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

Gold weakens as US Treasuries slump on Trump victory

MiFID II exempt information – see disclaimer below

Alba Mineral Resources (ALBA LN) – £300,000 fund raising and option over a Swedish rare-earths prospect

Castillo Copper (CCZ LN) – Rock chip sampling at the Harts Range project

East Star Resources (EST LN) – Drilling underway at Verkhuba

First Tin (1SN LN) – Test blasting at Taronga

KEFI Gold and Copper* (KEFI LN) – Bank lending update

Kore Potash* (KP2 LN) – US$900k equity raise

Neometals (NMT LN) – Equity raise update

Pan American Silver (PAAS CN) – Quarterly results

Kinross Gold (KGC US) – Quarterly results

Lithium Argentina* (LAAC US) – Quarterly results as ramp up continues

Red Rock Resources (RRR LN) – Exploration progress in Africa and Australia

Teck Resources (TECKA CN) – Copper growth strategy

Gold ($2,725/oz) weakens as US Treasuries slump on Trump victory

• Gold prices have weakened in the wake of the US election result, with prices now near two-week lows.
• Spot prices fell to $2,707/oz at one point, before regaining ground to $2,725/oz.
• The move came as the dollar soared and US Treasury yields climbed.
• The 10-year yield rose to 4.43%, its highest since July, and now up c.80bp since the Fed cut rates by 50bp.
• The move reflects concerns over potentially inflationary policies from the Trump administration.
• Gold buys may also have been positioning for some kind of contested election; however the Red sweep may have caused some offloading of such positions.

Tin prices steady despite supply problems as Chinese demand falters

• Tin prices have strengthened to $32,350/t but remain rangebound since the April rally.
• Tin concentrate availability has been limited this year by minimal output from the major Myanmar Man Maw mine (7% of global supply).
• Myanmar sold 1,400t in September, with ytd imports down 52%yoy to 66kt. (Reuters).
• As a result, Chinese smelters are seeking alternative sources, boosting imports of refined tin to January highs.
• However, LME and SHFE stocks are up on weak demand and 2023 inventory build.
• Reuters reports refined tin usage has contracted 3.9%yoy with total tin usage down 4.9%yoy.

Trump victory causes commodities to fall as US dollar strengthens

We see Trump as accentuating many previously enacted pro-America policies

• Inflation – markets see Trump policies as inflationary causing US Treasury yields rise to 4.43%
• Trump is looking to increase government spending by around $7.5tn over the next 10 years
• US interest rates may need to remain higher than under the Democrats to help fund the additional borrowing, though we suspect there is not much in it.
• The US national debt jumped by 39% ($8.4tn) to $27.75tn at end 2020 from $19.95tn at the start of the Trump term though $3.6tn came from COVID relief laws.
• The US Treasury may start looking to raise borrowing levels with markets worrying about sustainability of US debt unless if it is not accompanied by strong GDP growth.
• US dollar strengthens on likely increase in Tariffs and ongoing reshoring of manufacturing to the US
• Trump is not seen as good for globalisation but increasing US Tariffs will cause Chinese exports to find new homes in other regions.
• China implications:
  • China will just need to work harder to sell its exports, probably at lower cost.
  • Chinese manufacturers may take a more cautious approach to inventory as they look for alternative export markets in certain sectors.

US growth:

• If Trump adds 1% to US GDP the increase implies ~180,000t of new copper demand. This added to the OECD projection of 1.6% GDP could add some 470,000t of copper demand in the US.
• We see US metal demand rising across the metals as Trump policies add to the Biden IRA ‘Inflation Reduction Act’ – inevitably under another name.

Gold:

• We see Putin and Xi as continuing to work to reduce the dominance of the US dollar as the World’s major trading currency.
• This implies greater central bank holdings of gold with the metal stabilising the use of other currencies.
• If Central Bankers see Trump policies as strengthening the US dollar, they might look to reduce gold holdings but we see this as less likely

Conclusion:  We see today’s pullback in commodities as a short-term reaction to the stronger US dollar and increased uncertainty from the Trump victory.

Economics

US FOMC is kicking off its two-day policy meeting with expectations for monetary authorities to vote for a 25bp cut following a 50bp reduction at the last meeting.

US – The US$ index and stocks rallied while Treasuries sold off as President is set to return to the office.

• 10y yields jumped to a four month high amid concerns over projected budget deficits and inflationary Trump policies.
• Bitcoin hit a record high reflecting a generally pro cryptocurrency sentiment of the incoming administration.
• VIX is down as uncertainty behind election results looks like are now behind us.
• Chinese equities closed lower this morning with copper trading amid expectations for more trade tariffs on imports from China.
• Senate was reclaimed by Republicans with results for the House where Republicans hold a majority have not been finalised yet.

UK – Labour support for Democrats unlikely to find favour with Trump

• Foreign interference in elections rarely looks good and Labour’s public campaigning for the Democrats is likely to come back and bite them.
• We would not welcome any foreign entity interfering in our elections so it’s hard to see why Labour thought it was ok to campaign in the US.

Currencies

US$1.0757/eur vs 1.0892/eur previous. Yen 154.08/$ vs 152.24/$. SAr 17.634/$ vs 17.463/$. $1.289/gbp vs $1.298/gbp. 0.657/aud vs 0.662/aud. CNY 7.162/$ vs 7.109/$

Dollar Index 105.01 vs 103.81 previous

Precious metals:         

Gold US$2,728/oz vs US$2,738/oz previous

Gold ETFs 83.8moz vs 83.9moz previous

Platinum US$992/oz vs US$994/oz previous

Palladium US$1,068/oz vs US$1,088/oz previous

Silver US$32.2/oz vs US$32.6/oz previous

Rhodium US$4,675/oz vs US$4,675/oz previous

Base metals:   

Copper US$9,579/t vs US$9,711/t previous

Aluminium US$2,635/t vs US$2,647/t previous

Nickel US$16,110/t vs US$16,195/t previous

Zinc US$3,063/t vs US$3,075/t previous

Lead US$2,028/t vs US$2,040/t previous

Tin US$31,910/t vs US$32,135/t previous

Energy:           

Oil US$74.4/bbl vs US$75.2/bbl previous

• Crude oil prices and international gas prices edged lower as the market expects a Trump presidency to be more supportive to the US shale industry (LNG export approvals) and more unsupportive of renewables.
• The API estimated a 3.1mb w/w build to US crude oil inventories, versus market expectations for a 1.8mb build.
• French nuclear reactor operating levels were reported up 3% w/w to 75% of 61.4MW capacity, with Gazprom reporting a stable gas supply of 42.4mcm/d (~1.5bcf/d) via the Sudzha metering station.
• Orsted and Vestas, two of Europe’s largest wind energy players, are both down in early trading as the renewables industry braces itself for a potential Trump administration.

Natural Gas €39.7/MWh vs €40.4/MWh previous

Uranium Futures $77.2/lb vs $78.1/lb previous 

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$104.1/t vs US$104.1/t

Chinese steel rebar 25mm US$531.2/t vs US$535.7/t

HCC FOB Australia US$206.5/t vs US$206.0/t

Thermal coal swap Australia FOB US$143.8/t vs US$144.3/t

Other:  

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

NdPr Rare Earth Oxide (China) US$59,278/t vs US$59,924/t

Lithium carbonate 99% (China) US$10,124/t vs US$10,198/t

China Spodumene Li2O 6%min CIF US$760/t vs US$760/t

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

China Tungsten APT 88.5% FOB US$340/mtu vs US$340/mtu

China Graphite Flake -194 FOB US$440/t vs US$440/t

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

Europe Ferro-Vanadium 80% 24.55/kg vs US$24.55/kg

China Ilmenite Concentrate TiO2 US$312/t vs US$314/t

China Rutile Concentrate 95% TiO2 US$1,180/t vs US$1,189/t

Spot CO2 Emissions EUA Price US$62.6/t vs US$62.6/t

Brazil Potash CFR Granular Spot US$277.5/t vs US$277.5/t

Germanium China 99.99% US$2,875.0/kg vs US$2,875.0/kg

China Gallium 99.99% US$445.0/kg vs US$450.0/kg

Battery News

EV registrations in the UK continue to rise

• BEV registrations have now reached a 20.7% share of the UK’s total car market.
• Petrol car registrations have fallen by 14.2% and diesel is down by 20.5%, a sign that automakers are starting to make the shift away from ICE vehicles.
• Hybrid and plug-in hybrid registrations also a slight dip in sales , by 1.6% and 3.2% respectively.
• UK consumers now have 125 BEV models to choose from which is up 38% in the last 10 months.
• Almost 300,000 new BEVs have hit the road in 2024 to date, which is around 18.1% of the market, although short of the 22% target required under the ZEV mandate.

Xpeng unveils extended-range hybrid system with 1,400km range

• Chinese automaker Xpeng has unveiled its Kunpeng hybrid system, which it said delivers up to 1,400km of combined range which includes up to 430km of battery range.
• The move makes Xpeng the latest automaker to introduce plans for hybrid vehicles having previously solely produced pure EVs.
• The system uses a battery pack that supports 5C fast charging, capable of charging from 10% to 80% in 12 minutes according to the company.

Norway continues to lead the way in EV adoption, positive signs for Chinese EV makers

• 94% of cars sold in Norway in October were fully electric.
• Chinese carmakers sold no cars in Norway in 2019, but this year so far, they have managed to take 11% market share.
• Growth for Chinese automakers in Norway reached 5% market share in their first year of sales in 2020, and 10% by 2022.
• In 2023, their share declined before rebounding to the record level this year.
• The US and EU have introduce new tariff rates to stem the rise of Chinese EVs, but Norway has not followed suit.

Company News

Alba Mineral Resources (ALBA LN) 0.03p, Mkt cap £4.4m – £300,000 fund raising and option over a Swedish rare-earths prospect

• Alba Mineral Resources has raised £300,000 by placing an additional 1m shares at 0.03p/share.
• In addition, the company has announced a “retail offer to raise up a further £100,000 … at 0.03p per share, to provide existing retail shareholders in the Company with an opportunity to participate in the fundraising”.
• The additional funding will be deployed to continue the underground sampling at the Clogau mine in north Wales, upgrading of the process plant and to progress the recently announced plan to produce commemorative gold coins from ore currently available at the mine.
• The funds will also fund option payments totalling £10,000, of which 50% is due in cash, to acquire the Finnsbo Rare Earth Project in Sweden, announced today.
• Finnsbo is located in eastern Sweden approximately “15km north of the famous 540 yr old Dannemora magnetite mine”.
• Alba Mineral Resources says that sampling “by the present owners of historic blast material on surface at two separate blast sites … has returned very interesting rare earths assays … of up to 3.5% Total Rare Earth Oxides (TREO) … as well as gold and copper grades of up to 27g/t … and 2.9%” at one of the sites
• Welcoming the Swedish option, Executive Chairman, George Frangeskides, said that it “is not expected to detract from, the Company’s continued focus on the roll-out of blasting and development operations at the Clogau Gold Mine in Wales”

Castillo Copper (CCZ LN) 0.45p, Mkt Cap £6.2m – Rock chip sampling at the Harts Range project

• Castillo Copper reports the results of initial rock-chip sampling from its recently acquired Harts Range niobium/uranium and heavy rare-earth elements project in Australia’s Northern Territory.
• Samples taken from pegmatite outcrops returned “high-grade readings up to 29.80% Nb₂O₅, 14.04% U₃O₈, 1.63% Dy₂O₃, 0.22% Tb₄O₇ and 23.02% Ta₂O₅ … [which the company says] … clearly validate the significant exploration potential apparent for Niobium, Uranium and HREE mineralisation at the Cusp and Bobs Prospects”.
• The company plans a further geological “comprehensive and systematic exploratory programme, the geology team will shortly return to site to undertake a reconnaissance campaign to investigate incremental historic prospects, new / legacy pegmatite occurrences” in the near future.
• In addition, quotations are being sought for the provision of “heliborne radiometric and magnetic surveys that are critical to identify targets for subsequent follow up”.

Conclusion: Encouraging early geological reconnaissance of the Harts Range project is being followed up with more detailed geological work while the company solicits quotations from airborne geophysical contractors.

East Star Resources (EST LN) 1.2p, Mkt Cap £4.8m – Drilling underway at Verkhuba

• East Star Resources reports that it has started drilling at its Verkhuba copper project in east Kazakhstan.
• The first 1,000m of the planned 4,000m programme is expected to “be drilled this year, with the remainder of the programme to be completed as early as possible in 2025, subject to weather”.
• CEO, Alex Walker, explained that, following “a detailed review of the ore bodies, extensive modelling and early-stage mine planning, the Company has a greater understanding of the deposit and the requirements to upgrade the quality and potentially the tonnage of the resource”.
• He said that “The drill programme has been designed to increase certainty of the ore lenses within existing modelled open pits, and target gaps between lenses where the potential to increase tonnage exists”.
• The additional drilling will “assist in the completion of a scoping study, to determine the economics of a mining operation, in 2025”.

Conclusion: We look forward to the Verkhuba scoping study next year.

First Tin (1SN LN) 6.25p, Mkt Cap £19.9m – Test blasting at Taronga

• First Tin reports the successful completion of a trial blast at its Taronga tin project in New South Wales.
• Technical analysis of the results was positive and confirmed “that the powder factors used in the DFS produce excellent fragmentation and that further trials using even lower powder factors could result in significant operating cost savings”.

• Monitoring showed “acceptable vibration and noise from the trial … [and provided data for inclusion in] … Taronga’s Environmental Impact Statement”.
• The test blast has also “provided an opportunity to collect another bulk sample for our continuing metallurgical testwork programme, with samples more closely representing the actual run of mine blasted material”.
• CEO, Bill Scotting, commented that “These insights are invaluable as we advance our Taronga asset toward production”.

KEFI Gold and Copper* (KEFI LN) 0.6p, Mkt Cap £36m – Bank lending update

• Second co lending bank granted initial approvals for the Tulu Kapi Gold Project in Ethiopia.
• The approval was granted for $240m, an increase on previously targeted $190m.
• The first bank that granted its approval earlier this year will now update its formal approval for the larger proposed loan package.
• Increased loan does not alter total $320m in project funding but rather alters its composition.
• Higher bank debt allows to reduce the amount to be raised in Equity Risk Notes.
• New capital structure includes:
  • US$285m in bank debt and Equity Risk Notes comprising $240m bank debt ($190m before) and $45m ERN ($90-110m before);
  • $35m in new equity on a subsidiary level comprising $20m from government and regional authorities and $15m from other investors.
• Final approvals by credit committees are subject to remaining conditions being satisfied including
  • The Ethiopian Government formally ratifying the already approved Country Membership of the second bank;
  • Funding syndicate confirming the already drafted detailed definitive documentation;
  • Other normal conditions for mining project finance transactions.
• All conditions are expected to be achieved in 4Q24 (previously guided October).

Conclusion: Initial bank debt approval is a positive news with increased size of bank lending likely reflecting stronger gold price environment. Tulu Kapi funding completion is guided for 4Q24 from previously targeted October.

*SP Angel act as Nomad and Broker to KEFI Gold and Copper

Kore Potash* (KP2 LN) 3.2p, Mkt Cap £138m – US$900k equity raise

• The Company raised US$900k in new equity issuing 25.4m shares at 2.8p.
• The price implies a ~15% discount to the previous closing price.
• Proceeds from the raise will be used to cover working capital needs as the team works towards signing an EPC contract for the Kola Potash Project.
• Earlier last week, the Company reported that a final agreement with PowerChina regarding the EPC contract was reached and that two parties are looking forward to a signing ceremony expected on 19 November.
• Signing the contract will kick off the funding process with Summit Consortium financing parties expected to provide the term sheet including royalty and debt funding within 3m.

*SP Angel acts as Nomad and Broker to Kore Potash

Neometals (NMT LN) 5.0p, Mkt Cap £32m – Equity raise update

• The Company completed an equity issue announced earlier in October with A$7.1m raised.
• The raise is comprised of a A$4m placing with professional and institutional investors and A$3.1m rights issue.
• The placing was done at A$0.09/share implying a ~20% discount to previous close.
• Proceeds will be used to progress its lithium ion batteries recycling businesses, lithium and vanadium technology R&D, Barrambie Gold and Titanium project as well as cover general working capital needs.

Pan American Silver (PAAS CN) C$22.5, Mkt Cap C$8.1bn – Quarterly results

• Pan American Silver, who have operations in Canada, and South America, report results.
• The Company produced 3,833koz silver over the period at an AISC of $19.63/oz.
• The Company produced 1,635koz gold over the period at an AISC of $1,496/oz.
• Ventilation infrastructure at La Colarada has helped boost production by 59% and reduce costs by 26%.
• Revenues reported at US$716m, with cash increasing $101m.
• Guidance reaffirmed, with annual silver production guided towards the lower end of the range at 21-23moz.

Kinross Gold (KGC US) $10, Mkt Cap $12.3bn – Quarterly results

• Kinross produced 564koz AuEq over the period, at an AISC of $1,350/oz.
• The Company reports operating cash flow of $734m, and attributable free cash flow of $415m.
• Kinross has repaid $350m on its term loan over the period and a further $100m in November.
• Tasiast in Mauritania produced 162koz AuEq at a cash cost of $688/oz.
• Paracatu produced 146koz AuEq at cash costs of $1,006/oz.
• La Coipa produced 49koz AuEq at cash costs of $1,074/oz.
• Fort Knox produced 149koz AuEq at cash costs of $958/oz.
• Round Mountain produced 42koz at $1,540/oz cash costs whilst Bald Mountain produced 44koz at $1,326/oz cash costs.
• Development of Great Bear continues, which is expected to produce 500kozpa at AISC of $800/oz
• Company reaffirms guidance 2.1moz AuEq, with 2moz AuEq guided for 2025 and 2026.

Lithium Argentina* (LAAC US) $3.5, Mkt Cap $570m – Quarterly results as ramp up continues

• Lithium Argentina, which is ramping up the Cauchari Olaroz brine project alongside Ganfeng in Argentina, reports quarterly results.
• Production volumes up 21% over the period, hitting 6800t.
• Production currently at 75-80% of design capacity, which are expected to persist through 2024 and into 2025. Design capacity is 40ktpa.
• Production guidance retained at 20-25kt for 2024.
• Product was sold primarily to Ganfeng, with realized price at $8,000/t over the period, discounted for battery-grade adjustments and Chinese VAT, alongside impurity removal penalties.
• Lower impurities from September saw additional processing cost penalties reduced from $2,000/t to $1,500/t.
• However, lithium prices weakened further in October, seeing realized prices touching $7,000/t.
• Cash at $92m, debt at $228m following the sale of $70m worth of the Pastos Grandes project to Ganfeng, a 14.9% interest.

*An SP Analyst holds shares in Lithium Argentina

Red Rock Resources (RRR LN) 0.05p, Mkt Cap £2.6m – Exploration progress in Africa and Australia

• Red Rock Resources has provided progress reports on its projects in Burkina Faso, the DRC and Australia.

• In Burkina Faso, exploration of the Boromo and Banfora greenstone belts “is operating on time and on budget” with assaying and other equipment “organised to arrive locally by air … this week … [and] … Further equipment and six month’s spares and supplies … expected to be despatched to arrive mid- to late-January, allowing the operations to be stepped up”.
• In DRC, meetings have been held with the authorities in Kinshasa “to discuss a major and potentially cash-generative joint venture project … with site visits planned within days”.
• In Australia, exploration of the O’Loughlin’s gold project south of Ballarat has identified “significant antimony and arsenic anomalism … in soil and rock chip geochemistry”.
• The company explains that the identification of geochemically anomalous antimony “opens the possibility that gold mineralisation identified at O’Loughlin may have a different genesis to the orogenic gold mined at Ballarat and Bendigo … [and may] … be similar to the deposit styles of Fosterville or Sunday Creek rather than the more traditional Ballarat- Bendigo style of the region”.
• Drilling in the area in 2022 intersected a “mineralised structure … with spur veins returning a maximum interval of 0.4m @ 12.34g/t Au … [and the company says that] … Future exploration will now be directed towards better defining the key structures of the area at surface, particularly the fold hinges including plunge and from this a more targeted drill programme will be recommended”.

Teck Resources (TECKA CN) C$68.4, Mkt Cap C$35bn – Copper growth strategy

• Canadian copper and zinc miner Teck provided an update on its copper growth strategy yesterday.
• The Company sold their Elk Valley steelmaking coal interests to Glencore this year.
• The Company Expects to invest US$3.2-3.9bn over the next four years to boost copper production to 800ktpa, which they guide for ‘before the end of the decade.’
• This will be achieved by an optimisation and debottlenecking programme at Teck’s 60%-owned QB project (US$100-200m CAPEX)
• Highland Valey mine life set to be extended by 17 years to 2040s, with LOM production post-2024 at 137ktpa (US$1.3-1.4bn CAPEX).
• Teck’s Zafranal project guided for sanction decision in 2H25, targeting 126ktpa Cu first five years (US$1.5-1.8bn CAPEX).
• Teck’s 50%-owned San Nicolas Project in Mexico guided for 63ktpa over first five years, with sanction decision in 2H25. (US$0.3-0.5bn CAPEX)
• Copper production guided for 510-590kt in 2025.
• The EVR sale has bolstered Teck’s balance sheet, which holds net cash of C$1.8bn, with the Company executing C$2.3bn worth of buybacks.

LSE Group Starmine awards for Q3 commodity forecasting:

No.1 in Precious Metals: SP Angel mining team awarded No 1. ranking for Previous Metals forecasting in LSEG Quarterly Starmine Award for Reuters Polls Q3 2024

No.2 in Base Metals: SP Angel mining team awarded No 2. ranking for Base Metals forecasting in LSEG Quarterly Starmine Award for Reuters Polls Q3 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.

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