Objective Capital Precious Metals, Diamonds and Gemstones Investment Summit Focus on Gold: Challenges of gold mining in the US – reopening the Drumlummon Mine in Montana 20 May 2010 by David Wilson - Societe Generale

1. PRECIOUS METALS,
DIAMONDS & GEMSTONES
INVESTMENT SUMMIT
2.00 – 2.40
Panel Discussion: Outlook for the Precious
Metals Markets
David Wilson – Director, Metals Research,
Société Générale
THE LONDON CHAMBER OF COMMERCE AND INDUSTRY ● THURSDAY, 20 MAY 2010
www.ObjectiveCapitalConferences.com

2. An overview of Platinum
market drivers
May 2010
David Wilson
Director – Metals Research
david.wilson@sgcib.com
+44 (0)20-7762-5384
Important Notice: The circumstances in which this publication has been produced are such that
it is not appropriate to characterise it as independent investment research as referred to in
European MIF directive and that it should be treated as a marketing material even if it contains a
CONFIDENTIAL
research recommendation (« recommandation d’investissement à caractère promotionnel »).

3. 2
Platinum is still in surplus, but rising mining costs and improving
sentiment in autos in particular should support prices
000 oz 000 oz
10 000 1200
9 000 800
8 000 400
7 000 0
6 000 -400
5 000 -800
4 000 -1200
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010F
2011F
S upply Demand Balance, rh scale
Source: GFMS & SG Cross Asset Research
 Platinum’s surplus (prior to ETF investment activity) is increasing due to:
 A recovery in South African production.
 Increasing supply from other areas including automotive scrap
 The recent falls in automotive demand, which will take a long time to be recouped
 Bullish longer-term fundamentals (non-OECD demand vs. maturing supply).

4. 3
Global platinum inventories are estimated to have fallen by 2.4 million
ounces since the start of 1999
0 35
-500
30
-1000
25
-1500
-2000 20
-2500 15
-3000
10
-3500
5
-4000
-4500 0
1999 2003 2007 2011F
000 ounces weeks' demand
Source: GFMS & SG Cross Asset Research
 This is equivalent to roughly 24 weeks’ demand
 But the market has been able accommodate new ETF instruments as the balance has shifted into surplus
 And there is plenty of liquidity in the market
 With one month lease rates below 0.5%, and twelve months below 2%

5. 4
ETF net investment has taken up over a third of a million ounces of
platinum so far this year, augmenting demand by an ~15%
000 oz
1 200
1 000
800
600
400
200
0
Apr-07 Apr-08 Apr-09 Apr-10
ETF ZKB ETF NY
Source: GFMS & SG Cross Asset Research
 Although this interest has been distorted by the new ETF in New York
 Platinum ETFs have absorbed approximately 330,000 ounces so far this year
 With some small attrition in the ETF Securities London-listed funds, a slight increase in ZKB and over 330,000 ounces into the New
York ETF
 If this rate of accrual were to continue then ETFs would more than absorb this year’s industrial surplus, but this looks doubtful

6. 5
Net speculative platinum positions on NYMEX reached a record in mid-
April at 1.38 million ounces
000 oz
1 600
1 400
1 200
1 000
800
600
400
200
0
Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10
-200
Source: CFTC & SG Cross Asset Research
 This is starting to look top-heavy and may point towards a short term price correction
 This position is equivalent to 18% of one year’s industrial demand
 And the gross long position is just off a record level and comprises 41% of total open interest, vs a 38% average over the past
fifteen months

7. 6
South Africa remains the primary source of platinum supply with 76%
of mine production and 64% of total
Other
6%
Russia
13%
North America
5%
S outh Africa
76%
Source: GFMS & SG Cross Asset Research
 South Africa’s major producers continue to watch the purse-strings
 Although the major producers are running cost profiles lower than prevailing prices, their balance sheets have been under strain
 And the Eskom price increases will contribute to roughly 10% per annum cost increases
 This is unlikely – barring any extreme problems from external causes such as power loss – to affect output plans, but is likely to
continue to defer marginal expansion programmes

8. 7
Emission control demand remains the key to platinum, with jewellery
in second place for platinum
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2003
2004
2005
2006
2007
2008
2009
2010
J ewellery Autocats Other
Source: GFMS & SG Cross Asset Research
 Platinum use in autocats contracted sharply in the global downturn
 And while recovering, will lose market share to palladium as Europe, which is platinum-intensive, continues to struggle
 Especially by comparison with the recoveries elsewhere and the strength in China
 Jewellery demand has rebounded, but now needs to consolidate and may struggle at higher prices

9. 8
China remains key to platinum demand, especially in the jewellery
sector
000 oz %
1 800 90
1 500 75
1 200 60
900 45
600 30
300 15
0 0
1999 2001 2003 2005 2007 2009
China J ewellery As % of jewellery total
Source: GFMS & SG Cross Asset Research
 China’s jewellery demand rebounded last year and was almost certainly the second highest year on record
 But conditions slowed in late 2009 and the market is now consolidating in response to higher prices
 The country’s robust auto sector is underpinning its platinum demand, but is more important for palladium
 While the country’s economic growth is supporting demand in the glass and other sectors, suggesting that China is now likely to be
the world’s second largest platinum consumer behind Europe

10. 9
China’s automotive sector; palladium the primary beneficiary
000 oz
700
600
500
400
300
200
100
0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
P latinum P alladium
Source: GFMS & SG Cross Asset Research
 Palladium demand in the auto sector is likely to grow by more than 10% this year
 The Chinese auto market is not yet mature and new emission control limits are being rolled out across the country
 The industry is gasoline fuelled in the main and therefore much more reliant on palladium
 While it must not be forgotten that palladium is also now taking market share from platinum in the diesel sector

11. 10
By late April, Platinum had unwound 63% of the fall from its 2009 high,
while palladium has unwound 84% of its fall
P latinum US $/oz P alladium US $/oz
2 800 600
2 100 450
1 400 300
700 150
08
08
09
09
10
08
08
09
09
10
Apr-
J ul-
Oct-
J an-
Apr-
J ul-
Oct-
J an-
Apr-
J an-
P latinum P alladium
Source: GFMS & SG Cross Asset Research
 Price recoveries have been driven by an improving economic outlook
 With palladium especially boosted by the auto and electronic sectors
 While platinum has been boosted by improving jewellery (allied to reduced scrap return)
 But the majority of the recovery is now out of the way and there is a case for a mild retraction in prices

12. Platinum market to remain in surplus in 2010 (excluding
investment demand)
PLA T INUM
000oz 2005 2006 2007 2008 2009 2010f
Non-Russian prim ary product ion 5,632 5,447 5,074 4,671 4,600 4,720
Russian product ion 960 948 917 835 840 860
Ot her 13 628 591 645 635 700
Fabricat ion dem and: - Aut ocat alyst ** 3,056 3,251 3,218 2,816 1,950 2,050
- Jewellery 1,792 1,682 1,329 736 1,800 1,700
- Indust rial 1,827 1,849 1,950 2,273 1,500 1,701
Invest m ent in ETF/ ETCs 194 104 384
Residual balance -70 241 -217 222 441 830
Pr i ce – p m f i x, $ / o z 897 1 ,1 4 2 1 ,3 0 3 1 ,5 7 8 1 ,2 0 9 1 ,6 5 0
* Nat ional Defence St ockpile, aut om ot ive indust ry, fut ures ex changes ** net of scrap
Source: SGCIB
11

13. Forecast risks
Upside risks
 Further postponement/cancellation of expansion projects
 Energy related disruption at South African operations
 Faster than expected demand recovery in world outside China
 Further and higher than expected investment flows (into ETFs)
Downside risks
 Slower than expected global economic growth in 2010 / evaporation of positive investor sentiment
 Further palladium inroads into the diesel auto cat sector
12

14. 13
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15. An overview of Platinum
market drivers
Date - Location
David Wilson
Director – Metals Research
david.wilson@sgcib.com
+44 (0)20-7762-5384
Important Notice: The circumstances in which this publication has been produced are such that
it is not appropriate to characterise it as independent investment research as referred to in
European MIF directive and that it should be treated as a marketing material even if it contains a
research recommendation (« recommandation d’investissement à caractère promotionnel »).