27 June 2008
Metals & Mining
Commodities energised
Rob Clifford
Research Analyst
(44) 20 754 58339
robert.clifford@db.com
Miners well positioned in an energy constrained world
We have lifted our long-run view on energy prices and energy commodities with a
resultant flow-on effect on costs and long run commodity price assumptions. This
is positive for valuations with those companies in a long energy position
performing best. We remain very affirmative on commodity pricing (particularly the
bulk commodities) and expect positive pricing progression into 2010. Our key
picks in the sector are Xstrata, ENRC and Anglo.
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DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1
Estimate Revision
Top picks
Xstrata (XTA.L),GBP3,879.00 Buy
ENRC PLC (ENRC.L),GBP1,297.00 Buy
Anglo American (AAL.L),GBP3,303.00 Buy
Companies featured
Anglo American (AAL.L),GBP3,303.00 Buy
2007A 2008E 2009E
DB EPS (USD) 4.34 7.06 9.59
P/E (x) 13.2 9.2 6.8
EV/EBITA (x) 8.6 6.1 4.4
Antofagasta PLC (ANTO.L),GBP648.50 Hold
2007A 2008E 2009E
DB EPS (USD) 1.40 1.27 1.24
P/E (x) 8.9 10.1 10.3
EV/EBITA (x) 4.2 3.7 4.3
Boliden AB (BOL.ST),SEK50.75 Hold
2007A 2008E 2009E
DB EPS (SEK) 13.37 7.32 6.84
P/E (x) 10.4 6.9 7.4
EV/EBITA (x) 8.2 6.6 7.5
ENRC PLC (ENRC.L),GBP1,297.00 Buy
2007A 2008E 2009E
DB EPS (USD) 0.96 2.45 3.12
P/E (x) 12.9 10.4 8.2
EV/EBITA (x) 7.2 6.8 4.8
Ferrexpo Plc (FXPO.L),GBP400.00 Hold
2007A 2008E 2009E
DB EPS (USD) 0.20 0.64 0.86
P/E (x) 21.4 12.3 9.2
EV/EBITA (x) 12.5 9.4 7.2
Kazakhmys PLC (KAZ.L),GBP1,555.00 Buy
2007A 2008E 2009E
DB EPS (USD) 3.04 3.16 2.99
P/E (x) 8.3 9.7 10.2
EV/EBITA (x) 2.5 3.8 3.9
Lonmin Plc (LMI.L),GBP3,159.00 Hold
2007A 2008E 2009E
DB EPS (USD) 2.93 4.67 5.21
P/E (x) 22.1 13.3 11.9
EV/EBITA (x) 13.5 7.6 6.6
Vedanta Resources (VED.L),GBP2,185.00 Buy
2008A 2009E 2010E
DB EPS (USD) 2.95 3.87 4.98
P/E (x) 12.6 11.1 8.6
EV/EBITA (x) 7.9 7.7 6.4
Xstrata (XTA.L),GBP3,879.00 Buy
2007A 2008E 2009E
DB EPS (USD) 5.63 7.26 9.89
P/E (x) 10.4 10.5 7.7
EV/EBITA (x) 7.7 7.5 5.3
Norsk Hydro (NHY.OL),NOK78.20 Buy
2007A 2008E 2009E
DB EPS (NOK) 6.09 5.32 8.53
P/E (x) 11.6 14.7 9.2
EV/EBITA (x) 8.6 12.7 6.4
Nyrstar NV (NYR.BR),EUR11.70 Buy
2007A 2008E 2009E
DB EPS (EUR) 3.23 1.74 1.93
P/E (x) 5.1 6.7 6.1
EV/EBITA (x) 3.7 4.2 4.1
Global Markets Research Company
Watch out for the current cost overhang
While 2008 represents another year of bumper commodity prices in our view, it is
back-end loaded. The announcements of heady iron ore and coal prices have
driven high expectations in the market but only kicked in from the second quarter
or later in the case of deferred coal shipments – meanwhile operating costs have
been marching relentlessly upwards and remain underestimated by the market in
our view. We think the interim reports will be disappointing and drive some share
price weakness ahead of commodity price-fueled strength in the second half.
Commodities run, costs remain elevated – valuations are up
Our oil and gas team have taken a higher long term view on oil price and this has
impacted long-term commodity price expectations. By example, we have lifted our
long term price forecast for thermal coal by 51% to US$80/t, semi soft coking coal
by 43% to US$84/t, nickel by 36% to US$9/lb, Copper by 33% to US$2/lb and
Aluminium by 25% to US$1.22/lb. Higher energy prices will have a direct impact
on mining costs and we have also lifted these significantly. Despite higher costs,
the higher revenue streams generally drive higher cashflows and higher valuations.
Stick with bulks…price progression is locked-in
We continue to advocate exposure to the bulk commodities with significant price
progression locked-in in the second half. Our key picks (and revised price targets)
are Xstrata (BUY, PT 5300GBp), ENRC (Buy, PT 1770GBp) and Anglo (Buy, PT
4470GBp). We have also upgraded Kazakhmys to a Buy(PT1900GBp) with it
benefiting from higher copper price expectations and its newly acquired electricity
generating assets – we retain buys on VED, NHY and NYR

Table of Contents
Soft results period – strong finish to the year. ............................... 3
FTSE mining still performing.....................................................................................................3
Commodity review....................................................................................................................7
A word on costs............................................................................... 11
The long and the short of it ............................................................ 13
Iron ore remaining tight despite producer response...............................................................14
The pull back in the spot price is not the end of iron ore price strength. ................................19
Hard coking coal – Rainfall brings windfall ..............................................................................20
Energy coal – A new energy paradigm ...................................................................................23
Ferro-alloys– Long term good, short term exceptional. ..........................................................28
Anglo American ............................................................................... 33
Antofagasta...................................................................................... 34
Boliden.............................................................................................. 35
ENRC................................................................................................. 36
Ferrexpo ........................................................................................... 37
Kazakhmys ....................................................................................... 38
Lonmin.............................................................................................. 39
Norsk Hydro ..................................................................................... 40
Nyrstar.............................................................................................. 41
Vedanta Resources.......................................................................... 42
Xstrata .............................................................................................. 43

Soft results period – strong
finish to the year.
FTSE mining still performing
The FTSE mining index is up 12% since the start of the year against a 12% decline in the
FTSE 100 index (Figure 2 ). This has occurred against the backdrop of a major financial market
crisis and uncertainty surrounding global growth. Daily or monthly moves in various spot
commodity prices and stockpiles in China continue to drive speculation regarding the likely
meaning for global growth. We believe global growth remains robust – certainly robust
enough to maintain the current commodity prices. For the mining equities we think that this
will be tempered into the mid year results period by higher costs that we believe are yet to
be fully factored in…but more on that later.

On the macro front, OECD leading indicators are pointing to slower growth and possibly even
recession and are not particularly inspiring for a strong view on commodity demand.
However we are forecasting an acceleration in Chinese GDP and FAI for 3-4 quarters as a
result of the post quake rebuild, which should underpin strong commodity demand pull. Non-
OECD growth also continues to look robust and supportive of continuing demand for basic
raw materials