oz metals 6 oct 2014

Oz Metals 6th Oct 2014

DISCLAIMER This research report is provided in good faith from sources believed to be accurate and reliable. Terra Studio Pty Ltd directors and employees do not accept liability for the results of any action taken on the basis of the information provided or for any errors or omissions contained therein. Readers should seek investment advice from their professional advisors before acting upon information contained herein. / 3

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US$ COPPER & GOLD REVISITING 2014 LOWS Precious an and Base Metals Fundamentals

Source: Metal Prices, Reuters, SNL, Terra Studio

$2.70

$2.80

$2.90

$3.00

$3.10

$3.20

$3.30

$3.40

$3.50

0

100

200

300

400

500

600

Jan-14 Apr-14 Jul-14 Oct-14

Thou

sand

Ton

nes

Copper

SHFE COMEX LME

$2.80

$3.00

$3.20

$3.40

$3.60

$3.80

$4.00

0

100

200

300

400

500

600

Jan 14 Mar 14 May 14 Jul 14 Th

ousa

nd T

onne

s

China Copper Imports

Imports Price

$1,000

$1,100

$1,200

$1,300

$1,400

$1,500

$1,600

$1,700

$1,800

Jan/14 Apr/14 Jul/14 Oct/14

Gold A$ US$

0

20

40

60

80

100

120

140

160

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Tonn

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Hong Kong Gold Net Imports

2013 2014

$5.00

$6.00

$7.00

$8.00

$9.00

$10.00

0

100

200

300

400

500


Thou

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Ton

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Nickel

LME Price 3 month

$0.80

$0.85

$0.90

$0.95

$1.00

$1.05

$1.10

$1.15

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200

400

600

800

1,000

1,200

1,400


Thou

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Zinc

SHFE LME Price 3 month



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Markets & Majors

Thomson Reuters - The London Metal Exchange (LME), will increase its average transaction fee by 34% and will simplify the tariff by giving an all-in transaction fee with trading and clearing components all charged in U.S. dollars. The changes will take effect Jan. 1, 2015. The move is aimed at boosting profits while still allowing it to be competitive with U.S. rival CME Group. The new structure will simplify and level out the transaction fees across the exchange's user base and includes a significant discount on trades transacted on the Ring — its trading floor in London. The move will be another key step by the LME's owner, Hong Kong Exchanges and Clearing Ltd. (HKEx), to wring profits from its pricey $2.2 billion takeover of the world's biggest industrial metals market. Before the LME's sale in December 2012, it was owned by the banks and brokers that used it and therefore trading fees were kept very low for members.

SNL - Trading volumes at Shanghai Gold Exchange's new international gold trading platform have so far been quiet since the exchange's launch Sep 18th; however, market watchers say the establishment of the international board itself is a good start on the road to the internationalization of gold trading in China.

The Australian - Glencore says it has cut about 570 jobs from its Queensland copper operations since acquiring Xstrata last year, as mine workers continue to feel the impact of post-boom commodities prices and a focus on cost-cutting. However, the mining and trading giant, which is also planning to close its Mount Isa copper smelter in 2016, says it may grow copper concentrate production from Australia by more than previously flagged. Glencore bosses said there had been an 18% headcount reduction in North Queensland, a 3% cut in operating costs, a 30% drop in sustaining capital spending and a 25% cut in expansion spending.

Thomson Reuters - Chinese copper smelters are likely to increase purchases of spot raw material concentrates in the international market in the coming one to two months to take advantage of strong processing fees, trading sources said. Strong spot processing fees and high inventories of concentrates may also encourage Chinese smelters to ask global miners such as BHP Billiton and Freeport-McMoRan for higher term processing fees in 2015. Treatment and refining charges (TC/RCs) for spot copper concentrates to China have risen by a quarter since late July after Freeport and Newmont Mining resumed exports from Indonesia.

Copper production in Chile declined for the second consecutive month, decreasing 2% year over year to 483,170 tonnes in August, Business News Americas reported citing a new report from national statistics bureau INE.

New Caledonia and Vanuatu are studying a plan to jointly mine and process nickel ores into refined metal to help produce stainless steel in China, Reuters wrote. Under the proposed partnership, New Caledonian company MKM Group and China's Jin Pei Century Investment (Group) Co.

Ltd. plan to mine low-purity nickel ore in the French Pacific territory and ship it to Santo in northern Vanuatu for smelting.

Alto Capital senior analyst Carey Smith thinks the nickel price rallied too quickly following the introduction of the raw mineral export ban by Indonesia earlier in 2014. "I believe a fair price for nickel right now is probably still around US$18,000/t to US$19,000/t mark, which is a very good price in this current market." An oversupply in the market has weighed on the price, with around 360,000 tonnes of nickel in London Metal Exchange stockpiles, as well as 200,000 to 300,000 tonnes at China's ports and further supplies at mine sites. "At the moment there is an oversupply of nickel in the market, which is why I believe it probably ran too far when it got above US$20,000/t," Smith said. While the price has come off quite strongly in the past few weeks, Smith is confident the market will see a rally before the end of 2014 as London Metal Exchange stockpiles steadily decline and consumption increases.

SNL - Australian base metals producer MMG is working to increase zinc production at its existing operations as its Century mine in Queensland rapidly comes to the end of its life. The closure of Century will remove about 500,000 tpa of zinc concentrate from MMG's production profile. In 2014, the mine is expected to produce between 455,000 tonnes and 480,000 tonnes of zinc. MMG lowered its total full-year zinc production guidance in mid-July to between 575,000 tonnes and 600,000 tonnes after output fell 4% year over year in the first half to 270,201 tonnes due to lower grades at the Century mine. Century, which has been in operation for almost 20 years, is just one of several large zinc mines scheduled to close over the next few years. Vedanta Resources Lisheen mine in Ireland, which is in its second decade of operations and is one of the largest producers of zinc, is also slated for closure very soon, as is the company's Skorpion mine in southern Namibia. The closure of these mines and others is tipped to remove about 1 million tonnes of annual supply from the market. "This, along with the lack of new zinc mines coming online, is expected to significantly reduce supply — at the same time as ongoing industrialization and development maintains growth in demand," the spokesperson said. "While there has been a recent increase in zinc prices, we expect these factors to lead to increasing tightness in the market over the long term."

Mergers & Acquisitions

AFR - Wall Street brokerage Bernstein Research released a report mid-September suggesting Rio Tinto was a logical takeover target for Glencore, which has remained in people's minds. Senior analyst Paul Gait wrote that the key problems in the mining industry, as identified by Glencore, included "too much iron ore" but these issues can be fixed by handing the world's best mining assets to the world's best management. Glencore is making a pretty strong case that they, more than anyone else, understand what it will take to drive value in today's market.



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Copper Producers

Source: SNL

Copper Explorers & Emerging Producers

Source: SNL

Gold Producers

Source: SNL

Gold Explorers & Emerging Producers

Source: SNL

Nickel Sector

Source: SNL

Zinc & Poly-metallic Sector

Source: SNL

For further information, please contact:

JF Bertincourt m +61 406 998 779 [email protected]

oz metals 6 oct 2014

Economy & Finance