S&P '09 Gold, Copper and Nickel Base Price Assumptions Raised

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"Overall, we believe these price assumptions. . .remain conservative."

Standard & Poor's Thursday increased its 2009 price assumptions for copper, nickel and gold, citing higher market prices year-to-date, and also futures prices.

"Generally, we continue to expect near-term prices for base metals to be relatively weak, as demand in industrial end markets such as auto and construction remains depressed due to the global slowdown. Despite production cutbacks by companies in response to the difficult industry conditions, which are partly due to cash losses being generated by high-cost assets, we see that inventories are still high in certain segments," the analysts advised.

"Our long-term price assumptions are also in some cases revised, to more closely reflect broader market views of demand and supply fundamentals, and cost curves," they said.

"Aluminum and zinc assumptions are lower, compared with their respective positions in December 2008, while those for nickel and gold are higher," they added. "Overall, we believe these price assumptions, which we use to derive base-case forecasts and ultimately our issuer credit ratings, remain conservative."

Gold. S&P raised its 2009 gold price assumption to $850 per ounce and the long-term price assumption to $600/oz, while assumptions for 2010 and 2011 remain unchanged. "Prices for 2009 are supported by investors seeking a hedge on inflation risks and against uncertainty in financial markets."

Copper. The copper price assumptions for 2009-2011 were raised to $1.75/lb ($3,860 per metric ton) and kept the long-term price unchanged at $1.50 ($3,308).

Nickel. S&P raised its nickel price assumptions for 2009-2011 to $5/lb ($11,025 per metric ton) and for the long term to $5.50 ($3,308).

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