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COMMODITY NEWSBRIEFS: 5 NOVEMBER 2014 Please note that these articles are available in electronic format and can be requested and delivered via e-Mail.

(http://intra.spoornet.co.za) Natasha.Havenga@transnet.net

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INTERMODAL See article “REGULATOR TOO BROKE TO VALUE PORTS’ ASSETS” under heading TRANSNET IRON ANGLO SEES IRON DOLDRUMS LASTING A YEAR (Mineweb, 5/11/2014) Anglo American, the miner starting operations in Brazil at its biggest iron-ore project, expects a global glut of the steel-making ingredient to keep prices near five-year lows for at least another year. A price recovery may take as long as 18 months, as the reaction of higher cost mines to lower prices isn’t immediate, Paulo Castellari, chief executive officer of Anglo’s iron-ore unit in Brazil, said in an interview yesterday. The raw material will probably stay at about $75 to $80 a ton in the short term as the start-up of new mines boosts supply, he said. “It will take time for the market to react,” Castellari, 44, said at the company’s Brazilian headquarters in Belo Horizonte. “We will have another readjustment starting in 12 to 18 months because we know a lot of people won’t survive with prices between $70 to $90.” The project’s start, which faced delays and cost overruns since it was bought in 2008, coincides with a slump in iron-ore prices as Vale SA, Rio Tinto and BHP Billiton, the world’s top producers, expand capacity and demand stalls from China, the biggest user. The price of ore with 62 percent iron content delivered to the Chinese port of Qingdao fell 0.8% to $78.01 a ton today, extending its drop this year to 42%. The raw material slid to a five-year low of $77.97 a ton on September 29. STEEL MINISTER’S CALL FOR STEEL DISCOUNTS SUPPORTED (Business Day, 5/11/2014) Pressure is mounting on two of the country’s major manufacturers — ArcelorMittal SA and Sasol — to discount the price of steel and polymers respectively as a way of kickstarting industrial development. Added impetus to the campaign came yesterday from Parliament’s trade and industry committee, which urged the government to take the necessary measures to introduce a developmental price for steel and polymers to promote beneficiation. The committee’s recommendation endorses Trade and Industry Minister Rob Davies’ view that high steel and polymer prices have undermined the growth of the country’s manufacturing sector. ArcelorMittal SA and Sasol Chemicals have been targeted for practising import parity pricing. Import parity pricing adds costs such as international transport and import duties to locally manufactured goods. The committee’s recommendation came despite Sasol’s warnings that its future investment in chemical manufacture would hinge

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on its profitability relative to other possible uses of the by-products of its fuel-from-coal process. ArcelorMittal SA CEO Paul O’Flaherty was also at pains to tell the committee during its colloquium on beneficiation that the steel giant faced stiff competition from steel imported from the Far East. He insisted that its policy was to offer competitive steel prices to the domestic market. Several submissions were made that there were a host of other factors, such as unreliable energy supply, port and freight charges, and labour instability, that outweighed input prices as a constraint to business. These constraints and several failings by the government were acknowledged by the committee in a report on beneficiation — adopted yesterday — which was the outcome of engagements with government and industry stakeholders over several months. CHEMICALS See article “MINISTER’S CALL FOR STEEL DISCOUNTS SUPPORTED” under heading STEEL COAL TRANSNET WEIGHS STRATEGIC COAL AS FORCE MAJEURE (MiningMx, 5/11/2014) South Africa's transport utility, Transnet, and the country's coal producers are negotiating whether to include the declaration of coal as a strategic mineral as a force majeure event that would affect take-or-pay tariff agreements on the coal line. “There may be a force majeure clause in there that allows for possible government intervention on coal exports,” said Brian Molefe, CEO of Transnet. He did not give further details on how the tariff agreements could be adjusted in the event coal was declared a strategic mineral by the South African government. “The negotiation process continues,” he said. “It is under discussion,” said a senior officer at one of the country’s coal exporters. BHP Billiton Energy Coal South Africa (Becsa) and Anglo Thermal Coal had not responded to inquiries regarding the matter. In terms of proposed amendments to the Minerals & Petroleum Resources Development Act (MPRDA), which has yet to be signed into law, the mines minister has discussion to declare certain minerals strategic. The practical implication of this is that the government could ask coal exporters to sell a certain portion of their product to local users - namely Eskom - at lower than market or development prices, as it is termed. Becsa was the first company to sign a new tariff agreement for coal exports with Transnet. The deal, announced on September 30, was a 10-year take or pay agreement worth an estimated R24bn ($2.17bn) and will allow Becsa to add 800ktpa to current volumes as and when Transnet’s ratchets up capacity on the coal line to 85 million tonnes a year. Molefe said the other 28 users of the coal line were due to sign their tariff agreements before the year-end. It's unclear how the force majeure clause could be written into the take-or-pay agreements once signed. CHROME & MANGANESE GLENCORE FERROCHROME PRODUCTION UP AS LION II ROARS IN MPUMALANGA (Mining Weekly, 5/11/2014) South Africa-centred ferrochrome production of diversified miner Glencore lifted appreciably in the third quarter due to the roar of its low-energy Lion II ramp-up in Mpumalanga. The London-, Hong Kong- and now also Johannesburg-listed global mining and marketing company, headed by CEO Ivan Glasenberg, said on Tuesday that its attributable own-sourced ferrochrome production rose 5% to 939 000 t in the three months to September 30, reflecting the Lion II expansion ramp-up – which is on track to reach full capacity by mid-2015 – and higher operating capacity in the absence of a power buyback repeat from State electricity utility Eskom. Glencore’s own-sourced coal production rose 7% to 111.4 million tons, mainly on higher thermal coal production in Australia, driven by productivity improvements and the completion of various advanced-stage expansion projects. Own copper production rose 8% to 1 149 000 t, mainly driven by a 48% increase in production at the Mutanda opencast mine in Katanga in the Democratic Republic of Congo, which is operating at a production rate of 200 000 t/y, following completion of the expansion project at the end of last year. The Mutanda expansion also resulted in cobalt production rising 9% to 13 100 t. The continued ramp-up at Katanga and higher production at the Collahuasi copper mine in northern Chile also contributed to the increase. African third-quarter copper production rose 24% to 344 300 t, compared with the third quarter of 2013. The Phase V expansion at Katanga is completed and further operational improvements, including adding some additional back-up power generator capacity, are implemented. Glencore’s zinc output was 998 000 t, down 6%, following the closure of the Perseverance and Brunswick mines in June last year. The ramp-up at the Perkoa zinc mine in Burkina Faso, 120 km west of the capital Ouagadougou, and expansions at the McArthur River and Mount Isa zinc operations, in Australia, have seen 2014, production grow quarter-on-quarter, with the bigger volume benefits expected in 2015.

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INDIA FACES GRAVE SITUATION IN MANGANESE SUPPLY (Mining Weekly, 5/11/2014) India would face a severe manganese demand/supply gap by 2020 and a drag on steel production in the country, according to the Indian Bureau of Mines (IBM). “A huge gap will persist in demand and supply position by 2020, which is a matter of grave concern and in the existing situation needs immediate attention to revamp the entire mining activity on a large scale by all companies,” the IBM said. In a report titled 'Manganese Ore: Vision 2020 and Beyond', the government’s multidisciplinary organisation said that during 2012/13, Indian manganese production was estimated at 2.5-million tonnes of between 30% and 35% manganese content. The entire production was accounted for by companies such as MOIL Limited, Tata, Orissa Mining Corporation and Sandur, and even if their existing and future production were taken into account, the country’s manganese production would be around five-million tonnes a year by 2020, against a total demand forecast of nine-million tonnes a year, the report said. With a consumption rate of nine-million tonnes a year of run-of-mine manganese ore, the estimated Indian reserve of 142-million tonnes would last for a maximum of 10 to 15 years beyond 2020, and “unlike other metals, recycling of manganese was not possible, making it a consumable commodity in steelmaking and entirely dependent on fresh resources”. With depleting high-grade manganese ore reserves and a revision of the threshold value of manganese ore to 10%, it was obligatory on the part of the mining industry to exploit low and lean grade manganese ore that was now considered as waste. See article “RAIL LINE REOPENED” under heading TRANSNET TRANSNET RAIL LINE REOPENED (Cargo Info Africa, 5/11/2014) Minister of Public Enterprises, Lynne Brown, yesterday reopened the Fieldview - Kamfersdam section of rail line, following the construction and refurbishment of a waste water treatment system for the Kimberley area. The project is a partnership between Transnet and the Sol Plaatjie Municipality. Transnet Freight Rail’s Manganese Export line, which runs from the mines in Hotazel to the export facility in Port Elizabeth, runs through Kamfersdam. About 1.5km of railway tracks were submerged following abnormally high levels of rainfall in January 2011. TFR halted operations on this stretch of the line and diverted all traffic to the McFarlane – Kamfersdam line, which had a negative impact on rail efficiencies as it added three hours to train turnaround times. In addition, the flooding posed significant environmental risks. The Kamfersdam pan is a haven for birdlife and due to the rising water levels of the pan, the flamingo breeding area was flooded and the quality of water deteriorated over time. TFR and the Sol Plaatjie Municipality co-funded the restoration project with each entity contributing R74 million and R18 million respectively. Work commenced in June 2011 and was completed in December 2013. The restoration entailed construction of a pipeline running between Kamfersdam and Langleg Pan in Kimberley, while the line was raised by 700mm to eliminate any future risks of flooding. REGULATOR TOO BROKE TO VALUE PORTS’ ASSETS (Business Day, 5/11/2014) No independent valuation has been undertaken by the Ports Regulator of Transnet National Ports Authority (TNPA) assets even though this forms the basis for its decision on what tariffs should be imposed on port users. The regulator is so short of funds that it has had to abandon its plan to conduct an independent valuation of TNPA’s assets. SA’s container and roll-on, roll-off tariffs are among the highest in the world and act as a disincentive for ships to stop at its harbours unless absolutely necessary. The Ports Regulator uses a return on assets methodology to decide whether the tariff application by the TNPA is acceptable or not. In doing so it relies on the valuation of assets provided by the TNPA. But as its CEO Mahesh Fakir pointed out in Parliament yesterday, there are various methodologies which can be used to value assets and no certainty that the method employed by the TNPA is the most appropriate. An inflated value of assets would require higher tariffs, undermining the government’s efforts to make the economy more competitive and lower the costs of doing business. Even if TNPA’s asset valuations were corroborated by its auditors, an accounting valuation was different from other methodologies, Mr Fakir noted after his briefing to Parliament’s transport committee. Discussions under way in the Department of Transport are for the regulator to get additional funds. A small levy imposed on port users is also a possibility. A meeting with Transport Minister Dipuo Peters to discuss a sustainable funding model for the regulator is scheduled for later this month. Mr Fakir controversially noted that the ability of the Transnet group to draw funds from its port subsidiary by way of dividends could deprive the port authority of the funds needed for investment and force it to push up tariffs as a way of generating the required funds. The TNPA has applied for an average tariff adjustment of 9.47% for 2015/16, and indicative tariff adjustments

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of 15.91% for 2016/17 and 6.49% for 2017/18. The regulator held road shows to consult with industry in September and will announce its tariff adjustment in February. See article “TRANSNET WEIGHS STRATEGIC COAL AS FORCE MAJEURE” under heading COAL CURRENCIES AND PRICES

ALSI: 3 month to 4 Nov 14

(Mail & Guardian, 5/11/2014)

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JSE AS AT 17:00PM 4 NOVEMBER 2014

All Share Index 4/11 49,788

- 234.32 - 0.47%

Industrials Index 4/11 47,232

- 12.94 - 0.03%

Financials Index 4/11 39,513

- 170.74 - 0.43%

Top 40 Index 4/11 44,452

- 254.19 - 0.57%

Industrial 25 Index 4/11 60,674

- 172.38 - 0.28%

Financial 15 Index 4/11 15,173

- 83.40 - 0.55%

Resources 10 Index 4/11 47,575

- 533.84 - 1.11%

Alt-X Index 4/11 1,325

+ 4.21 + 0.32%

WORLD INDICATORS

FOREX

Rand/Dollar 06:30 11.0532

- 0.01 - 0.12%

Rand/Pound

06:35 17.6633

+ 0.01 + 0.07%

Rand/Euro 06:35 13.8760

+ 0.05 + 0.38%

COMMODITIES

Gold (usd/oz) 06:30 1,162.89

- 3.41 - 0.29%

Platinum (usd/oz)

06:30 1,216.50

- 11.50 - 0.94%

Brent (usd/barrel) 06:30 82.50

- 2.28 - 2.69%

WORLD MARKETS

Wall St (DJIA) 4/11 17,384

+ 17.60 + 0.10%

Germany (DAX)

4/11 9,166

- 160.40 - 1.72%

Japan (Nikkei) 06:30 16,878

+ 463.88 + 2.83%

(Business Report, 5/11/2014) COPPER A – SETTLEMENT PRICE – 6705, 5 FORWARD RATES - Dollar/rand 4pm close: R11, 05

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Petrol/ Diesel Price

YR2014

01-Jan-

14

05-Feb-

14

05-Mar-

14

02-Apr-

14

07-May-

14

04-Jun-

14

02-Jul-

14

06-Aug-

14

03-Sep-

14

01-Oct-

14

05-Nov-

14

03-Dec-

14

COASTAL

95 LRP (c/l) 1320.00 1359.00 1395.00 1398.00 1383.00 1361.00 1392.00 1392.00 1325.00 1320.00

95 ULP (c/l) 1320.00 1359.00 1395.00 1398.00 1383.00 1361.00 1392.00 1392.00 1325.00 1320.00

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Diesel 0.05% (c/l) 1260.55 1284.75 1311.95 1299.15 1269.37 1245.79 1259.79 1254.17 1228.79 1215.79

Diesel 0.005% (c/l) 1263.95 1288.15 1316.35 1304.55 1274.77 1249.19 1263.19 1258.57 1234.19 1221.19

Illuminating Paraffin (c/l) 963.828 975.828 991.828 953.028 934.028 924.028 947.028 940.028 921.028 907.028

Liquefied Petroleum Gas

(c/kg) 2260.00 2314.00 2372.00 2350.00 2346.00 2319.00 2377.00 2365.00 2257.00 2269.00

GAUTENG

93 LRP (c/l) 1336.00 1375.00 1411.00 1416.00 1401.00 1379.00 1408.00 1408.00 1341.00 1343.00

93 ULP (c/l) 1336.00 1375.00 1411.00 1416.00 1401.00 1379.00 1408.00 1408.00 1341.00 1343.00

95 ULP (c/l) 1357.00 1396.00 1432.00 1439.00 1424.00 1402.00 1433.00 1433.00 1366.00 1361.00

Diesel 0.05% (c/l) 1287.15 1311.35 1338.55 1329.75 1299.97 1276.39 1290.39 1284.77 1259.39 1246.39

Diesel 0.005% (c/l) 1290.55 1314.75 1342.95 1335.15 1305.37 1279.79 1293.79 1289.17 1264.79 1251.79

Illuminating Paraffin (c/l) 1009.728 1021.728 1037.728 1003.228 984.228 974.228 997.228 990.228 971.228 957.228

Liquefied Petroleum Gas

(c/kg) 2442.00 2496.00 2554.00 2532.00 2528.00 2501.00 2559.00 2547.00 2439.00 2451.00

YR2013

02-Jan-

13

06-Feb-

13

06-Mar-

13

03-Apr-

13

01-May-

13

05-Jun-

13

03-Jul-

13

07-Aug-

13

04-Sep-

13

02-Oct-

13

06-Nov-

13

04-Dec-

13

COASTAL

95 LRP (c/l) 1151.00 1192.00 1273.00 1283.00 1210.00 1202.00 1286.00 1318.00 1313.00 1293.00 1265.00 1282.00

95 ULP (c/l) 1151.00 1192.00 1273.00 1283.00 1210.00 1202.00 1286.00 1318.00 1313.00 1293.00 1265.00 1282.00

Diesel 0.05% (c/l) 1086.67 1104.47 1162.85 1170.01 1114.45 1110.47 1188.67 1221.63 1235.45 1233.45 1218.25 1228.37

Diesel 0.005% (c/l) 1091.07 1108.87 1167.25 1175.41 1118.85 1114.87 1193.07 1226.03 1240.85 1238.85 1221.65 1231.77

Illuminating Paraffin (c/l) 807.128 833.128 890.128 860.328 802.328 803.328 878.328 903.328 928.328 924.328 908.328 924.828

Liquefied Petroleum Gas

(c/kg) 2047.00 2120.00 2238.00 2183.00 2102.00 2107.00 2236.00 2258.00 2267.00 2227.00 2186.00 2204.00

GAUTENG

93 LRP (c/l) 1165.00 1206.00 1287.00 1297.00 1224.00 1216.00 1300.00 1332.00 1327.00 1308.00 1280.00 1297.00

93 ULP (c/l) 1165.00 1206.00 1287.00 1297.00 1224.00 1216.00 1300.00 1332.00 1327.00 1308.00 1280.00 1297.00

95 ULP (c/l) 1186.00 1227.00 1308.00 1320.00 1247.00 1239.00 1323.00 1355.00 1350.00 1330.00 1302.00 1319.00

Diesel 0.05% (c/l) 1111.37 1129.17 1187.55 1196.61 1141.05 1137.07 1215.27 1248.23 1262.05 1260.05 1244.85 1254.97

Diesel 0.005% (c/l) 1115.77 1133.57 1191.95 1202.01 1145.45 1141.47 1219.67 1252.63 1267.45 1265.45 1248.25 1258.37

Illuminating Paraffin (c/l) 849.028 875.028 932.028 906.228 848.228 849.228 924.228 949.228 974.228 970.228 954.228 970.728

Liquefied Petroleum Gas

(c/kg) 2229.00 2302.00 2420.00 2365.00 2284.00 2289.00 2418.00 2440.00 2449.00 2409.00 2368.00 2386.00

(SAPIA online)

Daily prices for 4 November 2014

LME Official Prices, US$ per tonne

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Contract Aluminium Alloy Aluminium Copper Lead Nickel Tin Zinc NASAAC

Cash Buyer 2080.00 2050.00 6705.00 2006.00 15150.00 19600.00 2285.50 2145.00

Cash Seller & Settlement 2090.00 2050.50 6705.50 2007.00 15155.00 19605.00 2286.00 2155.00

3-months Buyer 2085.00 2048.50 6660.00 2012.00 15215.00 19600.00 2283.50 2185.00

3-months Seller 2095.00 2049.00 6660.50 2013.00 15235.00 19605.00 2284.00 2190.00

Dec 1 Buyer 2085.00 2078.00 6605.00 2037.00 15305.00 2300.00 2220.00

Dec 1 Seller 2095.00 2083.00 6615.00 2042.00 15405.00 2305.00 2230.00

15-months Buyer 19615.00

15-months Seller 19665.00

Dec 2 Buyer 2105.00 6560.00 2060.00 15185.00 2290.00

Dec 2 Seller 2110.00 6570.00 2065.00 15285.00 2295.00

Dec 3 Buyer 2140.00 6520.00 2070.00 14975.00 2268.00

Dec 3 Seller 2145.00 6530.00 2075.00 15075.00 2273.00

(London Metal Exchange, 5/11/2014)

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