SP Angel Morning View -Today’s Market View, Wednesday 24th January 2023

Base Metals rally on China RRR rate cut

MiFID II exempt information – see disclaimer below

Adriatic Metals (ADT1 LN)– Update on Vares production ramp up

Amaroq Minerals (AMRQ LN) – Copper identified in Sava drilling programme

Atlantic Lithium* (ALL LN) – $5m MIIF Sovereign Wealth Fund subscription completes as part of $32.9m investment

Centamin (CEY LN) – Correction to reported underground mineral reserve estimate at Sukari

Hummingbird Resources (HUM LN) – Investment in Pasofino Gold

KEFI Gold and Copper* (KEFI LN) – Q4 quarterly operations update highlights progress towards finance of Tulu Kapi gold mine financing

Pilbara Minerals (PLS AU) – Guidance reiterated as costs lowered into weak spodumene price environment

Premier African Minerals (PREM LN) – Drilling results from the Zulu litium project, Zimbabwe

Red Rock Resources (RRR LN) – West African and DRC assets

Resolute Mining (RSG LN) – Initial mineral resource defined at Tamboronkoto as Resolute works to extend the life of its Mako mine in Senegal

Sovereign Metals* (SVML LN) – SocialEssence appointed to lead social and community development programs in Malawi

China EV equities slide as major manufacturer lowers prices

• There was a sell-off overnight in Chinese EV stocks, with Li Auto down 4.2%, Xpeng down 5.4% and BYD down 1%.
• The move followed Xpeng’s announcement that it is lowering prices on various models, pointing to increased competition from manufacturers or weaker demand.
• The Chinese ambassador to the EU has called the bloc’s probe into Chinese EV state subsidies, increasing tensions.

Iron ore climbs despite rising steel mill stockpiles as rate cuts point to improved demand

• Iron ore prices are climbing over $130/t again in the benchmark 62% Fe Chinese index.
• However, inventory levels across major Chinese steel mills are up 6.7% mom in January at 15.4mt.
• Daily crude steel production climbed 3.7% from earlier this month to 2.09mtpd – highest in four months.
• However, blast furnaces are slowing output in steel hub Tangshan, hitting their lowest level since China’s emergence from lockdown.
• Analysts expect steel mills are initiating a period of maintenance as the Country slows into the Lunar New Year holiday.

Copper rises on China monetary easing as Codelco taps debt market, boosting long term supply concerns

• LME copper futures up 2% to $8,570/t, bouncing off recent lows of $8,270/t.
• The move follows China’s surprise the reserve requirement ratio by 50bp, as it continues efforts to bolster the economy suffering from a property rout and deflationary pressures.
• The Renmimbi has strengthened from September lows, providing support to domestic commodity buyers in the international markets.
• Codelco announced plans to sell $2bn worth of bonds, with their current 2053 notes sliding amid liquidity concerns.
• Codelco continues to struggle to meet production, sliding to their lowest output in 25 years as ore quality continues to deteriorate.
• We note similar moves to shore up the economy failed to push copper above the $9,000/t level in 2023, with a sustained rebound in demand required for copper.
• However, concentrate supply remains tight amid the closure of Cobre Panama, with TCRC fees heading below $20/C20 as smelters battle for supply.
• The copper move follows rising aluminium, zinc, and nickel prices, with diversified miners Anglo American and Glencore also rallying on hopes of improved Chinese appetite.

Economics

China – China cuts RRR ‘Reserve ratio requirements’ by 50bp from 5^th February

• The PBoC will provide another CNY1tn ($140bn) of long-term capital adding extra liquidity and confidence to the market.
• The move is almost certainly designed to prop up property valuations and increase weak consumer activity
• Beijing is hoping to boost lending activity by the banks through the process while increasing their potential for profit.
• The PBoC cut the RRR two times last year in an attempt to restore confidence and liquidity to the ailing property market.
• But it will need more than just a bit of loose monetary policy to persuade buyers to commit to apartments in unfinished property complexes unless buyers can be sure the properties will be completed on time.
• In short, China needs to provide sufficient support to Evergrande, Country Garden and others to ensure they complete on the hundred’s of thousands of partly built property complexes they started.

South Africa – Department of Home Affairs telling international visitors hoping to extend their stay by a further 90 days they must leave two months earlier than expected

• We have long suspected elements of the ANC was set against returning citizens or international workers.
• South African citizens who dare to fly into South Africa on non-South African passports are not allowed into the country and renewing South African passports for overseas residents now appears to take between one and two years.
• Now we see news the DHA ‘Department of Home Affairs’ is instructing foreign workers who haven’t received a visa renewal by 23 February to leave South Africa by the end of February, or risk being banned.
• Fortunately the Johannesburg High Court has declared ID blocking by the DHA as unconstitutional
• “The Border Management Authority is under strict instructions from the DHA to enforce the directive, which at the same time gives foreigners whose waiver and visa applications were still pending as at 30 November 2023, including long-term visas such as business, study, relatives or work visas, another extension. Applicants falling under these categories have been given extensions until 30 June 2024 on their current visa status.” According to the Daily Maverick.
• While we are not sure the UK runs the world’s best visa services, we are concerned over the direction and potential for confusion under South Africa’s DHA.

Currencies

US$1.0871/eur vs 1.0907/eur previous. Yen 147.63/$ vs 147.29/$. SAr 18.880/$ vs 19.108/$. $1.271/gbp vs $1.274/gbp. 0.659/aud vs         0.660/aud. CNY 7.163/$ vs 7.170/$.

Dollar Index 103.29 vs 103.13 previous.

Commodity News

Precious metals:

Gold US$2,029/oz vs US$2,031/oz previous

Gold ETFs 84.3moz vs 84.3moz previous

Platinum US$906/oz vs US$908/oz previous

Palladium US$960/oz vs US$947/oz previous

Silver US$22.62/oz vs US$22/oz previous

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

Base metals:

Copper US$ 8,530/t vs US$8,420/t previous

Aluminium US$ 2,258/t vs US$2,179/t previous

Nickel US$ 16,280/t vs US$16,305/t previous

Zinc US$ 2,562/t vs US$2,503/t previous

Lead US$ 2,181/t vs US$2,152/t previous

Tin US$ 26,400/t vs US$26,130/t previous

Energy:

Oil US$79.9/bbl vs US$80.3/bbl previous

• Crude oil prices stabilised as the API reported a large 6.7mb w/w draw (3mb draw exp) to US crude stocks.
• European energy prices are also flat with French nuclear reactor operating levels falling 3% w/w to 79% of 61.4MW capacity and Gazprom reporting stable supply of 42.4mcm/d (~1.5bcf/d) via the Ukraine.
• EDF announced that costs could rise by up to a further 40% to £46bn on its UK nuclear project at Hinkley Point, with a two-year delay to start-up in 2029. The 2016 proposal was costed at £18m and due to start-up in 2025.

Natural Gas €27.5/MWh vs €27.5/MWh previous

Uranium Futures $105.5/lb vs $106.0/lb previous

Bulk:

Iron Ore 62% Fe Spot (cfr Tianjin) US$131.9/t vs US$128.3/t

Chinese steel rebar 25mm US$574.2/t vs US$574.1/t

Thermal coal (1st year forward cif ARA) US$93.0/t vs US$93.3/t

Thermal coal swap Australia FOB US$123.0/t vs US$124.0/t

Coking coal swap Australia FOB US$321.0/t vs US$321.0/t

Other:

Cobalt LME 3m US$29,135/t vs US$29,135/t

NdPr Rare Earth Oxide (China) US$56,044/t vs US$56,001/t

Lithium carbonate 99% (China) US$12,074/t vs US$12,065/t

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

Ferro-Manganese European Mn78% min US$1,060/t vs US$1,063/t

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

China Graphite Flake -194 FOB US$590/t vs US$590/t

Europe Vanadium Pentoxide 98% 5.9/lb vs US$6.0/lb

Europe Ferro-Vanadium 80% 28.75/kg vs US$28.75/kg

China Ilmenite Concentrate TiO2 US$318/t vs US$317/t

Spot CO2 Emissions EUA Price US$65.9/t vs US$66.1/t

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

Battery News

Tesla to launch new vehicle codenamed ‘Redwood’

• Tesla has told suppliers that it wants to start production of a new mass market EV in mid-2025.
• According to insiders the vehicle will be a compact crossover.
• Elon Musk has been hinting at new affordable EVs that will be made on next-gen, cheaper EV platforms to better compete with combustion-engine vehicles, and Chinese EVs.

Ipower Batteries launch graphene series lead-acid batteries

• Ipower become the first Indian company to successfully launch graphene series lead-acid batteries.
• The company claims its new batteries have been tested by ICAT and awarded Type Approval Certificate.
• Founder and MD of Ipower, Vikas Aggarwal said, “This is more than just a milestone for us; it’s a game-changer for the Indian EV industry.”
• The batteries will be used for 2-wheeler EV and will help to reduce the reliance on lithium batteries.

Company News

Adriatic Metals (ADT1 LN) 168p, Mkt cap £540m – Update on Vares production ramp up

• Adriatic provides an update on its commissioning of the Vares polymetallic project in Bosnia and Herzegovina.
• The Company expects first concentrate production in 1Q24, noting delays in instrumentation technicians and equipment delays.
• All necessary equipment is reportedly now on site, with disruption to the Suez Canal causing delays.
• The Company updates its mine production guidance, expecting 240-300kt in 2024, 750-850kt in 2025, 800-900kt in 2026 and 800-900kt between 2027-2040.
• The updated guidance reflects additional exploration drilling, with the updated mine sequencing plan reflecting a slower ramp up vs the original FS with higher silver grades and lower base metal grades.
• Adriatic notes that the poor rock mass zone that runs parallel to the orebody will require upgraded ground support, expected to increase production rates through 2H24.
• As regards financing, the Company states it is fully funded for plant completion and ramp up.
• However, Adriatic has rescheduled its debt repayment programme with Orion, pushing the first quarterly debt repayment to 31^st December 2024 from 30^th June.
• Adriatic’s secured debt facility with Orion bears an interest rate of US$ LIBOR + 7.5% and was finalised at US$142.5m, including a $22.5m copper stream.
• Current LIBOR rates sit at c.5.4%, adding some pressure to Adriatic’s balance sheet.
• Final capital costs for the project are raised to $189m from $182m.

Conclusion: Adriatic has been moving towards first concentrate production at the Vares Project, however unexpected delays in equipment and geotechnical issues have slowed the ramp up period. The Company provides a revised mine plan and has negotiated a rescheduled debt repayment programme with Orion. The Company continues to progress the asset, despite its complex orebody, and we look forward to further updates.

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

Amaroq Minerals (AMRQ LN) 75p, Mkt Cap £194m – Copper identified in Sava drilling programme

(Formerly AEX Gold (AEXG LN))

• Amaroq reports drilling results from its Sava target in South Greenland.
• The Company has drilled four holes over 2200m over two targets at its Sava Licence.
• Amaroq is exploring a copper-prospective region over a 120km strike.
• The Group has identified 36 targets, with the Sava West project exploring for a copper moly porphyry style system.
• Highlights from the exploration:
  • SAV2301 Target West: 98m at 0.1% Cu and 0.009% Mo from 2.4m and 17m at 0.2% Cu from 672m.
  • SAV2302 Target West: 228m at 0.1% Cu from 12m.
  • SAV2304 Target West: 346m at 0.1% Cu from 6m.
• 2023 was the first year of Amaroq’s funded three-year exploration programme alongside Gardaq.
• They will now look to drill targets with high-grade mineralisation.

Atlantic Lithium* (ALL LN) 20.7p, Mkt Cap £130m – $5m MIIF Sovereign Wealth Fund subscription completes as part of $32.9m investment

• Atlantic Lithium report the completion of the $5m subscription by the MIFF at 20p/s, Ghana’s Sovereign Wealth Fund.
• The $5m equity subscription is part of MIIF’s total committed $32.9m strategic investment into the company.
• The shares equate to a 3% holding in Atlantic Lithium.
• MIIF can now nominate a director to the board and will also receive 9,622,787 warrants at US$0.3637.
• Atlantic now expect MIIF to invest a further US$27.9m in the Ghanaian subsidiaries to acquire a 6% contributing interest in the Company’s Ghana Portfolio within the next few months.
• The funds will contribute towards Atlantic’s share of the total US$185m capex for the Ewoyaa project
• The investment demonstrates Ghana’s commitment to the Ewoyaa project and to the mining of new materials in Ghana.
• MIIF, CEO, Edward Nana Yaw Koranteng, sees the fund as leading co-investment opportunities within the mining sector in Ghana helping to de-risk new projects for investors and helping to develop value across the entire mining value chain of every mineral
  • ”MIIF is prepared to invest in line with the Government of Ghana’s energy transition plan, including becoming the EV hub for Africa.”
• MIIF has agreed not to sell any Atlantic Lithium Shares for:
  • 6.5 million Atlantic Lithium Shares, 24 months from the date of issue;
  • 6.5 million Atlantic Lithium Shares, 36 months from the date of issue;
  • 6,245,574 Atlantic Lithium Shares, 48 months from the date of issue.

Conclusion:  Bringing the Ghana sovereign wealth fund into Atlantic Lithium demonstrates Ghana’s commitment to the development of new lithium projects in the Cape Coast region of Ghana.

*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.

Centamin (CEY LN) 99.25p, Mkt Cap £1,078m – Correction to reported underground mineral reserve estimate at Sukari

• Centamin has issued a correction to the underground mineral reserves statement for the Sukari mine which it issued on 19^th December 2023.
• The company explains that although the “total Sukari Underground Mineral Reserves were accurately reported … due to a typographical error during the announcement drafting process, the Proven and Probable classification was incorrectly reported, resulting in an understatement of the higher confidence Proven Mineral Reserves and an overstatement of the Probable Mineral Reserves”.
• The corrected estimate shows a ‘Proven’ reserve of 4.0mt at an average grade of 3.8g/t gold containing 0.5moz (formerly reported as 1.4mt at an average grade of 3.4g/t gold containing 0.2moz) while the less assured ‘Probable’ reserve is corrected to 4.6mt at an average grade of 4.0g/t gold containing 0.6moz of gold (previously reported as 7.2mt at an average grade of 4.0g/t containing 0.9moz).
• The overall total contained gold of the Sukari underground reserves remains unchanged at 1.1moz with the proportion of the more assured ‘Proven’ category increasing from around 18% to around 45%.
• Similarly, the overall gold content of the Group’s ore reserves remains unchanged at 7.7m oz including the open-pit reserves at Sukari and reserves at the Doropo project in Cote d’Ivoire.
• CEO, Martin Horgan, said that Centamin’s “improved geological understanding at Sukari has enabled a 500 thousand ounce increase in reserves over the 5.3 million ounce reserve estimated in the recently published LOM plan”.

Conclusion: Centamin has corrected typographical errors in the previously reported mineral reserves of its underground Sukari mine in Egypt.  The overall estimated gold content remains unchanged but a larger proportion of the total 1.1moz is now reclassified in the higher confidence ‘Proven’ category.

Hummingbird Resources (HUM LN) 8.4p, Mkt Cap £67m – Investment in Pasofino Gold

• Hummingbird notes the announcement made by Pasofino Gold.
• The Company has raised a total $2.33m in a pirvate placement, which includes $2m invested by Hummingbird.
• Humminbird now holds a 53% stake in Pasofino.
• The equity raise will be used to upgrade the 2022 DFS, with Hummingbird working with the Pasofino team to optimise the Dugbe project and reduce CAPEX from current forecasts of $435m excluding $98m sustaining.
• Dugbe, 100% owned by Pasofino, holds a total M&I Resource of 3.3moz, excluding 588koz in the inferred category.
• The 2022 FS points to a 14yr LOM open pit project with an NPV5 of $690m for an IRR of 26% at $1,700/oz.

Conclusion: Hummingbird continues to invest in Pasofino and their Dugbe Gold Project in Liberia, with both parties keen to reduce the CAPEX requirements of the Project and realise its ‘full potential.’

KEFI Gold and Copper* (KEFI LN) 0.64p, Mkt Cap £32m – Q4 quarterly operations update highlights progress towards finance of Tulu Kapi gold mine financing

(Kefi’s Tulu Kapi Gold Project is currently 95%-owned but with Kefi’s share reducing to c.70% on current financing plans)

• Kefi Gold and Copper report strong progress towards the financing of the Tulu Kapi Gold mine in Ethopia.
• Critical conditions precedent for project financing and launch, all requiring government regulatory confirmations, were achieved by October 2023:
  • Central bank exemptions from exchange and capital controls, announced in October 2023;
  • Government security protection for strategic mining projects, announced earlier in 2023; and
  • Finance Ministry approval of country membership for AFC, announced earlier in 2023
• Conditional final Credit Committee approval by the lead lender has been granted, as announced on 10 January 2024, following increased security commitments by the government.
• Detailed definitive agreements for the project financing are in near-final form with contractors, equity investors and government agencies.
• Agreements with lenders have also been drafted and await credit committee approval by the co-lender before finalisation.
• Independent confirmation was received of compliance with international banking standards with regard to:
  • updated technical due diligence; and
  • appropriate preparations to date as regards security
• Financial projections were updated to reflect amendments to the business plan:
  • Development of the underground deposit so that it begins to contribute to production as from Production Year 3;
  • Processing of the low-grade stockpiles at end of mine life;
  • Equity analysts’ consensus long-term gold prices (as per Standard and Poor’s) now at US$1,862/oz;
  • Lifting the process rate by 20% to c, 2.4Mtpa; and
• The intention to refinance the debt package with conventional corporate finance in year 3.
• The team are also drilling for in-fill grade control along with some deeper drilling on the underground resource where the last drill-hole intersected 90m at ~3g/t gold.

• The team are also considering development scenarios for a potential new gold mine at Jibal Qutman in Saudi Arabia with development studies and regional exploration in progress.
• KEFI and ARTAR own 25% and 75% in the JV, respectively, compared to KEFI’s share of 27% previously.
• Drilling of 81,000m at Jibal Qutman and 101,000m at Hawiah to date with a comprehensive exploration update being assembled for publication.
• The report will include
  • Metallurgical testing for selection of preferred process flowsheet;
  • Geotechnical and hydrological drilling programmes for mine planning;
  • Initial mine planning;
  • Environmental and social responsibility plans for permitting;
  • Trenching programme over the planned locations for infrastructure to ensure no mineralisation;
  • Evaluation water source alternatives;
  • Electricity cost optimisation studies;
  • Costings of capex and opex; and
  • Completion of the initial accommodation and works compound at site..

Conclusion: We expect Kefi Minerals shares to rerate higher on the closing of the financing of the Tulu Kapi gold mine. The potential development of new mines in Saudi Arabia at Jibal Qutman and 101,000m at Hawiah is also a major positive step forward.

*SP Angel acts as Nomad and Broker to KEFI Gold and Copper. The analyst has previously visited the Tulu Kapi gold mine. A SP Angel corporate finance partner recently attended a meeting of finance partners in Addis Ababa.

Pilbara Minerals (PLS AU) A$3.46p, Mkt cap A$10.4bn – Guidance reiterated as costs lowered into weak spodumene price environment

• Pilbara, operator of the Pilgangoora spodumene project in WA, reports their quarterly production figures.
• The Company produced 176kt of spodumene concentrate, up 22% qoq.
• Production beat analysts’ expectations by c.10%.
• Realised prices fell 50% over the quarter to US$1,113/t vs US$2,240/t in the quarter to September.
• Revenue fell 46% to A$264m.
• The Company has cut operating costs on a FOB unit basis to US$416/t, down 15%, and CIF costs (including freight and royalty costs) reduced 20% qoq to US$523/t.
• Unit cost efficiency seen as a result of increased scale of production.
• Cash reduced 29% to A$2,144/t on the back of a tax payment of A$758m. FY24 CAPEX guidance lowered to A$820-875m, down $55-100m.
• The Company continues to invest in growth CAPEX, committing to the P680 Expansion Project and the P1000 expansion project as it looks to increase production to 1mtpa over the longer term.
• Lithium Market Commentary:
  • The Company expects pricing to remain volatile amid ‘uncertain macroeconomic conditions and closely managed inventories within the supply chain.’
  • They remain bullish on the long-term outlook for lithium products amid the ramp up in EV and battery energy storage demand.
  • Management notes the December quarter set all time records for EV sales, with China EV sales up 31% yoy in 2023.
  • China EV penetration rate at 38%, rising to 41% in the December quarter.
  • Management noted in the call that they are currently seeing a price range between US$800-900/t for spodumene concentrate.
• The Company has withheld its dividend amid the more challenging pricing climate.

Premier African Minerals (PREM LN) 0.2p, Mkt Cap £52m – Drilling results from the Zulu litium project, Zimbabwe

• Premier African Minerals has reported results from the latest two drillholes from the Southeast Zone at its Zulu lithium project.
• Among the results highlighted in the announcement are:
  • An intersection of 10.80m at an average grade of 1.11% Li₂O and 94ppm Ta₂O₅ from a depth of 198.00m in Hole ZDD162, which also intersected
  • 6.24m at an average grade of 0.84% Li₂O and 62ppm Ta₂O₅ from a depth of 238.41; and 3.07m at an average grade of 1.21% Li₂O and 83ppm Ta₂O₅ from 359.53m depth; and
  • An intersection of 7.68m at an average grade of 0.74% Li₂O and 41ppm Ta₂O₅ from a depth of 259.00m in Hole ZDD163; and
  • Intersections in infill hole ZDD165, located in the “North pit (Main zone)” of 6.04m at an average grade of 0.96% Li₂O and 19ppm Ta₂O₅ from a depth of 206.87m and 4.22m at an average grade of 1.00% Li₂O and 26ppm Ta₂O₅ from a depth of 215.25.
• The company says that results from the Southeast Zone show that it “appears to be Spodumene Quartz Intergrowths (“SQI“) dominant with more than 90% of the mineralisation associated with spodumene”.
• Commenting on progress with the plant, Premier African Minerals also takes the opportunity to confirm that “all components for the thickener are now either at site or on route. The final components and the ball mill are all expected to be loaded for planned departure for site on 29 January 2024. The mill is expected to be factory run on the 26 January 2024 immediately prior to loading”.
• Last week, the company reported that expected to resume production in late February.

Red Rock Resources (RRR LN) 0.08p, Mkt cap £2.4m – West African and DRC assets

• Red Rock Resources has provided a progress report on its West African and DRC projects.
• In Burkina Faso, the company highlights the contract renewal at its Bilbale gold project and renewal of its licence for the Boulon gold project.
• “Geochemical testing of Bilbale license and mapping of key zones has begun, with a view to semi-mechanised mining of alluvial areas and follow up drilling of hard rock targets”.
• The company also confirms the award of “a second license in the group of four Au applications around Yamoussoukro creates critical mass for development/joint venture in Côte d’Ivoire” where it reports “Approaches by third parties in relation to Cote d’Ivoire licenses”.
• In the DRC, the company says that it is optimistic of progress with its arbitration “following the conclusion of elections” and says that it believes “the conclusion of this lengthy process is now near”.
• We understand from the company’s annual report that the DRC arbitration concerns the company’s claim on the proceeds of joint-venture assets sold “without our knowledge and consent …for US$20m a few months after we had started work there”.

Resolute Mining (RSG LN) 21p, Mkt Cap £447m – Initial mineral resource defined at Tamboronkoto as Resolute works to extend the life of its Mako mine in Senegal

• Resolute Mining has issued a progress report on its Senegalese exploration properties, including an initial mineral resources estimate for the Tomboronkoto prospect located around 16km east, and 20km by road, of the processing plant at the company’s Mako operation.
• The estimate, which follows the completion of a 54-hole, 8,900m, drilling campaign in October 2023, reports 3.685m ‘Inferred’ tonnes at an average grade of 2.2g/t gold for a contained 264,000oz of gold using a 1g/t cut-off.
• The company explains that so far, most of the drilling is within the uppermost 100m and that the structure “is open along strike and down dip. Further drilling is expected to expand the Mineral Resource”.
• Resolute Mining says that the mineralisation at Tomboronkoto is hosted within “a shear in the granodiorite unit … [and that it] … has a relatively simple geometry comprising a zone that varies from 30 to 60m in width, along the 1,700m strike length drilled to date. The zone dips approximately 70⁰ to the south-southeast”.
• Initial metallurgical testing of samples from the reverse-circulation drilling “demonstrate that the Tomboronkoto ore body is free milling, with recoveries exceeding 90% from fresh and weathered gold mineralised material”.
• Future drilling, including a further 20,000m of reverse-circulation and 3,000m of diamond drilling planned for 2024 and budgeted to cost US$4m, “will be focused on both infill drilling to convert Inferred Mineral Resource to Indicated category and further drilling to expand the resource”.
• Today’s announcement also reports the signing of a joint-venture agreement with a Senegalese company “to earn into the Bantaco project located 20km east of Mako … [which the company describes as] … an excellent opportunity to discover an open cut gold resource within trucking distance of Mako”.
• The company expects to start exploration at Bantaco, an area with “extensive artisanal workings in two main locations, Baisso in the southwest and Bantaco in the northeast of the permit” during the current quarter and is budgeting US$1.4m, including 10,000m of reverse-circulation drilling in 2024.
• Resolute Mining has also signed a joint-venture agreement covering the Laminia project adjacent to and east of Bantaco in an area covering “the southern extensions of the Massawa Shear zone which controls the gold mineralisation hosted in the Massawa Deposits held by Endeavour Mining Corporation”.
• The company explains that “Auger drilling in the northwestern part of the … [Laminia] … permit covering the southern extensions of the Massawa shear zone, delineated a 3km gold anomaly open to the South”.
• Commenting on the progress of Resolute Mining’s exploration in Senegal, CEO, Terry Holohan, described the “completion of the maiden Inferred Mineral Resource at Tomboronkoto within 6 months … [as] …a significant achievement and … [said that it] … reflects the efforts and ability of our exploration and operations teams on the ground”.
• He also said that with “three projects close to our mine and within the same Greenstone Belt following the recent successful conclusion of the two JVs … [the company is making progress] … to extend the life of our Mako operation”.
• The company’s 2022 Annual Report shows a total ‘Measured, Indicated and Inferred’ resource at Mako of ~14.1mt at an average grade of 1.5g/t gold for a contained gold content of ~0.68moz.  Production from the mine in 2022 amounted to ~129,000oz of gold

Conclusion: Definition of an initial mineral resource at Tomboronkoto and securing additional exploration exposure close to the Mako mine provides an opportunity to extend the mine’s life.  We await news on the progress of further exploration at Tomboronkoto and at the joint-ventures at Bantaco and Laminia.

Sovereign Metals* (SVML LN) 24p, Mkt Cap £127m – SocialEssence appointed to lead social and community development programs in Malawi

(Rio Tinto is a 15% strategic investor in Sovereign Metals topco and not a jv partner)

Valuation 55p

• Sovereign Metals report the appointment of SocialEssence to lead social and community development programs for the company in Malawi.
• The company has previously worked with First Quantum Minerals in Zambia on the Trident and Kansanshi mining projects.
• SocialEssence involves some 7,000 local farmers in a conservation program in Zambia which are led by SocialEssence’s current Livelihood Specialist.
• The late Philip Pascal who founded and ran First Quantum till he stepped down in 2022 was particularly keen to see local Zambian’s develop work, education, health and community programs.
• Pascal’s thoughtful focus has helped lift thousands of Zambian farmers out of the poverty of simple subsistence farming.
• Sovereign has the world’s largest rutile resource at 1.8bn grading 1.01% rutile.
• Sierra Rutile, the world’s largest rutile producer is expected to run down its operations in Sierra Leone within the next three years.

Conclusion:  Sovereign Metals along with its 15% strategic investor, Rio Tinto are looking to build on the work done by First Quantum and SocialEssence to support farmers and communities in Malawi around the prospective Kasiya rutile and graphite project.

*SP Angel act as Nomad and 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.

DISCLAIMER

This note is a marketing communication and comprises non-independent research. This means it has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of its dissemination.

This note is intended only for distribution to Professional Clients and Eligible Counterparties as defined under the rules of the Financial Conduct Authority and is not directed at Retail Clients.

This note is confidential and is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published in whole or in part, for any purpose.

This note has been issued by SP Angel Corporate Finance LLP (‘SPA’) to promote its investment services. Neither the information nor the opinions expressed herein constitutes, or is to be construed as, an offer or invitation or other solicitation or recommendation to buy or sell investments. The information contained herein is based on sources which we believe to be reliable, but we do not represent that it is wholly accurate or complete. All opinions and estimates included in this report are subject to change without notice. It is not investment advice and does not take into account the investment objectives and policies, financial position or portfolio composition of any recipient. SPA is not responsible for any errors or omissions or for the results obtained from the use of such information. Where the subject of the research is a client company of SPA we may have shown a draft of the research (or parts of it) to the company prior to publication to check factual accuracy, soundness of assumptions etc.

Distribution of this note does not imply distribution of future notes covering the same issuers, companies or subject matter.

Where the investment is traded on AIM it should be noted that liquidity may be lower and price movements more volatile.

SPA, its partners, officers and/or employees may own or have positions in any investment(s) mentioned herein or related thereto and may, from time to time add to, or dispose of, any such investment(s).

SPA is registered in England and Wales with company number OC317049.  The registered office address is Prince Frederick House, 35-39 Maddox Street, London W1S 2PP.  SPA is authorised and regulated by the UK Financial Conduct Authority and is a Member of the London Stock Exchange plc.

MiFID II – Based on our analysis we have concluded that this note may be received free of charge by any person subject to the new MiFID II rules on research unbundling pursuant to the exemptions within Article 12(3) of the MiFID II Delegated Directive and FCA COBS Rule 2.3A.19.

A full analysis is available on our website here http://www.spangel.co.uk/legal-and-regulatory-notices.html. If you have any queries, feel free to contact our Compliance Officer, Tim Jenkins (tim.jenkins@spangel.co.uk).

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%