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Page 1: Molybdenum presentation  chengdu- march 2011

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Roskill

Molybdenum market outlookChina International Tungsten, Molybdenum & Vanadium

Forum, March 2011

Khayyam JahangirResearch Manager – Steel AlloysRoskill Information Services Ltd.

Page 2: Molybdenum presentation  chengdu- march 2011

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Roskill

The statements in this presentation represent the considered views of RoskillInformation Services Ltd. It includes certain statements that may be deemed"forward-looking statements." All statements in this presentation, other thanstatements of historical facts, that address future market developments, governmentactions and events, are forward-looking statements. Although Roskill InformationServices Ltd. believes the outcomes expressed in such forward-looking statementsare based on reasonable assumptions, such statements are not guarantees of futureperformance and actual results or developments may differ materially from those inforward-looking statements. Factors that could cause actual results to differmaterially from those in forward-looking statements include changes in miningcosts, the LME molybdenum price and general economic, market or businessconditions.

While Roskill Information Services Ltd has made every reasonable effort to ensurethe veracity of the information presented it cannot expressly guarantee the accuracyand reliability of the estimates, forecasts and conclusions contained herein.Accordingly, the statements in the presentation should be used for general guidanceonly.

Disclaimer

Page 3: Molybdenum presentation  chengdu- march 2011

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• Supply Review of molybdenum production Production by company and mine type Production costs

• Demand Review of molybdenum consumption Consumption by end-use

• Market outlook Forecast molybdenum consumption Forecast molybdenum production Molybdenum price forecast

Outline

Page 4: Molybdenum presentation  chengdu- march 2011

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Molybdenum production

Page 5: Molybdenum presentation  chengdu- march 2011

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World: Molybdenum mine production, 1990-2010, (kt)

Source: Roskill, IMOA

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World: Molybdenum mine production bycountry, 1990-2010, (kt)

Source: Roskill, IMOA

Page 7: Molybdenum presentation  chengdu- march 2011

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World: Annual change in molybdenumproduction, 2002-2010, (kt)

Source: Roskill, IMOA

Page 8: Molybdenum presentation  chengdu- march 2011

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World: Molybdenum production by company,2009

Source: Roskill

Page 9: Molybdenum presentation  chengdu- march 2011

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Producers were forced to cut output sharplyduring 2008/9, due to the effects of the globalrecession

Source: Roskill

Page 10: Molybdenum presentation  chengdu- march 2011

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Molybdenum prices fell by 75% betweenAugust 2008 and April 2009

Source: Metal Bulletin

Page 11: Molybdenum presentation  chengdu- march 2011

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RoskillSource: Roskill: Molybdenum Market Outlook to 2014

The fall in prices saw producers suspend output,cut inventories and delay expansion/construction

Page 12: Molybdenum presentation  chengdu- march 2011

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Rising prices have resulted in production fromprimary molybdenum mines increasing

Source: Roskill, IMOA

Page 13: Molybdenum presentation  chengdu- march 2011

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Since falling from record highs, molybdenumprices are closer to the marginal cost

Source: Roskill, Mine Cost

Page 14: Molybdenum presentation  chengdu- march 2011

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Molybdenum consumption

Page 15: Molybdenum presentation  chengdu- march 2011

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As with most other commodities, China is thelargest consumer of molybdenum

Source: Roskill, IMOA

Page 16: Molybdenum presentation  chengdu- march 2011

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Molybdenum consumption has correlated closelyto the steel market, while outperformingconsumption of nickel in recent years

Source: Roskill, IMOA, INSG, WBMS, WSANote: 1) 1998 = 100

Page 17: Molybdenum presentation  chengdu- march 2011

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Steel products account for around 70% of worldmolybdenum consumption

Source: Roskill, IMOA

Page 18: Molybdenum presentation  chengdu- march 2011

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After a poor performance during 2008 and 2009,stainless production is making a recovery

Source: Roskill, ISSF

Page 19: Molybdenum presentation  chengdu- march 2011

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Molybdenum market outlook

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Emerging markets are consuming an everhigher quantity of molybdenum

Source: Roskill, IMOA

Page 21: Molybdenum presentation  chengdu- march 2011

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Strong economic growth in emerging marketsis driving consumption of a variety ofcommodities

Source: EIU, IMF

Page 22: Molybdenum presentation  chengdu- march 2011

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Steel production in the BRIC countries isexpected to outpace that in the rest of the world

Source: WSA, Roskill

BRIC 2011-2015 CAGR = 8%ROW 2011-2015 CAGR = 5%

Page 23: Molybdenum presentation  chengdu- march 2011

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RoskillSource: ISSF, Roskill

Chinese output of stainless steel to grow fasterthan the rest of the world

China 2011-2015 CAGR = 8-9%ROW 2011-2015 CAGR = 4-5%

Page 24: Molybdenum presentation  chengdu- march 2011

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Roskill

How much further will Chinese stainless steelconsumption grow?

Source: Roskill, WBMS, IMF

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Page 25: Molybdenum presentation  chengdu- march 2011

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• Increased use of stainless and other steels containing molybdenum in process, powerand desalination plants

• Greater use of Advanced High Strength Steel (AHSS) in pipelines and motor vehiclecomponents

• The ability of alloy steels containing molybdenum to function in harsh conditions,leading to increasing use of drill rods and bits to access oil & gas reserves deeperunderground

• Growth in nuclear power generation, and replacement of components in existingpower stations, providing significant markets for high grade molybdenum-containingsteels

• Rising demand for Ni-Mo and Co-Mo catalysts in production of ultra-low sulphurdiesel

The principal drivers for future molybdenumdemand are as follows:

Page 26: Molybdenum presentation  chengdu- march 2011

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RoskillSource: Roskill

Announced future mined molybdenum capacity,2011-2015 (t)

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RoskillSource: Roskill

Announced future molybdenum capacity bymine type, 2011-2015

Page 28: Molybdenum presentation  chengdu- march 2011

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RoskillSource: Roskill

Potential new capacity is evenly spread acrossthe world

Page 29: Molybdenum presentation  chengdu- march 2011

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RoskillSource: OandaNote: 1) Peruvian Nuevo Sol

Currency fluctuations could have a major impacton future capacity

Page 30: Molybdenum presentation  chengdu- march 2011

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Earnings in local currency have fallen sharply,as the US$ continues to weaken

Price change 2005-2010:US$ = -50%AUS$ = -60%CAD$ = -60%PEN = -58%

Source: Roskill, OandaNote: 1) Peruvian Nuevo Sol

Page 31: Molybdenum presentation  chengdu- march 2011

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RoskillSource: Roskill

Various factors, including exchange rates andfinancing, are likely to delay some projectsreaching the market place

Page 32: Molybdenum presentation  chengdu- march 2011

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RoskillSource: Roskill

A slow rise in production should see a marketdeficit open up in 2013/14, or maybe earlier

Page 33: Molybdenum presentation  chengdu- march 2011

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RoskillSource: Roskill

The market deficit will result in price increases -although unlikely to reach historical highs

Page 34: Molybdenum presentation  chengdu- march 2011

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Steel Alloys – Minor Metals – Industrial Minerals

New reports for 2010:Silicon (Q2)Iron ore (Q3)

Contact:Khayyam Jahangir

Research Manager – Steel Alloys+44 20 8944 0066

[email protected]


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