SP Angel Morning View -Today’s Market View, Monday 30th December 2024

Gold prices hold at $2,616/oz as market looks forward to new year

MiFID II exempt information – see disclaimer below

Atlas Metals Group (AMG LN) – Managem withdraws from agreement to sell Oumejrane copper mine in Morocco.

Orano SA (Private) – Agreement with Mongolia for uranium production from Zuuvch Ovoo

Power Metal Resources* (POW LN) – Interim financial results following productive year

Sunrise Resources (SRES LN) – Tolsa pulls out of Pioche Sepiolite Project option

Technology Minerals (TM1 LN) – Withdrawal of AGM Resolutions to subdivide ordinary shares and approve terms of deferred shares

Gold – Prices hold at $2,616/oz as market looks forward to new year

Can 2024’s rally extend into 2025 or is the bull market over?

• Gold prices had a strong run in 2024, rising from $2,000/oz to hit $2,790/oz in late October amid escalating geopolitical tensions and the BRICs summit.
• Since the beginning of November, gold prices have been relatively flat, recovering from short term lows of $2,560/oz and testing the $2,720/oz mark twice.
• The past two months’ weakness likely reflects a combination of higher US dollar, higher US Treasury yields and an easing of tension in the Middle East.
• The BRICs summit was also expected to highlight the strategy of nations such as Russia, Turkey, and China to further diversify their foreign reserve holdings away from the dollar, with gold expected to be a beneficiary.
• Whilst there were murmurings of a BRICs payment currency, gold was not emphasised as much as gold bulls were expecting, supporting a sell-down.
• Gold had likely been severely overbought at the $2,790/oz mark, with algorithm-based momentum funds pushing speculative positions to extended levels.
• We see the recent period of weakness in gold as an encouraging consolidation process, with the metal finding strong support at $2,620/oz.
• This comes despite a sharp rally in the US dollar, with the dollar index up 8% since September.
• This followed an extended sell-off in US Treasuries since the September Fed meeting, with the 10 year yield rising from 3.6% to 4.6%, despite 100bp worth of cuts from the FOMC.
• Gold traditionally moves inversely to the dollar and US real yields, although this dynamic was somewhat skewed over 2024 given record central bank buying.
• The sell-off in US Treasuries and the strength in the dollar likely reflects a phasing out of recession expectations, concerns over reignited inflationary pressures under Trump and renewed discussions over the feasibility of the US deficit levels.
• Can this hawkish move reverse in 2025, likely supporting gold prices with a lower dollar and lower US borrowing costs?
• We expect the key focus for 2025 to be on the US unemployment rate, which is currently hovering around 4.3% using the Fed’s primary gauge.
• Should inflation stay relatively anchored and not reaccelerate, we would see a further uptick in the unemployment rate as likely refuelling recessionary positioning, with gold set to be a beneficiary.
• This would see gold ETFs traded by western investors as another primary buyer of gold, having been relatively muted over 2024.
• Any weakness in bitcoin may also be a beneficiary for gold, with investors potentially set to take profit in the digital currency in favour of its more established counterpart.
• However, we suspect gold may also be vulnerable to renewed inflationary pressures, which would support the higher rates for longer narrative.
• China’s sustained Yuan weakness and plummeting yields may continue to push retail investors into safe haven assets, with gold benefitting from this trend over the past twelve months.
• Ultimately, we remain bullish gold into the new year and would expect a reversal in the recent and aggressive sell-off in US Treasuries to lift gold out of its recent malaise.

SP Angel Top Gold Picks:

• • Anglo Asian Mining* – producing gold in Azerbaijan with long-term copper exposure to compliment
  • Oriole Resources* – Assays due imminently from new, large-scale anomaly Mbe Project in Cameroon with ongoing 24 hole programme
  • Orosur Mining* – Recently expanded drilling programme in Colombia following high-grade results from surface and subsequent £1.25m equity raise
  • Resolute Mining** – Suffered sharp sell-off following detaining of staff in Mali and subsequent $160m payment to Military Junta. Syama holds tier one potential following refining of processing by current management and strong cash flows expected at spot prices.
  • Ones to watch include Great Western Mining* who are ramping up their precious metal processing mill, Goldstone Resources* in Ghana with their Homase heap leach project and Galantas Gold* with the Omagh Project in Northern Ireland.

*SP Angel acts as Nomad, Broker or both, **SP Angel Analysts hold shares in Resolute Mining

 Economics

US – Goods exports rose 6.1% to US$176.4bn yoy in November

• Wholesale inventories fell -0.2% mom to US$901.6bn.
• Retail inventories climbed 0.3% mom to US$827.5bn.
• Trade deficit grew to US$102.9bn vs US$ -98.3bn in October and significantly larger than the expected US$ -101bn.
• The deficit likely expanded with retailers stocking up for a good US Christmas with cheaper Chinese goods.
• Chinese manufacturers are also racing to beat Trump’s new Tariffs due shortly.

China – US$1bn in unpaid bills to businesses by local authorities

• Chinese contractors are reported to be owed around US$1bn in unpaid bills relating to unfunded projects by local governments, according to a report by the NAO ‘National Audit Office’.
• Ten provinces have CNY7.63bn in arrears to businesses since March 2023 according to the NAO report.
• The revelation is a further example of how malpractice pervades local government in China. We also suspect a degree of cronyism and corruption to have exacerbated the problem.

Japan – Manufacturing PMI rose to 49.6 in December from 49.0 in November

• While conditions appear to be improving for Japanese manufacturers, input costs are rising as a result of Yen weakness.
• Manufacturers are seen pushing prices higher and are increasing new recruitment on a more positive outlook for demand.
• Uncertainty remains in the automotive sector where China is increasingly competitive and where Japanese manufacturers have been cautious in their move to large-scale EV production.
• We note Toyota is still busy working on hydrogen / fuel cell technology.
• We see the combination of mid-sized Li-ion batteries charged by onboard hydrogen fuel cells as a positive alternative to pure EVs and a better option than hybrids with internal combustion engines.

Currencies

US$1.0420/eur vs 1.0412/eur previous. Yen 157.88/$ vs 157.84/$. SAr 18.734/$ vs 18.806/$. $1.252/gbp vs $1.257/gbp. 0.622/aud vs 0.622/aud. CNY 7.310/$ vs 7.306/$.

Dollar Index 108.04 vs 108.14 previous

Precious Metals

Gold US$2,616/oz vs US$2,626/oz previous

Gold ETFs 82.6moz vs 82.6moz previous

Platinum US$937/oz vs US$947/oz previous

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

Silver US$29.9/oz vs US$30.2/oz previous

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

Base metals:   

Copper US$8,963/t vs US$8,964/t previous

Aluminium US$2,555/t vs US$2,557/t previous

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

Zinc US$3,051/t vs US$3,031/t previous

Lead US$1,955/t vs US$1,969/t previous

Tin US$28,810/t vs US$28,818/t previous

Energy:           

Oil US$73.5/bbl vs US$73.0/bbl previous

Natural Gas €48.2/MWh vs €46.8/MWh previous

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

Bulk:   

Iron Ore 62% Fe Spot (cfr Tianjin) US$103.9t vs US$104.1/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

Atlas Metals Group (AMG LN) – 11.74p, Mkt Cap £1.74m – Managem withdraws from agreement to sell Oumejrane copper mine in Morocco.

(Formerly MetalNRG) (MNRG LN)

• Atlas Metals Group reports the termination of their previously agreed deal to acquire the Oumejrane copper mine in Morocco from Managem.
• Management had lined up US$25m from a fund managed by Orion Resource Partners which has subsequently withdrawn from the agreement.
• The team are now examining possible alternative options which may potentially lead to a closing of the Acquisition.

• The original deal required Atlas to pay US$32m to Managem for the Oumejrane copper mine in Morocco with an initial US$25m convertible note from OMF Fund IV SPV K LLC (Orion Resource Partners) to be topped up with an additional US$5m of other funding.
• Oumejrane mine sales to end -December 2023 were US$28.0m.
• Drilling has identified further copper mineralization at a depth of 296m with the current mining activities currently limited to 140m.
• The mine is in the Eastern Anti-Atlas about 90km northeast of Zagora starting with vein mining in the Middle Ages and later by BRPM.
• Managem restarted the mine in 2014 having worked up a reserve of around 2mt grading 2.7% copper but with >10mt in the Boukerzia district to the east of the Central deposit.
• A central processing plant at Oumejrane derives feed from four operational sites processing mainly chalcoipyrite-rich sulphide ores.
• The mine owns four exploitation licenses covering >200sqkm with just 10km so far explored.
• The district consists of copper vein swarms hosted in sandstone sedimentary formations.
• Management were also working on a potential strategic partnership with Managem to explore additional opportunities to collaborate on mining projects in Morocco and elsewhere.

• Indirect projects:
  • Uranium in Kyrgyzstan with a total JORC resource of 5.512mlbs U3O8 made up of 3.657mlbs indicated and another 1.854mlbs of inferred uranium.
  • Gold: Lake Victoria Gold project in Tanzania (Imwelo). Plans to start mining and processing for 12,000ozpa from an estimated 200,000oz resource
    • ~50% of this in measured and indicated. FS shows an economic open cut Reserve of 44,000 oz. at 2.9g/t, for the 2 ore zones.

Conclusion: We are hopeful for a restructuring of the proposed deal next year and for improved market conditions to enable the acquisition of the Oumejrane copper mine

Orano SA (Private) – Agreement with Mongolia for uranium production from Zuuvch Ovoo

• State-controlled uranium miner Orano SA from France has agreed to develop the Zuuvch Ovoo mine in Mongolia.
• Bloomberg reports the French miner will invest an initial $500m in CAPEX, with the total development CAPEX bill at $1.6bn.
• First production is aimed for 2028.
• Orano has operations in Canada, Kazakhstan and Niger but has been exploring for uranium in Mongolia for 25 years.

Power Metal Resources* (POW LN) 13.5p, Mkt cap £15.4m – Interim financial results following productive year

• Power Metals report their interim results for the six month period to 30^th September 2024.
• The Company reports a cash position of £0.9m at the end of the period.
• Over the period, POW has signed a JV with UCAM for uranium exploration in Canada, namely the Athabasca Basin and Newfoundland.
• The Company has also signed agreements for base metals exploration in Oman and Saudi Arabia.
• Additionally, POW has signed agreements with GSAe, for engineering projects in Saudi Arabia focusing on recovery of high-value metal waste from fly ash.

*SP Angel acts as Nomad and Broker for Power Metal Resources

Sunrise Resources (SRES LN) 0.03p, Mkt cap £1.3m – Tolsa pulls out of Pioche Sepiolite Project option

• Sunrise, which holds the Pioche Sepiolite Project in Nevada, reports that Tolsa has ‘notified the Company that it will not proceed’ with its option to purchase the project.
• The option was originally granted in June 2022, and extended or a further 12 months.
• The two parties had been negotiating over the terms of calculation and payment of the agreed 3% royalty due to Sunrise on commercial production.
• Tolsa has indicated that ‘it has been difficult to correlate specific sepiolite grades between drill holes.’
• Sunrise suggests that ‘sepiolite deposits in Nevada differ significantly in origin and character from those exploited in Tolsa’s existing operations in Spain.’
• Sunrise expects Tolsa to supply project data from remaining exploration samples.
• Management states that ‘the Company is now free to market the project to other parties.’

Technology Minerals (TM1 LN) 0.17p, Mkt Cap £3.0m – Withdrawal of AGM Resolutions to subdivide ordinary shares and approve terms of deferred shares

• Technology Minerals report the board has decided to withdraw Resolution 12 giving the directors the authority to subdivide the company’s ordinary shares.
• The directors have also elected to withdraw the terms of the deferred shares which proposed a capital reorganisation.
• The company’s 48.35% subsidiary Recyclus recently signed an offtake agreement with Glencore to supply black mass to Glencore from its facility in Wolverhampton, starting with a 100t trial.
• Black mass is mainly sourced from the scrapping of Li-ion batteries and contains lithium, manganese, nickel and cobalt.
• Recyclus had previously signed agreements with LOHUM, an Indian metal producer but delays to the start of sales were triggered by regulatory clearances.

 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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