SP Angel Morning View -Today’s Market View, Wednesday 6th March February 2024

Gold holds record highs as traders hope for Fed pivot on weaker economic data

MiFID II exempt information – see disclaimer below

Cornish Lithium (Private) – Keith Liddell steps in as NED as Ian Cockerill moves to takeover as CEO of Endeavour Mining following the termination of Sebastien de Montessus

Kavango Resources* (KAV LN) – Initial MRE for Nara gold tailings project

Galantas Gold* (GAL LN) – Exploration and drilling update

Red Rock Resource (RRR LN) – Update on DRC arbitration and gold assets

SolGold* (SOLG LN) – Joint declaration signing at PDAC shows Government support for Cascabel

Thor Energy (THR LN) – Improved insights into the mineralisation controls at Alford East

Gold – $2,127/oz – Gold holds record highs as traders hope for Fed pivot on weaker economic data

• Spot gold continues to hold around the $2,125/oz mark, having risen nearly $100/oz over the past week.
• Monetary easing expectations are fuelling the rally, with gold prices moving ahead of Treasury yields.
• There may also be a technical role played in the recent move, with momentum traders jumping on the rally.
• Rate cut expectations have been rising over the past week, with markets now expecting a 65% chance of a rate cut in June.
• The next three days will be key for both the gold price and the Treasury markets, with ADP and JOLTs data due today followed by NFP data due Friday.
• ETF flows have yet to pick up, which could provide an additional catalyst to the upside for gold bulls.

Canada shuns Chinese investments for mining projects

• Canada’s Natural Resources Minister stated that the answer to mining capital issues ‘cannot be from Chinese stateowned industries.’
• The Ministry introduced stricter rules in 2022 to reduce Chinese access to Canadian mining projects.
• Graphite developer SRG Mining faced criticism from the Ministry for its C$17m investment from a Chinese firm, subsequently backtracking on the deal.
• Zijin’s investment in Solaris, which holds a copper project in Ecuador, will face national security reviews from Canada.
• Canada ordered three Chinese investors to divest their stakes in three lithium firms in 2022.

Titanium prices strengthen on low stocks following China holiday

• Titanium concentrate prices have increased to $320/t.
• Shanghai Metals Market reports corporate inventories are low and mining has yet to resume following the holiday period.
• Rutile titanium dioxide is reportedly trading at $2,400/t in China.
• Titanium sponge prices reportedly trading c.$7,000/t, also seen in tight supply.

Lithium carbonate prices pare gains as Ganfeng continues to invest upstream

• Lithium carbonate prices reportedly fell to $15,800/t in China overnight in the futures market.
• Spot prices for battery-grade carbonate traded as low as $14,300/t.
• Equities continued their sell off after Albemarle plummeted 20% following a $1.75bn equity raise.
• Ganfeng agreed to buy 15% of the Pastos Grandes brine project in Argentina, boosting their exposure to Argentinian carbonate production.
• The Company has continued to acquire stakes in mining projects and offtake, increasing their position in Leo Lithium and securing additional offtake from Pilgangoora.
• Goldman Sachs’ recent report is likely fuelling negative sentiment, with the bank now predicting a 150kt LCE surplus in 2024 and carbonate prices to average $11k/t.

Iron ore prices soften as hopes of NPC stimulus measures disappoint

• Iron ore prices are hovering around the $115/t mark for the 62% benchmark in China.
• Premier Li Qiang announced the 5% GDP growth target, but limited guidance on government policy failed to stimulate trader optimism.
• Construction is reportedly ramping up slower than expected in China, despite the traditional seasonality.
• $139bn worth of infrastructure bonds are reported to be inbound, however this failed to improve sentiment.
• However, steel margins in China are improving, climbing to $45/t having been close to negative at the turn of the year.
• Stronger Asian FX are expected to support steel economics, providing a floor to iron ore demand despite the elevated price historically.
• Nippon Steel continues to invest in iron ore and coal, taking a 20% stake in Teck’s coking unit and also acquiring US Steel.

Copper – DRC and Zambia Copperbelt look likely to run short on hydropower again this year

• Drought conditions in the DRC and Zambia are already causing the import and rationing of energy in Zambia with a deficit of >500MW now looking likely.
• The government is realigning the national budget to account for food shortages with nearly half the planted crop already destroyed by drought conditions this year.
• While the Zambian drought seems to come around every 10 years this year is looking worse than previously with more power generation being run at Kariba so using more water.
• There is little or no spare power capacity in South Africa with Eskom still load shedding across much of South Africa and generator availability running at <50%.
• One expert reckons this could be the worst power crisis to ever hit Zambia with the rains failing in Angola and record low flows at Chavuma on the Angola border.
• The situation indicated Lake Kariba could reach a critical low level in July around six months earlier than usual.
• The situation looks likely to limit copper production on the Copperbelt with some miners in the DRC also though to be affected.

Economics

US – US Fed Chairman is giving a two day Congress semi-annual testimony with expectations for Jerome Powell to reiterate a lack of urgency for rate cuts.

• Nikki Haley unexpectedly secured a nomination win against Trump in Vermont securing her second victory of the presidential primary.
• The win is unlikely to Trump losing the GOP’s 2024 nominee but it may offer Haley’s financial donors more reason to continue supporting the candidate, Bloomberg writes.
• Falling employment and slowing inflation in the services sector in February taking US yields and the US$ index lower.
• ISM Services data showed the sector is cooling down with the headline index coming off more than expected.
• ISM Servies Index: 52.6 v 53.4 January and 53.0 est.
• ISM Services Prices Paid: 58.6 v 64.0 January and 62.0 est.
• ISM Services Employment: 48.0 v 50.5 January and 51.4 est.
• Factory orders fell 3.6% in January vs 0.3% in December
• Factory orders ex transport -0.8% (0.3%) and
• LMI Logistic Manager Index 56.5 in March vs 55.6 in February
• Total US vehicle sales rose to 15.81m in February vs vs 14.92m previously

China – Reports from China indicate no great stimulus is planned but that the CCP still sees GDP growth of ~5%

• While official policy remains to encourage the transition to high-tech manufacturing it appears the administration will simply encourage SMEs and entrepreneurs to grow.
• Encouragement may be through easier bank lending and some stimulation of consumer demand.
• The administration acknowledges that it needs to raise the wellbeing of city workers to stimulate domestic consumption and resolve the property crisis without raising local debt to unsustainable levels.
• Reducing the RRR to enable more mortgage lending should be effective but the government needs to stimulate sufficient confidence for Chinese workers to buy into the property market and splash out again.
• Three years of severe lockdowns have taken their toll with rising youth unemployment in the ‘lay-flat’ generation, and weak consumer confidence due to the need to be prepared for the next event.
• Also, many flats were designed for the defunct ‘one child’ policy and are seen as just too small for couples planning larger families.
• With China’s falling birthrate we suspect, and hope apartments are being remodelled to include more bedrooms and more space for larger families to encourage the next generation.
• China’s birthrate fell 5.7% last year to 9.02m, a new low while its mortality rose to its highest level since 1974 which saw extensive civil strife caused by the economic policies of Chairman Mao.
• The result was a 0.15% or 2.08m fall in the population to 1.409bn last year accelerating the decline of 850,000 seen in 2022.

Japan – The currency strengthened sub 150 level on the news that at least one of the nine BOJ’s policy board members consider its appropriate to lift rates, Bloomberg reports.

Germany – Strong trade data released this morning in a sign that challenges in the struggling industrial sector may be easing.

• Exports to China reported to have climbed almost 8%mom.
• Exports (%mom): 6.3 v -4.5 (revised from -4.6) December and 1.5 est.
• Imports (%mom): 3.6 v -6.7 (no revision) December and 1.8 est.

UK – Spring budget statement is due later today with expectations for the Chancellor of the Exchequer to propose tax cuts rallying support behind Conservatives trailing behind the opposition ahead of the upcoming general elections.

• Jeremy Hunt may propose to cut 2pp off the UK’s NI payroll tax, Bloomberg cites people familiar with discussions.
• The move is likely to be countered with a series of measures to fund personal tax cuts including ending UK non-domiciled tax status, cutting public spending and extending a windfall tax on oil and gas companies.
• The latest Ipsos survey published on Monday showed that Conservatives are running at an all time low of just 20% support levels versus 47% for Labour.

Singapore – PMI composite 56.8 in February vs 54.7 in January

South Korea  – Manufacturing PMI 50.7 in February vs 51.2 in January

Turkey – Inflation 4.5% in February vs 6.7% in January and 67% yoy in February vs 65% yoy in January

Saudi Arabia – PMI composite 57.2 in February vs 55.4 in January

UAE – PMI composite 57.1 in February vs 56.6 in January

South Africa – PMI composite 50.8 in February vs 49.2 in January  

Zambia – PMI composite 47.3 in February vs 49.2 in January

Ghana – PMI composite 50.2 in February vs 48.4 in January

Nigeria – PMI composite 51.0 in February vs 54.5 in January

Egypt – PMI composite 47.1 in February vs 48.1 in January

SubSea cables – Someone appears to have damaged at least four undersea fibre optic cables last week in the Red Sea

• One telecoms operator estimates this has affected around a quarter of all internet traffic between Europe and Asia.
• But will anyone risk repairing these cables in a hurry due to the threat of Houthi rocket attacks.
• The cables which generally rest hundreds of meters down may have been damaged by Anchor dragging – cargo ships generally carry 275-365m long anchor chains
• Three divers attempted to cut undersea cable SE-WE-ME-4 offshore Alexandria in 2013 causing internet speeds in Egypt to fall by ~ 60%.
• If someone cuts the SE-WE-ME-4 cables and blows up the GPS and other satellites along with a few other fibre optic cables for good measure then it seems likely that western markets will crash and we will go back to carrier pigeons for urgent messages.
• There are 14 cables running through the Red Sea with another six planned and a great deal of redundancy built into the system.
• We feel sure Putin is upset with Elon Musk for giving his Star Link system to Ukraine and might accidentally test his new Nuclear EMP weapon in space conveniently close to some of the 5,504 Star Link satellites.
• BUY GOLD!.

Currencies

US$1.0868/eur vs 1.0848/eur previous. Yen 149.61/$ vs 150.38/$. SAr 18.870/$ vs 19.045/$. $1.272/gbp vs $1.267/gbp. 0.652/aud vs 0.648/aud. CNY 7.199/$ vs 7.200/$

Dollar Index 103.67 vs 103.89 previous.

Commodity News

Precious metals:         

Gold US$2,127/oz vs US$2,122/oz previous

Gold ETFs 82.3moz vs 82.3moz previous

Platinum US$887/oz vs US$896/oz previous

Palladium US$963/oz vs US$953/oz previous

Silver US$23.70/oz vs US$24/oz previous

Rhodium US$4,500/oz vs US$4,500/oz previous

Base metals:   

Copper US$ 8,525/t vs US$8,529/t previous

Aluminium US$ 2,231/t vs US$2,228/t previous

Nickel US$ 17,650/t vs US$17,835/t previous

Zinc US$ 2,468/t vs US$2,446/t previous

Lead US$ 2,060/t vs US$2,039/t previous

Tin US$ 26,960/t vs US$26,715/t previous

Energy:           

Oil US$82.3/bbl vs US$82.3/bbl previous

• Energy prices were broadly unchanged with the API reporting a 0.4mb w/w build to US crude stocks (+2.6mb exp) and French nuclear reactor operating levels were reported up 1% w/w to 69% of 61.4MW capacity.

Natural Gas €27.0/MWh vs €27.5/MWh previous

Uranium Futures $92.5/lb vs $93.3/lb previous

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$115.2/t vs US$116.2/t

Chinese steel rebar 25mm US$563.9/t vs US$565.0/t

Thermal coal (1st year forward cif ARA) US$110.0/t vs US$108.3/t

Thermal coal swap Australia FOB US$141.9/t vs US$139.7/t

Other:  

Cobalt LME 3m US$28,550/t vs US$28,550/t

NdPr Rare Earth Oxide (China) US$49,310/t vs US$49,310/t

Lithium carbonate 99% (China) US$14,099/t vs US$14,098/t

China Spodumene Li2O 6%min CIF US$1,070/t vs US$1,070/t

Ferro-Manganese European Mn78% min US$985/t vs US$985/t

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

China Graphite Flake -194 FOB US$540/t vs US$555/t

Europe Vanadium Pentoxide 98% 5.7/lb vs US$5.7/lb

Europe Ferro-Vanadium 80% 27.45/kg vs US$27.45/kg

China Ilmenite Concentrate TiO2 US$323/t vs US$323/t

Spot CO2 Emissions EUA Price US$56.4/t vs US$56.4/t

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

Battery News

Total Chinese EV exports rise >850% over past three years with most sales in Europe.

• China overtook Japan as the world largest vehicle exporter led by EVs which account for ~40% of sales..

EU could add tariff on Chinese-made EVs as Commission continues anti-subsidy investigation

• Chinese EV could be hit by tariffs if the EU’s trade investigation later concludes that they are receiving unfair subsidies. (Reuters)
• The Commission this week published a document saying it had ‘sufficient evidence’ that tended to show Chinese EVs were being subsidised.
• Chinese EV imports to the EU have increased 14% yoy.
• The China Chamber of Commerce to the EU said that it was disappointed by the move and that the surge of imports reflected increasing European demand for affordable EVs.

BYD cuts cost of its cheapest EV further

• The EV price war in China continues to drive EV costs down.
• EV giant BYD further added fuel to the fire as it announced a 5% drop in the price of its cheapest EV, the Seagull.
• The Seagull will now start at $9,700.

Germany saw 39% increase in EV registrations in 2023

• The number of EVs registered in Germany rose 39.1% to 1.4m in 2023.
• The number of hybrid vehicles also increased to 2.9m.
• Germany has 49.1m passenger vehicles on its roads so EVs and hybrids account for around 8.7% of vehicles.
• Environmental activist group Greenpeace has said that the rollout has been too slow to reach the governments target of 15m EVs on the road by 2030.
• Germany would need to see growth of 2m a year for the next six years to reach the target.

Jaguar to stop production of some ICE models as it gears up for electric

• Jaguar will stop production of three models, the F-Type, XE and XF, at its Brimingham factory in June of this year.
• The automaker will continue to make its E-Pace, F-Pace and current electric SUV, the I-Pace until the end of the year.
• Production of all six vehicles is winding down according to Joe Eberhardt, CEO of Jaguar Land Rover, but there will be enough stock available to last until its next waves of EVs are ready to hit the market in Europe and the US.
• Jaguar is expected to announce an all-electric grand tourer in 2025, followed by a luxury SUV and saloon in 2026.

Vanadium – Standard Energy unveils vanadium-ion battery with 1% degradation

• Standard Energy has developed a battery with just 1% degradation after 20,000 cycles (PV magazine).
• Vanadium sheds electrons without shifting from its ionic state enabling high cycling stability
• Cycling them at a strenuous C-rate of 3, with 100% depth of discharge for 20,000 cycles, the company noted a degradation of just 1%.
• Delivery of a C-rate of 5, gives a roundtrip efficiency of 96 %
• Vanadium-ion batteries can be designed to deliver 10-hour duration storage for PV and wind systems or 5 C for UPS and frequency regulation without a change in their cathode design.

Company News

Cornish Lithium (Private) – Keith Liddell steps in as NED as Ian Cockerill moves to takeover as CEO of Endeavour Mining following the termination of Sebastien de Montessus

• Cornish Lithium reports the appointment of Keith Liddell as NED to replace Ian Cockerill who has moved to take on the CEO role following the sacking of Sebastien de Montessus for an alleged irregular payment instruction issued by him in relation to an asset disposal.
• Keith is an experienced metallurgical engineer with significant small company experience and
• Liddell is the inventor of the patented Kell Process for the hydrometallurgical recovery of Platinum Group Metals from concentrates and is currently working with Lifezone on its Kabanga nickel project in Tanzania.
• Ian Cockerill, formerly CEO at Gold Fields Ltd will have his time cut out at Endeavour managing the unravelling the four gold mines and other projects not to mention the situation around the very public termination of Sebastien de Montessus.
• Endeavour has two operating mines in Burkina Faso to the south west of Ouagadougou. The security situation in Burkina Faso has deteriorated significantly in recent years and remains volatile. A transitional government took control following a coup in 2022 and the political situation remains unstable with further coups possible.
• Cornish Lithium are busy working on the potential extraction of lithium from the Trelavour Downs kaolin hard rock project in Cornwall where lithium bearing micas were identified within the granite.
• Lithium has been shown to be amenable to extraction in lab-based metallurgical trials with concentration to a lithium mica concentrate using a licensed process developed by Lepidico in Australia.
• A 2022 Scoping Study highlighted a potential 20-year mine life with 7,800tpa of lithium hydroxide on capex of $244m.
• Cornish Lithium are also working on the potential extraction and production of lithium hydroxide from geothermal brines in Cornwall through its subsidiary GeoCubed.

Kavango Resources* (KAV LN) 0.83p, Mkt Cap £9m – Initial MRE for Nara gold tailings project

• Kavango Resources has announced a mineral resource estimate for the Nara tailings project in Zimbabwe.

• The estimate, described as the “first Mineral Resource Estimate Kavango has delivered” reports a JORC (2012) compliant ‘Indicated’ resource of:.

• • 293kt Indicated at 0.62g/t Au for 5,860oz.
  • 11.9kt Inferred at 0.66g/t Au for 253oz contained.
• No mining will be required for the material, given the previously mined nature of the tailings dumps.

• Today’s announcement explains that there is “upside potential at the tailings dump … highlighting the opportunity to increase tonnage at as-yet-untested depths.”
• “Kavango currently has an exclusive 2-year option to buy Nara” which “covers four historic mines with total recorded production of more than 90,000oz in the first half of the 20th Century”.
• Explaining that there has been no modern exploration over the “>4km of strike potential at Nara” the announcement identifies “significant potential for Kavango to explore for hard-rock resources, and for which it is ultimately targeting >1 million oz. gold potential” while generating some near-term cash flow from the dump material.
• Chief Executive, Ben Turney, explained that cash generated from the tailings treatment “can help fund both our development of this project and our wider exploration across Zimbabwe’s highly prospective, under-explored greenstone belts”.

*An SP Angel Analyst holds shares in Kavango

Galantas Gold* (GAL LN) 11p, Mkt Cap £13m – Exploration and drilling update

• The Company updates on a completion of a recent gradient array IP and resistivity geophysical survey at the Cornavarrow target as well as planned drilling at the Omagh mine site.
• The survey commissioned in January 2024 identified a strong north-south trending anomaly stretching for 900m and found 100m west of previously mapped vein mineralisation.
• The geophysical signature is similar to that generated over a mineralised structure close to the mine in 2021 with the structural setting reported to be similar to that at the Omagh mine site.
• The geophysical anomaly is likely to represent fault structures in the bedrock prospective for hosting gold mineralisation.
• The Cornavarrow target lies five kilometres west of the Omagh Gold Project.
• No diamond drilling was carried at site previously.
• Separately, the team secured full planning permission for eight drillholes to be driven into a southern part of the Joshua Vein.
• Drilling will test the down dip potential of the dilation zone at Joshua targeting resource expansion.

Conclusion: Geophysical survey at the Cornavarrow target identified a 900m long anomaly with the signature and structural setting similar to mineralised targets around the Omagh Gold Project representing an exciting target for follow up exploration. Additionally, the team secured permits for start of step out drilling at the Joshua Vein testing down dip extension.

*SP Angel acts as Broker to Galantas Gold

Red Rock Resource (RRR LN) 0.08p, Mkt cap £2.7m – Update on DRC arbitration and gold assets

• Red Rock Resources provides an update on their arbitration process in the DRC.
• The Company is pursuing a claim of $10m for its interest in the VUP copper-cobalt JV, alongside various gold assets.
• Red Rock is seeking their share of the sale proceeds of an asset sold in 2018.
• The arbitration has been delayed by the Presidential and Parliamentary elections, with senior management expected to be in the DRC over the next fortnight to finalise.
• Red Rock is also looking to renew two licences in Kenya which hold a mineral resource of 723koz Au, and a tailings project.
• The Company is looking to fund further exploration with an aim of increasing the resource to +1moz Au.
• In the Ivory Coast, reports have been commissioned for the seven gold licences, with various routes to value crystallization being considered.

SolGold* (SOLG LN) 7.2p, Mkt Cap £198m – Joint declaration signing at PDAC shows Government support for Cascabel

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• Solgold reports the signing of a ‘joint declaration’ with the Ecuador Government “in preparation for the execution of the Complementary Investment Protection Agreement (“IPA”) for the Cascabel Project … in Ecuador”.
• The IPA covers an investment of US$311m, in addition to the US$3.2bn investment planned at Cascabel which was discussed in the updated pre-feasibility study for Cascabel released in February.
• Today’s announcement describes the “Complementary IPA … [as] … the largest mining investment in Ecuadorian history, highlighting the scale and importance of the Project, SolGold’s commitment, and the impact on the broader Ecuadorian mining sector”.
• The joint declaration, which was signed at the Prospectors and Developers Association of Canada meeting in Toronto by the Minister of Production, Foreign Trade, Investments and Fisheries, Ms. Sonsoles García, and Scott Caldwell, CEO of SolGold, “in advance of the definitive Complementary IPA to be signed in Ecuador”.
• Mr. Caldwell described the IPO as symbolic of the “deepening of our relationship with the Ecuadorian State. President Noboa’s attendance and insightful speech at the PDAC convention were warmly welcomed by the mining community and underscores the significant support of his administration for responsible mining in Ecuador”.
• Mr. Caldwell also said that the “Complementary Investment Protection Agreement … reinforces the protections for our key investment in Ecuador”.

Conclusion: Solgold is working to strengthen its ties with the Ecuador Government as it progresses the development of Cascabel and advances other projects in the country.

*SP Angel acts as broker to Solgold

Thor Energy (THR LN) 1.45p, Mkt Cap £4.0m – Improved insights into the mineralisation controls at Alford East

• Thor Energy has provided a summary of its recent modelling of its 80% owned Alford East copper and REE project in South Australia.
• Recent Ambient Noise Tomography (“ANT”) surveys by Fleet Space Technologies have been incorporated in the models and have helped to confirm “the significance of the prominent north-northeast (NNE) structure associated with copper oxide mineralisation … [and provided] … targeted criteria for extensions to existing mineralisation and potential for new discoveries of oxide copper-REE mineralisation”.

·        The work has also shown that “Deeply weathered troughs in areas of unaltered metamorphic rocks … [are] … associated with zones of faulting, deep oxidation and intrusives at depth” providing insights into the structural and lithological context of the mineralisation which can help guide future exploration.

• Commenting on these new insights, Managing Director, Nicole Galloway Warland said that the work had also provided “greater insight into historical, negative drill results that led to major explorers leaving the area”.
• The current mineral resources estimate for Alford East, released in early 2021, shows ~126m ‘Inferred’ tonnes at an average grade of 0.14% copper and 0.018g/t gold.
• The project is “considered amenable to extraction via In Situ Recovery techniques”.
• Future work is expected to include drilling and pump testing to assess the In-situ-recovery characteristics of the mineralisation and continuing groundwater monitoring.

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

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