SP Angel . Morning View . Monday 21 03 22
Copper and tin hold despite nickel trading limit down
MiFID II exempt information – see disclaimer below
Anglo Asian Mining PLC (AIM:AAZ, OTC:AGXKF)* - BUY– Zafar MRE comes down on lower tonnage and grades
Atlantic Lithium Limited (AIM:ALL)* – Len Kolff to be appointed to board and as interim CEO
Antofagasta PLC (LSE:ANTO) – Framework for Reko Diq exit
Ariana Resources PLC (AIM:AAU) – Venus Minerals plans for IPO
Castillo Copper Ltd (LSE:CCZ, ASX:CCZ) – Preliminary analytical results from historic core at BHA
Conroy Gold and Natural Resources PLC (AIM:CGNR, OTC:CGDNF) – JV receives Crown permits
Orosur Mining Inc (AIM:OMI, TSX-V:OMI)* – Mobilisation of field team to El Pantano
Tungsten West PLC (AIM:TUN) – Moving ahead as Hemerdon prepares to install X-Ray sorting
LME nickel falls 15% limit down as traders continue to sell the metal
- LME nickel prices slid to the market’s 15% set limit at $31,380/t this morning.
- Nickel on the SHFE is trading at $32,390/t.
Commodity trader bond yields rise as investors take fright over crisis in nickel market and rumours of losses with traders
- Trafigura 2025 bond yields rose 10% on the week , Gunvor Group 2026 bond yields are also up 16.8%. (Bloomberg)
- Louis Dreyfus Co. credit default swaps have risen from 140 basis points pre-invasion to 260 basis points now, suggesting increasing concern of a default.
- A ramp up in margin calls caused by extreme volatility in commodity prices is straining trading houses’ access to vital liquidity from creditors.
- A report from lobbying group EFET, representing the major European trading houses, states traders are receiving margin calls of c. $500m each day per company, hitting the billions in some cases. This was c. $50m per day before the pandemic.
- Commodity traders are a fundamental part of the metals supply chain, with potential defaults expected to further exacerbate global trade disruption.
Chinese copper smelters hike treatment charges to 2019 highs on local smelter issues and Russia/Ukraine disruption
- Treatment charges in Chinese copper smelters have risen 150% since April 2021 to their highest level since March 2019.
- Yanggu Xiangguang, which has been cut off by creditors from loan renewals is cited as one reason alongside disruption caused by the invasion of Ukraine
- Xiangguang has capacity to produce 450,000t of copper pa, with a potential closure enabling alternative smelters to hike fees.
Aluminium rises as Australian export ban triggers further supply concerns
- Aluminium prices up 4.8% after Australia banned exports of alumina and aluminium ore to Russia amid Putin’s invasion of Ukraine.
- Alongside bauxite, alumina is the main feedstock for aluminium production.
- Russia accounts for 10% of global aluminium supply, with Australia’s ban expected to limit production capacity.
- German producer Trimet announced plans to slash production at its Essen factory by 50% on soaring energy costs.
Nyrstar moves to resume zinc smelting at French plant with limited capacity
- Nyrstar will resume zinc smelting at below 50% of capacity at its Auby plant within the fortnight having suspended operations since January.
- The smelter has been hit by soaring electricity costs alongside other European metals producers.
- The restart will not help Europe reduce its dependence on Russian gas
Dow Jones Industrials +0.80% at 34,755
Nikkei 225 +0.65% at 26,827
HK Hang Seng -1.25% at 21,144
Shanghai Composite +0.08% at 3,254
Economics
US - President Biden to hold talks with the leaders of France, Germany, Italy and the UK today ahead if EU-China summit planned for the start of April.
- The US and European leaders urge China not to help Russia circumvent sanctions and not to offer military support to its neighbour.
- China has repeatedly denied that Moscow asked for help, with Beijing’s envoy to the US saying that it has not sent “weapons and ammunition to any party”.
China – One and five year borrowing rates were left unchanged at 3.7% and 4.6%, in line with expectations.
- The loan prime rates are based on the quotes that 18 qualified banks submit each month to the PBOC, Bloomberg writes.
- The rates typically move in line with the central bank’s policy rate of the medium-term lending facility which was left unchanged last week.
- Expectations of a monetary policy easing have been building up lately with markets increasingly anticipating a cut in the reserve requirement ratio or a see a potential cut in reduction in the MLF facility rate in April.
China Evergrande trading suspended as local government land sale revenues continue to slide
- China Evergrande and its subsidiaries were suspended on the Hong Kong Exchange this morning on expectations of an ‘inside information’ announcement.
- Onshore bonds have also been suspended as Evergrande is due to update investors of its debt restructuring plan this week. (REDD)
- Evergrande’s Nanjing unit, which provides valuation and management services, is set to sell a 30% stake to AVIC Trust.
- Ronshine, another Chinese developer, has announced the resignation of its auditor, PWC, siting delays in requested information.
- China’s real estate sector accounted for c. 40% of bond defaults last year.
- Local Chinese governments have seen land sale revenues slide 30% Jan-Feb vs same period 2021. (Ministry of Finance)
Covid – Tangshan, China’s steel city halts transport pending mass Covid testing.
- Disneyland in Shanghai closes as the city moves to contain spread of Omicron
- China reported >2,000 new cases yesterday excluding Hong Kong with > 1,540 infections in Jilin province.
Germany – Factory gate inflation continued to climb hitting nearly 26% in February reflecting higher energy costs and a continuing challenges in components’ availability.
- PPI (%mom): 1.4 v 2.2 in January and 1.7 est.
- PPI (%yoy): 25.9 v 25.0 in January and 26.2 est.
Germany Drops most COVID restrictions despite rise in new infections
- Mask-wearing remains mandatory on public transport and in nursing homes. Hotspots can also have stricter regulations.
China calls for ‘rational’ lithium prices as government moves to cool soaring prices
- The Chinese government called on key members of the EV supply chain to make efforts to cool prices which have soared 500% over the past 12 months.
- The Ministry of Industry and Information Technology held a seminar involving carmakers and lithium producers alongside battery makers last week.
- The seminar discussed improving supply bottlenecks, lithium pricing, controlled development of the EV and battery sectors and securing supply.
- The seminar mirrors a move made in January by Beijing to cool rare earths prices.
Ukraine – As many as 10m people have fled the Ukraine conflict, leaving abroad or having been displaced within the country, the UN refugee agency reports.
India – appears eager to buy discounted crude oil from Russia (Bloomberg)
- The move risks the imposition of US and EU sanctions against India for aiding the Russian regime.
Covid - AstraZeneca study on Evusheld treatment shows the antibody-based cocktail retains neutralizing activity against Omicron coronavirus variants
- This includes the highly contagious BA.2 sub-variant according to an independent study (Reuters).
- Evusheld was found to cut the risk of developing symptomatic COVID-19 by 77% in trials according to the UK drug regulator.
Container ship runs aground near Baltimore
- The Ever Forward, a sister container ship to the Evergreen ship which blocked the Suez Canal for six days last year has run aground in the US.
- The ship may be carrying >4,900 containers and 2,200t of fuel oil.
Currencies
US$1.1054/eur vs 1.1075/eur last week. Yen 119.22/$ vs 118.90/$. SAr 14.968/$ vs 14.934/$. $1.316/gbp vs $1.315/gbp. 0.740/aud vs 0.740/aud. CNY 6.363/$ vs 6.364/$.
Commodity News
Precious metals:
Gold US$1,924/oz vs US$1,934/oz last week
Gold ETFs 104.4moz vs US$104.0moz last week
Platinum US$1,031/oz vs US$1,030/oz last week
Palladium US$2,555/oz vs US$2,563/oz last week
Silver US$24.99/oz vs US$25.31/oz last week
Rhodium US$19,000/oz vs US$19,000/oz last week
Base metals:
Copper US$ 10,246/t vs US$10,314/t last week
Aluminium US$ 3,506/t vs US$3,430/t last week
Nickel US$ 31,380/t vs US$36,915/t last week
Zinc US$ 3,892/t vs US$3,876/t last week
Lead US$ 2,255/t vs US$2,290/t last week
Tin US$ 42,445/t vs US$42,670/t last week
Energy:
Oil US$111.9/bbl vs US$107.5/bbl last week
- Oil prices jumped as a weekend attack on Saudi oil facilities added to existing concerns regarding the lack of progress in Russian ceasefire talks with Ukraine.
- The US rig count was unchanged at 663 rigs as of Friday 18th March 2022.
- The UK Government is expected to publish an energy transition strategy plan this week, which will put greater focus on security of energy supply through domestic production.
- Gazprom said its Ukraine transit nomination for Monday was 104.7mcm, up from 95mcm on Thursday.
Natural Gas US$4.914/mmbtu vs US$4.831/mmbtu last week
Uranium UXC US$57.25/lb vs $55.60/lb last week
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$151.6/t vs US$148.7/t
Chinese steel rebar 25mm US$777.8/t vs US$774.1/t
Thermal coal (1st year forward cif ARA) US$187.0/t vs US$187.0/t
Thermal coal swap Australia FOB US$240.0/t vs US$245.0/t
Coking coal swap Australia FOB US$600.0/t vs US$620.0/t
Other:
Cobalt LME 3m US$82,000/t vs US$82,000/t
NdPr Rare Earth Oxide (China) US$160,299/t vs US$161,065/t
Lithium carbonate 99% (China) US$74,256/t vs US$74,247/t
China Spodumene Li2O 5%min CIF US$2,790/t vs US$2,790/t
Ferro-Manganese European Mn78% min US$2,283/t vs US$2,287/t
China Tungsten APT 88.5% FOB US$340/t vs US$340/t
China Graphite Flake -194 FOB US$805/t vs US$805/t
Europe Vanadium Pentoxide 98% 12.4/lb vs US$12.4/lb
Europe Ferro-Vanadium 80% 62.75/kg vs US$62.75/kg
China Ilmenite Concentrate TiO2 US$397/t vs US$397/t
Spot CO2 Emissions EUA Price US$84.2/t vs US$84.4/t
Brazil Potash CFR Granular Spot US$1100/t vs US$820/t
Battery News
CATL increase battery prices as raw material costs continue to rise
- Leading battery manufacturer CATL has increased the price of its EV batteries twice since the second half of last year, according to local media outlet Yicai, citing an unnamed source at a new energy vehicle (NEV) maker.
- The cost of an NEV increased by another ¥10,000 following the last battery price hike after rising by ¥10,000 ($1,570) not long ago, the source said.
- EV companies have raised vehicle prices in China as the country's subsidies for NEV purchases have been reduced this year and the prices of raw materials, including lithium and nickel, have risen sharply.
- Most of the car manufacturers that have not yet announced price increases are those whose contracts with battery suppliers have not yet been finalised, and once they are they will also increase prices according to Li Auto founder, Li Xiang.
- Tesla has already introduced several price hikes in China this year, making the cost of purchasing a vehicle tens of thousands of yuan higher than in the second half of last year.
- Chinese EV manufacturer Nio said on Monday that it had no intentions to raise prices in the short term, but that it would be flexible on its decision making given evolving circumstances.
VW announces Asia ventures to secure battery material supply
- Volkswagen will form joint ventures with Huayou Cobalt and Tsingshan Group to secure nickel and cobalt supplies in China. (Reuters)
- The move is part of a $33.2bn push by VW to build a network of battery cell factories and secure more direct access to vital raw materials that are needed to supply them.
- VW and Tsingshan have signed a memorandum of understanding for a JV in Indonesia to focus on nickel and cobalt raw material production
- More than 10% of the world's laterite nickel ore reserves are in Indonesia.
- When complete, the venture will be able to supply raw materials for 160GWh of EV batteries, Volkswagen China said in a statement.
- VW's second JV with Huayou, in China's southwestern Guangxi region, will be for the refining of nickel and cobalt sulphates, precursor and cathode material production, it said.
- "The cooperation aims to achieve significant cost advantages, secure the raw material supply and achieve a transparent and sustainable supply chain," VW said in a statement. "The two partnerships target to contribute to the Group's long-term target of a 30-50% cost reduction on each battery."
Company News
Anglo Asian Mining PLC (AIM:AAZ, OTC:AGXKF)* 97p, Mkt Cap £110m – Zafar MRE comes down on lower tonnage and grades
BUY
- The Company released an updated mineral resource estimate for the recently discovered Zafar copper/gold deposit located next to Gedabek processing facilities.
- Updated total resource is estimated at 6.8mt at 0.5% Cu and 0.4g/t Au for 28kt copper and 73koz gold including:
- 5.5mt at 0.5% Cu and 0.4g/t Au in the Measured and Indicated category:
- 1.3mt at 0.2% Cu and 0.2g/t Au in the Inferred category.
- This compares with a previous estimate of 8.5mt at 0.6% Cu and 0.3g/t Au for 51kt and 82koz in total resource (May/21).
- The deposit is reported to be comprised of lower and upper section with the latter containing the main, more continuous mineralisation zone with lower part planned to be further infill drilled in the future.
- Lower resource is attributed to identified barren parts of the deposit during the infill drilling.
- In total the Company completed ~40,500m of drilling on the project with works now to focus on maiden mineral reserve estimate and mine planning ahead of targeted first production in 2023.
- The Company is planning to utilise semi-bulk sub-level caving underground mining method to keep costs low and engaged a hydrological and geotechnical consulting group to asses water issues and rock mass for mine planning and design.
- Geotechnical drilling, access tunnelling and development work will commence shortly.
Conclusion: The Company released an updated Zafar MRE that is a more robust estimate compared to the maiden resource estimate prepared in mid-21 but delivering a smaller and a lower grade resource. Resource grades (although those will need to be adjusted for underground mining dilution) are close to copper/gold grades currently processed from the Gedabek open pit while metallurgical testwork that is to be completed shortly is likely to demonstrate recoveries close to the ones currently seen at the Gedabek flotation circuit. While smaller size and lower grade resource weakens project economics, Zafer location offers significant development cost savings given its close proximity to extensive existing mining/processing infrastructure. We are looking forward to the mineral reserve estimate as the team readies for 2023 production start.
*SP Angel act as Nomad and broker to Anglo Asian Mining
Atlantic Lithium Limited (AIM:ALL)* 35p, Mkt cap £202m – Len Kolff to be appointed to board and as interim CEO
- Atlantic Lithium reports it proposes to appoint Len Kolff to the board and as interim CEO subject to normal regulatory due dilligence.
- The move follows the sudden passing of Vincent Mascolo on the 9th of March.
- Kolff worked closely with Vince Mascolo over the past seven years and was instrumental in the discovery and evaluation of the Ewoyaa lithium project in Ghana.
- Len has been working on the ground in Ghana and is well placed to ensure ongoing continuity in the development of the Ewoyaa project.
- He has the detailed working knowledge of the project and relationships with key personnel and government ministers to continue to advance Vince Mascolo’s vision that Ewoyaa would become a leading lithium mine.
- Len was with Rio Tinto for 16 years working on Simandou in Guinea and Northparkes Copper-Gold mine in Australia. He has a BSc from the Royal School of Mines, Imperial College, London and a Masters of Economic Geology from CODES, University of Tasmania.
- Drilling recently restarted 12,000m of exploration at Ewoyaa which now has a JORC-resource of 21.3mt @ 1.31% Li2O.
- Scoping study (2.0mtpa) update:
- Pre-tax NPV8% of US$1,227m
- Pre-tax EBITDA of US$2,024m
- Post-tax NPV8% of US$789m
- Post-tax IRR of 194%
- Average EBITDA of US$178m per annum
Conclusion: Len Kolff worked closely with Vince Mascolo on Ewoyaa and is well placed to continue the vision and work set in motion by the late Vince Mascolo.
*SP Angel acts as Nomad to Atlantic Lithium
Antofagasta Gold (TSX-V:AN) 1,690p, Mkt Cap £16bn – Framework for Reko Diq exit
- Antofagasta reports an agreement under which it will withdraw from the Reko Diq copper project in Pakistan where work has been suspended since 2011 as a result of disputes over the legality of the permitting process.
- Today’s announcement says that “Antofagasta … , Barrick Gold Corporation ("Barrick") and the Governments of Pakistan and Balochistan have”agreed that the large copper project “ will be reconstituted under Tethyan Copper Company Pty Limited ("TCC"), a joint venture held equally by the Company and Barrick, and TCC's International Centre for the Settlement of Investment Disputes ("ICSID") award will be resolved”.
- A consortium of Pakistan state-owned companies “will hold the Project for consideration of approximately US$900 million; and … proceeds will be distributed to Antofagasta in return for its exit from the TCC holding structure”.
- Antofagasta says that it “has decided not to participate in the reconstituted project as the Company's growth strategy is focused on the production of copper and by-products in the Americas”.
- Prior to the suspension, Reko Diq was widely regarded as one of the world’s largest copper development opportunities with the capacity to produce around 200,000tpa of copper and up to 250,000oz pa of gold.
- The project is now to proceed under the joint ownership of Barrick and the Pakistan entities.
Ariana Resources PLC (AIM:AAU) 3.7p, Mkt Cap £41m – Venus Minerals plans for IPO
- Ariana Resources has confirmed its intention to list its 50% owned Cyprus-focussed exploration company, Venus Minerals, in an AIM market IPO during Q2 2022.
- The IPO is intended to “advance the development of” the Apliki project, which is reported to contain a mineral resource of 11mt at an average grade of “0.25% to 0.69% Cu … and to fund the further exploration of its copper-gold portfolio across Cyprus”.
- Ariana Resources says that Venus Minerals “has completed definitive and binding agreements with Hellenic Copper Mines Ltd ("HCM"), and contractor the Iacovou Group in Cyprus for a 50:50 Joint Venture for the development of the Apliki Copper Mine”.
- Ariana Resources’ Managing Director, Dr. Kerim Sener, described Venus Minerals as “the pre-eminent copper and gold exploration company operating on the island of Cyprus, with combined mineral resources of 17Mt @ 0.45 to 1.10% Cu” and explained that “Venus can fast-track to the mining stage within 18 months following its proposed stock exchange listing”.
Conclusion: The forthcoming IPO of Venus Minerals will introduce a copper development project with an existing resource base and near-term production possibilities based in a European jurisdiction. We await details with interest.
Castillo Copper Ltd (LSE:CCZ, ASX:CCZ) 1.2p, Mkt Cap £14.6m – Preliminary analytical results from historic core at BHA
- Castillo Copper has reported that its geological team has analysed historic core from the ‘Seven Siters’ project at BHA held in the core-library at Broken Hill NSW.
- The company says that portable XRF analysis of previously untested core from holes BH1 and BH2 “demonstrate the presence of cobalt-zinc mineralisation at The Sisters Prospect”.
- Results reported today include:
“9.05m @ 859ppm Co & o.26% Zn from 11.84m
8.42m @897ppm Co & 3.26% Zn from 116.24m
7.26m @ 946ppm Co & 1.53% Zn from 106.62m
4.88m @ 370ppm Co & 0.89% Zn from 124.66m”
- The “identified intervals from BH1 & BH2 diamond core are being sent to the laboratory for a complete analysis to confirm the results reconcile with the PXRF observations”.
- CEO, Dennis Jensen, explained that “The preliminary results from analysing The Sisters Prospect's diamond core has delivered Castillo Copper an excellent outcome. We now have compelling evidence, subject to final assays, there is high-grade cobalt-zinc mineralisation apparent and a prime target for future test drilling. Furthermore, the Board believes that, once all the assays are in from The Sisters Prospect, there will be sufficient data to potentially prove up a primary global cobalt mineral resource estimate that complies with the JORC 2012 Code
Conclusion: We await the assay results and the release of the mineral resources estimate for the BHA project to clarify the potential scale of the mineral endowment within this historic mining area.
Conroy Gold & Natural Resources (CGNR LN) 36.25p, Mkt Cap £13.3m – JV receives Crown permits
- Conroy Gold reports that its joint venture company with Demir Export, Conroy Gold (Armagh) has been granted the Mines Royal Options previously held by Conroy Gold
- The option areas “in the Longford–Down Massif in Northern Ireland … cover areas encompassing those previously held, together with, in Mines Royal C1, an additional c. 20 sq km. Other than the change of grantee, the Mines Royal options are on similar terms to those previously held by the Company”.
- Conroy Gold explains that “The grant of these options meets the final outstanding condition precedent to completion of the Joint Venture Agreement … with Demir Export”.
- Chairman, Prof. Richard Conroy, welcomed the Crown Estate’s granting of the Options and said that “My colleagues and I look forward very much to working with the Demir Export team and building a long term, successful relationship”.
Orosur Mining Inc (AIM:OMI, TSX-V:OMI)* 9.75p, Mkt Cap £18.4m – Mobilisation of field team to El Pantano
- Orosur Mining reports that its field exploration teams have mobilised to start the company’s first exploration programme at the El Pantano gold/silver project in the Deseado Massif of southern Argentina.
- The project, which is subject to an agreement with a privately owned local company, is located “several hours drive south from the regional city of Comodoro Rivadavia, and then roughly 50km travel on good quality dirt roads” and is situated approximately 45km from Anglogold’s Cerro Vanguardia operation.
- The initial field exploration is expected to include “extensive mapping and surface sampling (soils and rock chip) programs over the two most attractive prospects” and is expected to last approximately 2 weeks.
- The San Antonio prospect is located in the SE of the project area and is known to contain “epithermal veins along the main structure that were the NW continuation of high grade veins that had been previously identified” with the potential to host a “large epithermal system associated with the eruption of dacitic domes, and evidence of pervasive silicification and argillic alternation”.
- The La Esfinge prospect is located “approximately 5km along strike from San Antonio to the NW, located directly on the primary regional structure. This prospect is characterised by a large (8km strike length) silicified hill within a large erosional window whereby the overlying basalts have been removed … [and with geological characteristics that suggest] … La Esfinge is part of the same epithermal system as San Antonio, but slightly higher in that system”.
- Orosur Mining says that there is “No evidence of historical modern exploration … [at La Esfinge] … and it is possible then the prospect is untouched”.
- Orosur Mining can earn a 100% interest in the project by “investing US$3m over five years in two phases:
- Phase 1, earn 51% by investing US$1m over an initial 3-year period.
- Phase 2, move to 100% ownership by investing an additional US$2m over a subsequent 2-year period and granting Deseado a residual 2% net smelter return royalty on the Project.”
Conclusion: We await news of the initial exploration mapping and sampling at El Pantano.
*SP Angel act as Nomad and Broker to Orosur Mining
Tungsten West PLC (AIM:TUN) – 66.5p, Mkt cap £119m – Moving ahead as Hemerdon prepares to install X-Ray sorting
- Tungsten West, the company aiming to bring the Hemerdon tungsten / tin mine in Devon back into production, reports that it has broken ground for the “the installation of the X-Ray Transmission ("XRT") Ore Sorters” at site.
- The sorters “will make up part of the upgraded equipment the Company plans to install into the front end of the processing plant. The XRT ore sorter will substantially improve and streamline operations once production restarts, minimising plant downtime, increasing recovery as well as a host of ESG benefits”.
- CEO, Max Denning, said that the breaking of ground to install the new equipment marked “an important milestone in the Projects restart”.
- He said that “Ensuring the UK and the western hemisphere have got access to two key critical minerals has never been more profound”.
- Today’s announcement also confirms the appointment of former Technical and Operations Director, “James McFarlane as Managing Director of Tungsten West”. Mr. Denning said that the appointment brings Mr. McFarlane’s extensive experience which “will prove invaluable in the Company's development as we move closer to first production at Hemerdon”.
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Analysts
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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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