CPM Group Silver Users Association Washington, D.C. November 2007 Jeffrey M. Christian Managing Director CPM Group Using Silver in an Era of High Prices

CPM Group Silver Prices Are High Monthly Average Comex, Through October 2007

CPM Group Silver Prices Are High Weekly Through 2 November 2007

CPM Group Prices Have Become More Volatile

CPM Group Why Prices Have Risen Silver prices have risen primarily because investors have been buying large amounts of silver. Investors have been buying silver primarily because the political environment they face is frightening them. –Economic and financial concerns have contributed to investor interest in silver. –Bullish views of silver market fundamentals have contributed to investor interest in silver as well. Silver’s fundamentals meanwhile have been mixed to negative for prices. –Declining fabrication demand and rising supplies should be pushing prices lower. –Declining world stocks are offsetting these negative factors ever so slightly.

CPM Group Investor Buying Has Driven Prices Higher

CPM Group Prices May Stay High CPM Group Main Scenario Price Outlook

CPM Group Prices May Stay High CPM Group Five Silver Market Scenarios, Real Price Projections

CPM Group Prices May Stay High CPM Group Five Silver Market Scenarios, Nominal Price Projections

CPM Group Why Prices May Stay High It would take a major reduction in world political, economic, and financial risks to cause investors to back away from silver on a sustained basis. That may not happen for years. Conditions actually could worsen. Fabrication demand may rise sharply over the coming decade, and could outpace the rise expected in total supply.

CPM Group Investors May Remain Net Buyers

CPM Group Fabrication Demand May Outpace Supply

CPM Group Living With High Silver Prices Grin and bear it. Go out of business. Buy some insurance. –Insurance comes in many forms –Standard insurance or catastrophic insurance. –Buyer beware. Bad hedging can be as terminal as no hedging at all.

CPM Group How to Hedge Your Silver Purchases Two sets of hedges are shown here as examples of what might be done. (All priced on 1 November 2007.) Three hedge opportunities for December Two hedge opportunities for December All of the hedges here have no premiums paid up front. Silver options prices at present show that the market has a tremendously bullish upward bias. The market overall is discounting sky-rocketing prices.

CPM Group Hedge 1: December 2008 $16 maximum price

CPM Group Hedge 2: December 2008 $17 maximum price

CPM Group Hedge 3: December 2008 $18 maximum price

CPM Group Hedge : December 2009 $17 maximum price

CPM Group Hedge : December 2009 $18 maximum price

CPM Group Why Prices Might Decline If prices rose primarily because investors have been buying so much silver and gold out of political, economic, and financial market fears… The logical extension is that it would take a major reduction in the factors causing these fears for silver prices to fall. Silver supply and fabrication demand trends can contribute to a decline to some extent, just as they have contributed to the rise in prices to some extent. But they will not be the primary factors determining prices in the future, just as they have not been in the past.

CPM Group “There Is A Lot Of Silver Out There” Estimated Disposition (Million Troy Ounces) Silver Bullion and Coins Bullion:461 Coins:559 Subtotal: 1,020 Jewelry, Decorative, and Religious: 20,199 Industrial Use, Undetermined or Lost: 21,528 Total: 43,011

CPM Group “There Is A Lot Of Silver Out There” There are 43 billion ounces of silver that have been mined through the years. Roughly half of this is unaccounted for, and most of the rest is in jewelry, decorative objects, and religious items. While one might try to take comfort in the fact that there are 43 billion ounces of historical mine production that could ride to the rescue, consider this. There were 32 billion ounces of cumulative silver mine production as of 1980, and it did not stop prices from going to $50 per ounce. You can say that it caused prices to fall, although many people would credit the metals committee of the Comex for that. You can say that it contributed to the 20+ years of lower silver prices after that, and you probably would be right.

CPM Group The “Indian Inventories to the Rescue” Theory There are 4 billion ounces or more of silver held in jewelry and decorative objects form in India. Indians have not shown much interest in selling these objects to date. In fact, they keep buying more. Indian silver exports are prohibited, which inhibits sales by risking a build up of sold silver in the Indian market. The Indian government has been thinking of relaxing silver export restrictions, for years. Maybe someday it will. This would not be expected to unleash major sales by Indians, but it could lead to increased sales of some of these metal stocks in the event of sharply higher prices in the future. Do you want to bet your company’s future on the potential for sales by Indian investors, many who are peasant farmers?

CPM Group Summary CPM Group began predicting in the middle of the 1990s that silver prices would have to adjust to around $7 - $10 at some point for supply to rise to meet long-term fabrication demand requirements. We also stated that prices could over-shoot this level, but then come back toward $7 - $8 on a sustained basis. In late 2000 we moved to a more bullish projected outlook for gold and silver. We now think that prices may stay above such levels for an extended period of time. Prices are heavily influenced by investment demand, and not just supply and fabrication demand. Think about why investors have been buying so much silver, as well as gold and other commodities… Think whether you can construct a reasonably credible scenario in which these factors are reduced to a level where investors back off from buying so much silver. With silver, it also is supply and fabrication demand… fabrication demand may rise sharply over the coming decade.

CPM Group Among CPM Group’s research products are its monthly reports on precious metals, base metals, and energy. These provide analysis on market developments for these commodities over the past month and an eight quarters forward monthly price outlook. CPM Group – Commodity Research 21

CPM Group CPM Group’s annual yearbooks on gold, silver and the platinum group metals provide detailed statistics and analysis of what has transpired in the markets for these metals over the past year and a half. They present a realistic and well researched set of projections for supply and demand trends in each metal's markets for the upcoming year. CPM Group - Precious Metals Yearbooks 22

CPM Group CPM Group produces research and provides consulting services on a wide array of commodities, including precious metals, base metals, energy commodities, agricultural commodities, and commodities in general. CPM Group provides: Research Consulting Investment banking Commodities management Asset management services 30 Broad Street, 37th FloorTelephone: (212) New York, N.Y Telefax: (212)