SP Angel Morning View -Today’s Market View, Wednesday 24th July 2024

Gold hovers around $2,410/oz ahead of US PCE data

MiFID II exempt information – see disclaimer below

Bradda Head (BHL LN) – Progress report from the Basin clay project, Arizona

Mkango Resources* (MKA LN) – Tyseley HPMS facility development update

Peak Rare Earths (PEK AU) – Non-binding Term Sheet for Shenghe to secure controlling stake in Ngualla

Phoenix Copper* (PXC LN) – Appointment of VP Investor Relations

Versarien* (VRS LN) – £550,000 raised to purchase testing equipment

Economics

Japan

• Flash Manufacturing PMI (Jul/Jun/Est): 49.2/50.0/NA
• Flash Services PMI (Jul/Jun/Est): 53.9/49.4/NA
• Flash Composite PMI (Jul/Jun/Est): 52.6/49.7/NA

Eurozone – Economic recovery continued to fade in July

• New orders dropped for the second consecutive month and business confidence dropped to a six month low.
• Hiring slowed while inflation also pulled back to the slowest level since last October.
• Although, services sector continued to report positive inflation compared to a manufacturing sector where prices fell moderately.
• Flash Manufacturing PMI (Jul/Jun/Est): 45.6/45.8/46.1
• Flash Services PMI (Jul/Jun/Est): 51.9/52.8/52.9
• Flash Composite PMI (Jul/Jun/Est): 50.1/50.9/50.9

Germany – Struggling manufacturing sector drags nation’s private sector activity into a contraction at the start of Q3.

• New business orders fell for the second month in a row with the steepest drop registered by the manufacturing sector.
• Services registered an increase in orders for the fourth month in a row albeit it was the weakest reading during the period.
• Employment fell and inflation softened.
• “With the composite PMI now below 50, our GDP Nowcast predicts that economic output will shrink by 0.4% in the third quarter compared to the second quarter… while it is still early days and many data points are yet to come, the second half of the year is starting on a very weak note,” the report read.
• Flash Manufacturing PMI (Jul/Jun/Est): 42.6/43.5/44.0
• Flash Services PMI (Jul/Jun/Est): 52.0/53.1/53.3
• Flash Composite PMI (Jul/Jun/Est): 48.7/50.4/50.6

France

• Flash Manufacturing PMI (Jul/Jun/Est): 44.1/45.4/45.9
• Flash Services PMI (Jul/Jun/Est): 50.7/49.6/49.7
• Flash Composite PMI (Jul/Jun/Est): 49.5/48.8/48.8

UK – Business activity picks up with general elections behind.

• New business orders climbed at the fastest pace in 15 months, hiring was at its strongest in more than a year.
• Confidence bounced back in July and is now close to a two year high hit earlier this year, Bloomberg writes.
• Price pressures moderated to the weakest rate since February 2021 on the back of a softer increase in output charges in the services sector.
• Flash Manufacturing PMI (Jul/Jun/Est): 51.8/50.9/51.0
• Flash Services PMI (Jul/Jun/Est): 52.4/52.1/52.5
• Flash Composite PMI (Jul/Jun/Est): 52.7/52.3/52.6

Currencies

US$1.0849/eur vs 1.0878/eur previous. Yen 154.77/$ vs 156.44/$. SAr 18.405/$ vs 18.367/$. $1.290/gbp vs $1.292/gbp. 0.660/aud vs 0.663/aud. CNY 7.274/$ vs 7.275/$.

Dollar Index 104.42 vs 104.34 previous

Precious metals:         

Gold US$2,416/oz vs US$2,394/oz previous

Gold ETFs 82.1moz vs 82.0moz previous

Platinum US$957/oz vs US$948/oz previous

Palladium US$935/oz vs US$894/oz previous

Silver US$29.26/oz vs US$29/oz previous

Rhodium US$4,650/oz vs US$4,650/oz previous

Base metals:   

Copper US$ 9,152/t vs US$9,124/t previous

Aluminium US$ 2,301/t vs US$2,301/t previous

Nickel US$ 15,985/t vs US$16,065/t previous

Zinc US$ 2,691/t vs US$2,689/t previous

Lead US$ 2,049/t vs US$2,072/t previous

Tin US$ 29,730/t vs US$29,175/t previous

Energy:           

Oil US$81.2/bbl vs US$82.5/bbl previous

• Crude oil prices edged lower despite the API reporting a 3.9mb w/w draw to US crude stocks (-2.5mb exp).
• Media reports that the US Bureau of Safety and Environmental Enforcement (BSEE) has issued a suspension order that directs the offshore Massachusetts Vineyard Wind farm to halt any power production or new construction activity whilst investigators examine the failure of a blade from a 13MW GE Vernova wind turbine.

Natural Gas €31.5/MWh vs €31.7/MWh previous

Uranium Futures $83.2/lb vs $83.3/lb previous

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$99.5/t vs US$103.0/t

Chinese steel rebar 25mm US$506.9/t vs US$508.1/t

Thermal coal (1st year forward cif ARA) US$112.7/t vs US$111.5/t

Thermal coal swap Australia FOB US$138.0/t vs US$138.5/t

Coking coal Dalian Exchange futures price US$205/t vs US$206.3/t

Other:  

Cobalt LME 3m US$26,625/t vs US$26,625/t

NdPr Rare Earth Oxide (China) US$49,627/t vs US$49,488/t

Lithium carbonate 99% (China) US$11,204/t vs US$11,204/t

China Spodumene Li2O 6%min CIF US$970/t vs US$970/t

Ferro-Manganese European Mn78% min US$995/t vs US$995/t

China Tungsten APT 88.5% FOB US$325/mtu vs US$325/mtu

China Graphite Flake -194 FOB US$470/t vs US$470/t

Europe Vanadium Pentoxide 98% 5.1/lb vs US$5.1/lb

Europe Ferro-Vanadium 80% 26.75/kg vs US$26.75/kg

China Ilmenite Concentrate TiO2 US$314/t vs US$314/t

China Rutile Concentrate 95% TiO2 US$1,382/t vs US$1,382/t

Spot CO2 Emissions EUA Price US$64.6/t vs US$63.9/t

Brazil Potash CFR Granular Spot US$297.5/t vs US$297.5/t

Germanium China 99.99% US$2,075.0/kg vs US$2,055.0/kg

China Gallium 99.99% US$427.0/kg vs US$427.0/kg

Battery News

Volkswagen plans 1m EVs sold annually

• Volkswagen’s battery company, PowerCo, has signed an agreement with QuantumScape to industrialise next-generation solid-state lithium-metal battery technology.
• PowerCo aims to manufacture up to 40GWh/year, with potential expansion to 80GWh annually, sufficient for about 1m vehicles.
• QuantumScape’s technology uses a proprietary solid-state ceramic separator enabling a pure lithium-metal anode, promising improved energy density, power density, fast charging, and safety.
• The companies plan to scale up this technology for integration into a Volkswagen Group vehicle series.
• The agreement aims to drive the industry forward, ensuring Volkswagen’s EVs are benchmarks for excellence and sustainability.

LGES in talks with Chinese material firms for low-cost European batteries

• South Korea’s LG Energy Solution (LGES) is in talks with about three Chinese suppliers to produce low-cost EV batteries for Europe, according to a senior executive.
• The potential partnerships come as the global EV industry struggles with a slowdown in demand, and tackling growing pressure non-Chinese battery firms face from automakers to lower prices to levels matching cheaper Chinese rivals.
• Renault will include lithium iron phosphate (LFP) battery technology in its plans to mass produce EVs, and has chosen LGES and its Chinese rival CATL as partners to build a supply chain in Europe.

Trump win could spell trouble for Asian firms, but benefit China

• Asian EV and battery makers are concerned about a potential Trump election victory, which could threaten their investments and plans in the US
• Korean and Japanese firms currently rely on US sales due to slowing demand and intense competition in China.
• Trump plans to end the current Biden administration’s EV mandate and related policies, potentially affecting these companies.
• The Biden administration has tried to exclude Chinese EV makers from the US market, benefiting other carmakers.
• Trump, however, promises to allow Chinese EV makers to build factories in the US, which could intensify competition.
• Japanese and Korean automakers are shifting focus to hybrids to mitigate risks from potential Trump policies.
• Korean companies’ shares dropped due to election concerns, while Chinese EV makers saw gains.

Giant battery-powered dump truck dumps diesel for electric

• Hitachi Construction Machinery has developed the world’s first ultra-large, fully electric mining dump truck, marking a significant innovation in heavy industry.
• This electric dump truck is capable of hauling over 200 tons of earth without using any diesel, drastically reducing greenhouse gas emissions.
• The truck can operate for up to 20 hours a day, 350 days a year, matching diesel-powered vehicle schedules while emitting zero emissions.
• The electric dump truck could potentially eliminate the need for 1,200,000 litres of diesel fuel annually per truck, avoiding 3,000 metric tons of CO2 emissions each year.

Flying taxi journeys could cost the same as ‘hiring an Uber’, UK firm says

• Vertical Aerospace claims electric flying taxi journeys could eventually cost the same as hiring an Uber.
• The Bristol-based company aims for regulatory approval for its eVTOLs by the end of 2026, with commercial flights starting in 2027.
• Vertical Aerospace’s technology promises quick, clean journeys that could be as cost-efficient as road or rail transport due to high frequency, low maintenance, and operational efficiency.
• The company plans a gradual rollout, starting with tens to hundreds of aircraft, with the market initially targeting first and business class passengers.
• eVTOLs are expected to be cheaper, safer, quieter, and more eco-friendly compared to helicopters, utilising electric motors and batteries instead of complex mechanical systems.
• The UK government’s Future of Flying plan includes ambitions for piloted eVTOL flights by 2026 and pilotless flights by 2030.

Company News

Bradda Head (BHL LN) 1.85p, Mkt Cap £6.5m – Progress report from the Basin clay project, Arizona

• Bradda Head reports results for the three months to 31st May 2024 recording a pre and post-tax loss of US$0.57m (2023 – US$1.08m) and a closing cash balance of US$0.53m.
• Operationally, the company highlights the completion of an eight-hole follow-up drilling programme totalling 2,353m at its Basin North lithium in clay project in Arizona where an intersection of 103m of the ‘Upper Clay’ unit is reported from hole BND24-19 .
• The company also highlights the announcement (after the end of the reporting period) of a new mineral resource estimate “for the Basin Project of 2.834 MT of LCE”.
• The new estimate triggered the “final royalty payment from LRC … [Lithium Royalty Company] … of US$ 3m”.
• Bradda Head also reports that channel sampling results from its San Domingo pegmatite project “included 5.00 meters of 2.33%, 4.10 meters of 2.81%, and 4.00 meters of 1.26% Li2O at the White Ridge Target and 5.30 meters of 1.25% Li2O at Morning Star”.
• Chairman, Ian Stalker, also explained that the company is maintaining a dialogue “with third parties and examination of our oil brine projects in Pennsylvania and Texas, along with the Nevada brine projects to align with expanding DLE initiatives across the industry”.

 Mkango Resources* (MKA LN) 4.4p, Mkt Cap £15m – Tyseley HPMS facility development update

• The Company updates on development of the commercial short loop magnet recycling facility at Tyseley Energy Park in Birmingham, UK.
• Commercial operations are now expected to be launched 1Q25 subject to permitting completion as well as equipment arriving and works starting on time.
• HPMS vessel is due to be delivered on site in September with contractors expected to start infrastructure related works same month.
• Permitting for commercial operations is continuing in line with expectations.
• The majority of equipment will initially be owned by the University of Birmingham and used by HyProMag, an exclusive HPMS technology licensee wholly owned by Maginito (79%/21% Mkango/CoTec).
• The facility is guided to initially run at 25-30tpa of recycled NdFeB, equivalent to 20% capacity utilisation rates, for first few months.
• The Company holds two months’ worth of NdFeB containing scrap in stocks at the moment.
• The facility will start off with production of a NdFeB alloy for magnet manufacturing or for chemical processing by third parties.
• Additionally, the facility will produce recycled sintered NdFeB magnet blocks for qualification purposes for ongoing customer discussions and further ramp up.
• The Tyeseley facility production potential is estimated at a minimum of 100-330tpa of recycled NdFeB at full capacity.

Conclusion: The team revised timing for the Tyseley commercial scale HPMS facility commissioning to 1Q25 (2H24 previously) as the Company is moving towards establishing UK’s first domestically produced sintered magnet in over 20 years.. The facility will start off with production of NdFeB alloy for magnet manufacturing first as well as blocks of sintered magnets for qualification purposes.

*SP Angel acts as nomad and broker to Mkango Resources

Peak Rare Earths (PEK AU) A$0.2, Mkt Cap A$56m – Non-binding Term Sheet for Shenghe to secure controlling stake in Ngualla

• The Company signed a non-binding Term Sheet for a potential project funding with Shenghe Resources for the Ngualla REE Project in Tanzania.
• Shenghe will invest A$96m into the Ngualla Group UK Limited, a 84% owner of the Ngualla Project, for a 50% stake with the balance held by Peak.
• Additionally, Shenghe will arrange a debt facility for the remainder of capex with no requirement from Peak to contribute.
• FEED study released November last year estimated ~US$290m development capital cost and a 24m construction for a flotation operation producing REE containing concentrate.
• Shenghe also holds a 19.9% in Peak through its subsidiary Shenghe Resources (Singapore).
• Conditions precedent to the deal are that Sheghe is awarded an EPC, EPCM or EPS contract, a delivery of an actionable funding solution and Chinese regulators’, Peak and Shenghe shareholders’ approval.
• Shenghe holds a binding offtake for 100% of rare earth concentrate from the Ngualla Project.
• Shenghe Resources is a Shanghai listed REE developer and producer (Mkt Cap US$1.8bn, TEV $2.2bn) with $2.5bn generated in annual sales in FY23.
• Shenghe is the largest importer of rare earth concentrate into China and its operations span rare earth mining, beneficiation, refining, trading and alloy and metals production.
• Shenghe also holds an approximate 7.7% interest in MP Materials Corp.

Phoenix Copper* (PXC LN) 21p, Mkt Cap £37m – Appointment of VP Investor Relations

Phoenix holds 80% of the Empire mining property in Idaho)

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• Phoenix Copper has announced the appointment of Paul de Gruchy as Vice President of Investor Relations.
• Mr. de Gruchy who has helped the company with its investor relations “for the past two years” will also join Phoenix Copper’s Advisory Board.
• Welcoming his appointment, CEO, Ryan McDermott, said that “Paul has proved to be a great asset to our Company … [and] … combined with his extensive background in corporate law … Paul … [is] …an ideal person to have in a leadership role”.
• Mr. de Gruchy said that Phoenix Copper has “a number of developments planned to improve communications with current and potential investors, and I look forward to implementing these in the coming weeks”.

*SP Angel acts as Nomad to Phoenix Copper

Versarien* (VRS LN) 0.07p, Mkt Cap £1.4m – £550,000 raised to purchase testing equipment

• Versarien Plc has raised £550,000 (gross) by placing an additional ~846m shares at 0.065p/share.
• The proceeds will be “used for the purchase of Versarien’s own mortar and concrete testing systems for monitoring mechanical and durability properties”.
• The announcement explains that “in-house concrete and mortar testing capability is viewed by the Directors as essential for supporting the Company’s ongoing Cementene^TM admixture developments, and helping the Company towards securing BS934 accreditation. The Directors believe that bringing this testing capability in-house will provide the Company with greater flexibility and cost-savings”.
• The additional shares represent ~36% of the enlarged issued share capital.
• The company also confirms its previously announced plan to dispose of “two mature businesses … [and says that] … Talks are at an advanced stage with one party regarding the sale of the AAC Cyroma plastics business, although there can be no certainty that this will lead to a successful sale”.

Conclusion: The acquisition of its own concrete and mortar testing capacity is seen as improving the company’s operational flexibility and providing cost saving opportunities.

*SP Angel acts as Nomad and Broker to Versarien

No.1 in Base Metals: SP Angel mining team awarded No 1. ranking for Base Metals forecasting in LSEG Quarterly Starmine Award for Reuters Polls Q1 2024

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

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

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

Analysts

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

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

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

Sales

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

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

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

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

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*SP Angel are the No1 integrated nomad and broker by number of mining brokerage clients on AIM according to the AIM Advisers Ranking Guide (joint brokerships excluded)

+SP Angel employees may have previously held, or currently hold, shares in the companies mentioned in this note.

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