gold investor pro · • in its federal budget for 2017-2018, the government of india has left a...

Gold Investor ProMarch 6, 2017

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Roller-Coaster Ride for Gold ContinuesGold thrives on uncertainty and 2016 proved to be an intense year of global market volatility. From Brexit and concerns about China’s economic slowdown to India’s demonetization and the election of President Donald Trump, gold bullion rallied as high as US$1365/oz as investors fled to safe havens. Fast-forward to 2017, headwinds continue as the world markets price in the impact of Donald Trump’s economic action plan, new trade agreements, monetary policies, and political concerns about upcoming elections in the Netherlands, France, and Germany. Speaking to various mining industry experts, analysts and fund managers, the question which resonated was - “Is 2017 the year of gold’s bull market”?

In this first edition of the Gold Investor Pro, we will examine factors affecting the gold industry and the top gold companies—as they would benefit most from a rising price of gold bullion. Year to date, gold has climbed over 10% to US$1255/oz., with gold miners such as Goldcorp and Barrick Gold surging 15%. Using a rating scale that includes balance sheet fundamentals, operational performance, and a peer valuation, we will rank those companies that are best positioned to deliver healthy returns to shareholders. All this, and more, in this edition of the Gold Investor Pro!

Alex Cutulenco | Senior Analyst | Gravitas Financial Inc. | [email protected] | 1 (416) 992-6731Jassie Bhathal | Analyst | Gravitas Financial Inc. | [email protected] | 1 (647) 409-6308



Figure 1: Strong Performance of Gold Stocks (52-weeks)

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Banro CorpDetour Gold Corp

Premier Gold Mines LtdYamana Gold Inc

Semafo IncEldorado Gold Corp

Alacer Gold CorpCenterra Gold Inc

Goldcorp IncNovaGold Resources Inc

Kinross Gold CorpAsanko Gold Inc

Agnico Eagle Mines LtdDalradian Resources IncNewmont Mining Corp

Argonaut Gold IncBarrick Gold Corp

Alamos Gold IncLundin Gold Inc

Teranga Gold CorpTimmins Gold Corp

Golden Star Resources LtdRoxgold Inc

Torex Gold Resources IncGuyana Goldfields Inc

IAMGOLD CorpMcEwen Mining Inc

Klondex Mines LtdKirkland Lake Gold Ltd

Endeavour Mining CorpWesdome Gold Mines Ltd

B2Gold CorpGold Standard Ventures Corp

Continental Gold Inc

Source: Thomson Reuters






Table of ContentsIndustry Highlights .............................................................................................................................................. 4

Value of the US Dollar ............................................................................................................................................................................

Key Industry Drivers ........................................................................................................................................... 5Value of the US Dollar ......................................................................................................................................................................... 5

Interest Rates ......................................................................................................................................................................................... 6

China: The Shift to a Domestically-Oriented Economy ....................................................................................................................... 7

Inflation ................................................................................................................................................................................................ 8

Market Volatility .................................................................................................................................................................................. 9

Ubika’s Outlook on Gold Prices ......................................................................................................................................................... 10

Global Economic Overview ............................................................................................................................... 11United States ....................................................................................................................................................................................... 11

China .................................................................................................................................................................................................. 11

India .................................................................................................................................................................................................... 12

Eurozone ............................................................................................................................................................................................. 13

Gold Universe: Key Performers, Stats and Analysis ....................................................................................... 14The Ubika Rating ................................................................................................................................................................................ 15

Gold Pro Report – A Look at Valuations .......................................................................................................... 16Location Matters ................................................................................................................................................................................. 18

Global Decline in Capital Expenditure ............................................................................................................................................... 19

Reserves & Resources Data .............................................................................................................................. 20






Industry Highlights• On December 14th, the Federal Reserve announced a raise to its target short-term interest rates by 25 basis points to a

range of 0.50% - 0.75% and forecasted multiple hikes to follow in 2017 contingent on the US economy approaching full employment and its 2% inflation target. As a result, gold sold off to a 10-month low of US$1,120 and has been regaining ground ever since. The Bank of Canada, on the other hand, decided to maintain its overnight rate at 0.5% at its January 18th meeting, citing uncertainty supported by a hike in both US and Canadian bond yields as investors moved into stocks after Trump was elected.

• The uncertainty surrounding US president Donald Trump, coined the “Trump Effect,” poses a significant impact on the price of gold. Trump has no prior military or political experience, and although his proposed reforms are broad, they have significant economic and geopolitical impacts pertaining to inflation, free trade, tax cuts, and defence as well as infrastructure spending. Recently, Trump has threatened to break the NAFTA agreement and plans to implement an ambitious tax-reform plan.

• India, one of the largest gold importers in the world, saw its bullion imports fall 32% Y/Y to US$17.7B in April-December of the current fiscal period. In December alone, gold imports dipped by 48.5% Y/Y to US$1.96B as a result of softening prices of the metal on world markets and the cash crunch in the monetary system due to demonetisation.

• The Bank of England, for the first time, is publishing monthly data revealing the amount of gold it holds (in weight) on behalf of other central banks. As of November 2016, the Bank held 164.7 Moz as reported on their website. Following China’s voluntary official gold reserve reporting in 2015, we are beginning to see an increasing transparency of gold reserves by central banks around the world.

• In its federal budget for 2017-2018, the government of India has left a 10% customs duty on gold unchanged. Additionally, the government has banned all cash transactions over Rs. 300k (about 100 grams of gold). The jewelry industry in India is most likely to be affected by this cash cap due to the excise duty on jewelry manufacturing, cleaning up of books by retailers, destocking by retailers in the informal segment, as well as reduced discretionary spending by consumers. Altogether, this may further reduce gold demand in India.

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Gold Silver Copper

Figure 2: Since 2016, Gold Underperforms both Silver and Copper






Figure 3: Strong Annual Inverse Relationship between USD & Price of Gold


Key Industry Drivers

Although gold, like other commodities, follows the fundamental law of supply and demand, gold has a much stronger correlation with macroeconomic factors. While the precious metal is used physically to create jewelry and electronic equipment, the majority of its price is derived from global macro trends. In the following section, we present these key macro drivers, as well as an analysis of each one.

Value of the US Dollar There is a strong inverse relationship between the price of gold and the value of the USD, relative to other currencies. This correlation dates back to the 1970s when gold began trading on floating exchange rates, making it vulnerable to the USD’s values. Gold is denominated (traded) in US currency (hence the $/oz on each gold price). For this reason, an increase in the USD’s value (relative to other currencies) will reduce the purchasing power of other countries, making gold more expensive. In addition, as the US dollar gains momentum, the yield on bonds becomes more attractive to investors than gold.

To be sure, in 2008 the International Monetary Fund (IMF) noted that 40-50% of the variations in the price of gold can be explained by the variations in the strength of the USD. In this regard, an inverse relationship between the price of gold and the value of the USD is largely apparent (Figure 3).

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Figure 4: Quarterly Positive Relationship between U.S. GDP and the USD Index


Diving deeper, we can further analyze the factors that drive movements in the USD. Again, the concept here is one of supply and demand.

Historically, the USD gains momentum as employment and income levels in the US experience positive trends. As consumer sentiment rises and unemployment falls, the multiplier effect is spread throughout the economy. The result is an increase in national income (technically synonymous to GDP). In turn, Americans spend (consume) more on goods and exports. The growth in the economy leads to foreign desire to invest in the US and thus buy dollars to pay for stocks & bonds. This fundamentally increases the value of the USD, which is ultimately relatable to a decrease in the price of gold.

Interest RatesSince the end of 2014, the USD Index has appreciated ~15%. However, the start of 2016 entailed a different route for the currency: the USD had depreciated 4% and put a (at least momentary) halt to its advance. This change can explain a significant chunk of the variations that have caused gold prices to move up since the start of 2016. The depreciation of the USD can be somewhat attributable to the Federal Reserve’s (the Fed) sentiment on domestic (and global) markets. Opting to not increase interest rates (a gold price driver we explore further), the Fed cited mixed indicators (namely slower foreign growth and volatility in crude oil prices), causing markets to dump the USD.

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Figure 5: Slowdown in Chinese GDP Growth

Source: Trading Economics

However, as crude oil prices continued to recover in 2016, so did the economic health of the US as domestic growth, unemployment, exports and consumer confidence also improved. As a result, the Federal Reserve raised its short-term interest rates by 25 basis points to 0.75%, and the USD index strengthened to its highest level of the year at 103.82. Consequently, gold sold off to a low of $1120/oz as bond yields became more attractive to investors.

Looking forward in 2017, with the labour market near full employment and rising inflation to the Fed’s 2% target, multiple rate hikes are not impossible this year. Additionally, monetary policy is likely to diverge between the US and other parts of the world. The Fed is widely expected to tighten monetary policy, but it is unknown what other central banks will do. Unless the US economy witnesses a recession, the booming US economy, strengthening US dollar, and increasing interest rates will not support the price of gold.

China: The Shift to a Domestically-Oriented EconomyPerhaps the most important global growth story affecting the outlook on the US (and entire world’s) economy is China. There seems to be consensus that the Chinese double-digit GDP growth story is over (see Figure 3 below). Indeed, the second-largest economy in the world is moving from an investment and exporting-focused nation, to a consumption and domestic-growth economy. In effect, this shift will bring uncertainty and lowered global demand (i.e. on commodities like oil). This will prove (perhaps already has) impactful to the US economy, signifying further headwinds in terms of exports.






That being said, while China is the US’s 3rd largest exporter, it still only represents 7.7% of overall exports, leading us to believe a more domestically-focused Chinese economy will not be detrimental to the US. From an imports perspective, we believe that as Chinese exports to the US slow down, other developing nations that are still in that phase of external growth (India, Thailand, Malaysia come to mind) will begin to replace China, giving US consumers a relatively attractive price for products they desire. We are already seeing evidence of this, as Apple recently announced that it will move manufacturing of its iPhone SE to India from China.

Conclusively, we believe a slowing and more domestically-focused Chinese economy is not detrimental to the US economy. In this regard, we expect the Fed will pull the trigger on multiple rate hikes this year, which will slow down the appreciation of gold prices.

Inflation Despite not receiving the amount of news-worthy attention it deserves—primarily due to its very low and contained range—inflation remains an important figure that indefinitely affects the price of gold.

Historically, investors held gold in their portfolio as a hedge to rising inflation. As inflation rises, the purchasing power of currencies fall, giving incentive to invest in a resource that does not lose its true value. One of the key determinants of the inflation rate is expected inflation. Since 1990, expected inflation (and in turn inflation) has been relatively low and within a range that does not threaten the purchasing power of currencies.

Currently, the Federal Open Market Committee (FOMC) is targeting an inflation rate of 2% for the US economy in order to continue raising interest rates. The FOMC believes a 2% rate,

Figure 6: Relationship between Price of Gold and Expected Inflation


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Since the beginning of 2016, the VIX saw relatively manageable and short-lived spikes from fears related to China’s slowing growth in January, to the surprise Brexit in June, and the November election of President Donald Trump. Although the current low value of the VIX index at ~11.87 signifies plenty of optimism in the market right now, this can all quickly change. For instance, the Brexit led to a sharp rally of the VIX to a close over 25, while gold prices rallied above US$1350 as investors looked for safety. Looking forward into 2017, the Trump effect as well as the Eurozone elections are sure to create volatility in the markets, the extent to which is yet to be seen. Should England fail to negotiate a soft Brexit or Trump’s economic policies lead to a recession, we may witness fresh new highs in gold bullion.

Market Volatility A key indicator of market volatility is the VIX index, also known as the ‘fear’ index. This contrarian indicator is oftentimes used to identify tops and bottoms in markets, as well as gauge general market sentiment (i.e. a spike up during a market sell-off may signal investors the market is oversold).

Similar to money-market securities (fixed-income securities with maturities less than a year), gold is seen as a ‘flight to quality’ option for investors during times of greater volatility and selloff. The following relationship can be somewhat explained by the following figure. While the relationship is oftentimes lagged (i.e. Great Recession hit did not instantaneously cause a spike in gold), the long-term trend still holds: as volatility and thus uncertainty in the broader market expands, so too will the price of gold.

Figure 7: Relationship between Price of Gold and Volatility Index (VIX)

Source: Ubika Research, Thomson Reuters

Flight to Quality Begins

Prices Contract as Volatility Dies Down

Height of Great Recession

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Ubika’s Outlook on Gold PricesThe bullion commodity has witnessed continued weakness throughout the past few years. The trend since the end of the recession is left somewhat unchanged, in our opinion. We believe that any rally in gold may hit a ceiling and be short-lived due to the following factors:

Appreciating USD: Long-lasting trend of improvement in labour markets shows the American economy continues its advancement to, and above, pre-recessionary times. An appreciated USD will make gold relatively more expensive for foreigners, due to the bullion being fundamentally denominated in USD

Increasing Inflation: The era of unconventionally low inflation rates has subsided as consumer prices in the United States increased 2.5% Y/Y for January 2017. Now that the FOMC has met its 2% inflation target and both employment and wages continue to improve, there is reason for further interest rate hikes in 2017.

Higher Yields: As the American economy continues its boom, contractionary monetary policy (through a hike to the Fed’s Funds Rate) by the Fed will become more and more a reality. With that comes higher yields down the yield curve, thereby decreasing the incentive for investors to put money in gold assets, as bonds, stocks, and other securities offer higher returns.

With that being said, there are current and future catalysts that may cause spikes in the price of gold. We believe 2017 will be a year of lots of side-ways action as the following factors come to play in the mid-term horizon:

Continued Political Volatility: Increased volatility in the markets is expected from the political instability in the Eurozone and the recent election of US President Donald Trump. The upcoming elections in Europe, England’s Eurozone-exit negotiations, and the implications of Mr. Trump’s economic policies are sure to keep investors on the edge of their seats.

Foreign Economic Slowdowns: China is poised for continually slower GDP growth, and will, in our belief, be exporting less goods (or at a slower rate of increase) than in the past. They will also demand more goods and increase consumption. From this regard, physical gold will ramp up in demand, namely in jewelry and technology.

Increased Central Bank Investments: Emerging markets continue to be net buyers of gold in order to hedge against unforeseen policy mistakes (inflation) and strengthen the diversification of their currency reserves. Most significantly, countries like China and Russia (~10% of reserves in gold each) will play ‘catch up’ with countries like the U.S and Germany (~70% of reserves in gold each). The trend seems to be upward sloping, suggesting appreciation in gold bullion.






Global Economic OverviewConsidering that the price of gold is so heavily tied to fear and economic tensions across the world (i.e. during times of economic crises, investors flock to gold), examining global events give light to a more holistic view of the world.

United StatesA booming domestic economy with ever improving labour markets points to continued upward pressure to interest rates. With a newly-elected president, the world is watching very closely to gauge the economic implications of the Trump administration.

• US real GDP growth has averaged a tame 2.1% since the US economy began to expand in 2009. The unemployment rate has plunged from a high of over 10% to below 5%, however wage gains and inflation have grown more modestly. Nonetheless, the labour market is expected to continue to tighten in 2017, adding to upward pressure on inflation and wage gains, making the case for further rate hikes. Consensus forecasts call for 75 BPS of Fed tightening this year, followed by another 100 BPS next year.

• There is a clear divergence in monetary policies amongst the major central banks in the world. In the Eurozone, for example, the European Central Bank is not expected to raise interest rates anytime soon. The American economy is growing faster than other developed countries, which would strengthen the US currency and real interest rates. As the spread between interest rates of the US and other countries continues to widen, the price of gold is expected to soften as the greenback strengthens.

• Although President Trump has no prior political or military experience, investors are exuberant for his new economic action policies. Markets anticipate heavy government spending as well as corporate and personal tax cuts. The Trump administration aims to achieve a 3% GDP growth rate, which may lead to a substantial switch by investors from bonds and into stocks as consumer and investor confidence increases. If Trump is successful in achieving his mandates, gold is likely to depreciate.

China Concerns persist about China’s economic slowdown and transition from an investment/exporting economy to more domestic focused. China’s government is targeting a 6.5-7% annual GDP growth rate.

• The Chinese economy advanced 6.8% Y/Y in Q4/2016, compared to a 6.7% growth rate in the previous three periods and above market expectations of 6.7%. It was the strongest expansion since Q4/2015, supported by consumer spending, higher government expenditure, and robust lending. However, China’s GDP grew by 6.7% for full year 2016, marking the weakest full-year growth since 1990. The consensus forecasts for the full year 2017 is even lower at 6.6%.

• People’s Bank of China (PBOC) seems to be holding back the lever on rate increases






and continues to provide government stimulus, which is supporting China’s exports. The benchmark lending rate has been left unchanged since October 2015 at 435 BPS. As China’s currency continues to depreciate against the USD, investors are pouring money into the stock market and gold bullion to protect against currency depreciation.

• The International Monetary Fund warned China on its continued reliance on policy stimulus measures in its credit-fuelled recovery. The rapid expansion of credit and slow progress in addressing corporate debt—especially in hardening the budget constraints of state-owned enterprises—may raise the risk of a much sharper economic slowdown. Over the past decade, China’s total debt grew by 465% according to Bloomberg Intelligence; with total debt rising to 247% of GDP in 2015, from 160% in 2005 and corporate debt jumping to 165% of GDP from 105% in 2005.

• For 2017, China is facing more headwinds from the external environment, as President Donald Trump has threatened tough trade measures against Beijing, including tariffs as well as subsidies to domestic manufacturing.

IndiaSide effects of demonetisation appear to have subsided, as demand for gold returns and India retains its title as the world’s fasted-growing major economy.

• Despite a cash crunch from demonetization, India outperformed China’s economy, posting a 7% GDP growth rate for the quarter ending December 2016. Analysts had predicted that India’s growth rate would decline by as much as 1% for the two quarters following the cash ban. The economy may take another short-term hit from a national sales tax, the Goods and Services Tax (GST), which is to replace India’s complicated list of state tariffs.

• In 2015, China replaced India as the largest importer of gold in the world. India has a huge appetite for gold, as it purchased 700 tonnes of gold for jewelry in 2015, while only mining 2 tonnes annually! Instead of purchasing bonds or buying stocks, most of India’s residents buy gold jewelry with savings to store wealth.

• The Indian government has tried to introduce a plan allowing residents to trade in gold for interest-bearing bonds to increase the lending power of its banking system. However, after two such attempts, the plan only netted 14 tonnes of gold in return. It is estimated that approximately 20,000 tonnes of gold is held by Indian residents as savings.

• India’s February 2017 gold imports surged to 50 tonnes, up more than 82% from a year ago, on pent-up jeweller demand and as retail consumers ramped up purchases for weddings. Additionally, the Indian government is considering reducing gold import taxes from 10% to 6%, to curb the incentive of smuggling the precious metal. The increased demand and lower import duties is expected to support global gold prices, which are currently trading at their highest levels in 15 weeks.






EurozoneIncreasing uncertainty regarding the success of a soft Brexit negotiation and looming political risks from upcoming elections continues to increase volatility in markets.

• Europe’s economies are likely to continue their expansionary monetary policy as they have for the past five years. Since the European Central Bank announced further quantitative easing measures in January 2015, its balance sheet has increased by US$1.6 trillion, resulting in an increase of 70% and bringing the current balance sheet total to more than US$3.8 trillion. As a result, the fears of currency depreciation will likely lead to substantial gold buying.

• Political risk is rising in Europe with England to negotiate its exit from the European Union and upcoming elections in the Netherlands, France, and Germany. The shock to the markets has been evidenced by the Greece and Spain elections just a few years ago, triggering inflation hedging and safe-haven demand. The continuation of tight fiscal and loose monetary policy is likely to pressure the euro and create friction amongst the Eurozone. It cannot be ruled out that perhaps a member would follow Britain’s lead in exiting the group; another Brexit would be bullish for gold.

• France’s first round of presidential elections is on April 23, and French presidential candidate Marine Le Pen’s following is gaining traction. Le Pen’s right-wing platform is promising a “Frexit” vote if she wins, and aims to uphold national sovereignty and independence.

• In the Eurozone banking sector, non-performing loans are reaching worrying levels in Cyprus, Greece, and Italy. There is increased speculation about possible failings of European Banks, such as Deutsche Bank, and the political turmoil in individual member states such as France, Netherlands, and Italy may re-escalate.






Gold Universe: Key Performers, Stats and AnalysisThis report is attempting to take an in-depth analytical perspective of the Top 34 gold-focused publicly listed companies in the world. Each of these companies have an Enterprise Value (EV) of greater than $100 million, and a combined EV of $111 billion.

Looking at the graph below, we notice that almost 75% of the stocks are trading higher than one year ago. The average return of these stocks is 35.4%, with Continental Gold Inc. (TSX:CNL) stealing the show with an 165% return.

The distribution of returns has a mean and median returns of 35% and 32%, respectively, with a whopping 51% standard deviation. Such a standard deviation indicates the variation of returns within the sector. Although most of the sector constituents are up over the past year, the high volatility of return signifies the importance of specific stock selection.

Figure 8: Price Change of Gold Constituents (52 weeks)


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The Ubika RatingPerforming a holistic and comprehensive analysis of the gold universe was attacked from three points of view: balance sheet health, operational success, and relative valuation. Within the three areas of focus lies analysis that is best suited for the metals & mining industry. Companies are given points for keeping certain financial metrics in check, and an overall point system is granted to the security in respect to its combined point total – i.e. its Ubika Rating. You will notice the Ubika Rating assigned to each company at the top right hand side of each tear sheet in Appendix A. The flow of the analysis is outlined in Table 1.

The flow of the analysis is outlined below:

1. Balance Sheet Fundamentals and Ratio Analysis• Debt / EBITDA• Coverage Ratio• Current Ratio• Debt / Equity

2. Operational Performance• Revenue Base• Operating Costs • Profitability Margins

3. Valuation• EV / ounces • P / FCF• P / BV






Gold Pro Report – A Look at Valuations

Our Valuation Analysis was designed based on evaluating companies on an EV to gold equiva-lent (AuEq) ounces in the ground. This is one of two main ways to perform a relative valuation analysis for mining-specific companies, with the other being a Price to Net Asset Value multiple (P/NAV). The latter multiple is only applicable to mines/companies with an economic assess-ment done of their assets. As this is not always the case with various miners (some companies only have a resource estimate, and an economic assessment has yet to be performed), we will only focus on the Ev/AuEq Valuation metric.

When not allocating for the type of deposit (proven & probable vs. measured & indicated vs. inferred), we see that companies trade at an average Ev/AuEq multiple of 93x.

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Figure 9: EV/AuEq. oz. Valuation Analysis







However, when you adjusted the AuEq value to account for the difference in the ounces in the ground (giving 90% probability of recovery to P&P reserve, 50% recovery to M&I resource, and 10% to Inferred resource), then you may draw a different analysis.

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Figure 10: EV/AuEq. oz. (adjusted) Valuation Analysis


Specifically, the valuation metric undoubtedly increase to an average of 187x, and some com-panies start to draw your attention. In this case, Gold Standard Ventures Corp. (TSXV:GSV) appears on the far right scale of this spectrum (an outlier as some might say), trading at a market cap of $539mm, with only 630 k oz. of M&I gold. The company is also one of the top performers over the past year, gaining 115%. Although its assets are in a prime location – the Carlin trend in Nevada – does this warrant such a high relative valuation?

This brings us to our next point …






Location MattersWhen discussing mineral exploration that is. Within the downloadable Excel file, you will no-tice another tab called “Mines.” This tab was segregated to include all the mines (with a reserve and/or resource) of the companies discussed. We can filter this file based on the location of the mine. If you are interested in properties in Nevada, then you can filter for that.

Identifier Company Name Name of Mine Location of Mine Type of Mine Phase

NEM.N Newmont Mining Corp Phoenix Nevada, USA Open-pit ProductionK.TO Kinross Gold Corp Round Mountain Nevada, USA Open-pit ProductionKDX.TO Klondex Mines Ltd Fire Creek Nevada, USA Underground ProductionKDX.TO Klondex Mines Ltd Midas Nevada, USA Underground ProductionPG.TO Premier Gold Mines Ltd South Arturo Nevada, USA Open-pit ProductionMUX.TO McEwen Mining Inc New Pass Nevada, USA Open-pit DevelopmentMUX.TO McEwen Mining Inc Limo Nevada, USA Open-pit DevelopmentMUX.TO McEwen Mining Inc Gold Bar Nevada, USA Open-pit DevelopmentNEM.N Newmont Mining Corp Turquoise Ridge Nevada, USA Underground ProductionMUX.TO McEwen Mining Inc Tonkin Nevada, USA Open-pit DevelopmentABX.TO Barrick Gold Corp Goldstrike Property Nevada, USA Open-pit/Underground ProductionGSV.V Gold Standard Ventures Corp Dark Star Nevada, USA Open-pit ExplorationK.TO Kinross Gold Corp Bald Mountain Nevada, USA Open-pit ProductionABX.TO Barrick Gold Corp Cortez Nevada, USA Open-pit/Underground ProductionNEM.N Newmont Mining Corp Twin Creeks Nevada, USA Open-pit ProductionGSV.V Gold Standard Ventures Corp Pinion Nevada, USA Open-pit ExplorationNEM.N Newmont Mining Corp Carlin Nevada, USA Open-pit/Underground ProductionNEM.N Newmont Mining Corp Turquoise Ridge Nevada, USA Underground ProductionABX.TO Barrick Gold Corp Turquoise Ridge Nevada, USA Underground Production

Figure 10: EV/AuEq. oz. (adjusted) Valuation Analysis







Global Decline in Capital ExpenditureAnother interesting observation that we can make from the data is the fall in global capital expenditure. A figure which once stood above $10 billion U.S. dollars in 2014, has dropped to just under $7.5 billion. However, the curve looks to reverse, as companies are projecting larger expenditure budgets in 2017.

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Global investment into mine development and exploration activity is a strong indicator of both the capital markets activity (investors’ appetite to give money to mining projects/companies) as well as the overall health of the industry. The more money that is being devoted to the industry, the more interest there appears to be.






Reserves & Resources Data

Company Name Ticker EV (mm) EV/AuEq. oz.AuEq oz.

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(000's)Inf.

(000's)

Barrick Gold Corp ABX.TO 29,210 147.8x 197,585 83,829 52,092 14,588Newmont Mining Corp NEM.N 21,064 174.6x 120,646 66,643 27,812 12,886Goldcorp Inc G.TO 15,484 140.1x 110,530 37,040 32,620 16,470Yamana Gold Inc YRI.TO 4,121 38.8x 106,184 23,170 19,927 14,115NovaGold Resources Inc NG.TO 1,617 23.0x 70,231 19,650 23,514 4,345Eldorado Gold Corp ELD.TO 1,880 29.9x 62,926 20,745 27,698 11,528Kinross Gold Corp K.TO 5,125 91.8x 55,802 30,966 15,250 5,134McEwen Mining Inc MUX.TO 940 17.7x 53,186 630 4,044 3,203Agnico Eagle Mines Ltd AEM.TO 9,877 218.0x 45,317 19,941 12,866 10,524IAMGOLD Corp IMG.TO 1,634 43.1x 37,904 7,690 23,481 6,733B2Gold Corp BTO.TO 3,201 118.3x 27,058 7,458 15,416 4,184Centerra Gold Inc CG.TO 1,743 66.9x 26,037 14,096 4,615 2,572Detour Gold Corp DGC.TO 2,246 104.9x 21,402 16,395 3,886 1,121Endeavour Mining Corp EDV.TO 1,735 89.0x 19,493 5,404 10,238 3,851Torex Gold Resources Inc TXG.TO 1,808 117.6x 15,374 3,630 4,120 4,340Banro Corp BAA.TO 288 18.8x 15,300 3,180 7,040 5,080Alacer Gold Corp ASR.TO 650 44.6x 14,589 4,987 7,122 1,405Continental Gold Inc CNL.TO 426 32.1x 13,263 3,710 4,480 4,500Argonaut Gold Inc AR.TO 204 15.8x 12,895 3,320 7,710 1,260Guyana Goldfields Inc GUY.TO 824 68.5x 12,037 3,537 6,250 2,250Golden Star Resources Ltd GSC.TO 395 34.2x 11,567 2,142 6,120 3,305Alamos Gold Inc AGI.TO 2,163 205.6x 10,522 5,880 3,839 803Asanko Gold Inc AKG.TO 598 57.0x 10,490 4,120 6,230 140Lundin Gold Inc LUG.TO 481 49.7x 9,684 0 7,350 2,130Premier Gold Mines Ltd PG.TO 378 39.9x 9,473 2,495 4,448 2,415Kirkland Lake Gold Ltd KL.TO 1,314 152.1x 8,637 2,296 3,345 2,996Semafo Inc SMF.TO 770 92.2x 8,354 3,265 2,970 2,119Dalradian Resources Inc DNA.TO 197 33.7x 5,853 1,438 2,095 2,310Wesdome Gold Mines Ltd WDO.TO 363 67.3x 5,390 431 2,300 2,659Timmins Gold Corp TMM.TO 115 32.5x 3,537 574 2,888 75Klondex Mines Ltd KDX.TO 794 251.7x 3,154 549 1,263 1,165Teranga Gold Corp TGZ.TO 259 95.2x 2,725 660 1,792 273Gold Standard Ventures Corp GSV.V 515 247.0x 2,087 0 630 1,456Roxgold Inc ROG.V 379 205.1x 1,847 759 810 278Total 112,798 1,131,080Average 93.1x

Gold

Figure 12: Gold Resource Data

Source: Ubika Research






Figure 12: Silver and Copper Resource Data


Company Name TickerP&P

(000's)M&I

(000's)Inf.

(000's)P&P

(000's)M&I

(000's)Inf.

(000's)

Barrick Gold Corp ABX.TO 44,100 7,500 12,300 10,856,000 9,093,000 1,259,000Newmont Mining Corp NEM.N 88,000 71,500 1,280 2,490,000 2,240,000 310,000Goldcorp Inc G.TO 205,260 394,930 72,530 3,455,960 657,710 2,600,950Yamana Gold Inc YRI.TO 182,500 69,000 0 13,060,000 2,379,000 5,386,000NovaGold Resources Inc NG.TO 51,100 68,200 23,900 3,406,000 4,466,000 1,613,000Eldorado Gold Corp ELD.TO 0 71,193 36,572 0 637,800 0Kinross Gold Corp K.TO 37,400 6,500 6,500 1,444,000 265,000 0McEwen Mining Inc MUX.TO 14,357 58,426 95,200 0 5,400,000 14,300,000Agnico Eagle Mines Ltd AEM.TO 53,509 26,543 13,694 170,122 53,316 62,238IAMGOLD Corp IMG.TO 0 0 0 0 0 0B2Gold Corp BTO.TO 0 0 0 0 0 0Centerra Gold Inc CG.TO 0 0 0 2,185,000 0 0Detour Gold Corp DGC.TO 0 0 0 0 0 0Endeavour Mining Corp EDV.TO 0 0 0 0 0 0Torex Gold Resources Inc TXG.TO 5,450 6,800 44,700 0 0 1,128,500Banro Corp BAA.TO 0 0 0 0 0 0Alacer Gold Corp ASR.TO 32,700 39,000 2,200 0 0 0Continental Gold Inc CNL.TO 10,700 13,980 14,700 0 0 0Argonaut Gold Inc AR.TO 0 38,190 3,390 0 0 0Guyana Goldfields Inc GUY.TO 0 0 0 0 0 0Golden Star Resources Ltd GSC.TO 0 0 0 0 0 0Alamos Gold Inc AGI.TO 0 0 0 0 0 0Asanko Gold Inc AKG.TO 0 0 0 0 0 0Lundin Gold Inc LUG.TO 0 9,900 4,100 0 0 0Premier Gold Mines Ltd PG.TO 3,500 4,419 0 0 0 0Kirkland Lake Gold Ltd KL.TO 0 0 0 0 0 0Semafo Inc SMF.TO 0 0 0 0 0 0Dalradian Resources Inc DNA.TO 664 0 0 0 0 0Wesdome Gold Mines Ltd WDO.TO 0 0 0 0 0 0Timmins Gold Corp TMM.TO 0 0 0 0 0 0Klondex Mines Ltd KDX.TO 2,700 7,031 2,412 0 0 0Teranga Gold Corp TGZ.TO 0 0 0 0 0 0Gold Standard Ventures Corp GSV.V 0 0 0 0 0 0Roxgold Inc ROG.V 0 0 0 0 0 0

Silver Copper






Company Name Ticker

2014 2015 2016 A/E 2017 ECapex Increase

(2017/2016)Barrick Gold Corp ABX.TO 2,432,000 1,713,000 1,120,000 1,400,000 280,000Newmont Mining Corp NEM.N 1,040,000 1,311,000 1,200,000 1,000,000 -200,000Goldcorp Inc G.TO 2,021,000 1,229,000 730,000 1,300,000 570,000Yamana Gold Inc YRI.TO 662,111 353,800 473,000 572,000 99,000NovaGold Resources Inc NG.TO 16,000 11,000 9,700 12,000 2,300Eldorado Gold Corp ELD.TO 410,690 347,060 310,000 425,000 115,000Kinross Gold Corp K.TO 631,800 610,000 633,800 900,000 266,200McEwen Mining Inc MUX.TO 17,634 10,731 17,990 10,900 -7,090Agnico Eagle Mines Ltd AEM.TO 475,412 449,758 535,000 850,000 315,000IAMGOLD Corp IMG.TO 354,600 200,700 280,000 25,000 -255,000B2Gold Corp BTO.TO 311,656 289,820 87,451 260,000 172,549Centerra Gold Inc CG.TO 276,285 243,767 247,700 155,000 -92,700Detour Gold Corp DGC.TO 132,175 100,804 105,000 170,000 65,000Endeavour Mining Corp EDV.TO 117,114 92,648 68,000 265,000 197,000Torex Gold Resources Inc TXG.TO 262,116 316,581 51,300 115,000 63,700Banro Corp BAA.TO 126,714 150,681 42,288 - -Alacer Gold Corp ASR.TO 35,320 65,008 353,000 475,000 122,000Continental Gold Inc CNL.TO 54,741 29,607 18,036 77,840 59,804Argonaut Gold Inc AR.TO 48,241 36,954 39,000 75,800 36,800Guyana Goldfields Inc GUY.TO 131,874 106,510 52,500 21,400 -31,100Golden Star Resources Ltd GSC.TO 32,804 57,051 84,400 58,400 -26,000Alamos Gold Inc AGI.TO 188,800 163,100 121,000 113,500 -7,500Asanko Gold Inc AKG.TO 64,522 219,034 42,808 122,500 79,692Lundin Gold Inc LUG.TO 154,240 40,633 42,618 27,300 -15,318Premier Gold Mines Ltd PG.TO 14,631 46,832 186,144 95,000 -91,144Kirkland Lake Gold Ltd KL.TO 66,743 55,282 120,000 50,000 -70,000Semafo Inc SMF.TO 68,591 79,449 234,000 65,000 -169,000Dalradian Resources Inc DNA.TO 7,872 28,042 23,349 22,500 -849Wesdome Gold Mines Ltd WDO.TO 14,014 11,398 28,300 31,000 2,700Timmins Gold Corp TMM.TO 47,113 31,989 5,800 4,000 -1,800Klondex Mines Ltd KDX.TO 29,982 45,620 50,000 59,500 9,500Teranga Gold Corp TGZ.TO 18,913 47,682 38,700 31,000 -7,700Gold Standard Ventures Corp GSV.V 10,613 6,583 23,064 15,000 -8,064Roxgold Inc ROG.V 10,448 55,909 97,475 26,000 -71,475Total 10,286,768 8,557,032 7,471,423 8,830,640

CapEx (includes expensed items) (000's)(red represent expected figures)

Figure 13: Capex Data







Company Name Ticker

2015 2016 2017 E 2015 2016 2017 E

Barrick Gold Corp ABX.TO $854 $730 720-770 6,117,000 5,520,000 5.6 - 5.9 millionNewmont Mining Corp NEM.N $898 $912 940-1000 5,035,000 4,900,000 4.9 - 5.4 millionGoldcorp Inc G.TO $894 $856 $850 3,464,400 2,873,000 2,500,000Yamana Gold Inc YRI.TO $868 $897 $910 1,280,000 1,270,000 920,000NovaGold Resources Inc NG.TO - - - - - -Eldorado Gold Corp ELD.TO $842 $915 845-875 723,532 485,994 365,000 - 400,000Kinross Gold Corp K.TO $980 $984 925-1025 2,620,262 2,789,150 2.5 - 2.7 millionMcEwen Mining Inc MUX.TO $919 $750 $940 154,529 145,530 144,000Agnico Eagle Mines Ltd AEM.TO $869 $824 850-900 1,671,340 1,662,888 1,550,000IAMGOLD Corp IMG.TO $1,118 $1,075 1000-1080 806,000 813,000 845,000 - 885,000B2Gold Corp BTO.TO $947 $795 940-970 493,265 550,423 545,000 - 595,000Centerra Gold Inc CG.TO $814 $682 786-873 536,920 598,677 715,000 - 795,000Detour Gold Corp DGC.TO $1,056 $1,005 1025-1125 505,558 537,765 550,000 - 600,000Endeavour Mining Corp EDV.TO $928 $895 865-905 516,646 583,712 600,000 - 640,000Torex Gold Resources Inc TXG.TO - $733 775-825 0 279,937 350,000 - 380,000Banro Corp BAA.TO $657 $876 183,000 197,691 240,000Alacer Gold Corp ASR.TO $966 $725 119,000 170,000Continental Gold Inc CNL.TO - - - -Argonaut Gold Inc AR.TO $853 $950 910-960 139,059 122,097 115,000 - 130,000Guyana Goldfields Inc GUY.TO - $738 775-825 - 151,600 160,000 - 180,000Golden Star Resources Ltd GSC.TO $1,158 $1,093 970-1070 222,416 194,054 255,000 - 280,000Alamos Gold Inc AGI.TO $1,099 $1,000 $940 380,000 392,000 400,000 - 430,000Asanko Gold Inc AKG.TO $907 810 - 840 - 158,000 - 163,000 220,000Lundin Gold Inc LUG.TO - - - -Premier Gold Mines Ltd PG.TO 660-690 112,018 125,000 - 135,000Kirkland Lake Gold Ltd KL.TO $1,338 $940 950-1000 102,597 542,751 500,000 - 525,000Semafo Inc SMF.TO $652 $720 795-835 255,900 240,000 215,000 - 235,000Dalradian Resources Inc DNA.TO - - - -Wesdome Gold Mines Ltd WDO.TO $1,206 $1,289 1075-1150 50,470 47,737 52,000 - 58,000Timmins Gold Corp TMM.TO $1,144 $800 <$1000 93,353 100,322 70,000 - 75,000Klondex Mines Ltd KDX.TO 1070-1130 160,457 210,000 - 225,000Teranga Gold Corp TGZ.TO $1,023 $940 1000-1075 182,282 216,735 205,000 - 225,000Gold Standard Ventures Corp GSV.V - - - -Roxgold Inc ROG.V 740-790 77,157 105,000 - 115,000

Au Produced (oz.)AISC / Au oz. produced

Figure 13: Capex Data







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