SP Angel Morning View -Today’s Market View, Tuesday 9th January 2024

Potential PBoC reserve ratio cut to boost metals demand outlook

MiFID II exempt information – see disclaimer below

Alcoa (AA US) –Curtailment of Kwinana Alumina Refinery

Centamin (CEY LN) – Initial exploration drilling results from the Eastern Desert programme, Egypt

Cobra Resources (COBR LN) – New tenements granted in South Australia targeting ionic REE mineralization

Cornish Metals* (CUSN LN) – NED appointment

Galan Lithium (GLN AU) – HMW Phase 1 construction update

Golden Metal Resources (GMET LN) – Copper/gold/silver mineralisation identified over 4km² at the Garfield project, Nevada

NGEX Minerals (NGEX CN) – New assays show 62m at 6.98% CuEq at Lunahuasi, Argentina

Oriole Resources* (ORR LN) – Receipt of US$450k payment for Bibemi earn-in agreement

Premier African Minerals (PREM LN) – Drilling and trenching results from the Zulu lithium project, Zimbabwe

Copper continues to slide as contango persists despite Cobre Panama shutdown

• Copper prices have weakened to $8,400/t, down from $8,700/t.
• The cash-three month spread on LME copper currently sits at c.$110/t, near two-decade highs.
• The copper supply story flipped rapidly in Q3, when Cobre Panama shut down, wiping out 350ktpa, and Anglo American slashed c.200ktpa of production.
• Lower demand from China’s property sector has been offset by renewables demand and the EV sector.
• Countering this has been Ivanhoe’s ramp up of Kamoa Kakula, with Friedland reporting yesterday plans to boost output this year to 440-490ktpa.

Economics

US – Fed officials highlight progress in taking inflation lower while avoiding a pick up in unemployment.

• Atlanta Fed President Raphael Bostic, a voting FOMC member this year, said that the economy is on a path to 2% target.
• He expects two rate cuts this year, one less than median FOMC estimates, with the first one coming in Q3/24 compared to market expectations for as early as March.
• Fed Governor Michelle Bowman, also backed lowering borrowing costs if inflation continues to pullback but warned that upside inflation risks remain.
• “There is also the risk that the recent easing in financial conditions encourages a reacceleration of growth, stalling the progress in lowering inflation, or even causing inflation to reaccelerate,” she said.
• “I will remain cautious in my approach to considering future changes in the stance of policy,” Bowman added.
• December inflation numbers are due on Thursday with estimates pointing to a slight pick up in headline number, although, a more closely watched core measure is forecast to continue slowing (3.8% v 4.0% November).

China – The central bank indicated that the PBOC may lower the reserve requirement to boost lending and support economic growth, head of the central bank’s monetary policy department told local news agency.

• PBOC official remark does not suggest an imminent cut but may indicate such action is on the table in the coming months, Bloomberg writes.
• Similar comments were made last July before the central bank reduced the ratio for major banks in September last year.

Japan – Inflation slowed in the capital offering a welcome piece of news for the central bank that has been pushing against market expectations for a change in the loose monetary policy.

• The reading increases chances the central bank will maintain its negative rate policy at the coming meeting on 22-23 January.
• Tokyo CPI (%yoy): 2.4 v 2.7 (revised from 2.6) November and 2.5 est.
• Tokyo CPI ex Fresh Food, Energy (%yoy): 3.5 v 3.6 November and 3.5 est.

Germany – Industrial production unexpectedly contracted in November as fragile overseas demand and high interest rates continued to weigh on the manufacturing sector.

• Industrial Production (%mom): -0.7 v -0.3 (revised from -0.4) October and 0.3 est.
• Industrial Production (%yoy): -4.8 v -3.4 (revised from -3.5) October and -4.0 est.

Currencies

US$1.0944/eur vs 1.0943/eur previous. Yen 144.05/$ vs 144.43/$. SAr 18.684/$ vs 18.753/$. $1.273/gbp vs $1.271/gbp. 0.670/aud vs         0.670/aud. CNY 7.160/$ vs 7.159/$.

Dollar Index 102.40 vs 102.39 previous.

Commodity News

Precious metals:

Gold US$2,034/oz vs US$2,031/oz previous

Gold ETFs 85.1moz vs 85.2moz previous

Platinum US$949/oz vs US$959/oz previous

Palladium US$994/oz vs US$1,015/oz previous

Silver US$23.15/oz vs US$23/oz previous

Rhodium US$4,400/oz vs US$4,400/oz previous

Base metals:

Copper US$ 8,412/t vs US$8,428/t previous

Aluminium US$ 2,233/t vs US$2,261/t previous

Nickel US$ 16,265/t vs US$16,385/t previous

Zinc US$ 2,523/t vs US$2,533/t previous

Lead US$ 2,072/t vs US$2,082/t previous

Tin US$ 24,490/t vs US$24,505/t previous

Energy:

Oil US$76.8/bbl vs US$78.1/bbl previous

Natural Gas €30.7/MWh vs €33.2/MWh previous

Uranium UXC US$91.00/lb vs US$82.30/lb previous

Bulk:

Iron Ore 62% Fe Spot (cfr Tianjin) US$137.9/t vs US$138.6/t

Chinese steel rebar 25mm US$578.1/t vs US$578.3/t

Thermal coal (1st year forward cif ARA) US$102.5/t vs US$102.5/t

Thermal coal swap Australia FOB US$130.0/t vs US$131.7/t

Coking coal swap Australia FOB US$317.0/t vs US$317.0/t

Other:

Cobalt LME 3m US$29,135/t vs US$29,135/t

NdPr Rare Earth Oxide (China) US$57,964/t vs US$58,804/t

Lithium carbonate 99% (China) US$12,082/t vs US$12,082/t

China Spodumene Li2O 6%min CIF US$1,030/t vs US$1,060/t

Ferro-Manganese European Mn78% min US$1,067/t vs US$1,067/t

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

China Graphite Flake -194 FOB US$600/t vs US$600/t

Europe Vanadium Pentoxide 98% 6.0/lb vs US$6.0/lb

Europe Ferro-Vanadium 80% 27.05/kg vs US$27.05/kg

China Ilmenite Concentrate TiO2 US$315/t vs US$315/t

Spot CO2 Emissions EUA Price US$78.7/t vs US$81.7/t

Brazil Potash CFR Granular Spot US$302.5/t vs US$302.5/t

Battery News

EU to provide €4bn for EV batteries, heat pumps and solar in France and Germany

• France will receive almost €3bn to support the production of batteries, solar panels, wind turbines and heat pumps, along with key component and critical raw material supply chains.
• Northvolt will be one of the big beneficiaries – the Swedish battery maker has secured approval for $986m in German state funding for an EV battery plant in the north of Germany.
• The plant will have an annual capacity of 60GWh – approx. 800,000 to 1m EVs per year.
• This follows other similar schemes in Austria, Belgium, Germany, Hungary, Italy, Slovakia, and Spain, worth in total €9.1bn.
• The investments are part of the EU’s mission for net zero by 2050 and are also designed to help protect the bloc from the growing competition from Chinese car, solar panel, and other green tech factories.

BYD to start sales in Indonesia next week

• Chinese automakers are looking to expand into other markets as the Chinese market struggles with over saturation.
• Indonesia is also looking to accelerate EV adoption in a bid to reduce emissions.

Company News

Alcoa (AA US) $31.7, Mkt cap $5.66bn –Curtailment of Kwinana Alumina Refinery

• Major bauxite, alumina and aluminium product producer Alcoa reports it is shutting the Kwinana Alumina Refinery in Western Australia.
• The refinery has an annual nameplate production capacity of 2.2mt, but has been operating at 80% of capacity since January 2023.
• The reasons for curtailment are listed as; age, scale, operating costs, lower bauxite grades and weak market conditions.
• The refinery lost $130m new last year.
• Key raw material costs in caustic soda, calcinated coke and pitch have all fallen between 20% and 45%, however the refinery’s economics remain constrained.
• Alcoa will record restructuring charges between $180-200m, $76-84m of which will be Alcoa’s direct share.
• Management had previously described Kwinana as a marginal asset, and analysts had expected further curtailments given the challenging price environment of alumina currently.
• LME aluminium has bounced off lows of $2,130/t to current levels at $2,250/t, still well below highs of $3,500/t reached in 2022.

Centamin (CEY LN) 94.45p, Mkt Cap £1,093m – Initial exploration drilling results from the Eastern Desert programme, Egypt

• Centamin has announced drilling results from its Eastern Desert Exploration programme in Egypt where it has completed an initial 16,216m programme of reverse-circulation drilling (RC) on eight targets within the Nugrus Block situated adjacent to the company’s Sukari mining concession.
• Among the results highlighted in today’s announcement are results from the Little Sukari prospect located 28km west of the Sukari mine, including:
  • A 46m wide intersection at an average grade of 3.3g/t gold from a depth of 91m in hole LSRC-030; and
  • A 77m wide intersection averaging 1.84g/t gold from 44m depth in hole LSRC-012, including single metre intervals assaying 5.2g/t and 8.26g/t at 69m and 87m depth; and
  • A 69m wide intersection averaging 2.01g/t gold from 81m depth in hole LSRC-009, including a 1m wide interval between 143-144m depth averaging 5.19g/t gold; and
  • A 46m wide intersection averaging 2.14g/t gold from 116m depth in hole LSRC-019, including two higher grade intersections, each of 2m width, averaging 15.62g/t from 144m depth and 6.28g/t from 159m depth as well as a single metre at 5.95g/t gold at 148m; and
  • A 29m wide intersection averaging 2.71g/t gold from 2m depth in hole LSRC-010, including a single metre assaying 36.7g/t gold at 6m depth.
• Centamin says that the Little Sukari prospect, which is named in recognition of “its geological and geochemical resemblance to the Sukari deposit … returned the most encouraging results of the programme.  Zones of consistent gold mineralisation up to 30-60 metres wide occur over a strike length of at least 250 metres and extend at least 230 metres downdip to a vertical depth of approximately 200 metres below surface.  Mineralisation remains open at depth”.
• Today’s announcement also includes results from the Umm Majal prospect which lies 23km west of the Sukari Mine and 5km SE of Little Sukari, including:
  • An intersection of 18m at an average grade of 2.33g/t gold from 21m depth in hole UMRC-006; and
  • A 15m wide intersection averaging 1.46g/t gold from 4m depth in hole UMRC-003, including 2m averaging 5.87g/t gold from a depth of 16m; and
  • An 8m wide intersection averaging 2.67g/t gold from 2m depth in hole UMRC-002, including 1m at an average grade of 7.89g/t at 7m depth; and
  • A 5m wide intersection averaging 16.20g/t gold from 44m depth in hole UMRC-011, including single metre wide intercepts assaying 5.48g/t and 80.9g/t gold at 45 and 48m depth respectively.
• Mineralisation at Umm Majal “is hosted in an altered granitoid that appears to be distinct from the host rocks at Little Sukari, but occurs within a similar ophiolitic-melange sequence. Mineralisation occurs over a strike length of 200-250 metres and the gold mineralised zone is up to 20 metres wide. Initial shallow drill testing has demonstrated gold mineralisation up to 30-40 metres below surface”.
• The announcement also includes results of drilling at other sites, including Ambaud North, Ambaud South, Jebel Rabdi, Umm Shaw, Wadi Kiribi and Wadi Marwah indicating the wide scope of the initial exploration drilling.
• Outlining its follow-up exploration plans for 2024, Centamin says that “Up to 15,000 metres of both RC and core drilling is planned for Little Sukari, Umm Majal, and other nearby targets, starting  in H1 2024 with results expected before the end of the year” backed up by ground and airborne geophysics.
• Earlier stage exploration including geochemical and geophysical exploration is planned during 2024 at several other locations within the 3,000km² exploration licences in the Eastern Desert including at Um Rus Block and the Najd Block.
• Describing the initial results as “encouraging”, CEO, Martin Horgan, said that the 2024 exploration “includes delineating potential resources and further drill targets in Egypt as part of our growth strategy, which has already increased pre-depletion Group reserves by 3.5Moz over the last three years”.

Conclusion: Centamin’s initial exploration of its Eastern Desert licence blocks has identified promising targets west of the Sukari mine at Little Sukari and Umm Majal which will be followed up with additional drilling in 2024.  Earlier stage exploration of additional targets in the Um Rus and Najd blocks is also scheduled for 2024.

Cobra Resources (COBR LN) 1.19p, Mkt cap £7m – New tenements granted in South Australia targeting ionic REE mineralization

• Cobra has been granted two new tenements totalling 1,512km² near its Boland discovery.
• Previous drilling at the new Smokey Bay and Pureba tenements encountered playa clays, similar to at Boland.
• There is also contained Hiltaba Suite intrusives, also considered a source of primary rare earth enrichment.
• The Company has submitted 220 samples from historic drillholes for analysis, results expected in late January.
• As regards Boland, the Company’s ionic clay REE project, a Sonic drilling contractor has been booked for February.
• The Company will drill and case 3-5 drillholes to highlight the concentration of mineralisation and its amenability to in situ recoveries.
• The core will also support bench scale ISR leach testing and flow-sheet studies with Watercycle Technologies.
• Cobra has employed Wallbridge Gilbert Aztec to oversee bench scale ISR studies.

Cornish Metals* (CUSN LN) – 9.5p, Mkt cap £51m – NED appointment

Valuation 48p/s

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• Cornish Metals has appointed Samantha Hoe-Richardson as a non-executive director with immediate effect.
• Ms Hoe-Richardson “was Head of Environment & Sustainable Development at Network Rail until 2017 and prior to that spent 16 years at Anglo American plc, latterly as Head of Environment”.
• “She previously worked in investment banking and audit. Samantha holds a Masters Degree in nuclear and electrical engineering from the University of Cambridge, and is also a qualified Chartered Accountant”.
• Welcoming the new appointment, Chairman, Patrick Anderson, said that “Samantha’s experience in both Sustainability / ESG and Finance will be a great addition to the Board’s skill set … as we embark on another exciting and critical year on the path to get South Crofty back up and running”.

*SP Angel acts as Nomad and Broker to Cornish Metals. An SP Angel analyst formerly worked in the South Crofty tin mine in the 1980s and holds shares in Cornish Metals.

Galan Lithium (GLN AU) A$0.7, A$237m – HMW Phase 1 construction update

• The Company reports on Phase 1 construction progress at the 100% owned high grade Hombre Muerto West (HMW) Lithium Project in Argentina.
• Pond 1 earthworks are completed, and liner installation is 5% complete.
• Filling of the pond with brine is expected in Q1/24 with first production guided for H1/25.
• The team completed nine production wells while Phase 1 production only requires six.
• A total of 23 production wells will be required for Phase 1 and 2.
• Pond 2 earthworks construction is underway and 10% complete.
• The project is estimated to produce 5.4ktpa LCE in a lithium chloride concentrate at Phase 1.
• Phase 2 is expected to bring this up to 21ktpa LCE in 2026

Golden Metal Resources (GMET LN) 11p, Mkt Cap £7.9m – Copper/gold/silver mineralisation identified over 4km² at the Garfield project, Nevada

• Golden Metal Resources reports that it has defined “High-grade copper-gold-silver mineralisation … [over 4km², covering all of its] … 100% owned” claims at its Garfield project area in the Walker-Lane Belt of Nevada.
• The company recently expanded its exploration holdings at Garfield by a further 26 claims, bringing its holdings to 65 claims covering 5.4km².
• The company describes that “Five rock samples were taken from … newly staked ground and all of these returned high-grade gold-silver-copper assay results including up to 22.7g/t gold” leading it to conclude that there is the potential for “a large and well mineralised copper-gold-silver deposit”.
• Welcoming the results from the new sampling, CEO, Oliver Friesen, said that “from my experience, and understanding of the Project, geologically and geographically, I consider Garfield holds the potential for a major metal discovery”. He undertook to “push this Project forward at some pace”.

Conclusion: Golden Metal Resources has expanded its holdings at the Garfield project in Nevada and identified mineralisation over an area of 4km². The company says that follow-up exploration from the early-stage exploration rock-sampling is expected to proceed rapidly. We await further news as the programme develops.

NGEX Minerals (NGEX CN) C$7.82, Mkt cap C$1.46bn – New assays show 62m at 6.98% CuEq at Lunahuasi, Argentina

• NGEX Minerals provides new assay results from its drilling programme at its Lunahuasi Project in the Vicuña District , Argentina.
• The Company, backed by the Lundin family, is currently completing its second drilling programme, targeting the area around the initial Lunahuasi discovery hole.
• Highlights today include:
  • DPDH009 : 62m at 6.98% CuEq from 144m
    • Includes – 26,1m @ 13.36m CuEq from 169m, 4.5m at 18.37% CuEq from 172m, 6.5m at 26% CuEq from 188.5m.
  • The broader interval from hole DPDH009 intersected 128m at 4% CuEq from 144m.
  • DPDH010: 62.6m @ 5.84% CuEq from 226m
    • Includes: 9.4m at 12.1% CuEq from 232m, 4.2m @ 19.7% CuEq from 282m.
  • The broader interval from the above hole intersected 102m at 4.56% CuEq from 192m.
• Management believes the new campaign has begun to outline three main mineralised structures, trending north-northwest.
• These two holes are considered to have intersected the same section of the porphyry as the initial discovery zone.
• Copper mineralisation is reported to occur primarily in enargite and massive pyrite-enargite veins.
• Gold grades reported up to 22g/t Au and silver up to 1,490g/t.
• The Company reports that four rigs are currently active and 921m worth of assays are currently pending.

Oriole Resources* (ORR LN) 0.21p, Mkt cap £8m – Receipt of US$450k payment for Bibemi earn-in agreement

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• Oriole reports that it has now received the remaining $450k signature payment for its earn-in agreement at Bibemi with BCM International.
• BCM has already started paying towards its $4m funding commitment to earn up to a 50% in Bibemi via $72k in camp upgrades and technical studies.
• Oriole expects to begin drilling at Bibemi this quarter, building out the current 305koz total inferred resource at 2.19g/t Au.
• The Groups are targeting the development of a multi-pit mining operation at Bibemi, dependent on future drilling and the receipt of an exploitation licence.

*SP Angel acts as Broker to Oriole Resources

Premier African Minerals (PREM LN) 0.23p, Mkt Cap £63m – Drilling and trenching results from the Zulu lithium project, Zimbabwe

• Premier African Minerals has reported drilling and trenching results from the ‘Southeast Pegmatite’ at its Zulu Lithium project with geological logging showing “that the lithium mineralisation in this pegmatite is almost exclusively spodumene”.
• The company explains that “a grade of 1% Li2O when the mineralisation is all spodumene, is the equivalent of 12.5% of the ore body being made up of the mineral spodumene. Test work in our laboratory at Zulu has consistently confirmed that Zulu is able to produce SC6 at acceptable grades from a contained spodumene content in the ore body as low as 4%, representing a potential economic cut-off grade as low as 0.37% Li2O when the contained mineral is spodumene”.
• Among the drilling results reported today are:
  • An intersection of 32.44m at an average grade of 1.08% Li₂O and 63ppm Ta₂O₅ from a depth of 154.56m in hole ZDD160 including shorter sections of 1 or 2 metres with grades up to around 1.80% Li₂O and 100ppm Ta₂O₅; and
  • An intersection of 8.35m at an average grade of 1.53% Li₂O and 54ppm Ta₂O₅ from a depth of 165.73m in hole ZDD161 as well as an intersection of 5.54m at an average grade of 1.06% Li₂O and 97ppm Ta₂O₅ from a depth of 180.46m.
• Results from surface trenches reported in today’s announcement include:
  • Assays of 0.95% Li₂O and 81ppm Ta₂O₅ over 5.49m in trench ZT-016; and
  • Assays of 0.94% Li₂O and 79ppm Ta₂O₅ over 2.0m in trench ZT-020; and
  • Assays of 0.87% Li₂O and 49ppm Ta₂O₅ over 8.05m in trench ZT-022; and
  • Assays of 1.40% Li₂O and 52ppm Ta₂O₅ over 7.5m in trench ZT-026; and
  • Assays of 1.15% Li₂O and 37ppm Ta₂O₅ over 3m in trench ZT-027.
• The Southeast Pegmatite is “adjacent but discrete from the main mining and pit developments underway at present … [where mining] … operations are now well developed, and we anticipate no issues associated with ore delivery to Run of Mine pad in future”.  More specifically, the company says that the Southeast Pegmatite “is located approximately 350 meters southeast of current pit developments”.
• Reporting on progress with the processing plant, which suffered setbacks last year, the company reports that civil engineering work “associated with the thickener and new mill installation are substantially complete and first materials are now at site with further loads on route. The new mill is expected to be the last component to be positioned at Zulu late in January 2024 with anticipated restart of operations as early in February as possible”.

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 employees may have previously held, or currently hold, shares in the companies mentioned in this note.

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