Please see below corrected version of daily note, apologies for inconvenience: Tuesday, 12 February 2013
Snapshot ¢ Company news highlights: Glencore production report including merged pro-forma production report, Xstrata production report, Impala sees profits fall, Ruukki results, Sibanye Gold first day of trading, Zijin takes stake in Nkwe, Robust Resources receives payment ¢ Commodity review highlights: Chinese iron ore imports, copper at one week low, gold prices remain weak, New Japanese government may not phase out nuclear power. ¢ Other Economic News: Chinese GDP update ¢ The Australian market reacted positively to National Australia Bank’s monthly business survey, which showed business confidence and conditions improved in January.

However, while business conditions improved in manufacturing and finance sectors, NAB noted that conditions in mining had deteriorated sharply in January.

The S&P/ASX 200 closed down 0.01% to 4,959 points.

Miners had lacklustre day, with basic materials shedding 0.5%.

Source: MiningNews
Company News ¢ Glencore (GLEN LN) production for the year to December highlights rising output across various divisions.

The company has also provided a pro-forma production report for both Glencore and Xstrata combined.

The merger remains conditional upon receipts of outstanding regulatory approval in China, completion of the Xstrata court process and Glencore giving effect to the commitments required by the EC.

The long stop date for the merger is 15 March 2013.

Key highlights from the company indicate gold production from Kazzinc up 22%, Katanga copper metal output up 2% despite power disruptions, Mutanda copper ouput up 37%, Murrin Murrin may achieved record production from own ore at 33.4kt Ni, with oil, sugarcane and oil seed production all reflecting increases.

Coal output has also been increasing in both South African and Columbia.

Source: Company ¢ Xstrata (XTA LN) production report highlights record thermal coal production following commissioning of projects in Australia and productivity improvements elsewhere.

Nickel (107kt) and zinc volumes also hit records.

The company has successfully commissioned 9 projects in the period boosting output across various commodities.

However, copper output was down 16% yoy to 747kt as output transitioned from older end of life mines to new mines.

With the new projects started the company indicates annualised output going forward to 900ktpa by the end of December, vs 700ktpa annualised output in January 2012.

Coal output was 90.4mt up 7% yoy, although Australian Hard coking coal output did fall 9% yoy to 6.9mt.

The alloys business saw output fall in the year including PGM production.

Source: Company ¢ Impala Platinum saw profits fall as much as 79% in its first half due to falling output and rising costs.

Exacerbating the rising cost base from labour are power cost pressures with Eskom looking to raise prices by 16%pa to 2018.

The company is forecasting declining earnings due to a decrease in mine to market throughput, above inflation cost pressures and the impairment of long term receivables.

Source: Bloomberg ¢ Sibanye Gold (SGL LN) ends its first day positively.

The South African-focussed spin off from Gold Fields (GFI SJ) closed at ZAR13.56 rand (opening trade of ZAR13.20), giving the company a market cap of US$1.1bn.

Sibanye contains what was GFI’s deeper, more labour-intensive operations.

It becomes the biggest South African gold miner after AngloGold.

Source: Reuters Investec view: A good start for the company, albeit at an opening price lower than it might have hoped for.

While the asset base comprises relatively difficult, high cost operations (c.US$1300/oz all-in), the attraction is a large production base (remaining above 1moz/pa for several years) and low on-going capital costs (since the mines are mature).

The company should therefore generate healthy cash flow at current gold prices and it is Sibanye’s intention is to pay out 25-35% of normalised earnings.

¢ Improved FY result for Ruukki Group (RKKI LN), but still a loss.

RKKI delivered FY12A EBITDA of €10.9m, ahead of FY11A of €1.4m.

The reported loss of €18.1m, from continuing operations, was marginally improved on the FY11A loss of €18.4m.

Notwithstanding a 38% reduction in overall sales of processed products, cashflow from operations improved to €5.8m (FY11A -€2.4m), as RKKI focussed on higher margin European production, while South African production was impacted by the Eskom power buy-back scheme.

RKKI has also reported that Danko Koncar is to take over as CEO of the company, with headquarters to be run from Malta (where the sales function is already based).

Source: Company Investec view: In its outlook comments, RKKI points towards a very difficult operating environment and continued uncertainty.

Focus for the company continues to be on reducing costs and increasing efficiencies, with the aim of maximising cash generation from the existing asset base, while holding back on growth.

¢ Zijin Mining (2899 HK) may take a minority interest in Nkwe Platinum (NKP AU).

The WSJ reports that Zijin Mining may subscribe to an AUD10m convertible note in Nkwe Platinum and could eventually acquire a >50% stake in the company.

Nkwe has the exclusive rights to develop the Garatau platinum project in South Africa’s Bushveld region.

Source: WSJ ¢ Robust Resources (ROL AU) has received final payment for $31.5m part sale of Romang Island project.

ROL today received the final (5th) $6.3m cash instalment, bringing the total sale to $31.5m, and resulting in a 22.5% ownership of the project by PT KSP. Investec view: Interesting to note that ROL has a cash balance of ~$25m ($0.28/share) against its current market cap of $30.8m ($0.35/share).
Commodities News ¢ Chinese iron ore imports for January came to 65.5mt.

Chinese imports amounted to 65.54mt in January, at an import price of US$119.9/t, US$5.90/t higher than December ’12 but down from US$136.5/t in January ‘12.

In terms of volume, compared with January 12, this figure represents an increase of 6.22mt (10.5%).

Source: Tex report ¢ Copper near one week low as Chinese markets are closed this week and little market interest visible.

Weak Euro data is also expected to undermine pricing as the week progresses.

Source: Bloomberg ¢ Gold prices continue to fall despite North Korea carrying out a third nuclear test.

Gold prices fell sharply yesterday as US treasury official said Group of 20 nations must avoid currency devaluations.

Gold ETPs fell 0.14% yesterday, the biggest decline since 24 January to 2,611.41t.

Source: Bloomberg ¢ New Japanese government may not phase out the use of the country’s nuclear power according to the International Atomic Agency.

The previous government had planned to close production output by the 2030s, however, the new government indicated that nuclear power would be retained.

Source: Engineering News
Other economic news ¢ Chinese county level economy now accounts for more than half the country’s GDP as the counties have seen higher growth than the rest of the nation.

In 2010, county level GDP accounted for 49.8% of the country’s whole economy.

Source: Xinhua.net
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