state of the market: mining

Presenter: Chris Hinde, London

Researcher: Sussie Gylesjö, Stockholm

Mining on Top: Stockholm

November 26th, 2013

State of the Market: Mining

Over 30 years of providing mining information:

Databases, consultancy, maps, reports and conferences

Databases ‒ Lease locations and ownership, company

intelligence, drill results, project pipeline, due diligence

reports, production statistics, finance, M&A activity etc.

Reports ‒ Examination of the trends in exploration, mine

development, metals production and finance.

Events ‒ ‘Mining on Top’ conferences in Stockholm, Helsinki

and London, and training seminars.

Disclaimer:

IntierraRMG makes reasonable and diligent efforts to obtain accurate information for our clients and presentations. No warranty, expressed or implied is made regarding the accuracy, adequacy,

completeness, reliability, or usefulness of any information contained herein. Neither IntierraRMG nor the contributors of data to this presentation shall be held liable for any improper or incorrect use of

the information contained herein and assume no responsibility for the use of the information.

ABOUT THE COMPANY

ORE WASTE TOTAL (Mt) (Mt) (Mt)

Metals Mines 7,000 13,000 20,000

Aggregates 15,000 0 15,000

Coal Mines 8,000 7,000 15,000

Industrial Minerals 1,000 1,000 2,000

Total 31,000 21,000 52,000

FIRST, AN OVERVIEW

Annual global output

CAUSE FOR HOPE

Metals demand follows global GDP

-20

-15

-10

-5

0

5

10

15

20

25

1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009

% c

han

ges f

ro

m p

revio

us y

ear

Global GDP Aluminium Copper Zinc

Courtesy Professor Phillip Crowson

Prices follow OECD output

Courtesy Professor Phillip Crowson

-20

-15

-10

-5

0

5

10

15

20

1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010

Ind

us

tria

l o

utp

ut

-120

-100

-80

-60

-40

-20

0

20

40

60

80

100

120

No

n-f

err

ou

s m

eta

l p

ric

es

Industrial output

Non-ferrous metal prices

Note different scales for output and prices

And metals demand is linked to

population and urbanisation

Source: ICSG, Raw Materials Group

Indonesia

Pakistan

Philippines

Switzerland

Thailand

Zambia

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1 10 100 1000 10000

Urb

anis

atio

n

Population (m)

India

Brazil

USA:

5.5kg/person

World:

2.8kg/person Japan

Russia Malaysia

Chile

Australia

G = Germany Yellow = UK

SK

SK = South Korea (17.4kg/person)

G

South Africa

China

COPPER

CONSUMPTION

Shape of the international

mining industry

• Surface/underground ratio = 60/40 physical operations

• Surface mines and quarries = 95% of all ore + rock output

• Top ten companies = one-third of mined production

• Total of almost 3,500 exploration and mining companies*

(half of these being located in Canada).

* These companies, and their projects/mines, are tracked

in the IntierraLive database, and their performance

reflected in the State of the Market reports.

During the past few years, the mining industry has

found itself between a rock and a hard place.

Rock: Falling prices, with little prospect of an early

recovery because of lacklustre demand.

Hard Place: Pressure on operating costs and a

heightened threat of resource nationalism.

Problems compounded by the restricted supply of

finance, especially for mineral exploration

Disclaimer:

IntierraRMG makes reasonable and diligent efforts to obtain accurate information for our clients and presentations. No warranty, expressed or implied is made regarding the accuracy, adequacy,

completeness, reliability, or usefulness of any information contained herein. Neither IntierraRMG nor the contributors of data to this presentation shall be held liable for any improper or incorrect use of

the information contained herein and assume no responsibility for the use of the information.

Recent mining performance

Coal: Price roller-coaster

Story of the whole mining sector!

Australian thermal coal (US$/t)

Monthly average price

2004 2006 2008 2010 2012

180

140

100

60

20

3 years: stable

20 month boom

9 month

collapse

21 month

recovery

Down again!

Continued

slump in

coal prices

Down 16%

before ‘recovery’

But no energy in coal this year

Still, mining can not be ignored

Extracted total worth some US$1,900 billion pa:

US$700 billion - metals and gems

US$660 billion - coal / lignite

US$340 billion - cement and aggregates

US$200 billion - industrial minerals

Coal 7,800,000 85 663

Iron Ore 1,900,000 130 247

Copper 17,000 7,100 121

Gold 2.65 42,300,000 112

Nickel 1,700 14,000 24

Zinc 13,000 1,800 23

PGMs 0.48 30,300,000 15

Diamonds 0.025 580,000,000 14

Bauxite 240,000 45 11

Lead 3,600 2,000 7

Top Ten Total 9,975,000 (124) 1,237

At the commodity level

MINED (‘000t)

PRICE (US$/t)

VALUE PA (US$ bn)

Mid 2013

$1,300/oz

$950/oz

$115/ct 90 Mct

85 Moz

At the regional level: African exploration

56.4%

7.9% 7.9%

6.3%

Exploration

financing in the

24 months to

end-May 2013.

Total = US$829m 5.1%

Latin American exploration finance

Over 24 months to

end-August 2013

24%

Latin American exploration drilling

34% 32%

NOW THE CURRENT STATUS

State of the Market:

Mining and Finance Report

Quarter to end-September

Global mining industry

End-September 2013

<US$1m

in cash

57% of

industry

Global exploration projects

Source: Raw Materials Database

Red – Copper

Yellow – Gold/Silver

Green – Iron Ore

Blue – Nickel/Lead/Zinc

Purple – PGMs

Pink – Aluminium

White – Diamonds/Other

Quarterly drilling reports

?

18-month decline

SOTM: Mining and Finance Report

SOTM: Mining and Finance Report

Value of mining deals

SOTM: Mining and Finance Report

27% of

year ago

Reason for optimism

(RMG analysis)

Forecast

Extracted ore (Mt)

Forecast

RMG analysis of projects

Mining industry capital expenditure (US$ million)

Long-term demand certainty

Source: 2011, Minerals Information Institute, SME Foundation

Twice world

average

By 2100, every world citizen born will need…

Source: 2011, Minerals Information Institute, SME Foundation

If we are all American …

Much more copper …

By 2100, every world citizen born will need…

Source: 2011, Minerals Information Institute, SME Foundation

Huge new coal discoveries …

By 2100, every world citizen born will need…

Source: 2011, Minerals Information Institute, SME Foundation

But we are already producing

enough iron ore!

By 2100, every world citizen born will need…

Source: 2011, Minerals Information Institute, SME Foundation

State of the Market: Mining

That’s it, thanks

Chris Hinde

Editorial Director

IntierraRMG

Tel: +44 (0)20 7780 7471

Email: chris.hinde@intierraRMG.com