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Morning View:

Economic News:

China – Chinese Premier Wen Jiabao has stated that he expects business conditions to be relatively difficult this quarter. 

· The Chinese Premier also stated that monetary policy would be tailored as needed. 

· “We see downside pressure on our economy and elevated inflation at the same time” 

· Many are now predicting that the PBOC will cut lenders’ reserve requirements before a weeklong Chinese New Year holiday starts on Jan 23rd. 

· The State Council’s Development Research Centre has stated that China can maintain growth of 8-9% over the next two or three years but that longer term a rate of 6-7% would be more likely. 

· Home prices have reportedly dropped for a 4th month in a row. Prices fell in 60 out of 100 cities. 

· Despite comments by the Premier regarding inflation, China’s government bonds are rallying the most since 2008 as inflation moderates. The yield on benchmark 10 year notes dropped 43 basis points to 3.43% in the last quarter. 

US - Oil prices are on the way down this morning but still remain above $111. 

· Last night the US rebuffed Iran’s demand not to return an aircraft carrier to the Persian Gulf stating that it will continue to protect freedom of navigation in the region. 

· Watch this space. US officials continue to claim that Iran is fear mongering in an attempt to distract the population from the socio-economic problems facing the country. 

· Mitt Romney has won the Iowa Caucus by 8 votes, narrowly defeating Rick Santorum. 

· The Caucus failed to clearly indicate the type of candidate republicans intend to rally behind but has if nothing else presented Rick Santorum as potentially Romney’s main challenger. 

· It will be interesting to watch developments in the coming months. At this stage many commentators believe that republicans will struggle to select a candidate who can challenge Obama but if the economy remains fragile by November the momentum could be with the Republican nominee. 

· The Federal Reserve is betting that by announcing their own forecasts they will increase transparency and make monetary policy more effective. It was announced yesterday that from its meeting at the end of January that forecasts for the next two years will be announced – with the goal of driving down longer term interest rates. 

Europe – Not a whole lot of news from Europe today. 

· Germany and Portugal are preparing to sell a combined €6bn in debt. 

· Stocks were down today in anticipation that yields could well climb. 

· Yesterday more positive news emerged from Germany with the unemployment rate falling to a twenty year low of 6.8%. 

· Unfortunately the same can not be said for Spain. The number of those seeking work in Spain rose to 4.42m – almost 23% of the workforce. 

Japan – Stocks have continued to rise today supported by the positive economic news emerging from the US and Germany yesterday. 

Brazil – The country’s currency rose the most in two months, leading advances in emerging market currencies on the back of the improved sentiment over global output and the knock on effect this will likely have on commodities. 

Thailand – The country’s inflation rate eased in December to a nine month low on the back of falling food costs as the nation recovers from the worst floods in almost 70 years. 

Nigeria – The Nigerian President Goodluck Jonathan has called for an emergency meeting of his cabinet today to discuss the government’s scrapping of subsidies on fuel. 

India – Imports of coal from South Africa fell in the first 11 months of 2011 at the same time China almost doubled its purchases. 

· India bought 14.39m tons of the fuel from South Africa down 24% years on year. 

· Shipments to China rose 88% to 12.26mt in the first 11 months of 2011. 

Commodity News: 

Precious:

Gold US$1,603/oz vs US$1,587/oz yesterday – Gold prices are up this morning after climbing by nearly US$40 yesterday.

· Bullion demand in China normally reaches its peak during the Lunar New Year that starts on Jan 23.

· China may boost its gold jewellery demand by 35% in 2012 according to a research firm Frost & Sullivan estimates.

· Indian gold imports may fall 48% in Q1 as weak rupee boosts local prices and high interest rates limit investment demand, the Bombay Bullion Association said. Imports may total 150t in Q1 compared to 286t last year. Total imports equalled 875-880t (-8.5%yoy) in 2011.

· Rio Alto Mining, a Canadian gold producer, mined 51,398oz of gold 2011, the first full year in production at La Arena mine, Peru.

· Venezuela will leave 15t of its gold reserves abroad in foreign banks, Central Bank announced.

· Mali produced 43.5t of gold in 2011 according to President Amadou Toumani Toure.

· SPDR gold trust holdings remained at 1,255t (40.336moz) value US$64.429bn. 

Platinum US$1,430/oz vs US$1,414/oz yesterday

Palladium US$657/oz vs US$657/oz yesterday

· Prices may drop to US$565/t in the coming several months on slowing global economic growth, Commerzbank said.

Silver US$29.43/oz vs US$28.39/oz yesterday

Rhodium US$1,350/oz vs US$1,360/oz yesterday

Base metals:

Copper US$ 7,683/t vs US$7,680/t yesterday – Copper is off after prices gained nearly US$400 in the last 3 days.

· Workers at Kansashi Copper mine (First Quantum) in Zambia prepare to hold the strike for a 2nd day demanding a double increase in pay. Kansashi is the 8th world’s largest Copper mine, and 1,512 employees worked at the site as of Dec 31, 2010.

· Codelco will file 2 lawsuits in Santiago courts to annul Anglo American’s sale of 24.5% of Sur Copper unit to Mitsubishi lat year.

· Inmet Mining announced yesterday that Panama government approved on Dec 28 the environmental and social impact assessment for its Cobre Panama Copper site.

Aluminium US$ 2,056/t vs US$2,023/t yesterday

· Vedanta Resources, the largest aluminum producer in India, plans to build a US$132m caustic soda plant in the eastern state of Orissa to cut the cost of production.

· Aluminum price dropped 18% in 2011, while the cost of caustic soda, a raw material used to produce alumina from bauxite, increased 39% in the local market last year.

· Nearly 110kg of soda is used to produce a ton of alumina.

Nickel US$ 18,695/t vs US$18,710/t yesterday

Zinc US$ 1,865/t vs US$1,862/t yesterday

Lead US$ 2,067/t vs US$2,050/t yesterday

Tin US$ 19,300/t vs US$19,300/t yesterday

Energy: 

Oil US$111.91/bbl vs US$108.82/bbl Yesterday – Brent oil, the European benchmark soared over US$112 yesterday over news on Iran’s threats over military action and positive US and Chinese economic growth figures

· US crude followed Brent’s trend and increased by nearly US$2 to US$102.78/bbl on the New York Mercantile Exchange. 

· Sinopec agrees a US$2.2bn deal with Devon Energy offering the Chinese company access to shale deposits from 125 wells that Devon expect to drill this year 

· A transfer of oil is being delayed off the entrance to Belfast Lough in Northern Ireland until high winds settle. 

Natural Gas US$3.02/mmbtu vs US$3.004/mmbtu yesterday – The controversial shale oil and gas industry is not showing signs of slowing down as China and India continue to invest in overseas assets.

· Total, Frances largest oil and Gas Company is poised to pay $2.32bn for a 25% stake in a shale deposit in the US’s east Ohio. 

· Environmentalists and critics of the fracking method are pushing Congress to force energy companies to disclose fully the chemicals used in the technique as threats over local water supply pollution and earth tremor activity remain a big concern. 

Uranium US$53.30/lbs vs US$53.30/lbs yesterday –  Cameco announces that the second shaft at its Cigar Lake  project has reached the main mine working. 

· They say they are still on track to start ore mining by mid 2013. 

Coal – Coal-fired power station profits in Germany may decline according to Barclays as Europe’s biggest market boosts electricity generating capacity in 2012. 

Other:

Bloomberg Survey – Precious metals are forecasted to gain 27% or more in 2012 and industrial metals at least 17% led by emerging markets’ growth.

· Gold may reach new record high of US$2,140/oz

Steel – US raw steel output dropped 1.7% week on week (+12.8%yoy) in a week ended on Dec 31 to 1.867mt.

Company News:

 Bezant Resources (LON:BZT) – Update on Eureka Gold Project

· The company announced that it has agreed to acquire a 100% of the Eureka Project. 

· The project hosts 11 Copper and gold exploration licences in the province of Jujuy in north-west Argentina. 

· The overall acquisition cost is 33% less than the original agreement with a payment of US$2.6m versus US$3.9m based on an accelerated schedule of payments. 

Kefi Minerals (LON:KEFI) – Exploration Licences granted to JV in Saudi Arabia

· Two 5 year licences Hikyrin and Hikyrin South were granted to the JV Gold & Minerals (G&M). 

· The licences are contiguous and cover 61 km2  and 90 km2  respectively. 

· The licences are located in the Central Arabian Gold Region 30 km north of Ma’aden’s Ar Rjum gold deposit of 2.65 m oz. 

· The JV expects to immediately commence surface exploration programmes over the licence in order to generate targets for drill testing. 

· Ancient gold workings are located within the licence areas. 

· Kefi Minerals has a 40% interest in the JV and is the operating partner. 

· EMED Mining has an 18% stake in Kefi Minerals. 

Paragon Diamonds (LON:PRG) – Results from first micro-diamond sample at Motete Dyke Licence

· The company announced results from a 24 kg sample from its Motete Dyke Licence in Lesotho. 

· Over 2 diamonds per kg were recovered with a total of 49 diamonds including 7 macro diamonds above 0.5 mm. 

· 48 of the 49 stones recovered were white transparent with the majority in clean crystal form (76%). 

· Results are expected in the coming weeks from an additional 900 kg of samples sent for micro-diamond analysis. 

The largest diamond exceeded 1.18 mm in size.