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

Lithium, spodumene prices rise as consumers restock following closure of lepidolite production

MiFID II exempt information – see disclaimer below

Cobra Resources (COBR LN) – Rare earths potential in South Australia

Cora Gold (CORA LN) – $2.3m debt conversion

Galan Lithium (GAL AU) – HMW Pond 1 liner installed and evaporation process having commenced

Rainbow Rare Earths (RBW LN) – Mineral resource upgrade at Phalaborwa

Red Rock Resources (RRR LN) – Progressing the evaluation of alluvial gold in Burkina Faso

Sibanye-Stillwater (SSW SJ) – MRE expansion at Keliber lithium project supports 55% growth in lithium reserves

Lithium futures rise again as activity resumes following Lunar New Year

• Lithium carbonate futures in China’s most actively traded market rose 2% overnight to $14,200/t.
• Shanghai Metals Market reports Australian spodumene pricing now averaging $910/t, up from recent averages of $850/t.
• Analysts expect the destocking period of the cathode supply chain to be cooling, with a rebound seen following the China Lunar New Year.
• Order volumes for battery products are expected to grow in March, with EV demand still strong year on year as lower battery material prices improve economics.
• Lithium refineries in China are expected to come out of their maintenance periods initiated in January, supporting upstream demand.
• However, current supply/demand dynamics remain bearish, with producers retaining buoyant stockpiles amid the depressed pricing environment.
• China boosted lithium concentrate imports by 41% in 2023, climbing to 4mt. This was fuelled primarily by Australia, Zimbabwe and Brazil.
• Australia has boosted spodumene exports to 1.1mt, up 3x vs 2021.
• However, higher cost producers have begun slashing production, with Core suspending operations, Greenbushes trimming guidance, Arcadium reducing production at Mt Cattlin, Sayona issuing a strategic review for NAL and MinRes slashing expansion plans.
• The AFR reports Chinese engineers have been flown in by Albemarle to fix issues at the Kemerton hydroxide plant, also backed by Tianqi and IGO.
• The Hydroxide facility is reportedly operating one train at 50% capacity.

China experienced surge in lithium production in 2023

• Chinese lithium carbonate production rose 31.1% to 517,900t last year on the back of strong demand for EV batteries
• China’s production capacity rose 83.3% to > 1.1mt in 2023 as the nation gears up to meet strong anticipated growth in production and demand.
• Chinese smelters which are unable to ‘properly handle lithium slag will be restricted from starting operations.’ following environmental audits.
• Reports suggest major producers are continuing production despite environmental issues.
• Lithium carbonate produced from lepidolite fell 33% mom in February reflecting downtime over the Lunar New Year holiday and a move to spodumene from lepidolite.
• Spodumene is preferred as Lepidolite is a form of mica. Micaceous minerals make furnaces less efficient and more polluting with micaceous dust.

Copper holds flat after major inventory jump as TC charges continue to slide

• Copper prices shrugged off the largest inventory jump since November.
• Inventories are well-stocked following the Lunar New Year holiday, climbing nearly 5x since March last year.
• Copper cathodes are trading at a discount to futures, reflecting a state of contango, usually associated with oversupply.
• Traders are waiting for a follow up from Xi’s stimulus hints on Friday.
• However, copper smelters are facing pressure from collapsing margins as processing fees slide to decade lows.
• Processing fees have slumped c.80% on the shutdown of Cobre Panama, exacerbated by Vale’s Sossego mine coming offiline.
• Chinese smelters have been on a major expansion drive over the past three years, with capacity now likely oversupplied vs demand.
• With limited additional concentrate expected to come online soon (Kamoa set to smelt 500ktpa on site), closures will be required of some of China’s newly built smelter supply.

Thermal coal prices rise as China’s largest producer slashes 2024 guidance

• Shenhua has slashed production guidance for 2024 by c.3% to 316mtpa.
• The cuts reflect government-issued controls over safety and environmental concerns.
• CAPEX expected to range between $4-7bn pa over the next three years.
• Spending on thermal power stations is expected to increase.

Uranium – New European Investment Bank (EIB) President is looking to increase investments into nuclear energy and dual-use technologies, FT reports.

• The institution with an estimated balance sheet of more than €500bn under previous leadership shunned away from new nuclear generation projects since 1987 partly because of opposition from countries like Germany.
• Naida Calvino, a former Spanish economy minister and new head of the EIB, said Europe “needs to be active because (it) cannot be behind the curve” on “modular reactors”.
• While modular technology is currently operational only in China and Russia, it is still in a research and development stage in Europe.

Economics

Bitcoin prices climbed briefly past the $57,000 mark for the first time since late 2021 on the back of strong ETF buying.

Japan – Inflation slowed down in January, although, the reading was slightly above expectations.

• Market beating numbers saw 2y sovereign bond yields climbing to the highest level since 2011.
• Stickier than expected inflation raised market speculation that the central bank is close to the first rate hike since 2007, Bloomberg writes.
• Traders are expected the BOJ to exit its negative rate policy by April with a >80% chance, up from 78% before the announcement.
• Additionally, inflation is expected to pick up in February as the impact of government price relief measures fades in year on year comparison.
• CPI (%yoy): 2.2 v 2.6 December and 1.9 est.
• Core CPI (ex Food and Energy, %yoy): 3.5 v 3.7 December and 3.3 est.

South Korea – South Korea gives striking doctors till end-February to return to work or face consequences.

• Two-thirds of South Korea’s resident and intern doctors are on strike disrupting services at major hospitals.

Germany – Consumer confidence improves slightly in March, albeit, on absolute levels the sentiment remains at below pandemic era levels.

• GfK Consumer Confidence: -29.0 v -29.6 (revised from -29.7) February and -29.0 est.

UK – Growth in shop prices fell to 2.5% in February, down from 2.9% in the previous month, marking a ninth consecutive monthly drop, British Retail Consortium data showed.

• Among factors mentioned helping to bring the index down were easing supply-chain pressures, falling input costs for energy and fertilisers and competition among retailers.
• Grocery price inflation is reported to have come down to 5.0%, down from 6.1%.

Woman claiming £650,000 for car crash injuries loses case after winning Christmas tree throwing competition

• The lady was not able to ‘spruce’ up her argument sufficiently for the judge after photos emerged of her throwing a six-foot tree in a tree throwing competition in Limerick, Ireland.
• We hope she will return the disability payments claimed since the car crash in 2017.

Denmark – Denmark drops investigation into Nord Stream pipeline explosions.

• The question is was it the Ukrainians as rumoured or was it the Russian’s making it look like the Ukrainians – I go for the latter myself.

Currencies

US$1.0857/eur vs 1.0835/eur previous. Yen 150.27/$ vs 150.62/$. SAr 19.243/$ vs 19.347/$. $1.269/gbp vs $1.267/gbp. 0.656/aud vs 0.654/aud. CNY 7.198/$ vs 7.198/$.

Dollar Index 103.69 vs 103.90 previous.

Commodity News

Precious metals:         

Gold US$2,036/oz vs US$2,033/oz previous

Gold ETFs 82.5moz vs 83.0moz previous

Platinum US$888/oz vs US$896/oz previous

Palladium US$960/oz vs US$968/oz previous

Silver US$22.63/oz vs US$23/oz previous

Rhodium US$4,425/oz vs US$4,550/oz previous

Base metals:   

Copper US$ 8,500/t vs US$8,597/t previous

Aluminium US$ 2,198/t vs US$2,226/t previous

Nickel US$ 17,300/t vs US$17,140/t previous

Zinc US$ 2,449/t vs US$2,415/t previous

Lead US$ 2,109/t vs US$2,085/t previous

Tin US$ 26,170/t vs US$26,545/t previous

Energy:           

Oil US$82.8/bbl vs US$83.4/bbl previous

• European gas prices remain depressed as demand continues to be restrained by warmer-than-usual temperatures and strong electricity output from wind turbines, hydropower plants and French nuclear reactors
• Chevron announced that it is in talks with Exxon and CNOOC on whether a pre-emption right exists on the acquisition of Hess’ 30% stake in the Stabroek block, offshore Guyana.
• Woodside announced that the offshore Senegal Sangomar development was 93% complete at YE23, since which the FPSO has arrived, and first oil is targeted in mid-2024 leading to production ramp-up in 2H24.
• Bankruptcy proceedings have been initiated against Petroswede (private), the parent Company for Svenska Petroleum Exploration, which is in the final stages of a sales process for its ~5kboe/d of net production from the CNR-operated Block CI-40 Baobab field (27.3% WI), offshore Ivory Coast.

Natural Gas €23.6/MWh vs €24.0/MWh previous

Uranium Futures $94.9/lb vs $99.3/lb previous

Uranium Spot $102.0/lb vs $102.0/lb previous

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$113.6/t vs US$117.0/t

Chinese steel rebar 25mm US$568.6/t vs US$570.0/t

Thermal coal (1st year forward cif ARA) US$91.0/t vs US$90.0/t

Thermal coal swap Australia FOB US$128.0/t vs US$124.3/t

Coking coal swap Australia FOB US$307.0/t vs US$307.0/t

Other:  

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

NdPr Rare Earth Oxide (China) US$52,097/t vs US$52,789/t

Lithium carbonate 99% (China) US$12,434/t vs US$12,225/t

China Spodumene Li2O 6%min CIF US$1,000/t vs US$1,000/t

Ferro-Manganese European Mn78% min US$1,069/t vs US$1,066/t

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

China Graphite Flake -194 FOB US$560/t vs US$560/t

Europe Vanadium Pentoxide 98% 5.8/lb vs US$5.8/lb

Europe Ferro-Vanadium 80% 27.55/kg vs US$27.55/kg

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

Spot CO2 Emissions EUA Price US$57.7/t vs US$57.5/t

Brazil Potash CFR Granular Spot US$285.0/t vs US$290.0/t

Battery News

China set to introduce national standards for e-bikes following recent fires

• China is set to introduce mandatory national standards for electric bicycle batteries following a series of recent fires.
• According to statistics from the National Fire and Rescue Administration, there were 21,000 reported cases of EV fires nationwide in 2023, an increase of 17.4% from 2022.
• Many cities already have local technical standards for lithium-ion battery safety, but a mandatory national standard has not yet been implemented.
• The mandatory national standard “Safety Technical Specification of Lithium-ion Battery for Electric Bicycle,” which was drafted in 2022, has completed the drafting and consultation stage and is currently under review.

Tata Group planning IPO for EV unit

• Tata Group is looking to list its EV unit Tata Passenger Electric Mobility (TPEM) in an IPO valued at $1-2bn.
• TPEM is a subsidiary of Tata Motors which has an 80% share of the electric car market in India.
• TPEM saw sales of 53,000 for FY24 and projections indicate sales will reach over 100,000 in FY25.
• In January the company saw sales of 6,979 units, a 69% yoy growth.

BYD delivers first passenger cars in Hungary

• According to the companies official WeChat account, BYD delivered the first batch of BYD ATTO 3 vehicles in Hungary.
• BYD announced in December 2023 that it would build a new energy vehicle production base in Hungary – which will be the companies first European factory for passenger cars. The company already has a bus factory in Hungary.
• The company is also planning to increase its number of shops in the country from three to six by the end of the year.

New non-flammable electrolyte developed for lithium batteries

• Researchers from Korea and the US have developed a fluorine-substituted high-voltage stable chloride-based solid-state electrolyte to replace liquid electrolytes in current batteries.
• The new material is non-flammable and therefore safer for EV batteries.
• The solid chloride-based electrolyte is expected to replace solid sulphide-based electrolytes that are unstable at high voltages.
• The Korea-US joint research team will conduct follow-up research on the synthesis process of the material, alongside the optimisation of electrode and cell manufacturing processes.

Ministry of Defense to trial hydrogen-fuelled charging

• The MoD is currently conducting trials of hydrogen-fuelled charging stations for EVs at military sites.
• The charging facilities are being used at RAF Leeming, with two-month trials planned for Merville Barracks and HMNB Devonport.
• These charging stations will support the charging of non-tactical vehicles, part of the MoD’s aim to transition its entire vehicle fleet to “zero emission” by 2027.
• Let’s hope the hydrogen fuel chain still works in a conflict situation

Company News

Cobra Resources (COBR LN) 0.98p, Mkt cap £6.3m – Rare earths potential in South Australia

• Cobra Resources reports that analysis of historical drilling has identified heavy rare earth oxide (HREO) mineralisation within the sediments of the Yaninee Paleochannel located around 30km SW of its “Boland ionic rare earth discovery” in South Australia.
• Among the historic drill intersections highlighted in today’s announcement are:
  • Intersections of multiple mineralised layers in hole SBUO-5008 with 3m averaging 818ppm total rare earth oxides (TREO) from 52m depth, a second 3m wide interval averaging 810ppm from an undisclosed depths as well a s single metres of 519ppm and 171ppm at 80m and 52m; and
  • An intersection of 6m averaging 778ppm TREO from 46m in hole IR-e93; and
  • Another interval of 6m in hole RD1 which intersected 514ppm at 54m depth.
• The company says that the “results are from composited downhole samples, with grade concentrations expected over narrower intersections” and confirms that follow up, Stage 2 analysis, will test
  • “Intervals from 20 holes on the Narlaby Palaeochannel to define extensions to the Boland discovery
  • Intervals from a further nine holes located within the Yaninee Palaeochannel
  • Intervals from ~50 drillholes from the Pureba tenement, where holes proximal to roll-front uranium mineralisation will be prioritised”.
• CEO, Robert Verco, said that the results “re-affirm our belief that the ionic REE mineralisation confirmed at Boland is not isolated but part of an extensive system within Cobra tenements that is amenable to low cost, low disturbance ISR … [in-situ recovery] … mining”.
• He said that the “amenability of mineralisation and geology to ISR is a significant advantage that Cobra is moving quickly to demonstrate given the extraction method’s potential to offset the depth of intersection and materially reduce mining costs”.

Conclusion: We await the results of the continuing evaluation from South Australia to establish the development potential of the paleochannels.

Cora Gold (CORA LN) 2.2p, Mkt Cap £8m – $2.3m debt conversion

• $2.3m of outstanding ~$15.3m convertible loan notes are being converted into new shares at $0.03 (or 2.2p) per share.
• The conversion price has been reduced from the previous $0.05 with a 5% repayment premium wavered by noteholders.
• ~82m new shares to be issued taking total share capital to 452m.
• ~76m of new shares are taken up by current >3% shareholders of the Company.
• Convertible loan outstanding balance post this conversion stands at ~$13.0m and due 12 March 2024.
• The Company continues to await the lifting of the moratorium on the issuance of mining permits in Mali.
• Once the moratorium is lifted, the team is aiming to progress its application for a mining permit for the Sanankoro Gold Project.

Galan Lithium (GAL AU) A$0.35, Mkt Cap A$132m – HMW Pond 1 liner installed and evaporation process having commenced

• Galan provides an update on its Hombre Muerto West Project in Argentina with the Pond 1 earthworks and liner now completed. Filling is underway.
• 9 production wells are up and running with Phase 1 production (5.4ktpa LCE in lithium chloride) requiring only 6 to be in operation.
• Pond 2 earthworks construction is 65% completed with liner installation to start next week.
• Galan is targeting lithium chloride production in Phase 1 of 5.4ktpa LCE in H1 2025.
• Phase 2 DFS targets 21ktpa LCE with first production in 2026 operating 23 production wells.
• This will then eventually ramp up to Phase 4, targeting 60ktpa in 2030, including the addition of Candelas.
• The Company is targeting operating costs of $3,510/t LCE.
• They are currently in discussions with Glencore, who has entered a binding offtake agreement for the initial period of 5 years from commencement of commercial production.
• Glencore has offered a financing prepayment facility of up to $100m, with due diligence continuing.

Rainbow Rare Earths (RBW LN) 11.75p, Mkt cap £74m – Mineral resource upgrade at Phalaborwa

• Yesterday, Rainbow Rare Earths reported that, following a reassessment of the bulk density of its Phalaborwa project in South Africa, it has increased the resource tonnage by ~16% to 35.1mt from the previously estimated 30.4mt.
• Previously reported estimates were for grades of 0.44% total rare earth oxides at Phalaborwa with a projected mine life of ~14 years.
• The increased tonnage which follows advice from ”US-based global gypsum experts Ardaman and Associates” extends “the operating life by over two years”.
• Explaining in more detail, the company explains that drilling “carried out at Phalaborwa in H2 FY 2023 to provide representative samples from the stacks and samples from this campaign were submitted to Ardaman for comprehensive bulk density testing at their laboratory in Orlando, USA … [showed] … a clear corelation of higher bulk density with increasing depth” resulting in the increased tonnage reported in the announcment.
• The company explains that “Samples from the drill campaign will now be assayed for grade by SGS in South Africa in order to allow for an updated JORC compliant Mineral Resource Estimate. This work is also expected to upgrade the Inferred Resources to the Measured and Indicated categories”.
• CEO, George Bennett, described the increased resource tonnage as “extremely positive” and confirmed that “it is clear that the growth in tonnages will lead to an increase in the life of the project by over two years in due course”.

Conclusion: Measurement of density is a fundamental, but sometimes under-recognised component of mineral resource estimation and yesterday’s announcement underlines its importance.

Red Rock Resources (RRR LN) 0.08p, Mkt cap £2.9m – Progressing the evaluation of alluvial gold in Burkina Faso

• Red Rock Resources has provided a further progress report on its West African Bilbale and Boulon gold projects in Burkina Faso.
• The announcement confirms that a joint site visit, in conjunction with “our colleagues at Riverstone Resources Ltd, a Hong Kong company owned by Mr Mahendran Samuel (“Riverstone”) on site at Bilbale has now been scheduled for the first week of March”.
• The planned visit, by “experienced geologists and engineers from India and Africa with experience of mine development, including in Burkina Faso, as well as our local staff … will consist of locating and setting up areas for initial trials, some trenching and benching, drilling of two bore holes, and civil works including ponds and preparation of areas for administration, fuel storage, laboratory, furnace, and security”.
• “Red Rock and Riverstone will implement a test programme processing alluvial material from different parts of the license, on a scale sufficient to establish gold grade, including high grade zones”.
• Chairman, Andrew Bell, confirmed the commitment to establishing a “long term relationship” between Red Rock Resources and Riverstone Resources and said that “Our expectation is that when we leave site, there will remain behind a core team that will work together in order to move the project through the steps towards production”.

Sibanye-Stillwater (SSW SJ) R2,020, Mkt Cap R57bn – MRE expansion at Keliber lithium project supports 55% growth in lithium reserves

• Sibanye reports an increased Mineral Resource Estimate for its Keliber lithium project and Rhyolite Ridge projects.
• Keliber, a spodumene project in Finalnd, now stands at 11.3mt M&I at 1.25% Li20 for 349kt LCE attributable.
• Keliber reserves decreased to 7.7mt at 0.96% Li20 for 182kt LCE attributable.
• Rhyolite Ridge now stands at 20.4mt at 0.37% Li20 for 188kt LCE attributable.
• Rhyolite Ridge is a lithium-boron clay project in Nevada with a BFS showing 22ktpa Li production at an AISC of $2,510/t, post tax NPV of 21% at Li price of $11.7k/t.
• Sibanye is earning into Rhyolite Ridge through a $490m investment – currently holds c.7% of the Project.

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

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

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