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Morning View 

Take care of your miners

• Take care of your geologists, miners and metallurgical engineers.

• We need these guys to find, mine and process the metals which we want them to produce.

• We need their skills and work to develop prospects for the next generation of mines.

• We need these guys to do a tough job in hard terrain with little backup and sometimes quite unfriendly locals.

• Think of the guys that take three days to fly from Australia to West Africa into strange cultural practices, into tropical climates, into hard terrain and exotic wildlife.

• Spiders and poisonous snakes are the least of their worries.  Malaria is the dark continent's biggest killer but let's not forget the other parasites that get the tropical diseases clinics so excited, apparently they love to find a live parasite.  Problem is that you are the host.

• Northern Kenya is tough one. If the Somali bandits don't get you then the violent locals probably will.  Parts of the DRC are dangerous where warlords and their bands often ransack villages.  No one works there without a 24 hour evac. plan in place and a team of soldiers to come and get you if trouble is near by.

• Work is a near 24 hour occupation as there is often little else to do unless you want to sample the delights of the local bush bar and drink something which has been squeezed out of elephants parts.

• And then there are the injections. You get live Yellow Fever and Meningitis from the vaccines and if you are unlucky you get the full disease and not just the immunity.

• So without going into too much gory detail into people being marched into the jungle at gun point and held as hostages.  Or emergency help for cerebral malaria.  We should just say, be nice to your miners, be good to them and appreciate their efforts for you never know what horrors they may face on their next trip.  And remember investors can go after blood just as aggressively as any parasite ridden mosquito.

Economic News 

China – The IMF has said that China’s economic expansion could be cut by almost 50% if Europe’s debt crisis worsens, forcing the government to provide a significant fiscal stimulus.

• However, China is in a position to respond to any external economic shockwave by implementing tax cut of 3% of GDP to cushion any potential impact, said the IMF.

• Figures on Chinese spending over the Lunar New year holiday were lower than expected by Hong Kong Jewellers with consumers spending more time browsing, buying smaller diamonds and generally taking longer to buy.

• Holiday sales on the mainland grew to 470bn Yuan or 16% ($75bn) the slowest pace since 2009, according to the Ministry of Commerce.

• Caution may appear in luxury brand items as China is expected to grow at a much slower pace than in 2011.

US – The January jobs report indicates that the U.S. economy is “on the right road” according to former Treasury Secretary Lawrence Summer.

• Employers added 243,000 jobs in January the largest gain in 9 months.

• Unemployment rate fell by 8.3% from 8.5% in December, reported the Labour Department.

Europe – The Euro weakened as Greece struggles to secure second EU-led rescue package.

• Leaders are maintaining pressure for Greece to accept terms demanded by international lenders as a 14.5bn euro bond payment looms. 

• The leaders meet today in Athens to complete an accord as international creditors imposed an 11am deadline for a final deal. 

India – The Sensex grew 11% in January as foreign investors pumped $3bn into stocks so far this year.

• Inflation has slowed and earnings of some of the biggest companies were greater than estimates.

Egypt – The ruling military Junta has said it will put 19 Americans and a number of others on trail in a politically charged criminal investigation over foreign financing of nonprofit groups.

• The move will jeopardize a $1.55bn U.S. aid package this year, which includes $1.3bn for the military.  

Philippines – A 6.8 magnitude earthquake causing a landslide has killed 13 people with many more still missing in Guihulngan, a city with c.180, 000 people in the Negros Oriental province.

Australia – Retail sales dropped unexpectedly in December as consumers spent less on food and dining out.

• A cut in interest rates is expected to be announced this week by the Reserve Bank of Australia at its policy meeting tomorrow.

UK – The Bank of England may release up to £50bn of quantitative easing as hints are dropped that they will buy more government bonds to lower interest rates and boost demand.

• Businesses are cautious over investing and expansion, slow on hiring and freezing pay in a bid to whether the economic storm 

• Average salary growth is expected to slow 1.1% with unemployment figures likely to rise. 

Kazakhstan - Plans to invest $700m into the construction of a new power line that will tackle issues such as the development of the mining industry in its Aktogai district. The line will cover 1.5 thousand kilometres and is expected to be financed by part debt and the national budget.

US$1.3176/eur vs 1.3136/eur last week. Yen 76.62/$ vs 76.20/$. SAr 7.579/$ vs 7.667/$. $1.585/gbp vs 1.583/gbp

Company News 

Precious:

Gold US$1,731/oz vs US$1,758/oz last week – Gold rebounded this morning following a 2% decline on Friday as strong Jan employment data in the US cut expectations of a new round of quantitative easing.

• Harmony Gold, the third biggest producer in Africa, beat analysts’ estimates and reported a 154% quarter on quarter increase in Q2 profits. Earnings excluding one-time items were 1b rand (US$129m), or 2.42 rand/share, in the 3 months through Dec. Analysts forecast 1.54 rand/share.

• The company produced 344,592oz in Q2, 5% more gold compared to the previous 3 months.

• On Friday Cluff Gold announced it will acquire Orezone Gold’s Sega mining licences and property in Burkina Faso for 11m shares and US$15m in cash.

• The transaction will be financed by Ciff Gold’s existing cash tthat stood at US$28.9m as of Dec 31.

• The Sega project is estimated to contain 450,336oz at 1.69g/t in indicated resource and 147,344oz at 1.58g/t in inferred resource category.

• Holdings in gold backed ETPs increased 2,385.66t last Friday.

• SPDR gold trust holdings remained at 1.277t (41.061moz) value US$71.172bn.

Platinum US$1,618/oz vs US$1,630/oz last week

• Impala Platinum forecast earnings to grow by 60-70% year on year for the six months ended Dec 31 due to a favourable rand/dollar exchange rate and accounting adjustments reflecting changes in the share price and metal prices.

• Northam Platinum expects to report a 136-156% increase in earnings per share in the 6 months through Dec on improved production at its Zondereinde mine in Limpopo and a weaker rand/dollar exchange.

Palladium US$701/oz vs US$712/oz last week

Silver US$33.57/oz vs US$34.22/oz last week

Rhodium US$1,425/oz vs US$1,418/oz last week                                                            

Base metals:

Copper US$ 8,533/t vs US$8,370/t last week – Copper pulled back slightly following a nearly 3% increase on Friday as strong employment figures in the US boosted demand for industrial metals.

• Inventories monitored by the Shanghai Futures Exchange increased to 179,891t, a 21-month high, the exchange said last Friday.

• Codelco, the largest copper producer, said its production in 2012 may not match last year’s record output of 1.735mt.

Aluminium US$ 2,245/t vs US$2,209/t last week

Nickel US$ 21,214/t vs US$20,958/t last week

• Clive Palmer cut 2011 bonus payments to workers at his nickel refinery in Queensland due to weak prices and stronger local currency.

• Last year, Palmer paid 800 workers of Queensland Nickel bonuses including extra rewards such as 700 vacations in Fiji and 50 Mercedes Benz cars.

• BHP cut operations at its Nickel West unit in Western Australia by 30% this month citing price and currency pressures.

Zinc US$ 2,149/t vs US$2,101/t last week

Lead US$ 2,225/t vs US$2,170/t last week

Tin US$ 23,950/t vs US$24,050/t last week

Energy:

Oil US$114.58/bbl vs US$112.07/bbl yesterday – Brent spot gets a boost this morning with Brent futures for March delivery also up at $114.40/bbl. U.S. unemployment rate fell to the lowest in three years, offering a positive outlook to Chinese exports.

• U.S. crude oil is rose at the beginning of the week at $97.20/bbl on the New York Mercantile exchange with WTI at $97.25/bbl on the London-based ICE futures exchange. 

• Iran said it is planning to cut oil exports to hostile European states, said oil minister Rostam Ghasemi, putting Euro-states under pressure in a pre-empt to the embargo due to come in to force on 1st July. 

• Kazakhstan has raised export duties on petroleum products by 15%. 

• The export duty on light petroleum products will come to $164.97 per ton, compared to the previous rate of $143.54 (since September 2011). Dark petroleum products will have an export duty of $109.98 per ton, versus $95.69. 

• Export duty on oil is being kept at $40 per ton. 

Natural Gas US$2.456/mmbtu vs US$2.554/mmbtu yesterday – 

Uranium US$52.95/lbs vs US$52.95/lbs yesterday – Uranium developer Extract Resources has said that it expects a takeover offer from China Guangdong Nuclear Power Corp.’s Taurus Minerals by 1st March.

• Kazakhstan produced 19,450t of uranium last year, nearly 9% than in 2010. 

• At a meeting in early February of the Kazakhstan National Welfare Fund Samruk-Kazyna announced plans to produce up to 25,000t of uranium per year during the period of 2012-2015. 

Coal – BHP Billiton’s coking coal miners have voted to resume strike action after rejecting the company’s offer on employment and accommodation.

• Alpha Natural Resources Inc. said it will reduce production as utilities switch more to natural gas to generate electricity. 

Other:

M&A activity in the global mining and metals sector will be supported by healthy demand fundamentals, strong balance sheets and expansionary plans according to the latest Ernst and Young report.

• “The global uncertainty and volatility is likely to continue through 2012, but mining and metals companies have an appetite for growth and are increasingly unwilling to stall their growth plans, so it is likely that there would be a return to deal-making this year,” the report said.

• The total world value of deals in 2011 jumped by 43% to US$162.4bn from the previous year, with mega-deals of US$1bn and more accounting for two-thirds of the total lead by strategic domestic consolidation. The volume of deals was 10% yoy down to 1,008 in 2011.

Steel – Magnitogorsk Iron & Steel, a Russian steel manufacturer, may sell a 51% share in Bakalskoye Rudoupravleniye, its iron ore division, due to shareholder conflicts, according to local business newspaper. The stake may be valued at US$120m.

• Posco forecast a 3% growth in steel market this year driven by stronger demand in emerging economies. In South Korea, steel demand will be supported by auto producers amid weaker shipbuilding and domestic real estate sectors

Company news:

Shanta Gold (LON:SHG) Shanta Gold shares rise on good news from drilling at the New Luika Gold Mine

• Shanta shares which have struggled to gain market traction in recent years are at last moving ahead.  

• The stock looks set to post strong gains on confirmation of 'amazing' results from mineralisation seen in recent drilling.

• The drill results are not yet known, assayed or released but the style and nature of the mineralisation indicates/suggests that very good grades should be found within the quartz stockwork as seen in the drill cores.

• It feels early to know if these are repeating mineralised structures indicating a very substantial gold resource increase or intersections through the same structure which has been faulted or folded back on itself.  

• Either way the structure should lead to a substantially larger and higher grade gold resource and this should lead to a big increase in value for the mine and its shareholders.

• The great thing is that Shanta will be in production within the next few months and have tied up most of the ground in the region so they own most of the gold rush which might start in the area.

• It feels only a matter of time before the company is swallowed by a major, looking to add production and gold ounces.

*Fairfax acts as Nomad and broker to Shanta Gold

Randgold Resources (LON:RRS) – Q4 results show record profit and production

• Q4 profit soared 323% yoy to US$136.2m. FY 2011 profit was up 259% yoy to US$433.4m.

• The Board proposed a US$0.40 annul dividend, up 100% from 2010.

• Gold sales were up 117%yoy Q4, US$313m, on a 73% rise in ounces sold and a 25% increase in average gold price compared to the previous year.

• Annual production climbed by 58% yoy to 696,023oz at cash operating costs of US$641/oz, in line with the ones in 2010. Output advanced at all operations along with a commissioning of Gounkoto mine.

• The company forecasts production growth in each of the following 5 years, with total output for 2012 of 825-865koz.

• Costs are expected to average US$650/oz in 2012 and drop to US$500-550/oz over the next five years.

• Cash balances climbed by 33% yoy to US$487.6m as at Dec 31.

• Total capital expenditure for 2012 is forecast at US$660m due to a start-up construction at Kibali, expansion programmes at Loulo and Tongon and a planned exploration works across the group.

Baobab Resources (LON:BAO) – IFC agreed to support the 2012 exploration programme at Tete project, Mozambique, with a contribution of US$1.9m

• IFC, a JV partner at Tete, will participate in exploration works in 2012 on a pro-rata basis as Baobab moves from resource definition towards pre-feasibility studies at the site. 

Coal of Africa (LON:CZA)– BEE companies will acquire a 26% interest in the Chapudi Coal project and related exploration properties

• Rothe Investment, a newly established company with 2 BEE companies Terracotta and Vibrant Veterans each owning 30% of the share capital and King Makhado, a party representing local communities, holding the remaining 40%, will purchase a 26% stake in Keynote, a wholly owned-subsidiary of Coal of Africa.

• Keynote will own Chapudi Coal project once the US$75m acquisition of properties from Rio Tinto Minerals Development and Kwezi mining is complete.

• Chapudi contains both thermal and coking coal development projects with an estimated 1,040mt JORC resource – 90mt in measured category, 220mt in indicated and 730mt in inferred.

• Coal of Africa will fund US$75m acquisition of the Chapudi project and initial costs up to bankable feasibility study. The financing will be loaned to Keynote on an interest free basis for 3 years and the publicly quoted prime rate thereafter.

• Following a completion of the bankable feasibility study, Rothe will pay for its 26% share of the funding costs and acquisition costs of US$75m and will finance its share of the project post bank feasibility.

Glencore/Xstrata merger – Glencore may offer a larger than expected premium for Xstrata shares in a US$88bn merger.

• Under the terms of the all-share merger, Xstrata shareholders will receive 2.8 shares in Glencore for each share held, representing an 8% premium to the closing share price on Wednesday last week, according to Financial Times.

• The agreement and its terms may still change. The deal is likely to be announced tomorrow.