🕐20.06.13 - 09:27 Uhr

INVESTEC GLOBAL NATURAL RESOURCES DAILY - MINING - THURSDAY 20 JUNE 2013 - FMG A
U, GLEN LN, IRN AU, TINS IJ, GRY AU, LSX AU, HAR SJ



[cid:image001.png@01CE6D8C.02185080] Thursday, 20 June 2013 [cid:image006.jpg@01CE6D8C.174B8F80]
Snapshot � Company news highlights: Fortescue update, Glencore goes to court against Indophil, Timah sees rising tin prices, Gryphon puts SAG mill order on hold, Lion Selection raises funds, Harmony expects Hidden Valley write-down � Commodity review highlights: Iron ore recovering, Coking coal contract price to fall, Chinese gold consumption to pass India � Other Economic News: China flash June PMI disappoints, Gillard leaving a poison pill for Abbott � African Resources Update: Amplats positive on working relationships with government and unions � FTSE futures off 82.5 points (7am) - markets are set to open down heavily this morning, taking a lead from the US (DOW - 1.35%, S&P - 1.39%) and Asian markets are also under considerable pressure (Nikkei - 1.74%, Hang Seng -2.63%, ASX 200 -2.12%).

The global sell off is off the back of last nights announcement by Ben Bernanke that the pace of the Feds bond buying program may start to slow later this year and end all-together in mid-2014 provided the economy shows sustained improvement - particularly inflation and unemployment with pledges to keep short-term interest rates at record lows until the jobless rates hits 6.5%.

The HSBC flash Chinese manufacturing survey results added fuel to the fire, dropping to 48.3 from 49.2 in the previous months (consensus 49.1).

The poor data is potentially the result of deteriorating external demand, moderating domestic demand and rising de-stocking pressures according to reports. Commodity markets - gold -0.57% (US$1,343.67/oz), silver -1.49% (US$21.0925/oz), copper -1.41% (US$3.1075/lb), iron ore +1.95% (US$120.00/t), platinum -0.84% (US$1,412.00/oz), WTI -1.71% (US$96.56/bbl), and Brent -1.48% (US$104.55/bbl).

Due listed - BHP AU -2.55% (A$32.15), RIO AU -3.27% (A$52.60). Economic data due today: US - initial jobless claims (forecast 340K), continuing claims (forecast 2958K), Market US PMI (forecast 52.7), Philadelphia Fed, existing home sales (forecast 5m), leading indicators (forecast 0.2%).

EU - PMI manufacturing (forecast 48.6), PMI services (forecast 47.5), PMI composite (forecast 48.1).

Eurozone consumer confidence (forecast -21.5).

UK - Retail sales ex-auto fuel (forecast 1.0%), with auto-fuel (0.8%).
Company News � Fortescue Metals (FMG AU) corporate update on volumes, costs, fiscal position and potential TPI sale.

FMG stated it is expecting full year tonnes shipped to be between 80-82wmt, with C1 cash cost in the June quarter ranging between US$38-US$40/wmt, leading to full year cash costs at the low end of guidance (US$45 -US$50/wmt).

FMG continues to expect iron ore prices to range between US$110-US$120/dmt 62%Fe), and expects cash at the end of June to be between US$1.7 - 2.0b, with an estimated net debt position of US$10b, and with no financial maintenance provisions in any of FMGs debt facilities.

FY14 guidance is for 127-133wmt at a C1 cash cost of US$38-to US$40/wmt, and with FY14 capex estimated to be US$1.9b (FY13 at US$6.3b in line with prior guidance).

Regarding the TPI sale, FMG states it is not under pressure to conclude a sale, and the high level of interest has required a longer period of evaluation.

If sanctioned, any transaction is likely to be announced in SepQ13.

Source: Company Investec view: Sales guidance was in line with our estimate, but below previous guidance for 82-84mt, FY14 guidance includes 3rd party shipments, with attributable shipments of 123-129mt in line with our estimates.

FY14 cost guidance is about 10% better than our estimate, with reductions driven by the lower cost Solomon mine.

Net debt estimate is ~5% above our estimate, despite capex being US$0.5b below our estimate.

The "move to a dividend policy over time" doesnt sound too optimistic, with our FY14 dividend assumption appearing at risk.

TPI sale process commentary suggests FMG are still not willing to cede control, while Aurizon (AZJ AU) says it would only be in the deal if it had control. � Indpohil (IRN AU) responds to Glencore Xstrata (GLEN LN).

IRN has put out a release outlining that a GLEN subsidiary has issued proceedings in the Queensland Supreme Court, seeking an order for performance that IRN contends it has been active on.

IRN owns 37.5% of the world-class Tampakan project in the Philippines, with the remaining 62.5% held by Xstrata Copper.

Source: Company Investec view: This is one of the worst company releases we have ever seen in terms of clear corporate communication.

All we can ascertain is that GLEN and IRN do not appear to be getting on very well. � Timah (TINS IJ) sees rising tin prices on implementation on new Indonesia export rules.

Indonesian tin producer Timah sees tin exports from Indonesia declining by up to 24% and tin prices rising by up to 20% from current levels as Indonesia begins enforcing new rules requiring minimum tin export purity of 99.9% from 1 July 2013.

Timahs smelters are able to meet the new requirements but the Indonesia Tin Association estimates only 13% of tin smelters can meet the new requirements.

Source: Company Investec view: We expect a number of smaller mines in Bangka to close due to the new export rules as well as recent police enforcement actions against illegal miners. � Gryphon Resources (GRY AU) SAG mill order put on hold.

In a market update GRY highlighted a current cash position of A$54m, with efforts being made to preserve this, with cost cutting and reviews on all assets, including Mauritania.

As part of the cost cutting measures, the company has placed the SAG mill order on hold, saving A$8m until ready to re-start the process, with a delivery time expected to be less than one year from recommencement of manufacturing.

As a result, the first gold pour from Banfora will now be later than the anticipated Q4 2014.

Source: Company � Lion Selection raises funds to pursue "well-valued opportunities".

Mining investment company, Lion Selection Group (LSX AU), has raised A$10m to take advantage of a "multitude of well-valued opportunities from both its existing investment pool and potential new investments".

It is the first raising since Lion listed on the ASX in 1997.

Source: MiningNews � Harmony Gold (HAR SJ) expects Hidden Valley write down Harmony Gold announced earlier that it expects a write-down on a portion of the carrying value of Hidden Valley in PNG (50% owned) due to recent poor performance and the reduction in US$ gold and silver prices.

Harmony expects to know the outcome of impairment testing toward the end of July 2013.

Source: Company
[cid:image007.png@01CE6D8C.174B8F80]
Commodities News � Iron ore prices recovering.

The spot 62% Fe fines price has recovered to $120/t, up 8.7% from the 7-month low of $110.4/t it hit at the end of May.

The recovery is being driven by restocking amongst Chinese traders and steel mills, which had previously sold down inventories on the expectation of muted Chinese economy.

Source: FT � Coking coal contract set to fall.

According to a Bloomberg survey, Asian buyers will probably pay cUS$155/t for hard coking coal during Q3, which would be the lowest level since 2009 when contracts were set on an annual basis.

Spot prices have declined 15% this year to US$138/t.

Source: Bloomberg Investec view: Read across is negative for the pure coking coal miners, but also for the diversified companies, in particular BHP Billiton (BLT LN) and Anglo American (AAL LN). � China gold consumption seen as passing Indias this year.

China is poised to pass India as the largest consumer of bullion as the Delhi government raised import taxes while Chinese regulators approved the first two domestic ETFs backed by metal this month.

Chinese domestic gold consumption was 776 tonnes in 2012, versus Indias of 864 tonnes.

Source: Bloomberg Investec view: Overall, this article is positive for gold as the ETF options in China should boost demand while gold consumption in India is firmly entrenched in the culture there so while increased import taxes may hurt consumers, we do not believe they will entirely put them off. � Chinese YTD gold consumption up 36% YoY.

The China Gold Association estimates Chinas gold consumption was 456.24t YTD through April, up 36.4% YoY.

Consumption was particularly strong in April following the gold price decline, when consumption was 135.7t.

Source: Bloomberg Investec view: Increased Chinese gold demand is one of the bright spots within an otherwise bleak gold market.
Other economic news � China June flash manufacturing PMI disappoints at 48.3.

The HSBC/Market China flash manufacturing PMI for June was 48.3, down from 49.2 in May.

The reading signals that the Chinese manufacturing sector contracted at an accelerated pace and was worse than the Bloomberg consensus median of 49.1.

Source: Bloomberg Investec view: The disappointing PMI reading is negative for commodities demand, although poor Chinese economic data and low inflation suggest tightening measures will be stopped. � Gillards poison pill.

Liberal leader, Tony Abbott, may well take government on September 14 as Labour disintegrates, but it will not be an easy road thanks to new labour laws that Labour is pushing through.

This could leave Labour with a real chance of being returned in 2016.As the final sitting days of this parliament draw to a close, Labour is using its majority and a friendly senate to push through a raft of union-friendly bills.

This comes at a time when productivity in key Australian industries such as mining, and oil and gas are diminishing.

Unless Abbott has a massive win in the senate, an outcome deemed unlikely, he will not be able to undo these laws, regardless of the size of the majority he holds in the House of Representatives.

Source: MiningNews
African Resources update � Amplats (AMS SJ) CEO impressed by "step change" in SA government support.

Hosting a lunch yesterday, Anglo American Platinum CEO Chris Griffith, indicated that there had been a step change in the engagement between the mining industry, government and labour, with constructive support from the government.

The three groups have committed to continue to meet quarterly over the next year, or as frequently as required to ensure common action.

"The draft is clear on the need for law and order and I dont think the industry is going to continue to see the nonsense of intimidators being back on the street the next day," Griffith added.

Source: MineWeb Investec view: While we wont be holding our breath, it is pleasing to see that there finally appears to be recognition amongst all parties of the importance of the mining industry, and a desire to engage constructively.
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
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USA Thomas Lawrence Tel: +1 212 2595604
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Alistair Roberts Tel: +852 3187 5097
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