SP Angel . Morning View . Tuesday 08 06 21
Base metals recover from long fund liquidation as market waits on US inflation data
MiFID II exempt information – see disclaimer below - FCA looks to scrap MiFID research rules on small-caps in UK competitiveness drive (Investment Week)
We are raising funds for a private Graphene producer – EIS scheme approval applied for
The company is selling a number of graphene products to industrial and retail customers.
- Sales of certain products have sold out unexpectedly quickly.
- The company wishes to fund a ramp up in production to get ahead of demand and to develop markets for a number of new, graphene products
- The business is also able to upgrade graphite to a higher grade/specifications using its process – rolling out this process also requires funding
- The company has also applied for EIS scheme approval from HMRC
- Please let me know if you wish to invest in the company
*SP Angel’s role is limited to making introductions and interested parties should be aware that investment in a private company can present certain risks not present in listed companies (e.g. limited or no liquidity and no rules compelling disclosure of information to investors). This offer is open to professional investors only and is not offered to retail investors.
Empire Metals* (AIM:EEE) – Sale of Georgian copper and gold assets for US$3.3m
GoldStone Resources* (AIM:GRL) – Warrant exercise provides £120k of funding to company
Kodal Minerals* (LON:KOD) –– Bougouni Lithium Project moves s step closer to final approval
Lucara Diamonds (TSX:LUC) – Karowe mine yields third diamond larger than 300carats in size this year
Serabi Gold* (AIM:SRB) – Drilling results from the Sao Domingos project area west of Sao Chico
Thungela Resources Ltd (LON:TGA) – Shares tumble on London debut
LG Energy makes A$19.3m investment in Australian nickel company
- LG Energy Solution is set to buy a 7.5% stake in Queensland Pacific Metals for 12bn won, according to a statement from the South Korean company.
- QPM will supply 7,000t of nickel and 700t of cobalt to LG annually for the next 10 years from end-2023 through an offtake agreement.
- QPM are in the process of building a nickel sulphate and cobalt sulphate production plant with an environmentally-friendly processing method – a positive as companies look to try and reduce their environmental impact.
- The increased supply of nickel will aid in LG’s plans to roll out Li-ion batteries with higher nickel content to increase the battery’s energy density and capacity.
Covid-19 - cases rise across Asia as new variants increase transmissibility
- Formerly Covid-free areas appear to be subcuming to new, more infectious, variants across Asia
- A surge of new cases in Taiwan and Guangzhou, China is of concern as this suggests the potential for further restrictions on movement and impact on logistics and manufacturing.
China - trade surplus was US$ 45.54bn vs US$42.86bn in April
- Chinese exports rose 27.9% yoy
- imports into China rose 51.1% in May vs 43.1% in April driven largely by higher commodity prices
- Note, commodity prices were low this time last year
Copper – China unwrought Chinese copper imports fell 8% yoy to 445,725t in May vs 484,890t in April possibly due to logistical issues
- Copper concentrate imports rose 1.95mt in May vs 1.921mt in April (The General Administration of Customs)
LME to reopen The Ring for trading from 6 September 2021
- The open outcry system is still considered by many in metals trading to be the most efficient and effective way of trading large volumes of metal.
- The owners of the LME had tried to use pandemic restrictions to permanently disband trading floor but the outcry of client objections have ensured The Ring will reopen.
Semiconductor supply under greater threat as surge in Covid cases in Taiwan combines with power and water restrictions
- Taiwan, the world’s leader in semiconductor chip manufacturing is under pressure (SCMP).
- A long-running drought means that hydropower supply is falling and under increasing threat.
- Water restrictions are also threatening semiconductor manufacturing.
- A surge in Covid-19 cases is now causing problems with few of the 23.5m population having taken any vaccine
- Clusters of Covid-19 cases are reported at a number of electronics factories including King Yuan Electronics, in Miaoli where 131 employees recently tested positive.
- The situation has the potential to slow production lines globally where semiconductors are already in short supply.
- Japanese and other Semiconductor foundries are struggling to match the better technology used in Taiwan’s $10bn foundry industry.
Economics
US – Equities are trading around record highs and Treasury yields eased for three successive weeks as Fed calls for a continuing support to the economy calm investors’ concerns over potential tapering.
- Consumer inflation data due this Thursday will be watched closely for signs of a build up in consumer prices’ pressure.
- Estimates are for CPI and core CPI to climb to 4.7% and 3.5%, respectively.
Japan – Q1 GDP numbers are revised up, although, the upgrade has been driven by higher inventories while private spending was downgraded.
- A potential unwinding of inventories in a coming quarter suggest a weaker outlook.
- Athletes, trainers, officials and reporters begin to arrive in Japan seven weeks before the games, FT reports.
- Although, Tokyo and other large cities remain under Covid-19 state of emergency.
- Authorities believe the Games may go ahead without spectators to reduce social mixing.
- Business leaders and up to 80% of the Japanese public are reported to have called for the government to cancel the Olympics.
- GDP (%qoq): -1.0 v -1.3 estimated previously.
- Private Spending (%qoq): -1.5 v -1.4 estimated previously.
- Inventory Contribution (pp of GDP): 0.4 v 0.3 estimated previously.
Germany – Industrial production pulled back in April on a lack of semiconductors, timbe and other intermediate goods.
- Although the economy ministry added that business sentiment surveys were suggesting an improvement in coming months.
- Weaker industrial production means the economy will have to rely more on consumer spending that is still fragile following the coronavirus crisis.
- Industrial Production (%mom): -1.0 v 2.2 in March and 0.4 est.
UK – The government will decide whether to go ahead with easing all restrictions in England from June 21 next Monday.
So far a recent surge in new cases (5,683 yesterday) has not translated in a significant increase in hospital admissions suggesting the cabinet may proceed with the plan to lift restrictions.
Peru – Socialist candidate Pedro Castillo widened his lead against right-wing rival and markets favourite Keiko Fujimori in the nation’s presidential race, Reuters reports.
- The official count from Sunday’s election showed Castillo with 50.3% and Fujimori with 49.7% following around 95% of the vote counted.
- The leftist candidate trailed overnight but started to come ahead as the count progressed.
- Castillo promised to redraft the constitution to strengthen the role of the state and take a larger share of profits from mining firms.
Currencies
US$1.2169/eur vs 1.2148/eur yesterday. Yen 109.47/$ vs 109.56/$. SAr 13.567/$ vs 13.463/$. $1.414/gbp vs $1.412/gbp. 0.774/aud vs 0.773/aud. CNY 6.394/$ vs 6.401/$.
Commodity News
Precious metals:
Gold US$1,896/oz vs US$1,883/oz yesterday
Gold ETFs 100.8moz vs US$101.0moz yesterday
Platinum US$1,168/oz vs US$1,164/oz yesterday
Palladium US$2,826/oz vs US$2,845/oz yesterday
Silver US$27.72/oz vs US$27.49/oz yesterday
Base metals:
Copper US$ 9,926/t vs US$9,895/t yesterday
Aluminium US$ 2,425/t vs US$2,437/t yesterday
Nickel US$ 17,845/t vs US$17,710/t yesterday
Zinc US$ 3,007/t vs US$2,971/t yesterday
Lead US$ 2,149/t vs US$2,2118/t yesterday
Tin US$ 30,680/t vs US$30,620/t yesterday
Energy:
Oil US$70.9/bbl vs US$71.4/bbl yesterday
- Oil prices pulled back yesterday after touching two-year highs on expectations of improved demand and OPEC producers keeping supply curbs in place
- Prices retreated on Chinese data showing crude oil imports fell to a year's low in May
- Crude has risen for two weeks, with Brent up by 38% this year and WTI rising 43%, helped by nascent recovery from pandemic-related demand disruptions and supply curbs by OPEC+
- The core reason for the slight drop stems from provisional crude oil import data for Asia’s top markets signal that physical demand is softer than what investors forecast in the paper market
- The COVID crisis in India, which peaked in early May, and the return of restrictions in several south Asian countries such as Malaysia, which is now in a third lockdown have been depressing fuel demand in many parts of Asia in recent weeks, bloating the fuel inventory glut further and hitting refining margins
- In addition, some refineries, including in the world’s top importer China, have entered planned seasonal maintenance this spring and have reduced their crude intake in the second quarter
- As a result of all those factors, imports into the Asian region are estimated to have dropped in May to the lowest monthly level so far this year
- Asia imported 23.07MMbopd of crude oil last month, down from more than 24MMbopd in each of April and March, and from 25.2MMbopd in February, according to data from Refinitiv Oil
- The Indian health crisis resulted in reduced refinery run rates, and crude oil imports likely fell to 3.9MMbopd in May, compared to 4.46MMbopd in April
Natural Gas US$3.114/mmbtu vs US$3.098/mmbtu yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$192.6/t vs US$201.2/t
Chinese steel rebar 25mm US$798.3/t vs US$810.9/t
Thermal coal (1st year forward cif ARA) US$81.2/t vs US$80.5/t - China loosens coal import restrictions as mine fatalities increase
- China has moved to bolster its coal supply with more shipments from overseas as Beijing’s policy of limiting imports has driven up domestic prices.
- Ports in the provinces of Zhejiang, Jiangsu and Fujian have fully removed restrictions on imports, with the exception of banned Australian purchases, Mysteel reports.
- Thermal coal futures hit record highs last month ahead of a looming power crunch, while imports through to May are down 25% YoY due to the Australian embargo and heavy rainfall in Indonesia.
- Chinese authorities have called in coal producers to discuss the mounting toll of fatalities in the industry, after a further 8 miners trapped in an accident in Henan died last week.
- China has blamed the marked increase in accidents on a surge in prices that have affected safety practices.
- State media has not commented in over a month regarding the 21 workers trapped in an underground mine in Xinjian since April.
- Futures closed at 800.2 yuan/t on Monday – 50% higher than this time last year (Bloomberg).
- Coking coal swap Australia FOB US$151.0/t vs US$151.0/t
Other:
Cobalt LME 3m US$42,535/t vs US$43,535/t
NdPr Rare Earth Oxide (China) US$73,904/t vs US$74,359/t
Lithium carbonate 99% (China) US$12,669/t vs US$12,653/t
China Spodumene Li2O 5%min CIF US$640/t vs US$640/t
Ferro-Manganese European Mn78% min US$1,795/t vs US$1,787/t
China Tungsten APT 88.5% FOB US$270/t vs US$270/t
China Graphite Flake -194 FOB US$515/t vs US$515/t
Europe Vanadium Pentoxide 98% $8.3/lb vs US$8.3/lb
Europe Ferro-Vanadium 80% $39.75/kg vs US$39.75/kg
Battery News
ORNL team uses green solvent to recover materials from Li-ion batteries
- A team at Oak Ridge National Lab have developed a solvent that enables a more environmentally friendly process to recover valuable materials from used Li-ion batteries.
- The process will support a stable domestic supply chain for new batteries while keeping spent batteries out of landfill.
American Resources achieves high purity REEs from waste magnets
- In conjunction with Purdue University, American Resources has successfully achieved the recovery of neodymium with a 99.5% purity from waste permanent magnets.
- “We achieved this result…at a cost point and environmental standard that is extremely competitive on a worldwide basis. [The result] is equally important…as the demand and need for rare earth elements is growing at a pace north of 12% a year.” Mark Jensen, CEO American Resources
Company News
Empire Metals* (AIM:EEE) 2.9p, Mkt cap £9.65m – Sale of Georgian copper and gold assets for US$3.3m
- Empire Metals have agreed to sell their 50% stake in Georgian Copper & Gold JSC for US$3.3m to Russian-owned, CMG, Caucasian Mining Group.
- CMG had a first right of refusal over the sale of the assets under their 50:50 jv agreement.
- The funds will be used to generate value at its Eclipse and Central Menzies Gold Projects in Western Australia.
- Empire had previously agreed to sell the assets to Candelaria Mining Corporation for $6m worth of Candelaria shares but was prevented from proceeding with the transaction due to CMG’s first right of refusal.
- Empire Metals, formerly known as Georgian Mining, acquired the 50% stake for is £2.6m in shares and US$6m of expenditure on the project including significant management time.
- The geological team at Georgian (Empire) were hugely successful in the reinterpretation of the historical geological work done in Georgia almost immediately discovering significant copper and gold in an areas previously dismissed by the previous geological team.
- CMG proved to be difficult partners in Georgia once the first discovery at Kvemo Bolnisi was made
- The Georgian government then refused to extend the exploration license at Kvemo Bolnisi causing field exploration work to stop.
- The Mining Agency later withdrew the majority of the original licence area with no guarantee of its return to Empire.
- Empire Metals is now well funded to add value to its Eclipse project near Kalgoolie and at its new Central Menzies Gold Projects in Western Australia.
- Empire will also pay a fee of US$250,000 to an unrelated third party in Georgia who has acted as an adviser and assisted in bringing the CMG negotiations to fruition.
- The ‘fee is payable on completion and consists of US$100,000 in cash and US$150,000 to be satisfied by the issue of 3,995,238 Empire shares at 2.65p.
Conclusion: The sad part about this story is that had CMG cooperated and supported the development of a mine at Kvemo Bolnisi they would have started gold production in 2019 and have gone onto develop the underlying copper mine.
Both companies would probably have added well over >$100m to their net worth given market conditions, the people in the Bolnisi area would have well paid jobs and the economy would be booming.
The Georgian government would be receiving royalties and taxes with additional support for schools, health services and other infrastructure.
The apparent political interference in the exploration licensing process will sadly yet prove to be a significant disincentive for further investment in the minerals sector in Georgia.
For now the area remains poor and neglected, barely supported by CMG’s Madneuli copper gold mine which is in desperate need of more resources, investment and plant modernisation.
*SP Angel act as Nomad and Broker to Empire Metals
GoldStone Resources* (AIM:GRL) 13.5p, Mkt Cap £44m – Warrant exercise provides £120k of funding to company
- GoldStone reports an exercise of 4,000,000 warrants to subscribe for new ordinary shares of 1 penny each in the capital of the Company at a price of 3 pence per Ordinary Share.
- The Warrant Exercise provides £120,000 of additional funding to the Company.
*SP Angel act as Broker to GoldStone Resources
Kodal Minerals* (LON:KOD) – 0.31p, Mkt cap £38m – Bougouni Lithium Project moves s step closer to final approval
- Kodal Minerals reports that it has received formal notification from the regulatory authorities in Mali of the acceptance of its feasibility study for the development of the Bougouni Lithium Project.
- The notification includes a “request to pay the application fee for the delivery of the Mining Licence. Kodal will pay the £135,000 application fee promptly to continue to advance the application process”.
- The company explains that following the payment, the Direction Nationale de la Geologie et des Mines (DNGM) “will then draft the Exploitation Decree (Mining Licence) which is forwarded to the Ministry of Mines, Energy and Water”.
- Following a final checking of the application, “the Ministry of Mines, Energy and Water will then forward the Exploitation Decree to the office of the Prime Minister for formal signing, which is the final step in the process”.
- CEO, Bernard Aylward, explained that “Our Mining Licence application is progressing through the final regulatory stages and the receipt of this letter confirming the Feasibility Study for the development of the Bougouni Lithium Project and the request to pay the Mining Licence application fee is a very positive development and brings us significantly closer to a fully permitted project”.
Conclusion: Kodal Minerals’ Bougouni Lithium Project has moved closer to final mining approval with the acceptance of the feasibility study and the request for payment of the requisite fee.
*SP Angel acts as Financial Advisor and Broker to Kodal Minerals
Lucara Diamonds (TSX:LUC) C$0.75, Mkt Cap C$298m –Karowe mine yields third diamond larger than 300carats in size this year
- Lucara Diamonds reports the recovery of a 470 carat diamond from its wholly-owned Karowe mine in Botswana – the third individual diamond larger than 300 carats recovered so far this year.
- The diamond, which is described as a “top light brown clivage diamond” was recovered from the South Lobe of the mine and forms part of a production run which includes “5 diamonds greater than 100 carats (265ct, 183ct, 161ct, 116ct, 106ct) and 13 diamonds between 50 and 100 carats in weight”.
- The company says that the “May production run … [was] … dominated by … [a geological unit known as … EM/PK(S) ore, … [which] … produced diamonds greater than 10.8 carat in weight accounting for 12.7% weight percent of total production, exceeding resource expectations. Continued strong resource performance and recovery of large diamonds reinforces the significance of the EM/PK(S) as an important economic driver for the proposed underground mine at Karowe”.
- CEO, Eira Thomas, said that “The benefits of a South Lobe dominated mine-plan continue to be realized in 2021 and underpins our confidence in the ever-improving Karowe resource as we mine deeper in the open pit to 2026 and move into underground mining out to at least 2040. Both main rock types from the South Lobe continue to deliver large, high value diamonds, including 6 diamonds greater than 200 carats in the first five months of this year alone”.
- Last month, Lucara Diamonds announced that a consortium of five international banks had approved a US$220m project finance package to help fund the underground development at Karowe.
Conclusion: The latest recovery of a large diamond from the South Lobe ore at Karowe forms part of a continuing pattern of recovering these large stones from this geological facies and vindicates the decision to move underground to access this material over the longer term.
Serabi Gold* (AIM:SRB) – 68.5p, Mkt Cap £52m – Drilling results from the Sao Domingos project area west of Sao Chico
- Serabi Gold reports that its recently completed initial drilling at the Toucano Zone within its Sao Domingos project area has demonstrated both depth and lateral continuity of mineralisation along strike within a 50m wide alteration zone. The project area is located west and along strike from Serabi Gold’s Sao Chico deposit.
- Among the results reported today, the company highlights the “deepest hole drilled yet under the Toucano pit”, 21-SD-012, which “confirmed the broad alteration zone continues a further 50 metres below the previously reported high-grade intercepts from drill hole 21-SD-010”and produced the following significant intersections:
- A 3.25m wide intersection averaging 2.91g/t gold from a depth of 192.75m; and
- A 3.75m wide intersection averaging 7.95g/t gold from a depth of 208.80m; and
- A 0.70m wide intersection averaging 6.63g/t gold from a depth of 222.30m; and
- A 0.80m wide intersection averaging 7.00g/t gold from a depth of 236.30m
- The company explains that “Holes 21-SD-013, 014 and 015 were all drilled 250 metres further north, and continued to intersect a broad 40 metre wide alteration zone containing multiple vein lode structures along strike. These holes are all below the Raimundo artisanal pit, 250 metres to the north-east of the Toucano artisanal pit. These holes also intersected additional parallel structures, north and south of the alteration halo.”
- Chief Executive, Mike Hodgson, welcomed the results from Toucano as continuing to “demonstrate the potential for the target and in particular the continuity of mineralisation at depth” and explained that “Drilling beneath the Raimundo pit confirms the continuity of mineralisation along strike and has also identified parallel mineralised structures that warrant further follow-up”.
- Drilling has now shifted to the investigation of the “Atacadão prospect where historic exploration around significant artisanal activity identified a series of highly prospective targets worthy of follow-up. While the Atacadão Phase One drilling is being undertaken, access and drill pads will be prepared for infill and step-out drilling on the Toucano Zone”.
- This new area lies around 2km south of the Toucano Zone “is characterised by the presence of several large artisanal open pits and a series of shafts and adits. Mineralisation relates to quartz vein-lode type structures in a similar orientation to that of the Toucano Zone further north”.
- Eleven holes were drilled over an 800m strike length by Aurora Gold at the Atacadão prospect in 2006 and “intersected a number of narrow but high-grade veins within a broader structural trend. Although Serabi has not verified nor validated the results reported, drill intersected grades up to 59.97g/t are recorded”.
- Mr. Hodgson explained that the historic exploration and extensive artisanal mining at the Atacadão prospect led Serabi Gold to “believe this prospect is a series of parallel mineralised structures and … [we] …plan to drill a fence of holes across it to provide a greater geological understanding and aid future drill planning”.
- He added that “Elsewhere within our broader tenement area, we continue to drill close to the Sao Chico and Palito mines and have a fourth rig due to arrive at site later this month”.
Conclusion: Serabi Gold’s exploration at the Toucano and Atacadão prospects at Sao Domingos is still at a relatively early stage but is identifying lateral and depth continuity to broad mineralised zones containing multiple individual structures. We look forward to further results as they become available and ultimately to seeing the individual results reflected in mineral resources estimates for these additional areas.
*An SP Angel analyst has visited the Serabi’s gold mining operations in Brazil
Thungela Resources Ltd (LON:TGA) – 125p, Mkt cap £170m – Shares tumble on London debut
- Thungela began trading in London and Johannesburg yesterday following the demerger from Anglo American.
- Thungela holds 90% of the thermal coal operations in South Africa, with the remaining 10% held collectively by an employee partnership plan and a community partnership plan.
- Many attribute Thungela’s falling share price to the recent FT article reporting that Anglo have massively underestimated the environmental liabilities associated with a South African coal business according to short seller Boatman Capital Research
- Thungela’s price on the LSE has fallen over 12% since trading commenced yesterday morning to 111p , on a total volume traded of 0.398m shares.
- In Johannesburg, prices have fallen nearly 14% since yesterday morning to 21.54 ZAr, on a total volume traded of 6.4m shares.
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
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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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