🕐16.09.14 - 11:27 Uhr

INVESTEC GLOBAL NATURAL RESOURCES DAILY - MINING - TUESDAY 16TH SEPTEMBER - PDL
LN, RRS LN, POG LN, WLFE LN, AAL LN, BLT LN, BMN LN, KAS AU



[cid:image001.png@01CFD186.AB609490] Tuesday, 16 September 2014 [cid:image006.jpg@01CFD186.BE550720]
Snapshot � Company news highlights: Petra Diamonds gets US$27.6m for its blue, Randgold unlikely to buy remainder of Kibali (AngloGold not selling anyway), Petropavlovsk update on refinancing, Wolf debt drawdown, DeBeers considering options on its Kimberly mines, planned strike at Escondida, Bushveld Minerals scoping study on Mokopane, Kasbah Resources rights issue � Commodity review highlights: Rebar and iron ore up, Indian gold imports jump 176% YoY, China may boost gold reserves, Indian iron ore demand may relieve some oversupply, Indonesian tin export slow down to continue � Other economic news: Two nuclear power IPOs planned in China, US jewellery retail sales up 8% YoY � African resources update: Russians exploring for diamonds in Zimbabwe, Mali has signed US$11bn worth of projects with China, Todays African Proverb
Company news � Petra Diamonds (PDL LN) US$27.6m sales price achieved for 122.52carat blue diamond recovered earlier this year.

The sales structure agreed is for 85% of the value to a partner, with Petra retaining 15% until the stone has been cut and polished.

Source: Company Investec View: The value uplift from the cutting and polishing can be very material and the sales structure agreed is an interesting one.

Petra therefore realises a meaningful cash injection now and exposure to upside from polishing whilst mitigating the risk of damage to the stone from the cutting and polishing process.

The value achieved is ahead of what our analyst modelled of US$20m but some had been speculating over the potential for US$30-40m and higher.

The company is due to announce its year end results on Thursday. � Randgold (RRS LN) unlikely to buy remainder of Kibali, but AngloGolds not selling anyway.

Responding to a note from our analysts yesterday, suggesting that AngloGold Ashanti (ANG SJ) sell its share of Kibali to RRS, Marc Bristow has said that "it doesnt make sense to pay a premium on a premium we created ...it is doesnt really fit with what Randgold stands for." Bristow said, however, that his company would study assets ANG might look to sell.

ANG yesterday cancelled its plans to split the company and undertake a $2.1bn rights issue after shareholders objected.

The ANG CEO has said that the company will now consider other ways to cut debt and simplify its business, such as a sale of assets, while noting that Kibali is a "core" asset.

Source: Bloomberg Investec view: It appears odd to us that AngloGold went to all the trouble of getting official approval for its planned restructure, without consulting the key shareholders who have now forced it to scupper the transaction. � Petropavlovsk (POG LN) update on bond refinancing, proposing rights issue.

The company acknowledges that full cash repayment of its 4% Convertible Bonds, due 15 February 2015, may not be possible "in light of the current market and geopolitical environment".

POG is therefore working on the issue of new convertible bonds in exchange for existing bonds but with a cash element, the size of which would depend upon a proposed equity rights issue.

The ultimate size of the rights issue will be governed by the demand.

The proposed new bonds will have an Oct19 maturity, 7.5% coupon, total US$310m (less net rights issue proceeds and a 60-65p conversion.

Source Company � Wolf Minerals (WLFE LN) about to commence debt drawdown.

The company has announced that it will shortly commence draw-down of the �75m senior debt facility for development of its Drakelands Mine.

This facility, in conjunction with the �90m of equity raised in early 2014, should cover the project through to production, which is scheduled for the 3Q15.

Source: Company Investec view: Another milestone for the company, where development remains on budget and schedule.

Interested parties should check out the live streaming video of the projects development.

All companies with development projects should do this. � Anglo American (AAL LN) subsidiary DeBeers considering options on its Kimberly mines shutting them down, selling the asset or finding new technology and mining methods to tackle tailings dumps.

De Beers sold Kimberly underground to Petra Diamonds (PDL LN) in 2010.

Source: Bloomberg � Planned strike at BHP Billitons (BLT LN) Escondida.

An Escondida union issued an email statement, proposing to strike on Sept 22 and Sept.

24 Escondida Union No.

1 represents 2,800 workers at the mine in northern Chile.

Source: Bloomberg � Bushveld Minerals (BMN LN) releases scoping study on its Mokopane tin project outlining a US$16.7m capex to deliver 700tpa of tin generating an NPV post tax of US$18m and an IRR of 34.6% at a tin price of US$22,928/t.

Source: Company � Kasbah Resources (KAS AU) announces 3 for 10 rights issue to raise A$8.3m at 7Ac per share.

The funds will be to extend the Western Zone Shallows target and continue the optimisation of the Achmmach tin project DFS.

Source: Company Investec View: Yet another raising to maintain the glacial pace this project is taking to move from concept to development.

The Achmmach project is 75% held by Kasbah with the remainder with Japanese investors who have paid around US$17.2m to Kasbah since 2012.
[cid:image007.png@01CFD186.BE550720]
Commodities news � Rebar near one-week high, highest daily iron ore gain in 15 months.

Steel reinforcement-bar for Jan.

delivery on Shanghai Futures Exchange rose to the highest for most- active contract since Sept.

5.

Spot iron ore at Qingdao rose +3.9% yesterday, the biggest 1-day gain since Jun13, to $85.58/t.

The difference between China iron ore and global market fell accordingly, to $20.23/t.

Source: Bloomberg Investec view: Rebar is only at a one-week high, but its a very pleasant change to be able to report increasing rebar and iron ore prices � Indias trade deficit opens up as August gold imports jump 176% YoY.

Indias trade deficit widened slightly YOY with a shortfall of $10.8bn in August versus $10.7bn last year.

Gold shipments surged to $2bn in August, from $739m last year, after the government allowed more banks and traders to buy bullion overseas.

The reserve Bank of India believes that while the shortfall will widen through March to 2015, it will stay sustainable.

Controls on imports will probably be permanent and the government may keep a rule that requires importers to supply 20% to jewellers for re-export.

Source: Bloomberg � China may boost gold reserves amid imbalances in asset holdings.

China hasnt announced any changes to its gold reserves since 2009 when holdings totalled 1,054.1t.

While China holds the worlds biggest FX reserves, bullion accounts for 1.1% of the total, compared with about 70% for the U.S.

and Germany, the biggest gold holders.

Russia is among nations that added gold to reserves this year, boosting holdings to the highest in at least two decades and surpassing Chinas hoard to become the fifth-largest by country, data from the council show.

Source: Bloomberg Investec view: Its an odd argument that China has to increase the gold proportion of its reserves just because other countries have high proportions.

If it had sold its US$ reserves to buy gold a couple of years ago, it wouldnt have been looking very clever.

Anyway, while China hasnt reported any increase in its gold holdings since 2009, we very much doubt that it hasnt been accumulating reserves. � Indian iron ore demand may relieve some of the oversupply in the market as it turns from being a significant exporter to an importer.

The company may need to import up to 45mt over the next three years as domestic supply falls short of demand.

The nation imported 370kt over 2013/14 and in the current financial year is expected to import 6mt.

Mines are closing around the country leading to supply disruptions.

However, the requirement may be relatively short lived as the domestic shortage is a consequence of government policy measures that could be reversed as miners are struggling to renew mining leases such as only 22 out of 122 mines in Karnaka eligible to resume operations due to the slow and bureaucratic process.

Source: Thomson Reuters � Indonesias self-imposed tin export slow down to continue for another month with refined exports expected to fall around 80kt this year and 72kt next.

Members of the Indonesian Association of Tin Exporters (AETI) agreed to a slowdown in domestic trades late last month in an effort to strengthen prices.

The country exported 92kt of tin in 2013, and shipped 52.7kt over January to August.

Despite AETI members constraining exports, other exporters may be looking to by-pass rules via non-ingot tin exports which have made up around 18kt YTD or a third of exports.

Source: Thomson Reuters
Other economic news � Two nuclear power IPOs planned in China highlight the nations efforts to move from coal and gas.

The companies to be listed include CGM Power and China National Nuclear Power (CNNC).

Source: Thomson Reuters � US jewellery retail sales up 8% yoy in July at US$2.37bn according to government retail survey.

Source: Rappaport Investec View: This is positive news for diamond miners such as Petra Diamonds (PDL LN), Gem Diamonds (GEMD LN), Lucara Diamonds (LUC CN) and Dominion Diamonds (DDC CN).

The US is the single largest diamond market accounting for around 40% of diamond demand.
African resources update � Russians exploring for diamonds in Zimbabwe.

Russian diamond miner, Alrosa (ALRS RX) is partnering a Zimbabwe-Russia JV, DTZ-OZGEO, to prospect for and mine diamonds in Zimbabwe.

DTZ-OZGEO would prospect for diamonds throughout Zimbabwe.

Shunned by western countries, President Robert Mugabe has reached out to Beijing and now to Moscow for badly needed investment in a country.

Russia, like China, has strong historical political ties with the country.

Russia, now the target of sanctions by the US and EU, in 2008 vetoed a Security Council resolution to impose sanctions on Zimbabwe.

Source: MiningWeekly � Mali has signed US$11bn worth of projects with China, the majority of which is to be spent on two railway projects linking the country to the coast.

The IMF and World Bank froze nearly US$70m of financing in May due to concerns over the US$40m purchase of a presidential jet and a loan for military supplies.

The country secured over US$4bn in donor pledges last year.

Source: Thomson Reuters � Todays African Proverb.

"Termites are far from the moon".

Source: BBC
Investec Global Natural Resources Research Team: UK South Africa
Hunter Hillcoat Tel: +44 (0) 20 7597 5182
Albert Minassian Tel: +27 (0) 21 416 1454
Marc Elliott Tel: +44 (0) 20 7597 5189
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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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