🕐09.04.14 - 10:27 Uhr

INVESTEC GLOBAL NATURAL RESOURCES DAILY - MINING - WEDNESDAY 09 APRIL - AMI LN,
CZA LN, CEY LN, KGI LN, GLEN LN, AAL LN, AA US, RIO LN, 975 HK, 2112 HK, 486 HK, BLT LN



[cid:image001.png@01CF53CB.F06E4A20] Wednesday, 09 April 2014 [cid:image006.jpg@01CF53CB.FF5598E0]
Snapshot � Company news highlights: Research notes out on African Minerals and Coal of Africa, weak Q1 from Centamin but FY14E guidance maintained, Kirkland Lake provides encouraging FY15E guidance, Glencore and Anglos Collahuasi only suffers minor earthquake disruption, good Alcoa result encouraging for Rio Tinto, Mongolian Mining cross-border rail, CAA Resources grows production, Rusals lenders grant loan forbearance � Commodity review highlights: Codelco expects stronger copper production in 2014, while GFMS forecasts growing copper surplus this year, Chinese copper and iron imports to recover in March from February � Other economic news: WTO warns on trade recovery, strong US growth to help offset weakening EMs, 28% fall in Cargill quarterly earnings, BHP Billiton states that Chile losing its edge � African resources update: WHO expect Ebola containment to take 2-4 months, Ethiopia inflation at 8.8%, Todays African proverb � Market notes: FTSE futures up 23 points this morning.

A small positive move in the US overnight (Dow +0.06%, S&P +0.38%).

Asia is mixed (Nikkei -2.10%, Hang Seng +0.75%, ASX200 +0.98%).

The fall in Japan was the result of a much stronger Yen, hitting a 3 week high.

The market will be watching for the FOMC minutes this afternoon as well as UK and German trade figures. Commodity markets - gold +0.23% $1,311.72/oz, silver -0.21% $20.0012/oz, platinum +0.25% $1,445.00/oz, copper -0.26%, $3.043/lb, nickel +0.27% $16,409.50/t, iron ore +0.85% $118.20/t, thermal coal $73.55, WTI -0.34% $102.21/bbl, Brent -0.22% $107.43/bbl, zinc +1.24% $2,018.50/t.

Dual listed - BHP +1.37% A$38.40, RIO +0.99% A$64.14.

Alcoa are forecasting global aluminium demand to exceed production this year, predicting an end to the decade-long supply surplus driven by Chinese output.

WTI climbs to 1 month high on speculation Cushing inventories dropped for a 10th week, gold is trading near a 2 week high ahead of the FOMC minutes release, Chinese rebar trades at a 1 month high with stockpiles falling 2.9%mto 8.57Mt according to Shanghai Steelhome data. Economic data due today: US - MBA mortgage application, wholesale inventories MoM (forecast 0.5%), wholesale trade sales MoM (forecast 1.0%).

Eurozone - UK visible trade balance (forecast -�9.2bn), German trade balance, German current accounts, German imports/exports.
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Company news � Research note out on African Minerals (AMI LM).

Our analyst has put out an update note, adjusting FY14E and FY15E earnings in particular, and reducing the target price as higher costs are incorporated longer term.

FY13A provided a sobering reminder of how the cash margin between a $118/t iron ore price and a headline $44/t cash cost can erode down to less than $5/t and we address this in the note.

With Tonkolili finally performing as a fully integrated mine-plant-rail-port-marine circuit, AMI absolutely needs to optimise production and aggressively reduce unit costs.

Source: Investec � Coal of Africa (CZA LN) research published, reiterating our view that the company has made good progress with its stabilisation strategy in the last twelve months, having concentrated on selling non-core assets and closing down loss making operations.

We believe that the company has significant inherent value in its Vele and Makhado coal projects, with financing being the key hurdle for the company to overcome in the near term in order to realise this.

Source: Investec � Centamin (CEY LN) preliminary Q1 production results.

The company reported Q1 gold production of 74,241oz, 16% below our expectation of 88,368oz, largely due to underground equipment availability issues.

CEY has kept its FY14E guidance of 420koz unchanged.

Source: Company Investec view: This was a soft start to the year but we are encouraged that CEY has retained its guidance, particularly since the guidance was given towards the end of January, when the company was still experiencing the equipment issues.

The problem now appears to be resolved with record underground volumes in March.

Positive news is that the Stage IV plant ramp-up is progressing well and we expect to see improving performance through each successive quarter of the year. � Kirkland Lake (KGI LN) outlines FY15E production guidance (KGI has an April year-end).

The company has provided FY15E guidance of 140-155koz at an average grade of 0.37oz/t (12.7g/t), which will be a solid improvement on FY14E guidance of 120-125koz.

The company expects the production to be steady throughout the year at 35-39koz per quarter.

FY15E is described as a transition year as the operation adapts to the lower-tonnage, higher-grade mine plan and KGI intends to release a 3yr mine plan during the 1Q15E (May-Jul 2014).

Source: Company Investec view: The guidance is in line with our expectations of 145koz for FY15E.

While this is well below the levels aimed for in previous years, the upside is that the new management now appear to be setting targets that the mine will be able to achieve.

A steady production rate also brings a sense of managed stability to the operation. � Glencore (GLEN LN) / Anglo American (AAL LN) suffer only minor disruption at major Collahuasi copper mine in Chile from last weeks earthquake in the north of Chile.

A ship has already entered the port to load up with concentrate from the mine.

Operations had to be suspended temporarily due to the earthquake that left copper output from the country largely unscathed.

Source: Thomson Reuters � Alcoa (AA US) 1Q14 better than expected.

Alcoa reported a 1Q14 loss of US$178m (US$0.16/share) but excluding exceptional items net income was positive US$98m (US$0.09/share), better than Bloomberg consensus of US$0.05/share.

The result was helped by Alcoas downstream segments with record profits from Engineered Products and Solutions due to higher volumes in aerospace and commercial transportation, and a 3x QoQ increase in profitability in Global Rolled Products on record auto sheet quarterly revenue.

Source: Company Investec view: Alcoa continues to forecast a 7% YoY increase in aluminium demand in 2014.

The company has increased its 2014 global aerospace growth expectation from 7%-8% to 8%-9% YoY on strong demand for large commercial and regional jets and continues to forecast YoY growth in automotive (1%-4%), packaging (2%-3%) and building and construction (4%-6%) in 2014.

Alcoa continues to target a lowering of its position on world aluminium production cost curve to the 38th percentile by 2016.The good result and encouraging outlook from Alcoa bodes well for Rio Tinto (RIO LN), whose aluminium assets are all but ignored by the market. � Mongolian Mining (975 HK) announces cross border rail JV.

Mongolian Mining (MMC) has formed a joint venture with Shenhua (1088 HK), Erdenes Tavan Tolgoi and Tavan Tolgoi JSC to develop a standard (Chinese) gauge railway connecting Mongolia to the Chinese railway network via the Mongolia/China border crossing at Ganqimaodu (GM)/Gashuunsukhait (GS).

Shenhua will have a 49% interest in the JV and MMC a 17% interest.

JV partners will initially, proportionally, commit US$500,000 with a further US$10m required for technical studies and engineering design.

The JV agreement follows the visit of the Mongolian Prime Minister to China in October 2013 and the signing of a MoU on 25 October 2013.

Source: Company Investec view: Capex commitments are likely to be relatively modest yet the benefits of the cross border rail link are potentially significant and could eliminate up to US$7/t-US$8/t of trucking and rehandling costs (c.

10% of total cash costs) for MMC.

The rail link could be completed as soon as late 2014.

Our analysts do not currently include any potential cost savings from the rail in their forecasts.

See also our analysts research report Living to fight another year dated 11 March 2014. � CAA Resources (2112 HK) grows production in MarQ14.

Malaysian iron ore producer CAA Resources reported iron ore sales volume of 484kt in MarQ14, up 31.9% QoQ and 656% YoY.

Revenue in MarQ14 was US$51.4m, up 49.9% QoQ and 519% YoY.

Source: Company Investec view: CAA has started 2014 strongly with sales on pace to grow well above the 1.053mt achieved in CY13 as the company recovers from operational setbacks experienced in 2013 as well as grows production capacity. � Rusals (486 HK) lenders grant loan forbearance.

Rusal has received repayment forbearance from lenders including BNP Paribas on its pre-export finance facility until 7 July 2014 so long as the company continues to pay accrued interest under the facility.

Source: Company Investec view: Rusal management will hopefully use the forbearance period to conclude refinancing of the facility.
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Commodities news � Copper major Codelco saw Q1 output on target and expects 2014 output to be ahead of 2013 as new mine, Ministro Hales ramp up smoothly, and expected to reach full capacity of 183ktpa Cu by the end of the quarter.

The companys 2013 output was at a five year low of 1.62mt.

Codelco is looking to expand further with a US$6.8bn expansion of its Andina mine that would take output to 600ktpa, however, financing may be an obstacle to the expansion.

Source: Company � GFMS forecasts growing copper surplus this year and forecasts an average copper price of US$6,790/t, a third consecutive year of decline.

The group expects a 352kt surplus this year.

2013 suffered a tightness in scrap markets and delays processing concentrates to refined metal that helped to balance the market.

Mine supply grew 8% in 2013 to 17.8mt with key growth coming from the DRC and Chile, although refined growth reached 20.7mt, below expectations due to technical problems at certain smelters, stockpiling of concentrates and maintenance outages.

Consumption was balanced at 20.7mt.

Source: Thomson Reuters � Chinese copper and iron ore imports expected to show a recovery in March from February that saw multi year lows.

April-June is typically peak demand season in China as weather improves allowing construction activities to pick up.

Hopes of stimulus packages may have also leant optimism to companies leading them to ramping up imports as Beijing has announced its intention to speed up construction of railway lines and redevelop shanty towns.

However, thermal coal imports are expected to be weak falling from 22.82mt in Feb that was down 36% from January.

Preliminary trade data is due to be released tomorrow.

Source: Thomson Reuters
Other economic news � WTO warns on trade recovery.

The World Trade Organisation is widely expected to lower its global trade growth projections to 4.5% in FY14.

It is also expected to say that commerce only expanded by around 2%, down from the previous forecast of 2.5%.

Global trade has failed to rebound as sharply as expected in the first three months of 2014 due to the Eurozones fragile recovery.

Source: FT � US growth strong, weakening in Brazil and Russia.

According to the IMF, stronger US growth this year and next will help the world economy withstand weaker recoveries in emerging markets including Brazil and Russia.

The IMF said that emerging markets should prepare for flows of capital back to advanced economies.

Source: Bloomberg � Major trading house Cargill saw quarterly earnings fall 28% to US$319m as it was hit by a series of unexpected events including a surge in energy prices in January, rail back logs and the rejection of US corn shipment by China.

Peers such as Archer Daniels Midland and Bunge are also expected to be hit.

Cargill recently announced its intention to stop trading coal and deal in gas and power in Europe.

Source: Thomson Reuters � BHP Billiton (BLT LN) states that Chile losing its edge.

The company stated at a conference in Santiago overnight that Chile is losing its competitive advantage given falling grades and as labour costs rise.

The company pointed out that Chilean workers produce ~30Ktpa, less than 50% of their North American peers and has urged contractors to participate in efficiency improvements as well.

Source: Metal Bulletin
African resources update � WHO expects a 2-4 month period to contain the Ebola outbreak in West Africa that continues to spread.

The organisation has not recommended travel restrictions in Guinea that has a total of 157 suspected and confirmed cases that includes 101 fatalities.

Liberia has 21 suspected and confirmed cases.

Source: Thomson Reuters � Ethiopias inflation rises to 8.8% in the year to March from 7.9% the previous month due to both food and non-food items.

Source: Thomson Reuters � Todays African proverb.

"No matter how wise you are, you cannot trace footsteps in water".

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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