Deep Value Israel Partnership

Newmont Mining (NEM)

Going for the gold

Guy ShahamDVIP Capital, LP

4 Steimatsky St. Tel AvivTel: +972-3-6037484

guy@deepvaluefund.com

This presentation is not an offering for any investment. It represents only the opinions of Guy Shaham of DVIP, LP. Any views expressed are provided for information

purposes only and should not be construed in any way as an offer, an endorsement, or inducement to invest. This presentations does not constitute an offer for or advice

about any investment product. Past performance is not indicative of future performance. Nothing contained herein constitutes a representation, nor a

solicitation for the purchase or sale of commodities or securities and therefore no information, nor opinions expressed, shall be construed as a solicitation to buy or sell any commodities or securities mentioned herein. Investors are advised to obtain the

advice of a qualified financial, legal and investment advisor before entering any financial transaction.

The Fundamentals• The value of Newmont Mining is based on the

difference between the cost of Production and the market price for gold

• The demand for gold is twice the mine supply

• Historically mining stocks have returned 1.5-3 the rise in the price of gold itself

• This means that if the gold price doubles then the mining shares will return 3X-6X

Supply and Demand in 2013

• Demand – at least 4350 of net imports to the East (=countries outside US/Europe, mainly Asia)

• Mine supply of 2188 tons available to meet net imports = 2866 global output – 431 tons from China – 247 tons from Russia that are not exported

• Other supply – 930 tons – from the ETFs – only 1800 tons left in ETFs

Supply and Demand in 2013

Demand Mine Supply ETF Supply Other Supply0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

Supply and Demand in 2013, in tons

Chinese Gold Demand

Source: Koos Jansen - In Gold We Trust - http://www.ingoldwetrust.ch/chinese-gold-demand-418-mt-ytd-west-in-deny

Demand in 2013 • Greater China (China +Hong Kong) is taking

the entire mine supply. The rest of the East net imports another 2000 tons.

• Greater China went from buying 25% of the global mine supply in 2010 to buying 100% in 2013

• In the East buying gold is part of the culture – they see gold as a better form of money and savings than national currencies

Supply in 2013• The available supply from inventories in the West

(US/Europe) is very tight and rapidly dwindling

• Germany asked the US Federal Reserve for 300 tons back of the 1500 tons stored with the Fed in NY, were told will take 8 years and even then got only 5 tons of recast bars back.

• ABN Amro and Rabobank in Holland defaulted on gold savings accounts and halted withdrawal in physical, allowing only cash (Euro) withdrawals

Supply in 2013• Every known supply that we have data on in

the West has been decreasing rapidly• The GLD ETF decreased from 1330 tons at the

beginning of 2013 to 790 at the end• COMEX Registered stocks decreased from 100

tons to 15 tons during the year• The United Kingdom net exported 1425 tons• Some mines have shut down due to their costs

being higher than the market price

What is the Fair Price of gold?

The formula above was used to determine the price of gold in the 1944 Bretton Woods that set up the Post World War II Monetary System

According to the above formula the price of gold should be above $12,000

Source: James Turk, www.goldmoney.com

Gold Money Index1960 - 2013 (yearly)

60 65 70 75 80 85 90 95 00 05 10 15$10

$30

$100

$300

$1,000

$3,000

$10,000

Actual Price

Fair Price

Log Scale

Source: James Turk, www.goldmoney.com

Why is the Fair Price rising?

• True Money Supply (=Bank Checking and Savings Accounts) has risen in the USA from $2.5 to $10.5 Trillion in last 13 years

• The growth in money supply is greater than 10% a year and is accelerating

• The amount of above-ground gold is growing at 1.8% annualy

• To keep the same ratio between money supply and gold, the price of gold has to rise 8% a year

US True Money Supply Until 2013

Source: Alisdair MacLeod, www.financeandeconomics.com

Bottom Line on the Price of Gold

• In the space of 3-5 years, the price of gold must rise rapidly due to:– The vacuuming of inventories in the West by the

East, leading to rivers of gold flowing from New York and London to China and the East. At some point the inventories will be depleted.

– The increasing money supply of national currencies ($, EUR, etc.) is 10% a year which raises the Fair Price of gold.

Who is investing in gold and miners?

• George Soros• Ray Dalio• Seth Klarman • Kyle Bass• Bill Gross • Tom Kaplan• David Einhorn • John Paulson• JP Morgan – went from being short 25% of COMEX to long 25%

of COMEX • Goldman Sachs – buying lots of GLD• Central Banks of many Creditor Nations – China, Russia, Korea, …

Why Newmont Mining? • Newmont has annual output of 5 Million oz.• All-in costs of $1300/oz.• At $2300/oz., gross profit is $1000• Net Profit after 30% taxes - $700/oz. - $3.5B • With P/E of 10 we get Market Cap of $35B• Current Market Cap of $12B• Profit of 200% in 3 years

Why Newmont Mining ?

Geographical diversification mainly in safe political jurisdictions

• 35% USA• 19% Peru• 31% Australia• 13% Ghana

• 88 Million ounces of reserves

Why Newmont Mining ?

• Debt/Equity Ratio 0.66• Price/Net Tangible Book Value Ratio 1.2• Share price was $72 in 2011 when price of gold

was $1920, now $25 with price of gold at $1300. Returning to that price will lead to 200% profit.

• 4% dividend yield

5 Year Revenue + IncomeYEAR SALES TOTAL NET INCOME

2013 8.32 Bil -2.46 Bil

2012 9.87 Bil 1.81 Bil

2011 10.36 Bil 0.36 Bil

2010 9.54 Bil 2.28 Bil

2009 7.71 Bil 1.30 Bil

YearCash Flow from Operations ($B)

2011 3.5

2012 2.4

2013 1.5

Bottom Line

• The price of gold must rise due to East insatiable thirst for gold and dwindling supplies in West. When Inventories are depleted, a much higher price will balance supply and demand

• Newmont is a large company with good leverage to price of gold

• The downside is limited – the mines are producing, safe jurisdictions, can weather a downward spike in gold price.

Thank you

Guy ShahamDVIP Capital, LP

4 Steimatsky St. Tel AvivTel: +972-3-6037484

guy@deepvaluefund.com