SP Angel Morning View -Today’s Market View, Monday 22nd April 2024 (2024)

Takeover of Base Resources highlights need to secure critical minerals supply

MiFID II exempt information – see disclaimer below

Base Resources (BSE LN) – Acquisition by Energy Fuels Inc. for shares

First Tin (1SN LN) – Mineral resource revision for Tellerhäuser

Galan Lithium (GLN AU) – Commercial agreement with the Catamarca government

Gem Diamonds (GEMD LN) –Letšengmine yields another large diamond

Golden Metal Resources (GMET LN) – Drilling approvals for the Pilot Mountain tungsten project

Kavango Resources* (KAV LN) – Geophysics identifies drilling targets at Hillside, Zimbabwe

M&A – Base Resources deal shows expansion in premiums paid for strategic critical metals

Today’s deal for Base Resources highlights the potential value of critical minerals in the ground.
The Toliara project is not yet permitted but Energy Fuels Inc, are prepared to discount the risk and press ahead with the permitting program.
Monazite contains cerium, lanthanum, neodymium and thorium making it an important source of critical minerals.
More M&A is likely to follow in a sector which has been hard hit by investors reducing risk through the sale of small cap equities

Gold ($2,360) prices slip from Friday afternoon high of $2,413/oz

Gold prices are pulling back from recent high levels in a sign that its extraordinary rise might be pulling back.
Many gold miners will be forward selling into the new high price levels with the influx of new metal into futures markets likely to temper further price rises.
The ability of to secure futures prices of >$2,373/oz this morning will likely bring in substantial tonnages of gold from miners looking to secure profits in the face of inflation.
Gold prices appear to have been driven higher in recent weeks by a marked rise in trading activity on the SHFE, ‘Shanghai Futures Exchange’.
The last substantial rise in gold trading on the SHFE was also accompanied by a substantial and relatively sustained rise in gold prices.
See chart of gold vs SHFE gold trading

Copper prices likely to break $10,000/t this week

Copper prices look likely to break $10,000/t this week.
While the market is long copper traders are split as to its short term price potential.
Recent news on negative Tc/Rcs is relatively bullish as is unverified news of disruption in the DRC relating to shipments via Botswana carrying uranium.
The ongoing closure of First Quantum’s Cobre Panama mine is starving the market of copper concentrates with more than one Chinese smelter expected to close
Less copper concentrates = less smelting = less metal down the line and China knows it will need allot more copper to meet demand for growth in EV manufacturing going forward.

China’s EV sales break 50% share for first two weeks in April

Between 1^st-14th April 2024, sales of NEVs in China exceeded 50% of all car sales for the first time.
During this period, retail NEV sales were 260,000 units, a 32% year-over-year increase, accounting for 50.4% of total car sales.
This milestone was achieved earlier than projections by the Economist Intelligence Unit, which predicted the milestone would happen in 2028, and the Chinese Federation of Passenger Cars which predicted achieving a 40% for 2024.
In contrast, sales of ICE cars are declining rapidly, impacting joint venture automakers like SAIC GM, GAC Honda, and SAIC Volkswagen.
BYD’s CEO Wang Chuanfu predicted that joint ventures’ market share would drop to only 10% as NEV adoption accelerates.

Dow Jones Industrials	+0.56%	at	37,986
Nikkei 225	+1.00%	at	37,439
HK Hang Seng	+1.98%	at	16,545
Shanghai Composite	-0.67%	at	3,045
US 10 Year Yield (bp change)	1.9	at	4.64

Economics

US – The focus is on the March PCE report this Friday which is considered the Fed’s preferred measure of consumer prices inflation.

No comments from the Fed as the market enters the blackout period before the next week’s policy meeting.

China – The central bank left benchmark lending rates unchanged on Monday, in line with expectations.

1y and 5y prime loan rates were kept at 3.45% and 3.95%, respectively.
Monetary authorities cut the latter by 25bp earlier in February which was the largest move since the reference rate was introduced.
Most new and outstanding loans in China are based off one year loan rate while the five year rate is used as a reference for mortgages.

ECB – President Lagarde gives a speech at Yale later today that will be followed for comments around a potential rate cut as early as June as well as potential further monetary easing later in the year.

Earlier, French central bank governor Francois Villeroy de Galhau said on Sunday that “barring surprises, there is no need to wait much longer” for policy easing.

Japan – The central bank is holding is policy meeting later this week with monetary authorities likely to keep rates unchanged as well as issue new economic forecasts.

Ukraine – The House of Representatives agreed US$60bn military aid to Ukraine over the weekend with the bill that is to be signed off by President Biden once Senate votes on the bill.

The Senate is expected to start discussions on the bill this Tuesday with the final vote expected some time this week.
President Zelensky welcomed the assistance calling for a start of an actual transfer of weapons as soon as possible with long range arms and air defence systems being top priorities.

Currencies

US$1.0658/eur vs 1.0653/eur previous. Yen 154.62/$ vs 154.53/$. SAr 19.093/$ vs 19.146/$. $1.237/gbp vs $1.245/gbp. 0.643/aud vs 0.643/aud. CNY 7.243/$ vs 7.238/$.

Dollar Index 106.06 vs 106.00 previous.

Precious metals:

Gold US$2,357/oz vs US$2,376/oz previous

Gold ETFs 81.3moz vs 81.5moz previous

Platinum US$927/oz vs US$940/oz previous

Palladium US$1,013/oz vs US$1,034/oz previous

Silver US$27.73/oz vs US$28/oz previous

Rhodium US$4,750/oz vs US$4,725/oz previous

Base metals:

Spot CO2 Emissions EUA Price US$68.9/t vs US$68.9/t

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

Battery News

India makes big bet on electric buses

India has launched a $7bn initiative to support 10,000 new electric buses across 169 cities.
The initiative will prioritise smaller cities that currently lack organised bus services.
The program aims to make public transport integral to sustainable urban growth in India, which is expected to see the largest urban population increase globally by 2050.
Research shows India must shift 50% of projected travel to public transit, walking, and cycling by 2050 to meet its 1.5°C global warming target.
From just 3 electric buses in 2015, India now has 7,757 e-buses, with Maharashtra state accounting for 25% and procuring 5,150 more units.
The national goal is to deploy 50,000 new electric buses by 2027 as part of India’s transition to electric mobility in public transport.

Electric cars will continue to rise in the US, despite what some claim

A new survey by Bloomberg Intelligence indicates that EV market penetration in the US is likely to reach 25% by the end of this decade.
Despite challenges like inadequate charging infrastructure and high costs, 42% of respondents are considering buying an EV as their next vehicle.
The survey shows strong loyalty among current EV owners, with 93% stating they would choose an EV again for their next purchase.
Tesla leads in brand loyalty, with 87% of its customers intending to buy another Tesla, surpassing non-EV brands like Lexus (67%) and Toyota (54%).
While challenges exist, the survey findings suggest that electric cars have a bright future in the US market, driven by growing consumer interest and loyalty.

China’s flying cars ready for liftoff with EV technology

XPeng, EHang and other Chinese companies are close to commercialising flying cars in 2024, leveraging China’s strengths in EV technology.
XPeng AeroHT aims to sell a dual-mode eVTOL vehicle that can drive on roads and detach a flying module for air travel.
EHang, a pioneer in autonomous aerial vehicles, plans to launch an eVTOL model capable of carrying two passengers with autonomous flight features.
These flying car projects utilise EV batteries, motors, and autonomous driving systems adapted from the automotive industry.
China’s large EV market, supply chains, and policy support give domestic companies an advantage in the emerging flying car sector.
Commercialising flying cars faces challenges like airspace management, regulations, infrastructure, and public acceptance.
The flying car market is projected to grow rapidly, with Morgan Stanley estimating it could be worth $1.5tn by 2040.

Xiaomi sees sales of new EV 3-5 times more than expected

Sales of Chinese smartphone maker Xiaomi’s first electric car have been 3-5 times higher than expected said CEO, Lei Jun.
Xiaomi launched the SU7 last month for prices starting under $30,000 – $4000 cheaper than the base model of Tesla’s Model 3.

Maserati will become a fully electric brand by 2028

Maserati has announced an ambitious plan to become a fully electric brand by 2028.
By 2025, Maserati will offer an electrified (electric or hybrid) version of every model in its lineup, marking the end of the V8 engine era.
Despite going electric, Maserati assures customers they will not have to sacrifice performance, luxury, and the brand’s signature driving experience.
Maserati’s CEO states the transition will be gradual, adapting to different markets’ electric vehicle adoption rates.

Environmental protection agency looking to expand

EPA’s $1.84bn “Clean School Bus Program” funds 5,103 clean buses, 96% electric, across 642 districts.
Replacing half of US school buses with electricmodels would avoid 2.1mt of CO2 annually.
Electric buses eliminate harmful tailpipe emissions like nitrogen oxides and particulate matter.
Widespread EV adoption would benefit paediatric lung health, reducing asthma and bronchitis cases.
The EPA is assisting school districts with fleet planning, engaging utilities, and addressing challenges like ensuring sufficient charging infrastructure for the electric bus fleets.
While the upfront costs of electric buses are higher, they have lower operating and maintenance costs compared to diesel counterparts over their lifetime.
The program aims to accelerate the replacement of aging, high-polluting diesel school buses with cleaner electric models to improve air quality and reduce emissions contributing to climate change.

Maltese EV registrations up 7%, more charging points planned

Prime Minister Robert Abela announced that the Maltese government plans to invest in more electric vehicle charging points across the country.
Abela stated that a 7% increase in registrations of “less-polluting” vehicles in recent months shows the government’s incentives are having an effect.
He highlighted incentives announced in this year’s budget aimed at making environmentally-friendly vehicles more affordable for Maltese consumers.
Abela emphasized the shift towards sustainability is a strategic move aligned with Malta’s goal of achieving carbon neutrality, not just a matter of convenience.
He praised the local company Michael Debono Ltd for its focus on sustainability, diversification, and prioritizing employee training as an example of successful Maltese entrepreneurship.
The Prime Minister stressed that collective collaboration can help drive the move towards sustainability across different sectors, benefiting everyone.

Company News

Base Resources (BSE LN) 11p, Mkt cap £174m – Acquisition by Energy Fuels Inc. for shares

Base Resources reports it has received a share offer from Energy Fuels Inc. (UUU N, EFR CN).
The offer is for 0.0260 Energy Fuels shares plus a dividend of A$0.065/s representing a premium of 188% to the last closing price.
Base management board recommend the deal along with two manor shareholders of 26.5% and 24.8% which have confirmed they intend to vote for the scheme.
Rationale:Base management see the deal as creating a better platform for the development of the Toliara project in Madagascar along with combining rare earths, uranium and heavy mineral sands.
Toliara contains Monazitewhich fits from a processing perspective with Energy Fuels’ operations at White Mesa mill in the US.
Base management will remain with the Toliara project and to oversee the closure of Kwale in Kenya. Recall, it has been difficult to
Base Resources shareholders will hold around 16.4% of the combined group with a combined market cap of US$1,144m.
The transaction requires Australian Foreign Investment Review Board approval along with approval of the Federal Court of Australia along NYSE and TSX approvals and US Securities Act exemption for the Share Consideration, and approvals of the Competition Authority of Kenya and Malagasy Competition Council.
Break fee of US$2.4mapplies if either side break the deal.
The deal is expected to complete in Q3.
Cancellation from the ASX and AIM:Base Resources shares will be cancelled from the ASX and AIM markets with the combined entity trading on the NYSE and TSX.
Base Resources recently published a PFS on the concept of enriching the monazite in the Toliara project for its rare earth content.
Monazite PFS project metrics on upgrading of monazite tailings to a saleable product:
- Post-tax NPV@10%: US$1bn
- IRR: 79%.
- Capex: is $71m.
- Monazite production 21,800tpa
- NdPr content 2,800t
- FCF $130mpa and $4.7bn for the life of the mine.
- EBITDA $164m.
Combined Monazite and Mineral Sands project metrics:
- NPV@10% $1,687m
- IRR 32.4%
- Capex (Stage 1): $591m
- Capex (Stage 1): $137m
- Production of ilmenite, rutile and zircon; 1,033,000tpa
Madagascarrecently re-elected President Rajoelina securing a third term as president. We believe President Rajoelina will support the Toliara project development.
Energy Fuels Inc.:runs three opeating uranium and uranium/vanadium mines in the US. The team have three more mines in development in the US along with a uranium mine on standby and a mineral sands project with Monazite in planning/permitting at Bahia in Brazil.
Uranium productionshould reach 2mlbs in the short term worth ~$180m at current uranium spot-market prices. Energy Fuels sold 100,000lbs of uranium at $102.88 in Q1 with their remaining sales sold under long-term contract. Full-year sales to end-December 2023 were US$38m vs $12.5m in 2022 highlighting the impact of markedly higher uranium prices and rising production.
Energy Fuels Inc. plan to ramp-up production to a run rate of 1.1 – 1.4mlbs of uranium this year representing around 1% of global production.

Conclusion: This looks like a good deal for both Base Resources and Energy Fuels Inc. The combined entity should see synergies from the processing of Monazite in the US once the Toliara project is approved and built.

*The analyst has previously visited the Toliara project in Madagascar.

First Tin (1SN LN) 5.75p, Mkt Cap £14.6m – Mineral resource revision for Tellerhäuser

First Tin reports a 35% increase in JORC (2012) compliant mineral resources at its Tellerhäuser tin project in Germany following the addition of more than 42,000additional assays from “historic drilling data discovered in the archives in Hartenstein and Chemnitz”.
The new estimate, “completed by independent geological consultants DMT Group”, and reported at a 0.2% tin cut-off grade “considered by the consultants to be a reasonable cut-off based on current tin prices” updates the 2019 estimate by H&S Consultants shows:
- An indicated resource of 9.97mt at an average grade of 0.45% tin; and
- An inferred resource of 17.97mt at an average grade of 0.52% tin.
Describing the larger and updated resource estimate as “a large step forward”, and commenting on the context of “a world requiring more tin”, CEO, Bill Scotting, said that inclusion of the additional historic assay data “has enabled a more robust resource model with significantly more tonnes.The increase in tonnage, especially in the Indicated category, allows us to consider a longer mine life in economic evaluations”.
The company has previously explained that it expects tin supply to move into deficit in 2026.

Conclusion:The addition of historic drilling and assay information has increased theTellerhäuser ‘Indicated & Inferred’ MRE by 35% to a total of ~28mt at an average grade of 0.5% tin.

Galan Lithium (GLN AU) A$0.33, Mkt Cap A$140m – Commercial agreement with the Catamarca government

The Company issued an announcement regarding permitting of the HMW Lithium Project in Argentina with shares resuming trading this morning.
The Company signed a commercial agreement with the Catamarca Government in support of permits for production of LiCl and selling it locally or exporting internationally.
The agreement also includes a commitment by the Company to pursue downstream processing (eg LC, LHM or other alternatives) after year 4 locally as well as an increase in royalty rate to 7%, up from 3% used in the Phase 1 FS.
The next stage in the process will be the formalisation of the agreement and the passing into legislation.
Phase 1 is envisaged as a 5.4ktpa LCE operation producing a lithium chloride concentrate (6% Li) with first production due in H1/25 as governed by the approved production permits.
Phase 2 for 21tktpa LCE production rates is currently being permitted.

Conclusion:Authorities are supporting the case for a potential local sale or export of lithium chloride but would want the Company to pursue downstream processing following an initial period of four years.

Gem Diamonds (GEMD LN) 8.62p, Mkt Cap £12m –Letšengmine yields another large diamond

Gem Diamonds reports the recovery of a 169 carat Type II white diamond from itsLetšengmine in Lesotho.
The stone “is the fourth greater than 100carat diamond recovered to date this year” from the mine which has an established history of producing large, high-quality white diamonds.
In 2023, the mine yielded 5 diamonds larger than 100 carats and, although such finds are by their nature erratic events, the recovery of four such stones within the first 110 days of 2024 suggests that 2024 may be on track to match the six >100 carat diamonds produced in 2021.

Golden Metal Resources (GMET LN) 14.5p, Mkt Cap £13.5m – Drilling approvals for the Pilot Mountain tungsten project

(Power Metal Resources (POW LN) 0.76p, Mkt cap £15m holds 62% of Golden Metal Resources)

Golden Metal Resources reports that it has received approval for its agreed a 2,000m drilling programme at its wholly-owned Pilot Mountain tungsten project located ~200km SE of Reno in Nevada.
The programme is expected to consist of 40 holes “including 2 at Good Hope, 4 at Desert Scheelite Parallel West and 1 at Porphyry South, with the remaining 33 being located at or proximal to the main Desert Scheelite zone”.
The company explains that additional “drilling sites can quickly and easily be permitted as drilling progresses”.
Golden Metal Resources expects drilling to start on 11^thMay.
With an indicated mineral resource of 9.01mt at an average grade of 0.26% tungsten trioxide (WO₃) plus an inferred resource of a further 3.53mt at an average grade of 0.31% WO₃within the deposits at Desert Scheelite and Garnet,Pilot Mountainis understood to be the USA’s largest known tungsten deposit.
The US does not currently produce tungsten, which it recognises as a critical commodity, potentially giving the Pilot Mountain project a strategic significance in a market currently dominated by China.

Conclusion: Drilling at Pilot Mountainis expected to start next month and we look forward to results which may lead to an expansion of the scale of what is already the USA’s largest known tungsten deposit.

Kavango Resources* (KAV LN) 1.1p, Mkt Cap £13.7m – Geophysics identifies drilling targets at Hillside, Zimbabwe

Kavango Resources reports that induced-polarisation (IP) geophysics at its Hillside Prospect 4 gold prospect in Zimbabwe has identified up to five potentially mineralised shear zones over 500m of strike length and 700m width.
The company says that two zones shown in the IP survey“appear to coincide with a series of parallel artisanal workings… [and that] …”Three additional shear zones have been interpreted under slightly thicker cover and remain undiscovered by the artisanal miners with no indications of historic workings”
Kavango Resources says that it plans“to drill a fence of six holes to test potential for a bulk-minable gold deposit at Prospect 4”.
On 15^thApril, the company announced results of its drillhole SKDD-001 at Hillside Prospect 4 showing an intersection of gold mineralisation including visible gold and 2.53m at an average grade of 29.08g/t gold from a depth of 97.47m.
In today’s announcement, Chief Executive, Ben Turney, says that the IP survey was conducted after the results of the drilling and that the “high-grade upper intersection in Hole SKDD001 represents a near-term, minable opportunity well within trucking distance of the Hillside stamp mills…[and that]… Kavango Mining is currently developing a work plan to pursue this”.
Interestingly, however, Mr. Turney also says today that “it is the presence of the smaller, low-grade lower intersection in the same hole that our exploration team is now pursuing. Hole SKDD001 appears to have clipped a second shear zone, as indicated by results from the IP survey…[and the company now plans]… to return to Prospect 4 and drill a fence line of holes to test the IP anomalies and additional parallel artisanal mine workings we have identified. If these prove to be wide gold-bearing shear zones, Prospect 4 could represent an unanticipated bulk-minable opportunity”.”

Conclusion: Kavango Resources’ understanding of the geological nature of its target at Prospect 4 seems to be evolving swiftly as geophysical work is pointing to the possibility of a larger bulk mining opportunity rather than the narrow high grade concept envisaged originally. Considering a range of geological possibilities at this relatively early stage seems a prudent and sensible approach to the evaluation of Prospect 4 and we await results from the new fence of holes with interest.

*An SP Angel Analyst holds shares in Kavango

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

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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.

Sources of commodity prices
Gold, Platinum, Palladium, Silver	BGNL (Bloomberg Generic Composite rate, London)
Gold ETFs, Steel	Bloomberg
Copper, Aluminium, Nickel, Zinc, Lead, Tin, Cobalt	LME
Oil Brent	ICE
Natural Gas, Uranium, Iron Ore	NYMEX
Thermal Coal	Bloomberg OTC Composite
co*king Coal	SSY
RRE	Steelhome

Lithium Carbonate, Ferro Vanadium, Tungsten, Spodumene, Ferro-Manganese, Graphite, Rutile	Asian Metal

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SP Angel Morning View -Today’s Market View, Monday 22nd April 2024 (2024)

References