[cid:image001.png@01CE76FC.07391260] Tuesday, 02 July 2013 [cid:image006.jpg@01CE76FC.1DAE4740]
Snapshot � Company news highlights: Antofagasta secures power supply, Amara feasibility study for Baomahun, Talvivaara to cut up to 250 jobs, Wolf awards development contract, Central Asia production on track, Vedanta no longer looking at RIOs IOCC stake, Mongolian Mining commissions 3rd coal plant, Apex shuts down Wiluna, Rey Resources sells Duchess Paradise Coal Project, Elemental receives $190m cash takeover bid, Mirabela reduces 2013 guidance, Tawana early development plans for Mofe Creek � Commodity review highlights: Japan receives first nuclear fuel since Fukushima, Rusal urges aluminium production cuts, further falls in Chinese coal prices, China issues 2nd rare earth quota, unchanged manganese prices from BHP Billiton, thermal coal weakness intensifies � Other Economic News: Mick Daviss private equity firm to face some competition � African Resources Update: Egypt facing a new crisis, Obama backs a new model for Africa � FTSE futures up 1 point this morning.

Strong ISM data pushed the Dow and S&P up 0.44% and 0.54% respectively and Asian markets are fairly mixed (Nikkei +1.78%, Hang Seng -0.29, ASX200 +2.63%).

The gains in the Australian market are a result of yesterdays positive move in commodity prices combined with positive US data and the RBA keeping the cash rate at 2.75%.

Markets in Europe are looking to open flat with Italy in focus after a coalition partner threatened to withdraw support for the government. Shanghai steel rebar prices gain 0.7% to 3,559 Yuan amid rumours that the Chinese may release details of policies to redevelop shantytowns in the second half of the year. Commodity markets - gold +0.47% (US$1,258.29/oz), silver +0.17% (US$19.6715/oz), copper -0.73% (US$3.1385/lb), iron ore +0.34% (US$116.90/t), platinum -0.04% (US$1,381.90/oz), WTI -0.08% (US$97.91/bbl), and Brent +0.04% (US$103.04/bbl).

Due listed - BHP AU +3.65% (A$32.07), RIO AU +2.59% (A$53.07) Economic news due today: US - Factory orders (forecast 2%), total vehicle sales (forecast 15.5m), and domestic vehicle sales (forecast 12.05m).

Europe - UK PMI construction (forecast 51.2), Eurozone PPI (forecast -0.2%).
Company News � Antofagasta (ANTO LN) acquires stake in hydroelectric project.

ANTO has entered into a binding agreement to acquire 40% of Alto Maipo SpA, a company planning to construct two hydroelectric plants 50kn SE of Santiago.

As part of this, ANTO has signed two 20yr power purchase agreements (PPA) that will secure power for ANTOs Los Pelambres operation, with the first PPA starting in 2015.

Power for Los Pelambres is currently purchased at spot prices since the previous PPA expired at the end of 2012.

The HEP project is largely debt financed, with ANTOs exposure restricted to 40% of the equity participation, expected to be c.$300m.

Source: Company Investec view.

The company does not provide any details on the pricing of the power contract, relative to current spot process, but we would expect that it is value accretive.

Importantly, it secures ongoing provision of power for Los Pelambres, from a sustainable source.

The US$300m capex is easily affordable for ANTO. � Amara Mining (AMA LN) releases feasibility study for Baomahun project.

The feasibility study for the Baomahun project in Sierra Leone demonstrates a post-tax NPV of US$127m at an 8% discount rate and a gold price of US$1,350/oz (against a current gold price of US$1,258/oz).

This is based on a mineral reserve of 1.21Moz (comprising 23.3Mt at 1.62g/t Au) and envisages cash costs of US$799/oz and initial capex of US$151m.

Gold production is estimated to be 148,500oz/year for the first six years at an average grade of 2.53g/t Au.

Production of 203,970/oz is estimated for the first year, at a higher grade of 3.9g/t Au.

Source: Company Investec view: In light of the todays gold price, this is not an encouraging outcome for this company which has been active in its exploration efforts at this project in Sierra Leone for many years.

Looking at the gold price sensitivities given by the company, the NPV would be US$41m at US$1,200/oz and US$99m at US$1,300/oz and clearly these numbers are more reflective of the current gold price environment.

The group will clearly now focus on its optimisation options. � Talvivaara (TALV LN) cutting up to 250 jobs.

TALV has announced planned cost cutting initiatives to better withstand current (depressed) market conditions.

This should lead to the termination or temporary lay-off of a maximum 250 employees.

Source: Company � Wolf Minerals (WLFE LN) awards contract.

WLFE has awarded an �85m mining services contract for the Hemerdon tungsten project in Devon to CA Blackwell.

The contract includes pre-strip and development and also mining operations.

The awarding of the contract compares well to the DFS estimates of A$141m.

Development is likely to commence in March 2014.

Source: Company � Central Asia Metals (CAML LN) production on track.

CAML has reported Q2 copper production of 3,081t and H1 production of 4,857t.

The company is on track to meet its full year production target of 10,000t.

Source: Company Investec view: CAMLs production figures are very positive and we expect the market to respond well to todays news. � Vedanta (VED LN) apparently out of bidding for RIOs Canadian iron ore.

Newswires indicate that VED has exited from the bidding for RIOs 59% stake in IOCC, estimated to be worth $4bn, as such an acquisition would add to its financial burden (current debt of $16.7bn).

Incidentally, Labrador (LIF CN) is apparently looking at selling its 15% stake in IOCC.

Source: WSJ � Mongolian Mining Corporation (975 HK) commissions 3rd CHPP module.

Mongolian Mining Corporation (MMC) announced that it commissioned its 3rd Coal Handling and Preparation Plant (CHPP) in June 2013.

MMC now has 15mtpa of wet washing capacity at its UHG mine in Mongolia.

Source: Bloomberg Investec view: We forecast MMC will receive an average realised coking coal price in 2013E at the Mongolia-China border of USD103/t and sales volume of washed hard coking coal and middlings in 2013E of 7.3mt (10.8mt RoM).

Our sales volume forecast for JunH13E is 3.1mt and we expect DecH13E to be seasonally stronger, as it has been historically, although this is a risk in a weak market. � Apex Gold puts Wiluna mine on care and maintenance.

Following appointment on 25 June 2013, and consideration of future cash flows, the Voluntary Administrator has immediately transitioned the Wiluna mine to care and maintenance, resulting in a number of workforce redundancies.

The mine had ceased operation prior to todays announcement as repairs as it awaited repairs and the re-establishment of gas supply.

Source: Company/Administrator � Rey Resources (REY AU) announces sale of Duchess Paradise Coal Project to Crystal Yield Investments.

The transaction, worth up to A$21m, is a 3 stage process, through which Crystal will acquire 100% of REYs subsidiary "Blackfin Pty Ltd" (the holder of 100% of the Project).

REY is expected to book a loss of ~A$480k, whilst reducing 12 month exploration expenditure by ~A$2m.

Post transaction, REY will focus on exploring for and developing energy resources in the Canning Basin WA, where is continues to hold a number of coal and petroleum exploration licences/permits.

Source: Company � Elemental Minerals (ELM AU) receives all cash takeover bid.

The offer, received from Dingyi Group Investment Limited following completion of due diligence post the 12 April 13 announcement, is for A$0.66/share, valuing the Company at ~A$190m, a 45% premium to the closing price of ELM shares on 28 June 13.

The bid has been recommended by ELMs Board, and, importantly, is not conditional on finance, Chinese regulatory or FIRB approvals.

Interim funding, providing working capital for ELM, has also been secured from DIngyi, with A$5m to be raised via the issue of 14.7m shares to Dingyi (at A$0.34/share), and a further A$15m to be raised through a secured Convertible Note Facility provided by Dingyi.

Source: Company � Mirabela Nickel (MBN AU) reduces guidance for 2013.

As a result of lower quality ore in the Central zone, disruptions to nitrate supplies in Brazil, and ongoing maintenance to the primary crusher, MBN has reduced 2013 production guidance to 17-18.5kt of Nickel concentrate (down from 22-24kt).

With production expected to be stronger in the second half, MBN has maintained its cost guidance with cash costs expected to be US$5-6/lb for the period.

Capital expenditure/exploration expenditure guidance has also been revised down to US$35-45m (previously US$40-50m).

Source: Company � Tawana Resources (TAW AU) releases preliminary assessment of Mofe Creek Iron Ore Project in Liberia.

TAW has announced a collective exploration target of 95mt of friable itabirite at the Gofolo and Koehnko prospects, with metallurgical recoveries of 44-57% achieved.

TAW is aiming to develop an open cut mine, with a life of at least 10 years, operating at an FOB cost of US$30-35/t (excluding royalties and taxes).

Source: Company
[cid:image007.png@01CE76FC.1DAE4740] Commodities News � Japan receives first nuclear fuel since Fukushima meltdown.

Following expectations that the current ban on almost all nuclear power generation in Japan is lifted early next year, the Takahama power station on Japans Western shore has received a shipment of nuclear fuel from France, scheduled for delivery in 2011 but was delayed a result of the Fukushima disaster.

Source: Bloomberg � Rusal (486 HK) urges further aluminium production cuts.

Rusal Deputy CEO, Oleg Mukhamedshin, has said further aluminium production cuts are required to support prices.

Average production costs are estimated by Mr Mukhamedshin at USD2,300/t versus the current spot price of USD1,784/t.

Source: Bloomberg � China Qinhuangdao (QHD) thermal coal prices fall.

QHD coal prices for 5,500kcal/kg product fell to CNY585-600/t from CNY595-610/t a week earlier.

Source: Bloomberg � China issues 2nd rare earth quota for 2013.

Chinas Ministry of Commerce will allow 13 companies to export up to 15,500t of rare earths in 2H13.

This brings the 2013 full year quota to 31,001t versus 30,996t in 2012.

Source: Bloomberg � BHP Billiton (BLT LN) leaves Manganese price unchanged for August shipments.

According to the TEX Report, BHP has given notice that its manganese price for August shipments will remain unchanged from July at US$5.95 per 1% Mn.

Source: TEX Report � Thermal coal price weakness intensifies.

Latest data on Newcastle thermal contracts signed in June highlights that thermal prices have dipped ~US$8/t since 6 June 13, with price falls occurring at an increasing rate.

Source: TEX Report
Other economic news � Mick Daviss private equity firm, X2, to face some competition.

Mick Davis, in a clear nod towards his success at Xstrata, has named his soon-to-be-launched private equity firm, X2.

His first acquisitions are speculated to be unloved assets in the coal sector, possibly the metallurgical coal assets owned by Rio Tinto (RIO LN), which is divesting of non-core assets.

Davis is, however, likely to have face increased competition for new acquisitions, including from Leigh Clifford (former CEO of RIO, advisor to PE firm KKR & Company), Tom Albanese (former CEO of RIO, considering private equity), Keith Rumble (former Impala Platinum CEO, now with Sun Mining), Aaron Regent (former CEO of Barrick Gold, established Magris Resources), Ian Hamman (ex JPM Cazenove, now with his own start-up, Strand Partners), Lloyd Pengilly (formerly JPM, now establishing a $2bn African mining fund) and the Oppenheimer & Sons.

Eight natural resources funds focused solely on mining raised an aggregate of $8.5bn in 2012, more than the years 2006 to 2012 combined.

Davis, is rumoured to have some $1.5bn available.

Source: MiningMX
African Resources update � Egypt facing a new crisis.

President Morsi has rejected the armys 48-hour ultimatum to resolve the countrys crisis, insisting that he will continue with his own plans for national reconciliation.

The army has warned it will intervene if the government and its opponents fail to heed "the will of the people".

Source: BBC � Obama backs new model for Africa, based on trade and partnership.

The US president, during his current visit to Africa has stated that "ultimately the goal here is for Africa to build Africa for Africans.

Our job is to be a partner in the process." Obama wants to move away from traditional forms of international development and work more closely with businesses in Africa, a model thats based "not just on aid and assistance but on trade and partnership".

Source: BBC
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