[cid:image001.png@01CFD24F.4BBF6EC0] Wednesday, 17 September 2014 [cid:image006.jpg@01CFD24F.656B1680]
Snapshot � Company news highlights: Fortescue accelerates debt repayments and denies that it is holding stocks, Newmont expects to take 6-8 weeks to ramp Batu Hijau mine once it receives export permit, Sierra Rutile interim results, IFL extends loan facility, Bellzone funding update � Commodity review highlights: Copper prices bounce on Chinese liquidity injection leading to short covering, Canberra continues to expect mine closure to stabilise iron ore price, gold price supported ahead of Fed decision, China to ban low quality thermal coal usage � Other economic news: China Central Bank may inject Rmb500bn liquidity into top banks as part of stimulus effort, Business sentiment amoungst Asias top companies down sharply in Q3, FDI into China slumps � African resources update: Russian consortium to make US$3bn on Zimbabwe platinum project, Lesotho to bring election date forward, Ghana in talks with IMF for financial assistance, Eskom passing on cost pressures to gold producers, US to commit assistance to fight Ebola, todays African proverb
Company news � Fortescue (FMG AU) denies that it is holding 6mt of tocks of iron ore at Chinese ports.

The company has high debt levels with net debt of A$7.2bn at the end of June with management indicating that it plans to make a voluntary A$500m payment in October taking total payments over 12 months to $3.6bnManagement also indicated that it aims to make US$3.6bn of debt payments.

The company also indicated that its delivered costs to China were expected to be US$50/wmt.

Source: MiningNewsPremium � Newmont Mining (NEM US) expects to return to full rates 6-8weeks after receiving its promised export permit at its Batu Hijau mine in Indonesia.

The permit is expected shortly but still remains outstanding.

The mine is expected to ship around 200kt of copper concentrate for the remainder of the year.

Source: Thomson Reuters � Sierra Rutile (SRXR LN) interim results.

On the back of an 8% YoY increase in rutile production and 34% increase in sales, the company has delivered revenue in line with last year, despite lower pricing.

EBITDA has, however, reduced from $13.5m to $8.7m, notwithstanding an 26% reduction in all-in cash cost to $627/t (slightly above FY14E guidance of $605/t.

At the end of 1H14A, SRXR had cash and equivalents of US$10.8m and total borrowings of US$44.6m.

Source: Company Investec view: The company is showing clear signs of operational improvement, although like all of its peers it is not being assisted by pricing.

We note that operating cashflow was $1.6m, down from $23.9m last year, despite the 34% higher sales and 26% lower all-in costs. � International Ferro Metals (IFL LN) extends ZAR500m loan facility from 25 September to 16 September 2015 on the same term.

The loan is with Bank of China.

The company is optimistic about its outlook with the resumption of UG2 ore supply from Anglo Platinum.

Source: Company Investec View: A positive development for the company that for some time has faced a tough commodity environment, although management have been successfully improving operational performance. � Bellzone (BZM LN) funding update.

Bellzone reports that it remains in discussions with China Sonangol to reach agreement on satisfaction of all conditions underpinning a loan agreement and that it currently only has funding to continue operations until mid-September.

BZM requires a further advance of financing by early next week to continue operations.

Source: Company Investec view.

BZM has so far received only two $750k tranches from major shareholder, China Sonangol (29%), out of the $4m loan announced in August.

The total loan was to last BZM until late Oct14 while it progressed discussions with other prospective providers of financing.

The loan and interest is repayable by mid-December (assuming it is all provided) so BZM needs to lock in a strategic partner or find alternate financing, or will otherwise be in default of its loan and China Sonangol will gain control of BZMs key asset, Kalia, without having had to take over the company.
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Commodities news � Copper prices surged by around 4% to 6 a day high after short covering triggered by a stimulus injection of Rmb500bn by the Peoples Bank of China into the countrys five biggest banks.

This comes after markets slowed on a generally bearish perception of growth in China following recent figures on the economy.

Further good news for copper was provided by news that the main miners union at Escondida has called for workers to strike for two days over better working conditions.

If the situation worsens and workers elect to take further strike action it could influence copper prices due to the outage of the worlds biggest copper mine.

Source: SNL, Thomson Reuters and Bloomberg Investec View: Copper prices had been drifting back on concerns of weaker demand and rising supply, however the jump implies a reasonably balanced/tight market and concerns over evolving tightness if material disruptions occur.

We note comments earlier this year that China would buy copper for a strategic stockpile at prices below US$7,000/t .

Of the major miners Glencore provides best exposure to copper and base metal exposure, and material strike action at Escondida would adversely impact Rio and BHP that operate the mine. � Canberra continues to expect mine closures to stabilise price fall.

Wayne Calder, deputy executive director at the Canberra-based Bureau of Resources and Energy Economics (BREE), has stated that he expects iron ore to average $90-$95/t over the next five years.

"It helps prices level out," Calder said today, referring to potential mine closures that would reduce output.

"Well still see the price cycle and volatility in that, but if the higher-cost producers come out of the market it will reduce supply, so will give some stabilisation to the price." Source: Bloomberg Investec view: We agree that the price fall will eventually force the high-cost producers out of the industry, but it appears that this may take longer than most have thought.

Past falls in prices (Sep12 for example) forced high-cost producers to cease production, only for them to re-enter the market when prices rose again.

This time around, the flood of new supply should ensure that they are never in position to re-enter, but total extinction takes time and that means a lengthy suppressed price. � Gold price supported by speculation that the Fed would maintain interest rates at low levels when the US Central Bank meets later today and releases its statement on policy decisions at 18:00GMT.

However, prices are not far from an 8 month low of US$1,225/oz on Monday.

Source: Thomson Reuters � China plans to ban the use of low quality coal in an effort to reduce pollution and oversupply.

The NDRC indicated that it would ban the burning of coal with ash over 16% or sulphur over 1% form 2015 in populous and prosperous eastern cities.

The country has also seen a surge of coal mines developed, a flood of new hydro projects and easing demand due to the slowing economy and pollution curbs undermining coal prices domestically.

Source: FT Investec View: Ironically on a mid and longer term basis this could benefit the major diversified miners that typically aim to sell higher quality coal onto export markets that wouldnt be affected by the ban, whilst lower quality product from Indonesia would suffer.

However, implementing a ban may be challenging.
Other economic news � Chinas Central Bank looking to inject a combined Rmb500bn (US$81bn) of liquidity into its top banks as part of an effort to shore up the faltering economy.

The injection would ease overall credit conditions and help stabilize the economy.

Source: Thomson Reuters � Business sentiment amoungst Asias top companies fell sharply in Q3 due to concerns over Chinas slowing economy, an end to US stimulus policy and a decline for regional economic hubs according to a Thomson Reuters survey which saw its Asian sentiment index fall to 66 from 74 the previous quarter, the steepest decline in three years.

A reading over 50 indicates an overall positive outlook.

Source: Thomson Reuters � FDI into China slumps.

According to the Chinese Ministry of Commerce, foreign direct investment totalled $7.2bn in August, the lowest monthly total since July 2010.

This was down 14% YoY, following a 17% YoY drop in July and marks the first time since 2009, in the midst of the global financial crisis, that FDI has dropped by more than 10% in two consecutive months.

This wont be helped by Beijing targeting a widening array of global companies in the country for alleged price-fixing and monopolistic behaviour.

Source: FT
African resources update � A Russian consortium have formed a partnership to develop a US$3bn platinum project in Zimbabwe.

The project would be the single biggest mining project in the country and the biggest investment since independence in 1980.

A member of the consortium includes Russian arms manufacturer Rostec.

The project would include a mine, concentrator and smelter with annual production of 250kozpa within three years and peak output of 800koz by 2024.

Source: Thomson Reuters Investec View: Weak platinum pricing seen lately despite major supply disruption certainly highlights that there isnt a need for more supply so we question whether this development will really eventuate.

We note this news follows on from comments on Russian investment in Zimbabwe diamond assets, Mr Mugabe is making new friends. � Lesotho to hold elections sooner than 2017 in an effort to ease the current political crisis that led to a coup last month with the prime minister fleeing the country.

Source: Thomson Reuters � Ghana in talks with IMF in an effort to secure financial assistance as it faces painful public sector reform.

The government has benefitted from a successful US$1bn Eurobond last week and has secured a US$1.7bn loan to fund cocoa purchases, however, inflation remains an issue at close to 16% and a budget deficit over 10% since 2012.

A key problem will be to reform its public sector which accounts for 70% of expenditure, against a background of elections due in 2016.

Source: Thomson Reuters � Eskom passing its pressures onto gold produces: PAF.

Presenting its FY14A results, Pan African (PAF LN) CEO Ron Holding stated that the South African state electricity utility, Eskom, was passing its power-interruption pressures on to mid-tier gold producers, which in lost 11 days to both planned and unplanned power outages.

At the same time, Holding pointed out that Eskom was already negotiating to increase the 8% power tariff increase to 12%, noting that PAFs electricity costs already increased 12.5% in FY14A.

Source: MiningWeekly � US to commit assistance to fighting Ebola.

Stating that the recent Ebola outbreak is a "potential threat to global security", President Barack Obama has announced a larger US role in fighting the virus.

Measures announced include sending 3,000 US troops to the region and building new healthcare facilities.

Ebola has killed 2,461 so far this year, about half of those infected, according to the World Health Organization (WHO).

Source: BBC Investec view: Tough posting for a US troop -Ebola or Isis.

Ebola is a potential global threat and a scary one but heres something to put WHOs death toll in context: also according to the WHO in 2012 approximately 627,000 people died of malaria. � Todays African Proverb.

"Respect cannot be built with a stick".

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