SP Angel Morning View -Today’s Market View, Monday 23rd December 2024

Metals higher after rough week as copper refining contracts highlight smelter demand

MiFID II exempt information – see disclaimer below

Atlantic Lithium* (ALL LN) – Award of performance rights to directors and key staff

Aura Energy* (AURA LN) – Sweden recommends lifting ban on uranium mining

Goldstone Resources* (GRL LN) – Update on Convertible Loan Note

Hummingbird Resources (HUM LN) – Poor performance at operations sees management encourage shareholders to accept offer

IGO Limited (IGO AU) – Update on lithium business as hydroxide stockpiles rise on low demand

Kodal Minerals* (KOD LN) – Interim results highlight near completion of Bougouni lithium, spodumene concentrate, plant in Mali

Orosur Mining* (OMI LN) – Further drill results from Pepas in Colombia

Metals higher after rough week as copper refining contracts highlight smelter demand

• Metals have been suffering a lack of direction with little longer-term positioning – nobody quite knows their direction
• Copper is hovering around the $9,000/t mark having weakened sharply last week amid the higher US dollar.
• Lead, zinc, and PGMs are all higher this morning whilst nickel and tin continue to struggle.
• Reports suggest that Jiangxi and Anglo American have signed a TCRC contract at US$21.25 and 2.125c, same as Antofagasta.
• The fees are down considerably on last year and reflect a huge expansion in global smelter capacity alongside reduced output from mines in Panama and Chile.
• Iron ore continues to weaken on China property weakness and slow restocking demand from steel mills.

Gold ($2,630/oz) holds higher ground after volatile Fed week

• Gold strengthened over 1% on Friday after a whipsawing week of volatility, driven by central bank decisions and the Fed’s hawkish pivot.
• The Fed cut by 25bp but their dot plot outlined increased concerns over ongoing inflationary pressures, reducing rate cut expectations.
• This pushed the 10 year yield over 4.5% again, seeing the dollar hit two year highs and pressuring metals.
• However, we expect Asian buyers have been taking advantage of sell-offs, with periods of strength happening overnight,

China lithium production rises again as inventory slides in ports and warehouses

• Mysteel reports that China weekly carbonate production rose again, up 1.6% to the 20^th November.
• Trader weekly inventory fell 7.7% whilst total inventories rose 0.1%.
• Weaker carbonate prices are encouraging downstream restocking.
• SMM reports much of the downstream restocking is ‘short-term’, whilst carbonate production remains in an upward trend and showing signs of a slight decline.
• China spodumene imports fell 7% in November, with Australian imports down 17%mom to 300kt whilst Zimbabwe imports rose 124%mom to 119kt.
• China imported 19.2kt of lithium carbonate, down 17%mom, led by weaker imports from Chile.
• Australian lithium equities strengthened overnight whilst Chinese names like Ganfeng and Tianqi sold off slightly.

Nickel – While China is flooding the market with new nickel supply from Indonesia, we suspect the Indonesian’s would prefer to control the market to ease prices higher

• A Reuters report suggests Indonesia is looking to cut quotas to reduce nickel mining to 150mt from 227mt to support prices.
• Indonesia undoubtedly remembers the cost of the Tin Crisis, and we suspect, does not want to see Chinese oversupply damaging their royalty / tax margins.
• Nickel smelters in Indonesia are now importing laterite ores from the Philippines – we suspect this practice might get banned.
• China Inc. appears focussed on reducing commodity import prices to enhance the margins of processors and manufacturers while also holding back inflation.
• This is at odds with Indonesia’s desire to increase its take through royalty and other tax payments from mining and metal exports.

Economics

Central banks tread cautiously as US economy continues to support US dollar strength

Inflation remains above target levels in many regions as government balance demand for greater public funding with highish interest rates

• • Japan monthly inflation 0.6% mom vs 0.4% mom, yoy 2.9% vs 2.3% yoy,
  • EU monthly inflation -0.3% vs 0.3%, yoy 2.2% vs 2.0%,
  • UK monthly inflation 0.1% vs 0.6%, yoy 2.6% vs 2.3%.

US – Final Q3 GDP 3.1%qoq vs Q2 3%

• Weekly jobless claims fall to 220k from 242k
• Philadelphia Fed manufacturing index fell to -16.4 in December vs -5.5 in November
• Kansas City Fed manufacturing index -5 from -4,
• Housing starts -1.8% to 1.28m units in November vs -3.2% in October at 1.311m units,
• Building permits +6.1% to 1.505m units vs -0.4% at 1419m units,
• Existing home sales rose 4.8% 4.15mill units vs 3.4% at 3.96m,
• Personal income rose slightly 0.3% in November vs 0.7% in October
• Personal spending also rose 0.4% vs 0.3%,
• Personal consumption expenditure index 0.1% vs 0.2% and 2.4% yoy in November vs 2.3% yoy in October
• Final Uni of Michigan consumer sentiment 74.0 for December vs 71.8

Currencies

US$1.0410/eur vs 1.0393/eur previous. Yen 156.55/$ vs 156.91/$. SAr 18.383/$ vs 18.338/$. $1.257/gbp vs $1.251/gbp. 0.625/aud vs 0.625/aud. CNY 7.299/$ vs 7.299/$.

Dollar Index 107.92 vs 108.11 previous

Precious Metals

Gold US$2,630/oz vs US$2,607/oz previous

Gold ETFs 82.6moz vs 82.6moz previous

Platinum US$938/oz vs US$924/oz previous

Palladium US$923/oz vs US$912/oz previous

Silver US$29.7/oz vs US$29.0/oz previous

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

Base metals:   

Copper US$8,955/t vs US$8,941/t previous

Aluminium US$2,542/t vs US$2,544/t previous

Nickel US$15,495/t vs US$15,275/t previous

Zinc US$3,001/t vs US$2,982/t previous

Lead US$2,001/t vs US$1,969/t previous

Tin US$29,050/t vs US$28,600/t previous

Energy:           

Oil US$73.1/bbl vs US$72.5/bbl previous

Natural Gas €44.1/MWh vs €44.4/MWh previous

Uranium Futures $72.8/lb vs $73.8/lb previous

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$104.0/t vs US$103.9/t

Chinese steel rebar 25mm US$487.6/t vs US$487.2/t

HCC FOB Australia US$203.0/t vs US$204.0/t

Thermal coal swap Australia FOB US$127.0/t vs US$128.3/t

Other:  

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

NdPr Rare Earth Oxide (China) US$53,776/t vs US$54,323/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$435/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$295.0/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$415.0/kg vs US$420.0/kg

Battery News

China’s battery exports to US jumped to record $1.9bn in November

• China’s exports of lithium-ion batteries to the US spiked to a record in November as companies raced to ship products before the Chinese government removed tax benefits.
• Beijing cut or cancelled export tax rebates on a range of products including batteries, used cooking oil, solar equipment and gasoline.
• Shipments of lithium-ion batteries to the US jumped by 27% yoy to $1.9bn in November.
• The export tax rebate for batteries was cut to 9% from 13%.

EV battery materials facing supply crunch by 2030

• McKinsey’s latest report warns of significant strain on the supply chain for critical battery materials by 2030.
• EV sales are expected to jump from 4.5m units in 2023 to around 28m annually by the end of the decade.
• LFP batteries have reduced reliance on materials like cobalt and nickel, but they still depend heavily on lithium, manganese and graphite.
• Upstream raw material mining and refining these materials account for about 40% of an EV battery’s total emissions – McKinsey’s report emphasises that reducing emissions in these processes is critical to the expansion of EVs in the

Company News

Atlantic Lithium* (ALL LN) 14.71p, Mkt Cap £101m – Award of performance rights to directors and key staff

• Atlantic Lithium Report the award of new performance rights to its key directors and senior employees
• The awards include:
• Neil Herbert, Chairman: 1.68m
• Keith Muller, CEO: 1.09m
• Amanda Harsas, FD and company secretary: 1.0m
• The director awards total 3.8m as approved at the November AGM
• We note the directors have bought substantial numbers of shares over the past few years
• We look forward to approval of the Ewoyaa mining license year and for a recovery in Lithium prices as electric vehicle and hybrid sales continue to improve

*SP Angel acts as Nomad and Broker to Atlantic Lithium

Aura Energy* (AURA LN) 6.7p, Mkt Cap £55m – Sweden recommends lifting ban on uranium mining

(Aura Energy hold 100% of Tiris Uranium and 100% of the Häggån Project in Sweden, Häggån hosts 2.5bnt of vanadium, SOP ‘sulphate of potash’ and uranium resource)

• Aura Energy report the recommendation for the listing of the ban on uranium mining by a government inquiry.
• The inquiry recommends that uranium mining should be regulated as s a concession mineral within the Minerals Act to allow the exploitation of economic resources like any other natural resource in Sweden.
• Sweden’s climate minister announced plans to lift the nation’s ban on uranium mining last year.
• The nation is planning another 10 new nuclear reactors to provide base load power to support the decarbonisation of the economy.
• Häggån Scoping Study estimates (2023) – focussed on Vanadium and SoP ‘Sulphate of Potash’ fertiliser only.
• The scoping study was done on 65mt resource represents under 3% of Haggan’s 2.0bnt estimated MRE Mineral Resource Estimate (JORC 2004)

• • Throughput:  3.5mtpa – Base Case scenario proposes mining the high-grade zone at ~5.9mtpa
  • Vanadium production:  10,400tpa V2O5 high-quality vanadium flake
  • SoP fertilizer production:  217,000tpa sulphate of potash (SOP) by-product for sale as fertiliser
  • Mixed sulphide product: 3,000tpa
  • Capex: US$592m
  • NPV₈ of between US$456m to US$1,307m.
  • Assumes:  V2O5 price of between US$7.0/lb and $13/lb, SOP price of US$650/t K2O, a Nickel price of US$20,000/t, Mo price of US$51,000/t and Zn price of US$2,500/t, with 70% payability for base metal units

• Socping Study including uranium (2023):

• • NPV₈ rises by 37% at a uranium price of US$65/lb U₃O₈.
  • NPV base-case:  $756 – $1,606m including uranium production
  • Assumes:  V2O5 price of between US$7.0/lb and $13/lb, SOP price of US$650/t K2O, U3O8 price of US$65/lb, a Nickel price of US$20,000/t, Mo price of US$51,000/t and Zn price of US$2,500/t, with 70% payability for base metal units. Subject to anticipated Swedish legislative change
  • IRR:  26-47%
  • Operating cash flow of between US$140 – 270mpa
  • Payback:  1.5 to 2.0

• Resource (Indicated & Inferred) estimated to contain 2.35bt @ 155ppm (800mlbs) U₃O₈ plus ~0.3% vanadium pentoxide, ~210ppm molybdenum, ~340 ppm nickel, ~465 ppm zinc and around 4% K2O.
• Over 90% of the resource is currently classed as ‘Inferred’ although the company has previously described a higher-grade core to the deposit.
• Sweden currently uses 2.4Mlbs pa of U₃O₈ in their three nuclear reactors and is committed to building two additional nuclear reactors by 2035 making Häggån strategically important to the nation’s ongoing energy security.
• If the Häggån mine were to run at 2.4mlbspa the mine could meet Sweden’s current uranium demand >300 years.
• Funding: Aura recently raised A$9m with investors in a placing backed by Sachem Cove Partners LLC at A$0.14/s.
• Aura reported A$15.8m at the end of Q3 including proceeds from a A$5.4m placement with Curzon Uranium Limited following the restructuring of its offtake agreement on Aura’s Tiris uranium project in Mauritania.

Conclusion:  This is positive news for the Häggån project and while we expect local objections to continue to provide obstacles we hope the government inquiry recommendations will lead to the overturning of the government ban and a resolution to all other objections.

*SP Angel acts as Nomad to Aura Energy

Goldstone Resources* (GRL LN) 1.25p, Mkt Cap £9.4m – Update on Convertible Loan Note

• The Company provides an update on their convertible loan note agreement.
• The Convertible Loan Notes will be assigned to Devenport Capital Ltd, Blue Gold’s secured lender.
• The redemption date has been extended to 31^st December 2025.
• The Convertible Loan Note will cease to accrue from 20^th December 2024.
• The Convertibles and accrued interest will be converted into 85,859k new ordinary shares at a price of 3.25p.
• The issue of the Conversion Shares will ‘constitute full and final redemption of the outstanding principal amount of the Convertible Loan Notes and all accrued interest, which will amount to £2.8m.’
• In consideration of the Conversion Agreement, Goldstone will issue an additional 61,833k shares to Devonport, with the aggregated new ordinary shares equal to c.16% of the issued share capital.

*SP Angel acts as broker to Goldstone Resources

Hummingbird Resources (HUM LN) 2.2p, Mkt Cap £18m – Poor performance at operations sees management encourage shareholders to accept offer

• Hummingbird provides an update on Kouroussa and Yanfolila.
• Kouroussa saw 585kt mined over December vs 950kt mined, will milled tonnes at 97kt vs 76kt forecast.
• Feed grade of 1.92g/t Au vs 4.3g/t forecast, producing 5.7koz vs 10koz forecast.
• The mine will not ‘generate enough cash to fund the much-needed capex to complete the finalisation of the mine build.’
• At Yanfolila, mined tonnes for December at 129kt vs 442kt expected, milled tonnes of 120kt vs 123kt expected.
• Feed grade of 0.88g/t Au vs 1.66g/t Au expected, with gold poured at 3koz vs 6koz expected.
• The Company reports that ‘Yanfolila will struggle to break even for the foreseeable future’ and has overdue creditor payments.
• The Company does not expect to achieve its 100-115koz guidance at AISC of $2,100/oz provided in November.
• The Company now expects to produce 95-100koz Au in 2024 at AISC of $2,200/oz.
• Hummingbird states it ‘requires very material additional financing to address significant operational performance and maintain business continuity.’
• Management urges shareholders to vote in favour of the transaction currently presented to shareholders to avoid default.

IGO Limited (IGO AU) A$4.9, Mkt Cap A$3.7bn – Update on lithium business as hydroxide stockpiles rise on low demand

• IGO, which has lithium interests in Western Australia, provides an update.
• The Company reports improved performance at the Kwinana Lithium Hydroxide refinery which it is JV in alongside Tianqi.
• However, the refinery has seen a build up in hydroxide inventory over recent months, due to weak market demand.
• This is expected to ‘continue in the short to medium term.’
• IGO does not expect to receive a dividend from their JV with Tianqi.
• Additionally, IGO reports Greenbushes continues to generate cash despite weak markets.

Kodal Minerals* (KOD LN) 0.35p, Mkt Cap £70m – Interim results highlight near completion of Bougouni lithium, spodumene concentrate, plant in Mali

(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 with Mali holding 35% through LMLB and 65% of LMLB held by the Kodal jv with Hainan Mining within KMUK)

• Kodal Minerals report the expenditure of £0.57m for the six-months to end-September vs £0.51m a year earlier.
• The operating loss rose to £0.84m vs £0.51m a year earlier.
• Pre-tax losses rose to £1.5m vs £0.5m yoy following a £0.83m loss at an associate company.
• A substantial currency translation loss of £2.4m pushed the total comprehensive loss for the year to £3.6m
• The accounts do not reflect the substantial activity within KMUK, the joint venture company between Kodal Minerals and Hainan Mining which is building the Bougouni mine.
• KMUK: The carrying value of Kodal’s investment in KMUK at end-September was £28.2m.
• Cash within Kodal Minerals stands at £18.1m vs £1.7m due to an injections funds by way of share subscription from Hainan Mining which is has also funded >100m into the KMUK jv constriction.
• There have been minor delays to the construction at Bougouni due to exceptionally heavy rainfall this year and the availability of suitable shipping from China to the Ivory Coast.
• The Bougouni mine and process plant is now close to completion despite the unusually long wet season.
• The team have mined >150,000t of ore at Bougouni grading 1.17% Li2O and is well set to start the DMS plant for concentration of the spodumene ore.
• License:  The Malian government has signed a binding MoU with KMUK so that the Bougouni mine and associated licenses can move to the new Mali 2023 Mining Code.
• Key terms:

• • 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.
  • US$15m cash payment to the government of Mali 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.”

• • “Negotiations progressed during the period concerned with Hainan regarding an offtake agreement for 100% of the spodumene production from the Stage 1 DMS processing plant.  The offtake agreement being negotiated between KMUK and Hainan will be based on market prices for spodumene, with a floor set to ensure that all costs are covered and will require express written approval from Kodal Minerals PLC as a shareholder of KMUK.  Offtake for Stage 2 production is outside of the scope of current negotiations with Hainan and remains available to KMUK for future commercial opportunities. .”

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

Orosur Mining* (OMI LN) 7.4p, Mkt Cap £19.5m – Further drill results from Pepas in Colombia

CLICK FOR PDF

• Orosur releases the results of hole PEP015.
• The hole was intended to test the controlling SE to NW trend at Pepas, using the defined basement fault to act as a marker.
• Hole PEP015 was collared 45m NW of PEP014, using the same azimuth.
• The hole returned results of:

o   40m at 3.75g/t Au from 23.5m

• Including 6.8m at 9g/t Au from 27m and 5m at 7g/t Au from 55m.

• The hole intercepted zones of soils, saprolite and intense weathering and faulting before intercepting mineralisation.
• Management notes that the extent of the weathering and alteration in the tuffs could be ‘indicative of a hanging wall fault system.’
• The result suggests that the mineralisation at Pepas is more complex to the northwest and will require further drilling to build a geological model.
• Results from PEP016 are expected soon as they are in the laboratory awaiting assay results.
• PEP016 was drilled further down dip and should provide more insight into the presumed hanging wall feature.
• Last week’s capital raising enables an expanded drilling programme to boost the Company’s understanding of the Pepas mineralisation.

*SP Angel acts as Nomad and Broker to Orosur Mining

 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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