Platinum 2008 2008 Interim Review Interim Review Platinum th - PDF document

Platinum 2008 2008 Interim Review Interim Review Platinum th November 2008 18 th 18 November 2008 • Good morning, and welcome to the launch of Johnson Matthey’s Platinum 2008 Interim Review • My name is Mark Bedford and I am Director of JM’s Precious Metals Marketing business that is responsible fpr producing this report • I am joined on the platform by John Cullen, our General Manager responsible for sales • We are launching the Interim Review in New York, Johannesburg, Moscow, Tokyo, Shanghai and here in London • As usual, I will start with a presentation of the main points contained in the Review, after which we’d be pleased to take your questions • Copies of the Review will be available as you leave. 1

Platinum Platinum • I will start with a review of platinum supply and demand for 2008 before turning to the outlook for platinum and our price forecast for the next six months • I will then do the same for palladium before closing with some remarks about rhodium. 2

Platinum Price in 2008 (US$) Platinum Price in 2008 (US$) $ per oz 2,500 2,000 1,500 1,000 500 J A J O J A J O 2007 2008 www.platinum.matthey.com • It is worth starting by pointing out the unprecedented price volatility we have seen in the platinum market this year. • Platinum started the year at $1530 and recorded a series of record prices even before the South African power problems hit. These forced the price sharply higher to record of $2276 in March. • It remained strong through the second quarter before collapsing under pressure from hedge fund selling caused by major troubles in the financial markets and the worsening outlook for demand. Platinum plummeted to end September near $1000 and has since fallen below that level. • It’s worth bearing in mind when considering the figures we are about to present the huge change that has occurred in economic activity and outlook between the 1 st and 2 nd halves of this year and in particular the contrast between the first part of the year and the unprecedented events we have seen in the last two months. • For this reason we have included an update slide in the presentation to cover events in the weeks since our Review went to press 3

Platinum: Key features Platinum: Key features • Platinum market set to be in deficit by 240,000 oz in 2008 • South African supplies fall to lowest since 2003 • Autocatalyst demand grows due to European diesel market • Jewellery demand driven lower by high prices and increased recycling • Industrial demand forecast to climb www.platinum.matthey.com • Platinum is forecast to remain in deficit by 240,000 oz in 2008, compared to a deficit of 120,000 oz in 2007. • Global supplies will fall largely due to a wide range of issues in South Africa from skills shortages to electricity problems and bad weather. • Moving to the demand side, the autocatalyst sector is set to grow once more, with increased use of platinum in the European diesel sector more than offsetting the weakness seen in the North American market, particularly in the second half of the year. • Demand is expected to fall, however, in the jewellery industry, where high prices in the first half of the year have hit consumer sales and increased recycling of old jewellery in Asia. • Industrial demand should rise due to greater purchases by the chemical, glass and petroleum refining sectors. 4

Platinum Supply and Demand Platinum Supply and Demand 2007 2008 % ’000 oz 2007 2008 % Supply 6,555 6,280 6,280 (4.2) Demand 6,675 6,520 (2.3) 6,520 Movements in stocks (120) (240) (240) www.platinum.matthey.com • In summary we expect to see… • … a 4.2% reduction in global platinum supplies to 6.28m ozs. • and a 2.3% drop in platinum demand to 6.52m ozs • This is expected to result in an increased deficit of 240,000 ozs compared to 2007. 5

Platinum Supply Falls by 4.2% Platinum Supply Falls by 4.2% million oz • South African supplies to drop 8 6.280 6.555 to a forecast 4.78 million oz 7 • Russian production expected 6 to fall to 855,000 oz 5 • ROW production forecast to 4 rise to 520,000 oz 3 2 1 0 2007 2008 RSA Russia Other www.platinum.matthey.com • Looking at platinum supply in more detail … • Global platinum supplies will drop in 2008, falling to 6.28 million ounces, 275,000 oz below the total for 2007. • The fall in South African supplies is the steepest and these will drop to 4.78 million ounces, of which more later • Russian platinum supplies are set to fall, with output likely to drop both at Norilsk Nickel, reflecting weather problems and a smelter rebuild in the first half of the year and at the alluvial producers • Sales of metal from Zimbabwean production should also grow, demonstrating the better than expected performance of mines in that country. 6

South African Platinum Supply South African Platinum Supply • Supplies will fall again, from 5.03 million oz in 2007 to 4.78 million oz in 2008 • Major causes include: • Amandelbult flooding • Safety stoppages • Smelter outages • Labour disruption • Power supply issues • Finding and retaining skilled staff www.platinum.matthey.com • 2008 has been another very difficult year for the South African mining industry, with a wide range of problems affecting almost every company • To give some examples, at Anglo Platinum, 67,000 oz of platinum production was lost due to the flooding of the Amandelbult mine and a further 36,000 oz was lost in due to refurbishment of the Turffontein shaft at Rustenburg. The impact of the closure of the Polokwane smelter in early November came too late to be included in this review. • Impala identified the loss 12,000 oz of platinum production due to stoppages to allow for the Presidential Safety Audit, but there were safety-related stoppages at numerous other mines • Both Lonmin and Anglo Platinum suffered significant loss of smelter capacity earlier in the year and we saw a number of small, short-lived strikes which hit production this year. • The issue of power supply, although having a dramatic impact on the price of platinum, eventually had a relatively limited impact on output with under 60,000ozs of production lost as a direct consequence. It remains a significant issue, of course, in terms of expansion of platinum production in the years to come. • All of this was set against a backdrop where skills shortages were increasingly problematic across the whole of the South African mining industry 7

Platinum Demand Drops by 2.3% Platinum Demand Drops by 2.3% million oz • Total net demand to fall by 8 6.675 6.520 155,000 oz to 6.52 million oz 7 • Gross autocatalyst demand 6 set to rise by 85,000 oz to 4.23 million ounces 5 4 • Jewellery demand to drop by 340,000 oz to 1.12 million oz 3 2 • Investment demand to fall to 145,000 oz 1 • Industrial demand forecast to 0 2007 2008 rise 10.5% to 1.995 million oz Auto Jlry Investment Other www.platinum.matthey.com • Turning to platinum demand , we see a mixed picture … • Gross autocatalyst demand – the green bar in this chart - should rise by 85,000 oz this year. In considering this number, I would ask you to remember my earlier comments about the contrast in conditions in the first half of the year compared to the sharp downturn we are seeing in the fourth quarter. • Jewellery demand is expected to fall by 340,000ozs to 1.12m ozs and I will explain a little more about that later • Investment demand also looks likely to fall…. • …. but in spite of the deteriorating economy there should be good overall growth in a number of industrial sectors for the year as a whole. 8

Platinum Demand: Autocatalyst Autocatalyst Platinum Demand: million oz • Gross auto sector platinum 5 purchases rise by 2.1% to 4.23 4.145 4.230 million oz 4 • North American weakness cuts demand by 305,000 oz 3 • European demand driven 335,000 oz 2 higher by diesel demand • Growth in China and the Rest of the 1 World region despite substitution of platinum by palladium 0 2007 2008 • Movements in stocks have little China Japan N. Am. impact Europe RoW www.platinum.matthey.com • Looking at gross autocatalyst demand a little more closely …. • Auto industry purchases of platinum are expected to grow by 2.1% to 4.225m ozs, despite a 305,000 oz fall in demand in North America due to substitution, a move by consumers to smaller vehicles and depressed production output, particularly in the fourth quarter. • However, this should be outweighed by increased demand in Europe – the magenta bar here – where increased use of platinum in the diesel sector will push demand up to 2.4 million ounces. • There was also some growth in China and the Rest of the World region as booming car production and increased use of platinum on heavy duty diesel vehicles negated the impact of thrifting and the introduction of more palladium into both gasoline and diesel catalysts. • Finally, it is worth noting that we have seen some sales of strategic stocks of platinum by the North American automakers. However, the impact on the market has been minimal as we saw purchasing of extra stocks by European companies over the same period. 9