🕐03.02.14 - 10:00 Uhr

INVESTEC GLOBAL NATURAL RESOURCES DAILY - MINING - MONDAY 3 FEBRUARY - FQM LN, P
DL LN, RRS LN, GEM LN, AMS SJ



[cid:image001.png@01CF20B8.5F659D80] Monday, 03 February 2014 [cid:image006.jpg@01CF20B8.649F5A70]
Snapshot � Company news highlights: First Quantum Minerals research published, Petra Diamonds site visit, Randgold Resources FY13 results, Gemfields Q2 trading update, Anglo American Platinum FY13 results. � Commodity review highlights: Copper fell for a 9th day - the longest losing streak since January 1996. � Other economic news: EY sees funds leading 2014 mining M&A with US$10bn in deals, Chinese January PMI 50.5 vs 51 in December. � African resources update: Mining Indaba conference in Cape Town, Rand weakens ahead of South Africas PMI data, todays African proverb. � Market notes: FTSE futures down 29 points this morning following sharp falls in the US on Friday (Dow -0.94%, S&P -0.65%) and similar performance from Asia (Nikkei -1.98%, Hang Seng closed, ASX200 -0.04%).

Asian markets are pushed down by a poor official Chinese PMI print (50.5 versus 51 in Dec) as government measures to address the shadow banking industry affect liquidity. Commodity markets - gold +0.13% $1,246.12/oz, silver -0.02% $19.1894/oz, platinum +0.90% $1,388.10/oz, copper -0.22%, $3.19/lb, nickel +1.23% $13,937.00/t, iron ore 0.00% $122.60/t, thermal coal $79.85, WTI -0.41% $97.09/bbl, Brent +0.02% $106.42/bbl, zinc -0.52% $1,964.00/t.

Dual listed - BHP -0.13% A$36.44, RIO -0.46% A$65.34.

copper and aluminium were the standouts, with copper touching a low of US$7,033.50/t, the weakest since early December, as a Bloomberg survey showed traders and analysts are now the most bearish in a year.

3 month LME aluminium futures fell heavily too on the weaker Chinese data, hitting a July 2009 low of US$1,698.25/t.

Iron ore was untraded during the Chinese New Year holiday, however pressure on prices may be to the upside after CNY as Decembers global steel output showed a rise of 1.4% MoM to 129.2Mt.

Finally, gold had another week to forget about with prices closing at US$1,239.80/oz.

The pain looks set to continue as the USD rebounds further. Economic data due today:- US - ISM manufacturing (forecast 56), ISM prices (54), total vehicle sales (15.7m).

Eurozone - Jan PMI manufacturing Italy, France, Germany, UK, and EC (forecast 53.2, 48.8, 56.3, 57.3, 53.9).
Company news � First Quantum Minerals (FQM LN) research published.

First Quantum Minerals recently delivered to the market the results of its review of the Cobre Panama asset, increasing output estimates but delaying production and increasing overall capex by c.3%.

We have updated our Cobre Panama assumptions and, given a firm plan, have now included the asset in our overall earnings model.

We have also updated our FY13E estimates post the production update, which highlighted that sales were lower than output due to smelter capacity issue.

We therefore lower our EPS estimates from 101c to 95c.

Source: Investec � Petra Diamonds (PDL LN) site visit.

Petra Diamonds site visit.

Our analysts visited the Cullinan Mine over the weekend to observe the new development taking place.

With the company ramping up the pace of development, we got the impression that the construction if tracking on schedule if not slightly ahead.

Costs are being contained despite high wage & power price pressure.

With infrastructure over 100 years old in places, the company sees scope to streamline further aspects of operations.

Source: Investec � Randgold Resources (RRS LN) FY13 results.

During FY13, RRS produced 910Koz at a cash cost of US$715/oz.

The Q4 cash cost was US$628/oz.

EPS was 302c and the group has declared a 50c/share dividend.

The groups cash balance at 31 December was US$38m and it ended the year with no debt.

Operationally, the highlight of the year was the start-up of the Kibali mine in the DRC which was profitable in its first quarter.

The Loulo-Gounkoto complex produced 580,000oz during FY13, beating the companys targets by 20,000oz.

Source: Company Investec view: RRSs production and earnings were ahead of both consensus and our analysts expectations.

We were looking for production of 881Koz at a cash cost of US$731/oz.

At EPS 0f 302c, this was higher than our analysts estimate of 285c and of consensus of 287c.

We therefore believe that this should be taken well by the market today.

For FY14E, our analyst estimates production of 1.135Moz at an average gold price of US$1,250/oz, leading to EPS of 324c.

We continue to like RRS given its superior production growth, a higher grades profile and greater operational diversity. � Gemfields (GEM LN) Q2 trading update.

During Q2, GEM mined 17.2Kt of ore at a grade of 224cts/t, producing 3.9Mcts of emerald and beryl.

Rock handling costs were US$3.5/t.

Revenues from auctions and the direct sale of beryl during the first 6 months of the year totalled US$60m.

Cash at 31 December was US$14.8m and total debt was US$8.9m.

The company plans to undertake two auctions in Lusaka, Zambia, before 30 June 2014, one of which will be for high quality emeralds.

Source: Company Investec view: While GEMs Q2 production was below the 6.5-8Mcts which we were looking for, this predominantly highlights the variability in grade in precious stone mining, which we understand.

We look forward to the results of the forthcoming auctions, particularly the high quality emerald sale which we expect to reinforce the market demand for GEMs attractive product. � Anglo American Platinum (AMS SJ) FY13 results.

AMS announced FY13 HEPS of 556c, including 402c worth of one off restructuring costs.

The improvement in earnings is attributed to higher volumes and a weaker rand.

In line with expectations, the company has not declared a dividend.

Source: Company. Investec view: AMSs earnings were in line with the trading statement range, which was for 480c-590c.

Including the 402c of one-off restructuring costs, adjusted EPS is 958c.

While we view the results as a good turnaround from last years loss of 562c, we believe the market is looking for substantial improvements in 2014 and beyond as the 2013 restructuring efforts start to pay off.
[cid:image007.png@01CF20B8.649F5A70] Commodities news � Copper fell for a 9th day, the longest losing streak since Jan 1996, after manufacturing slowed in China, the largest users of the based metal.

Copper for delivery in 3 months on the LME slid as much as 0.4% to $7,035/t.

Source: Bloomberg.
Other economic news � EY sees funds leading 2014 mining M&A with $10bn in deals.

Mining mergers and acquisitions will likely increase this year, led by more than $10bn in deals by PE funds as 2013 saw the fewest buyouts in seven years.

Source: Bloomberg. Investec view: With a number of mining orientated PE funds raising funds over the past 18 months including QKR & X2 we would expect some deployment over the course of 2014. � Chinese PMI 50.5 versus 51 in Dec.

The survey showed jobs and export orders are shrinking, amplifying risks of a deeper slowdown as the Chinese Communist Party leaders clamp down on the $6 trillion shadow banking industry.

Source: Bloomberg Investec view: This is confirmation from the official measure following last weeks HSBC/Markit reading which indicated a contraction.
African resources update � Mining Indaba conference, Cape Town.

Today marks the start of the annual Mining Indaba conference in Cape Town, where many mining companies and investors will present.

Source: Investec � Rand weakens 0.6% TO 11.1885 ZAR/USD ahead of South Africas PMI data print where analysts are expecting a rise to 50.2 from 49.9 in Dec.

the emerging market currency sell off is expect to continue according to Citigroup and Goldman Sachs due to inflation-adjusted real interest rates still being too low to prevent the currency sell off.

Source Bloomberg. � Todays African proverb.

"A razor may be sharper than an axe, but it cannot cut wood".

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
USA Thomas Lawrence Tel: +1 212 2595604
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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