“The Perfect Gold Storm”

Presented by Pierre Lassonde| Tuesday October 23rd, 2012

Grant’s Interest Rate Observer Conference, New York

A gold bull market brings a production response...

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OOPS! Not this time

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0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8TSX Gold Index / Gold ($USD)

TSX GOLD/GOLD(US$)

13 week moving avg

52 week moving avg

Pierre Lassonde | “The Perfect Gold Storm” | 23 October, 2012

New finds are proving increasingly elusive...

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Represents 189 gold deposits discovered since 1990, each with at least 2m oz of gold in total reserves, resources and past production (or at least 1m oz in reserves) Data sources: Metals Economics Group – Strategies for Gold Reserves Replacement 2012

Pierre Lassonde | “The Perfect Gold Storm” | 23 October, 2012

It’s all about grade...or lack of it

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Resource nationalism is polarising production...

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New finds are taking longer to bring to market...

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Data sources: Metals Economics Group – Strategies for Gold Reserves Replacement 2012

Pierre Lassonde | “The Perfect Gold Storm” | 23 October, 2012

Analysts: Perfectly wrong forecasts

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Oil price: Costs proxy Gold price: Revenue proxy

Dead cat bounce or ninth life

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• Cut-off grades reaching limits of current technologies

• Energy (25%) & labor (40%) could provide stability

• Capex still a wild card (location, labor productivity)

• Consensus price forecast ≠ reality

Yearly gold supply – 2001 & 2011

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All the gold in the world! 171,300 tonnes

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Jewellery 50%

Private Investment

19%

Central Banks 17%

Tech 12%

Unaccounted 2%

• Value @ $1,700/oz =US$ 9.3 Trillion • ~0.78 oz/person on the planet (assuming 7 B people) • ~1 part/billion in earth’s crust

Pierre Lassonde | “The Perfect Gold Storm” | 23 October, 2012

68’

Demand continues to expand and broaden...

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Central banks return as net buyers after 20 years...

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and are not done yet...

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Investment growing steadily, but gold is significantly under-owned...

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Gold’s share of global allocations, 1980-2011

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Includes: global equity, global marketable gov't debt, global private investment stocks of gold Excludes: corp/agency debt, money markets, commodities, real estate, hedge funds, private equity

If gold’s share doubled, it would amount to c.66,000 tonnes, equivalent to 23 years of production at current levels.

Pierre Lassonde | “The Perfect Gold Storm” | 23 October, 2012

China and India account for a lion’s share of growth...

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With rising incomes driving demand in India...

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and China...

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Commodity super-cycle

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Global Debt Crisis Bottom Line: most countries have excessive debts …

Pierre Lassonde | “The Perfect Gold Storm” | 23 October, 2012 21

Source: IMF Fiscal Monitor, April 2012 and IMF World Economic Outlook, April 2012; DundeeWealth

Government Gross Debt% of GDP

PIIGS

Over 90%

spells trouble!

Europe’s pension liabilities are massive

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Source: Research Center for Generational Contracts, January 2009NB – Future contributions are not taken into account

AustriaBulgaria

Czech RepGermany

SpainFinlandFranceGreece

HungaryItaly

LithuaniaLatviaMalta

NetherlandsPoland

PortugalSwedenSlovakia

UK

%GDP

100% of GDP

Before euro: PIIGS regularly devalued

Pierre Lassonde | “The Perfect Gold Storm” | 23 October, 2012

PIIGS EXCHANGE RATESJanuary 1957 to December 1998

Units per Deutschemark: Jan 1957=100100

10

21.1

15.0

10.9

6.7

4.3

Log Scale

Index Value When Euro starts - 1999

24.8

Source: DundeeWealth

Gold rises and falls with FX liquidity

24

%

-36

-24

-12

0

12

24

36

48

60

82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12-14

-7

0

7

14

21

28

35

42

Global Liquidity:FX Reserves

Gold

Global Liquidity: FX Reserves + US MBaseSource: IMF, Federal Reserve

Correlation: .62

Last month: August 2012Liquidity estimated

% %

Pierre Lassonde | “The Perfect Gold Storm” | 23 October, 2012

Printing of money drives gold …

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200

350

500

650

800

950

1100

1250

1400

1550

1700

1850

82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 120.0

1.5

3.0

4.5

6.0

7.5

9.0

10.5

12.0

13.5

15.0

16.5

Global LiquidityFX Reserves (trillion$)

Gold (US$)

Last month: August 2012Liquidity estimated

Dow / Gold ratio: The Ultimate Test

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“The Perfect Gold Storm”

Presented by Pierre Lassonde| Tuesday October 23rd, 2012

Grant’s Interest Rate Observer Conference, New York

Thank you