🕐03.05.13 - 10:27 Uhr

INVESTEC GLOBAL NATURAL RESOURCES DAILY - MINING - FRIDAY 3 MAY 2013 - IMP SJ, G
LEN LN, JLP LN, COOL LN, CKA AU, BCI AU



[cid:image001.png@01CE47D4.72266200] Friday, 03 May 2013 [cid:image006.jpg@01CE47D4.80C13E70]
Snapshot � Company news highlights: Impala note, Glencore Xstrata merger completed, Jubilee delays Platinum Australia merger, Continental financing approved, management changes at Cokal, BCI enters Brazilian MOU � Commodity review highlights: Steel prices continue to fall, gold prices picking up � Other Economic News: ECB rate cut, US jobless at a 5-yr low � African Resources Update: SA platinum output unlikely to rebound, AMSs planned job cuts likely to be scaled back, Goldfields chairman wants more regulatory uncertainty � FTSE futures off 1 point (recovering from -10.5 points at 6:30) - a healthy 14.89 point (0.94%) upward move on the S&P overnight thanks to the ECB rate cut (to 0.5%) and the US initial jobless claims number coming in at 324k v 345k estimate.

Whilst UK markets are anticipated to be relatively quiet this morning ahead of the long weekend, the US non-farms payroll (consensus change 140k), unemployment rate (consensus 7.6%), factory orders (consensus -2.9%), and ISM no-manufacturing composite (consensus 54) should provide plenty of reasons to watch markets closely.

European markets appear cautious ahead of the data Asian markets are mixed, the Nikkei is off 0.76%, Hang Seng up 0.21%,and the ASX 200 is flat.

BHP in Australia closed up 0.57% at A$31.97 and Rio up 1.08% at A$54.49. Commodity prices are looking positive this morning: gold +0.55% (US$1,475.04/oz), silver +0.77% (US$24.04/oz), platinum +0.47% (US$1,507.20/oz), copper +2.14% (US$3.172/lb).

Iron ore had a healthy drop yesterday, falling 3.5% to US$129.40, this is the first time since Dec December the price has fallen below US$130/t however Steel reinforcement bar futures reacted well to yesterdays economic data increasing 1.9% to 3,610 Yuan after falling 1.6% the day before. Other economic data: China Non-manufacturing PMI (forecast 54.5), UK PMI services (forecast 52.4), European Zone PPI for March (-0.2%).
Company News � Investec research note out today on Impala Platinum (IMP SJ), following up on yesterdays March quarterly.

The near-term outlook remains bleak, as the company reports that the steep drop in PGM prices has caused a growing number of shafts to become marginal or loss making and that these are being "monitored...to determine their on-going viability".

A possible supply reduction action in this regard could kick start a material recovery in PGM prices, in our view.

We recognise that physical metal and ETFs are the initial beneficiaries of such developments but we believe platinum sector stocks will also benefit given their higher leverage.

Source: Investec � Glencore (GLEN LN) completes merger.

GLEN will commence trading as Glencore Xstrata today, having completed the merger of the two groups.

The merged entity will trade in Hong Kong next week.

It will have a have a market c.$65bn making it one of the largest of the FTSA 100.

Source: Company, FT � Jubilee Platinum (JLP LN) delays merger with Platinum Australia (PLA AU) due to difficulties in meeting ASX listing requirements.

The scheme of implementation is delayed with the end date now due on the 30th June.

ASX requirements that a company seeking admission on the ASX has an issue price of 20c or more, above the Jubilee share price of 10.12p on the date the implementation deed was executed (late Feb).

The ratio between the respective companies share prices for the deal was a 1:1 basis.

In order to address the 20c rule the company plans to issue CDIs at a ratio of 0.5 Jubilee for each Jubilees share, with each Jubilee CDI representing 2 Jubilee shares.

Effectively a form of share consolidation to get over the 20c threshold.

Source: Company Investec View: A frustrating issue for all shareholders undoubtedly.

Jubilee has a diverse portfolio of assets for a junior miner, which has its pros and cons since no single asset is at an established state of production generating significant cash flows.

The merger with Platinum Australia that will bring in the Smokey Hills PGM mine to the portfolio could achieve this, however, we note that the asset has long been a problematic mine, hence PLA having been in administration, we wish management and shareholders luck. � Continental Coal (COOL LN) gets approval for strategic financing.

COOL has announced South African Reserve Bank approval for the strategic financing transaction with Village Main Reef where by VMR would subscribe for 100m shares at 8Ac/share to raise A$8m, establish and fund a mechanism for the sale of less A$500 share parcels and acquire on market at up to 10Ac/share sufficient shares to take its holding to 19.9%.

Source: Company � Management changes at Cokal (CKA AU).

Cokal have announced that Jim Middleton will step down as CEO.

His duties will be split between Peter Lynch who will assume the role of Chairman and CEO and Garry Kielenstyn who has been appointed Indonesian Country Management.

Source: Company Investec view: Management expect production forestry permits and completion of the BFS on the BBM project by October 2013.

Construction at BBM is expected to commence in 4Q13.

The announced management changes suggest the requirement to now have senior management based in Indonesia who are closer to the project as it enters the development stage. � BC Iron (BCI AU) enters into Brazilian iron ore MOU.

BCI today announced it has signed two MOUs, in conjunction with its Strategic Alliance partner Cleveland Mining, to earn the rights to acquire 80% of three iron ore projects in Brazil.

Since the Alliance was formed in August 2012, the JV has been searching for appropriate greenfields targets with proximity to port and rail.

Under the announced earn-in schedule, the initial short term requirement is to complete a "first pass" assessment of the projects (including a drill program), at an expected cost of US$4m, with costs shared 50:50 between BCI and Cleveland in line with the terms of the Alliance.

Source: Company Investec view: While the MOUs represent BC Irons first real Greenfields opportunity, we dont expect it to distract BCI from their main focus in the Pilbara, and anticipate that the new projects will be largely managed by Cleveland Mining due to their in country knowledge and established technical resources.
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Commodities News � Steel prices continue to fall in China.

In the first day of trading yesterday after a three day holiday in China spot steel prices continued to fall.

Metal Bulletin reported commercial-grade HRC (4.5-12mm) in Shanghai trading at RMB3,680-3,720/t (USD593-599/t), down RMB50 (USD8) per tonne from last Friday.

Source: Metal Bulletin Investec view: Falling steel prices are likely to continue to put downward pressure on iron ore prices. � Gold prices picking up in response to growing expectations of further economic stimulus with the ECB cutting interest rates yesterday.

ETP holdings fell to 2,262.665t yesterday, the lowest level since October 2011 and down 0.9% this week.

Holdings have fallen 369.3t this year alone.

US$21.8bn hedge fund, Elliott Management Corp, affirms its view on gold saying it remains the best store of value in an uncertain global economy.

Source: Bloomberg
Other economic news � ECB rate cut.

Yesterday, the European Central bank cut its main interest rate by a quarter of a percent to 0.5%.

Mario Draghi, the ECB president said that the bank remained ready to act if needed and that he remained an open mind about imposing negative interest rates where commercial banks would effectively be charged for depositing money at the central bank.

Source: FT. � US jobless at 5 year low.

The number of Americans who claimed unemployment insurance for the first time fell by 18,000 to 324,000 during the week ending 27 April, representing the smallest number of claims since January 2008.

Source: FT. Investec view: While this analysis doesnt take gross hirings into account, it does however point to the improving economic outlook in the US which the market is becoming more comfortable with.

As a significant consumer of raw materials, the health of the US economy is very important to the mining sector.
African Resources update � SA platinum output unlikely to rebound: GMS.

SA platinum output unlikely to rebound: GFMS.

GFMS published its annual platinum and palladium survey yesterday.

For the first time in 7 years, labour disruptions in South Africa pushed the platinum market into a narrow deficit of 83,000oz in 2012.

Mining output fell by 10%, recycling of autocatalysts fell by 9% and scrap jewellery sales fell by 19%.

GFMS said that South African platinum supply was unlikely to rebound in 2013 owing to resurgence in labour disruptions.

Source: MiningMX Investec view: This corresponds largely with our view and we expect a small (3%) supply-demand deficit in 2013 � Meanwhile, Amplatss (AMS SJ) targeted 14,000 job cuts look unlikely to occur.

AMS is still in protracted discussions with the government regards its plans to scale back operations.

Negotiations were extended for a month at the end of March and AMS has said that it expects the final plan to be made public next week.

For AMS the cuts are crucial to returning to profitability, while the government is highly sensitive about jobs ahead of elections next year.

Sources state that AMS could reduce the cuts to just 5,000, then attaining the original target though a prolonged period of attrition.

Source: MiningWeekly � Goldfields (GFI SJ) chairperson comments that the South African mining industry requires much more regulatory certainty, greater efficiencies and improved safety.

The investments required by miners are major and companies need confidence in the regulatory environment, with South Deep having required ZAR31bn.

Source: Mining Weekly
Investec Global Natural Resources Research Team: UK Australia Hong Kong South Africa Hunter Hillcoat Tel: +44 (0) 20 7597 5182
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Investec Global Natural Resources Sales Team: UK Australia Hong Kong South Africa Jamie Campbell Tel: +44 (0) 20 7597 5038
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