SP Angel Morning View -Today’s Market View, Wednesday 21st February 2024

US DLA to compete with China SRB on refilling stockpiles of cobalt and critical metals

MiFID II exempt information – see disclaimer below

First Au Ltd (FAU AU) – Acquisition of lithium-prospective licences in Ghana

Glencore (GLEN LN) – Mine disruption and demand growth in China  identified as a key factors in 2023 performance while marketing delivers above average performance

Ionic Rare Earths (IXR AU) – Drilling results from Makuutu infill programme

Lucara Diamonds (LUC CN) – Lucara reports a loss of US$20.2m (2022 – profit of US$40.4m), including a US$11.2m impairment charge reflecting the expected fair value of its ‘Clara’ sales platform.

Midnight Sun (MMA AU) – KoBold earn-in to accelerate Dumbwa target in Zambia

Perseus Mining (PRU AU) – Cooperation agreement with a Saudi Arabia based partner

Power Metal Resources* (POW LN) – Annual results show continued progress across assets

Rio Tinto (RIO LN) ––2023 delivers resilient financial performance and steady improvement in operations as Gladstone signs up for Australia’s largest renewable power deal

Zinnwald Lithium (ZNWD LN) – MRE update

Tin – Indonesia ships just 400t of tin in January

• Exports fell 12% to 75,000t in 2023 representing around 20% of global demand. (Reuters)
• A change in the permitting process from one to every three years along with a rush to permit new nickel mines has led to a backlog in permits for tin miners
• Miners need to submit a mine plan for approval and the authorities are keen to see greater value added in Indonesia.
• While this has worked well in the nickel industry this could be more disruptive in the tin industry where a limited number of tin smelters are keen to retain their dominance.
• China imported 3,500t of Indonesian tin in 2021, 24,000 tons in 2022 and 24,475t in 2023
• Total Chinese tin imports rose to an all-time high of 33,470t in 2023 with net imports of 21,400t partly to feed growth in EV battery pack construction.
• Reduced production from the Man Maw tin mine in Wa state, Myanmar have not helped.

Iron ore prices weaken following Lunar New Year, steel mills look to ramp up

• Benchmark China 62% Fe prices have slid to $119/t, down from $129/t at the beginning of the Lunar New Year holiday.
• Steel production rose in China 2.6% over the first 10 days of February, with steelmakers looking to mortgage rate cuts as a sign of support.
• Inventory levels climbed 24% however at major mills.
• Steelmakers are suffering from weak margins.
• Singapore futures climbed to $123/t however.

Cobalt – US looks to rebuild stockpiles of critical metals as prices fall to low levels

• The US DLA or National Defense Stockpile is reported to be facing serious shortages of the raw materials required for the Biden Administration energy transition to support IRA funding (Bloomberg)
• While a fall in prices should be good for stockpiles, we suspect the DLA is struggling to obtain much physical stock in the Rare Earths, Cobalt and other critical raw materials.
• Worse still, the fall in prices is causing Western miners to cut back production of materials required for the expansion of EVs, Windfarms and other elements in the energy transition chain, not to mention missiles for defence purposes.
• Fortunately, the new National Defense Authorization Act, gives the DLA a $1bn pa in funding and freedom to buy in the materials it needs without recourse to Congress.
• The DLA can also sign long-term deals with domestic refineries for the smelting and refining of raw ores and concentrates where China is now dominant and is controlling availability.
• We wonder if competition between the DLA and China’s SRB will start to bid up prices for physical metal. Somehow we suspect the SRB will, yet again get the upper hand.

Graphite – GM sign graphite supply deal with materials producer NMG

• The agreement will see NMG provide 18t/yr of graphite for an initial six years.
• GM will invest an initial $25m to support production at NMG’s Matawinie Mine just north of Montreal.
• The automaker will then invest a further $125m upon completion of certain conditions.
• More than 95% of the anode side of EV batteries is made from graphite, making it the most demanded raw materials of all battery metals (Benchmark Mineral Intelligence, January 2023).

SMT Energy to build $130m 250MW battery storage system in Washington state

• The US grid is looking to add more energy storage systems to assist the renewable energy transition.
• Construction of the 250MW system is to begin in 2026 and is expected to be connected to the grid in 2027.
• The project will use lithium iron phosphate batteries and will provide a safe and efficient energy storage solution.

Economics

US – January FOMC meeting minutes are out later today that are expected to reiterate policymakers’ commitment to wait before cutting rates reiterating no urgency for the first cut as of yet.

• Nvidia is reporting its earnings today as well that will be watched closely to grasp demand and outlook for semiconductors driven by AI revolution.
• The Company is the best performing stock in the S&P 500 index this year after more than tripling in 2023, Bloomberg writes.

US $60.7bn aid package into Ukraine directs $38.8bn back into US manufacturers

• The aid package looks as much like Quantitative Easing for the US as support for Ukraine and may cause the Fed to support higher interest rates for longer

• US Ukraine aid breakdown:
  • $20bn for replenishing US military with weapons and equipment provided to Ukraine from Defense Department inventory.
  • $14bn for Ukraine to buy weapons and equipment from US companies.
  • $15bn US support including military training, intelligence sharing, increased presence in Eastern Europe plus other activities.
  • $8bn Direct budget support for Ukraine
  • $3.2bn including $1.6bn for economic development, $1.6bn to boost air and maritime defences in and around Ukraine.

China – World Bank indicates China needs to do more to manage debt

• PBOC move to cut mortgage rates by 25bps to 3.95% signals move back to state support to restore economic growth
• The PBOC kept the 1-year rate unchanged at 3.45% probably to support the renminbi which it has been defending against the dollar.
• We believe Bitcoin and the reimport of repriced goods by truck are being used to support capital flight out of China with maybe an element of ‘Carry Trade’.
• But while Deflation remains a risk the PBOC has the luxury of room for expansionist policy without much fear of inflation and has already released CNY1tn of liquidity through reducing RRR ‘Reserve Requirement Ratio for commercial banks.
• We note the recently supportive Chinese government policy is skilfully avoiding the printing of government debt and perhaps pays heed to World Bank concerns over high government and municipal debt levels.
• So far 11 nations are on the IMF distressed list with a further 28 at risk which isn’t bad considering the impact of Covid on economic activity.
• China records an official debt to GDP ratio of 77% for 2022 though Caixin reports total outstanding nonfinancial debt at 288% of GDP in 2023 according to the NIFD ‘National Institution for Finance and Development’.

Regulators imposed trading bans on two quant funds in a sign of increasing scrutiny on hedge funds and market control.

• The ban will last for three days.

EU passenger new car registrations rose 12.1% yoy in January and somewhat ahead of expectations driven by weak December sales according ACEA ‘European Automobile Manufacturers’ Association’

• BEV sales rose 28.9% yoy to a 10.9% market share vs 9.5% last year
• Hybrid-EVs were ~30% with sales rising 23.5% yoy.
• Sales of petrol cars rose 4% yoy in January to 35.2% of the market vs a 37.9% share a year earlier
• Diesel car sales fell to 13.4% in January vs 15.8% a year earlier
• It is perhaps surprising to see big jumps in January sales in some EU nations with
  • German sales rising +19.2%
  • Italy +10.6%
  • France +9.2%
  • Spain +7.3%.

Sweden – Sweden boosts aid to Ukraine with US$682m of armaments

• Sweden is giving $682m worth of military equipment to Ukraine to help the nation combat Russia.
• The package will consist of artillery shells, air defence, boats and underwater weapons such as mines and torpedoes as well as training for Ukrainian soldiers.
• This is Sweden’s 15^th and largest aid package to Ukraine.
• Sweden has already donated its Archer mobile artillery system, 50 CV90 armoured combat vehicles and ~10 Leopard 2 tanks and anti-air missile systems.

Hungary – Hungary sings security agreement with China

• Viktor Orban has long been a thorn in the side of the EU through his opposition of support for Ukraine and now his agreement on a security pact with China.
• China is looking for friends and a way into the EU with Orban appearing to provide a way into the Common Market.
• But if Orban thinks China might protect Hungary against a Russian invasion we reckon he should think again.

UK – UK government reports largest surplus on record in January raising prospects of tax cuts in the March 6 budget.

• Revenues exceeded spending by ~£17bn leaving the budget deficit in the first 10 months of the year at ~£97bn, though it is less than previously forecast by OBR.
• UK tax receipts jumped by 5% to £695.1bn for the year ended 5^th April 2023
• The £33.6bn increase includes a £21.1bn rise in receipts from income tax, capital gains tax and national insurance which added up to £390.9bn.
• The rise in Corporation Tax to 25% in April 2023 has also helped boost income with receipts for business-related taxes rising to £9.3bn
• Full capital expensing was made permanent last year enabling companies to deduct the cost of investments in IT and machinery from their taxable profits in the year of spend.

Currencies

US$1.0808/eur vs 1.0772/eur previous. Yen 150.18/$ vs          150.34/$.           SAr 18.889/$ vs            19.074/$.            $1.262/gbp vs  $1.259/gbp.      0.656/aud vs     0.653/aud.        CNY 7.189/$ vs 7.199/$.

Dollar Index 104.06 vs 104.34 previous.

Commodity News

Precious metals:

Gold US$2,028/oz vs US$2,022/oz previous

Gold ETFs 83.0moz vs 83.0moz previous

Platinum US$906/oz vs US$901/oz previous

Palladium US$983/oz vs US$943/oz previous

Silver US$23.08/oz vs US$23/oz previous

Rhodium US$4,550/oz vs US$4,425/oz previous

Base metals:

Copper US$ 8,559/t vs US$8,452/t previous

Aluminium US$ 2,262/t vs US$2,185/t previous

Nickel US$ 16,655/t vs US$16,365/t previous

Zinc US$ 2,414/t vs US$2,380/t previous

Lead US$ 2,065/t vs US$2,034/t previous

Tin US$ 26,700/t vs US$26,325/t previous

Energy:

Oil US$82.1/bbl vs US$83.5/bbl previous

Natural Gas €23.8/MWh vs €23.8/MWh previous

Henry Hub Gas US$1.69/mmBtu vs US$1.57/mmBtu yesterday

• European energy prices are stable and French nuclear reactor operating levels reported flat w/w at 73% of 61.4MW capacity with EDF’s continued shut down of two reactors at Chinon earlier this month following a fire.
• US natural gas prices rose after Chesapeake announced plans to reduce production ~20% y/y and drop one rig and one frac crew in each of the Haynesville and Marcellus US shale plays from the current total of 9 rigs.

Uranium Futures $101.3/lb vs $101.8/lb previous

Bulk:

Iron Ore 62% Fe Spot (cfr Tianjin) US$119.6/t vs US$129.7/t

Chinese steel rebar 25mm US$570.5/t vs US$569.9/t

Thermal coal (1st year forward cif ARA) US$90.0/t vs US$89.1/t

Thermal coal swap Australia FOB US$122.0/t vs US$122.5/t

Coking coal swap Australia FOB US$310.0/t vs US$310.0/t

Other:

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

NdPr Rare Earth Oxide (China) US$54,667/t vs US$54,872/t

Lithium carbonate 99% (China) US$12,241/t vs US$12,225/t

China Spodumene Li2O 6%min CIF US$1,000/t vs US$1,000/t

Ferro-Manganese European Mn78% min US$1,065/t vs US$1,061/t

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

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

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

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

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

Spot CO2 Emissions EUA Price US$56.1/t vs US$61.3/t

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

Battery News

Hybrid sales growth outperformed EVs in 2023

• According to a MarkLines report, sales of hybrid vehicles outperformed those of electric vehicles across 14 major markets in 2023.
• Sales of hybrids in those 14 countries (incl. China, Japan and the US) increased 30% over 2023 to 4.21m units.
• EV and plug-in hybrid sales saw growth of 28% to 11.96m units.
• Sales of EVs have slowed off consumer concerns over the reliability of the vehicles, particularly range anxiety and charging infrastructure availability.

Ford slashes prices on Mustang Mach E

• Ford is following Tesla in cutting prices on its leading EV to combat higher finance costs and lower demand.
• The Mustang Mach E now starts at $39,895 vs $42,995 previously with the Mach E GT spec costing $52,395 down from $60,000

Company News

First Au Ltd (FAU AU) A$.003p, Mkt Cap A$1.8m – Acquisition of lithium-prospective licences in Ghana

• First AU announced on Monday that it has acquired a 100% interest in six tenements on the Cape Coast in Ghana over 898km^2.
• The licence package lies 66km from Atlantic Lithium’s* Ewoyaa discovery.
• Early-stage exploration work has mapped pegmatites with an assumed thickness of 10-20m.
• The Group believes the pegmatites hold geological parallels to those at Ewoyaa.
• The Company will acquire the assets through the issue of 916.7m shares in FAU, 500m performance rights and a 1.5% NSR over future production.
• The acquisition is subject to a $1.2m capital raise.

*SP Angel acts as Nomad to Atlantic Lithium. Two mining analysts from SP Angel recently visited the Ewoyaa mine site in Ghana and drove onto Takoradi to check the quality of the road to port. Our analysts also visited the Ministry of Minerals Commission and MIIF, the Ghana Minerals Income Investment Fund

Glencore (GLEN LN) 373p, Mkt cap £48bn – Mine disruption and demand growth in China  identified as a key factors in 2023 performance while marketing delivers above average performance

• Glencore reports reduced revenue, adjusted EBITDA, adjusted EBIT and net attributable income for 2023.
• Revenues declined 15% to US$218bn (2022 – US$256bn) against “the backdrop of a rebalancing and normalisation of international energy trade flows”.
• Adjusted EBITDA declined 50% to US$17bn (2022 – US$34bn) and EBIT, adjusted, fell by 61% to US$10.4bn (2022 – US$26.7bn) resulting in attributable net income of US$4.3bn – down 75% compared to the US$17.3bn achieved in 2022.
• The company says that the lower adjusted EBITDA reflects “the rebalancing and normalisation of international energy trade flows, with coal and LNG, and to a lesser extent, oil prices materially declining”.
• Chief Executive, Gary Nagle, explained that “China’s demand growth and broader industry supply constraints in many key markets (nickel, cobalt and lithium being the clear exceptions), played an important role in supporting metals markets in 2023, particularly in copper, which continued to see significant mine disruption and underperformance throughout the year” despite a trend to lower commodity prices reflecting “the impact of higher interest rates on consumer and industrial demand and more normalisation of energy markets from 2022’s extreme disruption”.
• Mr. Nagle said that “the current macroeconomic environment remains challenging, global economic growth is forecast to bottom out in 2024. Expected interest rate cuts and corresponding restocking along the supply chain are likely to bring an improvement in demand conditions in Western markets later in the year”.
• Glencore’s metals and minerals business contributed around 42% (US$7.2bn) to adjusted EBITDA with energy products, net of corporate and other costs representing the balance.
• On an adjusted EBIT basis, metals and minerals US$3.3bn represented around 31% of the total.
• The results include impairment charges of ~US$2.5bn with the major individual items being US$762m at Mutanda “due to lower cobalt hydroxide price assumptions and mine planning changes”, and US$314m against zinc operations at Mt Isa and in Kazakhstan “due mainly to significant changes to key macro-estimates, including higher discount rates associated with the higher long-term interest rate environment”.
• The Nordenham zinc and lead smelter incurred a further US$191m impairment charge “due to updated assumptions projecting an extended challenging margin environment” while Mopani incurred US$156, “reflecting the latest restructuring discussions”.
• Glencore’s Marketing operation delivered “EBIT of $3,450 million … [which] … was a strong result by historical standards (top-three over the past 10 years) and above our long-term, through the cycle, range of $2.2-$3.2 billion p.a”.

Ionic Rare Earths (IXR AU) A$.02p, Mkt Cap A$82m – Drilling results from Makuutu infill programme

• Ionic reports drilling results from the Makuutu Phase 5 infill drilling.
• 52 infill core drill holes were completed, intended to update the Makuutu MRE by 1Q24.
• Highlights include:
  • 4.4 metres at 1,412 ppm TREO from 1.2 metres in RRMDD789
  • 8.1 metres at 1,261 ppm TREO from 3.7 metres in RRMDD822
  • 3.9 metres at 1,077 ppm TREO from 2.3 metres in RRMDD831
  • 10.2 metres at 991 ppm TREO from 1.7 metres in RRMDD818
  • 5.6 metres at 997 ppm TREO from 4.3 metres in RRMDD790
  • 9.5 metres at 824 ppm TREO from 1.1 metres in RRMDD825
  • 14.6 metres at 812 ppm TREO from 3.7 metres in RRMDD834
• The basket is dominated 71% by heavy rare earth content.
• Ownership of the asset is expected to increase to 94% from 60% this half year.

Lucara Diamonds (LUC CN) C$0.39, Mkt Cap C$179 – Annual results confirm delay and cost overrun for Karowe development

• Lucara reports a loss of US$20.2m (2022 – profit of US$40.4m), including a US$11.2m impairment charge reflecting the expected fair value of its ‘Clara’ sales platform.

• In addition to the impairment, the company attributes the loss to “the decrease in revenue … and a significant non-cash deferred tax expense as the investment in the underground expansion project continues”.
• The financial performance was generated from the recovery of 395,134 carats of diamonds including the recovery of 602 ‘Special’ stones larger than 10.8 carats “with 22 diamonds greater than 100 carats including five diamonds greater than 300 carats”.
• Lucara Diamonds describes “a weaker rough diamond market” during 2023 as “slower than anticipated economic growth in China and a voluntary import ban on rough diamonds into India in Q4 2023 dampened the recovery of rough diamond prices” while remaining positive on the longer term outlook.
• The company comments that sales of “lab-grown diamonds increased steadily through 2023 with many smaller retail outlets increasingly adopting these diamonds as a product. Lab-grown stones have established themselves in the marketplace and is expected to continue to take up increasing market share in the smaller to medium sized goods over time”.
• Guidance expectations for 2024 are for the production of 345-375,000 carats from the processing of between 2.6-2.9mt of ore at a cost of US$28.50-33.50/tonne.  Capital expenditure on the underground project at Karowe is “expected to be up to $100 million” in 2024.
• As previously announced, the company confirms that development of the Karowe underground mine in Botswana is expected to take longer than expected resulting from slower than expected sinking rates and delays to grouting “due to a combination of high-water volumes in the sandstone lithologies between 870 and 752 metres above sea level in depth (144 metres to 262 metres below the shaft collar) and technical challenges associated with the transition to main sinking”.
• “The updated schedule incorporates a 28% increase in the duration of construction, extending the anticipated commencement of production from the underground from H2 2026 to H1 2028. The revised forecast of costs at completion is $683.0 million (including contingency), a 25% increase to the May 2022 estimated capital cost of $547 million”.

Midnight Sun Mining (MMA CN) C$0.28p, Mkt Cap C$34m – KoBold earn-in to accelerate Dumbwa target in Zambia

• Midnight Sun announces an earn-in agreement with KoBold Metals to progress their Dumbwa target on the Solwezi Project.
• KoBold will hold the right to earn a 75% interest in Dumbwa through $15m worth of exploration expenditures.
• Cumulative cash payments of $500k over 4.5 years will also be made to MMA.
• The earn-in requirements include:
  • Year 1 – minimum of 2,000m of diamond core drilling
  • Year 2 – $4m of exploration expenditure
  • Year 3 – $7m of cumulative exploration expenditure
  • Year 4.5 – $15m of cumulative exploration expenditures
• Midnight Sun previously had an earn-in/JV agreement with Rio Tinto over the Solwezi licenses, although these were terminated in 2022.
• The Company believes Rio’s work had provided ‘excellent databases of geochemical and geophysical information,’ and that ‘falling short of Rio’s parameters does not mean they don’t have the makings of an economic orebody.’

Perseus Mining (PRU AU) A$1.7, Mkt Cap A$2.3bn – Cooperation agreement with a Saudi Arabia based partner

• The Company entered into a partnership agreement with Ajlan & Bros Mining & Metals (ABM), the mining division of Saudi Arabia based investment company, Ajlan Brothers.
• The agreement involves potential co-investments into mining projects in Saudi Arabia and northern African countries like Algeria, Eritrea, Ethiopia, Egypt and Sudan.
• The partnership will consider both early stage and more advanced (PFS/DFS) mining projects.

Conclusion: The agreement offers Perseus an opportunity to potentially diversify its asset base outside West Africa with a help of a local partner and highlights increasing investment interest in Saudi Arabia and northern Africa as a mining jurisdiction.

Power Metal Resources* (POW LN) 0.88p, Mkt cap £20m – Annual results show continued progress across assets

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• Power Metal Resources provide their financial results for the year ended 30^th September 2023.
• The Company remains well capitalised with £1.1m in cash at the end of the year.
• Exploration activity progressed over the year, securing 18 uranium properties over 1000km² in the highly prospective Athabasca Region in Canada.
• 10 properties have seen preliminary exploration to date, with additional updates expected over the coming weeks.
• In Africa, exploration has progressed at the Tati Gold Project, with high-grade samples collected over two grids.
• Diamond drilling at Molopo Farms is planned to target a feeder zone of PGEs/nickel sulphides.
• Lithium prospectivity is held at the North Wind Lithium Project, where pegmatites are being targeted.
• IPO spin out is planned for the Company’s Uranium Energy Exploration entity.
• The Company is seeking partnerships for its Tati and Molopo Farms projects, with discussions with third parties ongoing.
• POW holds a £7.1m interest as of date of reporting in Golden Metal Resources following its IPO, alongside various warrants.
• POW’s Australian interest First Development Resources is preparing for IPO, working alongside Red Rock Resources to expedite the project progression.

Conclusion: Power Metal continues to progress their expansive portfolio of licences, having acquired a significant and prospective package of uranium-focused licences in Canada. IPO/value generation opportunities, as seen with Golden Metal last year, remain through FDR and UEE, and we look forward to further corporate and exploration updates as the year progresses. The Company remains well capitalised and expects ‘junior resource and commodity market conditions to normalise.’

*SP Angel acts as Nomad and Broker for Power Metal Resources

Rio Tinto (RIO LN) – 5,134p, Mkt cap £65bn –2023 delivers resilient financial performance and steady improvement in operations as Gladstone signs up for Australia’s largest renewable power deal

• Rio Tinto reports a 2023 attributable, after-tax, profit of US$10.1bn (2022 – US$12.4bn) including US$0.7bn of net impairment charges.
• Underlying EBITDA declined 9% to US$23.9bn (2022 – US$26.3bn) and year end net debt grew by just 1% to US$4.2bn (2022 – US$4.2bn).
• Lower commodity prices are identified as the source of US$1.5bn of the decline in EBITDA with a further US$1.4bn of the decline attributed to “Operating cash unit costs”.
• Dividends of US$7.1bn or US$4.35/share (20220- US$4.92/share) represents “a 60% payout”.
• Acknowledging the “tragic loss of our four Diavik colleagues and two airline crew members in a plane crash last month”, Chief Executive, Jakob Stausholm, described “clear progress as we shape Rio Tinto into a stronger and even more reliable company”.
• He identified the US$7bn “Oyu Tolgoi underground copper/gold mine in Mongolia and the Simandou iron ore project in Guinea” as key components in “building a portfolio that is fit for the future”.
• Oyu Tolgoi delivered its “first sustainable production” during 2023 and remains “on track to ramp up to 500 thousand tonnes of copper per year from 2028 to 2036 … from the open pit and underground”.
• Longer term major copper development projects include the 55% owned Resolution project in Arizona where environmental work with the United States Forest Service continued and at the Winu discovery in Western Australia where “drilling and fieldwork progressed sufficiently to commence Winu’s formal Western Australian Environmental Protection Authority approval process”.
• Expenditure at Simandou, where the Simfer JV is developing a US$6.2bn, 60mtpa iron ore mine, with initial production expected furing 2025, “increased from $0.2 billion to $0.5 billion (100% basis at underlying EBITDA level) on ramp-up of project activity in 2023”.
• Other iron ore projects include the development of the 54% owned US$1.3bn Western Range project in WA where construction “is currently on schedule with civil work well advanced … [and initial] … production is anticipated in 2025”.
• Rio Tinto confirms that its greenfield exploration include “activity in 18 countries across eight commodities” with ~US$300m of pre-tax expenditure (and overall expenditure of US$0.9bn on exploration and evaluation) “focused on copper in Australia, Chile, Colombia, Namibia, the United States and Zambia; diamonds in Canada; nickel in Brazil, Canada and Peru; heavy mineral sands in South Africa; and potash in Canada”.
• In a separate announcement today, Rio Tinto has “signed Australia’s largest renewable power purchase agreement (PPA) to date to supply its Gladstone operations in Queensland, agreeing to buy the majority of electricity from Windlab’s planned 1.4GW Bungaban wind energy project”.
• Rio Tinto has agreed to buy 80% of the “power generated from the Bungaban wind energy project over 25 years”. The site is located around 290km southwest of Gladstone and the company says that the purchase agreement “is the second renewable power deal signed for Rio Tinto’s Gladstone operations, after the recent agreement signed with European Energy to drive development of the 1.1GW Upper Calliope solar farm”.
• “Construction of the Bungaban project is targeted to start in late 2025 and is expected to produce electricity by 2029”.

Conclusion: Rio Tinto highlights key expansion projects at Oyu Tolgoi and Simandou and has announced participation in Australia’s largest renewable power supply agreement for its Gladstone aluminium smelter.

Zinnwald Lithium (ZNWD LN) 7.6p, Mkt Cap £36m – MRE update

• The Company released an updated mineral resource estimate for the 100% owned Zinnwald Lithium Project, eastern Germany.
• Updated MRE stands at:
• 227mt at 0.48% Li2O for ~2.7mt LCE including 194mt at 0.48% for ~2.3mt LCE in the Measured&Indicated category.
• 0.1% Li cut off grade was used derived from  $23,800/t LiOH price, 69% recoveries and $122/t ROM operating costs.
• Updated estimate includes ~27,000m of new DD drilling across 84 drill holes as well as reinterpreted geological model.
• Previous estimate from September 2018 stood at
• 40mt at 0.76% Li2O for 0.8mt LCE including 36mt at 0.76% Li2O for 0.7mt LCE in the Measured&Indicated category.
• 2018 estimate was using 0.25% Li COG.
• Lithium mineralisation within all geological domains is hosted exclusively by polylithionite micas, or better known as “zinnwaldite” type micas.

Conclusion: Zinnwald Lithium Project update delivers an expansion in the resource estimate following additional drilling and reinterpretation of the model. The increase is largely driven by a drop in the assumed cut off grade (0.1% Li from 0.25% Li) translating into lower grade higher tonnage resource. The cut off grade is consistent with the estimate used by European Metals across the border for their 49% owned Cinovec Lithium Project, Czech Republic, hosting ~7.3mt LCE at 0.42% Li2O (100% based).

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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SPA research ratings – Based on a time horizon of 12 months: Buy = Expected return of more than 15%, Hold = Expected return between -15% and +15%, Sell = Expected return of less than 15%