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

Gold and base metals continue to rise as market looks for larger Fed rate cuts

MiFID II exempt information – see disclaimer below

Bushveld Minerals* (BMN LN) – Losses climb on lower sales and vanadium prices

Europa Metals Limited (EUZ LN) – Proposed disposal of the Toral project in Spain & RTO of Viridian Metals

First Quantum Minerals (FM CN) – Voluntary ‘retirement’ reportedly on offer to workers at Cobre Panama

Pasofino Gold (VEIN CN) – Exclusivity agreement regarding a potential US$75m offer

PYX Resources (PYX LN) – Rutile export licence

Winsome Resources (WR1 AU) – Scoping Study for Adina Lithium Project in Quebec

Wishbone Gold* (WSBN LN) – Red Setter geophysics delivers improved geological understanding ahead of diamond drilling

Gold – $2,583/oz – Saudi Arabia Central Bank appear to be buying gold in preference to US dollars

Gold futures now at $2,615/oz

Spot gold hit $2,590/oz yesterday with the December gold future at $2,617/oz

• Saudi Arabia has been quietly buying gold adding a further 160t of gold since early 2022, just after the start of the Ukraine war. (Gulf Insider).
• The 160t import figure is deduced by ‘Money Metals’ through cross-boarder trade statistics though central bank trade are exempt from disclosure.
• But the bullion banks declare physical gold shipments to customs which is where the trade shows.
• Money Metals simply subtract Saudi consumer demand from its imports and compare the gold imported but not sold to consumers with gross exports from Switzerland to Saudi Arabia.
• While the PBoC says it has not been buying gold we suspect a number of central banks have been quietly adding to their holdings in the expectation of US dollar weakness as the Fed cuts rates.

Is hydrogen the future for commercial vehicles?

• Diesel-powered light commercial vehicles (LCVs) are making a resurgence, with sales increasing in 2024 (Auto Express).
• Electric van sales dropped by almost 40% in 2024 compared to 2023, with only 566 sold in Britain by August 2024.
• Sales of electric LCVs have slumped by 85% compared to August 2023, with less than one electric van sold per day.
• Despite government pushes for electric LCVs, only 5% of consumers have adopted electric technology, while over 90% remain loyal to diesel.
• LCV consumers prefer diesel for its lower costs, faster refuelling times, and minimized downtime.
• The shift from diesel to electric LCVs may take decades, and some industry leaders believe hydrogen, not electric, is the future solution for LCVs and heavy goods vehicles.
• Companies like Toyota, BMW, and Hyundai are pioneering hydrogen technology, which is seen as a better fit for commercial transportation.

Global battery capacity estimated to grow 800% by 2027

• By 2027, global battery production is expected to increase nearly 800%, reaching 8,945 GWh, with China accounting for 69% of total production (BloombergNEF)
• Despite projected growth in US battery production, America will only represent 10% of global production by 2027.
• China’s dominance driven by intense domestic competition, consolidation and policy support could lead to major players like CATL and BYD controlling nearly 70% of global production by 2030.

EV battery prices have also dropped 90% over the past 15 years

• The US and EU are investing heavily in battery R&D and manufacturing but continue to lag China.
• Last week, Europe’s biggest battery hope, announced it was scaling back full supply chain expansion and would focus solely on cell production and will source anode and cathode materials from China.

SharePickers: Video: This is Why Gold is Rising and It Will Probably Continue: https://www.youtube.com/watch?v=EsA7ICSVku8

• 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 – Mooncake, mid-Autumn, festival today

• Housing starts fell 22.5% yoy.
• Home competitions also fell 23.6% for the year-to-date.
• Cement production fell 11.9% yoy reflecting the poor state of construction but it could have been worse.
• Steel production fell 6.5% to 110.0mt in August though production for the year is 0.4% higher yoy at 925.7mt.
• House prices fell in 69 out of the 70 largest cities
• Automotive sales rose 4.5% to 2.453m units in August vs 2.62m in July
• High-tech manufacturing rose 8.6% yoy driven by a 17.8% rise in semiconductors, 11% gains in computers and electrical equipment and a 12% rise in rail, ships and aircraft.

EU – Q2 labour cost index rose 4.7% yoy vs 5% in Q1

• EU wages rose 4.5% in Q2 vs 5.2% in Q1.

Currencies

US$1.1136/eur vs 1.1111/eur previous. Yen 140.42/$ vs 139.88/$. SAr 17.624/$ vs 17.663/$. $1.322/gbp vs $1.316/gbp. 0.676/aud vs 0.672/aud. CNY 7.097/$ vs 7.097/$.

Dollar Index 100.69 vs 100.76 previous

Precious Metals

Gold US$2,585/oz vs US$2,582/oz previous

• Gold ETFs 83.2moz vs 83.3moz previous

Platinum US$991/oz vs US$992/oz previous

Palladium US$1,094/oz vs US$1,073/oz previous

Silver US$30.8/oz vs US$30.9/oz previous

Rhodium US$4,775/oz vs US$4,800/oz previous

Base metals:   

Copper US$9,437/t vs US$9,266/t previous

Aluminium US$2,534/t vs US$2,494/t previous

Nickel US$16,355/t vs US$16,050/t previous

Zinc US$2,968/t vs US$2,916/t previous

Lead US$2,050/t vs US$2,050/t previous

Tin US$31,850/t vs US$31,900/t previous

Energy:           

Oil US$73.0/bbl vs US$72.0/bbl previous

• Crude oil prices were stable ahead of tomorrow’s key decision by the US Fed, where a 0.5% interest rate reduction would be seen as more bullish for oil demand.
• BKV Corporation launched its delayed IPO that will value the Company at $1.6-1.8bn, based on a production portfolio of 718mmcf/d in in Texas’ Barnett shale and Pennsylvania’s Marcellus shale.
• Coterra’s CEO said the Company has dropped its last Marcellus rig, in line with 2Q24 results guidance, and may also pause completion as it waits for stronger natural gas prices to emerge in Appalachia.
• BP announced plans to divest BP Wind Energy, which operates ten onshore wind farms across seven states in the US, and intends to focus its renewable efforts on Lightsource BP, its US solar power business.

Natural Gas €34.5/MWh vs €34.6/MWh previous

Uranium Futures $79.5/lb vs $79.6/lb previous

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$92.5/t vs US$91.6/t

Chinese steel rebar 25mm US$473.1/t vs US$473.1/t

Thermal coal (1st year forward cif ARA) US$112.8/t vs US$115.3/t

Thermal coal swap Australia FOB US$132.8/t vs US$133.0/t

Coking coal Dalian Exchange futures price US$172/t vs US$172.0/t

Other:  

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

NdPr Rare Earth Oxide (China) US$58,122/t vs US$58,122/t

Lithium carbonate 99% (China) US$9,933/t vs US$9,933/t

China Spodumene Li2O 6%min CIF US$740/t vs US$740/t

Ferro-Manganese European Mn78% min US$995/t vs US$995/t

China Tungsten APT 88.5% FOB US$330/mtu vs US$330/mtu

China Graphite Flake -194 FOB US$440/t vs US$440/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$321/t vs US$321/t

China Rutile Concentrate 95% TiO2 US$1,374/t vs US$1,374/t

Spot CO2 Emissions EUA Price US$64.4/t vs US$64.4/t

Brazil Potash CFR Granular Spot US$290.0/t vs US$290.0/t

Germanium China 99.99% US$2,625.0/kg vs US$2,625.0/kg

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

Battery News

Italy back EU tariffs on Chinese EVs

• Italy will back tariffs proposed by the European Commission on imported Chinese EVs, according to the Italian Foreign Minister, Antonio Tajani.
• The Foreign Minister made his comments in an interview with Corriere della Sera.
• Mr. Tajani met with Chinese minister Wang Wentao, who is currently in Europe for discussions, with senior figures, regarding the incoming tariffs.
• Italy is a major carmaker in Europe, and has also been seeking to attract Chinese carmakers including Dongfeng and Chery Auto to open factories in order to raise vehicle output.

Tata Motors and MG Motor to offer free charging and battery rental to encourage sales

• Tata Motors and MG Motor are offering free charging and battery rental plans to attract electric vehicle buyers in India.
• Despite rapid EV growth in recent years, sales now represent only 2% of India’s annual car sales, with recent declines attributed to high prices and limited charging infrastructure.
• Gasoline and diesel vehicles remain popular due to the scarcity of charging stations, despite government efforts to promote clean cars.
• While electric scooter sales have surged, electric car sales remain below 100,000 annually.
• Luxury brands like BYD, BMW, and Mercedes-Benz continue to launch EV models, targeting India’s affluent buyers.

Despite growing EV sales, automakers reassess their electric plans

• EV sales in Canada are growing, with BEVs and PHEVs now accounting for 12.9% of new registrations, compared to just 3.4% five years ago (CBC).
• Over 65,000 BEVs and PHEVs were registered in the second quarter of 2024, reflecting steady growth but slower than anticipated.
• Automakers like General Motors and Ford are scaling back their EV production goals, while others like Volvo have adjusted their timelines for going fully electric.
• New 100% tariffs on Chinese-made EVs are delaying the introduction of cheaper models in North America to give domestic EV manufacturing time to grow.
  Federal and provincial incentives have helped boost EV adoption, especially in provinces like Quebec, though some subsidies are set to decrease or end.
• To meet federal targets and spark demand, EV prices would need to drop by around 31%, according to a report by the Parliamentary Budget Officer.

Company News

Bushveld Minerals* (BMN LN) 0.45p, Mkt Cap £10m – Losses climb on lower sales and vanadium prices

• The Company released interim results primarily reflecting Vametco operations with Vanchem classified as held for sale discontinued asset.
• Revenues amounted to $25.6m (1H23: $55.1m) reflecting lower sales volumes and realised vanadium prices.
• Sales totalled 949mtV (1H23: 1,428mtV) on the back of lower production At Vametco amid capital constraints and maintenance shutdowns as well as less destocking recorded compared to the respective period last year.
• Realised FeV prices averaged $26.9/kgV (1H23: $38.6/kgV) weighed down by slowing economic outlook in general and struggling steel demand in China, in particular.
• AISC costs averaged $42.9/kgV (1H23: $30.8kgV) primarily reflecting lower sales volumes.
• EBITDA came in at -$14.3m (1H23: $12.5m).
• At Vanchem, sales amounted to 690mtV (1H23: 668mtV) with realised prices of $22.5/kgV and $34.9/kgV.
• AISC costs averaged $52.8/kgV(1H23: $38.9/kgV).
• Vanchem EBITDA amounted to -$7.6m (1H23: -$2.3m) excluding a $12.3m impairment.
• Group wide, net loss came in at $45.0m (1H23: -$12.5m) including $20.8m loss recorded at Vametco (1H23: -$6.3m).
• Group FCF amounted to -18.2m (1H23: -$5.3m) including -$12.7m (1H23: -$10.7m) at Vametco.
• Capital spend was cut significantly as the Company struggled with liquidity with Group wide capex down to $1.9m (1H23: $4.3m) including $0.9m at Vametco.
• Net Debt climbed to $123m (YE23: $106m) including only $1.0m in cash balance as of period end and $125m in outstanding debt mostly with Orion and SPR.
• Latest cash balance is reported to stand at $4.1m as of 31 August with the Company reporting receiving $10m in matched funding from Orion.
• The Company highlighted in accounts that its going concern status is contingent on closing Vanchem and Mokopane sale on time (Competition Commission approval is expected end of October 2024), Orion support, achieving production target and performance of vanadium prices averaging $29.2/kgV in the remained of 2024 (8% over current levels) and $34.4/kgV in 2025 (27% above).

Conclusion: Interim results reflect both a drop in sales volumes driven by lower production in 1H24 on capital constraints and weak vanadium prices. The management implemented a series of initiatives to reduce the cash burn and downsize operations amid an ongoing Vanchem sale process (authorities’ approval expected late October) with the future of the business ultimately dependent on a recovery in the vanadium price from current depressed levels.

*SP Angel act as nomad and broker to Bushveld Minerals

Europa Metals Limited (EUZ LN) 2p, Mkt Cap £2m – Proposed disposal of the Toral project in Spain & RTO of Viridian Metals

• In two separate announcements today, Europa Metals reports plans to sell its Toral zinc / lead /silver project in the Spanish region of Castilla y Leon to Canadian-based Denarius Metals Corporation for C$3.5m in shares and also to acquire Viridian Metals Ireland and its wholly-owned Tynagh lead/zinc/copper/silver project in Ireland via a reverse takeover.
• Disposal of the Toral project, which hosts an underground ‘Indicated’ resource of ~7mt at a grade of 5.0% zinc, 3.7% lead and 29g/t silver plus ‘Inferred’ resources of 13mt at a grade of 4.1% zinc, 2.3% lead and 19g/t silver is subject to the successful completion of Board, shareholder, and regulatory approval and “provides Europa … [with] … exposure to Denarius’ portfolio of projects within Spain and Colombia”.
• Europa Metals also announces “the proposed acquisition of Viridian Metals Ireland Limited, (“Viridian”), and its 100 % owned Tynagh brownfield Pb/Zn/Cu/Ag project in the Republic of Ireland” via a “a reverse takeover under the AIM Rules”.
• The Tynagh mine was worked as both surface and underground operations during the 1970s and hosts waste ‘tailings’ from this era at “an equivalent grade to what is being mined underground elsewhere today” comprising a CIM compliant “4.0mt@6.1% combined Zn+Pb, 1.4 Oz/t Ag (44g/t Ag), 18.95% BaO” plus “2.7mt@1.7% combined Zn+Pb, 0.4 Oz/t Ag (13g/t Ag), 9.5% BaO”.
• The company also alludes to a “possible 3.0mt of non compliant resources”.
• The transaction with Viridian Metals is subject to “a number of conditions including;

• • satisfactory mutual due diligence
  • entering into a definitive legal agreements
  • raising further funds for the Proposed Transaction
  • approval by Europa shareholders at a General Meeting
  • obtaining all necessary approvals (if required) and;
  • granting of eligibility for the readmission of the Company to AIM by the LSE”

• Executive Chairman and Acting CEO, Myles Campion, described the proposed acquisition of Tynagh as “an important inflexion point for Europa whereby the Company now has a clear pathway to affordable production”.

Conclusion: Europa Metals is embarking on a new path as it disposes of its long-term project at Toral in Spain and embarks on plans to process tailings from historic mining at Tynagh in Ireland.  We await developments.

First Quantum Minerals (FM CN) C$16.77, Mkt Cap C$14bn – Voluntary ‘retirement’ reportedly on offer to workers at Cobre Panama

• News reports indicate that First Quantum Minerals is offering workers at the Cobre Panama operation voluntary ‘retirement’.

• The mine is currently suspended following a decision by the Panamanian Supreme Court and environmental protests.
• The reports suggest that the Government is unlikely to address the issue until next year and that “First Quantum has asked its employees in Cobre Panama to choose between taking the voluntary retirement offer that would come into effect from January 2025 or work with reduced hours”.
• Union representatives are quoted saying that a “small number” of the approximately 900 workers remaining on site had accepted the offer “and most of the employees would prefer to work with reduced work hours”.
• The US$6.5bn mine has capacity to produce ~350ktpa of copper but has been the subject of previous disputes with Government over tax and royalty issues as well as attracting environmental criticism from activists.

Pasofino Gold (VEIN CN) C$0.72, C$81m – Exclusivity agreement regarding a potential US$75m offer

• The Company signed an exclusivity agreement for a potential acquisition of Pasofino in a cash deal for US$75m (~C$0.91/share).
• The potential offer implies a 26% premium to the Monday close of C$0.72.
• The agreement offers an exclusivity period for a potential acquisition of the Company until November 7.
• The offer is subject to due diligence with a definitive agreement expected to be singed in 4Q24.
• Pasofino holds a 100% interest in a FS stage Pasofino Gold Project in Liberia hosting 2.8moz at 1.30g/t in Reserves and 3.9moz at 1.35g/t in total Resource.
• Hummingbird Resources (HUM LN) holds a 53% interest in Pasofino.

PYX Resources (PYX LN) 6.5p, Mkt Cap £28m – Rutile export licence

• PYX Resources reports that the Indonesian Ministry of Trade has granted it a licence to export rutile at a minimum grade of 90% TiO2 from its mineral sands operations in Kalimantan.
• The licence, which comes into immediate effect and requires PYX Resources to “use two types of Ports, a Loading and Export Port”, allows the company to supply from stockpiled material amounting to ~6,000t of rutile.
• Under the licence, the company will load at the Banjarmasin port and export via Jakarta.
• CEO, Oliver Hasler, described the permission to export rutile as “a pivotal step forward in strengthening our market position, as a leading producer of mineral sands”.

Winsome Resources (WR1 AU) A$0.5, Mkt Cap A$112m – Scoping Study for Adina Lithium Project in Quebec

• The Company released a Scoping Study on its 100% owned Adina Lithium Prooject located in James Bay region, Quebec.
• The project is designed as an open pit operation with a 21y LOM using a DMS circuit (ie no flotation) producing spodumene concentrate and using Renard diamond’s mine existing processing facility and associated infrastructure.
• Renard processing plant features a primary jaw crusher, secondary cone crusher, high-pressure grinding rolls, ore sorting, and DMS circuits necessary for lithium processing and spodumene concentrate production.
• The Company reports that the capital investment to date at Renard based on publicly available information is over C$900 million.
• The mine is expected to run at 5.3x strip ratio delivering 35.8mt at 1.24% Li2O over the life of mine.
• The plant to run at 1.7mtpa with 67.2% recoveries and producing ~260ktpa SC5.5 (~240ktpa SC6.0 equivalent).
• C1 and AISC are estimated at US$615/SC and $716/SC, respectively.
• Development capex of $259m after deducting $33m in tax credits under the Clean technology manufacturing – Income Tax Credit scheme.
• The study used flat $1,375/SC5.5 FOB Quebec price ($1,500/SC6.0 equivlent)
• Estimated post tax NPV8 and IRR are $743m and 43%, respectively, with NPV falling ~26% for a 10% reduction in the assumed price.
• FID is targeted for 1H27.
• Adina hosts 77.9mt at 1.15 Li2O in total resource including 61.4mt at 1.14% Li2O in the Measured and Indicated category.

Wishbone Gold* (WSBN LN) – 0.63p, Mkt Cap £1.9m – Red Setter geophysics delivers improved geological understanding ahead of diamond drilling

• Wishbone Gold reports that recent 3D geophysical modelling of mobile magnetotelluric data from its Red Setter exploration project in the Paterson Range in WA has provided insights into the possible origin of gold and copper mineralisation extending over a 3km strike length.
• The modelling “provides a key insight in advance of the next stage of the diamond drill program at the site” and shows deeper level dome structures, similar to those observed at the large, nearby Telfer mine, which may be linked to the metallogeny of Red Setter.
• The company says that “Last year’s reverse circulation (“RC”) drill collar program penetrated to a depth of 300m with new modelling showing the target at a depth of approximately 550m for the targeted diamond drill program”.
• The exploration at Red Setter is still at a relatively early stage and Wishbone Gold explains that the “cover in the area which is mostly in the range of 50-100m depth means that the full understanding of these systems requires good geological management and a systematic approach”.
• Chairman, Richard Poulden, explained that “delineated lineaments, derived from the EM data, will help emphasise and evaluate geological structures that control mineralisation and assist in drilling planning”.

Conclusion: The geophysical results from Red Setter should aid in planning the next, diamond-drilling, phase of exploration which is expected to probe deeper to up to 550m depth.  Similarities to the nearby Telfer deposit are encouraging the exploration team and we look forward to results from the drilling in due course.

*SP Angel acts as a Broker for Wishbone Gold

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

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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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