Patricia M. Mohr Vice-President, Economics & Commodity Market Specialist

1. The Outlook for Commodity Prices and the Global Mining Industry Seminar on Surviving the Global Financial Crisis in the Mining Sector Mine Africa Radisson Admiral Harbourfront Toronto, Ontario February 28, 2009 Patricia M. Mohr Vice-President, Economics & Commodity Market Specialist The Scotiabank Group, Toronto

2. Commodity Price Upswing This Decade On a Par With 1970’s Expansion Scotiabank Commodity Price Index1 Index:1997=100 New record high in July 2008 at 226% above cyclical low * All Items October 2001 Bottom Arab Oil Embargo A trade-weighted U.S. dollar-based index of principal Canadian exports. Shaded areas represent U.S. recession periods. Scotiabank Commodity Price Index edged up in January.

3. Commodity Prices Retreat From Record High in July 2008 The ‘Bull-Run’ in commodities continued in 2008:H1 due to ongoing strength in China’s GDP growth, under-investment in oil & gas and metals during the 1990s and delays in expanding capacity this decade. Interest by investment funds in commodities as a ‘hedge against a declining U.S. dollar’ and a major rejuvenation in international grain & oilseed prices – linked to biofuel development and tight global supplies – also pushed up commodity prices. Fertilizer prices (especially potash) rose to record levels. However, after reaching a cyclical peak in July 2008, Scotiabank’s Commodity Price Index plunged by a sharp 39% through December alongside a faltering global economy – ushered in by a U.S. and European banking crisis, deleveraging by financial institutions and much tighter global credit conditions. Most G7 economies are now contracting.

4. Hedge Funds Exit Oil & Metal Positions While inter-bank lending has improved – following government guarantees on inter-bank lending in Europe, government capital injections into financial institutions to shore up their balance sheets and massive central bank liquidity injections – tighter credit will contribute to sharply reducing global growth from 5% in 2006 and 2007 to about -0.5% in 2009. This will occur, even with relative strength in ‘emerging markets’ such as China, where GDP growth should still advance by 5.8% in 2009 – though well below the estimated 9.0% of 2008 and 13.0% of 2007. The sudden and unusually sharp decline in commodity prices since the July peak reflects the exit of many hedge funds from long commodity ‘futures’ positions and ‘commodity index-linked investments’—forced by fund redemptions and tighter credit – as well as a shift to record short positions by funds and trading companies. On a more positive note, the Scotiabank Commodity Price Index rose by 1.3% in January 2009, as buying by China’s State Reserve Bureau contributed to stronger base metal and grain prices and oil prices steadied.

5. China -- Vital to Global Commodity Markets China Industrial Production: December 2008 5.7% yr/yr G7 Industrial Production -7.8% (Nov) U.S. -10.0% (Jan) Japan -22.6% (Dec) Germany -12.0% (Dec) yr/yr % change *3 mth moving avg. China – Industrial Production* China shifts policy in mid-September 2008 from preventing ‘overheating’ to supporting fast and steady growth; monetary policy has been eased decisively, while a massive fiscal stimulus package (infrastructure spending totaling 4.16 tr RMB from 2008:Q4 through 2010 – equivalent to 6% of nominal GDP in each of 2009 and 2010) was announced on Nov. 9, 2008. This spending has already been expanded. Measures to bolster 10 key industries (including nonferrous metals) have been unveiled ahead of the National People’s Congress on March 5, 2009. G7 Industrial Production Demand Growth in China (2007, % change)

6. GDP (% per annum) ‘Emerging Markets’ Should Provide Some Offset To G7 Contraction yr/yr % change Widening credit squeeze cuts growth prospects. A ‘seismic’ shift in global growth has occurred from the G7 to ‘emerging markets’ this decade. *Global GDP estimate based on “purchasing power parity,” as used by the IMF. + Negative growth in current dollars. Average 1988-1997: 3.4% p.a. prior to the “economic take-off” in China and India.

7. U.S. housing starts at 466,000 units in January 2009 are the lowest in data back to 1959. Shaded areas represent U.S. recession periods. U.S. Housing Starts U.S. Housing Start Outlook (million units) millions of units, quarterly, annualized 1978 – Strong ‘Baby-Boom’ Demand Total Tighter U.S. lending standards, an end to private-label mortgage securitization, high existing home inventories (exacerbated by near-record foreclosures) and severe employment losses point to prolonged U.S. slowdown. Single-Family Units

8. The Fed Takes Action to Stem Fallout from Sub-prime Mortgage Meltdown Federal Funds Target Rate is 0.25% in February 2009. Fed Funds expected to remain virtually flat through 2010:H1. * Inflation-adjusted with the U.S. Personal Consumption Deflator (PCE) and the core PCE. Shaded areas represent U.S. recession periods. Federal Funds – Effective Rates “Real” Federal Funds Rate (Adjusted for Inflation)* per cent per cent January 2009 = -1.41%Average = 2.31% Average

9. Credit Conditions Tighten Globally In September & October 2008 USD Libor Shows Significant Improvement in Late October + Inter-bank lending thaws following government guarantees on inter-bank lending and capital injections into banks and other financial institutions in the U.K. and Western Europe in October. However, general credit conditions remain tight world-wide for corporate and consumer loans in early 2009. % ‘Credit Squeeze’ 3-month Overnight +Inter-bank lending thaws Data to February 25, 2009.

10. After a Weak 2009, Oil Prices Will Likely Rebound Medium-Term 1990-99 US$19.69/bbl 2006 US$66.22 2007 US$72.32 2008 US$99.62 2009F US$45–50 2010F US$65 2011 US$75+ Oil Prices Tumble from Record High * US$ per barrel New Record High: July 11, 2008: US$147.90 OPEC announces output cuts of 4.2 mb/d in Sept/08 – Jan/09 to shore up prices. Iraq War Iranian Revolution Gulf War A global capital spending slowdown on oil field development in 2009, due to tighter credit and the slide in oil prices, sets the stage for a strong rebound in oil prices in 2011-13. U.S. demand for gasoline shows signs of stabilizing (rising 1.7% yr/yr in latest 4 weeks); U.S. oil imports are also declining now, partly due to OPEC cutbacks. Arab Oil Embargo Source: Scotiabank Commodity Price Index. WTI on February 27, 2009: US$44.64.

11. U.S. Economy Contracts Waning U.S. Industrial Activity U.S. Employment Growth yr/yr % change million units, quarterly yr/yr % change Industrial Production U.S. Payrolls U.S. Motor Vehicle Assemblies U.S. motor vehicle assemblies (including General Motors, Mitsubishi, Nissan…) totalled 8.7 million units in 2008, and are expected to drop to 7.3 million in 2009, before edging up to 7.6 million in 2010. Assemblies averaged about 12 million from 1993-2007.

12. Shaded areas represent U.S. recession periods. Latest data: January 2009. Commodity prices recently trade down with weak equity markets. Scotiabank Metal and Mineral Price Index Retreats from Record U.S. Equity Markets Remain Jittery Index: 1997=100 Index: 1941-43=10 S&P 500 Metal and Mineral Price Index in July 2008 reached a new record high – 123.8% above the June 1988 peak. An Indicator of Financial Market Distress & Economic Sentiment Feb 23/09 10

13. LME cash settlement prices. * Latest data: February 27, 2009. Copper Prices Still at Profitable Level Re-weighting of Dow Jones-AIG Commodity Price Index and S&P GSCI boosts base metals (at least temporarily) in early January. Buying by China’s State Reserve Bureau also boosts copper prices in January/February 2009. US$ per pound Record High: US$4.08 on July 3, 2008 * + Low During Credit Squeeze (Aug. 17, 2007) • Price Outlook • US$3.23 • 2008 US$3.15 • 2009F US$1.40 • (possibly as high as US$1.50) • 2010F US$1.40

14. Copper Prices Will Likely Outperform Other Base Metals LME copper prices at US$1.54 per pound on February 27, 2009 are at profitable levels -- yielding an 11% margin over average world break-even costs including depreciation, interest expense & royalties. Prices have edged up in early 2009, after falling as low as US$1.26 on December 24 (well below the 90th percentile of direct cash costs) – triggering substantial production cuts and mine expansion deferrals. Roughly 670,000 tonnes of production has recently been curtailed. Significant buying of copper by China’s State Reserve Bureau (recently as much as 300,000 tonnes via intermediaries from Latin American and European copper suppliers) contributed to the rebound in prices in January & February. Should recent rumours be true -- that China wishes to build its overall copper reserve to 1 million tonnes -- the additional buying would go a long way towards offsetting the projected 2009 copper surplus. Nevertheless, prices could move lower again later in 2009, given prospects for a contraction in world copper consumption of about -4.6% in 2009, after last year’s marked deceleration in demand to only +0.3%. Global consumption should pick up again modestly in 2010 (+1.0%).

15. China’s Copper Consumption Likely to Rise by 5% in 2009 and in 2010 China’s copper consumption will decelerate from last year’s 8% growth (16% in 2007) to only 5%, given lower exports to the G7 and substantial inventory liquidation in parts of its manufacturing sector (e.g. air conditioners) linked to a domestic housing correction and industry rationalization. However, this inventory correction should come to an end by mid-year and China’s massive infrastructure spending program (particularly on power transmission in urban areas – as well as aluminium-intensive cross country transmission) will provide some support for copper. Japan’s auto sector is dominated by export demand and, with declining car sales in the United States and Europe, Japan’s auto makers have been forced to cut output (-41% in January). Copper consumption is also quite weak in Western Europe (-9.8% expected in 2009). LME copper inventories have surged by 67% since early January (from 324,000 tonnes to 542,300 tonnes in late February), but remain low on the Shanghai Futures Exchange at only 28,332 tonnes. While global copper inventories may continue to rise through early 2010, the increase is likely to be less than for nickel and aluminium (in terms of days of global consumption). Copper prices should hold up better than many other base metals.

16. Latest data: February 2009. Stainless steel production slowdown in Asia and Europe pushes down prices in 2008. Mine & refinery closures (at Ravensthorpe in Australia and Loma de Niquel in Venezuela) and delays in ramping up new projects (possibly at Goro and Onça-Puma) together with stronger consumption point to a modest rebound in prices by 2010. Nickel Prices Retreat US$ per pound May 16, 2007 New Record US$24.59 LME Nickel Prices Previous Record US$10.84 in March 1988 LME Nickel Prices(US$ per pound)

17. Including alloy surcharges. Data to February 2009. U.S. Stainless Steel Prices Expected global capital spending slowdown in 2009 will pressure stainless steel prices. However, capital spending should reaccelerate early in the next decade. U.S. nickel surcharges on stainless steel prices have dropped from US$1.48 per pound in January 2008 to US$0.54 in January 2009. US$ per tonne U.S. Midwest, spot prices Stainless Steel Prices - CR304*

18. Zinc Prices Ease US$ per pound LME Zinc Prices(US$ per pound) Zinc producers announce pro-active output cuts to shore up market conditions Zinc prices should start to recover in 2010, though prices may remain at a low ebb (below average world break-even costs including depreciation). LME official cash settlement prices. Data to February 2009.

19. Collapse in Global Auto Production & Weak Residential Construction Takes Toll on Zinc The global supply/demand balance for zinc moved into a surplus in 2008, with traders continuing to short the market through most of the year – initially in anticipation of substantial new mine capability scheduled to come on stream and later with growing realization that much of the G7 had entered recession. Zinc prices fell to a low of US$0.47 per pound on December 12 – close to average world cash costs – amid a collapse in demand in the global auto and construction sectors. Prices peaked for the business cycle around US$2.09 in December 2006. However, zinc prices rallied back in late December and averaged US$0.54 in January. The market responded favourably to substantial mine and smelter production cutbacks as well as the annual re-jigging of the Dow Jones-AIG Commodity Index boosting the weighting of zinc and news that China’s State Reserves Bureau would buy about 200,000 tonnes of refined zinc from Chinese smelters for its ‘strategic’ stockpile (intended to bolster hard-pressed domestic smelters as well as take advantage of bargain prices). Interestingly, Yunnan province may also buy reserves to shore up its beleaguered zinc smelting industry.

20. Zinc Smelters Take Unusual Steps To Bolster Market Conditions Twenty zinc smelters (including Zhuzhou in China -20%, Trail -20% to mid-2009, Kidd Creek -30% to mid-2009) have now announced deep production cuts – a very unusual step. Smelters often wait until mine concentrate supplies dwindle before cutting output. Weak demand for the sulphuric acid produced by some smelters and insufficient storage capability for it could also cut smelter output in coming months, as will a tightening supply of concentrates from mines. While lower smelter output has bolstered market conditions, it would not be surprising to see zinc prices retest previous lows in the first half of 2009. In fact, zinc has fallen back to US$0.49 in late February. Zinc prices should start to rebound on a sustained basis by the second half of 2010.

21. Gold – A Hedge Against Economic Uncertainty • Price Outlook • US$697 • 2008 US$872 • 2009F US$975 • 2010F US$900-950 US$ per ounce * New Record: March 17, 2008 US$1,032.70 Jan. 21, 1980 peak US$850 Gold Prices London PM Fix London PM Fix on Feb 26, 2009: US$945. Investor Interest in ETFs and retail interest in bars and coins remains strong.

22. Gold Should Shine as ‘Safe-Haven’ in 2009 Gold prices (London PM Fix) – traditionally considered a store of value and a hedge against economic uncertainty – have held up better than base metal prices. However, a stronger trade-weighted U.S. dollar (especially against the euro) from mid-July 2008 through November 20th – linked to some improvement in the U.S. merchandise trade performance last summer, but more importantly to a counter-intuitive flight to the ‘safe-haven’ of U.S. Treasury securities during the height of the banking credit crisis last Fall, prevented gold from climbing back to its previous March 2008 record high of US$1,032.70 and – in fact – pushed prices down.

23. Gold Should Shine as ‘Safe-Haven’ in 2009 A largely ‘deflationary’ economic environment, falling oil prices and the forced exit of many hedge funds from commodity market positions also contributed to a decline in gold prices to a low of US$712.50 on October 24. Gold prices have subsequently rallied back, averaging US$859 in January 2009 and surging as high as US$1,006 in intraday trading on the spot market on February 20. Prices were pushed up by another global selloff in equity markets, triggered by concern over the stability of the U.S. banking industry. While day-to-day prices remain volatile and retreated to US$942 (spot) on February 27, the big picture outlook for gold remains bullish in 2009. Asian and Middle East central banks and sovereign wealth funds could be less supportive of U.S. debt markets in the next 12-24 months, in view of large debt issuance to fund massive U.S. federal government budgetary deficits (US$1.75 trillion in FY2009 and probably over US$1.2 trillion in FY2010). Gold should come into its own as a true ‘safe haven’ in 2009.

24. *Data to February 26, 2009. Canadian Dollar U.S. Dollar Trade Weighted vs. Euro US centsmonthly averages US centsmonthly averages March 1973=100monthly averages euro Commodity prices slip U.S. Dollar Trade Weighted Canadian dollar reached parity with the U.S. dollar on Sept. 20th, 2007. Canadian Dollar: US$0.802 as of February 26, 2009.

25. Spot Uranium Prices Will Rally in Medium Term US$ per pound Feb 23, 2009 Spot US$45.00 LT Contract US$70.00 Russian HEU Agreement Cancelled Options Three Mile Island US$43.40 Peak Arab Oil Embargo Low US$7.10 in Dec. 2000 Nuclear Disarmament Source: Scotiabank Commodity Price Index.

26. Spot Uranium Prices Will Rally in Medium-Term The forced liquidation of commodity market investments by funds and individual investors also affected the uranium market last October, when spot prices declined to a low of US$44 per pound (an oversold position). Prices rallied back to US$55 in late November -- as Asian utilities, commodity brokers and producers took advantage of bargain prices – though bids have dropped back to the US$45 level as of late February. Spot prices are expected to strengthen medium-term (to around US$70 from 2011-14). Term-contract prices remain lucrative. ‘Uncovered U3O8 requirements’ by North American utilities will be low in 2009, given the re-stocking and term contracting of recent years. However, three developments point to firmer prices in the medium-term: 1) India will return as an importer of uranium concentrates in 2009 after more than a 30-year absence, given approval by the World Nuclear Suppliers Group, and has now signed bilateral nuclear cooperation agreements with the United States, France and Russia (from whom it may import concentrates and equipment). Canada requires a similar agreement. India has been operating its nuclear reactors at 50% of capability, given inadequate domestic uranium supplies, and has huge nuclear power expansion plans. 2) Delays in commissioning the Cigar Lake project and in Olympic Dam expansion will dramatically tighten world supplies around 2011-13; and 3) Higher capital and operating costs will lift the medium-term floor on prices.

27. Western Canadian Coking Coal Prices Poised to Drop From Record Levels Steam Coal Prices US$ per tonne, spot FOB Newcastle, Australia US$ per tonne FOB port Western Canada to Japan Steam Coal Prices Premium-Grade Hard Coking Coal Contract Price * China’s Electricity Shortage Boosts Steam Coal Prices Last Summer Prices leapt to record US$300 in April 2008 from US$93. *Forecast JFY 2009: US$125-150. Source: Scotiabank Commodity Price Index. China imposes export tax of 10% on steam coal and raises export tax on coking coal from 5% to 10% on August 20, 2008 to conserve supplies for domestic power generation. Contract price: Australia/Japan. FY2008 US$125:FY2009 US$75 forecast.

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29. C$22,001,200 TSX IPO - Common Shares C$34,256,035 Units C$50,025,000 Common Shares C$65,520,000 Common Shares Sole Bookrunner February 2008 Sole Bookrunner January 2008 Sole Bookrunner November 2007 Sole Bookrunner November 2007 has acquired has consolidated its interest inthe Corani Silver Project by acquiringthe remaining 30% interest from Is merging with to create a company with a combinedmarket capitalization of Evaluating an unsolicited tender offer and identifying potential alternatives to enhance shareholder value for for C$550,000,000 US$1,200,000,000 US$75,000,000 Financial Advisor Pending Financial Advisor October 2008 Financial Advisor July 2008 Financial Advisor Pending Scotia Capital Mining Investment Banking Recent Equity Leads US$163,000,000 Common Shares Co-Bookrunner September 2008 Recent Advisory Transactions has acquired 100% of the Life of Mine Silver Production from the Sabinas Mine of for US$350,000,000 Financial Advisor May 2008 Strong Commitment to the Sector

30. This Report is prepared by Scotia Economics as a resource for the clients of Scotiabank and Scotia Capital. While the information is from sources believed reliable, neither the information nor the forecast shall be taken as a representation for which The Bank of Nova Scotia or Scotia Capital Inc. or any of their employees incur responsibility.