SP Angel Morning View -Today’s Market View, Wednesday 23rd August 2023

Copper prices climb alongside base metals in anticipation of China restocking

MiFID II exempt information – see disclaimer below

Atlantic Lithium* (ALL LN) – Minerals Commission comments on speculation over Ewoyaa mining license

Bluejay Mining* (JAY LN) – Placing raises further £600,000 at 1p/s

Bradda Head (BHL LN) – Additional results from Basin lithium clay project to support MRE delivery

First Class Metals (FCM LN) – JV agreement reached by Palladium One for 80% of West Pickle Project

Premier African Minerals (PREM LN) – Progress report from Zulu

Copper prices tick higher alongside base metals in anticipation of China restocking

• Copper prices have bounced off recent lows, climbing from $8,178/t last week to $8,400/t today.
• The move followed improving import premiums, suggesting Chinese buyers are ramping up refined purchases.
• Shanghai stocks are also low, with traders betting additional inventory draws will support higher prices.
• COMEX short positions hit the highest since early 2020, with upwards momentum adding pressure on funds to cover their bearish bets.
• Iron ore is also strengthening, up 10% over the past week, with hopes that an uptick in seasonal construction demand may be looming.
• Coking coal and coke prices both jumped overnight.
• Authorities have been quiet in China on a steel mill production cap, pushing steel inventories to their highest level since May at 16.6mt.

Northvolt raises USD$1.2bn for battery plant expansion

• The Swedish lithium-ion battery producer Northvolt has raised USD$1.2bn in their latest fundraising round as it plans new European plants and an expansion into North America, its financial chief told Reuters.
• The funds will help Northvolt expand its factory footprint – the firm has several factories across Europe with a €600m investment to build a plant in Germany, announced in May.
• The battery maker has a facility in the US and some sources have said the company is close to finalising plans to build a multibillion-dollar battery factory in Canada that will be announced later this year.
• Northvolt has secured orders of over USD$55bn for batteries from customers such as BMW, Fluence, Scania, Volvo Cars and Volkswagen.
• It has also recently completed its first energy storage system facility in Poland and expects to start customer deliveries later this year.
• There have been some reports that Northvolt is preparing for an IPO that could value the company at over USD$20bn, but there has been no official confirmation of this from the company.

Zambian state revenues slide on falling copper output, pressuring authorities to support mining industry

• Mining tax revenue in Zambia fell 64% to 3.44bn Kwacha ($176m) in H1 this year.
• Royalty tax collected fell to 3.74bn Kwacha.
• Gross revenue fell 8% below target.
• HH’s government is pushing to support the copper mining industry, and today’s data highlights the state’s reliance on copper output to fund fiscal programmes.
• We expect the administration to continue incentivising additional copper output from Zambia.

Gold prices tick higher as Treasury sell-off calms on weakening PMI data

• Gold spot prices bounced over $1,900/oz overnight following a sustained sell-off since mid-July.
• US Treasuries had sold off over the same period, providing a major headwind to gold prices and supporting the dollar.
• Expect a fall in longer duration yields to provide support to gold going forward.
• If the US follows the Eurozone today with contracting PMIs, gold should see some major support.
• However, continued strength in the US economy, with jobless claims data due tomorrow and Jackson Hole due on Friday, should weigh on gold prices.
• The dollar hit a two-month high against a basket of currencies, as the Euro sold off and the Yen holds around a nine-month low.
• A stronger dollar traditionally caps gold’s gains.

Economics

UK – Manufacturing PMI falls to 31-month low at 41.5 in August from 45.3 in July

• Services PMI falls to 48.7 from 51.5 a 7-month low
• PMI Composite fell to 47.9 from 50.8, a 31-month low.

Eurozone – Manufacturing PMI rose to 43.7 from 42.7 in August

• Services PMI collapsed to 48.3 a 30-month low
• Composite PMI declined to 47.0 a 33-month low

Germany –  Germany PMI Manufacturing rose to 39.1 in August from 38.8 in July a 39-month low.

• PMI Services collapsed to 47.3 from 52.3, a 9-month low generating fears for stagflation
• PMI Composite collapsed to 44.7 from 48.5, a 39-month low

France – Manufacturing PMI rose to 46.4 in August from 45.1 in July.

• Services PMI fell to 46.7 from 47.1 a 30-month low impacted by higher labour and input costs
• Composite PMI holds steady at 46.6.

Japan – Manufacturing PMI climbed to 49.7 in August from from 49.6 with flat manufacturing employment

• Services PMI rose to 54.3 from 53.8
• Composite PMI also edged up from 52.2 to 52.6.

Flying fish causes power cut

• Workers for the Jersey Central Power and Light Company found a fish to have shorted out a transformer on New York’s Staten Island.
• The team reckon the fish was put there by a bird.

Currencies

US$1.0868/eur vs 1.0922/eur yesterday. Yen 145.67/$ vs 145.85/$. SAr 18.702/$ vs 18.871/$. $1.276/gbp vs $1.279/gbp. 0.643/aud vs 0.644/aud. CNY 7.288/$ vs 7.289/$

Dollar Index 103.45 vs 103.11 yesterday.

Commodity News

Precious metals:

Gold US$1,904/oz vs US$1,899/oz yesterday

Gold ETFs 90.1moz vs US$90.1moz yesterday

Platinum US$929/oz vs US$921/oz yesterday

Palladium US$1,265/oz vs US$1,254/oz yesterday

Silver US$23.74/oz vs US$23.33/oz yesterday

Rhodium US$4,100/oz vs US$4,100/oz yesterday

Base metals:

Copper US$ 8,422/t vs US$8,344/t yesterday

Aluminium US$ 2,191/t vs US$2,166/t yesterday

Nickel US$ 20,630/t vs US$20,490/t yesterday

Zinc US$ 2,349/t vs US$2,346/t yesterday

Lead US$ 2,168/t vs US$2,180/t yesterday

Tin US$ 26,055/t vs US$26,100/t yesterday

Energy:

Oil US$83.7/bbl vs US$84.4/bbl yesterday

• Crude oil prices edged lower in thin markets as the API reporting that US crude stocks fell by 2.4mb (vs -2.9mb expected) last week.
• European energy prices remain elevated as the market awaits the outcome of negotiations to avoid strikes at facilities that supply roughly half of Australia’s LNG exports.

Natural Gas US$2.555/mmbtu vs US$2.599/mmbtu yesterday

Uranium UXC US$57.00/lb vs US$56.75/lb yesterday

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$111.0/t vs US$108.0/t

Chinese steel rebar 25mm US$514.2/t vs US$510.5/t

Thermal coal (1st year forward cif ARA) US$134.0/t vs US$130.0/t

Thermal coal swap Australia FOB US$164.5/t vs US$162.0/t

Coking coal swap Australia FOB US$252.0/t vs US$252.0/t

Other:  

Cobalt LME 3m US$33,420/t vs US$33,420/t

NdPr Rare Earth Oxide (China) US$68,603/t vs US$67,641/t

Lithium carbonate 99% (China) US$27,784/t vs US$27,783/t

China Spodumene Li2O 6%min CIF US$3,170/t vs US$3,170/t

Ferro-Manganese European Mn78% min US$1,038/t vs US$1,043/t

China Tungsten APT 88.5% FOB US$310/mtu vs US$310/mtu

China Graphite Flake -194 FOB US$672/t vs US$672/t

Europe Vanadium Pentoxide 98% 7.6/lb vs US$7.6/lb

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

China Ilmenite Concentrate TiO2 US$309/t vs US$309/t

Spot CO2 Emissions EUA Price US$94.2/t vs US$95.4/t

Brazil Potash CFR Granular Spot US$360.0/t vs US$360.0/t

Battery News

Xiaomi wins go ahead for EV plans amid congested market concerns

• Smartphone maker Xiaomi has won the approval of China’s state planner to manufacture EVs, according to two people with knowledge of the matter.
• China’s National Development and Reform Commission (NDRC), which regulates new investments and production capacity in China’s auto industry, gave the nod for EV manufacturing to Xiaomi earlier this month, said the sources. Xiaomi’s venture is only the fourth since the end of 2017 to win NDRC approval.
• China has been clamping down on EV startups, with the NDRC being cautious in approving new EV production plans of companies because of concerns on overcapacity and slowing demand in the sector.

Company News

Atlantic Lithium* (ALL LN) 21p, Mkt Cap £128m – Minerals Commission comments on speculation over Ewoyaa mining license

(Piedmonth can earn into up to 50% of the Ewoyaa lithium project through the expenditure of around 70% of the project capex)

BUY

• The Minerals Commission in Ghana commented yesterday that it is currently negotiating with Atlantic Lithium over the development of the Ewoyaa lithium project.
• The commission states that discussions have not evolved to the stage where the company could be granted an operating license and any reports to the contrary are false.
• Atlantic Lithium has been granted a prospecting license which it acquired through its Ghanian subsidiary, Barari Development Ghana.
• The Ghana government Cabinet approved a new policy framework on 27 July for the exploitation, management and regulation of lithium and other green minerals in Ghana.
• The Minerals Commission is mandated to make recommendations to the Minister for the grant of mineral rights including mining leases and has not made any such recommendations for the grant of a mining lease to the minister for the development of lithium deposits at Ewoyaa.

Conclusion:  We expect the Minerals Commission to grant a mining license to Ewoyaa as soon as it has concluded final negotiations.

*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 intrepid analysts also visited the Ministry of Minerals Commission and MIIF, the Ghana Minerals Income Investment Fund.

Bluejay Mining* (JAY LN) 0.99p, Mkt cap £11m – Placing raises further £600,000 at 1p/s

(Bluejay Mining holds 100% of the Hammaslahti and Enonkoski projects)

• Bluejay Mining report the placing of 60m new shares at 1p/s raising £600,000.
• Funds will be used for the definition of a new copper-zinc-gold resource at Hammaslahti in Finland.
• Hammaslahti: final assay results are due in early September from the second phase of drilling at Hammaslahti which will feed into the new JORC resource statement.
• Recent drilling on the E-lode at Hammaslahti intersected sulphide mineralisation in all holes indicating likely metal content.
• “Further work is planned on the E-lode, as well as down-plunge extensions to previously mined ore-lodes, to enable the delivery of a maiden MRE for the ore bodies.“
  • The E-lode discovery hole returned 8.65m @ 2.2% copper, 2.0% zinc, 0.5 % lead, 47.5 g/t silver, and 0.5 g/t gold
    • Inc. 5.60m @ 3.2% copper, 3.2% zinc, 81.1 g/t silver, and 0.9 g/t gold
• Management continues to believe that the Hammaslahti Project has the potential to provide meaningful near term value to shareholders.
• The historic Hammaslahti polymetallic mine produced some 7mt of high-grade Cu-Zn-Ag-Au ore
• Enonkoski: Further work will be done along with a potential 1,000-1,500m of drilling to test a series of targets at Makkola, Hälvalä and Kiislampi following up on work done by Rio Tinto who recently ended their jv with Bluejay.
• Kangerluarsuk:  Bluejay are looking forward to planning a new work program at Kangerluarsuk despite excessive sea ice making access difficult for the 2023 field season.
• Disko-Nuussuaq: Bluejay are also looking forward to advancing the Disko-Nuussuaq project with jv partner, Kobold Metals though no work appears to be ongoing at the site this year
• Dundas:  Management are waiting on a new MRE, Mineral Resource Estimate as part of the ongoing Feasibility Study optimisation.
• Ilmenite prices continue to pick up in China with TiO2 46% concentrate prices rising to CNY 2,230-2,280/t (from CNY 2106-2210/t in mid-July.
• The current price equates to US$328/t in China and $285/t after the deduction of import tariffs.
• The move reflects the need for new sources of titanium feedstock in the market.
• Further funding: Bluejay is in discussion with strategic investors in the US and Nordic region with respect to partnering on one or more of its base metals projects in Finland and Greenland.
  • “Funds will also go toward the planning activities aiming for exploration at the Kangerluarsuk Zn-Pb-Ag±Ga±Ge±Cu project in 2024.”
• Prospective Strategic Investors: Bluejay is also in advanced discussions with five strategic investors and management are hopeful to conclude some of these discussions in the second half.
• Metals One shares: Bluejay currently hold ~29% of Metals One shares which started trading on AIM on 31^st July at 4.5p/s. The stake is currently worth around £2.56m.
• Bluejay has transferred its Black Shales licenses towards the north of Finland to Metals One in return for the stake, £150,000 in cash and further potential shares in Metals One.

Conclusion:  Bluejay are focussing on the potential for near-term resource definition at Hammaslahti over the next few months followed by the potential for further discovery at Enonkoski in Finland.  Management are closing in on a series of strategic discussions across the portfolio and are likely to bring in new partners with expertise to help fund future resource definition and potential development.

*SP Angel acts as nomad and broker to Bluejay Mining. The analyst has visited the historic Enonkoski mine site and holds shares in Bluejay Mining

Bradda Head (BHL LN) 3.8p, Mkt Cap £15m – Additional results from Basin lithium clay project to support MRE delivery

• Bradda Head provides an update from its drilling programme at the Basin East Extension in Arizona.
• The current drilling programme is intended to support a resource expansion at the project.
• Lithium intercepts over the two sonic core holes include:
  • 88.7m @ 903ppm Li
  • 75m @ 983ppm Li
• The Company believes higher grade units lie in the upper clay unit, which is the shallowest.
• BHL notes encouraging continuity of lithium intercepts and is targeting +1mt LCE resource.
• If Bradda Head delivers a +1mt LCE MRE, they trigger a $2.5m royalty payment from LRC.
• As regards resource expansion, the project holds a 1-6mt LCE JORC-compliant Exploration Target identified by SRK, with the upper clay unit holding an average width of 78m in the Basin East Extension, with BE holding an average thickness of 34m.

Conclusion: Bradda Head continues to deliver drilling results at their Arizona Lithium Clay project, with today’s results supporting their ambitions of delivering a +1mt LCE MRE. We imagine such results will support the necessary 800ppm, >1mt MRE to trigger the $2.5m royalty agreement reached with LRC on the 22^nd December 2021. Given the complexities of developing a lithium clay project, it is encouraging to see the Bradda Head team continue begin the Phase 3 drill programme on the San Domingo pegmatite district, where the Company is focused on delivering a Resource.

First Class Metals (FCM LN) 8.9p, Mkt Cap £6.4m – JV agreement reached by Palladium One for 80% of West Pickle Project

• First Class Metals reports an update to the JV agreement with Canadian-listed Palladium One for the West Pickle Lake project.
• Palladium One has now completed the rights to gain an 80% interest in the Project.
• This enables the formal creation of a JV agreement.
• The agreement required Palladium One to earn an 80% interest by spending an aggregate C$325k in exploration expenses.
• The 2022/23 Palladium One drilling campaign returned highlights including:
  • TK-22-070 returning 3.1% NiEq over 10.1m from 164m.
  • TK21-059 returning 5.27% NiEq over 2.5m from 185m
  • TK21-060 returning 4% NiEq over 2.4m from 186m
• FCM is ‘actively exploring the contiguous 100% owned areas for similar potential,’ including the OnGold area lying to the north.

Premier African Minerals (PREM LN) 0.44p, Mkt Cap £98m – Progress report from Zulu

• Premier African Minerals has provided a progress report from its Zulu Lithium project in Zimbabwe where, earlier this year, it emerged that the 40tph pilot plant had suffered construction delays and was reported to require modifications to achieve its design performance.
• Today’s announcement confirms the company’s expectation that “the Zulu plant will produce spodumene to the specification required by the Company’s offtake partner”.
• The company describes an “interim milling solution” involving the “relocation of the RHA mill to Zulu … [as] … an interim mitigation step … [and confirms that] … the mill has been decommissioned at RHA and transported to the Zulu site and is under installation at present”.
• Premier African Minerals says that it expects to complete the installation of the mill from the RHA tungsten mine, also located in Zimbabwe, and, we believe, not currently producing, “in the coming month when commissioning is planned to commence”.
• Today’s announcement also says that flotation tests on spodumene from the Zulu project conducted during the summer have produced “a spodumene concentrate with a chemical grade of 6.56% Li2O, 0.26% K2O, 0.47% Na2O, and 2.31% Fe₂O₃ … along with an overall spodumene recovery of approximately 81%” from mica tailings.
• The test-work, conducted by Geolabs, described as “a leading provider of mineral processing solutions for the mining and minerals industry” indicated that “it may be worth testing magnetic separation on the final spodumene concentrate to reduce the Fe₂O₃ and meet the desired specifications”.
• Premier African Minerals confirms that the “plant at Zulu includes magnetic separation”.

Conclusion: Measures to address the shortcomings of the Zulu pilot plant are expected to start commissioning in the next month. We await further news on their effectiveness with interest.

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

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

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

Analysts

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

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

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

Sales

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

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

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

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

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