SP Angel Morning View -Today’s Market View, Tuesday 27th August 2024

Copper strengthens as BHP calls for ‘flyup’ pricing environment following 2025 surplus

MiFID II exempt information – see disclaimer below

Anglo Asian Mining* (AAZ LN) – $3.7m Caterpillar vendor financing

Base Resources (BSE LN) – Annual results as Energy Fuels transaction looms

Bezant Resources (BZT LN) – Geophysical data points to extension of mineralisation at the Kanye manganese project, Botswana

BHP (BHP LN) – Annual results highlight growing significance of India and include initial MRE for Oak Dam deposit. South Australia

Endeavour Mining (EDV LN) – Settlement Agreement with Lilium Gold

GreenRoc Strategic Materials Plc (formerly GreenRoc Mining) (GROC LN) – Anode materials plant site acquired in Norway

Hummingbird Resources (HUM LN) – Pasofino interim financing and nonbinding expressions of interest

Jubilee Metals Group (JLP LN) – Three-year renewable power agreement

Power Metal Resources* (POW LN) – Extension to Uranium JV transaction

Zijin Mining Group (2899 HK) – Zijin misses lithium production guidance and limits supply growth as prices remain depressed

Copper ($9,420/t) strengthens as BHP calls for ‘flyup’ pricing environment following 2025 surplus

• BHP reiterated their bullishness on copper in their full year results this morning, calling for a ‘fly-up pricing regime.’
• They caveated this with expectations of a surplus in 2025, reducing their Chinese demand forecasts.
• Copper has been supported recently by rate cut optimism, with Powell’s dovish comments last week weighing on the dollar, supporting metals.
• However, short term supply risks are diminishing, with BHP averting a strike last week and Lundin Mining’s workers resuming work over the weekend.
• Codelco’s El Teniente will be next strike focus, with various contracts pending.

Gold peak $2,532/oz – prices hold high levels following Fed Powell comments on rate cuts and inflation

• Powell referred to supporting the US labour market and highlighted progress on inflation.
• The debate over a 25/50bp cut in September continues, with the market currently pricing a 28% chance of a 50bp cut in 22 days.
• US Treasury yields ticked up yesterday, with the 10 year yield climbing to 3.84% having been 3.77% in the wake of Powell’s comments.

Iron ore ticks higher on green shoot signs from Chinese steel sector

• Iron ore prices have strengthened to c.$100/t, with marginal supply likely coming off amid the lower pricing environment.
• Iron ore inventory in China has been dropping in August but is holding near two year highs.
• Steel production is reportedly down 10% in August yoy.
• There has been an uptick in steel prices in China, with lower coking coal prices also boosting margins.
• Reports have suggested that c.1% of Chinese steel mills are profitable at current levels. (AFR).
• BHP warns that Chinese steel makers are expected to ease blast furnace rates amid weak margins.

Economics

China – Industrial profits growth accelerated in July on the back of a recovery in overseas orders as well as a low comparison to 2023.

• Separately, PDD Holdings, an e-commerce firm focused on low priced goods, surprised markets with a gloomy sales outlook sending tis share price down 30%.
• “We are seeing many new challenges ahead, from changing consumer demand, intensifying competition, and uncertainties in global environment,” CEO said.
• The announcement highlights struggles faced by a Chinese consumer.
• Industrial Profits (%yoy, Jul/Jun/Est): 4.1/3.6/NA
• Industrial Profits (%YTD, Jul/Jun/Est): 3.6/3.5/NA

Jake Sullivan, US National Security Advisor flies to Beijing to suggest meeting between Xi and Biden

• Xi may not wish to offend Biden who is on his way out but this may provide a good opportunity to generate greater dialogue between Kamala Harris and President Xi.

New book by Michael Sheridan who is reported to be one of the wisest writers on China.

• ‘The Red Emperor: Xi Jinping and His New China’ describes Xi Jinping as a princeling to one of Communist China’s ruling families fighting his way back from countryside exile to lead the CCP.
  • “In Xi’s new China, family mafias struggle for power amid murder, corruption and sex scandals as ministers and generals vanish in purges.
  • No one is safe in his techno-security state. Xi is an absolute ruler whose word is law on everything from war and peace to the ruthless campaign against Covid-19.
  • He aims to dominate world trade, to defeat Western democracy and to make China the supreme power in the East. A loner and a risk-taker, he is the most consequential leader of our time.”
  • Drawing on intimate stories from the closed world of China’s leading families and two decades of first-hand reporting, Michael Sheridan sheds new light on the history and politics of China. The book reveals that behind the façade of the Chinese Communist Party there is a modern dynasty and a new emperor.

Germany – September consumer confidence dipped further coming in sub market expectations on rising jobs market worries.

• GfK index improved in August on European Championship with the improvement undone in September.
• Final 2Q24 GDP reported unchanged from preliminary estimates released earlier showing the economy contracted 0.1%qoq.
• Breakdown of 2Q24 GDP showed poor consumer spending (-0.2%qoq) and business investment (-2.2%qoq) weighed on growth.
• GfK Consumer Confidence (Sep/Aug/Est): -22.0/-18.6(revised from -18.4)/-18.2

Kazakhstan – The government to hold a nuclear power plant referendum as the nation accounting for >40% of global uranium production aims to diversify its energy sources.

• Sites considered for the facility include the shores of Lake Balkhash and Kurchatov region.
• Four foreign potential suppliers of nuclear tech are being considered including France’s EDF, China National Nuclear Corporation, Korea Hydro & Nuclear Power and Russia’s Rosatom.

Azerbaijan – New bilaterial relationship with China upgrades economic, military and political cooperation

• Azerbaijan is looking for new investment from Chin in the form of infrastructure, renewable energy, advanced technology and military equipment.
• While Azerbaijan has amazing roads and a first-class train from Ganja to Baku it lacks high-tech industry and a significant army to defend its borders.

Currencies

US$1.1168/eur vs 1.1121/eur previous. Yen 145.06/$ vs 145.84/$. SAr 17.750/$ vs 17.960/$. 1.321/gbp vs $1.313/gbp. 0.678/aud vs 0.673/aud. CNY 7.128/$ vs 7.137/$.

Dollar Index 100.82 vs 101.38 previous.

Precious metals:         

Gold US$2,509/oz vs US$2,496/oz previous

Gold ETFs 82.8moz vs 82.6moz previous

Platinum US$957/oz vs US$955/oz previous

Palladium US$970/oz vs US$941/oz previous

Silver US$29.87/oz vs US$29/oz previous

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

Base metals:   

Copper US$ 9,345/t vs US$9,200/t previous

Aluminium US$ 2,508/t vs US$2,492/t previous

Nickel US$ 16,965/t vs US$16,780/t previous

Zinc US$ 2,902/t vs US$2,900/t previous

Lead US$ 2,110/t vs US$2,089/t previous

Tin US$ 32,870/t vs US$32,900/t previous

Energy:           

Oil US$81.5/bbl vs US$77.6/bbl previous

• Crude oil prices surged higher yesterday after Libya’s eastern government called a “force majeure” over all fields, terminals and oil facilities, which produced 1.15mb/d in July.
• The Baker Hughes rig count fell by 1 unit w/w to 585 rigs last week (-47 or 7% y/y), with oil rigs flat at 483 units (-29 y/y) and gas rigs down 1 to 97 units (-18 y/y), as the Permian gained 3 rigs to 306 units (-14 y/y).
• New Zealand announced plans to reverse a 2018 ban on offshore oil and gas exploration and several other policies aimed at loosening regulations to address a nationwide energy shortage.

Natural Gas €37.4/MWh vs €36.5/MWh previous

Uranium Futures $80.2/lb vs $79.9/lb previous

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$100.4/t vs US$97.0/t

Chinese steel rebar 25mm US$474.7/t vs US$475.6/t

Thermal coal (1st year forward cif ARA) US$126.5/t vs US$125.5/t

Thermal coal swap Australia FOB US$147.3/t vs US$146.3/t

Coking coal swap Australia FOB US$195.0/t vs US$199.0/t

Other:  

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

NdPr Rare Earth Oxide (China) US$56,116/t vs US$54,853/t

Lithium carbonate 99% (China) US$9,890/t vs US$9,878/t

China Spodumene Li2O 6%min CIF US$770/t vs US$780/t

Ferro-Manganese European Mn78% min US$1,111/t vs US$995/t

China Tungsten APT 88.5% FOB US$333/mtu vs US$333/mtu

China Graphite Flake -194 FOB US$450/t vs US$457/t

Europe Vanadium Pentoxide 98% 4.7/lb vs US$4.7/lb

Europe Ferro-Vanadium 80% 24.75/kg vs US$24.80/kg

China Ilmenite Concentrate TiO2 US$322/t vs US$322/t

Spot CO2 Emissions EUA Price US$80.8/t vs US$1,394.0/t

Brazil Potash CFR Granular Spot US$292.5/t vs US$72.4/t

Battery News

Canada to introduce 100% tariffs on Chinese EVs

• Canada have followed suit from the US and announced it will impose a 100% of Chinese-made EVs.
• It has also announced a 25% tariff on imported steel and aluminium from China.
• The duties will apply to all EVs shipped from China, which includes those made by Tesla.
• Canada saw imports of EVs from China jump 460% yoy to 44,356 in 2023, when Tesla started shipping Shanghai-made EVs to Canada.

Xiaomi’s first EV, the SU7, sees strong sales in Q2

• Xiaomi sold over 27,000 units of its first EV, the SU7, in Q2 2024, which saw Xiaomi generate approximately $898m in revenue. (fortune.com)
• Xiaomi’s auto unit is still unprofitable and aggressive pricing means it has lost around $9,200 on each $29,900 EV it shipped.
• Initially aiming to sell 100,000 SU7 units by the end of the year, Xiaomi now expects to surpass this target by November, potentially reaching 120,000 units by year-end.
• The SU7, available in two variants with a third (SU7 Ultra) coming soon, is positioned to compete directly with Tesla and BYD in China.
• To meet growing demand, Xiaomi has increased production with double-shift operations and plans for further optimisation of its production lines.
• Despite currently operating at a loss, Xiaomi has sufficient funding for five years and plans to enter global markets, including potentially Europe, by 2024

Hong Kong Investment Corporation backs EV charging firm

• The government-owned Hong Kong Investment Corporation (HKIC) is backing Spark EV, a joint venture between Cornerstone Technologies and Thai firms to roll out a charging network in Thailand.
• Spark has a long-term agreement with the Thai state-owned energy conglomerate Bangchak Corporation Public to install and operate 1000 EV charging points across Thailand in five years.
• Thailand has a 19-to-1 EV-to-charger ratio versus the 10-to-1 global average.
• EV adoption has also soared from 1.4% in 2020 to 14% last year.
• The investment in Spark EV is HKIC’s fourth announced deal since inception and the first in new energy and green technology.

US EV sales saw mixed performance across models and brands in July

• Tesla remained top of US sales in July, with a 49.7% share but faces declining dominance. (Autoweek)
• Kia and Hyundai saw significant growth, with Kia’s EV sales up 135% and Hyundai following closely.
• Ford’s Mustang Mach-E and F-150 Lightning are solid performers but face slowing sales.
• Companies like Polestar, Lucid, and Audi are underperforming compared to competitors.
• SUVs and crossovers, such as the Tesla Model Y, Ford Mustang Mach-E, and Hyundai Ioniq 5, are highly favoured over sedans.
• Despite challenges, newer models like the Tesla Cybertruck and upscale SUVs like the Cadillac Lyriq are showing strong sales.

GMC begins first deliveries of Sierra EV pickups

• GMC has started delivering its first Sierra EV electric pickup trucks, specifically the limited “Denali Edition 1,” to customers. (InsideEVs)
• The Denali Edition 1 features the unique CrabWalk mode, also seen in the Hummer EV, allowing diagonal driving.
• It also boasts an impressive range of 440 miles on a single charge, surpassing the Rivian R1T’s 420-mile range.
• The starting price for the Denali Edition 1 is $97,500, aligning with GM’s strategy of pricing their electric pickups around $100,000.
• While the Sierra EV offers advanced features, its high price may be a tough sell compared to the Ford F-150 Lightning, which starts under $70,000.

Company News

Anglo Asian Mining* (AAZ LN) 80p, Mkt Cap £97m – $3.7m Caterpillar vendor financing

BUY

• The Company received $3.7m under a Vendor Financing Facility Agreement with Caterpillar.
• Terms of the deal remain unchanged from the ones announced earlier in May.
• The facility carries a SOFR plus 2pp interest rate and is repayable in 12 equal quarterly instalments.

*SP Angel acts as Nomad and Broker to Anglo Asian Mining

Base Resources (BSE LN) 12.5p, Mkt cap £147m – Annual results as Energy Fuels transaction looms

• Base Resources reports FY24 financial and operational results.
• The Company has transitioned to lower grade ore bodies as Kwale comes to the end of its mine life.
• Kwale expects to come to the end of production in December 2024.
• Regarding Toliara, fiscal terms with the Madagascar Government remain subject to binding documentation but have been reached in-principle.
• The Company will pay a A$0.065/shr special dividend in connection with the combination with Energy Fuels, with Base shareholders also entitled to 0.026 Energy Fuels share per Base share.
• Revenue for the period at US$135m, down 50% yoy on lower production.
• $26.4m EBITDA, net cash of US$88m.

*The analyst has previously visited the Toliara project in Madagascar.

Bezant Resources (BZT LN) 0.03p, Mkt cap £3.5m – Geophysical data points to extension of mineralisation at the Kanye manganese project, Botswana

• Bezant Resources says that results from an induced polarisation (IP) geophysical survey have shown “near surface areas of high conductivity/low resistivity which could reflect manganiferous mineralisation for about 900m to the NW of the previously exposed manganese occurrence in the Moshaneng borrow pit” at its wholly-owned Kanye project located ~65km SW of Botswana’s capital, Gabarone.
• The geophysical anomaly extends the potential strike length of the prospective zone to 1.4km and “extends … [it to] … up to 300m width in places”.
• The company plans to use RC (reverse-circulation) drilling “to confirm possible mineral continuity and grade. If mineralisation of economic interest is found by drilling then an extension to the IP survey is recommended to follow the strike further”.
• In February 2023, the company reported that initial drilling had “intersected a zone of shallow flat-lying detrital supergene manganese-iron mineralisation which appears to infill an irregular karst surface over a minimum strike length of 400m” with reported assays including “6m @ 28.64% MnO from 6m depth in hole MS-RC-12 including 4m @ 35.38% MnO from 8m depth”.
• Subsequent tests of sulphuric acid leaching “found that manganese recoveries of 99.4% were achievable at moderate process conditions”.
• Bezant Resource says it intends to drill “to confirm possible mineral continuity and grade and ultimately, dependent on the results, extend the resource” Executive Chairman, Colin Bird, welcomed the results of the geophysical work and said that the company is “strongly encouraged by initial indications from the geophysical survey of potential for a wider zone of continuous mineralisation over at least 900m of strike, with the target still open further to the NW”.

BHP (BHP LN) 2,105p, £105bn – Annual results highlight growing significance of India and include initial MRE for Oak Dam deposit. South Australia

• Reporting on a year bolstered by record iron-ore production BHP reports a 2% increase in attributable profits for the year ending 30^th June to US$13.7bn (2023 -US$13.4bn).
• Chief Executive, Mike Henry, described “a strong set of results in FY24 on the back of solid operational performance”.
• Underlying EBITDA increased by 4% to US$29.0bn (2023 – US$28.0bn) at an unchanged margin of 54%.
• The company recognises exceptional charges totalling US$5.8bn of which ~US$5.8bn is attributed to the dam wall failure at Samarco in 2015 and a further ~US$2.7bn to the impairment of its Western Australian nickel assets, which are currently suspended in response to global market conditions for nickel, offset by ~US$0.7bn gains on the divestment of the Blackwater and Daunia coal operations to Whitehaven Coal in April 2024.
• Net debt declined to US$9.1bn (2023 – US$11.2bn) within the company’s target range of US$5-15bn.
• BHP has declared a final dividend of US74ȼ/share bringing distributions for the year to US$1.46/share.
• The contribution of BHP’s iron ore operations continues to dominate contributing US$18.9bn (65%) to underlying EBITDA (FY 2013 – US$16.7bn or 60%).  Mr. Henry said that BHP has “extended our lead as the world’s lowest cost iron ore producer”.
• Copper operations contributed a further US$8.6bn (~30%) to EBITDA (FY2023 – US$6.7bn or 24%) with the balance from coal.  The CEO confirmed that BHP had grown its “overall copper volumes by 9% for the second consecutive year and expect to deliver a further 4% in FY25”.
• Commenting on the global economy and the demand for mineral commodities, BHP says that it expects “steady global growth slightly above 3% for CY24 and CY25” with a disparity between “developed economies facing less of a drag from higher interest rates … [with] … China experiencing an uneven recovery among its end-use sectors, and India likely to continue as the fastest growing major economy”.
• Explaining that the “Chinese economy has been volatile since CY23 … [BHP says that demand] … for commodities in the developed world has been relatively soft over CY23 and into CY24 as anti-inflationary policies, sluggish industrial activity and the last of the lagged impacts of the energy crisis were felt”.
• BHP says that weakness in China’s property sector is impacting steel demand although “annual steel production is still expected to be more than 1 Bt for the sixth consecutive year” while “China’s economic transition could accelerate its demand shift increasingly towards ‘future-facing commodities”.
• BHP recognises that the “Indian economy has maintained healthy momentum after the general election, particularly in relation to demand linked to the steel sector”.
• BHP also reports an initial, ‘Inferred’ mineral resource for its wholly-owned Oak Dam copper deposit in South Australia reporting 1.34bnt at an average grade of 0.66% copper and 0.33g/t gold.
• Development of Oak Dam, which is located 65km SE of the company’s Olympic Dam mine, is expected to use “a non-selective underground block caving scenario” although the company explains that “within this Mineral Resource is a bornite-dominant mineralisation domain, that at a 1% Cu cut-off, contains 220 million tonnes at 1.96% Cu and 0.68 g/t Au”.
• We imagine that BHP’s engineers will work on a mine design which facilitates the early extraction of this high-grade zone to help maximise the project’s economic returns.
• BHP’s production guidance for FY 2025 envisages copper output of between 1,745-2,045kt with iron ore in the range 255-265.5mt dominated by 250-260mt from the WA operations.

Conclusion: BHP has built on record iron-ore production growth and a strong performance from its copper operations in FY 2024 and is guiding for iron ore production to match or exceed 2024 in FY2025 with copper output expected to continue to grow in FY 2025.

Endeavour Mining (EDV LN) 1,640p, Mkt Cap £4.3bn – Settlement Agreement with Lilium Gold

• Endeavour has settled an agreement over their divestment of Boungou and Wahgnion projects.
• Lilium will now transfer ownership of Boungou and Wahgnion to Burkina Faso state.
• Endeavour will receive $15m upfront in cash, $15m by Q3-end and $30m by Q4 end.
• Endeavour will also hold a 3% royalty on production up to 400koz from Wahgnion.
• Endeavour sold Boungou and Wahgnion in June 2023 for c.$300m to Lilium Capital.
• Endeavour filed for arbitration proceedings against Lilium in March 2024, suggesting that terms of the agreement were broken and agreed cash payments had not been made.
• Lilium had argued that there were ‘discrepancies between the represented and actual financial and operative states of the mines.’

GreenRoc Strategic Materials Plc (formerly GreenRoc Mining) (GROC LN) 1.51p, Mkt Cap £2.94m – Anode materials plant site acquired in Norway

• GreenRoc Minerals report their intention to acquire a site in Norway for the manufacturing of Active Anode Materials.
• CRMA: The company has made two applications for Strategic Project status under the EU ‘CRMA’ Critical Raw Materials act.
• The first application is for the extraction of flake graphite in Greenland, the second is for the production of Anode Active Material in Norway.
• CRMA projects, in theory, should benefit from access to funds, accelerated permitting , access to technology etc…
• Eyde Materials Park: Management have signed a Letter of Intent with Otra Holdings, owner of the Eyde Materials Park in southern Norway for a 100,000sqm site.
• The site is to receive a new 800MW powerline in 2027 and a 5km industrial road from a new port being built at Arendal https://eydematerialpark.com/plots/.
• Norway has a history of hosting mineral processing industries with substantial hydropower from high rainfall not to mention local gas reserves.
• The Arendal port is just five days shipping from the Amitsoq graphite mine.
• Longum Nord is just 5km from Arendal the site of Morrow Batteries’ LFP ‘Li-ion phosphate’ Gigafactory which was officially inaugurated on 16 August 2024.
• Permitting: GreenRoc has submitted its final project description to the Greenland government for approval ahead of the public consultation process.
• This is part of the Exploitation Permit application process for the reopening the historic graphite mine.
• Graphite: We believe high-grade vein graphite carries a higher carbon content and makes for better Anode material than synthetic graphite.
• Updated Amitsoq PFS (11 July 2024):
  • NPV of US$621m vs $545m – post tax
  • IRR 26.5% vs 25.3%
  • Capex $340m vs $321m
  • Opex $1,872/t vs $2,211/t
  • Production 80,000tpa of concentrate – remains the same
  • Production 39,700tpa active anode material – remains the same
  • Includes: onsite production of de-ionised water and construction of a plant for the production of nitrogen.
• Potential to cut operating costs to US$1,662 using sodium hydroxide (NaOH) for purification instead of the very efficient, but more hazardous and expensive, hydrofluoric acid.
• Unfortunately, NaOH processing would increase the capital cost and reduce the post-tax NPV8 to US$601M with an IRR of 23.7%.

Conclusion:  It is good to see GreenRoc making progress towards the reopening of the mine and eventual production of Active Anode Material.

Hummingbird Resources (HUM LN) 8.3p, Mkt Cap £63m – Pasofino interim financing and non binding expressions of interest

• Pasofino Gold, a gold developer focused on the Dugbe Gold Project in Liberia, is planning an interim financing to progress Feasibility Study related works.
• Terms of the financing are expected to be announced shortly.
• Additionally, the Company engaged with multiple parties regarding strategic development options with two parties reported to have provided Pasofino with non-binding expressions of interest to acquire the Company.
• The team is hoping to enter with the third party into a letter of intent/exclusivity agreement by end of September 2024 followed by a definitive acquisition agreement in 4Q24.
• Hummingbird holds 53% interest in Pasofino.

Jubilee Metals Group (JLP LN) – 5.65p, Mkt cap £170m – Three-year renewable power agreement

• Jubilee Metals has secured a 3-year renewable power supply agreement covering the full requirements of its Roan and Sable operations in Zambia.
• The agreement with independent supplier, Lunsemfwa Hydro Power “ensures that the total power supply needs of … [the operations] … will be continuously met at competitive rates to the prevailing power tariffs, commencing on 1 September 2024”.
• Lunsemfwa Hydro Power is described as “an established independent power producer in Zambia and owns and operates two hydropower plants in the central province … [which is also] … building a 20MW solar plant and plans to use its portfolio of renewable power sources to meet Jubilee Zambia’s power requirements”.
• Jubilee Metals also confirms that “the agreement allows Jubilee the option to secure a further 10MW of solar generated power discounted by more than 30% below the initial power purchase agreement power rates. The additional power secures Jubilee’s future power demands to meet its expanding operational footprint”.
• “The additional power allocation of 10MW which holds the potential to be further scaled, ensures that our immediate power demands for our operational expansion targeting 25 000 tonnes of annual copper processing capacity will be met”.
• Recent liberalisation of Zambia’s power supply industry has provided “private players … access … [to] … the electricity transmission and distribution lines in the country to give consumers alternative sources of electricity to encourage the development of power generation in the country. LHPC and Jubilee are excited to be among the pioneers in actualising this government policy”.

Conclusion: Jubilee Metals is in the forefront of the liberalisation of Zambia’s power supply with a deal that secures renewable energy for its expanding operations.

Power Metal Resources* (POW LN) 17.5p, Mkt cap £19.5m – Extension to Uranium JV transaction

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• Power Metal Resources provides an update on their uranium JV with ACAM LP.
• The parties had previously extended the due diligence period to 23^rd August 2024.
• Today POW reports that ACAM has ‘substantially completed their due diligence… and the definitive legal documentation to the JV is in advanced form.’
• Both parties are reportedly working together to complete the transaction, with the exclusivity period extended to 13^th of September.
• The Company emphasises that there is no guarantee of completion, however they express confidence in ‘completion within that period.’
• ACAM is a natural resource focused fund, previously investing in AIM-quoted Amaroq Minerals.
• The original agreement sees ACAM or an affiliate make an initial £10m equity investment into the Power Metal Uranium spin out, earning a 70% interest, with a potential further £4m  upon value realisation.
• The proposed JV would see five drilling programmes.

*SP Angel acts as Nomad and Broker for Power Metal Resources

Zijin Mining Group (2899 HK) HK$15.4, Mkt cap HK$430m – Zijin misses lithium production guidance and limits supply growth as prices remain depressed

• The Company expects to miss its production target of 25kt LCE production this year, and expects to control construction progress amid the ‘significant oversupply pressure.’ (Bloomberg, Company Filings)
• They are ramping up the Xiangyuan polymetallic mine in Hunan, expected to produce 567kt of iron lepidolite concentrate next year.
• Zijin holds a ‘two lakes, two mines’ approach, with hard rock projects in Hunan and the DRC (Manono), alongside brine projects in China and Argentina.
• Zijin reports 14.11mt of LCE in resources and 5.05mt of LCE in reserves.
• They expect global lithium carbonate demand to exceed 3mt by 2030, vs c.1.4mt in 2024.
• Lithium prices continue to weaken, with China 6% spodumene concentrate prices falling to $770/t today.
• Carbonate prices are holding below $10,000/t, exerting significant pressure on upstream operations.
• Oher large producers are slowing CAPEX programmes, with Arcadium reducing 2024 guidance to 62-66kt LCE, pausing investments in James Bay and Hombre Muerto.

No.1 in Base Metals: SP Angel mining team awarded No 1. ranking for Base Metals forecasting in LSEG Quarterly Starmine Award for Reuters Polls Q1 2024

No.1 in Copper:  “The winner of the 2020 Fastmarkets Apex contest for copper was the team at SP Angel comprising John Meyer, Sergey Raevskiy and Simon Beardsmore, with an accuracy score of 93.8%”

No1. In Gold:  “SP Angel’s trio took the top spot for the gold price prediction throughout the year, with an accuracy score of 97.59%”

The SP Angel team also ranked 1st in Palladium, 3rd in Tin and 5th in Silver in the fourth quarter of 2020

Analysts

John Meyer – John.Meyer@spangel.co.uk – 0203 470 0490

Simon Beardsmore – Simon.Beardsmore@spangel.co.uk – 0203 470 0484

Sergey Raevskiy –Sergey.Raevskiy@spangel.co.uk – 0203 470 0474

Sales

Richard Parlons –Richard.Parlons@spangel.co.uk – 0203 470 0472

Abigail Wayne – Abigail.Wayne@spangel.co.uk – 0203 470 0534

Rob Rees – Rob.Rees@spangel.co.uk – 0203 470 0535

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

SP Angel                                                            

Prince Frederick House

35-39 Maddox Street London

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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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Distribution of this note does not imply distribution of future notes covering the same issuers, companies or subject matter.

Where the investment is traded on AIM it should be noted that liquidity may be lower and price movements more volatile.

SPA, its partners, officers and/or employees may own or have positions in any investment(s) mentioned herein or related thereto and may, from time to time add to, or dispose of, any such investment(s).

SPA is registered in England and Wales with company number OC317049.  The registered office address is Prince Frederick House, 35-39 Maddox Street, London W1S 2PP.  SPA is authorised and regulated by the UK Financial Conduct Authority and is a Member of the London Stock Exchange plc.

MiFID II – Based on our analysis we have concluded that this note may be received free of charge by any person subject to the new MiFID II rules on research unbundling pursuant to the exemptions within Article 12(3) of the MiFID II Delegated Directive and FCA COBS Rule 2.3A.19.

A full analysis is available on our website here http://www.spangel.co.uk/legal-and-regulatory-notices.html. If you have any queries, feel free to contact our Compliance Officer, Tim Jenkins (tim.jenkins@spangel.co.uk).

SPA research ratings – Based on a time horizon of 12 months: Buy = Expected return of more than 15%, Hold = Expected return between -15% and +15%, Sell = Expected return

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