Metals & Mining For FCA purposes this is a Marketing Communication Analysts Cailey Barker Tel: +44 (0)20 7260 1420 [email protected]Phil Swinfen Tel: +44 (0)20 7260 1430 [email protected]This research was prepared and approved by Numis Securities Limited The London Stock Exchange Building 10 Paternoster Square London EC4M 7LT +44 (0)20 7260 1000 [email protected]www.numis.com Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange 9 April 2015 Metals & Mining Industry Update Treading Water We revise our recommendations and target prices on the back of our new commodity price forecasts. Q1 was another tough quarter - a brief bounce was short lived, as a dive in copper and iron ore dragged down the sector once again. We still expect little respite through this year with a headwind of depressed prices and downward earnings momentum. Despite some improvement in businesses and lower input costs, we retain our view that only the strong will survive through what appears to be close to the bottom of the cycle. We tweak our stock picks, keeping with a theme of value and high quality assets; we recommend Acacia, Petra and Highfield Resources. ● Quality & value. We retain Acacia Mining as our pick, a quality company going through a pivotal year with lots potential for substantial cash generation if it can deliver. We continue with Petra Diamonds, with its peer-leading management and assets plus steady growth profile. We include Dalradian Resources as our choice of the gold juniors and elevate Highfield Resources to a pick as the best play in the potash space, both companies with quality, high return assets in developed jurisdictions. We retain our caution amongst the copper players and avoid iron ore. ● Downgrades aplenty. We expect further earnings downgrades this year and retain our caution, expecting "riskier" stocks, to remain under pressure. The sector continues to price-in discounted gold and industrial prices, at an average 8% discount to spot (implied prices $1,107/oz gold, $2.69/lb copper, $59/t iron ore). Our TPs increase by an average of 2%. We are cautious but see value in some shares on a 1-3 year view, reflected by a number of Buy recommendations. ● M&A over-rated. We expect the spotlight to continue for the rest of the year on cost- cutting, free cashflow, balance sheets and shareholder returns. M&A is likely to remain in focus as stretched finances may offer opportunities in times of distress, although there are limited quality assets on offer, in our view. We are ever cognisant of grade remaining a key attribute and those with low margin assets are likely remain under pressure. ● Commodities nearing bottom. Fx remains a key driver. For gold, we retain our $1,200/oz flat spot price based model, due to ongoing volatility, mixed directional signals, and a de-coupling from logical fundamental indicators. We expect industrials to remain subdued, with building surpluses and weakening Chinese demand; we chop our iron ore forecasts (2015 NUMe $2.71/lb Cu, $55/t Fe). Diamonds are likely to remain flattish in the ST due to rolling liquidity constraints. Other commodities are generally subdued, failing to respond to what may appear ambitious long term fundamentals. For FCA purposes this marketing communication has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of such research. Important disclosures are on pages 70 to 74 relating to Numis Securities Limited, analyst certification, other requirements which restrict dealing ahead, relevant investment banking relationships, potential conflicts of interest and additional disclosures. See www.numis.com/x/regulatory.html for other disclosures.
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Metals & MiningFor FCA purposes this is a Marketing Communication
Registered No 02285918. Authorised andRegulated by The Financial ConductAuthority. A Member of the LondonStock Exchange
9 April 2015Metals & MiningIndustry Update
Treading Water
We revise our recommendations and target prices on the back of our newcommodity price forecasts. Q1 was another tough quarter - a brief bounce wasshort lived, as a dive in copper and iron ore dragged down the sector once again.We still expect little respite through this year with a headwind of depressed pricesand downward earnings momentum. Despite some improvement in businesses andlower input costs, we retain our view that only the strong will survive through whatappears to be close to the bottom of the cycle. We tweak our stock picks, keepingwith a theme of value and high quality assets; we recommend Acacia, Petra andHighfield Resources.
● Quality & value. We retain Acacia Mining as our pick, a quality company goingthrough a pivotal year with lots potential for substantial cash generation if it can deliver.We continue with Petra Diamonds, with its peer-leading management and assets plussteady growth profile. We include Dalradian Resources as our choice of the goldjuniors and elevate Highfield Resources to a pick as the best play in the potash space,both companies with quality, high return assets in developed jurisdictions. We retainour caution amongst the copper players and avoid iron ore.
● Downgrades aplenty. We expect further earnings downgrades this year and retainour caution, expecting "riskier" stocks, to remain under pressure. The sector continuesto price-in discounted gold and industrial prices, at an average 8% discount to spot(implied prices $1,107/oz gold, $2.69/lb copper, $59/t iron ore). Our TPs increase byan average of 2%. We are cautious but see value in some shares on a 1-3 year view,reflected by a number of Buy recommendations.
● M&A over-rated. We expect the spotlight to continue for the rest of the year on cost-cutting, free cashflow, balance sheets and shareholder returns. M&A is likely to remainin focus as stretched finances may offer opportunities in times of distress, althoughthere are limited quality assets on offer, in our view. We are ever cognisant of graderemaining a key attribute and those with low margin assets are likely remain underpressure.
● Commodities nearing bottom. Fx remains a key driver. For gold, we retain our$1,200/oz flat spot price based model, due to ongoing volatility, mixed directionalsignals, and a de-coupling from logical fundamental indicators. We expect industrials toremain subdued, with building surpluses and weakening Chinese demand; we chop ouriron ore forecasts (2015 NUMe $2.71/lb Cu, $55/t Fe). Diamonds are likely to remainflattish in the ST due to rolling liquidity constraints. Other commodities are generallysubdued, failing to respond to what may appear ambitious long term fundamentals.
For FCA purposes this marketing communication has not been prepared in accordancewith legal requirements designed to promote the independence of investment researchand is not subject to any prohibition on dealing ahead of the dissemination of suchresearch. Important disclosures are on pages 70 to 74 relating to Numis SecuritiesLimited, analyst certification, other requirements which restrict dealing ahead, relevantinvestment banking relationships, potential conflicts of interest and additionaldisclosures. See www.numis.com/x/regulatory.html for other disclosures.
Contents
Treading Water _______________________________________________________ 4
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange8
Beta Back in Gold, AWOL in Base Metals
Beta Returning as Gold/Equities Reconnect
Equities once again offer significant leverage to the gold price
LT Chart – HUI vs Gold
Correlation broke down in 2011 but is returning
12m Chart – HUI vs Gold
Correlation returns to equities
Base Metal Equities – Beta Disappearing
Volatility abounds. Equities and copper price follow own path
Dislocation Closed – Copper Follows the Pain Trail
Base metals driven by the macro, equities focused on staying alive
R2 ranges from 0 to 10. Determines % of the equities’ movement that is explained by the underlying index/benchmark. 0 = no correlation, 100= full correlation. Measure
of “goodness of fit” of the data. Higher R-squared (>75) indicates a more useful Beta data. Thus R2 and Beta must be used in conjunction
Beta indicates how sensitive the measured equity is to the underlying market (index or commodity). A high Beta (above 1) indicates that the equity is more volatile than
the underlying, whilst a Beta of less than 1 indicates less volatility than the market.
Registered No 02285918. Authorised andRegulated by The Financial ConductAuthority. A Member of the LondonStock Exchange
9 April 2015
BUY
Current Share Price 270pTarget Price 370pMarket Capitalisation £1.1bnShares In Issue 410mRIC/BLBG ACAA.L/ACA LNAvg. Daily Volume (3M) 665,245
Current share price(s) timed at 7:00AM on 07/04/15
Apr- 14 Jul- 14 Oct- 14 Jan- 15 Apr- 15
340320300280260240220200180
Share Price
Acacia MiningRelat ive to UK Market
Performance (%) 1M 3M 12M
Absolute 11 2 9
Relative 11 -6 4
Source: Datastream (relative to UK-DS Market index)
Acacia MiningEstimate Changes
The Money Tree
We maintain our BUY recommendation and increase our TP to 370p, from 340p,due to our new commodity price forecasts and changes to our model. Remains ourgold pick.
● Company Snapshot. Mid-tier African gold producer with three operating mines inTanzania and exploration properties in Kenya. Spun out of Barrick in April 2010(previously named African Barrick). ABX owns 64%.
● Investment Thesis. Buly is key – Group production of +750kozpa at AISC of <$900/ozover 5 years; Buly at 350kozpa at AISC <$900/oz from current 200koz by end 2015(50koz grade/productivity, 60koz Upper East, 40koz CIL expansion). Key is achievingsustainable reserve grade of 9.5g/t. LT potential for +400kozpa with exploration tofirm up an additional 5Moz. We believe establishing additional production centres toprovide operational flexibility will be key. North Mara at 250kozpa at $900/oz withGokona underground to bring CFs forwards, reduce footprint and ease illegal miningissues. Buzwagi on 5 year LOM plan. FCF focus – New management are drivingcosts down, improving efficiencies and rationalising the business. We expect to seecontinued better numbers with a few speed bumps on the way. Barrick - Barrick islikely to reduce its interest further at some point, caping potential gains.
● Guidance - 2015: 750-800koz (up 9%) at TCC of $695-725/oz and AISC of$1,050-1,100/oz (down 5%). H2 weighted with Buly 300-330koz at $950-1,000/oz.Capex $220-240m.
● Preview Q1 (23 Apr). Flat quarter with production of 180koz at a cash cost of $737/ozand AISC of $1,069/oz (Q4 181koz at $744/oz, AISC $1,088/oz). Buly flat at 66koz withelevated tonnages maintained as Upper East and CIL expansion commissioning; NorthMara and Buzwagi flat with marginally lower planned grades. FY guidance maintained.Financials: EPS of $0.06 (Q1/Q4 2014 $0.05), up q-o-q on higher gold prices andy-o-y on higher production. EBITDA up sharply q-o-q at $67m. Balance sheet flatwith minimal $2m in FCF, up at $292m (debt $142m). We look to see how the BulyCIL expansion is performing plus Upper East (Buly) and Gokona underground (NorthMara).
● Valuation. Blend of 1.5x NAV/5x P/CF (middle of 1-2x NAV/5-15x P/CF range forgolds).
● Risks. Medium - Tanzanian politics, social unrest at North Mara, VAT receivables &back tax claims, operational delivery risk, Barrick interest
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange24
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Figure 1: Model summary
Source: Company & Numis Securities Research
Acacia Mining Ticker ACA.L Market Capitalisation £1,107m Financial Year End Dec
BUY Current Share Price £2.70 Enterprise Value (EV) £1,007m Reporting Currency US$
£3.70 Implied Return 37% Net Debt (Cash) -$150m Shares in Issue 410m
Valuation Key Metrics 2013 2014 2015F 2016F 2017F
Net Asset Value Disc Rate NAV (%) $m $/sh £/sh EPS ($/sh) - Underlying 0.26 0.22 0.24 0.44 0.44
Current share price(s) timed at 7:00AM on 07/04/15
Apr- 14 Jul- 14 Oct- 14 Jan- 15 Apr- 15
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Share Price
AntofagastaRelat ive to UK Market
Performance (%) 1M 3M 12M
Absolute -1 3 -13
Relative -2 -5 -17
Source: Datastream (relative to UK-DS Market index)
AntofagastaEstimate Changes
Red Light
We maintain our REDUCE recommendation and £6 TP, despite our revisedcommodity price forecasts and changes to our model.
● Company Snapshot. FTSE100 major copper producer with four operating mines inChile, producing 700ktpa, plus three development projects. Also has the Twin MetalsProject in USA and water and transport distribution. 65% owned by Luksic Group.
● Investment Thesis. A stable and conservative business with steady, mostly brownfieldgrowth. Given high capex requirements over the next few years, repeat specialdividends are unlikely, in our view, but may be higher than 35% payout. ST growth- Immediate production plan is to reach 900kt by 2018 due to brownfield expansionsat Centinela Concentrates (Esperanza, 105ktpd debottlenecking; 10-12ktpa Cu fromend 2015, capex $110m), Los Pelambres (15% increase to 205ktpd; 95ktpa Cu from+2018, feasibility end 2016), Centinela Cathodes (50ktpa from H2 2016, maintains ElTesoro at 100ktpa, capex $636m), Centinela moly plant (2.4ktpa from H2 2016, capex$125m). Antucoya is progressing on schedule and budget. LT growth - Centinelasecond concentrator (140ktpa Cu & 150kozpa Au, capex $2.7bn, likely +2019, notin our model). Los Pelambres has potential to be doubled but full evaluation andpermitting is expected to take a number of years. Twin Metals has been bought andundergoing evaluation but likely one for the future.
● Guidance. 2015: 710kt copper (less 8kt loss for protect +/- flooding disruptions),250koz gold, 7.5kt moly at C1 cost of $1.50/lb net by-products ($1.85/lb gross), Capex$1.3bn.
● Preview Q1 (29 Apr). Production down 14% q-o-q and 5% y-o-y at 161kt copper (Q4187kt, Q1 2014 170kt) due to production disruptions from the protests and flooding.Gold and moly also down at 64koz and 1.9kt (Q4 82koz & 2.4kt). Cash costs up 6%q-o-q at $1.88/lb (gross) and $1.49/lb (net). Tonnages and grades down across theboard. 2015 guidance expected maintained for now, with losses expected to be madeup in the year. Antucoya on track for start-up this quarter.
● Valuation. Blend of 1x NAV/15x P/E (top of 7-15x P/E range for copper producers).
● Risks. Low - Proposed tax changes in Chile (being evaluated, with $105-150mdeferred tax provision), Chilean politics.
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange26
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Figure 1: Model summary
Source: Company & Numis Securities Research
Antofagasta Ticker ANTO.L Market Capitalisation £7,207m Financial Year End Dec
Registered No 02285918. Authorised andRegulated by The Financial ConductAuthority. A Member of the LondonStock Exchange
9 April 2015
BUY
Current Share Price 24pTarget Price 40pMarket Capitalisation £88mShares In Issue 367mRIC/BLBG AUE.L/AUE LNAvg. Daily Volume (3M) 822,249Broker Yes
Current share price(s) timed at 7:00AM on 07/04/15
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Aureus MiningRelat ive to UK Market
Performance (%) 1M 3M 12M
Absolute 7 24 -22
Relative 6 14 -26
Source: Datastream (relative to UK-DS Market index)
Aureus MiningEstimate Changes
On the Cusp of Production
We maintain our BUY recommendation and 40p TP, despite our revised commodityprice forecasts and changes to our model.
● Company Snapshot. Aureus is an AIM and TSX-listed gold explorer and developerfocused in Liberia. Its main asset is the 120kozpa New Liberty project expected tostart production in May 2015, becoming Liberia's first commercial gold mine. Otheradvanced exploration prospects exist within the sizeable 1,470km² licence portfolio.
● Investment Thesis. Aureus is firmly on the way to becoming a African junior goldproducer with financing complete and development started. Robust project - NewLiberty has a 0.9Moz reserve with a high grade of 3.4g/t (1.7Moz resource). Standardopen pit and 1.1Mtpa gravity/CIL operation is envisaged. Following the new mine planin February 2015, LOM production is expected to be 107kozpa over 8 years (119kozpafirst 6 years), at a cash costs of $692/oz (AISC $789/oz). The new plan included anadditional starter pit so the project will have increased operational flexibility throughthe provision of a larger stockpile and more working faces, plus access to higher gradeore earlier. Fully financed - Project capex was estimated at $152m (inc. contingency).Fully funded following recent $18m equity raising. c$24m in potential "dead money"due to debt service requirements and contingencies. Exploration upside - Additionalproduction potential from Ndablama (plus possibly the 180koz Weaju prospect),30-40km away with resources of 0.9Moz, grading 1.7g/t. Initial testwork is encouragingand pit optimisation will be taken this year; with a shallow dip and decent thickness weshould see low strip ratios. Also further potential to increase mine life or go undergroundat New Liberty.
● Guidance. 2015: 60koz.
● Preview Q1. First gold pour now scheduled for the end May (full pelt July). We forecastcapex of c.$55m required to complete construction. We forecast cash of $40m anddebt of $90m at end Q1, following the recent $15m raising to cover the cost delaysfrom Ebola.
● Valuation. Blend of 1x NAV/5x P/CF (bottom of 1-2x NAV/5-15x P/CF range for golds).
Registered No 02285918. Authorised andRegulated by The Financial ConductAuthority. A Member of the LondonStock Exchange
9 April 2015
BUY
Current Share Price 12pTarget Price 40pMarket Capitalisation £22mShares In Issue 180mRIC/BLBG BKY.L/BKY LNAvg. Daily Volume (3M) 22,733
Current share price(s) timed at 7:00AM on 07/04/15
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Berkeley ResourcesRelat ive to UK Market
Performance (%) 1M 3M 12M
Absolute 7 -20 -23
Relative 6 -26 -27
Source: Datastream (relative to UK-DS Market index)
Berkeley ResourcesEstimate Changes
Game Changer on the Horizon
We maintain our BUY recommendation but increase our TP to 40p, from 35p, dueto our updated commodity prices and changes to our model.
● Company Snapshot. Berkeley is an AIM/ASX listed uranium developer focused onSpain. The company’s flagship asset is the Salamanca Project in Western Spain wherea DFS is underway. Permitting is well advanced and we estimate first production in2018 depending on uranium prices.
● Investment Thesis. Low capex and opex, robust resource, simple open pitshallow mining, low-risk jurisdiction, uranium developer with regional hub model,first production should coincide with a higher price environment. Regional Hub -Salamanca is composed of three separate deposits: Retortillo, Alameda and recentlydefined Zona 7. Plans to build a centralised processing plant at Retortillo with heapleach at each site, for competitive opex and capex and growth flexibility. Resourcedoubled. New Zona 7 resource brings total resource to 88Mlbs at 469ppm, better thanmost African projects. Satellite Promoted. Zona 7 (10km away) is now the largestdeposit within Salamanca and higher grade (589ppm). Scoping study due Q2 2015 tointegrate into DFS with potential to defer Retortillo/Alameda capex as Zona 7 likely tojump queue being high-grade, shallow and low pre-strip. Timeline drag will be that Zona7 needs permitting. Existing PFS plan. 3.3Mlbs U3O8 p.a, cash costs $25/lb (AISC c.$29/lb), mid-low on cost curve. Initial capex for Retortillo is $95m. Growth Potential -Lots more satellite potential (eg. Gambuta) within trucking distance. Zona 7 resourceremains open. Balance sheet. A$16m cash and comfortable.
● News Catalysts: Zona 7 scoping study (Q2), Resource update (Q2).
● Uranium Market. Currently challenging but excellent long term fundamentals due aprojected doubling of electricity consumption by 2030 and increased contribution fromnuclear requiring a substantial world reactor build-out. New mine supply is constrainedby new project delays, cancelled expansions and mothballing of existing operations,whilst secondary supply is dwindling due to the end of the Russian HEU programme.Restart of Japanese reactors is now rolling out - four so far, twenty under review.Restarts drawn-out and onerous process but ultimately key market catalyst to promptunavoidable resumption of U3O8 contracting volumes, as despite inventory build up,utilities typically plan 3-5 years out to secure feed. 2014 contract volumes triple 2013'slow. Major reactor build-out in China (under pressure to cut pollution) also underpinsdemand story. Our LT price is $60/lb vs spot at $39/lb.
● Valuation. 0.5x NAV, middle of 0.25-1x P/NAV range for pre-producers.
● Risks. Low - Project delivery risk, environmental approval and permitting in Spain,project financing, uranium market.
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange30
1
Figure 1: Model summary
Source: Company & Numis Securities Research
Berkeley Resources Ticker BKY Market Capitalisation £22m Financial Year End June
Registered No 02285918. Authorised andRegulated by The Financial ConductAuthority. A Member of the LondonStock Exchange
9 April 2015
BUY
Current Share Price 39pTarget Price 75pMarket Capitalisation £20mShares In Issue 52mRIC/BLBG CALq.L/CMCL LNAvg. Daily Volume (3M) 11,298Broker Yes
Current share price(s) timed at 7:00AM on 07/04/15
Apr- 14 Jul- 14 Oct- 14 Jan- 15 Apr- 15
6560555045403530
Share Price
Caledonia Mining CorpRelat ive to UK Market
Performance (%) 1M 3M 12M
Absolute 3 -1 -12
Relative 2 -9 -17
Source: Datastream (relative to UK-DS Market index)
Caledonia Mining CorpEstimate Changes
Building a Golden Future
We maintain our BUY recommendation and 75p TP, despite our new commodityprice forecasts and changes to our model.
● Company Snapshot. Caledonia Mining is an AIM/TSX-listed junior gold producerfocused in Zimbabwe. Its flagship asset is the low cost, cash-generative Blanket mine,which is fully indigenised and potentially being expanded to 75-80kozpa by 2021, fromthe current 40kozpa.
● Investment Thesis. Low cost growth - Blanket is a historic mine with excellentinfrastructure, being expanded to 75-80kozpa by developing down-dip extensionsbelow 750m via a central shaft and the No.6 Winze, plus making minor modificationsto the under-utilised plant. Cash is king - Caledonia has c.$27m in cash and no debt.Growth comes at a very low $70m in capex, which will be funded internally. Blanket isan efficient, low-cost and cash generative mine with AISC of c.$900/oz, well below theindustry average (a function of low power and labour costs, plus natural ventilation in adry mine). Caledonia pays an 8% yield. Upside potential - We see potential to increaseproduction by 10-15kozpa from satellite properties, subject to more work. There is alsopotential for further operational efficiencies. M&A potential - Longer term, Caledoniawill have a decent cash pile and a hungry plant, putting it in a strong position to pickup distressed assets in Zimbabwe.
● Guidance. 2015: 42koz (NUMe 42koz).
● Preview Q1. Production of 10koz, slightly down q-o-q. 2015 guidance maintained. EPSof 3.5c, up q-o-q on WIP and higher gold price.
● Valuation. Blend of 1x NAV/5x P/CF (bottom of 1-2x NAV/5-15x P/CF range for golds).
● Risks. High - Zimbabwe: Caledonia has navigated through Zimbabwean politicalchallenges and pioneered a successful indigenisation structure. Recent new marketinglaw for gold sales to state owned Fidelity is working out ok so far but there is alwaysa risk of political or legal change, in our view.
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange32
1
Figure 1: Model summary
Source: Company & Numis Securities Research
Caledonia Mining Ticker CMCL.L Market Capitalisation £20m Financial Year End Dec
Current share price(s) timed at 9:00AM on 07/04/15
Apr- 14 Jul- 14 Oct- 14 Jan- 15 Apr- 15
807570656055504540
Share Price
Centamin EgyptRelat ive to UK Market
Performance (%) 1M 3M 12M
Absolute 1 -7 12
Relative 1 -14 6
Source: Datastream (relative to UK-DS Market index)
Centamin EgyptEstimate Changes
Egyptian Yield
We maintain our HOLD recommendation and 60p TP, despite our revisedcommodity price forecasts and changes to our model.
● Company Snapshot. TSX/LSE-listed Mid-tier Egyptian gold producer. Main assetis the world class, 450-500kozpa Sukari gold mine. Also has some earlier stageexploration properties in Burkina Faso (Ampella) and Ethiopia.
● Investment Thesis. World class mine - Sukari has a 15Moz resource in a mine life of+20 years. It is the first and only commercial gold mine in the country, held in a 50%production sharing agreement with the government. Ramping up - Stage 4 10Mtpaplant expansion is complete ($330m). The original 5Mtpa plant had been runningat +15-20% of nameplate capacity so there is potential for 11-12Mtpa in our view.Underground is key - Productivity is up to 1Mtpa although there is potential to push this.Grade is key, originally expected to average 8-10g/t, but closer to 6.5-7g/t in the shortterm. Geology is tricky but potential is evident, with real upside from a second Ptahdecline (not in LOM plan). We expect to see the operation surprise to the upside withpotential to beat on plant throughput or underground grade. Cash & divi - Reducingcapex and no debt leaves plenty cash available. Dividend policy of 15-30% of FCF(2-4% yield). Profit sharing payments expected to start H2 2016. Legal cases - 2 casesregarding legitimacy of its exploitation licence by a private individual and fuel subsidy.Likely to take some time to resolve although a recent new law to restrict third partychallenges may quicken the process.
● Guidance. 2015: 420koz at cash operating cost of $700/oz (exc. royalties and fuelsubsidy), AISC $950/oz. From H2 hits the longer term rate of 450-500kozpa at $700/oz (AISC $850-900/oz).
● Preview Q1 (13 May). Q1 produced 108koz, 16% down q-o-q but better than guided,with open pit grades moving down temporarily in line with the mine plan. FY guidanceis maintained but looks well on track to beat it as expected (NUMe 445koz). Financials- EPS of 1.4c, down q-o-q on lower production and y-o-y on lower gold prices (NPAT$17m, 2014 Q1 1.9c), EBITDA of $45m, up y-o-y but down q-o-q. Balance sheetremaining strong, up at $181m has capex falls away and FCF is generated. Cashoperating costs $733/oz, up q-o-q on lower grades and ounces. No material updatesexpected on legal cases with a hopeful change around on the new law to restrict thirdparty challenges.
● Valuation. Blend of 1x NAV/5x P/CF (bottom of 1-2x NAV/5-15x P/CF range for golds).
Current share price(s) timed at 7:00AM on 07/04/15
Apr- 14 Jul- 14 Oct- 14 Jan- 15 Apr- 15
20181614121086
Share Price
Chaarat GoldRelat ive to UK Market
Performance (%) 1M 3M 12M
Absolute -8 -34 -29
Relative -8 -39 -32
Source: Datastream (relative to UK-DS Market index)
Chaarat GoldEstimate Changes
DFS Abound
We maintain our BUY recommendation but increase our TP to 24p, from 23p, dueto our new commodity price forecasts and changes to our model.
● Company Snapshot. Chaarat is an AIM-quoted junior gold developer focused inKyrgyzstan. Its flagship asset is the 6.1Moz Chaarat gold project, with the resourcecontained within the Tulkubash (oxide) and Kiziltash (sulphide & refractory) deposits.DFS is expected mid 2015.
● Investment Thesis. Potential outweighs challenges - World Class potential +10Mozdeposit (current resource 6km of total 40km strike) with decent grades of +3g/t (1.7g/t Tulkubash), healthy mineable widths up to 20m, and relatively simple and consistentgeology. Topographically challenging location with a seasonally harsh climate, limitedinfrastructure and steeply dipping, predominantly refractory ore. Strategic partnerlikely - Given scale and financing requirements, plus close proximity to China, astrategic partner seems the likely solution to develop the project. The DFS shouldmake the project more robust and put Chaarat in a stronger bargaining position withShandong and other potential strategic investors. DFS Making progress - Beingundertaken by China Nonferrous (NFC), Chaarat's 9% shareholder - expected tocomplete mid 2015, which will keep costs down and align the company with a potentialdevelopment partner. DFS will define operating parameters; Initial assumptions are fora 250kozpa, with the option to develop in 2 stages. Initial stage will be a 120kozpa heapleach - a sizeable 5Mtpa operation with low grade (0.9g/t), low strip (2:1) and cashcosts of $550-600/oz; Second stage will be open pit/underground to process refractoryore by POX/Biox. Phase 1 will have ore transported through a 10km long tunnel to theplant, so will take c.3 years to complete. We conservatively estimate start-up in 2019,with capex of $200-250m for stage 1 and $150m for stage 2. A resource update forTulkubash is expected over the coming months. Funded to complete - recent raised$5m to Fasanara Capital (26%), which is sufficient to last until Q1 2016.
● Valuation. 0.75x NAV (middle of 0.5-1x NAV range for gold pre-producers).
Registered No 02285918. Authorised andRegulated by The Financial ConductAuthority. A Member of the LondonStock Exchange
9 April 2015
BUY
Current Share Price 64pTarget Price 90pMarket Capitalisation £29mShares In Issue 46mRIC/BLBG CNR.L/CNR LNAvg. Daily Volume (3M) 101,561Broker Yes
Current share price(s) timed at 7:00AM on 07/04/15
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Condor GoldRelat ive to UK Market
Performance (%) 1M 3M 12M
Absolute 10 3 -9
Relative 9 -5 -14
Source: Datastream (relative to UK-DS Market index)
Condor GoldEstimate Changes
Dotting the i's and crossing the t's
We maintain our BUY recommendation and 90p TP despite our revised commodityprice forecasts and changes to our model.
● Company Snapshot. AIM-listed gold developer focused on Nicaragua. PFScompleted Nov 2014 on its flagship 2.3Moz La India gold project. Focus of the PFSon the Indicated 830koz resource but Condor's all about options including mining ofsatellite pits, underground mining and a district scale exploration play. A clear take-outtarget for a larger player.
● Investment Thesis. High Grade Simplicity. Robust resource of 2.3Moz Au ofwhich 900koz is open-pittable at a high grade of 3.1g/t, well above peers (1.7g/t).Reserve 675koz at 3g/t Au. Simple mining, low capex, lower quartile AISC, excellentinfrastructure with roads and power, lower risk jurisdiction. Takeover Target. Given theproject's high-grade and advance stage, we believe Condor could be a take-over targetfor a larger player. PFS options. Base case - 0.8Mpta mill, 79kozpa, 9 year LOM,AISC of $690/oz and capex $110m. PFS included two PEA scenarios - A: includingsatellite pits and B: satellites + underground. Scenario "A" is based on a larger plantand increases production by 25% (1.2Mtpa plant, 97kozpa, 8 year LOM, capex $127m,AISC $685/oz). Scenario B boosts gold production to 137koz pa but comes with acapex of $169m. Our View. We base our valuation on Scenario A as we believe it doesnot make sense to exclude satellite pits - 100kozpa, 9 year LOM, $130m capex, AISCof $740/oz, start up 2018, 30% IRR. We see Condor defining a modest, high-gradeopen pit as a foundation and expanded from there. District play. Real upside is thescalability of a new district play - numerous untested targets within trucking distance- 75% of the district is unexplored. Cash to keep busy. £6.4m placing in Q3 2014,£3.5m from the IFC, a strong endorsement of the project. Current Activity- focusedon the de-risking the project through permitting and land acquisition and working on allthe soft issues before moving into the BFS and significant expenditure.
● Valuation. 0.75x NAV (middle of 0.5-1x NAV range for gold pre-producers).
● News Catalysts. On-going exploration - Drilling at La India for depth and strikeextensions and exploration drilling at Real de la Cruz.
Registered No 02285918. Authorised andRegulated by The Financial ConductAuthority. A Member of the LondonStock Exchange
9 April 2015
BUY
Current Share Price 49pTarget Price 90pMarket Capitalisation £80mShares In Issue 162mRIC/BLBG DALR.L/DALR LNAvg. Daily Volume (3M) 24,693
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Dalradian ResourcesRelat ive to UK Market
Performance (%) 1M 3M 12M
Absolute -11 28 n/a
Relative -11 18 n/a
Source: Datastream (relative to UK-DS Market index)
Dalradian ResourcesEstimate Changes
The Golden Shamrock
We maintain our BUY recommendation and 90p TP, despite our new commodityprice forecasts and changes to our model.
● Company Snapshot. Dalradian is an AIM/TSX-listed gold developer based inNorthern Ireland. Its flagship asset is the high grade 3.5Moz Curraghinalt project, whichis undergoing a PFS, expected to produce 162kozpa at an AISC of <$700/oz from2019.
● Investment Thesis. We view Dalradian as a rare investment opportunity for low-risk,high-grade exposure in the junior gold space. After successfully defining an attractiveand sizeable project in under 4 years, it is now de-risking it through permitting andfeasibility. The project is one of the few high grade gold projects in the world, locatedin a developed jurisdiction with low costs/capex and excellent infrastructure. We seeplenty of upside potential in what could well become a new gold belt. Grade is king -Curraghinalt has a decent 3.5Moz resource at a high grade of 9.3g/t (diluted). The 2014revised PEA envisaged a conventional 620ktpa shallow underground/CIL operation.Cash costs and capital intensity are bottom quartile at $485/oz and $86/oz (capex$250m). A PFS is expected to be completed by the year end, which is investigating anumber of potential options which should enhance the project. Location, Location -Strong government and local community support. Like its neighbour, Northern Irelandis pro-investment and mining friendly. It has already approved use of explosives forDALR's underground program and we expect to see a similar success story as WolfMinerals has enjoyed. With strong support and first world infrastructure we think that itwould be when, rather than if, the project gets developed. Plenty of upside - We seeplenty of upside, including a reduction in NI tax to 12% (TBA soon), increased mine life,plus exploration upside - open in all directions on a largely unexplored 12km gold trend,which we ascribe no value to. We believe the region has potential to become a major+10Moz gold district. Value to be had - The shares are trading behind its high gradepeers and we would expect a re-rating as it moves through the stages of feasibility andde-risks towards production. We see plenty of newsflow this year to drive the shareswith exploration results, permitting, underground development, resource update andPFS results.
● Valuation. 0.5x P/NAV (bottom of 0.5-1x P/NAV range for gold pre-producers).
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FerrexpoRelat ive to UK Market
Performance (%) 1M 3M 12M
Absolute 18 18 -58
Relative 17 9 -60
Source: Datastream (relative to UK-DS Market index)
FerrexpoEstimate Changes
Pellet Protection
We maintain our HOLD recommendation and 60p TP, despite our revisedcommodity price forecasts and changes to our model.
● Company Snapshot. FTSE250 iron ore producer in Ukraine. 6th largest pelletproducer in the world with integrated logistics capability and 20Bnt in resources.Steadily increasing production from its 12Mtpa Poltava (FPM) and Yeristovo (FYM)mines; with blue sky from Belanovskoye (FBM). Also owns 14% of Ferrous Resources.
● Investment Thesis. Pellet premium - Production gently ticking up as plant upgradeshave been made, increasing to 12Mtpa. C1 costs are down below $40/t, helped bymore efficient FYM ore, cost savings and fx devaluation ($4/t per 10% UAH), althoughexpected to see inflationary increases (>10%) into 2016. Produces a premium qualitypellet and remains competitive on the global pellet cost curve (c.$20/t premium toChina 62% CFR price, comprising $29/t pellet premium, $7.5/t for 65%, less $13/t freight). No impact from Ukraine issues at present. We estimate AISC of c.$60/t(C1 $40/t, plus $4/t G&A, $6/t sustaining capex, $9/t freight to border), plus $7/t fordebt interest and tax, leaving a small margin at current iron ore prices. Businessimprovement - All now complete - Quality upgrade programme (100% 65% pelletsby end 2015), 12Mtpa capacity upgrade, Mine Life Extension (2038), plus marketing,cost and logistics improvements. 10Mtpa concentrator at FYM has been postponeduntil market improves, with modest capex expenditure to continue (NUMe 2019/20,$850m capex, phased development likely). Balance sheet holding - Well managedand conservative keeping net debt to EBITDA within its financial parameters; furtherrefinancing expected ($576m to repay by April 2016 from bank amortisation and re-financed Eurobond). Consistent dividend payer (5% yield).
● Guidance. 2015: 11.5-12Mt (12Mtpa run rate by year end).
● Preview Q1 IMS (16 Apr). Production up 2.5% y-o-y at 2.8Mt, a quarterly record. Highgrade 65% Fe pellets are now at 85%, up 48% y-o-y. We forecast a small premium tobenchmark prices; pellet premiums being maintained. C1 costs continuing to fall at $36/t, down y-o-y; continuing to benefit from higher production volumes and fx devaluation.Net debt up down slightly at $650m.
● Valuation. Blend of 1x NAV/7x P/E (bottom of 7-12x P/E range for bulk miners).
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First Quantum MineralsRelat ive to UK Market
Performance (%) 1M 3M 12M
Absolute 12 -3 -19
Relative 11 -11 -23
Source: Datastream (relative to UK-DS Market index)
First Quantum MineralsEstimate Changes
Building Through the Cycle
We downgrade to an ADD recommendation and decrease our TP to £10.00, from£10.50, due to our revised commodity price forecasts and changes to our model.
● Company Snapshot. TSX/LSE-listed major +400ktpa global copper producer with 7operating mines and 5 development projects across 8 countries. It's flagship assetsare the Kansanshi & Sentinel mines in Zambia and the Cobre Panama project.
● Investment Thesis. Superior growth - Plans to grow to 1.1Mtpa by 2018, from thecurrent +400ktpa; 2015: ramp-up of 300ktpa Sentinel project and Zambia smelter,Enterprise nickel in H2 2015, Kansanshi 60-70kpta sulphide expansion 2017, 320ktpaCobre Panama project Q4 2017 ($6.4bn). Longer term: Haquira & Taca Taca. Bestin Class - FQM is a leader in the copper space, having developed 5 mines in last10 years, on time and budget, and at costs well below industry norms. It has a trackrecord of adding value at its projects and has been able to exceed expectations andre-invent itself from the DRC/Zambia into a global player. Challenging year - Withdevelopment project build out, smelter constraints and power issues in Zambia, plusbuild up of activities at Cobre Panama, we see 2015 as a big and challenging year forFQM, operationally and financially. Debt has been restructured and covenants relaxed;should be ample headroom ($2bn) but we are in a period of peak capex, so will needto be well managed, in our view (gearing 60%, Net Debt/EBITDA 3.5x).
● Guidance. 2015: 410-440kt copper (560-640kt inc. Sentinel), 32-40kt nickel,218-247koz gold; C1 cost $1.30-1.55/lb Cu and $4.80-5.30/lb Ni. Capex $1.2-1.4bn.
● Preview Q1. Better quarter at 118kt copper, up 12% q-o-q, gold flat at 56koz and nickeldown at 4.8kt (Q4 2014 105kt Cu, 56koz Au, 10kt Ni). C1 costs slightly 8% y-o-y at$1.44/lb Cu and $6.74/lb Ni (Q4 2014 $1.33/lb). Kansanshi flat but should see orecoming though from Sentinel. Ravensthorpe down following leach tank failure. Othersrelatively flat with grades and tonnage holding up ok. Financials - EPS $0.16 (NPAT$94m), up q-o-q (Q4 2014 $0.13) and EBITDA of $315m. Restructured balance sheetto remain debt heavy: net debt of $5.7bn ($0.6bn cash). We look to see the progresson ramp up of Sentinel and the smelter.
● Valuation. Blend of 1X NAV/12x P/E (upper end 7-15x P/E range for coppers).
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FresnilloRelat ive to UK Market
Performance (%) 1M 3M 12M
Absolute 1 -12 -21
Relative 0 -19 -25
Source: Datastream (relative to UK-DS Market index)
FresnilloEstimate Changes
Investing in a Downturn
We maintain our BUY recommendation and increase our TP to £10, from £9, due toour new commodity price forecasts and changes to our model.
● Company Snapshot. FTSE 100 company and world’s largest primary silver producerwith 5 operating mines and 3 development projects in Mexico. Flagship assets are theFresnillo/Saucito mines and the Herradura district gold mines. 75% owned by Peñoles.
● Investment Thesis. Preferred silver play - A conservative, well run company with asuperior growth profile and premium quality assets that sit on the bottom of the costcurve. Gold revenue now switched to 55% following $450m acquisition of Newmont's44% in Herradura district mines. Superior growth - LT target of 65Mozpa Ag and+750kozpa Au by 2018 (more likely 80Mozpa, 1.3Mozpa or 2-2.5Mozpa AuEq).Saucito II started H2 2014 (10Mozpa Ag, 35kozpa Au, $235m capex), San Julian H22015 (10Mozpa Ag, 45kozpa Au, $515m capex), Fresnillo & Cienega optimisationprojects (2017, 10Mozpa at $170m and 20kozpa at $55m), Pyrites plant (4MozpaAg, 18kozpa Au, $105m), Mega Centauro pit and Centauro Deep at Herradura(2019/20, 280/225kozpa, $155/365m), Juanicipio (2018, 10Mozpa Ag, 30kozpa Au,$300m), Orisvyo (2018, 136kozpa, $350m). More projects likely with sizeable $225mexploration budget. Balance sheet tight - Net debt of $350m as YE, post Newmontacquisition and $800m in senior notes. Hedge on 44% on Herradura projects. Peakcapex in 2015/6, we estimate an additional $300m in debt will be needed. High marginbusiness with low cost operations (Fresnillo AISC $9/oz, Saucito $7/oz, EBITDA margin45%). Little risk and divi with 4-4.5% (inc. special). Chinks in armour - 2013/14 weredifficult years, with land issues, tax changes, plus labour and cost pressures againstfalling grades and rising capex. Conducting a group wide review of its land rights andcommunity relations but outside of this we now see limited risks.
● Preview Q1 (15 Apr). Production down q-o-q at 11.3Moz silver (inc. Silverstream) and326koz gold (Q4 2014 12.2Moz Ag, 360koz Au). Production from Saucito slightly loweras the expansion ramps up, Fresnillo still struggling with tonnage and lower grades.Herradura and Cienega flat.
● Valuation. Blend of 2x NAV/15x P/CF (top of 1-2x NAV/5-15x P/CF range for silvers).
● Risks. Low: Land issues, Mexican tax.
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange46
Figure 1: Model summary
Source: Company & Numis Securities Research
Fresnillo Ticker FRES.L Market Capitalisation £5,232m Financial Year End Dec
Registered No 02285918. Authorised andRegulated by The Financial ConductAuthority. A Member of the LondonStock Exchange
9 April 2015
BUY
Current Share Price 53pTarget Price 75pMarket Capitalisation £287mShares In Issue 541mRIC/BLBG GEM.L/GEM LNAvg. Daily Volume (3M) 173,356
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GemfieldsRelat ive to UK Market
Performance (%) 1M 3M 12M
Absolute 5 15 42
Relative 5 5 35
Source: Datastream (relative to UK-DS Market index)
GemfieldsEstimate Changes
A Uniquely Colourful Story
We maintain our BUY recommendation but increase our TP to 75p, from 70p, dueto our new commodity price forecasts and changes to our model.
● Company Snapshot. AIM-listed Gemfields is the world's largest producer of colouredgemstones. Main assets: the producing Kagem emerald mine in Zambia, Montepuezruby mine in Mozambique, early stage sapphires in Sri Lanka and the Fabergé luxuryjewellery brand. A mining stock with unique luxury retail exposure.
● Investment Thesis. First Mover Advantage. A fast growing business leveringexperience to consolidate the highly fragmented coloured gemstone industry.Gemfields has introduced mechanised mining, security of supply, a consistentmarketing message and a proprietary grading system to take control of the industryand stimulate demand. World-class Mines - Kagem produces 20% of the world'semeralds and Montepuez has the potential to match this with rubies. Kagem hasreached a steady production plateau, Montepuez has recently started ramp up fromtrial to full-scale mining. Coloured Gems - Produces a mix of stones which are sold atseparate lower and higher quality auctions. Higher quality emeralds and rubies 10% ofproduction but 80% of revenues. Emeralds well established, but only two ruby auctionsso far. Potential for rubies to become flagship asset. Prices Up - Gemfields has seena 12-fold increase in received emerald prices since 2009 and demand continues toimprove. Luxury Exposure - Owns 100% of luxury brand, Fabergé, which providesdirect access to market coloured stones and has historically provided some protectionfrom broader commodity weakness. Hollywood Actress, Mila Kunis is Gemfields brandambassador. Solid Footing - Decent balance sheet, cash $50m, $86m inventory and$30m debt. Scope for further acquisitions.
● Preview - Q1 Production. Production 5.6Mcts emeralds broadly in-line with previousquarter. Grade 200cpt and likely to be below 300cpt average run-rate. Unit operatingcosts $2.20/ct, up 10% from previous quarter. Production 2.3Mcts rubies, down 30%as mining focuses on lower volume, higher quality areas. Unit costs $1.8/ct in line withprevious quarter. Looking for more guidance on auction plan (and content) and newson the ramp up at Montepuez as the operation transitions to full scale mining.
● Valuation. TP blend 1x NAV/7.5x CF. (middle of 5-15x CF range for gem producers).
● Risks. Moderate. Gemstone mining highly variable, grade volatility, limited freefloat (Pallinghurst 74%), technical challenges for UG mining at Kagem. ZambianGovernment ban on emerald auctions outside Zambia. Mooted Zambian tax changes.
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange48
1
Figure 1: Model summary
Source: Company & Numis Securities Research
Gemfields Ticker GEM.L Market Capitalisation £287m Financial Year End June
Current share price(s) timed at 7:00AM on 07/04/15
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Highfield ResourcesRelat ive to ASX200I
Performance (%) 1M 3M 12M
Absolute 68 143 347
Relative 67 124 325
Source: Datastream (relative to UK-DS Market index)
Highfield ResourcesEstimate Changes
Potash in Pamplona
We maintain our BUY recommendation and A$3.00 TP, despite our revisedcommodity price forecasts and changes to our model.
● Company Snapshot. ASX-listed potash junior focused in Spain. Its assets comprisethe Muga, Sierra del Perdón and Pintano projects, which are undergoing resourcedefinition and feasibility work. Javier is expected to commence production Q2 2017,producing 1.1Mtpa KCl at $135/t, with one of the lowest capital intensities in the world.
● Investment Thesis. Attractive - Three low-risk, shallow potash projects that can utiliselow-capital entry, conventional extraction plus strong local infrastructure and in-countryexpertise to fast track development in close proximity to end markets. Muga robust- DFS showed an NPV (10%) of $1.42bn and IRR of 52%. Production of 1.12Mtpaover 24 years at an AISC of $135/t, in the middle of the cost curve. Shallow (<300m),meaning accessible by twin decline for conventional underground mining and flotationprocessing. Capex of $354m (pre-production $254m), with bottom quartile capitalintensity of $315/tpa vs. global average of c.$930/tpa. Plenty of upside: increased sizeand grade of resource, higher extraction rates, higher plant recovery and utilisation,lower capex/opex, plus salt by-products. Mining concession application was lodged inQ4 2014 and MOU signed with two ports and for power. Other projects - We forecastthe 82Mt Sierra del Perdón project starting in 2017/18 and Pintano in 2018/19, withpeak group production at 2.2Mtpa in 2024 at a cash costs of $140/t, in line with globalaverages. While of modest grade, the projects are within the same region, all benefitingfrom competitive advantages with low capital intensity and high IRR's of +40%.
● Potash market. The potash market appears to have bottomed at c.$305/t KCl. Pricesare thought to remain subdued in the short-term but rebound in the long-term, asprice momentum and demand pick up and inventory levels decline. We remain neutral,forecasting c.$300/t KCl.
● News Catalysts. Q2 - Sierra Del Perdon scoping study (NUMe 400-500ktpa KCl,capex $250m, NPV 10% $440m, IRR 31%), Pintano drilling results.
● Valuation. 1x NAV; projects risk-weighted up to 75%.
● Risks. Moderate: Permitting, keeping on time and budget, financing, project delivery.
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange50
1
Figure 1: Model summary
Source: Company & Numis Securities Research
Highfield Resources Ticker HFR.AX Market Capitalisation A$428 Financial Year End June
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Highland GoldRelat ive to UK Market
Performance (%) 1M 3M 12M
Absolute 5 10 -43
Relative 5 1 -46
Source: Datastream (relative to UK-DS Market index)
Highland GoldEstimate Changes
Slow and Steady
We maintain our BUY recommendation and 80p, despite our new commodity priceforecasts and changes to our model.
● Company Snapshot. AIM-quoted c.250kozpa junior gold producer focused in Russiawith three operating mines (MNV, Novo & Belaya Gora), two development projects(Klen & Kekura) and some advanced stage exploration properties. 32% owned byRoman Abramovich's Millhouse LLC.
● Investment Thesis. Solid, defensive junior with growth, but perceived Russian riskand project delivery risks may continue to cap substantial stock gains. Solid base withgrowth - Production to stay 250-300koz from average sized, low cost mines: MNV -flagship mature open pit/underground mine (150kozpa) falling on lower grades, offsetby higher tonnage and increase open pit mine life. Novo polymetallic undergroundmine increasing plant throughput (90kozpa AuEq) and Belaya Gora, now a stand-alone operation that is ramping to full capacity (80-100kozpa). Cash costs are low at$650-700/oz; AISC bottom quartile at $850-900/oz, well below the industry average.Chukotka focus - Growth is focussed on Klen and Kekura in Chukotka, Far EastRussia. Klen project design is under state review (start 2017 at 50koz pa) andKekura is undergoing met testwork, resource extension and upgrade (start 2018 at180-220koz pa). Other projects Taseevskoye, Unkurtash and Lyubov to remain lowerpriority. Balance sheet prudence - Well managed, prudent company keeping net debt/EBITDA within limits. Net debt $240m, with $100m undrawn debt facility available.Capex to tick up over next few years as projects build out. Divi payer with 7% yield.
● Guidance. 2015: 270-285koz.
● Preview FY (27 Apr). Production up 11% y-o-y at 259koz, as reported previously. TCC$690/oz, AISC $899/oz. Financials - EPS down y-o-y at $0.12, EBITDA $111m. Netdebt down at $240m. We look for more colour on Kekura, with the scoping study nowbeing finalised; expected to have been submitted for state approval of reserves.
● Valuation. Blend of 1.25x NAV/5x P/CF (low end of 1-2x NAV/5-15x P/CF range forgolds).
Registered No 02285918. Authorised andRegulated by The Financial ConductAuthority. A Member of the LondonStock Exchange
9 April 2015
HOLD
Current Share Price 88pTarget Price 85pMarket Capitalisation £324mShares In Issue 368mRIC/BLBG HOCM.L/HOC LNAvg. Daily Volume (3M) 772,958
Current share price(s) timed at 7:00AM on 07/04/15
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Hochschild MiningRelat ive to UK Market
Performance (%) 1M 3M 12M
Absolute 10 -5 -51
Relative 10 -12 -53
Source: Datastream (relative to UK-DS Market index)
Hochschild MiningEstimate Changes
Here Comes Inmaculada
We maintain our HOLD recommendation and increase our TP to 85p, from 75p, dueto our revised commodity prices forecasts and changes to our model.
● Company Snapshot. FTSE 250, fifth largest primary silver producer with four coreunderground mines in Peru and Argentina, plus some exploration projects. 54% ownedby Chairman Eduardo Hochschild.
● Investment Thesis. Limited margin - 3 core assets include Pallancata, Arcata andInmaculada in Peru (9 & 6Mozpa AgEq), plus 51% owned San Jose in Argentina(12Mozpa AgEq). These are all underground, high-grade narrow vein mines whichare highly capital intensive. Despite cost savings, group AISC is still high at c.$17/oz(plus c.$1/oz for debt interest), leaving little FCF margin. HOC expects further savings,AISC expected to fall to $15-16/oz with Inmaculada, although it clearly struggles todeliver margin. Growth to come. Following Inmaculada starting up in Q2, productiongrowth from 22Moz to 29Moz AqEq in 2016. Inmaculada 194kozpa Au at $527/oz,AISC $11-12/oz AgEq, capex $373m). Crespo has been postponed from its 2017 start-up (2.7Mozpa, $80m capex left), and we view the project as marginal. Also earlierstage 9.6Moz Volcan project in Chile (Andina) and Azuca. Exploration is to focus onbrownfield and resource drilling to improve LOM quality; value accretion likely a wayoff. Balance sheet struggle - Following re-financing, HOC has net debt of c.$350m.Hedge of 6Moz Ag at $17.75/oz and 38koz Au at $1,300/oz. Divi is suspended andwe don't see a re-start until Inmaculada is up and running and the balance sheet isrestored. We see decent FCF yields of +5% but still a long haul to pay back all the debt.
● Preview Q1 (22 Apr). Production down y-o-y and q-o-q at 4.5Moz AgEq, comprising3.3Moz silver and 20koz gold. A seasonally weaker quarter. Arcata and Pallancatalower as higher grade/lower tonnage is mined through 2015 to preserve cash. SanJose slightly down and Ares closed. Inmaculada starting up in Q2. Net debt up at c.$400m, depending on new facility drawdown.
● Valuation. Blend of 1.5x NAV/5x P/CF (mid/low end of 1-2x NAV/5-15x P/CF for silver).
● Risks. Moderate: Tax & labour issues, project delivery, maintaining costs and balancesheet.
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange54
Figure 1: Model summary
Source: Company & Numis Securities Research
Hochschild Ticker £7.00 Market Capitalisation £323m Financial Year End Dec
HOLD Share Price £0.88 Enterprise Value (EV) £558m Reporting Currency US$
£0.85 Implied Return -3% Net Debt (Cash) $353m Shares in Issue 367m
Valuation Key Metrics 2013 2014 2015F 2016F 2017F
Net Asset Value Disc Rate NAV (%) $m $/sh £/sh EPS ($/sh) - Underlying (0.15) (0.15) 0.00 0.04 0.04
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Internat ional Ferro MetalsRelat ive to UK Market
Performance (%) 1M 3M 12M
Absolute -7 -10 -67
Relative -7 -17 -69
Source: Datastream (relative to UK-DS Market index)
International Ferro MetalsEstimate Changes
Chrome Headwinds
We maintain our BUY recommendation and 25p TP, despite our revised commodityprice forecast and changes to our model.
● Company Snapshot. LSE-listed, South African integrated ferrochrome producer.Produces 265ktpa from its two mines, Letsedi and Sky Chrome, plus third party ores.Chinese steelmaker JISCO holds 29%, as a strategic shareholder and offtake partner.
● Investment Thesis. Leverage - Pure, highly leveraged play on South AfricanFerrochrome. Our NAV increases by 40% for a 10% increase in FeCr price. Aturnaround story with furnaces now operating at full load and profits have restartedafter a 5 year gap but margins remain relatively tight, like many SA producers.Realised prices receive discounts of c.25-30% (c.80c/lb) and cash costs are c.65-75c/lb (R6.50-7.50/lb). Costs key - reduction initiatives have been successfully achievedbut likely to have to continue to work hard to keep costs down given rising powerprices (12% pa) and labour pressures, even with helpful Rand weakness. However,IFL plans to move to owner-operated and has new cost reduction initiatives; plansto improve efficiencies in reductants and power consumption; co-gen plant is yet todeliver its full potential. Also, Letsedi underground mine has restarted and increasedproduction will help reduce reliance on more costly third party ores. Debt reducing- Net borrowings expected to reduce (c.R450-490m) as cash generation increases,helped by cumulative tax losses and reduced capex. Has a one year loan from Bank ofChina, rolled over for another year. Upside - Potential to move to a 60MW DC furnaceand a phase II expansion to 100ktpa at a cost of c.R1bn, reducing costs by 12%. BFSQ1 2015, commissioning H1 2017; non-equity financing (partner etc.). Not in our model.
● Guidance. FY15 200-205kt (downgraded from 215-222kt).
● Preview Q3. Production 51kt, up q-o-q following the DMR stoppages, but down y-o-y (Q2 49.8kt). Production costs down q-o-q at R7.47/lb (Q2 R7.82/lb), as betterore supply is utilised, offset by increased power costs. Letsedi underground now onaccelerated schedule and cogen plant to restart shortly. Net borrowings up slightly atR465m, before coming down after June. Market remaining subdued with recent rolloverof benchmark prices at $1.08/lb.
● Valuation. TP blend of 1x NAV/7.5x P/E (bottom of 7-12x P/E range for industrials).
● Risks. Moderate: South African labour, power supply & prices, ferrochrome market,cash generation and balance sheet.
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange56
Figure 1: Model summary
Source: Company & Numis Securities Research
International Ferro Metals Ticker IFL.L Market Capitalisation £20m Financial Year End June
Current share price(s) timed at 7:00AM on 07/04/15
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Kaz MineralsRelat ive to UK Market
Performance (%) 1M 3M 12M
Absolute -3 -12 -17
Relative -4 -19 -21
Source: Datastream (relative to UK-DS Market index)
Kaz MineralsEstimate Changes
Red on the Horizon
We upgrade to a REDUCE recommendation and increase our TP to 190p, from 180p,due to our revised commodity price forecasts and changes to our model.
● Company Snapshot. FTSE 250, major copper producer in Kazakhstan. It isrestructuring as KAZ Minerals to produce 80ktpa from its fully integrated business,comprising 5 mines (including Bozymchak mine in Kyrgyzstan). It has three c.100ktpagrowth projects: Boschekul and Aktogay, which are scheduled to start in 2015, plusthe earlier stage Koksay.
● Investment Thesis. Growth to start - Flat to declining production of 80-85ktpa fromexisting mature mines. Steady growth to 300ktpa in 2018 as Boschekul and Aktogay(Oxide) begin production in Q4 2015 and Aktogay Sulphide in 2017 (we exclude Koksay- 80ktpa Cu, 60kozpa Au). Leverage - Leveraged copper play due to narrow margin.Gross cash costs high at +$3.00/lb due to mature mines, but closer to $1.20-1.40/lbnet due to significant by-product credits (4Moz Ag, 40koz Au and 120kt Zn). Costs areexpected to decline with fx devaluation, plus addition of Boschekul ($0.80-1.00/lb net)and Aktogay ($1.20-1.40/lb). Balance sheet - Net debt $1bn with peak capex of $1.6bnin 2015 due to high capital intensity growth projects ($2.3bn each) doesn't leave anyFCF. Gearing +250% and 7x net debt/EBITDA (2016) looks ugly; no covenants testeduntil 2016; we expect further refinancing required. Divi suspended.
● Preview FY (30 Apr). Production of 21kt, with lower grades filtering through anda seasonally weaker quarter. Silver and zinc by-products down on lower grades at700koz and 25kt; gold flat at 11koz. Projects on track for Q4 start-up.
● Valuation. Blend of 1x NAV/10x P/E (middle of 7-12x range for copper miners).
Registered No 02285918. Authorised andRegulated by The Financial ConductAuthority. A Member of the LondonStock Exchange
9 April 2015
BUY
Current Share Price 3pTarget Price 10pMarket Capitalisation £7mShares In Issue 231mRIC/BLBG MIRL.L/MIRL LNAvg. Daily Volume (3M) 355,111
Current share price(s) timed at 7:00AM on 07/04/15
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Minera IRLRelat ive to UK Market
Performance (%) 1M 3M 12M
Absolute -3 22 -58
Relative -4 12 -60
Source: Datastream (relative to UK-DS Market index)
Minera IRLEstimate Changes
All Rests on Ollachea
We maintain our BUY recommendation and 10p TP, despite our new commodityprice forecasts and changes to our model.
● Company Snapshot. AIM/TSX-listed junior gold producer focused in Latin America.It’s assets comprise the 20kozpa Corihuarmi mine in Peru and the 100kozpa Ollacheaproject in Peru.
● Investment Thesis. Growth & upside - Growth to +100kozpa in 2017 at cash costsof <$600/oz. Production at Corihuarmi is reducing due to lower grades, offset by highertonnage and recovery through the pads. Exploration at satellite deposits has extendedLOM to H1 2017. Don Nicolas sold for $10m. Ollachea expected to start Q4 2016 (likelylater), subject to financing of $165m capex, with construction permit now received.Upside from the 0.9Moz Concurayoc Zone, plus potential to extend at depth and alongstrike; could increase LOM and/or increase production by 20-30kozpa. Financingremains key - Cash of $1m at end Q1, plus a $2m working cap facility. A $100m loanfacility has been offered by Macquarie but not taken up (inc. consolidating existing$30m debt facility), leaving potentially $110m to finance Ollachea. Minera is pursuinga range of avenues - royalty streams, JV partners, offtake and equity. Expected tocomplete in Q2.
● Guidance. 2015: 22koz (prev. 20koz).
● Preview FY. Production at Corihuarmi 23.3koz as announced previously. Cash costsof $874/oz. EPS -18c, down y-o-y (NPAT -$40m). EBITDA $3m. Cash down at $2.5m;$30m in debt. We look for progress on financing for Ollachea. Q1 production downslightly at 5.7koz.
● Valuation. 1x P/NAV (bottom end of 1-2x NAV gold producers).
● Risks. High: Financing and balance sheet, development risk, Argentina & Peru politics.
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange60
Figure 1: Model summary
Source: Company & Numis Securities Research
Minera IRL Ticker MIRL.L Market Capitalisation £7m Financial Year End Dec
Current share price(s) timed at 9:00AM on 07/04/15
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Petra DiamondsRelat ive to UK Market
Performance (%) 1M 3M 12M
Absolute -2 -5 23
Relative -3 -12 17
Source: Datastream (relative to UK-DS Market index)
Petra DiamondsEstimate Changes
Sparkling Resilience
We maintain our BUY recommendation and 250p TP despite our revised commodityprice forecasts and changes to our model.
● Company Snapshot. FTSE 250 mid-tier diamond producer with 6 operations in SouthAfrica and Tanzania. Large 300Mct resource base and it's two main mines, Cullinanand Finsch, make up 75% of revenues. Also some early stage exploration in Botswana.
● Investment Thesis. Preferred diamond play - Long term investment with premiumquality management and assets, plus growth into a firm diamond market. GradeBoost Coming - Gradual production increase to 5Mcts by 2019 and increasing gradeas Cullinan and Finsch move into undiluted kimberlite ore (Cullinan grade going to50cpht from 31cpht; 2.2Mcts pa, Finsch 60cpht, from 37cpht; 2Mcts pa) which shouldincrease margins. Production to increase by 2019 at Kimberley underground (100kcts),Koffiefontein (105kcts) and Williamson (300kcts). Upside beyond FY19 with excessore handing capacity at Cullinan and Finsch. Fancy upside - Revenues H2 weighteddue to seasonality, with more tenders. Upside for specials from Cullinan (average 1-2pa at c.$15-25m), which go straight to the bottom line. Balance sheet steady - Costswell controlled despite inflation, labour and power issues. Margins to increase to 50%,from 40%. Funds continue to be well managed and we see limited pressure to executegrowth plans which are fully funded; peak capex this year. First Divi- 2p for FY15,starter yield of only 1% but progressive policy in place.
● Preview - Interims (Late Feb). Production 835kcts, a return to a similar level as Q1 andon track for FY15 guidance of 3.3Mcts and target of 5Mcts by FY19. Sales 1,053kcts,up y-o-y (Q3 2014 905kcts). Sales revenue $137m. Results will be H2 weighted due tothe usual seasonal timing of tenders, which should see a solid finish to FY15. Continuedramp up at Finsch and Cullinan. Further potential grade volatility at Cullinan. We expectthe diamond market to have firmed from the dip in Q1 but with overall growth remainingmuted. Short-term issues with mid-stream manufacturers and cutters being squeezedto persist, but long term underpinned by US market and continued growth from China.
● Valuation. Blend of 1x NAV/5x P/CF (bottom of 5-15x P/CF range for diamond miners).
● Risks. Low: South Africa labour & power. Delivery on growth programme.
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange62
Figure 1: Model summary
Source: Company & Numis Securities Research
Petra Diamonds Ticker PDL.L Market Capitalisation £943m Financial Year End June
Current share price(s) timed at 9:00AM on 07/04/15
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Randgold ResourcesRelat ive to UK Market
Performance (%) 1M 3M 12M
Absolute 5 0 3
Relative 5 -8 -2
Source: Datastream (relative to UK-DS Market index)
Randgold ResourcesEstimate Changes
Reaching a Peak
We maintain our HOLD recommendation and increase our TP to £51, from £49, dueto our new commodity price forecasts and changes to our model.
● Company Snapshot. FTSE 100 mid-tier African gold producer. Produces 1.2Mozpafrom 5 mines in Mali (Loulo-Gounkoto, Morila), Cote d'Ivoire (Tongon) and DRC (Kibali).Also has the Massawa project in Senegal, plus a large exploration portfolio and anumber of JVs with juniors.
● Investment Thesis. Industry leader - Peer-leading management and assets, with solidorganic growth and upside, while not without its political and technical challenges.Well-deserved premium rating for an impressive track record in creating shareholdervalue. Growth peaking - Loulo-Gounkoto growing to 650-700kozpa moving into highergrade areas; Kibali is firing on all cylinders with production moving to full 600kozpa(RRS 45%). Tongon appears the ongoing bug-bear with recovery and power issues(260-300kozpa). We see upside to 1.3Mozpa at $600/oz (AISC $750-800/oz) on grade,optimisation and minor expansions. Cash to come: M&A or divi? - Capex has peakedso will come down sharply. RRS want to build the coffers up to $500m to cover the nextmine build. It recently increased its debt facility to $400m, which appears to be a moveto capitalise on a faltering industry; despite its strict filters, M&A could be a real prospectthis year. We see substantive cash generation and chance of dividend upgrades in2015. Organic trail - Exploration is now focusing on discovery of elephants andbrownfield targets to improve mine plans. We see lots of prospectivity, particularly inMali and DRC. Political challenges - African political issues are ongoing, particularlyin Cote d'Ivoire and the DRC and we could see further wobbles. However, a peer-leading approach to African politics should navigate through the crossfire.
● Guidance. 2015: 1.2-1.26Moz at TCC of $650-700/oz. Capex $330m.
● Preview Q1 (7 May). Production flat q-o-q at 289koz at a cash cost of $693/oz (Q4 2014287koz at $712/oz). Loulo-Gounkoto slightly up on grade and ratio switches to morefrom Loulo; Tongon stays with elevated tonnage and grade with recoveries continuingto improve with the new crusher and expanded flotation circuit; Morila down slightlyfrom a strong Q4 when the pushback started. Kibali down at 166koz as grade comesdown. EPS flat q-o-q at $0.48 with a slightly higher gold price (NPAT $45m, Q4 2014$0.49). Balance sheet up at $114m cash and no debt as Kibali capex comes off butVAT receivables remain outstanding.
● Valuation. Blend of 2x NAV/15x P/CF (top of 1-2x NAV/5-15x P/CF for golds).
Registered No 02285918. Authorised andRegulated by The Financial ConductAuthority. A Member of the LondonStock Exchange
9 April 2015
BUY
Current Share Price C$0.90Target Price C$1.75Market Capitalisation C$161,889,480Shares In Issue 180mRIC/BLBG TMM.TO/TMM CNAvg. Daily Volume (3M) 642,035
Current share price(s) timed at 9:00AM on 07/04/15
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Share Price
Timmins Gold
Performance (%) 1M 3M 12M
Absolute -15 -32 -43
Relative -16 -36 -46
Source: Datastream (relative to UK-DS Market index)
Timmins GoldEstimate Changes
Platform for Growth
We maintain our BUY recommendation and increase our TP to C$1.75 from C$1.60,due to our revised commodity price forecasts and changes to our model.
● Company Snapshot. TSX/NYSE-listed junior gold producer operating in Mexico. It’smain asset is the San Francisco gold mine in Sonoro State which produces 120kozpa. It recently acquired two development projects, Caballo Blanco and Ana Paula, alsoin Mexico.
● Investment Thesis. Robust producer - San Francisco has a solid production trackrecord producing c.120koz pa at an operating cost of below $800/oz. The mine is asimple heap leach operation with very few moving parts. Free Cash Flow to Return.Once growth capex on Caballo Blanco and Ana Paula is spent, Timmins shouldreturn to generating significant free cash flow, even at current gold prices. CoiledSpring. Timmins is highly leveraged to the gold price. The combination of an unhedgedproducer with strong cash flow and a moderate but stable opex base, provides acompelling call on gold price recovery. A modest move to $1,300 gold (vs NUMe$1,200) would increase our FY15 EPS forecast by 125%. Growth Story - TMM is acheap way to buy into a future mid-tier producer. Timmins could potentially doubleproduction within the next two years to 325koz pa. Caballo Blanco and Ana Paula willbe developed to Timmins' own time-line to manage the capital spend. Organic Growth.Timmins is planning to capitalise on drilling success late last year which identified high-grade feeders in the San Francisco pit, along strike and down dip. Exploration Play.Timmins has a Mexican focused 200,000ha under-explored land package.
● Guidance. FY guidance remains 115-125koz at $800-850/oz at a stable 25ktpdcrushing rate and 0.59g/t head-grade.Preview Q1. Production 29koz gold at $876/ozcash operating cost (after by-product credits). 2,250t processed at 0.59g/t Au headgrade.
● Valuation. 1.25x NAV and 7.5x CF (middle of 1-2x NAV and 5-15x CF range for goldproducers).
Current share price(s) timed at 7:00AM on 07/04/15
Apr- 14 Jul- 14 Oct- 14 Jan- 15 Apr- 15
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Share Price
Wolf MineralsRelat ive to UK Market
Performance (%) 1M 3M 12M
Absolute 6 42 -6
Relative 6 31 -10
Source: Datastream (relative to UK-DS Market index)
Wolf MineralsEstimate Changes
Tantalizing Tungsten
We maintain our ADD recommendation and 23p TP, despite our new commodityprice forecasts and changes to our model.
● Company Snapshot. AIM/ASX-listed emerging UK tungsten producer. It owns theHemerdon mine in Devon, the third largest tungsten project in the world, which is fullypermitted and financed, starting production in Q3 2015.
● Investment Thesis. Ready to roll - Wolf successfully completed its A$183m (£99m)equity fundraising which, along with permitting already complete, removes the lastsignificant key risk. Construction commenced in February, marking Hemerdon’strajectory to be the first new metal mine in the UK for 45 years. Production is expected tostart in Q3 2015. Robust, simple project - Hemerdon has a substantial resource baseof 145Mt at a moderate grade of 0.19% WO3. A simple 3Mtpa open pit/gravity operationis envisaged to produce 345,000 mtu pa at a C1 cost of $109/mtu (net tin credits),at the bottom of the cost curve (AISC c.$180/mtu). Capex is expected to be £123m,giving a low capital intensity of $66/tpa. The project is located in a mining town withexcellent infrastructure, being fully permitted with no environmental concerns. Offtakeand marketing are secured. Plenty of upside - As we roll forward into production, wesee a 36% upside to our TP over the next 3 years. Mine life has been extended by3 years, beyond the current 9 years by expanding the pit and steepening the walls.Wolf has also been given the temporary go-ahead for 24/7 operation for 6 months.If it can operate within permitted noise levels, it will apply for a permanent change,growing production by 27% to 440,000mtu pa, increasing our TP by 5p. We also seepotential for an underground operation, opportunities to optimise the plant and upsidefrom country rock processing and aggregate sales. Assuming this upside, our bestcase TP increases by 34%. Profit potential - From FY16 onwards, we forecast Wolfhas the potential to generate A$60-80m in profits (3-4x P/E), EBITDA of A$100-110m(c.2x EV/EBITDA), FCF of $70-90m (3-4x P/CF) and dividends with a yield of +7%.
● Attractive LT market. Tungsten is classed as a strategic metal due to its uniqueproperties (used in drill bits etc). The market is forecast to move into deficit with supplyunable to keep up with rising demand and limited projects on the horizon. We are yet tosee a price response as prices have drifted lower to $255/mtu, on a lack of consistentbuying, but experts forecast a pick up in H2 (NUMe LT price is $450/mtu).
● Preview FY15. Financials academic. We forecast capex spend of A$144m. We expectsome fx benefit, with the balance sheet having net debt of A$51m, depending on timingof debt drawdown and payment of key capital items.
● Valuation. Blend of 1x NAV/7x 2016 P/E (bottom of 7-12x P/E range for industrials).
● Risks. Low: Project delivery, tungsten market.
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange68
Figure 1: Model summary
Source: Company & Numis Securities Research
Wolf Minerals Ticker WLFE Market Capitalisation £160m Financial Year End June
Registered No 02285918. Authorised and Regulated by The Financial Conduct Authority. A Member of the London Stock Exchange 69
Regulatory Notice & DisclaimerAureus Mining, Highfield Resources, Wolf Minerals, Condor Gold, Caledonia MiningCorp, Chaarat Gold, First Quantum Minerals, International Ferro Metals andHighland Gold are or have been during the 12-month period preceding the date ofthis research report, a client of Numis.Numis has received compensation for investment banking services from AureusMining, Highfield Resources, Wolf Minerals, Condor Gold, Caledonia Mining Corp,Chaarat Gold, First Quantum Minerals, International Ferro Metals and HighlandGold in the past 12 months.Numis and/or one or more of its affiliates has managed or co-managed a publicoffering for Aureus Mining and Condor Gold in the past 12 months.
Numis and/or one or more of its affiliates may receive or may seek to receivecompensation for investment banking services from Minera IRL, Aureus Mining,Highfield Resources, Wolf Minerals, Condor Gold, Caledonia Mining Corp, ChaaratGold, First Quantum Minerals, International Ferro Metals, Centamin Egypt,Ferrexpo, Randgold Resources, Fresnillo and Highland Gold in the next 3 months.As at the date of this research report, Numis and/or one or more of its affiliatesis making a market in Minera IRL, Aureus Mining, Wolf Minerals, BerkeleyResources, Condor Gold, Gemfields, Dalradian Resources, Caledonia Mining Corp,Chaarat Gold, First Quantum Minerals, International Ferro Metals, Centamin Egypt,Ferrexpo, Randgold Resources, Fresnillo, Highland Gold, Hochschild Mining,Acacia Mining and Petra Diamonds.
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9 April 2015
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split of recommendationsbased on the lastrecommendation for eachresearch stock during the lastfour calendar quarters.
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For the split of recommendations by sector for the period from 1 Oct 2013 to 30 Sep2014, please contact the Research Department of Numis Securities Ltd.
The following graphs display the three year recommendation, target price and shareprice history for the subject corporation(s) of this research report. In those instanceswhere the subject corporation(s) have been traded on the London Stock Exchangeor Alternative Investment Market for less than three years, the graph will show thehistory since the date the subject corporation(s) were admitted to trading. Prices inthe graph(s) below are in pence unless otherwise stated.
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