1. 1 SULPHURIC ACID MARKET What Happens Next? What can be expected near and medium term - prices, operating rates, new plants. Robert Boyd, PentaSul Inc. NA Sulphuric Acid Roundtable 2009 - Galveston

2. PentaSul 2 Forward Looking Statements PentaSul is an independent market research organization with offices in the US and Canada. PentaSul has a close working relationship with FRC (Fertecon Research Centre), based in London, UK. PentaSul undertakes research in the North American sulphur sector with diligence and care, but cannot accept responsibility for decisions that are made based on the information provided. Every effort has been made to avoid errors and omissions, but accuracy of prices, analysis and forecasts cannot be guaranteed.

3. 3 SULPHUR Feedstock for >60% global sulphuric acid

4. PentaSul 4 Elemental Sulphur Production 48 million tonnes (2007)

5. PentaSul 5 Elemental Sulphur Production Trends (Million Tonnes)

6. PentaSul 6 Recovered Sulphur Production Trend (million tonnes)

7. PentaSul Elemental Sulphur Balance million tonnes Deficit Surplus Deficit Surplus Updated January 2009

8. PentaSul 8 World Sulphur Inventory

9. PentaSul 9.

10. 10 Price History To 7/07 ADNOC – Abu Dhabi National Oil Company – Monthly Posted Price Vancouver - Contract Price

11. PentaSul 11 China Sulphur Imports million tonnes

12. PentaSul 12 DAP and Sulphur Prices - 2008 source: Fertecon Phosphate prices continued to climb followed by sulphur DAP prices rose by nearly $1,000/t. Sulphur was up nearly $800!

13. PentaSul 13 Supply-Demand Forecasts for 2007 million tonnes Source: FRC Year of Forecast

14. PentaSul 14 Comparison of Forecast to Actual for the Year 2007

15. PentaSul Revised January 2009 China’s Imports Collapse in 2008 Followed by a worldwide collapse end-08

16. PentaSul 16 Recent Price History ADNOC – Abu Dhabi National Oil Company – Monthly Posted Price Vancouver - Contract Price Updated January 2009 Tampa sulphur price slides to zero in Q1-09!!

17. PentaSul 17 Supply/Demand Balance A large surplus is coming It is like waiting for an overdue bus – the longer you wait the more likely it is that it is about to arrive – IN THREES!!

18. PentaSul 18 China Sulphur Imports million tonnes

19. PentaSul 19 World Sulphur Balance & Price Forecast US$/tonne Updated January 2009

20. PentaSul 20 SULPHURIC ACID Market Trends

21. PentaSul 21 World Sulphuric Acid Consumption 203 million tonnes (2007) Integrated S-based Purchased Byproduct

22. PentaSul 22 Phosphate Fertilizer Consumption million tonnes P2O5

23. PentaSul 23 Sulphuric Acid Consumption million tonnes H 2 SO 4

24. 24 SULPHURIC ACID Trade Factors

25. PentaSul 25 Sulphuric Acid Trade Only 6% of global sulphuric acid production is traded between countries Only 4% is traded by sea Most trade is driven by involuntary production

26. PentaSul 26 World Sulphuric Acid Trade (million tonnes) source: FRC/IFA Over 12 million tonnes traded in 2007 World trade has grown 15% since 2003 Seaborne trade accounts for two-thirds Seaborne trade has grown 14% since 2003 Long-haul seaborne sets the market price

27. PentaSul 27 Major Seaborne Exporters SOURCE: FRC 2003200520072010 Europe3.12.82.52.7 S Korea1.7 2.12.3 Japan1.21.42.01.7 India/China--0.40.0 Peru0.1 0.51.4 Other1.11.30.7 TOTAL7.27.38.28.8

28. PentaSul 28 Major Seaborne Importers SOURCE: FRC 2003200520072010 Europe1.81.51.21.0 Africa/Mideast0.60.70.80.6 China1.92.01.92.3 Other Asia/Oceania 0.70.91.8 Chile0.50.61.41.8 Other Americas1.6 1.21.3 TOTAL7.27.38.28.8

29. 29 Current Market Why the turmoil?

30. PentaSul 30 Monthly Copper Cash Prices source: LME It started with copper Tight concentrates supply to smelters left oxide leaching as the way to go Chile went furthest in developing new capacity

31. PentaSul 31 Chile: Quarterly Acid Imports (‘000 tonnes) source: Global Trade Atlas New capacity came in at the end of 2006 (Spence) Supply from Peru came 3 months later causing an abnormal acid market Demand has jumped again in 2008 (Gaby)

32. PentaSul 32 Acid Prices Surge in 2007-2008

33. PentaSul 33 Metals Cash Prices Collapse source: LME

34. PentaSul 34 Metals Cash Prices Collapse source: LME

35. PentaSul 35 Acid Prices Collapse in 2009

36. 36 Market Outlook What happens next?

37. PentaSul 37 2009 Demand for purchased acid collapses worldwide in all three key sectors - fertilizers, metals, chemicals. Smelters under pressure to move acid selling at distress prices. Some smelters forced to curtail production because of acid disposal constraints. Slow recovery during second half possible. Demand and prices remain low.

38. PentaSul 38 2010-2013 Smelters begin operating a better levels New smelter acid capacity comes on line. Sulphur-burning plants to substitute imports by metals producers. Nickel projects get going again. Phosphate fertilizers resume growth. Need $60 oil, $2.50 copper, $8 nickel, $300 DAP to support operating rates, capital investment.

39. PentaSul 39 Chile/Peru: Acid Balance Forecast (mmt) source: FRC/Cochilco

40. PentaSul 40 Acid Prices There are three prices in the market. High for those that have to buy and do not have option to build own plant. Medium for those that could invest but do not yet have production capability. Low for those that have production capacity and only take acid because it is cheaper. High end usually limited by cost of discretionary acid entering market.

41. PentaSul 41 Acid Price Forecast Prices will return to “normal” by 2010. Existing plants will run at decent rates. Lower sulphur prices will limit how high acid can go even at times of tight supply. China and India will play the balancing role in traded acid rather than the US in the next long market as the US has become a much smaller potential importer. Landed prices US Gulf basis for acid will be in the $70-90 per tonne range. Investment can begin at this level.

42. PentaSul Where New Plants Will be Built Fertilizers China, Saudi Arabia, Morocco, Brazil, N. Africa. Base Metal Smelters Peru, China, Chile, Kazakhstan, India. Metals (leaching/electrowinning) Pacific Rim, Mexico, Turkey, Chile, Cuba, Madagascar, S. Africa, Brazil, United States. Chemicals China, developing world 42