SP Angel Morning View -Today’s Market View, Monday 27th December 2024

Copper steady as Panama President sees no immediate environmental risk from Cobre mine

MiFID II exempt information – see disclaimer below

Bezant Resources (BZT LN) – Fundraising to advance Hope and Gorob projects in Namibia

Gemfields Group (GEM LN) – Invasion of Gemfield’s Montepuez ruby mining camp leaves two dead in Mozambique. Restructuring of Gemfields businesses.

Kenmare Resources (KMR LN) – Update on Mozambique as operations remain undisturbed by election disruption

Premier African Minerals (PREM LN) – Update on Offtake and Prepayment Agreement for Zulu lithium project

Copper steady as Panama President sees no immediate environmental risk from Cobre mine

• Copper continues to hover around the $8,950/t mark amid limited holiday-season trading.
• Bloomberg reports newly elected Panama President Mulino sees no ‘imminent risk for the country’ from the 350ktpa Cobre Panama mine.
• The President stated yesterday that they ‘can’t leave it abandoned perpetually so that it could eventually cause ecological damage.’
• Mulino has ordered an environmental audit of the mine to reopen temporarily before a permanent shutdown.
• First Quantum has taken the case to international arbitration.
• A full-scale reopening of Cobre Panama could flip market expectations deeper into surplus territory, weighing on copper prices.

Electric Vehicle sales in China expected to soar ahead of expectations in 2205

• Reports indicate Chinese EV sales should rise 20% to ~12m vehicles in 2025 and surpass Internal Combustion Engine cars next year (FT)
• Sales including pure battery and PHEV sales
• Sales of ICE vehicles are expected to fall by >10% to under 11m despite overall market growth.
• China is moving to electrify as much of its economy in its move towards higher-tech industries, greater efficiency and self-sufficiency.
• Much of the electricity will be provided by substantial, planned new wind, solar, hydro and nuclear power capacity.
• China now looks like it will achieve its 2035 target of >50% EV ten year ahead of schedule.

Lithium 2025 – more pain to come or cause for optimism?

• Lithium prices have had a dire year, with spodumene starting the year at $1,000/t and spending much of it around the $800/t mark on an SC6 basis.
• Carbonate prices have hovered around the $10,000/t mark having begun the year c.$12,000/t.
• Prices seem a long way off the lofty levels reached in 2025, when spodumene hit $5,000/t.
• These elevated levels pushed cathode producers and lithium product traders to stockpile inventory through 2023, and they continue to work through these reserves.
• Surprising supply from China lepidolite and African, primarily Zimbabwean, spodumene has taken market forecasters by surprise.
• A rapid expansion from Western producers, such as Albemarle and Pilbara minerals alongside new producers like Sigma Lithium also added to the surplus in 2024.
• We wonder whether 2025 will be easier on lithium bulls.
• EV sales in China continue to accelerate, with Beijing’s official forecasts suggesting a 20% growth in domestic EV sales at 12m cars in 2025.
• This is expected to translate to a comparable increase in LCE demand, with some forecasters seeing near 30% growth.
• Australian supply is expected to remain constrained given their higher cost nature, with Mineral Resources’ Bald Hill going on care and maintenance in November.
• Additional Australian supply is likely to come offline, with Pilbara slashing growth targets and MinRes’ Wodgina and Mt Marion operations both likely operating at a loss.
• Reports from China suggest some lepidolite operations have come offline, however the integrated nature of many operations with downstream facilities takes the pressure off.
• Sinomine’s Bikita petalite operation has reduced output from Zimbabwe and reduced volumes are being reported from Yahua’s Kamativi mine.
• Meanwhile, the Goulamina mine, operated by Ganfeng, is currently ramping up production from Zimbabwe.
• DLE continues to pose a risk, with large balance sheet players like Rio Tinto and Exxon Mobil both entering the space, with Rio giving Rincon the greenlight and $2.5bn worth of CAPEX funding.
• The roll-out of DLE is an inevitable but likely slow and complex source of lithium supply, with Tsingshan pulling out of Eramet’s Centenario project during ramp-up.
• DLE will likely be brine-specific and require an extended period of engineering adjustments to enable ramp up, as Rincon’s six year construction and ramp up period highlights.
• Industry sources suggest that China’s DLE operations from the Qinghai salt lakes are achieving recoveries of <40%, likely unprofitable at current price levels.

Conclusion: We would expect lithium to have bottomed at or around current levels into 2025, given further supply curtailments likely due from Australia and Africa. However, 2022-esque upside to prices over a sustained period is unlikely given substantial swing supply from China and Zimbabwe. EV sales continue to accelerate and, although the short-term trend remains vulnerable to a global growth slowdown, the transition from ICE to EV vehicles seems well established and should accelerate further into the end of the decade as affordability and technology improves.

Economics

Japan – Industrial production falls -2.3% mom in November due to weaker semiconductor replated production, manufacturing, devices, and autos

• Production machinery fell a massive -9.1% on lower exports of chip-making equipment to China and Taiwan
• Automotive vehicle production fell -4.3%
• Fabricated metal products also fell -5.7%.
• Tokyo core CPI rose to 2.4% in December.
• Core-core CPI fell to 1.8% from 1.9% – this excludes food and energy.
• Services inflation rose to 1.0% from 0.9%.
• Headline inflation rose to 3.0% yoy from 2.6% yoy driven by energy and food with a marked raise in price of rice due to last year’s poor yields.

Currencies

US$1.0412/eur vs 1.0410/eur previous. Yen 157.84/$ vs 156.55/$. SAr 18.806/$ vs 18.383/$. $1.252/gbp vs $1.257/gbp. 0.622/aud vs 0.625/aud. CNY 7.306/$ vs 7.299/$.

Dollar Index 108.14 vs 107.92 previous

Precious Metals

Gold US$2,626/oz vs US$2,630/oz

Gold ETFs 82.6moz vs 82.6moz

Platinum US$947/oz vs US$938/oz

Palladium US$919/oz vs US$923/oz

Silver US$30.2/oz vs US$29.7/oz

Rhodium US$4,575/oz vs US$4,575/oz 

Base metals:   

Copper US$8,964/t vs US$8,955/t

Aluminium US$2,557/t vs US$2,542/t

Nickel US$15,876/t vs US$15,495/t

Zinc US$3,031/t vs US$3,001/t

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

Tin US$28,818/t vs US$29,050/t 

Energy:           

Oil: US$73.0/bbl vs US$73.1/bbl

Natural Gas: €46.8/MWh vs €44.1/MWh

Uranium Futures: $72.8/lb vs $72.8/lb

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin): US$104.1/t vs US$104.0/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

Company News

Bezant Resources (BZT LN) 0.03p, Mkt cap £3.7m – Fundraising to advance Hope and Gorob projects in Namibia

• Bezant Resources report the raising of £560,000 at 0.024p to support the future development of the Hope and Gorob gold mines in Namibia.
• Geotechnical and optimisation drilling is underway at its Hope & Gorob Copper & Gold Project in Namibia following Mining Licence approval, though this remains subject to statutory approval.
• Hope & Gorob resources:
  • Indicated: 10mt @ 1.89% Cu & 0.31g/t Au
  • Targeting >3mt @ >1.8% Cueq – in open pit resource subject to independent mineral resource estimation
• Hope and Gorob cover ~17km of strike within the southern Matchless exploration licences.

Gemfields Group (GEM LN) 6.6p, Mkt Cap £77m – Invasion of Gemfield’s Montepuez ruby mining camp leaves two dead in Mozambique. Restructuring of Gemfields businesses.

(Montepuez Ruby Mining Limitada in Mozambique (“MRM”) and which is 75% owned by Gemfields, the Kagem emerald mine in Zambia is 75% owned by Gemfields)

• Gemfields Group report the invasion and damage to the mining camp by >200 people at Montepuez in Mozambique.
• The invasion appears to be associated with “groups associated with illegal ruby mining taking advantage of the prevailing political unrest”
• A number of community buildings built by Montepuez Ruby Mining Limitada in and around an adjacent village were set on fire with a vocational training centre built by MRM at Wikupuri looted and damaged on two occasions.
• Two people were shot and later declared dead by security forces who used a staged approach to defending the facilities.
• While Gemfields maintains >500 security around the Montepuez mine and camp a number of staff have been moved offsite for their protection.
• Gemfields warned the market of ongoing unrest in the region around the Montepuez ruby mine which has attracted thousands of artisanal miners to informal workings in the region in its strategic update on 23 December.
• The Montepuez ruby mine intends to return to normal operation by the end of this year.
• Rioting, strikes and unrest have followed the recent election and confirmation of Daniel Chapo as leader of Frelimo, which has governed since independence in 1975.
• 56 have been reported killed in the unrest since Monday according to the New York Times with 1,530 escaping from the Maputo prison on Wednesday.
• Damage within the Montepuez area includes:
• Namanhumbir village set fire
  • Administrative offices of Namanhumbir district.
  • Namanhumbir police station;
  • Offices of MRM’s Operational Grievance Mechanism;
  • MRM community centre; and
  • Community radio centre built by MRM.
• Nanune village water borehole sabotaged, cutting off the water supply.
• Wikupuri resettlement village and Wikupuri police station fires:
• Gemfields recently highlighted a number of challenges facing the business in its 23^rd December strategic update.
• Management are restructuring the business to address lower sales values and other challenges including:
  • An oversupply of Zambian emeralds at discounted prices by a competing producer
  • Conflicting auction dates looks likely to damage emerald prices further through 2025.
  • Lower production of premium rubies in Mozambique
  • A fall in sales of luxury gemstones in China. A flood of cheap Lab Grown Diamonds is damaging these markets.
  • Ongoing civil unrest and associated supply chain and logistics interruptions in Mozambique
• Restructuring and cost cutting:
  • Construction of the second ruby processing plant at MRM in Mozambique.
  • Suspension of all mining at the Kagem emerald mine in Zambia with the mine processing stockpiled ore in its recently upgraded processing plant;
  • Halting all non-essential spend and suspending planned capital expenditure at its ruby development assets in northern Mozambique
  • Halting operations at Nairoto Resources Limitada (“NRL”), the gold project situated north of Montepuez.
  • Potential sale of the Fabergé brand.
  • Targeted rationalisation of operations and businesses across the Group.

Conclusion: Management are taking tough action to address a series of issues across the group. We wish Gemfields well in the restructuring and we hope peace returns in Mozambique.

Kenmare Resources (KMR LN) 320p, Mkt Cap £286m – Update on Mozambique as operations remain undisturbed by election disruption

• Kenmare, who operate the Moma mineral sands project in Mozambique, provide an update amid widespread national disruptions.
• The Company reports that there ‘have been no material incidents at the Mine and no damage to Company facilities.’
• The operations have ‘comfortably exceeded minimum production guidance in respect of all products for 2024.’
• Management has implemented increased security measures to enable continued operations with minimal disruption.

Premier African Minerals (PREM LN) 0.05p, Mkt Cap £17m – Update on Offtake and Prepayment Agreement for Zulu lithium project

• PREM and Canmax have reached an agreement on amendments to the Offtake Agreement.
• The agreement remains the same, but both parties have agreed to adjust the settlement options for Canmax and provide security under the Prepayment Agreement.
• Should Premier not deliver the required product or cash plus interest by April 1^st 2025, Canmax will gain a direct interest in the Zulu Project based on a project valuation of US$100m.
• Alternatively, Canmax can accept settlement in Premier ordinary shares.
• PREM will provide Canmax ‘an extension of their existing security by providing a fixed charge over the shares of Zulu Lithium.’
• Canmax will now gain the right to participate in equity raises to maintain its current 13.4% interest in Premier African.

 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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