🕐11.06.14 - 09:54 Uhr

INVESTEC GLOBAL NATURAL RESOURCES DAILY - MINING - WEDNESDAY 11 JUNE - BLT LN, M
IN AU, CLF US, AUE LN, SYR AU, NYO LN, 1898 HK



[cid:image001.png@01CF8549.CAA48480] Wednesday, 11 June 2014 [cid:image006.jpg@01CF8549.CB337E10]
Snapshot � Company news highlights: BHP terminates Goonyella overburden removal contract, Mineral Resources buys % stake in Aquila, Cliffs likely to have two board nominees from activist investor, Aureus Mining construction on track, Syrah offtake negotiations with Chalieco, Nyota sells remaining interest in Tulu Kapi, China Coal begins commissioning coal chemicals project � Commodity review highlights: China gas consumption to double over next five years, Chinese gold imports 150t in Q1, platinum and palladium prices up sharply yesterday, zinc prices firm on tightening supplies � Other economic news: Rios unmanned fleet reaches 200mt milestone, Panama Canals new locks to be operational by January 2016 � African resources update: Latest negotiations between platinum majors and AMCU fail again, Malis prime minister raises concerns over Islamist threat, Sierra Leone sacks chief of staff, Todays African proverb. � Market notes: Australian heavyweight miners continue to drag the market lower on weaker iron ore prices and continued concern over seaborne volumes.

Japanese markets are staging a turnaround while the price on 5 year government bond CDSs is now 38bps, the lowest since 2009, indicating that investors believe the economy really is on the mend. Commodities.

Iron ore fell yesterday to US$93.60/t, as concerns over new seaborne supply rose.

This came despite October rebar prices rising during the Shanghai session after the PBoC cut the RRR for certain banks.

With the unfolding probe of metal financing and collateral in China, it has been reported that some Chinese banks are now limiting credit for iron ore financing with margins for letters of credit raised to 30-50% from 15-30% in the last few days.

GS expects the probe to reduce copper prices to US$6,200/t before the year end and cause a significant scaling back of FX inflows from foreign banks into China. Data due: UK - May Unemployment Data, Spain - House Transactions YoY, U.S.

monthly budget statement (May); MBA Mortgage Applications; OPEC ministers discuss oil supply in Vienna
Company news � BHP Billiton (BLT LN) terminates Goonyella overburden removal contract with Downer (DOW AU).

Mining contractor Downer announced that BHP Billiton Mitsubishi Alliance has terminated an overburden removal contract covering the Goonyella Riverside coking coal mine in Queensland, Australia effective September 2014.

The contract was originally scheduled to expire in June 2016 with expected remaining revenue of A$360m.

Source: Company Investec view: BMAs move is indicative of the continued difficult times for coking coal producers and will help the company improve the cost structure at Goonyella, which has production capacity of up to 14mtpa of coking coal (50% BHP). � Mineral Resources (MIN AU) buys Aquila (AQA AU) block at 10% premium to takeover offer price.

Mineral Resources has reportedly purchased c.

50m shares of iron ore and coking coal explorer Aquila, taking 12% ownership of the company, at A$3.75/share.

This is a 10% premium to the takeover offer on the table from Baosteel and Aurizon (AZJ AU).

Source: The Australian, Company Investec view: Aquila has been trading above the A$3.40/share offer price by Baosteel and Aurizon in recent days while investors await a recommendation from Aquilas Board on the unsolicited takeover offer.

Mineral Resources intentions are currently unclear and the company has entered a trading halt but it seems likely that Baosteel and Aurizon will need to increase their offer price if they wish to take control of Aquila. � Cliffs (CLF US) expects two nominees from activist investor Casablanca Capital to be appointed to its board at its AGM in July.

Casablanca is expected to continue to proxy contest against Cliffs and release a statement soon.

The group owns around 5.2% of the company and wants to replace the CEO and the majority of the board as well as for Cliffs to split off its international operations from its Great Lakes based operations.

Source: Thomson Reuters � Aureus Mining (AUE LN) construction update states that development is on track for first gold in Q1 2015.

The ball mill has been delivered with various ancillary equipment.

The EPCM contract to develop the plant is 60% complete with first steel erection having started in May, earthworks are largely complete and civils are progressing to schedule.

The Marvoe Creek diversion channel is 85% complete, as is the tailings storage facility.

The local village has also now been successfully relocated.

Source: Company � Syrah (SYR AU) offtake negotiations with Chalieco (2068 HK) hit snag.

Syrah Resources, which is developing the 220ktpa Balama graphite and vanadium project in Mozambique, disclosed that it continues to work to finalise an offtake agreement with Chalieco (2068 HK) that was announced on 7 March 2014 but has been unable to finalise terms during the indicative three month execution period as the company needs more time to work out technical and financial parameters of vanadium production.

Source: Company Investec view: Syrah hopes to produce a high value battery quality vanadium product, which sells for c.

US$50/kg, while the Chalieco offtake would likely only be for a lower value steel strengthening vanadium product, which sells for c.

US$15/kg.

Until Syrah finalises its vanadium production strategy, it is unlikely that the offtake agreement with Chalieco can be concluded.

Finalisation of the offtake agreement is likely critical for Syrah to put debt financing in place to develop Balama, which the company hopes to complete by December 2014, as the proposed offtake agreement with Chalieco underpins nearly half of production. � Nyota (NYO LN) sells its remaining interest in Tulu Kapi.

The company has entered into a conditional agreement with KEFI Minerals (KEFI LN) for the sale of Nyotas remaining 25% direct interest for a total consideration of �1.5m, comprising �0.75m cash and 50m KEFI shares.

The sale followed NYOs inability to contribute to its 25% share of ongoing costs on the project.

NYO intends to use the cash proceeds to focus on evaluation of the Northern Block licences.

Source: Company � China Coal (1898 HK) begins commissioning CNY19.3bn coal chemicals project.

China Coal provided an update on the progress of its Shaanxi Yulin coal chemical project with capacity of 300ktpa polyethylene and 300ktpa polypropylene being built in the Yuheng High-Tech Development Zone in Shaanxi province, China.

All major processing equipment has been completed and some devices have commenced commissioning test runs.

Land acquisition remains ongoing with around half completed and regulatory approvals for the project continue to progress with the environmental assessment report and water resources appraisal report already approved.

Through December 2013 China Coal has invested CNY14.4bn in Shaanxi Yulin out of the expected CNY19.3bn total.

Source: Company
[cid:image007.png@01CF8549.CB337E10] Commodities news � China gas consumption expected to double in five years over pollution concerns.

The International Energy Agency expects this to occur as the country targets cleaner fuels to clear high pollution levels.

Overall Chinese gas demand is expected to increase to 315bcm in 2019, up 90% from 2013.

Source: FT � China imports almost 150t gold in the 1Q14: Reuters.

Direct imports in the 1Q have nearly doubled YoY according to Reuters, citing calculations using export numbers from Global Trade Information.

Banks are reportedly trialling gold imports directly into Shanghai free- trade zone ahead of the start of a gold exchange there.

The downside of this is that rising direct imports to make it more difficult to use Hong Kong export data as proxy for Chinese demand.

Source: Bloomberg � Platinum and palladium prices rally yesterday as talks to resolve strike action in South Africa continue to fail with Implats CEO indicating that they have nothing left to offer workers.

Source: Thomson Reuters � Zinc prices in Shanghai at 15 month high as improving demand met tighter supplies.

LME inventories remain at high levels with 696kt, although this is well down from the 1.2mt level at the start of the year.

Source: Thomson Reuters & Bloomberg Investec View: Zinc has long been expected to enter a supply squeeze as some major mines reach end of life this could now at last be happening.
Other economic news � Rio Tintos (RIO LN) unmanned mining fleet reaches 200mt milestone.

The company has announced that it has now shipped 200mt of ore using its fleet of 53 autonomous electric haul trucks.

The target was reached across three operations, Yandicoogina, Nammuldi and Hope Downs 4.

The last 100mt was moved in just 13 months later.

Rio Tintos mines, ports and rail systems can all be controlled from one central hub in Perth, although the fleet itself is mainly controlled from rooms at each mine site.

Source: MiningNews � New set of locks on Panama Canal to be operational by January 2016 deadline, allaying fears of further delays to the project that was threatened by strike action.

The strike ended on 8th May and brought work to widen the canal to a halt for over two weeks.

The work has already been subject to US$1.6bn cost overrun.

Source: Thomson Reuters
African resources update � Latest negotiations between South Africas platinum producers and unions fail.

Anglo American Platinum, Impala Platinum and Lonmin released a joint statement yesterday saying negotiations overseen by the Minister of Mineral Resource, Ngoako Ramatlhodi, with the Association of Mineworkers and Construction Union (AMCU) have been dissolved without an outcome.

Mineworkers have been on strike since 23 January 2014.

The strike is estimated by producers to have cost c.

US$2bn in lost revenue to date.

The AMCU is sticking to its 4-year target of R12,500/month wages for entry level underground workers, platinum producers will now review further options.

Source: Bloomberg � Malis prime minister raises concerns over Islamist threat in the northern end of the country.

Islamist fighters are sheltering in areas controlled by Taureg separatist rebels that control Kidal that was subject to a failed attempt by Malis army to seize the town.

Source: Thomson Reuters � Sierra Leone President sacks Chief of Staff.

The presidents office stated that the dismissal related to accusations of a lack of transparency in an unnamed mining deal and involvement in the illegal export of timber from the country.

Police are investigating the allegations.

Source: MiningWeekly � Todays African Proverb.

"A dog destined to be lost does not hear the hunters whistle".

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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