🕐03.04.14 - 10:00 Uhr

INVESTEC GLOBAL NATURAL RESOURCES DAILY - MINING - THURSDAY 03 APRIL - AMI LN, A
UY US, CAML LN, IMP SJ, LMI LN, AQR AU, PDZ AU



[cid:image001.png@01CF4F14.9A9B6850] Thursday, 03 April 2014 [cid:image006.jpg@01CF4F14.9AF60B70]
Snapshot � Company news highlights: African Minerals FY13 results, Yamana outbids Goldcorp for Osisko, Central Asia Metals production report, Impala may buy metal on open market, Lonmin declares force majeure with some suppliers, Aeon Metals acquires Ason Metals, Prairie Downs completes transport infrastructure study � Commodity review highlights: Indian gold imports up, copper prices slip, second powerful earthquake hits Chile, BHP bullish on long term coal demand, Russia could divert nickel sales to China � Other economic news: Chinese stimulus measures, Canadian IPO activity grinds to a halt in Q1 � African resources update: Mining companies in Guinea lock down operations due to Ebola, Zambia to hike power prices on miners, Vale suspends operations on Moatize-Biera coal line due to gunfire, Ghana raises bank cash limits, Todays African proverb � Market notes: FTSE futures +8.5 points.

US markets closed up (Dow +0.24%, S&P +0.29%) thanks to reassuring US employment data.

Asian markets are also positive (Nikkei +0.84%, Hang Seng +0.09%, ASX200 +0.12%) with the Chinese announcing a new round of stimulus, selling RMB150bn of bonds to help build 6,000km of railways in the central and western regions as well as creating a development fund of between RMB200-300m a year to increase sources of rail financing.

The State Council will also extend a preferential tax policy to more small companies and increase financing to build low-income housing.

However the Chinese market isnt responding well with the Shanghai Composite down 0.80% with the market impression that this isnt enough.

In Europe its all about the ECB announcement today, despite no change in stance expected, the recent commentary from IMF MD Christine Lagarde calling for monetary easing to tackle low inflation is a signal for ECB action in the near term.

We also have PMI data for the Eurozone countries providing some direction to the regions strength. Commodity markets - gold +0.26% US$1,293/oz, silver +0.05% US$19.99/oz, platinum +0.26% US$1,442/oz, copper -0.71%, US$3.024/lb, nickel +0.99% US$16,154/t, iron ore -1.96% US$115.30/t, thermal coal US$75.35, WTI -0.19% US$99.43/bbl, Brent +0.05% US$104.84/bbl, zinc +0.19% US$1,964/t.

Dual listed - BHP +0.43% A$37.53, RIO -0.66% A$63.68.

WTI drops on speculation demand may slow (from both China & US), copper drops as Chilean operations return to normal following the earthquake, gold move higher with ETP holdings steady. Economic data due today: US - trade balance (forecast -$38.5bn), initial jobless claims (319K), continuing claims (2843K), Market US services PMI (55.5), ISM non-manufacturing composite (53.5).

Eurozone - Spanish Markit Services PMI (53.3), Spanish Markit Composite PMI (53.7), Italian Markit Services PMI (52.3), French Composite PMI (51.6), French Services PMI (51.4), German composite PMI (55), German Services PMI (54.0), Eurozone services PMI (52.4), Eurozone composite PMI (53.2), UK composite PMI (58.1), UK services PMI (58.2), EC retail sales (-0.5% MoM), ECB rate announcement (no change expected), Halifax House Prices (0.6% MoM).
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http://www.extelsurveys.com/ Company news � African Minerals (AMI LN) FY13A results.

The company delivered sales of US$869m (Investec US$825m, BB consensus US$865m) and EBITDA of US$203m (Inv US$248m, cons US$217m).

Full year cash cost were US$44/t vs.

US$43/t in the 1H13A.

It ended 2013 at a run rate of 19mtpa and has kept the momentum into 2014, producing 5.3mt and shipping 4.6mt in the Q1.

The company is guiding FY14E production of 16-18mt, with C1 cash costs of US$34-36/t.

AMI is still progressing the infrastructure build to 25mtpa in the near term for relatively little capital and with Phase II still planned without recourse to equity markets.

In this regard Tewoo is still continuing due diligence with respect to its $990m investment (it has been six months since the announcement).

At end of FY13A AMI had debt of US$836m and cash of US$362m ($305m restricted for phase II).

Source: Company Investec view: We are pleased to see that AMI has continued to keep up a good run rate in the Q1, but if it is going to achieve 20mtpa it needs to deliver at even higher rates given that this is the dry season.

Our analyst had been forecasting FY14E sales of 18mt at US$34/t cash costs, which is now at the high end of AMIs guidance range.

The company generated free cash flow of $14m during the year, but net cash outflow was US$494m (incorporating capex and working capital).

While it can still progress with phase II work, completion of the Tewoo transaction would clearly provide considerable comfort to the market. � Yamana (AUY US) outbids Goldcorp (GG US) for Osisko (OSK CN).

Osisko Mining has agreed to sell 50% of its assets to Yamana Gold in a cash and stock deal as it attempts to fend of Goldcorps hostile takeover offer made in January.

Yamanas offer values Osisko at CAD7.60/share and is a c.

22% premium to the Goldcorp offer, although for only half of Osiskos assets.

Osisko will also enter a gold stream agreement with Caisse de Depot for 37,500ozpa for C$275m.

Source: Company, Bloomberg Investec view: This is good news for Osisko shareholders in our view as Goldcorp had indicated it was unlikely to raise its bid for Osisko.

Osiskos main asset is the Malartic mine in Quebec, Canada.

The company is guiding for 2014 production of 525koz-575koz at a direct cash cost of CAD580/oz-CAD635/oz.

The Malartic mine had a proven and probable reserve of 9.37moz and resources of 12.3moz. � Central Asia Metals (CAML LN) Q1 FY14 production.

CAML has produced 1,905t of copper during Q1 FY14, which is 14% higher than Q1 FY13.

Q1 copper sales through Traxys were 1,771t.

Source: Company Investec view: Q1 will be a difficult quarter for the company in terms of production given severe winter conditions in Kazakhstan, and other Kazakh producers also typically report lower Q1 production compared to other quarters.

The company reiterates its full year FY14 copper production target of 11,000t, which we believe looks achievable. � Impala (IMP SJ) may buy metals to supply customers.

IMP has told Bloomberg that it may buy platinum on the open market to meet deliveries, stating that it cant continue to supply its clients as normal after the two month strike.

Source: MiningMX � Lonmin (LMI LN) reported to have declared force majeure with some suppliers.

Source: Thomson Reuters � Aeon Metals (AQR AU) acquires Aston Metals.

Aeon Metals has acquired Aston Metals, which owns the polymetallic Walford Creek deposit in Queensland formerly controlled by Nathan Tinkler, for consideration including an A$20m loan, 48.3m AQR shares and c.

70m AQR options at c.

A$0.145/share.

Walford Creek has a JORC resource of 48mt at 1.42% Cu equivalent (0.39% Cu, 0.83% Pb, 0.88% Zn, 20.5g/t Ag, 731ppm Co).

In conjunction with the acquisition, Aeon will raise A$8m by issuing 66.7m shares at A$0.12/share to fund Walford Creek through prefeasibility study completion.

Source: Company � Prairie Downs (PDZ AU) completes transport infrastructure study.

Prairie Downs, which is developing the Lublin coal project in Poland, has released results from an independent transport infrastructure study by Zespol Doradcow Gospodarczych TOR that confirm significant unutilised regional infrastructure exists to support bulk commodity movements at competitive rates to inland customers as well as seaborne markets.

A number of inland rail transport corridors have been identified to export coal to traditional markets as well as to seaborne markets through c.

15mtpa of unutilised port capacity, including at Gdansk where PDZ believe coal can be loaded onto ships for US$4/t-US$6.5/t FOB vessel.

Source: Company Investec view: Results from the transport infrastructure study will be incorporated in the scoped study due for completion in JunH14.

We note recently strong imports of coal from Russia and elsewhere into Germany as the nation burns more coal due to lower prices and cheaper carbon emissions.

Coal from Poland would very likely outcompete such sources, highlighting the regional market for the product.
[cid:image007.png@01CF4F14.9AF60B70] Commodities news � Indian gold imports are estimated to have jumped in March from the 25t imported in February as the central bank allowed more private banks to ship metals leading to premiums falling 85% to US$25-30/oz from a peak of US$160/oz in December.

Prices are up ahead of US non-farm payrolls data as market participants close off short positions.

Source: Thomson Reuters � Copper prices slip in response to disappointment over Chinas modest stimulus package which did not include new demand for copper.

Source: Thomson Reuters � Another powerful earthquake hits Chile.

A 7.6 magnitude earthquake has hit off the coast of northern Chile, just 24 hours after the 8.2 magnitude tremor killed 5 people.

However, Chiles navy has now cancelled the resultant tsunami alert and instructed people on the coastline to return to their homes.

Collahuasi mine says that no problems have been reported.

Source: BBC, Reuters Investec View: The limited reaction to the earthquake and weaker pricing following disappointment over Chinese stimulus measures highlight the ample supply of copper.

We are in a seasonally stronger demand period, however, supplies are rising and moving into surplus which the International Copper Study Group has reportedly forecast 405kt this year following four consecutive years of deficit.

We therefore would not be surprised to see still weaker prices as the year progresses. � BHP Billiton bullish on coal demand.

Speaking in Brisbane, the company reiterated its view that demand for energy coal was expected to grow, with the International Energy Agency forecasting a compound annual growth rate of 2.4% through to 2035, which translates growth from 5.4bnt billion today to 6.3bnt over the next 20yrs.

While growth rates for energy coal would likely be lower than other energy sources, coal would still power c.35% of the worlds electricity needs.

Source: MiningWeekly � Russia would divert nickel sales to China on sanctions.

In the event of US and EU trade sanctions, nickel from Russia, which is the worlds second largest producer of refined metal, would switch to buyers in China.

About 46% of Chinas refined nickel imports already come from Russia.

Norilsk nickels CEO Vladimir Potanin has previously said that his company is reasonably prepared to deal with sanctions.

Source: Bloomberg
Other economic news � China announces stimulus measures.

Chinas government announced several new policies intended to boost economic growth including creation of a CNY200bn-CNY300bn rail financing development fund, increased funding for low-income housing development and small business tax policy incentives.

Credit markets however remain tight.

Source: Bloomberg & Thomson Reuters Investec view: The measures are a response to slowing growth and should help boost Chinas GDP growth rate back towards Li Keqiangs 7.5% target.

We expect them to be positive for commodity demand, although they are relatively modest and targeted in scope as compared to prior stimuli. � Canadian IPO activity grinds to a halt in 1Q14.

The pick-up in IPO activity seen in the 2H13 has not continued into 2014, with the only activity of on Canadian equity markets being two new issues worth $3.8m on the TSX Venture Exchange.

In contrast, there were four new issues with a value of US$422m during the first quarter of 2013.

According to the PwC survey, this is the worst quarterly result in five years, i.e., since the period immediately following the Financial Crisis.

Source: MiningWeekly
African resources update � Mining companies in Guinea lock down operations with some pulling out some international staff as death toll from Ebola outbreak hits 84.

Four new cases have been identified taking the total to 134 with Medecins San Frontier (MSF) warning of an unprecedented epidemic of the disease that has a 90% fatality rate.

The disease has reached the capital Conakry which is more densely populated that more remote mining sites.

Source: Thomson Reuters � Zambia to increase electricity prices 28.8% effective yesterday in some instances with all mines to pay a minimum tariff of 6.54c/KWh.

The president of the Chamber of Mines has indicated that the increase has come as a shock and a comprehensive statement is to be issued today.

Source: Thomson Reuters Investec View: The news flow on this issue is ambiguous as it is focussed on developments between Copperbelt Energy Corporate and the Energy Regulation Board.

We await a response from the Chamber of mines to clarify the issue which could adversely impact a number of miners operating in country.

However, we note that 6.84c/KWh is a relatively low price to pay for power. � Vale (VALE US) suspends operations on its Moatize-Beira coal line in Mozambique as one of its trains was hit by gunfire injuring the driver highlighting the continued difficulties it and others have faced operating in country where there have been commitments to invest US$10bn.

Source: Thomson Reuters � Ghana raises bank cash limits to boost its currency.

Ghanas central bank has kept its interest rate unchanged at 18% while raising the cash reserve requirement for lenders to help curb inflation and bolster Africas worst-performing currency this year.

Source: Bloomberg � Todays African proverb.

"You do not have to tell a blind person that there is no salt in the soup".

Source: BBC
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