SP Angel Morning View -Today’s Market View, Tuesday 25th July 2023

China stimulus talks help risk sentiment ahead of US Fed rate decision Wednesday

MiFID II exempt information – see disclaimer below

Alphamin Resources (AFM CN) – Operational and financial update as full year production set to exceed guidance

Base Resources (BSE LN) – Quarterly production report and further delays in Madagascar

Bluejay Mining* (JAY LN) – Bluejay redoubles focus on Hammaslahti sulphides as Rio Tinto withdraws from Enonkoski

Hummingbird Resources (HUM LN) – Robust production at Yanfolila with Kouroussa in a ramp up stage and updated FY23 guidance due Q3/23

Sunrise Resources (SRES LN) – Pioche drill programme update

Pre-IPO financing for High-Purity Alumina project

Li-ion batteries use a separator membrane made out of High-Purity Alumina

• High-Purity Alumina (HPA) is an inert chemical with high thermal stability. It gives good heat resistance and insulation making it ideal as a coating for separator membranes.
• The project alumina has been shown to be suitable for Li-ion batteries, LED lighting and synthetic sapphire for smartphones and tablets,
• The resource contains a JORC inferred resource sufficient for 10,000 – 20,000tpa of HPA >30 years
• The process uses an innovative process flowsheet combining commercial proven technologies with recent metallurgical tests producing 99.995% alumina.
• CRU estimate demand for HPA powder could reach 187,000t in 2028 from 19,000t in 2018.
• CRU predict substantial demand growth led by Li-ion battery and LED production,
• Price: High-purity alumina sells for ~$30,000/t today up from $24,000/t in 2018,
• The company looking to fund HPA studies, metallurgical work, working capital and listing costs

*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.

VOX Markets:  

24/07/2023: https://audioboom.com/posts/8338437-john-meyer-on-improved-liquidity-plus-cornish-metals-beowulf-rainbow-rare-earths-solgold-sove

14/07/2023: https://audioboom.com/posts/8334912-john-meyer-on-china-s-deflation-plus-bushveld-minerals-empire-metals-strategic-minerals

*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.

Base metals rally on bets China stimulus will support faltering property sector and weak yuan

• Copper rallied to a ten day high of $8,658/t this morning following more concrete evidence Beijing will support the flailing property sector.
• Aluminium and zinc both up 1.5%, tin up 0.6%, nickel and lead both rallied.
• Traders notice strong volumes for base metals.
• The yuan is also strengthening following a 3.5% fall against the dollar this year, with rumours that state-owned banks are selling dollars to prop up the yuan.
• A stronger yuan offers domestic Chinese traders more purchasing power in overseas commodity markets.

Bank of Ghana ramps up gold purchases

• The Bank of Ghana has bought 7.73t from domestic miners since June 2021.
• The amount is valued at $480m, with the bank stating it has ‘exceeded’ its targets.

Economics

US – Growth loss momentum with the headline rate coming down to a five month low with services sector expansion starting to slowdown, according to latest PMI numbers.

• Demand as indicated by new orders remained in expansion territory but climbed at a softer pace.
• Employment climbed at the start of the quarter although the rate of growth was only marginal and the weakest since January.
• Inflation picked up during the month as firms are aiming to pass through higher costs and increased interest rate payments onto consumers.
• “July is seeing an unwelcome combination of slower economic growth, weaker job creation, gloomier business confidence and sticky inflation,” the survey concluded.
• Preliminary Manufacturing PMI: 49.0 v 46.3 June and 46.2 est.
• Preliminary Services PMI: 52.4 v 54.4 June and 54.0 est.
• Preliminary Composite PMI: 52.0 v 53.2 June and 53.0 est.
• US Philadelphia Fed manufacturing index fell -13.5 in July vs -13.7 in June
• US existing home sales fell -3.3% in June to 4.16m units vs +0.2% in May to 4.3m units
• Conference Board economic index slipped 0.7% in June to 106.1
• Atlantic Fed NOW GDP index 2.3% pa on 19 July
• Chicago Fed national activity index fell to -0.32 in June vs -0.28 in May

China – Authorities pledged yesterday to step up policy support for the economy albeit little details on exact measures following the July Politburo meeting.

• The July Politburo meeting typically sets the tone for national economic policies for the second half of the year.
• The focus of the countercyclical measures will be domestic demand trying to support residents’ incomes to enable consumption to drive economic growth.
• The government will boost demand for autos, electronics and household products and promote tourism, Reuters cites state news agency Xinhua.
• “Currently, the economy is facing new difficulties and challenges, mainly due to insufficient domestic demand, difficulties in the operation of some enterprises, many risks and hidden dangers in key areas, and a grim and complex external environment,” Xunhua quoted the Politburo.
• Separately, authorities will adjust property policies in response to “significant changes” in the demand supply dynamics.
• We expect renewed focus on job creation and economic growth from the authorities
• We expect the authorities to lower deposit ratios to make mortgages more attainable for lower income workers.
• We expect renewed support for dual-circulation to boost local consumption, particularly in some poorer areas
• Investors are mentioned for the first time indicating new investment created by entrepreneurs may find support from the authorities.

China property equities rally on pledges of support from Beijing

• Hang Seng Mainland Property Index rallied 12% this morning, benchmark real estate index rallied 7%.
• Indebted developers County Garden rallied 15%.
• Property bonds are also rallying on the pledges of additional support from Beijing.

Japan – CPI 0.2% in June and 3.3% yoy in June vs 3.2% yoy in May

• Core CPI rose 3.3% yoy in June vs 3.2% yoy in May

Germany – Business sentiment pulled back on all fronts in July with both assessments of current conditions and expectations weakening from the previous month.

• Weak overseas demand and tight monetary policy are likely contributors to a continuing decline.
• IFO Business Climate: 87.3 v 88.6 (revised from 88.5) June and 88.0 est.
• IFO Current Assessment: 91.3 v 93.7 June and 93.0 est.
• IFO Expectations: 83.5 v 83.8 (revised from 83.6) June and 83.4 est.

UK – GfK consumer confidence -30 in July vs -24 in June

• Retail sales 0.7% in June vs 0.1% in May and -1% yoy in June vs -2.3% yoy in May

Sweden – Greta Thunberg fined for disobeying a police order to leave a climate protest in the southern Swedish city of Malmo

• The news is interesting as it highlights a change in attitude towards activists disrupting society in Sweden.

Indonesia courts EV makers with incentives as Thailand and Vietnam threaten market share

• Indonesia is looking to introduce a new set of incentives to draw investment from EV makers.
• Reuters reports the government is in the process of establishing relationships with Tesla and BYD.
• China’s BYD recently invested in Thailand, despite Indonesia’s wealth of critical battery metals including nickel.

Vietnam looking to ramp up rare earth production with northern province reserves

• Vietnam is aiming to boost its rare earth production to 2mt pa by 2030.
• Th country produced 4,300t last year and 400t in 2021, with rare-earth oxide production targeted at 20-60kt pa by 2030 then 40-80ktpa by 2050.
• Vietnam holds 22mt in reserves currently.
• Output is set to ramp up from Lai Chau, Lao Cai and Yen Bai.

Currencies

US$1.1082/eur vs 1.1124/eur yesterday. Yen 141.50/$ vs 141.32/$. SAr 17.689/$ vs 17.995/$. $1.286/gbp vs $1.287/gbp. 0.677/aud vs 0.673/aud. CNY 7.143/$ vs 7.197/$.

Dollar Index 101.27 vs 100.97 yesterday.

Commodity News

Precious metals:

Gold US$1,962/oz vs US$1,966/oz yesterday

Gold ETFs 91.7moz vs US$91.8moz yesterday

Platinum US$971/oz vs US$972/oz yesterday

Palladium US$1,293/oz vs US$1,285/oz yesterday

Silver US$24.58/oz vs US$24.85/oz yesterday

Rhodium US$4,000/oz vs US$4,050/oz yesterday 

Base metals:   

Copper US$ 8,617/t vs US$8,381/t yesterday

Aluminium US$ 2,243/t vs US$2,208/t yesterday

Nickel US$ 21,520/t vs US$20,927/t yesterday

Zinc US$ 2,462/t vs US$2,367/t yesterday

Lead US$ 2,179/t vs US$2,139/t yesterday

Tin US$ 28,850/t vs US$28,494/t yesterday

Energy:           

Oil US$82.9/bbl vs US$80.3/bbl yesterday

• Crude oil prices continue to gain ground, rising to a 3M high, as the supply side cuts to OPEC+ production and US rig numbers begin to have a positive impact on sentiment.
• European energy prices edged higher yesterday on the back of a searing heatwave affecting parts of the Continent and concerns regarding an escalation of the Russia-Ukraine war.
• Shell announced the sale of its 35% interest in the giant 10Tcf Abadi gas discovery offshore Indonesia to state-owned players Pertamina and Petronas for $325m upfront cash and $325m contingent on project FID, which is expected to develop a 9.5mtpa onshore LNG facility.

Natural Gas US$2.715/mmbtu vs US$2.751/mmbtu yesterday

Uranium UXC US$55.75/lb vs US$55.75/lb last week

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$112.7/t vs US$113.2/t

Chinese steel rebar 25mm US$535.8/t vs US$527.0/t

Thermal coal (1st year forward cif ARA) US$125.8/t vs US$114.0/t

Thermal coal swap Australia FOB US$144.0/t vs US$140.0/t

Coking coal swap Australia FOB US$236.0/t vs US$236.0/t

Other:  

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

NdPr Rare Earth Oxide (China) US$64,751/t vs US$63,032/t

Lithium carbonate 99% (China) US$39,270/t vs US$40,092/t

China Spodumene Li2O 6%min CIF US$4,060/t vs US$4,080/t

Ferro-Manganese European Mn78% min US$1,092/t vs US$1,097/t

China Tungsten APT 88.5% FOB US$315/mtu vs US$315/mtu

China Graphite Flake -194 FOB US$675/t vs US$675/t

Europe Vanadium Pentoxide 98% 7.5/lb vs US$7.5/lb

Europe Ferro-Vanadium 80% 32.05/kg vs US$32.25/kg

China Ilmenite Concentrate TiO2 US$312/t vs US$310/t

Spot CO2 Emissions EUA Price US$99.6/t vs US$96.8/t

Brazil Potash CFR Granular Spot US$340.0/t vs US$345.0/t

Battery News

China exports 800,000 EVs in H1 23

• According to data released yesterday by the China Passenger Car Association (CPCA), China exported 2.34m vehicles in the first half of the year, up 73% from the same period last year.
• Of the 2.34m vehicles, 800,000 were NEVs, up 105% yoy and accounting for 34% of vehicles exported.
• Chinese NEVs have mainly been exported to Western European and Southeast Asian markets, with Belgium, Spain, Slovenia and the United Kingdom becoming major destinations in the past two years, the CPCA said.
• Exports to Southeast Asian countries such as Thailand have increased, thanks to the success of new models from BYD and SAIC.

Indonesia to finalise new incentives to attract EV investments

• At a nickel industry conference, senior ministers announced that the country was finalising a new set of incentives to attract investment of EVs and are in talks with companies like Tesla and BYD.
• Indonesia, has been trying to attract EV makers to invest in the country, hoping that its rich nickel reserves will be a key factor.
• However, some automakers like China’s BYD have instead chosen to invest in Thailand, Southeast Asia’s automotive hub.

EV charger operator EVCS seeks to raise $125m to expand network

• EV charger operator EVCS is looking to raise $125m, as it races to expand its network of fast chargers eightfold by 2025 and capitalise on the US government’s push to boost EV adoption. (Reuters)
• The $5b federal program to electrify the US has caused a capital-intensive race amongst charger makers and operators.
• Tesla’s recent agreements to open its network to rival automakers has also accelerated other manufacturers plans to offer new products and to expand their networks.
• EVCS, which operates its own network of fast chargers as well as stations for clients such as Hertz and Hilton, plans to increase its network to 2,100 fast chargers by 2025 from 260 currently.

Company News

Alphamin Resources (AFM CN) C$1, Mkt cap C$1.28bn – Operational and financial update as full year production set to exceed guidance

• Alphamin Resources, operator of the Mpama North project, provides an operational and financial update.
• The Company reports a 3% qoq increase in ore processed to 99,035t for the June quarter.
• Grades processed fell 4% to 4.2% Sn, recovery rates unchanged at 76%.
• Tin production fell 1% to 3,151t and tin sold stood at 3,068t, down 3% qoq.
• The Company reported a 14% decline in EBITDA for the quarter to $35.4m as a result of lower tin prices and delayed sales expected to clear next quarter.
• Management notes the current tin price is trading 11% higher than Q2 2023 realised prices.
• YTD tin production of 6,338t currently exceeds the targeted FY23 guidance of 12kt.
• As regards the Company’s expansion plans at Mpama South, a 6m wide area of ‘extremely poor ground conditions’ is reportedly delaying advancement of the Mpama South adit, now expected to connect with Mpama South underground workings in November.
• The Company notes that the ytd development of 1,460m at Mpama South is in line with expectations of targeted tin production expansion from FY24.
• An additional 2km of underground development at Mpama South is required over the next six months.
• Mpama South is expected to increase production from 12kt to 20kt pa.
• $30m was spent on Mpama South over 2Q23, bringing total expenditure to $75m of a total $116m forecasted budget.
• Cash on hand now stands at $51m.

Base Resources (BSE LN) 8.75p, Mkt cap £100m – Quarterly production report and further delays in Madagascar

• Base provides a production update from the quarter to June 30^th, alongside FY24 production guidance.
• The quarter saw 4.1mt mined vs 3.3mt in the March quarter and 3.9mt in the quarter for June 2022.
• The ramp up is explicable by delays caused by the mine move to North Dune in the quarter to March 2023.
• Ilmenite production fell to 55.5kt qoq from 71.6kt in the March quarter and 83.8kt same period last year.
• Rutile production fell to 13.8kt vs 16.6kt in the quarter to March and 19.2kt same period last year.
• Zircon production fell to 5.5kt vs 6.4kt last quarter and 6.8kt same period last year.
• Sales revenue per tonne rose to $695/t vs $637/t last quarter and $691/t same period last year.
• Guidance vs Actual for the FY23
  • Rutile – 68,784t (62-73kt forecast)
  • Ilmenite – 297,861t (260-310kt forecast)
  • Zircon – 25,954 (22-27kt forecast)
• Guidance for Full Year 2024
  • Rutile – 35-41kt
  • Ilmenite – 130-160kt
  • Zircon – 13-16kt.
• The transition to North Dune is driving heavy mineral grades lower, with 3% grades mined in the quarter vs 3.9% in the quarter for March.
• Costs:
  • Unit operating costs rising to $240/t produced on a combined basis vs $190/t last quarter on lower grades.
  • Cash operating costs of $18.8m in line with prior quarter (reduction in product transport, shipping and maintenance costs)
  • COGS rose to $263/t
• Mineral sands market
  • Company notes stable market in North America and Europe but weakness in China on stalling recovery.
  • Ilmenite pries steady, rutile inching lower and zircon prices increased.
  • Past six months has seen Chinese pigment plants ramping up production, however end user demand failed to pick up causing Chinese pigment operations to subsequently slow, reducing ilmenite demand.
  • Management notes cautious pigment producers and lower inventory levels, however rutile remains the primary feedstock owing to the reduction of chlorine reliance.
  • Welding and titanium sector demand for rutile expected to increase in Q3 and the Company is looking to ramp up exports to the sector.
  • Zircon – decreased on negative sentiment in China and stagnant European economy.
• Toliara (Madagascar)
  • Management notes limited engagement with Government of Madagscar over Toliara Project terms as the presidential elections approach and mining code reform continues. No material progress is expected before late 2023.
  • Engagement “on lifting of the project’s on-ground suspension, has been limited during the quarter due to the Government focus on an overhaul of the Malagasy Mining Code and preparations for the upcoming Presidential elections.” 

Conclusion: Base Resources needs to find another titanium project to occupy its expert team as the Kwale mine runs down its resources. While the government of Madagascar have permitted other mining projects in recent years permitting for Toliara has been inexplicably paralysed putting management in the challenging position of managing declining grades and resource at Kwale.

Bluejay Mining* (JAY LN) 1.86p, Mkt cap £20m – Bluejay redoubles focus on Hammaslahti sulphides as Rio Tinto withdraws from Enonkoski

(Bluejay Mining holds 100% of the Hammaslahti and Enonkoski projects)

• Bluejay Mining report the withdrawal of Rio Tinto from the Enonkoski project leaving Bluejay with full ownership.
• Rio Tinto elected to drop their involvement and exploration at Enonkoski following expenditure of $4.6m testing the ground around the old Enonkoski / Laukunkangas mining lease.
• The rest of the 15km belt remains largely untested with Bluejay proposing to test the Makkola intrusion, close to the Hälvälä Ni-Cu-Co Mine where a ground gravity survey, shows  potential shallow mineralisation.
• Bluejay plan to drill up to 1,500m to test the Makkola, Hälvalä and Kiislampi targets later this year.
• Hammaslahti: Management reckon they should be able to identity meaningful mineralisation at Hammaslahti with recent drill core showing intersections of high-grade sulphides.
• Geochemical assays from Phase 1 of recent diamond drilling programme are due shortly.
  • “All seven Phase 1 drill holes intersected broad zones of disseminated to semi-massive sulphide mineralisation corresponding to the E-lode orebody, some of which exceeded 10m width.”
• Drilling will restart in August for the development of a new MRE ‘Mineral Resource Estimate’ on the E-lode as well as the down plunge extensions to the historic mine.
• Hammaslahti formerly produced a total of 7mt grading 1.16% copper, 1.55% zinc, 0.59 g/t gold and 5.2 g/t silver.
• Outokumpu high-priority Haapovaara target: The team are looking at running ground gravity and airborne magnetic surveys over Haapovaara, just a few km from Boilden’s Kylylahti Mine.
  • “The target is coincident with two gravity highs in existing regional gravity data that have never been drill tested.
  • Bluejay recently increased its licence areas and is now the largest landholder on the highly prospective Outokumpu belt, that hosts three past producing high-grade, polymetallic mines.”
• Metals One plc which is acquiring Bluejay’s Black Schist projects in Finland is expected to start trading next Tuesday.
• Bluejay is due to receive >£4m worth of shares in Metals One representing some 29.01% of the newly issued share capital.

Conclusion:  High-grade VMS targets as at the Hammaslahti mine generally occur in clusters suggesting there are more discoveries to come. Bluejay is determined to develop a new resource at Hammaslahti and to follow survey results to identify new discoveries in the region. Rio Tinto’s withdrawal from Enonkoski is not surprising or unexpected. It is extremely difficult to identity and discover mineral deposits of the scale required for a major company. The smallish, but high-grade nature of nickel mines makes them even more difficult to find. While no discovery was made at Enonkoski Bluejay management are ahead in terms of their understanding and knowledge of the geology of the region.

*SP Angel acts as nomad and broker to Bluejay Mining. The analyst has visited the historic Enonkoski mine site and holds shares in Bluejay Mining

Hummingbird Resources (HUM LN) 14.2p, Mkt Cap £85m – Robust production at Yanfolila with Kouroussa in a ramp up stage and updated FY23 guidance due Q3/23

• Yanfolila produced 23.9oz (+19%yo) in Q4/23 taking H1/23 production to 51.1koz (+44%yoy).
• Stronger production in H1/23 led by higher processed grades helped to bring cash costs lower to $1,170/oz (-42%yoy).
• Gold sales amounted to 24.8koz in Q2/23 and 51.1koz in H1/23 with realised gold prices averaging $1,927/oz in H1/23.
• Kouroussa poured first gold in early June with regular gold pours followed in July.
• Processing plant availability is currently at ~68% with the operation expected to reach steady state in Q4/23.
• Kouroussa is expected to produce ~30koz in H2/23.
• EBITDA benefited from higher production, lower unit costs and stronger gold prices coming in at $33.1m (H1/22: -$9.3m).
• Net debt (incl gold inventory) came down to $119m as of H1/23 compared to $125m as of FY22.
• Deleveraging is expected to accelerate through H2/23 as Kouroussa driven capital-intensive period is now behind.
• Group wide guidance will be released Q3/23 once Kouroussa is closer to steady state production while the team reiterated that Yanfolila is in good position to meet its asset level guidance of 80-90koz at $1,500/oz AISC.

Sunrise Resources (SRES LN) 0.085p Mkt Cap £3.4m – Pioche drill programme update

• Sunrise provides an update for its Pioche Sepiolite Project in Nevada, USA.
• Resource drilling has now started, with a 24 hole programme currently planned.
• A truck mounted auger drill will be used to an average depth of 50ft.
• Sepiolite beds at Pioche are considered to lie near surface.
• Tolsa, the world’s largest sepiolite producer, has the option to buy the Pioche Project for $1.25m up until 28^th December 2023.
• Tolsa is completing the drilling at the project, with Sunrise holding the option to retain a 3% royalty were production to begin.

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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