SP Angel Morning View -Today’s Market View, Wednesday 14th August 2024

Gold prices push towards record highs on softer US PPI ahead of US CPI data today

MiFID II exempt information – see disclaimer below

Amaroq Minerals (AMRQ LN) – Quarterly results as gold production target retained for this year

Atalaya Mining (ATYM LN) – Expecting to build on s strong H1 performance as grades improve during H2

Predictive Discovery (PDI AU) – Strategic investment from Perseus Mining

SolGold* (SOLG LN) – Building the operational team at Cascabel

Thor Energy (THR LN) – Molyhil JV agreement

Versarien* (VRS LN) – New contract for Versarien input into 3D construction printing for 46 homes at Accrington, Lancashire

Gold ($2,475/oz) pushes on as US PPI comes in soft and market looks to today’s CPI

• Gold prices are spiking this morning, touching $2,478/oz, nearing recent record highs of $2,484/oz.
• US Treasuries rallied yesterday, with yields sliding to 3.86% for the 10 year.
• Yields remain above recent lows of 3.66% for the 10 year, which was triggered by US recession concerns and safe haven demand amid a wider market sell off.
• The dollar index has been weakening, down to 102.6 from March ytd highs of 106.
• Focus turns to today’s CPI data from the US, which will be key for gold over the short term, alongside tomorrow’s retails sales data.
• The Fed’s annual summit, Jackson Hole, is approaching next week, with the labour market strength set to be a key focus.
• Economists are debating over whether the US has entered a recession or not, with concerns mounting that the Fed has waited too long before cutting rates.
• The market currently estimates a 50% chance of a 50bp rate cut in September, having been near 100% chance last week.

Iron ore slides as major Chinese steelmaker rings alarm bells

• 62% Fe China iron ore prices have fallen below $100/t, with the Mysteel index hitting $98/t.
• Major Chinese steel producer, Baowu, has warned of a ‘severe winter’ in the sector, stating that current market dynamics will be ‘more difficult to endure than we expected.’
• Baowu produces over 7% of global steel supply.
• Iron ore port inventory in China continues to build, with steelmakers suffering weak margins and dumping stock in advance of new regulations next month.

EV battery pack costs to fall further 55% to 2030

• The average cost of lithium-ion battery packs is expected to fall an further 55% 2030 following a significant 90% fall from 2008 to 2023 (US Department of Energy).
• In 2023, battery prices averaged $139/kWh, a significant decline from $1,415/kWh average in 2008 (e-vehicleinfo.com).
• Other sources see Li-ion prices falling below $100/kWh though total pack prices remain higher due to the extra cost of the housing and related electronics.
• While battery prices have fluctuated due to external factors like the COVID-19 pandemic, the overall trend remains downward.
• Tesla’s efforts to further reduce costs with its 4680 cells have not yet achieved the desired savings, but future projections remain optimistic.
• Battery costs are forecast to fall a further 40% to ~$80/kWh by 2025 with total pack prices of around $84/kWh and then onto $62/kWh (total pack $68/kWh) by 2030 according to data from Wood Mackenziem SNE, BNEF and others.
• We suspect greater gains will be made due to improved battery chemistry increasing battery capacity on a per cell basis.

Economics

US – Raphael Bostic, Atlanta Fed President and a voting FOMC member, pushed back against the notion for an early cut, reiterating his stance for a possible cut “by the end of the year”.

• Bostic said that “a little more data” is needed to support a rate cut adding that “it would be really bad if we started cutting rates and then had to turn around and raise them again”.
• A separate report released yesterday showed both headline and core producer prices measures slowed down in July.
• CPI report is due later today.
• PPI (%mom, Jul/Jun/Est): 0.1/0.2/0.2
• PPI ex Food and Energy (%mom, Jul/Jun/Est): 0.0/0.3(revised from 0.1)/0.2
• PPI (%yoy, Jul/Jun/Est): 2.2/2.7(revised from 2.6)/2.3
• PPI ex Food and Energy (%yoy, Jul/Jun/Est): 2.4/3.0/2.6

Japan – Fumio Kishida, PM, will be stepping down as leader of the ruling Liberal democratic Party in September ending three year premiership.

• PM will not seek re-election at next month’s leadership election amid low approval ratings and a funding scandal that forced him to fire four cabinet ministers last year, according to FT.

UK – The pound is trading lower this morning on the back of lower than expected inflation in July.

• The currency gained strongly on Tuesday on labour numbers that showed the market may be tighter than previously thought.
• CPI (%mom, Jul/Jun/Est): -0.2/0.1/-0.1
• CPI (%yoy, Jul/Jun/Est): 2.2/2.0/2.3
• Core CPI (%yoy, Jul/Jun/Est): 3.3/3.5/3.4

Zambia – The government is to reopen the border crossing with the DRC following a short lived dispute.

• The two governments signed a communique that will allow Zambian products to enter Congo without restrictions.
• The DRC decision to ban imports of beer, soft drinks and lime last week led Zambia to close its borders for DRC exports through Zambia.
• Almost all of Congo’s copper production (>2.8mt in 2023) typically travels through Zambia to regional ports of Tanzania, South Africa and Namibia, Bloomberg writes.

Iran is not expected to retaliate should Israel agree to a ceasefire deal on Thursday, President Biden said.

• Avoiding an escalation and agreeing a ceasefire between Hamas and Israel would be a significant diplomatic win for the current US administration.

Argentina – Generators looks at transmission lines into North to supply future lithium production

• Central Puerto, YPF Luz and Genneia are all looking at the potential to build transmission lines and new capacity to feed into plans for new lithium production into the North of Argentina.
• Central Puerto expects to complete construction of its 15MW Salta province solar farm in San Carlos next year at a cost of US$15m and is also working on a US$150m combined-cycle conversion project at the 292MW Santa Fe province thermoelectric power station Brigadier López, work that will increase capacity to 432MW which is due in October 2025.

Germany – Arrest warrant issued for Ukrainian diver over Nord Stream pipeline explosion

• The German authorities believe the diver was part of a team that sabotaged the pipeline.
• There is no info on who the diver may have been acting for.

Russia – Russia bought 478,000 Chinese EVs in the first seven months of this year according to new data

Currencies

US$1.1003/eur vs 1.0928/eur previous. Yen 147.20/$ vs 147.80/$. SAr 18.108/$ vs 18.226/$. $1.284/gbp vs $1.280/gbp. 0.664/aud vs 0.660/aud. CNY 7.148/$ vs 7.174/$.

Dollar Index 102.63 vs 103.17 previous

Precious metals:         

Gold US$2,475/oz vs US$2,464/oz previous

Gold ETFs 82.3moz vs 82.2moz previous

Platinum US$936/oz vs US$941/oz previous

Palladium US$952/oz vs US$920/oz previous

Silver US$27.90/oz vs US$27.79/oz previous

Rhodium US$4,725/oz vs US$4,725/oz previous

Base metals:   

Copper US$ 8,986/t vs US$8,967/t previous

Aluminium US$ 2,348/t vs US$2,300/t previous

Nickel US$ 16,280/t vs US$16,200/t previous

Zinc US$ 2,712/t vs US$2,727/t previous

Lead US$ 1,990/t vs US$2,022/t previous

Tin US$ 31,550/t vs US$31,125/t previous

Energy:           

Oil US$81.1/bbl vs US$81.9/bbl previous

• Crude oil prices edged lower despite the API reporting a 5.2mb w/w draw to US crude stocks (+2mb exp).
• European energy prices were stable with French nuclear reactor operating levels falling 3% w/w to 67% of 61.4MW capacity and Gazprom reporting supply back up to 42.4mcm/d (~1.5bcf/d) via the Ukraine.
• Vestas Wind systems narrowed guidance on FY24 revenues to €16.5bn-17.5bn (from 16bn-18bn) and EBIT margin before special items to 4-5% (from 4-6%) due to adjustments to planned costs in the service segment.

Natural Gas €39.7/MWh vs €39.2/MWh previous

Uranium Futures $81.5/lb vs $81.4/lb previous

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$99.0/t vs US$99.2/t

Chinese steel rebar 25mm US$489.3/t vs US$491.1/t

Thermal coal (1st year forward cif ARA) US$128.8/t vs US$128.8/t

Thermal coal swap Australia FOB US$152.5/t vs US$152.5/t

Coking coal Dalian Exchange futures price US$184/t vs US$186.4/t

Other:  

Cobalt LME 3m US$26,500/t vs US$26,500/t

NdPr Rare Earth Oxide (China) US$53,024/t vs US$52,133/t

Lithium carbonate 99% (China) US$10,143/t vs US$10,106/t

China Spodumene Li2O 6%min CIF US$860/t vs US$870/t

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

China Tungsten APT 88.5% FOB US$327/mtu vs US$327/mtu

China Graphite Flake -194 FOB US$462/t vs US$462/t

Europe Vanadium Pentoxide 98% 4.7/lb vs US$4.7/lb

Europe Ferro-Vanadium 80% 25.2/kg vs US$25.2/kg

China Ilmenite Concentrate TiO2 US$321/t vs US$320/t

China Rutile Concentrate 95% TiO2 US$1,406/t vs US$1,401/t

Spot CO2 Emissions EUA Price US$69.9/t vs US$69.9/t

Brazil Potash CFR Granular Spot US$295.0/t vs US$295.0/t

Germanium China 99.99% US$2,145/kg vs US$2,145/kg

China Gallium 99.99% US$440/kg vs US$440/kg

Battery News

DOE Invests $43m to boost Advanced Battery Research

• The US Department of Energy has committed to investing $43m in projects aimed at advancing battery technology for EVs
• The funding will support innovations in cost-effective battery production, safety improvements, and strengthening the domestic supply chain.
• This initiative aligns with the US goal of eliminating transportation emissions by 2050 and includes research on new battery materials and manufacturing methods.
• Applications for grants are open until October 2024, with funding expected to be distributed between March and June 2025.

China’s auto sales decline, but EV exports surge

• China’s auto sales fell by 5% in July compared to the previous year, with 2m passenger cars sold.
• Domestic sales dropped 10% to 1.6m cars, while exports jumped by over 20% to 399,000 units.
• EV sales surged by 30% yoy, with 991,000 units sold, including 103,000 exported.
• Chinese brands captured two-thirds of the market, benefiting from intense price competition that affected foreign brands.
• Companies like BYD and Tesla are rapidly increasing exports, although traditional automakers like Chery and Geely still lead.
• Russia, Mexico, and Brazil were the top importers of Chinese autos, with Russia receiving the most at 478,000 units in the first seven months of this year.

BYD sees record EV sales but yet to see impact of Europe and Canada tariffs

• BYD set a new sales record in July 2024, selling 342,383 new energy vehicles, a 30% increase from the previous year.
• BYD faces potential tariffs in Canada and Europe, which could impact its expansion plans in these markets.
• The Canadian government is considering tariffs on Chinese EVs, supported by local industry leaders like General Motors Canada, to protect domestic automakers from competition.
• Europe has already implemented tariffs up to 38% on Chinese EVs, with further measures under consideration. China has responded by filing a complaint with the WTO.
• Despite these challenges, BYD continues its global expansion, including plans to enter the Pakistani market.

Korean researchers unveil first universal design principles for safe solid-state batteries

• A team of Korean scientists has made a major breakthrough in battery technology by creating the first universal design principles for solid-state batteries.
• Until now, developing solid-state batteries largely depended on trial and error, with researchers combining materials and adjusting designs based on experience rather than standardised guidelines.
• To address the lack of standard guidelines, the Korean research team introduced several key design principles for solid-state batteries:
  • Balance threshold – refers to the ideal ratio of active materials and solid electrolytes in the battery.
  • Percolation threshold – is the minimum density needed for the battery’s materials to maintain contact and allow the flow of lithium ions, which is essential for the battery to function.
  • Loading threshold – helps determine the best thickness for the battery’s electrodes, ensuring that the battery can operate efficiently without significant voltage drops.
• Using these principles, the research team successfully built a solid-state battery pouch cell with an impressive energy density of 310Wh/kg – higher than most commercial lithium-ion batteries.

Indian Navy finish trials for Fuel-Cell and Lithium-ion battery submarines

• German submarine-builder ThyssenKrupp and its Indian partner Mazagaon Dockyard Ltd. have come out on top of the field trials conducted by the Indian Navy for the construction of six submarines with Fuel Cell Air-Independent Propulsion (AIP) technology combined with Lithium-ion battery.
• ThyssenKrupp is currently the only company with sea-proven AIP systems, with its 214-class submarine currently operated in Greece, Portugal, Turkey and South Korea.
• Fuel Cell Air-Independent Propulsion (AIP) technology combined with a Lithium-ion battery gives the submarines the capability to lurk in the ocean depths for a longer duration and, when required, race to their target at high speeds while not giving up their position.

China fuels African lithium boom to secure future battery supplies

• Africa’s share of global lithium supply has risen to 11% in 2023, with projections to exceed 14% by 2028, driven by Chinese investment (Bloomberg).
• Despite falling prices, Chinese firms are heavily investing in African lithium to secure future supplies.
• Zimbabwe leads African production, with major Chinese-backed projects also in Mali, Namibia, and Nigeria.

Company News

Amaroq Minerals (AMRQ LN) 61p, Mkt Cap £195m – Quarterly results as gold production target retained for this year

• Amaroq, which is developing the Nalunaq gold project in Greenland, reports quarterly results.
• The Company received its EIA and social impact assessment in June, and is now working on the Impact Benefit Agreement, expected to be in place by year end.
• Contract package procurement is 92% complete, with remaining contracts expected to be concluded in 3Q24.
• Phase one process plant design and engineering 96% complete at quarter end, with engineering for phase two expected to be complete by 3Q24 end.
• The Company has completed 100% of plant pad earthworks and civil construction.
• 68% of crushing circuit mechanical installation complete, with Amaroq now beginning civil foundations of the stockpile reclaimer, stacker conveyor and retaining walls.
• Process plant construction now 56% complete.
• Mine development ramp has hit 732m worth, with first ore blasted on June 30^th.
• Drilling from surface for exploration is progressing, targeting the ‘Target Block.’
• First gold expected 4Q24.
• C$62.2m in cash, undrawn credit facilities and revolving credit overrun facility, down from C$96.3m the previous quarter.
• Cash on hand of C$32m vs C$65m
• Company has secured a US$35m revolving credit facility HoT agreement with Landsbankinn post-period.

Atalaya Mining (ATYM LN) 343.5p, Mkt Cap £479m – Expecting to build on s strong H1 performance as grades improve during H2

• In its Q2 and H1 2024 results announcement Atalaya Mining reports quarterly profits of €14.5m lifting H2 profit to €16.1m (Q2 2023 – €9.2m and H2 €20.3m) reflecting strong copper prices and the impact of cost control measures.
• EBITDA of €26.4m in the quarter (2023 – €15.7m) bring the six months result to €36.7m (2023 – €40.1m).
• The company has declared an interim dividend of US$0.04/share (2023 US$0.05/share).
• The results reflect the processing of 7.8mt of ore at an average grade of 0.33% copper during the six months to produce 113kt of copper concentrate (2013 – 7.8mt at a grade of 0.39% copper to produce ~126kt of concentrate).
• Production costs of US$2.93/lb on a cash basis and US$3.19/lb on an all-in-sustaining basis (2023 – US$2.73/lb and US$3.00/lb respectively) are likely to benefit from the start of solar power generation from the new 50MW plant which is expected in “late 2024 … [and ] … Once fully operational … is expected to provide approximately 22% of Riotinto’s current electricity needs”.
• The company maintains its upgraded copper production guidance for 2024 at 45-50,000t of contained copper (previously 51-53,000t).
• “Cash cost and AISC guidance continues to be $2.80 – 3.00/lb and $3.00 – 3.20/lb copper payable… [excluding] … one-off investments in the tailings dam and ongoing waste stripping at the San Dionisio area”.
• CEO, Alberto Lavandeira, explained that during the quarter “Copper grades were lower than in comparable periods, but we expect to see an improvement in grades and strong plant performance in H2 2024”.
• He also highlighted continuing progress “at our higher grade deposits in the Riotinto District. Waste stripping and permitting activities at San Dionisio are advancing in line with plans and we continue to prepare for the development of an access ramp at Masa Valverde”.
• “At San Antonio, preparations are underway to begin an infill and step-out drilling programme”.
• These developments progress Atalaya Mining’s strategy to substitute higher grade ore from the San Dionisio deposit for ore from the Cerro Colorado deposit maximising the 15mtpa nominal processing capacity of the plant at Riotinto.

Conclusion: Atalaya Mining is looking for improving grades from its Riotinto operations during H2 2024 and continues to advance its strategy to substitute higher grade ore feed from satellite deposits for part of the current Cerro Colorado ore in order to maximise the capacity of the plant.

Predictive Discovery (PDI AU) A$0.2, Mkt Cap A$454m – Strategic investment from Perseus Mining

• Perseus reports a strategic investment into Predictive.
• The Company has acquired a 13.82% stake in Predictive’s equity.
• Perseus acquired A$47.3m shares worth of Predictive from Capital Limited.
• Perseus also holds a 3.45% interest via cash settled equity swaps.
• The Company states it has no ‘current intention to acquire or control or make a takeover offer for Predictive.’
• Predictive holds the Bankan Gold Project in Guinea.
• Bankan holds reserves of 57.7mt at 1.64g/t Au for 3.05moz.
• The Company reported a recent PFS showing an NPV5 of US$670m at $1,800/oz Au, rising to US$1.4bn at $2,300/oz.
• Bankan is expected to produce 270koz over a 12 year LOM.
• The deposit is split between 2,300koz Au in open pit at 1.42g/t and 740koz underground at 3.24g/t in reserves.
• Perseus recently acquired OreCorp’s Nyanzaga gold project in Tanzania and is aiming first production for 1Q27.
• Perseus held US$587m in cash as of June 30^th.

SolGold* (SOLG LN) 10.1p, Mkt Cap £307m – Building the operational team at Cascabel

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• SolGold has provided a progress report on its Cacabel project in Ecuador.
• Today’s announcement confirms progress on geotechnical work to aid site selection “for future infrastructure at Cascabel, including the process plant, tailings storage facility (TSF), camp, waste dumps, and surface workshops” as well as building its project execution team and securing permits for underground exploration and for the “mine’s future portal and declines”.
• Solgold confirms that it has already made several appointments and that it aims for all the key project expertise “in various fields such as Mining (Block Caving, Sublevel Caving, and Open Pit mining), TSF, Logistics, Infrastructure, Civil, Geology, Metallurgy, Process Plant, Environmental Management and Permitting, Scheduling and Cost Control, and Offtake Marketing” to be in place “early Q4 calendar 2024”.
• The company is also reviewing the provision of additional expertise to help mitigate project development risks through the appointment of “various independent consultants”.
• The company published its pre-feasibility study for the project in March and in July announced that it had secured a US$750m gold-streaming agreement with Franco Nevada and Osisko.

Conclusion: The gold-streaming agreement provided a phased release of funds with US$33.4m available since July.  It appears that Solgold is now deploying these resources to establish the project development and execution capacity to move the project ahead.  We look forward to further news as the process accelerates.

*SP Angel acts as broker to Solgold

Thor Energy (THR LN) 0.85p, Mkt Cap £3.2m – Molyhil JV agreement

• Thor Energy has formed a joint venture with ASX listed Investigator Resources to progress the Molyhil tungsten/molybdenum deposit located around 230km northeast of Alice Springs in the Northern Territory.
• The agreement provides Investigator Resources an initial 25% interest in the project following its completion of A$1m of spending on the property which led to the increased mineral resource estimate of 4.65mt (up ~6%) at an average grade of 0.26% tungsten trioxide (around 4% lower than the previous estimate) and 0.09% molybdenum which was announced in May.
• Investigator Resources (operating as FRAM), “will now issue Thor A$250,000 worth of IVR shares upon the formalisation of Fram’s 25% JV interest … [and] … Fram can opt to continue to earn up to 80% interest by spending up to, a further $7,000,000 on the Tenements via a three-stage process”.
• Explaining that the increased mineral resource estimate “is underpinning feasibility work at Molyhil”, Managing Director, Nicole Galloway-Warland, explained that “The Molyhil divestment and Bonya sale (EL29701) will support the Company’s focus on its priority US uranium assets”.
• Earlier this week, Thor Energy announced that it had secured approval to drill at its Wedding Bell and Radium Mountain exploration projects in southwest Colorado.
• In an announcement to the ASX, Investigator Resources’ Managing Director, Andrew McIlwain, noted that “The Northern Territory Government will provide continued support of the project through co-funding of the drill program planned for later in 2024 to follow up on targets generated from their cofunded geophysics survey in 2023 … [and said that Investigator Resources is] … keen to commence that drill program around Molyhil once clearances have been obtained from the Central Land Council”.

Conclusion: The JV at Molyhil frees Thor Energy to pursue its US exploration agenda while providing Investigator Resources a pathway to move towards an 80% interest in Molyhil from a current 25% level. We await developments with interest.

Versarien* (VRS LN) 0.076p, Mkt Cap £1.8m – New contract for Versarien input into 3D construction printing for 46 homes at Accrington, Lancashire

• Versarien report the signing of a contract with Building For Humanity for their input into the 3D construction printing for 46 homes at Accrington, Lancashire.
• The initial £200,000 contract is for technical input into the 3DCP ‘3D construction printing’ process in the project from design to construction for 46 homes, for one of five blocks with associated infrastructure and a community hub.
• The project is similar to Versarien’s involvement in the headwall built with National Highways.
• Versarien recently raised £550,000 at 0.065p/s for the purchase of Versarien’s own mortar and concrete testing systems for monitoring mechanical and durability properties.
• This will support development of Versarien’s Cementene^TM admixtures and novel 3DCP mortars.
• Versarien has also said it is at an advanced stage in talks for the sale of the AAC Cyroma plastics business.

Conclusion:  Versarien is making good progress in its work with the construction industry and while there is no graphene being used in this 3D construction printing process, we believe it will eventually lead to the incorporation of new materials. Today’s news shows further positive progress in Versarien’s turnaround strategy.

*SP Angel acts as Nomad and Broker to Versarien

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

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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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