Jp Morgan Global Metals & Mining October

Global Equity Research 09 October 2009

Global Metals & Mining Weekly Wrap-Up •

Alcoa: Kleinfeld Rejuvenating Alcoa - Reiterate OW (p-8)

Metals & Mining

•

Burning Thoughts #24: Coal and the Vancouver Port Tango (p-8)

Michael F. Gambardella

•

Norsk Hydro: Upgrade to Neutral (p-11)

•

Klöckner & Co.: Upgrade to OW; Accretive deals to enhance valuation (p-11)

Rodolfo R. De Angele, CFA

BHP Billiton Limited: Olympic Dam Main Haulage Shaft Failure (p14)

Banco J.P. Morgan S.A.

•

AC

(1-212) 622-6446 [email protected] J.P. Morgan Securities Inc. AC

(55-11) 3048-3888 [email protected]

AC

John Bridges CFA, ACSM (1-212) 622-6430 [email protected]

•

Bumi Resources: 19% interest charged annually - ALERT (p-14)

•

Steel: Domestic HRC prices likely to come under pressure in the near term - ALERT (p-15)

•

Steel Authority of India Ltd: Chiria Mine allocation- Long Term Positive, No near term impact likely - ALERT (p-16)

•

Latin Coppers: Raising estimates on higher copper price forecasts, prefer GMex over PCU (p-18)

•

Vale: Revising estimates to incorporate new base metal forecasts (p18)

J.P. Morgan Securities Inc. AC

David George

(61-3) 9608-4002 [email protected] J.P. Morgan Securities Australia Limited

Jeffrey Largey

AC

(44-20) 7325-9744 [email protected] J.P. Morgan Securities Ltd. AC

Frank Li

(852) 2800-8511 [email protected] J.P. Morgan Securities (Asia Pacific) Limited

Steve Shepherd

AC

(27-11) 507-0386 [email protected] J.P. Morgan Equities Ltd.

Please refer to “Table 2: Most Recent Publications by the Global Metals and Mining Team” for the list of original publication dates.

Please see page 2 for our complete Global Metals & Mining team list.

Table 1: Top Global Metals Equity Picks prices are in local terms unless otherwise indicated JPM Rating OW OW OW OW OW

Company Alcoa Thompson Creek Metals Nucor Randgold Resources Ltd Arch Coal

Analyst Gambardella Gambardella Gambardella Shepherd Bridges

Primary Metal Aluminum Moly Minimill Gold Coal

Country US US US UK US

CCY USD USD USD USD USD

Price 08 Oct-09 14.35 12.67 45.53 74.78 23.44

Mkt. Cap (US$ MM) 13,982.25 1,763.44 14,327.06 6,201.09 3,808.32

Fiscal Yr. End Dec Dec Dec Dec Dec

EPS (Local) 09E -0.70 0.50 -0.82 1.02 0.26

10E 1.15 1.80 3.00 1.34 1.12

Source: J.P. Morgan estimates, Bloomberg. Note: J.P. Morgan ratings: OW = Overweight; N = Neutral; and UW = Underweight

See page 29 for analyst certification and important disclosures, including non-US analyst disclosures. J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

Michael F. Gambardella (1-212) 622-6446 [email protected]

Global Equity Research 09 October 2009

J.P. Morgan Global Metals and Mining Equity Research North America Michael F. Gambardella (New York) Global Sector Coordinator (1-212) 622-6446 [email protected] John Bridges,CFA, ACSM (New York) (1-212) 622-6430 [email protected] Nathan Zibilich, CFA (New York) (1-212) 622-2039 [email protected] Ankush Agarwal, CFA (New York) (1-212) 622-5623 [email protected] Tyler Langton (New York) (1-212) 622-5234 [email protected] J.P. Morgan Securities Inc.

Europe Jeff Largey (London) (44-20) 7325-9744 [email protected] Michael Jansen (London) (44-20) 7325-5882 [email protected] Ben Defay (London) (44-20) 7325-9231 [email protected] J.P. Morgan Securities Ltd.

Latin America & Emerging Markets Rodolfo Angele, CFA (Sao Paulo) (55 11 3048 3888) [email protected] Fabio Bevilaqua (Sao Paulo) (55 11 3048 3403) [email protected] Banco J.P. Morgan S.A. Yuriy A Vlasov (Moscow) (7 495 967 7033) [email protected] J.P. Morgan Bank International LLC

Africa Steve Shepherd (Johannesburg) (27-11) 507 0386 [email protected] Allan Cooke (Johannesburg) (27-11) 507-0384 [email protected] Abhishek Tiwari (Johannesburg) (27-11) 507 0363 [email protected] J.P. Morgan Equities Limited

Asia Pacific Sukit Chawalitakul (Thailand) (66-2) 684-2679 [email protected] J.P. Morgan Securities (Thailand) Limited Frank Li (Hong Kong) (85-2) 2800 8511 [email protected] Wenwen Wang (Hong Kong) (86-21) 5200 3786 [email protected] J.P. Morgan Securities (Asia Pacific) Limited Aditya Srinath (Jakarta) (62-21) 5291 8573 [email protected] Stevanus Juanda (Jakarta) (62-21) 5291 8574 [email protected] PT J.P. Morgan Securities Indonesia Pinakin Parekh (Mumbai) (91-22) 6639 3018 [email protected] J.P. Morgan India Private Limited

Australia Mark Greenwood (Sydney) (61-2) 9220 1563 [email protected] Benjamin Wilson (Sydney) (61-2) 9220 1384 [email protected] Dale Koenders (Sydney) (61-2) 9220 1579 [email protected] David George (Melbourne) (613) 9608 4002 [email protected] J.P. Morgan Securities Australia Limited Japan Akira Kishimoto (Tokyo) (81-3) 6736-8646 [email protected] JPMorgan Securities Japan Co., Ltd.

J.P. Morgan USA Metals and Mining Credit Research North America High Yield Research Dave Katz (New York) (1-212) 270-4593 [email protected] J.P. Morgan Securities Inc.

The authors acknowledge the contribution of Sadhak Bindal of J.P. Morgan Services India Private Ltd., Mumbai, to this report

2

Michael F. Gambardella (1-212) 622-6446 [email protected]

Global Equity Research 09 October 2009

Recently Published Reports Table 2: Most Recent Publications by the Global Metals and Mining Team Date Published 8-Oct-09 8-Oct-09 7-Oct-09 7-Oct-09 6-Oct-09 6-Oct-09 5-Oct-09 1-Oct-09 30-Sep-09 25-Sep-09 25-Sep-09 24-Sep-09 24-Sep-09 24-Sep-09 23-Sep-09 22-Sep-09 22-Sep-09 22-Sep-09 22-Sep-09 22-Sep-09

Analyst Gambardella Bridges Largey George Parekh Juanda Kishimoto Kishimoto Bridges Gambardella Bridges Vlasov Parekh Kishimoto Kishimoto Bridges Bridges Angele Greenwood Katz

21-Sep-09

George

21-Sep-09 18-Sep-09 18-Sep-09 17-Sep-09 17-Sep-09 16-Sep-09 16-Sep-09 16-Sep-09 16-Sep-09 16-Sep-09 15-Sep-09

Parekh Kishimoto Gambardella Largey George Gambardella Largey Kishimoto Katz Katz Gambardella

15-Sep-09

Gambardella

15-Sep-09

Kishimoto

15-Sep-09

Kishimoto

15-Sep-09 15-Sep-09 15-Sep-09

Kishimoto Kishimoto Kishimoto

15-Sep-09

Kishimoto

15-Sep-09 15-Sep-09

Kishimoto Bridges

15-Sep-09 14-Sep-09 14-Sep-09 13-Sep-09 11-Sep-09 11-Sep-09 10-Sep-09 10-Sep-09 10-Sep-09

Kishimoto Angele Gambardella Largey Gambardella Parekh Gambardella Vlasov Gambardella

Title Pages Alcoa : Kleinfeld Rejuvenating Alcoa - Reiterate OW 9 Burning Thoughts #24 : Coal and the Vancouver Port Tango 22 Klöckner & Co. : Upgrade to OW; Accretive deals to enhance valuation 16 BHP Billiton Limited : Olympic Dam Main Haulage Shaft Failure 9 Steel Authority of India Ltd : Chiria Mine allocation- Long Term Positive, No near term impact likely - ALERT 4 Bumi Resources : 19% interest charged annually - ALERT 5 Nippon Steel (5401) : Kimitsu No. 2 Furnace Restarted - ALERT 4 Steel Sector : Steel Shipments (August): Volume up YoY; Prices Likely to Rise Moderately 6 Coal : EPA turns the screw on 79 mountaintop permits - ALERT 4 Global Metals & Mining : Weekly Wrap-Up 44 US Coal Industry : Q3 Earnings' Preview, Coal Price Update, Ratings Changes and Roll-over of Target Prices 24 Polymetal : Turning silver into gold. Initiating coverage at OW 36 Sterlite Industries : Sterlite Energy- Company re-affirms 1980MW power project - ALERT 4 Steel Sector : World Crude Steel Production (August): Solid Recovery Continues 5 Steel Sector : U.S. Steel Inventories (August): At Historical Lows 4 Gold & Precious Metals : Denver Gold Forum 2009 Round-Up 36 Rentech Inc. : Test unit is working; now for the first commercial plant. We visit the PDU 11 Grupo Mexico : Asarco worst case not nearly as bad as before - expect discount to narrow further - ALERT 6 OneSteel Limited : Demand outlook remains cautious despite price rises and stimulus spending 11 HY Metals and Mining : September monthly: Coal outlook, steel outlook and X 57 Rio Tinto Limited : Feedback from North American Site Visit: Cautious on aluminium outlook, focus on cost reductions ALERT 5 Metals - Investor Meeting Takeaways : While investors wary of valuations, few willing to go against momentum; China data points over the next two months likely to be key - ALERT 5 Steel Sector : Domestic Crude Steel Production (August): Blast Furnace Steel Has Recovered to Nearly 80% of Peak 6 Global Metals & Mining : Weekly Wrap-Up 43 Outokumpu : Take Aways from IR Day - ALERT 4 BHP Billiton and Rio Tinto : BHP priced for perfection, downgrade to UW, take profits; maintain market weight in RIO 16 Arcelor Mittal : Investor Day Recap - ALERT 4 ArcelorMittal : Investor Day's Recap - ALERT 4 Nippon Steel (5401) : Kimitsu Plant No. 2 Blast Furnace to Be Restarted - ALERT 4 Steel Industry Primer and High Yield Outlook 43 U.S. Steel Corp : Initiating Credit Coverage with an Overweight Rating 77 Nucor Corp. : NUE Specific Pig Iron Hits 3Q EPS - Raising 4Q EPS 8 Nucor Corp. : Company specific pig iron issue a $0.37 drag on 3Q - Remain positive on integrated producers X, MT and AKS 1 Nippon Steel (5401) : Initiating Coverage at Overweight: Top Blast Furnace Steelmaker, Growth Strategy Centers on Highgrade and Midrange Market Segments 5 YAMATO KOGYO (5444) : Initiating Coverage at Neutral: Electric Furnace Ordinary Steel Maker with Ambitious Overseas Plans 5 JFE Holdings (5411) : Initiating Coverage at Overweight: Needs to Beef Up Overseas Strategy to Complement Domestic Earning Power 5 TOKYO STEEL MFG (5423) : Initiating Coverage at Neutral: Clear Medium- to Long-Term Growth Scenario 5 Sumitomo Metal Industries (5405) : Initiating Coverage at Overweight: Realizing Distinctive Growth 5 Kobe Steel (5406) : Initiating Coverage at Neutral: Comprehensive Assessment of Diversified Business Portfolio Takes Time 5 Daido Steel (5471) : Initiating Coverage at Overweight: Cyclical Recovery and Attractive Medium- to Long-term Growth Potential 5 Gold & Precious Metals : Denver Gold Forum Day 1 Wrap-up 12 Steel Sector : Initiating Coverage of Seven Steelmakers: Increasing Strategic Options for Longer-term Growth in Addition to Cyclical Recovery 164 Latin Steels : Brazilian flat steel price increases at risk - ALERT 7 Freeport-McMoRan Copper & Gold : FCX Big Beneficiary of Weak Dollar - Raising 3Q EPS by 52% 6 European Steel : Top Threats to Sustainable Recovery 60 Global Metals & Mining : Weekly Wrap-Up 32 Sterlite Industries : Back in the reckoning? Sterlite increases cash bid for Asarco to $2.56bn - ALERT 5 Steel Dynamics : Raises 3Q09 EPS guidance to $0.20-0.25 from $0.10-0.20 1 MMK : Surprising on the upside with 2Q09 results - ALERT 4 Steel : Tariffs on Chinese Steel Pipe a positive for X - ALERT 4

Source: Morgan Markets (J.P. Morgan)

3

Michael F. Gambardella (1-212) 622-6446 [email protected]

Global Equity Research 09 October 2009

Metals Snapshot Figure 1: Aluminum

Figure 2: Copper

$/lb

LME+Comex Aluminum Inventory

1.60

LME Aluminum Price

1.50

'000 tons

$/lb

LME+Comex Copper Inventory

5,000

4.50

LME Copper Price

4,500

1.40

'000 tons 700

4.00

600

3.50

500

4,000

1.30 3,500

1.20 1.10

3,000

3.00

400

1.00

2,500

2.50

300

2.00

200

1.50

100

0.90

2,000

0.80 1,500

0.70

1,000

0.60 0.50 Oct-07

Mar-08

Jul-08

Dec-08

May-09

500 Oct-09

1.00 Oct-07

Mar-08

Jul-08

Dec-08

May-09

0 Oct-09

Source: Bloomberg

Source: Bloomberg

LME aluminum prices moved lower by 1% to $0.82/lb while LME & COMEX inventories remained unchanged at 4,581kt for the week

The LME copper moved higher by 2% to $2.76/lb, while LME & COMEX inventories moved higher by 1% to 401kt for the week.

Figure 3: Nickel

Figure 4: Zinc

$/lb

'000 tons 140

$/lb 1.80

15.00

120

1.60

13.00

100

1.40

11.00

80

1.20

9.00

60

1.00

7.00

40

0.80

5.00

20

0.60

17.00

LME Nickel Inventory

LME Nickel Price

LME Zinc Inventory

'000 tons 500

LME Zinc Price

450 400 350 300 250 200 150 100

3.00 Oct-07

Mar-08

Jul-08

Dec-08

May-09

0 Oct-09

0.40 Oct-07

50

Mar-08

Jul-08

Dec-08

May-09

Source: Bloomberg

Source: Bloomberg

The LME nickel prices moved higher by 7% to $8.42/lb, while inventories remained unchanged at 121,326tonnes.

The LME zinc price moved higher by 1% to $0.87/lb, while inventories remained unchanged at 435,325 tonnes

4

0 Oct-09

Michael F. Gambardella (1-212) 622-6446 [email protected]

Global Equity Research 09 October 2009

Metals Snapshot Figure 5: Lead

Figure 6: Tin

$/lb 2.05

LME Lead Inventory

LME Lead Price

'000 tons 140

$/lb 14.00

LME Tin Inventory

'000 tons

LME Tin Price

18 1.85

120

16

12.00

1.65

14

100 1.45

10.00

1.25

80

1.05

60

12 10

8.00

0.85

8 6.00

6

40 0.65 20

0.45 0.25 Oct-07

Mar-08

Jul-08

Dec-08

May-09

0 Oct-09

4

4.00

2 2.00 Oct-07

Mar-08

Jul-08

Dec-08

May-09

0 Oct-09

Source: Bloomberg

Source: Bloomberg

The LME lead price fell 2% to $0.96/lb and inventories remained unchanged at 127,875 tonnes.

The LME tin price fell 1% to $6.83/lb and inventories moved higher by 3% to 26.1kt.

Figure 7: Gold

Figure 8: Silver

$/oz

Comex Gold Open Interest

1100

Gold Price

No. of Contracts ('000) 650 600

1000 550

950

500

900 850

190 18.5 170 16.5 150

450

800 400

750

350

700 650

14.5 130 12.5

110

300

600 250

550

Source: Bloomberg

No. of Contracts ('000) 210

Silver Price 20.5

1050

500 Oct-07

Comex Silver Open Interest

$/oz

Mar-08

Jul-08

Dec-08

May-09

200 Oct-09

10.5

8.5 Oct-07

90

Mar-08

Jul-08

Dec-08

May-09

70 Oct-09

Source: Bloomberg

Industrial weakness led to a sharp pullback in silver prices, We remain positive on the longer gold fundamentals driven by demand and supply. However, we believe the near term direction which are now recovering. We expect silver prices to remain will be driven by inflation and dollar depreciation expectations. volatile and to move more in line with gold prices.

5

Michael F. Gambardella (1-212) 622-6446 [email protected]

Global Equity Research 09 October 2009

Metals Snapshot Figure 9: Gold & Silver Inventories

Figure 10: PGMs

Mn Ounces

Comex Silver Inventory (LHS)

145

Comex Gold Inventory (RHS)

$/oz

Platinum Price (LHS) Palladium Price (RHS)

10.0

140

2,150

850

1,950

750

1,750

650

1,550

550

1,350

450

1,150

350

950

250

9.0

135 8.0

130 125

7.0

120

6.0

115 5.0

110 105 Oct-07

$/oz

Mn Ounces

Mar-08

Jul-08

Dec-08

May-09

750 Oct-07

4.0 Oct-09

Mar-08

Jul-08

Dec-08

May-09

150 Oct-09

Source: Bloomberg

Source: Bloomberg

Are the recent declines in the Comex silver inventories suggesting a tighter silver market?

We see a bleak environment ahead for PGMs demand that resulted from the global recession. We think a supply-side response is badly needed to avoid a massive oversupply.

Table 3: Metal Performance & JPM Forecasts Commodity Aluminum Copper Nickel Zinc Lead Tin Silver Gold Platinum Palladium DXY Index

Price on 08 Oct-09 0.82 2.76 8.42 0.87 0.96 6.83 17.79 1055 1347 321 76

Week Ago 0.83 2.71 7.87 0.86 0.98 6.92 16.35 999 1280 292 77

Week Chng % -1% 2% 7% 1% -2% -1% 9% 6% 5% 10% -2%

30 Days Ago 0.85 2.93 8.13 0.89 1.11 6.85 16.43 995 1286 297 77

30 Day Chng % -3% -6% 4% -2% -13% 0% 8% 6% 5% 8% -2%

Price 01-Jan-09 0.68 1.38 5.27 0.54 0.46 4.70 11.39 879 935 187 81

YTD Chng % 20% 100% 60% 62% 110% 45% 56% 20% 44% 71% -7%

YTD Avg 0.71 2.14 6.28 0.67 0.70 5.94 13.83 934 1,152 239 82

QTD Avg 0.81 2.70 8.03 0.85 0.96 6.74 16.77 1,021 1,301 303 77

JPM Forecasts Q3 09E 2009E 2010E 0.83 0.75 0.84 2.70 2.27 2.70 8.16 7.06 7.77 0.84 0.72 0.86 0.91 0.75 0.84 6.58 6.02 7.03 16.13 14.33 15.79 1000 948 1006 1275 1183 1338 290 250 306 -

Source: J.P. Morgan estimates, Bloomberg Note: All prices for in $/lb, except for Gold, Silver & PGMs, which is in $/oz

Table 4: Metal Inventories Commodity Aluminum Copper Nickel Zinc Lead Tin Silver Gold

Inventory on 08 Oct-09 4,581,214 401,308 121,326 435,325 127,875 26,085 116,159 9,316

Week Ago 4,587,089 398,807 120,912 436,775 127,775 25,425 115,421 9,297

Week Change % 0% 1% 0% 0% 0% 3% 1% 0%

30 Days Ago 4,602,639 368,283 117,504 436,525 121,775 20,345 117,655 9,173

30 Day Change % 0% 9% 3% 0% 5% 28% -1% 2%

Inventory 01-Jan-09 2,339,651 373,744 78,390 253,500 45,150 7,790 127,692 8,535

YTD Change % 96% 7% 55% 72% 183% 235% -9% 9%

Source: Bloomberg. Note: Copper & Aluminum inventories are LME + Comex inventories in metric tonnes. Nickel, Zinc, Lead & Tin inventories are LME inventories in metric tonnes. Gold & Silver inventories are Comex inventories in '000 troy ounces

6

Michael F. Gambardella (1-212) 622-6446 [email protected]

Global Equity Research 09 October 2009

Global Movers and Shakers Figure 11: Best and Worst Equity Performance by Metals Sector five-day market-cap weighted return of indexes (%), local Copper

Gold

Diversified

Aluminum

PGM

Zinc

Steel

Nickel

Coal

0

2

4

6

8

10

12

14

16

Source: Bloomberg

Figure 12: : Best Performance (Copper Sector)

Figure 13: Worst Performance (Coal Sector)

five-day return (%), local

five-day return (%), local Massey Energy International Coal Group

Teck Cominco Ltd.

CONSOL Energy Peabody Energy Arch Coal

Freeport-McMoRan Copper China Coal Energy Rentech Inc. Yanzhou Coal Mining - H Southern Copper Corp Banpu Public Raspadskaya China Shenhua Energy Grupo Mexico

PT Tambangraya Megah Tambang Bukit Asam Centennial Coal Company

Sterlite Industries

Exxaro Resources Ltd Bumi Resources

0

2

Source: Bloomberg

4

6

8

10

12

14

16

-15

-10

-5

0

5

10

15

20

Source: Bloomberg

7

Michael F. Gambardella (1-212) 622-6446 [email protected]

Global Equity Research 09 October 2009

Regional Publications for the Week This note consists of excerpts from recently published research. For additional information on each stock's investment thesis, including valuation methodology and risks to price targets, please contact your salesperson, the covering analyst's team, or www.morganmarkets.com.

North America Nonferrous Metals and Mining

Alcoa: Kleinfeld Rejuvenating Alcoa - Reiterate OW • Alcoa kicked off 3Q09 earnings season last night with an impressive upside surprise driven by both aggressive cost-cutting and by answering many of the market skeptics, posting 9% sequential revenue growth demonstrating strong operational leverage. At the same time, we believe CEO Klaus Kleinfeld has placed his stamp on Alcoa and changed the culture of the company which we believe should help Alcoa continue and maintain real cost reductions into the future. This marks the third consecutive quarter of better-than-expected EPS for AA after a dismal record of misses over the prior five quarters. We believe the sentiment around AA’s stock could be turning more positive and that this DJIA component could likely serve as a magnet for new money looking to play a global economic recovery. We reiterate our OW rating and December 2010 target price of $22.00. • Raising 4Q EPS estimate to $0.15 from $0.10 and maintaining 2010 EPS estimate of $1.15. Our 4Q EPS increase reflects a $0.01/lb increase in our aluminum price forecast to $0.83/lb vs. the current spot price of $0.82/lb and further benefits from lower costs. Despite an increase in our aluminum price assumption for 2010 to $0.84/lb from $0.81/lb, we are maintaining our 2010 EPS forecast of $1.15 after adjusting for a higher fully diluted share count. Our 2010 EBITDA forecast increases to $4.1 billion from $3.7 billion and our 2010 ATOI forecast goes to $2.0 billion from $1.8 billion. • Big 3Q EPS beat driven by cost-cutting and revenue growth. GAAP EPS from continuing operations was $0.07 which included a one-time $0.03 gain from the completion of the Suriname transaction resulting in adjusted EPS of $0.04 vs. JPM and consensus forecasts of ($0.09). The beat was driven by better-thanforecast ATOI in every segment except Engineered Products & Solutions. • AA an attractive play on a global recovery. We believe investor sentiment is changing towards AA and the stock is beginning to be viewed as an attractive play on a global economic recovery. The stock trades at only 6.2x our 2010 EBITDA forecast vs. its long-term historical average multiple of 9.1x. We are maintaining our December 2010 target price of $22.00 which assumes an 8.0x EBITDA multiple which we view as conservative. (Michael F. Gambardella— New York) Burning Thoughts #24: Coal and the Vancouver Port Tango • We recently visited Teck Coal’s mines in Canada and the Westshore and Neptune ports that handle the bulk of coal sales. Although still small, Westshore handled 2.5mt of PRB coal in the last 15 months. The smaller Neptune port is looking for more of Teck’s business while Westshore is expanding capacity and is interested

8

Michael F. Gambardella (1-212) 622-6446 [email protected]

Global Equity Research 09 October 2009

in adding more PRB tons. We expect to see increases in PRB exports from Westshore and a slow build in Teck’s coking coal exports. We report on what we saw and learned, in this note. • In coking coal “less is more” says CEO Don Lindsay. Teck highlights that in a tight market the company improves its bottom line by leaving the marginal ton of product in the ground. The company has the capacity to increase production from its current 24mt run rate perhaps by close to 50% but given the high stripping ratios, a decision to expand today would only raise sales in several years. • Westshore has benefited from higher coking coal prices. Westshore’s contract with Teck gave the facility a share in the upside in coking coal prices. Teck has already removed this from its CP rail contracts and is hoping to do the same with its port contracts. Westshore, perhaps anticipating lower revenues from coking coal, is expanding capacity. We wonder if the PRB producers will offer Westshore price participation. • Westshore says it likes the more stable profile of thermal coal, though the currently intermittent PRB exports create problems. Westshore has had some spontaneous combustion problems with PRB exports which it attributes to remnants of cargos that dry and then burn. One solution to this would be to export more coal. As Westshore readies to negotiate new port contracts with Teck, we expect more talks with PRB producers. We accept that PRB exports are unlikely to be high-margin business, but we continue to feel that they add value to the balance of PRB producers’ domestic sales. • We conclude that coking coal supply remains tight and well managed in the Pacific basin though we remain skeptical of the higher price forecasts for 2010 coking coal prices. Teck has little scope to raise production in the short to medium term. Negotiations with unionized labor could actually interfere with planned sales. Positioning by Teck and Westshore ahead of negotiations is like a dance. Teck’s stance in redirecting some tonnage to its Neptune facility should open up more capacity for PRB coal exports. (John Bridges—New York)

9

Michael F. Gambardella (1-212) 622-6446 [email protected]

Global Equity Research 09 October 2009

Leaders and Laggards: North America Figure 14: Five-Day Performance five-day return (%), local Century Aluminum Co. Coeur d'Alene Stillwater Mining

Massey Energy International Coal Group Cliffs Natural Resources Pan American Silver Teck Cominco Ltd. Silver Wheaton Freeport-McMoRan Copper CONSOL Energy Gerdau Ameristeel Peabody Energy Agnico-Eagle Mines Arch Coal Alcoa Newmont Mining Kinross Gold Goldcorp Inc GrafTech International Barrick Gold Allegheny Technologies Arcelor Mittal Carpenter Technology Gold Reserve Steel Dynamics AK Steel Rentech Inc. Thompson Creek Metals Commercial Metals U.S. Steel Corp Haynes International Worthington Industries Dynamic Materials Globe Specialty Metals Nucor 0

5

10

15

20

25

30

Source: Bloomberg

Figure 15: 30-Day Performance 30-day return (%), local International Coal Group Gold Reserve Cliffs Natural Resources Arch Coal CONSOL Energy Coeur d'Alene Teck Cominco Ltd. Silver Wheaton Haynes International Gerdau Ameristeel Alcoa Peabody Energy Dynamic Materials Allegheny Technologies Stillwater Mining Freeport-McMoRan Copper Agnico-Eagle Mines Pan American Silver Massey Energy Carpenter Technology Century Aluminum Co. Kinross Gold Globe Specialty Metals Goldcorp Inc Newmont Mining GrafTech International U.S. Steel Corp Arcelor Mittal Barrick Gold Nucor

Commercial Metals Worthington Industries Thompson Creek Metals AK Steel Steel Dynamics Rentech Inc. -20

Source: Bloomberg

10

-10

0

10

20

30

40

50

Michael F. Gambardella (1-212) 622-6446 [email protected]

Global Equity Research 09 October 2009

Europe/Africa Nonferrous Metals and Mining

Norsk Hydro: Upgrade to Neutral • Adjusting estimates based on new metal price forecast. J.P. Morgan's metal strategist, Michael Jansen, has upgraded his aluminium price forecast to $1,647/tonne in 2009 (was $1,608/tonne) and to $1,844/tonne in 2010 (was $1,775/tonne). While NHY's practice of selling volumes forward limits the impact on our 2009 forecast, the new 2010 aluminium price forecast of $0.84/lb leads to a material 12% upgrade in our 2010 EBIT forecast (to NOK2,543m) and a 14% increase in our 2010 EPS forecast (to NOK1.25). • Aluminium price has ignored supply overhang. Admittedly the aluminium price has proved stronger than anticipated YTD. Given that the aluminium price likely faces limited downside risk due to modestly improving supply/demand fundamentals (excluding perhaps exchange inventories), a weak USD and production cost pressures, we believe an UW rating on NHY is no longer justified particularly as the start up of Qatalum – a likely positive investment catalyst – comes closer to reality and NHY's earnings recovery, based in large part on restructuring and cost control, begins to gather steam. On the other hand, we believe aluminium's upside remains limited due to the risk of capacity restarts, significant LME inventories and a relatively muted recovery in underlying demand. • Potential for Energy asset disposals further underpins share price. Following Orkla's recent disposal of Norwegian hydro power assets, we believe shares of NHY will be further underpinned by speculation regarding the future of its own Energy assets as the Orkla disposal values NHY's Energy division at NOK27 per share. While the disposal of NHY's power assets is not necessarily imminent, it should set a floor in the value of NHY's share price. • Upgrade to N; Set Dec 10 PT of NOK46. Aluminium faces many headwinds relative to other metals (namely in terms of supply), but we also acknowledge that curtailments have helped mop up excess supply while a demand recovery (at least in terms of re-stocking) is underway. In addition, a weak USD, the potential for power asset disposals, a potential reduction in pension liabilities and the pending start up of Qatalum all create a more positive outlook for shares of NHY. We raise our PT from NOK33 (Dec-09) to NOK46 (Dec-10) at an average forward multiple of 8x ‘11E EBITDA and estimate NHY trades appropriately at 8.5x ‘10 EBITDA. (Jeff Largey—London)

Steel

Klöckner & Co.: Upgrade to OW; Accretive deals to enhance valuation • Rights issue overhang now gone. Now that KCO has completed its €193m rights issue, we believe a key overhang has been removed and investors can benefit in two respects from owning under valued shares of KCO: 1.) KCO enjoys considerable leverage to the steel cycle thus benefiting from a macro economic recovery; and 2.) KCO is now positioned to engage in accretive and valuation enhancing acquisitions. • Competitive landscape ripe for acquisitions. Armed with a total war chest of over €600m, we believe KCO finds itself in a unique position to enhance its valuation by adding incremental EBITDA through acquisitions at relatively low cost as the highly fragmented steel distribution industry is potentially rife with distressed competitors who are unable to finance net working capital requirements. In terms 11

Michael F. Gambardella (1-212) 622-6446 [email protected]

Global Equity Research 09 October 2009

of timing, we believe KCO is exploring multiple value enhancing transactions that could occur within the next six to twelve months and serve as positive catalysts for KCO’s share price. We note the latent acquisition benefit is enhanced by KCO’s successful track record of cost savings through integration. • Raising 2011 earnings outlook. Based on KCO’s guidance (from the October 6 capital markets day) that the company would achieve an underlying EBITDA margin of 6% in 2011 and 10% y/y sales growth in both 2010 and 2011, we have raised our 2011 EBITDA forecast by 12% to €257m (although we do not give KCO the full benefit yet). While underlying EBITDA should soon swing back to profitability in the near term, we believe reported 2H 2009 EBITDA could be aided by an inventory re-valuation reversal (perhaps by as much as €60m). • Upgrade to OW; Increase Dec-10 PT to €24 (from €22). We believe KCO's improving earnings outlook and leverage to the cycle justify our PT of €24 as KCO trades at an attractive 2010 EV/EBITDA multiple of 4.8x and a P/E of 14.7x. Moreover, KCO's strong balance sheet and potential for valuation enhancing acquisitions further strengthens the Overweight investment thesis as it partially detaches KCO from the macro economic outlook (as does the selfstabilizing steel distribution model). (Jeff Largey—London)

12

Michael F. Gambardella (1-212) 622-6446 [email protected]

Global Equity Research 09 October 2009

Leaders and Laggards: Europe/Africa Figure 16: Five-day Performance five-day return (%), local Klöckner & Co. Novolipetsk Steel Norsk Hydro Rio Tinto plc Randgold Resources Ltd Anglo American Platinum TMK Lonmin plc SSAB Evraz Group AngloGold Ashanti Limited Aquarius Platinum (SA) Outokumpu Salzgitter ArcelorMittal Harmony Gold Mining Co MMK ThyssenKrupp Eastern Platinum Ltd. Gold Fields Ltd Northam Platinum Ltd DRDGold Ltd Voestalpine BHP Billiton (BILJ.J) African Rainbow Minerals Raspadskaya Impala Platinum Holdings Lonmin plc (LONJ.J) Acerinox Exxaro Resources Ltd Severstal -5

0

5

10

15

20

Source: Bloomberg

Figure 17: 30-Day Performance 30-day return (%), local TMK Raspadskaya MMK Severstal Novolipetsk Steel Norsk Hydro Evraz Group Voestalpine Rio Tinto plc SSAB Eastern Platinum Ltd. Klöckner & Co. Randgold Resources Ltd Anglo American Platinum Salzgitter Exxaro Resources Ltd ThyssenKrupp Aquarius Platinum (SA) Gold Fields Ltd AngloGold Ashanti Limited BHP Billiton (BILJ.J) ArcelorMittal African Rainbow Minerals Harmony Gold Mining Co Acerinox Lonmin plc Outokumpu Impala Platinum Holdings Lonmin plc (LONJ.J) DRDGold Ltd Northam Platinum Ltd -20

-10

0

10

20

30

40

50

60

Source: Bloomberg

13

Michael F. Gambardella (1-212) 622-6446 [email protected]

Global Equity Research 09 October 2009

Asia/Australia Nonferrous Metals and Mining

BHP Billiton Limited: Olympic Dam Main Haulage Shaft Failure • BHP announced the fully automated haulage system in the main shaft at its Olympic Dam copper/uranium/gold mine was damaged in a mechanical failure at 10:30pm on Tuesday October 6. Details on the extent of damage, potential cause and likely outage period for the operations are sparse, but it has been confirmed that there were no injuries. The secondary ore haulage system was not damaged in the incident. • Olympic Dam ore production in FY2009 was 9.88Mt, of which it is estimated the now damaged non-operating main haulage system accounted for ~80%. Total copper production in FY09 was 194kt, uranium production was 4kt, while gold production was 108koz. Our estimate of outage period for repairs and recommissioning is 3-6 months, absent company guidance. While some 20% of ore haulage capacity through the secondary system remains unaffected, we expect that this will provide insufficient ore to feed the concentrator circuit efficiently. Consequently, if the ore haulage shaft outage does extend to 3 months we’d expect the concentrator, smelter and refinery will need to be temporarily shutdown. • Earnings impact of extended outage is minimal as Olympic Dam contributed only US$117M EBIT to BHP’s US$18.2B for FY09, and we were forecasting EBIT loss of –US$31M for FY10E (JPM est. BHP FY10 EBIT of US$13.2B). • However, as Olympic Dam accounts for ~5% of global uranium supply, an extended outage is likely to cause upward pressure on uranium prices. Given its large exposure to spot uranium prices, we'd argue Paladin is the preferred exposure to this effect rather than ERA, which still sells majority of its uranium under lower-priced legacy contracts. While Olympic Dam accounts for only ~1% of global copper supply its annual production is ~50% of LME stockpiles, prolonged outage would be supportive of prices in a tight market. • We stay UW on BHP, with the shares seen as expensive, trading at 1.5x FY10E NPV, a demanding FY10E P/E of 20.5x, and 22.8% above our price target. While not cheap in its own right, we prefer RIO (CY10E P/E 13.7x, 1.2x CY10E NPV Neutral, P/T $58.24/sh) for large mining stock exposure to global economic recovery. Risks include different commodity, currency and operating costs than our forecasts. (David George—Melbourne) Bumi Resources: 19% interest charged annually - ALERT • We attended BUMI’s analyst meeting and reiterate our negative view on CIC loan. (For complete analysis, kindly refer to our 2 Oct 2009 report: “Short-term selling pressure from CIC loans likely” for more detail.): • 19% interest will be charged: The US$1.9B CIC loans will be charged at 19% per annum for the next two years. As the lock-up period is for the loan is two years, BUMI will not be able to refinance. Hence, the interest cost will be high for the next two years until 4Q11. If we were to simulate using 2Q09 results with $1.9B in debt and 19% annual interest (equivalent to US$90MM per quarter), 2Q09 net income would be adjusted downwards by 36.7%. (Please refer to Table 1 for detailed calculation.) • Potential downwards adjustments to consensus FY10E forecast: Once again, we would like to reiterate our concern over potential downwards adjustment to

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Michael F. Gambardella (1-212) 622-6446 [email protected]

Global Equity Research 09 October 2009

consensus’ FY10E forecast. Currently consensus is forecasting FY09E and FY10E net income of US$444.9MM to US$392.8MM; down 11.7% Y/Y. With the effective interest rate rising from 4% (1H09 effective interest cost) to 19% and assuming US$1.9B in loan outstanding, we calculate that there is a 41.1% potential downside adjustment (to US$231MM) to consensus forecast. (Please refer to Table 2 for detailed calculation.) • Cash out to DEWA, FBS, and Pendopo: With the receipts of the CIC debt, the sellers of DEWA, Fajar Bumi Sakti and Pendopo Batubara Energy have received the proceeds from BUMI. Although BUMI could get the money back if the three companies do not achieve their targets, we view this negatively as this is a deviation of the original plan communicated to investors, not to mention that these three deals had been viewed as controversial by the market. • Debt level likely to rise: In anticipation, we believe that debt level is likely to rise beyond the US$1.9B level on the back of capital expenditure requirement that could amount to US$3billion in the next 3 years. While currently BUMI’s equity is only US$1.76B, debt raising is likely to be needed to finance these aggressive expansions. • Maintain Neutral and Jun-10 PT of Rp3,200: With these factors, we maintain our Neutral rating and Rp3,200 Jun-10 PT. Our SOTP is derived by adding the DCF values of each subsidiary (risk-free: 10.5%, equity risk premium: 5.5% and terminal growth: 5.5%). Finally, we attach a 15% corporate governance discount to BUMI. Risks: (1) Better than expected profit (2) Favorable/irrational acquisitions. (Stevanus Juanda—Jakarta) Steel

Steel: Domestic HRC prices likely to come under pressure in the near term ALERT • Import prices decline sharply, domestic prices likely to come under pressure: Landed imported steel prices in India have declined sharply over the last 1 month as Chinese export prices have come off. The recent INR appreciation has added to the woes (INR has appreciated by 5.5% since the beginning of September). While CIS import HRC prices have remained stable, Chinese HRC prices have declined sharply from $630/MT to $500/MT (offers are now happening at $480/MT). Thus landed Chinese import prices are at Rs27,000/MT around 10% lower than current domestic prices of Rs30-31,000/MT. • Domestic steel prices- October is officially a roll-over month, but we do expect steel discounting to increase from here: Steel companies, which had hiked flat product prices by Rs1000-1500/MT in September, have as of now rolled over prices for October. However, given the increasing gap between import and domestic prices, we do expect discounts to be likely given (though ‘officially' list prices would be maintained). • Steel imports unlikely to increase materially from here: Steel prices for most part of the year, early on (please refer to Figure 1 on page 2), were at a significant premium to import prices, given that non tariff barriers like ‘licensing' were in place. However, while we may see end users like re-rollers look more towards the import market, we do not see steel imports materially picking up from here, given that it remains difficult for the trade level to import in India. However, given the continued sluggish state of domestic demand, we expect imports on the margin influencing prices. 15

Michael F. Gambardella (1-212) 622-6446 [email protected]

Global Equity Research 09 October 2009

• Long steel prices remain sluggish: Increase in scrap prices, combined with some recovery in demand led to long steel prices recovering over the last 2 months, but prices are stable, and unless, globally scrap prices and iron ore prices move up significantly, longs should remain stable. Demand should recover as the rains recede. • Risk remains of further decline in Chinese export prices: Given the cost structure of the Chinese steel industry, while it looks difficult for export steel prices to weaken further from $500/MT, in the event they do fall further, it is likely to increase pressure on the domestic steel pricing market. As of now CIS steel prices are holding up well, and we have not seen CIS matching offers with the Chinese prices. (Pinakin Parekh—Mumbai) Steel Authority of India Ltd: Chiria Mine allocation- Long Term Positive, No near term impact likely - ALERT • Government decision to allot half of Chiria Mines to SAIL, long term positive: As per the Business Standard, the Government has decided to allot half of the Chiria Mines (in the Eastern India state of Jharkhand) to SAIL, while the other half would be kept for development by the private sector. Earlier Arcelor Mittal was also in the race for the Chiria Mines. • Chiria Mines- Among the largest in the world: Current reserves of Chiria mines stand at close to 2bn tonnes of high grade iron ore, among the larger ones in the world. However this is likely based on preliminary exploration, and generally in India the reserves are marked up significantly as a more detailed exploration takes place. • Longer term positive for SAIL: While we do not expect any near term supply of iron ore from the Chiria mines (in fact it would likely be years, before supply starts), we believe it is a long term positive for SAIL given the expected steel capacity growth. It is also positive for SAIL, in the sense that it retains a competitive advantage of captive iron ore vis a vis many other industry players and highlights that green field capacities in India remain very difficult to execute. • Would any new steel plant be required in Jharkhand?: What remains to be seen is, if in lieu of the mine allocation, SAIL has to further increase investments in Jharkhand (it already has planned expansions in Bokaro steel plant in Jharkhand). • Current iron ore reserves and requirements: While no clear cut data is available on iron ore mine reserves of steel companies, as per our interactions with industry associations, SAIL has an estimated 1.2bn tonnnes of iron ore reserves but is currently mining from mines with an estimated reserves of 0.5bn tones, given various clearances are still awaited for the other mines (Forest clearance not yet been received for the large Rowghat mines). SAIL's current iron ore requirements are 23MT, but is likely to increase to 43MT, post the capacity expansions. • Updates on equity issuance: As per media reports (Economic Times), the government has asked SAIL to give a specific proposal for the proposed fund raising and the company's board is likely to discuss the same over the next few weeks. We believe SAIL is likely to raise fresh equity to fund its large capex program, and the Government has stated that it would likely sell some of its stake in the equity issuance. Current Government stake stands at 85.8%. Current market cap is $14bn. (Pinakin Parekh—Mumbai)

16

Michael F. Gambardella (1-212) 622-6446 [email protected]

Global Equity Research 09 October 2009

Leaders and Laggards: Asia/Australia Figure 18: Five-day Performance five-day return (%), local

Bumi Resources

Zijin Mining Group Co Ltd Lihir Gold Sterlite Industries PT Aneka Tambang Tbk Newcrest Mining Alumina Limited China Coal Energy Tata Steel Ltd Yanzhou Coal Mining - H OZ Minerals Limited Angang Steel Co - H Paladin Energy Ltd Tokyo Steel Rio Tinto Limited Daido Steel Steel Authority of India Ltd Banpu Public Sumitomo Metal OneSteel Limited BHP Billiton Limited Yamato Kogyo Nippon Steel Maanshan Iron & Steel - H China Shenhua Energy Hindalco Industries Fortescue Metals Group Kobe Steel PT Nickel Indonesia Energy Resources of AUS National Aluminium Co Ltd PT Tambangraya Megah BlueScope Steel

Tambang Bukit Asam Iluka Resources Centennial Coal Company China Steel Corp POSCO Baoshan Iron & Steel - A Aluminum Corp. of China JFE Holdings Sims Group Limited Maanshan Iron & Steel - A Angang Steel Co - A

-15

-10

-5

0

5

10

15

Source: Bloomberg

Figure 19: 30-Day Performance 30-day return (%), local

Energy Resources of AUS Iluka Resources Sumitomo Metal China Steel Corp PT Nickel Indonesia OneSteel Limited Yamato Kogyo Paladin Energy Ltd Nippon Steel JFE Holdings Angang Steel Co - H Tokyo Steel Maanshan Iron & Steel - H Kobe Steel Bumi Resources Fortescue Metals Group Sims Group Limited Daido Steel Aluminum Corp. of China Baoshan Iron & Steel - A Maanshan Iron & Steel - A Angang Steel Co - A

OZ Minerals Limited -40

Alumina Limited Tata Steel Ltd China Coal Energy Zijin Mining Group Co Ltd Sterlite Industries PT Aneka Tambang Tbk Hindalco Industries Tambang Bukit Asam Banpu Public Rio Tinto Limited Steel Authority of India Ltd China Shenhua Energy POSCO Newcrest Mining Lihir Gold Yanzhou Coal Mining - H BlueScope Steel BHP Billiton Limited Centennial Coal Company PT Tambangraya Megah National Aluminium Co Ltd

-30

-20

-10

0

10

20

30

Source: Bloomberg

17

Michael F. Gambardella (1-212) 622-6446 [email protected]

Global Equity Research 09 October 2009

Latin America Nonferrous Metals and Mining

Latin Coppers: Raising estimates on higher copper price forecasts, prefer GMex over PCU • Revising copper price forecasts. J.P. Morgan’s commodity strategy team revised its base metal price forecasts upward. We expect the base metal space to remain softer into year-end due to the absence of aggressive Chinese demand, but the advent of Western world restocking should set the scene for higher prices in 1Q10. Copper remains J.P. Morgan’s preferred base metal as the long-term fundamentals remain strong driven by supply-side constraints. Our new copper prices are $4,998/tonne and $5,950/tonne for ’09 and ’10, respectively (or $2.27/lb and $2.70/lb), up 5% and 7%. Our forecasts are in line with consensus and forward prices for 2010 but are 5-7% shy in 2011 as we believe the supply deficit will not be as extreme as consensus foresees. We are also assuming higher moly prices ($13.7/lb for ’09 and $20.0/lb for ’10, up 19% and 11% respectively) as a result of higher spot prices and a pickup in global steel production. • Raising PCU estimates: valuations remain rich – remain UW. We are raising PCU’s ’09 and ’10 EBITDA estimates to $1.9B and $2.6B, respectively, 11% and 14% higher vs. previous estimates, on higher commodity price forecasts. We keep our volume assumptions unchanged as there is little update on the Cananea mine restart (25% of capacity), which should continue to weigh on earnings into 2010. We maintain our UW rating on PCU based mostly on rich valuations – even with revised copper prices, PCU still trades at 15.1x and 10.9x ’09e and ’10e EBITDA, at a premium to the copper peers’ average of 10.7x and 7.4x, respectively. Our new Dec-10 price target of $27.5 implies 17% downside to current market price. • GMex – our preferred way to gain copper exposure as risks diminish. With substantial risks related to the Asarco bankruptcy out of the way, in our view, and a final outcome expected soon (by Nov. 30), we believe GMex’s discount to NAV of 38% is not justified and should close to ~20% on a final ruling by the District Court. We revise our ’09 and ’10 EBITDA estimates for GMex to $2.2B and $2.9B, respectively, 9% and 12% above previous estimates. Trading at 8.9x and 6.5x ’09e and ’10e EBITDA, GMex remains one of the cheapest stocks and our preferred way to gain copper exposure. Our new Dec-10 price target of Ps31.5 implies 18% upside from the current price. (Rodolfo Angele—Sao Paulo) Vale: Revising estimates to incorporate new base metal forecasts • We are adjusting our estimates to incorporate slightly increased base metal price forecasts. Our new Dec ’10 price targets are $24.5/ADR for VALE and $21.5/ADR for VALE/P (up from $23.5/ADR and $20.5/ADR respectively). In a separate note published today, we have also increased our estimates for copper producers Southern Copper and Grupo Mexico. • Base metal prices modestly up . . . J.P. Morgan’s commodity strategist has revised base metal price forecasts upward. The view is less bullish in the near term as Western world restocking lags, but as demand picks up in 1Q10, prices should follow suit. It is important to notice, however, that we are not changing our iron ore forecasts of an increase of 10% in ’10. Our new nickel prices are $17,125/tonne and $16,000/tonne for ’10e and ’11e, respectively, up 9% and 7% from previous forecasts, while ’09e numbers remain largely unchanged. Copper has also been moved up to $4,998/ton from $4,775/ton in ’09e (up 5%) and to

18

Michael F. Gambardella (1-212) 622-6446 [email protected]

Global Equity Research 09 October 2009

$5,950/ton from $5,563/ton in ’10e (up 7%). Please refer to table 4 for the other changes. • . . . and slightly higher estimates as a consequence. In line with JPM’s metal strategist’s revision, we are also marking 3Q metal prices to market and incorporating a slightly more positive forward scenario in our model. Our revised ’10e EBITDA numbers for Vale are now at $13.8B, up 5% vs previous forecasts of $13.1B, mainly on the back of improved base metal prices and slightly higher iron ore volumes – now at 306Mtons vs previous 292Mtons – slightly offset by lower nickel volumes due to strikes in Canada (down 13% to 287ktons). • Top down constructive but valuations not supportive – Reiterate Neutral ratings. As we have said (please see our report Vale: Key takeaways from investor tour), Vale’s business outlook has been improving consistently, and not only should volumes increase but also prices are likely to stay supportive. This, coupled with positive newsflow, could drive share prices up short term. However, we believe that Vale’s share prices already reflect all the potential improvents that are yet to come, and trading at 9.7x EV/EBITDA for ’10e, Vale is at a 51% premium to its 6.4x historical average and 2% above peers’ valuation. Thus, we reiterate our Neutral ratings on the stocks. (Rodolfo Angele—Sao Paulo)

19

Michael F. Gambardella (1-212) 622-6446 [email protected]

Global Equity Research 09 October 2009

Leaders and Laggards: Latin America Figure 20: Five-Day Performance five-day return (%), local CDM Buenaventura

Southern Copper Corp

Gerdau S.A.

Vale ON

Vale PN

Grupo Mexico

Ternium

CSN

Usiminas

Lupatech S.A.

0

2

4

6

8

10

12

14

16

Source: Bloomberg

Figure 21: 30-Day Performance 30-day return (%), local CDM Buenaventura

Vale PN

Vale ON

Southern Copper Corp

Lupatech S.A.

Grupo Mexico

Gerdau S.A.

CSN

Ternium

Usiminas

0

Source: Bloomberg

20

5

10

15

20

25

30

Michael F. Gambardella (1-212) 622-6446 [email protected]

Global Equity Research 09 October 2009

Global Metals & Mining Valuation by Sector Figure 22: Non-ferrous Metals and Mining FV/EBITDA 2009E

18

2010E

15.6

16

14 11.9

12

10.9 9.9

10

9.2 7.7

8

7.5

7.2

7.0

6.5

6.3

6.2

6

4

2

0.8

1.1

0 N o rth A m e ric a

E uro p e

A fric a

A sia

A u s t r a li a

L a tin A m e ric a

G lo b a l

Source: J.P. Morgan estimates

Figure 23: Precious Metals FV/EBITDA 40

2009E

2010E

23.0 20

13.7 11.6

14.5

11.0 11.8

7.4

7.6

7.2

12.0

0 North America

Europe

Africa

Australia

Latin America

Global

(14.3)

(20)

(40)

(60)

(80)

(94.2)

(100)

(120)

Source: J.P. Morgan estimates

Figure 24: Steel FV/EBITDA 20

2009E

18.7

2010E

18 15.3

16 14 12

10.3 10 7.4

8 6.1

6.6

6.1

5.6

5.4

6

3.8

4

5.1 4.3

2 0 N o rth A m e ric a

E uro p e

A sia P a c i fic ( e x J ap an)

Japan

L a tin A m e ric a

G lo b a l

Source: J.P. Morgan estimates

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Michael F. Gambardella (1-212) 622-6446 [email protected]

Global Equity Research 09 October 2009

J.P. Morgan Global Metals & Mining Coverage and Valuation Table JPM Bloomberg Rating Company Ticker Non-ferrous Metals & Mining North America OW Alcoa AA US OW Arch Coal ACI US N Century Aluminum Co. CENX US OW Cliffs Natural Resources CLF US N CONSOL Energy CNX US OW Freeport-McMoRan Copper FCX US OW Globe Specialty Metals GSM US N International Coal Group ICO US N Massey Energy MEE US N Peabody Energy BTU US N Rentech Inc. RTK US OW Teck Cominco Ltd. TCK/B CN OW Thompson Creek Metals TC US

Country

CCY

Analyst

US US US US US US US US US US US Canada US

USD USD USD USD USD USD USD USD USD USD USD CAD USD

Gambardella Bridges Gambardella Gambardella Bridges Gambardella Gambardella Bridges Bridges Bridges Bridges Gambardella Gambardella

Price Local 08 Oct-09 14.35 23.44 10.76 35.68 49.51 74.98 8.55 4.61 31.39 40.09 1.63 30.82 12.67

52-Wk (local) High Low 15.86 28.95 18.69 37.70 49.96 75.67 9.22 5.95 33.51 41.54 2.93 33.10 16.50

4.97 10.43 1.04 11.80 18.50 15.70 6.81 1.09 9.62 16.00 0.45 3.35 3.15

Local Returns (%) 1 Wk 1 Mo 1 Yr YTD 11.1 13.9 -2.4 11.7 29.4 -6.7 25.4 7.3 -38.1 16.8 32.0 7.3 14.4 22.7 34.0 14.6 10.3 76.0 2.4 4.9 NM 17.0 41.8 10.8 18.0 8.8 26.6 12.3 13.1 25.5 5.8 -15.1 143.3 14.8 17.7 52.9 5.4 -2.7 61.8

27.4 43.9 7.6 39.3 73.2 206.8 NM 100.4 127.6 76.2 139.7 438.4 172.0

USD (%) Mkt. Cap. Fiscal YTD (US$MM) Yr-end 27.4 43.9 7.6 39.3 73.2 206.8 NM 100.4 127.6 76.2 139.7 364.6 134.7

13,982 3,808 798 4,674 8,946 32,241 620 711 2,683 10,730 314 18,138 1,763

UW N N OW OW OW

Europe/Africa Norsk Hydro Raspadskaya Rio Tinto plc African Rainbow Minerals BHP Billiton (BILJ.J) Exxaro Resources Ltd

NHY NO RASP RU RIO LN ARI SJ BIL SJ EXX SJ

Norway Rus UK S.Africa S.Africa S.Africa

NOK USD USD ZAR ZAR ZAR

Largey Vlasov Gardiner Cooke Cooke Cooke

42.50 42.50 19.75 4.15 4.22 0.72 182.52 184.50 50.03 15,600.00 16,900.00 7,600.00 20,877.00 21,799.00 11,980.00 9,100.00 9,600.00 4,751.00

12.8 2.2 11.6 2.7 2.9 -0.7

N N N OW N UW OW OW OW N OW OW UW UW N UW N UW

Asia/Australia Aluminum Corp. of China Banpu Public Bumi Resources China Coal Energy China Shenhua Energy Hindalco Industries PT Tambangraya Megah PT Nickel Indonesia Tambang Bukit Asam Yanzhou Coal Mining - H PT Aneka Tambang Tbk Sterlite Industries Alumina Limited BHP Billiton Limited Centennial Coal Company Fortescue Metals Group Iluka Resources National Aluminium Co Ltd

2600 HK BANPU TB BUMI IJ 1898 HK 1088 HK HNDL IN ITMG IJ INCO IJ PTBA IJ 1171 HK ANTM IJ STLT IN AWC AU BHP AU CEY AU FMG AU ILU AU NACL IN

China Thailand Indonesia China China India Indonesia Indonesia Indonesia China Indonesia India Australia Australia Australia Australia Australia India

CNY THB USD CNY CNY INR IDR USD IDR CNY IDR INR AUD USD AUD USD AUD INR

Li Chawalitakul Juanda Li Li Parekh Juanda Juanda Juanda Li Juanda Parekh George George George George George Parekh

12.76 20.83 446.00 460.00 2,725.00 3,475.00 3.41 3.46 34.50 36.80 129.25 139.90 23,850.00 27,800.00 4,200.00 5,100.00 14,100.00 15,100.00 11.80 13.00 0.28 2,775.00 820.85 835.00 1.93 2.39 38.16 39.85 3.25 4.37 3.74 4.75 3.85 5.40 349.05 400.00

-2.3 -11.0 59.3 107.5 107.4 22,560 3.2 6.2 110.4 95.6 87.6 3,639 -12.8 -8.4 25.3 199.5 154.2 5,600 6.6 16.0 215.7 360.8 360.8 610 1.9 3.3 130.0 110.4 110.4 88,473 1.9 7.5 42.3 151.5 138.8 4,742 0.2 0.6 88.5 127.1 92.8 2,854 1.2 -2.3 86.7 117.6 84.7 4,420 -0.4 7.2 168.6 104.3 73.5 3,441 5.5 2.4 104.5 107.4 107.4 10,076 8.1 9.2 154.8 145.4 108.3 2,702 9.4 9.8 180.0 215.6 199.7 14,884 6.6 20.2 -17.3 60.6 107.1 4,268 2.6 1.2 27.9 25.4 61.7 179,187 -0.6 0.9 -5.2 -2.1 26.3 1,101 1.6 -10.5 13.3 93.8 149.9 10,482 -0.5 -1.3 3.2 -17.0 7.0 1,461 0.4 0.2 -7.7 84.2 75.0 4,853

22

5.90 140.00 385.00 0.58 7.91 36.75 5,900.00 1,140.00 3,750.00 2.98 770.00 164.50 0.68 20.00 1.51 1.16 2.70 105.25

13.5 44.3 8.9 0.1 0.4 2.6

38.4 52.9 23.9 9,353 48.2 315.0 315.0 3,240 14.7 142.9 142.9 103,235 17.3 40.5 8.2 4,514 31.0 17.5 -9.5 179,188 33.8 26.6 -2.6 4,423

Dec Dec Dec Dec Dec Dec Jun Dec Dec Dec Sep Dec Dec

EPS (Local) (Calendarised) 09E 10E (0.70) 0.26 (2.09) (0.21) 2.81 3.59 0.26 0.20 1.34 1.26 0.06 1.89 0.50

P/E FV/EBITDA Net EBITDA (Calendarised) (Calendarised) Debt / Margin 09E 10E 09E 10E Capital 09E

1.15 1.12 (0.31) 2.30 2.82 6.00 0.55 0.21 1.53 1.34 NM 1.76 1.80

NM 90.2 NM NM 17.6 20.9 32.9 23.1 23.4 31.8 27.2 16.3 25.3

12.5 20.9 NM 15.5 17.6 12.5 15.5 22.0 20.5 29.9 NM 17.5 7.0

28.3 10.7 (21.6) 15.3 7.3 7.5 NM 5.2 6.3 11.0 13.3 6.5 12.3

Dec (0.45) 1.10 Dec 0.12 0.18 Dec 7.71 NM Jun 3,970.00 3,718.00 Jun 1,531.00 1,534.00 Dec 1,629.41 1,575.55

NM 34.6 23.7 3.9 13.6 5.6

38.6 23.1 NM 4.2 13.6 5.8

20.1 2.7 NM 1.9 7.8 10.3

7.8 1.8 NM 1.7 7.0 10.3

-4% 4% -36% -28% NM 12%

3% 55% 55% 65% 35% 27%

116.0 9.3 NM 4.3 21.0 15.0 NM NM 10.3 10.9 NM 17.3 NM 29.2 19.9 28.1 NM 23.8

45.6 16.8 NM 4.2 19.7 15.5 NM NM 24.0 11.0 NM 14.0 48.3 22.1 13.2 36.0 175.0 21.0

NM 0.3 5.6 NM NM NM (0.5) (3.2) (0.2) NM NM NM NM 7.9 7.6 21.1 13.7 NM

NM NM 0.3 22% 6.5 88% NM NM NM NM NM NM (0.5) -34% (3.4) -19% 0.3 -16% NM NM NM NM NM NM 42.4 18% 6.7 9% 6.6 29% 16.0 189% 6.7 51% NM NM

15% 61% 35% 30% 50% 5% 31% 16% 43% 38% 13% 28% NM 36% 22% 37% 26% 27%

Dec 0.11 Dec 47.96 Dec 0.03 Dec 0.79 Dec 1.64 Mar 8.60 Dec 0.30 Dec 0.01 Dec 1,371.32 Dec 1.08 Dec 93.01 Mar 47.32 Dec (0.01) Jun 1.31 Jun 0.16 Jun 0.13 Dec (0.11) Mar 14.67

0.28 26.56 0.02 0.82 1.75 8.35 0.19 0.01 587.19 1.07 118.04 58.58 0.04 1.73 0.25 0.10 0.02 16.61

6.1 62% 7.6% 6.6 94% 17.0% 10.5 22% -4.0% 5.9 -5% 11.0% 6.9 46% 27.7% 5.2 37% 32.5% NM -10% 0.6% 5.7 55% 16.9% 5.9 47% 17.7% 10.7 57% 20.4% NM 350% 13.5% 7.0 47% 45.8% 4.2 -29% 39.1%

Michael F. Gambardella (1-212) 622-6446 [email protected]

JPM Rating Company OW OZ Minerals Limited N Rio Tinto Limited Latin America OW UW N N

Grupo Mexico Southern Copper Corp Vale ON Vale PN

Precious Metals North America N Agnico-Eagle Mines N Barrick Gold N Coeur d'Alene N Gold Reserve N Goldcorp Inc N Kinross Gold OW Newmont Mining UW Pan American Silver OW Silver Wheaton N Stillwater Mining

Global Equity Research 09 October 2009

Bloomberg Ticker Country CCY Analyst OZL AU Australia AUD George RIO AU Australia USD George

Price Local 08 Oct-09 1.26 61.30

52-Wk (local) Local Returns (%) High Low 1 Wk 1 Mo 1 Yr YTD 1.39 0.40 4.8 -36.0 -85.1 -84.2 68.30 23.59 4.1 5.4 -0.4 104.5

USD (%) Mkt. Cap. Fiscal YTD (US$MM) Yr-end 194.3 3,550 Dec 163.8 103,265 Dec

EPS (Local) P/E FV/EBITDA Net EBITDA (Calendarised) (Calendarised) (Calendarised) Debt / Margin 09E 10E 09E 10E 09E 10E Capital 09E 0.01 0.06 209.2 20.2 8.8 8.3 -30% 22% 3.69 3.59 16.6 17.1 4.4 2.9 46% 32%

GMEXICOB MM PCU US VALE US VALE/P US

Mexico Peru Brazil Brazil

USD USD USD USD

De Angele De Angele De Angele De Angele

26.67 33.26 24.97 22.20

26.77 33.37 25.28 22.35

6.34 9.12 8.80 7.78

10.3 12.6 12.0 11.6

14.5 16.4 19.3 19.8

258.8 214.0 204.3 15,667 159.6 107.1 107.1 28,271 96.2 106.2 106.2 128,131 100.2 108.5 108.5 128,131

Dec Dec Dec Dec

0.11 1.04 1.09 1.09

0.15 1.51 1.27 1.27

242.5 32.0 23.9 23.9

177.8 22.0 18.2 18.2

AEM US ABX US CDE US GRZ US GG US KGC US NEM US PAAS US SLW US SWC US

Canada Canada US US US US US US US US

USD USD USD USD USD USD USD USD USD USD

Bridges Bridges Bridges Bridges Bridges Bridges Bridges Bridges Bridges Bridges

71.77 39.51 23.04 0.93 42.39 22.87 47.01 25.93 13.77 7.78

72.77 42.10 23.50 1.25 43.39 23.65 49.84 27.42 14.17 8.35

20.87 17.27 3.60 0.24 13.84 6.85 21.17 11.12 2.51 1.76

11.8 9.2 21.8 6.9 10.4 10.6 10.9 16.7 14.8 21.8

9.6 0.5 21.5 38.8 3.6 4.9 2.9 9.1 16.9 10.5

42.1 39.8 39.8 10.6 7.5 7.5 73.2 161.8 161.8 52.5 -0.6 -0.6 36.7 34.4 34.4 41.2 24.2 24.2 25.9 15.5 15.5 37.7 29.8 12.0 112.2 112.2 112.2 83.1 57.5 57.5

11,201 38,832 1,737 55 31,251 15,893 23,035 2,262 4,685 735

Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec

0.68 1.82 0.14 (0.09) 0.65 0.52 2.13 0.65 0.37 (0.16)

2.13 1.75 0.34 (0.03) 0.77 0.62 2.28 0.64 0.50 (0.27)

105.5 21.7 164.6 NM 65.2 44.0 22.1 39.9 37.2 NM

33.7 22.6 67.8 NM 55.1 36.9 20.6 40.5 27.5 NM

7.6 -7.1 -1.7 110.2 110.2 8.3 3.5 19.2 37.9 6.2 7.0 0.5 103.4 30.8 0.6 6.8 0.7 28.4 48.8 14.5 4.0 -12.8 35.0 3.1 -20.7 4.6 7.2 -1.4 37.8 6.0 4.5 0.6 53.1 19.9 -7.7 5.4 -0.9 -0.3 -11.2 -31.7 2.0 -9.2 29.4 28.5 -1.1 0.3 -10.5 -22.3 56.7 20.6 4.4 -16.0 -0.7 62.6 25.1 10.7 4.2 93.5 73.8 73.8

5,116 23,201 16,273 2,233 293 403 10,596 5,042 14,314 5,017 1,646 6,201

Sep (0.40) 0.71 Dec 1,060.00 2,260.00 Dec (1,131.00) 2,420.00 Jun 0.07 0.33 Jun 28.00 33.50 Dec NM 0.05 Jun 525.00 657.50 Jun 288.50 376.50 Jun 815.00 787.00 Sep (368.00) 612.00 Jun 157.00 173.00 Dec 1.02 1.34

NM 67.4 NM NM 20.3 NM 21.0 30.1 21.3 NM 21.3 73.3

37.3 31.6 13.6 NM 16.9 NM 16.8 23.0 22.0 31.2 19.4 55.8

(94.2) 28.8 26.6 (95.0) 8.0 13.2 5.9 9.1 14.1 (82.1) 14.6 18.6

78.5 72.8 35.8 33.8 144.4

17,440 4,399 6,805 15,401 3,054

Dec Dec Dec Jun Jun

0.21 0.87 (0.04) 0.67 (0.32)

0.22 1.72 0.11 1.02 0.17

40.0 29.4 NM 52.7 NM

38.1 NM 14.8 16.2 25.8 (122.7) 34.4 20.5 27.0 8.2

93.3 93.3

10,612

Dec

2.09

2.09

18.4

18.4

N OW OW UW UW OW OW UW N N OW OW

Europe/Africa Lonmin plc Anglo American Platinum AngloGold Ashanti Limited Aquarius Platinum (SA) DRDGold Ltd Eastern Platinum Ltd. Gold Fields Ltd Harmony Gold Mining Co Impala Platinum Holdings Lonmin plc (LONJ.J) Northam Platinum Ltd Randgold Resources Ltd

LMI LN AMS SJ ANG SJ AQP SJ DRD SJ EPS SJ GFI SJ HAR SJ IMP SJ LON SJ NHM SJ RRS LN

UK S.Africa S.Africa S.Africa S.Africa S.Africa S.Africa S.Africa S.Africa S.Africa S.Africa UK

USD ZAR ZAR USD ZAR USD ZAR ZAR ZAR ZAR ZAR USD

Shepherd Shepherd Shepherd Shepherd Shepherd Shepherd Shepherd Shepherd Shepherd Shepherd Shepherd Shepherd

N UW OW N N

Asia/Australia Zijin Mining Group Co Ltd Energy Resources of AUS Lihir Gold Newcrest Mining Paladin Energy Ltd

2899 HK ERA AU LGL AU NCM AU PDN AU

China Australia Australia Australia Australia

CNY AUD USD AUD USD

Li George George George George

8.39 25.45 2.79 35.16 4.70

8.48 28.28 3.64 37.17 5.52

1.39 9.35 1.52 16.55 1.63

10.2 0.8 9.7 7.9 4.2

11.7 -1.1 2.6 2.6 -4.1

N

Latin America CDM Buenaventura

BVN US

Peru

USD

Bridges

38.50

39.44

9.00

13.8

26.3 72.0

26.50 71,400.00 32,952.00 3,546.00 567.00 434.00 11,020.00 8,675.00 17,343.00 19,064.00 3,350.00 74.78

30.11 7.45 76,820.00 35,000.00 36,900.00 15,011.00 4,250.00 1,524.98 955.00 286.00 625.00 202.00 12,500.00 5,325.00 13,285.00 6,199.00 21,700.00 8,655.00 26,859.95 7,976.21 4,400.00 1,650.00 76.07 19.00

163.0 89.9 20.1 31.7 86.5

78.5 33.9 5.3 3.7 89.5

7.6 13.0 12.3 12.3

5.6 9.6 9.7 9.7

-2% 14% 11% 11%

46% 50% 46% 46%

28.0 NM 8.4 8.2 14.6 8.6 24.6 (10.5) 18.9 19.0 12.4 11.3 8.6 7.2 10.3 10.7 19.6 13.8 11.9 14.8

11% 16% 12% -65% 0% -1% 20% -23% 1% 0%

33% 44% 29% NM 51% 47% 37% 40% 65% 15%

23.0 15.7 5.9 7.9 3.2 4.7 4.8 7.9 14.6 21.4 12.6 15.0

4% 58% 9% -18% -32% -6% 11% -7% -3% 4% -7% -26%

1% 17% 16% 22% 14% 20% 40% 26% 32% 1% 27% 35%

NM 8.6 16.0 14.8 17.7

NM -26% -16% -3% 67%

41% 46% -7% 34% NM

7.6

-29%

36%

7.4

23

Michael F. Gambardella (1-212) 622-6446 [email protected]

JPM Rating Steel

Company

Bloomberg Ticker

Global Equity Research 09 October 2009

Country

CCY

Analyst

Price Local 08 Oct-09

52-Wk (local) High Low

Local Returns (%) 1 Wk 1 Mo 1 Yr YTD

USD (%) Mkt. Cap. Fiscal YTD (US$MM) Yr-end

EPS (Local) (Calendarised) 09E 10E

P/E FV/EBITDA Net EBITDA (Calendarised) (Calendarised) Debt / Margin 09E 10E 09E 10E Capital 09E

OW N OW N OW N OW N N OW OW OW N

North America AK Steel Allegheny Technologies Arcelor Mittal Carpenter Technology Commercial Metals Dynamic Materials Gerdau Ameristeel GrafTech International Haynes International Nucor Steel Dynamics U.S. Steel Corp Worthington Industries

AKS US ATI US MT US CRS US CMC US BOOM US GNA US GTI US HAYN US NUE US STLD US X US WOR US

US US US US US US US US US US US US US

USD USD USD USD USD USD USD USD USD USD USD USD USD

Gambardella Gambardella Gambardella Gambardella Gambardella Gambardella Gambardella Gambardella Gambardella Gambardella Gambardella Gambardella Gambardella

19.44 36.05 37.86 24.50 18.17 19.08 8.60 14.82 32.44 45.53 15.64 44.12 13.68

24.27 44.09 42.32 26.30 21.29 23.17 8.97 15.88 34.67 51.08 18.56 58.00 16.42

5.20 15.00 15.44 11.72 6.25 4.95 2.85 3.55 10.92 25.25 5.18 16.66 6.99

6.0 8.3 8.3 8.3 4.8 2.7 12.9 9.5 4.3 1.3 6.5 4.4 2.8

-7.0 12.8 1.1 8.6 -0.3 13.0 15.1 2.3 16.1 0.3 -9.4 1.9 -1.4

37.2 108.6 108.6 54.1 41.2 41.2 15.7 54.0 54.0 16.7 19.3 19.3 71.7 53.1 53.1 5.9 -1.2 -1.2 21.6 41.9 41.9 70.5 78.1 78.1 13.9 31.8 31.8 40.5 -1.5 -1.5 64.5 39.9 39.9 -17.3 18.6 18.6 9.3 24.1 24.1

2,127 3,536 59,096 1,079 2,045 246 3,726 1,784 392 14,327 3,365 6,324 1,082

Dec Dec Dec Jun Aug Dec Dec Dec Sep Dec Dec Dec May

(0.92) 0.21 (1.55) 0.86 0.16 0.68 (0.11) 0.44 (0.98) (0.82) (0.12) (11.58) 0.33

1.74 1.70 3.40 NM NM 1.00 1.10 1.10 1.36 3.00 1.72 3.45 NM

NM 171.7 NM 28.5 113.6 28.1 NM 33.7 NM NM NM NM 41.5

11.2 21.2 11.1 NM NM 19.1 7.8 13.5 23.9 15.2 9.1 12.8 NM

26.3 15.4 13.4 7.1 6.0 15.5 16.3 14.3 (17.7) 57.2 14.2 (7.2) 25.2

4.2 27% 6.3 16% 6.2 42% NM -17% NM 44% 12.0 31% 5.2 78% 7.0 2% 5.6 -27% 6.8 22% 5.4 107% 5.1 42% NM 22%

2% 6% 10% 9% 7% 16% 8% 14% 1% 2% 19% -10% 3%

UW OW OW OW N OW OW UW UW N N N OW

Europe/Africa Acerinox Evraz Group Klöckner & Co. MMK Novolipetsk Steel Outokumpu Salzgitter Severstal SSAB ThyssenKrupp TMK Voestalpine ArcelorMittal

ACX SM EVR LI KCO GR MAGN RU NLMK LI OUT1V FH SZG GR CHMF RU SSABA SS TKA GR TMKS LI VOE AV MT NA

Spain Rus Germany Rus Rus Finland Germany Rus Sweden Germany Rus Austria France

EUR USD EUR USD USD EUR EUR USD SEK EUR USD EUR EUR

Largey Vlasov Largey Vlasov Vlasov Largey Largey Vlasov Largey Largey Vlasov Largey Largey

14.26 27.85 17.57 0.79 2.75 13.25 67.90 7.80 87.50 23.86 17.46 24.95 38.08

15.44 28.99 18.17 0.80 2.75 15.67 73.40 7.96 108.25 25.34 18.92 26.59 28.82

7.94 3.70 4.82 0.15 0.63 6.33 37.80 2.08 49.60 11.71 1.50 9.07 12.58

-0.6 7.1 18.2 5.1 15.5 6.0 5.4 -1.8 7.4 4.6 8.1 3.1 5.4

-3.6 12.3 4.6 19.8 15.5 -8.8 2.7 18.8 7.7 2.5 54.5 10.3 0.2

27.7 47.3 68.6 139.0 111.5 49.4 30.5 4.0 -9.3 41.9 0.6 60.9 12.9

33.8 223.8 75.0 296.2 139.1 69.5 30.7 140.0 8.8 33.3 347.7 75.7 60.3

5,260 12,195 1,729 681 16,481 3,568 6,037 7,860 1,408 18,162 3,811 6,198 59,443

Dec Dec Dec Dec Dec Dec Dec Dec Dec Sep Dec Mar Dec

(0.92) 0.25 (2.85) NM 0.11 (1.80) (3.00) (0.26) (5.76) (1.56) 2.51 0.83 (1.54)

0.67 3.09 1.10 NM 1.42 1.15 5.67 NM 4.10 1.30 2.81 0.80 3.21

NM 111.4 NM NM 25.0 NM NM NM NM NM 7.0 30.1 NM

21.3 9.0 16.0 NM 1.9 11.5 12.0 NM 21.3 18.4 6.2 31.2 11.9

(27.9) 8.4 (19.7) 7.9 11.4 (16.2) 28.1 8.5 (31.6) 13.4 3.1 7.5 10.2

9.5 42% 4.0 147% 7.1 18% 3.3 9% 6.2 10% 7.2 50% 3.7 -17% 5.4 32% 10.6 56% 4.0 51% 2.6 105% 7.3 81% 4.7 40%

-5% 16% -2% 17% 18% -7% 1% 10% -6% 3% 20% 11% 10%

OW OW OW OW N OW OW N OW N N N OW OW N OW

Asia/Australia Angang Steel Co - A Angang Steel Co - H Baoshan Iron & Steel - A BlueScope Steel China Steel Corp Maanshan Iron & Steel - A Maanshan Iron & Steel - H OneSteel Limited POSCO Sims Group Limited Steel Authority of India Ltd Tata Steel Ltd Nippon Steel Sumitomo Metal Kobe Steel JFE Holdings

000898 CH 347 HK 600019 CH BSL AU 2002 TT 600808 CH 323 HK OST AU 005490 KS SGM AU SAIL IN TATA IN 5401 JT 5405 JT 5406 JT 5411 JT

China China China Australia Taiwan China China Australia S.Korea Australia India India Japan Japan Japan Japan

CNY HKD CNY AUD TWD CNY CNY AUD KRW AUD INR INR JPY JPY JPY JPY

Li Li Li Greenwood Lai Li Li Greenwood Park Greenwood Parekh Parekh Kishimoto Kishimoto Kishimoto Kishimoto

19.30 5.26 19.64 2.73 10.33 4.26 5.05 1.68 32.70 18.41 7.13 3.12 6.70 0.87 4.01 1.40 525,000.00 234,500.00 29.15 10.68 188.00 55.25 545.00 137.50 407.00 233.00 291.00 160.00 204.00 109.00 3,880.00 1,852.00

-6.2 4.7 -1.4 0.0 -0.7 -5.7 2.1 2.6 -1.2 -5.4 3.5 6.1 2.2 2.7 1.3 -2.9

-16.4 -5.7 -12.8 1.3 -2.0 -13.8 -7.4 -2.8 3.0 -10.7 3.3 16.1 -5.5 -1.7 -7.6 -5.6

59.7 63.2 63.1 160.5 75.8 75.8 7.3 39.2 39.2 -38.4 7.3 38.4 8.8 35.7 33.0 10.3 29.1 29.1 149.0 73.2 73.2 -13.6 40.8 81.6 30.0 26.6 17.3 -7.5 22.1 57.5 49.8 125.4 114.1 58.1 146.3 133.9 8.6 12.8 10.0 -7.7 5.1 2.5 -4.2 -2.5 -4.9 26.6 29.3 26.2

12,350 12,350 16,572 4,974 12,244 4,714 4,714 3,809 36,047 3,500 15,570 10,241 25,175 12,393 5,567 20,987

Dec 0.25 0.83 Dec 0.25 0.83 Dec 0.46 0.64 Jun 0.04 0.23 Dec 0.87 1.67 Dec 0.15 0.35 Dec 0.15 0.35 Jun 0.21 0.28 Dec 33,497.48 52,978.2 Jun (0.05) 1.32 Mar 13.88 14.27 Mar 37.39 49.26 Mar 8.55 27.02 Mar 1.85 13.91 Mar (12.61) 3.91 Mar 148.56 294.06

45.4 61.0 14.0 70.0 34.5 27.8 31.9 15.4 14.4 NM 12.6 14.3 38.2 123.2 NM 20.3

13.7 18.4 10.1 13.4 18.0 11.9 13.7 11.4 9.1 16.1 12.2 10.9 12.1 16.4 40.4 10.3

11.2 2.2 4.6 12.3 2.6 6.9 1.7 8.6 7.3 34.3 (0.9) NM 5.9 6.5 2.9 4.5

8.2 1.1 3.6 6.6 1.3 4.7 0.9 6.6 5.0 7.8 (0.4) NM 4.4 4.7 2.5 3.7

13% 14% 14% 5% 14% 11% 12% 9% 19% 3% 22% 9% 10% 13% 10% 14%

24

11.34 15.24 6.46 3.01 30.05 4.17 4.78 3.17 481,000.0 21.18 174.70 534.95 327.00 228.00 158.00 3,020.00

26.3 223.8 65.2 296.2 139.1 60.0 23.5 140.0 22.4 25.8 347.7 65.9 51.4

57% 46% 41% 16% 26% 46% 47% 26% 5% 4% -28% NM NM NM NM NM

Michael F. Gambardella (1-212) 622-6446 [email protected]

JPM Rating Company N Tokyo Steel N Yamato Kogyo OW Daido Steel N OW N OW UW

Latin America CSN Gerdau S.A. Lupatech S.A. Ternium Usiminas

Global Equity Research 09 October 2009

Bloomberg Ticker Country CCY Analyst 5423 JT Japan JPY Kishimoto 5444 JT Japan JPY Kishimoto 5471 JT Japan JPY Kishimoto SID US GGBR4 BZ LUPA3 BZ TX US USIM5 BZ

Brazil Brazil Brazil Luxembourg Brazil

BRL BRL BRL USD BRL

De Angele De Angele De Angele De Angele De Angele

Price 52-Wk (local) Local 08 Oct-09 High Low 1,128.00 1,336.00 568.00 2,570.00 3,090.00 1,697.00 323.00 488.00 201.00 56.90 25.90 27.00 27.51 48.90

57.10 25.95 33.00 28.38 50.13

19.76 10.43 13.38 4.55 18.65

Local Returns (%) 1 Wk 1 Mo 1 Yr YTD 4.2 -5.9 37.4 21.0 2.4 -3.9 2.8 8.0 3.9 -10.8 -7.2 21.0 7.5 12.1 3.9 9.0 6.7

11.5 14.1 14.8 9.4 6.7

91.6 75.0 21.6 175.7 84.5

96.2 72.0 15.3 221.0 84.4

USD (%) Mkt. Cap. Fiscal YTD (US$MM) Yr-end 18.1 1,978 Mar 5.3 2,092 Mar 18.0 1,587 Mar 47.1 29.0 -13.5 221.0 38.3

24,759 19,702 742 5,515 13,860

Dec Dec Dec Dec Dec

EPS (Local) P/E FV/EBITDA Net EBITDA (Calendarised) (Calendarised) (Calendarised) Debt / Margin 09E 10E 09E 10E 09E 10E Capital 09E 75.27 31.21 15.0 36.1 6.7 5.7 NM 20% 239.24 188.10 10.7 13.7 9.5 8.9 NM 14% (23.71) 10.95 NM 29.5 10.7 6.1 NM 4% 1.13 1.12 2.28 2.76 1.33

2.31 2.09 1.05 2.14 3.45

50.4 23.1 11.8 10.0 36.8

24.6 12.4 25.7 12.9 14.2

16.6 13.5 3.4 11.7 17.5

8.9 73% 6.3 57% 9.8 280% 4.8 14% 7.1 39%

26% 13% 20% 12% 14%

65.1 60.1 0.0 209.2 22.0 43.0 46.6 22.8 37.9

28.9 43.8 0.0 20.2 19.3 31.3 27.8 18.5 13.5

23.5 9.0 -3.2 8.8 6.6 9.9 -1.7 9.1 10.3

12.2 6.9 -3.4 8.3 6.2 10.9 15.7 7.5 5.1

32% 26% -19% -30% 42% 4% 23% 11% 39%

15% 43% 15% 22% 42% 38% 21% 41% 12%

Summary Global Metals Indices Aluminum Copper Nickel Zinc Coal Gold PGM Diversified Steel Non-ferrous Metals & Mining North America Europe Africa Asia Australia Latin America Global Precious Metals North America Europe Africa Asia Australia Latin America Global Steel North America Europe Asia Pacific (ex Japan) Japan Latin America Global

5.6 4.6 58.3 104.8 99.3 75,439 13.3 14.2 127.0 222.6 206.8 94,318 3.8 2.0 112.5 128.2 93.7 7,122 4.8 -36.0 -85.1 -84.2 194.3 3,550 3.6 6.6 99.8 109.4 105.6 150,649 9.9 5.0 51.0 32.1 30.9 217,614 5.3 -2.9 25.4 47.0 27.8 60,118 6.8 8.1 44.5 73.9 83.6 844,030 4.0 3.1 36.6 55.7 49.8 453,958 13.8 11.5 2.8 0.6 2.0 11.8 6.4

15.1 10.3 0.4 0.6 1.3 19.0 7.6

41.9 177.0 162.9 99,410 17.6 140.4 138.1 115,829 30.7 18.3 -9.0 188,126 40.4 43.5 41.3 163,999 9.9 35.3 65.8 308,166 112.3 112.9 112.4 300,200 47.1 75.9 77.6 1,175,729

24.6 24.0 13.2 33.6 26.9 38.7 28.2

16.5 34.6 13.2 22.3 21.9 27.5 21.6

10.9 15.6 7.7 0.8 7.2 11.9 9.2

6.5 6.3 7.0 1.1 6.2 9.9 7.5

45% -32% -8% 17% 28% 10% 15%

27% 51% 36% 39% 34% 46% 39%

10.8 7.6 5.9 3.8 4.3 13.8 8.2

4.1 -7.1 -1.1 4.3 0.9 26.3 2.8

31.5 26.8 26.4 129,687 -1.7 110.2 110.2 5,116 42.8 34.2 6.2 85,218 60.4 29.1 29.1 17,440 27.3 11.0 32.4 29,659 72.0 93.3 93.3 10,612 37.3 31.6 25.1 277,732

45.2 0.0 44.7 40.0 47.5 18.4 43.7

33.9 37.3 25.5 38.1 28.7 18.4 30.6

13.7 -94.2 11.0 0.0 -14.3 7.4 7.2

11.6 23.0 11.8 0.0 14.5 7.6 12.0

9% 4% 15% 0% -2% -29% 8%

44% 1% 23% 41% 25% 36% 34%

6.9 6.7 0.0 0.3 8.8 4.0

1.6 10.4 -1.6 -1.7 11.1 3.1

22.9 51.5 28.4 3.5 91.4 36.6

100.5 51.3 26.3 47.4 35.2 37.9

12.1 13.0 12.4 15.7 17.7 13.5

18.7 6.6 6.1 5.6 15.3 10.3

6.1 5.4 3.8 4.3 7.4 5.1

40% 53% 21% 0% 58% 39%

7% 9% 15% 12% 18% 12%

43.0 109.9 38.5 5.2 96.0 55.7

43.0 99,128 113.6 83,389 37.3 137,086 4.3 69,779 53.8 64,577 49.8 453,958

25

Michael F. Gambardella (1-212) 622-6446 [email protected]

JPM Rating Company Steel Producers Integrated Minimill Specialty

Bloomberg Ticker

Global Equity Research 09 October 2009

Country

CCY

Analyst

Price Local 08 Oct-09

52-Wk (local) High Low

Equity Indices MSCI World Dow Nasdaq S&P 500 Composite S&P/TSX Composite Nikkei 225 MSCI Asia Ex-Japan FTSE 100 FTSE EuroTop 100 CAC 40 ASX 300 Index (Australia) JSE ASI (Jo'burg) KOSPI (Korea) Taiwan SE 100 Ibovespa (Brazil) AMEX Gold Bugs FTSE Gold Mines Index

311.67 109.67 795.38 9786.87 1717.79 1065.48 11484.51 9832.47 542.10 5154.64 2122.36 3806.81 4767.60 25528.40 1615.46 7503.31 63759.87 449.61 3237.07

EPS (Local) (Calendarised) 09E 10E

P/E FV/EBITDA Net EBITDA (Calendarised) (Calendarised) Debt / Margin 09E 10E 09E 10E Capital 09E

2.7 36.2 -0.1 2.3 -0.3 3.5

59.0 52.3 395,539 0.6 0.6 23,807 3.5 4.0 33,872

36.5 46.5 60.1

13.4 16.0 16.7

9.3 38.3 1.7

5.0 6.7 6.1

40% 39% 29%

13% 7% 4%

6.5

6.1 55.6

80.0

32.2

20.8

9.2

7.5

21%

31%

161.41 69.67

2.0 -1.5

3.6 26.7 1.9 3.4

40.4 57.6 14.9 18.7

808.85 527.42 9917.99 6469.95 1754.54 1018.86 1080.15 666.79 11648.55 7479.96 10767.00 6994.90 549.41 290.97 5190.00 3460.71 2167.57 1384.52 3856.67 2465.46 4778.60 3109.90 26067.97 17770.97 1723.17 892.16 7635.66 3955.43 63816.30 29435.11 457.05 150.27 3237.07 1156.45

-0.5 2.9 3.1 3.5 3.7 -1.5 0.5 2.1 1.9 2.3 1.4 2.2 -3.4 -0.6 5.5 13.1 10.6

320.36 114.37

Source: Bloomberg and J.P. Morgan estimates Note: J.P. Morgan ratings: OW = Overweight; N = Neutral; UW = Underweight

26

USD (%) Mkt. Cap. Fiscal YTD (US$MM) Yr-end

3.8 0.1 0.2

Global J.P. Morgan Metals Coverage List (based on US$ returns) Industry indices MSCI Metals & Mining MSCI Industrials

Local Returns (%) 1 Wk 1 Mo 1 Yr YTD

2.5 3.0 3.8 3.9 3.4 -4.7 1.4 4.2 2.0 4.0 5.4 1.2 0.5 3.5 10.2 9.0 5.1

4.5 5.7 29.1 8.2 14.2 7.4 42.2 18.0 4.8 8.9 10.9 21.8 24.8 46.2 65.2 50.1 53.2

17.3 11.5 41.8 18.0 27.8 11.0 54.8 16.2 18.0 18.3 28.7 18.7 43.7 63.4 69.8 48.7 36.6

1,907,419

22.0 11.5 41.8 18.0 10.3 8.3 59.9 28.0 24.9 25.3 66.0 -8.7 33.1 60.2 27.3 48.7 36.6

Michael F. Gambardella (1-212) 622-6446 [email protected]

Global Equity Research 09 October 2009

Table 5: Stock Tickers of J.P. Morgan Metals & Mining Coverage Companies Aluminum Alcoa Alumina Limited Aluminum Corporation of China Limited Century Aluminum Company Hindalco Industries National Aluminium Co Ltd Sterlite Industries

AA US AWC AU 2600 HK CENX US HNDL IN NACL IN STLT IN

Copper Southern Copper Corp Freeport-McMoRan Copper & Gold Teck Cominco Ltd.

PCU US FCX US TCK/B CN

Nickel PT International Nickel Indonesia PT Aneka Tambang Tbk

INCO IJ ANTM IJ

Zinc OZ Minerals

OZL AU

Coal Arch Coal Banpu Public Bumi Resources Centennial Coal Company China Coal Energy China Shenhua Energy CONSOL Energy Exxaro Resources Ltd International Coal Group Massey Energy Peabody Energy Raspadskaya Rentech Inc. Tambang Batubara Bukit Asam Yanzhou Coal Mining - A Yanzhou Coal Mining - H Teck Cominco Ltd.

ACI US BANPU TB BUMI IJ CEY AU 1898 HK 1088 HK CNX US EXX SJ ICO US MEE US BTU US RASP RU RTK US PTBA IJ 600188 CH 1171 HK TCK/B CN

Gold Agnico-Eagle Mines AngloGold Ashanti Limited Barrick Gold Coeur d'Alene Compania de Minas Buenaventura DRDGold Ltd Gold Fields Ltd Gold Reserve Goldcorp Inc Harmony Gold Mining Co Ltd Hochschild Kinross Gold Lihir Gold Newcrest Mining Newmont Mining Pan American Silver Randgold Resources Ltd Silver Wheaton Zijin Mining Group Co Ltd

AEM US ANG SJ ABX CN CDE US BVN US DRD SJ GFI SJ GRZ US GG US HAR SJ HOC LN KGC US LGL AU NCM AU NEM US PAAS US RRS LN SLW US 2899 HK

PGM Anglo American Platinum Corporation Ltd Aquarius Platinum Limited (SA) Energy Resources of Australia Limited Impala Platinum Holdings Ltd Lonmin plc Lonmin plc (LONJ.J) Northam Platinum Ltd Paladin Energy Ltd Stillwater Mining Barrick Gold

ANP LN AQP SJ ERA AU IMP SJ LMI LN LMI LN NHM SJ PDN AU SWC US ABX CN

Diversified African Rainbow Minerals Ltd Anglo American Anglo American (AGLJ.J) BHP Billiton BHP Billiton (BILJ.J) BHP Billiton Limited Boliden Cleveland-Cliffs CVRD ON CVRD PN Fortescue Metals Group Ltd Highveld Steel and Vanadium Iluka Resources Kazakhmys Plc Rio Tinto Limited Vedanta Resources Xstrata

ARI SJ AAL LN AGL SJ BLT LN BIL SJ BHP AU BOL SS CLF US RIO US RIO-P FMG AU HVL SJ ILU AU KAZ LN RIO AU VED LN XTA LN

Steel Acerinox AK Steel Allegheny Technologies Angang Steel Company Limited - A Angang Steel Company Limited - H Arcelor Mittal Baoshan Iron & Steel - A BlueScope Steel Carpenter Technology China Steel Corp Commercial Metals CSN Dynamic Materials Gerdau Ameristeel Evraz Group

ACX SM AKS US ATI US 000898 CH 347 HK MT US 600019 CH BSL AU CRS US 2002 TT CMC US SID US BOOM US GNA US EVR LI

GrafTech International Haynes International Jindal SAW Klöckner & Co. Lupatech S.A. Maanshan Iron and Steel - A Maanshan Iron and Steel - H MMK Monnet Ispat & Energy Limited Norsk Hydro Novolipetsk Steel Nucor OneSteel Limited Outokumpu POSCO Salzgitter Severstal Sims Group Limited SSAB Steel Authority of India Ltd Steel Dynamics Tata Steel Ltd Tenaris SA Ternium ThyssenKrupp TMK U.S. Steel Corp Usiminas Voestalpine Worthington Industries Nippon Steel Sumitomo Metal Kobe Steel JFE Holdings Tokyo Steel Yamato Kogyo Daido Steel

GTI US HYNI US JSAW IN KCO GR LUPA3 BZ 600808 CH 323 HK MAGN RU MISP IN NHY NO NLMK LI NUE US OST AU OUT1V FH 005490 KS SZG GR CHMF RU SGM AU SSABA SS SAIL IN STLD US TATA IN TS US TX US TKA GR TMKS LI X US USIM5 BZ VOE AV WOR US 5401 JT 5405 JT 5406 JT 5411 JT 5423 JT 5444 JT 5471 JT

Source: J.P. Morgan

27

Michael F. Gambardella (1-212) 622-6446 [email protected]

28

Global Equity Research 09 October 2009

Michael F. Gambardella (1-212) 622-6446 [email protected]

Global Equity Research 09 October 2009

Companies Recommended in This Report (all prices in this report as of market close on 08 October 2009, unless otherwise indicated) Alcoa (AA/$14.35/Overweight), BHP Billiton Limited (BHP.AX/A$37.85 [09-October-2009]/Underweight), Bumi Resources (BUMI.JK/Rp2,900 [09-October-2009]/Neutral), Grupo Mexico (GMEXICOB.MX/Ps26.67/Overweight), Klöckner & Co. (KCOGn.DE/€17.57/Overweight), Norsk Hydro (NHY.OL/Nkr 42.50/Neutral), Nucor Corp. (NUE/$45.53/Overweight), Randgold Resources Ltd (RRS.L/4,653p/Overweight), Southern Copper Corporation (PCU/$33.26/Underweight), Steel Authority of India Ltd (SAIL.BO/Rs174.00 [09-October-2009]/Neutral), Teck Resources (TCKb.TO/C$32.41/Overweight), Thompson Creek Metals (TC/$12.66/Overweight), Vale ON (VALE/$24.97/Neutral), Vale PN (VALEp/$22.20/Neutral) Analyst Certification: The research analyst(s) denoted by an “AC” on the cover of this report certifies (or, where multiple research analysts are primarily responsible for this report, the research analyst denoted by an “AC” on the cover or within the document individually certifies, with respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of any of the research analyst’s compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report. In compliance with Instruction 388 dated April 30, 2003, issued by CVM - Comissão de Valores Mobiliários (the Brazilian securities commission), which regulates analyst's activities and certification, and except as otherwise already specifically provided for in any previous disclaimer herein, the Brazilian primary analyst signing the present report declares that: (1) all the views expressed herein accurately reflect his or her personal views about the securities and issuers described herein. All recommendations issued by him or her were independently produced; (2) to the best of his or her knowledge, he or she does not maintain any relationship with any person who works for the subject companies whose securities are mentioned in the present report; (3) to the best of his or her knowledge, Banco J.P. Morgan S.A. and/or funds, portfolios and securities investment clubs managed by such mentioned entity do not own, directly or indirectly, 1% or more of the total capital stock of the subject companies and is not involved in the acquisition, sale or acting as intermediary of such securities in the market; (4) he or she does not own, directly or indirectly, securities of the subject companies in an amount equivalent or superior to 5% of his or her net worth and he or she is not involved in the acquisition, sale or acting as intermediary of such securities in the market; (5) neither the analyst nor Banco J.P. Morgan S.A , to the best of his or her knowledge, receive any compensation for services rendered or maintain any commercial relationship with any of the subject companies or any individual, legal entity, fund or communion of rights which represents the same interests of the companies; (6) no part of the research analyst compensation was, is, or will be directly or indirectly related to the pricing of any of the securities issued by any of the subject companies and, part of the analyst's compensation may come from the profits of Banco J.P. Morgan S.A. and/or its subsidiaries and, consequently, revenues arisen from transactions held by Banco J.P. Morgan S.A. and/or its subsidiaries.

Important Disclosures • • • • •

Market Maker/ Liquidity Provider: JPMSL and/or an affiliate is a market maker and/or liquidity provider in Klöckner & Co., Norsk Hydro. Designated Sponsor: JPMSL is the appointed designated sponsor to Klöckner & Co.. Lead or Co-manager: JPMSI or its affiliates acted as lead or co-manager in a public offering of equity and/or debt securities for Klöckner & Co., Teck Resources, Vale ON, Vale PN within the past 12 months. Director: A senior employee, executive officer or director of JPMorgan Chase & Co. , JPMSI, and/or its affiliates is a director and/or officer of BHP Billiton Limited. Beneficial Ownership (1% or more): JPMSI or its affiliates beneficially own 1% or more of a class of common equity securities of Steel Authority of India Ltd.

29

Michael F. Gambardella (1-212) 622-6446 [email protected]

•

• • •

•

Global Equity Research 09 October 2009

Client of the Firm: Alcoa is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI provided to the company investment banking services, non-investment banking securities-related services and non-securities-related services. BHP Billiton Limited is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI provided to the company noninvestment banking securities-related services and non-securities-related services. Bumi Resources is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI provided to the company investment banking services. Grupo Mexico is or was in the past 12 months a client of JPMSI. Klöckner & Co. is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI provided to the company investment banking services. Norsk Hydro is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI provided to the company non-investment banking securities-related services and non-securities-related services. Nucor Corp. is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI provided to the company investment banking services, non-investment banking securities-related services and non-securities-related services. Randgold Resources Ltd is or was in the past 12 months a client of JPMSI. Southern Copper Corporation is or was in the past 12 months a client of JPMSI. Steel Authority of India Ltd is or was in the past 12 months a client of JPMSI. Teck Resources is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI provided to the company investment banking services, noninvestment banking securities-related services and non-securities-related services. Thompson Creek Metals is or was in the past 12 months a client of JPMSI. Vale ON is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI provided to the company investment banking services, non-investment banking securities-related services and non-securities-related services. Vale PN is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI provided to the company investment banking services, non-investment banking securities-related services and non-securities-related services. Investment Banking (past 12 months): JPMSI or its affiliates received in the past 12 months compensation for investment banking services from Alcoa, Bumi Resources, Klöckner & Co., Nucor Corp., Teck Resources, Vale ON, Vale PN. Investment Banking (next 3 months): JPMSI or its affiliates expect to receive, or intend to seek, compensation for investment banking services in the next three months from Alcoa, BHP Billiton Limited, Bumi Resources, Klöckner & Co., Norsk Hydro, Nucor Corp., Teck Resources, Vale ON, Vale PN. Non-Investment Banking Compensation: JPMSI has received compensation in the past 12 months for products or services other than investment banking from Alcoa, BHP Billiton Limited, Norsk Hydro, Nucor Corp., Teck Resources, Vale ON, Vale PN. An affiliate of JPMSI has received compensation in the past 12 months for products or services other than investment banking from Alcoa, BHP Billiton Limited, Norsk Hydro, Nucor Corp., Southern Copper Corporation, Thompson Creek Metals, Vale ON, Vale PN. Broker: An affiliate of J.P. Morgan Securities Ltd. acts as Corporate Broker to BHP Billiton Limited.

Alcoa (AA) Price Chart 85 OW $12 68

N

51

N $8

OW $14

N $11.5

OW $13.5

Price($) 34

17

0 Oct 06

Jan 07

Apr 07

Jul 07

Oct 07

Jan 08

Apr 08

Jul 08

Oct 08

Jan 09

Apr 09

Jul 09

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends. This chart shows J.P. Morgan's continuing coverage of this stock; the current analyst may or may not have covered it over the entire period. J.P. Morgan ratings: OW = Overweight, N = Neutral, UW = Underweight.

30

Date

Rating Share Price ($)

11-Jun-08

N

OW $22

Oct 09

Price Target ($)

42.72

--

19-Nov-08 N

9.48

11.50

11-Dec-08 N

10.20

8.00

19-Mar-09

OW

5.48

12.00

01-Jul-09

OW

10.33

13.50

09-Jul-09

OW

9.46

14.00

28-Jul-09

OW

11.30

22.00

Global Equity Research 09 October 2009

Michael F. Gambardella (1-212) 622-6446 [email protected]

BHP Billiton Limited (BHP.AX) Price Chart 84

OW A$47

70

OW A$43

56

N A$27.5 N A$25.87 UW N A$23.07 A$30.827

OW A$40

OW A$37

N A$24.4 N A$26.15 N A$31.46

Price(A$) 42

28

14

0 Oct 06

Jan 07

Apr 07

Jul 07

Oct 07

Date

Rating Share Price (A$)

Price Target (A$)

10-Jul-07

N A$26.5 N A$25.62 N A$30.38

Jan 08

Apr 08

Jul 08

Oct 08

Jan 09

Apr 09

Jul 09

Oct 09

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends. Break in coverage Jul 07, 2004 - Nov 18, 2004. This chart shows J.P. Morgan's continuing coverage of this stock; the current analyst may or may not have covered it over the entire period. J.P. Morgan ratings: OW = Overweight, N = Neutral, UW = Underweight.

OW

38.83

40.00

18-Sep-07 OW

38.82

43.00

26-Oct-07

OW

44.74

47.00

01-Dec-08 OW

31.00

37.00

21-Jan-09

27.50

N

28.95

04-Feb-09 N

29.78

26.50

07-Apr-09

N

34.00

24.40

22-Apr-09

N

31.56

25.87

26-May-09 N

33.87

25.62

29-May-09 N

34.02

26.15

22-Jul-09

N

36.19

23.07

28-Jul-09

N

37.85

30.38

12-Aug-09 N

37.60

31.46

17-Sep-09 UW

39.00

30.83

Bumi Resources (BUMI.JK) Price Chart Date

14,904 OW Rp1,570 OW Rp2,900

OW Rp7,700 OW Rp10,400

N Rp2,100

12,420 OW Rp1,120 OW Rp3,000 OW Rp5,800 OW Rp8,000 9,936

OW Rp960

OW Rp2,200 OW Rp3,400

UW Rp580

OW Rp8,300OW Rp8,500

UW Rp620

N Rp3,200

Price(Rp) 7,452

4,968

2,484

0 Oct 06

Jan 07

Apr 07

Jul 07

Oct 07

Jan 08

Apr 08

Jul 08

Oct 08

Jan 09

Apr 09

Jul 09

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends. This chart shows J.P. Morgan's continuing coverage of this stock; the current analyst may or may not have covered it over the entire period. J.P. Morgan ratings: OW = Overweight, N = Neutral, UW = Underweight.

Oct 09

Rating Share Price (Rp)

Price Target (Rp)

08-Dec-06 OW

860

13-Feb-07 OW

1040

960 1120

04-Apr-07

OW

1330

1570

15-Jun-07

OW

1890

2200

09-Jul-07

OW

2775

3000

08-Aug-07 OW

2350

2900

11-Sep-07 OW

2925

3400

31-Oct-07

OW

4450

5800

30-Jan-08

OW

6600

7700

13-Mar-08 OW

6300

8300

08-Apr-08

5700

8000

OW

16-May-08 OW

7700

10400

01-Aug-08 OW

6750

8500

07-Jan-09

620

UW

850

17-Mar-09 UW

770

580

04-Jun-09

N

2175

2100

02-Oct-09

N

3125

3200

31

Global Equity Research 09 October 2009

Michael F. Gambardella (1-212) 622-6446 [email protected]

Grupo Mexico (GMEXICOB.MX) Price Chart 55

Date OW Ps31.5

44

OW Ps26.5

N Ps14.5

33

N Ps26.5

Rating Share Price (Ps)

Price Target (Ps)

18-Nov-08 N

8.37

14.50

28-Jul-09

16.77

26.50

19-Aug-09 OW

20.17

26.50

09-Oct-09 OW

26.67

31.50

N

Price(Ps) 22

11

0 Oct 06

Jan 07

Apr 07

Jul 07

Oct 07

Jan 08

Apr 08

Jul 08

Oct 08

Jan 09

Apr 09

Jul 09

Oct 09

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends. Break in coverage Aug 25, 2005 - Nov 18, 2008. This chart shows J.P. Morgan's continuing coverage of this stock; the current analyst may or may not have covered it over the entire period. J.P. Morgan ratings: OW = Overweight, N = Neutral, UW = Underweight.

Klöckner & Co. (KCOGn.DE) Price Chart

95

OW €35

76

OW €32 OW €31

57

OW €55

OW €36

OW €52

N €14

N €36 OW €47

OW €45

N €26 OW €42

N €15 OW €22

N €11 N €10

OW €24 N €22

Price(€) 38

19

0 Sep 06

Dec 06

Mar 07

Jun 07

Sep 07

Dec 07

Mar 08

Jun 08

Sep 08

Dec 08

Mar 09

Jun 09

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends. Break in coverage Jan 05, 2008 - Jan 11, 2008. This chart shows J.P. Morgan's continuing coverage of this stock; the current analyst may or may not have covered it over the entire period. J.P. Morgan ratings: OW = Overweight, N = Neutral, UW = Underweight.

32

Date

Rating Share Price (€)

16-Oct-06

N €17

Sep 09

Price Target (€)

OW

20.62

31.00

07-Dec-06 OW

23.65

32.00

18-Jan-07

35.00

OW

29.36

27-Mar-07 OW

35.58

45.00

23-Apr-07

39.79

52.00

OW

11-May-07 OW

42.35

55.00

11-Jan-08

N

19.13

26.00

08-Feb-08 N

23.62

36.00

11-Feb-08 OW

23.64

36.00

03-Apr-08

29.37

42.00

OW

16-May-08 OW

32.18

47.00

23-Oct-08

10.04

22.00

19-Dec-08 N

9.32

15.00

02-Feb-09 N

9.48

14.00

01-Apr-09

6.43

10.00

OW

N

15-May-09 N

9.56

11.00

25-Jun-09

12.07

17.00

N

14-Aug-09 N

16.45

22.00

08-Oct-09

16.00

24.00

OW

Global Equity Research 09 October 2009

Michael F. Gambardella (1-212) 622-6446 [email protected]

Norsk Hydro (NHY.OL) Price Chart 150

Date OW NKr92.394

OW NKr91

125 N NKr205

OW NKr90.54 OW NKr92

UW NKr21

N NKr46

100 N NKr210

N NKr249

OW NKr90

UW NKr18

UW NKr33

Price(NKr) 75

50

25

0 Sep 06

Dec 06

Mar 07

Jun 07

Sep 07

Dec 07

Mar 08

Jun 08

Sep 08

Dec 08

Mar 09

Jun 09

Sep 09

Rating Share Price (NKr)

Price Target (NKr)

21-Dec-06 N

62.20

210.00

23-Jan-07 N

61.47

205.00

17-Jul-07

80.13

249.00

04-Oct-07 OW

N

73.60

90.54

29-Oct-07 OW

82.60

92.39

25-Jan-08 OW

57.90

90.00

03-Mar-08 OW

74.10

92.00

23-Apr-08 OW

73.90

91.00

24-Feb-09 UW

22.85

18.00

15-Apr-09 UW

28.00

21.00

25-Aug-09 UW

38.15

33.00

09-Oct-09 N

42.50

46.00

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends. This chart shows J.P. Morgan's continuing coverage of this stock; the current analyst may or may not have covered it over the entire period. J.P. Morgan ratings: OW = Overweight, N = Neutral, UW = Underweight.

Nucor Corp. (NUE) Price Chart Date

138

OW $53.5

115

OW $100

92

OW $71

OW $82

OW $51 OW $59

OW $55 OW $50

Price($) 69

46

Rating Share Price ($)

Price Target ($)

03-Aug-07 OW

50.77

14-Mar-08 OW

72.47

71.00 82.00

04-Jun-08 OW

74.45

100.00

17-Oct-08 OW

31.79

59.00

10-Dec-08 OW

40.98

51.00

28-Jan-09 OW

39.80

53.50

23-Apr-09 OW

44.07

50.00

23-Jul-09

44.28

55.00

OW

23

0 Oct 06

Jan 07

Apr 07

Jul 07

Oct 07

Jan 08

Apr 08

Jul 08

Oct 08

Jan 09

Apr 09

Jul 09

Oct 09

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends. This chart shows J.P. Morgan's continuing coverage of this stock; the current analyst may or may not have covered it over the entire period. J.P. Morgan ratings: OW = Overweight, N = Neutral, UW = Underweight.

33

Global Equity Research 09 October 2009

Michael F. Gambardella (1-212) 622-6446 [email protected]

Randgold Resources Ltd (RRS.L) Price Chart

OW 1,340p

7,170

OW 1,420p OW 1,460p

5,975 4,780

OW 1,920p

OWOW 1,490p 1,520p

OW 1,580p

OW 3,600p

OW 1,430p

OW 2,680pOW 2,420p OW 2,510p

OW 4,090pOW 5,150p

Price(p) 3,585 2,390 1,195 0 Sep 06

Dec 06

Mar 07

Jun 07

Sep 07

Dec 07

Mar 08

Date

Rating Share Price (p)

Price Target (p)

05-Oct-06

OW

1024

1490

23-Oct-06

OW

1121

1420

21-Nov-06 OW

1148

1340

12-Dec-06 OW

1187

1520

OW 3,910p

Jun 08

Sep 08

Dec 08

Mar 09

Jun 09

Sep 09

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends. This chart shows J.P. Morgan's continuing coverage of this stock; the current analyst may or may not have covered it over the entire period. J.P. Morgan ratings: OW = Overweight, N = Neutral, UW = Underweight.

08-Mar-07 OW

1180

1460

17-Jul-07

1143

1430

13-Sep-07 OW

1399

1580

13-Dec-07 OW

1780

1920

28-Feb-08 OW

2640

2680

20-Jun-08

2001

2420

OW

OW

10-Nov-08 OW

1958

2510

17-Feb-09 OW

3253

3600

06-Mar-09 OW

3261

3910

13-May-09 OW

3869

4090

03-Sep-09 OW

3689

5150

Southern Copper Corporation (PCU) Price Chart Date

80

UW $27.5

64 UW $30.3

48

UW $16.8

UW $23

Price($) 32

16

0 Oct 06

Jan 07

Apr 07

Jul 07

Oct 07

Jan 08

Apr 08

Jul 08

Oct 08

Jan 09

Apr 09

Jul 09

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends. Break in coverage Aug 25, 2005 - Mar 14, 2008. This chart shows J.P. Morgan's continuing coverage of this stock; the current analyst may or may not have covered it over the entire period. J.P. Morgan ratings: OW = Overweight, N = Neutral, UW = Underweight.

34

Oct 09

Rating Share Price ($)

Price Target ($)

14-Mar-08 UW

37.19

30.30

18-Nov-08 UW

12.10

16.80

28-Jul-09

UW

25.57

23.00

09-Oct-09 UW

33.26

27.50

Global Equity Research 09 October 2009

Michael F. Gambardella (1-212) 622-6446 [email protected]

Steel Authority of India Ltd (SAIL.BO) Price Chart Date 468

OW Rs81

390

OW Rs147 OW Rs125

312 Price(Rs)

OW Rs135 OW Rs291

OW Rs195

OW Rs90

N Rs160

234 156

Rating Share Price (Rs)

Price Target (Rs)

10-Jan-07 OW

84.90

11-Apr-07 OW

117.70

125.00 147.00

31-Oct-07 OW

261.05

291.00

22-Jul-08

OW

125.65

195.00

16-Oct-08 OW

104.20

135.00

20-Nov-08 OW

58.95

81.00

29-Jan-09 OW

80.95

90.00

02-Jun-09 N

175.50

160.00

78 0 Oct 06

Jan 07

Apr 07

Jul 07

Oct 07

Jan 08

Apr 08

Jul 08

Oct 08

Jan 09

Apr 09

Jul 09

Oct 09

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends. Initiated coverage Jan 10, 2007. This chart shows J.P. Morgan's continuing coverage of this stock; the current analyst may or may not have covered it over the entire period. J.P. Morgan ratings: OW = Overweight, N = Neutral, UW = Underweight.

Teck Resources (TCKb.TO) Price Chart

90

OW C$8 OW C$19

72

OW C$10 OW C$22

OW C$28 OW C$6.5 OW C$18.5

54

Date

Rating Share Price (C$)

Price Target (C$)

23-Oct-08

OW

28.00

OW C$14OW C$33

Price(C$) 36

18

14.32

19-Nov-08 OW

6.12

19.00

11-Dec-08 OW

4.83

8.00

18-Feb-09 OW

4.44

6.50

03-Apr-09

OW

8.14

10.00

21-Apr-09

OW

9.11

14.00

21-May-09 OW

15.91

18.50

01-Jul-09

OW

18.55

22.00

28-Jul-09

OW

26.28

33.00

0 Oct 06

Jan 07

Apr 07

Jul 07

Oct 07

Jan 08

Apr 08

Jul 08

Oct 08

Jan 09

Apr 09

Jul 09

Oct 09

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends. This chart shows J.P. Morgan's continuing coverage of this stock; the current analyst may or may not have covered it over the entire period. J.P. Morgan ratings: OW = Overweight, N = Neutral, UW = Underweight.

35

Global Equity Research 09 October 2009

Michael F. Gambardella (1-212) 622-6446 [email protected]

Thompson Creek Metals (TC) Price Chart Date

Rating Share Price ($)

Price Target ($)

27-Apr-09

7.50

OW $15.5 44 OW $10 33 OW $7.5OW $23

OW

6.21

05-May-09 OW

7.68

10.00

09-Jun-09

OW

9.74

15.50

21-Jul-09

OW

12.68

23.00

Date

Rating Share Price ($)

Price($) 22

11

0 Oct 06

Jan 07

Apr 07

Jul 07

Oct 07

Jan 08

Apr 08

Jul 08

Oct 08

Jan 09

Apr 09

Jul 09

Oct 09

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends. Initiated coverage Apr 27, 2009. This chart shows J.P. Morgan's continuing coverage of this stock; the current analyst may or may not have covered it over the entire period. J.P. Morgan ratings: OW = Overweight, N = Neutral, UW = Underweight.

Vale ON (VALE) Price Chart

75

OW $23.3 OW $19.8

60

OW $17.8

45

N $31.5

OW $23.4

OW $31.5

OW $30.68

OW $27.9

OW $46.1

OW $47.5

N $24.5 N $18.5

N $23.5

Price($) 30

15

0 Sep 06

Dec 06

Mar 07

Jun 07

Sep 07

Dec 07

Mar 08

Jun 08

Sep 08

Dec 08

Mar 09

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends. Break in coverage Dec 30, 2001 - Feb 12, 2002, and Aug 25, 2005 - Dec 22, 2006. This chart shows J.P. Morgan's continuing coverage of this stock; the current analyst may or may not have covered it over the entire period. J.P. Morgan ratings: OW = Overweight, N = Neutral, UW = Underweight.

36

Jun 09

Sep 09

Price Target ($)

22-Dec-06 OW

14.59

07-Feb-07 OW

17.32

17.80 19.80

17-Apr-07 OW

20.95

23.30

09-Jul-07

27.90

OW

24.02

14-Sep-07 OW

27.50

31.50

03-Oct-07 N

35.45

31.50

11-Apr-08 OW

36.36

46.10

02-Sep-08 OW

26.55

47.50

16-Oct-08 OW

11.14

30.68

19-Nov-08 OW

11.09

23.40

20-Feb-09 N

14.72

18.50

03-Aug-09 N

20.77

23.50

08-Oct-09 N

24.41

24.50

Global Equity Research 09 October 2009

Michael F. Gambardella (1-212) 622-6446 [email protected]

Vale PN (VALEp) Price Chart 65

Date OW $27.9

52

OW $20.5

OW $24.7

OW $34.17

39

OW $26.912

N $27.9

OW $39

OW $40.3

N $21.5

N $16

N $20.5

Price($) 26

13

0 Sep 06

Dec 06

Mar 07

Jun 07

Sep 07

Dec 07

Mar 08

Jun 08

Sep 08

Dec 08

Mar 09

Jun 09

Rating Share Price ($)

Price Target ($)

17-Apr-07 OW

17.54

34.17

09-Jul-07

20.31

24.70

OW

14-Sep-07 OW

23.23

27.90

03-Oct-07 N

30.05

27.90

11-Apr-08 OW

30.46

39.00

02-Sep-08 OW

23.77

40.30

16-Oct-08 OW

10.39

26.91

19-Nov-08 OW

10.12

20.50

20-Feb-09 N

12.37

16.00

03-Aug-09 N

18.15

20.50

08-Oct-09 N

21.64

21.50

Sep 09

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends. Break in coverage Dec 30, 2001 - Feb 12, 2002, and Aug 25, 2005 - May 31, 2006. This chart shows J.P. Morgan's continuing coverage of this stock; the current analyst may or may not have covered it over the entire period. J.P. Morgan ratings: OW = Overweight, N = Neutral, UW = Underweight.

Explanation of Equity Research Ratings and Analyst(s) Coverage Universe: J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Neutral [Over the next six to twelve months, we expect this stock will perform in line with the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] The analyst or analyst’s team’s coverage universe is the sector and/or country shown on the cover of each publication. See below for the specific stocks in the certifying analyst(s) coverage universe.

Coverage Universe: Michael F. Gambardella: AK Steel (AKS), Alcoa (AA), Allegheny Technologies (ATI), Arcelor Mittal (MT), Carpenter Technology (CRS), Century Aluminum Company (CENX), Cliffs Natural Resources (CLF), Commercial Metals (CMC), Dynamic Materials (BOOM), Freeport-McMoRan Copper & Gold (FCX), Gerdau Ameristeel (GNA), Globe Specialty Metals (GSM), GrafTech International (GTI), Haynes International (HAYN), Nucor Corp. (NUE), Steel Dynamics (STLD), Teck Resources (TCKb.TO), Thompson Creek Metals (TC), U.S. Steel Corp (X), Worthington Industries (WOR) Jeffrey Largey: Acerinox (ACX.MC), ArcelorMittal (ISPA.AS), Klöckner & Co. (KCOGn.DE), Norsk Hydro (NHY.OL), Outokumpu (OUT1V.HE), SSAB (SSABa.ST), Salzgitter (SZGG.DE), ThyssenKrupp (TKAG.DE), Voestalpine (VOES.VI), Xstrata (XTA.L) Frank Li: Aluminum Corporation of China Limited (2600.HK), Angang Steel Company Limited - A (000898.SZ), Angang Steel Company Limited - H (0347.HK), Baoshan Iron & Steel - A (600019.SS), Brilliance China Automotive (1114.HK), China Coal Energy (1898.HK), China Shenhua Energy (1088.HK), Denway Motors (0203.HK), DongFeng Motor Co., Ltd. (0489.HK), Great Wall Motor Company Limited (2333.HK), Maanshan Iron and Steel - A (600808.SS), Maanshan Iron and Steel - H (0323.HK), Minth Group (0425.HK), Qingling Motors Co (1122.HK), Shougang Concord International (0697.HK), Sinotruk (3808.HK), WSP Holdings (WH), Weichai Power (2338.HK), Yanzhou Coal Mining - A (600188.SS), Yanzhou Coal Mining - H (1171.HK), Zijin Mining Group Co Ltd (2899.HK) Steve Shepherd: Anglo American Platinum Corporation Ltd (AMSJ.J), AngloGold Ashanti Limited (ANGJ.J), Aquarius Platinum Limited (AQP.L), Aquarius Platinum Limited (SA) (AQPJ.J), DRDGold Ltd (DRDJ.J), Eastern Platinum Ltd. (EPSJ.J), Gold Fields Ltd (GFIJ.J), Harmony Gold Mining Co Ltd (HARJ.J), Impala Platinum Holdings Ltd (IMPJ.J), Lonmin plc (LMI.L), Lonmin plc (LONJ.J) (LONJ.J), Northam Platinum Ltd (NHMJ.J), Randgold Resources Ltd (RRS.L)

37

Michael F. Gambardella (1-212) 622-6446 [email protected]

Global Equity Research 09 October 2009

Rodolfo R. De Angele, CFA: Bradespar (BRAP4.SA), CSN (SID), Gerdau S.A. (GGBR4.SA), Grupo Mexico (GMEXICOB.MX), Lupatech S.A. (LUPA3.SA), Southern Copper Corporation (PCU), Tenaris SA (TS), Ternium (TX), Usiminas (USIM5.SA), Vale ON (VALE), Vale PN (VALEp) John Bridges CFA, ACSM: Agnico-Eagle Mines (AEM), Arch Coal (ACI), Barrick Gold (ABX), CONSOL Energy (CNX), Coeur d'Alene (CDE), Compania de Minas Buenaventura (BVN), Gold Reserve (GRZ), Goldcorp Inc (GG), International Coal Group (ICO), Kinross Gold (KGC), Massey Energy (MEE), Newmont Mining (NEM), Pan American Silver (PAAS), Peabody Energy (BTU), Rentech Inc. (RTK), Silver Wheaton (SLW), Stillwater Mining (SWC) David George: Alumina Limited (AWC.AX), BHP Billiton Limited (BHP.AX), Centennial Coal Company (CEY.AX), Energy Resources of Australia Limited (ERA.AX), Fortescue Metals Group Ltd (FMG.AX), Iluka Resources (ILU.AX), Lihir Gold (LGL.AX), Newcrest Mining (NCM.AX), OZ Minerals Limited (OZL.AX), Paladin Energy Ltd (PDN.AX), Rio Tinto Limited (RIO.AX) J.P. Morgan Equity Research Ratings Distribution, as of September 30, 2009

JPM Global Equity Research Coverage IB clients* JPMSI Equity Research Coverage IB clients*

Overweight (buy) 39% 56% 38% 76%

Neutral (hold) 46% 57% 51% 72%

Underweight (sell) 15% 42% 10% 56%

*Percentage of investment banking clients in each rating category. For purposes only of NASD/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold rating category; and our Underweight rating falls into a sell rating category.

Valuation and Risks: Please see the most recent company-specific research report for an analysis of valuation methodology and risks on any securities recommended herein. Research is available at http://www.morganmarkets.com , or you can contact the analyst named on the front of this note or your J.P. Morgan representative. Analysts’ Compensation: The equity research analysts responsible for the preparation of this report receive compensation based upon various factors, including the quality and accuracy of research, client feedback, competitive factors, and overall firm revenues, which include revenues from, among other business units, Institutional Equities and Investment Banking. Registration of non-US Analysts: Unless otherwise noted, the non-US analysts listed on the front of this report are employees of non-US affiliates of JPMSI, are not registered/qualified as research analysts under NASD/NYSE rules, may not be associated persons of JPMSI, and may not be subject to NASD Rule 2711 and NYSE Rule 472 restrictions on communications with covered companies, public appearances, and trading securities held by a research analyst account.

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Michael F. Gambardella (1-212) 622-6446 [email protected]

Global Equity Research 09 October 2009

India. Thailand: JPMorgan Securities (Thailand) Limited is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission. Indonesia: PT J.P. Morgan Securities Indonesia is a member of the Indonesia Stock Exchange and is regulated by the BAPEPAM. Philippines: J.P. Morgan Securities Philippines Inc. is a member of the Philippine Stock Exchange and is regulated by the Securities and Exchange Commission. Brazil: Banco J.P. Morgan S.A. is regulated by the Comissao de Valores Mobiliarios (CVM) and by the Central Bank of Brazil. Mexico: J.P. Morgan Casa de Bolsa, S.A. de C.V., J.P. Morgan Grupo Financiero is a member of the Mexican Stock Exchange and authorized to act as a broker dealer by the National Banking and Securities Exchange Commission. Singapore: This material is issued and distributed in Singapore by J.P. Morgan Securities Singapore Private Limited (JPMSS) [MICA (P) 132/01/2009 and Co. Reg. 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39

Michael F. Gambardella (1-212) 622-6446 [email protected]

Global Equity Research 09 October 2009

Copyright 2009 JPMorgan Chase & Co. All rights reserved. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan.

40