ECONOMIC NEWS

Dow Jones Industrials +0.00% at 12,807.51

Nikkei 225 +1.57% at 10,004.20

HK Hang Seng -1.70% at 23,231.58

China - The PBOC has stated in its first quarterly monetary policy report that "stabilizing prices and managing inflation expectations are critical" suggesting that more tightening is possible.

• Manufacturing index reportedly slid in April from March, a sign that curbs are having an effect.
• The China Electricity Council has asked governments to appropriately increase power prices to avoid supply shortfalls according to local media.
• China Citic Bank has announced that it plans to cut new real estate lending this year by at least one third. Maybe a sign of things to come?
• The Asian Development Bank is expected to state today that the widely held belief that Asia's economies will dominate the and overtake the West over the coming decades may not now be achievable.

US - Ahead of a report due for release later today expectations are that service industries in the US accelerated in April in the face of rising oil prices.

• Positively a number of auto manufacturers reported gains in new vehicle sales last month as rising fuel prices encouraged people to seek more fuel efficient vehicles.
• Focus for the remainder of the week will be on the employment figures at the end of the week. Employment is forecast to have increased by around 198,000 according to Bloomberg.

Australia - Business investment climbed 7.6% in the first quarter from a year earlier encouraged by a higher currency that increased imports as prices were reduced.

• Resources Minister Martin Fergusson has stated that country is fast approaching a period of "significant energy reform"

Brazil - Central Bank President has reiterated that they will continue to raise interest rates for as long as required in order to bring soaring inflation under control. The government target is for 4.5% by 2012 and currently inflation sits at 6.44%.

India - Service industries in the country continue to expand according to figures releases yesterday in spite of 7 rates hikes in the last 15 months.

Portugal - Government have announced an agreement on a 78bn euro, 3 year loan package. The rescue package is said to be more stringent than that of Greece. The challenge for the government will be to push through the required reforms in a country that has experienced stagnant growth in the last decade.

Libya - Gaddafi's forces continue to attack rebel held areas in the west of the country as the NATO continues to carry out strikes on the city of Misrata.

Greece - Government advisors have indicated that the country will try and extend current loans rather than restructure them.

UK - According to the Nationwide, house prices fell in April for the first time in 3 months and values and look unlikely to rise in the near future as restricted lending and government lead austerity measures weigh on investor sentiment.

• Figures released yesterday made grim reading as growth in the manufacturing sector slowed to its weakest level in seven months suggesting that the part of the economy is running out of steam.

Currency - The yen and the dollar have both strengthened today as the prospect of further monetary tightening in China prompts risk aversion.

US$1.486/eur vs $1.476eur yesterday. Yen81.05/$ vs 81.04/$, SAr6.628$ vs 6.658/$ $1.652/GBP vs 1.655/GBP

COMMODITY NEWS

Precious metals:

Gold US$1,537/oz vs US$1,542/oz on yesterday - Prices are off this morning as the dollar rebounds and the news emerges that the Soros fund has sold much of its gold and silver holdings over the last month.

• SPDR gold trust holdings fall to 1,224.49t (39.368moz) from 1,229t (39.534moz) current value US$60,613bn

Platinum US$1,853/oz vs US$1,860/oz yesterday -

Palladium US$774/oz vs US$771/oz yesterday -

Silver US$42.16/oz vs US$44.89/oz yesterday - An increase in margin requirements from the Comex has encouraged investors to diversify away from the metal. Expectations are now widely stacked prices will experience a decline over the coming days as the market digests the impact of the Soros fund's selling.

Rhodium US$2,250/oz vs 2,275/oz

Base metals:

Copper US$9,219/t vs US$9,253t yesterday - Prices are off this morning as demand concerns increase amid rising inventories and increasing monetary tightening programs in China.

• Copper held in Shanghai warehouses rose by 650,000t in April.
• Bloomberg is reporting that prices have moved into backwardation, indicating that near term prices are higher than future prices. The market has been in Contango or the opposite stance since October.

Aluminium US$2,793/t vs US$2,757/t yesterday -

Nickel US$26,925t vs US$26,650/t yesterday -

Zinc US$2,252/t vs US$2,230/t yesterday -

Lead US$2,497/t vs US$2,507/t yesterday -

Tin US$31,800/t vs US$31,890/t yesterday -

Energy:

Oil US$122.65/bbl vs US$124.52/bbl yesterday - Prices are off slightly today on the back of increasing supplies and the suggestion that labour figures at the end of the week will show that the jobs market is tightening.

• New forecasts this morning suggest that gasoline futures may climb above a record price of US$3.631 a gallon as a combination of factors including refinery outages, declining imports and rising exports in the US push prices up.

Natural Gas US$4.667/mmbut vs US$4.693/mmbtu -

Uranium US$55.25 vs US$55.50 last week - Prices move off slightly this week as expectations of an increase in new mines coupled with global reviews of plant safety appear to reduce demand prospects.

Coal - Inventories in both China and India are at critical levels according to industry experts, forcing prices higher. Prices at the Qinhuangdao port rose to the highest in more than two years to US$124.

Other:

Steel - Global steel production is forecast to rise by 7% this year pushed higher by increasing demand in China and India according to Ernst and Young. Rising income and aspirations in both countries is expected to outweigh government efforts to rein in soaring property prices in China. The report suggests that demand may climb as much as 12% and 5% in India and china respectively.

COMPANY NEWS

Glencore - price range set at 480p - 580p as Glencore prepares to publish prospectus for listing

• Glencore, the world's largest commodity trader has announced its IPO range and the names of key cornerstone investors.
• A number of sovereign wealth funds are cornerstone deal which looks set to raise over $10 billion.
• The mid price of 530p implies a market capitalisation of US$61 billion making this the largest IPO in London for some time.
• The key cornerstone investors are said to be locked in for a minimum period of six months.
• The awaited prospectus is to be published shortly.
• Current trading: Glencore has published a current trading account today highlighting performance and prospects in the following divisions.
• Marketting: a strong start to the year is reported with the Oil division showing substantially improved results due to increased arbitrage opportunities, more in line with 2009 performance. Higher oil prices should increase margins and the predictability and stability of oil at these levels may help the business.
• Industrial: again substantially improved results on the back of a strong commodity price environment. We are seeing demand and prices pick up this year in ferro-alloys and other industrial commodities and it sounds like this is feeding into better business for Glencore traders who are dominant in many of these specialist areas.
• Overall outlook: "The directors remain confident that economic activity and commodity demand remain robust and that Glencore remains well positioned for the remainder of 2011.

Conclusion: We see Glencore raising its full $10m plus the over allotment greenshoe. The shares should be priced to go and the market is likely to lift on the back of a successful issue. Glencore is in the middle of a near perfect storm regarding commodity prices and trading conditions although there is much room for trading volumes to increase further. Glasenberg has built an astonishing trading business which should gain much from its transition from secretive Swiss trader into a new listed and rather more open public company. We believe investors have much to gain but should remember that trading and mining companies remain volatile according to the state of global demand.

Hambledon Mining* (HMB LN) 5p mkt cap £36m - Rising gold sales push Hambledon to profit in 2010

• Hambledon Mining today announce pre-tax profits of £2.1m vs a loss of £0.2m in 2009.
• Net profit £1.9m for 2010 vs £0m yoy.
• Gold production rose to 22,678oz last year vs 19,575oz in 2009. The rise in gold production combined with higher gold prices raised sales to £18.7m vs £12.8m a year earlier.
• Production costs rose to $927/oz from $816/oz on slightly lower gold and silver grades. The higher costs seen last year reflect the impact of last year's severe winter on gold production with a 70% improvement now seen in Q1 2011 yoy.
• Gold recovery rates improved to 83.6% from 80.1% although silver recoveries fell to 84.7% from 87.7% yoy. Even small improvements in gold recoveries make a meaningful difference to the bottom line as some $7.5m worth of gold was left in waste material last year and any improvement here will fall through to the bottom line.
• The gold processing plant is being expanded to manage consistent throughput of 1mtpa. A third excavator was delivered this quarter and two new Balaz trucks have been ordered to raise ore production towards the 1mtpa level.
• Administrative expenses remained broadly similar while the cost of sales rise to £13.2m from £10.0m yoy.
• Capital expenditure rises to £3.2m vs £2.4m as underground development steps up. The '320' shaft has been extended to a depth of 120m and refurbishment of the '320' exploration drift should now be done.
• Cash £0.6m at year end vs £1.5m.
• The company raised £8.8m after costs in March bringing in a range of new investors and improving its cash position. The funds should enable the company to cut operating costs by an estimated $120/oz. Much of this should already be achieved by the impact of the winterisation program, through improved recoveries and through raised ore throughput.

Conclusion: Q1 2011 is already showing meaningful improvement on last year positive result. Higher gold prices and gold production should radically upgrade profits this year and if management can manage to improve ore throughput and recovery rates then costs should naturally fall markedly on a per ounce basis. We look forward to a much improved year based on the hard work and planning prepared through 2010.

* Fairfax acts as Nomad & Broker to Hambledon Mining

Fairfax forecasts

Ormonde Mining* (ORM LN) 10p mkt cap £30m - placing raises £4m to advance Tungsten project

BUY - Target Price raised to 21p from 19p

• Ormonde Mining has raised £4m to advance the Barruecopardo Tungsten project in Spain.
• The company is to use the funds to advance work on this project and to support the mine permitting process.
• We do not expect mine permitting to be difficult in this region of Spain as other mines including another tungsten mine have been permitted in recent years.
• Funds partially discharge the cost of acquiring the outstanding 10% of the tungsten project.
• This also includes the surrounding tungsten and gold exploration permits, see comment on 4^th April.
• Some funds will be used to advance work on this exploration portfolio in Salamanca.
• Funding will also go to maintain and evaluate the La Zarza copper project which lies outside the Antofagasta joint venture.
• Tungsten: prices continue to rise with market demand and with moves in China to restrict smuggling of ferro-tungsten according to Metal Bulletin Chinese authorities seized around 160t in April as part of a tax-evasion crack-down. The material had been declared as silico-manganese which is not subject to such high export taxation.
• Valuation: we are raising our valuation on Ormonde Mining to 21p due to lower than anticipated dilution on funding the company through this stage of its development.

Conclusion: Ormonde is progressing well on a number of fronts. The company is set to significantly advance the Barruecopardo Tungsten project which has good scale and metallurgical characteristics. Consolidating the exploration permits could add further ore tonnage to the project increasing its potential production rate and its value to investors

* Fairfax acts as broker to Ormonde Mining

Mining last week:

Ampella Mining (AMX AU) 206c/s, A$416m - pre-feasibility starts on 2.2moz Konkera gold project BUY - Target 450c/s

Centamin Egypt (CEY LN), 130p Mkt cap £1.42bn BUY

Medusa Mining* (MML LN) 522p mkt cap £975m - Fidelity take stake to over 11% BUY - target price raised 588p from 549p

* Fairfax acts as advisor to Medusa Mining

DISCLAIMER - Non Independent Research

⁺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