[cid:image001.png@01CF6E83.BCCD5C60] Tuesday, 13 May 2014 [cid:image006.jpg@01CF6E83.C6A83FC0]
Snapshot � Company news highlights: DSO resource lift for African Minerals, four Lonmin workers killed, Aureus Q1 update, Wolf Minerals EGM, Guangdong Rising bid for PanAust, Northern Star to acquire Jundee, South Gobi MarQ � Commodity review highlights: Threat to Australian coking coal supply, Indian gold imports plunge in April, aluminium outlook from Rusal, Chinese crude steel up, Glencore and Goldmans have longest warehouse waiting times � Other economic news: New appointees to Codelco, weaker than expected Chinese economic numbers, rising Mongolian mineral exports � African resources update: Platinum producers call on AMCU to guarantee worker safety, Amplats dismisses likelihood of agreement with AMCU, Kenya blocks Tata in power plant bid, Ethiopia receives first sovereign rating, Chad closes border with CAR, Todays African proverb � Market notes: FTSE futures +24 points.

European markets set to open higher today thanks to corporate earnings and improving economic outlook sending US markets to record highs (Dow +0.68%, S&P +0.97%).

Asian markets are all up (Nikkei +1.95%, Hang Seng +0.35%, ASX200 +0.91%) with the Japanese market rallying on a weaker Yen.

Markets are gaining confidence that despite the referendum held in Eastern Ukraine over the weekend Russia has no intension of subsuming Eastern Ukraine.

Markets will focus on US retail sales data this afternoon for more confidence in the US recovery along with import/export prices and business inventories. Commodity markets - gold -0.25% $1,292.65/oz, silver -0.65% $19.4165/oz, platinum -0.39% $1,436./oz, copper -0.59%, $3.131/lb, nickel +5.10% $20,898.00/t, iron ore +0.29% $103.00/t, thermal coal $75.25, WTI +0.% $100.73/bbl, Brent +0.01% $108.42/bbl, zinc +1.95% $2,069.50/t.

Dual listed - BHP +2.15% A$37.96, RIO +3.03% A$62.85.

Nickel and tin continue their stellar runs on global supply concerns as Vale announce their operations in New Caledonia remain halted following a contaminants spill.

Gold reversed earlier losses on physical purchases in China.

WTI trading higher on speculation crude stockpiles in the US have declined for the second week, potentially falling by up to 1 million barrels. Economic data due today: US - NFIB small business optimism (forecast 94.5), retails sales MoM (0.4%), Import price index MoM (0.3%), business inventories (0.4%).

Eurozone - German wholesale price index (actual 0.2% MoM), Italian CPI (0.6% YoY), German ZEW survey current situation (60.5), German ZEW survey expectations (40.0).
Company news � Increase in African Minerals (AMI LN) DSO resource base.

AMI has provided an updated DSO resource of 142mt at 57% Fe, versus the last reported resource of 126mt at 58% Fe back in Dec10 with AMI having mined 44mt of DSO since then.

The updated resource should enable AMI to continue mining DSO all the way to 2020, in conjunction with the saprolite ore (8-10mtpa rate from 1H16), with the company aiming for an overall 25mtpa production rate.

Source: Company Investec view: This takes some pressure off AMI.

Our analyst had expected ongoing resource upgrades and had already assumed DSO production to 2020 but the higher resource now provides confidence to this and should be taken positively. � Lonmin (LMI LN) four workers killed over the last three days, three over the weekend and once yesterday in violent incidences.

Lonmin released interim results yesterday highlighting the challenges faced by the industry.

It has been liaising directly with employees to get them to return to work this week.

Police have said they would increase patrols along workers commuting routes from 14 May.

Other unions comprising the NUM and Solidarity have indicated that their members returning to work were being intimidated.

Source: Company Investec View: Clearly violent events such as this undermine the potential for getting workers back to work as planned with intimidation a major issue.

We hope that government and police pressure can prevent further such incidences and facilitate an end to the strike. � Aureus Mining (AUE LN) Q1 results reflect progress in advancing New Liberty gold project.

The project is on schedule with first gold planned for Q1 of next year.

Capex from Q2 is to be funded from loan facilities with equity money prior to this period.

The key focus in Q1 was for the construction of foundations and concrete structures of the plant.

At the end of March the company had cash and equivalents of US$18.5m with the debt undrawn, but has since started to draw downUS$32.4m of debt of the US$100m of facilities available.

Source: Company Investec View: The company has an extensive exploration portfolio that should also add value for shareholders, however, the key drivers will be the progress at New Liberty and the delivery of the project which encouragingly remains on schedule. � Wolf Minerals (WLFE LN) EGM.

WLFE has held its EGM related to the issue of the shares in conjunction with the recent placing and all resolutions were passed.

The new shares will begin trading on 20 May.

Source: Company � Another bid for an Australian-listed miner.

Guangdong Rising Assets Management Company, a state-owned Chinese investment group, has made a US$1.4bn cash bid for PanAust (PNA LN).

Guandong Rising, already a 23% shareholder, has offered a conditional A$2.30/share, a 46% premium to the previous days close.

PNA has rejected the bid as being too low but has agreed to give Guangdong Rising access to financial information.

Source: Bloomberg Investec view: Giving Guangdong Rising access to information will presumably enable it to sweeten the offer.

PNA agreed last year to buy Glencore Xstratas (GLEN LN) stake in Frieda River for $75m with the deal expected to be concluded before Sep14 and there is some thought that Guangdong Risings bid is opportunistic, with PNA currently receiving little value attribution for the acquisition. � Northern Star (NST AU) to acquire Jundee gold mine.

Northern Star has entered into a binding purchase agreement to acquire 100% of the Jundee gold mine in Western Australia from Newmont for A$82.5m in cash.

Jundee has reserves of 411koz and all-in sustaining cash costs of c.

A$930/oz.

Jundee is expected to produce c.

200koz pa of gold over the next 2 years and the acquisition will increase Northern Stars production from c.

350koz pa to c.

550koz pa in FY15.

The acquisition will be financed through an increase in Northern Stars revolving debt facility up to A$100m from Investec.

Source: Company � SouthGobi Resources (1878 HK) MarQ14 results.

SouthGobi reported a MarQ14A loss of US$20.75m, following a significant fall in raw coal sales from 1.72mt in DecQ13A to just 0.39mt.

Weaker sales were due to seasonal holidays in Mongolia and China but also due to weak economic activity.

Average realised coal prices in the quarter were just US$19.5/t.

Cash as at 21 April 2014 had fallen to US$15.8m, from US$21.8m at year-end 2013.

Source: Company Investec view: With a US$7.9m cash interest payment to CIC due on 19 May 2014 the company has little room to manoeuvre and will need to secure additional sources of funding imminently.
[cid:image007.png@01CF6E83.C6A83FC0] Commodities news � Threat to Australian coking coal supplies.

Stalemate over negotiations between rail unions and Australias largest coal rail hauler, Aurizon threatens the coking coal supply chain out of Queenslands Bowen Basin.

The company hauled around 39.1mt Q1 this year and wage negotiations remain unresolved.

Source: Inside coal Investec View: Should strike action follow then supplies could be disrupted lending support to coking coal prices that have been persistently weak.

At the same time, iron ore prices could be helped by a potential tugboat operator strike at Australias Port Hedland.

A resurgence of the Australian industrial action can help commodity prices, but only help the companies able to export. � Indias gold imports plunge in April.

As gold smuggling in India surges, official imports continue to wither.

According to government trade figures, gold imports declined by 74% to US$1.75bn in April from US$6.78bn in April 2013.

However, gold smuggling has jumped to an all-time high, with Mumbai Airport Customs reporting seizures of 72kg in April 2014.

Source: Mineweb Investec view: The plunge in imports YoY is also likely to be due to very high import levels in April last year, following the collapse in the gold price around the time. � Rusals (486 HK) aluminium outlook.

Rusal expects global demand for aluminium to maintain its growth trend, increasing by 6% to 55mt in 2014.

The global aluminium deficit, excluding China, is expected to reach 1.2mt in 2014, from 0.3mt in 2013, with aluminium premiums to remain strong due to physical market tightness.

About 1.5-1.6mt of the global aluminium production outside of China is expected to be idled in 2014.

The Chinese aluminium market is expected to remain balanced in 201, with c.3mt of Chinese aluminium production to be cut in 2014 as a result of low prices.

Source: Company � Chinese April crude steel output rose 2.1% yoy to 68.84mt according to government data.

Record production of 70.25mt was achieved in March.

Source: Thomson Reuters � Waiting times to get metal out of warehouses by firms owned by Glencore (GLEN LN) and Goldman Sachs (GS US) are the longest in the market and apparently extend as far as two years according to the LME.

The LME has been trying to reform the process of holding and freeing up metal that has been an issue particularly for aluminium, however, a court ruling recently halted reforms, yet the group is advancing other aspects of its plans, including transparency.

Warehouse owners have been profiting through rental charges by letting long queues build up for buyers to withdraw metal tying up huge stocks of aluminium.

Source: Thomson Reuters
Other economic news � New Chilean president named two economists and a lawyer to join the board of state copper producer Codelco.

The new government was keen to stress that improving the competitiveness of the worlds number one copper producer was the key challenge for the new members.

Codelco faces funding challenges to overhaul its huge but tired mines, and will need government assistance to do this.

Source: Thomson Reuters Investec View: We note that the government is keen to improve the competitiveness of the company but its appointments do not include any technical expertise that would be best placed to identify areas to improve competiveness so question whether the appointments are appropriate. � Weaker than expected Chinese economic numbers.

China industrial output rose 8.7% in April, but below the Bloomberg consensus median estimate of 8.9%, which was the same as the March number.

In addition, Jan-Apr fixed-asset investment (ex-rural households) rose 17.3% YoY (consensus 17.7%), while April retail sales were up 11.9% YoY (consensus 12.2%).

Source: Bloomberg, FT � Mongolias mineral exports on the rise.

The value of Mongolias total mineral exports between January - April rose from US$1.21bn to US$1.43bn as copper concentrate exports rose 70% YoY to 316.5Kt and gold exports rose from 1.3t to 2.5t.

The ramp up in exports is primarily due to Oyu Tolgoi, managed by Rio Tinto (RIO LN).

Source: Reuters
African resources update � Platinum producers call on AMCU to guarantee safety.

South Africas platinum producers Lonmin (LMI LN), Impala (IMP SJ) and Anglo American Platinum (AMS SJ) have called on AMCU to guarantee the safety of members who want to end the unions 16 week strike.

Chris Griffith, CEO of AMS made these comments after the deaths of workers on their way to LMIs mine was reported yesterday.

Additional police have been deployed in the platinum belt, and a park and ride system has been set up to handle the number of arrivals.

Source: Company Investec view: As reiterated by LMIs CEO, Ben Magara, at the interim results presentation yesterday, intimidation and threats are a serious issue in the platinum strike, with workers fearful of coming back to work due to repercussions from AMCU.

The two workers who were killed on their way to LMIs mine yesterday is clearly a warning to others too.

Calling on AMCU to guarantee safety of workers is a smart move by the CEOs as this should bring AMCUs tactics to a head and may pave the way for miners to return to work if they wish to. � Amplats (AMS SJ) CEO states that an agreement with militant union AMCU is "out of the question" at the current time as the two parties are too far apart.

Source: Thomson Reuters Investec View: We note the recent fatalities at Lonmin due to violent action, that is most likely the result of intimidation activities by AMCU members. � Kenya blocks coal-fired power plant bid from Tata.

Tata Power (TPWR IN) has been from bidding for a 1,000MW plant at Lamu on Kenyas coast because of breach of regulations.

TPWR was bidding both as an individual and as part of consortium, violating a rule blocking double bidding.

Tata also has a controlling stake in one of the companies thats part of the consortium it joined.

Source: Bloomberg � Ethiopia receives first sovereign rating.

Yesterday, Moodys put Ethiopias foreign currency sovereign credit rating as B1, one notch above the B given by Standard & Poors and Fitch.

The country is one of the worlds fastest growing economies, averaging annual growth of over 10% for the last decade.

Ethiopias Prime Minister said last year that the country was planning a Eurobond once it had secured a credit rating.

Source: FT � Chad closes boarder with Central African Republic pending an end to violence that has killed thousands of people and forced nearly 1m to flee their homes.

Thousands of French and African troops have failed to stop the killings after the Muslim Seleka rebel movement seized power in the majority Christian country.

Source: Thomson Reuters � Todays African proverb.

"A home without a mother is like a desert".

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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