CPM Gold Yearbook 2011

29 March 2011 Bloomberg New York

h 30 Broad Street, 37th Floor New York, NY 10004 www.cpmgroup.com

CPM Gold Yearbook 2011 Sponsors p

Agenda: Speakers g p
Jeffrey Christian, Managing Director Review and Outlook Investment Demand Chinas Gold Market Carlos Sanchez, Director of Risk Management Official Transactions Erica Rannestad, Commodity Analyst Supply Fabrication Demand bi i d Markets Prices

Gold Prices
Weekly Average London PM fix by London bullion dealers, through 18 March 2011
$/Ounce 1,500 1,400 1,300 1,200 1,100 1,000 900 800 700 600 500 400 300 200 100 0 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 10 $/Ounce 1,500 1,400 1,300 1,200 1,100 1,000 900 800 700 600 500 400 300 200 100 0

Intermediate Term Gold Recommendations

CPM Group's Intermediate Term Gold Recommendations
$/Oz. $/Oz.

1,400

1,400

1,200
S

1,200

1,000

1,000

800

S S

800

600

S S

600

400

400

200
B B

200

80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10

The Economic Outlook

Real Gross Domestic Product Annual, Projected Through 2015
Percent 12 Percent 12

World
10 8 6 4 2 0 -2 -4 Average Global GDP = 3.0% -6 90 92 94 96 98

Emerging Economies

Advanced Economies
10 8 6 4 2 0 -2 -4

Average Global GDP = 4.0%

Average GDP =3.8% -6

00

02

04

06

08

10

12p

14p

Source: IMF World Economic Outlook, January 2011 & October 2010

Investment Demand

Net Investment Demand and Prices Projected through 2011

Million Ounces 60.0 Percent 120

50.0 Net Investment Demand (left scale) 40.0 Percent Change in Price 30.0

100

80

60

20.0

40

10.0

20

0.0

-10.0

-20

-20.0 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10e Note: Price Change through the end of 2010

-40

Global Financial Assets

Global Financial Assets US$ Trillion 220 Investor Gold Holdings 200 Equity Securities 180 Private Debt Securities 160 Government Debt S G t D bt Securities iti 140 120 100 80 60 40 20 0 80 90 95 00 01 02 03 04 05 06 07 08 09 10e Bank Deposits 140 120 100 80 60 40 20 0 160 US$ Trillion 220 200 180

Gold as a Percent of Global Financial Assets

Gold as a Percent of Global Financial Assets Percent 6% Percent 6%

5%

5%

4%

4%

3%

3%

2%

2%

1%

1%

0% 1968 1980 1990 1995 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010e

0%

There Are Many Myths That Surround Gold y y

Given golds historical role as a financial asset and a monetary asset, and the special place in mankinds dreams occupied by gold, gold also is the subject of many belief systems and superstitions that do not hold up to statistical scrutiny.
Correlations Monthly o t y Gold Inflation TWD DJIA S&P T-Bill T-Bond

1970 - 2009 2000 - 2009 2006 - 2009

0.08 -0.07 -0.06

-0.28 -0.41 -0.45

-0.03 -0.17 -0.13

-0.05 -0.12 -0.11

-0.07 -0.07 0.00

-0.11 -0.17 -0.09

Note: TWD - Trade Weighted Dollar. 2008 Through December. Source: CPM Group

Combined Gold Exchange Traded Fund Holdings

Million Ounces 75 70 65 60 GoldIst 55 50 45 40 35 30 25 20 15 10 5 0 GLD GTU GBS CEF GOLD NYSE-ETF NYSE ETF ZKB JB IAU ETF JSE SGBS Dubai 55 50 45 40 35 30 25 20 15 10 5 0 AGOL India GLTR PHYS CGL Xetra-Gold Million Ounces 75 70 65 60

Net Additions to Gold Exchange Traded Funds

Million Ounces 25 Million Ounces 25

20

20

15

15

10

10

-5 03 04 05 06 07 08 09 10 11

-5

Note: 2011 data is the net reduction in combined gold ETF holdings on 15 March 2011 from 31 December 2010.

Chinas Gold Market

Chinese Gold Supply and Demand Projected Through 2011 pp y j g

Million Ounces 25 Investment Demand Fabrication Demand Gold Supply 20 20 Million Ounces 25

15

15

10

10

0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010e 2011p

Gold Mine Production in China Projected Through 2011 j g

Million Ounces 14.0 Million Ounces 14.0

12.0

12.0

10.0

10.0

8.0

8.0

6.0 60

6.0 60

4.0

4.0

2.0

2.0

0.0 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010

0.0

Gold Mine Production and Secondary Recovery

Projected Through 2011
Million Ounces 16 Secondary Recovery Mine Production 14 14 Million Ounces 16

12

12

10

10

0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011p

Chinese Fabrication Demand Projected Through 2011

Million Ounces
16

Million Ounces
16

Dental/Medical D t l/M di l
14

Electronics Jewelry

14

12

12

10

10

0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011p

Official Transactions

Official Gold Transactions

Official Transactions
Million Ounces Million O Milli Ounces

30 20
Net Additions

30 20 10 0 -10 -20
Net Reductions

The official sector added 10.22 million ounces to its holdings in 2010 The official sector is projected to add between 8 and 12 million ounces gold this year hi

10 0 -10 -20 -30 -40 40 -50 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 11p

-30 -40 40 -50

20

A Closer Look at Official Gold Transactions

Central Bank Changes In Gold Holdings 2004 - 2010 Central Bank Changes In Gold Holdings in 2009 2010 Excludes China's Purchases, Indian and IMF Transactions Million Ounces 30 25 Gross Additions 20 15 Net Additions/Reductions 10 5 0 -5 -10 -15 Gross Reductions -20 04 05 06 07 08 09 10 -20 10 5 2.0 0 -5 0.5 -10 -15 0.0 -0.5 -1.0 -1.5 Jan M M J Mar May J l S Jul Sep N Nov J Jan M M J l S Mar May July Sep N Nov Gross Reductions 0.5 0.0 -0.5 -1.0 -1.5 1.5 1.0 2.0 1.5 1.0 20 15 3.5 3.0 2.5 Net Additions/Reductions 3.5 3.0 2.5 Million Ounces 30 25 5.0 4.5 4.0 Gross Additions 5.0 4.5 4.0 Million Ounces 6.0 5.5 Million Ounces 6.0 5.5

Trillion $ 3.0

Foreign Exchange Reserves and Gold Reserves in U.S. Dollars

China Japan Russia Sa audi Arabia United States Taiwan India Korea Brazil Hong Kong S Switzerland Singapore Germany Thailand Algeria Italy France Mexico Libya Malaysia Poland Indonesia Turkey ECB Denmark Israel United Philippines Argentina Romania

0.0

0.5

1.0

1.5

2.0

2.5

Monetary Reserves Gold Reserves and Foreign Exchange Holdings y g g g

100%

Gold Reserves as a Percentage of Total Monetary Reserves

10%

20%

30%

40%

50%

60%

70%

80%

90%

0%
U United States Germany Italy France ECB Unite Kingdom ed S Switzerland Philippines Romania India Russia Turkey Libya Poland Argentina Algeria Denmark Indonesia Japan Sa audi Arabia Thailand China Malaysia Brazil Mexico Korea Hong Kong Taiwan Singapore Israel

Official Foreign Exchange Reserves & Central Bank Gold Holdings in Developed & Developing Economies g p p g
Official Foreign Exchange Reserves Central Bank Gold Holdings US$ Trillion 10 9 8 7 800 6 Developed Economies 5 4 3 2 1 Developing Economies 0 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 0 5 4 3 2 200 1 100 0 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11p 200 100 0 600 500 400 300 Developed Economies 600 500 400 300 6 700 800 700 Million Ounces 1,200 1 200 1,100 1,000 900 7 Developing Economies Million Ounces 1,200 1 200 1,100 1,000 900 US$ Trillion 10 9 8

Source: IMF Statistics Department COFER database and International Financial Statistics

Official Transactions and Net Private Investment

Official Transactions and Net Private Investment Demand Million Ounces 50 40 30 20 10 0 -10
Net Reductions

Million Ounces 50 40

Official Transactions Net Private Investment

Net Additions

30 20

Official sector net gold additions coupled with high levels of investment demand should help support prices pp p Over the past two years both official sector additions and ddi i d investment demand have added to more than 40 million ounces per year

10 0 -10 -20 -30 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11p

-20 -30

Supply and Demand

Total Gold Supply Projected Through 2011

Million Ounces 130 120 110 Secondary Supply 100 90 80 Transitional Economies 70 60 50 40 30 20 10 0 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11p South African Mine Production Other Mine Production 70 60 50 40 30 20 10 0 100 90 80 Million Ounces 130 120 110

Global Gold Discoveries

Million Ounces 400 Million Ounces 400 350 350

300

300

250

250

200

200

150

150

100

100

50

50

0 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08
Source: Richard Schodde, MD MinEx Consulting, as reported in Gold Fields p , g, p presentation to Diggers & Dealers in Kalgoorlie in August 2010. gg g g Note: Includes byproduct gold sources. 'Other Estimates' includes resource estimates for deposits found since 2004 but not yet reported or full delineated.

Estimated Total Global Exploration Spending p p g

Projected Through 2011
US$ Billion 18 16 14 12 10 Gold Price (RHS) 8 6 4 2 0 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10e 11p
Source: MEG, CPM Group

$/Ounce 1,400 1,300 1,200 1,100 1,000 900 800 700 600 500 400 Allocated to Gold 300 200

Average Grade of Gold Mined

Grams/Metric Tons 14 Grams/Metric Tons 14

12 Average Grade of Gold Mined in USA + Canada + Australia + South Africa 10

12

10

2 Average Grade of Gold Mined in the World 0 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09

Global Mining Capital Expenditure

Billion $ 140 Billion $ 140

120

120

100

100

80

80

60

60

40

40

20

20

0 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10e

The Price of Gold and Cash Operating Costs of Production p g

$/Ounce 1,400 1,300 1,200 Gold Price 1,100 1,000 900 800 700 Production Cost 600 500 400 Cash Cost C hC t 300 200 100 02 03 04 05 06 07 08 09 10 300 200 100 600 500 400 1,100 1,000 900 800 700 $/Ounce 1,400 1,300 1,200

Gold Cash Costs in Third Quarter 2010 Q

Cash Cost /Ounce $2,600 $2,400 $2,200 $2,000 $1,800 $1,600 $1,400 Annual Average Gold Price in 2010 Q3 = $1,227.64 $1,200 $1,000 $800 $600 $400 $200 $0 1% 14% 20% 34% 40% 47% 55% 64% 70% 76% 82% 85% 88% 91% 95% 98% Weighted Average Cash Cost = $550.11 $1,200 $1,000 $800 $600 $400 $200 $0 Cash Cost /Ounce $2,600 $2,400 $2,200 $2,000 $1,800 $1,600 $1,400

Margin between Gold Price and Cash Costs

$/Ounce 700 650 600 550 500 450 400 350 300 250 200 150 100 50 0 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10e $/Ounce 700 650 600 550 500 450 400 350 300 250 200 150 100 50 0

Estimated Gold Production Additions

Million Ounces 25 Million Ounces 25

20

20

15

15

10

10

0 2011 2012 2013 2014 2015

Annual Gold Recovery and Average London Gold Price y g

Projected Through 2011
Million Ounces 75 70 65 60 55 50 45 40 35 30 25 20 15 10 5 0 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11p Prices (right scale) Scrap $/Ounce 1,500 1,400 1,300 1,200 1,100 1,000 900 800 700 600 500 400 300 200 100 0

Total Fabrication Demand Projected Through 2011

Million Ounces 120 110 Other 100 90 Jewelry, Developed Countries 80 70 Electronics 60 Dental 50 40 30 20 10 0 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11p Jewelry, Developing Countries 50 40 30 20 10 0 60 80 70 100 90 Million Ounces 120 110

Jewelry Demand Projected Through 2011

Million Ounces 120 Developing Countries p g Developed Countries 100 100 Million Ounces 120

80

80

60

60

40

40

20

20

0 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11p

Markets

The Gold Market

Million Ounces 10,000 9,000 9 000 London Bullion Market Clearing Volume 8,000 7,000 Futures & Options Exchanges' Trading Volume 6,000 5,000 4,000 3,000 2,000 2 000 1,000 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Physical Market Flow

Trading Volumes in the Futures Markets g

Million Ounces 6,000 Million Ounces 6,000

5,000

5,000

4,000 ,

4,000 ,

3,000

3,000

2,000

2,000

1,000

1,000

0 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09

Prices

Gold Price Seasonality y

Monthly Gold Price Seasonality Seasonal Strength 101.5 101.0 100.5 100.0 100 0 99.5 99.0 98.5 98.0 97.5 97.0 96.5 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Seasonal Strength 101.5 101.0 100.5 100.0 100 0 99.5 99.0 98.5 98.0 97.5 97.0 96.5

London Gold Prices since 1700 Base Year = 2010

$/Ounce 6,000 $/Ounce 6,000

5,000

5,000

4,000 ,

4,000 ,

Real 3,000 3,000

2,000

2,000

1,000 Nominal

1,000

0 1700

0 1750 1800 1850 1900 1950 2000

Thank You
CPM Yearbooks 2011

*This years Yearbooks feature a special section on Chinas precious metals markets Please visit the CPM Store, via www.cpmgroup.com, to purchase this years Precious Metals Yearbooks. l b k