Enhancing Market Transparency and Cooperation Between Countries Trading Minerals and Metals

OECD Conference on Trade in Raw Materials Paris, France, 3 November, 2014 Enhancing Market Transparency and Cooperation Between Countries Trading Minerals and Metals Don Smale, Secretary-General International Copper Study Group, International Lead and Zinc Study Group and International Nickel Study Group 1 Lisbon, Portugal

ICSG Membership Autonomous International Governmental Organization. Active industry involvement Main source of unbiased information for governments, the public and the industry Membership open to countries involved in copper production, use or international trade 23 member countries and the EU. 4 recent member states. Non-members can attend as observers. Australia France Luxembourg Serbia Belgium Germany Mexico Spain Chile Greece Peru United States China India Poland Zambia European Community Finland Italy Iran Japan Portugal Russian Federation Sweden 2

International Lead and Zinc Study Group Autonomous International Governmental Organization Membership open to any country involved in lead and/or zinc production, usage, or trade 30 members (>85% of global lead/zinc industry). Key role in the industry. Australia Germany Morocco Serbia Belgium India Namibia South Africa Brazil Iran Netherlands Sweden Bulgaria Ireland Norway Thailand Canada Italy Peru United States China Japan Poland European Union Finland France Korea Rep. Mexico Portugal Russian Fed. 3 3

Australia International Nickel Study Group Autonomous International Governmental Organization Co-located with ICSG and ILZSG resulting in significant cost savings Enhancement of market transparency in the nickel market Active industry involvement. Forum for discussions on nickel. 15 members. Brazil Cuba European Union Finland France Germany Greece Italy Japan Norway Portugal Russian Federation Sweden United Kingdom 4

Role of Study Groups Promote Market Transparency Closely monitor production, consumption, prices, stocks, trade flows and market balances Reports and directories Facilitate Co-operation Between Government and Industry Twice yearly meetings Special conferences/seminars In-depth Research into Issues of Interest/Concern to Members Environmental legislation Economic developments 5

Enhancing market transparency and cooperation between governments: regular and affordable data on metal supply, demand and trade by country World Non Ferrous Metal Usage 2002-2012. Thousand Tonnes of Metal Kt Copper Usage 20,260 25,356 Zinc Usage 9,381 12,300 Lead Usage Nickel Usage 1,659 1,175 6,829 10,382 2012 2002 0 5,000 10,000 15,000 20,000 25,000 30,000 World Mine Production 2002-2012 Cu, Ni, Zn and Pb. Kt. Metal Content. Copper Mine Production 13,577 16,697 Zinc Mine Production 9,174 13,149 Nickel Mine Production Lead Mine Production 2,178 1,248 2,868 4,994 2012 2002-2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 Regular Press Releases on Monthly Bulletins and Yearbooks widely used by governments, the industry, funds and analysts to make decissions affecting metals industry value chain. 6

Tracking changes in the global capacity of mines, plants and fabricators is an essential activity to understand the future of the non ferrous metal industry World Copper and Alloy Fabrication Capacity. Plant Situation in 2014 in Kt gross weight 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 30,785 Operational in 2014: Old and New Plants 11,699 Plants Not Reporting in 2014 2,766 Plants Closed in 2014 5,511 Expected Operational 2014 1,622 680 To Start Operations 2015-2016 Projects Delayed and Planned 2017+ 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 World Copper Mine Capacity Plans 2014-2017. Recent Changes. Kt-Cu. ICSGDatabase December 2013 ICSGDatabase July 2014 COPPER CONCENTRATES MINE CAPACITY GROWTH PLANS 2014-2017 SX-EX CATHODE CAPACITY GROWTH 2014-2017 7

Lead supply is particular: most of supply from recycled lead-acid batteries scrap. Most of zinc supply comes from mining, with most of mine supply in China World Refined Lead Mined and Recycled - Kt. 2012 New Mines Operational 2012 Commited New Mines + Expansions 2012-2014 Refined Lead from Mines, 4,592, 44% Europe 7.7% Canada 4.5% India 5.7% Refined Lead Recycled, 5790, 56% Peru 9.4% Lead Mines Capacity Pipeline Zinc Scrap Direct Melt, 2500, 17% 0 100 200 300 400 500 World Zinc Mine and Recycled Supply Kt of Metal Content in 2012 Other 25.6% Australia 11.1% China 36.0% Recycled Zinc Refined Production, 822, 6% Zinc Mine Production, 11478, 8 77%

Some countries tax exports of metals or other raw materials in order to encourage local processing or to assure that supplies do not leave the country In February 2014 the Study Groups issued a Report on Taxation, Royalties and Fiscal Incentives which provides information on trends in taxation of metals and ores Export restrictions on minerals is a current topic of concern Earlier this year Indonesia placed a ban on exports of unprocessed ores The objective is to capture value added processing within the country 9

China & Indonesia - A key relationship China is more dependent on Indonesia for nickel supply than it is any other single country (with exception of PGMs) 90+% % of Chinese demand from largest source country selected metals - 2012 36% 35% 23% Platinum (South Africa) Nickel (Indonesia) Iron Ore (Australia) Copper (Chile) Source: USGS, Wood Mackenzie, Citi Research 10

China & Indonesia - A key relationship but Indonesia realizes a much smaller fraction of the product value than the other countries (who ship a much greater proportion as higher valued added product) ~100% Export Value as % of Metal Value Selected Source Country /Metals to China Selected Metals - 2012 80% 14% 29% PGM (South Africa) Nickel (Indonesia) Iron Ore (Australia) Copper (Chile) Source: USGS, Wood Mackenzie, Citi Research 11

Visible and hidden stocks of refined metals: a recurrent topic across Study Groups members, because it affects metal price movements and public revenues 200 000 150 000 100 000 tonnes Nickel Exchange Copper Stocks Exchange (LME) Stocks 50 000 Feb 2014: >126 Kt of nickel on warrant in LME 0 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 500 000 LM E (t) Shanghai (t) 1 600 000 1 400 000 LM E (t) Shanghai (t) 400 000 1 200 000 1 000 000 800 000 600 000 400 000 200 000 0 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 12 Zinc Exchange Stocks Feb 2014: >582 Kt of Zinc on warrant in LME 300 000 200 000 100 000 0 Lead Exchange Stocks Feb 2014: >171 Kt of lead on warrant in LME Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Source: LME, SHFE, Comex. Citi @ Joint ICSG/INSG/ILSG

Changes in regulations affecting metals are tracked by each Study Group and regulatory reports are delivered to member countries periodically Refined Export Tax: Operational Suspended Operational 13

Studies of common interest are developed jointly. An example is the recovery of by-products of copper, nickel, lead and zinc, including molybdenum, cobalt, rhenium, selenium, tellurium, bismuth and rare earths. Lead/Zinc Copper Barriers to Byproducts Recovery by Industry 0% 20% 40% 60% 80% 100% Not present in ore/ concentrate Outside core business Technology not available Extraction not economic Processing techniques prohibit extraction 14

Refined Copper Market Forecast ICSG Meeting, 13-14 October 2014 '000MT 27,500 25,000 22,500 20,000 17,500 15,000 12,500 10,000 7,500 5,000 2,500 0 WORLD COPPER BALANCE '000MT 700 600 500 400 300 200 100 0-100 -200-300 -400 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Balance World Ref ined Production (adjusted) World Usage 2010-2014: 5 years of small deficits in a very tight market 2013: -272 Kt-Cu deficit. Adding bonded stock change, the deficit was -519 Kt-Cu in 2013 15

Selected Countries Dif. Kt Cu Dif. % share in world usage (2014) DECLINES Russian Fed. -114-17% 2% Autralia, Oman, North Korea -65-48% GROWTH China 636 6.6% 46% EU 225 7.4% 15% Gulf + N Africa 65 10.3% 3% Japan 54 5.4% 5% United States 50 2.7% 8% Korean Rep. 30 4.1% 3% Taiwan 30 7.0% 2% Malaysia 18 8.9% 1% Brazil 17 3.9% 2% India 15 3.3% 2% Thailand 12 4.8% 1% World 1,058 5.0% Selected Countries Dif. Kt Cu Dif. % share in world production (2014) DECLINES Kazakhstan -85-25% 1% Chile -78-3% 12% Zambia -26-5% 2% Philippines -23-15% 1% GROWTH China 616 9% 33% Congo 126 20% 3% India 102 17% 3% Japan 89 6% 7% United States 76 7% 5% Spain 67 19% 2% Mexico 45 13% 2% Indonesia 31 15% 1% Iran 16 8% 1% Sweden 12 6% 1% Finland 12 10% 1% World 1,088 5% World Ex-China 472 3% 67% 2014: world refined copper demand and output growing at similar volumes ~ +1.1 million tonnes / a year. 16

Joint Seminars Held by the Study Groups International Metals Recycling (October 2014) Individual Regional Seminars on Mining and Metals in China, India and Europe ( September 2011, October 2012, February 2014) By-products Of Copper, Nickel, Lead And Zinc (October 2013) Financial Aspects Of The Metals Industry (April 2013) How Society Benefits From Mining And Metals Production (April 2012) Materials Stewardship For Mining And Metals (April 2011) The Contribution Of Metals To Our Sustainable Future (October 2010) New And Innovative Applications For Metals (April 2010) Post-crisis Metals: What Will Be Different? (October 2009) 17

Improving metal markets transparency and multilateral cooperation: challenges for the future Metal market price discovery: stocks out of metal exchanges Overcapacity of the world metal fabrication industry Over-indebted operators across metal value chains Capital expenditures costs for non ferrous mining projects increasing Environmental, energy, water, labour constraints for mining Absence of metal scrap supply and metal scrap theft statistics Market integration between metal producers and metal end users Precious metals as byproducts, conflict minerals, critical materials 18