Key Metal Refining. Platinum Market Review Weekly Summary

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1 Key Metal Refining Platinum Market Review Weekly Summary January 22, 2018 Metal Price Performance % Change Over Period Precious Metals - Spot Prices (US$/oz.) January 19, 2018 Price 1 week 1 month 3 months 1 year Gold $1, % 5.9% 3.8% 11.6% Silver $ % 5.4% 0.1% 0.5% Platinum $1, % 10.6% 9.8% 5.8% Palladium $1, % 9.4% 16.9% 48.1% Rhodium $1, % 7.0% 10.8% 97.7% LBMA/ICE auction prices for gold (PM) and silver; LME auction prices (PM) for platinum and palladium; JM Base Price, 9:30 AM New York, for rhodium LME Metals - 3 Month Closing Prices (US$/ton) January 22, 2018 Price 1 week 1 month 3 months 1 year Aluminum $2, % 1.2% 3.9% 20.3% Copper $7, % -1.2% 1.3% 22.5% Lead $2, % 3.7% 2.6% 11.8% Nickel $12, % 4.9% 8.4% 31.1% Tin $20, % 5.5% 5.2% 1.9% Zinc $3, % 3.4% 8.9% 22.0% Technical Levels January 22, 2018 Platinum Palladium Gold Silver Rhodium 15-day MA $976 $1,097 $1,323 $17.09 $1, day MA $939 $1,045 $1,290 $16.66 $1, day MA $941 $993 $1,292 $16.96 $1, day MA $941 $919 $1,274 $16.93 $1,214 Key Metal Refining, LLC 5400 Delaware Avenue Hainesport, NJ Bollinger Bands - Upper Limit $1,032 $1,132 $1,354 $ Mid $970 $1,092 $1,317 $ Lower Limit $908 $1,053 $1,280 $16.65 CFTC Commitment of Traders Non-Commercial Positions as of January 16, 2018 (# of Contracts) Longs Change % of Tot. Shorts Change % of Tot. Platinum 58,368 5, % 23, % Palladium 31, % 4, % Gold 301,863 12, % 90,152 4, % Silver 79,866-4, % 42,654-3, % Patrick Magilligan pmagilligan@keymetalrefining.com

2 Market Highlights (for week ending January 19, 2018) Platinum prices tested the $1,000 an ounce barrier more than once last week before climbing convincingly above the mark to $1,020 an ounce. It is the highest price for the metal since last September s $1,024 an ounce; the high price for platinum in 2017 was $1,046 an ounce set back on the 3 rd of March, a possible target for the current move. Continued strength in both the gold and palladium prices likely supported platinum s recent increase in speculative interest as prices played catch-up, rising more than 16% in just the past month. EU new car registrations rose to million units in 2017, 3.4% above the million reported in 2016 (13.71 million vehicles recorded in 2015) for the fourth straight year of higher sales, according to the European Automobile Manufacturers Association (ACEA). Of the major markets across the EU, positive year-on-year growth in new registrations in 2017 was posted in Italy (+7.9%), Spain (+7.7%), France (+4.7%), and Germany (+2.7%), while the UK experienced a decline (-5.7%) for the first time in six years. New car registrations for December actually fell 4.9% to 1.09 million units, essentially on the loss of one day s sales when compared to the same period of 2016, and the relatively strong December 2016 sales, reportedly the largest total sales for the month of December for more than a decade. With the exception of Spain (+6.2%), each of the other major EU markets posted lower sales y/y in December. It is of interest to note that General Motors sold just 45 cars in December following the sale of its Opel and Vauxhall units to PSA earlier in the year. The company has effectively relinquished any prospect of competing in the world s third largest market for vehicle sales, for now, after 90 years of maintaining a European presence. Commercial vehicle sales across the EU countries increased 3.9% y/y in the January through November period of 2017 (most recent data) to 2.2 million units. Of the major EU markets, only the UK reported fewer sales for the eleven-month period (-4.6%). The share of diesel powered passenger cars across the EU market peaked in 2011 at 56.1% and has steadily declined since to a 49.9% share in 2016, according to the ACEA. Initially, diesel s market share was eroded by the advent of less expensive turbo-charged four-cylinder gasoline engines that could achieve the same mileage as diesels. By 2014, however, many European cities, most notably Paris, had begun to propose the ban of diesel cars as early as 2020 because of the higher than claimed emissions of nitrogen oxides and particulate matter, known to cause increased incidences of respiratory disorders. Other cities like London have limited the use of diesel cars in certain areas. The image of diesel cars was further tarnished by the Volkswagen emissions scandal that began in late-2015 and the admission that the company had deliberately acted to falsify government testing data. The result has been a rise in the sale of gasoline powered passenger cars, and to some extent hybrids and ELVs, at the expense of diesel cars. Platinum demand in the EU automotive sector has decreased as a consequence as the metal is preferred over palladium in the manufacture of catalytic converters for 1

3 diesel engines, while palladium demand has improved with the subsequent rise in sales of gasoline powered cars. Palladium prices set a new record high early last week of $1,139 an ounce before easing lower as the supply deficit in the market is projected to widen over the intermediate term. Consumption of palladium in the manufacture of catalytic converters already outstrips annual primary supplies of the metal. And as global vehicle sales will be a product of economic expansion, so will the price performance of palladium be directed by the growth in world output. In sequence, palladium prices will also be influenced by changes in equity values, another proxy for world growth. As the chart below illustrates, the palladium price has been increasing with, but at a greater pace than, the S&P 500 Index in recent years. A measure of the linear relationship between these two variables produces a simple correlation coefficient of 0.95, indicating that the S&P 500 Index and palladium prices are highly positively correlated for this period. Most market analysts have cautioned that a temporary correction in the steady rise in global equity prices may be overdue, and that a 10% to 20% pullback is possible; economists and market analysts on the whole remain bullish on equities over the intermediate term, however. But should equities face a bout of profit taking at some point in the months ahead, palladium prices could be vulnerable as well. Rhodium prices remain firm at just below $1,700 an ounce for the third consecutive week. Solid economic fundamentals continue to support metal prices, while positive growth in most of the world s largest vehicle markets augurs well for the industrial metals needed in their manufacture. Gold prices gained as much as $12 an ounce at one point on Friday in reaction to the US government impasse that led to a shutdown, the first in five years. But prices couldn t recover to highs posted at the start of the week of $1,344 an ounce. Nonetheless, gold prices remained firm after climbing $100 above mid-december lows. The World Gold Council cited four overlying trends that should be supportive of gold prices in The Council s first argument relates continued advances in global economic growth, rising wealth levels and consequent consumer demand, particularly in China and India, to improved gold prices. Another potential source for firming gold prices stems from a perceived increase in systematic market risk associated with record values in global equity markets and expectations of an inevitable correction in A third reason to hold gold would be the added benefits of increasing efficiencies and transparencies in world gold markets and the anticipated constructive changes in prohibitive tax schemes that could attract new investors. Less convincing, however, was the Council s fourth reason that the expected tightening of global monetary policies will not affect gold prices as negatively as some might think. While interest rates are expected to rise through the year, rates will still remain at historically low levels. And with returns on widely-held investments such as government securities expected to decline in value, gold may rise as a comparatively attractive alternative. Furthering its argument, the Council refers to its research that gold holdings can have a positive impact on the performance of a balanced portfolio containing gold especially during volatile periods. 2

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6 Material contained in this report is based upon publicly available market data believed to be accurate and reliable and is presented for informational purposes only. KMR assumes no warranty or liability for its completeness, nor guarantees future market performance. Further, KMR assumes no liability for direct or indirect loss or damage from the use of information contained in this report, or from any unforeseen errors or omissions. 5