[cid:image001.png@01CF4A5D.D0332360] Friday, 28 March 2014 [cid:image006.jpg@01CF4A5D.DE4AC610]
Snapshot � Company news highlights: FY13 results from Asia Mineral Resources and Rusal, Anglo American issues EUR750m bonds, new NE Chairman for Anglo Pacific, Strategic Natural Resources update, DiamondCorp raising, Blackthorne study update on Kitumba, Impala sees no future investor support for platinum mining, Beacon Hill update, Fortescue complete expansion to 155mtpa � Commodity review highlights: Thermal coal settled at $82/t, coking coal at $120/t, European spot thermal under $75/t, LME to postpone implementation of new Linked Load-In Load-Out warehousing rules, Freeport could soon resume Indonesian copper concentrate exports � Other Economic News: US Economy grows by 2.6% in 4Q13, Cargill to stop trading and dealing in coal, gas and power in Europe � African Resources Update: Zambian consumer inflation up 7.7% YoY, Todays African proverb � Market notes: FTSE futures +13.5 points.

A relatively flat session in the US overnight (Dow -0.03%, S&P -0.19%) as the 4Q13 GDP print was below consensus forecast overshadowing the better consumption and jobless claims numbers.

Asian stocks are up (Nikkei +0.50%, Hang Seng +1.13%, ASX200 +0.31%) on speculation China will do more to support growth as Premier Li Keqiang said the country has policies in reserve to deal with any economic volatility this year and cant ignore difficulties and risks from a slowdown in the economy.

Optimism out of Asia is spreading to Europe along with hopes that the ECB may ease policy further. Commodity markets - gold +0.49% $1,297.68/oz, silver +0.79% $19.8625/oz, platinum +0.76% $1,409.30/oz, copper +0.90%, $3.02/lb, nickel -1.21% $15,683.50/t, iron ore +0.36% $112.30/t, thermal coal $74.60, WTI +0.21% $101.48/bbl, Brent 0.00% $107.83/bbl, zinc +0.04% $1,964.50/t.

Dual listed - BHP +0.44% A$36.14, RIO +0.09% A$63.24.

Gold falling through US$1,300/oz despite geopolitical tensions between Russia and the West is a strong indication of the markets opinion that interest rates will be rising soon, copper rises back above US$3/lb on concerns global supplies will trail forecasts and the potential for increasing demand in China if any form of stimulus is introduced, nickel slips further as market commentators speculate Chinese inventories will be sufficient to satisfy industrial demand following an Indonesian ban on ore exports earlier this year.

WTI rises further on shrinking US stockpiles and concern over Russian supplies. Economic data due today: US - Personal income (forecast 0.3%), University of Michigan confidence (80.5).

Eurozone - French consumer spending (forecast 0.7%), French PPI (0.3% MoM), Spanish CPI (0.1%), UK GDP QoQ (0.7%), EC economic confidence (101.4), EC industrial confidence (-3.5), EC business climate indicator (0.38), German CPI (0.4% MoM).
Company News � Asia Mineral Resources (ARMS LN) FY13 results.

During FY13, ARMS produced 23.5Mt of thermal coal realising an average price of US$59.6/t.

Production cost of sales was US$38.6/t.

ARMS has reported revenue of US$1.4bn, underlying EBITDA of US$176m and a loss of US$212m.

The underlying loss was US$173m.

Group net debt was US$507m and capex was reduced considerably to US$46m from over US$100m in 2012.

ARMS intends to distribute at least US$400m to its shareholders following the separation from the Bakrie Group.

Source: Company Investec view: ARMS is committed to returning cUS$400m in cash to its shareholders, which have waited a long time for some positive news.

ARMS financial results reflect the continued weak thermal coal prices and also the US$144m in interest which the group paid, which undermines its operational achievements.

However, the company has made operational improvements and has demonstrated cost control, particularly in terms of capex.

The company is focussed on organic growth from its PT Berau assets and, having increased thermal coal production by 12% in FY13, FY14 should also deliver increased output. � Rusal (486 HK) reports CY13 loss.

Rusal reported a CY13 loss of US$3.22bn which included c.US$2bn of impairment and restructuring charges.

The CY13 adjusted loss of US$662m compared to an adjusted loss of US$498m in CY12.

Adjusted EBITDA of US$651m was down 28.9% YoY.

In CY13 aluminium production reached 3.85mt, down 7.6% YoY, and in CY13 Rusals aluminium segment costs reduced 2% to US$1,907/t with a record low of US$1,864/t achieved in 4Q13, helped by Rouble depreciation.

Source: Company Investec view: Rusal expects aluminium demand to reach 55mt in 2014, up 6% YoY, with a global deficit of 1.3mt helped by 3mt of aluminium production capacity cuts in China.

Rusal management expect the company to breach debt covenants measured on 31 March 2014 but remains in advanced stage negotiations to restructure US$3.68bn of PFX debt facilities. � Anglo American (AAL LN) issues bonds of Euro750m at 1.75% due April 2018 issued at 99.79 with a second tranche of Euro750m at 3.25% due April 2023 issued at 99.823.

Source: Company � Anglo Pacific (APF LN) non exec chairman appointed Mr Mike Blythe with effect 1st April.

Brian Wides has been serving as acting Chairman since December 2012 is to step down but continue in his role of International Business Development until this years AGM when he is to retire from the board but continue in a part time consultancy role for 6 months as part of the handover process.

Mr Blyth is a chartered accountant with experience in audit and corporate governance and has been a non-exec director since March 2013.

Source: Company � Strategic Natural Resources (SNRP LN) update.

SNRP has confirmed that talks with a potential strategic investor are ongoing and that the directors are hopeful of a successful conclusion to these discussions in the near term.

Source: Company Investec view: The clock is ticking for SNRP given yesterdays announcement that the winding up petition, which has been filed, is due to be heard in court on 12 May 2014.

The company also announced yesterday afternoon that it received a court order in South Africa, which likely freezes the companys entire interest in Elitheni, its key coal asset.

It may be that this situation is all starting to look too difficult for the potential suitor. � DiamondCorp (DMC LN) raises �2.1m equity at 5p per share in an oversubscribed placing to new and existing shareholders in the UK and South Africa.

�2.0m will be used to fund corporate overheads over the next two years and for general working capital purposes.

The mine has already been fully funded to start its block caving operation on track for commercial production in H2 of next year.

Source: Company Investec View: DiamondCorp has been steadily advancing the historic Lace Diamond mine, it has been a challenging process, however, with the new block cave plan well advanced, financing in place and a strong outlook for the diamond market the company � Blackthorn Resources (BTR AU) optimisation study update on Kitumba results due out by end April that should show improved feed grade, improved recovery, lower operating costs supporting substantially better economics.

A simple power supply solution has also been identified by state power company ZESCO.

Source: Company Investec View: The pre-feasibility study released last year outlined a project that was interesting but certainly needed stronger economics with a cash cost of 204c/lb, and capex of US$358m producing 36-40ktpa copper cathode.

Continued exploration work has returned high grades that have been supportive of improved economics. � Impala Platinum (IMP SJ) does not see future investor support for labour intensive platinum mining.

IMP is considering abandoning its ZAR11bn Leeuwkop mining project and feels that investors would not support another labour intensive mining development in the South African platinum sector.

The company believes that this will be the long term consequence of the strike by AMCU which is now aiming to extend its strike into the gold and coal sectors.

IMP believes that mechanisation represented the long term future of the countrys platinum sector because labour intensive mines will not be profitable.

Source: MiningMX � Beacon Hill (BHRB LN) FY13A results and Moatize update.

The company reported a loss before tax of US$18.9m (2012: loss of US$45.1m).

It ended the period with cash of $8.7m and debt of $23.9m (mainly notes).

The company notes that it requires additional funds for working capital, the wash plant expansion and the rolling stock lease and that it is examining a number of funding options.

Post-period the company received an offer for a $20m debt facility (subject to pre-conditions) to enable expansion of the wash plant from the current 1.8mtpa to 2.8mtpa.

All going well, Beacon Hill hopes to draw down the debt facility in the 2H14, enabling commercial production from the expanded facility in the 2H15.

Source: Company � Fortescue Metals Group (FMG AU) completes expansion to 155mtpa.

Fortescue has officially opened its 40mtpa King Valley project marking completion of its expansion to 155mtpa.

Source: Company
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Commodities News � Thermal coal appears to be settled at $81.80/t.

Glencore Xstrata (GLEN LN) has reportedly agreed to supply Tohoku Electric Power, the lead negotiator in annual supply contracts for Japans utilities, at $81.80/t, the lowest price in five years.

The contract is estimated to account for about 60mt of Australian exports to Japan, equivalent to about a third of the nations shipments in 2013.

Source: Bloomberg Investec view: This is a long way down from the $130/t in 2011, or even the $95/t settled last year, but reflects the currently oversupplied market, where spot Australian cargoes are being sold at $73/t.

However, when looked at in Australian dollar terms, the current settlement equates to A$89/t, just A$2/t short of the equivalent A$91/t settled last year. � Coking coal price settlement looking likely at US$120/t for JunQ14.

Increasingly it looks like a JunQ14 benchmark hard coking coal contract price of US$120/t will be settled between Anglo Coal and Nippon Steel.

Source: Inside Coal Investec view: A US$120/t settlement would represent a 16% QoQ fall from the MarQ14 settlement price of US$143/t.

A contract price of US$120/t is however still above the current spot price of US$112/t. � European physical coal prices slip further to US$74.5/t as demand eases and markets anticipate resumption of exports from Drummonds Colombian operations.

Source: Thomson Reuters � LME to postpone implementation of new Linked Load-In Load-Out warehousing rules.

The London Metal Exchange has said that certain warehousing changes scheduled to begin on 1 April 2014 now wont be implemented after a judgement in the UK courts ruled in favour of Rusal (486 HK) who claimed that the LME hadnt considered all options to reduce queues and improve load-out rates.

The court found that the LMEs consultation with customers, prior to implementing changes, should have encompassed banning or capping rents for metal in queues.

The LME is currently taking further legal advice.

Source: Bloomberg, FT Investec view: The new LME rules would have seen warehouses with more than 50 days of queues load-out more metal than they accepted in.

This attempt to increase availability of metal clearly had the potential to put downward pressure on aluminium prices.

Delays to changes in LME warehousing rules are likely to result in continued high physical aluminium premiums and make LME quoted aluminium prices less relevant.

Rusal does seem to be doing a good job of supporting aluminium prices.

There was press speculation that it was also Rusal that was lobbying the Indonesian government to impose bans on the export of bauxite. � Freeport (FCX US) could resume Indonesian copper concentrate exports in April.

Freeport has reportedly reached an agreement with the Indonesian government allowing the company to resume copper concentrate exports from its Grasberg mine as early as next month.

New regulations published in January 2014 conflicted with FCXs Contract of Works (CoW) and resulted in delays to FCXs 2014 export permits.

Companies exporting copper concentrate are required under the new regulations to pay a 20-25% export tax in 2014, increasing to 60% by mid-2016.

Source: Bloomberg Investec view: Resumption of exports would be a positive for FCX but does not resolve the need for the company to renegotiate its CoW with the Indonesian government and eliminate conflicts with the new regulations.

Freeport has not exported copper concentrate since January 2014 and its Grasberg operations are reportedly only operating at 50% of capacity.

Freeport has previously guided for sales of 1.1bn lbs copper and 1.6moz gold from its Grasberg mine in 2014.
Other economic news � US economy grew by 2.6% in Q4.

The US economy grew faster than previously thought during Q4 2013 due to strong consumer spending.

Commerce Department figures showed that the economy grew by 2.6%, up from the previous estimate of 2.4%.

Source: FT � Cargill to stop trading and dealing in coal, gas and power in Europe due to significant changes in these markets squeezing margins.

Last month the company was reported to have lost US$100+m in the US energy markets due to a wrong trade during a bitter cold snap at the start of the year.

The group will continue to trade in oil, petrochemicals, iron ore and steel, ocean freight and North American Gas & Power.

Source: Thomson Reuters
African Resources update � Zambian consumer inflation rose to 7.7% yoy in March from 7.6% in February.

Month on month CPI stood at 1.3% versus 0.5% in February.

Source: Thomson Reuters � Todays African proverb.

"God will drive the flies away from a tailless cow".

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
Marc Elliott Tel: +44 (0) 20 7597 5189
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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
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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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