MPS   MAR TIN PLACE SECURITIES   Australia’s BoutiqueResource Investment Firm                              1
MPS                                        MAR TIN PLACE SECURITIES             Mines and Money          Sydney 10 October...
MPS                                                                             MAR TIN PLACE SECURITIES                  ...
MPS                                                 MAR TIN PLACE SECURITIES          Global Outlook Dichotomy• China and ...
MPS                                            MAR TIN PLACE SECURITIES           Commodity Outlook I•   Emerging economie...
MPS                         MAR TIN PLACE SECURITIESLong term commodity prices
MPS                                           MAR TIN PLACE SECURITIES         Commodity Outlook II• Steel industry is key...
MPS                                          MAR TIN PLACE SECURITIESAustralia’s Resources Investment Outlook•   Major ben...
MPS                         MAR TIN PLACE SECURITIESMPS Wave Market Psychology
MPS                                    MAR TIN PLACE SECURITIESGlobal Consumption Growth                 Source: IEA 2010 ...
MPS                                   MAR TIN PLACE SECURITIESAnnual Steel Production                Source: World Steel A...
MPS                                     MAR TIN PLACE SECURITIESAnnualised Steel Production                  Source: World...
MPS                                           MAR TIN PLACE SECURITIESAustralian Iron Ore Exports (mt)                    ...
MPS                                                MAR TIN PLACE SECURITIESPilbara Iron Ore Operations               Sourc...
MPS                                    MAR TIN PLACE SECURITIESAustralian Coal Exports (mt)                   Source: ABARES
MPS                                     MAR TIN PLACE SECURITIESCentral Queensland Coal                  Source: Queenslan...
MPS                                          MAR TIN PLACE SECURITIES    China is leader in basic industries•   8-10%pa gr...
MPS                                        MAR TIN PLACE SECURITIESChina’s Share of Metals Consumption                    ...
MPSShanghai Stock Exchange (SSE) Composite    MAR TIN PLACE SECURITIES             (Monthly)                         Sourc...
MPS                                                    MAR TIN PLACE SECURITIES   Global Capital Flows and Investing Three...
MPS                                              MAR TIN PLACE SECURITIES            Following the Money• Global pessimism...
MPS                                           MAR TIN PLACE SECURITIES             Following the Money•   Global pessimism...
ASX 300 vs Australian Bank Deposits (A$bn)   MPS                                             MAR TIN PLACE SECURITIES     ...
MPS                                                                                                                   MAR ...
MPS                                             MAR TIN PLACE SECURITIESOutlook for Australian Resources•   Commodity volu...
Australian Resource Sector Exports (A$bn)             MPS                                                      MAR TIN PLA...
MPS                                 MAR TIN PLACE SECURITIESASX Metals and Mining Index                 Source: IRESS
MPS                                      MAR TIN PLACE SECURITIESNon Ferrous Metals Market Share                    Source...
MPS                                              MAR TIN PLACE SECURITIES       Gold a Major Driving Force•   Gold in bull...
MPS                                         MAR TIN PLACE SECURITIESLong Term Gold Price                 Source: Eric de G...
MPS                                         MAR TIN PLACE SECURITIES10 Year US$ Gold Price                   Source: Stock...
MPS                                           MAR TIN PLACE SECURITIES            Gold Sector Outlook•   Gold price likely...
MPS                                     MAR TIN PLACE SECURITIESLong Term A$ Gold Price               Source: Stockcharts
MPS                                      MAR TIN PLACE SECURITIESAustralian Gold Exploration   (A$m annualised)
MPS                                         MAR TIN PLACE SECURITIESYilgarn Archean Greenstone Belt                 Source...
MPS                                                                               MAR TIN PLACE SECURITIES                ...
MPS                                        MAR TIN PLACE SECURITIESAustralian Gold Production (t) Year End June           ...
MPS                                               MAR TIN PLACE SECURITIESAustralian Gold Mine Production                 ...
MPS                               MAR TIN PLACE SECURITIESLong Term ASX Gold Index               Source: IRESS
MPS                                 MAR TIN PLACE SECURITIESASX Gold Index Vs A$ Gold                 Source: IRESS
MPS                                         MAR TIN PLACE SECURITIESLong Term Gold Shares                 Source: Eric de ...
MPS                                      MAR TIN PLACE SECURITIESUS Gold Stocks vs S&P 500                Source: Stockcha...
MPS                                          MAR TIN PLACE SECURITIESGold Stocks Market Share in US                   Sour...
MPS                                         MAR TIN PLACE SECURITIESLong Term US Gold Stocks vs Gold                   Sou...
MPS                                               MAR TIN PLACE SECURITIES              Making sense of it all•   Commodit...
Australian Resource Sector Exports (A$bn)             MPS                                                      MAR TIN PLA...
MPS                                  MAR TIN PLACE SECURITIESA$ vs US$ 1913 - 2011                  Source: Thechartstore....
MPSA$ vs US Gold Index (XAU)                            MAR TIN PLACE SECURITIES
MPS                                              MAR TIN PLACE SECURITIES                   Conclusions•   Gold price to b...
MPS                         MAR TIN PLACE SECURITIESMPS Wave Market Psychology
MPS                                 MAR TIN PLACE SECURITIESASX Metals and Mining Index                 Source: IRESS
MPS                         MAR TIN PLACE SECURITIESMPS Wave Market Psychology
MPS                                                MAR TIN PLACE SECURITIESLong Term Dow Jones Ind Index                  ...
Recommended Strategy                                                 MPS                                                 M...
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The Australian resources sector within the context of the global outlook - Presented at www.minesandmoney.com

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Export revenue trends for Australian commodites

Examining Australia’s share of the global resources market: key competitive advantages and threats

Currency exchange trends and implications for the Australian resources sector

Strengths and weaknesses of Australia as an investment destination for foreign

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The Australian resources sector within the context of the global outlook - Presented at www.minesandmoney.com

  1. 1. MPS MAR TIN PLACE SECURITIES Australia’s BoutiqueResource Investment Firm 1
  2. 2. MPS MAR TIN PLACE SECURITIES Mines and Money Sydney 10 October 2011Australian Resources Sector Outlook for 2012 Barry Dawes B Sc FAusIMM(CP) MSAA MSEG Managing Director Martin Place Securities
  3. 3. MPS MAR TIN PLACE SECURITIES DisclaimerNothing in this presentation shall be construed as a solicitation to buy or sell any security or product, or to engage in or refrain from engaging in any transaction. In preparing this research, MPS did not take into account the investment objectives, financial situation and particular needs of the reader.Before making an investment decision on the basis of this presentation, the reader needs to consider, with or without the assistance of an adviser, whether the advice is appropriate in light of their particular investment needs, objectives and financial circumstances.This presentation is based on information obtained from sources believed to be reliable but MPS does not make any representation or warranty that it is accurate, complete or up to date. MPS accepts no obligation to correct or update the information or opinions in it. Opinions expressed are subject to change without notice and accurately reflect the views of MPS at the time of writing.This presentation has originated from MPS (ABN 30 094 927 947), a licensed securities dealer (AFS Licence 247 404). MPS can gain income through brokerage, capital raising commissions and corporate advisory fees.
  4. 4. MPS MAR TIN PLACE SECURITIES Global Outlook Dichotomy• China and other BRIC making >60% global growth• Commodity volumes and US$ prices increasing• Rising living standards• OECD (US, Europe and Japan) locked in debt• `Quant Easing’ debasing OECD currencies• Falling living standards• Flight of funds from cash and bonds .commodities to be major beneficiaries..
  5. 5. MPS MAR TIN PLACE SECURITIES Commodity Outlook I• Emerging economies emphasise basic industries• BRIC long term secular growth vs OECD cyclical• 20 years of underinvestment in commodities• Low inventory of undeveloped projects• `Peak Oil’, `Peak Gold’?, tight copper• Expenditures up but few major discoveries..commodity prices to rise further...
  6. 6. MPS MAR TIN PLACE SECURITIESLong term commodity prices
  7. 7. MPS MAR TIN PLACE SECURITIES Commodity Outlook II• Steel industry is key driver for:- - Iron ore, met coal, Ni, Zn, Mo, Co, Va• Base metals have high mine utilisation rates• Non-OECD energy demand exceeds OECD• Oil, gas & uranium have tight supply lines• Gold and silver boosted by currency turmoil• Minor metals scarce – Wo, Sb, Cd, Ti• Rare Earths and Li driven by new technologies
  8. 8. MPS MAR TIN PLACE SECURITIESAustralia’s Resources Investment Outlook• Major beneficiary of global steel boom• Rising export income >A$210bn• >A$175bn resources investment planned• >100 new projects underway• Resources equity earnings growth attractive• Exploration and development gains• Strong currency
  9. 9. MPS MAR TIN PLACE SECURITIESMPS Wave Market Psychology
  10. 10. MPS MAR TIN PLACE SECURITIESGlobal Consumption Growth Source: IEA 2010 10
  11. 11. MPS MAR TIN PLACE SECURITIESAnnual Steel Production Source: World Steel Association
  12. 12. MPS MAR TIN PLACE SECURITIESAnnualised Steel Production Source: World Steel Association
  13. 13. MPS MAR TIN PLACE SECURITIESAustralian Iron Ore Exports (mt) I - forecast Source: ABARES / MPS forecasts
  14. 14. MPS MAR TIN PLACE SECURITIESPilbara Iron Ore Operations Source: Fortescue Metals Group
  15. 15. MPS MAR TIN PLACE SECURITIESAustralian Coal Exports (mt) Source: ABARES
  16. 16. MPS MAR TIN PLACE SECURITIESCentral Queensland Coal Source: Queensland Government
  17. 17. MPS MAR TIN PLACE SECURITIES China is leader in basic industries• 8-10%pa growth rates being maintained• Major internal migration• Basic industries still growing• Over 40% of global demand for most metals• Aggressively acquiring global resources• Massive foreign reserves to fuel growth
  18. 18. MPS MAR TIN PLACE SECURITIESChina’s Share of Metals Consumption Source: Various
  19. 19. MPSShanghai Stock Exchange (SSE) Composite MAR TIN PLACE SECURITIES (Monthly) Source: StockCharts.com
  20. 20. MPS MAR TIN PLACE SECURITIES Global Capital Flows and Investing Three major features in global economy – BRIIC et al exceeding OECD demand and growth – Supply-side issues for commodities continuing – West is debasing currencies through debt problems ........the money flow is into hard assets....... and AUSTRALIA is a big winner..
  21. 21. MPS MAR TIN PLACE SECURITIES Following the Money• Global pessimism means high cash levels• CB roles mean abnormally low interest rates• Negative real interest rates applyingSo….• 30yr bull market in bonds and financial assets over• Flight from cash and bonds to flow into hard assets• Resources stock to benefit• Strong commodity currencies attractive
  22. 22. MPS MAR TIN PLACE SECURITIES Following the Money• Global pessimism means high cash levels• S&P 500 Cash US$1,800bn• Corporate USA ~US$3,000bn• Australian GDP A$1,300bn• All Ords market value A$1,300bn• Australian Super A$1,350bn• Australian bank deposits A$1,330bn• Australian Super cash ~A$350-400bn
  23. 23. ASX 300 vs Australian Bank Deposits (A$bn) MPS MAR TIN PLACE SECURITIES Source: RBA IRESS
  24. 24. MPS MAR TIN PLACE SECURITIESThe Long View on US T-Bond Yields16 1942 -1981 39 Yrs rising bond yields 1981-2009 28 Yrs falling yields14 Deflation12 Disinflation Inflation10 8 6 4 2 Reflation 0 1940 1944 1949 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 Source: IRESS MPS
  25. 25. MPS MAR TIN PLACE SECURITIESOutlook for Australian Resources• Commodity volumes and US$ prices rising• Resources corporate earnings rising• Resources equities significantly discounted• Exploration and development surprises• Rising A$ attractive to global investors
  26. 26. Australian Resource Sector Exports (A$bn) MPS MAR TIN PLACE SECURITIES ABARES 2000-11 MPS estimates to 2015 Source: ABARES, MPS
  27. 27. MPS MAR TIN PLACE SECURITIESASX Metals and Mining Index Source: IRESS
  28. 28. MPS MAR TIN PLACE SECURITIESNon Ferrous Metals Market Share Source: Mark J Lundeen
  29. 29. MPS MAR TIN PLACE SECURITIES Gold a Major Driving Force• Gold in bull market in all currencies• Supply constrained by inelastic mine output• Central banks now net buyers• Demand strong from jewellery and hoarding• Gold stocks rising after 30 years consolidation• Gold likely to exceed US$2000 then US$5000
  30. 30. MPS MAR TIN PLACE SECURITIESLong Term Gold Price Source: Eric de Groot
  31. 31. MPS MAR TIN PLACE SECURITIES10 Year US$ Gold Price Source: Stockcharts
  32. 32. MPS MAR TIN PLACE SECURITIES Gold Sector Outlook• Gold price likely to exceed US$2000/oz• Gold price alltime highs in all currencies• Strong gold demand from all sectors• Global mines supply beginning to rise• Australian gold to rise 50% to >390t by FY15• Global gold sector equities very cheap• Earnings and dividends to rise sharply• Only early stages of major bull market!!
  33. 33. MPS MAR TIN PLACE SECURITIESLong Term A$ Gold Price Source: Stockcharts
  34. 34. MPS MAR TIN PLACE SECURITIESAustralian Gold Exploration (A$m annualised)
  35. 35. MPS MAR TIN PLACE SECURITIESYilgarn Archean Greenstone Belt Source: Gold Road Ltd
  36. 36. MPS MAR TIN PLACE SECURITIES Yilgarn New ProducersYilgarn FY10 FY11 FY 12 FY13 FY14 FY15 Alacer Gold AQG 229 300 325 350 400 400 Carrick CRK 0 0 0 20 50 75 Focus Minerals FML 0 20 200 220 220 250 Integra Mining IGR 0 55 105 125 140 185 Norton Goldfields NGF 140 140 150 150 175 180 Ramelius Res RMS 61 80 140 180 230 250 Regis Resources RRL 0 81 110 350 310 310 Saracen Minerals SAR 40 111 125 200 250 260 Silver Lake Resources SLR 67 77 125 200 300 300 St Barbara SBM 231 258 320 350 350 360 Total koz 768 1123 1600 2145 2425 2570 Total Tonnes 24 35 50 67 76 80 Source: MPS
  37. 37. MPS MAR TIN PLACE SECURITIESAustralian Gold Production (t) Year End June Source: ABARES MPS
  38. 38. MPS MAR TIN PLACE SECURITIESAustralian Gold Mine Production Source: ABARES MPS ests
  39. 39. MPS MAR TIN PLACE SECURITIESLong Term ASX Gold Index Source: IRESS
  40. 40. MPS MAR TIN PLACE SECURITIESASX Gold Index Vs A$ Gold Source: IRESS
  41. 41. MPS MAR TIN PLACE SECURITIESLong Term Gold Shares Source: Eric de Groot
  42. 42. MPS MAR TIN PLACE SECURITIESUS Gold Stocks vs S&P 500 Source: Stockcharts
  43. 43. MPS MAR TIN PLACE SECURITIESGold Stocks Market Share in US Source: Mark Lundeen
  44. 44. MPS MAR TIN PLACE SECURITIESLong Term US Gold Stocks vs Gold Source: Stockcharts
  45. 45. MPS MAR TIN PLACE SECURITIES Making sense of it all• Commodity volume and price rises to continue• Australian resource corporate earnings to improve• Foreign investment in Australia to grow further• Cash mountain to drive market higher• Sharemarket to boom as new players enter• New capital infusion to boost exploration..Resources stocks boom time!!... .......it could be very big
  46. 46. Australian Resource Sector Exports (A$bn) MPS MAR TIN PLACE SECURITIES ABARES 2000-11 MPS estimates to 2015 Source: ABARES, MPS
  47. 47. MPS MAR TIN PLACE SECURITIESA$ vs US$ 1913 - 2011 Source: Thechartstore.com
  48. 48. MPSA$ vs US Gold Index (XAU) MAR TIN PLACE SECURITIES
  49. 49. MPS MAR TIN PLACE SECURITIES Conclusions• Gold price to be very strong• Commodities to follow• Capital flows critical to outlook• Resources sector underowned• Earnings and dividends to be remarkable• A$ to be very strong• Exploration opportunities on the way• Expect a major Mining BoomThe `Optimism’ leg now underway!
  50. 50. MPS MAR TIN PLACE SECURITIESMPS Wave Market Psychology
  51. 51. MPS MAR TIN PLACE SECURITIESASX Metals and Mining Index Source: IRESS
  52. 52. MPS MAR TIN PLACE SECURITIESMPS Wave Market Psychology
  53. 53. MPS MAR TIN PLACE SECURITIESLong Term Dow Jones Ind Index Source: Thechartstore.com
  54. 54. Recommended Strategy MPS MAR TIN PLACE SECURITIESOptimism Upleg – Higher Risk/Reward • Large caps – 30% BHP WPL NCM • Mid caps - 40% IGO FMG PDN SMR AQA LYC AGO • Small caps – 20% » 5% Gold 5% Energy 3% Iron ore 2% Copper 2% Base Metals 2% Exotics • Microcaps - 20% » 5% Gold 5% Energy 3% Iron ore 2% Copper 2% Base Metals 2% Exotics

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