🕐28.03.13 - 10:27 Uhr

INVESTEC GLOBAL NATURAL RESOURCES DAILY - MINING - THURSDAY 28 FEBRUARY 2013 - A
NTO LN, BAO LN, HUM LN, AXM LN, BDR AU, NCM AU, SDL AU, BTU AU, POG LN, MIRL LN, FDI LN, 1733 HK, 1208 HK, 2600 KH, 2899 HK, 347 HK



[cid:image001.png@01CE2B8B.C3F38CD0] Thursday, 28 March 2013 [cid:image006.jpg@01CE2B8C.29D0F920]
Snapshot Company news highlights: Antofagasta about-turns on Antucoya, Baobab completes Tete PFS, good drill results from Hummingbird, Alexander raises �750k, Beadell raises $25m, Newcrest production guidance downgrade, Sundance-Hanlong update, Bathurst gets approval for Escarpment, FY12A results from Petropavlovsk, Minera, Firestone, Winsway, MMG, Chalco, Zijin, Angangsteel � Commodity review highlights: Gold heads for worst quarter since 2001 � Other Economic News: Mongolia softening its stance, Mongolian government looking for Tavan Tolgoi rail partner � African Resources Update: FT examines SA prospects, SA credit growth sub 8% � FTSE futures - off 3 points (7:10) - despite a 120 points fall from the opening bell in the US, the Dow managed to claw back to close down only 33 points.

Most of the damage was due to a slip in pending American home sales and the risk of the Cyprian banking disaster spilling over to the other parts of the EU that are under on-going financial pressure.

The Chinese index sank 2.8% as restrictions imposed on wealth management products spurred concerns that growth in bank earnings will be impacted leading to a slow-down in the economy.

Asian markets reacted according with the Nikkei off 1.26%, Hang Seng off 0.89% and ASX 200 off 0.57%.

In Europe, German retail sales for Feb rose 0.4% versus the 0.6% contraction forecast however with the world watching the impact on the capital controlled Cyprian banks reopening today the positive impact will be subdued. Economic news out today: US - 4QGDP (survey 0.5%), 4Q personal consumption (survey 2.1%), March initial jobless claim survey 340k), Chicago PMI (survey 56.5).

EU - German March unemployment rate (survey 6.9).
Company News � Antofagasta (ANTO LN) has announced its intention to resume the development of its Antucoya project, which it is developing in JV with Marubeni which has a 30% stake in the project.

The company expects development costs of US$1.9bn of which US$500m has already been incurred (and since impaired) prior to the suspension of development at the end of 2012.

Antos share of the financing of Antucoya is expected to be partly funded through debt.

Operations are expected to start in 2015 producing 85ktpa over the initial 10 year mine life which should extend for around 20 years.

Previously the company had estimated a capex of US$1.7bn producing 80ktpa Cu at a cash cost of 145c/lb in the first five years of operation and 155c/lb over the remaining 20 year mine life.

Source: Company Investec View: Having only just written down Antucoya the action could be perceived as a little confusing, although we understand the rational.

The development is a leveraged play on strong copper prices since the capital requirement is substantial and the cash costs are likely to have risen since last guided.

At current copper prices (c.

US$7,700/t / 350c/lb) the mine would be likely be NPV accretive, however at more conservative assumptions the project may not add value.

The long life of the asset c.

20 years will see significant contributions at high copper prices, and the companys balance sheet can afford this sort of investment.

The company may trade higher in response to this development however, from a valuation perspective it appears unlikely to add value at the current time. � Baobab (BAO LN) completes Tete PFS.

The pre-feasibility study had confirmed the economics of a long-life (+37yrs) 1mtpa pig iron operation.

Capex is estimated at US$1.4bn, with estimated opex costs of $225/t, before the potential for vanadium by-product credits (potentially $65/t pig-iron Eq).

This would make it one of the worlds lowest cost producers.

Source: Company Investec view.

While the project is 15% held by the IFC, raising c.$1.4bn of capital in the current market would still be a daunting task.

Fortunately, BAO has still to complete a definitive feasibility study (DFS), which is now underway.

It has access to �17m equity line facility from Dutchess Opportunity Cayman Fund Ltd (last reported position still had �13.8m available). � Hummingbird Resources (HUM LN) releases positive results from its FY13 infill drilling programme.

The group has reported results from the first 6 holes at Tuzon, totaling 1,678m.

Intersections include: 20.31m at 2.69g/t Au, 7.26m at 2.91g/t Au and 9.12m at 2.18g/t Au.

HUM aims to increase the confidence category of its resource from inferred to measured and indicated.

Source: Company � Alexander Mining (AXM LN) raises under �1m in placing.

AXM has raised �751,000 through issuing new shares at 4p.

The proceeds will be used to fund working capital.

Source: Company � Beadell Resources (BDR AU) completes A$25m institutional placement.

Shares were placed at A$0.91/share by way of an institutional book build, with the price representing a 3.2% discount to the 27 March 2013 closing price, and equal to the five-day volume weighted average price..

The Company has indicated that ~US$8m of the raising will be used to pay down outstanding capital expenditure invoices on the Tucano CIL Gold Plant, with the remainder used to bolster the Companys balance sheet and cash reserves.

Source: Company. Investec view.

We note this follows on from previous financings that should have ensure the company was fully financed to get the mine fully up and running � Newcrest Mining (NCM AU) production guidance downgrade.

NCM has advised that the production ramp-up of Cadia East and the Lihir Million Ounce Plant Upgrade (MOPU) is progressing in line with expectations.

However, it has been found that repairs are necessary on autoclave 1 (part of the original Lihir plant), and this should take 5 to 7 weeks to complete.

NCM has therefore reduced FY13 gold production guidance by c.10% 2.00-2.15moz.

Annual copper production guidance of 75-85kt remains unchanged, as does guidance for full year site costs and capex.

Source: Company. � Now what? Hanlong missed deadline for Sundance (SDL AU) bid.

Chinas Hanlong Mining informed SDL that it would miss a key deadline in the bid: delivering a credit-approved term sheet by March 26.

The two firms now enter into a five-day good faith consultation period.

If the parties still fail to reach an agreement, the scheme implementation agreement could be terminated.

Source: Company Investec view.

Should the bid fail, this could be a genuine test of the markets appetite for iron ore in the region, Chinas in particular.

While the Hanlong bid was not bound by exclusivity agreements, the reality is that Chinese firms were unlikely to compete with one another, while Chinese firms were natural candidates (strategic partners) for development of the infrastructure. � Background to Hanlong chairman arrest: reads like a Quentin Tarantino script.

The chairman of Hanlong, Liu Han, cannot be contacted.

Unconfirmed reports from the official Xinhua News Agency, suggests that he is in police custody in Beijing, under investigation for sheltering a murder suspect, Liu Yong, his brother.

Liu Yong in 2009 apparently incited gunmen to kill three people at an outdoor teahouse.

Adding to the intrigue, it appears that Liu Han himself was the target of a failed assassination attempt in 1997, initiated by a disgruntled businessman.

The failed hit man was executed in 2006 for killing another man who had threatened to expose the murder plot.

Source: Bloomberg � Bathurst Resources (BTU AU) welcomes positive decision on Escarpment.

The Environment Court has made an interim decision on the Escarpment Mine Project near Westport, and has announced that consents are likely to be granted provided details of certain conditions are worked out by the parties who have been given three weeks to agree to a timetable to complete the case.

Bathursts Managing Director, Hamish Bohannon, has indicated that the Company is now reviewing the detail of the decision and will respond to the Courts request to finalise the details of conditions so development can start as soon as possible.

Source: Company. � Petropavlovsk (POG LN) reports FY12 results.

POG produced 710,400oz of gold, up 13% YoY and beating its target of 700,000oz.

The group reported revenue of US$1.4bn, EBITDA of US$488m and EPS of 54c, broadly in line with Bloomberg consensus of 58c.

Capex was US$408m and net debt was US$1.1bn.

FY13 production guidance is for 760,000-780,000oz and production during the first two months of FY13 has been on budget.

Source: Company � Minera IRL (MIRL LN) reports FY12 results.

MIRL has reported gold sales of 27,462oz at a cash cost of US$581/oz, revenue of US$46m and net profit of US$3.3m, down 66% on last year due to planned lower gold production.

As of 31 December 2012, the group had cash of US$6.2m but undertook a fundraising recently and raised C$15.5m.

Looking ahead, the group awaits its Environmental Impact Assessment for the Ollachea development project in Peru, which is due in H2 FY13.

Source: Company � Firestone Diamonds (FDI LN) weak interim results.

79k carats sold at an average price of US$102/carat from Liqhuhobong.

The pilot plant produced 73k carats at a grade of 24.8cpht and is expected to achieve 160-180k carats per year.

Modifications continue to be made to reduce breakage and damage of larger stones.

Financing discussions are underway following last years DFS on the main treatment plant.

BK11 in Botswana remains on care and maintenance costing US$45kpm, the company has also implemented cost savings initiatives of GBP556k.

Group revenues stood at GBP5.1m in the period with a loss of GBP4.9m.

Cash at the start of the period stood at GBP10.6m and has declined by GBP6.4m.

Source: Company Investec: The poor results reflect the tough operating conditions the company faces with one mine on care and maintenance and another at pilot scale whilst discussions continue to finance the full sized operation. � Winsway (1733 HK) reports CY12 loss of HKD1.62bn.

Winsway, a coking coal trading company active in Mongolia/China and acquirer of Grande Cache, reported a CY12 loss of HKD1.62bn versus a profit of HKD1.05bn in CY11 and versus a Bloomberg consensus forecast of a HKD775m loss.

Source: Company Investec view: Winsway reported record sales volumes of 11mt in 2012.

Earnings were however adversely affected as margins fell with coking coal prices and as the company reduced its Mongolian coal inventory levels.

In 2013 Winsway will attempt to import more coking coal into China from Mongolia, Russia, Australia, Canada and the US.

We would expect Winsways imports from Mongolia to improve as Mongolian Mining Corporation (975 HK) increases production and as SouthGobi (1878 HK) restarts production but difficult to see margins improving without continued recovery in coal pricing. � MMG Ltd (1208 HK) CY12 results and Dugald River financing.

MMG reported a CY12 underlying profit of USD217.5m, 29% lower than CY11.

MMG also announced that it has received an indicative, non-binding commitment from China Development Bank to provide up to USD1bn in financing for the development of the AUD1.5bn Dugald River zinc/lead/silver deposit.

Source: Company Investec view: The company is pointing to construction of affordable housing in China as a key driver of copper demand in 2013.

Six million units are expected to be constructed in 2013. � Chalco (2600 HK) CY12 results.

Aluminium producer Chalco reported a CY12 loss of CNY8.2bn including inventory write-downs of CNY1.5bn.

The loss was flagged to the market in the companys profit warning on 29 January 2013 but Bloomberg consensus forecasts were for a more modest loss of CNY5.5bn.

The loss was attributed to weak aluminium prices and rising bauxite costs.

Source: Company Investec view: In 2012 Chalco produced 17.26mt bauxite, 11.9mt aluminium and 4.22mt primary aluminium.

The company did not provide any 2013 guidance with its results but did say it will focus on cost reduction and improving efficiencies and "strive to significantly reduce its losses".

Difficult to see this without improved aluminium prices. � Zijin (2899 HK) CY12 results.

Chinese gold miner Zijin reported a CY12 attributable profit of CNY5.2bn.

Mined gold rose 15.5% YoY to 33.2t and gold resources increased to 1,192t, up 14.3% YoY.

Source: Company Investec view: Attributable profit fell 8.8% YoY largely due to lower copper segment profit fell and higher finance expense. � Angang Steel (347 HK) CY12 results.

Following in the footsteps of Maanshan who reported yesterday Angang reported a CY12 loss of CNY4.1bn.

Source: Company.
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Commodities News � Gold heads for worst quarter since 2001.

Gold headed for a second quarterly loss as ETF holdings fell by the most on record.

Bullion for immediate delivery on the day was little changed at US$1,606/oz.

During the quarter, gold has fallen 4.1%, in the first back to back 3 month losses since 2001.

Source: Bloomberg
Other economic news � Mongolia softening its stance towards foreign investment.

There are reports that Mongolia is looking to soften its restrictive foreign investment legislation.

Currently all investment in the mining sector above c.

USD70m requires parliamentary approval.

It is being suggested that this requirement could be reduced to include only State Owned Enterprises looking to acquire more than 49% of a company.

There are also reports that amendments to the Minerals Law will be postponed until after the May/June 2013 presidential election Source: Reuters Investec view: We view any steps by the government to improve the acute investment uncertainty in Mongolia as a positive.

See our report Mining Asia - Mongolian Coal dated 18 February 2013. � Mongolian government looking for Tavan Tolgoi rail partner.

The Mongolian government is reportedly looking for a non-state partner to finance a 49% interest in the 260km Tavan Tolgoi to Gants Mod (on the China border) railway project.

Source: Bloomberg Investec view: Mongolian Mining Corporation (975 HK) started construction on this rail line in 2012 after it was awarded a BOT concession.

The government however subsequently revoked the concession.

This rail project was due for completion in late 2014 but now that the government is involved we assume significant delays.

Completion of the rail would materially reduce transport costs between Tavan Tolgoi and the Chinese border and would be a significant positive for Mongolian Mining and other Tavan Tolgoi producers including state owned Erdenes Tavan Tolgoi.
African Resources update � FT examines South Africas prospects: In the early 2000s, South Africa was seen as the one shining light in Africa, but the country is now on track to end the year with its GDP growing at 2.5%, one of the slowest rates on the continent.

It argues that the problems of inequality and unemployment are just as acute as they were two decades ago.

The richest 20% of the population still control 72% of the national income.

Problems of high labour costs and low productivity are affecting the economy.

Source: FT � South African credit growth slowed to 7.9% in February (Bloomberg consensus was 8%).

The South African Reserve Bank kept its benchmark interest rate at 5% last week as inflation remained near the top of the banks 3-6% target range.

Overall spending in SA shrank in the last three months of the year, the first contraction since 2009.

Source: Bloomberg
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