Gold $1,485/oz - Gold prices hit our H1 target

• Gold has risen despite a stronger US dollar against the Euro
• Gold prices may take a breather following their strong run from $1,450/oz to $1,485/oz over the past five days

ECONOMIC NEWS

Dow Jones Industrials +0.46% at 12,451

HK Hang Seng -0.74% at 24,468

China - China raised bank liquidity ratios on Sunday for the fourth time this year.

• China is seen squeezing banks by raising commercial bank reserve requirements.
• Commercial banks must now deposit 20.5% with the central bank an increase of 50%
• The idea is to limit inflation by restricting liquidity in the wider economy

US - Treasury secretary attacks the IMF for failure to use tools to tackle China's China's exchange rate

• The US and others see China's managed exchange rate as generating substantial global imbalances to the detriment of many other countries around the world.
• China usually allows its currency to slip a little when under pressure to avoid sanctions on its currency

Burkina Faso - reports of a mutiny within the armed forces are causing concern amongst investors.

• The president is said to have fled the capital.
• Poorly paid soldiers are said to be responsible.
• The mutinying soldiers are said to have joined forces with demonstrating students.
• Dialogue between the government, students and mutineers is likely to resolve the situation

US$1.434/eur vs $1.445eur yesterday. Yen82.95/$ vs 84.57/$, SAr6.838$ vs 6.65/$ $1.627/GBP vs 1.634/GBP

COMMODITY NEWS

Precious metals:

Gold US$1,484/oz vs US$1,474/oz on yesterday - Gold holds onto Friday's gains at record levels on inflationary concerns.

Platinum US$1,788/oz vs US$1,805/oz yesterday - prices are following gold and prospects for greater auto sales

Palladium US$763/oz vs US$800/oz yesterday -

Rhodium US$2,350/oz unchanged - Silver US$42.9/oz vs US$40.25/oz yesterday - Highest price in 31 years.

Base metals:

Copper US$9,428/t vs US$9,400/t yesterday - Picks up in morning trading in response to speculation that china's measures to curb asset price gains may be ending as the government moved to secure more cash and growth in home costs slowed according to Bloomberg.

Aluminium US$2,700/t vs US$2,710/t yesterday -

Nickel US$26,375/t vs US$27,500/t yesterday -

Zinc US$2,396/t vs US$2,525/t yesterday -

Lead US$2,660/t vs US$2,852/t yesterday -

Tin US$33105/t vs US$32,980/t yesterday -

Energy:

Oil US$1236/bbl vs US$124/bbl yesterday - Prices drift back this morning as Saudi Arabia says that the global market is oversupplied.

Natural Gas US$4.185/mmbut vs US$4.200/mmbtu -

COMPANY NEWS

Kenmare Resources (KMR LN) 49.6p mkt cap £1,192m - Preliminary results to December

• Kenmare's prelims demonstrate a major increase in output with HMC up 16% to 957kt, ilmenite up 44% to 678kt, zircon up 76% to 37kt and rutile up 161% to 4.7kt. 43 ships were loaded taking total sales in the year to 712.9kt of product. The company also increased mineral resources by 20% since June 2010.
• Revenues up 242% to US$91.5m leading to a gross profit of US$13.846, up from an US$8.449m loss a year ago. The company reports an operating loss of US$3.5m since it booked additional operating costs as it moved from ramp up to commercial production as well as disruptions following a dam breach in the year. Financing costs at US$16.3m in contrast FX movements led to a US$16.69m credit. Post tax earnings for the year stood at US$16.334m.
• At the end of the period the company had cash of US$239m against bank loans of US$338m, of which US$85.6m is current. The company raised US$270m in March 2010 to fund the 50% expansion.
• Going forward the company intends to get to design capacity and sees continued improvements in selling prices for the its products as more is sold on spot. Work is also underway on expansion with the excavation of the starter pond for new mining operations having started in February and on schedule. A new larger dredge is 75% complete and will be shipped from the US for Q3. A second expansion is also being planned with the results of s scoping study due by the end of this year which if positive would be followed up with a full feasibility study.

Blackthorn Resources (BTR LN) 62.5Ac mkt cap A$66.8m - Update on enhancement work at Perkoa

• Glencore is currently investigating ways to recover silver and led from the Perkoa mine to enhance value as well as other initiatives. A drill rig is on site to drill in the vicinity of the main ore body targeting silver and led.
• 1,900m of drilling is planned over 10 holes up to 220m depth.
• Other work being investigated includes open pit mining and increasing the plant throughput to 1mtpa from 720ktpa.
• The agreement between Glencore and Blackthorn allows Blackthorn to contribute its share of costs but has no obligation.
• The company notes reports of unrest in Ouagadougou but states that operations at Perkoa are unaffected.

Conclusion: Clearly there is considerable value in Perkoa in which Blackthorn has a 39.9% stake. The company also has other projects which could deliver exciting results including gold exploration in Burkina Faso and a JV with BHP on a large copper target in Zambia, Mumbwa.

Stellar Diamonds (STEL LN) 8.38p mkt cap £18m - Bulk sample results from Tongo

• Stellar Diamonds has processed 566t from its kimberlite dyke at Tongo in Sierra Leone which has returned a high grade of 109cpht with 90% classified as gem quality. Historic valuations indicate that Dyke 1 has potential to return over US$200/carat.
• The bulk sample is planned to get to 2kt so the company is around 30% through the mining and processing. Following positive results the company plans to start shaft sinking for the collection of an underground bulk sample at a depth of 45m.
• Kimberlite dykes can be attractive assets, however, they tend to be limited in terms of scale so can be highly profitable but lack size for significant cash generation. Dilution can also be a problem as is demonstrated from the bulk samples that comprised of around 60% kimberlite and 40% granite as the dyke width runs between 40cm and 1m, whereas the trench width needs to be over 1.1m to ensure a safe working environment, although underground mining should see the dilution reduced. The bulk sample is intended to reach 1,000-2,000 carats.
• The company is also carrying out improvements to the processing plant.
• 3,000m of resource definition drilling is planned for June.

Conclusion: Following refinancing in March of £6.2m the company can crack on with exploration work at its various projects which are yielding positive results. We are most interested in the work on the Droujba Kimberlite pipe as that has the most potential value in the portfolio as it is a pipe estimated at 3ha closer to surface and not a dyke which tend to be limited in size.

Mining this week:

BHP Billiton (BLT LN) 2650p, mkt cap £160bn - Rumours of potential bid for Woodside Petroleum

EMED MINING * (EMED LN) 17p mkt cap £120m - Quarterly update highlights progress made at Rio Tinto

Frontier Mining (FML LN) 6p, mkt cap £114m - Acquisition of Coville completes

Glencore - Announcement of intention to float on LSE and Hong Kong

Ormonde Mining* (ORM LN) 11p mkt cap £28m - Further positive drill results from Barruecopardo

Glencore - looking for $9-$11 billion in largest IPO so far this year

KazakhGold - Management agree $509m sale of operating unit with Assaubayev company

Hambledon Mining* (HMB LN) 4.3p mkt cap £32m - gold production recovers from hard Kazak winter

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