[cid:image001.png@01CEC00D.04088C60] Thursday, 03 October 2013 [cid:image006.jpg@01CEC00D.045C0390]
Snapshot � Company news highlights: Glencore closes Falcondo, Rio divests Blair Athol to Linc Energy, Alrosa IPO pre marketing starts this week, Aureus looking to raise US$16m, Uralkali stake up for sale, Iluka acquires Sri Lanka tenements � Commodity review highlights: Gold holds above US$1,300/oz on US government shutdown, ICSG updates 2013-2014 copper market forecast, BREE forecasts China iron ore imports to reach 872mt in 2014, Port Hedland exports a record amount of iron ore in September � Other Economic News: China services PMI rises to six month high � African Resources Update: Zambia in talks with banks for US$250m of infrastructure loans, Angola aims to boost infrastructure spending � Market notes: Another day of the shutdown in the US.

Stocks dropped as we edge closer to the possibility of a default and as a weaker than expected private sector jobs report raised concerns that the recovery remains fragile.

Note that tomorrows US government payrolls report may be delayed if no deal on the budget is reached by then.

Goldmans Blankfein joined JP Morgans Dimon as "representatives of the financial markets" to urge Congress to raise the debt ceiling to avoid "extremely adverse" consequences and markets staged a bit of a turnaround in late trading on hopes that a deal will be struck.

Elsewhere, Bernanke refrained from commenting on monetary policy, the government shutdown or the economy in his speech overnight, but Eric Rosengren, President of the Boston Fed, stated that the Feds easy policy stance and bond-buying program could last for "several years" to make sure that the economy remains on track for solid growth and moderate inflation. In Europe, markets were much more sanguine yesterday after the ECB left rates unchanged and said they would be "particularly attentive" to any moves in market rates that could threaten the nascent economic recovery or push inflation too low, with extra tools available to enforce this.

The current elephant in the room, Italy, seems to be climbing back from the brink after Berlusconi abandoned his bid to topple PM Lettas government. In Asia Pacific, markets were up across the board as the China services PMI came in at a six month high.

China remains shut for the National Day Golden Week with limited news and data releases.

Yesterday afternoon, the Asian Development Bank became the latest supra-national institution to cut its China growth forecast as it expects the government to struggle to rebalance the economy as domestic demand slows and foreign trade drops.

The 2013 GDP growth forecast was lowered to 7.6% from Julys forecast of 7.7% and Aprils forecast of 8.2%, while 2014 was lowered to 7.4% for 2014 from Aprils forecast of 8%. � Commodity Markets: Gold futures rose on the safe haven trade with December prices rising back through the psychological US$1,300/oz level and currently stand at US$1,310/oz, down from intraday highs of US$1,324/oz.

Base metals were mostly up on the LME as the US$ weakened with 3mth copper up to US$7,278/t and aluminium up to US$1,838/t.

Spot iron ore remain untraded given the Chinese holiday, but the futures market continued to trade with 6mth futures falling further.

Also of note, Malaysias Bursa announced that it will start trading Ringgit denominated gold futures from 7 October.
Company News � Glencore (GLEN LN) to close Falcondo nickel mine.

Glencore will close the Falcondo nickel mine in the Dominican Republic for 2-3 years due to the fall in nickel prices.

Source: The State Investec view: Falcondo produced 7kt of nickel in ferronickel in JunH13A, 6.6% of Glencores total contained nickel production of 106.2kt (includes using feed from own sources and third party sources). � Rio Tinto (RIO LN) sells its Blair Athol mine to Linc Energy (LNC AU).

The Blair Athol Coal JV (71.5% Rio Tinto) has signed a sale and purchase agreement with Linc Energy for the sale of the Blair Athol thermal coal mine in Queensland.

Linc will pay no upfront consideration and the Blair Athol Coal JV will make payments towards site rehabilitation obligations.

Linc expects to reopen the mine in c.

6 months and produce 3mtpa.

Source: Company � Alrosa IPO pre marketing starting this week.

Russian diamond producer Alrosa is set to being pre marketing for an IPO this week.

Proceeds from share sales by the Russian government, Republic of Yakutia and treasury shares are expected to fetch over US$1bn.

Source: Bloomberg � Gemfields (GEM LN) full year results to June highlights progress on numerous fronts.

The financials reflected revenue US$48.4m, EBITDA of US$1.2m leading to net loss of US$22m versus net profit last year of US$120m that was a consequence of greater sales volumes and an asset revaluation.

That the results reflect weaker earnings is no surprise since the company delayed a high quality auction to the current financial year.

The companys balance sheet shows cash and debt of US$11.2m and US$11.6m respectively.

The results provide some positive indication of the Ruby potential from the companys Montepuez ruby mine in Mozambique with bulk sampling having recovered 1.8m carats for which an auction should give an indication of the potential value to be unlocked from this asset.

The results also give some clearer indication of the Faberge business on the company contributing a US$6.9m loss.

Going forward Gemfields is looking to ramp up activities at Montepuez to 2.5m carats per month, continue to develop Faberge within the group, and advance the Kariba Minerals Amethyst Mine I Zambia that the company has helped refinance.

Source: Company Investec View: Gemfields has numerous coloured stone assets to advance, including the development of an underground mining operation at its key operating Kagem mine.

We hope that the situation in Zambia concerning overseas auctions is resolved soon allowing larger auctions closer to the buyers that could incorporate stones from Montepuez.

The synergies in the different business units, e.g.

mines and Faberge, should in time lead to enhanced value for coloured stones, the results of which we have already begun to see with rising emerald prices.

The Faberge business unit still needs to become a profit centre, however it should help enhance value for the rest of the group by generating greater interest and prices in coloured stones.

We look toward future auctions from both Kagem and Monte Puez that could help drive the share price materially. � Aureus Mining (AUE LN) to raise a further US$16m at 32p, to fund on-going exploration and development activities as it constructs the New Liberty Mine.

The company recently announced securing an US$88m debt facility with a US$12m subordinated debt component yet to be finalised.

Source: Company Investec View: We are not surprised to see a further top up funding as money due from the US$80m equity raise at the start of the year came with warrants that could have generated US$24m but are now too far out of the money to be considered.

Furthermore the debt facility of a possible US$100m is slightly below the original US$108m facility outlined in March.

Our analyst estimated a US$20m shortfall by 2015.

This should ensure that the project is fully financed but there could still be additional top up requirements before production finally starts up in 2015. � Possible sale of stake in Uralkali (URKA RX) a positive for potash prices.

Russia has told bidders for Suleiman Kerimovs 22% interest in Uralkali that they must repair relations with Belarus and state owned potash producer Belaruskali.

Uralkali withdrew from the Belarusian Potash Company (BPC) marketing agreement with Belaruskali in August 2013 causing a fall in potash prices which had been tightly controlled by the Canpotex and BPC duopoly.

Source: Reuters Investec view: A positive for potash prices. � Iluka (ILU AU) completes acquisition of Sri Lankan tenements.

Iluka has completed the acquisition of PKD Resources, a Sri Lankan domiciled company that owns an exploration tenement near the city of Puttalam, in the north-west of Sri Lanka.

The tenement contains a 689mt heavy mineral (HM) resource grading 8.2% HM and Iluka intends to commence a feasibility study shortly.

Source: Company
[cid:image007.png@01CEC00D.045C0390] Commodities News � Gold holds above US$1,300/oz on US government shutdown.

Gold continues to hold above the US$1,300/oz level due to weak US economic data and hopes that the US Federal Reserve will stick to stimulus for longer due to the partial US government shutdown.

Source: Reuters � ICSG releases updated 2013-2014 copper market forecasts.

The International Copper Study Group (ICSG) forecasts refined copper surplus of 390kt in 2013 and a surplus of 632kt in 2014.

Mine production is expected to increase to 18.6mt in 2014 from 16.7mt in 2012 as mine projects that were deferred or delayed due to the financial crisis start coming on stream.

Source: ICSG Investec view: A 390kt/632kt surplus in 2013/2014 is significant in the context of LME copper inventories of 531.8kt. � BREE forecasts China iron ore imports to reach 872mt in 2014.

Australias Bureau of Resources and Energy Economics (BREE) expects China to import 872mt of iron ore in 2014, up 8.3% YoY.

Australias iron ore exports are forecast to increase 17% to 669mt in 2014 and are expected to reach 847mt by 2018 at an annual growth rate of 8%.

Source: Financial Times � Port Hedland exports a record amount of iron ore in September.

Iron ore exports from Port Hedland rose to 28.96mt in September, up from 27.39mt in August 2013 and 19.89mt in September 2012.

Source: Bloomberg
Other economic news � China services PMI rises to six month high.

The China services PMI was 55.4 in September, up from 53.9 in August and the highest reading since March, according to data released by the National Bureau of Statistics.

Source: Bloomberg Investec view: The strength of the services PMI will ease concerns over a Chinese economic slowdown and suggests that the government is having some success at stimulating domestic demand.
African Resources update � Zambia in talks with banks for US$250m of infrastructure loans.

Zambia is in talks with Standard Chartered and Citigroup for a syndicated loan of US$250m with proceeds used to fund infrastructure projects that are contributing to a widening budget deficit.

Proposed projects include power plants, roads and rail line upgrades.

Source: Bloomberg Investec view: Ensuring reliable power is key to the viability of copper projects within Zambia. � Angola aims to boost infrastructure spending.

Angola is aiming to boost lagging spending on infrastructure projects by attracting greater foreign investment with a target of US$4bn/year according to the chairwoman of Angolas National Private Investment Agency.

Source: Bloomberg
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