[cid:image001.png@01CF3D00.9F642AF0] Tuesday, 11 March 2014 [cid:image006.jpg@01CF3D00.B29A1350]
Snapshot � Company news highlights: African Rainbow research note following solid results, Exxaro Resources research note following results, Barrick to sell around 13.5% of its stake in African Barrick, Metals Exploration project update, China Nonferrous Gold operational update, Freeport McMoran cuts Grasberg output by 60%, Royal Bafokeng Platinum land claim struggle, Mongolian Mining reports CY13 loss of US$58m, Brockman Mining upgrades Sirius resource, Hot Chili announces maiden resource at Frontera, Western Desert announces A$60m entitlement offer, Adaro reports CY13 earnings of US$229m. � Commodity review highlights: Iron ore prices fall by 8.3%. � Other economic news: Global debt exceeds US$100tr, Senate Ukraine draft measure set to include IMF change. � African resources update: South Africas labour mediator and the chamber of mines sees talks break down, Zimbabwe signs US$400m deal to upgrade its road network, Todays African proverb. � Market notes: FTSE futures set to open up 19 points this morning, despite a weak performance from the US (Dow -0.21%, S&P -0.05%) and mixed cues from Asia (Nikkei +0.69%, Hang Seng +0.09%, ASX200 +0.04%, Shanghai +0.10%).

Chinese credit growth was weaker than expected, the BOJ didnt add to their fiscal stimulus, and the Russians refuse to accept a plan for a western-backed government in the Ukraine.

Despite the negative sentiment in the market we are expecting a positive day as market rebound from a 2 days slump. Commodity markets - gold +0.23% $1,342.82/oz, silver +0.59% $20.943/oz, platinum +0.07% $1,478.20/oz, copper +0.59%, $305.00/lb, nickel +0.99% $15,419.00/t, iron ore -8.32% $104.70/t, thermal coal $73.40, WTI +0.20% $101.32/bbl, Brent +0.19% $108.28/bbl, zinc -1.05% $2,033.50/t.

Dual listed - BHP -0.64% A$35.93, RIO +0.03% A$61.22.

The big fall in the iron ore price yesterday could be due to the impact of tightening credit in China, copper rebounds slightly as investors see the sell-off as overdone.

The 1.4% fall in WTI yesterday is due to speculation that US crude stockpiles will expand by 1.85mmbls. Economic data due today: US - NFIV small business optimism (forecast 93.8), JOLT job openings (4015), wholesale inventories (0.4%), wholesale trade sales (0.2%).

Eurozone - Italian GDP QoQ (forecast 0.1%), UK industrial production (0.2%), UK manufacturing production MoM (0.3%).
Company news � African Rainbow (ARM SJ) research note following solid results.

Despite good performance in platinum and nickel, Ferrous earnings dominate (92% of earnings) and in particular iron ore (75% of earnings).

The share price in ZAR is up in excess of 20% year to date.

The company maintained a good, high pace of earnings, which we expect will continue into the June half, despite the year to date declines in iron ore prices and coal that could be offset a weaker ZAR and higher PGM prices.

Operating performance was good with and cost management continuing at Nkomati (nickel) and Two Rivers (platinum) while adverse conditions and lower than expected profitability was delivered in the Coal segment and Zambian copper.

Iron ore contributed 59% of EBITDA, 75% of net income implying that it presents the biggest risk to earnings forecasts should iron ore prices soften materially.

Source: Investec � Exxaro Resources (EXX SJ) research note following results with 2H13 delivered a fairly good HEPS, albeit flat on 1H13.

Declining iron ore prices impart downward risk to earnings but are likely to be offset at a value level through higher trading multiples in our view.

The stock on roughly 10X P/E on 2013 HEPS in line with peers, although PPA adjustments at Tronox understate its earnings.

We think that Exxaros longer term coal prospects are good despite softening export prices in the near term as TFR unlocks rail potential out of the Waterberg, Medupi is ramped up and Thabametsi project development continues at a reasonable pace.

We expect declining export coal prices to be at least partly mitigated by Eskoms take or pay contributions and increased export coal volumes guidance of up to 5Mt from 4Mt in prior years (4.5Mt in FY2013).

Source: Investec � Barrick (ABX US) to sell around 13.5% of its stake in African Barrick (ABG LN) that will leave it with just over 60% of the company.

Barrick tried to sell part or all of its interest in African Barrick to China National Gold Group in 2012 but the deal fell through last year.

Barricks share price has risen 11% since the start of the year versus a 65% increase for African Barrick.

Barrick has agreed not to sell further shares in African Barrick without the consent of the book runners.

Source: Thomson Reuters Investec view: Barrick has been a distressed seller of assets, and the sharp run up of African Barrick as it works to turn its business around headed up by new management clearly opens the door to sell some of Barricks holding. � Metals Exploration (MTL LN) project update indicating Runruno (Philippines gold mine) 46% complete at the end of January and on target for start-up in Q4 of this year.

Debt negotiations underway for US$70m.

Asset operating cost estimated to average US$474/oz over the first 5 years of production.

Work also continues on resource extension.

Final capital cost of the project estimated at US$182.8m with US$77.9m spent to date.

At the end of January the company had US$50.2m in the bank.

Source: Company � China Nonferrous Gold (CNG LN) operational update.

CNG has reported that underground development of its Pakrut project in Tajikistan is progressing well, with the main decline having reached 600m out of a total planned depth of 1,800m.

Construction work in terms of mine infrastructure is also progressing well.

The tender process for construction of processing facilities and the tailings dam has commenced and contracts are expected to be awarded shortly.

Source: Company Investec view: This update reads well and it is positive news that the company remains on track to achieve production at Pakrut towards the end of 2014 as planned. � Freeport McMoran (FCX US) cuts Grasberg output by 60%.

According to a union official, FCX has cut ore production at its Indonesian copper and gold mine by about 60% two months after the US miner halted exports over a dispute with the government on the implications of the fiscal changes.

FCX and Newmont (NEM US) have refused to pay an escalating export tax introduced in January as part of a package of new mining rules aimed at forcing miners to smelt in Indonesia.

Source: Reuters � Royal Bafokeng Platinum (RBP SJ) land claim struggle.

The Bafokeng Land Buyers Association is to oppose plans by RBP, the Bafokeng Nation and Impala Platinum (IMP SJ) to mine land on property near to Rustenburg, because it is owned by the Mogono and Maile communities.

The Bafokeng Land Buyers Association said it would take the matter to the Constitutional Court if necessary.

Source: Miningmx � Mongolian Mining (975 HK) reports CY13 loss of US$58.1m.

Mongolian Mining reported a CY13 loss of US$58.1m marginally better than our analysts forecast loss of US$59.7m.

Cash as at 31 December 2013 was US$76m.

Source: Company Investec view: The company did not provide any price or volume outlook commentary with the results although we expect some comments following the analyst briefing later today.

Our analysts forecast CY14 production of 9.53mt and sales of 7.14mt at an average realised price of US$83/t. � Brockman Mining (159 HK, BCK AU) upgrades Sirius resource.

Brockman has announced a 14% increase in the Sirius mineral resource at its Opthalmia iron ore project in the east Pilbara, Western Australia, to 124mt at 60.32% Fe.

Brockman will now commence a pre-feasibility study at Ophthalmia for a 15mtpa DSO mining operation, subject to a rail solution being realised for the Marillana project 80km away.

Source: Company � Hot Chili (HCH AU) announces maiden resource at Frontera.

Hot Chili has announced a maiden resource at its Frontera project (50km south of the companys flagship Productora project) of 50.5mt at 0.4% copper and 0.2g/t gold for 187kt contained copper and 356koz of gold.

Mineralisation is from surface and 33% of the resource is classified as indicated.

Mineralisation is open at depth and is likely to extend beyond the companys land position.

Source: Company Investec view: The company expects to announce revisions to its flagship Productora project resources and reserves later in March 2014, including the announcement of first reserves for Productora. � Western Desert (WDR AU) announces A$60m entitlement offer.

Western Desert Resources has announced a fully underwritten 6 for 25 renounceable entitlement offer at an issue price of A$0.50/new share, a 15.3% discount to the closing price on 6 March 2014.

The A$60m offer is fully underwritten by Ord Minnett.

Proceeds will be used to fund working capital, settle derivative hedge liabilities and repay bridge funding from Macquarie Bank.

Source: Company Investec view: The entitlement discount appears modest in our opinion given the entitlement offer will increase the number of shares on issue by 24%.

Western Deserts operations at its Roper Bar iron ore mine in the Northern Territories, Australia, commenced in January 2014 but are currently being hampered by the wet season although the company expects to achieve full production levels of >250kt (3mtpa) by May 2014. � Adaro (ADRO IJ) reports CY13 earnings of US$229m.

Indonesian thermal coal producer Adaro Energy reported CY13 net income of US$229m, core earnings (excl non-operational accounting items) of US$284m and EBITDA of US$822m, within EBITDA guidance of US$750-900m.

The company reported CY13 cash costs of US$34.86/t (excl royalties) better than guidance of US$35-38/t.

CY13 production totalled 52.3mt versus 47,2mt in CY12.

The company had cash of US$681m and net debt of US$1.54bn as at 31 December 2013.

Source: Company Investec view: Adaro is guiding for CY14 production of 54-56mt (subject to government approvals) at a cash cost of US$35-38/t and EBITDA of between US$750m and US$1bn.
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Commodities news � Iron ore prices fall by 8.3%.

Billions of dollars were wiped off the market value of the worlds biggest mining companies yesterday as concerns mounted about slowing demand from China which prompted one of the steepest iron ore price falls on record.

The benchmark iron ore into China price fell by 8.3% to an 18 month low of US$104.70/t.

Source: FT Investec view: The share price of Rio Tinto (Rio LN), which is the most heavily exposed to iron ore, has fallen by in excess of 13% since February.

Clearly, this iron ore price fall is a worrying development for the iron ore producers, for which majors BHP Billiton (BLT LN) and Anglo American (AAL LN) are also exposed.

In the UK market, pure iron ore miners Ferrexpo (FXPO LN), African Minerals (AMI LN) and London Mining (LOND LN) shares are also under pressure.
Other economic news � Global debt exceeds US$100tr.

The amount of debt globally has soared by more than 40% to US$100tr since the first signs of the financial crisis in 2007 as governments borrowed to pull their economies out of recession.

The increase in debt equates to almost twice the size of the US economy.

Source: Bloomberg � Senate Ukraine draft measure set to include IMF change.

US Senate democrats may boost IMF resources in an aid package theyre preparing for Ukraine, potentially setting up a dispute with the US House.

Lawmakers in the committee are very close to r4eaching an agreement on an aid plan for Ukraine.

Source: Bloomberg Investec view: Funding developments for Ukraine are relevant to Ferrexpo (FXPO LN) which operates its iron ore mines in Ukraine and is owed c.US$300m in unpaid VAT by the government.
African resources update � South Africas labour mediator and the Chamber of Mines see talks break down with no new talks scheduled.

Wage talks collapsed last Wednesday with workers on strike since 23rd January.

The government mediator was accused by the Chamber of Mines of showing an "absolute lack of economic acumen".

Mining companies state that they are sticking to their latest offer of 9% on the basis they cannot afford more.

Employees have lost earnings of more than ZAR3.4bn and it has cost companies ZAR7.7bn in revenue.

Source: Thomson Reuters Investec View: With break downs taking place between mediators, let alone between AMCU and companies, then it seems unlikely that well see a resolution any time soon.

We anticipate that if producers cant restart production soon, inventories will be largely exhausted by the end of the month. � Zimbabwe signs US$400m deal to upgrade its road network.

A South African company Neo Capital will contribute US$400m for the project and get revenue from vehicle license and billboard activities.

The government however indicates it needs US$27bn to fund a five year plan to improve basic services and rebuild the countrys infrastructure.

Source: Thomson Reuters � Todays African proverb.

"A hunter who has only one arrow does not shoot without aiming carefully".

Source: BBC
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
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