Precious Metal Opportunity

Incredible Opportunity…

• Precious metal stocks represent one of the best opportunities in the market today.• The opportunity is potentially more attractive than the bull

market of 2001-2008.• There are very few—if any—other ways for investors to

protect their wealth from numerous negative long-term fundamentals in traditional assets and sectors.

Outlook For PMs Has Never Been Better…• The Federal Reserve has no intention of reversing interest

rate policy soon.• Even if we have higher rates, will likely be matched with

higher inflation, hence “real rates” will remain very low.• Policies have stoked an epic stock market bubble and epic

precious metals bear market, both of which are unsustainable.• Poor future returns for stocks—based on valuation—means

reversion and poor returns from bonds due to rising rates. This could very well mean losses in a balanced portfolio.• Gold and other precious metals have historically acted as a

store of wealth during such times.

Leading Strategists Don’t Like Financial Assets…• GMO’s Jeremy Grantham is one of the top-ranked

forecasters of the past 15 years. Here is his outlook for a “balanced” portfolio…

Gold Should See Much Higher Highs…• The Dow-to-Gold ratio is currently over 13-times, while the historical average is about

8-times.

• Most recent lows in Summer 2011 were under 6-times.

• Dow and Gold prices have converged at major crisis points in history.

• Given current government policy, valuations, etc., there is no reason convergence can’t happen.

Why Precious Metal Miners?

• At the end of Q2 in 2014, precious metal miners traded at valuations that haven’t been seen since the bursting of the technology bubble and subsequent bull market in miners.• PMs trade in the bottom quartile of absolute and

comparative valuation against the general market using last 18 years of data. No other sector is this cheap.• Gold mining index trades near bottom decile of valuation

versus gold.• In order of attractiveness:

(least) U.S. Stocks Bonds Gold Gold Mining (most)

Miners Cheap on a Number of Metrics• Assuming no appreciation in gold, a move to 50th percentile valuation versus

S&P 500 implies an 80% upside. This will happen as weak miners close down operations and costs are realigned.

• Move to 50th percentile ratio versus gold implies a 100% upside.

• If gold appreciates, return possibilities become exponential (please see next slide).

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Unompelling Value

Junior Miners: “Call Options” At These Levels

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Jr vs Sr Miners Price Ratio

Jr vs Sr Median Jr Miner Index

Explosive Possibilities Based on History

Case Dow (Index Level)

Gold ($)Gold / HUI

Index valuation

HUI Index Gain

Dow Bear Case 6,000 3,000 50th percentile ~400%

Dow Base Case 12,000 6,000 50th percentile ~800%

Dow Bull Case 17,000 8,500 50th percentile ~1,200%• Current valuations are on par with Summer 2001, prior to a 8-times move in the HUI

Index over six to seven years.• Gold “only” moved about 200% during that time.• Gold could move as much or more in a much shorter period of time given that in

2001…• You could make over 7% per year holding an investment grade bond. Today, it’s

under 3%.• You could earn over 5% per year for your money in the bank. Today, it’s pretty

much 0%.• Real Estate prices had languished relative to the other forms of investment since

the early 1990’s bust. Today, the Fed has induced “Real Estate Bubble 2.0,” especially in major cities.

Ten “Best in Class” Miners to Profit From an Incredible Opportunity…

Name Ticker Fundamental Technical

    Profitability Dividend Debt Liquidity Chart

Randgold GOLD Strong Yes Very Low Very Good Strong

Semafo SMF.TO Strong No (Suspended) Nil Good Strong

Primero Mining PPP Moderate No Moderate Very Good Strong

Agnico Eagle Mines AEM Strong Yes Moderate Excellent Strong

Eldorado Gold EGO Strong Yes Moderate Excellent Average

McEwen Mining MUX Moderate No Nil Very Good Average

Franco Nevada FNV Strong Yes Nil Excellent Strong

AngloGold Ashanti AU Moderate No (Suspended) High Excellent Average

IAM Gold IAG Low No (Suspended) High Good Poor

Detour Gold DGC.TO Moderate No High Good Average