🕐15.08.14 - 09:54 Uhr

INVESTEC GLOBAL NATURAL RESOURCES DAILY - MINING - FRIDAY 15TH AUGUST - CEY LN,
BLT LN, ZIOC LN, GLEN LN, EMED LN, MWE AU, RIO LN, HAR SJ



[cid:image001.png@01CFB85F.986B3380] Friday, 15 August 2014 [cid:image006.jpg@01CFB85F.A17902E0]
Snapshot � Company news highlights: Research note on Centamin, BHP Billiton update on portfolio simplification, Zanaga mining license approved, EMED Mining enters subscription agreement, Mawson West interim results � Commodity review highlights: Rebar and iron ore weaken but seaborne-domestic iron ore spread increasing, silver market commences electronic benchmarking today, Chinas fourth gold ETF raises US$50m, Paulson maintained stake in worlds largest gold ETF � Other economic news: "Fragile Five" currencies looking shaky again, PwC indicate miners losing billions on inefficiencies, Australian property market to benefit from offshoring by wealthy Chinese � African resources update: Indian coal company plans rapid production lift in Mozambique, WHO indicates that official Ebola toll may underestimating the scale, Harmony Golds experience highlights difficulty at ramping output, todays African Proverb
Company news � Research note on Centamin (CEY LN).

Yesterdays 1H14A results were nothing special, but our analyst expects improving performance through 2H14A and into FY15E.

CEY is maintaining FY14E guidance of 420koz (Investec 405koz) putting itself under pressure to deliver in the 2H.

The company occupies that desirable space of good balance sheet, low op costs, no major capex and growing free cash flow, i.e., it is resilient, self-funding and capable of paying returns (as evidenced by maiden interim dividend).

Source: Investec � BHP Billiton (BLT LN) update on portfolio simplification.

The share price in Australia was up 2.5% on the back of news that the company may next week announce a spinoff of non-core assets, estimated to be worth as much as $12bn.

The company has already sold assets worth $5.2bn since as part of its portfolio simplification.

In a statement the company announced that the board is expected to consider this when it reconvenes next week, with the company stating that a "demerger of a selection of assets is our preferred option." Source: Bloomberg, Company Investec view: With BLT identifying iron ore, copper, coal and petroleum (plus potash) as the key divisions, a spin-off is expected to nickel, manganese and aluminium, which together accounted for 14% revenue in FY13A and less than 1% of operating income, affirming its status as non-core. � Zanaga (ZIOC LN) mining license approved.

The Zanaga project, a JV with Glencore (GLEN LN) has now been granted a Mining Licence and signed a Mining Convention setting out the fiscal and legal terms.

Key terms are a 25yr operating licence, 15yr renewable terms, 3% mining royalty, 5yr tax holiday and 15% corporate tax.

The next step is for the Congolese Parliament to approve the Convention as a law, with this expected before the year end.

Source: Company Investec view: While the JV will still need to come up with the c.$3bn to get the project going, this is positive news in that it is another tick in the box that any potential strategic investor will require. � EMED Mining (EMED LN) enters subscription agreement with Yanghu Xiandguang Copper and Orion Mine Finance Fund to issue 181.2m shares at 7.25p to raise around �13.1m.

Source: Company � Mawson West (MWE AU) interim results return 1,623t Cu in concentrate and 131,337oz Ag delivering revenue of US$11.1m.

The company booked an impairment charge of US$65m for the period at the end of which it had cash of US$52m.

The company is in ramp up mode at Dikulushi underground targeting 6-7ktpa Cu in concentrate this year with underground drilling underway to extend the mine life.

Construction progress is being accelerated at Kapulo scheduled for commissioning in Q4 in conjunction with a mineral reserve upgrade.

With development and ramp up work underway, financial performance is less relevant versus project development with cumulative capex at Kapulo now at US$87m of a forecast US$124m.

Source: Company Investec View: Key in the months ahead will be the ramp up at Dikulushi and the commissioning at Kapulo to drive value for shareholders.

There is a threat of weaker copper pricing in H2 of this year in our view, but longer term copper exposure should be increasingly attractive to investors.
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Commodities news � Rebar and iron ore weaken, but seaborne-domestic iron ore spread now at $16.77/t.

Rebar futures also fell on concerns over continued weak demand on seasonality and poor credit conditions.

Traders continue to de-stock with a negative outlook, and financing conditions are not conducive to re-stocking.

However, the seaborne price discount is now at its largest to local Chinese price at US$16.77/t.

Source: Bloomberg, Thomson Reuters Investec view: While iron ore prices have weakened recently, the increasing spread between domestic and seaborne prices provides comfort since buyers will eventually baulk at paying a hefty premium for domestic product, thereby favouring the seaborne producers. � Silver market commences electronic benchmarking today as part of a move to more transparent price setting ending the 117 year old silver fix.

The process is to be jointly operated by the Chicago Mercantile Exchange that provides the platform and the algorithm, and administrator Thomson Reuters.

The new benchmark will be set every day at noon as an online equilibrium auction conducted over multiple rounds.

Source: Thomson Reuters � Chinas fourth gold ETF raises US$50m.

The vehicle called Bosera Funds met internal expectations and is expected to start trading as early as next month.

The fund had been delayed due to falling gold prices and other complex reasons.

Source: Thomson Reuters � Paulson maintained stake in worlds largest gold ETF, SPDR Gold Trust, and Soros Fund Investment has boosted investments in gold mining stocks suggesting that major hedge funds have confidence in the metal.

Source: Thomson Reuters
Other economic news � "Fragile Five" currencies looking shaky again.

The emerging-market currencies are looking fragile again after a six-month reprieve.

Bloomberg data shows that the average cost of options betting on a decline in Brazils real, Indonesias rupiah, South Africas rand, Turkeys lira and Indias rupee has jumped to the highest level in almost five months.

Increased anxiety over developing-nation currencies comes as the US preparations to lift interest rates threatens to draw investment away from riskier assets.

Source: Bloomberg � PwC indicate that miners may be losing billions on inefficiencies as data usually used to measure productivity had led the industry to wrongly equate enhanced productivity with cost-cutting and increased volumes.

Research carried out indicated that considerable financial gains could be achieved through more attention to the reliability of physical output of mining equipment particularly for open cut operations.

PwC estimated in a report that equipment productivity in open cut mines fell 20% over the past 7 years despite a push for increased output.

Source: MiningNewsPremium � Australian property market to benefit from wealthy Chinese offshoring their money as the Chinese government continues its corruption crackdown.

Beijing has been targeting "naked officials", a term for state employees whose spouses or children live overseas.

These individuals are typically suspected by the party of using overseas connections to illegally move assets.

China was the no.1 source of foreign capital into Australias real estate in 2013 for which there were approvals for nearly A$6bn into the sector.

Source: Thomson Reuters
African resources update � Indian coal company plans rapid production lift in Mozambique.

Indian Coal Ventures (ICVL), which recently bought Rio Tintos (RIO LN) 65% interest in the Benga mine for $50m, has plans to triple production over the next three years, taking production up to 13mtp.

The ICVL chairperson has stated the company will be able to profitably produce coal at the mine and ship it to India by employing a "secret recipe" adding that ICVL will have operational control that will provide it with coal security in a cost effective way." The other 35% of Benga is owned by Tata Steel.

Source: MiningWeekly Investec view: No mention is made of how the additional tonnage can be taken along existing infrastructure or what additional capex (if any) is required.

We await details of the "secret recipe". � WHO indicates that official Ebola toll may be vastly underestimating the scale of the outbreak as the death toll on Wednesday stood at 1,069 from 1,975 confirmed cases.

The group is co-ordinating the rapid scaling up of international response to the epidemic.

Korean airlines has stopped flights to Kenya due to the countrys links to those where Ebola is spreading.

More locally the Ivory Coast will not allow any ships from Guinea, Sierra Leone and Liberia to enter its port at Abidjan.

Source: Thomson Reuters & Bloomberg � Harmony Golds (HAR SJ) experience highlights difficulty at ramping output after militant strike action.

Since re-opening its Kusasalethu mine 18 months ago that was shut for three months due to union violence the mine is still not on target which raises concerns for platinum producers and a successful ramp up at their operations following 5 months of strike action.

Tensions between unions continue adding to the challenges faced.

Source: Thomson Reuters Investec View: Since the mines where strike action took place in the platinum sector are dominated by one union we hope that union tensions will not disrupt resumption of productivity.

However, it will is a major operation for the platinum majors to get back on course and the complexity should not be underestimated. � Todays African Proverb.

"If a dog cannot crack a bone there is no need to give it to a chicken to crack".

Source: BBC
Investec Global Natural Resources Research Team: UK South Africa
Hunter Hillcoat Tel: +44 (0) 20 7597 5182
Albert Minassian Tel: +27 (0) 21 416 1454
Marc Elliott Tel: +44 (0) 20 7597 5189
Investec Global Natural Resources Sales Team: UK Hong Kong South Africa Adam Bidwell Tel: +44 (0) 20 7597 5089
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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