Nickel
The Wildcard
 Nickel Needs Help — For nickel prices to see meaningful upside over the next
few years two factors are required: 1) The failure of all leaching projects 2) A
recovery in austenitic stainless steel production.
 A Laterite Leaching Letdown? — Laterites account for three quarters of the
growth in nickel supply. The potential economic failure of laterite leach
technology is a source of risk we have long highlighted. Ravensthorpe closure
whilst co-incident with a depressed nickel market reflects design failure, even
after several capital cost escalations. This raises significant questions over
other large scale acid leach operations.
 Cost Curve Coerces Cuts — 20% of nickel supply has been cut. There are two
reasons for the large curtailments. Firstly, the steep cost curve means that high
cost producers have come under sever pressure very rapidly. Secondly
curtailments in laterite leach production.
 Changing Costs — We expect a significant flattening of the nickel cost curve in
2009 as rising costs at the bottom end of the curve offset cost declines at the
top of the curve. Falling by-product credits will impact low cost operations.
High cost producers will benefit from lower energy costs.
 Nickel in Pig Plummets — Nickel-in-pig represents a significant proportion of
production at the top of the cost curve. Its future is important in the supply
demand outlook and in marginal cost pricing. However we believe the current
price environment has seen nearly all blast furnace operations close, resulting
in total nickel in pig production falling by 50%.
 Austenitic Upside Essential — High nickel content stainless steel alloys
continue to be substituted by low nickel alloys despite depressed nickel prices.
But if the austenitic ratio were to increase and if leaching projects were to fail
the nickel market would tighten much more rapidly.
 Price Potential — Our base case outlook for nickel remains unchanged at
$US4.80/lb and $5.00/lb for 2009 /10 respectively. If leaching is a failure and
demand recovers (or austenitic regain market share) nickel prices could reach
$US10/lb in the outer year of our forecasts.

Contents
Supply 3
Laterites & Leaching 4
Industry Costs – Changing 10
Nickel in Pig – Chinese Production Collapse 13
Demand – Substitution Stings 16
Appendix: Nickel Leaching Technologies 21
Ammonia leaching 21
Pressure acid leaching 22
Atmospheric Pressure (VAT) Leaching 23
Heap Leaching 25
Appendix A-1 34