SP Angel Morning View -Today’s Market View, Tuesday 24th October 2023

Weaponisation of EV battery anode graphite has begun

MiFID II exempt information – see disclaimer below

Last brick in the wall financing required for Graphite miner

• Management have already mined one year of production and has already commissioned the front section of the process plant
• Process plant almost ready to commission back end of plant to get to 98% Cg
• The team have already upgraded 20 tonnes of graphite to ~94% Cg with the material ready for the polishing mill
• Almost all the capital required has been spent to developing the mine and plant to this stage
• The company is now looking for a financial backer to fund:

• • Working Capital (WIP)
  • ‘spargers’ to fit into their flotation columns to improve recovery rates ($360,000)
  • a new Solar power plant for 1.5MW capacity (€3.5m). should put the mine in the lowest cost quartile

• A liquidity event is planned for the next 3-6 months
• The mine has all permits for full production and graphite export and is debt free

*SP Angel’s role is limited to making introductions and interested parties should be aware that investment in a private company can present certain risks not present in listed companies (e.g. limited or no liquidity and no rules compelling disclosure of information to investors).This offer is open to professional investors only and is not offered to retail investors.

Adriatic Metals (ADT1 LN) – Quarterly activities report as ore stockpiling accelerates

Anglo American (AAL LN) – Largely on track to deliver 2023 production and cost guidance

Aterian Plc (ATM) – Aterian meets conditions under Rio Tinto earn-in agreement

Beowulf Mining* (BEM LN) – Roadmap for Kallak Iron Ore development

Castillo Copper (CCZ LN) – Asset review confirms the NWQ project as a core exploration asset

Greatland Gold (GGP LN) – Havieron decline approaches the final major aquifer

GreenRoc Mining* (GROC LN) – GreenRoc clarifies Chinese government restrictions on the implementation of export restrictions on graphite

Petra Diamonds (PDL LN) – Early resumption of production at the Williamson mine helps drive a 12% increase in diamond output

Phoenix Copper* (PXC LN) – Navarre Creek exploration progress encourages the staking of additional 400 acres

China & Graphite – Are Chinese threats to ban high-grade graphite real or a warning shot?

• China is planning to utilise all its domestic high-grade graphite production.
• We believe China also subsidises this production in a variety of ways.
• We suspect China will still allow the export of high-grade graphite prices to favoured nations.
• Unfortunately, the mere threat of high-grade graphite supply restrictions will be problematic for Gigafactory and EV factory financing around the world.
• The critical time for any factory is when all the capital has been spent and production is about to start. The threat of reduced or unavailable graphite anode supply will create problems here.
• China has the ability to strangle the rest of the world’s EV industry and to hold back its development till new sources of EV graphite anode material are developed.
• Fortunately, Syrah Resources, GreenRoc* and others can produce substantial flake graphite but this still needs to be purified into battery anode grade material, though this is not nearly enough to meet forecast demand growth.
• Weaponisation of graphite will enable Chinese EV manufacturers to get ahead and appears to have begun.

*SP Angel act as Nomad and broker to GreenRoc Mining PLC

Copper trends lower as higher rates weigh on demand as PMIs show economic slowdown

• Copper prices hit an 11-mont low of $7,850/t before ticking back to $8,000/t this morning.
• The price has been on a steady downtrend as LME inventories build and traders sell down inventories on higher financing costs.
• Elevated levels of contango, where spot prices are cheaper than futures, are hitting trader confidence of a rebound in demand as supply floods in.
• However, majors are trimming their supply outlooks, with Teck and Anglo American both cutting production guidance.
• BHP’s Chief Economist sees the copper market in surplus currently and warns of further downside before an inevitable ‘squeeze on the copper market’ later this decade.
• Reassuringly, although copper inventories are elevated on recent levels, they are very low on an historical basis.

Nigeria cracks down on raw mineral exports as African resource nationalism continues

• The Nigerian Minister for Solid Minerals stated that ‘you can’t take our minerals away without adding value locally,’ adding that miners ‘must start a factory to produce something that is associated with the mineral that you are taking out.’ (Bloomberg)
• Nigeria is looking to diversify its economy away from oil income.
• It seems the Country is eyeing a potential Indonesia model, where miners are encouraged/forced to build downstream facilities to maximise domestic value from deposits.
• Lawmakers have been trying to boost mining activity, with the sector accounting for just 0.2% last year.

Economics

Chinese sovereign wealth fund is reported to be investing in state backed financial institutions at low valuations shoring up sentiment in the nation’s capital markets, FT reports.

Japan – The central bank continued with its YCC programme stepping in the bond market in another unscheduled bond purchase operation to curb rising sovereign yields, Bloomberg reports.

• This marked the fifth time the central bank has stepped into the market with such buying since it adjusted its yield curve control programme in late July.
• Rates been rising lately amid a global sell off in bond markets amid high inflationary pressures.
• Expectations are rising that the BOJ may announce changes to its monetary policy this month.

Eurozone –Contraction accelerated across both manufacturing and services sectors in the first month of Q4/23 according to preliminary PMI numbers.

• New orders dropped at an accelerating pace while companies cut jobs for the first time since the lockdown of early 2021.
• Inflation pressures moderated slightly down to their lowest since Feb/21.
• Manufacturing PMI (Preliminary): 43.0 v 43.4 September and 43.7 est.
• Services PMI (Preliminary): 47.8 v 48.7 September and 48.6 est.
• Composite PMI (Preliminary): 46.5 v 47.2 September and 47.4 est.

Germany – Along with weak October flash PMI numbers, underwhelming economic data released today included deteriorating consumer sentiment for November.

• Falling consumer confidence was attributed to high food and energy prices.
• GfK Consumer Confidence: -28.1 v -26.7 October (revised from -26.5) and -27.0 est.
• Manufacturing PMI (Preliminary): 40.7 v 39.6 September and 40.1 est.
• Services PMI (Preliminary): 48.0 v 50.3 September and 50.0 est.
• Composite PMI (Preliminary): 45.8  v 46.4 September and 46.6 est.

France

• Manufacturing PMI (Preliminary): 42.6 v 44.2 September and 44.5 est.
• Services PMI (Preliminary): 46.1 v 44.4 September and 45.0 est.
• Composite PMI (Preliminary): 45.3 v  44.1 September and 44.6 est.

UK – Preliminary PMI numbers show a continuing contraction in both manufacturing and services activity in October amid a reduction in new orders and employment.

• Output growth expectations over the next twelve months hit the lowest since December 2022.
• “The UK economy continued to skirt with recession in October, as the increased cost of living, higher interest rates and falling exports were widely blamed on a third month of falling output,” the report read.
• Interestingly, final goods and services prices managed to record an increase to a three month high as services providers managed to transfer higher costs onto consumers and limit the squeeze on their operating margins.
• Meanwhile, employment pulled back for a second consecutive month.
• Jobless Claims Change: 20.4k September and -9.0k (revised from 0.9k) August.
• Manufacturing PMI (Preliminary): 45.2 v 44.3 September and 44.7 est.
• Services PMI (Preliminary): 49.2 v 49.3 September and 49.3 est.
• Composite PMI (Preliminary): 48.6 v 48.5 September and 48.5 est.

Australia – The A$ is trading higher this morning as the RBA Governor said the bank “will not hesitate” to hike rates in case there is a material upgrade in inflation outlook.

• “Our focus remains on bringing inflation back to target within a reasonable timeframe, while keeping employment growing,” new Governor Michele Bullock sa in a speech today.
• The RBA meets on November 7 with markets seeing only a just over 20% chance of a 25bp increase at the meeting.

Israel – Hamas released two more hostages as on the ground operation continues to be postponed amid diplomatic efforts to free up more people.

• Nurit Cooper, 79, and Yocheved Lifshitz, 85, were freed while their husbands along with more than 200 other people remain in captivity.
• Israel reports Hamas demanded fuel be allowed into Gaza in exchange for the release of more hostages.

Currencies

US$1.0661/eur vs 1.0585/eur previous. Yen 149.41/$ vs 149.93/$. SAr 18.950/$ vs 19.069/$. $1.226/gbp vs $1.217/gbp. 0.637/aud vs 0.631/aud. CNY 7.306/$ vs 7.318/$.

Dollar Index 105.45 vs 106.28 previous..

Commodity News

Precious metals:

Gold US$1,975/oz vs US$1,976/oz previous

Gold ETFs 86.6moz vs 86.2moz previous

Platinum US$902/oz vs US$895/oz previous

Palladium US$1,136/oz vs US$1,095/oz previous

Silver US$23.10/oz vs US$23/oz previous

Rhodium US$4,750/oz vs US$5,400/oz previous

Base metals:

Copper US$ 8,003/t vs US$7,894/t previous

Aluminium US$ 2,174/t vs US$2,167/t previous

Nickel US$ 18,255/t vs US$18,515/t previous

Zinc US$ 2,434/t v US$2,410/t previous

Lead US$ 2,119/t vs US$2,093/t previous

Tin US$ 25,015/t vs US$25,060/t previous

Energy:

Oil US$90.5/bbl vs US$91.4/bbl previous

• Crude oil prices fell on reports that Israel was reconsidering the scope of its military activities against Hamas in Gaza, reducing the risk of a wider conflagration engulfing the region.
• European gas prices remain stable on weather forecasts that average temperatures are expected to stay above seasonal norms into early November and with no rebound expected to EU industrial gas demand.
• The IEA now expects global natural gas demand to peak in all forecast scenarios by 2030, as it anticipates faster gas demand destruction in Europe and renewables taking up a greater share of the energy mix (50% of electricity in 2030) in its latest annual World Energy Outlook (WEO-2023).
• However, the IEA also forecasts that demand for fossil fuels globally is currently set to remain far too high to achieve the Paris Agreement goal of limiting the rise in average global temperatures to 1.5°C, and the WEO-2023 report puts forward a global strategy based on five pillars to get the world on track by 2030.
• Chevron announced an all-share acquisition that places a $60bn enterprise value on US E&P Hess (~10% premium to 20-day VWAP), with plans to achieve $1bn in cost synergies as it adds leading producing acreage positions in the onshore US Bakken Shale Formation and the Stabroek block in the offshore Guyana Basin.

Natural Gas €49.600/MWh vs €49.500/MWh previous

Uranium UXC US$69.00/lb vs US$72.75/lb previous

Bulk:

Iron ore 62% Fe spot (cfr Tianjin) US$112.7/t vs US$112.1/t

Chinese steel rebar 25mm US$534.8/t vs US$534.1/t

Thermal coal (1st year forward cif ARA) US$133.0/t vs US$136.8/t

Thermal coal swap Australia FOB US$140.0/t vs US$143.5/t

Coking coal swap Australia FOB US$325.0/t vs US$325.0/t

Other:  

Cobalt LME 3m US$33,420/t vs US$33,420/t

NdPr Rare Earth Oxide (China) US$71,314/t vs US$71,402/t

Lithium carbonate 99% (China) US$21,559/t vs US$21,660/t

China Spodumene Li2O 6%min CIF US$2,010/t vs US$2,050/t

Ferro-Manganese European Mn78% min US$1,029/t vs US$1,021/t

China Tungsten APT 88.5% FOB US$300/mtu vs US$300/mtu

China Graphite Flake -194 FOB US$630/t vs US$635/t

Europe Vanadium Pentoxide 98% 6.2/lb vs US$6.2/lb

Europe Ferro-Vanadium 80% 26.25/kg vs US$26.25/kg

China Ilmenite Concentrate TiO2 US$314/t vs US$314/t

Spot CO2 Emissions EUA Price US$84.6/t v US$85.3/t

Brazil Potash CFR Granular Spot US$340.0/t vs US$340.0/t

EV and Battery News

Amazon launch EV instillation service in the UK

Jaguar Land Rover are developing a £250m EV engineering facility in Coventry, UK creating 350 new jobs

• The Future Energy Lab will enable rapid testing of EVs in extreme-weather conditions.

Malaysia continues to look for EV investment off the back of positive growth

• Malaysia has secured RM26bn in EV investments across 59 projects since 2018 and is targeting a further RM20bn by 2025 and RM40bn by 2030.
• This was revealed by trade and industry minister Tengku Zafrul in a post on his official Facebook page congratulating EP Manufacturing (EPMB), which recently announced it will begin construction of an automotive manufacturing facility in Melaka.
• The assembly plant will be built in the Hicom Pegoh Industrial Park and will manufacture BAIC as well as Great Wall Motor vehicles when completed.
• EPMB will be investing RM100m into the project which is poised to create around 1,000 new job opportunities in Melaka.

Tesla has now sold 1m EVs in Europe with the Model Y leading EV sales in March

• Tesla has now sold one million EVs in Europe in the company’s latest major milestone.
• A statement read: “14 years ago, we delivered the first Tesla Roadster to customers in Europe. Today, we hit one million Tesla vehicles on the road across Europe.”
• Tesla sales in Europe are expected to grow at a faster in the coming years following the opening of Gigafactory Berlin-Brandenburg.
• It is hoped that Tesla Giga Berlin will have a production capacity of half a million vehicles a year, with requests to up the production to one million.
• The company plans to spend US$9bn this year as it rolls out new models.

Electra makes advancements with North American cobalt refinery

• Electra has recently secured $5m in vital equipment for its solvent extraction plant and crystalliser circuit.
• Its battery-grade cobalt sulfate refinery in North America aims to fortify the local EV battery supply chain, especially as global supply disruptions have made it imperative for regions to be self-reliant.
• There were delays due to global supply chain disruptions; equipment installation will progress as capital funding is secured.
• Electra’s hydrometallurgical complex, situated near Toronto, has an estimated replacement value of $200m.
• Approximately $55.7m to $62m more is needed to conclude the construction.
• The refinery, once operational, could generate enough cobalt for nearly 1.5 million EVs yearly.
• An expanded agreement with LG Energy Solution is in place to supply 19,000t of cobalt from 2025, which is 80% of Electra’s projected annual production.

Japan pushing for EV and chip subsidy rules with US and Europe

• Japan plans to set shared standards with the US and Europe on subsidies for EVs, semiconductors, and other critical fields.
• Discussions will be aimed at promoting a fair competitive environment, with the new framework covering areas such as government support for securing stable supplies of critical materials, as well as investment in green transformation.
• The Japanese government aims to invest 20tr yen ($133.62bn) in green transformation over 10 years, according to Nikkei.
• Japan will also increase investment in the so-called Global South, which is comprised of emerging and developing countries mainly in Asia, Africa and Latin America, Nikkei said. The ministry aims to facilitate 2tr yen (~$13bn) in public and private investment in these countries over five years.

Toyota lobbies India to cut hybrid-EV taxes

• Toyota is lobbying the Indian government to cut taxes on hybrid vehicles by as much as 21%, arguing they are far less polluting than petrol cars but do not get fair policy treatment.
• The Japanese automaker plans to expand production capacity to meet a surge in Indian demand for hybrids.
• Despite hybrid vehicle’s popularity with the Indian population, Prime Minister Narendra Modi is focussing on pushing EV sales.
• India is offering companies millions of dollars in incentives to build EVs and batteries.
• India currently taxes EVs at just 5%, while the levy on hybrids is as high as 43%, just below the 48% imposed on petrol cars.
• Indian giants Tata Motors and Mahindra & Mahindra are both backing EVs, while Toyota and Honda Motor want support for hybrids.

Samsung SDI to supply Hyundai with batteries from 2026

• The South Korean battery maker said it will supply Hyundai with EV batteries for seven years starting 2026, marking the first battery supply deal between the two companies.
• Samsung SDI currently supplies batteries to GM, Stellantis and BMW among others.
• It will supply prismatic batteries manufactured at its factory in Hungary for Hyundai Motor’s EVs targeting the European market.
• The size of the deal has not been disclosed, but Samsung SDI would likely supply EV batteries that could power about 500,000 EVs over the next seven years, a source told Reuters.

Company News

Adriatic Metals (ADT1 LN) 174p, Mkt cap £507m – Quarterly activities report as ore stockpiling accelerates

• Adriatic provides an update on the Vares Silver Project in Bosnia & Herzegovina.
• Commissioning of the Vares Processing plant has begun and is expected to take two months.
• Underground development rates are picking up and the Company has started stockpiling ore.
• Concentrate production is expected to be produce in January 2024 following equipment delays and electricity issues.
• Management will use the delay as an opportunity to continue stockpiling ore and improve grade control,
• The 24.5km haul road and refurbished railway line expected to be completed next month.
• The Company delivered an MRE update at Rupice and Rupice NW of 21mt for 105Moz Ag, 789koz Au, 913koz Zn, 581kt Pb and 88kt Cu.
• An updated reserve estimate at Rupice is expected to be delivered by year-end.
• Assay results for Rupice West and Semizova Ponikva expected in Q3.
• Cash balance at end of period was $68m, with $43m of expected CAPEX/Exploration outflows expected before production in January.

*An SP Angel mining analyst has visited Adriatic Metals operations in Bosnia

Anglo American (AAL LN) 2023p, Mkt Cap £27.2bn – Largely on track to deliver 2023 production and cost guidance

• In its production report for the 3 months to 30th September, Anglo American reports production consistent with Q3 2022 and is maintaining its full year production guidance across all its major products with the exception of “a minor revision to guidance for our Chile … [copper] … operations”.
• Across the group, copper production rose by “42% … [to 209,100t] … reflecting the progressive increase in production from Quellaveco in Peru, while production from our operations in Chile decreased by 4%”.
• The lower copper output in Chile was “driven by lower grade and throughput at Los Bronces, partially offset by planned higher grade at Collahuasi”.
• Anglo American’s copper production guidance for 2022 “is revised to 830,000-870,000 tonnes (previously 840,000-930,000 tonnes) … [with unit cost guidance ] … unchanged at c.166 c/lb (Chile c.205 c/lb; Peru c.100 c/lb)”.
• Iron ore output declined by 4% to 15.4mt (Q3 2022 – 16.1mt) “principally driven by planned plant maintenance at Minas-Rio”.
• Iron Ore production guidance for the year is maintained in the range 57-61mt with unit cost guidance of ~US$39/t.
• Platinum group metals output of 1.03m oz (Q3 2022 – 1.05moz) is described as “broadly flat despite planned mining in a lower grade area at Mogalakwena”.
• Production at Amandelbult was around 4% lower “due to continued poor ground conditions” with the contribution of joint operations increasing “by 2% to 97,500 ounces, mainly due to improved grade at Modikwa”.
• PGM production guidance for 2023 remains intact in the range 3.6-4.0moz with costs of ~US$1,000/oz.
• Anglo American’s nickel output was 7% lower at 9,300t (Q3 2022 – 10,000t) “mainly reflecting the impact of lower grades … and planned maintenance at Barro Alto, despite operational improvements at Codemin”.
• Nickel production guidance for 2023 is maintained in the range 38-40,000t with cost guidance also unchanged at ~US$5.60/lb.
• Rough diamond output for the quarter of 7.4m carats is 23% below the 9.6m carats of Q3 2022 “primarily due to the planned reduction as Venetia transitions to underground operations”.
• Anglo American still expects to produce between 30-33m carats of diamonds during 2023at an average cost of ~US$75/carat.
• “Challenging strata conditions at Moranbah and the ramp-up of Grosvenor during July following the longwall move in Q2” resulted in a 21% decline in steel-making coal output to 4.4mt (Q3 2022 – 5.5mt) although guidance remains intact at 16-19mt for the full year with costs also unchanged at ~US$105/t.
• Chief Executive, Duncan Wanblad, confirmed that Anglo American remains focussed on “delivering our full year production guidance in line with a planned stronger second half of the year … [and that the company is] … on track to deliver our full year guidance” with the exception of the minor adjustment to copper expectations.

Conclusion: Anglo American is largely on track to deliver its 2023 production and cost guidance across all commodities although there has been a minor adjustment to expectations for copper reflecting by lower grade and throughput at the Los Bronces mine in Chile.

Aterian Plc (ATN LN) 1.00p, Mkt cap £9.65m – Aterian meets conditions under Rio Tinto earn-in agreement

• Aterian Plc has met conditions required for the initiation of their agreed earn-in investment and joint venture agreement in Rwanda.
• Rio Tinto has been active in Rwanda, establishing operational infrastructure and has recently started field operations on the ‘HCK’ Project.
• Aterian’s local subsidiary, Kinunga Mining is also working on local training and staff secondment in preparation for the exploration programme.
• The Rwanda regional and local governments along with the Rwanda Mines, Petroleum and Gas Board have assisted the process for meeting conditions necessary for the joint venture.
• The exploration team are now ready to start defining the LCT ‘Lithium-cesium-tantalum’ pegmatite swarm on the HCK site.
• HCK has 19 identified zones across 2,750 hectares with showings of lithium, tantalum, tin, and niobium.
• The team plan to work up a preliminary resource estimate to determine the nature and scale of the lithium and by-product mineral potential across this project area.

Rio Tinto jv agreement for the exploration and development of lithium and by-products at HCK:

• Rio Tinto have the option to invest US$7.5m in two stages to earn up to a 75% interest in the licence.

• • Stage 1 exploration expenditures of US$3m over two years to earn a 51% interest in the Licence.
  • Stage 2 exploration expenditures of US$4.5m for the following three years to earn a further 24% interest in the licence.

• A cash consideration of US$300,000 over Stage 1 and Stage 2.
• A 2% capped NSR capped at US$50m
• Rio Tinto also has the option to add Aterian’s two other Rwandan projects, pending licence approval.

Conclusion: It is good news to hear the jv conditions have been met and particularly good news to know the exploration teams are trained and ready to start work on defining the scale and potential value of the HCK prospects.

Beowulf Mining* (BEM LN) 1.6p, Mkt Cap £18m – Roadmap for Kallak Iron Ore development

• Beowulf has provided an update on its plans for the Kallak Iron Ore Project in Sweden.
• The Company notes that they are currently progressing environmental baseline studies for the completion of the Environmental Impact Assessment and subsequent Environmental Permit application.
• Additionally, work towards a PFS is currently underway with the consultant services of SLR.
• Samples have been taken for metallurgical testing.
• The PFS is expected to take 10 months to complete, with the EIA dependent on the PFS.
• The environmental permitting process is expected to take c. one year.
• Following the PFS completion, a DFS will be completed, expected to take approximately on eyear.
• The DFS and receipt of the Environmental Permit will enable financing and design discussions.
• As a result, the company expects the EIA submission to be made in 2H24, with DFS aimed for completion by 4Q25 and a potential construction decision made in 1Q26.
• The Kallak North Scoping Study includes an MRE of 111mt MI @ 28% Fe + a 25MT Inferred Resource at 28.3% Fe.
• The Scoping study uses conservative pricing assumptions for an NPV8 of $177m but the Company emphasises that spot prices from January, similar to current levels today, would imply an NPV8 of $852m.

Conclusion: Beowulf management continues to provide clear and concise guidance on its various project roadmaps to the benefit of shareholders. We are encouraged to read that progress at the Kallack Iron Ore project is accelerating, and we look forward to the PFS results in due course. The long-term fundamentals of high-grade iron ore products are compelling and, in our view, remain under-appreciated by the wider natural resource investment community. Global steel demand is expected to grow by 24% to 2050. 70% of steelmaking is currently dominated by Blast Furnace operations, which is being shifted to high-grade, pellet-hungry Direct Reduction-Electric Arc Furnaces. As a result, we anticipate high-grade premiums to continue to increase, supporting the long-term economic potential of Kallack. In the meantime, progress at the GAMP graphite anode facility continues, with the EIA expected to be completed next quarter and DFS work starting mid-2024.

*SP Angel acts as Nomad and Broker to Beowulf Mining

Castillo Copper (CCZ LN) 0.34p, Mkt Cap £4.4m – Asset review confirms the NWQ project as a core exploration asset

• Reporting on initial findings of its strategic asset review, Castillo Copper confirms that it has identified its north-west Queensland (NWQ) project as a ‘core asset’ and will “be embarking on a campaign to deepen its understanding of the 20+ prospects across the tenure (excluding the Big One Deposit) ahead of engaging with potential strategic partners”.
• The review is continuing and will assess the merits of the Cangai Copper Mine, BHA Project and Zambian exploration projects.
• The NWQ project includes the Boomerang and Josephine prospects “interpreted to be prospective for structurally controlled copper mineralisation” where mineralisation is associated with the ~1.7bn years old Surprise Creek Formation in the Mt Isa Inlier of western Queensland.
• The asset review follows recent management restructuring, and aims to maximise the exploration potential of Castillo Copper’s suite of exploration projects.

Conclusion: The NWQ copper project is confirmed as one of the company’s core projects.  We await the views on Castillo Copper’s other projects in Australia and Zambia with interest.

Greatland Gold (GGP LN) 6.55p, Mkt Cap £382m –Havieron decline approaches the final major aquifer

• Greatland Gold reports that the main decline at its 30% owned Havieron gold copper project in the Paterson region of WA has now reached 2,030m and has a further 770m to go before it reaches “the base of the Permian cover and top of the Havieron orebody”.
• The decline is now within around 280m of reaching the lower confined aquifer (LCA) unit which is “the final aquifer that the underground decline passes through before reaching the Havieron orebody”.
• Greatland Gold describes passing the LCA as “a key milestone and de-risking event in the decline development” and explains that during the underground development it has “successfully developed through two shallower aquifers at vertical depths of 50 and 250 metres”.
• Preparatory work ahead of reaching the LCA includes depressurisation drilling and extraction of water to the surface.  The company says that this “water management has indicated potential for greater volumes of water to be managed at surface than originally modelled. In order to increase the confidence in water management from the LCA, further hydrological drilling, data collection and evaluation will be completed”.
• “To allow this work to occur prior to the decline intersecting the LCA, development will continue to advance in the short term before a temporary pause in decline development prior to entering the LCA, commencing later this quarter”.
• Based on previously reported advance rates we would estimate that the Havieron decline would be likely to reach the base of the Permian cover overlying the orebody in around six months, however, slowing the advance rates and introducing a “temporary pause” in order to manage the LCA will almost inevitably extend this timing.
• Managing large volumes of water can be a key challenge in underground mining and we are wholly supportive of the prudent approach to water management in this case, even with its potential to extend the project completion times.
• The company confirms that it is continuing and expanding the depressurisation drilling as “experience from the upper two aquifers has demonstrated … [that this technique] … is highly effective in improving the aquifer ground conditions prior to decline development”.
• Greatland Gold also confirms that work on its feasibility study “will continue, incorporating the further hydrological drilling, data collection, and enhanced understanding of the LCA and water management requirements… [and that it expects the study to be completed … by the September 2024”.

GreenRoc Mining* (GROC LN) 3.95p, Mkt Cap £5.8m – GreenRoc clarifies Chinese government restrictions on the implementation of export restrictions on graphite

• GreenRoc Mining notes the recent decision by the Chinese government to implement export restrictions on exports of higher grade graphite from 1 December 2023
• The move has significant potential implications for the global battery industry.
• Chinese companies will have to seek special export permits to supply synthetic, natural flake graphite, graphite concentrate and purified graphite to international battery manufacturers.
• The restrictions do not extend to lower grades of graphite which are used for EAF ‘Electric Arc Furnace’ anodes as used in the production of aluminium, steel and ferro alloys.
• China is the primary source for > 70% of global synthetic graphite production and ~65% of natural flake graphite.
• China also processes >90% of graphite used in Electric Vehicle Li-ion battery anodes.
• Forecasts indicate demand for graphite in Li-ion battery anodes should quadruple within the next decade.
• European demand for battery-grade graphite is estimated to reach 1mtpa by 2030, equivalent to the entire global graphite production in the year 2020.

• • Stefan Bernstein, GreenRoc’s CEO, commented: “China’s decision to impose export restrictions on graphite underscores the critical need to establish secure supply chains by boosting domestic, non-Chinese production capability, which is less vulnerable to market shocks and geopolitical events.  

• China’s threat to restrict high-purity graphite products required for Li-ion battery anode production risks harming if not killing off the nascent European EV battery industry.
• Any interruption to graphite anode supply will lift China’s competitive advantage in the Electric Vehicle sales at a time when regulations are forcing drivers to buy EVs in increasing numbers.
• GreenRoc is looking to develop the Amitsoq graphite mine in the south of Greenland, 20km to the Northeast of the town of Nanortalik.
• Amitsoq is one of the ‘highest-grade’ graphite projects in the world with potential for significant expansion within the local area.
• GreenRoc Resource Estimate and parameters for upcoming PEA:

• • 400,000t of ore output for
  • ~80,000t of graphite concentrate

• Total Resource: 23.05mt grading 20.41% Cg at a cut-off grade of 0% Cg JORC inferred.

• • 1.26mt of Measured Resource @ 22.05% Cg,
  • 6.12mt Indicated Resource @ 21.04% Cg from 2.04mt – a 200% increase over the 2022 MRE,
  • 15.67mt Inferred Resource @ 20.04% Cg from 6.24mt – a c.150% increase over the 2022 MRE,

Conclusion:  GreenRoc is very well placed to meet European Li-ion battery graphite demand. The team are also looking to develop a process plant for anode-ready material for EV battery manufacturers.  The mine is well positioned to feed into Europe and North America’s energy transition.  GreenRoc expects to publish results from its forthcoming Preliminary Economic Assessment next week.

*SP Angel acts as broker to GreenRoc Mining

Petra Diamonds (PDL LN) 48.25p, Mkt Cap £90m – Early resumption of production at the Williamson mine helps drive a 12% increase in diamond output

• In its Q1 operational review for its FY Petra Diamonds reports a 12% rise in diamond output to 696,639 carats (Q4 2023 – 620,018 carats).
• The company attributes the higher production largely to its Williamson mine “resuming operations ahead of schedule” following the suspension of operations in the aftermath of the tailings dam incident in November 2022.
• Production at the “Cullinan Mine was largely in line with expectations, with a small increase in tonnes treated offset by grade trending towards the lower end of expectations”.
• At the Finsch mine, tonnes treated decreased 23% from the preceding quarter, largely offset by “a 26% increase in ROM grade, reflecting increased quarter-on-quarter volatility associated with the sub-level cave maturity”.
• Production guidance “for FY 2024 remains unchanged” in the previously announced 2.9-3.2m carats range.
• The company reports revenues of US$97.6m including “Tender 1 sales of US$79.3 million and a portion of Tender 2 sales concluded prior to 30 September, with the balance of Tender 2 adding a further US$22.2 million post period end”.
• Commenting on the condition of the rough-diamond market, CEO, Richard Duffy, explained that “the actions taken by the major producers to curb supply and the two-month Indian diamond import moratorium will assist in stabilising the market and supporting prices as inventory levels reduce”.
• He explained that “By bringing forward our second tender of FY 2024 we were able to sell 75% of our goods ahead of the moratorium, with the balance sold shortly after …[and that Petra Diamonds is]… evaluating options to provide further financial flexibility, such as optimising our operational expenditure and deferring capital spend”.

Conclusion: Petra Diamonds is maintaining its FY 2024 production guidance following an early resumption of production from the Williamson mine.  In the wider rough-diamond market context, remedial measures to address weaker market conditions include supply curbs from the major producers and a moratorium on imports into India.

Phoenix Copper* (PXC LN) 17.25p, Mkt Cap £23.9m –Navarre Creek exploration progress encourages the staking of additional 400 acres

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

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• Phoenix Copper has provided a progress report on the exploration of its Navarre Creek project in Idaho where it has now completed 28 reverse circulation (RC) drillholes of a planned 60-hole programme and is evaluating the initial results.
• Although it is not releasing detailed assay and intersection results while it assesses the data in the context of “the geologic system as we currently understand it”, the company says that results of the first 7 holes indicate the presence of “continuous, low-grade gold mineralisation, open along strike and down-dip” along the Lehman Creek fault.
• Despite the lack of public detail at this stage we infer from the company’s decision to extend its land holding by a further 400 acres (to 3,977 acres) towards the southwest and its comments that mineralisation remains open both laterally and down dip, that it has been encouraged by the initial findings.
• Confirming that the mineralised “zone appears to trend off the property to the southwest … [CEO, Ryan McDermott, explained that] … results at the other target areas are presently under evaluation.
• In addition, he confirmed that “we are also in the process of updating the Empire mine open pit resource model to include last year’s metallurgical drilling results, finalising metallurgical testing and completing an updated feasibility study for the open pit mine”.
• Commenting that the “Empire mine open pit process design and development is well underway, including the engineering evaluation of the footprint proposed as the site of the processing facility on the Company’s patented land near the future open pit … [Mr. McDermott explained that the] … final process design is critical to the success of the mining operation as it is the step that ensures maximum metal recovery and maximum revenue. We are advancing through the engineering studies at a pace reasonable to maintain the integrity of the final design”.

Conclusion: Phoenix Copper’s decision to extend its land holding over a further 400acres to the southwest of its Navarre Creek project area implies that initial drilling has provided encouraging results and we look forward to seeing them once the company completes its detailed evaluation.

*SP Angel acts as nomad to Phoenix Copper

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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

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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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