[cid:image001.png@01CEB058.30CD13C0] Friday, 13 September 2013 [cid:image006.jpg@01CEB058.310B0720]
Snapshot � Company news highlights: Glencore/Zanaga announced revised scope for Zanaga iron ore project, pit wall at Rios Bingham Canyon moves 400ft halting operations, maiden reserve for Bellzones Kalia project, Sibanye goes ahead with interim dividend, Brockman Mining infrastructure progress whilst CEO comes under investigation for bribery, Shenhua coal sales flat in August, Aspire Mining signs MOU for Black Sea port access, Discovery Metals annual results reflect US$206m impairment, Gabriel Resources may sue Romania for US$2bn, Ivanhoe Mines commences shaft sinking at Flatreef project � Commodity review highlights: Copper futures near lowest level in five weeks, Gold price falls sharply, India reduces iron ore export restrictions. � Other Economic News: Mining M&A transactions half 2012 levels � African Resources Update: Auto worker strike action in South Africa may have cost US$2bn in revenue, Zimbabwe seeks economic ties with friendly countries such as China. � FTSE futures -6.5 points.

Following the recent strong run markets are set to take a break today as Fed tapering concerns re-ignite with the strongest jobless claimed data since 2006.

The Dow closed down 25.96 points, the S&P down 5.71 (0.34%).

Asian markets are relatively weak (Nikkei +0.12%, Hang Seng -0.38%, ASX 200 -0.44%).

Markets will remain cautious ahead of US PPI and retail sales data as well as the Syrian situation as diplomatic efforts between the US and Russia are weighed up. � Commodity markets - gold -0.55% (US$1,314.55/oz), silver +0.26% (US$21.8477/oz), copper -0.20% (US$3.2035/lb), iron ore +0.07% (US$135.20/t), platinum -0.50% (US$1,435.50/oz), WTI -0.16% (US$108.42/bbl), and Brent +0.08% (US$112.72/bbl).

Duel listed - BHP AU -1.04% (A$36.20), RIO AU -1.74% (A$63.08). � Economic data due today: US - PPI MoM (forecast 0.2%), retail sales advance (forecast 0.5%), university of Michigan confidence (forecast 82), business inventories (forecast 0.2%).

EU - Hungarian industrial production, Swedish GDP (forecast -1.1% QoQ).
Company News � Glencore Xstrata (GLEN LN) / Zanaga (ZIOC LN) announce revised scope for Zanaga iron ore project looking at a staged development, "substantially" reducing initial capital requirement.

The feasibility study is due to be completed by Q2 2014, to then form the basis for a mining application.

The call option that GLEN had has been deleted.

ZIOC has agreed to contribute to the budget and work program, which has been extended to Dec 2014, and will include investigating DSO opportunities.

The staged approach is expected to enhance the ability to finance the project.

Both parties have agreed to explore funding options aiming to attract third party debt and equity finance.

Source: Company Investec View: Previously Xstrata (XTA LN) was funding the entire BFS, whereas ZIOC has now agreed to contribute US$17m.

GLEN has frequently cited that it is averse to greenfield developments, which has undermined the markets belief that the Zanaga project will be developed.

However, the staged development approach is certainly more in line with GLENs strategy, supporting the possibility that the project may go ahead in some form.

Whether this is in a form that its meaningful to GLEN is uncertain, but it is already contracted in marketing rather small volumes of African iron ore production, including that from Bellzone (BZM LN), London Mining (LOND) and African Minerals (AMI LN).

GLEN is certainly keeping its options open, notwithstanding that its call option has been deleted.

We note that ZIOCs share price more than doubled over the past few weeks. � Pit wall movement at Rio Tintos (RIO LN) Bingham Canyon mine halts operations.

400 feet of material moved several hundred feet bringing a halt to operations at Rio Tintos Bingham Canyon mine.

Bingham Canyon experienced a massive landslide earlier this year.

Mining operations subsequently resumed while the impacted area remains under surveillance.

Source: Deseret News � Maiden ore reserves for Bellzones (BZM LN) Kalia.

After previously announcing resources of 124mt at 53.5% Fe, BZM has reported reserves of 59.8mt at 54.1% Fe.

The Kalia Optimisation Study is due for release at the end of this month.

Source: Company Investec view: While the grades are still below benchmark levels, we expect that a simple crush and screen operation should be able to lift them to acceptable levels.

The reserves obviously now build in economic parameters, thereby potentially supporting an initial production base (BZM states that estimated costs should allow it to sell the iron product profitably). � Sibanye (SGL SJ) gold goes ahead with dividend at 37cps at its interim following agreement with workers for an 8% wage increase.

The pay-out ratio is 25% of annualised earnings giving scope for the company to pay-out a larger full year dividend based on an agreement with lenders that it can pay-out up to 35% of earnings.

Source: Mining MX � Brockman Mining (159 HK / BCK AU) application for Fortescue (FMG AU) infrastructure access progresses.

Australian iron ore explorer Brockman Mining has received floor and ceiling cost determinations for access to Fortescues below-rail infrastructure from the Western Australian Economic Regulation Authority (ERA).

The cost range is A$84.7m-A$316.9m, or A$0.55/t-A$2.04/t based on 155mtpa rail capacity.

Source: Company Investec view: The ERAs ruling is a milestone in Brockmans application but the cost determination range has low information value for investors given it is only for below-rail infrastructure, which is a small part of the required railway infrastructure.

Moreover, Brockman must still overcome Fortescues contentions that 1) Brockman does not have the financial resources and managerial capability to carry on the proposed operations and 2) Fortescue does not have sufficient unused rail capacity to open access before access negotiations begin. � Brockman Mining (159 HK) CEO under investigation for bribery.

Peter Luk, the CEO of Australian iron ore explorer Brockman Mining, has been charged with offences under the Prevention of Bribery Ordinance and the Crime Ordinance by Hong Kongs Independent Commission Against Corruption.

The relevant matters are unrelated to the affairs of Brockman and Luk will continue as CEO.

Source: Company � Shenhua (1088 HK) August coal sales flat YoY.

Shenhua reported August 2013 coal sales of 39.3mt, down 0.5% YoY, although up sharply from a year-to-date low of 33.1mt in July 2013.

Monthly coal production was 26.4mt, up 3.1% YoY, and monthly total power output dispatch was 21.15bn kWh, up 23.1% YoY.

Source: Company Investec view: QHD thermal coal prices continue to remain in the doldrums at to CNY530/t (5,500kcal/kg). � Aspire Mining (AKM AU) signs MOU for Black Sea port access.

Mongolian coking coal explorer Aspire Mining has signed a non-binding memorandum of understanding (MOU) with Taman port, which can accommodate Capesize vessels in the Black Sea.

Source: Company Investec view: While Aspire has high quality coking coal, the company faces an insurmountable transportation problem in our view given it requires a 595km, US$1.3bn rail link to be built between its Ovoot project and the Trans-Mongolian Railroad.

Even if this is constructed, long transportation distances are likely to make the economics of shipping to any destination other than China cost prohibitive including to Taman port, which is >8,000km by rail. � Discovery Metals (DML LN) annual results show loss of US$224m following US$206m impairment charge on the Boseto project taking total assets down to US$254m.

At the end of June the company had cash of US$21.3m and interest bearing debt of US$153.9m.

The company reported a revenue of US$122.5m and Boseto operating costs including depreciation and exploration of US$156m that were capitalised.

From 1st July operating revenue and expenses will no longer be capitalised.

The company continues discussions over a change in control, whilst discussions also continue with lenders that have not taken action over disclosed defaults under the revolving credit facility.

Source: Company � Gabriel Resources (GBU CN) may sue Romanias government for up to US$2bn in damages if its Rosia Montana gold project that would use cyanide leaching is rejected by legislators as public and political resistance mounts.

Miners however trapped themselves in pits on Wednesday at Rosia, to protest against the development possibly not going ahead.

The company has spent around US$550m on the project so far over a 14 year period.

Source: Thomson Reuters � Ivanhoe Mines (IVN CN) commences sinking shaft at Flatreef platinum project in South Africa announced earlier this week.

The contractor mobilised for the 7.25m diameter shaft to start construction in Q4.

The shaft will extend to 800m below surface and enable the company to take bulk samples of the ore for further testing.

The capital cost is expected to be US$80m (ZAR818m) to be funded from the c.

US$180m remaining of the US$280 received in 2011 for an 10% stake in the project to a Japanese consortium.

IVP is working with its consortium partners to develop a 12mtpa operation utilising multiple shafts.

IVP has submitted its Mining Right Application in June and started the ESIA to be filed by 24 Feb 2014.

Source: Company Investec View: The Flatreef project benefits from having a thick predominantly flat ore body with grade shells of around 24m thickness at 4.1g/t 3E PE indicated, with significant copper and nickel credits (0.17% and 0.34% respectively) at a 2g/t 4PE cut-off.

The deposit therefore lends itself to bulk mining techniques that we expect to lead to low cost mining with relatively low labour force reducing operational exposure to possible militant union action.

That the project is well financed is a further key benefit in the current market.

We would envisage that the 12mtpa scenario will require the development of smelting capacity since the high base metals content of the ore means that there will be limited options for smelting significant volumes.

Although it should be possible to toll treat the concentrate from an initial 4mtpa development.
[cid:image007.png@01CEB058.310B0720] Commodities News � Copper futures near lowest level in five weeks on concerns that the US Fed would curb fiscal stimulus.

The supply side may also play a role, with strike action continuing at Codelcos Salvador mine in Chile, however, this isnt a major operation having produced 62.7kt of copper last year.

Source: Thomson Reuters � Gold price drops sharply to US$1,310/oz.

The gold price dropped sharply overnight to from c.

US$1,365/oz yesterday as US macro data reinforced expectations the US Federal Reserves will start to unwind monetary stimulus and tensions with Syria eased.

Golds movement included a US$10/oz gap down, which triggered the CME to pause trading for 20 seconds.

Source: Reuters � India can export additional 10mt of iron ore this FY.

India should be able to export an additional 10mt during the remainder of FY14, according to the Mines Ministry, with the government acting swiftly to reduce the export tax from 30% to 20%.

The estimated increase would lift FY14E exports to 20mt, double the current estimates, albeit still well below the 117mt achieved three years ago before the clamp-down on illegal mining.

This is apparently possible even without lifting the ban on mining in the Karnataka and Goa provinces.

The Mines Ministry is meanwhile seeking resumption of mining in Goa and Karnataka, where a mining ban has been imposed by the Supreme court, following recommendations from an investigating committee.

Source: MiningWeekly Investec View: In its current situation with a collapse in the Rupee, the Indian government is likely to be desperate to encourage any exports that it can, although reversing legislation aimed at controlling certain exports would likely take time due to the countrys excessive bureaucracy.
Other economic news � Mining M&A transactions at US$64bn this year, roughly half the value of announced deals at the same time last year.

Major miners are trying to sell assets, although buyers and sellers are frequently not able to reach agreement.

Ernst & Young expect the tough M&A market conditions to continue for at least another two years.

Source: Thomson Reuters
African Resources update � Strikes in the South African automotive industry are now over, but may have lost as much as US$2bn of revenue over four weeks.

Total lost output has amounted to 45,000 vehicles.

Vehicle and automotive component manufacturing accounts for around 30% of the countrys manufacturing output.

Source: Thomson Reuters � Zimbabwe to increase economic ties with "friendly" countries like China, as Western nations maintain their sanctions China has already emerged as a major investor, building the largest alluvial diamond mine in the east of the country and running the biggest ferrochrome producer, while a Chinese-backed firm is to start mining coal in western Zimbabwe and build a 600MW coal-fired power station next year.

The government has also given US$1.7bn of contracts to Chinese firms to expand the countrys two largest power plants.

Source: Reuters
Investec Global Natural Resources Research Team: UK Hong Kong South Africa Hunter Hillcoat Tel: +44 (0) 20 7597 5182
Matthew Whittall Tel: +852 3187 5075
Albert Minassian Tel: +27 (0) 21 416 1454
Marc Elliott Tel: +44 (0) 20 7597 5189
Leavitt Pope Tel: +852 3187 5074
Louise Collinge Tel: +44 (0) 20 7597 5779
Investec Global Natural Resources Sales Team: UK Hong Kong South Africa Jamie Campbell Tel: +44 (0) 20 7597 5038
Will Robbins Tel: +852 3187 5098
Hayden Smith Tel: +27 (0) 21 416 1401
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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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