of the potential for porphyry-type Cu-Au mineralisation plus associated base-metal skarn, tourmaline breccia-hosted Cu-Au and high sulphidation epithermal type Au-Ag mineralisation”.

Conclusion: Reconnaissance sampling is helping to focus on identifying scout drilling targets at Especularita.

Great Western Mining* (GWMO LN) 0.05p, Mkt Cap £2.8m – CLICK FOR PDF – Positive update on mill construction as final concrete pour completed

• Great Western provides an update on its Western Milling JV in Mineral County, Nevada.
• The Company successfully completed the final concrete pour on the processing mill site.
• The site is now ready and waiting for pre-prepared equipment, the majority of which has been mobilised to site.
• The project is now awaiting final approval from the NDEP, Nevada’s environmental authority.
• We look forward to further updates from the JV and expect swift consent from the Nevada state authorities, enabling the group to start processing the number precious metal spoil heaps via gravity separation in preparation for contained leaching.

*SP Angel act as Broker to Great Western Mining, an SP Angel Analyst has visited Great Western’s Nevada claim blocks.

KEFI Gold and Copper* (KEFI LN) 0.68p, Mkt Cap £30m – Ethiopia and East Africa attract gold investors as Kefi receives approval of ESIA for Tulu Kapi

• Kefi Gold & Copper reports that, following meetings last week, it has now received approval of the updated Environmental and Social Impact Assessment for its Tulu Kapi project in Ethiopia together with “updated completion schedules by the electricity and roads authorities for offsite infrastructure”.
• Today’s announcement also confirms that Ethiopia’s National Bank has now “proclaimed and published a new … Directive … which satisfies the requests made to ensure conformity with the specific Project details. This was one of the final action points remaining to enable completion of the Tulu Kapi Project financing package”.
• The company also announces that “Security to facilitate next steps in the field and to ensure continuing stability is being addressed”.
• Orecorp which is developing a similar gold project at Nyanzaga in Tanzania is currently subject to a takeover by Silvercorp (SVM CN)
• The deal aims to create a US$630m market cap diversified gold and sliver miner. Orecorp used to hold licenses next to Kefi’s Tulu Kapi gold project.
• Allied Merger Corp. (Allied Gold) also just reported a US$267m financing to fund the Kurmuk gold project in Ethiopia to the west of Tulu Kapi on the border with South Sudan.

*SP Angel acts as Nomad to KEFI Gold and Copper

Kore Potash* (KP2 LN) 0.62p, Mkt Cap £22m – Interim results

(Kore Potash hold 97% of the Kola and DX Potash Projects in the Sintoukola Basin, Republic of Congo)

• Kore Potash report on progress at their Kola and DX Potash projects in the Republic of Congo within their interim results to end-June 2023.
• Kore cut expenditure through the first half to US$520,473 vs US$637608 a year earlier reflecting reduced local activity in the RoC.
• Kore reports an H1 profit of US$2,540,490 vs a loss of US$11,887,165 yoy.
• The Total Comprehensive profit rose to US$ 2,075,507 vs a loss of US$12,790,375 yoy .
• Cash and cash equivalents:  fell by US$2,491,375 to US$2,555,254 in the six months to end-June.
• Capitalised Exploration and Evaluation assets stands at US$167,201,357 at end-June vs US$162,729,194 a year earlier.
• Highlights
• PowerChina and SEPCO have started work to support EPC ‘Engineering, Procurement and Construction’ contract guarantees for the Kola project.
• Summit Consortium will provide a financing proposal for the full capital cost of Kola within six weeks of the EPC contract terms.
• Kola project:
  • Production target of 15.5mt sylvinite gradin 30.63% KCl
  • Total production 4.8mt MoP ‘Muriate of Potash’ over 12 year life of mine
  • Throughput 400,000tpa MoP using selective solution mining of high grade sylvinite seams.
  • Opex $90.5/MOP FOB Pointe Noire
  • Capex $316m
  • Assumptions: flat $450 / MoP price
  • NPV10% $275m (post-tax) on a 90% attributable basis
  • 27% IRR on a real post tax basis
  • Payback 2.9 years
  • Production target based on Proven and Probable Ore Reserves and 13% of the Inferred Mineral Resources that represents 30% of the life of project MoP production.
• JORC resource estimate:
  • 28mt at 29.9% KCl for 8mt KCl contained in the Measured and Indicated category (down from 79mt at 39.1% KCl for 31mt KCl previously);
  • 101mt at 23.5% KCl for 24mt KCl contained in the Inferred category (up from 66mt at 40.4% KCl for 27mt KCl).
• JORC reserves estimate:
  • 9.31mt at 35.7% KCl for 3mt KCl contained (down from 18mt at 41.7% KCl for 7mt previously).
• Dougou Extension:  Sylvinite Defined Feasibility Study Phase 1

*SP Angel acts as Nomad and Broker to Kore Potash

Savannah Resources* (SAV LN) 3.7p, Mkt Cap £68m – Management and Board appointments

BUY – 21.1p

• Savannah Resources reports the appointment of Emanuel Proença as its new CEO and that its interim CEO, Dale Ferguson, is to revert to his previous Board role as Technical Director in order to “lead the ongoing technical development of the Barroso Lithium Project”.
• Mr. Proença, a Portuguese national, joins from his previous role as CEO of Prio which is described as “one of Portugal’s 20 largest companies, and the country’s largest green fuels and biodiesel producer, and its second largest provider of electricity for mobility and a network of charging points”.
• Initially, the new CEO appointment will be “in a Non-Board capacity. The Company envisages that Mr Proença will formally join Savannah’s Board during H1 2024”.
• Welcoming the appointment of the new CEO, Chairman, Matthew King, said that “as CEO of Prio Supply, he has grown EBITDA by 20 times in 6 years. In that role, he has developed skills in managing a rapidly growing business, which are highly transferable to Savannah. He has also developed excellent relations with the Portuguese Government, industry regulators, commercial partners in the energy sector, and service providers”.
• Today’s announcement also confirms the appointment of new non-executive directors. Bruce Griffin who “brings over 20 years of mining sector experience to Savannah’s Board. This includes recent mining project construction and commissioning experience gained on the 10Mtpa Thunderbird minerals sands project in Australia in his role as the Executive Chair of Sheffield Resources”.
• Mr. Mohamed Sulaiman, who is also appointed as a non-executive director is described as “Head of Strategy at the Omani conglomerate business, Towell Group, and has significant experience on the Boards of both public and private companies, and in the energy sector”. He replaces “the retiring Imad Sultan (Non-Executive Director since July 2016) as the Board representative of Savannah’s largest shareholder, Al Marjan Ltd”.
• Mr. King thanked Mr. Sultan for his “seven years of valuable service and contribution as the representative of Al Marjan” and welcomed Mr. Sulaiman.

Conclusion: Savannah Resources is strengthening and refreshing its senior management team including the appointment of a Lisbon-based Portuguese national as its new CEO as it progresses its Mina do Barroso lithium project towards production

*SP Angel acts as Nomad and Broker to Savannah Resources

Syrah Resources (SYR AU) A$0.56, Mkt cap A$387m – Conditional loan commitment to Balama of US$150m from the US Government

• Syrah has received approval for a conditional $150m loan to Syrah’s Balama graphite project in Mozambique.
• The funding will cover Balama’s capital requirements, including:
  • Working and sustaining capital for the Balama graphite mine
  • Expansion of the tailings storage facility
  • Feasibility studies for Balama’s vanadium resource
• The funding forms part of Biden’s commitment to boost trade and investment between the US and Africa, under the US International Development Finance Corporation Board of Directors.
• The loan is for a maximum of $150m up to 13 years.
• We expect the funding terms to be relatively generous from the US, with the announcement suggesting a long-dated US Treasury rate + a margin.
• Syrah has placed the Balama project on care and maintenance for the past few months given an influx of synthetic graphite supply into China.
• The Company will be relatively debt-heavy were it to take on the entire $150m loan, given current liabilities of $173m from non-current borrowings for convertible notes and the DoE loan.

Tertiary Minerals* (TYM LN) 0.14p, Mkt cap £2.7m – BUY– pXRF analysis at Mukai highlights encouraging copper anomaly

CLICK FOR PDF

• Tertiary has received provisional pXRF soil sample results for the Mukai copper project in Zambia.
• To date, 526 samples have been collected over a 300m x 100m grid, infilled to 100m x 50m.
• Tertiary reports an encouragingly large copper-in-soil anomaly over 1,300m by 400m, with a peak soil value of 1,660ppm, averaging 252ppm.
• 162 samples contained over 80ppm copper and averaged 173ppm copper over 1,800m by 800m.
• Past producing mines on the Copperbelt hold soil anomalies ranging between 50-150ppm, averaging 80ppm.
• The Company has now submitted a subset of samples to lab for analysis.

Conclusion: It is encouraging to see Tertiary making swift progress on its prospective Zambian exploration licences, with today’s large copper-in-soil anomaly stretching to the border of First Quantum’s Trident mining complex. The Company now holds an interesting drill target prospective for copper sulphide mineralisation. Additional soil sample pXRF analysis is expected from Konkola West and subsequently Mushima North. We look forward to further positive updates with anticipation.  

*SP Angel acts as Nomad and Broker to Tertiary Minerals

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

Analysts

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

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

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