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EFG Continent - Daily Update, May 24, 2012.


Zhaikmunai announces first quarter results (page 2).

Anglo Asian Mining: FY2011 results (page 2).

Ivanhoe Mines and Rio Tinto tweak the right-offering deal (page 3).

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Zhaikmunai announces first quarter results

EVENT: Zhaikmunai (ZKM) released 1Q12 results. The company finished the quarter with a close to four-fold Y-o-Y increase in EBITDA to US$110.9 million, over four-fold Y-o-Y increase in Net Income to US$48.4million, over three-fold Y-o-Y increase in Revenue to US$163.4 million with cash balance going up 12.3% Y-o-Y to US$144.3 million. High growth was achieved primarily on the heels of increasing total production, which rose over five times between the first quarter of 2011 and the first quarter of 2012. Total production increased to 3,053,210 boe from 604,746 boe or 404.9%, with an average daily production of 33,552 boepd from 6,719, or 399.3%. Total production has since further increased to an average of 37,237 boepd in April 2012.

COMMENT: We take a positive view on the news on the back of impressive growth exhibited by ZKM, albeit the production growth is in line with our expectations. For the second quarter ZKM is set to connect one further gas condensate well (Well #218) to continue bringing GTF to full design capacity as well as to connect two crude oil wells (Wells #116 and #67) to bring crude oil production above 7,500 boepd within the quarter.

Anglo Asian Mining: FY2011 results

EVENT: Anglo Asian Mining (AAZ) announced its final results for the year ended 31 December 2011. Over the period AAZ increased profit before tax to US$31.6 million (2010: US$19.8 million) on revenue of US$83.8 (2010: US$72.0 million). Gross profit is also up totaling US$43.0 million (2010: US$31.4 million), with an increase in operating cash flow before movement in working capital to US$55.8 million (2010: US$47.0 million) despite lower total gold production of 57,068 ounces (2010: 67,267 ounces).

COMMENT: The results are mixed for AAZ, in our view. Despite rising sales and profit, growth in earnings came primarily as a function of higher realized price of gold at US$1,573 per ounce (2010: US$1,241 per ounce), coupled with declining overall efficiency as an average cash operating cost saw a 25% increase Y-o-Y totaling US$448 per ounce (2010: US$358 per ounce).

Ivanhoe Mines and Rio Tinto tweak the right-offering deal

EVENT: Ivanhoe Mines (IVN) and controlling shareholder Rio Tinto (RIO) have tweaked the terms of a US$1.8 billion rights offering and financing package to help fund the development of the massive Oyu Tolgoi copper-gold mine in Mongolia to reflect the fall in mining sector share prices. Under the agreement, a rights offering that was to allow Ivanhoe shareholders to buy additional shares at a subscription price of US$8.34 per share has been changed so that the price will now be determined in the final prospectus.

COMMENT: Rio and IVN last month signed a wide-ranging agreement to ensure funding for the Oyu Tolgoi project, including plans for US$1.8 billion in equity financing and a bridge-loan and support from Rio for US$3 billion-US$4 billion in project financing being negotiated with multinational lenders. However, as RIO will continue to provide a standby commitment for the full amount of the US$1.8 billion offering and will buy as many new shares in Ivanhoe as its 51% shareholding at agreed price, we view the news as neutral on IVN.


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Publication:Russian Banks and Brokers Reports
Date:May 24, 2012
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