SP Angel Morning View -Today’s Market View, Wednesday 5th April 2023

Gold prices rally past $2,000/oz as US labour data surprises to the downside

MiFID II exempt information – see disclaimer below

Goldstone Resources* (GRL LN) – Drilling results at the Akrokeri Underground Mine

Kavango Resources (KAV LN) – Historical exploration drill core logged at Ditau

NGEx Minerals (NGEX CN) – Potro Cliffs marks new discovery with 60m drilled at 7.52% CuEq

Savannah Resources* (SAV LN) – FY22 results show >£7m in cash and no debt with DIA decision expected end of May

Scotgold Resources (SGZ LN) – Cononish update

Sovereign Metals (SVML LN) – Increase to indicated resources at Kasiya, Malawi.

Gold prices rally past $2,000/oz as US labour data surprises to the downside

• Gold spot prices hit and held $2,020/oz following yesterday’s US JOLTS data release.
• The 13-month high was triggered by US Jobs Openings and Labour Turnover Survey Data showing 9.931m vs an expected 10.4m.
• The weaker-than-expected labour data triggered a sell-off in both the US dollar and US Treasury yields, as bond buying accelerated.
• Traders are betting on the Fed nearing the end of its rate hiking cycle owing to a weakening US economy.
• However, we note that inflation remains hot and close to 10m job openings does not suggest major weakness in the US economy.
• On the contrary, the market remains concerned about the US banking crisis and the sector’s ability to absorb a further step higher in interest rates.
• Traders’ focus now turns to US nonfarm payrolls and unemployment data due on Friday, with positive signs in the report likely to add pressure to gold.

 Codelco copper output sinks 15% in Feb yoy

• Chile’s Codelco saw copper production slide 105,400t in February.
• The yoy move marks a 15% slide.
• Escondida, operated by BHP, saw output at 72.7kt, sliding mom but rising yoy.

China moves to crack down on futures companies to limit iron ore speculation

• The NDRC today stated that futures companies must trade rationally, following a meeting with the China Securities Regulatory Commission’s futures department.
• Companies engaging in futures were demanded to not exaggerate ‘the atmosphere of price increases,’ Bloomberg reports.
• The Commission stated it will continue to monitor the iron ore market and ramp up its controls over the market.
• Iron ore prices have slid to a near a four-month low, down 6% this week.

 Trafigura CEO takes grand tour of China in sign of commitment to base metals trade

• Trafigura’s CEO, Jeremy Weir, has been travelling across China meeting with port officials, metals superpowers and China’s base metal association.
• The metal trading giant has been noting strong demand expectations for base metals from China as it recovers from Zero Covid policies and a construction crisis.
• Weir notes that the combination of the energy transition and Russia’s invasion of Ukraine emphasises the importance of base metals trade.
• The visit also follows the nickel scandal hitting Trafigura earlier this year, with expectations the group is looking to emphasise its reliability in international trading.

Indonesian nickel IPO raises $586m for country’s third largest capital raise of the year

• PT Merdeka Battery Materials is reported to be raising $586m for an IPO, set to debut on April 18^th.
• The raise is reported by Bloomberg to be at the top end of its expected offering range, highlighting strong investor demand for exposure to nickel.
• A portion of the capital raised will be used to develop a high-pressure acid leaching plant in Sulwesi, with a capacity of 120ktpa.

Economics

Currencies

US$1.0962/eur vs 1.0919/eur yesterday. Yen 131.49/$ vs 132.63/$. SAr 17.882/$ vs 17.754/$.  $1.251/gbp vs $1.243/gbp. 0.673/aud vs 0.676/aud. CNY 6.879/$ vs 6.879/$

 Dollar Index 101.50 vs 102.03 yesterday.

Commodity News

 Precious metals:

Gold US$2,028/oz vs US$1,981/oz yesterday

Gold ETFs 93.1moz vs US$93.1moz yesterday

Platinum US$1,026/oz vs US$990/oz yesterday

Palladium US$1,459/oz vs US$1,468/oz yesterday

Silver US$24.91/oz vs US$23.94/oz yesterday

Rhodium US$7,350/oz vs US$7,300/oz yesterday

 Base metals:   

Copper US$ 8,686/t vs US$8,914/t yesterday

Aluminium US$ 2,349/t vs US$2,383/t yesterday

Nickel US$ 22,995/t vs US$23,075/t yesterday

Zinc US$ 2,807/t vs US$2,882/t yesterday

Lead US$ 2,114/t vs US$2,117/t yesterday

Tin US$ 24,600/t vs US$25,850/t yesterday           

 Energy:           

Oil US$85.5/bbl vs US$85.4/bbl yesterday

• Crude oil prices were broadly unchanged with the API reporting a weekly 4.3mb draw in US crude oil stocks (vs 1.8mb draw expected).

Natural Gas US$2.079/mmbtu vs US$2.134/mmbtu yesterday

• European gas prices moved lower as French nuclear reactors increase operating levels to 68% of capacity from 39 available reactors, up from 65% yesterday.

Uranium UXC US$50.35/lb vs US$50.35/lb yesterday

Bulk:

Iron ore 62% Fe spot (cfr Tianjin) US$118.5/t vs US$120.8/t

Chinese steel rebar 25mm US$605.9/t vs US$605.8/t

Thermal coal (1st year forward cif ARA) US$142.0/t vs US$142.0/t

Thermal coal swap Australia FOB US$204.0/t vs US$217.5/t

Coking coal swap Australia FOB US$294.0/t vs US$320.0/t

           Other:  

Cobalt LME 3m US$34,930/t vs US$34,930/t

NdPr Rare Earth Oxide (China) US$77,333/t vs US$75,944/t

Lithium carbonate 99% (China) US$27,401/t vs US$27,398/t

China Spodumene Li2O 5%min CIF US$4,610/t vs US$4,610/t

Ferro-Manganese European Mn78% min US$1,354/t vs US$1,348/t

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

China Graphite Flake -194 FOB US$785/t vs US$785/t

Europe Vanadium Pentoxide 98% 9.4/lb vs US$9.4/lb

Europe Ferro-Vanadium 80% 37.55/kg vs US$37.55/kg

China Ilmenite Concentrate TiO2 US$345/t vs US$345/t

Spot CO2 Emissions EUA Price US$102.6/t vs US$101.1/t

Brazil Potash CFR Granular Spot US$420.0/t vs US$420.0/t

 Battery News

LG Energy agrees MOU with Yahua for lithium hydroxide production

• LG Energy has signed an MoU with Chinese firm Yahua to produce lithium hydroxide in Morocco.
• Morocco has a free trade agreement with both the US and EU, enabling LG to tap into funding and markets enhanced by the Inflation Reduction Act and EU CRMA.

 Company News

Goldstone Resources* (GRL LN) 3.1p, Mkt Cap £16m – Drilling results at the Akrokeri Underground Mine

• The Company released remaining results from the diamond drilling programme completed at the brownfield Akrokeri Underground Mine, Ghana.
• The programme included a total of 20 holes for ~2,000m with 14 testing the southern extension of the South Shaft and the remaining 6 holes around the North Shaft.
• Latest results include high grade narrow intersections with selected ones including:
  • 22AKDD006: 5.74 metres @ 3.43g/t from 55.66 metres, including 1.1 metres @ 15.25g/t;
  • 22AKDD008: 3.00 metres @ 3.08g/t from 34.8 metres, including 1.0 metre @ 5.23g/t
  • 22AKDD008: 3.70 metres @ 2.54g/t from 72.6 metres, including 2.2 metres @ 4.03g/t;
  • 22AKDD009: 4.80 metres @ 7.31 g/t from surface, including 1.0 metre @ 25.8 g/t;
  • 22AKDD015: 1.0 metre @ 4.53 g/t from 61.9 metres;
  • 22AKDD015: 1.10 metres @ 11.23 g/t from 95.7 metres, including 0.5 metre @ 20.01 g/t.
• Drilling confirmed continuity of the mineralisation at 36-65m and extended it along strike to the south and north.
• Past ~180m beyond the southern limit of the mine there is believed to be a potential fault displacing the zone westwards.
• The team is planning to review the latest data to evaluate next steps including targeted soil geochemistry, geophysics, further drilling, with a particular focus on the southern area.
• Additionally, the team completed a soil and auger sampling programme in Q3/22-Q1/23 around the Homase operation.
• The programme targeted Esuaya in the north east and Adubriem West in the south west of known Homase Trend collecting ~580 samples.
• Results confirmed the presence of anomalous gold levels warranted follow up exploration.
• The goal is to identify new areas of mineralisation to extend the life of mine at the Homase mine.

Conclusion: Final drilling results at the Akrokeri Underground Mine extended known mineralisation along strike, although, the vein seem to may have displaced in the southernmost part, while soil and auger drilling at Homase confirmed new mineralised zones to the west and north east of the Homase open pit.

*SP Angel acts as broker to GoldStone Resources.

Kavango Resources (KAV LN) 1p, Mkt cap £8m –Historical exploration drill core logged at Ditau

• Having confirmed the 470m strike of the Banded Iron Formation at Ditau, Kavango has now logged two additional historic exploration holes gained from the Botswana Geological Institute.
• The Kavango team note that both holes show clear visual evidence of mineralisation.
• X077_H002 was drilled to 189m depth and is 470m away from DITDD004.
• X077 is noted to intercept similar mineralisation to the BIF identified by Dr Hamid Mumin in his recent review of Ditau.
• Mineralisation in the X077 hole remains open at depth, with the Kavango team eyeing a twin drill hole to gain a better understanding of the target.
• The second hole, X081 was drilled to a depth of 144km and lies 3km southwest of the DITDD004 hole.
• Kavango notes the core is highly weathered and oxidised but contains clear signs of intense hydrothermal activity.
• We await the assay results eagerly.

NGEx Minerals (NGEX CN) C$5.5, Mkt cap C$945m – Potro Cliffs marks new discovery with 60m drilled at 7.52% CuEq

• Lundin-backed NGEx Minerals reports a new discovery at its 100% owned Potro Cliffs project in San Juan, Argentina.
• Drilling intersected a previously undiscovered zone of high-grade gold, copper, and silver mineralisation.
• Highlights include:
  • Hole DPDH002:
    • 4m at 8.44% CuEq from 150m.
    • 60m at 7.52% CuEq from 212m (including 10m at 18% CuEq and 6m at 14% CuEq)
    • 4m at 4.57% CuEq from 308m
    • 4m at 3.89% CuEq from 520m.
    • 10m at 7.08% CuEq from 574m.
• The Company is currently re-evaluating its planned 2023 drill program following the discovery, with new drilling planned to expanding and delineating the above-mentioned mineralised intersections.
• NGEx also has a Joint Exploration Agreement with Nippon Caserones Resources for its Los Helados Project.

Savannah Resources* (SAV LN) 3.2p, Mkt Cap £54m – FY22 results show >£7m in cash and no debt with DIA decision expected end of May

BUY – 17.9p

• The Company released FY22 results highlighting licensing progress at the flagship Barroso Lithium Project in Portugal.
• The team submitted the updated environmental report, mine plan and associated documentation for the project to APA on 16 March.
• Assuming the Company secures a positive decision on the DIA application (31 May 2023), the licensing process will progress to next two phases (RECAPE and DCAPE).
• Further licensing work will run alongside the Project Feasibility Study to complete the final design of the Project.
• The Company expects permitting to be completed in H2/24.
• DFS is expected to be completed no later than 12 months following the restart of the necessary fieldwork with a target for H2/24.
• Subject to positive decision on the DIA, the Company will release an updated Scoping Study in H2/23 reflecting project design changes, higher costs led by inflation in the industry as well as upgrade prices from the average of $685/t used in the 2018 study to better reflect current market outlook.
• Financially, the Company reported a £2.9m loss (FY21: -£3.5m) largely reflecting £3.5m in admin costs (FY21: £3.3m).
• FCF amounted to -£6.7m (FY21: -£5.7m) split between operational costs and capitalised project development and exploration costs.
• The Company remained debt free with £7.2m in the back as of YE22 (YE21: £13.0m).
• The cash balance is expected to cover the Article 16 process and into the start of DFS related works.

Conclusion: The Company has a strong cash balance (£7.2m) to see it through the Article 16 process with the DIA decision expected on 31 May as well as start of DFS relate works with the report ready in 12 months, assuming permitting process continue on target.

*SP Angel act as Nomad and Broker to Savannah Resources

Scotgold Resources (SGZ LN) 15p, Mkt Cap £10m – Cononish update

• The Company secured a US$500k short term loan from its gold offtake partner that it received today.
• Repayments will be executed by offsetting $100k against monthly deliveries from July to November with the facility carrying a SOFR + 4.5% (~9%) interest.
• Bridge Barn Ltd, a major creditor owned by a major shareholder (Nat le Roux), agreed to postpone all interest payments currently due and payable up to and including 1 December 2023 (~£450k).
• The Company also announced the start of long hole open stoping in the eastern section of the 430 West drive.
• Mining will focus on a 115m long stope with grades seen ranging from 8gpt to 17gpt.

Sovereign Metals SVML LN 24p, Mkt Cap £108m – Increase to indicated resources at Kasiya, Malawi.

• Sovereign Metals has reported an 81% increase in the indicated resources at its Kasiya rutile and graphite deposit in Malawi.
• The new estimate, reported at a 0.7% rutile cut-off grade and prepared independently by Placer Consulting, shows a JORC (2012) compliant indicated and inferred resource of 1.8bn tonnes at an average grade of 0.99% rutile and 1.35% graphite.
• Today’s announcement describes Kasiya as the “world’s largest natural rutile deposit and second largest flake graphite deposit”.
• The updated resource will “underpin the mining inventory and mine plan for the forthcoming Pre-feasibility Study”.
• As the company details, over 60% of the resource, 1.2bn tonnes at a grade of 1% rutile and 1.5% graphite, is classed as ‘Indicated’ with the remaining 0.6bn tonnes grading 0.9% rutile and 1.1% graphite as ‘Inferred’ at the 0.7% cut-off.
• The announcement tabulates tonnage and grades across a range of cut-offs between 0.4-1.4% rutile with over 3.2bn tonnes at 0.8% rutile and 1.3% graphite at the 0.4% cut-off and 163mt grading 1.64% rutile and 0.45% graphite at the 1.4% cut-off.
• Sovereign Metals explains that the Kasiya deposit “is best described as a residual placer, or otherwise known as eluvial heavy mineral deposit … formed by weathering of the primary host rock and concentration in place of heavy minerals” and that the new resource is hosted within “broad and contiguous zones of high-grade rutile and graphite which occur across a very large area of over 201km²”.
• The graphite “generally occurs in broad association with rutile. However, it is depleted in the top 3-5m and therefore can often show an inverse grade relationship with rutile in the near-surface zones. At depths generally greater than 5m, graphite is not depleted, and rutile is not particularly enriched, so a more consistent grade relationship exists”.
• The new resource estimate is based on “1,357 holes for 12,643m” of hand-auger drilling, 488 push-tube drill holes (4,669m) and 182 aircore holes totalling 4,404m “in six locations across the MRE deemed likely to fall into mining pit areas”.
• The auger holes are “nominally spaced at a 400m-by-400m spaced array with the PT holes similarly spaced at an offset, infill grid. This results in a 200m by 200m drill spacing”.
• The announcement says that “Hydro-mining has been determined as the optimal method of mining for the Kasiya Rutile deposit”.
• Commenting on the new resource estimate, Managing Director, Dr. Julian Stephens, said that the increased indicated resource converted on a “one-for-one” basis … confirms the very consistent geological and grade continuity and is testament to the high-quality and robustness of the deposit”.
• He also said that “Kasiya is poised to become a major long-term supplier of the critical minerals natural rutile and graphite … [and that Sovereign Metals] … is looking forward to presenting the outcomes of the PFS in the coming months”.

Conclusion: The successful upgrading of the Kasiya mineral resource so that over 60% is now classed as ‘Indicated’ underpins future pre-feasibility studies.  Resource tonnage appears relatively sensitive to the cut-off grade applied and we would expect the pre-feasibility to work to provide insight into the appropriate cut-off for commercial operation.

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 – [email protected] – 0203 470 0490

Simon Beardsmore – [email protected] – 0203 470 0484

Sergey Raevskiy –[email protected] – 0203 470 0474

 Sales

Richard Parlons –[email protected] – 0203 470 0472

Abigail Wayne – [email protected] – 0203 470 0534

Rob Rees – [email protected] – 0203 470 0535

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

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