[cid:image001.png@01CEFC92.4FC26DD0] Thursday, 19 December 2013 [cid:image006.jpg@01CEFC92.65B94AF0]
Snapshot � Company news highlights: Glencore-Vale to finalise Sudbury consortium, Glencore increases Mutanda interest, IMIC finally acquires Afferro, Bumi name change, Ferrex does deal with Anglo American/Kumba, Stratex drilling at Tembo, Sundance gets good response to infrastructure tender, Sirius interim report, MMG update on Century and Dugald River, Cokal update on BBM, Discovery struggling with Blumont transaction � Commodity review highlights: Muted response from gold on Fed taper, Vale still aiming for +4mtpa potash, Chinese steel mills selling iron ore back into market, European coal continues to fall � Other Economic News: Fed delivers a soft landing, improving credit to drive mining: E&Y � African Resources Update: Mozambique seeking larger stakes in new mining projects, Mali elections, todays African Proverb � Market notes: FTSE futures +56 points.

Following a +1.84% move on the Dow and +1.66% on the S&P, European markets are set to have a strong session.

Asian markets are mixed (Nikkei +1.74%, Hang Seng -0.78%, ASX 200 +2.08%).

It would appear that the uncertainty regarding US Fed fiscal tapering was more relevant than the outcome as markets soar as a result of the US$10bn reduction in monthly bond purchases announced following the FOMC meeting last night.

Interest rates remained untouched and it was stressed that whilst tapering has commenced the asset purchases are not on a pre-set course. Commodity markets - gold +0.38% (US$1,223.16/oz), silver -0.63% (US$19.6125/oz), copper -0.42% (US$3.305/lb), iron ore -0.90% (US$133.40/t), platinum -0.34% (US$1,338.20/oz), WTI -0.07% (US$97.73/bbl), and Brent -0.26% (US$109.35/bbl).

Dual listed - BHP +2.82% ($36.80), RIO +1.84% ($66.53).

Copper and gold both declined with the Fed tapering announcement, gold pushing back towards the yearly lows as only 34% of economists surveyed predicted the paring to commence this month.

WTI rose as investors become more optimistic about the improving economic outlook and crude inventories shrank by 2.94m barrels.

Steel re-bar futures in Shanghai climbed from a 3-week low on speculation that improving economics in China and the US will boost steel demand however this is yet to be reflected in the iron ore price which was off 0.90%. Economic data due today: US - Initial jobless claims (forecast 335K), continuing claims (2775K), Philadelphia Fed Business Optimism (10.0), existing home sales Nov (5.02M), leading index (0.7%).

UK - retail sales ex auto MoM (forecast 0.3%).

Eurozone - ECB current account, Nov Irish PPI, Irish GDP 3Q (0.6%).
Company News � Glencore (GLEN LN) and Vale (VALE US) may finalise consortium with Sudbury nickel operations in Q1 of next year to operate them as a single unit and improve efficiencies.

Source: Thomson Reuters Investec View: We understand such a plan has been looked at in the past, however, with nickel prices remaining lacklustre and margins being squeezed, there is no doubt considerable pressure to improve margins. � Glencore (GLEN LN) increases direct interest in Mutanda copper project in the DRC to 69% through the acquisition of the remaining 14.5% of the project previously held by High Grade Minerals for US$430m.

The remaining equity in the project is held by a subsidiary of Fleurette Properties.

The mine is set to produce around 140ktpa of copper with cobalt by-products.

Source: Company � International Mining and Infrastructure Corporation (IMIC LN) completes Afferro acquisition.

IMIC has announced that the acquisition of Afferro Mining (AFF LN) will complete at 8am this morning.

Source: Company � Bumi plc changes its name.

As of today, Bumi plc will trade as Asia Resource Minerals with new ticker ARMS.

Source: Company Investec view: The name change is a positive step which should enable the company to relaunch itself after ending its troubled relationship with PT Bumi and the Bakries. � Ferrex plc (FRX LN) signs term sheet with Anglo American (AAL LN) and Kumba Iron Ore (KIO SJ).

FRX has signed a binding term sheet with AAL and KIO to advance its Mebaga DSO project iron ore project in Gabon.

The term sheet outlines a transaction whereby AAL and KIO fund the Mebaga exploration for up to two years, and also allows AAL and KIO to move to 100% ownership of the project at its election via a purchase agreement.

Source: Company Investec view: On the face of it, this sounds like a positive announcement for FRX, given that significant iron ore producers AAL and KIO see potential in the groups Mebaga project.

However, investors will need a little more information, like the terms of the agreement, before getting too excited. � Stratex (STIL LN) diamond drilling has started at Tembo gold project focussing on Ngula 1 target that had returned promising drill results in the past.

A second rig will be mobilised to site in Q1 of next year.

The project is located on the same trend as African Barricks Bulyanhulu Mine.

Stratex holds a 13.2% stake in Tembo Gold Corporation that is operating the project.

Source: Company � Sundance Resources (SDL AU) receives strong response to tender process to finance and build rail and port infrastructure for its Mbalam iron ore project by contractors.

Negotiations are to commence to finalise exclusivity by Q2 of next year.

Both Chinese and non-Chinese parties are involved in the discussions.

Negotiations are also underway concerning the sale of equity and take or pay iron ore off-take agreements.

Source: Company � Sirius Minerals (SXX LN) interim report to September highlights maiden JORC reserve of 250mt of polyhalite and signing of MOUs for offtake.

However, considerable work remains on environmental permitting with difficulties encountered.

Loss in the period came to �6.3m with cash at the end of September standing at �13.1m.

The company has issued a �25m convertible of which �10m was drawn in the period.

Operating cash outflow totalled �6.1m with �9.2m spent on investing activities.

Source: Company Investec View: There remains a long road ahead to develop this project with permitting and financing remaining key obstacles.

Clearly at the current burn rate the company will need to identify new sources of funds even without needing to finance the project. � MMG Ltd (1208 HK) provides an update on its Century mine and Dugald River project.

Following the release of its updated Mineral Resources and Ore Reserves statement, MMG has disclosed that its Century lead/zinc mine will close in mid-2015.

At the Dugald River greenfield lead/zinc project the resource has been increased following further drilling but the reserve has been revised lower due to revised dilution and stope stability parameters and increased cash cost assumptions.

MMG will spend A$57m at Dugald River in 2014 to progress trial mining, bringing total project expenditure to A$610m by end 2014.

Source: Company Investec view: Closure of Century in mid-2015 is earlier than our analysts forecast that it closes in DecQ15E.

Century is forecast to produce 480-490kt zinc and 38-42kt of lead in 2013E.

A board decision to develop Dugald River is unlikely before completion of the A$57m trial mining program.

The company had previously expected first concentrate shipment from Dugald River in late 2015 but even our analysts assumption of first shipments in 2H16E now looks optimistic.

Higher mining costs and capex likely higher than the A$1.5bn estimate will adversely affect the projects economics. � Cokal (CKA AU) provides an update for its BBM project.

Cokal has received approval for its river barge loading point (Purnama Port) on the Barito River from Indonesias Minister for Transport.

Cokal is targeting first production from its 2mtpa BBM coking coal project in 2H14.

Cokal is however still awaiting its Forest Rent Use Permit (IPPKH) which is expected in 1Q14.

The company expects to announce the results of its definitive feasibility study in 1Q14.

Source: Company Investec view: The timetable is slipping at Cokals BBM project.

The Forest Rent Use Permit had been expected in 4Q13 and first production from BBM was targeted by the company in mid-2014.

Our analysts continue to forecast first production in late 2014.

Cokal is still finalising financing for its BBM project and has a US$150m non-binding offer from a consortium including Platinum Partners. � Discovery Metals (DML AU) provides update on Blumont (BLUM SP) convertible note.

Discovery Metals has advised that the conditions associated with the proposed US$100m convertible note to be issued to Blumont Group have not been met by the sunset date of 19 December 2013 and the proposed term sheet has lapsed.

Discovery Metals remains in discussions with Blumont.

Source: Company
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Commodities News � Muted response from gold on news (finally!) of Fed taper.

The Fed announced yesterday that it will reduce its monthly asset purchases from $85bn to $75bn (divided between $40bn in Treasuries and $35bn in mortgage bonds) starting in January.

Gold swung between gains and losses with the general sense being that the taper was already priced in.

There is possibly some upside to the gold price, given that speculative short positions remain at historically high levels.

Source: Bloomberg � Vale (VALE US) still aiming for over 4mtpa of potash production.

Vale expects to more than fill the gap resulting from the cancellation of its 4mtpa Rio Colorado project, in Argentina, as it opens mines elsewhere.

Over 2mtpa of potash output is expected from Carnalita in Brazil while 3-5mtpa could be produced from Kronau in Canada.

A decision on Carnalita could be made by 1Q14, with Reuters reporting in October that the $4bn project could be producing by 2017, building up in two 1.2mtpa phases at $2bn each.

Source: MiningWeekly � Chinese steel mills selling iron ore cargoes back into the market to realise cash from stockpiles ahead of potential spot price falls as some producers struggle with limited credit and softer demand for their products.

Recent increases on interbank lending rates have led banks to restrict credit making it harder for mills to open letters of credit for imports.

Source: Thomson Reuters � European coal prices continue to slip slowly as a compromise to allow major Colombian exporter to continue shipments despite the late implementation of a new law that was set to cause problems for Drummond.

The law requires changes to loading methods that the company is not yet prepared for.

Prices in Europe yesterday were reported at US$86.25/t.

Source: Thomson Reuters
Other economic news � Fed delivers a soft landing.

Together with clarification around the aforementioned taper, the Fed expressed just enough confidence in the jobs outlook and extended the timeline for zero interest rates to ensure a positive reaction from the markets.

This was the opposite of the experience in June, when global equity markets lost $3tn in the five days after Bernanke announced a possible tapering schedule.

Concerns over the impact on interest rates were ameliorated when the Fed stated that rates are likely to continue to remain low well past the time that the unemployment rate declines below the 6.5% target, especially if projected inflation continues to run below its 2% target.

Source: Bloomberg Investec view: Although the taper was in line with expectations, the Fed delivered the message well, providing the market with confidence that easing QE can be achieved without serious impact to the global economy.

We note that the basic materials sector in the Australian market was up 2.7%, while the Australian dollar fell below 0.8825. � Improved credit availability set to drive mining sector next year: Ernst & Young.

In the Capital Confidence Barometer: Metals and Mining Ernst & Young report, the company said that improved credit availability was set to drive momentum in the mining and metals sector, with 55% of companies being focussed on growth compared to 38% in 2012.

Deal volume has fallen from 58% to 37% in Canada over the last year.

47% of mining companies believed credit availability was improving and 72% believed the global economy was improving compared with 57% six months ago.

Source: Mining Weekly
African Resources update � Mozambique seeking larger stakes in new mining projects.

The Deputy Mineral Resources Minister has said that the cabinet has approved a new mining policy, replacing one adopted in 1998, to promote greater participation by locals in the sector.

The new policy will have to be passed in Parliament.

Certain production and marketing licences are given exclusively to Mozambicans, while the participation of flag companies (those owned by the state) are to be increased from 5% to 25% in any new deals.

Source: Reuters, MiningWeekly � Mali elections grant comfortable majority in a parliamentary election that should see a return to democratic civilian rule following an army coup in March 2012.

The completion of the vote should unlock US$3.25bn pledged to donors to rebuild the country.

Source: Thomson Reuters � Todays African proverb: "He who spends a night with a chicken will cackle in the morning".

Source: BBC
Investec Global Natural Resources Research Team: UK Hong Kong South Africa Hunter Hillcoat Tel: +44 (0) 20 7597 5182
Matthew Whittall Tel: +852 3187 5075
Albert Minassian Tel: +27 (0) 21 416 1454
Marc Elliott Tel: +44 (0) 20 7597 5189
Leavitt Pope Tel: +852 3187 5074
Louise Collinge Tel: +44 (0) 20 7597 5779
Investec Global Natural Resources Sales Team: UK Hong Kong South Africa Jamie Campbell Tel: +44 (0) 20 7597 5038
Will Robbins Tel: +852 3187 5098
Hayden Smith Tel: +27 (0) 21 416 1401
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Alistair Roberts Tel: +852 3187 5097
Investec Commodity Hedging Team: http://treasury.investec.co.uk/products-and-services/commodities.html UK Callum Macpherson Tel: +44 (0) 20 7597 5070
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