SP Angel Morning View -Today’s Market View, Tuesday 17th December 2024

Copper leads metals lower as absence of bazooka stimulus disappoints

MiFID II exempt information – see disclaimer below

Aura Energy* (AURA LN) – A$9m placing adds a new specialist shareholder

Barrick Gold (GOLD US) – Update on Mali situation as tensions continue to escalate

Burgundy Diamonds (BDM AU) – Sales report and Company update

Cobra Resources (COBR LN) – Resource drilling at the Boland rare-earths project, South Australia

Ferro-Alloy Resources (FAR LN) – Non-binding offtake term sheet signed for Balasausqandiq vanadium project

First Tin (1SN LN) – Drilling plans for Taronga

Hummingbird Resources (HUM LN) – Recommended cash offer

Novonix Ltd (NVX AU) – US DOE loan for synthetic graphite production

Rome Resources (RMR LN) – £4.2m strategic investment for further drilling in DRC

Sovereign Metals* (SVML LN) – Rapid rehabilitation of mine area at Kasiya in Malawi improves soil and enhances bioactivity

Copper ($9,000/t) leads metals lower as absence of bazooka stimulus disappoints

• Copper prices have fallen alongside other base metals, with nickel down 1.9%, aluminium down 1.3% and zinc down 0.7%.
• Beijing continues to emphasise support for consumer demand and consumption as opposed to propping up the unravelling property sector.
• Chinese bond yields continue to sink lower, highlighting diminishing confidence in policymaker ability to support growth.
• A weaker Yuan is also weighing on Chinese buyers’ ability to purchase in the international market.
• The Chilean peso has shot lower, highlighting concerns over longer-term prospects for copper, with Chile relying on much of its revenues from the mining industry.
• Premier Li Qiang has called on Xi’s government to ‘act as early as possible’ after they announced plans to take a ‘more proactive’ approach to monetary policy.

Gold ($2,640/oz) extends sell-off as long duration treasuries weaken further on inflation concerns

• Gold prices have been falling since PPI report came in hot last week, reigniting concerns over US inflationary pressures.
• The Fed is expected to cut tomorrow by 25bp, however expectations are for Powell to hint at a slowing cutting cycle going forward.
• The 10 year has risen over 4.4% again, having hit 4.13% in the wake of signs of weakness in the labour report at the beginning of the month.
• However, the market continues to price a soft/no landing, with unemployment still c.4.3% and continuing claims low.
• Gold may be pressured by concerns of stagflation, with potential for slowing labour market meeting higher inflation, constraining the Fed’s ability to cut rates.
• Central Banks will likely continue to accumulate reserves in a bid to diversify away from dollars, with Syria reported to hold c.26t of gold vs $200m in cash.

Rio and BHP team up for EAF steelmaking facility in Western Australia

• Rio Tinto and BHP are forming a JV with BlueScope Steel to build an electric iron-making furnace in Kwinana.
• The project will be a pilot-scale operation producing 30-40kt of molten iron pa.
• The project will use natural gas and hydrogen from Woodside Energy, reducing iron ore to DRI.
• Facility expected to be commissioned in 2028.
• Rio and BHP are struggling with declining grades from the Pilbara, which currently produces 60% of global seaborne iron ore.

Economics

US – FOMC is starting a two day policy meeting with a 25bp rate expected to be announced on Wednesday.

China – Authorities agreed to raise budget deficit to 4% of GDP for 2025 marking the highest level on record, Reuters writes.

• The new deficit compares to an initial target of 2% for 2024 and is in line with a “more proactive” fiscal policy announced by Politburo earlier this month.
• Extra percentage amounts to ~1.3tn CNY (~$180bn) in spending.
• Targets are typically announced at an annual parliament meeting in March and those still can change.

UK – The pound is trading higher this morning as labour earnings beat expectations in October.

• Average weekly earnings (ex bonus) climbed 5.2%yoy, up from 4.9% in September and over 5% expected.

Russia/Ukraine – A top Russian general killed in Moscow in a bomb blast that went off at the entrance to his home Tuesday morning.

• Igor Kirillov, Lieutenant-General, was in charge of the military’s nuclear, chemical and biological defence forces.
• Kirillov is the most prominent military officer assassinated since Russia’s invasion into Ukraine in 2022.
• Kyiv accused Kirrilov of war crimes including the use of banned chemical weapons against the Ukrainian military.

Israel – Discussions are being held between Israel and mediators in Doha over a ceasefire with Hamas and the release of hostages from Gaza.

• Diplomats are aiming to sign a deal before Trump takes office in January, according to FT.
• The agreement considered is based on a version of a three phase plan offered by US President Biden at the end of May.
• The initial phase would involve a six- to eight-week ceasefire during which some of around 100 hostages held by Hamas since October last year would be let go in exchange for the release of Palestinian prisoners from Israeli jails.

Currencies

US$1.0490/eur vs 1.0513/eur previous. Yen 154.08/$ vs 153.66/$. SAr 17.948/$ vs 17.857/$. $1.269/gbp vs $1.265/gbp. 0.634/aud vs         0.637/aud. CNY 7.284/$ vs 7.283/$.

Dollar Index 106.98 vs 106.79 previous

Precious metals:         

Gold US$2,647/oz vs US$2,658/oz previous

Gold ETFs 82.7moz vs 82.9moz previous

Platinum US$930/oz vs US$928/oz previous

Palladium US$943/oz vs US$957/oz previous

Silver US$30.4/oz vs US$30.7/oz previous

Rhodium US$4,575/oz vs US$4,575/oz previous

Base metals:   

Copper US$9,021/t vs US$9,064/t previous

Aluminium US$2,540/t vs US$2,594/t previous

Nickel US$15,580/t vs US$15,845/t previous

Zinc US$3,031/t vs US$3,085/t previous

Lead US$2,001/t vs US$2,018/t previous

Tin US$29,110/t vs US$29,220/t previous

Energy:           

Oil US$73.6/bbl vs US$74.1/bbl previous

• Crude oil prices were stable ahead of tomorrow’s US Federal Reserve’s interest rate decision.
• Forecast 1Q25 international LNG prices are hovering in line with oil prices at around the $12.50/mmBtu level in both Europe and Asia, with approximately one third of the 2024/25 Winter heating season now gone.

Natural Gas €40.2/MWh vs €39.6/MWh previous

Uranium Futures $75.1/lb vs $76.4/lb previous

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$105.6/t vs US$105.6/t

Chinese steel rebar 25mm US$487.5/t vs US$487.1/t

HCC FOB Australia US$204.5/t vs US$205.3/t

Thermal coal swap Australia FOB US$130.5/t vs US$131.5/t

Other:  

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

NdPr Rare Earth Oxide (China) US$55,946/t vs US$56,298/t

Lithium carbonate 99% (China) US$10,022/t vs US$10,024/t

China Spodumene Li2O 6%min CIF US$790/t vs US$790/t

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

China Tungsten APT 88.5% FOB US$338/mtu vs US$338/mtu

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

Europe Vanadium Pentoxide 98% US$5.0/lb vs US$5.0/lb

Europe Ferro-Vanadium 80% US$26.3/kg vs US$26.3/kg

China Ilmenite Concentrate TiO2 US$296/t vs US$299/t

China Rutile Concentrate 95% TiO2 US$1,091/t vs US$1,092/t

Spot CO2 Emissions EUA Price US$65.1/t vs US$65.1/t

Brazil Potash CFR Granular Spot US$292.5/t vs US$292.5/t

Germanium China 99.99% US$2,735.0/kg vs US$2,765.0/kg

China Gallium 99.99% US$430.0/kg vs US$430.0/kg

Battery News

Automakers preparing for stricter emissions regulations in Europe next year

• EV sales in Europe have accounted for around 13% of new vehicle sales in the region in 2024.
• From 2025, EVs will need to account for 22% of the new vehicles sold.
• According to the European Automobile Manufacturers’ Association (ACEA), if automakers don’t make significant adjustments to sales strategy, then it could cost them up to €15bn in fines.
• VW, Stellantis and Renault have raised the prices of petrol engine models by several hundred euros in the last two months, in an attempt to curb demand for heavier emitters and make pricier electric models appealing.
• Stellantis’s Peugeot hiked prices in France of all of models apart from fully electric ones by up to €500.
• Automakers are also looking to discount prices of EVs to drive sales.
• In the UK, which has its own EV targets following Brexit, the sector has warned that EV targets will cost automakers £6bn this year, including about £4bn in discounts.
• Industry analysts believe that “pooling” emissions or buying credits from companies such as Tesla, will be the only way that automakers have a chance of meeting the targets.
• Japan’s Suzuki agreed in October to pool with Geely-owned Volvo in 2025.

Trump transition team targeting sweeping cutbacks to Biden EV policies

• According to a document seen by Reuters, the Trump transition team is targeting sweeping cutbacks to policies supporting EVs and charging stations.
• The document also suggests that stronger measures to block cars, components and battery materials from China will be implemented.
• During his campaign, Trump vowed to ease regulations on fossil-fuel cars and roll back what he called President Joe Biden’s EV mandate.

Company News

Aura Energy* (AURA LN) 7p, Mkt Cap £59m – A$9m placing adds a new specialist shareholder

(Aura Energy hold 100% of Tiris Uranium and 100% of the Häggån Project in Sweden, Häggån hosts 2.5bnt of vanadium, SOP ‘sulphate of potash’ and uranium resource)

• Aura Energy reports that it has firm commitments from investors to raise A$9m via the pacing of ~64.2m shares at a price of A$0.14/share
• The additional shares represent around 7% of the enlarged capital and the funds will “be applied to progressing the development activities at the Company’s Tiris Uranium Project beyond FID”.
• Today’s announcement confirms that “Sachem Cove Partners LLC, a leading international uranium investment group, has committed A$6.5 million and will become a significant shareholder, holding approximately 5.1% of Aura Energy’s issued stock”.
• Welcoming Sachem Cove as a shareholder, CEO, Andrew Grove, described their “extensive expertise in the uranium markets, both physical and equity … [which, he said] … underscores the quality and deep value at the Tiris Uranium Project and for Aura’s broader growth potential”.

Conclusion: Aura Energy’s A$9m fundraising brings a new, specialist uranium investor, to its share register.

*SP Angel acts as Nomad to Aura Energy

Barrick Gold (GOLD US) $16.4 Mkt Cap $29bn – Update on Mali situation as tensions continue to escalate

• Barrick put out a statement yesterday commenting on its ongoing disputes with the Government of Mali over their Loulo-Gounkoto complex.
• The Company comments it has ‘been unsuccessful in arriving at a final resolution despite numerous good-faith attempts to negotiate.’
• Mali is demanding an increased share of the economic benefits of Loulo-Gounkoto.
• Mali is looking to push Loulo-Gounkoto into the 2023 Mining Code.
• Company reports that multiple Barrick employees have been ‘imprisoned without cause and gold shipments blocked.’
• Barrick reports Loulo employs a 97% Malian workforce of its 8,000 employees, with ‘the Malian state receiving more than 70% of the economic benefits from the complex.’
• Barrick CEO, Bristow, states that recent events ‘further erode investor confidence in Mali’s mining sector and will deter future investment.’
• The Company states that should shipments remain suspended. They will be ‘compelled to suspend operations.’
• Loulo was guided to 510-560koz of attributable production to Barrick in 2024, at AISC of US$1,150-1,250/oz.

Burgundy Diamonds (BDM AU) A$0.08 Mkt Cap A$111m – Sales report and Company update

• New diamond producer Burgundy, who has taken control of the Ekati mine in Canada, provides an update.
• The Company sold 583kcts in an October sale at an average price of US$80/ct for proceeds of US$47m.
• In December, provisional sales suggest 435kcts sold at an average price of US$106/ct for proceeds of US$46m.
• The Company points to a potential recovery in the diamond market, based on gains in the mid to large size categories in December.
• Burgundy expects to deliver an update on its mine life extension efforts at Sable underground and Misery underground, alongside an updated Fox PFS.

Cobra Resources (COBR LN) 1.2p, Mkt cap £9.6m – Resource drilling at the Boland rare-earths project, South Australia

• Cobra Resources reports that aircore drilling is underway at its Boland rare-earths project with an initial 20 holes aimed at extending the existing mineralised envelope expected to be completed before Christmas.
• This drilling is the first part of a larger 12,000m programme “to support a maiden resource at the Company’s Boland Project as a precursor to undertaking initial economic evaluations in the form of a scoping study in late 2025”.
• The full programme is expected to be completed by the end of January with the first assay results likely in February.
• Managing Director, Rupert Verco, explained the rationale for resource drilling after metallurgical testing where the most recent results were released yesterday as de-risking “key features of the deposit … with a measure of confidence in the future economics”.
• He explained that rare earths at Boland “are hosted within permeable sands … [confined by impermeable clays] … which is the critical enabler of ISR … [in-situ recovery] … as an extraction method to bypass the challenges of handling and treating clay ores. This reduces both infrastructure and operational costs, positioning Cobra for a potential bottom quartile cost mining operation”.

Conclusion: We look forward to drilling results from Boland and eventually to an initial mineral resource estimate.

Ferro-Alloy Resources (FAR LN) 10.5p Mkt Cap £51m – Non-binding offtake term sheet signed for Balasausqandiq vanadium project

• Ferro-Alloy, who hold the Balasausqandiq vanadium project in Kazakhstan, have entered a non-binding offtake term sheet.
• The Agreement was reached with LL-Resources for the sale of vanadium pentoxide from Balasausqandiq’s Phase 1.
• The term will cover a six-year period from the start of production.
• LLR trades with over 300 steel mills, foundries, and other end users with a global turnover of €550mm last year.
• Management expects the deal to enable them to ‘begin to negotiate the project financing with confidence in our routes to market.’

First Tin (1SN LN) 6p, Mkt Cap £27.1m – Drilling plans for Taronga

• First Tin has outlined its 2025 plans for drilling 10,000m at its Taronga tin project in New South Wales.
• Drilling aims to expand the existing resource base and upgrade the current ‘Inferred’ resources to the more assured ‘Measured & Indicated’ level.
• The company’s website reports 71.9mt of ‘Measured & Indicated’ resources at an average grade of 0.12% tin plus an additional ‘Inferred’ resource of 61.1mt at an average grade of 0.09% tin.
• Today’s announcement highlights that the “Taronga Definitive Feasibility Study noted that approximately 3.6Mt of … [the] … Inferred resource is located within the current pit designs … [and that this portion of the resource] … is currently not included in any economic analysis”.
• The company also clarifies that geological modelling “shows that some of this inferred mineralisation is related to a poorly defined lode structure located close to the northwestern pit walls in both the north and south pits”.
• “If this lode structure can be shown to be continuous and mineralised, it could add significantly additional resources that may possibly allow the northwestern walls to be pushed back and the pits deepened”.
• First Tin indicates that its geological model “suggests that around 19Mt of Inferred resource could be added to Indicated and Measured categories if this drilling is successful, mainly from the Hillside Extended lode system.  This is both within, and external to, the current pit designs”.
• CEO, Bill Scotting, commented that if the Taronga resources can be expanded and upgraded they could “translate to additional ore reserves and ultimately a longer life of mine”.
• An increased resource and reserve “will form the basis of a revised, optimised and value enhanced update to the feasibility study, planned to be completed during 2025”.

Conclusion: Additional drilling at Taronga is aimed at expanding and upgrading existing resources in order to extend mine life with revision to the current DFS expected to be available in 2025.  We look forward to the results of the drilling, the revised resource estimate and feasibility assessment.

Hummingbird Resources (HUM LN) 2.17p, Mkt Cap £18m – Recommended cash offer

• Nioko Resources made a 2.68p cash offer for remaining shares in Hummingbird.
• The price is the same as the recently agreed debt-to-equity conversion for outstanding debt with CIG, that owns Nioko Resources.
• The offer is recommended by the Company.
• The Company earlier agreed a debt for equity conversion relating to the CIG $30m loan that would take Nioko interest in the Company from current 42% to 72% following the restructuring.
• Nioko will be seeking the cancellation of the admission to trading on AIM once restructuring is completed.
• The team highlighted operational and liquidity challenges in both Guinea and Mali .
• The Company needs urgent injection of new capital to meet creditor payments, replenish essential spare parts and invest in engineering and drilling.
• The Company also mentions grade reconciliation issues at Kouroussa, supplier availability, and the political and operating environment in Mali, as well as specific risks to delivering Yanfolila’s underground plan which currently relies on further definition drilling which is currently unfunded.
• The offer is subject to a series of conditions including Rule 9 Waiver resolution passing at the 23 December 2024 and regulatory approvals among others.
• The offer is expected to become effective 1Q25.

Novonix Ltd(NVX AU) A$0.6 Mkt Cap A$341m – US DOE loan for synthetic graphite production

• Novonix has agreed a conditional commitment from the US Department of Energy for a direct loan of up to US$755m.
• The funding will be used for a new facility at Chattanooga, Tennessee.
• At full capacity, the facility will be able to produce 31.5ktpa synthetic graphite, with full production aimed for 2028-end.
• The graphite will be fed into the EV anode market.
• Novonix has offtake agreements with Panasonic, Stellantis and PowerCo.
• Novonix is currently working on a synthetic graphite facility, also in Chattanooga, which is aiming to produce 20ktpa from 2025.

Rome Resources (RMR LN) 0.37p, Mkt Cap £16m – £4.2m strategic investment for further drilling in DRC

• Rome Resources reports that it has raised £4.2m via a strategic investment from Stanvic Mining which is described as “a specialist long-term investor that operates in the DRC mining commodity sector with a well-established portfolio of resource investee businesses”.
• Stanvic Mining is subscribing for 1.2bn additional shares at a price of 0.35p/share and “Stanvic will … [also] … receive one Warrant for every one Ordinary Share subscribed for pursuant to the Subscription, with each Warrant entitling the holder to acquire one new Ordinary Share at the Exercise Price … [of] … 0 .50 pence per new Ordinary Share”.
• As a result of its investment, Stanvic Mining will hold 19.76% of Rome Resources.
• Today’s announcement confirms that “the net proceeds of approximately £4.1 million” will be used to:
  • Expand “the current drilling campaign through into 2025”; and
  • “further geophysics (including LIDAR* mapping) and surface geochemical exploration”; as well as
  • “regional geological work to support the exploration model”.
• Chief Executive, Paul Barrett, said that Rome Resources is “immensely pleased to have attracted a strategic partner who is well positioned in the DRC and who is familiar with the mining industry, which further reinforces the quality of the Bisie North Project”.
• He said that “the Strategic Investment allow the Company to continue its drilling efforts beyond the current drilling programme … [and] … will also accelerate the work required to … add significant value”.

Conclusion: A strategic investment of £4.2m adds a key new shareholder and provided funding for further drilling and other exploration at the North Bisie tin project in DRC.

Sovereign Metals* (SVML LN) 38.80p, Mkt Cap £228m – Rapid rehabilitation of mine area at Kasiya in Malawi improves soil and enhances bioactivity

(Sovereign currently holds 100% of the Kasiya project. Malawi has 10% free carry right. Rio Tinto acquired an initial strategic interest of 15% for A$40m mid 2023 and has recently invested a further A$19.2 to move up to 19.9%)

STRONG BUY – Valuation 55p

• Sovereign Metals in close cooperation with Rio Tinto and their environmental advisors report the filling in and rehabilitation of land covering the first test pit at the Kasiya mine site.
• The rapid backfilling of the pit with run-of-mine material and improved soil should provide better crop yields and support sustainable farming for land after mining.
• Importantly, the backfilling and remediation process should allow farmers to return to their land without losing a single planting season.
• The extraction of rutile and graphite from the run-of-mine material requires no chemical interaction meaning the material can be safely reintroduced back into the pit.
• The work also shows that Sovereign are able to mine and extract rutile and graphite from the Kasiya site using dry and wet mining processes with relatively little disruption of the farming cycle.
• The dry-mining fleet which had mined 170,000m³  of material was able to refill the pit to the original ground level in less than two months and ahead of schedule.
• Local on-site soil remediation incorporating carbon in the form of biochar, lime and a fertiliser in the form of potash, phosphate, and a blend of nitrogen, potash, and sulphur.
• Local dolomitic lime is used to improve naturally low PH levels.
• Existing soils are replaced and improved through grading, ripping, and discing using graders and locally sourced farming equipment to ensures the land is level and safe.
• Sovereign is planting rehabilitation crops to maximise crop yields from the coming summer rainfall.
• Giant bamboo will be introduced in 4 by 8-metre blocks to serve as a primary crop to enhance carbon and bioactivity in the remediated soils.
• Maize and other cover crops will be intercropped between the giant bamboo in formalised farm blocks for return to local farmers.
• The work is designed to show local communities how fast and how well the land can be rehabilitated for farming after mining.
• Pictures in the press release show the rehabilitated pit along with the introduction of lime and biochar to the test site.
• Given the success of this latest trial it will be interesting to see how this affects the PFS capex estimates.
  • Capex – Stage 1: US$572m – increased from the Scoping Study due to the acceleration of Stage 2 items such as the rail spur and water dam.
  • Expansion capital – US$652m for plants 2 & 3 funded from project cashflows, Inc. Stage 2: US$287m expansion to 24mtpa, Plant Relocation capex US$366m
  • Sustaining Capital: US$470m
  • Payback: 4.3 years

Conclusion: The well considered and expert work being done at Kasiya should set new standards in how to manage and rehabilitate land for local farming and community use.

This is another important step towards the goal of the Final Investment Decision for the Kasiya mine in Malawi.

*SP Angel act as Nomad and Broker to Sovereign Metals. The analyst has recently visited the Kasiya mine site. We highly recommend the Malawi coffee beans sold in Lilongwe airport.

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

Arthur Parish – Arthur.Parish@spangel.co.uk – 0203 470 0476

Sales

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

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

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

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

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

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