[cid:image001.png@01CE13F6.DC74D590] Tuesday, 26 February 2013 [cid:image003.jpg@01CE13F7.73F2E0B0]
Snapshot � Company news highlights: Rio downgraded by S&P, Mwana increases DRC gold resource by 30%, weak trading statement from Exxaro, Regis Resources, Atlas Iron and Whitehaven Coal all publish results � Commodity review highlights: Gold market mixed signals, Chinese copper demand likely to remain strong, Cape Sized shipping rates could double, Iron ore prices still high although under pressure, Chinese rebar prices under pressure, steel prices up post Chinese New Year, China to halt approvals for new coal mines below 450ktpa capacity, Columbian coal disruptions having limited impact, Chinese coking coal and coal imports up. � Other Economic News: Two recent financings at Northern Minerals and Sumatra copper, Chinese government pushes to speed up land supplies for housing to cool the market. � African Resources Update: AMCU at last signs the peace accord in SA, Zambia lifts mine license fees � FTSE futures - off 100 points (7am) - the inconclusive election in Italy and potential for a hung parliament with Berlusconi having a minority blocking stake in the senate has sparked concerns that the European debt crisis will worsen as populous candidates look to reverse the austerity measures implemented by Mario Monti.

European index futures are all off heavily this morning in response following a 216 point (1.55%) fall in the Dow overnight. � Data due today: US - Feb Consumer Confidence (62.0 fcst), New Home Sales Jan (380k fcst), Dec House Price Index (+0.6% MoM fcst). Company News � Rio Tinto (RIO LN) has had its outlook downgraded by S&P to negative on concerns over high debt levels forcing the minor to make some major asset sales.

Rios debt could rise further over the next two years unless major asset sales take place or iron ore prices remain well above US$120/t cfr China.

Capex requirements and dividend payments will prevent deleveraging.

Gross debt at the end of 2012 stood at US$26.7bn which S&P estimates translates to adjusted net debt of around US$33bn, above the US$30bn level that is commensurate with its rating.

S&Ps credit rating for Rio stands at A-/A-2.

Source: Mining News Premium � Mwana Africa (MWA LN) resource update on Zani Kodo project in the DRC totalling 2.6moz at 2.42g/t Au, some 30% up on the February 2012 resource statement.

The resource is over four deposits trending North west..

Metallurgical test work and preliminary mine design studies are underway on what would likely be an open pit development.

The bulk of the resource is inferred, although 548koz at Kodo Main are in the indicated category. Investec view: These are encouraging results from Mwana Africa, and the grade for an open pit development is certainly attractive.

We await updates on metallurgy and feasibility work to better ascertain the projects potential. � Weak trading statement from Exxaro (EXX SJ), revising downward a previous trading statement issued on 30 November where it simply disclosed that HEPS would be down by more than 20%.

It appears now that the final number will be down by 31-40%.

Headline EPS of 1261c to 1553c is the new guidance vs.

consensus of 1560c and Investec of 1646c.

Result detail 7 March, we suspect it is the continuing disappointment from mineral sands that caused this further downgrade Investec view: We suspect the downward revision is the continuing disappointment from mineral sands operations. � Regis Resources (RRL AU) DecH12 result.

RRL has announced a NPAT of A$66m (A$0.14/share), 73% higher than the DecH11.

Cash costs for the half year came in at A$515/oz, up slightly on the pcp due to minor increases in Moolart Well costs, up 8% to A$534/oz.

Cash flow from operations for the period was A$107m, with cash on hand at 31 December of A$32m, with no debt.

Source: Company � Atlas Iron (AGO AU) DecH12 result.

Underlying earnings came to A$1m, well below market expectations.

AGO had an overall reported loss of A$256m, following the A$257m net impact of impairments to tenements, including to the carrying value of Horizon 1 and Horizon 2 project areas (disclosed 20th Feb 13).

Half year cash costs were in-line with guidance of A$46-50/t.

The average price received (including 6 cargos of low grade 54% Fe ore) was US$98/t, slightly below our estimate of US$99.5/t.

Source: Company Investec view: Despite falling short of expectations, Atlas has managed an underlying profit despite the volatile iron ore market conditions in the DecH12.

Based on the current strength of iron ore prices, lower end of guidance cash costs, fully funded 12mtpa expansion plans, and upcoming catalysts (infrastructure deal), we continue to see upside. � Whitehaven Coal (WHC AU) DecH12 result.

Underlying EBITDA of A$8.2m vs our analyst estimate of A$5.7m.

Adjusted NPAT loss of A$38.8m in line with estimates, with higher finance costs offset by a tax benefit.

Higher than expected significant items (A$19.45m) predominantly relating to the closure of Sunnyside lead a reported loss of A$47.0m.

In keeping with dividend policy, no dividend was declared.

Source: Company Investec view: A poor financial result in a difficult market, but broadly in line with expectations.

WHC is looking closely at cost reduction opportunities across the business, but improved earnings will require higher coal prices or a lower A$, or ideally both.

Todays presentation shows Vickery now pushed back beyond FY17, with the focus squarely on lower-cost Maules Creek tonnages.

WHC hope to receive secondary federal approvals (relating to Water Management Plan cumulative impacts) by the end of March, and hope to commence construction mid-year for first coal from Maules Creek in DecH14.

Development at Narrabri has seen a big turnaround in performance, with WHC now considering standing down the contract development crew, now being out-performed by in-house crews.
[cid:image004.png@01CE13F7.73F2E0B0] Commodities News � Continued market commentary on the end of the gold cycle as improving economic data undermines the case for buying gold.

ETF holdings are falling, most recently reported at 2,536.289t yesterday, undermining prices still further.

However, support for the metal is coming in response to signs of increased demand in China with physical buyers returning to the market after the Lunar New Year celebrations.

Source: Bloomberg � Chinese copper demand set to continue to be strong, with demand expected to rise 8% this year to 8.833mt.

China is a net importer of copper with production expected to be around 6.541mt.

China is planning to urbanise 100m people over the next decade which will support the consumption of the metal whos key usage will be in the electric grid.

A stronger US housing market will also contribute toward rising copper consumption.

Source: Bloomberg � Shipping rates for cape sized vessels to China likely to double from US$5,088/day currently according to consensus estimates.

Chinese steelmakers are set to import extra cargoes as iron ore stockpiles at ports are at a three year low since shipments have been curbed by storms off the coast of Australia.

Iron ore shipments accounts for 75% of single-voyage capsize cargoes.

Spot prices are holding up and reported at around US$151.9/t cfr China for 62% Fe fines product, although there is speculation that prices could fall to US$70/t in Q3.

Source: Bloomberg � Spot 62% Fe CFR Tianjin fell 1.1% yesterday, the 3rd straight session yesterday, despite news that Cyclone Rusty had closed the major WA ports that service more than half of the seaborne iron trade.

Traders are stating that inventories at Chinas ports have been reversing their recent downward trend and are now just shy of 69mt.

However, the falls may be limited as Chinese iron ore prices have now exceeded the cost of imported cargoes for the first time since mid-December, with local iron ore now $0.50/t more expensive. � Rebar prices in China at low level as government likely to implement property control measures.

Prices are reported at US$636/t.

Around 100mt if iron ore capacity is expected to start up again in China in the next month as winter comes to an end.

Source: Bloomberg � Chinas steel market up post Chinese New Year.

All steel prices have risen post the New year, with further increases expected.

Prices of hot-rolled steel coils were 4,290CNY ($681, up $6 from the previous week), cold-rolled steel sheets were $767 (up $9), and galvanized steel $822 (up $6).

Although all slight rises, they maintain an upward trend.

Steel production appears to be rising in response to the higher prices, with the question being whether it feeds into the domestic or export markets.

Source: TEX Report � China to halt approvals for mines with capacity <450ktpa.

The State Administration of Work Safety will no longer approve new coal mines with capacity below 300ktpa, for high gas coal mines, and below 450ktpa for other mines.

Source: Shanghai Daily Investec view: Coal mine fatalities in China continue to be a focus.

In 2012 there were 1,384 fatalities in coal mines and whilst significantly below the 1,973 in 2011 the government is likely to continue to target smaller mines with poor operational management.

Xinhua reports that YtD production at over 5,000 mines has been suspended or shut due to safety concerns. � Lacklustre price response to Columbian situation evidences the oversupplied market.

Stalled production (strikes/government ban) could see Columbia lose almost 3mt production for February, equivalent to Germanys average monthly imports.

The failure of European coal prices to rise more than $2-3/t shows just how oversupplied the market has become.

Torrential monsoon rains in Indonesia, a strike in New South Wales and cyclone-related disruptions in Queensland have also not helped.

Demand for coal in Europe tends to ease in the 2Q as the northern hemisphere moves into spring.

Source: Reuters � China coal imports in January up 54% YoY.

Coal imports in January increased to 25.2mt (up 8.8mt or 53.7% YoY).

Metallurgical imports totalled 7.1mt, an increase of 3.7mt (107.3%) YoY.

Of this, 3.4mt came from Australia and 1.4mt from Mongolia.

Source: TEX Report � Chinese coking coal imports remain elevated in January.

China imported 7.2mt of coking coal in January, up 107% YoY and the second highest monthly total ever after December 2012.

Seaborne imports contributed 5.7mt, a record, while Mongolia contributed 1.4mt, high for the seasonally slow January-February period.

Prices reported paid by importers were flat for seaborne coal (USD145/t vs.

USD147/t in Dec) and improved for Mongolian coal (USD81/t vs.

USD71/t in Dec), although precise comparisons are difficult given coal quality is unknown in each period.

Source: Bloomberg, China Customs Investec view: Chinese coking coal imports have increased due to a combination of low seaborne prices, strong Chinese steel production and safety shutdowns of a number of underground mines in China.

We view high Chinese import levels as a precursor to rising coking coal prices.

Strong imports from Mongolia are likely indicative of a strong start to the year for Mongolian Mining Corp (975 HK).
Other economic news � Financing updates Source: Mining Weekly: � $27m for Northern Minerals (NTU AU).

Fully underwritten one-for-two rights issue (plus a attaching option) to raise A$26.6m towards development of the Browns Range heavy rare earths project, in northern Australia.

The issue is part of a four-stage funding initiative to raise a total of A$58m. � $63m for Sumatra Copper & Gold (SUM AU).

A$63m funding package to develop the Tembang gold/silver project in Indonesia: A$8.4m placement to cornerstone investor, Provident Capital Partners, A$20m one-for-three rights issue and A$35m in project funding from Credit Suisse. � In an effort to stabilise property prices, the Chinese government is pushing local planning authorities to speed up plans for land supplies for housing, with the Ministry of Land and Resources (MLR) ordering local branches to report this years plans for residential land supplies by the end of March.

Chinas land supplies for real estate shrank 4.2% yoy in 2012 to 160,300 hectares with housing land supplies falling 11.5% to 110,800 hectares.

Source: Xinhua.net
African Resources update � Better late than never...AMCU signs mine peace accord.

Mineral Resources Minister Susan Shabangu reconvened on Monday to assure full-house agreement by all main mining stakeholders, including the AMCU, the former absentee.

Mondays meeting followed three meetings last week.

All stakeholders have agreed to the framework, with all workers asked to refrain from violence, intimidation, illegal gatherings and strikes as leaders work to normalise the working environment and formulate implementation action.

Source: MiningNews � Zambia increases mine licence fees to global levels.

The mines department has increased the cost of its mining licences in order to bring them in line with other countries.

The fees for large-scale mining and change of control licences have been increased from 1,800 kwacha ($336) to 28,800 kwacha ($5,373).

The increase is also aimed at deterring speculators.

Source: MiningNews
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