Lincoln crowne resources investorseries_july2013

Keynote
WWW.LCC.ASIA
COMMODITY OUTLOOK
Jean-François (J-F) Bertincourt
Director, Natural Resources & Resource Services
16 July, 2013
ResourcesInvestorSeries
1

Keynote
WWW.LCC.ASIA16 July, 2013
2
Contents
OUTLOOK
 Copper
 Gold
 Oil & Gas
 Tungsten

Keynote
3
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 of
mines operating in 2012
excluding brownfield
expansions (mt)
1.4 mt production loss
between 2013-16 due to
closures
1.8 mt annual production*
lost due to declining
grades between 2013-16
Source: Wood Mackenzie, Rio Tinto

Keynote
4
Are we discovering enough copper?
Source: MinEx Consulting © Feb 2012. Production data from USGS.
Moderate shortfall, lacking large discoveries
Mining and discovery rates for copper Discovery Year Top 10 Mines
1979 Escondida
1988 Grasberg
1910 Chuquicamata
1996 Antamina
1910 El Teniente
1979 Collahuasi
1996 Los Pelambres
1876 Los Bronces
1935 Norilsk
1870s Morenci
As a rule of thumb – to be sustainable we
need to find at least 2x as much as we mine

Keynote
5
“Quality” of the 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

Keynote
6
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

Keynote
7
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

Keynote
8
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$23 billion to increase production from a stagnant production of 1.8 mtpa copper
over the period 2009-2012 to 2.1 mtpa in 2021, i.e. an increase of only 300,000 tpa.
Period Projects
Capital Intensity
2011 US$/tpa
1985 - 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

Keynote
9
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 behaviour
Percent of Indian and Chinese consumers who
have 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

Keynote
10
Are we finding enough?
Source: MinEx Consulting © Feb 2012. Production data from USGS, World Gold Council
Mining and Discovery Rates for Gold
Possibly lacking gold discoveries

Keynote
11
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 14th January 2000; index made up of eight major
gold producers total return indexes by market capitalisation; major gold producers are AngloGold Ashanti, Barrick,
Harmony, Kinross, Goldcorp, Goldfields, Newmont and Newcrest.
Gold and Major Gold Equities Performance

Keynote
12
Performance of Australian Gold Producers
Source: Goldnerds, LCC Research
Casualties 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
1000
1200
1400
1600
1800
2000
-
100
200
300
400
500
600
700
800
900
1,000
MedusaMining
PrimeroMining
KingsroseMining
TerangaGold
RandMining
TribuneResources
RegisResources
Citigold…
NorthernStar…
PolymetalsMining
NewcrestMining
SilverLake…
TroyResources
PerseusMining
Millennium…
EvolutionMining
ResoluteMining
AlacerGold
OceanaGold
Kingsgate
BesraGold
AngloGoldAshanti
StBarbara
AustralGold
SaracenMineral…
LachlanStar
EndeavourMining
Red5
Ramelius…
Mintails
UnityMining
NortonGoldFields
TanamiGold
VantageGoldfields
GoldOne…
DragonMining
NorsemanGold
FocusMinerals
Navigator…
MineraGold
ReedResources
BCDResources
ApexMinerals
CurrentProduction(Koz/year)
(A$/oz)
Current Production koz/year
Cash Cost A$/oz
Current Gold Price in A$
2nd Quartile: cost
under A$ 967/oz
3rd Quartile: cost
under A$ 1202/oz
1st Quartile: cost
under A$ 704/oz
Producers with gold
projects soley based
in Australia
Wiluna mine
for sale
Comet Vale project
for sale (terminated
by CTT)
Laverton mine
closed
WA mines
for sale
Coyote mine
closed
Write down of operations
in Papua New Guinea
Bronzewin
g mine
closed

Keynote
13
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

Keynote
Page| 14
Future Global Demand and Supply for Energy
Oil and gas remain key component of the energy mix
Source: Exxon Mobil
Energy Mix continues to evolve
Quadrillion BTUs
Residential/commercial fuel
demand by sector
Quadrillion BTUs
Residential/commercial demand
by fuel
Quadrillion BTUs
Liquid supply by type
Millions of oil equivalent barrels per day
Global natural gas supply
Billions of of cubic feet per day

Keynote
Page| 15
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 for
the 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 gas
well drilling
 Natural gas prices more volatile than oil prices
Crude Oil Natural Gas
Crude Oil and Natural Gas Spot Price 2006-2013

Keynote
16
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)

Keynote
Page| 17
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

Keynote
Page| 18
Contact us
Important Information
Information that has been prepared in this presentation has been done so by
Lincoln 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.
Whilst it is believed that the information is accurate at the date of publication, no
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.
In any engagement LCC acts as an independent contractor and not in any other
capacity, including as an agent or a fiduciary. LCC does not provide any tax
advice. Any tax statement herein regarding any US federal tax is not intended or
written to be used, and cannot be used, by any taxpayer for the purpose of
avoiding any penalties. Any such statement herein was written to support the
marketing or promotion of the transaction(s) or matter(s) to which the statement
relates. Each taxpayer should seek advice based on the taxpayer’s particular
circumstances from an independent tax advisor.
Lincoln Crowne & Company holds a series of registered trademarks in the
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trademarks are “Lincoln Crowne & Company”: Reg. No. 4,107,955 with the
United States Patent & Trademark Office and the following with the Australian
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(Trade Mark No. 1423960); “Lincoln Crowne & Company” (Trade Mark No.
1423961); “LCC” (Trade Mark No. 142116) and “lincolncrowne” (Trade Mark No.
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T: +61 2 8288 8688
J-François Bertincourt
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T: +61 2 8288 8611

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