Gold $1,494/oz - Gold prices hit our H1 target

• Gold hits $1,496/oz
• Prices run beyond our expectations and look close to breaking the $1,500/oz psychological barrier despite dollar strength vs the Euro
• Silver at $43.2/oz continue to rise alongside gold

Markets are suffering poor liquidity in the run up to Easter and the Royal Wedding

• There are some great stock picking opportunities in this market environment but poorer quality stocks are likely be left behind when markets return from the Easter break.
• Yesterday's market rout is followed by some recovery today but thin markets mean that stocks can be easily moved over the next few trading days.

ECONMIC NEWS

Dow Jones Industrials -1.14% at 12,201.59

Nikkei 225 -1.21% at 9,441.03

HK Hang Seng -1.30% at 23,520.62

US - Yesterday Standard and Poor's dropped its outlook on US sovereign debt to Negative from Stable, while maintaining the triple A credit rating. The outlook cut highlights the threats that a sustained period of stimulus and spending increases, coupled with tax breaks has had on the economy. The question now is whether the move will force the government to adopt a deficit reduction program. The IMF is now forecasting that the country will have a deficit of 10.8% of GDP for the year.

China - Forecasts today suggest that the manufacturing sector will maintain momentum this month regardless of the interest rate rise and further tightening of bank reserve requirements.

• New estimates by the China Economic Research unit at UBS, suggests that inflation will overshoot the government's target despite the prospect of further tightening measures.
• According to the China Security Journal, authorities will allow the yuan to rise at a faster pace in order to help tame the problems of escalating inflation in the country.
• China PMI numbers in line, eg same as February
• Foreign direct investment rose indicating potential for further monetary tightening by the Chinese authorities

Japan - As expected consumer confidence fell last month as a result of the devastating earthquake, re-affirming expectations that the economy will contract this quarter.

Europe - Figures released this morning show that manufacturing in the Euro zone increased this month, beating exceptions. Forecasts had suggested the index would slump to 55.0 from 55.4 but it actually increased to 56.9.

Greece - The cost of insuring the country's debt rose to a record yesterday. Speculation continues to escalate that the country will need to restructure its debt.

South Africa - More than 1000 registrations were recorded in the first 3 hours of the country's new online system "Samrad" that enables prospective mineral investors to apply for exploration rights and mining permits electronically.

Nigeria - Victory in the national elections by Christian President Good Luck Jonathan has resulted in protests in the north of the country, an area that is dominated by Muslims, that has left "lots of people" dead according to the Red Cross.

Ivory Coast - Fighting continues in parts of the country despite calls from former President Gbagbo to end the escalation in violence.

Burkina Faso - The country's leader Blaise Compaore has appointed a new Prime Minister as leaders of the military mutiny that started on the 15^th of April apologised for their actions and called for an end to the unrest. The unrest has not affected mining operations according to companies operating in the country.

Zimbabwe - Prime Minister Morgan Tsvangirai has dismissed President Mugabe's plans to nationalise foreign owned firms as "empty rhetoric" and as "looting and plundering".

Currency - The Yen is up this morning as a result of on going concerns over the sovereign debt situation in Europe.

US$1.425/eur vs $1.445eur yesterday. Yen82.47/$ vs 84.57/$, SAr6.850$ vs 6.65/$ $1.625/GBP vs 1.634/GBP

COMMODITY NEWS

Precious metals:

Gold US$1,494/oz vs US$1,474/oz on yesterday -Prices are off slightly this morning after having moved within touching distance of the 1,500 mark yesterday. Profit taking is likely driving the price this morning.

• Newcrest Mining has cut its production forecast for the second time as a result of weather related problems in Australia and the mine shutdown in the Ivory Coast.

• SPDR gold trust holdings are at 1,231t (39.582moz) current value US$59,083bn

Platinum US$1,783/oz vs US$1,805/oz yesterday -

Palladium US$736/oz vs US$800/oz yesterday -

Silver US$43.21/oz vs US$40.25/oz yesterday - Prices are off slightly today after having moved up to a new record yesterday. The metal has benefited as an alternative value store to gold of late as sovereign debt concerns in Europe mount.

Rhodium US$2,350/oz unchanged

Base metals:

Copper US$9,269/t vs US$9,400/t yesterday - Prices are up slightly this morning after recovering from the events of yesterday and the impact on demand that would result from debt problems worsening in the US.

Aluminium US$2,680/t vs US$2,710/t yesterday -

Nickel US$25,474/t vs US$27,500/t yesterday -

Zinc US$2,325/t vs US$2,525/t yesterday - As a result of the Earthquake zinc output in Japan may drop by as much as 8% this year, resulting in imports potentially more than doubling according to Mitsui Mining & Smelting.

Lead US$2,557/t vs US$2,852/t yesterday -

Tin US$32,600/t vs US$32,980/t yesterday -

Energy:

Oil US$120.74/bbl vs US$124/bbl yesterday - Prices are off this morning as the market digests the prospects of US debt problems and the impact of falling demand if the global economic recovery falters.

Natural Gas US$4.137/mmbut vs US$4.200/mmbtu -

Uranium US$58.50 vs US$59.00 last week.

Other:

Steel - As a result of the devasting earthquake in Japan, India has been studying whether it would be beneficial to implement a number of mandatory steel quality standards that will require mills to gain a certificate for as many as ten products. A large percentage of the steel made in the country currently is weak steel as a result of the number of low cost induction furnaces used that are unable to remove impurities in the metal.

COMPANY NEWS

Aureus⁺ Mining (AUE LN) 97.5p mkt cap £84m - Progress update plus positive drilling results

• Aureus has provided an update on feasibility study work currently underway at the company's Bea Mountain 100% mining license area (457km²) in Liberia that holds the New Liberty project.
• 4,450m of infill drilling has been completed with a further 15,000m planned. The company is on track to complete a DFS for Q4. New Liberty is planned to produce a minimum of 100,000ozpa of gold over the first five of an 8.5 year mine life.
• There is upside potential around the deposit that could well extend the mine life beyond this and drilling West of New Liberty has picked up some encouraging intercepts including 10m at 5.25g/t and 9m at 1.25g/t.
• The company has recruited the services of a range of credible consultants to undertake various aspects of the DFS, including the likes of Golders and AMC.
• Aureus has an extensive tenement package with numerous other targets in Liberia and exploration work continues across the Bea License. Management has published further encouraging drilling and trenching results from Ndablama including 14m at 2.86g/t and 10m at 2.77g/t in drill holes at reasonably shallow depths.
• Continuous bedrock mineralisation has been outlined over 900m by 150m trending East West at Ndablama. Around 1,500m of trenching results are due back and further work is planned with ground geophysical surveys and follow up drill programmes.
• Other targets within the Bea Mountain license include Weaju and Gondja. Future exploration work at the various targets include ground geophysics as well as 36,000m of drilling with 6 rigs signed up through two drilling contractors.

Conclusion: Aureus, now an independent gold exploration/development company (previously African Aura) is pushing ahead with an aggressive exploration programme focusing on the Bea Mountain license that holds substantial potential for a new gold mining province. New president David Reading is clearly keen to push ahead and rapidly develop a substantial gold producer. We look forward to the results of the exploration and feasibility work being carried out that should add substantial value which will be clearer than when the assets were held in diversified explorer developer African Aura.

EMED MINING * (EMED LN) 16p mkt cap £110m - Progress on Rio Tinto copper mine project closer to restart

• EMED Mining report significant progress in Spain with the relevant authorities required for permits to restart mining in Spain.
• Management have not received responses from all the key departments required for approval.
• Junta de Andalucia departments:

Department of Culture and Heritage - now satisfied

Department of Environment,

Water Authority

Department of Industry.

• The other departments have requested:

revised capital cost estimates for the project

review of concentrate grade, metal recoveries and reduction of waste and seepage

commitment to rehabilitate additional areas outside the project area which have been affected by mining since 1982 by previous holders of administrative standing. 'The removal or minimisation of pollution in the Odiel river basin is to be a primary objective of this particular aspect'.

• Management need to clarify technical details for these requests and in particular the last point which seems to be somewhat outside EMED's area of responsibility.
• The sense of this press release is that while the company has gained a key approval it is still being held back by inane and probably unreasonable requests for further information. The request for environmental remediation outside the project area looks particularly unreasonable and while the company may be able to help in some way it should not be a requirement for the project in our view.
• The company needs the 'grant of Administrative Standing' so that it can move to compulsory acquisition on the various landholdings which were divided up by the previous project owners.

Conclusion: EMED staff must be getting pretty fed up with the petty bureaucracy and constant holdups in Spain. It looks likely that the more militant staff and local supporters might stage another underground sit-in to highlight the unnecessary delays to this valuable project posed by local government. Local politicians do not seem to be acting in the interest of the people and generation of employment for the community by continually delaying the restart of the project.

* Fairfax acts as a UK broker to EMED Mining. Fairfax placed stock in the recent issue to institutions.

Cluff Gold (CLF LN) 97.5p mkt cap £128m - Events in Burkina not affecting operations

• Cluff has stated that its Kalsaka mine in Burkina Faso is operating without interruption and all staff are safe. Gold production and exports have been unaffected.

Discovery Metals* (DME LN) 79p mkt cap £213m - Report highlights mine construction & exploration progress

BUY Target price - 94p

• Discovery Metals' has published its quarterly report from 1 Jan to 31 March 2011.
• The report indicates that construction of the Boseto copper mine is on track for commissioning in H1 2012.
• Exploration; progress through the quarter should lead to a new resource at Zeta in the next few months.
• The Plutus-Petra underground resource drilling is also near done. Drilling at Plutus is designed to hit mineralisation at 350m below surface to potentially double the resource in this area eg adding another 67mt @ 1.4% copper.
• Together the total measured, indicated and inferred resource is >100mt @ 1.4% copper and 17g/t silver. Of this 21.8mt are classed as high grade proven and probable reserves.
• The Zeta mineral resource is 35.4mt @ 1.4% copper and 22.3g/t silver. At a cut off grade of 0.6%.
• Each of the projects remains open at depth giving good scope for resource and longer term mine expansion.
• Pictures published in the quarterly show the pouring of concrete in steel for the mill and other foundations.
• Many more targets are identified in the regional exploration program .
• Nickel exploration: A 4.1mt nickel resource grading 0.7% nickel and 0.5% copper has been identified through the $3m drilling program. JOGMEC, the Japan Oil, Gas and Metals, National Corporation has now earned a 60% interest in the jv and is expected to pass this onto another Japanese entity for development. Xstrata holds 15% of the project.
• Manganese: licenses in southern Botswana cover three former manganese mines which have produced some 224,000t in the past. Manganese ore prices have risen to $6.5-7.5/mtu and should enable the economic extraction from surface mining activities in new areas. We would expect the recent analysis of historic data to show up good potential for new supply in this area.
• Discovery Metals remains one of the few way available for investors to get exposure to a junior developer rapidly evolving into a producer.
• The strong management team has methodically worked up the project and continues to deliver successfully.

Conclusion: The Boseto project has major upside potential and we envisage ongoing work to identify the means to expand output from around 35ktpa to 50ktpa of copper contained and potentially more. The delineation of underground and along strike resources would support this.

In addition, we envisage other resources being identified within the company's extensive tenement package that could support a second operation of similar scale which would add substantial value for shareholders.

* Fairfax acts as a UK nomad and broker to Discovery Metals.

European Nickel (ENK LN) 14.75p mkt cap £39m - Operational update

• Irrigation of Heap 1 at the company's trial heap leach at its flagship Acoje project in the Philippines has started. 2kt of agglomerated nickel laterite ore has been stacked on a 33m by 18m pad stacked to a height of 4m.
• A net work of drippers and wobblers will irrigate the heap with dilute sulphuric acid to test the best irrigation method. Rain mitigation techniques will also be tested as Acoje is in a high rainfall tropical environment that is subject to cyclones.
• A second trial heap will sit adjacent to Heap 1 to start in May/June this year to test combining secondary and primary phases of leaching.
• DMCI continues to mine and stockpile ore in preparation for the initial 50kt shipment from its port at Santa Cruz.

Conclusion: We look forward to the results of the heap leach trial to determine how effective heap leaching will be for tropical laterites as the normal but highly capital intensive and risky method to treat these ores is high pressure acid leaching.

Triple Plate Junction (TPJ LN) 8p, mkt cap £24m- Newcrest upgrades Wafi to 40moz target + 15mt contained copper

• Triple Plate Junction are working on a prospect just 4.5km from Wafi although this close-ology does necessarily impart the same sort of potential success

Mining this week:

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

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

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

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

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