lcc copper gold report 20140317

17th March 2014 WWW.LCC.ASIA

IMPORTANT DISCLAIMER This report has been prepared by Lincoln Crowne & Company Pty. Limited ("LCC"). The research is based on information obtained from sources believed to be accurate and reliable. LCC does not guarantee the accuracy, reliability, completeness or suitability of any such information and makes no warranty, guarantee or representation, expressly or impliedly about this research. LCC accepts no ob ligation to correct or update the information. No opinion or recommendation is made within this research. This report is not intended to be, nor should it be relied on, as a substitute for professional advice. This report should not be relied upon as the sole basis for any investment decision or planning, and LCC does not accept any responsibility on this basis for actions made

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COPPER SUFFERING COLLATERAL DAMAGE Global Economic Fundamentals

Source: Capital IQ, COMEX, LCC, LME, SHFE, Thomson Reuters, WGC

Precious Metals Last Week r 4-Wk r YTD r Base Metals Last Week r 4-Wk r YTD r

Gold (A$/oz) 1,532 ▲ 3.9% ▲ 5% ▲ 14% Copper (A$/lb) 3.26 ▼ (5.8%) ▼ (10%) ▼ (13%)

Gold (US$/oz) 1,383 ▲ 3.3% ▲ 5% ▲ 15% Copper (US$/lb) 2.94 ▼ (6.4%) ▼ (10%) ▼ (12%)

Silver (US$/oz) 21.4 ▲ 2.3% ▼ (0%) ▲ 11% Copper (RMB/t) 44,380 ▼ (9.1%) ▼ (12%) ▼ (15%)

Platinum (US$/oz) 1,465 ▼ (1.3%) ▲ 2% ▲ 7% Cobalt (US$/lb) 14.06 ▼ (0.6%) ▼ (2%) ▲ 5%

Palladium (US$/oz) 769 ▼ (1.6%) ▲ 4% ▲ 7% Molybdenum (US$/lb) 10.43 ▼ (2.1%) ▲ 1% ▲ 7%

Iron Ore (US$/t) 111 ▼ (2.0%) ▼ (9%) ▼ (17%) Nickel (US$/lb) 7.17 ▲ 3.1% ▲ 11% ▲ 13%

Crude Oil (US$/barrel) 98 ▼ (3.0%) ▼ (2%) ▼ (0%) Lead (US$/lb) 0.92 ▼ (3.2%) ▼ (7%) ▼ (9%)

Gas H.Hub (US$/m btu) 4.37 ▼ (4.2%) ▼ (4%) ▲ 4% Zinc (US$/lb) 0.90 ▼ (4.9%) ▼ (4%) ▼ (5%)

Uranium (US$/lb) 35 ▼ (0.6%) ▼ (3%) ▲ 1% Tin (US$/lb) 10.48 ▼ (0.2%) ▲ 1% ▲ 2%

Currencies & Indices Last Week r 4-Wk r YTD r Global Markets Last Week r 4-Wk r YTD r

AUD/USD 0.903 ▼ (0.6%) ▲ 0% ▼ (1%) ASX 200 5,329 ▼ (2.4%) ▼ (1%) ▼ (0%)

RMB/USD 0.163 ▼ (0.4%) ▼ (1%) ▼ (0%) Dow Jones 16,066 ▼ (2.4%) ▼ (1%) ▼ (3%)

CAD/USD 0.901 ▼ (0.1%) ▼ (1%) ▼ (0%) S&P 500 Index 1,841 ▼ (2.2%) ▲ 0% ▼ (1%)

EUR/USD 1.391 ▲ 0.3% ▲ 2% ▲ 0% Shang Hai Index 2,004 ▼ (2.8%) ▼ (5%) ▼ (3%)

ASX Ordinary Gold 2,634 ▲ 0.2% ▲ 4% ▲ 2% Hang Seng Index 21,539 ▼ (2.6%) ▼ (3%) ▼ (5%)

TSX Global Gold 213 — 0.0% ▲ 6% ▲ 6% Nikkei 225 14,328 ▼ (6.2%) ▲ 0% ▼ (12%)

ASX 300 Metals & Mining 3,210 ▲ 1.8% ▼ (6%) ▼ (5%) FTSE 100 Index 6,528 ▼ (3.4%) ▼ (2%) ▼ (2%)

TSX Global Mining 75 ▲ 6.1% ▼ (3%) ▼ (1%) Euro STOXX 50 Index 3,005 ▼ (3.1%) ▼ (4%) ▼ (5%)

1,100

1,200

1,300

1,400

1,500

1,600

0

100

200

300

Dec Jan Feb Mar

Tho

usa

nd

s Gold PriceVolume

A$/oz

US$/oz

2.90

3.10

3.30

3.50

3.70

0

100

200

300

Dec Jan Feb Mar

Tho

usa

nd

s

LME Copper Price and Volume

Volume ('000 lot)Price (A$/lb)Price (US$/lb)

2.90

3.10

3.30

3.50

0

10

20

30

40

50

Dec Jan Feb Mar

COMEX Copper Price and Stocks

Stocks ('000 t)

Price (US$/lb)

44000

46000

48000

50000

52000

54000

0

50

100

150

200

250

300

Dec Jan Feb Mar

Tho

usa

nd

s SHFE Copper Price and Stocks

Stocks ('000 t)

Price (RMB/t)

44000

46000

48000

50000

52000

54000

0

25

50

Dec Jan Feb Mar

Tho

usa

nd

s

SHFE Copper Price and Volume

Volume ('000 lot)Price (RMB/t)

2.90

3.10

3.30

3.50

0

25

50

75

100

Dec Jan Feb Mar

COMEX Copper Price and Volume

Volume ('000 lot)

Price (US$/lb)1500

2000

2500

3000

Dec Jan Feb Mar

S&P/ASX All Ordinaries Gold Index(XGD)

3.00

3.20

3.40

3.60

3.80

4.00

0

100

200

300

400

500

600

Jan 13 Apr 13 Jul 13 Oct 13 Jan 14

China Copper Imports

Tonnes (kt)

Copper Price

2.90

3.10

3.30

3.50

3.70

0

100

200

300

400

Dec Jan Feb Mar

LME Copper Price and Stocks

Stocks (kt)

Price (A$/lb)

Price (US$/lb)

0

500

1000

1500

2000

600

800

1000

1200

1400

Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13

World Gold Demand and Supply

Total Demand (tonnes)

Total Supply (tonnes)

Gold Price (US$/oz, RHS)

Gold Demand

$2.92

$2.93

$2.94

$2.95

$2.96

$2.97

Cash 3 Months Dec 1 Dec 2 Dec 3

LME copper forward curve

Seller

Buyer



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Markets & Majors

On the back of bad economic news out of China – responsible for 42% of the world’s global copper consumption – the price of copper has plummeted more than 6% in USD and 9% in RMB over last week. Chinese overall exports slid a stunning 18% year on year and imports of copper fell 30% in February from the month before, but increased 26% year on year. The current slump has been exacerbated by distortions in the Chinese copper market, where the red metal is often used as collateral for loans. Last week a solar-cell producer became the first Chinese company in history to default on a corporate bond, sending shivers through the Chinese industry and sparking fears of a knock-on effect. The worsening credit situation in the country could see the copper market enter a vicious circle. Borrowers, forced by their bankers to repay loans will have to sell the metal into an already well-supplied market and in the process pushing down market prices even further. Shanghai Future Exchange copper inventories increased to 213,000 tonnes, while LME and COMEX inventories slumped further leading to another decrease in global inventories. Of note is the strong increase in volumes traded on both the LME (+65% w/w) and COMEX (+96% w/w). European manufacturers are seeing the most favourable conditions for buying copper with the copper price drop and the euro at a 2-½ year high against the US dollar. In parallel, Chinese funds have been building up bets against copper in a market edgy over the slowing Chinese demand and fears that credit upheaval could unwind financing deals. The scale of the sell-off shows that Chinese funds are gaining greater sway over global commodity markets.

Metal Bulletin quoted Jiangxi Copper Co Ltd Chairman and Party Secretary Baoming Li as saying that China's copper demand will grow in line with the country's growth target of 7.5% for the year.

Sydney Morning Herald - Rio Tinto subsidiary Bougainville Copper told shareholders that the visit by Papua New Guinean Prime Minister Peter O'Neill to Bougainville Island earlier this year prompted conciliatory sentiment toward production resuming at its Panguna copper project.

Coeur Mining plans to offer US$150 million of 7.875% senior notes due 2021. The notes form a further issuance of the company's US$300m outstanding principal amount of 7.875% senior notes, also due 2021, and when issued, will form a single series of debt securities with existing notes.

Peru's Mines and Energy Minister announced that copper production increased by 20% year on year in January to 111,855 t. The increase was reportedly due to higher production from the country's biggest mines Antamina and Cerro Verde. However, during said period, the country saw its gold production drop 6% to 11,089 kg because of lower output from Yanacocha. The Minister also indicated that five copper mines with an estimated investment of US$13 billion are expected to commence production before 2016, raising the country's output of to 2.8 million tonnes from 1.3 million tonnes in 2013.

Copper Explorers & Emerging Producers

Source: ASX, Capital IQ, LCC. A$/US$ exchange rate of 0.90

Copper Producers

Source: ASX, Capital IQ, LCC. Assumption: A$/US$ of 0.90

Mergers & Acquisitions

Mining Weekly - AngloGold Ashanti reiterated its dedication to both Australia and South Africa as destinations for investment, with its chairperson, Sipho Pityana, saying the company was looking to develop a well-balanced portfolio, by both divesting uneconomic assets and possibly acquiring others.

ABM Resources (ASX: ABU) secured a A$19.6 million strategic investment from Pacific Road Capital. On completion of the transaction, Pacific Road Capital will hold 19.9% of shares on issue.

Blackham Resources (ASX: BLK) expects the completion of the acquisition of the Wiluna plant and infrastructure this week as all conditions precedent are now satisfied. The acquisition significantly reduces the timeline and capital cost for developing the Mathilda gold project.

MMG’s management has not confirmed that it remains the only remaning bidder for the Las Bambas copper project in Peru, despite Glencore Xstrata’s management announcing it.

Code Company NameClose

PriceWeek r YTD r

Market

Cap (A$m)

52 Week

Range

Cash

(A$m)

EV

(A$m)

AVI Avalon Minerals 0.008 — 0% (20% ) 10 2.7 7

AZS Azure Minerals 0.033 ▼ (6% ) 10% 24 2.3 21

BMB Balamara Resources 0.12 ▼ (12% ) 21% 38 1.2 37

BTR Blackthorn Resources 0.16 — 0% (38% ) 26 16.3 10

BOC Bougainville Copper 0.57 ▲ 12% 20% 229 6.2 222

ERM Emmerson Resources 0.038 ▲ 6% (10% ) 10.0 1.2 9

ENR Encounter Resources 0.25 ▲ 11% 32% 33 3.9 29

ESR Estrella Resources 0.12 — 0% (31% ) 12 2.0 10

GCR Golden Cross Resources 0.005 ▼ (17% ) 0% 9 1.1 8

HAV Havilah Resources 0.24 ▲ 4% (4% ) 29 3.5 25

HCH Hot Chili 0.44 ▼ (3% ) 2% 151 8.2 143

HIG Highlands Pacific 0.073 — 0% 20% 62 9.6 53

IRN Indophil Resources 0.19 — 0% 12% 223 215.1 7

KGL KGL Resources 0.110 — 0% 5% 15 7.8 8

KDR Kidman Resources 0.140 ▼ (3% ) (24% ) 18 3.7 14

MMC Marengo Mining 0.015 ▼ (6% ) 0% 17 4.5 40

MNC Metminco 0.027 ▼ (21% ) (13% ) 47 7.8 39

PEX Peel Mining 0.25 ▼ (9% ) (4% ) 33 3.8 29

RDM Red Metal 0.18 ▲ 3% 20% 26 1.1 25

RXM Rex Minerals 0.39 ▼ (8% ) (20% ) 84 20.9 63

SBR Sabre Resources 0.043 ▲ 8% 0% 10 4.1 6

SUH Southern Hemisphere 0.050 ▲ 11% 0% 10 0.5 9

TLM Talisman Mining 0.11 ▼ (9% ) 0% 14 17.3 (4)

VXR Venturex Resources 0.010 ▲ 25% 0% 15 3.4 12

YTC YTC Resources 0.25 — 0% 9% 82 25.8 121

AVB Avanco Resources 0.066 ▼ (4% ) (7% ) 89 16.6 73

CDU Cudeco 1.56 ▼ (12% ) (14% ) 364 47.4 317

FND Finders Resources 0.17 ▼ (8% ) (21% ) 91 12.9 78


PriceWeek r YTD r

Market

Cap (A$m)

52 Week

Range

Cash

(A$m)EV (A$m)

EV/

EBITDA

ABY Aditya Birla Minerals 0.32 ▼ (3% ) (7% ) 99 118 (19) NM

AOH Altona Mining 0.16 ▼ (6% ) (6% ) 82 20 73 5.5x

DML Discovery Metals 0.030 ▼ (17% ) (43% ) 17 13 175 NM

HGO Hillgrove Resources 0.088 ▼ (2% ) (2% ) 104 17 132 3.8x

OZL OZ Minerals 3.45 ▼ (12% ) 10% 1,047 364 683 3.9x

PNA PanAust 1.60 ▼ (12% ) (12% ) 974 145 1,009 4.1x

SFR Sandfire Resources 5.58 ▼ (10% ) (14% ) 868 75 1,023 8.1x

SRQ Straits Resources 0.005 — 0% (38% ) 6 12 116 NM

TGS Tiger Resources 0.39 ▼ (10% ) 12% 309 42 323 6.1x



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Gold Explorers & Emerging Producers


ASX-Listed Company News

Altona Mining (ASX: AOH) completed a cost review for its Little Eva copper project, which forms part of the Roseby copper gold project in Queensland, resulting in a decrease in costs and an increase in the NPV for the project. The study reduced the capital expenditure estimates by 8% to A$294 million, while increasing the project's pretax NPV by 37% to A$346 million at a 7.5% discount rate. C1 costs are estimated at US$1.65/lb Cu. The internal rate of return for Little Eva also increased from 22% to 29%, with a three-year payback period.

Augur Resources (ASX: AUK) completed a scoping study for the Randu Kuning deposit in Central Java, Indonesia. The capital expenditure is estimated at US$56 million (excluding contingencies). Life of mine production of 283,000 oz of gold and 236,000 tonnes of copper is expected over nine years at C1 costs of US$786/oz Au equivalent. The total Randu Kuning mineral resource is estimated at 91 mt @ 0.3 g/t gold and 0.1% copper.

Besra Gold (ASX: BEZ) has updated the feasibility study for Stage 1 of its Bau gold project in Malaysia. The initial capital required is estimated at US$92 million. All-in costs were lowered 12% to US$973/oz and all-in sustaining costs lowered 11% to US$1,030/oz. The NPV8% derived amounts to US$91 million, with an IRR of 38%.

Gold Producers



PriceWeek r YTD r

Market Cap

(A$m)

52 Week

Range

Cash

(A$m)

EV

(A$m)

ABU ABM Resources 0.025 ▼ (7% ) 14% 82 5.1 77

ALK Alkane Resources 0.35 ▼ (3% ) 1% 129 43.3 85

AUK Augur Resources 0.050 ▼ (4% ) (33% ) 13 2.2 11

AZM Azumah Resources 0.058 ▼ (2% ) 107% 21 3.3 17

BSR Bassari Resources 0.008 ▼ (20% ) 0% 8 0.2 7

BAB Bullabulling Gold 0.055 ▼ (4% ) 22% 19 4.3 15

CHN Chalice Gold 0.16 — 0% 15% 46 55.1 (9)

CHZ Chesser Resources 0.13 ▲ 4% 19% 27 4.6 23

CDG Cleveland Mining 0.11 — 0% 5% 25 0.6 25

CVG Convergent Minerals 0.013 — 0% (19% ) 5 0.7 4

CAS Crusader Resources 0.29 ▼ (2% ) (5% ) 36 2.2 39

DCN Dacian Gold 0.37 ▼ (14% ) 54% 36 13.2 22

EXG Excelsior Gold 0.090 ▼ (2% ) 30% 37 4.3 31

FMl Focus Minerals 0.02 — 0% 33% 146 81.2 72

GCY Gascoyne Resources 0.14 ▼ (15% ) 0% 22 1.2 21

GOR Gold Road Resources 0.19 — 0% 87% 84 7.1 77

GRY Gryphon Minerals 0.18 ▼ (3% ) 3% 70 41.7 28

IDC Indochine Mining 0.068 ▲ 1% 58% 71 0.5 71

IAU Intrepid Mines 0.29 ▲ 10% (10% ) 159 98.2 60

KGD Kula Gold 0.10 ▲ 6% (5% ) 13 3.2 9

MSR Manas Resources 0.045 ▲ 5% 41% 19 5.6 13

MYG Mutiny Gold 0.030 ▼ (3% ) (6% ) 18 1.7 23

OBS Orbis Gold 0.32 ▼ (3% ) 28% 80 5.5 75

ORD Ord Resources 0.00 ▼ (33% ) (20% ) 5 1.5 3

PAN Panoramic Resources 0.41 — 0% 64% 132 34.0 98

PIR Papillon Resources 1.44 — 0% 47% 491 43.6 447

PXG Phoenix Gold 0.15 ▼ (6% ) (9% ) 35 4.6 30

RED Red 5 0.09 ▼ (13% ) (1% ) 66 36.7 29

RNI Resource & Investment 0.099 ▼ (6% ) 87% 30 3.0 42

ROL Robust Resources 0.28 ▼ (2% ) (21% ) 28 2.5 32

SIH Sihayo Gold 0.029 ▼ (3% ) (3% ) 27 0.5 27

SXG Southern Cross Goldfields 0.017 ▲ 6% 31% 15 5.1 17

SUM Sumatra Copper & Gold 0.09 ▲ 15% 31% 38 4.0 37

TAM Tanami Gold 0.03 ▲ 7% 45% 38 8.8 44

WAF West African Resources 0.16 ▼ (18% ) 14% 40 1.3 38

YTC YTC Resources 0.25 — 0% 9% 82 25.8 121


PriceWeek r YTD r

Market

Cap (A$m)

52 Week

Range

Cash

(A$m)EV (A$m)

EV/

EBITDA

AQG Alacer Gold 3.52 ▲ 11% 55% 1,048 322 726 2.7x

AGD Austral Gold 0.09 ▲ 6% (25% ) 15 9 67 3.5x

BDR Beadell Resources 0.76 ▼ (1% ) (4% ) 601 24 646 64.2x

BEZ Besra Gold 0.027 — 0% (40% ) 13 1 38 NM

CRK Crocodile Gold Corp 0.33 ▲ 27% 175% 157 28 135 0.6x

DRM Doray Minerals 1.00 ▼ (2% ) 79% 163 24 189 6.1x

DRA Dragon Mining 0.20 ▲ 3% 50% 17 6 11 2.5x

EVN Evolution Mining 0.97 ▼ (1% ) 58% 687 37 792 4.7x

EVR Endeavour Mining Corp 1.00 ▲ 14% 106% 401 119 582 NM

IGO Independence Group 4.00 ▼ (8% ) 29% 933 46 951 11.3x

KCN Kingsgate Consolidated 1.24 ▼ (3% ) 33% 203 37 342 4.2x

KRM Kingsrose Mining 0.43 ▲ 21% 28% 154 1 153 NM

LSA Lachlan Star 0.29 ▲ 4% 45% 43 3 44 NM

MML Medusa Mining 2.44 ▲ 4% 20% 507 23 484 9.3x

MLX Metals X 0.24 ▲ 4% 41% 397 50 347 16.5x

MOY Millennium Minerals 0.14 ▲ 4% (29% ) 29 5 63 2.2x

MLI Mintails 0.054 — 0% (4% ) 15 4 10 NM

NCM Newcrest Mining 12.10 ▲ 1% 55% 9,268 121 13,785 13.0x

NGF Norton Gold Fields 0.13 ▼ (7% ) (7% ) 116 41 190 2.6x

NST Northern Star Resources 1.23 ▼ (2% ) 56% 709 49 659 11.6x

OGC OceanaGold Corporation 2.80 ▲ 2% 76% 883 28 1,049 4.3x

PNA PanAust 1.60 ▼ (12% ) (12% ) 974 145 1,009 4.1x

PGI PanTerra Gold 0.046 ▲ 5% 12% 36 5 80 NM

PRU Perseus Mining 0.49 ▲ 11% 98% 255 28 227 21.0x

RMS Ramelius Resources 0.14 ▼ (4% ) 39% 49 33 20 1.6x

RRL Regis Resources 2.56 ▲ 10% (12% ) 1,279 13 1,276 5.3x

RSG Resolute Mining 0.70 ▲ 4% 26% 449 50 493 3.8x

SAR Saracen Mineral Holdings 0.37 ▲ 6% 100% 278 23 277 3.4x

SBM St Barbara 0.40 ▲ 13% 52% 193 70 453 NM

SLR Silver Lake Resources 0.46 ▼ (12% ) (14% ) 231 17 222 NM

TBR Tribune Resources 3.18 ▲ 4% 36% 160 9 170 2.8x

TGZ Teranga Gold Corp 1.07 ▼ (2% ) 94% 329 39 357 NM

TRY Troy Resources 1.32 ▲ 3% 68% 252 18 264 9.2x

UML Unity Mining 0.032 ▼ (3% ) (22% ) 22 10 13 1.8x

VGO Vantage Goldfields 0.028 ▼ (3% ) 8% 7 1 6 2.4x

ANG AngloGold Ashanti 209.00 ▲ 6% 70% 8,683 725 12,185 6.9x

ABX Barrick Gold Corp 23.19 ▲ 5% 24% 26,965 2,688 40,908 6.7x

GFI Goldfields 45.65 ▲ 13% 39% 3,626 358 5,684 5.9x

NEM Newmont Mining Corp 26.18 ▲ 6% 14% 14,442 1,739 23,338 6.6x



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Australian Gold Producers Cost Curve as at 31 December 2013

lcc copper gold report 20140317

Economy & Finance