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Today's Market View - Anglo Asian Mining, and more...

Published: 11:28 20 Sep 2022 BST

Today's Market View - Anglo Asian Mining, and more...

SP Angel . Morning View . Tuesday 20 09 22

Lithium prices extend gains as supply concerns regain market focus 

 

MiFID II exempt information – see disclaimer below 

Private Equity / joint venture opportunity
We are looking for investors / jv partners for an exploration opportunity on a newly discovered copper / moly porphyry system with two adjacent non-porphyry gold and silver deposits over 6km in South-East Asia

  • 2,000m in 8 holes already drilled with intersections of visible chalcopyrite and molybdenite both disseminated and in B-veins
  • Positive indications of grade at shallow depths. Total funding $2.34m to date. Current implied valuation $4.4m. Best drill result:
    • 60m grading 0.4% copper, 0.2% gold plus molybdenum from 24m eg. below the leached cap
    • 3m grading 0.51% copper, 9.2g/t gold, and 49g/t silver from 64m down hole
    • 2m grading 0.3% copper, 6% zinc and 9g/t gold, 40 g/t silver from 33m down hole related to a massive pyrite-magnetite-sphalerite-chalcopyrite vein

*SP Angel’s role is limited to making introductions.  No due diligence or verification of information supplied by the company has been performed.  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.

 

Alara Resources (ASX:AUQ) – Al Washi-hi Majaza mine construction progress
Anglo Asian Mining PLC (AIM:AAZ, OTC:AGXKF)* – 50k share bought back in the market
AngloGold Ashanti (ASX:AGG) – Agreement to acquire Nevada properties for $150m cash
Aura Energy Ltd (ASX:AEE, AIM:AURA)* – CEO appointed
Gemfields Group Limited (AIM:GEM) – September auction yields $33m in sales
Griffin Mining Ltd (LON: GFM) – Production shutdown on cessation of explosives access in lead-up to CCP’s 20th Party Congress
Renascor Resources Ltd (ASX:RNU)* – Renascor executes option on new Battery Anode site for purified spherical graphite
Talga Group (ASX: TLG) – Drilling at Vittangi returns high grade intersections with MRE update due Q4/22
URU Metals Ltd (AIM:URU) – New gold zone discovered at Zeb project in South Africa

 

Copper strengthens on tight inventories and spiking China premiums

  • Copper has continued to tick around the $7,800/t mark despite demand fears as inventories remain low.
  • The metal remains down 20% this year as the dollar soars and global economic outlook remains gloomy.
  • China SHFE copper spot cargoes are seeing premiums of $118/t, the highest level since November.
  • Analysts expect China copper buying to remain strong before the National Day 1-week holiday from Oct. 1.
  • Inventories are starting to climb – the LME saw warehouse stocks increase 3%. Singapore, German, and Taiwanese stocks also jumped.
  • Stocks remain over 50% depressed on a seasonal basis vs the past 5-years.
  • Chinese futures exchange brokers remain net long on copper, further supporting strong demand sentiment.

 

Gold steadies lower as traders hold fire before Wednesday’s Fed rate hike announcement

  • Gold is hovering around the $1,675/oz mark, its lowest level in 2 years.
  • The dollar’s strength has weighed on the gold price, with the greenback resuming its rally against a basket of currencies.
  • The US 10-year yield jumped over 3.5% for the first time since 2011.
  • Traders are holding off bets in anticipation of a 75bp Fed rate hike, with any hint of dovishness expected to support gold.
  • Sentiment remains bearish, however, with hedge funds moving net-short gold on the COMEX last week.

 

Lithium prices extend gains as supply concerns regain market focus

  • Lithium carbonate prices touched $71,315/t in China on Friday, a new record.
  • Lithium hydroxide prices are nearing April’s all-time high levels.
  • Lithium prices weakened this summer but have now resumed their upwards momentum.
  • Demand remains strong for EVs, with China’s Passenger Car Association expecting EV sales to double 2021’s total at 6m vehicles.
  • Lithium producers have reinforced comments that supply remains an issue, with SQM predicting a ‘very tight market’ going forward.
     

Dow Jones Industrials +0.64% at 31,020
Nikkei 225 +0.44% at 27,688
HK Hang Seng +1.10% at 18,770
Shanghai Composite +0.18% at 3,121

 

Economics

UN General Assembly in NY this week

  • General António Guterres doesn't appear to think there is any chance of dialogue between the Russians and Ukrainians in New York
  • Guterres comments the two sides are "a long way" from the conditions for a peace agreement.

 

China - UBS cuts full-year growth forecasts for China from to 2.7% from 3% for 2022 and to 4.6% from 5.4% in 2023.

  • Industrial production rose 4.2% yoy in August vs 3.8% in July
  • Retail sales yoy rose 5.4% in August vs 2.7% in July
  • Fixed asset investment 5.8% ytd yoy in August vs 5.7% yoy in July
  • Unemployment 5.3% in August vs 5.4% in July
  • House price index fell 1.3% yoy in August vs vs -0.9% in July
  •  Chinese aluminium output rose 2.3% yoy to a record 3.51mt and 26.47m ytd despite problems with hydropower according to the National Bureau of Statistics.
  • Production of ten nonferrous metals rose 6.7% yoy in August to 5.74mt and 44mt YTD the highest level since January last year
  • We are surprised the figures are so strong.

Provinces see major economic disruption on application of Zero-Covid policies

  • We expect broader application of ‘Dynamic Zero Covid’ going forward as the nation prioritises growth over Covid restrictions
  • The authorities still need to vaccinate the population with a more effective serum due to low protection rates from the Sinovac vaccine
  • The City of Chengdu has announced plans to restart production and life in an orderly manner after over two weeks of restrictions and local lockdowns.

China spending on Russian energy hits record high last month

  • China’s spending Russian energy products hit a record $8.3bn last month, up 68% year on year.
  • Since Russia invaded Ukraine, Chinese spending on Russian energy has increased 74% to $44bn.
  • China is taking more volumes and at discounted rates from Russia, given the western sanctions imposed on the Putin regime.
  • Russian oil exports to China hit 8.34mt last month, from 7.15mt in July and 6.53mt in August 2021.
  • China’s spending on energy in August made up 83% of its total imports from Russia.
  • Imports of Russian coal hit 8.5mt – up 57% yoy.
  • Copper at 33,140t – up 25% yoy.
  • Refined aluminium at 42,000t – up 63%.
  • Palladium at 861kg – up 447%.
  • Gold imports fell to 263.5kg, down 86% from July’s 5-year record.

 

US - Home Builders / Wells Fargo sentiment falls to 46 as mortgage rates rise and construction costs rise

  • More than half the builders in the survey reported using incentives to support sales
  • US second largest port sees consumer demand easing after Covid-surge
  • Interest rates: The Fed is expected to raise rates by 75bp this week.
  • A larger rise would raise the US dollar unleashing further market volatility and potentially destabilising developing markets
  • NY Empire State manufacturing index -1.5 in September vs -31.3 in August
  • Philadelphia Fed manufacturing index -9.9 in August vs 6.2 in July
  • Preliminary Spt Uni of Michigan consumer sentiment 59.5 in August vs 58.2 in July

 

EU - CPI rose 0.6% in August vs 0.1% in July and 9.1% yoy in August vs 8.9% voy in July

  • EU proposing a 15% reduction in gas consumption and 5% cut in electricity usage as it brings back coal power generation.
  • The EU also plans to bring in a windfall tax of €140bn on energy companies
  • German energy supplier Uniper faces nationalising.
  • Lenin would be proud to see how the German system is shaping up
     

UK - Retail sales fell to 1.6% in August vs 0.4% in July and -5.4% yoy in August vs -3.2% yoy in July

 

Russia - Central bank cut rates to 7.5% from 8%

 

Germany – Government commits billions for LNG imports to make up for lost Russian gas supplies

  • Berlin has arranged for a fifth floating LNG terminal to be connected to the German gas network alongside a further floating LNG tanker to be stationed at Lubmin where the Nord Stream pipeline lands.
  • The LNG tankers regasify LNG for input into the pipelines.
  • Germany imported some 50bcm from Russia a year. Each floating LNG terminal will be able to process 5-8bcm of gas for Germany pipelines assuming the tankers are available to feed LNG.
  • Unfortunately only two of the floating LNG terminals are scheduled to start operating this year, in October and November, with the rest scheduled for winter 2023 (Euractiv).
     

South Africa – ESKOM load shedding to continue due to strikes, corruption and theft

  • South Africa is suffering Stage 6 load shedding as power generation units fail as it runs out of reserves according to the Eskom ceo
  • Eskom is currently sitting with planned losses of 7,062MW, full unit losses 10,877MW, and partial losses of 4,753MW (unplanned losses of 15,630MW) (Businesstech).
  • But problems run far deeper with coal deliveries containing metal and other rocks damaging power stations.
  • An unconfirmed report says Eskom employed a forensic expert to work on Eskom corruption. The reports says his house was shot at and he resigned.
  • The situation is going to make operating in South Africa increasingly challenging for manufacturers and miners.

 

Currencies
US$1.0034/eur vs 0.9996/eur last week. Yen 143.43/$ vs 143.56/$. SAr 17.690/$ vs 17.612/$. $1.144/gbp vs $1.142/gbp. 0.672/aud vs 0.670/aud. CNY 7.014/$ vs 7.010/$.
Dollar Index  109.57 / -0.15% on week

 

Commodity News

Precious metals:         

Gold US$1,674/oz vs US$1,661/oz last week

Gold ETFs 98.9moz vs US$99.1moz last week

Platinum US$925/oz vs US$899/oz last week - Amplats cuts forecast from Polokwane by 7.5-11.4%

Palladium US$2,188/oz vs US$2,101/oz last week

Silver US$19.40/oz vs US$19.04/oz last week

Rhodium US$14,200/oz vs US$14,200/oz last week

 

Base metals:   

Copper US$ 7,774/t vs US$7,688/t last week

Aluminium US$ 2,250/t vs US$2,279/t last week

Nickel US$ 24,680/t vs US$23,340/t last week

Zinc US$ 3,140/t vs US$3,127/t last week

Lead US$ 1,883/t vs US$1,903/t last week

Tin US$ 20,575/t vs US$20,900/t last week

 

Energy:

Oil US$92.2/bbl vs US$91.4/bbl last week - UAE Accelerates Plan to Increase Its Oil Production Capacity

  • Crude oil prices were broadly flat as the upcoming Federal Reserve meeting tomorrow looks likely to set the tone for future expectations of global crude demand growth.
  • European energy prices fell as Europe’s politicians made further pledges on intervention in the gas market this Winter, with Europe’s inventories now at 86% of capacity, slightly above the 5-year average.

Natural Gas US$7.835/mmbtu vs US$8.297/mmbtu last week

Uranium UXC US$50.85/lb vs US$50.85/lb last week

 

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$97.8/t vs US$100.6/t

Chinese steel rebar 25mm US$580.0/t vs US$581.9/t

Thermal coal (1st year forward cif ARA) US$305.0/t vs US$305.0/t

Thermal coal swap Australia FOB US$432.0/t vs US$436.0/t

Coking coal swap Australia FOB US$253.0/t vs US$253.0/t

 

Other:  

Cobalt LME 3m US$51,955/t vs US$51,955/t

NdPr Rare Earth Oxide (China) US$86,974/t vs US$85,232/t

Lithium carbonate 99% (China) US$69,365/t vs US$69,255/t

China Spodumene Li2O 5%min CIF US$5,310/t vs US$5,310/t

Ferro-Manganese European Mn78% min US$1,239/t vs US$1,235/t

China Tungsten APT 88.5% FOB US$325/t vs  US$327/t

China Graphite Flake -194 FOB US$825/t vs US$820/t

Europe Vanadium Pentoxide 98% 7.2/lb vs US$7.3/lb

Europe Ferro-Vanadium 80% 30.75/kg vs US$30.95/kg

China Ilmenite Concentrate TiO2 US$324/t vs US$325/t

Spot CO2 Emissions EUA Price US$70.7/t vs  US$70.4/kg

Brazil Potash CFR Granular Spot US$750.0/t vs US$800.0/t

 

Battery News

CATL and LG eye $15bn investment in Indonesia EV battery plants

  • Battery makers CATL and LG alongside Samsung have agreed to build 50GWh PA battery manufacturing plants in Southeast Asia.
  • C.50% of this capacity will be built in Indonesia, with companies attracted by the country’s attractive incentives for EV battery production.
  • The country is reportedly in talks with both Tesla and VW and hopes to reach 140GWh pa cell manufacturing capacity by 2030.

 

Fortescue to spend $6.2bn to decarbonize iron ore operations

  • FMG have committed to spend $6.2bn over the next 10-years as the company aims to eliminate fossil fuels by 2030.
  • The company will spend $3.2bn to construct 2-3GW of renewable energy, battery storage and charging infrastructure in the Pilbara region.
  • The renewable energy is intended to replace diesel at its mines.
  • Fortescue will also spend $1.3bn on a fleet of low carbon vehicles and $900m on new infrastructure.
  • Separately, the company has promised to manufacture 15mt of green hydrogen by 2030.
     

Company News

Alara Resources (ASX:AUQ) A$0.04, Mkt Cap A$31m – Al Washi-hi Majaza mine construction progress

  • The Company released an update on the mine construction progress at 51%-owned Al Wash-hi Majaza Copper Gold Project in Oman.
  • The mine pit itself, the gossan dump, the haul road leading to it and the drill pad are now all well on the way to completion.
  • Construction remains on track for completion in Q2/23 (June quarter).
  • Al Washi-hi Majaza MRE stands at 12.4mt at 0.89% Cu and 0.22g/t Au in the Indicated category and 3.7mt at 0.79% Cu ad 0.23g/t Au in the Inferred resource.

 

Anglo Asian Mining PLC (AIM:AAZ, OTC:AGXKF)* 72p, Mkt Cap £82m – 50k share bought back in the market
BUY

  • The Company bought back 50k shares in the market as close period ended following the release of Interim results.
  • The buyback completed on Friday was done at 73p.
  • Following the last purchase, the Company how holds 150k shares in Treasury.

*SP Angel act as Nomad and broker to Anglo Asian Mining

 

AngloGold Ashanti (ASX:AGG) ZAR22,803, Mkt cap ZAR95bn – Agreement to acquire Nevada properties for $150m cash

  • AngloGold reports that it has entered into an agreement with Coeur Mining (NYSE:CDE) to acquire 100% of Coeur’s wholly owned subsidiary, Coeur Sterling which owns neighbouring properties to AngloGold Ashanti (ASX:AGG)’s in the Beatty district of southern Nevada.
  • AngloGold will acquire all shares of Coeur Sterling for $150m in cash when the transaction closes.
  • According to studies undertaken by Coeur, the properties to be acquired in this transaction have a Mineral Resource of 914,000oz.
  • If AngloGold take the mineral resource to 3.5Moz, they must make an additional payment of $50m to Coeur.
  • The company comments that Coeur’s C-Horst orebody is located in the vicinity of AngloGold Ashanti’s Merlin orebody, where AngloGold Ashanti is currently undertaking extensive exploration activities.
  • AngloGold expect production to commence at Beatty in about three-year’s time, with production of 300kozpa with an all-in sustaining cost of less than $1,000/oz, by the end of the decade.

 

Aura Energy Ltd (ASX:AEE, AIM:AURA)*  17.75p, Mkt Cap £90m – CEO appointed

  • Aura reports that David Woodall has been appointed as Managing Director and Chief Executive Officer.
  • Mr Woodall has over 30 years of international mining experience across technical, managerial, consulting, executive and director roles, holding senior positions with Rio Tinto, Fortescue Metals Group (ASX:FMG), Newcrest Mining and Ivanhoe Mines.
  • Mr Woodall has a proven track record of transitioning companies from explorers to producer, a vital skillet as Aura fast-tracks to uranium production at the Tiris Uranium Project.
  • Mr Woodall is a member of the Australian Institute of Mining and Metallurgy (AusIMM) and a member of the Australian Institute of Company Directors (AICD).

*SP Angel acts as Nomad and Broker to Aura Energy

 

Gemfields Group Limited (AIM:GEM) 17.8p, Mkt Cap £210m – September auction yields $33m in sales

  • The Company reported on results from its September auction (31 Aug – 19 Sep) of rough emeralds from the Kagem operation in Zambia.
  • Auction revenues totalled $32.9m, the second highest figure reached at a Kagem commercial quality auction.
  • Of the 34 lots offered, 97% or 33 were sold.
  • Average price came in at $9.01, the second highest figure after $9.37/ct recorded in the previous auction in March/April.
  • Results confirm that 2022 is the strongest year on record for Kagem generating $118m in revenues YTD, up strongly on FY21 sales of $92m.

 

Griffin Mining Ltd (LON: GFM) 80.00p, Mkt Cap £139.2m – Production shutdown on cessation of explosives access in lead-up to CCP’s 20th Party Congress

  • Griffin Mining announced a pause in production at the Caijiaying Zinc Gold Mine in the lead-up to the Chinese Communist Party’s 20th Party Congress on October 16th.
  • Griffin has an 88% stake in the mine via a joint venture.
  • Processing and milling will cease on the 22nd of September and the Company expects full operations to resume on Tuesday 1st November. The Company is unable to access explosives required for production.
  • ‘Severe security measures’ taken by local authorities include the restriction of explosive supplies to mining operations in the municipalities surrounding Beijing.
  • The Company hopes increased production over the past quarter will account for anticipated production losses over September and October.
  • Management hopes to retain monthly production rates of c. 1.5mt on an annualised basis come the resumption of operations.

Conclusion: The security measures seem extreme and follow on from disruption caused by Covid lockdowns. Thankfully zinc prices are relatively robust at $3,140/t. The situation highlights why more businesses are leaving China in search of easier nations in Asia or simply reshoring back to the US.

 

Renascor Resources Ltd (ASX:RNU)* A$0.22, Mkt Cap A$455m – Renascor executes option on new Battery Anode site for purified spherical graphite

  • Renascor has executed an option over a new facility for the processing of PSG ‘purified spherical graphite’.
  • The 20Ha site is sufficient for Stage 1 28,000tpa, capacity along with expansion to Stage 2.
  • The site in Bolivar, north of Adelaide and just 30km from a major port and gives Renascor a lease option of 40 years from the South Australian Government-owned utility SA Water.
  • Management are currently optimising Battery Anode Material Studies for a vertically integrated operation to combine the planned Siviour graphite mine and concentrator with the Bolivar PSG production facility.
  • Siviour is currently the second largest reported Proven Graphite Reserve in the world, supporting a 40-year mine life with production of Graphite Concentrates up to 150,000 tonne per annum.
  • The total Measured, Indicated and Inferred estimate now consists of 93.5Mt @ 7.3% TGC for 6.9Mt of contained graphite – with 67% classified as Measured or Indicated.

*SP Angel has formerly acted as broker to Renascor

 

Talga Group (ASX: TLG) A$1.4, Mkt Cap A$432m – Drilling at Vittangi returns high grade intersections with MRE update due Q4/22

  • The Company released the balance of 36-hole drill programme testing the ~2km long Niska Link graphite target at Vittangi project in northern Sweden.
  • The assay results from the remaining 23 drill holes showed further zones of high grade graphite mineralisation over substantial widths.
  • Significant downhole intersections include:
    • 25m @ 28.4% Cg (from 39m) NIS22007 incl. 6m @ 45.5% Cg;
    • 85m @ 23.0% Cg (from 87m) NIS22020 incl. 46m @ 30.4% Cg;
    • 15m @ 31.7% Cg (from 2m) NIS22033 incl. 7m @ 42.0% Cg.
  • The Niska Link zone along with adjacent Niska South and North deposits remain open at depth and along strike.
  • Drilling was focused on growing the Vittangi resource that would support potential future expansions of vertically integrated anode production capacity.
  • The Company started an update of the Vittangi graphite resource and is expected to be completed in Q4/22.
  • Vittangi MRE currently stands at ~30.1mt at 24.1% Cg for 7.2mt contained graphite (22.6mt at 24.9% Cg for 5.6mt in the Indicated category).

Conclusion: The balance of the 36-hole drill programme testing the Niska Link delivered good results boding well for an upgrade in the Vittangi MRE that is targeted for completion in Q4/22.

 

URU Metals Ltd (AIM:URU)* - 172p, Mkt cap £2.8m – New gold zone discovered at Zeb project in South Africa

(URU Holds a 74.82% stake in Zeb Nickel (TSX-V:ZBNI, OTC:ZBNIF) Corp which holds the Zebediela Nickel project in South Africa – URU remains as the technical operator of the Zebediela Project)

  • URU Metals reports the discovery of a new gold zone underneath the main reef on its Zebediela project in the Bushveld region of South Africa.
  • Drilling done by Zeb Nickel Corp (ZBNI) shows substantial extension to the high-grade gold mineralisation of 28m grading 9.05g/t intersected in April this year.
  • “Gold mineralization on the Project is almost certainly related to gold mineralization which occurs on the Pietersburg Greenstone Belt, which hosts the historical Eerstegeluk Gold Mine.”
    • Hole Z026 drilled on 15th March 2022 intersected 0.68 g/t Au over 1.83 m from a depth of 221.41 m to 223.20, and 1.36 g/t Au over 1.50 m from a depth of 250.50 m to 252m,
    • Hole Z029 drilled on 12th April 2022 intersected 9.05 g/t Au over 28.32 m, including 12.21 g/t Au over 10.86 m and including 11.25 g/t Au over 10.64 m,
    • Hole Z027 drilled on 12th April 2022 intersected 1.67 g/t Au over 33.81 m, including 5.07 g/t Au over 4.81 m.
  • The nickel-PGE results of Z026 were reported in a news release on March 15, 2022.
  • Historic drill hole UIT01-5, around 530m north of hole Z026 also contained anomalously high gold mineralization of 2.45m grading 0.82g/t gold.
  • Drillhole Z026 intersected 0.68 g/t Au over 1.83 m from a depth of 221.41 m to 223.20, and 1.36 g/t Au over 1.50 m from a depth of 250.50 m to 252m.
  • There are no drill holes between UIT01-5 and Z026.

Conclusion: The analysis suggests there is greater potential for the discovery of economic mineralisation one the Zebediela project due to the presence of gold underneath the main nickel and other Platinum Group Elements.

*SP Angel acts as Nomad and Broker to URU Metals

 

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

 

 

SP Angel                                                            

Prince Frederick House

35-39 Maddox Street London

W1S 2PP

 

*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

 

DISCLAIMER

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SPA research ratings – Based on a time horizon of 12 months: Buy = Expected return of more than 15%, Hold = Expected return between -15% and +15%, Sell = Expected return of less than 15%

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