UBS Investment Research Australian Resources Weekly

ab Global Equity Research Australia UBS Investment Research Australian Resources Weekly Mining & Metals Sector Comment Uranium 101 Mining uranium to marketing yellowcake Yellowcake in uranium mining is analogous to copper concentrate in the case of copper mining Yellowcakes typically contain 70%- 90% U3O8 besides other oxides This concentrate is not the final fuel (much like copper concentrate is not the final copper metal) and hence utilities then contract with third parties like converters, enrichers and fuel fabricators to produce the required reactor fuel Demand and supply fundamentals Uranium is primarily used by nuclear power plants (c.95%) in generating electricity Uranium supply comes from mines or from secondary sources Secondary supply in the form of inventories held by utilities, producers, governments, recycled products, and dismantling of Russian nuclear weapons etc accounts for approximately 30% of uranium supply Uranium pricing mechanismn Uranium is sold both under long term contracts as well as in the spot market Long term contracts dominate the market with c.85% share of all uranium sold and are multi-year contracts (two to ten years or more) with deliveries starting after two to five years when the contract was finalized 10 July 2009 www.ubs.com/investmentresearch Glyn Lawcock Analyst glyn.lawcock@ubs.com +61-2-9324 3675 Jo Battershill Analyst jo.battershill@ubs.com +61-2-9324 2834 Mark Busuttil Analyst mark.busuttil@ubs.com +61-2-9324 3623 Daniel Morgan Analyst daniel.morgan@ubs.com +61-2-9324 3844 PDN and ERA provide exposure to uranium We recently increased our uranium prices for 2008 and 2009 to US$64/lb (+29%) and US$52/lb (+30%) and our long term prices to US$70.lb (+17%) Paladin is more exposed to spot market while has long-term contracts We maintain neutral on both the stocks as they are trading close to their NPVs Uranium explorers are trading at an average EV/lb multiple of US$3.54/lb of U3O8 resources This report has been prepared by UBS Securities Australia Ltd ANALYST CERTIFICATION AND REQUIRED DISCLOSURES BEGIN ON PAGE 19 UBS does and seeks to 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 Australian Resources Weekly 10 July 2009 Uranium Geology Uranium is not found in native state but is found combined with other elements Uranium deposits worldwide can be grouped in a defined number of ore bodies Australia's uranium resources can largely be classified in two kinds of orebodies, unconformity-related and breccia complex (most of the Canadian deposits are unconformity-related) Unconformity-related deposits constitute almost 20% of Australia’s total uranium resources e.g Nabarlek (now mined out) and Ranger & Other major deposits are Jabiluka, Koongarra and Ranger 68 ERA’s Ranger mine has reserve grades of around 0.1% U3O8 whereas Jabiluka has reserve grades of around 0.5% U3O8 Most of Canada’s Uranium deposits like Key Lake, Cluff Lake, Rabbit Lake (all now depleted), and McClean Lake and McArthur River deposits are all unconformity-related deposits Cigar Lake is also unconformity-related deposit with exceptionally high grades of around 20% U3O8 The Olympic Dam deposit, accounting for about 66% of Australia’s reserves and resources is Breccia complex deposit Uranium grades here average from 0.08% to 0.04% U3O8 The most common ore for Uranium are uraninite (also called Pitchblende; U2O5.UO3, better known as U3O8) Other common mineral ore for uranium are carnotite, autunite, torbernite, and coffinite etc Mining uranium to marketing yellowcake The common uranium mining methods include underground mining, open pit mining and in situ leach mining among others According to the World Nuclear Association, share of various uranium mining methods are as follows: Table 1: Uranium mining methods, 2008 Mining method % share Conventional underground & open pit 62% In situ leach (ISL) 28% By-product 10% Source: World Nuclear Association; considering Olympic Dam as by-product rather than in underground category In conventional mining (open pit/underground) the ore is crushed and finely ground before being leached with chemicals to separate the uranium from the waste rock (tailings) This leached slurry then undergoes various other extraction and refining processes to form a uranium oxide (U3O8) concentrate called yellowcake In in-situ leach mining, the ore is not dug out but is chemically treated such that the minerals dissolve and the mineral rich solution can be recovered on the surface This method is largely used in sandstone type deposits since the ore body needs to be permeable to liquids used This method is increasingly gaining popularity as there are no tailings or wastes generated and there is little disturbance to the surface UBS Australian Resources Weekly 10 July 2009 Yellowcake in uranium mining is analogous to copper concentrate in the case of copper mining Yellowcakes typically contain 70%- 90% U3O8 besides other oxides This yellowcake is then sold to utilities around the world on the basis of the U3O8 contained in the uranium concentrate This concentrate is not the final fuel (much like copper concentrate is not the final copper metal) and hence utilities then contract with third parties like converters, enrichers and fuel fabricators to produce the required reactor fuel Yellowcake needs to be converted to nuclear grade UO3 (uranium trioxide), which is further converted to UF6 (uranium hexafluoride) UF6 is finally enriched to contain 3%-4% of U-235 (from a natural level of 0.7% U3O8) This enriched uranium hexafluoride is the reactors grade uranium and used by power utilities This low enriched uranium can be further enriched to produce highly enriched uranium (HEU), which is weapons grade and has c.90% U-235 Figure 1: Drummed yellowcake Source: EIA Australian uranium miners sell yellowcake to the utilities and not process the concentrate themselves Some uranium companies like Cameco are involved in converting the yellow cake to the final reactor fuel Cameco is involved in the complete value chain of uranium from (a) uranium exploration; (b) mining and milling; (c) refining and conversion; (d) enrichment; and (e) fuel fabrication (also known as fuel manufacturing) Figure 2: Relative volumes of uranium in the nuclear fuel cycle Mining and milling 200 tonnes of Conversion Enrichment Fuel fabrication 170 tonnes of 24 tonnes of 24 ton as UO2fuel uranium as UF6 uranium (roughly eq to the as enriched UF6 amount of fresh uranium oxide (U3O8) (needs fuel required around 150kt of annually by a rock and ore) 1000 MW reactor) Depleted uranium tails 146 tonnes of uranium as tails Source: Australian govt document on Nuclear energy, UBS Secondary sources of uranium Uranium supply from mines is not sufficient to meet uranium demand with remaining demand met by secondary sources like inventories held by utilities, producers, governments, and recycled products Excess Russian enrichment capacity is also used to enrich depleted uranium tails Uranium available from demantling Russian nuclear weapons under the HEU agreement is also a significant source of uranium as it contains highly enriched uranium (HEU) This highly enriched uranium is converted to low enriched uranium to be used by the power generating utilities Secondary sources accounted for approximately 30% of the total uranium supply in 2008 UBS Australian Resources Weekly 10 July 2009 HEU agreement The HEU agreement, also called the megaton-to-megawatts agreement, was signed by the US and Russia in 1993 Under this agreement Russia would dismantle a significant portion of its nuclear warheads by converting highly enriched uranium (HEU) from Russian nuclear warheads into low enriched uranium (LEU) used to fabricate fuel for commercial nuclear power plants The agreement is to convert 500MT of HEU to LEU over a 20 year period ending in 2013 LEU uranium coming in the market due to this agreement is a major source of secondary uranium supply – the equivalent of one major mine according to Cameco Russia had indicated, early in 2006, that it does not wish to enter into a second HEU deal after 2013 Uranium marketing Uranium is not traded on exchanges the way other base metals like Cu, Al etc are traded Uranium, instead, is traded through contracts negotiated directly between the buyer and the seller The structure of these contracts tends to vary widely depending on the way pricing mechanism has been agreed upon between the two parties Pricing can be as simple as single fixed pricing or can be referenced to economic indices Contracts traditionally specify a base price, and rules for escalation The escalation can be based on economic indicators like inflation, GDP etc Uranium is sold both under long term contracts as well as in the spot market Long term contracts dominate the market with close to 85% share of all uranium sold Approximately 15% of the uranium is sold under spot market Long-term contracts Long-term contracts as the name suggests are multi-year contracts (two to ten years or more) with deliveries starting after two to five years when the contract was finalized Long-term contract prices can be referenced to spot prices or long-term indicator prices They can also be based on fixed price mechanism with escalation linked to various economic factors In the former case the companies’ revenues would be affected by the spot prices but in the later they may not necessarily be Even in long-term contract prices, companies tend to have a mix of both the above two types of contract mechanism The way contract prices are agreed on also appears to have changed over a period of time According to Cameco, the company used to have ceilings for 100% of volumes and no floors in 2001 but it currently has some ceilings in prices for prices above US$100/lb and floors with escalation ERA is another company which sells most of its uranium under long dated contracts Producers tend to prefer long-term contracts because it gives them visibility of earnings in a capital intensive business whereas buyers prefer these contracts due to supply security Spot market Spot contracts are shorter term in duration with deliveries done within year of the contract award UBS Australian Resources Weekly 10 July 2009 Since there is no established exchange to quote spot rates for uranium, spot quotes are provided by uranium market service providers like Ux, TradeTech or Nukem etc Chart 1: Uranium spot versus long-term prices $160.0 US$/l $140.0 $120.0 LT $100.0 Spot $80.0 $60.0 $40.0 $20.0 Apr 09 Jan 09 Oct 08 Jul 08 Apr 08 Jan 08 Oct 07 Jul 07 Apr 07 Jan 07 Oct 06 Jul 06 Apr 06 Jan 06 Oct 05 Jul 05 Apr 05 Jan 05 $0.0 Source: Cameco Buyer behaviour Utilities tend to prefer a diverse set of suppliers for their supplies to ensure security of supply In some cases (e.g in the EU), this is a requirement and in cases, it could be also be individual utilities’ belief that it is getting a better price by contracting separately with various parties Market segregation according to geography Uranium markets are differentiated by geography as well (in addition to being sold in different forms,) Historical and political forces have shaped the market in two distinct marketplaces: The first, the western world marketplace comprises the Americas, Western Europe and the Far East A separate marketplace comprises countries within the former Soviet Union, or the Commonwealth of Independent States (CIS), Eastern Europe and China Most of the fuel requirements for nuclear power plants in the CIS are supplied from the CIS's own stockpiles Often producers within the CIS also supply uranium and fuel products to the western world, increasing competition (Source: Cameco) UBS Australian Resources Weekly 10 July 2009 Factors affecting Uranium market Demand & Supply Uranium is primarily used by nuclear power plants in generating electricity Uranium demand directly depends on the need of uranium by these nuclear power plants Future uranium demand can be estimated using the number of current and planned reactors, which further depends on the choice of fuel to produce electricity by various nations E.g Nuclear power contributes to approximately 16% of the global energy requirements but contributes to only 3% of the China’s power production Uranium supply, as discussed above, comes from primary mines and secondary sources Primary mine production can be estimated from production plans and exploration programs of respective companies Secondary sources can depend on the individual government policies E.g the recent news that Presidents Obama & Medvedev had agreed to a reduction in the number of nuclear weapons allowed by both countries means that potentially secondary sources of uranium may increase Further, government policies and agreements control the uranium mining and to which nation uranium can be sold Chart 2: Illustrative demand/supply Other 5% Electricity 95% Source: WNA, UBS estimates The paragraph below, sourced from Paladins annual report, talks about the political scene in Australia with respect to uranium mining Investment View In this section we look at the valuations of various Uranium producers and Uranium explorers and developers using EV/lb (enterprise value per pound of U3O8) metric While EV/lb is not the sole metric to compare various entities, it does provide a useful comparison between both producing and non producing uranium companies It is a useful metric especially in the case of explorers and developers where other metrics like P/NPV may not be very reliable because of a lack of visibility on data regarding production, capex and other operational metrics Due to production and cashflow, producers tend to command higher multiple than explorers Similarly among producers, a company with higher grade assets would command higher multiple because higher grades normally imply lower costs of production Chart provides a comparison of Uranium producer’s based on EV/lb of U3O8 resources and EV/lb of U3O8 reserves Uranium producers are trading at an average EV/lb multiple of US$27.3/lb of U3O8 reserves and at an average EV/lb multiple of US$9.3/lbx of U3O8 resources UBS Australian Resources Weekly 10 July 2009 Chart 3: Uranium producers comps - EV/lb of U3O8 reserves Chart 4: Uranium producers comps - EV/lb of U3O8 resources 70.0 25.0 60.0 20.0 50.0 40.0 15.0 30.0 10.0 20.0 5.0 10.0 Source: Company reports, Datastream ,UBS One Uranium Mines Denison Energy Paladin ERA Average Corp Cameco ERA Mines Denison Corp Cameco Energy One Average Paladin 0.0 Uranium 0.0 Source: Company reports, Datastream ,UBS Chart below shows junior Uranium explorers and developers on EV/lb of U3O8 resources U3O8 resources include measured and indicated as well as inferred resources We not compare these entities on EV/lb of U3O8 reserves as most of them not have defined reserves (with the exception of First Uranium and Forsys Metals) The chart shows that Uranium explorers are trading at an average EV/lb multiple of US$3.54/lb of U3O8 resources The multiple for explorers and developers is understandably lower than producers’ because of the certainty of production and hence the cash flows from producers Based on EV/lb multiples alone Mega Uranium and Extract Resources appear to be more expensive while Energy Metals and Bannermann Resources appear to be trading relatively inexpensive Chart 5: Uranium Explorers/Developers (Australia & Canada) Comparables – EV/lb of U3O8 resource 9.0 US$/lb of U3O8 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 Resources Bannerman Resources Laramide Metals Energy First Uranium Ur-Energy Toro Energy Metals Corp Forsys Average Resourcs Alliance Deep Yellow Uranium Mega Mantra Resources Resources Arafura Extract Resources 0.0 Source: Company reports; Bloomberg; Resources as on May 20th, 2009; Price as on Jul 09th, 2009 Equity read-through In our Uranium coverage universe, Paladin and ERA are trading at EV/lb multiple of US$26.3/lb and US$13.3/lb of U3O8 reserves respectively On EV/lb UBS Australian Resources Weekly 10 July 2009 of U3O8 resources, the two stocks are trading at a similar multiple of US$7.6/lb and US$7.1/lb respectively We recently increased our uranium prices for 2008 and 2009 to US$64/lb (+29%) and US$52/lb (+30%) and our long term prices to US$60lb (+20%) As a result we increased our price target for Paladin to US$5.10 based on our NPV and of ERA to $21.50 which is set by combining our 12 month forward NPV of $16.48 and our valuation for Ranger Deeps We maintain our Neutral rating on both the stocks as we see the share price as fair value We note that Paladin is more levered to rising uranium prices as most of its production is un-contracted At current prices PDN appears to be fully valued but we believe that corporate interest and any upswing in uranium price will underpin the share price in the near term Most of ERA sales are under long term contracts We forecast a fixed contract book for ERA over the next couple of years so the increase in our uranium price assumptions not offset this impact to near term earnings forecasts We also believe the market is becoming more comfortable with ascribing value to the Ranger Deeps potential underground project which remains the key upside to the stock We anticipate the market will be willing to ascribe more value should further favorable updates be forthcoming UBS Australian Resources Weekly 10 July 2009 Uranium Industry Chart 6: Uranium mine production by region, 2008E US 5% Russia Asia Other 2% 6% Chart 7: Major producers of Uranium, 2008E Cameco Others Australia 22% 26% 23% 9% KazAtom RIO Africa Kazakh 18% 13% 6% Priargunsky 19% 6% COGEMA 7% Canada ERA BHP 11% 9% 18% Source: UBS estimates Source: UBS estimates Chart 8: Regional consumption of Uranium, 2008E Chart 9: Global uranium reserves by region Other Oth Asia Namibia 12% 6% Brazil 8% Europe 5% 7% 4% Canada Japan 9% 10% Kazakh Sth Africa 10% Nth Am 31% Source: AME, UBS estimates Australia 27% 6% USA 35% China Other Russia 18% 12% Source: USGS UBS Australian Resources Weekly 10 July 2009 Weekly share price movement Chart 10: Weekly price changes M CC 3.6% 2% 2.4% CNA -40.1 % ILU -0.4% 30.9% GCL -0.4% WHC -0.7% 56.4% OZL -2.8% 1% S&P /A SX 200 -2.9% 56.8% FLX -3.2% -5.0% -4.0% LGL -1 2.7% NCM -5.1 % ERA 9.3% ASX 200 Reso urces -5.6% 6.1 % BHP B illito n -5.9% -2.5% -6.9% AWC M RE -7.5% 58.8% RIO -8.0% -34.0% CEY -9.5% P DN -1 % 0.1 PEM -1 3.3% AB Y -1 4.0% -4.8% AVO -65% 8.7% -5.4% -1 4.7% -55% -45% -35% -25% -15% -5% 5% 15% %ch Week 25% 35% 45% %ch YTD (2009) 55% 65% Source: IRESS Both the S&P/ASX200 and the S&P/ASX200 Resources Index eased, falling 2.9% and 5.6% w/w, respectively RIO underperformed BHP w/w, falling 8.0% while BHP fell 5.9% MCC and CNA where the only stocks to gain this week, while other coal names also outperformed the resources index, potentially due to weakness in base metals prices We prefer the bulk producers to base metals as we anticipate base metals prices will continue to ease over the northern hemisphere summer AVO was the worst performer, losing 14.7% w/w following an increase in the takeover offer for DIO on July UBS 10 Australian Resources Weekly 10 July 2009 Chart 11: Aluminium – LME price vs LME stocks 165 Chart 12: Copper – LME price vs LME stocks Kt US¢/lb 145 5000 4000 Al Stocks 125 3000 105 2000 85 65 1000 Al Price 45 Kt 445 USc/lb Cu Stocks 345 1200 1000 Cu Price 800 245 600 400 145 200 45 0 Dec-94 Nov -96 Oct-98 Sep-00 Aug-02 Jul-04 Jun-06 May -08 Dec-94 Nov -96 Oct-98 Sep-00 Aug-02 Jul-04 Jun-06 May -08 Source: Datastream Source: Datastream Chart 13: Lead - LME price vs LME stocks Chart 14: Nickel - LME price vs LME stocks Pb Stocks 65 15 1150 650 115 1650 200 Pb Price 2150 100 165 2650 400 Kt US¢/lb 500 300 215 150 Dec-94 Nov -96 Oct-98 Sep-00 Aug-02 Jul-04 Jun-06 May -08 US¢/lb 200 Kt 150 Ni Price 100 Ni Stocks 50 Dec-94 Nov -96 Oct-98 Sep-00 Aug-02 Jul-04 Jun-06 May -08 Source: Datastream Source: Datastream Chart 15: Tin - LME price vs LME stocks Chart 16: Zinc - LME price vs LME stocks 1350 1200 1050 900 750 600 450 300 150 US¢/lb Kt Sn Stocks Sn Price Dec-94 Nov -96 Oct-98 Sep-00 Aug-02 Jul-04 Jun-06 May -08 40 35 30 25 20 15 10 210 US¢/lb 1700 1460 1220 980 740 500 260 20 -220 Kt 180 150 120 90 60 Zn Stocks Zn Price 30 Dec-94 Nov -96 Oct-98 Sep-00 Aug-02 Jul-04 Jun-06 May -08 Source: Datastream Source: Datastream Chart 17: Spot steam coal pricing Chart 18: P/NPV BHP 200 US$/t FOB New castle Richards Bay 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 JBM Contract 150 100 50 Jul-01 Jul-02 Source: Global Coal Jul-03 Jul-04 Jul-05 Jul-06 Jul-07 Jul-08 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 Source: UBS estimates UBS 11 Australian Resources Weekly 10 July 2009 Table 2: Recent Research Company Share Price Rec'n Date Analyst Research A$24.57 Neutral 9-Jul Mark Busuttil Is Sims about to make more acquisitions? Alumina Limited A$1.36 Buy 9-Jul Glyn Lawcock Alcoa Q2 suggests consensus too harsh Aditya Birla Minerals A$0.55 Sell 8-Jul Jo Battershill Cessation of coverage Equinox Minerals A$2.40 Buy 8-Jul Jo Battershill Initiation of coverage Kyoei Steel Y2615 Buy 7-Jul Katsuya Takeuchi Maintaining bullish stance Osisko Mining C$6.62 Buy 7-Jul Dan Rollins Debt agreement reached in principle Sidenor E5.10 Neutral 7-Jul Marcelo Zilberberg Shares already discounting a recovery Tokyo Steel Y1103 Neutral 7-Jul Katsuya Takeuchi Downward revision seems increasingly likely RCnt9.112 Buy 6-Jul James Bennett Latest forecasts 6-Jul Glyn Lawcock Commodity prices and earnings revised Sims Metal ArcelorMittal Australian Resources Bt324.00 Buy 6-Jul Athaporn Arayasantiparb Upgrade to Buy on higher coal prices C$2.58 Buy 6-Jul Onno Rutten Ramp-up to extend into H2/09 Y244 Neutral 6-Jul Atsushi Yamaguchi Q1 results preview A$49.60 Buy 6-Jul Glyn Lawcock RIO sells first part of Alcan packaging 2026p Buy 6-Jul Peter Hickson Commodity prices stronger in 2010E Sesa Goa Rs187.35 Sell 6-Jul Sunita Sachdev Iron ore prices raised for 2011; risks stack up for now Sterlite Industries Rs629.40 Neutral 6-Jul Sunita Sachdev Bullish on commodities; in the price C$19.99 Buy 6-Jul Brian MacArthur Lower rail costs for coal 1388p Buy 6-Jul Sunita Sachdev Upgrade to Buy: concerns being mitigated Y218 Neutral 3-Jul Atsushi Yamaguchi Uncertain about sustainability of recovery in stainless steel C$20.94 Buy 3-Jul Brian MacArthur Teck arranges C$1.74bn private placement ArcelorMittal RCnt9,700 Buy 2-Jul James Bennett Another domestic SA steel price hike JFE Holdings Y3,200 Neutral 1-Jul Atsushi Yamaguchi Top in terms of earnings momentum Kobe Steel Y178 Neutral 1-Jul Atsushi Yamaguchi Q1 preview Nippon Steel Y366 Neutral 1-Jul Atsushi Yamaguchi Q1 preview US$52.86 Sell 1-Jul Atsushi Yamaguchi Moving Past Bottom, But reflected in Shrs Y258 Neutral 1-Jul Atsushi Yamaguchi Stagnant near term, promising long term Banpu Equinox Minerals Mitsui Mining Rio Tinto Limited Rio Tinto plc Teck Resources Vedanta Resources Nisshin Steel Teck Resources Schnitzer Steel Sumitomo Metal Industries Source: UBS UBS 12 Australian Resources Weekly 10 July 2009 Table 3: Upcoming Events Company Date Event FMG 13-Jul June Qrt Production Energy Resources of Aust 15-Jul June Qrt Production Rio Tinto 15-Jul June Qrt Production Coal & Allied 15-Jul June Qrt Production Iluka 16-Jul June Qrt Production Oz Minerals 21-Jul June Qrt Production BHP Billiton 22-Jul June Qrt Production Newcrest Mining 22-Jul June Qrt Production Centennial Coal 27-Jul June Qrt Production PanAustralia 27-Jul June Qrt Production Coal & Allied 29-Jul Half Year results Macarthur Coal 29-Jul June Qrt Production Felix Resources 30-Jul June Qrt Production Lihir Gold 30-Jul June Qrt Production Western Areas 30-Jul June Qrt Production Ivanhoe 30-Jul June Qrt Production Energy Resources of Aust 31-Jul Half Year results Paladin 31-Jul June Qrt Production Perilya 31-Jul June Qrt Production Alumina 6-Aug Half Year results FMG 6-Aug FY Result BHP Billiton 12-Aug FY Result Bluescope Steel 17-Aug FY Result Newcrest Mining 17-Aug FY Result Onesteel 18-Aug FY Result Rio Tinto 18-Aug Half Year results Centennial Coal 19-Aug FY Result Iluka 19-Aug Half Year results Macarthur Coal 26-Aug FY Result Lihir Gold 27-Aug Half Year results Oz Minerals 27-Aug Half Year results PanAustralia 27-Aug Half Year results Perilya 29-Aug FY Result Felix Resources 31-Aug FY Result Minara 31-Aug Half Year results Paladin 31-Aug FY Result Western Areas 31-Aug FY Result Ivanhoe 10-Sep Half Year results Murchison Metals 30-Sep FY Result Avoca Resources TBA June Qrt Production UBS 13 Australian Resources Weekly 10 July 2009 Company Date Event Dominion Mining TBA June Qrt Production Gloucester Coal TBA June Qrt Production Kagara TBA June Qrt Production Mt Gibson Iron TBA June Qrt Production Murchison Metals TBA June Qrt Production Source: Company data Absolute measures Diversified mining 09-Jul-09 Domestic BHP Billiton Limited Rio Tinto Ltd International Anglo American BHP Billiton Plc Vale S.A (PN) Rio Tinto Plc Share Price Trading curr Rptg curr Year end 32.29 47.60 AUD AUD USD USD Jun Dec NA 50899 63714 40981 22465 29744 54264 36071 NA 23036 30775 15681 10670 11152 19517 13428 NA 13265 15501 7438 7446 9828 7457 NA 4874 5.61 2.37 5.77 2.77 7.62 1.33 2.99 16.51 13.10 28.17 19.67 GBX GBX BRL GBX USD USD USD USD Dec Jun Dec Dec 33072 NA 19653 22465 26311 NA 63714 40981 37478 22651 54264 36071 11615 NA 9582 10670 5497 5761 5237 NA 13265 15501 7354 12887 13222 7438 7446 9828 NA 7457 7060 4874 3.74 NA 1.38 5.61 4.40 2.37 2.41 5.77 4.36 2.77 2.48 7.62 NA 1.33 1.32 2.99 52-week low DPS 2007e Div (%) EBITDA margin (%) 2006 2007 2008 2009e 2006 RoIC (EBIT) (%) 2007 2008 2009e 2006 21.10 25.24 0.56 1.36 1.73 2.86 NA 47.5 45.3 37.5 48.3 36.0 38.3 37.2 NA 39.7 39.4 29.5 41.7 28.9 28.7 28.2 NA 41.3 46.2 22.4 55.7 31.0 23.1 21.8 NA 42.4 44.6 32.6 43.7 40.3 18.3 15.3 9.14 7.53 20.24 8.96 0.62 0.23 0.63 0.69 3.78 1.79 2.23 3.48 35.1 NA 48.8 47.5 45.4 38.6 45.3 51.0 37.5 44.4 40.1 48.3 47.1 36.0 44.5 NA 38.3 47.6 37.2 40.8 26.4 NA 43.7 39.7 38.6 29.9 39.4 44.2 29.5 37.5 30.3 41.7 39.6 28.9 37.1 NA 28.7 37.3 28.2 31.1 27.7 NA 35.2 41.3 35.7 32.3 46.2 35.3 22.4 36.8 28.0 55.7 31.7 31.0 41.0 NA 23.1 16.8 21.8 20.9 20.1 NA 41.2 42.4 37.1 22.4 44.6 44.2 32.6 39.3 22.7 43.7 32.7 40.3 37.5 NA 18.3 14.9 15.3 16.6 Net Debt 07e (US$ m) EV 07e (US$ m) Shares o/s (m) 2006 EPS Growth (%) 2007 2008 2009e 2006 EV/EBITDA 2007 2008 2009e 2006 P/E 2007 2008 2009e 2006 P/BV 2007 2008 2009e 12156 45182 182418 131066 5605.0 1958.3 NA 46.3 NA 2.9 16.9 32.0 -51.9 -60.7 NA 7.4 7.9 11.8 6.4 8.8 9.5 7.7 NA 6.4 9.5 6.9 9.8 5.2 17.7 11.8 5.5 3.5 4.8 2.5 3.6 2.9 3.4 1.5 5170 12156 17984 45182 88326 159700 116622 146018 1336.8 5565.4 5340.6 1958.3 45.0 NA 51.6 46.3 17.4 NA 75.2 2.9 -0.8 16.9 2.6 32.0 NA -51.9 -46.6 -60.7 47.8 33.1 12.5 -52.3 5.7 NA 7.0 7.1 6.7 7.8 7.4 7.1 13.1 8.5 7.4 5.7 7.0 8.1 6.7 NA 8.1 7.8 5.9 7.5 7.1 NA 10.2 5.4 8.4 6.1 7.9 5.8 5.9 7.4 6.1 8.2 5.7 4.4 6.6 NA 14.8 10.6 10.1 13.1 2.7 4.6 2.6 2.8 3.5 3.3 4.0 3.3 2.0 3.3 2.2 3.1 2.2 2.4 2.6 NA 2.9 1.6 1.2 2.1 2006 P/CF 2007 2008 2009e 2006 Capex (US$ m) 2007 2008 2009e 2006 2006 Sales (US$ m) 2007 2008 2009e 29537 50899 32242 29744 2006 EBITDA (US$ m) 2007 2008 2009e 11395 23036 16442 11152 10544 NA 30775 15681 17639 10776 19517 13428 Net income (US$ m) 2006 2007 2008 2009e EPS (Reporting curr.) 2006 2007 2008 2009e Profitability measures Diversified mining 52-week high Domestic 41.75 BHP Billiton Limited 100.56 Rio Tinto Ltd International Anglo American 29.73 BHP Billiton Plc 17.47 Vale S.A (PN) 43.90 46.80 Rio Tinto Plc Diversified Mining wtd avg EBIT margin (%) 2007 2008 2009e 2006 RoE (net) (%) 2007 2008 2009e EPS growth, value measures Diversified mining Mkt cap (US$ m) Domestic 141992 BHP Billiton Limited Rio Tinto Ltd 73132 International Anglo American 36106 119275 BHP Billiton Plc 75582 Vale S.A (PN) 58418 Rio Tinto Plc Diversified Mining wtd avg Cash flow, capital intensity measures Diversified mining Rating Domestic BHP Billiton Limited Neutral Rio Tinto Ltd Buy International Restricted Anglo American Neutral BHP Billiton Plc Buy (CBE) Vale S.A (PN) Rio Tinto Plc Buy Div Mining wtd avg or sum P/NPV or P/NAV NAV/ Share Target Price Net Debt/Equity (%) 2006 2007 2008 2009e 6.57 3.96 4.92 12.01 37.00 66.00 30.5 14.3 39.9 171.6 11.0 171.8 17.7 46.8 NA NA NA NA NA NA NA NA 0.97 NA 0.63 0.54 0.67 17.10 #N/A 45.07 36.48 NA 14.50 41.00 27.50 15.1 30.5 80.6 14.3 38.4 25.1 39.9 50.2 171.6 67.3 60.1 11.0 12.4 171.8 50.0 NA 17.7 17.5 46.8 24.3 4.7 NA 9.0 NA 7.6 4.2 NA 5.0 NA 4.7 4.1 NA 4.7 NA 4.5 NA NA 8.0 NA 8.0 NA 4064 7417 4948 9152 8666 Capex % sales 2007 2008 2009e 9607 4521 NA 18.1 14.6 16.6 14.4 16.0 23.4 12.5 3750 3932 5146 4564 NA 7417 9152 9607 6316 9177 11759 10409 4064 4948 8666 4521 14130 25474 34723 29100 11.3 NA 32.1 18.1 22.9 13.3 14.6 28.5 16.6 18.5 19.6 14.4 31.4 16.0 19.8 NA 23.4 46.0 12.5 27.6 UBS 14 Australian Resources Weekly 10 July 2009 Absolute measures Uranium Producers 09-Jul-09 BHP Billiton Limited Cameco Corporation ERA Paladin Energy Rio Tinto Ltd Share Price 32.29 27.38 20.66 4.45 47.60 Trading curr AUD CAD AUD AUD AUD Rptg curr USD CAD AUD USD USD Year end Jun Dec Dec Jun Dec Sales (US$ m) 2006 2007 2008 2009e NA 50899 63714 40981 1615 2160 2698 2520 236 299 421 471 48 117 255 22465 29744 54264 36071 EBITDA (US$ m) 2006 2007 2008 2009e NA 23036 30775 15681 441 842 1078 964 77 129 186 271 -19 -47 10 67 10670 11152 19517 13428 52-week low DPS 2007e Div (%) 21.10 15.46 10.10 1.79 25.24 0.56 0.20 0.20 0.00 1.36 1.73 0.73 0.97 0.00 2.86 EBITDA margin (%) 2006 2007 2008 2009e 45.3 48.3 38.3 NA 27.3 39.0 40.0 38.3 32.7 43.0 44.3 57.6 8.9 26.2 NA -99.5 47.5 37.5 36.0 37.2 44.8 41.2 43.6 38.1 EBIT margin (%) 2006 2007 2008 2009e NA 39.4 41.7 28.7 16.4 29.2 29.7 28.3 22.0 30.2 34.7 49.9 99.5 -114.3 0.0 15.2 39.7 29.5 28.9 28.2 38.1 34.3 36.7 28.7 2006 NA 10.9 14.0 -30.5 41.3 35.3 RoIC (EBIT) (%) 2007 2008 2009e 46.2 55.7 23.1 21.5 23.3 18.8 21.8 37.3 65.6 -38.8 0.0 7.4 22.4 31.0 21.8 36.5 45.8 22.9 2006 NA 13.1 7.9 -8.9 42.4 36.8 RoE (net) (%) 2007 2008 2009e 44.6 43.7 18.3 13.2 12.7 13.0 13.1 19.2 28.0 -6.8 -2.1 0.0 32.6 40.3 15.3 38.6 40.6 17.1 Net Debt 07e (US$ m) 12156 595 33 133 45182 EV 07e (US$ m) 182418 15628 3441 4020 131066 Shares o/s (m) 5605.0 392.5 190.7 613.9 1958.3 NAV/ Share 5.79 25.15 2.81 2.18 12.01 Target Price 37.00 35.00 21.50 5.10 66.00 Net income (US$ m) 2006 2007 2008 2009e NA 13265 15501 7457 331 389 425 500 33 64 101 173 -19 -55 -19 7438 7446 9828 4874 EPS (Reporting curr.) 2006 2007 2008 2009e NA 2.37 2.77 1.33 0.82 1.67 1.68 1.54 0.23 0.40 0.62 1.21 -0.04 -0.08 -0.03 0.00 5.61 5.77 7.62 2.99 Profitability measures Uranium Producers 52-week high BHP Billiton Limited 41.75 42.97 Cameco Corporation 27.53 ERA Paladin Energy 6.46 100.56 Rio Tinto Ltd Uranium Producers wtd avg EPS growth, value measures Mkt cap (US$ m) 141992 BHP Billiton Limited Cameco Corporation 9247 3092 ERA 2143 Paladin Energy Rio Tinto Ltd 73132 Uranium Producers wtd avg Uranium Producers EPS Growth (%) 2007 2008 2009e NA 16.9 -51.9 103.2 0.4 -7.8 74.6 56.4 93.7 NA NA NA 2.9 32.0 -60.7 7.5 22.0 -54.0 2006 NA 30.5 25.7 NA 7.4 10.6 EV/EBITDA 2007 2008 2009e 7.9 6.4 9.5 18.6 10.2 10.1 26.7 16.8 10.9 -84.9 298.3 46.6 11.8 8.8 7.7 9.0 10.2 9.3 2006 NA 33.3 90.5 NA 6.4 11.3 P/E 2007 2008 2009e 9.5 9.8 17.7 16.4 16.3 17.7 51.8 33.1 17.1 -53.7 -149.1 ###### 6.9 5.2 11.8 NA NA 17.7 2006 5.5 5.5 7.1 7.6 3.5 4.9 P/BV 2007 2008 2009e 4.8 3.6 3.4 5.8 3.1 2.6 6.5 5.2 4.4 2.0 5.6 5.6 2.5 2.9 1.5 4.1 3.4 2.8 Net Debt/Equity (%) 2006 2007 2008 2009e 30.5 39.9 11.0 17.7 12.2 18.7 24.3 13.3 -1.7 6.2 -14.1 -25.2 -5.9 10.1 79.9 107.0 14.3 171.6 171.8 46.8 23.8 80.2 63.0 27.0 2006 NA 19.7 NA NA NA 19.7 P/CF 2007 2008 2009e NA NA NA 11.8 10.9 11.8 NA NA NA NA NA NA NA NA NA 11.8 10.9 11.8 Capex (US$ m) 2006 2007 2008 2009e NA 7417 9152 9607 405 462 594 416 31 78 13 15 87 72 196 130 4064 4948 8666 4521 4587 12977 18621 14689 2006 NA 25.1 13.1 NA 18.1 18.7 Capex % sales 2007 2008 2009e 14.6 14.4 23.4 21.4 22.0 16.5 26.0 3.0 3.2 150.4 167.8 51.2 16.6 16.0 12.5 16.9 16.5 19.7 2006 NA 32.4 6.9 NA 46.3 45.7 Cash flow, capital intensity measures Uranium Producers Rating Neutral BHP Billiton Limited Buy (CBE) Cameco Corporation Neutral ERA Paladin Energy Neutral Rio Tinto Ltd Buy Uranium Producers wtd avg or sum P/NPV or P/NAV 5.58 1.09 7.36 2.04 3.96 4.88 UBS 15 Australian Resources Weekly 10 July 2009 Absolute measures Share Coal Producers Price 09-Jul-09 Domestic (Diversified) BHP Billiton Limited 32.29 47.60 Rio Tinto Ltd Domestic (Coal-only) Centennial Coal 2.19 86.00 Coal & Allied Gloucester Coal Ltd 5.08 6.65 Macarthur Coal Ltd International (Diversified) 16.51 Anglo American 13.10 BHP Billiton Plc 19.67 Rio Tinto Plc 18.43 Teck Resources International (Coal-only) 315.00 Banpu Bumi Resources 1850.00 29.34 Peabody Energy 9.68 Yanzhou Coal Trading curr Rptg curr Year end AUD AUD USD USD Jun Dec AUD AUD AUD AUD AUD AUD AUD AUD Jun Dec Jun Jun GBX GBX GBX CAD USD USD USD CAD Dec Jun Dec Dec THB IDR USD HKD THB IDR USD CNY Dec Dec Dec Dec 881 1852 5256 1506 1569 2946 6024 2936 161 391 1040 585 52-week low DPS 2007e Div (%) EBITDA margin (%) 2006 2007 2008 2009e 2006 21.10 25.24 0.56 1.36 1.73 2.86 NA 47.5 45.3 37.5 48.3 36.0 38.3 37.2 NA 39.7 39.4 29.5 41.7 28.9 28.7 28.2 NA 41.3 46.2 22.4 55.7 31.0 23.1 21.8 NA 42.4 44.6 32.6 43.7 40.3 18.3 15.3 1.58 70.00 2.60 2.36 0.08 0.25 0.11 0.10 3.65 0.29 2.17 1.50 20.0 27.0 30.3 35.1 22.1 15.5 18.5 19.4 25.5 48.1 39.1 41.3 24.3 36.3 38.5 30.1 3.6 20.2 26.3 31.7 8.5 8.0 13.9 14.0 15.0 44.3 36.4 38.1 13.4 31.0 35.8 25.9 1.9 23.2 59.2 56.5 7.4 8.0 23.3 11.8 31.4 97.6 125.1 72.0 13.6 45.1 129.2 43.2 -0.2 25.0 45.7 28.3 5.2 13.6 15.5 9.3 18.9 79.5 69.7 32.7 10.8 29.0 51.8 11.2 9.14 7.53 8.96 3.42 0.62 0.23 0.69 0.97 3.78 1.79 3.48 5.26 35.1 NA 47.5 55.7 38.6 45.3 37.5 44.3 40.1 48.3 36.0 38.4 NA 38.3 37.2 39.4 26.4 NA 39.7 51.6 29.9 39.4 29.5 39.1 30.3 41.7 28.9 30.9 NA 28.7 28.2 26.6 27.7 NA 41.3 85.1 32.3 46.2 22.4 35.9 28.0 55.7 31.0 12.4 NA 23.1 21.8 7.3 20.1 NA 42.4 45.6 22.4 44.6 32.6 22.5 22.7 43.7 40.3 7.3 NA 18.3 15.3 5.8 140.00 425.00 69.51 16.25 3.02 8.00 86.80 NA 0.24 0.28 2.54 4.69 NA 0.82 2.88 18.3 21.1 NA 19.8 38.8 41.0 14.4 22.1 NA 18.4 38.7 40.7 24.8 35.4 NA 27.1 40.0 42.5 29.8 36.2 NA 22.9 41.2 37.3 13.5 17.4 NA 12.6 29.9 33.4 9.5 17.9 NA 10.5 30.0 33.9 21.2 32.8 NA 20.9 35.3 35.4 25.6 31.6 NA 16.2 33.6 28.0 25.6 28.4 NA 11.8 30.0 37.6 15.1 32.3 NA 8.4 30.4 36.0 44.4 67.7 NA 21.6 53.4 42.7 45.6 36.7 NA 15.6 38.7 22.3 16.6 77.1 NA 26.4 12.9 35.2 21.7 95.9 NA 17.1 15.9 37.0 21.5 36.4 NA 35.9 27.1 37.7 24.9 15.7 NA 19.5 18.4 16.9 Net Debt 07e (US$ m) EV 07e (US$ m) Shares o/s (m) 2006 EPS Growth (%) 2007 2008 2009e 2006 EV/EBITDA 2007 2008 2009e 2006 P/E 2007 2008 2009e 2006 P/BV 2007 2008 2009e 12156 45182 182418 131066 5605.0 1958.3 NA 46.3 NA 2.9 16.9 32.0 -51.9 -60.7 NA 7.4 7.9 11.8 6.4 8.8 9.5 7.7 NA 6.4 9.5 6.9 9.8 5.2 17.7 11.8 5.5 3.5 4.8 2.5 3.6 2.9 3.4 1.5 -265 274 12 25 1296 5796 333 1118 373.6 86.6 81.7 244.0 -103.6 -29.0 2.1 -19.2 NA -46.9 -60.8 -64.5 116.2 639.4 402.1 305.4 -36.6 -42.9 1.3 -51.8 14.5 17.7 7.2 4.9 8.7 32.8 15.7 23.4 7.7 6.5 7.8 8.3 6.7 10.3 4.1 4.1 -637.6 36.1 13.1 11.7 19.7 68.1 33.4 33.1 9.1 9.2 6.6 8.2 14.4 16.1 6.6 16.9 0.8 9.1 5.8 3.0 1.3 9.3 4.8 3.1 1.4 5.0 3.9 2.0 1.4 4.3 3.1 1.6 5170 12156 45182 115 88326 159700 146018 16173 1336.8 5565.4 1958.3 538.4 45.0 NA 46.3 71.6 17.4 NA 2.9 -21.3 -0.8 16.9 32.0 -64.0 NA -51.9 -60.7 -9.9 5.7 NA 7.1 3.5 7.8 7.4 13.1 6.1 7.4 5.7 8.1 8.2 NA 8.1 5.9 6.7 7.1 NA 5.4 3.6 6.1 7.9 5.9 4.6 6.1 8.2 4.4 12.7 NA 14.8 10.1 14.1 2.7 4.6 2.8 2.4 3.3 4.0 2.0 2.5 2.2 3.1 2.4 1.3 NA 2.9 1.2 0.8 175 -27 3228 -738 2041 5694 16527 6395 271.8 19404.0 267.4 4918.4 -22.3 42.4 41.2 NA 44.9 72.8 68.9 -30.2 36.3 4.4 69.8 72.1 130.6 100.7 20.3 39.2 -28.1 -31.8 -20.8 -50.6 5.7 5.8 15.9 5.0 6.9 14.1 11.0 16.7 8.6 9.2 6.5 8.3 10.2 4.3 6.8 4.4 3.3 7.7 3.8 7.3 27.6 16.2 13.1 20.1 #N/A 16.0 9.6 18.8 14.7 7.3 9.4 5.6 8.2 7.3 6.5 6.8 7.8 12.0 9.3 12.4 1.8 4.8 5.5 1.5 3.8 2.2 4.8 5.0 2.5 3.4 2.5 5.8 5.0 1.8 2.8 1.7 1.8 2.0 1.5 2.2 P/NPV or P/NAV NAV/ Share Target Price Net Debt/Equity (%) 2006 2007 2008 2009e 2006 P/CF 2007 2008 2009e 2006 Capex (US$ m) 2007 2008 2009e 2006 5.58 3.96 5.79 12.01 37.00 66.00 30.5 14.3 39.9 171.6 11.0 171.8 17.7 46.8 NA NA NA NA NA NA NA NA NA 4064 7417 4948 9152 8666 9607 4521 NA 18.1 14.6 16.6 14.4 16.0 23.4 12.5 0.78 9.02 5.44 2.96 2.81 9.54 0.93 2.25 2.90 85.00 7.00 7.25 86.1 34.0 16.8 -18.3 -61.3 39.0 16.6 7.0 24.0 -35.2 -23.7 2.8 39.1 -6.1 -15.1 -28.0 NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA 128 111 215 103 22 131 127 12 20 164 105 23 10 19.0 10.5 8.8 0.7 32.0 9.0 5.5 8.9 18.1 5.7 6.3 3.6 27.2 7.0 12.7 2.5 0.97 NA 0.54 0.71 17.10 #N/A 36.48 26.08 NA 14.50 27.50 24.00 15.1 30.5 14.3 -57.6 25.1 39.9 171.6 1.5 60.1 11.0 171.8 109.3 NA 17.7 46.8 47.7 4.7 NA NA 3.2 4.2 NA NA 3.8 4.1 NA NA 7.1 NA NA NA 6.0 3750 NA 4064 309 3932 5146 7417 9152 4948 8666 534 11673 4564 9607 4521 669 11.3 NA 18.1 5.4 13.3 14.6 16.6 9.0 19.6 14.4 16.0 179.2 NA 23.4 12.5 10.8 NA NA NA NA 0.70 NA NA NA NA 364.00 3400.00 38.00 15.20 66.7 247.5 125.3 -29.1 27.7 13.6 -1.9 128.1 -25.4 70.8 35.6 35.1 93.2 -34.6 65.2 26.2 41.8 46.5 -38.1 29.1 18.2 12.7 8.1 13.8 6.0 12.3 7.8 9.4 10.6 5.4 7.8 4.9 5.8 6.2 5.0 5.7 5.9 7.4 7.1 6.5 148 152 540 550 241 245 416 508 576 649 445 450 394 483 293 353 9114 17923 36038 20868 16.8 13.0 11.0 26.1 14.4 15.2 10.5 12.0 25.2 14.5 35.2 12.0 6.7 8.4 21.6 35.1 17.2 7.5 12.0 19.1 2006 Sales (US$ m) 2007 2008 2009e #N/A 50899 63714 40981 22465 29744 54264 36071 670 1066 105 356 672 1142 114 246 722 2245 198 560 601 1498 181 419 33072 29537 26311 NA #N/A 50899 63714 40981 22465 29744 54264 36071 5765 5958 6514 6205 1005 2339 5393 1915 1534 3470 6593 3512 2006 EBITDA (US$ m) 2007 2008 2009e #N/A 23036 30775 15681 10670 11152 19517 13428 134 288 32 125 148 177 21 48 184 1079 77 231 146 544 70 126 11615 11395 10544 NA #N/A 23036 30775 15681 10670 11152 19517 13428 3209 2642 2498 2445 145 518 991 740 380 1229 1786 1405 Net income (US$ m) 2006 2007 2008 2009e #N/A 13265 15501 7438 7446 9828 EPS (Reporting curr.) 2006 2007 2008 2009e 7457 4874 #N/A 5.61 2.37 5.77 2.77 7.62 1.33 2.99 78 689 51 140 47 346 46 72 0.00 2.38 0.39 0.57 0.11 1.26 0.15 0.20 0.24 9.33 0.76 0.81 0.15 5.33 0.77 0.39 5497 5761 5237 #N/A 13265 15501 7438 7446 9828 2143 1510 618 NA 7457 4874 593 3.74 #N/A 5.61 5.11 4.40 2.37 5.77 4.02 4.36 2.77 7.62 1.45 NA 1.33 2.99 1.31 -1 155 22 82 467 1067 1377 1211 95 222 601 298 EBIT margin (%) 2007 2008 2009e 2006 29 92 10 32 206 856 419 425 280 650 974 934 373 11.41 19.73 33.49 46.63 376 113.86 192.35 331.11 238.21 655 2.23 1.56 3.59 2.45 752 0.48 0.66 1.32 1.04 Profitability measures Coal Producers 52-week high Domestic (Diversified) BHP Billiton Limited 41.75 100.56 Rio Tinto Ltd Domestic (Coal-only) 5.87 Centennial Coal Coal & Allied 119.50 12.14 Gloucester Coal Ltd 17.84 Macarthur Coal Ltd International (Diversified) 29.73 Anglo American BHP Billiton Plc 17.47 46.80 Rio Tinto Plc Teck Resources 48.66 International (Coal-only) 460.00 Banpu Bumi Resources 6900.00 100.69 Fording Peabody Energy 79.28 15.42 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) 141992 BHP Billiton Limited Rio Tinto Ltd 73132 Domestic (Coal-only) Centennial Coal 642 5842 Coal & Allied 325 Gloucester Coal Ltd 1273 Macarthur Coal Ltd International (Diversified) Anglo American 36106 119275 BHP Billiton Plc Rio Tinto Plc 58418 8699 Teck Resources International (Coal-only) 2513 Banpu 3533 Bumi Resources Peabody Energy 7846 6143 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 Buy Gloucester Coal Ltd Buy Macarthur Coal Ltd International (Diversified) Restricted Anglo American Neutral BHP Billiton Plc Buy Rio Tinto Plc Teck Resources Buy (CBE) International (Coal-only) Banpu Buy Bumi Resources Buy Peabody Energy Buy Yanzhou Coal Buy Coal Producers wtd avg or sum Capex % sales 2007 2008 2009e UBS 16 Australian Resources Weekly 10 July 2009 Absolute measures Share Price Trading curr Rptg curr Year end 2006 1.57 2.86 29.60 AUD AUD AUD AUD USD AUD Jun Dec Jun 310 1113 393 2061 39 680 2153 167 1014 1917 -2 119 349 -1 131 662 -1 293 922 79 460 823 -2 55 99 -2 23 268 -13 122 450 37 252 370 NA 0.06 0.39 281.97 31.73 69.00 91.12 72.00 38.04 ZAR USD PEN ZAR ZAR USD ZAR USD USD ZAR ZAR USD Dec Dec Dec Jun Jun Dec 2997 6404 NA 2526 1382 4987 3272 6332 NA 3042 1437 5526 3726 7961 NA 3167 1293 6199 4078 8380 NA 3685 1486 6755 1099 2459 NA 819 237 1898 937 2744 NA 1131 305 2007 -681 3552 NA 1148 335 2034 1558 4019 NA 1486 464 3118 417 1538 NA 254 -55 704 280 1110 NA 360 51 631 -884 872 NA 363 106 891 734 1762 NA 518 206 1061 10.24 1.83 NA 3.22 -0.84 1.57 52-week high 52-week low DPS 2007e Div.Yield (%) EBITDA margin (%) 2006 2007 2008 2009e 2006 RoIC (EBIT) (%) 2006 2007 2008 2009e 2006 2.29 3.56 36.30 1.05 1.53 17.01 0.00 0.00 0.05 0.00 0.00 0.17 NA 38.4 31.3 NA 33.3 32.1 -3.6 43.1 42.8 47.7 45.4 42.9 NA 26.3 18.2 NA 20.4 21.3 -40.3 28.0 32.1 34.7 34.1 29.7 297.8 9.4 19.6 -3.5 6.7 38.5 -17.6 10.5 62.9 48.4 14.7 51.6 -18.7 6.9 33.8 -3.3 1.6 17.8 -15.2 4.8 18.1 35.3 7.5 12.0 359.76 50.39 96.46 123.50 129.50 51.92 152.00 18.14 30.74 54.00 54.99 21.54 0.21 0.30 NA 0.12 0.00 0.40 0.07 0.95 NA 0.14 0.00 1.05 36.7 38.4 NA 32.4 17.1 38.1 35.7 28.6 43.3 NA 37.2 21.3 36.3 36.2 -18.3 44.6 NA 36.2 25.9 32.8 31.1 38.2 48.0 NA 40.3 31.2 46.2 44.0 16.4 26.7 NA 19.4 5.6 25.3 22.3 10.6 27.7 NA 23.1 11.5 23.7 22.0 -33.8 31.6 NA 22.2 16.1 20.2 18.0 24.3 35.5 NA 26.1 21.7 34.2 31.3 13.1 18.3 NA 13.3 2.5 13.8 16.0 10.9 12.3 NA 12.7 5.4 13.1 15.0 -41.5 16.1 NA 11.8 7.1 11.7 11.8 30.8 17.2 NA 16.1 11.4 18.5 23.4 14.6 17.0 NA 8.6 -1.7 7.1 14.4 10.3 7.5 NA 8.1 1.7 6.5 8.4 -35.8 5.7 NA 6.1 3.9 10.2 2.2 31.8 10.9 NA 8.1 6.6 10.9 13.4 Mkt cap (US$ m) Net Debt 07e (US$ m) EV 07e (US$ m) Shares o/s (m) 2006 EPS Growth (%) 2007 2008 2009e 2006 EV/EBITDA 2007 2008 2009e 2006 P/E 2007 2008 2009e 2006 P/BV 2007 2008 2009e 300 5295 11163 -3 -173 88 297 5122 11251 243.8 2359.9 480.7 NA 466.0 -17.2 5.8 12.2 13.5 NA 50.5 75.8 NA 197.6 34.9 -21.6 42.9 26.0 7.9 20.1 28.9 8.2 3.6 18.7 3.0 2.2 4.6 3.5 1.5 3.9 2.2 1.4 3.0 12309 27700 4101 7906 3779 18602 883 946 NA 648 581 1646 13199 31439 NA 17009 5277 20961 354.1 873.0 274.9 703.8 425.8 489.0 NA NA -421.8 -179.7 245.5 -30.0 -21.9 101.8 NA NA NA NA 52.4 27.6 8.8 45.1 -73.1 -207.3 143.8 94.9 67.7 -10.4 41.2 10.4 152.0 -10.6 -32.5 155.9 13.2 10.8 NA 11.7 13.1 12.0 13.7 14.1 11.5 NA 15.0 17.3 10.4 13.1 8.6 7.9 NA 6.9 9.1 7.2 8.8 27.5 17.4 NA 28.3 -86.0 24.3 40.1 24.8 NA 22.2 80.2 27.1 -12.5 31.7 NA 20.4 32.9 19.2 15.6 15.7 NA 14.1 16.9 17.4 4.3 1.8 NA 2.6 1.9 2.4 4.7 5.3 1.9 NA 1.8 1.8 2.6 2.9 3.8 2.2 NA 1.3 1.4 2.8 2.6 5.6 1.6 NA 1.2 1.1 2.0 2.4 2006 P/CF 2007 2008 2009e Gold 09-Jul-09 Domestic Avoca Resources Ltd Lihir Gold Newcrest Mining International Anglogold Barrick Gold Corp Buenaventura Gold Fields Ltd Harmony Newmont Mining Corp Sales (US$ m) 2007 2008 2009e 2006 EBITDA (US$ m) 2007 2008 2009e Net income (US$ m) 2006 2007 2008 2009e EPS (Reporting curr.) 2006 2007 2008 2009e NA 0.01 0.85 -0.07 0.07 1.14 0.20 0.14 1.02 7.03 -22.62 1.28 1.00 NA NA 4.11 4.47 0.90 2.19 1.40 1.98 18.02 2.02 NA 6.48 4.27 2.19 Profitability measures Gold Domestic Avoca Resources Ltd Lihir Gold Newcrest Mining International Anglogold Barrick Gold Corp Buenaventura Gold Fields Ltd Harmony Newmont Mining Corp Gold wtd avg EBIT margin (%) 2007 2008 2009e RoE (net) (%) 2007 2008 2009e EPS growth, value measures Gold Domestic Avoca Resources Ltd Lihir Gold Newcrest Mining International Anglogold Barrick Gold Corp Buenaventura Gold Fields Ltd Harmony Newmont Mining Corp Gold wtd avg NA -74.5 117.4 NA -372.5 360.5 114.0 34.1 -10.0 -38.1 -265.3 -261.2 23.9 37.2 18.2 22.4 14.0 13.4 -15.4 10.5 NA 7.1 16.2 11.2 6.8 Cash flow, capital intensity measures Rating P/NPV or P/NAV NAV/ Share Target Price Net Debt/Equity (%) 2006 2007 2008 2009e Buy Buy (CBE) Neutral 3.13 2.23 10.78 0.50 1.28 2.75 2.10 3.35 31.00 10.7 28.8 265.3 -3.4 -8.0 3.4 99.4 -2.2 19.4 26.0 -13.9 -2.3 NA NA NA NA NA NA 160.4 NA NA 5.0 NA NA 171 224 60 212 211 41 251 497 31 316 353 NA 55.0 20.2 NA 53.8 10.2 105.8 37.0 23.1 18.4 31.2 18.4 Buy Buy (CBE) Suspended Buy Neutral Buy 0.78 1.03 NA 1.14 0.74 1.14 2.34 363.11 30.74 NA 80.21 97.55 33.49 350.00 48.00 NA 125.00 90.00 56.00 31.5 7.5 NA 3.1 11.6 6.1 44.7 36.4 6.2 NA 11.2 20.9 18.3 12.9 54.0 18.8 NA 10.6 17.9 36.5 25.9 87.0 12.5 NA 17.3 -4.9 20.7 21.0 11.2 11.7 NA 12.3 38.6 12.8 13.4 12.9 13.1 NA 10.1 21.4 12.9 13.1 -35.9 14.5 NA 9.1 15.1 10.3 4.7 8.7 9.9 NA 6.9 10.0 9.9 9.3 1338 1207 40 2435 325 1551 7290 671 1205 44 2312 481 1671 6865 348 3765 42 966 273 1875 8059 42 1825 NA 998 180 1505 5249 44.6 18.8 NA 96.4 23.5 31.1 34.8 20.5 19.0 NA 76.0 33.5 30.2 28.4 9.3 47.3 NA 30.5 21.1 30.2 32.1 1.0 21.8 NA 27.1 12.1 22.3 19.1 Gold Domestic Avoca Resources Ltd Lihir Gold Newcrest Mining International Anglogold Barrick Gold Corp Buenaventura Gold Fields Ltd Harmony Newmont Mining Corp Gold wtd avg or sum Capex (US$ m) 2006 2007 2008 2009e 2006 Capex % sales 2007 2008 2009e UBS 17 Australian Resources Weekly 10 July 2009 Absolute measures Metals 09-Jul-09 Domestic Alumina Ltd Iluka Resources Minara Resources Ltd OZ Minerals International Alcoa Freeport-McMoRan Norilsk Nickel Southern Copper Teck Resources Umicore Xstrata Plc Share Price Trading curr Rptg curr Year end 2006 1.36 2.78 0.74 0.86 AUD AUD AUD AUD AUD AUD AUD AUD Dec Dec Dec Dec 804 570 961 772 657 920 897 363 750 655 251 919 -7 240 327 626 -9 237 330 509 -13 189 19 -983 -9 147 -34 282 385 95 255 428 366 43 230 272 172 22 -16 -1296 -30 -48 0.44 0.54 0.73 0.40 0.38 0.22 0.59 0.20 0.16 0.08 -0.02 -0.65 -0.02 0.02 -0.06 0.00 9.23 46.69 83.00 19.47 18.43 15.02 6.10 USD USD USD USD CAD EUR GBX USD USD USD USD CAD EUR USD Dec Dec Dec Dec Dec Dec Dec 30379 5791 11550 5460 5765 11167 26877 30748 16939 17119 6086 5958 11392 28542 26901 17796 13980 4851 6514 13488 27952 16949 12546 8173 2831 6205 9039 NA 5639 3103 7610 3314 3209 500 10605 4779 7823 10253 3824 2642 698 10904 3313 6052 5807 2529 2498 642 9669 624 4237 2540 1230 2445 319 NA 2466 1453 4996 2016 1897 202 4806 2131 3485 7319 2217 1623 306 5525 1012 2259 4308 1406 618 328 4826 -772 650 1084 562 593 86 NA 2.84 7.62 26.29 2.28 5.11 1.27 2.92 2.48 10.22 38.39 2.51 4.02 1.87 3.24 1.26 5.91 23.15 1.59 1.45 1.93 2.81 -0.83 1.58 6.21 0.64 1.31 0.56 NA 52-week High 52-week low DPS 2007e Div Yield (%) EBITDA margin (%) 2006 2007 2008 2009e 2006 EBIT margin (%) 2007 2008 2009e 2006 RoIC (EBIT) (%) 2007 2008 2009e 2006 4.67 5.04 2.64 2.26 0.84 2.74 0.26 0.50 0.24 0.10 0.40 0.08 17.71 3.60 54.42 9.30 NA 29.8 57.4 65.1 NA 30.7 50.2 55.3 NA 21.0 5.3 -131.2 NA 22.5 -13.5 30.7 NA 17.9 52.9 56.9 NA 14.6 45.2 46.1 NA 5.7 -5.7 -155.3 NA 3.2 -27.7 6.3 NA 12.3 77.0 84.3 NA 8.6 66.1 39.5 NA 4.1 -4.4 -53.1 -24 1.7 -14.5 3.4 30.7 16.9 53.1 72.3 25.7 7.0 37.9 25.0 10.1 3.2 -2.7 -71.7 -1.3 0.9 -8.4 0.4 34.94 109.71 235.00 33.46 48.66 29.99 21.81 5.22 16.80 37.50 9.19 3.42 10.27 2.98 0.68 1.25 8.97 2.27 0.97 0.65 0.25 7.37 2.68 10.81 11.64 5.26 4.33 4.13 18.6 53.6 65.9 60.7 55.7 4.5 39.5 15.5 46.2 59.9 62.8 44.3 6.1 38.2 12.3 34.0 41.5 52.1 38.4 4.8 34.6 3.7 33.8 31.1 43.5 39.4 3.5 NA 49.0 45.4 32.6 31.3 14.3 49.7 60.8 55.6 51.6 2.8 31.0 43.3 11.4 38.8 55.1 57.5 39.1 4.0 30.8 39.2 7.7 24.0 32.6 45.4 30.9 3.5 26.0 24.2 -2.8 25.5 19.5 31.8 26.6 1.8 NA 20.8 17.9 105.9 71.6 81.0 85.1 15.9 34.0 64.2 12.5 43.0 60.9 89.8 35.9 20.2 21.2 43.7 7.0 19.0 24.7 56.3 12.4 18.3 16.4 22.1 -1.6 18.3 11.2 22.5 7.3 6.1 NA 11.9 15.9 61.5 40.7 57.6 40.4 21.5 34.5 43.3 12.2 38.4 41.9 58.9 24.1 20.5 24.6 34.0 6.2 23.9 25.6 38.7 7.3 15.1 19.4 19.8 -5.4 15.8 8.8 18.1 5.8 4.2 NA 9.8 EPS Growth (%) 2007 2008 2009e 2006 EV/EBITDA 2007 2008 2009e 2006 P/E 2007 2008 2009e 2006 Sales (US$ m) 2007 2008 2009e 2006 EBITDA (US$ m) 2007 2008 2009e Net income (US$ m) 2006 2007 2008 2009e EPS (Reporting curr.) 2006 2007 2008 2009e Profitability measures Metals Domestic Alumina Ltd Iluka Resources Minara Resources Ltd OZ Minerals International Alcoa Freeport-McMoRan Norilsk Nickel Southern Copper Teck Resources Umicore Xstrata Plc Metal wtd avg RoE (net) (%) 2007 2008 2009e EPS growth, value measures Metals Domestic Alumina Ltd Iluka Resources Minara Resources Ltd OZ Minerals International Alcoa Freeport-McMoRan Norilsk Nickel Southern Copper Teck Resources Umicore Xstrata Plc Metal wtd avg Mkt Cap (US$ m) Net Debt 07e (US$ m) EV 07e (US$ m) Shares o/s (m) 2006 2594 913 673 2106 861 527 -138 154 5244 1671 2450 4247 2440.2 418.7 1167.8 3121.3 61.7 -40.0 688.4 630.5 -12.4 -60.0 -18.9 -48.6 -57.2 -64.8 -102.8 -418.7 -110.1 -69.7 239.8 -100.4 -661.5 7.2 3.1 4.7 -568.4 7.1 7.4 8.3 -176.4 8.6 65.7 -4.3 7454 17836 15170 17199 8699 2545 29131 7570 9560 4068 40 115 259 11975 45125 32944 41368 27696 16173 5949 69164 807.6 382.0 182.8 883.4 538.4 120.7 2920.0 93.7 46.9 116.1 6.7 71.6 5.7 90.0 78.6 -12.8 34.2 46.0 10.0 -21.3 47.1 10.8 12.8 -48.9 -42.1 -39.7 -36.6 -64.0 3.3 -13.1 -41.2 -165.3 -73.3 -73.2 -60.0 -9.9 -71.1 NA -73.9 6.6 3.5 2.6 4.1 3.5 9.3 3.5 -12.6 9.4 4.2 4.0 7.2 6.1 8.5 6.3 -8.2 12.1 7.0 7.1 9.9 8.2 8.8 6.9 3.6 2006 -11.2 7.9 -17.0 7.9 3.1 5.2 1.0 2.2 3.5 12.9 1.2 4.2 8.2 36.7 -45.3 -1.3 P/BV 2007 2008 2009e -81.9 120.9 -13.3 297.7 0.9 1.0 0.5 1.2 1.0 1.0 0.5 0.9 0.7 1.1 1.0 0.8 0.9 1.0 1.1 1.6 40.8 3.3 3.7 7.3 -11.2 6.7 6.1 4.6 7.9 29.6 7.2 3.2 2.2 3.6 13.4 14.8 8.5 7.8 12.2 30.6 6.7 3.6 4.6 12.7 14.1 9.9 11.8 8.0 7.8 26.9 NA 3.4 3.0 3.5 NA 11.3 ###### ###### ###### ###### 1.8 NA 1.7 3.7 2.4 6.3 1.8 2.3 1.8 NA 2.1 7.2 2.5 2.5 2.3 3.1 2.0 14.6 3.5 7.2 1.3 2.1 1.8 5.1 0.8 5.3 1.2 6.0 0.8 1.2 NA 3.2 Cash flow, capital intensity measures Metals Domestic Alumina Ltd Iluka Resources Minara Resources Ltd OZ Minerals International Alcoa Freeport-McMoRan Norilsk Nickel Southern Copper Teck Resources Umicore Xstrata Plc Metal wtd avg or sum P/NPV or NAV/ Target Rating P/NAV Share Price Net Debt/Equity (%) 2006 2007 2008 2009e Buy Neutral Sell Neutral 1.02 0.98 0.43 0.90 1.32 2.85 1.71 0.96 1.75 3.00 0.60 0.92 23.9 83.3 -38.0 -24.2 58.7 79.6 -22.3 11.2 35.1 23.4 -17.5 33.4 9.5 32.4 -16.1 -47.9 NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA 130 41 206 87 93 846 191 66 2041 527 11 277 NA 16.2 7.1 21.4 NA 11.2 14.1 91.9 NA 21.2 18.2 272.2 NA 80.5 4.5 30.1 Neutral Buy (CBE) Buy Neutral (CBE) Buy (CBE) Sell Restricted 0.55 0.70 0.48 NA 0.71 NA 0.53 16.71 66.70 172.70 NA 26.08 NA 11.54 11.00 66.00 123.00 21.00 24.00 13.50 NA 41.4 -8.6 -11.1 6.2 -57.6 194.9 74.4 22.1 41.1 61.7 23.7 1.0 1.5 11.9 53.5 34.6 69.1 298.6 46.5 15.0 109.3 24.2 77.2 98.0 61.3 197.1 20.8 44.5 47.7 23.6 NA 72.6 2.1 5.3 2.8 7.5 3.2 6.0 2.3 4.0 2.3 3.4 1.9 6.8 3.8 4.5 2.2 3.4 3.3 4.4 2.8 9.9 7.1 5.2 2.3 4.7 26.4 11.4 7.1 19.3 6.0 9.4 NA 13.3 3091 251 724 436 309 173 1453 3636 414 1098 304 534 204 2848 3438 341 2335 496 11673 275 4796 1840 341 1540 391 669 202 3603 6818 10137 25689 9407 10.2 4.3 6.3 8.0 5.4 1.5 5.4 6.5 11.8 2.4 6.4 5.0 9.0 1.8 10.0 8.9 12.8 1.9 16.7 10.2 179.2 2.0 17.2 31.7 10.9 2.7 18.8 13.8 10.8 2.2 NA 12.3 0.60 P/CF 2007 2008 2009e 2006 Capex (US$ m) 2007 2008 2009e 2006 Capex % sales 2007 2008 2009e UBS 18 Australian Resources Weekly 10 July 2009 Statement of Risk Investment risk inherent in the resource sector includes, but is not limited to, movement of commodity price and currency, which may differ materially from the assumptions used in this report Furthermore, the sector is subject to political, 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Limited Rio Tinto plc Teck Resources Vedanta Resources Nisshin Steel Teck Resources Schnitzer Steel Sumitomo Metal Industries Source: UBS UBS 12 Australian Resources Weekly 10 July 2009 Table... that research analyst in the research report UBS 19 Australian Resources Weekly 10 July 2009 Required Disclosures This report has been prepared by UBS Securities Australia Ltd, an affiliate of UBS. .. of this report UBS 21 Australian Resources Weekly 10 July 2009 Global Disclaimer This report has been prepared by UBS Securities Australia Ltd, an affiliate of UBS AG UBS AG, its subsidiaries,