Gold Survey 2010 Philip Klapwijk Executive Chairman, GFMS Ltd. Denver Gold Group –European Gold Forum 2010 Zurich, 15th April 2010 GFMS gratefully acknowledge the generous support from the following comp anies for this year’s Gold Survey and its two Updates Commerzbank Global www.pamp.com Precious Metals Tanaka Precious Metals Group Valcambi sa World Gold Council Dubai Multi Commodities Barrick Gold Corporation JPMorgan Chase Bank Centre www.IBKCapital.com ScotiaMocatta www.standardbank.com www.newmont.com www.nyse.com/nyseliffeus Johnson Matthey www.ljgold.com www.commodities.sgcib.com Kinross Gold Corporation www.natexiscm.com www.randrefinery.com INTL Commodities, INC. The GFMS Group’s Unique Research Capabiliti es & P rogramme Large and experienced team of 25 Analysts + Consultants. Not just desk-based: Over 300 companies and organisations in 36 countries visitedbd by our personnel in th e l ast 12 month s. Annual Gold, Silver, Platinum & Palladium and Copper Survey s. Also, weekly, monthly, quarterly & bi-annual reports plus forecasts and a wide range of consultancy services across all the precious and base metals & steel. For more information visit: www.gfms .co . uk or email: [email protected] Presentation Outline • GldPiGold Prices • SlSupply • Demand • Outlook US Dollar Gold Price Weekly Averages 1300 DOLLAR 2008 2009 Q1 2010 Average 871.96 972.35 1,109.12 1100 Intra-Year 2.7% 24.4% -0.5% Year-on-Year 25.4% 11.5% 22.1% zz 900 US$/oz US$/o 700 500 2626--weekweek moving average 300 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Source: GFMS; Thomson Reuters Euro Gold Price Weekly Averages 850 EURO 2008 2009 Q1 2010 Euro/oz Average 593. 09 696. 94 802. 51 IntraIntra--YearYear 6.9% 21.5% 6.1% 650 YearYear--onon--YearYear 17.0% 17.5% 15.0% uro/oz EE 450 2626--weekweek moving average 250 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Source: GFMS; Thomson Reuters Gold Prices in Different Currencies Indexed Daily Series 140 US$/oz ) 00 130 120 Rupee 10g/g 2009=10 Euro/kg 110 4th Jan (( 100 Index 90 Rand/kg 80 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 Source: GFMS; Thomson Reuters Real and Nominal Gold Prices (($preal US$ price in constant 2009 terms) 1800 1980 average: $1,600 New record nominal 1500 annual average reached in 2009, but in real terms today’s prices are still well 1200 short of historical peaks. z oo 900 Real Price US$/ 600 300 Nominal Price 0 Source: GFMS, Thomson Reuters Suppl y GFMS’ Mine Supply Database • Over 100 companies analysed on a quarterly basis – production/costs/corporate activity • Over 300 mines recorded on an annual basis – production/costs/reserves/grade • Over 320 projects – projected production profile, startstart--upup date, capex, reserves, resources • Informal mine production measured on a countrycountry--byby-- country basis • Costs measured at 70% of Western World gold production • BottomBottom--upup cost analysis methodology to assess $/tonne mining, ore processing and on -site administration costs , plus benchmarking of fuel, power, labour productivity and other key inputs • Glbllobal anal ysis and df forecasting of mine suppl y, b reakd own of industry cost structures and trends, benchmarking Gold Mine Production Latin America Other 2009 up 163t North America China 3000 South Africa Australia or 6.8% yoy 2500 2000 nes nn 1500 to 1000 500 0 1981 1985 1989 1993 1997 2001 2005 2009 Source: GFMS (Gold Survey 2010) Mine Production: Winners and Losers (Figures represen t year-on-year chihange, i.e. 2009 less 2008) 70 Indonesia 60 50 40 China 30 nnes oo RiRussia Argentina t 20 Ghana 10 0 -10 Mongolia -20 SthSouth UitdUnited Africa States Source: GFMS (Gold Survey 2010) Major Western World Mines' Cash Costs (in money-of-the-day terms) 800 700 Australia 600 500 South Africa S$/oz North UU 400 America Other 300 Latin America 200 100 Q1-05 Q1-06 Q1-07 Q1-08 Q1-09 Source: GFMS (Gold Survey 2010) YearYear--onon--YearYear Changes to Cash Costs 540 +3 +5 +5 +6 520 --44 +12 S$/oz) --1212 UU 500 +10 +21 Costs ( 480 hh --3333 460 464 478 otal Cas 2009 vs 2008 TT 440 Source: GFMS (Gold Survey 2010) Mine Production 163 tonneincrease equal to 6.8% y-y-oo--yy in 2009; the first annual increase for three years. Strong growth from a suite of new projects and operating mines. Major country gains in Indonesia, China, Russia, Argg,entina, Brazil and Mexico. All regions posted growth, except for North America. Two largest falls at the mine level were seen in the United States. US dollar denominated total cash costs increased by an average 3%, or $14/oz, to $478/oz in 2009. GFMS’ propr ietary ‘All-I’CIn’ Costs measure i ncreased db39% by 3.9% to $717/oz. AboveAbove--GroundGround Stocks of Gold, end-end-20092009 Gold is not “consumed” like most commodities; stocks can be available at the right price… Above-ground Stocks, end 2009 = 166,000t Jewellery 52% Lost & Unaccounted Official Holdings 2% 16% Other Fabrication 12% Private Investment 18% Source: GFMS (Gold Survey 2010) Supply from Scrap, Hedging & Official Sales Net Official Sector Sales Flat trend since 2000? Hedging Supply 2000 Scrap 1800 1600 Secular increase in supply 19871987--9999 1400 1200 1000 onnes TT 800 600 400 200 0 1980 1984 1988 1992 1996 2000 2004 2008 Source: GFMS Change in Supply from AboveAbove--GroundGround Stocks 2009 compared to 2008 400 300 200 100 tonnes 0 -100 -200 -300 Official Sector Scrap Source: GFMS (Gold Survey 2010) Regional Changes in Scrap Supply 2009 compared to 2008 80 70 60 50 40 tonnes 30 20 10 0 Middle East Asia Other Indian Europe North Latin East SC America America Source: GFMS (Gold Survey 2010) Jewellery Fabrication & Scrap Supply 1700 1500 Jewellery Fabrication 1300 1100 900 Tonnes 700 500 300 SSlScrap Supply 100 04. H1 05. H1 06. H1 07. H1 08. H1 09. H1 Source: GFMS (Gold Survey 2010) AboveAbove--GroundGround Jewellery Stocks by Region, end-2009 Indian Sub- Continent 16% North America Europe 17% 20% Other 9% East Asia Middle East 25% 12% Source: GFMS (Gold Survey 2010) CBGA and Other Gold Sales Other 700 CBGA 600 500 400 300 tonnes 200 100 0 -100 2000 2002 2004 2006 2008 “CBGA” refers to signatories to the Central Bank Gold Agreement “Other” refers to all other countries Source: GFMS (Gold Survey 2010) Demand World Gold Fabrication 4500 Developing Countries 2009 down 472t 4000 Industrialised Countries or 16% yoy 3500 3000 2500 tonnes 2000 1500 1000 500 0 1980 1984 1988 1992 1996 2000 2004 2008 Source: GFMS (Gold Survey 2010) Jewellery Fabrication: Winners and Losers (Figures represent year-on-year change, i.e. 2009 less 2008) 0 Latin America -50 North Other East America Asia Indian nnes -100 Europe S-C oo t -150 -200 Middle East Source: GFMS (Gold Survey 2010) Fabrication Demand in 2009 A sharp decline in jewellery demand was the principal driver of the 16% or 472t fall in fabrication demand to 2,417 t. Full year jewellery fabrication dropped by 20% or 434 tonnes,,ggp with higher gold prices and the economic downturn the primary reasons for the fall. Other fabrication fell by just 5.4% y-o-y to 658 tonnes in 2009. However, with all coins excluded, the drop reaches 15%. • Electronics demand dropped by 16%, largely due to the economic crisis, particularly in the first half. GFMS’ Hedging Analysis • GFMS enter all hedging transactions into our hedging database and the Brady Trinity system. • Trades are input on a quarterly basis by company, instrument, year of expiry and currency. • Using detailed market data, accurate deltas and other sensitivities are calculated. • Comppggrehensive global hedge book analy ypsis is published once per quarter by GFMS, in association with Société Générale. Net Market Impact of Producer Hedging 150 50 -50 tonnes -150 -250 -350 Source: GFMS ( Su 00.Q1 pp y ly 01.Q1 Gold Survey 2010) 02.Q1 2010) 03.Q1 Demand 04.Q1 05.Q1 06.Q1 07.Q1 08.Q1 09.Q1 Total Accelerated Supply from Producer Hedging* 4 rr Outstanding hedge book just 3 236 tonnes at end-end-20092009 end-yea 2 tonnes, )) 1 (1000s 0 1995 1997 1999 2001 2003 2005 2007 2009 * outstanding forward sales, loans and net delta hedge against positions Source: GFMS (Gold Survey 2010) Investment in 2009 • World Investment (which includes the implied figure, bar hoarding and all coins) nearly doubled in 2009 to over 1,900 tonnes and reached an approximate value of $60 billion. • The first few months of 2009 saw a record level of investment demand. Fears about financial stability and economic depression triggered a wave of safe haven buying, particularly in the forms of gold ETFs and physical bullion products. • After a summer lull, investor activity, especially in the OTC and futures markets, picked up strongly from September onwards, ppyrimarily driven by a weaker dollar, ,gpp higher price expectations and growing concerns regarding future trends in inflation. This surge in investment demand drove prices above $1,200, before a loss of momentum and some profit taking brought about a price correction in the final weeks of 2009. World Investment* 2000 70 Value of World 60 IttInvestment 1500 50 U S 40 $ Billion 1000 30 Tonnes s 20 500 10 0 0 2000 2002 2004 2006 2008 *World Investment is the sum of Implied Net ((DisDis)Investment,)Investment, Bar Hoarding and all Coins & Medals.