SP Angel . Morning View . Monday 09 01 23
Global commodity inventories continue to slide with nickel and copper near risk of depletion
MiFID II exempt information – see disclaimer below
Anglo Asian Mining PLC (AIM:AAZ, OTC:AGXKF)* - BUY – Follow up investment in Libero Copper & Gold maintaining 20% interest
Beowulf Mining PLC (AIM:BEM)* – Contract awarded for Grafintec PFS
Cobra Resources PLC (LSE:COBR) – Maiden resource estimate for Wudinna rare earth project
KEFI Gold and Copper PLC (AIM:KEFI, OTC:KFFLF)* – 2022 drilling grows Hawiah MRE by 16% to 29mt
Tianqi-led company bids A$136m for Australian lithium developer Essential Metals
Sunrise Resources PLC (AIM:SRES) – Pioche sepiolite project extended following trenching programme
Global commodity inventories continue to slide, nickel and copper near risk of depletion
- Inventories for a wide range of commodities from soft including corn and cotton to metals including zinc, aluminium, copper, and nickel are almost all well below the 5-year median average.
- Nickel inventories are > 70% lower than its previous average, with copper and aluminium the second and third lowest levels.
- Crude, gasoil and US nat gas stocks remain > 10% lower than their previous 5-year averages.
- European Nat Gas breaks the trend, increasing c.10% against the average amid a scramble for Russian alternatives.
Copper jumps to 6-month high on combination of sliding dollar, China reopening and further property stimulus measures
- Copper jumped to $8,750/t this morning alongside other base metals.
- Chinese official Guo Shuqing stated that the Country will resume ‘normal’ growth, with the Party moving to ease its three red lines which have proven so detrimental to the inflated property sector.
- China has been easing Covid restrictions further, with the widescale reopening providing a major headwind to base metals prices.
- The dollar weakened following Non-Farm Payroll data, which came in higher than expectations but provided enough signals of a weakening economy in the US.
- Copper futures climbs towards backwardation on the CMX but remains in contango on LME futures as shorter term supply pictures remain muddied by China’s reopening and previous efforts to stockpile.
- Global inventories remain flat and hover around 2008 lows, 43% lower than the past 5 years’ seasonal average
- Yangshan copper premium has flattened around $37/t, having touched $150/t earlier in October 2022.
- Chilean copper production fell 6.9% in November to 449kt, with Codelco’s production falling 11.7% in Nov yoy to 135.8kt. Glencore and Anglo’s Collahuasi produced 7.9% less in November.
Gold - $1,873/oz – prices rally to June highs on China buying and Dollar weakness as traders bet on Fed easing
- Gold prices rallied to near $1,880/oz following a series of US economic data releases last week.
- The US dollar slid against a basket of major currencies, with NonFarm Payroll data beating expectations but providing early signals of a cooler labour market.
- The Fed’s primary concern has shifted form headline inflation data to the strong US labour market, which is providing cause for concerns over longer-term, sticky inflation.
- Unemployment rates in the US fell to 3.5%, pointing to a healthy American economy, but wage growth slid, fuelling bets on gold in the hope the Fed will take the foot off the accelerator in terms of aggressive rate hikes.
- Central banks continue to hoover up physical bullion, with the People’s Bank of China increasing gold holdings for the second month in a row.
- China has now bought 62t worth of gold over the past two months. Global central bank gold buying hit a record in Q3 as its appeal as a reserve asset is bolstered.
Nickel - Tsingshan commissions new plant with capacity of 1,500tpa when at full bore
Inflation - Food prices ease globally in December but remained 14% higher than 2021
- Food prices fell 1.9% in December last year. (FAO Food Price Index)
- Prices climbed 14.3% yoy in 2022.
- Cooling vegetable oil prices led the ease, alongside palm oil, soil, rapeseed and sunflower seed oils.
- Meat and dairy prices hit their highest level since 1990.
Coal shipments from Australia to China resume following diplomatic spat
- China Energy Investment Corp has ordered the first official Australian coal shipment since 2020 following an import ban initiated by Beijing.
- Both Australian coal miners and Chinese steel mills have not noted any official policy change yet.
- China’s move for Australian coal highlights the increased energy demands from its rapid reopening from Covid restrictions, alongside moving to secure supply following reduced Russian shipments.
- China approved 65GW of new coal power projects in the first 11 months of 2022, more than three times the capacity approved in the whole of 2021 (SCMP).
Dow Jones Industrials +2.13% at 33,631
Nikkei 225 +0.59% at 25,974
HK Hang Seng +1.89% at 21,388
Shanghai Composite +0.58% at 3,176
Economics
US – ISM nonmanufacturing 49.6 in November vs 56.5 in October
- Factory orders fell 1.8% in November vs 1% in October
- Factory orders ex. transport fell -0.8% in November vs 0.1% in October
- Nonfarm payrolls added 223k in December vs 256k in November
- Unemployment 3.5% in December vs 3.6% in November
- Participation rate 62.3% in December vs 62.1% in November
- Private employment 220k in December vs 202 in November
- Manufacturing 8k unchanged
- Government 3k in December vs 54k in November
- Average weekly earnings 4.6% yoy in December vs 5.1% yoy in November
- Average weekly hours 34.3 in December vs 34.4 in November
China - year of the rabbit - so show me the Bunny!
- Lunar new year dates run from Sunday 22nd January to 9th February
- Workers typically get seven days off for the lunar new year but this year many factories are either closed or on reduced working.
- Factories are suffering from reduced orders due to high inventory levels and a slowdown in Western demand
- High Covid and flu sickness rates are also affecting production lines and logistics.
- Covid is almost endemic across China and likely to become a seasonal presence according to experts
- Experts China to catch up with the rest of the world in terms of Covid infection as Covid becomes endemic across the nation.
- Around 8% of Covid infections in China are resulting in pneumonia according to an official at the National Health Commission.
- Omicron strains, BF. 7 and BA. 5.2, are the dominant variants with 16 cases of the new XBB variants which are dominant in the United States, Europe, Singapore and India.
Taiwan – China’s PLS sends 57 aircraft close to Taiwan airspace in high-intensity combat exercise
- The Taiwanese ministry of defense shows the aircraft appearing to form a blockade around the island.
- The exercise appeared to be coordinate the Chinese navy and air force.
- Taiwan’s president has called on China to resume dialogue and ‘Common responsibility’.
Japan - Service PMI 51.1 in December vs 50.3 in November
- Composite 49.7 in December vs 48.9 in November
EU – Manufacturing PMI 42.6 in December vs 43.6 in November
- Flash CPI -0.3% in December vs -0.1% in November and 9.2% yoy in December vs 10.1% yoy in November
- Retail sales 0.8% in November vs -1.5%), yoy -2.8% (-2.7% in October
- Nov economic sentiment 95.8 in November vs 93.7 in October
- Industrial sentiment -1.5 in November vs -2 in October
- Service sentiment 6.3 in November vs 3.1 in October
- Consumer confidence -22.2 in November vs -23.9 in October
Germany - Factory orders fell 5.3% in November vs 0.6% in October
- Retail sales rose 1.1% in November vs -2.8% in October -5.9% yoy in November vs -5.0% yoy in October
- German police to evict climate activists blocking coal mine expansion.
- Police from 14 federal regions of Germany are being sent to the village of Lützerath to evict climate activists who are blocking its demolition. (Euractiv)
- Police horses and dogs, as well as water cannons, are being prepared according to the media. Mrs Thatcher would have been proud!
- The village is being levelled to enable the expansion of the Garzweiler open-pit coal mine.
- Villagers have largely abandoned Lützerath since RWE (ETR:RWE) elected to expand the coal mine a few months ago.
- The number of protestors is estimated to be around 1,500 with the police operation estimated to cost €53m.
UK – Manufacturing PMI 48.8 in December vs 50.4 in November
Mini nuclear reactor plans delayed over cost of deployment
- Plans for eight new 470MW SMR reactors to be built by Rolls Royce are on hold as the government debates how to fund the project.(The Times)
- Rolls Royce is reported to be seeking commitment for four initial reactors costing around £2bn each so it can start building the factories to make the reactors.
- Treasury officials are refusing to sign off on any orders or significant funding till the technology is approved by the Office for Nuclear Regulation, due in 2024.
Freight - Rates continue to fall as manufacturers locate production closer to consumers
- Baltic Exchange Dry Bulk Index fell 34% in 2022 to 1,146 and has fallen 80% to 1,130 today from a peak of 5,545 in September 2021.
- Drewry composite container index Fell 77% to $2,135 from peak of Jan’22 at US$9,698.
- Global port labour disruptions quadrupled last year on rising inflationary pressures
- Over 38 port operation strikes were recorded in 2022, four times higher than 2021.
- Unions globally are calling for increased wages as fuel prices hit living costs.
- Analysts expect labour disruptions at port operations to increase in 2023.
- Container ship quickly refloated in Suez Canal after grounding
- The Suez canal authority says traffic was unaffected. The grounding reminds us of how vulnerable the West is to disruption in this single waterway.
- Might be a new target for Al Qaeda?
South Africa – ESKOM power supply crisis worsening
- Corruption, bad management and criminal activity is damaging ESKOM to the detriment of South African industry and the economy.
- South African’s have been patiently suffering increasing bouts of daily load shedding in the hope Cyril Ramaphosa and the ANC might fix the situation.
- Eskom set four new lows for its EAF ‘energy availability factor’ in December according to Moneyweb.
- Eskom’s coal fleet is showing a new low in terms of its capacity factor with breakdowns reducing availability of machinery.
- Eskom’s week-on-week energy EAF on energy availability also hit a new record low of 50.43% in the run up to Christmas from >75% in 2016, partly due to planned maintenance.
- Load shedding rose to close to 12,000 GWh last year, well ahead of the 2,400GWh shed in 2021 highlighting the severity of the situation.
- All the more reason for South African businesses to develop their own power infrastructure using Bushveld Mini-grid type solutions.
- We are looking forward to Bushveld Minerals* demonstrating the effectiveness of combining solar with VRFB battery storage to provide an effective solution for load shedding.
- The ability to switch to VRFB power during periods of ESKOM load shedding could provide significant backup while improving green credentials, reliability and possibly lowering overall power costs.
*SP Angel acts as Nomad and broker to Bushveld Minerals
Finland - Finland preparing to sign bilateral security and defence agreement with the US.
- Finland is also in talks to donate tanks to the Ukraine, presumably on agreement to acquire more modern tanks from the US or Germany
Currencies
US$1.0686/eur vs 1.0523/eur last week. Yen 132.21/$ vs 134.23/$. SAr 17.034/$ vs 17.170/$. $1.215/gbp vs $1.190/gbp. 0.693/aud vs 0.675/aud. CNY 6.773/$ vs 6.860/$.
Dollar Index: 103.47 vs 105.21 last week
Commodity News
Precious metals:
Gold US$1,875/oz vs US$1,840/oz last week
Gold ETFs 94.2moz vs US$94.1moz last week
Platinum US$1,096/oz vs US$1,061/oz last week
Palladium US$1,833/oz vs US$1,758/oz last week
Silver US$23.96/oz vs US$23.47/oz last week
Rhodium US$12,400/oz vs US$12,400/oz last week
Base metals:
Copper US$ 8,738/t vs US$8,450/t last week
Aluminium US$ 2,364/t vs US$2,275/t last week
Nickel US$ 29,000/t vs US$27,785/t last week
Zinc US$ 3,125/t vs US$3,019/t last week
Lead US$ 2,274/t vs US$2,207/t last week
Tin US$ 25,880/t vs US$25,300/t last week
Energy:
Oil US$80.4/bbl vs US$78.7/bbl last week
- Crude oil prices started the week in positive territory following China's initiation of steps to reopen its borders.
- High levels of European gas storage (83%) continue to have a dampening effect on energy prices in light of mild temperatures.
- The US Baker Hughes rig count fell by seven to 772 rigs last week, with oil rigs down 3 to 618 rigs and gas rigs down 4 to 152 rigs, and Pioneer Natural Resources (NYSE:PXD) CEO, Scott Sheffield, commenting that he sees current US Permian Basin crude oil production of 5.5mb/d growing to 7mb/d by 2030, down from a previous view of 8mb/d.
Natural Gas US$3.888/mmbtu vs US$3.620/mmbtu last week
Uranium UXC US$48.90/lb vs US$48.80/lb last week
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$116.6/t vs US$116.6/t
Chinese steel rebar 25mm US$616.1/t vs US$606.2/t
Thermal coal (1st year forward cif ARA) US$225.0/t vs US$225.0/t
Thermal coal swap Australia FOB US$367.0/t vs US$371.0/t
Coking coal swap Australia FOB US$314.0/t vs US$305.0/t
Other:
Cobalt LME 3m US$49,000/t vs US$50,000/t
NdPr Rare Earth Oxide (China) US$106,183/t vs US$104,976/t
Lithium carbonate 99% (China) US$66,826/t vs US$66,995/t
China Spodumene Li2O 5%min CIF US$5,990/t vs US$5,990/t
Ferro-Manganese European Mn78% min US$1,320/t vs US$1,300/t
China Tungsten APT 88.5% FOB US$322/mtu vs US$320/mtu
China Graphite Flake -194 FOB US$885/t vs US$885/t
Europe Vanadium Pentoxide 98% 8.9/lb vs US$8.9/lb
Europe Ferro-Vanadium 80% 36.75/kg vs US$36.75/kg
China Ilmenite Concentrate TiO2 US$339/t vs US$335/t
Spot CO2 Emissions EUA Price US$80.3/t vs US$79.2/t
Brazil Potash CFR Granular Spot US$505.0/t vs US$500.0/t
Battery News
Company News
Anglo Asian Mining PLC (AIM:AAZ, OTC:AGXKF)* 105p, Mkt Cap £120m – Follow up investment in Libero Copper & Gold maintaining 20% interest
BUY
- The Company acquired 2.6m new shares for a total consideration of C$390k at 15c/sh in Libero Copper & Gold.
- The follow up investment maintains the Company’s interest at 19.8%.
- The investment comes on the back of the recently launched private placement by Libero for ~C$2.0m to fund exploration at Mocoa and Esperanza porphyry copper projects in Colombia and Argentina, respectively.
- This marks a third investment in Libero and brings total shareholding to 18.1m shares with 8.9m held in warrants exercisable at 22-75c.
Conclusion: The Company maintained its 20% interest in Libero, a copper explorer with an extensive portfolio of prospective ground across Americas, as Libero raises C$2.0m to fund exploration at Mocoa and Esperanza.
*SP Angel acts as nomad and broker to Anglo Asian Mining
Beowulf Mining PLC (AIM:BEM)* 4p, Mkt Cap £33m – Contract awarded for Grafintec PFS
- Beowulf has awarded a Pre-feasibility Study contract to the UK based RB Plant Construction to “assess the technical, economic, statutory, regulatory and commercial options for a natural flake graphite micronisation, spheronisation, purification, and coating plant in Finland.”
- The study will investigate Best Available Technology or transforming a high-grade natural flake graphite concentrate to graphite anode material suitable for the European Lithium-Ion Battery market.
- Currently there is no commercial production of graphite anodes in Europe and with all graphite anode materials imported from Asia
- The PFS is a key part of Grafintec`s strategy to develop a Finnish value chain for anode materials production in line with Business Finland’s BATCircle2.0 (Finland-based Circular Ecosystem of Battery Metals) consortium.
- The aim of the BATCircle2.0 consortium is to create a competitive and sustainable European battery industry through collaboration and joint research between companies and research organisations.
- Beowulf’s Finnish subsidiary has previously been the recipient of €791k grant from Business Finland as part of BATCircle2.0 with funds intended for 'Spheronisation and Purification of Natural Graphite for the European Lithium-Ion Battery Market'.
- Grafintec has received interest from and is progressing discussions with several industrial sites in Finland, focusing on sites with access to 100% renewable energy and room for expansion.
- Alongside processing, the company is also focussed on expanding its resource footprint at Rääpysjärvi natural flake graphite exploration project along with the more advanced Aitolampi project.
*SP Angel acts as nomad and broker to Beowulf
Cobra Resources PLC (LSE:COBR) 2p, Mkt Cap £10m – Maiden resource estimate for Wudinna rare earth project
(Cobra has achieved 65% of its earn-in obligation and has the right to earn up to 75% in the project)
- Cobra has released a maiden JORC-Resource for the Wudinna Project in South Australia.
- Wudinna hosts a clay-hosted resource of 20.9mt at 658ppm TREO in the inferred category.
- Of this 658ppm, 155ppm are higher value elements – Nd, Pr, Dy, Tb.
- The REE mineral resource occurs above a defined 94,000 Oz gold resource at the Baggy Green prospect and gold mineralisation at the Clarke prospect.
- In terms of geology, “Gold and REE mineralisation has a spatial association with mafic intrusions/granodiorite alteration and is associated with metasomatic alteration of host rocks. The REE mineralisation is regionally extensive in weathered (saprolite and saprock) zones developed on basement rocks. The nature of controlling structures that act as conduits for gold mineralisation are also thought to act as catalysts for the secondary processes that promote weathering and subsequent mobilisation of REEs to the saprolite and saprock.”
- Preliminary metallurgical testing undertaken by ANSTO showed recoveries of up to 34.7% were achievable using H2SO4 as a lixiviant.
- Cobra intend to continue with met testing for flowsheet evaluation and also intend to complete a 5,000m – 10,000m drill programme, commencing in March 2023, aimed at growing both gold and REE Mineral Resources at Clarke, Barns, and Thompson prospects.
KEFI Gold and Copper PLC (AIM:KEFI, OTC:KFFLF)* 0.8p, Mkt Cap £30m – 2022 drilling grows Hawiah MRE by 16% to 29mt
- The Company released an updated MRE for the Hawiah Copper-Gold Project in Saudi Arabia.
- New MRE stands at 28.9mt at 0.89% Cu, 0.67g/t Au, 0.94% Zn and 10g/t Ag for 258kt Cu, 620koz Au, 272kt Zn and 9,408koz Ag.
- New MRE increases total tonnage by 16% with higher grades reported for zinc (+11%) and gold (+7%); silver (+3%) and copper (-1%) grades were little changed.
- An increase is driven by increased density used in the Oxide zone, expansion of Crossroads Extension Lode at depth as well as new tonnages added from increased drill density.
- Measured & Indicated category accounts for ~43% of the total hosting 12.4mt at 0.86% Cu, 0.78g/t Au, 0.80% Zn and 10g/t Ag.
- Open pit domain accounts for ~38% of the total MRE and is estimated at 11.1mt at 0.90% Cu, 0.81g/t Au, 0.75% Zn and 10g/t Ag.
- Split of the open pit domain includes:
- Oxide material for 1.2mt at 2.06g/t Au and 7g/t Ag;
- Transition material for 2.6mt at 0.50% Cu, 0.74g/t Au, 0.77% Zn and 12g/t Ag and;
- Fresh material for 7.3mt at 0.92% Cu, 0.63g/t Au, 0.88% Zn and 10g/t Ag.
- The Company completed ~7,700m of diamond drilling and ~4,800m of RC drilling over the past year bringing the Project total to ~58,200m.
- Work on PFS is ongoing with additional drilling being designed for 2023 to further increase and upgrade the resource.
- Separately, the team is targeting the maiden MRE for the nearby Al Godyere license area, secured in Dec/21, in Q1/23.
- KEFI holds a 30% in a JV with its local partner (ARTAR) that owns projects in Saudi Arabia.
Conclusion: The Company delivers an increased resource as well as expanded open pit domain as the team is working on the PFS studying the potential for a combined open pit/underground operation at Hawiah.
*SP Angel act as Nomad to KEFI Gold and Copper
Tianqi-led company bids A$136m for Australian lithium developer Essential Metals
- Tianqi Lithium Energy Australia (51% Tianqi and 49% IGO) has offered to buy Essential Metals for 50 cents per share.
- The bid was supported by Essential's board which recommended shareholders vote in favour of a deal.
- The deal requires the approval of Australia's Foreign Investment Review Board (FIRB), with Treasurer Jim Chalmers having the ultimate say – though Chalmers said in November Australia would become more assertive in who it allowed to invest in the country's growing critical minerals industry.
- China lifted its ban on Australian coal last week in a sign that relations between the two nations may be improving.
- The company’s most advanced project is Pioneer Dome, where the company holds a 11.2mt @ 1.16% Li20 resource.
- Essential Metals expect to be in production at Pioneer Dome by 2025, having lodged a Mining Lease application in September 2022.
Sunrise Resources PLC (AIM:SRES) 0.11p Mkt Cap £3.9m – Pioche sepiolite project extended following trenching programme
- Sunrise Resources reports that it has staked an additional 31claims at its Pioche sepiolite project in Lincoln County, Nevada following the completion of an October 2022 trenching programme.
- The additional land more than doubles the land holding at Pioche and covers “projected extensions of the sepiolite deposits outlined in the 2022 mapping and trenching programmes”.
- Today’s announcement also confirms that Sunrise Resources has now received a $50,000 option fee from Tolsa which “has an option to purchase the Pioche Project for US$1.25 million no later than 28 December 2023 and ongoing payment of a 3% revenue royalty to Sunrise”.
- Tolsa is the world’s largest producer of sepiolite, a specialised magnesium silicate clay mineral, also sometimes known as meerschaum, and its uses include products for the absorption of industrial spillages and in waste treatment and for pet litter.
- Last year’s trenching programme was undertaken by Tolsa as part of its investigation of the Pioche project and Tolsa has now “advised that it intends to carry out resource definition drilling in the Spring and industrial testing of the bulk samples and feasibility studies in the next 12 months”.
- Sunrise Resources’ Executive Chairman, Patrick Cheetham, welcomed “Tolsa's further commitment to this rapidly evolving project” and explained that the “trenching programme at Pioche has clearly identified potential for substantial extensions to the sepiolite deposits which is great news for the project.”
- He also confirmed that “Our agreement with Tolsa provides that any mining claims staked by either party within a 2-mile radius of our original claim boundary are subject to the agreement and the payment of royalties”.
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
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Grant Barker – Grant.Barker@spangel.co.uk – 0203 470 0471
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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
Coking Coal - SSY
RRE - Steelhome
Lithium Carbonate, Ferro Vanadium, Tungsten, Spodumene, Ferro-Manganese, Graphite - Asian Metal
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