L ION G OLD C ORP C ASE S TUDY Tan Weihan. Disclaimer and Declaration The objective of the presentation is for educational purposes. The full content.

LION GOLD CORP CASE STUDYTan Weihan

Disclaimer and Declaration

The objective of the presentation is for educational purposes. The full content of the presentation is for illustration purposes only and should not be used as investment recommendations. The presenter is not responsible for all investment activities conducted by the participants and cannot be held liable for any investment loss.

The presenter may have personal interest in the particular shares presented.

Agenda

Company Background1

Industry Overview2

Ratio Analysis3

Valuation4

5 Risk

Company Background

LionGold Corp Ltd is a Main Board SGX listed investment holding company focused on gold mining, mine development and exploration. Primary gold interests are currently in Ghana and Australia.

Company Background

Source: Company’s Presentation Slides

Source: Company’s Presentation Slides

Company Background

Company Background

Source: Company’s Presentation Slides

Business Model

Source: Annual Report

86.74; 72%

33.49; 28%

Office Equipment Gold Division

Revenue Breakdown for 2013

Business Model

Source: Company’s Presentation Slides

Business Model

Source: Company’s Presentation Slides

Business Model

Source: Company’s Presentation Slides

Business Model

Source: Company’s Presentation Slides

Industry Outlook

• Central Bank become Net Buyers of Gold

Source: CPM Group

Industry Overview

Source: World Gold Council

• Gold jewellery, bars, coin still in Demand

Industry Overview

Source: CPM Group

• Gold Mining hits a Plateau

Industry Overview

Source: Bloomberg. Barclay Research

• Diminishing Margin Return for Gold Mining

Recent News

Source: SGX Announcement

• Liongold on course to achieve 40,000 to 50,000 production annual target

Ratio AnalysisRatio Analysis FY2008 FY2009 FY2010 FY2011 FY2012 FY2013

Growth rate (%YoY)

Revenue 4.58% -10.62% 19.20% 10.36% 29.79%

EBIT 14.21% -158.80% -88.06% -8807.18% -61.55%

Net proft 0.93% -157.89% -67.12% -3066.95% -69.89%

Profitability

Gross Profit Margin 5.48% 14.07% 12.53% 10.65% 8.51%

Net Profit Margin -6.26% 4.05% 1.12% -30.04% -6.97%

Return on Asset -8.77% 3.89% 1.15% -31.70% -3.48%

Return on Equity -24.68% 11.05% 3.63% -157.10% -6.82%

Liquidity

Current Ratio 1.72 1.80 1.38 1.87 2.52 2.73

Quick Ratio 1.05 1.17 0.70 0.75 1.59 2.39

Cash Ratio 0.44 0.61 0.08 0.02 0.52 2.04

Solvency

Debt to Equity 0.03 0.05 0.02 0.27 0.93 0.17

Interest Coverage 139.67 70.17 NA NA NA NA

Solvency -6.66 -2.44 3.71 0.07 -0.89 -0.20

Did not generate returns for shareholders

Solid cash balance with no default risk

Valuation

• Methodology

– Enterprise Value/Resource Comparison– Discounted Cash Flow

Valuation (EV/Resource)

Source: Bloomberg and respective company websites

• Enterprise Value

– How much are you willing to pay to buy the company?

– Market Cap + Debt + Preferred shares - Cash

Valuation (EV/Resource)

Source: Bloomberg and respective company websites

• Fair Value– Current Share Price: $0.154

– Gold Company Valuation Median : 217– Lion Gold EV/Resource : 17– Fair Value Calculation

Fair Value = 217 / 17 x 0.154 = $1.96

Valuation (EV/Resource)

• Profit / FCFF projection

Valuation

Valuation - AssumptionsBeta 0.19

Risk Free Rate 3.00%

Market Risk Premium 7.00%

Cost of Debt 6.50%

Cost of Equity 4.36%

Equity Funding 137,312

Debt Funding 42,761

WACC 4.87%

Terminal Growth 3.00%

Total Outstanding Shares 858199

Total Debt 42761

Valuation – DCF Assumption

Valuation – Fair Value

• Low valuation, because financial reports had shown that Lion Gold been unable to generate returns for shareholder

Trading Data

52 Weeks Trading Range $0.14 - $1.76

Avg Volume (3 mths) 14.6 mil

Market Cap $141.98 mil

Source: Yahoo Finance

Main Risks

• Valuation assumes cash cost per ounce remains stable at USD $1200/oz for the next 5 years

• Fluctuation in Spot Gold prices is likely to have an impact on the profit margin of Gold mining companies.

Main Risks

• Recent plunge in share price means that Lion Gold is unable to use its strategy of using share placement for acquisition of gold mines.

• Default Risk – Very Low– Current ratio = 2.73x– Interest coverage = NA– D/E ratio = 0.17– Loans maturing this year = $2.7 mil– Cash = $46 mil

Conclusion

• Lion Gold Corp had been using a acquisition model to grow its business however due to the sudden plunge, their M&A model is likely to be halted.

• Low Enterprise Value to Resource makes Lion Gold a potential takeover target for large capital group or bigger gold mine

• Lion Gold is asset rich, however the jury is still out on whether they can continue to create returns for Shareholders, thus explaining the low valuation for this counter.