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Strictly Private and Confidential
October 18, 2013
Project “Duncan”Discussion Materials
This presentation was prepared exclusively for the benefit and internal use of the recipient for the purpose of considering thetransaction or transactions contemplated herein. This presentation is confidential and proprietary to RBC Capital Markets andmay not be disclosed, reproduced, distributed or used for any other purpose by the recipient without our express writtenconsent.
The information and any analyses contained in this presentation are taken from, or based upon, information obtained from therecipient or from publicly available sources, the completeness and accuracy of which has not been independently verified, andcannot be assured by RBC Capital Markets. The information and any analyses in these materials reflect prevailing conditionsand our views as of this date, all of which are subject to change.
To the extent projections and financial analyses are set forth herein, they may be based on estimated financial performanceprepared by or in consultation with the recipient and are intended only to suggest reasonable ranges of results. The printedpresentation is incomplete without reference to the oral presentation or other written materials that supplement it.
Any calculations or value ranges indicated herein (i) are preliminary and should not be construed as opinions of RBC CapitalMarkets or their individual members as to value, fair market value, or prices at which a transaction would be considered fairfrom a financial point of view, and (ii) have not been subject to the processes that we apply to fairness opinions and valuations,including our due diligence process and our internal opinion review process and, accordingly, must not be considered toconstitute a valuation, formal valuation, appraisal, professional opinion, or fairness opinion as contemplated under IIROC Rules29.14 to 29.25 or Multilateral Instrument 61-101 and must not be relied upon or disclosed as constituting such a document oropinion.
Employees of RBC Capital Markets are expressly prohibited from offering directly or indirectly a specific price target, or offeringor threatening to change research, a rating or a price target, to a company as inducement for the receipt of business orcompensation.
All figures are in CAD$ unless noted
Disclaimer
2
Table of Contents
I. Introduction
II. Market Update
III. Preliminary Financial Assessment
IV. Potential Interested Parties
V. Summary / Next Steps
Appendices
A. RBC as a Partner for Duncan
B. Supplemental Materials
3
Senior Coverage
Duncan’s RBC Coverage Team
Gordon BellHead, Mining & Metals(416) [email protected]
Metals & Mining Investment Banking
John BlanchetteVice President(416) [email protected]
Jason CovienskyAnalyst(416) [email protected]
RBC has assembled a highly experienced deal team for Duncan and will bring our global expertise, industry knowledge and full commitment to ensure optimal execution
Mergers & Acquisitions
Arjun TanejaDirector(416) [email protected]
Markus SturmAnalyst(416) [email protected]
Alan HibbenManaging Director(416) [email protected]
Equity Capital Markets
Ryan LatinovichDirector(416) [email protected]
Paolo CiotolaVice President(416) [email protected]
Global Contacts
Richard Horrocks-TaylorManaging [email protected]
Robert SennittManaging [email protected]
Ken WangHead, Natural Resources [email protected]
Gavin EzekowitzCo-President, GIB [email protected]
Financial Sponsors
Sonal DoshiDirector(416) [email protected]
“Duncan”
IntroductionSECTION I
5
Introduction
Market UpdateSECTION II
7
Given lack of direct information, exploration expenditure is used as a proxy to indicate potential future mine development
Mining Services Industry Trends
Global Economic Uncertainty
Investors focused on macro themes of economic growth in the Eurozone and China
Concerns over U.S. debt ceiling and potential global implications
Asset Optimization
Seniors and majors are selling non core assets and reassessing exploration/expansion programs
Key Themes / Trends Global Exploration Budgets(1)
Hardrock Underground Mines in the Americas(2)
Mining sector in general and small cap sector specifically have been significantly impacted by weak share prices and reduced trading liquidity over the last 12 months
(1) Metals Economics Group, Corporate Explorations Strategies, World Exploration Trends(2) Metals Economics Group
Limited Availability of Capital
Institutional investors have suffered large losses and many are seeking to decrease exposure to the sector
As a result, companies are preserving cash balances and have delayed/deferred project development
Loyal Customer Base
[•]
Barriers To Entry [•]
Early StageInvolvement [•]
MIN
ING
SER
VIC
ESM
ININ
G S
ECTO
R
$0
$6
$12
$18
$24
2003 2004 2005 2006 2007 2008 2009 2010 2011 20120
40
80
120
160
Total Non-Ferrous Exploration S&P/TSX Mining Index
6 6 613
7 7 5 1 1
49 11 12
7 13
41
1015 17
29
1914
18
51 1
16
0
10
20
30
40
2010 2011 2012 2013E 2014E 2015E 2016E 2017E 2018E 2019E
Num
ber o
f UG
Min
esC
omm
enci
ng P
rodu
ctio
n
Latin America North America
Highest prevalence of mine contractors is in the first stages of underground development
Forecasted new mine startups support pipeline growth
8
(60%)
(40%)
(20%)
0%
20%
40%
60%
Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13
Drilling Companies AverageMining Services AverageS&P 500 IndexS&P/TSX Composite IndexBBG World Mining Index
(49%)
(23%)
41%
7%
(30%)
Percentage Price Change
2 Years LTM YTD 3M 1MDrilling Companies
Boart Longyear (86%) (74%) (85%) (15%) (14%)Major Drilling Group (41%) (32%) (53%) 4% (1%)Orbit Garant Drilling (77%) (57%) (78%) 3% 7%Swick Mining Services 9% 40% 15% 21% 6%
Average (49%) (31%) (50%) 3% (0%)
Mining ServicesMurray & Roberts 19% 32% 25% 11% 1%Ausdrill (54%) (52%) (55%) 30% (22%)NRW Holdings (43%) (29%) (47%) 36% (8%)MacMahon Holdings (75%) (44%) (71%) 0% (7%)Maca Limited 39% 36% 45% 39% 9%
Average (23%) (11%) (21%) 23% (6%)
Overall Peer Average (34%) (20%) (34%) 14% (3%)
S&P 500 Index 41% 18% 37% 3% 1%S&P/TSX Composite Index 7% 4% 8% 4% 1%BBG World Mining Index (30%) (23%) (22%) 8% (2%)
Peer Group Relative Share Price and Commodity Performance
Source: Bloomberg, as of October 16, 2013
Mining services sector has been negatively impacted by ongoing mining market volatility
Last Two Years Trading HistoryPeer Group Performance
Resource investors have largely remained on the sideline, although many are becoming more engaged and looking for opportunities with a focus on balance sheet strength, free cash flow generation and relative valuations
Investors agree valuations are low but the catalyst for re-valuation outside of a strong underlying commodity rally remains unclear over medium term
− Recognition that new projects need to be built to satisfy supply / demand fundamentals although exploration drilling expected to remain subdued in the near to medium term
9
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Oct-13
Mining Services Mineral Drillers
Avg. Mineral Drillers: 6.6x
Avg. Mining Services: 5.1x
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Oct-13
Mining Services Mineral Drillers
5yr Avg. Mineral Drillers: 5.4x
5yr Avg. Mining Services: 4.1x
Peer Group Historical Trading MultiplesMultiples have fluctuated significantly over a 5 year cycle, currently trading below LT averages
Source: Bloomberg Note: Mining Services Companies include: Murray & Roberts, Ausdrill, MacMahon, NRW Holdings, and MACA Limited
Mineral Drillers include: Boart Longyear, Major Drilling Group, Orbit Garant Drilling and Swick Mining Services
Enterprise Value / LTM EBITDA
Enterprise Value / +1 year FWD EBITDA
Forecasted lower EBITDA estimates have increased
multiples despite share price weakness
5yr Avg. 3yr Avg. YTD Avg. CurrentMining Services 4.1x 4.2x 3.4x 2.9xMineral Drillers 5.4x 4.9x 4.2x 4.8x
5yr Avg. 3yr Avg. YTD Avg. CurrentMining Services 4.9x 5.1x 4.1x 3.5xMineral Drillers 6.6x 6.2x 3.6x 3.9x
Preliminary Financial AssessmentSECTION III
11
RBC notes that the analysis contained herein is illustrative only and that RBC would need to perform further due diligence toadvance its preliminary value assessment
− Further work will be required with the Duncan team for RBC to develop a more detailed forecast and enhanced financial model that allows for further sensitivity analysis
Appr
oach
& C
onsi
dera
tions
RBC has prepared a preliminary financial assessment for Duncan based on the following methodologies, using management’s forecast for 2013E-2015E
Approach to Preliminary Financial Assessment
Implied intrinsic value of business based on a five-year financial forecast Sensitivity analysis conducted on multiple assumptions, including
discount rates and operating assumptions
Discounted Cash Flow (“DCF”) Analysis
Review of implied multiples of EV / EBITDA paid in precedent transactions Represents “en bloc” controlling interest values
Precedent Trading Analysis
Considerations
Leveraged Buy-Out (“LBO”) Analysis
Determine the maximum amount a financial buyer can pay based on leverage and required equity internal rates of return (“IRRs”)
Sensitivity analysis for leverage and entry / exit multiples employed
EV / EBITDA trading multiples of comparable public mining services and mineral drillers
Trading values reflect current market views of minority interest values rather than “en- bloc” values that reflect a control premium
Comparable Company Trading Analysis
12
$5.8 $9.4$17.1
$26.5 $30.0 $32.0 $34.2 $36.6 $39.2
$0
$15
$30
$45
2010A 2011A 2012A 2013E 2014E 2015E 2016E 2017E 2018E
EBIT
DA
(C$
milli
ons)
.
$153 $150$187 $185 $195 $205 $215 $226 $237
$0
$100
$200
$300
2010A 2011A 2012A 2013E 2014E 2015E 2016E 2017E 2018E
Rev
enue
(C$
milli
ons)
.
Review of Financial Forecast (2013E – 2018E)
Commentary
Historical and Projected EBITDA
Historical and Projected Revenue(C$ millions, unless otherwise noted)
Actual ResultsDuncan Management Guidance
2013E - 2015E based on Duncan’s management guidance
2016E - 2018E forecast based on annual revenue and EBITDA growth rates of 5% and 7%, respectively, per management guidance
Execution of management plan and achievement of forecast, particularly the 2013E EBITDA, will be critical to obtaining full value upon a sale of the business
2013E-2018E CAGR: 5.1%
2010A-2013E CAGR: 6.6%
EBITDA Margin (%): 3.8% 6.3% 9.2% 14.3% 15.4% 15.6% 15.9% 16.2% 16.5%
RBC Forecast Extrapolation
2013E-2018E CAGR: 8.1%
2010A-2013E CAGR: 65.9%
Significant improvement in EBITDA margins demonstrated in historical and forecasted financial performance
13
WACCMultiple 10% 11% 12%
6.0x $227 $219 $2115.0x $203 $195 $1894.0x $178 $172 $166
Annual Capex (C$M) WACC'14-18E Avg. ∆ Flex 10% 11% 12%
$6.3 - $203 $195 $189$8.3 +$2.0 $195 $188 $181$10.3 +$4.0 $187 $180 $173
EBITDA Margin WACC'14-18E Avg. ∆ Flex 10% 11% 12%
16.0% 0.0% $203 $195 $18913.5% (2.5%) $169 $163 $15711.0% (5.0%) $135 $130 $125
Discounted Cash Flow Analysis
Forecast
Revenue & EBITDA: per management guidance
Depreciation: assumed $6M annually per management guidance
Capex: 2014E - 2015E per management guidance; growth in 2016E - 2018E assumed equal to revenue growth
Working Capital: Annual changes in working capital assumed to be negligible
Taxes
Rate: 26.5% effective cash tax rate per management guidance
NOLs: None available starting Jan 1, 2014
Terminal Value & WACC
Terminal Value: based on EBITDA multiple methodology
WACC: see Appendix B for detailed calculation
Key Assumptions Unlevered Free Cash Flow Forecast
Enterprise Value Sensitivity Analysis (C$M)
C$ millions, unless noted otherwise2014E 2015E 2016E 2017E 2018E
Revenue $195.0 $205.0 $215.3 $226.0 $237.3Growth 5.4% 5.1% 5.0% 5.0% 5.0%
EBITDA $30.0 $32.0 $34.2 $36.6 $39.2EBITDA Margin 15.4% 15.6% 15.9% 16.2% 16.5%
Less: Capex (5.5) (6.0) (6.3) (6.6) (6.9)Less: Unlevered Cash Taxes (6.4) (6.9) (7.5) (8.1) (8.8)Unlevered FCF $18.1 $19.1 $20.5 $21.9 $23.5
Operational Sensitivities(1)
(1) Enterprise value based on terminal multiple of 5.0x EV / EBITDA
14
EV / '13E Total '13E EBITDA LeverageEBITDA 1.5x 2.0x 2.5x
4.0x 18.7% 20.4% 22.8%5.0x 14.4% 15.2% 16.4%6.0x 11.7% 12.2% 12.8%
C$ millions, unless noted otherwiseTotal Leverage
IRR 1.5x 2.0x 2.5x20.0% $76 $79 $8225.0% $67 $71 $7430.0% $60 $64 $68
C$ millions, unless noted otherwiseExit Multiple
IRR 4.0x 5.0x 6.0x20.0% $72 $79 $8625.0% $65 $71 $7630.0% $59 $64 $69
C$ millions, unless noted otherwise PF2013E 2014E 2015E 2016E 2017E 2018E
EBITDA $26.5 $30.0 $32.0 $34.2 $36.6 $39.2EBITDA Growth 13.2% 6.7% 7.0% 7.0% 7.0%
Less: Sustaining Capex n/a (5.5) (6.0) (6.3) (6.6) (6.9)Less: Cash Interest Expense n/a (3.2) (2.5) (1.7) (0.8) (0.3)Less: Levered Cash Taxes n/a (5.4) (6.1) (6.9) (7.7) (8.7)Less: Mandatory Amortization n/a (8.0) (8.0) (8.0) (8.0) (5.3)
Cash Flow Available for Cash Sweep n/a $8.0 $9.5 $11.4 $13.5 $17.9
Cash Balance - - - - - -Total Debt Balance 79.5 63.6 46.1 26.8 5.3 -Total Debt / EBITDA 3.0x 2.1x 1.4x 0.8x 0.1x 0.0xEBITDA / Total Interest Expense n/a 9.4x 12.8x 20.0x 43.8x nmf
Sources Amount PercentTerm Loan A $79.5 58%Revolver - 0%Equity Requirement 57.5 42%
Total Sources $137.0 100%
Uses Amount PercentPurchase of Dumas $132.5 97%Transaction Costs 4.5 3%
Total Uses $137.0 100%
Financial Sponsor Indicative LBO Analysis
Sources and UsesTransaction Assumptions
Transaction purchase price of $132.5M
− 5.0x LTM (2013E) EBITDA
3.0x LTM EBITDA total leverage
− Term Loan A at BA’s+3% = 4.275%
− $25M undrawn revolver at same interest rate + 0.6% undrawn fee
− 100% cash flow sweep
Purchase multiple equals exit multiple
~26.5% tax rate with no NOLs
Total transaction costs (incl. advisory and underwriting fees) of $4.5M
Ability to Pay Analysis
Illustrative Pay Down & Credit Statistics
Note: Assumes fixed entrance / exit multiple of 5.0x
Note: Assumes fixed total leverage of 3.0x
Note: Assumes exit multiple equals purchase multiple
Note:Leverage assumptions will be positively affected by degree of contracted revenues and life of mine arrangements
Duncan
15
Announced Date May-08 Jun-10 Aug-09 Sep-09 Mar-10 Jun-11 Sep-11 Dec-11 Dec-11 Mar-12 Mar-13 Jun-13EV (C$M)(1) $23 $348 $99 $93 $93 $206 $95 $12 $198 $86 $28 $70LTM EBITDA Margin 26.9% 8.1% 12.9% 10.9% 20.6% 27.4% 16.7% na na 23.0% na naEV / LTM Sales 0.9x 0.7x 0.6x 0.5x 1.4x 1.2x 0.9x 0.5x na 1.2x 0.4x 0.2x
3.3x
8.4x
4.7x5.0x
7.0x
4.2x
5.6x
n/a n/a
5.4x
n/a n/a
Major Drilling /Forage
URS / ScottWilson
Ausdrill /Brandrill
Basil Read /TWP
Foraco /Adviser Drilling
Tuscany Int.Drilling / Caroil
Major Drilling /Bradley
Orbit Garant /Lantech Drilling
CAMCE / Procon Foraco / WFSSondagem
Ferrovial / SteelIngeniería
Forge Group /Taggart Global
Mean (excl. High and Low) : 5.3x
Comparable and Precedent Transaction Analysis
(1) As converted to Canadian dollars(2) As per S&P Capital IQ and Bloomberg, as at October 16, 2013(3) Construction includes Aecon, Churchill and Bird(4) Global UG mining segment accounts for 23% and 28% of FY13 company sales and EBITDA, respectively; segment FY13 EBITDA margin of 8.8%
Limited direct comparables exist for Duncan given business mix and geographic focus
6.7x5.8x
3.9x2.9x
3.8x 3.4x 3.1x 3.1x
1.3x
5.9x
Major DrillingGroup
BoartLongyear
Orbit GarantDrilling
Sw ick MiningServices
Murray &Roberts
NRWHoldings
Ausdrill Maca Limited MacMahonHoldings
Construction
Precedent Transactions
Comparable Companies – EV / 2014E EBITDA(2)
Avg: 4.8x
EV (C$M)(1) $556 $781 $52 $83 $965 $462 $798 $392 $200 $696
‘14E EBITDA Margin 17.8% 11.5% 13.7% 21.5% 6.9% 13.3% 24.1% 22.6% 15.6% 5.8%
Avg: 2.9x
Drilling CompaniesMining Services Companies
Average
(4)
(3)
Construction Companies
16
$90
$120
$0
$100
$200
$300
$400
Comps
Enter
prise
Valu
e (C$
mill
ions
)
$133
$162
$106$125
$159
$219
$0
$100
$200
$300
$400
DCF Precedents LBO
Enter
prise
Valu
e (C$
mill
ions
)Preliminary Illustrative Financial AssessmentIllustrative Enterprise Value (C$ millions)
Dec 31, 2013 transaction date Discount rate: 11% - 12% Exit EBITDA multiple: 4.0x – 6.0x Avg. EBITDA margin: 11% - 16%
Primary Approach Public Market Approach
Dec 31, 2013 transaction date 2013E EBITDA of $26.5M Applies multiple range of 4.0x – 6.0x
2013E EBITDA
Dec 31, 2013 transaction date Target IRR: 20% - 30% Exit EBITDA multiple:
4.0x – 6.0x Total leverage: 3.0x
Dec 31, 2013 transaction date 2014E EBITDA of $30.0M Applies multiple range of 3.0x – 4.0x
2014E EBITDA
Key Factors Influencing Value & Leveragability
[•]
[•]
Revenue Visibility
Customer Relationships
Margin Sustainability
Growth Prospects
Geographical Risk
Industry Dynamics
Potential Interested PartiesSECTION IV
18
Factors Considered in Assessing Potentially Interested PartiesBoth qualitative and quantitative assessment factors need to be considered in assessing potentially interested parties
Current Investor Sentiment
Recent performance Investor outlook Shareholder “license” to pursue M&A
Near Term Focus Likelihood of growth via M&A vs. organic growth
Interest in Region & Specialization
Insight from recent investment in relevant deals / processes Appetite for underground operations
Strategic Fit Relative project pipeline, location and potential scale
Contribution to operations Relationships with existing clients
Contribution to Portfolio
Shareholder Vote Implications of transaction size and potential need for a shareholder vote
Ability to Pay / Transact
Acquisition cost relative to the market capitalization, cash balance and near-term capital requirements Overall assessment of do-ability
Per Share Metrics / Impact Accretion / dilution
Qualitative Assessment Factors Quantitative Assessment Factors
19
Addressing Potential Buyer Concerns
Potential Questions Response
Current State of the Industry
Record Financial Performance
By addressing considerations up front, investors can focus on Duncan’s investment highlights
Availability of Skilled Personnel / Potential Attrition
Sponsor Exit /Prior M&A Initiatives
Existing Customer Base
Nature of Contracts
Summary / Next StepsSECTION V
21
Next Steps
Should Duncan decide to pursue a sale process, RBC recommends commence working on the following work streams
Assemble team, define roles and responsibilities
− Work alongside engaged legal counsel
Financial analysis (en bloc and segmented)
− Review of standalone business plan, 5-year plan and existing financial forecast model (if available)
− Discounted cash flow analysis
− Precedent transaction and comparable company analysis
− Refine financial assessment
Evaluate alternatives
Identify potential transaction issues and considerations
Review of potential purchasers
− Strategic interest / financial capacity / synergies
− Key decision maker contact information
Establish and agree on timelines
Assemble dataroom
− Identify key documents
− Review of key contracts (e.g. potential change of control issues)
Discuss process and timing considerations
Prepare marketing materials
− Key value positioning issues and investment highlights
− CIM
− Management presentation
Communications strategy
− Communications plan for employees
Near-Term Key Work Streams
RBC is well positioned to be Duncan’s financial advisor and will ensure the use of all resources of our firm to meet the objectives of Duncan and its shareholders
RBC as a Partner for DuncanAPPENDIX A
23
Wealth Management
10%
Insurance9%
Other6%
Capital Markets
21%
Personal & Commercial
Banking54%
RBC is a Leading Global Investment Bank
Financial Stability and Strong Results
Fiscal Year 2012
Total Revenue: $29.6 billion (+8% YoY)
Net Income(1): $7.5 billion (+9% YoY)
Return on Equity: 19.3%Tier 1 Capital Ratio: 13.1% Market Capitalization(2): $82 billion5th largest in North America
Assets: $825 billion6th largest in North America
Credit Ratings (Mdy’s/S&P/Fitch): Aa3 / AA- / AAHighest ratings among global financial institutions
Diverse Business Mix
Fiscal Year 2012
Over 50% of Capital Markets revenue in 2012 was derived from the U.S., highlighting RBC’s focus on gaining client and market share in the U.S.Global Footprint
Fiscal Year 2012
Countries of Operations: 53Employees Worldwide: 80,000Clients Worldwide: 15 million
Global Rankings by Market Capitalization
Fiscal Year 2012
Gaining Market Share
2012 Global Fee Share According to Dealogic
Ranking by net investment banking revenues (M&A, Equity, Bonds, and Loans)
(1) From continuing operations(2) Capital IQ - October 31, 2012
2012Rank Investment Bank Revenue
($mm)Wallet
Share %YoY
Change1 JPMorgan 5,140 7.6% (8%)2 Bank of America ML 4,459 6.6% (13%)3 Goldman Sachs 3,942 5.9% + 1%4 Morgan Stanley 3,709 5.5% (5%)5 Deutsche Bank 3,538 5.3% + 3%6 Credit Suisse 3,525 5.2% + 1%7 Citi 3,449 5.1% + 10%8 Barclays Capital 3,096 4.6% + 15%9 UBS 2,142 3.2% (6%)
10 RBC CM 1,779 2.6% + 33%11 Wells Fargo 1,684 2.5% + 4%12 HSBC 1,254 1.9% (1%)13 RBS 9,223 1.4% (19%)14 BNP Paribas 913 1.4% (32%)15 Nomura 878 1.3% + 0%
RBC’s capital markets and global market share growth has been supported by its industry best ratings and strong balance sheet
Capital Markets RevenueBy GeographyU.S. 52%Canada 32%U.K. & Europe 14%Asia Pacific 2%
$218
$188
$179
$178
$158
$131
$120
$110
$100
$96
$82
$81
$75
$74
$71
$0
$50
$100
$150
$200
$250
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24
RBC is Canada’s Leading M&A Advisor
(1) Ranked by U.S. dollar enterprise value. As at December 31, 2012Source: Thomson Financial
Deals Over US$100 million in 2009-2012 – Advisors in Canadian Target, Acquiror, or Vendor Transactions(1)
RBC is the leading advisor on Canadian target or acquiror transactions from 2009 – 2012
Deals Over US$100 million in 2009-2012 – Advisors in Canadian Target Transactions(2)
Source: Bloomberg(2) Ranked by U.S. dollar enterprise value. As at December 31, 2012
$144,095$132,399
$121,731
$102,946 $99,894
$207,840
$0
$50,000
$100,000
$150,000
$200,000
$250,000
RBC CIBCWM
Goldman BMO NB BoAMerrill
TDSI
Dea
l Val
ue (U
S$
mill
ions
)
$100,573
$90,319
$74,981
$56,204
$44,626
$117,553
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
RBC BMO CIBC TD Scotia Morgan
Dea
l Val
ue (U
S$
mill
ions
)
25
Vancouver Toronto
New York
LondonLausanne Beijing
Hong Kong
Sydney
Dedicated Mining Team Corporate Finance Offices
RBC’s Global Mining PlatformRBC’s Mining and Metals Group has one of the largest mining teams globally, with over 100dedicated mining only professionals, and the largest group within RBC
One of the largest dedicated mining teams of any investment bank
44 mining corporate finance professionals 17 mining institutional equity sales and
trading professionals 16 equity capital markets professionals across four global centers (New York, London,
Toronto, Sydney)
20 mining research professionals covering 158 companies 12 commodity trading professionals 10 corporate banking professionals
Toronto 39• Corporate Finance
Gord Bell, David Shaver, Lance Rishor, Tim Loftsgard, Sebastian Becerra, John Blanchette
13
• Equity ResearchPatrick Morton, Fraser Phillips, Stephen Walker, Sam Crittenden, Dan Rollins
11
• Institutional SalesRobert Lee, Andrew Thompson
2
• Equity TradingJohn Cole
1
• Equity Capital Markets Ryan Latinovich, Paolo Ciotola
6
• Corporate BankingRalph Sehgal, Stam Fountoulakis
5
• Commodity Trading 1
Vancouver • Corporate Finance
Craig Dudra7
New York 4• Corporate Finance
Paul Milcetic1
• Institutional SalesRyan Dolan
1
• Equity TradingJustin Doran
1
• Equity Capital MarketsMichael Goldberg
1
London / Lausanne 37• Corporate Finance
Patrick Meier, Richard Horrocks-Taylor, Jonathan Stephens, Seil Song, Richard Hughes, Vera Ivanova, Rob Bailey
10
• Equity ResearchJonathan Guy, Timothy Huff, Des Kilalea
5
• Institutional SalesChris Law, Marc Archambault
3
• Equity Capital Markets (London)Joshua Critchley, Stephen Foss, Matthew Coakes, Martin Eales
5
• Equity TradingDarryl Willoughby
2
• Corporate BankingMichael Ellison
2
• Commodity Trading 10
Hong Kong / Beijing 8• Corporate Finance
Ken Wang, John Broere • Equity Capital Markets
John D’Abo, Simon Moss
6
2
Sydney 24• Corporate Finance
Robert Sennitt, Duncan St John7
• Equity ResearchChris Drew, Steuart McIntyre
4
• Institutional SalesPeter Main, Steven Michael, Ben Cleary
4
• Equity TradingPaul Johnston
3
• Equity Capital MarketsGavin Ezekowitz
2
• Commodity Trading 1• Corporate Banking
Tim Hallam3
26
Leading Global and Canadian Mining M&A Advisor
Rank Advisor Volume (US$mm)
1 RBC Capital Markets $29,460
2 BMO Capital Markets $22,480
3 CIBC $18,306
4 TD Securities $17,384
5 Bank of America Merrill Lynch $17,143
6 GMP Securities $15,621
7 Goldman Sachs & Co $14,783
8 Canaccord Genuity Corp $11,933
9 Scotiabank $11,627
10 Morgan Stanley $10,275
1
Rank Advisor Volume (US$mm)
1 Goldman Sachs & Co $113,117
2 Barclays $94,860
3 Morgan Stanley $88,634
4 JP Morgan $85,156
5 Credit Suisse $78,576
6 Citi $77,476
7 Deutsche Bank AG $65,149
8 BNP Paribas Group $50,231
9 Bank of America Merrill Lynch $49,519
10 RBC Capital Markets $31,910 10
2011-2013YTD Canadian Mining M&A 2011-2013YTD Global Mining M&A
Source: Bloomberg League Tables
A$206,000,000
On the acquisition of Rockland
Richfields Limited
Financial Advisor November 2012
A$565,000,000
On the sale to St. Barbara
Financial AdvisorSeptember 2012
A$4,700,000,000
On the joint acquisition of
Macarthur Coal with Peabody
Financial AdvisorNovember 2011
C$608,000,000
On the sale to IAMGOLD
Corporation
Financial AdvisorJune 2012
C$578,000,000
On the acquisition of
Hathor Exploration
Financial AdvisorJanuary 2012
C$7,300,000,000
Financial AdvisorJuly 2011
On the acquisition of
Equinox Minerals Ltd.
US$500,000,000
On the acquisition ofBHP's Ekati
Diamond Mine
Financial AdvisorNovember 2012
C$5,100,000,000
On the acquisition of
Inmet
Financial AdvisorApril 2013
C$7,500,000,000
On the acquisition of
Viterra Inc.
Financial AdvisorDecember 2012
C$310,000,000
On the acquisition of
Rainy River
Financial AdvisorPending
US$371,000,000
On the acquisition of International
Minerals Corporation
Financial Advisor Pending
C$103,000,000
On the acquisition of
Andina Minerals
Financial AdvisorNovember 2012
Supplemental MaterialsAPPENDIX B
28
Roles and Responsibilities in a Two-Stage Sale ProcessPhase 1 Phase 2
Preparation Marketing andNon-Binding Proposals
Due Diligence and Binding Proposals Execution and Announcement
Advisor due diligence Define and rank potential buyers Prepare CIM and “teaser” document Prepare CA Engage virtual data room service
provider
Contact potential interested parties Distribute teaser and CA Negotiate and execute CAs Provide CIM to parties who return
signed CA Invite parties to submit non-binding
proposals Evaluate non-binding proposals Invite selected parties to Phase 2
Access to virtual data room Management presentations Site visits (as appropriate) Invite parties to submit final binding
proposals Drafts of definitive agreements for
markup would be provided to interested parties
Selection of preferred buyer(s)
Confirmatory due diligence Committed financing Negotiation of definitive agreements Receipt of required internal
approvals Execute definitive agreements Announcement
Management Role
Supply financial forecast and business plan
Provide input into creation of CIM and teaser
Gather information on the company for inclusion in virtual data room
Prepare various operating agreements
Provide input into negotiation of CAs Rehearse management presentation Provide input into form of definitive
agreement
Deliver management presentation Facilitate site visits (as appropriate) Respond to buyer due diligence
questions Participate on buyer due diligence
calls
Negotiate definitive agreement Stakeholder communications
Time Intensity: Medium Low High High
RBC Role
Undertake due diligence and financial analysis
Develop a list of potential purchasers
Identify potential “deal issues” Assist in the preparation of
marketing materials
Solicit interest in the company Run controlled and organized
optimal sale process Act as communication channel and
manage bidders through due diligence process and respond to requests for information
Evaluate transaction proposals Advise on strategy, tactics, options
and alternatives in pursuing and structuring a transaction
RBC’s financial assessment will be important as it provides a reference for negotiations
Participate in negotiating transaction terms with buyer(s)
Assist in preparation of transaction documentation
3-4 weeks 4-5 weeks 4-5 weeksIllustrative Timing*
* Timing depends on a number of factors including number of parties and response time for solicited parties to decide to move forward, sign CA, conduct due diligence and submit proposals
3-4 weeksApprovalProcess
29
Mining Services Precedent Transactions(In millions unless otherwise stated)Announcement Reporting EnterpriseDate Target Acquiror Currency Value(1) Revenue EBITDA EBITDA Margin03-Jun-13 Taggart Global Forge Group Ltd USD $68.0 0.2x na na
Provides engineering, construction and technical services across industries including mining30-Jul-13 Clough Limited (remaining 38.4%) Murray & Roberts Holdings Ltd. AUD $582.2 0.9x 5.8x 16.1%
Provides engineering, construction contracting, and procurement and construction services23-May-13 SCR Mines Technology Inc. (preferred year-1 dividend of $6.4M; % of revenue thereafter) Alaris Royalty Corp. CAD $40.0 na na na
Underground mining, surface and underground construction, electrical, and mechanical services04-Mar-13 Steel Ingeniería S.A. Ferrovial Servicios, S.A. EUR € 21.0 0.4x na na
Provides industrial maintenance and heavy machinery operation and maintenance at mines02-Mar-12 WFS Sondagem LTDA Foraco International S.A. USD $86.7 1.2x 5.4x 23.0%
Acquire a 51% stake in WFS Sondagem, 86 drill rigs, together with support equipment and personnel19-Dec-11 Procon Holdings CAMCE CAD $198.3 na na na
Provides contract mine services to customers primarily in UG mining in Western & Northern Canada16-Dec-11 Lantech Drilling Services Inc. Orbit Garant Drilling, Inc. CAD $12.0 0.5x na na
32 multi-purpose and diamond core drill rigs, together with personnel08-Sep-11 Bradley Group Limited Major Drilling Group International Inc. CAD $95.0 0.9x 5.6x 16.7%
Gold and diamond drilling and mining services, 124 mining rigs21-Jun-11 Caroil SAS Tuscany International Drilling Inc. USD $202.0 1.2x 4.2x 27.4%
Provides drilling and mining services09-Mar-10 Adviser Drilling S.A. Foraco International S.A. EUR € 67.1 1.4x 7.0x 20.6%
50 reverse circulation drill rigs, together with support equipment, and personnel05-Nov-09 Bergteamet AB (55% stake) Accent Equity Partners EUR na na na na
Provides underground mining services30-Sep-09 TWP Holdings Ltd Basil Read Holdings Ltd RAND $655.8 0.5x 5.0x 10.9%
Provides engineering and project management services in mining and minerals industries17-Aug-09 Brandrill Ltd Ausdrill Ltd AUD $108.3 0.6x 4.7x 12.9%
Provides mining services including drillling and blasting services to mining industry28-Jun-10 Scott Wilson Group PLC URS Corp GBP £223.0 0.7x 8.4x 8.1%
Provides engineering, construction and technical services across industries including mining07-May-08 Forage à Diamant Benoit Ltée Major Drilling Group International USD $23.1 0.9x 3.3x 26.9%
19 drill rigs, together with support equipment, existing contracts and personnel 28-Sep-07 Dynatec Mining Services Business FNX Mining Company CAD $59.5 0.3x 2.7x 10.7%
Provides underground mining services in North America12-Jun-07 Certain Assets of Axxis Drilling Trinidad Energy Services Income Trust USD $139.0 na 4.7x na
4 land drilling rigs and 1 barge drilling rig, together with inventory, crew boats and spare parts21-Aug-06 Drillcorp Ltd Boart Longyear AUD $133.7 1.9x 4.1x 46.8%
Provider of mineral drilling services in Western Australia07-Jun-05 Boart Longyear Advent International / Bain Capital USD $545.0 0.6x 4.1x 13.5%
Providers of drilling services and equipmentMean 0.8x 5.0x 19.5%Median 0.7x 4.7x 16.4%Mean (excluding high and low) 0.8x 4.9x 17.9%
Notes(1) Enterprise Value = Equity Value + Net Debt + Preferred Securities + Minority Interest(2) Enterprise value depicted represents implied value based on 100% of equity
Enterprise Value / LTM
(2)
Mining Services Precedent Transactions
30
(C$ millions, except share price)
Price Market % Public Enterprise Price / Earnings(1,2) EV / EBITDA(1,2) Net Debt / EBITDA(1,2) EBITDA Margin(1,2)
Company 16-Oct-13 Cap. Float Value 2013E 2014E 2013E 2014E 2013E 2014E 2013E 2014E
Drilling Companies
Major Drilling Group CAD 7.38 $586 99.6% $556 22.5x 27.3x 5.9x 6.7x neg neg 18% 18%
Boart Longyear USD 0.42 $198 96.9% $781 neg neg 6.7x 5.8x 5.0x 4.3x 9% 11%
Swick Mining Services AUD 0.35 $81 55.4% $83 8.4x 7.4x 2.9x 2.9x 0.1x 0.1x 21% 22%
Orbit Garant Drilling CAD 1.15 $38 44.2% $52 41.8x nmf 3.6x 3.9x 0.9x 1.0x 14% 14%
Drilling Companies Average 24.3x 17.4x 4.8x 4.8x 2.0x 1.8x 16% 16%
Mining Services
Murray & Roberts ZAR 28.82 $1,238 91.9% $965 13.5x 10.9x 4.4x 3.8x neg neg 6% 7%
Maca Limited AUD 2.65 $421 60.6% $392 8.3x 8.0x 3.3x 3.1x neg neg 23% 23%
Ausdrill AUD 1.36 $413 74.1% $798 4.6x 5.2x 2.9x 3.1x 1.7x 1.8x 25% 24%
NRW Holdings AUD 1.36 $374 96.9% $462 5.8x 7.0x 3.0x 3.4x 0.6x 0.6x 13% 13%
MacMahon Holdings AUD 0.14 $134 74.5% $200 4.0x 5.6x 1.4x 1.3x 0.5x 0.4x 11% 16%
Mining Services Average 7.2x 7.3x 3.0x 2.9x 0.9x 0.9x 16% 17%
`
Group Average 13.6x 10.2x 3.8x 3.8x 1.4x 1.4x 16% 16%
Sources: Trading and historical data as per Capital IQ; estimates as per Bloomberg consensus
(1) All estimates are Bloomberg consensus as at Oct 16, 2013
(2) Forward estimates have been calendarized for comparability purposes
Comparable Trading AnalysisLimited direct public comparables exist for Duncan given business mix and geographic focus
31
WACC Analysis
Weighted Average Cost of Capital Calculation
WACC Sensitivity to Leverage and Cost of Debt WACC Sensitivity to Leverage and Unlevered Beta
Cost of Equity Cost of Debt
Unlevered Beta 1.60 Pre-Tax Cost of Debt 4.28%Relevered Beta 1.81 Tax Rate 26.5%Risk Premium 5.0% After-Tax Cost of Debt 3.1%
Relevered Beta * Risk Premium 9.0%Risk Free Rate (Long-Term GoC Bonds) 3.1% Assumed Optimal Capital StructureCost of Equity 12.1%
Debt 15.0%Equity 85.0%
Weighted Average Cost of Capital 10.78% Debt / Equity Ratio 17.6%
% Debt Pre-Tax Cost of Debt % Debt Unlevered Beta3.25% 3.75% 4.28% 4.75% 5.25% 1.20 1.40 1.60 1.80 2.00
10.0% 10.81% 10.84% 10.88% 10.92% 10.95% 10.0% 8.94% 9.91% 10.88% 11.86% 12.83%12.5% 10.74% 10.78% 10.83% 10.88% 10.92% 12.5% 8.90% 9.86% 10.83% 11.80% 12.77%15.0% 10.67% 10.72% 10.78% 10.83% 10.89% 15.0% 8.86% 9.82% 10.78% 11.74% 12.70%17.5% 10.60% 10.66% 10.73% 10.79% 10.85% 17.5% 8.82% 9.77% 10.73% 11.68% 12.64%20.0% 10.53% 10.60% 10.68% 10.75% 10.82% 20.0% 8.78% 9.73% 10.68% 11.62% 12.57%