This document has been prepared by UBS Securities Australia Ltd

UBS does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

Nov 19 2013

UBS Investment Research

ANALYST CERTIFICATION AND REQUIRED DISCLOSURES BEGIN ON SLIDE 16

www.ubs.com/investmentresearch

Ghee Peh

Analyst

Email: ghee.peh@ubs.com

Tel: +852 2971 6448

Commodities – Mining & Metals

From copper to met coal: Demand and price outlook

SECTION 1

Commodities outlook

2

Copper: supply growth is real

10

60

110

160

210

260

Oct

-12

Nov

-12

Jan-

13

Mar

-13

Apr

-13

Jun-

13

Aug

-13

Sep

-13

China’s (SHFE) copper inventories (kt)

3.0

3.5

4.0

4.5

5.0

22-M

ar-1

3

19-A

pr-1

3

17-M

ay-1

3

14-J

un-1

3

12-J

ul-1

3

9-A

ug-1

3

6-S

ep-1

3

4-O

ct-1

3

LME

& S

HF

E C

u pr

ices

(U

S$/

lb)

-0.3

-0.2

-0.2

-0.1

-0.1

0.0

0.1

0.1

0.2

diff

. S

HF

E 3

mth

Cu

prem

/-di

sc t

o LM

E

LME SHFE diff. (RHS)

SHFE 3mth Cu Prem/-Disc to LME (last 3 months)

2.0

2.5

3.0

3.5

4.0

4.5

5.0

Oct

-10

Feb

-11

Jun-

11

Oct

-11

Jan-

12

May

-12

Sep

-12

Jan-

13

May

-13

Sep

-13

0

200

400

600

800

1,000SHFE Comex

LME (kt) - RHS Price (US$/lb) - LHS

Copper global stocks vs. LME price (kt, US$/lb)

Sources: Bloomberg, LME, SHFE, Comex

• Short-term (next 3 years) price drivers: China’s seasonality in trade; traditional market restocking

• Longer-term price drivers: mine supply growth a critical theme; no commercial substitutes exist

• China: 2013 total supply isn’t keeping up with its record-high semis production rate – creating a metal shortfall.

• key market signals highlight stability too => rate-of-cancelled-warrants has slowed but remains relatively high + all major merchant premia (China/US/Europe) are also still high) + LME/SHFE price differential @ parity + global exchange inventories are easing (modestly bullish)

•

• we see adequate concentrate supply in Q4 + an-end-to-seasonal trade => there’s downside risk from here, going into 2014.

• this year, copper’s price has been buoyed by the US Fed’s proposed QE ‘tapering’ program (implies actual Cu-demand growth imminent), then undermined by uncertainty over ‘US shutdown’ (now delayed). It highlights how Cu-traders are heavily influenced by macro-factors.

• key long-term theme for copper: global mine supply growth; 3-5% for 2013-14, reflects diverse supply growth; brown/greenfield, from mostly South America, Asia, Africa.

• structural shift in mine supply key: dominance of massive porphyry deposits of Sth America in last 40 years has negated ongoing exploration work, creating shortage. Next suite of deposits? Central Africa (Copper Belt), Central Asia (Kazakhstan, Uzbekistan). These need 3-5 years for development. Supply growth appears adequate.

33

Copper: China's semis output vs. total contained Cu-supply

Source: China Customs; UBS Research; assumes China held 500kt of total inventories at the start of 2009

-2,500

-2,000

-1,500

-1,000

-500

0

500

1,000

1,500

2,000

2,500

Jan-

05

Jan-

06

Jan-

07

Jan-

08

Jan-

09

Jan-

10

Jan-

11

Jan-

12

Jan-

13

cons

umpt

ion

& p

rodu

ctio

n (k

t/m

th)

-1,500

-1,000

-500

0

500

1,000

1,500

mon

thly

bal

ance

& in

vent

orie

s (k

t/m

th)

appt consumption total copper

copper semis production

total inventories

monthly balance

4

Iron ore: China steel growth vs supply surge

35

45

55

65

75

85

95

105

Dec

-06

Dec

-07

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

mill

ion

tonn

es

20

40

60

80

100

120

140

160

180

200

220

Jan-

04

Nov

-04

Sep

-05

Jul-0

6

May

-07

Mar

-08

Jan-

09

Nov

-09

Sep

-10

Jul-1

1

May

-12

Mar

-13

US

$/t

India-China spotBraz.

Aust.China domestic

China’s iron ore prices (kt)

China’s iron ore port stockpiles (kt)

Source: Bloomberg, Tex Report, Metalytics

0

10

20

30

40

50

60

70

Jul-0

2

May

-03

Mar

-04

Jan-

05

Nov

-05

Sep

-06

Jul-0

7

May

-08

Mar

-09

Jan-

10

Nov

-10

Sep

-11

Jul-1

2

May

-13

US

$/t

Brazil/Australia to Asia freight differential

• Short-term (next 3 years) price drivers: China’s demand growth; supply diversification; price mechanism change

• Longer-term price drivers: evolution of supply-side, away from 3-way oligopoly

• Primary gauges of iron ore’s short-term demand continue to be China’s monthly import rate (currently 65-75Mt/mth; record-high 75Mt for Sep), and the spot price (holding at US$130-140/t cfr)

• Spot signals lifted sharply coming into 2013, reflecting China’s seasonal restock, together with a lack of Indian ore (politically constrained) – ahead of the CYH1 lift in steel production rates.

• Demand: Robust steel production rates in China averted the risk of an iron ore price correction in Q3. The risk remains for Q4 though, until evidence of a seasonal cut in steel production rates occurs (Oct).

• Supply: looming supply growth of >500Mtpa (extra 50%) over the next 5-years cannot be ignored

• availability of spot ore is lifting in 2013Q4, driven mostly by Rio Tinto’s commissioning of 290-project.

• Return of Indian ore is a risk to prices, 2013 likely to be <15Mtpa, way down on 100-120Mtpa exports in last few years.

• China continues to invest in non-Rio/Vale/BHP supply sources, undermining the pricing power of the majors (in Africa mainly).

• Longer-term (>2-3 years), uncertainty over the timing & scale of China’s infrastructure programs (rail, bridges, roads, power stations, towns – away from developed eastern seaboard), to provide support for the trade’s outlook.

.

55

Iron ore: range trading + seasonality – it’s realIron ore spot indices (US$/t fob)

Source: UBS Research, McCloskey, Tex Report, Platts

0

20

40

60

80

100

120

140

160

180

200

Feb

-09

Jul-0

9

Jan-

10

Jun-

10

Dec

-10

Jun-

11

Nov

-11

May

-12

Oct

-12

Apr

-13

Sep

-13

US

$/t f

ob

Aust.

Sth Africa

India West

India East

Brazil

China crude steel production rates (Mtpa annualised)

Source: CISA

0100200300400500600700800900

09-F

eb

1st

09-J

un

1st

09-O

ct

1st

10-F

eb

1st

10-J

un

1st

10-O

ct

1st

11-F

eb

1st

11-J

un

1st

11-O

ct

1st

12-F

eb 1

st

12-J

un 1

st

12-O

ct 1

st

13-F

eb 1

st

13-J

un 1

st

Mtpa

(annualised)No Iron ore Correction Iron ore Correction

Total crude steel production - composite index

Source: Bloomberg

96

98

100

102

104

106

108

110

112

jan

feb

mar ap

r

may jun jul

aug

sep

oct

nov

dec

Australian Iron ore supply (Mt/mth)

Source: UBS Research

40

42

44

46

48

50

52

54

56

58

60

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

6

Iron ore: break even prices

Vale RIO BHP FMG Kumba Cliffs -

Canada &

Australia

Ferrexpo MMX

Volume 310 290 240 150 44 41 11 7

Local currency BRL AUD AUD AUD ZAR CAD&AUD UAH BRLCurrency rate to USD 2.16 0.96 0.96 0.96 10 0.92 8 2.16Unit Costs - FOB Local currency/wmt 58 26 28 38 331 83 435 157SG&A Local currency/wmt 11 1 1 1 20 4 40 54Exploration Local currency/wmt 4 1 1 1 20 1 3 4Sustaining Capex Local currency/wmt 17 7 5 7 38 12 78 2Interest Local currency/wmt 10 3 3 6 3 42 80Total Cash Outgoings Local currency/wmt 100 38 38 53 408 103 598 297Unit Costs - FOB US$/wmt 27 25 27 36 33 76 54 73SG&A US$/wmt 5 1 1 1 2 4 5 25Exploration US$/wmt 2 1 1 1 2 1 0 2Sustaining Capex US$/wmt 8 7 5 7 4 11 10 1Interest US$/wmt 5 3 3 6 0 3 5 37Total Cash Outgoings US$/wmt 46 36 36 51 41 95 75 138Royalties % 2.0 7.5 7.5 7.5 5.0 5.0 2.0 2.0Royalties US$/wmt 1 3 3 4 2 5 2 3Price Req'd to be Cash Breakeven - FOB US$/wmt 47 39 39 55 43 100 76 140

Implied cfr price to BreakevenPrice Req'd to be Cash Breakeven - FOB US$/wmt 47 39 39 55 43 100 76 140Moisture content % 6% 6% 6% 9% 2% 3% 1% 6%Adjusted for Moisture US$/dmt 50 42 42 60 44 103 77 149Quality/Contract Adjustment % 0% 0% 0% -5% 0% 0% -1% 0%Quality/Contract Adjustment US$/dmt 50 42 42 64 44 103 78 149Fe Content % 65.0% 62.0% 62.0% 57.0% 64.0% 65.0% 63.5% 63.0%Adjusted for Fe Content (62% equivalent) US$/dmt 48 42 42 69 42 98 76 147Pellet premium US$/dmt 22Price Req'd to be Cash Breakeven - FOB US$/dmt 48 42 42 69 42 98 54 147Freight Adjustment US$/dmt 20 10 10 10 15 20 22 2062% Fe equiv. to be Cash Breakeven - cfr US$/dmt 68 52 52 79 57 118 76 167

Source: UBS Research

7

0

50

100

150

200

250

300

350

400

Sep

-03

Jul-0

4

May

-05

Mar

-06

Jan-

07

Nov

-07

Sep

-08

Jul-0

9

May

-10

Mar

-11

Jan-

12

Nov

-12

spot HCC

HCC

PCI

SSCC

50

125

200

275

350

425

500

Jan-

08

Dec

-08

Nov

-09

Oct

-10

Sep

-11

Aug

-12

Aust. spot (US$/t fob)

Shanx i premium (US$/t)

100

150

200

250

300

350

400

450

1-O

ct-1

0

22-D

ec-1

0

14-M

ar-1

1

4-Ju

n-11

25-A

ug-1

1

15-N

ov-1

1

5-F

eb-1

2

27-A

pr-1

2

18-J

ul-1

2

8-O

ct-1

2

29-D

ec-1

2

21-M

ar-1

3

11-J

un-1

3

1-S

ep-1

3

US

$/t

cfr China low-volfob Aust. low-volfob Aust. mid-vol

Met-coal: US remains the swing producer

Australia vs. China: spot HCC prices (US$/t)

Source: Platts, CRU

Met Coal prices (US$/t fob)

Australia vs. China: spot HCC prices (US$/t)

• Short-term (next 3 years) price drivers: China’s domestic vs. seaborne supply/price trade-off

• Longer-term price drivers: mine supply shortage for high-grade products is a risk; no commercial substitutes

• spot prices in 2013 for HCC + PCI + SSCC have recovered from mid-year lows, re-rating to US$150/t fob for top-grade HCC.

• this recovery should preserve most production capacity, including marginal US supply.

• we’re modest bears longer-term: supply growth is adequate; China’s merely arb-ing domestic + seaborne (Shanxi’s producing at record-highs again) + India’s not driving demand (economy’s weak) + Mongolian coal supply to China is promising to lift.

• key risk to a bear-view? underperforming supply growth for new centres of Mozambique (Rio’s writedown) + Mongolia (govt wants more) + India (difficult to quantify this key demand growth driver).

• US is set to maintain its position as the trade’s swing producer over the medium-term.

• note, price mechanism has changed; new ‘quarterly pricing’ culture looks just like annual benchmark – only its quarterly. don’t get used to it; slowly shifting to mostly spot-terms.

• 2013Q4 deals include HCC US$152/tfob; (+5%qoq; $148/tfob spot); LV-PCI $120-121/tfob (+4%qoq; $116/tfob spot); SSCC $105.5/t fob (flat; $95/tfob spot) – all done late Sep-to-early Oct.

8

Capex by key commodities

Iron ore capex

Source: UBS Research and company filings

05

10152025303540

2006

A

2007

A

2008

A

2009

A

2010

A

2011

A

2012

A

2013

E

2014

E

2015

E

2016

E

US$bn

Vale Rio Tinto BHP Billiton Fortescue Anglo American Juniors

Seaborne iron ore volume growth

Source: UBS Research

0

500

1,000

1,500

2,000

2006

A

2007

A

2008

A

2009

A

2010

A

2011

A

2012

A

2013

E

2014

E

2015

E

2016

E

Mt

0%2%4%6%8%10%12%14%16%

Seaborne iron ore volume [LHS] % change y-o-y [RHS]

Thermal Coal Industry Capex

Source: UBS Research and company filings

0

1

2

3

4

5

6

7

8

9

2006

A

2007

A

2008

A

2009

A

2010

A

2011

A

2012

A

2013

E

2014

E

2015

E

2016

E

US$bn

Met Coal Industry Capex

Source: UBS Research and company filings

0

2

4

6

8

10

12

2006

A

2007

A

2008

A

2009

A

2010

A

2011

A

2012

A

2013

E

2014

E

2015

E

2016

E

US$bn

9

Capex by key commodities - copper

Copper industry capex (US$bn) and copper price (US$/lb)

Source: UBS Research and company filings

0

5

10

15

20

25

30

35

2006

A

2007

A

2008

A

2009

A

2010

A

2011

A

2012

A

2013

E

2014

E

2015

E

2016

E

0.00.51.01.52.02.53.03.54.04.55.0majors juniors copper price

Copper mine supply growth

Source: UBS Research and company filings

10

12

14

16

2006

A

2007

A

2008

A

2009

A

2010

A

2011

A

2012

A

2013

E

2014

E

2015

E

2016

E

Mine Supply -

Mtpa [LHS]

0%

1%

2%

3%

4%

5%

6%

7%

8%yoy growth

[RHS]

1010

UBS price forecasts (as at 15-Oct-13)

Source: UBS Research

Base Metals, Ferroalloys, O units 2012 1Q13 2Q13 3Q13 4Q13 2013E 1H13 2H13 2014E 2015E 2016E 2017E 2018E LT real

Aluminium US$/lb 0.92 0.91 0.83 0.81 0.80 0.84 0.87 0.80 0.85 0.90 1.00 1.21 1.24 1.10

Copper US$/lb 3.61 3.59 3.25 3.21 3.10 3.29 3.42 3.16 2.90 2.85 2.85 2.81 2.88 2.55Lead US$/lb 0.94 1.04 0.93 0.95 0.95 0.97 0.98 0.95 1.00 1.10 1.12 1.10 1.13 1.00

Nickel US$/lb 7.95 7.84 6.80 6.33 5.90 6.72 7.32 6.11 6.20 7.50 8.50 9.02 9.25 8.20Zinc US$/lb 0.88 0.92 0.84 0.84 0.85 0.86 0.88 0.85 0.93 0.95 0.95 0.94 0.96 0.85

Cobalt US$/lb 14.0 12.4 13.3 14.0 13.5 13.3 12.9 13.7 13.0 12.8 12.5 12.7 13.0 11.5Molybdenum US$/lb 12.8 11.4 11.1 9.6 9.5 10.4 11.3 9.5 10.0 9.5 9.0 9.4 9.6 8.5

Manganese ore US$/dry tonne 4.76 5.51 5.72 5.28 5.00 5.38 5.61 5.14 4.75 4.60 4.50 4.40 4.51 4.00Uranium US$/lb 49.0 42.8 40.7 36.6 37.0 39.3 41.8 36.8 47.5 60.0 65.0 66.0 67.7 60.0

Crude oil (WTI) US$/bbl 94.1 94.3 94.1 105.8 95.0 97.3 94.2 100.4 93.5 89.0 86.0 86.3 88.4 78.4Precious Metals

Gold US$/oz 1,668 1,631 1,416 1,327 1,375 1,437 1,524 1,351 1,325 1,200 1,250 1,210 1,241 1,100Palladium US$/oz 646 741 715 725 760 735 728 742 825 850 825 825 846 750Platinum US$/oz 1,552 1,633 1,469 1,454 1,475 1,508 1,551 1,465 1,600 1,900 2,060 2,179 2,233 1,980

Rhodium US$/oz 1,275 1,198 1,117 996 1,050 1,090 1,158 1,023 1,320 1,550 2,000 3,521 3,609 3,200Silver US$/oz 31.1 30.1 23.2 21.3 22.5 24.3 26.7 21.9 25.0 24.0 25.0 24.2 24.8 22.0A$/US$ 1.036 1.039 0.992 0.916 0.930 0.969 1.015 0.923 0.930 0.912 0.886 0.850 0.850 0.850Bulk Commodities

Iron Ore - lump (Pilbara) US$/mtu fob 2.082 2.361 2.044 2.140 1.952 2.124 2.202 2.046 1.883 1.703 1.540 1.526 1.565 1.387US$/t fob 129.1 146.4 126.7 132.7 121.0 131.7 136.5 126.9 116.8 105.6 95.5 94.6 97.0 86.0

%chg yoy 2.0% -11.3% -9.6% -9.6% -0.9% 2.5% -11.3%Iron Ore - fines (Pilbara) US$/mtu fob 1.963 2.265 1.904 1.970 1.774 1.978 2.085 1.872 1.715 1.536 1.346 1.278 1.310 1.161

US$/t fob 121.7 140.5 118.0 122.2 110.0 122.7 129.2 116.1 106.3 95.3 83.5 79.2 81.2 72.0%chg yoy 0.8% -13.3% -10.4% -12.4% -5.1% 2.5% -11.3%

Hard Coking Coal US$/t fob 209.0 165.0 172.0 145.0 152.0 158.5 168.5 148.5 158.8 150.0 150.0 143.1 146.6 130.0%chg yoy -24% 0% -6% 0% -5% 3% -11%

Low Volatile PCI US$/t fob 152.8 124.0 141.0 116.0 120.5 125.4 132.5 118.3 123.5 125.0 122.0 121.0 124.1 110.0%chg yoy -18% -1% 1% -2% -1% 3% -11%

Semi Soft US$/t fob 131.3 120.0 121.0 105.0 105.5 112.9 120.5 105.3 111.8 115.0 112.0 110.0 112.8 100.0%chg yoy -14% -1% 3% -3% -2% 3% -11%

JFY13 JFY14E JFY15E JFY16E JFY17E JFY18E JFY19E LT real

Thermal Coal US$/t fob 95.0 85.0 90.0 90.0 93.2 95.6 98.0 85.0

%chg yoy -11% 6% 0% 4% 3% 3% -13%

UBS Commodity Price Forecasts (as at 15-Oct-13)

1111

UBS supply-demand forecasts (as at 15-Oct-13)

Source: UBS estimates

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013e 2014e 2015e 2016e 2017e

Global commodity balancesAluminium (Mt) supply 29.89 31.94 33.82 38.09 39.98 37.50 42.66 45.90 47.90 50.05 52.77 55.39 58.09 60.45

demand 30.02 31.82 34.30 38.00 37.68 35.60 41.53 45.04 47.01 49.28 52.03 54.89 57.93 60.45balance -0.13 0.11 -0.48 0.09 2.29 1.91 1.13 0.86 0.89 0.77 0.74 0.50 0.16 -0.00

Alumina (Mt) supply 59.54 62.35 69.66 76.63 82.76 74.52 83.84 90.16 93.98 97.66 102.92 107.87 113.10 117.60demand 58.56 62.62 66.30 74.95 78.24 72.90 83.85 89.93 93.80 97.67 102.96 107.89 113.11 117.58balance 0.98 -0.27 3.36 1.68 4.52 1.62 -0.01 0.23 0.18 -0.02 -0.04 -0.02 -0.01 0.02

Copper (Mt) supply 15.94 16.60 17.30 18.04 18.34 18.34 18.95 19.78 20.55 21.52 22.26 22.97 23.46 23.94demand 15.96 16.61 17.31 18.04 18.33 18.33 18.96 19.79 20.55 21.32 22.04 22.78 23.48 23.96balance -0.03 -0.01 -0.00 0.00 0.01 0.00 -0.01 -0.01 0.00 0.20 0.22 0.19 -0.01 -0.02

Nickel (Mt) supply 1.292 1.274 1.400 1.398 1.283 1.328 1.521 1.641 1.741 1.838 1.953 1.993 2.057 2.103demand 1.293 1.272 1.401 1.397 1.282 1.327 1.522 1.639 1.738 1.813 1.921 1.987 2.056 2.107balance -0.00 0.00 -0.00 0.00 0.00 0.00 -0.00 0.00 0.00 0.02 0.03 0.01 0.00 -0.00

Zinc (Mt) supply 10.06 10.07 10.50 11.23 11.55 11.28 12.42 12.71 13.03 13.19 13.73 14.18 14.64 14.71demand 10.04 10.08 10.54 11.26 11.56 11.32 12.41 12.73 13.00 13.24 13.74 14.18 14.64 14.70balance 0.03 -0.01 -0.04 -0.03 -0.01 -0.04 0.01 -0.02 0.03 -0.05 -0.01 0.00 0.00 0.01

Lead (Mt) supply 7.14 7.73 8.13 8.38 8.84 9.10 9.65 10.19 10.55 10.95 11.43 11.76 12.21 12.78demand 7.22 7.80 8.19 8.40 8.82 9.06 9.63 10.19 10.53 10.95 11.46 11.93 12.38 12.80balance -0.07 -0.07 -0.06 -0.02 0.02 0.03 0.02 0.00 0.02 0.00 -0.02 -0.17 -0.17 -0.02

Steel (Mt; slab) supply 1061.2 1146.6 1249.0 1347.0 1341.2 1235.8 1431.7 1518.3 1547.8 1594.4 1653.9 1702.0 1739.9 1797.1demand 1061.8 1144.1 1248.0 1336.4 1328.1 1236.0 1422.9 1500.5 1547.8 1594.7 1654.1 1702.1 1739.9 1809.5balance -0.57 2.48 1.01 10.61 13.07 -0.15 8.73 17.84 0.00 -0.33 -0.21 -0.08 0.00 -12.43

Iron ore (Mt; seaborne) supply 610.0 682.3 733.7 790.6 860.2 930.4 1015.9 1080.5 1131.2 1212.1 1373.6 1516.0 1628.4 1682.0demand 608.2 678.7 732.4 788.5 854.7 910.1 1011.8 1078.4 1130.0 1188.4 1219.9 1302.2 1359.6 1432.3balance 1.81 3.54 1.27 2.06 5.46 20.30 4.09 2.04 1.14 23.77 153.66 213.73 268.82 249.73

Iron ore (Mt; global) supply 1231.7 1394.1 1556.4 1684.0 1691.1 1576.7 1791.6 1844.4 1963.0 2045.4 2286.5 2421.7 2515.0 2553.8demand 1190.0 1337.2 1474.3 1597.1 1611.7 1507.4 1727.8 1821.1 1928.0 1971.2 2023.8 2065.6 2084.5 2129.3balance 41.68 56.86 82.12 86.90 79.37 69.31 63.83 23.30 35.07 74.21 262.71 356.09 430.48 424.50

Metallurgical coal (seaborne, Mt) supply 215.6 215.4 211.3 231.9 238.8 227.7 278.1 280.8 293.3 319.7 335.5 348.2 358.3 365.0demand 216.1 215.2 211.3 232.3 238.6 227.9 278.3 280.7 293.3 308.7 312.6 317.8 329.5 342.5balance -0.56 0.17 0.08 -0.39 0.20 -0.15 -0.23 0.06 0.03 11.05 22.83 30.38 28.75 22.49

Thermal coal (seaborne, Mt) supply 512.1 561.7 619.6 656.1 661.0 680.3 740.2 805.4 889.5 943.5 982.8 1017.9 1044.4 1058.9demand 512.1 561.4 619.3 655.5 660.0 680.3 739.3 804.8 887.8 935.3 947.2 958.5 982.1 992.7balance 0.07 0.28 0.35 0.53 0.98 0.02 0.83 0.59 1.69 8.16 35.67 59.34 62.25 66.22

Uranium (Mlbs) supply 172.2 170.8 173.3 186.8 180.6 183.5 191.8 196.6 191.6 179.9 193.5 208.5 225.3 242.5demand 172.2 170.8 173.3 186.8 180.6 183.5 191.8 196.6 175.5 176.4 193.5 208.7 226.5 244.0balance 0.00 -0.00 0.00 0.00 -0.00 -0.00 0.00 -0.00 16.09 3.52 -0.05 -0.20 -1.21 -1.56

Gold (Moz) supply 124.2 132.7 128.4 128.2 129.1 140.9 143.5 145.2 143.1 138.4 140.1 141.5 142.9 144.1demand 127.5 124.0 124.9 129.5 139.1 124.3 135.9 148.3 142.7 128.0 140.4 141.8 144.9 148.9balance -3.28 8.68 3.47 -1.32 -10.00 16.53 7.59 -3.12 0.48 10.41 -0.29 -0.30 -2.00 -4.76

Silver (Moz) supply 874.2 951.7 926.0 911.6 914.3 929.0 1076.2 1068.7 1048.3 1102.6 1086.6 1119.4 1149.4 1174.2demand 868.8 888.3 1007.6 982.4 995.8 929.6 1033.7 907.0 942.4 888.8 959.3 979.7 998.6 1018.7balance 5 63 -82 -71 -81 -1 42 162 106 214 127 140 151 156

Platinum (Moz) supply 7.18 7.91 8.25 8.19 7.77 7.43 7.88 8.53 7.67 7.87 8.07 8.20 8.42 8.54demand 7.23 7.97 7.89 8.27 7.99 6.80 7.91 8.10 8.05 8.68 8.49 8.76 9.04 9.22balance -0.05 -0.05 0.36 -0.08 -0.22 0.64 -0.03 0.43 -0.38 -0.81 -0.41 -0.56 -0.62 -0.68

Palladium (Moz) supply 7.21 8.85 8.54 9.57 8.57 8.07 8.67 9.06 8.21 8.49 8.70 8.86 9.07 9.19demand 7.09 7.98 7.42 7.85 7.78 7.37 9.20 7.88 9.28 9.41 9.84 10.02 10.22 10.39balance 0.12 0.87 1.12 1.72 0.80 0.71 -0.53 1.18 -1.07 -0.92 -1.14 -1.16 -1.14 -1.20

Titanium pigment (Mt) supply 4.66 4.71 4.92 5.15 4.97 4.37 5.33 5.51 4.71 5.40 5.57 5.94 5.94 5.94demand 4.64 4.62 4.75 5.14 4.88 4.69 5.31 5.52 4.80 5.28 5.47 5.67 5.87 6.08balance 0.02 0.09 0.17 0.01 0.10 -0.32 0.02 -0.01 -0.09 0.12 0.10 0.27 0.07 -0.14

Zircon (Mt) supply 1.17 1.20 1.21 1.24 1.16 0.99 1.32 1.42 1.19 0.87 1.33 1.52 1.67 1.76demand 1.17 1.20 1.21 1.24 1.16 0.99 1.32 1.37 0.94 1.13 1.28 1.36 1.41 1.45balance 0.00 -0.00 -0.00 0.00 0.00 0.00 0.00 0.06 0.25 -0.26 0.05 0.16 0.26 0.31

SECTION 2

China's impact on global market

China's economy outlook to affect demand

13

• Our China economic team believes

– Q3 rebound was benefited from earlier credit growth and restocking in some sectors

– Going forward, they expect slower credit can lead to slower growth, and restocking momentum will fade

– The strength of exports and property determine Q4 and 2014 GDP growth (7.8%)

– Urbanization-related investment rush in an upside risk

• Demand side: Power output growth is recovering

– Thermal power output is up 9.7%YoY for June, 16.7%YoY for Jul and 23.2%YoY for Aug, and 17%YoY for Sep

– Hydropower output has been declining since July

• China's coal import is increasing

– After temporary decline in June, China's July import picks up the rising trend and up 18%YoY, slowing down in August, rising 38% in Sept

– Mainly driven by rising coking coal import to prepare for steel output high season from late Q3 to Q4

– Shanxi benchmark coking coal price has risen Rmb150/t (+16.0%) from the YTD lowest level of Rmb960/t in August

Major downstream demand indicators

Unit H113 %YoY chg 13-Jun %YoY chg 13-Jul %YoY chg 13-Aug %YoY chg 13-Sep %YoY chg

Total power output kWh bn 1,987 5.0% 425 8.1% 479 10.2% 499 14.0% 431 10.3%

Thermal power output kWh bn 1,652 5.9% 324 9.7% 375 16.7% 395 23.2% 332 16.6%

Hydropower output kWh bn 246 11.4% 82 8.2% 85 -6.8% 84 -10.9% 78 -7.1%

Steel mt 324 9.6% 65 7.4% 65 6.1% 66 12.9% 65 12.9%

Cement mt 863 8.3% 228 9.8% 212 10.8% 215 9.9% 225 7.3%

Coal output mt 1,750 -6.0% 335 -3.9% 300 -11.8% 300 -7.0% 315 -1.3%

Import mt 159 13.3% 22 -17.9% 29 18.0% 26 7.0% 26 38.1%

Source: sxcoal, CEIC, UBS estimates

14

China’s material: intensive growth to slow

• BHP’s view here is more bullish than that of UBS

• at UBS, we expect China’s evolution will resemble that of the US…

• …but be careful of comparisons with export economies South Korea & Japan

1515

China's %-share of commodities' demand (sorted on 2015 data)

Source: UBS estimates

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16

Disclosures & Analyst Certification

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