[cid:image001.png@01CF8614.D323CB40] Thursday, 12 June 2014 [cid:image006.jpg@01CF8614.DA714D00]
Snapshot � Company news highlights: Avocet Mining business update, Hummingbird to acquire Mali project for US$20m, WorleyParsons awarded Vale construction contract, Mineral Resources confirms stake in Aquila, Leighton Holdings update on strategic review, Evolution Mining farm-in and JV with Emmerson � Commodity review highlights: Copper prices remain near one month lows, China now has worlds second largest gold resource inventory, European coal prices still show no signs of improving � Other economic news: Chinas commodity probe broadening beyond metals � African resources update: SA PGM majors to struggle with restructuring in response to the strike action, tensions mounting on DRC-Rwanda border, Botswana to assess Sasol-style coal-to-fuels project, Ghana sorting its priorities: football coverage beats aluminium production, Todays African Proverb � Market notes: US and Europe markets yesterday reacted to the cuts to the World Bank growth forecasts and concerns over political gridlock in the US.

Australasia is continuing the trend, with Australias heavyweight miners falling post downgrades and recommendation cuts in the iron ore space and market upgrades to the outlook for the A$ wont help this, with one broker now forecasting parity with the US$.

In China, the main stories of note concern the poor property market and the unfolding metals collateral probe at Qingdao Port, with concerns over vast commodity inventories being dumped into the market. Commodities.

Rebar fell to its lowest since the futures contract started in 2009, hitting RMB3,046/t overnight, following pessimism over the property market.

Iron ore continued its falls, hitting US$93.50/t, the difference between the Chinese domestic and global iron ore prices now at US$16.35/t.

Elsewhere, palladium futures reached their highest since 2001 on concern that supply will be restricted by the continuing strike in South Africa that is now in its 5th month. Data due.

Eurozone: Industrial Production; Germany - Wholesale Price Index MoM; France - Current Account Balance; Inflation data; Ireland - Inflation, US: May Retail Sales (fcst+0.6% MoM, prior +0.1%); Weekly Initial Jobless Claims (fcst 310K, prior 312K); April Business Inventories (fcst +0.4% MoM, prior +0.4%)
Company news � Avocet Mining (AVM LN) business update highlights discussions underway with a number of parties reviewing various potential investment or asset sale transactions with a view to paying major shareholder Elliott Management monies owed and ensure adequate working capital.

There have been some delays in equipment delivery for the new carbon blinding circuit and consequently this is expected to ramp up in September.

The company now requires US$15-20m this year due to negative cash flows that are expected (previously US$20-30m), but that the current LOM plan should generate US$115m pre-financing at US$1,250/oz down from US$180m at US$1,200/oz expected previously.

Source: Company Investec View: Avocet continues to face strong headwinds and it is disappointing that the cashflows from the new life of mine plan have decreased, however cash shortfall has also fallen.

We wait to see how the Elliott loan is resolved and if other opportunities present. � Hummingbird Resources (HUM LN) to acquire Yanfolila, Mali project for US$20m, payable in shares at 56p from Gold Fields who would become 26.3% shareholders in Hummingbird.

The project has 1.8moz at 2.8g/t of which the company plans to develop the oxide resource that would mine for 6 years processing 850ktpa of ore and in year 1 produce 81koz for a cash cost of US$503/oz and all in sustaining cost of US$700/oz for initial capex of US$52m and life of mine capex of US$71m.

The company believes that the mineral resources could be enhanced by reviewing existing data.

Source: Company Investec View: This is an encouraging development for the company and will hopefully provide a low cost rapid route for the company to evolve from explorer to producer.

We note however, that the announcement does not provide details on the production profile of Yanfolila other than year 1, nor is there an indication of how grades evolve.

We wait to see further news flow on the project as management get to grips with it.

In time this will hopefully better position the company to develop other assets in its portfolio. � WorleyParsons (WOR AU) awarded construction management support contract for Vales (VALE US) S11D project.

Vale has awarded WorleyParsons a construction management agreement for its S11D project in Para state, Brazil.

S11D is a 90mtpa iron ore processing facility which WorleyParsons has been working on since 2010.

Source: Company � Mineral Resources (MIN AU) confirms it has acquired a 12.78% interest in Aquila Resources (AQA AU).

Mineral Resources has confirmed that it has acquired a 12.78% stake, 52.6m shares, in Aquila Resources.

Mineral Resources intends to engage with stakeholders in the West Pilbara Iron Ore Project to build own and operate the project.

Source: Company Investec view: Mineral Resources acquired its interest at A$3.75/share.

This is a 10% premium to the takeover offer on the table from Baosteel and Aurizon (AZJ AU). � Leighton Holdings (LEI AU) provides update on its strategic review.

Leighton has outlined a strategic blueprint for its future business involving strengthening the balance sheet, streamlining operation and improving project delivery.

The company intends to establish businesses focussed on construction, mining, PPPs and engineering.

A decision is yet to be made on the groups John Holland, property and services businesses.

Source: Company � Evolution Mining (EVN AU) has entered into a farm-in and JV with Emmerson Resources (ERM AU) over the Tennant Creek gold-copper project in the NT, Australia.

The Tennant Creek Mineral Field has historically produced more than 5.5moz Au and 470kt Cu from a variety of high grade deposits, many of which are located within Emmersons tenement portfolio.

EVN can earn a 65% interest in the project by spending A$15m and not less than A$5m/pa within 3 years and earn another 10% by spending a further A$10m within 2 years.

EVN must spend a minimum A$7.5m before it can withdraw from the agreement.

EVN will subscribe for 13% or 49m new shares in Emmerson at A$0.0381/share.

Source: Company
[cid:image007.png@01CF8614.DA714D00] Commodities news � Copper prices remain near one month lows due to ongoing concerns over Chinese demand and the recent probe into using the metal in financing transactions.

Source: Thomson Reuters � China now has worlds second largest gold resource inventory.

The countrys Bureau of Raw Materials has put Chinas gold resources at 8,200t (264moz), only exceeded by known South African resources of 31kt tonnes (close to 1bnoz).

China has for the past seven years been the worlds largest producer of gold and the updated resource inventory suggests that it sufficient resources available to retain this position (acknowledging that resources and reserves are not the same), with the Bureau indicating that discovery is occurring faster than depletion.

China currently produces c.65% more gold per annum than global No.2 miner, Australia and almost 140% more than South Africa.

Source: MineWeb � European coal prices still show no signs of improving currently reported at around US$72.6/t with 50kt traded yesterday.

A weak dark spread which is the profit margin for coal burning power generators continue to weigh on prices.

Source: Thomson Reuters
Other economic news � Chinas commodity probe broadening beyond metals.

Chinas probe into financing of copper and aluminum that has led to urgent checks at major Qingdao port could spread to iron ore and soya beans.

Financing deals against commodities have provided a cheap source of short term finance and led to increased imports.

At least two global banks have asked some clients to shift copper and aluminium used in financing transactions to better regulated warehouses.

Source: Thomson Reuters
African resources update � SA PGM majors to struggle with restructuring in response to the strike action.

Since the strike is protected, the miners cannot retrench workers unless there comes a point at which the economics of the situation make retrenchment unavoidable.

The companies will have to prove that external economic factors such as depressed PGM price and low demand concurrently with the strike threaten the economic viability of the company as a going concern.

If able to prove failure then it can use Section 189 of Labour Relations act to propose retrenchments.

The union can however attempt to interdict retrenchments, but the chances of this being successful decrease as a company reaches liquidation.

Source: Mining Weekly Investec View: Clearly the options available to miners to restructure prior to the resolution of a strike are limited, furthermore, even upon resumption of operations, necessary restructuring could be challenging.

The PGM miners are caught between a rock and a hard place. � Tensions mounting on DRC-Rwanda border.

Rival troops are skirmishing on their shared border, the Congolese information minister says.

This apparently follows an attack by Rwandan soldiers resulting in the kidnap of a DRC army corporal, who was subsequently killed.

Rwandan authorities have yet to comment.

Source: BBC Investec view: This has long been an unsettled area, following the 1994 genocide.

The countrys copper operations and Randgolds (RRS LN) Kibali JV are well removed (+1,000km) from area and are unlikely to be impacted by an escalation in conflict. � Botswana to assess Sasol-style coal-to-fuels project.

The Botswana Chamber of Mines and the Ministry of Minerals and Botswana Investment and Trade Centre plan conduct a feasibility study over the next two years for coal-to-liquid project.

South Africas Sasol (SOL SJ), the worlds largest maker of motor fuels from coal, is the benchmark for any initiative.

The motivation is driven by a desire to exploit the countrys coal resources (+200bnt) and to reduce cut its annual fuel import bill.

Source: Bloomberg � Ghana sorting its priorities: football coverage beats aluminium production.

Ghana plans to increase power production during its World Cup matches and has asked its largest aluminium smelter, Volta Aluminum Co, to reduce consumption to ensure that scheduled blackouts dont interfere with the home countys football games.

Neighbouring Ivory Coast has agreed to supply 50MW to Ghana during its games.

Ghana has been rationing power because of a shortage of natural gas and below average levels of water at hydroelectric plants.

Source: Bloomberg � Todays African Proverb.

"No matter how hot your anger is, it cannot cook yam".

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
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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