SP Angel Morning View -Today’s Market View, Tuesday 13th June 2023

Metals climb on Chinese rate cut news and expectations for further stimulus

MiFID II exempt information – see disclaimer below

American West Metals (AW1 AU) – New geophysical study identifies potential for large-scale sediment hosted copper mineralisation at the Storm project

Atlantic Lithium* (ALL LN) – Site visit comments; Stuart Crow steps aside as non-executive director

Corcel Plc (CRCL) – Mt Weld – initial drilling programme

La Mancha Resource Fund investing US$100m to support ACG Electric Metals’ acquisition of the Atlantic Nickel and the Mineraçao Vale Verde mines in Brazil

Rockfire Resources (ROCK LN) – Drilling results from the Molaoi zinc project

Tertiary Minerals* (TYM LN) – Additional exploration licence in Zambia

Economics

US – Inflation data is in focus this afternoon ahead of the Fed rates decision tomorrow.

• Estimates are for headline and core inflation measures to continue to pull back during May allowing the FOMC to announce a pause in rate hikes.
• US CPI (%yoy): 4.1 v 4.9 April.
• US Core CPI (%yoy): 5.2 v 5.5 April.

China – The central bank surprised markets by announcing a 10bp cut to its seven day reverse repo rate to 1.9% suggesting officials are increasingly concerned about faltering growth, Bloomberg reports.

• The news comes days ahead of the announcement of any adjustments to the rate on medium term lending facility (1y) with speculation building up that the PBOC may cut it this Thursday.
• Bloomberg earlier reported that multiple government agencies drafted a number of stimulus proposals earlier this month aimed at supporting property market and domestic demand.
• The State Council is said to potentially discuss the policies as soon as this Friday, albeit, it is currently unclear when those measures may be announced if at all.
• The currency dropped to a more than six month low today on the back of expectations for increasingly different borrowing rates outlook.
• Separately, credit data released this morning showed growth in borrowings weakened in May in another sign of slowing economic recovery.
• Aggregate financing, a broad measure of credit, came in at CNY1.6tn, below expected CNY1.9tn.

UK – Better than expected employment numbers released this morning point with earnings climbing strongly and jobless rate falling further.

• The data saw the sterling climbing against the US$ and two year sovereign bond yields increasing 8bp to 4.72% on course to highs last seen during the global financial crisis in 2008.
• Expectations are for the central bank to raise key rates by almost 120bp taking the key rate to 5.7% by Feb/24.
• The BOE is holding its policy meeting next Thursday.
• Employment Change (mom): 23k v 7k (revised from -136k) April and 23k est.
• Weekly Earnings (3m %yoy): 6.5 v 6.1 (revised from 5.8) March and 6.1 est.
• Weekly Earnings ex Bonus (3m %yoy): 7.2 v 6.8 (revised from 6.7) March and 6.9 est.
• Unemployment Rate (%): 3.8 v 3.9 March and 4.0 est.

Cobalt – Indonesia, having overtaken Australia as the world’s second largest cobalt supplier after the DRC, is looking to grow its share in total production from 3% in 2022 to 19% by 2030.

• The increase is driven by an increase in nickel production and cobalt as a source of by product supply.
• Growth in cobalt from Indonesia coupled with new projects coming online in the DRC will result in the market having enough cobalt to meet demand this decade, Bloomberg concludes.

Currencies

US$1.0803/eur vs 1.0759/eur yesterday. Yen 139.51/$ vs 139.53/$. SAr 18.609/$ vs 18.653/$. $1.257/gbp vs $1.258/gbp. 0.678/aud vs 0.676/aud. CNY 7.148/$ vs 7.144/$.

Dollar Index 103.28 vs 103.53 last week.

Commodity News

Precious metals:

Gold US$1,965/oz vs US$1,961/oz yesterday

   Gold ETFs 93.8moz vs US$93.9moz yesterday

Platinum US$999/oz vs US$1,005/oz yesterday

Palladium US$1,367/oz vs US$1,318/oz yesterday

Silver US$24.25/oz vs US$24.15/oz yesterday

Rhodium US$6,200/oz vs US$6,200/oz yesterday           

Base metals:   

Copper US$ 8,436/t vs US$8,284/t yesterday

Aluminium US$ 2,236/t vs US$2,228/t yesterday

Nickel US$ 21,140/t vs US$21,250/t yesterday

Zinc US$ 2,380/t vs US$2,370/t yesterday

Lead US$ 2,074/t vs US$2,070/t yesterday

Tin US$ 26,040/t vs US$25,630/t yesterday         

Energy:           

Oil US$72.5/bbl vs US$73.7/bbl yesterday

Natural Gas US$2.310/mmbtu vs US$2.255/mmbtu yesterday

Uranium UXC US$55.50/lb vs US$55.50/lb last week

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$107.9/t vs US$113.7/t

Chinese steel rebar 25mm US$527.4/t vs US$526.3/t

Thermal coal (1st year forward cif ARA) US$106.0/t vs US$107.0/t

Thermal coal swap Australia FOB US$139.0/t vs US$145.0/t

Coking coal swap Australia FOB US$224.0/t vs US$224.0/t         

Other:  

Cobalt LME 3m US$29,525/t vs US$29,525/t

NdPr Rare Earth Oxide (China) US$70,084/t vs US$70,128/t

Lithium carbonate 99% (China) US$42,736/t vs US$42,763/t

China Spodumene Li2O 6%min CIF US$4,090/t vs US$4,090/t

Ferro-Manganese European Mn78% min US$1,259/t vs US$1,254/t

China Tungsten APT 88.5% FOB US$320/mtu vs US$320/mtu

China Graphite Flake -194 FOB US$745/t vs US$750/t

Europe Vanadium Pentoxide 98% 7.1/lb vs US$7.1/lb

Europe Ferro-Vanadium 80% 31.75/kg vs US$31.75/kg

China Ilmenite Concentrate TiO2 US$308/t vs US$309/t

Spot CO2 Emissions EUA Price US$91.4/t vs US$85.7/t

Brazil Potash CFR Granular Spot US$340.0/t vs US$340.0/t

Battery News

Toyota unveils roadmap for new battery technology

• Toyota will introduce high-performance, next-generation batteries and other technologies to improve the range and performance and to cut costs of its EVs from 2026.
• Some key announcements made prior to its annual shareholders meeting:
  • developing a method to mass produce solid-state batteries, which it aims to commercialise in 2027/2028.
  • said, without providing details, it had achieved a “technological breakthrough” overcoming problems previously identified with solid-state batteries’ durability.
  • said it would have a more energy-dense battery available for an EV in 2026 that has a driving range of 1,000 km on a single charge, a charge time of 20 minutes or less, and cost reduction of 20% versus its current EV
  • would use Giga casting, a production process pioneered by Tesla to reduce the complexity and cost of manufacturing its next-generation EVs.
• The Japanese automaker, which has been scrutinised by some for being slow to roll out battery electric models, said it expects annual sales of 1.5m EVs by 2026.

Company News

American West Metals (AW1 AU) A$0.75, Mkt Cap A$21.0m – New geophysical study identifies potential for large-scale sediment hosted copper mineralisation at the Storm project

• In a release to the ASX, American West Metals has discussed results from a high-resolution ground gravity survey over the Storm copper project on Somerset Island in northern Canada.
• The company says that the identification of “significant new anomalies” show potential for “a large-scale sediment-hosted copper system”.
• The gravity anomalism is coincident with “historical electromagnetic (EM) and induced-polarisation (IP) anomalies” and the fringes of the anomaly were “intersected by a 2022 drill hole … [ST22-10] … that terminated in 68m of copper-bearing sulphide mineralisation (remaining open at depth) from 277m downhole”.
• American West Metals describes the mineralisation encountered in ST22-10 as “stratabound and … hosted within a vuggy, bituminous and fossiliferous unit”.
• Managing Director, Dave O’Neill, said that the “gravity anomalies are modelled to commence around 200m below surface and have a strike of several kilometres”
• Maps and a conceptual cross-section presented with the announcement suggest that the relatively shallow copper mineralisation encountered in exploration of the 2200N, 2,750N and 4100N zones so far is potentially the result of remobilisation of material from an underlying “stratiform copper” target along fault structures associated with the margins of the Storm Graben.
• American West Metals describes the use of the high resolution gravity data as a “Game Changing Targeting Tool” which is able to identify the “high contrast in density between copper sulphide mineralisation and the mostly homogenous dolomite host sedimentary rocks at Storm”.
• The gravity work has “provided high quality data and a significant increase in the understanding of the Storm graben area”.
• The company plans to schedule diamond drilling to test the new targets identified by the gravity work while continuing its current programmes on the 4100N Zone to expand the mineralised footprint.
• Resource definition drilling is also planned at the 2200N and 2750N zones where previous drilling “intersected high-grade copper sulphides close to surface”.
• In addition to the geological and geophysical work, “Ore sorting and beneficiation test work for a potential direct shipping ore (DSO) operation is continuing with results to follow shortly”.
• American West has an option to earn an 80% interest in the Storm and Seal projects from Aston Bay Minerals.

*SP Angel has previously raised funds for Aston Bay Minerals

Atlantic Lithium* (ALL LN) 33.5p, Mkt Cap £205m – Site visit comments; Stuart Crow steps aside as non-executive director

• Atlantic Lithium report the resignation of Stuart Crow from his role as Senior non-executive director.
• We understand from discussion with the company that the move is entirely due to Stuart’s other business commitments.
• We recently visited the Ewoyaa lithium mine project site in Ghana with Keith Muller, the new CEO and Len Kolf, the Chief Geologist and former acting CEO.
• Keith is focussed on the development of a DMS ‘Dense Media Separation‘ circuit to accelerate the move to spodumene concentrate production.
• Len is busy on extending the lithium resources at Ewoyaa along with better definition of the existing proposed open cast pits.
• Piedmont recently appointed their COO, Patrick Brindle as a non-executive director of Atlantic Lithium. Piedmont Lithium holds 9.34% of Atlantic stock.
• The board also has two nominated NEDs from Assore Int. which holds 24.92% of Atlantic stock. They are Christelle Van Der Merwe, a geologist and Kieran Daly, a mining engineer from CSM.
• Processing: The current plan is to use a very simply gravity process flow sheet to concentrate the spodumene to >6% at a 10mm crush using a conventional DMS.
• Spodumene is a relatively uniform, hard and dense mineral at 6.5-7 on Mohs scale and a specific gravity of around 3–3.2 making it relatively easy to separate from the country rock.
• The heavy liquid separation shows recoveries of up to 90% with low contaminants.
• Test work at the Australian ANSTO facilities show successful battery-grade Li carbonate and Li hydroxide conversion. We have a number of Spodumene samples in our offices for inspection.
• Exploration: The team are drilling some 20,000m of auger drilling with a further 6,500m of RC drilling as follow up exploration depending on the results to expand the resource portfolio.
• A further 10,000m of RC and DD drilling is infilling and extending the known 35.5mt @ 1.25% Li resources along with a further 2,000m of DD for project studies such as geotechnical work.
• Infrastructure: Ewoyaa is just minutes off the main highway from the capital Accra to Takoradi, a major port on the Cape Coast.
• Ewoyaa is within 110km from the Takoradi port and is just a few miles of the coast. We took a local taxi from Ewoyaa to Takoradi in under two hours.
• A high-tension power line runs across the Ewoyaa property giving good access to power. The power line will need to be moved at some stage and could supply power for the process plant.
• Ghana has around 1.58GW of hydro capacity and two 40MW solar projects within 40km of the Ewoyaa mine site.
• Labour: There is a surplus of skilled mining labour in Ghana with many young men having worked on various gold mines.
• It is rare to find a country where there is so much available skilled mining labour.
• Even the guys managing security at the Komase airport had all worked at local mines and they recognise a mineral sample when they see one.
• Offtake: Atlantic has been careful not to commit 50% off the available offtake to any third party. The other 50% is with Piedmont who are funding the development of the Ewoyaa project.
• Funding: Piedmont have already invested US$16m into Atlantic plus another US$18m for 22.5% of the Ghana portfolio.
• Piedmont are also sole funding the US$70m capex for the DMS to qualify for their 50% offtake.
• This should process 1.5-2.0mtpa for 255,000tpa of SC6 spodumene concentrate.

Conclusion: Atlantic Lithium is evolving from an exploration venture into a mining company at a rapid rate with Keith Muller’s recent appointment reflecting the move to production. We see the combination of skills with Keith Muller and Len Kolff as key to the rapid development of the project and the issuance of a mining license later this year.

*SP Angel acts as Nomad to Atlantic Lithium

Corcel Plc (CRCL) – 0.33p, Mkt cap £4.1m – Mt Weld – initial drilling programme

• Corcel plc has reported results from composite reverse-circulation drilling samples derived from a 2,000m drilling programme at the Mt Weld rare-earths by its joint-venture partner, Riverside Gold.
• The drilling programme, which is reported to be 52% complete, is situated “immediately to the west of Lynas’ globally significant Mt Weld rare earth oxide mine” near Laverton, WA.
• Drilling has now completed five holes of a planned seven hole initial campaign to test “several magnetic features confirmed through both airborne and ground magnetic surveying”.
• Today’s announcement tabulates composite samples from holes MWRC- 002 and -003 which intersected:
  • 4m at an average grade of 1600ppm TREO (0.16% total rare-earths oxide) from 196m in hole MWRC-002 which also intersected a deeper 4m interval, from 162m depth at an average grade of 1,900ppm TREO (0.19%); and
  • 4m at an average grade of 2,200ppm TREO (0.22%) from 116m in hole MWRC-003 which also intersected 4m averaging 1,600ppm TREO (0.16%) from 106m depth.
• The company says that hole -001 “was abandoned due to difficult ground conditions at 84m … [but that] …. All four remaining holes intersected the geophysical targets as modelled. The magnetic high was deemed to be highly magnetic, black mafic volcanics which were intersected at a width of 10 to 20m from 190 to 210m downhole”.
• Corcel explains that a “further detailed analysis of the anomalous REE assays and minerology is currently underway, and the operator is expected to make further decisions once these assessments have been completed”.
• Commenting that the results so far “reinforce our fundamental view of the exciting mineral and commercial prospectivity of the project” CEO, Scott Kaintz, said that the company is looking forward to “additional results firming up the potential for a mineral resource estimate in due course”.

La Mancha Resource Fund investing US$100m to support ACG Electric Metals’ acquisition of the Atlantic Nickel and the Mineraçao Vale Verde mines in Brazil

• ACG Electric Metals will acquire the Atlantic Nickel nickel sulphide mine in Santa Rita and the Mineraçao Vale Verde copper mine in Serrote on a cash and debt free basis from funds advised by Appian for an enterprise value of US$1.0bn.
• The mines have a combined 2022 Adjusted EBITDA of US$260m.
• Stellantis and PowerCo will also be partners in the project.
• Citi, ING and Société Générale are underwriting debt commitments alongside a prepayment commitment from PowerCo and a royalty financing commitment from Royal Gold.
• ACG has secured the following funding sources towards the consideration required for the Acquisition:
• Commitments to subscribe for ACG equity (each subject to customary closing conditions) from Glencore, Stellantis and La Mancha, each for US$100m.
  • A prepayment commitment totalling US$100m from PowerCo, a subsidiary of Volkswagen AG.
  • US$250m in royalty finance commitments from Royal Gold, a leading global royalty company.
  • US$225m in committed senior bank debt underwritten by a syndicate led by Citigroup, ING and Société Générale, along with a US$75 million revolving credit facility.
  • ACG will conduct a c.US$300m equity offering starting in June, to fund the balance of the acquisition, repayment of certain Mineraçao Vale Verde debt obligations and certain transaction costs.
• The proposed Acquisition, which is subject to obtaining the approval of ACG’s public shareholders and applicable regulatory approvals, is currently expected to complete in July.
  • Glencore will become an off-taker of choice for ACG, allowing for supply of concentrate to Glencore’s western European and North American refineries.
  • La Mancha will receive a 2.5% net smelter royalty on Atlantic Nickel’s production outside of existing reserves.
  • Appian will retain its 2.75% net smelter royalty on Atlantic Nickel, but its gold royalty on Mineraçao Vale Verde will be extinguished.
  • Stellantis and La Mancha will each have the right to nominate one director to the Board of ACG.
• La Mancha’s investment will be accompanied by a 2.5% NSR on Atlantic Nickel’s production outside of existing reserves.
• The assets were subject to a $1.2bn legal battle in London last year when Sibanye Stillwater withdrew from a potential acquisition of the Atlantic Nickel and Mineração Vale Verde assets, citing a ‘geotechnical event’ at the Santa Rita mine in Bahia, Brazil (FT).

Rockfire Resources (ROCK LN) 0.32p, Mkt Cap £5.6m – Drilling results from the Molaoi zinc project

• Rockfire Resources has announced results from a fourth drillhole at the wholly-owned Molaoi zinc project in Greece.
• Results from hole MO-GTK-004 have shown two mineralised lodes “reaffirming that multiple lodes are continuous at Molaoi”.
• Hole -004 intersected an upper lode at an average grade of 6.0% zinc with 0.8% lead and 31.3g/t silver over an interval of 2.37m from a depth of 107m as well as a lower structure averaging 5.3% zinc with 1.3% lead and 13.6g/t silver over a width of 2.3m from 110m depth.
• The company explains that the mineralised intervals in hole -004 “are positioned up-dip from hole MO_GTK_003A, which encountered multiple zinc lodes including 4.85m @ 14.6% Zn and 2.5m @ 11.7% Zn”.
• CEO, David Price, welcomed continuing evidence of the continuity of the mineralised structures at Molaoi and said that “Importantly, the minimum mining width for mechanised mining of 2 metres is still being achieved. This is a critical aspect of mine design and planning for underground extraction”.
• Mr. Price confirmed that “Rockfire is committed to proceeding as quickly as possible towards feasibility”.

Conclusion: Rockfire Resources’ drilling at Molaoi continues to show continuity of the zinc mineralisation as it works towards a resource upgrade and the start of feasibility work.

Tertiary Minerals* (TYM LN) 0.12p, Mkt cap £2.2m – Additional exploration licence in Zambia

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• Tertiary Minerals has been awarded a 41km² exploration licence covering around 15km of strike length of the prospective Lower Roan age rocks west of the Kabompo Dome in NW Zambia.
• The new licence, Mupala, is situated 12km west of the company’s Mukai project and “adjacent to and immediately east of the Anglo American/Arc Minerals joint venture licence block where Anglo American has the right to earn a 70% interest through expenditure of $88.5 million”.
• Executive Chairman, Patrick Cheetham, said that “The licence will be granted following payment of the requisite fees which we expect to do later this week.  We will then move to submit an Environmental Project Brief to allow a start to exploration and have begun compiling historical exploration data for the licence which will then inform our exploration plans going forward”.

Conclusion: Tertiary Minerals is expanding its exploration portfolio in NW Zambia and we look forward to results and additional technical information as the exploration progresses.

*SP Angel acts as Nomad and Broker to Tertiary Minerals

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

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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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