gold and the uk-listed gold miners -...

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

[email protected]

Grant Sporre

Research Analyst

(+44) 20 754-58170

[email protected]

Franck Nganou

Research Associate

(+44) 20 754-18161

[email protected]

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


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



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



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


28 June 2016

Gold



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


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



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



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



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)


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


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



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, %)


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, %)


Current: 5.22%2007-2013 average: 5.33%


28 June 2016

Gold



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


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



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




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




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



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



28 June 2016

Gold



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)


+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



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



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




Running the numbers

Europe

United Kingdom

Gold

Fresnillo Reuters: FRES.L Bloomberg: FRES LN

Sell Price (27 Jun 16) GBP 1,483.00


52 Week range GBP 588.00 - 1,483.00


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


Fresnillo FTSE 100 INDEX (Rebased)

Margin Trends

10

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02468101214

-30

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-10

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10

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Solvency

0

10

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30

40

50

60

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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




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


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


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


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)


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



Cash and other liquid assets 1,252 154 381 372 574 867




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


Total liabilities 1,412 1,440 1,483 1,479 1,474 1,477


Minorities 399 27 30 30 30 30


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


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


28 June 2016

Gold



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%


28 June 2016

Gold



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




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


Nordgold Russian RTS Index (Rebased)

Margin Trends

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-20

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-5

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Solvency

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13 14 15 16E 17E 18E





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


Average market cap (USDm) 973 602 1,015 1,260 1,260 1,260


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


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


EBIT 168 308 324 213 268 362



Exceptionals/extraordinaries -386 -24 -15 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


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)


Net Capex -162 -115 -227 -365 -249 -219

Free cash flow 148 213 191 -37 225 287


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



Tangible fixed assets 816 669 668 808 808 808



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



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


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


28 June 2016

Gold



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%


28 June 2016

Gold



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




Running the numbers

Emerging Europe

Russia

Metals & Mining

Polymetal Reuters: POLYP.L Bloomberg: POLY LN

Hold Price (27 Jun 16) GBP 968.00


52 Week range GBP 427.10 - 968.00


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


Polymetal Russian RTS Index (Rebased)

Margin Trends

10

20

30

40

50

60

13 14 15 16E 17E 18E



-20

0

20

40

60

80

-20-15-10-505

1015

13 14 15 16E 17E 18E


Solvency

0

5

10

15

20

0

50

100

150

200

250

300

13 14 15 16E 17E 18E





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




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


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


EBIT 287 432 506 467 531 682


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




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)


Net Capex -319 -210 -205 -321 -323 -213

Free cash flow 142 305 285 230 667 391


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






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



Shareholders' equity 1,787 869 487 583 1,047 1,379


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


Net debt/equity (%) 58.5 134.0 266.7 162.2 54.0 25.8



28 June 2016

Gold



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%


28 June 2016

Gold



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




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


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


Randgold FTSE 100 INDEX (Rebased)

Margin Trends

10

20

30

40

50

13 14 15 16E 17E 18E



0

2

4

6

8

10

12

-15-10-505

101520

13 14 15 16E 17E 18E


Solvency

0

20

40

60

80

-20

-15

-10

-5

0

13 14 15 16E 17E 18E





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




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


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


EBIT 355 279 188 192 323 386



Exceptionals/extraordinaries 0 0 0 0 0 0


Profit before tax 403 353 261 259 415 533


Minorities 47 36 24 33 54 70


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)


Net Capex -728 -222 -218 -213 -360 -285

Free cash flow -283 96 134 167 118 376


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







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


Total liabilities 319 230 245 256 245 250


Minorities 179 205 219 249 303 373


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


Net debt/equity (%) -1.2 -2.5 -6.2 -8.7 -8.9 -14.7



28 June 2016

Gold



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%


28 June 2016

Gold



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



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



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

1819

20 21

2223

2425

0.00

50.00

100.00

150.00

200.00

250.00

300.00

350.00

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


16. 31/03/2015: Downgrade to Hold, Target Price Change GBP260.00 Robert Clifford**







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**





10. 03/09/2014: Downgrade to Hold, GBP280.00 Robert Clifford** 23. 23/02/2016: Buy, Target Price Change GBP300.00 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



12

3

4

5

67 8 9

10 11121314

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00


Secu

rity

Pri

ce

Date







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



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

1819

202122

23

24252627

28

0.00

100.00

200.00

300.00

400.00

500.00

600.00

700.00

800.00

900.00

1,000.00


Secu

rity

Pri

ce

Date







28 June 2016

Gold



1. 23/08/2013: Downgrade to Hold, Target Price Change GBP820.00 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


Secu

rity

Pri

ce

Date







28 June 2016

Gold



1. 08/08/2013: Buy, Target Price Change GBP4,840.00 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


14. 31/03/2015: Hold, Target Price Change GBP5,300.00 Robert Clifford**


15. 07/05/2015: Hold, Target Price Change GBP4,800.00 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**




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




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


Secu

rity

Pri

ce

Date







28 June 2016

Gold




















20. 04/03/2016: Downgrade to Sell, Target Price Change GBP750.00 Anna Mulholland, CFA


21. 22/03/2016: Sell, Target Price Change GBP790.00 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



Additional Information

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28 June 2016

Gold



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28 June 2016

Gold



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Research

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