Denver Gold Group - Metals & Mining · 2015-04-13 · our caution, expecting "riskier" stocks, to...
Transcript of Denver Gold Group - Metals & Mining · 2015-04-13 · our caution, expecting "riskier" stocks, to...
Metals & MiningFor FCA purposes this is a Marketing Communication
AnalystsCailey BarkerTel: +44 (0)20 7260 [email protected]
Phil SwinfenTel: +44 (0)20 7260 [email protected]
This research was preparedand approved by
Numis Securities LimitedThe London Stock Exchange Building10 Paternoster SquareLondon EC4M 7LT
+44 (0)20 7260 [email protected]
Registered No 02285918. Authorised andRegulated by The Financial ConductAuthority. A Member of the LondonStock Exchange
9 April 2015Metals & MiningIndustry Update
Treading Water
We revise our recommendations and target prices on the back of our newcommodity price forecasts. Q1 was another tough quarter - a brief bounce wasshort lived, as a dive in copper and iron ore dragged down the sector once again.We still expect little respite through this year with a headwind of depressed pricesand downward earnings momentum. Despite some improvement in businesses andlower input costs, we retain our view that only the strong will survive through whatappears to be close to the bottom of the cycle. We tweak our stock picks, keepingwith a theme of value and high quality assets; we recommend Acacia, Petra andHighfield Resources.
● Quality & value. We retain Acacia Mining as our pick, a quality company goingthrough a pivotal year with lots potential for substantial cash generation if it can deliver.We continue with Petra Diamonds, with its peer-leading management and assets plussteady growth profile. We include Dalradian Resources as our choice of the goldjuniors and elevate Highfield Resources to a pick as the best play in the potash space,both companies with quality, high return assets in developed jurisdictions. We retainour caution amongst the copper players and avoid iron ore.
● Downgrades aplenty. We expect further earnings downgrades this year and retainour caution, expecting "riskier" stocks, to remain under pressure. The sector continuesto price-in discounted gold and industrial prices, at an average 8% discount to spot(implied prices $1,107/oz gold, $2.69/lb copper, $59/t iron ore). Our TPs increase byan average of 2%. We are cautious but see value in some shares on a 1-3 year view,reflected by a number of Buy recommendations.
● M&A over-rated. We expect the spotlight to continue for the rest of the year on cost-cutting, free cashflow, balance sheets and shareholder returns. M&A is likely to remainin focus as stretched finances may offer opportunities in times of distress, althoughthere are limited quality assets on offer, in our view. We are ever cognisant of graderemaining a key attribute and those with low margin assets are likely remain underpressure.
● Commodities nearing bottom. Fx remains a key driver. For gold, we retain our$1,200/oz flat spot price based model, due to ongoing volatility, mixed directionalsignals, and a de-coupling from logical fundamental indicators. We expect industrials toremain subdued, with building surpluses and weakening Chinese demand; we chop ouriron ore forecasts (2015 NUMe $2.71/lb Cu, $55/t Fe). Diamonds are likely to remainflattish in the ST due to rolling liquidity constraints. Other commodities are generallysubdued, failing to respond to what may appear ambitious long term fundamentals.
For FCA purposes this marketing communication has not been prepared in accordancewith legal requirements designed to promote the independence of investment researchand is not subject to any prohibition on dealing ahead of the dissemination of suchresearch. Important disclosures are on pages 70 to 74 relating to Numis SecuritiesLimited, analyst certification, other requirements which restrict dealing ahead, relevantinvestment banking relationships, potential conflicts of interest and additionaldisclosures. See www.numis.com/x/regulatory.html for other disclosures.
Contents
Treading Water _______________________________________________________ 4
Stocks ______________________________________________________________ 6
Rocks vs. Stocks ______________________________________________________ 8
Beta ________________________________________________________________ 9
RSI _______________________________________________________________ 10
Volatility Reigns ______________________________________________________ 11
Economy ___________________________________________________________ 12
Commodities ________________________________________________________ 13
Gold _______________________________________________________________ 14
Silver ______________________________________________________________ 15
Copper ____________________________________________________________ 16
Nickel _____________________________________________________________ 17
Iron Ore ____________________________________________________________ 18
Ferrochrome ________________________________________________________ 19
Diamonds __________________________________________________________ 20
Tungsten ___________________________________________________________ 21
Uranium ____________________________________________________________ 22
Potash _____________________________________________________________ 23
Priced as at 7am on 7th April 2015; Exchange Rate £/$: 1.50, £/ZAR: 9.50.
Key sources are company data, including annual reports and analysts’ presentations.
Numis acts as an adviser/broker to Aureus Mining, Berkeley Resources, Caledonia Mining,
Chaarat Gold, Condor Gold, International Ferro Metals, Highfield Resources, Highland Gold, First
Quantum Minerals and Wolf Minerals.
9 April 2015
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange2
Figure 1: Research Universe
Source: Numis Securities Research, Bloomberg and company data
Company Ticker Rec. Share Target Return RSI Market P/NAV P/E P/CFEV/EBITDA EBITDA FCF Net Debt/ Gearing Growth Divi ROE
LN Price Price Cap 2015F 2015F 2015F Margin Yield EBITDA CF Yield
£ £ % £m x x x x % % x % % % %
GOLD & SILVER
Fresnillo FRES BUY 7.10 10.00 41 46 5,228 1.2 105.4 15.2 15.5 35 -5 1.4 46 -10 0.5 3
Randgold Resources RRS HOLD 48.52 51.00 5 50 4,505 1.9 39.0 15.8 15.2 27 3 -0.4 0 33 0.8 3
Acacia Mining ACA BUY 2.70 3.70 37 61 1,109 1.4 17.0 6.2 5.3 31 3 -0.6 6 -7 1.1 5
Centamin Egypt CEY HOLD 0.60 0.60 0 54 691 1.0 8.4 4.7 4.0 37 11 -1.1 0 17 3.8 8
Hochschild HOC HOLD 0.88 0.85 -3 54 323 4.4 197.5 2.6 5.0 31 -14 2.5 52 97 0.0 -1
Highland Gold* HGM BUY 0.41 0.80 96 58 133 0.7 7.9 2.7 4.6 31 5 2.5 36 -34 6.2 3
Timmins Gold TMM BUY 0.90 1.75 94 42 87 0.4 27.1 9.9 3.9 20 0 -0.8 5 -11 0.0 3
Aureus Mining* AUE BUY 0.24 0.40 69 57 87 0.7 14.2 4.6 5.4 42 -36 2.6 48 529 0.0 3
Dalradian DALR BUY 0.49 0.90 83 49 80 0.5 n.a. n.a. n.a. 0 -45 0.7 0 41 0.0 -5
Condor Gold* CNR BUY 0.64 0.90 42 64 29 0.5 n.a. n.a. n.a. 0 -10 2.3 0 32 0.0 n.m.
Chaarat Gold* CGH BUY 0.08 0.24 193 28 22 0.3 n.a. n.a. n.a. 0 0 0.3 0 -56 0.0 -15
Caledonia Mining* CMCL BUY 0.39 0.75 95 64 20 0.4 6.0 3.0 0.5 23 -20 -1.3 0 -27 9.1 6
Minera IRL MIRL BUY 0.03 0.10 208 54 8 0.3 n.a. n.a. 172.9 -8 -254 181.9 42 91 0.0 -4
Polyus Gold PGIL N/C 1.91 - - 44 5,784 - 15.1 10.9 8.3 44 4 0.4 112 13 1.2 -6
Polymetal POLY N/C 5.86 - - 60 2,474 - 11.5 6.4 6.6 42 8 1.1 152 9 3.3 -16
Kirkland Lake KGI N/C 3.00 - - 67 240 - 20.4 5.2 6.7 29 -14 0.4 57 271 0.0 4
Pan African PAF N/C 0.12 - - 52 215 - 10.7 9.0 5.6 24 0 0.4 3 -46 6.0 10
Petropavlovsk POG N/C 0.06 - - 55 184 - 3.0 0.6 5.3 -15 24 2.2 101 -50 0.0 0
Shanta Gold SHG N/C 0.09 - - 22 41 - 2.4 2.7 2.7 18 59 0.5 71 -8 0.0 8
Amara Mining AMA N/C 0.15 - - 57 63 - n.a. n.a. n.a. -6 -2 -6.0 0 -182 0.0 -12
Avocet Mining AVM N/C 0.05 - - 46 10 - n.a. 1.1 5.4 -7 -607 5.7 63 -217 0.0 -66
Average (Producers) 52 1,408 1.3 32.4 6.3 16.1 18.9 -66 0.6 46 52 2.1 2
Average (Non-Producers) 50 35 0.4 n.a. n.a. n.a. n.a. n.a. n.a. 17 34 0.0 -16
COPPER
Antofagasta ANTO REDUCE 7.31 6.00 -18 55 7,207 1.0 14.2 5.5 4.0 47 10 -0.1 21 47 2.5 10
First Quantum Minerals* FQM ADD 8.80 10.00 14 65 5,281 0.6 17.4 4.1 8.9 34 -2 3.3 59 154 2.8 5
Kaz Minerals KAZ REDUCE 2.16 1.90 -12 50 965 0.7 29.8 5.6 7.0 39 -94 8.6 167 543 0.3 2
Central Asia Metals CAML N/C 1.75 - - 64 195 - 7.8 6.4 4.5 63 6 -1.1 0 20 6.4 37
EMED EMED N/C 0.04 - - 42 54 - n.a. n.a. n.a. n.a. -16 -16.0 26 143 9.7 -35
Rambler RMM N/C 0.11 - - 26 16 - 4.4 2.4 2.2 37 58 0.5 29 -35 0.0 16
Average 50 2,286 0.8 14.7 4.8 5.3 35 -6 2.2 64 124 3.1 2
DIVERSIFIED
BHP Billiton BLT N/C 14.57 - - 45 81,159 - 15.0 6.4 6.4 44 7 1.1 41 -19 5.6 13
Rio Tinto RIO N/C 28.04 - - 47 52,159 - 13.7 7.3 6.9 41 8 1.0 46 -12 5.3 13
Glencore GLEN N/C 2.88 - - 51 37,638 - 17.1 5.1 9.1 5 1 3.4 102 10 4.0 5
Anglo American AAL N/C 10.15 - - 40 14,222 - 12.7 4.0 6.1 26 -2 2.0 58 -11 5.4 -9
Vedanta VED N/C 4.90 - - 48 1,316 - n.a. 1.2 6.4 36 25 2.2 94 -42 7.8 0
Average 46 37,299 14.6 4.8 7.0 30 8 1.9 68 -15 5.6 5
GEMSTONES
Petra Diamonds PDL BUY 1.83 2.50 37 54 941 0.5 14.9 6.2 6.3 41 -1 0.3 27 45 1.2 16
Gemfields GEM BUY 0.53 0.75 43 65 284 0.7 20.1 5.4 4.5 47 3 -0.2 9 18 0.0 3
Gem Diamonds GEMD N/C 1.40 - - 44 193 - 9.5 3.3 2.8 38 30 -0.9 10 -5 2.2 11
IRON ORE / COAL / STEEL
Ferrexpo FXPO HOLD 0.65 0.60 -8 63 383 0.6 6.5 2.1 4.9 24 40 2.0 119 -37 6.3 11
Evraz EVR N/C 1.92 - - 56 2,893 - 9.4 3.0 4.6 22 30 2.3 309 0 3.4 -34
New World Resources NWR N/C 0.01 - - 39 54 - n.a. 1.4 11.2 1 -159 9.3 256 -121 0.0 0
Asia Resource Minerals ARMS N/C 0.14 - - 46 33 - n.a. n.a. 27.9 14 -359 32.5 66 0 0.0 -15
Coal of Africa CZA N/C 0.01 - - 46 20 - n.a. n.a. n.a. n.a. -87 12.4 2 0 0.0 -13
MINERAL SANDS
Sierra Rutile SRX N/C 0.20 - - 21 102 - 18.7 5.1 4.9 28 -6 1.0 23 206 0.0 -5
Kenmare Resources KMR N/C 0.04 - - 44 100 - n.a. 3.0 6.4 9 -36 4.2 54 n.a. 1.8 -11
Base Resources BSE N/C 0.06 - - 19 35 - 40.3 1.8 5.3 37 -193 3.2 112 -579 0.0 -9
PLATINUM
Lonmin LMI N/C 1.21 - - 40 707 - 74.1 7.0 6.7 -11 -34 0.4 5 -215 0.1 -10
Aquarius AQP N/C 0.09 - - 31 137 - n.a. 5.3 4.0 12 -3 -1.3 25 92 0.7 -14
FERROCHROME
International Ferro Metals* IFL BUY 0.04 0.25 590 44 20 0.1 n.a. 2.2 0.0 6 -6 -6.2 29 95 0.0 -2
Afarak AFRK N/C 0.33 - - 99 84 - 55.9 n.a. 12.5 7 -7 0.3 7 0 0.0 2
POTASH
Highfield Resources* HFR.AX BUY A$1.70 A$3.00 76 90 A$428 0.6 n.a. n.a. n.a. 0 -33 1.3 87 142 0.0 -29
Sirius Minerals SXX N/C 0.10 - - 75 210 - n.a. n.a. n.a. n.a. -4 3.1 4 -17 0.0 -8
OTHER
Wolf Minerals WLFE BUY 0.20 0.23 16 49 160 0.7 n.a. 19.3 23.2 6 -19 -2.8 27 154 0.0 1
Berkeley Resources* BKY BUY 0.12 0.40 233 54 22 0.3 n.a. n.a. n.a. 0 -17 0.0 0 143 0.0 -29
COMMODITY / FX SPOT FY13 FY14 FY15 FY16 FY17 LT RSI DATE COMPANY EVENT
Gold $/oz 1,211 1,412 1,266 1,205 1,200 1,200 1,200 58 10-Apr Vedanta Q4 prod results
Silver $/oz 16.9 23.9 19.1 16.7 17.6 18.6 18.5 54 15-Apr Fresnillo Q1 prod results
Platinum $/oz 1,175 1,487 1,385 1,161 1,243 1,330 1,500 57 16-Apr Ferrexpo Q1 IMS
Palladium $/oz 770 726 803 759 802 747 600 50 21-Apr Rio Tinto Q1 prod results
Copper $/lb 2.76 3.33 3.11 2.71 2.89 2.92 2.50 57 21-Apr Polymetal Q1 prod results
Lead $/lb 0.86 0.97 0.95 0.83 0.89 0.90 0.90 65 22-Apr BHP Billiton Q3 prod results
Zinc $/lb 0.97 0.87 0.98 0.95 0.95 0.95 0.95 66 22-Apr Hochschild Q1 prod results
Nickel $/lb 5.67 6.82 7.66 5.97 6.41 6.98 8.00 35 23-Apr Acacia Mining Q1 results
Aluminium $/lb 0.81 0.84 0.85 0.80 0.81 0.82 0.85 50 23-Apr Anglo American Q1 IMS
Ferrochrome $/lb 1.08 1.16 1.19 1.08 1.17 1.24 1.20 10 28-Apr Aquarius Q3 prod results
Iron ore $/t 49 135 97 55 59 60 60 20 29-Apr Antofagasta Q1 prod results
Thermal Coal $/t 57 81 72 60 62 66 75 34 29-Apr Petropavlvosk FY & Q1 prod results
Uranium $/lb 39 39 34 39 41 48 60 66 30-Apr KAZ Minerals Q1 prod results
Diamonds (polished) $/ct 133 140 145 134 136 140 187 46 05-May Glencore Q1 prod results
Potash $/t 305 379 297 303 300 300 300 - 07-May Randgold Q1 results
Tungsten (APT) $/mtu 258 372 357 264 313 406 450 20 11-May Lonmin H1 results
USD / GBP 1.49 1.56 1.65 1.50 1.50 1.50 1.50 49 13-May Centamin Q1 results
CAD / USD 1.24 1.03 1.10 1.25 1.25 1.25 1.25 42 14-May Vedanta FY results
ZAR / USD 11.79 9.65 10.85 11.87 11.13 10.13 9.50 44 18-May Centamin Capital Markets Day
AUD / USD 1.30 0.97 0.90 0.76 0.75 0.75 0.75 49 21-May Polymetal Investor Day
9 April 2015
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange 3
Treading Water
Q1 was another tough quarter - a brief bounce was short lived, as a dive in copper and
iron ore dragged down the sector once again. We still expect little respite through this
year with a headwind of depressed prices and downward earnings momentum. Despite
some improvement in businesses and lower input costs, we retain our view that only the
strong will survive through what appears to be close to the bottom of the cycle.
Stock Picks: Acacia, Petra, Highfield.
Gold: We retain Acacia Mining as our top pick. A quality company which still has to
prove its stripes, but has plenty potential for high reward. We continue to like Randgold
as a best in class gold play but the shares looks pricey at these levels. On the small cap
end, we like recently initiated Dalradian, a developer which offers an attractive, low
cost, high grade project in new and prospective gold belt and first world country.
Silver: During the quarter we removed Fresnillo from our pick list after a few negative
updates, despite its premium production profile and superior asset portfolio.
Copper: We are cautious on the space but prefer First Quantum, which is not a pick
due to a challenging year of project build out, peak capex and political risk.
Diamonds: Petra remains our preferred play; quality with steady production growth.
Others: As our favoured juniors, we continue to like Highfield and Berkeley, both with
highly attractive projects in developed jurisdictions. Highfield has completed a DFS on
its flagship project with low capex/opex and a very high 52% IRR; lots of value upside
and looks set to be the next cab off the rank in the potash world. Avoid iron ore.
Table 1: Recommendation & Target Price Changes (Average +2%, Gold +3%)
Company New Rec Old Rec New TP (£) Old TP (£) Change (%) Price (£) Return (%)
Gold
& S
ilver
Fresnillo BUY BUY 10.00 9.00 10 7.10 41
Randgold Resources HOLD HOLD 51.00 49.00 4 48.52 5
Acacia Mining BUY BUY 3.70 3.40 8 2.70 37
Centamin Egypt HOLD HOLD 0.60 0.60 0 0.60 0
Hochschild HOLD HOLD 0.85 0.75 12 0.88 (3)
Highland Gold* BUY BUY 0.80 0.80 0 0.41 95
Timmins Gold BUY BUY 1.75 1.60 9 0.90 94
Aureus Mining* BUY BUY 0.40 0.40 0 0.24 67
Dalradian BUY BUY 0.90 0.90 0 0.49 84
Condor Gold* BUY BUY 0.90 0.90 0 0.64 41
Chaarat Gold* BUY BUY 0.24 0.23 4 0.08 200
Caledonia Mining* BUY BUY 0.75 0.75 0 0.39 92
Minera IRL BUY BUY 0.10 0.10 0 0.03 233
Average 4 76
Copp
er Antofagasta REDUCE REDUCE 6.00 6.00 0 7.31 (18)
First Quantum Minerals* ADD BUY 10.00 10.50 (5) 8.80 14
Kazakhmys REDUCE SELL 1.90 1.80 5 2.16 (12)
Oth
er
Petra Diamonds BUY BUY 2.50 2.50 0 1.83 37
Gemfields BUY BUY 0.75 0.70 7 0.53 42
Ferrexpo HOLD HOLD 0.60 0.60 0 0.65 (8)
Highfield Resources* BUY BUY A$3.00 A$3.00 0 A$1.70 76
International Ferro Metals* BUY BUY 0.25 0.25 0 0.04 525
Wolf Minerals* BUY ADD 0.23 0.23 0 0.20 15
Berkeley Resources* BUY BUY 0.40 0.35 13 0.12 233
Average (all) 3 82
* is a corporate broking client of Numis Securities
Source: Numis Securities Research, Bloomberg
9 April 2015
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange4
Commodity Forecasts: Soggy Bulks Key changes: Iron ore -30%, Nickel -22%, Diamonds -7%, Tungsten -16%
We continue with our flat spot price based model for gold and silver due to ongoing
volatility, mixed directional signals and a de-coupling from logical fundamental
indicators. Gold stays flat while we tweak silver as remains over sold. Nickel looks under
pressure on weaker demand and we re-balance our forecasts. Iron ore has fallen
through the floor on over-supply and weak demand and we see little respite, pulling our
LT price down to $60/t, from $80/t. We forecast weaker ST diamond prices on lower
liquidity and inventory draw, weaker tungsten prices on a lack of demand.
Table 2: Commodity Price Forecasts
2015 YTD 2015F 2016F 2017F 2018F LT
Gold New $/oz 1,219 1,205 1,200 1,200 1,200 1,200
Old $/oz 1,200 1,200 1,200 1,200 1,200
Change (%) 0 0 0 0 0
Silver New $/oz 16.7 16.7 17.6 18.6 18.5 18.5
Old $/oz 16.9 18.5 18.5 18.5 18.5
Change (%) (2) (5) 1 0 0
Copper New $/lb 2.65 2.71 2.89 2.92 2.69 2.50
Old $/lb 2.75 2.97 2.80 2.61 2.50
Change (%) (1) (3) 4 3 0
Zinc New $/lb 0.94 0.95 0.95 0.95 0.95 0.95
Old $/lb 0.99 0.95 0.95 0.95 0.95
Change (%) (5) 0 0 0 0
Lead New $/lb 0.82 0.83 0.89 0.90 0.90 0.90
Old $/lb 0.91 0.95 0.93 0.91 0.90
Change (%) (9) (6) (3) (1) 0
Nickel New $/lb 6.53 5.97 6.41 6.98 7.52 8.00
Old $/lb 7.63 8.23 8.15 8.06 8.00
Change (%) (22) (22) (14) (7) 0
Ferrochrome, contract New $/lb 1.08 1.08 1.17 1.24 1.25 1.20
Old $/lb 1.14 1.20 1.25 1.25 1.20
Change (%) (6) (2) (1) 0 0
Platinum New $/oz 1,195 1,161 1,243 1,330 1,420 1,500
Old $/oz 1,275 1,360 1,411 1,466 1,500
Change (%) (9) (9) (6) (3) 0
Iron ore (China 62% CFR) New $/t 63 55 59 60 60 60
Old $/t 75 89 88 86 80
Change (%) (27) (33) (32) (31) (25)
Diamonds (rough index) New $/ct 224 227 246 247 243 215
Old $/ct 245 259 256 252 224
Change (%) (7) (5) (4) (4) (4)
Potash (KCl, MOP) New $/t 305 303 300 300 300 300
Old $/t 300 300 300 300 300
Change (%) 1 0 0 0 0
Tin New $/t 18,370 12,761 15,375 16,521 18,250 20,000
Old $/t 20,500 21,500 21,667 20,778 20,000
Change (%) (38) (28) (24) (12) 0
Tungsten - APT New $/t 281 264 313 406 450 450
Old $/t 315 381 438 453 450
Change (%) (16) (18) (7) (1) 0
Uranium New $/lb 38 39 41 48 55 60
Old $/lb 38 43 50 57 60
Change (%) 3 (3) (4) (3) 0
Source: Numis Securities Research, Bloomberg
9 April 2015
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange 5
Stocks Margins Improving but FCF Yields Still Low
P/NAV P/E
P/CF FCF Yield
EV/EBITDA EBITDA Margin
Source: Numis Securities Research, Bloomberg, Company Data
0.10.2
0.30.30.30.40.50.50.50.50.60.60.60.70.70.80.8
1.01.0
1.11.21.3
1.82.8
0.0x 0.5x 1.0x 1.5x 2.0x 2.5x 3.0x
Inter Ferro MetalsBerkeleyChaarat
DalradianMinera
TimminsCaledonia
KazakhmysCondor
HighfieldPetra Diamonds
First QuantumHighland
AureusGemfields
Wolf MineralsAverage
AntofagastaCentaminFresnilloFerrexpo
Acacia MiningRandgold
Hochschild
(44)(27)
(15)(7)(6)(4)(3)
7 8 9 11 13 14 15 17 20 21 23 24
32 38
79 115
-60x -35x -10x 15x 40x 65x 90x 115x
Wolf MineralsDalradian
CondorInter Ferro Metals
BerkeleyChaaratMinera
CaledoniaHighlandFerrexpoCentamin
AureusAverage
Petra DiamondsAcacia MiningFirst Quantum
GemfieldsHighfieldTimmins
AntofagastaRandgold
KazakhmysFresnillo
(16)(16)
(10)(6)(6)
0 0 1 2 2 3 3 4 4 4 5 6 7 7 8
13 16
-30x -20x -10x 0x 10x 20x 30x
MineraCondorAureus
ChaaratBerkeleyHighfield
Petra DiamondsInter Ferro Metals
FerrexpoHighland
PetropavlovskHochschild
AverageCaledonia
First QuantumGemfields
KazakhmysAntofagasta
CentaminAcacia Mining
FresnilloRandgold
Wolf Minerals 53
-49%-38%-35%
-17%-16%-16%-15%
-6%-2%
0% 3% 3% 5% 7% 8% 9% 9% 11% 12% 13%
23% 48%
-60% -40% -20% 0% 20% 40% 60%
HighlandKazakhmys
CondorHighfield
CaledoniaBerkeley
DalradianFresnilloAverage
Petra DiamondsGemfieldsTimminsRandgold
HochschildFirst Quantum
AntofagastaWolf MineralsAcacia Mining
CentaminAureus
FerrexpoInter Ferro Metals
(32)(16)
(7)(5)
(2)(1)(0)(0)
01112344556667
151516
-40x -30x -20x -10x 0x 10x 20x
DalradianCondorMinera
ChaaratPetropavlovsk
Inter Ferro MetalsHighlandFerrexpoBerkeley
HochschildKazakhmys
AverageFirst Quantum
AureusHighfield
CaledoniaTimmins
GemfieldsCentamin
Petra DiamondsAcacia Mining
AntofagastaFresnillo
RandgoldWolf Minerals
6%7%
16%21%
23%24%
29%30%31%31%32%32%33%
35%35%35%37%
41%42%
44%48%
0% 10% 20% 30% 40% 50% 60%
MineraInter Ferro Metals
Wolf MineralsTimminsFerrexpo
CaledoniaHochschild
AverageHighfield
Acacia MiningHighland
KazakhmysFirst Quantum
FresnilloPetropavlovsk
AntofagastaCentaminRandgold
AureusPetra Diamonds
Gemfields
9 April 2015
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange6
Stocks Finances Improving, Growth/Cost Down, Divi Up
Net Debt/EBITDA Gearing
Growth Dividend Yield
Implied Prices Total Cash Cost & All-In Sustaining Cost
Source: Numis Securities Research, Bloomberg, Company Data
(11.0)(2.4)
(1.5)(1.0)(0.7)(0.7)(0.1)
0.30.30.40.81.11.32.12.22.32.32.32.5
3.74.3
9.5
-15x -10x -5x 0x 5x 10x 15x
AureusWolf Minerals
CaledoniaCentaminRandgold
Acacia MiningGemfields
AntofagastaChaarat
Petra DiamondsAverage
Inter Ferro MetalsFresnilloHighland
HochschildPetropavlovsk
CondorBerkeleyHighfieldFerrexpo
First QuantumKazakhmys
0%0%0%0%0%0%0%
5%6%9%
23%28%28%29%32%
36%41%43%46%46%
52%59%
83%122%
0% 20% 40% 60% 80% 100% 120% 140%
RandgoldCentamin
ChaaratCaledonia
CondorBerkeley
DalradianTimmins
Acacia MiningGemfields
Petra DiamondsWolf Minerals
Inter Ferro MetalsAntofagasta
AverageHighland
MineraHighfieldFresnillo
AureusHochschild
First QuantumKazakhmys
Ferrexpo
-91%
-35%-34%
-6%-4%-1%
1%9%11%16%16%16%22%25%28%
43%44%47%52%56%
68%90%
211%
-100% -50% 0% 50% 100% 150% 200% 250%
MineraAureus
DalradianChaarat
HighlandBerkeley
GemfieldsRandgoldHighfield
Wolf MineralsCentamin
Petra DiamondsCondor
AverageTimmins
CaledoniaFerrexpo
Acacia MiningFresnillo
First QuantumAntofagastaKazakhmys
Inter Ferro Metals
NAV/EPS2014F-2015F
0%0%
1%1%
1%1%
2%3%3%
4%4%5%
5%5%
6%7%7%
9%9%9%10%
0% 2% 4% 6% 8% 10% 12%
PetropavlovskKazakhmys
RandgoldAcacia MiningFirst Quantum
FresnilloPolyus Gold
PolymetalAntofagasta
EvrazAverage
Glencore XstrataRio Tinto
Anglo AmericanBHP BillitonPan African
Central Asia MetalsCaledoniaFerrexpo
Highland GoldVedanta
4659
113234
389
256 270 269 281
911 988
1,061 1,070 1,078 1,097 1,107 1,115 1,118 1,130 1,134
1,193 1,236 1,263
0 500 1,000 1,500 2,000
BerkeleyFerrexpo
Inter Ferro MetalsHighfield
Wolf
First QuantumKazakhmys
AverageAntofagasta
CaledoniaDalradianChaaratTimmins
AureusFresnilloAverageHighland
AcaciaMinera IRL
CondorRandgoldCentamin
Hochschild
Gold($/oz)
Copper(c/lb)
Other
($/mtu APT)($/t KCl)
($/t FeCr)($/t Fe)
($/lb U3O8)
779805807819825
864893899
927949954969975
1,0061,0061,026
1,0601,0691,0801,1011,105
1,1721,242
0 200 400 600 800 1,000 1,200
Eldorado
Randgold
Yamana
Newcrest
Polyus
Barrick
Polymetal
Highland
Newmont
Goldcorp
Agnico Eagle
Caledonia
Average
Kinross
Centamin
AngloGold
Gold Fields
Sibanye
Petropavlovsk
IAMGold
Acacia
Minera
Harmony
H1 '14$/oz
0
500
1,000
1,500
04 06 08 10 12 FY14TCC
AISCGold
FY14 $/oz
9 April 2015
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange 7
Rocks vs. Stocks Miners Rout
Miners Losing to Market
Continuing to fall away from the broader market
Miners Follow Copper Spiral
Equities continue to follow coper, albeit with more volatile swings
Gold Equities Losing to Gold
Equities underperform gold, 30-50% discount, UK better than NA
UK Gold Miners Mixed bag
CEY best performer, ACA & RRS flat, POG in doldrums
Gold Safer but Equities Oversold
Historically gold has a better return but equities can outperform
Miners Losing to US Dollar
After a period of consolidation, reverse correlation restarts as $ rockets
Source: Numis Securities Research, Bloomberg, Barrons
4,000
4,500
5,000
5,500
6,000
6,500
7,000
7,500
10,000
15,000
20,000
Mar-13 Jul-13 Nov-13 Mar-14 Jul-14 Nov-14 Mar-15
FTSE 350 Mining (LS) FTSE 100 (RS)
10,000
12,000
14,000
16,000
18,000
20,000
22,000
24,000
26,000
28,000
30,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
11,000
2010 2011 2012 2013 2014 2015
Copper ($/t, LS) FTSE 350 Mining (RS)
Apr-10 Oct-10 Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14
0
50
100
150
200
Gold (£/oz) Numis Gold Index (re-based) HUI Index
Implied 30-50% discount to spot
Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15
Petropavlovsk Centamin Acacia Mining Randgold
0
1,000
2,000
3,000
4,000
5,000
6,000
1960 1970 1980 1990 2000 2010
HUI/Barrons Mining Index Gold
70
75
80
85
90
95
100
250
350
450
550
Mar-13 Jul-13 Nov-13 Mar-14 Jul-14 Nov-14 Mar-15
Stoxx 600 Basic Resources (LS) Dollar Index (RS)
9 April 2015
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange8
Beta Back in Gold, AWOL in Base Metals
Beta Returning as Gold/Equities Reconnect
Equities once again offer significant leverage to the gold price
LT Chart – HUI vs Gold
Correlation broke down in 2011 but is returning
12m Chart – HUI vs Gold
Correlation returns to equities
Base Metal Equities – Beta Disappearing
Volatility abounds. Equities and copper price follow own path
Dislocation Closed – Copper Follows the Pain Trail
Base metals driven by the macro, equities focused on staying alive
R2 ranges from 0 to 10. Determines % of the equities’ movement that is explained by the underlying index/benchmark. 0 = no correlation, 100= full correlation. Measure
of “goodness of fit” of the data. Higher R-squared (>75) indicates a more useful Beta data. Thus R2 and Beta must be used in conjunction
Beta indicates how sensitive the measured equity is to the underlying market (index or commodity). A high Beta (above 1) indicates that the equity is more volatile than
the underlying, whilst a Beta of less than 1 indicates less volatility than the market.
Source: Numis Securities Research, Bloomberg,
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.0
1.2
1.4
1.6
1.8
2.0
2.2
2.4
2.6
2.8
3.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
HUI Gold Index Beta R2
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
0
100
200
300
400
500
600
700
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
HUI Index Gold
Equities lost thier way in 2011
$1,000
$1,050
$1,100
$1,150
$1,200
$1,250
$1,300
$1,350
$1,400
$1,450
$1,500
100
150
200
250
300
Jan-14 Apr-14 Jul-14 Oct-14 Jan-15
HUI Index Gold
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
0.5
0.6
0.7
0.8
0.9
1.0
1.1
2009 2010 2011 2012 2013 2014
TSX Base Metals Beta R2
4,000
5,000
6,000
7,000
8,000
9,000
10,000
11,000
50
70
90
110
130
150
170
190
210
2009 2010 2011 2012 2013 2014
TSX/S&P Base Metals LME Copper
Correlation re-established again
9 April 2015
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange 9
RSI Most Commodities Have Rebalanced
RSI Trend Close to Oversold:
Coking and thermal coal appear hugely oversold. Nickel, and iron
ore now oversold.
Volatility Remains:
Commodities remain volatile swinging between overbought and
oversold on a monthly basis.
General Explanation. A technical momentum indicator that compares the
magnitude of recent gains to recent losses in order to attempt to determine if
an asset/stock/metal/index is overbought or oversold. Traders generally
consider the market overbought approaching 70 and over, and oversold when
approaching 30 or below.
Source: Numis Securities Research, Bloomberg
Commodity/Index 90 Day RSI Trajectory Latest RSI
FTSE 350 Mining 41
FTSE 100 41
FTSE All Share Mining 41
HUI Index 36
S&P/TSX Metals Mining 51
Gold 46
Silver 54
Platinum 47
Palladium 34
Copper 56
Nickel 28
Zinc 54
Lead 53
Iron Ore 24
Coking Coal 23
Thermal Coal 17
Overbought >70 Oversold<30
-10
10
30
50
70
90
0
20
40
60
80
100
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
FTSE 350 Mining Oversold Overbought
0
20
40
60
80
0
20
40
60
80
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
FTSE All Share Mining Oversold Overbought
0
20
40
60
80
0
20
40
60
80
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
FTSE 100 Oversold Overbought
0
20
40
60
80
0
20
40
60
80
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
HUI Index Oversold Overbought
0
20
40
60
80
0
20
40
60
80
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
S&P/TSX Metals Mining Oversold Overbought
0
20
40
60
80
100
0
20
40
60
80
100
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
Iron Ore Oversold Overbought
9 April 2015
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange10
RSI Volatility Reigns
Source: Numis Securities Research, Bloomberg
0
20
40
60
80
0
20
40
60
80
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
Gold Oversold Overbought
0
20
40
60
80
0
20
40
60
80
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
Silver Oversold Overbought
0
20
40
60
80
0
20
40
60
80
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
Platinum Oversold Overbought
0
20
40
60
80
0
20
40
60
80
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
Palladium Oversold Overbought
0
20
40
60
80
0
20
40
60
80
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
Copper Oversold Overbought
0
20
40
60
80
0
20
40
60
80
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
Nickel Oversold Overbought
0
20
40
60
80
0
20
40
60
80
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
Zinc Oversold Overbought
0
20
40
60
80
0
20
40
60
80
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
Lead Oversold Overbought
0
20
40
60
80
0
20
40
60
80
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
Thermal Coal Oversold Overbought
0
20
40
60
80
100
0
20
40
60
80
100
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
Coking Coal Oversold Overbought
9 April 2015
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange 11
Economy Oil hits US, China Faltering, Eurozone Fighting Back
Manufacturing PMI
Eurozone gathering pace, China flat, US softening
Industrial Production (YoY %)
China on a slippery slope, Eurozone fighting back, US picking up
Leading Indicators
Pointing down - not a great trend (except India), Europe sliding
GDP Growth (YoY %)
China down, US recovery slows, Eurozone soggy
Housing Trends (YoY %)
China shows a big slowdown, US mixed, Eurozone dead
Auto Sales (YoY %)
Mixed bag, broadly sideways but green-shoots in US
US: Manufacturing output growth continues to slow in the US lead by contraction in oil and coal sector and negative effects of the dollar.
Eurozone: Q1 saw an increase in activity with the Eurozone PMI growing at the fast rate for four years fuelled by growth in German industrial output.
The ECB’s QE programme is now set against a backdrop of economic growth, but Greek exit fears still hang heavily on recovery.
China: China manufacturing PMI continues to flat-line, although overall growth remains resilient and broadly in line with the 7.5% growth target for
2014. Chinese economic data continues to cause concern with PMI remaining below 50 and house prices continue to deteriorate. Authorities have
begun to introduce more stimulus measures with cuts in rates in recent weeks.29 of the 31 Chinese provinces have lowered their 2015 GDP targets.
Source: Numis Securities Research, Bloomberg, Longview Economics
40
45
50
55
60
Nov-11 May-12 Nov-12 May-13 Nov-13 May-14 Nov-14
China USA Eurozone
Expansion
Contraction
-15
-5
5
15
Nov-11 May-12 Nov-12 May-13 Nov-13 May-14 Nov-14
China USA Eurozone
-5
0
5
10
15
Nov-11 May-12 Nov-12 May-13 Nov-13 May-14 Nov-14
China India USA Europe OECD
-5
0
5
10
Nov-11 May-12 Nov-12 May-13 Nov-13 May-14 Nov-14
China USA Eurozone
-20
-10
0
10
20
30
40
50
Nov-11 May-12 Nov-12 May-13 Nov-13 May-14 Nov-14
China USA Eurozone
-0.3
-0.2
-0.1
0.0
0.1
0.2
0.3
0.4
0.5
Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14
China USA Eurozone
9 April 2015
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange12
Commodities Grim Reading
Palladium, Gold Best; Nickel, Iron Ore & Coal Grim. The down turn in commodities across the board makes grim reading. The charts
above plot the change in commodity prices from current back to 5 years. Palladium has been the only clear winner. The data represents a snapshot
in time so the peaks and troughs are not captured here. Returns can be made by getting in and out quickly – hardly useful for companies building a
long-term sustainable business. Either way, the graphs above show that most commodities are at 5 year lows – a good entry point?
Source: Bloomberg
Commodity 5 year 4 year 3 Year 2 Year 1 Year 6m
Coking Coal -30% -66% -46% -34% -1% -2%
Gold 6% -17% -29% -26% -8% -2%
Silver -5% -56% -49% -41% -16% -2%
Palladium 53% -4% 13% -5% -5% -5%
Aluminium -22% -32% -14% -5% 3% -7%
Thermal Coal -23% -48% -40% -22% -16% -7%
Zinc -10% -11% 5% 13% 7% -8%
Copper -21% -35% -28% -19% -8% -9%
Lead -14% -33% -10% -13% -11% -13%
Platinum -31% -36% -31% -28% -21% -13%
Tin -8% -47% -25% -27% -26% -16%
Nickel -49% -51% -28% -23% -19% -21%
Iron Ore -14% -70% -64% -62% -55% -32%
-32%-21%
-16%-13%-13%
-9%-8%-7%-7%
-5%-2%-2%-2%
-40% -20% 0%
Iron OreNickel
TinPlatinum
LeadCopper
ZincThermal Coal
AluminiumPalladium
SilverGold
Coking Coal
6m
-55%-26%
-21%-19%
-16%-16%
-11%-8%-8%
-5%-1%
3%7%
-60% -40% -20% 0% 20%
Iron OreTin
PlatinumNickel
Thermal CoalSilverLead
CopperGold
PalladiumCoking Coal
AluminiumZinc
1 Year
-62%-41%
-34%-28%-27%-26%
-23%-22%
-19%-13%
-5%-5%
13%
-80% -60% -40% -20% 0% 20%
Iron OreSilver
Coking CoalPlatinum
TinGold
NickelThermal Coal
CopperLead
PalladiumAluminium
Zinc
2 Year
-64%-49%
-46%-40%
-31%-29%-28%-28%
-25%-14%
-10%5%
13%
-80% -60% -40% -20% 0% 20%
Iron OreSilver
Coking CoalThermal Coal
PlatinumGold
CopperNickel
TinAluminium
LeadZinc
Palladium
3 Year
-70%-66%
-56%-51%
-48%-47%
-36%-35%
-33%-32%
-17%-11%
-4%
-80% -60% -40% -20% 0%
Iron OreCoking Coal
SilverNickel
Thermal CoalTin
PlatinumCopper
LeadAluminium
GoldZinc
Palladium
4 Year
-49%-31%-30%
-23%-22%-21%
-14%-14%
-10%-8%
-5%6%
53%
-60% -40% -20% 0% 20% 40% 60%
Nickel
Platinum
Coking Coal
Thermal Coal
Aluminium
Copper
Iron Ore
Lead
Zinc
Tin
Silver
Gold
Palladium5 Year
9 April 2015
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange 13
Gold Neutral on Limited Drivers Money Supply Remains the Key Driver
FRB’s tightening fiscal policy weighing down but outperforms copper
Historical Prices Indicate Room to Trend Upwards
TMS-adjusted price average of c.$1,400/oz, above current price
Investment Appetite Continues to Wane
Net long positions down at 169t; shorts up; ETF’s flat at 1,675
Physical Mixed but Irrelevant (3% of 175kt Inventory)
Rising jewellery demand, less central bank purchases, more supply
Seasonal Trends Clouded; Indian Wedding Season Fails
Indian wedding season: Sept; Chinese New Year: Late Jan-Mid Feb
Interest Rates Relationship Decoupled
US bond yields fall back again, now on same short-term trend as gold
Source: Numis Securities Research, Bloomberg, FRB Statistics, GFMS, Company Data
1982 1987 1992 1997 2002 2007 2012
TMS YoY % Gold/Copper
100
1,000
10,000
1960 1970 1980 1990 2000 2010
Gold TMS-adj TMS ($bn)
Peak ~$8,000/oz
Ranges from $800-2,000/oz
Average $1,400/oz
0
500
1,000
1,500
2,000
2,500
3,000
3,500
-500
-300
-100
100
300
500
700
900
1,100
2005 2007 2009 2011 2013 2015
Net Non-Commercial Positions (t, LS) ETFs (t, RS)
Short
Long
2,000
1,000
0
1,000
2,000
-5,000
-4,000
-3,000
-2,000
-1,000
0
1,000
2,000
3,000
4,000
5,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Mine production Scrap Hedging
Jewellery & Industrial Central Bank Retail Investment
Gold price TCC AISC
Supply
Demand
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Seasonal trend since 1985 2013 gold price (normalised)
0
1
2
3
4
5
6
7
8
0
250
500
750
1,000
1,250
1,500
1,750
2,000
2000 2002 2004 2006 2008 2010 2012 2014
Gold ($/oz, LS) US 10 Year Yield (%, RS)
Market Balance (t) 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 YTD 2014 LT
Supply (Production, Scrap) 2,947 3,372 3,194 3,072 3,423 4,105 4,346 4,509 4,455 4,254 3,181
% movement -11.6% 14.4% -5.3% -3.8% 11.4% 19.9% 5.9% 3.8% -1.2% -4.5% 0.0%
Demand (Physical & Monetary) 3,136 3,147 3,128 3,104 3,805 3,685 4,245 4,692 4,583 3,977 3,311
% movement -5.9% 0.4% -0.6% -0.8% 22.6% -3.2% 15.2% 10.5% -2.3% -13.2% 0.0%
Surplus (Deficit) (189) 225 66 (33) (382) 420 101 (183) (128) 277 (130)
Gold Price ($/oz) 363 409 444 604 695 872 972 1,225 1,572 1,669 1,266 1,200
Total Cash Cost ($/oz) 216 281 328 405 469 468 625 743 841 734 754
All-In Sustaining Cost ($/oz) 929 1,114 1,047 1,002
Free Cash Flow M argin 24% 29% 37% 21%
9 April 2015
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange14
Silver Gold’s Poor Cousin A Cheaper, More Volatile & Illiquid Gold
Tracker with volatile peaks and troughs; sheep mentality to remain
Gold-Silver Ratio - Silver Seemingly Oversold
Trading at 74:1 currently, above 60:1 historic average
Historical Prices Paint a Bear LT Picture
Tracker currency (uncertain) vs industrial commodity (normal); $7/oz
Investment Appetite Remains Strong
Long positons & ETF’s sideways, net neutral - shorts at all-time highs
Physical Market Remains in Increasing Surplus
Mine supply increasing, lower scrap, jewellery/industrial demand flat
Cost Floors Irrelevant as Secondary Producers Dominant
70% supply is through by-product credits from base metal/gold mines
*YTD 2014 to October. Source: Numis Securities Research, Bloomberg, Company Data, GFMS
0
500
1,000
1,500
2,000
0
10
20
30
40
50
1970 1980 1990 2000 2010
Silver ($/oz, LS) Gold ($oz, RS)
0
10
20
30
40
50
60
70
80
90
100
1971 1975 1979 1983 1987 1991 1995 1999 2003 2007 2011 2015
Historic Average (60:1)
1
10
100
1965 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005 2009 2013
Inflation Adjusted Silver Price Spot Silver Price
Historic Average ($7/oz)
0
100
200
300
400
500
600
700
-60
-40
-20
0
20
40
60
80
2007 2008 2009 2010 2011 2012 2013 2014 2015
Net Non-Commercial Positions (Moz, LS) ETFs (Moz, RS)
Short
Long
20
10
0
10
20
30
40
50
-500
-250
0
250
500
750
1,000
1,250
2004 2006 2008 2010 2012 2014
Mine production (Moz) Scrap Hedging
Jewellery & Industrial Central Bank Retail Investment
Silver price ($/oz) Total Cash Cost
Supply
Demand
Primary29%
Gold13%
Lead/Zinc38%
Copper20%
Market Balance (Moz) 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 YTD 2014* LT
Supply (Production, Scrap) 872 954 916 887 906 912 1,071 1,038 1,005 978 874
% movement 2.7% 9.4% -4.0% -3.1% 2.1% 0.7% 17.4% -3.1% -3.1% -2.7% 0.0%
Demand (Physical & Monetary) 897 962 1,082 1,029 1,171 998 1,158 1,057 1,072 1,091 0
% movement 5.6% 7.2% 12.5% -4.9% 13.8% -14.8% 16.0% -8.7% 1.4% 1.8% 0.0%
Surplus (Deficit) (25) (8) (166) (141) (265) (86) (87) (20) (66) (113) 874
Silver Price ($/oz) 6.7 7.3 11.5 13.4 15.0 14.7 20.2 35.1 31.2 23.8 19.1 18.5
Total Cash Cost ($/oz) 3.7 3.7 2.6 3.9 5.9 5.3 5.9 8.1 9.2 9.3 9.4
Cash M argin 45% 49% 77% 71% 60% 64% 71% 77% 71% 61% 51%
9 April 2015
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange 15
Copper Balanced but Vulnerable
Prices and Inventories Rebound off 6 year Lows
Prices bounce off lows; stocks re-build; China off-exchange?
Market Tight with Apparent Surplus to Come
Balanced in 2014,switching to surplus in 2015 but supply risk remains
China Continues to be Key Driver
Correlation to China PMI; industrial activity running out of steam Investment Appetite Looks Shaky
Net long positons spike, weak PMI data, reduced trading activity
Chinese Consumption Remains High
Consumption continues to rise but stalls this year Backwardation Narrows as Premiums Fall
Backwardation narrows to $25/t, Shanghai physical premia remains low
Source: Numis Securities Research, Bloomberg, SNL Metals & Mining
0
250
500
750
1000
1.00
2.00
3.00
4.00
5.00
2008 2009 2010 2011 2012 2013 2014
LME SHFE COMEX Copper ($/lb, LS)
-1,500
-1,000
-500
0
500
1,000
1,500
14,000
16,000
18,000
20,000
22,000
24,000
26,000
2000 2002 2004 2006 2008 2010 2012 2014 2016
Surplus/Deficit (RS) Refined ProductionRefined Demand Demand at 2.5% paDemand at 5% pa
Surplus
Deficit
35
40
45
50
55
60
65
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
11,000
12,000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
LME 3m Copper ($/t, LS) China PMI (RS)
-100
0
100
200
300
400
500
600
700
800
900
0
50
100
150
200
250
300
350
400
450
500
2007 2008 2009 2010 2011 2012 2013 2014 2015
Comex Positions (kt, RS) Copper Price (c/lb, RS)
5,000
5,500
6,000
6,500
7,000
7,500
8,000
8,500
9,000
400
500
600
700
800
900
1,000
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
China Refined Consumption China Refined ProductionLME Copper Price
-125
-75
-25
25
75
125
175
225
0
250
500
750
1,000
Jun-11 Jun-12 Jun-13 Jun-14
LME Stocks (kt, LS) Shanghai Stocks (kt, LS)
Contango/Backwdation Shanghai Premium ($/t, RS)
Backwardation
Contango
Market Balance (kt) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Refined Production 14,844 15,364 15,196 15,277 15,878 16,607 17,350 18,026 18,236 18,473 19,044 19,697 20,314 21,024 21,693 22,362 23,128 23,911 24,720
% movement 3.5% 3.5% -1.1% 0.5% 3.9% 4.6% 4.5% 3.9% 1.2% 1.3% 3.1% 3.4% 3.1% 3.5% 3.2% 3.1% 3.4% 3.4% 3.4%
Refined Demand 15,160 14,759 15,012 15,673 16,903 16,938 17,520 18,093 18,001 17,447 19,218 19,888 20,107 21,013 21,684 22,248 23,006 23,581 24,171
% movement 7.3% -2.6% 1.7% 4.4% 7.8% 0.2% 3.4% 3.3% -0.5% -3.1% 10.2% 3.5% 1.1% 4.5% 3.2% 2.5% 2.5% 2.5% 2.5%
Surplus (Deficit) (317) 605 184 (396) (1,025) (331) (170) (67) 235 1,026 (174) (191) 207 11 9 114 122 330 549
Long Term
Copper Price ($/lb) 0.82 0.72 0.71 0.81 1.30 1.61 3.04 3.23 3.12 2.34 3.42 4.00 3.61 3.33 3.11 2.71 2.89 2.92 2.50
Copper Price ($/t) 1,814 1,580 1,559 1,780 2,866 3,554 6,711 7,113 6,877 5,165 7,538 8,828 7,959 7,333 6,863 5,978 6,366 6,430 5,512
C1 cost ($/lb) 1.06 1.00 1.12 1.40 1.55 1.61 1.50
9 April 2015
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange16
Nickel LT Supply Squeeze not a Driver Yet Ban Rally Reversed to 6 Year Low
LME stocks continue to build, short term supply abundant
Weaker Demand Growth, Neutral Market for next 3yrs
Deficit of 250kt by 2020. Long term supply growth looking shaky
China Stainless Steel Continues Waiver
Question marks over level of domestic stocks, China economy weaker
China Dominates Consumption & Refining
Supply patterns likely to change
Indonesia Gone, Philippines Fills the Gap
No Indo exports, replaced by lower grade ore from Philippines Falling Chinese Nickel Pig Iron Production may Fuel Deficit
NPI production to depend on lower grade Philippines ore
Source: Numis Securities Research, Bloomberg, Anglo American, Wood Mackenzie, Glencore , Bloomberg
100
150
200
250
300
350
400
450
500
12,000
13,000
14,000
15,000
16,000
17,000
18,000
19,000
20,000
21,000
22,000
Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
LME Stocks (kt, RS) Nickel Price ($/t, LS) Open Interest (kt)
Indonesian Export BanAnnounced
-400
-300
-200
-100
0
100
200
300
400
1,000
1,200
1,400
1,600
1,800
2,000
2,200
2,400
2,600
2006 2008 2010 2012 2014 2016 2018 2020
Surplus/Deficit (RS) Refined Supply Consumption Demand
Surplus
Deficit
12,000
13,000
14,000
15,000
16,000
17,000
18,000
19,000
20,000
21,000
22,000
2,000
2,200
2,400
2,600
2,800
3,000
3,200
Stainless Steel Price ($/t, LS) Nickel Price ($/t, RS)
0
200
400
600
800
Ch
ina
Eu
rope
Ja
pan
N.A
me
rica
Ro
W
So
uth
Ko
rea
India
Taiw
an
Ru
ssia
2013 Refined Nickel Consumption (Ktpa)
0
200
400
600
800
Ch
ina
Ro
W
Ru
ssia
Ja
pan
Ca
na
da
Au
str
alia
Eu
rope
Bra
zil
2013 Nickel Refinery Production (Ktpa)
0.0
0.5
1.0
1.5
2.0
2.5
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
Mine Production (Mt)
Indonesia Philippines Russia
Australia China RoW
0
1
2
3
4
5
6
7
8
9
Feb-12 May-12 Aug-12 Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Aug-14 Nov-14 Feb-15
Indonesia Imports (Mt Ni) Philippine Imports ROW Imports
Export Ban
200
300
400
500
600
20
13
20
14
F
20
15
F
20
16
F
20
17
F
20
18
F
20
19
F
China NPI (Kt)
Market Balance (kt) 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Refined Supply 1,349 1,460 1,399 1,355 1,436 1,664 1,856 1,985 1,885 1,864 1,988 2,082 2,106 2,136 2,106
% movement - 8.3% -4.2% -3.1% 6.0% 15.8% 11.6% 6.9% -5.0% -1.1% 6.7% 4.7% 1.1% 1.4% -1.4%
Consumption Demand 1,375 1,354 1,333 1,315 1,427 1,661 1,729 1,801 1,868 1,941 2,017 2,095 2,177 2,262 2,350
% movement -1.5% -1.5% -1.4% 8.5% 16.4% 4.1% 4.1% 3.7% 3.9% 3.9% 3.9% 3.9% 3.9% 3.9%
Surplus (Deficit) (26) 107 65 40 9 2 127 184 17 (77) (28) (13) (71) (126) (244)
Long Term
Nickel Price ($/lb) 10.55 16.41 9.66 6.66 9.89 10.39 7.96 6.82 7.66 5.97 6.41 6.98 7.52 7.97 8.00
Nickel Price ($/t) 23,263 36,171 21,302 14,676 21,810 22,911 17,552 15,031 16,893 13,161 14,129 15,382 16,585 17,562 17,637
9 April 2015
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange 17
Iron Ore Avoid as Oversupply Swamp gets Deeper
Prices at 10 Year Low – Further Pain to come
China’s war on pollution could shut more steel mills
Prolonged Period of Surplus on Large Expansions
Chinese demand growth soft, Awash with low cost supply from majors
Coking Coal – 6 yr Low, Shrinking Steel Output
Production cuts so far a mere drop in the ocean Port Inventories Level Off, Plenty of Tonnes Around
Coking coal stocks at Chinese ports building, iron ore flat
Prices Plummet but Aus Exports Remain Strong
BHP & Rio etc still pulling in decent margins, no incentive to pullback
China Steel Usage Continues to Grow – But for How Long?
China steel use per capita is still growing, outstripping the world ave
Source: Numis Securities Research, World Steel Association, World Bank, Bloomberg
-5%
0%
5%
10%
15%
20%
25%
30%
40
60
80
100
120
140
160
180
2012 2013 2014 2015
$/t
on
ne
Fines 62% Fines 58% Premia 58% vs 62%
No Premium for Quality
-100
-50
0
50
100
150
200
250
300
350
400
0
500
1,000
1,500
2,000
2006 2008 2010 2012 2014 2016 2018 2020
Iron Ore Supply (Mt, LS) Surplus/Deficit (RS) Import Demand
Surplus
Deficit
50%
75%
100%
125%
150%
175%
200%
0
50
100
150
200
250
300
350
2011 2012 2013 2014 2015
Premium (RS) Coking Coal ($/t, LS) Thermal Coal ($/t, LS)
0
20
40
60
80
100
120
140
160
180
50
70
90
110
130
150
Jan-2013 Jul-2013 Jan-2014 Jul-2014 Jan-2015
Iron ore Mt (LHS) Coking Coal Mt (LHS) Fines 62% (RHS)
50
70
90
110
130
150
170
15
20
25
30
35
40
02/2012 08/2012 02/2013 08/2013 02/2014 08/2014 02/2015
Port Hedland Exports Mt (LHS) Fe 62% Fines China $/t (RHS)
400
450
500
550
600
650
700
750
800
850
900
100
200
300
400
500
600
700
800
900
2007 2008 2009 2010 2011 2012 2013
World Avg (kg, LS) China
Taiwan China Steel Production (Mt)
Market Balance (Mt) 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Total supply 633 684 750 889 974 1,065 1,095 1,210 1,269 1,330 1,429 1,479 1,482 1,468 1,473
% movement - 8.0% 9.7% 18.5% 9.6% 9.3% 2.8% 10.5% 4.9% 4.8% 7.4% 3.5% 0.2% -0.9% 0.3%
Import Demand 633 684 750 889 974 1,065 1,095 1,210 1,234 1,259 1,284 1,310 1,336 1,362 1,390
% movement 8.0% 9.7% 18.5% 9.6% 9.3% 2.8% 10.5% 2.0% 2.0% 2.0% 2.0% 2.0% 1.9% 2.1%
Surplus (Deficit) 35 71 145 169 146 106 83
Long Term
Iron Ore Price ($/t) 70 78 129 80 147 168 129 135 97 55 59 60 60 60 60
9 April 2015
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange18
Ferrochrome Neutral on Margin Pressure
Both Contract and China Spot under Pressure
Benchmark $1.08/lb vs China $80/lb; remains in gentle decline
Peak Surplus Expected to Decline
Peak surplus of 280kt, declining into LT deficit, consumption levels up
China to Build out Production Capacity
Chinese production to increase, SA gentle YoY growth, rest flat
Capacity Utilisation Gently Increasing
Capacity at +70% and expected to increase further as demand picks up
China Driving Demand Increase
Demand to increase across board due to higher SS production
Stainless Steel Production Expected to Rise Further
Set to increase further around world if construction activities improves
Source: Numis Securities Research, Bloomberg, CRU
0.00
0.50
1.00
1.50
2.00
2.50
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
European Benchmark Charge Chrome ($/lb, 50%) China Import CIF
25
20
15
10
5
0
5
10
15
20
25
-800
-600
-400
-200
0
200
400
600
800
2003 2005 2007 2009 2011 2013 2015 2017
Market Balance (kt, LS) Stocks Weeks of Consumption (kt, RS)
Surplus
Deficit
0
2
4
6
8
10
12
14
2003 2005 2007 2009 2011 2013 2015 2017
China (Mt) South Africa Kazakhstan India RoW
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
2003 2005 2007 2009 2011 2013 2015 2017
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Utilisation (%, RS) Ferrochrome Price ($/lb, LS)
0
10
20
30
40
50
0
2
4
6
8
10
12
14
2003 2005 2007 2009 2011 2013 2015 2017
China (Mt, LS) AsiaEurope IndiaRoW Stainless Steel (Mt, RS)
0
2
4
6
8
10
12
14
0
10
20
30
40
50
60
2003 2005 2007 2009 2011 2013 2015 2017
China (Mt, LS) Europe
Japan USA
RoW FCr Consumption (Mt, RS)
Market Balance (Mt) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Supply 5.4 6.0 6.1 6.6 7.7 7.5 6.1 8.8 8.9 9.0 10.4 11.4 11.9 12.3 12.7 12.9
% movement 23.9% 10.2% 1.3% 7.9% 18.2% -3.5% -18.0% 42.9% 1.3% 1.2% 15.3% 9.8% 4.6% 3.6% 3.2% 1.6%
Consumption 5.5 6.0 5.9 6.8 7.6 6.8 7.0 8.5 8.7 9.0 10.2 11.1 11.7 12.2 12.7 13.2
% movement 9.9% 8.4% -1.6% 15.3% 11.7% -11.1% 3.0% 22.5% 1.5% 4.1% 13.2% 8.8% 5.5% 4.3% 4.2% 4.1%
Surplus (Deficit) (102) (12) 164 (258) 138 712 (834) 232 218 (23) 164 283 193 121 (1) (321)
Long Term
Ferrochrome Price ($/lb) 1.0 1.1 0.74 0.71 0.91 1.80 0.92 1.24 1.25 1.22 1.16 1.19 1.08 1.17 1.24 1.20
9 April 2015
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange 19
Diamonds Liquidity Drought Starting to Bite
Price Level Looks Sustainable Despite Uncertainty
Polished & rough show recent weakness; liquidity tight
Best Fundamentals with Flat Supply & Increasing Demand
Demand increasing with no supply response; increasing deficit & prices
Supply Constraints Leads to Unhealthy Industry
Less reserves/production, less exploration, no major discoveries
Top Producers Dominate but Margin is Key
Top 3 producers 60% supply; Canada high rock value but low margin
Demand Driven on US with China/India to Rise
US primary driver (37%), China rises (18%) as middle class grow
Demand Drivers show Plenty of Reasons to be Bullish
Increasing population, spending, jewellery demand/value, plus China
Source: Numis Securities Research, Bloomberg, Company Data, Bain & Co, Kimberley Process, WWW Diamond Forecasts Ltd, Metals Economic Group
100
150
200
250
300
350
2005 2007 2009 2011 2013 2015 2017 2019
Rough Price Index Polished Price Index
40
20
0
20
40
60
80
100
-10
-5
0
5
10
15
20
25
2004 2006 2008 2010 2012 2014 2016 2018
Jewellery Demand ($bn, RS) Surplus (Deficit)
Supply ($bn, LS) Rough Demand ($bn, LS)
Surplus
Decficit
2,023
1,663
2,584
2,316160
134
1,085
520
2
15
2000 2012 2000 2012 2004 2013 2008 2012 2000 2013
Russia Botswana DRC Australia South Africa Canada RoW
Resources(Mcts)
Reserves
(Mcts)Production
(Mcts)ExplorationSpend ($m)
Discovery(years ago)
Alrosa (72%)
De Beers (23%)
Rio Tinto (30%)
Dominion (24%)
Petra (73%) Gem (58%)Lucara (68%)
0
50
100
150
200
250
0 250 500 750 1,000 1,250 1,500
Ave
rag
e g
rad
e (
cp
ht)
Average value ($/ct)
300
150
75
25
Rock Value
Margin in Brackets
48%37% 34%
3%13% 18%
9%14%18%
10%7%5% 8%9%
16% 8%5%
10% 15% 13%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2000 2012 2017
USA China/HK India Japan Gulf Europe RoW
0%
25%
50%
75%
100%
125%
150%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Disposable Income (China) GDP (China)Middle Class (China) Luxury Goods ValueGDP/Capita Jewellery DemandPopulation
Market Balance 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Production (Mcts) 159 177 176 168 163 120 128 123 128 134 143 149 157 161 165
Production ($bn) 10.2 11.6 12.0 11.9 12.7 8.3 11.4 14.1 12.6 15.5 17.5 17.0 19.4 19.9 20.1
% movement 0.0% 11.0% -0.4% -4.5% -3.0% -26.2% 6.7% -4.3% 4.2% 4.3% 7.3% 4.0% 5.4% 2.2% 2.7%
Rough Demand ($bn) 15.3 17.3 18.0 17.8 19.0 13.0 15.0 15.0 15.0 16.0 17.0 18.0 18.9 19.7 20.5
Jew ellery Demand ($bn) 62.8 71.3 74.0 73.3 78.2 67.2 73.5 74.0 74.7 77.6 83.0 88.0 92.4 96.1 100.0
% movement 0.0% 13.5% 3.8% -0.9% 6.7% -14.1% 9.4% 0.7% 0.9% 3.9% 7.0% 6.0% 5.0% 4.0% 4.0%
Surplus (Deficit) (5.0) (5.7) (5.9) (5.9) (6.3) (4.7) (3.6) (0.9) (2.4) (0.5) 0.5 (1.0) 0.5 0.2 (0.4)
Rough Diamond Price Index 123 138 129 143 166 144 215 257 226 230 243 227 246 247 243
Polished Diamond Price Index 113 122 125 127 131 113 123 153 147 140 145 134 136 140 143
9 April 2015
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange20
Tungsten Fundamentals Good but Weak Price Response
Yet to see Meaningful Price Response
Directionless price decline and no solid rise yet as forecast
Peak Deficit as Projects Slow to Respond to Demand
Small 80kt market, peak 4kt deficit due to flat production/rising demand
Production Growth in 2016-18 as Projects Start
Projects in Canada, Oz & UK start-up; main producer China flat
Demand for ‘Strategic Metal’ to Rise 4-5%
Market to rise 4-5% to 100kt in 2017 as China steel production grows
New Supply Drags Continues to Disappoint
Projects delayed by 2-3 yrs due to financing, permitting etc
Global Cost Curve Dictated by China
Average $140-150/mtu, new projects at similar level (Wolf $109/mtu)
Source: Numis Securities Research, Bloomberg, Company Data, Tungsten Market Research Ltd
0
50,000
100,000
150,000
200,000
0
100
200
300
400
500
2004 2006 2008 2010 2012 2014
APT Europe ($/mtu, LS) Concentrate China (RMB/t, RS)
0
100
200
300
400
500
-20,000
-15,000
-10,000
-5,000
0
5,000
10,000
15,000
20,000
2003 2005 2007 2009 2011 2013 2015 2017
Market Balance (t W, LS) Tungsten Price (APT $/mtu, RS)
Deficit
0
20,000
40,000
60,000
80,000
100,000
120,000
2004 2006 2008 2010 2012 2014 2016 2018
China Canada Vietnam Russia UK Spain Australia RoW
0
500
1,000
1,500
2,000
0
20,000
40,000
60,000
80,000
100,000
120,000
2004 2006 2008 2010 2012 2014 2016 2018
China (t W, LS) Europe
USA RoW
Japan Steel Production (Mt, RS)
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
2013 2014 2015 2016 2017 2018+
Original Current
Chinese Producers
Panasquie
ra
0
100
200
300
Mittersill
Los SantosPasta Bueno
Cantung
Wolfram Camp
Average ($140-150/mtu)
Market Balance (t W) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Supply 57,200 51,100 55,500 55,700 54,357 64,680 66,020 76,920 83,555 80,155 79,350 80,850 86,750 92,000 100,250 105,250
% movement 5.0% -10.7% 8.6% 0.4% -2.4% 19.0% 2.1% 16.5% 8.6% -4.1% -1.0% 1.9% 7.3% 6.1% 9.0% 5.0%
Demand 53,100 52,700 62,550 72,500 68,100 66,100 52,400 70,750 79,600 76,150 80,000 84,850 89,450 94,800 100,150 105,500
% movement 5.0% -0.8% 18.7% 15.9% -6.1% -2.9% -20.7% 35.0% 12.5% -4.3% 5.1% 6.1% 5.4% 6.0% 5.6% 5.3%
Surplus (Deficit) 4,100 (1,600) (7,050) (16,800) (13,743) (1,420) 13,620 6,170 3,955 4,005 (650) (4,000) (2,700) (2,800) 100 (250)
Long Term
Tungsten Price (APT $/mtu) 62 84 221 260 248 249 203 243 430 385 372 357 284 363 438 450
9 April 2015
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange 21
Uranium Bright Future but a Slow Starter
Building Momentum from 9 year Low
Utilities well covered, opportunistic buying on spot market only
Deficit by 2019, Widening Supply Gap
New mine pipeline slow, mothballed mines, lower secondary supplies
Contracting Activity Modest, Utilities yet to Return
Spot vol normal, LT vol only 50% of annual reactor requirements
Prices Below Marginal Cost, No New Supply
Most producers under-water, incentive price for new production c$70/lb
World Electricity Demand Only Going One Way
China, Russia, India are key. Nuclear 11% of world’s generation
Global Reactor Build-out will Underpin LT Demand
Price catalyst – Japan restarts. 73 new reactors req. 50Mlbs U3O8
Source: Numis Securities Research, Bloomberg, World Nuclear Association, Bloomberg, Cameco IAEA
0%
10%
20%
30%
40%
50%
60%
70%
20
30
40
50
60
70
80
2010 2011 2012 2013 2014 2015
Contract Premia (RS) U3O8 Spot ($/lb, LS) U3O8 Term
Fukushima
-50
-25
0
25
50
-40
10
60
110
160
210
260
2012 2014 2016 2018 2020 2022
Primary Production (Mlbs) Mines under development
Planned Mines Secondary Supply
Surplus/Deficit (RS) Total demand
Surplus
Deficit
240
200
250
130
150
250
120
194
24
82
36 3520
4354 50 55
43 5042
0
50
100
150
200
250
300
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Long-term market (Mlbs U3O8) Spot market
190Mlbs 2005-2012
avg LT volume
0
5
10
15
20
25
30
35
40
45
50
0 10 20 30 40 50 60 70 80 90 100 110 120
Cash
Co
st ($
/lb
U3O
8)
Cumulative Production (Mlbs U3O8)
U3O8 spot $39/lb
90th percentile $37/lb
U3O8 Term $49/lb
World avg prod cost $44/lb
5,710
10,085
19,005
32,150
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
1980 1990 2011 2035
TW
h
OECD Non-OECD
2357
12129
57
118
31
18
22
35
0
50
100
150
200
250
0
50
100
150
200
250
300
350
400
Under Construction Planned Proposed
Re
qu
ire
d U
3O
8 (
Mlb
s)
Nu
mb
er
of re
acto
rs
ROW China Russia India USA Saudi Arabia U3O8 Req'd
73 reactors
172 reactors
309 reactors48
Offline
Current Reactors Operable
ROW Japan
Total:434 Reactors
171 MlbsU3O8 required
Market Balance 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Production (existing & new ) 103 107 114 132 141 141 152 156 147 147 152 160 171 175 184 188 190 196
% movement -4.6% 3.9% 6.5% 15.8% 6.8% 0.0% 7.8% 2.6% -5.8% -0.5% -0.5% -0.5% -0.5% -0.5% -0.5% -0.5% -0.5% -0.6%
Secondary Supply 58 51 51 54 50 45 49 52 35 34 33 32 31 30 30 30 30 30
Total Consumption 177 174 167 169 172 160 165 167 155 166 177 188 199 209 220 231 242 253
% movement 1.1% -1.7% -4.0% 1.2% 1.8% -7.0% 3.1% 1.2% -7.2% 7.0% 6.6% 6.2% 5.8% 5.5% 5.2% 4.9% 4.7% 4.5%
Surplus (Deficit) (16) (16) (2) 17 19 26 36 41 27 15 8 4 3 (4) (6) (13) (22) (27)
Long Term
Spot Uranium Price ($/lb) 48 99 64 47 46 56 49 39 34 39 41 48 55 60 60 60 60 60
Term Uranium Price ($/lb) 50 91 83 66 61 67 60 54 46 - - - - - - - - -
9 April 2015
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange22
Potash Under ST Pressure
Prices Continue to Look Under Pressure
Drifting lower since 2011 peak, bottoming out for now
Supply Set to Grow Alongside Capacity Utilisation
60Mt market, supply +3% pa, capacity +2.5% pa, utilisation 75%
Top 4 Dominate Supply with Challenging Growth
Top 4 = 80%, Canada/FSU 60%, high capex/development issues
Canada & FSU Have all the Cards
Canada & FSU have largest and highest grade reserves globally
Demand Growth of 3% pa Driven by Americas
95% agriculture use with Americas 40% consumers & China 14%
Demand Drivers show Plenty of Reasons to be LT Bullish
Increasing population, middle class & diet, less arable land, biofuels
Source: Numis Securities Research, Bloomberg, USGS, IFA, K+S, Company Data
0
200
400
600
800
1,000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
MOP $/t, Standard FOB Vancouver
40
50
60
70
80
90
100
0
20
40
60
80
100
2003 2005 2007 2009 2011 2013 2015 2017 2019
Production (Mt, LS) Capacity Utilisation (%, RS)
Former BPC (Uralkali &
Belaruskali), 31%
Canpotex (Agrium,
Mosiac, Potash Crop), 28%
K+S (inc. Potash One), 10%
ICL, 8%
SQM, 3%
APC, 3%
China, 13%
Others, 4%
0%
10%
20%
30%
40%
0
1,000
2,000
3,000
4,000
5,000
Can
ada
Russia
Be
laru
s
Bra
zil
Chile
Chin
a
Ge
rma
ny
US
RoW
Reserves (Mt, LS) Grade (% KCl, RS)
North America, 19%
China, 14%
South America, 23%
India, 7%
Other Asia, 19%
RoW, 18%
-20%
0%
20%
40%
60%
80%
100%
120%
2003 2005 2007 2009 2011 2013
Potash Consumption Harvested Land per PersonPopulation Meat Consumption (BRIC)GDP/Capita BiofuelsHarvested Land
Market Balance (Mt) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Supply 46.9 52.6 55.4 49.8 57.2 55.2 33.8 55.2 56.5 52.5 53.0 57.0 61.6 63.4 65.4 67.3
% movement 5.0% 12.2% 5.3% -10.1% 14.9% -3.5% -38.8% 63.3% 2.4% -7.1% 1.0% 7.5% 8.1% 3.0% 3.0% 3.0%
Capacity 55.9 58.4 59.1 59.6 62.3 64.7 66.6 67.2 69.4 70.5 76.9 80.5 82.5 84.6 86.7 88.9
% movement 5.0% 4.5% 1.2% 0.8% 4.5% 3.9% 2.9% 0.9% 3.3% 1.6% 9.1% 4.7% 2.5% 2.5% 2.5% 2.5%
Utilisation (%) 84 90 94 84 92 85 51 82 81 74 69 71 75 75 75 76
Long Term
Potash Price ($/t) 113 125 159 175 201 578 624 332 435 459 379 297 300 300 300 300
9 April 2015
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange 23
Metals & MiningFor FCA purposes this is a Marketing Communication
AnalystsCailey BarkerTel: +44 (0)20 7260 [email protected]
Phil SwinfenTel: +44 (0)20 7260 [email protected]
This research was preparedand approved by
Numis Securities LimitedThe London Stock Exchange Building10 Paternoster SquareLondon EC4M 7LT
+44 (0)20 7260 [email protected]
Registered No 02285918. Authorised andRegulated by The Financial ConductAuthority. A Member of the LondonStock Exchange
9 April 2015
BUY
Current Share Price 270pTarget Price 370pMarket Capitalisation £1.1bnShares In Issue 410mRIC/BLBG ACAA.L/ACA LNAvg. Daily Volume (3M) 665,245
Current share price(s) timed at 7:00AM on 07/04/15
Apr- 14 Jul- 14 Oct- 14 Jan- 15 Apr- 15
340320300280260240220200180
Share Price
Acacia MiningRelat ive to UK Market
Performance (%) 1M 3M 12M
Absolute 11 2 9
Relative 11 -6 4
Source: Datastream (relative to UK-DS Market index)
Acacia MiningEstimate Changes
The Money Tree
We maintain our BUY recommendation and increase our TP to 370p, from 340p,due to our new commodity price forecasts and changes to our model. Remains ourgold pick.
● Company Snapshot. Mid-tier African gold producer with three operating mines inTanzania and exploration properties in Kenya. Spun out of Barrick in April 2010(previously named African Barrick). ABX owns 64%.
● Investment Thesis. Buly is key – Group production of +750kozpa at AISC of <$900/ozover 5 years; Buly at 350kozpa at AISC <$900/oz from current 200koz by end 2015(50koz grade/productivity, 60koz Upper East, 40koz CIL expansion). Key is achievingsustainable reserve grade of 9.5g/t. LT potential for +400kozpa with exploration tofirm up an additional 5Moz. We believe establishing additional production centres toprovide operational flexibility will be key. North Mara at 250kozpa at $900/oz withGokona underground to bring CFs forwards, reduce footprint and ease illegal miningissues. Buzwagi on 5 year LOM plan. FCF focus – New management are drivingcosts down, improving efficiencies and rationalising the business. We expect to seecontinued better numbers with a few speed bumps on the way. Barrick - Barrick islikely to reduce its interest further at some point, caping potential gains.
● Guidance - 2015: 750-800koz (up 9%) at TCC of $695-725/oz and AISC of$1,050-1,100/oz (down 5%). H2 weighted with Buly 300-330koz at $950-1,000/oz.Capex $220-240m.
● Preview Q1 (23 Apr). Flat quarter with production of 180koz at a cash cost of $737/ozand AISC of $1,069/oz (Q4 181koz at $744/oz, AISC $1,088/oz). Buly flat at 66koz withelevated tonnages maintained as Upper East and CIL expansion commissioning; NorthMara and Buzwagi flat with marginally lower planned grades. FY guidance maintained.Financials: EPS of $0.06 (Q1/Q4 2014 $0.05), up q-o-q on higher gold prices andy-o-y on higher production. EBITDA up sharply q-o-q at $67m. Balance sheet flatwith minimal $2m in FCF, up at $292m (debt $142m). We look to see how the BulyCIL expansion is performing plus Upper East (Buly) and Gokona underground (NorthMara).
● Valuation. Blend of 1.5x NAV/5x P/CF (middle of 1-2x NAV/5-15x P/CF range forgolds).
● Risks. Medium - Tanzanian politics, social unrest at North Mara, VAT receivables &back tax claims, operational delivery risk, Barrick interest
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange24
1
Figure 1: Model summary
Source: Company & Numis Securities Research
Acacia Mining Ticker ACA.L Market Capitalisation £1,107m Financial Year End Dec
BUY Current Share Price £2.70 Enterprise Value (EV) £1,007m Reporting Currency US$
£3.70 Implied Return 37% Net Debt (Cash) -$150m Shares in Issue 410m
Valuation Key Metrics 2013 2014 2015F 2016F 2017F
Net Asset Value Disc Rate NAV (%) $m $/sh £/sh EPS ($/sh) - Underlying 0.26 0.22 0.24 0.44 0.44
Bulyanhulu (100%) 10% 72% 960 2.34 1.56 EPS Growth 79% -15% 9% 82% 1%
Buzwagi (100%) 10% 10% 128 0.31 0.21 P/E 15.6x 18.4x 16.8x 9.2x 9.2x
North Mara (100%) 10% 23% 305 0.74 0.50 CFPS ($/sh) 0.46 0.71 0.66 0.90 0.94
Nyanzaga (100%) 12% 4% 48 0.12 0.08 P/CFPS 8.9x 5.7x 6.1x 4.5x 4.3x
Sub-total 1,441 3.51 2.34 FCFPS ($/sh) (0.34) 0.07 0.14 0.45 0.47
Cash & Equivalents 22% 292 0.71 0.47 P/FCFPS n.m 62.3x 28.2x 9.1x 8.5x
Debt (11%) (142) (0.35) (0.23) FCF Yield -9% 2% 4% 11% 12%
Corporate G&A / Other (20%) (263) (0.64) (0.43) EV/EBITDA 5.5x 6.0x 5.2x 4.0x 4.0x
Total 1,328 3.24 £2.16 EBITDA Margin 30% 27% 31% 37% 40%
Current NAV Multiple (Implied) 1.25x Dividend Per Share ($/sh) 0.13 0.03 0.04 0.06 0.12
Cash Flow Value $/sh £/sh Dividend Yield 3.3% 0.8% 1.1% 1.4% 2.9%
CFPS (1 year forward) 0.72 0.48 Return on Assets (ROA) -32% 3% 4% 6% 6%
Current P/CF multiple (implied) 5.6x Return on Equity (ROE) -40% 5% 5% 8% 7%
Blended Valuation Target Multiple Weight Return on Capital Employed (ROCE) -41% 5% 6% 10% 10%
NAV valuation 1.75x 50% £3.78 Net Debt/EBITDA -0.5x -0.6x -0.6x -0.9x -1.3x
Cash Flow valuation 7.5x 50% £3.61 Gearing (Debt/Equity) 7% 7% 6% 4% 3%
VALUATION £3.69 Interest Cover n.m -0.1x 0.0x 0.0x 0.0x
Shares Outstanding (m) 410 410 410 410 410
Sensitivity Analysis NAV (£/sh) 15F EPS 15F CFPS Income Statement 2013 2014 2015F 2016F 2017F
Base case gold price forecast 2.16 0.24 0.66 Revenue 929 930 930 1,002 958
Base case +10% 3.05 0.39 0.88 Cost of Sales (561) (563) (574) (561) (511)
Base case -10% 1.25 0.09 0.44 G&A (32) (41) (38) (36) (35)
Flat gold price (at spot $1,200/oz) 2.02 0.24 0.66 Exploration (17) (18) (20) (20) (21)
News Catalysts H2 14 H1 15 H2 15 2016 Other (43) (55) (10) (10) (10)
Buly CIL expansion starts EBITDA 276 253 288 375 381
Upper East production starts DD&A (153) (125) (136) (111) (91)
Gokona u/g feasibility (North Mara) EBIT (921) 124 152 264 290
Gokona u/g production starts Net Interest Expense (8) (9) (7) (7) (4)
PBT (929) 115 145 257 286
Reserves & Resources (attributable) Gold Copper Gold Eq EV/oz Non-Recurring Items/Other (40) 1 0 0 0
Reserves (P&P) Moz / Mlbs 12.5 427 13.5 112 Taxes/Recovery 188 (26) (47) (77) (105)
Resources (M&I) Moz / Mlbs 24.3 683 25.9 58 Net Profit (Loss) - attributable (781) 90 99 180 181
Production & Cost (attributable) 2014 2015F 2016F 2017F Minority Interest (17) (0) 0 0 0
Gold Production 000oz 719 768 822 762 Cashflow 2013 2014 2015F 2016F 2017F
Silver Production 000oz 289 314 322 337 Net Profit (Loss) (798) 90 99 180 181
Copper Production 000t 6 6 6 6 DD&A 153 125 136 111 91
Gold Eq. Production 000oz 757 802 860 801 Non Recurring/Other 877 58 53 84 109
EV/oz Production $/oz AuEq 1,996 1,884 1,757 1,887 Working Cap. Changes (41) 20 (10) 2 10
Total Cash Cost (net by-products) $/oz 732 729 661 681 Cash Flow From Operations 187 290 271 370 387
All-in Sustaining Cost $/oz 1,105 1,073 942 907 Capital Expenditure (373) (247) (229) (191) (186)
Acquis./Investments (14) (10) 0 0 0
Cash Flow From Investing (387) (257) (229) (191) (186)
Equity Issues (Net of Costs) 0 0 0 0 0
Net Borrowings 142 0 (15) (30) (20)
Dividends Paid & Other (60) (19) (18) (23) (49)
Cash Flow From Financing 82 (19) (33) (53) (69)
Net Change in Cash (119) 11 9 126 132
Free Cash Flow (141) 27 59 183 195
Balance Sheet 2013 2014 2015F 2016F 2017F
Cash & Equivalents 282 294 303 429 561
Total Current Assets 676 671 717 838 946
PP&E & Mining Interests 1,281 1,425 1,519 1,599 1,694
Deferred taxation 51 51 51 51 51
Other 424 436 436 436 436
Total Assets 2,432 2,583 2,723 2,924 3,126
Short Term Debt 0 14 14 14 14
Current Liabilities 183 215 241 238 224
Long Term Debt 142 128 113 83 63
Assumptions (Real) 2014 2015F 2016F 2017F LT Other Long Term Liabilities 179 239 239 239 239
Gold Price ($/oz) 1,266 1,205 1,200 1,200 1,200 Total Liabilities 505 581 593 560 525
Copper Price ($/lb) 3.11 2.71 2.89 2.92 2.50 Shareholder Equity 1,927 2,002 2,130 2,364 2,601
Exchange Rate (US$:£) 1.65 1.50 1.50 1.50 1.50 Total Liab. & S/Holder Equity 2,432 2,583 2,723 2,924 3,126
Working Capital 493 457 476 600 722
Net Debt (Cash) (140) (152) (176) (332) (484)
0
250
500
750
1000
1250
1500
0
100
200
300
400
500
600
700
800
900
2007 2008 2009 2010 2011 2012 2013 2014 2015F 2016F 2017F 2018F
Bulyanhulu Buzwagi North Mara Tulawaka
Nyanzaga Total Cash Cost AISC
Attrib. Gold Production ('000oz) Total Cash Cost / AISC ($/oz AuEq)
Acacia Mining 9 April 2015
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange 25
Metals & MiningFor FCA purposes this is a Marketing Communication
AnalystsCailey BarkerTel: +44 (0)20 7260 [email protected]
Phil SwinfenTel: +44 (0)20 7260 [email protected]
This research was preparedand approved by
Numis Securities LimitedThe London Stock Exchange Building10 Paternoster SquareLondon EC4M 7LT
+44 (0)20 7260 [email protected]
Registered No 02285918. Authorised andRegulated by The Financial ConductAuthority. A Member of the LondonStock Exchange
9 April 2015
REDUCE
Current Share Price 731pTarget Price 600pMarket Capitalisation £7.2bnShares In Issue 986mRIC/BLBG ANTO.L/ANTO LNAvg. Daily Volume (3M) 3,363,323Net Cash/(Debt) (m) (12/15F) $(495.3)m
Current share price(s) timed at 7:00AM on 07/04/15
Apr- 14 Jul- 14 Oct- 14 Jan- 15 Apr- 15
900
850
800
750
700
650
600
Share Price
AntofagastaRelat ive to UK Market
Performance (%) 1M 3M 12M
Absolute -1 3 -13
Relative -2 -5 -17
Source: Datastream (relative to UK-DS Market index)
AntofagastaEstimate Changes
Red Light
We maintain our REDUCE recommendation and £6 TP, despite our revisedcommodity price forecasts and changes to our model.
● Company Snapshot. FTSE100 major copper producer with four operating mines inChile, producing 700ktpa, plus three development projects. Also has the Twin MetalsProject in USA and water and transport distribution. 65% owned by Luksic Group.
● Investment Thesis. A stable and conservative business with steady, mostly brownfieldgrowth. Given high capex requirements over the next few years, repeat specialdividends are unlikely, in our view, but may be higher than 35% payout. ST growth- Immediate production plan is to reach 900kt by 2018 due to brownfield expansionsat Centinela Concentrates (Esperanza, 105ktpd debottlenecking; 10-12ktpa Cu fromend 2015, capex $110m), Los Pelambres (15% increase to 205ktpd; 95ktpa Cu from+2018, feasibility end 2016), Centinela Cathodes (50ktpa from H2 2016, maintains ElTesoro at 100ktpa, capex $636m), Centinela moly plant (2.4ktpa from H2 2016, capex$125m). Antucoya is progressing on schedule and budget. LT growth - Centinelasecond concentrator (140ktpa Cu & 150kozpa Au, capex $2.7bn, likely +2019, notin our model). Los Pelambres has potential to be doubled but full evaluation andpermitting is expected to take a number of years. Twin Metals has been bought andundergoing evaluation but likely one for the future.
● Guidance. 2015: 710kt copper (less 8kt loss for protect +/- flooding disruptions),250koz gold, 7.5kt moly at C1 cost of $1.50/lb net by-products ($1.85/lb gross), Capex$1.3bn.
● Preview Q1 (29 Apr). Production down 14% q-o-q and 5% y-o-y at 161kt copper (Q4187kt, Q1 2014 170kt) due to production disruptions from the protests and flooding.Gold and moly also down at 64koz and 1.9kt (Q4 82koz & 2.4kt). Cash costs up 6%q-o-q at $1.88/lb (gross) and $1.49/lb (net). Tonnages and grades down across theboard. 2015 guidance expected maintained for now, with losses expected to be madeup in the year. Antucoya on track for start-up this quarter.
● Valuation. Blend of 1x NAV/15x P/E (top of 7-15x P/E range for copper producers).
● Risks. Low - Proposed tax changes in Chile (being evaluated, with $105-150mdeferred tax provision), Chilean politics.
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange26
1
Figure 1: Model summary
Source: Company & Numis Securities Research
Antofagasta Ticker ANTO.L Market Capitalisation £7,207m Financial Year End Dec
REDUCE Share Price £7.31 Enterprise Value (EV) £7,208m Reporting Currency US$
£6.00 Implied Return -18% Net Debt (Cash) $2m Shares in Issue 986m
Valuation Key Metrics 2013 2014 2015F 2016F 2017F
Net Asset Value Disc Rate NAV (%) $m $/sh £/sh EPS ($/sh) - Underlying 0.67 0.47 0.34 0.74 0.78
Los Pelambres (60%) 8% 54% 6,000 6.09 4.06 EPS Growth (36%) (30%) (26%) 114% 6%
Centinela Concs (Esperanza) (70%) 8% 24% 2,735 2.77 1.85 P/E 21.6x 27.9x 31.8x 14.9x 14.0x
Centinela Cathodes (El Tesoro) (70%) 8% 4% 409 0.42 0.28 CFPS ($/sh) 1.73 1.85 1.25 1.93 2.14
Michilla (74%) 8% 0% 14 0.01 0.01 P/CFPS 6.3x 5.9x 8.8x 5.7x 5.1x
Antucoya (70%) 10% 8% 874 0.89 0.59 FCFPS ($/sh) 0.27 0.18 (0.08) 0.97 1.01
Centinela exploration 4% 500 0.51 0.34 P/FCFPS 40.8x 61.9x (132.0)x 11.3x 10.9x
Nokomis (Twin Metals, 100%) 1% 100 0.10 0.07 FCF Yield 2% 2% -1% 9% 9%
Railway & other transport (100%) 8% 1% 72 0.07 0.05 EV/EBITDA 4.8x 5.8x 6.9x 4.1x 3.6x
Water concession (100%) 8% 5% 592 0.60 0.40 EBITDA margin 45% 42% 35% 46% 48%
Sub-total 11,297 11.46 7.64 Dividend Per Share ($/sh) 0.95 0.22 0.12 0.26 0.27
Corporate G&A / Other 10% (3%) (319) (0.32) (0.22) Dividend Yield 6.58% 1.65% 1.10% 2.35% 2.50%
Investments (book value) 2% 216 0.22 0.15 Return on Assets (ROA) 10% 7% 5% 10% 10%
Cash & equivalents 21% 2,375 2.41 1.61 Return on Equity (ROE) 14% 11% 7% 14% 14%
Debt (21%) (2,376) (2.41) (1.61) Return on Capital Employed (ROCE) 19% 14% 9% 16% 16%
Total 11,193 11.35 £7.57 Net Debt/EBITDA -0.5x 0.0x 0.3x -0.1x -0.3x
Current NAV multiple (Implied) 0.97x Gearing (Debt/Equity) 15.9% 29.6% 28.8% 21.2% 15.4%
Earnings Value $/sh £/sh Interest Cover -35.0x -36.8x -12.5x -21.8x -23.6x
EPS - 12 months forward 0.47 0.31 Shares Outstanding (m) 986 986 986 986 986
Current P/E multiple (implied) 23.6x Income Statement 2013 2014 2015F 2016F 2017F
Blended Valuation Target Multiple Weight Revenue 5,972 5,290 4,652 5,646 5,795
NAV valuation 1.00x 50% £7.57 Cost of sales (2,905) (2,828) (2,775) (2,789) (2,748)
Earnings valuation 15.0x 50% £4.66 G&A (83) (73) (72) (73) (74)
VALUATION £6.11 Exploration write-down (275) (168) (160) (182) (200)
Sensitivity Analysis Valuation NAV/sh 16F EPS 16F CFPS EBITDA 2,702 2,222 1,645 2,603 2,772
Base case metal price forecast £6.11 £7.57 $0.74 $1.93 DD&A (518) (606) (613) (613) (645)
Base case +10% £7.06 £9.47 $0.98 $2.37 Excpetional items (12) 24 0 0 0
Base case -10% £5.15 £5.65 $0.50 $1.49 EBIT 2,172 1,640 1,032 1,990 2,127
Flat copper price (at spot $2.70/lb) £6.54 £8.48 $0.59 $1.67 Net finance income (expense) (89) (66) (67) (75) (71)
Growth catalysts H1 15 H2 15 2016 2017 PBT 2,084 1,574 965 1,915 2,056
Antucoya first production Q2 Tax (844) (723) (347) (594) (653)
Centinela Concs optimisation (105ktpd) Net Profit (Loss) 1,240 851 618 1,321 1,403
Centinela 2nd Concentrator PFS (140-150ktpa) Profit attributable to equity 660 460 340 727 772
Los Pelambres EIA submission & feas study (205ktpd) Profit attributable to minority interest 580 391 278 594 631
Encuentro Oxides start production H2 Cashflow 2013 2014 2015F 2016F 2017F
Reserves (attributable) Tonnes Grade Metal EV/lb Net profit (loss) 1,240 851 618 1,321 1,403
Copper reserves (P&P): Cu-equiv 2,739 Mt 0.58% 15,885kt $0.31 /lb Working capital change 179 100 1 (29) (4)
Copper resources (M&I): Cu-equiv 2,401 Mt 0.55% 13,315kt $0.37 /lb DD&A 506 595 613 613 645
Production & cost 2014 2015F 2016F 2017F 2018F Non-recurring/other (219) 275 0 (2) 66
Copper prod (kt) - consolidated 705 704 779 788 828 Cash Flow From Operations 1,706 1,821 1,232 1,903 2,111
Gold production (koz) 271 254 245 255 259 Capital expenditure (1,441) (1,646) (1,314) (944) (1,117)
EV per lb Cu prodn ($/lb Cu) 6.96 6.97 6.30 6.22 5.92 Acquis./investments/adjustments 399 411 829 0 0
C1 Cash Cost (gross by-products) 1.86 1.86 1.66 1.55 1.48 Cash Flow From Investing (1,041) (1,235) (485) (944) (1,117)
C1 Cash Cost (net by-products) 1.43 1.50 1.34 1.23 1.15 Borrowings (515) 1,002 0 (400) (400)
All-in Sustaining Cost ($/lb) 1.92 1.95 1.77 1.66 1.58 Dividends paid (3,281) (1,748) (412) (239) (467)
Other 1,951 419 0 0 0
Cash Flow From Financing (1,846) (326) (412) (639) (867)
Net Change in Cash (1,181) 259 335 321 127
Free Cash Flow 265 175 (82) 959 994
Balance Sheet 2013 2014 2015F 2016F 2017F
Cash & equivalents 2,685 2,375 1,881 2,203 2,331
Other current assets 1,516 1,287 1,247 1,446 1,400
PP&E & mining interests 7,425 8,227 8,928 9,259 9,731
Investments 195 216 216 216 216
Other non-current assets 569 711 711 711 644
Total Assets 12,390 12,815 12,982 13,835 14,321
Short-term debt 341 285 285 285 285
Other current liabilities 790 879 840 1,010 960
Long-term debt 1,033 2,092 2,092 1,692 1,292
Other non-current liabilities 1,904 1,810 1,810 1,810 1,810
Assumptions (Real) 2014 2015F 2016F 2017F LT Total Liabilities 3,726 4,780 4,742 4,511 4,061
Copper Price ($/lb) 3.11 2.71 2.89 2.92 2.50 Shareholder equity 6,725 6,174 6,287 6,882 7,397
Molybdenum Price ($/lb) 11.45 8.37 9.01 9.41 10.00 Minority interest 1,939 1,861 1,954 2,441 2,862
Gold Price ($/oz) 1,266 1,205 1,200 1,200 1,200 Total Liab. & Equity 12,390 12,815 12,982 13,835 14,321
Silver Price ($/oz) 19.08 16.69 17.59 18.60 18.46 Working Capital 605 386 385 414 418
Exchange rate (US$/£) 1.65 1.50 1.50 1.50 1.50 Net Debt (Cash) (1,311) 2 495 (227) (754)
0.00
0.25
0.50
0.75
1.00
1.25
1.50
1.75
2.00
2.25
0
100
200
300
400
500
600
700
800
900
11 12 13 14 15F 16F 17F 18F 19F 20F
Los Pelambres Centinela Concs (Esperanza) Centinela Cathodes (El Tesoro)Michilla Antucoya Total goldC1 Cash Cost AISC
Copper (kt) / Gold (koz) C1 Cost / AISC ($/lb Cu)
Antofagasta 9 April 2015
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange 27
Metals & MiningFor FCA purposes this is a Marketing Communication
AnalystsCailey BarkerTel: +44 (0)20 7260 [email protected]
Phil SwinfenTel: +44 (0)20 7260 [email protected]
This research was preparedand approved by
Numis Securities LimitedThe London Stock Exchange Building10 Paternoster SquareLondon EC4M 7LT
+44 (0)20 7260 [email protected]
Registered No 02285918. Authorised andRegulated by The Financial ConductAuthority. A Member of the LondonStock Exchange
9 April 2015
BUY
Current Share Price 24pTarget Price 40pMarket Capitalisation £88mShares In Issue 367mRIC/BLBG AUE.L/AUE LNAvg. Daily Volume (3M) 822,249Broker Yes
Current share price(s) timed at 7:00AM on 07/04/15
Apr- 14 Jul- 14 Oct- 14 Jan- 15 Apr- 15
35
30
25
20
15
10
Share Price
Aureus MiningRelat ive to UK Market
Performance (%) 1M 3M 12M
Absolute 7 24 -22
Relative 6 14 -26
Source: Datastream (relative to UK-DS Market index)
Aureus MiningEstimate Changes
On the Cusp of Production
We maintain our BUY recommendation and 40p TP, despite our revised commodityprice forecasts and changes to our model.
● Company Snapshot. Aureus is an AIM and TSX-listed gold explorer and developerfocused in Liberia. Its main asset is the 120kozpa New Liberty project expected tostart production in May 2015, becoming Liberia's first commercial gold mine. Otheradvanced exploration prospects exist within the sizeable 1,470km² licence portfolio.
● Investment Thesis. Aureus is firmly on the way to becoming a African junior goldproducer with financing complete and development started. Robust project - NewLiberty has a 0.9Moz reserve with a high grade of 3.4g/t (1.7Moz resource). Standardopen pit and 1.1Mtpa gravity/CIL operation is envisaged. Following the new mine planin February 2015, LOM production is expected to be 107kozpa over 8 years (119kozpafirst 6 years), at a cash costs of $692/oz (AISC $789/oz). The new plan included anadditional starter pit so the project will have increased operational flexibility throughthe provision of a larger stockpile and more working faces, plus access to higher gradeore earlier. Fully financed - Project capex was estimated at $152m (inc. contingency).Fully funded following recent $18m equity raising. c$24m in potential "dead money"due to debt service requirements and contingencies. Exploration upside - Additionalproduction potential from Ndablama (plus possibly the 180koz Weaju prospect),30-40km away with resources of 0.9Moz, grading 1.7g/t. Initial testwork is encouragingand pit optimisation will be taken this year; with a shallow dip and decent thickness weshould see low strip ratios. Also further potential to increase mine life or go undergroundat New Liberty.
● Guidance. 2015: 60koz.
● Preview Q1. First gold pour now scheduled for the end May (full pelt July). We forecastcapex of c.$55m required to complete construction. We forecast cash of $40m anddebt of $90m at end Q1, following the recent $15m raising to cover the cost delaysfrom Ebola.
● Valuation. Blend of 1x NAV/5x P/CF (bottom of 1-2x NAV/5-15x P/CF range for golds).
● Risks. Low - Project delivery, Liberian politics.
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange28
1
Figure 1: Model summary
Source: Company & Numis Securities Research
Aureus Mining Ticker AUE.L Market Capitalisation £88m Financial Year End Dec
BUY Share Price £0.24 Enterprise Value (EV) £118m Reporting Currency US$
£0.40 Implied Return 67% Net Debt (Cash) $46m Shares in Issue 367m
Valuation Key Metrics 2013 2014 2015F 2016F 2017F
Net Asset Value Disc Rate NAV (%) $m $/sh £/sh EPS ($/sh) (0.03) (0.01) 0.03 0.01 (0.00)
New Liberty (90%) 12% 107% 204 0.56 0.37 EPS Growth 41% 58% 303% -61% -141%
Exploration Properties (inc. Ndablama/Weaju) 26% 50 0.14 0.09 P/E n.m n.m 13.7x 35.5x n.m
Sub-total 254 0.69 0.46 CFPS ($/sh) (0.02) (0.01) 0.08 0.08 0.06
Investments (Stellar Diamonds) 0% 1 0.00 0.00 P/CFPS n.m n.m 4.7x 4.4x 5.6x
Cash & Equivalents 21% 40 0.11 0.07 FCFPS ($/sh) (0.21) (0.34) (0.10) 0.04 0.03
Debt (45%) (86) (0.23) (0.16) P/FCFPS n.m n.m n.m 8.1x 12.7x
Corporate G&A / Other (10%) (18) (0.05) (0.03) FCF Yield -60% -95% -29% 12% 8%
Total 190 0.52 £0.35 EV/EBITDA n.m n.m 5.8x 5.0x 6.6x
Current NAV Multiple (Implied) 0.69x EBITDA Margin 0% 0% 42% 26% 19%
Cash Flow Value $/sh £/sh Dividend Per Share ($/sh) 0.00 0.00 0.00 0.00 0.00
CFPS (2 year forward) 0.08 0.06 Dividend Yield 0.0% 0.0% 0.0% 0.0% 0.0%
Current P/CF multiple (implied) 4.4x Return on Assets (ROA) -4% -1% 3% 1% -1%
Blended Valuation Target Multiple Weight Return on Equity (ROE) -5% -2% 4% 1% -1%
NAV valuation 1.25x 50% £0.43 Return on Capital Employed (ROCE) -6% -2% 5% 3% 1%
Cash Flow valuation 7.5x 50% £0.41 Net Debt/EBITDA 4.3x -8.1x 2.4x 1.8x 2.4x
VALUATION £0.42 Gearing (Debt/Equity) 0% 42% 46% 39% 35%
Sensitivity Analysis NAV (£/sh) 15F EPS 15F CFPS Interest Cover n.m n.m -0.3x -0.5x -1.4x
Base case gold price forecast 0.35 0.01 0.08 Shares Outstanding (m) 221 286 367 367 367
Base case +10% 0.47 0.04 0.10 Income Statement 2013 2014 2015F 2016F 2017F
Base case -10% 0.24 0.01 0.06 Revenue 0 0 73 140 139
Flat gold price (at spot $1,200/oz) 0.35 0.02 0.08 Cost of Sales 0 0 (39) (100) (108)
News Catalysts Q4 14 Q1 15 Q2 15 Q3 15 G&A (4) (4) (4) (4) (4)
New Liberty construction Exploration 0 0 0 0 0
New Liberty revised mine schedule Other (5) (1) (0) (0) (0)
Ndablama resource update EBITDA (9) (5) 30 36 27
Ndablama scoping study DD&A (0) (1) (15) (26) (25)
New Liberty production starts EBIT (9) (6) 16 9 2
Net Interest Expense 0 (0) (4) (4) (3)
Reserves & Resources (attributable) Tonnage Grade Gold EV/oz PBT (9) (6) 12 5 (1)
Reserves (P&P) Moz 8 3.4 0.8 214 Non-Recurring Items/Other 2 2 (2) (1) (1)
Resources (M&I) Moz 17 2.7 1.4 129 Taxes/Recovery 0 0 0 0 0
Resources (Total) Moz 35 2.5 2.5 70 Net Profit (Loss) - attributable (7) (4) 10 4 (2)
Production & Cost 2014 2015F 2016F 2017F Minority Interest 0 0 2 1 1
Gold Production (consolidated) 000oz 0 61 115 111 Cashflow 2013 2014 2015F 2016F 2017F
Gold Production (attributable) 000oz 0 55 103 100 Net Profit (Loss) (7) (4) 12 5 (1)
EV/oz Production (attributable) $/oz Au 0 3,250 1,721 1,775 DD&A 0 1 15 26 25
Cash Operating Cost $/oz 0 602 821 870 Non Recurring/Other 2 (1) 4 4 3
Total Cash Cost (net by-products) $/oz 0 638 858 907 Working Cap. Changes (0) 1 2 (1) (0)
All-in Sustaining Cost $/oz 0 689 922 978 Cash Flow From Operations (5) (4) 28 30 24
Capital Expenditure (42) (94) (66) (14) (13)
Acquis./Investments (8) (7) (8) (8) (8)
Cash Flow From Investing (50) (101) (74) (22) (22)
Equity Issues (Net of Costs) 15 25 14 0 0
Net Borrowings 0 75 19 (11) (11)
Dividends Paid & Other 0 (1) 0 0 0
Cash Flow From Financing 15 99 33 (11) (11)
Net Change in Cash (40) (6) (12) (3) (8)
Free Cash Flow (47) (98) (38) 16 10
Balance Sheet 2013 2014 2015F 2016F 2017F
Cash & Equivalents 39 33 21 18 9
Total Current Assets 45 38 27 23 14
PP&E & Mining Interests 96 196 255 250 247
Deferred taxation 0 0 0 0 0
Other 25 34 34 34 34
Total Assets 166 267 315 307 295
Short Term Debt 0 1 0 0 0
Current Liabilities 7 12 14 12 11
Assumptions (Real) 2014 2015F 2016F 2017F LT Long Term Debt 0 75 95 83 73
Gold Price ($/oz) 1,412 1,266 1,200 1,200 1,200 Other Long Term Liabilities 0 0 0 0 0
Exchange Rate (US$:£) 1.56 1.65 1.50 1.50 1.50 Total Liabilities 7 87 109 95 84
Shareholder Equity 159 180 206 211 211
Total Liab. & S/Holder Equity 166 267 315 307 295
Working Capital 38 26 13 11 3
Net Debt (Cash) (39) 43 74 66 64
0
250
500
750
1000
1250
0
25
50
75
100
125
150
175
2013 2014 2015F 2016F 2017F 2018F 2019F 2020F 2021F 2022F
New Liberty Total Cash Cost AISC
Gold Production ('000oz, 100% basis) Total Cash Cost / AISC ($/oz Au)
Aureus Mining 9 April 2015
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange 29
Metals & MiningFor FCA purposes this is a Marketing Communication
AnalystsPhil SwinfenTel: +44 (0)20 7260 [email protected]
Cailey BarkerTel: +44 (0)20 7260 [email protected]
This research was preparedand approved by
Numis Securities LimitedThe London Stock Exchange Building10 Paternoster SquareLondon EC4M 7LT
+44 (0)20 7260 [email protected]
Registered No 02285918. Authorised andRegulated by The Financial ConductAuthority. A Member of the LondonStock Exchange
9 April 2015
BUY
Current Share Price 12pTarget Price 40pMarket Capitalisation £22mShares In Issue 180mRIC/BLBG BKY.L/BKY LNAvg. Daily Volume (3M) 22,733
Current share price(s) timed at 7:00AM on 07/04/15
Apr- 14 Jul- 14 Oct- 14 Jan- 15 Apr- 15
20
18
16
14
12
10
Share Price
Berkeley ResourcesRelat ive to UK Market
Performance (%) 1M 3M 12M
Absolute 7 -20 -23
Relative 6 -26 -27
Source: Datastream (relative to UK-DS Market index)
Berkeley ResourcesEstimate Changes
Game Changer on the Horizon
We maintain our BUY recommendation but increase our TP to 40p, from 35p, dueto our updated commodity prices and changes to our model.
● Company Snapshot. Berkeley is an AIM/ASX listed uranium developer focused onSpain. The company’s flagship asset is the Salamanca Project in Western Spain wherea DFS is underway. Permitting is well advanced and we estimate first production in2018 depending on uranium prices.
● Investment Thesis. Low capex and opex, robust resource, simple open pitshallow mining, low-risk jurisdiction, uranium developer with regional hub model,first production should coincide with a higher price environment. Regional Hub -Salamanca is composed of three separate deposits: Retortillo, Alameda and recentlydefined Zona 7. Plans to build a centralised processing plant at Retortillo with heapleach at each site, for competitive opex and capex and growth flexibility. Resourcedoubled. New Zona 7 resource brings total resource to 88Mlbs at 469ppm, better thanmost African projects. Satellite Promoted. Zona 7 (10km away) is now the largestdeposit within Salamanca and higher grade (589ppm). Scoping study due Q2 2015 tointegrate into DFS with potential to defer Retortillo/Alameda capex as Zona 7 likely tojump queue being high-grade, shallow and low pre-strip. Timeline drag will be that Zona7 needs permitting. Existing PFS plan. 3.3Mlbs U3O8 p.a, cash costs $25/lb (AISC c.$29/lb), mid-low on cost curve. Initial capex for Retortillo is $95m. Growth Potential -Lots more satellite potential (eg. Gambuta) within trucking distance. Zona 7 resourceremains open. Balance sheet. A$16m cash and comfortable.
● News Catalysts: Zona 7 scoping study (Q2), Resource update (Q2).
● Uranium Market. Currently challenging but excellent long term fundamentals due aprojected doubling of electricity consumption by 2030 and increased contribution fromnuclear requiring a substantial world reactor build-out. New mine supply is constrainedby new project delays, cancelled expansions and mothballing of existing operations,whilst secondary supply is dwindling due to the end of the Russian HEU programme.Restart of Japanese reactors is now rolling out - four so far, twenty under review.Restarts drawn-out and onerous process but ultimately key market catalyst to promptunavoidable resumption of U3O8 contracting volumes, as despite inventory build up,utilities typically plan 3-5 years out to secure feed. 2014 contract volumes triple 2013'slow. Major reactor build-out in China (under pressure to cut pollution) also underpinsdemand story. Our LT price is $60/lb vs spot at $39/lb.
● Valuation. 0.5x NAV, middle of 0.25-1x P/NAV range for pre-producers.
● Risks. Low - Project delivery risk, environmental approval and permitting in Spain,project financing, uranium market.
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange30
1
Figure 1: Model summary
Source: Company & Numis Securities Research
Berkeley Resources Ticker BKY Market Capitalisation £22m Financial Year End June
BUY Share Price £0.12 Enterprise Value (EV) £13m Reporting Currency A$
£0.40 Implied Return 233% Net Debt (Cash) -$10m Shares in Issue 180m
Valuation Key Metrics 2014 2015F 2016F 2017F 2018F
Net Asset Value Disc Rate NAV (%) $m $/sh £/sh EPS (A$/sh) (0.04) (0.04) (0.04) (0.03) 0.03
Salamanca 10% 104% 241 1.25 0.84 EPS Growth 33% 5% 1% 29% 195%
Sub-total 241 1.25 0.84 P/E n.m n.m n.m n.m 8.6x
Cash & Equivalents 4% 10 0.05 0.03 CFPS ($/sh) (0.04) (0.04) (0.04) (0.03) 0.05
Debt 0% 0 0.00 0.00 P/CFPS n.m n.m n.m n.m 4.4x
Corporate G&A / Other (8%) (19) (0.10) (0.06) FCFPS ($/sh) (0.04) (0.04) (0.04) (0.39) 0.04
Total 232 1.21 £0.81 P/FCFPS n.m n.m n.m n.m 5.1x
Current NAV Multiple (Implied) 0.15x FCF Yield -18% -18% -16% -172% 20%
EV/EBITDA n.m n.m n.m n.m 1.2x
Valuation EBITDA Margin 0% 0% 0% 0% 26%
NAV valuation NAV risk multiple 0.50x £0.39 Dividend Per Share ($/sh) 0.00 0.00 0.00 0.00 0.00
VALUATION £0.39 Dividend Yield 0.0% 0.0% 0.0% 0.0% 0.0%
Return on Assets (ROA) -20% -25% -16% -6% 6%
Return on Equity (ROE) -21% -26% -16% -10% 9%
Sensitivity Analysis NAV (£/sh) Return on Capital Employed (ROCE) -21% -26% -17% -7% 8%
Base case U3O8 price forecast 0.81 Net Debt/EBITDA 0.0x 1.7x 4.4x -5.0x 1.7x
Base case +10% 0.47 Gearing (Debt/Equity) 0% 0% 0% 59% 49%
Base case -10% 0.27 Interest Cover n.m n.m n.m n.m -0.2x
LT U3O8 price ($60/lb) 0.36 Shares Outstanding (m) 180 180 264 347 347
Income Statement 2014 2015F 2016F 2017F 2018F
Revenue 0 0 0 0 80
Cost of Sales 0 0 0 0 (54)
News Catalyst (CY) 2014 2015 2016 2017 2018 G&A (2) (1) (2) (2) (4)
Permitting Exploration (7) (7) (8) (8) (3)
Zona 7 Scoping Study Other 1 0 0 0 (0)
Zona 7 in-fill drilling EBITDA (8) (7) (10) (10) 21
DFS DD&A 0 0 0 0 (9)
Construction & Engineering EBIT (8) (7) (10) (10) 12
Production Net Interest Expense 0 0 0 0 (3)
Reserves & Resources (attributable) Mt Grade ppm U3O8 EV/lb PBT (8) (7) (9) (10) 9
Reserves (P&P) Mlbs - - - - Non-Recurring Items/Other 0 0 0 0 0
Resources (M&I) Mlbs 34 423 32 0.42 Taxes/Recovery (0) 0 0 0 0
Resources (Total) Mlbs 85 469 88 0.15 Net Profit (Loss) - attributable (7) (7) (9) (10) 9
Production & Cost 2017F 2018F 2019F 2020F Minority Interest 0 0 0 0 0
U3O8 production Mlbs 0.00 1.15 1.47 3.25 Cashflow 2014 2015F 2016F 2017F 2018F
EV/lb Production (attributable) $/lb 0.0 11.6 9.1 4.1 Net Profit (Loss) (7) (7) (9) (10) 9
C1 Cash Cost $/lb 0 30 28 26 DD&A 0 0 0 0 9
All-in Sustaining Cost $/lb 0 36 37 27 Non Recurring/Other (1) (0) 0 0 0
Working Cap. Changes 0 0 0 0 0
Cash Flow From Operations (7) (7) (9) (10) 18
Capital Expenditure (0) (0) 0 (127) (3)
Acquis./Investments (0) (0) 0 0 0
Cash Flow From Investing (0) (0) 0 (127) (3)
Equity Issues (Net of Costs) 0 0 38 45 0
Net Borrowings 0 0 0 55 0
Dividends Paid & Other (0) 0 0 0 (5)
Cash Flow From Financing (0) 0 38 100 (5)
Net Change in Cash (7) (8) 29 (36) 11
Free Cash Flow (7) (8) (9) (136) 16
Balance Sheet 2014 2015F 2016F 2017F 2018F
Cash & Equivalents 20 13 41 5 16
Total Current Assets 21 14 42 6 16
PP&E & Mining Interests 2 2 2 129 122
Deferred taxation 0 0 0 0 0
Other 14 15 15 15 15
Total Assets 37 30 59 149 153
Short Term Debt 0 0 0 0 0
Current Liabilities 1 1 1 1 1
Assumptions (Real) 2014 2015F 2016F 2017F LT Long Term Debt 0 0 0 55 50
Uranium U3O8 price ($/lb) 34 39 41 48 60 Other Long Term Liabilities 0 0 0 0 0
Exchange Rate (A$:US$) 0.90 0.76 0.75 0.75 0.75 Total Liabilities 1 1 1 56 51
Exchange Rate (US$:£) 1.65 1.50 1.50 1.50 1.50 Shareholder Equity 36 29 57 93 102
Total Liab. & S/Holder Equity 37 30 59 149 153
Working Capital 19 12 41 4 15
Net Debt (Cash) (20) (13) (41) 50 34
0
5
10
15
20
25
30
35
40
0
1,000
2,000
3,000
4,000
2018F 2019F 2020F 2021F 2022F 2023F 2024F 2025F
Retortillo Alameda C1 Cash Cost ASIC
U3O8 Production ('000 lb, 100% basis) C1 Cash Cost / AISC ($/lb)
Berkeley Resources 9 April 2015
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange 31
Metals & MiningFor FCA purposes this is a Marketing Communication
AnalystsCailey BarkerTel: +44 (0)20 7260 [email protected]
Phil SwinfenTel: +44 (0)20 7260 [email protected]
This research was preparedand approved by
Numis Securities LimitedThe London Stock Exchange Building10 Paternoster SquareLondon EC4M 7LT
+44 (0)20 7260 [email protected]
Registered No 02285918. Authorised andRegulated by The Financial ConductAuthority. A Member of the LondonStock Exchange
9 April 2015
BUY
Current Share Price 39pTarget Price 75pMarket Capitalisation £20mShares In Issue 52mRIC/BLBG CALq.L/CMCL LNAvg. Daily Volume (3M) 11,298Broker Yes
Current share price(s) timed at 7:00AM on 07/04/15
Apr- 14 Jul- 14 Oct- 14 Jan- 15 Apr- 15
6560555045403530
Share Price
Caledonia Mining CorpRelat ive to UK Market
Performance (%) 1M 3M 12M
Absolute 3 -1 -12
Relative 2 -9 -17
Source: Datastream (relative to UK-DS Market index)
Caledonia Mining CorpEstimate Changes
Building a Golden Future
We maintain our BUY recommendation and 75p TP, despite our new commodityprice forecasts and changes to our model.
● Company Snapshot. Caledonia Mining is an AIM/TSX-listed junior gold producerfocused in Zimbabwe. Its flagship asset is the low cost, cash-generative Blanket mine,which is fully indigenised and potentially being expanded to 75-80kozpa by 2021, fromthe current 40kozpa.
● Investment Thesis. Low cost growth - Blanket is a historic mine with excellentinfrastructure, being expanded to 75-80kozpa by developing down-dip extensionsbelow 750m via a central shaft and the No.6 Winze, plus making minor modificationsto the under-utilised plant. Cash is king - Caledonia has c.$27m in cash and no debt.Growth comes at a very low $70m in capex, which will be funded internally. Blanket isan efficient, low-cost and cash generative mine with AISC of c.$900/oz, well below theindustry average (a function of low power and labour costs, plus natural ventilation in adry mine). Caledonia pays an 8% yield. Upside potential - We see potential to increaseproduction by 10-15kozpa from satellite properties, subject to more work. There is alsopotential for further operational efficiencies. M&A potential - Longer term, Caledoniawill have a decent cash pile and a hungry plant, putting it in a strong position to pickup distressed assets in Zimbabwe.
● Guidance. 2015: 42koz (NUMe 42koz).
● Preview Q1. Production of 10koz, slightly down q-o-q. 2015 guidance maintained. EPSof 3.5c, up q-o-q on WIP and higher gold price.
● Valuation. Blend of 1x NAV/5x P/CF (bottom of 1-2x NAV/5-15x P/CF range for golds).
● Risks. High - Zimbabwe: Caledonia has navigated through Zimbabwean politicalchallenges and pioneered a successful indigenisation structure. Recent new marketinglaw for gold sales to state owned Fidelity is working out ok so far but there is alwaysa risk of political or legal change, in our view.
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange32
1
Figure 1: Model summary
Source: Company & Numis Securities Research
Caledonia Mining Ticker CMCL.L Market Capitalisation £20m Financial Year End Dec
BUY Share Price £0.39 Enterprise Value (EV) £9m Reporting Currency C$
£0.75 Implied Return 92% Net Debt (Cash) -$21m Shares in Issue 52m
Valuation Key Metrics 2013 2014 2015F 2016F 2017F
Net Asset Value Disc Rate NAV (%) $m $/sh £/sh EPS (Adjusted, $/sh) 0.28 0.12 0.11 0.20 0.35
Blanket (49%) 14% 108% 96 1.75 0.93 EPS Growth -43% -57% -6% 74% 77%
Exploration Properties 0% 0 0.00 0.00 P/E 2.6x 6.0x 6.4x 3.7x 2.1x
Sub-total 96 1.75 0.93 CFPS ($/sh) 0.28 0.26 0.21 0.31 0.46
Cash & Equivalents 24% 21 0.39 0.21 P/CFPS 2.6x 2.8x 3.5x 2.4x 1.6x
Debt 0% 0 0.00 0.00 FCFPS ($/sh) 0.06 0.13 (0.15) (0.12) 0.10
Corporate G&A / Other (31%) (28) (0.51) (0.27) P/FCFPS 12.9x 5.5x n.m n.m 7.6x
Total 89 1.63 £0.87 FCF Yield 8% 18% -20% -16% 13%
Current NAV Multiple (Implied) 0.45x EV/EBITDA 1.3x 1.0x 1.1x 0.7x 0.5x
Cash Flow Value $/sh £/sh EBITDA Margin 20% 28% 24% 31% 39%
CFPS (1 year forward) 0.23 0.12 Dividend Per Share ($/sh) 0.05 0.07 0.05 0.05 0.04
Current P/CF multiple (implied) 3.1x Dividend Yield 7.5% 10.2% 6.6% 6.6% 5.1%
Blended Valuation Target Multiple Weight Return on Assets (ROA) -4% 7% 7% 11% 16%
NAV valuation 1.00x 50% £0.87 Return on Equity (ROE) -11% 6% 7% 10% 15%
Cash Flow valuation 5.0x 50% £0.62 Return on Capital Employed (ROCE) 15% 18% 14% 22% 31%
VALUATION £0.75 Net Debt/EBITDA -1.8x -1.6x -1.1x -0.3x -0.3x
Gearing (Debt/Equity) 3% 0% 0% 0% 0%
Sensitivity Analysis NAV (£/sh) 15F EPS 15F CFPS Interest Cover 0.0x 0.0x 0.0x 0.0x 0.0x
Base case gold price forecast 0.87 0.20 0.31 Shares Outstanding (m) 52 52 52 52 52
Base case +10% 1.06 0.28 0.40 Income Statement 2013 2014 2015F 2016F 2017F
Base case -10% 0.70 0.12 0.21 Revenue 65 59 62 75 92
Flat gold price (at spot $1,200/oz) 0.99 0.15 0.24 Cost of Sales (32) (36) (40) (45) (50)
H1 15 H2 15 2016 2017 G&A (8) (7) (7) (7) (7)
Tramming loop on 750m level Exploration 0 0 (0) (1) (1)
Start Sinking Central Shaft (800tpd) Other (13) 1 0 1 1
No. 6 Winze Project (500tpd) starts production EBITDA 13 16 15 23 36
Mining of AR Main/South below 750m starts DD&A (3) (4) (5) (4) (4)
Complete Central Shaft H2 EBIT 10 12 11 18 32
Net Interest Expense (0) (0) 0 0 0
Reserves & Resources (attributable) Tonnage Grade Gold EV/oz PBT 9 12 11 19 32
Reserves (P&P) Moz 3 3.7 0.3 39 Non-Recurring Items/Other (3) (3) (2) (3) (4)
Resources (M&I) Moz 4 3.8 0.5 27 Taxes/Recovery (10) (5) (3) (6) (10)
Resources (Total) Moz 10 4.2 1.4 10 Net Profit (Loss) - attributable (3) 5 6 10 18
Production & Cost 2014 2015F 2016F 2017F Minority Interest 3 2 2 3 4
Gold Production 000oz 42 42 49 60 Cashflow 2013 2014 2015F 2016F 2017F
Gold Production (attributable) 000oz 20 21 24 30 Net Profit (Loss) (0) 8 8 13 22
EV/oz Production (attributable) $/oz Au 660 654 561 457 DD&A 3 4 5 4 4
Cash Operating Cost $/oz 652 695 650 560 Non Recurring/Other 25 4 3 5 10
Total Cash Cost (net by-products) $/oz 743 760 717 627 Working Cap. Changes (5) 2 (1) (1) (2)
All-in Sustaining Cost $/oz 969 949 885 770 Cash Flow From Operations 15 14 11 16 24
Capital Expenditure (12) (7) (19) (22) (19)
Acquis./Investments 0 0 0 0 0
Cash Flow From Investing (12) (7) (19) (22) (19)
Equity Issues (Net of Costs) 0 0 0 0 0
Net Borrowings 0 (1) 0 0 0
Dividends Paid & Other (8) (4) (3) (3) (2)
Cash Flow From Financing (7) (5) (3) (3) (2)
Net Change in Cash (5) 2 (10) (9) 3
Free Cash Flow 3 7 (8) (6) 5
Balance Sheet 2013 2014 2015F 2016F 2017F
Cash & Equivalents 25 27 16 8 11
Total Current Assets 36 36 28 22 28
PP&E & Mining Interests 33 38 52 70 85
Deferred taxation 0 0 0 0 0
Other 0 0 0 0 0
Total Assets 70 74 80 92 113
Short Term Debt 2 0 0 0 0
Current Liabilities 8 6 6 7 9
Assumptions (Real) 2014 2015F 2016F 2017F LT Long Term Debt 0 0 0 0 0
Gold Price ($/oz) 1,266 1,205 1,200 1,200 1,200 Other Long Term Liabilities 10 10 10 10 10
Exchange Rate (US$:£) 1.65 1.50 1.50 1.50 1.50 Total Liabilities 18 16 17 18 19
Exchange Rate (C$:US) 0.91 0.80 0.80 0.80 0.80 Shareholder Equity 52 58 63 74 94
Total Liab. & S/Holder Equity 70 74 80 92 113
Working Capital 29 30 22 14 19
Net Debt (Cash) (23) (27) (16) (8) (11)
0
250
500
750
1,000
1,250
0
25
50
75
2009* 2010 2011 2012 2013 2014F 2015F 2016F 2017F 2018F
Blanket Cash Costs AISC
Gold Production ('000oz, 100% basis) Total Cash Cost / AISC ($/oz Au)
Caledonia Mining Corp 9 April 2015
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange 33
Metals & MiningFor FCA purposes this is a Marketing Communication
AnalystsCailey BarkerTel: +44 (0)20 7260 [email protected]
Phil SwinfenTel: +44 (0)20 7260 [email protected]
This research was preparedand approved by
Numis Securities LimitedThe London Stock Exchange Building10 Paternoster SquareLondon EC4M 7LT
+44 (0)20 7260 [email protected]
Registered No 02285918. Authorised andRegulated by The Financial ConductAuthority. A Member of the LondonStock Exchange
9 April 2015
HOLD
Current Share Price 60pTarget Price 60pMarket Capitalisation £691mShares In Issue 1,152mRIC/BLBG CEY.L/CEY LNAvg. Daily Volume (3M) 8,204,692Net Cash/(Debt) (m) (12/15F) $225.9m
Current share price(s) timed at 9:00AM on 07/04/15
Apr- 14 Jul- 14 Oct- 14 Jan- 15 Apr- 15
807570656055504540
Share Price
Centamin EgyptRelat ive to UK Market
Performance (%) 1M 3M 12M
Absolute 1 -7 12
Relative 1 -14 6
Source: Datastream (relative to UK-DS Market index)
Centamin EgyptEstimate Changes
Egyptian Yield
We maintain our HOLD recommendation and 60p TP, despite our revisedcommodity price forecasts and changes to our model.
● Company Snapshot. TSX/LSE-listed Mid-tier Egyptian gold producer. Main assetis the world class, 450-500kozpa Sukari gold mine. Also has some earlier stageexploration properties in Burkina Faso (Ampella) and Ethiopia.
● Investment Thesis. World class mine - Sukari has a 15Moz resource in a mine life of+20 years. It is the first and only commercial gold mine in the country, held in a 50%production sharing agreement with the government. Ramping up - Stage 4 10Mtpaplant expansion is complete ($330m). The original 5Mtpa plant had been runningat +15-20% of nameplate capacity so there is potential for 11-12Mtpa in our view.Underground is key - Productivity is up to 1Mtpa although there is potential to push this.Grade is key, originally expected to average 8-10g/t, but closer to 6.5-7g/t in the shortterm. Geology is tricky but potential is evident, with real upside from a second Ptahdecline (not in LOM plan). We expect to see the operation surprise to the upside withpotential to beat on plant throughput or underground grade. Cash & divi - Reducingcapex and no debt leaves plenty cash available. Dividend policy of 15-30% of FCF(2-4% yield). Profit sharing payments expected to start H2 2016. Legal cases - 2 casesregarding legitimacy of its exploitation licence by a private individual and fuel subsidy.Likely to take some time to resolve although a recent new law to restrict third partychallenges may quicken the process.
● Guidance. 2015: 420koz at cash operating cost of $700/oz (exc. royalties and fuelsubsidy), AISC $950/oz. From H2 hits the longer term rate of 450-500kozpa at $700/oz (AISC $850-900/oz).
● Preview Q1 (13 May). Q1 produced 108koz, 16% down q-o-q but better than guided,with open pit grades moving down temporarily in line with the mine plan. FY guidanceis maintained but looks well on track to beat it as expected (NUMe 445koz). Financials- EPS of 1.4c, down q-o-q on lower production and y-o-y on lower gold prices (NPAT$17m, 2014 Q1 1.9c), EBITDA of $45m, up y-o-y but down q-o-q. Balance sheetremaining strong, up at $181m has capex falls away and FCF is generated. Cashoperating costs $733/oz, up q-o-q on lower grades and ounces. No material updatesexpected on legal cases with a hopeful change around on the new law to restrict thirdparty challenges.
● Valuation. Blend of 1x NAV/5x P/CF (bottom of 1-2x NAV/5-15x P/CF range for golds).
● Risks. Moderate-High: Legal cases, Egyptian politics.
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange34
Figure 1: Model summary
Source: Company & Numis Securities Research
Centamin Egypt Ticker CEY.L Market Capitalisation £685m Financial Year End Dec
HOLD Share Price £0.60 Enterprise Value (EV) £577m Reporting Currency US$
£0.60 Implied Return 0% Net Debt (Cash) -$163m Shares in Issue 1,142m
Valuation Key Metrics 2014 2015F 2016F 2017F 2018F
Net Asset Value Disc Rate NAV (%) $m $/sh £/sh EPS ($/sh) - Underlying 0.07 0.08 0.10 0.05 0.05
Sukari (100%) 12% 92% 974 0.84 0.56 EPS Growth (57%) 14% 26% (48%) (6%)
Sub-total 974 0.84 0.56 P/E 12.5x 11.0x 8.7x 16.9x 18.0x
Corporate G&A / Other 12% (7%) (76) (0.07) (0.04) CFPS ($/sh) 0.10 0.18 0.19 0.13 0.13
Cash & Equivalents 15% 163 0.14 0.09 P/CFPS 9.1x 5.1x 4.9x 6.7x 7.1x
Debt 0% 0 0.00 0.00 FCFPS ($/sh) 0.04 0.10 0.11 0.06 0.06
Total 1,061 0.92 £0.61 P/FCFPS 21.8x 8.6x 8.4x 14.3x 14.4x
Current NAV multiple (Implied) 0.98x FCF Yield 5% 12% 12% 7% 7%
Cash Flow Value $/sh £/sh EV/EBITDA 5.2x 4.1x 3.6x 3.4x 2.9x
CFPS - 12 month forward 0.18 0.12 EBITDA margin 35% 37% 37% 36% 36%
Current P/CF multiple (implied) 5.1x Dividend Per Share ($/sh) 0.02 0.03 0.03 0.02 0.02
Blended Valuation Target Multiple Weight Dividend Yield 2.2% 3.5% 3.6% 2.1% 2.1%
NAV valuation 1.00x 50% £0.61 Return on Assets (ROA) 6% 6% 8% 4% 4%
Cash Flow valuation 5.0x 50% £0.58 Return on Equity (ROE) 6% 7% 8% 4% 4%
VALUATION £0.60 Return on Capital Employed (ROCE) 6% 7% 8% 8% 9%
Net Debt/EBITDA -1.0x -1.2x -1.1x -1.2x -1.3x
Sensitivity Analysis Valuation NAV/sh 15F EPS 15F CFPS Gearing (Debt/Equity) 0% 0 0 0 0
Base case gold price forecast £0.60 £0.61 $0.10 $0.19 Interest Cover n.m n.m n.m n.m n.m
Base case +10% £0.65 £0.77 $0.14 $0.22 Shares Outstanding (m) 1,132 1,142 1,142 1,142 1,142
Base case -10% £0.51 £0.47 $0.06 $0.14 Income Statement 2014 2015F 2016F 2017F 2018F
Flat gold price (at spot $1200/oz) £0.56 £0.60 $0.11 $0.19 Revenue 473 536 597 632 665
News catalysts H2 14 H1 15 H2 15 2016 Cost of sales (358) (411) (445) (470) (488)
Court cases G&A (16) (16) (16) (17) (17)
Stage 4 (plant expansion: 10Mt p.a.) Other (14) (16) (18) (19) (20)
Sukari resource update EBITDA 165 196 218 227 240
Sukari full run rate (450-500kozpa @ $700/oz) DD&A 84 103 100 101 100
EBIT 84 93 118 126 140
Reserves & Resources (attributable) Tonnes Grade Gold EV/oz Net finance income (expense) (2) 1 2 5 10
Reserves (P&P) 217 Mt 1.10 g/t 7.7 Moz 112 PBT 82 94 121 132 150
Resources (M&I) - inc. Ampella 411 Mt 1.13 g/t 14.9 Moz 58 Non-Recurring Items/Other 0 0 0 0 0
Resources (M, I&I) - inc. Ampella 502 Mt 1.15 g/t 18.5 Moz 47 Tax / Payment to EMRA (0) 0 (3) (71) (93)
Production & cost 2014 2015F 2016F 2017F 2018F Net Profit (Loss) - attributable 82 94 118 61 57
Gold production (koz) 377 445 493 507 521 Minority Interest (0) 0 (0) 0 (0)
EV/oz production ($/oz AuEq) 2,293 1,943 1,755 1,706 1,659 Cashflow 2014 2015F 2016F 2017F 2018F
Cash Operating Cost ($/oz) 729 692 694 699 698 Net Profit (Loss) 82 94 118 61 57
Total Cash Cost ($/oz) 766 728 730 734 734 Working Cap. change (59) 4 (3) (3) (3)
All-in Sustaining Cost ($/oz) 1,006 947 908 877 858 DD&A 84 103 100 101 100
Non Recurring/Other 5 (1) (3) (6) (10)
Cash Flow From Operations 112 200 211 152 144
Capital Expenditure (65) (81) (89) (81) (73)
Acquis./investments/adjustments (14) (30) (30) (10) (5)
Cash Flow From Investing (79) (111) (120) (91) (78)
Borrowings 0 (0) 0 0 0
Capital stock 50 0 0 0 0
Dividends paid & other (61) (31) (49) (31) (12)
Cash Flow From Financing (12) (31) (49) (31) (12)
Net Change in Cash 21 58 43 31 54
Free Cash Flow 47 119 122 72 71
Balance Sheet 2014 2015F 2016F 2017F 2018F
Cash & Equivalents 163 231 235 265 320
Total Current Assets 293 354 403 438 498
PP&E & Mining Interests 929 907 897 877 849
Deferred taxation 0 0 0 0 0
Other 148 178 209 220 225
Total Assets 1371 1440 1508 1535 1573
Short Term Debt 0 0 0 0 0
Assumptions (Real) 2014 2015F 2016F 2017F LT Current Liabilities 34 41 43 45 48
Gold Price (US$/oz) 1,266 1,205 1,200 1,200 1,200 Long Term Debt 0 0 0 0 0
GBPUSD exchange rate 1.65 1.50 1.50 1.50 1.50 Other Long Term Liabilities 3 3 3 3 3
Total Liabilities 37 44 46 49 51
Shareholder Equity 1333 1395 1462 1486 1522
Minority interest (0) (0) (0) (0) (0)
Total Liab. & Equity 1371 1440 1508 1535 1573
Working Capital 132 119 123 126 129
Net Debt (Cash) (163) (231) (235) (265) (320)
0
250
500
750
1,000
1,250
0
100
200
300
400
500
600
2013 2014 2015F 2016F 2017F 2018F 2019F 2020F 2021F 2022F 2023F
Sukari (100% basis) Total cash costs AISC
Attrib. Gold Eq Production ('000oz) Total Cash Cost ($/oz AuEq)
Centamin Egypt 9 April 2015
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange 35
Metals & MiningFor FCA purposes this is a Marketing Communication
AnalystsCailey BarkerTel: +44 (0)20 7260 [email protected]
Phil SwinfenTel: +44 (0)20 7260 [email protected]
This research was preparedand approved by
Numis Securities LimitedThe London Stock Exchange Building10 Paternoster SquareLondon EC4M 7LT
+44 (0)20 7260 [email protected]
Registered No 02285918. Authorised andRegulated by The Financial ConductAuthority. A Member of the LondonStock Exchange
9 April 2015
BUY
Current Share Price 8pTarget Price 24pMarket Capitalisation £22mShares In Issue 273mRIC/BLBG CGH.L/CGH LNAvg. Daily Volume (3M) 174,102Net Cash/(Debt) (m) (12/13F) $11.2mBroker Yes
Current share price(s) timed at 7:00AM on 07/04/15
Apr- 14 Jul- 14 Oct- 14 Jan- 15 Apr- 15
20181614121086
Share Price
Chaarat GoldRelat ive to UK Market
Performance (%) 1M 3M 12M
Absolute -8 -34 -29
Relative -8 -39 -32
Source: Datastream (relative to UK-DS Market index)
Chaarat GoldEstimate Changes
DFS Abound
We maintain our BUY recommendation but increase our TP to 24p, from 23p, dueto our new commodity price forecasts and changes to our model.
● Company Snapshot. Chaarat is an AIM-quoted junior gold developer focused inKyrgyzstan. Its flagship asset is the 6.1Moz Chaarat gold project, with the resourcecontained within the Tulkubash (oxide) and Kiziltash (sulphide & refractory) deposits.DFS is expected mid 2015.
● Investment Thesis. Potential outweighs challenges - World Class potential +10Mozdeposit (current resource 6km of total 40km strike) with decent grades of +3g/t (1.7g/t Tulkubash), healthy mineable widths up to 20m, and relatively simple and consistentgeology. Topographically challenging location with a seasonally harsh climate, limitedinfrastructure and steeply dipping, predominantly refractory ore. Strategic partnerlikely - Given scale and financing requirements, plus close proximity to China, astrategic partner seems the likely solution to develop the project. The DFS shouldmake the project more robust and put Chaarat in a stronger bargaining position withShandong and other potential strategic investors. DFS Making progress - Beingundertaken by China Nonferrous (NFC), Chaarat's 9% shareholder - expected tocomplete mid 2015, which will keep costs down and align the company with a potentialdevelopment partner. DFS will define operating parameters; Initial assumptions are fora 250kozpa, with the option to develop in 2 stages. Initial stage will be a 120kozpa heapleach - a sizeable 5Mtpa operation with low grade (0.9g/t), low strip (2:1) and cashcosts of $550-600/oz; Second stage will be open pit/underground to process refractoryore by POX/Biox. Phase 1 will have ore transported through a 10km long tunnel to theplant, so will take c.3 years to complete. We conservatively estimate start-up in 2019,with capex of $200-250m for stage 1 and $150m for stage 2. A resource update forTulkubash is expected over the coming months. Funded to complete - recent raised$5m to Fasanara Capital (26%), which is sufficient to last until Q1 2016.
● Valuation. 0.75x NAV (middle of 0.5-1x NAV range for gold pre-producers).
● Risks. High: Kyrgyzstan politics, metallurgy & mining, limited infrastructure &topographically challenging, project delivery.
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange36
1
Figure 1: Model summary
Source: Company & Numis Securities Research
Chaarat Ticker CGH.L Market Capitalisation £22m Financial Year End Dec
BUY Share Price 8p Enterprise Value (EV) £17m Reporting Currency US$
24p Implied Return 193% Net Debt (Cash) -$8m Shares in Issue 273m
Valuation Key Metrics 2013 2014F 2015F 2016F 2017F
Net Asset Value Disc Rate NAV (%) $m £m p/sh EPS ($/sh) (0.06) (0.02) (0.03) (0.03) (0.03)
Chaarat (100%) 14% 109% 151 101 34 EPS Growth -25% 57% -10% -23% 15%
Exploration properties 0% 0 0 0 P/E n.m n.m n.m n.m n.m
Sub-total 151 101 34 CFPS ($/sh) (0.02) (0.02) (0.03) (0.03) (0.03)
Cash & Equivalents 6% 8 5 2 P/CFPS n.m n.m n.m n.m n.m
Debt 0% 0 0 0 FCFPS ($/sh) (0.10) (0.03) (0.04) (0.20) (0.36)
Corporate G&A / Other (14%) (20) (13) (4) P/FCFPS n.m n.m n.m n.m n.m
Total 140 93 31 FCF Yield -1% 0% 0% -2% -3%
Current NAV Multiple (Implied) 0.26x EV/EBITDA n.m n.m n.m n.m n.m
VALUATION Target Multiple 0.75x 24p EBITDA Margin 0% 0% 0% 0% 0%
Dividend Per Share ($/sh) 0.00 0.00 0.00 0.00 0.00
Dividend Yield 0.0% 0.0% 0.0% 0.0% 0.0%
Return on Assets (ROA) -22% -11% -14% -6% -4%
Return on Equity (ROE) -23% -11% -15% -6% -6%
Return on Capital Employed (ROCE) -23% -11% -15% -7% -7%
Net Debt/EBITDA 0.8x 1.2x 0.3x 5.9x -4.2x
Gearing (Debt/Equity) 0% 0% 0% 0% 49%
Interest Cover n.m n.m n.m n.m n.m
Shares Outstanding (m) 250 262 273 300 300
Sensitivity Analysis NAV (p/sh) 15F EPS 15F CFPS Income Statement 2013 2014F 2015F 2016F 2017F
Base case gold price forecast 31 (0.03) (0.03) Revenue 0 0 0 0 0
Base case +10% 46 (0.03) (0.03) Cost of Sales 0 0 0 0 0
Base case -10% 16 (0.03) (0.03) G&A (6) (4) (4) (4) (4)
Flat gold price (at spot $1,200/oz) 30 (0.03) (0.03) Exploration (9) (3) (4) (7) (7)
News Catalysts H1 15 H2 15 2016 2019 EBITDA (15) (7) (8) (11) (11)
Tulkubash resource update DD&A 0 0 0 0 0
DFS completes EBIT (15) (7) (8) (11) (11)
Financing Net Interest Expense 0 0 0 1 1
Construction/Development PBT (14) (7) (8) (10) (10)
Production starts Non-Recurring Items/Other 0 0 0 0 0
Taxes/Recovery 0 0 0 0 2
Reserves & Resources (attributable) Gold Silver Gold Eq EV/oz Net Profit (Loss) - attributable (14) (7) (8) (10) (9)
Reserves (P&P) Moz 2.6 0 2.6 10 Minority Interest 0 0 0 0 0
Resources (M&I) Moz 5.2 0 5.2 5 Cashflow 2013 2014F 2015F 2016F 2017F
Resources (M, I&I) Moz 6.1 0 6.1 4 Net Profit (Loss) (14) (7) (8) (10) (9)
Production & Cost (attributable) 2016F 2017F 2018F 2019F DD&A 0 0 0 0 0
Gold Eq. Production 000oz 0 0 0 120 Non Recurring/Other 5 0 0 0 0
EV/oz Production $/oz AuEq 0 0 0 215 Working Cap. Changes 3 2 0 0 0
Total Cash Cost (net by-products) $/oz 0 0 0 585 Cash Flow From Operations (6) (5) (8) (10) (9)
All-in Sustaining Cost $/oz 0 0 0 720 Capital Expenditure (19) (4) (3) (50) (100)
Acquis./Investments 0 1 5 1 0
Cash Flow From Investing (19) (4) 2 (49) (100)
Equity Issues (Net of Costs) 0 5 0 120 0
Net Borrowings 0 0 0 0 75
Dividends Paid & Other 0 0 0 0 0
Cash Flow From Financing 0 5 0 120 75
Net Change in Cash (25) (3) (5) 60 (34)
Free Cash Flow (25) (9) (11) (60) (109)
Balance Sheet 2013 2014F 2015F 2016F 2017F
Cash & Equivalents 11 8 2 63 29
Total Current Assets 14 8 2 63 29
PP&E & Mining Interests 51 52 50 100 200
Deferred taxation 0 0 0 0 0
Other 0 0 0 0 0
Total Assets 65 60 53 163 229
Short Term Debt 0 0 0 0 75
Current Liabilities 2 1 1 1 76
Long Term Debt 0 0 0 0 0
Assumptions (Real) 2014F 2015F 2016F 2017F LT Other Long Term Liabilities 0 1 1 1 1
Gold Price ($/oz) 1,266 1,205 1,200 1,200 1,200 Total Liabilities 2 1 1 2 77
Silver Price ($/oz) 19.08 16.69 17.59 18.60 18.46 Shareholder Equity 63 59 51 161 153
Exchange Rate (US$/£) 1.65 1.50 1.50 1.50 1.50 Total Liab. & S/Holder Equity 65 60 53 163 229
Working Capital 12 7 2 62 (47)
Net Debt (Cash) (11) (8) (2) (63) 46
0
250
500
750
1000
0
50
100
150
200
250
2016F 2017F 2018F 2019F 2020F 2021F 2022F 2023F
Heap Leach Open Pit (POX) Kiziltash (U/G) Total Cash Cost AISC
Attrib. Gold Eq Production ('000oz) Total Cash Cost / AISC ($/oz AuEq)
Chaarat Gold 9 April 2015
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange 37
Metals & MiningFor FCA purposes this is a Marketing Communication
AnalystsPhil SwinfenTel: +44 (0)20 7260 [email protected]
Cailey BarkerTel: +44 (0)20 7260 [email protected]
This research was preparedand approved by
Numis Securities LimitedThe London Stock Exchange Building10 Paternoster SquareLondon EC4M 7LT
+44 (0)20 7260 [email protected]
Registered No 02285918. Authorised andRegulated by The Financial ConductAuthority. A Member of the LondonStock Exchange
9 April 2015
BUY
Current Share Price 64pTarget Price 90pMarket Capitalisation £29mShares In Issue 46mRIC/BLBG CNR.L/CNR LNAvg. Daily Volume (3M) 101,561Broker Yes
Current share price(s) timed at 7:00AM on 07/04/15
Apr- 14 Jul- 14 Oct- 14 Jan- 15 Apr- 15
140
120
100
80
60
40
Share Price
Condor GoldRelat ive to UK Market
Performance (%) 1M 3M 12M
Absolute 10 3 -9
Relative 9 -5 -14
Source: Datastream (relative to UK-DS Market index)
Condor GoldEstimate Changes
Dotting the i's and crossing the t's
We maintain our BUY recommendation and 90p TP despite our revised commodityprice forecasts and changes to our model.
● Company Snapshot. AIM-listed gold developer focused on Nicaragua. PFScompleted Nov 2014 on its flagship 2.3Moz La India gold project. Focus of the PFSon the Indicated 830koz resource but Condor's all about options including mining ofsatellite pits, underground mining and a district scale exploration play. A clear take-outtarget for a larger player.
● Investment Thesis. High Grade Simplicity. Robust resource of 2.3Moz Au ofwhich 900koz is open-pittable at a high grade of 3.1g/t, well above peers (1.7g/t).Reserve 675koz at 3g/t Au. Simple mining, low capex, lower quartile AISC, excellentinfrastructure with roads and power, lower risk jurisdiction. Takeover Target. Given theproject's high-grade and advance stage, we believe Condor could be a take-over targetfor a larger player. PFS options. Base case - 0.8Mpta mill, 79kozpa, 9 year LOM,AISC of $690/oz and capex $110m. PFS included two PEA scenarios - A: includingsatellite pits and B: satellites + underground. Scenario "A" is based on a larger plantand increases production by 25% (1.2Mtpa plant, 97kozpa, 8 year LOM, capex $127m,AISC $685/oz). Scenario B boosts gold production to 137koz pa but comes with acapex of $169m. Our View. We base our valuation on Scenario A as we believe it doesnot make sense to exclude satellite pits - 100kozpa, 9 year LOM, $130m capex, AISCof $740/oz, start up 2018, 30% IRR. We see Condor defining a modest, high-gradeopen pit as a foundation and expanded from there. District play. Real upside is thescalability of a new district play - numerous untested targets within trucking distance- 75% of the district is unexplored. Cash to keep busy. £6.4m placing in Q3 2014,£3.5m from the IFC, a strong endorsement of the project. Current Activity- focusedon the de-risking the project through permitting and land acquisition and working on allthe soft issues before moving into the BFS and significant expenditure.
● Valuation. 0.75x NAV (middle of 0.5-1x NAV range for gold pre-producers).
● News Catalysts. On-going exploration - Drilling at La India for depth and strikeextensions and exploration drilling at Real de la Cruz.
● Risks. Moderate. Project delivery, financing, opex and capex changes, NGO activity.
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange38
1
Figure 1: Model summary
Source: Company & Numis Securities Research
Condor Ticker CNR.L Market Capitalisation £26m Financial Year End Dec
BUY Share Price 64p Enterprise Value (EV) £23m Reporting Currency £
90p Implied Return 41% Net Debt (Cash) -£4m Shares in Issue 41m
Valuation Key Metrics 2012 2013 2014F 2015F 2016F
Net Asset Value Disc Rate NAV (%) $m £m p/sh EPS (£/sh) (0.11) (0.08) (0.09) (0.06) (0.04)
La India 12% 78% 76 51 97 EPS Growth -54% 25% -2% 24% 33%
Resources not in mine plan 29% 28 19 36 P/E n.m n.m n.m n.m n.m
Exploration properties 10% 10 7 13 CFPS (£/sh) (0.06) (0.07) (0.07) (0.06) (0.04)
El Salvador projects 0% 0 0 0 P/CFPS n.m n.m n.m n.m n.m
Sub-total 114 76 146 FCFPS (£/sh) (0.19) (0.21) (0.08) (0.06) (0.34)
Cash & Equivalents 4% 4 2 5 P/FCFPS n.m n.m n.m n.m n.m
Debt 0% 0 0 0 FCF Yield -29% -34% -13% -10% -53%
Corporate G&A / Other (22%) (21) (14) (27) EV/EBITDA n.m n.m n.m n.m n.m
Total 97 64 124 EBITDA Margin 0% 0% 0% 0% 0%
Current NAV Multiple (Implied) 0.52x Dividend Per Share (£/sh) 0.00 0.00 0.00 0.00 0.00
VALUATION Target Multiple 0.75x 93p Dividend Yield 0.0% 0.0% 0.0% 0.0% 0.0%
Return on Assets (ROA) n.m n.m n.m n.m n.m
Return on Equity (ROE) n.m n.m n.m n.m n.m
Sensitivity Analysis NAV (p/sh) Return on Capital Employed (ROCE) n.m n.m n.m n.m n.m
Base case gold price forecast 124 Net Debt/EBITDA 0.8x 0.8x 1.7x 2.3x 7.6x
Base case +10% 170 Gearing (Debt/Equity) 0% 0% 0% 0% 97%
Base case -10% 63 Interest Cover n.m n.m n.m n.m n.m
Flat gold price (at spot $1,200/oz) 121 Shares Outstanding (m) 31 37 41 48 75
News Catalysts 2014 2015 2016 2017 2018 Income Statement 2012 2013 2014F 2015F 2016F
PFS Completed Revenue 0 0 0 0 0
Exploration results Cost of Sales 0 0 0 0 0
BFS G&A (3) (3) (3) (3) (3)
Funding Exploration 0 0 0 0 0
Construction EBITDA (3) (3) (3) (3) (3)
Production DD&A 0 0 0 0 0
Reserves & Resources (La India attributable) Gold EV/oz EBIT (3) (3) (3) (3) (3)
Reserves (P&P) Moz 0.7 51 Net Interest Expense 0 0 0 0 0
Resources (M&I) Moz 1.1 31 PBT (3) (3) (3) (3) (3)
Resources (M, I&I) Moz 2.3 15 Non-Recurring Items/Other 0 0 0 0 0
Production & Cost (attributable) 2016F 2017F 2018F 2019F Taxes/Recovery 0 0 0 0 0
Gold Production 000oz 0 0 82 88 Net Profit (Loss) - attributable (3) (3) (4) (3) (3)
EV/oz Production $/oz Au - - 414 384 Minority Interest (0) (0) (0) 0 0
Operating Cash cost (C1) $/oz 0 0 608 778 Cashflow 2012 2013 2014F 2015F 2016F
Total Cash Cost (C2) $/oz 0 0 648 815 Net Profit (Loss) (3) (3) (4) (3) (3)
All-in Sustaining Cost $/oz 0 0 742 917 DD&A 0 0 0 0 0
Non Recurring/Other 1 1 0 0 0
Working Cap. Changes 0 (1) 0 0 0
Cash Flow From Operations (2) (3) (3) (3) (3)
Capital Expenditure (4) (5) (1) 0 (22)
Acquis./Investments 0 0 0 0 0
Cash Flow From Investing (4) (5) (1) 0 (22)
Equity Issues (Net of Costs) 7 7 6 5 43
Net Borrowings 0 0 0 0 60
Dividends Paid & Other 0 0 0 0 0
Cash Flow From Financing 7 7 6 5 103
Net Change in Cash 1 (1) 3 2 78
Free Cash Flow (6) (8) (3) (3) (25)
Balance Sheet 2012 2013 2014F 2015F 2016F
Cash & Equivalents 2 2 5 7 85
Total Current Assets 3 3 6 8 86
PP&E & Mining Interests 0 0 0 0 22
Deferred taxation 0 0 0 0 0
Other 10 15 14 14 14
Total Assets 13 18 21 23 122
Short Term Debt 0 0 0 0 0
Current Liabilities 1 1 1 1 1
Assumptions (Real) 2013 2014F 2015F 2016F LT Long Term Debt 0 0 0 0 60
Gold Price ($/oz) 1,412 1,266 1,205 1,200 1,200 Other Long Term Liabilities 0 0 0 0 (0)
Silver Price ($/oz) 23.9 19.1 16.7 17.6 18.5 Total Liabilities 1 1 1 1 61
Exchange Rate (US$/£) 1.56 1.65 1.50 1.50 1.50 Shareholder Equity 13 18 20 22 62
Total Liab. & S/Holder Equity 13 18 21 23 122
Working Capital 2 3 5 7 85
Net Debt (Cash) (2) (2) (5) (7) (25)
0
250
500
750
1000
0
20
40
60
80
100
120
140
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
La India (open pit) Feeders La India (underground)
Artisanal Total Cash Cost AISC
Attrib. Gold Production ('000oz) Total Cash Cost / AISC ($/oz )
Condor Gold 9 April 2015
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange 39
Metals & MiningFor FCA purposes this is a Marketing Communication
AnalystsCailey BarkerTel: +44 (0)20 7260 [email protected]
Phil SwinfenTel: +44 (0)20 7260 [email protected]
This research was preparedand approved by
Numis Securities LimitedThe London Stock Exchange Building10 Paternoster SquareLondon EC4M 7LT
+44 (0)20 7260 [email protected]
Registered No 02285918. Authorised andRegulated by The Financial ConductAuthority. A Member of the LondonStock Exchange
9 April 2015
BUY
Current Share Price 49pTarget Price 90pMarket Capitalisation £80mShares In Issue 162mRIC/BLBG DALR.L/DALR LNAvg. Daily Volume (3M) 24,693
Current share price(s) timed at 7:00AM on 07/04/15
Dec- 14 Jan- 15 Feb- 15 Mar- 15 Apr- 15
6560555045403530
Share Price
Dalradian ResourcesRelat ive to UK Market
Performance (%) 1M 3M 12M
Absolute -11 28 n/a
Relative -11 18 n/a
Source: Datastream (relative to UK-DS Market index)
Dalradian ResourcesEstimate Changes
The Golden Shamrock
We maintain our BUY recommendation and 90p TP, despite our new commodityprice forecasts and changes to our model.
● Company Snapshot. Dalradian is an AIM/TSX-listed gold developer based inNorthern Ireland. Its flagship asset is the high grade 3.5Moz Curraghinalt project, whichis undergoing a PFS, expected to produce 162kozpa at an AISC of <$700/oz from2019.
● Investment Thesis. We view Dalradian as a rare investment opportunity for low-risk,high-grade exposure in the junior gold space. After successfully defining an attractiveand sizeable project in under 4 years, it is now de-risking it through permitting andfeasibility. The project is one of the few high grade gold projects in the world, locatedin a developed jurisdiction with low costs/capex and excellent infrastructure. We seeplenty of upside potential in what could well become a new gold belt. Grade is king -Curraghinalt has a decent 3.5Moz resource at a high grade of 9.3g/t (diluted). The 2014revised PEA envisaged a conventional 620ktpa shallow underground/CIL operation.Cash costs and capital intensity are bottom quartile at $485/oz and $86/oz (capex$250m). A PFS is expected to be completed by the year end, which is investigating anumber of potential options which should enhance the project. Location, Location -Strong government and local community support. Like its neighbour, Northern Irelandis pro-investment and mining friendly. It has already approved use of explosives forDALR's underground program and we expect to see a similar success story as WolfMinerals has enjoyed. With strong support and first world infrastructure we think that itwould be when, rather than if, the project gets developed. Plenty of upside - We seeplenty of upside, including a reduction in NI tax to 12% (TBA soon), increased mine life,plus exploration upside - open in all directions on a largely unexplored 12km gold trend,which we ascribe no value to. We believe the region has potential to become a major+10Moz gold district. Value to be had - The shares are trading behind its high gradepeers and we would expect a re-rating as it moves through the stages of feasibility andde-risks towards production. We see plenty of newsflow this year to drive the shareswith exploration results, permitting, underground development, resource update andPFS results.
● Valuation. 0.5x P/NAV (bottom of 0.5-1x P/NAV range for gold pre-producers).
● Risks. Low: Project development, financing, permitting.
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange40
Figure 1: Model summary
Source: Company & Numis Securities Research
Dalradian Resources Ticker DALR.L Market Capitalisation £80m Financial Year End Dec
BUY Share Price £0.49 Enterprise Value (EV) £58m Reporting Currency C$
£0.90 Implied Return 84% Net Debt (Cash) -$33m Shares in Issue 163m
Valuation Key Metrics 2014 2015F 2016F 2017F 2018F
Net Asset Value Disc Rate NAV (%) $m C$/sh £/sh EPS (C$/sh) (0.06) (0.04) (0.06) (0.04) (0.05)
Curraghinalt (100%) 10% 111% 530 3.70 1.97 EPS Growth 77% 36% -67% 42% -44%
Exploration Properties 0% 0 0.00 0.00 P/E n.m n.m n.m n.m n.m
Sub-total 530 3.70 1.97 CFPS (C$/sh) (0.04) (0.03) (0.03) (0.02) (0.05)
Cash & Equivalents 7% 33 0.23 0.12 P/CFPS n.m n.m n.m n.m n.m
Debt 0% 0 0.00 0.00 FCFPS (C$/sh) (0.12) (0.21) (0.15) (0.44) (0.68)
Corporate G&A / Other (18%) (87) (0.61) (0.32) P/FCFPS n.m n.m n.m n.m n.m
Total 476 C$3.32 £1.76 FCF Yield -13% -23% -16% -48% -74%
Current NAV Multiple (Implied) 0.28x EV/EBITDA n.m n.m n.m n.m n.m
VALUATION Target Multiple 0.50x C$1.66 £0.88 EBITDA Margin 0% 0% 0% 0% 0%
Dividend Per Share (C$/sh) 0.00 0.00 0.00 0.00 0.00
Dividend Yield 0.0% 0.0% 0.0% 0.0% 0.0%
Return on Assets (ROA) -8% -6% -10% -5% -4%
Return on Equity (ROE) -9% -6% -10% -5% -7%
Return on Capital Employed (ROCE) -9% -7% -10% -5% -5%
Net Debt/EBITDA 4.2x 2.3x 0.3x 0.7x -9.8x
Gearing (Debt/Equity) 0% 0% 0% 0% 97%
Sensitivity Analysis NAV (£/sh) 18F EPS 18F CFPS Interest Cover n.m n.m n.m n.m n.m
Base case gold price forecast 1.76 (0.05) (0.05) Shares Outstanding (m) 120 163 174 326 326
Base case +10% 2.28 (0.05) (0.05) Income Statement 2014 2015F 2016F 2017F 2018F
Base case -10% 1.37 (0.05) (0.05) Revenue 0 0 0 0 0
Flat gold price (at spot $1,200/oz) 1.70 (0.05) (0.05) Cost of Sales 0 0 0 0 0
News Catalysts H1 15 H2 15 2016 2017 G&A (7) (6) (11) (11) (12)
EIA preparation & submission Exploration 0 0 0 0 (10)
UG development Other 0 0 0 0 0
Resource update EBITDA (7) (6) (11) (11) (22)
Pre-Feasibility Study Q4 DD&A 0 0 0 0 0
Definitive Feasibility Study & Permitting EBIT (7) (6) (11) (11) (22)
Financing & Construction Net Interest Expense 0 0 0 0 0
Reserves & Resources (attributable) Tonnage Grade Gold EV/oz PBT (7) (6) (11) (11) (22)
Reserves (P&P) Moz 0 0.0 0.0 0 Non-Recurring Items/Other 0 0 0 0 0
Resources (M&I) Moz 3 10.4 1.0 88 Taxes/Recovery 0 0 0 0 6
Resources (Total) Moz 11 9.9 3.5 25 Net Profit (Loss) - attributable (7) (6) (11) (11) (17)
Production & Cost 2017F 2018F 2019F 2020F Minority Interest 0 0 0 0 0
Gold Production (consolidated) 000oz 0 0 221 171 Cashflow 2014 2015F 2016F 2017F 2018F
Gold Production (attributable) 000oz 0 0 221 171 Net Profit (Loss) (7) (6) (11) (11) (17)
EV/oz Production (attributable) $/oz Au 0 0 401 517 DD&A 0 0 0 0 0
Cash Operating Cost $/oz 0 0 323 345 Non Recurring/Other 1 1 5 5 (0)
Total Cash Cost (net by-products) $/oz 0 0 402 426 Working Cap. Changes 1 0 0 0 0
All-in Sustaining Cost $/oz 0 0 479 519 Cash Flow From Operations (5) (5) (6) (6) (17)
Capital Expenditure (9) (30) (20) (138) (206)
Acquis./Investments (1) 0 0 0 0
Cash Flow From Investing (10) (30) (20) (138) (206)
Equity Issues (Net of Costs) 38 19 15 148 0
Net Borrowings 0 0 0 0 222
Dividends Paid & Other 0 0 0 0 0
Cash Flow From Financing 38 19 15 148 222
Net Change in Cash 23 (15) (11) 4 (1)
Free Cash Flow (14) (35) (26) (144) (223)
Balance Sheet 2014 2015F 2016F 2017F 2018F
Cash & Equivalents 30 14 4 8 6
Total Current Assets 33 18 7 11 10
PP&E & Mining Interests 49 79 99 237 443
Deferred taxation 0 0 0 0 0
Other 2 2 2 2 2
Total Assets 84 98 107 249 454
Short Term Debt 0 0 0 0 0
Current Liabilities 3 3 3 3 3
Assumptions (Real) 2017F 2018F 2019F 2020F LT Long Term Debt 0 0 0 0 222
Gold Price ($/oz) 1,200 1,200 1,200 1,200 1,200 Other Long Term Liabilities 0 0 0 0 0
Silver Price ($/oz) 18.6 18.5 18.5 18.5 18.5 Total Liabilities 3 3 3 3 225
Exchange Rate (US$:£) 1.50 1.50 1.50 1.50 1.50 Shareholder Equity 80 95 104 245 229
Exchange Rate (C$:US$) 1.25 1.25 1.25 1.25 1.25 Total Liab. & S/Holder Equity 84 98 107 249 454
Working Capital 30 15 4 8 7
Net Debt (Cash) (30) (14) (4) (8) 216
0
250
500
750
0
50
100
150
200
250
2016F 2017F 2018F 2019F 2020F 2021F 2022F 2023F 2024F
Curraghinalt Total Cash Cost AISC
Gold Production ('000oz, 100% basis) Total Cash Cost / AISC ($/oz Au)
Dalradian Resources 9 April 2015
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange 41
Metals & MiningFor FCA purposes this is a Marketing Communication
AnalystsCailey BarkerTel: +44 (0)20 7260 [email protected]
Phil SwinfenTel: +44 (0)20 7260 [email protected]
This research was preparedand approved by
Numis Securities LimitedThe London Stock Exchange Building10 Paternoster SquareLondon EC4M 7LT
+44 (0)20 7260 [email protected]
Registered No 02285918. Authorised andRegulated by The Financial ConductAuthority. A Member of the LondonStock Exchange
9 April 2015
HOLD
Current Share Price 65pTarget Price 60pMarket Capitalisation £383mShares In Issue 589mRIC/BLBG FXPO.L/FXPO LNAvg. Daily Volume (3M) 1,110,586Net Cash/(Debt) (m) (12/15F) $(506.4)m
Current share price(s) timed at 7:00AM on 07/04/15
Apr- 14 Jul- 14 Oct- 14 Jan- 15 Apr- 15
180160140120100806040
Share Price
FerrexpoRelat ive to UK Market
Performance (%) 1M 3M 12M
Absolute 18 18 -58
Relative 17 9 -60
Source: Datastream (relative to UK-DS Market index)
FerrexpoEstimate Changes
Pellet Protection
We maintain our HOLD recommendation and 60p TP, despite our revisedcommodity price forecasts and changes to our model.
● Company Snapshot. FTSE250 iron ore producer in Ukraine. 6th largest pelletproducer in the world with integrated logistics capability and 20Bnt in resources.Steadily increasing production from its 12Mtpa Poltava (FPM) and Yeristovo (FYM)mines; with blue sky from Belanovskoye (FBM). Also owns 14% of Ferrous Resources.
● Investment Thesis. Pellet premium - Production gently ticking up as plant upgradeshave been made, increasing to 12Mtpa. C1 costs are down below $40/t, helped bymore efficient FYM ore, cost savings and fx devaluation ($4/t per 10% UAH), althoughexpected to see inflationary increases (>10%) into 2016. Produces a premium qualitypellet and remains competitive on the global pellet cost curve (c.$20/t premium toChina 62% CFR price, comprising $29/t pellet premium, $7.5/t for 65%, less $13/t freight). No impact from Ukraine issues at present. We estimate AISC of c.$60/t(C1 $40/t, plus $4/t G&A, $6/t sustaining capex, $9/t freight to border), plus $7/t fordebt interest and tax, leaving a small margin at current iron ore prices. Businessimprovement - All now complete - Quality upgrade programme (100% 65% pelletsby end 2015), 12Mtpa capacity upgrade, Mine Life Extension (2038), plus marketing,cost and logistics improvements. 10Mtpa concentrator at FYM has been postponeduntil market improves, with modest capex expenditure to continue (NUMe 2019/20,$850m capex, phased development likely). Balance sheet holding - Well managedand conservative keeping net debt to EBITDA within its financial parameters; furtherrefinancing expected ($576m to repay by April 2016 from bank amortisation and re-financed Eurobond). Consistent dividend payer (5% yield).
● Guidance. 2015: 11.5-12Mt (12Mtpa run rate by year end).
● Preview Q1 IMS (16 Apr). Production up 2.5% y-o-y at 2.8Mt, a quarterly record. Highgrade 65% Fe pellets are now at 85%, up 48% y-o-y. We forecast a small premium tobenchmark prices; pellet premiums being maintained. C1 costs continuing to fall at $36/t, down y-o-y; continuing to benefit from higher production volumes and fx devaluation.Net debt up down slightly at $650m.
● Valuation. Blend of 1x NAV/7x P/E (bottom of 7-12x P/E range for bulk miners).
● Risks. High: Ukraine politics - access & supply lines, VAT receivables, legal case.
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange42
1
Figure 1: Model summary
Source: Company & Numis Securities Research
Ferrexpo Ticker FXPO.L Market Capitalisation £381m Financial Year End Dec
HOLD Share Price £0.65 Enterprise Value (EV) £833m Reporting Currency US$
£0.60 Implied Return -8% Net Debt (Cash) $678m Shares in Issue 585m
Valuation Key Metrics 2013 2014 2015F 2016F 2017F
Net Asset Value Disc Rate NAV (%) $m $/sh £/sh EPS ($/sh) 0.45 0.30 0.11 0.18 0.15
Poltava (FPM) & Yeristovo (FYM) 12% 355% 1,686 2.88 1.92 EPS Growth 22% -33% -63% 64% -19%
Sub-total 1,686 2.88 1.92 P/E 2.2x 3.2x 8.8x 5.4x 6.7x
Investments (Ferrous - 14.4%) 0 0.00 0.00 CFPS ($/sh) 0.86 0.73 0.40 0.48 0.40
Cash & Equivalents 132% 627 1.07 0.71 P/CFPS 1.1x 1.3x 2.4x 2.1x 2.5x
Debt (275%) (1,305) (2.23) (1.49) FCFPS (£/sh) (0.06) 0.09 0.31 0.23 0.21
Corporate G&A (112%) (533) (0.91) (0.61) P/FCFPS n.m 10.6x 3.2x 4.2x 4.7x
Total 475 0.81 £0.54 FCF Yield -7% 9% 32% 24% 21%
Current NAV Multiple (Implied) 1.20x EV/EBITDA 2.5x 2.5x 5.5x 4.7x 5.6x
Earnings Value $/sh £/sh EBITDA Margin 32% 36% 23% 24% 20%
EPS (1 year forward) 0.13 0.09 Dividend Per Share ($/sh) 0.13 0.13 0.05 0.06 0.04
Current P/E multiple (implied) 7.6x Dividend Yield 13.6% 13.5% 5.0% 5.7% 4.6%
Blended Valuation Target Multiple Weight Return on Assets (ROA) 9% 8% 3% 7% 6%
NAV valuation 1.0x 50% £0.54 Return on Equity (ROE) 15% 24% 8% 12% 9%
Earnings valuation 7.0x 50% £0.60 Return on Capital Employed (ROCE) 19% 27% 13% 18% 15%
VALUATION £0.57 Net Debt/EBITDA 1.3x 1.4x 2.3x 1.6x 1.5x
Sensitivity Analysis NAV (£/sh) 15F EPS 15F CFPS Gearing (Debt/Equity) 59% 182% 122% 63% 49%
Base case iron ore price forecast 0.54 0.18 0.48 Interest Cover -0.1x -0.1x -0.3x -0.2x -0.1x
Base case +10% 1.55 0.28 0.60 Shares Outstanding (m) 585 585 585 585 585
Base case -10% (0.47) 0.08 0.35 Income Statement 2013 2014 2015F 2016F 2017F
Flat iron ore price (at spot $50/t) (1.06) 0.02 0.28 Revenue 1,581 1,388 998 1,107 1,119
News Catalysts 2014 2015 2016 2017 Cost of Sales (773) (648) (529) (588) (670)
Yeristovo concentrator decision Selling and distribution expenses (336) (312) (290) (300) (270)
Poltava Quality upgrade project G&A and Other operating expenses (71) (20) (40) (40) (48)
Poltava mine life extension project EBITDA 506 496 225 268 222
Yeristovo concentrator production (stage 2) 2020 DD&A 100 82 81 85 87
Reserves & Resources Tonnage Grade Iron EV/t EBIT 401 409 140 179 131
Reserves (P&P) Mt 1,491 32% 477 2.62 Net Interest Expense (64) (49) (63) (51) (28)
Resources (M&I) Mt 4,721 32% 1,511 0.83 Exceptionals and Other (32) (107) 3 3 3
Resources (Inferred) Mt 2,088 31% 647 1.93 PBT 305 252 80 132 106
Production & Cost (attributable) 2014 2015F 2016F 2017F Taxes/Recovery (42) (70) (14) (24) (19)
Poltava (FPM) Mt pellets 7.6 7.8 8.2 8.2 Net Profit (Loss) 262 176 65 106 86
Yerostovo (FYM) Mt pellets 3.4 3.8 3.8 3.8 Minority Interest 2 6 1 2 1
Belanovskoye Mt conc 0.0 0.0 0.0 0.0 Cashflow 2013 2014 2015F 2016F 2017F
Total Mt Fe 11.0 11.6 12.0 12.0 Net Profit (Loss) 262 176 65 106 86
C1 Cost $/t Fe 46 37 43 48 DD&A 100 82 81 85 87
All-in Sustaining Cost $/t Fe 71 56 62 65 Non Recurring/Other (26) 43 35 24 2
Working Cap. Changes (103) (15) 69 (5) 0
Cash Flow From Operations 233 286 251 210 174
Capital Expenditure (271) (233) (70) (75) (53)
Investments/Sale of Assets (87) 9 2 1 (0)
Cash Flow From Investing (357) (224) (68) (74) (53)
Equity Issues (Net of Costs) 0 0 0 0 0
Net Borrowings 7 274 (354) (400) (100)
Dividends Paid & Other (89) (80) (29) (33) (26)
Cash Flow From Financing (82) 193 (383) (433) (126)
Net Change in Cash (206) 234 (200) (297) (5)
Free Cash Flow (38) 54 181 135 122
Balance Sheet 2013 2014 2015F 2016F 2017F
Cash & Equivalents 390 627 426 129 124
Total Current Assets 915 932 738 447 442
PP&E 1,534 926 915 906 872
Other 483 277 203 203 204
Total Assets 2,932 2,135 1,856 1,556 1,517
Short Term Debt 101 248 0 0 0
Current Liabilities 211 329 82 83 83
Long Term Debt 928 1,056 951 551 451
Other Long Term Liabilities 58 32 43 54 65
Total Liabilities 1,197 1,417 1,075 687 598
Assumptions (Real) 2014 2015F 2016F 2017F LT Shareholder Equity 1,735 718 781 868 919
Iron Ore Price ($/t 62% Fe) 97 55 59 60 60 Total Liab. & S/Holder Equity 2,932 2,135 1,856 1,556 1,517
Iron Ore Price Received ($/t) 116 77 82 82 82 Working Capital 704 602 656 364 359
Exchange Rate (US$/£) 1.65 1.50 1.50 1.50 1.50 Net Debt (Cash) 639 678 524 421 326
0
25
50
75
100
0
5
10
15
04 05 06 07 08 09 10 11 12 13 14 15F 16F 17F 18F
Poltava (FPM) Yerostovo (FYM) C1 Cost AISC
Fe Production (Mt) C1 Cost / AISC ($/t)
0%
25%
50%
75%
100%
0
250
500
750
04 05 06 07 08 09 10 11 12 13 14 15F 16F 17F 18F
EBITDA EBITDA Margin
Group EBITDA ($m) EBITDA Margin
Ferrexpo 9 April 2015
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange 43
Metals & MiningFor FCA purposes this is a Marketing Communication
AnalystsCailey BarkerTel: +44 (0)20 7260 [email protected]
Phil SwinfenTel: +44 (0)20 7260 [email protected]
This research was preparedand approved by
Numis Securities LimitedThe London Stock Exchange Building10 Paternoster SquareLondon EC4M 7LT
+44 (0)20 7260 [email protected]
Registered No 02285918. Authorised andRegulated by The Financial ConductAuthority. A Member of the LondonStock Exchange
9 April 2015
ADDFrom Buy
Current Share Price 880pTarget Price 1,000pMarket Capitalisation £5.3bnShares In Issue 601mRIC/BLBG FQM.L/FQM LNAvg. Daily Volume (3M) 29,915Net Cash/(Debt) (m) (12/15F) $(4,846.2)mBroker Yes
Current share price(s) timed at 7:00AM on 07/04/15
Apr- 14 Jul- 14 Oct- 14 Jan- 15 Apr- 15
1600
1400
1200
1000
800
600
400
Share Price
First Quantum MineralsRelat ive to UK Market
Performance (%) 1M 3M 12M
Absolute 12 -3 -19
Relative 11 -11 -23
Source: Datastream (relative to UK-DS Market index)
First Quantum MineralsEstimate Changes
Building Through the Cycle
We downgrade to an ADD recommendation and decrease our TP to £10.00, from£10.50, due to our revised commodity price forecasts and changes to our model.
● Company Snapshot. TSX/LSE-listed major +400ktpa global copper producer with 7operating mines and 5 development projects across 8 countries. It's flagship assetsare the Kansanshi & Sentinel mines in Zambia and the Cobre Panama project.
● Investment Thesis. Superior growth - Plans to grow to 1.1Mtpa by 2018, from thecurrent +400ktpa; 2015: ramp-up of 300ktpa Sentinel project and Zambia smelter,Enterprise nickel in H2 2015, Kansanshi 60-70kpta sulphide expansion 2017, 320ktpaCobre Panama project Q4 2017 ($6.4bn). Longer term: Haquira & Taca Taca. Bestin Class - FQM is a leader in the copper space, having developed 5 mines in last10 years, on time and budget, and at costs well below industry norms. It has a trackrecord of adding value at its projects and has been able to exceed expectations andre-invent itself from the DRC/Zambia into a global player. Challenging year - Withdevelopment project build out, smelter constraints and power issues in Zambia, plusbuild up of activities at Cobre Panama, we see 2015 as a big and challenging year forFQM, operationally and financially. Debt has been restructured and covenants relaxed;should be ample headroom ($2bn) but we are in a period of peak capex, so will needto be well managed, in our view (gearing 60%, Net Debt/EBITDA 3.5x).
● Guidance. 2015: 410-440kt copper (560-640kt inc. Sentinel), 32-40kt nickel,218-247koz gold; C1 cost $1.30-1.55/lb Cu and $4.80-5.30/lb Ni. Capex $1.2-1.4bn.
● Preview Q1. Better quarter at 118kt copper, up 12% q-o-q, gold flat at 56koz and nickeldown at 4.8kt (Q4 2014 105kt Cu, 56koz Au, 10kt Ni). C1 costs slightly 8% y-o-y at$1.44/lb Cu and $6.74/lb Ni (Q4 2014 $1.33/lb). Kansanshi flat but should see orecoming though from Sentinel. Ravensthorpe down following leach tank failure. Othersrelatively flat with grades and tonnage holding up ok. Financials - EPS $0.16 (NPAT$94m), up q-o-q (Q4 2014 $0.13) and EBITDA of $315m. Restructured balance sheetto remain debt heavy: net debt of $5.7bn ($0.6bn cash). We look to see the progresson ramp up of Sentinel and the smelter.
● Valuation. Blend of 1X NAV/12x P/E (upper end 7-15x P/E range for coppers).
● Risks. High: Zambian tax, politics & outstanding VAT, power supply & prices, Zambiansmelter constraints, capex overruns & balance sheet, project delivery.
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange44
1
Figure 1: Model summary
Source: Company & Numis Securities Research
First Quantum Minerals Ticker FQM.L Market Capitalisation £5,199m Financial Year End December
ADD Share Price £8.80 Enterprise Value (EV) £1,502m Reporting Currency US$
£10.00 Implied Return 14% Net Debt (Cash) $5,546m Shares in Issue 591m
Valuation Key Metrics 2013 2014 2015F 2016F 2017F
Net Asset Value Disc Rate NAV (%) $m $/sh £/sh EPS - underlying ($/sh) 0.96 0.80 0.67 1.39 2.06
Kansanshi (80%) 10% 29% 3,099 6.45 4.30 EPS Growth (18%) (17%) (16%) 276% 48%
Guelb Moghrein (100%) 10% 3% 288 0.60 0.40 P/E 13.8x 16.5x 19.6x 9.5x 6.4x
Kevitsa (100%) 8% 13% 1,391 2.89 1.93 CFPS ($/sh) 1.55 1.26 3.09 4.63 4.24
Ravensthorpe (100%) 8% 14% 1,437 2.99 1.99 P/CFPS 8.5x 10.5x 4.3x 2.9x 3.1x
Sentinel (95%) 10% 17% 1,807 3.76 2.51 FCFPS ($/sh) (2.96) (1.47) (0.35) 1.12 0.39
Enterprise (100%) 12% 15% 1,608 3.35 2.23 P/FCFPS (4.5)x (9.0)x (37.7)x 11.8x 34.2x
Haquira (100%) 10% 9% 961 2.00 1.33 FCF Yield -22% -11% -3% 8% 3%
Las Cruces (100%) 8% 12% 1,244 2.59 1.73 EV/EBITDA 8.8x 10.3x 10.1x 6.5x 4.8x
Cayeli (100%) 10% 2% 242 0.50 0.34 EBITDA margin 38% 40% 33% 36% 41%
Pyhasalmi (100%) 8% 4% 446 0.93 0.62 Dividend Per Share ($/sh) 0.28 0.04 0.13 0.28 0.41
Cobre Panama (100%) 12% 32% 3,371 7.01 4.67 Dividend Yield 2.1% 0.3% 1.0% 2.1% 3.1%
Taca Taca Project (100%) 437 0.91 0.61 Return on Assets (ROA) 3% 6% 2% 4% 6%
Sub-total 16,331 33.97 22.65 Return on Equity (ROE) 6% 10% 4% 8% 10%
Corporate G&A / Other 11% (2%) (254) (0.53) (0.35) Return on Capital Employed (ROCE) 7% 5% 4% 7% 10%
Cash & Equivalents 4% 436 0.91 0.60 Net Debt/EBITDA 2.5x 3.9x 3.5x 2.1x 1.5x
Debt (57%) (5,982) (12.44) (8.30) Gearing (Debt/Equity) 44.8% 59.3% 59.4% 47.2% 41.8%
Total Net Asset Value 10,531 21.91 £14.60 Interest Cover 18.8x 12.9x 6.4x 13.3x 17.8x
Current NAV multiple (Implied) 0.60x Shares Outstanding (m) 560 590 596 596 596
Earnings Value $/sh £/sh Income Statement 2013 2014 2015F 2016F 2017F
EPS - 1 year forward 0.67 0.45 Revenue 3,553 3,542 4,203 5,911 7,084
Current P/E multiple (implied) 19.6x Cost of sales (2,419) (2,544) (3,354) (4,454) (4,927)
Blended Valuation Target Multiple Weight G&A (123) (116) (107) (28) (28)
NAV valuation 1.00x 50% £14.60 Other (116) (41) (82) (21) (22)
Earnings valuation 12.0x 50% £5.38 EBITDA 1,352 1,413 1,379 2,104 2,924
VALUATION £9.99 DD&A 477 594 720 697 818
Sensitivity Analysis Valuation NAV/sh 15 EPS 15 CFPS EBIT 895 841 659 1,407 2,106
Base case metal price forecast £9.99 £14.60 $0.67 $3.09 Non-Recurring Items/Other - - - - -
Base case +10% £14.03 £22.02 $0.75 $3.21 Net finance income (expense) 5 11 10 (53) (116)
Base case -10% £7.30 £8.55 $0.75 $3.21 PBT 899 852 669 1,354 1,990
Using flat $2.50/lb Cu; $6.50/lb Ni £7.54 £12.00 $0.40 $2.71 Tax (370) 141 (201) (406) (597)
News catalysts 2014 2015 2016 2017 Net Profit (Loss) - attributable 459 835 401 829 1,225
Sentinel starts production Q3 Minority Interest 71 159 68 118 168
Smelter starts up (Zambia) Q4 Cashflow 2013 2014 2015F 2016F 2017F
Enterprise starts production H2 Net profit (loss) 530 993 468 948 1,393
Kansanshi sulphide expansion (60-70ktpa) Working capital change (65) 15 118 1,100 298
Cobre Panama starts production Q4 DD&A 477 594 720 697 818
Reserves (attributable) Tonnes Grade Metal EV / lb Non-recurring/other (72) (859) 532 14 19
Copper reserves (P&P): Cu-equiv 1,389 Mt 0.64% 8,875kt Cash Flow From Operations 869 744 1,839 2,759 2,528
Nickel reserves (P&P): Ni-equiv 358 Mt 0.64% 2,282kt Capital expenditure (2,802) (2,647) (1,545) (2,035) (2,363)
Combined reserves: Cu-equivalent 1,747 Mt 0.93% 16,177kt $0.06 /lb Acquis./investments/adjustments 4,069 (111) 776 - (190)
Production & cost 2014 2015F 2016F 2017F 2018F Cash Flow From Investing 1,267 (2,758) (769) (2,035) (2,553)
Copper production (kt) - cons'd 428 576 731 838 1,122 Borrowings 3,677 1,909 281 (260) (167)
Copper production (kt) - equity 331 485 633 653 689 Capital stock 2,274 188 - - -
Nickel production (kt) 46 42 87 85 81 Other (7,701) (437) - - -
Gold production (koz) 227 239 254 329 481 Cash Flow From Financing (1,750) 1,659 281 (260) (167)
EV per lb Cu-equiv prodn ($/lb Cu) 3.08 2.11 1.61 1.56 1.48 Net Change in Cash 386 (356) 1,351 464 (191)
C1 Cost ($/lb Cu) 1.35 1.42 1.47 1.27 1.17 Free Cash Flow (1,933) (1,903) 294 724 165
C1 Cost ($/lb Ni) 4.37 5.10 3.94 3.84 3.65 Balance Sheet 2013 2014 2015F 2016F 2017F
All-in Sustaining Cost ($/lb Cu) 1.69 1.72 1.62 1.42 1.33 Cash & equivalents 695 436 1,417 1,325 1,134
All-in Sustaining Cost ($/lb Ni) 6.34 7.40 4.37 4.29 4.11 Other current assets 1,933 1,678 1,883 3,813 4,305
PP&E & mining interests 11,986 14,719 15,544 18,109 19,654
Investments 58 33 33 33 33
Other non-current assets 800 957 (0) - -
Total Assets 15,471 17,824 18,878 23,281 25,126
Short-term debt 1,046 23 23 23 23
Other current liabilities 759 674 967 4,069 4,859
Long-term debt 3,027 5,929 6,240 5,774 5,608
Other non-current liabilities 2,597 1,134 1,134 1,161 1,179
Total Liabilities 6,383 7,736 8,341 11,003 11,645
Shareholder equity 7,968 8,913 9,305 10,840 11,899
Minority interest 1,120 1,175 1,232 1,438 1,582
Total Liab. & Equity 15,471 17,824 18,878 23,281 25,126
Working Capital 1,004 989 870 (300) (598)
Net Debt (Cash) 3,379 5,546 4,846 4,472 4,497
Assumptions (Real) 2014 2015F 2016F 2017F LT
Copper Price ($/lb) 3.11 2.71 2.89 2.92 2.50
Gold Price ($/oz) 1,266 1,205 1,200 1,200 1,200
Nickel Price ($/lb) 7.66 5.97 6.41 6.98 8.00
Exchange rate (US$/£) 1.65 1.50 1.50 1.50 1.50
0.00
0.50
1.00
1.50
2.00
0
200
400
600
800
1,000
1,200
1,400
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Kansanshi Guelb Moghrein Frontier Kevitsa Sentinel Haquira
Cayeli Pyhasalmi Cobre Panama Las Cruces Total gold AISC
Copper / Gold Production - Consolidated (kt/koz) C1 Cost / AISC ($/lb Cu)
0.00
2.00
4.00
6.00
8.00
10.00
0
20
40
60
80
100
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Ravensthorpe Kevitsa Enterprise C1 Cost
Nickel Production - Consolidated (kt) C1 Cost / AISC ($/lb Ni)
First Quantum Minerals 9 April 2015
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange 45
Metals & MiningFor FCA purposes this is a Marketing Communication
AnalystsCailey BarkerTel: +44 (0)20 7260 [email protected]
Phil SwinfenTel: +44 (0)20 7260 [email protected]
This research was preparedand approved by
Numis Securities LimitedThe London Stock Exchange Building10 Paternoster SquareLondon EC4M 7LT
+44 (0)20 7260 [email protected]
Registered No 02285918. Authorised andRegulated by The Financial ConductAuthority. A Member of the LondonStock Exchange
9 April 2015
BUY
Current Share Price 710pTarget Price 1,000pMarket Capitalisation £5.2bnShares In Issue 737mRIC/BLBG FRES.L/FRES LNAvg. Daily Volume (3M) 1,676,016Net Cash/(Debt) (m) (12/14F) $(738.5)m
Current share price(s) timed at 7:00AM on 07/04/15
Apr- 14 Jul- 14 Oct- 14 Jan- 15 Apr- 15
1100
1000
900
800
700
600
500
Share Price
FresnilloRelat ive to UK Market
Performance (%) 1M 3M 12M
Absolute 1 -12 -21
Relative 0 -19 -25
Source: Datastream (relative to UK-DS Market index)
FresnilloEstimate Changes
Investing in a Downturn
We maintain our BUY recommendation and increase our TP to £10, from £9, due toour new commodity price forecasts and changes to our model.
● Company Snapshot. FTSE 100 company and world’s largest primary silver producerwith 5 operating mines and 3 development projects in Mexico. Flagship assets are theFresnillo/Saucito mines and the Herradura district gold mines. 75% owned by Peñoles.
● Investment Thesis. Preferred silver play - A conservative, well run company with asuperior growth profile and premium quality assets that sit on the bottom of the costcurve. Gold revenue now switched to 55% following $450m acquisition of Newmont's44% in Herradura district mines. Superior growth - LT target of 65Mozpa Ag and+750kozpa Au by 2018 (more likely 80Mozpa, 1.3Mozpa or 2-2.5Mozpa AuEq).Saucito II started H2 2014 (10Mozpa Ag, 35kozpa Au, $235m capex), San Julian H22015 (10Mozpa Ag, 45kozpa Au, $515m capex), Fresnillo & Cienega optimisationprojects (2017, 10Mozpa at $170m and 20kozpa at $55m), Pyrites plant (4MozpaAg, 18kozpa Au, $105m), Mega Centauro pit and Centauro Deep at Herradura(2019/20, 280/225kozpa, $155/365m), Juanicipio (2018, 10Mozpa Ag, 30kozpa Au,$300m), Orisvyo (2018, 136kozpa, $350m). More projects likely with sizeable $225mexploration budget. Balance sheet tight - Net debt of $350m as YE, post Newmontacquisition and $800m in senior notes. Hedge on 44% on Herradura projects. Peakcapex in 2015/6, we estimate an additional $300m in debt will be needed. High marginbusiness with low cost operations (Fresnillo AISC $9/oz, Saucito $7/oz, EBITDA margin45%). Little risk and divi with 4-4.5% (inc. special). Chinks in armour - 2013/14 weredifficult years, with land issues, tax changes, plus labour and cost pressures againstfalling grades and rising capex. Conducting a group wide review of its land rights andcommunity relations but outside of this we now see limited risks.
● Guidance. 2015: 45-47Moz silver (inc. Silverstream) and 670-685koz gold. Capex$700m.
● Preview Q1 (15 Apr). Production down q-o-q at 11.3Moz silver (inc. Silverstream) and326koz gold (Q4 2014 12.2Moz Ag, 360koz Au). Production from Saucito slightly loweras the expansion ramps up, Fresnillo still struggling with tonnage and lower grades.Herradura and Cienega flat.
● Valuation. Blend of 2x NAV/15x P/CF (top of 1-2x NAV/5-15x P/CF range for silvers).
● Risks. Low: Land issues, Mexican tax.
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange46
Figure 1: Model summary
Source: Company & Numis Securities Research
Fresnillo Ticker FRES.L Market Capitalisation £5,232m Financial Year End Dec
BUY Share Price £7.10 Enterprise Value (EV) £5,463m Reporting Currency US$
£10.00 Implied Return 41% Net Debt (Cash) $347m Shares in Issue 737m
Valuation Key Metrics 2013 2014 2015F 2016F 2017F
Net Asset Value Disc Rate NAV (%) $m $/sh £/sh EPS ($/sh) 0.33 0.15 0.09 0.18 0.27
Fresnillo (100%) 8% 33% 2,370 3.22 2.14 EPS Growth -68% -55% -37% 94% 48%
Saucito (100%) 8% 32% 2,239 3.04 2.03 P/E 32.3x 72.4x 115.5x 59.6x 40.2x
Cienega (100%) 8% 4% 269 0.37 0.24 CFPS ($/sh) 1.03 0.77 0.68 0.97 1.29
Herradura (100%) 8% 23% 1,613 2.19 1.46 P/CFPS 10.4x 13.8x 15.7x 11.0x 8.3x
Soledad & Dipolos (100%) 8% 0% 0 0.00 0.00 FCFPS ($/sh) (0.17) (0.41) (0.54) (0.61) (0.21)
Noche Buena (100%) 8% 2% 149 0.20 0.13 P/FCFPS n.m n.m n.m n.m n.m
Juanicipio (56%) 10% 4% 312 0.42 0.28 FCF Yield -2% -4% -5% -6% -2%
San Julian (100%) 10% 9% 611 0.83 0.55 EV/EBITDA 7.5x 9.6x 10.7x 7.4x 5.7x
Orisyvo (100%) 10% 4% 308 0.42 0.28 EBITDA Margin 45% 40% 35% 41% 41%
Sub-total 7,871 10.68 7.12 Dividend Per Share ($/sh) 0.69 0.12 0.05 0.07 0.13
Silverstream Contract 3% 198 0.27 0.18 Dividend Yield 6.5% 1.1% 0.5% 0.7% 1.2%
Cash & Equivalents 6% 449 0.61 0.41 Return on Assets (ROA) 6% 3% 2% 3% 4%
Debt (11%) (796) (1.08) (0.72) Return on Equity (ROE) 8% 4% 3% 5% 8%
Corporate G&A / Other (9%) (637) (0.86) (0.58) Return on Capital Employed (ROCE) 12% 7% 5% 9% 12%
Total 7,086 9.62 £6.41 Net Debt/EBITDA -0.6x 1.1x 1.4x 1.6x 1.5x
Current NAV Multiple (Implied) 1.11x Gearing (Debt/Equity) 31% 35% 46% 60% 56%
Cash Flow Value $/sh £/sh Interest Cover 0.0x -0.3x -0.2x -0.1x -0.1x
CFPS (1 year forward) 0.75 0.50 Shares Outstanding (m) 730 737 737 737 737
Current P/CF multiple (implied) 14.2x Income Statement 2013 2014 2015F 2016F 2017F
Blended Valuation Target Multiple Weight Revenue 1,615 1,414 1,481 1,789 2,333
NAV valuation 2.0x 50% £12.82 Cost of Sales (608) (597) (771) (893) (1,223)
Cash Flow valuation 15.0x 50% £7.50 G&A (62) (68) (70) (71) (73)
VALUATION £10.16 Exploration (208) (169) (170) (172) (176)
Sensitivity Analysis NAV (£/sh) 15F EPS 15F CFPS Other (7) (13) 42 81 101
Base case silver price forecast 6.41 0.09 0.68 EBITDA 730 567 511 734 963
Base case +10% 8.09 0.20 0.86 DD&A (239) (295) (313) (353) (450)
Base case -10% 4.70 (0.02) 0.50 EBIT 488 246 198 381 512
Flat silver price (at spot $17/oz) 5.86 0.13 0.73 Net Interest Expense (15) (72) (41) (54) (57)
News Catalysts 2015 2016 2017 2018 PBT 473 174 157 327 456
San Julian starts production H2 Non-Recurring Items/Other (90) 77 0 0 0
Cienega optimisation project (5ktpd) Taxes/Recovery (122) (134) (89) (195) (260)
Fresnillo optimisation (10ktd) / pyrites plant projects Net Profit (Loss) - attributable 240 108 68 132 195
Herradura Mega Centauro / Centauro Deep projects 2019/20 Minority Interest 21 9 0 0 0
Juanicipio / Orisivyo projects Cashflow 2013 2014 2015F 2016F 2017F
Reserves & Resources (attributable) Silver Gold Gold Eq EV/oz Ag Net Profit (Loss) 261 117 68 132 195
Reserves (P&P) Moz 475 19.5 26.8 306 DD&A 239 295 313 353 450
Resources (M&I) Moz 1,287 23.5 43.3 189 Employee Profit Sharing (55) (20) (29) (36) (44)
Production & Cost (attributable) 2014 2015F 2016F 2017F Non Recurring/Other (33) (87) 29 36 44
Silver Production (inc Silverstream) 000oz 44,802 45,972 58,037 74,716 Working Cap. Changes 34 (183) (79) (116) (136)
Gold Production 000oz 596 674 747 795 Cash Flow From Operations 446 122 302 369 510
Gold Eq. Production 000oz 1,179 1,344 1,635 2,003 Capital Expenditure (572) (426) (701) (817) (664)
EV/oz Production $/oz AuEq 6,948 6,095 5,011 4,091 Acquisitions & Exploration 87 (213) 341 47 49
Total Cash Cost (silver, by-product) $/oz Ag 4.9 6.3 6.7 7.4 Cash Flow From Investing (485) (638) (360) (771) (615)
Total Cash Cost (gold, by-product) $/oz Au 552 698 674 690 Equity Issues (Net of Costs) 346 (44) 0 0 0
All-in Sustaining Cost (silver) $/oz Ag 7.9 8.4 8.0 8.4 Net Borrowings 794 0 270 370 (30)
All-in Sustaining Cost (gold) $/oz Au 894 1,005 998 985 Dividends Paid & Other (465) (533) (39) (54) (98)
Cash Flow From Financing 676 (577) 231 316 (128)
Net Change in Cash 638 (1,097) 173 (86) (233)
Free Cash Flow (126) (304) (399) (448) (154)
Balance Sheet 2013 2014 2015F 2016F 2017F
Cash & Equivalents 1,252 449 328 242 9
Total Current Assets 1,773 1,178 1,142 1,198 1,131
PP&E & Mining Interests 1,838 1,969 2,358 2,822 3,035
Silverstream Contract 373 392 348 305 258
Deferred taxation 56 58 56 53 52
Other 416 537 493 450 402
Total Assets 4,084 3,742 4,049 4,522 4,620
Short Term Debt 41 0 0 0 0
Current Liabilities 144 140 147 173 203
Long Term Debt 795 796 1,066 1,436 1,406
Other Long Term Liabilities 473 504 504 504 504
Total Liabilities 1,412 1,440 1,718 2,114 2,114
Shareholder Equity 2,672 2,302 2,331 2,409 2,507
Total Liab. & S/Holder Equity 4,084 3,742 4,049 4,522 4,620
Assumptions (Real) 2014 2015F 2016F 2017F LT Working Capital 1,629 1,038 995 1,025 928
Gold Price ($/oz) 1,266 1,205 1,200 1,200 1,200 Net Debt (Cash) (415) 347 738 1,194 1,397
Silver Price ($/oz) 19.1 16.7 17.6 18.6 18.5
Exchange Rate (US$/£) 1.65 1.50 1.50 1.50 1.50
0.0
2.5
5.0
7.5
10.0
12.5
0
25
50
75
05 06 07 08 09 10 11 12 13 14 15F 16F 17F 18F
Fresnillo Cienega Herradura Soledad & DipolosSaucito Juanicipio San Julian Noche BuenaOrisyvo Total Cash Cost AISC
Attrib. Silver Production (Moz) Total Cash Cost / AISC ($/oz AgEq)
0
250
500
750
1000
1250
0
250
500
750
1,000
05 06 07 08 09 10 11 12 13 14 15F 16F 17F 18F
Attrib. Gold Production ('000oz) Total Cash Cost / AISC ($/t AuEq)
Fresnillo 9 April 2015
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange 47
Metals & MiningFor FCA purposes this is a Marketing Communication
AnalystsPhil SwinfenTel: +44 (0)20 7260 [email protected]
Cailey BarkerTel: +44 (0)20 7260 [email protected]
This research was preparedand approved by
Numis Securities LimitedThe London Stock Exchange Building10 Paternoster SquareLondon EC4M 7LT
+44 (0)20 7260 [email protected]
Registered No 02285918. Authorised andRegulated by The Financial ConductAuthority. A Member of the LondonStock Exchange
9 April 2015
BUY
Current Share Price 53pTarget Price 75pMarket Capitalisation £287mShares In Issue 541mRIC/BLBG GEM.L/GEM LNAvg. Daily Volume (3M) 173,356
Current share price(s) timed at 7:00AM on 07/04/15
Apr- 14 Jul- 14 Oct- 14 Jan- 15 Apr- 15
60
55
50
45
40
35
Share Price
GemfieldsRelat ive to UK Market
Performance (%) 1M 3M 12M
Absolute 5 15 42
Relative 5 5 35
Source: Datastream (relative to UK-DS Market index)
GemfieldsEstimate Changes
A Uniquely Colourful Story
We maintain our BUY recommendation but increase our TP to 75p, from 70p, dueto our new commodity price forecasts and changes to our model.
● Company Snapshot. AIM-listed Gemfields is the world's largest producer of colouredgemstones. Main assets: the producing Kagem emerald mine in Zambia, Montepuezruby mine in Mozambique, early stage sapphires in Sri Lanka and the Fabergé luxuryjewellery brand. A mining stock with unique luxury retail exposure.
● Investment Thesis. First Mover Advantage. A fast growing business leveringexperience to consolidate the highly fragmented coloured gemstone industry.Gemfields has introduced mechanised mining, security of supply, a consistentmarketing message and a proprietary grading system to take control of the industryand stimulate demand. World-class Mines - Kagem produces 20% of the world'semeralds and Montepuez has the potential to match this with rubies. Kagem hasreached a steady production plateau, Montepuez has recently started ramp up fromtrial to full-scale mining. Coloured Gems - Produces a mix of stones which are sold atseparate lower and higher quality auctions. Higher quality emeralds and rubies 10% ofproduction but 80% of revenues. Emeralds well established, but only two ruby auctionsso far. Potential for rubies to become flagship asset. Prices Up - Gemfields has seena 12-fold increase in received emerald prices since 2009 and demand continues toimprove. Luxury Exposure - Owns 100% of luxury brand, Fabergé, which providesdirect access to market coloured stones and has historically provided some protectionfrom broader commodity weakness. Hollywood Actress, Mila Kunis is Gemfields brandambassador. Solid Footing - Decent balance sheet, cash $50m, $86m inventory and$30m debt. Scope for further acquisitions.
● Guidance. FY15 Kagem 25-30Mcts emeralds, Montepuez 8Mcts rubies.
● Preview - Q1 Production. Production 5.6Mcts emeralds broadly in-line with previousquarter. Grade 200cpt and likely to be below 300cpt average run-rate. Unit operatingcosts $2.20/ct, up 10% from previous quarter. Production 2.3Mcts rubies, down 30%as mining focuses on lower volume, higher quality areas. Unit costs $1.8/ct in line withprevious quarter. Looking for more guidance on auction plan (and content) and newson the ramp up at Montepuez as the operation transitions to full scale mining.
● Valuation. TP blend 1x NAV/7.5x CF. (middle of 5-15x CF range for gem producers).
● Risks. Moderate. Gemstone mining highly variable, grade volatility, limited freefloat (Pallinghurst 74%), technical challenges for UG mining at Kagem. ZambianGovernment ban on emerald auctions outside Zambia. Mooted Zambian tax changes.
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange48
1
Figure 1: Model summary
Source: Company & Numis Securities Research
Gemfields Ticker GEM.L Market Capitalisation £287m Financial Year End June
BUY Share Price £0.53 Enterprise Value (EV) £274m Reporting Currency US$
£0.75 Implied Return 29% Net Debt (Cash) -$20m Shares in Issue 541m
Valuation Key Metrics 2013 2014 2015F 2016F 2017F
Net Asset Value Disc Rate NAV (%) $m $/sh £/sh EPS ($/sh) (0.05) 0.02 0.04 0.04 0.04
Kagem Emeralds (75%) 12% 55% 350 0.65 0.43 EPS Growth -115% 130% 139% 3% 1%
Montepuez Rubies (75%) 14% 37% 233 0.43 0.29 P/E n.m 49.0x 20.5x 19.8x 19.7x
Sub-total 583 1.08 0.71 CFPS ($/sh) (0.04) 0.10 0.15 0.15 0.16
Gemstone Inventories 10% 62 0.11 0.08 P/CFPS n.m 8.0x 5.4x 5.4x 5.0x
Faberge inventory & brand 16% 100 0.18 0.12 FCFPS (£/sh) (0.10) 0.05 0.02 0.02 0.03
Exploration & other licences 1% 5 0.01 0.01 P/FCFPS n.m 14.7x 41.4x 37.0x 31.3x
Cash & Equivalents 8% 50 0.09 0.06 FCF Yield -13% 7% 2% 3% 3%
Debt (5%) (30) (0.06) (0.04) EV/EBITDA n.m 2.7x 4.6x 4.4x 4.2x
Corporate G&A (22%) (139) (0.26) (0.17) EV/SALES 8.8x 2.6x 2.2x 2.0x 1.8x
Total 631 1.16 £0.77 EBITDA Margin 1% 37% 48% 46% 44%
Current NAV Multiple (Implied) 0.69x Dividend Per Share ($/sh) 0.00 0.00 0.00 0.00 0.00
Earnings Value $/sh £/sh Dividend Yield 0.0% 0.0% 0.0% 0.0% 0.0%
CPS (1 year forward) 0.15 0.10 Return on Assets (ROA) -6% 2% 4% 4% 4%
Current P/CF multiple (implied) 5.4x Return on Equity (ROE) -8% 0% 4% 3% 2%
Blended Valuation Target Multiple Weight Return on Capital Employed (ROCE) 0% 16% 22% 22% 22%
NAV valuation 1.00x 50% £0.77 Net Debt/EBITDA 0.8x -0.3x -0.2x -0.2x -0.3x
Cash flow valuation 7.5x 50% £0.73 Gearing (Debt/Equity) 4% 6% 9% 9% 5%
VALUATION £0.75 Interest Cover -0.6x 0.0x 0.0x 0.0x 0.0x
Sensitivity Analysis NAV (£/sh) 15F EPS 15F CFPS Shares Outstanding (m) 417 541 541 541 541
Base case gemstone price forecast 0.77 0.04 0.15 Income Statement 2013 2014 2015F 2016F 2017F
Base case +10% 0.78 0.04 0.15 Revenue 48 160 184 202 224
Base case -10% 0.61 0.04 0.15 Cost of Sales (35) (75) (77) (90) (107)
Flat gemstone price 0.70 0.04 0.15 Gross Profit 14 85 106 112 117
News Catalysts 2014 2015 2016 2017 (33) (48) (49) (50) (50)
Kagem - Fibolele & Libwente bulk sampling EBITDA 0 59 89 93 99
Sri Lanka Sapphire business DD&A 20 22 31 31 32
Acquisitions EBIT (20) 37 58 62 67
MRM- plant upgrade Net Interest Expense (0) (1) (2) (1) (1)
Expand auction platform Exceptionals and Other 0 (0) (0) 0 0
MRM ramp up PBT (20) 36 56 61 66
Resource (Kagem) Tonnage Grade E+B (Mcts) Taxes/Recovery (3) (20) (26) (26) (29)
Reserves (P&P) Mt - - - Net Profit (Loss) (23) 9 21 22 22
Resources (M&I) Mt 2.7 365 1,003 Minority Interest (0) 7 10 13 16
Resources (Inferred) Mt 0.01 24.5 0.22 Cashflow 2013 2014 2015F 2016F 2017F
Production & Cost (attributable) 2013 2014 2015F 2016F PAT (23) 16 31 35 38
Gemstone Production (E+B) Mcts 29.9 20.3 23.5 25.0 DD&A 20 22 31 31 32
Gemstone Production (Rubies) Mcts 1.9 6.5 10.8 16.1 Non Recurring/Other 5 23 28 27 29
Gemstone TCC (ROM Em+Ruby) $/ct 1.2 1.8 1.9 1.5 Working Cap. Changes (17) (7) (10) (13) (12)
Gemstone AISC (ROM Em+Ruby) $/ct 2.3 3.7 4.1 3.3 Cash Flow From Operations (15) 54 79 80 87
Capital Expenditure (8) (9) (36) (37) (36)
Stripping costs / Other (7) (11) (28) (5) (9)
Cash Flow From Investing (15) (20) (64) (42) (45)
Equity Issues (Net of Costs) 0 0 0 0 0
Net Borrowings 9 5 14 0 (10)
Dividends 0 0 0 0 0
Other (1) (5) (4) (10) (10)
Cash Flow From Financing 8 1 10 (10) (20)
Net Change in Cash (26) 26 12 2 (6)
Free Cash Flow (43) 29 10 12 14
Balance Sheet 2013 2014 2015F 2016F 2017F
Cash & Equivalents 11 37 50 52 45
Inventory 78 89 93 91 98
Total Current Assets 97 147 160 167 170
PP&E 229 229 253 264 276
Other 52 51 59 63 66
Total Assets 379 427 472 493 513
Short Term Debt 12 15 15 15 7
Current Liabilities 28 62 68 63 56
Long Term Debt 0 2 15 15 13
Other Long Term Liabilities 76 73 70 70 70
Assumptions (Real) 2013 2014F 2015F 2016F 2017F Total Liabilities 103 138 154 149 140
High Quality Emeralds ($/ct) 41.9 58.3 51.5 55.1 59.0 Shareholder Equity 275 289 319 345 373
Lower Quality Emeralds ($/ct) 2.87 3.24 3.12 3.38 3.70 Total Liab. & S/Holder Equity 379 427 472 493 513
Rubies ($/ct) 0.0 18.5 18.9 19.7 20.8 Working Capital 70 85 92 104 114
Wt. avg - all gemstones ($/ct) 7.7 15.0 7.6 12.3 12.9 Net Debt (Cash) 0 (20) (20) (21) (25)
Exchange Rate (US$/£) 1.56 1.65 1.50 1.50 1.50
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
0
5
10
15
20
25
30
35
40
45
50
06 07 08 09 10 11 12 13 14 15F 16F 17F 18F
Gemstone Production (E+B) Ruby Production AISC (Em+Rb)
Gemstone Production (Mcts) Gemstone Unit Cost ($/ct)
0
50
100
150
200
250
10 11 12 13 14 15F 16F 17F 18F
HQ Emeralds LQ Emeralds Rubies Other Revenue
Revenue ($m)
Gemfields 9 April 2015
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange 49
Metals & MiningFor FCA purposes this is a Marketing Communication
AnalystsCailey BarkerTel: +44 (0)20 7260 [email protected]
Phil SwinfenTel: +44 (0)20 7260 [email protected]
This research was preparedand approved by
Numis Securities LimitedThe London Stock Exchange Building10 Paternoster SquareLondon EC4M 7LT
+44 (0)20 7260 [email protected]
Registered No 02285918. Authorised andRegulated by The Financial ConductAuthority. A Member of the LondonStock Exchange
9 April 2015
BUY
Current Share Price AUD2Target Price AUc300Market Capitalisation AUD428,400,000Shares In Issue 252mRIC/BLBG HFR.AX/HFR AUAvg. Daily Volume (3M) 433,697Net Cash/(Debt) (m) (06/15F) AUc107.9mBroker Yes
Current share price(s) timed at 7:00AM on 07/04/15
Apr- 14 May- 14 Jul- 14 Sep- 14 Oct- 14
0.9
0.8
0.7
0.6
0.5
0.4
0.3
Share Price
Highfield ResourcesRelat ive to ASX200I
Performance (%) 1M 3M 12M
Absolute 68 143 347
Relative 67 124 325
Source: Datastream (relative to UK-DS Market index)
Highfield ResourcesEstimate Changes
Potash in Pamplona
We maintain our BUY recommendation and A$3.00 TP, despite our revisedcommodity price forecasts and changes to our model.
● Company Snapshot. ASX-listed potash junior focused in Spain. Its assets comprisethe Muga, Sierra del Perdón and Pintano projects, which are undergoing resourcedefinition and feasibility work. Javier is expected to commence production Q2 2017,producing 1.1Mtpa KCl at $135/t, with one of the lowest capital intensities in the world.
● Investment Thesis. Attractive - Three low-risk, shallow potash projects that can utiliselow-capital entry, conventional extraction plus strong local infrastructure and in-countryexpertise to fast track development in close proximity to end markets. Muga robust- DFS showed an NPV (10%) of $1.42bn and IRR of 52%. Production of 1.12Mtpaover 24 years at an AISC of $135/t, in the middle of the cost curve. Shallow (<300m),meaning accessible by twin decline for conventional underground mining and flotationprocessing. Capex of $354m (pre-production $254m), with bottom quartile capitalintensity of $315/tpa vs. global average of c.$930/tpa. Plenty of upside: increased sizeand grade of resource, higher extraction rates, higher plant recovery and utilisation,lower capex/opex, plus salt by-products. Mining concession application was lodged inQ4 2014 and MOU signed with two ports and for power. Other projects - We forecastthe 82Mt Sierra del Perdón project starting in 2017/18 and Pintano in 2018/19, withpeak group production at 2.2Mtpa in 2024 at a cash costs of $140/t, in line with globalaverages. While of modest grade, the projects are within the same region, all benefitingfrom competitive advantages with low capital intensity and high IRR's of +40%.
● Potash market. The potash market appears to have bottomed at c.$305/t KCl. Pricesare thought to remain subdued in the short-term but rebound in the long-term, asprice momentum and demand pick up and inventory levels decline. We remain neutral,forecasting c.$300/t KCl.
● News Catalysts. Q2 - Sierra Del Perdon scoping study (NUMe 400-500ktpa KCl,capex $250m, NPV 10% $440m, IRR 31%), Pintano drilling results.
● Valuation. 1x NAV; projects risk-weighted up to 75%.
● Risks. Moderate: Permitting, keeping on time and budget, financing, project delivery.
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange50
1
Figure 1: Model summary
Source: Company & Numis Securities Research
Highfield Resources Ticker HFR.AX Market Capitalisation A$428 Financial Year End June
BUY Share Price A$1.70 Enterprise Value (EV) A$395 Reporting Currency A$
A$3.00 Implied Return 76% Net Debt (Cash) -A$25 Shares in Issue 252m
Valuation Key Metrics 2014 2015F 2016F 2017F 2018F
Net Asset Value Disc Rate NAV (%) $m *$/sh *A$/sh EPS ($/sh) (0.04) (0.07) (0.15) (0.13) 0.09
Muga-Vipasca (25% risk-weighted) 10% 83% 1,185 1.98 2.64 EPS Growth -29% -93% -107% 12% 168%
Pintano (75% risk weighted) 10% 14% 206 0.34 0.46 P/E n.m n.m n.m n.m 18.6x
Sierra del Perdon (75% risk weighted) 10% 8% 108 0.18 0.24 CFPS ($/sh) (0.03) (0.04) (0.15) (0.13) 0.11
Sub-total 1,500 2.51 3.34 P/CFPS n.m n.m n.m n.m 15.6x
Cash & Equivalents 2% 25 0.04 0.06 FCFPS ($/sh) (0.03) (0.18) (0.76) (0.28) (0.02)
Debt 0% 0 0.00 0.00 P/FCFPS n.m n.m n.m n.m n.m
Corporate G&A / Other (6%) (93) (0.16) (0.21) FCF Yield -2% -11% -45% -16% -1%
Total 1,432 2.39 A$3.19 EV/EBITDA n.m n.m n.m n.m 4.0x
Current NAV Multiple (Implied) 0.53x EBITDA Margin 0% 0% 0% -305% 38%
Earnings Value $/sh A$/sh Dividend Per Share ($/sh) 0.00 0.00 0.00 0.00 0.03
EPS (1 year forward) 0.00 0.00 Dividend Yield 0.0% 0.0% 0.0% 0.0% 1.6%
Current P/E multiple (implied) 0.0x Return on Assets (ROA) -10% -9% -18% -16% 10%
Blended Valuation Target Multiple Weight Return on Equity (ROE) -11% -9% -49% -45% 25%
NAV valuation 1.00x 100% A$3.19 Return on Capital Employed (ROCE) -11% -9% -17% -13% 18%
Earnings valuation 0.0x 0% A$0.00 Net Debt/EBITDA 2.1x 5.7x -3.7x -4.8x 3.3x
VALUATION A$3.19 Gearing (Debt/Equity) 0% 0% 174% 184% 142%
Sensitivity Analysis NAV (A$/sh) 18F EPS 18F CFPS Interest Cover n.m n.m n.m n.m -0.2x
Base case potash price forecast 3.19 0.09 0.11 Shares Outstanding (m) 156 462 462 562 562
Base case +10% 3.63 0.12 0.14 Income Statement 2014 2015F 2016F 2017F 2018F
Base case -10% 2.68 0.06 0.08 Revenue 0 0 0 20 257
Flat potash price (at spot $305/t) 2.67 0.06 0.08 Cost of Sales 0 0 0 (7) (81)
News Catalysts (CY) H2 14 H1 15 H2 15 2017 G&A (5) (6) (6) (15) (15)
Muga resource update (M&I) Exploration (1) (13) (60) (61) (61)
Muga DFS Other 0 0 0 (0)
Sierra del Perdon resource EBITDA (6) (19) (66) (62) 99
Sierra del Perdon Scoping Study DD&A 0 0 0 (1) (10)
Muga permits received & financing Q4 EBIT (6) (19) (66) (63) 89
Muga starts construction Q4 Net Interest Expense 0 0 (4) (12) (15)
Muga begins production Q2 PBT (6) (19) (70) (75) 73
Reserves & Resources (attributable) Tonnage Grade % Potash EV/t Non-Recurring Items/Other 0 0 0 0 0
Reserves (P&P) Mt KCl 146 21.2 31.0 9.56 Taxes/Recovery 0 0 0 0 (22)
Resources (M&I) Mt KCl 281 18.0 50.5 5.87 Net Profit (Loss) - attributable (6) (19) (70) (75) 51
Resources (Total) Mt KCl 572 17.8 101.7 2.91 Minority Interest 0 0 0 0 0
Production & Cost 2016F 2017F 2018F 2019F Cashflow 2014 2015F 2016F 2017F 2018F
Potash Production (KCl, MOP) 000t 0 45 535 802 Net Profit (Loss) (6) (19) (70) (75) 51
Salt Production (NaCl) - excluded 000t 0 27 321 524 DD&A 0 0 0 1 10
Potash Eq. Production 000t 0 49 588 975 Non Recurring/Other 1 0 (0) (0) (0)
EV/oz Production (attributable) $/t 0 6,648 554 369 Working Cap. Changes 0 1 0 0 0
Total Cash Cost (co-product basis) $/t 0 111 111 112 Cash Flow From Operations (4) (17) (70) (74) 61
All-in Sustaining Cost $/t 0 146 146 137 Capital Expenditure (0) (67) (280) (80) (72)
Acquis./Investments (4) (1) 0 0 0
Cash Flow From Investing (4) (68) (280) (80) (72)
Equity Issues (Net of Costs) 14 182 0 100 0
Net Borrowings 0 0 250 60 (20)
Dividends Paid & Other 0 0 0 0 (15)
Cash Flow From Financing 14 182 250 160 (35)
Net Change in Cash 5 96 (100) 5 (46)
Free Cash Flow (4) (84) (350) (155) (10)
Balance Sheet 2014 2015F 2016F 2017F 2018F
Cash & Equivalents 12 108 8 13 (33)
Total Current Assets 13 108 8 13 (33)
PP&E & Mining Interests 0 68 348 428 489
Deferred taxation 0 0 0 0 0
Other 40 40 40 40 40
Total Assets 53 216 396 480 496
Short Term Debt 0 0 0 0 0
Current Liabilities 2 2 2 2 2
Long Term Debt 0 0 250 310 290
Assumptions (Real) 2014 2015F 2016F 2017F LT Other Long Term Liabilities 0 0 (0) (0) (0)
Potash Price (KCl, MOP - $/t) 379 297 303 300 300 Total Liabilities 2 2 252 312 292
Salt Price (NaCl, $/t) - excluded 50 50 50 50 50 Shareholder Equity 51 214 144 168 204
Exchange Rate (A$:US$) 0.97 0.90 0.76 0.75 0.75 Total Liab. & S/Holder Equity 53 216 396 480 496
Working Capital 11 106 6 11 (35)
* post-financing basis Net Debt (Cash) (12) (108) 242 297 323
0
50
100
150
200
0
250
500
750
1,000
1,250
1,500
1,750
2,000
2014 2015F 2016F 2017F 2018F 2019F 2020F 2021F 2022F
Muga-Vipasca Pintano (excluded) Sierra del Perdon (excluded)
Potash Production (kt KCl, 100% basis) Total Cash Cost / AISC ($/t KCl)
Highfield Resources 9 April 2015
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange 51
Metals & MiningFor FCA purposes this is a Marketing Communication
AnalystsCailey BarkerTel: +44 (0)20 7260 [email protected]
Phil SwinfenTel: +44 (0)20 7260 [email protected]
This research was preparedand approved by
Numis Securities LimitedThe London Stock Exchange Building10 Paternoster SquareLondon EC4M 7LT
+44 (0)20 7260 [email protected]
Registered No 02285918. Authorised andRegulated by The Financial ConductAuthority. A Member of the LondonStock Exchange
9 April 2015
BUY
Current Share Price 41pTarget Price 80pMarket Capitalisation £133mShares In Issue 325mRIC/BLBG HGM.L/HGM LNAvg. Daily Volume (3M) 536,592Net Cash/(Debt) (m) (12/14F) $(239.7)mBroker Yes
Current share price(s) timed at 7:00AM on 07/04/15
Apr- 14 Jul- 14 Oct- 14 Jan- 15 Apr- 15
80
70
60
50
40
30
20
Share Price
Highland GoldRelat ive to UK Market
Performance (%) 1M 3M 12M
Absolute 5 10 -43
Relative 5 1 -46
Source: Datastream (relative to UK-DS Market index)
Highland GoldEstimate Changes
Slow and Steady
We maintain our BUY recommendation and 80p, despite our new commodity priceforecasts and changes to our model.
● Company Snapshot. AIM-quoted c.250kozpa junior gold producer focused in Russiawith three operating mines (MNV, Novo & Belaya Gora), two development projects(Klen & Kekura) and some advanced stage exploration properties. 32% owned byRoman Abramovich's Millhouse LLC.
● Investment Thesis. Solid, defensive junior with growth, but perceived Russian riskand project delivery risks may continue to cap substantial stock gains. Solid base withgrowth - Production to stay 250-300koz from average sized, low cost mines: MNV -flagship mature open pit/underground mine (150kozpa) falling on lower grades, offsetby higher tonnage and increase open pit mine life. Novo polymetallic undergroundmine increasing plant throughput (90kozpa AuEq) and Belaya Gora, now a stand-alone operation that is ramping to full capacity (80-100kozpa). Cash costs are low at$650-700/oz; AISC bottom quartile at $850-900/oz, well below the industry average.Chukotka focus - Growth is focussed on Klen and Kekura in Chukotka, Far EastRussia. Klen project design is under state review (start 2017 at 50koz pa) andKekura is undergoing met testwork, resource extension and upgrade (start 2018 at180-220koz pa). Other projects Taseevskoye, Unkurtash and Lyubov to remain lowerpriority. Balance sheet prudence - Well managed, prudent company keeping net debt/EBITDA within limits. Net debt $240m, with $100m undrawn debt facility available.Capex to tick up over next few years as projects build out. Divi payer with 7% yield.
● Guidance. 2015: 270-285koz.
● Preview FY (27 Apr). Production up 11% y-o-y at 259koz, as reported previously. TCC$690/oz, AISC $899/oz. Financials - EPS down y-o-y at $0.12, EBITDA $111m. Netdebt down at $240m. We look for more colour on Kekura, with the scoping study nowbeing finalised; expected to have been submitted for state approval of reserves.
● Valuation. Blend of 1.25x NAV/5x P/CF (low end of 1-2x NAV/5-15x P/CF range forgolds).
● Risks. Moderate: Perceived Russian risk, project delivery, financing.
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange52
Figure 1: Model summary
Source: Company & Numis Securities Research
Highland Gold Ticker HGM.L Market Capitalisation £134m Financial Year End Dec
BUY Share Price £0.41 Enterprise Value (EV) £293m Reporting Currency US$
£0.80 Implied Return 95% Net Debt (Cash) $240m Shares in Issue 326m
Valuation Key Metrics 2013 2014F 2015F 2016F 2017F
Net Asset Value Disc Rate NAV (%) $m $/sh £/sh EPS ($/sh) 0.17 0.12 0.08 0.07 0.15
Mnogovershinoye (MNV - 100%) 12% 27% 85 0.26 0.17 EPS Growth -57% -28% -36% -9% 111%
Novoshirokinskoye (Novo - 100%) 12% 39% 126 0.38 0.26 P/E 3.7x 5.1x 8.0x 8.8x 4.2x
Belaya Gora (100%) 12% 48% 152 0.47 0.31 CFPS ($/sh) 0.29 0.35 0.23 0.23 0.21
Kekura (100%) 14% 53% 170 0.52 0.35 P/CFPS 2.1x 1.8x 2.7x 2.7x 3.0x
Klen (100%) 14% 16% 50 0.15 0.10 FCFPS ($/sh) (0.19) 0.13 0.03 (0.29) (0.35)
Unkurtash (100%) 14% 11% 36 0.11 0.07 P/FCFPS n.m 4.9x 18.7x n.m n.m
Taseevskoye (100%) 14% 6% 20 0.06 0.04 FCF Yield -30% 21% 5% -48% -56%
Lyubov (100%) 14% 6% 18 0.06 0.04 EV/EBITDA 2.2x 2.6x 3.0x 3.0x 2.9x
Sub-total 656 2.01 1.34 EBITDA Margin 44% 36% 32% 30% 30%
Cash & Equivalents 22% 70 0.21 0.14 Dividend Per Share ($/sh) 0.09 0.08 0.04 0.02 0.02
Debt (97%) (309) (0.95) (0.63) Dividend Yield 14.0% 13.4% 6.0% 3.9% 3.5%
Corporate G&A / Other (31%) (98) (0.30) (0.20) Return on Assets (ROA) 4% 3% 2% 2% 3%
Total 319 0.98 £0.65 Return on Equity (ROE) 7% 5% 3% 3% 5%
Current NAV Multiple (Implied) 0.63x Return on Capital Employed (ROCE) 7% 5% 4% 4% 7%
Cash Flow Value $/sh £/sh Net Debt/EBITDA 1.9x 2.2x 2.5x 3.6x 4.4x
CFPS (1 year forward) 0.23 0.15 Gearing (Debt/Equity) 38% 37% 36% 50% 49%
Current P/CF multiple (implied) 2.7x Interest Cover 0.1x -0.1x -0.3x -0.3x -0.2x
Blended Valuation Target Multiple Weight Shares Outstanding (m) 325 325 325 325 325
NAV valuation 1.25x 50% £0.81 Income Statement 2013 2014F 2015F 2016F 2017F
Cash Flow valuation 5.0x 50% £0.77 Revenue 304 311 307 322 335
VALUATION £0.79 Cost of Sales (150) (182) (191) (207) (215)
Sensitivity Analysis NAV (£/sh) 15F EPS 15F CFPS G&A (19) (17) (18) (19) (19)
Base case gold price forecast 0.65 0.08 0.23 Other (3) (1) (0) 0 0
Base case +10% 1.32 0.14 0.30 EBITDA 133 111 97 97 101
Base case -10% (0.04) (0.00) 0.15 DD&A (54) (52) (50) (52) (20)
Flat gold price (at spot $1,200/oz) 0.63 0.07 0.23 EBIT 77 59 47 45 81
News Catalysts 2014 2015 2016 2017 Net Interest Expense 5 (4) (15) (16) (20)
Belaya Gora starts production (stand-alone) PBT 82 55 32 29 61
Kekura PFS H2 Non-Recurring Items/Other 0 0 0 0 0
Kekura pilot plant starts Taxes/Recovery (27) (15) (7) (6) (13)
Klen starts production Net Profit (Loss) - attributable 55 39 25 23 48
Kekura starts production (2017/2018) Minority Interest 0 1 1 1 1
Reserves & Resources (attributable) Gold Silver Gold Eq EV/oz Cashflow 2013 2014F 2015F 2016F 2017F
Reserves (P&P) Moz 2.6 0 2.6 169 Net Profit (Loss) 55 40 26 23 49
Resources (M&I) Moz 11.5 0 11.5 38 DD&A 54 52 50 52 20
Production & Cost (attributable) 2014F 2015F 2016F 2017F Non Recurring/Other 1 (3) (1) (1) (1)
Gold Eq. Production 000oz 259 275 285 288 Working Cap. Changes (15) 23 (0) (1) (1)
EV/oz Production $/oz AuEq 1,700 1,598 1,546 1,529 Cash Flow From Operations 95 113 75 73 67
Total Cash Cost (net by-products) $/oz 690 687 704 704 Capital Expenditure (156) (72) (65) (169) (180)
All-in Sustaining Cost $/oz 899 898 903 903 Acquis./Investments (191) (0) 0 0 21
Cash Flow From Investing (346) (72) (65) (169) (158)
Equity Issues (Net of Costs) 0 0 10 25 20
Net Borrowings 298 (0) 0 120 10
Dividends Paid & Other (42) (33) (12) (8) (7)
Cash Flow From Financing 255 (33) (2) 137 23
Net Change in Cash 4 7 9 41 (68)
Free Cash Flow (61) 41 11 (96) (113)
Balance Sheet 2013 2014F 2015F 2016F 2017F
Cash & Equivalents 58 70 68 85 (4)
Total Current Assets 191 187 186 205 118
PP&E & Mining Interests 976 997 1,011 1,128 1,288
Deferred taxation 0 2 2 2 2
Other 126 121 121 121 121
Total Assets 1,293 1,307 1,320 1,456 1,529
Short Term Debt 124 175 175 295 305
Current Liabilities 170 224 224 345 356
Long Term Debt 185 134 134 134 134
Assumptions (Real) 2014F 2015F 2016F 2017F LT Other Long Term Liabilities 115 115 115 115 136
Gold Price ($/oz) 1,266 1,205 1,200 1,200 1,200 Total Liabilities 471 473 473 594 626
Silver Price ($/oz) 19.1 16.7 17.6 18.6 18.5 Shareholder Equity 822 834 847 862 903
Lead Price ($/lb) 0.95 0.83 0.89 0.90 0.90 Total Liab. & S/Holder Equity 1,293 1,307 1,320 1,456 1,529
Zinc Price ($/lb) 0.98 0.95 0.95 0.95 0.95 Working Capital 20 (37) (38) (140) (238)
Exchange Rate (US$/£) 1.65 1.50 1.50 1.50 1.50 Net Debt (Cash) 251 240 241 345 443
0
250
500
750
1000
1250
0
100
200
300
400
05 06 07 08 09 10 11 12 13 14F 15F 16F 17F 18F
Mnogovershinoye (MNV) Novoshirokinskoye (Novo) Belaya GoraKlen Kekura Total Cash CostAISC
Attrib. Gold Eq Production ('000oz) Total Cash Cost / AISC ($/oz AuEq)
Highland Gold 9 April 2015
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange 53
Metals & MiningFor FCA purposes this is a Marketing Communication
AnalystsCailey BarkerTel: +44 (0)20 7260 [email protected]
Phil SwinfenTel: +44 (0)20 7260 [email protected]
This research was preparedand approved by
Numis Securities LimitedThe London Stock Exchange Building10 Paternoster SquareLondon EC4M 7LT
+44 (0)20 7260 [email protected]
Registered No 02285918. Authorised andRegulated by The Financial ConductAuthority. A Member of the LondonStock Exchange
9 April 2015
HOLD
Current Share Price 88pTarget Price 85pMarket Capitalisation £324mShares In Issue 368mRIC/BLBG HOCM.L/HOC LNAvg. Daily Volume (3M) 772,958
Current share price(s) timed at 7:00AM on 07/04/15
Apr- 14 Jul- 14 Oct- 14 Jan- 15 Apr- 15
200180160140120100806040
Share Price
Hochschild MiningRelat ive to UK Market
Performance (%) 1M 3M 12M
Absolute 10 -5 -51
Relative 10 -12 -53
Source: Datastream (relative to UK-DS Market index)
Hochschild MiningEstimate Changes
Here Comes Inmaculada
We maintain our HOLD recommendation and increase our TP to 85p, from 75p, dueto our revised commodity prices forecasts and changes to our model.
● Company Snapshot. FTSE 250, fifth largest primary silver producer with four coreunderground mines in Peru and Argentina, plus some exploration projects. 54% ownedby Chairman Eduardo Hochschild.
● Investment Thesis. Limited margin - 3 core assets include Pallancata, Arcata andInmaculada in Peru (9 & 6Mozpa AgEq), plus 51% owned San Jose in Argentina(12Mozpa AgEq). These are all underground, high-grade narrow vein mines whichare highly capital intensive. Despite cost savings, group AISC is still high at c.$17/oz(plus c.$1/oz for debt interest), leaving little FCF margin. HOC expects further savings,AISC expected to fall to $15-16/oz with Inmaculada, although it clearly struggles todeliver margin. Growth to come. Following Inmaculada starting up in Q2, productiongrowth from 22Moz to 29Moz AqEq in 2016. Inmaculada 194kozpa Au at $527/oz,AISC $11-12/oz AgEq, capex $373m). Crespo has been postponed from its 2017 start-up (2.7Mozpa, $80m capex left), and we view the project as marginal. Also earlierstage 9.6Moz Volcan project in Chile (Andina) and Azuca. Exploration is to focus onbrownfield and resource drilling to improve LOM quality; value accretion likely a wayoff. Balance sheet struggle - Following re-financing, HOC has net debt of c.$350m.Hedge of 6Moz Ag at $17.75/oz and 38koz Au at $1,300/oz. Divi is suspended andwe don't see a re-start until Inmaculada is up and running and the balance sheet isrestored. We see decent FCF yields of +5% but still a long haul to pay back all the debt.
● Guidance. 2015: 24Moz silver equivalent (Inmaculada 6-7Moz); AISC $15-16/oz.
● Preview Q1 (22 Apr). Production down y-o-y and q-o-q at 4.5Moz AgEq, comprising3.3Moz silver and 20koz gold. A seasonally weaker quarter. Arcata and Pallancatalower as higher grade/lower tonnage is mined through 2015 to preserve cash. SanJose slightly down and Ares closed. Inmaculada starting up in Q2. Net debt up at c.$400m, depending on new facility drawdown.
● Valuation. Blend of 1.5x NAV/5x P/CF (mid/low end of 1-2x NAV/5-15x P/CF for silver).
● Risks. Moderate: Tax & labour issues, project delivery, maintaining costs and balancesheet.
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange54
Figure 1: Model summary
Source: Company & Numis Securities Research
Hochschild Ticker £7.00 Market Capitalisation £323m Financial Year End Dec
HOLD Share Price £0.88 Enterprise Value (EV) £558m Reporting Currency US$
£0.85 Implied Return -3% Net Debt (Cash) $353m Shares in Issue 367m
Valuation Key Metrics 2013 2014 2015F 2016F 2017F
Net Asset Value Disc Rate NAV (%) $m $/sh £/sh EPS ($/sh) - Underlying (0.15) (0.15) 0.00 0.04 0.04
Arcata (Peru - 100%) 10% 44% 79 0.21 0.14 EPS Growth -180% 0% 101% 3008% 7%
Pallancata (Peru - 100%) 10% 58% 103 0.27 0.18 P/E n.m n.m 1,141.3x 36.7x 34.3x
San José (Argentina - 51%) 10% 33% 59 0.15 0.10 CFPS ($/sh) 0.15 0.25 0.49 0.53 0.53
Inmaculada (Peru - 100%) 12% 236% 421 1.09 0.73 P/CFPS 8.5x 5.2x 2.7x 2.5x 2.5x
Crespo (Peru - 100%) 12% 5% 10 0.03 0.02 FCFPS ($/sh) (0.52) (0.61) (0.15) 0.09 0.07
Azuca (Peru - 100%) 12% 0% 0 0.00 0.00 P/FCFPS n.m n.m n.m 14.9x 19.8x
Dorado (Chile - 100%) 12% 19% 34 0.09 0.06 FCF Yield -39% -46% -11% 7% 5%
Sub-total 707 1.83 1.22 EV/EBITDA 4.3x 6.2x 5.2x 4.6x 4.9x
Cash & Equivalents 65% 116 0.30 0.20 EBITDA Margin 31% 28% 31% 29% 26%
Debt (263%) (469) (1.22) (0.81) Dividend Per Share ($/sh) 0.05 0.01 0.00 0.00 0.00
Corporate G&A / Other (98%) (176) (0.46) (0.30) Dividend Yield 4.0% 0.5% 0.0% 0.0% 0.0%
Total 178 0.46 £0.31 Return on Assets (ROA) -8% -4% 0% 1% 1%
Current NAV Multiple (Implied) 2.85x Return on Equity (ROE) -14% -7% -1% 1% 1%
Cash Flow Value $/sh £/sh Return on Capital Employed (ROCE) -7% -2% 3% 4% 5%
CFPS (1 year forward) 0.37 0.25 Net Debt/EBITDA 0.8x 2.6x 2.6x 2.2x 2.2x
Current P/CF multiple (implied) 3.5x Gearing (Debt/Equity) 45% 52% 52% 45% 41%
Blended Valuation Target Multiple Weight Interest Cover n.m n.m -0.7x -0.5x -0.4x
NAV valuation 1.50x 50% £0.46 Shares Outstanding (m) 367 367 385 385 385
Cash Flow valuation 5.0x 50% £1.24 Income Statement 2013 2014 2015F 2016F 2017F
VALUATION £0.85 Revenue 622 493 528 626 665
Sensitivity Analysis NAV (£/sh) 15F EPS 15F CFPS Cost of Sales (322) (282) (259) (339) (367)
Base case silver price forecast 0.31 0.00 0.49 G&A (57) (46) (40) (40) (50)
Base case +10% 0.87 0.06 0.61 Exploration (46) (18) (15) (15) (16)
Base case -10% (0.24) (0.06) 0.36 Other (1) (11) (52) (52) (62)
Flat silver price (at spot $17/oz) (0.04) (0.00) 0.47 EBITDA 195 136 162 180 170
News Catalysts H1 15 H2 15 2016 2017 DD&A (147) (129) (131) (136) (132)
Inmaculada starts production EBIT (79) (27) 56 70 72
Net Interest Expense (41) (41) (37) (35) (32)
PBT (120) (68) 19 35 40
Reserves & Resources (attributable) Silver Gold Silver Eq EV/oz Ag Non-Recurring Items/Other 0 0 0 0 0
Reserves (P&P) Moz 81 1.2 152 5.5 Taxes/Recovery (9) (3) (8) (15) (17)
Resources (M&I) Moz 241 11.2 910 0.9 Net Profit (Loss) - attributable (134) (69) 0 14 15
Production & Cost (attributable) 2014 2015F 2016F 2017F Minority Interest 6 (2) 10 6 8
Silver Production 000oz 16,166 15,671 17,136 17,143 Cashflow 2013 2014 2015F 2016F 2017F
Gold Production 000oz 101 145 203 203 Net Profit (Loss) (129) (71) 11 20 23
Silver Eq. Production (reported) 000oz 22,202 24,371 29,300 29,345 DD&A 147 129 131 136 132
EV/oz Production $/oz AgEq 38 34 29 29 Non Recurring/Other (13) (2) (6) (6) (6)
Total Cash Cost (co-product) $/oz Ag 12.1 9.1 10.1 10.9 Working Cap. Changes 59 29 (16) 4 (0)
AISC (co-product) $/oz Ag 17.8 15.3 15.0 16.5 Cash Flow From Operations 65 85 121 155 150
Capital Expenditure (259) (315) (187) (131) (135)
Acquisitions & Exploration 41 52 0 0 0
Cash Flow From Investing (218) (263) (187) (131) (135)
Equity Issues (Net of Costs) 72 0 0 0 0
Net Borrowings 314 15 0 (50) (25)
Dividends Paid & Other (286) (1) 0 0 0
Cash Flow From Financing 100 14 0 (50) (25)
Net Change in Cash (54) (164) (66) (26) (10)
Free Cash Flow (184) (224) (56) 34 26
Balance Sheet 2013 2014 2015F 2016F 2017F
Cash & Equivalents 286 120 54 28 18
Total Current Assets 546 371 372 337 328
PP&E & Mining Interests 873 1,076 1,138 1,138 1,146
Investments 0 0 0 0 0
Deferred taxation 2 2 2 2 2
Other 312 257 257 257 257
Total Assets 1,734 1,706 1,769 1,734 1,732
Short Term Debt 436 28 0 0 0
Current Liabilities 568 149 173 168 168
Long Term Debt 0 441 469 419 394
Other Long Term Liabilities 195 222 222 222 222
Total Liabilities 764 812 863 808 784
Assumptions (Real) 2014 2015F 2016F 2017F LT Shareholder Equity 970 894 905 926 949
Gold Price ($/oz) 1,266 1,205 1,200 1,200 1,200 Total Liab. & S/Holder Equity 1,734 1,706 1,769 1,734 1,732
Silver Price ($/oz) 19.1 16.7 17.6 18.6 18.5 Working Capital (22) 222 199 169 160
Exchange Rate (US$/£) 1.65 1.50 1.50 1.50 1.50 Net Debt (Cash) 149 348 415 391 375
0.0
5.0
10.0
15.0
20.0
25.0
0
5
10
15
20
25
05 06 07 08 09 10 11 12 13 14 15F 16F 17F 18F
Arcata Pallancata San José Ares Selene
Inmaculada Azuca Crespo Cash Cost AISC
Attrib. Silver Production (Moz) Total Cash Cost ($/oz AgEq)
0
250
500
750
1000
0
50
100
150
200
250
300
05 06 07 08 09 10 11 12 13 14 15F 16F 17F 18F
Attrib. Gold Production ('000oz) Total Cash Cost ($/t AuEq)
Hochschild Mining 9 April 2015
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange 55
Metals & MiningFor FCA purposes this is a Marketing Communication
AnalystsCailey BarkerTel: +44 (0)20 7260 [email protected]
Phil SwinfenTel: +44 (0)20 7260 [email protected]
This research was preparedand approved by
Numis Securities LimitedThe London Stock Exchange Building10 Paternoster SquareLondon EC4M 7LT
+44 (0)20 7260 [email protected]
Registered No 02285918. Authorised andRegulated by The Financial ConductAuthority. A Member of the LondonStock Exchange
9 April 2015
BUY
Current Share Price 4pTarget Price 25pMarket Capitalisation £22mShares In Issue 554mRIC/BLBG IFL.L/IFL LNAvg. Daily Volume (3M) 687,718Net Cash/(Debt) (m) (06/14F) ZAR(344.2)mBroker Yes
Current share price(s) timed at 7:00AM on 07/04/15
Apr- 14 Jul- 14 Oct- 14 Jan- 15 Apr- 15
12
10
8
6
4
2
Share Price
Internat ional Ferro MetalsRelat ive to UK Market
Performance (%) 1M 3M 12M
Absolute -7 -10 -67
Relative -7 -17 -69
Source: Datastream (relative to UK-DS Market index)
International Ferro MetalsEstimate Changes
Chrome Headwinds
We maintain our BUY recommendation and 25p TP, despite our revised commodityprice forecast and changes to our model.
● Company Snapshot. LSE-listed, South African integrated ferrochrome producer.Produces 265ktpa from its two mines, Letsedi and Sky Chrome, plus third party ores.Chinese steelmaker JISCO holds 29%, as a strategic shareholder and offtake partner.
● Investment Thesis. Leverage - Pure, highly leveraged play on South AfricanFerrochrome. Our NAV increases by 40% for a 10% increase in FeCr price. Aturnaround story with furnaces now operating at full load and profits have restartedafter a 5 year gap but margins remain relatively tight, like many SA producers.Realised prices receive discounts of c.25-30% (c.80c/lb) and cash costs are c.65-75c/lb (R6.50-7.50/lb). Costs key - reduction initiatives have been successfully achievedbut likely to have to continue to work hard to keep costs down given rising powerprices (12% pa) and labour pressures, even with helpful Rand weakness. However,IFL plans to move to owner-operated and has new cost reduction initiatives; plansto improve efficiencies in reductants and power consumption; co-gen plant is yet todeliver its full potential. Also, Letsedi underground mine has restarted and increasedproduction will help reduce reliance on more costly third party ores. Debt reducing- Net borrowings expected to reduce (c.R450-490m) as cash generation increases,helped by cumulative tax losses and reduced capex. Has a one year loan from Bank ofChina, rolled over for another year. Upside - Potential to move to a 60MW DC furnaceand a phase II expansion to 100ktpa at a cost of c.R1bn, reducing costs by 12%. BFSQ1 2015, commissioning H1 2017; non-equity financing (partner etc.). Not in our model.
● Guidance. FY15 200-205kt (downgraded from 215-222kt).
● Preview Q3. Production 51kt, up q-o-q following the DMR stoppages, but down y-o-y (Q2 49.8kt). Production costs down q-o-q at R7.47/lb (Q2 R7.82/lb), as betterore supply is utilised, offset by increased power costs. Letsedi underground now onaccelerated schedule and cogen plant to restart shortly. Net borrowings up slightly atR465m, before coming down after June. Market remaining subdued with recent rolloverof benchmark prices at $1.08/lb.
● Valuation. TP blend of 1x NAV/7.5x P/E (bottom of 7-12x P/E range for industrials).
● Risks. Moderate: South African labour, power supply & prices, ferrochrome market,cash generation and balance sheet.
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange56
Figure 1: Model summary
Source: Company & Numis Securities Research
International Ferro Metals Ticker IFL.L Market Capitalisation £20m Financial Year End June
BUY Share Price 3.6p Enterprise Value (EV) £52m Reporting Currency ZAR
25p Implied Return 590% Net Debt (Cash) $48m Shares in Issue 554m
Valuation Key Metrics 2014 2015F 2016F 2017F 2018F
Net Asset Value Disc Rate Rm $m $/sh £/sh EPS (R/sh) 0.08 (0.37) 0.22 0.34 0.35
Buffelsfontein (100%) 10% 3,895 410 0.74 0.49 EPS Growth 134% (564%) 160% 56% 112%
Sub-total 3,895 410 0.74 0.49 P/E 6.5x n.m 2.4x 1.5x 1.5x
Corporate G&A / Other 10% (704) (74) (0.13) (0.09) CFPS (R/sh) 0.23 0.09 0.46 0.65 1.16
Cash & Equivalents 49 5 0.01 0.01 P/CFPS 2.2x 5.8x 1.1x 0.8x 0.4x
Debt (509) (54) (0.10) (0.06) FCFPS (R/sh) 0.04 (0.34) 0.24 0.45 0.98
Total 2,731 287 0.52 £0.35 P/FCFPS 11.8x n.m 2.2x 1.2x 0.5x
Current NAV multiple (Implied) 0.10x FCF Yield 8% -66% 46% 86% 189%
Earnings Value R/sh $/sh £/sh EV/EBITDA 3.7x -38.4x 2.2x 1.8x 1.8x
EPS - 1 year forward 0.22 0.02 0.02 EBITDA margin 10% -1% 14% 15% 15%
Current P/E multiple (implied) 2.4x Dividend Per Share (R/sh) 0.00 0.00 0.00 0.00 0.00
Blended Valuation Target Multiple Weight Dividend Yield 0.0% 0.0% 0.0% 0.0% 0.0%
NAV valuation 1.00x 50% £0.35 Return on Assets (ROA) 1% (7%) 4% 6% 6%
Earnings valuation 7.50x 50% £0.12 Return on Equity (ROE) 2% (10%) 6% 8% 8%
VALUATION £0.23 Return on Capital Employed (ROCE) 4% (6%) 8% 10% 8%
Net Debt/EBITDA 1.7x -27.1x 1.1x 0.3x -1.1x
Gearing (Debt/Equity) 25.1% 30.9% 25.7% 16.4% 8.7%
Sensitivity Analysis Valuation NAV/sh 16F EPS 16F CFPS Interest Cover 1.9x -2.3x 3.4x 4.8x 6.9x
Base case ferrochrome forecast £0.23 £0.35 R0.22 R0.46 Shares Outstanding (m) 554 554 554 554 554
Base case +10% £0.36 £0.55 R0.34 R0.58 Income Statement (Rm) 2014 2015F 2016F 2017F 2018F
Base case -10% £0.08 £0.10 R0.10 R0.34 Revenue 2,101 2,022 2,491 2,690 2,813
Flat long-term prices (at $1.08/lb & R9.50) £0.23 £0.35 R0.22 R0.46 Cost of sales (1,870) (2,007) (2,214) (2,352) (2,482)
G&A (100) (148) (100) (103) (105)
News catalysts (CY) H1 14 H2 14 H1 15 H2 15 Other (25) 2 (0) (0) 0
Letsedi underground restarts EBITDA 202 (19) 337 410 409
Phase II Expansion (DC Furnace, 100ktpa) feasibility study DD&A 107 112 161 174 184
Non-Recurring Items/Other (5) 0 0 0 0
EBIT 105 (132) 176 236 225
Production & cost (equity) 2014 2015F 2016F 2017F 2018F Net finance income (expense) (65) (72) (55) (47) (31)
FeCr production (kt) 228 203 242 252 252 PBT 40 (204) 121 189 195
EV/lb production ($/lb Cr) 0.31 0.34 0.29 0.28 0.28 Tax 2 0 0 0 0
C1 Production Cost (R/lb) 6.87 7.75 7.67 7.77 7.77 Net Profit (Loss) - attributable 43 (203) 121 189 195
C1 Production Cost ($/lb Cr) 0.66 0.68 0.66 0.73 0.81 Minority Interest (1) (1) 0 0 0
All-in Sustaining Cost ($/lb Cr) 0.73 0.77 0.71 0.78 0.86 Cashflow 2014 2015F 2016F 2017F 2018F
Net Profit (Loss) 42 (204) 121 189 195
Working Cap. change 53 (15) 100 66 (214)
DD&A 129 130 179 192 201
Non Recurring/Other (94) 138 (145) (85) 459
Cash Flow From Operations 130 49 255 363 642
Capital Expenditure (57) (95) (50) (50) (50)
Acquis./investments/adjustments 14 (11) (2) (4) (3)
Cash Flow From Investing (43) (107) (52) (54) (53)
Borrowings (4) 9 (75) (172) (164)
Capital stock 0 0 0 0 0
Dividends paid & other (58) (65) (55) (47) (31)
Cash Flow From Financing (62) (56) (130) (218) (194)
Net Change in Cash 25 (113) 73 90 395
Free Cash Flow 24 (188) 132 247 542
Balance Sheet 2014 2015F 2016F 2017F 2018F
Cash & Equivalents 162 49 122 212 607
Total Current Assets 731 551 664 801 1,204
Assumptions (Real) 2014 2015F 2016F 2017F LT PP&E & Mining Interests 2,045 2,049 1,938 1,814 1,680
FeCr benchmark ($/lb Cr) 1.16 1.13 1.11 1.21 1.20 Deferred taxation 235 235 235 235 235
Payable discount to benchmark (%) -30% -33% -30% -30% -25% Other 248 242 228 217 204
FeCr realised price ($/lb Cr) 0.81 0.75 0.77 0.84 0.93 Total Assets 3,259 3,077 3,065 3,067 3,324
Exchange rate (US$/ZAR) 10.39 11.43 11.63 10.69 9.50 Short Term Debt 506 509 509 386 222
Exchange rate (US$/£) 1.63 1.57 1.50 1.50 1.50 Current Liabilities 838 872 737 595 654
South Africa inflation (%) 0% 0% 2% 4% 4% Long Term Debt 61 49 49 0 0
Other Long Term Liabilities 103 107 109 112 115
Total Liabilities 1,002 1,028 895 707 769
Shareholder Equity 2,261 2,052 2,174 2,363 2,558
Total Liab. & Equity 3,259 3,077 3,065 3,067 3,324
Working Capital 245 230 330 396 183
Net Debt (Cash) exc fin lease 344 527 378 116 (442)
0.40
0.50
0.60
0.70
0.80
0.90
1.00
0
100
200
300
2013 2014 2015F 2016F 2017F 2018F 2019F 2020F
Buffelsfontein C1 Production Cost AISC
Attrib. FeCr Production (kt) Total Unit Operating Cost ($/lb Cr)C1 Production Cost / AISC ($/lb Cr)
International Ferro Metals 9 April 2015
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange 57
Metals & MiningFor FCA purposes this is a Marketing Communication
AnalystsCailey BarkerTel: +44 (0)20 7260 [email protected]
Phil SwinfenTel: +44 (0)20 7260 [email protected]
This research was preparedand approved by
Numis Securities LimitedThe London Stock Exchange Building10 Paternoster SquareLondon EC4M 7LT
+44 (0)20 7260 [email protected]
Registered No 02285918. Authorised andRegulated by The Financial ConductAuthority. A Member of the LondonStock Exchange
9 April 2015
REDUCEFrom Sell
Current Share Price 216pTarget Price 190pMarket Capitalisation £965mShares In Issue 447mRIC/BLBG KAZ.L/KAZ LNAvg. Daily Volume (3M) 2,303,740Net Cash/(Debt) (m) (12/15F) $(2,929.5)m
Current share price(s) timed at 7:00AM on 07/04/15
Apr- 14 Jul- 14 Oct- 14 Jan- 15 Apr- 15
400
350
300
250
200
150
Share Price
Kaz MineralsRelat ive to UK Market
Performance (%) 1M 3M 12M
Absolute -3 -12 -17
Relative -4 -19 -21
Source: Datastream (relative to UK-DS Market index)
Kaz MineralsEstimate Changes
Red on the Horizon
We upgrade to a REDUCE recommendation and increase our TP to 190p, from 180p,due to our revised commodity price forecasts and changes to our model.
● Company Snapshot. FTSE 250, major copper producer in Kazakhstan. It isrestructuring as KAZ Minerals to produce 80ktpa from its fully integrated business,comprising 5 mines (including Bozymchak mine in Kyrgyzstan). It has three c.100ktpagrowth projects: Boschekul and Aktogay, which are scheduled to start in 2015, plusthe earlier stage Koksay.
● Investment Thesis. Growth to start - Flat to declining production of 80-85ktpa fromexisting mature mines. Steady growth to 300ktpa in 2018 as Boschekul and Aktogay(Oxide) begin production in Q4 2015 and Aktogay Sulphide in 2017 (we exclude Koksay- 80ktpa Cu, 60kozpa Au). Leverage - Leveraged copper play due to narrow margin.Gross cash costs high at +$3.00/lb due to mature mines, but closer to $1.20-1.40/lbnet due to significant by-product credits (4Moz Ag, 40koz Au and 120kt Zn). Costs areexpected to decline with fx devaluation, plus addition of Boschekul ($0.80-1.00/lb net)and Aktogay ($1.20-1.40/lb). Balance sheet - Net debt $1bn with peak capex of $1.6bnin 2015 due to high capital intensity growth projects ($2.3bn each) doesn't leave anyFCF. Gearing +250% and 7x net debt/EBITDA (2016) looks ugly; no covenants testeduntil 2016; we expect further refinancing required. Divi suspended.
● Guidance. 2015: 80-85kt copper, 90-95kt zinc, 2.25-2.5Moz silver and 42.47koz gold.Gross C1 costs $2.80-3.00/lb; project capex of $1.4-1.6bn, sustaining capex $110m.
● Preview FY (30 Apr). Production of 21kt, with lower grades filtering through anda seasonally weaker quarter. Silver and zinc by-products down on lower grades at700koz and 25kt; gold flat at 11koz. Projects on track for Q4 start-up.
● Valuation. Blend of 1x NAV/10x P/E (middle of 7-12x range for copper miners).
● Risks. Moderate: Political risk, project delivery, balance sheet, restructuring plan,costs.
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange58
Figure 1: Model summary
Source: Company & Numis Securities Research
KAZ Minerals Ticker KAZ.L Market Capitalisation £965m Financial Year End Dec
REDUCE Share Price £2.16 Enterprise Value (EV) £1,873m Reporting Currency US$
£1.90 Implied Return -12% Net Debt (Cash) $962m Shares in Issue 447m
Valuation Key Metrics 2013 2014 2015F 2016F 2017F
Net Asset Value Disc Rate NAV (%) $m $/sh £/sh EPS ($/sh) - Underlying 1.78 0.19 (0.06) 0.17 0.69
Mining Assets (inc. Projects) 12% 196% 4,670 10.45 6.97 EPS Growth 89% -89% -133% 360% 311%
Sub-total 4,670 10.45 6.97 P/E 1.8x 16.8x n.m 19.4x 4.7x
Cash & Equivalents 40% 965 2.16 1.44 CFPS ($/sh) 0.35 (0.13) 0.23 0.88 1.66
Debt (130%) (3,092) (6.92) (4.61) P/CFPS 9.3x n.m 14.0x 3.7x 1.9x
Corporate G&A (7%) (160) (0.36) (0.24) FCFPS ($/sh) (2.04) (2.24) (3.78) (0.99) (0.17)
Total 2,383 5.33 £3.55 P/FCFPS n.m n.m n.m n.m n.m
Current NAV Multiple (Implied) 0.61x FCF Yield -63% -69% -117% -31% -5%
Earnings Value $/sh £/sh EV/EBITDA 4.8x 5.3x n.m 3.7x 2.1x
EPS (1 year forward) 0.03 0.02 EBITDA Margin 42% 42% 21% 34% 44%
Current P/E multiple (implied) 114.5x Dividend Per Share ($/sh) 0.08 0.00 (0.01) 0.02 0.07
Blended Valuation Target Multiple Weight Dividend Yield 2.5% 0.0% -0.2% 0.5% 2.1%
NAV valuation 1.0x 50% £3.55 Return on Assets (ROA) -51% -41% 0% 1% 4%
Earnings valuation 10.0x 50% £0.19 Return on Equity (ROE) -123% -112% -1% 3% 13%
VALUATION £1.87 Return on Capital Employed (ROCE) 4% 2% 1% 6% 11%
Sensitivity Analysis NAV (£/sh) 15F EPS 15F CFPS Net Debt/EBITDA 3.9x 3.8x 15.9x 7.0x 4.0x
Base case copper price forecast 3.55 (0.06) 0.23 Gearing (Debt/Equity) 129% 147% 172% 185% 174%
Base case +10% 5.52 0.03 0.41 Interest Cover -0.2x -2.8x -1.9x -0.6x -0.1x
Base case -10% 1.60 (0.15) 0.05 Shares Outstanding (m) 513 447 447 447 447
Flat copper price (at spot $2.75/lb) 4.46 (0.05) 0.25 Income Statement 2013 2014 2015F 2016F 2017F
News Catalysts H1 14 H2 14 2015 2017 Revenue 933 846 829 1,486 2,016
Kazakhmys NewCo restructuring Cost of Sales (577) (456) (588) (902) (1,130)
Bozymchak starts production Admin & Selling Expenses (177) (164) (180) (232) (181)
Bozshakol commences production H2 Other 14 (132) 0 0 0
Aktogay commences production (oxide) Q4 EBITDA (exc. MET) 389 355 176 503 887
Aktogay commences production (sulphide) DD&A (50) (42) (42) (43) (39)
Reserves & Resources (attributable) Copper Gold Cu Eq EV/lb Cu MET (86) (86) (73) (108) (143)
Reserves (P&P) Mt / Moz 15.9 9.4 20.6 0.06 EBIT 193 94 62 352 704
Resources (M&I) Mt / Moz 23.4 11.6 29.0 0.04 Net Interest Expense (47) (263) (119) (203) (92)
Sales 2014 2015F 2016F 2017F PBT 146 (169) (57) 149 613
Copper kt 84 94 178 239 Taxes/Recovery (56) (65) 29 (75) (306)
Silver Moz 3.4 2.5 2.8 3.0 Profit (Loss) from disc'd operations (3,053) (2,128) 0 0 0
Gold koz 35 45 64 80 Net Profit (Loss) - attributable (2,963) (2,362) (29) 75 306
Costs 2014 2015F 2016F 2017F Underlying Profit 911 86 (29) 75 306
C1 cost (gross by-products) $/lb 2.57 2.84 2.27 2.06 Minority Interest 0 0 0 0 0
C1 Cost (net by-products) $/lb 0.85 1.55 1.42 1.29 Cashflow 2013 2014 2015F 2016F 2017F
All-in Sustaining Cost $/lb 2.03 2.88 2.35 1.90 Net Profit (Loss) (2,963) (2,362) (29) 75 306
DD&A 50 42 42 43 39
Non Recurring/Other 3,091 2,262 90 278 398
Working Cap. Changes 118 21 13 98 83
Cash Flow From Operations 73 202 (41) 192 416
Capital Expenditure (1,120) (1,203) (1,646) (635) (491)
Investments/Sale of Assets 668 1,068 32 23 12
Cash Flow From Investing (452) (135) (1,614) (612) (479)
Equity Issues (Net of Costs) 0 0 0 0 0
Net Borrowings 683 (26) 487 391 237
Dividends Paid & Other (42) 0 3 (7) (31)
Cash Flow From Financing 641 (26) 490 383 206
Net Change in Cash 257 15 (1,165) (37) 143
Free Cash Flow (1,047) (1,001) (1,687) (443) (75)
Balance Sheet 2013 2014 2015F 2016F 2017F
Cash & Equivalents 1,582 1,730 565 528 671
Total Current Assets 3,545 2,496 1,366 1,586 1,946
PP&E & Mining Assets 1,693 2,740 4,380 4,972 5,424
Investments in associate 0 0 0 0 0
Assets held for sale 1,018 0 0 0 0
Other (431) 482 482 482 482
Total Assets 5,825 5,718 6,227 7,040 7,852
Short Term Debt 503 181 181 181 181
Current Liabilities 746 638 686 1,041 1,340
Long Term Debt 2,608 2,911 3,398 3,788 4,025
Assumptions (Real) 2014 2015F 2016F 2017F LT Other Long Term Liabilities 56 65 65 65 65
Copper Price ($/lb) 3.11 2.71 2.89 2.92 2.50 Total Liabilities 3,410 3,614 4,149 4,895 5,431
Silver Price ($/oz) 19.1 16.7 17.6 18.6 18.5 Shareholder Equity 2,416 2,104 2,078 2,145 2,421
Gold Price ($/oz) 1,266 1,205 1,200 1,200 1,200 Total Liab. & S/Holder Equity 5,826 5,718 6,227 7,040 7,852
Zinc Price ($/lb) 0.98 0.95 0.95 0.95 0.95 Working Capital 2,799 1,858 679 545 605
Exchange Rate (US$/£) 1.65 1.50 1.50 1.50 1.50 Net Debt (Cash) 954 962 2,614 3,041 3,135
0.00
1.00
2.00
3.00
4.00
0
100
200
300
400
05 06 07 08 09 10 11 12 13 14 15F 16F 17F 18F
Core Assets Boschekul Aktogay Cash Cost AISC
Copper Production (kt) Net Cash Cost / AISC ($/lb Cu)
0%
25%
50%
75%
100%
0
500
1,000
1,500
2,000
2,500
3,000
05 06 07 08 09 10 11 12 13 14 15F 16F 17F 18F
KAZ Minerals Kazakhmys Copper EBITDA Margin
Group EBITDA ($m) EBITDA Margin
Kaz Minerals 9 April 2015
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange 59
Metals & MiningFor FCA purposes this is a Marketing Communication
AnalystsCailey BarkerTel: +44 (0)20 7260 [email protected]
Phil SwinfenTel: +44 (0)20 7260 [email protected]
This research was preparedand approved by
Numis Securities LimitedThe London Stock Exchange Building10 Paternoster SquareLondon EC4M 7LT
+44 (0)20 7260 [email protected]
Registered No 02285918. Authorised andRegulated by The Financial ConductAuthority. A Member of the LondonStock Exchange
9 April 2015
BUY
Current Share Price 3pTarget Price 10pMarket Capitalisation £7mShares In Issue 231mRIC/BLBG MIRL.L/MIRL LNAvg. Daily Volume (3M) 355,111
Current share price(s) timed at 7:00AM on 07/04/15
Apr- 14 Jul- 14 Oct- 14 Jan- 15 Apr- 15
14
12
10
8
6
4
2
Share Price
Minera IRLRelat ive to UK Market
Performance (%) 1M 3M 12M
Absolute -3 22 -58
Relative -4 12 -60
Source: Datastream (relative to UK-DS Market index)
Minera IRLEstimate Changes
All Rests on Ollachea
We maintain our BUY recommendation and 10p TP, despite our new commodityprice forecasts and changes to our model.
● Company Snapshot. AIM/TSX-listed junior gold producer focused in Latin America.It’s assets comprise the 20kozpa Corihuarmi mine in Peru and the 100kozpa Ollacheaproject in Peru.
● Investment Thesis. Growth & upside - Growth to +100kozpa in 2017 at cash costsof <$600/oz. Production at Corihuarmi is reducing due to lower grades, offset by highertonnage and recovery through the pads. Exploration at satellite deposits has extendedLOM to H1 2017. Don Nicolas sold for $10m. Ollachea expected to start Q4 2016 (likelylater), subject to financing of $165m capex, with construction permit now received.Upside from the 0.9Moz Concurayoc Zone, plus potential to extend at depth and alongstrike; could increase LOM and/or increase production by 20-30kozpa. Financingremains key - Cash of $1m at end Q1, plus a $2m working cap facility. A $100m loanfacility has been offered by Macquarie but not taken up (inc. consolidating existing$30m debt facility), leaving potentially $110m to finance Ollachea. Minera is pursuinga range of avenues - royalty streams, JV partners, offtake and equity. Expected tocomplete in Q2.
● Guidance. 2015: 22koz (prev. 20koz).
● Preview FY. Production at Corihuarmi 23.3koz as announced previously. Cash costsof $874/oz. EPS -18c, down y-o-y (NPAT -$40m). EBITDA $3m. Cash down at $2.5m;$30m in debt. We look for progress on financing for Ollachea. Q1 production downslightly at 5.7koz.
● Valuation. 1x P/NAV (bottom end of 1-2x NAV gold producers).
● Risks. High: Financing and balance sheet, development risk, Argentina & Peru politics.
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange60
Figure 1: Model summary
Source: Company & Numis Securities Research
Minera IRL Ticker MIRL.L Market Capitalisation £7m Financial Year End Dec
BUY Share Price £0.03 Enterprise Value (EV) £23m Reporting Currency US$
£0.10 Implied Return 220% Net Debt (Cash) $24m Shares in Issue 225m
Valuation Key Metrics 2013 2014 2015F 2016F 2017F
Net Asset Value Disc Rate NAV (%) $m $/sh £/sh EPS ($/sh) (0.19) (0.18) (0.02) (0.06) 0.01
Corihuarmi (Peru) 10% 15% 6 0.02 0.02 EPS Growth -969% 7% 88% -214% 119%
Ollachea (Peru) 12% 202% 83 0.31 0.21 P/E n.m n.m n.m n.m 3.8x
Exploration Properties 0% 0 0.00 0.00 CFPS ($/sh) 0.00 (0.02) (0.01) (0.04) 0.23
Sub-total 90 0.33 0.22 P/CFPS 67.8x n.m n.m n.m 0.2x
Cash & Equivalents 8% 3 0.01 0.01 FCFPS ($/sh) (0.02) (0.07) (0.29) (0.51) 0.21
Debt (67%) (28) (0.10) (0.07) P/FCFPS n.m n.m n.m n.m 0.2x
Corporate G&A / Other (58%) (24) (0.09) (0.06) FCF Yield -46% -142% -612% -1096% 449%
Total 41 0.15 £0.10 EV/EBITDA n.m n.m n.m n.m 0.3x
Current NAV Multiple (Implied) 0.30x EBITDA Margin -1% 3% -2% -28% 20%
VALUATION Target Multiple 1.0x £0.10 Dividend Per Share ($/sh) 0.00 0.00 0.00 0.00 0.02
Dividend Yield 0.0% 0.0% 0.0% 0.0% 35.4%
Return on Assets (ROA) -18% -25% -2% -5% 1%
Return on Equity (ROE) -26% -39% -3% -12% -4%
Return on Capital Employed (ROCE) 0% 1% 0% -2% 10%
Net Debt/EBITDA 4.2x 7.0x 1.5x -28.4x 1.3x
Gearing (Debt/Equity) 19% 27% 41% 86% 63%
Interest Cover n.m -6.7x n.m n.m -0.4x
Sensitivity Analysis NAV (£/sh) 15F EPS 15F CFPS Shares Outstanding (m) 174 225 226 236 236
Base case gold price forecast 0.10 (0.02) (0.01) Income Statement 2013 2014 2015F 2016F 2017F
Base case +10% 0.22 (0.02) 0.00 Revenue 36 30 26 24 155
Base case -10% (0.02) (0.02) (0.01) Cost of Sales (23) (21) (20) (20) (75)
Flat gold price (at spot $1,200/oz) 0.10 (0.02) (0.01) G&A (8) (7) (5) (5) (5)
News Catalysts H1 2014 H2 2014 2015 2016 Exploration (0) (0) (0) (0) (0)
Ollachea financing Other 1 1 (0) (3) 0
Ollachea construction permit EBITDA 5 3 2 (5) 74
Cayhua feasibiilty results (Corihuarmi) DD&A (5) (2) (2) (2) (43)
Ollachea development EBIT (1) 1 (1) (7) 31
Ollachea production starts H2 Net Interest Expense (31) (7) (4) (9) (12)
PBT (32) (6) (4) (16) 19
Reserves & Resources (attributable) Tonnage Grade Gold EV/oz Non-Recurring Items/Other (0) (32) 0 0 0
Reserves (P&P) Moz 10 3.6 1.2 20 Taxes/Recovery (2) (2) 1 5 (6)
Resources (M&I) Moz 23 2.4 1.8 13 Net Profit (Loss) - attributable (34) (40) (5) (16) 3
Resources (Total) Moz 44 2.3 3.4 7 Minority Interest 0 0 2 5 10
Production & Cost 2014 2015F 2016F 2017F Cashflow 2013 2014 2015F 2016F 2017F
Gold Production (consolidated) 000oz 23 22 19 126 Net Profit (Loss) (34) (40) (3) (11) 13
Gold Production (attributable) 000oz 23 22 19 120 DD&A 5 2 2 2 43
EV/oz Production (attributable) $/oz Au 1,487 1,572 1,798 290 Non Recurring/Other 34 40 2 5 18
Cash Operating Costs $/oz Au 705 806 893 495 Working Cap. Changes (1) (3) (1) 0 (1)
Total Cash Cost (net by-products) $/oz 874 903 1,047 561 Cash Flow From Operations 0 (5) (1) (9) 55
All-in Sustaining Cost $/oz 1,172 1,141 1,322 642 Capital Expenditure (4) (10) (63) (112) (5)
Exploration & Other (18) 12 (4) (10) (10)
Cash Flow From Investing (22) 2 (67) (122) (15)
Equity Issues (Net of Costs) 14 (0) 90 0 0
Net Borrowings 5 5 50 70 (30)
Dividends Paid & Other 0 (2) 0 0 (4)
Cash Flow From Financing 19 3 140 70 (34)
Net Change in Cash (3) 0 71 (61) 6
Free Cash Flow (4) (15) (65) (121) 50
Balance Sheet 2013 2014 2015F 2016F 2017F
Cash & Equivalents 3 3 75 13 19
Total Current Assets 10 12 82 20 51
PP&E & Intangibles 174 136 201 322 294
Deferred taxation 0 0 0 0 0
Other 7 8 8 8 8
Total Assets 190 156 291 349 352
Short Term Debt 25 28 0 0 0
Current Liabilities 40 34 5 4 28
Long Term Debt 0 0 78 148 118
Assumptions (Real) 2014 2015F 2016F 2017F LT Other Long Term Liabilities 19 19 20 25 20
Gold Price ($/oz) 1,266 1,200 1,200 1,200 1,200 Total Liabilities 58 54 103 177 165
Silver Price ($/oz) 19.1 16.9 18.5 18.5 18.5 Shareholder Equity 132 103 189 172 187
Exchange Rate (US$:£) 1.65 1.50 1.50 1.50 1.50 Total Liab. & S/Holder Equity 190 156 291 349 352
Working Capital (30) (22) 78 16 23
Net Debt (Cash) 22 24 3 134 99
0
250
500
750
1000
1250
1500
0
25
50
75
100
125
2008 2009 2010 2011 2012 2013 2014 2015F 2016F 2017F 2018F
Corihuarmi Ollachea Total Cash Cost AISC
Gold Production ('000oz, 100% basis) Total Cash Cost ($/oz Au)
Minera IRL 9 April 2015
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange 61
Metals & MiningFor FCA purposes this is a Marketing Communication
AnalystsPhil SwinfenTel: +44 (0)20 7260 [email protected]
Cailey BarkerTel: +44 (0)20 7260 [email protected]
This research was preparedand approved by
Numis Securities LimitedThe London Stock Exchange Building10 Paternoster SquareLondon EC4M 7LT
+44 (0)20 7260 [email protected]
Registered No 02285918. Authorised andRegulated by The Financial ConductAuthority. A Member of the LondonStock Exchange
9 April 2015
BUY
Current Share Price 183pTarget Price 250pMarket Capitalisation £943mShares In Issue 515mRIC/BLBG PDL.L/PDL LNAvg. Daily Volume (3M) 1,074,673Net Cash/(Debt) (m) (06/14F) $(125.6)m
Current share price(s) timed at 9:00AM on 07/04/15
Apr- 14 Jul- 14 Oct- 14 Jan- 15 Apr- 15
240
220
200
180
160
140
120
Share Price
Petra DiamondsRelat ive to UK Market
Performance (%) 1M 3M 12M
Absolute -2 -5 23
Relative -3 -12 17
Source: Datastream (relative to UK-DS Market index)
Petra DiamondsEstimate Changes
Sparkling Resilience
We maintain our BUY recommendation and 250p TP despite our revised commodityprice forecasts and changes to our model.
● Company Snapshot. FTSE 250 mid-tier diamond producer with 6 operations in SouthAfrica and Tanzania. Large 300Mct resource base and it's two main mines, Cullinanand Finsch, make up 75% of revenues. Also some early stage exploration in Botswana.
● Investment Thesis. Preferred diamond play - Long term investment with premiumquality management and assets, plus growth into a firm diamond market. GradeBoost Coming - Gradual production increase to 5Mcts by 2019 and increasing gradeas Cullinan and Finsch move into undiluted kimberlite ore (Cullinan grade going to50cpht from 31cpht; 2.2Mcts pa, Finsch 60cpht, from 37cpht; 2Mcts pa) which shouldincrease margins. Production to increase by 2019 at Kimberley underground (100kcts),Koffiefontein (105kcts) and Williamson (300kcts). Upside beyond FY19 with excessore handing capacity at Cullinan and Finsch. Fancy upside - Revenues H2 weighteddue to seasonality, with more tenders. Upside for specials from Cullinan (average 1-2pa at c.$15-25m), which go straight to the bottom line. Balance sheet steady - Costswell controlled despite inflation, labour and power issues. Margins to increase to 50%,from 40%. Funds continue to be well managed and we see limited pressure to executegrowth plans which are fully funded; peak capex this year. First Divi- 2p for FY15,starter yield of only 1% but progressive policy in place.
● Guidance. FY15: Production 3.3Mcts (June YE). Cullinan - price $130/ct, Finsch -price $90/ct.
● Preview - Interims (Late Feb). Production 835kcts, a return to a similar level as Q1 andon track for FY15 guidance of 3.3Mcts and target of 5Mcts by FY19. Sales 1,053kcts,up y-o-y (Q3 2014 905kcts). Sales revenue $137m. Results will be H2 weighted due tothe usual seasonal timing of tenders, which should see a solid finish to FY15. Continuedramp up at Finsch and Cullinan. Further potential grade volatility at Cullinan. We expectthe diamond market to have firmed from the dip in Q1 but with overall growth remainingmuted. Short-term issues with mid-stream manufacturers and cutters being squeezedto persist, but long term underpinned by US market and continued growth from China.
● Valuation. Blend of 1x NAV/5x P/CF (bottom of 5-15x P/CF range for diamond miners).
● Risks. Low: South Africa labour & power. Delivery on growth programme.
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange62
Figure 1: Model summary
Source: Company & Numis Securities Research
Petra Diamonds Ticker PDL.L Market Capitalisation £943m Financial Year End June
BUY Share Price £1.83 Enterprise Value (EV) £955m Reporting Currency US$
£2.50 Implied Return 37% Net Debt (Cash) $19m Shares in Issue 515m
Valuation Key Metrics 2014 2015F 2016F 2017F 2018F
Net Asset Value Disc Rate NAV (%) $m $/sh £/sh EPS ($/sh) 0.10 0.13 0.26 0.37 0.45
Cullinan (74%) 10% 47% 1,383 2.56 1.58 EPS Growth 54% 29% 105% 43% 24%
Finsch (74%) 10% 44% 1,289 2.39 1.47 P/E 30.6x 23.7x 11.6x 8.1x 6.5x
Williamson (75%) 10% 6% 171 0.32 0.20 CFPS ($/sh) 0.38 0.35 0.56 0.78 0.70
Koffiefontein (74%) 10% 5% 155 0.29 0.18 P/CFPS 7.7x 8.4x 5.3x 3.8x 4.2x
Kimberley U/G (74%) 10% 1% 37 0.07 0.04 FCFPS ($/sh) (0.10) (0.07) 0.04 0.26 0.40
Fissures (74%) 10% (0%) (2) (0.00) (0.00) P/FCFPS (30.9)x (45.4)x 76.9x 11.2x 7.4x
Sub-total 3,033 5.61 3.46 FCF Yield -3% -2% 1% 9% 14%
Corporate G&A / Other 10% (3%) (83) (0.15) (0.10) EV/EBITDA 9.9x 8.9x 5.8x 4.0x 3.0x
Cash & equiv (est) 5% 153 0.28 0.17 EBITDA margin 36% 36% 49% 55% 56%
Debt (est) (6%) (172) (0.32) (0.20) Dividend Per Share ($/sh) 0.00 0.03 0.04 0.04 0.09
Total 2,931 5.42 £3.35 Dividend Yield 0.0% 1.0% 1.2% 1.5% 3.1%
Current NAV multiple (Implied) 0.55x Return on Assets (ROA) 6% 7% 12% 16% 18%
Earnings value $/sh £/sh Return on Equity (ROE) 11% 12% 21% 24% 23%
Cash flow per share (12 months forward) 0.36 0.22 Return on Capital Employed (ROCE) 13% 13% 19% 25% 26%
Current P/CF multiple (implied) 8.2x Net Debt/EBITDA 0.7x 0.2x 0.2x -0.2x -0.7x
Blended valuation Target Multiple Weight £/sh Gearing (Debt/Equity) 25% 27% 26% 15% 4%
NAV valuation 1.00x 50% £3.35 Interest Cover 21.9x 18.3x 25.5x 38.5x 117.5x
Cash flow valuation 7.5x 50% £1.66 Shares Outstanding (m) 511 515 515 515 515
VALUATION £2.51 Income Statement (US$m) 2014 2015F 2016F 2017F 2018F
Sensitivity Analysis Valuation NAV/sh 16F EPS 16F CFPS Revenue 472 500 586 722 843
Base case diamond price forecast £2.51 £3.35 $0.26 $0.56 Cost of sales (320) (343) (321) (350) (404)
Base case +10% £2.51 £3.36 $0.26 $0.56 G&A (14) (15) (14) (14) (15)
Base case -10% £2.50 £3.33 $0.25 $0.55 Other (10) (1) 1 1 1
Flat diamond prices (Rough Index @ 180) £1.92 £2.87 $0.14 $0.34 EBITDA 170 181 288 399 470
News catalysts FY 14 FY 15 FY 16 DD&A 42 39 37 42 45
Potential value-add from 'specials' EBIT 128 142 251 358 425
Cullinan - C-Cut production starts Net finance income (expense) (4) (14) (4) (4) (0)
Finsch - development of Block 5 SLC PBT 124 129 247 354 424
Finsch - development of SWC Non-Recurring Items/Other (16) 0 0 0 0
Koffiefontein - Production from Ebenhaezer pit Tax (41) (44) (69) (99) (109)
Reserves & Resources (attributable) Tonnes Grade Carats EV$/ct Net Profit (Loss) - attributable 50 64 132 189 234
Reserves (P&P) 94 Mt 42 Mt 40 Mt 39 Minority Interest 18 20 46 66 82
Resources (M&I) 352 Mt 47 Mt 165 Mt 9 Cashflow (US$m) 2014 2015F 2016F 2017F 2018F
Production & cost (cons) 2014 2015F 2016F 2017F 2018F Net Profit (Loss) 68 85 178 255 316
Diamonds produced (kct) 3,110 3,306 3,301 3,870 3,918 Working Cap. change 20 46 3 3 0
EV$/ct production 497 468 468 400 395 DD&A 42 43 37 42 45
Total Cash Cost ($/ct) 79 78 70 73 78 Non Recurring/Other 67 9 70 100 1
All-in Sustaining Cost ($/ct) 84 84 76 78 82 Cash Flow From Operations 196 182 287 400 362
Capital Expenditure (209) (229) (196) (120) (85)
Acquis./investments/adjustments (2) 92 0 0 0
Cash Flow From Investing (211) (137) (196) (120) (85)
Borrowings 12 38 27 (60) (116)
Capital stock 3 (4) (1) (1) 0
Dividends paid & other 7 0 (37) (47) (31)
Cash Flow From Financing 22 34 (11) (107) (146)
Net Change in Cash 7 79 80 172 131
Free Cash Flow (13) (47) 91 280 277
Balance Sheet (US$m) 2014 2015F 2016F 2017F 2018F
Cash & Equivalents 34 159 171 245 376
Total Current Assets 168 280 303 389 521
PP&E & Mining Interests 839 959 1,118 1,196 1,236
Deferred taxation 30 29 29 29 29
Other 62 2 3 3 4
Total Assets 1,099 1,270 1,452 1,617 1,790
Short Term Debt 34 54 54 54 54
Current Liabilities 106 131 145 160 162
Assumptions 2014 2015F 2016F 2017F 2018F Long Term Debt 159 197 224 164 49
Diamond Price (weighted avg, $/ct) 138 130 167 188 213 Other Long Term Liabilities 202 216 217 218 220
Cullinan - average $/ct (real) 185 169 155 167 178 Total Liabilities 467 543 585 542 430
Finsch - average $/ct (real) 99 88 124 144 170 Shareholder Equity 596 676 780 934 1,146
Polished Price Index 144 138 135 138 141 Minority interest 36 50 87 141 214
Rough Price Index 238 234 236 249 245 Total Liab. & Equity 1,099 1,270 1,452 1,617 1,790
South Africa & Tanzania inflation 0.0% 0.0% 1.9% 4.0% 4.0% Working Capital (2) (48) (51) (54) (54)
Exchange rate (US$/ZAR) 10.39 11.43 11.63 10.69 9.63 Net Debt (Cash) 125 37 53 (81) (327)
0
20
40
60
80
100
120
0
1,000
2,000
3,000
4,000
5,000
2013 2014 2015F 2016F 2017F 2018F 2019F 2020F 2021F 2022F 2023F 2024F
Cullinan Finsch Fissures Williamson
Kimberley U/G Koffiefontein Total Cash Cost AISC
Diamond Production ('000ct) Total Cash Cost / AISC ($/ct)
Petra Diamonds 9 April 2015
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange 63
Metals & MiningFor FCA purposes this is a Marketing Communication
AnalystsCailey BarkerTel: +44 (0)20 7260 [email protected]
Phil SwinfenTel: +44 (0)20 7260 [email protected]
This research was preparedand approved by
Numis Securities LimitedThe London Stock Exchange Building10 Paternoster SquareLondon EC4M 7LT
+44 (0)20 7260 [email protected]
Registered No 02285918. Authorised andRegulated by The Financial ConductAuthority. A Member of the LondonStock Exchange
9 April 2015
HOLD
Current Share Price 4,852pTarget Price 5,100pMarket Capitalisation £4.5bnShares In Issue 93mRIC/BLBG RRS.L/RRS LNAvg. Daily Volume (3M) 613,991Net Cash/(Debt) (m) (12/15F) $168.6m
Current share price(s) timed at 9:00AM on 07/04/15
Apr- 14 Jul- 14 Oct- 14 Jan- 15 Apr- 15
6000
5500
5000
4500
4000
3500
3000
Share Price
Randgold ResourcesRelat ive to UK Market
Performance (%) 1M 3M 12M
Absolute 5 0 3
Relative 5 -8 -2
Source: Datastream (relative to UK-DS Market index)
Randgold ResourcesEstimate Changes
Reaching a Peak
We maintain our HOLD recommendation and increase our TP to £51, from £49, dueto our new commodity price forecasts and changes to our model.
● Company Snapshot. FTSE 100 mid-tier African gold producer. Produces 1.2Mozpafrom 5 mines in Mali (Loulo-Gounkoto, Morila), Cote d'Ivoire (Tongon) and DRC (Kibali).Also has the Massawa project in Senegal, plus a large exploration portfolio and anumber of JVs with juniors.
● Investment Thesis. Industry leader - Peer-leading management and assets, with solidorganic growth and upside, while not without its political and technical challenges.Well-deserved premium rating for an impressive track record in creating shareholdervalue. Growth peaking - Loulo-Gounkoto growing to 650-700kozpa moving into highergrade areas; Kibali is firing on all cylinders with production moving to full 600kozpa(RRS 45%). Tongon appears the ongoing bug-bear with recovery and power issues(260-300kozpa). We see upside to 1.3Mozpa at $600/oz (AISC $750-800/oz) on grade,optimisation and minor expansions. Cash to come: M&A or divi? - Capex has peakedso will come down sharply. RRS want to build the coffers up to $500m to cover the nextmine build. It recently increased its debt facility to $400m, which appears to be a moveto capitalise on a faltering industry; despite its strict filters, M&A could be a real prospectthis year. We see substantive cash generation and chance of dividend upgrades in2015. Organic trail - Exploration is now focusing on discovery of elephants andbrownfield targets to improve mine plans. We see lots of prospectivity, particularly inMali and DRC. Political challenges - African political issues are ongoing, particularlyin Cote d'Ivoire and the DRC and we could see further wobbles. However, a peer-leading approach to African politics should navigate through the crossfire.
● Guidance. 2015: 1.2-1.26Moz at TCC of $650-700/oz. Capex $330m.
● Preview Q1 (7 May). Production flat q-o-q at 289koz at a cash cost of $693/oz (Q4 2014287koz at $712/oz). Loulo-Gounkoto slightly up on grade and ratio switches to morefrom Loulo; Tongon stays with elevated tonnage and grade with recoveries continuingto improve with the new crusher and expanded flotation circuit; Morila down slightlyfrom a strong Q4 when the pushback started. Kibali down at 166koz as grade comesdown. EPS flat q-o-q at $0.48 with a slightly higher gold price (NPAT $45m, Q4 2014$0.49). Balance sheet up at $114m cash and no debt as Kibali capex comes off butVAT receivables remain outstanding.
● Valuation. Blend of 2x NAV/15x P/CF (top of 1-2x NAV/5-15x P/CF for golds).
● Risks. Mali, Cote d'Ivoire & DRC politics, mining code & tax.
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange64
Figure 1: Model summary
Source: Company & Numis Securities Research
Randgold Resources Ticker RRS.L Market Capitalisation £4,493m Financial Year End Dec
HOLD Share Price £48.52 Enterprise Value (EV) £4,432m Reporting Currency US$
£51.00 Implied Return 5% Net Debt (Cash) -$91m Shares in Issue 93m
Valuation Key Metrics 2013 2014 2015F 2016F 2017F
Net Asset Value Disc Rate NAV (%) $m $/sh £/sh EPS ($/sh) 3.02 2.54 1.90 2.11 2.62
Loulo - Mali (80%) 10% 30% 1,129 12.19 8.13 EPS Growth -35% -16% -25% 11% 24%
Gounkoto - Mali (80%) 10% 20% 755 8.15 5.43 P/E 24.1x 28.7x 38.4x 34.4x 27.8x
Tongon - Cote D'Ivoire (89%) 10% 20% 768 8.29 5.53 CFPS ($/sh) 5.04 3.43 4.62 5.08 5.65
Morila - Mali (40%) 10% 0% 18 0.20 0.13 P/CFPS 14.4x 21.2x 15.8x 14.3x 12.9x
Kibali - DRC (45%) 12% 28% 1,044 11.28 7.52 FCFPS ($/sh) (2.86) 0.94 2.44 3.76 4.59
Massawa - Senegal (83%) 12% 3% 109 1.18 0.78 P/FCFPS n.m 77.6x 29.9x 19.4x 15.8x
Sub-total 3,823 41.29 27.52 FCF Yield -4% 1% 3% 5% 6%
Cash & Equivalents 2% 91 0.98 0.66 EV/EBITDA 9.1x 8.8x 10.0x 8.8x 7.8x
Debt 0% 0 0.00 0.00 EBITDA Margin 31% 33% 27% 28% 32%
Corporate G&A / Other (4%) (149) (1.61) (1.07) Dividend Per Share ($/sh) 0.50 0.47 0.60 0.63 0.83
Total 3,765 40.66 £27.10 Dividend Yield 0.7% 0.6% 0.8% 0.9% 1.1%
Current NAV Multiple (Implied) 1.79x Return on Assets (ROA) 8% 7% 5% 5% 6%
Cash Flow Value $/sh £/sh Return on Equity (ROE) 8% 6% 3% 4% 4%
CFPS (1 year forward) 4.73 3.16 Return on Capital Employed (ROCE) 11% 11% 8% 9% 10%
Current P/CF multiple (implied) 15.4x Net Debt/EBITDA -0.1x -0.2x -0.4x -0.8x -1.2x
Blended Valuation Target Multiple Weight Gearing (Debt/Equity) 0% 0% 0% 0% 0%
NAV valuation 2.0x 50% £54.21 Interest Cover 0.1x 0.0x 0.0x 0.0x 0.0x
Cash Flow valuation 15.0x 50% £47.34 Shares Outstanding (m) 92 93 93 93 93
VALUATION £50.77 Income Statement 2013 2014 2015F 2016F 2017F
Revenue 1,138 1,087 1,074 1,220 1,271
Sensitivity Analysis NAV (£/sh) 15F EPS 15F CFPS Cost of Sales (609) (627) (712) (759) (739)
Base case gold price forecast 27.10 1.90 4.62 G&A & Exploration (49) (37) (60) (50) (52)
Base case +10% 34.09 2.92 5.78 Share of JV Profits, Other 6 81 140 91 89
Base case -10% 20.13 0.87 3.45 EBITDA 485 504 442 503 569
Flat gold price (at spot $1,200/oz) 26.23 1.90 4.62 DD&A (131) (147) (152) (165) (160)
News Catalysts Q1 14 Q2 14 Q3 14 Q4 14 EBIT 355 357 290 337 409
Kibali sulphide production starts Share of JV profits, Net Interest 48 (4) 0 2 1
Cote d'Ivore New Mining Code PBT 402 353 290 339 410
Kibali underground stoping begins Non-Recurring Items/Other (49) (36) (56) (59) (65)
Gounkoto u/g trade-off study Taxes/Recovery (77) (82) (58) (85) (102)
Tongon float circuit installed Net Profit (Loss) - attributable 277 235 176 196 242
Reserves & Resources (attributable) Gold Silver Gold Eq EV/oz Minority Interest 47 36 56 59 65
Reserves (P&P) Moz 15.0 0 15.0 443 Cashflow 2013 2014 2015F 2016F 2017F
Resources (M&I) Moz 22.0 0 22.0 302 Net Profit (Loss) 324 271 232 254 307
Production & Cost 2014 2015F 2016F 2017F DD&A 131 147 152 165 160
Gold Production (consolidated) 000oz 1,147 1,211 1,301 1,307 Non-Cash Items/JV Dividends 79 60 112 141 159
Gold Production (attributable) 000oz 995 1,055 1,126 1,130 Working Cap. Changes (47) (67) (11) (6) (1)
EV/oz Production $/oz Au 6,685 6,299 5,905 5,885 Cash Flow From Operations 464 318 428 470 523
Total Cash Cost (net by-products) $/oz 698 684 686 647 Capital Expenditure (exc. JVs) (728) (231) (202) (122) (98)
All-in Sustaining Cost $/oz 805 756 757 776 Acquis./Investments 0 9 0 0 0
Cash Flow From Investing (728) (222) (202) (122) (98)
Equity Issues (Net of Costs) 1 2 0 0 0
Net Borrowings 0 0 0 0 0
Dividends Paid & Other (73) (53) (137) (110) (127)
Cash Flow From Financing (72) (51) (137) (110) (127)
Net Change in Cash (336) 45 89 238 298
Free Cash Flow (264) 87 226 348 425
Balance Sheet 2013 2014 2015F 2016F 2017F
Cash & Equivalents 44 91 172 410 708
Total Current Assets 406 396 507 754 1,054
PP&E (inc. JVs) 2,778 2,932 3,050 3,028 2,985
Deferred taxation 1 0 0 0 0
Other 191 205 205 205 205
Total Assets 3,377 3,533 3,761 3,987 4,243
Short Term Debt 0 0 0 0 0
Current Liabilities 238 142 153 156 157
Long Term Debt 0 0 0 0 0
Other Long Term Liabilities 81 89 89 89 89
Total Liabilities 319 230 241 245 245
Assumptions (Real) 2014 2015F 2016F 2017F LT Shareholder Equity 3,058 3,303 3,520 3,742 3,998
Gold Price ($/oz) 1,266 1,205 1,200 1,200 1,200 Total Liab. & S/Holder Equity 3,377 3,533 3,761 3,987 4,243
Silver Price ($/oz) 19.08 16.7 17.6 18.6 18.5 Working Capital 168 254 354 598 897
Exchange Rate (US$:£) 1.65 1.50 1.50 1.50 1.50 Net Debt (Cash) (44) (91) (172) (410) (708)
0
250
500
750
1000
0
250
500
750
1,000
1,250
04 05 06 07 08 09 10 11 12 13 14 15F 16F 17F 18F 19F
Loulo Morila Tongon Gounkoto
Massawa Kibali Total Cash Cost AISC
Attrib. Gold Eq Production ('000oz) Total Cash Cost / AISC ($/oz AuEq)
Randgold Resources 9 April 2015
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange 65
Metals & MiningFor FCA purposes this is a Marketing Communication
AnalystsPhil SwinfenTel: +44 (0)20 7260 [email protected]
Cailey BarkerTel: +44 (0)20 7260 [email protected]
This research was preparedand approved by
Numis Securities LimitedThe London Stock Exchange Building10 Paternoster SquareLondon EC4M 7LT
+44 (0)20 7260 [email protected]
Registered No 02285918. Authorised andRegulated by The Financial ConductAuthority. A Member of the LondonStock Exchange
9 April 2015
BUY
Current Share Price C$0.90Target Price C$1.75Market Capitalisation C$161,889,480Shares In Issue 180mRIC/BLBG TMM.TO/TMM CNAvg. Daily Volume (3M) 642,035
Current share price(s) timed at 9:00AM on 07/04/15
Apr- 14 Jul- 14 Oct- 14 Jan- 15 Apr- 15
2.5
2
1.5
1
0.5
Share Price
Timmins Gold
Performance (%) 1M 3M 12M
Absolute -15 -32 -43
Relative -16 -36 -46
Source: Datastream (relative to UK-DS Market index)
Timmins GoldEstimate Changes
Platform for Growth
We maintain our BUY recommendation and increase our TP to C$1.75 from C$1.60,due to our revised commodity price forecasts and changes to our model.
● Company Snapshot. TSX/NYSE-listed junior gold producer operating in Mexico. It’smain asset is the San Francisco gold mine in Sonoro State which produces 120kozpa. It recently acquired two development projects, Caballo Blanco and Ana Paula, alsoin Mexico.
● Investment Thesis. Robust producer - San Francisco has a solid production trackrecord producing c.120koz pa at an operating cost of below $800/oz. The mine is asimple heap leach operation with very few moving parts. Free Cash Flow to Return.Once growth capex on Caballo Blanco and Ana Paula is spent, Timmins shouldreturn to generating significant free cash flow, even at current gold prices. CoiledSpring. Timmins is highly leveraged to the gold price. The combination of an unhedgedproducer with strong cash flow and a moderate but stable opex base, provides acompelling call on gold price recovery. A modest move to $1,300 gold (vs NUMe$1,200) would increase our FY15 EPS forecast by 125%. Growth Story - TMM is acheap way to buy into a future mid-tier producer. Timmins could potentially doubleproduction within the next two years to 325koz pa. Caballo Blanco and Ana Paula willbe developed to Timmins' own time-line to manage the capital spend. Organic Growth.Timmins is planning to capitalise on drilling success late last year which identified high-grade feeders in the San Francisco pit, along strike and down dip. Exploration Play.Timmins has a Mexican focused 200,000ha under-explored land package.
● Guidance. FY guidance remains 115-125koz at $800-850/oz at a stable 25ktpdcrushing rate and 0.59g/t head-grade.Preview Q1. Production 29koz gold at $876/ozcash operating cost (after by-product credits). 2,250t processed at 0.59g/t Au headgrade.
● Valuation. 1.25x NAV and 7.5x CF (middle of 1-2x NAV and 5-15x CF range for goldproducers).
● Risks. Moderate-high. Mexican tax changes, project delivery, financing, securityissues in Guerrero State.
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange66
Figure 1: Model summary
Source: Company & Numis Securities Research
Timmins Gold Ticker TMM.TO Market Capitalisation C$162m Financial Year End Dec
BUY Share Price C$0.90 Enterprise Value (EV) $116m Reporting Currency $
C$1.75 Implied Return 94% Net Debt (Cash) -£17m Shares in Issue 180m
Valuation Key Metrics 2013 2014 2015F 2016F 2017F
Net Asset Value Disc Rate NAV (%) $m C$m C$/sh EPS ($/sh) 0.11 0.06 0.03 0.02 0.04
San Francisco (100%) 8% 54% 282 353 1.23 EPS Growth n.m -46% -49% -29% 83%
Ana Paula (100%) 10% 24% 127 159 0.56 P/E 6.8x 12.6x 25.0x 35.0x 19.2x
Caballo Blanco (100%) 10% 10% 50 62 0.22 CFPS ($/sh) 0.36 0.20 0.08 0.07 0.11
Resources off-plan, Exploration 18% 95 118 0.41 P/CFPS 2.0x 3.5x 9.0x 10.4x 6.6x
Sub-total 554 692 2.42 FCFPS ($/sh) (0.00) (0.02) 0.01 (0.20) (0.35)
Cash & Equivalents 5% 28 35 0.12 P/FCFPS n.m n.m 124.4x n.m n.m
Debt (2%) (11) (14) (0.05) FCF Yield 0% -2% 1% -23% -39%
Corporate G&A / Other (9%) (48) (60) (0.21) EV/EBITDA 2.1x 2.9x 3.9x 3.9x 1.9x
Total 522 653 2.28 EBITDA Margin 35% 26% 21% 20% 28%
Current NAV Multiple (Implied) 0.39x Dividend Per Share ($/sh) 0.00 0.00 0.00 0.00 0.00
Dividend Yield 0.0% 0.0% 0.0% 0.0% 0.0%
Cash Flow Value $/sh C$/sh Return on Assets (ROA) 6% 3% 2% 2% 2%
CPS (1 year forward) 0.07 0.09 Return on Equity (ROE) 9% 4% 3% 3% 4%
Current P/CF multiple (implied) 10.4x Return on Capital Employed (ROCE) 19% 8% 4% 4% 6%
Blended Valuation Target Multiple Weight Net Debt/EBITDA -0.1x -0.4x -0.5x 0.3x 2.0x
NAV valuation 1.25x 50% $2.85 Gearing (Debt/Equity) 10% 5% 5% 4% 41%
Cash flow valuation 7.5x 50% $0.65 Interest Cover 0.0x -0.1x -0.1x -0.2x -0.3x
VALUATION $1.75 Shares Outstanding (m) 144 180 283 340 374
Sensitivity Analysis NAV (p/sh) 15F EPS 15F CFPS Income Statement 2013 2014 2015F 2016F 2017F
Base case gold price forecast 2.28 0.02 0.07 Revenue 161 154 143 152 216
Base case +10% 2.81 0.06 0.11 Cost of Sales (88) (98) (105) (112) (143)
Base case -10% 1.28 (0.01) 0.03 G&A (11) (14) (10) (10) (12)
Flat Gold Price (at spot $1,200/oz) 2.05 0.03 0.07 Other (5) (2) 2 0 0
News Catalysts 2014 2015 2016 2017 2018 EBITDA 57 41 30 30 61
San Francisco mine plan update DD&A (15) (19) (17) (18) (31)
San Francisco regional drilling EBIT 41 22 12 12 31
Caballo Blanco - infill, Met testing Net Interest Expense (1) (2) (2) (2) (10)
CB & AP - PEA Optimisation, Permitting PBT 40 20 11 10 20
Caballo Blanco - Production (H2) Non-Recurring Items/Other 0 0 0 0 0
Ana Paula - Production Taxes/Recovery (3) (10) (3) (3) (6)
Reserves & Resources (La India attributable) Gold EV/oz Net Profit (Loss) - attributable 15 9 7 7 14
Reserves (P&P) Moz 1.6 73 Minority Interest 0 0 0 0 0
Resources (M&I) Moz 4.3 27 Cashflow 2013 2014 2015F 2016F 2017F
Resources (M, I&I) Moz 6.6 18 PBT 40 20 11 10 20
Production & Cost (attributable) 2013 2014F 2015F 2016F DD&A 15 19 17 18 31
Gold Production 000oz 120 120 118 125 Non Recurring/Other 8 3 2 2 10
Gold Eq Production 000oz 121 121 119 126 Working Cap. Changes (11) (9) (9) (6) (21)
EV/oz Production $/oz Au 962 958 978 925 Cash Flow From Operations 52 33 21 24 41
Operating Cash cost $/oz 717 790 876 861 Capital Expenditure (53) (36) (19) (92) (172)
Total Cash Cost $/oz 727 799 885 870 Acquis./Investments 0 (11) 0 0 0
All-in Sustaining Cost $/oz 872 925 999 919 Cash Flow From Investing (53) (47) (19) (92) (172)
Equity Issues (Net of Costs) 0 24 0 47 28
Net Borrowings 0 (5) 0 0 0
Other (1) (1) (2) (2) 110
Cash Flow From Financing (1) 19 (2) 45 138
Net Change in Cash (1) 4 (0) (24) 7
Free Cash Flow (0) (3) 1 (69) (131)
Balance Sheet 2013 2014 2015F 2016F 2017F
Cash & Equivalents 23 27 27 3 10
Total Current Assets 82 90 100 82 130
PP&E & Mining Interests 180 216 218 292 433
Deferred taxation 7 6 6 6 6
Other 0 0 0 0 (0)
Total Assets 269 312 324 380 569
Short Term Debt 16 11 11 11 11
Current Liabilities 46 38 42 44 72
Long Term Debt 0 0 0 0 120
Other Long Term Liabilities 58 60 60 60 60
Total Liabilities 104 98 103 105 252
Shareholder Equity 164 214 221 275 317
Assumptions (Real) 2014 2015F 2016F 2017F LT Total Liab. & S/Holder Equity 269 312 324 380 569
Gold Price ($/oz) 1,266 1,205 1,200 1,200 1,200 Working Capital 35 52 58 37 58
Silver Price ($/oz) 19.1 16.7 17.6 17.6 18.5 Net Debt (Cash) (6) (16) (16) 8 121
Exchange Rate (US$/£) 1.65 1.50 1.50 1.50 1.50
0
250
500
750
1000
0
50
100
150
200
250
300
350
400
2012 2013 2014 2015F 2016F 2017F 2018F 2019F 2020F 2021F 2022F 2023F
San Francisco Caballo Blanco Ana Paula Total Cash Cost AISC
Attrib. Gold Production ('000oz) Total Cash Cost / AISC ($/oz )
Timmins Gold 9 April 2015
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange 67
Metals & MiningFor FCA purposes this is a Marketing Communication
AnalystsCailey BarkerTel: +44 (0)20 7260 [email protected]
Phil SwinfenTel: +44 (0)20 7260 [email protected]
This research was preparedand approved by
Numis Securities LimitedThe London Stock Exchange Building10 Paternoster SquareLondon EC4M 7LT
+44 (0)20 7260 [email protected]
Registered No 02285918. Authorised andRegulated by The Financial ConductAuthority. A Member of the LondonStock Exchange
9 April 2015
ADD
Current Share Price 20pTarget Price 23pMarket Capitalisation £162mShares In Issue 808mRIC/BLBG WLFE.L/WLFE LNAvg. Daily Volume (3M) 360,759Net Cash/(Debt) (m) (06/15F) £(49.9)mBroker Yes
Current share price(s) timed at 7:00AM on 07/04/15
Apr- 14 Jul- 14 Oct- 14 Jan- 15 Apr- 15
2422201816141210
Share Price
Wolf MineralsRelat ive to UK Market
Performance (%) 1M 3M 12M
Absolute 6 42 -6
Relative 6 31 -10
Source: Datastream (relative to UK-DS Market index)
Wolf MineralsEstimate Changes
Tantalizing Tungsten
We maintain our ADD recommendation and 23p TP, despite our new commodityprice forecasts and changes to our model.
● Company Snapshot. AIM/ASX-listed emerging UK tungsten producer. It owns theHemerdon mine in Devon, the third largest tungsten project in the world, which is fullypermitted and financed, starting production in Q3 2015.
● Investment Thesis. Ready to roll - Wolf successfully completed its A$183m (£99m)equity fundraising which, along with permitting already complete, removes the lastsignificant key risk. Construction commenced in February, marking Hemerdon’strajectory to be the first new metal mine in the UK for 45 years. Production is expected tostart in Q3 2015. Robust, simple project - Hemerdon has a substantial resource baseof 145Mt at a moderate grade of 0.19% WO3. A simple 3Mtpa open pit/gravity operationis envisaged to produce 345,000 mtu pa at a C1 cost of $109/mtu (net tin credits),at the bottom of the cost curve (AISC c.$180/mtu). Capex is expected to be £123m,giving a low capital intensity of $66/tpa. The project is located in a mining town withexcellent infrastructure, being fully permitted with no environmental concerns. Offtakeand marketing are secured. Plenty of upside - As we roll forward into production, wesee a 36% upside to our TP over the next 3 years. Mine life has been extended by3 years, beyond the current 9 years by expanding the pit and steepening the walls.Wolf has also been given the temporary go-ahead for 24/7 operation for 6 months.If it can operate within permitted noise levels, it will apply for a permanent change,growing production by 27% to 440,000mtu pa, increasing our TP by 5p. We also seepotential for an underground operation, opportunities to optimise the plant and upsidefrom country rock processing and aggregate sales. Assuming this upside, our bestcase TP increases by 34%. Profit potential - From FY16 onwards, we forecast Wolfhas the potential to generate A$60-80m in profits (3-4x P/E), EBITDA of A$100-110m(c.2x EV/EBITDA), FCF of $70-90m (3-4x P/CF) and dividends with a yield of +7%.
● Attractive LT market. Tungsten is classed as a strategic metal due to its uniqueproperties (used in drill bits etc). The market is forecast to move into deficit with supplyunable to keep up with rising demand and limited projects on the horizon. We are yet tosee a price response as prices have drifted lower to $255/mtu, on a lack of consistentbuying, but experts forecast a pick up in H2 (NUMe LT price is $450/mtu).
● Preview FY15. Financials academic. We forecast capex spend of A$144m. We expectsome fx benefit, with the balance sheet having net debt of A$51m, depending on timingof debt drawdown and payment of key capital items.
● Valuation. Blend of 1x NAV/7x 2016 P/E (bottom of 7-12x P/E range for industrials).
● Risks. Low: Project delivery, tungsten market.
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange68
Figure 1: Model summary
Source: Company & Numis Securities Research
Wolf Minerals Ticker WLFE Market Capitalisation £160m Financial Year End June
ADD Share Price £0.20 Enterprise Value (EV) £158m Reporting Currency A$
£0.23 Implied Return 16% Net Debt (Cash) -$4m Shares in Issue 808m
Valuation Key Metrics 2014 2015F 2016F 2017F 2018F
Net Asset Value Disc Rate NAV (%) $m $/sh £/sh EPS (A$/sh) (0.04) (0.01) (0.01) 0.04 0.07
Hemerdon 10% 112% 343 0.42 0.28 EPS Growth -22% 73% 51% 839% 86%
Sub-total 343 0.42 0.28 P/E n.m n.m n.m 9.4x 5.0x
Cash & Equivalents 10% 31 0.04 0.02 CFPS ($/sh) (0.02) (0.01) 0.04 0.07 0.10
Debt (9%) (28) (0.03) (0.02) P/CFPS n.m n.m 10.6x 5.7x 3.8x
Corporate G&A / Other (13%) (40) (0.05) (0.03) FCFPS ($/sh) (0.29) (0.19) 0.03 0.06 0.10
Total 306 0.38 £0.25 P/FCFPS n.m n.m 12.0x 5.9x 3.9x
Current NAV Multiple (Implied) 0.79x FCF Yield -77% -51% 8% 17% 26%
Earnings Value A$/sh £/sh EV/EBITDA n.m n.m n.m 4.7x 3.1x
EPS (2 year forward) 0.06 0.03 EBITDA Margin 0% 0% -1% 29% 41%
Current P/E multiple (implied) 6.5x Dividend Per Share ($/sh) 0.00 0.00 0.00 0.01 0.02
Blended Valuation Target Multiple Weight Dividend Yield 0.0% 0.0% 0.0% 3.2% 6.0%
NAV valuation 1.00x 50% £0.25 Return on Assets (ROA) -1% -3% -1% 12% 20%
Earnings valuation 7.0x 50% £0.21 Return on Equity (ROE) -2% -4% -2% 13% 21%
VALUATION £0.23 Return on Capital Employed (ROCE) -2% -3% 0% 16% 26%
Net Debt/EBITDA 19.4x -6.4x 1.4x -0.1x -0.7x
Gearing (Debt/Equity) 0% 31% 25% 6% 0%
Sensitivity Analysis NAV (£/sh) 17F EPS 17F CFPS Interest Cover n.m n.m n.m -0.1x 0.0x
Base case tungsten price forecast 0.25 0.04 0.07 Shares Outstanding (m) 266 808 808 808 808
Base case +10% 0.30 0.05 0.08 Income Statement 2014 2015F 2016F 2017F 2018F
Base case -10% 0.20 0.03 0.05 Revenue 0 0 93 149 185
Flat tungsten price (at spot $255/mtu) 0.04 0.01 0.03 Cost of Sales 0 0 (60) (72) (76)
News Catalyst (CY) Q4 14 Q1 15 Q2 15 Q3 15 G&A (5) (8) (10) (8) (8)
Geotech Drilling (mine life extension) Exploration 0 0 0 (5) (5)
Construction Other 0 0 0 0 0
Commissioning EBITDA (5) (8) 23 64 95
Production starts DD&A 0 0 (23) (21) (20)
EBIT (5) (8) (1) 43 76
Reserves & Resources (attributable) Tonnage Grade % Tungsten EV/t Net Interest Expense 2 (1) (3) (2) (0)
Reserves (P&P) 000 mtu 36 0.18 6,426 0.04 PBT (4) (9) (4) 40 75
Resources (M&I) 000 mtu 59 0.17 10,174 12.52 Non-Recurring Items/Other 0 0 0 0 0
Resources (Total) 000 mtu 145 0.15 22,298 5.76 Taxes/Recovery 0 1 (1) (8) (15)
Production & Cost 2016F 2017F 2018F 2018F Net Profit (Loss) - attributable (4) (9) (4) 32 60
Tungsten Production 000 mtu 287 380 374 356 Minority Interest 0 0 0 0 0
Tin Production 000t 0.44 0.58 0.52 0.44 Cashflow 2014 2015F 2016F 2017F 2018F
Tungsten Eq. Production 000t 312 406 396 374 Net Profit (Loss) (4) (9) (4) 32 60
EV/mtu Production (attributable) $/t 824 623 632 663 DD&A 0 0 23 21 20
C1 Cash Cost (net by-products) $/mtu 134 116 122 132 Non Recurring/Other (1) (2) 2 (0) 0
All-in Sustaining Cost $/mtu 184 148 155 167 Working Cap. Changes 0 0 8 0 0
Cash Flow From Operations (4) (11) 29 53 80
Capital Expenditure (73) (144) (3) (2) (2)
Acquis./Investments 0 (13) 0 0 0
Cash Flow From Investing (73) (158) (3) (2) (2)
Equity Issues (Net of Costs) 181 0 0 0 0
Net Borrowings (17) 82 (15) (40) (14)
Dividends Paid & Other 0 (5) (5) (10) (18)
Cash Flow From Financing 163 78 (20) (50) (32)
Net Change in Cash 84 (86) 5 2 46
Free Cash Flow (77) (155) 25 52 78
Balance Sheet 2014 2015F 2016F 2017F 2018F
Cash & Equivalents 103 18 21 23 69
Total Current Assets 122 31 31 33 79
PP&E & Mining Interests 120 265 246 226 208
Deferred taxation 0 0 0 0 0
Other 6 20 20 20 20
Total Assets 249 316 297 279 307
Short Term Debt 0 0 0 0 0
Current Liabilities 26 20 20 20 20
Assumptions (Real) 2014 2015F 2016F 2017F LT Long Term Debt 0 69 54 14 0
Tungsten Price - APT ($/mtu) 357 264 313 406 450 Other Long Term Liabilities 2 5 5 5 5
Tin Price ($/t) 21,899 12,761 15,375 16,521 20,000 Total Liabilities 28 93 78 38 24
Exchange Rate (A$:US$) 0.90 0.76 0.75 0.75 0.75 Shareholder Equity 221 223 218 241 283
Exchange Rate (US$:£) 1.65 1.50 1.50 1.50 1.50 Total Liab. & S/Holder Equity 249 316 297 279 307
Working Capital 97 11 11 13 59
Net Debt (Cash) (103) 51 33 (9) (69)
0
50
100
150
200
0
100
200
300
400
500
2014 2015F 2016F 2017F 2018F 2019F 2020F 2021F 2022F
Hemerdon Total Cash Cost AISC
Tungsten Production ('000 mtu, 100% basis) C1 Cash Cost / AISC ($/mtu)
Wolf Minerals 9 April 2015
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange 69
Regulatory Notice & DisclaimerAureus Mining, Highfield Resources, Wolf Minerals, Condor Gold, Caledonia MiningCorp, Chaarat Gold, First Quantum Minerals, International Ferro Metals andHighland Gold are or have been during the 12-month period preceding the date ofthis research report, a client of Numis.Numis has received compensation for investment banking services from AureusMining, Highfield Resources, Wolf Minerals, Condor Gold, Caledonia Mining Corp,Chaarat Gold, First Quantum Minerals, International Ferro Metals and HighlandGold in the past 12 months.Numis and/or one or more of its affiliates has managed or co-managed a publicoffering for Aureus Mining and Condor Gold in the past 12 months.
Numis and/or one or more of its affiliates may receive or may seek to receivecompensation for investment banking services from Minera IRL, Aureus Mining,Highfield Resources, Wolf Minerals, Condor Gold, Caledonia Mining Corp, ChaaratGold, First Quantum Minerals, International Ferro Metals, Centamin Egypt,Ferrexpo, Randgold Resources, Fresnillo and Highland Gold in the next 3 months.As at the date of this research report, Numis and/or one or more of its affiliatesis making a market in Minera IRL, Aureus Mining, Wolf Minerals, BerkeleyResources, Condor Gold, Gemfields, Dalradian Resources, Caledonia Mining Corp,Chaarat Gold, First Quantum Minerals, International Ferro Metals, Centamin Egypt,Ferrexpo, Randgold Resources, Fresnillo, Highland Gold, Hochschild Mining,Acacia Mining and Petra Diamonds.
Numis may rely on information barriers, such as "Chinese Walls", to control the flowof information within the areas, units, divisions, groups, or affiliates of Numis.No part of the content of this research report may be copied, forwarded or duplicatedin any form or by any means without the prior consent of Numis and Numis acceptsno liability whatsoever for the actions of third parties in this respect.Numis research is being produced in accordance with COBS 12.3 as Non-Independent Research.
The following disclosures are addressed toUS-based recipients.Analyst CertificationThe names of the research analysts who prepared this research report are shownin bold beside each company comment. They hereby certify that all of the viewsexpressed herein accurately reflect the research analysts. personal views about anyand all of the subject securities and/or issuers.The research analysts who prepared this research report also certify that no part ofthe research analysts. compensation was, is, or will be, directly or indirectly, relatedto the specific recommendations or views expressed by the research analysts inthe research report.
Important DisclosureThis research report has been prepared and approved by Numis Securities Limited("Numis"), a securities dealer in the United Kingdom. Numis is not a registeredbrokerdealer in the United States and therefore is not subject to U.S. rules regardingthe preparation of research reports and the independence of research analysts.This research report is provided for distribution solely to "major U.S. institutionalinvestors" in the United States in reliance on the exemption from registrationprovided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended.Any recipient of this research report wishing to effect any transaction to buy orsell securities or related financial instruments based on the information provided inthis research report should do so only through Numis Securities Inc. ("Numis Inc").Numis Inc. may be contacted in writing or by phone: Numis Securities Inc., 275Madison Avenue, 40th Floor, New York, NY 10016, U.S. phone (212) 277 7300.Numis Inc. is an affiliate of Numis. Under no circumstances should any recipienteffect any transaction to buy or sell securities or related financial instruments throughNumis.
Numis Inc. accepts responsibility for the contents of this research report, subject tothe terms set out below, to the extent that it is delivered to a U.S. person other thana major U.S. institutional investor.
The research analysts who prepared this research report receive compensationbased upon various factors (such as the general perception of their ability and theircommitment to their analytical work) and upon the overall revenues including theinvestment banking revenues of Numis and/or one or more of its affiliates.
Numis, Numis Inc. and/or their affiliates, directors, officers, and employees mayhave or have had interests, or long or short positions, and may at any time makepurchases or sales as a principal or agent of the subject companies mentioned orreferred to in this report.
Additional DisclosureThis Numis Securities Limited ("Numis") research report is for distribution only undersuch circumstances as may be permitted by applicable law. This research reporthas no regard to the specific investment objectives, financial situation, or particularneeds of any specific recipient, even if sent only to a single recipient. This research
report is offered solely for informational purposes and is not to be construed asa solicitation or an offer to buy or sell securities or related financial instruments,nor is it to be construed as a recommendation for Numis to effect any transactionto buy or sell securities or related financial instruments on behalf of any recipient.There is no express or implied understanding between Numis or Numis SecuritiesInc. ("Numis Inc.") and any recipient of this research report that Numis will receiveany commission income in connection with this research report. The securitiesthat may be described in this research report may not be eligible for sale in alljurisdictions or to certain categories of investors. This research report is based oninformation believed to be reliable, but it has not been independently verified and isnot guaranteed as being accurate. This research report is not guaranteed to be acomplete statement or summary of any securities, markets, reports or developmentsreferred to in this research report.
Any statements or opinions expressed in this research report are subject to changewithout notice and Numis is not under any obligation to update or keep currentthe information contained herein. All statements and opinions expressed in thisresearch report are made as of the date of this research report and are not held outas applicable thereafter. Neither Numis nor any of its directors, officers, employees,or agents shall have any liability, however arising, for any error, inaccuracy orincompleteness of fact or opinion in this research report or lack of care in thisresearch report's preparation or publication; provided that this shall not excludeliability to the extent that this is impermissible under the law relating to UK financialservices.
Investing in any non-U.S. securities or related financial instruments (includingADRs) discussed in this research report may present certain risks. The securitiesof non-U.S. issuers may not be registered with, nor be subject to the regulationof the U.S. Securities and Exchange Commission. Information on such non-U.S.securities or related financial instruments may be limited. Foreign corporations aretypically not subject to audit and reporting standards and regulatory requirementscomparable to those in effect within the United States.
Past performance is not an indication or guarantee of future performance and norepresentation or warranty, express or implied, is made by Numis with respect tofuture performance. The value of any investment or income from any securities orrelated financial instruments discussed in this research report is subject to volatilityand can fall as well as rise. Investors may not get back the full amount they originallyinvested. The value of any investment or income from any securities or relatedfinancial instruments discussed in this research report denominated in a currencyother than U.S. dollars is subject to exchange rate fluctuations that may have apositive or adverse effect on the value of or income from any securities or relatedfinancial instruments discussed in this research report.
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange70
9 April 2015
The following disclosures are addressed tonon-US-based recipients.Numis regards this document as research. It has been approved under part IVarticle 19 of The Financial Services and Markets Act 2000 (Financial Promotion)Order 2005 (the “FPO”) by Numis Securities Limited (“Numis”) for communicationin the United Kingdom only to investment professionals as that term is defined inarticle 19(5) of the FPO. Its contents are not directed at, may not be suitable for andshould not be relied on by anyone who is not an investment professional includingretail clients. Numis does not provide investment advisory services to retail clients.This research report is not directed at you if Numis is prohibited or restricted byany legislation or regulation in any jurisdiction from making it available to you. Youshould satisfy yourself before reading it that Numis is permitted to provide researchconcerning investments to you under relevant legislation and regulations.Thisresearch report is not an offer or a solicitation to buy or sell any security. It doesnot constitute a personal recommendation and recipients must satisfy themselvesthat any dealing is appropriate in the light of their own understanding, appraisal ofrisk and reward, objectives, experience, and financial and operational resources. Ithas not been prepared in accordance with legal requirements designed to promotethe independence of research. Non independent research is not subject under theMarkets in Financial Instruments Directive (“MiFID”) to any prohibition on dealingahead of the dissemination of research. However, Numis is required by the FCAto have policies in place to identify and manage the conflicts of interest whichmay arise in its production, which include preventing dealing ahead.The prices ofthe investments referred to in this research report and the income from them maygo down as well as up and investors may realise losses on them. Neither pastperformance nor forecasts are a reliable indicator of future results. Numis acceptsno fiduciary duties to the reader of this research report and in communicating itNumis is not acting in a fiduciary capacity. Neither Numis nor any of its directors,officers, employees or agents shall have any liability, howsoever arising, for anyerror, inaccuracy or incompleteness of fact or opinion in it or lack of care in itspreparation or publication except where such is caused by its gross negligence,wilful default or fraud; nor shall it exclude or restrict any liability it has under theregulatory system to the extent that to do so is impermissible under the law relatingto financial services.
All statements and opinions are made as of the date on the face of this document andare not held out as applicable thereafter. Research will carry the date of publicationor, on research printed overnight, the date on which it was sent to the printers.Where a price is quoted in research it will generally, in the absence of contrarywords, be the latest practicable price prior to distribution or, in the case of researchprinted overnight, the closing price at the close of business. Unless otherwise stated,prices in this research report are derived from quotations on the London StockExchange. A list of significant items which could create a conflict of interest and othermaterial interests in relation to research, together with Numis’s policy for managingsuch conflicts of interest, is set out on the Numis website (www.numis.com/x/regulatory.html).
Numis or one or more of its associates or a director or an employee of Numis or ofan associate may from time to time have a position, or may have undertaken or mayundertake an own-account transaction, in a security referred to in this document orin a related security. Such a position or such a transaction may relate to the marketmaking activities of Numis or to other activities of Numis.
Numis or one or more of its associates may from time to time have a broking,advisory or other relationship with a company which is the subject of or referredto in this research, including acting as that company’s official or sponsoring brokerand providing corporate finance or other financial services. It is the policy of Numisto seek to act as corporate adviser or broker to many of the companies whichare covered by the Research Department. Accordingly companies covered in anyresearch may be the subject of marketing initiatives by the Corporate FinanceDepartment.
A company covered in this research may have paid for an analyst’s reasonableexpenses to visit their premises or offered modest hospitality or entertainment;further details are available on request.
Research will specifically identify sources of information for material facts, wherethese are not regulatory company announcements and published company financialdocuments. In those cases (but not otherwise) where the subject company has seena draft of the research report and has suggested factual amendments which areincorporated by the researcher, this will be noted on the research.
In longer pieces of research the risk warnings (if any) attaching to a particularcompany will be set out; in shorter pieces (typically no more than one-side long)there is a cross-reference to the archive of research on the Numis website where,under the appropriate company name, details of such matters can be viewed.
The archive of research (available to all clients who normally receive Numisresearch) is available on the Numis website (http://www.numis.com/x/research-sectors.html).
Numis accepts no responsibility whatever for any failure by a person residentoutside the United Kingdom to observe the foregoing. No part of the content of anyresearch material may be copied, forwarded or duplicated in any form or by anymeans without the prior consent of Numis and Numis accepts no liability whatsoeverfor the actions of third parties in this respect.
Numis believes that its research service as a whole amounts to ‘substantiveresearch’ as defined by the FCA
Sector Notes (mentioning 6 or more companies)Our sector notes may contain references to information on companies (e.g. targetprices and recommendations) which has already been published by us (see ourwebsite at http://www.numis.com/x/us-research.html) and consequently, details ofour assumptions, the material investment risks and/or the basis for each company.starget price may not be repeated in these sector notes.
Valuation and RisksFor details relating to valuation and risks in printed research, please refer to thecompany comment contained herein. In electronic pieces of research please referto the relevant company section of the Numis website http://www.numis.com/x/research-sectors.html
Ratings KeyIn making a recommendation the analyst should compare his target price with theactual share price and then make a recommendation derived from the percentagethus calculated.:As from 14 February 2005, the formula is:Buy >= +20%Add >= +10% to +19.99%Hold 0% to +/-9.99%Reduce <= -10% to -19.99%Sell <= -20%Upon the initial establishment of a recommendation and target price for a company,an additional 10 % deviation in the price from the default bands set out above ispermitted before the recommendation has to be changed in subsequently publishedresearch documents.
Distribution of RatingsUS Requirement
01/01/2014 - 31/12/2014UK Requirement
01/10/2014 - 31/12/2014All
SecuritiesCorporate
ClientsAll
SecuritiesCorporate
ClientsBuy 42.2% 72.8% 45.7% 76.2%Add 23.2% 21.6% 23.1% 18.4%Hold 29.2% 5.6% 25.6% 5.4%Reduce 4.3% 0.0% 4.1% 0.0%Sell 1.1% 0.0% 1.5% 0.0%Total 100% 100% 100% 100% The above table shows the
split of recommendationsbased on the lastrecommendation for eachresearch stock during the lastfour calendar quarters.
The above table shows the splitof recommendations based onall recommendations duringthe last calendar quarter forall securities and within eachcategory the proportion ofissuers to which Numis suppliedmaterial banking services in theprevious 12 months.
For the split of recommendations by sector for the period from 1 Oct 2013 to 30 Sep2014, please contact the Research Department of Numis Securities Ltd.
The following graphs display the three year recommendation, target price and shareprice history for the subject corporation(s) of this research report. In those instanceswhere the subject corporation(s) have been traded on the London Stock Exchangeor Alternative Investment Market for less than three years, the graph will show thehistory since the date the subject corporation(s) were admitted to trading. Prices inthe graph(s) below are in pence unless otherwise stated.
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange 71
9 April 2015
May
'12
Aug
'12
Dec
'12
Apr
'13
Aug
'13
Dec
'13
Apr
'14
Aug
'14
Dec
'14
Apr
'15
600
500
400
300
200
100
0
Acacia Mining
Recommendation Price Target Price
Three Year - Recommendation, Target Price, Share History
Buy
Add
Hold
Reduce
Sell
Created By BlueMatrix
Source: Numis Securities Research
May
'12
Aug
'12
Dec
'12
Apr
'13
Aug
'13
Dec
'13
Apr
'14
Aug
'14
Dec
'14
Apr
'15
80
70
60
50
40
30
20
10
Aureus Mining
Recommendation Price Target Price
Three Year - Recommendation, Target Price, Share History
Buy
Add
Hold
Reduce
Sell
Created By BlueMatrix
Source: Numis Securities Research
May
'12
Aug
'12
Dec
'12
Apr
'13
Aug
'13
Dec
'13
Apr
'14
Aug
'14
Dec
'14
Apr
'15
180
160
140
120
100
80
60
40
20
Caledonia Mining Corp
Recommendation Price Target Price
Three Year - Recommendation, Target Price, Share History
Buy
Add
Hold
Reduce
Sell
Created By BlueMatrix
Source: Numis Securities Research
May
'12
Aug
'12
Dec
'12
Apr
'13
Aug
'13
Dec
'13
Apr
'14
Aug
'14
Dec
'14
Apr
'15
45
40
35
30
25
20
15
10
5
Chaarat Gold
Recommendation Price Target Price
Three Year - Recommendation, Target Price, Share History
Buy
Add
Hold
Reduce
Sell
Created By BlueMatrix
Source: Numis Securities Research
May
'12
Aug
'12
Dec
'12
Apr
'13
Aug
'13
Dec
'13
Apr
'14
Aug
'14
Dec
'14
Apr
'15
1600
1400
1200
1000
800
600
400
Antofagasta
Recommendation Price Target Price
Three Year - Recommendation, Target Price, Share History
Buy
Add
Hold
Reduce
Sell
Created By BlueMatrix
Source: Numis Securities Research
May
'12
Aug
'12
Dec
'12
Apr
'13
Aug
'13
Dec
'13
Apr
'14
Aug
'14
Dec
'14
Apr
'15
40
35
30
25
20
15
10
Berkeley Resources
Recommendation Price Target Price
Three Year - Recommendation, Target Price, Share History
Buy
Add
Hold
Reduce
Sell
Created By BlueMatrix
Source: Numis Securities Research
May
'12
Aug
'12
Dec
'12
Apr
'13
Aug
'13
Dec
'13
Apr
'14
Aug
'14
Dec
'14
Apr
'15
140
120
100
80
60
40
20
Centamin Egypt
Recommendation Price Target Price
Three Year - Recommendation, Target Price, Share History
Buy
Add
Hold
Reduce
Sell
Created By BlueMatrix
Source: Numis Securities Research
May
'12
Aug
'12
Dec
'12
Apr
'13
Aug
'13
Dec
'13
Apr
'14
Aug
'14
Dec
'14
Apr
'15
250
200
150
100
50
0
Condor Gold
Recommendation Price Target Price
Three Year - Recommendation, Target Price, Share History
Buy
Add
Hold
Reduce
Sell
Created By BlueMatrix
Source: Numis Securities Research
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange72
9 April 2015
May
'12
Aug
'12
Dec
'12
Apr
'13
Aug
'13
Dec
'13
Apr
'14
Aug
'14
Jan'
15
Apr
'15
100
90
80
70
60
50
40
30
Dalradian Resources
Recommendation Price Target Price
Three Year - Recommendation, Target Price, Share History
Buy
Add
Hold
Reduce
Sell
Created By BlueMatrix
Source: Numis Securities Research
May
'12
Aug
'12
Dec
'12
Apr
'13
Aug
'13
Dec
'13
Apr
'14
Aug
'14
Dec
'14
Apr
'15
1800
1600
1400
1200
1000
800
600
400
First Quantum Minerals
Recommendation Price Target Price
Three Year - Recommendation, Target Price, Share History
Buy
Add
Hold
Reduce
Sell
Created By BlueMatrix
Source: Numis Securities Research
May
'12
Aug
'12
Dec
'12
Apr
'13
Aug
'13
Dec
'13
Apr
'14
Aug
'14
Dec
'14
Apr
'15
80
70
60
50
40
30
20
10
Gemfields
Recommendation Price Target Price
Three Year - Recommendation, Target Price, Share History
Buy
Add
Hold
Reduce
Sell
Created By BlueMatrix
Source: Numis Securities Research
May
'12
Aug
'12
Dec
'12
Apr
'13
Aug
'13
Dec
'13
Apr
'14
Aug
'14
Dec
'14
Apr
'15
250
200
150
100
50
0
Highland Gold
Recommendation Price Target Price
Three Year - Recommendation, Target Price, Share History
Buy
Add
Hold
Reduce
Sell
Created By BlueMatrix
Source: Numis Securities Research
May
'12
Aug
'12
Dec
'12
Apr
'13
Aug
'13
Dec
'13
Apr
'14
Aug
'14
Dec
'14
Apr
'15
500
400
300
200
100
0
Ferrexpo
Recommendation Price Target Price
Three Year - Recommendation, Target Price, Share History
Buy
Add
Hold
Reduce
Sell
Created By BlueMatrix
Source: Numis Securities Research
May
'12
Aug
'12
Dec
'12
Apr
'13
Aug
'13
Dec
'13
Apr
'14
Aug
'14
Dec
'14
Apr
'15
2200
2000
1800
1600
1400
1200
1000
800
600
Fresnillo
Recommendation Price Target Price
Three Year - Recommendation, Target Price, Share History
Buy
Add
Hold
Reduce
Sell
Created By BlueMatrix
Source: Numis Securities Research
May
'12
Aug
'12
Dec
'12
Apr
'13
Aug
'13
Dec
'13
Apr
'14
Aug
'14
Dec
'14
Apr
'15
350
300
250
200
150
100
50
0
Highfield Resources
Recommendation Price Target Price
Three Year - Recommendation, Target Price, Share History
Buy
Add
Hold
Reduce
Sell
Created By BlueMatrix
Source: Numis Securities Research
May
'12
Aug
'12
Dec
'12
Apr
'13
Aug
'13
Dec
'13
Apr
'14
Aug
'14
Dec
'14
Apr
'15
600
500
400
300
200
100
0
Hochschild Mining
Recommendation Price Target Price
Three Year - Recommendation, Target Price, Share History
Buy
Add
Hold
Reduce
Sell
Created By BlueMatrix
Source: Numis Securities Research
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange 73
9 April 2015
May
'12
Aug
'12
Dec
'12
Apr
'13
Aug
'13
Dec
'13
Apr
'14
Aug
'14
Dec
'14
Apr
'15
50
40
30
20
10
0
International Ferro Metals
Recommendation Price Target Price
Three Year - Recommendation, Target Price, Share History
Buy
Add
Hold
Reduce
Sell
Created By BlueMatrix
Source: Numis Securities Research
May
'12
Aug
'12
Dec
'12
Apr
'13
Aug
'13
Dec
'13
Apr
'14
Aug
'14
Dec
'14
Apr
'15
70
60
50
40
30
20
10
0
Minera IRL
Recommendation Price Target Price
Three Year - Recommendation, Target Price, Share History
Buy
Add
Hold
Reduce
Sell
Created By BlueMatrix
Source: Numis Securities Research
May
'12
Aug
'12
Dec
'12
Apr
'13
Aug
'13
Dec
'13
Apr
'14
Aug
'14
Dec
'14
Apr
'15
10000
9000
8000
7000
6000
5000
4000
3000
Randgold Resources
Recommendation Price Target Price
Three Year - Recommendation, Target Price, Share History
Buy
Add
Hold
Reduce
Sell
Created By BlueMatrix
Source: Numis Securities Research
May
'12
Aug
'12
Dec
'12
Apr
'13
Aug
'13
Dec
'13
Apr
'14
Aug
'14
Dec
'14
Apr
'15
35
30
25
20
15
10
Wolf Minerals
Recommendation Price Target Price
Three Year - Recommendation, Target Price, Share History
Buy
Add
Hold
Reduce
Sell
Created By BlueMatrix
Source: Numis Securities Research
May
'12
Aug
'12
Dec
'12
Apr
'13
Aug
'13
Dec
'13
Apr
'14
Aug
'14
Dec
'14
Apr
'15
1200
1000
800
600
400
200
0
Kaz Minerals
Recommendation Price Target Price
Three Year - Recommendation, Target Price, Share History
Buy
Add
Hold
Reduce
Sell
Created By BlueMatrix
Source: Numis Securities Research
May
'12
Aug
'12
Dec
'12
Apr
'13
Aug
'13
Dec
'13
Apr
'14
Aug
'14
Dec
'14
Apr
'15
300
250
200
150
100
50
Petra Diamonds
Recommendation Price Target Price
Three Year - Recommendation, Target Price, Share History
Buy
Add
Hold
Reduce
Sell
Created By BlueMatrix
Source: Numis Securities Research
May
'12
Aug
'12
Dec
'12
Apr
'13
Aug
'13
Dec
'13
Apr
'14
Aug
'14
Dec
'14
Apr
'15
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
Timmins Gold
Recommendation Price Target Price
Three Year - Recommendation, Target Price, Share History
Buy
Add
Hold
Reduce
Sell
Created By BlueMatrix
Source: Numis Securities Research
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange74
9 April 2015