🕐23.04.13 - 09:27 Uhr

INVESTEC GLOBAL NATURAL RESOURCES DAILY - MINING - TUESDAY 23 APRIL 2013 - POG L
N, PNA AU, EVN AU, HGM LN, FML LN, CZA LN, SXX LN, DML AU, TIG AU, 486 HK, NCR AU



[cid:image001.png@01CE3FF9.52484E40] Tuesday, 23 April 2013 [cid:image006.jpg@01CE3FF9.752F16F0]
Snapshot � Company news highlights: March quarterlies from Petropavlovsk, PanAust and Evolution, Highland Gold FY12A, Frontier recommences copper operations, Cola of Africa CEO to depart, Sirius planning update, Discover trading halt, Tigers Realm Amaan North drilling, Prokhorov considering Rusal debt purchases, Nucoal corruption case update � Commodity review highlights: Commodities decline on PMI, Positive movements for gold � Other Economic News: China PMI decline � African Resources Update: Egypt Justice Minister quits, union clinging to Assmang recognition � The S&P rallied after the London close - ending the day up 0.47%.

Halliburton rose 5.6% following better than expected numbers.

Far Eastern markets have given up earlier gains to trade lower in response to a weaker than expected Chinese Manufacturing PMI number.

The FTSE is expected to open up 7 points.
Company News � Petropavlovsk (POG LN) Q1 IMS.

POG has produced 137,000oz of gold during Q1 FY13 and is on track to meet its full year target of 760-780,000oz.

Costs are to be in line with those of FY12, although the group has launched a cost-cutting programme, designed to ensure the group is robust in a low gold price environment.

POG has forward sold 46-47% of its gold until March 2014 at an average price of US$1,663/oz.

The group considers its options over the next couple of years in light of weak gold prices - one option could be to delay implementation of the POX plant until 2015.

As of March 2013, net debt stood at US$1.2bn, 10% higher than 31 December 2012 and terms of certain bank facilities have been renegotiated so sizeable payments are now only due in 2016 (previously 2014).

Source: Company Investec view: The focus on POG has shifted from simply keeping its promises and achieving stated production at guided costs to its sizeable debt position.

Theres no getting away from the fact that this company has a lot of debt and must be feeling relatively uncomfortable at the moment, especially given the wobbles in the gold market.

Its hedging is looking smart, and may protect the group from covenant issues which will be tested at mid-year.

Also positive is that initial debt repayments which were scheduled for 2014 have been pushed back to 2016.

That said, this company still faces operating with significant debt until 2019. � PanAust Limited (PNA AU) quarterly production results.

13,753t of copper in concentrate produced at Phu Kham, 12% lower than our estimate of 15,620t.

C1 cash cost of US$1.28/lb, 7.5% higher than our estimate of US$1.19/lb.

Ban Houayxai gold production totalled 24,137oz, 4% lower than our expectation of 25,250oz, 122,265oz of silver produced, 50% higher than our estimate of 81,320oz.

C1 cash cost of US$677/oz were 11% higher than our forecast of US$611/oz.

Full year production guidance remains unchanged with 62-65kt copper in concentrate, 160-175koz of gold and 1.2moz silver (Investec estimates 63.9kt Cu, 168.9koz Au and 1.12moz Ag).

C1 cost estimates for the full year at Phu Kham are guided at US$1.15-1.25/lb, while C1 costs at Ban Houayxai are guided at US$550-600/oz.

Source: Company Investec view: Lower production numbers than our expectations but PNA appears comfortable with achieving guidance for the full year.

Copper production was lower than expected (due to processing of lower grade ore during the quarter), with C1 cash costs 7.5% higher than anticipated (due to major mill maintenance).

Revised mine scheduling due to pit instability restricted access to high grade ore, however, commissioning of the increased recovery project commenced in March (several months ahead of schedule and >US$10m under budget), which should see copper production rise and cash costs fall for the balance of the year.

Ban Houayxai gold production was slightly down on our assumptions, while cash costs were 11% higher than forecast. � Evolution Mining (EVN AU) quarterly production report.

Quarterly production at 84,251oz was below our expectation with the impact of extreme wet weather (over 1.1metres of rainfall in the quarter) on Mt Rawdon greater than we had anticipated.

Average group C1 cash costs were A$918/oz during the quarter.

EVN also announced a new resource and reserve, with reserves increased by 7% and resources up by 10% (on a gold equivalent basis) with no change to assumed commodity prices or cut-off grade since the June 2012 estimate.

EVN also announced its best ever drill result at Mt Rawdon with an intercept of 35m at 24.2g/t.

EVN maintained its production and cost guidance (370-410koz Au-eq, at A$730-A$790/oz) Mt Carlton is ramping up and is not expected to contribute to the P&L until the SepQ13.

Silver concentrate has been produced and is within specification..

Source: Company Investec view: On an absolute basis, costs were well controlled with high unit costs the result of lower production predominantly at Mt Rawdon, but also Edna May where 140hrs processing time was lost to maintenance and storm related power outages.

EVN has brought forward hedging contracts and received price this half is likely to be close to its hedged price of A$1,573/oz.

The result at Mt Rawdon, 50m from the existing orebody, highlights the prior lack of modern, systematic exploration at EVNs assets.

Management expect to beat the lower end of its production guidance range even if Au-eq ounces from Mt Carlton are excluded.

In short, the company is expecting a strong JunQ13. � Highland Gold (HGM LN) FY12A results.

HGM announced EBITDA of $161.8m (+3% YoY) and EPS of 78.8cps (+18% YoY), following the stronger gold production during 2012 of 217koz (+18% YoY).

Operating cash flows of $131m were enough to offset capex of $125m, leaving the company with net cash of $53m (started with $127m but also made a $69m acquisition through the year).

A final dividend of 3p per share brings the FY12A dividend distribution to 7.8p (up 2.8p per share), A subsequent highlight for this year was the US$223m acquisition of the Kekura licence, extending HGMs interest in region and adding c.

2.9moz of resources.

The acquisition is being funded by $250m debt facility.

HGM is targeting FY13E production of 225-240koz.

Source: Company Investec view: This appears to be solid performance from HGM, with a good production base, good cash generation and opportunities for growth and extensions of mine life.

Post commissioning of the new Belaya Gora processing facility, first gold is expected to be poured in May followed by a ramp up to nameplate by the year end. � Frontier (FML LN) recommences copper operations at Benkala, following suspension during the winter months.

The leach pads are being prepared for restart with first cathode likely to be shipped in early June.

FML is to spend capex of $6m, aimed at lifting capacity from the current 7ktpa to 10ktpa.

This follows an earlier announcement that the company had received approval for an additional $17.9m of loans and credit (taking total Sberbank facilities to $52.9m).

Interest rates are 8.5%-9.0%.

Source: Company Investec view: FML is now moving into producer status - unfortunate that copper has fallen from the c.$8,200/t ($3.70/lb) when it suspended operations, to the c.$6,900/t ($3.14/lb) currently.

Our analysts do, however, expect a recovery in the 2H13 and into 2014 to $3.70-3.80/lb. � Coal of Africa (CZA LN) CEO to leave.

CZA has announced that, by mutual agreement, CEO John Wallington is to leave the company as of 31 May when his 3 year contract expires.

The chairman, David Brown, will become the interim CEO.

Source: Company � Sirius Minerals (SXX LN) planning approval update.

SXX has announced that it has now submitted the required additional documentation to the North York Moors National Park Authority.

Source: Company � Discovery Metals (DML AU) trading halt.

DML has requested a trading halt in Australia until Friday 26 April ahead of a financing statement.

Source: Company � Tigers Realm Coal (TIG AU) completes Amaam North drilling program.

Russian coking coal explorer Tigers Realm Coal has completed an initial 3,000m drill program at Amaam North, which confirmed coal seam continuity over 3.1km of strike and 600m down dip with cumulative thickness of 2m to 11m.

Management expect to announce a maiden resource from Amaam North in JunQ13 and complete a prefeasibility study in SepQ13.

Source: Company Investec view: We view the results positively and expect a measured and indicated resource of c.

12-16mt to be realised based on the drill program.

This would be sufficient to underpin a low capex, low cost, direct shipping operation mining the Lower Chukchi coal seam at Amaam North, in our view. � Prokhorov considering Rusal (486 HK) debt purchases to boost influence.

Russian oligarch Mikhail Prokhorov is considering buying Rusal debt to boost his influence over the company and encourage Rusal to divest its stake in Norilsk Nickel according to comments by Onexim CEO Dmitry Razumov.

Onexim, Prokhorovs holding company, is currently a minority shareholder in Rusal with 17% ownership.

Source: Bloomberg Investec view: Disposal of its Norilsk Nickel stake would help Rusal deleverage and is a potential share price catalyst, although unlikely as Prokhorovs ability to influence Rusal managements decisions is limited. � Nucoal Resources (NCR AU) ICAC commissioner proposes a solution under the worst case scenario.

During yesterdays hearing the ICAC Commissioner put forward a potential solution for NCR, if he were to find corruption occurred in the granting of the Doyles Creek exploration property, whereby NCR would pay to the Government the "value forgone" by the government by not holding a competitive tender for the license.

Source: Company Investec view: We stress that this applies only if a finding of corruption is brought down and would not necessarily apply.

However, it represents a far more benign worst case scenario than many in the market may have imagined.

In our view, NCR are only likely to accept such a proposal if a fairly nominal valuation is applied, given similar tenements have since been granted subject only to repayment of government exploration costs.

It would appear to offer potential for a pragmatic and relatively quick resolution in our view
[cid:image007.png@01CE3FF9.752F16F0]
Commodities News � Commodities decline on China PMI.

The Standard and Poors GSCI index of 24 raw materials fell 0.2% in Asia.

3 month copper fell by 1.2% to US$6,853/t and West Texas crude oil lost 0.5% to US$88.75.

Source: Bloomberg � Positive movements for gold.

Gold futures climbed to the highest in the last week as japan pushes ahead with stimulus measures.

Source: Bloomberg
Other economic news � China April flash manufacturing PMI decelerates to 50.5.

The HSBC/Market China flash manufacturing PMI for April was 50.5, down from 51.6 in March.

While the reading signals that the Chinese manufacturing sector continues to expand, it was worse than the Bloomberg consensus median of 51.5.

Source: Bloomberg
African Resources update � Egypt Justice Minister Mekky quits over cleansing call.

Egypts justice minister has resigned, following demands from Islamist supporters of President Morsi for the "cleansing" of the judiciary, aimed at removing all that were active during former President Mubaraks rule.

There have been attempts to pass a new bill which critics argue would give the Muslim Brotherhood-dominated government greater control over the judiciary.

The bill envisages the lowering of the retirement age of judges - a measure that would mean the forced retirement of some 3,000 judges.

Source: BBC � Solidarity clinging onto Assmang recognition.

Trade union Solidarity has filed for an interdict to prevent Assmang (ASG SJ) from terminating the unions recognition agreement.

ASG is doing this on the grounds that the union does not meet the minimum representation threshold for recognition.

Source: MiningWeekly
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