ECONOMIC NEWS

Dow Jones Industrials +0.36% at 12,684.68

Nikkei 225 +0.25% at 9,818.76

HK Hang Seng +0.76% at 23,336.00

China - Figures released yesterday showed that Chinese exports rose 29.9% in April on an annual basis and imports climbed 21.8% resulting in a trade surplus of US$11.42bn.

• China's vice Premier has suggested that the government is divided on the country's trade surplus. As annual economic talks get underway with the US, Wang Qishan is reported to have stated that with regard to the nation's trade surplus "the biggest challenge for us is to make sure that everyone is on the same page"
• Inflation data for April will be released tomorrow. Estimates suggest that inflation for the month rose to 5.1 or 5.2%.
• Moody's have stated that the Government's tightening measures are starting to "bear fruit" and that the worst of inflation is now over, with growth still being achieved.

Japan - Japan's second largest home builder, Sekisui House ltd has stated that as a result of the devastating earthquake in March it expects that nation's biggest housing boom in at least 15 years as the rebuild effort takes force in the second half of the year.

UK - The Confederation of British Industry has cut its growth forecast for 2011 and 2011 with growth now expected to be 1.7% and 2.2% respectively. The CBI remains supportive of the Governments deficit reduction plans. The report stated that the group expects export growth of 8.6% this year and 7.6% in 2012. House hold spending is predicted to rise by 0.2% this year and by 1.1% next year.

• The recent run of public holidays as led to the largest surge in retail sales in 5 years. Sales rose 5.2% in April from a year earlier.
• Estimates by Deutsche Bank suggest that manufacturing has boosted its factory output leading it to now account for around 11.5% of the UK's output in 2010 up from 11% in 2009.

Europe - S&P has cut Greece's credit rating by two notches to "B" amid warnings that a debt restructuring would lead to a default. The Greek government have called the downgrade unjustified.

• Treasury bill sales take places today.

Australia - Ahead of the budget announcement later today, Treasurer Swan has stated that the Country's budget will return to surplus before other major developed economies. Estimates ahead of the budget suggest that the deficit will be a A$48bn with a forecast of A$2bn surplus in 2012-13.

• Employers in the country added 37,800 workers in March, more than initially forecast.

Indonesia - S&P are estimating that the recent Mining Law Overhaul could deter investment and could weaken the operating and financial performance of companies operating in the country.

South Africa - The Minister for Public Enterprises Malusi Gigaba has criticised the breakdown in relations between the mining industry and the state owned network industries which he says lead to the country failing to capitalise on the commodity boom.

• RBC are estimating that the country's mining industry could face up to US$100bn worth of Silicosis related damage claims. Currently South Africa's National Union of Mineworkers is pursuing a class action lawsuit against Anglo Ashanti following the company's loss of a previous case. Industry studies carried out in 1998 concluded that their could be as many as 300,000 sufferers.
• Harmony Gold has stated that the Gold industry in South Africa has a good future but needs to be nurtured if the country wishes to halt its recent slide down the production ladder.

Syria - As the tide of violent repression continues, an EU arms embargo comes into effect today but fails to specifically penalise President Bashar al-Assad for overseeing the force that many believe has led to human rights violations. Concerns are specifically focused on events in the southern city of Derea that has been cut off by the Syrian military for the past two weeks.

Currency - The euro is off this morning against the yen as concerns over sovereign debt and Greece re-emerge. The aussie dollar is off today before the country's budget is revealed. The dollar is up this morning against its most traded counterparts.

US$1.435/eur vs $1.443eur yesterday. Yen80.73/$ vs 80.67/$, SAr6.741$ vs 6.664/$ $1.636/GBP vs 1.638/GBP

COMMODITY NEWS

Precious metals:

Gold US$1,514/oz vs US$1,506/oz on yesterday - Prices are off slightly this morning as the dollar moves up.

• Sprott Inc. has estimated that demand for alternative investments to currencies could potentially see gold hit the US$2,000 mark this year.

• SPDR gold trust holdings fall further to 1,201.95t (38.644moz) from 1,205.39t (38.754moz) current value US$58,035bn

Platinum US$1,795/oz vs US$1,794/oz yesterday -

Palladium US$731/oz vs US$733/oz yesterday -

Silver US$37.87/oz vs US$36.61/oz yesterday - Prices are up again today as investors look to alternative stores of value as sovereign debt concerns in Europe continue to dominate the market and investors capitalise on the large dip last week.

Rhodium US$2200 vs US$2,200/oz yesterday

Base metals:

Copper US$8,944/t vs US$8,936t yesterday - Prices are up this morning as the oil price comes off increasing expectations that demand will recover.

• Figures released today show that copper imports by China, fell by 14% in April from March as considerable demand held back domestic prices and impacted demand for expensive foreign shipments. Imports of copper products fell to 262,676t from 304,299t in March.
• Refined copper output was 470,000 in March a 22% gain from February according to Bloomberg.
• BNP Paribas has estimated that prices could reach a record in the second half after stockpiles decline in China.

Aluminium US$2,619/t vs US$2,613/t yesterday -

• New estimates suggest that the market in China will broadly balance this year with output rising along with demand. China reportedly accounts for around 40% of both global production and consumption according to Wood Mackenzie.

Nickel US$24,745t vs US$24,800/t yesterday -

Zinc US$2,177/t vs US$2,179/t yesterday -

Lead US$2,327/t vs US$2,346/t yesterday -

Tin US$30,025/t vs US$30,000/t yesterday -

Energy:

Oil US$115.45/bbl vs US$111.67/bbl yesterday - Prices are off this morning have made gains yesterday. In the US the energy department will make its report on inventories tomorrow with forecasts suggesting that inventories climbed for a third week in a row.

Natural Gas US$4.176/mmbut vs US$4.272/mmbtu -

Uranium US$55.25 vs US$55.25 last week -

Other:

Iron Ore - Purchases by China fell 11% in April to 52.88mt as higher prices put off buyers. Imports by China were 52.88mt compared to 59.48 in March. Imports for the first four months of the year were up 9.5% on an annual basis.

• Iron ore prices have continued to rise despite the fall in imports but may pull back on the realisation that China imported less iron ore last month. The rise in prices seems at odds with slowdown in imports but may reflect a potential pick up in imports from here.
• Baosteel Corp forecast prices to rise by 25% encouraging Chinese steelmakers to rush to buy iron ore in March before prices increased.

Steel - China steel product exports fell by 2.85% mom in April to 4.77mt (Interfax-China). China's steel product imports also fell by 10.46% mom to 1.37mt.

Rare Earths - Interfax reports that Chinese rare earths oxide prices have risen by 200% so far this year.

Medusa Mining* (MML LN) 514p mkt cap £966m - Medusa hits prospective mineralisation in exploration

BUY - target price raised to 599p (from 588p)

http://www.medusamining.com.au/index1.html

• Medusa Mining, better known for its low cost high grade gold mine at Co-O in the Philippines, has identified a number of mineralised and potential discoveries.
• The complex, over a 7km x 3km area hosts a range of gold and copper mineralised ores in differing geological settings.
• Mineralisation also continues along a 'structural corridor' trending to the northeast.
• New outcrop is also discovered at the lower Bananghilig River prospect which lies southwest of the Bananghilig gold project which the company is currently drilling with six rigs.
• Management see similarities between the newly identified mineralisation at Sawahon Creek porphyry copper prospect and the giant Wafi Golpu project in PNG and the richly mineralised Baguio district north of Manila.
• Valuation: we are raising our valuation on Medusa's advancing exploration portfolio to $85m from $52m previously. This is mainly through raising our value for resource ounces at Bananghilig to $100/oz from $50/oz used previously. While the discovery and explanation of a number of new mineralised areas should add value to the company it is difficult to value this until resource calculations are released. We include $20m of value for other exploration and it is this figure which should perhaps increase further.
• Mineralisation in the Tagabaca, Canugas, Lansang and Supon-Bananghilig areas have potential to host a number of discoveries. The Sawahon copper prospect and Supon prospect also show promising samples.
• Further technical details showing results of the exploration program are available from the company announcement carried on the following web site. The press release contains some useful maps.

http://www.asx.com.au/asx/statistics/announcements.do?by=asxCode&asxCode=mml&timeframe=D&period=W

Conclusion: Medusa is fast developing a portfolio of significant projects in a region which is developing well for mining. Medusa's consistently low cost of gold mining at the Co-O mine is impressive and the addition of new projects and mines to the portfolio should lead Medusa's market valuation and rating higher.

*Fairfax acts as advisor to Medusa Mining. Medusa is listed on the LSE Official List

Mining this week:

Ormonde Mining* (ORM LN) 10p mkt cap £30m - Tungsten prices rise as Ormonde selects engineer for project

BUY - Target Price 21p

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