lead & zinc outlook - jan 2015

8/9/2019 Lead & Zinc Outlook - Jan 2015

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AME GROUPTACTICAL LEAD & ZINC OUTLOOK

January

2015


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Confidential:see contract at www.amegroup.com

AME Group

Page 2

Market Balance and Reconciliation

Market Balances

Table 1: Zinc Market Balances 2010

2016

Thousand Tonnes 2010 2011 2012 2013 2014Q2 2014Q3 2014 2015 2016

World Refined Demand 12,649 12,699 12,386 12,970 3,509 3,513 13,737 14,177 14,705

World Refined Supply 12,825 13,216 12,720 13,264 3,240 3,372 13,203 14,188 14,892

World Concentrate Demand 12,662 13,136 12,611 13,127 3,237 3,346 13,167 14,126 14,891

World Concentrate Supply 12,330 12,827 13,403 13,378 3,211 3,413 13,177 14,164 14,561

World Metal Balances 176 517 334 294 -269 -141 -534 12 187

Commercial InventoryLME 701 822 1,221 933 668 751SHFE 234 175 216 69 49 40Producers 305 333 323 304 335 321Consumers 122 128 128 147 148 148Merchant 15 14 13 13 13 13

Total Inventory 1,378 1,472 1,900 1,467 1,214 1,273

Inventory MovementsOpening Balance 1,051 1,378 1,472 1,900 1,360 1,214 1,467 933 945Movement in stocks 151 -423 95 -727 123 201Drawdown/(Addition) 176 517 334 294 -269 -141 -534 12 187Closing Balance 1,378 1,472 1,900 1,467 1,214 1,273 933 945 1,132

PriceLME Cash Average Zinc PriceUS$/t 2,159 2,193 1,948 1,909 2,072 2,310 2,165 2,400 2,485US/lb 98 99 88 87 94 105 98 109 113

Market Balances

Table 2: Lead Market Balances 20102016


World Refined Demand 9,809 10,436 10,483 11,119 2,706 2,829 11,317 11,624 12,031

World Refined Supply 9,714 10,640 10,601 11,209 2,685 3,033 11,509 11,646 12,071

World Concentrate Demand 832 951 1,104 1,156 305 321 1,299 1,369 1,434

World Concentrate Supply 4,222 4,650 5,136 5,380 1,210 1,330 5,031 6,011 6,304

World Metal Balances -95 204 119 89 -21 203 193 21 40

Commercial InventoryLME 208 353 320 222 194 225SHFE 75 90 67 68Producers 127 129 137 179 176 172Consumers 111 98 92 115 110 110Total Inventory 446 581 624 606 547 575

Inventory MovementsOpening Balance 389 446 581 624 567 547 606 799 820Movement in stocks 151 -69 -75 -108 1 -175Drawdown/(Addition) -95 204 119 89 -21 203 193 21 40Closing Balance 446 581 624 606 547 575 799 820 860

PriceLME Cash Average Lead PriceUS$/t 2,147 2,397 2,062 2,139 2,097 2,181 2,114 2,300 2,380

US/lb 97 109 94 97 95 99 96 104 108


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The Market

The average zinc price for December, at the time of writing, had fallen 3% on the November monthly average to

US$2,183/t (US$0.99/lb) as China indicated softer-than-expected growth data. AME forecasts the zinc price to be

US$2,250/t (US$1.02/lb) in the December Quarter of 2014 before rising to an average of US$2,400/t (US$1.09/lb) in 2015.

LME stocks have grown 1.3% to 682kt, but are still only 5% higher than the four-yearly lows seen in July this year.

With 2015 seeing approximately 800kt removed from the mined market with the closures of Century and Lisheen, the

mined market is now expected to hang in the balance as the demand for zinc concentrates is expected to soften to 6.8%,

down from 8.0%. With both finished and mined markets forecast to be in balance for 2015, the actuality of this rests on the

ability of major sources to ramp up and for China to increase its domestic production.

With the top-ten producing mines contributing 25% of the 2014 zinc in concentrate, the outcome of the mined

market in 2015 is contingent on the performance of these top-tier producers. Given the large-scale mine closures, the

specific focus is on those operations looking to ramp-up to supply replacement production. The two operations in

particular are Glencores 380kt McArthur River Mine and Vedantas 685kt Rampura Agucha operation, forecast to

ramp up 42% and 11%, respectively. Both projects have experienced problems achieving production targets over the

year with McArthur River now facing pressure over its waste rock storage practices and Rampura Agucha struggling to

achieve underground productivity from a narrow, albeit high-grade, orebody.

While some of the larger projects are facing difficulties, AME believes some of the less risky sources of zinc over the

2015 shall be obtained from the expansion of Bolidens 142ktpa Garpenberg operation in Sweden and Trevalis two

sitesthe 25ktpa Santander ramping-up in Peru and the 80ktpa Halfmile in Canadathat will be brought out of care

and maintenance.

Chinese operations are typically low-grade and relatively high-cost operations. As prices consistently remained below

US$1.05/lb (US$2,204/t) from October onwards, operations began to close throughout Yunnan Province, contributing

to the 6.3% fall in domestic zinc concentrate production. It would be reasonable to expect these operations and other

high-cost producers being incentivised back into production when prices return to higher levels as forecast in 2015.

An edict made in September by the Chinese Ministry of Industry and Information Technology for zinc lead mines to

meet minimum production outputs could potentially be supply disruptive as projects are required to ramp up, while

smaller operations close. Furthermore, requirements for backfilling to improve stability could make some operations

more expensive.

As the zinc price has moderated from the highs seen in August, which encouraged a lot Chinese smelters to destock,

smelter inventories have steadily climbed 28% from the lows of 60kt seen in July to 77kt at the end of November. This is

likely to at least stay level as Chinese smelters have increased their operating rate during November prior to a potential

slowdown over the winter and Chinese New Year period. However, SHFE stocks have fallen 41% over the same period to

84kt indicating robust downstream demand.

Downstream production galvanising activity fell during November as plants closed due to weak demand and low profit

margins. Other closures were part of the initiative to provide clearer environmental conditions during the APEC Summit in

Beijing. This 1015-day closure affected plants in Tianjin, Hebei and Shandong. As such, the fall in operation rate from 81%

to 71% is expected to revert to optimal operating rates during December.

Lead prices on the LME have averaged US$1,973/t (US$0.89/lb) to the 19th of December, a fall of 3% from the November

average. Lead stocks on the LME have climbed 1.5% over the month to 221kt, albeit after falling from a spike of 229kt from

earlier in the month. AME forecasts lead prices to average US$2,075/t (US$0.94/lb) for the December Quarter before

climbing to US$2,300/t (US$1.04/lb) for 2015.


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Supply and Demand Outlook

Finished Demand by Country

Table 3: Zinc Finished Demand by Country 2010

2016


North America 1,259 1,288 1,255 1,297 373 355 1,413 1,439 1,492Canada 149 145 140 152 40 39 157 160 162Mexico 218 215 211 210 60 60 238 240 253United States 892 928 904 935 273 256 1,019 1,039 1,076

Central & South America 452 446 403 412 100 97 385 396 409Argentina 57 51 45 46 11 11 44 44 46Brazil 246 237 239 257 60 55 215 219 224Chile 9 11 10 10 3 3 11 11 12Other Central & South America 140 148 109 99 27 28 115 122 128

EU-15 2,017 1,994 1,797 1,814 465 473 1,867 1,905 1,953Austria 29 39 46 62 14 15 60 62 63Belgium 399 395 372 378 101 101 400 410 418France 217 206 207 199 35 50 184 190 194Germany 494 509 474 475 125 126 481 489 497Greece 21 10 10 9 2 2 9 9 10Italy 339 338 247 245 75 67 278 282 292Netherlands 98 94 88 89 23 23 90 91 94Other EU-15 41 41 45 41 11 9 41 42 43Portugal 15 13 10 10 2 3 10 10 10Spain 200 201 170 174 44 44 176 180 186Sweden 36 31 25 24 7 7 26 27 28United Kingdom 128 120 104 109 28 28 112 114 117

EU-12 123 123 137 107 16 21 72 74 77Czech Republic 11 12 12 9 2 2 8 8 8Hungary 8 9 10 8 2 2 9 9 9Other EU-12 12 14 13 14 4 3 14 14 15Poland 93 88 102 76 8 14 41 43 45

Europe - Other 275 305 345 373 98 91 382 397 414Other EU- Other 122 142 149 139 37 33 145 148 154

Turkey 153 163 196 234 61 58 237 249 260

CIS 271 299 315 331 86 87 337 345 355Kazakhstan 34 34 31 32 8 8 31 32 33Other CIS 21 21 21 21 5 5 21 22 22Russia 178 208 231 246 65 65 251 256 263Ukraine 38 36 32 32 9 9 34 35 37

Middle East 142 130 125 122 31 31 125 129 134Iran 74 58 45 42 11 11 42 43 44Israel 10 9 7 7 2 2 8 8 8Saudi Arabia 58 63 73 73 19 19 75 78 81

Africa 178 177 171 166 39 40 158 163 170Egypt 12 12 11 10 3 3 10 11 11Nigeria 13 13 16 17 4 4 17 17 18Other Africa 61 70 64 67 16 16 65 67 70South Africa 92 83 81 72 16 17 67 68 70

Asia 7,732 7,724 7,644 8,174 2,256 2,270 8,811 9,135 9,505China 5,403 5,458 5,343 5,748 1,652 1,641 6,322 6,582 6,838Chinese Taipei 232 221 193 201 44 52 202 207 215India 579 513 586 655 153 173 659 688 736Indonesia 94 105 120 119 28 30 117 122 131Japan 516 501 479 498 127 123 512 519 530Korea 538 545 561 570 160 156 621 627 637Malaysia 59 64 58 57 15 15 58 61 65Other Asia 176 179 172 173 44 44 174 180 193Singapore 15 16 16 16 4 4 16 17 17Thailand 120 122 117 137 29 34 130 133 142

Oceania 200 211 194 173 45 48 187 193 196Australia 190 201 184 164 42 46 178 183 187New Zealand 10 10 9 9 2 2 9 9 9

Total 12,649 12,699 12,386 12,970 3,509 3,513 13,737 14,177 14,705


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Finished Supply by Country

Table 4: Zinc Finished Supply by Country 20102016


North America 1,297 1,248 1,261 1,238 272 268 1,082 1,320 1,350Canada 720 689 649 652 161 161 635 712 713Mexico 333 322 324 323 79 79 326 348 357United States 245 238 288 263 32 28 120 260 280

Central & South America 543 637 603 654 158 156 643 769 799Argentina 41 45 31 38 9 10 29 44 44Brazil 278 278 254 270 66 66 265 345 365Peru 223 314 318 346 82 80 349 380 390

EU-15 1,791 1,810 1,764 1,787 460 452 1,798 1,811 1,842Belgium 282 282 250 252 66 62 255 270 270Finland 307 307 315 312 77 72 302 306 306France 163 164 161 152 42 42 161 160 160Germany 165 179 172 175 44 41 173 175 175Italy 105 106 97 99 25 32 112 120 120Netherlands 263 261 257 275 74 73 275 260 260

Spain 506 511 512 522 131 130 519 520 551

EU-12 234 232 223 230 58 58 233 247 277Bulgaria 85 87 73 72 18 18 72 72 102Poland 149 145 150 158 40 40 161 175 175

Europe - Other 149 153 153 143 39 43 161 170 195Kosovo - - - - - - - - 25Norway 149 153 153 143 39 43 161 170 170

CIS 599 622 623 631 150 155 623 693 693Kazakhstan 300 301 301 300 76 76 306 293 293Russia 249 256 250 266 61 63 249 310 310Uzbekistan 50 65 72 65 14 16 68 90 90

Middle East 139 159 175 172 37 37 147 147 147Iran 139 159 175 172 37 37 147 147 147

Africa 257 249 165 148 38 32 152 180 180Algeria 28 29 20 20 5 5 20 30 30Namibia 139 147 145 128 33 27 132 150 150South Africa 90 73 - - - - - - -

Asia 7,373 7,597 7,249 7,765 1,902 2,048 7,871 8,357 8,915China 5,295 5,271 4,918 5,395 1,342 1,449 5,447 5,859 6,382India 612 825 730 726 145 185 730 796 861Japan 556 523 568 594 146 146 617 620 590Korea 750 826 887 920 230 230 920 920 920Korea, Dem. Rep. 42 30 31 32 9 9 36 42 42Thailand 101 106 95 78 25 25 100 100 100Vietnam 16 16 20 20 5 5 20 20 20

Oceania 444 509 504 494 126 123 492 495 495Australia 444 509 504 494 126 123 492 495 495

Total 12,825 13,216 12,720 13,264 3,240 3,372 13,203 14,188 14,892


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Mined Demand by Country

Table 5: Zinc Mined Demand by Country 20102016



Central & South America 568 671 624 664 163 161 652 795 826Argentina 42 46 32 39 10 10 30 45 45Brazil 297 302 264 278 69 69 274 358 378Peru 229 323 328 347 85 82 348 392 403

EU-15 1,701 1,740 1,703 1,724 442 427 1,752 1,746 1,778Belgium 237 237 211 208 54 51 222 223 223Finland 290 313 322 326 80 73 315 317 317France 137 138 136 128 34 34 138 132 132Germany 171 181 177 181 46 43 178 181 181Italy 109 109 100 102 26 33 116 124 124Netherlands 235 234 230 241 66 59 248 233 233

Spain 522 527 528 538 135 134 535 536 568

EU-12 249 254 232 247 64 64 255 255 286Bulgaria 95 99 78 74 19 19 74 74 106Poland 154 155 155 173 45 45 180 180 180

Europe - Other 154 159 158 148 38 39 158 176 202Kosovo - - - - - - - - 26Norway 154 159 158 148 38 39 158 176 176

CIS 612 641 642 651 155 160 639 715 715Kazakhstan 310 310 310 310 78 78 315 302 302Russia 250 264 258 275 63 65 257 320 320Uzbekistan 52 67 74 67 14 16 67 93 93

Middle East 154 165 181 178 38 38 152 152 152Iran 154 165 181 178 38 38 152 152 152

Africa 29 31 21 23 5 5 21 31 31Algeria 29 31 21 23 5 5 21 31 31

Asia 7,615 7,838 7,449 7,909 1,928 2,047 7,924 8,407 9,026China 5,569 5,554 5,164 5,623 1,380 1,462 5,562 5,962 6,471India 633 855 755 759 153 189 744 824 888Japan 529 489 536 515 137 137 587 582 627Korea 731 798 853 887 222 222 887 887 887Korea, Dem. Rep. 34 31 32 33 9 9 37 43 43Thailand 100 90 88 72 22 22 88 88 89Vietnam 19 21 21 21 5 5 21 21 21

Oceania 426 500 494 484 124 127 496 516 516Australia 426 500 494 484 124 127 496 516 516

Total 12,662 13,136 12,611 13,127 3,237 3,346 13,167 14,126 14,891


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Mined Supply by Country

Table 6: Zinc Mined Supply by Country 20102016



Central & South America 2,135 1,965 1,897 1,904 480 531 1,990 1,977 2,017Argentina 33 38 38 42 10 9 37 35 33Bolivia 390 427 406 383 92 103 391 375 378Brazil 192 204 168 158 42 42 168 168 168Chile 20 29 20 24 10 10 34 36 36Guatemala - - - - 4 5 16 16 36Honduras 34 26 26 25 7 8 29 29 29Peru 1,466 1,241 1,240 1,273 315 355 1,315 1,319 1,338

EU-15 646 669 657 608 169 168 652 743 682Finland 56 64 52 41 12 8 38 48 48Greece 20 20 18 22 6 5 23 25 46

Ireland 342 347 339 281 68 64 271 280 160Portugal 6 4 30 53 21 21 74 99 108Spain 18 33 29 34 9 9 34 51 69Sweden 204 200 188 177 53 60 211 240 252

EU-12 108 87 77 77 15 15 60 50 34Poland 108 87 77 77 15 15 60 50 34

Europe - Other 226 191 243 244 59 61 244 241 455Greenland - - - - - - - - 214Macedonia (FYROM) 29 28 28 28 9 9 36 36 36Montenegro 1 3 8 8 1 1 5 20 20Turkey 196 160 207 208 49 51 203 185 185

CIS 678 696 725 769 197 194 787 896 1,036Armenia 9 9 7 7 1 1 6 6 6Kazakhstan 411 414 437 473 118 114 459 461 476Russia 259 264 269 267 68 68 282 369 493

Tajikistan - 9 12 22 10 10 40 60 60

Middle East 124 135 152 157 34 34 138 138 153Iran 120 131 140 136 28 28 111 111 126Saudi Arabia 4 4 12 21 7 7 27 27 27

Africa 138 124 123 143 46 44 182 217 275Burkina Faso - - 3 32 17 18 69 90 90Eritrea - - - - - - - - 44Morocco 44 37 45 39 11 10 42 41 41Namibia 56 48 40 33 9 7 32 33 41South Africa 38 39 34 38 10 10 39 40 47Zambia - - - - - - - 12 12

Asia 4,758 5,336 5,868 6,072 1,353 1,518 5,645 6,139 6,134China 3,827 4,300 4,859 5,012 1,147 1,279 4,628 4,835 4,702India 743 848 823 872 158 188 779 991 1,101Korea - - 2 25 7 11 45 75 92Korea, Dem. Rep. 36 40 40 40 10 10 40 40 40

Mongolia 58 55 62 55 16 16 65 65 65Pakistan 10 9 - - - - 15 61 61Philippines 15 19 21 18 - - - - -Thailand 33 31 36 29 6 6 43 42 43Vietnam 36 34 25 22 8 8 30 30 30

Oceania 1,448 1,487 1,498 1,477 365 358 1,476 1,496 1,275Australia 1,448 1,487 1,498 1,477 365 358 1,476 1,496 1,275

Total 12,330 12,827 13,403 13,378 3,211 3,413 13,177 14,164 14,561


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Finished Demand by Country

Table 7: Lead Finished Demand by Country 20102016


North America 1,710 1,779 1,746 1,939 500 461 1,940 1,967 2,008Canada 21 14 16 31 3 6 21 22 23Mexico 248 227 230 188 46 51 191 195 199United States 1,441 1,538 1,499 1,720 451 405 1,729 1,749 1,786

Central & South America 385 387 381 373 94 93 363 368 377Argentina 29 27 25 26 6 6 25 26 26Brazil 258 263 260 262 64 66 253 257 263Chile 1 4 2 2 1 1 2 2 2Other Central & South America 98 94 93 83 22 20 83 84 86

EU-15 1,290 1,315 1,270 1,276 325 334 1,322 1,354 1,393Austria 36 44 41 46 11 11 43 44 44Belgium 34 36 37 32 8 8 32 32 33France 71 74 64 58 17 20 63 64 67Germany 341 372 377 367 97 94 378 383 387Greece 15 15 7 11 4 4 15 15 16

Ireland 33 33 20 20 5 5 20 21 21Italy 247 233 214 215 59 59 234 237 245Netherlands 18 17 17 16 4 4 16 16 16Other EU-15 1 2 4 4 1 1 5 5 5Portugal 8 10 11 15 3 4 15 15 15Spain 264 265 245 254 56 71 261 269 277Sweden 6 5 5 8 2 2 8 8 8United Kingdom 214 209 228 230 57 52 230 244 256

EU-12 222 193 204 251 67 65 263 267 275Bulgaria 13 11 10 8 2 2 8 8 8Czech Republic 84 43 70 103 32 29 115 116 119Hungary 5 8 9 7 2 2 8 8 8Poland 121 130 116 132 31 32 132 136 140

Europe - Other 155 169 190 182 43 50 194 201 206Other EU- Other 43 38 47 48 11 12 49 51 53Turkey 112 131 143 134 31 38 145 149 154

CIS 94 89 114 106 26 26 105 107 110Kazakhstan 9 9 10 10 2 2 9 10 10Other CIS 13 15 30 31 7 7 29 30 31Russia 72 65 74 65 17 17 67 68 70


Africa 81 100 101 98 27 25 104 106 109Egypt 1 3 6 2 1 2 2 2Nigeria 3 3 3 3 1 1 4 4 4Other Africa 22 27 27 24 9 7 33 34 35South Africa 55 67 65 68 17 16 65 66 68

Asia 5,715 6,242 6,328 6,751 1,589 1,739 6,884 7,108 7,404China 4,171 4,588 4,574 4,977 1,146 1,294 5,081 5,223 5,432

Chinese Taipei 75 111 107 105 20 22 92 95 98India 433 445 521 497 144 142 516 546 580Indonesia 122 130 116 120 29 31 121 126 131Japan 224 236 273 255 62 63 262 269 278Korea 385 420 428 487 116 104 498 523 546Malaysia 47 34 25 26 4 8 27 27 28Other Asia 100 111 121 126 32 32 129 133 137Singapore 12 11 12 12 3 3 12 12 12Thailand 145 157 151 147 33 39 146 154 161

Oceania 30 25 18 19 5 5 19 20 20Australia 28 22 17 18 4 5 18 19 19New Zealand 2 4 1 1 1 1 1

Total 9,809 10,436 10,483 11,119 2,706 2,829 11,317 11,624 12,031


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Finished Supply by Country

Table 8: Lead Finished Supply by Country 20102016


North America 1,851 1,878 1,844 1,888 455 455 1,827 1,789 1,915Canada 278 283 279 288 67 68 279 309 328Mexico 317 348 332 306 87 88 349 380 380United States 1,256 1,247 1,233 1,294 300 300 1,200 1,100 1,207

Central & South America 313 330 327 325 85 87 387 423 453Argentina 44 42 41 41 11 11 42 44 44Bolivia - - - - - 2 9 31 31Brazil 172 184 184 184 46 46 184 184 184Colombia 42 42 42 42 11 11 42 42 42El Salvador 11 12 12 12 3 3 12 12 12Guatemala 13 24 23 24 5 5 20 20 20Peru - - - - - 38 50 80Venezuela 31 26 25 22 10 10 40 40 40

EU-15 1,325 1,433 1,463 1,457 384 363 1,537 1,556 1,587Austria 24 25 24 25 6 6 24 25 25

Belgium 120 121 120 134 34 34 135 135 135France 72 80 83 80 22 22 87 88 90Germany 387 495 515 466 118 118 470 480 480Greece 10 11 6 7 3 3 12 12 12Ireland 19 19 17 17 4 6 20 23 25Italy 150 150 138 180 51 56 226 190 190Netherlands 20 27 27 27 8 8 30 30 30Spain 163 177 160 160 40 40 160 160 165Sweden 59 52 62 69 20 12 67 73 75United Kingdom 301 275 312 292 80 60 306 340 360

EU-12 265 272 265 287 68 76 289 348 352Bulgaria 81 72 65 71 18 18 71 131 131Czech Republic 30 34 30 28 8 8 30 30 30Estonia 10 10 11 12 3 3 12 12 12Poland 119 134 134 149 33 33 132 131 130Romania 11 7 13 14 3 3 14 15 20Slovenia 14 15 12 13 4 11 30 30 30

Europe - Other 6 48 50 50 15 15 60 60 60Switzerland - - - - 3 3 10 10 10Turkey 6 48 50 50 13 13 50 50 50

CIS 208 248 219 239 66 72 267 250 250Kazakhstan 124 132 88 102 29 38 127 110 110Russia 77 104 106 109 29 29 115 115 115Ukraine 7 12 25 28 8 5 25 25 25


Africa 93 117 90 91 25 30 110 130 150Morocco 27 37 16 14 5 10 30 50 70Namibia 15 24 20 25 5 5 20 20 20South Africa 51 56 54 52 15 15 60 60 60

Asia 5,288 5,932 6,000 6,524 1,496 1,832 6,643 6,662 6,841China 4,194 4,640 4,643 5,154 1,152 1,438 5,157 5,142 5,289Chinese Taipei 35 41 35 36 12 12 46 48 50India 292 353 400 399 91 126 443 470 470Indonesia 45 47 45 45 13 13 50 50 50Japan 267 254 258 250 68 68 271 305 333Korea 321 421 460 473 118 138 510 480 480Korea, Dem. Rep. 5 4 4 4 2 2 6 6 6Malaysia 26 44 32 38 10 5 30 30 30Myanmar 2 2 2 2 2 2 6 7 8Philippines 30 34 34 32 8 9 34 34 35Thailand 71 93 87 90 23 23 90 90 90

Oceania 231 239 197 210 54 64 231 255 290Australia 222 226 194 210 54 64 231 255 290New Zealand 9 13 3 - - - - - -

Total 9,714 10,640 10,601 11,209 2,685 3,033 11,509 11,646 12,071


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Mined Demand by Country

Table 9: Lead Mined Demand by Country 20102016


Central & South America - - - 3 8 8 32 32 32Bolivia - - - 3 8 8 32 32 32

EU-15 309 344 336 300 81 81 324 324 324Germany 309 344 336 300 81 81 324 324 324

EU-12 441 486 447 450 112 112 448 448 448Poland 441 486 447 450 112 112 448 448 448

Asia 83 121 161 222 60 66 304 364 394China 83 121 161 222 60 66 304 364 394

Oceania - - 160 181 44 55 193 202 237Australia - - 160 181 44 55 193 202 237Total 832 951 1,104 1,156 305 321 1,299 1,369 1,434


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Mined Supply by Country

Table 10: Lead Mined Supply by Country 20102016


North America 619 627 644 613 147 153 616 713 782Canada 59 65 66 24 2 2 6 36 97Mexico 185 217 234 225 57 58 226 226 245United States 374 345 345 364 88 94 384 451 440

Central & South America 402 381 373 383 97 101 396 443 525Argentina 23 23 25 25 7 7 26 25 25Bolivia 81 87 86 86 19 19 76 79 80Brazil 13 13 10 13 3 3 13 13 14Chile 1 - 1 1 2 2Guatemala - - - - 3 2 9 10 18Honduras 17 11 12 12 3 4 13 13 13Peru 268 247 239 247 61 66 257 300 372

EU-15 119 133 121 119 31 31 132 144 155Greece 12 17 10 10 3 3 12 14 30Ireland 39 48 44 42 9 9 41 39 24

Portugal - - 1 1 1 4 - -Spain 6 4 6 1 1 6 8 11Sweden 68 62 64 60 18 18 70 82 89

EU-12 21 32 36 36 8 8 32 28 21Poland 21 32 36 36 8 8 32 28 21

Europe - Other 76 77 92 104 29 29 114 196 214Greenland - - - - - - - - 18Macedonia (FYROM) 38 36 34 34 10 10 40 40 40Montenegro 1 2 2 1 1 2 6 6Turkey 38 40 56 68 18 18 72 150 150

CIS 120 162 189 176 56 55 221 338 372Kazakhstan 37 34 35 37 9 9 37 66 78Russia 83 119 142 123 38 38 153 220 243Tajikistan - 9 12 16 9 9 31 52 52

Middle East 32 40 45 39 8 8 30 40 45Iran 32 40 45 39 8 8 30 40 45

Africa 109 114 93 91 23 20 86 102 107Burkina Faso - - - 1 1 1 1Morocco 44 48 28 23 6 6 24 24 24Namibia 13 11 9 14 2 2 10 12 16South Africa 52 55 55 53 13 10 46 56 57Zambia - - - - 2 2 5 8 8

Asia 2,093 2,477 2,970 3,164 635 755 2,687 3,236 3,317China 1,972 2,347 2,838 3,020 604 727 2,552 3,015 3,062India 88 90 96 105 20 20 93 166 197Korea, Dem. Rep. 26 32 26 26 8 8 30 30 30Myanmar 6 7 10 13 4 8 8 8Pakistan 1 1 - - - - 4 17 17Thailand - - - - - - - - 3

Oceania 631 607 573 655 177 171 719 770 766

Australia 631 607 573 655 177 171 719 770 766Total 4,222 4,650 5,136 5,380 1,210 1,330 5,031 6,011 6,304


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Year in Review

The zinc price has climbed 10.6% over 2014 levels from US$2,037/t (US92/lb) in January to US$2,253/t (US102/lb) in

November (Figure 1). The price over the year has been closely linked to the stock levels, with prices in July increasing to

over US$2,400 (US109/lb), coinciding with the LME stock levels declining to 655kt. At the beginning of 2014, AME

anticipated prices to increase over the year to average US$2,138/t (US97/lb); this is 1% below the actual average year to

date of US$2,160/t (US98/lb). AME currently forecasts a yearly average of US$2,165/t (US98/lb) for 2014.

With the closure of MMGs 500ktpa Century site in 2015, AME expected key sites operated by the major zinc

producers to fill the supply void; however, unexpected expansion delaysparticularly Glencores 380ktpa expansion at

McArthur River and Vedantas 685ktpa Rampura Aguchahave placed some emphasis on other sites, such as

Bolidens 142ktpa Garpenberg site.

Throughout 2014, AME forecast a significant deficit in the zinc market moving into 2015; however, with an unexpected

decline in Chinese demand growth in the December Quarter of 2014, the market is likely to balance in 2015. The

recent slower growth in Chinese demand came from decreased demand for end-use products particularly in

construction.

Greenfield projects resembled 57% of new zinc supply in 2014; this is in strong contrast for 2015 where 92% of supply

is expected to come from project expansions or the reopening of sites placed under care and maintenance.

Despite prices and stocks being reasonably correlated, sharp spikes in both price and stocks have occurred when

unexpected material stock movements have been made. These movements, including major overnight restocking

events have all been conducted at the New Orleans warehouse.

Figure 1: Daily LME Cash Zinc price01/01/201415/12/2014

$1,700

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US$/tonne

Looking toward 2015, AME forecasts zinc prices to continue to increase to US$2,400/t (US109/lb). With the recent

downward adjustment to global demand, the market that was expected to be in deficit is now expected to become more


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balanced. However, there is still a significant risk to mine-site supply due to delays in expansion projects and the

commissioning of new sites, meaning the market sits on the precipice of more deficits in the short term.

The recent downward adjustment of global demand was related to the slowing of Chinese demand growth over the

December Quarter of 2014 due to lessening demand for end-use products, particularly in construction. Although

demand has slowed, the global supply will remain tight in 2015.

The most significant contributors of risk to supply in 2015 are the expansions of Glencores 380ktpa McArthur River

Mine in Australia and Vedantas 685ktpa Rampura Agucha in India. Glencore is currently assessing environmental

concerns that may impact the expansion mine plan, while Vedanta is potentially facing issues over underground

ramp-ups. Meanwhile, electricity generation for the production of refined zinc and lead by Vedanta will potentially be

impacted by the Indian Governments decision to cancel various coal licences. Significant new projects, such as the

216kt Dugald River, are also experiencing commissioning delays, with AME now expecting this operation to begin in

2016.

In comparison to 2014, where 57% of new supply came from new projects, AME expects 92% of supply in 2015 to be

from expanding projects or reopened care-and-maintenance projects. The expansions at Bolidens 142ktpa

Garpenberg, Glencores 380ktpa McArthur Riverand Vedantas 685ktpa Rampura Aguchawill be the most significantnew supply sources in 2015.

At the beginning of 2014, AME forecast refined demand to be 13.6Mt; this was 1% below the December 2014 forecast of

13.7Mt for the year. AME expected the concentrate demand to be 13.9Mt at the beginning of the year; however, by

December, this has dropped 5.2% to 13.1Mt.

Refined zinc demand exhibited quarterly gains over the first three quarters of the year, supported by stronger

demand in both emerging and established markets. Chinathe largest consumer of refined zincsaw demand

growing at 13.7% from January to September, while demand in the US and the EU-15 region rose by 9.1% and 2.7%,

respectively.

AMEs forecast for refined zinc supply fell 3.9% over 2014, from 13.7Mt at the beginning of the year to 13.2Mt in

December. Similarly, the forecast supply for zinc concentrate has also decreased 4.8% from 13.7Mt to 13.2Mt.

Unforeseendisruptions in supply over 2014 primarily came from the delay of Glencores expansion at the 380ktpa

McArthur River, Vedantas 685ktpa Rampura Agucha expansionand the closure of a number of mine sites in the

Yunnan province of China due to economics and stricter environmental and safety standards.

In 2014, AME forecast 14 projects to commence during the year with an operating zinc capacity of 440kt. Of those

projects, nine were new developments totalling 250kt. The most significant projects to commence in 2014 were the

60ktpa expansion at Altin-Topkan in Tajikistan , Zijins 82ktpa Kyzyl-Tashtygskoye in Russia and the restart of the

34ktpa Aljustrel site in Portugal.

External factors have also had an impact on zinc supply during 2014. Vedantas Indian operations (including the

685ktpa Rampura Agucha) will potentially face delays due to power supply disruptions during the December Quarter.

The disruption to the power supply was caused by a lack of coal to feed the power plants, due to the cancellation of

coal mining rights by the Indian Government. Industrial action at BHP and Glencores 200ktpa Antamina site in Peru is

also expected to have an impact on zinc supply during the December Quarter of 2014.

Both production and cash costs have been weaker in 2014 when compared with 2013 figures. Productivity has fallen

0.46% from 13.3Mt in 2013 to 13.2Mt in 2014 and cash costs have increased 23.2% from US31.5/lb to US38.8/lb in

2014. The increase in costs are due to a fall in by-product creditsboth lead and copper prices have decreasedand

an increase in offsite costs due to a rise in treatment charges (TCs) of 7% to US$225/t.


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The lead price has declined 5.3% over 2014 from US$2,143/t (US97/lb) in January to US$2,030/t (US92/lb) in November.

At the beginning of 2014, AME forecast prices to increase over the year to average US$2,225/t (US101/lb); however, prices

have continued to fall with the actual average year-to-date price of US$2,110/t (US96/lb). AME currently forecasts a yearly

average of US$2,144/t (US97/lb).

Looking toward 2015, AME forecasts the lead prices to increase to US$2,300/t (US104/lb). While the lead market recorded

a 192kt surplus in 2014, AME is expecting the surplus to decrease in 2015 to approximately 20kt.

Over 2014, AMEs lead demand forecast decreased marginally (0.7%) from 11.4Mt to 11.3Mt. The forecast for global refined

lead supply at the beginning of 2014 was 11.3Mt; however, the current forecast for 2014 has increased by 1.9% to 11.5Mt,

due better-than-expected output from Chinese lead smelters. In comparison, the supply of global lead concentrate has

fallen 13.8% from the forecast 5.8Mt at the beginning to 2014 to 5.0Mt in December, due to forecast limited supply from

Chinese mines in the December Quarter of 2014.


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Economics

China: Some Reasons to be Positive

2014 has not been the best year for the Chinese economy. The super-charged rates of GDP growth that characterised

much of the 1990s and 2000s are unlikely to be repeated going forward. Nevertheless, it is important not to overstate the

downside, so with much commentary focussed on the negatives, in this months article, we present a few arguments to

redress the analytical balance.

China will remain the key driver of global commodity demand over our forecast period, and the IMFs baseline forecasts

see real GDP growth remaining above 7% in 2015, albeit slowing from an estimated 7.4% in 2014 to 7.1%. After a 2014 that

has been disappointing for some commodities, our forecasts for Chinese demand in 2015 are generally solid, on base

effects alone. Moreover, our demand projections have long incorporated the assumption that China, like other countries

before it, will see growth in the metals intensity of GDP begin to moderate and eventually start to drop as the economy

matures and the structure of GDP shifts more towards services. We continue to see a hard landing for the Chinese

economy as unlikely, with the fact that the Chinese state still has so much control over the economy providing some

reassurance that it can contain risks even as it seeks to restructure the economy.

In addition, some commodities will benefit from specific factors.

For example, Chinas imports of metallurgical coal will be supported by the cancellation of import tariffs on

metallurgical coal as part of the recent free trade agreement with Australia.

Although the corresponding import tariffs on thermal coal will not be removed for another two years, we are

assuming that stringent restrictions imposed in 2014 by the authorities on coal imports by power stations will not be

extended. (In August, the National Development and Reform Commission (NDRC) requested that the countrys

leading power producers reduce average monthly imports in SeptemberDecember to no more than 50% of the

average rate in JanuaryAugust.)

In the case of base metals, the apparent demand data can give a misleading picture of underlying demand. For

example, we believe that Chinas apparent copper demand, which rocketed by more than 21% year on year in

JanuaryAugust despite the slowing of overall economic growth, has been supported by large-scale purchases by the

countrys State Reserve Bureau (SRB), which have boosted imports. In 2015, we do not expect the scale of 2014s SRB

purchases to be repeated and, therefore, forecast modest growth of just 1% in Chinas apparent demand. However,

demand excluding SRB purchases will be stronger.

In addition, we expect that official policy will be more supportive of economic growth in 2015.

Growth has been held back in 2014 by the anti-corruption campaign, which has dampened conspicuous consumption

by the elite and government employees. If anything, the campaign has gathered momentum of late, having claimedthe most senior official yet. However, it will need to wind down sooner or later, the more so given its notable impact

on headline growth and the overriding imperative in China to ensure a sufficient rate of expansion to maintain social

stability. We anticipate that the campaign will have a more moderate impact on economic growth in 2015.


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The anti-corruption campaign aside, government and central bank policy has recently become notably more proactive

in supporting growth, particularly with the vital real estate sector undergoing a substantial cooling. The government

has adopted various mini-stimulus measures during the course of the year as the economy has slowed. Since

November the NDRC has approved CNY1trn (US$160bn; equivalent to 1.6% of 2014 nominal GDP) in infrastructure

projects, including 28 railways and a new Beijing airport. In addition, the Peoples Bank of China (PBOC) cut its

benchmark interest rates in November for the first time since 2012. With inflation currently subdued, there is scope

for further monetary easing in 2015. The authorities have also taken various steps to support the real estate sector

specifically; for example, in late September they relaxed mortgage rates and down-payment levels for second-home

buyers.

It is also worth noting that the IMFs October forecasts will not have incorporated the full effect of the recent dramatic fall

in global oil prices.

The slide in oil prices is already having a severe impact on the economies of some major energy producers, most

notably in the case of Russia. China is also one of the worlds largest oil producers, but is the worlds largest oil

importer. There is, therefore, expected to be a net positive effect on the economy from falling prices at the level of

imports and for consumers. The figure below shows that the fall in global oil prices during the global financial crisis

was not passed on to Chinese consumers. However, in 2014, retail prices have been falling in China, albeit not to the

same degree as in the US.

Chinese and US Petrol Prices vs Brent Spot Price, 20052014

20

40

60

80

100

120

140

0.2

0.4

0.6

0.8

1.0

1.2

1.4

Mar-2005

Sep-2005

Mar-2006

Sep-2006

Mar-2007

Sep-2007

Mar-2008

Sep-2008

Mar-2009

Sep-2009

Mar-2010

Sep-2010

Mar-2011

Sep-2011

Mar-2012

Sep-2012

Mar-2013

Sep-2013

Mar-2014

Sep-2014

US$/bblUS$/litre

China state guidance retail 93 RON gasoline price (Beijing; LHS)US regular conventional retail gasoline prices (LHS)

Brent spot price F OB (RHS)

Source: Bloomberg, EIA, AME

Against this backdrop, recent economic indicators from China have been disappointing. In November, industrial production

growth eased to 7.2% year on year from 7.7% in October, making it the second-slowest pace of growth of the year so far

after Augusts surprise deceleration to 6.9% year onyear.

However, there appear to have been specific one-off factors at play in November that will not apply going forward,

notably Beijings hosting of the Asia-Pacific Economic Cooperation (APEC) gathering of world leaders that month. In

anticipation of the meeting, hundreds of factories, including steel plants, were ordered to temporarily halt production,

in order to reduce pollution levels in the capital.


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In JanuaryNovember, the total floor space of newly started construction (AMEs proxy for Chinese c onstruction

activity, as building materials are usually ordered in the early stage of the construction process) fell by 9.0% year on

year, accelerating sharply from JanuaryOctobers 5.5% year-on-year fall. However, it is worth noting that, prior to

November, the indicator had consistently improved during the course of the year, from a 27.4% year-on-year

contraction in JanuaryFebruary.

In light of the above, data for the coming few months will be closely watched for confirmation that Novembers particularl yweak outturn was temporary.

China: Industrial Output, 20002014 China: Floor Space of Newly Started and CompletedBuildings, 20022014 (Cumulative Data)

-

5.0

10.0

15.0

20.0

25.0

Jan-00

Aug-00

Mar-01

Oct-01

May-02

Dec-02

Jul-03

Feb-04

Sep-04

Apr-05

Nov-05

Jun-06

Jan-07

Aug-07

Mar-08

Oct-08

May-09

Dec-09

Jul-10

Feb-11

Sep-11

Apr-12

Nov-12

Jun-13

Jan-14

Aug-14

% ch. yoy

-30.0

-10.0

10.0

30.0

50.0

70.0

90.0

Feb-02

Aug-02

Feb-03

Aug-03

Feb-04

Aug-04

Feb-05

Aug-05

Feb-06

Aug-06

Feb-07

Aug-07

Feb-08

Au

-08

Feb-09

Aug-09

Feb-10

Aug-10

Feb-11

Aug-11

Feb-12

Aug-12

Feb-13

Aug-13

Feb-14

Aug-14

% ch. yoy

Newly started Co mp leted

Source: NBS, AME


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Industrial Indicator Summary

Table 11: Industrial Indicator Summary 20072014 Q3

2007 2008 2009 2010 2011 2012 2013 Jun-14 Sep-14

Industrial production(real % ch. yoy)

United States 2.5% -3.5% -11.4% 5.4% 4.0% 3.7% 2.9% 4.2% 4.4%Germany 5.9% -0.1% -15.5% 10.1% 7.4% -0.4% 0.1% 1.1% -0.3%Italy 2.5% -3.2% -18.7% 6.9% 0.3% -6.0% -3.2% -1.6% -7.8%China 18.5% 12.9% 11.0% 15.7% 13.9% 10.0% 9.5% 8.9% 8.0%Japan 2.9% -3.6% -21.6% 15.6% -2.7% 0.2% -0.6% 2.6% -1.1%South Korea 7.0% 3.4% -0.7% 16.5% 5.9% 1.7% 0.2% 1.3% 1.0%India 15.7% 7.7% 0.2% 9.7% 4.8% 0.7% 0.5% 4.4% 0.6%Brazil 5.6% 2.9% -7.0% 10.4% 0.5% -2.7% 2.2% -4.3% -4.0%Russia 6.8% 0.6% -9.3% 8.2% 4.7% 2.6% 0.4% 1.9% 1.6%Exchange Rate (Local / US$)

USD/DEM 0.73 0.68 0.72 0.76 0.72 0.78 0.75 0.73 0.75USD/JPY 117.77 103.39 93.60 87.73 79.69 79.82 97.58 102.11 104.00USD/CNY 7.61 6.95 6.83 6.77 6.46 6.31 6.15 6.23 6.17USD/CAD 1.07 1.07 1.14 1.03 0.99 1.00 1.03 1.09 1.09USD/BRL 1.95 1.84 2.00 1.76 1.67 1.96 2.16 2.23 2.27USD/ZAR 7.05 8.26 8.41 7.32 7.26 8.21 9.64 10.54 10.77Industrial/business leading indicator

United States 51.2 45.5 46.4 57.4 55.2 51.8 53.9 55.2 57.6Germany 110.9 100.4 90.7 107.8 111.3 105.0 106.9 110.4 106.3Japan 51.2 45.3 45.9 51.3 50.1 48.8 51.8 50.3 51.5China 55.1 50.1 53.0 53.8 51.4 50.8 50.8 50.7 51.3Brazil 59.9 58.5 55.0 64.8 57.8 56.9 54.7 48.2 46.5South Korea 105.9 88.6 94.0 108.4 101.1 94.2 95.1 94.7 95.0Consumer confidence

United States 85.6 63.8 66.3 71.9 67.4 76.6 79.2 82.8 83.0Germany 4.4 -7.5 -25.2 -3.2 4.3 -4.8 -4.2 4.3 1.0Japan 44.7 32.4 35.5 41.4 37.7 40.0 43.7 39.1 40.9China 112.6 108.7 102.0 105.5 103.3 102.4 101.2 103.9 104.5Italy -18.7 -23.8 -21.0 -21.6 -27.7 -36.7 -25.7 -9.9 -13.9Brazil 111.3 111.7 112.3 116.8 113.2 114.0 111.9 107.5 109.2Russia -2.1 -5.2 -28.0 -9.5 -9.0 -5.8 -7.8 -6.0 -7.0South Korea 83.3 103.0 112.6 102.6 101.1 104.1 106.7 106.3

End Use Sectors

Table 12: End Use Sectors 20072014 Q3

2007 2008 2009 2010 2011 2012 2013 Jun-14 Sep-14

Construction

United States Constructionspending (nominal US$m)

1,153,027.0 1,067,828.0 905,334.0 804,226.0 787,539.0 859,758.0 908,528.0 240,859.0 238,844.6

Germany Construction GDP (realindex)

96.2 95.3 92.6 99.2 103.4 104.5 104.3 106.4

China Floor space U/C -residential (mn sqm)

1,864.6 2,166.7 2,508.0 3,149.4 3,884.4 4,289.6 4,863.5 4,372.0 4,790.2

Japan Construction work (realindex) 93.9 86.3 81.8 75.9 74.4 76.7 84.6 82.5 83.1Motor vehicle sales

United States (thousands) 16,152.5 13,216.7 10,425.8 11,577.5 12,731.7 14,440.8 15,485.0 4,133.3 4,182.5Germany (thousands) 3,148.2 3,090.0 3,807.2 2,916.6 3,173.6 3,082.5 2,952.4 826.5 743.4China (thousands) 6,297.9 6,747.5 10,315.4 13,748.9 14,498.0 15,493.6 17,928.0 4,763.5 4,522.1Japan (thousands) 5,353.6 5,082.2 4,609.3 4,956.2 4,210.2 5,369.7 5,375.5 1,161.2 1,312.5Consumer durables sales

United States (nominal US$m) 421,151.0 357,706.0 271,759.0 328,964.0 356,738.0 393,853.0 439,061.0 110,153.0 113,799.0Germany (nominal index) 99.2 100.3 97.6 99.9 103.8 104.6 102.5 102.1 100.8China (nominal US$m) 31,205.0 38,968.0 46,121.0 59,887.0 83,045.0 93,921.0 113,167.0 30,734.0 30,092.0Japan (nominal index) 165.3 156.2 117.1 100.1 101.0 97.7 93.5 88.2 84.5


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Developed World GDP

Figure 2: Developed World GDP 20102016

Developing World GDP

Figure 3: Developing World GDP 20102016


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GDP % change per annum

Table 13: GDP % Change per Annum 20102016

2010 2011 2012 2013 2014 2015 2016

Brazil 7.5% 2.7% 1.0% 2.5% 0.3% 1.4% 2.2%China 10.4% 9.3% 7.7% 7.7% 7.4% 7.1% 6.8%France 1.9% 2.1% 0.4% 0.4% 0.4% 1.0% 1.6%Germany 3.9% 3.7% 0.6% 0.2% 1.4% 1.5% 1.8%India 9.3% 7.7% 4.8% 4.7% 5.6% 6.4% 6.5%Italy 1.7% 0.7% -2.3% -1.9% -0.2% 0.9% 1.3%Japan 4.7% -0.4% 1.5% 1.5% 0.9% 0.8% 0.8%Korea 6.5% 3.7% 2.3% 3.0% 3.7% 4.0% 4.0%Russia 4.1% 4.3% 3.5% 1.3% 0.2% 0.5% 1.5%United Kingdom 1.9% 1.7% 0.7% 1.7% 3.2% 2.7% 2.4%United States 2.5% 1.6% 2.3% 2.2% 2.2% 3.1% 3.0%

FX Forecast

Table 14: FX Forecast 20102016

2010 2011 2012 2013 2014 2015 2016

Algeria(DZD/US$) 73.85 72.89 77.88 79.68 79.69 82.08 84.54

Argentina(ARS/US$) 3.91 4.13 4.55 5.47 8.23 11.20 15.31Armenia(AMD/US$) 373.70 372.68 401.90 409.75 412.81 430.48 452.01Australia(AUD/US$) 1.09 0.97 0.97 1.04 1.09 1.10 1.12Azerbaijan(AZN/US$) 0.80 0.79 0.79 0.78 0.78 0.77 0.77Bolivia(BOB/US$) 7.02 6.95 6.92 6.91 6.86 6.86 6.86Bosnia & Herzegovina(BAM/US$) 1.48 1.41 1.52 1.47 1.43 1.40 1.39Botswana(BWP/US$) 6.79 6.82 7.61 8.39 8.56 8.57 8.75Brazil(BRL/US$) 1.76 1.67 1.96 2.16 2.28 2.32 2.37Bulgaria(BGN/US$) 1.48 1.41 1.52 1.47 1.42 1.40 1.38Burkina Faso(XOF/US$) 495.86 473.70 512.43 495.95 479.21 470.76 465.03Canada(CAD/US$) 1.03 0.99 1.00 1.03 1.09 1.10 1.10Chile(CLP/US$) 509.94 483.71 486.34 495.21 556.53 562.00 564.00China(CNY/US$) 6.77 6.46 6.31 6.15 6.22 6.25 6.30Chinese Taipei(TWD/US$) 31.49 29.39 29.58 29.70 30.05 28.90 27.83Colombia(COP/US$) 1,897.33 1,847.82 1,797.07 1,868.58 1,936.96 1,941.94 1,965.29Croatia(HRK/US$) 5.50 5.35 5.85 5.71 5.53 5.45 5.40Czech Republic(CZK/US$) 19.10 17.69 19.56 19.56 20.08 20.04 20.15Denmark(DKK/US$) 5.62 5.36 5.79 5.62 5.46 5.42 5.41Egypt(EGP/US$) 5.63 5.94 6.07 6.87 6.97 7.18 7.33

Ethiopia(ETB/US$) 14.48 16.98 17.79 18.72 20.01 21.41 22.91Georgia(GEL/US$) 1.78 1.68 1.65 1.66 1.81 1.84 1.88Germany(DEM/US$) 0.76 0.72 0.78 0.75 0.74 0.74 0.74Hungary(HUF/US$) 208.08 201.11 225.04 223.57 233.49 238.58 238.61Iceland(ISK/US$) 122.15 116.00 125.13 122.13 116.10 115.63 116.58India(INR/US$) 45.74 46.68 53.48 58.54 62.86 64.70 67.16Indonesia(IDR/US$) 9,084.00 8,773.00 9,388.00 10,440.50 11,761.43 12,391.72 13,047.26Iran(IRR/US$) 10,074.21 10,616.94 12,198.76 17,942.31 26,755.83 31,339.84 36,869.33Iraq(IQD/US$) 1,169.00 1,169.65 1,165.24 1,164.97 1,166.00 1,166.00 1,166.00Israel(ILS/US$) 3.73 3.58 3.85 3.61 3.57 3.55 3.55Jamaica(JMD/US$) 87.16 85.74 88.46 99.78 111.89 121.15 129.94Japan(JPY/US$) 87.73 79.69 79.82 97.58 102.44 102.33 102.50Kazakhstan(KZT/US$) 147.36 146.65 149.15 152.20 178.68 180.00 180.00Korea(KRW/US$) 1,156.37 1,107.96 1,126.49 1,094.58 1,036.81 1,019.81 1,011.50Kyrgyz Republic(KGS/US$) 45.87 46.12 47.00 48.43 51.16 53.92 55.54Malaysia(MYR/US$) 3.22 3.06 3.09 3.15 3.20 3.13 3.09Mexico(MXN/US$) 12.63 12.44 13.15 12.76 13.24 13.42 13.58Mongolia(MNT/US$) 1,355.99 1,263.92 1,358.42 1,520.31 1,802.40 2,034.59 2,177.82

Morocco(MAD/US$) 8.43 8.10 8.64 8.42 8.17 8.06 8.00New Zealand(NZD/US$) 1.39 1.27 1.24 1.22 1.16 1.15 1.16Nigeria(NGN/US$) 151.06 155.89 158.83 159.20 155.22 160.63 171.35Norway(NOK/US$) 6.04 5.61 5.82 5.88 6.12 6.24 6.32Peru(PEN/US$) 2.82 2.75 2.64 2.70 2.80 2.75 2.70Poland(PLN/US$) 3.02 2.97 3.25 3.16 3.09 3.04 3.04Qatar(QAR/US$) 3.64 3.64 3.64 3.64 3.64 3.64 3.64Romania(RON/US$) 3.18 3.05 3.47 3.33 3.26 3.23 3.20Russia(RUB/US$) 30.37 29.40 31.06 31.85 35.33 37.23 37.64Saudi Arabia(SAR/US$) 3.75 3.75 3.75 3.75 3.75 3.75 3.75Serbia(RSD/US$) 77.91 73.34 88.02 85.17 86.42 89.60 90.73Singapore(SGD/US$) 1.36 1.26 1.25 1.25 1.25 1.26 1.27South Africa(ZAR/US$) 7.32 7.26 8.21 9.64 10.69 11.20 11.61Sweden(SEK/US$) 7.20 6.49 6.77 6.51 6.69 6.81 6.75Switzerland(CHF/US$) 1.04 0.89 0.94 0.93 0.90 0.92 0.93Thailand(THB/US$) 31.71 30.49 31.07 30.71 32.19 32.88 33.30Turkey(TRY/US$) 1.51 1.68 1.80 1.90 2.17 2.25 2.35Ukraine(UAH/US$) 7.95 7.99 8.08 8.15 11.30 12.91 13.32United Arab Emirates(AED/US$) 3.67 3.67 3.67 3.67 3.67 3.67 3.67

United Kingdom(GBP/US$) 0.65 0.62 0.63 0.64 0.60 0.59 0.59Vietnam(VND/US$) 19,138.00 20,663.00 20,872.00 21,028.75 21,421.57 22,064.25 22,667.60


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Prices

Exchange Prices vs Stocks

Figure 4: Zinc Exchange Prices vs Stocks

Cash to Three Month Price Spread

Figure 5: Zinc Cash to Three Month Price Spread


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Forward Curve

Figure 6: Zinc Forward Curve

Exchange Prices vs Stocks

Figure 7: Lead Exchange Prices vs Stocks


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Cash to Three Month Price Spread

Figure 8: Lead Cash to Six Month Price Spread

Forward Curve

Figure 9: Lead Forward Curve


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Historical Prices & Stocks

Table 15: Lead Historical Prices & Stocks

Cash Price Total Stocks

US$/t US/lb (Kt)Latest 2,030 92 218Oct-14 2,034 92 227Sep-14 2,117 96 225

Aug-14 2,237 101 221Jul-14 2,193 99 216Jun-14 2,107 96 194May-14 2,097 95 190Apr-14 2,087 95 194Mar-14 2,053 93 200Feb-14 2,108 96 202Jan-14 2,143 97 208Dec-13 2,137 97 222Nov-13 2,090 95 231Oct-13 2,115 96 233Sep-13 2,085 95 240

Aug-13 2,173 99 186Jul-13 2,048 93 200

Jun-13 2,100 95 198May-13 2,032 92 219Apr-13 2,024 92 255Mar-13 2,173 99 263Feb-13 2,366 107 287Jan-13 2,334 106 291Dec-12 2,280 103 320Nov-12 2,182 99 362Oct-12 2,142 97 324Sep-12 2,178 99 268

Aug-12 1,898 86 310Jul-12 1,881 85 327Jun-12 1,851 84 350May-12 1,999 91 350Apr-12 2,074 94 361Mar-12 2,057 93 377Feb-12 2,121 96 370Jan-12 2,100 95 363Dec-11 2,025 92 353

Nov-11 1,994 90 370Oct-11 1,960 89 388Sep-11 2,288 104 374

Aug-11 2,393 109 318Jul-11 2,681 122 311Jun-11 2,525 115 320May-11 2,420 110 322Apr-11 2,719 123 308Mar-11 2,624 119 281Feb-11 2,596 118 294Jan-11 2,584 117 280Dec-10 2,413 109 208Nov-10 2,365 107 204Oct-10 2,384 108 200Sep-10 2,193 99 192

Aug-10 2,083 94 192Jul-10 1,844 84 184Jun-10 1,707 77 190

May-10 1,877 85 191Apr-10 2,272 103 181Mar-10 2,163 98 176Feb-10 2,126 96 165Jan-10 2,352 107 157


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17/12/2014 Teck Resources Limited (Pend Oreille)

Production at Teck's Pend Oreille in the United States has recommenced with the first shipment of zinc concentrate sent to

the nearby Trail Operation in British Columbia for processing. The site was under care and maintenance since 2009, but

maintained to allow the restart of the project to be completed on time and under budget. The site anticipates an annual

production of rate of 44ktpa of zinc concentrate (26ktpa contained zinc), operating until 2020. AME estimates Pend Oreille

to produce approximately 2kt of contained zinc in 2014.

17/12/2014 Vedanta Resources PLC, Vedanta Resources PLC, Vedanta Resources PLC, Vedanta Resources PLC,

Vedanta Resources PLC (Kayad, Rajpura-Dariba, Rampura Agucha, Sindesar Khurd, Zawar Mines)

The sale of Hindustan Zinc is likely to be postponed until the next financial year (FY2016). The Indian Government will wait

for the results of the Central Bureau of Investigation's report into the previous 20022003 sale of assets and the Supreme

Court's verdict on the legality of the sale before making any further decisions. The government is also waiting on the

valuation report for Hindustan Zinc.

Vedanta's shareholders have approved the offer to buy out the Indian Government's 29.5% stake in Hindustan Zinc to

become the sole owner of the operations that include the 680ktpa Rampura Agucha site.

17/12/2014 Canadian Zinc Corporation (South Tally Pond)

Canadian Zinc Corporation has completed their recent 2,754m drilling programme on the South Tally Pond polymetallic

deposit. Significant intersections include 6.1m in LM14-103 from 340.9347.0m at 8.50% zinc, 4.41% lead, 1.06% copper,

34g/t silver and 0.55g/t gold. LM14-102 included 7m from 341.1348.1m at 3.40% zinc, 0.30% lead, 0.52% copper, 25.3g/t

silver and 0.44g/t gold.

Mineralisation is at a vertical depth of 260350m and remains open to the north and east of the current drilling. AME

expects further drilling to be conducted to upgrade the current 1.24Mt Indicated Resource.

15/12/2014 Exxaro Resources Limited, Vedanta Resources PLC (Gamsberg mine)

Vedanta anticipates to have the first phase of the 250ktpa Gamsberg project completed and producing by 20172018. An

investment of US$630m is planned for the first phase of the project, which includes developing access to approximately

50Mt of zinc contained in ore, 27% of the overall 185Mt resource.

12/12/2014 Yunnan Chihong Zinc and Germanium Co Ltd (Hulunbeier Chihong (Zn))

Yunnan Chihong's Hulunbeier smelter in China has successfully produced zinc ingot. The smelter began trial production in

October and, when running at full capacity, it will produce 140ktpa.

11/12/2014 Nyrstar NV (Campo Morado)

Mining and Milling activities at Nyrstar's Campo Morado mine in Mexico have fully resumed after the two-week blockade

of site by the local CTM trade union was lifted. The blockade was lifted on the 28th November and production is expected

to be at pre-blockade levels within the next few days. Negotiations with the local and federal union leaders are ongoing

and the possibility of further industrial action remains.

Nyrstar are predicting a loss of 2kt (40%) zinc in concentrate over the December Quarter of 2014 due to the production

suspension.

11/12/2014 Goldspike (Lone Mountain )

Goldspike have continued to receive positive results from drilling at Lone Mountain, Nevada, in the US. Further to initial

results, Goldspike have intersected 15.24m of 33.06% zinc and 0.61% lead from 147.83m to 163.07m in drill hole LM-14-04.Of the seven holes drilled in phase one, each has intersected mineralisation except hole LM-14-03 due to technical issues.

Phase two of the drilling programme is due to commence in early January.


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10/12/2014 Boliden AB (Kokkola)

Boliden's new silver recovery plant at the Kokkola smelter in Finland has been commissioned. The new plant will produce a

silver concentrate, an intermediate product, which will be sold to silver refineries. The silver refinery will produce

approximately 25t of silver in concentrate annually. Kokkola is primarily a zinc smelter producing approximately 305ktpa

refined zinc, the introduction of the silver recovery plant will be an important by-product for the site.

10/12/2014 Glencore (Mount Isa Zinc)

The expansion at Glencore's Lady Loretta Mine in Australia is ahead of schedule. Construction on the project commenced

in 2011 and has since ramped up to currently produce 1Mtpa of ore, this is expected to increase to 1.6Mtpa mined ore by

the second half of 2015. The overall capital cost of the project is approximately US$350m.

With the currently stated Reserves, the site is forecast to have a mine life of 12 years. AME estimate a head grade of 14.7%

zinc based on reported Reserve grades, although AME believes the grade profile increases with depth. As such, assuming

the orebody is mined from the top down, grades in the early stages of production will be lower. Changes in the head grade

over the mine life will vary the quantity of contained zinc; however, based on mined ore of 1.6Mtpa, AME estimates

contained zinc in ore to be between 150200ktpa. Ore is transported 140km to Glencore's Mount Isa concentrator for

further processing.

09/12/2014 Firestone Ventures Inc. (Torlon Hill)

The Guatemalan President has signed into law the proposed increase in mining royalties. This will have an impact on the

feasibility study at Torlon Hill where the business plan may be reconsidered.

Mines will now be subject to two royalties, totalling 10% (9% for the national government and 1% for the producing

project municipality). Previously zinc producers were required to pay only 1%; however, 3% was voluntarily paid in

agreement with the mining industry association.

AME believe the change in royalties will shift the operation from negative to positive cash costs (after credits), although the

site will still be operating in the first cost quartile. AME expects Torlon Hill to begin production in 2016 producing

approximately 21ktpa of contained zinc.

09/12/2014 Henan Yuguang Gold & Lead Group Co Ltd (Yuguang Zinc)

Henan Yuguang Gold and Lead Group's Zinc smelter resumed production after a 30-day routine maintenance shutdown.

Production increased 7kt in November compared to October; however, the smelter is not yet at the full capacity of

250ktpa.

08/12/2014 Maguan Yutong Zinc (Maguan)

Yunnan Yuntong Zinc's Maguan Smelter in China will lose 2,000t of production in December due to equipment failure. The

smelter has an annual capacity of 50ktpa.

08/12/2014 Glencore (McArthur River)

The environmental issues (fuming waste dumps and water pollution) at Glencore's McArthur River Mine are still being

debated with the local Borroloola community. The Borroloola traditional owners have filed a complaint with the Australian

Competition and Consumer Commission (ACCC) over claims that Glencore gave them misleading and false information

regarding environmental hazards associated with the mine during the approval process.

The Borroloola traditional owners believe that Glencore have misinterpreted the results of an independent report that was

released in October 2014, and Glencore should be doing more to ensure the safety of the local community and people

working onsite.


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McArthur River is currently undertaking an expansion programme to produce 380ktpa zinc by 2016. Any adverse

environmental or legal action may result in delays to the expansion programme.

04/12/2014 ZincOx Resources Plc (Korean Recycling Plant)

The ZincOx Korean Recycling Plant has restarted as scheduled. This was following the suspension of production for repairs

to the refractory. The plant is working at approximately 94% of the current target capacity of 212ktpa with zinc recovery at

about 94% of the target 95%.

04/12/2014 KBL Mining Limited (Mineral Hill)

KBL Mining has produced the first zinc concentrate from their Mineral Hill project in Australia. The one-week trial produced

a saleable lead and zinc concentrate from feed grades of 6.3% lead and 2.7% zinc with recoveries of 87% lead and 55%

zinc, producing a final concentrate containing 45% lead and 46% zinc. Minimal changes were required to convert an

existing copper circuit into a zinc circuit while the lead circuit was left unaltered. Permanent modifications are expected to

be carried out within the next three months.

04/12/2014 Lundin Mining Corporation (Zinkgruvan)

Lundin released 20152017 guidance figures for their Zinkgruvan project in Sweden. The site is expected to produce 78

82kt zinc, 2730kt lead and 3.54.0kt copper in 2015. Production of zinc and copper will remain consistent with previous

years while lead will vary with head grade in accordance with the mine plan. The project is expected to spend US$45m in

sustaining capex during 2015 on underground development, tailings and paste backfill.

03/12/2014 Vedanta Resources PLC (Gamsberg Refinery)

Vedanta has approved an investment of US$782m over three years to develop the Gamsberg-Skorpion zinc project in

Namibia. From the total investment, approximately US$150m will be used to upgrade the Skorpion zinc refinery to enable

the roasting of zinc sulphide concentrates.

The first phase of the Gamsberg open pit is estimated to have a mine life of 13 years and is expected to begin productionin 2017/18. The Gamsberg ore is expected to be mined and refined at Skorpion during the December Half of 2017 and the

June Half of 2018.

Original plans to construct a zinc refinery at the Gamsberg site appear to have been shelved and as such AME do not see

the likelihood of construction proceeding.

02/12/2014 Binani Industries Limited, Binani Industries Limited (Toranica, Zletevo)

The strike that was planned to take place on the 2nd of December at the Indo Minerals and Mining's (IMM Marketing)

Toranica and Zletovo mines in Macedonia has been put on hold. The Trade Union of Energy and Mining in Macedonia have

agreed to a solution with IMM Marketing.


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AMEs Lead & Zinc Services

AME offers the following four major services on the Lead & Zinc industry.

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& Zinc industry.

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AMEs Lead & Zinc Database ensures you get accurate up-to-date technical information on mines

around the world via the Internet. For each operation we provide historical and forecast production

and cost data. Our work is based upon detailed analysis of flowsheets, supplemented by mine andplant visits and ongoing technical contact with individual operations.

AME offers a database service which is accessible online via AME Direct and is regularly updated.

The most highly researched large project mineral economics database available. They cover the

great majority of all production and constitute a powerful business development tool.

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Given our long experience over four decades in market analysis, we appreciate that the devil is in the

detail. To this end, we concentrate on end-users, particularly the construction, transport, equipmentand consumer durable sectors.

Consulting Services As pre-eminent and independent economists in the Lead & Zinc industry, we are experienced

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AME Outlook ISSN 13216775

Copyright 2014 by AME Mineral Economics (Asia) Limited and AME Mineral Economics Pty Limited. This confersInternational Copyright under the Universal Copyright Convention. All rights reserved. No part of this publication may be

reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording, or any

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Disclaimer: While AME believes that the information and analysis contained herein are accurate, neither AME, its

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