SP Angel Morning View -Today’s Market View, Wednesday 8th May 2024

Metals weaken on profit taking on stronger dollar as US treasuries rally

MiFID II exempt information – see disclaimer below

Anglo Asian Mining* (AAZ LN) – Vendor financing for $3.7m agreed with Caterpillar

Arc Minerals (ARC LN) – Investors seething at lack of results or analysis from drilling.

CleanTech Lithium (CTL LN) – CleanTech believes its founder and former CEO does not have any interest in the company’s issued share capital

Conroy Gold and Natural Resources (CGNR LN) – Scout drilling of base metal targets in Northern Ireland

De Grey Mining (DEG AU) SUSPENDED– A$600m equity raise to fund Hemi Gold Project

Kodal Minerals* (KOD LN) – Kodal not subject to terms signed by Leo Lithium MoU with Mali Government

Leo Lithium (LLL AU) SUSPENDED – Sale of remaining stake in Goulamina spodumene project to Ganfeng

Premier African Minerals (PREM LN) – Zulu lithium plant gets to 50% of flotation design capacity as previous shortcomings addressed

Sovereign Metals* (SVML LN) – Kasiya graphite concentrates average >97% TGC with >90% floatation recoveries

Copper prices ease below $10,000/t as Indonesia to extend Freeport’s export permit

• Copper prices have fallen to $9,850/t, having hovered around $10,050/t earlier this week.
• Copper had rallied on deficit calls, with Goldman updating their expectations to a 430kt deficit this year.
• Prices have been strong on tight concentrate markets, however Jokowi has intended Freeport is likely to receive an extension to their export permit set to expire this month.
• The Country has been encouraging Freeport to boost smelter capacity in country, which is currently underway.
• The dollar has also held strength on some hawkish Fedspeak, with Kaskhari expecting rates to stay elevated for ‘an extended period of time.’
• China exports are accelerating as domestic demand remains weak.
• On the supply side, whilst Cobre Panama remains offline, Chilean and Peruvian output is rising this year, with China inventory higher than any point in 2023.
• Net speculative positioning has climbed above the five-year average to multi year highs.

EV manufacturers expected to use around 950,000t of copper this year

• This is around 530,000 more copper than would be used for traditional ICE vehicles.

Gold weakens as yields bounce and China buying cools

• Gold prices have cooled slightly to $2,310/oz having neared highs of $2,330/oz earlier this week.
• The metal has been relatively stagnant following a sharp $200/oz rally in April, driven by China and CTA fund buying.
• US Treasury yields have eased, with the 10-year sliding to 4.43% before bouncing to 4.47%.
• Geopolitical tensions continue to bubble, with Israeli troops crossing into Gaza yesterday.
• China buying slowed in April, however net additions continued for the 18^th straight month.

EV sales – China to continue raising EV manufacturing output to attain production efficiencies and gain global market share

• Politicians are raising drawbridges, demanding China should not dominate the EV market and imposing new tariffs.
• But, it is much more serious than that.
• China has >150 battery manufacturing factories in production and in planning and it has dozens of new EV manufacturers creating stiff internal competition on sales and costs.
• The Beijing Auto show is the launch pad for >100 new models and new ideas on Li-battery chemistry and battery improvements are announced on a weekly if not daily basis.
• Tesla showed the world how to make Electric Vehicles better than ICE Internal Combustion Engines but while Western Automotive giants dithered China Inc. stole the initiative.
• If Western nations effectively bar sales of Chinese EVs then China Inc. will have to continue to stimulate sales within China and in other more-friendly nations
• We are expert in selling cars but we reckon Chinese EVs will sell on:
  • Cost – Chinese EV manufacturers look likely to be >30% cheaper than their Western counterparts
  • Design – Chinese designs look remarkably similar to many luxury western designs
  • Range – New batteries are offering increasing range
  • Reliability & build quality – Cars made by Tesla in China are said to be very good
  • Battery life – Warranties cover much of this while battery lifespans are extending year-by-year
  • Speed of recharge – We expect recharge speeds to continue to rise as battery chemistries improve but we do not see this as such a major issue
• We doubt if many consumers will switch off from buying EVs because they can’t be sure of where the cobalt in their Chinese made batteries came.
• Fleet buyers, are asking governments for incentives and to cut VAT to help with the transition to EV fleets.
• While China says it is looking to limit overcapacity in battery manufacturing we believe this is in reaction to the need to rationalise rapid expansion in this area.

China released draft rules aimed at limiting battery industry expansion amid overcapacity concerns

• Firms should avoid developing plants that “simply expand production capacity”, the Ministry of Industry and Information Technology said today (Bloomberg).
• The draft considers minimum standards for energy density and other benchmark battery specifications with the ministry is seeking feedback on its document.
• The release partially addresses US and European complaints about Chinese overcapacity and coincides with the Chinese President Xi Jinping visit to Europe.

Australian government to fund critical mineral exploration programmes

• The Australian government is planning on spending US$373m over the next decade to map out critical mineral deposits.
• PM Albanese notes his government ‘is going to help Australia find more’ critical resources.
• The project will also fund carbon capture and clean hydrogen projects.
• The project is aimed at boosting regional geological understanding, intended to boost private investment into drilling and exploration programmes.
• Data generated will be provided to junior exploration companies.

IG TV: Gold and Copper. 10/04/2024: https://youtu.be/KuGSbDqWglk?si=-8iikkOHxbbLSnPZ

Sharepickers TV:  It’s all about copper. 26/04/2024 podcast: https://audioboom.com/posts/8496588-john-meyer-it-s-all-about-copper

Video: https://www.youtube.com/watch?v=MV9_8K494rY

*SP Angel almost invariably acts as nomad or broker or nomad and broker to companies mentioned in the above videos and podcasts. We speak more about these companies as we have a good understanding of their business and can talk with a greater degree of confidence. As ever, however, it should be noted that our views do not take into account the circumstances and needs of any particular investor or investor type. So enjoy the talks, but please do your own research, including other companies not mentioned by us but operating in the same areas, and get professional advice where appropriate. SP Angel acts as Broker/Nomad or both for Anglo Asian Mining, Kodal Minerals, Power Metals Resources.

 Economics

US – Minneapolis Fed President, Neel Kashkari, offered hawkish take on monetary policy outlook saying the central bank is likely to keep rates where they are “for an extended period of time”.

• Kashkari does not vote on the policy this year.

US/China – The US administration revoked licenses granted to Huawei Technologies to buy semiconductors from Qualcomm and Intel, Bloomberg cites people familiar with discussions.

• The decision was driven by intentions to preventing China from developing advanced AI and marks further escalation in US/China relations.
• The effect is expected to be limited as two companies are reported to have reduced supply of its equipment into China.

Germany – Industrial production contracted for the first this year in March in a sign of continuing challenges in the Europe’s largest economy.

• The sector that accounts for a larger share of the economy compared to other countries in the region still reeling from subdued global demand, high interest rates and more expensive energy, Bloomberg writes.
• Industrial Production (%mom, Mar/Feb/Est): -0.4/1.7(revised from 2.1)/-0.7
• Industrial Production (%yoy, Mar/Feb/Est): -3.3/-5.3(revised from -4.9)/-3.6

Israel/US – Tensions are rising between allies as Israel launches a ground operation in Rafah.

• The US paused an alleged supply of 3,500 bombs on concerns over potential damage that large bombs could inflict on dense urban areas in Rafah.
• Israel declined to comment on the news and it is unclear if the delay will have a significant impact on the course of the ground operation, Bloomberg writes.

Investors bank profits in developing markets

• Investors withdrew$2.5bn outflow from key Asian emerging markets as US Fed delays rise in interest rates
• Data from exchanges in Taiwan, India, Indonesia, Vietnam, the Philippines, Thailand, and South Korea show the largest monthly net outflow since November 2023 (AsiaFinancial)
• Foreign investors pulled $2.23bn in equities from Taiwan, $1.14bn from Indonesia, $1.04bn from India and $190m from Vietnam in April.
• Asian developing markets saw a net $18.57bn of foreign inflows in Q1

Brazil – Government demands R$79.6bn ($15.7bn) from BHP and Vale and jv company Samarco within 15 days

• The petition from the country’s solicitor general’s office also requests the court to block the companies’ assets if the demand is not paid within 15 days.
• The companies were ordered to pay $9.52bn in damages for the Samarco dam collapse in January.

Currencies

US$1.0741/eur vs 1.0762/eur previous. Yen 155.29/$ vs 154.30/$. SAr 18.581/$ vs 18.481/$. $1.248/gbp vs $1.254/gbp. 0.657/aud vs         0.660/aud. CNY 7.226/$ vs 7.215/$.

Dollar Index 105.55 vs 105.20 previous.

Precious metals:         

Gold US$2,311/oz vs US$2,320/oz previous

Gold ETFs 80.7moz vs 80.7moz previous

Platinum US$976/oz vs US$959/oz previous

Palladium US$966/oz vs US$974/oz previous

Silver US$27.27/oz vs US$27/oz previous

Rhodium US$4,725/oz vs US$4,725/oz previous

Base metals:   

Copper US$ 9,877/t vs US$9,988/t previous

Aluminium US$ 2,532/t vs US$2,567/t previous

Nickel US$ 18,765/t vs US$19,230/t previous

Zinc US$ 2,913/t vs US$2,922/t previous

Lead US$ 2,229/t vs US$2,240/t previous

Tin US$ 31,835/t vs US$32,465/t previous

Energy:           

Oil US$82.3/bbl vs US$83.4/bbl previous

• Crude oil prices edged lower after the API reported a 0.5mb w/w build (1.4mb draw exp) to US crude stocks.

Natural Gas €30.6/MWh vs €31.6/MWh previous

Uranium Futures $93.6/lb vs $92.3/lb previous

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$118.1/t vs US$119.7/t

Chinese steel rebar 25mm US$532.0/t vs US$530.7/t

Thermal coal (1st year forward cif ARA) US$113.5/t vs US$113.5/t

Thermal coal swap Australia FOB US$146.5/t vs US$115.5/t

Hard Coking Coal Australia FOB US$326.0/t vs US$326.0/t    

Other:  

Cobalt LME 3m US$27,830/t vs US$27,830/t

NdPr Rare Earth Oxide (China) US$56,051/t vs US$55,925/t

Lithium carbonate 99% (China) US$15,154/t vs US$15,177/t

China Spodumene Li2O 6%min CIF US$1,240/t vs US$1,240/t

Ferro-Manganese European Mn78% min US$972/t vs US$972/t

China Tungsten APT 88.5% FOB US$335/mtu vs US$335/mtu

China Graphite Flake -194 FOB US$480/t vs US$480/t

Europe Vanadium Pentoxide 98% 5.1/lb vs US$5.1/lb

Europe Ferro-Vanadium 80% 26.35/kg vs US$26.35/kg

China Ilmenite Concentrate TiO2 US$326/t vs US$326/t

China Rutile Concentrate 95% TiO2 US$1,405/t vs US$1,421/t

Spot CO2 Emissions EUA Price US$69.6/t vs US$72.1/t

Brazil Potash CFR Granular Spot US$305.0/t vs US$305.0/t

Battery News

China’s EV makers unfazed by US and European export curbs

• Curbs on exports of Chinese-made EVs to the US and EU will not deter major Chinese automakers like BYD and Chery from pursuing their global ambitions.
• They plan to localise production facilities outside mainland China to circumvent potential higher tariffs.
• China is expected to export 6m vehicles in 2024, 22% higher than 2023, maintaining its position as the world’s largest vehicle exporter.
• EVs are projected to account for 40% of China’s vehicle exports in 2024, reaching 2.4m units, double the 2023 figure.
• Chinese EVs have a cost advantage and are well-positioned to gain market share in fast-growing EV markets like Southeast Asia and the Middle East.
• Chery Automobile has finalised a deal to build its first European factory in Barcelona, Spain.

UK – electric van demand falls as zero emission target pushed back

• The UK Government has downgraded its target for new van sales to be zero-emission by 2040, instead of the previous 2035 goal, leading to a decline in demand for electric vans from fleets and businesses.
• The change in target is due to concerns over the pace of infrastructure rollout and vehicle supply constraints.
• The Government now aims for all new car and van sales to be zero-emission by 2035, with larger trucks and vehicles following by 2040.
• Fleet operators and the BVRLA have criticised the decision, stating it undermines efforts to decarbonise road transport and could slow the transition to electric vans.
• Fleets had been preparing for the original 2035 target by placing orders for electric vans, but some are now reconsidering their plans.

UK new car sales grow in April but private EV share falls

• New car sales in the UK grew by 4.4% yoy in April 2024, with 134,735 units registered.
• Growth was largely down to fleet purchasing, up 18.5% to 81,207, while private sales fell 17.7%.
• Private market share of BEVs fell from 16.2% in April 2023 to 13.9% in April 2024.
• Overall BEV registrations increased by 10.7% yoy to 22,717 units, with a market share of 16.9%.
• Plug-in hybrid electric vehicles saw a 26.3% decline in registrations compared to April 2023.
• Hybrid electric vehicles continued their strong performance, with registrations up 41.3% yoy.
• Petrol and diesel vehicle registrations also increased, by 2.9% and 10.3% respectively, compared to April 2023.
• The decline in private BEV market share is attributed to the reduction in government incentives and rising costs of living impacting consumer demand.

Automakers in US continue to see EV sales growth

• Overall, the EV share of US auto sales was 6.9% in the first quarter of 2024, a slight decrease from 7% in Q1 2023 but an increase from 4.5% in Q1 2022.
• BMW Group became the top auto group in the US for the share of its sales that were electric, at 13.6% share.
• Geely was second with 10.6% share, followed by Mercedes at 10.1% share, and Volkswagen Group at 9.4% share.
• Tesla accounted for more than half of US EV sales, and its drop in sales quarter-over-quarter significantly impacted the overall EV market share decline.
• The temporary dip or levelling off in EV market share growth is expected to be short-lived, given the benefits, cost reductions, and growing model variety of electric cars.

Ford’s EV sales surged significantly, with 8,019 units sold in April, representing a 129% increase from the previous year.

• The proportion of EVs out of Ford’s total sales volume reached 4.7% in April, up from 2.0% a year ago.
• In the US market, Ford has sold over 28,000 all-electric vehicles so far in 2024, a 97% increase from the previous year, accounting for about 4.3% of Ford’s total sales volume.
• Ford aims to reach 100,000 units of EV sales in 2024 and anticipates further growth, particularly in the sales of the F-150 Lightning.
• The company recently resumed shipping the 2024 model year of the F-150 Lightning after a hiatus of over two months, accompanied by new pricing adjustments.

Volvo Cars reports April sales, 48% share of plug-in vehicles

• Volvo Cars reported global sales of 51,233 cars in April 2024, a 12.2% decrease compared to the same month last year.
• Out of the total sales, 48% were plug-in electric vehicles, including fully electric and plug-in hybrid models.
• Recharge models (fully electric and plug-in hybrids) accounted for 31,447 cars sold globally, representing a 4.9% year-over-year increase.
• Fully electric car sales grew by 124.5% compared to April 2023, reaching 18,765 cars.
• In the United States, Volvo Cars reported 7,159 cars sold, with Recharge models making up 51.2% of the total volume.
• The company aims to become a fully electric car brand by 2030, with an all-electric lineup available by 2028.

India’s EV sales numbers grew well over last 12m, but stall in April

• From April 2023 to April 2024, India witnessed a steady rise in EV sales, totalling 1,683,600 units.
• However, overall EV sales in India decreased across different categories in April 2024 compared to March 2024.
  • Electric two-wheeler sales substantially decreased from 139,288 units to 65,057 units – the substantial decline has been attributed to challenges faced by several OEMs in the post-festive season period.
  • E-rickshaw sales declined from 37,352 units to 31,796 units.
  • The E3W L5 Passenger vehicle category saw a decrease from 11,777 units to 4,271 units.
  • E-cart sales slightly decreased from 5,090 units to 4,220 units.
  • E3W L5 Cargo vehicle sales plummeted from 6,554 units to 1,745 units.
  • Electric four-wheeler sales declined from 9,383 units to 7,290 units.
  • Electric bus sales decreased from 414 units to 211 units.

Company News

Anglo Asian Mining* (AAZ LN) 71p, Mkt Cap £81m – Vendor financing for $3.7m agreed with Caterpillar

BUY

• The Company signed a Vendor Financing Agreement with Caterpillar for $3.7m.
• The loan relates to $4.6m spent on new Caterpillar underground mining equipment for the Gilar development project.
• Equipment included a fleet of five underground loaders that were delivered to site in December last year.
• The deal marks the first time Cat Financial provided vendor financing to a customer in Azerbaijan.
• The loan is for three years, costing SOFR plus 2pp, repaid quarterly, secured by equipment and can be prepaid subject to a fee.

Conclusion: The Company secures vendor financing with Caterpillar for a total of $3.7m allowing the team to better manage liquidity as the Company is looking to restart milling operations once tailings dam expansion permits are granted.

*SP Angel acts as Nomad and Broker to Anglo Asian Mining

Arc Minerals (ARC LN) 1.83p, Mkt cap £26m – Investors seething at lack of results or analysis from drilling.

• Do you ever feel like you have been wrongfooted by something on a management call or in an RNS.
• Most management teams are straight up about their work though bad weather or other issues in the environment can frustrate their work.
• Normally a company might be expected to announce disruption or delays in timely order particularly in unforeseen circumstances. But as investors we are often, perhaps, overly forgiving.
• In fact we probably forgive too much in terms of management incompetence or simple laziness but sometimes we come across a team which seems to go beyond all that.

• Arc Minerals held an investor call on 30th October at 4:05. https://www.arcminerals.com/news/media-and-press/default.aspx
• During this call management discussed:
  • “…mobilizing the rigs and finally starting the actual drilling. So we’ve been drilling for circa, about 10 days, and as I’m sure most of you know, we were as keen as anyone in this call to get going, and we have, that’s the really exciting news. We have started drilling, we have been at it, as I say, for about 10 days and we’re about to do two shifts of twelve hours…. We’re currently drilling a target in the Cheyeza area, which as you probably know was one of our top targets we had identified, and I’m pleased to say it’s being going extremely well. The plan has been for two rigs, one is at site, and drilling as I say has been drilling for almost ten days…while there has been some rain, we have been drilling through that…. We’re working on ensuring that we can continue even when the rains do start, and they have started, so we’re working on making parts of the road system more accessible, for additional holes that we’re planning to drill in the next few weeks so as not to be impacted by the onset of rains…. When we do get results, we will of course report them… and of course we’re going to have a very busy period of news flow, especially as we deploy more rigs…
• In response to issues relating to the delays in the Zambia mining Cadastre:
  • “I should add we are not delayed by any of this in terms of killing drilling on any of our targets.”
• Since the 30^th October call I do not believe we have seen any specific announcements on disruption or delays to drilling, no announcement on the number of rigs turning, no announcement on the geology seen in this drilling and no announcement on any assays relating to this drilling. We are now six months on from the 30 October call giving ample time for statements from the company.
• On the same call the COO and geologist commented:
  • “as of a couple of days ago, they were a hundred meters down. I’ve seen some questions about how deep we’re drilling, so at the moment, if everyone recalls, when we did our drilling, we were looking for resources that were near surface, and Anglo feel that we’ve done a pretty good job on that, and they are looking to go a lot deeper down, at the moment they are starting off targeting stratigraphy roughly about 300m below surface so that’s the sort of depth they are starting to look at for economic grades of mineralization”.
  • Question: ”will you be able to provide details of the drill targets this season?
  • Answer: “we will in due course, as I mentioned we are heading up there…our technical meetings going through everything, as you can imagine, we’ve been all hands on deck to get the deal over the line…now that we’ve done that… in due course we hopefully be able to divulge a lot more information on what we’re doing”.
• Question on the Number of rigs at each location. Total drilling meters planned:
  • “to summarise they are going to be drilling tens of thousands of meters. The rigs are in. I think the rig that the drilling contractor will leave for the rainy season. If the weather clears up we’ll be able to turn that on straight away. They are in the process of getting a contractor to start surfacing some of the roads which will enable them to move around… Anglo are planning to drill as deep as they can realistically drill into the rainy season…. By bringing in trucks with laterite then putting surface material on the road, that should enable movement from site to site and accessing drill rigs and servicing them… historically we drilled without doing anything through to about the middle of, early December, 10th December, so I expect that with them being able to surface the roads, to enable access they should at least be able to drill well into that, and further.
  • “Anglo are planning to drill as deep as they can into the rainy season…. Should enable them to movement from site to site… so historically we drilled from early to 10^th December so they should be able to drill well into that.”
  • Re: the timely disclosure of drilling information: this is “included that in the joint venture agreement with Anglo American… built in to that agreement the requisite clause and ability for us to meet our regulatory obligations”
• On the same call there was an interesting question relating to costs incurred in the deal with Anglo American:
  • “regarding Rothschild and their involvement, and fees, there’s been a few questions on these, one in particular, if these are not already accrued in our accounts, does this need to be paid from the sum received from Anglo American? are the fees split with Kopore, and are you able to comment on the amount of any investment banking fees?
  • Nicholas von Schirnding replied   “No I don’t expect it to be of any significance at all to us”.
• Nicholas von Schirnding later admitted on an investor call on 25^th January:
  • “in Zambia, though the rigs remain in situ, we’ve had to pause drilling because of the rains, as I’ve said before, when there are windows where we can drill through the season if the rains permit, we shall do so. In the meantime, we are finalizing our drill programmes with our partners, Anglo, and we’re due to meet together in Zambia very shortly… we are on the brink of a very major drill campaign in Zambia….
• It was only in this call that Nicholas von Schirnding explained that they had put a halt to the Botswana assays to preserve cash despite investors waiting for news on the Botswana assays through 2022.
• Nicholas von Schirnding went on to say:
  • “we’re in Zambia in early Feb and we’re meeting with our partners and we’re going to agree in detail the next phase of the drilling program … multiple rigs drilling at multiple sites”...

Conclusion:  Many investors were under the impression the company was busy drilling in Zambia and it would be normal to expect results would follow in the form of assays or stratigraphic analysis within a reasonable time frame.

We are now more than six months on from the start of drilling and there appears to have been only the one hole drilled for which there appear to be no available assay results or geological analysis.

Arc Minerals management appear to be falling short in their announcements on news that investors would reasonably expect to see despite their having assured investors results would be released in a timely manner.

We also have to wonder, why, if the fees relating to the Anglo transaction were insignificant why did Arc feel the need to raise £4.14m at a time when we believe the Swedish shareholder only had ~£400,000 worth of shares?

This seems particularly unnecessary given Anglo had paid Arc Minerals US$2.3m in November. We believe the issue of warrants in the £4.14m funding will continue to undermine the shares.

If Arc’s management knew about the limits of the drilling campaign in February then why did they not update the market on the drilling before the capital raise?

More positively, we still see the deal with Anglo as a great deal for Arc Minerals and we see potential for new discoveries to be made within Arc’s current licenses.

CleanTech Lithium (CTL LN) 21.50p, Mkt Cap £31m – CleanTech believes its founder and former CEO does not have any interest in the company’s issued share capital

• CleanTech Lithium report results of their investigation into Aldo Boitano, founder and former CEO.
• The Company reports that since 9th April 2024, the Company has served various notices on entities that it believes are interested in the Ordinary Shares previously held by Mr Boitano.
  • From the responses it has received, as far as the Company can determine, 6,679,300 of the 9,400,002 Ordinary Shares previously held by Mr Boitano have been transferred to several third parties on the instructions of the Lender.
  • The balance of 2,720,702 Ordinary Shares is held in an account in the name of a custodian (“Custodian”) for the benefit of the Lender and what is currently assumed by the Company to be a related party of the Lender.
  • As far as the Company can determine the Lender exercises control over these shares.
  • Therefore, the Company believes that Mr Boitano does not have an interest in any of the Company’s Ordinary Shares and the Lender currently has an interest in less than three per cent of the Company’s issued share capital.
  • The Company points out that it has not received any detailed responses from the Lender in relation to its repeated requests for information and that Mr Boitano has informed the Company that he was not aware that the Lender had been disposing of his Ordinary Shares or that the Lender has the right to control the remaining Ordinary Shares retained by the Custodian.

Questions: Will the Company and Mr Boitano be subject to AIM & FSA investigation and action? Is it possible for Mr Bonito to compensate shareholders for losses caused by the probable undeclared sale of his shares?

• Could Mr Bonito use the proceeds from his loan from the Lender to buy back CleanTech lithium shares at a price that is at least equal to the price at which he pledged his stock to the Lender?
• Is the recent and remarkable rise in CleanTech shares due to a short seller closing out positions in the stock?
• Who is really behind the lender, “High West Capital Partners LLC.”? We wonder how they reconcile their ESG Principles as stated on their website with their lack of transparency in the transfer of Mr Boitano’s CleanTech shares?

Conroy Gold and Natural Resources (CGNR LN) 10p, Mkt Cap £4.8m – Scout drilling of base metal targets in Northern Ireland

• Conroy Gold reports the results of scout drilling in the Longford/Down Massif of Northern Ireland.
• The drilling of base-metal targets located southeast of its Clay Lake gold target comprised two holes at the “Mountain Lodge and adjacent Wolf Island base metal targets … tested a 275 metre portion of the 800 metre wide section of the Zinc in soil anomaly at the Mountain Lodge target”.
• Hole ML-22-004 “intersected 30.0 metres at 0.42% combined Zinc and Lead from 9.0 metres including 3.0 metres at 0.83% Zinc and Lead combined from 34.0 metres”.
• Hole ML-22-005 located “100 metres to the east of drill hole ML-22-004 … intersected Zinc and Lead mineralisation including 25.0 metres grading 0.26% Zinc and Lead combined from a down hole depth of 11.0 metres and including 1.0 metre grading 1.05% Zinc and Lead combined from 20.0 metres”.
• Confirming that “Further drilling of the anomaly to test for higher grades in this large Zinc anomaly will be carried out” the company says that “the initial drilling covers only “a 275 metre portion of the 800 metre wide section of the Zinc soil anomaly … [which] … leaves over 500 metres of width to the West, where some of the highest Zinc in soil values (3,700ppm Zn) have been returned”.
• Chairman, Prof. Richard Conroy, welcomed the results of the initial scout drilling “indicate the potential for base metals in an area which was once known as the Armagh Monaghan Mining District”.

Conclusion: Initial drill testing of the base metal potential of the Longford/Down Massif has returned wide, low-grade zinc intersections.

De Grey Mining (DEG AU) SUSPENDED– A$600m equity raise to fund Hemi Gold Project

• De Grey Mining has launched an underwritten A$600m Equity Raise at an issue price of A$1.1/share – a 13% discount to last closing.
• Funds raised will be used for the Hemi Gold Project, ordering long lead items, completing detailed engineering studies and constructing initial project infrastructure.
• A$130m will be spent on exploration and studies, A$60m will be spent on corporate costs and A$150m will be spent on commissioning working capital.
• De Grey expects it will need an additional A$766m for the DFS Project CAPEX estimate, with an additional liquidity buffer from previous term sheets.
• The Company is aiming to finalise its project financing in 2H24.
• De Grey will hold 2.4bn shares on issue following the completion of the raise, with A$919m in cash and no debt.
• Subject to debt funding, De Grey expects first commissioning and operation in late 2026.
• The DFS holds a CAPEX of A$1.3bn, producing 550koz over the first five years from a 10mtpa plant and 800ktpa POX circuit.
• 5.7moz expected to be produced over the 12 years, with recoveries estimated at 93.5%.
• NPV5 of A$2.9bn post-tax with AISC estimated at A$1,230/oz (assuming A$2,170/oz gold price)

Kodal Minerals* (KOD LN) 0.42p, Mkt Cap £85m – Kodal not subject to terms signed by Leo Lithium MoU with Mali Government

BUY – Target 0.97p

(Hainan Mining holds a 51% stake in KMUK which holds the Bougouni Lithium Project in Mali with Kodal holding 49%. The Mali government has the right to a free carry on 10% of the project and an option to acquire a 10% stake)

• We note the news today by Leo Lithium in relation to a new MoU signed with the Mali Government.
• Leo Lithium have also agreed the sale of the entire Goulamina lithium project to Ganfeng.
• The Goluamina lithium project is now subject to the new 2023 Malian Mining Code (see comment on Leo Lithium below)
• We believe Kodal Mineral’s Bougouni lithium project in the south of Mali is subject to terms in the former mining code and should not be subject to the terms and conditions imposed on the Goulamina project.
• It is interesting to see Chinese companies continuing to buy up lithium production in Africa and elsewhere.
• Ganfeng recently took a 15% stake in Lithium Argentina’s Pastos Grandes. Atlas Lithium recently gained offtake funding from two Chinese partners Chengxin and Yahua.
• Suay Chin which recently agreed to sell its offtake from Kodal’s Bougouni project is likely to be in the market to replace this production.

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

Leo Lithium (LLL AU) SUSPENDED – Sale of remaining stake in Goulamina spodumene project to Ganfeng

• Leo Lithium announces it has agreed a binding sale and purchase agreement with Ganfeng for the sale of its remaining stake in the Goulamina lithium project.
• The Company has sold its remaining 40% stake in the asset for US$342.7m.
• This was followed by an MoU with the Mali Government, with Leo paying US$60m in a settlement to the Mali Government to resolve outstanding issues.
• Goulamina will now be subject to the 2023 Malian Mining Code, which increases Government Project interest to 30%, with an additional local 5%.
• Leo Lithium will receive a 1.5% gross revenue fee over 20 years from Ganfeng in exchange for the offtake rights lost by Goulamina following the agreement termination.
• Goulamina remains on track for first spodumene in 3Q24.
• Management is now progressing the relisting process.

Premier African Minerals (PREM LN) 0.2p, Mkt Cap £58m – Zulu lithium plant gets to 50% of flotation design capacity as previous shortcomings addressed

• Remedial measures at Premier African Minerals’ troubled Zulu lithium plant in Zimbabwe have lifted the feed rate to the flotation plant to 50% of design capacity and improved recovery rates.
• The company says that flotation concentrate grades have been “improved to between 4.5% and 6.3% Li₂O” and that “production for the coming week is expected to start at 50 tonnes spodumene concentrate per day with increasing production. Target full projected capacity remains at 4,000 tonne per month”.
• Additional improvements, including “a further conditioning tank and minor pump upgrades …[in addition] … to operate at the full design capacity. This is over and above the recently completed flow changes … [and that the] …. required pumps are already at site and the additional civils for the conditioning tank should complete in May 2024”.
• Premier African Minerals explains that as “previously reported, Premier replaced the original plant contractor in March 2024. Whilst the floatation circuit is now running in a constant and stable state, it will take time to fully remedy the original design deficiencies in the overall plant and move from what in many instances are interim fixes to the final operating plant”.
• The company explains that “Neither the XRT or the Ultraviolet sorters are adequately performing the functions for which they were sold and delivered to the Company” and although it has an interim solution which “is working well and is adequate for now … [it] … does not represent a long-term solution”.
• The company also explains that the “original mill and screen system was inadequate and unable to provide ore adequately milled and screened … [and that the low-intensity magnetic separator supplied originally is] … unable to efficiently remove iron generated from the milling process to an acceptable degree and will need to be upgraded in the near future”.
• Today’s announcement catalogues a wide range of shortcomings in the original design and execution of the Zulu lithium plant and although these now appear to be being addressed there remain issues to be rectified before the original design aspirations can be delivered.

Sovereign Metals* (SVML LN) 26.88p, Mkt Cap £150m – Kasiya graphite concentrates average >97% TGC with >90% floatation recoveries

(Sovereign currently holds 100% of the Kasiya project. The government has a right to a 10% free carry in the project. Rio Tinto acquired an initial strategic interest of 15% for a $40.6m with an option to increase it to 19.99% within 12 months from 17 July 2023)

STRONG BUY – Valuation 55p

• Sovereign Metals report positive results from graphite concentrate prepared at their laboratory in Lilongwe where it was screened and separated over a wet shaking table.
• Results show the concentrate averages 97% TGC ‘Total Graphite Content’ with >90% flotation recoveries after flotation and cleaning in tests from four independent laboratories.
• The 1.44% ore upgrades to >55% TGC in a rougher concentrate without the need for any crushing or milling highlighting the low-cost nature of the graphite ore.
• Importantly, the concentrates contain low levels of sulphur vs their typical hard-rock graphite peers.
• Testwork to produce CSPG ‘Coated Spherical Purified Graphite’ active anode material continues with ProGraphite.
• Sovereign technical comment:
  • “The graphite feed grades of 3.5%-4.0% TGC to the graphite circuit are significantly higher than the Mineral Resource Grade of 1.44%, highlighting the ~2.4-2.8-fold upgrading of graphite grades when ROM ore passes through the front-end rutile gravity separation circuit. “
  • The first stage of upgrading the graphite feed, rougher flotation, achieved very high rejection (>90%) of waste materials to rougher tails, producing a rougher concentrate with more than 55% TGC and very high recoveries (94%-98%) in laboratory scale testing consistently across all four laboratories.
  • Upgrading the graphite feed at very high recoveries and rejection of non-graphitic minerals without run-of-mine milling is another of Kasiya’s significant advantages, supporting the lowest cost graphite production.
  • The rougher concentrate was further upgraded through laboratory scale flotation, cleaning and polishing stages, producing high-grade concentrates at high graphite circuit recoveries.
  • Pilot-scale test work confirmed the laboratory-scale results with >90% TGC recovery to high-grade graphite concentrates (<180-micron concentrate at 96.9% TGC and >180-micron concentrate at 97.2% TGC).”

*SP Angel act as Nomad and broker to Sovereign Metals.

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The SP Angel team also ranked 1st in Palladium, 3rd in Tin and 5th in Silver in the fourth quarter of 2020

Analysts

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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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