Today's Market View - Aura Energy, Shanta Gold, and more...

SP Angel . Morning View . Wednesday 19 10 22

Copper continues to slide as majors warn on China slowdown

MiFID II exempt information – see disclaimer below

Private Zambian copper exploration opportunity

• We are looking for investment into a private copper explorer with four highly prospective licences in Zambia, near major mines or significant exploration targets.
• One license is contiguous with First Quantum’s Sentinel copper and Enterprise nickel mines which whom they have a Technical Cooperation Agreement.
• Historic drilling on the licence includes 0.7% copper over 1m and 0.2% nickel over 3m. Geophysics in 2021 & 2022 advanced project toward identifying drill targets.
• A large licence with multiple copper targets. Samples from small artisanal mines assayed 15.8% copper, 0.57g/t gold and 4.87% copper, 18.3 g/t gold.
• A highly prospective licence acquired in 2022 on the Western Foreland trend which hosts the giant Kamoa-Kakula mine.
• IPO documentation has been prepared for listing when market conditions improve.
• All licences are 100% owned with Zambian partners significant shareholders in the company.

Aura Energy Ltd (ASX:AEE, AIM:AURA)* – Completion of resource-enhancement drilling at the Tiris uranium development project in Mauritania

Antofagasta PLC (LSE:ANTO)* – Improved water availability at Los Pelambres helps increase copper production

BHP Group Ltd (LSE:BHP, ASX:BHP) – Quarterly operations review leaves production and cost guidance intact.

Culpeo Minerals Ltd (ASX:CPO)* – Phase-2 drilling commences at Lana Corina

Lepidico Ltd (ASX:LPD) – Pilot trials demonstrate feasibility of LiOH production

Shanta Gold Limited (AIM:SHG, OTC:SAAGF) – Potential takeover offer

Talga Group (ASX: TLG) – Talga received ISO certification for its EV Li-ion battery anode plant and office in Luleå, Sweden

Zijin Mining (HKG: 2899) – Zijin to buy Rosabel Gold Mine in Suriname for $360m

US market strengthens on unexpected earnings strength despite wider recession concerns

• US equities have enjoyed a counter-trend rally on a series of robust earnings reports this week.
• The Dow rose 1.9% yesterday, S&P500 up 2.7% and the Nasdaq up 3.4%.
• 70% of the 46 S&P500 companies which have reported so far have beaten analyst estimates for revenues. (FactSet)
• The S&P500 has fallen 22% from this year’s highs, however recent earnings and algorithmic short-covering have provided a likely temporary respite from the weakness.
• Bloomberg’s economic forecast model currently has a US recession next year priced in at 100%.

Gold slides on stronger US Treasury yields and hawkish Fed despite subdued Dollar

• The gold price has weakened again, touching $1,638/oz before climbing slightly to hit $1,645/oz.
• Gold is feeling the pressure from a renewed rally in US Treasury yields, with the benchmark 10-year returning to 2008 highs of 4.0627%.
• US yields had weakened slightly alongside UK gilts following Jeremy Hunt’s fiscal U-turn, however this short-term relief seems to have fizzled out.
• Gold is set to continue to suffer from the Fed’s hawkish approach to tackling inflation, however there are limited catalysts due over the next fortnight.
• Comments from Fed member Kashkari yesterday highlighted the Fed’s commitment to tackling elevated core inflation levels.
• Kashkari stated that the Fed will not pivot on its tightening program at 4.75% if ‘underlying’ inflation remains hot.
• Gold’s weakness has advanced despite a cooling off of the US dollar’s previously unrelenting rally.
• Despite these macro headwinds, Gold ETFs added $16.2m in physical gold to their holdings yesterday, the first buying day in 10.

Copper retreats on warnings from mining majors and China’s commitment to demand-restrictive policies

• Copper has fallen 2% this week, hitting $7,388/t at the time of writing.
• Confirmation of a policy continuation from China’s ruling elite at the National Congress this week are expected to provide a further hit to demand expectations.
• Beijing has stuck to its guns on Zero-Covid this week – many traders had hoped the gathering would provide an opportunity for Xi to reverse policy having gained his 3rd term election.
• Virus infections in the Country’s capital hit a 4-month high this week.
• China’s property sector continues to struggle, with limited additional stimulus announced this week and previous efforts to shore up the market failing to make a dent.
• In both a China and global context, Rio and BHP have warned that copper demand is expected to remain subdued next year.
• Another headwind to the copper price has been rising global inventories, now up 36% from their lows in September.

Concerns mount over China’s coal supply as Covid hits major producing regions

• Major coal producing regions Inner Mongolia and Shanxi are suffering from labour shortages as officials ramp up Covid restrictions to tame infections.
• The key rail route has seen volumes shrink c. 30% owing to crew shortages triggered by Covid lockdowns.
• Inner Mongolia, China’s coal hub, has seen a 3-day lockdown hit coal sales.
• We do not expect any major power disruptions in China as a result, considering coal stockpiles are double last year’s levels.

Dow Jones Industrials +1.12% at 30,524

Nikkei 225 +0.37% at 27,257

HK Hang Seng -2.18% at 16,547

Shanghai Composite -1.13% at 3,046

Economics

US – The US economy continues to power ahead despite rising interest rates

• Stories of businesses reshoring into the US out of China support the narrative
• The Fed continues to indicate higher interest rates in its bid to quash inflation. We reckon there is another agenda here.
• It is, perhaps, useful for the US to demonstrate the power of the US dollar as sharply higher US rates draw funds out of the rest of the world causing liquidity crises in a range of industries and nations around the world. Eg Chinese property developers and many others are struggling to refinance debt which they had easily refinanced in past years.
• Industrial production rose 0.4% in September vs -0.1% in August and rose 5.3% yoy in September vs 3.9% in August
• Manufacturing output 0.4% in September vs 0.4% in August and 4.7% yoy in September vs 3.5% in August
• capacity utilisation 80.3% in September vs 80.1% in August
• NAHB housing index 38 in October vs 46.0 in September and 83.0 in January
• NY Empire State manufacturing index -9.1 in October vs -1.5% in September

China – President Xi’s CPC report

• Xi refers to a ‘new great struggle’ promoting Taiwan’s peaceful reunification with China (SCMP).
• Xi also warns of money worship, ‘deeply shocking cases of corruption’
• Xi promised ‘incomparable glory’ hailing the CPC’s achievements over the past 10 years while rallying the nation for future challenges (SCMP).
• Xi warns on the pointless formalities, bureaucratise, hedonism, and extravagance that have persisted in some localities and departments.
• Privilege-seeking mindsets and practices posed a serious problem, and some deeply shocking cases of corruption had been uncovered according to the party 72 page congress work report.
• The report blames ‘some people’ for a lack confidence in the socialist political system with Chinese characteristics, and who ignored the related laws.
• The report also highlights the party’s achievements in providing better protections for human rights, ethnic minorities and religion along with progress in promoting ethnic unity and implemented the party’s basic policy on religious affairs.
• The report continues to stress ‘one country, two systems’ and zero tolerance for corrupt cadres with business links.
• Re Taiwan: China ‘will conduct extensive and in-depth consultations on cross-strait relations and national reunification with people from all political parties, sectors, and social strata in Taiwan, and we will work with them to promote peaceful development of cross-strait relations and advance the process of China’s peaceful reunification,’ according to the report

PBoC ramps up support for Yuan as currency continues to fall against the US dollar

• Rising US interest rates combined with the reiteration of China’s Zero-Covid policy at the CPC Congress on Sunday continues to depress the Yuan.
• China’s state banks are reported to have been swapping Yuan for US dollars in the futures markets and then selling those dollars onshore to support the Yuan (FT).
• China’s regulators relaxed informal foreign exchange trading limits in September before raising margin requirements on Yuan short selling as the currency fell to a new 14-year low of 7.24877 against the US dollar. The Yuan appears to be working its way back towards the September low despite the state-bank intervention.
• Traders expect China to maintain a steady Yuan at around 7.2 through the duration of the CPC 20th Congress .
• Trade data and Q3 GDP data remain delayed possibly to avoid embarrassing the China National Congress meeting with a lower GDP figure.

South Korean ministers and automakers continues to lobby against US rule on EVs

• Hyundai and the South Korean government are reportedly stepping up their lobbying campaign in order to loosen rules brought in earlier this year in the US climate law.
• The US government introduced a $7,500 consumer tax credit to EVs built in North America, however Hyundai wont have a plant there until 2025.
• The law leaves foreign automakers at a huge disadvantage, and South Korea has three of the world’s largest EV battery manufacturers that have announced $25bn in US investment since Biden took office.
• South Korean trade ministers continue to reach out to their US counterparts – to no avail at this stage.
• Hyundai sold 44,544 BEVs in Q3 2022 – more than Ford and General Motors.

EU - ZEW Institute economic sentiment recovered slightly to a still horrendous -59.7 in October vs -60.7 in September. It was +49.4 in January before the war

Germany - ZEW Institute economic sentiment -59.2 in October vs -61.9 in September and +51.7 in January

UK – Headline inflation climbed back to a 40-year high of 10.1%yoy in September, exceeding market estimates.

• Core measure that excludes volatile items like energy also picked up coming in ahead of estimates.
• Double digit inflation has been driven by a hike in food prices (+14.8%yoy) and puts the central bank into spotlight as to the size of the interest rate increase at the next meeting in November.
• The pound slipped on the news initially but regained most of its losses this morning.
• CPI (%yoy): 10.1 September v 9.9 August and 10.0 est.
• Core CPI (%yoy): 6.5 September v 6.3 August and 6.4 est.

Indonesia eyes downstream tin industry boost before making export ban decision

• Indonesian officials are looking to boost its tin ingot processing industry from 5% to 50%.
• The Government is currently carrying out an audit to weigh up its options as a refined tin exporter.
• The move follows Joko Widodo’s plans to move Indonesia further up the commodities value chain by banning all raw commodity exports eventually.
• Officials have not yet announced a planned date for the export ban.
• It’s decision to ban nickel ore has been seemingly successful to date, with investment into domestic nickel refining plants currently underway.

Belarus – Belarus says no mobilisation planned despite summoning citizens to check their eligibility for military service

• Do we believe anything the Belarus government has to say? No!
• Should we prepare for an exodus of young men from Belarus? Yes!.

Social media is changing the world as the youth start to challenge the old guard in Russia, Iran, Belarus and other autocracies

• Social media sparked the Arab Spring revolutions
• Social media has also given confidence to 200,000-300,000 Chinese people to withhold their mortgages and effectively force the government to push for the completion of the apartments they were paying for while accelerating the restructuring of highly indebted construction companies.
• Social Media has undoubtedly played its part in Ukraine resistance and the mass exodus of young men out of Russia dodging their conscription.
• Now social media is fuelling massive demonstrations in Iran
• It feels as if the world may be on the verge of substantial change driven by dissatisfied youth fuelled by largely uncensored social media reporting
• If Russia is pushed out of Ukraine, is severely weakened in its military capacity and sees regime change to more moderate governance, then much of the rest of the world may also change.

Currencies

US$0.9820/eur vs 0.9838/eur yesterday. Yen 149.47/$ vs 149.01/$. SAr 18.196/$ vs 18.025/$. $1.127/gbp vs $1.132/gbp. 0.629/aud vs 0.629/aud. CNY 7.224/$ vs 7.196/$.

Dollar Index 112.03 / -0.77% on week

Commodity News

Precious metals:

Gold US$1,639/oz vs US$1,652/oz yesterday

Gold ETFs 96.2moz vs US$96.2moz yesterday

Platinum US$897/oz vs US$920/oz yesterday

Palladium US$2,025/oz vs US$2,016/oz yesterday

Silver US$18.58/oz vs US$18.74/oz yesterday

Rhodium US$14,100/oz vs US$13,800/oz yesterday

Base metals:

Copper US$ 7,414/t vs US$7,485/t yesterday

Aluminium US$ 2,184/t vs US$2,230/t yesterday

Nickel US$ 22,055/t vs US$21,470/t yesterday

Zinc US$ 2,878/t vs US$2,847/t yesterday

Lead US$ 1,984/t vs US$2,039/t yesterday

Tin US$ 19,575/t vs US$19,650/t yesterday

Energy:

Oil US$90.6/bbl vs US$92.1/bbl yesterday

• Crude oil prices fell on comments that the US administration would authorise a further crude release of 10-15mb from the Strategic Petroleum Reserve.
• European energy prices edged lower as warmer weather and high winds reduce gas demand, despite further threats from Gazprom’s CEO that it would halt gas supplies into Europe if the price of gas imports was capped.

Natural Gas US$5.745/mmbtu vs US$5.917/mmbtu yesterday

Uranium UXC US$51.50/lb vs US$51.00/lb yesterday

Bulk:

Iron ore 62% Fe spot (cfr Tianjin) US$92.4/t vs US$92.0/t

Chinese steel rebar 25mm US$557.0/t vs US$561.1/t

Thermal coal (1st year forward cif ARA) US$270.0/t vs US$270.0/t

Thermal coal swap Australia FOB US$393.0/t vs US$393.0/t

Coking coal swap Australia FOB US$291.0/t vs US$291.0/t

Other:

Cobalt LME 3m US$51,955/t vs US$51,955/t

NdPr Rare Earth Oxide (China) US$93,781/t vs US$94,844/t

Lithium carbonate 99% (China) US$72,741/t vs US$73,027/t

China Spodumene Li2O 5%min CIF US$5,640/t vs US$5,640/t

Ferro-Manganese European Mn78% min US$1,213/t vs US$1,215/t

China Tungsten APT 88.5% FOB US$32.0/kg vs US$32.0/kg

China Graphite Flake -194 FOB US$860/t vs US$860/t

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

Europe Ferro-Vanadium 80% 30.75/kg vs US$30.75/kg

China Ilmenite Concentrate TiO2 US$312/t vs US$313/t

Spot CO2 Emissions EUA Price US$66.8/t vs US$66.9/t

Brazil Potash CFR Granular Spot US$650.0/t vs US$650.0/t

Green Energy News

H2 Green Steel raises €260m to build plant in northern Sweden

• H2 Green Steel has closed its latest funding round, raising €260m to build a green hydrogen-powered steel plant in northern Sweden.
• Green steel utilises reactions in an electric arc furnace (EAF) to create fossil-fuel free steel.
• Earlier this year, the company reported that Hitachi Energy had taken a stake in the company.
• H2 aim to start production in the second half of 2025 and have a target of producing 5mtpa by 2030.
• For the EAF process to work at an optimum level, a high-quality iron ore concentrate feedstock is required with low levels of impurities.
• CEO Henrik Henriksson commented: “Northern Sweden is among the right places in Europe to do the green iron part of the steelmaking process. Here you have access to infrastructure grids and renewable energy at favourable long term costs.”
• Beowulf Mining* (Beowulf Mining PLC (AIM:BEM)) is currently developing its Kallak magnetite project in northern Sweden – which hosts a particularly clean concentrate that should enable steel makers to reduce carbon emissions, improve energy efficiency and reduce waste leading to cleaner and greener steel production.
• The project is also ~120km southwest of the giant Kiruna iron ore mine which LKAB claims to be the first source of green iron in the Europe.
• We see Beowulf as perfectly positioned to service the Swedish Green steel industry given the high-quality magnetite product and close location to H2’s facilities which reduces the overall scope 3 emissions for H2.

*SP Angel acts as nomad and broker to Beowulf Mining

Company News

Aura Energy Ltd (ASX:AEE, AIM:AURA)* 15p, Mkt Cap £80m – Completion of resource-enhancement drilling at the Tiris uranium development project in Mauritania

• Aura Energy reports that it has now completed its 10,000m programme of resource-enhancement drilling at Tiris and that it expects to complete an updated mineral resources estimate by the end of 2022.
• The programme aims to upgrade the “Inferred resources of 26.3m lbs at 100ppm U3O8 cut-off within Tiris East into Measured or Indicated status, and to identify further exploration targets within the tenure”.
• Acting CEO, Dr. Will Goodall, explained that the completion of the drilling “is a key milestone in developing Tiris, and it is aligned with our objective to achieve uranium production by 2025”.
• He also clarified that this quarter Aura Energy expects “to finalise key negotiations with the Mauritanian government, which remains very supportive of Tiris”.
• Aura Energy explains that historically infill drilling has been able to convert around 65% of inferred resources to the higher Measured and/or Indicated level and that it has also “consistently discovered additional mineralisation when drilling areas with high surface radiometric signature. Together, and assuming this trend continues, our objective of having identified sufficient U3O8 resources to support a 2-4Mlbs pa operation within 5 years should be achieved”.
• Aura Energy expects to take a Final Investment Decision during Q1 2023 and “also provide cost estimates and indicative economic analysis for an expansion to a target of between 2 and 4 million lbs U3O8 per year”.
• Current capital and operating cost estimates demonstrate the low cost nature of the Tiris project with an estimated capital cost of US$74.8m and C1 costs of US$25.43/lb of U3O8 for the initial 800,000lbs pa project.
• The company also reiterates its previously announced conclusion that pilot plant testing has confirmed that grade increases of “500-600% … [are achievable through upgrading using simple screening of the ore] … while retaining 90% of the uranium”.
• The company also reconfirms that it is developing the Tiris flowsheet in order to “recover a by-product vanadium pentoxide from our proposed 800klbs project, with the expectation of operating cost savings” accruing to the uranium product.

Conclusion: The completion of its infill drilling positions Aura Energy to deliver an upgraded mineral resource estimate capable of expanding the planned annual uranium production rate at Tiris from the currently envisaged 800,000lbs/year rate ultimately to reach 2-4m lbs per year. We look forward to the updated mineral resources estimate which is expected by the end of 2022 as well as to further insight into the expansion plans.

*SP Angel acts as Nomad and Broker to Aura Energy

Antofagasta PLC (LSE:ANTO)* 1,079.5p, Mkt Cap £11bn – Improved water availability at Los Pelambres helps increase copper production

• Antofagasta reports that improved water availability at its Los Pelambres mine in Chile has helped deliver a 40% quarter-on-quarter increase in copper output to 181,900t during the 3 months ending 30th September 2022.
• Quarterly cash costs of US$2.12/lb before by-product credits bring the year-to date costs to US$2.27/lb which are “29.7% higher than in the same period last year mainly due to the temporary decrease in production in H1 and higher input prices during the period, particularly for diesel and sulphuric acid.” Antofagasta says that “Other inflationary pressures were largely offset by the weaker Chilean peso”.
• After by-product credits, net cash costs were US$1.66/ln for the quarter and US$1.76/lb on a year-to-date basis representing “a 12.6% decrease compared with the previous quarter and 53.0% higher than the same period last year, respectively” and reflecting “the increase in cash costs before by-product credits and lower by-product credits due to lower by-product production”.
• The improved output, which includes a near-doubling of output from Los Pelambres where the additional water allowed increased throughput and “the movement of the concentrates that were temporarily stockpiled in June”, as well as the benefits of “higher grades at Centinela Concentrates” brings YTD copper production to 450,600t and keeps Antofagasta “on track to achieve the lower end of our full year production guidance of 640-660,000 tonnes”.
• In July the company revised its 2022 guidance to the 640-660,000t range (previously 660-690,000t) at an expected net cash cost of US$1.65/lb (previously US$1.55/lb) following the impact of the pipeline incident at Los Pelambres and continuing drought conditions which led to water shortages.
• Daily ore throughput at Los Pelambres increased by 46% during the quarter to 160,700tpd (Q2 – 110,100tpd) and with grades broadly stable at 0.61% copper (Q2 – 0.64%), copper output rose by 98% to 87,800t (Q2 – 44,300t). Cash costs, on a net basis, declined by 13% to US$1.19/lb (Q2 – US$1.37/lb.
• The company says that “As at the end of Q3 the Los Pelambres Expansion project was 88% complete, and completion of the desalination plant is expected in H1 2023 and the concentrator expansion in Q1 2023”.
• At Centinela, copper output rose by 12.4% during the quarter to 62,500t bring YTD production to 173,800t with “higher copper grades, slightly offset by lower throughput”.
• Copper in concentrate production from Centinela increased by 12.9% during the quarter to 37,600t with copper cathode output rising by 12.2% to 24,900t.
• The company explains that “Production for the year-to-date was 173,800 tonnes, 14.3% lower than in the same period last year, due to expected lower ore grades at Centinela Concentrates”.
• Cash costs, before by-product credits at Centinela declined by 7.1% to US$2.47/lb with by-product credits from copper and molybdenum, contributing “$0.55/lb compared with $0.63/lb in Q2”.
• The Autocoya mine increased quarterly copper production by 11.1% to 21,000t (Q2 – 18,900t) with cash costs of US$2.40/lb bringing YTD output to 57,400t at a cash cost of US$2.47/lb (2021 YTD – 57,700t at US$2.05/lb).
• The Zaldivar mine produced 10,600t of copper at an average cost of US$2.55/lb during the quarter (Q2 – 11,000t at US%2.18/lb) bringing the YTD total to 33,100t at a cost of US$2.27/lb (2021 – 31,600t at US$2.42/lb). The company says that the increased quarterly costs were “primarily due to lower production, higher sulphuric acid consumption and the payment of a one-off signing bonus following the successful completion of a new 3-year labour agreement”.
• Commenting on the company’s growth projects, Antofagasta says that “at the end of Q3 the Los Pelambres Desalination Plant and Expansion projects, including design, procurement and construction, were 88% complete”.
• The company also says that the “Expected completion of the Los Pelambres concentrator plant expansion in Q1 2023 remains unchanged, as is the estimated total capital cost of the Los Pelambres Expansion project”.

Conclusion: Access to higher volumes of water has helped Antofagasta to increase its copper output by around 40% during the quarter and keeps it on t rack to achieve the lower end of its revised 640-660,000t guidance range for 2022 copper output.

*An SP Angel mining analyst has previously visited a number of Antofagasta’s copper mines.

BHP Group Ltd (LSE:BHP, ASX:BHP) 2,152.5p, £46bn – Quarterly operations review leaves production and cost guidance intact.

• In its operational review for the 3 months to 30th September 2022, BHP reports a strong start to the financial year and confirms its existing production and cost guidance.
• CEO, Mike Henry, explained that BHP expects “global macro-economic uncertainty in the short term to continue to affect supply chains, energy costs, labour markets and equipment and materials availability” but he said that “BHP remains well positioned, with a portfolio and balance sheet to withstand external challenges and a strategy positioned to benefit from the global mega-trends of decarbonisation and electrification”.
• Quarterly iron ore output from the WA operations increased by 3% to 63.9mt leaving annual guidance unchanged in the range 246-256mt with an additional 1.1mt from the Samarco operation in Brazil which is expected to deliver full year output of 3-4mt.
• The company says that ramping up of the South Flank iron ore operation to 80mtpa capacity “remains on track” although BHP explains that “Natural variability in the ore grade is expected as the mine progresses through the close to surface material, however this is expected to stabilise as we move deeper into the ore body and achieve full ramp up”.
• The output at Samarco “reflected continued production of one concentrator, following the recommencement of iron ore pellet production in December 2020”.
• Copper production rose by 9% compared to the equivalent quarter last year to 410,100t with production guidance for the year in the range 1.635-1.825mt “with production weighted toward the second half of the year”.
• The Escondida mine (BHP 57.5%) produced 203,100t of copper in concentrate and an additional 49,600t of copper cathode benefitting from “higher concentrator feed grade of 0.83 per cent compared to 0.73 per cent in the September 2021 quarter. Guidance for the 2023 financial year remains unchanged at between 1,080 and 1,180 kt”.
• The wholly-owned Pampa Norte copper mine produced 28,600t of copper in concentrates plus 42,000t of cathode while Antamina (33.8% BHP) generated 37,100t of copper in concentrates and cathode output from the 100% owned Olympic Dam mine in Australia was 49,700t.
• BHP explains the 68% rise in copper output from Olympic Dam compared to the September quarter 2021 as the result of “the September 2021 quarter having included the SCM21 major smelter maintenance campaign. Strong smelter performance resulted in record gross anode2 production in the September 2022 quarter, however copper cathode production was constrained by planned annual refinery maintenance”.
• Metallurgical coal production “was marginally lower than the prior period at 7 Mt (13 Mt on a 100 per cent basis) despite record wet weather during the September 2022 quarter and ongoing labour shortages”. BHP says that these “impacts have been largely offset by an inventory drawdown, and the continued ramp up of autonomous haul truck fleets at Goonyella”.
• Guidance for metallurgical coal output is maintained at “between 29 and 32 Mt (58 and 64 Mt on a 100 per cent basis).”
• Energy coal output from the operations in New South Wales “decreased by 38 per cent to 3 Mt, reflecting the ongoing impacts of significant wet weather with more than three times the amount of rainfall than the prior year, continued labour shortages impacting stripping performance and mine productivity, and an increased proportion of washed coal”.
• Energy coal guidance for the full year remains in the range 13-15mt.
• Nickel West “production increased by 16 per cent to 21 kt, reflecting the completion of planned maintenance across the supply chain in the prior period. Guidance for the 2023 financial year remains unchanged at between 80 and 90 kt, weighted to the second half of the year due to planned smelter maintenance in the December 2022 quarter”.
• In a brief reference to the Canadian Jansen potash project which the company has previously said is expected to reach production in 2027 at a design rate of 4.35mtpa, BHP describes the project as now 11% complete and Mr Henry said that it is “tracking well, with work ongoing to bring forward first production from Jansen Stage 1 and accelerate Jansen Stage 2”.
• BHP reports exploration expenditure of US$73m during the quarter. The company says that it has extended its exploration agreement with Midland Exploration for nickel exploration in Nunavik by a further year until August 2023.
• The company also confirms that at “Oak Dam in South Australia, BHP is continuing next stage resource definition drilling with six drill rigs”. Previous company announcements have described the Oak Dam drilling encountering “high grade mineralised intercepts of copper, with associated gold, uranium and silver”.

Conclusion: BHP reports a strong start to its FY 2023 with production guidance maintained across all commodity products. Although BHP expects short-term economic uncertainty to affect supply chains, energy costs and labour and equipment supply it asserts that it has the financial resilience, asset portfolio and strategy “to benefit from the global mega-trends of decarbonisation and electrification”.

Culpeo Minerals Ltd (ASX:CPO)* A$0.125, Mkt cap A$7.5m – Phase-2 drilling commences at Lana Corina

• Culpeo reports that it has commenced Phase-2 drilling at its Lana Corina Project, testing district targets within a 1km structural trend.
• The drill program will consist of 9-10 holes for approximately 5,000m and follow on from previous results, with highlights:
• 257m @ 0.95% Cu & 81ppm Mo in CMLCD002 from 170m
• 173m @ 1.05% Cu & 50ppm Mo in CMLCD003 from 313m
• 104m @ 0.74% Cu & 73ppm Mo in CMLCD001 from 155m
• 89m @ 1.06% Cu & 145ppm Mo in CMLCD005 from 302.1m
• 113m @ 0.60%Cu & 122ppm Mo in CMLCD009 from 331m
• Last week, Culpeo announced its intention to raise $2.14m in order to explore multiple targets at Lana Corina.

*An analyst at SP Angel holds shares in Culpeo Minerals

Lepidico Ltd (ASX:LPD) A$0.02, MKt Cap A$140m – Pilot trials demonstrate feasibility of LiOH production

• The Company completed the demonstration and pilot scale trials on processing of lepidolite minerals (lithium bearing mica) confirming the Phase 1 L-Max and LOH-Max design.
• Tests were carried by Strategic Metallurgy in Perth, WA, and run since late 2021.
• Third party tests on LiOH produced using the L-Max and LOH-MAX technology are reported to satisfy battery grade specifications with lithium “crystals produced (being) much more pure than that produced from the sodium sulfate route”.
• Testwork showed feasibility of production of caesium, rubidium and sulfate of potash by products.
• The Company submitted two trial plant reports on production of LiOH and by-products to an independent engineering company (Behre Dolbear Australia) to verify results.
• Behre Dolbear technical due diligence is part of the finalising project lending with International Development Finance Corporation.
• The Company is testing its proprietary lithium-bearing mica processing technology (L-Max and LOH-Max) to treat lepidolite concentrate from its planned open pit mining operations at Namibia.
• The Karibib asset hosts 11.2mt at 0.43% Li2O for ~120kt LCE in total resource including 6.7mt at 0.46% Li2O for 76kt LCE in reserves.
• The plan to treat concentrate ore in Namibia using conventional flotation process, transport concentrate to UAE where L-Max and LOH-Max chemical conversion process using sulphuric acid is used.
• Phase 1 is based on ~4.9ktpa LiOH (7.1 LCE including SOP and caesium sulphate by-products) with first production targeted for 2024.

Shanta Gold Limited (AIM:SHG, OTC:SAAGF) 12.5p, Mkt Cap £131m – Potential takeover offer

• The Company said it received approaches from three companies regarding a potential takeover of Shanta.
• Three companies involved at Shandong Gold, Yintai Gold and Chaarat Gold.
• The Company added that any offer from Yintai is also “likely to be solely in cash”.
• Company shares are trading ~40% higher compared to pre-announcement levels.

Talga Group (ASX: TLG) A$1.2, Mkt Cap A$364m – Talga received ISO certification for its EV Li-ion battery anode plant and office in Luleå, Sweden

• Talga reports the award of ISO certification for its EV Li-ion anode plant in Luleå, Sweden
• Talga also recently signed a deal with ACC ‘Automotive Cells Co.’ for the supply of its Talnode®-C, from its Vittangi Anode Project
• Talga will supply ACC with 60,000t of Talnode®-C over a 5-year term to ACC which is co-owned by Mercedes and Stellantis.
• Production is expected to ramp up over 2023 – 2025 to 60,000t in 2026.

Zijin Mining (HKG: 2899) HK$7.61 mkt cap HK$221bn (US$28.4bn) – Zijin to buy Rosabel Gold Mine in Suriname for $360m

• Zijin Mining has reached an agreement to purchased IAMGOLD’s interest in the Rosabel Gold Mine for $360m cash.
• Zijin will acquire a 95% interest in the project, with the remaining 5% held by the Government of Suriname.
• The mine is a series of open pits, with ore subject to gravity circuit and then leaching.
• The mine produces around ~200koz of gold per annum, with cash costs in Q2 2022 of $1,327/oz and gold reserves at the end of 2021 of 2.47Moz.
• Last week, Zijin have agreed to pay CNY4bn ($554m) to acquire 30% equity interest in Ruiyin Mining, who wholly own the Haiyu gold mine, offshore in northern Sanshandao, Laizhou City, Shandong Province.
• The mine is the largest development stage mine in China, with a recoverable gold resource of ~20Moz @ 4.2g/t.
• Ruiyin is investing US$834m to build the deep seabed mine, scheduled to be finished by 2025

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

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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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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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