SP Angel Morning View -Today’s Market View, Tuesday 18th April 2023

Tin extends gains as International Tin Association Confirms Myanmar state export ban

MiFID II exempt information – see disclaimer below

Anglo American (AAL LN) – Environmental permit approved for the next phase of development at Las Bronces.

East Star Resources (EST LN) – Results for 13 months to 31^st December 2022

Galantas Gold* (GAL LN) – Gairloch drilling to start in coming weeks

Leo Lithium (LLL AU) – Annual report and expectations of first ore shipment this year

Oriole Resources* (ORR LN) – CLICK FOR PDF –  £157k received from R&D rebates

Petra Diamonds (PDL LN) – Increased Q3 output at Finsch and Cullinan mines lifts diamond production by 3%.

Tin extends gains as International Tin Association confirms Myanmar state export ban

• Tin prices hit nine-month highs this morning, bouncing to $28,343/t before settling at $27,770/t .
• Yesterday’s rally extended this morning on a note from the International Tin Association stating that a general halt to mining operations in Wa state was ordered by the United Wa State Army. (Bloomberg)
• Mining in Wa State will be suspended from the beginning of August in order to preserve remaining resources. (Reuters)
• The ITA’s Pearce notes that there is ‘a fair bit of buffer stock’ in Chinese refineries, however this will leave a major supply hole in the already-tight tin market.
• The region accounts for c.30% of China’s total supply of tin ore, with over 70% of China’s tin ore imports coming from wider Myanmar.
• Analysts suggest weak demand for electronic products and battery products for the foreseeable future should keep prices from an unsustainable rally.

Gold – $2,002/oz – Gold strengthened following a 2% slide yesterday on mixed rate hike signals

• Gold slid to $1,984/oz in the spot market yesterday before climbing again to $2,002/oz.
• Bullion prices are tracking the US dollar, which hit a one week high yesterday before sliding back again, supporting gold.
• Manufacturing activity data from new York showed an increase for the first time in five months, with homebuilder confidence also improving, tempering concerns of an imminent US recession.
• The positive data points on Monday lifted US Treasury yields for 10 year notes to 3.6%, 30bp higher than lows hit in the first week of April.

Iron ore bounces from multi-month lows after promising Chinese economic data

• Singapore iron ore jumped 2% to $118/t this morning alongside finished steel product prices after China’s GDP reportedly rose 4.5% yoy.
• China is currently in its peak construction season, with iron ore stockpiles at domestic ports sitting at five-month lows.
• Steel mills are reportedly replenishing inventories, although pricing data suggests demand remains weaker than expected.

Peru copper exports slide 20% as miners warn of ever tightening market

• Peruvian copper exports fell 20% in January and February despite production climbing 5%.
• Miners are struggling to ship concentrate withheld on mine sites during the country’s extended period of social unrest after Castillo’s impeachment.
• MMG notes it will take until Q4 to ship 85kt of copper from Las Bambas.
• Global copper inventories stand at 18-year lows, with executives warning of deficits as soon as 2026.
• Copper prices fell to $8,900/t this morning but have been rangebound around the $9,000/t mark for the past three months.

Ancient ocean floor surrounds Earth’s core, seismic imaging reveals

• Scientists have discovered an ancient ocean floor between Earth’s core and mantle according to Science Advances.
• Underground imaging using seismic shows a massive, ancient, ocean floor surrounds potentially the whole of the earth’s core.
• The thin, dense layer is around 2,000 miles deep between the core and the mantle making up a core-mantle boundary.
• The dense ocean crust near the core creates an ULVZ ‘ultra-low-velocity-zone structure’ where seismic waves travel slowly.
• 15 seismic stations across Antarctica measuring waves from earthquakes collected data for three years to show the boundary around the 450-mile-wide solid metal core.
• The ancient ocean floor is thin at around 3.1 miles when compared with the 450 mile-wide core and 1,800 mile thick mantle

Fossilised lightning – crystal-like matter found in fulgurite

• A potential new mineral has been discovered within a chunk of fulgurite (fossilised lightning) found behind a tree which was hit by lightning in Florida.
• Scientists say they have never seen this material occur naturally on Earth though similar minerals are seen in meteorites and in space, see: Communications Earth & Environment journal
• The new mineral is a colourful, crystal-like matter composed of calcium phosphate (CaHPO3) with scientists looking to confirm the uniqueness of their find..
• This is not the first time a new compound has been found in fulgurite with an unusual type of quasicrystal found in a fulgurite in Nebraska. Quasicrystals have non-repeating structures.

Lithium – Lilac Solutions (private) claims historic advancement with unique ion exchange technology

• Lilac Solutions has earned its way into a 20% stake in the Kachi Project through production of 2.5t of lithium carbinate equivalent at site with an 80% recovery rate from a 200-300 mg/L grade brine.
• The project is now on track to move from its pilot phase into commercial-scale development.
• Lilac claim this is the first successful implementation of ion exchange technology in South America with > 200,000 hours of operation at their mini-pilot and pilot scale operations in North America.
• Lilac report they have proven it possible to produce high-purity lithium faster and without evaporation ponds.
• Purity: The lithium chloride Lilac produces is low in impurities, enabling efficient production of high-purity lithium carbonate for battery manufacturers. Rejection of boron, is greater than 99.9%;
• Lake and Lilac plan to raise production to 50,000tpa through scaling up the technology.
• The technology is more commonly used for water treatment and metals processing applications.
• Lilac produces its ion exchange beads which are saturated with lithium in brines. Hydrochloric acid is then used to flush out the lithium, yielding lithium chloride which may be further processed into carbonate or hydroxide products for battery manufacturers. Lithium chloride prices are currently at $47,100/t .
• Unfortunately, there is no mention of the cost capital, operating costs, cost of ion exchange beads, or, energy consumption.

Economics

G7 Environment meeting in Japan agreed a new, tough 1TW target for solar and 150GW for offshore wind capacity but held back on a faster phase out of coal by 2030

• The group agreed to achieve net zero in energy systems by 2050.
• The IEA has called for an annual average 9% reduction in unabated coal-fired generation between 2022 and 2030 and a complete phaseout by 2040.

China – Growth beats estimates accelerating to 4.5% in Q1/23 led by strong gains in consumer spending.

• Retail sales climbed 10.6%yoy in March marking the biggest monthly increase since Jun/21.
• GDP (%yoy): 4.5 v 2.9 Q4/22 and 4.0 est.
• Industrial Production (%YTD): 3.0 2.4 February and 3.5 est.
• Retail Sales (%YTD): 5.8 v 3.5 February and 3.7 est.
• FAI (%YTD):  5.1 v 5.5 February and 5.7 est.

Germany – Investor sentiment pulled back below all estimates in April on the back of a continuing tightening in the monetary policy and following a brief period of increased concerns over the health of the banking system.

• ZEW Expectations: 4.1 v 13.0 March and 15.6 est.
• ZEW Current Situation: -32.5 v -46.5 March and -40.0 est.

US – NY Empire State Fed manufacturing index rose to +10.8 for April vs -24.6 in March marking a sharp turnaround in business confidence.

• NAHD housing market index 45 in April vs 44 in March

UK – Employment growth slows down in March underperforming estimates, although, February data showed labour earnings remained strong.

• Payroll employment rises 0.1% (31,000) in March, and 1.8% yoy (533,000)
• Additionally, February payrolls data was revised significantly lower from 98k to 39k.
• Wage growth has also been maintained .
• Unemployment also increased to 3.8%
• Average earnings excluding bonuses rose 6.6% yoy
• The data seem to have led the market to increase chances of a 25bp hike by the central bank in May.
• CPI data due tomorrow will provide more evidence on the strength of inflationary pressures in the economy (CPI/Core CPI est 9.8%/6.0%).
• Employment Monthly Change: 31k v 39k (revised from 98k) February and 48k est.
• Av Weekly Earnings (3m/%yoy): 5.9 v 5.9 January and 5.1 est.

Argentina – CPI rose 7.7% in March vs 6.6% in February and 104.3% yoy in March vs 102.5% yoy in February. The nation is long used to high inflation.

Russia – Aluminium tycoon criticises ‘primitive’ national finance system

• Oleg Deripaska has lashed out against the state bank-dominated Russian finance system.
• Deripaska founded Rusal and has been a vocal critic of Putin’s government’s management of the Russian economy during the invasion of Ukraine.
• He notes that Russia’s ‘financial system of bondage and usury based on state banks’ is pushing the country ‘further and further into the past.’ (Reuters)

External funding stress could hit emerging market banks

• Emerging Markets may be the next area to be hit by reduced bank lending and tighter financing conditions caused by the collapse of SVB and rising interest rates.
• North African and SE Asian nations appear particularly vulnerable from the rising cost of capital combined with the strength of the US dollar and devalued currencies and reduced capital availability.
• Many banks and nations might turn towards China for additional liquidity though interest rates are expected to hit 3.85% by the end of the quarter.
• We could be in for a rerun of the Asian Crisis if rising loan book defaults destabilise some of the larger local lenders.
• CDSs ‘Credit Default Swaps’ represent the cost of insuring against default, and give an idea of the countries which are most exposed to default.
• The cost of CDSs for Egypt have increased +548% over the past year, followed by Argentina +68% and South Africa at +27%.
• We also see Tunisia, Turkey, and Indonesia as at risk due to their high exposure to external borrowing with Turkey particularly exposed.
• Corrupt lending practices are often exposed in stressed economic conditions with potential for broader contagion if borrowers are not able to refinance at affordable rates.

Currencies

US$1.0957/eur vs 1.0996/eur yesterday. Yen 134.35/$ vs 133.89/$. SAr 18.263/$ vs 18.035/$. $1.242/gbp vs $1.242/gbp. 0.673/aud vs 0.672/aud. CNY 6.878/$ vs 6.867/$.

Dollar Index 101.87 vs 100.91 yesterday.

Commodity News

Precious metals:

Gold US$2,002/oz vs US$2,012/oz yesterday

Gold ETFs 93.4moz vs US$93.5moz yesterday

Platinum US$1,057/oz vs US$1,057/oz yesterday

Palladium US$1,603/oz vs US$1,493/oz yesterday

Silver US$25.15/oz vs US$25.57/oz yesterday

Rhodium US$7,700/oz vs US$7,500/oz yesterday

Base metals:   

Copper US$ 8,999/t vs US$9,101/t yesterday

Aluminium US$ 2,409/t vs US$2,387/t yesterday

Nickel US$ 24,650/t vs US$24,660/t yesterday

Zinc US$ 2,848/t vs US$2,863/t yesterday

Lead US$ 2,117/t vs US$2,152/t yesterday

Tin US$ 27,800/t vs US$24,853/t yesterday

Energy:           

Oil US$85.1/bbl vs US$86.3/bbl yesterday

• Crude oil prices moved lower as signs of demand weakness in the global diesel market and a stronger US dollar weighed on sentiment.
• US natural gas prices moved higher on expectations of colder upcoming weather in the Lower 48 and as gas flows to LNG export terminals surged 6.5% w/w to ~14.7 bcf/d.

Natural Gas US$2.277/mmbtu vs US$2.170/mmbtu yesterday

Uranium UXC US$51.00/lb vs US$50.35/lb yesterday

Bulk:

Iron ore 62% Fe spot (cfr Tianjin) US$116.7/t vs US$116.0/t

Chinese steel rebar 25mm US$587.1/t vs US$590.7/t

Thermal coal (1st year forward cif ARA) US$132.0/t vs US$132.0/t

Thermal coal swap Australia FOB US$183.5/t vs US$189.0/t

Coking coal swap Australia FOB US$286.0/t vs US$286.0/t

Other:  

Cobalt LME 3m US$34,930/t vs US$34,930/t

NdPr Rare Earth Oxide (China) US$69,423/t vs US$71,972/t

Lithium carbonate 99% (China) US$23,916/t vs US$25,501/t

China Spodumene Li2O 5%min CIF US$4,460/t vs US$4,590/t

Ferro-Manganese European Mn78% min US$1,353/t vs US$1,367/t

China Tungsten APT 88.5% FOB US$323/mtu vs US$323/mtu

China Graphite Flake -194 FOB US$780/t vs US$780/t

Europe Vanadium Pentoxide 98% 8.9/lb vs US$8.9/lb

Europe Ferro-Vanadium 80% 36.25/kg vs US$36.75/kg

China Ilmenite Concentrate TiO2 US$345/t vs US$347/t

Spot CO2 Emissions EUA Price US$99.9/t vs US$102.2/t

Brazil Potash CFR Granular Spot US$415.0/t vs US$420.0/t

Battery News

Company News

Anglo American (AAL LN) 2,769.50p, Mkt Cap £36bn – Environmental permit approved for the next phase of development at Las Bronces.

• Anglo American reports that Chile’s Committee of Ministers has approved the environmental permit for the next stage of development at its Los Bronces copper mine.
• The development, known as the Los Bronces Integrated Project (LBIP) secures “the long term future of one of the world’s largest copper mines … to develop the next phase of the existing open pit within Los Bronces’ operating site and replace future lower grade ore by accessing higher grade ore from a new underground section of the mine”
• Anglo American clarifies that the “project uses the mine’s existing processing facilities, optimises water efficiency, has no impact on glaciers and requires no additional fresh water or tailings facilities”.
• The company will now continue to progress the project through its pre-feasibility stages towards submission for approval by the Anglo American Board in due course”.
• The Los Bronces mine produced approximately 270,000t of copper in 2022 from the treatment around 46mt of ore at a grade of 0.62% copper. from an ore reserve of approximately 1.3bn tonnes at an average grade of 0.54% copper.
• Media reports indicate that the project is likely to increase the mine’s output to around 400,000tpa of copper at a cost in the region of US$2.5bn however, with pre-feasibility work still underway, these estimates are probably relatively inexact and subject to change at this stage.

East Star Resources (EST LN) 3p, Mkt Cap £5.4m – Results for 13 months to 31^st December 2022

• East Star, which is developing Kazakhstan-focused copper-zinc-lead, rare earth and gold assets covering 1,321.5 km².
• East Star re-listed in January 2022, raising £3.1m.
• The Company is looking to ramp up drilling at the copper-zinc-lead Verkhuba Deposit Exploration Target, with the aim of upgrading the project to a JORC-compliant resource.
• East Star is waiting for leach test work results following assay results from 1,001m RC drilling at its East Kostanay Rare Earths project, which holds a non-compliant historical resource of 19,962t of yttrium + REEs.
• East Star also holds a project targeting the Chu-Ili Orogenic Gold Belt, where 4,947m of diamond drilling has been undertaken.
• The Apmintas gold target has revealed ‘potential economic grades’ at its Eshkilitau II and Southern Sabdar targets, with the former showing a potential mineralised system over 1km long.
• The Southern Shabdar licence offers the potential for high-grade zones, and the Company is completing structural logging over both projects.
• Going forward, the Company will focus on upgrading the Vekhuba Exploration Target and look to progress with resource drilling at the East Kostanay Rare Earths project.
• The Company’s cash position stood at $1.5m at the end of the reporting period.

Galantas Gold* (GAL LN) 25p, Mkt Cap £28m – Gairloch drilling to start in coming weeks

• The Company is planning to launch a 800m drilling programme at the recently acquired Gairloch Project in Scotland.
• The programme will start in coming weeks targeting the Kerry Road gold bearing VMS deposit.
• Drilling will a ~350m hole testing down dip extension of the deposit where historical drilling ceased after intercepting the main sulphide horizon as well as collecting more data on the local geology.
• Additionally, drilling will focus on lateral northeast and southwest extensions of outcropping mineralisation.
• The project covers a 217km2 mineral license area over a highly prospective, 10km long gold bearing VMS trend.
• Historical drilling results from Consolildated Goldfields (from late 1970s, early 1980s) sourced from the British Geological Survey show high grade polymetallic intersections including:
• 16m at 11.3g/t Au, 0.58% Cu, 2g/t Ag and 0.19% Zn;
• 18m at 3.2g/t Au, 0.90% Cu, 3g/t Ag and 0.51% Zn;
• 20m at 1.5g/t Au, 1.86% Cu, 2g/t Ag and 1.08% Zn;
• 6m at 9.6g/t Au, 1.17% Cu, 3g/t Ag, and 0.55% Zn;
• 6m at 1.5g/t Au, 5.92% Cu, 17g/t Ag, and 0.54% Zn.

Conclusion: Having secured the Gairloch Project in January this year, the team is moving quickly and is expecting to launch the first drilling programme at the Kerry Road gold bearing VMS deposit in coming weeks testing extensions to the mineralisation intersected in historical drilling.

*SP Angel act as Broker to Galantas Gold

Leo Lithium (LLL AU) – A$0.56, Mkt cap A$552m – Annual report and expectations of first ore shipment this year

• Leo Lithium’s 2022 annual report notes hat construction activities at the Goulamina Project is progressing on schedule and withim budget.
• The Company has mobilised EPCM and contractor teams to the site, and expects Direct Shipped Ore for the second half of this year.
• Leo has upgraded the Goulamina Project resource base by 31% to 142Mt @ Li2O.
• First spodumene is expected to be delivered in H1-24.
• Leo agreed $130m in equity funding from Ganfeng Lithium, with a $40m arranged debt agreement, also from Ganfeng Lithium.

Oriole Resources* (ORR LN) 0.18p, Mkt cap £4.8m – CLICK FOR PDF –  £157k received from R&D rebates

• Oriole has received a total rebate of £157k from HMRC for Research and Development.
• The rebates were claimed in respect of geoscientific advances sought by Oriole when exploring in Cameroon and elsewhere.
• Bob Smeeton, Oriole’s CFO, notes that the Company is ‘delighted to have received further support for our research work from HMRC.’

*SP Angel acts as Broker to Oriole Resources

Petra Diamonds (PDL LN) 73.9p, Mkt Cap £146m – Increased Q3 output at Finsch and Cullinan mines lifts diamond production by 3%.

• Petra Diamonds reports that total diamond production during the three months ending 31^st March rose by 3% to 653,700 carats (Q2 – 636,529 carats) bringing total output for the FY to date to 2.05m carats and keeping the company on track to achieve its revised 2.75-2.85m carats guidance.
• The production comes from the processing of 1.76mt of ore during the quarter and was aided by a 14% increase in production from the Finsch mine “following the introduction of new equipment” and by a 7% rise at Cullinan which delivered “higher tailings and ROM grades”.
• Petra Diamonds says that these improvements “more than offset the temporary suspension of production at Williamson and the placing of Koffiefontein on care and maintenance”.
• Production at Williamson is expected to resume in Q1 of FY 2024 following the November 2022 tailings dam accident.
• Consolidated net debt increased to US$124.7m at 31^st March (31^st December 2022 – US$90.8m) reflecting reduced cash balances of US$96.8m (US$146.6m) and increased diamond inventories of 728,765 carats valued at US$73.9m compared to the 31^st December 2022 level of 540,153 carats valued at US$59.9m.
• Looking to the future, Richard Duffy, CEO, explained that resumption of production at the Williamson mine is expected “to increase production by c.1Mct to 3.6-3.9 Mcts in FY 2025”.
• Mr. Duffy commented that “a post-COVID 19 recovery in demand from China” had led to improved diamond prices and said that Petra Diamonds continues to “expect a supportive diamond market in the medium to longer-term as a result of the structural supply deficit, while noting potential volatility in the near-term owing to recent geopolitical and macroeconomic uncertainty”.

Conclusion: Petra Diamonds is aiming to increase annual diamond output by around 1m carats by FY 2025 as a consequence of operating improvements at Finish and Cullinan and the resumption of production at Williamson.

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 – [email protected] – 0203 470 0490

Simon Beardsmore – [email protected] – 0203 470 0484

Sergey Raevskiy –[email protected] – 0203 470 0474

Sales

Richard Parlons –[email protected] – 0203 470 0472

Abigail Wayne – [email protected] – 0203 470 0534

Rob Rees – [email protected] – 0203 470 0535

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

SP Angel                                                            

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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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