Australian Resources Weekly coal 101 ubs (2009)

UBS Investment Research Australian Resources Weekly Coal 101  Types of Coal - Thermal and Metallurgical coal The two main types of coal are thermal coal and metallurgical coal primarily used in power generation and steel-making respectively. Metallurgical coal can further be sub-divided as hard coking coal, PCI and semi-soft coal.  Substitution between Thermal and Metallurgical coal Though thermal coal and coking coal have separate markets, some produc t substitution does occur. This substitution is largely confined to low quality coking coal and high quality thermal coal. This is the reason why, historically, PCI and semi-soft coal prices have been related to thermal coal prices. Producers tend to switch between high-volatile coal, low-volatile coal and thermal depending on the relative attractiveness of the end market i.e. steel demand and power generation.  Coal pricing premium Historically (prior to 2004), semi-soft has traded at an average premium of around US$3.5/t (~10%) to thermal coal. The premium paid to account for the fact that a certain portion of thermal coal can be washed to remove ash and then be sold as semi-soft coal or PCI. Strong steel demand post 2005 has translated into strong demand for coking coal. As a result, semi-soft and PCI prices have tended trade more off hard coking coal prices than thermal coal prices.  Coal equities trading back towards NPV Sentiment towards the coal market has improved in recent months leading to a rerating of various coal equities back towards NPV. On a P/NPV basis GCL & WHC appear the least expensive at discounts to NPV of ~30%. The sector has b ecome more expensive on a P/E multiple basis as well with all of our coverage now trading on greater than 10.0x FY10E P/E. Global Equity Research Australia Mining & Metals Sector Comment 12 June 2009 www.ubs.com/investmentresearch Glyn Lawcock A nalyst glyn.lawcock@ubs.com +61-2-9324 3675 Jo Battershill A nalyst jo.battershill@ubs.com +61-2-9324 2834 Mark Busuttil A nalyst mark.busuttil@ubs.com +61-2-9324 3623 Daniel Morgan A nalyst daniel.morgan@ubs.com +61-2-9324 3844 This report has been prepared by UBS Securities Australia Ltd ANALYST CERTIFICATION AND REQUIRED DISCLOSURES BEGIN ON PAGE 15. 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. ab Australian Resources Weekly 12 June 2009 UBS 2 Coal types Coal types can broadly be divided in two types 1. Based on ranking 2. Based on its use/trade The following figure shows different types of coal Figure 1: Coal types Source: World coal institute; Anthracite market is small and is largely utilized domestically than exported 1. Based on rank Coal is formed from vegetation by the combined effect of pressure and temperature over millions of years. The degree of change undergone by a coal as it matures during this period has an important bearing on its physical and chemical properties and is referred to as the ‘rank’ of the coal. Low rank coals have high moisture levels and low carbon content, and therefore have low energy content whereas higher rank coals have lower moisture content, contain more carbon, and produce more energy. Higher rank coals are generally harder and stronger. Table 1: Basic coal types Rank Calories Kcal/kg Carbon % Lignite 3,850 - 6,000 45 - 65 Semi bituminous 5,500 - 7,150 60 - 75 Bituminous 7,700 - 8,800 75 - 90 Semi anthracite 8,250 - 8,525 90 - 93 Anthracite 8,000 - 8,250 93 - 95 Source: The Mining Valuation Handbook (2 nd Edition, 2004) Australian Resources Weekly 12 June 2009 UBS 3 2. Based on marketability/use Coal is marketed as thermal coal and metallurgical coal. Metallurgical coal is also known as coking coal and is further divided into hard coking coal, semi soft coking coal and PCI. Thermal coal Thermal coal (or steaming coal) as the name suggests is used for generating steam i.e. power generation. To some extent it is also used in cement making and other power intensive industries. As shown in Figure [1], different types of thermal coal used in power generation are lignite, sub-bituminous and bituminous coal. In Australia, thermal coal is sold into both the domestic thermal coal and the export thermal coal markets. Export thermal coal tends to be of higher quality (i.e. higher energy content and lower ash content) than coal sold in domestic markets. The table below lists the various physical and chemical properties of thermal coal and lists the preferred specification of the coal. The desired properties in thermal coal are lower ash, moisture, sulphur and phosphorus content and higher energy content. Ash content between 11% - 25% is acceptable as thermal coal. We believe coal with ash content less than 10% can be used as PCI or semi-soft coal. Low ash, sulphur, and carbonate coals are prized for power generation because they do not produce much boiler slag and they do not require as much effort to scrub the flue gases to remove particulate matter. Carbonates and sulphide are deleterious as they readily stick to the boiler apparatus and can form smog, acid rain and haze pollution when sulphur is emitted. Table 2: Physical and chemical properties of thermal coal Standard Description Value Preference Ash Inorganic residue Lower the better 11% - 25% Ash Fusion Softening temperature Higher the better +1,560C Crucible Swelling Number (CSN) Amount coal swells on heating 0: low (1 to 3) 9: Superior - Fixed Carbon - Higher the better 51.5% - 56.5% Gross calorific value Amount of heat liberated Higher the better 6,200 - 7,200 kcal/kg Inherent moisture In the coal as measured Lower the better 1.5% - 3.0% Total moisture Moisture content Lower the better 7.0% - 8.0% Phosphorus - Lower the better 0.01% - 0.2% Sulphur - Lower the better 0.4% - 0.8% Volatile matter Matter distilled off on heating Lower the better 22% - 33% Source: The Mining Valuation Handbook (2 nd Edition, 2004) Australian Resources Weekly 12 June 2009 UBS 4 Metallurgical Coal Metallurgical coal (or coking coal) as the name suggests is used in steel making. It is further sub-divided in hard coking coal, semi-soft coal and PCI. Hard coking coal produces high strength coke. A blast furnace uses coke (about 2/3 rd of the steel is made using the blast furnace) to produce pig iron by reducing oxygen from the blast furnace. Semi-soft coal is usually blended with hard coking coal to be fed into the blast furnace to meet particular specifications of coke. Semi-soft coal can not be used as a stand alone feed to the blast furnace due to its inferior properties such as high volatility. If semi-soft coal has reasonably high volatility, it can also be used as thermal coal. This substitution has been seen over last few months as coal producers have shifted their tonnages towards the thermal market due to reduced demand for steel. PCI (pulverized coal injection) coal is crushed into a fine powder and injected directly into blast furnaces as a replacement for coke in the production of pig iron. PCI technology helps reduce the operating costs of steel mills by using lower priced PCI coal. (PCI coal is sold at premium to thermal coal and semi- soft coal but at a significant discount to hard coking coal). Macarthur is the largest producer of PCI coal. Table 3 lists the various physical and chemical properties of coking coal and lists the preferred specification of the coal. The desired properties in coking coal are lower ash, moisture, sulphur and phosphorus content and higher energy content. As shown in Figure 1 and Table 3, coal used for metallurgical purposes has higher energy content than coal used for power generation. The property that differentiates coking coal from thermal coal, besides higher energy content, is the crucible swelling number and fluidity in coking coal. Crucible swelling number measures volatility and plasticity and denotes the amount coal swells on heating. Volatility is very important as it determines the burn rate of the coal. The smelter must balance the volatile content of the coals to optimize the ease of ignition, burn rate, and energy output of the coal. Whereas high volatile coal will burn easily, low volatile coal might be difficult to burn but contains more energy per unit volume. Australian Resources Weekly 12 June 2009 UBS 5 Table 3: Physical and chemical properties of coking coal Standard Description Value Preference Ash Inorganic residue Lower the better 7% - 14.5% Coke strength (CSR) Strength in blast furnace Higher the better - Crucible Swelling Number (CSN) Amount coal swells on heating 0: low 9: Superior 3 - 9 Fixed Carbon - Higher the better 51.0% - 70.6% Fluidity As coal melts its plastic range is measured Higher the better 10 - 10,000 Gross calorific value Amount of heat liberated Higher the better 6,600 - 7,900 kcal/kg Moisture Moisture content Lower the better 1.0% - 3.0% Phosphorus - Lower the better 0.011% - 0.09% Sulphur - Lower the better 0.3% - 1.29% Volatile matter Matter distilled off on heating Lower the better 16% - 38% Source: The Mining Valuation Handbook (2 nd Edition, 2004) Coal Pricing Chart 1 shows the historical benchmark prices of metallurgical coals and thermal coal. Prices have significantly strengthened in recent years as a result of significant growth in global steel production, growth in energy demand and a constrained supply environment. Chart 1: Historical coal price settlements (Japanese Financial Year basis) 0 50 100 150 200 250 300 350 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Hard Coking Coal PCI Semi Soft Coking Thermal Coal US$/t Source: UBS Chart 2 below shows the premium among various coal types – premium of semi- soft to thermal coal, premium of PCI to semi-soft coal and hard coking coal to PCI. Prior to 2004 – 2005, there appears to have been a stable relationship between various types of coal as far price premiums are concerned. However, since then the price premium relationship has been more volatile. Australian Resources Weekly 12 June 2009 UBS 6 Chart 2: Price premiums among various coal types(Japanese Financial Year basis) -20% 0% 20% 40% 60% 80% 100% 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 % Premium Semi-soft-Thermal PCI-Semi-soft Hard Coking coal-PCI Source: UBS Though thermal coal and coking coal have separate markets and prices are settled on the demand supply dynamics of the individual markets, some product substitution does occur between the various coal types as mentioned above. This substitution is largely confined to low quality coking coal and high quality thermal coal. This is the reason why, historically, PCI, semi-soft and thermal coal prices have shown a historical relationship. Historically (prior to 2004), semi-soft coal has traded at an average premium of around US$3.5/t (approximate range of US$2/t – US$6/t or ~10%) to thermal coal. The premium paid to account for the fact that a certain portion of thermal coal can be washed to remove ash and then be sold as semi-soft coal or PCI. The washing costs and the yield loss would then account for the price difference between the two coal types. Conversely if the steel market is relatively weak, semi-soft and PCI coal can be sold as thermal coal without washing. Producers tend to switch between high- volatile coal, low-volatile coal and thermal depending on the relative attractiveness of the end market. Since 2004 – 2005 (especially in 2005 and 2008, when benchmark steel raw material prices were settled significantly higher than previous settlements), the price relationship appears to have broken mainly due to the shortage of all kinds of coal. This shortage stemmed from strong demand as well as supply issues owing to infrastructure constraints in transporting coal. Strong steel demand post 2005 has translated into strong demand for coking coal. As a result, semi-soft and PCI prices have tended to trade more off hard coking coal prices than thermal coal prices. Coal Exposures The following table illustrates the coal exposure of our coal coverage list. The splits are based on 2008 figures to exclude the large substitution of semi-soft and PCI coal being sold into the thermal market. Australian Resources Weekly 12 June 2009 UBS 7 Chart 3: Normalised product splits from current operations 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% CEY CNA FLX GCL MCC WHC Hard Coking Semi Soft PCI Thermal Source: Company filings and UBSe Coal pricing assumptions Table 4 illustrates our coal price assumptions on a Japanese fiscal year basis. Table 4: UBS Coal price assumptions JFY 08 JFY 09 JFY 10e JFY 11e Thermal Coal US$/t 125 71 80 120 Hard Coking Coal US$/t 300 129 135 160 PCI US$/t 240 90 105 150 Semi Soft Coking US$/t 235 80 95 135 Source: UBS estimates; Industry reports Equity read through Sentiment towards the coal market has improved in recent months leading to a rerating of various coal equities back towards NPV. On a P/NPV basis GCL & WHC appear the least expensive at discounts to NPV of ~30%. The sector has become more expensive on a P/E multiple basis as well with all of our coverage now trading on greater than 10.0x FY10E P/E. Table 5: Coal valuation summary EPS (cps) PE (x) Company Price FY 09 FY 10 FY11 FY 09 FY 10 FY11 NPV P/NPV Centennial Coal 3.03 16.6 25.6 49.3 18.2 11.8 6.2 3.49 0.87 Coal & Allied 82.01 645.0 557.8 1311.7 12.7 14.7 6.3 86.74 0.95 Felix Resources 14.89 135.7 49.7 109.8 11.0 30.0 13.6 13.52 1.10 Gloucester Coal 6.74 107.3 65.6 100.2 6.3 10.3 6.7 9.63 0.70 Macarthur Coal 7.65 69.1 50.5 145.4 11.1 15.1 5.3 7.98 0.96 Whitehaven Coal 3.21 12.6 14.3 20.8 25.5 22.4 15.4 4.54 0.71 Source: UBS estimates. Australian Resources Weekly 12 June 2009 UBS 8 Weekly share price movement Chart 4: Weekly price changes -8.1% -6.2% -5.4% -4.6% -4.5% -4.1% -0.4% -0.3% 1. 2 % 2.3% 2.9% 6.3% 7.1% 7.6% 9.0% 10 .2 % 11.7 % 12 . 6 % 15 .2 % 25.1% 0.9% -3.5% -5.6% 61.8% 58.1% 23.7% 9.3% -14.2% 25.7% -0.7% 8.7% -18.8% 24.6% 27.9% -65% -55% -45% -35% -25% -15% -5% 5% 15% 25% 35% 45% 55% 65% ERA AVO LGL CNA PEM NCM GCL WHC PDN OZL S&P/ASX 200 FLX ASX 200 Resources MRE BHP Billiton ILU MCC ABY CEY RIO AWC %ch Week %ch YTD (2009) Source: IRESS Resources again outperformed, with the S&P/ASX200 resources index gaining 7.1%, while the S&P/ASX200 index gained 2.9%. Of the majors, RIO gained 15.2% w/w post the announcement of a rights issue and iron ore JV with BHP on Friday 5 June. BHP in comparison gained 9.0% w/w. AWC was the best performing stock, gaining 25% w/w, largely as a result of an improvement in Al prices which has rallied 20% in the past 2 weeks. ERA was the worst performing stock, losing 8.1%. We downgraded ERA to sell on 25 May, largely due to share price appreciation. Australian Resources Weekly 12 June 2009 UBS 9 . Chart 7: Aluminium – LME price vs LME stocks Chart 8: Copper – LME price vs LME stocks 45 65 85 105 125 145 165 Dec-94 Nov -96 Oct-98 Sep-00 Aug-02 Jul-04 Jun-06 May -08 0 1000 2000 3000 4000 5000 Al Price Al Stocks Kt US¢/lb 45 145 245 345 445 Dec-94 Nov -96 Oct-98 Sep-00 Aug-02 Jul-04 Jun-06 May -08 0 200 400 600 800 1000 1200 Cu Price Cu Stocks Kt USc/lb Source: Datastream Source: Datastream Chart 9: Lead - LME price vs LME stocks Chart 10: Nickel - LME price vs LME stocks 15 65 115 165 215 Dec-94 Nov -96 Oct-98 Sep-00 Aug-02 Jul-04 Jun-06 May-08 0 100 200 300 400 500 Pb Price Pb Stocks Kt US¢/lb 150 650 1150 1650 2150 2650 Dec-94 Nov -96 Oct-98 Sep-00 Aug-02 Jul-04 Jun-06 May -08 0 50 100 150 200 Ni Price Ni Stocks KtUS¢/lb Source: Datastream Source: Datastream Chart 11: Tin - LME price vs LME stocks Chart 12: Zinc - LME price vs LME stocks 150 300 450 600 750 900 1050 1200 1350 Dec-94 Nov -96 Oct-98 Sep-00 Aug-02 Jul-04 Jun-06 May -08 0 5 10 15 20 25 30 35 40 Sn Price Sn Stocks KtUS¢/lb 30 60 90 120 150 180 210 Dec-94 Nov -96 Oct-98 Sep-00 Aug-02 Jul-04 Jun-06 May -08 -220 20 260 500 740 980 1220 1460 1700 Zn Price Zn Stocks Kt US¢/lb Source: Datastream Source: Datastream Chart 13: Spot steam coal pricing Chart 14: P/NPV BHP 0 50 100 150 200 Jul-01 Jul-02 Jul-03 Jul-04 Jul-05 Jul-06 Jul-07 Jul-08 Newcastle Richards Bay JBM Contract US$/t FOB 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 Source: Global Coal Source: UBS estimates Australian Resources Weekly 12 June 2009 UBS 10 Table 6: Recent Research Company Share Price Rec'n Date Analyst Research Adaro Rp1,370 Neutral 3-Jun Andreas Bokkenheuser A two-year story Alumina Limited A$1.33 Buy 2-Jun Glyn Lawcock Incorporating retail take-up of rights Andean Resources A$2.03 Buy 2-Jun Jo Battershill Exploration continues to add value Anglo American RCnt22,919 Neutral 2-Jun James Bennett Long-term issues remain Coal and Allied A$82.00 Neutral 2-Jun Glyn Lawcock Remains expensive relative to peers Macarthur Coal A$6.67 Neutral 2-Jun Glyn Lawcock Neutral due to share price appreciation Bumi Resources Rp1,960 Neutral 1-Jun Andreas Bokkenheuser The dilemmas Fortescue Metals Group A$2.70 Neutral 1-Jun Glyn Lawcock Reports Mar09 underlying NPAT of US$22m Novolipetsk Steel US$1.94 Buy 1-Jun Alexei Morozov 1Q09 US GAAP results preview Belon US$0.40 Neutral 29-May Alexei Morozov Good long-term value, but valuation and refinancing risks trigger downgrade Hyundai Steel Won61,500 Neutral 29-May Yong-Suk Son A little overdone; maintain Neutral First Quantum Minerals C$47.00 Buy 28-May Onno Rutten Half a billion, for what? Fortescue Metals Group A$2.56 Neutral 28-May Glyn Lawcock Signs of operational improvement Iluka Resources A$3.13 Neutral 28-May Glyn Lawcock Demand outlook remains weak Mt Gibson Iron A$0.83 Neutral 26-May Glyn Lawcock Downgrading estimates on currency PanAust Limited A$0.40 Buy 26-May Jo Battershill Recapitalisation underway Energy Resources of Australia A$27.53 Sell 25-May Glyn Lawcock Downgrade to Sell on share price rise Katanga Mining C$0.92 Sell 25-May Onno Rutten Glencore cleans up KAT & seeks partner Mitusi Mining Y203 Neutral 22-May Neutral Trending above guidance in Q1; could lose momentum in H2 ANZ Resources 21-May Glyn Lawcock Alpha Preferences Gloucester Coal A$7.01 Neutral 21-May Glyn Lawcock Noble declares offer unconditional Straits Asia Resources S$1.41 Buy 21-May Andreas Bokkenheuser Poised to unlock value Vale R$53.00 Buy 21-May Edmo Chagas Capex cut to $9bn, but more cuts possible Whitehaven Coal A$2.49 Buy 21-May Glyn Lawcock WHC offers most valuation upside Fortescue Metals Group A$2.75 Neutral 20-May Glyn Lawcock The new force in iron Ore? Godo Steel Y278 Neutral 20-May Katsuya Takeuchi Two factors for uncertainty Kyoei Steel Y2,180 Buy 20-May Katsuya Takeuchi We look positively on this growth company Silver Standard Resources Inc US$20.86 Buy 20-May Chris Lichtenheldt Lowering EPS on higher near-term costs MMX Minerals R$6.82 Buy 19-May Edmo Chagas MOU signed with Chinese steel maker AngloGold Ashanti RCnt32.076 Neutral 18-May Simon Kendall Q1 review - 2009 to be back end loaded Potash Corporation US$107.14 Buy 18-May Brian MacArthur We adjust estimates, raise price target Source: UBS [...]... 4.83 5.85 UBS 11 Australian Resources Weekly 12 June 2009 Absolute measures Share Coal Producers Price 11-Jun-09 Domestic (Diversified) BHP Billiton Limited 38.27 77.05 Rio Tinto Ltd Domestic (Coal- only) Centennial Coal 2.85 82.00 Coal & Allied Gloucester Coal Ltd 6.97 7.34 Macarthur Coal Ltd International (Diversified) 17.62 Anglo American 15.17 BHP Billiton Plc 31.57 Rio Tinto Plc 20.69 Teck Resources. .. Plc 67614 8310 Teck Resources International (Coal- only) 2911 Banpu 4251 Bumi Resources Peabody Energy 9835 7132 Yanzhou Coal Coal Producers wtd avg Cash flow, capital intensity measures Coal Producers Rating Domestic (Diversified) BHP Billiton Limited Neutral Rio Tinto Ltd Buy Domestic (Coal- only) Buy Centennial Coal Neutral Coal & Allied Neutral Gloucester Coal Ltd Neutral Macarthur Coal Ltd International... the percentage band criteria used in the rating system was 10% UBS 18 Australian Resources Weekly 12 June 2009 Global Disclaimer This report has been prepared by UBS Securities Australia Ltd, an affiliate of UBS AG UBS AG, its subsidiaries, branches and affiliates are referred to herein as UBS In certain countries, UBS AG is referred to as UBS SA This report is for distribution only under such circumstances... views expressed by that research analyst in the research report UBS 15 Australian Resources Weekly 12 June 2009 Required Disclosures This report has been prepared by UBS Securities Australia Ltd, an affiliate of UBS AG UBS AG, its subsidiaries, branches and affiliates are referred to herein as UBS For information on the ways in which UBS manages conflicts and maintains independence of its research... Profitability measures Coal Producers 52-week high Domestic (Diversified) BHP Billiton Limited 45.88 141.75 Rio Tinto Ltd Domestic (Coal- only) 6.32 Centennial Coal Coal & Allied 119.50 13.63 Gloucester Coal Ltd 20.80 Macarthur Coal Ltd International (Diversified) 35.26 Anglo American BHP Billiton Plc 19.50 60.90 Rio Tinto Plc Teck Resources 49.92 International (Coal- only) 544.00 Banpu Bumi Resources 8550.00... International (Diversified) Neutral Anglo American Neutral BHP Billiton Plc Buy (UR) Rio Tinto Plc Teck Resources Buy (CBE) International (Coal- only) Banpu Sell Bumi Resources Neutral Peabody Energy Buy Yanzhou Coal Buy Coal Producers wtd avg or sum Capex % sales 2007 2008 2009e UBS 12 Australian Resources Weekly 12 June 2009 Absolute measures Share Price Trading curr Rptg curr Year end 2006 1.67 2.99 32.00... analyst of UBS Securities France S.A has contributed to this report, the report is also deemed to have been prepared by UBS Securities France S.A Germany: Prepared by UBS Limited and distributed by UBS Limited and UBS Deutschland AG UBS Deutschland AG is regulated by the Bundesanstalt fur Finanzdienstleistungsaufsicht (BaFin) Spain: Prepared by UBS Limited and distributed by UBS Limited and UBS Securities... Fording Peabody Energy 88.05 15.76 Yanzhou Coal Coal Producers wtd avg RoIC (EBIT) (%) 2007 2008 2009e 2006 RoE (net) (%) 2007 2008 2009e EPS growth, value measures Coal Producers Mkt cap (US$ m) Domestic (Diversified) 174541 BHP Billiton Limited Rio Tinto Ltd 80532 Domestic (Coal- only) Centennial Coal 866 5777 Coal & Allied 463 Gloucester Coal Ltd 1267 Macarthur Coal Ltd International (Diversified) Anglo... SV, SA UBS Securities España SV, SA is regulated by the Comisión Nacional del Mercado de Valores (CNMV) Turkey: Prepared by UBS Menkul Degerler AS on behalf of and distributed by UBS Limited Russia: Prepared and distributed by UBS Securities CJSC Switzerland: Distributed by UBS AG to persons who are institutional investors only Italy: Prepared by UBS Limited and distributed by UBS Limited and UBS Italia... 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UBS 18 Energy Resources of Australia Limited (A$) 01-Apr-04 01-Jul-04 01-Oct-04 01-Jan-05 01-Apr-05 01-Jul-05 01-Oct-05 01-Jan-06 01-Apr-06 01-Jul-06 01-Oct-06 01-Jan-07 01-Apr-07 01-Jul-07 01-Oct-07 01-Jan-08 01-Apr-08 01-Jul-08 01-Oct-08 01-Jan-09 01-Apr-09 0.0 10.0 20.0 30.0 40.0 Price. 150 300 450 600 750 900 1050 1200 1350 Dec-94 Nov -9 6 Oct-98 Sep-00 Aug-02 Jul-04 Jun-06 May -0 8 0 5 10 15 20 25 30 35 40 Sn Price Sn Stocks KtUS¢/lb 30 60 90 120 150 180 210 Dec-94 Nov -9 6 Oct-98 Sep-00 Aug-02 Jul-04 Jun-06 May -0 8 -2 20 20 260 500 740 980 1220 1460 1700 Zn. 01-Apr-04 01-Jul-04 01-Oct-04 01-Jan-05 01-Apr-05 01-Jul-05 01-Oct-05 01-Jan-06 01-Apr-06 01-Jul-06 01-Oct-06 01-Jan-07 01-Apr-07 01-Jul-07 01-Oct-07 01-Jan-08 01-Apr-08 01-Jul-08 01-Oct-08 01-Jan-09 01-Apr-09 0.0 10.0 20.0 30.0 40.0 Price Target (A$) Stock Price (A$) Buy 2 Neutral 2 Reduce 2 Buy Neutral Sell No Rating Source: UBS;