SP Angel Morning View -Today’s Market View, Friday 20th December 2024

Gold holds above key level as rate cut expectations fade for next year

MiFID II exempt information – see disclaimer below

Andrada (ATM LN) – Quarterly operational update on tin mine in Namibia

Kodal Minerals* (KOD LN) – Kodal installs first crusher module at Bougouni lithium mine in Mali

Tertiary Minerals* (TYM LN) – Expect drill results from Zambian copper targets in new year

South32 (S32 LN) – State approval for Worsley mine development

Sylvania Platinum (SLP LN) – Share buyback programme initiated

Gold ($2,605/oz) holds above key level as rate cut expectations fade for next year

• Gold is headed for a weekly slide following a hawkish Federal Reserve meeting, which outlined higher inflation expectations and fewer cuts going forward.
• A soaring dollar has been boosted by six-month highs in the US 10 year, as yields repriced.
• The dollar index has now climbed to 108.2, having hit 100 in late September.
• Gold sold off below $2,600/oz yesterday before being bought in Asian trading, a common theme this year.
• Meanwhile, Bloomberg reports that record Indian gold import data was potentially calculated in error, inflating the November number.

Copper ($8,900/t) slips lower as dollar strength pressures International buyers

• Copper fell below $8,900/t yesterday before ticking back up slightly.
• Meanwhile tin and nickel extended losses over continued concerns of a global slowdown.
• Higher yields may be pressuring metals prices, as borrowing costs weigh on growth expectations.

CPCA predicting fifth consecutive month of record EV sales in China

• In December, retail sales of passenger NEVs in China are estimated at 1.4m units, up 47.8% yoy and up 10.4% from November, according to estimates released today by the China Passenger Car Association (CPCA).
• The CPCA is expected to release more accurate preliminary data on December NEV sales early next month and final figures in the middle of next month.
• If the estimated figures are accurate, China will have sold around 11m NEVs in 2024.

Economics

US – Core PCE prices up 2.2% in Q3 (2.1% Q2, 2.8% forecast)

• Philadelphia manufacturing down 16.4 vs 2.9 expected and -5.5 previous

China – Chinese farms raise yields through use of technology while displacing expensive fertiliser (SCMP)

• The modernisation of farming in China appears to be paying dividends through higher yields and lower use of fertiliser which continued to fall
• Fertiliser usage is now at its lowest level since 2015 (NBS)
• Agricultural production continues to grow with 1.6% yoy growth to a record of 706.5bnt this year
• Great wall of Taklamakan: China surrounds its largest desert with green belt
• China is accelerating investment in agricultural research and development with ~US$2.2bn in R&D marking a 25.2% increase on 2022.
• Yields per hectare have risen by 2.54% yoy for soybeans and by 4.87% for corn
• Rice yields also rose by 0.63% yoy.
• Mechanisation of harvesting has risen to >73% from 71%. A 40% cut in waste by 2035 could save 53.9mt of rice, wheat, and corn.
• Scientists are looking to develop more high-yield crop varieties while enabling farmers to withstand droughts, floods and the changing weather.
• The CCP is also looking to further reform rural land practices for more efficient, larger scale farming to improve land-use efficiency, particularly in underutilised areas such as China’s vast grasslands and forests.
• China crop imports rose 12% in 2023 vs 11% in 2022 with the US being the major food exporter to China.
• A breakthrough in crop breeding and greenhouse construction in Xinjiang’s desert is showing nearly 10 times the average rice yield of 7.1tpha this year
• China is conscious of the impact of a hotter climate on rise production with a steep 63.6% yoy rise in rice prices in Japan in November due to last year’s hot summer disrupting production.

Japan – Core CPI climbs to 2.7% in November

• Japan is at long last seeing greater than expected acceleration of its core CPI to 2.7%
• The market was looking for 2.6% which is above the BoJ 2% target.
• Energy prices rose 6% yoy in November vs 2.3% on October.
  • Electricity prices rose 9.9% yoy
  • City gas costs rose 6.4% yoy.
• Rice prices jumped a massive 63.6% yoy their highest rise in , the steepest increase in 54 years due to last year’s hot summer disrupting rice production.

UK – Scrooge has taken over at the BoE which elected to hold interest rates at 4.75% yesterday

• The move brings no Christmas cheer to mortgage holders who are being hit by a combination of higher utility bills and now ongoing high mortgage rates.
• The BoE is conscious that cutting rates might weaken the pound causing higher import prices to drive inflation higher.
• The core CPI inflation rate rose to 2.6% in November giving the BoE little room to cut rates.
• UK retail sales still managed to rose 0.2% mom in November vs a -0.7% decline in October. We note many sales have started early.

Currencies

US$1.0393/eur vs 1.0400/eur previous. Yen 156.91/$ vs 156.83/$. SAr 18.338/$ vs 18.279/$. $1.251/gbp vs $1.262/gbp. 0.625/aud vs 0.624/aud. CNY 7.299/$ vs 7.299/$.

Dollar Index 108.11 vs 108.03 previous

Precious Metals

Gold US$2,607/oz vs US$2,616/oz previous

Gold ETFs 82.6moz vs 82.7moz previous

Platinum US$924/oz vs US$929/oz previous

Palladium US$912/oz vs US$919/oz previous

Silver US$29.0/oz vs US$29.6/oz previous

Rhodium US$4,575/oz vs US$4,575/oz previous

Base metals:   

Copper US$8,941/t vs US$8,918/t previous

Aluminium US$2,544/t vs US$2,513/t previous

Nickel US$15,275/t vs US$15,265/t previous

Zinc US$2,982/t vs US$2,969/t previous

Lead US$1,969/t vs US$1,972/t previous

Tin US$28,600/t vs US$28,425/t previous

Energy:           

Oil US$72.5/bbl vs US$72.8/bbl previous

• US Henry Hub natural gas prices hit their highest levels since January 2023 as the EIA reported a larger-than-usual 125bcf w/w draw to 3,622bcf (vs -123bcf exp), with storage inventories falling to 0.6% above last year and 3.8% above the 5-year average, as gas deliveries to LNG export terminals increased to 14.3bcf/d.
• Germany has passed a change to energy law that scarps a domestic market gas storage fee on border points and virtual hubs, thereby removing a transit fee that was set to increase the cost of accessing LNG imports to €2.99/MWh next month for landlocked such as Austria, Slovakia and the Czech Republic.

Natural Gas €44.4/MWh vs €41.3/MWh previous

Uranium Futures $73.8/lb vs $74.3/lb previous

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$103.9/t vs US$104.4/t

Chinese steel rebar 25mm US$487.2/t vs US$487.1/t

HCC FOB Australia US$204.0/t vs US$204.5/t

Thermal coal swap Australia FOB US$128.3/t vs US$129.2/t

Other:  

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

NdPr Rare Earth Oxide (China) US$54,323/t vs US$55,009/t

Lithium carbonate 99% (China) US$9,933/t vs US$9,933/t

China Spodumene Li2O 6%min CIF US$790/t vs US$790/t

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

China Tungsten APT 88.5% FOB US$338/mtu vs US$338/mtu

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

Europe Vanadium Pentoxide 98% US$5.0/lb vs US$5.0/lb

Europe Ferro-Vanadium 80% US$26.3/kg vs US$26.3/kg

China Ilmenite Concentrate TiO2 US$294/t vs US$294/t

China Rutile Concentrate 95% TiO2 US$1,089/t vs US$1,089/t

Spot CO2 Emissions EUA Price US$65.1/t vs US$65.1/t

Brazil Potash CFR Granular Spot US$292.5/t vs US$292.5/t

Germanium China 99.99% US$2,725.0/kg vs US$2,725.0/kg

China Gallium 99.99% US$420.0/kg vs US$430.0/kg

Company News

Andrada (ATM LN) 2.1p, Mkt Cap £36m – Quarterly operational update on tin mine in Namibia

• Andrada reports quarterly results for the quarter ending 30^th November.
• Tin concentrate production fell 2%qoq to 376t, with feed grade down 4%qoq and ore processed down 2%.
• Tom recoveries over the quarter at 74%, vs 75% in the previous quarter.
• C1 operating costs up 10% to $22,000/t, with AISC also up 10% at $30,779/t.
• Average tin price achieved of $31,937/t.
• Company states that higher costs are due to ‘higher processing and maintenance costs resulting from improvements in Uis’ engineering protocols.’
• Cash position on 30^th November was $2.6m.
• SQM is set to pay the outstanding US$1.5m balance from their Lithium Ridge Agreement, once approval is received from the Namibian Competition Commission.
• Management also states they are in discussions with debt providers for expansion project capex.

Kodal Minerals* (KOD LN) 0.35p, Mkt Cap £72m – Kodal installs first crusher module at Bougouni lithium mine in Mali

Recommendation and valuation under review

(Hainan Mining holds a 51% stake in KMUK which holds the Bougouni Lithium Project in Mali with Kodal holding 49%. Mali will hold 35% of the jv company with KMUK)

(Kodal Minerals Plc now, effectively, hold 49% of 65% of the Bougouni project)

• Kodal Minerals reports the startup of its first crushing module at the Bougouni lithium mine in Mali.
• The construction team are working towards the final construction and commissioning of the Stage 1 DMS ‘Dense Media Separation’ process plant.
• Mining has already started at the Ngoualana open pit in preparation for first stage crushing and DMS processing for the concentration of the spodumene ore.
• Over 150,000t of ore grading ~1.17% Li2O has been stockpiled in preparation for commissioning.
• First spodumene concentrate production remains on track for Q1 2025.
• Capex costs remain within the US$65m budget.
• The second crusher should start up in the next few weeks.
• Steelwork for the main DMS building, the screening building and the filtration building are almost complete.
• Electrical cabling, motor terminations and piping installations continue.
• The power plant, associated transformers and switch gear is now on site with the power plant due for installation and cabling next week.
• Exploration: in-fill and extension drill programme at Boumou is being prepared ahead of updating the JORC resource.
• Metallurgical samples are being tested to confirm the best recovery methods, eg DMS and or flotation.
• Kodal recently agreed key terms with the government of Mali for compliance with the new 2023 Mining Code:
  • 35% of the mining project will be transferred to the Mali government and will be held in the LMLB jv company made up of:
    • 10% free carry. This is a long-standing item in Mali.
    • 25% of new equity for ~US$4.3 million.
    • The 35% equity interest cannot be diluted below 35% in the event of any capital increases in LMLB.
    • KMUK partners are able to recover all capital investment and intercompany loans from the operation as a priority.
  • 65% of LMLB will be held by the Kodal jv with Hainan Mining within KMUK.
  • 10-year term for the mining license with renewal likely but subject to conditions in the mining code.
  • Customs and duties exemptions during construction continue including the temporary admission of vehicles, machinery and other property under the regime and in the mining list.
    • Including all tools, oils and greases for machines necessary for their activities, petroleum products, spare parts, materials and equipment, machinery and appliances.
  • LMLB will have at least four directors representing Mali including two independent directors.
  • Mali will grant all necessary permits for operation including export permits for the spodumene product.
  • US$15 million cash payment to the State relating to the Hainan Transaction with US$7.5m paid and a second US$7.5m due by 31 March 2025.
  • “Upon completion of transfer of the mining licence the MoU confirms that the Bougouni mining licence will be in full compliance with all legal requirements and in good standing.”

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

South32 (S32 LN) 164p, Mkt Cap £7.5bn – State approval for Worsley mine development

• South32 has received approval from the WA Minister for Environment for the Worlsey Mine Development Project.
• The review process began in 2019.
• The approval enables South32 to access bauxite crucial to sustaining production at Worlsey Alumina.
• This now triggers the Federal approval process, which is expected to be approved in early 2025.

Sylvania Platinum* (SLP LN) 40p, Mkt Cap £104m – Share buyback programme initiated

• Sylvania reports that it is planning an on-market buyback programme.
• The Company will spend up to US$1.6m in the share buyback programme.
• The buyback will be effective from today to 28^th February 2025.

*An SP Angel analyst holds shares in Sylvania Platinum

Tertiary Minerals* (TYM LN) 0.06p, Mkt Cap £2.1m – Expect drill results from Zambian copper targets in new year

• Tertiary provides an update on their progress in Zambia.
• At the Konkola West Project, where Tertiary is in a JV with KoBold, the single hole has not yet hit its target horizon.
• KoBold is drilling a deep hole on Tertiary’s licence blocks to analyse the potential for down-dip extensions to the Lubambe-Mingomba-Konkola deposit.
• Drilling has paused over Christmas but will resume in January.
• At Mukai, First Quantum has now drilled 552m over three diamond drill holes.
• The core samples have been submitted for analysis and data will be used for the 2025 exploration programme.
• Drilling is set to resume in 2Q25 after the rainy season and a review of the results.
• At Mushima North, The Company has completed a magnetic survey over the A1 target, where it drilled in 3Q24.
• Analysis of the results will be used to support further drilling planned in 2025.

Conclusion: Tertiary continues to progress their portfolio of exploration assets in Zambia and Nevada. They are leveraging their JV partnerships in Zambia with KoBold and First Quantum, who are both drilling on Tertiary’s claim blocks. We look forward to updates from the Mukai licence following three holes completed and assay results from Brunton Pass early next year.

*SP Angel acts as Nomad and Broker to Tertiary Minerals

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

Arthur Parish – Arthur.Parish@spangel.co.uk – 0203 470 0476

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 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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