SP Angel Morning View -Today’s Market View, Wednesday 4th September 2024

Commodity sell-off continues as Bank of Japan hints at further rate hikes and recession fears resurface

Gold defies Treasury rally as traders take profit amid global sell off

MiFID II exempt information – see disclaimer below

Bluejay Mining* (JAY LN) – Bluejay Mining changes name to 80 Mile Plc

Celsius Resources (CLA LN) – Additional regulatory approval for the MCB project, Philippines

Centamin (CEY LN) – Filing of Doropo DFS

Ecora Resources (ECOR LN) – Stronger H1 underpinned by Kestrel coal royalty with H2 expected to shift towards volume growth in base metals

Empire Metals* (EEE LN) – Mineralogical testing supports high-purity titanium feedstock potential

G Mining (GMIN CN) – Commercial production at Tocantinzinho, Brazil

Liontown Resources (LTR AU) – Kathleen Valley production milestone

Resolute Mining (RSG LN) – Loan facility for growth opportunities

Rockfire Resources (ROCK LN) – Increased mineral resource for the Molaoi zinc project in Greece

Sovereign Metals* (SVML LN) – Anode material produced from natural graphite from the Kasiya project in Malawi

Commodity sell-off continues as Bank of Japan hints at further rate hikes and recession fears resurface

• Base and ferrous metals sold off across the board yesterday.
• Copper fell to $8,900/t, whilst zinc, tin, nickel lead and aluminium are all down c.3%.
• The COPX copper miners ETF fell c.8% yesterday as miners’ rerated on a more downbeat price outlook.
• The Bank of Japan warned that they may need to hike rates again, supporting the yen against the dollar.
• This saw a rush to haven assets, with US Treasuries rallying sharply yesterday.
• Slowdown fears are also mounting as traders look to job data due this week, culminating in NFP numbers on Friday.
• Coking coal and iron ore have both weakened alongside base metals, with China’s property collapse continuing to weigh on demand.
• Global slowdown sentiment has been supported by a falling oil price, with WTI sliding 4.4% yesterday and Brent down 5%.
• Goldman’s ex copper super bull Jeff Currie U-turned on his $15,000/t target yesterday, suggesting that the near term peak is likely $9,500/t.
• Steel mill demand out of China is reportedly limited, with production cuts rumoured in Jiangsu and Hebei.
• Zinc smelters are reportedly cutting production in China amid weak demand and low processing fees.

Gold ($2,475/oz) defies Treasury rally as traders take profit amid global sell off

• Gold prices have given up the $2,500/oz level in the spot market, sliding to $2,475/oz amid yesterday’s wider asset sell off.
• US Treasuries rallied yesterday over concerns of another Yen carry trade implosion, reminiscent of early August.
• The 10 year yield fell to 3.815%, having been 3.93% on Friday.
• JOLTs data today followed by Friday’s NFP data will be watched closely for clues over Powell’s Fed rate cut in two weeks.
• NFP estimates range from c.100k new jobs to 210k new jobs, following last month’s disappointing 114k additions.

Economics

Japan – The currency strengthened for a second day as the BOJ Governor hinted at further rate hikes.

• In a document filed with a government panel led by PM on Tuesday, BOJ Governor Kazuo Ueda said that the economic environment remained accommodative with real rates below zero even after late July increase.
• Further increase in rates and appreciation in the yen may see unwinding of carry trades that saw a brief sell off in the beginning of August.

US – Manufacturing sector contracted for a fifth month in August, according to the Institute for Supply Management data.

• New orders gauge dropped to a 15-month with export orders falling at the fastest pace since the start of the year.
• The focus is on NFPs due later this week with estimates for a slight pullback in unemployment rate (4.2% v 4.3%), marginally higher growth in earnings (0.3%mom v 0.2%mom) and a pickup in employment numbers (165k v 114k).

The Department of Justice sent subpoenas to Nvidia and other companies seeking evidence on antitrust investigation adding to a selling pressure in the market.

• Antitrust officials are looking into if Nvidia is making it harder to switch to other suppliers and penalises buyers that do not exclusively use it AI chips, Bloomberg cites people familiar with discussions.
• Nvidia closed 9.5% lower yesterday and lost a further 2.1% in the post close market.

China – Regulators are considering cutting mortgage rates by a total of about 80bps in two increments with the first one potentially coming in the next few weeks, according to people familiar with the matter.

• The second one may be announced at the beginning of next year.
• The measure considered is suggested to cover both first and second homes.
• Separately, private PMI survey showed services sector growth slowed down in August.
• Growth in new orders softened, although, export orders growth climbed, highlighting more challenging domestic consumer demand situation.
• Caixin Services PMI (Aug/Jul/Est): 51.6/52.1/51.8
• Caixin Composite PMI (Aug/Jul/Est): 51.2/51.2/NA

Eurozone – Composite PMI has been revised lower in August from preliminary estimates with further weakness registered in the largest economy in the region, Germany.

• Composite PMI was updated to 51.0, down from 51.2 reported previously.
• Germany Composite PMI was brought down to 48.4 from 48.5 dragged by both lower manufacturing and services sector numbers.

Ukraine – Seven people are reported killed with another 38 injured following a ballistic missiles attack on Lviv.

• The news follows the announcement of more than 50 people killed and more than 270 injured the day before during an airstrike on military institute in the central city of Poltava in eastern Ukraine.
• Separately, Foreign Minister Dmytro Kuleba is reported to have stepped down in the shake up of the wartime government.
• David Arakhamia, the head of the ruling party in parliament, said that more than half of Ukraine’s current cabinet will be moved or replaced in the coming days.
• Kuleba served as foreign minster since March 2020.

Currencies

US$1.1057/eur vs 1.1067/eur previous. Yen 145.00/$ vs 146.17/$. SAr 17.963/$ vs 17.857/$. $1.311/gbp vs $1.314/gbp. 0.671/aud vs 0.675/aud. CNY 7.112/$ vs 7.116/$

Dollar Index 101.65 vs 101.65

Precious metals:         

Gold US$2,485/oz vs US$2,501/oz previous

Gold ETFs 83.0moz vs 83.1moz previous

Platinum US$905/oz vs US$921/oz previous

Palladium US$937/oz vs US$974/oz previous

Silver US$27.9/oz vs US$28.5/oz previous

Rhodium US$4,625/oz vs US$4,625/oz previous

Base metals:   

Copper US$ 8,960/t vs US$9,112/t previous

Aluminium US$ 2,400/t vs US$2,416/t previous

Nickel US$ 16,310/t vs US$16,630/t previous

Zinc US$ 2,817/t vs US$2,829/t previous

Lead US$ 2,040/t vs US$2,059/t previous

Tin US$ 30,505/t vs US$31,100/t previous

Energy:           

Oil US$73.2/bbl vs US$77.5/bbl previous

Henry Hub Gas US$2.20/mmBtu vs $2.18/mmBtu yesterday

• WTI Crude dropped below $70/bbl for the first time this year on negative factory demand data from China and the US, as well as expectations that a potential agreement in Libya is close to restoring over 0.5mb/d to supply.
• European energy prices edged lower as French nuclear reactor operating levels fell 1% w/w to 65% of 61.4MW capacity and Gazprom reporting stable supply of 42.3mcm/d (~1.5bcf/d) via the Sudzha metering station.

Natural Gas €36.5/MWh vs €38.2/MWh previous

Uranium Futures $79.4/lb vs $79.2/lb previous

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$100.8/t vs US$100.8/t

Chinese steel rebar 25mm US$473.5/t vs US$474.0/t

Thermal coal (1st year forward cif ARA) US$120.9/t vs US$124.8/t

Thermal coal swap Australia FOB US$141.3/t vs US$143.0/t

Coking coal Dalian Exchange futures price US$177/t vs US$167.9/t

Other:  

Cobalt LME 3m US$24,300/t vs US$24,300/t

NdPr Rare Earth Oxide (China) US$58,355/t vs US$58,314/t

Lithium carbonate 99% (China) US$10,054/t vs US$10,047/t

China Spodumene Li2O 6%min CIF US$770/t vs US$770/t

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

China Tungsten APT 88.5% FOB US$333/mtu vs US$333/mtu

China Graphite Flake -194 FOB US$443/t vs US$447/t

Europe Vanadium Pentoxide 98% 4.6/lb vs US$4.6/lb

Europe Ferro-Vanadium 80% 24.75/kg vs US$24.75/kg

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

China Rutile Concentrate 95% TiO2 US$1,371/t vs US$1,370/t

Spot CO2 Emissions EUA Price US$72.4/t vs US$72.4/t

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

Germanium China 99.99% US$2,545.0/kg vs US$2,545.0/kg

China Gallium 99.99% US$445.0/kg vs US$445.0/kg

Battery News

Labour approve record number of renewable projects in first renewable energy auction

• The Labour government has put accelerating the drive to net zero by 2050 front and centre of its early legislative agenda since winning the general election in July, lifting the ban on onshore wind, launching Great British Energy, backed by £8.3bn of taxpayers’ money and moving to allow the Crown Estate to borrow to invest in green energy projects.
• It has also increased the subsidies available to clean energy businesses to bid for by 50% to £1.5bn in July.
• A record 131 new green infrastructure projects were approved in this year’s auction round – the highest number of projects approved in a previous auction round was 92.
• Wind and solar projects were the bulk of those approved, according to officials, and could generate enough power for 11m homes.
• Nine new offshore wind farms, totalling over 5GW of capacity, were among the projects to receive approval as Labour plans to expand Britain’s offshore wind capacity to 60GW by 2030, from about 15GW currently.
  • Offshore wind developers won contracts at inflation-indexed 2012 strike prices of £58.87/MWh and £54.23/MWh. This is well below the £73/MWh price cap and equivalent to strike prices of £75/MWh and £82/MWh in 2024 terms.
• Over 20 onshore wind projects were also approved, the first since Labour reversed the de facto ban on developments that had been introduced in 2015.
• Solar projects were also a big winner, with approved capacity totalling around 3.3GW.
• A total of 9.6GW across all technologies, is a significant increase on the 5.9GW approved in last years auction under the Conservative government.

VW’s Cupra at risk from EU tariffs according to CEO

• The Cupra Tavascan electric SUV, made in China and designed in Spain, would be “wiped out” if the European Commission followed through with planned import tariffs of 21.3% on the vehicle, according to the brands CEO. (Reuters)
• Raising the price of the Tavascan to cover costs is not an option in the current economic climate.
• Relocation of production to another country is also not feasible as investment has already been committed to expand the plant in Anhui, a joint venture with China’s JAC Automobile Group.

Turkey’s EV sales see impressive growth amid European slump

• Turkey’s EV sales surged by 158%, reaching 41,371 units, making it the ninth largest EV market in Europe. (Turkiye Today)
• Hybrid car sales in Turkey also grew by 47%, with 77,641 units sold, ranking seventh in Europe.
• In contrast, several European countries, including Germany, Sweden, and Norway, experienced declines in EV sales due to reduced incentives.
  • Norway has seen a drop in sales in 2024, but EVs now account for 94% of new vehicle sales.
• Turkey’s EV market growth is largely driven by favourable tax policies, with lower taxes on EVs compared to gasoline cars.
• Despite the decline, Germany remains Europe’s largest EV market with 214,000 units sold, followed by the UK and France.
• The Togg T10X was the top-selling EV in Turkey, with 14,248 units sold, followed by Tesla Model Y and other models from SsangYong and BMW.

Company News

Bluejay Mining* (JAY LN) 0.33p, Mkt cap £5m – Bluejay Mining changes name to 80 Mile Plc

(Bluejay Mining holds 100% of the Hammaslahti and Enonkoski projects and all its Greenland prospects)

• The name change follows the passing of the relevant resolutions at the General Meeting on 10th July.
• A new website will be available on www.80mile.com on the 5^th September 2024
• The name change reflects the new management and refocussed strategy of the company after previous management shambles.
• Greenland: management are still focussed on rectifying the Disko Joint Venture with Kobold Minerals at Disko,
  • Dundas global resource review is also due at some point in the coming months
  • The Thule red bed copper prospects
  • and potentially the most significant of all of the assets, the recent White Flame acquisition. We look forward to updates on this asset in the near term
• Disko-Nuussuaq (JV with KoBold Metals): Preparation for Disko 2025 fieldwork as well as stakeholder engagement.
  • KoBold metals may or may not return to the Disko project where they collected substantial geophysical and sampling data two years ago
  • We note the KoBold team are very busy on a number of projects in Zambia at present
• Dundas: Fully permitted project with JORC resource covering 117mt of 6.1% ilmenite and an offshore exploration target of 530mt. The ilmenite is of good technical quality with low impurity material.
• The opening of shipping lanes through the Northwest Passage from The North Atlantic to Asia may transform the economics of the project through lower cost shipping to China.
• Industrial gas: Preparation for White Flame Jameson Environmental Impact Assessment and drilling consultation.
  • White Flame Energy holds 100% of three potentially large-scale industrial gas, natural gas and liquid hydrocarbon rich exploration and exploitation licences, onshore, East Greenland.
• Industrial gas (hydrogen): Resampling and partner engagement at the Company’s Outokumpu industrial gas asset in Finland.
  • The team are going over historic data with gas showings from the Finish Geological Survey with a view to drilling for industrial gasses including hydrogen.
• Thule Copper (underneath Dundas) Site surveys and regional sampling at the Company’s Thule Copper project.
  • The Thule Basin hosts the first-order controls required for sedimentary copper deposits and mineralisation observed within several geological units across the basin.
  • Encouraging ore-grade samples of mineralisation locally exceeding 10% copper have been identified.
  • Bluejay’s camp on the Dundas project at (Moriusaq) will serve as a basecamp for work on the expanded licence area and is close BHP’s Camelot Project.
  • Management plan to run a helicopter-supported geological reconnaissance program to support its work on the license through the 2024 field season.
  • Reconnaissance of the Thule Group and underlying basement shows at least 15 sills form a sill system that dominates the landscape in southern Steensby Land.
    • Ilmenite Tonnages Calculated for Steensby Land Sill Complex
    • 17 Gt – Ilmenite contained in sills prior to erosion
    • 10 Gt – Ilmenite remaining in sills after erosion
    • 7 Gt – Ilmenite available for sedimentation
• Finland (Copper, zinc, gold, silver VMS exploration): Continued maintenance and engagement on Hammaslahti a historical state-owned copper mine in Finland; and
  • We believe the Hammaslahti license area is prospective for remobilised VMS style pods of mineralisation.

*SP Angel acts as nomad and broker to Bluejay Mining. The analyst has visited Dundas in Greenland and the Hammaslahti and Enonkoski projects in Finland.

Celsius Resources (CLA LN) 0.68p, Mkt Cap £16m – Additional regulatory approval for the MCB project, Philippines

• Celsius Resources reports that it has received formal certification of the approval of indigenous peoples for its flagship MCB project (Maalinao-Caigutan-Biyog Copper-Gold Project).
• The certification “is the culmination of a ~3-year process which entailed extensive stakeholder engagement resulting in a Memorandum of Agreement … stipulating the benefits, commitments, and obligations of all parties during the life of the MCB mine”.
• Development of the MCB project envisages an underground mine processing of 2.28mtpa of ore over a 25 years mine life to produce an average of around 16,000tpa of copper and 19,000oz pa of gold in concentrate with production weighted towards the initial 10 years of the project
• A 2021 study described an initial investment of US$253m delivering a post-tax NPV_8% of US$464m and an IRR of 31%. The study was based on lower commodity prices than currently prevail with an assumed copper price of US$4:00/lb and a gold price of US$1,695/oz.

Centamin (CEY LN) 120p, Mkt Cap £1.4bn – Filing of Doropo DFS

• Following the release of highlights last month, Centamin has announced the filing of its Definitive Feasibility Study (DFS) for the Doropo Gold project in Cote d’Ivoire.
• Using a conservative gold price of US$1,900/oz, the study describes an investment of US$373m delivering a mine delivering an average of 167,000oz pa of gold (and 207,000oz pa over the first 5 years) over a 10 year mine life and generating an after tax NPV_8% of US$426m and IRR of 34%.
• The project develops a probable reserve of 38.22mt at an average grade of 1.53g/t gold within a ‘Measured & Indicated’ mineral resource of 76.85mt at an average grade of 1.26g/t to deliver gold at an average life of mine cash cost of US$892/oz and all-in-sustaining cost of US$1,097/oz and cash cost of US$817/oz (AISC US$971/oz) over the first five years.
• July’s announcement confirmed that initial gold production was expected within 36 months.

Conclusion: We welcome the release of the detailed technical and economic information on Doropo to provide a deeper insight into the project.

Ecora Resources (ECOR LN) 57p, Mkt cap £144m – Stronger H1 underpinned by Kestrel coal royalty with H2 expected to shift towards volume growth in base metals

• Reporting results for the six months to 30^th June, the royalty and streaming company, Ecora Resources, has announced a 15% rise in the contribution of its royalty portfolio to US$51.3m (H1 2023 US$44.5m).
• The increase was “driven by a strong performance from Kestrel” a steel-making coal royalty which rose by 28% to US$40.8m (H1 2023 – US$31.8m) and delivered approximately 80% of the total.
• Commenting on the results, CEO, Marc Bishop Lafleche, acknowledged the significance of the contribution from the Kestrel coal royalty but said that the “H2 portfolio contribution is expected to be principally weighted to the Group’s other producing royalties including production volume growth at the Voisey’s Bay and Mantos Blancos mines. Further production growth at Voisey’s Bay is expected thereafter as underground operations ramp-up up to steady state production levels”.
• He also said that Ecora Resources has “seen a strong uptick in opportunities to further grow our portfolio, which we continue to evaluate applying our stated investment criteria and a capital allocation priority to maintain a strong balance sheet”.
• Among recent, post 30th June, royalty acquisitions are a 0.85% gross revenue royalty over the Phalaborwa rare earths project in South Africa.
• Today’s announcement also confirms that Ecora Resources expects “Year-on-year production volume growth … in 2024 and through 2025 at operations underlying the Group’s royalty portfolio”.

Empire Metals* (EEE LN) 7.2p, Mkt Cap £43m – Mineralogical testing supports high-purity titanium feedstock potential

• Empire reports initial processing testwork results on their Pitfield titanium dioxide project ore.
• The Company continues to explore various processing routes, through metallurgical testwork, seeking to develop an optimum flowsheet.
• Today, the Company provides results from testing on its fresh bedrock ore. Management emphasises that focus has since shifted to the high-purity anatase ore in the near-surface weathered cap.

Comminution

• Preliminary focus has been on removing the gangue minerals.
• For the initial stage of the flowsheet, Empire has been exploring routes for comminution.
• Testing has shown the weathered zone, containing the high purity anatase, to be ‘very soft,’ whilst the fresh bedrock proved to be ‘more competent’ but is also expected to ‘fracture easily.’
• The Company will now look to conduct more comminution testing when it has prepared additional diamond drill core from the weathered bedrock cap.

Mineral Concentration

• In addition to comminution, Empire’s team is exploring additional routes for separating the gangue minerals from Ti-bearing minerals.
• Screening and size analysis has been completed, suggesting some coarse rejection of gangue minerals is possible.
• The Company is considering an initial stage of scrubbing and jibs.
• However, given the expected higher-value nature of the anatase section of the orebody, further crushing and grinding testing will now be completed on the diamond core samples.
• Gravity separation work is being tested to generate both a titanium-rich mineral concentrate and a low-grade mineral waste stream.
• Early gravity results on the primary titanite ore:
  • Heavy liquid separation at specific gravity cut of 2.9g/ml rejected 35% of the mass and 46% of the gangue silicate
  • 10% of titanite rejected in stream.
  • Management will continue to explore optimum gravity cut size to minimise titanite losses
• Magnetic separation testwork is being explored, to separate weakly magnetic minerals, including ilmenite.
• Froth flotation testwork is underway, with 60 diagnostic flotation tests now completed.

Hydrometallurgy

• Empire is also exploring routes for mineral separation through a leaching phase.
• The Company has been conducting bench-scale leaching tests with HCI and H₂SO_4.
• Leaching is being testing under both atmospheric and low pressure conditions.
• Titanite ore leaching has proven responsive to leaching with sulphuric and hydrochloric acid, dissolving within six hours with HCl leach.
• Empire will now explore leaching options on concentrates generated from gravity/flotation testing.

End product

• Empire is exploring various options for a potential high-purity feedstock for the chloride pigment value chain.
• The Company is also considering going down the titanium metal sponge route, which requires a high purity titanium dioxide product, such as 95% Tio2 natural rutile.

Conclusion: The Pitfield flowsheet remains conceptual at this stage, however the Company continues to progress their understanding of the ore body. To date, Management expects to utilise gravity and flotation separation processes before hydrometallurgical leaching. We reiterate that testing is ongoing on the higher-purity, more accessible anatase orebody in the weathered cap zone. We expect optimising processing for the anatase cap to be primary focus for the Company, given its near surface, low strip access and high-purity TIO2 potential. Empire continues to progress this discovery with methodical testwork via a range of labs and industry specialists in order to ascertain an economic route to feedstock production for either chloride pigment production or the higher value sponge route.

 *SP Angel acts as nomad and broker to Empire Metals

G Mining (GMIN CN) C$8.32, Mkt Cap C$1.8bn – Commercial production at Tocantinzinho, Brazil

• G Mining, which has developed the Tocantinzinho gold project in Brazil, reports ‘commercial production’.
• The Company has produced at 60% of nameplate capacity for 30 consecutive days, hitting 76% in August.
• The 2022 Feasibility study suggests recoveries of 90%, assuming average milling throughput of 12.6ktpd.
• The mill processed 9,817tpd in August at recoveries of 88%.
• The Company is now focused on ramping production to boost recoveries to 90%, expected to hit nameplate capacity by 1Q25.
• The FS assumes a 10.5 year LOM with average annual gold production of 175koz.

Liontown Resources (LTR AU) A$0.61, Mkt Cap A$1.6bn – Kathleen Valley production milestone

• Liontown Resources, who are ramping up production from the Kathleen Valley spodumene project, provides an update.
• The Company expects to ship their first 10kt of SC5.2% this month.

Resolute Mining (RSG LN) 32p, Mkt Cap £720m – Loan facility for growth opportunities

• Resolute announces today it has signed a senior debt facility of up to $140m with Nedbank and Citibank.
• The loan facilities will provide up to $60m in funding immediately, with the option to increase this by $80m via an Accordion Facility.
• Resolute states the ‘primary purpose of the Facility is to provide increased flexibility to continue to explore organic and inorganic growth opportunities.’
• Resolute entered a net cash position this year, holding $143m in cash and bullion as of June 2024.
• As regards organic growth opportunities, Resolute’s Syama Phase 1 expansion and Mako LOM are self-funded.

Conclusion: We will be interested hear an update from Resolute’s Mansala Prospect in Guinea, where they expect to deliver an initial MRE this quarter. The Company currently assumes 100kozpa production from Guinea over the long term, suggesting confidence on the asset’s development potential. As regards inorganic growth opportunities, we suspect Resolute may be keen to diversify their asset base outside of Mali, despite their successful operating track record in country, potentially consolidating their asset base in Guinea.

Rockfire Resources (ROCK LN) 0.23p, Mkt Cap £4.6m – Increased mineral resource for the Molaoi zinc project in Greece

• Rockfire Resources has announced a five-fold increase in the ‘Inferred’ resources of its wholly owned Molaoi zinc project in Greece.
• The new JORC compliant mineral resource estimate, reported at a 4% zinc cut-off grade,  is 15mt at an average grade of 7.26% zinc, 1.75% lead and 39.5g/t silver.  In addition, the company estimates a non-compliant estimate of 4.8mt at an average grade of 21.9g/t germanium.
• The company says that the new estimate “places Molaoi within the top 20 undeveloped zinc resources globally in terms of tonnage, grade and zinc equivalent metal content”.
• Approximately 9% of the overall estimate (1.3mt at an average grade of 8.19% zinc, 1.37% lead and 40.69g/t silver) is classified as oxidised material with the balance of 13.7mt averaging 7.17% zinc, 1.79% lead and 39.4g/t silver) described as ‘Fresh’.
• Rockfire Resources confirms that the resource is hosted within “2.1 km of a potential strike extent of 7 km … [and that] … Owing to scheduling cut-offs, recent Rockfire drill holes HMO-005, HMO-006 and HMO-007 are not included in this resource estimate and are expected to increase the resource further”.
• The company says that these holes contained 1.7m at an average grade of 11.5% on a zinc equivalent (ZnEq) basis in hole HMO-005 as well as 1.5mat 3.2% ZnEq in hole HMO-006 and 2.0m at 14.3% ZnEq in hole HMO-007.
• Chief Executive, David Price, explained that the “maiden JORC resource in 2022 was established on a geological model of a single main zinc lode … [and that subsequent drilling has generated] … far more geological, structural and geochemical information … and a total of 23 lodes have so far been identified”.
• He said that historic drilling from the 1980s showed potential for lateral extensions to mineralisation over 5.5km of strike length as well as “significant upside … at depth”.
• Mr. Price also confirmed that “Our goal now will be to move as many zinc tonnes into the “Indicated” category of the JORC Code, for input to a Scoping Study of mining and processing options. Several important drill holes will be required to close drilling gaps on a number of drill lines”.

Conclusion: Rockfire Resources has delivered a five-fold increase in the ‘Inferred’ resources at Molaoi while retaining potential for further resource expansion both laterally and at depth. Upgrading the resource to the ‘Indicated’ level is a priority in order to develop a scoping study and provide an initial insight into the technical and financial opportunity of development.

Sovereign Metals* (SVML LN) 32.9p, Mkt Cap £200m – Anode material produced from natural graphite from the Kasiya project in Malawi

(Sovereign currently holds 100% of the Kasiya project. The government has a right to a 10% free carry in the project.

Rio Tinto acquired an initial strategic interest of 15% for a $40.6m and has also bought another A$0.7m of stock to raise its stake to 19.9%)

STRONG BUY – Valuation 55p

• Sovereign Metals reports the production of ‘outstanding’ battery anode material from graphite samples taken from the Kasiya project tin Malawi.
• The natural graphite at Kasiya was formed in-situ and is easily separated from the rutile and other sedimentary material excavated at Kasiya.
• Test work shows it forms “an excellent feedstock for natural graphite anode materials suitable for battery production”.
• Graphite is mined alongside rutile at Kasiya enabling a low carbon footprint.
• The test work is reported to show “performance characteristics comparable to the highest quality natural graphite battery material produced by dominant Chinese anode manufacturers”
  • “Electrochemical testing achieved very high first cycle efficiencies of 94.2% to 95.8% supporting long battery life
  • Excellent initial discharge capacities greater than 360mAh/g as required for highest quality natural graphite anode materials.
  • Very low specific surface areas (known as BET) of ≤2.0m2/g minimising the loss of lithium in the first battery charging cycle
• Low BET (Brunauer Emmett Teller) specific surface area indicates relatively few exposed surfaces for interaction for reduced reactivity. A higher surface area usually leads to increased irreversible battery capacity loss in graphite battery anodes.
  • Excellent tap densities of 1.11 to 1.18g/cm3 meaning higher electrical storage
• Low BET graphite normally has a higher tap density which helps to increase volumetric energy density in Li-ion batteries.
  • Outstanding anode material results are attributed to the unique geological setting of the highly weathered Kasiya orebody compared to fresh rock hosted graphite deposits, including:
  • high purity of the natural flake,
  • near perfect crystallinity, and
  • very low levels of sulphur and other impurities.”
• Further optimisation test work will start using additional graphite concentrate being generated at pilot-scale plant in South Africa
• Offtake discussions will proceed based on this test work
• The graphite is relatively simple to separate and to purify
• The results are said to also give excellent first cycle efficiencies and initial battery discharge capacities.

*SP Angel act as Nomad and broker to Sovereign Metals. The analyst has recently visited the Kasiya mine site. We highly recommend the Malawi coffee beans sold in Lilongwe airport.

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

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.

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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