Des Jar Dins - Metals and Mining Weekly

8/8/2019 Des Jar Dins - Metals and Mining Weekly

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John Redstone, MBA, MEngMetals & Mining

(514) 281-7088

Aleem Ladak, Associate(514) 985-3573

John HughesMetals & Mining, Steels

(416) 867-3778

NOVEMBER 16, 20

Research

Metals & Mining WeekDesjardins Basic Materials Conference

How good can it g

STEELS

STRATEGYPLUS

RESEARCH REPORTS

METALS & MINING

DesjardinsSecurities

Please see disclosure section on pages 1213 for company specific disclosures, analyst certification and legal disclaimers.

More than 20 companies will be presenting in Montral on December 6 and 7 Copperthe risks are on the upside Physical market in copper continues to tightenevidenced by declining inventory and rising cancel

warrants

We will be hosting our annual metals conference at our head office (1170 Peel Street, Montral) on December 6 (Monday) aDecember 7 (Tuesday). A tentative schedule is set out below. There will be ample opportunity for clients to meet wmanagement individually. We have asked our presenters to focus on the potential upside for their companies in the nterm.

We hope you can join us.

Desjardins Basic Materials Conference, December 6 & 7, 2010Day 1, December 6 8:009:30am Registration/continental breakfast 9:3010:00am First Quantum Minerals Ltd. 10:0010:30am Quadra FNX Mining Ltd. 10:3011:00am HudBay Minerals Inc. 11:1511:45am Cameco Corporation 11:45am12:15pm Uranium One Inc. 2:002:30pm SouthGobi Resources Ltd. 2:303:00pm Ivanhoe Mines Ltd. 3:003:30pm Consolidated Thompson Iron Mines Limited 4:154:45pm Royal Nickel Corporation

Day 2, December 7 8:009:00am Registration/continental breakfast 9:009:30am Teck Resources Limited 9:3010:00am Thompson Creek Metals Company 10:0010:30am Inmet Mining Corporation 10:3011:00am Capstone Mining Corp. 11:0011:30am Peregrine Metals Ltd. 11:30am12:00pm Aurizon Mines Ltd. 1:001:30pm Orezone Gold Corporation 1:302:00pm Gammon Gold Inc. 2:002:30pm Sabina Gold & Silver Corp. 2:303:00pm Allied Nevada Gold Corp. 3:003:30pm Richmont Mines Inc. 3:304:00pm Agnico-Eagle Mines Ltd. 4:004:30pm SEMAFO Inc. 4:305:00pm Osisko Mining Corporation


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Metals & Mining WeeklPAGE 2NOVEMBER 16, 2010


John RedstoneAleem Ladak, Associate

John Hughes

Copper outlookUS$4/lb may be too conservativeAt the risk of sounding like a broken record, the outlook for the copper market remains extremely strong. We would sugthat the risk is that demand will outstrip supply by an even greater amount than we forecast, driving prices well above

forecast average price for 2011 of US$4/lb.

Moderate growth in consumption forecast. As shown in Exhibit 1, our forecast for world copper consumption in 201essentially in line with long-term growth patterns. The pick-up in demand for 2011 is in line with growth patterns seesimilar stages of previous economic cycles (ie roughly four years after an economic downturn, copper demand is roughly above the previous high). Our forecast assumes growth in China continues to moderate but remains robust (growing 8% in 2vs 2010). China should act to contain inflation, but still post GDP growth in excess of 8% to maintain social stability. Chininfrastructure projects (eg the rapidly expanding high-speed rail network) should drive growth in copper demand. We assume that demand in most western economies remains below the levels of 2007. If Chinas economy were to continuegrow at the rates seen in 2010 and if economic growth in the west were to accelerate from current levels, world demand coexceed our forecast by roughly 1 MMT.

Exhibit 1: Global copper consumption

0

5,000

10,000

15,000

20,000

25,000

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010E

2011F

(KMT)

ROW China

Source: Desjardins Securities, World Bureau of Metal Statistics

Limited supply-side response. Our forecast is based on maximum production at all existing mines and assumes thatpotential expansions come onstream at the maximum rate as early as possible. Our list of expansions is shown in Exhibit 2addition, we assume the availability of secondary materials is optimized. Obviously, delays, strikes and other producproblems could significantly reduce the level of production in 2011. We would suggest our supply forecast may have toreduced by as much as 500 KMT.


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John Hughes

Exhibit 2: 200911 new mines and expansions

Mine Country Net rise in capacity (KMT)

Esperanza Chile 180

Konkola Deep Zambia 160

Cananea Mexico 120

Andacollo Chile 79

Vale Inco Canada 72

Las Cruces SXEW Spain 70

Los Bronces Chile 60

Lumwana Zambia 56

Tenke Fungurume DRC 54

Olympic Dam Australia 50

Miscellaneous Various 47.9

Source: Brook Hunt, Metal Bulletin

Low inventories do not provide a safety net. Strong demand/supply fundamentals have reduced total inventorie825.8 KMTwhich is equivalent to 2.3 weeks of consumption (compared with normal levels of 6.0 weeks).

Exhibit 3: Long-term copper inventories and price

0

400

800

1,200

1,600

2,000

(KMT)

0.40

1.20

2.00

2.80

3.60

4.40

Jan-0

0

May-0

0

Sep-0

0

Jan-0

1

May-0

1

Sep-0

1

Jan-0

2

May-0

2

Sep-0

2

Jan-0

3

May-0

3

Sep-0

3

Jan-0

4

May-0

4

Sep-0

4

Jan-0

5

May-0

5

Sep-0

5

Jan-0

6

May-0

6

Sep-0

6

Jan-0

7

May-0

7

Sep-0

7

Jan-0

8

May-0

8

Sep-0

8

Jan-0

9

May-0

9

Sep-0

9

Jan-1

0

May-1

0

Sep-1

0

(US$/lb)

Producer (LHS) Consumer (LHS) Merchant (LHS)

Shanghai stocks (LHS) LME and Comex (LHS) LME 3-month price (RHS)

Source: CRU, Comex, LME, SHFE

Our current forecast (see Exhibit 4) calls for a deficit of 375 KMT. If, as discussed above, demand were to exceed our expectatby 1 MMT and supply were to be 500 KMT lower than our forecast, total inventories would be completely depleted, wwould result in an explosive rise in prices.


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John Hughes

Exhibit 4: Copper supply/demand balance

(KMT) 2007 2008 2009 2010E 2011

Western world mine production 12,800 12,700 12,350 12,700 13,600

Russia 682 689 678 687 73

China 925 1,025 1,050 1,075 1,100

Other former communist countries (FCC) 1,430 1,515 1,582 1,633 1,609

Total FCC 3,037 3,229 3,310 3,395 3,440

Total world mine production 15,837 15,929 15,660 16,095 17,040

SXEW production -3,200 -3,000 -3,300 -3,400 -3,400

Mine production available for smelting 12,637 12,929 12,360 12,695 13,640

Smelter equivalent (at 98%) 12,384 12,670 12,113 12,441 13,367

Indicated change in concentrate stocks -266 1 -87 -59 67

Concentrate consumed by primary smelters 12,650 12,670 12,200 12,500 13,300

Scrap consumed by primary smelters 1,500 1,600 1,500 1,700 1,900

Western world primary smelter production 9,400 9,200 8,250 8,500 8,900

Russia 950 876 850 900 93

China 2,600 2,900 3,300 3,500 4,100

Other FCC 1,370 1,400 1,400 1,400 1,400

Total FCC 4,920 5,176 5,550 5,800 6,430

World primary smelter production 14,320 14,376 13,800 14,300 15,330

Fed directly to refineries 776 1,330 1,000 1,100 1,100

Western world primary refinery production 12,525 12,500 11,800 11,900 12,200

Russia 950 876 850 900 93

China 3,500 3,900 4,300 4,900 5,300

Other FCC 1,150 1,300 1,100 1,100 1,300

Total FCC 5,600 6,076 6,250 6,900 7,530

Total world refined production 18,125 18,576 18,050 18,800 19,730

Change (yoy%) 3.3 2.5 -2.8 4.2 4.9

Total world refined metal supplies 18,126 18,600 18,000 18,700 19,700

Refined consumption 18,150 18,450 17,600 18,900 20,075

Change (yoy%) 3.1 -0.3 4.6 7.4 6.2

Metal balance -24 150 400 -200 -375

Price LME (US$/lb) 3.22 3.12 2.32 3.30 4.00

Weeks of consumption 1.7 2.0 3.3 2.5 1.4

Source: Desjardins Securities

All the more reason then that we have Buy recommendations (except for HudBay, which is rated Hold) on our covered coproducers. Exhibit 5 shows the leverage to the copper price of the earnings of our covered copper producers.

Exhibit 5: Company-specific sensitivity to a US$0.10/lb change in copper price

Company (C$)Impact on EPS

($/share)Impact on NAV (LT copper price effect)

($/share)

First Quantum (US$) 0.40 NA

Freeport-McMoRan (US$) 0.55 NA

HudBay 0.05 NA

Inmet 0.51 NA

Teck Resources 0.07 NA

Capstone NA 0.23

Quadra FNX NA 0.93

Source: Desjardins Securities, company reports


5/14




John Hughes

LME copper inventories declining as level of cancelled warranincreasesa positive for copper pricesLME copper cancelled warrantson the rise. We note the level of copper cancelled warrants in LME warehouses remainthe rise. Cancelled warrants reflect the amount of copper currently in LME inventory that is scheduled or earmarkeddelivery out of the warehouse over the coming two-week period. Total cancelled warrants have reached 33,800 tonnesfrom 16,000 tonnes in mid-May 2010 and compare with a low of 2,600 tonnes at the beginning of the year (see Exhibit In addition, the current level of copper cancelled warrants relative to total available copper in LME warehouses is increasingcurrently representing almost 10% of total LME inventory vs only 1% at the beginning of the year. This is driventwo factorsa rising level of cancelled warrants during a period of declining copper inventory. We highlight the downtrenLME copper inventory during a period of uptrend in related cancelled warrants as one signal of accelerating tightness inphysical copper market.

Conclusionthe level of copper cancelled warrants is becoming more meaningful. We believe one of the major discuspoints for copper traders and consumers during late 4Q10 and early 1Q11 should be the rising level of copper cancewarrants during a period of declining LME inventory. This trend indicates a real potential for the downward trend in Lcopper inventory to continue. Although at present currency markets are a major determinant of copper prices over the shoterm, improving physical markets should advance to the forefront of trader discussions. This should provide upside potenfor copper prices over the same timeframe from current levels of US$3.10/lb.

We maintain our forecast average copper price of US$3.30/lb during 2010 and US$4.00/lb in 2011. The year-to-date averagUS$3.33/lb, with the price on November 15, 2010, of US$3.91/lb following a year-to-date low of US$2.75/lb during e

June 2010.

Exhibit 6a: Tonnes of LME copper cancelled warrants rising Exhibit 6b: reaching almost 10% of total LME inventory

0

15,000

30,000

45,000

60,000

75,000

90,000

Jan-0

9

Apr-0

9

Jul-09

Oct-09

Jan-1

0

Apr-1

0

Jul-10

Oct-10

(tonnes)

100,000

200,000

300,000

400,000

500,000

600,000

(tonnes)

LME Cu inventory (RHS)

LME Cu cancelled warrants (LHS)

0%5%

10%

15%

20%

25%

Jan-0

9

Apr-0

9

Jul-09

Oct-09

Jan-1

0

Apr-1

0

Jul-10

Oct-10

1.21.8

2.4

3.0

3.6

4.2

Warrants vs total inventory (%) (LHS)

Copper price (US$/lb) (RHS)

Source: Desjardins Securities, Reuters, LME Source: Desjardins Securities, Reuters, LME

EconomicsUSOctober retail sales. Retail sales in the worlds largest economy increased 1.2% mom in October, indicating that consummay play a bigger role in a recovery. The market was expecting an increase of 0.7% mom.

AsiaChina October consumer price index. Consumer prices increased 4.4% yoy in October, adding to the governments neecontrol price increases. The market was expecting an increase of 4.0% yoy.

China October retail sales. Retail sales increased 18.6% yoy in October. The market was expecting an increase of 18.8% yoy.

China October industrial production. Industrial production increased 13.1% yoy in October. The market was expectingincrease of 13.4% yoy.

Japan September machine orders. Machine orders fell 10.3% mom and increased 4.2% yoy in September. The market expecting a decrease of 9.5% mom and an increase of 4.5% yoy.


6/14




John Hughes

Japan 3Q10 gross domestic product. The economy expanded at a rate of 0.9% qoq in 3Q10. The market was expectingincrease of 0.6% qoq.

EuropeGermany September industrial production. Industrial production fell 0.8% mom and increased 7.9% yoy in Septemadding to signs that the recovery is losing momentum. The market was expecting an increase of 0.4% mom and 9.5% yoy.

Germany October consumer price index. Consumer prices increased 0.1% mom and 1.3% yoy in October, both in line wmarket expectations.

Germany 3Q10 gross domestic product. The economy expanded at a rate of 0.7% qoq in 3Q10. The market was expectingincrease of 0.8% qoq.

Copper

Exhibit 7: Copper market review and forecastLME Comex Shangha

Market review

Closing price 12-Nov-10 (US$/lb) 3.91 4.02 4.63

Change on the week (US$/lb) -0.02 0.11 0.26

Ytd average (US$/lb) 3.34 3.35 3.97

Inventory as of 12-Nov-10 (tonnes) 362,775 67,390 115,423

Change on the week (tonnes) -3,575 -404 8,572

Ytd change (tonnes) -139,625 -22,592 20,108

Weeks of consumption

Current 2.3

Estimated for end of 2010 2.5

Forecast

(000 tonnes, year-end Dec-31) 2008 2009 2010E 2011

Consumption 18,450 17,600 18,900 20,075

% increase -0.3 -4.6 7.4 6.2

Supply 18,600 18,000 18,700 19,700

% increase 1.5 -3.2 3.9 5.3

Market balance: Surplus (deficit) 150 400 -200 -375

Average price (US$/lb) 3.12 2.32 3.30 4.00

Note: Surplus = demand < supply, Deficit = demand > supplySource: LME, Comex, Shanghai Exchange

Company news. Nanya Copper Foil Co. Ltd. has invested US$96m to build a new plant in Kunshan City that will be the lar

copper foil plant in China. The Nanya copper foil plant will have a production capacity of roughly 45.9 KMT/yr of refined copfoil.

Chinalco has postponed the start of construction of its Toromocho project in Peru due to resistance from some local residof the Morococha town to their relocation. The original start date was 4Q12; however, CRU estimates a new production dat2Q13. The projects total capital expenditure requirement will be US$2b. The mine is expected to produce 250 KMT/ycopper-in-concentrate.

Production update. The strike at theCollahuasi mine in Chile (jointly owned by Xstrata, Anglo American and a numbeJapanese companies) is ongoing. Mine management has indicated that operations are being run by non-unionized woand that the company can meet its contract requirements. The mine was expected to produce 493 KMTcopper-in-concentrate and 43 KMT of copper cathode this year. We forecast world refined copper production of 18,700 Kand 19,700 KMT in 2010 and 2011, respectively.


7/14




John Hughes

Aluminium

Exhibit 8: Aluminium market review and forecast

LME Shangha

Market review

Closing price 12-Nov-10 (US$/lb) 1.09 1.14

Change on the week (US$/lb) -0.02 0.02

Ytd average (US$/lb) 0.99 1.07

Inventory as of 12-Nov-10 (tonnes) 4,252,550 485,420

Change on the week (tonnes) -31,725 -7,391

Ytd change (tonnes) -371,875 187,911


Current 8.1


Forecast


Consumption 38,000 35,600 40,900 46,700

% increase 1.8 -6.3 14.9 14.2

Supply 40,020 36,760 41,010 46,210

% increase 4.7 -8.1 11.6 12.7

Market balance: Surplus (deficit) 2,020 1,160 110 -490



Production update. A transformer fire at China Power Investments 270-KMT/yr Yichuan Ningdong smelter in the NinAutonomous Republic has forced the plant to be idled for roughly 45 months. We forecast world primary aluminproduction of 41,010 KMT and 46,210 KMT in 2010 and 2011, respectively.

Zinc

Exhibit 9: Zinc market review and forecast

LME Shangha

Market review

Closing price 12-Nov-10 (US$/lb) 1.09 1.32

Change on the week (US$/lb) -0.06 -0.08

Ytd average (US$/lb) 0.99 1.19

Inventory as of 12-Nov-10 (tonnes) 631,875 300,848

Change on the week (tonnes) -1,325 4,093

Ytd change (tonnes) 142,660 128,948


Current 6.0


Forecast


Consumption 11,575 10,705 11,650 12,700

% increase -0.1 -7.5 8.8 9.0

Supply 11,650 11,230 12,210 12,335

% increase 2.3 -3.6 8.7 1.0

Market balance: Surplus (deficit) 75 525 560 -36




8/14




John Hughes

Production update. Horsehead Holding Corp.s Monaca zinc smelter in Pennsylvania is set to return to full production byend of the year, earlier than the previous estimated date of 1Q11. In July, the plant was hit by an explosion that causedcompany to declare force majeure on supply contracts. The company produced 25.5 KMT of zinc in 3Q10, up from 24.7 KM3Q09. We forecast world refined zinc production of 12,210 KMT and 12,335 KMT in 2010 and 2011, respectively.

Nickel

Exhibit 10: Nickel market review and forecast

LM

Market review

Closing price 12-Nov-10 (US$/lb) 10.29

Change on the week (US$/lb) -0.81

Ytd average (US$/lb) 9.78

Inventory as of 12-Nov-10 (tonnes) 130

Change on the week (tonnes)

Ytd change (tonnes) -28


Current 8.


Forecast


Consumption 1,319 1,301 1,431 1,521

% increase -5.9 -1.4 10.0 6.3

Supply 1,382 1,292 1,424 1,501

% increase -4.8 -6.5 10.2 5.4

Market balance: surplus (deficit) 63 -9 -7 -2

Average price (US$/lb) 9.63 6.63 9.00 10.00Note: Surplus = demand < supply, Deficit = demand > supplySource: LME, Comex, Shanghai Exchange

Production update. Norilsk Nickel has restarted the Nkomati mills (one of its South African mines) earlier than expected. mill was closed in July due to modifications made to increase its capacity (by 150 KMT/month) to 250 KMT/month of ore. Tmill and the adjacent mill at the mine now have a combined capacity of 375 KMT/month of ore. CRU expects that expansion will double next years production to 16.5 KMT of nickel-in-concentrate.


9/14




John Hughes

Uranium

Exhibit 11: Uranium world balance

(tU) 2007 2008 2009 2010E 2011

Supply

Primary uranium (excluding Kazakhstan) 34,627 35,332 33,176 34,000 35,000

Kazakhstan production 6,637 8,521 13,800 17,000 19,000

Total production 41,264 43,853 46,976 51,000 54,000

% of primary capacity 67.7 71.4 72.7 72.1 75.

HEU downblended 9,000 9,000 9,000 9,000 9,000

DOE sales 100 600 600 2,381 1,997

DOE tails material 0 0 0 0

Re-enriched tails 5,000 3,000 3,000 3,000 1,000

Recycling 1,850 2,690 2,670 2,980 3,000

Russian LEU exports 3,500 2,000 2,000 2,000 2,000

Ex military MOX 250 300 350 350 350

Total secondary capacity 19,700 17,590 17,620 19,711 17,347

% of total secondary capacity 32.3 28.6 27.3 27.9 24.3

60,964 61,443 64,596 70,711 71,347

Demand requirements 64,375 64,615 66,625 70,000 71,500

Metal balance (supply demand) -3,411 -3,172 -2,029 711 -153

Total inventory (non-strategic) 17,589 14,417 12,388 13,099 12,946

Price (US$/lb) 98.55 63.03 46.66 45.00 60.00

Cameco average realized uranium price (US$/lb) 37.47 39.52 38.00 41.50 47.00

Source: Desjardins Securities, World Nuclear Association

Company news. AREVA has signed an agreement with China Guangdong Nuclear Power Corp. to supply the company w20,000 tU (52m lbs) of uranium over a 10-year period.

Australia update. Australia and Russia have signed a bilateral nuclear cooperation agreement that will allow Australia to ssupplying uranium to fuel Russias nuclear power reactors.

China update. A report indicates that China has begun building two more new nuclear energy plants in Dalian City in northLiaoning Province. The two reactors will have a total capacity of 2 GWe and are due to be completed by 2016.

Kazakhstan update. Kazakhstan plans to build its first nuclear power plant (estimated cost of US$1b) by 2020. The country talks with a number of nuclear power technology companies (including Rosatom) to help it obtain the technology and prea feasibility study.

KAZATOMPROM has also signed a long-term contract with China Guangdong Nuclear Power Corp. for the sale and purchasuranium. KAZATOMPROM will be supplying China with 24,200 tU (62.9m lbs) until 2020.


10/14




John Hughes

Metals & Mining and Steels: Earnings estimates and price targets

Exhibit 12: Earnings estimates and price targets

Annual EPS ($) Current Book Price/ One-year

Year-end Dec-31 2008 2009 2010E 2011F price ($) value ($) book (x) target ($) Rating

Agrium1 8.34 2.33 5.34 8.77 84.80 32.23 2.63 96.40 Buy

Alcoa (US$) 1.08 -0.71 0.59 2.20 13.78 13.00 1.06 26.40 Buy

Asian Mineral Resources NM NM NM NM 18.00 0.28 0.65 0.35 Buy

Baffinland Iron Mines NM NM NM NM 1.18 0.75 1.58 1.10 Tender

Cameco 1.67 2.82 1.23 1.59 37.51 12.57 2.98 42.50 Buy

Consolidated Thompson1 -0.12 -0.12 NA NA 11.51 3.44 3.35 NA Restricted

Freeport-McMoRan (US$) 5.32 5.86 8.38 10.17 102.00 24.46 4.40 122.00 Buy

GobiMin1 0.05 NM NM NM 0.83 0.99 0.84 1.19 Hold

Inmet Mining 5.07 5.13 5.27 7.25 64.80 36.61 1.77 79.75 Buy

Ivanhoe Mines NM NM NM NM 26.06 3.36 7.74 29.15 Buy

Potash Corporation1 11.01 3.25 6.40 15.92 142.47 25.72 5.54 175.00 Buy

Thompson Creek1 1.86 -0.44 1.13 1.91 13.22 5.87 2.25 20.55 Top Pick

Uranium One1 -4.98 -0.08 -0.03 0.19 13.22 2.65 4.98 5.50 Buy

Capstone Mining1 1.31 -0.11 0.26 0.75 4.16 1.97 2.11 4.90 Buy

First Quantum1 0.67 5.77 8.84 9.17 93.84 30.81 3.05 107.30 Buy

GlobeStar Mining1 -0.08 -0.02 0.37 0.52 1.64 0.90 1.83 1.65 Tender

Harry Winston1, 4 1.55 -0.27 0.51 0.78 13.36 9.95 1.34 10.90 Sell

HudBay Minerals 0.55 0.73 0.50 1.07 17.67 11.09 1.59 16.00 Hold

Polaris1 -0.26 -0.27 -0.30 -0.20 1.85 1.98 0.94 1.65 Hold

Quadra FNX1 0.60 0.93 1.25 2.00 14.38 17.22 0.83 18.50 Buy

Sherritt -1.05 0.30 0.65 0.88 8.59 11.87 0.72 9.65 Buy

Teck Resources2

1.57 3.42 2.41 4.27 50.26 26.84 1.87 56.10 BuyWestshore Terminals3 1.09 1.07 1.15 1.19 22.90 6.89 3.32 16.90 Hold

1All data in US$ except share price and target in C$/share, 2 Class B subordinate voting shares, 3Annual distribution, 4EPS forecasts for FY0912Source: Desjardins Securities, company reports


11/14

Desjardins Basic Materials ConferencHow good can it get

Two-day conference, December 6 & 7, 201Le Windsor, The Windsor Ballroom, Montr

Des ar nsSecurities

LE WINDSORThe Windsor Ballroom1170 Peel StreetMontral, Qubec H3B 0A9

DESJARDINS OFFICESMontral1170 Peel StreetSuite 300Montral, Qubec H3B 0A9(514) 987-1749

Toronto145 King Street WestSuite 2750Toronto, Ontario M5H 1J8(416) 867-6000

Calgary110 9th Avenue SWSuite 410Calgary, Alberta T2P 0T1

(877) 532-6601

For further information, please contact Christine Wise at (514) 281-2313 or (877) 780-1171 ext [email protected], or your institutional equity salesperson.

METALS & MINING METALS & MINING/STEELS PRECIOUS METALS John Redstone, MBA, MEng John Hughes Brian Christie(514) 281-7088 (416) 867-3778 (416) 867-3776

Aleem Ladak, Associate Graham Markham, CA, CFA, Associa

(514) 985-3573 (416) 867-3769

Participating companies include:Base Metals Cameco Corporation Capstone Mining Corp. Consolidated Thompson Iron Mines Limited First Quantum Minerals Ltd. HudBay Minerals Inc. Inmet Mining Corporation Ivanhoe Mines Ltd. Peregrine Metals Ltd. Quadra FNX Mining Ltd. Royal Nickel Corporation SouthGobi Resources Ltd. Teck Resources Limited Thompson Creek Metals Company Inc. Uranium One Inc.

Precious Minerals Agnico-Eagle Mines Ltd. Allied Nevada Gold Corp. Aurizon Mines Ltd. Gammon Gold Inc. Orezone Gold Corporation Osisko Mining Corporation Richmont Mines Inc. Sabina Gold & Silver Corp. SEMAFO Inc.


12/14



DISCLOSURES

Distribution of ratings

Rating Desjardins Desjardins coverage % Desjardins Investment %

category rating universe (# of stocks) distribution Banking (# of stocks) distribution

Buy Top Pick/Buy 104 70.7 37 74

Hold Hold 41 27.9 13 26

Sell Sell 2 1.4 0

Total 147 100 50 100

COMPANY SPECIFIC DISCLOSURESLegend1. Desjardins Securities makes a market in the securities of the issuer.2. Desjardins Securities has performed investment banking services for the issuer in the past 12 months.3. Desjardins Securities has received compensation for investment banking services from the issuer within the past 12 months.4. Desjardins Securities has managed or co-managed a public offering of securities for the issuer in the past 12 months.

5. Desjardins Securities beneficially owned 1% or more of the common equity (including derivatives exercisable or convertible w60 days) as of the month end preceding this report.6a. The Desjardins Securities research analyst(s) and/or associate(s) who covers the issuer discussed has a long position in its com

equity securities.6b. A member of the household of the Desjardins Securities research analyst(s) and/or associate(s) who covers the issuer has a

position in its common equity securities.7a. The Desjardins Securities research analyst(s) and/or associate(s) has viewed a material operation of the issuer, and the related tr

expenses have not been paid for by the issuer.7b. The Desjardins Securities research analyst(s) and/or associate(s) has viewed a material operation of the issuer, and the related tr

expenses have been paid for partially by the issuer.7c. The Desjardins Securities research analyst(s) and/or associate(s) has viewed a material operation of the issuer, and the related t

expenses have been paid for fully by the issuer.8. Desjardins Securities has received compensation for non-investment banking, non-securities-related services from the compan

the past 12 months.9. The issuer is a client for which a Desjardins Securities company has performed non-investment banking, non-securities re

services in the past 12 months.

10. The issuer is (or was) a client of Desjardins Securities or an affiliate within the Desjardins Group within the past 12 months received non-securities related services.11. A partner, director or officer of Desjardins Securities or any analyst(s) involved in the preparation of this publication has prov

services (other than for investment advisory or trade execution purposes) to the issuer for remuneration within the past 12 mont12. An officer or director of Desjardins Securities, outside of the Equity Research Department, or a member of his/her household i

officer or director of the issuer or acts in an advisory capacity to the issuer.13. The Desjardins Securities research analyst(s) and/or associate(s) had communication with the issuer regarding the verificatio

factual material in this research publication.14. The Desjardins Securities research analyst(s) and/or associate(s) had communication with Investment Banking regarding

verification of material in this research publication.15. A director or officer of the issuer (or any of its affiliates) serves on the board of the Desjardins Group.16. The issue date for this research publication is within the restricted period for any recent IPO, secondary offering or lock

agreement between the issuer and Desjardins Securities.17. The Desjardins Securities supervisory analyst serves as an officer, director or employee of the issuer or acts in an advisory capacit

the issuer.

Disclosures for issuers discussed in this publicationAgrium Inc.: 7a, 13 GlobeStar Mining Corporation: 2, 3, 4, 7b, 13 Potash Corporation of Saskatchewan Inc.: 7a, 1

Alcoa Inc.: 7a GobiMin Inc.: 7a, 13 Quadra FNX Mining Ltd.: 7a, 13

Asian Mineral Resources Limited: 7a, 13 Harry Winston Diamond Corporation: 7a Sherritt International Corporation: 7a

Baffinland Iron Mines Corporation: 2, 3, 7b HudBay Minerals Inc.: 7a, 13 Teck Resources Limited: 1, 7a

Cameco Corporation: 7b Inmet Mining Corporation: 6a-6b, 7a Thompson Creek Metals Company Inc.: 2, 3, 7a, 13

Capstone Mining Corp.: 7a, 13 Ivanhoe Mines Ltd.: 7a, 13 Uranium One Inc.: 13

First Quantum Minerals Ltd.: 7a Polaris Minerals Corporation: 7a, 13 Westshore Terminals Income Fund: 7a

Freeport-McMoRan Copper & Gold Inc.: 7a

Price graphs: For full disclosure, please visit our website at https://www.desjardins-securities.caFull disclosures for research of all companies covered by Desjardins Securities can be viewed at http://www.desjardins-securities.ca/DisclosurEnglish.aspx or http://www.desjardins-securities.ca/Disclosures/Francais.aspx


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DESJARDINS SECURITIES INC. LEGAL DISCLAIMERSDissemination of ResearchDesjardins Securities makes all reasonable effort to provide research simultaneously to all eligible clients. Research is available to

institutional clients via Bloomberg, FactSet, FirstCall Research Direct, Reuters and Thomson ONE. In addition, sales personnel distribresearch to institutional clients via email, fax and regular mail.

Analyst CertificationEach Desjardins Securities research analyst named on the front page of this research publication, or at the beginning of any subsechereof, hereby certifies that (i) the recommendations and opinions expressed herein accurately reflect such research analysts persviews about the company and securities that are the subject of this publication and all other companies and securities mentionethis publication that are covered by such research analyst, and (ii) no part of the research analysts compensation was, is, or wildirectly or indirectly, related to the specific recommendations or views expressed by such research analyst in this publication.

Additional DisclosuresDesjardins Securities equity research analysts are compensated from revenues generated by various Desjardins Securities busineincluding Desjardins Securities Investment Banking Department. Desjardins Securities will, at any given time, have a long or sposition or trade as principal in the securities discussed herein, related securities or options, futures, or other derivative instrumbased thereon. The reader should not rely solely on this publication in evaluating whether or not to buy or sell the securities of subject company. Desjardins Securities expects to receive or will seek compensation for investment banking services within the three months from all issuers covered by Desjardins Securities Research.

Legal MattersThis publication is issued and approved for distribution in Canada by Desjardins Securities Inc., a member of IIROC and CIPF. In thethis publication is issued via the exemptive relief described in SEC Rule 15a-6, and through reliance on Desjardins SecuInternational Inc., a member of FINRA and SIPC.

This publication is provided for informational purposes only, and does not constitute an offer or solicitation to buy or sell any securdiscussed herein in any jurisdiction where such offer or solicitation would be prohibited. The securities mentioned in this publicamay not be suitable for all types of investors; their prices, value and/or income they produce may fluctuate and/or be adversely affeby exchange rates. This publication does not take into account the investment objectives, financial situation or specific needs ofparticular client of Desjardins Securities. Before making an investment decision on the basis of any recommendation made inpublication, the recipient should consider whether such recommendation is appropriate, given the recipients particular investmneeds, objectives and financial circumstances. Desjardins Securities suggests that, prior to acting on any of the recommendatherein, you contact one of our client advisors in your jurisdiction to discuss your particular circumstances. Since the levels and basetaxation can change, any reference in this publication to the impact of taxation should not be construed as offering tax advice; as any transaction having potential tax implications, clients should consult with their own tax advisors. Past performance is noguarantee of future results.

This publication may contain statistical data cited from third party sources believed to be reliable, but Desjardins Securities doesrepresent that any such third party statistical information is accurate or complete, and it should not be relied upon as suchestimates, opinions and recommendations expressed herein constitute judgments as of the date of this publication and are subjechange without notice.

Although each company issuing this publication is a wholly owned subsidiary of Desjardins Group, each is solely responsible focontractual obligations and commitments, and any securities products offered or recommended to or purchased or sold in any claccounts (i) will not be insured by the Federal Deposit Insurance Corporation (FDIC), the Canada Deposit Insurance Corporatioother similar deposit insurance, (ii) will not be deposits or other obligations of Desjardins Group, (iii) will not be endorsed or guarantby Desjardins Group, and (iv) will be subject to investment risks, including possible loss of the principal invested.

The Desjardins trademark is used under licence.

2010 Desjardins Securities International Inc. and Desjardins Securities Inc. All rights reserved. Unauthorized use, distribuduplication or disclosure without the prior written permission of Desjardins Securities is prohibited by law and may resulprosecution.

STOCK RATING SYSTEM

Top Pick Buy Hold Sell Not RatedDesjardins best investment ideas stocks

that offer the best risk/reward ratio andthat are expected to significantlyoutperform their respective peer group*over a 12-month period

Stocks that are expected to

outperform their respectivepeer group* over a 12-month period


perform in line with theirrespective peer group* over a12-month period


underperform theirrespective peer group* overa 12-month period

Stock is being

covered exclusivelyon aninformational basis

RISK QUALIFIERS

Average Risk Above-average Risk SpeculativeRisk represented by the stock is in line with its peergroup* in terms of volatility, liquidity and earningspredictability

Risk represented by the stock is greater than thatof its peer group* in terms of volatility, liquidityand earnings predictability

High degree of risk represented by the stock,marked by an exceptionally low level ofpredictability

* Peer group refers to all of the companies that an analyst has under coverage and does not necessarily correspond to what would typically be considered an industrygroup. Where an analysts coverage universe is such that relative performance against a peer group is not meaningful, the analyst will benchmark the rating against thmost appropriate market index

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Research Industrials Paper & Forest ProductsPatrick Bartlett, CFA (416) 867-3760 Steels Pierre Lacroix, CFA (514) 281-4231Head of Research John Hughes (416) 867-3778 [email protected]@vmd.desjardins.com [email protected] David Rochow, Associate (514) 985-3576Portfolio Strategy & Quantitative Research Transportation & Aerospace [email protected] Sollbach, PEng, CFA (416) 867-6135 Benoit Poirier, CFA (514) 281-8653 Jeremy Rosenfield, Associate (514) [email protected] [email protected] [email protected] Jaitly, Associate (416) 867-2050 Etienne Durocher-Dumais, Associate (514) 985-3498 Real [email protected] [email protected] Jeff Roberts, CFA (416) 867-2048Philippe Gear, Associate (416) 867-9039 Diversified Industries [email protected] [email protected] Pierre Lacroix, CFA (514) 281-4231 Vanessa Gravina, Associate (416) 867-8002

Consumer Discretionary [email protected] [email protected]/Consumer Staples/Food & Beverages/ David Rochow, Associate (514) 985-3576 Telecom, Media & TechnologyFood & Drug Retailing [email protected] Maher Yaghi, CMA, CFA (514) 281-8664Keith Howlett (416) 861-0728 Jeremy Rosenfield, Associate (514) 985-1862 [email protected]@vmd.desjardins.com [email protected] Matthew Logan, Associate (416) 867-3573Chase Bethel, Associate (416) 867-3424 Martin Landry, CA (514) 985-3538 [email protected]@vmd.desjardins.com [email protected] ProductionFinancial Pooya Hemami, Associate (514) 985-7574 Karen Voon, Head of Production (416) 867-3585Banks & Diversified Financials/Insurance [email protected] [email protected] Goldberg, CFA (416) 867-3758 Materials Marigold de Mesa (416) [email protected] Metals & Mining [email protected] Lau, Associate (416) 867-3752 John Redstone (514) 281-7088 Simon Dukes (416) [email protected] [email protected] [email protected] Aleem Ladak, Associate (514) 985-3573 Heather Snow (416) 867-8983Pooya Hemami (514) 985-7574 [email protected] [email protected]@vmd.desjardins.com John Hughes (416) 867-3778 TranslationEnergy [email protected] Johanne Chevalier, C. Tr. (514) 281-4389Oil & Gas Precious Metals [email protected] Liu, CFA (403) 532-6611 Brian Christie (416) 867-3776 [email protected] [email protected] Tonia Di Censo (416) 867-3584Chris MacCulloch, Associate (403) 532-6617 Graham Markham, CA, CFA, Associate (416) 867-3769 [email protected]@vmd.desjardins.com [email protected] Christine Wise (514) 281-2313

Allan Stepa, PEng (403) 532-6613 [email protected]@vmd.desjardins.comDavid Hawthorn, CA, Associate (403) [email protected]

www.desjardins-securities.cahttp://strategy.vmd.ca

Desjardins EconomicsFranois Dupuis, Vice-President & Chief Economist Mathieu dAnjou, CFA (514) 281-2336Yves St-Maurice, Director & Deputy Chief Economist Benoit P Durocher [email protected]

Francis GnreuxMartin Lefebvre

Equity Capital MarketsPaul Hardy (416) 867-1789Head of Equity Sales & [email protected]

Sales

Paul Pint, CA, Head of Sales (416) 867-7590 Chung Kim (416) 867-3581 Rob Posthumus (416) [email protected] [email protected] [email protected] Bettez (514) 281-2894 Stephen Lloyd, CFA (416) 867-3598 Wolfgang Rosner (514) [email protected] [email protected] [email protected] Dennison (416) 867-3587 Jamie Murray (416) 867-1396 Paul Sun, PEng, CFA (416) [email protected] [email protected] [email protected] Dionne, Analyst (514) 985-5064 Andr Pag (514) [email protected] [email protected]

TradingFelix Blanger (514) 985-5072 David Lailey (416) 867-8612 Michael Nicholishen (416) [email protected] [email protected] [email protected] Bouchard (514) 985-1889 Franois Laplante, Head of Liability Trading (514) 281-7707 Mel Peralta (416) [email protected] [email protected] [email protected] Estevez (416) 867-2266 Reid McGregor (416) 867-1232 Pierre-Olivier Tardif (514) 281-8771 [email protected] [email protected] [email protected] Gouadec (416) [email protected]

AdministrationLindsay Booth (Sales) (416) 867-3586 Angela Di Pede (Trading) (416) 867-1952 Marie-Claude Thriault (514) 281-4210

[email protected] [email protected] [email protected] Borki (Trading) (416) 867-2262 Jay Peralta (Trading) (416) 867-1888 Angelique Welsch (514) [email protected] [email protected] [email protected] Deguire (514) [email protected]

Preferred SharesJohn Nagel, Vice-President (416) 867-3535 David Paul (416) 867-3772 Alex Somjen (416) 867-3751 [email protected] [email protected] [email protected]

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