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Group Introduction Lead & Lead Oxide Markets

PENOX - GROUP. Group Introduction Lead & Lead Oxide Markets. PENOX PLANTS LOCATION.

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Group Introduction Lead & Lead Oxide Markets

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  1. PENOX - GROUP Group Introduction Lead & Lead Oxide Markets

  2. PENOX PLANTS LOCATION

  3. Penox (formerly Penarroya Oxide) is the largest European producer of chemical grade lead oxide (litharge and red lead), holding 20% of the global market, but with significantly higher market share in Europe. Its position in the North American market is growing via its 50% joint venture in Mexico and 20% joint venture in Brazil. Penox was formed in 1994 by the merger of the leading PbO producers in Germany (Cologne), France (Rieux), Italy (La Spezia) and Spain (Barcelona). The combination created significant operational efficiencies and supported the needs of multinational clients to source their PbO needs from one supplier throughout Europe and North America with consistent quality. Existing legislation treats PbO as a toxic material, but in its most significant applications there are at present no viable substitute products. For the foreseeable future PbO will continue to be an essential component in the production of technical glass, plastics, batteries, stabilisers and certain pigments. Few companies can comply with the stringent environmental safety requirements imposed on PbO producers, creating a highly effective barrier of entry to new producers. Penox, thanks to its consistent investment and compliance with environmental safety measures, has been able to increase it’s market share all along the years. Penox is also the technological world leader in the design of lead oxide plant and equipment. As well as providing its in-house needs, this has permitted Penox to generate significant business from the design, engineering and supply of lead oxide plant for third parties (to date mainly battery producers, where plant supplied is not employed in the manufacture of chemical grade oxides). EXECUTIVE SUMMARY

  4. ENGINEERING - SCOPE AVAILABLE MODULES Transport • Automated Ingot Handling • Oxide Handling, etc. Grey Oxide • BartonHRB-140/180 • P20 Reactor  • Primary Furnace Litharge • LE2 Furnace Red Lead • SA3 Furnace Environment • Filter Systems • Lead Blood Levels Recent Projects • 20,000 t unit in Mexico 3 B180 + 2 PF • 10,000 t unit in Turkey 3 B140 + 3 LE2 • 4,000 t unit in Spain 2 LE2 • 16,000 t unit in UK 1 B180 + 1 PF + 9LE2 • 10,000 t unit in Germany 1 SA3 • 2,000 t unit in India 1 LE2 • 10,000 t unit in Brasil 3 B140 + 2 LE2

  5. EUROPEAN PbO MARKET LEAD OXIDE MARKET • Lead • Lead Oxide

  6. Lead Oxide price Lead LME Lead Premium Freight Others Margin Sale Price Low LME High LME

  7. EUROPEAN LEAD MARKET EUROPEAN LEAD MARKET 2004 situation

  8. LEAD SMELTER PRIMARY LEAD economical rule PURCHASE concentrates at LME - TC SALE lead ingots at LME + Premium LEAD INGOTS TO THE CUSTOMER LEAD CONCENTRATES FROM MINERS SMELTER REVENUES = TC + Premium

  9. CONCENTRATE NEED IN EUROPE NEED TO IMPORT LEAD 2003 2004 CONCENTRATE in EUROPE TONNAGE TONNAGE Western MINE 111 502 114 000 EUROPE PRIMARY SMELTER 367 155 307 000 SECONDARY SMELTER 1 036 500 1 019 000 LEAD PRODUCTION 1 403 655 1 326 000 Eastern MINE 184 000 184 000 EUROPE PRIMARY SMELTER 242 504 250 000 SECONDARY SMELTER 251 000 251 000 LEAD PRODUCTION 493 504 501 000

  10. CHINA concentrate imports EXPORTS OF CONCENTRATES TO CHINA 800 700 600 500 Thousands of tons 400 300 200 100 0 0 2 4 6 8 10 12 conc 99 conc 00 conc 01 conc 02 conc 03 Strong competition between smelters to buy concentrates : China purchases agressively with very low TC (50 $/t instead of 100-110). Less concentrates available for others :smelter closures in Western countries

  11. LOCATION OF SMELTERS 2002 Boliden : Sweden Smelter producing less than 100 kt for the market Smelter producing more than 100 kt for the market Competitors PZ : Morocco

  12. PRIMARY LEAD estimation in Europe 2002 2003 2004 COUNTRY LOCATION ESTIMATED TONNAGE GERMANY Nordenham 133 000 110 000 110 000 Stolberg 110 000 110 000 110 000 Duisbourg 35 000 10 000 0 FRANCE Noyelles Godault 125 000 10 000 0 UK Avonmouth 34 770 4 655 0 Northfleet 176 482 140 000 140 000 ITALY Porto Vesme 50 700 74 500 0 BELGIUM Hoboken 54 000 30 000 30 000 SWEDEN Ronnskar 17 753 18 000 18 000 MOROCCO Oued El Heimer 84 000 70 000 60 000 WESTERN EUROPE 820 705 577 155 468 000 POLAND Miasteczko 34 000 34 000 34 000 KAZAKHSTAN Ust Kamenogorsk 110 000 110 000 110 000 Chimkent 20 000 20 000 20 000 BULGARIA Plovdiv 50 000 50 000 50 000 Karjali 1 000 5 000 5 000 ROMANIA Copsa Mica 10 000 10 000 10 000 Firizo (Baia Mare) 5 000 5 000 5 000 SERBIA Zvecan 23 000 0 0 Titov Veles - Macedonia 20 000 15 000 0 EASTERN EUROPE 273 000 249 000 234 000 TOTAL EUROPE 1 093 705 826 155 702 000

  13. LOCATION OF SMELTERS 2004 Boliden : Sweden ? ? ? ? Competitors PZ : Morocco

  14. AMERICA PRODUCTION estimation 2002 2003 2004 COUNTRY LOCATION ESTIMATED TONNAGE USA Herculaneum (Mo) 138 000 140 000 140 000 Glover (Mo) 122 000 110 000 0 Canada Belledune 90 167 78 000 70 000 Trail 80 700 93 000 80 000 MEXICO Torreon 125 735 125 000 125 000 PERU LA OROYA 120 000 110 000 110 000 AMERICA TOTAL PRIMARY LEAD 676 602 656 000 525 000 Since the closure of East Helena smelter in 2001, USA primary lead production has kept on decreasing until recently with the announcement from DOE RUN of the closure of Glover smelter on December 2003 … less US lead available for exports to Europe !

  15. Primary Lead production in CHINA 2004 2003 2002 COMPANY LOCATION ESTIMATED TONNAGE SHAOGUAN Shaoguan (Guandong) 70 000 70 000 63 000 Zhuzhou (Hunan) 90 000 90 000 96 395 XUZHOU CHUNXIN Alloy Xuzhou (Jiangsu) 50 000 50 000 58 054 BAIYIN Baiyin (Gansu) 15 000 15 000 15 000 WESTERN METALS Hanjiang - Laochekou (Hubei) 30 000 30 000 30 000 YUBEI GOLD Yubei (Henan) 110 000 110 000 78 630 SONGBAI Shuikoushan (Hunan) 66 000 62 000 67 519 XINLI Non Ferrous Metals Kunming (Yunnan) 60 000 60 000 57 105 WESTERN METALS Xining (Hubei) 30 000 30 000 50 000 YUGUANG Gold & Lead Yuguang (Henan) 220 000 200 110 135 055 YUNNAN CHIHONG Huize (Yunnan) 20 000 20 000 20 000 JIYUAN WANYANG Jiyuan (Henan) 32 000 32 000 16 000 GEJIU SHADIAN Electrolytic Gejiu (Yunnan) 25 000 25 000 24 973 CHIZOU Anhui Chizou 33 000 33 000 24 000 JINCHENGJIANG CHENGYUAN 25 000 25 000 14 000 Dongfang Gold & lead Xiuwu (Henan) 35 000 0 0 HECCHI SOUTH Non Ferrous Hecchi (Guangxi) 20 000 27 000 24 000 Zhongjin-Lingnan Zhongjin (Guandong) 75 000 75 000 75 000 Jinyang metallurgical Inc. of China Hubei 30 000 25 000 15 000 Others 210 000 186 758 120 235 (Fankou, Huladoa,Boading Fen Fan, Nanjing Lead Zinc,…) TOTAL PRIMARY LEAD 1 246 000 1 165 868 983 965 CHINA is certainly the only country investing in new lead smelters to increase the capacity of production of primary lead : growth of their internal market !

  16. LEAD EXPORTS FROM CHINA 500 450 400 350 300 Thousands of tons 250 200 150 100 50 0 0 2 4 6 8 10 12 lead 99 lead 00 lead 01 lead 02 lead 03 CHINA lead exports lead 04 Higher production than in 2002 but internal growth of the Chinese market is such thatmonthly lead exports has decreased since end of 2003

  17. Western EUROPE market evolution

  18. LME LEAD PRICE (in $ & € - cash) since 1996

  19. LME METALS PRICE EVOLUTION (since Jan 02) 3,50 3,00 2,50 2,00 1,50 1,00 0,50 0,00 janv-02 avr-02 juil-02 sept-02 déc-02 mars-03 juin-03 sept-03 déc-03 mars-04 juin-04 Al Cu Ni Pb Sn Zn

  20. LME lead stocks evolution LME stocks evolution (from Sept 02 to 2004) 200000 180000 160000 140000 120000 100000 80000 60000 40000 20000 0 sept-02 janv-03 juin-03 nov-03 mars-04 EUROPE DUBAI SINGAPORE USA

  21. LME METALS STOCK EVOLUTION (since July 03) 1,60 1,40 1,20 1,00 0,80 0,60 0,40 0,20 0,00 01/07/2003 01/10/2003 01/01/2004 01/04/2004 Al (1200 kt) Cu (600 kt) Pb (170 kt) Ni (25 kt) Sn (20 kt) Zn (700 kt)

  22. CONCENTRATE MARKET : depressed lead and zinc price in 2001-2002-2003 have led to mine closures agressive purchase of concentrates at low TC from Chinese smelters LEAD PRODUCTION in Western Europe : tight concentrate market (pressure on primary lead) decrease of primary lead production due to lack of concentrates, environmental constraints and importance of financial losses LEAD IMPORTS : reduction of Chinese exports due to internal growth reduction of « taxes rebate » on Pb exports from China (from 15 to 11%) strong increase of maritime freight costs from China CONSEQUENCES Reduction of lead availability & inventories / speculation LME increase Tight 2004 European primary lead market lead premium increase SUMMARY

  23. EUROPEAN LEAD OXIDE MARKET LEAD OXIDE MARKET

  24. Prim Battery Oxide Gran. Litharge -ary Red Lead LEAD Powder Lith. LEAD OXIDES Raw Mat. Oxide Type Intermediates Enduse Batteries Glass Ceramics Ceramic Frits Lead Sulfate Lead Phosphite Lead Silicate Ca. Plombate Lead Stearate Chromate PVC Paints

  25. ENDUSE OF LEAD OXIDES Starter batteries containon avg 5-6 kg of lead oxide Batteries One TV-set containson avg 1.5++ kg of lead oxide Glass PVC contains 1-2% of lead oxide as stabilizer PVC Ceramics Enamels on tiles, etc. Chrome yellow Molybdate red Pigments Rubbers, Brake Pads, etc.contain lead oxide Other

  26. LEAD OXIDE MARKETS TV glass Crystal PVC stab Ceramics Pigments Batteries Misc. ASIA EUROPE AMERICA 210 kt 400 kt 110 kt DECLINE DECLINE GROWING WORLD CONSUMPTION: 720 kt - CAPTIVE : 210 ktSALES WORLDWIDE: 510 kt PENOX SALES 2003: 120 kt

  27. WORLD MARKET PbO World Market (t) 1995-2005 800.000 700.000 Europe 600.000 500.000 Americas 400.000 300.000 Asia 200.000 100.000 0 1995 2000 2005 2010 Asia Americas Europe

  28. SIGNIFICANT DEVELOPMENTS TV market Flatscreens Sales vs CRT in Germany (000) 6.000 5.000 4.000 3.000 2.000 1.000 0 1999 2000 2001 2002 2003 CRT Flatscreens

  29. RATE OF REPLACEMENT INCREASING in PVC Source: ELSA 2003

  30. LEAD OXIDE EUROPEAN MARKET

  31. LEAD MARKET current high LME lead price should decrease a bit but should remain higher than 750 $/t (according to « lead experts ») based on production/demand balance and on the low levels of lead in LME warehouses speculative market: disconnection between LME and physical market primary lead production moving to Asia – tight situation in Europe 2005 premium depending highly on China & Australia exports to Europe LEAD OXIDE MARKET due to environmental pressure (PVC, paints, pigments) or to strong Asian competition (TV glass), European lead oxide market shrinks year after year need for consolidationof the market with only few producers remaining high lead LME price and premium make lead oxide more expensive than in the past leading to substitution process for non-leaded products need for diversificationwith new products (PENOX antimony trioxide) SUMMARY

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