🕐20.05.13 - 09:54 Uhr

INVESTEC GLOBAL NATURAL RESOURCES DAILY - MINING - MONDAY 20 MAY 2013 - LMI LN,
CEY LN, ENRC LN, RRS LN, AUE LN, FDI LN, 1171 HK, NAE AU, PDZ AU



[cid:image001.png@01CE5532.7E8404B0] Monday, 20 May 2013 [cid:image006.jpg@01CE5532.A821DB80]
Snapshot � Company news highlights: Research notes out on Lonmin and Centamin, ENRC consortium gives board approval, Randgold $200m facility, Aureus optimised DFS, Firestone financing update, Freeport death toll now 14, Yanzhou to issue US$-denominated facilities, good progress for New Age Exploration, new CEO for Prairie Downs � Commodity review highlights: China steel running at a 800mtpa rate, China to tighten standards on thermal coal imports - positive for higher quality producers � Other Economic News: Rise in new passenger car sales in EU, China corporate bond issuance to surpass US, Chinese property prices continue to rise � African Resources Update: Aggressive start by NUM in annual SA wage negotiations, mining companies reject Zimbabwe state control � FTSE Futures up 18 points (7am) - markets looking firmer this morning following a positive lead from Asia .

Markets are reacting well to better-than-expected economic data out of the US - University of Michigan confidence (83.7 v, 77.9) and leading indicators (0.6% v.

0.2% forecast)), which lead to the S&P closing up 1.03% on Friday.

China property price data indicated that new-home prices rose last month in 68 of 70 cities track, indicating the government may have to introduce further measures to contain prices, having negative consequences for commodity markets.

Also on China, daily crude steel output rose 3% to 2.19 million tonnes in the first 10 days in May according to CISA indicating an annualised rate of 800.4mtpa despite the weak steel pricing.

Asian markets - Nikkei up 1.47%, Hang Seng +1.62%, and ASX200 + 0.54%.

Dual listeds - BHP AU +1.1% and RIO AU -0.22%. Commodity prices: gold -1.13% (US$1,344/oz), silver -4.16% (US$21.33/oz), platinum -1.47% (US$1,447/oz), copper -0.42% (US$3.3085/lb), iron ore -1.5% (US$123.10/t), nickel -0.51% (US$14,776/t),zinc +0.40% (US$1,818.50/t), WTI -0.20% (US$95.83/bbl) and Brent flat (US$104.64/bbl). Economic data due today: US-Chicago Fed National Activity Index, EU - Italian Industrial order for March (forecast 0.6% MoM), Asia - Chinese property prices, Japan - leading Index & Cabinet office economic report for May.
Company News � Research note out on Lonmin (LMI LN), updated for tough commodity priced environment for PGM miners against a background of a particularly volatile environment in South Africa with militant unions, strikes as well as operating issues at the miner, despite having had a surprisingly good result at the interim.

The company has the balance sheet to continue with its renewal plan even in the current environment for the next two years or so, provided there are no serious disruptions.

However, without an improvement in PGM prices, then longer term capital programmes would likely have to be reviewed.

Source: Investec � Research note out on Centamin (CEY LN).

Following CEYs very good 1Q13, demonstrating that it has its operations and expansion program well under control, we look at its capacity to start making returns to shareholders, particularly in light of its robust balance sheet (no debt and $189m in liquid assets).

Our analyst expects that it should be able to comfortably deliver a class-leading 5% dividend yield, even at depressed gold prices, while still maintaining a "war chest" for corporate opportunities that present themselves in the current challenging gold price environment.

Source: Investec � ENRC (ENRC LN) consortium gives Board a proposal.

The consortium, consisting of the three oligarchs and the Kazakh government, has given the Board of ENRC an indicative proposal to acquire all of the issued capital that it doesnt already own.

The deadline for the consortium to make a formal offer, or announce it does not intend to, has been extended to 3 June.

The indicative proposal comprised 175p in cash and 0.231 of an existing Kazakhmys (KAZ LN) share for each ENRC share.

This represented a total ENRC valuation of 260p/share, versus its current share price of 272p.

According to the Guardian, the KAZ shares which form part of the proposal would come from the Kazakh government.

This morning, KAZ has made comment on the ENRC announcement, clarifying that the KAZ shares in question represent the entire holding of the Kazakh government in KAZ and that no additional KAZ shares will be issues.

KAZ does not form part of the consortium, does not view its ENRC holding as a strategic investment and therefore will consider any proposal from the consortium made to all shareholders.

Source: Company, The Guardian Investec view: Given that the Board currently believes that the indicative proposal undervalues the group, this extension gives the consortium time to see it if can deliver a formal offer which the board could recommend to shareholders. � Randgold (RRS LN) secures $200m revolving credit facility.

The previously flagged facility is unsecured, matures in May 2016 with an interest rate of LIBOR plus 1.5%.

Source: Company Investec view: An Impressively low interest rate, given the location of RRSs asset base, but testament to the companys blue-chip gold stock status.

While RRS has a no other debt and had a healthy $250m in cash at the end of the 1Q13, it does have a daunting capex program this year and the facility gives it breathing space as Kibali is brought on stream at the end of 2013, particularly in light of the weaker gold price (and reduced operating cash flows). � Aureus Mining (AUE LN) optimised DFS released for New Liberty project outlining a viable gold project at US$1,400/oz generating a pre-tax NPV of US$225m and 32% IRR.

The production profile has been slightly amended to 119kozpa for the first 6 years at an average grade of 3.6g/t.

Cash costs have been reduced slightly (2.5%) to US$668/oz with initial capex reduced similarly to US$136m.

Reserves are up 1.6% to 924koz at 3.4g/t.

Total spend to date on New Liberty is US$61m, including US$49m on exploration and evaluation.

US$9m of the capex has been incurred to date, with cash position to end March of US$68.9m.

Discussions continue with bank financiers with approval expected late Q2 or early Q3.

The company is aiming for first gold production in Q4 of next year.

Source: Company Investec View: This is a positive step for the company in finalising the parameters of what is one of the more attractive gold projects around of this size, benefitting from high grade and low capital intensity, although the optimisation work has perhaps not generated quite the benefits hoped for.

The gold pricing environment is not helping miners currently, and we look to conclusion of the debt package to ensure the project is fully financed. � Firestone Diamonds (FDI LN) update on financing with mandate signed for Main Treatment Plant (MTP) at its flagship Liqhobong Mine in Lesotho with a US$6m forward sale agreement signed in relation to the smaller stones.

The due diligence process over the financing is expected to take 6 months.

A DFS released in October 2012 outlined an initial capex of US$167m which will need financing.

Source: Company � Freeport McMoran (FCX US) death toll now 14.

Following the collapse of a tunnel at the Grasberg copper and gold mine in Indonesia on 14 May, the death toll is now 14 people.

10 have been rescued and another 14 are still amidst the rubble.

FCXs CEO arrived in country on 18 May.

Source: Bloomberg � Yanzhou Coal (1171 HK) to issue USD denominated, subordinated perpetual securities.

Yanzhou will reportedly issue USD denominated, subordinated perpetual securities guaranteed by the company.

The amount and terms of the issue have not been decided.

The company intends to use the proceeds for debt repayment, capital expenditure, working capital and general corporate purposes.

Source: Company � Good progress of New Age Exploration (NAE AU) - Company meeting confirms that good progress continues to be made on the Lochinvar coking coal project on the Scottish border.

Currently drilling the third of a six hole program.

This will be followed by another 7 holes by year end.

The key target continues to be the Nine Foot seam at depths of between 300-600m.

The most likely starter operation (possibly 2016) will be scoped at 1mtpa using continuous miners.

The project is well located with respect to port and rail infrastructure.

The current $4.0m cash position is expected to be boosted by $2.0m following shareholder approval (28TH May) of a placement that will take RCF to 29%.

Source: Company � Prairie Downs (PDZ AU) appoints new CEO.

PDZ has announced that Benjamin Stoikovich has been appointed as CEO.

Mr Stoikovich is a mining engineer (having worked with BHP at Illawarra Coal), and most recently served as a Director of the Mining and Metals Corporate Finance Division of Standard Chartered Bank London.

Immediate focus will be placed on development of the Companys Lublin Coal Project, with completion of drilling, scoping/pre-feasibility studies, and marketing the Company.

Mr Stoikovich will be London based, and is expected to commence on June 17th.

Source: Company
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Commodities News � China steel production averages 2.193mt per day in the first 10 days of May.

China steel production hit a record high of 2.193mt per day in the first 10 days of May according to CISA.

At an annualised rate of 800.4mtpa steel production was up 3% on the 777mtpa rate (2.129mt per day) during the last 10 days of April.

Source: Reuters Investec view: The CISA estimate is based on a survey of CISA members, accounting for c.

80% of Chinas steel production capacity.

Increased production is despite continued weak steel pricing; rebar prices for May delivery are down to RMB3,400/t.

Steel mills have however received some margin reprieve from recent falls in iron ore and coking coal prices. � Australian coal industry may benefit from Chinas plans to tighten import standards.

According to news agency Platts, the Chinese National Energy Administration has released draft regulations outlining a ban on the import of low quality thermal coal with a calorific value lower than 4540kj/kg.

With potentially half of Indonesias current exports likely to be affected, the changes could result in increased demand for high quality Australian coal for blending, in order to meet specification.

Source: The Australian
Other economic news � New passenger car registrations up in the EU, but....

There was a 1.7% YoY increase in new passenger car sales in the EU.

This is the first time that the YoY monthly figure has risen since September 2011.

However, there were two extra working days in April 2013 versus last year and the absolute number of 1.04M new car registrations was the third lowest on record for any April.

Also, for the first 4 months of the year, EU new car registrations were down 7%.

Source: FT Investec view: The EU auto market is in poor health, as is the platinum mining sector in South Africa.

The two are intrinsically linked and in order for there to be a marked and sustainable increase in the platinum pricing environment for the South African miners, we undoubtedly need stronger demand for cars in Europe. � China corporate bond issuance to surpass the US, with companies raising US$43.2bn since the end of 2012, the most in five months.

Average yields have declined since the end of March to 5.19%.

Source: Bloomberg � Property prices continue to rise in China.

Chinas National Bureau of Statistics reported house prices rose in 67 of 70 major cities in April.

Source: Forbes Investec view: Whilst rising property prices are potentially good for commodity demand, currently it is more likely to signal further policy measures from the government.
African Resources update � Wage negotiations kick off strongly at the South African Miners with the NUM asking for a 60% wage increase for its entry level workers and 15% increases for all other wage categories.

Up to the end of March the NUM is estimated to account for around 65.5% of employees within the relevant bargaining categories.

Source: Mining MX Investec View: The NUM is demanding above inflation increases as it always does, against a background of falling commodity prices putting miners in a particularly difficult position.

The union will however, have to be aggressive in order for it appear credible against the more aggressive and militant AMCU.

This years negotiations will be particularly challenging for miners. � Mining companies reject Zimbabwe state control.

The Chamber of Mines of Zimbabwe, which represents companies such as Impala Platinum, rejected a proposal for the state to control mineral production and prices.

Earlier this month, the Ministry of Mines proposed the auctioning of mineral deposits, restrictions on mining strategic minerals and enforcements for the state to sell all output from the mines, thereby giving the impression that the state does not trust the private mining sector.

Source: Bloomberg Investec view: There are a number of platinum miners (IMP SJ, AMS SJ and AQP LN) which have operations in Zimbabwe.

The assets are high quality and on average operating costs are significantly lower than the mines in South Africa.

However, the operating environment in Zimbabwe is becoming more and more challenging and a resolution of these indigenisation issues hangs over all of these companies like the Sword of Damocles.
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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