SP Angel Morning View -Today’s Market View, Tuesday 19th March 2024

Copper holds higher ground as markets look for US interest rate guidance

MiFID II exempt information – see disclaimer below

American Rare Earths (ARR AU) – Scoping study for Wyoming rare earths project

Antofagasta (ANTO LN) – US$2.5bn project financing for 2^nd concentrator at Centinela

Atalaya Mining (ATYM LN) – 2023 delivers ~20% profit improvement with lower costs

Atlantic Lithium* (ALL LN) – Drill intersections highlight extension to Ewoyaa lithium resource

Boliden (BOL STO) – New copper smelter investment to boost cathode capacity

First Tin (1SN LN) – Additional exploration targets identified in the Taronga area

Phoenix Copper* (PXC LN) – Acquisition of ball mills for the Empire mine project, Idaho

Shanta Gold (SHG LN) – Cash offer improved to 14.85p

SolGold* (SOLG LN) – Continuing discoveries of surface mineralisation at Blanca Nieves being progressed towards drilling

Copper prices hold 11-month highs despite seasonally high inventories

• Copper prices continue to hover around the $9,050/t, having touched their highest since April 2023.
• Prices were supported by China smelter controls last week, following slumping TCRC fees.
• Prices have eased from recent highs over $9,150/t following a rally in the dollar, as yields climbed on more hawkish Fed expectations and a weaker Yen.
• Furthermore, SHFE copper inventories are nearing 300kt, highest level since Feb 2020 and up nearly 8x since January.
• Global copper inventories have risen sharply, higher hen the past four-year seasonal average.
• Fed policy as outlined on Wednesday will be a pivotal moment for copper, with traders backing it in the scenario of a lower rate environment.

China thermal coal producers see declining output in threat to energy security

• Bloomberg reports China thermal coal producers saw output fall 4.2% for the January-February period to 705mt.
• The decline marked the first slide in output since 2021, when Beijing pushed for increased output following the 2021 energy crisis.
• 2022 output climbed in line with Beijing’s policy of energy security.
• However, a crackdown on safety protocol in recent months has followed several fatal accidents.
• Coal-fired power, however, rose 9.7% over the period as imports offset sliding domestic output.

Sharepickers:  15/03/23:  https://audioboom.com/posts/8474024-john-meyer-on-copper-lithium-atlantic-lithium-savannah-res-cornish-metals-jangada-mines-ar

                 29/09/23:  https://www.youtube.com/watch?v=fpJ8VGpUKUU.

*SP Angel almost invariably acts as nomad or broker or nomad and broker to companies mentioned in the above videos and podcasts. We speak more about these companies as we have a good understanding of their business and can talk with a greater degree of confidence. As ever, however, it should be noted that our views do not take into account the circumstances and needs of any particular investor or investor type. So enjoy the talks, but please do your own research, including other companies not mentioned by us but operating in the same areas, and get professional advice where appropriate.

Economics

US – The FOMC starts its two-day policy meeting today with expectations for no change in rates to be announced tomorrow.

• Forecasts for the first rate cut in July and a total of 2-3 this year.

Beijing accuses Evergrande of $80bn fraud

• Beijing regulators have accused Evergrande of committing over $78bn worth of financial fraud between 2019 and 2020.
• The regulator accuses the defaulted property developer of inflating revenues and will impose a $580m fine on the mainland business.
• Evergrande defaulted in 2021 with $300bn of liabilities.
• Bernie Madoff’s fraud was estimated by the SEC at c.$20bn, whilst Sam Bankman Freid’s FTX fraud was stated at $8bn.

Japan – The BOJ lifts its target bond range to 0.0-0.1% from previous -0.1% marking the first rate hike in 17 years.

• The central bank also scrapped its yield curve control programme while pledging to continue buying long term bonds as required, Bloomberg writes.
• Governor Ueda highlighted that the latest move does not mean the start of an aggressive tightening cycle recorded in the US and Europe.
• The yen pulled back on the announcement given up all its gains in March and slipped over 150 level with investors underwhelmed by the decision.
• It appears markets saw the announcement coming on a dovish side as the central bank said there is chance its inflation goal will not be hit.

Germany – Business expectations are reported to have improved in March beating market estimates brightening up outlook for the economy that slipped into a recession last year.

• ZEW Expectations: 31.7 v 19.9 February and 20.5 est.
• ZEW Current Situation: -80.5 v -81.7 February and -82.0 est.

UK – The BOJ policy announcement due this Thursday with expectations for the central bank to leave rates unchanged at 5.25%.

• Market estimates are for the first rate cut to come around August and for a total of 2-3 cuts in 2024.

South Africa – Johannesburg and Soweto run out of water as pumping stations are knocked out by power outages

• A lack of regular power has caused Johannesburg and the Soweto township to run dry as utilities struggle with services.
• Rand Waer has warned the system is facing imminent collapse.
• A lack of pumping capacity will not help in the supply of water recently agreed from Zimbabwe.
• Many residents have been looking to move out of Johannesburg since Covid as more people work from home and are able to relocate to safer and more rural areas.
• We understand houses now sell for a fraction of their pre-Covid value in the area.
• The situation will do little to halt the ongoing exodus of skills and talent out of South Africa.

Currencies

US$1.0843/eur vs 1.0899/eur previous. Yen 150.45/$ vs 149.11/$. SAr 19.023/$ vs 18.835/$. $1.269/gbp vs $11.273/gbp. 0.651/aud vs 0.657/aud. CNY 7.199/$ vs 7.198/$

Dollar Index 103.91 vs 103.50 previous

Precious metals:

Gold US$2,149/oz vs US$2,153/oz previous

Gold ETFs 82,255,084.6moz vs 81.8moz previous

Platinum US$902/oz vs US$928/oz previous

Palladium US$999/oz vs US$1,076/oz previous

Silver US$24.81/oz vs US$25/oz previous

Rhodium US$4,725/oz vs US$4,575/oz previous 

Base metals:

Copper US$ 9,057/t vs US$9,039/t previous

Aluminium US$ 2,267/t vs US$2,268/t previous

Nickel US$ 17,630/t vs US$17,923/t previous

Zinc US$ 2,507/t vs US$2,571/t previous

Lead US$ 2,086/t vs US$2,106/t previous

Tin US$ 27,945/t vs US$2,674/t previous 

Energy:

Oil US$86.7/bbl vs US$06.1/bbl previous

• Energy prices continue to strengthen driven by supply outages and higher fuel transportation times driven by Red Sea attacks.
• Lhyfe announced a grant of up to €149m from the French government for a 100MW green hydrogen plant near Le Havre in France, which is scheduled to be operational by 2028 subject to permitting and FID.
• TotalEnergies will pay up to $148m in cash to acquire Talos Energy’s carbon capture and sequestration (CCS) business in order to take a 25% share in the Chevron-operated Bayou Bend CO2 storage project located close to its Port Arthur refinery and petrochemicals assets in La Porte  in the US Gulf of Mexico.

Natural Gas €29.1/MWh vs €2.4/MWh previous

Uranium Futures $85.5/lb vs $83.1/lb previous 

Bulk:

Iron Ore 62% Fe Spot (cfr Tianjin) US$104.4/t vs US$105.5/t

Chinese steel rebar 25mm US$548.5/t vs US$556.4/t

Thermal coal (1st year forward cif ARA) US$110.0/t vs US$105.8/t

Thermal coal swap Australia FOB US$128.0/t vs US$130.0/t 

Other:

Cobalt LME 3m US$28,550/t vs US$28,550/t

NdPr Rare Earth Oxide (China) US$47,990/t vs US$48,810/t

Lithium carbonate 99% (China) US$14,932/t vs US$15,088/t

China Spodumene Li2O 6%min CIF US$1,190/t vs US$1,120/t

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

China Tungsten APT 88.5% FOB US$305/mtu vs US$305/mtu

China Graphite Flake -194 FOB US$515/t vs US$535/t

Europe Vanadium Pentoxide 98% 5.3/lb vs US$5.6/lb

Europe Ferro-Vanadium 80% 26.75/kg vs US$27.25/kg

China Ilmenite Concentrate TiO2 US$327/t vs US$327/t

Spot CO2 Emissions EUA Price US$59.6/t vs US$55.4/t

Brazil Potash CFR Granular Spot US$305.0/t vs US$297.5/t 

Battery News

Saudi Aramco and Abu Dhabi National Oil to unite on lithium extraction project for Saudi EVs

• According to reports, Saudi Aramco and Abu Dhabi National Oil Company (ADNOC) will start a JV to extract lithium from oilfield brine.
• Crown Prince Mohammed bin Salman is looking to alternative sources of energy from oil.
• Saudi Arabia has established its own EV brand, Ceer, and has built an EV metals plant in preparation for local battery production.
• The Kingdom’s sovereign wealth fund, the Public Investment Fund, is set to fund 500,000 EVs annually by 2030.

Britain to trial flying taxis by 2026

• The UK government published the Future of Flight roadmap to bring ‘flying taxis’ to the UK by 2026.
• If the roadmap goes to plan trials of flying taxis will begin in 2026 and the first piloted flying taxi flight will come into regular service by 2028. By 2030, demos of pilot-less flying taxis will begin.
• In the plans the government will also explore the increased use of drones to support police and medical services.

Fisker halts production as it looks for cash

• The US EV startup has paused production of its Ocean SUV for six weeks as it searches for a cash injection.
• In a regulatory filing, the company revealed that it had just $121m in cash and cash equivalents as of March 15^th.
• In the filing, Fisker also said its accounts payable balance stood at $182m.
• There is ‘substantial doubt’ that the company will be able to continue operations without raising new capital.

Company News

American Rare Earths (ARR AU) A$0.28, Mkt cap A$140m – Scoping study for Wyoming rare earths project

• American Rare Earths releases the scoping study for its Halleck Creek Rare Earths Project in Wyoming, USA.
• The Study suggests a 3mtpa plant, 20 year mine life with a low stripping ratio of 0.03:1.
• The ore body is dominated by allanite, which ARR believes can be liberated from in-situ rock mass during crushing and grinding.
• 84% recoveries have been suggested
• The Company suggests a density separation and WHIMS plant alongside direct leaching.
• Open pit mining will be targeted and LOM average costs in NdPr equivalent suggested at £38/kg. (ARR suggests spot prices provide a 12% IRR using 10% discount rate)
• CAPEX suggested at $456m and NPV10 of $503m using a long-term price of $91/kg NdPr.
• The Company will aim to separate individual rare earh products in Wyoming, mixed between 66% NdPr, 16% Dy, 14% Tb.
• Average in-situ grades of the mine plan average 3,805ppm TREO

Antofagasta (ANTO LN) 1,934p, Mkt Cap £19bn – US$2.5bn project financing for 2^nd concentrator at Centinela

• Antofagasta has announced that it has secured US$2.5bn of project financing for the construction of its second concentrator at the Centinela mine.
• The facility “is a $2.5bn term loan facility with a 4-year drawdown period and a term of approximately 12 years” provided by a consortium of “international lenders, including the Japan Bank for International Cooperation, Export Development Canada, the Export-Import Bank of Korea and several commercial bank”.
• The second concentrator “will add 170,000 tonnes of copper-equivalent production, comprising 144,000 tonnes of annual copper production and associated gold and molybdenum by-products” and Antofagasta says that it “will improve its cost competitiveness through an increased focus on concentrator capacity that incorporates modern technologies, increased by-products and greater economies of scale. First copper production from the project is expected in 2027”.
• The total $4.4bn cost of Centinela compares with reasonably well with other copper mining projects@

• • Centinela $4.4bn – 170,000tpa = $25,882/tpa of copper eq.
  • QB2 (Teck) $9bn – 320,000tpa = $28,125/tpa of copper eq.
  • Cobre Panama (FQM) $6.2bn – 350,000tpa = $17,714 of copper eq.

*An SP Angel mining analyst has previously visited a number of Antofagasta’s copper mines

Atalaya Mining (ATYM LN) 349p, Mkt Cap £494m – 2023 delivers ~20% profit improvement with lower costs

• Atalaya Mining reports a 19% improvement in 2023 profit of €36.7m (2022 – €30.9m) and a 32% higher EBITDA of €73.1m (2022 – €55.3m) and a closing net cash balance of €54.3m.
• The financial results reflect the production of 51,667t of contained copper in concentrate (2022 – 52,269t) at an average cash cost of US$2.79/lb (2022 – US$3.16/lb) and all-in-sustaining costs (AISC) of US$3.09/lb (2022 – US$3.37/lb).
• The company confirms its 2024 production guidance range of 51-53,000t of copper at cash costs in the range US$2.80-3.00/lb and AISC between US$3.00-3.20/lb.
• Commenting on operational achievements during 2023, CEO, Alberto Lavandeira, confirmed the “approval to expand our tailings capacity and mine footprint, and also to begin waste stripping at San Dionisio” which will contribute higher grade ore to the 15mtpa plant facilitating growth in copper output without the need to expand processing capacity.
• Commenting on the lower costs achieved in 2023 Mr. Lavandeira explained that “European energy markets have continued to normalise, helping Atalaya achieve lower costs despite ongoing inflationary pressures. The start-up of our 50 MW solar plant is expected to provide further stability and also help to lower our carbon footprint”.
• Construction of the solar power plant, which is expected to deliver 22% of the Riotinto mine’s power requirement, experienced “certain procurement and installation delays,” which mean that “initial power generation is now expected to begin in Q2 2024”.
• Continuing exploration in 2024 is expected to see €5-7m spent on “on expanding current resources and making new discoveries at Proyecto Riotinto and Proyecto Masa Valverde” as well as “expanding and upgrading current resources at the Alconchel-Pallares copper-gold project and continue drill testing new targets elsewhere at Proyecto Ossa Morena”.
• Atalaya Mining confirms its commitment to the development of its Proyecto Touro in Galicia, north west Spain, where work on permitting continues in conjunction with positive discussions with “municipalities, farmers and fishermen associations and other industries indicate meaningful support towards the development of a new and modern mining project”.
• Atalaya Mining says that it “continues to successfully restore the water quality of the rivers around Touro and is operating its water treatment plant, which is addressing the legacy issues associated with acid water runoff from the historical mine, which closed in 1987” delivering “an immediate and visible improvement of the water systems surrounding the project”.

Atlantic Lithium* (ALL LN) 19.3p, Mkt Cap £125m – Drill intersections highlight extension to Ewoyaa lithium resource

(Ewoyaa Ownership: 40.5% Atlantic, 40.5% Piedmont, 6% MIIF Sovereign Wealth fund, 13% government of Ghana)

• Atlantic Lithium report results from a further 2,514m of drilling at Ewoyaa completed last year.
• The results highlight the ongoing extension of the Ewoyaa lithium resource in the ‘Dog-Leg’ area outside the current mineral resource.
• Best results show:

• • 69m at 1.25% Li2O from 45m
  • 34m at 1.02% Li2O from 160m
  • 22m at 0.85% Li2O from 141m
  • 16m at 1.08% Li2O from 111m
  • 12m at 1.11% Li2O from 83m.

• Sterilisation drilling under the proposed process plant site shows no mineralisation giving confidence on the site.
• The team are also looking to publish an upgraded Mineral Resource Estimate on the lithium and feldspar in the second half.
• Today’s RNS includes a number of maps and cross sections which give an idea of the potential for mining the Dog-Leg target.

Conclusion: Interims highlight the grant of the Ewoyaa Mining Lease setting the project on course for securing necessary permits to start construction in Q4/24. The team is progressing with offtake discussions as well as funding negotiations with most of $185m capex covered by its project partners including Piedmont and MIIF.

*SP Angel acts as Nomad to Atlantic Lithium. Two mining analysts from SP Angel recently visited the Ewoyaa mine site in Ghana and drove onto Takoradi to check the quality of the road to port. Our analysts also visited the Ministry of Minerals Commission and MIIF, the Ghana Minerals Income Investment Fund.

Boliden (BOL ST) SEK280, Mkt cap SEK80bn – New copper smelter investment to boost cathode capacity

• Boliden provided an investor update yesterday.
• The main update included plans to invest $460m in a new copper smelter at Rönnskär.
• The plant will have a capacity of 230ktpa and will aim to hit full capacity by 2H26.
• The Company also plans to boost investment in its dewatering and paste facilities in the Boliden Area, with $240m earmarked to CAPEX between 2024-2026.
• Boliden also announces it will launch a ‘Low-Carbon Nickel product,’ stating its nickel refineries produce nickel at <5kg CO2e/kg nickel vs global averages of 34kg CO2e/kg nickel.

First Tin (1SN LN) 5.55p, Mkt Cap £15m – Additional exploration targets identified in the Taronga area

• First Tin reports that exploration work around its Taronga tin project in New South Wales has identified targets which, if successful in delivering resources, could become satellite ore sources for the planned processing plant.
• Work on a Definitive Feasibility Study to develop Taronga is currently underway.
• The Pound Flat target, located 15km south of Taronga, was “partially drill tested in the early 1980s, with better results including 98.5m @ 0.13% Sn from 13.5m, 37m @ 0.13% Sn from 65m and 49m @ 0.13% Sn from 1m” and recent geochemical sampling work has “defined a soil anomaly that is 1,800m long by 270m wide at plus 500ppm Sn, and still open to the northeast”.
• Further work at Pound Flat aims to define drill targets.
• At an area of historic tin mining at Battery Hill, 23km NE of Taronga, “sampling has shown that moderate to high grade tin in rocks occurs over an area of at least 2,000m by 800m, with highest assays being 1.71% Sn, 2.47% Sn, 6.27% Sn, 1.88% Sn and 9.85% Sn.  These are very high values and confirm the presence of multiple narrow, high grade tin veins”.
• The McDonalds target, 5km NNE of Taronga, “may be an extension of the historically mined Butlers Mine, which occurs along strike approximately 3,500m to the northeast … [and] … was a very high grade mine …reported to have produced 21,000t tin ore grading over 1.5% Sn”.
• “Soil sampling … [at McDonalds] … in the early 1980s identified two parallel zones of tin in soil anomalism: the main zone is 2,000m long by 200m wide at plus 500ppm Sn, comparable with, but shorter than, the Taronga anomaly. The second zone occurs around 200m to the north and is 1,200m long by 100m wide at plus 500ppm Sn”.  First Tin plans further “sampling and mapping are … before any further drill follow-up”.
• First Tin says that “many other prospects are yet to be followed up in any detail and hence potential for satellite deposits to Taronga is considered to be excellent”.

Phoenix Copper* (PXC LN) 12.25p, Mkt Cap £18m – Acquisition of ball mills for the Empire mine project, Idaho

Phoenix holds 80% of the Empire mining property in Idaho)

CLICK FOR PDF

• Phoenix Copper has confirmed the completion of its previously announced purchase of two ‘pre-owned’ ball mills for its Empire open pit mining project in Idaho.
• The mills, which should reduce both the lead-time and cost compared to purchase of equipment from a manufacturer are “to be transported to Idaho in the summer months”.
• The company confirms that the “equipment was thoroughly inspected, motors tested, and the parts and components inventoried and catalogued prior to the purchase”.
• Phoenix Copper explains that compared to the US$1.1m purchase price “Similar brand-new equipment typically costs around US$7-8million for both ball mills and has a lead-in time of around 12 months”.
• The company also confirms that it “will continue to source additional pre-owned equipment in order to further improve the Project economics”.

Conclusion: The acquisition of ‘pre-owned’ mills for the Empire project at only around 15% of the cost from a manufacturer is a positive development for Phoenix Copper with meaningful savings of both money and time.  Transporting the equipment to site during the summer may also simplify the installation.

*SP Angel acts as nomad to Phoenix Copper

Shanta Gold (SHG LN) 14.6p, Mkt Cap £153m – Cash offer improved to 14.85p

• Saturn Resources raises its cash offer to 14.85p, up from 13.5p.
• Additionally, shareholders will be entitled to receive and retain an interim dividend of up to 0.15p.
• The revised offer represents a ~17% premium to the closing price prior to the first offer announcement in December valuing equity at ~$200m and ~$210m including net debt.
• Saturn Resources highlights that the latest offer is the final one unless the Company receives an offer from a third party.
• The offer is recommended by the Board with ~30% of voting scheme shares have expressed their support for the offer.
• The offer will be voted on at the Court Meeting and General Meeting on the 4th April.

Conclusion: Saturn improves on the previous offer as gold prices climb >$100/oz since the previous bid in December.

SolGold* (SOLG LN) 8.48p, Mkt Cap £249m – Continuing discoveries of surface mineralisation at Blanca Nieves being progressed towards drilling

CLICK FOR PDF

• Solgold has issued a progress report on its exploration of the wholly-owned Blanca Nieves project located approximately 8km north of its >3bn tonne Cascabel copper/gold project in Ecuador.
• The discovery of high-grade outcrops of epithermal quartz veins containing gold an silver wth grades of “over 100 g/t gold … at Cielito and Florida” has been previously reported and today’s announcement confirms that the continuing exploration shows “significant potential for complex high-grade epithermal vein systems, and recent work has also identified the potential for a parent mineralised porphyry body beneath the outcropping gold system”.
• Solgold says that the “porphyry target alteration footprint at El Cielito Norte covers approximately 2.5 x 2.5 km and is greater in extent than the Alpala system to the south”.
• Reporting assay results from channel samples of epithermal veins at the Florida prospect of “up to 6.15m true thickness … @ 7.46 g/t Au, including 2.2m @ 21.1 g/t Au” the company confirms it is “advancing new target areas towards drill-ready status as exploration continues”.
• Solgold says that it “intends ultimately to extend the definition of the gold-bearing epithermal veins at Cielito and Quiroz beyond the range of previous historical artisanal mining and drilling to date and to extend the size of the discovery at Florida”.
• Interestingly, Solgold says that it is committed “to realising the full potential of the Blanca-Nieves Project with a view to integration with Cascabel” which raises the possibility of a mining complex based around Cascabel.
• We speculate that near surface mineralisation at Blanca Nieves, possibly being developed in conjunction with that already identified at Tandayama America, raises the long-term possibility of open-pit mine development in parallel with the large scale underground mine proposed as Cascabel.
• Chief Geologist, Santiago Vaca, expressed the exploration team’s excitement for Blanca Neves and said that the “district scale opportunity reinforces our view that mining has the potential to be a significant, multi-generational sector in Ecuador”.

Conclusion: Blanca Nieves is being advanced towards drilling.  The project’s relative proximity to the Cascabel project located 8km to the south raises the possibility of integrated development of both an open-pit and large-scale underground mine.  Until drilling results and resource estimates are available, the potential cannot be quantified but early-stage exploration success at Blanca Nieves highlights the district scale potential.

*SP Angel acts as broker to Solgold

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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*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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