Morning View It is all looking a bit complicated this morning • The US dollar is off, gold is off, oil is up due to OPEC restrictions. • Interest rates are rising in Brazil, China etc except for the UK and US • Renewed growth expectations for the US trade deficit due to earthquake in Japan impacting import of Auto parts from the US Economic News US - Forecasts ahead of a report due for release later today suggest that the U.S. trade gap expanded to $48.8 billion in April from the $48.2 billion shortfall in March. The forecast April deficit would be the largest since June 2010. The poor figures may be attributed to the problems in Japan and the knock on impact that it has had for exports from the US. China – The World Bank announced yesterday that the economy will maintain its high growth levels and that there is ample space for monetary tightening should it be required. The bank forecast that growth this year would be 9.3% before moderating to 8.7% in 2012 and 8.8% in 2013. Officials stated that the biggest risk to the Chinese economy was not inflation but the property market. Japan – Official figures today showed that the Japanese economy contracted more than estimated in Q1 as a result of the damage that the Earthquake and Tsunami and the subsequent knock on effect on capital spending and factory production. GDP contracted by 3.5% compared with the 3% estimated. Capital investment dropped 1.3% in Q1. Reconstruction work in the second half of the year will likely drive an improvement. Europe – The latest reports filtering out of the ECB suggest that Jean Claude Trichet will forge ahead with another rate rise despite renewed concerns over Greece and an ongoing dispute with Germany. • Rather amusingly it has emerged that the rating framework used by the ECB on Government bonds puts Irish Bonds in the same risk category as German bunds – The collateral rules mean that the ECB does not differentiate the region’s safest bonds from the most risky. Greece – Workers at state owned gas, television, transit and utilities took to the streets yesterday to protest against the proposed privatisation and asset sale program the Greek Prime Minister is trying to implement. Papandreou is trying to win support for the 78bn euro plan for austerity measures and asset sales that would be drawn out over a 5 yr plan. Greece has been plagued by strike after strike as workers appear not to realise the severity of the situation facing the country. UK – Moody’s have warned that the UK economy is in danger of losing its triple A rating if the Government does not forge ahead with austerity measures and misses its fiscal target. • The Bank of England will keep its benchmark interest rate unchanged at 0.5% today. • Trade balance figures released will be released imminently. Spain – Figures released today show that Spain is planning to increase incentives for utility companies operating coal and gas power plants. The increase is rumoured to be around the 600m euro mark. The question is whether this is going to be a long term trend and the potential positives it will have for European coal and gas producers? Australia- – Fewer jobs were added than estimated in May. The number of people employed rose by 7,800 considerably lower than the estimate of 25,000 Brazil – Policy Makers yesterday pledged to remain committed to their plan of bringing inflation under control increasing expectations that rate rises will continue for the foreseeable future. Inflation forecasts for the year fell to 6.2% from 6.37% at the end of April. GDP in the country expanded in Q1 by 1.3% Peru – Expectations suggest that the Central Bank will raise its lending rate for the 6th straight month in an effort to rein in inflationary pressures. The central bank has a target of 1-3% but rising food costs have pushed inflation beyond this. • Advisors to the new President have been quoted as saying that the government is committed to maintaining existing macro economic, monetary and fiscal policies. Time will tell. Peru’s economy expanded at 8.8% in 2010. Forecasts are for growth of 7.5% this year. Egypt – The country’s risk of default has declined to the lowest level since the revolution that brought and end to the rule of Hosni Mubarak. Credit default swaps have slid to 292 basis points, according to Bloomberg – the lowest level since January. Last week the transitional government announced plans to raise state pay and food and fuel subsidies ahead of the parliamentary vote that is scheduled for September. East Africa – Kenya, Tanzania and Uganda have outlined plans to increase infrastructure spending in an effort to maintain economic growth as higher food costs impact growth expectations. • Additionally the Tanzanian Finance Minister announced plans to increase expenditure for electricity and power generation, and road building by 85% Botswana – State workers who have been striking for 8 weeks now throughout the country have turned what has generally been a peaceful protest sour. Looting broke out in the capital Gaborone yesterday forcing security forces and police to clash with demonstrators. Nurses, teachers and other state workers have been protesting peacefully throughout the country over the last couple of months over a pay dispute. Currency – The Euro is up this morning on the back of speculation that the ECB will continue with its plan to raise rates. • The dollar is off this morning as expectations increase that the US trade gap widened on the back of rising oil prices. US$/1.4627eur vs $1.466/eur yesterday. Yen80.06/$ vs 79.86/$, SAr6.715/$ vs 6.744/$ $1.646/GBP vs 1.637/GBP Commodity News Precious: Gold US$1,536/oz vs US$1,542/oz yesterday - Prices are off this morning attributed to the prospect of further interest rate hikes around the globe. • SPDR gold trust holdings fall to 1,211.57 (38.953moz) from 1,212.87 (38,995moz) current value US$59.892bn Platinum US$1,820oz vs US$1,819/oz yesterday Palladium US$807/oz vs US$801/oz yesterday Silver US$36.91/oz vs US$36.42/oz yesterday - The Silver Institute has announced silver usage in solar panels could well double to more than 100m oz by 2015. Last year demand for the metal in the applications was estimated at around 50moz. Rhodium US$2,075 vs US2,100/oz yesterday Base metals: Copper US$9,045t vs US$9,056t yesterday – Aluminium US$2,670/t vs US$2,684/t yesterday – Nickel US$22,800t vs US$22,485/t yesterday – Nickel prices gained 1.4% from yesterday levels, although, the market still underperforms its peak by more than 22% set February this year. Oversupply and low prices for stainless steel - two thirds of nickel production use – remain among the fundamentals behind depressed nickel prices. Zinc US$2,288/t vs US$2,226/t yesterday – Lead US$2,575/t vs US$2, 533/t yesterday – Tin US$25,750/t vs US$25,750/t yesterday – Energy: Oil US$118.03/bbl vs US$116.06/bbl yesterday – Brent crude spot prices increased after OPEC members did not reach an agreement on production quotas growth. OPEC supply will stay at current levels of 28.8mmbbl per day, which is 1.9mmbbl short of estimated demand for its oil in third and forth quarter this year. Natural Gas US$4.824/mmbut vs US$4.836/mmbtu – Prices slightly declined after hitting a 10-month high of US$4.919. • US power plants’ gas demand, which accounts for about 30% of the nation’s supplies, increased on the back of warmer-than-expected weather this week. Expectations of lower US gas stockpiles – report due tomorrow – added to a price rise. Uranium – US$56.00/lb vs $56.00 last week – Other: Iron Ore – Rio Tinto’s , the second-largest mining company, plan to expand its capacity 333mt per year may cost 9.5% more than previously estimated and amount to $16.2 bn. Cost rise is attributed to appreciation of Australian currency to US$1.10, driving operating costs in Western Australia up. Steel - China Steel Corp, has reportedly opened discussions with several steelmakers and a Japanese steelmaker to jointly invest in overseas iron ore and coking coal mines. Company News: Shanta Gold* (LON:SHG) – Tanzania parliament initiatives unlikely to pass in proposed form • Press reports from Tanzania yesterday indicated proposals to impose a super tax on miners in the region. • We are informed that the Hon. William Ngeleja, Minister of Energy and Minerals for Tanzania, believes that the government has no plans to implement this tax and if they had would have followed a process of consultation before announcing. We therefore believe that press statements are part of a process of political posturing. • These sorts of press pronouncements are common in Africa and rarely lead to new laws in the dramatic form suggested. • African Barrick Gold, AngloGold Ashanti and others are likely to vigorously contest any proposal and will point towards the benefits that they bring to Tanzania including job creation, investment and existing tax payments. Conclusion: Gold mining shares relating to Tanzania appear to have been unfairly penalised by sentiment relating to press reports on a potential super tax. While royalty rates may rise in future years if gold prices remain high more onerous taxation regimes seem unlikely for a country which needs to encourage investment in this growing sector. * Fairfax IS plc acts a nomad and broker to Shanta Gold Aurum Mining (LON:AUR)– Results highlight activity of team in hunt for new mining projects • Aurum Mining have published results for the year to end March 2011. • Operating losses have risen to £3.16m from £2.42m a year earlier due to a £1.25m impairment charge on writing the remaining 10% Andash stake to zero and previously announced in the 2010 interim results. • Administrative costs have fallen to £1.91m from £2.42m due to cost controls. • Post tax losses rise to £3.42m from £1.68m due to an additional £0.285m of finance expenses. • Disposal of Andash project in Kyrgyzstan in December 2009 let to the return of £23.5m with £7.9m returned in the second tranche to shareholders late last year leaving Aurum as a cash shell with a possible gain to come from ongoing litigation. • The company recently signed a deal with Ormonde Mining to explore for gold in Spain. Aurum committed Eur500,000 to this exploration over an 18 month period for a 60% stake in the projects. Drilling is to start this summer and news on this exploration should be forthcoming over the next few months. • Aurum raised £2m in April this year to better place the company in terms of deal making potential. • Current Cash of £2.5m. • Management are examining a number of opportunities which may lead to a transformation of the business by the end of this year. Conclusion: We view the company as well placed to take on and direct significant new opportunities in the mining sector and see the experienced board, AIM listing and significant £2.5m cash position as offering substantial value. *Fairfax act as nomad and broker to Aurum Mining

Source