Ryerson University Ted Rogers School of Management · student at Ryerson University. ... •Case...

Ryerson University

Ted Rogers School of Management

Goodman Gold Challenge

Team

2

Dmitry Zaytsev

Jacob Newman is a 3rd year economics and finance student. He has internship experience in Private Wealth Management and as a Data Analyst. Jacob is currently the President of the Ryerson Investment Group and covers the Consumer Staples & Discretionary sector. He enjoys camping and playing hockey and golf on his spare time.

George Tasevski Jacob Newman Adrian Parisotto

George Tasevski is a 3rd year finance student at Ryerson University. He has internship experience in financial advisory as well as capital markets and is actively involved with the Ryerson Investment Group, student run buy-side fund where he presently serves as Portfolio Manager.

Dmitry Zaytsev is a final year student. He has interned as analyst in a boutique investment bank, in structured finance at a credit rating agency and most recently, he worked as Treasury at a senior gold producer. He leads the Ryerson Investment Group as the fund’s Chief Strategy Officer.

Adrian Parisotto is a 3rd year Finance & Marketing student. He has internship experience as an Investment Banking Analyst, and as a Financial Analyst. He is also involved with the Ryerson Investment Group where he is an Analyst within the Metals & Mining sector. Adrian has played competitive hockey for 17 years.

Presentation Outline

3

•Case and Company Overview

• Industry Analysis

•Macroeconomic Analysis

•Comparable Analysis

•Valuation

4

Risk AverseDisciplined, Stable Cash Flows, Mid-Large Cap

Long Term HorizonCompounded Value, Proven Business Model, Long Mine Life

GovernanceSeasoned Executive Team, Environmental Sustainability

Goodman Pension Fund Overview

Company Overview

5

0%

50%

100%

150%

200%

250%

300%

350%

400%

450%

January February March April May June July August September October November December January

12 Month Share Price Performance

111%

331%

369%

Performance as of February 17th, 2017 2017

Company Overview Industry Analysis Macro Analysis Comparable Analysis Valuation Conclusion

Recommendation: Detour Gold TSX: DGC Price Target:$23

6

Simulated 1 Year Simulated Stock Price

Market Data Class AClosing Price (February 15, 2017) CAD 17.07

Market Cap ($bn) $3.04

Shares Outstanding (mm) 174.55

Average Daily Volume 1,414,371

Enterprise Value ($mm) $3.26

52 Week High $35.93

52 Week Low $15.36

$21.06

$7.10

$36.21

$0

$10

$20

$30

$40

12/11 05/13 09/14 01/16 06/17

DGC Price Median low High

Source: Company Filings, Company Bloomberg

70%/$24

30%/$20

NAV

Multiples


DGC Company Overview

7

P&P – West Detour Mine

Second-largest Canadian intermediate gold producer

Founded in 2006 by former CEO Hunter Dickinson

Focus on gold production and exploration activities in Northeastern Ontario

Largest gold reserves among the producing Canadian gold mines

Currently constructing the Detour West Lake Mine

Dedicated to responsible mining and growing cash flows organically

123

4

5

6

Entity’s Structure


Detour Gold Corp

Trade Winds Venture, Inc.

PDX Resources, Inc.

4%

96%

Proven

Probable

Overview Summary P&P – Detour Lake Mine

20%

79%

1%

Proven

Probable

Stockpiles


DGC Company Overview Cont’d

8Source: Company Filings, Company Bloomberg

EBITDA GrowthAsset Breakdown

Cost of Revenue (Millions of USD)

$154

$536 $563$661 $711

$0

$200

$400

$600

$800

2013 2014 2015 2016E 2017E

Revenue Growth (Millions of USD)

$165

$541 $550 $528 $550

$0

$200

$400

$600

2013 2014 2015 2016E 2017E

-$32

$113$142

$223 $232

-$50

$0

$50

$100

$150

$200

$250

2013 2014 2015 2016E 2017E

Detour Lake Mine

West Detour Mine


Governance: Environmental Sustainability

Full Time Employees

797Wages Paid

78MDonated to Hospitals

1.5MSpent on ON Businesses

220MAboriginal Employment Rate

24%

Mining Essentials Program, Women in Mining, Aboriginal Economic Development

No process water was discharged to the environment in the 3 years of operation

Proven land management practices to help minimize land disturbance

Leading The Way leadership program


Company Overview Industry Analysis Macro Comparable Analysis Valuation Conclusion

Executive Leadership

Paul Martin, President, Chief Executive Officer & Director

Mr. Martin is a mining executive with over 25 years of experience in Canadian and international precious metals mining and development projects. Prior to joining Detour Gold, Mr Martin most recently served as the CFO and Vp of Finance for New Gold Inc.

James Mavor, Chief Financial Officer

Mr. Mavor is a finance professional with over 20 years of experience in the mining industry. Prior to joining Detour Gold in 2012, he served as the Vice President and Treasurer for Barrick Gold Corporation .

Pierre Beaudoin, Chief Operating Officer

Mr. Beaudoin is a mineral processing professional with over 28 years of international operating and project development experience. Prior to going Detour Gold in February 2010, Mr. Beaudoin spent his last 16 years with Barrick Gold Corporation.


11

Industry Overview

Industry Overview

12

800

1000

1200

1400

1600

1800

2012 2013 2014 2015 2016AISC Gold Price

Gold Price vs AISC

NYSE Arca GDM: Net Debt Per Share

Gold Asset Acquisition

Cost Cutting

Asset Divestment

B/S Repair

Key Industry Themes

1.1

1.2

1.3

1.4

1.520

30

40

50

60

70

Feb-15 Oct-15 Jun-16

Crude Oil (WTI) USDCAD

Canadian Dollar & Crude Oil


Industry Overview

13

66%

34%

Total Mine Supply Recycled Gold

Gold Supply Gold Demand (Metric Tonnes)

0

500

1000

1500

Q 3 2014Q 4 2014Q 1 2015Q 2 2015Q 3 2015Q 4 2015Q 1 2016Q 2 2016Q 3 2016

Technology Investment Jewlery Central Banks

Source: World Gold Council

$0

$1,000

$2,000

50

90

130

170

210

2013 2014 2015 2016

Central Bank Net Purchases Gold Price

Central Bank Gold Demand (Metric Tonnes)


Industry Overview

14

Quarterly Global Jewelry Demand (Tones)

624

844

639613617590595

679

599

516

621653

478449

492

622

400

500

600

700

800

900

03

/13

06

/13

09

/13

12

/13

03

/14

06

/14

09

/14

12

/14

03

/15

06

/15

09

/15

12

/15

03

/16

06

/16

09

/16

12

/16

3,1143,0512,8692,8412,7402,6132,4302,4992,4962,5622,5042,6312,6252,6462,6202,6022,5742,5282,3752,2912,2852,2912,2372,162

201420132012201120102009200820072006200520042003200220012000199919981997199619951994199319921991

Gold Supply Mine Production (Tonnes)

Source: World Gold Council


M&A/IPO Volume

700

550

395

480

28

2018

21

15

20

25

30

350

450

550

650

750

2013 2014 2015 2016

IPO

Vo

lum

e

M&

A V

olu

me

M&A IPO

15

Macro Analysis

Near Term Catalysts

16

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

0

20

40

60

80

100

120

2007 2009 2011 2013 2015

Mil

lio

ns

of

Go

ld t

roy

ou

nce

s

Total Gold ETF Holdings Gold COT Disaggregated Gold Price [RHS]

Bull

Bear

Bull?

Net Short

Source: Bloomberg, CFTC

Gold Financial Flows New Bull Market?

Source: Bloomberg, CBT


17

$1,000

$1,050

$1,100

$1,150

$1,200

$1,250

$1,300

$1,350

$1,4000.0%

0.5%

1.0%

1.5%

2.0%

2.5%

January-15 July-15 January-16 July-16 January-17

Fed Funds Rate Expected Fed Funds Rate at End of 2017 Expected Fed Funds Rate at End of 2018 Gold

1 Hike

4 Hikes

3 Hikes

2 Hikes

Near Term Catalysts

Fed Rate Hike Path & Gold


Near Term Catalysts

18

$1,100

$1,150

$1,200

$1,250

$1,300

$1,350

$1,400

0.2%

0.4%

0.6%

0.8%

Feb-16 Jul-16 Dec-16

French-German 10 year spread GoldFed Meeting

French Political Risk

$1,000

$1,100

$1,200

$1,300

$1,400

-1

-0.5

0

0.5

1

Jan-16 Apr-16 Jul-16 Oct-16 Jan-17

3 Week Correlation Gold

Trump Frexit?

Brexit

Gold & European Political Risk Gold & Real Rates Diverge

$1,000

$1,100

$1,200

$1,300

$1,400-1

-0.5

0

0.5

Feb-16 May-16 Aug-16 Nov-16 Feb-17

Inve

rted

Rea

l yie

ld

5Y US Treasury Note Real Yield Gold

Real Rate & Gold Divergence


Long Term Macro

19

0

0.25

0.5

0.75

1

-5

-2.5

0

2.5

5

7.5

19

67

19

72

19

77

19

82

19

87

19

92

19

97

20

02

20

07

20

12

Stagnant Real Productivity Growth US Budget

US Federal Debt cost will NEVER get cheaper

7000B

12000B

17000B

22000B

0

2

4

6

2005 2007 2009 2011 2013 2015 2017 US

Fe

de

ral

De

bt

Pu

bli

c D

eb

t IR

US Weighted Average Interest Rate US Public Debt

1000B

2000B

3000B

4000B

5000B

6000B

202120112001199119811971

Discretionary Mandatory Net Interest

Higher Gold Price

Financial Inevitability

Stagnant Productivity

Lack of Political Wall

Inevitable Higher Prices


Comparable Analysis

20

• Single Asset Mine Producer • Diversified Asset Mine Producer

• Non-Producing Assets

• Gold Producer • Gold & Copper Producer • Mineral Exploration

• Northern Ontario• Canada, Serbia, Bulgaria,

Namibia• Northern Ontario & Quebec

Ass

ets

Spe

csSi

tes


Comparable Analysis Cont’d


Gold Reserves Among Peers (M Oz)

16.3 15.9

24.9

7.713.5

0.0

10.0

20.0

30.0

DetourGold

SEMAFO YamanaGold

EldoradoGold

IAMGOLD New Gold

21.3

5.9

55.9

47.0

35.8

20.7

0.0

10.0

20.0

30.0

40.0

50.0

60.0

DetourGold

SEMAFO YamanaGold

EldoradoGold

IAMGOLD New Gold

Gold Resources Among Peers (M Oz) Free Cash Flow / Total Debt

-100.0%-50.0%

0.0%50.0%

100.0%150.0%200.0%250.0%

DetourGold

SEMAFO YamanaGold

EldoradoGold

IAMGOLD New Gold

Comparable Analysis

Operating Profile

Gold Leverage

Financial Profile

Valuation

Investment Risks


Comparable Analysis


Comparable Analysis

Operating Profile

Gold Leverage

Financial Profile

Valuation

Investment Risks

0%

200%

400%

600%

800%

$1,235$1,300$1,400$1,500$1,600$1,700$1,800$1,900$2,000$3,000

% R

etu

rn

Gold Price

MVGDXJTR GDMNTR DGC DPM OSK

Graphical Representation of Gold LeverageRegression Analysis

y = 0.0866x - 84.396R² = 0.7596

$15

$20

$25

$30

$35

$40

$1,100 $1,150 $1,200 $1,250 $1,300 $1,350 $1,400

DGC (LHS)GOLD (Horizontal)

Gold ($) 1235 1300 1400 1500 1600 1700 1800 1900 2000 3000

MVGDXJTR 1001.1 853 981 1179 1377 1575 1773 1971 2169 2367 4346

GDMNTR 768.0 726 824 976 1128 1280 1432 1584 1736 1888 3408

DGC $17.8 $22.6 $28.2 $36.8 $45.5 $54.2 $62.8 $71.5 $80.1 $88.8 $175

DPM $3.62 $2.6 $3.1 $3.9 $4.7 $5.5 $6.3 $7.0 $7.8 $8.6 $16

OSK $3.83 $2.2 $2.3 $2.4 $2.5 $2.6 $2.8 $2.9 $3.0 $3.1 $4.2

Gold Leverage ($) return based on change in Gold Price

*1-year daily regression, gold price as independent x-variable, DGC has the highest correlation coefficient among its peer group and




35.3%

49.0%

34.1% 31.2%25.7%

40.5%

0.0%10.0%20.0%30.0%40.0%50.0%60.0%

DetourGold

SEMAFO YamanaGold

EldoradoGold

IAMGOLD New Gold

1.52

4.80

1.35

3.57

1.160.001.002.003.004.005.006.00

DetourGold

SEMAFO YamanaGold

EldoradoGold

IAMGOLD New Gold

EBITDA Margin Cash Ratio

13.8%

30.5%

12.8%

22.1%

1.4%8.0%0.0%

10.0%

20.0%

30.0%

40.0%

DetourGold

SEMAFO YamanaGold

EldoradoGold

IAMGOLD New Gold

Gross MarginComparable Analysis

Operating Profile

Gold Leverage

Financial Profile

Valuation

Investment Risks




0.00x

0.10x

0.20x

0.30x

2012 2013 2014 2015 2016

Precious Metal Peer Average DGC

Historical EV/Reserves Ratio vs Peer Group

EV to EBITDA Price to Cash Flow Multiple

7x 8x 8x 9x 10x 17x 18x

Median 9.04x

0x

4x

8x

12x

16x

20x

DGC SMF ELD TRI IMG NGD BTO

Median 8.22x

0x

5x

10x

15x

20x

25x

30x

DGC SMF ELD TRI IMG NGD BTO

Comparable Analysis

Operating Profile

Gold Leverage

Financial Profile

Valuation

Investment Risks



$413 $426 $425 $431 $447$400

$333 $305

$0

$100

$200

$300

$400

$500

2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 2016 Q2 2016 Q3 2016 Q4

Debt Cash

10.0%

22.8%67.1%

LOC

Amount Available

Bond Principal

Debt Breakdown

2% 3% 3%

14%16% 17% 18%

22%

28% 32% 34%

-5%

5%

15%

25%

35%

THO IVN PAAS EDV ELD AGI DGC IMG NG BTO YRI

Average = 17.1%

D/E Peer Average

Ability to Refinance Debt


Comparable Analysis

Operating Profile

Gold Leverage

Financial Profile

Valuation

Investment Risks

Investment Risks Cont’d

232287

456634505558 537765

0

100,000

200,000

300,000

400,000

500,000

600,000

2013 2014 2015 2016

Expected

Expected VS. Actual Gold Production Gold Price / VIX Correlation

$1,100

$1,200

$1,300

$1,400

10

15

20

25

02

-16

03

-16

04

-16

05

-16

06

-16

07

-16

08

-16

09

-16

10

-16

11

-16

12

-16

01

-17

02

-17

VIX Index Gold Price


Comparable Analysis

Operating Profile

Gold Leverage

Financial Profile

Valuation

Investment Risks

2. Behind on Expected Production & Tonnage

In 2016, Detour Lake only mined 66.4 million tonnesof the targeted 95 million tonnes

3. Operational Risk

• Increasing AISC• Increasing Cost of Sales• Fluctuating Gold Price

2

3

Key Metric 2: Gold Leverage

Private & Confidential 27

Strengths Risks

Low Cash Cost Producer

High Grade Ore

Low cost jurisdiction

Mining Friendly

Jurisdiction

Strong Initial Drill Results

High Grade Ore

Significant Property

ownership

Country RiskOperational

Risk

Non-Producing Asset

Drilling Disappoints

Multiple Contraction

Shareholder Dilution

28

Valuation Target Price:$23

Valuation Target Price:$23


70%/$24

30%/$20

NAV Multiples


Valuation: NAV


Key Assumptions Projected FCF – Life of Mine ($mm)

NAV Target Price $24.18 Net Asset Valuation

Net Present Value (millions) $4336.06

- Total Debt $334.00

+ Cash & Equivalents $115.60

+ Inventory $103.70

Net Asset Value (millions) $4,221.36

Shares o/s (millions) 174.6

NAV per share (Base Case) $24.18

Gold Operations

Realized Price ($/Oz) $1,231.75

Cash Costs ($/Oz) (without Maintenance/Expansion) $850

Capex(Maintenance/ Expansion) $100

AISC per Oz $950-$1050 -500

0

500

1000

1500

20

13

20

14

20

15

20

16

E

20

17

E

20

18

E

20

19

E

20

20

E

20

21

E

20

22

E

20

23

E

20

24

E

20

25

E

20

26

E

20

27

E

20

28

E

20

29

E

20

30

E

20

31

E

20

32

E

20

33

E

20

34

E

20

35

E

NAV 70%/$24


Valuation: Multiple Analysis


WA Target Price from Multiple Analysis Bear, Base Bull Case Scenarios

Multiples Target Price $20 P/NAV Sensitivity Table

33%/$21

33%/$19

33%/$21

EV/EBITDA EV/Reserves P/NAV

18.2x 21.0x 23.8x18.0x 19.1x 20.2x18.6x 21.0x 23.4x0.0x

5.0x

10.0x

15.0x

20.0x

25.0x

Bear Case Base Case Bull Case

EV/EBITDA EV/Reserves P/NAV

NAV

P/N

AV

$3809.77 $4010.29 $4221.35 $4432.42 $4654.04

0.7x $14.46 $15.29 $16.16 $17.03 $17.94

0.8x $16.64 $17.58 $18.57 $19.57 $20.61

0.9x $18.82 $19.88 $20.99 $22.10 $23.27

1.0x $21.01 $22.18 $23.41 $24.64 $25.94

1.1x $23.19 $24.47 $25.83 $27.18 $28.60


32

Gold Leverage

Acquisition Target

Valuation Buy $23Stable Investment

Conclusion: Investment Recommendation


Ryerson University Ted Rogers School of Management · student at Ryerson University. ... •Case...

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