1

Shift in gold production from traditional to emerging countries

Marino G. PieterseEditor Goldletter International

China Mining 2008 – BeijingChina Mining 2008 – Beijing

November 11 – 13, 2008November 11 – 13, 2008

Goldletter II NN TT EE RR NN AA TT II OO NN AA LLthe in ternational independent in formation and advice bu lle t in for gold and rela ted inves tments

2

Global financial crisis in perspectivePrime mortgage crisis $ 500 billion

Credit crunch $ 1.000 billion

Global Financial Stability Report (IMF):Rescue package United States $ 700 billion Europe $ 300 billion

- Banks write-off : $ 580 billion (40% European banks)- Estimated additional write-off over next 5 years $ 675 billion

Credibility crisis → Global stock markets crunch → Economy crisis $ 6.200 billion

in one week (October 3 – 10, 2008):Tokio - 24% Brazil - 22%London - 21% Russia - 21%Frankfurt - 21% India - 19%Paris - 21% Shanghai - 13%New York - 20%

2008 – to date : ± - 40% $ 12,000 billion

Capital infusions and loan guarantees $ 1.400 billion

Stimulous package China $ 586 billion

3

Asian growth of financial wealth2001 – 2008 growth monetary reserves China $ 1,800 billion

Sovereign Wealth Funds $ 3,000 billion

History of financial crisesDow Jones

1973 – 1974 : Oil crash 2-year fall 40%

October 19, 1987 (Black Monday) : - 22.6% 3 week fall - 34%

(blamed on the rise of computerized hedging strategies)

1997 – 1998 : Asian Crisis

October 1997 - 11%(Russian debt default in 1998)

4

Measuring the New Gold Bull Market

$ %

December 1, 2003 400.00 December 2, 2005 500.00 +25 (2 years)April 14, 2006 600.00 +20 ( 3 ½ months)May 10, 2006 700.00 +17 (- 1 month)May 12, 2006 725.25 +20 (- 1 month)October 6, 2006 560.75 -23 (5 months)Year-end 2006 635.75 +14 (3 months)April 20, 2007 691.40 +9 (4 months)June 27, 2007 642.10 -7 (2 months)September 18, 2007 714.75 +12 (2 ½ months)Year end 2007 836.50 +17 (3 ½ months)March 17, 2008 (H) 1,030.80 +24 (2 ½ months)May 1, 2008 853.00 -16 (1 ½ months)July 16, 2008 977.50 +15 (2 ½ months)September 11, 2008 740.75 -24 (2 months)October 10, 2008 918.00 +24 (1 month)October 24, 2008 (L) 692.50 -25 (2 weeks)October 31, 2008 730.75 +11 (1 week)

Measuring the New Gold Bull Market

5

Gold does not run its own course as a safe havenGold does not run its own course as a safe haven

Gold ($) €/$ Oil Gold/Oil$/barrel ratio

Year end 2001 276.50 0.88 19.80 14.0Year end 2002 342.75 1.05 28.13 12.2Year end 2003 417.25 1.26 30.17 13.8Year end 2004 438.00 1.36 40.25 10.0Year end 2005 513.00 1.18 58.87 8.7May 12, 2006 1) 725.75 1.29 68.05 10.7October 6, 2006 2) 560.75 1.27 58.86 9.5Year end 2006 635.70 1.32 60.14 10.6

January 16, 2007 3) 627.05 1.29 51.31 12.3June 30, 2007 650.50 1.35 72.82 8.9September 18, 2007 4) 714.75 1.39 77.58 9.2Year end 2007 836.50 1.47 93.89 8.9January 15, 2008 5) 921.25 1.47 91.18 10.1January 29, 2008 6) 927.50 1.49 92.56 10.0March 17, 2008 (High) 1030.80 1.58 102.82 10.0April 30, 2008 7) 853.00 1.55 109.78 7.8June 30, 2008 930.25 1.58 139.30 6.7July 9, 2008 8) 927.50 1.57 141.70 6.5July 16, 2008 977.50 1.58 134.54 7.3October 8, 2008 9) 903.50 1.37 83.18 10.9October 24, 2008 (L) 692.50 1.26 60.41 11.5October 29, 2008 10) 764.00 1.30 64.93 11.6

4) Fed funds rate lowered for the first time (0.50% to 4.75%)

5) power outages South Africa

6) record high of gold price (London fixing)

7) Fed funds rate lowered (0.25% to 2.00%)

8) ECB rate increased (0.25% to 4.25%)

9) Fed funds and ECB rates lowered 0.5% to 1.50% and 3.75%, respectively

10) Fed funds rate lowered (0.50 to 1.00%)

1) 2006 high of gold price

2) 2006 second half low of gold price after correction oil price

3) interim low of oil price 2006/07

GOLD DOESN'T RUN ITS OWN COURSE

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Overview metal / energy prices (in US$)

October 31 June 30 Year-end Change % Year-end Change % Year-end 2008 2008 2007 (current / year-end) 2006 (year-end O6 / 07) 2005

Copper 3.995 8.775 6.676 -40 6.290 6 4.584Nickel 11.305 21.675 25.805 -56 34.205 -25 13.380Lead 1.469 1.735 2.532 -42 1.775 43 1.100Zinc 1.091 1.875 2.290 -52 4.331 -47 1.915

Uranium Oxyde 45.00 59.00 90.00 -50 72.00 25 36.25(U3O8)

On December 31, 2000 historical low of $ 7.10 per pound, because of utilities cancelling nuclear plants as a result of Three Miles Island (Pennsylvania) accident in 1979

Since June 2003 ($ 10.90) until June 2007, when the U3O8 price reached a record high of $ 135, there were no interim price corrections. Until that time there was no open trading.

Oil (Brent) 64.40 139.30 93.89 -31 60.14 56 58.87

Gold 730.75 932.75 836.50 -13 635.70 32 513

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■ Story of modern gold market begins with free float of gold in March 1968 central banks give up trying to defend a fixed gold price at $ 35 per ounce

■ US Treasury closes “gold window” in April 1971 gold holdings of Europe central banks frozen

■ IMF alters articles in 1978 to suspend gold as an ultimate means of settlement

■ Central Bank Gold Agreements:

first agreement (September 1999 – 2004) : sale quota of 400 tonnes per year, with anabsolute limit of 2,000 tonnes over the whole 5-year periodsecond agreement (September 2004 – 2009) - sale quota of 500 tonnes per year with an overall total of 2,500 tonnes over the whole 5-year period ■ Asian Central Banks don’t consider gold as a monetary instrument

Gold holdings : 15 signatories + US: 20,238 tonnes 76%Major Asian countries 2,287 tonnes 9%Others 3,936 tonnes 5%

26,461 tonnes 100%

Demonetization of gold

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Western Central Bank gold holdings compared to non-gold monetary reserves

1950 1965

11 Central Bank gold holdings 26,300 31,900 20,238 *(in tonnes)

Value of gold reserves 29.5 33.4 567 **(US$ billion)

Value of non-gold reserves 5.6 12.4 895(US$ billion)

Gold in % of total reserves 84% 73% 39%

* 15 signatories to the second Central Bank Gold Agreement (September 2004 - 2009) including European Central Bank + United States** based on gold price of US$ 871 per ounce

June 2008

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Western countries (June 2008)

Gold reserves Total Gold astonnes reserves % total

(bln $) monetaryreserves *

United States 8,134 292 78Germany 3,417 145 66France 2,562 122 59Italy 2,452 101 68Switzerland 1,101 77 40Netherlands 621 28 61Portugal 382 12 87United Kingdom 310 58 15Spain 282 20 40Austria 280 19 42Sub-total 19,541 874 All countries 26,461 10

World (incl.institutes) 29,813 ECB 564 63 25

IMF 3,217 BIS 135

* b ased on gold price of $ 871 pwer troy ounce

Gold and total monetary reserves

Source: IMF/World Gold Council

Gold reserves Monetary Gold astonnes reserves % total

(bln $) monetaryreserves

China 600 1680 1.0Japan 765 1170 2.0Korea 14 196 1.0Singapore 127 168 2.2Taiwan 423 296 4.0India 358 228 3.3

Total 2,287 3,738 1.7

Gold Reserves - Asia

Gold reserves Monetary Gold as tonnes reserves % total

(bln $) monetaryreserves

Russia 458 534 2.4Venezuela 357 30 33.3Lebanon 287 22 36.9Libya 144 90 4.5Saudi Arabia 143 36 11.1

Total 1,389 712

Gold Reserves - Other countries

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Course of gold price determined by producer hedging and dehedging in last 10 years:

SUPPLY 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997

Mine production 2,447 2481 2,551 2,493 2,62 2,612 2,645 2,62 2,603 2,574 2,527Official sector sales 485 367 674 469 617 547 520 479 477 363 326Old gold scrap 937 1107 886 849 944 841 713 616 615 1105 631Net producer hedging - - - - - - - - 506 97 504Implied net disinvestment - - - 34 - - 16 303 - - 229

Total supply 3,869 3,955 4,111 3,845 4,181 4,000 3,894 4,018 4,201 4,139 4,217

DEMAND

Fabrication: Jewellery 2,426 2,283 2,707 2,614 2,482 2,66 3,008 3,204 3,139 3,169 3,294Other 465 458 575 552 513 481 474 557 592 567 561

Total Fabrication 2,891 2,741 3,282 3,166 2,995 3,140 3,482 3,761 3,732 3,736 3,855

Bar hoarding 238 226 263 257 180 264 261 242 269 174 362Net producer de-hedging 400 373 86 422 255 412 151 15 - - -Implied net investment 340 615 480 - 751 184 - - 200 229 -

Total demand 3,869 3,955 4,111 3,845 4,181 4,000 3,894 4,018 4,201 4,139 4,217

Gold price (London PM, US$/oz 695,39 603,77 444,45 409,17 363,32 309,68 271,04 279,11 278,57 294,09 331,29

source: GFMS

World Gold Supply and Demand (in tonnes)

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Source: World Gold Council

2007 versus 2006

Jewelly + 6.3%Net retail + 1.6%

Total + 5.7 %

Demand in major consumer countries (in tonnes)

2007 2006 2007 2006 2007 2006

India 558.2 526.2 215.4 195.7 773.6 721.9China 302.2 244.7 23.9 14.9 326.1 259.6Middle-East 328.1 296.1 20.4 19.2 348.5 315.3USA 262.9 306.1 15.2 32.4 278.1 338.5Turkey 188.1 165.3 61.1 59.9 249.2 225.2Vietnam 21.6 22.1 56.1 69.5 77.7 91.6Japan 32.2 32.8 -56.3 -45.7 -24.1 -12.9Other 732.4 689.7 69.5 53.0 801.9 742.7

World total 2,425.7 2,283.0 405.3 398.9 2,831.0 2,681.9

Major countries /World total

jewellery net retail total

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Source: World Gold Council

First half year 2008 versus first half year 2007

Jewelly - 22.8%Net retail - 25.7%

Total - 23.2%

First half year 2008 versus first half year 2007

H107 H207 H107 H207 H107 H207

363.8 164.7 134.5 76.3 498.3 241,0146.6 150,0 13.6 12.4 160.2 162.4171.4 154.1 10.3 9.8 181.7 163.9

99.7 154,0 5.8 11.0 105.5 165,083.5 102.3 36.8 24.3 120.3 126.611.5 10.1 31.3 24.8 42.8 34.915.3 16.9 -25.3 -31.0 -10.0 -14.1

336.1 445.7 31.4 39.3 367.5 485.0______ __________________ ______ ______1,227.9 1,197.8 238.4 166.9 1,466.3 1,364.7

totaljewellery net retail

Demand in major consumer countries (in tonnes)

H108 H108 H108jewellery total

India 189.1 74.4 263.5China 156.3 24.8 180.1Middle-East 145.7 10.9 156.6USA 72.5 18.4 90.9Turkey 71.4 24.3 95.7Vietnam 9.6 56.8 66.4Japan 14.7 -51.4 -36.7Other 289,0 18.9 308.9

______ ______ ______World total 948.3 177.1 1125.4

Major countries /World total

net retail

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World Gold Mine Production (10-year comparison – in tonnes)

Source: GFMS

2007 1997

Asia 597.1 395.9Africa 510.8 672.8Latin America 472.2 316,0North America (US, Canada) 340.7 533.5CIS region * 283,0 252.8Australia 246.3 313.2

Europe 16.8 27.2Other 8.9 16.1

Total 2,475.8 2,527.5

* East European countries (Russia) Central Asian countries

(Kazakhstan)(Kyrgyzstan)(Tajiskistan)

(Uzbekistan)

Gold production by continent

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TOP-10 GOLD PRODUCERS (in tonnes *)

Country Companies Country2007 2006 2007 2006

South Africa 269,9 295,7 Barrick Gold Canada 250,7 268,7Australia 246,3 247,1 Newmont Mining USA 165,6 184,3United States 239,5 251,8 AngloGold Ashanti South Africa 170,4 175,3China 280,5 247,2 Gold Fields South Africa 122,9 126,3Peru 169,6 202 Harmony South Africa 69,4 72,9Russia 169,2 172,8 Navoi MMC Uzbekistan 58,8 58,2Indonesia 280,5 116,3 Freeport McMoran USA 71,6 53,8Canada 101,2 103,5 Goldcorp Canada 71,3 52,7Uzbekistan 75,3 75,1 Newcrest Mining Australia 54,7 47,7Papua New Guinea 61,4 60,5 Kinross Gold Canada 39,9 43,0

Sub total 1893,4 1772 1075,3 1082,9Rest of the World 582,4 702,6 Rest of companies 1400,5 1388,1

Total 2475,8 2471,0 Total 2475,8 2471,0

Top-10 : 76% of total 2007 output Top-10 : 43% of total 2007 output

Source: GFMS * one tonne = 32,151 ounces

Production Production

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Country Company Output 2007 Reserves Mine life(mln ounces) (mln ounces)

South-Africa AngloGold Ashanti 5.48 73.1 13.3Gold Fields * 3.64 91.6 25.2Harmony * 1.55 53.6 34.6

US Newmont Mining * 5.32 86.5 16.3Freeport-McMoran 2.30 41.0 17.8

Canada BarrickGold 8.06 124.6 15.5Goldcorp 2.25 43.4 19.3Kinross Gold 1.61 47.0 29.2

Australia Newcrest Mining * 1.78 40.0 22.5

Peru Minas Buenaventura 1.09 13.3 12.2

* per 30/6/08 year-on-year

Reserves compared to annual gold output

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2007 1997 2007 1997Traditional countries Emerging countries

South Africa 269.9 527.0 China 280.5 162.8Australia 246.3 313.2 Peru 169.6 74.8United States 239.5 362.0 Russia 169.2 138.0Canada 101.2 171.5 Indonesia 146.7 101.6

_____ ______ _____ ______Total 856.9 1.373.1 766.0 477.2

Total world production 2,475.8 2,527.5

% total world production 34.6 54.3 30.9 17.7

source: GFMS

Shift in gold production from tradidional to emerging countries   ► China has passed South Africa as the world's premier gold producer

Production in tonnes Production in tonnes

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Overview of foreign gold/silver companies active in China

Canada Share price Net issued Market cap. Market cap.in Cdn$ shares in Cdn$ mln. in Cdn$ mln.

October 31, 2008 H L million current ultimo 2007

Eldorado Gold * ELD TSX 6.87 9.01 5.17 366.1 2515.1 2006.7Silvercorp Metals SVM TSX 3.06 10.65 2.38 152.9 467.9 1391.1Jinshan Gold Mines ** JIN TSX 1.33 3.22 0.80 163.6 217.6 426.6Continental Minerals KMK TSX.V 0.77 1.84 0.66 129.1 99.4 206.6Inter-Citic Minerals ICI TSX 0.48 2.50 0.44 82.5 39.6 131.0Minco Silver MSV TSX 1.13 4.19 0.70 31.3 35.4 92.7Minco Gold MMM TSX 0.65 1.80 0.40 43.0 28.0 30.1New Pacific Metals NUX TSX.V 0.86 3.15 0.55 30.1 25.9 60.2McVicar Resources MCV TSX.V 0.72 2.70 0.65 34.4 24.8 61.1Asia Now Resources NOW TSX.V 0.25 0.62 0.21 62.1 15.5 24.1Southwestern Resources SWG TSX 0.34 1.04 0.24 44.9 15.3 29.2Mundoro Mining MUN TSX 0.36 1.30 0.23 38.6 13.9 34.4Red Dragon Resources DRA TSX.V 0.16 0.61 0.15 63.8 10.2 24.0Silk Road Resources SIL TSX.V 0.45 1.75 0.20 22.5 10.1 27.8Dynasty Gold DYG TSX.V 0.06 0.13 0.03 79.0 4.7 5.5Maxy Gold ** MXD TSX.V 0.13 0.65 0.13 34.5 4.5 18.3Sparton Resources ** SRI TSX.V 0.07 0.45 0.06 63.5 4.4 18.9Goldrea Resources ** GOR TSX.V 0.07 0.43 0.07 58.2 4.1 17.9Majestic Gold MJS TSX.V 0.04 0.46 0.03 66.4 2.7 17.6Gold World Resources GDW TSX.V 0.06 0.15 0.05 37.2 2.2 1.3

** individually featured as Special Situation * gold producer in both Turkey and China

12 monthsprices

Trading Symbol

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Overview of foreign gold/silver companies active in China

Australia Share price Net issued Market cap. Market cap.in A$ shares in A$ in A$ mln.

October 31, 2008 H L million million ultimo 2007

Sino Gold Mining SGX ASX 3.50 7.61 2.37 291.6 1020.6 1552.6Tianshan Goldfields TGF ASX 0.07 0.60 0.07 268.4 18.8 100.9Dragon Mountain Gold DMG ASX 0.11 0.79 0.07 178.3 19.6 111.6Golden Tiger Mining GTX ASX 0.03 0.16 0.03 96.0 2.9 9.2Hodges Resources HDG ASX 0.04 0.37 0.04 47.4 1.9 12.3Gold Aura GOA ASX 0.01 0.10 0.01 152.9 1.5 9.1

United Kingdom Share price Net issued Market cap. Market cap.in pence shares in £ in £ mln.

October 31, 2008 H L million million ultimo 2007

China Goldmines CGM AIM 35.50 159.50 35.50 48.5 17.2 51.4Leyshon Resources ** LRL AIM 4.25 31.75 3.50 218.1 9.3 55.1Central China Goldfields ** GGG AIM 2.00 11.00 1.75 145.5 2.9 8.6

United States Trading Share price Net issued Market cap. Market cap.Symbol in US$ shares in US$ in US$ mln.

H L million million ultimo 2007

Magnus Int. Resources MGNU OTCBB 0.08 0.55 0.04 54.4 4.4 14.9Linux Gold LNXGF OTCBB 0.06 0.34 0.06 58.8 3.5 16.6East Delta Resources EDLT OTCBB 0.05 0.25 0.03 59.3 3.0 9.3

** individually featured as Special Situation

prices

12 monthsprices

Trading Symbol 12 monthsprices

12 monthsTrading symbol

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Foreign gold companies with NI 43-101 or JORC compliant reserves and resources(in million ounces)

RESERVESCompany Project Proven & Probable Measured & Indicated Inferred

Sino Gold Jinfeng / White Mountain / Beijnhar 4.3 5.3 2.2Mundoro Maoling 4.8 4.4Continental Minerals Xietongmen 4.3Jinshan Gold Mines CSH / Dadiangou 3.9 2.1Tianshan Goldfields Gold Mountain 2.0 0.6China Goldmines Shenjiaya 1.8Griffin Mining Caijiaying 1.6Eldorado Gold TJS 0.9 1.2 0.1Inter-Citic Minerals Dachang 2.9Leyshon Resources Zheng Guang 1.2Goldrea Resources Daye 0.3 0.3Minco Gold Changking 0.4 0.3

Total 7.2 25.1 12.6

Producers

Eldorado Gold 120.000 - 130.000 ounces per annum; first 6-months 2008: 71,896 ouncesSino Gold 180.000 ounces per annum; first 9-months 2008: 104,638 ouncesJinshan Gold Mines 117.000 ounces per annum; third quarter 2008: 18,103 ounces

RESOURCES

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2007 worldwide exploration budgets have exceeded US$ 10.0 billion

A study by Metals Economics Group, including the exploration budgets of more than 1,800 mining compa-nies, covering almost 95% of worldwide nonferrous exploration, indicates that nonferrous exploration budg-ets in 2007 will increase for the fifth consecutive year to a record level that will significantly exceed US$ 10 billion in 2007, and for the first time includes uranium exploration budgets, compared to last year’s US$ 7.5 billion total. The continuation of the current junior-led growth in exploration relies entirely on the junior companies' ability to raise capital. The junior companies have raised substantial amounts of money over the past four years - many already have the coffin to at least partially fund exploration programs that will run into 2008. Many of the major producers are unlikely to increase their exploration budgets substantially over the next few years, effected by the ongoing consolidation process amongst major and intermediate companies. Regionally, Latin America will remain the top destination for exploration spending in 2007, as it has been since 1992. However, Canada comes a very close second because of the large amount of uranium exploration budg-eted.

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Performance and risk associated with junior gold companies

• Quality and experience of management

• Access to financing

• Size and grade of projects economically exploitable

• Development process from:

inferred resources measured and indicated resources

to probable and proven resources (NI 43-101 compliant)

pre-feasibility bankable feasibility study

• Valuation of resources/reserves : ranging from $ 20 > $ 400 per ounce

• Joint ventures with majors acquisitions consolidation

• Geopolitical shift : from traditional to emerging countries

- new mines, lower costs, higher political risks

• Environmental problems

• Promotional impact on valuation

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LEVERAGE IN GOLD PRICE:

cash against production margin Gold price $ 400

total costs $ 320

Margin $ 80 + 20%

Gold price $ 800

Total costs $ 400

Margin $ 400 + 50%