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significant decline from the post-restriction highs and are trading at the end of Q1 2012 near historic 2010 averages.1 This increase in prices has made investing in exploration for these metals outside of China much more attractive. Additionally, all of these factors have recently led the United States, European Union, and Japan to jointly file a complaint against China over its export restrictions.2 This recent course of action signifies “the first time that Japan has started a formal trade case against China” and certain members of United States government have been compelled to comment on the significance of this conflict and the potential impact it may have on military defense products.3

China has been facing increased scrutiny over its rare earths trade restrictions by the World Trade Organization (WTO) and its appeals tribunals. However, China has continued the restrictions and has declared that it is motivated to keep such restrictions in place to “protect the environment, conserve its own reserves and encourage the development of manufacturing within China”. For example, China has imposed environmental controls, including requiring exporters to obtain a certificate of environmental compliance, on rare earth exports in order to limit or make difficult the process of exporting the minerals. Furthermore, China has provided large, state-owned mining companies with investment capital to buy out smaller domestic firms, which further strengthens the country's control on mining sources. This latter method of controlling rare earths is not something on which the WTO can have an effect.4 Certainly, there will be more developments on this issue in the coming months and years, but the landscape has potential to change dramatically with the near-future launch of a new maximum capacity rare earths refinery in Malaysia and with various companies seeking to expand exploration into such territories as Canada, South Africa, Vietnam, Kazakhstan, and Mongolia.

PwC 2012 Gold Price Report PwC's annual Gold Price Report features a survey of 40 mining companies that represent 26.5 million ounces of gold mined in 2011 and 37.8 million ounces of gold to be mined in 2012.

The mining executives of these companies shared their expectations on the price of gold in 2012, and how the price of gold is impacting their businesses and their stock price. A majority of the respondents believe the price of gold will peak at US$2,000 per ounce during the year, which is an increase from the US$1,570 to US$1,795 range in which gold traded during the end of 2011. And although the recent increase in gold prices has positively affected the mining companies' bottom lines, a majority of the firms felt the rise in prices had a smaller economic impact than expected. The report also details the more creative strategies the companies are implementing in order to make investment in their stocks more attractive as compared to the rash of gold exchange traded funds (ETFs). Gold ETFs have benefitted more in terms of capital appreciation than the stocks of the gold mining companies, as the price of gold has increased. These strategies include increasing their dividends and/or considering paying dividends in gold.

Access PwC 2012 Gold Price Report at http://www.pwc.com/ca/goldsurvey

1 http://www.metal-pages.com/metalprices/rareearths. 2 Keith Bradsher, Specialists in Rare Earths Say a Trade Case Against China May Be Too Late, The New York Times, March 13, 2012. 3 James T. Areddy and Nathan Hodge, Pentagon Plays Down China's Rare Earths Controls, The Wall Street Journal, March 16, 2012. 4 Id.

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PwC's Global Mining 2011 Deals Review and 2012 Outlook This annual report details the merger and acquisition activity in the mining sector in 2011. The report shows that even in the face of volatility in prices of mining commodities, along with challenging geopolitical concerns, M&A activity in the mining sector was strong. So strong, in fact, that 2011 was the second busiest year in terms of mining M&A activity in history. Not only was there increased activity, but the value of the deals also increased, nearly doubling the values of 2009, and nearing the peak of 2006. The report also breaks out the M&A activity by geographic region, showing that the United States, Canada, and Australia continuing to be the driving forces in the mining M&A area, followed by China and Russia. Additionally, the report breaks down the mining M&A activity by resource, with the gold sector leading the way, followed by coal, copper, and iron ore. The 2012 outlook for mining M&A is expected to be record breaking in terms of volume and value. This expectation is based upon the significant cash reserves of mining companies, built-up demand, decreasing reserves, and the entrance into the mining arena by metals companies and non-mining financial buyers.

To read more, please visit: http://www.pwc.com/gx/en/mining/publications/on-the-road-again-global-mining-2011-deals-review-and-2012-outlook.jhtml

PwC's Colombian Mining Matters PwC gives an update on Colombia's mining industry through a series of YouTube videos. Among the developments is an outbreak of growth due to stabilization of socio-political elements and security in the country. This stabilization of the country has produced a business friendly environment leading to a re-awakening of Colombia's long tradition of mining through an increase in foreign direct investment of over 80% from 2010. Activity in the mining sector has increased over 50% in the past year as well. PwC looks at a number of factors, such as the stabilization mentioned above, and the lack of exploration over the last few decades, to show that the opportunities for growth in the country are extensive and attractive. The videos also give background on the country, and cover environmental and community issues, such as environmental licenses, infrastructure and illegal mining. Colombia seems focused on using the mining industry to drive growth in their economy.

Overview http://www.youtube.com/watch?v=Dx-C7cMvbxc

Part I http://www.youtube.com/watch?v=Ply4j28Q5rU&feature=relmfu

Part II http://www.youtube.com/watch?v=QD4KDpuo77A&feature=relmfu

Part III http://www.youtube.com/watch?v=uxLQK8kA8YY&feature=relmfu

PwC's 15th Annual Global CEO Survey - Metals Sector Survey PwC's 15th Annual Global CEO Survey features the outlook of CEO's in the metals sector on a number of topics. One key topic touched upon, which relates to the mining industry, is investment in natural resources. According to the survey, 77% of metals-company CEOs expect to invest heavily in natural resources. Many of these CEOs believe this investment will be significant. Much of the motivation for this investment is to mitigate the effects of

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global mineral scarcity. Furthermore, the results of the survey help to illustrate the effect that a resource scarcity issue, such as the above discussed controversy in China, has on the mindset and operations of actual companies. PwC’s Annual Global CEO Survey aims to inform and stimulate the debate on how businesses are facing today’s challenges including embracing volatility, local approaches to global growth, and risk resilience.

The survey is online at: http://www.pwc.com/gx/en/ceo-survey/industry/metals.jhtml

PwC's Minerals and metals scarcity in manufacturing: The ticking time bomb In December 2011, PwC published observations from a survey of senior executives that focused on the issue of mineral scarcity. In Minerals and metals scarcity in manufacturing: The ticking time bomb, PwC looked at the impact that minerals and metals scarcity is likely to have on seven manufacturing industries. PwC surveyed executives in many of the leading companies in the manufacturing sector to learn their thoughts concerning the effects a scarcity in minerals may have on them. PwC found that the mineral supply is having a difficult time keeping up with increases in demand, which results in higher prices and delays in deliveries.

These concerns over mineral scarcity have popped up on the radar of policy makers and governing bodies. The European Union is focusing on conservation/efficiency and improving trade policies to favor more open markets. In the US, recent legislation has forced companies to be clear about how they use so-called ‘conflict minerals.’5 Producing countries are starting to protect their interests with export taxes and trade restrictions— a perfect example is the above discussion related to China's control of rare earth metals.

Within the industry, the response is one of conservation and efficiency. When a mineral scarcity arises, companies need flexibility in their supply chain, in order to reduce the impact of that scarcity. This is being done by the use of technology in the supply chain, in recycling processes, and conservation.

More information can be found at: http://www.pwc.com/gx/en/sustainability/research-insights/metal-minerals-scarcity.jhtml

China's gold production rises, South Africa's slumps China's official statistics show that it retains its position as the leading gold producer globally, a position it has held since 2007. In 2011, China reported a 5.89% increase in gold production which represents a total of 360.95 product tons. This production, however, pales in comparison to China's gold consumption which topped the 800 ton mark for the same year. Despite the strong statistics, import numbers through Hong Kong were down in the first two months of 2012, indicating that demand has slowed and signifying a significant decline over the same period a year ago. US production of gold for 2011 declined from 2010 figures and the number two country on the list of world-wide gold producers, Australia, also shows a slight decrease in production for the same period.6

While Australia and the US showed a dip in production for 2011, South Africa, once the world's largest gold producer, has seen gold production decrease year over year. South

5 See Dodd–Frank Wall Street Reform and Consumer Protection Act, Pub.L. 111-203, H.R. 4173, 2010. 6 Lawrence Williams, China Consolidates Position as World No. 1 Gold Miner, March, 14, 2012. http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=147272&sn=Detail&pid=102055.

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Africa saw an 11.3% decrease in gold production in 2011 following an 8.2% drop in December. MineWeb contributor Lawrence Williams commented that “[f]or [South Africa's] economy, higher metal prices have mitigated the production fall-off to a major extent, but the continuing output decline as many of the country's biggest gold mining operations have reached the ends of their lives and have closed down, and/or are having to work much lower ore grades, sees no end to the continuing downturn.” As support for the claim that South Africa will not correct the fall in production, Williams cites the age of the existing mines, safety concerns, and the reluctance towards new exploratory efforts.7

PwC's 2012 Americas School of Mines On May 15, 16, and 17 at the Scottsdale Resort and Conference Center, PwC will host the 2012 Americas School of Mines, which will feature a number of courses geared to individuals new to, and experienced in, the mining industry. A central theme of this year's School will be the impact of government and other non-economic influences on the mining industry. We are pleased to help you navigate these issues through presenters from North America, Latin America, Africa, Australia, and Asia. Topics focus on Tax, Assurance, Advisory, and other financial issues specific to the mining industry. Day one of the conference includes a day trip to an operational copper mine located outside Scottsdale or a visit to a country fair - Mining Around the World - where we will present a series of 30 minute-per-country presentations on many of the countries and regions of highest interest to the mining industry today: Australia, Chile, Columbia, Francophone Africa, Mexico, Mongolia, Peru, Quebec, South Africa, and more.

For more information regarding content and enrollment, please visit http://www.pwc.com/mining for a link to the registration. We hope to see you at PwC's 2012 Americas School of Mines!

Tax & technical developments Top 10 aspects of the tangible capitalization regulations relevant to the mining industry The US Internal Revenue Service (IRS) on December 23, 2011, published regulations (in proposed and temporary form) under Section 263(a) on the deduction and capitalization of expenditures related to tangible property (the repair regulations or temporary regulations). The repair regulations have been a priority guidance project for approximately eight years, having been announced initially in 2004 in an Advance Notice of Proposed Rule Making, proposed in regulations in August 2006, and then reproposed in March 2008. The repair regulations are significantly different in many respects from prior law as well as from the 2006 and 2008 proposed versions of these regulations. The temporary regulations serve as the text for the proposed regulations. On March 7, 2012, the IRS released Rev. Proc. 2012-19 and Rev. Proc. 2012-20, which provide rules under which taxpayers may make accounting method changes related to the repair regulations. The new revenue procedures add the method changes set forth therein to automatic method changes listed in the Appendix to Rev. Proc. 2011-14, replacing the method changes that were effectively made obsolete by the temporary regulations.

7 Lawrence Williams, South African Gold Production Continues to Plunge, March 13, 2012. http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=147221&sn=Detail&pid=102055.

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In response to the IRS publishing these repair regulations, PwC has identified a ‘top 10’ list of items relevant to the mining industry that stemmed from the new regulations:

1) changes in accounting method

2) unit of property

3) de minimus rules

4) rotable spare parts

5) routine maintenance safe harbor

6) improvements to leased property

7) casualty losses

8) inherently facilitative costs

9) dispositions

10) environmental cleanup

Throughout the process of interpreting and applying these temporary regulations, mining industry taxpayers should consider immediate actions, including the following:

1) impact on upcoming 2011 tax return filing

2) impact on 2012 cash flow and tax compliance, including potential method change filing

3) impact on uncertain tax positions reserves in financial statements

4) impact on Schedule UTP disclosures

5) impact on IRS exams/appeals issues

6) impact on certain specific calculations such as UNICAP (Section 263A), domestic production activities deduction (Section 199) and/or percentage depletion

Bonus depreciation provisions of 2010 Act still applicable in 2012 The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the Act) signed into law in December of 2010 included provisions that extended certain bonus depreciation aspects of the Small Business Jobs and Credit Act of 2010. Specifically, the Act extends 50% bonus deprecation through December 31, 2012, and, for long-production period property and certain aircraft the 50% bonus depreciation, through December 31, 2013.8 For current consideration, the provision also allows

8 Key issues under temporary 100-percent expensing and extended 50-percent bonus depreciation provisions of 2010 Act, WNTS Insight, a PwC Washington National Tax Services publication, January 24, 2011.

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taxpayers to elect to accelerate some AMT credits in lieu of bonus depreciation for taxable years 2011 and 2012.9

Mine reclamation funding might end for some states and tribes A Resolution on the House Budget for Fiscal year 2013 proposes to end mine cleanup payments to states with certified reclaimed mines where those states have previously restored or abandoned all qualifying mines. Currently the federal government collects fees from coal mining companies to restore abandoned mining sites. These funds are paid to states to restore any certified mining sites within their jurisdiction. As the law currently stands, states that have already restored or abandoned certified mining sites are still able to receive payments with no obligation to spend the funds on mining sites. The application of the law creates a potential federal subsidy for any state or tribal government that previously submitted certification for qualifying mines that have been fully restored. The proposed budget would terminate mine reclamation payments to states that no longer use the funds for their intended purpose.10

Tax Court denies fuel tax credit The Tax Court denied Myles Lorentz, Inc.11 (MLI) a credit for fuel taxes paid on diesel consumed in off-highway business use. MLI purchased diesel fuel for vehicles used in road-building and mining operations. The vehicles were designated as heavy-duty vehicles with lower-than-normal gear ratios, modified suspensions, axels, and chassis assemblies. The trucks were used to pull belly-dump trailers which were capable of handling loads of upwards of 43 tons each. Despite their heavy-duty design, each truck was capable of maintaining highway speeds even when fully loaded. The Commissioner denied MLI's entire credit amount and issued a notice of deficiency for the 2004 and 2005 tax years. Upon petition for redetermination the Tax Court considered, among other issues, the definition of ‘off-highway business use’ as defined in US Internal Revenue Code (IRC) Section 6421(e). Under that section, off-highway business use is defined in the negative, that is to say, the definition describes what is not off-highway business use. Petitioner argued that the definition of highway vehicle found in IRC §6421(e) should include both the trucks and the trailers being towed. The Tax Court sided with the Commissioner, holding that the ‘vehicle’ in question is the truck (or tractor) and not the trailer that the truck tows. Because the trucks consuming the fuel upon which MLI claimed the credit did not qualify under the off-highway business use exception, the Tax Court upheld the Commissioner's decision and denied MLI's claim for credit.

9 Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, Pub.L. 111-312, 124 Stat. 3296, H.R. 4853, 2010. 10 Concurrent Resolution on the Budget - Fiscal Year 2013, House Report No. 112–421. 11 Myles Lorentz, Inc. v. C.I.R., 128 T.C. No. 3, 2012.

© 2012 PricewaterhouseCoopers LLP. All rights reserved. PwC refers to the United States member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.

For a deeper discussion, please contact: Steve Ralbovsky PwC (602) 364-8193 steve.ralbovsky@us.pwc.com

Hallie Caywood PwC (720) 931-7310 hallie.caywood@us.pwc.com

Kerry Gordon PwC (720) 931-7364 kerry.m.gordon@us.pwc.com

Becky McLaughlin PwC (602) 364-8159 becky.mclaughlin@us.pwc.com

Sharon Powers PwC (415) 498-6198 sharon.powers@us.pwc.com

Carolyn Iacobelli PwC (602) 364-8146 carolyn.b.iacobelli@us.pwc.com

Daniel Love PwC (720) 931-7275 daniel.m.love@us.pwc.com

This issue's contributors

Alexander T. Tingey and Geoffrey Zimmermann Edited by Hallie Caywood, Daniel Love, and Zachary Bowman