SP Angel . Morning View . Thursday 26 05 22
Metals prices pause as Li Keqiang urges officials to kick start China economy
MiFID II exempt information – see disclaimer below
Amur Minerals Corporation (AIM:AMC, OTC:AMMCF)* 1.1p, Mkt Cap £16m – Shareholders reject the Stanmix $105m cash offer
Atlantic Lithium Limited (AIM:ALL)* 51.14p, Mkt Cap £296m – Ewoyaa project set to expand as visible spodumene is observed in new drilling
Beowulf Mining PLC (AIM:BEM)* 5.45p, Mkt Cap £44.5m – 2021 Results reports progress in Sweden, Kosovo and Finland CEO and highlight March 2022 award of Kallak licence
IRC Ltd (PRIVATE:IRC) HK$0.2, Mkt Cap HK$1.6bn – Management and Board changes
SolGold PLC (LSE:SOLG, TSX:SOLG, OTC:SLGGF)* 31p, Mkt Cap £700m – Updated Tandayama-America mineral resource estimate more than doubles measured and indicated tonnage
Dow Jones Industrials +0.60% at 32,120
Nikkei 225 -0.27% at 26,605
HK Hang Seng -0.56% at 20,059
Shanghai Composite +0.50% at 3,123
Gold - Margin calls on adventurous / leveraged Crypto-currency traders is also thought to be hitting other asset classes including gold
Economics
China – The government urged officials to help companies kickstart production after Covid-19 lockdowns as China might struggle to record a positive GDP growth rate this quarter, Premier Li Keqiang said.
- The last time the economy contracted was at the start of the pandemic in Q1/20 and Li suggested that the economy was “to some degree worse than” it has been at the start of 2020.
- Contentious zero Covid strategy highlight risks to targeted 5.5% GDP growth rate.
- Premier highlighted high unemployment with the 16-24 group showing a historic maximum of 18.2% and criticising low business reopening rates.
- “Progress is not satisfactory... some provinces are reporting that only 30% of businesses have reopened… the ratio must be raised to 80% within a short period of time”.
- “Many SMEs and local authorities told me their worst days have come.”
- SME account for half or more of economic output, employment and taxes in China.
China allows companies to violate labour laws as part of its support for companies
- China has offered immunity from infractions to labour laws according to the FT as a form of government support. It’s nice to know they take ESG so seriously.
Inflation – Inflation is causing consumers to slow their consumption of non-essential items so they can pay for fuel, energy and food
- Consumers are also increasingly wary of the risk of unemployment and are rebuilding cash and paying down debt
- Companies are also postponing or even cancelling capital expansion plans as increasing input prices and variable logistics create uncertainty as the era of cheap money is coming to an end creating a double whammy for companies faced with reluctant consumers, rising costs and falling.
- Netflix seems to be an early indicator of cancelled subscriptions in response to financial stress and a dramatic fall in consumer sentiment
- China can thank Russia for ramping up oil and gas prices and for collapsing demand for Chinese products in the west.
- Makes us wonder if China’s lockdowns might serve a dual purpose of slowing manufacturing output to avoid a build-up of unsold stock while the West adapts to higher inflation. (surely an unintended consequence).
- Will be interesting to see if the zero Covid policies are relaxed as the War in Ukraine abates and the world turns to a new normal.
- margins.
- Somehow we feel the impact of higher household costs should temper inflation and serve to restore some balance enabling central banks to go easy on interest rate rises later this year.
North Korea – North Korea fired three ballistic missiles yesterday to celebrate Joe Biden’s visit to Asia and US support for Quad countries under US aligned with the US Asia defence policy
Currencies
US$1.0690/eur vs 1.0692/eur yesterday. Yen 126.85/$ vs 127.22/$. SAr 15.728/$ vs 15.668/$. $1.259/gbp vs $1.255/gbp. 0.709/aud vs 0.711/aud. CNY 6.730/$ vs 6.671/$.
Commodity News
Precious metals:
Gold US$1,850/oz vs US$1,858/oz yesterday
Gold ETFs 105.1moz vs US$105.2moz yesterday
Platinum US$949/oz vs US$953/oz yesterday
Palladium US$2,000/oz vs US$2,029/oz yesterday
Silver US$21.86/oz vs US$21.97/oz yesterday
Rhodium US$15,600/oz vs US$15,600/oz yesterday
Base metals:
Copper US$ 9,347/t vs US$9,414/t yesterday
Aluminium US$ 2,884/t vs US$2,851/t yesterday
Nickel US$ 27,175/t vs US$26,155/t yesterday
Zinc US$ 3,747/t vs US$3,760/t yesterday
Lead US$ 2,114/t vs US$2,163/t yesterday
Tin US$ 32,950/t vs US$34,100/t yesterday
Energy:
Oil US$114.3/bbl vs US$114.6/bbl yesterday
The EIA reported a 1.0mb draw in US crude stockpiles last week driven by a 0.8mb/d increase in exports, in addition to a 0.5mb draw in gasoline as U.S. refinery utilisation rose by 1.4% to 93.2%.
The EIA also reported the U.S. average retail price of regular gasoline was $4.59 per gallon on May 23, the highest inflation-adjusted (real) price since 2012 and the all-time highest nominal price for gasoline.
European energy prices were broadly unchanged as despite flows via one cross-border point in Ukraine remaining out of service, Russian supply through its other transit routes remain stable.
Natural Gas US$9.160/mmbtu vs US$8.826/mmbtu yesterday
Uranium UXC US$47.25/lb vs $46.70/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$130.8/t vs US$129.6/t
Chinese steel rebar 25mm US$704.3/t vs US$710.6/t
Thermal coal (1st year forward cif ARA) US$248.5/t vs US$248.5/t
Thermal coal swap Australia FOB US$362.0/t vs US$375.0/t
Coking coal swap Australia FOB US$500.0/t vs US$485.0/t
Other:
Cobalt LME 3m US$75,000/t vs US$75,000/t
NdPr Rare Earth Oxide (China) US$140,410/t vs US$141,662/t
Lithium carbonate 99% (China) US$64,410/t vs US$64,385/t
China Spodumene Li2O 5%min CIF US$4,500/t vs US$4,380/t
Ferro-Manganese European Mn78% min US$1,854/t vs US$1,855/t
China Tungsten APT 88.5% FOB US$336/t vs US$336/t
China Graphite Flake -194 FOB US$815/t vs US$815/t
Europe Vanadium Pentoxide 98% 9.6/lb vs US$9.6/lb
Europe Ferro-Vanadium 80% 38.25/kg vs US$38.25/kg
China Ilmenite Concentrate TiO2 US$368/t vs US$371/t
Spot CO2 Emissions EUA Price US$86.2/t vs US$86.4/kg
Brazil Potash CFR Granular Spot US$1,200.0/t vs US$1,200.0/kg
Company News
Amur Minerals Corporation (AIM:AMC, OTC:AMMCF)* 1.1p, Mkt Cap £16m – Shareholders reject the Stanmix $105m cash offer
- Shareholders voted down the Stanmix $105m cash offer for the Kun Manie nickel/copper sulphide project in the Far East of Russia during the General Meeting yesterday.
- 73% of ~311m cast votes (~22% turnout) voted against the deal.
- The proposed $105m cash offer was proposed to be split over the following tranches:
- $15m on completion of the transaction;
- $10m within 12 months of the Share Purchase Agreement (SPA);
- $50m within 48 months of the SPA;
- $30m payable in 10 annual instalments of $3m starting on the anniversary of the date of completion in 2027.
- Stanmix Holding is a Cyprus based company controlled by Vladislav Sviblov, a Russian entrepreneur involved in a number of mining M&A transactions recently.
Conclusion: Shareholders voted down the proposed $105m cash offer suggesting the deal with a large part of the consideration delayed to later years undervalued the business and added risk that payments may not be completed amid latest geopolitical tensions following the invasion of Ukraine. The Company highlighted it is now planning to continue to advance the Kun Manie Project per original plan while continuing discussions with interested parties. The latter presumably should potentially involve an improvement on the Stanmix offer.
*SP Angel act as Nomad and Broker to Amur Minerals
Atlantic Lithium Limited (AIM:ALL)* 51.14p, Mkt Cap £296m – Ewoyaa project set to expand as visible spodumene is observed in new drilling
- Atlantic Lithium report the visual identification of spodumene in new drilling at the Ewoyaa Lithium Project in Ghana.
- The new discovery offers potential to significantly expand the resource with spodumene seen over 80m in multiple drill holes indicating a widening of the spodumene at depth.
- Spodumene is a particularly easy mineral to identify in drill cores though judging its grade probably best left to the assay labs.
- Drilling was completed below previously reported high-grade intervals:
- GRC0425: 75m at 1.17% Li2O from 68m in,
- GRC0426: 64m at 1.28% Li2O from 74m
- GRC0428: 66m @ 1.26% Li2O from 41m
- Ewoyaa currently has a 30.1mt mineral resource grading 1.26% Li2O making Ewoyaa one of the world’s better grade lithium resources.
- PFS ‘Pre-Feasibility Study’ due in Q3 2022 to upgrade the current Scoping Study despite delays in receiving assay results from labs.
- The project is located on the coast and is relatively close to port infrastructure for shipping concentrates to China for processing.
- Atlantic have mobilised a further three drill rigs following the new discovery to supplement the single rig currently working on site
- Two new RC rigs have just arrived with a diamond drilling rig due next week.
- 52 drill holes have been completed to date for 9,166m with a number of assays pending.
- The drill program has been expanded to ~37,000m from 19,000m including some infill and geotechnical drilling alongside the extension of the current resource.
- One of the rigs will also test the depth of a number of new targets which have been defined in auger drilling within the Ewoyaa pegmatite corridor, to the north and south of the current MRE.
- Infill drilling will also upgrade the inferred to measured and indicated resources for the first 1.5 years of planned mine production.
- Geotechnical drilling will test the ground conditions for pit wall planning and detailed engineering design.
- Regional exploration auger drilling is ongoing over Mankessim and Saltpond licenses with just 28sqkm2 tested and 13km2 drilled, within their 560km2 lithium portfolio in Ghana.
- Increasing the scale of the Ewoyaa lithium project offers the potential for a significant increase in the proposed production rate or for a second stage expansion. Both options should be highly value accretive in a market which is significantly short of spodumene and lithium supply.
- See press release for maps, cross sections and picture of RC chippings containing visible spodumene. http://www.rns-pdf.londonstockexchange.com/rns/8518M_1-2022-5-26.pdf
- Management have picked up the pace of development at Ewoyaa highlighting the strength of the team put in place by the late Vince Mascolo. While the sudden passing of ceo was a shocking and tragic event, we feel sure Vince would be proud to see the acceleration of his good work.
- Alternative lithium supply: We have been examining the potential for new production from DLE ‘Direct Lithium Extraction’ from lithium rich brines in the Atacama in Chile and in Argentina.
- So far DLE only appears to work commercially after lithium-bearing brines have been concentrated through evaporation ponds and in specific chemical conditions.
- Extraction of brines from aquifers is an increasing issue in Chile with regulations tightening permission to extract brines along with new indigenous opposition and environmentalists highlighting declining numbers of pink flamingos. We note; Chilean flamingos have a special gland behind the eyes which enables the processing and absorption of near boiling spring water and salt water.
- Rio Tinto recently acquired Rincon which has a DLE process in testing in Salta Argentina, though we would not be surprised to see some form of pre-concentration applied to the brines to get this to work.
- Geothermal lithium brines appear to offer potential for DLE extraction as energy from the hot fluids can be used as part of the process assuming the brines flow as intended.
- We conclude that the world is a long way off the holy grail of commercial DLE lithium extraction which presents significant challenges and Li-ion battery materials processors will continue to rely on spodumene as a primary feedstock for lithium for many more years to come.
Conclusion: Ewoyaa continues to stand out as one of the world’s best hard-rock lithium discoveries in recent years. News today on its further expansion offers potential for a significant increase in production and value going forward.
*SP Angel acts as nomad to Atlantic Lithium. An SP Angel mining analyst recently visited the Ewoyaa Lithium Project in Ghana
Beowulf Mining PLC (AIM:BEM)* 5.45p, Mkt Cap £44.5m – 2021 Results reports progress in Sweden, Kosovo and Finland CEO and highlight March 2022 award of Kallak licence.
- Beowulf Mining reports a loss of £1.49m for the year to 31st December 2021 (2020 - £1.29m loss) and a year end cash balance of £3.34m.
- In his letter to shareholders, Non-Executive Chairman, Sven Otto Littorin, says that Beowulf Mining “finished the year with strong prospects for 2022 across our three business areas; the future development of an anode materials plant in Vaasa, Finland; the restart of drilling in Kosovo; and a new Minister talking about making a decision on our Kallak application, which finally happened on 22 March 2022” when the exploitation licence was awarded.
- He says that “Kallak is excellently positioned as a potential secure and sustainable supplier of high-quality iron ore to Sweden's fossil-free steel making sector for decades to come … [and while referring to the opportunity to use renewable energy for the project says that Kallak] … is a tremendous opportunity to create a fossil-free business ecosystem of companies and stakeholders, collaborating and delivering the greater good”.
- He confirms that Beowulf’s “overall objective is to have Kallak in production in 3-4 years, developing the mine alone or with a strategic partner”.
- Commenting on the company’s operations in Kosovo, via Vardar Minerals, Beowulf confirms that “Vardar was unable to drill in 2021, as it awaited approval of its licence renewal applications” but that “It has, since March 2022, secured both licence renewals and been awarded a permit for the promising Shala licence, which covers 87 square kilometres, extends to the north and northeast of the Mitrovica Project, and includes several areas with significant alteration … along with associated gossans and evidence of historical artisanal workings”.
- The company says that, following a further £1.2m investment in Vardar it has increased its ownership “from 51.4 per cent to 59.5 per cent approximately” and the new investment is funding a 3,400m drilling programme at the Wolf Mountain zinc/lead/silver target and the Majdan Peak gold prospect.
- In Finland, the company has “invested approximately £1.5 million in exploration, mineral resource development, metallurgical testwork and the assessment of market applications for graphite” at it’s most advanced project – the Aitolampi graphite project.
- Mineral resources for Aitolampi, which has both an Eastern and Western Lens of mineralisation are currently 26.7mt at an average grade of 4.8% Total Graphite Carbon (TGC) with 11mt classed as ‘Indicated’ with the balance ‘Inferred’. “A Scoping Study contract for the Aitolampi graphite project was awarded to AFRY Finland Oy later in March” 2021.
- Beowulf Mining confirms that in early 2022, its Finnish company Grafintec, “and Epsilon Advanced Materials had signed a MoU with the City of Vaasa for the establishment of an anode materials production facility to be located in the GigaVaasa area”.
*SP Angel acts as Nomad and Broker to Beowulf
IRC Ltd (PRIVATE:IRC) HK$0.2, Mkt Cap HK$1.6bn – Management and Board changes
- The Company announced changes to management and the Board following a change in a major shareholder and on concerns of geopolitical tensions from the war in Ukraine.
- Yury Makarov will be resigning as CEO and Executive Director with Danila Kotlyarov assuming the role of Interim CEO until a replacement is appointed.
- Kotlyarov will also be leaving the Board of the Company.
- Additionally, all other Directors except for Nikolai Levitskii (Chairman of the Board and a 29.9% shareholder in the Company) and Dmitry Dobryak (Independent NED) left the Board including Peter Hambro, Daniel Bradshaw, Martin Smith, Raymond Woo and Martin Davison.
- New appointments include Natalia Ozhegina (Independent NED), Alexey Romanenko (Independent NED) and Vitaly Sheremet (Independent NED).
- The Company produced 2.6mt of 65% Fe concentrate last year generating ~$370m in revenue (+65%) and $170m in EBITDA (+114%) benefiting from a +60% rise in realise iron ore prices.
- Strong iron ore prices helped to significantly deleverage the business with net debt coming down to $60m compared to ~$180 a year earlier.
SolGold PLC (LSE:SOLG, TSX:SOLG, OTC:SLGGF)* 31p, Mkt Cap £700m – Updated Tandayama-America mineral resource estimate more than doubles measured and indicated tonnage
- Solgold has published an updated and independently verified mineral resources estimate for the Tandayama-America deposit which lies within its Cascabel licence area in northern Ecuador and approximately 3km north of its flagship Alpala project.
- The estimate, which is reported to NI43-101 standards and builds on the initial estimate released in October last year, shows a measured an indicated resource of 528.5mt at an average grade of 0.24% copper and 0.19g/t gold (reported as 0.36% copper equivalent – CuEq) plus an inferred resource of 105.1mt at a grade of 0.24% copper and 0.18g/t gold (0.36% CuEq).
- The estimate is based on a total of 30,892m of drilling from 41 holes completed up to 30th March 2022 and the measured and indicated portion of the estimate more than doubles the 233m indicated tonnes at an average grade of 0.23% copper and 0.16g/t gold (reported as 0.33% copper equivalent CuEq) reported in the initial estimate which used 18 holes (17,535m).
- Open-pittable resources comprise 356.5m measured and indicated tonnes at an average grade of 0.23% copper and 0.21g/t gold compared with 201m indicated tonnes at a grade of 0.33% CuEq in the October estimate.
- The company says that “Optimisation studies of the potentially open pittable Mineral Resource show a higher-grade internal zone containing 223.3Mt @ 0.41% CuEq which includes an outcropping zone containing 28.0Mt @ 0.43% CuEq and 10.5Mt @ 0.55% CuEq”.
- Indicated resources amenable to underground mining of 172mt grading an average 0.26% copper and 0.16g/t gold (0.35% CuEq) compare with 32m indicated tonnes at a grade of 0.35% CuEq in the previous estimate and Solgold confirms that there is a “a higher-grade core that continues to remain open to the southeast and at depth and will be the focus of further drilling aimed at quantifying potential of other underground mining methods such as sub-level caving and sub-level open stoping”.
- The estimate uses a cut-off grade of 0.16% CuEq for the open-pittable resources and 0.28% CuEq for the underground portion of the resource.
- Solgold says that after completing hole 42 at Tandayama-America “the drill machine was moved to the Moran target where exploration drilling of hole MOD-22-001 is at a current depth of 414.7m and continues to intersect bornite and visible chalcopyrite copper sulphide mineralisation from 19.1m to its current depth”.
- Mineralisation at Moran, which is located between the Alpala deposit and Tandayama America, “holds close affinities to that at the Alpala and TAM deposits”. Photographs of the Moran drill core included in the pdf version of the announcement 8977M_1-2022-5-26.pdf (londonstockexchange.com) show, at least to the untutored eye, similarities to similar core photographs for Alpala and TAM included in previous releases by Solgold.
- CEO, Darryl Cuzzobbo, explained that “The Cascabel project continues to grow with more drilling with the additional resources being identified at TAM providing an open pit resource potentially enabling Cascabel production to be brought forward and a significant risk mitigation to any ramp up delays in the underground production”.
- In April, the company issued its pre-feasibility results for the Alpala deposit where a 25mtpa underground mining operation using block-caving is expected to produce an average of 132,000tpa of copper, 358,000ozpa of gold and 1mozpa of silver over an initial 26 years mine life.
- The study showed that pre-production capital investment of US$2,746m followed by post-production sustaining capital of a further US$2,136m at Alpala is expected to generate an after-tax NPV8% of US$2,907m and an IRR of 19.3% using base case commodity prices of US$3.60/lb for copper, US$1,700/oz for gold and US$19.90/oz for silver
Conclusion: Expansion of the Tandayama America mineral resource, including mineralisation amenable to open-pit mining provides Solgold with a wider range of development options for the Cascabel licence area with the CEO indicating that production from open-pit mining could be brought in as the underground operation at Alpala builds to planned production. We also look forward to results from the drilling at Moran when they are available.
*SP Angel acts as Financial Advisor to SolGold
SP Angel and Digbee ESG joint initiative for mining companies
https://www.uploadlibrary.com/SPAngel_JohnMeyer/DIGBEE_Press_release.pdf
- SP Angel and Digbee, a specialist ESG group, wish to announce their joint initiative in bringing ESG accreditation to mining companies in their drive to meet institutional investment and rapidly evolving ESG standards and regulatory requirements.
- We are rapidly approaching a point where a company’s ESG profile will not simply be a positive investment factor but will become a precondition to investment by many investment funds.
- The guidance and ratings process developed by Digbee is specifically designed to assist mining companies meet the new expectations and ensure directors meet their ESG compliance objectives.
- The initiative will not only quantify and score the ESG profile of qualifying companies but will also highlight ESG improvements and positive performance as companies develop.
- Importantly, the process will enable investment funds to demonstrate the positive results of their investments to their underlying investors and stakeholders which can, in turn, lead to further funding.
- It is imperative that any ESG Rating is seen to be credible. Digbee’s solution was developed to address this: it is mining specific, right sized and future looking, based on an independent assessment of a submission that is supported by evidence and approved by the company’s board of directors. It will also address investor frustration at a lack of comparable or meaningful data.
- For companies at an earlier stage of their ESG journey, recording improvements over time through the Digbee initiative is likely to prove attractive to investment funds as a demonstration of their ESG commitment permitting institutional investment at an earlier stage.
- The direction of travel is now firmly towards renewable sources of energy and a transition to environmental sensitivity. Historically, regardless of the individual facts, miners have collectively been identified as bad actors in this regard. Digbee engagement and ratings should improve the visibility of the good work being done.
- For example, installing, wind and solar generation to displace oil and gas should not only cut energy costs but also reduce carbon emissions. Sharing this energy with a local community may further reduce emissions, strengthen community engagement and lead to long-term sustainable benefits well beyond the end of the mine life. Similarly, a mine closure, thoughtfully done, can leave a positive community legacy that will stand a company in good stead when it is seeking new mining opportunities. Having a third party ESG specialist incorporate these initiatives into a rating accepted by investors will help secure the credit such initiatives deserve.
Jamie Strauss, Founder & CEO, Digbee Ltd: “We are delighted with this joint initiative with SP Angel, the number one ranked advisor to the AIM Mining sector*. SP Angel has acknowledged the importance of presenting their corporate clients to institutional investors with credible ESG disclosure as an increasing prerequisite to encourage new investment. We look forward to working together to achieve a more sustainable mining industry that is recognised for its positive actions ”
John Meyer, Mining Analyst & Partner at SP Angel “Working with Jamie Strauss and Digbee will help prepare our corporate clients for ESG-orientated investment. Mining, exploration, and development companies contribute much to local communities which combined with the potential benefits of increasingly sustainable operations is worthy of recognition. Quantifying the benefits, improvements and legacies of these operations should act a catalyst to further improvement to the benefit of all stakeholders.
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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