SP Angel Morning View -Today’s Market View, Tuesday 5th March February 2024

China GDP target growth of ~5% implies more government stimulus

MiFID II exempt information – see disclaimer below

Empire Metals* (EEE LN) – Initial mineralogical results highlight dominance of titanite

Greatland Gold (GGP LN) – Continuing progress at Havieron as Newmont plans divestment of the project

KEFI Gold and Copper* (KEFI LN) – £5.0m equity raise

Savannah Resources* (SAV LN) – BUY, 21.1p – Major shareholding notification

Thor Energy (THR LN) – Interim results highlight US uranium projects

Copper prices strengthen as inventories fall and focus turns to China meeting

• Copper prices have strengthened to $8,550/t, having climbed from $8,200/t in mid-February.
• Focus is currently on China’s National People’s Congress, where guidance on economic growth targets is closely followed by metals traders.
• Copper inventories in LME fell for a fifth day, down the most since July.

Gold climbs to record levels in hopes of looser monetary policy

• Gold prices jumped again to $2,125/oz on the spot market, having broken through the key psychological $2,100/oz barrier.
• The move has been supported y a weaker dollar, however we note that US Treasury yields have not moved to the same extent.
• Central banks have been a major supporter of gold, with buying coming from Russia and China.
• We expect a cutting cycle to be supportive of gold, and the recent improvement in optimism over Fed rate cuts has been supporting bullion.
• Markets now expect a 52% chance of a 25bp rate cut in June, and a 13% chance of a 50bp cut.
• Hedge funds reportedly boosted net bullish gold bets to three-week highs as of February 27^th, with some short covering also suggested.

Lithium equities slide as Albemarle looks to raise $1.75bn with equity raise

• Lithium stocks have seen weakness in Australian trading following a sharp rally last week.
• Pilbara Minerals is down 7%, with IGO down 5% and Ganfeng down 3.3%.
• The move followed Albemarle’s announcement planning to sell $1.75bn shares in a public offering for ‘general corporate purposes.’
• The shares will represent a 1/20^th interest in Series A Mandatory Convertible Preferred Stock, converting automatically March 2027.
• The stock fell c.9% on the news, with uses also included as ‘funding growth capital expenditures.’
• We wonder if Albemarle is considering taking advantage of depressed lithium assets following the 85% decline in spot prices yoy.

Nickel – Chinese nickel refiners raise inventory levels by 106% yoy in January as demand falls

Economics

China – The government sets an around 5% target GDP growth rate surprising many on the upside and implying potentially more state support coming, Bloomberg reports.

• “It is not easy for us to realise these targets… we need policy support and joint efforts from all fronts,” PM Li Qiang told delegates of the National Peoples’ Congress.
• Authorities also target 3% budget deficit versus 3.9% recorded in 2023, although, the target has been revised during last year to 3.8% suggesting the government is relatively flexible on this front.
• China also unveiled plans to issue 1 trillion yuan ($139 billion) of ultra-long special central government bonds in 2024.
• Private survey point to a consolidation in the business activity growth momentum in February on Caixin PMI numbers.
• Overall, business activity climbed for the fourth straight month with a slight improvement in manufacturing and a marginally softer rise in services.
• New orders climbed at a fractionally stronger pace while employment slipped back into decline.
• Export demand picked up for the second month.
• Cost pressures picked up but were mild overall.
• Caixin Manufacturing PMI (released last Friday): 50.9 v 50.8 January and 50.7 est.
• Caixin Services PMI: 52.5 v 52.7 January and 52.9 est.
• Caixin Composite PMI: 52.5 v 52.5 January.

Eurozone – Region wide composite PMI was revised slightly higher (49.2 v 48.9 previously) as part of the final reading helped by upward revisions in Germany and France.

• Although, on absolute levels economic activity remained in contraction in February.
• Sentix rises to -10.5 in March from -12.9 in February
• This is the fifth rise since the -20.0 low last June
• Expectations Index also advanced to -2.3 from -5.5
• Investors are looking for the ECB to loosen monetary policy probably when the Fed starts cutting interest rates

Germany – Investor Confidence fell to -27.9 from -27.1

• Current Situation fell to -40.5 from -39.3
• Expectations Index fell to -14.3 from -14.0.
• NdPr falls below $50/kg; India auctions RE license; ARR comment; China adds to visitor hazard; EV espionage? Brazil Gold Rush; CRE warm-up stale story; More foghorning from the usual suspects..

UK – Retail sales disappointed climbing at the slowest pace in 19 months with businesses blaming wet weather on below expected growth rates.

• “Not even Valentine’s Day lifted customers out of the gloom,” the British Retail Consortium said.
• “Gifting products that typically sell well, like jewellery and watches, failed to deliver.”
• BRC Sales (%yoy): 1.0 v 1.4 January and 1.6 est.

Currencies

US$1.0848/eur vs 1.0813/eur previous. Yen 150.38/$ vs 150.66/$. SAr 19.045/$ vs 19.232/$. $1.267/gbp vs $1.264/gbp. 0.648/aud vs 0.650/aud. CNY 7.200/$ vs 7.199/$

Dollar Index 103.89 vs 104.12 previous

Commodity News

Precious metals:         

Gold US$2,122/oz vs US$2,087/oz previous

Gold ETFs 82.3moz vs 82.5moz previous

Platinum US$896/oz vs US$895/oz previous

Palladium US$953/oz vs US$970/oz previous

Silver US$23.95/oz vs US$23/oz previous

Rhodium US$4,500/oz vs US$4,450/oz previous

Base metals:   

Copper US$ 8,529/t vs US$8,545/t previous

Aluminium US$ 2,228/t vs US$2,239/t previous

Nickel US$ 17,835/t vs US$17,700/t previous

Zinc US$ 2,446/t vs US$2,447/t previous

Lead US$ 2,039/t vs US$2,048/t previous

Tin US$ 26,715/t vs US$26,885/t previous

Energy:           

Oil US$82.3/bbl vs US$83.7/bbl previous

Natural Gas €27.5/MWh vs €24.9/MWh previous

Henry Hub Gas US$1.94/mmBtu vs US$1.88/mmBtu yesterday

• European energy prices jumped 10% on news that the 12.1mcm/d Karsto plant in Norway will have bigger than expected capacity cuts during its maintenance schedule over the next two weeks due to ‘process problems’.
• Gazprom has launched a competitive process to sell its North Sea portfolio, which includes interests in the K18-Golf, Wingate, Q1-B, and Sillimanite gas fields in the Dutch, British, and Danish sectors of the North Sea. Open bidding is taking place via a public offer with a starting price of €344m and a cut-off price of €159m.
• Trafigura has agreed terms with Brookfield to acquire Greenergy’s European business, which includes biofuel manufacturing plants in the UK and the Netherlands and a UK distribution network for its renewable road fuels.
• EDF’s Dorenell wind farm in Scotland has been fined £5.5m by UK energy regulator Ofgem for overstating generation forecasts to attract higher curtailment payments.

Uranium Futures $93.3/lb vs $94.1/lb previous

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$116.2/t vs US$113.9/t

Chinese steel rebar 25mm US$565.0/t vs US$566.8/t

Thermal coal (1st year forward cif ARA) US$108.3/t vs US$103.8/t

Thermal coal swap Australia FOB US$139.7/t vs US$136.0/t

Other:  

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

NdPr Rare Earth Oxide (China) US$49,310/t vs US$50,424/t

Lithium carbonate 99% (China) US$14,098/t vs US$13,405/t

China Spodumene Li2O 6%min CIF US$1,070/t vs US$1,040/t

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

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

China Graphite Flake -194 FOB US$555/t vs US$560/t

Europe Vanadium Pentoxide 98% 5.7/lb vs US$5.8/lb

Europe Ferro-Vanadium 80% 27.45/kg vs US$27.55/kg

China Ilmenite Concentrate TiO2 US$323/t vs US$323/t

Spot CO2 Emissions EUA Price US$56.4/t vs US$54.9/t

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

Battery News

SVOLT’s EV battery plant in Thailand enters mass production

• Chinese battery manufacturer SVOLT Energy has announced its EV battery plant in China has gone online.
• The plant will produce SVOLT’s ‘LCTP’ battery packs boast 60kWh capacity – approx. 500km of range for an EV.
• The production plant is expected to produce 60,000 battery modules (~20,000 battery packs) per year.
• The exact capacity of the facility has yet to be disclosed by SVOLT.
• SVOLT is looking to expand its battery production globally, targeting 50GWh of capacity by 2030, with plans for up to five battery facilities in Europe.

Tesla sees China-made vehicle sales down 19% yoy

• Tesla Giga Shanghai’s wholesale vehicle shipments (local sales and exports) saw a 19% decrease yoy.
• Wholesale shipments in February totalled 60,365 – the sales figure is Tesla Shanghai’s lowest in over a year.
• The main reason behind the drop is the 2024 Chinese New Year holiday which fell on February 10^th-17^th which last year was January 21^st-27^th.

Norway sees EVs account for >90% of new vehicle registrations in February

• Norway had 6,647 EV registration in February, up 464 vehicles from February 2023.
• Total registrations fell by 58 vehicles yoy with 7380 vehicles registered in February.
• This meant that EVs had 90.1% share of registrations for February 2024.
• 147 plug-in hybrids were also registered meaning 92.1% of registered vehicles in February had charging capabilities.

UKs ‘Zebra Initiative’ favouring new electric buses from China over repowering

• The £400m scheme was introduced to encourage the rollout of electric buses across the UK.
• The plan unveiled by the Government during the pandemic and aims to finance the purchase of 4,000 buses, around one-tenth of Britain’s total fleet.
• British bus-makers including Sheffield-based Magtec, Scarborough-based Kleanbus and Norfolk-based Equipmake have said that Government’s grant scheme currently incentivises new bus purchases instead of repowering – the conversion of existing diesel buses to electric.
• Around 70% of new bus purchases in the UK are Chinese-manufactured or contain Chinese-made components, according to Magtec.
• The most common bus registered in the UK now is the Enviro bus, built by BYD.

Company News

Empire Metals* (EEE LN) 10.4p, Mkt Cap £62m – Initial mineralogical results highlight dominance of titanite

(Empire holds 70% of Pitfield, Century Minerals, which is run by two geologists holds the other 30%. One of these geologists works for Empire.)

• Empire Metals reports preliminary results from their on-going mineralogical and metallurgical studies.
• The team report drilling at Pitfield has shown a dominance of titanite, as the most abundant Ti-bearing mineral.
• Titanite reportedly accounts for 67% of the total contained TIO2 from drilling to date.
• Empire’s RNS explores a ‘conceptual’ processing flowsheet, using beneficiation followed by acid leaching, calcination and pelletisation.
• The titanite is considered amenable to low temperature acid leaching.
• The preliminary flowsheet also includes crushing, ore sorting, grinding, wet gravity separation and potential flotation and calcination.
• Management suggests that high-pressure pelletisation may be required to ‘improve the physical integrity of the product.’
• They alternatively point to additional processing to deliver product directly to end-user pigment producers.
• A study on the processing potential for titanite by hydrobromic acid leaching and carbochlorination on titanite in the Murmansk region in Russia uses similar processes where an experimental scale pilot plant was run at 1,500tpa.
• These papers suggest titanite ‘can be processed by hydrobromic acid’ followed by ‘selective carbochlorination of solid leaching residue.’ These combined can result in ‘over-all titanium extraction efficiency can be 93.8% higher.’
• We are also advised that making a successful chloride process feedstock has quite specific physical and chemical requirements.
• Empire is targeting the production of a high-grade TiO2 concentrate to feed into the titanium dioxide pigment market though the cost of processing and upgrading the titanite is as yet unknown.
• The team are looking to produce a final product ‘approaching the same content as natural rutile.’
• Sierra Rutile is currently selling rutile products at $1,400/t, with longer term expectations higher at $1,700-2,00/t.
• We also highlight the below table from a report by Gázquez et al on titanium products:

Conclusion: It is promising to see Empire continues to progress the Pitfield project through mineralogical and metallurgical studies.

The conclusion that titanite is the dominant TIO2-bearing mineral is a step forward as it enables Empire to focus on the potential economic extraction of the mineral going forward.

We anticipate this will require further studies and testing for the delivery of a ‘rutile equivalent’ product in line with Empire’s strategy.

This is untrodden ground for the Empire team and various routes will be explored, supported by the Company’s recently appointed metallurgical team.

*SP Angel acts as nomad and broker to Empire Metals

Greatland Gold (GGP LN) 6.45p, Mkt Cap £333m – Continuing progress at Havieron as Newmont plans divestment of the project

• In its interim report covering the six months ending 31^st December 2023, Greatland Gold reports a £5.5m loss (2022 – loss of £13.3m) as it progresses the Feasibility Study for its 30% owned (Havieron project in WA and advances the exploration of its other projects.
• As announced in December 2023, Havieron contains a JORC compliant mineral resource of 8.4m oz on a gold equivalent basis, including a “32% increase in contained gold equivalent metal in the higher confidence Indicated MRE category” compared to the previous, March 2022 estimate.
• Following Newmont Mining’s acquisition of Greatland Gold’s former partner at Havieron, Newcrest Mining, Newmont has announced its intention to divest its interest in the Havieron project and the nearby Telfer gold mine “in calendar year 2024”.
• Greatland Gold confirms that it “holds a right of last refusal in respect of a sale by Newmont of its joint venture interest in Havieron to a third party”.
• Describing the recent progress at Havieron, says that “approximately 80 vertical metres of the total 420 metres of vertical distance remaining before the decline reaches the base of the Permian cover and top of the Havieron orebody” and that the decline has advanced a total of 2,110m suggesting that there remains around a further 500m of decline required to reach the top of the mineralisation.
• The company announced in October that decline development rates were being slowed so that the final of 3 aquifers, the ‘Lower Confined Aquifer (LCA) could be depressurised.  Greatland Gold confirms that “The pause commenced in the December 2023 quarter and depressurisation activities were expanded, with six depressurisation holes now drilled into the LCA and pumping water to evaporation facilities at the surface.  Data collection and evaluation is continuing in parallel to increase confidence in water management from the LCA and determine the timing of any additional water management infrastructure required at surface”.
• Elsewhere, the company confirms that it intends to continue drilling during 2024 at the Paterson South project, also in the Paterson region of WA, where drilling started in June 2023 under a farm-in agreement with Rio Tinto which gives Greatland Gold the right to earn a 75% interest in the project by “spending at least A$21.1 million and completing 24,500 metres of drilling as part of a two-stage farm-in over seven years”.
• To 31^st December 2023, the company has “achieved the stage one minimum commitment under the farm-in arrangement by completing 2,000 metres of drilling and A$1.1 million of expenditure before 31 December 2024”.
• At the Juri Joint Venture property, held 51% by Newmont Mining and 49% by Greatland Gold, “Newmont carried out an airborne gravity survey over parts of the Juri Joint Venture tenure, the results of which are continuing to be reviewed by the Joint Venture and will be incorporated into future on-ground work plans”.
• “Newmont has the right to earn up to a 75% interest in the Juri tenements by spending up to a further A$17 million in Stage 2 of the farm-in”.
• Exploration at the Scallwag prospect, “located adjacent to and around Havieron” included 10 holes (2,500m) of drilling and ground geophysics which “indicates a conductor at depth within a syncline fold structure along trend from Havieron”.

Conclusion: Following its acquisition of Greatland Gold’s partner at Havieron, Newcrest Mining, Newmont Mining has announced its intention to divest its 70% interest in the project.  Meanwhile decline development and dewatering work continues to reach the base of the post-mineralisation cover and access the deposit located around 420m below surface.

KEFI Gold and Copper* (KEFI LN) 0.58p, Mkt Cap £29m – £5.0m equity raise

• The Company raised ~£5.0m through a placing at 0.6p to progress the Tulu Kapi Gold Project towards start of development works.
• In particular, proceeds are to be used to complete project funding, paying off certain current liabilities and for general working capital purposes.
• 750m new shares are expected to be admitted to trading around 8 March.
• Additionally, the Company will be holding a General Meeting on 26 March to approve issue of Conditional Remuneration shares of ~83m paying outstanding directors’ and corporate finance fees.

Conclusion: The Company secures ~£5.0m in new equity as Tulu Kapi funding is drawing to a close with all parties of the syndicate are expected to seek final approvals from respective committees this month. The project launch timeline reiterated for H1/24 with stronger gold prices offering a good backdrop for project economics.

*SP Angel acts as Nomad and Broker to KEFI Gold and Copper. The analyst has previously visited the Tulu Kapi gold mine. A SP Angel corporate finance partner recently attended a meeting of finance partners in Addis Ababa.

Savannah Resources* (SAV LN) 2.1p, Mkt Cap £38m – Major shareholding notification

BUY – 21.1p

• Mario Ferreira, a local businessman and entrepreneur, took a 4.3% stake in the Company
• Ferreira is the Chairman of Media Capital, a major Portuguese media company.

*SP Angel acts as Nomad and Broker to Savannah Resources

Thor Energy (THR LN) 1.5p, Mkt Cap £4.7m – Interim results highlight US uranium projects

• Thor Energy’s report for the six months ending 31^st December 2023 highlights results from its uranium exploration drilling in the US where it completed 23 shallow reverse-circulation holes (2,737m) at its Wedding Bell project in Colorado.
• The drilling intersected uranium mineralisation “in all holes drilled at Section 23, Rim Rock Mine and Groundhog Mine, with high-grade uranium up to 6885ppm (0.69%) eU₃O₈ intercepted (23WBRA020)”.
• Managing Director, Nicole Galloway Warland, commented on the strength of uranium prices “supported by strong supply and demand fundamentals … [which] … resulted in uranium breaking the resistance level of $100/lb in early 2024, recording a 16-year high and remaining above $100/lb”.
• She also highlighted US Government plans to “invest up to US$500m to help develop a secure domestic supply of nuclear energy fuel”.
• In Australia, surveys at the Alford East copper project in South Australia identified “low-velocity, weathered ‘troughs’ that are known to host the oxide copper-gold and REE mineralisation within the Alford Copper Belt”.
• The company’s Molyhil tungsten project in the Northern Territory is being explored by ASX listed Investigator Resources under an “Earn-in/JV Agreement to the value of A$8M … via a 3-stage process, to earn 80% interest in the Tenements and acquire Thor’s 40% interest in the Bonya tenement (EL29701). In late 2023, IVR carried out a 12-hole drilling program at Molyhil Project to verify and update the MRE; assays are anticipated in February 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

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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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