1. © 2009 Northern Trust Corporationnortherntrust.com FALL FOCUS 2009 INVESTMENT CONFERENCE Edward Trafford Senior Investment Analyst Basic Materials

2. 2 2009 Fall FOCUS Investment Conference Peak Fundamentals (Late Cycle) Gold Industrial Gases Mining Equipment Const. Machinery INDUSTRY FUNDAMENTALS Normal Trough Fundamentals (Early Cycle) Paper Commodity Chemicals Agriculture Machinery Specialty Chemicals Steel Construction MaterialsAluminum Staples Packaging Diversified Miners Agriculture Coal Today The Cycle – What to Own

3. 3 2009 Fall FOCUS Investment Conference Moderate Overweight  US economy is troughing  The basic materials space has historically outperformed  ‘Outperformance’ could be magnified this cycle  China growth engine  Investments in infrastructure  Shortage / tightness of supply  US$ depreciation  Demand needs to spread beyond the restocking and infrastructure / construction projects in China Portfolio Construction – barbell approach  Pseudo-basic materials  Higher beta commodity names Recommended Weighting

4. 4 2009 Fall FOCUS Investment Conference Multi-Year Outlook  Commodity Prices – violent up tick in pricing as global demand returns  Operating Leverage – underestimated Production Costs – down 20 - 40% yoy Vertical Integration & Inflation – own hard assets Debasing Fiat Currency – global trend toward the devaluing of fiat currency as the governments ‘print money’ Leverage – In a downturn, less leverage (both b/s and operating) is preferable and vice-versa Restocking  US apparent steel consumption has declined to levels last seen in the 1950s The Big Picture

5. 5 2009 Fall FOCUS Investment Conference Key Factors in the Commodity Space:  Levered to FAI  Peaking inventory levels  Lack of new supply  Barriers to new supply coming online  Demand troughing  Supplier consolidation  Rational behavior  Leverage to global GDP What to Look For

6. 6 2009 Fall FOCUS Investment Conference The Significance of China  Vale – China made up ~67% of iron ore consumption volumes in 1h’09  Chinese Inland Cities – Steel consumption at 215kg per capita vs 525kg in the coastal (developed) regions  BHP Commentary – inline with ours – Chinese demand for steel doubling over the next 15 years Buy what the Chinese are Short  Own those resources that Chinese must import  M&A – Own those companies that China wants a stake in Chinese Sovereign Wealth Fund – $800b  China is the largest foreign holder of US treasuries  Expect continued diversification into basic materials, energy and power infrastructure Significance of China

7. 7 2009 Fall FOCUS Investment Conference China’s Fundamentals – August Data  Power consumption – up 35% yoy  Vehicle production – up 40% yoy  China FAI – up 43% yoy  China Property Inventory Levels – peaked at 26 months; at ~10 months now  China Real-Estate Investment – up 38% yoy  Chinese Land Pricing – troughed in q1’09 Durability in Chinese Demand  SRB – stockpiles built; yes  Fundamental demand – it is there Sector Themes

8. 8 2009 Fall FOCUS Investment Conference How We See This Playing Out  Japan as our Proxy  Acquisitions – purchased Australian and global assets through the ’70’s and ’80’s  Rationale – available capital & desire to become increasingly self-sufficient  Today – ~50% of their copper and ~30% of their iron ore requirements fulfilled  Implications for China – we estimate that China would need to triple the level of investments spent thus far  The SRB  Inventory to be Consumed? or…  Inflation Hedge / Store of Value  Risk of a Fall / Winter Lull  High probability – We peg above 50%  Short Term vs. Long Term Investors – play this differently  Sequential Imports – down -20% Our Playbook

9. 9 2009 Fall FOCUS Investment Conference Production Growth – Back in vogue The Risk  Inflection Point Production will tick-up just as China steps out of the market  China’s Track Record Impressive track record of buying / stockpiling when prices are low and exiting as prices move up  BHP Management Similar view; Chinese momentum trade to lose momentum through q4 Our Stance  Short Term – Cautious  Long Term – Resolutely positive due to LT thesis – bottlenecks, fixed supply, escalating demand, industrialization of the BRICs Inflection Point – Today

10. 10 2009 Fall FOCUS Investment Conference BHP Billiton (BHP) – 1/B Thesis – Unchanged and Intact  Best commodity portfolio  Diversified asset base The B/S – We are comfortable  Debt – ~$900mm in debt coming due in 2010 and ~$1.9b in 2011  Acquisitions – “opportunistic” Company-Specific Drivers  Growth Projects – 2010-2012 – attractive returns  Western Aus Iron Ore JV with Rio Tinto  Low Cost Capacity Expansions  Rio Tino Acquisition – shows management discipline Management’s Macro Outlook – not exactly bullish; we prefer conservatism.  “Economic indicators remain weak by past standards and any assumption of a quick return to historical trend growth may be premature."

11. 11 2009 Fall FOCUS Investment Conference Freeport McMoRan (FCX) – 1/B  Downside Risk to Copper Pricing – we do NOT believe there is significant downside risk to the copper price as at $1.50 ~20% of global production is BELOW cash cost.  Market Share – While not an oligopoly; we would like to highlight the consolidation in production amongst the top 3 producers all of which we would depict as disciplined and rational.  Early (IMMEDIATE) cycle – FCX has direct / immediate leverage to commodity pricing and we therefore believe it will be one of the early beneficiaries of a stabilization / uptick in the global economies. Co-Specific Drivers  Optionality – FCX has significant optionality due to its steep cost curve.  Lifting Costs – FCX could drop its lifting costs to 0.66/lb in q1 vs $1.06 YOY (q1’08) and $1.04 sequentially (q4’08).  Low Cost Volume Growth – “the free option” The Commodity – copper is one of our most preferred commodities. We see the longer-term s/d outlook as compelling and bolstered by the acceleration of China’s infrastructure buildout.  End-Market Breakout – Over 60% of copper is consumed in infrastructure-type applications

12. © 2009 Northern Trust Corporationnortherntrust.com FALL FOCUS 2009 INVESTMENT CONFERENCE Edward Trafford Senior Investment Analyst Thank you.