Brent Oil Nickel Gold Zinc FTSE 100
Source: LME, Precious metals fix and Reuters
Bulk commodities and precious metals our preferred exposure
We forecast that in 2008, with the exception of zinc and nickel, our commodity suite
will register yoy annual average price gains. Iron ore, coal and precious metals are
particulary favoured above still-strong industrial metals. China remains a positive
common demand denominator. We believe price fragmentation is the theme for
2009-11, driven by world supply surpluses. We believe precious metals will
outperform in 2009, and industrial metals will embark upon three consecutive years
of annual price declines. Crucially, we forecast trough cycle prices in 2010-11 will be
elevated relative to previous cycle lows.
While still buyers of the miners, questions surround relative interest
We remain firm buyers of the mining sector in 2008, but aren’t surprised by the lack
of absolute performance in the miners for 1Q08. Despite a significantly strong
performance by commodities in the quarter, the relative attraction seemed to be
other weak sectors, such as banks. We believe the UK mining/banks trade is worth
monitoring in 2008, as investors take another look at relative attractions – not just
the short-term view, but on a three- to five-year basis as well.
Buy exposure to bulk commodities; don’t fret about copper yet
We stick with equity picks aligned with our preferred commodity exposures. Among
the diversified names, BHP Billiton and Anglo American have non-base metals
exposure exceeding 60%, and we estimate ENRC has bulk EBITDA exposure nearing
90% for 2008. Despite 13% returns in the first two weeks of 2Q08, we are
downgrading Xstrata to a Hold rating as it approaches our £41/share target.
Australian coal names such as MacArthur, New Hope and Gloucester are likely to
catch increasing amounts of investor attention during the remainder of 2008 given
that coal supply issues do not appear to us to be easing any time soon.
Produced by: ABN AMRO
Bank NV
Global
Mining
www.abnamroresearch.com
Analysts
Nick Moore
United Kingdom
+44 20 7678 0555
nick.metals.moore@uk.abnamro.com
Tim Huff
+44 20 7678 4813
tim.huff@uk.abnamro.com
Warren Edney
+61 3 9612 1557
warren.edney@au.abnamro.com
250 Bishopsgate, London, EC2M 4AA, United Kingdom
Important disclosures can be found in the Disclosures Appendix.
Wednesday 9 April 2008

Contents
G L O B A L M I N I N G 9 A P R I L 2 0 0 8 2
E X E C U T I V E S U M M A R Y
A stronger medium-term outlook 3
Our preferences among the mining equities continue to be those with bulk and
precious commodity exposure. In Europe, BHP Billiton, Anglo American and ENRC
are still our top three picks for the year.
I N D U S T R Y D Y N A M I C S
Commodities – long road out of Eden 8
Supply concerns have enabled commodity prices to shrug off economic woes of
the world, with most commodities posting handsome price gains in 1Q08. We
remain most bullish on bulk commodities and precious metals for 2008.
Economic review – troubling times 19
The US appears to have entered a recession. The euro area and emerging
markets have so far remained resilient. However, we believe global growth is
likely to slow significantly by the end of the year.
Aluminium – Lazarus-style recovery under way 22
Alumina – high production costs to limit price declines 28
Copper – endemic supply disruptions remain the key 30
Nickel – price to slide as supply overhauls demand 40
Zinc – hope springs eternal, but it’s too early for zinc 47
Lead – another strong year before prices slide 54
Gold – historic vaulting of the US$1,000/oz marker 59
Platinum and palladium – hostages to fortune 67
Coal – living in abnormal times 74
Iron ore – fun for all while the steel price rallies 78
Uranium – underlying demand remains firm 81
S E C T O R D Y N A M I C S
Revisions to our company forecasts 83
Increases to our commodity price assumptions have had a favourable earnings
impact for the miners. Notably, we have also raised our long-term price
assumptions for precious and the base metals.
C O M P A N Y P R O F I L E S
Anglo American 89
Xstrata 100
Vedanta Resources 109
Antofagasta 119
A P P E N D I X
Global metals and mining team 127
Guide to commodity applications 128
Glossary of useful mining industry websites 129
Selected websites for industry statistics 130

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