[cid:image001.png@01CF2892.27002190] Thursday, 13 February 2014 [cid:image006.jpg@01CF2892.27405EE0]
Snapshot � Company news highlights: Rio Tinto beats expectations, Gem Diamonds recovers two c.

160+ carat white stones, Goldfield achieves production and cost guidance, New World Resources results reflect tough market conditions, New Crest indicates it doesnt need to raise equity, Cokal DFS results see opex rise, and capex fall, Prairies Downs commences permitting for Lublin project, China Coal to be removed from Hang Seng. � Commodity review highlights: Gold easing back from 3 month highs, iron ore spot prices up slightly, Chinese iron ore imports hit 86.83t in January � Other Economic News: Eurozone industrial production falls, Germany raises growth forecast, China to set up CNY10bn fund to reduce air pollution � African Resources Update: Ugandas Museveni could stand for re-election in 2016, South African Rand weakens and bond yields rise, todays African Proverb � Market notes: FTSE futures -16 points this morning following a small fall in US markets overnight (Dow -0.19%, S&P -0.03%).

Asian markets are down across the board (Nikkei -1.79%, Hang Seng -0.68%, ASX200 -0.04%).

A quiet session expected on markets today as the Dow snaps a 4 days winning streak as markets digest comments from St Louis Fed President Bullard on GDP growth and the increase to the US government borrowing limit.

Janet Yellans testimony at the Senate Banking Committee was postponed due to poor weather. Commodity markets - gold -0.21% $1,288.47/oz, silver -0.16% $20.2052/oz, platinum -0.59% $1,399.00/oz, copper -0.26%, $3.2475/lb, nickel +1.64% $14,360.00/t, iron ore +0.83% $121.00/t, thermal coal $76.80, WTI -0.64% $99.72/bbl, Brent -0.39% $108.37/bbl, zinc +1.11% $2,020.00/t.

Dual listed - BHP +0.32% A$37.32, RIO -0.40% A$67.83.

Gold rose to a 3 month high and silver continued its best rally since 2011 on speculation that tapering will be slowed post Janet Yellens comments that stimulus would be cut in "measured steps".

Iron ore rose slightly overnight. Economic data due today: US - retail sales (forecast 0.1%), initial jobless claims (330K), continuing claims (2960K), business inventories (0.4%).

Eurozone - ECB monthly report, Greek unemployment (no forecast).
Company News � Rio Tinto (RIO LN) delivered EBITDA of $21.0bn up 7% on FY12A (consensus $20.8bn).

Underlying earnings were $10.2bn or 553cps (consensus 526cps, Investec 512cps), up 10% YoY.

The FY13A DPS was 192cps (consensus 181cps, Investec 178cps) with the company stating that the 15% higher dividend YOY reflects its confidence in business.

Most impressive was cashflow from operations of $20.1bn, up 22% from $17.6bn in FY12A, and capex reduction to $12.9bn (down 26% YoY), enabling RIO to reduce net debt to $18.1bn (consensus $21.0bn, $18.7bn).

Capex guidance of $11bn and $8bn in FY14E and FY15E is in line with consensus expectations.

Source: Company Investec view: Rio Tinto delivered a solid FY13A result, ahead of expectations on all measures.

Most impressive was the reduction in net debt to $18.1bn, with the company stating that debt reduction remains a priority.

At the same time, it has lifted the dividend by 15% YoY, reflecting confidence in the business going ahead.

The earnings break down reveals the companys stark exposure to iron ore but this is a key competitive advantage, and our analysts modestly positive outlook on iron ore in the medium term is encouraging for Rio Tinto. � Gem Diamonds (GEMD LN) recovery of two 160+ carat diamonds.

At the end of January, GEMD recovered two diamonds which are both 162 carats from its Letseng mine in Lesotho, one.

Source: Company Investec view: This news highlights the exceptional stones which the Letseng mine is capable of producing.

Exceptional revenue from these stones should feed more or less straight through to the bottom line, boosting profits.

Importantly, the diamonds were in largely undamaged condition which is an important development since Letseng has suffered from diamond breakage issues in the past.

The work which the company has done in the plant to reduce diamond damage is clearly having a positive effect. � Goldfields (GFI SJ) FY13 results.

During FY13, GFI produced 2moz of gold at all in sustaining costs of US$1,202/oz.

The group reported revenue of US$2,906m and a net attributable loss of US$296m, although this was adversely affected by US$901m of non-recurring items of which impairments were US$809m.

The company has declared a 22cps dividend.

At 31 December, GFI had debt of US$2.1bn and cash of US$325m.

Source: Company Investec view: GFI met its production and cost guidance for the year, which is positive.

Interestingly, the company has highlighted the positive effect on its cost base that the international operations (i.e.

outside South Africa) have had.

The companys December quarter all in costs would have been US$55/oz lower excluding South Deeps from the average.

Of the impairments reported, US$672m were recorded in the December quarter, which may unsettle the market.

That said, GFI has been going through a restructuring period and has clearly made significant progress in this regard during the course of the year. � New World Resources (NWRR LN) tough 2013 results reflect loss.

Revenues down 28% yoy to Euro850m as coking coal prices were down 22% yoy to Euro98/t and thermal coal prices fell 24% yoy to Euro56/t.

Cash costs stood at Euro78/t up 10% yoy due to a 21% fall in production.

Selling and admin costs were down 26% yoy to Euro165m leading to an EBITDA from operations of Euro-10m.

The company has recognised an impairment charge of Euro807m leading to a loss of Euro56m or Euro-3.62/share.

The company ended the year at Euro625m net debt and cash of Euro184m.

The company is aiming to produce 9-9.5mt this year of which 55-60% is to be coking coal, with capex aimed at Euro100m and cash costs to fall to Euro60/t by year end.

Discussions are underway with lenders.

Source: Company Investec View: Clearly a tough year for New World facing a weak coal pricing environment that is showing little signs of improvement near term.

We await updates on operational improvements to lower costs and the results of financing discussions. � Newcrest (NCM AU) does not intend to raise equity.

In response to market speculation Newcrest has stated that it is not looking to raise equity in the current operating and market conditions.

The company will release its half year results and mineral resources and reserves statement tomorrow.

Source: Company � Cokal (CKA AU) completes BBM feasibility study.

Cokal completed a definitive feasibility study (DFS) at its 60% owned BBM coking coal project in Central Kalimantan, Indonesia, confirming its viability.

Compared to the prefeasibility study, capex for the 2mtpa project has reduced from US$100m to US$75m but average life-of-mine cash costs excluding a 7% royalty have increased from US$89.6/t to US$97/t.

Other parameters including the life-of-mine strip ratio (18bcm/t) and 10 year mine life (assuming 20.8mt of coal is mined) remain unchanged.

Management now expect first production in MarQ15, a delay of six months.

Source: Company Investec view: Our analysts assume that Cokal will raise up to A$140m of equity and debt to progress BBM.

Cokal has announced that it has received a non-binding US$150m funding offer from a consortium including Platinum Partners but remains in discussions with other parties. � Prairie Downs (PDZ AU) commences permitting for the Lublin coal project.

Prairie Downs has appointed GEO-EKO-WIERT to prepare the first phase of mine permitting documentation for its Lublin coal project in Poland.

The permitting process will progress in parallel with technical studies.

A scoping study is expected to be completed during 1H14.

Source: Company � China Coal (1898 HK) to be removed from the Hang Seng Index.

Effective 10 March 2014 China Coal will be removed from the benchmark Hang Seng Index.

China Mengniu Dairy (2319 HK) will be added to the 50 stock index.

Source: Company
[cid:image007.png@01CF2892.27405EE0] Commodities News � Gold easing back from yesterdays close to 3 month high, with speculation that prices could break through the US$1,300/oz level, although physical demand could slow if prices break through this level.

Source: Thomson Reuters Investec View: We would anticipate that producers could seek to hedge at current levels, particularly if we break through US$1,300/oz. � Iron ore prices recovering from 7 month low at US$121/t cfr China yesterday as weaker pricing triggers buying interest.

However, steel demand in China is reportedly weak with plenty of material available.

Steel producers and traders may have built up stockpiles ahead of anticipated stronger demand in March.

Iron ore inventories at Chinese major ports hit 97.25mt last week.

Source: Thomson Reuters � Chinas iron ore imports reach 86.83mt in January 2014.

China imported 86.83mt of iron ore in January 2104, up 32% YoY and up 18% MoM.

Chinas iron ore port stockpiles increased to 97.25mt.

Source: Bloomberg Investec view: Iron ore imports and stockpiles have continued to increase during a seasonally weak period of steel demand.

Spot iron ore prices are currently US$121/t (62% Fe, CFR China) and are likely to remain under pressure until steel mills commence restocking in spring.
Other economic news � Eurozone industrial production falls.

Eurozone production fell by 0.7% MoM in the Eurozone and EU.

Source: FT � Germany raises growth forecast.

Yesterday, the German government raised its 2014 growth forecast from 1.7% to 1.8%, which is well ahead of last years sluggish 0.4% growth.

Source: FT � China to set up CNY10bn fund to reduce air pollution.

China will set up a CNY10bn fund in an attempt to reduce air pollution according to a release from a State Council meeting.

The fund will reportedly help efforts to reduce coal consumption and will focus on reducing particulate matter from 2.5-10 micrometres in size.

Source: Bloomberg Investec view: Continued focus on air pollution is likely to see slower growth in Chinas coal consumption which reached 3.7bt in 2013.
African Resources update � Ugandas ruling party passes resolution to urge President Yoweri Museveni to run for re-election in 2016.

Museveni has been in power since 1986.

There have been protests against his rule over corruption and the collapse of public services.

Source: Thomson Reuters � South Africa continues to face a weakening Rand and government bonds, with yields on the 2026 and 2015 bonds rising 2 basis points to 8.74% and 7.13% respectively.

President Zuma is due to address the nation today in his last pitch before the elections on 7th May.

Source: Thomson Reuters � Todays African proverb.

"What is coming does not beat a drum".

Source: BBC
Investec Global Natural Resources Research Team: UK Hong Kong South Africa Hunter Hillcoat Tel: +44 (0) 20 7597 5182
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