Tuesday, 29 January 2013
Snapshot � Company news highlights: Anglo American US$4bn write down, Petra Diamond interim trading update, Bellzone maiden resource at Forecariah JV, China Precious Metals proposes convertibles, Vale proposes minimum dividend, Blackthorn resumes trading after Perkoa update, Evolution Mining not been impacted by floods significantly, Tawana recommences drilling at Mofe Creek in Liberia. � Commodity review highlights: Rain impacts on Australian coal output, China iron ore imports update. � African news highlights: AngloPlatinum postpones restructuring, Nigeria tries to encourage minerals industry. � FTSE futures up 5.5 points (7am) - Dow Jones off 14 points ahead of US consumer confidence later on today and the FOMC rate decision tomorrow.

With signs emerging that the global economic is starting to recover over January.

ETP gold holdings contracted 0.8% from all-time highs seen in December 2012.

Whilst shorter term we expect the gold price to continue to remain strong as various countries central banks continue to build up reserves and the Indian wedding season progresses.

Gold is up marginally to US$1,663/oz.

Copper continues to edge forward, up to US$3.68/lb this morning as optimism spreads however a supply reaction from the likes of BHP and Codelco may cause a headwind longer-term.

Newcastle thermal coal futures (march13) up 1.27% to $95.45/t as supply concerns mount from recent heavy rainfall and flooding in Queensland that supply will be disrupted for longer than expected.

The Moura and Blackwater rail lines have been closed due to flooding with operator Aurizon stating that they may remain closed for 10 days as damages are accessed.


Company News � Anglo American (AAL LN) US$4bn write down on Minas Rio appears in line with expectations.

Capex previously guided has risen to US$8.8bn.

First ore on ship is targeted for the end of 2014 with the first phase of the ramp up expected to deliver a mine producing at US$30/t.

Analyst roundtable later to shed more light.

Source: Company � Petra Diamonds (PDL LN) interim trading update reflects growth albeit with some production issues leading to 7% below target production of 2.85m carats.

Revenue up 54% HoH to US$156.3m.

Expansion programmes underway with capex of US$92.1m in line with plans.

The balance sheet appears in good shape with US$38.8m cash, diamond inventories of US$45.4m and debt of US$127.2m leaving US$122.3m undrawn.

Operationally grades are a struggle at Finsch and Cullinan due to the mature nature of the ore bodies which will continue to struggle until new mining areas have been accessed from 2015.

The company suffered some issues from the labour problems in the country last year, however, these appear relatively limited.

The company saw relatively flat diamond markets over the period with some firming toward the end and expects prices to rise at Koffiefontein fall at Williamson and hold steady at its other assets.

Source: Company Investec View: Petra remains the quality diamond play in London with a significant and rising production base from a range of assets.

Management has demonstrated their ability at making these assets work.

Near term production appears a little disappointing but not major. � Bellzone (BZM LN) maiden JORC resource at Forecariah JV with 3.2mt indicated of DSO 55.8% material, a further indicated and inferred JORC resource of 71.1mt at 34.7% Fe of surface oxide, with a further 161.5mt of haematite schist at 24.3% Fe.

The results lead the company to indicating that the resource could support a 15 year mine life producing 4mtpa of beneficiated product grading 58% Fe.

The existing operations are around 76km by road to the trans-shipping port of Konta on Guineas South Western coast.

Source: Company � China Precious Metals (1194 HK) proposes issue of HK$1bn convertible note.

Chinese gold miner China Precious Metal Resources Holdings announced that it will raise a 7.25% HK$1bn (US$129m) convertible note due 2018 with a conversion price of HKD1.8125, a c.

25% premium over the last closing price.

The convertible represents c.

11.5% of the enlarged share capital of the company.

Source: Company � Vale (VALE US) proposes minimum dividend of US$4bn in 2013.

Vales executive board is proposing a minimum US$4bn dividend (US$0.77/common and preferred shares) in 2013.

This represents a yield of c.

3.8% based on the current share price.

Source: Company � Blackthorn (BTR AU) Resumes trading after Perkoa update.

Revised estimate of Glencores costs to completion of commissioning (end Feb13) is now expected to be in the order of US$180m (excluding capitalised borrowing costs).

This brings total project costs to US$260m, including BTRs initial US$80m spend).

In addition to increased capital costs, further short term funding will be needed to cover revised capital and working capital estimates that are not yet finalised.

The JV partners are targeting a conclusion regarding future funding in Feb13.

Source: Company. Investec view: As a 39.9% JV partner with Glencore in the Perkoa JV (operated by Glencore), BTR lacks leverage in negotiations around project funding, and clearly wont be receiving positive cash flow contributions from the project in 2013.

However, the longer term value of Blackthorn looks likely to be its Mumbwa copper project. � Evolution Mining (EVN AU) has advised that heavy rain and flooding in QLD has not significantly impacted its operations.

Mining and processing at Mt Rawdon have been closed temporarily, with an expected restart later this week once dewatering of the open pit is completed.

Activities at Cracow (UG) have continued as normal, and the company re-iterated FY13E guidance.

Source: Company. Investec view: We are hosting EVN management for a lunch in Sydney tomorrow so will get a more detailed update.

However with the company re-iterating guidance of 370-410koz in FY13E at A$730 - A$790/oz, we expect minimal impact from the wet weather.

� Tawana (TAW AU) has commenced RC drilling at Mofe Creek (Liberia) project.

Approximately 1,600m of RC drilling of a planned 2,500m programme has been completed with initial observations described as very encouraging; having exceeded estimates of friable iron formation depth extent and intersecting potential blind DSO (assays pending) the similarities observed between the geology and the historic 50Mt DSO Bomi Hills mine, 25km away, are very strong; further enhancing the potential to discover significant DSO at depth.

Source: Tawana. Investec view: Because the company is only 30km from port, this could be a good example of a capital "light" business model in West Africa.

Iron ore is likely where the real value lies in TAWs assets.
Commodities News � Rain impacts on Australian coal.

Very heavy rain moved down the Australian coast over the weekend and yesterday.

In Queensland the northern Newlands and Goonyella rail systems appear to have escaped relatively unharmed, while it appears the Blackwater and Moura (impacts Anglo and Cockatoo) lines are likely to be closed for a longer period as floodwaters subside.

Yancoal (YAL) announced water had breached a levee bank at the Middlemount JV (Peabody 50%) with mining expected to be disrupted for at least three weeks.

Mining was also suspended at Yarrabee, with operations expected to commence this week.

Not surprisingly, Cockatoos the levee banks designed around a 1 in a thousand year flood event (as required in permitting) at Baralaba mine have not been threatened.

Source: Bloomberg Investec View: Very heavy rain moved into NSW on Monday and overnight (its now sunny in Sydney after a grim morning) and Hunter Valley operators would also have experienced disruption.

On the plus side, high water flows in rivers would have allowed Queensland miners to discharge existing water still remaining in pits from the 2011 flood event (they cannot discharge water when river/creek flows are low).

� Chinas iron ore imports 11 months ended Nov12.

Australian market share increased from 43% YTD Nov11 to 47% YTD Nov12.

Brazilian market share increased from 20.8% to 21.4%, South Africa from 5.1% to 5.7%, and India declined from 11% to 4.9%.

During the period from 2007 to 2011, Australia maintained an average market share of 42% of all Chinese imports.

The extra 500 basis points in 2012 translates into a gain of ~28mt, courtesy of India.

Source: Tex report.
African Resources Update � Anglo Platinum indicated that it would suspend the restructuring of its Rustenburg mines for 60 days following the concerns raised by government and unions over the cutting of 14,000 jobs despite the commitment to create new ones to replace them.

The Section 189 process that allows for the dismissal of employees has been postponed whilst a detailed consultation process takes place between the DMR, Amplats and the labour force.

Source: Mining MX Investec View: The push back of production cuts is not supportive for PGM prices near term, however the rand has been weakening considerably which is positive for the miners.

We note also that platinum prices are currently holding onto their gains. � Nigeria offering mining concessions to Rio Tinto and Ratel Group to explore for various resources.

The country plans to present a mining road map including incentives for companies, including capital allowances for as much as 95% of qualifying expenditures as well as various waivers on customs and import duties.

The resources highlighted include 3bn tonnes of coal, 2.7bn tonnes of iron ore.


Investec Global Natural Resources Research Team: UK Australia South Africa Hunter Hillcoat Tim Gerrard Albert Minassian Tel: +44 (0) 20 7597 5182 Tel: +61 (0) 2 9293 2168 Tel: +27 (0) 21 416 1454
Marc Elliott Colin McLelland Tel: +61 (0) 2 9293 2140
Tel: +44 (0) 20 7597 5189

Simon Haggarty Tel: +61 (0) 2 9293 2462
Investec Global Natural Resources Sales Team: UK Australia South Africa Jamie Campbell Rod Clarkson Hayden Smith Tel: +44 (0) 20 7597 5038 Tel: +61 (0) 2 9293 2278 Tel: +27 (0) 21 416 1401
Matt Martin USA
Tel: +61 (0) 2 9293 2168 Thomas Lawrence
Tel: + 1 212 2595604

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