Gold slides to one-month low as traders optimistic over soft landing
MiFID II exempt information – see disclaimer below
Anglo Asian Mining* (AAZ LN) – Government approval for restart of operations following Micon report
Golden Metal Resources (GMET LN) – Copper targets identified at the Garfield project, Nevada
Great Western Mining* (GWMO LN) – Interim reports and project updates as first precious metal production looms
Oriole Resources* (ORR LN) – Wapouzé shows potential for economic limestone to support Cameroon’s £700m cement industry
Power Metal Resources* (POW LN) – Additional uranium targets identified at Athabasca Basin
Rainbow Rare Earths (RBW LN) – £4.5m fund-raising
Sunrise Resources (SRES LN) – Results of Pioche drill programme
Unicorn Mineral Resources (UMR LN) – Drilling results from Kilmallock, Ireland
*SP Angel almost invariably acts as nomad or broker or nomad and broker to companies mentioned in the above videos and podcasts. We speak more about these companies as we have a good understanding of their business and can talk with a greater degree of confidence. As ever, however, it should be noted that our views do not take into account the circumstances and needs of any particular investor or investor type. So enjoy the talks, but please do your own research, including other companies not mentioned by us but operating in the same areas, and get professional advice where appropriate.
Gold slides to one-month low as traders optimistic over soft landing
- Gold prices slumped below $1,900/oz on the spot market to hit $1,895/oz.
- ETF holdings are at their lowest since August 2019.
- The move followed another move higher in the dollar and continued elevated Treasury yields.
- Fed President Kashkari noted that higher rates may be needed to bring down inflation.
- The market narrative recently has shifted to concerns over continued inflation and persistent labour market strength.
- Gold will need a softer inflation reading on PCE data this week and some softer labour data for a bounce back.
- If inflation continues to come in hot and labour market strength persists in the US, gold’s downward trajectory seems assured.
Iron ore ticks up as Chinese industrial profits buoy sentiment
- Iron ore prices climbed to $116/t but remain below recent highs of $121/t hit last week.
- China has raised expectations of stimulus with comments of ‘precise and forceful’ support.
- China’s industrial profits improved for 30/41 companies tracked.
- But steel margins are weak and the property sector collapse continues to loom large.
Lithium – Chinese Gigafactories using long-term lithium feedstock contracts to avoid Spot market purchases and help prices lower
- Chinese lithium buyers have overturned normal Spot market buying practices, electing to sign up longer-term supplies where possible.
- Is this a reaction to the challenge of sourcing supply, or is this a reaction to government policy to control commodity markets?
- Lithium carbonate prices are falling despite strong demand growth for LFP batteries in China and new demand growth elsewhere
- Lithium Hydroxide demand has also collapsed in China as battery manufacturers produce more LFP batteries moving away from more power intensive NCM battery chemistries.
- European manufacturers will lift Lithium Hydroxide demand as the European consumers go for higher capacity NCM battery for longer range.
- Fastmarkets report talk of South Korean consumers attempting to sell lithium carbonate back to the Chinese market.
- China is increasingly coordinated in its purchasing of raw materials and its move to longer-term contracts may enable traders to more easily manipulate the spot market.
- The rest of the world is behind China in terms of Gigafactory capacity but new growth will likely raise lithium hydroxide and carbonate demand beyond current available supply in the short to medium term.
|Dow Jones Industrials||-1.14%||at||33,619|
|HK Hang Seng||+0.63%||at||17,577|
US – Government shutdown looks increasingly likely ahead of the looming October 1 deadline with lawmakers failing to agree new budget.
- Depending on a duration of a potential shutdown, a pullback in consumer and business sentiment may challenge the Fed’s latest ‘higher for longer’ stance on rate outlook.
- There have been 14 shutdowns since 1981 with most last only a day or two.
- The most recent one was also the longest, lasting 34 days between Dec/18 and Jan/19 due to a dispute over border security and estimated to have cost the economy ~$3bn or 0.02% of GDP, Reuters reports.
Former President Trump faced a major defeat in the New York state court in Manhattan as Justice Arthur Engoron ruled that Donald Trump and his family business fraudulently inflated the value of his properties and other assets.
- The non-jury trial will now focus on the remaining allegations including falsifying business records and issuing false financial statements.
- The suit seeks $250m in restitution and other penalties.
- Along with monetary penalties, the attorney general is seeking to bar Trump from serving as an office or director in any comment in the state, Bloomberg reports.
OpenAI, the creator of ChatGPT, is considering a potential share sale valuing the startup at $80-90bn or almost three times it was valued at earlier this year, Bloomberg cites WSJ.
US – The US is offering US$130bn of US Treasury bond this week with 2 to 7-year terms
- US 30-year mortgages at 7% keeping sellers from the market, reducing housing availability along and cutting purchasing power.
- New home sales fell 8.7% in August to 0.675m units vs 8% in July at 0.739m units
- House price index rose 0.8% in July vs 0.4% in June and 4.6% yoy in July vs 3.2% yoy in June
- S&P Case Schiller home price rose 0.1% yoy in July vs -1.2% in June
- Dallas Fed manufacturing index fell further to -18.1 in September vs -17.2.
Inflation looks like it is ready to move higher again
- Energy: Russia and Saudi Arabia look like they are preparing to squeeze energy supplies into Europe.
- Putin appears to be dragging out the war in Ukraine with the intention of grinding down all opposition to his invasion.
- China has stocked up on discounted oil and gas in preparation for a squeeze in supplies – did Europe not get the memo?
- The US has depleted a significant portion of its strategic oil reserve, though Fortunately oil >$85/bbl should increase US fracking output.
- Even if Ukraine succeeds in forcing Russia off its soil, Russia will, in all probability, continue to squeeze energy prices.
- Europe should prepare for sabotage to subsea oil and gas pipelines as well as interconnecting electricity cables.
- UK consumers might want to look at fixing their energy costs for the winter now that gas and electricity prices have pulled back.
- Higher Oil prices are, already, feeding into petrol and diesel prices at the pump
- Food: prices of food and non-alcoholic drinks rose 13.6% yoy in August vs vs 14.9% in July the highest rate for 45 years (ONS).
- Services: pulled back to 6.8% in August from a 31-year high of 7.4% in July
- Wages: nominal pay rose to a record 7.8% yoy in July (was 8.5% from May-July) with public sector wages rising 12.2% and private sector wage rising at 8.2% yoy.
- Manufacturing: factory gate prices fell 0.4% in August vs a fall of 0.7% in July partly driven by falling factory gate prices in China.
Germany – Ifo business climate index held steady at 85.7 though September vs 85.8 in August
Evergrande Chairman Hui Ka Yan is under police control according to Bloomberg.
- The news follows announcements that property developer’s former CEO and CFO have been detained by authorities as well.
China – Industrial production reports the first increase in more than a year reflecting higher output and slower producer price deflation.
- The report is a welcome news implying a potential stabilisation in the economic growth slowdown.
- The economy is projected to grow 5% this year, a 10bp downgrade from previous estimates, according to the latest Bloomberg survey.
- Industrial Profits (%yoy): 17.2 v -6.7 July.
- Industrial Profits (%YTD): -11.7 v -15.5 July.
Germany – Consumer sentiment pulled back in October on the back of challenging economic growth outlook with export oriented economy hit by a slowdown overseas while high borrowing costs and inflation weigh on spending locally.
- Separately, Ifo Institute survey showed that German businesses were most reluctant to take on new employees since 2021 this month.
- “The robust expansion of employment seen over the past few months has come to a standstill… due to a lack of orders, companies are being rather cautious about filling vacant positions,” Ifo reported.
- GfK Consumer Confidence: -26.5 v -25.6 September (revised from -25.5) and -26.0 est.
US$1.0573/eur vs 1.0584/eur previous. Yen 149.05/$ vs 149.04/$. SAr 19.053/$ vs 18.890/$. $1.215/gbp vs $1.217/gbp. 0.638/aud vs 0.640/aud. CNY 7.305/$ vs 7.312/$.
Dollar Index 106.23 vs 106.12 previous.
Gold US$1,897/oz vs US$1,912/oz previous
Gold ETFs 88.6moz vs 89moz previous
Platinum US$910/oz vs US$908/oz previous
Palladium US$1,247/oz vs US$1,221/oz previous
Silver US$22.81/oz vs US$23/oz previous
Rhodium US$4,100/oz vs US$4,100/oz previous
Copper US$ 8,110/t vs US$8,085/t previous
Aluminium US$ 2,233/t vs US$2,226/t previous
Nickel US$ 18,570/t vs US$18,960/t previous
Zinc US$ 2,487/t vs US$2,546/t previous
Lead US$ 2,166/t vs US$2,185/t previous
Tin US$ 25,650/t vs US$25,785/t previous
Oil US$94.6/bbl vs US$92.0/bbl previous
- Crude oil prices edged higher despite the API reporting that US crude stocks increased week-on-week by +1.6mb (-1.6mb expected).
- European energy prices continue to trade lower on forecasts for milder than usual weather and the resolution of LNG labour disputes in Australia.
- Following consent from the NSTA, Equinor and Ithaca Energy have taken the final investment decision to progress the $3.8bn Phase 1 development of the 300mb Rosebank discovery in the UK North Sea.
- Community Windpower announced it would suspend the 308MW Sanquhar II development onshore Scotland following an 80% increase in the project’s development costs to £550m coupled with the new 45% UK Electricity Generator Levy on revenues from electricity sold above £75/MWh.
Natural Gas €38.750/MWh v €42.450/MWh previous
Uranium UXC US$70/lb vs US$65.50/lb previous
Iron ore 62% Fe spot (cfr Tianjin) US$115.0/t vs US$115.5/t
Chinese steel rebar 25mm US$483.2/t vs US$538.6/t
Thermal coal (1st year forward cif ARA) US$129.5/t vs US$130.0/t
Thermal coal swap Australia FOB US$163.0/t vs US$160.8/t
Coking coal swap Australia FOB US$322.0/t vs US$324.0/t
Cobalt LME 3m US$33,420/t vs US$33,420/t
NdPr Rare Earth Oxide (China) US$71,319/t vs US$71,256/t
Lithium carbonate 99% (China) US$21,012/t vs US$20,994/t
China Spodumene Li2O 6%min CIF US$2,290/t vs US$2,350/t
Ferro-Manganese European Mn78% min US$1,026/t vs US$1,027/t
China Tungsten APT 88.5% FOB US$305/mtu vs US$305/mtu
China Graphite Flake -194 FOB US$645/t vs US$645/t
Europe Vanadium Pentoxide 98% 6.6/lb vs US$6.6/lb
Europe Ferro-Vanadium 80% 29.25/kg v US$29.25/kg
China Ilmenite Concentrate TiO2 US$316/t vs US$315/t
Spot CO2 Emissions EUA Price US$86.6/t vs US$86.7/t
Brazil Potash CFR Granular Spot US$350.0/t vs US$350.0/t
Macron announces plans for new €100/month leasing scheme for EU-made EVs
- The scheme is aimed to help poorer households, to shift mobility habits from combustion cars to EVs.
- “From November, we will be able to roll out a new electric car leasing scheme,” Macron said, with “a few tens of thousands of cars” made accessible in 2024.
- Only EVs made within the EU will be eligible for the scheme as France fights back against Chinese-made vehicles.
- MG, Dacia and Fiat, which all have under €100/month leasing offers in France, will be left out of the scheme as their fleet is China-made.
- The announcement is part of a broader government strategy to cut greenhouse gas emissions by 5% annually, with the aim of a 55% reduction by 2030.
- The announcement comes shortly after Macron also revealed cash incentives for EVs as of January 2024.
- €1bn has been set aside for the bill, with up to €7000 available for buyers.
Germany stops EV solar subsidy due to high demand
- State-owned KfW bank had set aside €300m to subsidise homeowners with EVs to install solar power to aid charging.
- Households were entitled to a subsidy of up to €10,200 to install ‘a photovoltaic system, with power storage and charging station.’
- Around 33,000 applications were submitted within 24 hours of its launch, exhausting funds. (Reuters)
- A further €200m has also been reserved for 2024 under first-come, first-served basis.
Anglo Asian Mining* (AAZ LN) 58p, Mkt Cap £66m – Government approval for restart of operations following Micon report
BUY – TP under review
- Anglo Asian provided an update on its operations in Azerbaijan yesterday afternoon..
- The Prime Minister of Azerbaijan issued a press release yesterday following the receipt of the Micon report, an independent review of the Gedabek tailings dam.
- Following receipt of the report, the Azeri government has given Anglo Asian the green light to ‘gradually restart operations.’
- The Company and the Government are currently in discussions over a timetable for the restart of flotation and agitation leaching operations at Gedabek.
Conclusion: The Azerbaijan Government has been a longstanding supporter of Anglo Asian’s efforts in country and yesterday’s press release was a testament to their strong relationship. It is reassuring to see the Micon report provided confidence to government officials over the safety and management of the Gedabek tailings. We look forward to further updates on the restart of agitation leaching and flotation.
*SP Angel acts as nomad and broker to Anglo Asian Mining
Golden Metal Resources (GMET LN) 9.75p, Mkt Cap £7.9m – Copper targets identified at the Garfield project, Nevada
(Power Metal Resources (POW LN) 0.73p, Mkt cap £15m holds 62% of Golden Metal Resources)
- Golden Metal Resources has announced that geochemical soil sampling at its Garfield project in Nevada’s Walker-Lane mineral belt has identified potential copper porphyry and skarn targets at the ‘Power Line’ and ‘High-Grade’ zones.
- The company says that the geochemical results as well as “historical rock sampling results … [of] … up to 2.6% Cu at Power Line and 5.53% Cu at High-Grade … [and demonstrate] … the potential for Garfield to host significant large-scale skarn and porphyry type mineralised bodies”.
- The Power Line zone is defined as a 1.5km long NE trending copper in soil anomaly, which remains open towards the SW, in the western part of the project area and which “connects up the original Garfield showing with a previously isolated zone located towards the southwest, where limited historical rock sampling results returned up to 2.6% Cu and 0.536g/t Au”.
- The High-Grade zone covers an area of 1.5km x 0.8km, which remains open laterally towards the north, south and east, located “in the southeast of the Project area and approximately 1 km southeast of the Power Line Zone”.
- “Limited historical rock sampling completed near what is now the western end of the High-Grade Zone returned up to 5.53% Cu, which highlights the potential of this large, newly defined copper mineralised system”.
- Describing the broader significance of the results the company says that they could “signify that a fully telescoped mineralised system may be fully preserved at Garfield”.
- The “Company will be conducting priority follow up prospecting and rock sampling at Garfield, with focus on the “High-Grade Zone”, which is to commence shortly”.
- Describing “the discovery of what appears to be both skarn-type as well as porphyry deposit geochemical signatures within the Garfield Project’s High-Grade Zone … [CEO, Oliver Friesen confirmed that] … field work will follow imminently and we look forward to providing updates from this exploration in due course”.
Conclusion: Early-stage geochemical work in the Garfield project area has identified two major target areas for follow-up copper exploration within the Walker Lane mineral belt. We await news from the next stage of the programme.
Great Western Mining* (GWMO LN) 0.05p, Mkt Cap £2.8m – CLICK FOR PDF – Interim reports and project updates as first precious metal production looms
- Great Western reports its interim update for the period to 30th June 2023.
- The Company held €411k at the time of reporting but has subsequently raised €581k via an equity placing.
- Great Western is progressing construction at the Western Milling site, with concrete poured a vital step towards processing gold and silver stockpiles, spoil heaps and tailings.
- Management expects production at Western Milling to start this year, despite several delays on severe weather and environmental regulation complications.
- As regards recent exploration efforts, an RC rig has been mobilised to the Mineral Jackpot silver project, however mechanical issues have delayed this.
- The exploration team has identified the under-explored Rhyolite Dome as a primary target for geophysical work before generating drill targes.
- Sampling and mapping has been completed at the Huntoon Valley and the M4 Prospect.
- Going forward, the Company’s primary objective is first production at the Western Milling site using gravity separation.
Conclusion: The inception of production at Western Milling will enable the Company to shift focus to its various gold and silver targets. These will be reviewed over the winter before exploring options for project development. We look forward to the resumption of RC drilling at the Mineral Jackpot project and further updates from Western Milling as first production looms.
*SP Angel act as Broker to Great Western Mining, an SP Angel Analyst has visited Great Western’s Nevada claim blocks.
Oriole Resources* (ORR LN) 0.99p, Mkt cap £3.8m – CLICK FOR PDF – Wapouzé shows potential for economic limestone to support Cameroon’s £700m cement industry
- Oriole provides an update on its Wapouzé Project in Cameroon.
- The Company has determined that the gold prospectivity at Wapouzé is limited when compared to neighbouring Bibemi.
- However, rock chip samples from outcropping limestone returned 13/14 results of high-grade carbonate material.
- Oriole believes the potential for cement-quality limestone is realistic and is looking to tap into the ‘£700m/pa’ Cameroonian cement industry.
- As a result of this development, Oriole has submitted a formal request to change the licence type from gold to industrial minerals – the Ministry of Mines has approved this request.
- Oriole is currently renewing the licence with the Presidency, with approval expected soon.
- Owing to the Company’s focus on gold exploration, the team will look to secure an industrial farm out partner to develop the asset, with Oriole targeting a royalty-based payment.
- This royalty may provide additional income to fund gold exploration at the Company’s flagship Bibemi and Central Licence Package assets.
Conclusion: Whilst Wapouzé ranked lower than Bibemi and the CLP on Oriole’s priority gold exploration list, the discovery of potentially economic limestone for the cement industry presents an alternative route for value creation from the asset. It is reassuring to see management’s commitment to gold exploration and development at the two flagship assets and an industrial partnership would provide a valuable income stream to fund their progression.
*SP Angel acts as Broker to Oriole Resources
Power Metal Resources* (POW LN) 0.82p, Mkt cap £17m – Additional uranium targets identified at Athabasca Basin
- Power Metal provides an update on its Badger Lake Uranium Project in the Athabasca Basin.
- The Company has identified similarities to the Arrow Deposit which hosts a MRE of 257mlb U3O8 via hyperspectral satellite data analysis.
- The Hyperspectral Analysis uses satellite data to identify ‘spectral signatures associated with alteration, gas emissions, and apparent electric flux properties.’
- The analysis is useful when exploring for vein type uranium deposits such as Arrow.
- Comparing Arrow to Badge Lake as identified 30 targets for further, ground-based exploration.
- Power Metals will now utilise a high-resolution electromagnetic UAV survey over Badger Lake.
- Dr. Pendock’s analysis follows his identification of an helium anomaly at the Perch River asset, presenting Power Metals with two interesting primary targets for uranium exploration across their Athabasca Basin portfolio.
*SP Angel acts as Nomad and Broker for Power Metal Resources
Rainbow Rare Earths (RBW LN) 15.75p, Mkt cap £93m – £4.5m fund-raising
- Rainbow Rare Earths has placed an additional 30m shares at a price of 15p/share to raise gross proceeds of £4.5m.
- We estimate that the new shares represent ~5% of the enlarged company.
- Existing shareholders, including Pella Ventures (£0.54m) and Techmet (£0.63m) as well as certain directors and management (£0.24m) are reported to have supported the placing.
- The funds will help “replace the US$5.0 million paid to Bosveld Phosphates (Pty) Limited (“Bosveld”) in July 2023, plus associated fees, to secure an immediate 85% ownership in the Group’s flagship Phalaborwa rare earths project” where Rainbow Rare Earths also holds “an option to acquire the remaining 15% … and will allow for the completion of the Phalaborwa pilot plant operation, which is expected to deliver separated rare earth oxides in Q4 2023”.
- CEO, George Bennett, confirmed that the company expects to produce “separated rare earth oxides from our back-end pilot plant in the US … [which he said will be] … the final de-risking step in order to demonstrate the commerciality of the unique rare earth process flow sheet that Rainbow has developed with its partner K-Technologies”.
Sunrise Resources (SRES LN) 0.08p Mkt Cap £3.0m – Results of Pioche drill programme
- Sunrise Resources has announced results of a 20-hole auger drilling programme conducted by Tolsa SA at its Pioche Sepiolite Project in Nevada, USA.
- Drilling covered an area of 2×1.1km to an average depth of 47 feet (~14m) and encountered “Two principal horizons of medium-high grade sepiolite”.
- Samples from the drilling have been sent to Tolsa’s Madrid laboratory with “40 samples selected for initial laboratory investigations to determine commercial quality”.
- Tolsa, described as “the world’s largest producer of sepiolite … has an option to purchase the Pioche Project for US$1.25 million no later than 28 December 2023 with the Company retaining a 3% revenue royalty on production from the entire project area”.
- Sunrise Resources confirms that it has now “agreed to move forward to draft a definitive option agreement as envisaged by the existing binding option agreement” with Tolsa.
- Welcoming the drilling’s confirmation of the “continuity of the sepiolite beds over a wide area”, Executive Chairman, Patrick Cheetham, said that Sunrise Resources is “encouraged by the decision to proceed to a definitive agreement and … [is looking]… forward to Tolsa’s decision on exercise of the option in due course”.
Unicorn Mineral Resources (UMR LN) 5.5p, Mkt Cap £1.5m – Drilling results from Kilmallock, Ireland
- Unicorn Mineral Resources reports that 7 cored drillholes (1,532.7m) drilled at its Kilmallock project in the Limerick Basin during the summer has confirmed the presence of “low to medium grade zinc lead sulphides and oxides … [in] … prospective basal Waulsortian Reef hosted, Pallas Green style, Black Matrix (BMB) / Polymictic (PMB) breccias”.
- We note that the results reported today cover a larger programme, both in terms of the number and metreage of holes drilled compared to the programme of a 6-hole, 1,250m, campaign which the company announced in May, which suggests that the company is taking some encouragement despite the complex geology and challenging drilling conditions.
- The exploration area is located around 20km south of Glencore’s Pallas Green project which has a published inferred resource estimate of 45.4mt at an average grade of 7% zinc and 1% lead.
- Kilmallock is also relatively close to the Stonepark exploration project owned by the Canadian exploration company, Group Eleven Resources (76.56%) and Arkle Resources* (23.44%) where an NI43-101 compliant inferred resource estimate of 5.1mt at an average grade of 8.7% zinc and 2.6% lead was published in April 2018.
- Drilling “at the Bulgaden Target UMK-003 => 008 confirmed that the region is structurally complex with NNW striking, enechelon, ramp-relay normal faults with a throw of between 60 – 80m to the east” with drilling conditions being described as “technically challenging”.
- Hole UMK-004 “intersected 2.8m grading 4.25% Zn / 0.47% Pb / 3.6g/t Ag” from a depth of 207.5m down-hole.
- Other holes showed lower grade intersections including 0.7m at an average grade of 0.72% zinc, 0.04% lead and 2g/t silver from 192.90m depth in hole UMK-007 and 11.70m at an average grade of 0.28% zinc, 0.14% lead and 1g/t silver from 167.30m depth in hole UMK-008.
- Describing the geological context, Unicorn Mineral Resources says that “mineralisation is focused within the basal part of the Waulsortian Reef hosted by breccias, and developed along the eastern, hangingwall side of the NNW striking Normal Fault. This fault has a throw of approximately 60m to the east and controls the emplacement of the mineralisation. The mineralisation is located at a depth of approximately 300m and consists of a series of high grade lenses”.
- Chairman, Paddy Doherty, said that the drilling confirmed that “the ground preparation and alteration is analogous to that seen at the Pallas Green Deposit … [and] … clearly confirms the area is part of a significant mineralising system and has been interpreted to be located along the northern margin of this system”.
- He said that the “exploration programme over the coming months will be designed to develop and refine targeting for the next phase of drilling”.
Conclusion: Drilling at Kilmallock has confirmed low to medium grade zinc and lead mineralisation at around 300m depth but challenging drilling conditions and complex geology suggest that additional exploration will be required to gain an understanding of the potential.
*SP Angel are Nomad and broker to Arkle Resources
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The SP Angel team also ranked 1st in Palladium, 3rd in Tin and 5th in Silver in the fourth quarter of 2020
John Meyer – John.Meyer@spangel.co.uk – 0203 470 0490
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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|
|Natural Gas, Uranium, Iron Ore||NYMEX|
|Thermal Coal||Bloomberg OTC Composite|
|Lithium Carbonate, Ferro Vanadium, Tungsten, Spodumene, Ferro-Manganese, Graphite||Asian Metal|
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