SP Angel Morning View -Today’s Market View, Wednesday 6th September 2023

Copper climbs as China property stocks post gains on scrapping home purchase curbs in smaller cities

MiFID II exempt information – see disclaimer below

Atlantic Lithium* (ALL LN) – High-grade intersections close to surface offer near-term mining potential.

Bluejay Mining* (JAY LN) – Chairman’s video update outlines current plan for exploration around

KEFI Gold and Copper* (KEFI LN) – Saudi Arabia operational update

Khoemacau Copper Mining (Private) – Bidders circle for Botswana’s Khoemacau project

Kodal Minerals* (KOD LN) – Results show progress at Bougouni lithium in Mali and on gold projects in Mali and Côte d’Ivoire

Savannah Resources* (SAV LN) – Barroso Lithium Project development update

Tertiary Minerals* (TYM LN) – BUY– Swedish government U-turn on Storuman Fluorspar  Project opens route to value creation

Gold prices slide as rate sell-off resumes and dollar rallies on Euro weakness

• Gold prices fell to $1,923/oz yesterday, their largest one-day loss since the beginning of August.
• The rally following last week’s nonfarm payroll data was short lived, as US Treasuries resumed their sell-off.
• This supported a stronger dollar, which hit a six-month high, weighing on dollar-denominated bullion.
• Fed speaker Waller stuck to the script by raising the possibility of ‘additional tightening in November/December.’
• The market is currently pricing in a 93% chance of a Fed pause in September, whilst the odds of a hike in November or December stay around 40%.
• Gold will need these hike expectations later in the year to cool alongside a softer labour market to resume its rally.
• The dollar is being supported by a weaker euro, weighed by dire German factory orders coming in at -11.7% vs expectations of -4%.

Platinum deficit looms as supply flattens and demand rises on industrial appetite

• The World Platinum Investment Council provides its quarterly update.
• The group expects the 2023 deficit to increase to 1,005koz or 12% of projected annual demand.
• Demand is expected to rise 27% yoy to 8,230koz, driven by a 381koz rise on yoy auto demand and a 336koz increase in industrial demand.
• Supply is expected to remain flat at 7224koz, 7% below the average annual output since 2013.
• South African mine supply has been on the slide since early last year on the back of electricity shortages.
• Russian mine supply is rising yoy but recycled supply is reportedly down 345koz on the back of limited scrap supply.
• Q2 platinum market stood in a deficit of 348koz.

Codelco secures $2bn from bond sales in a bid to shore up production

• Codelco has raised $2bn through the issuance of bonds yesterday in New York.
• 10- and 30-year notes were offered at a yield of 5.966% and 6.331% respectively.
• The Chilean mining giant is suffering from 25-year lows in copper production.
• Moody’s reported in August it was eyeing a downgrade for Codleco’s rating given its perceived ‘$4bn’ requirement for investment in ‘structural projects.’

Economics

China – Property stocks jump on hopes of sector focused stimulus as the state owned newspaper speculated the government should scrap home purchase curbs in smaller cities, FT reported.

• China Evergrande and Country Garden climbed ~54% and ~21% on the back of the news.

Certain Chinese ministries order worker to stop using iPhones

• The order is thought to be aimed at reducing perceived national security ross from telecoms devices.
• The order only applies to Apple iPhones and not to other brands.
• We recommend China buys Graphene Star’s GShield graphene paint to shield sensitive conversations from smartphone microphones.
• https://www.rustins.ltd/rustins/our-products/speciality-paints/g-shield-electro-smog-shielding-paint

Great Wall of China by excavator as workers looking for shortcut

• Two Chinese construction workers have been detained for digging through a section of the Great Wall of China.
• The workers wanted to create a shortcut to drive their excavator through.
• The Great Wall is seen as a cultural icon as it represents the unification of China as the separate parts of the wall were lined together as China was first unified in the Qin Dynasty of 221–206BC.

Germany – Factory orders slide 11.7% mom in July vs -4% expectations and +7.6% in June

UK – Construction PMI beats expectations at 50.8 vs 50.5 forecasted

EU – Retail sales slide 1% vs -1.2% expected yoy but down -0.2% mom vs -0.1% expected

Niger – Wagner forces reported in Niger

Currencies

US$1.0735/eur vs 1.0762/eur previous. Yen 147.42/$ vs 146.96/$. SAr 19.225/$ vs 19.257/$. $1.257/gbp vs $1.258/gbp. 0.638/aud vs 0.637/aud. CNY 7.312/$ vs 7.296/$.

Dollar Index 104.70 vs 104.45 previous..

Commodity News

Precious metals:

Gold US$1,924/oz vs US$1,936/oz previous

Gold ETFs 89.8moz vs 90moz previous

Platinum US$923/oz vsUS$945/oz previous

Palladium US$1,208/oz vs US$1,217/oz previous

Silver US$23.41/oz vs US$24/oz previous

Rhodium US$4,100/oz vs US$4,100/oz previous

Base metals:

Copper US$ 8,442/t vs US$8,398/t previous

Aluminium US$ 2,194/t vs US$2,187/t previous

Nickel US$ 20,915/t vs US$20,950/t previous

Zinc US$ 2,474/t vs US$2,454/t previous

Lead US$ 2,226/t vs US$2,194/t previous

Tin US$ 26,325/t vs US$26,370/t previous

Energy:

Oil US$89.8/bbl vs US$88.6/bbl previous

• Crude oil prices surged above $90/bbl yesterday after both Saudi Arabia (-1mb/d) and Russia (-0.3mb/d) committed to a 3M extension of additional output cuts, which is above market expectations for a 1M extension.
• US Henry Hub natural gas prices fell on weather forecasts indicating that a prolonged heat wave affecting much of the southern L48 would soon end thereby reducing cooling demand.

Natural Gas US$2.567/mmbtu vs US$2.658/mmbtu previous

Uranium UXC US$58.50/lb vs US$58.25/lb previous

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$116.1/t vs US$114.3/t

Chinese steel rebar 25mm US$531.5/t vs US$532.3/t

Thermal coal (1st year forward cif ARA) US$125.3/t vs US$125.0/t

Thermal coal swap Australia FOB US$166.1/t vs US$159.0/t

Coking coal swap Australia FOB US$261.0/t vs US$261.0/t

Other:  

Cobalt LME 3m US$33,420/t vs US$33,420/t

NdPr Rare Earth Oxide (China) US$71,456/t vs US$70,857/t

Lithium carbonate 99% (China) US$26,326/t vs US$26,794/t

China Spodumene Li2O 6%min CIF US$2,830/t vs US$2,910/t

Ferro-Manganese European Mn78% min US$1,036/t vs US$1,039/t

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

China Graphite Flake -194 FOB US$650/t vs US$650/t

Europe Vanadium Pentoxide 98% 7.0/lb vs US$7.1/lb

Europe Ferro-Vanadium 80% 31.05/kg vs US$31.25/kg

China Ilmenite Concentrate TiO2 US$311/t vs US$312/t

Spot CO2 Emissions EUA Price US$89.2/t vs US$89.5/t

Brazil Potash CFR Granular Spot US$355.0/t vs US$355.0/t

Battery News

Japan doubles EV infrastructure targets

• Japan’s government has announced it will double its current EV charger installation target to 300,000 by 2030.
• Currently there are fewer than 30,000 publicly available EV chargers in Japan.
• Japan has also set a goal for all new cars sold to be electrically powered by 2035 – in 2022, domestic sales of EVs in Japan totalled 77,000, representing about 2% of all passenger cars, lagging behind China and Europe.
• Lack of public charging stations is partly cited for consumer reluctance.
• Japan’s 30,000 charging stations, compare poorly with 107,000 in neighbouring South Korea, 1.76m in global leader China, 128,000 in the US, 84,000 in France and 77,000 in Germany.
• As of end of August, the UK had 48,450 operational charging points.

BYD and Tesla dominate global EV sales

• Latest data has shown how dominant BYD and Tesla have been in the global EV market in 2023 (CleanTechnica):
  • BYD (sales H1 ’23): 1,191,405 EVs
  • Tesla: 888,879 EVs
  • BMW: 220,795 EVs
  • GAC Aion: 212,090 EVs
  • Volkswagen: 209,852 EVs
  • Mercedes: 165,213 EVs
• Of BYD sales, 92,469 were to overseas markets, exceeding the total of 2022.
• On Monday, BYD presented six models for the European market at the Munich auto show, highlighting its plans to attack the overseas markets even harder in the coming years.

Toyota reveal hydrogen fuel cell Hilux

• The ground-breaking pick-up prototype was revealed at Toyota Manufacturing UK’s vehicle plant in Derby, England, where it has been developed in a joint project with consortium partners, supported by UK Government funding.
• The project began in 2022, and the prototype is a big step towards furthering commercial hydrogen vehicles.
• The new powertrain uses core elements of the Toyota Mirai hydrogen fuel cell technology which has been in commercial production for almost 10 years.
• Hydrogen is stored in three high-pressure fuel tanks, giving the prototype Hilux an expected driving range of more than 600km.

Company News

Atlantic Lithium* (ALL LN) 20.5p, Mkt Cap £126m – High-grade intersections close to surface offer near-term mining potential.

(Piedmonth can earn into up to 50% of the Ewoyaa lithium project through the expenditure of around 70% of the project capex)

BUY

• Atlantic Lithium report assay results for a further 6,150m of rc infill and exploration drilling and groundwater monitoring drilling at Ewoyaa in Ghana.
• The work is as part of a broader 18,500m drill programme planned for 2023.
• The work is designed to convert Inferred to Indicated Resources improving confidence and extending the known mineralisation at Ewoyaa South-2 and Ewoyaa North-East deposits
• These are currently outside of the current JORC (2012) compliant 35.3mt @ 1.25% Li2O mineral resource estimate.
• Intersections at the Kaampakrom Ewoyaa Main and Ewoyaa North-West deposits are also outside of the current Resource.
• Intersections at Ewoyaa South-2, Ewoyaa North-East, Ewoyaa Main and Ewoyaa North-West deposits with estimated true widths and including highlights at a 0.4% Li2O cut-off and a maximum 4m of internal dilution of:
  • 48m at 1.31% Li2O from 137m – mineralisation remains open along strike and at depth.
  • 24m at 1.86% Li2O from 10m
  • 29m at 1.37% Li2O from 184m
  • 29m at 1.2% Li2O from 69m
  • 23m at 1.51% Li2O from 23m
  • 13m at 1.19% Li2O from 28m
  • 9m at 1.6% Li2O from 223m
  • 9m at 1.48% Li2O from 44m
  • 8m at 1.18% Li2O from 75m
• Infill and extensional drilling results at the Ewoyaa South-2 have confirmed mineralisation continuity and extended mineralisation at depth, outside of the current JORC resource
• New, high-grade intersections occur close to surface offering near-term mining potential.

Conclusion:  These are good results for the Ewoyaa project and indicate strong potential for a longer mine life and further expansion of the mine. We expect the Government and Minerals Commission in Ghana to confirm agreement on the terms of the mining license sometime soon as it makes no sense to delay the Ewoyaa project at a time when buyers are desperate for new sources of spodumene for its contained lithium.

*SP Angel acts as Nomad to Atlantic Lithium. Two mining analysts from SP Angel recently visited the Ewoyaa mine site in Ghana and drove onto Takoradi to check the quality of the road to port. Our intrepid analysts also visited the Ministry of Minerals Commission and MIIF, the Ghana Minerals Income Investment Fund.

Bluejay Mining* (JAY LN) 1.01p, Mkt cap £12m – Chairman’s video update outlines current plan for exploration around

(Bluejay Mining holds 100% of the Hammaslahti and Enonkoski projects)

• Bluejay’s Chairman, Rob Edwards, has outlined management’s plans on exploration and future strategic support.
• Finland:
  • Hammaslahti: Expect to receive some interesting assay results from drilling at Hammaslahti in the short term.
  • Enonkoski:  Ongoing discussions with good quality and meaningful investors on targets around the former jv with Rio Tinto in the Enonkoski mine area.
  • Strategic investors are keen to secure some supply chain development and to invest into a good quality geological team.
  • These strategic investors are also in exploring the whole geological belt for battery and other critical metals.
  • Outokumpu: could spend some marginal dollars on exploration in their Outokumpu licenses .
• Greenland:
  • Kangerluarsuk has returned grab samples of >40% zinc and allot of sulphide material.
  • Kangerluarsuk is described as a walk-up target which is part of a basin structure offering scale, grade with the highest zinc in stream sediments found in Greenland
  • Access is via boat as with most other exploration targets in Greenland.
  • The Black Angel is located close to the south indicating a history of mining in the area.
  • Disko: remains a large district-scale nickel-copper opportunity subject to jv with Kobold Metals
  • Management are working out how to deploy their current budget in these areas.
• Video interview: https://www.youtube.com/watch?v=8JYFqnI1_F8
• Dundas:  There was no mention of the Dundas ilmenite project in the interview
• Metals One shares: Bluejay currently hold ~29% of Metals One shares which started trading on AIM on 31^st July at 4.5p/s. The stake is currently worth around £2.7m.
• Bluejay has transferred its Black Shales licenses towards the north of Finland to Metals One in return for the stake, £150,000 in cash and further potential shares in Metals One.

Conclusion:  Bluejay offer exploration upside to a suite of critical and EV metals including nickel, cobalt, copper, pgms… There are strategic investors who are interested in helping to develop this upside potential utilising the expertise and skills inherent in the Bluejay team.

*SP Angel act as nomad and broker to Bluejay Mining.

The SP Angel mining analyst has visited the Dundas, Iterlak ilmenite sands project in Greenland as well as the Enonkoski, Hammaslathi and Outokumpu projects in Finland

KEFI Gold and Copper* (KEFI LN) 0.58p, Mkt Cap £28m – Saudi Arabia operational update

• The Company released an operational update for JV owned assets in Saudi Arabia (27% owned by KEFI).
• At the Jibal Qutman Gold Project, the team completed 13,000m of drilling mainly focused on infill work to upgrade available mineral resource into higher confidence category and ultimately maiden mineral reserve.
• Metallurgical work on both oxide and sulphide gold mineralisation completed with further tests designed to improve gold recoveries from fresh material commenced.
• Additionally, the team started trenching and diamond drilling of targets adjacent to the property with a view to grow the resource base.
• At the Hawiah Polymetallic Project, +60,000m drilling programme designed to grow and upgrade the resource as part of the DFS work is ongoing and continues to yield positive results.
• Seven drilling rigs are currently onsite wit ~16,000m completed so far this year.
• Recent drilling returned 7.5m wide intercept extending mineralisation out by 230m downdip with assay results expected in due course.
• Separately, metallurgical testwork confirmed flotation recoveries used in the latest economic study with further work is considered to test alternative processing routes including SX/EW and the Albion Process.
• At the adjacent Al Godeyer Exploration License, drilling is ongoing to grow the existing resource (1.4mt at 1.39g/t Au and 0.60% Cu) to near term target of 2.0mt with a potential to develop the property as a satellite deposit to Hawiah.
• Initial trenching at the greenfield Abu Salal (50km south of Hawiah) following up on mapping and geophysical results identified 2km long, discontinuous N-S striking gossanous ridge exposed in all trenches with assays currently pending.

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

Khoemacau Copper Mining (Private) – Bidders circle for Botswana’s Khoemacau project

• Reuters reports Sibanye, Impala Platinum and Exxaro Resources are circling on Botswana’s Khoemacau copper mine.
• The project is currently valued around $1.2-1.8bn by analysts.
• South32 and Sandfire are reported to have dropped out of the process.
• The asset is owned by Cupric Canyon, a US-based PE firm.
• The mine reached 60ktpa production last year at a C1 cost of $1.5/lb.
• The project is eyeing expansion to 130ktpa Cu by 2027.
• Nominal run-rate EBITDA stands at $270m, according to the Company’s latest presentation.
• Cupric Canyon is owned by the Global natural Resource Investments fund, formerly Barclays Natural Resources Investments.

Kodal Minerals* (KOD LN) 0.50p, Mkt Cap £85m – Results show progress at Bougouni lithium in Mali and on gold projects in Mali and Côte d’Ivoire

(Kodal / Hainan jv deal long-stop date to 31 August 2023)

• Kodal Minerals reports final results for the year ended 31 March 2023.
• Bougouni lithium highlights:
  • US$117.75m funding agreed with Hainan Mining, part of Fosun Group
  • US$65m reserved to fund the DMS ‘Dense Media Separation’ plant to accelerate production to 12 months from the receipt of funds
  • Additional funds will be used to increase the Bougouni JORC resource of 21mt @ 1.11% Li2O
  • Flotation plant expansion project could increase spodumene production to >300,000tpa from ~125,000tpa
  • Mine life could increase to 8.5 years with sales of over US$2.15bn.
• DMS development shows low capex at  US$65m with two month payback and NPV7% at US$420mpost tax:
  • >130,000tpa production of spodumene concentrate over an initial four-year mine life
  • DMS spodumene conc. sales est. US$1.05bn in under four years based on a spodumene price of US$2,080/t
• Licensing: Bougouni is fully permitted for development and construction once full funding is received from Hainan
• Gold:
• Niéllé: work ongoing for a resource at Niéllé, in northern Côte d’Ivoire.
  • Intercepts from Niéllé include: 26m @ 1.95 g/t Au from 32m, and 26m @1.79g/t Au from 108m.
• Fatou:  Ongoing resource definition at Fatou, in southern Mali to enhance the historical resource of ~350 koz gold.
  • Recent drill intercepts include 23m @ 1.63 g/t Au from 82m, and 6m @ 1.49 g/t Au from 40m.
• Financials:
• Group loss of £1.5m to end March vs £0.9m yoy
• Exploration and evaluation expenditure of £3.3m vs £2,6m
• Cash balance was £0.55m at 31 March vs £1m yoy
• Hainan Mining paid US$3.5m to Kodal as reported on 3^rd August on top of the US$7m deposit received on 1 February into an escrow account
• Cash balance now stands at £2m at 31 August 2023

Conclusion: Investors are waiting on news of the receipt of the major portion of the Hainan funding.  Management have taken time to sort out the new corporate structure and associated bank accounts which has led to some delay. While we feel confident in Hainan Mining’s intentions we are also wary of issues at Leo Lithium with the Mali government and over Leo’s attempt to export unconcentrated DSO ores. While Chinese lithium processors appear desperate to buy spodumene cncentrates we are also wary of China’s PBoC moves to defend the Yuan currency.

*SP Angel acts as financial advisor and broker to Kodal Minerals

Savannah Resources* (SAV LN) 3.6p, Mkt Cap £67m – Barroso Lithium Project development update

BUY – 21.1p

• The Company is reporting increased strategic partnership interest following the announcement of a secured positive DIA from environmental regulators in May 2023.
• The team is compiling a shortlist of potential strategic partners to assist in project funding with the Company currently owning 100% of the asset and future production.
• Commercial arrangements update is expected to be provided towards the end of the year.
• The team completed a series of tenders as part of the further permitting and DFS work during months of July and August.
• On permitting side, the Company engaged two key consultants, Quadrante and Community Insights, that helped to secure positive DIA earlier his year.
• For metallurgy, the team is working with Minsol that led testwork since 2021 and produced the final design for the process flowsheet used in the updated Scoping Study.
• Tenders for DFS infrastructure and RECAPE bypass road contracts are expected to be completed in coming weeks.
• Drilling wise, the Company is working with EDASU (RC drilling) and SPI (DD) that has also been previously engaged by the Company.
• Drilling programme is for 60 RC and diamond core drillholes focused on infill drilling to convert resources into reserves as well as metallurgical and geotechnical drilling.
• The programme is expected to start mid-September and take 2-3 months to complete.
• On land acquisition and site access, the team is reporting it purchased or in the process of acquiring 70ha so far representing ~45% of the total privately owned land among more than 40 identified local landowners that will be required for the Project.
• The Company also made offers to secure access to land managed on behalf of the community by two relevant Baldios groups.
• The team estimates community land access provision at ~€10m with around €4m to be paid directly to community members allowing to share project economic benefits with local landowners.
• Permitting and DFS completion timeline reiterated for H2/24.

Conclusion: The Company is completing tenders for permitting and DFS related work with a number of companies engaged in the process having been previously involved with the project on many fronts including successful permitting as well as metallurgy testwork and drilling. Additionally, the team reports increased strategic partnership interest following a successful DIA outcome in May this year that frankly is of little surprise given strong economics and strategic location of the Project with the Company currently owning 100% of the asset and future production. Potential strategic partnership update are expected towards YE23 with both permitting and DFS completion targets reiterated for H2/24.

*SP Angel acts as Nomad and Broker to Savannah Resources

Tertiary Minerals* (TYM LN) 0.097p, Mkt cap £1.9m – BUY– Swedish government U-turn on Storuman Fluorspar  Project opens route to value creation

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• Tertiary reports that the Swedish Government has annulled its Mining Inspectorate’s 2019 refusal to grant an exploitation concession on the Storuman Fluorspar Project.
• Tertiary had been appealing the decision made by the authorities four years ago.
• The Government has instructed the Mining Inspectorate to ‘re-examine its decision.’
• The fluorspar project is 100% owned by Tertiary and located 25km from a bulk rail terminal.
• A 2010 scoping study on the project provided the following economic highlights:
  • 18-year LOM with a < 3 yr payback at a 24% IRR
  • NPV8 of $33m with an initial capex of $46m,
  • Average annual net operating cash flows in the first five years of $17m
• We recognise that the scoping study will need updating given cost inflation over the past 12 years.
• The asset holds a 2011 JORC-compliant resource of 27.7mt @ 10% CaF2.

Conclusion: Whilst Tertiary’s primary focus is currently on copper exploration in Zambia and Nevada, the Swedish government’s decision to overturn their blockage of Storuman’s exploitation concession should come as welcome news to management and shareholders. The asset reinforces the Company’s balance sheet and provides optionality. The Company is currently analysing soil samples from the Konkola West and Mukai projects as it progresses towards drill target generation in Zambia.

*SP Angel acts as Nomad and Broker to Tertiary Minerals

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                                                            

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

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

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