CRU STRATEGIES a division of CRU International Limited

31 Mount Pleasant,

London

WC1X 0AD

UK

Tel: +44 20 7903 2000

Fax: +44 20 7278 0003

517, Tower 2,

Bright China Chang An

Building,

7 Jianguomennei Avenue,

Beijing 100005, China

Tel: +86 10 6510 2206

Fax: +86 10 6510 2207

Augusto Leguía Norte

Nº 100 of.506,

Las Condes,

Santiago,

Chile

Tel: +56 2 231 3900

Fax: +56 2 231 4314

PO Box 1269,

Langley,

WA 98260

USA

Tel: +1 360 321 4707

Fax: +1 360 321 4709

Level 2, Kalpataru Synergy, Opp.

Grand Hyatt

Santa Cruz (East),

Mumbai 400055,

India

Tel: +91 22 3953 7395

Fax: +91 22 3953 7200

Mineral Commodities Outlook

Mining The Territory Conference

September 2013

Allan Trench

CRU STRATEGIES

2

“Uranium is the next great China story.

What China did for iron ore in the last decade,

it will do for uranium in the coming decades”.

A Trench & D Packey

Australia’s Next Top Mining Shares – Major Street Press

Uranium

CRU STRATEGIES

Uranium demand to 2035

0

60,000

120,000

180,000

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

201

9

202

0

202

1

202

2

202

3

202

4

202

5

202

6

202

7

202

8

202

9

203

0

203

1

203

2

203

3

203

4

203

5

ton

ne

s U

3O

8

USA Japan Europe China - Mainland India Russia RoW

Uranium

CRU STRATEGIES

4

“Our demand versus long-run marginal cost analysis out to

2035 suggests that only those tonnes that lie within the first

and second cost quartiles of

the project universe will be required to meet demand”.

CRU Group

Long-Term Outlook for Iron Ore

Iron Ore

CRU STRATEGIES

5

“Copper prices are supported by demand from China which

never fails to deliver – and by supply from the miners –

which frequently fails to deliver”.

John Sykes

Principal, Greenfields Research

Copper

CRU STRATEGIES

6

“Everything has its limit – iron ore cannot be educated into

gold”.

Mark Twain

“You’re still the one”

Shania Twain

Gold

CRU STRATEGIES

7

Gold – The Rise & Stall of Australian Gold

From De Assuncao 2013

CRU STRATEGIES

8

Ore Grades & Labour/Mining

Costs

Resource Nationalism &

Public Perception

Environmental Concerns & Governance

Infrastructure & Energy

Non-mine Supply Factors

e.g. Scrap, ETF s

Many immediate challenges facing mining industry

decision-makers

CRU STRATEGIES

9

CRU STRATEGIES

Grade decline can result from a combination of geological,

mining and economic factors acting together...

CRU Strategies

Grade Enhancement Near Surface Mined First

Low

grade

High

grade

(blind)

Enrichment zone

General

grade

decline

with

depth

Surface

So Grade Must Fall Over Time....

Enriched

cap

High

grade pod

Mine design brings

this forward

%

Cu

(eq)

GEOLOGY

Preferential ‘Bring-Forward’ of High Grade

High grade

taken firstPit outline 2013

MINING

High Prices ‘Creates’ Low Grade Ore

ECONOMICS

Economic low-grade

Final pit

outline

CRU STRATEGIES

0.5

0.6

0.6

0.7

0.7

0.8

0.8

0.9

0.9

1.0

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

20

21

20

22

Forecast of ore grades at

currently operating mines

Average ore

grade in

2012:

0.65%

Cu

Average ore

grade in

2022:

0.60%

Cu

Average ore

grade in

2002:

0.81%

Cu

% Cu

……Copper’s future grade challenge is well known

Data - CRU

CRU STRATEGIES

Porphyry 86.5%

IOCG 7.0%

VMS 0.4%

Other 6.2%

Major Cu mine projects

Porphyry 61.7%

VMS 8.5%

IOCG 6.2%

Sediment 12.4%

Other 11.1%

Existing Cu mine operations

Geology by production from existing operations; geology by potential capacity at 97 major copper

projects

…with a coming shift in the geology of copper mine supply

CRU STRATEGIES

0.1

1

10

100

1000

0.1 1 10 100 1000 10000

Closed Mine

Operating Mine

Development

Feasibility

Exploration

Stalled

Pre-Mined Resource (mt ore)

Gra

de (

kg U

3O

8/t

) The future grade (& scale) challenge is not limited to

copper - Uranium example

CRU STRATEGIES

The Economic Context

The Future of Mining

CRU

CRU STRATEGIES

The OECD still reeling from the Global Financial Crisis (GFC)

80

84

88

92

96

100

104

-6 -4 -2 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54

index of OECD IP

GFC

Mid-1970s

Early 1980s

Early 2000s

Early 1990s

months after cyclical peak

CRU STRATEGIES 15

Steady economic recovery forecast…..

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2012 2013 2014

February May August Long-run trend

Data: CRU

World GDP forecasts 2013 and trend growth, y/y %

CRU STRATEGIES

16

16

0

2

4

6

8

10

12

2013 2014 2015

China OECDRest of World World

Data: OE, CRU

GDP growth, % y/y

Growth to no longer be just a China story

0

2

4

6

8

10

12

2013 2014 2015

China OECDRest of World World

Data: OE, CRU

IP growth, % y/y

CRU STRATEGIES

0

200

400

600

800

1000

1200

1400

2010 2011 2012 2013 2014 2015 2016 2017

Re

fin

ed

Co

pp

er

Co

ns

um

pti

on

‘0

00

t

India India x 2

Source: CRU Group

India has a strong demand outlook too, take

copper….

CRU STRATEGIES

0

2000

4000

6000

8000

10000

12000

2010 2011 2012 2013 2014 2015 2016 2017

Re

fin

ed

Co

pp

er

Co

ns

um

pti

on

‘0

00

t

India India x 2 China

Source: CRU Group

But India is no replacement for China….

CRU STRATEGIES

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

Stronger dollar

Weaker energy

High stocks

in China

Macro uncertainty

stronger US$

Investment Factors $1,625/t Copper Fundamentals $6,075/t

Source: CRU

Stocks/

Demand

Relationship

Short

term

Investors

Hedge

Funds

Index

Funds

Total

Price

Physical

ETFs

China

Balance

Energy Currency

However not just the economy drives prices:

Investor influence can accentuate fundamentals LME Copper Cash Price Constituent Analysis – 2013 Example

CRU STRATEGIES

Selected Market Outlooks

20

The Future of Mining

CRU

CRU STRATEGIES

Consumption of copper Global balance

mill

ion t

onnes

-6%

-3%

0%

3%

6%

9%

12%

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2001 2003 2005 2007 2009 2011 2013 2015 2017

yoy change (mt)

yoy change %

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

2009 2010 2011 2012 2013 2014 2015 2016 2017

www.crugroup.com

Copper – price battered, but solid support seen at $6,650/t 21

Executive Summary

• CRU has increased its 2013 refined market surplus after adjusting for lower

consumption projections and a large drawdown of Chinese bonded stocks.

• CRU’s market balances remain unchanged from 2015. Lower consumption and

lower prices are offset by delays to production increases.

• CRU’s mine output growth has been lifted from 2.4% to 3.7% in 2013. Despite

the Bingham Canyon wall collapse in April, there have been few mine disruptions

this year. 43%

Chinese copper consumption

as a proportion of global

consumption in 2013

30% Chinese copper production

as a proportion of global

production in 2013

$151bn CRU calculated value of

global copper metal

production in 2013

mill

ion t

onnes

CRU STRATEGIES

-10%

-5%

0%

5%

10%

15%

20%

25%

-100

-50

0

50

100

150

200

250

2001 2003 2005 2007 2009 2011 2013 2015 2017

yoy change (000kt)

yoy change %

Consumption of nickel

-60

-40

-20

0

20

40

60

80

100

120

2009 2010 2011 2012 2013 2014 2015 2016 2017

Global balance

www.crugroup.com

Nickel – fundamentals to improve after 2015

Source: CRU Nickel Market Outlook, Jul 2013

thousand tonnes

Executive Summary

• The nickel market is in oversupply, with little sign of any significant production

response outside of China. The only supply response, from Chinese nickel pig iron

producers, not been sufficient to address the market imbalance.

• The low nickel price environment is slowing development in new capacity

outside China. This will result in a need for higher NPI production to limit the

shortfall.

• CRU has increased primary nickel demand growth to 7.1% in 2013. CRU

expects stronger Chinese consumption, due to robust stainless steel output.

50% Chinese nickel consumption

as a proportion of global

consumption in 2013

33% Chinese nickel production as

a proportion of global

production in 2013

$28.5bn CRU calculated value of

global nickel metal

production in 2013

thousand tonnes

CRU STRATEGIES

-10%

-5%

0%

5%

10%

15%

20%

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2001 2003 2005 2007 2009 2011 2013 2015 2017

yoy change (mt)

yoy change %

Consumption of zinc

-0.75

-0.50

-0.25

0.00

0.25

0.50

0.75

1.00

2009 2010 2011 2012 2013 2014 2015 2016 2017

Global balance

www.crugroup.com

Zinc – squeeze still in sight 23

Source: CRU Zinc Market Outlook, Jul 2013

mill

ion t

onnes

mill

ion t

onnes

Executive Summary

• CRU’s expectation that mine exhaustions will lead to a late-decade metal

squeeze remain intact. This will happen without further mine closures or cutbacks.

• With their profitability under pressure, Chinese smelters are presently unwilling

to produce any metal for which there is no domestic market. This has again

delayed the commissioning of new capacity and led to renewed cutbacks.

• The new Chinese leadership confirm is serious about rebalancing its economy.

This has caused CRU to trim estimates of current zinc consumption and, more

importantly, our expectation for the period ahead.

43% Chinese zinc consumption as

a proportion of global

consumption in 2013

39% Chinese zinc production as a

proportion of global

production in 2013

$24.8bn CRU calculated value of

global zinc metal

production in 2013

CRU STRATEGIES

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

-20

0

20

40

60

80

100

120

140

160

180

2001 2003 2005 2007 2009 2011 2013 2015 2017

yoy change (mt)

yoy change %

Iron Ore Demand

0

200

400

600

800

1,000

1,200

1,400

2009 2010 2011 2012 2013 2014 2015 2016 2017

Australia

India

Brazil

Iron Ore Exports

www.crugroup.com

Iron Ore – 3 digit prices hold 24

Source: CRU Iron Ore Market Outlook, Jul 2013

mill

ion t

onnes

Executive Summary

• To 2017, further price falls are forecast as demand growth eases and low-cost

supply ramps up, squeezing marginal Chinese production, despite new capacity

being planned.

• Oversupply in the Chinese steel sector, negative EBITDA margins at mills and

bearish sentiment pressurized miners into lowering Q2 2013 ore prices.

• Aggressive growth in low-cost Australian supply has added downward price

pressure to ore. In part, however, this ramp up has offset a weak performance in

Brazilian and Indian exports.

57% Chinese iron ore consumption

as a proportion of global

consumption in 2013

17% Chinese iron ore production

as a proportion of global

production in 2013

62% Chinese seaborne iron ore

imports as a proportion of global

seaborne exports in 2013

Mill

ion t

onnes

CRU STRATEGIES

Commodities to heat up again by 2017: Prices will increase

17% on average.*

Hot

> 15%

Warm

5% to 15%

Cold

-5% to 15%

Freezing

< -15%

Mild

0% to 5%

Cool

0% to -5%

Sulphuric Acid, Uranium, Tin, Palladium, Zinc, Nickel,

Coking Coal, Cobalt, Lead, Platinum, Aluminium, Coke

Molybdenum, Alumina, Phosphate DAP, Bauxite

Oil, Ferrochrome, Urea

Copper, Manganese

Gold, Potash

Sulphur, Ammonia, Iron Ore, Phosphate Rock, Silver

This is a relative story, prices will still be down by ~20% from their cyclical

peaks†

* 2017 annual average price forecast over 2013 Q2 average actual prices

† annual average price high 2014-2017 over quarterly average 2000-20013Q4

CRU STRATEGIES a division of CRU International Limited

31 Mount Pleasant,

London

WC1X 0AD

UK

Tel: +44 20 7903 2000

Fax: +44 20 7278 0003

517, Tower 2,

Bright China Chang An

Building,

7 Jianguomennei Avenue,

Beijing 100005, China

Tel: +86 10 6510 2206

Fax: +86 10 6510 2207

Augusto Leguía Norte

Nº 100 of.506,

Las Condes,

Santiago,

Chile

Tel: +56 2 231 3900

Fax: +56 2 231 4314

PO Box 1269,

Langley,

WA 98260

USA

Tel: +1 360 321 4707

Fax: +1 360 321 4709

Level 2, Kalpataru Synergy, Opp.

Grand Hyatt

Santa Cruz (East),

Mumbai 400055,

India

Tel: +91 22 3953 7395

Fax: +91 22 3953 7200

Thank you

Contacts:

Allan Trench (Allan.Trench@crugroup.com)

Philip Sewell (Philip.Sewell@crugroup.com)

CRU STRATEGIES a division of CRU International Limited

31 Mount Pleasant,

London

WC1X 0AD

UK

Tel: +44 20 7903 2000

Fax: +44 20 7278 0003

517, Tower 2,

Bright China Chang An

Building,

7 Jianguomennei Avenue,

Beijing 100005, China

Tel: +86 10 6510 2206

Fax: +86 10 6510 2207

Augusto Leguía Norte

Nº 100 of.506,

Las Condes,

Santiago,

Chile

Tel: +56 2 231 3900

Fax: +56 2 231 4314

PO Box 1269,

Langley,

WA 98260

USA

Tel: +1 360 321 4707

Fax: +1 360 321 4709

Level 2, Kalpataru Synergy, Opp.

Grand Hyatt

Santa Cruz (East),

Mumbai 400055,

India

Tel: +91 22 3953 7395

Fax: +91 22 3953 7200

Back-up slides

CRU STRATEGIES

-10%

-5%

0%

5%

10%

15%

20%

-4

-2

0

2

4

6

8

2001 2003 2005 2007 2009 2011 2013 2015 2017

yoy change (mt)

yoy change %

Consumption of aluminium

-1.0

0.0

1.0

2.0

3.0

4.0

2009 2010 2011 2012 2013 2014 2015 2016 2017

Global balance

www.crugroup.com

Aluminium – inventories ahoy

Source: CRU Aluminium Market Outlook, Jul 2013

Executive Summary

• Following LME proposals to address queuing warehouses have reduced

incentives to attract metal. Premiums are poised for a downward correction.

• CRU has downgraded its Chinese consumption growth in 2013 to 8.7% from

10%. Lower GDP and industrial production growth has caused the revision.

• CRU believes that 1.0m tpy of production have been curtailed in China in 2013

in response to low SHFE prices. CRU expects that a further 325,000tpy of capacity

will be curtailed by the end of the year. 47% Chinese aluminium

consumption as a proportion

of global consumption in 2013

48% Chinese aluminium

production as a proportion of

global production in 2013

$95.1bn CRU calculated value of

global aluminium metal

production in 2013

mill

ion t

onnes

mill

ion t

onnes

CRU STRATEGIES

-3%

0%

3%

6%

9%

12%

-200

0

200

400

600

800

2001 2003 2005 2007 2009 2011 2013 2015 2017

yoy change (000kt)

yoy change %

Consumption of lead

-150

-100

-50

0

50

100

150

2009 2010 2011 2012 2013 2014 2015 2016 2017

Global balance

www.crugroup.com

Lead – firmer market yet to fire prices 29

Source: CRU Lead Market Outlook, Aug 2013

Executive Summary

• Mine cuts on lower metal prices (notably silver) have moved centre stage,

adding to the already hard fight for raw materials between smelters, particularly

scrap.

• CRU’s new lead/zinc mine cost model shows that about 90% of mined lead

benefits from a precious metals revenue stream, mostly silver.

• After five years of surplus, CRU expects a greater rise in consumption over

production will finally move the market balance into deficit next year. The scale of

the shortfall will be modest.

44% Chinese lead consumption

as a proportion of global

consumption in 2013

44% Chinese lead production as a

proportion of global

production in 2013

$23.6bn CRU calculated value of

global lead metal

production in 2013

thou

sand tonn

es

thousand tonnes