lincoln crowne resourcesinvestorseries july2013
TRANSCRIPT
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Contents
OUTLOOK
Copper
Gold
Oil & Gas
Tungsten
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Copper Supply & Demand Fundamentals
The copper market remains supply constrained
Copper intensity of use
Source:: Turquoise Hill. * estimate of potential loss from concentrate supply only
Source: World Bank, Brook Hunt, CRU, IISI, Global Insight,
BHP Billiton analysis
Forecast production ofmines operating in 2012
excluding brownfieldexpansions (mt)
1.4 mt production loss
between 2013-16 due toclosures
1.8 mt annual production*
lost due to declininggrades between 2013-16
Source: Wood Mackenzie, Rio Tinto
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Are we discovering enough copper?
Source: MinEx Consulting Feb 2012. Production data from USGS.
Moderate shortfall, lacking large discoveries
Mining and discovery rates for copperDiscovery Year Top 10 Mines
1979 Escondida
1988 Grasberg
1910 Chuquicamata
1996 Antamina
1910 El Teniente1979 Collahuasi
1996 Los Pelambres
1876 Los Bronces
1935 Norilsk
1870s Morenci
As a rule of thumb to be sustainable weneed to find at least 2x as much as we mine
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Quality ofthe potential new supply?
Source: Wood Mackenzie, Rio Tinto
Lower quality, greater depth, declining grades translate in higher costs
Riskier Regions Greater Depth
High Disruptions Declining grades
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How supply is fitting demand?
Source: CRU Group, LCC Research
Possible and Probable projects likely to be postponed
0
200
400
600
800
1000
1200
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
5.00
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Inventories in 000 tonnes (RHS)
Cash Settlement Price US$/lb (LHS)
Global Copper Mine Production Potential
(000t contained copper in concentrates and SXEW cathode)
Consumption
Scrap + Secondary Refined Production
LME Copper Price and Inventories
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Operating costs trend
Operating costs trending up
Source: Company announcements, LCC Research
Copper Cash Operating Costs 2012
Selected C1 Costs
0.20
0.60
1.00
1.40
1.80
2.20
Jun-09
Sep-09
Dec-09
Mar-10
Jun-10
Sep-10
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Sep-12
Dec-12
Mar-13
US$/lb
Codelco Freeport OZ Minerals PanAust
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Capital Intensity
An unprecedented investment challenge for a minor capacity gain
Source: Wood Mackenzie, Codelco, LCC Research
Year Project / Mine Capacity Capex Capital Intensity
2013 Ministro Hales 183,000 tpa Cu US$3.1 billion $16,940/t
2016 - 2017 Radomiro Tomic sulphides Phase II 343,000 tpa Cu US$5.0 billion $14,577/t
2017 El Teniente new mine level 434,000 tpa Cu US$3.5 billion $8,065/t
2018 Chuquicamata underground 366,000 tpa Cu US$4.2 billion $11,475/t
2021 Andina Phase II 343,000 tpa Cu US$6.8 billion $19,825/t
Total 1,700,000 tpa Cu US$22.6 billion $13,294/t
If the projects are not developed, Codelco output could drop to 800,000 tpa. US$23 billion to increase production from a stagnant production of 1.8 mtpa copper
over the period 2009-2012 to 2.1 mtpa in 2021, i.e. an increase of only 300,000 tpa.
Period ProjectsCapital Intensity
2011 US$/tpa1985 - 2011 Greenfield and brownfield copper projects $7,700/t
2012 - 2015 Greenfield copper projects in construction $14,970/t
2016 - 2020 Greenfield unapproved copper projects $18,600/t
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How much gold does the world need/want?
Physical and investment demand difficult to predict
Physical Demand By Region in Q1 2013
World Gold Demand vs. Supply
Sources of Demand
Purchasing behaviourPercent of Indian and Chinese consumers whohave purchased gold in the last six months
Source: World Gold Council
73%
6%
12%
9%Consumer Demand
EFT Demand
Central Bank Demand
Technology Demand
World Gold Demand vs Supply
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Are we finding enough?
Source: MinEx Consulting Feb 201 2. Production data from USGS, World Gold Council
Mining and Discovery Rates for Gold
Possibly lacking gold discoveries
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Gold Price vs. Costs
Costs followed prices, grades and labour are the key drivers
Source: Company reports, Bloomberg, Barclays research
Source: GFMS
Source: Bloomberg, Mining Associates. Note data indexed to 14 th January 2000; index made up of eight major
gold producers total return indexes by market capitalisation; major gold p roducers are AngloGold Ashanti, Barrick,
Harmony, Kinross, Goldcorp, Goldfields, Newmont and Newcrest.
Gold and Major Gold Equities Performance
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Performance of Australian Gold Producers
Source: Goldnerds, LCC ResearchCasualties appearing at the high end of the cost curve
ASX Listed Gold Producers Cost Curve(as at 31 March 2013)
0
200
400
600
800
10001200
1400
1600
1800
2000
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100
200
300
400
500600
700
800
900
1,000
MedusaMining
PrimeroMining
KingsroseMining
TerangaGold
Rand
Mining
Tribun
eResources
Regis
Resources
Citigo
ld
NorthernStar
Polym
etalsMining
NewcrestMining
Silver
Lake
TroyR
esources
PerseusMining
Millen
nium
EvolutionMining
ResoluteMining
AlacerGold
Ocean
aGold
Kingsgate
Besra
Gold
AngloGoldAshanti
StBarbara
Austra
lGold
Sarac
enMineral
Lachla
nStar
Endea
vourMining
Red5
Rame
lius
Mintails
UnityMining
NortonGoldFields
Tanam
iGold
VantageGoldfields
GoldOne
Drago
nMining
Norse
manGold
Focus
Minerals
Navig
ator
MineraGold
Reed
Resources
BCD
R
esources
ApexMinerals
CurrentProduction
(Koz/year)
(A$/oz
)
Current Production koz/year
Cash Cost A$/oz
Current Gold Price in A$
2nd Quartile: costunder A$ 967/oz
3rd Quartile: costunder A$ 1202/oz
1st Quartile: costunder A$ 704/oz
Producers with goldprojects soley basedin Australia
Wiluna minefor sale
Comet Vale projectfor sale (terminatedby CTT)
Laverton mineclosed
WA minesfor sale
Coyote mineclosed
Write down of operationsin Papua New Guinea
Bronzewing mineclosed
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A$/US$ Exchange Rate The Saviour?
Source: Capital IQ, LCC Research
Price correction seen before, A$/US$ FX to assist Australian mines
Historical Gold Price
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Future Global Demand and Supply for Energy
Oil and gas remain key component of the energy mix
Source: Exxon Mobil
Energy Mix continues to evolveQuadrillion BTUs
Residential/commercial fueldemand by sectorQuadrillion BTUs
Residential/commercial demandby fuelQuadrillion BTUs
Liquid supply by typeMillions of oil equivalent barrels per day
Global natural gas supplyBillions of of cubic feet per day
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Outlook for Crude Oil and Natural Gas
Crude Oil: US$85-95/bbl; Natural Gas: US$3.70-4.00/mmbtu
Source: Capital IQ, LCC Research
Overall supply and demand figures show general weakness
Global demand has been growing, albeit slowly
Producers from Canada and US provide substantial supplies Geopolitical factors impacting oil prices
Consensus indicates an oil price between US$85 and US$95 forthe balance of the year
Structural shift to natural gas-fired power generation
Switch from gas to cheaper coal when price above US$4.00/mbtu
Prices above US$3.70 are seen as incentive for new natural gaswell drilling
Natural gas prices more volatile than oil prices
Crude Oil Natural Gas
Crude Oil and Natural Gas Spot Price 2006-2013
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Tungsten Fundamentals
Source: ITIA, Roskill Prices appear to be moving according to market fundamentals
Global Supply vs Demand Forecast Tungsten Demand 1989 to 2016*
Tungsten APT (EU)
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Outlook
Copper prices supported by strong long-term fundamentals: decreasing grades and
increasing depth, significant country and infrastructure risks, higher operating costs and
capital costs
For gold: supply adjusting quickly, high production costs, strong demand from India and
China, positive investment demand. Production costs are supporting of prices above the
current level Oil prices stable and natural gas prices more volatile
Tungsten represents an opportunity among the minor metals
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Contact us
Important Information
Information that has been prepared in this presentation has been done so byLincoln Crowne & Company (LCC) in good faith based on information sourced
from a variety of information points including public data, company published
information and third party data sources such as Capital IQ, Bloomberg, IRESS,
Merger Market, MDS News, Thomson Reuters and various other news and
information outlets.
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responsibility will be accepted in any way from any party seeking to rely upon
this information for any business or investment decision. The information has
been provided by way of background research only, and given its content is
subject to continual change in fluctuating markets.
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capacity, including as an agent or a fiduciary. LCC does not provide any tax
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