AME GROUP

TACTICAL LEAD & ZINC OUTLOOK

January
2015

Confidential: see contract at www.amegroup.com

Market Balance and Reconciliation

Market Balances

Table 1: Zinc Market Balances 20102016

Thousand Tonnes
World Refined Demand

2010
12,649

2011
12,699

2012
12,386

2013
12,970

2014Q2
3,509

2014Q3
3,513

2014
13,737

2015
14,177

2016
14,705

World Refined Supply

12,825

13,216

12,720

13,264

3,240

3,372

13,203

14,188

14,892

World Concentrate Demand

12,662

13,136

12,611

13,127

3,237

3,346

13,167

14,126

14,891

World Concentrate Supply

12,330

12,827

13,403

13,378

3,211

3,413

13,177

14,164

14,561

World Metal Balances

176

517

334

294

-269

-141

-534

12

187

Commercial Inventory
LME
SHFE
Producers
Consumers
Merchant

701
234
305
122
15

822
175
333
128
14

1,221
216
323
128
13

933
69
304
147
13

668
49
335
148
13

751
40
321
148
13

Total Inventory

1,378

1,472

1,900

1,467

1,214

1,273

Inventory Movements
Opening Balance
Movement in stocks
Drawdown/(Addition)
Closing Balance

1,051
151
176
1,378

1,378
-423
517
1,472

1,472
95
334
1,900

1,900
-727
294
1,467

1,360
123
-269
1,214

1,214
201
-141
1,273

1,467

933

945

-534
933

12
945

187
1,132

Price
LME Cash Average Zinc Price
US$/t
US/lb

2,159
98

2,193
99

1,948
88

1,909
87

2,072
94

2,310
105

2,165
98

2,400
109

2,485
113

Market Balances

Table 2: Lead Market Balances 20102016

Thousand Tonnes
World Refined Demand

2010
9,809

2011
10,436

2012
10,483

2013
11,119

2014Q2
2,706

2014Q3
2,829

2014
11,317

2015
11,624

2016
12,031

World Refined Supply

9,714

10,640

10,601

11,209

2,685

3,033

11,509

11,646

12,071

832

951

1,104

1,156

305

321

1,299

1,369

1,434

4,222

4,650

5,136

5,380

1,210

1,330

5,031

6,011

6,304

-95

204

119

89

-21

203

193

21

40

208

353

127
111
446

129
98
581

320
75
137
92
624

222
90
179
115
606

194
67
176
110
547

225
68
172
110
575

389
151
-95
446

446
-69
204
581

581
-75
119
624

624
-108
89
606

567
1
-21
547

547
-175
203
575

606

799

820

193
799

21
820

40
860

2,147
97

2,397
109

2,062
94

2,139
97

2,097
95

2,181
99

2,114
96

2,300
104

2,380
108

World Concentrate Demand

World Concentrate Supply
World Metal Balances
Commercial Inventory
LME
SHFE
Producers
Consumers
Total Inventory
Inventory Movements
Opening Balance
Movement in stocks
Drawdown/(Addition)
Closing Balance
Price
LME Cash Average Lead Price
US$/t
US/lb

AME Group
Page 2

Confidential: see contract at www.amegroup.com

The Market
The average zinc price for December, at the time of writing, had fallen 3% on the November monthly average to
US$2,183/t (US$0.99/lb) as China indicated softer-than-expected growth data. AME forecasts the zinc price to be
US$2,250/t (US$1.02/lb) in the December Quarter of 2014 before rising to an average of US$2,400/t (US$1.09/lb) in 2015.
LME stocks have grown 1.3% to 682kt, but are still only 5% higher than the four-yearly lows seen in July this year.
With 2015 seeing approximately 800kt removed from the mined market with the closures of Century and Lisheen, the
mined market is now expected to hang in the balance as the demand for zinc concentrates is expected to soften to 6.8%,
down from 8.0%. With both finished and mined markets forecast to be in balance for 2015, the actuality of this rests on the
ability of major sources to ramp up and for China to increase its domestic production.

With the top-ten producing mines contributing 25% of the 2014 zinc in concentrate, the outcome of the mined
market in 2015 is contingent on the performance of these top-tier producers. Given the large-scale mine closures, the
specific focus is on those operations looking to ramp-up to supply replacement production. The two operations in
particular are Glencores 380kt McArthur River Mine and Vedantas 685kt Rampura Agucha operation, forecast to
ramp up 42% and 11%, respectively. Both projects have experienced problems achieving production targets over the
year with McArthur River now facing pressure over its waste rock storage practices and Rampura Agucha struggling to
achieve underground productivity from a narrow, albeit high-grade, orebody.

While some of the larger projects are facing difficulties, AME believes some of the less risky sources of zinc over the
2015 shall be obtained from the expansion of Bolidens 142ktpa Garpenberg operation in Sweden and Trevalis two
sitesthe 25ktpa Santander ramping-up in Peru and the 80ktpa Halfmile in Canadathat will be brought out of care
and maintenance.

Chinese operations are typically low-grade and relatively high-cost operations. As prices consistently remained below
US$1.05/lb (US$2,204/t) from October onwards, operations began to close throughout Yunnan Province, contributing
to the 6.3% fall in domestic zinc concentrate production. It would be reasonable to expect these operations and other
high-cost producers being incentivised back into production when prices return to higher levels as forecast in 2015.
An edict made in September by the Chinese Ministry of Industry and Information Technology for zinc lead mines to
meet minimum production outputs could potentially be supply disruptive as projects are required to ramp up, while
smaller operations close. Furthermore, requirements for backfilling to improve stability could make some operations
more expensive.

As the zinc price has moderated from the highs seen in August, which encouraged a lot Chinese smelters to destock,
smelter inventories have steadily climbed 28% from the lows of 60kt seen in July to 77kt at the end of November. This is
likely to at least stay level as Chinese smelters have increased their operating rate during November prior to a potential
slowdown over the winter and Chinese New Year period. However, SHFE stocks have fallen 41% over the same period to
84kt indicating robust downstream demand.
Downstream production galvanising activity fell during November as plants closed due to weak demand and low profit
margins. Other closures were part of the initiative to provide clearer environmental conditions during the APEC Summit in
Beijing. This 1015-day closure affected plants in Tianjin, Hebei and Shandong. As such, the fall in operation rate from 81%
to 71% is expected to revert to optimal operating rates during December.
Lead prices on the LME have averaged US$1,973/t (US$0.89/lb) to the 19th of December, a fall of 3% from the November
average. Lead stocks on the LME have climbed 1.5% over the month to 221kt, albeit after falling from a spike of 229kt from
earlier in the month. AME forecasts lead prices to average US$2,075/t (US$0.94/lb) for the December Quarter before
climbing to US$2,300/t (US$1.04/lb) for 2015.

AME Group
Page 3

Confidential: see contract at www.amegroup.com

Supply and Demand Outlook

Finished Demand by Country

Table 3: Zinc Finished Demand by Country 20102016

2010
1,259
149
218
892

2011
1,288
145
215
928

2012
1,255
140
211
904

2013
1,297
152
210
935

2014Q2
373
40
60
273

2014Q3
355
39
60
256

2014
1,413
157
238
1,019

2015
1,439
160
240
1,039

2016
1,492
162
253
1,076

452
57
246
9
140

446
51
237
11
148

403
45
239
10
109

412
46
257
10
99

100
11
60
3
27

97
11
55
3
28

385
44
215
11
115

396
44
219
11
122

409
46
224
12
128

EU-15
Austria
Belgium
France
Germany
Greece
Italy
Netherlands
Other EU-15
Portugal
Spain
Sweden
United Kingdom

2,017
29
399
217
494
21
339
98
41
15
200
36
128

1,994
39
395
206
509
10
338
94
41
13
201
31
120

1,797
46
372
207
474
10
247
88
45
10
170
25
104

1,814
62
378
199
475
9
245
89
41
10
174
24
109

465
14
101
35
125
2
75
23
11
2
44
7
28

473
15
101
50
126
2
67
23
9
3
44
7
28

1,867
60
400
184
481
9
278
90
41
10
176
26
112

1,905
62
410
190
489
9
282
91
42
10
180
27
114

1,953
63
418
194
497
10
292
94
43
10
186
28
117

EU-12
Czech Republic
Hungary
Other EU-12
Poland

123
11
8
12
93

123
12
9
14
88

137
12
10
13
102

107
9
8
14
76

16
2
2
4
8

21
2
2
3
14

72
8
9
14
41

74
8
9
14
43

77
8
9
15
45

Europe - Other
Other EU- Other
Turkey

275
122
153

305
142
163

345
149
196

373
139
234

98
37
61

91
33
58

382
145
237

397
148
249

414
154
260

CIS
Kazakhstan
Other CIS
Russia
Ukraine

271
34
21
178
38

299
34
21
208
36

315
31
21
231
32

331
32
21
246
32

86
8
5
65
9

87
8
5
65
9

337
31
21
251
34

345
32
22
256
35

355
33
22
263
37

Middle East
Iran
Israel
Saudi Arabia

142
74
10
58

130
58
9
63

125
45
7
73

122
42
7
73

31
11
2
19

31
11
2
19

125
42
8
75

129
43
8
78

134
44
8
81

Africa
Egypt
Nigeria
Other Africa
South Africa

178
12
13
61
92

177
12
13
70
83

171
11
16
64
81

166
10
17
67
72

39
3
4
16
16

40
3
4
16
17

158
10
17
65
67

163
11
17
67
68

170
11
18
70
70

7,732
5,403
232
579
94
516
538
59
176
15
120

7,724
5,458
221
513
105
501
545
64
179
16
122

7,644
5,343
193
586
120
479
561
58
172
16
117

8,174
5,748
201
655
119
498
570
57
173
16
137

2,256
1,652
44
153
28
127
160
15
44
4
29

2,270
1,641
52
173
30
123
156
15
44
4
34

8,811
6,322
202
659
117
512
621
58
174
16
130

9,135
6,582
207
688
122
519
627
61
180
17
133

9,505
6,838
215
736
131
530
637
65
193
17
142

200
190
10
12,649

211
201
10
12,699

194
184
9
12,386

173
164
9
12,970

45
42
2
3,509

48
46
2
3,513

187
178
9
13,737

193
183
9
14,177

196
187
9
14,705

Thousand Tonnes
North America
Canada
Mexico
United States
Central & South America
Argentina
Brazil
Chile
Other Central & South America

Asia
China
Chinese Taipei
India
Indonesia
Japan
Korea
Malaysia
Other Asia
Singapore
Thailand
Oceania
Australia
New Zealand
Total

AME Group
Page 4

Confidential: see contract at www.amegroup.com

Finished Supply by Country

Table 4: Zinc Finished Supply by Country 20102016

2010
1,297
720
333
245

2011
1,248
689
322
238

2012
1,261
649
324
288

2013
1,238
652
323
263

2014Q2
272
161
79
32

2014Q3
268
161
79
28

2014
1,082
635
326
120

2015
1,320
712
348
260

2016
1,350
713
357
280

543
41
278
223

637
45
278
314

603
31
254
318

654
38
270
346

158
9
66
82

156
10
66
80

643
29
265
349

769
44
345
380

799
44
365
390

1,791
282
307
163
165
105
263
506

1,810
282
307
164
179
106
261
511

1,764
250
315
161
172
97
257
512

1,787
252
312
152
175
99
275
522

460
66
77
42
44
25
74
131

452
62
72
42
41
32
73
130

1,798
255
302
161
173
112
275
519

1,811
270
306
160
175
120
260
520

1,842
270
306
160
175
120
260
551

EU-12
Bulgaria
Poland

234
85
149

232
87
145

223
73
150

230
72
158

58
18
40

58
18
40

233
72
161

247
72
175

277
102
175

Europe - Other
Kosovo
Norway

149
149

153
153

153
153

143
143

39
39

43
43

161
161

170
170

195
25
170

CIS
Kazakhstan
Russia
Uzbekistan

599
300
249
50

622
301
256
65

623
301
250
72

631
300
266
65

150
76
61
14

155
76
63
16

623
306
249
68

693
293
310
90

693
293
310
90

Middle East
Iran

139
139

159
159

175
175

172
172

37
37

37
37

147
147

147
147

147
147

Africa
Algeria
Namibia
South Africa

257
28
139
90

249
29
147
73

165
20
145
-

148
20
128
-

38
5
33
-

32
5
27
-

152
20
132
-

180
30
150
-

180
30
150
-

7,373
5,295
612
556
750
42
101
16

7,597
5,271
825
523
826
30
106
16

7,249
4,918
730
568
887
31
95
20

7,765
5,395
726
594
920
32
78
20

1,902
1,342
145
146
230
9
25
5

2,048
1,449
185
146
230
9
25
5

7,871
5,447
730
617
920
36
100
20

8,357
5,859
796
620
920
42
100
20

8,915
6,382
861
590
920
42
100
20

444
444
12,825

509
509
13,216

504
504
12,720

494
494
13,264

126
126
3,240

123
123
3,372

492
492
13,203

495
495
14,188

495
495
14,892

Thousand Tonnes
North America
Canada
Mexico
United States
Central & South America
Argentina
Brazil
Peru
EU-15
Belgium
Finland
France
Germany
Italy
Netherlands
Spain

Asia
China
India
Japan
Korea
Korea, Dem. Rep.
Thailand
Vietnam
Oceania
Australia
Total

AME Group
Page 5

Confidential: see contract at www.amegroup.com

Mined Demand by Country

Table 5: Zinc Mined Demand by Country 20102016

2010
1,154
695
345
115

2011
1,137
704
330
104

2012
1,107
665
334
108

2013
1,098
668
331
98

2014Q2
280
168
82
31

2014Q3
278
170
82
27

2014
1,118
660
341
117

2015
1,333
720
356
258

2016
1,359
720
356
284

568
42
297
229

671
46
302
323

624
32
264
328

664
39
278
347

163
10
69
85

161
10
69
82

652
30
274
348

795
45
358
392

826
45
378
403

1,701
237
290
137
171
109
235
522

1,740
237
313
138
181
109
234
527

1,703
211
322
136
177
100
230
528

1,724
208
326
128
181
102
241
538

442
54
80
34
46
26
66
135

427
51
73
34
43
33
59
134

1,752
222
315
138
178
116
248
535

1,746
223
317
132
181
124
233
536

1,778
223
317
132
181
124
233
568

EU-12
Bulgaria
Poland

249
95
154

254
99
155

232
78
155

247
74
173

64
19
45

64
19
45

255
74
180

255
74
180

286
106
180

Europe - Other
Kosovo
Norway

154
154

159
159

158
158

148
148

38
38

39
39

158
158

176
176

202
26
176

CIS
Kazakhstan
Russia
Uzbekistan

612
310
250
52

641
310
264
67

642
310
258
74

651
310
275
67

155
78
63
14

160
78
65
16

639
315
257
67

715
302
320
93

715
302
320
93

Middle East
Iran

154
154

165
165

181
181

178
178

38
38

38
38

152
152

152
152

152
152

29
29

31
31

21
21

23
23

5
5

5
5

21
21

31
31

31
31

7,615
5,569
633
529
731
34
100
19

7,838
5,554
855
489
798
31
90
21

7,449
5,164
755
536
853
32
88
21

7,909
5,623
759
515
887
33
72
21

1,928
1,380
153
137
222
9
22
5

2,047
1,462
189
137
222
9
22
5

7,924
5,562
744
587
887
37
88
21

8,407
5,962
824
582
887
43
88
21

9,026
6,471
888
627
887
43
89
21

426
426
12,662

500
500
13,136

494
494
12,611

484
484
13,127

124
124
3,237

127
127
3,346

496
496
13,167

516
516
14,126

516
516
14,891

Thousand Tonnes
North America
Canada
Mexico
United States
Central & South America
Argentina
Brazil
Peru
EU-15
Belgium
Finland
France
Germany
Italy
Netherlands
Spain

Africa
Algeria
Asia
China
India
Japan
Korea
Korea, Dem. Rep.
Thailand
Vietnam
Oceania
Australia
Total

AME Group
Page 6

Confidential: see contract at www.amegroup.com

Mined Supply by Country

Table 6: Zinc Mined Supply by Country 20102016

Thousand Tonnes
North America
Canada
Mexico
United States

2010
2,069
645
572
852

2011
2,139
641
636
861

2012
2,163
651
654
858

2013
1,928
423
610
895

2014Q2
492
100
169
224

2014Q3
489
90
168
231

2014
2,004
378
666
961

2015
2,269
567
721
980

2016
2,500
764
753
983

Central & South America

Argentina
Bolivia
Brazil
Chile
Guatemala
Honduras
Peru

2,135
33
390
192
20
34
1,466

1,965
38
427
204
29
26
1,241

1,897
38
406
168
20
26
1,240

1,904
42
383
158
24
25
1,273

480
10
92
42
10
4
7
315

531
9
103
42
10
5
8
355

1,990
37
391
168
34
16
29
1,315

1,977
35
375
168
36
16
29
1,319

2,017
33
378
168
36
36
29
1,338

EU-15
Finland
Greece
Ireland
Portugal
Spain
Sweden

646
56
20
342
6
18
204

669
64
20
347
4
33
200

657
52
18
339
30
29
188

608
41
22
281
53
34
177

169
12
6
68
21
9
53

168
8
5
64
21
9
60

652
38
23
271
74
34
211

743
48
25
280
99
51
240

682
48
46
160
108
69
252

EU-12
Poland

108
108

87
87

77
77

77
77

15
15

15
15

60
60

50
50

34
34

Europe - Other
Greenland
Macedonia (FYROM)
Montenegro
Turkey

226
29
1
196

191
28
3
160

243
28
8
207

244
28
8
208

59
9
1
49

61
9
1
51

244
36
5
203

241
36
20
185

455
214
36
20
185

CIS
Armenia
Kazakhstan
Russia
Tajikistan

678
9
411
259
-

696
9
414
264
9

725
7
437
269
12

769
7
473
267
22

197
1
118
68
10

194
1
114
68
10

787
6
459
282
40

896
6
461
369
60

1,036
6
476
493
60

Middle East
Iran
Saudi Arabia

124
120
4

135
131
4

152
140
12

157
136
21

34
28
7

34
28
7

138
111
27

138
111
27

153
126
27

Africa
Burkina Faso
Eritrea
Morocco
Namibia
South Africa
Zambia

138
44
56
38
-

124
37
48
39
-

123
3
45
40
34
-

143
32
39
33
38
-

46
17
11
9
10
-

44
18
10
7
10
-

182
69
42
32
39
-

217
90
41
33
40
12

275
90
44
41
41
47
12

4,758
3,827
743
36
58
10
15
33
36

5,336
4,300
848
40
55
9
19
31
34

5,868
4,859
823
2
40
62
21
36
25

6,072
5,012
872
25
40
55
18
29
22

1,353
1,147
158
7
10
16
6
8

1,518
1,279
188
11
10
16
6
8

5,645
4,628
779
45
40
65
15
43
30

6,139
4,835
991
75
40
65
61
42
30

6,134
4,702
1,101
92
40
65
61
43
30

1,448
1,448
12,330

1,487
1,487
12,827

1,498
1,498
13,403

1,477
1,477
13,378

365
365
3,211

358
358
3,413

1,476
1,476
13,177

1,496
1,496
14,164

1,275
1,275
14,561

Asia
China
India
Korea
Korea, Dem. Rep.
Mongolia
Pakistan
Philippines
Thailand
Vietnam
Oceania
Australia
Total

AME Group
Page 7

Confidential: see contract at www.amegroup.com

Finished Demand by Country

Table 7: Lead Finished Demand by Country 20102016

2010
1,710
21
248
1,441

2011
1,779
14
227
1,538

2012
1,746
16
230
1,499

2013
1,939
31
188
1,720

2014Q2
500
3
46
451

2014Q3
461
6
51
405

2014
1,940
21
191
1,729

2015
1,967
22
195
1,749

2016
2,008
23
199
1,786

385
29
258
1
98

387
27
263
4
94

381
25
260
2
93

373
26
262
2
83

94
6
64
1
22

93
6
66
1
20

363
25
253
2
83

368
26
257
2
84

377
26
263
2
86

EU-15
Austria
Belgium
France
Germany
Greece
Ireland
Italy
Netherlands
Other EU-15
Portugal
Spain
Sweden
United Kingdom

1,290
36
34
71
341
15
33
247
18
1
8
264
6
214

1,315
44
36
74
372
15
33
233
17
2
10
265
5
209

1,270
41
37
64
377
7
20
214
17
4
11
245
5
228

1,276
46
32
58
367
11
20
215
16
4
15
254
8
230

325
11
8
17
97
4
5
59
4
1
3
56
2
57

334
11
8
20
94
4
5
59
4
1
4
71
2
52

1,322
43
32
63
378
15
20
234
16
5
15
261
8
230

1,354
44
32
64
383
15
21
237
16
5
15
269
8
244

1,393
44
33
67
387
16
21
245
16
5
15
277
8
256

EU-12
Bulgaria
Czech Republic
Hungary
Poland

222
13
84
5
121

193
11
43
8
130

204
10
70
9
116

251
8
103
7
132

67
2
32
2
31

65
2
29
2
32

263
8
115
8
132

267
8
116
8
136

275
8
119
8
140

Europe - Other
Other EU- Other
Turkey

155
43
112

169
38
131

190
47
143

182
48
134

43
11
31

50
12
38

194
49
145

201
51
149

206
53
154

CIS
Kazakhstan
Other CIS
Russia

94
9
13
72

89
9
15
65

114
10
30
74

106
10
31
65

26
2
7
17

26
2
7
17

105
9
29
67

107
10
30
68

110
10
31
70

Middle East
Iran
Israel
Saudi Arabia

127
46
32
49

138
43
31
64

130
40
30
61

126
34
30
62

31
8
8
16

31
8
8
16

124
31
30
63

126
31
31
64

129
32
32
66

Africa
Egypt
Nigeria
Other Africa
South Africa

81
1
3
22
55

100
3
3
27
67

101
6
3
27
65

98
2
3
24
68

27
1
9
17

25
1
1
7
16

104
2
4
33
65

106
2
4
34
66

109
2
4
35
68

Asia
China
Chinese Taipei
India
Indonesia
Japan
Korea
Malaysia
Other Asia
Singapore
Thailand

5,715
4,171
75
433
122
224
385
47
100
12
145

6,242
4,588
111
445
130
236
420
34
111
11
157

6,328
4,574
107
521
116
273
428
25
121
12
151

6,751
4,977
105
497
120
255
487
26
126
12
147

1,589
1,146
20
144
29
62
116
4
32
3
33

1,739
1,294
22
142
31
63
104
8
32
3
39

6,884
5,081
92
516
121
262
498
27
129
12
146

7,108
5,223
95
546
126
269
523
27
133
12
154

7,404
5,432
98
580
131
278
546
28
137
12
161

Oceania
Australia
New Zealand
Total

30
28
2
9,809

25
22
4
10,436

18
17
1
10,483

19
18
1
11,119

5
4

5
5

2,706

2,829

19
18
1
11,317

20
19
1
11,624

20
19
1
12,031

Thousand Tonnes
North America
Canada
Mexico
United States
Central & South America
Argentina
Brazil
Chile
Other Central & South America

AME Group
Page 8

Confidential: see contract at www.amegroup.com

Finished Supply by Country

Table 8: Lead Finished Supply by Country 20102016

2010
1,851
278
317
1,256

2011
1,878
283
348
1,247

2012
1,844
279
332
1,233

2013
1,888
288
306
1,294

2014Q2
455
67
87
300

2014Q3
455
68
88
300

2014
1,827
279
349
1,200

2015
1,789
309
380
1,100

2016
1,915
328
380
1,207

313
44
172
42
11
13
31

330
42
184
42
12
24
26

327
41
184
42
12
23
25

325
41
184
42
12
24
22

85
11
46
11
3
5
10

87
11
2
46
11
3
5
10

387
42
9
184
42
12
20
38
40

423
44
31
184
42
12
20
50
40

453
44
31
184
42
12
20
80
40

EU-15
Austria
Belgium
France
Germany
Greece
Ireland
Italy
Netherlands
Spain
Sweden
United Kingdom

1,325
24
120
72
387
10
19
150
20
163
59
301

1,433
25
121
80
495
11
19
150
27
177
52
275

1,463
24
120
83
515
6
17
138
27
160
62
312

1,457
25
134
80
466
7
17
180
27
160
69
292

384
6
34
22
118
3
4
51
8
40
20
80

363
6
34
22
118
3
6
56
8
40
12
60

1,537
24
135
87
470
12
20
226
30
160
67
306

1,556
25
135
88
480
12
23
190
30
160
73
340

1,587
25
135
90
480
12
25
190
30
165
75
360

EU-12
Bulgaria
Czech Republic
Estonia
Poland
Romania
Slovenia

265
81
30
10
119
11
14

272
72
34
10
134
7
15

265
65
30
11
134
13
12

287
71
28
12
149
14
13

68
18
8
3
33
3
4

76
18
8
3
33
3
11

289
71
30
12
132
14
30

348
131
30
12
131
15
30

352
131
30
12
130
20
30

Europe - Other
Switzerland
Turkey

6
6

48
48

50
50

50
50

15
3
13

15
3
13

60
10
50

60
10
50

60
10
50

CIS
Kazakhstan
Russia
Ukraine

208
124
77
7

248
132
104
12

219
88
106
25

239
102
109
28

66
29
29
8

72
38
29
5

267
127
115
25

250
110
115
25

250
110
115
25

Middle East
Iran
Israel
Saudi Arabia

134
70
26
38

144
82
27
35

146
81
26
39

138
72
26
40

38
21
7
10

40
21
9
10

158
83
35
40

173
91
40
42

173
91
40
42

Africa
Morocco
Namibia
South Africa

93
27
15
51

117
37
24
56

90
16
20
54

91
14
25
52

25
5
5
15

30
10
5
15

110
30
20
60

130
50
20
60

150
70
20
60

Asia
China
Chinese Taipei
India
Indonesia
Japan
Korea
Korea, Dem. Rep.
Malaysia
Myanmar
Philippines
Thailand

5,288
4,194
35
292
45
267
321
5
26
2
30
71

5,932
4,640
41
353
47
254
421
4
44
2
34
93

6,000
4,643
35
400
45
258
460
4
32
2
34
87

6,524
5,154
36
399
45
250
473
4
38
2
32
90

1,496
1,152
12
91
13
68
118
2
10
2
8
23

1,832
1,438
12
126
13
68
138
2
5
2
9
23

6,643
5,157
46
443
50
271
510
6
30
6
34
90

6,662
5,142
48
470
50
305
480
6
30
7
34
90

6,841
5,289
50
470
50
333
480
6
30
8
35
90

Oceania
Australia
New Zealand
Total

231
222
9
9,714

239
226
13
10,640

197
194
3
10,601

210
210
11,209

54
54
2,685

64
64
3,033

231
231
11,509

255
255
11,646

290
290
12,071

Thousand Tonnes
North America
Canada
Mexico
United States
Central & South America
Argentina
Bolivia
Brazil
Colombia
El Salvador
Guatemala
Peru
Venezuela

AME Group
Page 9

Confidential: see contract at www.amegroup.com

Mined Demand by Country

Table 9: Lead Mined Demand by Country 20102016

2010
-

2011
-

2012
-

2013
3
3

2014Q2
8
8

2014Q3
8
8

2014
32
32

2015
32
32

2016
32
32

EU-15
Germany

309
309

344
344

336
336

300
300

81
81

81
81

324
324

324
324

324
324

EU-12
Poland

441
441

486
486

447
447

450
450

112
112

112
112

448
448

448
448

448
448

Asia
China

83
83

121
121

161
161

222
222

60
60

66
66

304
304

364
364

394
394

832

951

160
160
1,104

181
181
1,156

44
44
305

55
55
321

193
193
1,299

202
202
1,369

237
237
1,434

Thousand Tonnes
Central & South America
Bolivia

Oceania
Australia
Total

AME Group
Page 10

Confidential: see contract at www.amegroup.com

Mined Supply by Country

Table 10: Lead Mined Supply by Country 20102016

2010
619
59
185
374

2011
627
65
217
345

2012
644
66
234
345

2013
613
24
225
364

2014Q2
147
2
57
88

2014Q3
153
2
58
94

2014
616
6
226
384

2015
713
36
226
451

2016
782
97
245
440

Central & South America

Argentina
Bolivia
Brazil
Chile
Guatemala
Honduras
Peru

402
23
81
13

381
23
87
13
1
11
247

373
25
86
10

383
25
86
13
12
247

97
7
19
3
1
3
3
61

101
7
19
3
2
4
66

396
26
76
13
1
9
13
257

443
25
79
13
2
10
13
300

525
25
80
14
2
18
13
372

EU-15
Greece
Ireland
Portugal
Spain
Sweden

119
12
39
-

121
10
44

68

133
17
48
6
62

4
64

119
10
42
1
6
60

31
3
9
1
1
18

31
3
9
1
1
18

132
12
41
4
6
70

144
14
39
8
82

155
30
24
11
89

EU-12
Poland

21
21

32
32

36
36

36
36

8
8

8
8

32
32

28
28

21
21

Europe - Other
Greenland
Macedonia (FYROM)
Montenegro
Turkey

76
38
38

77
36
1
40

92
34
2
56

104
34
2
68

29
10
1
18

29
10
1
18

114
40
2
72

196
40
6
150

214
18
40
6
150

CIS
Kazakhstan
Russia
Tajikistan

120
37
83
-

162
34
119
9

189
35
142
12

176
37
123
16

56
9
38
9

55
9
38
9

221
37
153
31

338
66
220
52

372
78
243
52

Middle East
Iran

32
32

40
40

45
45

39
39

8
8

8
8

30
30

40
40

45
45

Africa
Burkina Faso
Morocco
Namibia
South Africa
Zambia

109
44
13
52
-

114
48
11
55
-

93
28
9
55
-

91
1
23
14
53
-

23

20

6
2
13
2

6
2
10
2

86
1
24
10
46
5

102
1
24
12
56
8

107
1
24
16
57
8

Asia
China
India
Korea, Dem. Rep.
Myanmar
Pakistan
Thailand

2,093
1,972
88
26
6
1
-

2,477
2,347
90
32
7
1
-

2,970
2,838
96
26
10
-

3,164
3,020
105
26
13
-

635
604
20
8
4
-

755
727
20
8
-

2,687
2,552
93
30
8
4
-

3,236
3,015
166
30
8
17
-

3,317
3,062
197
30
8
17
3

Oceania
Australia
Total

631
631
4,222

607
607
4,650

573
573
5,136

655
655
5,380

177
177
1,210

171
171
1,330

719
719
5,031

770
770
6,011

766
766
6,304

Thousand Tonnes
North America
Canada
Mexico
United States

17
268

12
239

AME Group
Page 11

Confidential: see contract at www.amegroup.com

Year in Review
The zinc price has climbed 10.6% over 2014 levels from US$2,037/t (US92/lb) in January to US$2,253/t (US102/lb) in
November (Figure 1). The price over the year has been closely linked to the stock levels, with prices in July increasing to
over US$2,400 (US109/lb), coinciding with the LME stock levels declining to 655kt. At the beginning of 2014, AME
anticipated prices to increase over the year to average US$2,138/t (US97/lb); this is 1% below the actual average year to
date of US$2,160/t (US98/lb). AME currently forecasts a yearly average of US$2,165/t (US98/lb) for 2014.

With the closure of MMGs 500ktpa Century site in 2015, AME expected key sites operated by the major zinc
producers to fill the supply void; however, unexpected expansion delaysparticularly Glencores 380ktpa expansion at
McArthur River and Vedantas 685ktpa Rampura Aguchahave placed some emphasis on other sites, such as
Bolidens 142ktpa Garpenberg site.

Throughout 2014, AME forecast a significant deficit in the zinc market moving into 2015; however, with an unexpected
decline in Chinese demand growth in the December Quarter of 2014, the market is likely to balance in 2015. The
recent slower growth in Chinese demand came from decreased demand for end-use products particularly in
construction.

Greenfield projects resembled 57% of new zinc supply in 2014; this is in strong contrast for 2015 where 92% of supply
is expected to come from project expansions or the reopening of sites placed under care and maintenance.

Despite prices and stocks being reasonably correlated, sharp spikes in both price and stocks have occurred when
unexpected material stock movements have been made. These movements, including major overnight restocking
events have all been conducted at the New Orleans warehouse.

Figure 1: Daily LME Cash Zinc price01/01/201415/12/2014

$2,500
$2,400
$2,300

US$/tonne

$2,200
$2,100
$2,000
$1,900

$1,700

02-Jan-14
09-Jan-14
16-Jan-14
23-Jan-14
30-Jan-14
06-Feb-14
13-Feb-14
20-Feb-14
27-Feb-14
06-Mar-14
13-Mar-14
20-Mar-14
27-Mar-14
03-Apr-14
10-Apr-14
17-Apr-14
24-Apr-14
01-May-14
08-May-14
15-May-14
22-May-14
29-May-14
05-Jun-14
12-Jun-14
19-Jun-14
26-Jun-14
03-Jul-14
10-Jul-14
17-Jul-14
24-Jul-14
31-Jul-14
07-Aug-14
14-Aug-14
21-Aug-14
28-Aug-14
04-Sep-14
11-Sep-14
18-Sep-14
25-Sep-14
02-Oct-14
09-Oct-14
16-Oct-14
23-Oct-14
30-Oct-14
06-Nov-14
13-Nov-14
20-Nov-14
27-Nov-14
04-Dec-14
11-Dec-14

$1,800

Looking toward 2015, AME forecasts zinc prices to continue to increase to US$2,400/t (US109/lb). With the recent
downward adjustment to global demand, the market that was expected to be in deficit is now expected to become more

AME Group
Page 12

Confidential: see contract at www.amegroup.com

balanced. However, there is still a significant risk to mine-site supply due to delays in expansion projects and the
commissioning of new sites, meaning the market sits on the precipice of more deficits in the short term.

The recent downward adjustment of global demand was related to the slowing of Chinese demand growth over the
December Quarter of 2014 due to lessening demand for end-use products, particularly in construction. Although
demand has slowed, the global supply will remain tight in 2015.

The most significant contributors of risk to supply in 2015 are the expansions of Glencores 380ktpa McArthur River
Mine in Australia and Vedantas 685ktpa Rampura Agucha in India. Glencore is currently assessing environmental
concerns that may impact the expansion mine plan, while Vedanta is potentially facing issues over underground
ramp-ups. Meanwhile, electricity generation for the production of refined zinc and lead by Vedanta will potentially be
impacted by the Indian Governments decision to cancel various coal licences. Significant new projects, such as the
216kt Dugald River, are also experiencing commissioning delays, with AME now expecting this operation to begin in
2016.

In comparison to 2014, where 57% of new supply came from new projects, AME expects 92% of supply in 2015 to be
from expanding projects or reopened care-and-maintenance projects. The expansions at Bolidens 142ktpa
Garpenberg, Glencores 380ktpa McArthur River and Vedantas 685ktpa Rampura Agucha will be the most significant
new supply sources in 2015.

At the beginning of 2014, AME forecast refined demand to be 13.6Mt; this was 1% below the December 2014 forecast of
13.7Mt for the year. AME expected the concentrate demand to be 13.9Mt at the beginning of the year; however, by
December, this has dropped 5.2% to 13.1Mt.

Refined zinc demand exhibited quarterly gains over the first three quarters of the year, supported by stronger
demand in both emerging and established markets. Chinathe largest consumer of refined zincsaw demand
growing at 13.7% from January to September, while demand in the US and the EU-15 region rose by 9.1% and 2.7%,
respectively.

AMEs forecast for refined zinc supply fell 3.9% over 2014, from 13.7Mt at the beginning of the year to 13.2Mt in
December. Similarly, the forecast supply for zinc concentrate has also decreased 4.8% from 13.7Mt to 13.2Mt.

Unforeseen disruptions in supply over 2014 primarily came from the delay of Glencores expansion at the 380ktpa
McArthur River, Vedantas 685ktpa Rampura Agucha expansion and the closure of a number of mine sites in the
Yunnan province of China due to economics and stricter environmental and safety standards.

In 2014, AME forecast 14 projects to commence during the year with an operating zinc capacity of 440kt. Of those
projects, nine were new developments totalling 250kt. The most significant projects to commence in 2014 were the
60ktpa expansion at Altin-Topkan in Tajikistan , Zijins 82ktpa Kyzyl-Tashtygskoye in Russia and the restart of the
34ktpa Aljustrel site in Portugal.

External factors have also had an impact on zinc supply during 2014. Vedantas Indian operations (including the
685ktpa Rampura Agucha) will potentially face delays due to power supply disruptions during the December Quarter.
The disruption to the power supply was caused by a lack of coal to feed the power plants, due to the cancellation of
coal mining rights by the Indian Government. Industrial action at BHP and Glencores 200ktpa Antamina site in Peru is
also expected to have an impact on zinc supply during the December Quarter of 2014.

Both production and cash costs have been weaker in 2014 when compared with 2013 figures. Productivity has fallen
0.46% from 13.3Mt in 2013 to 13.2Mt in 2014 and cash costs have increased 23.2% from US31.5/lb to US38.8/lb in
2014. The increase in costs are due to a fall in by-product creditsboth lead and copper prices have decreasedand
an increase in offsite costs due to a rise in treatment charges (TCs) of 7% to US$225/t.

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The lead price has declined 5.3% over 2014 from US$2,143/t (US97/lb) in January to US$2,030/t (US92/lb) in November.
At the beginning of 2014, AME forecast prices to increase over the year to average US$2,225/t (US101/lb); however, prices
have continued to fall with the actual average year-to-date price of US$2,110/t (US96/lb). AME currently forecasts a yearly
average of US$2,144/t (US97/lb).
Looking toward 2015, AME forecasts the lead prices to increase to US$2,300/t (US104/lb). While the lead market recorded
a 192kt surplus in 2014, AME is expecting the surplus to decrease in 2015 to approximately 20kt.
Over 2014, AMEs lead demand forecast decreased marginally (0.7%) from 11.4Mt to 11.3Mt. The forecast for global refined
lead supply at the beginning of 2014 was 11.3Mt; however, the current forecast for 2014 has increased by 1.9% to 11.5Mt,
due better-than-expected output from Chinese lead smelters. In comparison, the supply of global lead concentrate has
fallen 13.8% from the forecast 5.8Mt at the beginning to 2014 to 5.0Mt in December, due to forecast limited supply from
Chinese mines in the December Quarter of 2014.

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Economics
China: Some Reasons to be Positive
2014 has not been the best year for the Chinese economy. The super-charged rates of GDP growth that characterised
much of the 1990s and 2000s are unlikely to be repeated going forward. Nevertheless, it is important not to overstate the
downside, so with much commentary focussed on the negatives, in this months article, we present a few arguments to
redress the analytical balance.
China will remain the key driver of global commodity demand over our forecast period, and the IMFs baseline forecasts
see real GDP growth remaining above 7% in 2015, albeit slowing from an estimated 7.4% in 2014 to 7.1%. After a 2014 that
has been disappointing for some commodities, our forecasts for Chinese demand in 2015 are generally solid, on base
effects alone. Moreover, our demand projections have long incorporated the assumption that China, like other countries
before it, will see growth in the metals intensity of GDP begin to moderate and eventually start to drop as the economy
matures and the structure of GDP shifts more towards services. We continue to see a hard landing for the Chinese
economy as unlikely, with the fact that the Chinese state still has so much control over the economy providing some
reassurance that it can contain risks even as it seeks to restructure the economy.
In addition, some commodities will benefit from specific factors.

For example, Chinas imports of metallurgical coal will be supported by the cancellation of import tariffs on
metallurgical coal as part of the recent free trade agreement with Australia.

Although the corresponding import tariffs on thermal coal will not be removed for another two years, we are
assuming that stringent restrictions imposed in 2014 by the authorities on coal imports by power stations will not be
extended. (In August, the National Development and Reform Commission (NDRC) requested that the countrys
leading power producers reduce average monthly imports in SeptemberDecember to no more than 50% of the
average rate in JanuaryAugust.)

In the case of base metals, the apparent demand data can give a misleading picture of underlying demand. For
example, we believe that Chinas apparent copper demand, which rocketed by more than 21% year on year in
JanuaryAugust despite the slowing of overall economic growth, has been supported by large-scale purchases by the
countrys State Reserve Bureau (SRB), which have boosted imports. In 2015, we do not expect the scale of 2014s SRB
purchases to be repeated and, therefore, forecast modest growth of just 1% in Chinas apparent demand. However,
demand excluding SRB purchases will be stronger.

In addition, we expect that official policy will be more supportive of economic growth in 2015.

Growth has been held back in 2014 by the anti-corruption campaign, which has dampened conspicuous consumption
by the elite and government employees. If anything, the campaign has gathered momentum of late, having claimed
the most senior official yet. However, it will need to wind down sooner or later, the more so given its notable impact
on headline growth and the overriding imperative in China to ensure a sufficient rate of expansion to maintain social
stability. We anticipate that the campaign will have a more moderate impact on economic growth in 2015.

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The anti-corruption campaign aside, government and central bank policy has recently become notably more proactive
in supporting growth, particularly with the vital real estate sector undergoing a substantial cooling. The government
has adopted various mini-stimulus measures during the course of the year as the economy has slowed. Since
November the NDRC has approved CNY1trn (US$160bn; equivalent to 1.6% of 2014 nominal GDP) in infrastructure
projects, including 28 railways and a new Beijing airport. In addition, the Peoples Bank of China (PBOC) cut its
benchmark interest rates in November for the first time since 2012. With inflation currently subdued, there is scope
for further monetary easing in 2015. The authorities have also taken various steps to support the real estate sector
specifically; for example, in late September they relaxed mortgage rates and down-payment levels for second-home
buyers.

It is also worth noting that the IMFs October forecasts will not have incorporated the full effect of the recent dramatic fall
in global oil prices.

The slide in oil prices is already having a severe impact on the economies of some major energy producers, most
notably in the case of Russia. China is also one of the worlds largest oil producers, but is the worlds largest oil
importer. There is, therefore, expected to be a net positive effect on the economy from falling prices at the level of
imports and for consumers. The figure below shows that the fall in global oil prices during the global financial crisis
was not passed on to Chinese consumers. However, in 2014, retail prices have been falling in China, albeit not to the
same degree as in the US.

Chinese and US Petrol Prices vs Brent Spot Price, 20052014

1.4

US$/bbl

US$/litre

140

Sep-2014

Mar-2014

Sep-2013

Mar-2013

Mar-2012

Sep-2012

Mar-2011

Sep-2011

Mar-2010

20

Sep-2010

0.2

Sep-2009

40

Mar-2009

0.4

Sep-2008

60

Mar-2008

0.6

Sep-2007

80

Mar-2007

0.8

Mar-2006

100

Sep-2006

1.0

Mar-2005

120

Sep-2005

1.2

China state guidance retail 93 RON gasoline price (Beijing; LHS)

US regular conventional retail gasoline prices (LHS)
Brent spot price FOB (RHS)

Source: Bloomberg, EIA, AME

Against this backdrop, recent economic indicators from China have been disappointing. In November, industrial production
growth eased to 7.2% year on year from 7.7% in October, making it the second-slowest pace of growth of the year so far
after Augusts surprise deceleration to 6.9% year on year.

However, there appear to have been specific one-off factors at play in November that will not apply going forward,
notably Beijings hosting of the Asia-Pacific Economic Cooperation (APEC) gathering of world leaders that month. In
anticipation of the meeting, hundreds of factories, including steel plants, were ordered to temporarily halt production,
in order to reduce pollution levels in the capital.

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In JanuaryNovember, the total floor space of newly started construction (AMEs proxy for Chinese construction
activity, as building materials are usually ordered in the early stage of the construction process) fell by 9.0% year on
year, accelerating sharply from JanuaryOctobers 5.5% year-on-year fall. However, it is worth noting that, prior to
November, the indicator had consistently improved during the course of the year, from a 27.4% year-on-year
contraction in JanuaryFebruary.

In light of the above, data for the coming few months will be closely watched for confirmation that Novembers particularly
weak outturn was temporary.

China: Industrial Output, 20002014

25.0

China: Floor Space of Newly Started and Completed

Buildings, 20022014 (Cumulative Data)
90.0

% ch. yoy

% ch. yoy

70.0
20.0
50.0
15.0
30.0
10.0

10.0
-10.0

5.0

Feb-02
Aug-02
Feb-03
Aug-03
Feb-04
Aug-04
Feb-05
Aug-05
Feb-06
Aug-06
Feb-07
Aug-07
Feb-08
Aug-08
Feb-09
Aug-09
Feb-10
Aug-10
Feb-11
Aug-11
Feb-12
Aug-12
Feb-13
Aug-13
Feb-14
Aug-14

Jan-14

Aug-14

Jun-13

Apr-12

Nov-12

Sep-11

Jul-10

Feb-11

Dec-09

Oct-08

May-09

Mar-08

Jan-07

Aug-07

Jun-06

Apr-05

Nov-05

Sep-04

Jul-03

Feb-04

Dec-02

Oct-01

May-02

Mar-01

Jan-00

Aug-00

-30.0
-

Newly started

Source: NBS, AME

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Industrial Indicator Summary

Table 11: Industrial Indicator Summary 20072014 Q3

2007
Industrial production(real % ch. yoy)
United States
2.5%
Germany
5.9%
Italy
2.5%
China
18.5%
Japan
2.9%
South Korea
7.0%
India
15.7%
Brazil
5.6%
Russia
6.8%
Exchange Rate (Local / US$)
USD/DEM
0.73
USD/JPY
117.77
USD/CNY
7.61
USD/CAD
1.07
USD/BRL
1.95
USD/ZAR
7.05
Industrial/business leading indicator
United States
51.2
Germany
110.9
Japan
51.2
China
55.1
Brazil
59.9
South Korea
105.9
Consumer confidence
United States
85.6
Germany
4.4
Japan
44.7
China
112.6
Italy
-18.7
Brazil
111.3
Russia
-2.1
South Korea

2008

2009

2010

2011

2012

2013

Jun-14

Sep-14

-3.5%
-0.1%
-3.2%
12.9%
-3.6%
3.4%
7.7%
2.9%
0.6%

-11.4%
-15.5%
-18.7%
11.0%
-21.6%
-0.7%
0.2%
-7.0%
-9.3%

5.4%
10.1%
6.9%
15.7%
15.6%
16.5%
9.7%
10.4%
8.2%

4.0%
7.4%
0.3%
13.9%
-2.7%
5.9%
4.8%
0.5%
4.7%

3.7%
-0.4%
-6.0%
10.0%
0.2%
1.7%
0.7%
-2.7%
2.6%

2.9%
0.1%
-3.2%
9.5%
-0.6%
0.2%
0.5%
2.2%
0.4%

4.2%
1.1%
-1.6%
8.9%
2.6%
1.3%
4.4%
-4.3%
1.9%

4.4%
-0.3%
-7.8%
8.0%
-1.1%
1.0%
0.6%
-4.0%
1.6%

0.68
103.39
6.95
1.07
1.84
8.26

0.72
93.60
6.83
1.14
2.00
8.41

0.76
87.73
6.77
1.03
1.76
7.32

0.72
79.69
6.46
0.99
1.67
7.26

0.78
79.82
6.31
1.00
1.96
8.21

0.75
97.58
6.15
1.03
2.16
9.64

0.73
102.11
6.23
1.09
2.23
10.54

0.75
104.00
6.17
1.09
2.27
10.77

45.5
100.4
45.3
50.1
58.5
88.6

46.4
90.7
45.9
53.0
55.0
94.0

57.4
107.8
51.3
53.8
64.8
108.4

55.2
111.3
50.1
51.4
57.8
101.1

51.8
105.0
48.8
50.8
56.9
94.2

53.9
106.9
51.8
50.8
54.7
95.1

55.2
110.4
50.3
50.7
48.2
94.7

57.6
106.3
51.5
51.3
46.5
95.0

63.8
-7.5
32.4
108.7
-23.8
111.7
-5.2
83.3

66.3
-25.2
35.5
102.0
-21.0
112.3
-28.0
103.0

71.9
-3.2
41.4
105.5
-21.6
116.8
-9.5
112.6

67.4
4.3
37.7
103.3
-27.7
113.2
-9.0
102.6

76.6
-4.8
40.0
102.4
-36.7
114.0
-5.8
101.1

79.2
-4.2
43.7
101.2
-25.7
111.9
-7.8
104.1

82.8
4.3
39.1
103.9
-9.9
107.5
-6.0
106.7

83.0
1.0
40.9
104.5
-13.9
109.2
-7.0
106.3

End Use Sectors

Table 12: End Use Sectors 20072014 Q3

Construction
United States Construction
spending (nominal US$m)
Germany Construction GDP (real
index)
China Floor space U/C residential (mn sqm)
Japan Construction work (real
index)
Motor vehicle sales
United States (thousands)
Germany (thousands)
China (thousands)
Japan (thousands)
Consumer durables sales
United States (nominal US$m)
Germany (nominal index)
China (nominal US$m)
Japan (nominal index)

2007

2008

2009

2010

2011

2012

2013

Jun-14

Sep-14

1,153,027.0

1,067,828.0

905,334.0

804,226.0

787,539.0

859,758.0

908,528.0

240,859.0

238,844.6

96.2

95.3

92.6

99.2

103.4

104.5

104.3

106.4

1,864.6

2,166.7

2,508.0

3,149.4

3,884.4

4,289.6

4,863.5

4,372.0

4,790.2

93.9

86.3

81.8

75.9

74.4

76.7

84.6

82.5

83.1

16,152.5
3,148.2
6,297.9
5,353.6

13,216.7
3,090.0
6,747.5
5,082.2

10,425.8
3,807.2
10,315.4
4,609.3

11,577.5
2,916.6
13,748.9
4,956.2

12,731.7
3,173.6
14,498.0
4,210.2

14,440.8
3,082.5
15,493.6
5,369.7

15,485.0
2,952.4
17,928.0
5,375.5

4,133.3
826.5
4,763.5
1,161.2

4,182.5
743.4
4,522.1
1,312.5

421,151.0
99.2
31,205.0
165.3

357,706.0
100.3
38,968.0
156.2

271,759.0
97.6
46,121.0
117.1

328,964.0
99.9
59,887.0
100.1

356,738.0
103.8
83,045.0
101.0

393,853.0
104.6
93,921.0
97.7

439,061.0
102.5
113,167.0
93.5

110,153.0
102.1
30,734.0
88.2

113,799.0
100.8
30,092.0
84.5

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Developed World GDP

Figure 2: Developed World GDP 20102016

Developing World GDP

Figure 3: Developing World GDP 20102016

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GDP % change per annum

Table 13: GDP % Change per Annum 20102016
Brazil
China
France
Germany
India
Italy
Japan
Korea
Russia
United Kingdom
United States

2010
7.5%
10.4%
1.9%
3.9%
9.3%
1.7%
4.7%
6.5%
4.1%
1.9%
2.5%

2011
2.7%
9.3%
2.1%
3.7%
7.7%
0.7%
-0.4%
3.7%
4.3%
1.7%
1.6%

2012
1.0%
7.7%
0.4%
0.6%
4.8%
-2.3%
1.5%
2.3%
3.5%
0.7%
2.3%

2013
2.5%
7.7%
0.4%
0.2%
4.7%
-1.9%
1.5%
3.0%
1.3%
1.7%
2.2%

2014
0.3%
7.4%
0.4%
1.4%
5.6%
-0.2%
0.9%
3.7%
0.2%
3.2%
2.2%

2015
1.4%
7.1%
1.0%
1.5%
6.4%
0.9%
0.8%
4.0%
0.5%
2.7%
3.1%

2014
79.69
8.23
412.81
1.09
0.78
6.86
1.43
8.56
2.28
1.42
479.21
1.09
556.53
6.22
30.05
1,936.96
5.53
20.08
5.46
6.97
20.01
1.81
0.74
233.49
116.10
62.86
11,761.43
26,755.83
1,166.00
3.57
111.89
102.44
178.68
1,036.81
51.16
3.20
13.24
1,802.40
8.17
1.16
155.22
6.12
2.80
3.09
3.64
3.26
35.33
3.75
86.42
1.25
10.69
6.69
0.90
32.19
2.17
11.30
3.67
0.60
21,421.57

2015
82.08
11.20
430.48
1.10
0.77
6.86
1.40
8.57
2.32
1.40
470.76
1.10
562.00
6.25
28.90
1,941.94
5.45
20.04
5.42
7.18
21.41
1.84
0.74
238.58
115.63
64.70
12,391.72
31,339.84
1,166.00
3.55
121.15
102.33
180.00
1,019.81
53.92
3.13
13.42
2,034.59
8.06
1.15
160.63
6.24
2.75
3.04
3.64
3.23
37.23
3.75
89.60
1.26
11.20
6.81
0.92
32.88
2.25
12.91
3.67
0.59
22,064.25

2016
2.2%
6.8%
1.6%
1.8%
6.5%
1.3%
0.8%
4.0%
1.5%
2.4%
3.0%

FX Forecast
Table 14: FX Forecast 20102016
Algeria(DZD/US$)
Argentina(ARS/US$)
Armenia(AMD/US$)
Australia(AUD/US$)
Azerbaijan(AZN/US$)
Bolivia(BOB/US$)
Bosnia & Herzegovina(BAM/US$)
Botswana(BWP/US$)
Brazil(BRL/US$)
Bulgaria(BGN/US$)
Burkina Faso(XOF/US$)
Canada(CAD/US$)
Chile(CLP/US$)
China(CNY/US$)
Chinese Taipei(TWD/US$)
Colombia(COP/US$)
Croatia(HRK/US$)
Czech Republic(CZK/US$)
Denmark(DKK/US$)
Egypt(EGP/US$)
Ethiopia(ETB/US$)
Georgia(GEL/US$)
Germany(DEM/US$)
Hungary(HUF/US$)
Iceland(ISK/US$)
India(INR/US$)
Indonesia(IDR/US$)
Iran(IRR/US$)
Iraq(IQD/US$)
Israel(ILS/US$)
Jamaica(JMD/US$)
Japan(JPY/US$)
Kazakhstan(KZT/US$)
Korea(KRW/US$)
Kyrgyz Republic(KGS/US$)
Malaysia(MYR/US$)
Mexico(MXN/US$)
Mongolia(MNT/US$)
Morocco(MAD/US$)
New Zealand(NZD/US$)
Nigeria(NGN/US$)
Norway(NOK/US$)
Peru(PEN/US$)
Poland(PLN/US$)
Qatar(QAR/US$)
Romania(RON/US$)
Russia(RUB/US$)
Saudi Arabia(SAR/US$)
Serbia(RSD/US$)
Singapore(SGD/US$)
South Africa(ZAR/US$)
Sweden(SEK/US$)
Switzerland(CHF/US$)
Thailand(THB/US$)
Turkey(TRY/US$)
Ukraine(UAH/US$)
United Arab Emirates(AED/US$)
United Kingdom(GBP/US$)
Vietnam(VND/US$)

2010
73.85
3.91
373.70
1.09
0.80
7.02
1.48
6.79
1.76
1.48
495.86
1.03
509.94
6.77
31.49
1,897.33
5.50
19.10
5.62
5.63
14.48
1.78
0.76
208.08
122.15
45.74
9,084.00
10,074.21
1,169.00
3.73
87.16
87.73
147.36
1,156.37
45.87
3.22
12.63
1,355.99
8.43
1.39
151.06
6.04
2.82
3.02
3.64
3.18
30.37
3.75
77.91
1.36
7.32
7.20
1.04
31.71
1.51
7.95
3.67
0.65
19,138.00

2011
72.89
4.13
372.68
0.97
0.79
6.95
1.41
6.82
1.67
1.41
473.70
0.99
483.71
6.46
29.39
1,847.82
5.35
17.69
5.36
5.94
16.98
1.68
0.72
201.11
116.00
46.68
8,773.00
10,616.94
1,169.65
3.58
85.74
79.69
146.65
1,107.96
46.12
3.06
12.44
1,263.92
8.10
1.27
155.89
5.61
2.75
2.97
3.64
3.05
29.40
3.75
73.34
1.26
7.26
6.49
0.89
30.49
1.68
7.99
3.67
0.62
20,663.00

2012
77.88
4.55
401.90
0.97
0.79
6.92
1.52
7.61
1.96
1.52
512.43
1.00
486.34
6.31
29.58
1,797.07
5.85
19.56
5.79
6.07
17.79
1.65
0.78
225.04
125.13
53.48
9,388.00
12,198.76
1,165.24
3.85
88.46
79.82
149.15
1,126.49
47.00
3.09
13.15
1,358.42
8.64
1.24
158.83
5.82
2.64
3.25
3.64
3.47
31.06
3.75
88.02
1.25
8.21
6.77
0.94
31.07
1.80
8.08
3.67
0.63
20,872.00

AME Group
Page 20

2013
79.68
5.47
409.75
1.04
0.78
6.91
1.47
8.39
2.16
1.47
495.95
1.03
495.21
6.15
29.70
1,868.58
5.71
19.56
5.62
6.87
18.72
1.66
0.75
223.57
122.13
58.54
10,440.50
17,942.31
1,164.97
3.61
99.78
97.58
152.20
1,094.58
48.43
3.15
12.76
1,520.31
8.42
1.22
159.20
5.88
2.70
3.16
3.64
3.33
31.85
3.75
85.17
1.25
9.64
6.51
0.93
30.71
1.90
8.15
3.67
0.64
21,028.75

2016
84.54
15.31
452.01
1.12
0.77
6.86
1.39
8.75
2.37
1.38
465.03
1.10
564.00
6.30
27.83
1,965.29
5.40
20.15
5.41
7.33
22.91
1.88
0.74
238.61
116.58
67.16
13,047.26
36,869.33
1,166.00
3.55
129.94
102.50
180.00
1,011.50
55.54
3.09
13.58
2,177.82
8.00
1.16
171.35
6.32
2.70
3.04
3.64
3.20
37.64
3.75
90.73
1.27
11.61
6.75
0.93
33.30
2.35
13.32
3.67
0.59
22,667.60

Confidential: see contract at www.amegroup.com

Prices
Exchange Prices vs Stocks
Figure 4: Zinc Exchange Prices vs Stocks

Cash to Three Month Price Spread

Figure 5: Zinc Cash to Three Month Price Spread

AME Group
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Confidential: see contract at www.amegroup.com

Forward Curve
Figure 6: Zinc Forward Curve

Exchange Prices vs Stocks

Figure 7: Lead Exchange Prices vs Stocks

AME Group
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Confidential: see contract at www.amegroup.com

Cash to Three Month Price Spread

Figure 8: Lead Cash to Six Month Price Spread

Forward Curve
Figure 9: Lead Forward Curve

AME Group
Page 23

Confidential: see contract at www.amegroup.com

Historical Prices & Stocks

Table 15: Lead Historical Prices & Stocks

Latest
Oct-14
Sep-14
Aug-14
Jul-14
Jun-14
May-14
Apr-14
Mar-14
Feb-14
Jan-14
Dec-13
Nov-13
Oct-13
Sep-13
Aug-13
Jul-13
Jun-13
May-13
Apr-13
Mar-13
Feb-13
Jan-13
Dec-12
Nov-12
Oct-12
Sep-12
Aug-12
Jul-12
Jun-12
May-12
Apr-12
Mar-12
Feb-12
Jan-12
Dec-11
Nov-11
Oct-11
Sep-11
Aug-11
Jul-11
Jun-11
May-11
Apr-11
Mar-11
Feb-11
Jan-11
Dec-10
Nov-10
Oct-10
Sep-10
Aug-10
Jul-10
Jun-10
May-10
Apr-10
Mar-10
Feb-10
Jan-10

US$/t
2,030
2,034
2,117
2,237
2,193
2,107
2,097
2,087
2,053
2,108
2,143
2,137
2,090
2,115
2,085
2,173
2,048
2,100
2,032
2,024
2,173
2,366
2,334
2,280
2,182
2,142
2,178
1,898
1,881
1,851
1,999
2,074
2,057
2,121
2,100
2,025
1,994
1,960
2,288
2,393
2,681
2,525
2,420
2,719
2,624
2,596
2,584
2,413
2,365
2,384
2,193
2,083
1,844
1,707
1,877
2,272
2,163
2,126
2,352

Cash Price
US/lb
92
92
96
101
99
96
95
95
93
96
97
97
95
96
95
99
93
95
92
92
99
107
106
103
99
97
99
86
85
84
91
94
93
96
95
92
90
89
104
109
122
115
110
123
119
118
117
109
107
108
99
94
84
77
85
103
98
96
107

AME Group
Page 24

Total Stocks
(Kt)
218
227
225
221
216
194
190
194
200
202
208
222
231
233
240
186
200
198
219
255
263
287
291
320
362
324
268
310
327
350
350
361
377
370
363
353
370
388
374
318
311
320
322
308
281
294
280
208
204
200
192
192
184
190
191
181
176
165
157

Confidential: see contract at www.amegroup.com

Historical Prices & Stocks

Table 16: Zinc Historical Prices & Stocks

Latest
Oct-14
Sep-14
Aug-14
Jul-14
Jun-14
May-14
Apr-14
Mar-14
Feb-14
Jan-14
Dec-13
Nov-13
Oct-13
Sep-13
Aug-13
Jul-13
Jun-13
May-13
Apr-13
Mar-13
Feb-13
Jan-13
Dec-12
Nov-12
Oct-12
Sep-12
Aug-12
Jul-12
Jun-12
May-12
Apr-12
Mar-12
Feb-12
Jan-12
Dec-11
Nov-11
Oct-11
Sep-11
Aug-11
Jul-11
Jun-11
May-11
Apr-11
Mar-11
Feb-11
Jan-11
Dec-10
Nov-10
Oct-10
Sep-10
Aug-10
Jul-10
Jun-10
May-10
Apr-10
Mar-10
Feb-10
Jan-10

US$/t
2,253
2,277
2,295
2,327
2,311
2,128
2,059
2,027
2,008
2,035
2,037
1,975
1,866
1,885
1,847
1,896
1,838
1,839
1,831
1,856
1,929
2,129
2,031
2,040
1,912
1,904
2,010
1,816
1,848
1,856
1,928
2,003
2,036
2,058
1,989
1,911
1,935
1,871
2,075
2,199
2,398
2,234
2,160
2,371
2,341
2,473
2,376
2,287
2,283
2,374
2,151
2,047
1,847
1,747
1,970
2,368
2,277
2,159
2,415

Cash Price
US/lb
102
103
104
106
105
97
93
92
91
92
92
90
85
85
84
86
83
83
83
84
88
97
92
93
87
86
91
82
84
84
87
91
92
93
90
87
88
85
94
100
109
101
98
108
106
112
108
104
104
108
98
93
84
79
89
107
103
98
110

Total Stocks
(Kt)
673
701
751
734
656
668
712
777
780
762
854
933
962
1,036
966
1,005
1,049
1,061
1,087
1,068
1,176
1,195
1,209
1,221
1,199
1,170
991
951
1,000
992
941
914
897
868
844
822
740
781
821
856
890
863
855
821
737
708
711
701
632
622
617
623
620
617
619
553
542
542
497

Events
17/12/2014 (Government), China NonFerrous Metal Mining (Group) Co Ltd (Baiyinnuoer Lead-Zinc)
Production at the Baiyinnuoer Lead-Zinc Mining's site has been temporarily suspended due to a fatal incident. The incident
occurred on the 20th November 2014 and production is not expected to resume until early January 2015. AME anticipates
a production loss of 4.9kt, this represents 11% of the site's 46ktpa contained zinc capacity.

AME Group
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Confidential: see contract at www.amegroup.com

17/12/2014 Teck Resources Limited (Pend Oreille)

Production at Teck's Pend Oreille in the United States has recommenced with the first shipment of zinc concentrate sent to
the nearby Trail Operation in British Columbia for processing. The site was under care and maintenance since 2009, but
maintained to allow the restart of the project to be completed on time and under budget. The site anticipates an annual
production of rate of 44ktpa of zinc concentrate (26ktpa contained zinc), operating until 2020. AME estimates Pend Oreille
to produce approximately 2kt of contained zinc in 2014.
17/12/2014 Vedanta Resources PLC, Vedanta Resources PLC, Vedanta Resources PLC, Vedanta Resources PLC,
Vedanta Resources PLC (Kayad, Rajpura-Dariba, Rampura Agucha, Sindesar Khurd, Zawar Mines)
The sale of Hindustan Zinc is likely to be postponed until the next financial year (FY2016). The Indian Government will wait
for the results of the Central Bureau of Investigation's report into the previous 20022003 sale of assets and the Supreme
Court's verdict on the legality of the sale before making any further decisions. The government is also waiting on the
valuation report for Hindustan Zinc.
Vedanta's shareholders have approved the offer to buy out the Indian Government's 29.5% stake in Hindustan Zinc to
become the sole owner of the operations that include the 680ktpa Rampura Agucha site.
17/12/2014 Canadian Zinc Corporation (South Tally Pond)
Canadian Zinc Corporation has completed their recent 2,754m drilling programme on the South Tally Pond polymetallic
deposit. Significant intersections include 6.1m in LM14-103 from 340.9347.0m at 8.50% zinc, 4.41% lead, 1.06% copper,
34g/t silver and 0.55g/t gold. LM14-102 included 7m from 341.1348.1m at 3.40% zinc, 0.30% lead, 0.52% copper, 25.3g/t
silver and 0.44g/t gold.
Mineralisation is at a vertical depth of 260350m and remains open to the north and east of the current drilling. AME
expects further drilling to be conducted to upgrade the current 1.24Mt Indicated Resource.
15/12/2014 Exxaro Resources Limited, Vedanta Resources PLC (Gamsberg mine)
Vedanta anticipates to have the first phase of the 250ktpa Gamsberg project completed and producing by 20172018. An
investment of US$630m is planned for the first phase of the project, which includes developing access to approximately
50Mt of zinc contained in ore, 27% of the overall 185Mt resource.
12/12/2014 Yunnan Chihong Zinc and Germanium Co Ltd (Hulunbeier Chihong (Zn))
Yunnan Chihong's Hulunbeier smelter in China has successfully produced zinc ingot. The smelter began trial production in
October and, when running at full capacity, it will produce 140ktpa.
11/12/2014 Nyrstar NV (Campo Morado)
Mining and Milling activities at Nyrstar's Campo Morado mine in Mexico have fully resumed after the two-week blockade
of site by the local CTM trade union was lifted. The blockade was lifted on the 28th November and production is expected
to be at pre-blockade levels within the next few days. Negotiations with the local and federal union leaders are ongoing
and the possibility of further industrial action remains.
Nyrstar are predicting a loss of 2kt (40%) zinc in concentrate over the December Quarter of 2014 due to the production
suspension.
11/12/2014 Goldspike (Lone Mountain )
Goldspike have continued to receive positive results from drilling at Lone Mountain, Nevada, in the US. Further to initial
results, Goldspike have intersected 15.24m of 33.06% zinc and 0.61% lead from 147.83m to 163.07m in drill hole LM-14-04.
Of the seven holes drilled in phase one, each has intersected mineralisation except hole LM-14-03 due to technical issues.
Phase two of the drilling programme is due to commence in early January.

AME Group
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Confidential: see contract at www.amegroup.com

10/12/2014 Boliden AB (Kokkola)

Boliden's new silver recovery plant at the Kokkola smelter in Finland has been commissioned. The new plant will produce a
silver concentrate, an intermediate product, which will be sold to silver refineries. The silver refinery will produce
approximately 25t of silver in concentrate annually. Kokkola is primarily a zinc smelter producing approximately 305ktpa
refined zinc, the introduction of the silver recovery plant will be an important by-product for the site.
10/12/2014 Glencore (Mount Isa Zinc)
The expansion at Glencore's Lady Loretta Mine in Australia is ahead of schedule. Construction on the project commenced
in 2011 and has since ramped up to currently produce 1Mtpa of ore, this is expected to increase to 1.6Mtpa mined ore by
the second half of 2015. The overall capital cost of the project is approximately US$350m.
With the currently stated Reserves, the site is forecast to have a mine life of 12 years. AME estimate a head grade of 14.7%
zinc based on reported Reserve grades, although AME believes the grade profile increases with depth. As such, assuming
the orebody is mined from the top down, grades in the early stages of production will be lower. Changes in the head grade
over the mine life will vary the quantity of contained zinc; however, based on mined ore of 1.6Mtpa, AME estimates
contained zinc in ore to be between 150200ktpa. Ore is transported 140km to Glencore's Mount Isa concentrator for
further processing.
09/12/2014 Firestone Ventures Inc. (Torlon Hill)
The Guatemalan President has signed into law the proposed increase in mining royalties. This will have an impact on the
feasibility study at Torlon Hill where the business plan may be reconsidered.
Mines will now be subject to two royalties, totalling 10% (9% for the national government and 1% for the producing
project municipality). Previously zinc producers were required to pay only 1%; however, 3% was voluntarily paid in
agreement with the mining industry association.
AME believe the change in royalties will shift the operation from negative to positive cash costs (after credits), although the
site will still be operating in the first cost quartile. AME expects Torlon Hill to begin production in 2016 producing
approximately 21ktpa of contained zinc.
09/12/2014 Henan Yuguang Gold & Lead Group Co Ltd (Yuguang Zinc)
Henan Yuguang Gold and Lead Group's Zinc smelter resumed production after a 30-day routine maintenance shutdown.
Production increased 7kt in November compared to October; however, the smelter is not yet at the full capacity of
250ktpa.
08/12/2014 Maguan Yutong Zinc (Maguan)
Yunnan Yuntong Zinc's Maguan Smelter in China will lose 2,000t of production in December due to equipment failure. The
smelter has an annual capacity of 50ktpa.
08/12/2014 Glencore (McArthur River)
The environmental issues (fuming waste dumps and water pollution) at Glencore's McArthur River Mine are still being
debated with the local Borroloola community. The Borroloola traditional owners have filed a complaint with the Australian
Competition and Consumer Commission (ACCC) over claims that Glencore gave them misleading and false information
regarding environmental hazards associated with the mine during the approval process.
The Borroloola traditional owners believe that Glencore have misinterpreted the results of an independent report that was
released in October 2014, and Glencore should be doing more to ensure the safety of the local community and people
working onsite.

AME Group
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Confidential: see contract at www.amegroup.com

McArthur River is currently undertaking an expansion programme to produce 380ktpa zinc by 2016. Any adverse
environmental or legal action may result in delays to the expansion programme.
04/12/2014 ZincOx Resources Plc (Korean Recycling Plant)
The ZincOx Korean Recycling Plant has restarted as scheduled. This was following the suspension of production for repairs
to the refractory. The plant is working at approximately 94% of the current target capacity of 212ktpa with zinc recovery at
about 94% of the target 95%.
04/12/2014 KBL Mining Limited (Mineral Hill)
KBL Mining has produced the first zinc concentrate from their Mineral Hill project in Australia. The one-week trial produced
a saleable lead and zinc concentrate from feed grades of 6.3% lead and 2.7% zinc with recoveries of 87% lead and 55%
zinc, producing a final concentrate containing 45% lead and 46% zinc. Minimal changes were required to convert an
existing copper circuit into a zinc circuit while the lead circuit was left unaltered. Permanent modifications are expected to
be carried out within the next three months.
04/12/2014 Lundin Mining Corporation (Zinkgruvan)
Lundin released 20152017 guidance figures for their Zinkgruvan project in Sweden. The site is expected to produce 78
82kt zinc, 2730kt lead and 3.54.0kt copper in 2015. Production of zinc and copper will remain consistent with previous
years while lead will vary with head grade in accordance with the mine plan. The project is expected to spend US$45m in
sustaining capex during 2015 on underground development, tailings and paste backfill.
03/12/2014 Vedanta Resources PLC (Gamsberg Refinery)
Vedanta has approved an investment of US$782m over three years to develop the Gamsberg-Skorpion zinc project in
Namibia. From the total investment, approximately US$150m will be used to upgrade the Skorpion zinc refinery to enable
the roasting of zinc sulphide concentrates.
The first phase of the Gamsberg open pit is estimated to have a mine life of 13 years and is expected to begin production
in 2017/18. The Gamsberg ore is expected to be mined and refined at Skorpion during the December Half of 2017 and the
June Half of 2018.
Original plans to construct a zinc refinery at the Gamsberg site appear to have been shelved and as such AME do not see
the likelihood of construction proceeding.
02/12/2014 Binani Industries Limited, Binani Industries Limited (Toranica, Zletevo)
The strike that was planned to take place on the 2nd of December at the Indo Minerals and Mining's (IMM Marketing)
Toranica and Zletovo mines in Macedonia has been put on hold. The Trade Union of Energy and Mining in Macedonia have
agreed to a solution with IMM Marketing.

AME Group
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Confidential: see contract at www.amegroup.com

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Copyright 2014 by AME Mineral Economics (Asia) Limited and AME Mineral Economics Pty Limited. This confers
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