SP Angel Morning View -Today’s Market View, Tuesday 3rd December 2024

Copper edges higher whilst Chinese traders halt US scrap imports over tariff concerns

MiFID II exempt information – see disclaimer below

Anglo American (AAL LN) – Brazilian iron ore expansion

Ariana Resources (AAU LN) – Exploration progress report

Condor Gold* (CNR LN) – Statement regarding possible offer from Metals Exploration

Cadence Minerals (KDNC LN) – Updated PFS for Amapa iron ore project

Gem Diamonds (GEMD LN) – Pit optimisation at Letšeng offers meaningful cost savings

Great Southern Copper (GSCU LN) – Interim report describes exploration progress in Chile

Kavango Resources* (KAV LN) – Widening suite of assays in future exploration in Zimbabwe

KEFI Gold and Copper* (KEFI LN) – Equity raise as Tulu Kapi nears project funding completion

Savannah Resources* (SAV LN) – LOI for an up to US$270m project finance loan guarantee

Strategic Minerals* (SML LN) – Exploration progress at Redmoor

Copper edges higher whilst Chinese traders halt US scrap imports over tariff concerns

• Copper prices are ticking higher, over $9,000/t as the dollar rally continues to cool.
• Antaike reports Chinese metal importers are not buying US scrap over concerns of Trump’s incoming tariffs.
• Trump is threatening a 60% tariff on Chinese imports, anticipated to garner a reaction from Beijing.
• Scrap provided 30% of copper feedstock in 2023, according to China Nonferrous, with c.20% of China’s scrap imports coming from the US.
• Copper is down 20% since May highs, when a short squeeze unfolded in the US.

Iron ore strengthening alongside China PMIs and optimism over Politburo meeting

• China iron ore prices are holding above $105/t, amid improving optimism over the Chinese economy.
• The Politburo appeared to miss a regular November meeting, leading to speculation of more material updates in December.
• Iron ore traders may be positioning for more clear-cut growth measures after the CNY10tn package disappointed.
• December will also see the Central Economic Work Conference, which may provide an additional opportunity for further stimulus measures.
• Blast furnace profitability remains weak in China, with Mysteel survey seeing positive margin-producing mills down to 52%, falling 2.6%wow.
• China Property Market
  • BI reports a 17% decline in top 100 Chinese developers’ contracted sales in November.
  • 7% drop in top 100’s contracted sales in November yoy, after a gain in October.
  • Looser regulations intended to encourage buying having limited effects.
  • Contraction in spending on land purchases expected to weigh on developer’s project pipelines into 2025.
  • BI expects 2024 sales to fall 30%yoy.

Tin prices slide on improved imports from Myanmar

• LME tin has fallen to $28,600/t, having neared $34,000/t in late September.
• The move is a result of improving ore imports in October, which rose 91%mom.
• The result is likely improved supply from Mynamar.
• However, October imports still saw a decline of 41%yoy.
• January to October imports fell 11%yoy.
• Mining in the tin hub Wa State remains suspended.
• Shanghai Metals market reports that spot trading is sluggish, with ‘most downstream enterprises having completed their restocking needs.’

Lithium prices slide on muted spot transactions

• Lithium carbonate prices in China have fallen back below $10,300/t, having neared $10,800/t.
• LFP producers are reportedly maintaining strong operating rates, whilst smelters are buying conservatively with high inventories.
• SMM reports ‘continuous expansion of capacity’ and ’market competition is becoming increasingly fierce,’ with ‘LFP companies facing unprecedented development challenges.’
• As a result, downstream cathode plants are reducing production schedules, expected to trigger destocking and weighing on lithium purchasing.

Economics

Metals remain becalmed on weak Chinese demand and stronger US dollar

• India leads the way in terms of positive PMI growth with only eight out of 20 countries below recording a positive PMI growth >50.
• We are surprised to see the US PMI figures in negative territory despite the huge success of the technology sector and new growth in AI.
• Curiously Caixin have recorded a stronger PMI growth number for China than seen in the official figures and we wonder if China inc. are deliberately downplaying their numbers?
• Of the CNY 12 trillion ($1.4bn) pledged to refinance aka ‘bail-out’ local government onlookers feel this may not quite refinance the entire black hole.
• Given much of this debt was supporting high interest bearing ‘guaranteed’ financial products which back savings and pensions across China it feels as if the nation is going through its own version of the Sub-Prime mortgage crisis which caused the GFC.
• The crisis stalled Chinese construction starting with the long-running collapse of Evergrande starting in 2020 leaving hundreds of thousands if not millions of unfinished apartments.
• But while the reinforced concrete shells of apartment blocks serve as a reminder of the overexuberance of the sector there are many thousands of apartments being finished under the ‘White-list’ scheme.
• The fitting out of these buildings still require many tonnes of copper pipe and cabling, steel and stainless steel fittings, wood, plasterboard, glass and other commodities before they become habitable.

US – NY Fed president indicates potential for monetary policy to move to more neutral setting

• John Williams, the NY Fed president indicated that interest rate policy will need to move to a more neutral policy over time but did not guide on a December rate cut.
• Williams indicated a relatively positive outlook for the US economy with growth of 2.5% for the year, inflation at 2.25% and unemployment of 4-4.25%.
• The outlook if correct should allow the Fed to continue reduce rates assuming inflation does not pick up from the 2.25% level.
• Despite slower progress on taming inflation, he highlighted broader economic stability as a factor supporting further monetary easing. Waller argued that, even after a cumulative 75 basis points in cuts, policy would remain restrictive, with additional easing simply reducing the intensity of Fed’s brake on economic activity.
• Fed Governor Chris Waller also suggested support for a December rate cut depending on inflation falling toward the 2% target.
• Construction spending rose 0.4% in October vs 0.1% in September
• ISM manufacturing recovers to 48.4 in November as new orders rise vs 46.5 in October. Sliding prices served to pull the figures back.
• New orders rose to 50.4 from 47.1 indicating an improving US environment after seven months of contraction.
• Production also rose to 46.8 from 46.2
• Prices collapsed to 50.3 from 54.8. we suspect this is due to lower price competition from China
• Employment rose to 48.1 from 44.4
• The figures support annualised GDP growth of 1.7%.

US government introduced new export controls on critical semiconductor manufacturing tools in an effort to limit Chinese development of advanced semiconductor industry and AI I with military applications.

• Authorities will also prevent the export of advanced high bandwidth memory (HBM), a key component in AI chips, to China, FT writes.
• The decision follows two previous trade restricting packages enacted in October 2022 and October 2023.
• “They’re the strongest controls ever enacted by the US to degrade the People’s Republic of China’s ability to make the most advanced chips that they’re using in their military modernisation,” US Commerce Secretary Gina Raimondo said.

China – Official Chinese nonmanufacturing index was 50.0 in November vs 50.2 in October

• Composite steady at 50.8.

Authorities retaliate against new export controls banning shipments to the US of several “dual-use” items in semiconductor manufacturing and military applications.

• National commerce ministry said exports of gallium, germanium, antimony and superhard materials to the US would not be permitted.
• Additionally, it would implement stricter controls for graphite related products.

Eurozone – Manufacturing PMI falls further to 45.2 as contraction deepens

• Europe is in a sorry state with the Germany automotive industry struggling to develop credible EVs
• France is in denial over its national debt of €3.2 trillion which represents 111% of GDP.
• PM Michel Barnier faces a vote of no-confidence tomorrow after forcing through €60bn of tax rises and spending cuts.

France – French government is readies for a no-confidence vote triggered by budget disagreements between parliamentary parties.

• The vote is expected tomorrow.

UK – Manufacturing PMI holds steady at 48.0 from 49.9 in October

• We blame the contraction in manufacturing on a pullback in business and consumer confidence combined with lower prices for goods from China and rising costs in the UK.
• Industry has not taken the recent UK budget well reacting through increasing caution in orderbooks.
• The impact of higher National Insurance costs on manufacturers in an already high-cost environment is to reduce new hiring and take a more cautious approach to ordering.
• Weaker demand from China, the US and EU is not helping with potential disruption from new tariffs coming from the incoming US Administration.

Workforce grows but productivity pulls back according to latest ONS numbers.

• The UK workforce was 484k larger than previously estimated that in turn translated into an even weaker productivity.
• Output per hour worked in April to June was 0.9%yoy down, compared to the previous estimate of a -0.3% reading.

Turkey – Inflation slowed to 47.1% in November, slightly ahead of market estimates, with the central bank due to hold a monetary policy meeting later this month.

• The bank held rates level at 50% for the nine consecutive months at its last meeting.

Currencies

US$1.0522/eur vs 1.0501/eur previous. Yen 149.95/$ vs 150.17/$. SAr 18.079/$ vs 18.150/$. $1.268/gbp vs $1.269/gbp. 0.650/aud vs         0.649/aud. CNY 7.281/$ vs 7.271/$.

Dollar Index 106.27 vs 106.43 previous

Precious metals:         

Gold US$2,642/oz vs US$2,628/oz previous

Gold ETFs 83.1moz vs 83.1moz previous

Platinum US$957/oz vs US$940/oz previous

Palladium US$995/oz vs US$969/oz previous

Silver US$30.9/oz vs US$30.2/oz previous

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

Base metals:   

Copper US$9,078/t vs US$8,929/t previous

Aluminium US$2,610/t vs US$2,580/t previous

Nickel US$15,950/t vs US$15,790/t previous

Zinc US$3,087/t vs US$3,076/t previous

Lead US$2,071/t vs US$2,059/t previous

Tin US$28,895/t vs US$28,600/t previous

Energy:           

Oil US$72.4/bbl vs US$72.6/bbl previous

• Natural gas prices remain elevated in the UK (~$89/boe) and Europe (~$87/boe) ahead of forecasts for colder weather next week.
• Media reports that TotalEnergies plans to pay private equity firm Partners Group ~€2bn to acquire renewable developer VSB Group, which builds wind, solar, battery and e-mobility projects across Europe.

Natural Gas €48.6/MWh vs €49.0/MWh previous

Uranium Futures $77.3/lb vs $77.0/lb previous

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$105.8/t vs US$105.5/t

Chinese steel rebar 25mm US$491.0/t vs US$491.6/t

HCC FOB Australia US$206.3/t vs US$204.8/t

Thermal coal swap Australia FOB US$136.0/t vs US$134.5/t

Other:  

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

NdPr Rare Earth Oxide (China) US$56,798/t vs US$56,867/t

Lithium carbonate 99% (China) US$10,233/t vs US$10,314/t

China Spodumene Li2O 6%min CIF US$790/t vs US$790/t

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

China Tungsten APT 88.5% FOB US$338/mtu vs US$338/mtu

China Graphite Flake -194 FOB US$440/t vs US$440/t

Europe Vanadium Pentoxide 98% US$5.0/lb vs US$5.0/lb

Europe Ferro-Vanadium 80% US$26.3/kg vs US$26.3/kg

China Ilmenite Concentrate TiO2 US$303/t vs US$303/t

China Rutile Concentrate 95% TiO2 US$1,119/t vs US$1,121/t

Spot CO2 Emissions EUA Price US$64.9/t vs US$64.9/t

Brazil Potash CFR Granular Spot US$287.5/t vs US$287.5/t

Germanium China 99.99% US$2,825.0/kg vs US$2,825.0/kg

China Gallium 99.99% US$430.0/kg vs US$430.0/kg

Battery News

Northvolt in talks with Chinese battery makers over partnership

• According to reports in Swedish media, Northvolt is in talks with several Chinese battery makers, including CATL.
• The Swedish battery maker filed for bankruptcy protection in the US last week after a bid to secure rescue funding fell short.
• CATL is looking for growth in Europe’s EV market and is in talks to establish battery recycling operations in the region, Bloomberg News reported this month.
• Northvolt was once seen as Europe’s chance to shake dependency from China for EV batteries.
• A spokesperson from Northvolt declined to comment on the report when contacted by Bloomberg.

JLR and Nissan to work with Altilium to decarbonise EV output

• British recycling firm Altilium says its recycling technologies can help automakers decarbonise EV production to meet sustainability goals and reduce supply chain dependence on China.
• The firm has received significant funding from the UK government to develop and expand its innovative operations.
• Altilium can recycle enough lithium, cobalt, nickel and manganese to make more than 250,000 new EV batteries a year.
• Jaguar Land Rover and Altilium are working together to build battery cells from recycled cathode materials from old Jaguar I-Pace EVs.
• Altilium is also working with Nissan on another project that will see it open a new £30m EV battery recycling plant in Teeside.

BYD to partner with e-bike maker TAILG to develop batteries for electric two-wheelers

• BYD is the second biggest producer of EV batteries globally, and will now partner with TAILG to develop two-wheeler batteries with the same lifespan as two-wheeler chassis’.
• TAILG announced the partnership at a product launch yesterday, becoming the first major manufacturer in the electric two-wheeler space to partner with BYD.
• China’s electric two-wheeler ownership reached 350m units, and production was 42.28m units in 2023, with TAILG being one of the largest manufacturers.
• One issue surrounding electric two-wheelers has been battery safety, with 21,000 fires reported in 2023.
• BYD and TAILG hope to develop a new type of battery with improved safety features and longer lifespan.

Company News

Anglo American (AAL LN) 2,573p, Mkt Cap £34bn – Brazilian iron ore expansion

• Anglo American reports the completion of its transaction with Vale SA to combine Vale’s Serra de Serpentina iron ore resource with Anglo American’s adjacent Minas Rio mine.
• “Under the transaction’s terms, Vale is transferring Serpentina and will pay US$157.5 million in cash (subject to completion and commodity price related adjustments(1)) to acquire a 15% shareholding in the enlarged Minas-Rio.  Vale also has an option to acquire an additional 15% shareholding in the enlarged Minas-Rio for cash if and when certain events relating to a future expansion of Minas-Rio occur”.
• Commenting that “Integrating Serpentina creates scope to double our production of premium grade pellet feed products for decades to come … [CEO, Duncan Wanblad, said the transaction with Vale ] … is a compelling example of industrial logic – putting together the contiguous resources of Minas-Rio and Serpentina to unlock significant value. Integration will generate material synergies through utilisation of Minas-Rio’s infrastructure to accelerate the development of Serpentina”.
• He described Serpentina as “an outstanding resource with a total orebody strike length more than double that of Minas-Rio with a higher iron ore grade than Minas-Rio’s premium grade ore as well as softer, friable ore, which should translate into lower unit costs and capital required for its extraction”.
• Today’s announcement says that the addition of Serpentina “creates scope to double our production of premium grade pellet feed products for decades to come and so help our steelmaking customers decarbonise their processes”.
• Anglo American also comments on progress in the “development of the margin-enhancing UHDMS processing technology at Kumba’s Sishen mine in South Africa that was announced in August. This will allow Sishen to treble its proportion of premium quality production volume. Together these initiatives will significantly enhance our global premium iron ore business and position it even more strongly for future demand trends”.

Ariana Resources (AAU LN) 2.7p, Mkt Cap £50m – Exploration progress report

• Ariana Resources describes progress at its exploration projects in Kosovo, Cyprus and Türkiye.
• Exploration of the 76% owned Western Tethyan Resources project in Kosovo is aimed at “major copper-gold deposits across the porphyry-epithermal transition … [included the completion of] … its first phase of drilling at the Hertica Project this year, with encouraging results suggesting a porphyry-style copper-gold-molybdenum bearing alteration system”.
• Trenching at the Slivova prospect has provided sufficient encouragement to justify “a 1,000-metre diamond drill programme for four holes” with “two infill resource holes (PL04 and PL25), which are critical for testing an area where the Slivova … [‘Inferred’] … resource is “open” … [and] … an exploration hole approximately 120m west of Slivova to test a significant IP chargeability target which shows characteristics suggestive of a concealed intrusive body”
• Kosovan drilling will also test the “Vajileviste target area to understand better the relationships between anomalous soil samples, historic trenching results, and a weak-to-moderate IP chargeability anomaly”.
• Work in Cyprus by 61% owned Venus Minerals, “is focused on the exploration and development of copper-gold assets in Cyprus containing a combined JORC Indicated and Inferred Resource of 16.6Mt @ 0.45% to 0.80% copper (excluding additional gold, silver and zinc). Kokkinoyia, the largest component of the combined Resource (12.3Mt @ 0.45% Cu and 0.28g/t Au)”.
• Today’s announcement confirms that “Discussions are underway with several third parties to fund all or part of the proposed exploration programmes via joint venture, earn-in or other commercial arrangements”.
• In eastern Türkiye, greenfield exploration of the wholly-owned Project Leopard is “targeting the discovery of significant new copper-gold deposits … [within] … three contiguous licences … covering approximately 6,000 hectares”.  Work is at an early stage using geological mapping and rock-chip and stream sediment sampling where “low-level gold anomalism … [has been detected] … along an NE-SW trending zone”.

Conclusion: Ariana’s exploration in the eastern Mediterranean area is progressing both greenfields projects and seeking to expand mineral resources at more advanced sites in Cyprus.

Condor Gold* (CNR LN) 27p, Mkt Cap £59m – Statement regarding possible offer from Metals Exploration

(Condor Resources holds 100% of the La India gold mining project)

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• In response to a press release by Metals Exploration yesterday, Condor clarified terms.
• Metals Exploration stated the following terms of the ‘Possible Offer.’
• Each Condor shareholder to receive:
  • 4.0526 new shares in Metals Exploration
  • 9.9p in cash.
  • This would suggest an uninterrupted valuation of Condor at £67.5m or 33p per Condor Share.
• Additionally, Condor shareholders would be entitled to one CVR of US$18 per ounce of additional contained gold under JORC MRE in excess of the current Group-wide MRE, capped at 1.6moz, which includes Rio Luna and Estrella.
• The CVR would be paid in pounds sterling (at prevailing interest rate) and cover ounces discovered over the five-year period following either:
  • First date of a suitable drilling rig mobilised to La India
  • Or six months following proposed scheme of arrangement’s effective date.
  • Payments settled in MTL shares or loan notes issued by MTL.
  • Maximum potential CVR consideration of US$28.8m (11.1p/share at current FX conversion)
• The current La India resource holds 9.7mt at 3.5g/t Au Indicated and 8.6mt at 4.3g/t Au inferred for an overall resource of 2.3moz, whilst Rio Luna and Estrella remain underexplored with minimal drilling.
• Condor reiterates that the announcement ‘does not amount to a firm intention to make an offer under Rule 2.7 of the Code, not does it impose any obligations of the Company to make an offer.’
• Metals Exploration reported they received an irrevocable undertaking from Jim Mellon’s Galloway Limited to vote in favour of the offer, which owns 24.7% of the issued ordinary capital, alongside a further 0.4% worth of warrants.
• However, Galloway Limited informed Condor yesterday that the Irrevocable Undertaking was provided ‘in contemplation of a recommended offer…and that until and unless that is the case, they reserve all their rights in relation thereto.’

Conclusion: The offer from Metals Exploration highlights appetite for Condor’s La India project. The CVR facility provides exposure to Condor’s considerable upside exploration over the next five years or so. Current gold prices are substantially higher than those used by the company in its 2022 Feasibility Study and we await further updates with interest.

*SP Angel acts as a broker to Condor Gold

Cadence Minerals (KDNC LN) 2.8p, Mkt Cap £5.2m – Updated PFS for Amapa iron ore project

• Cadence reports an update on its 34.6%-owned Amapa project in northern Brazil.
• The updated PFS incorporates the DR-grade flow sheet previously announced.
• The flowsheet is designed to produce 67.5% DR feed-grade iron ore concentrate at 5.5mtpa over a 15 year LOM.
• Recoveries estimated at 75%,
• FOB C1 costs estimated at $34/t, with CFR costs estimated at $62/t.
• Development CAPEX of US$377m and SUSEX at US$220m.
• Study assumes US$120/t for the 65% Fe index, alongside a US$24.8/t high-grade premium.
• This generates an NPV10 of US$2bn, 56% IRR and 3 year payback.

Gem Diamonds (GEMD LN) 11p, Mkt Cap £14m – Pit optimisation at Letšeng offers meaningful cost savings

• Gem Diamonds reports that pit redesign incorporating steeper pit walls has delivered a reduction in the ore:waste stripping ratio for the Satellite cut 6 West (SC6W) from 1:6.9 to 1:2.1 at its Letšeng mine in Lesotho.
• The new design is expected to cut ~US$180m from the cost of waste removal although ore from the pit is expected to be “reduced from 12.8 million tonnes to 10.4 million tonnes”.
• Cost savings will be slightly offset by expenditure of ~US$15m to provide “additional support measures … over the five-year waste-stripping period”.
• In addition to the redesign of the SC6W pit, the “final cutback in the Main pit (MC4W) is currently under review to assess the viability of a similar steeper slope design in the hard-rock basalt, the outcome of which is expected to be a reduced waste stripping ratio, which will be announced upon completion”.
• The company also confirms that its “revolving credit facilities comprising US$30.0 million … [which] … were due to expire on 21 December 2024… have been extended for a two-year period to 21 December 2026”.

Conclusion: Re-design of the pit slopes at Letšeng have delivered US$180m savings in the expected costs of waste removal.  Further geotechnical work is continuing, and we look forward to further news of additional pit optimisation.

Great Southern Copper (GSCU LN) 1.48p, Mkt Cap £7.6m – Interim report describes exploration progress in Chile

• In its interim report for the six months to 30th September, Great Southern Copper reports a pre and post-tax loss of ~£1m and a closing cash balance of ~£0.4m followed by a subsequent £780,000 fundraising completed in November.
• The report highlights progress made in its exploration of the expanded Especularita project in Chile with the completion of “scout drilling at its Teresita and Abundante prospects in April, confirming intrusive-related and breccia-hosted mineralisation systems with all drill holes intersecting anomalous gold and copper mineralisation”.
• The next phase of work at Teresita “is now focussing on delineating the vein targets in more detail for Phase 2 prospect-scale drilling programmes”.
• Expansion of the Especularita project included securing options over the Cerro Negro area “including the historical Mostaza mine” and “mapping and sampling campaign confirming high-grade structurally controlled copper-silver mineralisation up to 1.5km further south along trend of the Mostaza copper-silver mine and up to 400m further to the east than previously thought”.
• The company also highlights the completion, in October, of the “initial exploration mapping and rock chip and surface sampling at its Viuda prospect, which GSC acquired earlier in the year, identifying high-grade copper-gold-silver mineralisation and confirming the potential for a new untested porphyry system”.
• Great Southern Copper also comments on reconnaissance exploration of the San Lorenzo project area focussing initially on the anomalies at Hualcuna and Colorada  where “Follow-up prospect scale mapping and sampling is planned to further evaluate the prospect”.
• CEO, Sam Garrett, described a “significant period of progress … [where] … exploration work at our projects, … [was] … validated by excellent results received from a number of highly prospective targets”.

Conclusion: Great Southern Copper is progressing its early stage exploration projects in Chile with expansion of its land holdings and a recent fund-raising.

Kavango Resources* (KAV LN) 0.78p, Mkt Cap £12m – Widening suite of assays in future exploration in Zimbabwe

• Kavango Resources reports that multi-element assay results on core samples from its Prospect 3 in the Hillside gold project located in Matabeleland, southern Zimbabwe has shown “potentially economic concentrations of tungsten and other strategic elements, including bismuth, selenium and molybdenum”.
• Describing how “Strategic minerals and critical elements often occur within commercial gold deposits around the world … [CEO, Ben Turney explained that they] … can form a valuable biproduct of gold mining, especially in today’s climate of increasingly restricted supply and strong demand”.
• Assay results from holes BRDD-01 and BLDD-01, drilled primarily for gold exploration yielded peak levels of 536ppm for bismuth, 161.5ppm molybdenum, 11.8ppm selenium and 2,220ppm tungsten which exceed global crustal abundance levels.
• The company says that it “is particularly interested by the returns for bismuth and selenium” in the context of limited worldwide production of these elements and that there “are only 2 known dedicated bismuth mines and no primary selenium mines”.
• Commenting on the tungsten, today’s announcement describes that there “are 24 tungsten producers recorded within Kavango held properties with a total production of 155.88t of tungsten (scheelite) concentrate … [with ] … No modern exploration for tungsten or strategic elements has been conducted at the Company’s Hillside or Nara gold projects”.
• The company confirms that it will “now broaden its exploration at Hillside and Nara to routinely include ICP and X-Ray Fluorescence Spectrometry (XRF) analysis for Strategic Minerals and critical elements”.

Conclusion: Kavango Resources will be assaying for a broader range of elements in its exploration at the Hillside and Nara projects to better understand the potential for economic by-products.

*An SP Angel Analyst holds shares in Kavango

KEFI Gold and Copper* (KEFI LN) 0.52p, Mkt Cap £32m – Equity raise as Tulu Kapi nears project funding completion

• The Company issues new equity for £10.6m in total at 0.55p.
• The placing price represents a 15% discount to the closing price on Monday.
• £4.6m will be issued in respect of certain outstanding liabilities owed by the Company.
• ~£6.0m will be raised in new funds to complete the project funding stage at the Tulu Kapi Gold Project.
• Financing discussions are expected to be finalised during the next month allowing to start major development works.
• ~£5.1m worth of the raise is subject to a shareholder approval with a General Meeting scheduled 2 January 2025.

Conclusion: The equity raise helps the balance sheet converting outstanding liabilities into new equity while extra funds raised will support operations as the team is nearing project funding completion targeted for early 2025.

*SP Angel act as Nomad and Broker to KEFI Gold and Copper

Savannah Resources* (SAV LN) 4.1p, Mkt Cap £89m – LOI for an up to US$270m project finance loan guarantee

BUY – 18.1p

• Euler Hermes, the export credit agency acting for the government of Germany, confirmed in a non binding LOI the potential for a guarantee on a loan up to US$270m.
• The agency provided an “eligibility in principle” for the Company to have an Untied Loan Guarantee (UFK) with 80% of a UFK covered loan to be guaranteed by the Federal Republic of Germany.
• An up to $270m loan is capped to cover up to 60% of potential project capex requirements (latest capex estimate is $280m based on ScopStudy 2023).
• Potential lenders include Germany’s KfW IPEX-Bank and / or other banks.
• Discussed funding is based on the supply of lithium to Germany through an agreed offtake with AMG for 90ktpa over 10 years.
• KfW IPEX-Bank , Euler Hermes AG and its advisers will now undertake project due diligence as part of the “Project Funding Stage”.

Conclusion: Government guarantee eligibility serves as an important endorsement of the Barroso Lithium Project, the largest spodumene project in Europe, and, subject to securing binding commitments, significantly reduces project funding risks allowing to lock in highly competitive lending terms.

*SP Angel acts as Nomad and Broker to Savannah Resources

Strategic Minerals* (SML LN) 0.25p, Mkt Cap £5.0m – Exploration progress at Redmoor

• Strategic Minerals has provided a progress report on the work of its local operating subsidiary, Cornwall Resources )CRL), at its Redmoor project in eastern Cornwall.
• The company confirms that it has now relogged over half of the drill core produced during the 2018/18 exploration campaign with 7,375m completed an a further 7,022m still to be reassessed.
• Re-logging in conjunction with further analysis of other data is “expected to lead to both an updated geological model & ultimately a revised new mineral resource”.
• Redmoor’s current “JORC (2012) compliant, mineral resource estimate of a High Grade Inferred Resource of 11.7 Mt at 0.56% Tungsten Trioxide (WO₃), 0.16% Tin, & 0.50% Copper” was issued in 2019 and the re-evaluation of the data has already “confirmed that CRL’s drillholes contain additional zones of mineralisation at Redmoor from those previously reported, as extensions or additional mineralised zones within the Redmoor sheeted vein system”.
• In addition, today’s announcement says that a soil-sampling programme is underway on the “historically mined and highly prospective Tamar Valley Licence Area, with samples collected from previously unexplored and unsampled targets within the Duchy of Cornwall licenced mineral rights. Sampling and reconnaissance mapping will continue within the Tamar Valley Licence Area throughout 2025, with the aim to identify further potential targets for follow-up detailed exploration”.
• We comment that both the relogging of historic drilling and geochemical soil sampling are relatively inexpensive exploration which should help to squeeze the maximum amount of information from existing sources and help to guide future exploration plans.
• Strategic Minerals, which highlighted the continuing presence of tin and tungsten on the UK’s list of ‘Critical’ minerals comments on its “plans to apply to the EU for Strategic Project status for the Redmoor Project in 2025, as designated under the EU Critical Raw Materials Act”.
• Application for EU Strategic Project status “follows similar, and ongoing, efforts to promote the Project’s strategic nature to the United States” which, in common with the EU has “been heavily reliant on supply of tungsten from uncertain supply sources, including Russia and China, which combined control ~85% of global tungsten supply”.
• Executive Director, Mark Burnett, commented that planning for the 2025 exploration programme is well underway and Strategic Minerals “will look to increase activity at CRL and pursue a number of strategic project applications now open to Redmoor”.

Conclusion: Strategic Minerals is continuing its evaluation of historic drilling results and exploration data at Redmoor and extending geochemical soil sampling into the recently extended licence areas to help identify areas for further work in the 2025 programme.  We look forward to the results of the review of the drill core and to seeing its impact on the mineral resource estimate.

*SP Angel acts as Nomad and Broker to Strategic Minerals

 LSE Group Starmine awards for Q3 commodity forecasting:

No.1 in Precious Metals: SP Angel mining team awarded No 1. ranking for Previous Metals forecasting in LSEG Quarterly Starmine Award for Reuters Polls Q3 2024

No.2 in Base Metals: SP Angel mining team awarded No 2. ranking for Base Metals forecasting in LSEG Quarterly Starmine Award for Reuters Polls Q3 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                                                            

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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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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