SP Angel Morning View -Today’s Market View, Tuesday 15th October 2024

Copper slides on frustration over hesitant China stimulus

MiFID II exempt information – see disclaimer below

Caledonia Mining (CMCL LN) – Q3 Production Results

Emmerson (EML LN) – Unfavourable official recommendation regarding Khemisset Potash Project

Greatland Gold (GGP LN) – Update on Telfer acquisition

Rome Resources (RMR LN) – Drilling update

Pilbara Minerals (PLS AU) – A$1bn debt facility established

Semirara Mining and Power Corp (SCC PHS) – Substantial expansion of coal in the Philippines

Strategic Minerals* (SML LN) – Strong 3Q sales see an upgrade in FY24 guidance

Xanadu Mines (XAM AU) – PFS for Kharmagtai Copper-Gold Project

Copper prices ($9,570/t) slide further as frustration over hesitant China stimulus

• Copper prices have extended losses, sliding over $500/t in a week.
• Copper prices had been propelled higher by a double pronged tailwind of US fed rate cuts and optimism over larger Chinese stimulus measures.
• China cathode warehouse inventory has been rising, as traders hold off purchases following the Autumn holiday.
• The move likely reflects pessimism over the weekend’s conference which hinted at taking on more debt to shore up the economy.
• Doubts persist over Xi’s intentions to reignite the property sector, with focus currently on strengthening consumer demand.
• Bloomberg reports Indonesia may allow Freeport to continue to export concentrate for another two months as smelter delays continue.
• Shanghai brokers have cut net-long positions.
• The Yangshan premium ticked down this week, having rallied from May lows.
• Lower Yangshan premiums suggest reduced import demand from Chinese buyers.

China copper imports rise on delayed restocking, SHFE inventory drawdown, stimulus statements and Fed rate cuts

• Imports of unwrought copper into China rose by 15% to 479,000t in September
• Traders took advantage of weak copper prices after the summer lull to restock ahead of stimulus statements by the Chinese authorities
• Copper stock drawdowns on the SHFE to 156,000t today from a peak of around 330,000t in June supported trade encouraged by a dip in the US dollar following Fed interest rate cuts
• Concentrate imports have also risen 8.9% yoy to 2.44mt with imports of copper concentrates rose 3.7% to 21mt for the first nine months of the year.
• Tc/Rc ‘Treatment & Refining charges have fallen over the past year. Note the smelters still make byproduct revenues which pay for the smelting.
• China Tongling has delayed construction of a new 500,000tpa smelter in Anhui due Jan to the second half of 2025 due to a shortage of concentrate feedstock.

Copper and gold majors shine year to date as iron ore producers suffer

• Van Eck Gold Miners’ index up 30% ytd, whilst gold is up 28%.
• Newmont up 32%, Barrick up 26%.
• On the other hand, iron ore miner underperformance down 30%, Fortescue down 29% and BHP down 13% ytd.
• Iron ore prices have fallen 15% ytd, however, they sit above the five year average of $98/t.
• Meanwhile, copper-dominated majors have all performed strongly this year, with Freeport up 15% ytd and Teck up 27%.
• However, copper prices have climbed 12%, albeit paring gains by 5% over the past September.

China – Rare Earth exports fall as local demand takes precedence on metal supplies

• Exports of REEs fell 11.5% mom 4,181t of 17 REEs in September vs 4,723t in August and 3,935t a year ago as rising Chinese prices persuaded producers to sell locally
• Export levels from January-September are 6.4% higher yoy.
• September imports of REEs fell 32% yoy and 2.8% mom to 102,489t, though inflows are a lesser trade with January-September imports down 23.7% yoy to 102,489t.

Iron ore prices pull back despite China boosting imports and steel exports

• Iron ore prices weakened slightly from $107/t, but remain well above recent lows.
• September trade data showed China has boosted iron ore imports over the five year average of 104mt, whilst steel exports hit 2016 highs.
• Chinese officials note that exports will likely continue to be elevated as they shift strategies from domestic construction.
• China HRC prices are rising, up $15/t over the past fortnight to $537/t FOB from Tianjin.
• However, the World Steel Association has trimmed steel demand for 2025 to 1.75bnt, down 0.9% yoy.
• Previous forecasts had seen an increase of 1.7% yoy.

Global EV sales up 30.5% in September as China marches on and Europe recovers

• Global sales of fully electric and plug-in hybrid vehicles rose by an annual 30.5% to 1.69m units in September, thanks to record sales in China and resumed growth in Europe. (Rho Motion)
• This is the first time in nine months that global EV sales have surpassed the 1.5m mark.
• Excluding exports, China’s domestic sales were 1.18m units, surpassing 1.0m units for the second time.
• In Europe, EV sales rose 4.2% to 300,000 units, thanks to a 24% jump in the UK and gains in Italy, Germany and Denmark.
• Germany saw 7% yoy growth, thanks to a new tax reduction of up to 40% of new EVs for businesses.
• Since abruptly ending its subsidy programme at the end of last year, Germany’s EV market has struggled, having seen new registrations in July down 36.8% yoy.

eBay introduces new safety measures on e-bikes due to fire safety concerns

• eBay has announced a ban on the private sale of e-bikes and e-bike batteries in the UK due to fire safety concerns.
• The ban will take effect from 31^st October 2024, prohibiting private individuals from listing these items.
• The London Fire Brigade reported 155 e-bike fires in 2023, an increase of 78% from the previous year.
• Insurance company Aviva also noted a 7% rise in claims for fire damage caused by lithium-ion batteries during 2022 and 2023.

This is Why Gold is Rising and It Will Probably Continue:

• Podcast: https://audioboom.com/posts/8547593-john-meyer-this-has-one-of-the-lowest-risk-profiles-i-ve-seen-for-a-long-time

 Economics

China – Looking to issue $853bn of 3-year bonds debt swap deal to refinance some of off balance sheet liabilities owed by local governments and stimulate the economy

• Refinancing at lower interest rates and extended maturities should help free up some capital for local government to spend on stimulating local demand and funding construction projects, Bloomberg writes.
• A previous report had indicated a $285bn debt issue to fund stimulus (Reuters)
• The IMF estimated that local governments held over CNY 60tn of debt as of last year.
• Credit growth disappointed last month reflecting weak domestic demand with new stimulus measures announced in late September not reflected in numbers and yet to take effect.
• New loans came in at CNY 1.6tn, below 1.9tn forecast.
• Aggregate financing, a broader measure of credit, increased 3.8tn, down on 4.1tn in Sep23 but exceeding median estimate for 3.6tn thanks to an increase in government bond sales.
• $850bn is a very large number even for Sovereign debt issuance and we suspect the authorities are prepping the market for its funding domestically via stock market stimulus and statements on expanding financial markets.

Germany – ZEW survey showed an improvement in investment outlook slightly recovering from a one year low registered in the previous month.

• ZEW Survey Expectations (Oct/Sep/Est): 13.1/3.6/10.0

Wholesale Price Index m/m -0.3% in September vs -0.8% in August and -1.6% yoy vs -1.1% previously

France – CPI fell 1.30% mom in September

• This is the biggest single fall in the CPI for over 34 years
• Core inflation fell to 1.4% in September vs 1.7%
• French inflation is being pulled lower on falling prices for energy, travel, health and housing.
• The economy had gained from the Olympics and Paralympics through August

UK – Unemployment rises 113,000 0.4% yoy in September to 30.3m but remains at a steady on August

• Although, wage growth continued to slowdown hitting the lowest leve3l in more than two years over the summer.
• Median monthly pay rose 5.3% yoy vs 6.0% yoy in August and above 3.8% yoy in June, partly driven by Labour’s giveaway to the Unions.
• Unemployment claimants rose 27,900 to 1.797m.
• The figures reverse the fall in in unemployment which had fallen to 4.0% from 4.1%
• Average regular earnings excluding bonuses rose 4.9% yoy vs 5.1% yoy in August
• Average regular earnings including bonuses rose 3.8% yoy vs 4.0% yoy in August

Iran – Tehran is reported to have conveyed a message to Washington via a third country to say that if the Israeli response is limited to specific target it will not respond

• The message appears designed to put pressure on Israel via the US and to persuade Israel not to target Iran’s oil terminals.
• If Israel hits Iranian oil facilities then Iran will hit Israeli gas production causing a potential new energy crisis. This would help Putin and hit Europe which is already struggling with high energy prices.

The Middle East conflict – Number of missiles and rockets fired into Israel in the past 365 days

• 13,200 missiles from Gaza
• 13,400 missiles and drones from Lebanon
• 400 missiles and drones from Iran including a number of ballistic missiles
• 180 missiles and drones from Yemen
• 60 missiles from Syria
• Israel is reported to be examining its options for attacking Iran, with much justifiable cause.
• Mr Netanyahu has promised the Iranians they will be free of their regime “a lot sooner than people think” and has exhorted the Lebanese to “free your country from Hezbollah” (The Economist).
• The statement indicates potential for Israel to target Iran’s leadership in an effort to enable regime change.
• We wonder if Israel is using this time to prepare resistance within Iran to coordinate with its strategy and we suspect Israel has Joe Biden’s tacit blessing.

Cryptocurrencies gain on rising potential for a Trump win in the US November 5^th election

• Trump is seen as potentially helping the regulatory environment for digital assets in the US.
• The market sees Trump as raising borrowing more than Kamala, devaluing the US dollar and causing more people to buy cryptocurrencies.

Currencies

US$1.0892/eur vs 1.0928/eur previous. Yen 149.23/$ vs 149.26/$. SAr 17.651/$ vs 17.422/$. $1.306/gbp vs $1.307/gbp. 0.671/aud vs 0.674/aud. CNY 7.119/$ vs 7.080/$.

Dollar Index 103.28 vs 103.03 previous

Precious metals:         

Gold US$2,653/oz vs US$2,664/oz previous

Gold ETFs 83.5moz vs 83.4moz previous

Platinum US$985/oz vs US$984/oz previous

Palladium US$1,021/oz vs US$1,059/oz previous

Silver US$31.1/oz vs US$31.5/oz previous

Rhodium US$4,775/oz vs US$4,775/oz previous

Base metals:   

Copper US$9,547/t vs US$9,750/t previous

Aluminium US$2,540/t vs US$2,617/t previous

Nickel US$17,445/t vs US$17,740/t previous

Zinc US$3,018/t vs US$3,103/t previous

Lead US$2,040/t vs US$2,075/t previous

Tin US$32,080/t vs US$32,875/t previous

Energy:           

Oil US$74.4/bbl vs US$77.8/bbl previous

• Crude oil prices slumped after Chinese stimulus news disappointed, and media reported that Israel is willing to heed US advice and avoid striking oil and nuclear targets when it retaliates against Iran for recent attacks.
• OPEC revised global oil demand growth expectations by 0.1mb/d to 1.9mb/d in 2024 and 1.6mb/d in 2025 in October’s Monthly Oil Report, implying 4Q24 demand up ~1mb/d q/q to 105.6mb/d. The IEA forecasts demand growth of 0.9mb/d this year and is due to release the World Energy Outlook 2024 report on Wednesday.
• TotalEnergies joined its peers in releasing 3Q24 guidance that indicates downstream results are expected to sharply decrease q/q given much lower refining margins in Europe and in the rest of the world.
• ENI’s World Energy Review 2024 estimated that global energy-related CO2 emissions increased by around 1% in 2023 to a new record of 37.2 Gigatonnes, with China alone accounting for one third of the total.

Natural Gas €39.8/MWh vs €39.5/MWh previous

Uranium Futures $83.0/lb vs $83.1/lb previous

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$106.5/t vs US$107.5/t

Chinese steel rebar 25mm US$524.5/t vs US$525.5/t

HCC FOB Australia US$212.0/t vs US$211.5/t

Thermal coal swap Australia FOB US$148.3/t vs US$148.3/t

Other:  

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

NdPr Rare Earth Oxide (China) US$59,914/t vs US$61,030/t

Lithium carbonate 99% (China) US$10,044/t vs US$10,101/t

China Spodumene Li2O 6%min CIF US$750/t vs US$750/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$445/t vs US$445/t

Europe Vanadium Pentoxide 98% 4.6/lb vs US$4.6/lb

Europe Ferro-Vanadium 80% 24.55/kg vs US$24.55/kg

China Ilmenite Concentrate TiO2 US$315/t vs US$319/t

China Rutile Concentrate 95% TiO2 US$1,299/t vs US$1,321/t

Spot CO2 Emissions EUA Price US$63.9/t vs  US$63.9/t

Brazil Potash CFR Granular Spot US$277.5/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$455.0/kg vs US$455.0/kg

Battery News

New UK developed battery technology could increase EV range by 20%

• UK-based, Integrals Power have claimed to have made a significant breakthrough in Lithium Manganese Iron Phosphate (LMFP) cathode materials.
• It claims the breakthrough will increase the range of EV batteries by up to 20%.
• The newly developed LMFP cathodes are capable of supporting higher voltages and offer improved energy density.
• Integrals Power’s LMFP materials have a manganese content of 80%, much higher than the 50-70% of rival technologies.
• LMFP materials merge the cost-effectiveness and durability of Lithium Iron Phosphate (LFP) with the superior energy density found in Nickel Cobalt Manganese (NCM) technologies.
• The performance of these new materials has been independently verified by the Graphene Engineering Innovation Centre (GEIC) in coin cell configurations.

EU tariffs on Chinese EVs unlikely to be agreed by end of October

• According to a senior EU official, the introduction of the Chinese EV price deal will be “very, very difficult to reach an agreement by the end of October, because [of] the very complex, difficult issues to solve.”
• The tariffs are due to be imposed after the European Union’s anti-subsidy investigation into EVs, which is scheduled to conclude at the end of this month.
• Beijing and the EU are locked in discussion on minimum import prices to avoid the tariffs.
• The European Commission has received minimum price offers from the Chinese Chamber of Commerce covering several EV producers and from a number of diverse individual exporters, the official said.
• China has urged the EU not to conduct separate negotiations over prices of Chinese-made EVs sold in the bloc, but the EU believes a single price would not work, given different types of vehicles, the value of sales and the companies receipt of subsidies.
• The Commission is mindful of its experience a decade ago, when a minimum price replaced tariffs on Chinese solar panels – China now has a share of over 90% of the EU photovoltaic market.

Porsche recalls almost 30,000 Taycan EVs due to potential fire risk

• Porsche has recalled 27,527 Taycan EVs due to a defective cell block module that has the potential to short circuit and lead to a fire.
• The recall covers Taycan models produced between October 21, 2019, and February 1, 2024, as reported by the National Highway Traffic Safety Administration.
• The cell modules are supplied by LG Chem, which has had similar issues in the past with vehicles from different brands.
• One of the most notable recalls was with GM’s Chevy Bolt models, which experienced battery fires.
•  LG Chem remains a leading supplier of batteries for EVs, but these recalls have put pressure on automakers to monitor their battery safety standards more closely.

Company News

Caledonia Mining (CMCL LN) 1,168p, Mkt Cap £234m – Q3 Production Results

• Caledonia Mining produced 19koz gold in the quarter, down from 21.8koz same period last year. (100% basis)

• Blanket has now produced 56.8koz over the first nine months of 2024, vs 55.2koz same period last year.
• Company reiterates guidance of 74-78koz for the year.

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

Emmerson (EML LN) 0.8p, Mkt Cap £9m – Unfavourable official recommendation regarding Khemisset Potash Project

• The Company released an update on the latest ESIA for the Khemisset Potash Project yesterday.
• The official commission (Commission Régionale Unifiée de l’Investissement or CRUI) advised against the project.
• The Company reported that formal notification of a decision is yet to be received with the team seeking clarification regarding the decision and the unfavourable recommendation.
• The Project was designed as an underground operation developing 5371mt at 9.2% K2O mineral resource and running at over 0.7mtpa MOP over 19 year mine life in Morocco.
• The stock sold off 70% on the news yesterday.

Greatland Gold (GGP LN) 6.3p, Mkt Cap £651m – Update on Telfer acquisition

• Greatland Gold reports that it has received FIRB approval by the Treasurer of the Commonwealth of Australia for the acquisition.
• Consent has also been granted by the WA Minister for Mines for the transfer of relevant mining tenements.
• The environmental licence for Telfer has also been renewed for a period of 10 years.
• Greatland shareholders have also voted to approve the Acquisition.
• Progress is also being made on the Telfer Tailings Storage Facility 8.
• Completion remains dependent on several conditions in the Admission Document, with company still targeting 4Q24.

Pilbara Minerals (PLS AU) A$2.79, Mkt Cap A$8.4bn – A$1bn debt facility established

• Pilbara has agreed a new A$1bn debt facility via a new RCF with various domestic and international banks.
• The RCF can be used for refinancing, general corporate and working capital purposes.
• Pilbara will pay both it’s A$250m debt facility wth Export Finance Australia and their US$113m syndicated debt facility with Northern Australia Infrastructure Facility.
• Management states the RCF will provide ‘flexibility for future funding and bolsters the Company’s already strong liquidity position.’
• They report ‘strong appetite from both existing and new lenders to participate.’
• The facility will be split between A$500m, over 4 years from the date of syndicated facility agreement, and A$500m over 5 years from the same date.
• The funding cost is a floating base rate ‘plus a Margin linked to a senior net leverage ratio.’

Rome Resources (RMR LN) 0.27p, Mkt Cap £13.5m – Drilling update

• DRC tin explorer Rome Resources provides updates from drilling programmes at Mont Agoma and Kalayi (Bisie North Projects)
• Company has now drilled 1,336m, 1,001m at Kalayi and 335m at Mont Aogma.
• Seven holes have been drilled at Kalayi and one on Mont Agoma.
• A fourth drill rig is currently being mobilised to Mont Agoma by helicopter, expected to start drilling shortly.
• Hard quarry rods are expected to accelerate drilling by boosting efficiency.
• Assays from the first batch of diamond core are currently being shipped to ALS in Johannesburg. Results due this month.
• Next batch of samples to be transported this week.

Semirara Mining and Power Corp (SCC PHS) PHP34, Mkt cap PHP146bn (£1.9bn) – Substantial expansion of coal in the Philippines

• Semirara Mining and Power Corp is proposing to spend over $5bn on coal mine expansion in the Philippines.
• The five-year plan includes capex, operating costs and other expenditure.

Strategic Minerals* (SML LN) 0.2p, Mkt Cap £5m – Strong 3Q sales see an upgrade in FY24 guidance

• 3Q24 magnetite sales amounted to 19kt generating ~$1.3m in revenues.
• That marks a 215%yoy increase in sales reflecting no purchases by Cobre’s major client in the respective period last year.
• 9M24 sales amounted to ~51kt and $3.4m.
• The Company upgraded FY24 guidance with revenues expected to exceed $4.5m (FY23: $1.6m).
• The Company also reports that thanks to strong sales the team repaid two remaining loan facilities for A$100k used to cover working capital neds in October.

*SP Angel acts as Nomad and broker to Strategic Minerals

Xanadu Mines (XAM AU) A$0.07, Mkt Cap A$122m – PFS for Kharmagtai Copper-Gold Project

• Xanadu reported PFS results for its Kharmagtai copper project in Mongolia. (38% economic share)
• Post-tax NPV8 reported at US$930m, 29-year mine life producing 60-80ktpa Cu and 165-170kozpa Au
• Pre-production $1,610m, sustaining CAPEX, $360m over LOM.
• Base case assumes copper price of $4.1/lb and $2,100/oz Au.
• At Spot prices, NPV8 post-tax increases to $1,880m.
• C1 Cu costs reported at $0.7/lb net of by products over the first eight years.
• 1.4:1 strip ratio, average Cu grade processed at 0.21% Cu, average Au grade processed at 0.15g/t Au.
• Concentrate grade of 22% Cu and 11g/t Au.
• Total copper recoveries assumed at 82% Cu and 81% Au.

No.1 in Base Metals: SP Angel mining team awarded No 1. ranking for Base Metals forecasting in LSEG Quarterly Starmine Award for Reuters Polls Q1 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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35-39 Maddox Street London

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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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