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Nickel Market Prospects

Nickel Market Prospects. ISRI Spotlight on Nickel/Stainless April 2006. Source: Macquarie Research. Macroeconomic: Global Economic Outlook. Source: Economy.com March 06. Q4 2005 Bottom?. Demand: The Stainless Steel Cycle-Technical Analysis. Stainless Steel Scrap Market.

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Nickel Market Prospects

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  1. Nickel Market Prospects ISRI Spotlight on Nickel/Stainless April 2006

  2. Source: Macquarie Research

  3. Macroeconomic:Global Economic Outlook Source: Economy.com March 06

  4. Q4 2005 Bottom? Demand: The Stainless Steel Cycle-Technical Analysis

  5. Stainless Steel Scrap Market

  6. Demand: Declining Austenitic Ratios Source: CRU

  7. Non-Stainless Demand Source: NiDI

  8. Demand: Chinese Nickel Consumption • 26% annual growth rate since 2000 • 11% of overall nickel consumption Net Import Requirement

  9. (Thousand Tonnes) 200420052006 Supply Growth (%) +4.2 +0.8 +6.1 WORLD SUPPLY 1,271 1,281 1,359 Demand Growth (%) +0.5 -1.5 +7.3 WORLD DEMAND 1,2861,2661,359 BALANCE -15 +15 0 Stocks LME 21 Producer 93 __ __ Total 114 129 129 Nickel Market Balance

  10. Nickel Units Balanced Scorecard 2005

  11. LME Nickel Price Jan/87 - Feb/06 33 consecutive months of $4/lb.+ Nickel prices since June’ 03. 22 consecutive months of $4/lb. + nickel prices in the late 80’s.

  12. Nickel Price vs. New Mine Capacity

  13. Worldwide Nickel Exploration Budgets +200% increase in nickel exploration spending 44% decline in nickel exploration spending Source: Metals Economics Group

  14. PROJECTDISCOVEREDEXPLOREDACTIVATEDCOMMISSIONEDCAPACITY Loma de Niquel 1940 1960s 1991 2000 19,000 Murrin Murrin 1964 1970-80s 1993 1999 40,000 Raglan 1930’s 1957 1994 1998 26,000 Voisey’s Bay 1993 1993 1996 2005 60,000 Major Nickel ProjectsCommissioned Last 10 Years

  15. Project Timing

  16. Nickel C1 Costs ~ 46% increase Source: Brook Hunt

  17. ORIGINAL C URRENT CAPEX/LB. PROJECTCAPEXCAPEXCAPACITY ANN. PROD’N. PROD. Goro $1,400 M $1,880 M 60,000 t $14.21/lb Ravensthorpe $700 M $1,800 M 50,000 t $16.33/lb Koniambo $1,540M $2,200 M 60,000 t $16.63/lb Ambatovy $1,600 M $2,250 M 60,000 t $17.01/lb Capex Cost Pressures

  18. According to a survey carried out by Morgan Stanley investment funds which are investing in commodities are expected to double their financial resources within the next FIVE years! Source: Barclays Capital

  19. Analyst’s Reuters Poll: Nickel Price Forecasts US$/lb 2006 January 2006 2007 Mean $5.82 $5.33 High $6.65 $7.50 Low $4.54 $3.63 Range $2.11 $3.87 LME Average 2005 $6.68 LME Average 2006 Year to Date $6.70

  20. Take-Aways……….. • Positive macroeconomic outlook. • Funds viewing metals complex “favourably” and see the market as being “stronger for longer”. • Current stainless steel de-stocking phase is cyclical…..the market will turn around and when it does it will come roaring back. • Non-stainless demand will continue to remain healthy. • Inventories, despite trending upwards, are low by historical standards. • Strong Chinese demand and constrained supply (technical glitches, strikes, etc.) • All these factors point to another strong year for the nickel market in 2006.

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