🕐04.11.13 - 09:54 Uhr

INVESTEC GLOBAL NATURAL RESOURCES DAILY - MINING - MONDAY 4 NOVEMBER - BUMI LN,
BLT LN, IMP SJ, NHM SJ, GLEN LN, AAL LN, RIO LN, VED LN, SXX LN, DML AU, 3993 HK



[cid:image001.png@01CED935.119B0830] Monday, 04 November 2013 [cid:image006.jpg@01CED935.325DB860]
Snapshot � Company news highlights: BUMI 3Q production in line, BHP gives up on Abbot Point, Positive 1Q from Implats, Northam workers on strike, Glencore Las Bambas sale continues, Anglo completes Amap� sale, Rio withdraws expat families from Mozambique, Vedanta plans Zambian job cuts, test results from Sirius, Discovery Metals management changes, China Moly gets approval for Northparkes purchase � Commodity review highlights: Iron ore up, approval for new 30mtpa thermal coal mine in Australia, China gold output to rise to 430t this year � Other Economic News: China PMI data, China 3rd plenary session on 9-12 Nov � African Resources Update: SA PMI up in October, Eskom halts all construction work following a fatality � Market notes: FTSE futures up 31.5 points this morning.

Despite weak Asian markets ( Japan closed, Hang Seng -0.26%, ASX200 -0.38%) Europe looks set to open in positive territory this morning as markets remain upbeat before the ECB monetary policy announcement due Thursday.

In China, the official non-manufacturing PMI rose to 56.3 in October from 55.4 in September whilst the HSBC/Market gauge fell to 52.4 from 52.8.

A policy meeting between communist party leaders will be held this week to map out the blueprint for reform, possibly providing the market with some bullish signals. Commodity markets - gold -0.18% (US$1,314.16/oz), silver -0.87% (US$21.6882/oz), copper -0.41% (US$3.285/lb), iron ore +2.58% (US$135.30/t), platinum +0.06% (US$1,452.80/oz), WTI +0.19% (US$94.80/bbl), and Brent +0.47% (US$106.41/bbl).

Dual listed - BHP AU -0.03% (A$37.52), RIO AU +0.28% (A$63.54).

The Thomson Reuters/Core Commodity CRB index, fell to 274.9596 on Friday, the lowest reading since the June 2013.

Gold fell 3% last week, with futures dropping to a 2 week low on Friday after the Oct ISM print rose faster than forecast.

Futures fell to US$1,313.20/oz and in fact touched a low of US$1,305.60/oz during the session.

Stocks are taking a beating today again.

Spot iron ore rose over 2.5% to US$135.30/t on Friday and defied the movement in the short term futures (down 1.6%) as the Chinese data raised expectations of increased steel demand. Brent settled at its lowest point since early July, narrowing its premium to WTI.

3 mth copper closed down 1% at US$7,240/t and remains stuck in the US$7,000-7,420/t band that it has been in since early August.

Of note, the LME stated on Friday that it will enforce tighter rules for "open-outcry" floor trading on a permanent basis following a trial to increase transparency amid regulatory pressure across financial markets. Economic data due today: US - factory orders (forecast 1.8%).

Eurozone - Italian manufacturing PMI (forecast 51).

France manufacturing PMI (49.4), German manufacturing PMI (51.5), EC manufacturing PMI (51.3).

UK construction PMI (58.7), Italian budget and Spanish unemployment.
Company News � Bumi plc (BUMI LN) Q3 IMS.

During Q3 FY13, Bumi has reported production of 6Mt of coal, bringing full year production to 17.5Mt, which represents a 16% improvement on the first 9 months of FY12.

During the first 9 months of FY13, Bumi reduced its cost of sales by 6% to US$38.1/t.

The group remains on track to achieve its FY13 coal production goals of 23Mt.

Source: Company Investec view: While Bumi continues to operate in challenging thermal coal price environment, it is positive that the groups production is in line with expectations and the cost reduction initiatives are clearly bearing fruits. � BHP Billiton (BLT LN) giving up on Abbot Point.

BHP Billiton has formally surrendered its rights to build a new US$5bn coal terminal at Abbot Point in north Queensland, as a consequence of the prevailing weak coal market.

The new terminal was to link BHPs JV mines at Goonyella in the Bowen Basin, via a 250km, 60mtpa, rail line, reducing the reliance on 3rd party haulage.

BHP has also discontinued environmental approvals processes for the Red Hill and Saraji East projects, which would have been serviced by the rail and port.

BHP paid $2.45bn to buy back the Saraji East project from New Hope Corporation (NHC AU) in 2008 when coal prices were much stronger.

Source: Australian Financial Review, Thomson Reuters Investec view: Interesting how investment in growth appetite has swung from 2007 till now.

The lesson from this episode, in our view, is to remember that in the coal market response to prices is fairly swift compared to other commodities and the industry is geared to readily meet demand growth with overshoot likely.

We think this curtailment of infrastructure expansion will result in better mid-term coking coal prices. � Positive 1Q production from Implats (IMP SJ).

IMP delivered an overall decrease in gross platinum production (-17% to 376koz) but most of that was from refining business - so not too profit intensive compared to mined output.

The key profit driver, the Impala Lease Area, produced 195koz platinum, modestly up on year ago 192koz and more meaningfully on the previous quarter (June 2013) of 153koz.

Source: Company Investec view.

Difficult to read through to full year though given inventory and pipeline moves.

Overall costs are modestly lower than our full year expectations, hence we see this as a good result overall.

Strikes likely to come (our view).

May have more detail after analyst call at 11am. � Northam Platinum (NHM SJ) miners on strike.

A strike called by the NUM at NHMs Zondereinde mine has entered its second day, while the company has said it has proposed a meeting between both sides for tomorrow.

The strike was called after the companys latest wage offer of an increase of 7-8% was rejected.

Source: Bloomberg Investec view.

No surprise, with all major platinum producers on the edge of facing strike action...yet again. � Glencore (GLEN LN) sale of Las Bambas project continues with Chinas Jiangxi Copper among the list of interested parties in the US$5.9bn project.

The asset is 40% built currently and expected to be sold next year.

Reports of bids up to US$6bn are rumoured.

Other parties reportedly interested in the asset include Chinalco and China Minmetals.

Source: Thomson Reuters � Anglo American (AAL LN) completes the sale of Amap�.

Following receipt of regulatory approval, Zamin Ferrous Ltd is to pay initial cash consideration of $134m, followed by deferred consideration of up to $130m, payable over a 5yr period.

Anglo will use the proceeds to pay down debt.

Source: Company � Rio Tinto (RIO LN) withdraws expat families in Mozambique.

RIO is withdrawing expatriate employee families from Mozambique for their safety in a sign that an upsurge in kidnappings and violence is worrying the group.

RIO made this announcement a day after tens of thousands of Mozambicans marched in Maputo and two other cities to protest about the threat of armed conflict and a recent spate of kidnappings.

Source: Reuters � Vedanta (VED LN) plans to cut at least 1,529 jobs by March in Zambia at Konkola Copper Mines.

Productivity at the asset is 8t per employee versus the global average of 100t per employee.

The company is moving toward mechanising all of its operations.

Source: Thomson Reuters � Sirius Minerals (SXX LN) characterisation results from Poly4 polyhalite product which is the powder granulated product the company intends to produce from its York Potash project.

Tests confirmed that it is a soluble fertiliser that does not affect soil pH or conductivity adversely at commercial application rates.

Source: Company � Discovery Metals (DML AU) management changes.

Botswana copper producer Discovery Metals announced Brad Sampson will cease being Managing Director effective immediately and COO Bob Fulker will assume the role on an interim basis.

The company also announced Niall Lenahan has resigned as Director.

Source: Bloomberg Investec view: Given poor operational performance at Boseto and with Blumont Group (BLUM SP) set to become DMLs controlling shareholder, the management shakeup isnt surprising.

DML remains highly geared and completion of the US$100m convertible bond placement to Blumont Group (BLUM SP) and restructuring of existing debt of US$154m at end SepQ13 will be key to ensuring the companys viability.

The new management team will also need to address operational challenges including increasing ore delivered to the concentrator, a key bottleneck, and improving recoveries, which at 56% in September were well below expectations of 64% due to higher than expected levels of chrysocolla in ore mined. � China Moly (3993 HK) receives MOFCOM approval for Northparkes purchase.

MOFCOMs approval of China Molybdenums proposed purchase of Northparkes from Rio Tinto (RIO LN) follows NDRC approval, which was granted on 23 August.

Source: Company Investec view: We dont expect any problems with the Northparkes transaction, which continues to progress through the regulatory approval process.
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Commodities News � Iron ore up.

The spot iron ore price (62% Fe, CFR China) increased 2.6% to US$135.30/t from US$131.90/t on Friday.

Source: Bloomberg Investec view: The iron ore price is up despite a recent fall in Capesize freight rates between Dampier and Qingdao from US$12.80/t in late September to US$9.15/t currently.

Rebar prices in China for January 2014 delivery have however been rising and increased from CNY3,509/t on Thursday to CNY3,525/t on Friday. � Kevins Corner thermal coal mine approved in Australia.

The federal government has approved the 30mtpa Kevins Corner thermal coal mine in the Galilee Basin, Queensland.

The mine will be operated by GVK-Hancock a JV between GVK Power and Infrastructure Limited (India) and Hancock Prospecting with construction expected to begin in 2015 and first production in 2018.

Source: Bloomberg � Chinas gold output is forecast to rise to 430t this year with consumption to reach 1,000t according to China Gold Corp.

Last year production stood as 403t.

Source: Thomson Reuters
Other economic news � China PMI data.

Chinese PMI rose from 55.4 in September to 56.3 in October.

However, new orders declined from 53.4 to 51.6 in October.

Source: FT � Chinas 3rd plenary session of the 18th Central Committee to be held between 9-12 November.

China will hold the 3rd plenary session of the 18th Central Committee in Beijing between 9-12 November.

Source: Bloomberg
African Resources update � South African PMI up in October to 50.7, following drop in September that was revised to 50.

However the average in Q3 stands at 52.7.

Labour disputes have spilled over from September into October, undermining economic performance.

Source: Thomson Reuters � Reports on Friday indicated that Eskom had halted all work at construction sites following six fatalities at the Ingula Underground pumped storage construction site.

The incident took place last Thursday.

Four workers remain in intensive care following the incident with three discharged.

The project is to house four reversible 333MW pump turbines.

Source: Engineering News
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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