[cid:image001.png@01CF2181.0D549AE0] Tuesday, 04 February 2014 [cid:image006.jpg@01CF2181.3547F600]
Snapshot � Company news highlights: Investec feedback from Randgold analyst presentation in Cape Town, Kenmare Resources Indaba update, African Barrick Gold transfers Tulawaka, Barrick Gold and Goldcorp to divest Nevada mine, Mongolian Mining downgraded to CCC+ by S&P, Phoenix Gold boosts gold reserves to 1.16Moz, Cokal DecQ13 update, Tata Power divests Arutmin stake for US$500m. � Commodity review highlights: World Gold Council outlook for 2014, Copper heads for longest slump in 27 years on factory outlook, Gold extends gains as growth concerns increases demand for safe haven, Iron ore exports from Australias Port Hedland down 3.5% � Other economic news: Brazil suffers record trade deficit, Chiles 33 miners to surface again....this time in Hollywood � African resources update: Shabangu says Africa is under-explored relative to other continents, AMCU and platinum companies resume wage talks, Ivory Coast to launch Africas best mining code, Todays African proverb. � Market notes: FTSE futures set to open down 43.5 points this morning, taking a lead from US markets (Dow -2.08%, S&P -2.28%) and Asian markets (Nikkei -4.18%, Hang Seng -2.54%, ASX200 -1.75%) as weak manufacturing data in the US spooks markets and the debt ceiling raises its ugly head again.

US treasury secretary Jack Lew said yesterday that the US government will reach the debt limit on Friday and that it could default very soon.

In practice the treasury can stave off reaching the gap until later in the month but similar to the events of last years government shutdown Id expect the issue to remain on the fore-front of investors mind until another temporary and permanent solution can be found. Commodity markets - gold +0.11% $1,259.01/oz, silver +0.52% $19.4405/oz, platinum -0.55% $1,379.00/oz, copper +0.11%, $3.187/lb, nickel -0.72% $13,836.50/t, iron ore 0.00% $122.60/t, thermal coal $79.15, WTI +0.12% $96.53/bbl, Brent -0.04% $106.00/bbl, zinc -0.62% $1,951.75/t.

Dual listed - BHP -2.58% A$35.50, RIO -1.88% A$64.11.

Gold reacted well to the disappointing US manufacturing data, trading up from US$1,245 to US$1,265 within 20 min.

Copper kept falling, down for a 9th session its longest slump in 18 years and touching US$7,025/t on the weaker US and Chinese data.

Aluminium touched the lowest since 2009 at US$1,674/t.

Iron ore remains untraded in China. Economic data due today:- US - ISM New York, Factory Orders (forecast -1.8%).

Eurozone - UK Jan PMI construction (forecast 61.5), EC PPI MoM (0.2%), Italian CPI MoM (-2.1%).
Company News � Investec feedback from Randgold Resources (RRS LN) analyst presentation in Cape Town.

As usual, Mark Bristows presentation was upbeat, and highlighted the positives of the company including growth, high grades and low costs.

Kudos must be given for the fact that the company never used higher than US$1,000/oz for reserve calculations, unlike all other gold miners, meaning that reserves remain robust even after the significant fall in the gold price during 2013.

Key highlights of the presentation included the companys decision not to cut its exploration budget as RRS remains firmly an explorer (US$60m budget).

The Kibali 5 year guidance is unchanged, although capex has increased by 13% from original estimate to US$1.77bn but half of this has been due to capacity productivity improvements.

We continue to believe that RRS is an impressive company.

Source: Investec. � Kenmare Resources (JEV LN) Indaba update.

We met with JEV management at the Indaba conference, who highlighted the challenges of the mineral sands market.

A number of factors contributed to the tough market conditions, amongst them colours and pigments companies having previously built major stockpiles, meaning buying activity has been weak.

However, this should unwind this quarter.

Furthermore, these companies have been fighting for market share and delivering excess product in their various markets.

Operational problems have continued to be a struggle for JEV, with work ongoing to deal with the power instability.

Financially, discussions are in progress with lenders to refinance around US$160m of subordinated debt thats due in August 2015, with management appearing optimistic about achieving this.

At the end of June the company had c.US$360m of debt against cash of US$31m.

Source: Investec � African Barrick Gold (ABG LN) transfers Tulawaka.

ABG has announced that it has completed the transfer of Tulawaka and certain exploration licences to STAMICO, the Tanzanian state mining company.

STAMICO will take ownership and management of the rehabilitation fund established as part of the closure plan for that mine.

Source: Company � Barrick Gold (ABX US) and Goldcorp (GG US) to divest Nevada mine.

ABX has announced that it plans to sell its minority stake in the Marigold mine in Nevada to Silver Standard (SSO CN) for a total cash consideration of US$86m in a transaction which is expected to close in April 2014.

Goldcorp (GG US) is to sell the remainder of the asset.

The total which Silver Standard will pay for the mine, which produced 108,000oz in 2013 is US$275m.

Source: Company Investec view: This deal highlights the fact that gold companies in particular are focused on divesting their non-core assets as they look to reduce their average costs. � Mongolian Mining (975 HK) downgraded to CCC+ by S&P.

Mongolian coking coal producer MMC had its credit downgraded to CCC+ with negative outlook from B- by S&P citing the companys weak liquidity profile, which has been exacerbated by delays to anticipated paved road sale.

S&P projects that proceeds from asset sales and bank debt refinancing along with the companys cash balance will be sufficient to settle US$105m of promissory notes due in March 2014 as well as three to four quarters of cash requirements but could lower MMCs rating further within the next six weeks if the liquidity situation isnt addressed.

Source: S&P Investec view: MMCs 8.875% 2017 bond is trading at 71, a 22% yield-to-maturity.

Our analysts believe MMC will require cash be end JunH14 as well, with the Mongolian government as the most obvious potential source given it owes the company US$78m in VAT reimbursements, US$58m for work completed on the nationalised railroad and up to US$100m if it purchases the paved road.

See their note Staring down a hole dated 9 January 2014 for more information. � Phoenix Gold (PXG AU) boosts gold reserves to 1.16moz.

Australian gold explorer Phoenix Gold has increased gold reserves by 9.5% to 1.16moz (15.6mt at 1.75g/t of mill feed; 15.0mt at 0.58g/t of heap leach feed) as a maiden reserve of 111koz gold from the Kintore pit at its Castle Hill project was announced.

The Kintore reserve study is based on an AUD1,310/oz gold price assumption.

Source: Company Investec view: Phoenix remains on track to complete the Castle Hill feasibility study in early MarQ14.

The company had cash and bullion of AUD4.6m as at 31 December 2013, sufficient to cover estimated cash outflows of AUD2.5m in MarQ14. � Cokal (CKA AU) DecQ13 update.

Indonesian coking coal explorer Cokal indicated that the drilling program at its 60%-owned BBM project has been completed with an upgraded resource expected to be released in MarQ14.

Additionally, geological interpretation of drilling from the K, L, M area has indicated that much of the outcropping coal is a continuation of the high quality J seam found elsewhere on the BBM tenement.

Management reiterated that the company expects to release feasibility study results for its 2.0mtpa BBM project shortly and finalise the Forest Rent Use Permit at BBM in MarQ14.

Source: Company Investec view: No mention of targeted first production from BBM was made in the quarterly report as the timetable has slipped from mid-2014 due to delays to project financing and Forest Rent Use Permit issuance.

Arranging construction financing is the largest hurdle in our view and Cokal has received a US$150m non-binding debt financing offer on undisclosed terms from a consortium including Platinum Partners.

Platinum Partners is clearly supportive of Cokal and continues to buy shares on market, most recently announcing an increase in its ownership of Cokal to 13.3% from 12.2% on 31 January 2014 paying an average price of c.

AUD0.20/share.

The company ended the quarter with AUD5.9m plus undrawn loan facilities AUD1.7m from Blumont Group (BLUM SP), sufficient for estimated cash outflows in MarQ14. � Tata Power (TPWR IN) divests Arutmin stake for US$500m.

Indian power producer Tata Power announced it will divest its 30% stake in Indonesian coal company Arutmin, which is expected to produce 27mt (100%) of thermal coal in 2013 and has total reserves/resources of 410mt/2.3bt, and associated infrastructure companies to a Bakrie Group entity for US$500m, with the transaction expected to close within the next three months.

Tata cited its desire to reduce debt as well as production and cost viability challenges at Arutmin as reasons for its sale.

Bumi Resources (BUMI IJ) owns the remaining 70% of Arutmin, although not all of the associated infrastructure companies.

Source: Company Investec view: The Bakries transaction with Tata Power appears to be part of a larger plan by the group given recent media suggestions that Arutmin will be floated on the Indonesia Stock Exchange and we believe transaction completion is likely linked to completion of other deals including the Bakrie purchase of Bumi Resources shares from Asia Resource Minerals (ARMS LN).
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Commodities news � World Gold Council outlook for 2014.

The World Gold Council believes that gold price downside is limited in 2014 with monetary policy normalisation now largely reflected in the gold price, the current correction longer in duration than 75% of gold price pullbacks since the 1970s, many non-core investors having substantially reduced their positions, and price support from reduced mine production likely if gold prices reduce further.

Source: World Gold Council � Copper heads for longest slump in 27 years on factory outlook.

Copper dropped for the 10th day, the longest losing streak since 1986 on signs of weakening demand after manufacturing slows in China and the US.

Source: Bloomberg Investec view: Copper prices have come off from highs of US$3.40/lb a month ago to fall to US$3.18/lb this morning.

Short term resistance appears to sit at US$3.16/lb and the next break from here could be towards US$3.00 from a technical perspective. � Gold extends gains as growth concerns increases demand for safe haven.

Gold rose for a third day, extending the first monthly advance since August as concerns that global growth may be faltering boosted haven demand.

Bullion advanced 3.2% yesterday due to poor US and Chinese manufacturing data and the selloff in emerging market currencies and stocks deepened.

Source: Bloomberg. Investec view: With the US debt ceiling and the potential for another government shut-down back on the table markets may remain unstable in the coming future, sufficient to keep demand for gold relatively buoyant going forward. � Iron ore exports from Australias Port Hedland down 3.5%.

Iron ore exports from Australias Port Hedland to China fell by 3.5% in January from December.

The drop was largely due to weaker demand from Chinese steel mills and the aftermath of a December cyclone which closed the port for nearly three days.

Source: Reuters.
Other economic news � Brazil suffers record trade deficit.

Brazil reported its biggest monthly trade deficit in history of US$4.1bn for January, as the depreciation of the nations currency has yet to translate into an improvement in exports.

Source: FT � Chiles 33 miners to surface again.....this time in Hollywood.

The 33 Chilean miners who were trapped underground for 69 days and then lifted to the surface one by one in 2010 are to be portrayed in a film called "The 33" and played by a host of actors, including Antonio Banderas.

Source: Mineweb.
African resources update � Shabangu says Africa is under-explored relative to other continents.

Speaking at the start of the annual mining Indaba conference in South Africa, Mineral Resources Minister Susan Shabangu said that Africa remains under-explored relative to other continents.

She said that while an average of US$65/square metre is spent on exploration in Canada, Australia and Latin America, that figure is only US$5/ square metre in Africa.

Source: Mining weekly. � AMCU and platinum companies resume wage talks.

South Africas AMCU union and the top three platinum producers (Anglo American Platinum (AMS SJ), Impala Platinum (IMP SJ) and Lonmin (LMI LN)) have resumed wage talks and the parties hope to come to an agreement by the end of this week which would end the two week strike.

Source: Reuters � Ivory Coast to launch Africas best mining code.

Randgold Resourcess (RRS LN) CEO Mark Bristow says that his company has negotiated new terms of a mining code which would put the Ivory Coast ahead of the rest of the mining industry in Africa.

Additional details were not given.

Source: miningmx � Todays African proverb.

"Speech is like a tough bite of tendon." 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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