🕐25.04.13 - 09:54 Uhr

INVESTEC GLOBAL NATURAL RESOURCES DAILY - MINING - THURSDAY 25 APRIL 2013 - KAZ
LN, IFM LN, MWA LN, SRX LN, NCCL LN, 486 HK, ABX US, HCH AU



[cid:image001.png@01CE418B.A6DE7720] Thursday, 25 April 2013 [cid:image006.jpg@01CE418B.BF5DD3E0]
Snapshot � Company news highlights: Investec hosting conference call with Mongolia deputy mines minister 11am, research update on iron ore, Kazakhmys, International Ferro Metals quarterly production reports, Mwana operations update, Sierra Rutile 2012 results, Ncondezi signs power framework agreement, Rusal and Interros sell stake in Norilsk, Hot Chili identifies second project � Commodity review highlights: US gold coin sales accelerate, Central Banks expected to increase gold purchases. � Other Economic News: China cuts diesel and gasoline prices � African Resources Update: Eskom raises concerns over coal supplies, Exxaro considers selling stake in NCC, SA to send troops back in CAR � FTSE futures down 7 points (7am) - following a flat night on the S&P thanks to disappointing durable goods data (down 5.7% and a 7 month low versus the -3% forecast).

Asian markets are rallying this morning (Nikkei +0.60%, Hang Seng +0.98%, ASX200 closed for Anzac Day) as markets along with gold and oil speculate that central banks will spur monetary easing to boost the economic recovery.

South Koreas economy grew faster than expected at 0.9% in the previous quarter as the government front-loaded spending.

Markets are starting to speculate a rate cut in Europe in early May. � Commodity markets:- precious metals up - gold +0.96% to US$1,445.77/oz, silver + 0.32% to US$23.259, platinum +0.74% to US$1,441.40/oz.

Copper has rebounded well from lows, currently trading up 1.28% at US$3.2055/lb, nickel +0.93% to US$15,214/t and zinc +2.20% to US$1,893.50/t.

In commodity news both the Russian and the Kazakhstan governments increased their gold reserves for a 6th straight month in March ahead of the price slump.

Despite the upwards moves we have seen over the past few days markets remain concerned that central governments will look to diversify reserve positions away from the physical and into equities. � Economic data due today: - US - initial jobless claims (forecast 350K), continuing claims (3060K); EU - Spanish unemployment 1Q (forecast 26.50%), German government macroeconomic forecast.

UK - GDP 1Q actual (forecast 0.1%), Feb index of services MoM (forecast 0.2%). EXTEL: If you appreciate these daily reports and research published by the Investec Mining team we would be very grateful for your vote.

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Many thanks Company News � Investec is today hosting a conference call with Mongolias Deputy Minister of Mining, at 11am UK time.

The Deputy Minister is to speak about the Governments stance towards the mining sector and is reportedly eager to demonstrate that Mongolia is "open for business".

The call should provide and interesting read-through for Rio Tintos (RIO LN) Oyu Tolgoi.

There will be a Q&A after. � Research update note on iron ore sector, following our analysts quarterly review of commodity price assumptions (only very mild changes).

Iron ore equity prices continue to track lower, notwithstanding the fact that the underlying iron ore price remains remarkably resilient in the face of a broad commodity price rout.

While we acknowledge that there are market concerns of a looming glut of iron ore supply, we remain of the view that prices can be maintained around current levels for several years, enabling the new producers to entrench their positions.

The note includes three changes of recommendation. � Kazakhmys (KAZ LN) Q1 production.

KAZ produced 73,000t of copper cathode during Q1 2013, putting the group on track to meet its full year production targets of between 285-295kt of copper cathode.

By-product production is also on track to meet full year production targets.

Net power generation from Ekibastuz was down 7% compared to Q1 2012.

Source: Company Investec view: KAZ has had a good start to the year.

While the milder weather in Kazakhstan has clearly aided mining operations, it marginally adversely affected the power generation unit.

With KAZs copper production on track, the key item in investors minds will obviously be the comings and goings of its associate. � International Ferro Metals (IFM LN) Q1 report indicates 34.172kt production as expected and 41.63kt of sales mostly to Europe.

One furnace is operating, whilst the other is off line to participate in the Eskom electricity buy-back agreement that runs from 15 Feb to 31st May.

Furnace 1 was shut down for 6 weeks for maintenance and ramped back up in March.

The co-generation plant produced 4.1% of the power requirement in the period achieving over 10% by quarter end.

Net borrowings decreased from ZAR436m at end Dec, to ZAR425m at end March largely as a consequence of reduced working capital, with operations ZAR5m cashflow positive in the period.

Looking ahead the quarterly ferrochrome price settlement was up 14.5c/lb to 1.27c/lb.

Inventories are expected to fall by around 6kt this quarter from 8,358t, to be restored to 10kt once both furnaces are operating.

Source: Company � Mwana Africa (MWA LN) operations update.

Gold output from Freda Rebecca for the 12 month period to 31 March was 65,000oz, a 36% increase on the previous year.

C1 cash costs were US$883/oz.

Following the leach tank failure which was reported in February, MWA has minimised disruption by recommencing processing on 1 April using an interim tank configuration.

At Zani Kodo, MWA now has a 2.6Moz gold resource.

Source: Company Investec view: Zimbabwe is not an easy country in which to operate and we believe that MWA is doing a good job there.

Given that processing is currently through an interim tank configuration, it appears that some more work is still required to restore the failed leach tank. � Sierra Rutile (SRX LN) FY12 results - SRX has reported FY12 revenue of US$179m, up from US$55m in FY11.

EBITDA was US$108m and net profit was US$84m.

This financial result was achieved from a 39% increase in rutile production YoY to 94,500t.

During the year, the Lanti dry mining project has been completed and the Gangama dry mining pre-feasibility study and Sembehun dredge scoping study were also completed.

Source: Company � Ncondezi Coal (NCCL LN) signs power framework agreement.

NCCL has concluded its power framework agreement with the Mozambique government, which endorses the governments support of the project and intention to grant all permits required.

Source: Company Investec view: This is the positive news which NCCL has been waiting for.

The group can now push ahead in negotiating off-take agreements with potential power off-takers and source finance. � Rusal (486 HK) and Interros sell 5.87% of Norilsk Nickel to Abramovich.

In December 2012 Rusal and Interros agreed to sell shares in Norilsk Nickel to Crispian Investments a company affiliated with Mr Abramovich.

The announced sale of 3.87m shares at US$160/share is part of an on-going attempt to settle various disputes and claims between Rusal and Interros.

Source: Company � Barrick Gold (ABX US) Q1 results ahead of estimates as costs were lower than expected taking pre-exceptional EPS to 92c/share (86c/share expected).

Total cash costs stood at US$561/oz versus US$540/oz a year ago.

Capital spending is expected to fall to US$5.2-5.7bn from as much as US$6.3bn.

All in sustaining costs are expected to be US$950-1,050/oz versus a February forecast of US$1,000-1,100/oz.

The company may suspend work on the US$8.5bn Pascua Lama project in Peru.

Source: Bloomberg Investec View: It is good news to see the worlds largest gold miner start to get costs under control, however the gold pricing environment makes the outlook uncertain. � Hot Chili (HCH AU) announces second project yesterday with copper gold porphyry Frontera, 70km from flagship Productora project with highlighted drill intercepts including 256m at 0.5% Cu and 0.3g/t Au from 72m down hole, 188m at 0.5% Cu and 0.4g/t from surface, 122m at 0.5% Cu and 0.3g/t Au from 244m down hole and 73m at 0.5% Cu and 0.3g/t from 96m down hole.

Source: Company Investec View: This is a material development for HCH providing a second project to follow on and provide growth after Productora subject to further exploration success.

That the project is with 70km should ensure that its development will benefit from local experience and potentially infrastructure.
[cid:image007.png@01CE418B.BF5DD3E0] Commodities News � US gold coin sales heading for highest levels since December 2009 in response to weaker prices as sales hit 196.5koz this month versus 62koz in March.

December 09 sales were 231.5koz.

Gold flows into India are also reported to be at highest levels since 2008, and even Japan is currently a net buyer for the first time in 8 years.

Source: Bloomberg � Russia and Kazakhstan continued to expand gold reserves in March, ahead of the recent collapse in prices.

Russias added 4.7t to 981.6t up 2.5% this year having increased holdings by 8.5% in 2012.

Kazakhstan bought 1.2t taking its total to 122.9t this year.

The World Gold Council expects Central Banks to buy another 450t of gold this year alone.

Source: Bloomberg
Other economic news � China to cut gasoline and diesel prices.

Chinas National Development and Reform Commission (NDRC) said it will cut gasoline and diesel prices effective today.

Gasoline prices will be cut by RMB395/t and diesel prices by RMB400/t.

The cuts are in response to falls in international oil prices.

Under Chinas oil pricing system prices are adjusted when an average of an international crude basket changes more than RMB50/t over a period of 10 working days.

Source: Dow Jones Investec view: At the margin this will help reduce costs for mining companies.
African Resources update � Eskom continues to express concerns around future coal supply.

The SA electricity utility has again appealed for a domestic pricing regime premised on an "efficient and transparent cost, with a fair return" rather than one that migrates towards export parity-prices (EPP) that would result in higher costs for Eskom..

Eskom remains concerned that underinvestment in new capacity, industry consolidation and the emergence of viable export markets for Eskom-grade coal, could result in miners expecting Eskom to pay EPP in future.

Coal shortages of up to 40mtpa year are being forecast post 2018.

The utility purchased 124mt in 2012, the majority through cost-plus and fixed-cost contracts.

However, the proportion of coal acquired through short-term contracts had increased from around 17% in 2007 to 30% in 2012, as the performance of cost-plus mines decreased.

Source: MiningNews � Exxaro (EXX SJ) considers selling NCC.

Exxaro is calling for expressions of interest for its non-core New Clydesdale Colliery (NCC).

The company is testing the market after reportedly having received a number of unsolicited approaches from parties wanting to acquire the project.

Should a suitable buyer be identified, EXX would expect to conclude the transaction around mid-2014.

NCC produced 717kt of coal in 2012l, most of which was exported.

Source: MiningWeekly � South Africa to send troops back into Central African Republic having suffered its worst military casualties a month ago.

SA is waiting for a formal request from regional leaders.

Source: Bloomberg
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