[cid:image001.png@01CFD63D.C5D0FA70] Monday, 22 September 2014 [cid:image006.jpg@01CFD63D.CE083FF0]
Snapshot � Company news highlights: Gemfields strong year end results, London Mining in payment dispute with Glencore, Coal of Africa sells Mooiplaats for $23.5m, Amara Mining further drilling results from Yaoure, Bellzone suspends shares as funds dry up, African Rainbow not getting value for Harmony stake � Commodity review highlights: Current gold price stability paves way for longer-term bull cycle: GFMS, more positive news for copper but at a 3m low, more coking coal supply from BHP, silver at 4 year low, Chinas iron and steel association sees iron ore at around US$80/t long term � Other economic news: Mercuria registers with the UKs financial regulator � African resources update: Africa Eurobond binge may be costly to refinance: World Bank, Zambia state power supply cuts power supply to Vedantas Konkola, Todays African Proverb
Company news � Gemfields (GEM LN) strong year end results to June generated EBITDA of US$59.3m (US$1.2m last year) leading to net profit after tax of US$16.3m versus US$22.8m loss a year ago.

The company concluded the year with US$36.8m cash and US$16.7m debt.

The company has already disclosed the operational performance from its emerald and a ruby sale, however, its Faberge business appears to be turning the corner with the company indicating higher volumes and improving margins.

The company also generatedUS$22m from rough emerald trading activities from stones sourced on market.

Management is targeting 25-30m carats of emeralds and beryl from Kagem, 8 m carats of ruby and corundum from Montepuez and have at least three emerald and two ruby auctions in the year.

Source: Company Investec View: A good result from the diverse portfolio of assets that appears to be improving on numerous fronts although note that activities outside of primary production remain opaque and challenging to forecast.

We are however, particularly encouraged by the positive commentary on the Faberge business and hope to get a better indication of the breakdown of earnings within the group in due course to better assess this. � London Mining (LOND LN) in payment dispute with Glencore (GLEN LN).

LOND has announced that it is in dispute with GLEN regarding a cash prepayment amount LOND has requested and which Glencore has refused to pay.

LOND is considering its options, including termination of the offtake agreement with GLEN, while it is in discussions with its core lender to provide the required short term liquidity.

Separately, LOND has signed a term sheet with Afreximbank for a US$30m revolving 2yr pre-export financing facility, and is awaiting credit approval by LONDs existing lenders.

Source: Company Investec view: Another headache that LOND could well do without, given the Ebola crisis and the weak iron ore prices and resultant liquidity constraints.

Additional liquidity from its existing lenders wont come cheaply, considering the punishing terms associated with the recent debt facility that was announced in mid-August.

We wonder what GLENs game is and if it has anything to do with the strategic partner search process that LOND currently has underway. � Coal of Africa (CZA) sells Mooiplaats for $23.5m.

CZA has signed a Sale and Purchase Agreement (SPA) with a local private coal operator, Blackspear Holdings, for the disposal of the Mooiplaats for a gross consideration of ZAR250m (US$23.5m) cash.

Assuming all required approvals for the transaction, the 1st tranche of ZAR150m is expected in the 1Q15, the balance by Nov15.

Blackspear is to provide CZA with evidence of funding before 31 Oct14, with monthly payments to then commence until the 1st tranche is settled.

The Mooiplaats sale was one of two remaining priorities for CZA, with approvals for Makhado the last hurdle.

Source: Company Investec view: Good news as non-core asset is sold.

This is another positive and part of the financing outlined in the companys release of 26 August.

CZA is in the process of raising �38m (US$65m) in two tranches at 5.5p per share to settle outstanding liabilities (shareholder decision at EGM on 25 Sept).

Successful completion of this will be a significant step forward for the company, leaving it unencumbered of outstanding liabilities and providing it with the funds to progress its projects. � Amara Mining (AMA LN) further drilling results from higher grade zone at Yaoure.

Highlighted intercepts extend 7-25m from 90-279m down hole at grades of 4.1-16.1g/t Au.

The company has now completed over 61,000m of an 83,000m programme.

Management is on track to deliver the first mineral resource update this month.

Source: Company Investec View: Encouraging news flow, however, markets remain a tough place for junior gold explorers. � Bellzone Mining (BZM LN) suspends shares as funds dry up.

Further to the announcement of 17 September 2014, BZM has stated that it has not yet been able to reach agreement with China Sonangol with regard to the loan agreement announced on 18 August 2014.

BZM required further financing by this week and in light uncertainty surrounding financing it has requested suspension from trading, "pending clarification of its financial position".

Source: Company Investec view.

BZM has received only two $750k tranches from major shareholder, China Sonangol (29%), out of the $4m loan announced in August.

The total loan was to last BZM until late Oct14 while it progressed discussions with other prospective providers of financing. � African Rainbow Minerals (ARI SJ) not getting value for Harmony stake.

Executive Chairman Patrice Motsepe acknowledged that the company "does not get value" for their 14.6% stake in Harmony (HAR SJ) but that he is reluctant to cut the ties between the two companies.

Source SNL
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Commodities news � Current gold price stability paves way for longer-term bull cycle: GFMS.

In the first update to its 2014 gold survey, GFMS has forecast gold to average $US1270/oz this year, 10% lower than 2013.

Prices are, however, expected to recover following "a period of recuperation after last years dizzying action." GMFS noted that the average grade of ore has also increased for the first time in more than 10 years, that mine output was increasing and that global cash costs have dropped 6% over the 1H but that margins remain under pressure.

GFMS said 2014 was likely to be a cyclical top for mine output, with tightening supply and growing demand associated with inflationary expectations from late 2015.

"The price is therefore expected to bottom out during 2015 before embarking on a gradual bull market".

Source: MiningNews � Copper - more positive news.

It appears that Newmont (NEM LN) will soon be issued with a permit to resume exports of copper concentrate from its Batu Hijau operation in Indonesia but the bad news is that the permit will reportedly be considerably less than the capacity of the mine.

In further positive news for copper Vedanta (VED LN) reported that its Konkola Copper operation is Zambia have been adversely affected by restricted power supplies due to a dispute over increased power tariffs.

Source: Bloomberg, SNL � Copper at three month low this morning ahead of Chinas flash PMI reading tomorrow.

Prices at currently trading at around US$6,740/t.

Efforts to stimulate the economy appears in sufficient to prompt interest in the commodity.

A stronger US$ also appears to be contributing to weakening price performance.

Source: Thomson Reuters Investec View: Longer term we would hope to see copper prices firm toward FY16E as the market is expected to tighten.

Downside price movement may also be relatively limited from here as we would expect the Chinese SRB to be looking to opportunistically build up its strategic stockpile.

However, strong price performance may take some time. � More coking coal supply from BHP.

BHP Billiton (BLT LN) intends to further increase output of coking coal via productivity improvements and is also considering further expansions.

This goes counter to many other coking coal producers who are shutting down capacity in the face of low prices.

Source SNL � Silver at 4 year low at US$17.5/oz as investors unwound long positions and dollar strength undermined the metals pricing.

Gold is also under pressure as is platinum.

Future positions in silver reflect a net short currently.

Source: Thomson Reuters Investec View: A concerning trend in precious metals, with weaker pricing prompting ETF holders to sell down further exacerbating price erosion. � Chinas iron and steel association (CISA) sees iron ore prices to stay at around US$80/t long term with limited growth in steel output.

China is expected to produce around 800mtpa of crude steel for the next decade according to CISA.

Iron ore imports could be up 10% this year potentially even higher if prices continue to fall.

Source: Thomson Reuters Investec view: With all of the above articles, its no surprise to mention that commodities have fallen to 5yr low according to the Bloomberg Commodity Index of 22 raw materials. Other economic news � Mercuria registers with the UKs financial regulator, weeks ahead of the closure of a planned acquisition to buy JP Morgans commodities trading business.

Mercuria is developing its business to provide a greater number of services that appears to have driven the decision.

Trading houses are starting to provide greater clarity in their financial reporting as regulatory scrutiny in different markets increases.

Source: Thomson Reuters
African resources update � Africa Eurobond binge may be costly to refinance: World Bank.

The World Banks chief economist for Africa has said that countries tapping demand from bond investors lured by high yields may find refinancing of their Eurobonds costly.

Various African countries sold a record $6.25bn debt in 2013, which may be followed by $6 billion worth of issuance this year.

Low interest rates in the U.S.

and Europe have made African debt attractive because of its relatively higher yields.

However, if countries want to roll over the loans when they mature, rates may rise sharply, the World Bank warns.

Source: Bloomberg � Zambia state power supply cuts power supply to Vedantas (VED LN) Konkola Copper Mines after dispute over electricity bills.

The company lost a court application to stop Copperbelt Energy from cutting supplies over an unpaid US$44m bill.

Operations have already been impacted by the action.

Source: Thomson Reuters � Todays African Proverb.

"A monkey cannot judge a case involving a forest".

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
Investec Global Natural Resources Sales Team: UK Hong Kong South Africa Adam Bidwell Tel: +44 (0) 20 7597 5089
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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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