The gold price Demand and Supply Where to and when? René Hochreiter April 2011 Private and Confidential
The supply of gold 2010 The supply of gold 2010 By Country (2654 tons) Australia 259 USA 234 China 344 South Africa 206 Russia 199 Peru 162 Indonesia 132 Other 933 Canada 93 Ghana 92 2
The demand for gold in 2010 The demand for gold in 2010 By Region (2654 tons) By Region (2654 tons) By Sector (%) By Sector (%) Latin Oceania 13 America 60 Africa 38 Investment N America 35% 218 218 Middl Middle East E Technology 328 11% Europe 301 Other 216 CIS 85 East Asia 810 Jewellery India 886 54% 3
4 Historical Gold Price – the last 220 years the last 220 years Historical Gold Price
5 Historical Gold Price – 36 years (US$/oz) 36 years (US$/oz) US recessions i US Historical Gold Price
Historical Gold Price – 20 years (US$/oz) Historical Gold Price 20 years (US$/oz) Very controlled and professional market since 2001 Recession 6
Cash Cost of 332 Global Gold Miners (US$/t) Cash Cost of 332 Global Gold Miners (US$/t) 100 150 200 250 300 350 400 50 0 Agu a Rica Ballarat B pre-production stage 85 are in feasibility and Cam mp Caiman (Harm monie) Certej Eastern D Dragon Free e State Haile Julietta J L Lindero Mer rcedes Nzema N President t Steyn Rock Creek (A Alaska) Sigma-Lam maque Tucano-Am mapari Zara El Ch hanate La Her radura Ch hapada Ma arigold Batu u Hijau D Dolores Aurizona ( Piaba) Boroo Siguiri Pioneer P Raven swood El S Sauzal North h Lanut La Coipa Cooke-Rand Ur ranium K alsaka East t Rand Porc cupine Newmont N Nevada Union Reefs S St Ives Buffelsf fontein Hemlo (W Williams & Davi d Bell) S Syama Tur malina Centra l Rand J Jundee Kittila Meadow wbank Tau Lekoa Peak Tsh hepong Doo ornkop Pajingo P Joel Ta auTona Bar rberton Kupol Hi shikari La Ca amorra 7
The Cost of Producing Gold (US$/oz) The Cost of Producing Gold (US$/oz) 3000 2500 2000 Current Gold Price 1500 1000 500 0 0 202 Global Gold Miners -500 8
Today’s M+I+I Resources Today s M I I Resources Grade Resources (g/t) (million ounces) P Producers d 3.0 3 0 2 269 2,269 Explorers 1,84 390 Source: RBC, Allan Hochreiter 9
Junior Gold Explorers in Detail Junior Gold Explorers in Detail 10 000 20 000 30 000 40 000 50 000 60 000 70 000 0 PMI Gold Bra avo Ventures Lydian North hern freegold Goldston ne resources Total Resources 390moz Total Resources 390moz Canarc Cassidy Pin nnacle mines Premier Gold P Riverstone e Resources A Amarillo Gold Rolling Rock R Luna Gold Queen nston Mining Alhambra Extorre Go olden Goose Gold Resources Gold Resources – ‘000oz Grayd d Resources Mediterranea an resources Brazauro Klondex Vior inc. Haw wthorne Gold Tyhee Vere ena Minerals Sandsprin ng resources Andean Inter-Citic Rye Patch Pe ediment Gold Spanish Mo ountain Gold Linear Gold Gleiche en resources ‘000oz Orezone Coral Gold Keegan US S Gold Corp K Kiska Metals Comaplex Axmin Romarco M Midway Gold Guyan na Goldfields Rainy River Ce entral African Dyn nasty Metals Anatolia Bret tt Resources V Victoria gold Carp pathian Gold Medoro o Resources Osisko Andina Banro In ntl Tower Hill Gabriel Greystar Exete er Resources Chesa apeake Gold Wits gold Detour gold NovaGold Seabridge 10
Junior Gold Explorers in Detail Junior Gold Explorers in Detail 10.00 12 00 12.00 14.00 16.00 0.00 2.00 4.00 6.00 8.00 Rye Patch Andina Average 1.84 g/t Coral Gold Chesa apeake Gold Exete er Resources Haw wthorne Gold K Kiska Metals Carp pathian Gold Spanish Mo ountain Gold Bret tt Resources Seabridge In ntl Tower Hill North hern freegold Sandsprin ng resources Medoro o Resources Pe ediment Gold Alhambra Vere ena Minerals Orezone Lydian Mediterranea an resources Riverstone e Resources Gold Grade – g/t Gold Grade Goldston ne resources Greystar Osisko Midway Gold M Detour gold V Victoria gold US S Gold Corp Brazauro Rainy River Luna Gold Romarco Gabriel g/t Grayd d Resources Amarillo Gold A Vior inc. NovaGold Pin nnacle mines Keegan P Premier Gold Cassidy Linear Gold Ce entral African Anatolia Banro Bra avo Ventures Axmin PMI Gold Gleiche en resources Inter-Citic Extorre Tyhee Guyan na Goldfields R Rolling Rock Wits gold Go olden Goose Queen nston Mining Comaplex Andean Klondex Dyn nasty Metals Canarc 11
Fundamental Drivers and Risks Fundamental Drivers and Risks Fundamental Drivers Fundamental Drivers Risks (downside) Risks (downside) � Central banks to maintain loose monetary � Deterioration of investor sentiment policy; liquidity creation and negative real p y; q y g � Gold could take a backseat in asset rates are positive for metals. Investors will allocation if the global economy continues likely remain net gold buyers to expand at a steady pace � Reserve diversification into gold is set to R di ifi ti i t ld i t t � High gold prices deter buyers of physical continue, for instance by central banks gold � Gold demand from countries like Gold demand from countries like � Increased scrap supply China 12
What drives the gold price? What drives the gold price? In order of importance: � The strength (or lack of it) of the US economy In other words A weak US$ rate and high rates of inflation = strong investment demand Hence the rise in popularity of the exchange traded fund (ETF) � Jewellery demand • Entrenched in the Indian and South East Asian markets • • Fairly price inelastic Fairly price inelastic � New Supply • • Is only half of total demand Is only half of total demand • Above surface stocks remain at 30 000 tons of gold 13
Gold and the US$ Gold and the US$ Long Term Long Term Short Term Short Term Source: Citigroup Global Markets Source: Citigroup Global Markets � Very good correlation especially in the short term � Hence the strength of the dollar is the main driver of the gold price in recent years 14
Gold and US Inflation Gold and US Inflation 1995 – 2010 1970 – 1982 1970 1982 Source: Citigroup Global Markets Source: Citigroup Global Markets � Higher correlation in the long term but still not as good as the correlation to the US$ � Inflation not highly correlated to gold in recent years 15
Outlook for the US and other economies Outlook for the US and other economies 10.00 8.00 6 00 6.00 4.00 2.00 0.00 -2.00 -4.00 2009 2010 2011 2012 2013 2014 US GDP Growth Forecast EM GDP Growth Forecast Source: Citi Investment Research Allan Hochreiter Source: Citi Investment Research, Allan Hochreiter 16
ETF Holdings ETF Holdings Source: Citigroup Global Markets Source: Citigroup Global Markets � ETF demand has increase dramatically with rising gold prices � Also safe-haven investment due to global economic problems 17
Gold Supply Gold Supply 2006 2007 2008 2009 2010e 2011e 2012e 2015e 2020e Total Supply Tonnes 3,569 3,476 3,522 4,020 4,313 4,850 5,321 5,650 5,900 Of which : Of which : Mine production Tonnes 2,485 2,478 2,416 2,575 2,652 2,644 2,700 2,850 3,000 Growth % 0.0% -0.3% -2.5% 6.6% 2.4% 0.3% 2.1% - - Producer hedging Tonnes -410 -444 -358 -257 -92 50 100 - - Official sector sales Tonnes 365 484 246 30 0 -25 -100 - - Secondary supply, Tonnes 1,129 958 1,218 1,672 1,753 2,181 2,621 2,800 2,900 scrap Source: Deutsche Bank / Allan Hochreiter 18
Gold Demand Gold Demand 2006 2007 2008 2009 2010e 2011e 2012e 2015e 2020e T t l D Total Demand d T Tonnes 3,569 3 569 3 476 3,476 3 522 3,522 4 020 4,020 4,313 4 313 4 850 4,850 5 321 5,321 5 800 5,800 6 850 6,850 Of which: Jewellery Tonnes 2,288 2,404 2,159 1,758 1,834 1,618 1,378 1,600 2,000 Growth % -15.6% 5.1% -10.2% -18.6% 3.5% -11.1% -14.8% - - Industrial, other Tonnes 648 671 691 650 650 650 650 700 750 Total fabrication Tonnes Tonnes 2,936 2 936 3 075 3,075 2 850 2,850 2,408 2 408 2,469 2 469 2 268 2,268 2 028 2,028 2 300 2,300 2 750 2,750 demand Bar hoarding Tonnes 235 236 384 212 340 450 500 500 600 Coins, Tonnes 188 210 256 400 450 500 500 500 600 medallions etc medallions, etc Other, retail, Tonnes -50 -298 -289 337 239 532 593 500 400 dishoarding, etc. ETF and similar Tonnes 260 253 321 663 800 1,100 1,700 2,000 2,500 Total investment Tonnes 633 401 672 1,612 1,829 2,582 3,293 3,500 4,100 demand Gold bullion price US$/oz 604 695 872 974 1,225 1,600 2,000 2,200 2,000 Source: Deutsche Bank / Allan Hochreiter 19
Mine supply and fabrication demand Mine supply and fabrication demand Mine Supply (tons) pp y ( ) Gold Fabrication Demand (tons) ( ) Source: Citigroup Global Markets � Mine supply declining in recent years as exploration activity decreased late last century � Declining jewellery demand due to price and competing metals 20
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