SP Angel Morning View -Today’s Market View, Wednesday 21st June 2023

China Extends EV tax breaks

MiFID II exempt information – see disclaimer below

Adriatic Metals* (ADT1 LN) – Vares Project construction nearing completion as first concentrate production looms

Anglo American (AAL LN) –De Beers – Softening rough diamonds demand curbs fifth sales cycle

Ariana Resources (AAU LN) – Drilling results from Hizarilyayla, Turkey

Bushveld Minerals* (BMN LN) – FY22 results benefit from higher prices but highlight challenging outlook

Gemfields Group (GEM LN) – June ruby auction yields $80m in sales as demand continues to recover

Oriole Resources* (ORR LN) – CLICK FOR PDF – Additional high-grade gold intervals returned at Mbe, Cameroon

Power Metal Resources* (POW LN) – Update on uranium portfolio and corporative activity

Strategic Minerals* (SML LN) – 2022 results show continuing profitability and highlight increasing interest in critical mineral supply chain.

Sovereign Metals* (SVML LN)– SP Angel takes on Nomad role for Sovereign Metals

China announces $72b tax break for NEVs

Extended tax breaks for battery EVs until 2027 in an initiative that is expected to provide CNY520bn to the industry over the coming four years.

• China’s State Council Information Office unveiled a $72b support package to boost sales of EVs and other green vehicles over the next four years.
• NEVs purchased in 2024 and 2025 will be exempted from a 10% sales purchase tax amounting to as much as 30,000 yuan ($4170) per vehicle, with the exemption halving for purchases made in 2026 and 2027, the Ministry of Finance said.
• The 10% sales tax charged on new car sales that has not been applied to clean energy vehicles since 2014.
• The announcement follows a Cabinet meeting, on June 2^nd, during which authorities said they would extend and optimise the tax exemption and study policies to promote NEV development.
• Chinese auto shares rallied after the announcement, with EV makers NIO (9866.HK) and Xpeng (9868.HK) rising 6.1% and 5.5% respectively. Li Auto also climbed 3.5%
• The policy was recently extended through 2023 and will now push that out to 2025 for cars prices under CNY300k ($41.7k) and 2027 for cars under CNY150k.

Copper prices strengthen as market tightens amid signs of demand improvement in China  

• LME copper prices strengthened to $8,567/t, whilst Chinese copper futures rallied to $9,582/t in Renmimbi-denominated trade, highest level since April.
• Falling imports into China and sliding inventories have pushed copper spot premiums to eight-month highs, suggesting limitations in physical supply.
• Chinese buyers are limited from imports by the depreciating yuan, pushing domestic supply tightness higher.
• Analysts suggest short-term demand pressures may be a result of restocking before a two-day Dragon Boat public holiday in China in Thursday and Friday.
• SMM reports copper tube production rates rose to three-year highs.
• Some supply tightness is expected from Boliden which issued a force majeure on its Swedish smelter yesterday. The smelter produces >200ktpa.
• EVs, Renewable energy and air-conditioning product demand seems to be limiting weakness from more traditional downstream users.

Gold steadies lower as traders hold fire before Powell’s congressional testimony

• Gold has held above the $1,930/oz mark following a sharp jump in US housing starts yesterday.
• The more encouraging US data supported bets that the Fed has further rate hikes to come this year.
• However, US 10-year yields eased to June 7^th lows, suggesting traders are less confident on the longer-term economic strength of the US.
• Shorter term rates, more reflective of Fed rate policy, jumped to March highs, weighing on gold prices.
• The Dollar index bounced from mid-May lows, weighing on gold prices.
• Powell is expected to give more guidance to Fed policy today with a testimony before Congress, which should give some momentum to gold prices in either direction.
• ETF holdings unchanged.

IGTV:  https://www.ig.com/uk/market-insight-articles/ev-metals-to-regain-momentum–despite-economic-uncertainty–sp-a-230606

VOX Markets Podcast:   https://audioboom.com/posts/8318505-taking-stock-featuring-russ-mould-on-ipo-s-john-meyer-on-resource-co-s

                                          https://audioboom.com/posts/8310999-john-meyer-on-china-s-mixed-manufacturing-figures-plus-atlantic-lithium-goldstone-res-anglo-asi

• *SP Angel almost invariably acts as nomad or broker or nomad and broker to companies mentioned in the above videos and podcasts. We speak more about these companies as we have a good understanding of their business and can talk with a greater degree of confidence. As ever, however, it should be noted that our views do not take into account the circumstances and needs of any particular investor or investor type. So enjoy the talks, but please do your own research, including other companies not mentioned by us but operating in the same areas, and get professional advice where appropriate.

Economics

UK – Core inflation rate hit the highest rate in more than three decades coming ahead of expectations in May putting pressure on monetary authorities to step up policy tightening efforts.

• The central bank will be holding the policy meeting tomorrow with expectations for a 25bp rate hike to 4.75%, although, bets for a more aggressive more have been rising.
• Two-year yields jumped past the 5.1% level earlier in the morning but were pulling back since and currently stand around 5.0%.
• CPI (%mom): 0.7 v 1.2 April and 0.5 est.
• CPI (%yoy): 8.7 v 8.7 April and 8.4 est.
• Core CPI (%yoy): 7.1 v 6.8 April and 6.8 est.

US – Housings starts 21.7% to 1.631m units in May vs a rise of 2.9% to 1.34m units in April

• Building permits rose 5.2% to 1.491m units in May vs a fall of -1.4% or 1.417m units in April

Inflation – What is the tipping point between manageable inflation and the risk of hyper-inflation and what can Central Bankers do about it?

• There is much that Central Bankers cannot change with their simple economic levers.
• China’s PBoC has more levers to pull developed by its autocratic Communist leadership which has been closely managing economic activity
• Personally, I feel comfortable with something higher than just 2% so long as we can pass on the higher cost of running our business.
• UK core inflation rose to 7.1% in May vs 6.8% in April giving the BoE little option but to raise interest rates and probably go for a tough 0.5% rise to support sterling while slowing economic activity.
• The Bank of England raising rates to maintain a strong currency to combat import costs, though the negative effect is to crush anyone unlucky enough to be refinancing a mortgage.
• Though we recall the horrors of inflation in the Weimar republic in 1922 https://www.bbc.co.uk/sounds/play/m001k7ll
• But what is a feasible level of inflation in the current economic environment and are central bank targets of 2% realistic ?
• Major inflationary issues as we see them:
  • Oil prices – depressed by discounted Russian sales into China and India
  • Gas prices – still volatile,
  • Electricity prices – forward energy prices are said to be keeping electricity prices high,
  • Used car prices – expect prices to fall in the UK this summer,
  • New car prices – all new car prices have been pushed higher by a shortage of semiconductors
    • EVs are generally 30—50% more expensive than their combustion counterparts,
    • though you save on fuel costs depending on your mileage
  • Food prices – Tesco reckons food prices have peaked in the UK
  • Other input prices such as metals and reagents,
  • Wage rises – growth in total and regular pay fell in real terms, eg. adjusted for inflation) on the year in January to March 2023, by 3.0% for total pay and 2.0% for regular pay
  • Manufacturers raising margins,
  • Services companies raising margins,
  • Import costs from China and other major manufacturers.
    • – these should fall as China struggles to expand export markets and shipping rates are now much lower,
  • Public spending – the UK government is maintaining a relatively tough line on public sector wage inflation.
• The war in Ukraine created much uncertainty prompting food and other manufacturers to restock and diversify logistics.
• But if the war in Ukraine ends and much will depend on if and how this war ends, how will the world react?
  • Will oil prices surge driving global inflation higher?
• From an inflation perspective, it seems fortunate that oil prices are resting at $76/bbl and not $176/bbl largely due to Russia’s need to pump cheap oil to pay for its military incursion.
• The dilemma is that if China and India weren’t buying as much discounted Russian oil as they could and OPEC + could only make up 2.5mbpd then the world would run short of 2.5mbpd causing prices to rise by >$20/bbl.
• In the meantime, we can see why policymakers are striving to hold back wage inflation as this combined with another hike in energy prices could spark another round of higher inflation on top of current high levels.
• Elsewhere:
• China CPI was just 1% in the first four months of this year due to low oil and gas costs, falling metals prices and a fall in domestic demand as factory workers suffer lower wages on reduced productivity.
• The PBoC has just cut another 0.1% off the 1-year and 5-year loan prime rates to 3.55% and 4.2% in an effort to stimulate growth without inflation.
• Japan: Maintaining inflation in Japan is simple, the BoJ simply has to ask the Japanese people not to spend and not to support anyone raising prices and the job is done. If only other economies worked that way.

Shipping rates – Rates have returned to normal at around $1,592 for the benchmark 40ft container from $10,500 in September 2021

• The 10-year pre-pandemic average was $1,500 vs a 5-year average of $3,800.

Weather – Atlantic hurricane season due to kick of following development of new tropical depression

• Weather experts are looking out for the development of the first hurricane of 2023 with a depression expected to pass over the Lesser Antilles later this week (Reuters).
• While this feels like an early start to the hurricane season experts are predicting a near-normal hurricane season to run from 1 June to 30 November
• “The mean forecast anticipates a total of 15 named storms, seven hurricanes, and three major hurricanes. This outlook is based on models indicating that an El Niño-Southern Oscillation (ENSO) positive phase will be in effect during the peak of the season, which typically suppresses hurricane activity. However, the presence of warmer-than-normal sea surface temperatures is expected to contribute to an increase in overall activity, according to MS Amlin. ” (insurancebusinessmag.com).
• We will be watching the development of hurricanes in the Atlantic and Gulf of Mexico closely, not least because many of these storms bounce across the Atlantic and dump yet more rain on the UK.
• While much of this rain falls in bonnie Scotland and refills the hydropower reservoirs of south-West Norway some will end up watering the gardens of southern England to the joyful delight of our cash-strapped water utilities.
• I watch this rather more closely than I used to as the larger Atlantic hurricanes / UK storms have the potential to flood the river Glyme and the old mill house I live in.

Indonesian President confirms copper export ban on smelter openings

• Indonesian President Jokowi stated that once Freeport Indonesia and Amman open their copper smelters this year, the country will ‘no longer export raw copper because it will be processed domestically to become copper cathodes.’
• The facilities are expected to begin production in May 2024.
• Indonesia is moving its nickel model to copper by minimising ore exports in favour of downstream refining in country.
• Freeport and Amman received approval for concentrate shipments until the smelters are complete.

Currencies

US$1.0913/eur vs 1.0932/eur yesterday. Yen 142.00/$ vs 141.86/$. SAr 18.416/$ vs 18.169/$. $1.276/gbp vs $1.279/gbp. 0.677/aud vs 0.680/aud. CNY 7.194/$ vs 7.173/$.

Dollar Index 102.65 vs 102.48 yesterday.

Commodity News

Precious metals:

Gold US$1,936/oz vs US$1,954/oz yesterday

Gold ETFs 93.6moz vs US$93.6moz yesterday

Platinum US$960/oz v US$975/oz yesterday

Palladium US$1,364/oz vs US$1,400/oz yesterday

Silver US$23.09/oz vs US$23.93/oz yesterday

Rhodium US$5,900/oz vs US$6,100/oz yesterday

Base metals:

Copper US$ 8,567/t vs US$8,544/t yesterday

Aluminium US$ 2,221/t vs US$2,239/t yesterday

Nickel US$ 22,100/t vs US$22,290/t yesterday

Zinc US$ 2,385/t vs US$2,428/t yesterday

Lead US$ 2,145/t vs US$2,138/t yesterday

Tin US$ 26,905/t vs US$26,950/t yesterday

Energy:

Oil US$76.3/bbl vs US$76.4/bbl yesterday

UK NBP Futures 97p/therm vs 93p/therm yesterday – gas prices pull back following strong rise at end last week due to Norwegian outages and European heat wave

TTF Dutch Futures €39/MWh vs €37/MWh yesterday

• Crude oil prices were broadly unchanged as the API reported a 1.0mb build in US crude oil and fuel stocks (vs 1.3mb draw expected).
• European energy prices edged higher despite French nuclear reactor operating levels reported as increasing overnight from 57% to 61% of capacity from 34 available reactors (from 32) out of 56 units.
• US natural gas prices eased on forecasts for cooler temperatures following triple-digit temperatures in parts of the US in the last few days boosting demand for gas used in power consumption.
• Civitas has agreed two deals with PE player NGP Energy Capital Management to acquire 100kboe/d (54% oil) in the Permian’s Midland and Delaware basins for cash and stock totalling $4.7bn. The acquisitions are attractively priced at 3x 2024 estimated adjusted EBITDAX, in-line with recent US Permian transactions.
• OMV has taken FID on the ~3.6Tcf Neptun Deep project offshore Romania, which has an estimated capex of €4bn and unit opex of $3/boe and make Romania the largest gas producer in the EU.

Natural Gas US$2.500/mmbtu vs US$2.668/mmbtu yesterday

Uranium UXC US$57.75/lb vs US$57.75/lb yesterday

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$114.3/t vs US$114.4/t

Chinese steel rebar 25mm US$530.6/t vs US$540.2/t

Thermal coal (1st year forward cif ARA) US$116.5/t vs US$116.5/t

Thermal coal swap Australia FOB US$135.0/t vs US$131.0/t

Coking coal swap Australia FOB US$220.0/t vs US$220.0/t

Other:  

Cobalt LME 3m US$29,525/t vs US$29,525/t

NdPr Rare Earth Oxide (China) US$68,248/t vs US$68,730/t

Lithium carbonate 99% (China) US$42,325/t vs US$42,590/t

China Spodumene Li2O 6%min CIF US$4,090/t vs US$4,090/t

Ferro-Manganese European Mn78% min US$1,217/t vs US$1,220/t

China Tungsten APT 88.5% FOB US$315/mtu vs US$315/mtu

China Graphite Flake -194 FOB US$735/t vs US$735/t

Europe Vanadium Pentoxide 98% 7.3/lb vs US$7.2/lb

Europe Ferro-Vanadium 80% 31.75/kg vs US$31.75/kg

China Ilmenite Concentrate TiO2 US$305/t vs US$306/t

Spot CO2 Emissions EUA Price US$99.2/t vs US$100.5/t

Brazil Potash CFR Granular Spot US$325.0/t v US$325.0/t

Battery News

Hyundai could join Tesla charging partnership

• Hyundai is considering whether to join Ford and General Motors in using Tesla’s charging technology in North America.
• Tesla’s Superchargers make up about 60% of available U.S. fast chargers and Ford (F.N) and General Motors (GM.N) have, in recent weeks, struck deals with Tesla to use its charging technology, now dubbed the North American Charging Standard (NACS).
• Hyundai president, Jaehoon Chang, said the company would consider joining the alliance but would need to gauge customer interest.
• Tesla’s current network of Superchargers does not allow for the faster charging Hyundai’s EVs can achieve on other chargers – Hyundai’s new EVs, including the Ioniq 5, use an 800-volt electrical architecture to allow for faster charging, while Tesla’s Superchargers operate at a lower voltage.
• Chang said Hyundai would consult with Tesla to see whether it could make adjustments to its charging system for Hyundai customers so they could charge faster.

Company News

Adriatic Metals* (ADT1 LN) 154p, Mkt cap £328m – Vares Project construction nearing completion as first concentrate production looms

• Adriatic Metals reports 78% of the total Vares Project construction is complete.
• Vares’ 2021 DFS showed a post-tax NPV8 of $1,062m, IRR of 134% and CAPEX of $168m.
• The Bosnia and Herzegovina silver project Final Project cost is now estimated at $182m.
• The increase in CAPEX is a result of scope changes to ‘improve safety and operational performance.’
• Regarding the updated costs, Adriatic has widened the haul road for safety and operability, noted higher Nova costs, introduced Jameson Cells and reconfigured various equipment sizing and configuration details.
• The Company notes savings of $11m from favourable impacts of exchange rate movements alongside other marginal savings.
• The Company had $95.7m in cash at 30^th May and expects $85.1m of that in capex and exploration outflows pre-production.
• Adriatic is currently at 606m with its lower decline and 550m with its upper decline, expecting to reach ore by the end of this month.
• First concentrate production is anticipated for November 2023.
• The Company is building a 24.5km haul road and expects completion by Q3 2023 and Adriatic is also refurbishing the rail head and railway line.
• As regards Rupice, Adriatic expects to release a Mineral Resource Update by July.

*An SP Angel mining analyst has visited Adriatic Metals operations in Bosnia

Anglo American (AAL LN) 2,349p, Mkt Cap £32bn –De Beers – Softening rough diamonds demand curbs fifth sales cycle

• Anglo American reports that, provisionally, the fifth De Beers sales cycle of 2023 realised US$450m and that the previously reported provisional sales of US$480m for the fourth sales cycle have now been confirmed as US$479m.
• The outcome of the fifth sales cycle brings the year-to-date sales to approximately US$2.4bn, which we estimate is around 23% lower than the US$3.1bn of sales achieved during the first five sales cycles of 2022.
• Al Cook, CEO of the De Beers Group, commented that “with ongoing global macroeconomic challenges continuing to impact end-client sentiment, the diamond industry remains cautious heading into summer”.

Ariana Resources (AAU LN) 2.45p, Mkt Cap £28m – Drilling results from Hizarilyayla, Turkey

• Ariana Resources has released initial drilling results from its exploration at Hizarilyayla within its 23.5% owned Salinbas project in NE Turkey
• The company has now completed 2,548m of drilling and says that it plans a further 3,000m in the current programme.
• Among the results highlighted in today’s announcement are:
  • An intersection of 2.6m at an average grade of 0.21g/t gold, 4.45g/t silver and 0.19% zinc from 253.6 metres in hole HZR-001; and
  • An intersection of 18.6m at an average grade of 0.22g/t gold, 1.18g/t silver and 0.15% zinc from 187.9 metres in hole HZR-002; and
  • An intersection of 23.1m at an average grade of 0.34g/t gold, 2.83g/t silver and 0.13% zinc from 182.3 metres in hole HZR-003
• The company explains that the “Hizarliyayla Project is located 9km southwest of the Salinbas Project and about 8.5km north of the Hot Maden Au-Cu deposit”.
• Prior to its £167m acquisition by Sandstorm Gold in 2017, Mariana Resources had announced, in August 2015, a maiden resource for the Hot Maden deposit totalling 2.2 m ounces of gold and 167,000 tonnes of contained copper.
• Ariana Resources’ “original Hizarliyayla drilling programme consisted of up to 19 planned holes for approximately 4,000m, however, this is the subject of ongoing review based on results. Drilling commenced on the project in late December 2022, and to date, 5 drill holes have been completed for a total of 2,548m. Drilling is expected to continue at Hizarliyayla until mid-2023”.
• The company says that the “mineralisation intercepted within the first two Hizarliyayla drill holes appears to represent the intermediate zone (Ag-Pb-Zn±Au) of an intermediate sulphidation epithermal system. These may be developed peripherally to a buried porphyry system”.
• Commenting on the possible similarities to Hot Maden, Managing Director, Dr. Kerim Sener, explained that “Hizarliyayla is at an elevation of approximately 1,500m, whereas the high-grade gold zone of the Hot Maden deposit occurs 8km to the south at an elevation of about 900m. Interestingly, the grade of both gold and silver intercepted in the current drilling has a tendency to increase with depth, suggesting that the deeper we drill, the better the grade and perhaps increasing proximity to a high-grade gold zone akin to Hot Maden”.
• Dr. Sener said that as a result of the “elevation difference … we may need to drill holes well over 600m deep in order to encounter a potential Hot Maden-type discovery. Despite the mineralised intercepts being typically fairly narrow and deep, these broader observations regarding the prospectivity make these some of the most exciting exploration drilling results that we have ever announced”.

Conclusion: Initial drilling at Hizarliyayla has provided encouraging evidence of an intermediate sulphidation epithermal system similar to that at the Hot Maden copper/gold deposit 8.5km to the south.  Further deep drilling will be required and we await news from the continuing exploration programme with interest.

Bushveld Minerals* (BMN LN) 3.1p, Mkt Cap £40m – FY22 results benefit from higher prices but highlight challenging outlook

Target Under Review

• Revenues amounted to $148.4m (2021: $106.9m) reflecting both higher realised prices ($41.4/kgV, +28%) and sales volumes (3.6ktV, +8%).
• Most of sales were completed into premium pricing markets in the US (44% of total) and Europe (27%).
• Production cash costs climbed to $27.7/kgV (2021: $26.1/kgV) despite stronger production reflecting inflationary pressures across most inputs and energy.
• Costs were above guided range for $22.7-23.5/kgV as production at Vanchem lagged expectations on loadshedding, slower than forecast Kiln 3 ramp up and high silica content in treated ore affecting plant recoveries.
• Overall, Group production totalled 3.8ktV (2021: 3.6ktV), below the lower end of the revised guidance for 3.9-4.1ktV.
• EBITDA increased to $22.3m (2021: -$7.5m).
• PAT amounted to -$35.4m (2021: -$34.2m) including a $24.0m impairment (2021: $2.4m) including $17.2m relating to Vanchem.
• Net CFO was $21.2m (2021: $-12.1m) with FCF amounting to $2.5m (2021: -$32.5m) as 2022 marked the end of significant capital investment period with $18.2m (2021: $19.5m) reinvested to refurbish and optimise operations at Vametco and Vanchem as well as continue development of the BELCO electrolyte plant.
• Net debt position stood at $76.5m (2021: $68.9m) including $10.9m closing cash position and $3.1m held in investments (Mustang Energy convertible) and $90.4m in debt.
• Discussions with Orion over refinancing of the convertible loan note (~$45m including capitalised 10% coupon rate since Nov/20) that is due Nov/23 are well advanced with the team planning to close the transaction in due course.
• Refinancing should reduce the equity dilution overhang from the note and is expected to include a three year secured term loan (~$27m), a new convertible (~$14m) as well as a conversion of a part of the outstanding convertible (~$5m) into shares at 6p/sh.
• The transaction announced earlier in May/23 is subject to certain conditions including shareholders’ approval and finalisation of definitive binding agreements among other things.
• Vanadium prices have been pulling back lately and are reported to have averaged $38/kgV year to date on the back of global growth outlook concerns and slowing growth in China, in particular.
• The Company highlighted that using estimated realised prices of $36.2/kgV for 2023 and $35.5/kgV in 2024, the Group will need additional liquidity through a capital raise or alternative funding source over the next 12 months in addition to refinancing the Orion convertible.
• Outlook wise, 2023 guidance was reiterated at 4.2-4.5ktV with average cash costs at $26.1-27.0/kgV (R447-438/kgV).
• The team signed a new third party ore supply contract to provide low-silica high grade material for Vanchem.
• Load curtailment agreement signed with the Emalahleni Local Municipality in Nov/22 should help operations at Vanchem as the contract allows to reduce power supply during load shedding hours rather than outright loss of power that is detrimental to kiln efficiencies.
• BELCO, a vanadium electrolyte plant, and the Vametco hybrid mini-grid project (~10% of Vametco energy demand) are expected to be operational in H2/23.
• Separately, the Company announced today that Fortune Mojapelo, a co-founder and CEO of the Company, who developed Bushveld Minerals from an exploration Company to a multi asset vanadium producer operating two of four primary vanadium processing facilities and is expanding further downstream developing electrolyte plant decided to step down from July 1 2023.
• Craig Coltman will be joining the Company as new CEO having previously spent 32 years with De Beers Consolidated Mines in operational and commercial roles including acting as CFO and as Executive Director.

Conclusion: A mixed set of numbers released this morning highlight a positive effect of higher sales and stronger realised vanadium prices helping revenues and cash flows as the team completed its capital investment intensive period. On the downside, continuing power supply issues as well as strong industry related cost inflation weighed on operations ramp up and Group unit costs with results coming in below guidance. Weaker than anticipated performance as well as lower vanadium prices at Vanchem led the Group to record a ~$17m impairment on the unit dragging headline earnings down further. The Group has been doing well directing their vanadium products into the US and Europe attracting premium pricing, although, prices have been pulling back lately amid waning global growth outlook with steel related demand still accounting for ~90% of the total. Although, chemical sector demand including VRFB battery applications is reported to have increase >70% in 2022. The Company is expecting to finalise Orion convertible facility refinancing (~$45m) in due course, although, challenging operating conditions coupled with lower vanadium prices see the Company highlighting a need for additional liquidity over the next 12 months. Given Company’s high financial and operational leverage, we would expect the Group to perform well once the sentiment changes filtering into higher vanadium prices.

*SP Angel act as nomad and broker to Bushveld

Gemfields Group (GEM LN) 16.5p, Mkt Cap £202m – June ruby auction yields $80m in sales as demand continues to recover

• Gemfields reports that a sale of mixed -quality rubies from its 75% owned Montepuez mine in Mozambique held between 5th-20th June realised US$80.4m sales.
• The company confirms that “91 of the 94 lots offered for sale were sold … [at an average price of] … USD 265.99 per carat”.
• “One lot of 26.8kg (representing some 30% of the total weight offered) remained unsold. As a result, the average price per carat realised at this auction was considerably higher than it would have been had this lot also been sold.”
• We infer that purchasers are exercising discretion and avoiding the lower value output offered.
• Adrian Banks, Managing Director of Product & Sales, said that “the revenue from this auction … [was] …up 20% since our last ruby auction in December 2022, today’s results echo the significant rebound in market prices we reported just weeks ago for Zambian emeralds”.

Oriole Resources* (ORR LN) 0.2p, Mkt cap £5.8m – CLICK FOR PDF – Additional high-grade gold intervals returned at Mbe, Cameroon

• Oriole provides an update on its exploration programme at Mbe in its CLP licence package in Cameroon.
• Oriole’s pilot channel-chip sampling programme has returned mineralised intervals over all six sample lines.
• 11 samples graded over 1g/t Au from 19 taken, with all samples returning mineralisation.
• Highlights include:
  • MBTR01 : 2.20m @ 8.47 g/t Au
  • MBTR02 : 5.00m @ 0.90 g/t Au
  • MBTR04 : 5.00m @ 2.03 g/t Au
  • MBTR05: 2.10m @ 3.69 g/t Au
• The channel samples were taken from artisanal workings which had exposed trench-like profiles over a 200m strike length.
• The trend are perpendicular to the dominant north-east shear, suggesting the shear veins form part of a wider corridor of mineralisation.
• The sample depths were limited by the depth of the artisanal pit, as opposed to grade, with Oriole only taking samples from oxide material near surface.
• Although the mineralised zone’s full width has not yet been established, Oriole expects it to be at least 70m wide.
• Bulk-mineable mineralisation close to surface is considered possible owing to altered wall rocks hosting close to 6g/t Au in places.
• The Company is planning to begin a maiden drilling programme at Mbe over the upcoming 2023/24 field season.
• Oriole continues to progress its project-level funding for Mbe, which is now forecast to be complete in Q3-23.

Conclusion: Mbe continues to deliver promising early-stage exploration results, with multiple widths of gold mineralisation identified at surface over a 200m strike length. The channel-chip sampling covers just one vein within a wider, 3km x 70m mineralised corridor, offering Oriole the opportunity to pursue a second JORC-compliant MRE in Cameroon with a maiden drilling campaign in the CLP. We look forward to further updates from Oriole’s exploration efforts in Cameroon and their project-level funding for the CLP work programme as it progresses.

*SP Angel acts as Broker to Oriole Resources

Power Metal Resources* (POW LN) 0.83p, Mkt cap £17m – Update on uranium portfolio and corporative activity

• Power Metal provides an update on its expansive uranium portfolio across the Athabasca Basin, covering a combined 1,005km² across 17 properties.
• POW reports the completion of its 2023 exploration campaign planning over 10/17 of its uranium properties.
• The Company also acquired the Perch River Uranium Project, a 9.41km² asset, also in the Athabasca basin.
• The 2023 exploration campaign varies per asset, we summarise below:
• Tait Hill:
  • Targeting pegmatite-hosted uranium mineralisation, the asset has returned up to 825ppm U from a brecciated pegmatite dyke.
  • POW plans to complete geochemical soil sampling and early-stage prospecting over the centre of the project to shore up drill targets.
• Badger Lake:
  • Targeting sandstone and basement-hosted unconformity-related uranium mineralisation over 16.71km²
  • POW plans to utilise drone EM surveying to gain high-resolution data to guide future targets.
• Durrant Lake
  • An asset surrounded by producer/developers Cameco, Denison Mines and ISO Energy, with previous showings of elevated helium-in-lake water results.
  • Prospective for potential uranium mineralisation with helium.
  • Previous geophysical results highlighted VLF conductors trending northeast and EM anomalies presenting opportunity of unconformity-related uranium mineralisation.
  • POW will look to define drill targets using helicopter-borne passive EM surveys.
• Kerneghan
  • POW planning to conduct helicopter borne passive EM surveys for future programmes.
• Soaring Bay
  • POW planning soil/prospecting programme to test Radon anomalies identified in historic work over a 700m structural lineament.
  • Centred around U-in-lake sediment results.
• E-12
  • Targeted unconformity-related uranium mineralisation on the edge of the Athabasca Basin.
  • Uraniferous boulder trains and elevated radioactivity in sediments noted in historical data.
  • POW commissioning a drone-based EM survey over 100m line spacing.
  • POW will pay for exploration efforts at E-12 in the form of a loan to Uranium Energy Exploration, which expects to list on the London market. The exploration loan will be repaid upon relisting.
• Cook Lake
  • Prospective for basement-hosted unconformity-related uranium and intrusion/pegmatite-hosted uranium.
  • EM conductors identified in 1970s from geophysical work.
  • POW commissioning a drone-based EM survey across the project with 150-200m spacing.
• Clearwater
  • Two field seasons completed by POW at clearwater, returning results with highlights up to 1,120ppm U₃O₈.
  • Targeting Beaverlodge-style uranium mineralisation.
  • POW looking to refine structural geological understanding with geophysics via drone-based EM surveys.
  • Planning detailed mapping is planned.

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

Strategic Minerals* (SML LN) 0.18p, Mkt Cap £3.5m – 2022 results show continuing profitability and highlight increasing interest in critical mineral supply chain.

• In its financial results for 2022, published today, Strategic Minerals reports pre-tax profit of $0.37m (2021 – $0.26m) and a year-end cash balance of $0.34m.
• After a US tax charge of $288,000 (2021 – $101,000), the company reports an attributable profit of $84,000 (2021 – $156,000).
• Cash generated from operations was $0.77m (2021 – $0.61m).
• Acknowledging a “difficult year” in 2021, Chairman, Alan Broome, confirmed that Strategic Minerals considers “the long-term demand and supply outlook for tin and tungsten compelling” as it seeks to progress the Redmoor project in Cornwall.
• Mr. Broome said that “The Company has continued to market both Redmoor and LCCM … [the company’s copper project in S Australia] … at an asset level and has utilised external consultants to attempt to locate suitable investment/operating partners. This process remains ongoing, and Management and the Board continue to follow up on and develop discussions with a number of entities”.
• Reporting operational highlights of the year, which saw a 20% price increase for its magnetite product at Cobre in New Mexico, the company explains that “after many years of lobbying, management secured a longer-term access to the Cobre magnetite stockpile with it now being extended until 31 March 2027”.
• Cobre generated $2.45m in sales during the year (2021 – $2.61m) although the company confirms that in “the last quarter of 2022, sales to Cobre’s largest client significantly reduced due to recessionary concerns impacting the US west coast construction industry … [although Strategic Minerals expresses its confidence in] …. their return as a client, we are unsure of timing due to a large stockpile of our material that they have on site”.
• Referring to the protracted arbitration claim against the receivers of CV Investments, Strategic Minerals confirms that “During 2022, the receiver … indicated that they would not accept Southern Minerals Group’s (“SMG”) substantial arbitrated award against CVI and were likely to use the fact that CVI’s funds arose from a fraud to rank SMG’s claim, along with other creditors, behind equity holders”.
• In South Australia, resubmission of a “Program for Environment Protection and Rehabilitation (“PEPR”) … relating to planned mining of transitional ore at Paltridge North was submitted … as part of LCCM’s expected 2023 re-opening of operations at Mountain of Light at Leigh Creek, subject to funding”.
• As the new PEPR application covers much of the information previously submitted, “it is not expected that approval of this PEPR will be as protracted”.
• At the Redmoor tin/tungsten project in Cornwall, Strategic Minerals local operating company, Cornwall Resources, has continued its participation in the European Regional Development Fund financed Deep Digital Cornwall project, led by the University of Exeter’s Camborne School of Mines.
• Strategic Minerals highlights the ‘critical’ character of tin and tungsten supply and explains that “the US Government … [has instructed] … its defence contractors that their products must be free of Tungsten sourced from China or Russia (currently supplying 90% of the world market) and current indications that the US is about to classify the UK as a domestic source and, hence, eligible for government grants to develop critical minerals such as Tungsten and Tin”.

Conclusion: Despite what its Chairman acknowledges as a difficult year in 2022, Strategic Minerals remains profitable.  Securing long-term supply access to magnetite at Cobre should continue to provide support while increasing awareness of the critical nature of tungsten, particularly from the US, may spur renewed interest in the Redmoor project and potentially attract government financial support.  Plans to resume copper production at the Mountain of Light in S Australia during 2023 remain following further permit applications in late December 2022.

*SP Angel acts as Nomad and Broker to Strategic Minerals

Sovereign Metals* (SVML LN) 25.85p, Mkt Cap £120m – SP Angel takes on Nomad role for Sovereign Metals

• SP Angel is pleased to report its appointment as Nomad to Sovereign Metals
• Sovereign Metals are working on the development of the unique Kasiya rutile and graphite deposit in Malawi.
• Potentially one of the largest and lowest cost rutile and graphite deposits in the world with JORC (2012) resources of:
  • Indicated: 1.2bnt grading of 1% rutile and 1.5% graphite
  • Inferred: 0.6bnt grading 0.9% rutile and 1.1% graphite
• The dual extraction of both materials will also cut CO2 and other emissions in the mining process.
• The use of hydro-mining with high-pressure hoses should enable particularly low cost and low CO2 emissions in mining.
• There should be little or no risk of the inhalation of graphite and related silica particles in the mining process.
• Simple open-cast, hydro-mining resolves these issues and may also serve to preserve graphite flake size and quality enabling better prices for its concentrate.

*SP Angel acts as Nomad and joint broker to Sovereign Metals

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                                                            

Prince Frederick House

35-39 Maddox Street London

W1S 2PP

*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%