[cid:image001.png@01CEEB46.E46D75E0] Wednesday, 27 November 2013 [cid:image006.jpg@01CEEB46.F66782E0]
Snapshot � Company news highlights: Hochschild improved 3Q, Turquoise Hill $2.4bn rights issue, strong interest in Sundance rail tender, Tropicana project update, Stratex amends Centerra JV option, Baobab update on Changara, Afferro/IMIC extend date, Alumina CEO retires � Commodity review highlights: Chinese copper smelters seek 50% increase in premiums, strong Chinese gold demand, tighter than expected copper market � Other Economic News: China launches 2nd carbon trading platform, EU compromises on stricter CO2 rules, limited new project investment in Australia, Putin highlights Ukraines dependence � African Resources Update: NUM may split from ANC, Ethiopia to open up power sector to private investment, Mozambique to launch new round of coal tenement sales, SA growth falls to 4yr low � Market notes: FTSE futures +5 points this morning.

Following a flat night in the US (Dow flat, S&P +0.01%), Asian markets are mixed (Nikkei -0.42%, Hang Seng +0.56%, ASX200 -0.45%).

In European markets Germany is likely to be the focus with Angela Merkel forming a coalition agreement with the social democrats.

Markets are expected to be quiet as we lead into the US thanks-giving holiday tomorrow (US markets shut Thursday + half day Friday) however there is a slew of US data today including jobless claims potentially providing some additional tapering insight and durable good orders. Commodity markets - gold +0.20% (US$1,245.6/oz), silver +0.23% (US$19.91/oz), copper -0.03% (US$3.218/lb), iron ore -0.44% (US$135.90/t), platinum +0.29% (US$1,375.90/oz), WTI -0.22% (US$93.47/bbl), and Brent +0.06% (US$110.95/bbl).

Dual listed - BHP AU -1.46% (A$37.25), RIO AU -1.14% (A$64.30).

WTI fluctuated amid forecasts that tomorrows EIA report will show US crude supplies rose for a 10th week and by 750Kbbls.

Jan futures ended at US$94.04/bbl whilst Brent rose to the half nelson of US$111.11/bbl, now the widest since March 14.

Spot gold declined to US$1,241.58/oz on taper speculation post the better house price and building permit data.

Stocks are weaker in Australia this morning as a result.

Spot iron ore fell to US$135.90/t overnight, with Westpac stating that it believes prices will probably drop 19% by the end of the year to US$110/t as demand slows and supply increases.

LME aluminium stayed near 4�-month lows hit in the previous session on Tuesday amid worries a change in LME rules could push supply from bulging inventories on to the market. Economic data due today: US - MBA mortgage applications, initial jobless claims (forecast 330K), continuing claims (2850K), durable goods orders (-2.0%), capital goods orders (0.9%), Chicago PMI (60.0), University of Michigan confidence (73.1), leading index (flat).

Eurozone - French consumer confidence (85), Spanish retail sales, German GfK consumer confidence (7.1), Irish property prices.

UK - 3Q GDP (forecast 0.8%), private consumption (0.6%), Quarterly government spending (0.5%), exports (-1.0%), imports (1.3%), 3Q total business investment (2.0%).
Company News � Hochschild Mining (HOC LN) Q3 results.

For the 9 months ending 30 September, HOC has reported revenue of US$466m, a gross profit of US$124m and a loss of US$74m.

Excluding exceptional items, the net attributable loss was US$32m.

At the end of the period, the group had cash of US$273m and debt of US$202m.

Net cash generated from operations during the period was US$21m, although there was an overall net decrease in cash of US$70m.

Source: Company Investec view: According to the CEOs statement, HOC has delivered an improved Q3 on the H1, although the financials do not break the Q3 numbers out.

That said, the group reported EBITDA of US$98.4m during H1 and this lifted to US$164.8m for the 9 months, thereby demonstrating some improvement. � Turquoise Hill (TRQ CN) files final prospectus for rights issue.

Turquoise Hill (51% Rio Tinto (RIO LN)) has filed a final prospectus for a US$2.4bn rights issue.

The 1 for 1 rights issue will be at US$2.40/share or A$2.53/share, a c.

42% discount to the closing prices on 25 November.

Rio Tinto has committed to acquire any shares not taken up under the rights issue.

Source: Company Investec view: Rio Tinto provided Turquoise Hill an Interim Funding Facility (US$1.8bn) and New Bridge Facility (US$600m) which were due to mature on 31 December 2013.

Turquoise Hill was obliged to undertake a rights issue if these facilities were not replaced by project financing by year end.

These facilities will now be extended until 15 January 2014 in order to allow for completion of the rights issue to repay these facilities.

The rights issue may see Rio Tinto increase its 51% interest in Turquoise Hill which owns 66% of the Oyu Tolgoi project. � Strong interest in Cameroon rail construction tender: Sundance (SDL LN).

SDL has reported that there has been a solid turnout for the tender to build a 500km railway across Cameroon to SDLs project, with interest from a range of parties including sovereign wealth funds, Chinese banks and steel companies.

The tender will close mid-December, while SDL expects to report its infrastructure solution by the 2Q14.

Source: Reuters Investec view: This rail corridor could have far-reaching implications for a number of players in the region, including Afferro/IMIC, WAFM, Core Mining and Equatorial Resources, all of whom would benefit from sharing the infrastructure.

In our view, China Inc should be active in supporting such shared-infrastructure developments as the capital outlay should be rapidly offset by the pricing benefits that introducing new, alternate iron-ore supply could offer (see recent Investec research report: 700mt gorilla missing in West Africa). � Independence Group (IGO AU) gives Tropicana gold project update.

After completing two months of processing Independence Group expects to produce 90koz-110koz of gold in DecQ13 on a 100% basis.

In the first three years production is still expected to be 470-490koz at a cash cost of A$590-630/oz (incl royalties).

Tropicana is 30% owned by Independence and 70% owned by AngloGold Ashanti (ANG SJ).

Source: Company � Stratex (STIL LN) signs amendment to option on JV agreement with Centerra Gold (CG CN) with Centerra to direct remainder of US$500k earn in of Althunhisar project in Turkey.

Centerra has the option to fund US$1.145m to acquire a 51% interest in the project with an option to take its stake to 75% by spending US$2m over 2 years post the current commitments of US$500k by December 2015.

Source: Company � Baobab Resources (BAO LN) Changara project update discovery of third mineralised vein system with high grade lead and zinc from portable XRF testing of soil sampling over a 1km strike length adjacent to vein.

Soil sampling continues.

Source: Company � Afferro Mining (AFF LN) amendment to outside date.

AFF has announced that the company and International Mining and Infrastructure Corporation (IMIC LN) have agreed to extend the outside date for the completion of the transaction until 31 December 2013.

Source: Company � Alumina Ltd (AWC AU) CEO retirement.

Alumina Ltd CEO John Bevan will retire at end 2013 and be replaced by Peter Wasow, who is currently director of AWC and past experience as the CFO of Santos and VP, Finance at BHP Billiton.

Wasow will be compensated with A$1.15m in base pay, up to A$0.7m in incentive payments and A$0.2m in restricted share grants.

Source: Company
[cid:image007.png@01CEEB46.F66782E0] Commodities News � Chinese copper smelters seeking a 50% increase in copper premiums for 2014 following on from Codelco last week asking for a 41% premium.

Large Chinese copper smelters are planning to offer US$120-138/t for next year.

Spot premiums are currently at around US$190-200/t.

Source: Thomson Reuters � Chow Tai Fooks (1929 HK) earnings nearly double on increased Chinese gold demand.

One of the largest listed jewellery retailers, Chow Tai Fook, reported a 92.3% YoY increase in earnings to HKD3.5bn for the 6 months ended 30 September 2013.

The retailer estimates that c.

80% of its revenue is now from mainland Chinese consumers.

Sales of gold during the period increased 74.4% YoY.

Source: Company Investec view: Chow Tai Fook attributes much of the increase in gold sales to the mainland Chinese buying spree in April following the sharp fall in the gold price.

Chow Tai Fook remains a good indicator of gold consumer trends in China and their interim financials certainly suggest there is rapidly growing consumer demand for gold in China accentuated by bargain hunting when prices pullback.

The World Gold Council reported SepQ13 global gold jewellery demand of 487t of which China accounted for 164t; 18.8% of total gold demand of 869t in SepQ13. � Aurubis (NDA GR) sees tighter than expected copper market.

Copper smelter Aurubis believes the refined copper market could be tighter than expected in 2014, although still in surplus, due to damage to Glencore Xstratas Philippines smelter from Typhoon Haiyan as well as a copper scrap shortage and maintenance shutdowns.

Source: Bloomberg Investec view: Aurubis comments about market tightness are consistent with Codelco increasing physical premiums to Asian copper buyers.
Other economic news � China launches second pilot carbon trading platform, as it experiments with market-based systems for reducing pollution.

Close to 200 local companies have signed up to participate in the Shanghai Environment and Energy Exchange.

Three deals totalling 9,500t of credits cleared on the first day at prices between Rmb25-27/t, compared to Tuesdays settlement price of Rmb72.76 on the China Emissions Exchange in Shenzhen (close to the border with Hong Kong), which debuted Chinas carbon market in June.

A third exchange will launch in Beijing on Thursday.

Source: FT � EU compromises on stricter CO2 emissions for cars following Germanys insistence that an earlier deal was torn up.

The new agreement delays 100% implementation of 95g/km of CO2 for all new cars until 2021 from previous deadline of 2020.

By 2015 CO2 emissions must average 130g/km across the fleet, a goal which many manufacturers are already meeting or close to achieving.

Source: Thomson Reuters � Limited new project investment in Australia.

Australias Bureau of Resources and Energy Economics (BREE) said newly sanctioned mineral and energy projects were the lowest level in a decade at A$1.7bn in SepH13 while completions were a record high of A$30bn.

In addition, a number of projects in the planning stages are being delayed or cancelled and with the past six months 71 projects have been delayed for more than a year.

Source: Bloomberg, BREE � Putin reminds Ukraine of its dependence on Russia.

Russian President Vladimir Putin has reminded Ukraine of its economic dependence on Russia, citing debt to Russian banks Sberbank, Gazprombank, VEB and VTB of more than US$30bn.

Putin played a central role in encouraging Ukraine to derail the deal with the EU, and Kiev is now shaken by protests over the governments decision.

Source: FT
African Resources update � South Africas biggest union, the NUM is considering pulling out of the ANC aligned COSATU labour federation to form its own political entity that could hurt the current ruling party.

The union has around 350k members.

NUMs general secretary has been pushing for large scale nationalisation of mines.

Source: Thomson Reuters � Ethiopia to open up energy sector to private investment.

Until now the government-owned Ethiopia Electric Power Corporation (EEPCO) was solely in charge of power but a new law allows private power companies to compete with EEPCO.

The government plans to generate 10,000MW from various sources by the end of 2015, thereby supporting a GDP growth target of up to 15% per annum.

Source: The Africa Report � Mozambique to launch new round of coal tenement sales.

The Ministry of Mineral Resources announced that it will launch a round of bidding for coal mining in its Tete and Niassa provinces in June next year, but declined to say how many blocks would be on offer.

Source: MiningWeekly � South African growth falls to four year low.

The South African economy expanded by 0.7% QoQ during Q3 2013, sharply below the 3.2% recorded for the previous quarter.

The key reason for this was wage related strikes in the car, construction and mining industries.

Alongside Brazil, Turkey, India and Indonesia, South Africa is one of the so called "fragile five" emerging economies which are most at risk of a currency crisis once the US slows its QE.

Source: FT
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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