Metals Magnifier Can Silver Demand Be Solar Powered

COMMODITIES RESEARCH 15 March 2012
METALS MAGNIFIER
Can silver demand be solar powered?
Gayle Berry
+44 (0)20 3134 1596
gayle.berry@barcap.com
Suki Cooper
+1 212 526 7896
suki.cooper@barcap.com
Roxana Mohammadian Molina

+44 (0)20 7773 2117
roxana.mohammadian-molina@barcap.com
The base metals are faced with conflicting near-term demand signals: softness in
domestic Chinese buying on the one hand and improving global activity on the Kevin Norrish
other. The build in frontline stocks in China is likely to slow import demand for a +44 (0)20 7773 0369
time, but with pipeline stocks low and activity likely to improve from a weak Q1, kevin.norrish@barcap.com
it may not take as long as the market fears for those stocks to be absorbed.
Consumption elsewhere is showing signs of improvement. US data show a Nicholas Snowdon
recovery is underway and metals demand is increasing. Even in Europe, signs +1 212 526 7279
that the worst may be over are emerging. Indeed, our global consumption- nicholas.snowdon@barcap.com
weighted leading indicators are pointing towards a rebound in demand growth in
Q2 that is not priced into the market, in our view. Shiyang Wang
+1 212 526 7464
Chinese growth concerns and the reduced probability of further quantitative shiyang.wang@barcap.com
easing in the US have weighed upon the precious metals. Gold is searching for a
floor from the physical market but longer-term ETP demand has proved resilient www.barcap.com
so far. In platinum, we have revised our H1 12 price forecast to reflect production
losses but as operations restart, prices are likely to be capped in the near term,
while palladium has sidelined improving demand data. Silver remains dependent
upon investment demand but in the near term is set to take its cue from gold.
Silver had started the year on better footing, with cleaner investor positioning
allowing the market to find support from industrial demand. In this month’s
focus, we consider whether the growth in demand from the solar industry can
provide a boost for prices or whether prices can dampen demand.
Aluminium Copper Lead Nickel Tin Zinc Gold Silver Platinum Palladium
US$/t US$/t US$/t US$/t US$/t US$/t US$/oz US$/oz US$/oz US$/oz
Forecasts
2011 actual 2,398 8,813 2,399 22,853 26,063 2,191 1,571 35.2 1,716 729
Q1 2,150 8,000 2,100 19,250 21,000 1,950 1,700 30.0 1,610 680
Q2 2,250 9,000 2,200 20,500 23,000 2,100 1,850 34.5 1,640 745
Q3 2,350 9,700 2,350 20,000 25,000 2,200 2,030 38.0 1,755 860
Q4 2,500 9,300 2,500 19,750 28,000 2,300 1,920 27.5 1,815 895
2012 2,313 9,000 2,288 19,875 24,250 2,138 1,875 32.5 1,705 795
Source: Barclays Capital
PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES STARTING AFTER PAGE 70
Barclays Capital | Metals Magnifier
CONTENTS
Focus: Silver and solar demand – shining beacon or tarnished hope? .......................................... 3
Consumption indicators .........................................................................................................................12
Global Forecasts .......................................................................................................................................14
BASE METALS 15
Aluminium .................................................................................................................................................16
Copper ........................................................................................................................................................20
Lead .............................................................................................................................................................25
Nickel...........................................................................................................................................................30
Tin ................................................................................................................................................................34
Zinc..............................................................................................................................................................36
PRECIOUS METALS 41
Gold .............................................................................................................................................................42
Silver............................................................................................................................................................46
Platinum .....................................................................................................................................................48
Palladium....................................................................................................................................................50
DATA 53
Chinese physical market.........................................................................................................................54
China trade ................................................................................................................................................55
Cost indicators ..........................................................................................................................................56
Base metal stocks.....................................................................................................................................57
Prices...........................................................................................................................................................59
Trade recommendations ........................................................................................................................66
Base metal LME cash price forecasts...................................................................................................68
Precious metal spot price forecasts .....................................................................................................69
15 March 2012 2
FOCUS: SILVER AND SOLAR DEMAND
Shining beacon or tarnished hope?

Solar panel demand has been heralded as a vast growth opportunity for silver. We find
that although demand is set to grow, end consumption is unlikely to be a game changer,
particularly without government subsidies and unless costs are reduced significantly.
The substitution of silver in solar panels is not a major threat in the near term, in our
view, but has the potential to derail consumption growth longer term. China, the
largest producer and exporter of cells used in solar panels, is set to remain a net
importer of silver despite being a large producer of silver. But even as its own
installed solar capacity grows, the industry faces headwinds from oversupply.
That said, as mine supply growth starts to slow, we do expect prices to find greater
direction from industrial demand amid an improved macro backdrop and reduced
investor appetite. We believe total silver fabrication demand is set to reach record
levels by 2015, even if consumption from the solar industry slows, as demand for
silver in industrial usages particularly from emerging markets remains strong.
Healthy supply of silver means Given the healthy growth in silver mine supply and plentiful above ground stocks, the key
prices are demand driven driver for silver prices has been a two-pronged race between investment demand and
industrial demand. Investment demand has been the marginal buyer, but without the steady
floor from industrial consumption, growth in investor appetite would have had a much
larger gap to fill. Total demand has risen by 4% over the past 10 years to a record 27.9kt in
2011, while industrial demand has grown 43% to a record 15kt with its share rising from
just under 40% to over half. Some silver uses have been in decline, such as the well-
documented shrinkage in the photography sector, but growth in other uses such as in the
solar industry in photovoltaic (PV) cells have gained traction. Over the past 10 years, silver
consumption in the sector has risen from just under 50 tonnes in 2001 to our estimate of
1820 tonnes last year (7% of total demand). Although the growth has been impressive, it
has not offset the decline in photography demand which has fallen from 6,660 tonnes in
2001 to 2,441 tonnes last year, a drop of more than 50%, more than 4kt, whereas the
increase in photovoltaic demand is less than 2kt. But since 2009, growth in the PV sector
Figure 1: Growth in photovoltaic demand has been strong... Figure 2: ...and started to offset the fall in photography demand
40 Solar installation (GW, LHS) 3500 30000 Photovoltaic demand Photography

Other demand
35 Total silver consumption - 3000
25000
silicon cells (tonnes, RHS)
30
2500
20000
25
2000
20 15000
1500
15
10000
1000
10
500 5000
5
0 0 0
2003 2006 2009 2012F 2015F 2002 2004 2006 2008 2010 2012F
Source: Barclays Capital Clean Technology Research, Barclays Capital Source: CRU, Barclays Capital
15 March 2012 3
has started to compensate for loss in demand in the photography sector and helped to tip
total demand to record levels. Can consumption from this source lead silver demand growth
and how likely is it that demand will continue to grow at a rapid pace? Last year’s volatile
price action stoked discussions whether silver could be substituted and thrifted in industrial
applications. How likely is it that silver will be substituted in PV cells denting an area of
growth? And given that China has played a huge role in this sector, is it likely to maintain
this position?
Silver consumption growth from solar panels

Silver consumption in the PV sector started to gain traction over the past decade as demand
exceeded 1,000 tonnes for the first time in 2010, with solar contributing less than 1% of
global electricity generation capacity. Should solar achieve a greater share of the market,
silver consumption is set to grow. Figure 3 depicts our base case, worst case and best case
scenarios outlining our projections for demand. Using the forecasts of our Clean
Technology equity research team, as well as the EPIA (European Photovoltaic Industry
Association) for global photovoltaic solar installation over the next five years, we have
constructed a model that projects the future usage of silver in the production of PV cells to
2015. We have assumed three different growth scenarios:
Our base case scenario is based on our Clean Technology equity research analysts’
projections for PV installation. The details of their PV demand forecasts can be found in
U.S. Clean Technology & Renewables: Reducing Near-term Solar Expectations, 10
January 2012.
The worst case scenario in our model is based on the EPIA’s moderate growth scenario
where the study assumes a “business-as-usual” market behaviour with no major
reinforcement of existing support mechanisms, namely feed-in-tariffs, which is a policy
mechanism designed to accelerate investment in renewable energy by offering long-
term contracts to renewable energy producers with purchasing prices that are based on
the cost of generation.
The best case scenario in our model is based on the EPIA’s policy-driven scenario. This
scenario assumes the continuation and/or introduction of support mechanisms which
is also accompanied by a strong political will to consider solar energy as a major power
source in the coming years.
For the purposes of the analysis, we have also assumed:
Solar PV installation as a proxy for PV production mainly due to limited data on PV

shipments. We believe that using PV installation is a fair assumption as the stock level of
PV cells has stabilised in recent years. However, as supply is most likely greater than
demand in an industry that is experiencing overcapacity, we note that there is a modest
upside risk to our silver consumption projections.
“Thin-film” PV cells do not significantly gain traction. There is a negligible (if any)
content of silver in thin-film PV cells, thus our assumption on the market share of thin
film is important for silver consumption. Silver is primarily used as a highly conductive
metal paste that is screen printed onto the front surface of wafers in the production of
crystalline PV cells (can be contained in the back surface also), which hold a market
share of 86%. Our Clean Technology analysts expect the thin film market share to
remain at current levels (14%), mainly due to the fact that the cost advantage of thin-
film PV cells over traditional PV cells has been eroded over the past couple of years, as a
result of the successful cost reduction in crystalline PV cells (the more efficient
15 March 2012 4
traditional type of PV cell with greater silver content). Therefore, as the market is
chasing higher efficiencies and lower cost with greater focus being placed on
efficiencies, we believe the thin-film technology, which has lower efficiencies, will not
gain market share over the next five years.
Most importantly, we have assumed that, on average, 0.105 gram of silver is employed
to produce each watt of electricity by PV cells. Given our research and industry
discussions, we note that the content could vary from cell to cell, and view future
loadings as the greatest variable.
2012 silver usage in solar panels Our results show that silver usage in PV cells is set to grow by 4% y/y in 2012 from 1.8kt in 2011
is set to grow only moderately and up 22% from 2010 (1.5kt), in the base case scenario. This result compares to a 23% y/y
y/y as demand from Europe reduction in the worst case scenario and a 16% y/y increase in the best case scenario. The base
slows down temporarily case scenario represents a significant slow down of PV installation compared to the stellar
growth in the previous years (Figure 3). This growth pullback is mainly due to our in-house
expectations that issues of overcapacity, reductions in various regulatory incentives in select
markets and the tepid macro environment will curtail the industry’s ability to return to growth
ahead of 2013. For instance, in Europe, the traditional area of strong uptake of PV solar capacity,
both Germany and Italy, among other countries, are transitioning through a period of feed-in-
tariff reductions on top of the economic hardship that the Eurozone is facing. However, as our
Clean Technology analysts continue to believe that the longer-term demand drivers, such as
continuing government subsidies, energy security concerns, and the declining cost of solar
energy, remain intact, the growth of PV solar uptake should also remain on track in the long run.
Our base case scenario indicates that silver usage in PV cells should grow by 83% from 2011
levels to 3.3kt in 2015. The worst and best case scenarios indicate silver consumption by PV cells
of 2.2kt (less than 1kt from base case) and 3.9kt (more than 0.5kt from base case), respectively,
by 2015. In the best case, we expect Germany alone to install 5 GW per year from 2012 to 2015.
Other strong growth areas include the US and China, which are expected to add 13 GW and 17
GW of PV solar capacity, respectively, in the four-year period in reference.
Global PV demand growth Although the best case scenario results in silver demand from the sector doubling, and even
depends heavily on the worst case results in some growth, the bottom line is that the fate of PV cell uptake, thus
government incentives the usage of silver in PV cells, depends almost entirely on the direction of government policy
Figure 3: Projections for silver consumption in PV cells Figure 4: Solar is not expected to be a big player in the future
(tonnes) of global power generation by renewables (TWh)
5,000 9,000 Hydroelectric Wind Geothermal Solar Other

Base case
Worst case 8,000
4,000 Best case
7,000
6,000
3,000
5,000
4,000
2,000
3,000
1,000 2,000
1,000
0 0
2007 2008 2009 2010 2011 2012E 2013F 2014F 2015F 2008 2015 2020 2025 2030 2035
Source: EPIA, Barclays Capital Clean Technology Equity Research, Source: EIA, Barclays Capital
Barclays Capital
15 March 2012 5
and the incentives that the government provides to power generators. For instance, in
Germany, the government spent, on average, $18bn per year to subsidise new wind and
solar installations. Figure 5 shows a detailed example for which without government
support, generators would not have any incentive to build PV solar plants or install solar
panels. The figure shows that in the US, the average retail and wholesale power prices are
far below the full-cycle cost of an average PV solar generation plant without any subsidies
from the government. In the US, the federal government provides $22 tax credit for every
megawatt hour of electricity produced by a solar panel. As part of the push by individual
states to expand renewable energy, many states require their utilities to serve a set portion
of load with renewables. Some states also set aside a solar requirement, which creates a
solar-only market. Thus, solar does not compete with other forms of generation. These
states award solar renewable energy certificates (SREC), which subsidises another
$125/MWh, on average, for electricity generated by solar plants. SREC prices vary greatly
across the states. As shown in Figure 5, subtracting the subsidies from the full-cycle cost,
solar plants could now produce electricity at a cost of $37.82/MWh, a reasonable cost
compared to the average price of electricity in the US. It is also worth noting that the high
cost of solar plants is not caused by the costly equipment alone; in fact, the extremely low
capacity factor of solar plants also plays an important part in making achieving grid parity
practically impossible for PV solar. Due to the reasons highlighted above, as exhibited in
Figure 4, according to the US Department of Energy, solar generation is not expected to play
a large part of global renewable generation, let alone total power generation, even by 2035.
The amount of silver used in PV cells, on the other hand, is not only determined by the level
of government policy support for PV installation, but is also a function of the thin-film
market share and the speed at which the substitution of silver by other materials takes place
as a result of high silver prices. This is discussed in detail later in the report. While increasing
thin-film market share could certainly reduce silver content in PV cells, we find substitution
poses the biggest threat to silver demand.
Has silver’s erratic price action exposed it to substitution?

Volatile silver prices have stoke Silver’s unique properties make it an ideal candidate for many industrial usages, given that it
d discussions of substitution is ductile and malleable and pure silver has the highest electrical and thermal conductivity
and thrifting but also the lowest contact resistance. But with silver prices closing at an all-time high and
49 cents away from the all-time intra day high, silver’s share of costs started to challenge
the focus of the thrifting and substitution efforts away from silicon costs. Indeed, many
industrial users of silver have highlighted being priced out of the silver market when prices
surged and have started to search for substitutes. In fact, one of the largest consumers of
silver has recently filed for bankruptcy and had highlighted in its quarterly report the
negative effect of higher raw material costs, particularly silver. Of course, any substitution
effort will not feed through to demand instantly, but last year, prices crossed an important
line in raising their profile as a volatile industrial metal. This is particularly important for the
PV sector, which is focussing on its efficiency rates and battling the cost component for
solar demand to become a larger share of the energy market. Reducing the silver content in
silver screen printing lowers resistivity, thus, disables the ability to achieve high efficiency, as
well as lowering cost, ie, one comes at the cost of the other. But one research company,
Imec, has said in addition to reducing the silicon component, they are also working on
completely eliminating the use of silver in the crystalline-silicon technology.
Substitution is not likely to The company has said that to improve the yield of PV systems, there needs to be either
materialise immediately improvements in efficiency or cost or an increase in the life of the solar modules. Instead of
silver, Imec has proposed copper-plating for the front side of the cell as a potential alternative
with an efficiency of 19.4% but acknowledges that challenges exist. At the end of last year,
15 March 2012 6
Kaneka (a photovoltaic producer) and Imec presented a silver-free heterojunction silicon solar
cell using the copper electroplating technology which achieved more than 21% efficiency. The
company has not said what the cost saving would be and is working on its commercial
viability but believes it is feasible. Schott Solar, a specialist manufacturing company, has said it
has developed a multi-crystalline wafer that replaces the silver contacts that are commonly
used on the front side of the cells with nickel-copper plating, which would lower
manufacturing costs of the front side metallisation by more than half, and is working on
transferring the technology to mono-crystalline cells with efficiency exceeding 19%.
We believe that silver prices are set to remain volatile this year and have the ability to not only
recapture the $40/oz mark but we would also not rule out another challenge at $50/oz, given
that the key upside potential for prices is investment demand outperforming. Especially as
silver prices have been able to trade above $30/oz without ETP holdings setting fresh record
highs and speculative positioning in Comex silver has remained relatively light compared to
this time last year when silver prices were starting to mount their rollercoaster attack at 31-
year highs. We expect copper to average at or above $9,000/tonne (28 cents/oz) for the next
three years and nickel to average at or above $19,000/tonne (59 cents/oz).
Silver consumption in PV cells We believe that future silver usage by PV cells is more sensitive to the amount of silver that
will be more sensitive to is used in each crystalline PV cell than the uptake speed of thin-film PV technology in the
substitution than the market industry, Figure 6. In other words, the erosion of silver consumption in PV cells will more
share of thin-film PV cells likely be caused by silver’s substitution by other materials than the increasing market share
of thin film. All else equal, if we assume the market share of thin-film grows from the
current level of 14% in 2011 to 20% in 2015, silver consumption in 2015 will fall by only
270 tonnes (8%) to 3.1kt from our base case scenario (3.3kt). Comparatively, if we assume
that the silver content per watt of PV capacity is reduced by 50% from the current level
(0.105 gram/watt) by 2015; silver usage by PV cells will be reduced by 50% from our base
case to only 1.6kt for the same year in reference. Moreover, while the possibility of thin-film
increasing its market share is considered to be unlikely due to its declining cost advantage
over the mainstream PV cells and poorer efficiency rates, the PV industry has every
incentive to find the right material to substitute for silver or reduce it and reduce silicon
content that would decrease the production costs of crystalline PV cells.
Figure 5: Without government subsidies, PV solar plants are Figure 6: The consumption of silver in PV cells could be
out of the money in the US ($/MWh) significantly reduced if silver is substituted (tonnes)
200 4,000 Base case with greater thin-film market

180 share
Base case with silver substitution
160
140 Average US retail power price 3,000 Base case
120 2011
100
80 Average US whole sale power 2,000
60 price 2011
40
20 1,000
0
Full-cycle cost of PV solar Full-cycle cost of PV solar
generation without generation with subsidies in 0
subsidies in the US the US 2007 2009 2011 2013F 2015F
Source: EIA, Barclays Capital Source: Barclays Capital Clean Technology Equity Research
15 March 2012 7
Figure 7: Silver has risen more than five-fold since 1987, Figure 8: Silver has become a significant portion of the cost
while copper prices have increased by more than three-fold of PV cells as prices haven risen ($/Watt)
sending the ratio between them to its highest over the period
140 Silver-copper ratio (converted to ounces) 1.60 Other cell processing cost
Silver
120 1.40 Wafer processing cost
1.20 Silicon cost
100
1.00
80
0.80
60
0.60
40
0.40
20 0.20
0 0.00
1987 1991 1995 1999 2003 2007 2011 2007 2012E 2015E
Note: In 2011 1oz of silver = 128oz of copper compared to 2006 where 1oz silver Source: Company reports, Barclays Capital Clean Technology Equity Research,
= 56oz of copper. Source: EcoWin, Barclays Capital Barclays Capital
As cost reduction occurred As a result of escalating silver prices, the cost of silver as a percentage of the total PV cell
alongside the rise in silver prices, cost has increased dramatically since 2007 (Figure 8). When silver prices averaged $13/oz
silver’s share of total cost rose in 2007, the cost of silver was only 3% of total production cost, despite the fact that a
from 3% in 2007 to 14% in 2012 slightly higher amount of silver was used then (0.11 gram/Watt). It was also not surprising
that producers focussed mainly on reducing the cost of silicon, which was more than 40%
of total cost. However, in 2012, with silver prices expected to average $32.5/oz, the cost of
silver is now estimated to be as high as 15% of the total cost. Even given our forecast for
silver prices to ease to $21/oz in 2015, silver is still estimated to make up around 12% of
total cost. Certainly, silver’s contribution to the high cost of PV cells is further magnified as
the costs of the other components have come down dramatically over the past few years.
Clearly, as the cost of silver makes up a larger share of total costs, producers would
naturally shift their focus on either reducing the usage of silver or finding alternatives to
silver but only without sacrificing the efficiency rates of the PV solar system. We believe that
some level of substitution or thrifting seems inevitable.
China in the balance

China has the world’s largest China is the world’s third-largest producer of silver, behind Mexico and Peru, its production
solar cell production capacity has almost trebled over the past 15 years to over 3kt last year, accounting for over 10% of
global mine supply. However, China’s consumption of silver has risen by almost five-fold over
the same period to exceed 4kt, making it the second-largest consumer of silver behind the US.
Similar to other regions, photography demand has fallen over the past 15 years but jewellery
demand has been the biggest growth area. But electrical demand accounts for the largest
share with industrial consumption consisting of two-thirds of total demand. While China has
the world’s largest solar cell production capacity, its own installations are yet to gain traction,
with Germany maintaining the largest PV installations. Thus, despite the expiration of China’s
export tax rebate, which had a temporary effect in China’s trade status and its status as the
third-largest producer, it has not been able to meet its own demand even with scrap supply.
In 2011, silver imports fell 43.9% y/y to 235.1 tonnes in December, hovering around its
lowest level in three years, and imports for the full year were down 31% y/y to 3.5kt. The
full-year breakdown by product shows that imports fell across all sectors: silver powder
imports were down 43% y/y in December, but only down 5% for the whole year as
15 March 2012 8
Figure 9: Silver powder imports into China have slowed, Figure 10: Even though China is the third-largest silver
removing a key support for the silver market producer, its demand still outpaces mine supply
80% Silver powder imports (tonnes) 180 5000 China mine supply Total China demand
Percentage of total imports tonnes
70% 160
140 4000
60%
120
50% 3000
100
40%
80
30% 2000
60
20% 40 1000
10% 20
0% 0 0
Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 1998 2000 2002 2004 2006 2008 2010 2012F
Source: Antaike, Reuters, Barclays Capital Source: CRU, Barclays Capital
demand, particularly from the photovoltaic sector, started the year on a strong note but
tailed off following price volatility supporting substitution research and slowing industrial
demand. The weakest sector was semi-manufactured silver (down 48% y/y in December
and 45% y/y for 2011), while silver jewellery has struggled to benefit in line with previous
years from substitution from gold jewellery (down 17% y/y in December and down 29%
y/y for 2011). After five consecutive weaker months, silver exports recovered in December,
up 79.5% y/y at 210 tonnes, but were down 19% y/y at 1.3kt. Silver retained its status as a
net importer for the 27th straight month, albeit by the smallest margin over that period.
It is worth noting that, as silver prices ran up to 31-year highs in April last year, industrial
demand remained relatively healthy, with silver powder imports softening but staying
elevated. Exacerbating this was the tremendous growth in silver investment demand in China.
Monthly volume traded on the Shanghai Gold Exchange shot up to record levels, doubling the
previous high in October 2010, which doubled again in November 2010, which doubled again
in May 2011, as prices came off their record highs and then volumes halved in the following
month of June 2011. Unsurprisingly, volume traded in the full-year 2011 more than tripled the
previous record set in 2010. China has played a pivotal role in the silver story. Given our
forecast for continued growth in silver mine supply in China and moderating growth in
industrial demand in light of the photovoltaic sector and a soft landing in GDP growth, we
expect imports to start the year on a softer note but believe China will remain a net importer of
the metal, particularly if investment demand strengthens again.
In the medium term, China’s China’s PV cell manufacturing capacity as a share of global production capacity has
production of PV cells will still experienced stellar growth over the past five years. In 2010, China and Taiwan combined had
mostly depend on European almost 60% of global PV cell production capacity, up from 25% in 2006 in the span of only five
demand despite growing years. According to Solar Buzz, total global crystalline silicon cell production was 17.72 GW, if
domestic demand we assume production share was the same as capacity market share, then this puts China’s
production capacity at 10 GW in 2010, which was almost entirely devoted to the export
market as domestic installation was less than 2 GW that year. Most of China’s PV production,
along with production from other countries, has been exported to regions such as Europe,
Figure 11. As China’s domestic demand for PV cells is not expected to take off significantly
until 2015 (Figure 12), China’s need for silver, as a result of PV cell production, will mostly
depend on European and US PV demand at least for the next five years. European PV demand
is set to experience 36 GW of cumulative installation for the next four years (2012-15), while
Chinese demand is due to grow by 17GW for the same period in reference.
15 March 2012 9
Germany is the largest market for solar PV systems as feed-in tariffs and government
incentives have supported growth but recent commentary has highlighted that end market
uncertainty remains high. The country’s Environment Minister has discussed a potential cut to
subsidies which could potentially take place on a more frequent basis. Meanwhile, our Clean
Technology analysts expect China to be a key region of growth in 2012 and China’s National
Energy Administration (NEA) highlighted in January that it was now targeting 15GW of
installed solar capacity by 2012 (earlier estimate: 10GW raised from 5GW) and 50GW by 2020
(unchanged from previous estimate of 50GW raised from 20GW earlier). Silver demand from
the sector from 2011 to 2015 is just under 1.5kt over four years, and the consumption
between 2015 and 2020 is over 3.5kt over the five years, assuming silver content is
unchanged from today. Thus, on an annual basis, incremental demand is not sufficient to
tighten the global balance but is set to keep China a net importer of the metal. Our Clean
Technology analysts note that when China does set energy capacity goals, it generally exceeds
them and the shift in solar demand from developed markets, such as Europe to new markets
such as the US and China, will be a big influence on how the industry evolves.
What this means for silver

The solar industry faces Even though China’s own consumption of PV installations is set to grow significantly, our
headwinds… Clean Technology analysts note that the solar industry faces headwinds from overcapacity,
and declining demand in markets such as Germany needs to be offset by growth in regions
such as China, thus, consolidation and rationalisation is required. In the near term, despite
the material reduction of module prices, broader macro concerns and instability in
consumer confidence means that demand is fragile. From silver’s stand-point, its own price
and erratic behaviour have been forgiven and this demand had grown irrespective of its
price action providing an area of substantial growth for the metal. However, last year’s price
action forced it into the spotlight alongside silicon as a raw material to be bargained with.
Although we expect demand to grow, it is certainly not an area large enough to swing this
market into deficit.
…but silver demand is still set to Having said this, since 2009, growth of demand from this sector has compensated declining
hit a new record by 2015 consumption elsewhere such as the photography sector and tilted total demand into record
territory. Even though this sector alone is not large enough to drive the market into deficit
Figure 11: China and Taiwan are key exporters of cells... Figure 12: ...but China’s own PV installation is expected to
grow significantly (GW)
15 Net cell exports excluding Japan, US and Europe 55

(GW)
45
12
35
9
25
6
15
3
5
0 -5
2006 2007 2008 2009 2010 2011E 2012F 2013F 2014F 2015F 2020F
Note: Data cover net shipments excluding Japan, US and Europe. China accounts Source: CEC, Barclays Capital
for the largest share. Source: SolarBuzz, Barclays Capital
15 March 2012 10
by 2015, it is certainly playing its part to keep industrial and total fabrication demand at
record highs over that period which becomes increasingly important as mine supply growth
starts to slow. We forecast fabrication demand to rise from an estimated 27.9kt in 2011 to
just shy of 30kt by 2015 with solar demand’s share growing to just over 10% from 7% last
year. As the macro environment improves, and investment demand eases, industrial
demand will be key in setting the floor for prices. We believe overall demand for silver is set
to remain strong – in part due to silver’s unique properties and limited substitution
opportunities – but predominantly due to steady growth in “traditional” end uses of silver
such as in electronics and electrical, as well as brazing alloys and soldering from emerging
markets as demand remains strong. Furthermore, new usages are not likely to lead to rapid
growth of demand but are likely to build upon a strong foundation of industrial
consumption. We expect silver prices to average $32.5/oz in 2012, a record annual average
high and as investment demand softens, for industrial demand to support prices with silver
averaging $21/oz in 2015.
15 March 2012 11
CONSUMPTION INDICATORS
Global business confidence continued to improve in February, with the US and Japan showing the strongest signs of recovery.
However, higher oil prices and the risks to the global economy are back on the agenda and despite the ongoing recession in
Europe, higher expected inflation means that our economists no longer expect an ECB rate cut this year. In China, the January-
February activity data point to a slowing economy with the pace of its deceleration in line with our economists’ forecast of 8.1%
growth in 2012. Fixed asset investment has so far surprised to the upside, and property investment growth, a key area to watch
for downside growth risks, appears to have reversed its earlier rapid deceleration trend. In the US, business sentiment continued
to improve, with the non-manufacturing ISM highest in 12 months and solid employment report pointing to sustained recovery.
Figure 1: Barclays Capital macroeconomic forecasts
Q1 11 Q2 11 Q3 11 Q4 11 2011 Q1 12F Q2 12F Q3 12F Q4 12F 2012F
US
GDP (%, y/y) 2.2 1.6 1.5 1.6 1.7 2.2 2.5 2.8 2.8 2.5
IP (%, y/y) 5.4 3.8 3.7 3.9 4.2 3.6 4.6 4.1 4.3 4.2
Fed Funds (%) 0-0.25 0-0.25 0-0.25 0-0.25 n/a 0-0.25 0-0.25 0-0.25 0-0.25 n/a
Euro area
GDP (%, y/y) 2.4 1.6 1.3 0.7 1.5 -0.3 -0.5 -0.6 -0.1 -0.4
IP (%, y/y) 6.8 3.9 4.0 1.9 3.6 0.6 -0.5 -2.5 -3.2 -3.4
Refi Rate (period end-%) 1.00 1.25 1.50 1.00 1.00 1.00 1.00 1.00 1.00 1.00
China
GDP (%, y/y) 9.7 9.5 9.1 8.9 9.2 8.2 8.0 8.0 8.2 8.1
IP (%, y/y) 14.3 13.9 13.8 12.8 13.7 11.5 13.1 11.9 11.4 12.0
Monetary policy benchmark (%) 6.06 6.31 6.56 6.56 6.56 6.56 6.56 6.56 6.56 6.56
Global
GDP (%, y/y) 4.4 3.8 3.8 3.3 3.8 3.1 3.3 3.4 3.9 3.5
Figure 2: Barclays Capital FX forecasts (versus USD)

Spot 1 mth 3 mth 6 mth 1 year
EUR/USD 1.33 1.32 1.30 1.25 1.20
USD/JPY 80.2 78 80 82 84
GBP/USD 1.57 1.57 1.55 1.52 1.50
USD/CHF 0.91 0.93 0.96 1.04 1.08
USD/CAD 1.00 1.00 0.98 0.96 0.95
AUD/USD 1.07 1.07 1.08 1.09 1.10
NZD/USD 0.83 0.84 0.85 0.86 0.88
USD/ZAR 7.43 7.90 7.85 7.83 7.62
USD/CNY 6.29 6.28 6.24 6.17 6.08
Key economic indicators

Global
Figure 3: Regional PMI data have rebounded Figure 4: Global IP growth slowdown has stabilised
70 Expansion 15%
60 10%
50 5%
40 0%
30 -5%
20 Contraction -10%
Eurozone PMI new orders
Japan PMI new orders
10 -15%
US PMI new orders
China PMI new orders Global IP (%y/y ch)
0 -20%
Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Dec-03 Dec-05 Dec-07 Dec-09 Dec-11
Source: Thomson Datastream, Haver Analytics, Barclays Capital Source: Thomson Financial, Barclays Capital
15 March 2012 12
Consumption-weighted global leading indicators for base metals

China’s NBS PMI posted another small upside surprise and
Figure 5: Aluminium composite leading indicator
rose for the third consecutive month in February. However,
the headline number masks several very large increases in 70 Aluminium composite leading indicator - LHS 40%
some of the PMI components. Backlog of orders saw its Aluminium consumption (% y/y) - RHS
largest m/m increase since 2005 and jumped to 49.4, its
highest level since April 2011. Together with an equally large 60 20%
increase in “new export orders” and “new orders”, this

meant that the order book saw a very large m/m increase.
50 0%
However, the “stocks of major inputs” component of the PMI
fell in February. If we put together these two components,
higher order book and falling raw material stocks does point 40 -20%
to a higher “expected purchasing” of raw materials. This is a
key driver of the continued strong reading of our leading
indicator in February. The strong Chinese trend was partly 30 -40%
Jul-06 Jul-08 Jul-10 Jul-12
offset by weaker order book in the US and Europe.
Figure 6: Copper composite leading indicator Figure 7: Nickel composite leading indicator
70 Copper composite leading indicator - LHS 20% 70 Nickel composite leading indicator - LHS 60%
Copper consumption (% y/y) - RHS Nickel consumption (% y/y) - RHS
65 45%
60 10%
60 30%
55 15%
50 0%
50 0%
45 -15%
40 -10%
40 -30%
30 -20% 35 -45%
Jun-06 Jun-08 Jun-10 Jun-12 May-08 May-09 May-10 May-11 May-12
Figure 8: Zinc composite leading indicator Figure 9: Lead composite leading indicator
80 Zinc composite leading indicator - LHS 45% 80 Lead composite leading indicator - LHS 30%
Zinc consumption (% y/y) - RHS Lead consumption (% y/y) - RHS
70 30% 70 20%
60 15% 60 10%
50 0% 50 0%
40 -15% 40 -10%
30 -30% 30 -20%
Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12
Source for all charts: Barclays Capital
15 March 2012 13
GLOBAL FORECASTS
Real GDP Real GDP Consumer prices Consumer prices
% over previous period, saar % annual chg % over a year ago % annual chg
3Q11 4Q11 1Q12 2Q12 3Q12 2011 2012 2013 3Q11 4Q11 1Q12 2Q12 2011 2012 2013
Global 3.6 2.8 3.5 3.8 4.0 3.8 3.5 4.1 4.2 3.9 3.4 3.1 3.9 3.2 3.2
Developed 2.2 0.8 1.3 1.5 2.1 1.3 1.5 1.9 2.9 2.7 2.3 2.1 2.6 2.1 1.9
Emerging 5.1 4.9 5.8 6.1 6.1 6.4 5.6 6.3 6.6 6.0 5.2 4.9 6.3 5.1 5.3
BRIC 6.1 7.6 6.5 7.1 6.9 7.5 6.9 7.3 7.2 5.9 4.7 4.1 6.6 4.4 5.1
America 2.2 2.6 2.7 3.1 3.3 2.5 2.8 2.9 4.7 4.4 4.1 3.8 4.3 4.0 3.9
United States 1.8 3.0 2.5 2.5 3.0 1.7 2.5 2.5 3.8 3.3 2.9 2.5 3.2 2.8 2.6
Canada 4.2 1.8 2.5 2.5 2.0 2.5 2.3 1.7 3.0 2.7 2.2 1.7 2.9 2.2 2.5
Latin America 2.6 2.0 3.1 4.7 4.3 4.4 3.6 4.0 8.2 8.3 8.1 8.2 8.1 8.3 8.2
Argentina 4.5 -1.5 2.0 5.0 3.0 8.7 2.8 4.6 22.6 22.9 24.1 25.4 23.5 26.1 28.4
Brazil -0.3 1.4 3.4 5.5 5.2 2.7 3.3 4.1 7.1 6.7 6.0 5.4 6.6 5.6 5.6
Chile 2.6 1.2 2.9 4.7 6.8 6.0 3.7 5.0 3.1 4.0 3.8 3.3 3.3 3.5 3.1
Colombia 2.0 10.0 4.5 6.0 1.9 5.5 5.4 4.5 3.5 4.0 3.9 4.5 3.4 4.1 3.6
Mexico 5.1 1.7 2.0 3.2 3.4 3.9 3.0 3.3 3.4 3.5 3.8 4.4 3.4 4.2 3.8
Peru 5.2 5.0 6.1 5.9 6.5 7.0 5.8 6.0 2.8 3.3 3.8 4.0 2.6 3.9 3.2
Venezuela 4.9 1.9 4.7 2.9 4.6 4.2 4.9 2.2 25.8 27.6 28.2 31.4 26.2 32.0 30.7
Asia/Pacific 5.9 4.3 6.7 6.6 6.6 5.9 6.0 6.5 4.2 3.4 2.8 2.4 3.7 2.5 3.0
Japan 7.1 -0.7 2.6 2.6 3.4 -0.7 2.4 2.1 0.2 -0.1 -0.1 -0.3 -0.2 -0.3 0.1
Australia 3.2 1.7 1.6 2.4 2.8 2.0 2.4 2.8 3.5 3.1 2.1 1.9 3.4 2.1 2.5
Emerging Asia 5.8 5.4 7.8 7.5 7.4 7.4 6.9 7.5 6.1 5.0 4.1 3.6 5.6 3.8 4.3
China 8.5 9.0 7.0 7.4 8.7 9.2 8.1 8.4 6.3 4.6 3.7 2.9 5.4 3.2 4.5
Hong Kong 0.3 -1.2 2.0 8.2 8.2 4.8 3.0 3.9 6.4 5.4 4.0 3.3 5.2 3.5 3.5
India 2.7 4.8 9.7 9.7 5.4 7.1 6.9 7.7 9.7 8.9 7.3 7.1 9.4 7.1 6.0
Indonesia 5.6 7.6 4.3 6.3 6.4 6.5 6.2 6.6 4.7 4.2 4.2 4.8 5.4 4.8 5.1
South Korea 3.3 1.4 4.1 4.1 4.9 3.6 3.5 4.5 4.3 4.0 3.2 3.1 4.0 3.1 2.5
Malaysia 4.5 6.6 4.0 5.0 6.0 5.1 5.0 6.5 3.4 3.3 2.9 2.6 3.2 2.6 2.0
Philippines 0.1 8.6 6.0 0.3 2.9 3.8 4.2 4.6 4.5 5.0 3.8 3.3 4.5 3.5 3.7
Singapore 1.5 -2.5 3.1 3.4 11.1 4.9 3.0 5.0 5.5 5.5 4.6 4.1 5.2 3.3 1.9
Taiwan -0.2 -0.6 3.2 5.7 6.6 4.0 3.0 5.5 1.3 1.4 1.8 1.4 1.4 1.7 1.9
Thailand 3.4 -36.4 40.0 15.0 10.0 0.1 4.5 5.5 4.1 4.0 3.4 2.3 3.8 3.1 2.6
Europe and Africa 2.0 1.0 -0.2 0.5 1.1 2.3 0.8 2.0 3.6 3.7 3.2 3.0 3.6 3.0 2.5
Euro area 0.6 -1.3 -1.0 -0.1 0.1 1.5 -0.4 0.9 2.7 2.9 2.7 2.6 2.7 2.4 1.8
Belgium -0.4 -0.2 -0.5 0.4 0.8 1.9 0.1 1.0 3.6 3.4 3.4 3.2 3.5 3.2 2.0
France 1.3 0.9 -0.4 0.0 0.2 1.7 0.3 1.1 2.3 2.6 2.5 2.3 2.3 2.2 1.8
Germany 2.3 -0.7 0.3 1.2 1.2 3.1 0.8 1.7 2.6 2.6 2.4 2.4 2.5 2.3 2.0
Greece -2.7 -20.7 -4.0 -4.0 -4.0 -6.9 -7.2 -2.2 2.1 2.6 2.1 2.5 3.1 2.4 1.6
Ireland -7.5 -2.9 -0.5 3.3 4.8 0.6 0.2 2.6 1.1 1.5 1.2 1.0 1.2 1.0 0.7
Italy -0.7 -2.9 -2.6 -0.5 -0.6 0.4 -1.4 0.1 2.7 3.7 3.5 3.4 2.9 3.0 1.8
Netherlands -1.7 -2.8 -0.8 0.5 1.0 1.3 -0.6 1.3 3.1 2.6 2.9 2.7 2.5 2.7 1.7
Portugal -2.3 -4.9 -5.9 -3.1 -1.6 -1.5 -3.7 -2.0 3.1 3.8 3.1 2.7 3.6 2.6 1.0
Spain 0.2 -1.2 -2.1 -3.4 -2.6 0.7 -1.8 0.0 2.9 2.7 1.9 1.9 3.1 2.0 1.6
United Kingdom 2.2 -0.8 1.1 0.3 2.6 0.8 0.9 2.2 4.7 4.7 3.4 3.0 4.5 2.9 2.0
Switzerland 0.8 0.0 0.4 0.4 0.8 2.0 0.5 1.1 0.3 0.1 -0.5 -0.2 0.3 0.0 0.5
EM Europe & Africa 5.0 6.2 0.7 2.0 2.6 4.6 3.0 3.9 6.3 6.3 5.2 5.0 6.5 5.3 5.1
Czech Repub. 0.0 -1.2 -0.5 1.1 2.3 1.7 0.5 1.5 1.8 2.2 2.7 3.3 1.9 3.1 2.0
Hungary 1.5 1.1 -1.4 0.4 0.4 1.6 0.2 1.7 3.3 3.9 4.6 4.7 3.8 4.6 3.0
Poland 2.9 2.0 1.5 1.7 2.5 4.1 2.3 3.2 4.0 4.1 3.6 3.1 4.1 3.2 3.0
Russia 7.1 12.0 0.6 2.3 3.1 4.3 4.3 4.5 8.3 6.9 4.0 4.2 8.6 4.8 5.7
Turkey 5.9 1.5 0.4 1.1 1.4 7.9 1.8 4.1 6.4 9.2 9.9 9.0 6.5 9.0 6.9
Israel 3.7 3.1 1.6 2.3 2.0 4.8 2.5 3.3 3.2 2.7 2.7 2.2 3.5 2.2 2.2
South Africa 1.7 3.2 1.6 3.7 3.9 3.1 2.7 3.8 5.4 6.1 6.6 6.6 5.0 6.6 5.7
Note: Weights used for real GDP are based on IMF PPP-based GDP (2008). Weights used for consumer prices are based on IMF nominal GDP (2008).
15 March 2012 14
BASE METALS
15 March 2012 15
ALUMINIUM
Aluminium prices have edged lower in March, following a brief Figure 1: Continued stock builds in China indicative of short
foray at the beginning of the month above the $2,300/t level. term softness in domestic market fundamentals
In common with the majority of the base metals complex,
Domestic Chinese aluminium inventories (Kt)
performance has been constrained by evidence of continued
oversupply in the domestic Chinese market in spite of
1000 Nanhai
expectations of a seasonal improvement in demand. The 900 Huangzhou
potential downside to prices has in aluminium’s case in 800
Wuxi
particular been limited by the continued threat of cutbacks in 700
600 Shanghai
smelting capacity outside of China due to cost pressures.
500
400
In terms of the Chinese market, market signals have continued
300
to point to clear oversupply in Q1. Visible inventory levels have 200
doubled to close to 900Kt this year, while price signals have 100
been weak; physical premia have fallen, SHFE time spreads are 0
Nov-11 Dec-11 Jan-12 Feb-12 Mar-12
softer and the premium over LME prices has narrowed. This
has resulted from a sequential increase in domestic output so Source: SMM, SHFE, Barclays Capital
far in 2012 as new capacity ramp-ups outweigh curtailments –
the NBS data showed output in February up to 19.3Mty, the Figure 2: Financing deals and delivery backlog supports
tightness in the physical market and higher premiums
highest level since June 2011. Conversely, demand has suffered
from the holiday slowdown and a subsequent sluggish return. Average return on 15 month aluminium financing
However, there is now anecdotal evidence that fabricators trade ($/t, LHS)
US Mid West aluminium physcial premium ($/t,
have started to raise operating rates in March, which will likely 200 250
RHS)
continue into the traditionally strong Q2 demand period and 100
offer a tighter market balance during that timeframe. 200
0
In the US and Europe, market signals are more positive. -100 150
Physical premia are re-approaching their 2011 highs, while -200 100
LME-cancelled warrants levels remain close to record
-300
highs. Financing deals and inventory redistribution have 50
-400
been central drivers of this, although evidence from the US
market also suggests that consumer demand is strong, -500 0
with the transportation sector a key driver in the region Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12
and back to pre-2008 levels. Source: Barclays Capital
Figure 3: Global supply and demand balance

(Kt) 2010 Q1 11E Q2 11E Q3 11E Q4 11E 2011E Q1 12F Q2 12F Q3 12F Q4 12F 2012F
China 17,131 4,229 4,805 5,021 4,710 18,765 5,240 5,298 5,356 5,356 21,250
W.Europe 4,159 1,066 1,105 1,118 1,095 4,385 1,003 1,003 1,014 1,014 4,033
North America 4,689 1,189 1,241 1,262 1,277 4,969 1,146 1,260 1,274 1,273 4,953
Rest of the World 16,869 4,413 4,481 4,590 4,672 18,156 4,571 4,576 4,627 4,627 18,400
Global Production 42,848 10,897 11,633 11,991 11,755 46,276 11,960 12,137 12,270 12,270 48,637
y/y Change (%) 13.7% 4.1% 7.0% 10.5% 10.3% 8.0% 9.8% 4.3% 2.3% 4.4% 5.1%
China 17,725 4,329 4,971 5,208 4,634 19,142 4,715 5,469 5,781 5,206 21,170
W.Europe 6,622 1,809 1,710 1,548 1,539 6,606 1,634 1,667 1,556 1,570 6,427
North America 5,305 1,445 1,534 1,441 1,389 5,809 1,551 1,570 1,485 1,431 6,036
Rest of the World 12,949 3,298 3,457 3,354 3,726 13,834 3,374 3,741 3,624 4,041 14,779
Global Consumption 42,601 10,880 11,672 11,551 11,288 45,391 11,274 12,447 12,445 12,247 48,412
y/y Change (%) 18.9% 5.8% 10.2% 7.9% 2.4% 6.5% 3.6% 6.6% 7.7% 8.5% 6.7%
Balance 247 17 -40 440 467 885 687 -310 -175 23 225
Total Reported Stocks 6,334 6,760 6,528 6,359 6,815 6,815 7,501 7,192 7,017 7,040 7,040
Stock-to-consumption Ratio (wks) 7.6 8.2 7.3 7.2 7.9 7.9 8.7 7.6 7.4 7.6 7.6
LME Cash Price (US$/t) 2,172 2,503 2,600 2,399 2,090 2,398 2,150 2,250 2,350 2,500 2,313
LME Cash Price (Usc/lb) 99 114 118 109 95 109 98 102 107 113 105
Source: Brook Hunt, CRU, IAI, Barclays Capital
15 March 2012 16
Aluminium production
Figure 4: Reported primary aluminium production

Afr N.Am L.Am Asia W.Eur Aus China CIS E.Eur Global Daily
10 yr average 1,645 5,282 2,377 3,335 4,467 2,236 9,313 4,166 442 33,262 91.1
An. Av % change 4.0% -2.5% 0.6% 10.7% 0.2% 0.8% 19.9% 1.7% 2.1% 5.8%
2011 1,808 4,969 2,185 7,026 4,385 2,307 18,765 4,366 465 46,276 126.8
% change 7.6% 4.4% -12.9% 51.2% 5.4% 1.3% 9.5% 4.9% 0.0% 8.0%
Q2_10 430 1,179 573 1,416 1,030 566 4,483 1,079 116 10,872 119.5
Q3_10 442 1,160 582 1,463 1,052 578 4,366 1,091 117 10,852 118.0
Q4_10 446 1,186 582 1,586 1,078 578 3,986 1,102 117 10,662 115.9
Q1_11 435 1,189 547 1,671 1,066 564 4,229 1,082 115 10,897 121.1
Q2_11 449 1,241 548 1,722 1,105 576 4,805 1,070 116 11,633 127.8
Q3_11 459 1,262 555 1,778 1,118 582 5,021 1,099 117 11,991 130.3
Q4_11 465 1,277 535 1,854 1,095 585 4,710 1,116 117 11,755 127.8
y/y change 4.3% 7.7% -8.1% 16.9% 1.6% 1.2% 18.2% 1.3% 0.0% 10.3%
Jan 12 146 407 175 641 344 196 1,602 377 39 3,927 126.7
y/y change -2.7% 0.5% -7.4% 14.1% -5.5% 1.0% 18.8% 1.3% 0.0% 8.4%
Year to Jan 12 146 407 175 641 344 196 1,602 377 39 3,927 126.7
YTD y/y change -2.7% 0.5% -7.4% 14.1% -5.5% 1.0% 18.8% 1.5% 0.0% 8.4%
Source: IAI, Barclays Capital
Figure 5: Global alumina output Figure 6: Alumina prices
23,800 Global metallurgical grade alumina Spot alumina prices

$/t, fob RMB/t
production (Kt) 450 5,000
21,800
19,800 4,000
350
17,800
3,000
15,800
250
2,000
13,800
11,800 150 1,000

Mar-08 Mar-09 Mar-10 Mar-11 Mar-12
9,800
Q1 00 Q1 02 Q1 04 Q1 06 Q1 08 Q1 10 Q1 12 Australian alumina, LHS Chalco, RHS
Source: International Aluminium Institute, CRU, Barclays Capital Source: CRU, Antaike, Barclays Capital
Figure 7: Global production trends Figure 8: Change in Chinese output
700 Kt, Change in global aluminium production Change in Chinese aluminium production
600
y/y Kt,
500 y/y
500
400
300 300
200
100 100
0
-100
-100
12-month 12-month
-200
-300 moving average moving average
-300
-500 -400
Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12
Source: International Aluminium Institute, Barclays Capital Source: CNIA, Barclays Capital
15 March 2012 17
Aluminium consumption
Figure 9: Primary aluminium consumption
Europe Africa N.Am L.Am China Asia CIS ROW Global
10 yr average 6,499 438 6,541 1,308 9,131 4,366 1,015 3,483 32,780
An. Av % change 0.9% 5.5% -2.5% 5.4% 18.3% 0.9% 4.0% 13.4% 5.5%
2011 6,606 612 5,809 1,779 19,142 6,707 1,241 3,495 45,391
% change -0.2% 6.2% 9.5% 10.7% 8.0% 10.7% 3.6% -0.4% 6.5%
Q2 10 1,705 151 1,385 392 4,438 1,465 308 832 10,675
Q3 10 1,622 142 1,390 424 4,564 1,450 283 832 10,708
Q4 10 1,635 152 1,275 418 4,533 1,727 314 964 11,018
Q1 11 1,809 134 1,445 431 4,329 1,525 310 898 10,880
Q2 11 1,710 168 1,534 454 4,971 1,662 337 836 11,672
Q3 11 1,548 145 1,441 465 5,208 1,632 287 824 11,551
Q4 11 1,539 165 1,389 429 4,634 1,888 307 937 11,288
y/y change -5.9% 8.7% 8.9% 2.6% 2.2% 9.3% -2.2% -2.8% 2.4%
Jan 12 551 51 516 154 1,557 535 98 280 3,742
y/y change -9.0% 2.0% 11.0% 2.0% 11.7% 0.9% -6.0% -7.5% 3.9%
Year to Jan 12 551 51 516 154 1,557 535 98 280 3,742
YTD y/y change -9.0% 2.0% 11.0% 2.0% 11.7% 0.9% -6.0% -7.5% 3.9%
Source: IAI, Barclays Capital
Figure 10: Global aluminium consumption Figure 11: Chinese semis output
Global monthly primary aluminium 2,200 Chinese semi-fabricated production

40% consumption (Kt)
2,000
30% % change 1,800
Y/Y 12-month moving
1,600 average
20%
1,400
10% 1,200
1,000
0%
800
-10% 600
400
-20%
200
Jan-05 Oct-06 Jul-08 Apr-10 Jan-12
Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11
Source: CNIA, China Customs, CRU, Barclays Capital Source: CNIA, Barclays Capital
Figure 12: North American fabricator orders Figure 13: Japanese aluminium semis shipments
North American aluminium orders 3-month 60% Japanese aluminium semis shipments
moving average, y/y change (% change y/y)
30%
40%
20%
10% 20%
0% 0%
-10%
-20%
-20%
-30% -40%
-40%
-60%
Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11
Source: Aluminium Association, Barclays Capital Source: Japanese Aluminium Association, Barclays Capital
15 March 2012 18
Supply development
Figure 14: New and major expansions to aluminium smelters, 2010-13 (Kt)
Smelter Country Net change in capacity 2010 2011 2012 2013
Weiqiao China 601 1074 1188 1418 1675
Wujiaqu City China 584 66 301 525 650
Changji (Bingzhou) China 563 0 0 294 563
Taweelah Abu Dhabi 550 370 749 775 920
Changji (Shenhuo) China 513 0 5 231 513
Doha Qatar 479 126 452 600 605
Yulin China 448 0 32 253 448
Pingguo China 408 115 142 313 523
Shihezi China 400 0 0 196 400
Changji China 393 0 13 239 393
Jharsuguda India 368 370 410 513 738
Mahan India 346 0 0 141 346
Datang China 333 38 108 158 370
Nanshan China 327 500 590 743 828
Yinchuan China 310 240 245 418 550
Zhongning County China 292 88 214 355 380
Liancheng China 290 230 287 453 520
Shenhuo China 282 581 652 738 863
Xining City China 250 250 300 425 500
Longxi County China 250 250 270 328 500
Source: Brook Hunt
Recent production news

Rio Tinto has indicated that it may cut output at its Bell Bay smelter in Australia, given negative profit margins due to the
strong Australian dollar, high production costs and weak aluminium prices. The facility, which produced 181Kt in 2010, is
part of the Pacific Aluminium business Rio Tinto is looking to sell. The company, however, has stated that no decision has
been made to cut jobs or shut the smelter. The company is negotiating a new power supply contract with Hydro Tasmania
for Bell Bay from May 1, which could be key in helping to cut costs at the plant (4 March 2012).
Rio Tinto has also announced that it will close its 181Kty Lynemouth aluminium smelter in the north of England at the end of
March after a strategy review and consultation, confirming an intention first announced in November2011. Of the 515 people
employed at the smelter, 323 will be made redundant in May. Rio has also said that talks on the sale of Lynemouth power
station are ongoing, but require clarity from the UK government on rules for its continued operation without the smelter
(6 March 2012).
15 March 2012 19
COPPER
If the flow of macro data remains positive, copper prices Figure 1: Chilean copper mine production fell sharply in Jan
could target $9,000/t. But this is juxtaposed with the near- Chilean copper mine production 8%
550
term downside risk of softer Chinese import demand (Kt) decline
following the continued build in frontline stocks. So far, the 500
demand recovery following the new year holiday has been
soft. However, our economists expect Q1 to be the low for 450
growth and for the pace of activity to strengthen.
400
Although much attention has been focused on the demand
side of the copper market and in particular China, evidence
350
is emerging of a supply-side risk. Chilean mine production
data for January showed a large 8% y/y drop in production.
300
This has come as a surprise since Chilean production is
Jan-10 Jul-10 Jan-11 Jul-11 Jan-12
expected to improve this year driven by increases in
Source: INE, Barclays Capital
production from Los Bronces (474Kt), Esperanza (160Kt),
Escondida (1.1Mt) and more. We understand that ore Figure 2: Frontline Chinese copper stocks have built, but
hardness may be affecting the speed of ramp up at pipeline stocks still low
Esperanza and declining ore head grades have been
SHFE copper stocks (K tonnes, RHS)
eroding supply at a number of mines. This is the second
Finished product inventory at end-users, % of consumption
consecutive month Chilean mine production has Copper inventory at end-users, % of consumption
underperformed our expectations leading us to make a 25% 250
small 60Kt downward revision to our below consensus
21% 210
global mine production forecast for this year to 16.2Mt.
On Chinese imports, we believe that financing is part of the 17% 170
reason for the recent strength but also that consumer

13% 130
inventories are still very low. The chart above shows that
copper inventory at wire manufacturers is almost a third 9% 90
lower than normal for the time of year. Another factor may
be weakness in scrap imports. That all this is happening in a 5% 50
market in which inventories on the LME are falling fast will Mar-10 Jul-10 Oct-10 Mar-11 Jun-11 Dec-11 Mar-12
Source: SMM, Barclays Capital
lend support to prices.
(Kt) 2010E Q1 11E Q2 11E Q3 11F Q4 11F 2011F Q1 12F Q2 12F Q3 12F Q4 12F 2012F
Chile 3,244 754 790 754 819 3,117 784 820 784 849 3,237
China 4,541 1,185 1,298 1,383 1,331 5,197 1,305 1,418 1,548 1,496 5,767
USA 1,093 248 249 253 274 1,024 266 267 271 292 1,096
Global total 19,035 4,697 4,840 4,995 5,080 19,613 4,977 5,113 5,309 5,395 20,795
Disruption allowance 0% 0% 0% 0% 1% 0% 3% 3% 3% 3% 3%
Global production 19,035 4,697 4,840 4,995 5,030 19,562 4,828 4,960 5,150 5,234 20,171
y/y change 4.0% 1.7% 1.8% 3.8% 3.7% 2.8% 2.8% 2.5% 3.1% 4.1% 3.1%
N. America 2,182 563 572 542 525 2,202 570 579 551 534 2,234
Europe 3,789 967 995 901 919 3,782 931 957 896 924 3,707
China 7,120 1,637 2,035 2,064 2,059 7,794 1,710 2,147 2,178 2,151 8,186
Japan 1,061 254 265 234 267 1,020 254 273 245 275 1,047
ROW 5,080 1,308 1,363 1,304 1,268 5,243 1,318 1,383 1,327 1,292 5,320
Global consumption 19,232 4,729 5,229 5,046 5,038 20,041 4,782 5,338 5,198 5,176 20,494
y/y change 8.5% 1.4% 3.2% 2.4% 10.1% 4.2% 1.1% 2.1% 3.0% 2.7% 2.3%
Global balance -197 -33 -388 -50 -8 -479 45 -378 -48 58 -323
Total stocks 1,279 1,399 1,343 1,350 1,342 1,342 1,387 1,009 961 1,019 1,019
Stock/consumption ratio (wks) 3.6 3.8 3.3 3.5 3.5 3.5 3.8 2.5 2.4 2.6 2.6
LME cash price (US$/t) 7,533 9,646 9,137 8,982 7,489 8,813 8,000 9,000 9,700 9,300 9,000
LME cash price (Usc/lb) 342 438 414 407 340 400 363 408 440 422 408
Source: ICSG, Barclays Capital
15 March 2012 20
Copper mine production
Figure 4: Reported mine production

(Kt, recoverable Cu) Codelco Escondida Grasberg Kazakhmy Antamina Morenci Pelambres Others Total
2008 1,548 1,273 527 400 343 283 357 4,155 8,887
y/y change -7.6% -15.5% -7.9% 0.5% 2.7% -8.7% 17.0% 2.0% -3%
2009 1,676 1,117 640 361 304 194 316 3,631 8,242
y/y change 8.3% -12.2% 21.4% -9.8% -11.6% -31.3% -11.5% -12.6% -7.2%
Q3 10 409 281 162 83 69 49 106 866 2,025
Q4 10 480 288 140 83 80 53 92 879 2,095
y/y change -1.6% -9.6% 12.8% -8.8% 3.4% 10.5% 15.4% -6.9% -3.5%
2010 1,688 1,081 554 331 290 192 385 3,398 7,920
y/y change -0.8% -3.2% -13.4% -8.2% -4.4% -1.0% 21.7% -4.7% -3.4%
Q1 11 414 227 129 72 74 55 91 804 1,866
Q2 11 404 219 118 81 67 61 101 837 1,889
Q3 11 432 149 106 78 90 61 105 838 1,858
Q4 11 485 222 31 78 91 59 114 864 1945
y/y change 1.0% -23.0% -78.0% -6.1% 13.6% 12.9% 23.9% -3.3% -7.9%
2011 1,735 817 383 309 322 238 412 3,343 7,558
y/y change 2.8% -24.4% -30.9% -6.7% 10.7% 23.2% 7.1% -1.9% -4.7%
Source: Company reports
Figure 5: Global mine production

Chile Peru A ustralia China US ROW Total Concs SXEW
2010 5,419 1,247 870 1,156 1,129 6,167 15,989 12,676 3,313
% change 0.5% -2.3% 1.9% 8.9% -6.2% 0.0% 0.2% -0.2% 1.8%
Q1'10 1272 295 184 253 280 1472 3756 2950 806
Q2'10 1357 313 207 290 272 1517 3956 3138 818
Q3'10 1363 308 236 285 284 1582 4058 3226 831
Q4'10 1427 331 243 328 294 1597 4220 3362 857
Q1'11 1265 301 232 268 271 1504 3839 3046 793
Q2'11 1307 289 239 324 282 1544 3985 3136 849
Q3'11 1237 308 244 352 283 1574 3998 3142 856
y/y c hange -9.2% 0.1% 3.4% 23.3% -0.1% -0.5% -1.5% -2.6% 2.9%
Nov 11 456.8 110.5 77.0 115.8 104.5 497.4 1362.0 1061.0 301.0
y/y c hange -2.5% 5.8% -5.7% -0.8% 9.9% -5.7% -2.3% -4.1% 4.9%
Year to Nov 11 4735 1111 874 1174 1038 5646 14576 11469 3108
y/y c hange -3.8% -1.8% 10.6% 12 .3% 0.6% 0.2% 0.1% -0.6% 2.9%
Figure 6: Change in world mine output Figure 7: Copper concentrate charges
Change in world mine output (Kt, y/y) c/lb Spot treatment and refining charges for Cu concentrates
150
30
100
25
50
20
0
15
-50
-100 12-month 10
moving average
-150 5
-200 0
Nov-06 Nov-07 Nov-08 Nov-09 Nov-10 Nov-11 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12
Source: ICSG, CRU, Barclays Capital Source: CRU, Barclays Capital
15 March 2012 21
Copper refined production
Figure 8: Reported refined production

(Kt) China Chile EU-27 USA Russia ROW Total Electrowin Primary Secondary
10 yr average 2,865 2,961 2,456 1,328 899 7,767 18,276 2,885 13,013 2378
An. Av % change 12.8% 1.2% 1.2% -7.9% 3.6% -2.8% 0.4% 2.5% -1.0% 5.8%
2010 4,541 3,244 2,660 1,093 910 6,587 19,035 3,313 12,472 3,249
% change 12.1% -0.9% 4.6% -5.8% 4.1% 3.2% 4.1% 1.8% 2.4% 14.5%
Q1'10 1071 782 651 282 218 1614 4617 806 3062 753
Q2'10 1133 822 669 263 229 1637 4753 818 3112 821
Q3'10 1149 813 679 284 233 1656 4814 831 3142 839
Q4'10 1188 828 662 264 230 1680 4850 858 3156 836
Q1'11 1185 754 673 248 226 1611 4697 792 3100 804
Q2'11 1298 790 679 249 229 1595 4840 851 3105 885
Q3'11 1383 754 706 253 228 1673 4995 856 3220 919
y/y change 20.3% -7.3% 4.0% -11.1% -2.3% 1.0% 3.8% 2.9% 2.5% 9.6%
Nov 11 429 256 229 95 75 570 1654 301 1070 284
y/y change 6.9% -3.8% 2.0% 13.1% -2.3% 2.3% 2.8% 4.9% 4.5% -4.6%
Year to Nov 11 4744 2822 2523 934 838 6036 17897 3108 11573 3216
y/y change 15.3% -4.5% 3.3% -6.9% 0.5% 0.2% 3.0% 2.9% 1.6% 8.8%
Figure 9: Change in world refined copper output Figure 10: Changes in refined copper production
Change in world refined copper output (Kt, y/y) 18% YTD change in refined production by region
155
(% change y/y)
125 13%
95 8%
65
3%
35
-2%
5
-7%
-25 12-month
moving average -12%
-55
Nov-06 Nov-07 Nov-08 Nov-09 Nov-10 Nov-11 China Chile EU-27 USA Russia ROW
Source: ICSG, Barclays Capital Source: ICSG, Barclays Capital
Figure 11: Share of secondary in global refined output Figure 12: US copper scrap discounts
Share of secondary in global refined output 20 US copper scrap discount (c/lb)

20%
0
18% -20
16% -40
-60
14%
-80
12% MW No1. Bare Bright
-100
MW No1. Burnt Scrap
MW No2. Scrap
10% -120
Nov-06 Nov-07 Nov-08 Nov-09 Nov-10 Nov-11 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12
Source: ICSG, Barclays Capital Source: Platts, Barclays Capital
15 March 2012 22
Copper refined consumption
Figure 13: Reported refined consumption

(Kt) China EU-27 USA Japan S.Korea Russia India ROW Total
10 yr average 4,269 3,659 2,159 1,161 859 514 432 3,909 16,962
An. Av % change 12.3% -1.5% -3.8% -0.8% 0.0% 6.3% 8.3% 1.3% 2.7%
2010 7,120 3,372 1,760 1,061 828 460 626 4,006 19,232
% change 7.7% 8.8% 6.7% 21.1% -8.1% 16.9% 2.6% 11.9% 8.5%
Q1 10 1768 836 437 245 189 107 153 928 4663
Q2 10 1962 869 448 272 212 107 160 1034 5065
Q3 10 1856 827 458 266 220 113 154 1035 4930
Q4 10 1534 839 417 277 206 132 159 1009 4574
Q1 11 1637 861 453 254 210 184 157 973 4729
Q2 11 2035 882 454 265 201 196 171 1025 5229
Q3 11 2064 795 435 234 188 182 170 978 5046
y/y change 11.2% -3.9% -5.0% -12.2% -14.6% 60.7% 10.4% -5.5% 2.4%
Nov 11 699 270 139 96 62 56 54 327 1704
y/y change 35.4% -6.0% 0.7% -0.5% -11.3% 62.5% 1.9% -4.8% 10.7%
Year to Nov 11 7083 3110 1627 935 718 673 607 3634 18387
y/y change 7.6% -0.3% 0.0% -4.0% -5.9% 60.0% 5.7% -1.3% 3.6%
Figure 14: Actual and forecast global copper demand growth Figure 15: Chinese copper consumption indications
World copper demand growth (y/y) 1,100 Chinese copper demand indicators ('000t)
20%
15%
900
10%
5%
0% 700
-5%
-10% 500
F'cast Semis production
-15%
Apparent consumption refined Cu
-20% 300
Jan-10 Aug-10 Mar-11 Oct-11 May-12 Dec-12 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11
Source: ICSG, Barclays Capital Note: October data NBS. Source: China Customs, CNIA, Barclays Capital
Figure 16: US copper consumption indications Figure 17: Japanese copper consumption indicators
300 US consumption indicators Japanese copper wire and cable shipments ('000t)
Apparent Cons of rod (m lbs) 65
260 Apparent Cons of Refined Cu (000 short tons)

61
220
57
180
53
6-month moving
average
140 49
100 45
Nov-09 May-10 Nov-10 May-11 Nov-11 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12
Source: ABMS, Barclays Capital Source: JWCMA, Barclays Capital
15 March 2012 23
Supply development
Figure 19: New and major expansions to copper mines, 2010-13 (kt)
Mine Country net change in capacity 2010 2011 2012 2013
Los Bronces Chile 270 175 220 425 445
Esperanza Chile 200 0 90 160 200
Antapaccay Peru 150 0 0 40 150
Buenavista (Cananea) Mexico 140 0 110 140 140
Antamina Peru 138 302 345 413 440
Konkola Deep Zambia 125 0 0 60 125
Oyu Tolgoi Mongolia 120 0 0 10 120
Mutanda SxEw DR Congo 101 2 42 81 103
Salobo Brazil 90 0 0 20 90
KOV Restart and Expansion DR Congo 89 12 37 89 101
Morenci SxEw US 81 199 200 230 280
Escondida SxEw Chile 80 300 280 330 380
Vale - Sudbury Canada 65 35 102 95 100
Escondida Chile 63 787 560 770 850
Andina Chile 63 189 230 259 251
Candelaria Chile 61 158 170 137 219
Jabal Sayid Saudi Arabia 61 0 0 10 61
Source: Brook Hunt

On 12 March, Freeport McMoRan resumed production at Grasberg copper mine in Indonesia for the first time since 23
February this year. The company published a statement concluding that “PT Freeport Indonesia has resumed production
activities, Monday, March 12, 2012 […] Management and the union leaders have been coordinating to mobilise the
employees back to work”. It is unclear how the strike has affected production, although the company had previously forecast
copper sales from the mine site at close to 470Kt for 2012 after close to 425Kt in 2011.
Newmont Mining is reviewing the economics of its $4.8bn Minas Conga copper and gold project. The project, which at peak
production expected in 2014-15 would yield about 70-105Ktpy of copper, is still on suspension following protests by local
residents and politicians. The dispute is predominantly about water usage and environmental concerns; the Peruvian
government has undertaken an environmental impact review of the project, the results of which are expected to be ready in a
few weeks. News on March 14 that it had cut 6,000 jobs does not seem to bode well for a near-term restart of the project.
There have been a few smelter problems over the past month: Pan Pacific Copper is reported to be experiencing production
problems at the 250Ktpy Tamano smelter, causing it to be closed during 6-21 February; Philippine Associated Smelting and
Refining Corporation (PASAR)’s 175Ktpy Leyte smelter was closed on 2 January due to a fire, and there has been no
confirmation on the expected restart of the smelter.
On Thursday 1 March Mopani Copper Mines was forced by Zimbabwe environmental authorities to close its Mufulira heap
leaching plant (9Ktpy) due to pollution violations. The operations will only be allowed to resume after implementation of
environmental standards.
15 March 2012 24
LEAD
Lead has generally been range-bound over the past month, Figure 1: Even accounting for the seasonal dip, Chinese
centred on $2,150/t level. Given that prices continue to trade output was soft in Jan/Feb this year
into the cost curve, close to the 95th percentile currently, and, 16 Daily rate of Chinese refined lead production (Ktd)
at the same time, refined markets in both China and the RoW
15
are currently evenly balanced, the downside from here
appears limited. The case for a near-term upward trend in 14
prices, however, is leveraged to expectations regarding the 13
sustainability of the current tightness in the Chinese market,
12
which in our view is limited.
11
Unlike the rest of the base metals complex, which have seen
sustained builds, lead stocks in China have actually been on a 10
downward trend since the middle of last year. Critical to this 9
tightening effect has been the constraint seen by smelters in
8
output levels, as evidenced by the latest NBS data (daily
Aug-10 Feb-11 Aug-11 Feb-12
output in Jan-Feb 2012 fell 14% y/y). We believe this has
resulted from a combination of factors; downstream demand Source: NBS Barclays Capital
has been soft so far this year given constrained support from
replacement battery demand, secondary smelter Figure 2: Tightness in Chinese refined market has caused SHFE
environmental inspections have also been stepped up, and prices to continue to flirt with import arbitrage in Q1 2012
finally, there is some evidence of raw material tightness
SHFE/LME Pb ratio Import breakeven ratio
leveraged to an aversion to uneconomic lead concentrate 8.2
imports. Will this persist? Downstream demand should
improve in Q2 ahead of the summer replacement season; 7.8
however, we believe that a resultant modest improvement in
prices will support a firm rebound in refined output, 7.4
preventing a sustained deficit developing until later in 2012.
Outside China, the recent period of colder weather in Europe 7.0
provided a brief uptick to replacement demand set against a

tight scrap picture. In the US, mild winter conditions fed into 6.6
weaker shipment levels, as Figure 16 shows, for the end of

2011. On the supply-side, one potential boost to production 6.2
Jun-11 Jul-11 Sep-11 Oct-11 Dec-11 Jan-12 Mar-12
could come from Doe Run’s plan to restart its 130Kty idled
La Oroya lead smelter in May. Source: SHFE, Barclays Capital

China 4,146 1,056 1,124 1,189 1,248 4,617 1,081 1,211 1,296 1,385 4,973
Europe 1,698 444 448 410 441 1,743 453 457 418 450 1,777
USA 1,252 318 330 326 320 1,294 319 332 328 321 1,300
ROW 2,482 648 659 640 663 2,610 679 690 698 705 2,773
Global production 9,578 2,465 2,561 2,565 2,672 10,263 2,532 2,690 2,741 2,861 10,824
y/y change (%) 6.6% 15.5% 10.8% 3.2% 0.9% 7.2% 2.7% 5.0% 6.8% 7.1% 5.5%
China 4,213 1,072 1,087 1,172 1,288 4,618 1,157 1,195 1,289 1,442 5,084
Europe 1,637 428 419 396 391 1,634 406 409 406 410 1,631
USA 1,441 398 395 394 390 1,576 403 401 400 395 1,600
ROW 2,287 553 568 606 598 2,325 570 589 630 621 2,410
Global consumption 9,578 2,450 2,469 2,568 2,666 10,153 2,537 2,594 2,725 2,869 10,725
y/y change (%) 8.7% 16.3% 8.7% 2.0% -0.7% 6.0% 3.5% 5.1% 6.1% 7.6% 5.6%
Global balance 0 15 92 -3 5 110 -4 96 15 -7 99
Total reported stocks 449 532 585 691 621 621 617 713 728 721 721
Stock-to-consumption ratio (wks) 2.4 2.8 3.1 3.5 3.1 3.2 3.1 3.6 3.5 3.3 3.5
LME cash price (US$/t) 2,146 2,605 2,550 2,458 1,983 2,399 2,100 2,200 2,350 2,500 2,288
LME cash price (Usc/lb) 97 118 116 111 90 109 95 100 107 113 104
Source: Brook Hunt, ILZSG, Barclays Capital
15 March 2012 25
Lead mine production

(Kt, recoverable Pb) Europe US Americas China Asia Africa Oceania Global
10 yr average 270 416 585 1,159 210 112 633 3,393
An. Av % change -0.8% -1.5% 0.5% 10.5% 3.3% -6.1% -1.6% 3.1%
2011 359 334 652 2,358 272 111 539 4,624
% change 11% -10% 2% 27% 6% 19% -5% 12%
Q2'10 81 92 162 502 67 22 131 1073
Q3'10 83 91 157 503 58 24 142 1,064
Q4'10 83 92 153 546 59 24 160 1,120
Q1'11 92 85 158 402 69 25 122 951
Q2'11 89 87 163 593 68 28 145 1,173
Q3'11 93 81 167 622 67 29 132 1,192
Q4'11 86 81 163 741 68 29 140 1,308
Q4 11 y/y change 2.8% -11.4% 6.6% 35.7% 16.6% 23.4% -13.0% 16.8%
Dec 11 29 28 55 253 23 10 47 445
y/y change 3.6% -5.1% 5.9% 29.7% 15.1% 27.2% -12.8% 14.1%
Year to Dec 11 359 334 652 2,358 272 111 539 4,624
YTD y/y change 10.8% -10.4% 2.5% 27.4% 6.2% 19.4% -4.6% 11.8%
Source: ILZSG, Barclays Capital
Figure 5: Lead concentrate treatment charges Figure 6: Change in global lead mine output
Lead treatment charges

380 $/t Change in global lead mine production
75 Kt, y/y
320 12-month
60 moving average
260
45
200
30
140
15
80
0
20
-15
-40
Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 -30
Spot TC -45
Outurn TC (includes smelter's metal price participation) Dec-08 Dec-09 Dec-10 Dec-11
Source: CRU, Barclays Capital Source: ILZSG, Barclays Capital
Figure 7: Chinese mine output Figure 8: Regional trends in lead mine production
270 Chinese concentrate production (Kt) YTD change in mine production by region (Kt, y/y)
550
500
450
210 400
12-month
moving average 350
300
250
150 200
150
100
50
90 0
-50
Europe
US
Americas
China
Asia
Africa
Oceania
30
Nov-05 Nov-06 Nov-07 Nov-08 Nov-09 Nov-10 Nov-11
Source: CNIA, China Customs, Barclays Capital Source: ILZSG, Barclays Capital
15 March 2012 26
Lead refined production

Europe Africa US Americas China Asia Oceania Global
10 yr average 1,775 121 1,305 740 2,484 1,193 265 7,928
An. Av % change -2.2% -2.5% -1.3% 0.2% 19.3% 3.6% -0.6% 4.5%
2011 1,743 117 1,294 785 4,617 1,504 238 10,263
% change 2.6% 24.2% 3.3% 2.1% 11.4% 9.1% 8.3% 7.2%
Q2'10 432 22 297 196 950 341 63 2,311
Q3'10 414 23 316 189 1,146 359 45 2,485
Q4'10 422 26 328 199 1,239 373 68 2,647
Q1'11 444 29 318 197 1,056 361 61 2,465
Q2'11 448 30 330 200 1,124 366 63 2,561
Q3'11 410 29 326 190 1,189 393 53 2,565
Q4'11 441 29 320 198 1,248 384 62 2,672
y/y change 4.4% 12.6% -2.5% -0.4% 0.7% 2.9% -9.5% 0.9%
Dec 11 147 10 108 67 434 126 21 912
y/y change 7.8% 12.6% 0.9% -3.9% 3.9% 0.5% -15.5% 2.4%
Year to Dec 11 1,743 117 1,294 785 4,617 1,504 238 10,263
YTD y/y change 2.6% 24.2% 3.3% 2.1% 11.4% 9.1% 8.3% 7.2%
Figure 10: Global lead market balance Figure 11: Change in global refined production
Global refined lead balance (Kt) Kt, y/y Change in global lead refined production growth
60
150
40 12-month
100 moving average
20
50
0 0
-20 -50
-40 -100
Dec-09 Apr-10 Aug-10 Dec-10 Apr-11 Aug-11 Dec-11 Dec-08 Dec-09 Dec-10 Dec-11
Source: ILZSG, Barclays Capital Source: ILZSG, Barclays Capital
Figure 12: Chinese refined lead output Figure 13: Regional trends in refined output
Chinese refined lead production YTD changes in refined production by region

460 Kt 500
(Kt, y/y)
420
400
380
12-month
340 moving average 300
300
200
260
220 100
180
0
140
Europe
US
Americas
Africa
China
Asia
Oceania
100
Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11
15 March 2012 27
Lead refined consumption
Figure 14: Reported consumption

Europe Africa US Americas China Asia Oceania Global
10 yr average 1,919 107 1,538 534 2,240 1,524 34 7,895
An. Av % change -2.6% -3.1% -2.2% -0.1% 20.1% 1.5% -4.2% 3.6%
2011 1,634 89 1,576 477 4,618 1,735 24 10,153
% change -0.2% -6.1% 9.4% -10.7% 9.6% 6.6% -19.3% 6.0%
Q2 10 419 21 358 125 971 369 6 2,270
Q3 10 397 25 348 149 1,167 423 8 2,518
Q4 10 431 22 368 146 1,244 463 9 2,684
Q1 11 428 26 398 120 1,072 402 5 2,450
Q2 11 419 21 395 116 1,087 425 6 2,469
Q3 11 396 21 394 119 1,172 460 6 2,568
Q4 11 391 22 390 122 1,288 448 7 2,666
Q4 11 y/y change -9.4% -2.7% 5.8% -16.7% 3.5% -3.3% -23.4% -0.7%
Dec 11 129 8 133 42 452 154 2 919
y/y change -12.7% 17.2% 5.9% -10.4% 8.3% -3.8% 200% 1.7%
Year to Dec 11 1,634 89 1,576 477 4,618 1,735 24 10,153
YTD y/y change -0.2% -6.1% 9.4% -10.7% 9.6% 6.6% -19.3% 6.0%
Source: ILZG, Barclays Capital
Figure 15: Global lead consumption Figure 16: US battery shipments
Global lead refined consumption growth (Kt, y/y) 30% US battery shipments (% y/y
160
25% change)
120 20%
15%
80
10%
40
5%
0 0%
-5%
-40
-10%
-80 -15%
Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Dec-07 Apr-09 Aug-10 Dec-11
Source: ILZG, Barclays Capital Source: CRU, Barclays Capital
Figure 17: Chinese lead apparent consumption Figure 18: Regional trends in refined lead consumption
500 Chinese lead apparent consumption ('000t) YTD change in consumption by region (Kt, y/y)
12 month moving average 450
450
400
400 350
12-month 300
350 moving average 250
200
300
150
250 100
50
200 0
-50
150
Europe
US
Americas
Africa
China
Asia
Oceania
100
Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11
Source: CNIA, China Customs, Barclays Capital Source: ILZG, Barclays Capital
15 March 2012 28
Supply development
Figure 19: New and major expansions to lead mines, 2010-13 (Kt)
Mine Country net change in capacity 2010 2011 2012 2013
Penasquito Mexico 44 44 74 88 88
Magellan Australia 35 44 7 60 79
Sindesar Khurd India 30 0 17 27 30
Yinshan China 30 0 0 30 30
Rasp Australia 30 0 0 30 30
Altintopkan Tajikstan 28 5 5 10 33
Mount Isa Australia 21 144 144 158 165
Rampura-Agucha India 19 56 66 72 75
Khadiza Uzbekistan 18 0 13 18 18
Turkey Small mines Turkey 15 25 25 40 40
Gorevsk Russia 14 66 80 80 80
Hellyer Australia 13 0 6 13 13
Kyzyl Tashtygskoe Russia 13 0 0 7 13
Broken Hill Australia 13 51 53 55 64
Novoshirokinskoye Russia 12 3 9 15 15
Tara Ireland 11 19 21 30 30
McArthur River Australia 11 32 36 38 43
Duddar Pakistan 11 1 4 10 13
Zawar India 11 19 19 25 30
Zletovo-Toranica Macedonia 10 10 15 20 20
Source: Brook Hunt, Barclays Capital

Metal Bulletin reported that Doe Run Perú plans to restart its long-idled La Oroya polymetallics smelter on May 1, pending
the approval of a bill by the Peruvian congress extending the deadline for the company to complete a clean-up programme at
the plant. On Monday, February 27, Peru’s energy and mine minister Jorge Merino Tafur said that the government supports
Doe Run Perú and wants La Oroya to be restarted as soon as possible. In 2008, its last full year prior to idling, La Oroya
produced 114Kt of refined lead and 43Kt of refined zinc (29 February 2012).
15 March 2012 29
NICKEL
Nickel was the weakest performer in the complex over the Figure 1: Softer refined production and imports point to
past month, with prices falling close to 10% back to the tighter conditions emerging in Q2 in China
$19,000/t level. While a build in LME stocks since the
35 Chinese refined nickel production (Kt)
beginning of the year has been indicative of the spill over
from softer refined market conditions in H2 11, we think 30
there are good reasons for believing the downside to prices
is now limited, while there is also a growing probability of a 25
bullish scenario linked to the policy implications emerging 20

from Indonesia with regard to the NPI sector.
15
The domestic market in China is currently soft. Weak
10
physical premia, stainless mill cutbacks, rising stainless
stocks and sluggish downstream demand in early March all 5
support this view. We believe, however, that the market is
-
well-positioned to tighten during Q2. There is clearly a
Feb-10 Aug-10 Feb-11 Aug-11 Feb-12
supply-driven tightening effect underway to bring more
balance to the domestic refined market following the stock Source: NBS, Barclays Capital
builds in H2 11. The NBS production data for January-
February showed refined output falling close to 20% from Figure 2: Depressed NPI prices continue to eat into the
sector cost curve and, in turn, constrain output
the previous two months, while imports in January (12.8Kt)
halved from their peak in Q4 11. A rise in the premium of Chinese nickel pig iron prices
Chinese refined nickel prices versus LME by close to 25% in 2000
(10-15% nickel content RMB/tonne of nickel-unit)
March versus February indicates tightening is underway. 1900
The outlook for the NPI sector also appears to support 1800
refined nickel demand prospects, as and when the 1700

Chinese stainless sector reawakens. Current price levels 1600
continue to constrain NPI output, while medium risks to
1500
the sector are evident given the latest announcements
from the Indonesian government regarding the 2014 1400
laterite ore ban. Indonesia ore feeds as much as 80% of 1300

the Chinese NPI sector. Even if an outright ban remains a 1200
low probability, the prospect of export tariffs/quotas in Mar-10 Sep-10 Mar-11 Sep-11 Mar-12
Indonesia will contribute to cost inflation in the NPI
sector, providing support for higher refined prices.

China 323 93 100 108 110 411 103 110 118 121 452
Russian Federation 262 64 61 71 71 267 64 61 71 71 267
Global Production 1,446 385 375 408 422 1,589 413 402 437 454 1,705
y/y change (%) 9.1% 14.7% 3.2% 12.9% 9.4% 9.9% 7.3% 7.2% 7.2% 7.5% 7.3%
China 575 168 165 178 169 680 185 182 196 186 748
US 120 34 31 29 30 123 33 31 29 30 123
Europe 368 96 94 89 90 369 91 92 89 92 364
Global Consumption 1,476 403 384 398 389 1,573 417 408 425 419 1,669
y/y change (%) 18.9% 8.8% 4.5% 8.7% 4.4% 6.6% 3.7% 6.2% 6.8% 7.7% 6.1%
Global Balance -30 -17 -9 10 33 16 -4 -6 12 34 36
Total stocks 246 231 221 213 207 207 203 197 209 243 243
Stocks-to-consumption Ratio (wks) 8.7 7.2 7.1 6.3 5.9 5.9 5.8 5.8 5.9 7.0 7.0
LME Cash Price (US$/t) 21,809 26,899 24,165 22,043 18,303 22,853 19,250 20,500 20,000 19,750 19,875
LME Cash Price (Usc/lb) 989 1,220 1,096 1,000 830 1,037 873 930 907 896 902
Source: Brook Hunt, CRU, INSG, Barclays Capital
15 March 2012 30
Nickel production

(JKt, recoverable Ni) Africa Canada America Asia Russia Europe Australia Oceania World
10 yr average 77 198 224 295 263 45 186 111 1398
An. Av % change 1.6% -1.8% 0.6% 11.3% 1.4% 8.2% 0.2% 1.0% 3.0%
2011 82 223 274 629 270 92 202 128 1898
% change 1.9% 40.6% 31.3% 24.6% 0.0% 65.3% 18.3% -1.3% 20.3%
Q2'10 19 32 51 128 68 14 39 32 382
Q4'10 20 58 55 139 68 16 48 31 436
Q1'11 21 53 59 145 68 18 47 24 435
Q2'11 21 53 66 153 68 23 53 27 462
Q3'11 21 53 70 162 68 24 51 38 487
Q4'11 18 64 79 168 68 26 51 39 513
Q4 11 y/y change -9.1% 9.3% 42.1% 21.1% 0.0% 64.6% 6.0% 24.9% 17.7%
Dec 11 7 22 27 55 23 10 17 9 169
Dec 11 y/y change -5.3% 19.2% 46.7% 19.5% 0.0% 84.0% 0.7% -1.8% 17.6%
Year to Dec 11 82 223 274 629 270 92 202 128 1898
YTD y/y change 1.9% 40.6% 31.3% 24.6% 0.0% 65.3% 18.3% -1.3% 20.3%
Source: INSG, Barclays Capital
Figure 5: Reported primary nickel production

(Kt) Africa Canada Americas China Asia Russia Europe Oceania World
10 yr average 50 141 148 146 176 259 217 163 1301
An. Av % change -3.3% -2.4% 0.4% 20.3% 1.9% 1.7% 2.8% -0.9% 2.9%
2011 37 144 130 411 194 267 257 149 1589
% change 3.3% 37.0% 5.1% 27.2% -5.6% 1.7% 7.6% 5.1% 9.9%
Q2'10 9 21 32 83 50 64 60 36 363
Q3'10 9 22 31 80 52 67 63 36 361
Q4'10 9 42 30 88 51 68 66 31 386
Q1'11 9 39 29 93 52 64 65 34 385
Q2'11 9 31 31 100 45 61 59 38 375
Q3'11 9 32 34 108 51 71 64 39 408
Q4'11 9 43 36 110 47 71 68 38 422
Q4 11 y/y change 1.9% 1.4% 19.6% 24.4% -6.9% 4.7% 3.4% 19.4% 9.4%
Dec 11 3 15 12 36 15 24 23 12 141
Dec 11 y/y change 1.9% -2.8% 19.6% 14.4% -19.3% 4.7% 2.7% 41.5% 5.9%
Year to Dec 11 37 144 130 411 194 267 257 149 1589
YTD y/y change 3.3% 37.0% 5.1% 27.2% -5.6% 1.7% 7.6% 5.1% 9.9%
Figure 6: Global mine output and refined output Figure 7: Refined nickel production by region
180 Kt y/y changes in refined nickel output for top 5

Kt Global refined output producers 2011 YTD
170 Global mine output 100
160 80
60
150
40
140
20
130
0
120
-20
110 -40
100 -60
Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Canada China Asia Russia Oceania ROW
Source: International Nickel Study Group, Barclays Capital Source: International Nickel Study Group, Barclays Capital
15 March 2012 31
Nickel refined consumption
Figure 8: Refined nickel consumption

(Kt) US America China Japan Asia Europe World
10 yr average 125 37 251 169 212 431 1,268
An. Av % change -2.2% -3.0% 24.9% -2.9% 0.1% -1.6% 2.8%
2011 123 35 680 156 187 369 1,573
% change 2.1% 10.3% 18.3% 5.0% -9.3% 0.4% 6.6%
Q2 10 31 8 141 38 50 94 367
Q3 10 30 8 143 38 50 90 366
Q4 10 29 8 151 34 53 92 373
Q1 11 34 9 168 40 49 96 403
Q2 11 31 9 165 36 44 94 384
Q3 11 29 9 178 42 46 89 398
Q4 11 30 9 169 38 49 90 389
Q4 11 y/y change 1.7% 7.4% 12.1% 10.3% -7.6% -2.3% 4.4%
Dec 11 10 3 56 14 17 30 131
Dec 11 y/y change 5.3% 7.4% 10.7% 42.8% -3.5% -1.9% 6.8%
Year to Dec 11 123 35 680 156 187 369 1,573
YTD y/y change 2.1% 10.3% 18.3% 5.0% -9.3% 0.4% 6.6%
Figure 9: Global refined nickel consumption growth Figure 10: Refined nickel consumption by region
y/y Global refined nickel consumption 120 y/y changes in refined nickel consumption for top 5
60% consumers YTD 2011 (Kt)
50% 100
40% 80
30%
60
20%
10% 40
0%
20
-10%
-20% 0
-30%
-20
Dec-09 Jun-10 Dec-10 Jun-11 Dec-11
China Japan US Europe Asia
Source: International Nickel Study Group, Barclays Capital Source: International Nickel Study Group, Barclays Capital
Figure 11: European base stainless steel prices Figure 12: Asian base stainless steel prices
1,300 MB EU stainless steel price (Euro/t) 5,000 $/t Asian Stainless Steel CR 304 prices
Asian Stainless Steel HR 304 prices
4,000
1,200
3,000
1,100
2,000
1,000 1,000
Mar-11 Jul-11 Nov-11 Mar-12 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12
Source: Thomson Datastream, Barclays Capital Source: Ecowin, Barclays Capital
15 March 2012 32
Supply development
Figure 13: New and major expansions to nickel mines, 2010-13 (units kt)
Mine Country Net change in capacity 2010 2011 2012 2013
Onca Puma Brazil 39 0 9 22 39
Barro Alto Brazil 35 5 12 33 41
Sudbury - Vale Canada 33 38 61 73 71
Ravensthorpe Australia 30 0 0 17 30
Ambatovy Madagascar 28 0 0 14 28
Bonao Dominican Rep 24 0 22 24 24
Antam High Grade Ore - Garn Indonesia 23 49 54 72 73
Goro New Caledonia 22 4 9 10 27
Koniambo New Caledonia 16 0 0 0 16
Santa Rita Brazil 14 10 13 24 24
Ramu PNG 13 0 0 4 13
Taguang Myanmar 11 0 0 2 11
Punta Gorda Cuba 9 36 40 43 45
Talvivaara Finland 9 36 38 45 45
Totten Canada 9 0 2 8 9
Nicaro Cuba 8 11 14 17 19
Larymna Greece 8 16 23 24 24

Sherritt International announced in its FY 2011 results that they expect their 60Kty Ambatovy project in Madagascar to
produce its first metal in Q1 12. The company expects production of 8-13Kty in 2012, depending on the pace and success of
the ramp-up. The company then expects the plant to achieve full production in 2013. The company stated that the pressure
acid leach circuits continued the start-up sequencing, with a successful three-day test run on the first autoclave. All utilities
are either operational or in start-up, including the acid, hydrogen and hydrogen sulphide plants. The first ammonia shipment
was received and sent to the ammonia storage facility during the quarter. The critical period of susceptibility to disruption,
though, will come as all these components are operated in tandem in full ramp up this quarter (22 February 2012).
First Quantum Minerals announced in their Q4 results that they forecast production at their Ravensthorpe HPAL project to
rise to 33-36Kt in 2012. This follows output of 5.7Kt in Q4 during the commissioning ramp up following the re-building of
two crushing plants and the re-commissioning of the beneficiation plants that can boast a throughput of up to 1,200t per
hour of limonite (and 550 tonnes saprolite). The company expects refined nickel production at the facility to average 39Kty
for the first five years and 28Ktyover the next 30 years (6 March 2012).
15 March 2012 33
TIN
Following an explosive start to the year, tin prices have Figure 1: After a five-month period of sustained LME stock
softened over the past month, falling close to 8%. As the draws, Q1 2012 has seen softer conditions develop
second poorest performing base metal over this
26 LME tin stocks (Kt)
timeframe, relative weakness in fundamental drivers has
24
clearly played a part. First, LME stocks have risen by close
to 25% (+2.5Kt) over the past month, clearly indicative of a 22
traded market in surplus. Contributing to this softness 20
have been two key factors. On the supply side, Indonesian 18
refined export levels have bounced higher over the Dec 16
2011-Feb 2012 period, rising by 37% y/y (+8Kt). This was
14
achieved despite widespread reports of wet weather
conditions hampering mining activities early this year. 12
Weighing on the demand side has been sequentially softer 10

level of refined import into China over the same period, in 8
turn constrained by negative holiday effects, comfortable Mar-11 May-11 Aug-11 Oct-11 Dec-11 Mar-12
domestic stock levels, and the closure (by consequence) of
Source: LME, Barclays Capital
the import arbitrage window.
Figure 2: Firmer Indonesian exports and weaker Chinese
When and how will the refined market return to tighter imports have supported development of a short-term surplus
conditions? China is naturally the critical factor in
determining a shift in fundamental emphasis. While the 16
Indonesian refined tin exports (Kt)
domestic market is oversupplied currently following the very
14
strong levels of import refined metal at the level seen during
the final third of 2011 – when they averaged 3.9Kt/m versus 12
just 1Kt/m during the previous eight months – there is 10
evidence that a tightening effect is under way. Softer import
8
levels so far in 2012 combined with reduced levels of refined
output (-12% y/y in Jan-Feb) set against what is traditionally 6
the peak season for electronic goods output, offer the 4
foundations for an expectation of tighter domestic market
2
balance during Q2 2012. A question mark currently hangs
over Indonesia; the government stated in early March that it 0
is considering cutting export shipments of refined tin in a bid Feb-10 Aug-10 Feb-11 Aug-11 Feb-12
to push prices back above the $30,000/t level. Source: Barclays Capital

(Kt) 2005 2006 2007 2008 2009 2010 2011F 2012F
Global production 347 355 345 322 334 350 354 357
y/y change (%) 12.5% 2.3% -2.7% -6.8% 3.8% 4.9% 1.1% 0.8%
Global consumption 333 362 356 340 320 362 359 362
y/y change (%) 3.4% 8.8% -1.7% -4.5% -5.9% 13.1% -0.8% 0.8%
US stockpile sales 8 9 8 4 0 0 0 1
Global balance 14 -8 -11 -18 14 -12 -5 -5
Total reported stocks 37 34 32 31 46 36 31 26
Stocks-to-consumption ratio (wks) 5.7 4.8 4.6 4.7 7.5 5.2 4.5 3.7
LME cash price (US$/t) 7,375 8,761 14,542 18,500 13,579 20,407 26,122 24,250
LME cash price (Usc/lb) 335 397 660 839 616 926 1,185 1,100
Source: CRU, ITRI, Barclays Capital
15 March 2012 34
Tin supply and demand

Figure 4: Regional tin mine production Figure 5: Regional refined in production
12 2011 y/y change in tin mine production for top 5 12 2011 y/y change in refined tin production for top 5
10 producers (Kt) 10 producers (Kt)
8 8
6
6
4
4
2
2
0
-2 0
-4 -2
-6 -4
-8 -6
-10 -8
China Indonesia Peru Bolivia DRC ROW China Indones Peru Malaysia Thail ROW
Source: ITRI, Barclays Capital Source: CRU, ITRI, Barclays Capital
Figure 6: Regional refined tin consumption Figure 7: Chinese refined tin production
7 2011 y/y change in refined tin consumption for top 5 21 Kt China domestic refined tin output
consumers (Kt)
19
5
17
3
15
1 13
11
-1
9
-3 7
-5 5
China Europe Other Japan USA ROW 3
Asia Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11
Source: CRU, ITRI, Barclays Capital Source: Antaike, Reuters, Barclays Capital
Figure 8: China refined tin trade balance Figure 9: Chinese versus LME price spread
Net imports of refined tin Domestic Chinese Tin Prices LME Spot Tin Prices
5 34,000 $/t
Kt
4
3 Net Exports
29,000
2 12-month
moving average
1 24,000
0
-1 19,000
-2
-3 14,000
-4 Net imports
-5 9,000
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Mar 09 Mar 10 Mar 11 Mar 12
Source: China Customs, Barclays Capital Source: Antaike, Ecowin, Barclays Capital
15 March 2012 35
ZINC
Zinc prices have been largely flat over the past month, and Figure 1: And the build goes on…
provided that the outlook for growth continues to improve,
1,400.0
we see little downside to prices from here. After a bout of Zinc exchange stocks
short covering earlier in the year, we believe that market 1,200.0 (K tonnes)
positioning is now lighter and that unless the growth

1,000.0
environment deteriorates, we wouldn’t favour shorting SHFE
zinc at current levels. That said the fundamental picture for 800.0
LME
zinc remains weak. Inventories, both in China and on the 600.0
LME, continue to rise (as shown opposite), and unlike
some other base metals, cancelled warrants on the LME 400.0
are very low, which suggests that there is not much 200.0
demand for the metal at this point. Physical premiums in
the US have however been holding at a relatively high level, 0.0
Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12
perhaps reflecting the tightening impact that financing
deals have had on spot availability. Source: LME, SHFE, Barclays Capital. Note March is month to date
The demand picture has improved a little, with US Figure 2: Chinese mine production growth was robust in
transportation demand picking up while construction early 2012
activity appears to be stabilising, and we believe there is
18,000 Daily rate of Chinese zinc in concentrate production
scope for increased off-take from the sector this year. While
(tonnes)
in Europe the industrial recession means the outlook is 16,000
weak, at least through H1, though we do think the worst
14,000
period for demand is largely over. In China, meanwhile,
recent targeted easing measures for the residential property 12,000
market could prove to be positive for activity levels. On the 10,000

supply side, Chinese production data from the National
Bureau of Statistics showed that zinc-in-concentrate 8,000
production increased strongly in January/February. 6,000

Although these data are notoriously volatile, this
4,000
nevertheless suggests that there has been an improvement
Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Aug-11 Feb-12
in domestic concentrate supply.
Source: NBS, Barclays Capital

Balance 2010E Q1 11 Q2 11 Q3 11E Q4 11F 2011F Q1 12F Q2 12F Q3 12F Q4 12F 2012F
China 5,164 1,247 1,286 1,284 1,402 5,218 1,347 1,388 1,361 1,486 5,582
Total Europe 2,382 618 602 605 597 2,422 630 614 614 606 2,464
North America 940 226 232 212 215 885 235 241 219 222 918
ROW 4,335 1,089 1,094 1,146 1,159 4,488 1,101 1,106 1,152 1,168 4,528
Production (Kt) 12,821 3,179 3,214 3,247 3,373 13,013 3,313 3,350 3,347 3,482 13,492
y/y Change (%) 13.9% 4.7% 0.4% 0.9% 0.3% 1.5% 4.2% 4.2% 3.1% 3.2% 3.7%
China 5,358 1,273 1,303 1,349 1,542 5,468 1,299 1,375 1,430 1,635 5,739
Total Europe 2,488 640 648 624 614 2,526 608 637 624 623 2,492
North America 1,040 253 234 201 271 958 256 237 204 275 972
ROW 3,674 884 946 953 940 3,724 939 1,004 1,025 1,011 3,978
Consumption (Kt) 12,560 3,051 3,131 3,127 3,368 12,676 3,102 3,253 3,283 3,544 13,181
y/y Change (%) 19.7% 4.9% -0.9% -4.3% 4.4% 0.9% 1.7% 3.9% 5.0% 5.2% 4.0%
Global Balance (Kt) 262 129 83 121 5 337 211 97 64 -62 311
Total Reported Stocks 1,474 1,553 1,781 1,801 1,772 1,772 1,983 2,080 2,144 2,082 2,082
Stock-to-consumption Ratio (wks) 6.1 6.5 7.4 7.6 6.9 6.9 8.2 8.3 8.6 7.7 7.7
LME Cash Price 2,158 2,393 2,250 2,224 1,897 2,191 1,950 2,100 2,200 2,300 2,138
LME Cash Price 98 109 102 101 86 99 88 95 100 104 97
Source: ILZSG, Brook Hunt, Barclays Capital
15 March 2012 36
Zinc mine production

Europe Canada US Peru Americas China Asia Oceania Africa Global
10 yr average 1,025 750 746 1,297 957 2,697 1,289 1,407 308 10,476
An. Av % change -0.4% -4.7% -0.5% 3.7% 5.1% 6.9% 6.4% -0.1% 2.6% 2.9%
2011 1,075 613 767 1,256 1,416 4,308 1,838 1,473 280 13,026
% change 6.0% -5.6% 2.1% -14.5% 10.0% 16.4% 11.7% 1.0% -7.0% 6.1%
Q2'10 253 178 188 391 320 986 409 379 74 3,178
Q3'10 252 151 192 376 319 959 410 364 69 3,090
Q4'10 265 149 186 343 317 1,057 412 385 76 3,189
Q1'11 275 162 193 332 354 720 459 327 69 2,892
Q2'11 266 168 190 327 350 1,086 458 372 76 3,292
Q3'11 275 142 201 294 355 1,162 461 390 68 3,348
Q4'11 259 140 183 303 357 1,340 460 384 68 3,494
y/y change -2.3% -6.0% -1.3% -11.5% 12.4% 26.8% 11.6% -0.2% -10.2% 9.5%
Dec 11 91 47 63 102 119 449 153 128 20 1172
y/y change 5.0% -2.2% -4.0% -6.3% 13.0% 16.5% 11.2% -12.6% -19.5% 5.7%
Year to Dec 11 1,075 613 767 1,256 1,416 4,308 1,838 1,473 280 13,026
YTD y/y change 6.0% -5.6% 2.1% -14.5% 10.0% 16.4% 11.7% 1.0% -7.0% 6.1%
Source: ILZSG, CNIA, Barclays Capital
Figure 5: Zinc concentrate treatment charges Figure 6: Change in global zinc mine output
Zinc treatment charges ($/t) Change in global zinc mine production (Kt, y/y)
400
160
300
120
200
80
100
0 40
-100 0
-200 -40
-300 -80 12-month
Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 moving average
Spot TC -120
Outurn TC (includes smelter's metal price participation) Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11
Source: CRU, Barclays Capital Source: ILZSG, CNIA, Barclays Capital
Figure 7: Chinese concentrate output and imports Figure 8: Change in regional mine output
Kt 12-month moving 700 YTD change in mine production by region (Kt, y/y)
500
average
400 500
300 300
200 100
100 -100
0
-300
Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12
u
a
pe
as
a
US
da
ic
in
ni
i
As
Pe
Chinese zinc in concentrate imports

ic
ro
r
na
a
Ch
Af
er
ce
Eu
Ca
Am
Chinese zinc in concentrate production

Source: CNIA, China Customs, Barclays Capital Source: ILZSG, CNIA, Barclays Capital
15 March 2012 37
Zinc refined production

Europe Africa N.Am L.Am China Asia Oceania Global
10 yr average 2,554 235 1,041 794 3,215 2,323 509 10,671
An. Av % change -1.2% 6.8% -1.3% 3.2% 13.7% 5.9% 5.0% 5.1%
2011 2,422 242 885 968 5,218 2,816 462 13,013
% change 1.7% -9.1% -5.9% 11.0% 1.0% 4.4% -7.4% 1.5%
Q2'10 592 67 236 213 1,300 665 130 3,201
Q3'10 596 66 224 230 1,298 680 125 3,219
Q4'10 605 66 227 234 1,399 706 126 3,364
Q1'11 618 65 226 238 1,247 690 97 3,179
Q2'11 602 65 232 236 1,286 685 108 3,214
Q3'11 605 59 212 246 1,284 715 126 3,247
Q4'11 597 53 215 248 1,402 726 131 3,373
y/y change -1.4% -19.7% -5.6% 6.0% 0.2% 2.9% 4.2% 0.3%
Dec 11 199 15 73 83 465 243 44 1,122
y/y change -2.0% -34.8% -5.9% 4.1% -0.5% 2.8% 5.4% -0.6%
Year to Dec 11 2,422 242 885 968 5,218 2,816 462 13,013
YTD y/y change 1.7% -9.1% -5.9% 11.0% 1.0% 4.4% -7.4% 1.5%
Figure 10: Global refined zinc market Figure 11: Change in global refined output
120 Global refined zinc balance (Kt) 220 Change in global refined zinc production (Kt, y/y)
180
80 140
100
40
60
20
0
-20
-40 -60
12-month
-100 moving average
-80 -140
Dec-09 Aug-10 Apr-11 Dec-11 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11
Source: ILZSG, Barclays Capital Source: ILZSG, Barclays Capital
Figure 12: Chinese refined output and concentrate imports Figure 13: Regional changes in refined output
Kt Chinese zinc in concentrate imports 120 YTD change in refined production by region (Kt, y/y)
500
Chinese refined zinc production 100
12 per. Mov. Avg
400
80
60
300 40
20
200
0
100 -20
-40
0
a
A
pe
a
m
ic
in
ni
i
N
As
A
ro
a
Ch
Af
L.

ce
Eu
15 March 2012 38
Zinc refined consumption

Figure 14: Global refined zinc consumption
Europe Africa N.Am L.Am China Asia Oceania Global
10 yr average 2,679 190 1,270 633 3,061 2,471 229 10,541
An. Av % change -0.5% 1.4% -3.1% 3.0% 19.5% 2.6% -1.5% 4.8%
2011 2,526 162 958 682 5,468 2,709 171 12,676
% change 1.5% -10.5% -7.9% 1.9% 2.1% 2.3% -2.7% 0.9%
Q2 10 631 47 266 171 1,352 652 42 3,161
Q3 10 637 45 275 163 1,418 679 50 3,267
Q4 10 643 41 224 170 1,453 653 42 3,225
Q1 11 640 42 253 167 1,273 649 27 3,051
Q2 11 648 41 234 184 1,303 677 46 3,131
Q3 11 624 39 201 160 1,349 704 50 3,127
Q4 11 614 40 271 172 1,542 680 49 3,368
y/y change -4.5% -1.5% 20.7% 1.1% 6.2% 4.1% 17.0% 4.4%
Dec 11 199 11 90 53 524 229 16 1,122
y/y change -2.1% -28.9% 65.8% -5.6% 7.6% 5.9% 18.1% 7.3%
Year to Dec 11 2,526 162 958 682 5,468 2,709 171 12,676
YTD y/y change 1.5% -10.5% -7.9% 1.9% 2.1% 2.3% -2.7% 0.9%
Source: ILZG, Barclays Capital
Figure 15: Global refined zinc consumption Figure 16: Galvanised steel output
Change in global refined zinc consumption (Kt, y/y) Kt

250 3,000
150 2,500
China
50 2,000
USA
Japan
-50 1,500
12-month 1,000
-150
moving average
500
-250
Dec-09 Jun-10 Dec-10 Jun-11 Dec-11
Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11
Source: ILZG, Barclays Capital Source: CRU, Brook Hunt, Barclays Capital
Figure 17: Chinese apparent consumption Figure 18: Regional consumption trends
y/y 140 YTD change in consumption by region (Kt, y/y)

60%
12 month moving 100
average
60
40%
20
20% -20
-60
0%
-100
a
pe
nia
ia
m
Am
ric
in
As
ro
L.A
-20%
Ch
ea
N.
Af
Eu
Oc
Source: CNIA, China Customs, Barclays Capital Source: ILZG, Barclays Capital
15 March 2012 39
Supply development
Figure 19: New and major expansions to zinc mines 2010-13 (units kt)
Mine Country Net change in capacity 2010 2011 2012 2013
Penasquito Mexico 105 70 146 185 175
Rampura-Agucha India 104 646 692 740 750
Perkoa Burkina Faso 90 0 0 45 90
Kyzyl Tashtygskoe Russia 90 0 0 65 90
Cerro Lindo Peru 76 74 86 115 150
Bracemac McLeod Canada 75 0 0 0 75
Kidd Canada 65 86 120 149 151
Sindesar Khurd India 64 0 38 58 64
Talvivaara Finland 60 26 32 85 85
Wolverine Canada 52 1 30 50 53
Velardeña Mexico 50 0 0 0 50
Koktaus Kazakhstan 47 0 10 47 47
Gordonsville USA 47 13 29 50 60
Langlois Canada 46 0 0 23 46
Khandiza Uzbekistan 45 0 30 45 45
Halfmile Lake Canada 45 0 0 20 45
Mount Isa Pb/Zn Australia 45 355 354 375 400

it’s the $116mn Black Star Deep and $38mn Handlebar Hill projects were both commissioned in Q4. Both are on time and on
budget and will add 120Ktpy and 40Ktpy, respectively, to Mt Isa’s mine supply.
15 March 2012 40
PRECIOUS METALS
15 March 2012 41
GOLD
Gold prices continued to extend their gains into February Figure 1: ETP flows remain positive for a second consecutive
within touching distance of the $1800/oz mark, only to month
suffer a steep price correction at the end of the month. Gold ETPs (tonnes) Holdings Monthly change
Prices have continued to trend lower thus far in March and SPDR 1293.7 22.6
are now in search of a floor. Investor interest has been in the ZKB 223.4 -1.6
driver's seat for gold so far this year, with speculative ETFS - UK 139.5 -1.3
positioning on Comex reaching its highest level since GBS - UK 118.9 -0.3
September, while gold ETP holdings have scaled successive iShares 181.5 5.4
highs this year; in turn, gold prices have been able to sideline Julius Baer 109.1 1.5
the more muted physical market. Thus, Fed Chairman Other 374.3 13.6
Bernanke's failure to signal further asset purchases, Total 2440.5 40.0
combined with the dollar strengthening, triggered profit-
Source: Various ETP Issuer websites, Barclays Capital
taking. Prices now need to be reminded of where the
physical market cushion comes into play and also whether
Figure 2: Imports from Hong Kong to China slow in January
the longer-term sticky investment stays put.
Physical demand has become increasingly sensitive to price 50 SGE Trading Volume (tonnes) 120
Gold imports to China from Hong Kong (tonnes)
levels, with only the sharper price corrections triggering a
significant demand response. The latest Census and 100
40
Statistics Department of Hong Kong reported that although
80
gold imports into China from Hong Kong were up y/y (more 30
than four-fold), they were down 15% m/m but remained
60
elevated at 32.9 tonnes in January. Volume traded on the
20
Shanghai Gold Exchange was also lower m/m and y/y, but 40
does cover the Lunar New Year holiday which fell in January
10
this year compared with February last year. 20
Gold still faces near-term hurdles such as bouts of dollar 0 0

strength, broad risk reduction and profit-taking. However, Jan-10 Jul-10 Jan-11 Jul-11 Jan-12
we believe that the broader macro backdrop remains
favourable for gold, given the negative interest rate
Source: Reuters, EcoWin, Barclays Capital
environment, longer-term inflationary concerns and
lingering sovereign debt uncertainties.

(tonnes) 2006 2007 2008 2009 2010 2011E 2012F
Mine production 2,441 2,437 2,388 2,532 2,649 2,724 2,808
% change Y/Y -0.4% -0.2% -2.0% 6.0% 4.6% 2.8% 3.1%
Gold scrap 1,133 982 1,316 1,695 1,645 1,595 1,615
Official Sector net sales 288 431 232 41 6 - -
Total physical supply 3,862 3,849 3,936 4,268 4,300 4,319 4,423
% change Y/Y -0.4% -0.3% 2.2% 8.4% 0.7% 0.4% 2.4%
Jewellery 2,300 2,424 2,304 1,814 2,017 1,938 1,893
% change Y/Y -15.4% 5.4% -4.9% -21.3% 11.2% -3.9% -2.3%
Official Sector net purchases - - - - - 450 350
Other demand 658 680 715 695 751 764 779
Total fabrication demand 2,958 3,104 3,019 2,509 2,767 3,152 3,022
Implied physical balance 904 746 917 1,759 1,532 1,167 1,402
ETP flows 257 252 321 613 331 175 250
Net producer hedging -434 -444 -341 -246 -100 -15 -5
Implied surplus/ (deficit) 212 49 254 900 1,102 978 1,147
Gold price (US$/oz) 604 697 871 973 1,227 1,572 1,875
Source: CRU, VM Group, Barclays Capital
15 March 2012 42
Gold – Correlation
Figure 4: Gold and EUR/USD Figure 5: Gold and the trade-weighted dollar
1.60 EUR/USD (LHS) 2,000 2,000 Gold price (US$/oz, LHS) 90

Gold (US$/oz, RHS) TWI$ (inverted, RHS)
1,800 1,800 95
1.50
1,600 1,600
100
1.40 1,400 1,400
105
1.30 1,200 1,200
1,000 110
1,000
1.20
800 800 115
1.10 600
600 120
Mar-08 Dec-08 Oct-09 Aug-10 May-11 Mar-12
Mar-08 Dec-08 Oct-09 Aug-10 May-11 Mar-12
Source: EcoWin, Barclays Capital Source: EcoWin, Barclays Capital
Figure 6: Gold and inflation expectations Figure 7: Gold and US CPI
3.5 Implied Inflation Expectations (%, LHS) 2,000 6 US CPI (% y/y,LHS) 1,900
Gold Price (US$/ oz, RHS) 5 Gold spot prices (US$/oz, RHS)
3.0 1,800 1,650
4
2.5
1,600
3 1,400
2.0
1,400 2
1.5 1,150
1,200 1
1.0
0 900
1,000
0.5 -1
800 650
0.0 -2
-0.5 600 -3 400

Jan-08 Nov-08 Sep-09 Jul-10 May-11 Mar-12 Jan-06 Jan-08 Jan-10 Jan-12
Note: Implied inflation expectations refer to the difference between yields on 10y Source: EcoWin, Barclays Capital
US government bonds and 10y inflation-indexed bonds.
Source: EcoWin, Barclays Capital
Figure 8: Gold-silver ratio Figure 9: Gold-oil ratio
100 Gold-Silver Ratio 35 Gold-Oil Ratio
Average over the period 30 Average over the period

85
25
70 20
55 15
10
40
5
25 0
85 87 89 91 94 96 98 00 02 04 06 08 11 85 87 89 91 94 96 98 00 02 04 06 08 11
Source: EcoWin, Barclays Capital Source: EcoWin, Barclays Capital
15 March 2012 43
Gold – Physical and financial demand

Figure 10: Global jewellery demand (tonnes) Figure 11: Chinese spot demand
2,750 World jewellery fabrication demand 16 SGE Trading Volume (kg, LHS) 425
SGE Gold Price (CNY/g, RHS)
14
2,500 400
12
2,250 375
10
2,000 8 350
6
1,750 325
4
1,500 300
2
1,250 0 275
2005 2006 2007 2008 2009 2010 2011E 2012F Mar-11 May-11 Aug-11 Oct-11 Dec-11 Mar-12
Source: CRU, Barclays Capital Source: EcoWin, Barclays Capital
Figure 12: Net official sector activity (tonnes) Figure 13: Quarterly movements in global hedge book
120 Net official sector activity -200 Net Change in Global Hedgebook 1525
(tonnes, inverted, LHS)
100 Sales Purchases -175 Gold Price (Quarter average,
1375
-150 $/oz,RHS)
80
-125 1225
60
-100
40 1075
-75
20
-50 925
0 -25
775
20 0
40 25 625
Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Q207 Q208 Q209 Q2 10 Q2 11
Note: Includes Turkey’s new reserve policy management activity. Source: VM Group, Barclays Capital
Source: IMF Statistics, WGC, Barclays Capital
Figure 14: Monthly change in physically backed gold ETPs Figure 15: Total investment holdings across ETPs and futures
225 Monthly flows in gold ETPs (tonnes) 3,500 CFTC net long speculative positions (tonnes) 2,000
Major ETPs (tonnes)
175 3,000 Gold price ($/oz, RHS) 1,800
2,500
125 1,600
2,000
75 1,400
1,500
25 1,200
1,000
-25 500 1,000
-75 0 800
Feb-10 Aug-10 Feb-11 Aug-11 Feb-12 Feb-10 Aug-10 Feb-11 Aug-11 Feb-12
Source: Various ETP Issuer websites, Barclays Capital Source: EcoWin, CFTC, Various ETP issuer websites, Bloomberg, Barclays Capital
15 March 2012 44
Gold – Physical supply

000s oz Grasberg Yanacocha Goldstrike Lagunas Norte Kupol Lihir Kalgoorlie Total
2006 1,911 2,571 1,865 1,084 - 650 676 8,757
2007 2,425 1,531 1,629 1,085 - 701 608 7,978
y/y change 26.9% -40.5% -12.7% 0.1% - 7.7% -10.1% -8.9%
2008 1,283 1,809 1,706 1,175 627 771 604 7,975
y/y change -47.1% 18.2% 4.7% 8.3% - 10.1% -0.7% 0.0%
2009 2,833 2,056 1,355 1,007 926 853 688 9,719
y/y change 120.8% 13.7% -20.6% -14.3% 47.7% 10.6% 13.9% 21.9%
2010 1,970 1,784 1,241 807 739 711 788 8,040
y/y change -30.5% -13.3% -8.4% -19.9% -20.2% -16.6% 14.5% -17.3%
Q1 11 487 288 286 192 206 179 200 1837
Q2 11 359 341 299 176 245 183 206 1808
Q3 11 394 317 257 219 167 135 192 1681
Q4 11 164 652 245 176 185 157 198 1777
2011 1,403 1,599 1,087 763 802 653 796 7,103
y/y change -28.8% -10.4% -12.4% -5.5% 8.6% -8.2% 1.0% -11.7%
Note: Total reported mine production refers to approximately 10% of global production. Data refer to total mine output for the calendar year, and, if required, equity
production is grossed up. Total numbers and y/y change exclude Kupol. Source: Company reports, Barclays Capital

Australia & New
000s oz South Africa US Peru Indonesia Ghana Total
Zealand
2006 7,370 7,600 6,434 4,569 2,464 1,792 30,228
2007 7,048 7,120 6,182 3,541 2,885 1,843 28,620
y/y change -4.4% -6.3% -3.9% -22.5% 17.1% 2.8% -5.3%
2008 5,600 6,880 5,561 3,880 1,513 2,030 25,464
y/y change -20.5% -3.4% -10.1% 9.6% -47.6% 10.1% -11.0%
2009 4,972 6,278 5,719 4,116 3,295 2,004 26,385
y/y change -11.2% -8.8% 2.8% 6.1% 117.8% -1.3% 3.6%
2010 4,906 7,006 6,486 3,677 2,837 2,137 27,048
y/y change -1.3% 11.6% 13.4% -10.7% -13.9% 6.7% 2.5%
Q1 11 1103 1831 1741 751 573 664 6665
Q2 11 1178 1892 1818 770 408 614 6680
Q3 11 1125 1833 1671 768 518 610 6525
Q4 11 1150 1802 1682 1053 227 537 6451
2011 4,557 7,359 6,911 3,341 1,726 2,426 26,321
y/y change -7.1% 5.0% 6.6% -9.1% -39.2% 13.5% -2.7%
Note: Total reported mine production refers to approximately 32% of global production. Source: Company reports, Barclays Capital
Figure 18: Major gold expansions and contractions, 2011-12 Figure 19: Lihir quarterly production data
(tonnes)
Mine Country 2011 y/y 2012 y/y 250 Lihir quarterly production (000oz)
Bisha Eritrea 12 2
Malartic Canada 10 9
Cortez/Pipeline USA 10 -6 200
Essakane Burkina Faso 9 -2
Esperanza Chile 9 1
150
Grasberg Indonesia -21 -6
Batu Hijau Indonesia -14 5
Sunrise Dam Australia -4 2 100
Veladero Argentina -5 2
Buffelsfontein South Africa -3 0
Barcap estimated global mine production 2,724 2,808 50
0
Q4 09 Q2 10 Q4 10 Q2 11 Q4 11
Source: CRU, Barclays Capital Source: Company reports, Barclays Capital
15 March 2012 45
SILVER
Silver initially consolidated its gains in February before Figure 1: Silver inflows gain traction in February
breaking higher to peep above the $36/oz level but then came
Silver ETPs (tonnes) Holdings Monthly change
under immense pressure alongside the rest of the complex.
Cleaner market positioning at the start of the year allowed the iShares 9739.7 130.8
metal to find its floor supported by physical demand before ZKB 2525.5 -26.1
investment demand was introduced to push prices higher. ETFS - UK 881.1 -9.2
Investment demand across most forms has picked up. ETFS - US 574.1 -15.6
Speculative positioning as a percentage of open interest rose Julius Baer 491.5 6.1
to 26%, its highest since April last year, while net fund length
ETFS -Australia 70.4 1.0
in Comex silver also rose to its highest since the same period.
Physical ETP flows surged to 125 tonnes, quadrupling flows Other 529.6 37.8
from the previous month across open-ended funds, and the Total 14811.9 124.9
Source: Various ETP Issuer websites, Barclays Capital
highest monthly net inflow since September 2011. US coin
sales fell to less than 50 tonnes following the strong start in
January (190 tonnes), while the volume traded on the Figure 2: Volume traded on the Shanghai Gold Exchange
Shanghai Gold Exchange recovered from the lower volumes in recovers in February but remains below the highs
January – which covered the Lunar New Year. The volume
25 Silver volume traded on SGE (kg)
traded over the two months combined was up 1% y/y;
mn
however it remains well below the peak set last year on the
run-up to 31-year highs. 20
China’s silver imports fell by 47% y/y to 191.7 tonnes in 15

January, the lowest in three years, while exports fell by 39%
y/y to 53.8 tonnes, its lowest since the start of our database in
10
January 2005. On a product basis, with the exception of
unwrought silver, imports were down y/y in powder, semi
5
manufactured and jewellery form with the steepest decline in
semi-manufactured products at 58% lower y/y. We continue
to expect the silver market to be over supplied this year, thus, -
dependent upon investment demand to plug the gap and for Feb-10 Aug-10 Feb-11 Aug-11 Feb-12
prices to remain volatile.


tonnes 2006 2007 2008 2009 2010 2011E 2012F
Mine production 20,827 21,882 22,284 23,228 24,094 24,441 25,447
Net Official Sector Sales 2,296 1,474 800 425 1,300 750 500
Scrap Recovery 6,475 6,250 6,075 5,875 6,700 6,764 6,396
Total Physical Supply 29,598 29,606 29,159 29,528 32,094 31,954 32,344
% change 2.1% 0.0% -1.5% 1.3% 8.7% -0.4% 1.2%
Industrial demand 13,500 14,700 14,740 12,020 14,580 15,033 15,400
Photography 4,450 3,700 3,260 2,660 2,580 2,441 2,321
Jewellery & Silverware 6,980 6,830 6,600 6,670 6,710 6,772 6,736
Official Coins 1,200 1,310 2,100 2,520 3,180 3,672 3,788
Total Fabrication 26,130 26,540 26,700 23,870 27,050 27,917 28,245
% change 0.3% 1.6% 0.6% -10.6% 13.3% 3.2% 1.2%
Implied Physical Balance 3,468 3,066 2,459 5,658 5,044 4,037 4,099
ETP flows 3,768 2,146 2,339 4,112 3,084 -786 750
Net Hedging -200 -500 -250 -500 1,250 750 0
Implied Surplus/Deficit -500 420 -130 1,046 3,210 5,573 3,349
Silver Price (US$/oz) 11.55 13.37 14.95 14.60 20.20 35.20 32.50
Source: CRU, GFMS, Barclays Capital
15 March 2012 46
Silver – Fundamentals

tonnes Cannington Antamina Uchucchacua Escondida Mount Isa* Peñasquito Total
2006 863 288 302 176 195 - 1,824
2007 1,167 313 307 211 235 - 2,233
y/y change 35.2% 8.6% 1.6% 20.4% 20.1% - 22.4%
2008 1,077 336 356 164 318 - 2,249
y/y change -7.8% 7.5% 15.9% -22.7% 35.4% - 0.7%
2009 1,052 428 329 146 243 - 2,197
y/y change -2.3% 27.4% -7.5% -10.7% -23.6% - -2.3%
2010 1,202 399 290 170 211 433 2,705
y/y change 14.3% -6.8% -11.9% 16.3% -13.1% - 23.1%
Q1 11 228 75 78 36 - 118 581
Q2 11 257 71 64 31 92 129 598
Q3 11 235 90 87 22 - 118 608
Q4 11 282 100 87 30 112 171 726
2011 1,002 336 316 119 204 536 2,513
y/y change -16.6% -15.8% 9.2% -29.8% -3.4% 23.6% -7.1%
Note: Data for Mount Isa are available only on a half-yearly basis. Data refer to total mine output for the calendar year. Total refers to approximately 10% of global
production. Source: Company reports
Figure 5: Major silver production expansions and Figure 6: Mexican silver production
contractions, 2011-12 (tonnes)
Mine Country 2011 y/y 2012 y/y 400 Mexican silver production (tonnes)
Penasquito Mexico 200 166
350
Mt Isa et al Australia 30 77
Wolverine Canada 145 75 300
Antamina Peru -152 62
250
Sindesar Khurd India 65 55
Martabe Indonesia 5 40 200
Cannington Australia -295 -110
150
Fresnillo Mexico -180 -47
Bathurst Canada -4 -44 100
Palmarejo Mexico 84 -31 50
La Encantada Mexico 24 -25
LaRonde Canada 21 -22 0
BarCap estimated global mine production 24,441 25,447 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11
Source: CRU, Barclays Capital Source: EcoWin, Barclays Capital
Figure 7: Monthly change in physically backed silver ETPs Figure 8: Total investment holdings across ETPs and futures
CFTC net long speculative positions (tonnes)
1,000 Monthly flows to silver ETPs (tonnes) 24,000 45
ETPs (tonnes)
Silver price ($/oz, RHS) 40
500
18,000
35
0 30
12,000
25
-500
20
6,000
-1,000
15
-1,500 0 10
Oct-10 Feb-11 Jun-11 Oct-11 Feb-12 Feb-10 Aug-10 Feb-11 Aug-11 Feb-12
Source: iShares, ETF Securities, ZKB, JB, Bloomberg, Barclays Capital Source: EcoWin, CFTC, iShares, ETF Securities, ZKB, JB, Bloomberg, Barclays Capital
15 March 2012 47
PLATINUM
Platinum prices have breached the $1700/oz mark this Figure 1: Platinum ETP flows remain positive in February
year, but alongside the rest of the complex come under Platinum ETPs (koz) Holdings Monthly change
pressure particularly after concerns over China’s growth
ETFS - UK 401.0 19.9
materialised following the Government Work Programme,
which is targeting 7.5% growth in GDP for 2012. ETFS - US 508.5 49.2
ZKB 365.3 -1.7
Platinum prices have been driven higher by potential
Julius Baer 109.7 1.1
supply disruptions but also owing to greater-than
ETFS -Australia 7.4 0.0
expected actual supply disruptions at the second-largest
producer, Impala Platinum. The company said the strike Other 219.6 3.5
action at its Rustenburg mine has cost 120koz of lost Total 1611.5 71.9
platinum output. Although the strike action was declared Source: Various ETP Issuer websites, Barclays Capital
illegal early on, output has been affected since 20 January
and Impala has warned that its April deliveries could be Figure 2: Impala Platinum has said it has lost 120koz due to
industrial action
down by 50%, given its refinery holds enough supplies to
process PGMs for four months. The company is now
600 Impala Platinum (koz)
looking to restart its operations but has not been able to
provide firm guidance as to when normal production 500
levels would resume. Production losses alone have not
boosted prices, in contrast to Q4 11, when safety related 400
stoppages increased, investment demand has turned
positive and the combination of the two has tightened the 300
balance in the short term. Physically backed ETPs have
200
risen by 120koz thus far in 2012 to a fresh record high,
while Nymex non-commercial positions have risen to their
100
highest in a year. However, we still expect the market to
remain in net surplus for the full year. Given that Impala is 0
now looking to restart its operations, the elevated investor Q4 08 Q4 09 Q4 10 Q4 11
interest in platinum exposes prices to further profit-taking
in the near term. Source: Company reports, Barclays Capital

('000 oz) 2007 2008 2009 2010 2011E 2012F
South Africa 5,070 4,515 4,635 4,635 4,775 4,472
Russia 915 805 785 825 825 820
North America 325 325 260 200 360 395
Others 290 295 345 390 435 453
Primary Supply 6,600 5,940 6,025 6,050 6,395 6,140
% change Y/Y -3.4% -10.0% 1.4% 0.4% 5.7% -4.0%
Scrap Supply 1,590 1,830 1,405 1,830 1,880 1,885
% change Y/Y 12.4% 15.1% -23.2% 30.2% 2.7% 0.3%
Total Supply 8,190 7,770 7,430 7,880 8,275 8,025
% change Y/Y -0.7% -5.1% -4.4% 6.1% 5.0% -3.0%
Autocatalyst: gross 4,145 3,655 2,185 3,075 3,160 3,253
Jewellery 2,110 2,060 2,810 2,420 2,465 2,465
Industrial 1,845 1,720 1,140 1,755 1,960 2,035
Investment flows 170 555 660 655 327 235
Total Demand 8,270 7,990 6,795 7,905 7,912 7,988
% change Y/Y 4.8% -3.4% -15.0% 16.3% 0.1% 1.0%
Movement in stocks -80 -220 635 -25 364 37
Platinum Price (US$/oz) 1,304 1,569 1,205 1,610 1,716 1,705
Note: Investment flows include exchange-traded product flows. Scrap includes auto, jewellery and electrical. Source: Johnson Matthey, Barclays Capital
15 March 2012 48
Platinum – Fundamentals

000s oz Impala Platinum Marikana Rustenburg Amandelbult Union Total
2006 1,079 865 942 648 327 3,861
2007 1,086 746 732 574 310 3,447
2008 984 646 700 461 309 3,100
2009 867 611 730 444 292 2,944
y/y change -11.8% -5.3% 4.2% -3.8% -5.5% -5.0%
2010 940 688 557 448 292 2,924
y/y change 8.3% 12.6% -23.7% 0.9% 0.0% -0.7%
H111 441 327 250 207 132 1356
H211 490 370 311 239 141 1551
2011 930 697 561 446 273 2,907
y/y change -1.0% 1.2% 0.8% -0.3% -6.5% -0.6%
Note: Data refer to total mine output for the calendar year. AngloPlat has revised its reporting of refined mine supply from Q2 09 and no longer includes third-party
purchases within individual mines. Rustenburg includes purchases. Total refers to approximately 53% of global production. Source: Company reports, Barclays Capital
Figure 5: South African PGM production Figure 6: Chinese spot interest in platinum
60% South Africa mine supply (y/y change) 600 SGE Platinum Trading Volume (kg) 450
Platinum Price (CNY,RHS)
500
40%
400
400
20%
300 350
0%
200
300
-20%
100
-40% 0 250
Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12
Source: Statistics South Africa, Barclays Capital Source: EcoWin, Barclays Capital
Figure 7: Monthly change in physically backed platinum ETPs Figure 8: Total investment holdings across ETPs and futures
150 Flows into physical platinum ETPs (koz) 3,000 CFTC net long speculative positions ('000 oz) 2000
ETPs ('000 oz)
2,500 Platinum price ($/oz, RHS)
100
1800
2,000
50
1,500 1600
0
1,000
1400
-50
500
-100 0 1200
Feb-10 Aug-10 Feb-11 Aug-11 Feb-12 Feb-10 Aug-10 Feb-11 Aug-11 Feb-12
Source: ZKB, ETF Securities, JB, Bloomberg, Barclays Capital Source: CFTC, ZKB, ETF Securities, JB, EcoWin, Bloomberg, Barclays Capital
15 March 2012 49
PALLADIUM
Palladium suffered a steeper correction compared with the Figure 1: Palladium ETPs increase for a second month after a
rest of the complex following concerns arising over China’s weak 2011
growth but did rebound back above the $700/oz mark.
Palladium ETPs (koz) Holdings Monthly change
Underlying market trends have been supportive for ETFS - UK 495.0 35.8
palladium with our auto analysts raising their 2012 SAAR ETFS - US 735.7 88.5
forecast for the US to 14.4mn as the February data were
ZKB 384.0 -3.3
strong without artificial inflation via fleet, Japanese rebound
or pricing. In China, the China Association of Automobile Julius Baer 124.0 0.8
Manufacturers (CAAM) reported that passenger car sales ETFS -Australia 4.3 0.0
volume grew 27% y/y in February (down 24% in January), Other 223.9 25.2
due partly to the Lunar New Year falling in January this year, Total 1966.9 147.1
and sales over the two months combined were down about Source: Various ETP Issuer websites, Barclays Capital
4% y/y. Our auto analysts believe overall market
momentum has remained slow since H2 11 but that Figure 2: China auto sales are down YTD but US auto sales
have picked up
demand for premium autos remains strong. According to
the official data, palladium imports were up 13.6% y/y in 3,500 China auto sales US auto sales
January, while our unrevised data show palladium imports
were also softer, albeit by a smaller margin, 13% lower y/y, 3,000
compared with the rest of the sector. Palladium imports
2,500
came in at 76.6koz, softer m/m and below 100koz.
2,000
The latest Swiss trade data revealed that palladium imports
were down by more than half; it bodes well for the 1,500
palladium balance that shipments from Russia have
1,000
remained subdued, particularly following comments from
the official at Gokhran. Further, palladium ETP holdings 500
have risen 220koz YTD, to 1.987Moz, their highest since
October. Indeed, ETP outflows had proved to be a drag on -
palladium prices last year. Feb-08 Feb-09 Feb-10 Feb-11 Feb-12

('000 oz) 2007 2008 2009 2010 2011E 2012F
South Africa 2,765 2,430 2,370 2,640 2,610 2,460
Russia 3,050 2,700 2,675 2,720 2,700 2,714
Russia stock sales 1,490 960 960 1,000 750 300
North America 990 910 755 590 945 1,000
Others 285 310 340 405 415 431
Primary Supply 8,580 7,310 7,100 7,355 7,420 6,905
% change Y/Y 7.9% -14.8% -2.9% 3.6% 0.9% -6.9%
Scrap Supply 1,565 1,615 1,430 1,850 2,195 2,430
% change Y/Y 27.2% 3.2% -11.5% 29.4% 18.6% 10.7%
Total Supply 10,145 8,925 8,530 9,205 9,615 9,335
% change Y/Y 10.5% -12.0% -4.4% 7.9% 4.5% -2.9%
Autocatalyst 4,545 4,465 4,050 5,580 5,915 6,242
Industrial 2,640 2,420 2,400 2,465 2,645 2,707
Jewellery 950 985 775 595 545 475
Investment 260 420 625 1,095 -502 125
Total Demand by End Use 8,395 8,290 7,850 9,735 8,604 9,549
% change Y/Y 7.0% -1.3% -5.3% 24.0% -11.6% 11.0%
Movement in stocks 1,750 635 680 -530 1,012 -215
Palladium price (US$/oz) 354 348 262 526 729 795
Note: Investment includes ETPs. Scrap includes autocatalyst, jewellery and electrical. Source: Johnson Matthey, Barclays Capital
15 March 2012 50
Palladium – Fundamentals
000s oz Norilsk Impala Platinum Rustenberg Marikana Amandelbult Total
2006 3164 469 466 383 298 4780
2007 3113 485 386 338 280 4601
2008 2821 379 352 298 217 4066
2009 2677 416 289 284 201 3867
y/y change -5.1% 9.8% -17.8% -4.5% -7.5% -4.9%
2010 2721 495 288 314 213 4030
y/y change 1.6% 19.1% -0.3% 10.3% 5.8% 4.2%
H111 1363 279 124 152 94 2012
H211 1341 251 154 171 109 2025
2011 2704 530 278 323 202 4037
y/y change -0.6% 7.1% -3.5% 2.9% -4.8% 0.2%
Note: Data refer to total mine output for the calendar year. AngloPlat has revised its reporting of refined mine supply from Q2 09 and no longer includes third-party
purchases within individual mine data. Total refers to approximately 54% of global production. Source: Company reports, Barclays Capital
Figure 5: Palladium demand by end use (‘000oz) Figure 6: Platinum-palladium ratio
10,000 Autocatalyst : gross Electrical: gross 6 Pt/Pd ratio

Dental Chemical Average over period
8,000 Jewellery: gross Other 5
4
6,000
3
4,000
2
2,000
1
0
0
1988 1992 1996 2000 2004 2008 2012F
Mar-97 Dec-00 Sep-04 Jun-08 Mar-12
Source: Johnson Matthey, Barclays Capital Source: EcoWin, Barclays Capital
Figure 7: Monthly change in physically backed palladium ETPs Figure 8: Total investment holdings across ETPs and futures
300 Flows into physical palladium ETPs (koz) 5,000 CFTC net long speculative positions ('000 oz) 900
ETPs ('000 oz)
Palladium price ($/oz, RHS)
200 4,000 800
100 3,000 700
0 2,000 600
-100 1,000 500
-200
0 400
Source: ZKB, ETF Securities, JB, Bloomberg, Barclays Capital Source: CFTC, ZKB, ETF Securities, JB, EcoWin, Bloomberg, Barclays Capital
15 March 2012 51
This page is intentionally left blank
15 March 2012 52
DATA
15 March 2012 53
CHINESE PHYSICAL MARKET
Physical buying of base metals in China has been slow to Figure 1: Manufacturer utilisation rates are rising
recover after the Chinese new year. With end users uncertain
90% Average operating rates of Chinese copper pipe and tube
about future demand levels, they are opting to keep
manufacturers
purchases on a hand-to-mouth basis and we have seen little
85% March-12
evidence of any restocking at this point in the supply pipeline.
Indeed, according to SMM data inventories at some 80%
product manufacturers, such as copper pipe and tube,

75% March-11
have continued to be drawn down. However, there has
been restocking further up the supply chain at merchants 70%
and in bonded warehouses. Nevertheless, we understand
that fabricators have been raising utilisation rates and are 65%
March-10
increasing production and we would expect this to
continue throughout the seasonally stronger Q2 period for 60%
end-use manufacturing activity. Mar-10 Aug-10 Dec-10 May-11 Oct-11 Mar-12
In the aluminium market, smelters ramped up production
in February, which together with soft semis demand has Figure 2: Inverse relationship between copper scrap and
further exacerbated the domestic surplus, leading to more refined imports
builds in Inventories. Regional inventories, including SHFE, 25,000 Daily rate of Chinese copper imports
now stand at more than 800Kt taking inventories back to (tonnes)
early 2011 highs. We expect some of this to be absorbed in
20,000 Scrap (gross weight)
Q2 as semis output is ramped up.
Refined
Production data from the National Bureau of Statistics 15,000
showed that refined lead production was weaker y/y in
January/February 2012 and this has continued to keep the 10,000
domestic market slightly tight leading to small draws in
inventories. Indeed, we understand that as battery
5,000
manufacturing plants ramp up following environmental-
related closures last year, lead demand from the sector is
-
likely to improve.
Feb-00 Feb-02 Feb-04 Feb-06 Feb-08 Feb-10 Feb-12
In the case of copper, the perceived wisdom of the market is Source: China Customs, Barclays Capital
that strong imports are due to financing. However, it would
Figure 3: Aluminium stocks building rapidly
appear to us that the financial incentive for financing has
diminished since credit conditions in China have been 1000 Regional aluminium inventories
easing, although they remain somewhat tight, and that the (including SHFE, Kt)
reinvestment opportunities in property are not as lucrative.
800 Nanhai
Another factor at play may be low consumer inventories.
Huangzhou
SMM data show that copper inventory at wire
600 Wuxi
manufacturers is almost a third lower than usual for the time
of year. Another reason may be weakness in scrap imports. Shanghai
As Figure 3 shows, there is an inverse relationship between 400
refined copper imports and scrap imports, which may have
resulted in a bigger call on refined metal. 200
0
Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12
15 March 2012 54
CHINA TRADE
Kt % c hange % c hange 2012 2011 5 y ear monthly
Jan-12 D ec -11 N ov -11
A luminium Y /Y Y TD monthly av erage monthly av erage av erage
Alum ina im ports 447 30% 201 227 30% 447 157 433
Alum ina production N/ A N/ A 2,621 2,638 N/ A N/ A 2,834 1,801
Prim a ry im ports 47 38% 51 22 38% 47 19 38
Prim a ry exports 16 N/ A 5 22 N/ A 16 7 22
Net tra de -31 -8% -46 0 -8% -31 -12 -15
Prim a ry output N/ A N/ A 1,586 1,549 N/ A N/ A 1,564 1,088
Prim a ry a pp. consum ption N/ A N/ A 1,603 1,482 N/ A N/ A 1,595 1,097
Sem is im ports 38 -28% 44 46 -28% 38 48 53
Sem is exports 200 -9% 210 230 -9% 200 251 143
Net sem is tra de 162 -3% 166 184 -3% 162 203 90
Sem is output N/ A N/ A 1,991 2,128 N/ A N/ A 1,984 1,178
Sem is a pp. consum ption N/ A N/ A 1,825 1,944 N/ A N/ A 1,782 1,088
Copper
C oncentra te im ports (gross w eight) 602 5% 563 673 5% 602 533 433
Conc. im ports (est. m eta l content 28% 168 5% 158 188 5% 168 149 121
Concentra te output N/ A N/ A 123 108 N/ A N/ A 104 75
R efined im ports 335 37% 407 344 37% 335 236 165
R efined exports 0 -100% 0 2 -100% 0 13 10
Net tra de -335 51% -407 -342 51% -335 -223 -156
R efined output N/ A N/ A 453 429 N/ A N/ A 436 316
R efined a pp. consum ption N/ A N/ A 711 669 N/ A N/ A 647 462
Scra p im ports 229 -37% 447 433 -37% 229 391 408
Lead
C oncentra te im ports (gross w eight) 89 -46% 138 136 -46% 89 120 124
Conc. im ports (est. m eta l content 55% 49 -46% 76 75 -46% 49 66 68
R efined im ports 1 17% 0 1 17% 1 1 5
R efined exports 0 -85% 0 0 -85% 0 1 14
Net tra de 0 N/ A 0 -1 N/ A 0 0 10
N ic kel
C oncentra te im ports (gross w eight) 2,771 48% 4,372 6,305 48% 2,771 4,021 1,208
R efined im ports 13 -23% 19 19 -23% 13 18 13
R efined exports 1 -62% 1 3 -62% 1 3 2
Net tra de 12 -19% 18 16 -19% 12 15 10
Tin
R efined Im ports 2 N/ A 3 4 N/ A 2 2 2
R efined E xports N/ A N/ A 0 0 N/ A N/ A 0 1
Net tra de -2 N/ A -3 -4 N/ A -2 -2 -1
Z inc
C oncentra te Im ports (gross w eight) 186 -37% 279 261 -37% 186 245 207
Conc.im ports (est. m eta l content 50% ) 93 -37% 139 130 -37% 93 122 104
R efined Im ports 48 47% 54 26 47% 48 29 27
R efined E xports 1 -78% 0 1 -78% 1 4 12
Net tra de -47 56% -54 -25 56% -47 -25 -15
Prec ious metals
Pla tinum Im ports (000 ounces) 150 -37% 245 165 -37% 150 213 123
Pa lla dium Im ports (000 ounces) 77 -13% 104 64 -13% 77 81 54
Silver Im ports (tonnes) 192 -47% 235 232 -47% 192 293 453
Silver E xports (tonnes) 54 -39% 210 170 -39% 54 107 295
Net Silver exports -138 -49% -25 -62 -49% -138 -186 -158
Note: Net trade (negative value denotes net exports, positive value denotes net imports). Primary aluminium production is adjusted higher using Barclays Capital estimates
to account for smelters not included in the data. Apparent consumption is calculated using this higher production figure. Source: China Customs, CNIA, Barclays Capital
15 March 2012 55
COST INDICATORS
Figure 1: Current costs
One month ago Monthly One year ago Yearly
Energy Current price price change price change
EEX Electricity (Peak load, 1-Pos, EUR/MWh) 49.5 73.3 -32.5% 61.0 -18.9%
Coal (API2 Futures 1-Pos, USD/Tonne) 97.6 98.5 -0.8% 122.9 -20.6%
Diesel (Heating oil, NYMEX, USc/Gallon) 3.2 3.2 2.6% 3.1 5.8%
Natural Gas (Henry Hub, NYMEX, $/mmbtu) 2.3 2.4 -6.7% 3.9 -42.0%
Carbon (ECX CFI Phase 2 Futures 1-Pos, ICE) 7.7 7.5 2.7% 16.0 -52.2%
Transport
Baltic Dry freight index 837.0 734.0 14.0% 1,559 -46.3%
Baltic Panamax freight index 912.0 1,018.0 -10.4% 2,126 -57.1%
Raw materials
Coke (Chinese export price, USD/tonne) 450.0 370.0 21.6% 200 125.0%
Capital costs
Steel Rebar (China, USD/Tonne) 554.0 542.0 2.2% 490 13.1%
FX costs
USD/EUR 0.76 0.76 0.2% 0.71 6.4%
USD/CLP 485.35 478.80 1.4% 481.00 0.9%
USD/CAN 0.99 1.00 -1.0% 0.97 1.9%
USD/AUS 0.95 0.94 1.4% 0.99 -4.0%
USD/ZAR 7.55 7.75 -2.5% 6.82 10.8%
Figure 2: Marginal cost of production – Aluminium Figure 3: Marginal cost of production – Zinc
3,200 Aluminium smelter C1 cash cost curve 3,500 Zinc mine C1 cash cost curve
$/t Copyright Brook Hunt $/t Copyright Brook Hunt
3,000
2,800 Av. Cash price in
Av. Cash price in 2,500
Feb-12, $2,058/t
2,400 Feb-12, $2,204/t 2,000
1,500
2,000
1,000
1,600 2011 500
2010 -
1,200
-500 2011 % of production
% of production
800 2010
-1,000
29% 48% 65% 85% 100% 20% 37% 52% 65% 80% 90% 100%
Source: Brook Hunt, Barclays Capital Source: Brook Hunt, Barclays Capital
Figure 4: Marginal cost of production – Copper Figure 5: Marginal cost of production – Nickel
10,000 $/t Copper mine C1 cash cost curve 58,000 $/t Nickel mine C1 cash cost curve
Copyright Brook Hunt
Copyright Brook Hunt
8,000 42,000
Av. Cash price in
6,000 Av. Cash price in Feb-12 ,
Feb-12, $8,423/t 26,000 $20,465/t
4,000
10,000
2,000
-6,000
-
% of production
2011 -22,000 2011
-2,000 % of production
2010 2010
-4,000 -38,000
22% 36% 62% 76% 86% 93% 97% 34% 59% 75% 87% 99%
15 March 2012 56
BASE METAL STOCKS

Figure 1: Aluminium stocks Figure 2: Aluminium global stock-to-consumption ratio
Stocks (Kt) Global stock to Al Price US $/t (RHS)

Total consumption
10 3,600
Exchange Japan Port Producer stock ratio Global Stock-to-Consumption Ratio (Wks,
Apr 11 5,003 201 1,550 6,754 7.0 9 LHS)
May 11 4,995 219 1,514 6,728 7.2 3,200
Jun 11 5,024 225 1,573 6,823 6.8 8
Jul 11 4,730 229 1,474 6,432 6.6 2,800
Aug 11 4,627 204 1,563 6,394 6.7 7
Sep 11 4,751 241 1,486 6,478 6.7 6 2,400
Oct 11 4,641 231 1,414 6,287 6.6
Nov 11 4,670 236 1,406 6,312 6.8 5
2,000
Dec 11 4,735 222 1,457 6,414 6.9
4
Jan 12 5,187 247 1,499 6,933 7.2
1,600
Feb 12 5,278 278 1,603 7,158 7.7 3
2 1,200
Feb-08 Feb-09 Feb-10 Feb-11 Feb-12
Source: IAI, LME, Comex, Reuters, SHFE Source: IAI, LME, Comex, Reuters, SHFE, EcoWin
Figure 3: Copper stocks Figure 4: Copper global stock-to-consumption ratio
Stocks (Kt) Global stock to 5.0 Cu Price US $/t (RHS) 12,000

Total consumption
Exchange Producer Consumer Merchant stock ratio Global Stock-to-Consumption Ratio (Wks
Apr 11 667 639 64 10 1,380 3.3 LHS) 10,000
4.2
May 11 629 664 67 14 1,374 3.1
Jun 11 617 620 72 17 1,325 3.0
Jul 11 658 594 73 15 1,340 3.3 8,000
Aug 11 650 589 82 11 1,332 3.1 3.4
Sep 11 661 600 77 12 1,350 3.2
Oct 11 606 598 76 10 1,289 3.1 6,000
Nov 11 539 529 73 6 1,148 2.7
Dec 11 542 529 73 6 1,150 2.7 2.6
Jan 12 599 529 73 6 1,207 3.0 4,000
Feb 12 609 529 73 6 1,217 3.3
1.8 2,000
Source: ICSG, LME, SHFE, Comex Source: ICSG, SHFE, LME, EcoWin, Comex
Figure 5: Lead stocks Figure 6: Lead global stock-to-consumption ratio
Stocks (Kt) Global stock to Pb Price US $/t (RHS)

Total consumption 3.2 4,200
Exchange Producer Consumer Merchant stock ratio Global Stock-to-Consumption Ratio (Wks,
Apr 11 343 141 103 0.7 588 2.9 LHS)
May 11 359 147 105 0.7 612 3.1 2.8
Jun 11 365 151 104 0.7 621 2.9 3,200
Jul 11 369 151 104 0.7 626 3.0
Aug 11 383 145 102 0.7 630 2.9 2.4
Sep 11 439 143 96 0.7 678 3.1 2,200
Oct 11 431 145 99 0.7 676 3.1
2.0
Nov 11 410 142 98 0.7 651 3.0
Dec 11 382 141 98 0.7 623 2.7 1,200
Jan 12 396 141 98 0.7 636 3.0 1.6
Feb 12 407 141 98 0.7 647 3.2
1.2 200
Source: ILZSG, LME, SHFE Source: ILZSG, LME, EcoWin
15 March 2012 57
Figure 7: Nickel stocks Figure 8: Nickel global stock-to-consumption ratio
Global stock to
Stocks (Kt) Ni Price US $/t (RHS)
Total consumption
Exchange Producer Consumer stock ratio 12 70,000
Global Stock-to-Consumption Ratio (Wks,
Apr 11 117 93 25 235 7.2
11 LHS)
May 11 115 92 25 231 7.4 60,000
Jun 11 106 91 25 222 6.8 10
50,000
Jul 11 103 93 23 219 6.7 9
Aug 11 105 91 23 218 6.7 40,000
8
Sep 11 97 92 23 212 6.2
Oct 11 87 93 23 202 6.3 7 30,000
Nov 11 91 98 23 211 6.5 6
20,000
Dec 11 91 98 23 211 6.5
5
Jan 12 96 98 23 216 6.2 10,000
Feb 12 99 98 23 219 6.5 4
3 0
Source: INSG, CRU, LME Source: INSG, CRU, LME, EcoWin
Figure 9: Tin stocks Figure 10: Tin global stock-to-consumption ratio
Global stock to Sn Price US $/t (RHS)

Stocks (Kt)
Total consumption
Exchange Producer Consumer stock ratio
10 Global Stock-to-Consumption Ratio 35,000
Apr 11 21 9 11 40 5.8 (Wks, LHS)
9 30,000
May 11 22 9 11 41 5.9
Jun 11 22 9 11 42 6.0 8
Jul 11 21 7 10 38 5.4 25,000
Aug 11 23 7 10 40 5.7 7
Sep 11 21 7 10 38 5.5 20,000
Oct 11 16 6 10 32 4.6 6
Nov 11 12 6 10 28 4.0 15,000
Dec 11 12 6 10 28 4.0 5
Jan 12 9 6 10 25 3.5 10,000
4
Feb 12 11 6 9 26 3.6
3 5,000
Source: CRU, LME Source: CRU, LME, EcoWin
Figure 11: Zinc stocks Figure 12: Zinc global stock-to-consumption ratio
Global stock to
Stocks (Kt) 8 Zn Price US $/t (RHS) 5,000
Total consumption
Exchange Producer Consumer Merchant stock ratio Global Stock-to-Consumption Ratio
Apr 11 1216 304 141 20 1681 6.6 7
(Wks, LHS) 4,000
May 11 1254 318 152 23 1748 6.8
Jun 11 1262 329 163 27 1781 6.6 6
Jul 11 1290 333 185 31 1839 7.3 3,000
Aug 11 1271 354 196 33 1854 7.2
5
Sep 11 1220 354 201 34 1809 6.7
Oct 11 1148 360 204 35 1747 6.0 2,000
Nov 11 1110 366 204 34 1715 6.3 4
Dec 11 1184 379 204 34 1802 6.4
Jan 12 1216 379 204 34 1833 7.2 1,000
3
Feb 12 1251 379 204 34 1868 7.5
2 0
Source: ILZG, LME, SHFE Source: ILZG, LME, SHFE, EcoWin
15 March 2012 58
PRICES
Figure 1: LME, SHFE and TOCOM metal prices

Commodity Units 13 March 12 14 February 12 14 December 11 14 March 11
Close Close % chge Close % chge Close % chge
Base Metals: LME 3M Prices
Aluminium $/t 2,229 2,215 0.6% 1,962 13.6% 2,558 -12.9%
Copper $/t 8,445 8,415 0.4% 7,210 17.1% 9,190 -8.1%
Lead $/t 2,138 2,075 3.1% 1,998 7.0% 2,519 -15.1%
Nickel $/t 19,260 20,155 -4.4% 17,400 10.7% 25,825 -25.4%
Tin $/t 23,475 24,350 -3.6% 18,525 26.7% 29,900 -21.5%
Zinc $/t 2,091 2,033 2.9% 1,845 13.3% 2,330 -10.3%
Base Metals: SHFE Prices
SHFE Aluminium RMB/t 15,950 15,930 0.1% 16,020 -0.4% 16,435 -3.0%
SHFE/LME Aluminium spread $/t 292 314 -6.9% 553 -47.1% -56 -618.0%
SHFE Copper RMB/t 59,720 59,310 0.7% 56,370 5.9% 68,710 -13.1%
SHFE/LME Copper spread $/t 995 1,000 -0.5% 1,638 -39.3% 1,268 -21.6%
SHFE Zinc RMB/t 15,530 15,620 -0.6% 15,055 3.2% 17,600 -11.8%
SHFE/LME Zinc spread $/t 364 447 -18.6% 518 -29.8% 349 4.2%
Precious Metals: Spot Prices
Gold $/oz 1,700 1,720 -1.1% 1,574 8.0% 1,427 19.2%
Silver $/oz 34 34 0.1% 29 16.2% 36 -6.4%
Platinum $/oz 1,688 1,625 3.9% 1,420 18.9% 1,755 -3.8%
Palladium $/oz 696 684 1.8% 616 13.0% 740 -6.0%
Precious Metals: TOCOM Prices
TOCOM Gold yen/g 4,523 4,314 4.8% 4,117 9.9% 3,771 19.9%
TOCOM Silver yen/10g 89 84 6.9% 77 16.3% 92 -3.1%
TOCOM Platinum yen/g 4,454 4,127 7.9% 3,730 19.4% 4,638 -4.0%
TOCOM Palladium yen/g 1,868 1,746 7.0% 1,616 15.6% 1,984 -5.8%
SHFE Gold RMB/g 348 351 -0.8% 341 2.1% 302 15.1%
Source: Ecowin, Barclays Capital
Figure 2: Copper and aluminium have started 2012 Figure 3: … as have the other metals, with tin the strongest
strongly… performer across the complex
$/t Metals prices indexed to 100 in March 2011 $/t Metals prices indexed to 100 in March 2011
120 125
110 Nickel Lead

Zinc Tin
100 100
90
80 75
Aluminium
70 Copper
60 50
Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12
Source: Barclays Capital Source: Barclays Capital
15 March 2012 59
LME cash prices (up to and including 13 March 2012)

Figure 4: Aluminium Figure 5: Copper
$/t $/t
2,800 11,000
2,600 10,000
2,400 9,000
2,200 8,000
2,000 7,000
1,800 6,000
Figure 6: Lead Figure 7: Nickel
$/t $/t
3,000 30,000
2,800
27,500
2,600
25,000
2,400
2,200 22,500
2,000
20,000
1,800
17,500
1,600
1,400 15,000
Figure 8: Tin Figure 9: Zinc
$/t $/t
36,000 2,800
32,000
2,500
28,000
2,200
24,000
1,900
20,000
16,000 1,600
12,000 1,300
15 March 2012 60
LME cash-3m spread (up to and including 13 March 2012)

$/t $/t
30 40
20
20
10
0 0
-10
-20
-20
-30 -40
$/t $/t
70 40
20
50
0
30
-20
10
-40
-10
-60
-30 -80
$/t $/t
60 10
40 5
0
20
-5
0
-10
-20
-15
-40
-20
-60 -25
-80 -30
15 March 2012 61
Warehousing profit/loss 3m basis ($/t)

50
30
20
10 25
0
-10 0
-20
-30 -25
-40
-50
-50
-60
-70
Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 -75
Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12
Note: Calculated using federal funds rate and estimates of discounted Note: Calculated using federal funds rate and estimates of discounted
warehousing rents. Source: Barclays Capital warehousing rents. Source: Barclays Capital
40 200
20
0 100
-20
-40 0
-60
-80 -100
-100
-120 -200
Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12
200 30
100 20
10
0
0
-100
-10
-200
-20
-300 -30
-400 -40
Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12
15 March 2012 62
LME forward prices (as at 13 March 2012)

$/t 10,500 $/t Range for last 6 months

2,800 Current
One month ago
2,600 Six months ago
9,500
2,400
8,500
2,200
Range for last 6 months 7,500

2,000 Current
One month ago
Six months ago
1,800 6,500
1 13 25 37 49 61 1 13 25 37 49 61
Months forward Months forward
$/t Range for last 6 months 24,000 $/t Range for last 6 months
3,000 Current Current
One month ago One month ago
Six months ago
One year ago
2,700 22,000
2,400
20,000
2,100
18,000
1,800
1,500 16,000
1 7 13 19 25 1 7 13 19 25
$/t Range for last 6 months $/t Range for last 6 months
28,000 Current Current
One month ago 2,500 One month ago
Six months ago Six months ago
24,000 2,300
2,100
20,000
1,900
16,000 1,700
1 7 13 19 25 1 7 13 19 25
15 March 2012 63
SHFE/LME import breakeven ratios

SHFE/LME Al ratio Import breakeven ratio SHFE/LME copper ratio Import breakeven ratio
9.0 8.1
8.6
8.2 7.7
7.8
7.4 7.3
7.0
6.6 6.9
6.2
5.8 6.5
Source: SHFE, Barclays Capital Source: SHFE, Barclays Capital
SHFE/LME Pb ratio Import breakeven ratio Chinese price/LME Ni ratio Import breakeven ratio
8.2 9.0
8.6
7.8
8.2
7.4
7.8
7.4
7.0
7.0
6.6
6.6
6.2 6.2
Jun-11 Jul-11 Sep-11 Oct-11 Dec-11 Jan-12 Mar-12 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12
Source: Antaike, SHFE, Barclays Capital Source: Antaike, Barclays Capital
Chinese price/LME sn ratio Import breakeven ratio SHFE/LME Zn ratio Import breakeven ratio
9.5
8.5
9.0
8.5 8.2
8.0
7.9
7.5
7.0 7.6
6.5
7.3
6.0
5.5 7.0
Source: Antaike, Barclays Capital Source: SHFE, Barclays Capital
15 March 2012 64
Premiums (regional physical market above LME cash prices)

US$/t W Europe USA Asia (Japan)

US$/t W Europe US Asia (Shanghai)
250 240
210 200
170 160
130 120
j
90 80
50 40
10 0
Feb-06 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-06 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12
Source: Brook Hunt, Barclays Capital Source: CRU, Barclays Capital
US$/t US$/t W Europe US Asia (Singapore)

W Europe US Asia (Singapore)
250 4,800
200 4,000
3,200
150
2,400
100
1,600
50
800
0 0
Figure 38: Zinc Figure 39: Weighted average
US$/t W Europe US Asia (Singapore) Weighted average regional base metal

400 250 premiums ($/t)
350
200 Europe US Asia
300
250 150
200
100
150
100
50
50
0 0
15 March 2012 65
TRADE RECOMMENDATIONS
Figure 1: Key recommendations
Current price Gain/Loss
Contract Entry Date Entry price (March-13-2012) Unit $ %
Open trades
Rationale: We see the medium-term crude oil price risks, as being to the upside mainly due to strong EM demand growth, lack of spare capacity and constraints on non-OPEC
supply. We expect far-forward prices to benefit, with our long-term price forecast for Brent pegged at $135/bbl.
Long Brent crude oil Dec-15 27/01/11 98.2 99.8 $/bbl 1.6 1.7%
Rationale: China's rising costs for aluminium suggest a production slowdown ahead. Meanwhile, demand continues to grow very strongly and incentive prices for producers
are rising. This should support steady appreciation in prices over the medium-term with the back end of the curve expected to outperform
Long LME aluminium Dec-15 29/03/11 2884 2561 $/t -323.5 -11.2%
Rationale: We remain positive on corn prices with concerns on recent dry weather in South America and its impact on yields, while global inventory levels remain extremely
low.
Long CBOT corn Mar-12 21/11/11 605 674 c/Bsh 11.3 2.6%
Rationale: LME copper stocks are declining and Chinese imports have remained firm. The picture for raw materials is tight, with a narrowing in scrap discounts and recent
supply problems at Grasberg, plus some other mines.
Long LME copper Jun-12 21/11/11 7328 8559 $/t -508 -2.4%
Rationale: US soybeans have seen recent supply downgrades with production down y/y. Chinese import buying has been muted, but activity has picked up in recent weeks
after the decline in international prices. China's production is down y/y and we expect imports to move higher.
Long CBOT soybeans Mar-12 20/12/11 1155 1349 c/Bsh 194.3 -1.6%
Rationale: We anticipate a move into backwardation at the front-end of the copper curve due to low inventories and strong demand as consumption reaches its seasonal peak
approaching Q2
Copper spreads tightening 21/11/11 -17.3 -3.5 -4.0 -
Long position Mar-12 7317 8563 $/t 1246 -
Short position Sep-12 7334 8567 $/t -1233 -
Rationale: Our expectation of stable crude oil prices should support US gasoline demand at reasonable levels in 2012, but a substantial loss in refining capacity is set to
squeeze supplies. As a result, summer gasoline prices should increase.
US gasoline (RBOB) spread tightening 20/12/11 3.0 5.3 2.38 -
Long position Aug-12 265 325 cents/g 59.21 -
Short position Sep-12 263 319 cents/g -56.83 -
Rationale:Palladium has potentially the weakest supply outlook in 2012 of any commodity we forecast. We expect the market to swing from surplus in 2011 to a small deficit
in 2012, helped by a strong growth in autocatalyst demand. We also expect a rebound in net investment buying of palladium in 2012.
Long NYMEX palladium Dec-12 29/02/12 710 711 $/oz 1.5 0.2%
Rationale: The long-running push to reconfigure refineries globally to maximise the production of light products is coming at the expense of fuel oil output. Meanwhile
expansion in bulk carrier and tanker fleets, plus strong demand from Japanese electricity generators is underpinning demand
Fuel oil versus gasoil differentials 29/02/12 -30.54 -31.18 -0.64 -
Long Rotterdam fuel oil Q4 2013 97.74 101.20 $/bbl 3.46 -
Short ICE gasoil Q4 2013 128.28 132.38 $/bbl -4.10 -
Rationale: After a strong increase in global supply in the 2010-11 marketing year, we expect further production growth in the current marketing year. Coffee demand is more
leveraged to trends in mature economies than is the case for most other commodities; we expect sluggish consumption growth in 2011-12.
Short ICE coffee Dec-12 29/02/12 212 195 16.9 8.0%
Note: The long position on LME copper was opened on 26 May 2011 and includes losses from the previous trade (Dec 2011). The long position on CBOT corn was
opened on 20 April 2011 and includes losses from the previous trade (Dec 2011). The long position in LME copper spreads was opened on 24 August 2011 and
includes losses on the Dec 11/June 12 trade. The long position on CBOT soybeans was opened on 24 August 2011 and includes losses from the previous trade (Jan
2011). Source: Reuters, Barclays Capital
15 March 2012 66
Figure 2: Closed trades

Gain/Loss
Closed Trades Contract Entry Date Exit Date Entry price Exit price Unit $ %
Directional trades
Short US nat gas Henry Hub Oct-13 21/11/11 20/12/11 4.4 4.1 $/mmbtu 0.3 6.6%
Long COMEX gold** Dec-12 21/11/11 20/12/11 1694 1628 $/oz -66 29.3%
Long Carbon EUA Dec-11 24/02/11 30/06/11 15.4 13.5 €/t -1.9 -12.1%
Long KBOT wheat ** Dec-11 20/04/11 30/06/11 964 733 c/Bsh -231 -26.4%
Long UK natural gas Q3-11 29/03/11 26/05/11 63.9 58.5 p/therm -5.4 -8.5%
Long LME nickel Jun-11 24/02/11 26/05/11 27501 22821 $/t -4680 -17.0%
Long European delivered coal (API2) ** Apr-11 27/01/11 29/03/11 114.5 125.7 $/t 16 14.4%
Short Comex silver Dec-11 27/01/11 24/02/11 27.1 33.1 $/oz -6 -22.4%
Long LME copper Jun-11 22/09/10 24/02/11 7833.0 9505 $/t 1672 21.3%
Long CBOT corn ** Mar-11 26/11/10 24/02/11 553.0 685.8 c/Bsh 245 55.1%
Short UK natural gas Summer 2011 19/10/10 27/01/11 47.2 52.5 p/therm -5 -11.3%
Long NYMEX crude oil ** Dec-11 19/10/10 27/01/11 84.8 99.3 c/bbl 12.1 14.2%
Short US natural gas Dec-11 13/08/10 26/11/10 5.54 5.12 $/mmbtu 0.43 7.7%
Long ICE cotton Dec-10 14/04/10 19/10/10 75.7 110.3 c/lb 35 45.7%
Long LME lead Dec-10 21/06/10 13/08/10 1851 2065 $/t 214 11.6%
Long LME copper ** Sep-10 10/12/09 13/08/10 7062 7143 $/t 345 5.0%
Long NYMEX palladium Jun-10 22/02/10 11/05/10 444 532 $/oz 88 19.8%
Long ICE sugar Jul-10 18/03/10 14/04/10 22.6 17.7 c/lb -5 -21.6%
Long LME Nickel Jun-10 10/12/09 18/03/10 16331 22760 $/t 6429 39.4%
Long NYMEX crude oil May-10 10/12/09 18/02/10 75.4 79.1 $/b 3.7 4.9%
Long ICE sugar Mar-10 10/12/09 18/02/10 23.3 26.5 c/lb 0.03 13.8%
Spread trades
WTI contango widening 19/07/11 29/02/12 0.38 0.41 0.03 -
Short position Mar-12 100.40 105.84 $/b -5.44 -
Long position Apr-12 100.78 106.25 $/b 5.47 -
Natural gas spread widening 15/12/10 30/06/11 0.63 0.41 $/mmbtu -0.22 -
Short forward Henry Hub Oct-11 4.49 4.43 $/mmbtu 0.05 -
Long forward Henry Hub Jan-12 5.12 4.84 $/mmbtu -0.27 -
Crude oil spread tightening ** 20/04/11 26/05/11 -0.36 -0.37 $/b 0.34 -
Long forward Brent crude Jul-11 123.5 115.1 $/b -8.45 -
Short forward Brent crude Aug-11 123.1 114.7 $/b 8.46 -
Gasoil spread tightening 22/09/10 19/10/10 -16.8 -15.3 $/t 1.50 -
Long nearby ICE gasoil Dec-10 669.75 705.50 $/t 35.75 -
Short further forward ICE gasoil Jun-11 686.50 720.75 $/t -34.25 -
US Henry Hub natgas 21/06/10 13/08/10 0.66 0.65 $/mmbtu 0.01 -
Short position Oct-10 5.01 4.35 $/mmbtu -0.66 -
Long position Jan-11 5.67 5.00 $/mmbtu 0.67 -
Note: Entry and exit prices reference closing prices on the day of publication. **These trades include gains/losses from previous trades.
Source: Reuters, Barclays Capital
15 March 2012 67
BASE METAL LME CASH PRICE FORECASTS
Aluminium Copper Lead Nickel Tin Zinc

US$/t Usc/lb US$/t Usc/lb US$/t Usc/lb US$/t Usc/lb US$/t Usc/lb US$/t Usc/lb
Forecasts
2012 2,313 105 9,000 408 2,288 104 19,875 901 24,250 1,100 2,138 97
Q1 2,150 98 8,000 363 2,100 95 19,250 873 21,000 952 1,950 88
Q2 2,250 102 9,000 408 2,200 100 20,500 930 23,000 1,043 2,100 95
Q3 2,350 107 9,700 440 2,350 107 20,000 907 25,000 1,134 2,200 100
Q4 2,500 113 9,300 422 2,500 113 19,750 896 28,000 1,270 2,300 104
2013 2,650 120 9,200 417 2,750 125 19,000 862 30,000 1,361 2,800 127
2014 2,900 132 9,000 408 3,000 136 22,500 1,020 30,000 1,361 3,300 150
2015 3,000 136 9,500 431 3,650 166 25,000 1,134 30,000 1,361 3,500 159
Cycle Averages 2,750 125 6,200 281 2,700 122 19,000 862 18,000 816 2,600 118
History
1989 1,952 89 2,845 129 672 30 13,313 604 6,605 300 1,711 78
1990 1,640 74 2,662 121 809 37 8,881 403 6,200 281 1,518 69
1991 1,303 59 2,337 106 557 25 8,162 370 5,593 254 1,117 51
1992 1,254 57 2,282 103 542 25 7,001 318 6,099 277 1,240 56
1993 1,139 52 1,913 87 406 18 5,296 240 5,157 234 962 44
1994 1,478 67 2,308 105 547 25 6,337 287 5,461 248 998 45
1995 1,805 82 2,935 133 631 29 8,230 373 6,217 282 1,031 47
1996 1,507 68 2,296 104 774 35 7,501 340 6,163 279 1,025 46
1997 1,598 72 2,275 103 624 28 6,916 314 5,641 256 1,314 60
1998 1,358 62 1,654 75 529 24 4,632 210 5,536 251 1,024 46
1999 1,361 62 1,572 71 502 23 6,016 273 5,400 245 1,076 49
2000 1,548 70 1,813 82 454 21 8,638 392 5,432 246 1,128 51
2001 1,444 65 1,578 72 476 22 5,959 270 4,481 203 886 40
2002 1,350 61 1,558 71 453 21 6,763 307 4,057 184 778 35
2003 1,431 65 1,778 81 515 23 9,637 437 4,894 222 828 38
2004 1,716 78 2,865 130 886 40 13,846 628 8,484 385 1,049 48
2005 1,900 86 3,682 167 977 44 14,750 669 7,375 334 1,383 63
2006 2,568 116 6,731 305 1,286 58 24,271 1,101 8,761 397 3,274 148
2007 2,640 120 7,129 323 2,592 118 37,276 1,691 14,542 659 3,251 147
Q1 2,800 127 5,941 269 1,787 81 41,448 1,880 12,723 577 3,460 157
Q2 2,761 125 7,637 346 2,182 99 47,982 2,176 14,104 640 3,667 166
Q3 2,552 116 7,714 350 3,141 142 30,226 1,371 14,980 679 3,237 147
Q4 2,448 111 7,224 328 3,259 148 29,448 1,336 16,359 742 2,640 120
2008 2,573 117 6,961 316 2,093 95 21,115 958 18,500 839 1,876 85
Q1 2,729 124 7,763 352 2,891 131 28,863 1,309 17,695 803 2,426 110
Q2 2,941 133 8,448 383 2,316 105 25,730 1,167 22,612 1,025 2,115 96
Q3 2,792 127 7,693 349 1,912 87 18,980 861 20,567 933 1,773 80
Q4 1,830 83 3,940 179 1,251 57 10,885 494 13,127 595 1,189 54
2009 1,664 75 5,148 233 1,721 78 14,604 662 13,579 616 1,654 75
Q1 1,361 62 3,435 156 1,160 53 10,459 474 11,024 500 1,173 53
Q2 1,488 67 4,676 212 1,506 68 12,800 580 13,551 615 1,476 67
Q3 1,806 82 5,840 265 1,925 87 17,614 799 14,576 661 1,757 80
Q4 2,001 91 6,643 301 2,292 104 17,543 796 15,164 688 2,211 100
2010 2,172 99 7,533 342 2,146 97 21,809 989 20,407 925 2,158 98
Q1 2,165 98 7,243 328 2,219 101 20,078 911 17,225 781 2,288 104
Q2 2,092 95 7,013 318 1,944 88 22,382 1,015 17,844 809 2,018 92
Q3 2,088 95 7,243 328 2,031 92 21,178 960 20,559 932 2,013 91
Q4 2,343 106 8,634 392 2,390 108 23,598 1,070 26,001 1,179 2,315 105
2011 2,398 109 8,813 400 2,399 109 22,853 1,036 26,063 1,182 2,191 99
Q1 2,503 114 9,646 437 2,605 118 26,899 1,220 29,950 1,358 2,393 109
Q2 2,600 118 9,137 414 2,550 116 24,165 1,096 28,694 1,301 2,250 102
Q3 2,399 109 8,982 407 2,459 112 22,043 1,000 24,757 1,123 2,224 101
Q4 2,090 95 7,489 340 1,983 90 18,303 830 20,853 946 1,897 86
Note: Cycle Average denotes cost-driven estimate of the minimum sustainable price over a business cycle. Source: Barclays Capital
15 March 2012 68
PRECIOUS METAL SPOT PRICE FORECASTS
Gold Silver Platinum Palladium Figure 1: Gold

US$/oz US$/oz US$/oz US$/oz
Forecasts 2000 $/oz
2012 1,875 32.5 1,705 795
Q1 1,700 30.0 1,610 680 1800
Q2 1,850 34.5 1,640 745
Q3 2,030 38.0 1,755 860
Q4 1,920 27.5 1,815 895 1600
2013 1,790 28.0 1,800 830
2015 1,400 21.0 2,200 1,200 1400
Cycle average 1,125 16.0 1,850 650
1200
History
Mar-11 Jun-11 Sep-11 Dec-11 Mar-12
1989 382 5.5 509 144
1990 384 4.8 472 115
1991 362 4.1 376 88
Figure 2: Silver
1992 344 3.9 360 88
50 $/oz
1993 360 4.3 374 122
1994 384 5.3 405 143 45
1995 384 5.2 424 151
1996 388 5.2 397 128 40
1997 331 4.9 395 177
35
1998 294 5.5 372 285
1999 279 5.2 377 359 30
2000 279 5.0 545 682
2001 271 4.4 530 603 25
2002 310 4.6 539 337 20
2003 364 4.9 692 200 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12
2004 410 6.7 844 229
2005 445 7.3 896 202 Figure 3: Platinum
2006 604 11.6 1,139 319
2007 697 13.4 1,304 354
Q1 923 17.5 1,862 438 1950 $/oz
Q2 897 17.2 2,021 441
Q3 869 15.0 1,531 326 1850
Q4 797 10.2 859 186
1750
2008 872 15.0 1,569 348
Q1 908 12.6 1,023 198 1650
Q2 921 13.7 1,171 233
Q3 960 14.7 1,231 271 1550
Q4 1,100 17.6 1,394 348
1450
2009 972 14.6 1,205 262
Q1 1,110 16.9 1,562 440 1350
Q2 1,196 18.3 1,630 492 M 11 J 11 S 11 D 11 M 12
Q3 1,227 18.9 1,550 493 Figure 4: Palladium
Q4 1,370 26.5 1,697 678
2010 1,226 20.2 1,610 526 900 $/oz
Q1 1,387 31.9 1,789 788
Q2 1,508 38.4 1,781 756 800
Q3 1,705 38.8 1,766 747
Q4 1,682 31.8 1,527 626
2011 1,571 35.2 1,716 729 700
Q1 1,387 31.9 1,789 788
Q2 1,508 38.4 1,781 756 600
Q3 1,705 38.8 1,766 747
Q4 1,682 31.8 1,527 626
500
Note: Cycle Average denotes cost-driven estimate of the minimum sustainable
price over a business cycle. Source for all figures: Barclays Capital Mar-11 Jun-11 Sep-11 Dec-11 Mar-12
15 March 2012 69
COMMODITIES RESEARCH ANALYSTS
Barclays Capital
5 The North Colonnade
London E14 4BB
Gayle Berry Suki Cooper Helima Croft Paul Horsnell
Commodities Research Commodities Research Commodities Research Commodities Research
+44 (0)20 3134 1596 +1 212 526 7896 +1 212 526 0764 +44 (0)20 7773 1145
gayle.berry@barcap.com suki.cooper@barcap.com helima.croft@barcap.com paul.horsnell@barcap.com
Miswin Mahesh Roxana Mohammadian-Molina Kevin Norrish Amrita Sen
+44 (0)20 77734291 +44 (0)20 7773 2117 +44 (0)20 7773 0369 +44 (0)20 3134 2266
miswin.mahesh@barcap.com roxana.mohammadian-molina@barcap.com kevin.norrish@barcap.com amrita.sen@barcap.com
Trevor Sikorski Nicholas Snowdon Kate Tang Sudakshina Unnikrishnan
+44 (0)20 3134 0160 +1 212 526 7279 +44 (0)20 7773 0930 +44 (0)20 7773 3797
trevor.sikorski@barcap.com nicholas.snowdon@barcap.com kate.tang@barcap.com sudakshina.unnikrishnan@barcap.com
Shiyang Wang Michael Zenker
Commodities Research Commodities Research
+1 212 526 7464 +1 212 526 2081
shiyang.wang@barcap.com michael.zenker@barcap.com
Commodities Sales
Craig Shapiro Martin Woodhams
Head of Commodities Sales Commodity Structuring
+1 212 412 3845 +44 (0)20 7773 8638
craig.shapiro@barcap.com martin.woodhams@barcap.com
15 March 2012 70
Analyst Certification(s)
We, Gayle Berry, Suki Cooper, Roxana Mohammadian Molina, Kevin Norrish, Nicholas Snowdon and Shiyang Wang, hereby certify (1) that the views
expressed in this research report accurately reflect our personal views about any or all of the subject securities or issuers referred to in this research report
and (2) no part of our compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this research report.
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Metals Magnifier Can Silver Demand Be Solar Powered

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COMMODITIES RESEARCH 15 March 2012

Roxana Mohammadian Molina

Source: Barclays Capital

FOCUS: SILVER AND SOLAR DEMAND

Shining beacon or tarnished hope?

40 Solar installation (GW, LHS) 3500 30000 Photovoltaic demand Photography

Silver consumption growth from solar panels

For the purposes of the analysis, we have also assumed:

 Solar PV installation as a proxy for PV production mainly due to limited data on PV

5,000 9,000 Hydroelectric Wind Geothermal Solar Other

Has silver’s erratic price action exposed it to substitution?

200 4,000 Base case with greater thin-film market

China in the balance

Source: Antaike, Reuters, Barclays Capital Source: CRU, Barclays Capital

What this means for silver

15 Net cell exports excluding Japan, US and Europe 55

Figure 2: Barclays Capital FX forecasts (versus USD)

Key economic indicators

Consumption-weighted global leading indicators for base metals

increase in “new export orders” and “new orders”, this

Source for all charts: Barclays Capital

and back to pre-2008 levels. Source: Barclays Capital

Figure 3: Global supply and demand balance

Figure 4: Reported primary aluminium production

Figure 5: Global alumina output Figure 6: Alumina prices

23,800 Global metallurgical grade alumina Spot alumina prices

11,800 150 1,000

Figure 7: Global production trends Figure 8: Change in Chinese output

Global monthly primary aluminium 2,200 Chinese semi-fabricated production

Recent production news

 On Chinese imports, we believe that financing is part of the 17% 170

reason for the recent strength but also that consumer

Copper mine production

Figure 4: Reported mine production

Figure 5: Global mine production

Figure 6: Change in world mine output Figure 7: Copper concentrate charges

Source: ICSG, CRU, Barclays Capital Source: CRU, Barclays Capital

Copper refined production

Figure 8: Reported refined production

Source: ICSG, Barclays Capital Source: ICSG, Barclays Capital

Share of secondary in global refined output 20 US copper scrap discount (c/lb)

Copper refined consumption

Figure 13: Reported refined consumption

260 Apparent Cons of Refined Cu (000 short tons)

Source: ABMS, Barclays Capital Source: JWCMA, Barclays Capital

Recent production news

provided a brief uptick to replacement demand set against a

weaker shipment levels, as Figure 16 shows, for the end of

Figure 3: Global supply and demand balance

Lead mine production

Lead treatment charges

Source: CRU, Barclays Capital Source: ILZSG, Barclays Capital

Lead refined production

Source: ILZSG, Barclays Capital Source: ILZSG, Barclays Capital

Chinese refined lead production YTD changes in refined production by region

Lead refined consumption

Figure 14: Reported consumption

Figure 15: Global lead consumption Figure 16: US battery shipments

Source: ILZG, Barclays Capital Source: CRU, Barclays Capital

Recent production news

bullish scenario linked to the policy implications emerging 20

refined nickel demand prospects, as and when the 1700

laterite ore ban. Indonesia ore feeds as much as 80% of 1300

Solar PV installation as a proxy for PV production mainly due to limited data on PV

On Chinese imports, we believe that financing is part of the 17% 170

Gold still faces near-term hurdles such as bouts of dollar 0 0

China’s silver imports fell by 47% y/y to 191.7 tonnes in 15

Indeed, according to SMM data inventories at some 80%