[cid:image001.png@01CE5D0D.01EA66A0] Thursday, 30 May 2013 [cid:image006.jpg@01CE5D0D.02288110]
Snapshot � Company news highlights: Alcoa bonds downgraded to junk, Sibanye Gold reviews worker cut backs, Guildford Coal starts overburden removal at South Gobi, Brockman Mining signs MOU with Tianjin Port Group, Atlas Iron on track for 10mtpa rate, BC iron achieves 6mtpa production milestone, Fortescue costs rail access, Afferro updates resource at Nkout, Cockatoo Coal agrees to sell 30% interest in Hume Coal, � Commodity review highlights: Iron ore prices continue to fall, steel rebar prices at 8 month low, copper premiums at high levels � Other Economic News: Brazil posts disappointing economic news. � African Resources Update: New railway in Zambia, COSATU commissions graft audit, Nigeria continues to tackle Boko Harum. � FTSE futures off 21.5 points - market sell off looks set to continue this morning, albeit to a lesser extent, as investors remain cautious about global economic growth and speculation the US Fed will starting reducing stimulus shortly.

Asian markets are all off (Nikkei -5.15%, Hang Seng -0.33%, ASX 200 -0.89%), the stronger Yen dragging the Nikkei back sharply.

Quite a bit of economic data due today to keep markets poised in Europe, this will concentrate on a potential rise in Eurozone economic sentiment and GDP and jobless data out of the US.

In relation to stimulus, Federal Reserve of Boston President Eric Rosengren reiterated Bernankes testimony, saying "significant accommodation remains appropriate at this time" and "core inflation remains at the very low end of recent experience and unemployment close to the cyclical peaks of the past 2 recessions". � Chinese government organises a meeting of top executives from securities companies to discuss issues and development plans for the industry, whilst the PBoC, CSRC and NDRC are discussing further improvement of bond issuance system.

Also, in a sign of where the money truly lives, China has loaned Costa Rica US$400m for road building and also bought Londons Royal Albert Docks development zone in east London for US$1.5bn. � Commodity markets - gold +0.98% (US$1,406.50/oz), silver +0.61% (US$22.62/oz), copper -0.42% (US$3.283/lb), iron ore -4.90% (US$112.90/t), platinum +0.58% (US$1,461.50/oz), WTI -0.28% (US$92.87/bbl), and Brent -0.05% (US$102.38/bbl). � Economic data due today: US - 1st quarter GDP (forecast 2.5%), personal consumption (forecast 3.3%), GDP price index (forecast 1.2%), initial jobless claims (340K), Continuing Claims (2970K), pending home sales MoM (1.5%).

EU - Spanish GDP (forecast -0.5%), Spain CPI (1.7%), Eurozone consumer confidence (-21.9), Eurozone economic confidence (89.4),
Company News � Alcoa (AA US) bonds downgraded to junk (Ba1).

Moodys has downgraded the worlds third largest aluminium producer (after Rio Tinto and Rusal) senior unsecured debt to junk status, largely due to weakening aluminium prices (currently 84c/lb or $1860/t).

Moodys expressed concerns about Chinas slowing growth in relation to an aluminium market recovery and said there was little catalyst for upward price movement.

In order to meet Moodys criteria for investment grade with US$3bn of annual EBITDA, AA would need to reduce debt by US$2.8bn from c.US$9bn currently.

Source: Bloomberg Investec view: Aluminium prices are down 7% over the past three months, which is in line with most of the other base metals and considerably better than nickel, gold, and iron (down 11%, 11% and 26% respectively over the same time period).

The downgrade therefore reflects the weak commodity price outlook but also AAs balance sheet. � Sibanye Gold (SGL SJ) looking to cut workers at its Beatrix shaft.

It has previously indicated that it would cut 3,300 workers but is reviewing its options, with around 1,030 workers now expected to be affected.

Source: Mining MX � Guildford Coal (GUF AU) starts overburden removal at its South Gobi mine in Mongolia.

Guildford Coal has started overburden removal at its South Gobi coking coal mine in Mongolia.

Source: Company Investec view: GUF are expecting to produce a premium hard coking coal product.

The company will however produce an unwashed product.

GUF has still not yet finalised any off take agreements.

We believe prices for unwashed hard coking coal on the Mongolia/China border are currently just c.

US$50/t. � Brockman Mining (BCK AU) signs MOU with Tianjin Port Group ("TPG").

The MOU relates to a potential strategic investment by TPG in Brockmans infrastructure project.

The project includes BCKs interest in the North West Infrastructure development at South West Creek, in addition to the mining and rail infrastructure for the Marillana Project.

TPG is the main operator of Tianjin Port, the largest port in Northern China and the main maritime gateway to Beijing.

Source: Company � Atlas Iron (AGO AU) on track for 10mtpa rate in SepQ13.

With AGO set to ship 2.2mt in the JunQ13 (including 200kt of value fines), and construction at the new Abydos Mine progressing as expected with crusher commissioning in July, the Company is confident in achieving a 10mtpa production rate in the SepQ13.

AGO is also making progress toward its next development, Mt Webber, with the Company aiming to refer the Project to the Atlas Board by 30 June 2013.

Source: Company � BC Iron (BCI AU) achieves 6mtpa production milestone.

BCI has reported that the Nullagine Joint Venture has achieved its updated target production rate of 6mtpa.

The increase follows the Dec12 purchase of an additional 25% stake in the project from Fortescue Metals (FMG AU), which included an increase in the annual rail and port capacity available to the JV by 1mpta to 6mtpa, with BCI having an attributable 4.5mtpa.

Source: Company � Fortescue Metals (FMG AU) puts A$576m cost on rail access.

According to reports out of West Australia, FMG (through its subsidiary The Pilbara Infrastructure "TPI") has quoted potential floor and ceiling prices on access to its railway infrastructure at A$73.4m p.a.

and A$575.6m p.a.

respectively.

The figures (equating to A$3.67/t at the lower end) have come in well above analyst estimates which were based on 2010 prices put forward by FMG of A$5.07/t-A$5.70/t.

The Economic Regulation Authority has until June 23rd to approve TPIs rates or to set rates itself.

Source: The West Australian � Updated Nkout resource for Afferro (AFF LN).

Todays resource update demonstrates an increase of the DSO and high-grade saprolite component of Nkout by 156% to 64.3mt at 54.5% Fe, with previous metallurgical tests demonstrating positive beneficiation characteristics.

AFF expects another resource upgrade before the end of the year, targeting an indicated DSO/saprolite resource of 225mt, together with 1.7bnt of magnetite BIF (currently 1.4bnt in indicated).

Source: Company Investec view: An increase in the indicated DSO and saprolite component is obviously a positive for the company, although we suspect that any investment view may be overshadowed by the current takeover offer from IMIC, an offer that the AFF board has indicated that it intends to recommend.

Under the agreed terms, IMIC is to offer 80p cash plus a 2yr convertible (with a 40p principal value), for each AFF share. � Cockatoo Coal (COK AU) Agreement to sell 30% interest in Hume Coal COK has agreed to sell its 30% interest in Hume Coal to JV partner POSCO, for A$9.74m cash and the cancellation of 134.8m shares.

The management agreement will also be terminated, leaving POSCO to run the development.

Source: Company Investec view: The deal essentially reverses COKs acquisition of the 30% interest back in September 2010, with the cash element refunding expenditure to date.

The Hume project is located in NSWs Southern Highlands and was always going to be politically challenging, so the sale is a sensible outcome in our view.

COK needs to secure funding for its Baralaba expansion and also needs to refinance A$100m of debt maturing in June so capturing value from non-core assets that the market attributes no value to is likely to continue.

In the current market, we would expect the Bylong option to be the next deal.

COK has an option to acquire 30% of the Bylong project for A$157m by the end of 2013.

Clearly, COK cant fund that option at present, but may surprise the market by realising some value from the sale of the option.

Concentrating on its Queensland operations would also help manage corporate overheads.
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Commodities News � Iron ore prices continuing to fall sharply to around US$113/t FOB China for 62% fines, having been as high as US$140/t in mid-April, in response to high steel inventories in China against a weakening demand outlook.

Iron ore stockpiles in China were 66.3mt on March 8th (when prices were over US$145/t), the lowest since March 2009 and have not risen significantly, reported at 69.5mt last week.

Steel mills are reportedly selling ore bought contractually at around US$140/t indicating that further price weakness is expected.

Source: Bloomberg Investec View: We note that iron ore prices typically weaken in May, recovering marginally before declining through the 2H as inventories are run down.

However, this Mays correction appears particularly severe.

Last year prices fell sharply between July and September, from around US$134/t to a low of US$87/t, before recovering sharply back to a more sustainable US$120/t.

Consequently there could be further downside risk to prices before they recover, although sustained low port inventories may mitigate the downside risk. � Steel Rebar prices are at 8 month low due to concerns of overcapacity at Chinese mils, with prices reported at around US$558/t.

Source: Bloomberg � Despite copper stockpiles to the highest levels in a decade, premiums for immediate delivery are more than double last years level with Shanghai buyers paying US$135/t above futures, versus US$55/t last year.

It is estimated that as much as 30% of LME copper inventories are tied up in agreements, with around 84% of stockpiles concentrated in three locations.

Premiums have been boosted by supply disruptions such as at Bingham Canyon, port strikes in Chile and Freeports Grasberg mine recently halting production (to restart soon).

LME stockpiles are reported at 614kt yesterday.

Source: Bloomberg
Other economic news � Brazil posts disappointing first quarter.

Yesterday, Brazils central bank increased its interest rates by 50 basis points to 8% to try to rein in inflation.

The central bank committee believes that this will reverse inflation, which is currently at the upper end of the target range.

This follows Brazil posting just a 0.6% growth rate in Q1, missing consensus of 0.9%.

The Brazilian stock market fell 2.5% and the real depreciated 1.7% against the dollar.

Source: FT
African Resources update � New railway in Zambia.

Barrick Gold (ABX US) and First Quantum Minerals (FQM LN) will be able to cut their transport costs as a new railway to be operated by North West Rail Company won environmental approval to start construction this year.

The first trains will be ready to carry concentrate in 18 months and the link will run from Kalimbila (FQMs copper mine) via ABXs Lumwana operation to Chingola.

Source: Mineweb � Congress of South African Trade Unions commissions audit following graft allegations against its General Secretary over the purchase and sale of buildings.

Source: Bloomberg � Nigeria continues to tackle insurgency from Boko Haram that is looking to impose Sharia law in the country and has evidence that the insurgency is being influenced by external forces.

Boko Harem is seeking Islamic rule in the country.

Source: Bloomberg
Investec Global Natural Resources Research Team: UK Australia Hong Kong South Africa Hunter Hillcoat Tel: +44 (0) 20 7597 5182
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