SP Angel . Morning View . Monday 23 03 20
Virus related stimulus approaches $10tn mark
MiFID II exempt information – see disclaimer below
15.5p, Mkt Cap £34.6m – Sonora State reports first case of Covid19 infection
4.3p, Mkt Cap £5.6m – Sanankoro drilling results
(EUZ LN) 0.015 pence, Mkt Cap £1.7m – Impact of Covid19 containment measures at Toral zinc, lead, silver project in Spain
– 23.36p, Mkt Cap £36m – £6m subscription with US institutional investor
World Health Organisation (WHO) launches multinational COVID-19 trial (SP Angel Healthcare team)
: FDA Emergency Use Authorization for COVID-19 test
: FDA clearance for Haemostasis Device
UK government looking at closing non-essential retail and to criminalise non-compliance of Coronavirus rules
Moratorium from the FCA on listed companies releasing FY results for two weeks due to Coronavirus disruption
Coronavirus - COVID-19 news
- Iceland which is able to test its entire population has found that half those who tested positive had no symptoms of COVID-19
- The news ‘may’ indicated a smaller percentage of pneumonia cases and lower mortality rate
Hydroxychloroquine and azithromycin treatment
- News suggests hydroxychloroquine (Plaquenil) combined with the antibiotic azithromycin may be effective in curing patients with COVID-19
- A French study claims 100% recovery rates using hydroxychloroquine and azithromycin on a relatively small number of patients
- Both drugs have the huge advantage of previously being approved for use with relatively minor side effects as far as we can see.
- However, the findings were strong enough, given the drugs’ known safety records, to guide treatment decisions in a crisis (Forbes).
- Remdesivir, another hopeful drug is being studied in five large clinical trials by Gilead Sciences. The company has provided emergency access to several hundred patients in the United States, Europe, and Japan.
Stimulus funding relating to the Coronavirus (Updates in bold, figures converted to US dollars)
The US, Germany, Britain, France and Italy are estimated to have committed ~$7.4tn (23% of GDP) to fight the pandemic
Central banks have committed 4/5s of the $7.4tr (The Economist).
- $2tn fiscal package currently debated in the US Congress
- $1,000bn - IMF available
- $963bn (€750bn) ECB no limits for Action for Europe. QE through bond purchases inc $28.3bn (€25bn) from the EU inc. $120bn - ECB increased bond purchases + ECB – targeted loans to companies at an interest rate of -0.75%
- ECB says it is ready to do more
- $700bn – US + Fed rate cut to 0-0.25% last night. The $700bn QE program is to buy Treasuries and mortgage-backed securities. The program in two parts $500bn + $200bn
- $17.4bn Japan + + Y300bn of inflation-linked bonds,
- $400bn (£330bn) UK - Government-backed loan scheme. New business interruption loan scheme up to £5m with no interest. Will add whatever is required in COVID-bill + $242bn (£200bn) UK QE from Bank of England.
- $39m – UK (£30bn) stimulus + $29bn (£20bn) – UK No business rates plus £25,000 cash grants for shops, pubs, clubs in hospitality sector inc. $5bn (£3.5bn)
- $383bn (€300bn) – France - loan guarantees for French business inc. $50bn (€45bn) + France to also pay half wages for employees in affected firms
- $200bn (€200bn) – Spain
- $127.2bn China - China stimulus was $586bn in 2009 to rescue itself and the global economy. This time it is simply lowering lending rates slightly and made $77bn of new loan capacity at banks
- $15.4bn – Hong Kong relief package
- $13.7bn South Korea, $12bn World Bank, $10bn Australia, $10bn Switzerland, $8.4bn Italy, $7bn NZ, $3.5bn Ireland, $2bn Taiwan, $0.75bn Indonesia,
- The world was slow to recover from the 2008 GFC due to a lack of stimulus allowing China to get ahead
- This time the US and UK are likely to stimulate their economies to a far greater extent than seen in the GFC
- $6.68tr – TOTAL stimulus offered to-date vs G20 GFC stimulus of ~$2 trillion or 1.4% of global GDP (ILO, EU, IILS)
- >10tr expected if using the $7.4tr estimated by The Economist
Dow Jones Industrials
HK Hang Seng
Australia – Second government stimulus to benefit miners
- The federal government have announced a new AU$66bn stimulus package for businesses affected by the coronavirus outbreak.
- Payments for small businesses from $20,000 to $100,000 are designed to keep workers paid and employed in the mining sector as the industry is affected by international travel bans.
The US, Germany, Britain, France and Italy are estimated to have committed ~$7.4tn or 23% of their GDP to fight the pandemic with central banks accounting for 4/5s of that, according to The Economist.
- With the $2tn fiscal package currently debated in the US Congress and further pledges made by governments, the estimate is looking to easily exceed the $10tn mark.
S&P 500 futures fell 5% hitting the daily limit in in early trading hours before claiming some of its losses back (-3.6% at the time of writing).
- The House failed to approve the fiscal stimulus package as lawmakers disagreed on the use of the proposed $2tn programme.
- Speaker Nancy Pelosi suggested House lawmakers to prepare their own bill which may add days to the finalisation of the process.
- St Louis Fed President James Bullard yesterday mentioned the unemployment rate may hit 30% in Q2 because of shutdowns along an unprecedented 50% decrease in GDP.
- Investment banks are revising their economic growth forecasts down including Morgan Stanley (-30.1%qoq in Q2/GDP), Goldman Sachs (-24%), Bank of America (-25%) and JPMorgan (-14%), Bloomberg reports.
Germany – The administration is proposing to increase borrowing by as much as €150bn this year as well as to pass a €156bn supplementary budget.
- Additionally, the government is planning to launch a €500bn bailout fund to stakes in critical indsutries.
India – New Delhi is on lockdown until March 31 as the nation joins other countries urging its citizens to self distance themselves to halt the spread of the virus.
- The city will be closed to all but food, water and fuel supplies with orders in place to prevent gatherings of more than four people.
- Hoes of people that were ordered to go on quarantine have been marked with stickers.
- The number of total cases currently stands at 425, one of world’s lowest per capita measure, with commentators sceptical of the data given that fewer than 20,000 people have been tested so far v 1.3bn population.
Italy – The government ordered suspension of nearly all of its industrial production and closure of almost all private and public offices for 15 days.
Spain – The nation will extend state of emergency to April 11 in an effort to halt the spread of the virus in the second worst hit European country.
- Previously, the measure was announced on March 14 and was intended to last 15 days.
- The number of registered cases climbed to 28,572 on Sunday, up from 24,926 the day before, of which 54% are hospitalised and 12% are health staff.
- The latter reduces capacity of the healthcare to respond potentially further exacerbating the crisis.
Automakers given the greenlight to produce ventilators
- US President Donald Trump has given Ford, GM and Tesla the go ahead to start producing ventilators and metal. (Reuters)
- As yet it is not obvious what Trump means by ‘the go ahead’ given in his Twitter post on the subject.
- Last week Ford, GM and Tesla offered their spare and excess manufacturing facilities for use to produce ventilators. (ABC News)
- GM (General Motors) has partnered with an existing medical devices company Ventec Life Systems to enable ventilator production ramp up. (The Drive)
- This seems a more sensible approach as it has been suggested by an aid who served in the Bush administration that it could take up to 18 months for automakers to convert facilities to produce ventilators.
- Jaguar Land Rover, Toyota and Vauxhall have similarly indicated their readiness to assist in the UK while BYD is leading the way producing 5m face masks and 300,000 bottles of disinfectant per day at its Shenzhen facility (Inside EVs)
China to limit the number of new tailings dams for mining projects
- The ministry of Emergency Management announced it will limit the number of new tailings dams for mining projects and cut down the use of existing ones to reduce safety risks and ease environmental pressures (U.S News).
- Tailings dams that have been out of service for over three years or that have been abandoned must be shut down within a year.
- New tailings dams must be less than 200m tall, and not within 1km of residential or important facilities or 3km from the Yangtze or Yellow rivers.
US$1.0725/eur vs 1.0761/eur yesterday. Yen 110.29/$ vs 110.02/$. SAr 17.854/$ vs 17.318/$. $1.164/gbp vs $1.178/gbp. 0.576/aud vs 0.592/aud. CNY 7.114/$ vs 7.072/$.
Gold US$1,487/oz vs US$1,506/oz yesterday
Gold ETFs 87.7moz vs US$88.3moz yesterday
Platinum US$620/oz vs US$625/oz yesterday
Palladium US$1,659/oz vs US$1,702/oz yesterday
Silver US$12.49/oz vs US$12.80/oz yesterday
Copper US$ 4,553/t vs US$4,913/t yesterday - Copper in Shanghai falls to lowest price since 2009
- As global industrial activity continues to slow rapidly due to more shutdowns and restrictions imposed to curb the coronavirus outbreak, demand for industrial metals continues to fall.
- Despite the global slowdown, China’s industrial sector is restarting, however the build-up of inventories of many industrial metals is likely to keep the price low in the near-term.
- The price of copper on the SHFE fell as much as 8% this morning to 35,300 yuan/t, its lowest in nearly 11 years (Reuters).
- Three-month copper on the LME was down 5.2% earlier this morning to $4,563/t.
- Base metals are down across the board in both London and Shanghai this morning, as the virus continues to have an effect on businesses in Europe and US, and also affects demand more in the short-term (Fastmarkets MB).
- Despite the fall, temporary supply disruptions in the Americas may lead to a rebound in the copper price. A state of emergency in Peru has led to miners severely cutting production, whilst the governments of Chile and Canada take steps to slow the virus spread (Bloomberg).
Aluminium US$ 1,550/t vs US$1,622/t yesterday
Nickel US$ 11,010/t vs US$11,610/t yesterday
Zinc US$ 1,825/t vs US$1,910/t yesterday
Lead US$ 1,635/t vs US$1,696/t yesterday
Tin US$ 13,060/t vs US$14,150/t yesterday
Oil US$26.1/bbl vs US$30.5/bbl yesterday – Oil Price News • As COVID-19 continues to decimate global economic growth, oil prices plunged again today in anticipation of a further OPEC production ramp up next month
- International benchmark prices have more than halved since the start of the year, falling to below US$30/bbl
- In response, the broad majority of listed companies have cut forward spending budgets:
- BP – will reduce capital and operational spending, which was about c.US$15bn last year
- CHEVRON - will trim spending and lower oil output in the near term. 2020 organic capital expenditure guidance had been US$20bn
- DNO – will cut its FY20 budget by 30% or US$300m and lower its dividend for the first half of the year
- ENERGEAN - cut its investments by US$155m in Greece and Israel and could reduce its budget for Egypt by another US$140m if needed
- ENI - cancelled share buyback of €400m until Brent is at least US$60/bbl
- ENQUEST - cutting operating costs by 30% to US$375m and investment will be lowered by US$80m to US$150m
- EQUINOR - suspended its ongoing US$5bn share buyback programme
- EXXONMOBIL – TBC but confirmed significant cuts to spending. It had previously budgeted US$30bn to US$33bn for projects in FY20
- GENEL -reduce investments to US$60m this year, but expected the number to be US$100m
- KOSMOS ENERGY - dividend suspended, will reduce FY20 capex by 30%
- OIL SEARCH - cutting FY20 investment by 38% and capital spending by 44%
- PREMIER OIL - identified at least US$100m in potential savings on its FY20 capital spending plans
- SAUDI ARAMCO – will cut capital spending for FY20 to between US$25bn - US$30bn, compared with US$32.8bn in FY19
- ROYAL DUTCH SHELL – cut FY20 capex by US$5bn and suspended the next tranche of its share buyback plan
- TOTAL - cut capex by 20% and find additional cost savings of around US$400m this year
- TULLOW OIL – cut capex by US$350m this year and reduce exploration spending by 50%
- WINTERSHALL – 20% cut in capex to at least US$1.3bn
Natural Gas US$1.532/mmbtu vs US$1.670/mmbtu yesterday
- Natural gas prices fell another 3% on Friday, dragged down by another plunge in oil prices
- Earlier in the week, natural gas fell to a 24-year low as steps taken to stop the spread of COVID-19 cut into global economic growth and energy demand
- Warmer than expected weather is expected to cover the US east coast for the next 6-10 and 8-14 days which is likely to further weigh on prices
Uranium US$24.10/lb vs US$24.05/lb yesterday
Iron ore 62% Fe spot (cfr Tianjin) US$84.6/t vs US$87.4/t - Chinese iron ore prices fall 5% on virus fears
- Iron ore prices on the Dalian Commodities Exchange fell 5% this morning, as stricter measures to contain the virus pandemic further darkened the global economic outlook (The Australian).
- Iron ore’s most-traded May contract dropped as much as 5.5% to 632 yuan ($59.25)/t, and also fell 4.7% on the Singapore Exchange.
Chinese steel rebar 25mm US$525.8/t vs US$531.4/t
Thermal coal (1st year forward cif ARA) US$55.5/t vs US$55.3/t
Coking coal swap Australia FOB US$149.0/t vs US$152.0/t
Cobalt LME 3m US$32,000/t vs US$32,000/t
NdPr Rare Earth Oxide (China) US$38,378/t vs US$38,748/t - Lynas shuts down Malaysian rare earth operations
- Lynas has shut down its processing plant in Malaysia, placing it into care and maintenance until further notice (Australian Financial Review).
- The company have announced that the shutdown at the AU$1bn plant is temporary, but did not set a date for production restart.
- Operating has become more difficult in Malaysia, as the army have been deployed to help enforce movement restrictions aimed at slowing the spread of the coronavirus in the country.
- The Lynas share price fell more than 16% in early morning trading on Monday, and the company is the biggest producer of rare earths outside of China.
Lithium carbonate 99% (China) US$5,623/t vs US$5,657/t - Tianqi lithium postpone commissioning of Australian lithium plant
- The company announced yesterday it has postponed commissioning the first phase of its flagship Australian processing plant due to rising liquidity problems.
- The plant was touted to be the world’s largest facility for lithium hydroxide , with the first phase capable of producing 24,000tpa in Western Australia (Reuters).
- Tianqi have recently posted a huge fall in profits due to depressed prices and falling demand, making it harder to invest in infrastructure such as the processing facility.
- Earlier this month, the company reported a US$403m loss last year, down 228% compared to 2018 (Caixin).
Ferro Vanadium 80% FOB (China) US$27.8/kg vs US$28.0/kg –
- Ferro-vanadium fell -2.1% to $23.5-24/kgV in Western Europe
- Vanadium pentoxide prices rose 6.8% to $5-6/lbV in Rotterdam
Antimony Trioxide 99.5% EU (China) US$5.0/kg vs US$5.0/kg
Tungsten APT European US$240-245/mtu vs US$240-245/mtu
Graphite flake 94% C, -100 mesh, fob China US$540/t vs US$540/t
Graphite spherical 99.95% C, 15 microns, fob China US$2,550/t vs US$2,550/t
Kerb report suggests overnight charging is more important than faster charging
- Research suggests access to charging where cars are already parked, not public faster charging facilities will be more important in the decision to switch to EVs. (Fleetworld)
- The survey commissioned by Connected Kerb, interviewed 500 people who were EV owners of considering becoming one. (The Engineer)
- 67% of those who had already purchased an EV would not have done so if they had to rely on public chargers.
- The UK government is currently pursuing a strategy of installing rapid charging points instead of more numerous regular charging points that can be used overnight.
- A shift to a network of overnight charging points will require greater coordination, akin to that of broadband roll out according to the CEO of Kerb. A core infrastructure would need to be installed followed by more end points as more users come online.
The coronavirus claims another victim as Panasonic suspends production in Nevada
- Panasonic are to temporarily suspend production at their battery JV with Tesla at Nevada site, Gigafactory 1. (Reno Gazette Journal)
- The Company will send its 3500 workers home for a minimum of two weeks as part of the push to delay/stop the spread of the virus. (Reuters)
- The JV manufacturing plant is the primary facility producing battery cells for Modes 3 and Y. (Inside EVs)
- Tesla has suspended production at Fremont and New York factories, announcing that it has sufficient cash to see itself through this difficult period. The Company has to date given no indication that operations will cease on the Tesla side of the Nevada factory. (Teslarati)
- Tesla has seen a sharp drop in vehicle sales in China, falling 79.1% in February, the largest ever monthly decline. (Reuters)
Bacanora Lithium (BCN LN) 15.5p, Mkt Cap £34.6m – Sonora State reports first case of Covid19 infection
- Bacanora Lithium has reported that the Mexican State of Sonora, which hosts the company’s Sonora Lithium project has now confirmed the first case of Covid19 infection.
- Stressing the importance attached to the safety of its staff, the company confirms that its ʺadministrative staff, based in Hermosillo, are now working remotely. The pilot plant will continue to operate on day shift until the next batch of kiln and lithium samples are shipped to the USA and China, or until the Company is required to temporarily close its operations following a government directiveʺ.
- It also confirms that its UK staff and those working on the Zinnwald project in Germany are also working remotely.
- Commenting on the metallurgical test-work being undertaken by Ganfeng Lithium in China, the company says that Ganfeng ʺwas severely impacted by the travel restrictions imposed by the Chinese Government to slow the spread of Covid-19 during February and early March. Although these restrictions are now being lifted, the return to work has been slow. Ganfeng's main lithium processing plant at Xinyu is resuming operations and lithium production is building upʺ.
- Although ʺsome weeks of engineering [on the Sonora project] have been lost, completion of engineering and equipment selection is now scheduled for Q3, 2020ʺ.
- Upon completion of the engineering, ʺGanfeng will provide Bacanora with an Engineering, Procurement and Construction ("EPC") style engineering proposal for the production of downstream battery grade lithium products from the Sonora lithium plant. This schedule remains under regular review in relation to the ongoing Covid-19 situationʺ.
- Using the services of the recently appointed GR Engineering Services, ʺand Ganfeng, Bacanora is updating its engineering and contracts schedules, with a goal of being able to complete financing for the Project and commence construction before the end of 2020ʺ.
Conclusion: We imagine that Bacanora Lithium is not alone amongst mineral development companies in having its project development schedule disrupted by the impact of Covid19. In addition to the additional engineering and technical challenges posed by the virus, financing challenges will be exacerbated by the pandemic.
Cora Gold* (CORA LN) 4.3p, Mkt Cap £5.6m – Sanankoro drilling results
- The Company released final drilling results comprising 837m of core drilling at Zone A and B completed in Q4/19 at the Sanankoro Gold Project.
- At Zone A, drilling focused on the infill programme testing oxide-sulphide horizons of the pit-constrained inferred resource.
- Selected intersections include:
- 3.0m at 1.80g/t from 84.0m (SD0012);
- 13.4 at 1.41g/t from 138.0m including 1.5m at 6.36g/t (SD0012);
- 4.4 at 1.28g/t from 147.1m (SD0013).
- At Zone B, the team focused on step out programme testing 500m of oxide structure where access was previously constrained by ground stability issues due to historical artisanal mining and deposition of washed tailings.
- 3.0m at 2.04g/t from 74.5m, 0.9m at 44.60g/t from 104.2m and 3.0m at 5.16g/t from 134.4m (SD0016);
- 5.0m at 1.74g/t from 113.2m (SD0018).
Conclusion: Both infill and step out drilling results bode well for increasing the confidence and expanding the size of the Mineral Resource at Sanankoro currently standing at 0.3moz at 1.6g/t.
*SP Angel acts as Nomad and Broker to Cora Gold
Europa Metals Limited (EUZ LN) 0.015 pence, Mkt Cap £1.7m – Impact of Covid19 containment measures at Toral zinc, lead, silver project in Spain
- Europa Metals reports that its employees and direct associates have, so far, remained free of Covid19 infection and that the company is implementing all the recommended procedures to help ensure the safety of its personnel.
- The company says that it ʺhas been fortunate in completing its first 2020 field season prior to the coronavirus (COVID-19)'s significant escalation in Europe. Accordingly, we shall be continuing with our metallurgical and flow sheet work as planned and intend to make an announcement shortly on this workʺ.
- As a precaution, Europe Metals is ʺprudently reviewing and amending budgets to take into account the current adverse economic impact of COVID-19 on global financial markets."
Conclusion: Spain has been particularly hard-hit by Covid19 and it is encouraging to learn that Europa Metals’ personnel remain healthy so far.
Versarien PLC* – 23.36p, Mkt Cap £36m – £6m subscription with US institutional investor
- Versarien, the UK graphene producer, has signed a £6m subscription agreement with Lanstead.
- Lanstead is a US institutional investor offering convertible bond financing to smaller companies.
- Previous Lanstead bonds have worked well for related UK companies in our experience.
- The subscription is for 15m new shares issued at 40p/s representing some 9.74% of Versarien’s market cap.
- The agreement is for 24 months with the issue price varied each month in accordance with the share price at the time.
- Versarien had £2.2m of cash and headroom in the bank before the subscription agreement.
- The agreement secures Versarien’s financial wellbeing for the foreseeable future in our view.
*SP Angel acts as nomad and broker to Versarien PLC
SP Angel Healthcare team
World Health Organisation (WHO) launches multinational COVID-19 trial
- Last week, the WHO announced it would initiate a multi-country clinical trial, known as Solidarity, to evaluate potential treatments for COVID-19.
- The randomised, open-label trial will test four different treatment combinations which have been highlighted to have potential benefit against coronavirus against standard of care.
- The treatments tested will include:
- Ritonavir/lopinavir: Antiviral combination (protease inhibitors) approved for HIV patients.
- Ritonavir/lopinavir + interferon beta: Antiviral combination plus a modulator of innate immune system.
- Chloroquine and hydroxychloroquine: Approved therapies for malaria and certain autoimmune diseases.
- Remdesivir: An investigational antiviral (RNA polymerase inhibitor) for Ebola.
- An additional trial, led by the French National Research Institute for Medical Research (INSERM), began yesterday.
- The trial, known as Discovery, plans to enrol 3,200 patients and test these treatments in European countries.
The choice of treatment in this ‘megatrial’ stems from reports regarding their potential benefit in the treatment of COVID-19 patients. Although the recent reports are encouraging, the efficacy comes from relatively small datasets. A large clinical trial, as initiated by the WHO should provide robust evidence regarding the efficacy of these drugs. The repurposing of existing therapies from other conditions may offer a faster route to a COVID-19 therapy rather than developing a novel treatment. The safety profile has been approved by regulators and manufacturing has already been scaled-up for commercial purposes.
Novacyt (NCYT.L): FDA Emergency Use Authorization for COVID-19 test
Share Price: 122.5p Market Capitalisation: £82.9m
- Novacyt announced that Primerdesign the Group’s molecular diagnostics division, has received Emergency Use Authorization (EUA) from the FDA for its COVID-19 test.
- With FDA EUA in place, the test is now available for immediate distribution into the US market for clinical diagnosis of COVID-19.
- The Group’s COVID-19 research use only (RUO) test also received approval by the Indonesian Ministry of Health.
- On Friday, the Group announced that Primerdesign has sold and received orders for over £8.7m of its CE-Mark and research use only (RUO) COVID-19 tests.
The EUA marks the continued interest in the Group’s test and unlocks a large market for the test as the coronavirus outbreak increases the demand for effective diagnostics. Novacyt’s COVID-19 test can be used on multiple laboratory instrument platforms to provide results in under two hours and can be shipped at ambient temperatures. The Company has implemented production measures to ensure Primerdesign can meet the demand for the test. The Company has raw materials to produce c.5m COVID-19 tests and is making good progress to support manufacturing c.2m tests per month. The sale of the COVID-19 test has generated significant revenue for the Company, representing c.18 months of total sales for Primerdesign under normal circumstances. Although it is difficult to predict future sales with any certainty, we expect a continued interest in the test given the increasing status of the outbreak and demand for diagnostics.
*SP Angel act as Nomad and Broker to Novacyt
Creo Medical Group (CREO.L): FDA clearance for Haemostasis Device
Share Price: 105p; Market Capitalisation: £157.5m
- Creo Medical, a medical device company focused on surgical endoscopy, has received 510(k) clearance from the FDA for its HS1 Haemostasis device (HS1).
- The HS1 device is to be used with Creo's CROMA Advanced Energy Platform and alongside the Group’s Speedboat endoscopy tool.
This approval marks the second FDA approval following clearance for the Group’s Speedboat device in 2017. HS1 is a single use device which aims to stop bleeding during surgery. Whilst roll out of the Group’s training-led commercialisation strategy for its Speedboat device has been impacted by COVID-19 quarantine policies, the Group remains well-capitalised and continues to make progress in gaining regulatory approvals for its devices.
Vadim Alexandre, Liam Gascoigne-Cohen
John Meyer – 0203 470 0490
Simon Beardsmore – 0203 470 0484
Sergey Raevskiy – 0203 470 0474
Richard Parlons – 0203 470 0472
Abigail Wayne – 0203 470 0534
Rob Rees – 0203 470 0535
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+SP Angel employees may have previously held, or currently hold, shares in the companies mentioned in this note.
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Gold ETFs, Steel
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