Lehman Brothers does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.

Customers of Lehman Brothers in the United States can receive independent, third-party research on the company or companies covered in this report, at no cost to them, where such research is available. Customers can access this independent research at www.lehmanlive.com or can call 1-800-2LEHMAN to request a copy of this research.

Investors should consider this report as only a single factor in making their investment decision.

PLEASE SEE ANALYST(S) CERTIFICATION AND IMPORTANT DISCLOSURES BEGINNING ON PAGE 4.

Sell NEM Call Spreads, Buy PD Call Spreads

• In recent months, commodities – and stocks having exposure to them – have rallied across the board. This has often been accompanied by increasing implied and realized volatility in these names.

• Lehman Metals & Mining analyst Peter Ward views NEM’s multiple as excessive and believes potentially higher gold prices have already been discounted in the company’s valuation. Ward maintains a 1-Overweight rating on PD, based on the belief that rising global copper supply will prove difficult.

• 9-month implied volatility for NEM options is near a two-year high, while PD 9-month implied volatility has declined sharply, indicating that longer-term risk expectations are high for NEM, relatively low for PD. In addition, this infers NEM options are relatively “rich” and “PD” options are rather “cheap”.

• We recommend expressing bearish views on NEM by selling the Jan ’07 60-80 call spreads, to fund a purchase of PD Jan ’07 87.5-90 call spreads, for a net credit of about $1.90.

April 28, 2006

Ryan Renicker, CFA

1.212.526.9425 ryan.renicker@lehman.com

Devapriya Mallick 1.212.526.5429

dmallik@lehman.com

Equity Derivatives Strategy | Sell NEM Call Spreads, Buy PD Call Spreads

April 28, 2006 2

Commodities Rally, Risk Expectations Rise As Well

In recent months, commodities and stocks with exposure to them have rallied steadily for a variety of reasons, some fundamentally driven (demand supply imbalances, liquidity, inflation concerns), others technical (investor speculation, creation of commodity ETFs). For example, during the past 8 months (8/30/05 – 4/27/05), gold spot prices have increased about 46.81%, while the Philadelphia Stock Exchange Gold and Silver Index (XAU) is up 62.74% (S&P 500 up 8.38% in same time period).

Contrary to what is often seen for rallying stocks, XAU implied volatility has increased, closely tracking its realized volatility (Figure 1). A similar pattern was observed during the later part of the technology “bubble”, when a rise in the tech-heavy Nasdaq 100 Index (NDX) was accompanied by increasing implied and realized volatility (Figure 2).

Figure 1: XAU Index Implied, Realized Volatility

Figure 2: NDX Index, Volatility (8 Months Ending 3/31/2000)

80

90

100

110

120

130

140

150

160

Aug-0

5

Sep-0

5

Oct-05

Nov-0

5

Nov-0

5

Dec-0

5

Jan-0

6

Jan-0

6

Feb-

06

Mar-06

Apr-06

XAU

Inde

x Le

vel

22%

24%

26%

28%

30%

32%

34%

36%

38%

40%

Vola

tility

XAU IndexXAU 3-Month ImpliedXAU 66-Day Realized

2,000

2,250

2,500

2,750

3,000

3,250

3,500

3,750

4,000

4,250

4,500

4,750

5,000

Aug-9

9

Sep-9

9

Sep-9

9

Oct-99

Nov-9

9

Nov-9

9

Dec-9

9

Jan-0

0

Feb-

00

Feb-

00

Mar-00

ND

X In

dex

Leve

l

22%

27%

32%

37%

42%

47%

52%

57%

Vola

tility

NDX IndexNDX 3-Month ImpliedNDX 66-Day Realized

Source: Lehman Brothers, OptionMetrics, Bloomberg Source: Lehman Brothers, OptionMetrics, Bloomberg

Mining for Opportunities in Stocks with Commodity Exposure

NEM (Newmont Mining Corp, $56.72) has continued to trade at a multiple of over 30 times 2006 earnings, which Lehman Metals & Mining analyst Peter Ward views as excessive, considering it has just a decade of reserves and that other commodity stocks trade at cheaper valuations1. Ward sees gold mining costs continuing to increase and potentially higher gold prices adequately discounted in NEM’s valuation.

Among stocks with exposure to copper, Ward has maintained a 1-Overweight rating on PD (Phelps Dodge Corp, $81.86), based on the belief that increasing global copper supply will prove difficult with mature mines facing shortages of labor, machinery and tires. Demand is also expected to be higher, with China accounting for almost 23% of global demand.

PD declined 4.36% yesterday (S&P 500 up 0.33%) after reporting first quarter earnings, driven partly by extraneous factors such as the People’s Bank of China’s decision to raise the benchmark working capital lending rate. Lehman’s Global Economics team believes that while further tightening measures could weigh on global commodity prices, Chinese policy makers do not aim to slow the economy sharply2. Investors with a longer term bullish view on PD could use yesterday’s weakness as an opportunity to get upside exposure in the stock.

1 Please see Newmont Mining: Given Strong Gold Price, Fair Results, Peter Ward, April 21, 2006 for further details. 2 Please see China: Unexpected interest rate hike is an encouraging sign, Global Economic, April 27, 2006.

Equity Derivatives Strategy | Sell NEM Call Spreads, Buy PD Call Spreads

April 28, 2006 3

From a volatility perspective, medium term risk expectations for gold stocks in general and NEM in particular have continued to rise and are close to their two-year highs. However, PD 9-month implied volatility has collapsed more than 10 vol points over the last two months. In terms of absolute volatility levels, PD has been trading at a discount to NEM since the middle of April (Figure 4).

Figure 3: NEM 9-Month Implied Vol Near Two-Year High…

Figure 4: …While PD 9-Month Implied Vol Has Declined Sharply

25%

30%

35%

40%

45%

Apr-04

Jun-0

4

Aug-04

Oct-04

Dec-04

Feb-05

Apr-05

Jun-0

5

Aug-05

Oct-05

Dec-05

Feb-06

Apr-06

Impl

ied

Vola

tilty

(9-M

onth

)

0

10

20

30

40

50

60

70

NEM

Sto

ck P

rice

NEM 9-Month Implied VolNEM Price

25%

30%

35%

40%

45%

Apr-04

Jun-0

4

Aug-04

Oct-04

Dec-04

Feb-05

Apr-05

Jun-0

5

Aug-05

Oct-05

Dec-05

Feb-06

Apr-06

Impl

ied

Vola

tility

(9-M

onth

)

0

10

20

30

40

50

60

70

80

90

100

PD S

tock

Pric

e

PD 9-Month Implied VolPD Price

Source: Lehman Brothers, Factset Source: Lehman Brothers, Bloomberg

So What Should Investors Do?

Investors wishing to express a bearish view on NEM by selling call spreads could consider writing the Jan ‘07 60 calls for about $6.10 and purchasing the Jan ‘07 80 calls for about $1.70. This results in a premium of $4.40 and the trade finishes in the money so long as NEM finishes below $64.40 as of the January 19, 2007 expiration date.

Part of this premium can be used to express a bullish view on PD’s relatively cheap options by purchasing call spreads maturing in Jan ‘07. The 87.5-95 call spread was offered at $2.50, as of last night’s close. Figure 5 shows the payoff of the combined strategy under different scenarios of NEM and PD prices as of the Jan ‘07 expiration.

Figure 5: Expiration Payoff of Short NEM Call Spreads + Long PD Call Spreads Strategy

Source: Lehman Brothers, Bloomberg

Equity Derivatives Strategy | Sell NEM Call Spreads, Buy PD Call Spreads

April 28, 2006 4

Analyst Certification: The respective research analysts responsible for the fundamental ratings hereby certify (1) that the views expressed in this research email accurately reflect our personal views about any or all of the subject securities or issuers referred to in this email and (2) no part of our compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this email. I, Ryan Renicker, hereby certify (1) that the views expressed in this research email accurately reflect my personal views about any or all of the subject securities or issuers referred to in this email and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this email. To the extent that any of the conclusions are based on a quantitative model, Lehman Brothers hereby certifies (1) that the views expressed in this research email accurately reflect the firm's quantitative research model (2) no part of the firm's compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this research report. Important Disclosures Lehman Brothers does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this email communication.

Customers of Lehman Brothers in the United States can receive independent, third-party research on the company or companies covered in this report, at no cost to them, where such research is available. Customers can access this independent research at www.lehmanlive.com or can call 1-800-2-LEHMAN to request a copy of this research.

Investors should consider this communication as only a single factor in making their investment decision.

The analysts responsible for preparing this report have received compensation based upon various factors including the Firm’s total revenues, a portion of which is generated by investment banking activities.

Stock price and ratings history charts along with other important disclosures are available on our disclosure website at www.lehman.com/disclosures

And may also be obtained by sending a written request to: LEHMAN BROTHERS CONTROL ROOM , 745 SEVENTH AVENUE, 19TH FLOOR NEW YORK, NY 10019

Mentioned Stocks

Newmont Mining (NEM - USD56.72) 3-Underweight / Positive J

Risks Which May Impede the Achievement of the Price Target: We recommend that investors sell Newmont shares. Our target is well below the current stock price. The risks to our target are A) that investors continue to be willing to pay an extremely high multiple for earnings achievable at the current gold price and/or B) the gold price has a significant and sustainable rally.

Phelps Dodge (PD - USD81.86) 1-Overweight / Positive J

Risks Which May Impede the Achievement of the Price Target: Our long-term forecast for copper is $1.40 per pound. The risk to our target price is that our copper price forecast does not materialize.

Disclosure Legend:

J: Lehman Brothers Inc. or an affiliate trade(s) regularly in the shares of the subject company.

Options are not suitable for all investors and the risks of option trading should be weighed against the potential rewards. Supporting documents that form the basis of the recommendations are available on request. Please note that the trade ideas within this report in no way relate to the fundamental ratings applied to European stocks by Lehman Brothers' Equity Research.

Guide to Lehman Brothers Equity Research Rating System

Our coverage analysts use a relative rating system in which they rate stocks as 1-Overweight, 2- Equal weight or 3-Underweight (see definitions below) relative to other companies covered by the analyst or a team of analysts that are deemed to be in the same industry sector (“the sector coverage universe”). To see a list of companies that comprise a particular sector coverage universe, please go to www.lehman.com/disclosures.

In addition to the stock rating, we provide sector views which rate the outlook for the sector coverage universe as 1-Positive, 2-Neutral or 3-Negative (see definitions below). A rating system using terms such as buy, hold and sell is not the equivalent of our rating system. Investors should carefully read the entire research report including the definitions of all ratings and not infer its contents from ratings alone.

Stock Rating

1-Overweight - The stock is expected to outperform the unweighted expected total return of the sector coverage universe over a 12-month investment horizon.

2-Equal weight - The stock is expected to perform in line with the unweighted expected total return of the sector coverage universe over a 12-month investment horizon.

Equity Derivatives Strategy | Sell NEM Call Spreads, Buy PD Call Spreads

April 28, 2006 5

3-Underweight - The stock is expected to underperform the unweighted expected total return of the sector coverage universe over a 12-month investment horizon.

RS-Rating Suspended - The rating and target price have been suspended temporarily to comply with applicable regulations and/or firm policies in certain circumstances including when Lehman Brothers is acting in an advisory capacity on a merger or strategic transaction involving the company.

Sector View

1-Positive - sector coverage universe fundamentals are improving.

2-Neutral - sector coverage universe fundamentals are steady, neither improving nor deteriorating.

3-Negative - sector coverage universe fundamentals are deteriorating.

Distribution of Ratings:

Lehman Brothers Equity Research has 1834 companies under coverage.

43% have been assigned a 1-Overweight rating which, for purposes of mandatory disclosures, is classified as a Buy rating, 32% of companies with this rating are investment banking clients of the Firm.

40% have been assigned a 2-Equal weight rating which, for purposes of mandatory disclosures, is classified as a Hold rating, 5% of companies with this rating are investment banking clients of the Firm.

17% have been assigned a 3-Underweight rating which, for purposes of mandatory disclosures, is classified as a Sell rating, 61% of companies with this rating are investment banking clients of the Firm.

This material has been prepared and/or issued by Lehman Brothers Inc., member SIPC, and/or one of its affiliates (“Lehman Brothers”) and has been approved by Lehman Brothers International (Europe), authorized and regulated by the Financial Services Authority, in connection with its distribution in the European Economic Area. This material is distributed in Japan by Lehman Brothers Japan Inc., and in Hong Kong by Lehman Brothers Asia Limited. This material is distributed in Australia by Lehman Brothers Australia Pty Limited, and in Singapore by Lehman Brothers Inc., Singapore Branch. (“LBIS”). Where this material is distributed by LBIS, please note that it is intended for general circulation only and the recommendations contained herein does not take into account the specific investment objectives, financial situation or particular needs of any particular person. An investor should consult his Lehman Brothers’ representative regarding the suitability of the product and take into account his specific investment objectives, financial situation or particular needs before he makes a commitment to purchase the investment product. This material is distributed in Korea by Lehman Brothers International (Europe) Seoul Branch. This document is for information purposes only and it should not be regarded as an offer to sell or as a solicitation of an offer to buy the securities or other instruments mentioned in it. No part of this document may be reproduced in any manner without the written permission of Lehman Brothers. With the exception of disclosures relating to Lehman Brothers, this research report is based on current public information that Lehman Brothers considers reliable, but we make no representation that it is accurate or complete, and it should not be relied on as such. In the case of any disclosure to the effect that Lehman Brothers Inc. or its affiliates beneficially own 1% or more of any class of common equity securities of the subject company, the computation of beneficial ownership of securities is based upon the methodology used to compute ownership under Section 13(d) of the United States' Securities Exchange Act of 1934. In the case of any disclosure to the effect that Lehman Brothers Inc. and/or its affiliates hold a short position of at least 1% of the outstanding share capital of a particular company, such disclosure relates solely to the ordinary share capital of the company. Accordingly, while such calculation represents Lehman Brothers’ holdings net of any long position in the ordinary share capital of the company, such calculation excludes any rights or obligations that Lehman Brothers may otherwise have, or which may accrue in the future, with respect to such ordinary share capital. Similarly such calculation does not include any shares held or owned by Lehman Brothers where such shares are held under a wider agreement or arrangement (be it with a client or a counterparty) concerning the shares of such company (e.g. prime broking and/or stock lending activity). Any such disclosure represents the position of Lehman Brothers as of the last business day of the calendar month preceding the date of this report.

This material is provided with the understanding that Lehman Brothers is not acting in a fiduciary capacity. Opinions expressed herein reflect the opinion of Lehman Brothers and are subject to change without notice. The products mentioned in this document may not be eligible for sale in some states or countries, and they may not be suitable for all types of investors. If an investor has any doubts about product suitability, he should consult his Lehman Brothers representative. The value of and the income produced by products may fluctuate, so that an investor may get back less than he invested. Value and income may be adversely affected by exchange rates, interest rates, or other factors. Past performance is not necessarily indicative of future results. If a product is income producing, part of the capital invested may be used to pay that income. © 2006 Lehman Brothers. All rights reserved. Additional information is available on request. Please contact a Lehman Brothers entity in your home jurisdiction.

Lehman Brothers policy for managing conflicts of interest in connection with investment research is available at www.lehman.com/researchconflictspolicy. Ratings, earnings per share forecasts and price targets contained in the Firm's equity research reports covering U.S. companies are available at www.lehman.com/disclosures.

Complete disclosure information on companies covered by Lehman Brothers Equity Research is available at www.lehman.com/disclosures.