[cid:image001.png@01CE82C3.EF338E10] Wednesday, 17 July 2013 [cid:image006.jpg@01CE82C3.EF766370]
Snapshot � Company news highlights: BHP mixed quarterly result but mildly positive, quarterly reports from Iluka, Fresnillo, Hochschild, Phoenix Gold and Weatherly International.

Sirius Minerals could face increasing opposition, South Gobi appoints new president, China Shenua operational update, Datang International profits warning, Alkane Resources signs JV for ferro-niobium, Strategic Natural Resources faces debt deadline � Commodity review highlights: Chinese metal demand to remain steady, gold prices holding onto yesterdays gains, Indonesian tin exports to recover � Other Economic News: US inflation, China to maintain economic policy � African Resources Update: Anglo American to increase Namdeb diamond output, Zambia plans US$410m oil refinery, Eskom workers back to work after strike � FTSE futures up 5 points this morning despite being down earlier.

Bernankes testimony will be the primary driver in the markets today, with expectations he will reiterate his comments from last week regarding the tapering of stimulus.

Asian markets are relatively flat (Nikkei +0.11%, Hang Seng -0.06%, ASX 200 -0.09%).

In Europe, the Bank of Portugal has lowered the 2014 growth forecast to reflect he fiscal consolidation measures (new GDP growth of 0.3% is expected for 2014 compared to 1.1% expected before). � Commodity markets - gold -0.26% (US$1,288.72/oz), silver -0.71% (US$19.8775/oz), copper -0.99% (US$3.156/lb), iron ore +1.65% (US$129.10/t), platinum -0.15% (US$1,422.90/oz), WTI -0.50% (US$105.45/bbl), and Brent -0.31% (US$107.81/bbl).

Due listed - BHP AU +2.33% (A$34.21), RIO AU +1.17% (A$56.17). � Economic data due today: US - MBA mortgage applications, housing starts (forecast 960K), building permits (forecast 1000K).

UK - BOE monetary committee minutes, claimant count rate (forecast 4.5%), jobless change (forecast-8.0K), ILO unemployment rate (forecast 7.8%).

Europe - EC construction output MoM.
Company News � Mixed 4Q production result from BHP Billiton (BLT LN) but overall mildly positive.

Petroleum fell short of BLTs FY13E guidance (235.8mmboe vs.

240mmboe guidance) although BLT expects continued "robust growth" in Onshore US liquids production into FY14E.

Iron ore delivered a solid 4th quarter, with the Pilbara running at an annualised rate of over 211mtpa (100% basis) and taking FY13A sales to 161mt (BLT share), while total iron ore sales, including Samarco, were 172mt,.

BLT is guiding WA iron ore production of 207mt (100%) in FY14.

BLT delivered good performance from metallurgical coal (FY13A sales of 37.7mt, up 13% YoY) but weaker than expected sales from thermal coal.

Escondida delivered a strong 4Q (production up 28% YoY to 1.1mt copper) and BLT expects further improved performance in FY14, while copper provisional pricing adjustments will impact EBIT by $224m.

Source: Company Investec view: All up, more positive than negative and on first pass our analyst sees little downside risk to our FY13E numbers.

BLT has not provided any market commentary while the limited production guidance for FY14E appears to fall in line with our analysts expectations. � Iluka Resources (ILU AU) June Quarterly production ILU saw mineral sands revenue recover sharply in the June quarter to A$242m (up 73% on the weak MarQ13 figure of A$140m).

Zircon sales in the first half were 211kt and ILU is now guiding for a similar number in the second half.

Production guidance has been increased from ~200kt to ~280kt, with excess sales to be met from inventory.

The titanium dioxide market remains subdued and ILU expects demand recovery late in 2013 or early 2014.

This delayed recovery has led to reduced guidance to ~200kt for rutile and synthetic rutile, versus previous guidance for ~275kt.

Cash costs were A$202m with full year cash cost guidance of A$375m retained.

Restructuring costs are expected to be A$20m below initial expectations with A$30m expense in the June Half.

ILU reports that some thrifting activities in the zircon market appear to have reversed, or reduced, partly due to reduced product pricing, but also due to end product quality.

Titanium dioxide sales remain challenging as ILU faces a weak market and is competing for sales against remaining legacy priced (cheaper) contracts from other producers.

Source: Company Investec view: A good quarter, given the market circumstances.

ILU is still building inventories of concentrate, but finished product inventories reduced during the quarter.

Still hard to be confident of demand, with ILU forecasting flat zircon sales rather than assuming the typical seasonal sales strength in the DecH13.

Revenue and costs were both better than our expectations and it looks like ILU will avoid the first half loss we previously expected.

No commentary on potential for an interim dividend.

We would assume none at this stage.

In our view, declaration of an interim dividend would be a strong signal of confidence in the recovery of the titanium dioxide market.

ILU will also benefit from the recent weakening of the Australian dollar, with a predominantly A$ cost base. � Fresnillo (FRES LN) Q2 production.

During Q2, FRES produced 10.9Moz of attributable silver.

This represents an 8.6% increase in output over Q1 2013 and a 6.3% increase on Q2 2012.

Quarterly gold production was 118,315oz, a slight increase on Q1 2013 but below that of Q2 2012.

The group reiterates its 2013 silver production guidance for Fy13 of 41Moz, but lowers its gold guidance to 465,000oz.

Source: Company � Hochschild Mining (HOC LN) Q2 production report reflects 5moz Ageq production taking H1 to 9.7moz Ageq with the company on track to deliver 20moz Ageq.

The company is looking to reduce costs and improve productivity in this more difficult economic environment that should deliver results in H2 and into next year and as previously announced 2013 exploration spend has been cut from US$77m to US$55m.

At the end of June the company held cash of US$240m and minority investments of US$137m.

Source: Company � Phoenix Gold (PXG AU) June Quarterly activities report Mining at Catherwood was completed during the quarter (right to mine agreement with Norton Gold Fields (NGF AU) with haulage and processing of remaining ore expected to be completed in the current quarter.

PXG commenced mining at the Blue Funnel project during the quarter, using local contractors.

Blue Funnel mining and processing at the Greenfields Mill in Coolgardie (FMR Investments, private) are expected to be completed in the current quarter, with PXG forecasting cash generation of A$3.3, assuming a A$1,350/oz gold price and recovery of 9koz at a feed grade of 3.5g/t.

PXG continues its low cost consolidation activities with the acquisition of a tenement adjacent to the CastleHill tenure for A$60k, with A$30k to be paid in cash and 100k shares to be issued at a deemed price of 30 cents.

Cash at the end of June was A$16.4m.

Source: Company Investec view: PXG retains a strong cash position, with the Blue Funnel mining operation expected to lead to a cash neutral September quarter, despite a A$3.5m exploration spend.

PXG is on schedule to deliver its DFS by Dec13.The latest tenement represents further consolidation on the Western Flank of Castle Hill Stage 1. � Weatherly International (WTI LN) quarterly update reflects 5.25kt copper concentrate production containing 1.242kt copper leading t full year output of 5.182 Cu in concentrate.

Cash at the end of the period stood at US$7.5m, up slightly from the end of March of US$7.2m.

Quarterly cash costs came to 317c/lb with YTD costs at 296c/lb.

The company indicates that it is in final documentation stages for the Red Kite funding of the Tschudi project and finalising major contracts.

Source: Company Investec View: In the current environment, mining operations are unlikely to be break even including sustaining capital.

We await the outcome of the debt negotiations with Red Kite which have been going for some time now. � Sirius Minerals (SXX LN) article in FT.

The FT reports that Amec, consultants to the North Yorkshire Moors National park Authority, said SXX had underestimated the environmental impact of building a mineshaft within the national park and not given proper consideration to an alternative location.

It added that the construction of the mine "would potentially lead to significant adverse effects across a range of environmental topics".

Source: FT � SouthGobi (1878 HK) appoints President.

Mongolian coal miner SouthGobi Resources has appointed Enkh-Amgalan Sengee as President and Executive Director of operating subsidiary SouthGobi Sands.

Enhk-Amgalan was most recently CEO of Clean Energy, which developed a 50MW commercial wind farm in Mongolia, and has also held senior positions at a number of MCS Group companies including Mongolian Mining (975 HK).

Source: Company Investec view: Mr.

Enhk-Amglans background is impressive and will undoubtedly assist SouthGobi in dealing with the Mongolian government.

It will not however address low semi-soft coking coal prices and associated selective mining, which are existential challenges for SouthGobi in our opinion. � China Shenhua (1088 HK) June operational data.

Shenhua reported June 2013 coal production of 26.4mt (158.3mt cumulative total up to the end of June) putting the company on target to achieve 2013 guidance of 315mt.

Total power output dispatch of 18.32bn kwh (98.31bn kwh cumulative total up to the end of June) has the company slightly below the run rate required to achieve guidance of 205bn kwh.

Source: Company � Datang International (991 HK) positive profit warning.

Chinese independent power producer (IPP) Datang expects JunH13 earnings to be 70-80% higher than the pcp.

Earnings in JunH12 were CNY1.08bn.

Source: Company Investec view: Increased profitability has largely been due to falling Chinese thermal coal prices.

Given the high profitability of IPPs relative to coal producers there is, we believe, the increased risk of policy intervention. � Alkane Resources (AZL AU) signs Joint Venture Agreement for production of ferro-niobium.

The agreement with Triebacher Industrie (TIAG) replaces the MoU announced in October 2011, and enables AZL (through a subsidiary) to process Dubbo Zirconia Project niobium concentrate into Ferro-Niobium (FeNb) using TIAGs proprietary technology.

The JV expects to produce over 3kt of FeNb, generating ~US$90m of revenue at current prices.

On commencement, AZL will be the only FeNb producer in Australia.

This JV is estimated to generate 16% of project revenue from AZLs Dubbo Zirconia Project.

Source: Company � Strategic Natural Resources (SNRP LN) needs to repay debt in 13 days.

SNRP continues to look for a strategic investor which will allow it to progress its Elitheni mine in the Eastern Cape and, importantly, repay its bridging loan to Land Consultants Limited (LCL).

This loan is due for repayment on 30 July.

If an investment is not forthcoming, the Board will have to consider alternative ways of repaying the loan including issuing equity or taking on additional debt.

SNRP highlights that there can be no guarantee that funding will be available but remains "optimistic" that discussions with strategic investors will be successful.

Source: Company Investec view: The clock is ticking for SNRP which must repay the �6m of the LCL facility which it has drawn down.

The loan is guaranteed against SNRPs coal stocks and, most importantly, its wash plant, so the group stands to lose a lot if it cannot repay this debt somehow.
[cid:image007.png@01CE82C3.EF766370] Commodities News � Chinese metal demand to remain steady even as growth slows according to Antaike which works on behalf of local industries.

Copper consumption is expected to rise 5.5% to 8.1mt this year, lead to rise 8.9% to 4.91mt, zinc to increase 3.1% to 5.5mt and aluminium consumption to increase to 23.85mt.

Source: Bloomberg � Gold prices holding onto yesterdays gains as markets await comment from Bernanke.

Indian gold imports are expected to drop sharply in H2 of this year with estimates of as much as a 22% decline from H2 2012 of 478t.

Although full year imports could well exceed 900t.

Indian government policy to constrain gold buying appears to be impacting demand, and recent gold price appreciation may further undermine demand, however, reports indicate this year will see a bumper harvest following the monsoon and farmers typically invest in gold in good years.

Source: Bloomberg � Indonesian tin exports may exceed previous expectations by 33% as government has eased quality rule, leading to 100kt sales for this year, in line with last years 98.8kt.

Having been a poor performer, expectations are of an evolving deficit in tin.

Source: Bloomberg
Other economic news � US inflation moves towards the Feds target.

In June, the cost of living in the US rose by the most in four months.

CPI gained 0.5%, following a 0.1% uptick in May.

Source: FT � China to maintain economic policy for now.

Chinese Premier Li Keqiang made comments that the government shouldnt rush to change policy as long as growth is within the comfort zone but would safeguard lower limits for economic growth while being mindful of inflation.

Source: Reuters Investec view: Lis comments indicate that Chinas new government doesnt intend to back off from measures to restructure the economy towards domestic consumption and away from debt financed growth but would support the economy is growth falls too far below the official 7.5% GDP growth target.

For mining equity investors, this is a mixed bag in our view as it suggests stimulus isnt imminent but tail risk is mitigated.
African Resources update � Anglo American (AAL LN) Namdeb raises diamond output.

Namdeb has stated that it plans to raise output at its Elizabeth Bay mine by 32% from 205,000cts last year to 270,000cts during 2013.

The company has plans to extend mining at Elizabeth Bay to beyond 2015.

Source: Bloomberg � Zambia plans to build US$410m oil refinery.

Zambia plans to build a US$410m new oil refinery as the inefficiencies of the only existing facility, Indeni, in Ndola, adversely impacts growth in Africas largest copper producing country.

The government will look at all possible financing models for the refinery.

Source: Bloomberg � Eskom reports wild cat strike over wage negotiations at 3.6GW Matla power station is over and the plant is operating normally.

The strike has not impacted power output, but followed Eskoms proposed 5.6% wage increase.

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