SP Angel Morning View -Today’s Market View, Tuesday 4th June 2024 (2024)

Copper prices ease on potential for slowing global growth

MiFID II exempt information – see disclaimer below

Ariana Resources (AAU LN)– Salinbas drilling programme

Gem Diamonds (GEMD LN) – Another large diamondrecovered from the Letšengmine

Hummingbird Resources (HUM LN) – Pasofino exploration update

Oriole Resources* (ORR LN)– More positive gold results from Cameroon

Copper prices ($10,005/t) ease on global growth slowdown concerns.

• Copper prices have cooled below $10,100/t again, with downward pressure coming from funds.
• Shanghai brokers have reported slashed net-long positions.
• However, LME and CME traders are reported still long, with bullish bets at two-year highs.
• Reuters reports the largest ‘bull commitment since January 2018.’
• The metal had rallied overnight on a strong reading from China factory activity data, showing two-year highs.
• However, copper has continued to slide following is record highs of $11,000/t met over the past night, propelled by a short squeeze on COMEX.
• Spreads have cooled from $1,000/t to $250/t between CME and LME.
• The Chilean peso has been one of the tops performing global currencies in Q2 on the back of copper’s run.
• Inventories are still high, with Shanghai stocks art their highest seasonally since data began in 2003.
• Smelter expansions continue, with Kazakhstan set to build a $1.5bn, 300ktpa plant alongside China Nonferrous to take concentrate from the Bozshaol and Aktogay mines.
• Kazakhstan is aiming to boost copper output from 419kt to 1mt pa by 2029.

Iron ore prices continue to slide as Beijing cracks down on steel production

• Iron ore prices have fallen to $110/t for the 62% Fe China index, with the Mysteel index slumping below $109/t.
• Supply has been strong from main producers Brazil and Australia.
• Reports suggest that State Council plans will hit steel production in a bid to curb carbon emissions.
• China iron ore imports rose 12% yoy in April, with port inventory rising too. All eyes on China’s Friday iron ore import update.

Gold ( $2,344/oz) ticks lower despite sharp rally in US Treasuries

• Gold prices have continued their downward trend, bouncing off $2,350/oz yesterday.
• The metal has continued to break its correlation from US Treasuries, which traditionally rally in unison with bullion.
• However, yesterday yields fell to three-week lows, whilst gold sold off.
• The 10-year now sits at 4.38%, with weak manufacturing data yesterday prompting traders to boost rate cut bets.
• JOLTs data today should provide some more insight into the labour market, whilst bond traders will be focused on Friday’s nonfarm payrolls for a confirmation of any hiring slowdown.

Rare Earths – Australia orders Chinese-linked funds to sell rare-earth stakes in ‘national interest’ (FT)

Northern Minerals (NTU AU) A$0.043/s, Mkt cap A$229m

• The Australian government has ordered Yuxiao Fund and four associate funds to cut their stakes in Northern Minerals, a Western Australian rare-earths developer.
• The FIRB ‘Foreign Investment Review Board’ review is designed to protect Australian national interests and ensure compliance with its foreign investment framework.
• China controls 70% of REE mining 90% processing capacity (IEA).
• Northern Minerals is well placed to become a key REE concentrate supplier to a new refinery being built by Iluka Resources in WA.
• The FIRB blocked Singapore-based Yuxiao Fund run by My Wu Tao from doubling its stake in Northern Minerals to nearly 20% in February last year.
• The fund has also called an EGM to replace Chairman, Nicholas Curtis with Wu Tao along with nominations to insert other candidates onto the board.
• Curtis has since stepped down from his role ahead of its AGM this week which includes the proposed board nominations.
• Mr Tao’s move to control Northern Minerals is of concern on a number of fronts.
  • First, Northern Minerals has a long-term supply agreement with Iluka which is building a REE refinery in WA.
  • Second, The replacement of the Chairman by Mr Tao along with other proposed board nominations has the potential to looks hand control of the company to the Chinese investor group.
• We saw something similar with ASA Resources where HK investors took effective control of certain finance functions within the business and started syphoning funds out of the company using fake invoicing.
• The Chinese staff responsible were quickly replaced following unusually swift action by the UK-based NEDs though the company still ended up in receivership.
• Iluka which has a long-term supply and funding partnership covering 100% of Northern Minerals’ production up to a maximum of 5,500tpa (30,500t in total) will be extremely concerned over the potential for a key supplier to be disrupted in any way.
• The FIRB has ordered Yuxiao to reduce its stake to 8% with four associated funds and individuals including Black Stone Resources (BVI) and Indian Ocean International Shipping and Service Company (UAE) told to sell shares acquired since September.

IG TV:Copper and gold 10/04/2024: https://youtu.be/KuGSbDqWglk?si=-8iikkOHxbbLSnPZ

121 Mining Investment Conference investment Leaders panel:https://youtu.be/OWEASjgXiME?si=ZPzQT-1SnUhXRo0g

Sharepickers TV:Everybody wants copper. 17/05/2024 podcast:https://audioboom.com/posts/8507288-john-meyer-everybody-wants-copper

Video: https://www.youtube.com/watch?v=XfYNVjIiEs4

*SP Angel almost invariably acts as nomad or broker or nomad and broker to companies mentioned in the above videos and podcasts. We speak more about these companies as we have a good understanding of their business and can talk with a greater degree of confidence.As ever, however, it should be noted that our views do not take into account the circ*mstances and needs of any particular investor or investor type.So enjoy the talks, but please do your own research, including other companies not mentioned by us but operating in the same areas, and get professional advice where appropriate. SP Angel acts as Broker/Nomad or both for Anglo Asian Mining, Kodal Minerals, Power Metals Resources.

Economics

Economic indicators –This week we have seen:

• • Our first 0% financing deal for an Electric Vehicle – more will surely come.
  • First story on negative equity as recent home buyers discover the harsh reality of leverage in the property market
  • Oil price have fallen ~10% on lower demand growth forecasts due to a slowdown in the economic recovery despite OPEC + prolonging its output cuts
• The early election call in UK suggests as this is as good as it gets from an economic perspective in the UK and PM Sunak wants to get his kids settled into school in California before September.
• While the world continue to recover from Covid and China continues to promote exports the US is deliberately slowing its economy and raising tariffs against Chinese EVs

US – Manufacturing activity contracted in May at a faster pace as orders fell by the most in nearly two years, ISM data showed.

• Numbers suggest that US manufacturing is struggling to gain momentum on high borrowing costs, restrained business investment in equipment and softer consumer spending, Bloomberg reports.
• The gauge of input prices eased to 57.0 from 60.9, although it was still the second highest reading in about two years.
• ISM Manufacturing (May/Apr/Est): 48.7/49.2/49.5.

China – Manufacturing leads the way as China transforms to higher-value exports

• Beijing’s politicians are now international salesmen as the US and Europe turns away
• Brazil is now absorbing huge imports of EV alongside many other nations, but Brazil has its own automotive manufacturing and can support China’s EV ambitions for only so long
• China will continue to stimulate in the areas it needs. It will:
  • Stimulate consumption of EVs
  • Rescue property developments for social housing
• Initiatives to serve central government policy will get funded leaving other services to find their own way
• The idea is that if China creates more wealth this will spread through the economy. Shame nobody told the SMEs
• Unfortunately, SMEs which operate many services and employ lots of people are have been left behind dragging the economy and raising unemployment
• Curiously, businesses are reporting a lack of expat workers within China with relatively few returning after Covid.
• While this is similar to migrant workers in the UK China’s very severe lockdowns may have a greater impact on persuading workers to remain home.
• Economic growth across SE Asia is also creating new jobs enabling former migrant workers to work closer to home.

Japan – The yen strengthened as Finance Minister confirmed FX interventions to support the currency in April/May.

• The ministry numbers indicate authorities spend JPY9.8tn ($63bn) to prop up the yen between April 26 and May 29, Bloomberg writes.
• “It is not known whether the yen would have stopped weakening at 160 yen to the dollar without the intervention, so it must be said that it was effective,” Finance Minister Shunichi Suzuki said.
• The currency briefly hit 160 in late April before sliding to 153 over the next week and is currently trading 155.

Vietnam – Saigon Bank bailout cost rises to $24.5bn

• The cost of the Saigon Joint Stock Commercial Bank (SCB) bailout has escalated to $24.5bn equivalent to 6% of Vietnam’s 2023 GDP
• Vietnam’s central bank has advanced a further $1.2bn over the past two months to protect deposits.
• The SCB has so far used the central bank funds to help it settle withdrawals and payments of 626.9tn dong $24.5bn since October 2022 since going under central bank supervision.
• A weakening currency, rising inflation along with turmoil in Vietnam’s real estate sector has led to greater economic concern.
• Makes us wonder if we are close to another rerun of the ‘Asian Crisis’ (1997-98).

Germany – Unemployment climbed more than expected suggesting “the spring recovery hasn’t really taken off this year,” according to Federal Labor Agency/

• Unemployment (‘000, May/Apr/Est): 25.0/11.0(revised from 10.0)/7.0;
• Unemployment Rate (May/Apr/Est): 5.9%/5.9%/5.9%.

India – Markets sell off as preliminary election results show PM Narenda Modi’s Bharatiya Janata Party led coalition may fall short of a majority

• This contrasts with the landslide win predicted in exit polls.
• Early results show the incumbent alliance leading with just under 300 seats in the 543-member parliament.
• The alliance won 350 seats in 2019.
• The benchmark NSE Nifty 50 Index dropped as much as 8.5% marking the biggest intraday fall in more than four years.
• The currency and sovereign bonds also dropped.
• The world’s largest election was held in seven phases over six weeks with nearly a billion people registered to vote.

South Africa – Expect trouble as MK party led by Jacob Zuma looks to disrupt potential for ANC coalition with the DA and IFP

• The ANC’s drubbing at the ballot box last week is now followed by political negotiation to form an effective government.
• Jacob Zuma’s MK party is looking to force its way into a position of power despite Zuma being barred from standing as a Member of Parliament.
• Unfortunately a faction within the ANC is against a coalition with the Democratic Alliance which we see as a more credible political group.
• Also the DA may not want to work with Deputy President Paul Mashatile according to the Daily Maverick
• The DA formally filed criminal charges against Mashatile earlier in 2024 saying was part of a “web of nepotism and family patronage” which involved his son-in-law.

Currencies

US$1.0888/eur vs 1.0848/eur previous. Yen 155.65/$ vs 157.22/$. SAr 18.668/$ vs 18.860/$. $1.279/gbp vs $1.273/gbp. 0.666/aud vs 0.664/aud. CNY 7.246/$ vs 7.246/$.

Dollar Index 104.12 vs 104.65 previous.

Precious metals:

Gold US$2,344/oz vs US$2,325/oz previous

Gold ETFs 80.9moz vs 80.8moz previous

Platinum US$1,014/oz vs US$1,033/oz previous

Palladium US$919/oz vs US$909/oz previous

Silver US$30.50/oz vs US$30/oz previous

Rhodium US$4,725/oz vs US$4,725/oz previous

Base metals:

Copper US$ 10,119/t vs US$10,057/t previous

Aluminium US$ 2,673/t vs US$2,647/t previous

Nickel US$ 19,470/t vs US$19,475/t previous

Zinc US$ 2,954/t vs US$2,948/t previous

Lead US$ 2,285/t vs US$2,278/t previous

Tin US$ 32,545/t vs US$32,380/t previous

Energy:

Oil US$77.4/bbl vs US$81.2/bbl previous

• Crude oil pricesfell on demand growth concerns following weak US manufacturing data and mixed PMI data from China.
• European gas prices remain elevated after unplanned outages over the weekend, which continue to impact ~2.5bcf/d of gas supply from the Nyhamna gas processing plant in Norway and the Easington terminal in the UK.
• Labour leader Keir Starmer told party members in Scotland that his party would not be turning off the oil and gas taps or revoking any licences with the industry expected to play a significant role for decades to come.
• Oil vs US 10 Year Treasury Yield

Natural Gas €35.9/MWh vs €35.9/MWh previous

Uranium Futures $89.8/lb vs $88.8/lb previous

Bulk:

Iron Ore 62% Fe Spot (cfr Tianjin) US$110.2/t vs US$118.2/t

Chinese steel rebar 25mm US$540.4/t vs US$540.9/t

Thermal coal (1st year forward cif ARA) US$128.0/t vs US$126.8/t

Thermal coal swap Australia FOB US$143.5/t vs US$141.0/t

Hard co*king Coal Australia FOB US$326.0/t vs US$326.0/t

Other:

Cobalt LME 3m US$27,150/t vs US$27,150/t

NdPr Rare Earth Oxide (China) US$51,408/t vs US$50,925/t

Lithium carbonate 99% (China) US$13,870/t vs US$14,008/t

China Spodumene Li2O 6%min CIF US$1,190/t vs US$1,210/t

Ferro-Manganese European Mn78% min US$972/t vs US$972/t

China Tungsten APT 88.5% FOB US$360/mtu vs US$360/mtu

China Graphite Flake -194 FOB US$470/t vs US$470/t

Europe Vanadium Pentoxide 98% 5.2/lb vs US$5.2/lb

Europe Ferro-Vanadium 80% 26.85/kg vs US$26.85/kg

China Ilmenite Concentrate TiO2 US$321/t vs US$321/t

China Rutile Concentrate 95% TiO2 US$1,415/t vs US$1,415/t

Spot CO2 Emissions EUA Price US$74.1/t vs US$73.9/t

Brazil Potash CFR Granular Spot US$310.0/t vs US$310.0/t

Battery News

China to open $830m solid-state battery research fund

• China is planning to invest more than $830m in a government-led project to develop solid-state batteries with six firms eligible for state funding to work on the next-generation technology, according to a source with direct knowledge. (Reuters)
• Solid-state batteries have improved safety, a longer lifespan and faster charging compared with conventional lithium-ion batteries that use flammable liquid electrolytes.
• Mass adoption remains a challenge due to constraints in raw material availability, intricate manufacturing processes and the resultant high costs.
• China is seeking to extend its lead in the global EV market after early and heavy investment in domestic supply chains helped it become the most cost-competitive battery and EV producer in the world.
• Solid-state batteries are seen as the holy grail of EVs and will determine the competitiveness of next-gen EVs.

EU tariffs on Chinese EVs could cost China $4bn in trade

• According to research from the Kiel Institute for the World Economy, China’s EV imports to the EU would fall 25% if a 20% import tax was introduced.
• The European Commission has initiated several trade probes against Beijing, focusing on allegations of anti-dumping and unfair subsidies, particularly within the clean-technology sector.
• There is increasing tensions between the EU and China ahead of the decision on whether tariffs will be introduced.
• The EU must notify Chinese exporters by early June if it plans to impose tariffs on their EVs, detailing the specific tariff rate.

Hyundai unveils mass market EV in India for 2025

• Hyundaihas confirmed the unveiling of its first mass-market EV in India in January 2025.
• The new EV will be manufactured at Hyundai’s facility in Tamil Nadu, near Chennai.
• The forthcoming mass-market EV is tipped to be the CRETA EV and it is unclear whether the car will adopt a dedicated electric skateboard platform or modify its existing one for an electric drivetrain.

Lamborghini unveils its first EV

• The Italian supercar manufacturer unveiled its first EV, a Plug-in Hybrid Lamborghini Urus, in May.
• The hybrid powertrain generates 789hp; thanks to a twin-turbo, 4L V8 and a 25kWh lithium ion battery.

Tesla shareholder sues Elon Musk

• A Tesla shareholder has sued Elon Musk for alleged insider trading.
• The lawsuit accuses CEO Musk of insider trading when he sold $7.5bn of shares in Tesla, before disappointing production and delivery numbers were made public.
• The lawsuit also accused Tesla’s directors of breaching their fiduciary duty by allowing Musk to sell the shares.

Great Wall Motors closes European HQ and cuts around 100 European staff

• Great Wall Motors appears to be pulling out of Europe ahead of likely new tariffs.
• The company sold around 6,300 cars in Europe last year accounting for ~2% of its total exports.
• GWM’s China operations will assume support for European distributors and will continue to explore new markets.

EV batteries – Solid State

• While the Chinese government is investing some $830m into R&D in solid-state batteries we are reminded of an interview in the FT where CATL chief Robin Zeng said he years of research had showed they were unsafe and unsustainable.
• There is always more to learn about Li-ion battery chemistries but the idea is that ‘solid-state’ batteries should be better and in-particular safer.
• We note BYD has now completed a second journey with its purpose-built ship carrying 5,400 EVs from China. So far no vehicle fires on either of the two journeys

Company News

Ariana Resources (AAU LN) 2.65p, Mkt Cap £29.8m– Salinbas drilling programme

• Ariana Resources reports the completion of a 115-hole, 15,782m drilling programme, which started in November 2021, at its 23.5% owned Salinbas project located in the Artvin gold-field in north-east Turkiye.
• The company highlights results from the final 35 holes of the campaign including:
  • An intersection of 2.60m at an average grade of 10.30g/t gold and 2.48g/t silver, including 1.3m averaging 19.85g/t gold and 4.25g/t silver from a depth of 113.70m in hole SALH-137; and
  • An intersection of 6.70m at an average grade of 3.68g/t gold and 7.75g/t silver, including 4.8m averaging 4.49g/t gold and 10.12g/t silver from a depth of 141.80m in hole SALH-125; and
  • An intersection of 11.30m at an average grade of 1.88g/t gold and 14.50g/t silver, including 4.20m averaging 3.49g/t gold and 28.18g/t silver from 44.70m depth in hole SALH-131.
• The company confirms that a“revised Mineral Resource Estimate is currently underway… [initially concentrating] …on the Salinbas deposit and the main body of the Ardala Porphyry Complex”located to the northeast of Salinbas.
• Currently the mineral resource at the Salinbas project, which is located approximately 16km north of the 4moz Hot Maden deposit,“contains a JORC Measured, Indicated and Inferred Resource of 1.5 million ounces of gold”within 8.4mt at an average grade of 2.21g/t gold (598koz) at the Salinbas deposit and 66.4mt at an average grade of 0.44g/t gold and 0.2% copper at the Ardala deposit.
• In April 2017, Sandstorm Gold acquired Mariana Resources and its Hot Maden deposit in an all-share transaction valued at ~£167m.
• Welcoming the results of the drilling, which he said “demonstrate continuity across the Salinbas Zone, expanding its footprint and demonstrating the potential for repeated zones of mineralisation at depth”,Managing Director, Dr. Kerim Sener, said that Ariana Resources are“increasingly confident that the Salinbas mineralisation developed as a result of the intrusion of the Ardala Porphyry Complex”.
• Commenting on the resource estimation work, he said that the company expects “a conversion of mineral resources to higher categories of JORC within the Salinbas Zone. While the Ardala Porphyry Complex has received some new drilling from the programme, a lot of work remains to determine the full potential as it has been significantly less drill tested”.
• Dr.Sener, said that exploration at Salinbas “continues to be funded through US$8 million in new capital provided to the project byOzaltin Holding A.S., of which US$5 million has been spent to date”.

Conclusion:More than 15,000m of drilling at the Salinbas project will be incorporated in a revision to the existing 1.5m oz Mineral Resource Estimate which is expected to expand and improve the quality of the resource and establish the metallogenic relationship between Salinbas and mineralisation of the Ardala porphyry.

Gem Diamonds (GEMD LN) 13.05p, Mkt Cap £17.5m – Another large diamondrecovered from the Letšengmine

• Gem Diamonds reports the recovery of a 172.06 carat Type II white diamond from itsLetšengmine in Lesotho.
• The diamond was recovered on 2^ndJune and is the seventh stone exceeding 100 carats recovered so far this year and follows the 29^thMay recovery of a 212.49 carat diamond of similar ‘Type II white’ class.
• So far this year, large Type II diamonds are being recovered monthly and reinforce theLetšengmine’s established history of producing large, high-quality white diamonds which includethe1,109 carat ‘Lesedi La Rona’, discovered in 2017 and thought to be the world’s second largest diamond as well as the 910 carat ‘Lesotho Legend’ recovered in 2019, and understood to be the fifth largest gem quality diamond ever discovered, which realised US$40m when sold in Antwerp.

Hummingbird Resources (HUM LN) 8.7p, Mkt Cap £70m – Pasofino exploration update

• The Company reports completion of the diamond drilling programme by Pasofino Gold at the Bukon Jedeh project area in Liberia.
• First set of samples to be sent to the laboratory in early June with first assays expected in July.
• Hummingbird holds 53% interest in Pasofino.
• Bukon Jedeh is located 8km SE of the Dugbe Tuzon Deposit (4.0moz resource, 2.8moz reserves).

Oriole Resources* (ORR LN) 0.36p, Mkt cap £13.4m– FLASH NOTE – More positive gold results from Cameroon

CLICK FOR PDF

• Today Oriole provides an exploration update from the Mbe gold project.
• The Company has completed infill soil sampling over a 100m x 25m grid at MB01.
• Oriole has generated 4,537 samples, which returned up to 8,174ppb Au.
• Three targets have now been generated for follow up exploration at the MB01 prospect:

oA 1.15km x 0.75km soil anomaly showing ‘pervasive gold deposition’

oA 0.95km x 0.75km anomaly showing over 50ppb Au in soils

oA 0.5km x 0.5km anomalous zone along strike to the northeast.

• Management considers the MB01-S as a particularly encouraging zone, with the anomaly having a substantial higher-grade core of 500ppb Au.
• As a result of the encouraging soil sampling programme, Oriole has commenced a trenching programme over 5,500m to test the three targets.
• The aim of this is to generate three-dimensional data to help define drilling targets for the 2024/25 field season, set to begin in the Autumn.
• Pit sampling has provided results up to 260g/t Au from 556 samples. Importantly, 160 samples showed grades over 0.5g/t Au.
• Samples taken from the artisanal pits have been submitted for metallurgical testing. These yielded very encouraging results showing the near-surface, oxidised material as non-refractory.
• Initial metallurgical work gives Oriole encouragement that gold mineralisation at Mbe is non-refractory and amenable to conventional leaching extraction.
• Oriole has been conducting a second infill soil sampling programme over a wider target generated from the regional soil sampling programme, and ground geophysics completed earlier this year.
• The 100m x 50m sampling programme is expected to highlight further parallel mineralised trends in the licence and results are due in 3Q24.

Conclusion:Oriole and BCM continue their work programmes across the underexplored and highly prospective Mbe gold project in Cameroon. The Team has now generated three high-priority targets within the MB01 trend, showing consistent gold-in-soil anomalies. Trenching will support a maiden drilling programme on site during the next field season. We are particularly encouraged by the positive metallurgical results which pave the way to simplified leaching extraction methods.

*SP Angel acts as Broker to Oriole Resources

No.1 in Base Metals:SP Angel mining team awarded No 1. ranking for Base Metals forecasting in LSEG Quarterly Starmine Award for Reuters Polls Q1 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 anaccuracy 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, 3rdin 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

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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