SP Angel . Morning View . Monday 19 12 22
Base metals rally as Beijing supports China growth and Japan and EU PMIs pick up
MiFID II exempt information – see disclaimer below
Anglo Asian Mining PLC (AIM:AAZ, OTC:AGXKF)* – BUY – Gilar mineral resource shows 135,000oz gold, 21,500t copper and 23,000 zinc
Jubilee Metals Group PLC (AIM:JLP, JSE:JBL, OTC:JUBPF) – Operational progress in Zambia
Rio Tinto PLC (LSE:RIO) – Acquisition of Turquoise Hill complete
Tirupati Graphite PLC (LSE:TGR, OTCQX:TGRHF) – Suni Resources acquisition update
Tirupati Graphite PLC (LSE:TGR, OTCQX:TGRHF) – New mineral reserve and resource estimates for Hemerdon
Copper ticks up as Beijing moves to support China’s growth in 2023 and Panama and Peruvian politics threaten supply
- Copper rallied 1.8% from Friday’s lows, hitting the $8.400/t mark this morning.
- China saw its Central Economic Work Conference conclude on Friday, with a central message of supporting the private sector and reviving consumption to stimulate growth.
- Concerns are mounting over rising infections, with 2 official deaths being reported by officials.
- Short term supply is weakening, with global inventories ticking lower over the past week and futures strengthening out of contango, suggesting more ample physical available.
- Yangshan cathode premiums are continuing to fall, however, pointing to weaker Chinese physical demand.
- Analysts are weighing up the implications of Panama’s decision to cease FQM’s operations at the Cobre mine which supplies 1.5% of global output.
- Boluarte continues to reshuffle the Peruvian cabinet, with Prime Minister Angulo removed yesterday as she bids gain approval for early elections. Peru produces close to 10% of global copper output.
- The Country remains in a state of national emergency with protestors continuing throughout the weekend.
- Shanghai brokers remain net-long on copper contracts, although they are short January futures.
- Panama puts First Quantum’s Cobre Panama copper mine on care and maintenance while it works out its tax arrangements
- Sounds like First Quantum are playing hard ball over an agreed US$375m tax payment
- The mine produced some 331,000t of copper last year
- Cochilco estimates Chilean copper output to fall to 16-year low.
- Copper output fell to 6.7% YTD to 3.9mt in October
- 2023 is forecast to recover 7.5%
Lithium - China claims to have world’s largest lithium resource – but it may not be true
- CATL subsidiary Yichuan Times New Energy Mining Co. is reported to have bid $124m for exploration rights covering 6.44sqkm in Jianxiawo April 2022
- The deposit is described as ceramic clay in Zhenkouli-Fengxin County Jianxiawo Mining Area, Yifeng County, Jiangxi Province.
- The inferred porcelain clay mineral resource of 960mt are said to have the potential to yield 2.66mt of lithium metal oxide.
- A news report suggests the authorities have blocked an application to store tailings from the mine which if true would almost certainly kill the project.
- CATL to build a lithium battery manufacturing hub in the vicinity – signed a cooperation agreement with Yichun municipal government.
- Some years ago when iron ore prices were higher than Chinese industry would have liked, China Inc put out stories of huge iron ore deposits and mines in China.
- While there are many giant iron ore deposits in China and there are some higher cost open cast strip mines mining lower grade iron ore there were and are no iron ore mines that are able to compete with Rio’s, BHP’s and Fortescue’s giant mines in the Australian Pilbara.
- In short we see the story as a probable red herring from a nation which likes to produce a big, fat, red herring on occasions when prices go against them.
Chinese nickel king of short squeeze fame commits to LME trading with new Indonesian refining plant
- Tsingshan, owned by ‘Big Shot’ who was at the helm of the infamous short squeeze on LME this year, plans to build a 50ktpa nickel plant in Sulawesi, Indonesia.
- The move reflects the steelmaker’s desire to deliver nickel products to LME warehouses, which require refined metal.
- Bloomberg reports the plant is expected to come into production next July, capacity may be doubled.
- Rival producers Zhejiang Huayou and CNGR Advanced Material are both eyeing similar plants in Indonesia and China.
- The moves reflect nickel players’ expectations of continuing trading on the LME, which has suffered from a lack of client confidence and liquidity since the squeeze.
Gold flatlines as market weighs implications of higher Fed rates next year
- Gold prices have moved back to $1,800/oz levels, having weakened on Friday to the $1,775/oz mark.
- Hawkishness from major central banks last week weighed on prices, but the gold market has benefited from a peak in inflation and a weaker dollar.
- The dollar continues to fall, down 8.7% since highs reached towards the end of October.
- US 10 year yields have ticked higher to 3.52%, climbing 10bp. Bond buyers have been taking advantage of higher yields since the release of Tuesday’s inflation reading.
- Gold ETFs bought £318m worth of gold, 177,397 troy ounces on Friday, the most since June 17th.
Dow Jones Industrials -0.85% at 32,920
Nikkei 225 -1.05% at 27,238
HK Hang Seng -0.50% at 19,353
Shanghai Composite -1.92% at 3,107
Economics
When will Central banks set, new and more realistic targets assuming China will have a lesser deflationary impact on manufactured products.
Rates:
- US Fed 4.5% up 0.5% this week,
- BoE 3.5% up 0.5% this week
- ECB 2.5% up 0.5% this week
- Saudi Arabia 5% up 0.5% this week
- Switzerland 1% - unchanged,
- Norway 2.75% - unchanged
- Russia 7.5% - unchanged
US S&P - Manufacturing PMI 46.2 in December vs 47.7 in November,
- Services PMI 44.4 in December vs 46.2 in November
- Composite PMI 44.6 in December vs 46.4 in November
- Weekly jobless claims 211k from 231k previously
- Retail sales fell 0.6% in November vs 1.3% in October and 6.5% yoy in November vs 8.3% in October
- Retail sales ex auto -0.2% in November vs 1.3% in October
- Industrial production -0.2% in November vs -0.1% and 2.5% yoy in November vs 3.3% in October
- Manufacturing output -0.6% in November vs 0.3% and 1.2% yoy in November vs 2.4% in October
- Capacity utilisation 79.7% in November vs 79.9% in October
- NY Empire State manufacturing index -11.2 in December vs 4.5 in November
- Philadelphia Fed manufacturing index -13.8 in December vs -19.4 in November
China – Chongqing city allows residents with mild Covid symptoms to go to work in key policy shift
- Chongqing has become the first Chinese city to allow people exhibiting mild Covid-19 symptoms to go to work as normal as the government continues to retreat from its strict zero-Covid strategy that sparked mass protests.
- The government of Chongqing also encouraged asymptomatic individuals not to take tests or medicines.
- Retail sales fell a massive 5.9% yoy in November vs -0.5% yoy in October
- Industrial production rose 2.2% yoy in November vs 5% in October
- House price index -1.6%yoy in November vs -1.6% in October
- Fixed asset investment ex-rural rose 5.3% ytd yoy vs 5.8% in October
- 10 nonferrous metal output rose 8.8% to 5.88mt and 4.2% ytd to 61.81mt
- Aluminium output rose 9.4% to 3.41mt and 3.9% ytd to 36.77mt representing ~62% of global output (Chinese National Bureau of Statistics)
Japan - Manufacturing PMI slipped to 48.8 in December vs 49.0 in November
- Services PMI 51.7 in December vs 50.3 in November
- Composite PMI 50.0 in December vs 48.9 in November
- Trade deficit Y2,027bn in November vs 166bn in October
- Exports rose 20% yoy
- Imports +30.3% yoy.
EU - Manufacturing PMI 47.8 in December vs 47.1 in November
- Services PMI 50.0 in December vs 48.8 in November
- Composite PMI 49.0 in December vs 48.2 in November
- CPI fell -0.1 in November vs a rise of 1.5% in October and 10.1% yoyo in November vs 10.6% yoy in October
- The data indicates the EU can go slow on raising interest rates
Germany - Manufacturing PMI 47.4 in December vs 46.2 in November
- Services PMI 49.0 in December vs 46.1 in November
- Composite PMI 48.9 in December vs 46.3 in November
- WPI -0.9% in November vs -0.6% in October and 14.9% in November vs 17.4% yoy in October
- Nov car registrations rose 23.5% yoy in November vs 16.8% in October
France - Manufacturing PMI 48.9 in December vs 48.3 in November,
- Services PMI 48.1 in December vs 49.3 in November
- Composite PMI 48.0 in December vs 48.7 in November,
- CPI rose 0.3% in November vs 0.1% in October but was unchanged at 6.2% yoy
UK - Manufacturing PMI 44.7 in December vs 46.5 in November
- Services PMI 50.0 in December vs 48.8 in November
- Composite PMI 49.0 in December vs 48.2 in November
- GfK consumer confidence fell to -42 for December vs -44 in November
- Retail sales fell 0.4% in November vs +0.9% in October but held steady at -5.9% yoy
- Car registrations rose 23.5% yoy as more vehicles rolled off production lines
Australia – Coal overtakes iron ore as top export earner this financial year
- High energy prices have pushed the value of Australia’s resource exports to hit a record $549bn this year, vs an expected $450bn by the government.
- Australia’s combined coal exports are forecast to earn $132bn in 2022-23, with prices exceeding US$400/t earlier in the year.
- Iron ore export earnings fell to $113bn from $133bn on lower prices amid a slowing housing market in China.
Ghana suspends payments on several debt service payments, including Eurobonds amid restructuring
- Ghana has suspended payments on some categories of its external debt, according to the Ministry of Finance.
- The suspension includes payments on Eurobonds, commercial term loans and other bilateral debts.
- The Minister notes that ‘emergency measures are necessary to prevent a further deterioration in the economic, financial and social situation in Ghana.’
- Ghana had announced an extension on Saturday of its local debt exchange program to December 30th.
- The Country agreed a $3bn bailout from the IMF on last Tuesday, however this still requires approval from the IMF board.
- Ghana’s Cedi is the world’s worst performing currency this year, according to Bloomberg.
South Africa - Ramaphosa shrugs off corruption scandal by winning ANC vote
- Cyril Ramaphosa has won re-election as head of the ANC despite a sandal involving cash in a sofa at his game farm.
- Ramaphosa beat Zweli Mkhize 2,476 votes to 1,897 votes.
- South Africa continues to struggle with a weak economy and 32.9% unemployment rates, with an energy crisis that continues to wreak havoc on investor confidence.
Currencies
US$1.0641/eur vs 1.0633/eur last week. Yen 135.94/$ vs 137.08/$. SAr 17.508/$ vs 17.559/$. $1.220/gbp vs $1.218/gbp. 0.672/aud vs 0.669/aud. CNY 6.974/$ vs 6.971/$.
Dollar Index: 104.26 vs 104.47 last week.
Commodity News
Precious metals:
Gold US$1,796/oz vs US$1,776/oz last week
Gold ETFs 94.1moz vs US$93.9moz last week
Platinum US$1,005/oz vs US$1,000/oz last week
Palladium US$1,734/oz vs US$1,800/oz last week
Silver US$23.38/oz vs US$22.77/oz last week
Rhodium US$12,300/oz vs US$12,400/oz last week
Base metals:
Copper US$ 8,359/t vs US$8,302/t last week
Aluminium US$ 2,386/t vs US$2,410/t last week
Nickel US$ 28,370/t vs US$28,260/t last week
Zinc US$ 3,038/t vs US$3,132/t last week
Lead US$ 2,156/t vs US$2,155/t last week
Tin US$ 23,400/t vs US$23,250/t last week
Energy:
Oil US$79.0/bbl vs US$80.8/bbl last week
- Crude oil prices remain below $80/bbl despite news of a 3mb crude purchase for February by the US SPR, which has released c.180mb over the course of 2022.
- European energy prices dropped as milder weather boosted temperatures across the continent.
- The US Baker Hughes rig count fell by four to 776 rigs last week, with oil rigs down 5 to 620 rigs and gas rigs up 1 to 154 rigs, with the shale industry continuing to point to labour shortages and service constraints.
Natural Gas US$6.190/mmbtu vs US$6.605/mmbtu last week
Uranium UXC US$48.15/lb vs US$48.15/lb last week
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$108.9/t vs US$111.5/t
Chinese steel rebar 25mm US$581.0/t vs US$582.9/t
Thermal coal (1st year forward cif ARA) US$225.0/t vs US$225.0/t
Thermal coal swap Australia FOB US$370.0/t vs US$375.0/t
Coking coal swap Australia FOB US$275.0/t vs US$275.0/t
Other:
Cobalt LME 3m US$51,955/t vs US$51,955/t
NdPr Rare Earth Oxide (China) US$100,014/t vs US$99,343/t
Lithium carbonate 99% (China) US$74,491/t vs US$74,669/t
China Spodumene Li2O 5%min CIF US$6,040/t vs US$6,090/t
Ferro-Manganese European Mn78% min US$1,314/t vs US$1,313/t
China Tungsten APT 88.5% FOB US$320/mtu vs US$320/mtu
China Graphite Flake -194 FOB US$880/t vs US$880/t
Europe Vanadium Pentoxide 98% 7.9/lb vs US$7.9/lb
Europe Ferro-Vanadium 80% 33.25/kg vs US$33.25/kg
China Ilmenite Concentrate TiO2 US$323/t vs US$323/t
Spot CO2 Emissions EUA Price US$90.8/t vs US$90.8/t
Brazil Potash CFR Granular Spot US$510.0/t vs US$530.0/t
Battery News
LG Energy to invest $3.1bn in South Korean battery facility
- LG Energy to invest 4 trillion won from this year to 2026 in a facility making cylindrical batteries for electric vehicles.
- The funds will go into expanding and building new battery production facilities at the Ochang industrial zone, where the company already operates a cylindrical battery production facility.
- Last year, LG announced a $2.3bn JV with General Motors to build a new battery factory in Ohio, which began production in August.
- LG is also planning to build a battery production facility in Ontario with Stellantis, with an expected cost of $4.1bn and a $3.2bn plant to produce cathode, which is used in the manufacture of EV batteries, in Tennessee.
Company News
Anglo Asian Mining PLC (AIM:AAZ, OTC:AGXKF)* 84.7p, Mkt Cap £97m – Gilar mineral resource shows 135,000oz gold, 21,500t copper and 23,000 zinc
BUY
- Anglo Asian Mining have evaluated a new non-JORC mineral resource for the Gilar deposit in Azerbaijan.
- The total estimated resource contains: 3.90mt grading 1.08g/t gold, 0.55% copper and 0.6% zinc.
- Class 1+2 resources contain: 2.41mt grading 1.22g/t gold, 0.62% copper and 0.66% zinc
- Class 3 resources contain: 1.49mt grading 0.86g/t gold, 0.45% copper and 0.52% zinc
- Applied cut-off grades: 0.5 Au eq / Au eq = Au g/t + (Cu% x 1.49) + (Zn x 0.46) + (Ag x 0.01) + (Pb x 0.37)
- The resource has been estimated using JORC guidelines by an independent consultant using results from the stage one drilling.
- Earthworks for the portal for the new decline into the Gilar are underway highlighting the speed at which the Anglo Asian team move once a mineable resource has been confirmed.
- The team will conduct further resource drilling from the underground tunnel and we suspect this will run concurrent with the new Gilar mine development in due time.
- The tunnel will be directed into the lower mineralised zone for access and eventual production.
- Stephen Westhead, Anglo Asian’s principal geologist sees further drilling as increasing the scale of the resource.
- Recent assay results show:
- 67.0m at 2.02g/t Au, 1.6% Cu, 1.6% Zn from 327m (22GLDD118) including higher grade interval 17.8m at 4.31g/t Au, 3.1% Cu and 2.3% Zn from 336m;
- 13.9m at 3.04g/t Au, 2.7% Cu, 1.1% Zn from 198m (22GLDD103);
- 50.4m at 2.54g/t au, 1.4% Cu, 0.8% Zn from 342m (22GLDD112);
- 57.5m at 2.24g/t Au, 1.2% Cu, 1.0% Zn from 346m (22GLDD116).
Conclusion: The Anglo Asian team are fast tracking the new resource at Gilar into development to bridge the gap between declining grades at the Gedabek mine and the development of the company’s larger, new concessions. The news highlights the ability of the Anglo Asian team in the discovery, delineation and rapid development of new resources on their concessions near the Gedabek copper, gold mine.
*SP Angel acts as nomad and broker to Anglo Asian Mining
Jubilee Metals Group PLC (AIM:JLP, JSE:JBL, OTC:JUBPF) – 10. 5p, Mkt cap £280m – Operational progress in Zambia
- Jubilee Metals reports that it has completed improvements to its water management systems at its Roan project in Zambia where the company’s copper concentrator had been “severely hampered … [in] … its ability to operate at design throughput levels … [by] … water supply interruptions”.
- The company says that the “installation of the new dedicated water infrastructure and upgraded power and feed supply infrastructure have been completed successfully with the restart of operations back to nameplate capacity”.
- Jubilee Metals also reports what it describes as “significant progress” at the company’s Sable Refinery where it is implementing “new extractive methods for the recovery of copper and cobalt from historical waste”.
- Trials of direct leaching at the Sable Refinery “have been extremely effective and not only allow for significantly lower operating costs, but also for Sable to produce copper from mixed materials such as copper sulphide and copper oxide ores” and the company expresses confidence that “this new approach to extraction offers significant growth opportunities in the country”.
- Jubilee Metals’ previously announced target is to produce “50 tonnes of contained cobalt metal which is the equivalent of approximately 220 tonnes of final product, before ramping up to the 1 200 tonnes of contained cobalt metal annual capacity, which equates to some 5 280 tonnes of final product” and the company confirms that cobalt production “from waste remains in-line with management’s expectations”.
- Expressing satisfaction with the progress in Zambia, CEO, Leon Coetzer, confirmed that Jubilee Metals has “brought the entire Southern Copper Strategy into nameplate production and next quarter will see a new source of revenue for Jubilee in the form of first sales for our cobalt production”.
- He also explained that “As we conclude 2022, we now focus our attention on unlocking the potential of our Northern Refining Strategy in Zambia”.
Rio Tinto PLC (LSE:RIO) – 5,616p, Mkt cap £70bn – Acquisition of Turquoise Hill complete
- Rio reports that the acquisition of Turquoise Hill Resources has now been completed, meaning the company holds a 66% direct interest in the Oyu Tolgoi copper mine in Mongolia, while the remaining 34% is owned by the Mongolian Government through Erdenes Oyu Tolgoi.
- Rio’s final offer of $US3.3bn was accepted in December and Rio Tinto was finally granted approval to acquire the remaining 49% of Turquoise Hill.
- Oyu Tolgoi is expected to produce around 500,000 tonnes of copper per year on average from 2028 to 2036 from the open pit and underground, and an average of around 350,000 tonnes for a further five years.
- The capital forecast for the project is $7.06bn, and by 2030 the mine is expected to be the fourth largest copper mine in the world.
Tirupati Graphite PLC (LSE:TGR, OTCQX:TGRHF) 36.25p Mkt Cap £36m – Suni Resources acquisition update
- Tirupati provides clarification in its acquisition of Suni Resources over shareholder loans amounting to A$29m owed by Suni to Battery Minerals group.
- Tirupati comments that it will not be assuming any external debt as a result of the acquisition, and it will not have any obligation in respect of repayment of or the payment of interest in respect of any third party debt upon completion as a result of the acquisition of Suni Resources.
- On completion, the debt assigned to Tirupati by Battery Minerals group companies shall on completion become an intra group debt within the enlarged TG group owed by Suni Resources to Tirupati.
- Suni Resources holds the Balama Central and Montepuz projects licensed for construction for graphite flake production in Mozambique.
- Construction at Montepuz for a 50,000tpa module has been started by Battery Minerals.
- The two projects have c.152mt of JORC reserves and resources with c. 13mt of flake graphite.
Tungsten West PLC (AIM:TUN) – 15p, Mkt cap £26.5m – New mineral reserve and resource estimates for Hemerdon
- Tungsten West has unveiled updated estimates of both ore reserves and mineral resources at the Hemerdon tungsten project in Devon.
- The new estimates form an important part of the company’s current feasibility study for the resumption of mining where the company has previously indicated that it expects to restart mining in the second half of next year.
- The new estimates show a 60% increase in ore tonnage and a 10% rise in the contained metal within the ore reserve compared to the previous, 2021 estimate as well as a 7% higher resource tonnage containing 1% more metal compared to the 2021 report.
- The total reserve estimate, prepared independently by consultants, Mining Plus, and predominantly hosted in granite, amounts to 101.2mt at an average grade of 0.14% tungsten trioxide and 0.03% tin with approximately 40% (41mt) classified as ‘proved’ with the balance ‘probable’.
- The estimate, which includes 600,000t of stockpiled material produced by the previous operator of the mine, Wolf MInerals prior to 2018 is reported at a cut-off grade of 0.0742% tungsten trioxide equivalent within the granite and 0.0659% for mineralisation within the surrounding killas.
- Tungsten West also releases an internally generated update of the mineral resources estimate at Hemerdon totalling 351.2mt at an average grade of 0.12% tungsten trioxide and 0.03% tin.
- Approximately 12% of the resource (42.8mt at an average grade of 0.16% tungsten trioxide and 0.03% tin) is classified as ‘measured’ with a further 37% (128.6mt at 0.13% and 0.03% tin) identified as ‘indicated’ with the balance of 180.1mt (51%) at an average grade of 0.10% tungsten trioxide and 0.03% tin classified as ‘inferred’.
- In addition, the “2022 Hemerdon MRE retains the previously proposed exploration target from the 2021 MRE for Hemerdon of ~55.7 to 83.5 Mt of granite at a grade of ~0.09 to 0.13% WO3 and ~272 to 408 Mt of killas at a grade of ~0.10 to 0.14% WO3. In reporting the exploration target it should be made clear that the potential quantity and grade is conceptual in nature, that there has been insufficient exploration to estimate a Mineral Resource and that it is uncertain if further exploration will result in the estimation of a Mineral Resource”.
- Commenting on the new reserve and resource estimates, Executive Vice-Chairman, Mark Thompson, said that they highlight “the world class nature of the deposit we have in Devon, which now hosts the second largest tungsten reserve and resource, globally”.
- Mr. Thompson explained that “Within a year of acquiring the Project, we undertook the first exploration drilling programmes in almost 30 years. These programmes had significant success in growing the Mineral Resources and we have complemented that with the development of an enhanced mineral beneficiation flowsheet and energy saving initiatives to reduce our processing costs. These initiatives, in turn, have had a positive impact of the Ore Reserves”.
- Although the deposit at Hemerdon is undoubtedly very large by global standards, it is also relatively low grade (although we note not as low grade as the large North American deposits at Northern Dancer – 0.1% WO3 and Sisson -0.06% WO3). Tungsten West’s plans to use ore sorting technology to enhance the grade should help offset the inherently low grades but we wonder how sensitive the average grades of the reserves and resource are to the applied cut-off grades.
- The newly reported reserves and resources estimates follow the announcement earlier this month of the UK Environment Agency’s award of two of the four key permits required for the resumption of mining and the company’s expectation that the other two key permits are likely to be forthcoming early next year.
Conclusion: Increased ore reserve and mineral resources estimates for Hemerdon should underpin the continuing feasibility studies for the reopening of the mine which is currently expected in the second half of 2023.
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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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