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Deutsche Bank Markets Research
Europe
United Kingdom
Metals & Mining
Gold
Industry
Gold and the UK-listed gold miners
Date
28 June 2016
Forecast Change
Paying up for safety
Market is paying up for gold miners: Acacia and Nordgold still attractive at spot
________________________________________________________________________________________________________________
Deutsche Bank AG/London
Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MCI (P) 057/04/2016.
Anna Mulholland, CFA
Research Analyst
(+44) 20 754-18172
Grant Sporre
Research Analyst
(+44) 20 754-58170
Franck Nganou
Research Associate
(+44) 20 754-18161
Key Changes
Company Target Price Rating
ACAA.L 340.00 to 470.00(GBP)
-
NORDNq.L 3.90 to 4.60(USD) -
POLYP.L 610.00 to 780.00(GBP)
-
RRS.L 5,560.00 to 6,700.00(GBP)
-
FRES.L 790.00 to 970.00(GBP)
-
Source: Deutsche Bank
Top picks
Acacia Mining plc (ACAA.L),GBP440.00 Buy
Nordgold (NORDNq.L),USD3.35 Buy
Source: Deutsche Bank
The market is willing to pay up for the operational gearing the gold miners provide in times of a strong gold price. Gold is up 5% since the announcement of Brexit, to US$1,325/oz, but the UK-listed gold miners have risen more strongly still, up 10-30%. The shares are pricing in gold of US$1,650/oz, on our estimates, a 25% premium to spot, due to the heightened state of investor risk aversion. We find Acacia attractive, pricing in US$1,400 gold, trading at 1.3x NPV on spot and reflecting a spot 2017e FCF yield of 7%. We reiterate our Sell on Fresnillo – the shares are pricing in gold of US$2,200/oz or silver of US$25/oz, 66% and 41% above spot, respectively.
Assessing earnings, free cash flow and valuation at spot gold and silver In this note we assess what the UK-listed gold miners we cover are pricing in and how they stack up on valuation metrics using spot. We find that one-year-forward EV/EBITDA multiples for Nordgold, Polymetal and Acacia are attractive at sub-10x, and FCF yields for those stocks are also strong – between 7% (Acacia) and 23% (Nordgold).
The macro conditions for gold remain supportive The surprise result of the UK EU referendum and potential global market implications have dented confidence and in our view will reset the bar for gold. Simply put, investors will now likely be more willing to pay a (higher) premium for an ‘insurance policy’. A coordinated central bank response cannot be ruled out, in our opinion, depending on the quantum of currency and equity market moves. All of this will make life more difficult for the Fed in raising interest rates further. Our economists think the Bank of England could cut base rates by 25bps at its August meeting and could reintroduce quantitative easing. This is all accommodative for gold and the UK-listed gold mining equities.
Gold likely to remain in contango given political risk events on horizon The gold forward curve is in contango and we think will remain so given the number of political risk events over the next 18 months, which are likely to maintain investor sensitivity to risk. Inflows into gold ETFs are already running at the fastest pace on record – adding an annualized 29.7 million troy ounces year to date, above the previous high of 20.8 million troy ounces in 2010. In the near term, gold has overshot two of its main relationships, the US 10-year TIPS yield and the US equity risk premium. We think this is warranted with Brexit raising the bar for gold.
More cash in the coffers: likely for growth, not dividends If spot gold and silver hold, the average uplift to our free cash flow forecasts for 2017 would be 45%, all else equal. The largest increase would be at Randgold, with an uplift of 1.2x times the current US$90m dividend. However, the gold miners have never really been bought for yield – and the shares have been so strong that the 11% weakening in GBP/USD since Friday has been more than offset, so the 2016e dividend yield actually declines from 1% to 0.9%. Instead, we expect excess FCF to be used for growth, not dividends, for all except Polymetal which may pay out special dividends as it has in the past.
Risks: gold price & producer currency volatility. Stock specific risks from p.13 We use life of mine DCFs to value the gold miners and apply a 20% premium to the NPV to derive our 12-month TPs, using spot GBP/USD.
28 June 2016
Gold
Gold and the UK-listed gold miners
Page 2 Deutsche Bank AG/London
Table Of Contents
A further 25% rise in gold priced in ..................................... 3 Operational gearing kicks in for gold miners ...................................................... 3 Preferred UK gold exposures: Acacia, Nordgold, Polymetal ............................... 3 Implied gold price and gold price sensitivities .................................................... 4 Forward curve: gold is in contango .................................................................... 4 Growth, not dividends ........................................................................................ 5
Our gold view: Looking for a golden parachute .................. 6
UK-listed Gold miners: valuation metrics ............................ 9 P/NPV: Nordgold and Acacia are cheapest ......................................................... 9 P/E: Russian gold miners are cheapest ............................................................... 9 EV/EBITDA: Russian gold miners and Acacia are cheapest .............................. 10 FCF yield: Nordgold, Polymetal, Acacia most attractive ................................... 10
Acacia: Investment Thesis ................................................. 14 Outlook ............................................................................................................. 14 Valuation........................................................................................................... 14 Risks ................................................................................................................. 14
Fresnillo: Investment Thesis .............................................. 17 Outlook ............................................................................................................. 17 Valuation........................................................................................................... 17 Risks ................................................................................................................. 17
Nordgold: Investment Thesis ............................................ 20 Outlook ............................................................................................................. 20 Valuation........................................................................................................... 20 Risks ................................................................................................................. 20
Polymetal: Investment Thesis ............................................ 23 Outlook ............................................................................................................. 23 Valuation........................................................................................................... 23 Risks ................................................................................................................. 23
Randgold: Investment Thesis ............................................ 26 Outlook ............................................................................................................. 26 Valuation........................................................................................................... 26 Risks ................................................................................................................. 26
28 June 2016
Gold
Gold and the UK-listed gold miners
Deutsche Bank AG/London Page 3
A further 25% rise in gold priced in
Operational gearing kicks in for gold miners
The recent sharp move in gold highlights how complacent the global market
was about the risk of a ‘Leave’ vote in the UK referendum. The surprise result
and potential global market implications have dented confidence and in our
view will reset the bar for gold. Simply put, investors will now likely be more
willing to pay a premium for an insurance policy. The US dollar gold price has
lifted 5 per cent since Friday’s referendum result and the silver price almost 3
per cent. The UK-listed gold mining stocks have strongly outperformed the
underlying precious metals, the mining sector and the market: as shown in
Figure 1: over the two trading sessions since the Brexit vote announcement,
the gold miners are up between 10 and 30 per cent.
Figure 1: Huge step up in gold miners in two post-Brexit trading sessions
90
110
130
150
170
190
210
230
250
270
17429.8
2
16792.2
2
16695.7
7
16114.5
6
16146.9
8
16487.7
2
16086.7
3
15512.5
4
15702.2
9
16288.8
16567.0
4
16745.6
4
16591.6
1
16634.7
6
16862.8
3
16674.3
5
16926.1
2
16866.1
1
16795.3
16889.7
5
16871.4
6
17066.4
5
16659.4
4
16724.4
2
16699.3
2
16922.0
6
17192.8
3
17061.4
7
17195.3
8
16574.2
2
16422.0
4
17333.5
1
Acacia Fresnillo Nordgold Polymetal Randgold Gold
Source: Deutsche Bank; DataStream
Preferred UK gold exposures: Acacia, Nordgold
In this note we assess what the UK-listed gold miners we cover are pricing in
and how they stack up on valuation metrics using spot. We find that one-year-
forward EV/EBITDA multiples for Nordgold, Polymetal and Acacia are attractive
at sub-10x, and FCF yields for those stocks are also strong – between 7%
(Acacia) and 23% (Nordgold).
Figure 2: Summary of P/NPV, P/E ratio, EV/EBITDA and FCF yield using spot US$ gold price
Rank Company P/NPV Company P/E Company EV/EBITDA Company FCF yield
1 NORD 0.5 NORD 6.2 NORD 2.4 NORD 23.2
2 ACAA 1.3 POLYP 10.5 POLYP 4.2 POLYP 15.2
3 POLYP 1.5 ACAA 12.6 ACAA 4.5 ACAA 7.0
4 RRS 1.5 RRS 29.7 FRES 12.5 FRES 2.7
5 FRES 2.2 FRES 40.5 RRS 14.3 RRS 2.3
Group simple average 1.4 19.9 7.6 10.1
Source: Deutsche Bank
28 June 2016
Gold
Gold and the UK-listed gold miners
Page 4 Deutsche Bank AG/London
Implied gold price and gold price sensitivities
Across our coverage list, UK-listed gold equities are pricing in an average gold
price of US$1,650/oz, a 25% premium to the current spot price. We believe the
market is justifying the current premium due the heightened state of investor
risk aversion and the US$ gold forward curve remaining in contango (see
Figure 5). As shown in Figure 3, Nordgold has the lowest implied gold price at
US$1,065/oz while Fresnillo appears the most expensive, pricing in
US$2,200/oz gold price into perpetuity.
If we flex 2017e EPS and NPV by moving gold a further 1% up from spot
levels, we find that Nordgold and Acacia have the greatest sensitivity (see
Figure 4).
Figure 3: Implied US$ gold price from last closing price Figure 4: NPV/EPS sensitivity to +1% move in US$ gold
1065
1405
1625
1950
2200
0
500
1000
1500
2000
2500
NORD ACAA POLYP RRS FRES
Current gold price: US$1,325/oz
1.5%
2.9%
2.2%
3.3%
4.0%
0.8%1.1%
2.3%
3.3%
2.8%
0%
1%
2%
3%
4%
5%
FRES RRS POLYP ACAA NORD
% chg in EPS for 1% change in gold
% chg in NPV for 1% change in gold
Source: Deutsche Bank, IRESS
Source: Deutsche Bank
Forward curve: gold is in contango
The gold forward curve remains in contango, with expectations that gold will
finish the year at US$1,337/oz and reach US$1,400/oz by 2021.
Figure 5: The gold forward curve has stepped up over the last month
1,200
1,250
1,300
1,350
1,400
Jun
-2016
Sep
-2016
Dec-2
016
Mar-
2017
Jun
-2017
Sep
-2017
Dec-2
017
Mar-
2018
Jun
-2018
Sep
-2018
Dec-2
018
Mar-
2019
Jun
-2019
Sep
-2019
Dec-2
019
Mar-
2020
Jun
-2020
Sep
-2020
Dec-2
020
Mar-
2021
Jun
-2021
Sep
-2021
Dec-2
021
Gold forward curve (24 June 2016) Gold forward curve (1 week ago)
Gold forward curve (1 month ago) Source: Bloomberg Finance LP
28 June 2016
Gold
Gold and the UK-listed gold miners
Deutsche Bank AG/London Page 5
Growth, not dividends
As shown in Figure 6, despite an 11% weakening in the GBP/USD rate since
the Brexit announcement, the performance of the UK-listed gold stocks has
actually resulted in a reduction in this year’s average dividend yield for the peer
group from 1.0% to 0.9%:
Figure 6: Sector average yield has gone down despite GBP weakness as shares have ramped
Pre-Brexit Post-Brexit
2016e DPS Share price 2016e 2016e DPS Share price 2016e
GBP/USD USD GBP GBP Yield GBP/USD USD GBP GBP Yield
ACAA 1.48 0.04 0.027 3.42 0.8% 1.32 0.04 0.03 4.3627 0.7%
FRES 0.11 0.07 12.39 0.6% 0.11 0.08 15.0643 0.6%
POLYP 0.24 0.16 8.71 1.9% 0.24 0.18 9.645 1.9%
RRS 0.68 0.45 64.55 0.7% 0.68 0.51 79.85 0.6%
Average 1.0% 0.9% Source: Deutsche Bank
If spot gold and silver hold, the average uplift to our free cash flow forecasts
for 2017 should be 45% – all else equal:
Figure 7: Significant uplift to FCF using spot compared with DBe
Company FCF DBe FCF Spot US$m chg % chg 2017 DBe Dividend
Acacia 112.8 167.0 54.1 48.0% 17.0
Fresnillo 297.0 404.1 107.2 36.1% 95.2
Nordgold 225.1 292.8 67.8 30.1% 33.5
Polymetal 666.5 829.2 162.6 24.4% 110.2
Randgold 118.4 224.3 106.0 89.5% 90.5 Source: Deutsche Bank
The largest increase would be at Randgold, with an uplift of 1.2x times the
current US$90m dividend. However, the gold miners have never really been
bought for yield. Instead, we expect excess FCF to be used for growth, not
dividends, in the case of all the stocks except Polymetal, which may pay out
special dividends as it has done in the past.
Increasing our Target Prices…
…to reflect our constructive view of gold and the move in GBP/USD
We now apply a 20% premium our June-2017 NPVs for each stock, up from
10%, to reflect our more constructive view of gold. We also apply the lower
GBP/USD rate (spot at 1.32) when deriving our target prices for the GBP-
quoted stocks (all except Nordgold). On this basis our new target prices are as
follows:
Acacia Mining, Buy, TP £4.70 (£3.40)
Fresnillo, Sell, TP £9.70 (£7.90)
Nordgold, Buy, TP US$4.6 (US$3.90)
Polymetal, Hold, TP £7.80 (£6.10)
Randgold, Hold, TP £67.00 (£55.60)
28 June 2016
Gold
Gold and the UK-listed gold miners
Page 6 Deutsche Bank AG/London
Our gold view: Looking for a golden parachute
The ideal economic and financial conditions for gold are: i) negative or falling
real interest rate expectations, ii) rising risks and heightened sensitivity to
event risk, iii) falling growth expectations, and iv) a falling US dollar. Post the
Brexit vote, we think three of the four drivers have intensified, which should
provide a supportive environment for gold. Furthermore, the US dollar has the
weakest historical correlation.
At the time of writing, US 10-year real yields had fallen to 0.1% and gold had
jumped c.5%. When viewed on a performance momentum basis (Figure 8), it
seems that gold has led US real yields since the beginning of the year and may
have overshot in the short term. Our economists think the BOE could cut base
rates by 25bps at the August meeting, with a possibility of the quantitative
easing programme being restarted. A coordinated central bank response
cannot be ruled out, in our view, depending on the quantum of currency and
equity market moves. All of this will make life more difficult for the Fed in
raising interest rates further.
Figure 8: Gold price versus US real yields since 2007
Figure 9: Gold price move versus US real yields (6 month
change)
200
400
600
800
1000
1200
1400
1600
1800
2000-1.5%
-0.5%
0.5%
1.5%
2.5%
3.5%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
US 10Y Inflation-indexed Yield (lhs, inverted)
Gold Spot (rhs, USD/oz)
Current: 0.07%2007-2016 average: 0.82%
Dec-08 QE1
Nov-10 QE2
Sep-11 OperationTwist
Sep-12 QE3
-40%
-30%
-20%
-10%
0%
10%
20%
30%-150
-100
-50
0
50
100
150
Jun-1
1
Sep-1
1
Dec-1
1
Mar-
12
Jun-1
2
Sep-1
2
Dec-1
2
Mar-
13
Jun-1
3
Sep-1
3
Dec-1
3
Mar-
14
Jun-1
4
Sep-1
4
Dec-1
4
Mar-
15
Jun-1
5
Sep-1
5
Dec-1
5
Mar-
16
US 10-year TIPS yield, bps Gold (USD/oz), %, inverse scale - RHS
Source: Deutsche Bank, Bloomberg Finance LP Source: Deutsche Bank, Bloomberg Finance LP
The market implied probability of a Fed rate hike at the July meeting is already
very low, and is likely to head lower, in our view. However, the probability for
the September and November meetings is around 30%, and for December it is
around 40%. The volatility around the June meeting was informative, in our
opinion, as to the likely further behaviour in the run up to future meetings. The
key takeaway for us was simply that a move in probability from 35% to zero
led to a 5% upwards move in gold and silver.
28 June 2016
Gold
Gold and the UK-listed gold miners
Deutsche Bank AG/London Page 7
Figure 10: The probability of a Fed hike at each of the
following meetings
Figure 11: Gold and silver performance in the run up to
the June FOMC meeting
0
5
10
15
20
25
30
35
40
45
50
Jan
-16
Jan
-16
Jan
-16
Jan-1
6
Jan
-16
Feb-1
6
Feb-1
6
Feb-1
6
Feb-1
6
Mar-
16
Mar-
16
Mar-
16
Mar-
16
Apr-
16
Apr-
16
Apr-
16
Apr-
16
Apr-
16
May-1
6
May-1
6
May-1
6
May-1
6
Jun
-16
Jun
-16
Jun
-16
...July ...September ...November ...December
90
95
100
105
110
115
1200
5
10
15
20
25
30
35
40
Probability of a Fed hike in June
Gold price rebased to 100 RHS (inverse scale)
Silver price rebased to 100 RHS (inverse scale)
Source: Deutsche Bank, Bloomberg Finance LP Source: Deutsche Bank, Bloomberg Finance LP
We think that we are entering a period where investor sensitivity to event risk
will be heightened. The sharp move in gold indicates that investors were too
complacent about the risk of a Brexit vote. This has dented confidence and in
our view will reset the bar for gold. Simply put, investors will now likely be
more willing to pay a premium for an insurance policy. We highlight the next
potential catalysts for gold, including some of the political events into 2017.
Figure 12: Potential events that could affect gold through 2016/17
Source: Deutsche Bank
When we compare gold’s performance versus the US equity risk premium, we
see a similar divergence as with the US 10-year TIPS yield. Gold seems to be
leading the US equity risk premium, which currently implies a lower gold price.
28 June 2016
Gold
Gold and the UK-listed gold miners
Page 8 Deutsche Bank AG/London
Figure 13: Gold versus the US equity risk premium since
2007
Figure 14: Gold versus the US equity risk premium since
2014
600
800
1000
1200
1400
1600
1800
2000
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Equity Risk Premium (lhs, %)
Gold Spot (rhs, USD/oz)
Current: 5.22%2007-2013 average: 5.33%
1,000
1,050
1,100
1,150
1,200
1,250
1,300
1,350
1,400
4.0%
4.5%
5.0%
5.5%
6.0%
Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16
Equity Risk Premium (lhs, %)
Gold Spot (rhs, USD/oz)
Current: 5.22%2007-2013 average: 5.33%
Source: Deutsche Bank, Bloomberg Finance LP Source: Deutsche Bank, Bloomberg Finance LP
28 June 2016
Gold
Gold and the UK-listed gold miners
Deutsche Bank AG/London Page 9
UK-listed Gold miners: valuation metrics
P/NPV: Nordgold and Acacia are cheapest
We present P/NPV using the spot US$ gold price of US$1,325/oz and spot US$
silver price of US$17.75/oz for our gold/silver sector coverage in Figure 15. The
sector average is a 40% premium to NPV but skewed by Nordgold at a 50%
discount and Fresnillo trading at 2.2x NPV:
Figure 15: P/NPV using spot gold and silver
0.5
1.3
1.5 1.5
2.2
-
0.5
1.0
1.5
2.0
2.5
NORD ACAA POLYP RRS FRES
Source: Deutsche Bank
P/E: Russian gold miners are cheapest
On the same spot basis, Nordgold is the cheapest stock on 2017e EPS
multiples and Fresnillo the most expensive:
28 June 2016
Gold
Gold and the UK-listed gold miners
Page 10 Deutsche Bank AG/London
Figure 16: 2016e P/E using spot Figure 17: 2017e P/E using spot
8.3 12.3
15.9
42.8
63.2
-
10
20
30
40
50
60
70
NORD POLYP ACAA RRS FRES
6.2
10.5 12.6
29.7
40.5
-
5
10
15
20
25
30
35
40
45
NORD POLYP ACAA RRS FRES
Source: Deutsche Bank
Source: Deutsche Bank
EV/EBITDA: Russian gold miners and Acacia are cheapest
On an EV/EBITDA basis, again looking at 2017e on spot, the Russians are the
cheapest and Acacia Mining is also relatively attractive on 4.5x 2017e EBITDA:
Figure 18: 2016e EV/EBITDA using spot Figure 19: 2017e EV/EBITDA using spot
3.3
5.7 5.8
16.4
19.6
-
5
10
15
20
25
NORD ACAA POLYP FRES RRS
2.4
4.2 4.5
12.5
14.3
-
2
4
6
8
10
12
14
16
NORD POLYP ACAA RRS FRES
Source: Deutsche Bank
Source: Deutsche Bank
FCF yield: Nordgold, Polymetal, Acacia most attractive
For FCF yields at spot, Nordgold and Polymetal are the clear leaders in 2017e,
as shown in the following figures. Acacia also stands out with a 7% yield. Both
Fresnillo and Randgold are lagging.
28 June 2016
Gold
Gold and the UK-listed gold miners
Deutsche Bank AG/London Page 11
Figure 20: 2016e FCF yield using spot Figure 21: 2017e FCF yield using spot
5.2
3.4
2.1 1.6
0.7
-
1
2
3
4
5
6
POLYP ACAA RRS NORD FRES
23.2
15.2
7.0
2.7 2.3
-
5
10
15
20
25
NORD POLYP ACAA FRES RRS
Source: Deutsche Bank
Source: Deutsche Bank
28 June 2016
Gold
Gold and the UK-listed gold miners
Page 12 Deutsche Bank AG/London
Model updated:27 June 2016
Running the numbers
Europe
United Kingdom
Gold
Acacia Mining plc Reuters: ACAA.L Bloomberg: ACA LN
Buy Price (27 Jun 16) GBP 440.00
Target Price GBP 470.00
52 Week range GBP 156.60 - 440.00
Market Cap (m) GBPm 1,804
USDm 2,373
Company Profile
Acacia Mining is a gold exploration and mining company with three operating mines in Tanzania, producing c.800 koz of gold p.a. The company was spun out of parent company Barrick Gold, which is the world's largest gold producer. Acacia aims to grow production to over 1Moz of gold p.a. through a series of brownfield expansions at its existing mines, potential Greenfield projects in Burkina Faso and Kenya, plus potential M&A.
Price Performance
0
100
200
300
400
500
Jun 13 Dec 13 Jun 14 Dec 14 Jun 15 Dec 15
Acacia Mining plc FTSE 100 INDEX (Rebased)
Margin Trends
-120
-80
-40
0
40
80
13 14 15 16E 17E 18E
EBITDA Margin EBIT Margin
Growth & Profitability
-40
-30
-20
-10
0
10
-15
-10
-5
0
5
10
15
13 14 15 16E 17E 18E
Sales growth (LHS) ROE (RHS)
Solvency
05101520253035
-20
-15
-10
-5
0
13 14 15 16E 17E 18E
Net debt/equity (LHS) Net interest cover (RHS)
Anna Mulholland, CFA
+44 20 754-18172 [email protected]
Fiscal year end 31-Dec 2013 2014 2015 2016E 2017E 2018E
Financial Summary
DB EPS (USD) 0.30 0.22 -0.02 0.27 0.35 0.35
Reported EPS (USD) -1.86 0.22 -0.48 0.27 0.35 0.35
DPS (USD) 0.03 0.04 0.04 0.04 0.08 0.14
BVPS (USD) 4.7 4.9 4.4 4.9 5.4 5.7
Weighted average shares (m) 410 410 410 410 410 410
Average market cap (USDm) 1,189 1,573 1,575 2,373 2,373 2,373
Enterprise value (USDm) 1,053 1,426 1,469 2,186 2,056 1,927
Valuation Metrics P/E (DB) (x) 9.7 17.4 nm 21.4 16.5 16.4
P/E (Reported) (x) nm 17.5 nm 21.4 16.5 16.4
P/BV (x) 0.65 0.82 0.61 1.19 1.08 1.01
FCF Yield (%) nm 2.0 nm 2.5 4.8 5.5
Dividend Yield (%) 1.0 1.1 1.1 0.7 1.4 2.4
EV/Sales (x) 1.1 1.5 1.7 2.3 2.3 2.2
EV/EBITDA (x) 4.1 5.7 8.4 7.2 5.9 5.6
EV/EBIT (x) nm 11.5 nm 13.2 9.6 9.0
Income Statement (USDm)
Sales revenue 959 930 868 949 902 873
Gross profit 372 370 276 370 417 415
EBITDA 257 252 175 302 349 346
Depreciation 158 128 142 136 136 133
Amortisation 1,061 0 146 0 0 0
EBIT -962 124 -113 166 213 214
Net interest income(expense) -8 -9 -11 -8 -8 -7
Associates/affiliates 0 0 0 0 0 0
Exceptionals/extraordinaries 0 0 0 0 0 0
Other pre-tax income/(expense) 0 0 0 0 0 0
Profit before tax -970 115 -124 158 206 206
Income tax expense -188 26 73 47 62 62
Minorities -17 0 0 0 0 0
Other post-tax income/(expense) 0 0 0 0 0 0
Net profit -765 90 -197 111 144 144
DB adjustments (including dilution) 887 1 190 0 0 0
DB Net profit 123 90 -7 111 144 144
Cash Flow (USDm)
Cash flow from operations 187 290 156 248 331 291
Net Capex -375 -258 -193 -190 -218 -160
Free cash flow -187 31 -37 58 113 131
Equity raised/(bought back) 0 0 0 0 0 0
Dividends paid -55 -14 -17 -17 -17 -33
Net inc/(dec) in borrowings 142 0 -14 -28 -28 -28
Other investing/financing cash flows -19 -6 7 11 11 11
Net cash flow -119 12 -61 24 79 80
Change in working capital 0 0 0 0 0 0
Balance Sheet (USDm)
Cash and other liquid assets 282 294 233 257 331 403
Tangible fixed assets 1,281 1,425 1,391 1,445 1,528 1,556
Goodwill/intangible assets 211 211 211 211 211 211
Associates/investments 0 0 0 0 0 0
Other assets 658 653 495 537 518 500
Total assets 2,432 2,583 2,330 2,450 2,588 2,670
Interest bearing debt 142 142 128 71 14 -43
Other liabilities 363 439 415 386 375 370
Total liabilities 505 581 543 457 389 328
Shareholders' equity 1,922 1,997 1,787 1,993 2,199 2,342
Minorities 5 5 0 0 0 0
Total shareholders' equity 1,927 2,002 1,787 1,993 2,199 2,342
Net debt -140 -152 -105 -186 -316 -446
Key Company Metrics
Sales growth (%) -11.8 -3.0 -6.7 9.3 -4.9 -3.3
DB EPS growth (%) 31.2 -26.3 na na 29.9 0.3
EBITDA Margin (%) 26.8 27.1 20.2 31.8 38.7 39.7
EBIT Margin (%) -100.3 13.3 -13.0 17.5 23.6 24.5
Payout ratio (%) nm 19.2 nm 15.4 23.1 39.3
ROE (%) -32.7 4.6 -10.4 5.9 6.9 6.4
Capex/sales (%) 39.1 26.5 22.2 20.1 24.2 18.4
Capex/depreciation (x) 2.4 1.9 1.4 1.4 1.6 1.2
Net debt/equity (%) -7.3 -7.6 -5.9 -9.3 -14.4 -19.0
Net interest cover (x) nm 14.2 nm 21.0 27.9 29.4
Source: Company data, Deutsche Bank estimates
28 June 2016
Gold
Gold and the UK-listed gold miners
Deutsche Bank AG/London Page 13
Figure 22: Acacia Operational and Financial summary data
ACACIA MINING OPERATIONAL AND FINANCIAL SUMMARY DATA
FX/COMMODITY ASSUMPTIONS CY10 CY11 CY12 CY13 CY14 CY15 CY16F CY17F CY18F CY19F CY20F Total NPV US$m US$ps £ps
Silver 20.2 35.2 31.3 23.9 19.1 15.7 15.2 15.8 16.5 17.5 18.5 Bulyanhulu 715 1.74 1.34
Gold 1226 1570 1671 1413 1267 1161 1195 1231 1275 1317 1359 Buzwagi -211 -0.51 -0.40
Copper 343 400 361 334 311 250 210 214 237 260 282 North Mara 1653 4.03 3.10
Zinc 98 99 89 88 98 88 79 82 89 95 102 Nyanzaga 230 0.56 0.43
Lead 98 109 94 98 96 81 79 82 88 94 100 Golden Ridge 38 0.09 0.07
Tanzanian Shilling 1433 1555 1580 1580 1580 1954 2000 2000 2000 2000 2022 Investments 0 0.00 0.00
UK/USD 0.65 0.62 0.63 0.64 0.62 0.65 0.73 0.82 0.83 0.77 0.72 Total Operational 2425 5.91 4.55
Corporate / unallocated -319 -0.78 -0.60
KEY FINANCIAL METRICS Net (Debt)/Cash 256 0.62 0.48
Underlying earnings (US$m) 218 275 134 107 90 -7 111 144 144 149 195 Total 2362 5.76 4.43
Cash Generated for Operations (US$m) 344 501 291 191 293 164 256 356 360 350 405
Capex (incl. expl) and divestments (US$m) 224 273 313 375 247 193 190 218 160 134 114 Derivation of TP US$m US$ps £ps
Dividend (US$m) 260 31 74 55 14 17 17 17 33 57 63 Bulyanhulu 715 1.74 1.34
Acquisitions (US$m) 63 0 22 1 0 0 0 0 0 0 0 Buzwagi -211 -0.51 -0.40
Net Cash Flow (US$m) 332 184 -154 -117 14 -57 24 73 72 73 129 North Mara 1653 4.03 3.10Net Debt / (Cash ) - US$m -401 -584 -401 -140 -152 -105 -186 -316 -446 -518 -647 Nyanzaga -15 -0.04 -0.03
Gearing (ND/E - %) -16% -21% -14% -7% -8% -6% -9% -14% -19% -21% -25% Total NPV 2142 5.22 4.02
ROE (%) 9% 10% 3% -41% 4% -11% 6% 7% 6% 6% 8% Corporate / unallocated -319 -0.78 -0.60
ROA (%) 8% 9% 2% -33% 3% -8% 5% 6% 5% 5% 7% Net (Debt)/Cash 256 0.62 0.48
Underlying EPS (USc) 0.53 0.67 0.33 0.26 0.22 -0.02 0.27 0.35 0.35 0.36 0.48 Total equity value 2079 5.07 3.90EPS Change (%) 26% -51% -21% -15% -108% -1663% 30% 0% 3% 31% NPV discount 1.20
EPS CAGR since FY12 (%) -21% -18% -138% -5% 1% 1% 2% 5% Target price 4.70
DPS (USc) 0.05 0.16 0.16 0.03 0.04 0.04 0.04 0.08 0.14 0.15 0.23Payout ratio (%) 10% 24% 50% 12% 19% -243% 15% 23% 39% 42% 47% Valuation (FY16)
PRODUCTION
Bulyanhulu 261 262 236 198 235 274 291 297 304 308 304
North Mara 213 171 193 257 274 287 305 311 311 311 311
Buzwagi 186 197 166 182 210 171 180 106 52 0 0
Total gold (koz) 702 688 626 642 719 732 776 714 667 619 615
Silver (koz) 338 381 396 392 387 405 424 388 328 233 233
Copper (kt) 7 15 5 5 6 7 6 5 4 2 2
Copper Equivalent production (kt) 170 175 151 154 173 176 186 170 158 145 145
Gold Equivalent production (koz) 709 696 634 650 726 740 784 722 674 624 620
Gold production CAGR (%) 2% 7% 5% 5% 3% 1% 0% 0%
Revenue (US$m)
Bulyanhulu 328 427 418 279 287 319 346 371 394 413 421
North Mara 267 272 311 365 347 336 365 383 397 410 423
Buzwagi 245 316 283 259 296 213 223 137 71 0 0
Tulawaka 79 131 76 13 0 0 0 0 0 0 0
Byproducts 55 63 48 42 29 22 16 12 11 8 9
Total 974 1208 1135 959 959 890 949 902 873 830 853 Revenue split (FY15)
EBITDA (US$m)
Bulyanhulu 187 265 204 68 69 59 137 173 203 228 236
North Mara 166 133 118 -140 156 135 185 206 216 214 225
Buzwagi 110 180 86 -634 80 1 31 24 -17 -38 0
Tulawaka 33 71 16 -8 0 0 0 0 0 0 0
Nyanzaga 0 0 0 0 0 0 0 0 0 0 0
Group underlying total 416 544 319 257 252 175 302 349 346 349 415
EBITDA margin (%)
Bulyanhulu 57% 62% 49% 24% 24% 19% 39% 47% 52% 55% 56%
North Mara 62% 49% 38% -38% 45% 40% 51% 54% 54% 52% 53%
Buzwagi 45% 57% 30% -245% 27% 1% 14% 17% -24%
Total 43% 45% 28% 27% 26% 20% 32% 39% 40% 42% 49%
Cash costs (US$/oz)
Bulyanhulu 539 610 803 890 812 797 690 623 582 552 557
North Mara 493 801 953 659 623 590 583 561 575 623 630 EBITDA split (FY15)
Buzwagi 685 684 1066 904 791 1046 962 960 1545
Total 579 685 949 838 732 772 732 662 668 661 605
AISC (US$/oz)
Bulyanhulu 1,245 1,348 1,266 1,251 1,044 970 912 867 875
North Mara 1,693 1,231 947 914 866 850 737 713 721
Buzwagi 1,798 1,461 1,055 1,187 1,093 1,142 1,928
Total 1,585 1,362 1,105 1,112 984 943 908 866 797
CAPEX
Bulyanhulu 81 82 118 175 132 96 88 100 97 104 84
North Mara 91 104 76 94 72 44 68 72 32 9 9
Buzwagi 30 74 87 82 44 5 13 10 10 0 0
Tulawaka 16 21 17 0 0 0 0 0 0 0 0
Nyanzaga 0 5 10 0 0 0 0 0 0 0 0
Others 5 12 9 2 6 1 20 20 20 20 20
Total 222 292 317 354 254 145 189 202 159 133 113
Source: Company data, DB estimates
Bulyanhulu25%
Buzwagi-6%
North Mara58%
Nyanzaga8%
Golden Ridge1%
Bulyanhulu37%
North Mara24%
Buzwagi39%
Bulyanhulu30%
North Mara1%Buzwagi
69%
Source: Deutsche Bank, Company data
28 June 2016
Gold
Gold and the UK-listed gold miners
Page 14 Deutsche Bank AG/London
Acacia: Investment Thesis
Outlook
Acacia's management has delivered a significant turnaround in productivity
and cost control at its three gold mines in Tanzania over the past two years.
The key to a sustained reduction in production costs and therefore improving
cash margins is continued improvement at the flagship mine Bulyanhulu. Here
Acacia aims to mine at reserve grade, driving down costs along with continued
productivity gains. We are conservative in our Bulyanhulu forecasts and do not
assume that the mine reaches its targeted steady state output of 350koz per
year. Even on this more cautious basis, we expect Acacia's All-In Sustaining
Costs to move steadily down towards US$900/oz in the medium term, offering
positive operational leverage in the supportive gold price environment we
expect. In addition, Acacia's robust balance sheet provides it with flexibility to
manage periods of a more muted gold price performance. Buy.
Valuation
Our 12-month price target is based on 1.2x our 2016e NAV. Our NAV is based
on life of mine discounted cash flows, with a WACC of 5% and a long-run real
gold price assumption of US$1,300/oz. Our WACC of 5% is based on a risk free
rate of 4%, a market risk premium of 6%, a beta of 0.3x and a 30% target
gearing. We apply the 20% premium to our NPV to derive our target price - this
reflects the ranking we assign to Acacia within our coverage universe and our
view that gold miners deserve a premium to non-precious metals mining
stocks given our constructive view of gold on a 12 month view
Risks
Key downside risks include lower than expected gold prices, higher than
expected costs and volatility in the Tanzanian Shilling. The failure to deliver
cost and capex cuts as planned, plus the failure to improve grades especially at
its Bulyanhulu mine, are two key downside risks. There is a risk of an overhang
in the shares from any further sell-down by Barrick Gold's 64% majority stake
in Acacia Mining.
28 June 2016
Gold
Gold and the UK-listed gold miners
Deutsche Bank AG/London Page 15
Model updated:27 June 2016
Running the numbers
Europe
United Kingdom
Gold
Fresnillo Reuters: FRES.L Bloomberg: FRES LN
Sell Price (27 Jun 16) GBP 1,483.00
Target Price GBP 970.00
52 Week range GBP 588.00 - 1,483.00
Market Cap (m) GBPm 10,928
USDm 14,369
Company Profile
Fresnillo is the world's largest primary silver producer and a significant gold producer. All its operations are currently based in the highly prospective gold and silver belts of Mexico. The group currently has five operating mines, two advanced stage development and four medium-term growth projects, as well as significant land holdings in Mexico. Fresnillo's goal is to double production silver and gold by 2018, equating to 65Moz of silver and over 400koz of gold.
Price Performance
400
600
800
1000
1200
1400
1600
Jun 13 Dec 13 Jun 14 Dec 14 Jun 15 Dec 15
Fresnillo FTSE 100 INDEX (Rebased)
Margin Trends
10
20
30
40
50
60
13 14 15 16E 17E 18E
EBITDA Margin EBIT Margin
Growth & Profitability
02468101214
-30
-20
-10
0
10
20
13 14 15 16E 17E 18E
Sales growth (LHS) ROE (RHS)
Solvency
0
10
20
30
40
50
60
-20
-10
0
10
20
30
40
13 14 15 16E 17E 18E
Net debt/equity (LHS) Net interest cover (RHS)
Anna Mulholland, CFA
+44 20 754-18172 [email protected]
Fiscal year end 31-Dec 2013 2014 2015 2016E 2017E 2018E
Financial Summary
DB EPS (USD) 0.38 0.07 0.07 0.21 0.35 0.41
Reported EPS (USD) 0.33 0.15 0.10 0.21 0.35 0.41
DPS (USD) 0.34 0.08 0.05 0.11 0.18 0.20
BVPS (USD) 3.1 3.1 3.2 3.1 3.4 3.6
Weighted average shares (m) 737 737 737 737 737 737
Average market cap (USDm) 13,455 10,122 8,059 14,369 14,369 14,369
Enterprise value (USDm) 13,002 10,312 8,048 14,401 14,234 13,978
Valuation Metrics P/E (DB) (x) 48.4 187.1 157.6 92.2 55.2 47.7
P/E (Reported) (x) 56.0 93.7 114.3 92.2 55.2 47.7
P/BV (x) 3.99 3.87 3.30 6.29 5.77 5.41
FCF Yield (%) nm nm 0.9 0.3 2.1 2.9
Dividend Yield (%) 1.9 0.6 0.5 0.5 0.9 1.0
EV/Sales (x) 8.0 7.3 5.6 9.0 8.2 7.5
EV/EBITDA (x) 17.9 19.0 15.1 20.0 15.5 14.0
EV/EBIT (x) 26.7 42.1 40.2 42.8 27.8 24.2
Income Statement (USDm)
Sales revenue 1,615 1,413 1,444 1,594 1,741 1,865
Gross profit 1,000 803 751 900 1,095 1,179
EBITDA 727 541 532 718 916 1,000
Depreciation 239 296 331 382 403 422
Amortisation 0 0 0 0 0 0
EBIT 488 245 200 337 512 578
Net interest income(expense) -9 -47 20 -35 -34 -30
Associates/affiliates 0 0 0 0 0 0
Exceptionals/extraordinaries -54 77 28 0 0 0
Other pre-tax income/(expense) -6 -24 -36 -62 -77 -84
Profit before tax 418 251 212 240 401 464
Income tax expense 158 134 143 84 140 162
Minorities 21 9 -1 0 0 0
Other post-tax income/(expense) 0 0 0 0 0 0
Net profit 240 108 71 156 260 301
DB adjustments (including dilution) 38 -54 -19 0 0 0
DB Net profit 278 54 51 156 260 301
Cash Flow (USDm)
Cash flow from operations 446 122 543 609 682 745
Net Capex -560 -411 -469 -566 -385 -322
Free cash flow -114 -289 74 43 297 423
Equity raised/(bought back) 346 -451 0 0 0 0
Dividends paid -505 -88 -38 -50 -95 -137
Net inc/(dec) in borrowings 830 0 0 0 0 0
Other investing/financing cash flows 81 -270 190 -2 -1 7
Net cash flow 638 -1,098 227 -9 201 293
Change in working capital 0 0 0 0 0 0
Balance Sheet (USDm)
Cash and other liquid assets 1,252 154 381 372 574 867
Tangible fixed assets 1,838 1,969 2,139 2,323 2,304 2,204
Goodwill/intangible assets 0 0 0 0 0 0
Associates/investments 436 478 456 423 389 352
Other assets 558 1,140 881 677 726 743
Total assets 4,084 3,742 3,858 3,796 3,993 4,166
Interest bearing debt 836 796 797 797 797 797
Other liabilities 576 644 686 682 677 680
Total liabilities 1,412 1,440 1,483 1,479 1,474 1,477
Shareholders' equity 2,273 2,275 2,344 2,286 2,489 2,658
Minorities 399 27 30 30 30 30
Total shareholders' equity 2,672 2,302 2,374 2,316 2,519 2,688
Net debt -415 642 416 425 223 -69
Key Company Metrics
Sales growth (%) -25.1 -12.5 2.2 10.3 9.3 7.1
DB EPS growth (%) -58.5 -80.5 -5.5 204.9 67.0 15.7
EBITDA Margin (%) 45.0 38.3 36.8 45.1 52.6 53.6
EBIT Margin (%) 30.2 17.3 13.9 21.1 29.4 31.0
Payout ratio (%) 104.6 54.6 56.9 50.0 50.0 50.0
ROE (%) 10.7 4.8 3.1 6.7 10.9 11.7
Capex/sales (%) 35.4 30.1 32.9 35.5 22.1 17.3
Capex/depreciation (x) 2.4 1.4 1.4 1.5 1.0 0.8
Net debt/equity (%) -15.5 27.9 17.5 18.3 8.9 -2.6
Net interest cover (x) 54.5 5.2 nm 9.7 14.9 19.2
Source: Company data, Deutsche Bank estimates
28 June 2016
Gold
Gold and the UK-listed gold miners
Page 16 Deutsche Bank AG/London
Figure 23: Fresnillo Operational and Financial summary data
FRESNILLO OPERATIONAL AND FINANCIAL SUMMARY DATA
FX/COMMODITY ASSUMPTIONS CY12 CY13 CY14 CY15 CY16F CY17F CY18F CY19F CY20F NPV (FY16) US$m US$ps £ps
Silver 31 24 19 16 15 16 17 18 19 Fresnillo 1807 2.45 1.89
Gold 1671 1413 1291 1161 1195 1231 1275 1317 1359 Saucito 2179 2.96 2.28
Copper 361 334 311 250 210 214 237 260 282 Ciénega 415 0.56 0.43
Zinc 89 88 98 88 79 82 89 95 102 Herradura 175 0.24 0.18
Lead 94 98 96 81 79 82 88 94 100 Soledad & Dipolos 137 0.19 0.14
Mexican Pesos 13.2 12.8 13.2 15.8 14.6 17.6 17.4 17.7 17.9 Nochebuena 42 0.06 0.04
UK £ / US$ 0.63 0.64 0.62 0.65 0.73 0.82 0.83 0.77 0.77 San Julian 893 1.21 0.93
Silverstream 262 0.36 0.27
KEY FINANCIAL METRICS Exploration & development portfolio3145 4.27 3.28
Prof it After Tax (US$M) 845 261 117 70 156 260 301 285 323 Investments 50 0.07 0.05
Cash Generated for Operations (US$M) 1250 784 385 589 738 785 902 846 855 Total operational value 9106 12.36 9.51
Capex (incl. expl) and divestments (US$M) 520 572 426 475 566 385 322 245 233 Corporate / unallocated costs-1260 -1.71 -1.32
Dividend (US$M) 424 505 88 38 50 95 137 148 149 Net (Debt)/Cash -425 -0.58 -0.44
Other investment inflow / (outflow) 117 70 65 44 41 42 49 59 69 Total 7421 10.07 7.75
Net Cash Flow (US$M) -74 637 -1093 229 -9 201 293 310 336
Net Debt / (Cash ) - US$M -613 -415 642 416 425 223 -69 -380 -716 Valuation (FY16)
Gearing (ND/E - %) -24% -16% 28% 18% 18% 9% -3% -13% -24%
ROE (%) 36% 10% 5% 3% 7% 11% 12% 10% 11%
ROA (%) 26% 6% 3% 2% 4% 7% 7% 7% 7%
EPS (USD) 0.91 0.38 0.07 0.07 0.21 0.35 0.41 0.39 0.44
EPS Change (%) -17% -58% -81% -5% 202% 67% 16% -5% 13%
EPS CAGR since FY12 (%) -58% -71% -57% -31% -17% -12% -11% -9%
DPS (USc) 0.58 0.34 0.08 0.05 0.11 0.18 0.20 0.19 0.22
Payout ratio (%) 64% 89% 108% 78% 50% 50% 50% 50% 50%
PRODUCTION
Attributable production
Silver 36,939 38,796 40,103 43,024 47,731 58,771 64,720 64,467 64,442
Silverstream 4,035 3,946 4,650 3,955 4,121 3,931 3,931 3,931 3,931
Total silver 40,974 42,742 44,753 46,979 51,852 62,703 68,652 68,398 68,374
Total gold 473 426 472 762 782 721 720 499 431
Zinc 25 25 32 46 51 60 66 66 71
Lead 25 26 29 42 45 56 63 63 65
Consolidated production
Silver 37,076 38,963 40,353 43,024 47,731 58,771 64,720 64,467 64,442
Gold 688 611 596 762 782 721 720 499 431
Zinc 25 25 32 46 51 60 66 66 71
Lead 25 26 29 42 45 56 63 63 65
Copper Equivalent production 290 278 282 339 361 388 410 359 346
Gold Equivalent production 1,259 1,209 1,228 1,474 1,568 1,684 1,784 1,560 1,503
Gold Equivalent CAGR (%) -4% -1% 5% 6% 6% 6% 3% 2%
Revenue 2,157 1,615 1,413 1,444 1,594 1,741 1,865 1,682 1,696 EBITDA split (FY15)
EBITDA
Fresnillo 629 354 241 147 159 211 280 307 334
Saucito 195 216 257 311 280 358 366 389 416
Ciénega 219 146 91 59 49 76 82 90 98
Herradura 420 221 185 290 339 268 211 37 36
Soledad & Dipolos 102 1 - - - - 27 29 33
Nochebuena 81 98 83 53 47 41 61 47 26
San Julian - - - - 25 140 179 196 212
Silverstream 109 61 55 34 33 34 37 41 44
Total 1,755 1,098 912 893 933 1,129 1,243 1,135 1,199
EBITDA margin 81.3% 68.0% 64.5% 61.8% 58.5% 64.8% 66.7% 67.5% 70.7%
Unit costs
Fresnillo (per Ag oz) 5.87 5.29 5.56 5.83 4.44 3.82 3.62 3.41
Saucito (per Ag oz) 3.61 2.48 0.88 1.47 0.60- 0.23- 0.24- 0.48-
Ciénega (per Au oz) 38 288 440 528 288 261 197 134
Herradura (per Au oz) 651 465 410 401 407 497 893 930
Soledad & Dipolos (per Au oz) 820 - - - - - - -
Nochebuena (per Au oz) 928 946 789 824 866 795 - -
San Julian (per Ag oz) 4.04 1.76 1.71 1.38 1.04
CAPEX
Sustaining capex:
Fresnillo 42 42 48 60 100 80 60 62 63
Saucito 15 20 32 100 100 60 60 62 63
Ciénega 42 50 38 25 50 45 40 40 40
Herradura 40 35 20 80 96 60 61 12 12
Soledad & Dipolos 9 20 - - - - - 4 4
Nochebuena 42 50 21 3 14 14 14 14 15
San Julian - - - 35 36 36 36 37 38
Total 190 217 159 303 396 295 272 230 233
Project capex:
Fresnillo optimisation/ Pyrites plant 44 45 15 51 - 90 50 15 -
Saucito 39 82 82 53 - - - - -
Ciénega 40 8 - - - - - - -
Herradura 69 195 43 25 - - - - -
Soledad & Dipolos - 10 - - - - - - -
San Julian 62 135 112 95 128 - - - -
Other unapproved projects 76 40 13 14 42 - - - -
Total 330 515 266 238 170 90 50 15 -
Total group capex 520 732 425 541 566 385 322 245 233
Guidance including unapproved projects 596 700 620 650 500
Source: Company data, DB estimates
Fresnillo
16%
Saucito
35%
Ciénega
7%
Herradura
32%
Soledad &
Dipolos
0%
Nochebuena
6%
San
Julian
0%
Silverstream
4%
Fresnillo20%
Saucito24%
Ciénega5%Herradura
2%
Soledad & Dipolos
1%
Nochebuena0% San
Julian10%
Silverstream3%
Exploration & development
portfolio34%
Investments1%
Source: Deutsche Bank, Company data
28 June 2016
Gold
Gold and the UK-listed gold miners
Deutsche Bank AG/London Page 17
Fresnillo: Investment Thesis
Outlook
We believe Fresnillo is in a good position to successively grow volumes
through the addition of three new mines and a series of brownfield expansions
over the next four to five years. Growth in the next two years is more muted,
however, as grades decrease at four of its five mines. In addition, Fresnillo
shares are up strongly year to date, boosted by a combination of the gold price
rally, some silver price gains, and an oil and FX tailwind for costs and cash
flow. We find the shares relatively expensive and believe there are better value
opportunities elsewhere in our gold mining coverage. With 20% downside to
our target price, our recommendation is Sell.
Valuation
Our price target is set at a 20% premium to our NPV valuation, in line with the
other gold miners under our coverage. This reflects the ranking we assign to
Fresnillo within our coverage universe and our view that gold miners deserve a
premium to non-precious metals mining stocks given our constructive view of
gold on a 12 month view. Our NPV is based on life-of-mine cash flows, using a
long-term gold price of US$1,300/oz and a silver price of US$20/oz. The WACC
of 6.4% is based on a risk-free rate of 4%, a market risk premium of 6%, a Beta
of 0.4, and 0% gearing.
Risks
A key upside risk is higher than expected silver and gold prices. A sustained
weakening of the Mexican Peso is also an upside risk. The company has an
excellent exploration track record and could surprise on the upside by
discovering significant resources of silver and gold, leading to an upgrade in
future production expectations or improving grades at the large Fresnillo mine.
The company has an extensive project pipeline over the medium term - there is
an upside risk to our target price if this is brought to production quicker than
we forecast. On a 12 month time frame, outperformance of silver versus gold
is an upside risk.
28 June 2016
Gold
Gold and the UK-listed gold miners
Page 18 Deutsche Bank AG/London
Model updated:27 June 2016
Running the numbers
Emerging Europe
Russia
Metals & Mining
Nordgold Reuters: NORDNq.L Bloomberg: NORD LI
Buy Price (27 Jun 16) USD 3.35
Target Price USD 4.60
52 Week range USD 2.50 - 3.35
Market Cap (m) EURm 1,148
USDm 1,260
Company Profile
Nordgold is a gold mining and exploration company with eight operating mines in Russia, Kazakhstan, Burkina Faso and Guinea. The company is a former subsidiary of Severstal Group, spun off in January 2012, when a portion of Nordgold's share capital was listed in the form of Global Depositary Receipts.
Price Performance
0.81.21.62.02.42.83.23.6
Jun 13 Dec 13 Jun 14 Dec 14 Jun 15 Dec 15
Nordgold Russian RTS Index (Rebased)
Margin Trends
10
20
30
40
50
13 14 15 16E 17E 18E
EBITDA Margin EBIT Margin
Growth & Profitability
-20
-10
0
10
20
30
-10
-5
0
5
10
15
13 14 15 16E 17E 18E
Sales growth (LHS) ROE (RHS)
Solvency
0
2
4
6
8
10
0
20
40
60
80
100
13 14 15 16E 17E 18E
Net debt/equity (LHS) Net interest cover (RHS)
Anna Mulholland, CFA
+44 20 754-18172 [email protected]
Fiscal year end 31-Dec 2013 2014 2015 2016E 2017E 2018E
Financial Summary
DB EPS (USD) -0.55 0.26 0.47 0.27 0.39 0.49
Reported EPS (USD) -0.58 0.26 0.47 0.27 0.32 0.49
DPS (USD) 0.08 0.10 0.16 0.09 0.13 0.16
BVPS (USD) 3.1 2.5 2.2 2.5 2.9 3.4
Weighted average shares (m) 378 378 376 376 376 376
Average market cap (USDm) 973 602 1,015 1,260 1,260 1,260
Enterprise value (USDm) 1,756 1,238 1,609 1,920 1,755 1,550
Valuation Metrics P/E (DB) (x) nm 6.2 5.8 12.6 8.7 6.8
P/E (Reported) (x) nm 6.1 5.8 12.6 10.6 6.8
P/BV (x) 0.52 0.60 1.23 1.33 1.15 0.97
FCF Yield (%) 15.2 35.3 18.8 nm 17.9 22.8
Dividend Yield (%) 3.1 6.5 5.8 2.7 3.9 4.9
EV/Sales (x) 1.4 1.0 1.4 1.7 1.3 1.1
EV/EBITDA (x) 4.5 2.4 3.1 4.1 2.9 2.4
EV/EBIT (x) 10.4 4.0 5.0 9.0 6.5 4.3
Income Statement (USDm)
Sales revenue 1,271 1,216 1,129 1,149 1,302 1,389
Gross profit 461 572 578 587 723 777
EBITDA 388 510 522 474 607 652
Depreciation 219 202 198 260 339 291
Amortisation 0 0 0 0 0 0
EBIT 168 308 324 213 268 362
Net interest income(expense) -51 -101 -34 -43 -46 -46
Associates/affiliates 0 0 0 0 0 0
Exceptionals/extraordinaries -386 -24 -15 0 0 0
Other pre-tax income/(expense) 0 0 0 0 0 0
Profit before tax -269 183 274 170 222 316
Income tax expense -70 60 86 52 78 99
Minorities 19 25 13 18 26 33
Other post-tax income/(expense) 0 0 0 0 0 0
Net profit -218 98 176 100 119 185
DB adjustments (including dilution) 9 -1 0 0 27 0
DB Net profit -209 97 176 100 146 185
Cash Flow (USDm)
Cash flow from operations 310 328 418 328 474 505
Net Capex -162 -115 -227 -365 -249 -219
Free cash flow 148 213 191 -37 225 287
Equity raised/(bought back) 0 0 0 0 0 0
Dividends paid -71 -40 -59 -79 -33 -49
Net inc/(dec) in borrowings 232 -21 -2 22 38 0
Other investing/financing cash flows -110 -268 24 47 0 0
Net cash flow 199 -115 154 -48 229 238
Change in working capital -199 116 -154 45 -229 -238
Balance Sheet (USDm)
Cash and other liquid assets 244 128 364 319 548 786
Tangible fixed assets 816 669 668 808 808 808
Goodwill/intangible assets 906 708 683 695 695 695
Associates/investments 20 240 60 77 77 77
Other assets 646 498 352 361 390 390
Total assets 2,632 2,242 2,126 2,261 2,518 2,756
Interest bearing debt 968 944 946 967 1,005 1,005
Other liabilities 413 300 282 260 300 310
Total liabilities 1,381 1,245 1,228 1,227 1,305 1,315
Shareholders' equity 1,172 939 827 944 1,098 1,293
Minorities 78 59 71 89 115 148
Total shareholders' equity 1,251 998 898 1,034 1,213 1,441
Net debt 724 817 582 649 457 219
Key Company Metrics
Sales growth (%) nm -4.3 -7.1 1.7 13.4 6.6
DB EPS growth (%) na na 81.1 -43.0 45.4 26.8
EBITDA Margin (%) 30.5 41.9 46.2 41.2 46.6 47.0
EBIT Margin (%) 13.2 25.3 28.7 18.6 20.6 26.1
Payout ratio (%) nm 39.6 33.4 33.5 41.0 33.4
ROE (%) -15.7 9.3 19.9 11.3 11.6 15.4
Capex/sales (%) 12.8 9.5 20.1 31.8 19.1 15.7
Capex/depreciation (x) 0.7 0.6 1.1 1.4 0.7 0.8
Net debt/equity (%) 57.9 81.9 64.8 62.8 37.7 15.2
Net interest cover (x) 3.3 3.1 9.4 4.9 5.9 7.9
Source: Company data, Deutsche Bank estimates
28 June 2016
Gold
Gold and the UK-listed gold miners
Deutsche Bank AG/London Page 19
Figure 24: Nordgold Operational and Financial summary data
NORDGOLD N.V. OPERATIONAL AND FINANCIAL SUMMARY DATA
FX/Commodities Assumptions FY12A FY13A FY14A FY15A FY16F FY17F FY18F FY19F FY20F NPV (End FY16) US$mn US$ps
Gold (US$/Oz) 1,671 1,413 1,267 1,161 1,195 1,231 1,275 1,317 1,359 Bissa 732 1.95
Silver (US$/Oz) 31 24 19 16 15 16 17 18 19 Taparko 119 0.32
Lefa 694 1.85
KEY FINANCIAL METRICS Buryatzoloto 339 0.90
Underly ing earnings (US$M) 154 -190 122 189 118 172 218 296 288 Berezitovy 21 0.06
Cash Flow from Operations(US$M) 123 310 328 418 328 474 505 527 579 Neryungri 618 1.64
Capex and divestments (US$M) 326 162 115 227 365 249 219 164 223 Aprelkovo 7 0.02
Dividend (US$M) 2 71 40 59 79 33 49 62 84 Suzdal 218 0.58
Free Cash Flow (US$M) -203 148 180 151 -37 225 287 364 356 Bouly 461 1.23
Net Debt (US$M) 681 724 627 584 649 457 219 -83 -355 Operating asset value 3,210 8.53
Gearing (ND/E %) 40% 58% 63% 65% 63% 38% 15% -5% -18%
EPS (USc) 5 -58 26 47 26.6 38.7 49 67 65 Development and Exploration 134 0.36
EPS Change (%) -1176% -145% 81% -43% 45% 27% 36% -2% Total asset value 3,344 8.89
EPS CAGR (% f rom 2012) -1176% 119% 106% 49% 48% 45% 43% 37%
DPS (USc) 12 8 10 16 9 13 16 22 22
Payout ratio (%) 225% -14% 40% 33% 33% 33% 33% 33% 33% Minority Interest -100 -0.27
Net (debt)/cash -530 -1.41
Gold equivalent production (koz) Total equity value 2,714 7.21
Bissa na 254 251 235 208 253 241 214 193
Taparko 127 108 112 83 126 95 94 90 86 Target price 4.60
Lefa 172 163 205 214 245 241 243 243 243 Current price, USD 3.35
Buryatzoloto 109 99 120 113 102 107 109 111 111 % upside/downside 37.3%
Berezitovy 116 120 123 125 71 63 64 64 94
Neryungri (including Gross) 66 67 66 84 48 86 155 232 232 Valuation split (end FY16)
Aprelkovo 36 33 32 20 28 27 0 0 0
Suzdal 91 81 77 75 80 65 65 66 67
Bouly 59 120 118 118 118
Total 717 924 985 950 968 1058 1089 1139 1143
Revenue (US$m)
Bissa 0 350 318 274 246 311 307 282 262
Taparko 212 152 142 95 150 117 120 118 117
Lefa 287 226 247 260 290 297 309 319 329
Buryatzoloto 181 136 140 144 121 132 139 146 151
Berezitovy 194 165 150 150 84 77 82 85 127
Neryungri (including gross) 111 90 83 96 58 106 197 306 316
Aprelkovo 60 44 41 23 33 34 0 0 0
Suzdal 153 110 96 87 96 80 83 87 91
Bouly 0 0 0 0 71 148 150 155 160
Total 1,198 1,272 1,216 1,129 1,149 1,302 1,389 1,499 1,553
Production split (FY15)
Cash costs (US$/oz)
Bissa na 467 484 464 598 516 518 526 534
Taparko 610 771 720 778 736 669 654 647 643
Lefa 1,180 1,343 962 636 799 772 745 745 745
Buryatzoloto 812 978 862 665 786 744 718 693 668
Berezitovy 625 789 616 445 599 569 549 554 560
Neryungri 767 764 845 585 757 754 764 772 780
Aprelkovo 863 1,020 1,112 727 960 850 0 0 0
Suzdal 802 733 640 674 666 595 604 613 622
Bouly 625 625 625 624 624
Total Group Cash cost (US$/oz) 835 848 675 604 682 743 726 689 748
Total Group AISC (US$/oz) 1,174 1,091 885 793 862 916 871 828 943
Capex (US$m) Capex split (FY15)
Bissa 212 31 21 21 21 22 19 19 8
Taparko 28 37 21 34 54 27 27 27 27
Lefa 52 26 46 49 50 47 45 45 23
Buryatzoloto 32 34 20 17 27 18 19 20 21
Berezitovy 13 8 13 22 14 16 16 16 109
Neryungri (including Gross) 67 67 3 8 131 88 5 8 7
Aprelkovo 11 2 3 2 2 2 0 0 0
Suzdal 14 14 8 13 10 10 10 9 9
Bouly 85 47 10 10 10 10
Others 45 16 23 7 7 7 7 7 7
Total 474 238 158 258 365 246 159 161 221
o/w sustaining 87 94 110 132 144 146 143 132 197
o/w growth 387 143 48 126 221 100 16 29 24
Source: Deutsche Bank estimates, Company data
Bissa25%
Taparko4%
Lefa24%
Buryatzoloto-1%
Berezitovy1%
Neryungri21%
Aprelkovo0%
Suzdal8%
Development and
Exploration
5%
Bissa25%
Taparko9%
Lefa22%
Buryatzoloto12%
Berezitovy13%
Neryungri (including
Gross)
9%
Aprelkovo2%
Suzdal8%
Bissa8%
Taparko13%
Lefa19%
Buryatzoloto7%
Berezitovy9%
Neryungri (including
Gross)
3%
Aprelkovo1%
Suzdal5%
Bouly33%
Others2%
Source: Deutsche Bank, Company data
28 June 2016
Gold
Gold and the UK-listed gold miners
Page 20 Deutsche Bank AG/London
Nordgold: Investment Thesis
Outlook
Nordgold has a diversified portfolio of eight gold mines in West Africa, Russia
and Kazakhstan, and two projects in execution. We think the company will
grow production beyond 1moz per annum, with the new Bouly mine
commencing production in the second half of 2016. We believe Nordgold
offers a resilient business model with a healthy growth pipeline. We expect the
group to benefit from a stronger gold price, weaker operating currencies and
cost efficiencies in the next 12 months. The shares are valued at 0.5x P/NPV on
our estimates compared with an average of 1x for the peer group. Buy.
Valuation
We value Nordgold using a sum-of-the-parts of life of mine DCF models. We
apply an NPV multiple of 0.7x to reflect the ranking we assign to Nordgold
within our coverage universe. Our rankings are derived from debt reduction,
P/E valuation, near-term earnings growth, and management action taken to
control cash flow. We value the group's longer-dated growth options at
US$134m or US$0.36/GDR. We use a WACC of 8.36% and a long-term (real)
gold price of US$1,300/oz.
Risks
Key downside risks include lower-than-expected gold prices, higher-than-
expected costs and a stronger-than-expected Rouble, Tenge, Guinean franc
and West African franc. Operational risks are concentrated around
management's ability to deliver on development projects and to sustain cost
reduction programs. Further risks include changes in fiscal regime and/or
mining legislations. The planned seeking of a premium listing in London
requires a minimum freefloat of 25% - Nordgold has indicated it may issue
some new shares to meet this requirement thus there is a risk of dilution to
existing shareholders.
28 June 2016
Gold
Gold and the UK-listed gold miners
Deutsche Bank AG/London Page 21
Model updated:27 June 2016
Running the numbers
Emerging Europe
Russia
Metals & Mining
Polymetal Reuters: POLYP.L Bloomberg: POLY LN
Hold Price (27 Jun 16) GBP 968.00
Target Price GBP 780.00
52 Week range GBP 427.10 - 968.00
Market Cap (m) GBPm 4,112
USDm 5,407
Company Profile
Polymetal International is the holding company of Polymetal, a leading Russian gold and silver miner. In 2010, Polymetal was the fourth largest gold producer in Russia by production volume and its largest silver producer, ranked eighth worldwide Polymetal produced 810koz of gold equivalent in 2011 at six operating assets and targets a 73% organic growth in gold equivalent output by 2014.
Price Performance
200
400
600
800
1000
Jun 13 Dec 13 Jun 14 Dec 14 Jun 15 Dec 15
Polymetal Russian RTS Index (Rebased)
Margin Trends
10
20
30
40
50
60
13 14 15 16E 17E 18E
EBITDA Margin EBIT Margin
Growth & Profitability
-20
0
20
40
60
80
-20-15-10-505
1015
13 14 15 16E 17E 18E
Sales growth (LHS) ROE (RHS)
Solvency
0
5
10
15
20
0
50
100
150
200
250
300
13 14 15 16E 17E 18E
Net debt/equity (LHS) Net interest cover (RHS)
Anna Mulholland, CFA
+44 20 754-18172 [email protected]
Fiscal year end 31-Dec 2013 2014 2015 2016E 2017E 2018E
Financial Summary
DB EPS (USD) 0.30 -0.61 0.56 0.81 0.93 1.22
Reported EPS (USD) -0.51 -0.53 0.52 0.81 0.93 1.22
DPS (USD) 0.09 0.36 0.51 0.24 0.28 0.36
BVPS (USD) 4.6 2.2 1.2 1.4 2.5 3.2
Weighted average shares (m) 386 397 423 425 425 425
Average market cap (USDm) 4,420 3,645 3,512 5,407 5,407 5,407
Enterprise value (USDm) 5,427 4,796 4,795 6,698 5,958 5,749
Valuation Metrics P/E (DB) (x) 37.8 nm 14.8 15.8 13.7 10.5
P/E (Reported) (x) nm nm 15.9 15.8 13.7 10.5
P/BV (x) 2.05 4.11 7.53 9.27 5.16 3.92
FCF Yield (%) 3.2 8.4 8.1 4.3 12.3 7.2
Dividend Yield (%) 0.8 3.9 6.1 1.9 2.2 2.9
EV/Sales (x) 3.2 2.8 3.3 4.2 3.4 3.0
EV/EBITDA (x) 9.0 6.9 7.2 9.2 7.2 5.9
EV/EBIT (x) 18.9 11.1 9.5 14.3 11.2 8.4
Income Statement (USDm)
Sales revenue 1,707 1,690 1,441 1,585 1,736 1,941
Gross profit 829 929 829 961 1,063 1,214
EBITDA 601 693 662 727 823 974
Depreciation 238 260 156 260 292 292
Amortisation 76 0 0 0 0 0
EBIT 287 432 506 467 531 682
Net interest income(expense) -43 -41 -81 -41 -41 -40
Associates/affiliates -2 -7 -4 0 0 0
Exceptionals/extraordinaries -310 35 -17 0 0 0
Other pre-tax income/(expense) -90 -558 -129 1 1 1
Profit before tax -158 -138 276 427 491 642
Income tax expense 40 71 55 85 98 128
Minorities 0 0 0 0 0 0
Other post-tax income/(expense) 0 0 0 0 0 0
Net profit -198 -209 221 342 393 515
DB adjustments (including dilution) 315 -35 17 0 0 0
DB Net profit 117 -244 238 342 393 515
Cash Flow (USDm)
Cash flow from operations 462 515 490 551 989 605
Net Capex -319 -210 -205 -321 -323 -213
Free cash flow 142 305 285 230 667 391
Equity raised/(bought back) 0 0 0 0 0 0
Dividends paid -316 -65 -300 -108 -110 -136
Net inc/(dec) in borrowings 213 202 27 -84 -114 -30
Other investing/financing cash flows 8 -350 -117 -10 0 0
Net cash flow 47 92 -105 28 442 225
Change in working capital 0 -81 15 -51 304 -202
Balance Sheet (USDm)
Cash and other liquid assets 66 157 52 212 814 993
Tangible fixed assets 2,095 2,021 1,360 1,420 1,451 1,372
Goodwill/intangible assets 31 18 14 14 14 14
Associates/investments 39 15 14 14 14 14
Other assets 1,025 786 642 820 522 744
Total assets 3,255 2,997 2,081 2,480 2,816 3,138
Interest bearing debt 1,111 1,323 1,350 1,380 1,380 1,350
Other liabilities 356 805 245 373 381 401
Total liabilities 1,467 2,128 1,595 1,752 1,761 1,751
Shareholders' equity 1,787 869 487 583 1,047 1,379
Minorities 0 0 0 137 0 0
Total shareholders' equity 1,787 869 487 720 1,047 1,379
Net debt 1,046 1,165 1,298 1,168 565 356
Key Company Metrics
Sales growth (%) -8.0 -0.9 -14.7 10.0 9.5 11.8
DB EPS growth (%) -73.1 na na 43.6 15.0 30.9
EBITDA Margin (%) 35.2 41.0 45.9 45.9 47.4 50.2
EBIT Margin (%) 16.8 25.6 35.1 29.5 30.6 35.1
Payout ratio (%) nm nm 97.6 30.0 30.0 30.0
ROE (%) -10.1 -15.7 32.6 63.9 48.2 42.4
Capex/sales (%) 18.7 12.4 14.3 20.2 18.6 11.0
Capex/depreciation (x) 1.3 0.8 1.3 1.2 1.1 0.7
Net debt/equity (%) 58.5 134.0 266.7 162.2 54.0 25.8
Net interest cover (x) 6.7 10.6 6.3 11.3 12.8 16.8
Source: Company data, Deutsche Bank estimates
28 June 2016
Gold
Gold and the UK-listed gold miners
Page 22 Deutsche Bank AG/London
Figure 25: Polymetal Operational and Financial summary data
POLYMETAL OPERATIONAL AND FINANCIAL SUMMARY DATA, Yr ending DecemberCommodities Assumptions FY12a FY13a FY14a FY15a FY16e FY17e FY18e FY19e FY20e NPV (FY16) US$mn US$/share GBP/share
Gold (US$/oz) 1,671 1,413 1,267 1,161 1,195.0 1,231.3 1,279.8 1,321.8 1,363.7 Dukat 1015 2.39 1.84
Silver (US$/oz) 31 24 19 16 15 16 17 18 19 Khakanja 5 0.01 0.01
Copper (US$/tonne) 7,954 7,356 6,848 5,513 4,620 4,726 5,244 5,745 6,245 Voro 382 0.90 0.69
Varvara 1135 2.67 2.06
KEY FINANCIAL METRICS Omolon 237 0.56 0.43
Total Net Profit (US$m) 421 -198 -209 221 342 393 515 683 819 Albazino-Amursk 684 1.61 1.24
Cash Flow from Operations (US$m) 541 462 515 490 551 989 605 925 1,059 Mayskoye 588 1.38 1.06
Capex, net of divestments (US$m) 397 319 210 205 321 323 213 158 103 Kyzyl 925 2.18 1.68
Dividends (US$m) 77 316 65 300 108 110 136 180 225 Kapan 308 0.73 0.56
Free Cash Flow (US$m) 144 142 305 263 230 667 391 766 956 Entreprise Value 5,280 12.43 9.56
Net Debt/(Cash) (US$m) 1,037 1,046 1,245 1,298 1,219 624 433 -128 -838 NPV multiple 1.2
Headline Basic Eps (US$) 1.10 0.46 0.71 0.70 0.80 0.93 1.21 1.61 1.93 DB NPV 6,336 14.91 11.47
EPS (US$) 1.10 -0.51 -0.53 0.52 0.80 0.93 1.21 1.61 1.93 NPV other capex -579 -1 -1.05
Headline EPS Change (%) -58% 53% -1% 15% 15% 31% 33% 20% NPV of corp costs -268 -1 -0.48
Headline EPS CAGR (% from 2012) -147% NM -22% -8% -3% 2% 6% 7% (Net debt) / net cash -1219 -2.87 -2.21
Total DPS (US$) 0.81 0.09 0.36 0.51 0.24 0.28 0.36 0.48 0.58 Minority interest 0 0.00 0.00
Payout Ratio (%) 74% 19% 51% 98% 30% 30% 30% 30% 30% Invest, assocs & loans 14 0.03 0.03
Fair value 4285 10.09 7.80
Gold Equivalent Production (Koz) 14.6%
Dukat 356 409 431 442 371 325 332 317 324 0.18
Voro 157 154 159 140 147 157 157 97 58 # shares (mn) 424.8
Khakanja 162 144 126 117 25 17 1 0 0 WACC 8.9%
Varvara (includes Komarovskoye) 135 132 107 71 130 198 202 213 213 Valuation split (FY16)
Omolon 172 159 224 198 216 224 252 150 242
Albazino-Amursk 78 238 227 220 248 251 251 288 288
Mayskoye 0 48 187 137 156 172 154 168 185
Kyzyl 78 284 329
Kapan 30 60 90 120 120
Total Gold Equivalent Production 1,060 1,284 1,461 1,325 1,322 1,405 1,517 1,637 1,759
Gold share in GE Production 55% 63% 65% 58% 63% 65% 67% 72% 71%
Silver share in GE Production 35% 30% 25% 24% 20% 21%
Revenue (US$ m) 1,854 1,707 1,690 1,441 1,585 1,736 1,941 2,164 2,400
EBITDA (US$ m) 936 598 686 658 727 823 974 1,162 1,332
TCC/oz sold
Dukat (SE) 12.1 11.6 8.7 6.4 7.4 7.6 7.8 7.8 7.8
Voro 506.0 503.0 376.0 336.0 329.7 339.4 344.3 342.7 341.2
Khakanja 615.0 756.0 704.0 573.0 633.8 651.3 660.2 0.0 0.0
Varvara 795.0 791.0 705.0 818.0 476.7 479.4 476.9 473.2 469.5
Omolon 892.0 879.0 570.0 555.0 459.8 476.4 486.4 488.0 489.8
Albazino-Amursk 739.0 790.0 625.0 460.0 528.4 544.1 555.6 557.2 558.8
Mayskoye - 957.0 966.0 752.0 488.3 504.5 514.9 517.0 519.1
Kyzyl 556.4 556.5 556.6
Gr. Unit Cash cost (US$/GE oz) 690.0 745.0 634.0 538.0 508.1 515.4 530.5 544.9 545.5
- change yoy 8% -15% -15% -6% 1% 3% 3% 0%
Gr. AISC (US$/GE oz) 1,058.5 1,086.6 892.0 730.3 750.0 755.9 682.8 590.2 539.0
- change yoy 3% -18% -18% 3% 1% -10% -14% -9% Gold equivalent production split (FY15)
Capex (US$m)
Growth Capex 145.0 54.0 - 32.0 109.0 124.0 49.0 - -
Total Sustaining 136 138 98 121 61 49 59 53 53
Dukat 49.0 37.0 25.0 28.0 10.8 9.6 9.9 9.3 9.3
Voro 11.0 8.0 7.0 3.0 2.9 3.2 3.2 2.0 1.0
Khakanja 20.0 14.0 14.0 26.0 0.2 0.1 0.0 - -
Varvara (including Komarovskoye) 16.0 21.0 14.0 15.0 8.1 14.3 13.9 13.2 12.1
Omolon 40.0 22.0 7.0 8.0 5.0 5.3 6.1 3.7 5.9
Albazino-Amursk - 36.0 13.0 20.0 15.7 6.8 7.0 8.0 8.1
Mayskoye - - 18.0 21.0 13.0 4.3 4.0 4.4 2.4
Kyzyl 10.0 7.9 9.2
Kapan 5.0 5.0 5.0 5.0 5.0
Corporate & exploration 76.0 65.0 87.0 52.0 110.0 110.0 80.0 80.0 30.0
Capitalised stripping & interest 75.0 97.0 36.0 20.0 50.0 40.0 25.0 25.0 20.0
Total Capex 432 354 221 225 330 323 213 158 103
Source: Deutsche Bank, Company Data
Dukat33%
Voro11%
Khakanja9%
Varvara (includes
Komarovskoye) 5%
Omolon15%
Albazino-Amursk
17%
Mayskoye10%
Source: Deutsche Bank, Company data
28 June 2016
Gold
Gold and the UK-listed gold miners
Deutsche Bank AG/London Page 23
Polymetal: Investment Thesis
Outlook
Polymetal aims to grow gold equivalent production steadily from 1.2moz in
2016 to 1.6moz by 2020. The majority of the group's mines are in the lower
half of the cost curve, thus free cash flow generation is healthy in the
supportive gold price environment we expect. We note that Polymetal has
accumulated additional "3rd generation" assets to extend the life and growth
of its operations and is also continually assessing M&A opportunities. The
company will need to deliver an extension to its reserve base from developing
organic and/or acquired resources and this carries some execution risk. Hold.
Valuation
Our price target is set at a 20% premium to our DCF valuation, to reflect the
ranking we assign to Polymetal within our coverage universe and our view that
gold miners deserve a premium to non-precious metals mining stocks given
our constructive view of gold on a 12 month view. We value Polymetal from a
sum-of-the-parts life-of-mine DCF model. We apply a 9% WACC based on a
targeted capital structure of 70% equity and 30% debt.
Risks
Key risks include silver and gold prices significantly higher/lower than our
expectation as well as Russian macroeconomic factors such as Rouble
appreciation/depreciation. Management risks are concentrated around its
ability to integrate newly acquired deposits. Other risks include changes in
fiscal regimes and/or mining legislation. 90% of Polymetal's assets are in
Russia, with the residual 10% in Kazakhstan.
28 June 2016
Gold
Gold and the UK-listed gold miners
Page 24 Deutsche Bank AG/London
Model updated:27 June 2016
Running the numbers
Europe
United Kingdom
Gold
Randgold Reuters: RRS.L Bloomberg: RRS LN
Hold Price (27 Jun 16) GBP 8,035.00
Target Price GBP 6,700.00
52 Week range GBP 3,625.00 - 8,035.00
Market Cap (m) GBPm 7,506
USDm 9,869
Company Profile
Randgold Resources is a gold exploration and mining company focusing on prospective regions in West Africa and the Congo Craton. The company currently has three operating mines and one low-grade stockpile processing facility in Mali and the Cote d'Ivoire, producing c.750koz of gold in 2011F. The company plans to ramp up its newly commissioned mines and grow the portfolio to five mines producing c.1.2Moz of gold by 2014.
Price Performance
3000
4000
5000
6000
7000
8000
9000
Jun 13 Dec 13 Jun 14 Dec 14 Jun 15 Dec 15
Randgold FTSE 100 INDEX (Rebased)
Margin Trends
10
20
30
40
50
13 14 15 16E 17E 18E
EBITDA Margin EBIT Margin
Growth & Profitability
0
2
4
6
8
10
12
-15-10-505
101520
13 14 15 16E 17E 18E
Sales growth (LHS) ROE (RHS)
Solvency
0
20
40
60
80
-20
-15
-10
-5
0
13 14 15 16E 17E 18E
Net debt/equity (LHS) Net interest cover (RHS)
Anna Mulholland, CFA
+44 20 754-18172 [email protected]
Fiscal year end 31-Dec 2013 2014 2015 2016E 2017E 2018E
Financial Summary
DB EPS (USD) 3.00 2.52 2.01 1.82 2.84 3.71
Reported EPS (USD) 3.00 2.52 2.01 1.82 2.84 3.71
DPS (USD) 0.50 0.60 0.66 0.68 0.70 0.72
BVPS (USD) 31.2 33.4 34.4 35.5 37.6 40.6
Weighted average shares (m) 92 93 93 93 93 93
Average market cap (USDm) 7,089 6,942 6,374 9,869 9,869 9,869
Enterprise value (USDm) 7,227 7,062 6,378 9,807 9,833 9,628
Valuation Metrics P/E (DB) (x) 25.6 29.8 34.0 57.9 37.2 28.5
P/E (Reported) (x) 25.6 29.8 34.0 57.9 37.2 28.5
P/BV (x) 2.01 2.05 1.79 2.98 2.81 2.60
FCF Yield (%) nm 1.4 2.1 1.7 1.2 3.8
Dividend Yield (%) 0.7 0.8 1.0 0.6 0.7 0.7
EV/Sales (x) 6.3 6.5 6.4 9.0 7.9 7.2
EV/EBITDA (x) 14.9 16.6 18.8 24.9 17.7 15.2
EV/EBIT (x) 20.4 25.3 34.0 51.2 30.5 25.0
Income Statement (USDm)
Sales revenue 1,145 1,087 1,001 1,095 1,247 1,338
Gross profit 536 462 374 447 609 688
EBITDA 485 426 339 394 554 634
Depreciation 131 147 151 203 232 249
Amortisation 0 0 0 0 0 0
EBIT 355 279 188 192 323 386
Net interest income(expense) -6 -4 -4 -6 -8 -7
Associates/affiliates 54 78 77 74 101 154
Exceptionals/extraordinaries 0 0 0 0 0 0
Other pre-tax income/(expense) 0 0 0 0 0 0
Profit before tax 403 353 261 259 415 533
Income tax expense 77 82 48 54 94 114
Minorities 47 36 24 33 54 70
Other post-tax income/(expense) 0 0 0 0 0 0
Net profit 278 235 189 172 267 349
DB adjustments (including dilution) 0 0 0 0 0 0
DB Net profit 278 235 189 172 267 349
Cash Flow (USDm)
Cash flow from operations 445 317 352 380 479 661
Net Capex -728 -222 -218 -213 -360 -285
Free cash flow -283 96 134 167 118 376
Equity raised/(bought back) 1 2 0 1 0 0
Dividends paid -73 -53 -49 -77 -91 -101
Net inc/(dec) in borrowings 0 0 0 0 0 0
Other investing/financing cash flows 2 1 45 5 0 0
Net cash flow -353 45 130 97 28 276
Change in working capital 0 0 0 0 0 0
Balance Sheet (USDm)
Cash and other liquid assets 38 83 213 310 338 614
Tangible fixed assets 1,458 1,495 1,547 1,551 1,680 1,716
Goodwill/intangible assets 0 0 0 0 0 0
Associates/investments 2 1 1 1 1 1
Other assets 1,879 1,954 1,976 2,147 2,210 2,221
Total assets 3,377 3,533 3,737 4,009 4,230 4,553
Interest bearing debt 0 0 0 0 0 0
Other liabilities 319 230 245 256 245 250
Total liabilities 319 230 245 256 245 250
Shareholders' equity 2,879 3,098 3,203 3,312 3,514 3,795
Minorities 179 205 219 249 303 373
Total shareholders' equity 3,058 3,303 3,422 3,561 3,817 4,169
Net debt -38 -83 -213 -310 -338 -614
Key Company Metrics
Sales growth (%) -13.1 -5.1 -7.9 9.4 13.8 7.3
DB EPS growth (%) -35.5 -16.0 -20.2 -9.2 55.5 30.5
EBITDA Margin (%) 42.4 39.2 33.8 36.0 44.5 47.4
EBIT Margin (%) 31.0 25.7 18.7 17.5 25.9 28.8
Payout ratio (%) 16.6 23.7 32.6 37.0 24.5 19.3
ROE (%) 10.1 7.9 6.0 5.3 7.8 9.5
Capex/sales (%) 63.6 20.4 21.7 19.4 28.9 21.3
Capex/depreciation (x) 5.6 1.5 1.4 1.0 1.6 1.1
Net debt/equity (%) -1.2 -2.5 -6.2 -8.7 -8.9 -14.7
Net interest cover (x) 54.8 68.4 43.7 29.5 38.4 55.4
Source: Company data, Deutsche Bank estimates
28 June 2016
Gold
Gold and the UK-listed gold miners
Deutsche Bank AG/London Page 25
Figure 26: Randgold Operational and Financial summary data
RANDGOLD RESOURCES OPERATIONAL AND FINANCIAL SUMMARY DATAFX/Commodities Assumptions FY10A FY11A FY12A FY13A FY14A FY15A FY16F FY17F FY18F FY19F FY20F NPV(FY16) US$mn US$ps £ps
Silver (US$/Oz) 20.2 35.2 31.3 23.9 19.1 15.7 15.2 15.8 16.5 17.5 18.5 Loulo 2209 23.7 18.3
Gold (US$/Oz) 1226 1570 1671 1413 1215 1161 1195 1231 1275 1317 1359 Gounkoto 599 6.4 5.0
Copper (USc/Oz) 343 400 361 334 311 250 210 214 237 260 282 Morila -12 -0.1 -0.1
Zinc 98 99 89 88 98 88 79 82 89 95 102 Tongon 340 3.7 2.8
Lead 98 109 94 98 96 81 79 82 88 94 100 Kibali 2922 31.4 24.2
Massawa 240 2.6 2.0
KEY FINANCIAL METRICS Exploration 305 3.3 2.5
Tota l Income (US$M) 137 429 508 324 271 214 206 321 419 428 406 Total Operational 6602 71.0 54.6
Cash Flow from Operations(US$M) 108 570 494 445 317 352 380 479 661 676 726 Corporate costs -165 -1.8 -1.4
Capex and divestments (US$M) 411 448 561 728 222 218 213 360 285 231 127 Environmental rehab provision -56 -0.6 -0.5
Dividend (US$M) 15 18 62 46 43 39 62 64 65 67 69 Net (Debt)/Cash 338 3.6 2.8
Acquisitions (US$M) -24 0 0 0 0 0 0 0 0 0 0 Total 6719 72.2 55.6
Free Cash Flow (US$M) -303 122 -67 -283 96 134 167 118 376 445 600
Net Debt (US$M) 366 488 373 38 83 213 310 338 614 955 1,452 Current price 61.7
Basic EPS (USD) 1.14 4.12 4.71 3.02 2.55 2.02 1.84 2.86 3.73 3.81 3.62 Upside/downside 7.9%
EPS Change (%) 261% 14% -36% -15% -21% -9% 56% 31% 2% -5%
EPS CAGR (%) -36% -26% -25% -21% -10% -4% -3% -3%
DPS (USD) 0.20 0.40 0.50 0.50 0.60 0.66 0.68 0.70 0.72 0.74 0.76 Valuation split (FY16)
Payout ratio (%) 18% 10% 11% 17% 24% 33% 37% 24% 19% 19% 21%
Production (Koz)
- Loulo 317 208 220 308 382 351 405 428 460 387 416
- Gounkoto 0 138 284 272 257 280 244 261 261 276 224
Loulo - Gounkoto complex 317 346 503 580 639 630 648 689 721 663 641
Morila 95 100 81 57 44 49 26 19 11 0 0
Tongon 28 250 210 234 227 243 278 323 329 343 286
Kibali 0 0 0 40 237 289 273 277 316 330 343
Massawa 0 0 0 0 0 0 0 0 0 120 184
Tota l 440 696 794 910 1147 1211 1225 1309 1377 1456 1454
Cash Costs (US$/oz)
- Loulo 712 1009 781 788 714 743 609 593 544 619 620
- Gounkoto 0 536 706 680 629 603 658 498 522 540 710
Loulo - Gounkoto complex 712 821 738 704 680 681 627 557 536 586 651 Production split (FY15)
Morila 669 782 759 768 1165 761 1336 1476 1151 0 0
Tongon 459 557 772 829 877 840 879 785 802 842 921
Kibali 0 0 0 464 586 605 623 541 473 474 473
Massawa 0 0 0 0 0 0 0 0 0 812 822
Group Avg. Cash Cost 699 716 735 715 718 698 699 623 590 640 684
EBITDA (US$m)
Loulo 140 110 190 194 207 146 231 273 336 270 307
Gounkoto 0 155 272 200 168 153 129 191 197 214 146
Morila 54 79 73 37 5 24 -4 -5 -3 0 0
Tongon 4 274 189 134 89 75 86 144 156 163 125
Kibali 0 0 0 31 159 161 154 192 253 278 304
Massawa 0 0 0 0 0 0 0 0 0 58 99
Tota l 199 617 724 596 629 559 597 796 938 983 982 EBITDA split (FY15)
Capex (US$m)
Loulo 88 73 300 185 143 182 66 15 15 14 15
Gounkoto 70 70 20 20 9 3 10 23 58 59 32
Morila 3 2 2 32 6 11 2 1 1 0 0
Tongon 175 80 20 37 19 16 15 15 16 17 16
Kibali 25 100 260 350 193 126 175 125 25 15 15
Massawa 16 16 0 10 0 10 12 181 170 126 49
Others 5 5 10 10 0 0 0 0 0 0 0
Tota l 382 346 612 644 369 347 280 360 285 231 127
Source: Deutsche Bank estimates, Company data
- Loulo29%
- Gounkoto23%
Morila4%
Tongon20%
Kibali24%
Loulo26%
Gounkoto27%
Morila4%
Tongon14%
Kibali29%
Loulo33%
Gounkoto9%
Morila0%Tongon
5%
Kibali44%
Massawa4%
Exploration5%
Source: Deutsche Bank, Company data
28 June 2016
Gold
Gold and the UK-listed gold miners
Page 26 Deutsche Bank AG/London
Randgold: Investment Thesis
Outlook
Randgold has a strong exploration and operational track record in Africa.
Group production exceeded 1moz in 2014 and 1.2moz in 2015 but we expect it
to plateau around 1.2-3moz for the next three years. Cost control is excellent
and capex should decline during 2016. We expect this to result in solid free
cash flow which we think Randgold will build up to invest in its next mine. This
is the current target of the company's exploration efforts but we do not foresee
any new production coming on-stream until the back end of this decade.
Dividends are growing 10% yearly but off a low base and the relative yield is
not compelling in our opinion. In the medium to long term, we believe
Randgold has a high-quality mix of assets. The portfolio of reserves is stress-
tested down to US$1,000/oz gold, for a 20% IRR. This should mean Randgold
can generate higher margins and return on capital than peers but the shares
are expensive for the muted growth profile in the shorter-term. We rate the
shares Hold.
Valuation
Our price target is set at a 20% premium to our NPV, to reflect the ranking we
assign to Randgold within our coverage universe and our view that gold
miners deserve a premium to non-precious metals mining stocks given our
constructive view of gold on a 12 month view. We derive our NVP from a DCF
model of life of mine cash flows. We use a long-term gold price of
US$1,300/oz and a WACC of 5% (based on a risk-free rate of 4%, a market risk
premium of 6%, a beta of 0.3x and a 30% target gearing).
Risks
Key risks include higher- or lower-than-expected gold prices, lower- or higher-
than-expected costs, particularly due to labour inflation, and volatility in the
Euro/Dollar exchange rate.
28 June 2016
Gold
Gold and the UK-listed gold miners
Deutsche Bank AG/London Page 27
Appendix 1
Important Disclosures
Additional information available upon request
Disclosure checklist
Company Ticker Recent price* Disclosure
Acacia Mining plc ACAA.L 4.41 (GBP) 27 Jun 16 14,15
Nordgold NORDNq.L 3.35 (USD) 27 Jun 16 NA
Polymetal POLYP.L 951.04 (GBp) 27 Jun 16 NA
Randgold RRS.L 8,035.00 (GBp) 27 Jun 16 2,6,9
Fresnillo FRES.L 1,482.94 (GBp) 27 Jun 16 14 *Prices are current as of the end of the previous trading session unless otherwise indicated and are sourced from local exchanges via Reuters, Bloomberg and other vendors . Other information is sourced from Deutsche Bank, subject companies, and other sources. For disclosures pertaining to recommendations or estimates made on securities other than the primary subject of this research, please see the most recently published company report or visit our global disclosure look-up page on our website at http://gm.db.com/ger/disclosure/DisclosureDirectory.eqsr.
Important Disclosures Required by U.S. Regulators
Disclosures marked with an asterisk may also be required by at least one jurisdiction in addition to the United States. See Important Disclosures Required by Non-US Regulators and Explanatory Notes.
2. Deutsche Bank and/or its affiliate(s) makes a market in securities issued by this company.
6. Deutsche Bank and/or its affiliate(s) owns one percent or more of any class of common equity securities of this company calculated under computational methods required by US law.
14. Deutsche Bank and/or its affiliate(s) has received non-investment banking related compensation from this company within the past year.
15. This company has been a client of Deutsche Bank Securities Inc. within the past year, during which time it received non-investment banking securities-related services.
Important Disclosures Required by Non-U.S. Regulators
Please also refer to disclosures in the Important Disclosures Required by US Regulators and the Explanatory Notes.
2. Deutsche Bank and/or its affiliate(s) makes a market in securities issued by this company.
6. Deutsche Bank and/or its affiliate(s) owns one percent or more of any class of common equity securities of this company calculated under computational methods required by US law.
9. Deutsche Bank and/or its affiliate(s) owns one percent or more of any class of common equity securities of this company calculated under computational methods required by India law.
For disclosures pertaining to recommendations or estimates made on securities other than the primary subject of this research, please see the most recently published company report or visit our global disclosure look-up page on our website at http://gm.db.com/ger/disclosure/DisclosureDirectory.eqsr
Analyst Certification
The views expressed in this report accurately reflect the personal views of the undersigned lead analyst about the subject issuers and the securities of those issuers. In addition, the undersigned lead analyst has not and will not receive any compensation for providing a specific recommendation or view in this report. Anna Mulholland/Grant Sporre/Franck Nganou
28 June 2016
Gold
Gold and the UK-listed gold miners
Page 28 Deutsche Bank AG/London
Historical recommendations and target price: Acacia Mining plc (ACAA.L) (as of 6/27/2016)
1
2 34
5 6789
101112
1314
15 16
17
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20 21
2223
2425
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400.00
450.00
Jul 13 Oct 13 Jan 14 Apr 14 Jul 14 Oct 14 Jan 15 Apr 15 Jul 15 Oct 15 Jan 16 Apr 16
Secu
rity
Pri
ce
Date
Previous Recommendations
Strong Buy Buy Market Perform Underperform Not Rated Suspended Rating
Current Recommendations
Buy Hold Sell Not Rated Suspended Rating
*New Recommendation Structure as of September 9,2002
**Analyst is no longer at Deutsche Bank
1. 25/09/2013: Hold, Target Price Change GBP145.00 Robert Clifford**
14. 16/12/2014: Buy, Target Price Change GBP310.00 Robert Clifford**
2. 30/10/2013: Hold, Target Price Change GBP190.00 Anna Mulholland, CFA
15. 16/02/2015: Buy, Target Price Change GBP290.00 Anna Mulholland, CFA
3. 14/01/2014: Hold, Target Price Change GBP180.00 Robert Clifford**
16. 31/03/2015: Downgrade to Hold, Target Price Change GBP260.00 Robert Clifford**
4. 21/01/2014: Hold, Target Price Change GBP190.00 Anna Mulholland, CFA
17. 30/06/2015: Hold, Target Price Change GBP280.00 Robert Clifford**
5. 12/02/2014: Hold, Target Price Change GBP240.00 Anna Mulholland, CFA
18. 29/09/2015: Hold, Target Price Change GBP240.00 Robert Clifford**
6. 01/04/2014: Hold, Target Price Change GBP310.00 Robert Clifford**
19. 06/10/2015: Hold, Target Price Change GBP200.00 Anna Mulholland, CFA
7. 09/04/2014: Upgrade to Buy, GBP310.00 Anna Mulholland, CFA 20. 16/12/2015: Upgrade to Buy, Target Price Change GBP250.00 Robert Clifford**
8. 24/04/2014: Buy, Target Price Change GBP300.00 Anna Mulholland, CFA
21. 21/01/2016: Buy, Target Price Change GBP280.00 Anna Mulholland, CFA
9. 27/07/2014: Buy, Target Price Change GBP280.00 Anna Mulholland, CFA
22. 15/02/2016: Buy, Target Price Change GBP290.00 Anna Mulholland, CFA
10. 03/09/2014: Downgrade to Hold, GBP280.00 Robert Clifford** 23. 23/02/2016: Buy, Target Price Change GBP300.00 Anna Mulholland, CFA
11. 16/09/2014: Hold, Target Price Change GBP270.00 Robert Clifford**
24. 04/03/2016: Buy, Target Price Change GBP350.00 Anna Mulholland, CFA
12. 30/09/2014: Hold, Target Price Change GBP280.00 Robert Clifford**
25. 22/03/2016: Buy, Target Price Change GBP340.00 Anna Mulholland, CFA
13. 08/12/2014: Upgrade to Buy, Target Price Change GBP290.00 Anna Mulholland, CFA
Historical recommendations and target price: Nordgold (NORDNq.L) (as of 6/27/2016)
28 June 2016
Gold
Gold and the UK-listed gold miners
Deutsche Bank AG/London Page 29
12
3
4
5
67 8 9
10 11121314
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0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
Jul 13 Oct 13 Jan 14 Apr 14 Jul 14 Oct 14 Jan 15 Apr 15 Jul 15 Oct 15 Jan 16 Apr 16
Secu
rity
Pri
ce
Date
Previous Recommendations
Strong Buy Buy Market Perform Underperform Not Rated Suspended Rating
Current Recommendations
Buy Hold Sell Not Rated Suspended Rating
*New Recommendation Structure as of September 9,2002
**Analyst is no longer at Deutsche Bank
1. 05/09/2014: Downgrade to Hold, Target Price Change USD1.70 8. 18/05/2015: Hold, Target Price Change USD3.90
2. 30/09/2014: Hold, Target Price Change USD1.80 9. 22/07/2015: Hold, Target Price Change USD3.80
3. 22/10/2014: Hold, Target Price Change USD1.40 10. 22/10/2015: Hold, Target Price Change USD3.40
4. 16/12/2014: Hold, Target Price Change USD1.70 11. 16/12/2015: Hold, Target Price Change USD2.70
5. 25/02/2015: Hold, Target Price Change USD2.50 12. 04/03/2016: Upgrade to Buy, Target Price Change USD3.50
6. 22/04/2015: Hold, Target Price Change USD2.60 13. 22/03/2016: Buy, Target Price Change USD3.70
7. 28/04/2015: Hold, Target Price Change USD3.60 14. 18/04/2016: Buy, Target Price Change USD3.90
Historical recommendations and target price: Polymetal (POLYP.L) (as of 6/27/2016)
12
3
4 5
67
89
101112
1314 1516 17
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202122
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24252627
28
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700.00
800.00
900.00
1,000.00
Jul 13 Oct 13 Jan 14 Apr 14 Jul 14 Oct 14 Jan 15 Apr 15 Jul 15 Oct 15 Jan 16 Apr 16
Secu
rity
Pri
ce
Date
Previous Recommendations
Strong Buy Buy Market Perform Underperform Not Rated Suspended Rating
Current Recommendations
Buy Hold Sell Not Rated Suspended Rating
*New Recommendation Structure as of September 9,2002
**Analyst is no longer at Deutsche Bank
28 June 2016
Gold
Gold and the UK-listed gold miners
Page 30 Deutsche Bank AG/London
1. 23/08/2013: Downgrade to Hold, Target Price Change GBP820.00 Anna Mulholland, CFA
15. 29/01/2015: Hold, Target Price Change GBP730.00 Anna Mulholland, CFA
2. 28/08/2013: Hold, Target Price Change GBP800.00 Anna Mulholland, CFA
16. 31/03/2015: Hold, Target Price Change GBP520.00 Robert Clifford**
3. 25/09/2013: Hold, Target Price Change GBP730.00 Robert Clifford**
17. 21/05/2015: Hold, Target Price Change GBP530.00 Anna Mulholland, CFA
4. 17/10/2013: Hold, Target Price Change GBP690.00 Anna Mulholland, CFA
18. 30/06/2015: Hold, Target Price Change GBP520.00 Robert Clifford**
5. 14/01/2014: Hold, Target Price Change GBP500.00 Robert Clifford**
19. 14/07/2015: Hold, Target Price Change GBP510.00 Anna Mulholland, CFA
6. 09/04/2014: Hold, Target Price Change GBP520.00 Anna Mulholland, CFA
20. 20/10/2015: Hold, Target Price Change GBP500.00 Anna Mulholland, CFA
7. 22/04/2014: Hold, Target Price Change GBP530.00 Anna Mulholland, CFA
21. 17/11/2015: Hold, Target Price Change GBP540.00 Anna Mulholland, CFA
8. 22/05/2014: Hold, Target Price Change GBP500.00 Anna Mulholland, CFA
22. 16/12/2015: Hold, Target Price Change GBP460.00 Robert Clifford**
9. 02/07/2014: Hold, Target Price Change GBP505.00 Robert Clifford**
23. 21/01/2016: Hold, Target Price Change GBP430.00 Anna Mulholland, CFA
10. 27/08/2014: Hold, Target Price Change GBP555.00 Anna Mulholland, CFA
24. 04/03/2016: Hold, Target Price Change GBP550.00 Anna Mulholland, CFA
11. 16/09/2014: Hold, Target Price Change GBP530.00 Robert Clifford**
25. 22/03/2016: Hold, Target Price Change GBP560.00 Anna Mulholland, CFA
12. 30/09/2014: Hold, Target Price Change GBP550.00 Robert Clifford**
26. 29/03/2016: Hold, Target Price Change GBP520.00 Anna Mulholland, CFA
13. 08/12/2014: Hold, Target Price Change GBP540.00 Anna Mulholland, CFA
27. 15/04/2016: Hold, Target Price Change GBP550.00 Anna Mulholland, CFA
14. 16/12/2014: Hold, Target Price Change GBP720.00 Robert Clifford**
28. 19/05/2016: Hold, Target Price Change GBP610.00 Anna Mulholland, CFA
Historical recommendations and target price: Randgold (RRS.L) (as of 6/27/2016)
12 3
4
5 6
789 1011
1213
14 15
16 17
1819
20
21
22
0.00
1,000.00
2,000.00
3,000.00
4,000.00
5,000.00
6,000.00
7,000.00
8,000.00
9,000.00
Jul 13 Oct 13 Jan 14 Apr 14 Jul 14 Oct 14 Jan 15 Apr 15 Jul 15 Oct 15 Jan 16 Apr 16
Secu
rity
Pri
ce
Date
Previous Recommendations
Strong Buy Buy Market Perform Underperform Not Rated Suspended Rating
Current Recommendations
Buy Hold Sell Not Rated Suspended Rating
*New Recommendation Structure as of September 9,2002
**Analyst is no longer at Deutsche Bank
28 June 2016
Gold
Gold and the UK-listed gold miners
Deutsche Bank AG/London Page 31
1. 08/08/2013: Buy, Target Price Change GBP4,840.00 Anna Mulholland, CFA
12. 26/01/2015: Buy, Target Price Change GBP5,800.00 Anna Mulholland, CFA
2. 25/09/2013: Buy, Target Price Change GBP5,050.00 Robert Clifford**
13. 09/02/2015: Downgrade to Hold, Target Price Change GBP5,600.00 Anna Mulholland, CFA
3. 07/11/2013: Buy, Target Price Change GBP5,200.00 Anna Mulholland, CFA
14. 31/03/2015: Hold, Target Price Change GBP5,300.00 Robert Clifford**
4. 14/01/2014: Buy, Target Price Change GBP4,500.00 Robert Clifford**
15. 07/05/2015: Hold, Target Price Change GBP4,800.00 Anna Mulholland, CFA
5. 01/04/2014: Buy, Target Price Change GBP4,990.00 Robert Clifford**
16. 30/06/2015: Hold, Target Price Change GBP4,640.00 Robert Clifford**
6. 09/05/2014: Buy, Target Price Change GBP5,000.00 Anna Mulholland, CFA
17. 20/10/2015: Upgrade to Buy, Target Price Change GBP5,050.00 Anna Mulholland, CFA
7. 03/09/2014: Downgrade to Hold, GBP5,000.00 Robert Clifford** 18. 16/12/2015: Buy, Target Price Change GBP4,600.00 Robert Clifford**
8. 16/09/2014: Hold, Target Price Change GBP4,640.00 Robert Clifford**
19. 21/12/2015: Buy, Target Price Change GBP4,400.00 Anna Mulholland, CFA
9. 30/09/2014: Hold, Target Price Change GBP4,690.00 Robert Clifford**
20. 08/02/2016: Downgrade to Hold, Target Price Change GBP5,000.00 Anna Mulholland, CFA
10. 08/12/2014: Upgrade to Buy, Target Price Change GBP5,180.00 Anna Mulholland, CFA
21. 04/03/2016: Hold, Target Price Change GBP5,630.00 Anna Mulholland, CFA
11. 16/12/2014: Buy, Target Price Change GBP5,165.00 Robert Clifford**
22. 04/05/2016: Hold, Target Price Change GBP5,560.00 Anna Mulholland, CFA
Historical recommendations and target price: Fresnillo (FRES.L) (as of 6/27/2016)
1 23
4
5
678 9
10
11
12
13 141516 17
18 19
2021
0.00
200.00
400.00
600.00
800.00
1,000.00
1,200.00
1,400.00
1,600.00
Jul 13 Oct 13 Jan 14 Apr 14 Jul 14 Oct 14 Jan 15 Apr 15 Jul 15 Oct 15 Jan 16 Apr 16
Secu
rity
Pri
ce
Date
Previous Recommendations
Strong Buy Buy Market Perform Underperform Not Rated Suspended Rating
Current Recommendations
Buy Hold Sell Not Rated Suspended Rating
*New Recommendation Structure as of September 9,2002
**Analyst is no longer at Deutsche Bank
28 June 2016
Gold
Gold and the UK-listed gold miners
Page 32 Deutsche Bank AG/London
1. 17/07/2013: Hold, Target Price Change GBP977.00 Anna Mulholland, CFA
12. 04/03/2015: Hold, Target Price Change GBP855.00 Anna Mulholland, CFA
2. 06/08/2013: Hold, Target Price Change GBP970.00 Anna Mulholland, CFA
13. 31/03/2015: Hold, Target Price Change GBP780.00 Robert Clifford**
3. 25/09/2013: Hold, Target Price Change GBP1,000.00 Robert Clifford**
14. 30/06/2015: Hold, Target Price Change GBP815.00 Robert Clifford**
4. 14/01/2014: Hold, Target Price Change GBP825.00 Robert Clifford**
15. 22/07/2015: Hold, Target Price Change GBP750.00 Anna Mulholland, CFA
5. 04/03/2014: Hold, Target Price Change GBP840.00 Anna Mulholland, CFA
16. 04/08/2015: Hold, Target Price Change GBP715.00 Anna Mulholland, CFA
6. 01/04/2014: Hold, Target Price Change GBP860.00 Robert Clifford**
17. 29/09/2015: Hold, Target Price Change GBP705.00 Robert Clifford**
7. 02/07/2014: Hold, Target Price Change GBP870.00 Robert Clifford**
18. 16/12/2015: Hold, Target Price Change GBP570.00 Robert Clifford**
8. 16/07/2014: Hold, Target Price Change GBP890.00 Anna Mulholland, CFA
19. 20/01/2016: Hold, Target Price Change GBP560.00 Anna Mulholland, CFA
9. 05/08/2014: Hold, Target Price Change GBP860.00 Anna Mulholland, CFA
20. 04/03/2016: Downgrade to Sell, Target Price Change GBP750.00 Anna Mulholland, CFA
10. 16/09/2014: Hold, Target Price Change GBP800.00 Robert Clifford**
21. 22/03/2016: Sell, Target Price Change GBP790.00 Anna Mulholland, CFA
11. 28/01/2015: Hold, Target Price Change GBP865.00 Anna Mulholland, CFA
Equity rating key Equity rating dispersion and banking relationships
Buy: Based on a current 12- month view of total share-holder return (TSR = percentage change in share price from current price to projected target price plus pro-jected dividend yield ) , we recommend that investors buy the stock.
Sell: Based on a current 12-month view of total share-holder return, we recommend that investors sell the stock
Hold: We take a neutral view on the stock 12-months out and, based on this time horizon, do not recommend either a Buy or Sell.
Newly issued research recommendations and target prices supersede previously published research.
40 %
54 %
6 %
50 % 38 %
31 %
0
50
100
150
200
250
300
350
Buy Hold Sell
European Universe
Companies Covered Cos. w/ Banking Relationship
Regulatory Disclosures
1.Important Additional Conflict Disclosures
Aside from within this report, important conflict disclosures can also be found at https://gm.db.com/equities under the
"Disclosures Lookup" and "Legal" tabs. Investors are strongly encouraged to review this information before investing.
2.Short-Term Trade Ideas
Deutsche Bank equity research analysts sometimes have shorter-term trade ideas (known as SOLAR ideas) that are
consistent or inconsistent with Deutsche Bank's existing longer term ratings. These trade ideas can be found at the
SOLAR link at http://gm.db.com.
28 June 2016
Gold
Gold and the UK-listed gold miners
Deutsche Bank AG/London Page 33
Additional Information
The information and opinions in this report were prepared by Deutsche Bank AG or one of its affiliates (collectively
"Deutsche Bank"). Though the information herein is believed to be reliable and has been obtained from public sources
believed to be reliable, Deutsche Bank makes no representation as to its accuracy or completeness.
If you use the services of Deutsche Bank in connection with a purchase or sale of a security that is discussed in this
report, or is included or discussed in another communication (oral or written) from a Deutsche Bank analyst, Deutsche
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28 June 2016
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Gold and the UK-listed gold miners
Page 34 Deutsche Bank AG/London
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28 June 2016
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Gold and the UK-listed gold miners
Deutsche Bank AG/London Page 35
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