Investment in metals and minerals

Eurasia MENA Investment SummitIstanbul, May 16th and 17th, 2012

Mining Processing Investment

2

2

The Euro debt implications for metals and minerals

Table of Contents

1

3

Steel making raw materials – Iron ore and coking coal4

China’s role in commodity markets - has China over invested 5

Some longer term investment cycles – inflation, metal prices, equity returns

Recent economic cycles – what the PMI is telling us

3

Key Figures1

Over 50% employee owned Strong balance sheet of £302m net working capital Led or co-led 151 transactions globally during

CY2011, raising £3.6bn for clients² Advised on 48 transactions, with an aggregate value

of £10.6bn in CY2011² £17.0bn in assets under administration Over 2,400 employees

Investment Banking Over 200 senior investment

bankers globally CY2011: Led or co-led 151

transactions, raising £3.6bn for clients

M&A advisory experience3

Over 390 transactions valued at over £125bn

Research Over 80 research professionals Over 1,000 companies covered 18 focus sectors #1 independent research4 Respected media contributors

— CNBC— Bloomberg— BNN

Fully integrated, global investment bank

Sales and Trading Equities and Fixed Income Over 200 sales and trading

professionals Over 1,800 institutions

covered Ranked first for Quality of

Investment Ideas2 Making market for c.2,500

companies Operating on 10 exchanges

worldwide

Wealth management Approximately 390

investment advisors worldwide

41 wealth management offices across Canada, UK, Channel Islands, Ireland and mainland Europe

On and offshore client accounts

£17.0bn in assets under administration

1 Source: Company financial statements as of 30/06/112 Brendan Wood International 2010 Survey of Canadian Capital Markets Firms3 From 1 January 2007 to 30 June 2011

Distribution Strength Comprehensive coverage of the major growth equity buyers –

regardless of geography Operations in 12 countries and capabilities to list companies on 10

stock exchanges worldwide Committed to further development in key markets and sectors Successfully acquired and integrated five companies in the last six

years

LondonEdinburgh

MontrealBoston

New YorkToronto

CalgaryVancouver

San Francisco

Houston

Shanghai

Beijing

Hangzhou

Sydney

Hong Kong

Melbourne

Dublin

Paris Geneva

Singapore

Milan

FrankfurtLondonEdinburgh

MontrealBoston

New YorkToronto

CalgaryVancouver

San Francisco

Houston

Shanghai

Beijing

Hangzhou

Sydney

Hong Kong

Melbourne

Dublin

Paris Geneva

Singapore

Milan

Frankfurt

Capital Markets locations. Includes Canaccord BGF. Smaller offices not shown on map.

Principal offices

4

We can expect a decade of asset transfers

There are two groups of people in the world “Those with loaded guns and those who dig” !

Thanks Niall Ferguson for your right-wing view of history, and

Thanks Clint Eastwood for the “The Good, the Bad and the Ugly”

Sovereign Wealth Funds have loaded guns

Armed with $4.8 trillion as at October 2011, up 14% YoY.

Others are digging themselves into a hole Already buried under $44 trillion of global public debt - increasing at

$4.8m per minute

5

Uncertainty and volatility to continue through 2012

Developed economies face synchronised, multi-year deleveraging;

And that is no environment for growth

Developing economies are dependent on emerging consumers

And as we shall see later that the consumer part of China’s economy is sluggish;

Leadership changes likely to (continue to) dominate major markets

European Governments are assessing closer fiscal union

French and American citizens will decide on their next leaders

China will see its leadership transition after a dramatic 10-years of change

Conventional wisdom is suggesting commodity prices have rolled over

And the game has changed, permanently

That is what we are here to explore

6

Mining equity – was not always a “no brainer”

3.0

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Jan-73 Jan-76 Jan-79 Jan-82 Jan-85 Jan-88 Jan-91 Jan-94 Jan-97 Jan-00 Jan-03 Jan-06 Jan-09 Jan-12

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World Mining v World MSCI LMEX metals prices (RHS)

Dec 2008

May 2000

Jan 2011Oil shock

Scale & price gains

Flat commodity prices 40% lower

SOE privatisationPE expansion

Dot.ComEVA revelationAsian crisis

Industrialsation of China

7

Capitalism without bankruptcy is like Christianity without hell

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OECD - US CPI spread (RHS) LMEX index (LHS)

TRANSITIONpolicy intervention

HYPERINFLATIONexported from US and OPEC

Greenspan'sco-ordinated easing

Volker'sdisinflation

$13 to

$34 p

er b

bl

$3 to

$13 p

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blA CHANGING WORLD

China and QE

-44% / 18mo -49% / 30mo -53% / 48mo -45% / 82mo -58%

8

Resource Investment Cycle

Expectations become unrealistic Paper-backed corporate activity emerges

Quality staff migrate for money, not career

Investment strategies become stock picking

Smart money begins divesting Sound-bite tyranny over rules logic Cartoonish half truths outweigh complex reality

Expectations gather momentum Equity price volatility diminishes

Results begin to exceed expectations

Consensus forecasts rise on company guidance

Weight of money invests and delivers performance

Investment strategies become sector bets

Nirvana

Positive Transition Purgatory

Negative Transition

ShockQ2 1997: Asian crisisQ1 2000: Dot.com crashQ3 2007: ABCP failureQ1 2010: Greek debt crisis

UncertaintyQ4 1998: Russian default / LTCM Q3 2001: Sept. 11th

Q1 2009:Not before Q3 2012

Volatility peaks on bottom picking

AcceptanceQ2 1998 Q4 2000

Bank failures Q3 2008 Rescue packages Q3 2011

Estimates rebase only after

corporate guidance

DeliveryQ4 19992H 2003Mid 2007Q4 2009

Estimates reach peak momentum

Sector shunned by investors, research coverage diminishes

Market capitalisation lower than asset costs

Market disinterest creates opportunity

Smart money begins investing

Cash-backed takeovers emerge

Expectations fail to capture restructuring benefits

Stock cycle turns negative, pricing power erodes

Production expands to offset falling prices

“Best protection” strategies emerge to replace denial

Weight of money divests

Projects start to fail or get deferred

Liquidity & value sold indiscriminately

Expectations dragged down by reporting shocks

Q1 2012

Damien Hackett

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Sep 2010 – bottom of the expectation cycle

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Aug 2011 – another low in expectations

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March 2012

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37

STEEL: an industry transformed

Industry failed to anticipate the magnitude of this demand

Consequently exploration and development has exploded.

The iron ore market will return to equilibrium, and

The impact of this adjustment is likely within your investment horizon

115 years of global steel production

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1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020

Mil

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1,898 million tonnes

38

Our working assumptions

Chinese steel production will peak within your investment horizon China's rapid growth phase is more than half complete

Cities will be maintained not rebuilt after 750 million people in China relocate

We expect the main impact of this transition between 2016 - 2018

India’s growth in steel demand will not compensate for a slow down in China We can expect rapid GDP growth in India but it will not be steel-

intensive.

Economic growth is likely to be more diversified – capturing IT skills and language capabilities

And of course democracy is an art form in India (after learning from the British)

So projects take longer than when centrally planned

On the supply side however, +300 Fe ore projects in the pipeline If delivered they would support 4 billion tonnes pa by 2025

For perspective, this is 120% more than now or growth of 5.5%pa

Fe ore production grew at 7.7%pa over the last decade

39

Steel consumption will peak, EAFs will take market share

Steel consumption to peak at around 740kg per capita by 2020.

Post industrialisation steel consumption in China is likely to be similar to others.

Population to plateau or even fall from 2025. (World Bank data).

EAF production in China will expand in absolute terms and as % of the total.

EAFs deliver the cheapest form of steel. import-dependent BOF steel will become the

swing source of steel.

Trend to EAF based steel will be accelerate, underpinned by huge quantities of scrap arising from current consumption.

France

India

Brazil

China

Czech Republic Germany

Japan

Turkey

United States

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1995 to 2010China projected to 2030

2020

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40

Excess economic rent will be squeezed from iron ore

The project pipeline could support 4.0bt pa Fe Ore production Enough to support 3.5bt pa of integrated steel globally with 30% via the EAF circuit, 2.5x

more than 2011.

Implies an unlikely 2.5bt of steel into China by 2025, 4.0x the 0.64bt in 2011.

That’s 10%pa growth in steel consumption in China over the next 14 years with ROW at 1.5%pa

Any price impact will be moderated by the oligopolistic nature of the market. The 5 majors supply 70% of seaborne trade and will be more than 60% through the next

decade.

The 5 majors will account for more than half the new capacity.

They can (and very likely will) trade market share for price.

Prices will come down because costs will come down – the economic threshold will fall Capital costs will come down with easing pressure on equipment manufacturers

Operating costs will come down with weaker resource-based currencies (A$ & Rial).

Estimating $90 - $95/t (62% Fe fines landed Tianjin) end of 2015, down 35% from $145/t now

But not for 3 to 5 years Recovery from the financial crisis has further to play out

Industrialisation in China is just past half way and any easing will likely be gradual

Constraints on India’s iron ore exports are helping strengthen the seaborne trade

41

Met Coal: working assumptions – BF REMAINS KING

Despite decades of research, the BF is still the dominant iron making process Reliability likely to keep it the dominant base load technology for the

foreseeable future

All new steel-making technologies have their issues INTEGRATED STEEL MAKING

Environmental issues around the location of sinter plants and coke ovens

Land access and logistics closed to markets

SCRAP BASED MINI MILLS Availability of scrap, particularly in growth markets like China; Product quality

GAS BASED DRI MILLS Cost of gas; availability of pellets

COREX PLANTS Commercial viability being based on lump, capital cost, reliability

COAL BASED MINI MILLS (ITmk3) Unproven but possible at c.0.5mtpa scale

42

Productivity and cost pressures shape this market

Key blast furnace roles for coke shape this market Coke provides energy, reductant, strength and permeability

Bigger Blast Furnaces drive a push towards top quality HCC Higher coke strength after reaction (CSR) to support a heavier burden

Larger mean size for greater permeability

Lower ash content to reduce fuel rates

And the blast furnace is still evolving, reinforcing its central role for the future Capacities are expanding

Pulverised coal injection continues to increase

Oxygen enriched blast to speed up the process

Lower gangue feeds demanding higher quality feed

Improved instrumentation and controls for greater efficiency

43

Key issues facing China’s coal industry

Existing resources are not sufficient to maintain long term growth plans

Planned expansions increasingly dependent on expanding the rail network Further development of coal in the Eastern China is limited

The shift west in new supply is increasing pressure on transport links

NDRC estimates by 2015, inter-provincial transport will account for c.1.7 billion tonnes of coal

And a total of 2.6 billion tonnes will require rail transport equivalent to 3.0 billion tonnes of rail capacity

Delivery on the 12th 5-year plan will be difficult Mining technology, efficiency and safety remain below levels in

developed countries

39 mines in China are operating below 1000m with high gas content

The plan calls for 4.1 billion tonnes of capacity up 28% on 3.2 billion tonnes at the end of the 11 th 5-year plan

35% increase in the contribution from the 661 large mines (>1.2Mtpa) from 1.9 billion tonnes to 2.6 billion tonnes

12 to 15% decrease in the death rate in the industry.

44

China’s coal flows and rail dependence

Source: NRDC

Circa 50mt

45

Met coal market returning to price normality

Expected increase in met coal consumption by China over the 4 years from 2011 to 2015 will exceed ROW consumption last year

But supply disrupted price exaggeration in 2011 is likely to see price normalisation.

CAGR

2007 2008 2009 2010 2011 2012 2013 2014 2015 2011-2015

Total crude steel mt 1,357 1,334 1,228 1,417 1,534 1,634 1,728 1,817 1,898 5.5%

Total met coal mt 881 872 880 988 1,074 1,176 1,241 1,301 1,361 6.1%

of which:

EU-27 81 77 56 71 74 77 78 80 82 2.6%

Other Europe 6 6 6 7 7 9 9 9 10 7.5%

CIS 78 74 64 70 73 79 86 89 91 5.6%

North America 31 29 23 29 28 30 31 32 34 4.3%

South America 23 23 18 21 24 27 28 30 30 6.3%

Africa 7 7 5 7 6 8 8 8 8 8.7%

Asia 650 650 704 779 857 942 996 1,048 1,101 6.5%

Oceania 5 5 4 5 5 4 4 4 4 -1.3%

HCC fob Australia US$/t 104 311 133 219 295 224 209 195 183 -11.3%

Data: WSA, CRU Analysis

46

China’s infrastructure - highlights

•Rail in China to extend 32,000km by 2020 from 88,000km to 120,000km.

•Equivalent to 4.5mt in rail alone•$3,500bn allocated in the 12 financial plan

•Plans also include 97 new airports by 2020

• with related infrastructure will cost $71bn.

47

Over-investment in China maybe Over-stated

FAI spending at 26%pa over the past 7 years is misleading

It is unadjusted for inflation and includes purchases of existing assets

Real fixed-capital formation measures the increase YoY after inflation

And has risen 12%pa, about the same as GDP growth

Fixed-capital formation looks high at 48% of GDP in 2011

In developed countries it is around 20% of GDP or less

But in Japan and Korea it peaked at just under 40%

Total capital stock per person is a better measure (Economist & HSBC)

The capital stock per capita in China is less than 8% of the US today

And has less than a quarter of the US in 1930 – same level of development

And 17% of the per capita measure in Korea today

48

China’s resource independence

Note: Metallurgical coal includes hard coking coal, semi soft coking coal and PCI coal.

= $900 billion= $40 billion = $450 billionScale

49

Disclosures

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50

Where the treasure is buried

Russia + Former Soviet Union

China

Australia

South America

North

America

South

Africa

AfricaIndia

Europe

Other Asia$1.9t

$8.1t

$5.5t

$2.2t

$1.1t

Rest Of World

$4.8t

$3.1t

$2.9t

$3.1t

$1.4t

$1.3t

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COPPER: Our working assumptions = UNCERTAINTY

2012 - likely the 3rd straight deficit, and it maybe large, despite:.

Grade recovery at some of the world’s biggest mines Escondida, Bingham and Grasberg

c.1.3mt of new copper in concentrate planned for 2012, up 10.1% - adds to supply side risk

But this is only 0.65mt or 3.6% net of likely missed production - (5-year average = 5%pa miss)

Labour negotiations have 1.9mtpa of Cu “under discussion” – so the deficit could be large

2013 - 2015 small surplus, but greater risk from increasing new supply. Production should rebound on grade recovery at Escondida and Grasberg

Expansions include: Grasberg 422kt, Morenci SX-EX 110kt, Escondida 205kt,

Greenfields include: Konkola Deep 110kt, Salabo 175kt, Caserones 160kt, MMH 200kt, Tintaya 120kt, Las Bambas 300kt, Tromocho 190kt,

Supply side risk is increasing with dependence on new project supply

Exclude the new project risk and Cu prices likely to peak in 2H 2012

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The zinc bet is longer term

Stock plentiful in most warehouses but locked-up in financing deals

At year end 2011, ILZSG estimated total stock was equal to 8 weeks of 2012 consumption

And now inventories are higher, LME is highest since 1995

Q1 production in China was up c35% YoY.

Price reflects poor fundamentals offset by lack of deliverability

Therefore prices likely to move around 90c/lb

Expect little price change in 2013 Closure of the Brunswick mine will remind investors of future

structural imbalance

And a more positive economic environment should help prices

After 2013 the Zn market should rebalance on closure and reserve depletion

Prices could firm markedly – some predict as high as $1.80/lb but certainly well over $1.10

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Copper: market balance suggests prices $3.00- 3.50 / lb

2008 2009 2010 2011 2012E 2013E 2014E 2015EGlobal mine production 15,702 15,973 16,177 16,215 16,802 18,283 19,398 20,386 - of which concentrates 12,632 12,701 12,906 12,840 13,308 14,512 15,490 16,418 - of which SX/ EW 3,070 3,272 3,270 3,374 3,493 3,771 3,908 3,968 - allowance for production "losses" of 6% pa - - - 1,072 1,167 1,238 1,301 - mine production growth 0.8% 1.7% 1.3% 0.2% 3.6% 8.8% 6.1% 5.1%Global refined production 18,289 18,363 19,040 19,674 20,158 21,652 22,800 23,750 - refined production growth 1.5% 0.4% 3.7% 3.3% 2.5% 7.4% 5.3% 4.2%Global consumption 17,929 17,301 19,264 19,931 20,582 21,618 22,642 23,683 - consumption growth -0.3% -3.5% 11.3% 3.5% 3.3% 5.0% 4.7% 4.6%Global market balance 360 1,062 (224) (258) (424) 34 158 67

LME stockpiles 340 502 378 371 Total visible stockpiles 806 1,076 975 987 563 596 754 821 - days forward consumption 16 22 19 18 10 10 12 13 LME spot prices, annual average (UScents/ lb) 316.1 234.1 341.9 399.9 360.0 375.0 350.0 300.0 LME spot prices, annual average (US$/ tonne) 6,968 5,160 7,537 8,816 7,937 8,267 7,716 6,614

Consumption growth - US -5.4% -19.3% 7.8% 3.0% 2.0% 0.2% 0.2% 0.2% - Europe -7.4% -17.4% 8.8% -4.5% -5.0% 1.5% 1.5% 1.5% - Asia (ex Japan & China) -2.2% -3.5% 8.0% -3.2% 0.0% 5.3% 5.3% 5.3% - China 9.2% 25.0% 13.0% 8.0% 8.0% 7.5% 7.0% 6.5%

% of global consumption - US 11.3% 9.4% 9.1% 9.1% 9.0% 8.6% 8.2% 7.9% - Europe 21.2% 18.2% 17.7% 16.4% 15.1% 14.6% 14.1% 13.7% - Asia (ex Japan & China) 16.1% 16.1% 15.6% 14.6% 14.1% 14.2% 14.2% 14.3% - China 28.4% 36.8% 37.4% 39.0% 40.8% 41.8% 42.7% 43.5%

Scrap as % of consumption 19.7% 19.2% 20.5% 21.5% 21.3% 20.8% 20.3% 19.5%Concentrate stock change (10) 42 255 (135) - - - - Smelter utilisation 85.5% 82.3% 84.3% 85.5% 83.9% 87.4% 89.3% 92.8%

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China is the main player here as well

Global demand growth of 5.0% in 2012 will see zinc consumption at 13.2mt and 13.9mt in 2013 China will account for 70% of the 2-year incremental 1.3mt of zinc

Mature economies will account for just 9%

China’s consumption in 2013 is an estimated 6.2mt

Which is what global consumption was in 1983

Closures will be a feature of this market over the remainder of this decade Brunswick in Canada is due to close in 2013, with a loss of 209,000tpa

of zinc

Hellyer in Australia is to close on emerging technical problems with a loss of 22,000tpa

Kagara in Australia is on losses after 55,800tpa in 2011 and is at risk

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