[cid:image001.png@01CE34F8.50D938F0] Tuesday, 09 April 2013 [cid:image006.jpg@01CE34F8.5500C290]
Snapshot � Company news highlights: Alcoa Q1 results, Centamin strong Q1 production, Sundance Resource collapses with deal, Northam Platinum continues to suffer disruptions, Ferrexpo Q1 production report, Kenmare Resources Q1 production update, Alumina read across from Alcoa quarterly, Orosur exploration update, Base resources progress, Oceana Gold ships first concentrate � Commodity review highlights: Chilean miners to hold nationwide strike, Mongolian Mining expects higher coking coal demand, iron ore prices to rise, aluminium outlook, Tata steel to sell UK assets � Other Economic News: Chinese failed mining bids total US$45bn of US$107bn in past 5 years, Chinese inflation less than expected � African Resources Update: French launch last offensive in Mali before withdrawal, New Kenyan president sworn in � FTSE Futures up 40 points this morning.

Overnight the Dow recovered from being down 65 points to close up 48 points as investors speculated first quarter earnings would help equities rebound from the poor performance over the past week which was confirmed when Alcoa released.

Commodity markets are responding very positively to the Chinese CPI number of 2.1% for March, below the 2.5% estimated and 3.2% from Feb.

This should ease the tightening bias for the last 2 months after the PBC governors concerns about rising inflation.

Copper was up 0.82% to US$3.399/lb, nickel up 0.62% to US$16,983/t and Zinc up 0.40% to US$1,862.25/t.

Approaching the close in Australia BHP is up 1.47% to A$33.15 and RIO is up 3.48% to A$56.76.

Copper prices are set to advance further today as Chilean miners strike for 24 hours at Codelco, Anglo and BHP mines. � Asian markets have responded to the Chinese and US reporting news well - ASX 200 up 1.45%, Hang Seng up 1%, and the Nikkei flat at -0.24% points.

The Asian Development Bank said that prising private consumption and strong intraregional trade will spur a pickup in growth in developing Asia in 2013/14 despite weakness in the US and Europe. � Economic data due today: US - NFIB small business optimism (forecast 89.8%), Wholesale Inventories (forecast 0.5%), Wholesale Sales (forecast 1.3%); UK - Industrial production (forecast 0.4% MoM), manufacturing production (forecast 0.4% MoM), trade balance non-EU (forecast - 3.65bn).
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Company News � Alcoa (AA US) 1Q13 result better than consensus.

Alcoa reported 1Q13 earnings of US$0.11/share excluding special items, better than Bloomberg consensus of US$0.08/share and better than 4Q12 earnings of US$0.06/share.

Much of the QoQ earnings improvement was due to productivity gains particularly in the engineered products segment.

Source: Company Investec view: Outlook commentary is mixed.

Guidance is for continued improvement in the engineered products segment (guided to be up 5% in 2Q13) but for additional mining costs of US$20m in Australia, due to a crusher move, and Suriname.

Continued productivity improvements are expected in the primary metals business but there is also expected to be power outages at Anglesey and Warrick in 2Q13 costing US$25m.

Alcoa is forecasting a 155kt surplus in the aluminium market in 2013, which is considerably lower than the forecast surplus of 535kt in 4Q12 due to curtailments.

Alcoa expects a 100kt deficit in the alumina market in 2013, this deficit was forecast at 200kt in 4Q12.

Ultimately Alcoa remains highly leveraged to movements in the aluminium price with a US$100/t movement in the aluminium price expected to have an US$240m impact on net income. � Centamin (CEY LN) delivers a strong start to the year.

In its 1Q13A production results, CEY reported a record 87koz or 27% of the FY13E guidance of 320koz, which was a very good result given that the 2H13 is expected to be the better half.

FY13E costs are expected to be US$700/oz.

The plant exceeded its nameplate capacity of 5mtpa, while the Stage 4 expansion (to 10mtpa rate) remains on course for commissioning by the year end.

Source: Company Investec view: A very good result for CEY, which certainly appears to be doing a better job at managing (and exceeding) market expectations.

Unfortunately for CEY, its investment attractiveness is always going to be tempered by Egyptian political/legal risk. � Sundance Resources (SDL AU) is down ~45% today as it returned to trading post the collapse of the Hanlong takeover deal.

SDL terminated the agreement yesterday with Hanlong after the Chinese company failed to secure funding for its A$1.14bn takeover.

The company states that terminating the agreements will enable it to focus on discussions with other parties.

Source: Company Investec view.

We have a research note out today, "Value abyss across the West African iron ore companies", which illustrates the enormous value gap between the developed and producing companies and the aspirants, with the former trading at 30-40x the latter, when measured on a recovered EV/t basis.

Notwithstanding SDLs share price collapse, it still trades in the mid-range between the two aforementioned groups, suggesting that it is still not in the "too hard" basket. � Northam Platinum (NHJ SJ) continues to suffer disruption as 500 rock drill operators downed tools on 4th April demanding a 38% increase in monthly production bonuses, had not yet returned to work yesterday.

Source: Mining Weekly � Ferrexpo (FXPO LN) Q1 production report - FXPO produced 2,486kt of iron ore pellets (both 62% and 65% product) from its own operations during Q1 2013, some 0.4% higher than the previous quarter and 10.1% higher than Q1 2012.

Total production including third party production was 2,551t.

FXPO will release its Q1 results on 10 May.

Source: Company � Kenmare Resources (KMR LN) Q1 production update - KMR has produced 189,800t of heavy minerals concentrate in Q1, resulting in production of 137,500t of ilmenite and 10,400t of rutile.

Production was 20.9% higher than Q4 2012.

March tonnage was higher than the previous two months since the dredge pond transition to the raised Dunal plateau has now been completed.

However, only 48,500t of ilmenite was shipped during Q1, due to low levels of stocks at the year-end and a subdued market.

The group states that markets for titanium products are still subdued but there are positive signs, as demonstrated by increased shipping activity.

Source: Company. � Alumina (AWC AU) Read through from the Alcoa quarterly.

Alcoas Alumina earnings increased to A$58m, with the minorities line suggesting earnings of US$21m for AWC during the quarter.

The bulk of Alcoas alumina earnings increase over the 4Q12 was driven by LME pricing (+US$23m) with performance issues costing US$6m.

Alcoa expects 52% of Alumina shipments to be on spot or alumina index basis over CY13.

Source: Company Investec view: The increase in expected spot tonnage is a pleasant surprise (up from 48% previously) with a higher margin achieved on spot and index based sales.

AWC expect to see some cost benefits to come through as the lagged effect of the reduced caustic soda price flow through (down to US$300-330/t from US$475/t mid last year), however there is also a likely US$20m cost form a maintenance shutdown of the Anglesey smelter in the coming quarter (once every four years).

Post the CITIC placement net debt now sits just below US$200m. � Orosur Minings (OMI LN) Chile exploration update.

At Anillo, geophysics has identified structures which may contain economic gold-silver mineralisation and OMI will drill these targets in May 2013.

At Pantanillo, geological work has confirmed the evidence of a high sulphidation system.

This area will be drilled in November.

Source: Company � Base Resources Limited (BSE AU) achieves closure of Mukurumudzi Dam.

BSE has announced the closing of the Mukurumudzi Dam as the development of the Kwale Mineral Sands Project continues.

The Dam is the primary water supply for the project, and closure of the Dam ahead of the wet season represents a key milestone in ensuring sufficient water is available prior to commissioning of the processing plant, with practical completion on schedule for the SepQ13.

Source: Company � OceanaGold Corporation (OGC AU) ships first concentrate from Didipio.

OGC today announced that approximately 5,000dt of Cu-Au concentrate from the Didipio Project has been successfully shipped out of the San Fernando port in the Philippines, and is en route to Japan.

The Didipio Project has so far produced over 15,000dt of concentrate, with 1,500dt at the port and a further 8,800dt at the mine site.

First cash receipts for the project are expected in mid-April, with the next shipment of 5,000dt expected in late April.

Source: Company Investec view: With ramp up at Didipio progressing well we expect confirmation that the project will start contributing to the P&L to be included with OGCs March quarter production report.
[cid:image007.png@01CE34F8.5500C290] Commodities News � Chilean copper mines to hold nationwide strike today with unions vowing to halt all mining activity.

Workers at Codelco, Anglo American and BHP are to down tools.

It is not known whether Antofagasta and other miners will suffer a similar interruption, although the unions are looking to stop 100% of the countrys output.

In addition, major mine Collahuasi (produced 282kt Cu last year with 160ktpa expansion schedule for this year to achieve 400ktpa) faces a 45 days stoppage to replace a motor in a production line responsible for 70% of output.

In contrast to the near term supportive pressure for copper that is pushing up prices, Arubis is forecasting a 350kt concentrate surplus.

Source: Bloomberg Investec View: Clearly the copper price has fallen considerably since February highs, and on-going supply disruptions are reversing the trend.

However, it is of concern that producers and other market participants are talking about oversupply as operations, particularly in Chile, build up production. � Mongolian Mining (975 HK) expects increased coking coal demand from China.

Mongolian Mining believes the annulment of a 40% export tax on metallurgical coke exports effective from 1 January 2013 could result in a 20mt increase in coking coal demand from China.

Chinas metallurgical coke exports averaged 15mt between 2000-2007 before the tax was imposed in 2008, but were just 1mt in 2012.

China imported c.

56mt of coking coal in 2012.

Source: Company � In iron ore market, Chinese steel-rebar futures rose a further 0.7% to 3,861 Yuan (US622/t) as construction activity gathers pace as the Northern hemisphere winter ends.

Spot iron ore prices reacted yesterday closing up 1.3% to US$137.60/t.

Traders are likely to be looking to buy ahead of the peak season.

Source: Bloomberg � Aluminium outlook - Aluminium is the worlds most widely used metal after steel, yet hedge funds are still shying away from the metal.

Rusals CEO calls for discipline and proper caps in terms of output.

A sharp rally in aluminium in London last week sent the metal to a 5 month high of US�2,199/t, buoyed by QE discussions, but this was seen as a selling opportunity.

That said, Alcoa posted its Q1 results which demonstrated a 59% increase in net earnings due to strong demand from aerospace and automotive users.

Source: FT � Tata steel is considering selling some UK assets as weaker demand leaves factories underutilised.

The UK plants were acquired as part of a US$12bn takeover of Corus Group 6 years ago, and their sale would help cut the groups debt which is understood to be significant.

Tata steel generates around 2/3 of its output in Europe which has capacity to produce 210mtpa of steel, against a normal market demand of 150-160mt.

Tata Steel needs to redeem around US$5.5bn in bonds and loans by November 16.

Source: Bloomberg
Other economic news � Failed Mining bids by Chinese companies total around US$45bn in the past 5 years, having attempted US$107bn worth of mining takeovers implying a 42% failure rate.

In the same period, US$562bn of deals have been proposed globally of which US$180bn (32%) didnt succeed.

The latest failure of the US$1.2bn takeover of Sundance Resources by Hanlong is the largest since Minmetals abandoned its C$6.04bn takeover of Equinox Minerals in 2011, prior to that the biggest deal was the US$19.5bn proposed investment in Rio Tinto by Chinalco.

The government is planning to implement a more stringent approval process with regards to overseas takeover deals.

Source: Bloomberg Investec View: Some of the Chinese takeover deals have been contentious for a number of reasons such as the Rio investment.

In addition some of the deals that have been concluded have been relatively unsuccessful such as Citic Pacifics US$8bn Sino Iron project in Australia that has seen its budget blow out. � Chinese inflation eased more than forecast from 10month high as food price gains eased, with CPI up 2.1% in March yoy, versus an expectation of 2.5%.

Food prices were up 2.7% yoy vs.

6% up in February.

Producer prices fell 1.9% yoy a 13th straight decline.

The news eases concerns over further fiscal tightening from the Central Bank.

China is targeting inflation of around 3.5% this year.

Source: Bloomberg
African Resources update � French launch last offensive in Mali, before withdrawal.

French forces have launched a major offensive against militants in northern Mali, said to be the last major French-led operation before France starts reducing its military presence.

Militants have been driven out of northern cities and towns since France intervened militarily in January.

Source: BBC � New Kenyan president finally sworn in.

Uhuru Kenyatta, heir to one of the largest fortunes in Kenya, is to be sworn in as Kenyas fourth president, following his narrow victory in March against Raila Odinga.

Mr Kenyatta beat Mr Odinga by 50.07% to 43.28%, avoiding a run-off by just 8,100 votes.

Mr Odinga challenged the result, but has said he will respect the recent Supreme Court ruling in Mr Kenyattas favour.

Mr Kenyatta is due to appear at the International Criminal Court (ICC) for his trial in The Hague later this year, accused of crimes against humanity, related to post-election violence five years ago that left more than 1,200 people dead.

He denies the charges.

Source: BBC
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