[cid:image001.png@01CFBB84.23B27990] Tuesday, 19 August 2014 [cid:image006.jpg@01CFBB84.240AABB0]
Snapshot � Company news highlights: Updated Rio note, BHP full year results, AngloGold Ashanti to delist from LSE, Anglo Pacific agrees greater transparency on Kestrel Coking Coal royalty, Beacon Hill Funding update, Sirius Resources receives mining lease, Medusa management changes, Stellar Diamonds positive bulk sample results, Bellzone secures short term loan from major shareholder � Commodity review highlights: Gold prices tracking sideways, European coal prices steady as winter approaches � Other economic news: Ernst & Young sees another lacklustre quarter of mining, Chinese banks issuing capital � African resources update: Sierra Leone borrowing debt to fight Ebola, Nigerian CPI up for a fifth Month, Todays African Proverb
Company news � Update note on Rio Tinto (RIO LN).

RIOs stark exposure to iron ore is often seen negatively, yet the exaggerated operating margins provide RIO with greater earnings surety than more diversified peers, which rely on commodity divisions with smaller operating margins and greater earnings volatility.

This underpins the intention of "markedly increased cash returns" to shareholders.

In this regard, we assume a lift in the progressive dividend policy, with the pay-out ratio increasing 20% above recent levels to c.42%, maintainable under even bearish commodity price assumptions.

Excess cash can be applied to buy-backs, potentially resulting in a 4% lift in EPS and DPS from FY17E onwards.

Source: Company � BHP Billiton (BLT LN) FY14A results.

Underlying EBITDA of $32.4bn is 1% ahead of consensus and Investec, with underlying profit of $13.6bn in line with consensus and 2% ahead of our expectations.

FY14A dividend of 121cps (consensus 122cps, Investec 121cps).

Source: Company Investec View: Market may be disappointed regarding no mention of special dividend, numbers broadly in line with consensus. � AngloGold Ashanti (ANG SJ) to delist from LSE.

The company has decided to apply for the voluntary delisting of its Securities because of the lack of liquidity on the LSE.

Source: Company Investec view: We doubt that most in the London financial industry even knew that the company was listed here. � Anglo Pacific (APF LN) update on key Kestrel coking coal royalty.

Company has agreed with Rio to have greater clarity on the Kestrel Coking coal royalty.

APF will get full disclosure on the breakdown of the royalty as well as estimates on private royalty payable one quarter forward and forecast tonnages for the next four quarters.

APF expects around 43% of output from the mine to be on its Royalty Lands for 2H14, however, minimal tonnages mined in 1H15.

Thereafter it should pick up considerably in FY16.

Source: Company Investec View: A mixed result for the company, near term its disappointing that weak volumes are expected in H1 of next year, however, longer term improved clarity and that the coal will hopefully be mined in a stronger coking coal pricing environment is a positive set to deliver more value.

Key going forward will be securing additional royalties to reduce the companys reliance on this key and very valuable asset. � Beacon Hill (BHR LN) funding update.

The proposed senior debt lender has concluded financial due diligence while discussions with parties interested in an equity proposal continue.

A senior debt approval decision is still expected within the 3Q14, including final credit approval, with drawdown in the 4Q.

The $20m facility is to be applied the expansion of the MML wash plant from 1.8mtpa to 3.2mtpa.

Source: Company � Sirius Resources (SIR AU) receives mining lease for its nickel project, 9 days after signing mining access agreement.

Progress continues to secure remaining permits and approvals that required the mining lease.

Source: Company � Medusa Mining (MML AU) news reports indicate CEO Peter Helpburn Brown has resigned with Chairman Geoff Davis taking on the role.

Geoff previously held this role and will commence on 1st September.

Source: Thomson Reuters � Stellar Diamonds (STEL LN) positive bulk sample result from Tongo project in Sierra Leone delivers 1,182 carats at a grade of 178.7cpht 49% above the 120cpht for the current resource estimate.

The company recovered 53 diamonds larger than one carat including stones of 6.7 and 4.6 carats.

The results follow reprocessing of tailings material, and will be used to update the resource.

Work on site has now been paused in light of the work required to analyse the results, that the rainy season has started and the threat in country from Ebola.

Source: Company � Short term loan from Bellzone (BZM LN).

The company has provided a further update on the $4m loan announced last week.

It has now entered into an agreement with major shareholder, China Sonangol, whereby it will draw down $0.75m to provide working capital to continue until late August, with drawdown of the remaining $3.25m subject to transfer of the Kalia Mining Permit amongst subsidiary companies, which requires government approvals.

The transfer simplifies corporate transactions at the asset level and does not constitute a change of control.

The $3.25m should last BZM until late Oct14 while it continues discussions with other prospective providers of financing.

The Loan and interest is repayable by mid-December.

Source: Company Investec view: Desperate times call for desperate measures and the company is now on a timeline.

It reads to us that unless BZM is able to find a strategic partner very quickly, it will be in default of its loan and China Sonangol (29.9% shareholder) will gain control of BZMs key, Kalia, without having had to take over the company.
[cid:image007.png@01CFBB84.240AABB0] Commodities news � Gold prices tracking sideways with geopolitical tensions supporting prices that would otherwise be undermined by equity performance and strength of the US$.

Gold ETFs are estimated to have seen net fund inflows of US$75.5m last week, and the worlds largest gold ETF, SPDR Gold Trust saw holdings rise 2.09t yesterday to 797.69t.

Source: Thomson Reuters � European coal prices steady at US$77.75/t for October cargoes as downward pressure from oil and gas was offset by speculation of seasonal demand strength as northern hemisphere winter approaches.

Source: Thomson Reuters
Other economic news � Another lackluster quarter of mining: EY.

EYs Mining Eye index lost another 12% over 2Q14, taking the 1H14 net loss to 18%, a trend that is continuing into the 3Q.

The Canadian Mining Eye by contrast is up 24% in the 1H, while the Australian market is in-between, with the S&P/ASX 300 Mining index losing 6%.

EY attributes the difference to a comparatively heavy gold weighting in Toronto, Ukraine/Russia tensions impacting UK sentiment and concerns around Ebola (+10% of AIMs mining universe exposed).

For yet another quarter, there were no mining IPOs.

However, total funds raised from follow-on equity more than doubled in the 2Q, to �231m from �105m, albeit with just two deals (WLFE LN, FDI LN) accounting for three quarters of this.

EY sees little likelihood of improved sentiment for junior miners in the public equity markets but sees momentum building for greater deal activity.

Source: EY � Chinese banks issuing capital with the biggest five lenders issuing US$85bn of securities including bonds that can be written down in a crisis, and preferred shares that give high dividends but no votes.

The bonds carry as much as 5.8% coupon, higher than previous issues and the preferred shares may yield over 8%.

Source: Thomson Reuters
African resources update � Sierra Leone using debt to fight Ebola.

The Ebola outbreak is straining the finances of affected governments, with Sierra Leone using Treasury Bills to fund the fight.

It auctioned $20m of T-bills on July 31, with the 364-day debt selling at 6.64%.

Emergency aid of as much as $260m is being prepared by the World Bank and the African Development Bank, but is taking time to flow through.

The worst affected countries, Liberia, Sierra Leone and Guinea, have a combined GDP of $13bn, smaller than Afghanistans $21bn.

Source: Bloomberg � Nigerian CPI up for a fifth month to 8.3% in July from 8.2% in June driven by higher food prices.

Food inflation stood at 9.9%.

Source: Thomson Reuters � Todays African Proverb.

"Every vessel has its own waves".

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
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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