[cid:image001.png@01CE470C.90B7B020] Thursday, 02 May 2013 [cid:image006.jpg@01CE470C.A88B6390]
Snapshot � Company news highlights: Glencore to start trading post Xstrata merger tomorrow, Randgold reduces FY13 guidance, Avocet quarterly update, Alcoa to possibly curtail 460,000t of smelting capacity, Anglo American interested in jointly developing Tavan Tolgoi, Bumi Resources reports March Q loss, Cameco Q1 profit was below forecast, Afferro Mining NTEM update, Botswana Diamonds extends MOU, Blackthorn Resources board and management changes, Focus Minerals an early victim of the gold price, Discovery Metals Botswana dispute adjudication. � Commodity review highlights: Copper struggles to maintain ground, Palladium supplies from Russia state reserves may exceed expectations. � Other Economic News: China is expected to set an economic growth target of 7% for next year, Mining cut backs hit equipment manufacturers. � African Resources Update: Zuma comments at Workers day rally in Kimberly � FTSE futures (7am) - off 6 points - markets expected to open down marginally this morning following last nights announcement by the Fed to keep buying bonds at the US$85bn monthly pace while standing ready to lower or raise purchases as economic conditions evolve.

A poor ADP jobs data number caused further anguish.

The HSBC Chinese PMI number fell to 50.4 from 51.6 in March causing more concern of a slow-down in the Chinese economy and in Australia building permits fell 5.5% in March.

Markets have reacted to the damp news accordingly, the S&P closed down 0.93% and Asian markets are all trading off - Nikkei -1.03%, Hang Seng, -0.38%, ASX200 -0.82%. FTSE futures have turned around from being -15 points earlier as the markets looks slightly more optimistically about the ECB decision today. Commodity prices are mixed this morning - gold -0.22% (US$1,454.47/oz), silver -0.57% (US$23.5004/oz), platinum +0.33% (US$1,474.50/oz), copper +0.24% (US$3.087/lb).

Chinese markets were shut yesterday leaving iron ore price unchanged (as opposed to the US$0/t reported on Bloomberg). Economic data due today:- US - trade balance (forecast -$42.3Bn), initial jobless claim (forecast 345k), continuing claims (forecast 3,030K); EU - Eurozone PMI manufacturing (forecast 46.5), ECB interest rate announcement (forecast 0.50%), UK PMI construction (forecast 48).
Company News � Glencore (GLEN LN) to start trading post Xstrata merger tomorrow.

GLEN will merge with Xstrata today and the shares of the enlarged group will begin trading tomorrow.

GLEN will allegedly lay off hundreds of Xstrata managers and top executives, and will also move to dispose of assets and projects which is does not deem as necessary.

Source: The Times Investec view: We will keep an eye on Zanaga Mining (ZIOC LN) as to what the enlarged groups plans are with its RoC iron ore project. � Randgold (RRS LN) reduces FY13 guidance.

RRSs 1Q13A results included production of 199koz at total cash costs of $841/oz, weaker than our analysts expectation of 217koz at $757/oz.

It reported 1Q13 EPS of 76cps, below consensus of 87cps.

The key operation Loulo-Gounkoto has rejigged planning in light of the lower gold price (in order to optimise cash flows) and as a result has reduced FY13E guidance for this operation from 590koz to 560koz.

Therefore guidance for group should reduce from 900-950koz (at cash costs of $700-750oz) to 870-920koz.

Our analyst was assuming 893koz so is still comfortably within the revised range.

Source: Company Investec view: A downgrade so soon into the new year is disappointing but factors such as this is the reason our analyst had a FY13 target below RRSs earlier guidance.

On the face of it this is a minor adjustment in an otherwise strong production profile, with RRSs growth plans intact.

RRS is being prudent in managing cash flows, where possible.

The key driver to RRSs planned production growth in 2013 is increasing ore grades at the key operations, mainly Loulo, with each successive quarter expected to be slightly higher grade than the preceding quarter � Avocet Mining (AVM LN) quarterly update reflects production of 30.5koz at a cash cost of US$1,169/oz at a realised price of US$1,422/oz leading to an EBITDA for the period of US$6.7m, up from US$5.3m the previous quarter.

The company retains production guidance of 135koz at a cash cost of US$1,100/oz for the year.

The company saw grades fall by 20% as well as lower milling, however 1,977oz of gold in circuit inventory helped offset some of the weaker operational performance.

Mining volumes and costs improved QoQ following cost improvement initiatives.

The company has booked a number of exceptional items in the period as a result of re-structuring its hedge with Macquarie and have led it to reporting a US$44.8m loss including the US$44.97m exceptional charges).

Net cash in the period was down US$22m with closing cash balance of US$32.9m and US$10m of debt held by Macquarie and Elliott Advisors.

Source: Company Investec View: A weak quarter with the mine grades down significantly QoQ and lower ore throughput leading to slightly lower recoveries (82% vs 83% previous quarter) offset to an extent by improved operational performance and the release of some gold in circuit (1,977oz) versus 4,568oz that were locked up the previous quarter.

In the current gold environment the company faces significant difficulties in light of on-going development spend that is required, and will need to improve operational performance. � Alcoa (AA US) to possibly curtail 460,000t of smelting capacity.

Alcoa announced that it will review its smelting capacity over the next 15 months and possibly curtail a further 460,000t, 11%, of its global capacity.

Alcoa currently has 13% (568kt) of capacity idle.

The review is consistent with Alcoas 2015 goal of lowering its position on the global aluminium production cost curve.

Source: Company Investec view: Whilst curtailment of supply is a potential positive for aluminium prices, LME inventories are still at 5.15mt and a major overhang. � Anglo American (AAL LN) interested in jointly developing Tavan Tolgoi.

Anglo Americans chief representative in Mongolia, Graeme Hancock has said that AAL is interested in developing the West Tsankhi coal field, part of the larger Tavan Tolgoi deposit.

Source: Business Week Investec view: We do not believe current coking coal prices justify further development of production from Tavan Tolgoi.

Mongolian Mining Corporation (975 HK), the only company producing washed hard coking coal from the Tavan Tolgoi complex, requires a price equivalent to a seaborne price of c.

USD155/t (FOB) to be EBITDA breakeven. � Bumi Resources (BUMI IJ) reports MarQ13 loss of USD62.9m.

Bumi reported late on 30 Apr 13 a MarQ13 loss of USD62.9m versus a loss of USD100.3m in the pcp.

The company reported a gross profit of USD202m but had quarterly interest payments of USD146m.

Source: Company � Cameco Corp (CCO CN) the worlds third largest uranium producer Q1 profits were below forecasts, with net income down at C$9m (2c/share) versus C$129m a year ago.

One off costs totalled 7c/share.

The company has continued to suffer from the weaker uranium price and reduced volumes having sold 5.1mmlbs versus 8.2mmlbs a year ago, achieving prices most recently of US$48.42/lb.

Full year guidance remains at 23.3mmlbs with sales of 31-33mmlbs.

Source: Company Investec View: Clearly the uranium market remains tough for producers with Cameco awaiting for reactor re-starts in Japan and a significant return to long term contract buying by utilities.

The prices achieved by Cameco implies that a higher proportion of volumes are being sold on spot versus long term which is higher. � Afferro Mining (AFF LN) Ntem update.

AFF has undertaken metallurgical work on its Ntem project which has demonstrated that a high grade concentrate between 68.5% and 65.2% can be obtained from ore with a grind size of between 75 and 150 microns.

The product has low deleterious elements.

A resource estimate and scoping study for Ntem should be completed during Q2 2013.

Source: Company Investec view: While Ntem looks to be a smaller target than Nkout, it is significantly closer to the coast and to a deep water port which is currently being constructed.

Therefore, it may make sense for AFF to focus its efforts on this project given the current markets reluctance to fund big capex projects with big infrastructure requirements. � Botswana Diamonds (BOD LN) extends MOU.

BOD has extended the MOU with a South African private company which it had to review data over a group of licences to the southwest of Orapa, Botswana until 14 June.

The group is pleased with its findings so far.

Source: Company � Blackthorn Resources (BTR AU) Board and Management changes.

BTR Chairman Bill Cash has his retirement from the position effective November 2013.

He will be replaced by Mike Oppenheimer, who joined the Company in April 2011 as a Non-Exec Director, with Board commentary indicating that the handover reflects the changes in the Companies focus from explorer to developer.

In addition, BTRs Managing Director, Scott Lowe, has also advised his resignation, expected effective before the end of 2013.

The Company has indicated that an executive search for his replacement will commence in the near future.

Source: Company � Early victim of the gold price.

Focus Minerals (FML AU) is planning to close its Laverton project, noting that increasing costs, the higher Australian dollar and the recent drop in the gold price have rendered the operation commercially unviable.

Quarterly C1 cash costs at the mine were $1,642/oz compared to $1271/oz in the previous quarter.

Source: MiningNews Investec view: The lower gold price is now separating the chaff from the wheat.

We expect to see ongoing closures of marginal operations such as this one, which have only survived courtesy of elevated gold prices. � Discovery Metals (DML AU) Botswana dispute adjudication.

DML released a statement today stating the Dispute Adjudication Board has brought down a decision on each of the underlying items of dispute and determined a net total of US$4.99m is payable to DML by Sedgman (SDM AU).

Sedgman countered with a release of its own highlighting that undisputed amounts of US$6.79m are owed to SDM by discovery, with the net result being that Sedgman is owed US$1.8m.

Discovery Metals requested a voluntary suspension on 26th April pending an announcement relating to financing (including an accelerated non renounceable entitlement offer) which was expected to be made prior to commencement of trading today.

DML today announced that "discussions have continued with a number of potential investors and with the Companys banking syndicate", and that it would keep the market informed as matters progress.

Source: Company.
[cid:image007.png@01CE470C.A88B6390] Commodities News � Following another sharp drop yesterday copper prices initially rallied but have struggled to maintain ground.

A final reading for April Chinese PMI is likely to drive the price up or down subject to the result for which a preliminary reading on 23 April stood at 50.5, down from 51.6 in March.

Source: Bloomberg � Palladium supplies from Russian state reserves may exceed expectations as data indicates a surge of exports in palladium to Switzerland in March reflecting 8.9t or 286koz moving from Russia to Switzerland.

Source: Bullion Desk Investec View: Palladium has long been in supply deficit that has been made up by Russian stockpiles for a number of years.

Johnson Matthey estimates that last year Russian stockpiles provided 250koz of supply versus 1,490koz in 2007.

The stockpiles are generally expected to soon be exhausted, however they are not disclosed by the Russian government. Other economic news � China is expected to set an economic growth target of 7% for next year as it aims to address problems created by rapid expansion.

Source: Bloomberg � Mining cutbacks hit equipment manufacturers.

Reduced demand for earth moving equipment such as trucks and loading shovels is putting pressure on manufacturers such as Caterpillar, Joy Global, Atlas Copco and Sandvik.

Atlas Copcos order book dropped 15% in Q1 2013 versus Q1 2012 and Sandviks fell 18%.

Source: FT African Resources update � Zuma comments at Workers Day Rally in Kimberly.

Zuma said at a rally hosted by the Congress of South African Trade Unions (Cosatu) that organised labour must pay more attention to the living conditions of South African miners and farm workers.

He said that South Africa should bear in mind that farming and agriculture were the back bone of the countrys economy.

Source: Mining Weekly.
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