SP Angel Morning View -Today’s Market View, Wednesday 18th December 2024

Gold steady before FOMC as Hong Kong looks to boost bullion market

MiFID II exempt information – see disclaimer below

Anglesey Mining (AYM LN) – Interim results focus on progress at Parys Mountain

Botswana Diamonds (BOD LN) – Annual results describe exploration in Botswana and South Africa

Guardian Metal Resources (GMET LN) – Progress of due diligence on tungsten prospect in Nevada

Power Metals Resources* (POW LN) – (Power Metals* holds a 45% stake in Guardian Metal Resources)

Metals One (MET1 LN) – Norwegian drilling results

Technology Minerals (TM1 LN) – Black mass offtake agreement with Glencore

Patriot Battery Metals* (PMET CN) – Volkswagen offtake agreement and C$69m investment

Vulcan Energy (VUL AU) – €0.9bn conditional debt commitment

Gold ($2,647/oz) steady before FOMC as Hong Kong looks to boost bullion market

• Gold prices continue to hover below $2,650/oz as market waits for FOMC comments.
• The Fed is approaching a difficult crossroad, with the long-end of the yield curve rising over concerns of sticky inflation and strong labour data.
• The US unemployment rate has been ticking up, however, encouraging additional cuts.
• Powell expected to cut 25bp, however focus will be on his language, with equity markets continuing to grind higher.
• Gold has been pressured by these higher yields and the subsequently higher US dollar, which has hit risen near its two year high again after the hotter PPI data last week.
• Hong Kong is exploring options for boosting its gold market, as Asian trading continues to dominate retail flows.
• Western ETF investors have been selling down gold into the higher US rate environment, however, Hong Kong’s plans to boost its gold market shows rising appetite.

DRC files criminal complaints against Apple over conflict minerals

• Reuters reports that the DRC has filed criminal complaints against Apple in Europe.
• The Congolese government has accused the firm of using conflict minerals in their supply chains.
• Apple disputes the claims.
• The US firm stated it notified its suppliers that their smelters and refiners must suspend tin, tantalum and tungsten and gold sourced from the DRC and Rwanda.
• The Company stated that they ‘were concerned it was no longer possible for independent auditors or industry certification mechanisms to perform the due diligence required to meet their high standards.’

Iron ore eases as steelmaking sentiment continues to fade

• Iron ore prices fell below $104/t in some markets as sentiment continues to call after China’s economic forum last week.
• A Macquarie survey showed 405of iron ore trades were slightly bearish, vs 23% in November.
• Mills in China continue to struggle from weak demand, with the steel market still oversupplied.
• Expanding output from Brazil and Australia has met with a sustained bear market in China property following Xi’s three red line policy in 2021.

Economics

Carmageddon – Profits collapse at key German Automakers

• Audi down 91%
• BMW down 84%.
• Mercedes-Benz, down 54%
• Many of the world’s automotive manufacturers appear close to collapse with Nissan reported to be on the brink of collapse with only 12 months to survive.
• New regulations fining manufacturers if they don’t sell enough Electric Vehicles could simply hasten this demise.
• The situation is playing into the hands of Chinese EV manufacturers many of which do not have legacy ICE engine plants and manufacturing.
• VW’s strike situation could simply accelerate the decline of the business as it works to transition toward EV sales levels demanded by new EU regulations.
• Policymakers in the EU will be faced with a choice, either relax the rules or oversee the redundancy of hundreds of thousands of automotive factory workers.
• Automakers face up to a £15,000 fine for each ICE vehicle sold if they don’t sell 22% of new vehicles as EVs this year and 28% EVs in 2025.
• They are then required to sell 80% of vehicles as EVs by 2030 with a complete ban on ICE engines by 2035.
• We believe Automakers can offset their ICE sales by buying credits off Tesla and other pure EV manufacturers but that’s expensive too.

 PMI data – highlights worsening of Manufacturing PMIs across Europe and the UK

US – Economic data released ahead of the FOMC decision later today presented a mixed picture.

• Retail sales climbed at a firm pace while industrial production unexpectedly declined.
• The Fed 25bp cut to the 4.25-4.50% range is largely priced taking total easing for the year to 1pp.
• Markets are currently expecting two more cuts in 2025.
• Retail Sales (%mom, Nov/Oct/Est): 0.7/0.5 (revised from 0.4)/0.6
• Retail Sales ex Auto and Gas (%mom, Nov/Oct/Est): 0.2/0.2 (revised from 0.1)/0.4
• Retail Sales Control Group (%mom, Nov/Oct/Est): 0.4/-0.1/0.4
• Industrial Production (%mom, Nov/Oct/Est): -0.1/-0.4 (revised from -0.3)/0.3

China – Xinhua News Agency reports that lifting consumption vigorously and stimulating overall domestic demand was the top priority.

• Chinese vehicle sales rose 11.7% yoy in November vs 7% in October
• Total social financing CNY2.340bn in November vs CNY1,400bn in October

Japan – Overseas shipments recorded another increase in November helped by yen’s weakness.

• Exports to the US and Europe continued to slowdown while they increased in China.
• In volume terms, shipments were little changed.
• Exports (%mom, Nov/Oct/Est): 3.8/3.1/2.5
• Imports (%mom, Nov/Oct/Est): -3.8/0.4/0.8

Germany – Business sentiment continued to fall in December driven by slowing growth in major export markets, high borrowing costs and inflation.

• IFO Business Climate (Dec/Nov/Est): 84.7/85.6 (revised from 85.7)/85.5

UK – Inflation accelerated to 2.6% in November, in line with market expectations and up on 2.3% in October, adding to fears that the UK may be entering a period of stagflation.

• Core inflation picked up to 3.5% from 3.3% in October but a little under 3.6% forecast.
• Services sector inflation came in at 5.0% in line with the previous month and ahead of BOE estimate for 4.9%.
• BOE is expected to leave rates unchanged tomorrow with a potential with two rate cuts now forecast for 2025, down from three expected at the start of the week.
• The pound is trading slightly lower this morning.

Poland is selling 1,000t of its strategic butter reserves amid a surge in prices and ahead of May’s presidential elections.

• Shortage of mile is blamed for a rapid inflation in prices driven by declining number of cows and outbreaks of diseases in Europe.
• Butter prices in the EU climbed more than 40% over the course of 2024 with shortages of the dairy product in western Europe sending global prices to record highs in November, FT writes.
• The spread accounts for only 0.6% of the average Polish consumer’s spending but higher prices proved to be a hotly debated political topic.

Zambia Gets $184m from IMF following review of credit facility

• Zambia will immediately receive about $184m IMF following Board approval of the fourth review of an emergency credit facility.

Mining Sector: A Renewed Source of Optimism (The Lusaka Times)

• Zambia’s mining industry is witnessing a resurgence with transformative steps that have revitalized Mopani Copper Mines (MCM), Konkola Copper Mines (KCM), and other operations.
• The paper reports the strategic push will reposition the sector as a cornerstone of economic development and youth empowerment.
• Mopani Copper Mines Revival
• A significant milestone was achieved with the restructuring of Mopani Copper Mines.
• A finalised deal of $1.1 billion investment with Delta Mining Limited (DML) in 2024 ensures DML holds a 51% stake, while ZCCM-IH retains 49%.
• These funds are being allocated to clearing liabilities, supporting capital projects, and stabilizing operations, positioning Mopani for long-term growth.
• This restructuring is strengthening the mine’s operational performance and job creation.
• It aligns with the national vision to boost copper production to 3 million metric tonnes annually, creating thousands of opportunities for skilled and unskilled labor in Zambia’s Copperbelt. Its a huge plus for the youth and our future.
• Konkola Copper Mines Developments
• Konkola Copper Mines, previously embroiled in disputes, is also under renewed focus. The government announced fresh steps to resolve the financial and operational challenges the mine has faced, ensuring it remains viable.
• With KCM historically serving as a key economic driver in the Copperbelt, revitalizing it promises to stabilize jobs and export revenues.
• Investments in Emerging Sites
• In Luanshya, the reopening of Shaft 28 after 20 years of dormancy represents an investment exceeding $1 billion.
• This project is expected to create over 3,000 direct and indirect jobs and sustain local communities in the long term.
• Similarly, activities at Kasenseli Gold Mine, which faced operational halts in past years, are coming back to life as the government pushes for increased gold production within legal and regulatory frameworks.

Currencies

US$1.0494/eur vs 1.0492/eur previous. Yen 153.57/$ vs 154.05/$. SAr 18.081/$ vs 17.944/$. $1.269/gbp vs $1.269/gbp. 0.631/aud vs 0.635/aud. CNY 7.286/$ vs 7.284/$.

Dollar Index 107.01 vs 106.98 previous

Precious metals:         

Gold US$2,647/oz vs US$2,647/oz previous

Gold ETFs 82.6moz vs 82.7moz previous

Platinum US$935/oz vs US$930/oz previous

Palladium US$932/oz vs US$943/oz previous

Silver US$30.4/oz vs US$30.4/oz previous

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

Base metals:   

Copper US$8,985/t vs US$9,021/t previous

Aluminium US$2,535/t vs US$2,540/t previous

Nickel US$15,475/t vs US$15,580/t previous

Zinc US$3,001/t vs US$3,031/t previous

Lead US$1,973/t vs US$2,001/t previous

Tin US$29,055/t vs US$29,110/t previous

Energy:           

Oil US$73.6/bbl vs US$73.6/bbl previous

Henry Hub Gas US$3.32/mmBtu vs US$3.23/mmBtu yesterday

• Crude oil prices were stable as the API estimated a 4.7mb w/w draw (-1.9mb exp) to US crude inventories.
• European energy prices rose as France’s nuclear generation fell 2% w/w to 83% of 61.4MW capacity, with Gazprom reporting a stable gas supply of 42.4mcm/d (~1.5bcf/d) via the Sudzha metering station.
• A study by the US Energy Department found that continued growth in LNG exports could drive up energy costs in America and increase pollution in local communities, as well as increase global greenhouse gas emissions. Five Gulf Coast export terminals are currently under construction that will double export capacity by 2028.
• Ørsted announced the sale for $572m of a 50% equity stake in three onshore US projects to Energy Capital Partners, consisting of over 1GW of solar power generation and a 300MW/1,200MWh battery storage project.
• The EIA’s 3Q24 review of 128 E&Ps mainly headquartered in the US reveals that about 79% of companies had free cash flow and paid out an average ~9% annualised shareholder return even as prices fell y/y by over 10%.

Natural Gas €41.6/MWh vs €40.2/MWh previous

Uranium Futures $74.5/lb vs $75.1/lb previous

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$104.8/t vs US$105.6/t

Chinese steel rebar 25mm US$487.4/t vs US$487.5/t

HCC FOB Australia US$204.5/t vs US$204.5/t

Thermal coal swap Australia FOB US$130.4/t vs US$130.5/t           

Other:  

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

NdPr Rare Earth Oxide (China) US$55,453/t vs US$55,946/t

Lithium carbonate 99% (China) US$10,020/t vs US$10,022/t

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

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

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

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

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

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

China Ilmenite Concentrate TiO2 US$296/t vs US$296/t

China Rutile Concentrate 95% TiO2 US$1,091/t vs US$1,091/t

Spot CO2 Emissions EUA Price US$65.1/t vs US$65.1/t

Brazil Potash CFR Granular Spot US$292.5/t vs US$292.5/t

Germanium China 99.99% US$2,725.0/kg vs US$2,735.0/kg

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

Battery News

Trump Planning to Clamp Down on Chinese EV Supply Chains

• Trump’s transition team is poised to recommend the strengthening of measures blocking cars, components and battery materials from China (Reuters)
• Trump appears poised to make significant changes to Biden’s Inflation Reduction Act, EV transition plan which was trying to stimulate the move to EVs for US automotive manufacturers..
• While the raising of tariffs will hold back a flood of Chinese imports Trump policies may also buy time for US manufacturers to catch up with their Chinese counterparts.
• China has gained significant control and ownership of the EV material supply chain.
• Trump’s transition team is looking to raise tariffs on all battery materials, critical materials and charging components and then negotiate individual exemptions with allies.
• Rebalancing of the supply chain towards the West will require substantial investment in new processing capacity with substantial financial support as seen with Syrah Resources in Louisiana.

Company News

Anglesey Mining (AYM LN) 0.9p, Mkt Cap £4.3m – Interim results focus on progress at Parys Mountain

1. Anglesey Mining reports a loss of ~£0.31m for the six months to 30^th September (2023 – loss ~£0.60m) and a closing cash balance of ~£0.28m.
2. Commenting on progress at the Parys Mountain project on Anglesey, Chairman, Andrew King, highlighted “the assay results from the third and final hole in the Northern Copper Zone (NCZ) drilling program … [which] … intersected both broad zones of mineralisation and multiple higher-grade zones”.
3. He explained that all of the holes in the three-hole programme “delivered some exceptional high-grade copper intersections within broad thicknesses of mineralisation up to 100m wide”.
4. He said that the “results continue to support our view that the NCZ provides significant upside for the Parys Mountain project, over and above the 5 million tonne resource contribution included within the 2021 Preliminary Economic Assessment”.
5. Mr. King also commented on the submission, in July, of the “Parys Mountain Mine Environmental Impact Assessment (EIA) Scoping Report to the North Wales Minerals and Waste Planning Service as part of a formal EIA Scoping Opinion request”.
6. He explained that, in October, responses to the Scoping Report “broadly in line with our expectations” had been received from “each of the statutory and specialist consultees”.
7. Explaining that management will continue to progress Parys Mountain and the Grängesberg iron ore project, Mr King cautioned that “As always, the company’s activities are predicated upon raising funding which, notwithstanding the equity issuances completed during the reporting period, remains extremely challenging in the current market”.

Botswana Diamonds (BOD LN) 0.2p, Mkt Cap £2.7m – Annual results describe exploration in Botswana and South Africa

1. Reporting results for the year to 30^th June 2024, Botswana Diamonds announces a loss of £0.56m (2023 – loss of £3.68m after impairment of exploration properties totalling £3.12m) an a closing cash balance of ~£77,500.
2. In his Statement to Shareholders Chairman, John Teeling, commented on exploration at its KX36 kimberlite project in Botswana where exploration has identified additional “anomalies, of which two are 12 hectares and 6 hectares respectively in size … [and where it has now] … received approvals to drill … 5 holes on these large anomalies”.
3. He also commented on the Maibwe joint-venture located south of KX36 where it holds a 26% interest and where recent analysis using artificial intelligence technology has identified 7 previously undetected kimberlites and the “next steps are to finance and undertake a drilling programme”.
4. Mr. Teeling also commented on progress to resume mining at Marsfontein/Thorny River in South Africa explaining that “Mining started but was put on care and maintenance when diamond prices fell” although exploration interest is maintained with particular interest on the M3 kimberlite on the Marsfontein farm adjacent to Thorny River.
5. Mr. Teeing commented on the “current massive disruption and dislocation in the traditional diamond industry … [which he said] … will pass … [while expressing confidence in Botswana Diamonds having] … a number of very exciting and prospective projects” which await finance.

Conclusion: Botswana Diamonds continues exploration in Botswana and South Africa despite the headwinds faced by the diamond industry

Guardian Metal Resources (GMET LN) 29p, Mkt Cap £35m – Progress of due diligence on tungsten prospect in Nevada

Power Metals Resources* (POW LN) 13p, Mkt cap £15m – (Power Metals* holds a 45% stake in Guardian Metal Resources)

• Guardian Metal Resources reports that its’ ‘due-diligence’ on the former Tempiute tungsten mine located around 240km north of Las Vegas, Nevada, has confirmed the presence of tungsten-bearing skarn mineralisation.
• At the end of October, the company announced that it had secured a 90-day option to acquire the property which ““mined for tungsten, silver and zinc intermittently over the last century, most recently being in operation by United Carbide from 1977 to 1987”.
• Sampling has yielded assays of up to 1.50% tungsten trioxide “with several samples returning assay results consistent with historical records. In addition, high-grade silver (up to 66g/t Ag), molybdenum (up to 1,985ppm Mo), and strongly anomalous zinc (up to 5,510ppm Zn), and copper (up to 0.358% Cu) was recorded”.
• Confirming that environmental due-diligence and the preparation of legal documents is continuing, the company explains that its geological work is concentrating on previously defined “multiple skarn zones, up to 30 m thick and uniformly mineralised over vertical ranges of at least 400 m … [containing] …. Scheelite (tungsten), sphalerite (zinc), molybdenite (molybdenum), chalcopyrite (copper) and galena (lead)”.
• CEO, Oliver Friesen, confirmed that the due diligence process is “progressing well and we look forward to providing our next update in January 2025, with the expectation that, subject to final due diligence, this announcement will be in regard to the signing of the definitive agreement to acquire the Project”.
• He commented on the scarcity of an indigenous source of tungsten in the United States and said that “Guardian Metal is positioned to play a part in the reshoring efforts for tungsten with our flagship Pilot Mountain Project. Subject to the completion of due diligence, the acquisition of Tempiute would represent a significant step change as we look to scale our operations in the mining friendly state of Nevada, with the ultimate goal of helping the U.S. significantly reduce its dependence on foreign sources for this key defence and industrial metal”.
• We have previously commented that our research on data from the USGS indicates that the Tempiute mine (also known as the Emerson mine) produced ~0.5m short tonnes of tungsten ore between 1938 and 1982 making it the 2nd largest producer of the 20 Nevada operations included in the USGS data.

Conclusion: The company’s evaluation of a former tungsten mine in Nevada which may provide Guardian with a second Nevada tungsten project in addition to its Desert Scheelite deposit the Pilot Mountain project area, seems to be progressing well with the CEO indicating that he expects to acquire the Tempiute project.

*SP Angel acts as Nomad and Broker for Power Metals

Metals One (MET1 LN) 0.50p, Mkt Cap £1.45m – Norwegian drilling results

• Metals One reports that drilling of a previously undrilled massive sulphide outcrop located around 600m NW of the Rånbogen outcrop at its 39% owned Råna Ni-Cu-Co Project in Norway has encountered “disseminated to net-textured sulphide mineralisation”.
• The 706m drilling programme across three holes intersected:

• • 26.2m at 0.7% Ni, 0.2% Cu and 0.06% Co from 169.0m in hole 23RAN-002 at Rånbogen; and
  • 15.7m at an average grade of 0.3% Ni, 0.1% Cu, 0.02% Co from 143m in hole 24Ran-010 at Råna which also intersected a second mineralised horizon of 15.8m at an average grade of 0.5% Ni, 0.1% Cu, 0.06% Co from 165.2m; and
  • 13.8m at an average grade of 0.4% Ni, 0.1% Cu, 0.04% Co from 143m in hole 24RAN-009 also at Råna.

• The drilling was conducted by ASX listed Kingrose Mining and Metals One CEO, Jonathon Owen explained that mineralisation at Råna was “associated with an extensive conductive geophysical anomaly”.
• “Exploration has demonstrated nickel-copper-cobalt sulphide mineralising processes have occurred in multiple ‘stacked’ zones throughout the 10km diameter Råna intrusion, indicating a large search-space for future discovery”.
• Mr. Owen confirmed that “we look forward to discussing with our partner the most appropriate next steps for the project which still remains largely underexplored”.

Conclusion: Early drilling in a relatively underexplored region of Norway has intersected nickel/copper/cobalt bearing massive sulphide type mineralisation. We look forward to news on future exploration plans.

Technology Minerals (TM1 LN) 0.26p, Mkt Cap £4.6m – Black mass offtake agreement with Glencore

• Technology Minerals announced yesterday it had signed a black mass offtake agreement with Glencore and its 48.35% subsidiary Recyclus.
• Recyclus will supply black mass to Glencore from its lithium-ion facility in Wolverhampton, starting with a 100t trial.
• Black mass contains battery materials such as lithium, manganese, nickel and cobalt.
• The technology aims to recycle end-of-life batteries back into black mass.
• Recyclus had previously signed agreements with LOHUM, an Indian metal producer but delays to the start of sales were triggered by regulatory clearances.

Patriot Battery Metals* (PMET CN) C$2.65, Mkt Cap C$375m – Volkswagen offtake agreement and C$69m investment

• Patriot announced this morning that Volkswagen Group’s PowerCo has invested C$69m to acquire 9.9% of Patriot’s issued and outstanding common shares.
• The Company will subscribe at C$4.42/shr, a 35% premium to the 90d VWAP.
• The Binding Offtake Agreement will see VW’s integrated battery manufacturer, PowerCo, receive 100ktpa of SC5.5 from Patriot’s Shaakichiuwaanaan over 10 years.
• Pricing under the offtake is ‘linked to reported indices for lithium chemicals and spodumene using modifying factors against the indices to derive an adjusted long-term contracted price.’
• The Offtake is subject to conditions regarding the PFS and an FID by 30^th June 2031.
• The volume reflects 25% of Stage 1 production and 12.5% of combined Stage 1 and 2 production.
• PowerCo is planning a battery cell factory in St Thomas, Canada, producing 90GWh.
• Patriot has also signed a MoU for an ‘ongoing strategic relationship between PowerCo and Patriot to jointly explore and collaborate on shared strategic objects.’
• This will include the potential for a chemical conversion facility and opportunities for the development of Shaakichiuwaanaan.
• VW may contribute additional financing to support the construction of Shaakichiuwaanaan following the feasibility study, in return for additional offtake.

*An SP Angel analyst holds shares in Patriot Battery Metals

Vulcan Energy (VUL AU) A$5.9, Mkt Cap A$1.1bn – €0.9bn conditional debt commitment

• The Company secured €879m in conditional commitments from Export Finance Australia and seven commercial banks.
• The team is looking for additional approvals from Export Development Canada, Bpifrance AE and SACE to complete planned debt share (€1.5-1.6bn) for total project development capex (€2.2bn).
• Commitments are conditional at this stage on completion of due diligence, final credit committees and boards approvals, execution of the full form legal documentation among other things.
• Final funding term sheets are expected to be signed 1H25.

 LSE Group Starmine awards for Q3 commodity forecasting:

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

No.2 in Base Metals: SP Angel mining team awarded No 2. ranking for Base Metals forecasting in LSEG Quarterly Starmine Award for Reuters Polls Q3 2024

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

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

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

Analysts

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

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

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

Arthur Parish – Arthur.Parish@spangel.co.uk – 0203 470 0476

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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