[cid:image001.png@01CF3E93.A8456AF0] Thursday, 13 March 2014 [cid:image006.jpg@01CF3E93.A898E220]
Snapshot � Company news highlights: Antofagasta preview note and copper price exposure, London Mining research note published, Kirkland Lake Q3 financials, Berkeley Resources interim, Prairie downs returns excellent washability results, Hummingbird receives final royalty funding instalment, Yanzhou coal enters into sales agreement, ABM Resources secures A$19.6m from Pacific Road. � Commodity review highlights: Copper prices under pressure, gold prices at 6 month high, South African platinum losses at 500koz, US coal exports slow start � Other Economic News: Eurozone industrial production � African Resources Update: South African resources bill raises concerns, South African current account deficit narrowed, coal miners to improve quality of Eskom coal, Todays African Proverb. � Market notes: FTSE futures +7.5 points this morning.

US markets closed flat despite the sell-off in Europe yesterday (Dow -0.07%, S&P +0.03%).

Asian markets are mixed (Nikkei -0.10%, Hang Seng -0.52%, ASX200 +0.53%).

Markets will see some relief following comments from the Chinese premier, Li Keqiang, pledging to provide a stable environment for economic growth and contain systematic risks.

Whilst the Russia/Ukraine cloud will remain over the market for some time yet, next weeks FOMC will soon start grabbing the economic headlines. Commodity markets - gold +0.41% $1,372/oz, silver +0.20% $21.35/oz, platinum -0.09% $1,475/oz, copper -0.46% $2.947/lb, nickel +0.63% $15,613/t, iron ore +2.38% $107.40/t, thermal coal $73.25, WTI +0.07% $98.07/bbl, Brent +0.17% $108.23/bbl, zinc -0.90% $1,972.00/t.

Dual listed - BHP +1.14% A$36.40, RIO +2.74% A$63.07.

Copper resumed its falls ahead of the IP, FAI and retail sales numbers, with futures closing at under US$6,500/t overnight.

Of note, according to Citrine Capital, Chinese bonded copper stockpiles have reportedly seen a "very sharp increase since October" and are now over 800Kt.

Iron ore staged a little rebound, bouncing off its lows and hitting US$107.4/t.

Worth noting that the spread between the 6mth and 24mth futures is now only US$2.92, which is way below our US$6 level that acts as a buying trigger point.

Were still awaiting a momentum confirmation before going long the equities again. Economic data due today:- US - retail sales advance (forecast 0.2%), initial jobless claims (330K), continuing claims (2903K), import price index (0.5%), monthly budget statement (-$195bn).

Eurozone - Spanish retail sales, Italian CPI EU harmonised (forecast 0.5%), Irish CPI MoM Feb (0.7%).
Company News � Antofagasta (ANTO LN) research note ahead of results and examining copper price sensitivity.

Results out next Tuesday for FY13 for which our analyst expects EPS of 87.5cps (Bloomberg: 89.9cps), and EBITDA of US$2,665m (Bloomberg: US$2,700m.

The recent production FY13 production report reflected 722kt Cu for a cash cost of 179c/lb (excluding credits), and 136c/lb including credits.

Guidance for FY14 implies weaker earnings with 700kt output at 145c/lb cash cost including credits as gold prices have been eroded.

We wait to see if the company will provides as it has a long history of doing so but faces weaker earnings and commodity prices such as the recent sharp correction in copper.

Source: Investec � Update note on London Mining (LOND LN).

Post the in-line FY13A results, our analyst has made adjustments to forward earnings, largely at the revenue line, reflecting higher assumed marketing charges.

The key issue for LOND, however, has been spot iron ore price which has reduced from c.US$140/t at the end of FY13A to US$107/t currently.

LOND is the most exposed equity under our coverage, given its high leverage to iron ore price and its highly geared balance sheet, and we outline a range of economic scenarios in todays note, using the consensus iron ore pricing range.

While operating CFs remain positive throughout, LOND is likely to struggle to reduce debt under a low price scenario.

Source: Investec � Kirkland Lake (KGI LN) 3Q14E financials.

KGI had already reported 3Q14 production (31,022oz), and costs are now reported at $1,094/oz with all-in costs at $1,923/oz.

The company is now guiding FY14E production of 120-125koz (original guidance under previous plan was 150-180koz); with forward production growth expected to be at 3yr average levels (makes for c.140koz in FY15E).

It expects to be operating cash flow positive from the end of FY14E.

KGI ended the period with $52m in cash ($8m of this restricted) and debt of $111m.

Source: Company Investec view: The revised mine plan is starting to bear fruit, with January production showing a solid improvement on previous months, including an average grade of 15.1g/t, with costs falling substantially to $839/oz (all-in $1,513/oz).

Notwithstanding the improvements, KGI does rely on an on-going high gold price to cover all costs and meet its future debt obligations. � Berkeley Resources (BKY LN) half year report reflects progress on Salamanca uranium project in Spain that outlines a 3.3mmlbspa project over a 7 year mine life, or 2.7mmlbspa over 11 years for a US$24.6/lb cash cost.

The project would be developed in two stages the initial one for US$95.1m capex and a further US$74.4m in the second year to develop a second pit.

Permitting is advancing with only one left for the development of the first pit.

Exploration work has also identified considerable upside potential.

A DFS is to commence in the coming months and funding alternatives are being reviewed.

The company had cash of A$23m at the end of December.

Source: Company Investec View: Berkeley has a strong balance sheet ample to complete the BFS and undertake further exploration.

The uranium market remains a challenging place however, although in time conditions should improve enhancing the attractiveness of the project as security of supply is a long term concern for consumers. � Prairie Downs (PDZ AU) washability test work delivers excellent results with yields of u to 97% (75-97% range) and potential for extensive metallurgical and premium thermal coal.

Metallurgical coal analysis shows FSI numbers of 4.0-6.0 similar to international semi soft coking coals, with calorific values of 7,526-7,830kcal/kg.

Source: Company Investec View: These are impressive results that should enhance the attraction of the project to a broad range of consumers, not just power generators but also those seeking to secure Met Coal resources.

The asset in Poland neighbours a successful coal mine (Bogdanka) implying that a development need only replicate its neighbour lowering the risk profile of a development.

Infrastructure in the region is also excellent that will ensure route to market should be relatively straight forward. � Hummingbird Resources (HUM LN) receives final US$5m tranche of US$15m royalty funding package from Anglo Pacific taking the total cash balance to US$10m ensuring that the company is funded to completion of DFS due in ~Q3 of this year.

Source: Company � Jubilee Platinum (JLP LN) pulls out of Platinum Australia.

JLP has announced that the mutual agreement with Platinum Australia (PLA) no longer represents optimal value for Jubilees shareholders, and has terminated the Implementation Deed (ID) which proposed the acquisition by Jubilee of 100% of the PLA shares.

PLAs escalating debt has hindered the transaction since the majority of funding raised for the transaction would not be used to re-commission the plant but to settle debt instead.

JLP has the processing rights to recover platinum group metals from the Dilokong Chrome Mine tailings and had a processing agreement with a subsidiary of PLA to beneficiate these tailings.

JLP had been frustrated by PLAs inability to commit to a commencement date for this toll treating and is now exploring an alternative strategy.

Source: Company Investec view: Overall, this reads as positive news to us, as JLPs share price performance since the transaction was announced has not demonstrated investor support. � Yanzhou Coal (1171 HK) enters into thermal coal sales contracts in Shandong province.

Yanzhou has entered into thermal coal sales contracts for the sale of 7.2mt of coal in Shandong province in 2014.

The sales contracts represent a 4.5% (340kt) YoY reduction in volume and the average price of CNY519.40/t (4,900kcal/kg, NAR, incl VAT) represents an 11.6% YoY decrease.

Source: Company � ABM Resources (ABU AU) secures investment from Pacific Road Capital.

Pacific Road Capital, a resource specialist private equity fund, will invest A$19.6m in ABM at A$0.024/share versus a share price of A$0.027 the day prior to the announcement.

Source: Company Investec view: Proceeds from the share placement will be used for an extensional and infill drilling program of 30,000m at ABMs Old Pirate gold project in the Northern Territories, Australia, as well as metallurgical test work at the Buccaneer project.
[cid:image007.png@01CF3E93.A898E220] Commodities News � Copper prices remain under pressure today sitting close to multi year lows over concerns of a slowdown in China and that debt defaults could release copper held as part of financing deals that would depress prices further.

Source: Thomson Reuters � Gold prices hit 6 month high in light of tensions around the situation in Ukraine and fears of an economic slowdown in China following a recent bond default.

Physical demand has been subdued as the price of gold has rallied putting off jewellery buyers.

Source: Thomson Reuters Investec View: We are cautious that the current rally could be short lived.

If a solution to the situation in Ukraine is resolved in the weeks ahead, then demand for the safe haven metal will diminish undermining prices. � South African platinum losses now at 500,000oz.

Anglo American Platinum, Impala Platinum and Lonmin have now lost 499,000oz of production due to the AMCU strike.

This is equal to ZAR8bn in revenue (US$740m) and ZAR3.6bn in lost wages for the workers.

Source: MiningMX � US coal exports off to a slow start.

While both steam and coking coal exports declined YoY, it is difficult to determine how much of the decline is related to adverse weather and how much to economics.

The US exported 4.6mt of coking coal in January (down 7% YoY) and 2.3mt of thermal coal (down 22% YoY).

Exports to Europe dropped YoY despite Drummonds loading ban in Colombia, with South African exporters apparently filling that gap.

Source: Inside Coal
Other economic news � Eurozone industrial production falls.

Eurozone industrial production surprised the market by falling by 0.2% in January.

Expectations were for a 0.5% rise.

Source: FT
African Resources update � South Africas National Assembly passes the Mineral and Petroleum Resources Development Amendment Bill.

South Africas National Assembly passed, with a 226 to 66 majority, the Mineral and Petroleum Resources Development Amendment Bill.

The bill will allow the state a 20% free carry in all new energy projects and gives the mines minister discretionary power to place certain minerals in a value addition category requiring some domestic processing.

The bill will still have to be passed by the National Council of Provinces before being signed into law.

Source: Reuters Investec view: The bill has been widely criticized by South African opposition parties who have described it as nationalisation by stealth and by the Offshore Petroleum Association of South Africa as likely to have a chilling effect on investment.

If the 20% free carry cannot be considered as part of the 26% BEE requirement, then companies will be left with slightly over 50% interest in energy projects that will certainly be prohibitive to developments.

Also that such a significant stake 20% is free carry adds materially to the cost burden. � South Africas current account deficit narrowed in Q4 2013 on the back of a weaker rand, coming in at 5.1% compared with the 6.4% in Q3.

Source: FT � Coal miners told to improve Eskom quality coal.

South Africas Department of Public Enterprises has warned the countrys coal producers to improve the quality of its supply of coal to Eskom or face regulation.

This follows the supply of wet coal to Kendal power station which caused a shutdown of 3,000MW of power and load shedding.

Source: MiningMX � Todays African Proverb: "If the waterbuck continues returning to one place it will meet its death".

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