SP Angel . Morning View . Wednesday 31 03 21
Copper climbs ahead of the Biden $2.3tn infrastructure plan
We are working with a private copper company which is raising funds for new exploration
Please contact us for details of the investment opportunity
The company intends to list in London and its valuation is at a suitable discount to reflect its private status and stage of exploration
Condor Gold* (LON:CNR) – Key 2021 objective of advancing La India to production is confirmed.
IronRidge Resources* (LON:IRR) – 2020 interim results highlight strong acquisition and exploration activity across portfolio
Petropavlovsk (LON:POG) – 2021 operational guidance and management update
Scotgold Resources* (LON:SGZ) – £1.5m placing
Gold continues to decline on positive vaccine news flow, stronger dollar, surging yields
Gold extended declines on Tuesday through Wednesday, approaching a nine-month low and sliding back below $1,700/oz.
President Biden announced earlier this week that 90% of US adults will be eligible to get a Covid-19 vaccine by the 19th of April, triggering a bout of risk-on sentiment in US markets which dampened safe-haven appeal.
US Treasury yields surged to levels not seen since January 2020 on Tuesday, rising as high as 1.773% on news that Biden is expected to announce plans for a government spending package of between $2-4tn on Wednesday.
The surge in treasury yields weighed on bullion, with the former outcompeting the latter as a safe haven given gold’s non-yielding status.
The dollar index hit a five-month high against rivals and set for it best month since November 2016, making dollar-denominated metals more expensive to holders of other currency.
We are seeing some major and risks and logistical disconnects as the world changes from combustion engines to electric drive for transport.
Disruption and disconnects
Stuck container carrier in Suez – now freed. The Suez Canal carries around 10% of global trade
A shortage of containers in the right locations – that will get worse with the Suez blockage
Semiconductor shortage – we note China has been ahead of the game in setting up new chip foundries
Chinese raw materials producers may prefer to supply local battery and permanent manufacturers to European and US rivals in the event of supply shortages
China is increasingly using Tariffs and import/export controls to promote its political and economic agenda.
REEs: China cut rare earth supplies to Japan over an island dispute
Huawei: China has raised tariffs against Australian wine and has banned Australia coal from key states
Uyghurs: China is putting pressure on Nike, H&M and others over their refusal to buy cotton from Xinjiang
Western manufacturers feel hugely exposed to the potential imposition of Chinese controls on key raw materials and components as they ramp up EV production.
China holds dominant positions in:
Permanent magnet manufacture
Rare Earth mining and particularly its processing
Lithium processing into lithium hydroxide for Li-ion batteries
Graphite processing into spherical graphite for li-ion anodes.
Major manufacturers are lobbying hard and asking EU, US and UK politicians to help ensure there is raw material supply.
This is likely to help direct low cost loans into the mining and processing of critical raw materials in the West.
Examples of this are likely to be seen in the development of Pensana’s proposed rare earths refinery at Teesside in Yorkshire and the US Exim bank LoI loan offer to BlueJay Mining* in Greenland. The BlueJay loan offer is more down to the US offsetting Chinese influence in Greenland particularly with proximity of Bluejay’s Dundas mine site to the US Thule airbase.
Electric motorbike and E-bicycle markets to show strong expansion
Much attention is given to the electric car market but it is the electric bike market that has the potential to:
Cut significant pollution – mopeds are horrendous polluters in many emerging economies, such as India and Malaysia
Increase Li-ion battery demand beyond expectations
Give far greater reliability than petrol-driven bikes reducing costs
Enable lighter weight, safer and more innovative bike design
The electric bike market is estimated to grow at a CAGR of 7.9% to $70bn by 2027 from $41bn last year (MarketandMarkets)
The electric bicycle market is also projected to rose at a CAGR of 20% from 2019-2025. The e-bicycle market is expected to value at $6.1bn in 2025 from 1.7bn in 2018 according to the (Global Electric Bicycles Market Research Report 2019)
VOX Markets: 24/03/20: https://audioboom.com/posts/7829467-john-meyer-on-arc-minerals-cornish-metals-rainbow-rare-earths-altus-stategies
IGTV: VW expansion driving battery metals prices: https://youtu.be/7vqSrONBaWw
Are we in a new commodity supercycle, or is one coming? https://youtu.be/sw6gLNnM1s0
Is this a new Supercycle for commodities: https://youtu.be/BIWb-wqoLpM
*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.
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
Dow Jones Industrials -0.31% at 33,067
Nikkei 225 -0.86% at 29,179
HK Hang Seng -0.37% at 28,471
Shanghai Composite -0.43% at 3,442
Biden expected to unveil huge infrastructure spending plan in Pittsburgh on Wednesday
President Biden is to unveil his roadmap for a mass ramp-up in US infrastructure spending later today, with officials suggesting the package would amount to about $2tn over eight years.
The scheme is expected to be paid for over a 15-year period with a bump in corporation tax to 28% from 21%.
To put into context the size of the bill, the nation’s last long-term infrastructure bill amounted to $305bn over five years in 2015.
With the focus of the bill centred on transportation infrastructure and clean energy, base metals including copper and nickel are expected to be supported in the medium-term.
Currencies US$1.1735/eur vs 1.1752eur yesterday. Yen 110.68$ vs 110.15/$. SAr 14.886/$ vs 14.918/$. $1.376/gbp vs $1.376/gbp. 0.761/aud vs 0.764/aud. CNY 6.557/$ vs 6.568/$.
Gold US$1,687/oz vs US$1,705/oz last yesterday
Gold ETFs 100.0moz vs US$100.0moz yesterday
Platinum US$1,177/oz vs US$1,181/oz yesterday
Palladium US$2,630oz vs US$2,557/oz yesterday
Silver US$24.18/oz vs US$24.56/oz yesterday
Copper US$ 8,823/t vs US$8,837/t yesterday
Aluminium US$ 2,233/t vs US$2,263/t yesterday
Nickel US$ 16,025/t vs US$16,330/t yesterday
Zinc US$ 2,797/t vs US$2,816/t yesterday
Lead US$ 1,9741/t vs US$1,972/t yesterday
Tin US$ 25,200/t vs US$25,450/t yesterday
Oil US$64.8/bbl vs US$64.9/bbl yesterday
Ahead of tomorrow’s OPEC+ meeting, reports suggest that Russia, the leader of the non-OPEC group favours a rollover of the alliance’s oil production cuts while seeking a slight increase for itself to meet higher seasonal demand
Russia has sought and obtained small increases for its oil production every month since the start of the year, while all other members of the OPEC+ pact, except for Kazakhstan, were set to keep their production flat after January
Saudi Arabia is also cutting an extra 1MMbopd off its oil production on top of its quota for three months through April
OPEC+ hasn’t significantly eased oil production since January when the collective output was increased by 500,000bopd from 7.7MMbopd in December to 7.2MMbopd
Considering the still weak global demand, OPEC+ decided in January to give Russia and Kazakhstan small increases for February and March, keeping the overall production little changed
In each of those two months, Russia was set to ease its cuts by 75,000 bpd
While multiple factors may impact the group’s decision, the markets already priced in an expected rollover of current cuts through May
Platts data for February 2021 concluded that current global oil demand stands at c.92MMbopd while global supply stands at 91MMbopd, of which some 25.7MMbopd are produced by OPEC.
Given the uncertainty about the global demand recovery, OPEC+ is expected to continue to roll over its current cuts through May
Yet, if OPEC+ decides to roll over current cuts, the question remains whether Russia, and perhaps Kazakhstan will continue to be allowed to increase production to pre-agreed levels, given the expected rise in demand in May
Russia is set to increase its production by 125,000bopd in April from 9.18MMbopd in February
The group is also expected to emphasise compliance levels especially for countries that failed to meet their output quota in recent months such as Iraq and Nigeria
Natural Gas US$2.624/mmbtu vs US$2.650mmbtu yesterday
Natural Gas remain volatile with changing weather patterns across the US and Europe
The weather is expected to be much warmer than normal throughout the US Midwest
If it were not March and early April, this weather would generate significant cooling demand and potentially draws during the injection season
US demand continues to decline as the heating season comes to a close
Natural gas in storage was 1,746Bcf as of Friday 19 March, according to the EIA. This represents a net decrease of 36Bcf from the previous week
Expectations were for a 10Bcf draw according to survey provider Estimize
Stocks were 263Bcf less than last year at this time and 78Bcf below the five-year average of 1,824Bcf
At 1,746Bcf, total working gas is within the five-year historical range
According to the National Oceanic Atmospheric Administration, the weather is expected to be warmer than normal in the US and Europe over the next 8-14 days which should boost demand
Iron ore 62% Fe spot (cfr Tianjin) US$161.4/t vs US$161.4/t
Chinese steel rebar 25mm US$745.2/t vs US$743.4/t
Thermal coal (1st year forward cif ARA) US$72.0/t vs US$72.0/t
Coking coal swap Australia FOB US$126.0/t vs US$125.0/t
Cobalt LME 3m US$50,500/t vs US$51,000/t
NdPr Rare Earth Oxide (China) US$88,831/t vs US$89,520/t
Lithium carbonate 99% (China) US$12,810/t vs US$12,789/t
Spodumene 6% Li2O min, cif (China) US$510/t vs US$455/t
Ferro Vanadium 80% FOB (China) US$35.0/kg vs US$35.0/kg
Ferro-Manganese high carbon 78% Mn US$1,665/t vs US$1,625/t
Tungsten APT European US$270-278/mtu vs US$270-275/mtu
Graphite flake 94% C, -100 mesh, fob China US$550/t vs US$560/t
Graphite spherical 99.95% C, 15 microns, fob China US$2,525/t vs US$2,525/t
Over £30 million government investment to boost batteries and hydrogen vehicles
The government has announced that it is going to put £30 million in funding into pioneering research into battery technology, the electricity vehicle supply chain, and hydrogen vehicles.
22 studies will receive a share of £9.4 million, including proposals to build a plant in Cornwall that will extract lithium for use in electric vehicle batteries, a plant to build specialised magnets for EV motors in Cheshire and a lightweight hydrogen storage for cars and vans in Loughborough.
The government -backed Faraday Institution is also committing the first year of a £22.6m programme to continue its work to further improve the safety, reliability, and sustainability of batteries.
This funding comes ahead of the phasing out of the sale of new petrol and diesel cars by 2030, as pledged in the government’s 10 Point Plan for a green industrial revolution.
Orsted plans wind farm, hydrogen plant at North Sea Port
Denmark’s Orsted plans to develop an offshore wind farm and adjacent hydrogen plant at the North Sea Port straddling the Dutch-Belgium border.
It would have the capacity to produce 2 GWs of electricity and would power the. 1 GW hydrogen plant. The hydrogen facility would be able to produce about 116,000 tonnes a year by 2030 for use as energy.
Hydrogen can be used in fuel cells to generate power in applications such as heavy industry, aviation and shipping. Demand for hydrogen in the North Sea Port area is 580,000 tonnes a year, and a 1GW plant would cover 20%, Orsted said. It estimated that demand in the area will have almost doubled by 2050.
Condor Gold* (LON:CNR) 47p, Mkt Cap £63.4m – Key 2021 objective of advancing La India to production is confirmed.
In the company’s 2020 results, released today, Chairman, Mark Child, described 2020 as a transformational year for Condor Gold, and confirmed that “The key objective for 2021 is to continue to advance La India Project to production.”
Condor Gold has reported a loss of £1.3m (2019 – loss £1.5m) for the 12 months to 31st December 2020 and a closing cash balance of approximately £4.2m for the year.
A subsequent placing of approximately 9.5m shares at a price of 42p/share further increased cash resources by around £4m.
Highlighting the main events of 2020, Condor Gold Condor Gold draws attention to the award of environmental permits for the high-grade Mestiza pit containing approximately 36,000 indicated oz of gold at an average grade of 12.1g/t in April and of the America pit which contains around 30,000 indicated oz at a grade of 8.1g/t in May.
In addition to the indicated resources, the Mestiza pit contains a reported inferred resource of 85,000 inferred oz at a grade of 7.7g/t while America hosts a further 67,000inferred oz at an average grade of 3.1g/t.
Additional land purchases during 2020 are described as measures to de-risk the project through securing land for the process plant, tailings disposal, waste dumps and key facilities such as explosives storage as well as water management. Further land purchases have continued into 2021.
Condor Gold has maintained the momentum during 2021 with results from infill drilling in the starter pits reported yesterday. We consider that the infill drilling will provide pit design detail and improved scheduling during the transition into the production phase at La India.
The purchase of a new 24ft diameter SAG mill and ancillary equipment from First Majestic Silver, which was announced earlier this month, adds improved assurance of the availability of a key item of process equipment and shortens the lead time which would have been expected from a manufacturer.
Condor Gold has also commented that First Majestic Silver’s decision to accept US$3m of the total US$6.5m purchase price in Condor Gold shares endorses the project’s credentials.
Mr. Child emphasised the progress on de-risking the La India project and explained that Condor Gold had “run a number of internal mining scenarios ahead of a construction [decision]. The primary scenario is an open pit mining scenario from the permitted La India, America and Mestiza open pits, which would support a 4,000tpd processing plant producing approximately 120,000 oz gold per annum.”
Mr. Child described “A secondary scenario involves a 2 stage approach, commencing with a high grade open pit mining scenario of 1,000tpd producing approximately 50,000 oz gold per annum, increasing capacity to 4,500tpd in year 3 or 4 and bring in the underground Mineral Resource and potentially increasing production to circa 170,000 oz gold per annum”.
Disclosing that currently “the ability of the Company to operate has not been materially affected by the on-going Covid-19 pandemic” Mr. Child explained that “The Company continues to enhance its social engagement and activities in the community, thereby maintaining our social licence to operate. … The main local focus is the drinking water programme, implemented in April 2017. A total of 340 families are currently benefiting; they receive five-gallon water dispensers each week. The Company has ordered and is currently installing a water purification plant … to double the drinking water provided to the local communities. It is expected to be operational in April 2021”.
Conclusion: Confirmation that the company is focused on delivering production at La India is welcome news particularly in the context of the challenges posed by Covid19. Considerable progress on de-risking the project should set the conditions for a transition through project development into the production phase and we expect a continuing and increasing flow of news describing the progress over the rest of the year.
*SP Angel act as sole broker to Condor Gold
IronRidge Resources* (LON:IRR) 19.6p, Mkt Cap £94.2m – 2020 interim results highlight strong acquisition and exploration activity across portfolio
IronRidge has released its unaudited interim results for the half year ended 31st December 2020.
In Ghana, the company continued to advance its Ewoyaa Lithium Project where a JORC-compliant 14.5Mt at 1.31% Li2O Mineral Resource estimate Indicated and Inferred status is defined within the broader 684km2 Cape Coast Lithium portfolio.
Additional met testing was completed on the potential to further improve lithium recoveries by re-crushing middlings whilst maintaining a product grade of 6% Li2O.
In Côte D’Ivoire, the company continued drilling activities at the Zaranou gold license, focussing on the Ehuasso target but also drilling at the Ebilassokro, Mbasso, Coffee Bean and Yakassé targets.
The Company secured unverified historical soils and drilling data from previous explorers, while also completing a second phase drill programme for a total of 20,312m in 404 AC holes and 2,077m in 12 RC holes.
IronRidge has commenced a third phase drilling programme for approximately 20,000m of RC resource drilling at the Ehuasso Main target, and approximately 30,000m of exploration AC drilling at the Ebilassokro, Yakassé, M’Basso and Coffee Bean/Super pit targets at broad 160m spaced AC drill traverses.
In Chad, the company renewed its Dorothe, Echbara and Am Ouchar licenses for a further 4 years with requisite area reductions for a total 746.25km2 – where it has defined a significant gold target at Dorothe in approximately 15km of trenching at 200m spacing over a 3km x 1km surface area.
On the acquisition front, the company announced the 100% acquisition of the Vavoua gold license from CAPRI Metals SARL and the 100% acquisition of the Bodite and Bianouan Gold licenses from Major Star SA.
Total comprehensive loss for the period totalled -A$2.69m vs -A$2.23m last year.
Administration expenses fell to A$999k vs A$1.31m last year.
Exploration expenses rose to A$5.85m vs A$4.3m over the period last year.
The company had a cash position of A$1.5m at the period end, prior to the exercise of Fundraise Warrants in February 2021 which raised the equivalent of A$6.4m
Post period highlights include the completion of a Scoping Study on the Ewoyaa Lithium Project which supports a business case for 2.0mtpa production operation producing an average 295,000tpa of 6% Li2O spodumene concentrate with life of mine revenues exceeding US$1.55 billion.
*SP Angel acts as Nomad for IronRidge Resources
Petropavlovsk (LON:POG) 24p, Mkt Cap £944m – 2021 operational guidance and management update
The Company provides 2021 guidance including:
Gold production to come in at 430-470koz including 60-80koz in third-party concentrate (2020: 548koz including 163koz from 3rd parties).
At Pioneer, production will increase from 119koz in 2020 on higher grades and the commissioning of the 3.6mtpa flotation plant in Q2/21 to process refractory ores.
At Albyn, production to pull back from 127koz in 2020 on lower throughput and recoveries at Elginskoye deposit.
At Malomir, production to be broadly in line with 140koz in 2020; 3rd flotation line for a further 1.8mtpa is targeted for commissioning in Q3/22.
Third party concentrate processing is expected to be lower this year as the Company missed annual contracting window amid management disruption in 2020 that will see reduced volumes of concentrate available for purchase and lower concentrate grades.
Capex forecast at $140m including $120m in development/sustaining spend, half of which to cover costs at new Pioneer flotation plant and third flotation line at Malomir, and $20m for exploration programme, predominantly around areas of Malomir and Albyn.
New management team is continuing with a comprehensive review process to streamline operations, improve management systems and simplify corporate structures.
The review has already brought immediate cost savings through revised procurement and contracting.
The Company will complete a full management restructuring by the end of Q2/21 and propose a new medium-term corporate development strategy by Q3/21 followed by announcement of a dividend policy.
New COO, Deputy CEO for Corporate Development and heads of HD and administration, procurement and logistics, communications, capital construction and investment projects, business transformation, regional affairs, and legal affairs will be joining the Company.
KPMG is in the process of carrying a forensic audit into related-party and other transactions between the Company and IRC in the three years to Aug/20 with initial findings are expected to be provided by the end of Q2/21.
Phoenix Copper* (LON:PXC) 35p, Mkt Cap £40.7m – Geophysical programme at Red Star, Horseshoe Creek and Navarre Creek
(Phoenix holds 80% of the Empire mining property in Idaho)
Phoenix Copper has appointed an established Reno, Nevada based geophysical contractor, Magee Geophysical Services, to undertake ground-based electromagnetic surveys over its Red Star silver/lead and Navarre Creek gold projects in Idaho.
A 15.5 line km survey at the Red Star and Horseshoe Creek projects “will be used to delineate drill targets for the 2021 diamond core drilling programme. This will be followed by the survey of approximately 262 line kilometres on the Navarre Creek project, and to delineate drill targets for the 2021 summer drilling programme”.
In November last year, Phoenix Copper announced the results of a structural geological study by Dr. David Rodgers of Idaho State University which recommended a ground magnetic survey of the Red Star area which lies has 330m NNW of the Empire pit in an area of limited geological outcrop.
The geophysics was recommended as a means to overcome the outcrop constraints on geological mapping through detection of magnetite associated with the “high-grade silver and lead vein system at Red Star” and should provide insight into the key geological contact zone between the Mackay Granite formation and the White Knob limestone formation and into the possibility of skarn hosted mineralisation.
The Navarre Creek area to the NW of the Empire mine site “attracted attention as the geology appeared to be similar to volcanic hosted gold deposits on the Carlin Trend in Nevada, home to several multimillion ounce gold deposits”.
Although it is still at an early stage of exploration and yet to be proven, in our recent research report we pointed out that although the potential of the Navarre Creek area “has still to be realised but discovery of only a small fraction of the 84+moz of gold produced from the Carlin trend since the early 1960s would clearly prove transformational for Phoenix Copper.” The forthcoming geophysical programme is an early step in the investigation.
CEO, Ryan McDermott, explained that “Similar to the Red Star and Horseshoe areas, evidence of magnetite was discovered during an extensive geological mapping and sampling programme at our Navarre Creek gold property during the summer of 2020 and, like Red Star, outcropping of the magnetite material was rare but evident. For this reason, Magee will also be conducting a similar EM survey over the Navarre Creek claim block”.
Mr. McDermott said that “Additional geophysical techniques and technologies are being evaluated at this time and may be incorporated into the overall geophysical programme”.
Conclusion: Phoenix Copper is implementing the recommendations of its geological consultant for a ground-based magnetic survey to investigate the structural geological setting and help define drill targets at Red Star, Horseshoe Creek and Navarre Creek. The company’s technically driven, systematic exploration of the Idaho properties is underpinned by the recent equity fund raising of £16.45m and we look forward to the results as the survey proceeds.
*SP Angel act as Nomad for Phoenix Copper
Power Metal Resources* (LON:POW) 2.34p, Mkt cap £27m – POW Post AGM Video Presentation
We don’t normally recommend video presentations though not for any particular reason
We do recommend investors view the following presentation by Paul Johnson for its clarity, honest delivery and informative content
*SP Angel acts as Nomad and Broker to Power Metal Resources
Scotgold Resources* (LON:SGZ) 74p, Mkt Cap £40m – £1.5m placing
BUY – Target Price Being Updated
The Company raised £1.5m through a placing of 2.1m shares at 70p.
Additionally, Bridge Barn owned by major shareholder and the Chairman of the Company Nathaniel le Roux agreed to provide further debt funding of £0.5m if it is needed in the future.
The Company reiterated its CY21 production guidance for 25.7-28.5kt throughput and 7.0-7.9koz gold.
Proceeds will cover working capital requirements as operations at the recently commissioned high grade Cononish mine ramp up.
Longer than expected ramp up at the processing plant see commissioning of Phase 2 expansion to 72ktpa being delayed to Sep/22, from previous target May/22.
Processing plant issues highlighted earlier are being addressed including at the filter press part of the circuit that held back ramp through March.
The Company also released updated Cononish earnings and NPV projections adjusting for new ramp up schedule and lower gold price assumptions reflecting a pull back in market prices.
Using £1,250/oz gold price, the mine is expected to generate >£20m in EBITDA and >£15m in FCF (post-tax) per year following Phase 2 ramp up to 72ktpa, ~24kozpa GE and ~£430/oz (~$600/oz) AISC.
Conclusion: Ramp up delay as the team calibrates processing plant to reach steady state production see the Company raising equity and moving commissioning of Phase 2 by few months out. Nevertheless, the team reiterated its production guidance for 7.0-7.9koz in CY21. We remain supportive of the investment case highlighting significantly de-risked project status with operations set to benefit from high grade nature of the deposit.
*SP Angel act as Nomad and broker to Scotgold Resources. A number of SP Angel analysts have visited the Cononish gold mine
John Meyer – [email protected] – 0203 470 0490
Simon Beardsmore – [email protected] – 0203 470 0484
Sergey Raevskiy –[email protected] – 0203 470 0474
Joe Rowbottom – [email protected] – 0203 470 0486
Richard Parlons –[email protected] – 0203 470 0472
Abigail Wayne – [email protected] – 0203 470 0534
Rob Rees – [email protected] – 0203 470 0535
Grant Barker – [email protected] – 0203 470 0471
Prince Frederick House
35-39 Maddox Street London
*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
Copper, Aluminium, Nickel, Zinc, Lead, Tin, Cobalt
Natural Gas, Uranium, Iron Ore
Bloomberg OTC Composite
Lithium Carbonate, Ferro Vanadium, Antimony
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