🕐01.05.13 - 09:27 Uhr

INVESTEC GLOBAL NATURAL RESOURCES DAILY - MINING - WEDNESDAY 1 MAY 2013 - XTA LN
, ANTO LN, AMS SJ, COOL LN, AGO AU, ERA AU, CKA AU, ROL AU



[cid:image001.png@01CE4641.7B8AB6F0] Wednesday, 01 May 2013 [cid:image003.jpg@01CE4641.DD9FA990]
Snapshot � Company news highlights: Xstrata shares suspended today, Antofagasta reported a solid quarterly update, Anglo American Platinum updates the market on possible 14,000 job cuts, improving result from Continental Coal, Atlas Iron Corunna Downs DSO discovery, ERA analyst briefing, Cokal receives production mining lease for BBM project, Robust Resources acquisition of Andash project. � Commodity review highlights: Chinas middle class fascination with diamonds, copper weakens on China manufacturing data. � Other economic news: Chinese manufacturing slows � African resources update: Zambia loses tax revenue due to transfer pricing, corruption probe slows down Zimbabwe platinum deals. � FTSE futures up 13 points (7am).

Overnight the S&P fought back from early falls with a big miss from the Chicago PMI data (49 versus 52.5 consensus) to close up 3.96 points (0.25%) thanks to a better than expected consumer confidence read (68.1 versus 61) and corporate announcements from Apple (planning to issue a 6 part debt offering to finance a $100bn reward for shareholder) and Avon whose earnings topped analyst estimates.

Chinese PMI for April came in at 50.6 versus the 50.7 forecast and 50.9 in March.

The signs of a slowdown has pushed commodity prices lower this morning - gold down 0.13% to US$1,474.80/oz, silver off 0.35% to US$24.25/oz, platinum off 0.05% to US$1,506.40/oz, copper off 0.11% to US$3.184/lb, nickel off 0.73% to US$15,329.50/t, and zinc off 2% to US$1,840.25/t.

Asian markets have reacted accordingly with the Nikkei off 0.35% and the ASX 200 off 0.48% (HK closed). Whilst the UK futures are looking encouraging this morning, given the negative read for commodity prices resulting from the Chinese PMI data Id expect more pressure on resources stocks today, particularly copper and iron ore names.

Despite the negative moves in precious metal prices, the deluge of negative data recently, particularly a lack of improvement in US unemployment, has the potential to keep the Fed and other central banks committed to their bond buying programs as the global recovery shows increased signs of faltering. Economic data due today:- US: Markit PMI for April (forecast 52), ISM manufacturing (forecast 50.6), FOMC rate decision (forecast 0.25%), total vehicle sales (forecast 15.22m); UK - PMI manufacturing (forecast 48.5). Company News � Xstrata shares suspended today.

Ahead of the new scheme and merger with Glencore becoming effective as of 2 May, Xstrata shares are suspended from trading from 7.30am this morning in London and in Switzerland.

Source: Company � Antofagasta (ANTO LN) reported a solid quarterly update despite maintenance work at Los Pelambres that was offset by higher grades (0.71% Cu in Q4 2012 versus 0.74% in Q1).

Total copper output at 183.8kt in line with at a cash cost of 171.7c/lb pre by-products.

Higher plant throughput at Esperanza benefitted numbers.

We note that the recent drop in commodity prices is leading toward some negative provisional price adjustments totalling c.

US$88m for the quarter.

Source: Company Investec View: A solid quarter from ANTO, perhaps slightly ahead of expectations.

However, going forward grades are expected to fall.

On an annualised basis based off Q1 production would be 732kt, versus company expectations of c.

700kt.

The weaker commodity price environment flags the risk of further negative provisional price adjustments likely at the interim unless there is a strong recovery near term.

ANTO does have a strong balance sheet to handle such issues.

We note that the company goes ex-dividend on 8th May as it will pay out around 90c/share to shareholders. � Anglo American Platinum (AMS SJ) updates the market on possible 14,000 job cuts for which talks have been extended and are likely to conclude during the week commencing 6th May, having already been extended for 30 days.

The parties are still going through the consultation due to the delicate nature of the proposal.

Source: Company Investec View: The company is making insufficient returns currently and needs to shut some high cost production that should help balance the market and improve the pricing dynamic.

However, cutting the work force is a delicate and political issue, and clearly there was a backlash from the initial proposal from both the government and unions. � Improving results from Continental Coal (COOL LM).

Total thermal coal sales of 464kt with export sales of 114kt.

EBITDA of $0.7m leaving cash of $6.2m (vs.

$1.2m at end of 2Q), with $8m still available under the $30m ABSA financing facility (vs.

$15m available at end of 2Q).

Penumbra generated positive cashflow in its first full quarter of production.

Gross profit from operations was $7.2m for the quarter, while company profit was $2.7m.

The highlight for the quarter was the previously mentioned investment by Village main reef (VIL SJ),which is aiming for a 19.9% stakeholding.

Meanwhile talks continue with various potential strategic partners (Indian power companies and reading houses) with respect to development of De Wittekrans, which could be COOLs fourth mine.

Source: Company Investec view: Certainly not a bad quarter in this challenging coal price environment, with record ROM coal production and all three operations generating positive operating cashflow, albeit at modest levels.

We note that Vlakvarkfontein, which produces only domestic coal generated a respectable $6m of profit.

The key measure will be when the company actually generates positive overall cashflow, net of all capital requirements, and with Penumbra now 95% complete, COOL should be nearing this point. � Atlas Iron (AGO AU) Corunna Downs DSO discovery.

Ago has completed 31 RC holes at Corunna Downs and released assays from the 11 holes received to date, with intercepts including 234m @59.2%Fe.

The Corunna Downs tenements are located between the existing Mt Webber JV and the 100% owned McPhee Creek.

Mcphee Creek has a 247mt resource at 55.8% Fe, and a reserve of 178mt, with a DSO component of 100mt at 57.9% Fe, with Silica around 5% and Al2O3 1.8%.

McPhee Creek forms part of AGOs Horizon 2 growth plans targeting up to 46mtpa, targeting 2015 start up.

Source: Company Investec view: While the Corunna Downs drill results suggest Silica is likely to be higher at Corunna than McPhee Creek it does look a realistic proposition that Corunna could become a McPhee Creek scale deposit.

Additional resource and reserve tonnes at Corunna would add credibility to AGOs Horizon 2 growth plans, with the majority of Horizon 2 resources currently located in the Sth East Pilbara, much further from the Port.

There was a degree of disappointment with McPhee when only 100mt of the total 178mt reserve was shown to be DSO.

The potential for additional tonnes with no obvious incremental infrastructure cost (McPhee Creek infrastructure would pass by the Corunna tenements) is very positive for AGO. � Energy Resources of Australia (ERA AU): Analyst briefing in Sydney.

ERA held a briefing with analysts in Sydney yesterday.

The company is pleased with progress, and enjoying a drier than average wet season.

2013 is a transitional year with the company moving to processing stockpiles.

ERA has made strong progress in reducing costs with management very confident they could achieve above its a$150m cost saving target.

Ranger 3 Deeps is seen as an economically viable project even at the current uranium price and FX, even if the lease is not extended beyond 2021.

Clearly, ERA hopes it will be.

To that end, actions speak louder than words and ERA is ahead of schedule in terms of backfilling Pit 3 with 10million tonnes of backfill completed (30mt required by Q314).

A 2.3m lift in the tailings facility was completed in 2012, and brine concentrator expected to be commissioned in Q313, all very important symbolic actions in terms of site management and rehab.

The discounted value of rehab provisions now stands at A$640m.

In terms of 2013, the production forecast for U3 O8 is for between 2,700 to 3,300 tonnes.

Very confident in the long term outlook for uranium pricing.

With 172 nuclear reactors currently planned in China and a very strong emerging focus on air quality and pollution ERA thinks the current supply overhang (with only 2 nuclear reactors operating in Japan) could change very quickly.

Source: Company � Cokal Limited (CKA AU) receives Production Mining Lease for BBM Project.

Following receipt of the approval, CKA has reiterated its intention to be producing coal at BBM by the 1st half of 2014.

The Lease completes the "mining approvals" required for the Project, however CKA still requires its Forestry Exploration Permit to be upgraded to a Production permit in order to complete its construction approvals.

With the Forestry Permit upgrade scheduled for completion by the end of the 3rd quarter 2013, this should allow construction of the Project to begin before the end of the year.

Source: Company Investec view: Whilst the BBM feasibility study is progressing, with work being done on the haul road configuration, barge loading facility design and river trans-loading station design, cash is becoming tight.

The MarQ13 activities report suggests Cokal will need to raise capital in the near future; with end June 2013 cash implied to be A$3.6m based on end March 2013 cash of A$11.3m less projected JunQ13 expenditures of A$7.7m.

Funds are also required to make a US$10m milestone payment to Cokals BBM JV partner when the production permit is granted as well as fully fund capex at BBM given Cokals JV partner will receive a capex carry loan from Cokal; we estimate Cokal will require A$110m in debt and equity to bring BBM into production, which is above the companys estimate. � Robust resources (ROL AU) Acquisition of Andash Au-Cu project.

ROL has agreed to acquire the Andash Gold copper project from Kentor Gold (KGL AU) for A$15m.

The Andash project is in the Kyrgyz Republic has a completed BFS and low forecast cash costs due to substantial copper credits.

ROL expects to fund the acquisition via a further sell down of the Romang Island project, with the support of the Salim Group.

Source: Company Investec view: The Andash Project is an attractive project, but in a difficult operating environment.

Kentor acquired the project in the GFC for US$15m, targeting production in 2011.

Despite completing the BFS KGL was effectively unable to progress development of the project.

ROL must be hoping that the extensive connections of the alim Group will provide them with a comparative advantage in terms of project development.

The scoping study on the Lakuwahi oxide project on Romang Island in Indonesia is "progressing well" with additional scoping work on the manganese resource expected to be complete by the final quarter of 2013.
[cid:image005.png@01CE4641.DD9FA990] Commodities News � Chinas middle class fascination with diamonds.

Chinas middle class is buying mass market (low value) diamonds so quickly that the price of these stones is rising significantly faster than for high quality stones.

Prices for a 1 carat internally flawless top white diamond have risen by 7% in 2 years, while a stone of similar size but with imperfections would be 24% more expensive.

Source: Bloomberg. � Copper weakens on China manufacturing data.

Copper retreated yesterday on news that Chinas manufacturing growth weakened.

Copper declined 0.6% to US$7, 016.50/t on the LME and to US$7,029.50 in Singapore.

Nickel and zinc also fell.

Source: Bloomberg Other economic news � Chinese manufacturing slows.

In further evidence of weakness in the worlds second largest economy, China posted its PMI data yesterday which demonstrated a fall from 50.9 to 50.6 in April versus the previous month.

The China Federation of Logistics and Purchasing said "The slight fall in the PMI reading for April shows that the economic recovery is still not on a solid foundation".

Source FT African Resources update � Zambia loses tax revenue due to transfer pricing.

The Zambian government estimates that it is losing US$2bn annually as a result of tax avoidance and transfer pricing by foreign companies operating in-country.

This is equivalent to 10% of GDP.

Copper provides 20% of export earnings but state revenues only account for 0.5% of GDP.

The country plans to take action on this issue.

Source: FT � Corruption probe slows down Zimbabwean platinum deals.

Two Zimbabwean ministers (empowerment and mining development ministers) may be probed by the Zimbabwean Anti-Corruption Commission regarding irregular practice in empowerment deals with platinum miners.

Implats, Aquarius and Amplats have concluded non-binding agreements to transfer 51% of their local shares to local ownership but finalisation of these deals have now been thrown into doubt.

.

Source: Miningmx Investec view: The protracted timelines for finalisation of these deals is damaging for the companies involved, which, having come to terms with the transfer of 51% of their assets to local ownership, now simply want to bed into their new structures.

Conclusion of these deals will remove the unknown and be positive for Implats, Aquarius and Amplats.
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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