🕐10.10.13 - 09:54 Uhr

INVESTEC GLOBAL NATURAL RESOURCES DAILY - MINING - THURSDAY 10 OCTOBER - ZIOC LN
, AFF LN, GEM LN, TALV LN, AAZ LN, AAA US, BKY LN, MIRL LN, ERA AU, WHC AU, BUMI IJ



[cid:image001.png@01CEC590.3B7A0CE0] Thursday, 10 October 2013 [cid:image006.jpg@01CEC590.48ED5940]
Snapshot � Company news highlights: Research note out on Zanaga Iron Ore, Afferro gets Canadian court approval, Gemfields rough emerald auction, Talvivaara Q3 operational update, Anglo Asian Mining Q3 production update, Allana Potash gets mining licence for Ethiopian project, Berkeley Resources gets environmental licence, Minera IRL raises US$3m, Energy Resources of Australia SepQ13 production, Whitehaven enters contract with Leighton for construction of the Maules Creek rail loop, Bumi Resources to swap US$1.3bn of debt for equity. � Commodity review highlights: Brazil iron ore exports up 13.2% YoY, SA thermal coal back up to US$80/t after 4 months in the US$70s.

India wont reduce iron ore export duties, Indias gold imports slump in September, Indonesian thermal coal reference price lowered to US$76.61/t in October. � Other economic news: Brazil raises interest rates, Fed tapering threatens cUS$2tr in bond losses � African resources update: When court decisions dont go your way, go on strike anyway: NUM � Market notes: Yesterday in the US, the Dow and S&P rose slightly on signs of a possible break in the impasse, after President Obama invited both sides for talks.

An account of the Feds September meeting suggested that divisions among Fed officials on tapering were deep, with all agreeing that labour market conditions had improved significantly since the latest QE began, but with only a few agreeing that was reason enough to start pulling back. Early openings in Asia were mixed, with Japanese shares up on the back of the weaker Yen and better industrial data, but Australian stocks down as the resources names (particularly the gold names) drag the market lower.

The better than expected unemployment rate for September has taken the edge off the falls with the rate surprisingly falling from 5.8% to 5.6%. In the commodity markets in Asia, gold fell the most in a week, dropping below US$1,300/oz overnight, after the dollar extended gains and as imports slumped in India.

Iron ore was virtually unchanged at US$131.80/t on better volumes.

Copper futures fell the most in 5 weeks on the continued US impasse, dropping to US$7,071/t.

The LME is reportedly considering adding contracts settled on a monthly basis in parallel with the futures contracts that are settled on a daily basis.

In the energy space, WTI declined to US$101.58/bbl after a US government report showed inventories grew by the most in a year.
Company news � Research note out on Zanaga (ZIOC LN).

We have an update note out on Zanaga, following the announcement that the company and joint venture partner, Glencore (GLEN LN), had revised the scope for the Zanaga iron ore project in the Republic of Congo.

The JV is looking at a staged development that significantly reduces the expected capex, relative to earlier plans.

This should enhance the ability to finance the project and both parties have agreed to explore funding options, in order to attract third party debt and equity finance.

While the revised capital requirements are still demanding for a 12mtpa operation, presenting financing risk, it does offer value under our base assumptions and significant valuation leverage at higher prices.

Source: Investec � Afferro (AFF LN) gets Canadian court approval.

AFF has received British Columbia Supreme Court approval for the proposed acquisition by International Mining & Infrastructure Corp (IMIC LN).

Completion now remains conditional on approval by IMIC shareholders and the satisfaction or waiver of the conditions to closing, including receipt of all necessary regulatory approvals.

Source: Company � Gemfields (GEM LN) rough emerald auction.

Gemfields has undertaken an auction of traded rough emeralds (which did not originate from GEMs Kagem mine in Zambia) in Jaipur, India, raising gross revenue of US$8.5m.

The average emerald price received was US$58/ct, the highest unit value achieved at any GEM auction to date.

Source: Company Investec view: The Jaipur auction result demonstrated favourable market conditions and strong demand for emeralds from the customers, which is clearly positive for GEM. � Talvivaara (TALV LN) Q3 operational update.

During Q3, TALV produced 2,595t of nickel and 5,645t of zinc, bringing the total for the year to 30 September to 7,103t of nickel and 13,239t of zinc.

Production was adversely impacted by low metal grades in the leach solution due to excess water in the older heaps.

The company has flagged that its liquidity position has weakened more than anticipated and the group is undertaking an assessment of all available funding options to secure its financial position.

Source: Company Investec view: TALV is not in a strong position right now, with challenging operations, coupled with a weak nickel price environment and limited respite anticipated in the near term.

The group needs to source additional cash but we fear that this may not be an easy task. � Anglo Asian Mining (AAZ LN) Q3 production update.

AAZ has delivered record quarterly gold production from its Gedabek mine in Azerbaijan of 20,242oz in Q3.

The company remains on track to achieve its full year production targets.

Source: Company � Allana Potash (AAA US) gets mining licence for its Ethiopian project.

The mining licence was issued after a detailed review following submission of the feasibility study and the ESHIA.

Source: Company Investec view: This is very positive news for the company as this was the major milestone to be achieved ahead of progressing with financing and development.

Development of this project would position AAA as one of the few independent potash producers of significance. � Berkeley Resources (BKY LN) gets environmental licence.

The company announced yesterday that it had received its environmental licence for its Retorillo project in Spain, following earlier submission of the EISA.

It now only needs approval of the Exploitation and Reclamation and Closure Plans in order to get its mining licence.

Source: Company Investec view: This is a significant positive for the company, with environmental approval perceived by the market to be the greatest obstacle in the path to development.

It highlights that the permitting process in Spain does work. � Minera IRL (MIRL LN) raises US$3m.

MIRL has closed the previously announced offering of 9.1m shares at 20.4p/share, raising US$3m with CIMINAS.

This will form part of the US$80m funding package for the Don Nicholas gold project development in Argentina.

Source: Company � Energy Resources of Australia (ERA AU) SepQ13 production.

ERA reported production of 610t of U3O8 in SepQ13, down 36% QoQ and 51% YoY, as lower grade stockpiles were processed.

Processing of low grade ore will continue until production from Ranger 3 Deeps commences.

ERA continues to guide for 2013 production of 2,800t to 3,200t.

Source: Company � Whitehaven (WHC AU) enters contract with Leighton for construction of the Maules Creek rail loop.

Whitehaven Coal has entered into a contract with Leighton Contractors for the construction of the rail loop for Maules Creek.

Maules Creek is expected to be in production in MarQ15.

Source: Company � Bumi Resources (BUMI IJ) to swap US$1.3bn of debt for equity.

Bumi Resources will reportedly convert US$1.3bn of US$1.65bn debt due to China Investment Corporation (CIC) into a 42% interest in Bumi Resources Minerals (BRMS IJ), a 19% interest in PT Kaltim Prima, PT Indocoal Resources and PT Indocoal Kaltim Resources and USD150m of new shares in Bumi Resources.

Source: Company Investec view: Whilst the deal reduces Bumis debt levels, it is unlikely to significantly help BUMI service its remaining debt.

The company had debt of c.

US$4bn as at the end of June 2013 and whilst the debt for equity swap reduces debt by US$1.3bn, Bumi has given up significant stakes in its operating assets and the associated cash flow.

The yield-to-maturity on Bumis debt due in 2017 (US$700m with a 10.75% interest rate) is currently 22% and even higher, at 29%, for debt due in 2016 (US$300m with a 12% interest rate).

Bumi also has a US$375m 9.25% convertible note due to Credit Suisse maturing on 5 August 2014 that is well out of the money with a conversion price of IDR3,366.90/share versus the current share price of IDR485/share.

Bumi continues to walk a tightrope with cash from operations of US$110m in JunH13A after interest payments and finance charges of US$217m and is not being helped by continued weakness in thermal coal prices.
[cid:image007.png@01CEC590.48ED5940] Commodities news � Brazil iron ore exports up 13.2% YoY.

August exports totalled 31.1mt, including 27.1mt of non-agglomerated ore and 4.0mt of agglomerated ore, up 3.6mt or 13% on Aug12.

Annualised 2013 exports are running at 3083mtpa, just 2% ahead of 2012.

Source: TEX Report � SA thermal coal back up to $80/t after 4 months in the $70s.

A single spot deal of 50kt of South African thermal coal has been done for January 2014 delivery at US$80.00/t FOB.

The last time a spot deal was transacted at or above $80/t was on the 7th of June 2013, at US$81.25/t.

Source: TEX Report � India wont reduce iron ore export duties.

Indias Finance Minister, P Chidambaram has said that India will not lower its 30% export duty on iron ore.

Source: The Hindu Investec view: Indias iron ore exports were just 18mt in the period March 2012 to March 2013 and are expected to be well below this level in the March 2013 to March 2014 period.

Constrained iron ore exports from India have been a major contributing factor to higher iron ore prices. � Indias gold imports slump in September.

Measures taken by the Indian government to reduce precious metals imports are reportedly working as gold and silver imports reduced to USD0.8bn in September 2013 as compared with US$4.6bn in the prior year according to the Commerce Ministry.

Source: Bloomberg Investec view: This is a negative development for global gold demand as India accounted for 29% of consumer gold demand in the twelve months ending June 2013 according to World Gold Council statistics.

India has taken aggressive measures to reduce gold imports including raising import duties and mandating jewellery re-exports as the government attempts to reduce the current account deficit and falling rupee. � Indonesian thermal coal reference price lowered to US$76.61/t in October.

Indonesias Ministry of Energy and Mines has lowered the October International Coal Price Reference (ICPR) to US$76.61/t, down 0.36% from September.

Source: Platts Other economic news � Brazil raises interest rates.

Brazils central bank has raised its benchmark interest rate for the fifth time in a row.

The rate is now 9.5%.

Source: FT � Fed tapering threatens cUS$2tn in bond losses.

The IMF has warned that monetary tightening in the US threatens to expose financial excesses and vulnerabilities which could wipe trillions off bond markets.

Source: FT African resources update � When court decisions dont go your way, go on strike anyway: NUM.

The National Union of Mineworkers (NUM) may now join AMCU in its strike at the Rustenburg mines of Amplats (AMS SJ) after failing in a court bid to stop the planned restructuring of the operations.

The union is considering its options after the Labour Court yesterday handed down a judgement that Amplats had correctly followed due process in the correct manner.

Amplats is planning a restructuring that will result in the retrenchment of c.3,300 people.

The restructuring has already provoked a strike by AMCU, now well into its second week.

Source: MiningMX Investec Global Natural Resources Research Team: UK Hong Kong South Africa Hunter Hillcoat Tel: +44 (0) 20 7597 5182
Matthew Whittall Tel: +852 3187 5075
Albert Minassian Tel: +27 (0) 21 416 1454
Marc Elliott Tel: +44 (0) 20 7597 5189
Leavitt Pope Tel: +852 3187 5074
Louise Collinge Tel: +44 (0) 20 7597 5779
Investec Global Natural Resources Sales Team: UK Hong Kong South Africa Jamie Campbell Tel: +44 (0) 20 7597 5038
Will Robbins Tel: +852 3187 5098
Hayden Smith Tel: +27 (0) 21 416 1401
USA Thomas Lawrence Tel: +1 212 2595604
Alistair Roberts Tel: +852 3187 5097
Investec Commodity Hedging Team: http://treasury.investec.co.uk/products-and-services/commodities.html UK Callum Macpherson Tel: +44 (0) 20 7597 5070
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