Today's Market View - East Star Resources, Power Metal Resources, Rainbow Rare Earths, and more...

SP Angel . Morning View . Tuesday 23 08 22

Aluminium prices hold as Europe races towards energy Armageddon

MiFID II exempt information – see disclaimer below

Culpeo Minerals Ltd (ASX:CPO)* – Mapping programme refines four drill targets at Lana Corina

East Star Resources PLC (LSE:EST) – Interim report describes progress in Kazakhstan

Power Metal Resources PLC (AIM:POW)* – Drilling commences at Tati Gold Project in Botswana

Rainbow Rare Earths Ltd (LSE:RBW, OTC:RBWRF)* – Updated technical report indicates improvements in expected capital and operational costs. BUY – 51p

Rainbow Rare Earths Ltd (LSE:RBW, OTC:RBWRF)* – BUY, 51p – Rainbow strike deal with OCP for Rare Earth processing of Moroccan phosphate residues

Rambler Metals and Mining PLC (AIM:RMM, TSX-V:RAB)* – New discovery at EZZ starts just 30m from UFZ infrastructure

Talga Group* (ASX: TLG) – Talga battery day presentation in Oslow highlights plans for first EV Anode plant in Sweden

China lithium prices near record highs amid power squeeze

• Prices of lithium in China near a record high as shutdowns at refineries threaten to cut supply further in what is already a very tight market.
• Sichuan is home to more than a fifth of China’s lithium production and has extended industrial power cuts this week amid an intense heat wave.
• Lithium carbonate prices hit the highest level since April on Monday, at 484,500 yuan ($70,610) / tonne, according to Bloomberg.

Energy - The only real solution to high energy prices is high energy prices

• Europe is heading for a monumental energy crisis this winter unless it can source new gas supplies to replace Russia and there is sufficient rain to restore nuclear power to capacity
• In the meantime, the UK and Europe needs to focus on becoming much more energy efficient and saving energy
• Drought conditions have reduced hydropower and nuclear power and this combined with a lack of gas and coal fired power means we may be in for a very tough winter.
• We don’t want vulnerable people to go cold this winter, but governments should be working on measures to help reduce energy use, such as promoting much more home insulation
• The press and politicians seem to have forgotten that if there is limited energy supply then all you are going to do with energy price caps is to help demand higher while competing for very limited supply and effectively funding higher prices for Russia and other energy rich exporters. It also does little to reduce energy use which is the real problem
• Spain recently banned public offices from cooling down below 27C and is allowing civil servants not to wear ties – well it is a start
• Greenpeace got it wrong by campaigning against nuclear and causing the nation to become more dependent on coal and gas.
• Insulate Britain appear to be pushing a far more sensible agenda, albeit using some less-sensible protests.
• Insulating more houses makes so much sense whatever the source of heating

The enemy of my enemy is not my friend – as is so often the way in the Middle East

• Saudi Oil Minister Prince Abdulaziz bin Salman said the disconnect between the futures market and supply fundamentals may force OPEC and its allies to act to tighten production.
• It’s nice to know you can rely on the Saudis to help the West when Russia is squeezing energy prices.

Aluminium market remains uncertain as producers cut output, while demand side worsens on property crisis

• Power shortages in China continue to tighten the market, while the demand outlook continues to worsen because of a liquidity crisis in the Chinese property sector.
• China’s Sichuan province has idled all of its operational aluminium plants, with annual capacity of 1mt.
• According to SMM, power-related shutdowns have halted about 2.4% of China’s aluminium capacity.
• In Europe, half of the region’s aluminium and zinc capacity has been closed due to power costs.
• On the demand side, defaults by property developers have surged while companies are reluctant to expand while Covid restrictions remain in place.
• China accounts for nearly 60% of global aluminium demand, making the price of the metal sensitive to changes in policy affecting the domestic construction market.

Dow Jones Industrials -1.91% at 33,064

Nikkei 225 -1.19% at 28,453

HK Hang Seng -1.20% at 19,421

Shanghai Composite -0.06% at 3,276

Economics

China – 200bn yuan ($29bn) offered to troubled developers

• China will offer 200bn yuan in special loans to ensure housing projects are delivered to buyers.
• Yesterday, China cut the five-year loan prime rate for the second time this year as the property sector continues to suffer from a liquidity crisis.
• The one-year LPR, which is also based on domestic Chinese lending rates was cut to 3.65% from 3.7%.

Europe - S&P Global Eurozone Manufacturing PMI edged lower to 49.7 in August of 2022 from 49.8 in July

• Euro-area economic activity declined for a second straight month, with rising energy and food costs sapping demand.
• Germany posted the sharpest decline in output since June 2020 as it tries to wean itself of Russian gas.
• Europe feels as if it is headed for a economic collapse on the developing power crisis as drought and gas shortages combine to collapse energy supplies.
• Maybe this will be Europe’s winter of ‘discontinuance’

UK – Money markets price in rates hitting 4% next year

• Traders are pricing in the BoE raising its benchmark rate by 235 basis points in May, according to interest-rate derivatives tied to central bank decision dates.
• That would be on top of the current rate of 1.75%.
• Yesterday, Citigroup forecast inflation exceeding 18% next year amid rapidly increasing natural gas prices.
• Continental European gas prices are more than 14 times their average of the past decade.

Peru - Private investment in mining roughly halved to 10% from 19% in 2010 of Peru investment (Peru Institute of Economy)

Currencies

US$0.9913/eur vs 1.0021/eur yesterday. Yen 137.10/$ vs 136.80/$. SAr 17.037/$ vs 17.031/$. $1.174/gbp vs $1.181/gbp. 0.687/aud vs 0.690/aud. CNY 6.863/$ vs 6.828/$.

US Dollar index – 109.17 / +0.11% on week

Commodity News

Precious metals:

Gold US$1,737/oz vs US$1,739/oz yesterday

Gold ETFs 100.4moz vs US$100.4moz yesterday

Platinum US$877/oz vs US$885/oz yesterday

Palladium US$2,020/oz vs US$2,117/oz yesterday

Silver US$18.97/oz vs US$18.95/oz yesterday

Rhodium US$13,950/oz vs US$14,250/oz yesterday

Base metals:

Copper US$8,012/t vs US$8,064/t yesterday

Aluminium US$ 2,396/t vs US$2,392/t yesterday

Nickel US$ 22,343/t vs US$22,258/t yesterday

Zinc US$ 3,514/t vs US$3,499/t yesterday

Lead US$ 2,019/t vs US$2,057/t yesterday

Tin US$ 24,400/t vs US$24,750/t yesterday

Energy:

Oil US$97.2/bbl vs US$95.1/bbl yesterday

Crude oil prices bounced off yesterday’s lows following comments from Saudi Oil Minister Prince Abdulaziz bin Salman that the disconnect between the futures market and supply fundamentals may force OPEC and its allies to act to tighten production when it meets next month.

Energy prices remain at record levels equivalent to ~$400/boe in the UK and ~$500/boe in Europe, with the Euro also falling below parity against the US dollar, on expectations of greater offshoring of European industrial and manufacturing capabilities to jurisdictions with cheaper energy prices (US HH trades at ~$60/boe).

Natural Gas US$9.925/mmbtu vs US$9.268/mmbtu yesterday

Uranium UXC US$48.95/lb vs US$49.00/lb yesterday

Bulk:

Iron ore 62% Fe spot (cfr Tianjin) US$101.3/t vs US$101.3/t

Chinese steel rebar 25mm US$611.7/t vs US$614.9/t

Thermal coal (1st year forward cif A RA) US$300.0/t vs US$300.0/t

Coking coal swap Australia FOB US$296.0/t vs US$286.0/t

Other:

Cobalt LME 3m US$49,455/t vs US$49,455/t

NdPr Rare Earth Oxide (China) US$96,603/t vs US$103,993/t

Lithium carbonate 99% (China) US$68,852/t vs US$68,767/t

China Spodumene Li2O 5%min CIF US$4,720/t vs US$4,720/t

Ferro-Manganese European Mn78% min US$1,215/t vs US$1,227/t

China Tungsten APT 88.5% FOB US$333/t vs US$333/t

China Graphite Flake -194 FOB US$815/t vs US$815/t

Europe Vanadium Pentoxide 98% 7.3/lb vs US$7.3/lb

Europe Ferro-Vanadium 80% 31.75/kg vs US$32.25/kg

China Ilmenite Concentrate TiO2 US$343/t vs US$345/t

Spot CO2 Emissions EUA Price US$94.7/t vs US$95.7/t

Brazil Potash CFR Granular Spot US$900.0/t vs US$900.0/t

Battery News

International collaboration to develop battery-electric train fleet for UK

• Leasing company Eversholt Rail will partner with pioneering developers Vivarail and specialists Kiepe Electric, on a project to develop and deliver a zero-emissions upgrade to Greater Anglia’s rail fleet.
• The fleet, which was developed from a 1980s design and was last overhauled only three years ago, but is being re-engineered to deliver greater flexibility for the operator.
• This project will see the conversion of the 30-unit fleet into Battery Electric Multiple Units.
• Vivarail are the designers and manufacturers of the UK’s only battery and hybrid trains currently in passenger service.

Hyundai to accelerate US EV plant to ensure vehicles qualify for incentives

• 406466ow considering starting construction later this year to begin commercial production in the H2 2024.

Company News

Culpeo Minerals Ltd (ASX:CPO)* A$0.165, Mkt cap A$9.6m – Mapping programme refines four drill targets at Lana Corina

• Culpeo have completed a geological mapping and sampling programme over 2km2 at the Lana Corina Project, focussing on lithology, structure and alteration/mineralisation.
• The study was focused on the high priority magnetic targets shown in recent geophysics, where thirteen magnetic low targets have been identified regionally that are analogous to the area of known copper mineralisation at Lana Corina.
• Mapping has confirmed a strong correlation between areas of low magnetic response and mapped structural zones and surface copper mineralisation at the targets identified in magnetics.
• Following the study, T2, T4, T6 and T10 have been identified as priority follow-up drill targets.
• Recent drilling at Lana Corina has intersected significant copper and molybdenum mineralisation including:
• CMLCD002 - 257m @ 0.95% Cu, 81ppm Mo from 170m
• CMLCD003 - 173m @ 1.05% Cu, 50ppm Mo from 313m
• CMLCD005 - 81m @ 1.06% Cu, 145ppm Mo from 302m

*An analyst at SP Angel holds shares in Culpeo Minerals

East Star Resources PLC (LSE:EST) 4.4p, Mkt Cap £8.2m – Interim report describes progress in Kazakhstan

• East Star Resources reports a pre-tax loss of £2.1m for the six months to 31st May 2022. The loss includes £1.6m of non-cash, share-based, payments related to the acquisition of Discovery Ventures Kazakhstan (DVK).
• The company reports a 1st May cash balance of £3.2m following “an oversubscribed fundraising of £3.1 million”.
• Commenting on the main operational activities during the half year, the company highlights drilling at the Apmintas project where an intersection of 63m averaging 4.51g/t gold from surface is seen by the company as confirmation of “a gold bearing system with a strike of more than 4km”.
• Subsequently, East Star Resources has expanded the licence area, conducted geophysical surveying and awarded a 5,000m drilling contract within the Chulli gold belt which hosts the Apmintas prospect.
• In August, the company announced the completion of 970m of drilling in four holes at its Novoe target in Kakakhstan where intersections included “wide intersections of quartz diorite containing interspersed quartz veining and sulphides with some more intense sections of alteration”.
• The company has also acquired licences within the “Rudny Altai VMS belt, incorporating two historic operating copper-lead-zinc mines, one known deposit, and many historical mineral occurrences”.
• East Star Resources also announced, in May, that it had farmed in to licences over the Talairyk project located in the Kostanay region of Kazakhstan which hosts a known deposit of heavy rare-earth Ionic Adsorption clays (IAC) which exhibit a similar “geochemical signature as the IACs of South China from where most of the world's HREEs are currently supplied”.
• Existing data on Talairyk includes “128 core holes and 61 auger holes for 3,755 samples”. “The Company's JV partner is Phoenix Mining whose team includes a senior mining executive and a leading lawyer in Kazakhstan”. In August the company expanded the project via the award of additional licences covering 134.7km2 in an area known as Talairyk 1.
• Commenting on the Talairyk project, Chairman, Sandy Barblett, explained that Kazakhstan is one of “very few places in the world where a company can find a project of this quality and potential and with this amount of data that has not undergone any work since 1994”.
• He also described the exploration potential in Kazakhstan and characterised East Star Resources as the only “pure-play listed explorer with boots on the ground through which to access this opportunity”.

Power Metal Resources PLC (AIM:POW)* 1.65p, Mkt Cap £25m – Drilling commences at Tati Gold Project in Botswana

• Power Metal reports that it has commenced its 500m RC drill programme within nine holes, targeting near surface high-grade gold mineralisation.
• The programme is designed to test for the along strike and down-dip extension of the Cherished Hope mine mineralised quartz reef structures.
• Drilling will take one week and will be undertaken while preparations for the upcoming Molopo Farms Complex drilling campaign are ongoing.
• Power Metal recently visited the newly-acquired asset, with ground mapping showing that historical gold workings are more extensive than previously understood, with at least 10 individual workings comprising of vertical shafts and trial pits over 175m.
• Extensive tailings on site are going to be evaluated for their reprocessing potential at a later stage.
• At Molopo Farms, the Company is planning to drill multiple holes targeting the southerly dipping conductor at K1-6, the core of which has never been drilled.
• The Company has also engaged Spectral Geophysics to undertake additional MLEM surveys over two additional targets K1-3 and K2-3, located approximately 30km and 60km southwest of target K1-6.

*SP Angel acts as nomad and broker to Power Metal

Rainbow Rare Earths Ltd (LSE:RBW, OTC:RBWRF)* 11.4p, Mkt cap £60m – Updated technical report indicates improvements in expected capital and operational costs. BUY – 51p

(Rainbow hold 70% of Phalaborwa with 30% to be held by Bosveld Phosphates)

(Neodymium Nd, Praesidium Pr, Terbium Tb, Dysprosium Dy. Rainbow holds 100% of the Gakara mine and associated licenses in Burundi)

• Rainbow have released an updated technical report on their rare earths processing flow sheet for Phalaborwa.
• See: https://www.rainbowrareearths.com/investors/results-reports-presentations/
• The flowsheet has been developed in parallel with K-Technologies, Inc., USA (“K-Tech”) and represents a breakthrough in allowing for the economic extraction of rare earth elements from phosphogypsum.
• Key enhancements are expected to result in capital and operating cost savings with the PEA being finalised for October.
• key steps:
• Hydraulic mining to pump phosphogypsum residue to the plant.
• Fluoride leach to remove fluoride from the gypsum allowing REE grades to be maximised. Fluoride reagents can be used elsewhere in the circuit.
• Leach solution counter current with sulphuric acid to extract the REEs and recycle acid.
• REE concentration combined with primary impurity rejection to replace nano filtration system, significantly improving acid recycling.
• Continuous ion exchange and continuous ion chromatography processes to deliver separated rare earth oxides.
• Higher concentrations enable lower flow rates and significant cost savings.
• Rainbow and K-Tech are jointly applying for international patents for the process.

Conclusion: The work outlines in the updated process flow sheet combined with Rainbow’s new agreement with OCP in Morocco enable the group to diversify its operations and multiply its scale of production. Today’s news indicates improvements in expected capital and operational costs enabled by the use of conventional processes and equipment and simplification of the flowsheet.

Rainbow has published a technical report on the Phalaborwa processing flowsheet on their website at: https://www.rainbowrareearths.com/investors/results-reports-presentations/

*SP Angel acts as financial advisor and broker to Rainbow Rare Earths

Rainbow Rare Earths Ltd (LSE:RBW, OTC:RBWRF)*​​​​​​​ 11.4p, Mkt cap £60m – Rainbow strike deal with OCP for Rare Earth processing of Moroccan phosphate residues

BUY – 51p

(Rainbow hold 70% of Phalaborwa with 30% to be held by Bosveld Phosphates)

(Neodymium Nd, Praesidium Pr, Terbium Tb, Dysprosium Dy. Rainbow holds 100% of the Gakara mine and associated licenses in Burundi)

• Rainbow Rare Earths report a new agreement with OCP in Morocco for the extraction of REEs ‘rare earth minerals’ from phosphate residues.
• OCP is the world’s largest producer of phosphates and related fertilizers with >70% of global rock phosphate reserves. OCP employs ~23,000.
• The ‘Master Agreement’ is with OCP and UM6P ‘Mohammed VI Polytechnic University’, a science focussed Moroccan university to further investigate and the extraction of rare earth elements from phosphogypsum which is the residue from phosphate.
• OCP phosphogypsum contains REEs similarly to Rainbow’s Phalaborwa project indicating that the mineral process flowsheet designed by Rainbow and K-Tech could work for OCP phosphate residues.
• OCP and the UM6P university have significant expertise in phosphogypsum processing having developed a process for the reduction of uranium and thorium in processed Moroccan phosphates.
• Collaboration of OCP, UM6P, K-Tech and Rainbow’s metallurgical team should lead to further optimisation of the K-Tech flow sheet to ensure the best possible recovery of rare earths from rock phosphates.
• The key to the process is K-Tech’s patented CIX ‘Continuous Ion Exchange’ and CIC ‘Continuous Ion Chromatography’ process which has been shown to deliver high-purity oxides of selected rare earths.
• The CIX and CIC processes have been used commercially since the 1980s mainly in the food, biotech, chemical, water treatment, pharmaceutical and mining industries with several industrial installations operating in South Africa.
• Only nine process stages are required for the CIC separation, vs ~1,200 stages for conventional solvent extraction which is mainly done in China.
• No hazardous or toxic solvents are required in the Rainbow / K-Tech process.
• Capital and operating costs are said to be significantly lower and working capital costs are minimised due to reduced residence times and the relative simplicity of the CIX and CIC processes.
• The combined parties will work on pilot plant processing ahead of moving to industrial-scale extraction of rare earths.
• We believe SASOL produced a higher grade of REE’s in their phosphogypsum as was seen at Phalaborwa when it was operational.

Valuation: We value Rainbow’s Phalaborwa project at 43p/s based on a $204m capex assumption for the Phalaborwa project. While we are not able to assess the value of the OCP / UM6P master agreement at this stage but we can see multiple upside opportunity from a deal with a producer of this scale.

OCP produce 41mt of phosphate in 2020 exporting some 10mt of raw material. The group produced 7mt of phosphoric acid for fertilizers with 1.9mt of this exported. OCP Group sales rose 50% yoy to $8.8bn in 2021.

Conclusion: The Master Agreement should work to develop the extraction of REEs from phosphorgypsum and/ or their phosacid lived stream in Morocco , similar to the MoU Rainbow signed with a major chemical producer in SA in June to extract RE’s from their live phosacid stream, using technology developed by K-Tech and Rainbow which is being applied by Rainbow to the Phalaborwa project in South Africa.

This gives Rainbow another project and further country diversification creating a multi project RE company reducing risk etc.

In a world where China produces >80% of global rare earths, the development of new sources of the critical rare earths seems essential for global security and the ability to re-shore manufacturing to the West .

The deal also enables Rainbow to operate on phosphogypsum residues in a stable jurisdiction outside South Africa.

*SP Angel acts as financial advisor and broker to Rainbow Rare Earths

Rambler Metals and Mining PLC (AIM:RMM, TSX-V:RAB)* 21.75p, Mkt Cap £33m – New discovery at EZZ starts just 30m from UFZ infrastructure

NPV Valuation: 168p/s

• Rambler Metals and Mining reports the discovery of higher-grade copper and gold intersections in underground diamond at the Ming Mine in Newfoundland, Canada.
• The Rambler team have drilled over 12,767m this year to give greater definition to existing resources, to extend near term production stopes and to step-out from known mineralization close to underground infrastructure.
• Targets include:
• Ming North Zone (“MNZ”),
• Lower Footwall Zone (“LFZ”)
• Ezekiel Zone (“EZZ”) newly discovered and proximal to the Upper Footwall Zone (“UFZ”).
• Eight holes tested an area close to the Upper Footwall Zone intersecting copper 30m away from existing UFZ infrastructure
• Lower Footwall Zone (“LFZ”)
• 5.00m @ 2.67% Cu in hole R22-510-01 – LFZ
• 11.20m @ 2.17% Cu in hole R22-510-02 – LFZ
• 2.90m @ 8.94% Cu – LFZ, and 4.00m @ 2.11% Cu in hole R22-510-03 - LFZ
• 3.50m @ 3.74% Cu in hole R22-510–04 LFZ
• 8.35m @ 2.55% Cu – LFZ, and 7.50m @ 4.36% Cu in hole R22-510-05 – LFZ
• 7.50m @ 2.30% Cu in hole R22-510-06 – LFZ
• 16.00m @ 1.93% Cu – LFZ, including 7.00m @ 2.95% Cu in hole R22-510-07 - - LFZ
• 16.10m @ 2.73% Cu – LFZ, including 6.00m @ 4.46% Cu, and 4.00m @ 3.56% Cu in hole R22-510-07
• 15.00m @ 2.30% Cu – LFZ, including 3.00m @ 4.68% Cu in hole R22-510-10 - LFZ
• With a second LFZ intersection of 13.00m @ 4.33% Cu – LFZ, including 5.00m @ 8.82% Cu also in hole R22-510-10
• 3.00m @ 6.10% Cu – in hole R22-510-11 - LFZ
• 3.40m @ 2.01% Cu in hole R22-510-12 – LFZ
• 5.00m @ 2.59% Cu in hole R22-510-13 – LFZ
• 9.00m @ 2.26% Cu – LFZ, including 2.00m @ 5.97% Cu in hole R22-501 16 which also included 52.00m @ 2.53% Cu – LFZ, including 4.00m @ 5.55% Cu, also in the LFZ and
• 3.75m @ 3.77% Cu, and 5.00m @ 3.73% Cu in hole R22-510-14
• 13.00m @ 2.87% Cu – LFZ, including 5.00m @ 4.35% Cu in hole R22-501-16 and a second intersection of 15.00m @ 2.20% Cu – LFZ, including 6.00m @ 2.65% Cu
• Results from the newly discovered Ezekiel Zone (“EZZ”), which adds to the Jennings Zone and the LP East Zone to become the third new zone of mineralisation discovered close to existing mine infrastructure so far this year, and the known Upper Footwall Zone ‘UFZ’
• 8.00m @ 1.45% Cu in hole R22-707-01 – Ezekiel Zone
• 5.00m @ 2.43% Cu and 13.00m @ 5.06% Cu – UFZ, including 4.60m @ 11.44% Cu both in hole R22-701-02 – Ezekiel Zone
• 2.50m @ 8.43% Cu in hole R22-707-03 – UFZ
• 2.00m @ 2.10% Cu in hole R22-701-04 – Ezekiel Zone
• 6.37m @ 2.24% Cu -R22-701-05– Ezekiel Zone
• 2.00m @ 1.98% Cu – Ezekiel Zone
• 10.00m @ 1.63% Cu – Ezekiel Zone, including 3.00m @ 2.44% Cu in hole R22-701-06 which included a second intersection, of the UFZ Zone, of 8.00m @ 5.84% Cu – UFZ, including 3.00m @ 9.21% Cu and 4.00m @ 1.99% Cu – also UFZ
• 8.05m @ 2.24% Cu in hole R22-710-07– Ezekiel Zone
• These are just the results for the copper. Gold assays are still to be collated and announced
• Management have added a third drill to do short holes to optimise the underground mine plan.
• Commenting on the drilling programme, Toby Bradbury, President & CEO, said that the drilling on the 510 level of the mine “has once again reinforced the faith we have in the LFZ orebody by providing long intercepts of high-grade copper that can add near-term resources to the mine plan”.
• He also explained that drilling results from the 707 level programme are “exciting not only for …[returning] …good intercepts in the Upper Footwall Zone ("UFZ") but also because … [they show the] … potential to outline a new mineralised horizon only 30 meters away from the UFZ, which is currently in production on the 790L - 770L horizon”.
• Commenting briefly on the operational progress of the mine, he confirmed that “operations continue to improve on the performance of the last quarter and grade targets are being achieved”. In July, reporting on the operational performance achieved in June, the company said that “Milled grades were higher at 2.02% copper as feed material included the higher-grade Upper Footwall and Ming North Zones”.

Conclusion: Rambler continues to discover new zones of copper and gold mineralisation within easy reach of the existing underground mine with the new Ezekiel Zone being the third such discovery so far this year. Wide intersections of grades exceeding 2% copper in the new areas of mineralisation should enable management to create additional working faces to expand flexibility and optionality on production.

*SP Angel act as Nomad and Broker to Rambler Metals & Mining. An SP Angel analyst holds shares in Rambler Metals & Mining.

​​​​​​​Talga Group* (ASX: TLG) A$1.3 Mkt Cap A$396m – Talga battery day presentation in Oslow highlights plans for first EV Anode plant in Sweden

• Talga presented details on plans for their first electric vehicle anode plant in Sweden yesterday in Oslow.
• Production of Talnode®-C Li-ion battery anodes using graphite from their Vittangi project started in April this year.
• Management claim they have readied quality control skills for commercial development.
• Talga see EVs making up some 75% of passenger vehicle sales by 2040 vs around 13% today (source Rho Motion).
• Natural graphite is increasing its market share due to lower cost and better environmental footprint. Synthetic graphite comes from heating petroleum coke, coal-tar pitch or oil.
• Gigafactories are planning some 1TWh of capacity by 2030 requiring 1.2mtpa of graphite anode material on current battery chemistry plans.
• LFP ‘Lithium Iron Phosphate’ batteries also use graphite in similar qualities to NCM and NCA battery chemistries, though LFP’s lower power densities mean their batteries effectively need more graphite per KWh of power.
• Talga see a 551GWh battery supply deficit by 2030 ex-China with the largest deficit in the EU.
• Talga’s projects are planning to run on hydro and wind power making them relatively sustainable, though the graphite deposits are non-renewable resources.
• DFS: The team completed a ‘Detailed‘ Feasibility Study in July 2021 for 19,500tpa costing US$240m capex.
• The use of the word ‘Detailed’ is a new one on us as all Feasibility Studies are relatively detailed and we are wondering when a ‘Definitive’ FS becomes a ‘Detailed’ FS .
• Management also see a path to 100,000tpa of anode production which could potentially make Talga one of the largest anode producers outside China.
• Permitting: Permitting in Sweden in always a problem, particularly given Sweden’s treatment of Beowulf which has been working through the permitting process for around 10 years.
• Even the receipt of an official permit from the Ministry of Mines does not mean you are free of local opposition and legal and environmental challenges in the case of Beowulf.
• Talga have a permitted trial mine for extraction and are progressing with their larger-scale permit with a court decision hearing due in Q1 2023.
• The environmental and Natura 2000 permits are expected to be decided together, followed closely by the exploitation decision.
• Positive submissions from Norrbotten County Administrative Board stating Project’s environmental permit could be approved with appropriate conditions.
• Exploitation applications for Niska Stage 2 (additional 85,000tpa) submitted in August 2021
• Environmental permit for Luleå anode refinery production site submitted in June 2022.

*SP Angel used to act as UK broker to Talga Resources. SP Angel analysts have formerly visited the leading battery R&D institution WMG partnering with Talga.

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

Joe Rowbottom – Joe.Rowbottom@spangel.co.uk - 0203 470 0486

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

W1S 2PP

*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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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

Coking Coal - SSY

RRE - Steelhome

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

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SPA research ratings – Based on a time horizon of 12 months: Buy = Expected return of more than 15%, Hold = Expected return between -15% and +15%, Sell = Expected return of less than 15%

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