SP Angel Morning View -Today’s Market View, Wednesday 22nd January 2025

Gold extends gains as China and US government bonds climb in unison

MiFID II exempt information – see disclaimer below

Amaroq Minerals (AMRQ LN) – New gold licences acquired and initial exploration results

Ariana Resources (AAU LN) – Beats 2024 gold production guidance

Bradda Head (BHL LN) – Chairman reports on financial stability, work on key resources and potential for lithium market rebound

Europa Metals Limited (EUZ LN) Suspended – Progress report on the Viridian Metals acquisition

Greatland Gold (GGP LN) – Telfer’s December performance

Hochschild Mining (HOC LN) – Production results, guidance and financial update

Petra Diamonds (PDL LN) – US$16m sale of the Williamson mine, Tanzania

Savannah Resources* (SAV LN) – BUY, 18.1p – Additional lithium mineralisation discovered at Barroso

Sovereign Metals* (SVML LN) – Kasiya optimised PFS highlights rigorous work in trial mining and process plant development with support from Rio Tinto

West African Resources (WAF AU) – December production results as cash balance grows

Gold ($2,761/oz) extends gains as China and US government bonds climb in unison

• Gold prices have shown consistent strength since mid-December, rallying from $2,590/oz to $2,760/oz today.
• The move follows severe volatility in the US Treasury market, with the 10 year yield climbing to 4.8% before sliding again to today’s levels around 4.57%.
• Meanwhile, the dollar index shot up to 109.4 but has subsequently started cooling, settling today at 107.8.
• Gold prices shrugged off the higher dollar and yield combination, holding steady.
• However, now that the dollar has started easing, gold prices have broken out of their recent levels around $2,710/oz.
• This has coincided with another rally in China government bond yields, which are climbing on deflation concerns and the country’s economic malaise.
• We are noting an increasing correlation between lower China bond yields and higher gold prices.
• Chinese buying has also been strong from the Central Bank, who started purchasing gold again in November.
• We suspect the reversal in US Treasury yields, which have started sliding again, is the reason Gold ETF holdings are increasing again.
• This adds an additional tailwind to gold alongside Chinese retail and government buying.
• Tariff concerns, Trump rhetoric and other geopolitical tensions may also be pushing buyers into haven assets.

Gold market comment (17/01/2025):     Podcast:  

Video:  

Economics

ECB – Klaas Knot, Dutch ECB Governing Council member, agrees with expectations for rate cuts at the January and March meetings.

• Kont is not convinced on bringing in new stimulus indicating some pressure for the ECB to restart measures such as Quantitative Easing.
• President Trump’s potential to impose punitive tariffs is a clear concern.

Canada – Inflation falls to 1.8% in December vs 1.9% in November on lower food prices

• The fall in inflation is good news for Canada with lower food and alcohol-related prices.
• CPI rose by 2.1% yoy in December excluding food driven higher by energy .

Currencies

US$1.0419/eur vs 1.0365/eur previous. Yen 155.58/$ vs 155.71/$. SAr 18.490/$ vs 18.657/$. $1.232/gbp vs $1.226/gbp. 0.627/aud vs 0.624/aud. CNY 7.278/$ vs 7.280/$

Dollar Index 108.120 vs 108.543 previous

Precious metals:         

Gold US$2,753/oz vs US$2,726/oz previous

Gold ETFs 83.6moz vs 83.6moz previous

Platinum US$946/oz vs US$938/oz previous

Palladium US$968/oz vs US$934/oz previous

Silver US$30.9/oz vs US$30.5/oz previous

Rhodium US$4,675/oz vs US$4,675/oz previous

Base metals:   

Copper US$9,231/t vs US$9,214/t previous

Aluminium US$2,623/t vs US$2,660/t previous

Nickel US$15,835/t vs US$16,060/t previous

Zinc US$2,894/t vs US$2,936/t previous

Lead US$1,971/t vs US$1,951/t previous

Tin US$30,165/t vs US$30,470/t previous

Energy:           

Oil US$79.1/bbl vs US$79.8/bbl previous

• European natural gas prices hit 12M highs and moved back above €50/mmBtu even as France’s nuclear generation continued operating at 90% of the country’s 61.4MW maximum capacity.

Natural Gas €50.2/MWh vs €48.2/MWh previous

Uranium Futures $73.9/lb vs $74.0/lb previous

Bulk:   

Iron Ore 62% Fe Spot (Singapore) US$103.7/t vs US$105.0/t

Chinese steel rebar 25mm US$485.6/t vs US$485.7/t

HCC FOB Australia US$194.0/t vs US$193.0/t

Thermal coal swap Australia FOB US$124.0/t vs US$120.0/t

Other:  

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

NdPr Rare Earth Oxide (China) US$56,675/t vs US$56,197/t

Lithium carbonate 99% (China) US$10,099/t vs US$10,168/t

China Spodumene Li2O 6%min CIF US$805/t vs US$805/t

Ferro-Manganese European Mn78% min US$1,005/t vs US$1,005/t

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

China Graphite Flake -194 FOB US$430/t vs US$430/t

Europe Vanadium Pentoxide 98% US$4.5/lb vs US$4.5/lb

Europe Ferro-Vanadium 80% US$24.8/kg vs US$24.9/kg

China Ilmenite Concentrate TiO2 US$295/t vs US$295/t

China Rutile Concentrate 95% TiO2 US$1,079/t vs US$1,079/t – (Iluka report rutile at $1,662/t FOB today for Q4 for 95% grade rutile) – we will investigate the AsianMetal.com price

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

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

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

China Gallium 99.99% US$385.0/kg vs US$385.0/kg

Battery News

German automakers say Trump tariffs will hurt US consumers

• Germany’s car industry has warned that President Donald Trump’s tariff plans will increase prices for US consumers as well as having a negative impact on the global auto industry.
• Trump has used the threat of tariffs to push automakers to move more production to the US.
• Many global automakers make cars in Mexico for sale in the US, and it is also an integral part of the supply chain for US auto production.
• Hildegard Mueller, the president of Germany’s VDA auto association, told an annual press conference that Trump’s threatened tariffs would also drive up US inflation.

CATL expected to announce new European JV

• CATL is expected to unveil another new joint venture factory project with other automakers in Europe this year, after announcing in December that it would build a power battery plant with Stellantis in Spain.
• Including the Spanish joint venture project, CATL has three battery factories in Europe, with the other two in Germany and Hungary.

Company News

Amaroq Minerals (AMRQ LN) 108p, Mkt Cap £427m – New gold licences acquired and initial exploration results

• Greenland explorer/developer Amaroq report the acquisition of the Johan Dahl Land Licence, boosting Amaroq’s total land package by 667km2.
• Initial exploration at the new Ukaleq Target has shown gold grades up to 12g/t Au and copper grades up to 5% Cu in quartz and copper sulphide veins.
• Grades were noted from sampling of the Ukaleq veins.
• The Company has also identified a copper-gold anomalism over 19km2.
• Amaroq states that ‘geochemical signatures suggest the presence of an intermediate-to-high sulphidation epithermal system.’

Ariana Resources (AAU LN) 1.68p, Mkt Cap £32m – Beats 2024 gold production guidance

• Ariana Resources reports that its 23.5% owned Zenit Mining’s 2024 output of 20,866oz of gold beat the company’s 20,000oz guidance and generated US$54.7m gross revenue, described as “the second-highest annual revenue ever”.
• The company confirms that “Mining operations are continuing at both Kiziltepe and Tavsan, with the Arzu South pit at Kiziltepe due to re-commence production shortly”.
• Managing Director, Dr. Kerim Sener, commented that “Operations at Tavsan continued to accelerate during the year and ore production increased from the Main Pit. The construction of the Tavsan processing plant is largely complete and testing is due to commence”.
• He also said that “A new drilling programme … [at Tavsan] … has recently been permitted for up to 15,000m of largely resource expansion drilling which commenced last week … [although drilling] … is currently paused at the Salinbas Project due to local weather conditions”.
• Commenting on progress elsewhere, today’s announcement explains that drilling and other exploration results from the Dokwe project, described as “the largest undeveloped gold project in Zimbabwe” to “support revised Resource and Reserve Estimates … [are] … expected”.  Current resources are “over 1.83 million ounces of gold”.
• Drilling at the Slivova Project in Kosovo positions Ariana’s 76% owned Western Tethyan Resources to complete “its earn-in to 51%”.

Conclusion: Ariana’s Turkish mining operations produced better than expected gold output in 2024 while the company reports progress at its Dokwe project in Zimbabwe and its exploration in Kosovo.

Bradda Head (BHL LN) 1.85p, Mkt Cap £6.5m – Chairman reports on financial stability, work on key resources and potential for lithium market rebound

• Bradda Head Lithium, Chairman, Ian Stalker, reports on financial stability and potential for lithium market rebound.
•  San Domingo:  The company is looking to report a maiden NI 43-101 resource at San Domingo spodumene pegmatites over the next 12 months.

• • The metallurgy is described as having a dominance of spodumene as the primary lithium mineral with possible, but very minor petalite and eucryptite, along with muscovite, minor beryl, tourmaline, calcite, and apatite.
  • Further drilling has been approved and this combined with some additional drill targets should help define a “potentially much bigger resource”
  • metallurgical test-work is ongoing “to identify the simplest and most environmentally acceptable way to treat our pegmatite material to produce a sellable Lithium Concentrate Product. This next phase is planned to yield results in Q1 2025.”

• Basin lithium-clay project:  Management have also expanded the lithium-in-clay resource tp 2.8mt LCE from ~1.0mt previously.

• • Strategy to bring this into production by utilizing contract-led, simple, cost-effective open-pit mining, and use of contractor-supplied size reduction and gravity plants,”
  • “The Company has submitted a revised Exploration Plan of Operations expected to be approved by the Bureau of Land Management (“BLM “)in H2 of 2025.
  • The Company is examining commencement of a multi-stage leaching metallurgical study designed to analyze significant reduction of acid consumption and neutralization demands to reduce potential capital and operating expenditures in its lithium in clays resource via a Preliminary Economic Assessment (“PEA”) scenario.”

• Cash:  The Chairman states the company “is in a sound financial position through innovative approaches to raising cash, including the recent and final US$ 3 million royalty receipt from Lithium Royalty Corporation.”
• Outlook:  

• • “The noises currently coming from the US, and with the new administration in place will not change: the US needs to transition to a larger percentage usage of EVs which will directly impact the demand for lithium and, most crucially, a domestic source for it. The question is the speed at which they choose to achieve this.
  • Other countries, most notably China, already have a significant proportion of electric vehicles and it is growing in every visible market. “

Conclusion:  We feel the San Domingo project stands the best chance for future development as a source of lithium-bearing spodumene hard rock.

• We can see growing demand for lithium from spodumene ores with some growth in lithium from new brine production in Chile and Argentina.
• China is now selling >50% of its passenger vehicles as EVs and we suspect the proportion of EVs sold around the world will continue to rise as battery technology improves.
• We suspect the next generation of higher-capacity, faster charging, solid electrolyte, Li-ion batteries combined with increasing numbers of EV chargers will spark a marked increase in sales in future years.

Europa Metals Limited (EUZ LN) Suspended – Progress report on the Viridian Metals acquisition

• Europa Metals reports on the progress of its plans acquire Viridian Metals Ireland and its wholly-owned Tynagh lead/zinc/copper/silver project in Ireland via a reverse takeover which was initially announced in September 2024.
• The company confirms that its “Term Sheet is binding as to a mutual 150 day period of exclusivity, with the parties continuing to work through the conditions precedent to the Proposed Transaction as well as the Company seeking additional near term funding for work on the Proposed Transaction”.
• We estimate that the 150-day exclusivity period announced on 17^th September would expire around 14^th February.
• While it explains that “under the AIM Rules, the Company’s listing in its ordinary shares on AIM and trading from the London Stock Exchange (“LSE”) is currently suspended pending publication of the Admission Document or an announcement that the Proposed Transaction is not proceeding … [and comments that funding discussions were disrupted over the] … remain confidential and incomplete”.
• The Tynagh mine was worked as both surface and underground operations during the 1970s and hosts waste ‘tailings’ from this era at “an equivalent grade to what is being mined underground elsewhere today” comprising a CIM compliant “4.0mt@6.1% combined Zn+Pb, 1.4 Oz/t Ag (44g/t Ag), 18.95% BaO” plus “2.7mt@1.7% combined Zn+Pb, 0.4 Oz/t Ag (13g/t Ag), 9.5% BaO”.

Conclusion: Europa Metals is continuing to work on its plans to process tailings from historic mining at Tynagh in Ireland via the acquisition of Viridian Metals Ireland.  We await further news as the clock runs down on the agreed exclusivity period.

Greatland Gold (GGP LN) 6.58p, Mkt Cap £791m – Telfer’s December performance

• Greatland Gold reports strong December performance during the first month of its ownership of the recently acquired Telfer mine in WA.
• The mine produced 29,864oz of gold and 1,189t of copper during the 27 days of Greatland Gold’s ownership which took effect from 4^th December following the acquisition from Newmont Mining.
• Managing Director, Shaun Day, described the “successful production of 33,882 ounces gold equivalent during Greatland’s ownership in December … [as] … an excellent achievement and is testament to our team’s ability to maintain operational discipline whilst in parallel advancing the integration process”.
• In the FY to June 2023, under Newcrest Mining’s management, Telfer produced around 349,000oz of gold.
• The implementation of ‘dual train’ processing from the start of the company’s ownership enabled the treatment of 1.466mt of ore at an average grade of 0.77g/t gold and 0.11% copper with recovery rates of “82% for gold and 72% for copper”.
• The company also comments on progress evaluating extension potential at Telfer where it has identified “near-term … opportunities at the West Dome Open Pit in both Stage 7 and Stage 8 extension”.
• Today’s announcement explains that “These cutbacks have been prioritised for final evaluation works to enable final investment decision in FY25”.
• The company also reports that an updated mineral resource update for Telfer “remains targeted for completion in the March 2025 quarter”.
• Greatland Gold also confirms that the feasibility study for the nearby Havieron project “remains targeted for completion in H2 CY2025” with the scope of the study defined and tenders invited from shortlisted “engineering and technical consultants”.
• Mr. Day also confirmed that “Preparations for our ASX dual listing are well underway and we continue to target listing in the June 2025 quarter”.

Conclusion: Greatland Gold’s stewardship of the Telfer mine appears to have made a strong production start with mine extension opportunities also identified and work on a revised MRE expected to provide an updated resource estimate in the current quarter.  The feasibility study for the Havieron project is expected to be available in H2 this year.

Hochschild Mining (HOC LN) 190p, Mkt Cap £1,178m – Production results, guidance, and financial update

• Hochschild produced 245koz Au over the full year, alongside 8.5moz Ag.
• 347koz gold equivalent ounces produced vs previous guidance of 343-360koz AuEq.
• Average price sold in 2024 at $2,345/oz Au and $28.7/oz Ag.
• Cash balance stood at $97m in December, with net debt at $216m, up from $252m December 2023.
• Company restructured existing debt to boost unsecured medium-term facility to $300m ($30m drawn to date)
• 2025 production guidance of 350-378koz AuEq, with Mara Rosa expected to contribute 94-104koz Au.
• AISC for 2025 guided at $1,587-1,687/oz AuEq.
• Sustaining and development CAPEX forecast at $169-180m.
• Brownfield exploration budget of $36m.

Petra Diamonds (PDL LN) 29.4p, Mkt Cap £51m – US$16m sale of the Williamson mine, Tanzania

• Petra Diamonds reports the US$16m sale of its Williamson diamond mine to Pink Diamonds Ltd.
• The consideration is “payable by Pink Diamonds out of WDL’s distributable cash, with 20% of any distributable cash generated annually payable to Petra until this consideration is fully paid … [although today’s announcement cautions that there] … can be no certainty that any or all of this deferred consideration will be paid to Petra”.
• Completion of the transaction is expected “to occur during the first quarter of CY 2025, subject to receipt of customary regulatory and lender approvals”.
• Pink Diamonds is “affiliated to … [the Tanzanian company] … Taifa, the long-term technical services contractor at the Williamson Mine”.
• The Williamson mine, which was discovered in the 1940s and is reported to have a further 15 years mine life based on a resource of ~37m carats, produced 323,434 carats, valued at an average price of around US$190/carat in FY2024 from the processing of ~4.7mt of ore.
• Chief Executive, Richard Duffy, said that “We look forward to working closely with the Mining Commission, the Fair Competition Commission, employees, community representatives and other key stakeholders in completing the sale as soon as possible”.
• The proposed sale of the Williamson mine follows the 2024 sale of the Koffiefontein diamond mine in S Africa to Stargems “for a nominal cash consideration”.

Savannah Resources* (SAV LN) 4.5p, Mkt Cap £97m – Additional lithium mineralisation discovered at Barroso

BUY – 18.1p

• Lithium developer Savannah, who is progressing the Barroso spodumene project in Portugal, provides an exploration update.
• Savannah has conducted a rock chip and channel sampling programme to identify extensions of mineralisation at the C-100 and Aldeia licences, where limited exploration has been completed to date.
• The contiguous licence areas host a pegmatite field controlled by an east-west trending structural corridor.
• Results indicate encouraging signs of lithium mineralisation to the western end of C-100, with highlights including:

• • Carvalha da Bacora: 1.66% Li₂O; 1.5% Li₂O; 1.75% Li₂O; 1.46% Li₂O
  • Alto dos Corticos: 3.01% Li₂O; 1.9% Li₂O

• Previous drilling from C-100 identified a west-dipping pegmatite body with intercepts including:

• • 26m at 1.09% Li2O from 62m
  • 12m at 1.22% Li2O from 50m

• The recent mapping at C-100 has encouraged the Savannah team to pursue additional RC drilling to define the extent of the mineralisation.
• Also, at C-100, the Altos dos Corticos pegmatite body trends north-south, extending 600m, with rock chip sampling yielding high grades up to 3.01% Li20 and follow-up exploration work will be conducted.
• At the Aldeia Block-B licence, multiple northeast trending pegmatite bodies have been identified, with rock chip and channel sampling confirming the presence of lithium mineralisation.
• Aldea channel samples yielded highlights of:

• • 6m at 1.39% Li2O from Trench 1
  • 14m at 1.01% Li2O from Trench 1b
  • 4m at 2.08% Li2O and 4m at 2.62% Li2O from Trench 2.

• Furthermore, the presence of historical tin mining areas is encouraging given the common association between spodumene and tin bearing pegmatites.
• Two of the largest at Block B outcrops seemingly align with those at Reservatório.
• The Company expects today’s findings to potentially support the expansion of Savannah’s current 28mt at 1.05% Li2o JORC Resource, likely extending the current 14 year LOM.

Conclusion: Savannah has successfully identified multiple exploration targets at the Barroso Project whilst it continues to progress towards DFS and FID. The nature of the wider licence’s pegmatites leads the Company to believe that the current outcrops underestimate their full extend below surface. This presents an exciting opportunity for Savannah to add further value to the project through resource expansion and life of mine extension, should further exploration yield results.

*SP Angel acts as Nomad and Broker to Savannah Resources

Sovereign Metals* (SVML LN) 38p, Mkt Cap £222m – Kasiya optimised PFS highlights rigorous work in trial mining and process plant development with support from Rio Tinto

(Sovereign currently holds 100% of the Kasiya project. Malawi has 10% free carry right. Rio Tinto acquired an initial strategic interest of 15% for A$40m mid 2023 and has recently invested a further A$19.2 to move up to 19.9%)

STRONG BUY – Valuation 55p

• Sovereign Metals reports the result of optimisation work on their September 2023 PFS ‘pre-feasibility study’ for the Kasiya deposit in central Malawi.
• The optimisation retains the planned 25 year mine life at an initial throughput rate of 12mtpa doubling to 24mtpa after 4 years to produce an average 222ktpa of rutile.
• Optimised results have reduced the average graphite output from the originally planned 244ktpa to 233ktpa.
• The new study determined that the contractor-operated hydraulic mining envisaged in the 2023 PFS should be replaced by “a large-scale open-pit dry mining operation using draglines and trucking of material to the processing plants” with owner operation using “leased equipment … selected as the preferred operating model”.
• The new development plan maintains Kasiya’s position as “potentially the world’s largest producer of natural rutile and natural flake graphite”.
• Assumptions:

• • Rutile: US$1,490/t (Iluka report rutile at $1,662/t FOB today for Q4 for 95% grade rutile)
  • Graphite: US$1,290/t

PFS results:

• • Capex: US$665m vs US$597m in September 2023 on a pre-production basis
  • Total life of mine development capital: US$1,127m vs US$1,250m in September 2023
  • Sustaining capital: US$397m vs US$470m in (September 2023
  • NPV8% US$2,322m pre-tax vs US$2,419m in September 2023
  • IRR of 27% vs 32% in September 2023
  • Operating costs: US$428/t vs US$404/t , on an FOB, Nacala basis
  • Management caution the “results for the 2023 PFS in Table 1 have not been updated or adjusted for inflation since their release in September 2023”.

• The “level of accuracy and confidence in the economic and technical fundamentals of Kasiya have taken a massive step forward” according to Frank Eagar, MD.
• Eagar goes on to comment the “successful completion of large-scale field trials, in particular for dry mining, the high degree of technical rigour by our enhanced owner’s team, and Rio Tinto’s technical support have all contributed to confirming Kasiya’s potential to become a long-life, low-cost, secure source of two genuine critical and globally strategic minerals”.

Conclusion: Optimisation of the development plan for Kasiya confirms the project’s potential to become the world’s major rutile and natural flake graphite.

Sovereign have gone above and beyond the normal level of work seen in a PFS study. The rigorous involvement of world-class mining, processing and ESG experts from Rio Tinto gives us substantially greater confidence in the PFS following its optimisation.

We would expect the BFS to closely reflect the results of the PFS optimisation but with adjustments for both inflation and deflation in different elements of the mining sector.

*SP Angel act as Nomad and broker to Sovereign Metals. The analyst has recently visited the Kasiya mine site. We highly recommend the Malawi coffee beans sold in Lilongwe airport.

West African Resources (WAF AU) A$1.67, Mkt Cap A$1.9bn – December production results  as cash balance grows

• Burkina Faso-miner WAF reports 51.2koz Au produced over Q4 at AISC of US$1,216/oz.
• Cash flow over the period at A$76m, paying A$18m in income tax.
• FY24 production of 206.6koz at AISC of US$1,240/oz.
• Kiaka CAPEX over Q4 at A$151m, first mining scheduled for 1Q25.
• Current focus is maintaining timing and budget for Kiaka operations, drilling results from M1 South, M5 and Kiaka grade control.
• Company expects to deliver the Toega underground mining scoping study this quarter.

LSE Group Starmine awards for 2024 commodity forecasting:

No.1 in Precious Metals: SP Angel mining team awarded No 1. ranking for Precious Metals forecasting in LSEG Annual Starmine Award for Reuters Polls 2024

No.2 in Base Metals: SP Angel mining team awarded No 2. ranking for Base Metals forecasting in LSEG Annual Starmine Award for Reuters Polls 2024

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

SP Angel                                                            

Prince Frederick House

35-39 Maddox Street London

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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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