🕐20.03.13 - 09:27 Uhr

INVESTEC GLOBAL NATURAL RESOURCES DAILY - MINING - WEDNESDAY 20 FEBRUARY 2013 -
GLEN LN, SDL AU, AUE LN, ENRC LN, 3738 HK, 12258 HK, XTA AU, NCM AU



[cid:image001.png@01CE2542.12419440] Wednesday, 20 March 2013 [cid:image006.jpg@01CE2542.218CFC00]
Snapshot � Company news highlights: Sundance takeover saga takes another turn, Rio Tinto flags lower iron ore prices, Aureus Mining mandates banks for debt finance, ENRCs FY12 reflects poor pricing environment, China Hanking CY12 results, China Non Ferrous Mining CY12 results, Rio Tintos Oyu Tolgoi project attracts US$3.65bn in financing, Rio Tinto and Xstrata to cut 200 jobs, Newcrest supports all-in gold cost reporting. � Commodity review highlights: New South Wales coal exports total 13.6Mt in January, Japans nuclear power generation falls from 30% to 2%,shiploading halted at Hay Point, Abbot Point and Dalrymple Bay Coal Terminal � Other Economic News: EU car sales decline � African Resources Update: Exxaro strike continues. � FTSE futures up 17 points (7am): Following a positive move from Asia (Nikkei up 2.03% and Hang Sang up 0.85% and Shanghai 2.7%)as markets are optimistic regarding manufacturing data from HSBC due out tomorrow morning.

There is also a potential rotation out of Thai, Indonesian and Filipino stocks into China as market commentary suggests economic growth assumptions are priced into stocks.

The Cyprian government rejected the levy on bank accounts blocking the EU/IMF rescue package.

The ECB will meet today to look at alternatives and giving the nation more time to find a resolution as speculation mounts that Russia will lead a bailout package.

Markets look to start pushing through the perceived negatives associated with Cyprus and the impact on the greater Eurozone recovery and focus on the potential for positive news ahead of the FOMC announcement later today.

Base metals are recovering well this morning - copper u 0.7% and zinc up 0.33%. Economic data out today:- UK - MPC minutes, unemployment (forecast 4.7%), 2013 budget; US - FOMC announcement and press conference (forecast IR at 0.5% unchanged)
Company News � Sundance (SDL AU) takeover saga takes another turn.

Liu Han, the chairman of Hanlong Group, which is the company bidding for SDL, is reported to have been arrested in Beijing, following the National Party Congress.

There are no further details.

This adds another chapter to a takeover saga that has already seen the arrest and sentencing in Australia of Hanlong Mining executives for insider trading.

Source: Bloomberg Investec view: This adds another chapter to a takeover saga that has already seen the arrest and sentencing in Australia of Hanlong Mining executives for insider trading.

As a related aside, Investec has a note out today, following up on news that SDL is in talks with Glencore (GLEN). � Rio Tinto (RIO LN) flags lower iron ore prices.

Greg Lilleyman, president of RIOs Pilbara iron ore operations, told an industry conference in Perth on Tuesday that additional exports from Australia and a slowing in steel demand growth would hurt the iron ore price in the 2H13.

Source: AFR Investec view.

The comments are nothing new and RIO CEO, Sam Walsh, has been providing the same warnings for four months.

Investec has an update note out on RIO, outlining iron ore pricing scenarios � Aureus Mining (AUE LN) mandates banks for debt finance.

AUE has mandated Nedbank and RMB to provide up to US$108m project finance at a cost of c5%/year with no requirement to hedge.

The banks still need to complete their credit approval process.

The group also released its FY12 results, reporting a loss for the year of US$5.8m.

YE12 cash was US$79.4m following the equity issue.

The group remains on track (for its revised target) to pour first gold before the end of FY14.

Source: Company Investec view: Assuming credit approval from the mandated banks, AUEs funding package is a significant positive for the company which should then be able to push ahead in constructing its New Liberty mine in Liberia.

We view the terms (i.e.

interest of 5% p.a.

and no hedging) as attractive and believe they are an endorsement of the quality of the project. � ENRC FY12A reflects poor pricing environment.

Reported loss of $0.8bn (vs.

profit of $2.0bn in 2011) was impacted by $1.5bn of impairments and provisions.

Revenues have declined 15%, with underlying EBITDA falling 45% YoY to US$1.89bn.

EPS (adjusted) of 41cps vs.

Bloomberg consensus of 50cps.

No final dividend is proposed (interim dividend was 6.5cps).

ENRC ended the year with available funds of US$743m and borrowings of US$5,833m.

ENRC is planning capex of $1.75bn in 2013 ($2.35bn in 2012).

While ENRC states that the ferrochrome market remains "fundamentally over-supplied", it production is expected to continue at full capacity.

Source: Company Investec view.

ENRCs continued investment strategy should reinforce its position as a low-cost ferrochrome producer, while also diversifying its earnings base.

Its emphasis on maintaining its ferrochrome production levels reflects its market position, but does not bode well for higher costs producers. � China Hanking (3788 HK) CY12 results.

China Hanking reported CY12 earnings of CNY360m versus CNY456m in CY11 despite an increase in iron ore production.

Iron ore production in CY12 of 6.9mt was up 18.7% YoY and iron ore concentrate production of 1.6mt was up 6.2% YoY.

Average realised iron ore prices were CNY830/t in 2012, down 21.8% YoY, whilst costs of CNY355/t were up 21.5% versus CNY292/t in 2011).

Source: Company � China Nonferrous Mining (1258 HK) CY12 results.

Attributable profit for China Nonferrous Mining, which owns copper mining and smelting assets in Zambia and the DRC, rose 40.7% YoY to USD98.5m in CY12 as mine production increased and CCS smelter production benefitted from minimal maintenance shutdowns.

Revenue rose 19.3% YoY to USD1,284m.

China Nonferrous continues to progress the expansion of its CCS smelter to 250ktpa copper from 150ktpa by the end of 2013; the 20ktpa copper Mabende leach project by the end of 2013; the 3ktpa Kakoso tailings leach project; and the Chambishi Southeast Mine, which China Nonferrous expects will produce c.

63ktpa contained copper from 2016.

Source: Company � Rio Tintos (RIO AU) Oyu Tolgoi project attracts almost US$3.65b in financing.

The result is nearly double the US$2b sought from commercial banks for the project finance deal.

The US$6.6 billion copper and gold project, Mongolias single biggest investment will account for almost a third of the economy at full capacity.

The Oyu Tolgoi facility is controlled by Rio Tinto through its 51% stake in Turquoise Hill Resources Ltd.

which holds a 66% stake in the project.

The Mongolian government owns the remaining 34% stake.

Source: Bloomberg. � Rio Tinto (RIO AU) and Xstrata (XTA AU) to cut 200 jobs.

Following RIOs significant (US$3b) write-downs to their Mozambique coal investments and XTAs late 2012 restructuring of its Australian coal business (600 retrenchments), the two companies have announced that they expect to make another 100 retrenchments each.

The moves appear to be part of an effort to ensure profitability in the sector, which has come under increasing pressure due to the weakness in coal pricing, particularly in A$ terms.

Union reaction to the plans has been negative, with the moves labelled "disgusting" and "disappointing".

Source: Mining News Premium � Newcrest (NCM AU) supports all-in gold cost reporting, with the CEO, Greg Robinson, suggesting the industry averages around $US1,300-1,400/oz.

He said NCM was behind the World Gold Council push for gold producers to report "all-in" cash costs to give all stakeholders a clearer picture of industry costs, while stating that labour costs were around 40% of NCMs total costs.

Source: MiningNews
[cid:image007.png@01CE2542.218CFC00] Commodities News � New South Wales coal exports total 13.6mt in January (up 11% YoY).

Approximately 46% went to Japan, 20% to China and 18% to South Korea.

The split was 74% thermal coal and 16% coking coal.

Source: TEX Report � Japans nuclear power generation falls from 30% to 2%.

Power generation from fossil fuels rose to 90% of Japans total electricity output during 2012.

Before the Fukushima nuclear disaster in 2011, nuclear power generation accounted for about 30% of Japans total generation.

LNG-fired thermal power generation has grown the most, up 15% on 2011.

Source: TEX Report � Ship loading halted at Hay Point, Abbot Point, and Dalrymple Bay Coal Terminal (DBCT).

Strengthening winds from ex-tropical cyclone Tim have brought a halt to ship loading at DBCT as a precaution against damage to both ships and port infrastructure.

The shutdown is not expected to cause overall delays as in-loading operations will continue, replenishing the DBCT stockyard which has sufficient capacity for "days".

Similarly, ship loading has been suspended at Hay Point Coal Terminal and berthing at Abbot Point has been restricted in response to the weather conditions.

Source: Inside Coal.
Other economic news � EU car sales decline.

Given the backdrop of rising unemployment, new passenger car registrations in the EU fell by 10.5% in February, compared to the prior year.

The outlook for the EU during the rest of the year also looks poor, and industry experts suggest this may result in 5-10% fall in the overall market.

Source: FT Investec view: The continuing decline in car sales is bad news for platinum producers.

Platinum group metals (PGM) are used in autocatalysts around the world but, given the higher proportion of diesel cars in Europe, this points to a weaker outlook for platinum which is used primarily in diesel vehicles.

While the disconnect between PGM supply and demand is now starting to be addressed to some extent by the miners, we need a marked increase in PGM demand to revive this sub-sector. African Resources update � Exxaro (EXX SJ) strike continues.

EXX has put an 8 point proposal (including an offer to pay quarterly bonuses early) to its workforce in a bid to stop the strike but this has been rejected by the NUM, meaning the strike continues into its third week.

EXX will now apply to the Labour Court for an interdict forcing workers back to the mines.

There are now fears of electricity disruptions at power stations which EXX supplies coal.

Source: MiningMX
Investec Global Natural Resources Research Team: UK Australia Hong Kong South Africa Hunter Hillcoat Tel: +44 (0) 20 7597 5182
Tim Gerrard Tel: +61 (0) 2 9293 2168
Matthew Whittall Tel: +852 3187 5075
Albert Minassian Tel: +27 (0) 21 416 1454
Marc Elliott Tel: +44 (0) 20 7597 5189
Colin McLelland Tel: +61 (0) 2 9293 2140
Leavitt Pope Tel: +852 3187 5074
Louise Collinge Tel: +44 (0) 20 7597 5779
Simon Haggarty Tel: +61 (0) 2 9293 2462
Investec Global Natural Resources Sales Team: UK Australia Hong Kong South Africa Jamie Campbell Tel: +44 (0) 20 7597 5038
Rod Clarkson Tel: +61 (0) 2 9293 2278
Will Robbins Tel: +852 3187 5098
Hayden Smith Tel: +27 (0) 21 416 1401
USA Thomas Lawrence Tel: +1 212 2595604
Matt Martin Tel: +61 (0) 2 9293 2168
Alistair Roberts Tel: +852 3187 5097
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