SP Angel Morning View -Today’s Market View, Wednesday 12th June 2024

Metals markets await US inflation and FOMC outlook today

MiFID II exempt information – see disclaimer below

Anglo Asian Mining* (AAZ LN) – BUY – Tailings dam wall raise construction expected to commence shortly

Atalaya Mining (ATYM LN) – Award of options rewards good management and incentivises for future growth

Aura Energy* (AURA LN) – Recent drilling delivers increased mineral resources at Tiris uranium

Empire Metals* (EEE LN) 11.75p, Mkt Cap £70m – Empire estimates new exploration target for focus areas at Pitfield titanium prospect in Western Australia

Great Southern Copper (GSCU LN) 1.65p, Mkt Cap £6.2m – Option to expand the Especularita project area in Chile

Great Western Mining* (GWMO LN) 0.04p, Mkt Cap £2.5m – Progress on permitting in Nevada

Sovereign Metals* (SVML LN) 31.07p, Mkt Cap £177m – Trial mining and pilot plant update

Tungsten West (TUN LN) – 5.5p, Mkt cap £8.0m – Environment Agency approves plant operating permit at Hemerdon

China sees strong rebound in NEV sales as penetration reaches record 47% in May

• China’s NEV penetration at retail reached a record 47% in May, up 14% yoy and up 3.3% from April.
• Sales totalled 804,000 units which was up 38.5% yoy and 18.7% from April.
• April was a surprise weak month for sales, falling 5.21% from March.
• May did see a slow month for exports, with China exporting 378,000 vehicles, up 23% yoy, but down from April.

EU to impose temporary tariffs up to 25% on Chinese EVs (FT)

• The European Commission is expected to notify car makers today that it will provisionally apply additional duties of up to 25% on imported Chinese EVs from next month.
• This follows an investigation in which the EU alleges Chinese EV makers have been benefiting unfairly from state subsidies and accuses them of dumping excess production on Europe.
• Germany has launched an 11^th hour bid to minimise duties imposed in hopes of averting a full-scale trade war.
• The EU charges a 10% tariff on all car imports, with vehicles from China at 15% – Berlin is pushing to keep tariffs as low as possible.
• It is expected that Beijing will retaliate strongly which could affect European automakers, particularly Germany’s BMW, Mercedes and VW who have large manufacturing facilities in China.
• Last month the US quadrupled import duties on Chinese EVs to 100%.
• According to the Chinese Passenger Car Association (CPCA), “Chinese enterprises will continue to unswervingly develop in Europe and integrate into local markets.”

Economics

US – Inflation numbers (slight slowdown expected) and FOMC monetary policy announcement (no change forecast) are due later today.

• The Fed is expected to release updated economic projections as well as the so-called “dot plot” pointing out FOMC rate outlook.
• March projections were for three 25bp cuts this year with updated outlook likely to see fewer of those.
• CPI (%yoy, Est/Apr): 3.4/3.4;
• Core CPI (%yoy, Est/Apr): 3.5/3.6;
• FOMC Rate: unchanged at 5.25-5.50%.

China – Weak consumer goods inflation fuel concerns over persistently weak demand and deflationary risks.

• Factory prices dropped for the 20th consecutive month weighing on producers’ profits, employment outlook and demand for new investment.
• CPI (%yoy, May/Apr/Est): 0.3/0.3/0.4;
• PPI (%yoy, May/Apr/Est): -1.4/-2.5/-1.5.

Japan – More arguments in favour of a potential central bank rate hike were delivered this morning with producer prices inflation beating market estimates.

• PPI (%mom, May/Apr/Est): 0.7/0.5(revised from 0.3)/0.5;
• PPI (%yoy, May/Apr/Est): 2.4/1.1(revised from 0.9)/2.0.

UK – The economy stagnated in April in a sign of a lost momentum following a pickup from last year’s recession amid strong inflation and high borrowing costs weighing on consumers and businesses.

• Wet weather was not helping either with a drop in retail sales recorded during the period.
• The data undermines Conservatives claims that the economy turned the corner ahead of July general elections.
• GDP (%mom, Apr/Mar/Est): 0.0/0.4/-0.1;
• GDP (3M/3M, Apr/Mar/Est): 0.7/0.6/0.7

Malawi – No survivors plane crash kills vice president and nine others

• The plane was operated by the military and flew despite weather warnings.
• Air traffic control had warned the plane not to land at Mzuzu due to bad weather and to turn back to the capital, Lilongwe.
• We also had an interesting moment when flying from Malawi to Addis Ababa when the pilot was forced to abort our landing at the last minute following a sudden cross wind.

Currencies

US$1.0740/eur vs 1.0764/eur previous. Yen 157.31/$ vs 157.28/$. SAr 18.544/$ vs 18.643/$. $1.274/gbp vs $1.272/gbp. 0.661/aud vs 0.660/aud. CNY 7.254/$ vs 7.254/$.

Dollar Index 105.29 vs 105.17 previous.

Precious metals:         

Gold US$2,312/oz vs US$2,305/oz previous

Gold ETFs 81.1moz vs 81.1moz previous

Platinum US$957/oz vs US$964/oz previous

Palladium US$891/oz vs US$897/oz previous

Silver US$29.34/oz vs US$29/oz previous

Rhodium US$4,600/oz vs US$4,650/oz previous

Base metals:   

Copper US$ 9,818/t vs US$9,785/t previous

Aluminium US$ 2,534/t vs US$2,553/t previous

Nickel US$ 17,900/t vs US$17,900/t previous

Zinc US$ 2,798/t vs US$2,809/t previous

Lead US$ 2,164/t vs US$2,186/t previous

Tin US$ 32,860/t vs US$32,175/t previous

Energy:           

Oil US$82.3/bbl vs US$81.5/bbl previous

Natural Gas €34.7/MWh vs €34.8/MWh previous

Uranium Futures $82.9/lb vs $83.3/lb previous

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$103.9/t vs US$106.3/t

Chinese steel rebar 25mm US$536.8/t vs US$537.6/t

Thermal coal (1st year forward cif ARA) US$118.8/t vs US$117.0/t

Thermal coal swap Australia FOB US$134.3/t vs US$133.5/t

Hard Coking Coal Australia FOB US$326.0/t vs US$326.0/t

Other:  

Cobalt LME 3m US$27,150/t vs US$27,150/t

NdPr Rare Earth Oxide (China) US$50,181/t vs US$50,179/t

Lithium carbonate 99% (China) US$13,166/t vs US$13,441/t

China Spodumene Li2O 6%min CIF US$1,150/t vs US$1,180/t

Ferro-Manganese European Mn78% min US$995/t vs US$972/t

China Tungsten APT 88.5% FOB US$360/mtu vs US$360/mtu

China Graphite Flake -194 FOB US$470/t vs US$470/t

Europe Vanadium Pentoxide 98% 5.2/lb vs US$5.2/lb

Europe Ferro-Vanadium 80% 26.85/kg vs US$26.85/kg

China Ilmenite Concentrate TiO2 US$316/t vs US$316/t

China Rutile Concentrate 95% TiO2 US$1,413/t vs US$1,413/t

Spot CO2 Emissions EUA Price US$69.4/t vs US$69.4/t

Brazil Potash CFR Granular Spot US$310.0/t vs US$310.0/t

Battery News

Ola Electric wins approval for $660m IPO

• Indian e-scooter maker Ola Electric has received regulatory approval to go ahead with its $660m IPO, according to sources. (Reuters)
• The IPO would be the countries first EV stock listing.

Evergrande EV faces loss of assets as local governments demand subsidy repayments

• China Evergrande New Energy Vehicle Group faces the risk of losing assets such as land and equipment as local administrative bodies demand repayment of $261.9m in subsidies.
• The group intends to submit an appeal and rectification materials to the authority before the time limit.

Company News

Anglo Asian Mining* (AAZ LN) 67p, Mkt Cap £74m – Tailings dam wall raise construction expected to commence shortly

BUY

• The Company received technical confirmation and a positive environmental report from the government regarding a tailings dam wall raise.
• Final permission to start construction is subject to few administrative formalities that are expected to be secured shortly.
• The Expert Opinion and Environmental Report complete the technical work required for submission of all required documentation for approval to the State Committee on Urban Planning and Architecture of Azerbaijan and the local Gedabek authorities.
• A 7.0m raise is planned to be completed in two stages with the first increase of 2.5m to be completed within three months after permission is granted.
• The team  is expected to provide updated production guidance once construction permits are obtained with the new Gilar mine expected to start production in Q4/24.
• Yesterday the Company reported a prepayment $5m facility linked to copper concentrate sales with Trafigura and indicated that expectations are for the Group to produce enough concentrate to settle advance payments before YE24.
• This also suggests the Group is expecting to resume flotation operations in due course.

Conclusion: Technical and environmental work required by authorities for a tailings dam wall raise has been completed with the permits for start of construction works expected shortly. We are looking forward to a commencement of tailings wall raise construction that should allow to resume agitation leaching and flotation operations taking advantage of strong markets for both gold and copper. Updated production guidance is also expected in due course.

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

Atalaya Mining (ATYM LN) 410p, Mkt Cap £581m – Award of options rewards good management and incentivises for future growth

• Atalaya Mining reports that it has awarded a total of ~1.3m options taking the number of outstanding options to ~5.5m or ~4% of the fully diluted capital.
• Among the options awarded today, 800,000 have been allocated to the Managing director, Alberto Lavandeira (400,000), with a further 200,000 options to each of the CFO, Cesar Sanchez and the General Manager (Operations), Enrique Delgado.
• The balance of the options have been awarded to other employees.
• The options are exercisable at a price of 413.5p/share and expire after five years and “vest in three equal tranches, one third on grant and the balance equally on the first and second anniversary of the grant date”.

Conclusion: Atalaya is a well-run and well-organized business. The award of share options at 413.5p is higher than the current share price and incentivises the CEO, Operations General Manager and CFO to make the shares perform better than the 29% uplift seen over the past 12 months. Given Atalaya’s copper mining expertise we are hopeful that management will continue to perform.

Aura Energy* (AURA LN) 7.25p, Mkt Cap £55m – Recent drilling delivers increased mineral resources at Tiris uranium

• In a release to the ASX today, Aura Energy reports a 55% increase, compared with the previous February 2023 estimate, in the total mineral resource of its Tiris uranium project in Mauritania to 91.3m lbs of contained U₃O₈.
• The resource increase reflects the recent 15,262m drilling programme and includes 76.6mlbs U₃O₈ contained within 162mt at an average grade of 215ppm U₃O₈ at the Tris East prospect and an additional 14.6m lbs of U₃O₈ within 22mt at an average grade of 294ppm U₃O₈ at the Oum Ferkik prospect.
• The new estimate is based on a total of 8,031 drillholes totalling 43,543m including 125 holes (748m) of large diameter (PQ size) core drilling.
• At Tiris East, approximately 50% of the resource tonnage and contained U₃O₈ is classified at ‘Measured & Indicated’ with the balance as ‘Inferred’ while all the resource at Oum Ferkik is ‘Inferred’.
• The company explains that the additional resources “were defined from extensions to known mineralisation and exhibit the same characteristics as the current shallow free digging mineralisation that has proven exceptional beneficiation characteristics”.
• Aura Energy confirms that “Mine scheduling and optimisation including a review of the Ore Reserve Estimate will now be undertaken on the enhanced Mineral Resources”.
• Current ore reserves total 40.3mt at an average grade of 254ppm U₃O_8, including Proven Reserves of 19.3mt averaging 257ppm U₃O₈ and Probable Reserves of 21.3mt at an average grade of 251ppm U₃O_8.
• Managing Director, Andrew Grove, confirmed the Board’s belief that “the very significant increase in Mineral Resources resulting from the successful drilling campaign will have a materially positive impact on Tiris’ economics and has been delivered at a very low discovery cost of US$0.14/lb”.
• He also said that the “increased Mineral Resource inventory will further support the funding and development of the Tiris Uranium Project in the near future”.

Conclusion: A substantial increase in the mineral resource estimate for the Tiris uranium project is likely to be reflected in a re-evaluation of the project’s ore reserve currently underway and may also eventually feed into a revision of the appropriate scale of the operation currently designed to produce 2mlbs/year of U₃O₈ over a 17 year mine life.

*SP Angel acts as Nomad and Broker to Aura Energy

Empire Metals* (EEE LN) 11.75p, Mkt Cap £70m – Empire estimates new exploration target for focus areas at Pitfield titanium prospect in Western Australia

(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 report a new JORC Exploration Target on the Cosgrove and Thomas focus areas within the Pitfield Titanium project in Western Australia.
• A JORC exploration target is defined as:
  • ‘a statement or estimate of the exploration potential of a mineral deposit in a defined geological setting where the statement or estimate,…
  • relates to mineralisation for which there has been insufficient exploration to estimate Mineral Resources’. 
  • …all disclosures of an Exploration Target should clarify whether the target is based on actual exploration results completed or on proposed exploration programmes yet to commence, implying that Exploration Targets can be both conceptual or advanced.’
• The Exploration Target for the Pitfield Project has been compiled by Mr Andrew Faragher, an employee of Eclipse Exploration Pty Ltd, a wholly owned subsidiary of Empire Metals.
  • Mr Faragher is a Member of the Australian Institute of Mining and Metallurgy and is reported to have sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’.
• The total Exploration Target, covering the Thomas and Cosgrove mineral prospects, is estimated to contain between 26.4 – 32.2bnt grading 4.5-5.5% TiO2* and extends to just 150m with a 2% TiO2 cut-off grade..
• The estimate includes weathered sandstone material from surface 30-40m depth. This is estimated to contain 4.0-4.9bnt grading 4.8-5.9% TiO2*.
• The estimate covers <20% of the total mineralised system seen at Pitfield highlighting the huge scale of the potential resource where the magnetic anomaly has been mapped to 40-8km by 5km deep.
  • *The potential quantity and grade of the Exploration Target is conceptual in nature. There has been insufficient exploration to estimate a Mineral Resource and it is uncertain if further exploration will result in the estimation of a Mineral Resource.
  • Snowden Optiro, a leading Australian based, mineral resources consulting and advisory group, completed the QA/QC and geological modelling required in order to develop the JORC Exploration Target for the Cosgrove and Thomas mineral prospects;
• Other areas of high-grade titanium mineralisation have also been identified by the Empire team outside the two key prospects with potential to expand the JORC exploration target going forward.
  • The Exploration Target incorporates all the titanium mineralisation hosted within the interbedded succession of sandstones, siltstones and conglomerates as defined by the existing wide spaced diamond core and Reverse Circulation (‘RC’) drilling, that is backed up by geophysical surveys, surface mapping and soil and rock chip sampling.
• The team have used assay results from:
  • 7 diamond core drill holes overing 2,025m;
  • 101 Reverse Circulation (RC) drill holes completed for 15,010m;
  • 8,390 drill hole assay results;
  • 16 density measurements on diamond drill core;
  • 339 surface rock chip sampling assay results;
  • detailed surface geological mapping and diamond core geological logging;
  • geophysical datasets including detailed airborne magnetics, airborne electromagnetics and airborne gravity surveys;
  • 17.35 line kilometres of Dipole-Dipole Induced Polarisation ground surveys: and
  • wireframing and 3D modelling of the Cosgrove and Thomas prospects mineralised orebody.

Conclusion:  The Empire team have defined a huge mineralised exploration target at  Cosgrove and Thomas. This is hugely significant as more work will need to be done to establish the potential economic value of the rutile and anatase contained in near surface, weathered zone. We look forward to further information on the proportion of rutile in the exploration targets. We also look forward to further information on the potential value and processing of the titanium in anatase mineralisation. Anatase-rich ores with 25–35wt% TiO2 can be upgraded to >90wt% TiO2 but are not currently mined due to processing issues.

*SP Angel acts as nomad and broker to Empire Metals. Partners of SP Angel hold shares in Empire Metals

Great Southern Copper (GSCU LN) 1.65p, Mkt Cap £6.2m – Option to expand the Especularita project area in Chile

• Great Southern Copper reports that it has secured a binding purchase option to acquire additional concessions covering 1,665 hectares at its Especularita project in Chile.
• The new exploration ground, known as the Artemisa concessions, extend the company’s prospective IRGS (intrusion related gold system) Victoria prospect “2km to the west and 1.5km south with abundant artisanal mining and high-grade Cu-Au in rock chip samples up to 3.5% Cu and 0.5g/t Au”.
• They also extend the “Lipa lithocap-porphyry Cu-Au target 2km to the west with evidence of artisanal mining of hydrothermal breccia with grades up to 0.6% Cu” and add “two new breccia-porphyry Cu-Au targets at Breccia Amarilla and Viuda”.
• The company confirms that it has started permit applications to drill “at Lipa, Victoria, Aurelia, Viuda and Breccia Amarilla, with a view to drilling as soon as possible”.
• Great Southern Copper has also “extended its due diligence period for the Cerro Negro prospect … [located southeast of the Victoria prospect] … acquisition due to the high volume of geological fact-checking involved”.
• Chief Executive, Sam Garrett, welcomed the purchase of the Artemisa concessions and confirmed that the company looks forward “to commencing exploration activity immediately”.

Conclusion: Expansion of the Especularita project area should provide additional exploration targets.  We look forward to further news as exploration advances.

Great Western Mining* (GWMO LN) 0.04p, Mkt Cap £2.5m – Progress on permitting in Nevada

1. Yesterday afternoon, Great Western Mining reported that the Nevada Department of Environmental Protection had “published a Notice of Planned Action … to allow the operation of a gravity separation plant for production of precious metals by Western Milling … [including] … a draft Water Pollution Control Permit and finalisation of the permit is now subject only to a regulatory 30-day public consultation”.
2. The company says that following the consultation period, it “will be able to commission the plant and commence operations”.
3. Executive Chairman, Brian Hall, explained that “Initially the mill will be able to process approximately 35 tonnes per day but has the capacity to be expanded at minimal cost to 200 tonnes/day, once operating parameters have been established”.
4. Hea said that “In the first phase, material will be processed through the gravity circuit but the plant has been built to meet the specifications required for a second phase chemical leaching project, for which a permit application will be lodged once gravity processing is operational”.

Conclusion: Initial gravity processing of stockpiled ore, historic mine tailings and shallow ore is coming closer following progress with environmental permitting in Nevada

*SP Angel act as Broker to Great Western Mining, an SP Angel Analyst has visited Great Western’s Nevada claim blocks.

Sovereign Metals* (SVML LN) 31.07p, Mkt Cap £177m – Trial mining and pilot plant update

(Sovereign currently holds 100% of the Kasiya project. The government has a right to a 10% free carry in the project. Rio Tinto acquired an initial strategic interest of 15% for a $40.6m with an option to increase it to 19.99% within 12 months from 17 July 2023)

STRONG BUY – Valuation 55p

• Sovereign Metals are busy digging pits and preparing the trial mining site at the Kasiya rutile and graphite project in Malawi.
• Pictures in today’s press release show rapid progress in the development of the site.
• The main test pit will be 120 x 110m down to 20m for the hydro mining trial.
• The free-dig nature of the soft saprolite ore confirms it’s easy to dry mine the surface material no drilling or blasting required
• The team are also developing a water storage pond for the hydro-mining and an ore stockpile for pilot plant processing
• Water will come from eight boreholes with tankers being used to fill the storage pond.
• A series of tests will be done to confirm the optimal process for land rehabilitation.
• Four excavators and 20 trucks are being used and are currently moving around 5,000m3 a day.
• Rehabilitation: the team will prepare eight small rehabilitation demonstration pits over 100 x 130m for water storage, excavated material storage, and demonstration of multiple rehabilitation methods.
• Rutile prices remain at $1,420-1,462/t for TiO2 95%. Ilmenite grading 46% TiO2 sells for around $319-326/t Ex-VAT EXW China.

*SP Angel act as Nomad and broker to Sovereign Metals. The analyst has recently visited the Kasiya mine site with no ill effects in this site visit.

Tungsten West (TUN LN) – 5.5p, Mkt cap £8.0m – Environment Agency approves plant operating permit at Hemerdon

• Tungsten West has announced that the Environment Agency has approved the operating permit for the processing plant at its Hemerdon tungsten mine where the company is working on a resumption of operations.
• Under the previous operator, issues relating to low-frequency sound from the Hemerdon plant were experienced and Environment Agency approval “is the last of the key permits required to further progress the Project”.
• The company confirms that it is continuing feasibility work on a 3.5mtpa throughput operation at Hemerdon with a focus on “optimising the capital expenditure required to restart operations and the resultant operating costs” and that it expects the feasibility study to be completed during H2 2024.
• Welcoming the approval of the permit as “another significant step in derisking the recommencement of production at Hemerdon”, Alastair Scobie, CFO and Interim CEO, said that it “allows the Company to progress its financing discussions and fast track its updated Feasibility Study, with the aim of restarting operations in 2026”.
• We regard the Hemerdon deposit as one of the western-world’s larger sources of tungsten and a successful resumption of production at Hemerdon will be welcomed by western-world consumers of the commodity in a market dominated by China.

Conclusion: Approval to operate the processing plant removes the last regulatory hurdle for a resumption of production at Hemerdon. We look forward to the conclusions of the feasibility study later this year to gain further insight into Tungsten West’s plans to restart the mine.

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

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

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

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

Analysts

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

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

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

Sales

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

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

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

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

SP Angel                                                            

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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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