[cid:image001.png@01CE4AF8.F3B7B1D0] Tuesday, 07 May 2013 [cid:image006.jpg@01CE4AF8.F3F81630]
Snapshot � Company news highlights: Research note on Randgold, Rio Tinto to push ahead with iron ore expansion plans, FQM quarterly, Afferro maiden resource at NTEM, Aureus order ball mill, Sirius Minerals resource update, Firestone Diamonds diamond tender, Patagonia Gold progress update, Mongolian Mining Corp agrees to rail settlement, Whitehaven Coal achieves record railing, Centaurus Metals returns high grade iron, Blackthorn Resources update, � Commodity review highlights: SA coal exports fall, Chinese coal miners to cut output. � Other Economic News: Weaker Aussie dollar, China to propose capital account convertibility. � African Resources Update: South African unemployment rises to 25.2% in Q1, poor turnout at SA workers rally. � FTSE futures up 11 points (7am) - following a 0.19% rise from the S&P overnight European markets are looking positive this morning with banks, including Societe Generale and Commerzbank AG, reporting better-than-expected first quarter results.

The Euro is slightly weaker after ECB president Mario Draghi reiterated his intentions to closely watch incoming data and stands ready to cut interest rates again if needed.

Asian markets are mixed - Nikkei up 3.55%, Hang Seng up 0.20%, and ASX200 off 0.24% with the big news in the region being the 25bps interest rate cut in Australia.

The key theme is Central banks doing what is takes to reassure markets until sustainable growth is clearly apparent. � Commodity markets are slightly off this morning - gold -0.51% (US$1,461.85/oz), silver -1.56% (US$23.6525/oz), platinum -0.80% (US$1,495.60/oz), copper -0.51% (US$3.2935/lb).

Yesterday iron ore remained flat at US$128.10/t.

Steel reinforcement-bar futures in China rose for a 3rd straight session to 3,658 Yuan/t as rebar inventories fell to 9.23Mt, the lowest level since Feb 22.

Oils are off marginally - WTI US$95.52/bbl.

and Brent US$105.04/bbl. � Economic news out today:- US - IBD/TIPP Economic optimism (forecast 47.5), consumer credit for March (forecast $15.5bn); UK - new car registrations, Lloyds employment confidence survey.
Company News � Research note out on Randgold (RRS LN), post last weeks Q1 IMS.

The note looks at operating cash generation in a year of high capex.

In our analysts view, RRSs modest capex containment in the Q1 was overly cautious but nevertheless prudent, given the fall in the gold price (and continuing price uncertainty) and the demanding capital spend this year (was $670m now $626m).

The balance sheet remains resilient given that it is totally ungeared.

A $200m facility, to provide "insurance", is in the process of being completed.

Source: Investec � Rio Tinto (RIO LN) to push ahead with iron ore expansion plans.

New CEO Sam Walsh told investors in Sydney that the group plans to continue with its US$5bn plan to increase annual Pilbara iron ore output to 360Mt by 2015.

The board has already approved the plans to increase production to 290Mt.

The overall view is that there would have to be a structural change in iron ore supply-demand for RIO to change its plans.

Source: Company Investec view: Although we do not see an immediate surplus of iron ore, we assume that the price will fall to cUS$85/t by 2016, once additional supply (including the full 360mt from RIO) comes onto the market.

We believe RIO is financially capable of building this additional supply, but believe under the groups new leadership, the team will be pragmatic in its approach if demand starts to look weak. � First Quantum Minerals (FQM LN) quarterly update.

FQM produced 79,000t of copper at a C1 cash cost of US$1.52/t.

The group sold 89,000t at US$3.48/t.

11,000t of nickel was produced and sold and 56,000oz of gold was produced.

Copper production was slightly lower than Q4 2012 production but nickel production was up.

The group reported revenue of US$901m at EPS of US$0.23/share.

Source: Company Investec view: FQM has had a solid quarter, with the key event being concluding the acquisition of Inmet Mining Corporation.

The group looks on track to meet its full year production targets given the output now assumed from the Inmet mines. � Afferro Mining (AFF LN) Ntem maiden resource.

AFF has announced a maiden resource of 116mt at 34% Fe, with c.35% of this in the Indicated resource category.

This follows the announcement last week that metallurgical test work had demonstrated that Ntem was capable of producing a high grade concentrate between 68.5% and 65.2% Fe with low deleterious elements.

A scoping study for Ntem should be completed during Q2 2013.

Source: Company Investec view: While Ntem is a smaller target than the flagship Nkout project, it is significantly closer to infrastructure that is already under construction/build-up, including a gas fired power station and a deep water port just 80km away. � Aureus Mining (AUE LN) order placed for ball mill at New Liberty in order to ensure that longer lead items will be in place for first gold pour intended for December 2014.

The ball mill rated at 145t/hr will be capable of processing ore at 1.1mtpa and will be delivered in May 2014.

Other key to be ordered this quarter include crushers, apron feeder, various pumps, screens and the re-grind mill.

Source: Company Investec View: With long lead items starting to be ordered activity must be picking up.

The cost of the ball mill is not disclosed but it is typically the most expensive piece of equipment required.

The company had previously outlined attractive financing terms for US$100m of debt plus US$8m overrun at 5% interest rate with no hedging that would fully finance the project (including equity already raised).

We await for confirmation that this funding has been finalised, as well as updated feasibility numbers that we expect to demonstrate improved economics on what is already an attractive proposition. � Sirius Minerals (SXX LN) resource update.

SXX now has total resources of 2.66bnt at an average grade of 85.7% polyhalite within an area representing 7% of the York Potash area.

820Mt of this resource are now within the indicated category and should form the basis of a reserve estimate expected later in the year.

Source: Company Investec view: There is no doubt that SXX has a sizeable resource and this is not one of the companys challenges.

More challenging in this market would be to fund the sizeable capex requirements, assuming permitting success in Yorkshire. � Firestone Diamonds (FDI LN) tender results.

FDI held two diamond tenders recently - one in February and one in April.

In total, the group sold 55,950cts generating revenue of US$5.1m, equating to an average price of US$91/ct.

The prices received in April were 20% higher than those in February.

Source: Company � Patagonia Gold (PGD LN) progress update at its projects in Argentina indicating that Lomada de Lieva heap leach should be completed late this quarter.

Drilling continues at Cap Oeste with some attractive intercepts, and drilling commencing at La Manchuria, with a 4,000m of extension and exploration drilling due to be completed this quarter.

Source: Company Investec View: PGD has some promising exploration potential, and has been pursuing the development of Lomada de Lieva for some time that is intended to produce 21kozpa later this year that will help fund other exploration activities.

We note that this project has been planned for several years. � Mongolian Mining Corporation (975 HK) agrees to rail settlement with government.

MMC announced that their rail concession to construct a rail link between Tavan Tolgoi and the Mongolia/China border at Gants Mod has now been officially terminated by the Mongolian government.

MMC will be compensated MNT84bn (c.

US$60m) Source: Company Investec view: The compensation amount is in line with our expectations and equal with what MMC has spent advancing the rail project. � Whitehaven Coal (WHC AU) achieves record railing in April.

WHC today announced record monthly railings of 0.95Mt (100% basis) in Apr13, up 14% from the previous record of 0.82Mt in Jan13.

According to the Company, the railings reflect the continued ramp up of the Narrabri operations, careful management, and co-ordination with Hunter Valley Coal Chain Coordinator, Pacific national and the Australian Rail and Track Corporation.

The benefits of increased railings are expected to be visible in increased sales and a reduction in "take or pay" charges.

Source: Company Investec view: WHC is long port and rail capacity, and we assume a take of pay impost of A$32m in FY13, so every additional tonne through the coal chain is good news from that point of view, but no change to FY13 volume guidance.

Key newsflow the market is looking for is resolution of the moisture issue at Narrabri. � Centaurus Metals (CTM AU) announces high-grade near-surface iron ore mineralisation intersected at Candonga.

CTM has advised it is on track to complete a maiden JORC resource for the Candonga Project, located 33km from the flagship Jambreiro deposit.

Candonga is a friable itabirite deposit, with reported intersections generally in the high30-40%Fe but including 37m at 56.5%Fe and 20m at 63.4%Fe.

Recent In conjunction with the recent results at the Canavial Project, the Candonga results provide the Company with opportunities to grow/extend the life of Jambreiro, with construction on the project scheduled to commence shortly.

Source: Company Investec view: The Companys flagship Jambreiro project is targeting first sales early in 2014, with the recent receipt of the Installation License allowing construction works to commence.

The emergence of Canavial (10km from Jambrieiro) and Candonga (33km) as additional sources of itabirite ore offers potential for meaningful value upside via significant life extension of increased throughput rates at Jambreiro.

We see strong value in CTM without incorporating upside from these emerging deposits. � Blackthorn Resources (BTR AU) project update at Mumbwa indicates rigs being mobilised to start a 5,000m drilling programme to convert indicated resources to measured.

Source: Company Investec View: The company had a set back with its recent resource update.

However, BTR is improving its understanding of the deposit and continuing to advance a PFS that will give confidence in the economic potential.

In addition there is scope within the tenement package to identify other resources.
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Commodities News � SA coal exports fall in April.

Richards Bay exported 6.24mt in April, down from 7.5mt from March.

There were 3.6mt of stock at the terminal at the end of April.

Source: MiningWeekly � Chinese coal miners are likely to cut output further to curb losses, according to the China Coal Transport and Distribution Association.

This comes as a flood of cheap imports and higher hydro power output has hit domestic demand.

March production fell by 5mt to 290mt (-1.7% YoY) the first YoY decline for a non-holiday month since October while imports rose.
Other economic news � Aussie dollar falls.

The Australian dollar fell by 0.8% against the US dollar to US$1.0222 as retail sales fell in March and amid speculation that the countrys central bank would cut interest rates to help grow the economy.

At 3%, Australia currently has the highest interest rates of all developed countries.

Source: FT � China to propose capital account convertibility.

China will propose a plan to allow Yuan capital account convertibility this year including a mechanism to allow overseas investment by individuals as part of a plan to liberalise interest and exchange rates according to a cabinet statement.

Source: Bloomberg Investec view: This indicates that the new Chinese government is attempting to lift growth rates through reform as opposed to stimulus.
African Resources update � South African unemployment rate rises to 25.2% in Q1 from 24.9% in Q4 of last year, which is equivalent to another 100k people without jobs, taking the total to 4.6m.

The highest losses were in the trade industry that shed 66k, followed by 41k in the construction industry and 23k in financial industries.

Mining and manufacturing sectors actually created jobs in the period by 8k and 23k respectively.

65.3% of the unemployed have been looking for work for a year or longer, and the unemployment rate in the 15-24 year old group stands at 52.9%.

Source: Engineering News � Workers day rally in South Africa suffers poor turnout at stadium booked for the event.

Cosatu (congress of South African trade unions) organised the event of which its biggest member is the NUM that last year had around 320,000 members and could now be as low as 120-150,000 members, having lost out to AMCU.

Source: MiningMX
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