ECONOMIC NEWS

Dow Jones Industrials +0.41% at 12,220.59

Nikkei 225 -0.60% at 9,478.53

HK Hang Seng -0.65% at 23,008.25

UK - 'Slugflation' so aptly describes the UK's sluggish growth but inflationary impact of strong corporate earnings

• The term used by Richard Buxton at Schroders suggests that we should avoid stagflation but we wonder if the economy might get stuck in the slime left by our inflating slug.

US - Yesterday pending home sales figures recorded a surprising boost. The Association of Realtors said its Pending Home Sales Index increased 2.1%. The figure bodes well for the more closely watched "Home Sales" figures released later in the month.

• Two Federal Reserve regional bank Presidents have stated that it is too early to remove stimulus from the economy and that there should not be an alternation to the bond purchase program the FED put in place last year.
• Expectations ahead of a jobs report tomorrow suggest that US companies continued to add staff last month.

China - Mandatory targets announced yesterday to force companies to cut carbon and energy intensity levels by as much as 18% over the next 5 years.

• This target is ahead of the expected 16% target, with companies to cut levels this year by over 4%. Industrial sectors will also be forced to slash water use by 30% by the end of 2015 and raise solid recycling rates to around 72%.
• The steel sector in particular is expected to suffer as a consequence of these developments.
• Further concerns that tightening measures will be implemented to cool inflation head Chinese stocks lower in today's trading. The People's Bank of China reiterated yesterday that controlling inflation remains its main task.

Japan - Fears have resurfaced as high levels of plutonium have been found in soil samples around the Fukushima plant. Concerns are mounting that the Tokyo Electric Power company are really not in a position to quantify the problems. Experts suggest that the plutonium may have come from the spent fuel rods that were stored in the damaged pools. Very low traces of radioactivity from the damaged plant have been found in rain water in the North eastern US.

• While the country faces the prospect of dealing with the devastation from the earthquake signs are emerging that prior to the event the economy was improving. Figures released this morning showed that the Jobless rate fell from last month and that retail trade increased.

South Africa - Deputy finance minister Nhlanhla has stated that high wage demands are a stumbling block for the country's drive to create 5m jobs over the next 10 years.

• Only 40% of the population has regular work, and granting higher wages for those in employment reduces the government's ability to create new jobs. Wage inflation is a major problem for all those operating in South Africa with unions frequently striking if they don't get what they want. It is encouraging that the government is publically recognising this issue.

Zimbabwe - In a politicised speech yesterday President Mugabe, stated "We are taking back our country" and that foreign mining companies will now be "Junior Partners" in the country. He went further to stated that Anglo American and Rio Tinto will have to "Transform and become Zimbabwean"

• Companies have 6 months to adapt. It is currently not clear whether companies will get a market price for any stake they are forced to sell.

Libya - Qatar has become the first Arab nation to recognise the Rebel Council.

• As Libyan rebels moved westward supported by NATO air strikes, President Obama defended his backing of the rebels stating that action prevented a massacre of civilians that would have "stained the conscience of the world" The question now is what will happen when rebel forces reach Tripoli.

Europe - Speculation increased that the ECB will raise interest rates imminently. Jean Claude Trichet yesterday reiterated that the ECB's definition of price stability is below 2%

France - Consumer spending increased on and both a mom basis and a yoy.

Currency - The Euro rose this morning reversing a slide against the dollar as expectations increase that the ECB will raise interest rates soon. Additionally the positive consumer spending data emerging from France helped boost sentiment for the Eurozone.

US$1.407/eur vs $1.407eur yesterday. Yen81.69/$ vs 81.69/$ SAr6.86$ vs 6.86/$ $1.598GBP vs 1.598/GBP

COMMODITY NEWS

Precious metals:

Gold US$1,418/oz vs US$1,418/oz on Monday - Prices are off slightly today as the prospects of a sustainable economic recovery improve boosted by the housing figures yesterday in the US and the French consumer spending data. Every positive economic figure emerging from the US increases the prospect of interest rate rises.

• SPDR gold trust holdings fall to 1,211.84 (38.961moz) from 1,213.96 (39.029moz) Current value US$55,189bn

Platinum US$1,742/oz vs US$1,733/oz- Anglo Platinum has confirmed plans to refine and sell 2.6moz of platinum this year, up by over 100,000oz from last year.

• Platinum is an attractive metal and new supplies are severely limited. The recent developments in Zimbabwe with the aggressive indigenisation policy that is evolving clearly pushes back the potential for Zimbabwe to be a serious contender to South Africa as a major long term source of PGMs. Zimbabwe's latest policy appears to be the not so subtle move towards nationalisation of its mining industry which would hurt particularly Aquarius and Impala.
• South Africa is also high up on the political risk scale that

Palladium US$744/oz vs US$743/oz -

Silver US$36.85/oz vs US$36.75/oz -

Rhodium US$2,375/oz vs US$2,375/oz -

Base metals:

Copper US$9,489/t vs US$9,550/t on Monday -Prices are off this morning as the market again reacts to comments that suggest further tightening will emerge from China and as a result negatively impact demand.

• The general consensus is that supply will lag demand this year especially when the rebuild in Japan kicks in in the second half of the year.
• In stark contrast to the rest of the market, Standard Bank has stated that a build up of stockpiles in China could reverse the widespread expectations of a refined copper market deficit this year. The bank estimates that some 700,000 tonnes of refined copper is in warehouses, circa 40% of the country's refined copper demand.
• Previously Standard Bank had forecast a deficit of 385,000 this year.

Aluminium US$2,385/t vs US$2,385/t on Monday -

Nickel US$26,160/t vs US$26,725/t on Monday - Jinchuan reduced factory gate nickel prices by 10% in China in March indicating falling demand.

Zinc US$2,334/t vs US$2,352/t on Monday -

Lead US$2,616/t vs US$2,639/t -

Tin US$31,099/t vs US$31,715/t -

Energy:

Oil US$114.55/bbl vs US$114.90/bbl yesterday - Prices are off slightly this morning as leaders of the rebels in Libya announce that they have opened negotiations with officials in Qatar with a view to restarting exports from controlled production sites in the country.

Gas US$4.360/MMBTU vs US$4.434/MMBTU yesterday

Uranium US$60.00/lb vs US $60.00/lb last week - Despite the problems in the uranium industry following the Tsunami in Japan, China's director of the Science and Technology Commission has stated that the country "should not changes its development plan in the nuclear power sector".

COMPANY NEWS

Fortescue Metals (FMG AX) - considering listing in Hong Kong

• We recommend Andrew Forrest calls Peter Hambro for a chat on this one
• The potential move may be driven by China's Hunan Valin Iron and Steel group which holds 17% of FMG

Mount Burgess Mining (MTB AX) - 15.5c, mkt cap A$6m - Copper cobalt anomaly defined at Tsumkwe, Namibia

• Mt Burgess Mining have defined a new copper / cobalt anomaly at Tsumkwe in Namibia
• Soil geochemical samples returned values of up to 194ppm for copper and 401ppm for cobalt.
• Background values of less than 20ppm are normal
• The next stage is to collect more samples to better delineate the discovery
• Seasonal rains may restrict access to the site

Rio Tinto (RIO LN) 4,279p mkt cap £87,802m - Bid for Riversdale declared unconditional

• In and effort to advance its bid for Riversdale Rio has declared the offer unconditional and if it receives over 47% interest by 6^th April it will raise its offer to US$16.50/share.
• Those who've already accepted they be paid US$16.0/share and be entitled to US$16.50 if the offer reaches the 47% threshold.

Baobab Resources* (BAO LN) 39p mkt cap £64.8m - 3.5km magnetic anomaly may add substantially to resources

• A new geophysics survey commissioned to fly over the company's recently acquired exploration towards the east of the main Massamba Group trend has identified a coherent 3.5km long folded trend of strong magnetic response.
• The target sits around 7.5km east of the Massamba Trend which holds the Chitongue resource and South Zone where recent exploration has been focused and returned exciting results. The target has been named the Tenge-Ruoni magnetite prospect and was previously identified from field work with rock chip samples returning average head grades averaging 48.9% Fe with mineralised widths of 75-100m.
• It was clear from a recent site visit on some of this target that there is potential for significant magnetite with three distinct hills: Ruoni North and South and the larger Tenge target that is particularly significant hill. Such discoveries give greater confidence that substantial magnetite deposits lie in the area. Management has scheduled a 4,000m scout drilling programme to test the prospect from April.
• The geophysics survey over the Tenge-Ruoni prospect was over a 100m line space density. In addition to this survey a 50m higher resolution over the Massamba group trend was re-flown that has clarified considerably the morphology of the mineralised zones and will assist in focusing future drilling targets as some parts of the ore body are proving to be quite complex.
• We note that Baobab's Tete project has potential strategic value with major investment going into the region on coal and coking coal deposits with Vale and Riversdale having delineated over 8bn tonnes of coal resources. We note from the recent site visit, major activity from these miners with homes and camps being developed as well as considerable equipment being delivered. An attractive iron ore resource sat in amoungst coal and coking coal deposits being developed would be attractive to many of the players in the region. The activities will lead to much improved infrastructure and allow Baobab's Tete resources to piggy back of these, lowering the barrier to entry to develop projects. A further attraction is the cheap power to be had from the Cahora Bassa dam that is being upgraded.
• All the infrastructure benefits in place and evolving due to the development of other large projects mean that for an iron ore project to be a highly viable proposition, it need not have billions of tonnes of resource as in West Africa where projects often need several hundred kilometers of rail developed, as well as expensive power and port infrastructure to support them. Mozambique is also better located being on the east coast of Africa for shipments of ore to China.

Conclusion: The results from the geophysics are exciting with this latest anomaly standing out visibly, and is perhaps more attractive than the Massamba trend which has been the recent focus of exploration and has delivered very promising results. In addition, the company has its Monte Muande iron and phosphate target for which a recent independent study outlined an exploration target of 200-250mt.

* Fairfax acts as broker to Baobab

Horizonte Minerals (HZM LN) 20.5p mkt cap £57.3m - Drilling update from Araguaia returns high grades

• Infill drilling results from an on-going 8,000m programme started last October over the main Pequizeiro West, Pequizeiro and Baiao targets have returned some high grade intercepts (close to 2%). The programme is aimed at upgrading current inferred resources to indicated as the project advances towards scoping stage.
• To date 116 holes totaling 3,159m have been completed. Management is seeking to appoint a consulting group next month to oversea the scoping and pre-feasibility work underway.
• Four rigs active and a fifth on its way with work underway to source another contractor to get more rigs to site to enable fast tracking of the resource drilling with the aim of delineating 100mt of resource by Q4 2011 and a maiden JORC resource this quarter. New target areas are also being evaluated

Mining this week:

Sable Mining (SBLM LN) 23.5p mkt cap £217m - Results from Lubu indicate coking coal potential

Triple Plate Junction (TPJ LN) 6.5p, mkt cap £19m - Long gold intersection in PNG

European Nickel (ENK LN) 15.38p mkt cap £40.28m - Operational update

⁺Fairfax employees may have previously held, or currently hold, shares in the companies mentioned in this note.

DISCLAIMER

This note has been issued by Fairfax I.S. PLC in order to promote its investment services.

This information is a marketing communication for the purpose of the European Markets in Financial Instruments Directive (MiFID) and FSA's Rules. It has not been prepared in accordance with the legal requirements designed to promote the independence or objectivity of investment research.

This document is not based upon detailed analysis by Fairfax of any market; issuer or security named herein and does not constitute a formal research recommendation, either expressly or otherwise.

The value of investments contained herein may go up or down. Where investment is made in currencies other than the base currency of the investment, movements in exchange rates will have an effect on the value, either favourable or unfavourable. Securities issued in emerging markets are typically subject to greater volatility and risk of loss.

This [note] is confidential and is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published in whole or in part, for any purpose.

Neither the information nor the opinions expressed herein constitutes, or is to be construed as, an offer or invitation or other solicitation or recommendation to buy or sell investments. This information is for the sole use of Eligible Counterparties and Professional Customers only and is not intended for Retail Clients, as defined by the rules of the Financial Services Authority ("FSA") and subject to Fairfax's Terms of Business as published or communicated to clients from time to time.

It is not investment advice and does not take into account the investment objectives and policies, financial position or portfolio composition of any recipient. This document should not to be relied upon as authoritative or taken in substitution for the exercise of you own commercial judgment. Fairfax I.S. PLC is not responsible for any errors, omissions or for the results obtained from the use of the information in this document.

This document has been prepared on the basis of economic data, trading patterns, actual market news and events, and is only valid on the date of publication. Fairfax does not make any guarantee, representation or warranty, (either expressly or implied), as to the factual accuracy, completeness, or sufficiency of information contained herein. This document has been prepared by the author based upon information sources believed to be reliable and prepared in good faith.

Fairfax's officers, directors and employees may own or have positions in any investment(s) mentioned herein or related thereto and may, from time to time add to, or dispose of, any such investment(s).

Fairfax I.S. PLC is a company registered in England and Wales with company number 5496355 and whose registered office address is 7, Queen Street, Mayfair, London W1J 5PB. Fairfax I.S. PLC is authorised and regulated by the Financial Services Authority whose address is 25, The North Colonnade, Canary Wharf, London E14 5HS and is a Member of the London Stock Exchange plc.

Source: FAIRFAX I.S. PLC