🕐28.05.14 - 10:00 Uhr

INVESTEC GLOBAL NATURAL RESOURCES DAILY - MINING - WEDNESDAY 28 MAY - RIO LN, CL
F US, PDN AU, 975 HK, WLFE LN, IFL LN, TALV LN



[cid:image001.png@01CF7A4C.B1ED8430] Wednesday, 28 May 2014 [cid:image006.jpg@01CF7A4C.B2292DA0]
Snapshot � Company news highlights: Rio Tinto appoints new aluminium head, Cliffs cuts capex again, Paladin halts production at Kayelekera uranium mine, Mongolian Mining credit rating affirmed CCC+, Wolf Minerals update, International Ferro Metals signs agreement with Chrometco, Talvivaara interim highlights challenges � Commodity review highlights: Chinas NDRC anticipates no iron ore price rise for 3 months, Gold prices down in response to Chinese import figures � Other economic news: Chinas urbanisation drive to continue � African resources update: New SA mines minister to start strike mediation soon, Ghana cancels bond issue, Ebola outbreak in Sierra Leon continues � Market notes: New high for the S&P as US durable goods orders and consumer confidence prints were positive.

The Russell 2000 was also strong again as small caps continue their rally, whilst Treasuries remained resilient.

Oddly enough, Chinese ADRs were weaker despite continued speculation that the Chinese will stimulate the economy.

In Europe, removal of overhangs surrounding the European Parliament and Ukrainian presidential elections allowed markets to continue their rise, with the ECBs meeting in Portugal continuing to garner attention after another round of dovish commentary.

Asia inched higher in the early openings on the back of the continued improvement in US data. In China, the focus is on the if and where stimulus might come, with the local papers stating that the government may loosen monetary policy in "some areas very soon", with a RRR cut in central and western regions, an increase in the relending program, a move by the PBoC to buy treasuries, financial bonds, railway bonds and housing financing bonds to support liquidity and an easing of the loan-to-deposit ratio limits in "some areas" all discussed. Commodities: The value of projects being developed in Australia has fallen another 5% HoH to A$229bn as the investment cycle continues its downturn.

8 projects worth ~A$13bn between them moved to the committed stage over the 6mth period, led by Hancocks Roy Hill iron ore project, valued at A$10.7bn.

Gold fell again overnight as many viewed the results of the Ukrainian elections as positive and likely to ease tensions with Russia., Copper continued its rally on China stimulus expectations with 3mth LME futures closing just under US$7,000/t.

Despite the weakness in iron ore overnight, rebar futures hit a 2 week high on the same views as for copper.

The spread between Chinese and global rebar prices is now only US$18.85, the lowest this year. Data Due: US - MBA Mortgage Applications, EU - Germany - Unemployment data; Import Price Index; France - Consumer Spending Mom; PPI; Spain - Retail Sales YoY; House Mortgage approvals; Italy - Business Confidence and Economic Sentiment; Eurozone - Money Supply; Economic, China - April Industrial Profits YTD
Company news � Rio Tinto (RIO LN) appoints new aluminium business chief executive.

Rio Tinto has appointed Alfredo Barrios as chief executive of its aluminium business.

The previous head, Jacynthe Cote, is leaving the business for personal reasons.

Alfredo Barros was most recently Executive Director and Executive Vice President Downstream at the TNK-BP JV in Russia.

Mr Barros had been with BP since 1992.

Source: Company � Cliffs Natural Resources (CLF US) to cut 2014 capex by 25% or US$100m in light of weak coking coal and iron ore prices.

Capex will not total US$275-325m.

Prior to the latest cut, the company was already reducing capex with previous guidance 55% below 2013 levels.

The company is also fighting an activist investor that wants to replace the CEO and break up the company.

Source: Thomson Reuters � Production at Paladins (PDN AU) Kayelekera uranium mine ceases.

Following the decision on 7 February 2014 to ramp down production at Kayelekera and to place the mine on care and maintenance production at the Kayelekera mine in Malawi has now ceased.

Closure is due to continued deterioration in uranium prices.

Production could be resumed at Kayelekera with a c.

9 month lead time, although the incentive price required is US$70-75/lb U3O8.

Source: Company Investec view: Closure of Kayelekera will remove supply of c.

3.3mlb pa U3O8 from the market.

Paladin quotes sources that estimate 60% of current annual uranium production now has costs above the spot uranium price which is currently just US$28.25/lb. � S&P affirms Mongolian Mining (975 HK) at CCC+ with negative outlook.

Credit ratings agency Standard & Poors has affirmed Mongolian Mining Corps credit rating at CCC+ with negative outlook while removing the company from credit watch given easing liquidity pressures.

S&P believes MMC will have sufficient liquidity over the next twelve months after receiving US$90m from asset sales, refinancing its amortising bank loans, and S&Ps expectation that repayment of US$105m of promissory notes due to 11% shareholder Kerry Group will be postponed.

Source: Company Investec view: Mongolian Minings 2017 debt is currently trading at a yield-to-maturity of 34% and 57% of par.

While MMC is struggling with the difficult coking coal market, we believe the company has sufficient liquidity to continue operations this year while it awaits a recovery in currently depressed coking coal prices and cost reduction benefits expected next year from the recently announced cross border rail link that could eliminate up to US$7/t-US$8/t of trucking and re-handling costs (c.

10% of total cash costs). � Wolf Minerals (WLFE LN) provides update on Hemerdon tungsten project construction.

Wolf Minerals has advised that its 3.5ktpa, GBP123.1m Hemerdon tungsten project in Devon, UK, is progressing on schedule and contractors GR Engineering are due to finish plant construction in 3Q15.

Source: Company � International Ferro Metals (IFL LN) signs agreement with Chrometco to conduct exploration of LG6 chrome ore at Chrometcos Rooderand Mine.

If successful, IFL will be entitled to mine up to 200kt of chrome ore over 12 months for a fee.

The product is hopefully a higher grade ore source to feed IFLs furnaces that would allow for more flexibility and cost effectiveness.

Source: Company � Talvivaara (TALV LN) interim report shows production of 3.068kt Ni and 7.5kt Zn leading to net sales of Euro29m and operating loss of Euro7.1m and a total loss of Euro17.1m.

Ore production remains suspended and subject to refinancing although leaching of existing pads continues.

Guidance cannot be provided without a refinancing agreement.

Cash at the end of March stood at US$1.1m versus debt of Euro553m and advance payments of US$286m.

Source: Company
[cid:image007.png@01CF7A4C.B2292DA0] Commodities news � Chinas NDRC does not anticipate iron ore price rises over the next three months due to high port inventories and increased supplies.

Spot prices are at a 20 month low below US$100/t cfr.

China imported 819mt of iron ore in 2013 up 10.2% yoy and in the first four months of this year imports totalled 305.3mt up 21% yoy.

Inventories at ports are estimated at 113.3mt.

The NDRC also estimated global operating costs at US$54.7/t for production outside of China, whilst in country operating costs were US$75-145/t.

Source: Thomson Reuters Investec View: The high cost domestic production should eventually put a floor on iron ore prices, since at current levels output will likely face material cuts. � Chinas gold imports decline in April.

Chinas net gold imports from Hong Kong were 65.4t in April 2014, down 18.9% MoM from 80.6t in March 2014 and down 13.8% YoY from 75.9mt in April 2013.

The data prompted considerable overnight losses overnight with gold at 3.5 month lows.

Source: Bloomberg & Thomson Reuters Investec view: Data from the World Gold Council suggests that Chinese are buying fewer gold bars and coins for investment purposes while jewellery demand remains robust, although recent news flow indicates a subdued jewellery market at the current time.
Other economic news � Chinas urbanization drive to continue to drive demand for the next 15 years according to major domestic property developer China Vanke.

However, the rapid growth seen in recent years is over according to the group with annual growth rates slowing to an 11 month low in April following the government clamp down on speculative investment.

The industry was estimated to be worth US$1.3 trillion last year.

Source: Thomson Reuters
African resources update � A new mine minister to start strike mediation as soon as he has been briefed on his new portfolio, and highlights the need to treat AMCU with respect.

Yesterday there was growing hope that a resolution to the strike may be achieved this week, as last weeks three day mediation process has been extended.

The ongoing strike threatens to push South African toward a recession.

Source: Thomson Reuters & Mining MX � Ghana cancels plans to issue a 7 year domestic bond of US$33.4m to avoid paying an excessive yield.

The rate for the Bank of Ghanas benchmark 91 day bill was 24.1% on Friday versus 19.2% at the start of the year.

The 7 year bond could have required a yield of 30%.

Source: Thomson Reuters � Ebola outbreak in Sierra Leone continues with five people reported to have died on Monday according to the WHO.

The outbreak is estimated to have caused 185 fatalities in Guinea and Liberia, with 258 cases reported in Guinea since the outbreak was first identified in March.

Source: Thomson Reuters
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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