Canada Research AuRico Gold Inc. June 6, 2013€¦ · Production and Cost Profile: The transformed...

Canada Research Published by Raymond James Ltd.

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AuRico Gold Inc. June 6, 2013

AUQ-NYSE | AUQ-TSX Company ReportPhil Russo | 416.777.7084 | [email protected] Brad Humphrey | 416.777.4917 | [email protected] Tom Halton (Associate) | 416.777.7074 | [email protected] Mining | Precious Metals - Gold

All Eyes on Execution Event We are resuming coverage on AuRico Gold and presenting our view of the company’s investment thesis. Recommendation We rate AuRico Gold a Market Perform, with a $6.50 target price. Analysis The present day AuRico offers investors a company that has relatively recently, through a series of acquisitions and divestitures, undergone a transformation with the shedding of higher-cost, non-core assets. In our view, AuRico’s future is intrinsically linked to its ability to execute at Young Davidson, its future flagship operation in northern Ontario. That operation, coupled with the dependable, low technical risk, El Chanate operation in Mexico, makes AuRico an appealing investment case longer term for investors searching for companies with low financial, operating, and geopolitical risk amongst the mid-cap gold producers. Our Market Perform rating is predicated on both a timing and relative call on the stock. From a timing perspective, we believe the market will continue to look to incremental news flow from Young Davidson as this key asset de-risks and begins to materially contribute to AuRico’s ascent from its current production base of 180koz to 290koz by 2015 (commercial ounces only, RJL estimates), firmly entrenching the company in the mid-cap producer group. From a relative valuation perspective, AuRico trades at 1.0x P/NAV, 37x 2013 P/E, and 17x P/CF, relative to its peer group of 0.80x P/NAV, 19x P/E, and 8x P/CF, and as such, we believe for now that investors are likely to look for either the valuation divide from its peers to narrow, or further positive news from Young Davidson as a trigger to re-assess an entry point. That said, in the long-term, we believe investors will gather increasing comfort in the premium valuation AuRico will likely command once Young Davidson is proven and combined with the operating and cost profile the company will offer. Valuation We apply a 1.2x P/NAV multiple to our NAVPS estimate based on our view of the relative risk of AuRico’s operations, balance sheet, size, and liquidity. We believe AuRico’s premium multiple is warranted given its geopolitical risk profile, balance sheet, and growing production base.

EPS 1Q 2Q 3Q 4Q Full Revenues NAV Mar Jun Sep Dec Year (mln)

2012A US$0.13 US$0.05 US$0.06 US$0.05 US$0.12 US$164Old 2013E 0.04A NA NA NA NA NA NA

New 2013E 0.04A 0.01 0.03 0.06 0.15 279 US$5.64Old 2014E NA NA NA NA NA NA

New 2014E 0.10 0.10 0.10 0.10 0.40 239 NASource: Raymond James Ltd., Thomson One

Rating & Target Old: Under Review New: Market Perform 3Target Price (6-12 mos): Old: UR New: US$6.50Current Price ( Jun-04-13 ) US$5.24Total Return to Target 20%52-Week Range US$8.79 - US$4.24

Suitability High Risk

Market Data Market Capitalization (mln) US$5,346Current Net Debt (mln) US$447Enterprise Value (mln) US$5,793Shares Outstanding (mln, f.d.) 173.010 Day Avg Daily Volume (000s) 2,491Dividend/Yield US$0.16/3.0%

Key Financial Metrics 2012A 2013E 2014E

P/E NA 37.3x 13.7xP/NAV NA 1.0x NAP/CFPS NA 17.2x 8.3xCFPS Old NA NA NA New NA US$0.31 US$0.66Au Price (US$/oz) US$1,669 US$1,540 US$1,625Au Production (000 oz) Old NA NA NA New 100 180 242Au Total Cash Cost (US$/oz) US$516 US$685 US$696

Company Description AuRico is growing gold producer with assets in Ontario and Mexico. Its flagship Young Davidson mine is the pillar of the company's growth from 2013 onwards.

Canada Research | of 18 AuRico Gold Inc.

Raymond James Ltd. | 2100 – 925 West Georgia Street | Vancouver BC Canada V6C 3L2

Table of Contents

Investment Snapshot .......................................................................................................................... 3

Recent Share Price Performance ........................................................................................................ 3

Gold Production and Cost Profile ....................................................................................................... 4

All-In Cost Profile ................................................................................................................................ 4

Financial Position ................................................................................................................................ 5

Net Asset Value ................................................................................................................................... 6

Key Milestones .................................................................................................................................... 7

Appendix 1: Company Tearsheet ........................................................................................................ 8

Appendix 2: Financial Statements ...................................................................................................... 9

AuRico Gold Inc. Canada Research | of 18


Investment Snapshot

The present day AuRico Gold offers investors a company that has relatively recently, through a series of acquisitions and divestitures, undergone a transformation with the shedding of higher-cost, non-core assets. In our view, AuRico’s future is intrinsically linked to its ability to execute at Young Davidson, its future flagship operation in northern Ontario. That operation, coupled with the dependable, low technical risk, El Chanate operation in Mexico, makes AuRico an appealing investment case longer term for investors searching for companies with low financial, operating, and geopolitical risk amongst the mid-cap gold producers. It is our view that in today’s environment, AuRico presents a competitive investment case across key topical metrics: Production and Cost Profile: The transformed AuRico offers production growth

from 180koz in 2013 (RJL estimate, commercial only), growing to 290koz in 2015 as increasing underground tonnage from Young Davidson drives a growing production base. This ~60% growth, combined with a declining capital program past 2013, should position AuRico as a lower quartile gold producer with two mines in two geo-politically friendly regions.

All-In Cost Profile: Investor focus on a more transparent metric to determine a company’s true profitability has seen a rising emphasis on all-in costs. Using our definition, we estimate AuRico will trend towards the lower end of the curve with all-in costs averaging in the $950-$1,050/oz range beyond 2013. We calculate a current industry all-in cost of ~$1,250/oz.

Financial Position: With $269 mln in cash and $150 mln in available credit, we believe AuRico is well placed to withstand a prolonged period of depressed metal prices, and with Young Davidson’s peak capex requirements to conclude in 2013, the company is on the cusp of notable free cash flow generation.

Recent Share Price Performance

Exhibit 1: AuRico’s Share Price Performance Since 2011

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Source: Raymond James Ltd., Capital IQ

AuRico has fallen 33% since the beginning of 2013 (the TSX Global Gold Index has fallen 32% YTD). However, we believe the revamped investment case of the company should compel investors to revisit the name.



Gold Production and Cost Profile

As we move through 2013, AuRico’s story becomes increasingly simplified with production coming from 2 assets – the established and operating El Chanate mine contributing notably to its production base, and the (soon to be) newly commissioned underground mine at Young Davidson, the pillar of the company’s profile beyond 2013. Collectively, these two assets will provide a stable platform to build healthy production levels and maintain margin growth over the medium term. We estimate AuRico will grow gold output from 180koz in 2013 (RJL estimate, commercial only) to 290koz in 2015 with consolidated total cash costs in the range of $685/oz and $710/oz over that time (RJL estimate).

Exhibit 2: AuRico’s Production and Cost Profile to 2017

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Source: AuRico Gold Inc., Raymond James Ltd.

All-In Cost Profile

We believe investors are likely to gravitate towards those companies at the lowest end of the all-in cost spectrum. Under our definition of the concept, we estimate AuRico to average ~$1,400/oz in 2013, with its longer-term average beyond 2013 in the range of $950/oz to $1,050/oz. We see the most significant risk to this estimate coming from Young Davidson given the higher capital requirements of most underground mines, as well as our cautious view of the company’s underground costs – our estimate includes a conservative estimate for both sustaining capital and underground mining costs for Young Davidson, though we should note that the infrastructure investments in the underground to date (mid-shaft crushing and loading facility, dual shafts, conveyor and ventilation system), position AuRico to meet its guided plans.

Once Young Davidson is completely commissioned and operating to expectations, AuRico will present a relatively simple investment proposition for investors with production growing 60% to 2015 (RJL estimates).

With renewed focus on all-in costs in the industry, investors are likely to gravitate towards those names positioned at the lower end of the cost curve given their ability to withstand a volatile commodities market. In our opinion, AuRico fits this bill.



Exhibit 3: AuRico’s All-In Cost Estimate and Margin/Oz @ $1,400/oz Gold (RJL Assumptions)

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Source: Raymond James Ltd., AuRico Gold Inc.

Financial Position

Assessing AuRico’s financial flexibility, the company is well placed to weather any prolonged period of depressed metal prices with its combination of existing cash balance ($269 mln), available facilities ($150 mln) and growing operating cash flows. As such, we currently don’t foresee the need for AuRico to come to market for additional debt or equity to support its current plans. Importantly, AuRico is poised for free cash flow growth from 2014 onwards once the significant spend at Young Davidson is behind it.

Exhibit 4: AuRico’s Estimated Cash Flows Through to 2020 (at $1,400/oz Gold)

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CFF CFI CFO Cash Balance (RHS)

Source: AuRico Gold Inc., Raymond James Ltd.

Cash and available facilities of ~$420 mln position AuRico to weather a sustained period of lower metal prices while completing its current capital plans at Young Davidson.



Net Asset Value

Our $6.50 target price is derived from a 1.2x multiple applied to our estimated NAV per share of $5.64 (using RJL price deck). Under our current assumptions, we assume no additional requirement for equity or debt for AuRico to continue to ramp-up underground tonnage at Young Davidson and in optimizing El Chanate.

Exhibit 5: AuRico NAV (RJL Estimates)

NAV C$'000 $/Share % NAV C$'000 $/Share % NAVYoung Davidson (DCF, 5%) $955,846 $3.83 68% $1,179,643 $4.72 73%El Chanate (DCF, 5%) $159,245 $0.64 11% $141,419 $0.57 9%Kemess (Provisional Sum) $75,000 $0.30 5% $75,000 $0.30 5%Other Assets (Orion) $50,000 $0.20 4% $50,000 $0.20 3%

Mining Asset NAV $1,240,090 $4.97 88% $1,446,062 $5.79 90%

CorporateWorking Capital $317,709 $1.27 23% $317,709 $1.27 20%Additional Capital (wts, options) $18,607 $0.07 1% $18,607 $0.07 1%

LT Liabilities -$166,764 -$0.67 -12% -$166,764 -$0.67 -10%Corporate NAV $169,552 $0.68 12% $169,552 $0.68 10%

Total NAV $1,409,642 $5.64 100% $1,615,613 $6.47 100%

Target CurrentMultiple Multiple

Price/NAVPS (x) 1.20x 0.96xTarget Price (US$): $6.50

RJL Price Deck @ Spot Gold

Source: Raymond James Ltd.

Projected NAV Shape

We assessed AuRico’s NAV projection (incorporating net assets + net cash) through to 2020 based on a forward metal price of $1,400/oz. While those mining companies who choose not to invest in their operations (through exploration, capital investment, organic growth projects, etc.) are likely to experience declining NAVs almost immediately, AuRico’s profile demonstrates a stable to increasing valuation in its asset weighting driven principally by Young Davidson’s optimal valuation still ahead of the mine. In an industry where intrinsic valuations deplete without continual investment, the fully-funded profile of AuRico’s (see exhibit below) shows the company’s fundamental valuation is solid, affording the company the opportunity to assess a suite of options to increase its profile over time (versus those companies fighting depleting valuations from the onset).

We apply a 1.2x multiple to our NAV estimate for AuRico, reflecting our collective view of AuRico’s operations, balance sheet, size, and liquidity.



Exhibit 6: AuRico’s Projected NAV Shape (Net Assets + Net Cash) at $1,400/oz Gold

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Net Assets/sh Net Cash/sh

*Net Cash considers EOY projected net cash balances.

Source: Raymond James Ltd.

Key Milestones

With Young Davidson central to our investment thesis, incremental news flow from that asset will take on added emphasis from investors. We look to the following milestones over the short term:

Commissioning of mid-shaft crushing and hoisting system during 3Q13, as well as further underground development, commissioning of main shaft and advancement of ventilation system.

Commissioning of paste backfill plant early 2014.

Increasing stope development from underground during 2013 and 2014 to support planned throughput increases.

Ongoing fulfillment of guided production, cost and capital expectations from Young Davidson.

Young Davidson’s optimal valuation remains ahead of the mine as it moves beyond a high capital year in 2013, driving AuRico’s fundamental valuation going forward.



Appendix 1: Company Tearsheet

RAYMOND JAMES LTD.Phil Russo 416.777.7084

Rating: M/P AUQ-T Brad Humphrey 416.777.49176-12 Mth Target: C$ 6.50 NAV $5.64 Tom Halton (Assoc.) 416.777.7074Projected Return: 16.7% YR-END: 31-Dec-13

Reporting Currency: USDInvestment Thesis ManagementAuRico is a growing gold producer with assets located in northern Ontario and Mexico. Its Scott Perry CEOoperating cost structure affords the company the ability to operate in low gold price conditions. Rob Chausse CFOSupported by its robust balance sheet flexibility, AuRico is approaching commissioning of its Peter MacPhail COOunderground mine at Young Davidson - at which point we believe the market will reward the company. Market Statistics

Share Price $5.57 Shares Basic (mln) 246.8Key Attributes 52 Week High/Low US$ 9.00/ 4.39 Shares Fully Diluted (mln) 249.71. Robust balance sheet with $269mln in cash and $150mln in available credit. Market Cap. (mln) $1,375 Adj. Shares used in NAV calc (mln) 249.72. Growing production base from 180oz in 2013 to 289oz in 2015 (60%). Enterprise Value (mln) $1,272 Avg Daily Volume: 685,5803. Enviable geopolitical profile with operations located in low risk nations of Canada and Mexico.4. Solid management team focused on successfully executing at Young Davidson, future free cash Dividend $0.16

flow generation and growing the dividend. Div Yield % 2.9%

Key Concerns Financial Metrics 2012A 2013E 2014E 2015E 2016E1. Successful commissioning and operation of the Young Davidson underground. Cash & Equivalents (EOY, mln) 603.4 171.8 239.4 305.2 203.0

Working capital (mln) 644.9 230.1 319.9 385.7 283.5Reserves & Resources Current ratio (x) 7.8 3.7 6.0 7.1 5.5

L-term debt (mln) 167.5 166.8 166.8 166.8 0.0Tonnes (mln) Grade (g/t) Ounces (Moz) Common equity (mln) 2,297.8 2,348.6 2,446.6 2,527.8 2,597.8

Reserves Price/book (x) 0.68 0.60 0.56 0.54 0.53Young Davidson - UG 39.04 2.82 3.54 LTD/(LTD + Equity) 6.8% 6.6% 6.4% 6.2% 0.0%

El Chanate 55.85 0.67 1.20 ROE (%) 2.6% 1.9% 4.0% 3.2% 2.6%ROIC 2.0% 1.6% 3.5% 2.9% 2.5%

ResourcesYoung Davidson - UG 23.51 2.78 2.10 Earnings/Cash Flow 2012A 2013E 2014E 2015E 2016E

El Chanate 3.88 0.38 0.05 RJ Gold Forecast US$/oz 1,669 1,540 1,625 1,600 1,450Revenue ($mln) 163.62 278.66 393.04 463.03 465.88Corporate EBITDA ($mln) (72.47) 117.78 190.38 222.96 210.99

Operating Summary 2012A 2013E 2014E 2015E 2016E EBITDA Margin nm 42% 48% 48% 45%Production - Gold (oz) 100 180 242 289 321 EV/EBITDA nm 10.80 6.68 5.71 6.03Total Cash Cost (US$/oz) $516 $685 $696 $711 $687 Corporate EBIT ($mln) (91.20) 66.80 120.76 138.96 117.33All-In Cost (US$/oz)* $1,337 $1,436 $1,092 $1,169 $1,079 Net Earnings ($mln) - adjusted 59.28 44.26 97.96 81.16 67.48

EPS ($) - adjusted 0.12 0.15 0.40 0.33 0.27P/E (x) 46.4 38.3 14.0 16.9 20.4Cash flow Operations (mln) 170.38 79.79 161.75 159.32 156.75CFPS ($) 0.60 0.31 0.66 0.65 0.64P/CF (x) 9.2 17.7 8.5 8.6 8.8

Capex ($ mln) 370.1 173.0 60.0 61.7 63.3

Valuation C$'000 $/share % NAV

Mining AssetsYoung Davidson (DCF, 5%) $955,846 $3.83 68%El Chanate (DCF, 5%) $159,245 $0.64 11%Kemess (Provisional Sum) $75,000 $0.30 5%Other Assets (Orion) $50,000 $0.20 4%

Mining Asset NAV $1,240,090 $4.97 88%

CorporateWorking Capital $317,709 $1.27 23%Additional Capital (wts, options) $18,607 $0.07 1%LT Liabilities -$166,764 -$0.67 -12%

Corporate NAV $169,552 $0.68 12%

NAV (5%) $1,409,642 $5.64 100%

Target CurrentValuation Measures Multiple Multiple

Price/NAVPS (x) 1.20x 0.99xTarget Price $: $6.50

AuRico Gold Inc.

5-Jun-13

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Production - Gold (oz) Total Cash Cost (US$/oz)RJ Gold Forecast US$/oz All-In Cost (US$/oz)*

Operating79%

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NAV Breakdown (%)

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Source: Company Reports, Raymond James Ltd.



Appendix 2: Financial Statements

US$ '000s 2012A 2013E 2014EIncome StatementRevenue $163,622 $278,658 $393,037Operating Expenses -$60,107 -$126,316 -$169,344G+A -$35,730 -$25,129 -$25,000Other -$1,385 -$13,766 -$8,000DD+A -$18,723 -$50,989 -$69,631Interest Expense -$2,237 -$5,837 -$5,837Tax Expense -$6,625 -$16,696 -$16,673Other -$136,636 $4,335 -$1,257Net Income -$97,821 $44,260 $97,294Fully Diluted SO 282,194 246,775 246,775 Adj. EPS (FD) $0.12 $0.15 $0.39

Cash FlowOperating $80,404 $72,770 $161,089Investing $545,723 -$175,607 -$60,000Financing -$53,198 -$328,784 -$34,034Cash (EOY) $603,401 $171,770 $238,824CFPS (FD) $1.48 $1.02 $0.94

Balance SheetCurrent Assets $740,324 $315,886 $382,940Non-Current Assets $2,156,875 $2,613,220 $2,621,350Total Assets $2,897,199 $2,929,106 $3,004,290Current Liabil ities $95,381 $85,748 $63,638Non-Current Liabil ities $504,023 $494,759 $494,759Total Liabil ities $599,404 $580,507 $558,397Shareholders Equity $2,297,795 $2,348,599 $2,445,893Total Liabil ities + Equity $2,897,199 $2,929,106 $3,004,290 Source: AuRico Gold Inc., Raymond James Ltd.



Company Citations Company Name Ticker Exchange Currency Closing Price RJ Rating RJ EntityAgnico Eagle Mines AEM NYSE US$ 32.28 3 RJ LTD.Alacer Gold Corp ASR TSX C$ 2.25 3 RJ LTD.Alamos Gold Inc. AGI NYSE US$ 14.28 2 RJ LTD.B2Gold Corp. BTO TSX C$ 2.68 2 RJ LTD.Eldorado Gold Corp. EGO NYSE US$ 8.04 2 RJ LTD.Endeavour Mining Corp. EDV TSX C$ 0.90 2 RJ LTD.Golden Star Resources GSS NYSE MKT US$ 0.63 3 RJ LTD.Guyana Goldfields Inc. GUY TSX C$ 1.60 2 RJ LTD.Orezone Gold Corp. ORE TSX C$ 0.63 2 RJ LTD.Osisko Mining Corp. OSK TSX C$ 4.58 3 RJ LTD.PMI Gold Corporation PMV TSX C$ 0.36 2 RJ LTD.Sulliden Gold Corporation Ltd. SUE TSX C$ 1.06 2 RJ LTD.Yamana Gold Inc. AUY NYSE US$ 11.80 2 RJ LTD. Notes: Prices are as of the most recent close on the indicated exchange and may not be in US$. See Disclosure section for rating definitions. Stocks that do not trade on a U.S. national exchange may not be registered for sale in all U.S. states. NC=not covered.



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Strong Buy (SB1) The stock is expected to appreciate and produce a total return of at least 15% and outperform the S&P/TSX Composite Index over the next six months. Outperform (MO2) The stock is expected to appreciate and outperform the S&P/TSX Composite Index over the next twelve months. Market Perform (MP3) The stock is expected to perform generally in line with the S&P/TSX Composite Index over the next twelve months and is potentially a source of funds for more highly rated securities. Underperform (MU4) The stock is expected to underperform the S&P/TSX Composite Index or its sector over the next six to twelve months and should be sold.

Raymond James & Associates (U.S.) definitions

Strong Buy (SB1) Expected to appreciate, produce a total return of at least 15%, and outperform the S&P 500 over the next six to 12 months. For higher yielding and more conservative equities, such as REITs and certain MLPs, a total return of at least 15% is expected to be realized over the next 12 months. Outperform (MO2) Expected to appreciate and outperform the S&P 500 over the next 12-18 months. For higher yielding and more conservative equities, such as REITs and certain MLPs, an Outperform rating is used for securities where we are comfortable with the relative safety of the dividend and expect a total return modestly exceeding the dividend yield over the next 12-18 months. Market Perform (MP3) Expected to perform generally in line with the S&P 500 over the next 12 months. Underperform (MU4) Expected to underperform the S&P 500 or its sector over the next six to 12 months and should be sold. Suspended (S) The rating and price target have been suspended temporarily. This action may be due to market events that made coverage impracticable, or to comply with applicable regulations or firm policies in certain circumstances, including when Raymond James may be providing investment banking services to the company. The previous rating and price target are no longer in effect for this security and should not be relied upon.

Raymond James Latin American rating definitions Strong Buy (SB1) Expected to appreciate and produce a total return of at least 25.0% over the next twelve months. Outperform (MO2) Expected to appreciate and produce a total return of between 15.0% and 25.0% over the next twelve months. Market Perform (MP3) Expected to perform in line with the underlying country index. Underperform (MU4) Expected to underperform the underlying country index. Suspended (S) The rating and price target have been suspended temporarily. This action may be due to market events that made coverage impracticable, or to comply with applicable regulations or firm policies in certain circumstances, including when Raymond James may be providing investment banking services to the company. The previous rating and price target are no longer in effect for this security and should not be relied upon.

Raymond James Euro Equities, SAS rating definitions Strong Buy (1) Expected to appreciate, produce a total return of at least 15%, and outperform the Stoxx 600 over the next 6 to 12 months. Outperform (2) Expected to appreciate and outperform the Stoxx 600 over the next 12 months. Market Perform (3) Expected to perform generally in line with the Stoxx 600 over the next 12 months. Underperform (4) Expected to underperform the Stoxx 600 or its sector over the next 6 to 12 months. Suspended (S) The rating and target price have been suspended temporarily. This action may be due to market events that made coverage impracticable, or to comply with applicable regulations or firm policies in certain circumstances, including when Raymond James may be providing investment banking services to the company. The previous rating and target price are no longer in effect for this security and should not be relied upon.

In transacting in any security, investors should be aware that other securities in the Raymond James research coverage universe might carry a higher or lower rating. Investors should feel free to contact their Financial Advisor to discuss the merits of other available investments.



Suitability Categories (SR) Total Return (TR) Lower risk equities possessing dividend yields above that of the S&P 500 and greater stability of principal.

Growth (G) Low to average risk equities with sound financials, more consistent earnings growth, at least a small dividend, and the potential for long-term price appreciation.

Aggressive Growth (AG) Medium or higher risk equities of companies in fast growing and competitive industries, with less predictable earnings and acceptable, but possibly more leveraged balance sheets.

High Risk (HR) Companies with less predictable earnings (or losses), rapidly changing market dynamics, financial and competitive issues, higher price volatility (beta), and risk of principal.

Venture Risk (VR) Companies with a short or unprofitable operating history, limited or less predictable revenues, very high risk associated with success, and a substantial risk of principal.

Rating Distributions

Coverage Universe Rating Distribution Investment Banking Distribution RJL RJA RJ LatAm RJEE RJL RJA RJ LatAm RJEE

Strong Buy and Outperform (Buy) 66% 51% 32% 41% 25% 22% 0% 0% Market Perform (Hold) 33% 43% 64% 38% 26% 9% 0% 0% Underperform (Sell) 1% 6% 4% 21% 0% 2% 0% 0% Raymond James Relationship Disclosures Raymond James Ltd. or its affiliates expects to receive or intends to seek compensation for investment banking services from all companies under research coverage within the next three months.

Company Name Disclosure Agnico Eagle Mines Raymond James Ltd - the analyst and/or associate has viewed the material operations of

Agnico Eagle Mines. Raymond James Ltd - within the last 12 months, Agnico Eagle Mines has paid for all or a material portion of the travel costs associated with a site visit by the analyst and/or associate.

Alacer Gold Corp Raymond James Ltd - the analyst and/or associate has viewed the material operations of Alacer Gold Corp. Raymond James Ltd - within the last 12 months, Alacer Gold Corp has paid for all or a material portion of the travel costs associated with a site visit by the analyst and/or associate.

Alamos Gold Inc. Raymond James Ltd - the analyst and/or associate has viewed the material operations of Alamos Gold Inc. Raymond James Ltd. has provided non-investment banking securities-related services within the last 12 months with respect to Alamos Gold Inc. Raymond James Ltd. has received compensation for services other than investment banking within the last 12 months with respect to Alamos Gold Inc.

AuRico Gold Inc. Raymond James Ltd - the analyst and/or associate has viewed the material operations of AuRico Gold Inc. Raymond James Ltd - within the last 12 months, AuRico Gold Inc. has paid for all or a material portion of the travel costs associated with a site visit by the analyst and/or associate.

B2Gold Corp. Raymond James Ltd - the analyst and/or associate has viewed the material operations of B2Gold Corp.



Company Name Disclosure Eldorado Gold Corp. Raymond James Ltd - the analyst and/or associate has viewed the material operations of

Eldorado Gold Corp. Raymond James Ltd - within the last 12 months, Eldorado Gold Corp. has paid for all or a material portion of the travel costs associated with a site visit by the analyst and/or associate. Ross Cory who is an employee of Raymond James Ltd. or its affiliates serves as a director of Eldorado Gold Corp.

Endeavour Mining Corp. Raymond James Ltd - the analyst and/or associate has viewed the material operations of Endeavour Mining Corp. Raymond James Ltd - within the last 12 months, Endeavour Mining Corp. has paid for all or a material portion of the travel costs associated with a site visit by the analyst and/or associate.

Golden Star Resources Raymond James Ltd - the analyst and/or associate has viewed the material operations of Golden Star Resources. Raymond James Ltd. makes a market in the securities of Golden Star Resources.

Guyana Goldfields Inc. Raymond James Ltd - the analyst and/or associate has viewed the material operations of Guyana Goldfields Inc. Raymond James Ltd - within the last 12 months, Guyana Goldfields Inc. has paid for all or a material portion of the travel costs associated with a site visit by the analyst and/or associate. Raymond James Ltd. has managed or co-managed a public offering of securities within the last 12 months with respect to Guyana Goldfields Inc. Raymond James Ltd. has provided investment banking services within the last 12 months with respect to Guyana Goldfields Inc. Raymond James Ltd. has received compensation for investment banking services within the last 12 months with respect to Guyana Goldfields Inc.

Orezone Gold Corp. Raymond James Ltd - the analyst and/or associate has viewed the material operations of Orezone Gold Corp.

Osisko Mining Corp. Raymond James Ltd - the analyst and/or associate has viewed the material operations of Osisko Mining Corp. Raymond James Ltd - within the last 12 months, Osisko Mining Corp. has paid for all or a material portion of the travel costs associated with a site visit by the analyst and/or associate. Raymond James Ltd. has provided non-investment banking securities-related services within the last 12 months with respect to Osisko Mining Corp. Raymond James Ltd. has received compensation for services other than investment banking within the last 12 months with respect to Osisko Mining Corp.

PMI Gold Corporation Raymond James Ltd - the analyst and/or associate has viewed the material operations of PMI Gold Corporation. Raymond James Ltd - within the last 12 months, PMI Gold Corporation has paid for all or a material portion of the travel costs associated with a site visit by the analyst and/or associate. Raymond James Ltd. has managed or co-managed a public offering of securities within the last 12 months with respect to PMI Gold Corporation. Raymond James Ltd. has provided investment banking services within the last 12 months with respect to PMI Gold Corporation. Raymond James Ltd. has received compensation for investment banking services within the last 12 months with respect to PMI Gold Corporation.



Company Name Disclosure Yamana Gold Inc. Raymond James Ltd - the analyst and/or associate has viewed the material operations of

Yamana Gold Inc. Raymond James Ltd - within the last 12 months, Yamana Gold Inc. has paid for all or a material portion of the travel costs associated with a site visit by the analyst and/or associate.

Stock Charts, Target Prices, and Valuation Methodologies Valuation Methodology: The Raymond James methodology for assigning ratings and target prices includes a number of qualitative and quantitative factors including an assessment of industry size, structure, business trends and overall attractiveness; management effectiveness; competition; visibility; financial condition, and expected total return, among other factors. These factors are subject to change depending on overall economic conditions or industry- or company-specific occurrences.

Target Prices: The information below indicates our target price and rating changes for AUQ stock over the past three years.

Valuation Methodology: Our target price is based on a cash-adjusted P/NAV multiple applied to our NAVPS estimate

Risk Factors General Risk Factors: Following are some general risk factors that pertain to the projected target prices included on Raymond James research: (1) Industry fundamentals with respect to customer demand or product / service pricing could change and adversely impact expected revenues and earnings; (2) Issues relating to major competitors or market shares or new product expectations could change investor attitudes toward the sector or this stock; (3) Unforeseen developments with respect to the management, financial condition or accounting policies or practices could alter the prospective valuation.

Risks - AuRico Gold Inc. - Resource Risk. Geological models and mineralization are interpretative and the current resource may be more complex than modeled, resulting in less grade and tonnage than estimated. That said, we are confident part of AuRico’s ongoing drill program will increase the level of confidence of the current resource estimate.



- Capital Requirements. The company has sufficient funds to complete its capital programs, however inflation and the resultant capex-creep is an omnipresent risk. We believe AuRico is adequately funded for its current spending program. - Country Risk. Although Canada and Mexico are stable democracies, future governments and potential labour issues could affect the project and profitability if put into production. - Additional Risks include development and operational risks inherent in the mining industry, as well as global economic and gold price volatility.

Additional Risk and Disclosure information, as well as more information on the Raymond James rating system and suitability categories, is available for Raymond James at rjcapitalmarkets.com/Disclosures/index and for Raymond James Limited at www.raymondjames.ca/researchdisclosures.

International Disclosures For clients in the United States:

For clients in the United States: Any foreign securities discussed in this report are generally not eligible for sale in the U.S. unless they are listed on a U.S. exchange. This report is being provided to you for informational purposes only and does not represent a solicitation for the purchase or sale of a security in any state where such a solicitation would be illegal. Investing in securities of issuers organized outside of the U.S., including ADRs, may entail certain risks. The securities of non-U.S. issuers may not be registered with, nor be subject to the reporting requirements of, the U.S. Securities and Exchange Commission. There may be limited information available on such securities. Investors who have received this report may be prohibited in certain states or other jurisdictions from purchasing the securities mentioned in this report. Please ask your Financial Advisor for additional details and to determine if a particular security is eligible for solicitation in your state. Raymond James Ltd. is not a U.S. broker-dealer and therefore is not governed by U.S. laws, rules or regulations applicable to U.S. broker-dealers. Consequently, the persons responsible for the content of this publication are not licensed in the U.S. as research analysts in accordance with applicable rules promulgated by the U.S. Self Regulatory Organizations. Any U.S. Institutional Investor wishing to effect trades in any security should contact Raymond James (USA) Ltd., a U.S. broker-dealer affiliate of Raymond James Ltd.

For clients in the United Kingdom: For clients of Raymond James & Associates (London Branch) and Raymond James Financial International Limited (RJFI): This document and any investment to which this document relates is intended for the sole use of the persons to whom it is addressed, being persons who are Eligible Counterparties or Professional Clients as described in the FCA rules or persons described in Articles 19(5) (Investment professionals) or 49(2) (High net worth companies, unincorporated associations etc) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended) or any other person to whom this promotion may lawfully be directed. It is not intended to be distributed or passed on, directly or indirectly, to any other class of persons and may not be relied upon by such persons and is therefore not intended for private individuals or those who would be classified as Retail Clients.

For clients of Raymond James Investment Services, Ltd.: This report is for the use of professional investment advisers and managers and is not intended for use by clients. For purposes of the Financial Conduct Authority requirements, this research report is classified as independent with respect to conflict of interest management. RJA, RJFI, and Raymond James Investment Services, Ltd. are authorised and regulated by the Financial Conduct Authority in the United Kingdom. For clients in France: This document and any investment to which this document relates is intended for the sole use of the persons to whom it is addressed, being persons who are Eligible Counterparties or Professional Clients as described in “Code Monétaire et Financier” and Règlement Général de l’Autorité des Marchés Financiers. It is not intended to be distributed or passed on, directly or indirectly, to any other class of persons and may not be relied upon by such persons and is therefore not intended for private individuals or those who would be classified as Retail Clients.

For institutional clients in the European Economic Area (EEA) outside of the United Kingdom:

http://www.rjcapitalmarkets.com/Disclosures/index



This document (and any attachments or exhibits hereto) is intended only for EEA institutional clients or others to whom it may lawfully be submitted. Raymond James International and Raymond James Euro Equities are authorized by the Autorité de Contrôle Prudentiel in France and regulated by the Autorité de Contrôle Prudentiel and the Autorité des Marchés Financiers. Proprietary Rights Notice: By accepting a copy of this report, you acknowledge and agree as follows:

This report is provided to clients of Raymond James only for your personal, noncommercial use. Except as expressly authorized by Raymond James, you may not copy, reproduce, transmit, sell, display, distribute, publish, broadcast, circulate, modify, disseminate or commercially exploit the information contained in this report, in printed, electronic or any other form, in any manner, without the prior express written consent of Raymond James. You also agree not to use the information provided in this report for any unlawful purpose. This is RJA client releasable research This report and its contents are the property of Raymond James and are protected by applicable copyright, trade secret or other intellectual property laws (of the United States and other countries). United States law, 17 U.S.C. Sec.501 et seq, provides for civil and criminal penalties for copyright infringement.

Additional information is available upon request. This document may not be reprinted without permission.

RJL is a member of the Canadian Investor Protection Fund. ©2013 Raymond James Ltd.



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BEN CHERNIAVSKY 604.659.8244 THEONI PILARINOS, CFA (ASSOCIATE) 604.659.8234 GREG JACKSON (ASSOCIATE) 604.659.8262

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