[cid:image001.png@01CE35C1.C808C020] Wednesday, 10 April 2013 [cid:image003.jpg@01CE35C2.28CD8C10]
Snapshot � Company news highlights: Vedanta Q4 and full year production results, Talvivaara completes fund raising after gypsum pond leakage, ongoing talks between Rio Tinto and the Mongolian government, Goldfields strike action in Ghana ends, Eldorado Gold Corp continues to face resistance developing Skouries, Polymetal completes acquisition, China Polymetallic continues share buy-back, Prairie Downs completes share placement, Sirius Minerals has drilled another hole, Karara opening defies Oakajee sceptics, Medusa Mining publishes scoping study on Bananghilig deposit. � Commodity review highlights: Gold holding close to one week high on expectation that government stimulus around the world will continue, Chinese copper imports up in March versus February, Construction of fourth coal terminal in Newcastle delayed three years, Chinas chicken industry exceeds that of the US. � Other Economic News: Fitch downgrades Chinas local debt rating to A+, Chinas March CPI falls. � African Resources Update: Guinea has amended its mining code to improve the investment climate � FTSE futures up 5.5 points (7am): The Dow closed up 60 points thanks to the positive Chinese inflation data and expectations of better corporate earnings.

Asian markets are looking to close up (Nikkei up 96 points or 0.73% and Hang Seng up 40 point or 0.18%) whilst the Australian market is off marginally (down 9 points or 0.18%) dragged down by consumer goods and services.

European futures are also looking positive this morning - Eurostoxx up 10 points, CAC 11.5 and DAX 34. Chinese trade balance came in at a deficit of $880m(compared to forecast $15.15bn surplus) as exports rose less than forecast causing concerns for trade outlook and quality of data as the government said some companies file false customs declarations.

Imports rose 14.1%.

The import data is positive for commodities in general however the subdued exports strength is causing a mild concern, copper is reacting accordingly off -0.45% to US$3426/lb. Economic data due today: EU - French Industrial Production (-3.9% YoY fcst), Italian Industrial Production (-4.0% YoY fcst), Spanish Unemployment March (6.7% prev).

G8 foreign ministers meet in London for 2 days; US - MBA Mortgage Apps (-4.0% prev); Obama sends 2014 budget to Congress more than 2 months after deadline; Fed releases minutes of March 19-20 meeting.
Company News � Vedanta (VED LN) Q4 and full year production results reflect growth across oil and gas, copper, aluminium, lead and silver.

Full year mined metal production was up 5% yoy to 870kt with Q4 at 260kt up 16% yoy.

Oil output benefitted from the start-up of Aishwariya at the end of the last quarter that will ramp up to 10,000bopd.

Total oil and gas output reached 74.94boe up from 20.48boe in 2012, of which VEDs working interest was 46.66boe.

Iron ore operations continue to be affected by suspension of mining in Goa and Karnataka leading to a fall in sales from 16mt to 3.1mt in the last financial year.

Pig iron and metallurgical coal output however was significantly higher at 308kt and 257kt respectively up 24% and 29% yoy.

Source: Company � Talvivaara (TALV LN) completes fund raise after gypsum pond leakage.

Yesterday, TALV announced that it had suffered from a leak at its gypsum pond on 7 April, adjacent to the site of a previous leakage in November 2012.

The water should be captured within the mines safety systems and therefore no untreated water should escape out of the mine area.

Fortunately, TALV had already launched a rights issue which ended 2 days before this leakage, and the take-up of 96.7% raising EUR261m for the issue of 1.58bn shares was announced last night.

Source: Company Investec view: The demand for TALV stock has both impressed and surprised us, seeing as this company has suffered many blows since its arrival in London.

With no cost guidance on the clean-up, we surmise that the new funds will be put to good use. � Ongoing talks between Rio Tinto and the Mongolian government.

Rio Tintos Jean-Sebastien Jacques, CEO Copper, has reportedly said that constructive progress is being made between Rio Tinto and the Mongolian government in talks over the Oyu Tolgoi investment agreement.

Oyu Tolgoi, 66% owned by Turquoise Hill, in which RIO has a 51% majority interest, and 34% owned by the Mongolian government, is expected to be in commercial production by June 2013.

Source: Bloomberg Investec view: Rio Tinto continues to highlight the positive longer term copper industry trends.

In a presentation to the CESCO/CRU conference in Santiago yesterday Rio Tinto highlighted research by Wood Mackenzie indicating an additional 11mtpa of copper semis demand by 2024 (global copper consumption was 19.8mt in 2012) and a requirement for 4mtpa of additional new copper supply by 2024 just to offset grade decline and mine depletion globally.

Rio Tinto estimates copper head grades will decline from c.

1.3% in 2000 to c.

0.9% by 2024, a decline of c.

30%. � Gold fields (GFI SJ) strike action in Ghana ends with workers returning to work Monday and Tuesday at the Tarkwa and Damang mines having reached a settlement.

The company estimates that it has lost around 14koz of production as a result of the week long illegal strike.

Source: Mining Weekly � Eldorado Gold Corp (ELD CN) continues to face resistance developing Skouries (acquired through the US$2.4bn takeover of European Goldfields) with reported nightime attacks in recent months as locals are opposed to the development due to the potential threat to the tourist industry.

Some in the region are in favour of the development due to the jobs that would ensue.

Source: Bloomberg Investec View: Clearly the Greek asset base that was the core of European Goldfields is proving difficult to advance. � Polymetal International (POLY LN) completes acquisition.

POLY has completed the acquisition of 100% of the Maminskoye gold deposit which it announced on 20 February.

Payment was US$3.9m cash and US$73.4m in 5.49m shares.

Source: Company � China Polymetallic Mining (2133 HK) continues share buyback.

Chinese lead/silver/zinc miner China Polymetallic Mining repurchased 1.33m shares on market at an average price of HKD1.27/share on 9 April.

This was 65% of daily volume and CPMs first on market purchase since 26 March.

Source: HKSE Investec view: We view share repurchases by CPM as highly accretive given they are being made at a 60% discount to our HKD3.18/share NPV. � Prairie Downs (PDZ AU) completes share placement.

PDZ has successfully raised A$6m, through placement of 12m ordinary shares to institutional and sophisticated investors in Australia, Europe and Asia.

PDZ will use the proceeds of the placement to accelerate exploration and development activities, including completion of a drill program and mining studies at the Lublin Project, as well as to provide working capital.

Source: Company Investec view: With cash and PIR holding, Prairie Downs is now well funded to progress the Lublin Coal Project, with the appointment of the CEO the next likely catalyst. � Sirius Minerals (SXX LN) has drilled another hole.

SXX has drilled hole SM11B which has intersected 58m of 88% polyhalite from 1,511m depth.

Source: Company Investec view: Given the depth of this deposit and therefore the cost of drilling a hole, it is perhaps no wonder that SXX choses to announce them one by one.

We await positive permitting developments. � Karara opening defies Oakajee sceptics.

The opening of Karara in Western Australias Mid-West region, operation, a 50:50 JV between Gindalbie (GBG AU) and Chinas biggest iron ore miner, Ansteel (ANSTEZ CH), has been hailed as the first piece of the jigsaw for the troubled Oakajee port and rail project.

The region could end up producing 50mtpa of magnetite ore and that cant be done through Oakajee.

GBG, however, brushed off the importance of Oakajee, reiterating that it had built a port with a 16mtpa capacity (initial production is for 8mtpa).

Source: MiningNews � Medusa Mining (MML LN) publishes scoping study on Bananghilig deposit yesterday, outlining a 5mtpa mill producing 200kozpa of gold at a cash cost of US$565/oz and capex of US$220m of which the mill would cost US$170m and associated infrastructure of US$50m.

The company estimates the mining opex at US$15.5/t and a strip ratio of 5:1.

Processing would be through CIL with 80% recoveries with potential to increase to 90% with flotation plus oxidation processing routes.

MML also sees opportunities to extend mine life and improve project economics.

A feasibility study is due to be completed in Q3.

Part of the reason for the low costs may be that the ore is soft to medium hardness and predominantly free dig.

Source: Company Investec View: This was a positive step for the company and outlines a doubling of the long term production profile.

The capex and opex appear surprisingly low for an operation of this size, however, MML has previously demonstrated good cost control at its CO-O mine.
[cid:image004.png@01CE35C2.28CD8C10] Commodities News � Gold holding close to one week high on expectation that government stimulus around the world will continue, offsetting pressure from further declines in SPDRs holdings to 1,200.37t, the lowest since June 2011, and down 11% this year.

There are signs of considerable strength in physical demand from China as gold imports from Hong Kong were up 89% in February to 97t including scrap, versus 51.3t in January.

Weaker gold pricing has encouraged Chinese investors and jewellery buyers.

Source: Bloomberg � Chinese Copper imports up in March to 319kt versus 298kt in February and 462kt the previous year.

There is speculation that higher deliveries in April in response to lower prices encouraging purchasing could raise inventories and limit price rallies.

Scrap imports also rose, reaching 350kt in March versus 300kt the previous month.

Source: Bloomberg � Construction of fourth coal terminal in Newcastle delayed 3 years.

Port Waratah Coal Services (PWCS) has today announced that the planning process for the proposed T4 coal loader will continue, but that the projected timeline has been delayed, with the terminal unlikely to be approved by 2014 or built before 2018, representing a 3 year deferral on original plans to have the terminal on line in 2015.

In addition, the project itself is being reconsidered (on the back of lower expected coal demand and falling prices), with PWCS "considering other options" including expansion of the existing Kooragang Island loader.

Source: Bloomberg. Investec view: We see the delay in T4 as a breakthrough for common sense given the delays in Federal approvals for projects potentially utilizing the port.

If the terminal had proceeded as originally planned producers would have faced take or pay commitments to fund construction of a new terminal while existing port capacity went unutilised.

This announcement is a good outcome. � In further evidence of Chinas growing dominance of commodity markets, Chinas chicken industry exceeded the USs for the first time last year.

However, the industry is under threat due to an outbreak of bird flu.

China is the biggest chicken consuming nation, and is largely self-sufficient versus a forecast deficit in the US of 3.79mt.

However, the flu is clearly an issue and there have been reported fatalities which is leading to sharp drops in consumption locally.

Source: Bloomberg Other economic news � Fitch downgrades Chinas local debt rating to A+.

Fitch has downgraded Chinas long-term local currency rating from AA- to A+ over concerns of high local government debt levels.

Total credit in China is estimated to have reached 198% of GDP by the end of 2012 up from 125% in 2008.

Source: FT � Chinas March CPI falls.

China reported a CPI increase of 2.1% YoY in March, down sharply from 3.2% in February, easing any concerns of monetary tightening.

Source: FT
African Resources update � Guinea has amended its mining code to improve the investment climate.

Mining profit taxes are to be reduced from 35% to 30%, and tax on bauxite to 0.15% of the international price of aluminium from 0.55%.

In addition, the number of mining licenses a single company can hold has been changed from three to five and a lower minimum investment requirement has been agreed for certain types of concession.

Source: Mining Weekly. Investec View: Companies that could benefit include Rio Tinto, various bauxite miners, Bellzone and Avocet.
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