RBC Capital Gold Stress TEST April 2013

RBC Dominion Securities Inc.Stephen D. Walker(Head of Global MiningResearch)(416) 842-4120;[email protected] Rollins, CFA (Analyst)(416) 842-9893;[email protected] Crittenden, P.Eng.(Analyst)(416) 842-7886;[email protected]

RBC Europe LimitedJonathan Guy (Analyst)+44 20 7653 4603;[email protected]

April 8, 2013

Risk-Reward for NA Gold Producers in an UncertainGold Price EnvironmentWith gold stocks under pressure, we believe this presents an opportunity to buy gold equities withan attractive risk-reward. To support this we: (1) run a downside stress-test to see how robust thebalance sheets are for the North American gold producers; (2) estimate what gold price is discountedinto the shares and review historic trading multiple ranges; and (3) examine relative valuations for NorthAmerican gold producers to identify attractively-priced names.

Stress Test Suggests $1,200 Gold is a Critical LevelWe have run flat gold price scenarios at $1,200/oz, $1,300/oz and $1,400/oz for the North Americangold producers to determine when their current cash positions could decline to zero; both with andwithout their existing credit facilities (Exhibits 2 & 3). This second scenario, albeit unlikely in the currentenvironment, would be a “worst possible scenario”.

Most of the companies in our coverage universe appear to be able to weather a $1,500/oz and $1,400/oz flat gold price environment, although we would expect most companies to cut G&A and explorationexpenses, and begin to defer discretionary capital spending. At $1,300/oz gold, we would expect BarrickGold, Lake Shore Gold, Allied Nevada, Osisko, Claude Resources and Kinross to draw down theirexisting credit facilities to avoid cash depletion, given their current spending plans. Most gold producersat $1,300/oz gold would have to cut discretionary capital sharply and/or seek new capital to completetheir existing capital programs.

Gold Producers Can Survive by Slashing Spending and High GradingA $1,200/oz gold price has a significant negative impact on the cash position for the NA Gold Producers.In particular, we see risks for companies, over a 12- to 36-month period, with some combination of thefollowing: above average all-in operating costs, high levels of debt, and firm capital commitments. Thisincludes Barrick Gold, Lake Shore Gold, Allied Nevada, SEMAFO, Claude Resources, Osisko, DetourGold, Kinross, Centerra Gold, and IAMGOLD (Exhibit 2). At $1,200, within 24 months, most of thecompanies in our coverage universe would need to draw down credit facilities and in many cases (1)cut capital spending sharply, (2) seek new capital to complete their existing capital programs, (3) placehigh-cost operations on care and maintenance, and (4) cut dividends.

A Core of High Quality NamesIn our view, at sharply lower gold prices, the most resilient NA gold producers with solid, yet flexiblebusiness plans would be Goldcorp, Yamana Gold, Agnico-Eagle, New Gold, Randgold Resources,Alamos Gold, Dundee Precious Metals, Argonaut Gold, and Timmins Gold with low net debt, lowcapital spending to cash flow ratio, and significant new mine development recently completed.

Within our coverage universe, the gold companies with the most robust business models that arethe best-positioned to weather a sharply declining gold price environment, in our view, would be theroyalty and streaming companies, including Silver Wheaton, Franco-Nevada, Royal Gold, Sandstormand Premier Royalty, which have minimal operating costs and no significant capital cost exposure.

We estimate that the Tier I North American gold producers are discounting an estimated $1,520/ozgold price, the Tier II producers are discounting an estimated $1,360/oz , and the Tier III producersare discounting an estimated $1,300/oz (Exhibit 4). In addition, the NA gold producers are trading atvaluation levels approximately 10% above the Q4/08 lows, offering investors an attractive entry point,in our view (Exhibit 5).

Priced as of prior trading day's market close, EST (unless otherwise noted).All values in USD unless otherwise noted.

For Required Non-U.S. Analyst and Conflicts Disclosures, see page 16.

NA Gold Producers: Under Owned and Offering an Investment Opportunity Gold stocks are currently out of favor and investors continue to liquidate equity positions to rotate into other industry sectors. We believe the three primary reasons for this are:

1) The inability to generate significant free cash flow on a sustainable basis, particularly during the previous rising gold price environment;

2) Failure to execute and achieve operating and capital spending guidance on a consistent basis; and

3) With gold’s recent sell off to $1,550/oz and concerns that gold could go lower, investors are asking “how robust are the gold producer's business models at lower gold prices?”

On average, the North American gold producers have an all-in cash operating cost1 of

$1,200/oz (Exhibit 1). However, after accounting for cash taxes (~$200/oz) and current levels of new mine capital (~$250/oz), there is a modest amount of cash left for dividends or debt repayment for companies in a new mine development cycle. We would note that exploration and sustaining capital are discretionary items and can be cut or curtained without a significant negative impact over 12 to 24 month period, however, over the long-run, cutting exploration would reduce the mine life, and starving a mine of sustaining capital is likely to lead to eventual production-related challenges and higher operating costs.

Exhibit 1: Average All-in Costs Including Taxes and New Mine Capital for the North American Gold Producers All-in Costs Average $1,200 before Taxes, New Mine Capital, Debt Repayment and Dividends.

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

Q1/

98

Q1/

99

Q1/

00

Q1/

01

Q1/

02

Q1/

03

Q1/

04

Q1/

05

Q1/

06

Q1/

07

Q1/

08

Q1/

09

Q1/

10

Q1/

11

Q1/

12E

US

$/o

z

Source: RBC CM Estimates, GFMS

1 RBC CM’s all-in operating costs defined as total cash costs plus the company’s entire budget for G&A, exploration and sustaining capital.

New mine capital

Taxes (~30%)

Corporate expense and sustaining capital

Total cash costs

2

Identifying the Opportunity While the gold sector on average may have thin net cash margins, we have identified a number of North American Tier I, II, and III gold producers and royalty/streaming companies that have favorable fundamentals and offer investors an attractive risk-reward investment opportunity in the current volatile gold price environment. We performed the following analysis in identifying these companies: 1) Near-Term Liquidity Analysis: A downside stress test is performed to assess near-term

liquidity risk in terms of operations and balance sheet pressures at a range of lower gold prices.

2) Implied Stock-Discounted Gold Price Valuation and Historic P/E and P/CF Multiples: Using Net Asset Values, we estimate implied gold prices using both RBC CM commodity price assumptions as well as the current forward curve commodity prices, in order to determine attractively-valued Tier groups. We also review historic P/E and P/CF multiples to see how valuations have trended over time for certain gold producer Tiers.

3) Risk-Reward Relative Valuation: We select the most attractive names based on a range of valuation metrics and potential for opportunity in the current gold price environment.

Assessing Near-Term Liquidity Risk at Various Gold Price Scenarios We have run a series of gold price scenarios for the North American gold producers to estimate when their current cash positions could potentially decline to zero. In this analysis, beginning in Q2/13, we run a series of flat gold prices at $1,200/oz, $1,300/oz and $1,400/oz, while leaving all other commodities

2 and currencies at current spot prices. We then look out

over the next three years in order to estimate:

1) The quarter and year when a company is expected to draw its balance sheet cash position to zero, assuming a drawdown of the existing credit facilities if required (Exhibit 2); and

2) The quarter and year when a company is expected to draw its balance sheet cash position to zero, assuming no drawdown of the existing credit facilities (Exhibit 3).

This second scenario above reflects the possibility that, at sharply lower gold prices, the undrawn balance of a credit facility may not be available to a company, similar to the situation that occurred during the global financial crisis in late 2008. However, we would note that most companies have the ability to slash near-term operating costs and capital spending and, in many cases, assume some form of distress financing (e.g. selling production streams, issuing equity, aligning with a strategic partner, etc.) prior to running out of cash, which examined on Page 6 of this report. Our findings are as follows:

At $1,500/oz gold, we estimate that all of the North American gold producers in our coverage universe can survive over the next 24 to 36 months and most companies need not draw down their existing credit facilities to fund ongoing operations.

At $1,400/oz gold, we estimate that Barrick and Lakeshore Gold would need to draw down their existing credit facilities and seek new financing to complete their existing capital spending programs within 24 months. We estimate that all remaining producers would need to make significant cuts in their G&A and exploration expenses, and begin to defer some discretionary sustaining capital spending (Appendix I, Exhibits 12 and 13).

At $1,300/oz gold, we estimate Barrick, Lake Shore Gold, Osisko, Claude Resources and Allied Nevada would need to draw down their existing credit facilities to avoid cash

2 The silver price is assumed to move in tandem with the gold price at ~1:54 gold to silver price ratio.

3

depletion. We also expect all remaining producers to cut discretionary capital sharply and/or seek new capital to complete their existing capital development programs (Appendix I, Exhibits 10 and 11).

At $1,200/oz gold, we estimate the most significant liquidity impacts for Allied Nevada, Barrick, Claude Resources, Lake Shore Gold, Osisko and SEMAFO, with all remaining producers scaling back operations and curtailing budgets as well. The $1,200/oz gold price scenario is discussed separately below.

$1,200/oz Downside is a Critical Level At the $1,200/oz gold price level, we see a significant negative impact and cash burn over a 12 to 18 month period, particularly for gold producers with various stages of new mine development, significant mine expansions, and/or significant debt obligations. In Exhibit 2 below, we identify the companies that have the most rapid cash and credit facility drawdown and, within 24 months, would likely need to either (1) cut capital sharply, (2) seek new financing to complete their existing capital programs within a 12 to 18 month period, (3) place high cost mines on care and maintenance and/or (4) cut dividends, at $1,200/oz gold. At this price level, the companies that we believe would be most impacted in 2014 are Allied Nevada, Barrick, Claude Resources, Lake Shore Gold, Osisko and SEMAFO, while in 2015 we see significant risks for Detour Gold, Kinross, Centerra Gold, and IAMGOLD (Exhibit 2).

Exhibit 2: Cash Burn Rates at $1,200/oz Gold for the NA Gold Producers, With Access to Credit Facilities

ABX GGKGC

NEM

AEM

ASR

ANV

CEY

CGDGC

EGO

IAG

NGD

OSK

RRS

SMF

AUY

AGI

AR

AUQ

CRJ

DPM

LSG

PPP

TMM

SLW

FNV

RGLD

Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 OK OK1No Issues

Source: RBC CM Estimates

2014 2015

4

At a $1,200/oz gold price, the companies with the greatest risks have a combination of significant near-term capital commitments, debt obligations, and/or above average operating costs. As an example, we assume Barrick and Allied Nevada are committed at this point to completing development of the Pascua-Lama project and the Hycroft mine expansion project respectively. As a result of a combination of above-average all-in operating costs, new project development, and/or debt obligations, we estimate that Lake Shore Gold, SEMAFO, Claude Resources, Osisko, Detour Gold, Kinross Gold, Centerra and IAMGOLD would see cash reserves drawn down.

We would expect many of the remaining producers in our coverage universe to defer proposed mine development as many of the projects would become uneconomical at a $1,200/oz gold price. For example, we believe IAMGOLD would likely have to defer development of Cote Lake, while Osisko would likely need to defer the Upper Beaver project or extend its debt facilities beyond 2014, in our view.

A Core of High Quality Companies Can Survive Lower Gold Prices Gold producers with the greatest capacity to withstand lower gold prices, without changing their current business plan or depleting lines of credit, would be Timmins Gold, Dundee Precious Metals, AuRico, Argonaut, Alamos, New Gold, Primero, Yamana, Randgold, Centamin, Agnico-Eagle and Alacer, in our view (Exhibit 3). In general, these companies have low all-in cash costs, significant cash balances, low or no debt and, in most cases, recently completed new mine development. One other favorable factor would be a high proportion of gold production coming from underground mines, which inherently have more flexibility with grade control and access to higher grade, lower-cost ore.

Without full access to credit facilities and at sharply lower gold prices, we estimate that many of the companies on the left hand side of Exhibit 3 would see cash balances drawn down within 12 to 24 months and would likely need to seek alternative means of financing, slash capital spending, cut dividends and/or reduce discretionary spending significantly.

Exhibit 3: Cash Burn Rates at $1,200 Gold for the NA Gold Producers, Without Access to Credit Facilities

ABX

GG

KGC

NEM AEM

ASR

ANV

CEY

CGDGC EGO IAG

NGD

OSK

RRS

SMF

AUY

AGI

AR

AUQ

CRJ

DPM

LSG

PPP

TMM

SLW

FNV

RGLD

Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 OK OK1No Issues

Source: RBC CM Estimates

5

Ultimately, the best protection in a sharply declining gold price environment would be the royalty and streaming companies, including Silver Wheaton, Franco-Nevada, Royal Gold, Premier Royalty and Sandstorm, all of which have minimal operating costs and no significant capital cost exposure

3. The principal risk for streaming and royalty companies would be

premature closure of mines where these companies receive revenues.

Lower Gold Price Alternatives: Slash Spending and High Grade Based on our analysis, even at a long-term gold price of $1,200/oz, many of the gold producers within our coverage universe that can avoid drawing down cash reserves have a combination of (1) below-average all-in costs (due in part to significant by-product credits), (2) no significant new mine capital commitments and (3) a lower debt burden. However should gold trade below $1,500/oz we would expect all of the gold producers to begin to take cost-saving measures to preserve cash balances. In a sharply lower gold price scenario, the greatest balance sheet stress would occur for Barrick, Allied Nevada, IAMGOLD, Kinross and Eldorado who would have significant capital spending commitments that would be difficult to walk away from; i.e., where a mine could be in production within 12 to 24 months.

The following are some of the cost-cutting alternatives, listed in the likely order of priority, for gold producers in a low commodity and/or high all-in operating cost environment. While there may be revenue generating opportunities, we would view these as distress financing alternatives. We would note that companies could also "high-grade"

4 their mines to survive

a sustained lower gold price.

1) Reduction of Corporate Overhead: This includes staffing cuts and cutting exploration programs.

2) Minesite Cost-Saving Initiatives: Deferring low-return, non-critical sustaining capital and increasing cut-off grades. Alternatively, companies could place a mine on care and maintenance, which would defer reclamation costs.

3) Restructuring Balance Sheets: Maturing debt could potentially be replaced by convertible debentures, while new debt may require hedging revenues. Alternatively, issuing equity to strategic partners could also be an option.

4) Sale of Non-core Assets: This includes divestiture of equity holdings and/or selling royalties or metal streams. Receiving reasonable prices would be a challenge in a weak commodity price environment, especially in a distressed situation.

5) Dividend Cuts: We believe companies would begin to cut their dividends, if the above efforts are unsuccessful, however dividend cuts could be forced if debt covenants are triggered, possible scenario for some companies at lower gold prices.

6) Deferral of Growth Projects: With many companies relying on future growth projects and in many cases debt tied to these projects, we believe most companies will wait as long as possible to defer growth projects. In particular the capital-intensive, bulk tonnage open-pit projects with significant upfront investment are at risk.

3 RBC CM research report: Precious Metals Royalty and Streaming Primer. Dan Rollins et al, April 5th, 2013. 4 High grading is where a company decides to mine above the current forecast cut off grade to process higher grade ore to reduce their costs per ounce. In many cases the remaining reserve material that is not mined may be uneconomic and may need to be written off.

6

Implied Gold Price and Historic Multiples Show Attractive Valuations Implied Gold Price Valuation Favors the Tier II and III Companies To estimate what gold price is discounted into the stocks, we use two scenarios: (1) a Net Asset Value analysis at a 7% discount rate using the RBC Capital Markets’ commodity price forecast

5, and (2) the same analysis using the forward curve commodity prices. The

difference between the implied gold price at forward curve prices vs. our commodity price assumptions are that the less favorable prices for Cu and exchange rates.

We estimate that the Tier I North American gold producers are discounting an average $1,520 long-term gold price, the Tier II producers are discounting an average $1,360 long-term gold price and the Tier III producers are discounting an average $1,300 long-term gold price (Exhibit 4).

We continue to favor the Tier II and III gold sector names based on their superior production growth, the ability to generate superior returns, overall stronger balance sheets and, in general, lower operating and geopolitical risk. Within our coverage universe, the companies with robust business plans at sharply lower gold prices, as discussed earlier, that are trading at or below the current $1,575 gold price are Agnico-Eagle, Alacer, Alamos, Argonaut, AuRico, Dundee Precious Metals, Goldcorp, New Gold, Primero and Timmins.

Exhibit 4: NAV and Stock Discounted Gold Prices Under Different Commodity Price Scenarios

RBC - Forward Curve - Current NAV Under Flat Gold Price Scenario Implied Implied

Tick. Price $1,200 $1,400 $1,600 Gold Price Gold Price5-Apr-13 (NAV's given in trading currency) (US$/oz) (US$/oz)

Tier I Gold ProducersBarrick Gold ABX $26.69 $7.26 $17.97 $28.69 $1,566 $1,565Goldcorp Inc. GG $31.79 $22.90 $28.31 $33.73 $1,515 $1,539Kinross Gold KGC $7.07 $2.47 $6.06 $9.64 $1,457 $1,448Newmont NEM $39.37 $8.76 $26.96 $45.16 $1,541 $1,588

Tier I Average $1,520 $1,530

Tier II Gold ProducersAgnico-Eagle AEM $38.05 $26.65 $35.98 $45.30 $1,447 $1,493Alacer Gold ASR C$3.74 C$2.10 C$3.47 C$4.85 $1,426 $1,477Allied Nevada ANV C$12.71 C$27.07 C$36.68 C$46.28 $901 $1,132Centerra Gold CG C$5.88 C$5.73 C$9.44 C$13.14 $1,208 $1,208Detour Gold DGC C$16.60 C$13.02 C$20.71 C$28.41 $1,296 $1,356Eldorado Gold EGO $8.16 $7.13 $9.90 $12.68 $1,281 $1,254IAMGOLD IAG $6.54 $3.56 $7.89 $12.21 $1,356 $1,396New Gold NGD $8.63 $5.09 $7.30 $9.50 $1,551 $1,519Osisko Mining OSK C$5.44 C$3.91 C$5.86 C$7.80 $1,372 $1,397Randgold Resources RRS £52.07 £16.29 £27.68 £39.08 $1,601 $1,601SEMAFO SMF C$2.34 C$2.64 C$3.95 C$5.27 $1,157 $1,157Yamana Gold AUY $14.28 $8.15 $10.91 $13.67 $1,678 $1,755

Tier II Average $1,360 $1,400

Tier III Gold ProducersAlamos Gold AGI C$12.68 C$10.76 C$14.77 C$18.77 $1,312 $1,368Argonaut Gold AR C$7.87 C$8.09 C$11.00 C$13.90 $1,185 $1,242AuRico Gold AUQ $6.10 $3.67 $5.59 $7.51 $1,486 $1,538Claude Resources CRJ C$0.42 -C$0.30 C$0.67 C$1.63 $1,349 $1,360Dundee Precious Metals DPM C$7.57 C$11.80 C$14.41 C$17.03 $876 $951Lake Shore Gold LSG C$0.60 C$0.18 C$1.01 C$1.85 $1,301 $1,298Primero Mining PPP $6.19 $3.87 $5.55 $7.23 $1,499 $1,530Timmins Gold TMM C$2.90 C$2.07 C$3.08 C$4.10 $1,364 $1,425

Tier III Average $1,300 $1,340

Source: RBC CM Estimates, Bloomberg

5 RBC CM gold price forecast is $1,700 in 2013, $1,700 in 2014, $1,600 in 2015, $1,500 in 2016 and $1,400/oz long term. The silver price forecast is $35.00 in 2013, $35.00 in 2014, $32.00 in 2015, $28.50 in 2016 and $25.00/oz long term. The copper price forecast is $3.75 in 2013, $3.75 in 2014, $3.25 in 2015, $4.00 in 2016, $4.25 in 2017 and $2.75/lb long term.

7

Tier I and II Producers Trading at Historic Lows on P/E and P/CF Multiples Basis Many of the gold producers within our coverage universe have recently struggled to generate sustainable positive earnings. However, with a higher sustained gold price and a greater critical mass (+200koz of production), the gold producers have once again started to generate positive earnings and more favorable return metrics. While the market traditionally has not used earnings for gold company valuation, it is useful to look at where the gold sector has traded versus the broader market.

In 2001, the larger North American Tier I and II gold producers were trading below the market multiples and gold stocks were clearly out of favor with investors. Currently the Tier I and II producers are once again trading at an estimated 300 to 500 bps discount to the North American market multiples (Exhibit 5). In addition, both the Tier I and II shares are currently trading not far from the recent trough valuations observed during the 2008 global financial crisis. In our view, the Tier I and II gold names offer investors an attractive entry point from an absolute valuation perspective with respect to the broader market.

Exhibit 5: NA Gold Equities Tier I & II Average Historical P/E, Based on Forward Estimates

0x

5x

10x

15x

20x

25x

30x

35x

40x

45x

50x

Jan-0

0

Jan-0

1

Jan-0

2

Jan-0

3

Jan-0

4

Jan-0

5

Jan-0

6

Jan-0

7

Jan-0

8

Jan-0

9

Jan-1

0

Jan-1

1

Jan-1

2

Jan-1

3

Forw

ard

P/E (

x)

S&P TSX S&P 500

Tier I Average Tier II Average

Source: RBC CM Trend and Cycle and Factset Estimates

The contraction in the earnings multiples for the gold sector began in 2004, coincidental with the creation of a number of gold ETF products, and has continued to the present for the Tier I and II companies. A similar contraction of the average annual forward cash flow multiples for the Tier I gold producers is shown in Exhibit 6.

We believe much of the lower P/E and P/CF valuations are due to missed production guidance, significant operating/capital cost escalation and generation of little or no free cash flow, and not necessarily a result of higher earnings and cash flow per share for some miners.

8

Exhibit 6: North American Gold Equities Tier I Historical Average Annual Forward Cash Flow Multiples

10.6x

17.6x

20.7x

18.0x

21.4x

18.7x

22.9x

26.4x

18.4x

15.5x 15.5x

6.5x

8.5x 9.2x

11.5x12.8x

11.4x

13.3x

8.2x9.4x

11.0x 11.0x

9.0x8.3x

12.8x

14.8x 14.3x

16.2x

14.3x

16.7x

18.6x

13.8x12.6x 12.6x

10.1x

12.3x12.6x

6.5x

7.3x

0x

4x

8x

12x

16x

20x

24x

28x

32x

36x

40x

44x

48x

52x

56x

60x

Jan-0

0

Jan-0

1

Jan-0

2

Jan-0

3

Jan-0

4

Jan-0

5

Jan-0

6

Jan-0

7

Jan-0

8

Jan-0

9

Jan-1

0

Jan-1

1

Jan-1

2

Jan-1

3

Forw

ard

CF

Multip

le

$-

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

Avera

ge M

ontly G

old

Price (

US

$/o

z)

.

HIGH

AVERAGE

LOW

Source: RBC CM Estimates

9

Risk-Reward Ranges Remain Attractive for Select Producers A Focus on Three key Metrics When we consider which gold equities offer the best risk-reward, we have selected names that can: (1) maintain a strong balance sheet in a sharply lower gold price environment, (2) achieve gold production growth via recently-completed mine expansions; and (3) be well-positioned in a recovering or high sustained gold price environment with production growth and strong fundamentals.

As discussed earlier, we believe that the gold producers best-positioned to weather a sharply-declining gold price environment would be the royalty and streaming companies, including Silver Wheaton, Franco-Nevada, Royal Gold, Premier Royalty and Sandstorm, which have minimal operating costs and no significant capital costs. The gold producers that we believe have an attractive risk-reward profile, as identified in blue on Exhibits 7, 8 and 9, are: Yamana, Goldcorp, Agnico Eagle, New Gold, Alamos, Dundee Precious Metals, Argonaut Gold, Randgold Resources and Timmins Gold.

We combine three key metrics that illustrate free cash flow, growth and valuation. These are (1) 3-Year Operating Free Cash Flow (FCF) Yield; (2) the 3-Year Production CAGR; and (3) the 3-Year Average Price to Cash Flow Multiples. We choose a 3-year period in order to smooth the volatility in the numbers and coincide with the timeframe of our Liquidity Risk analysis discussed earlier in this report.

Ability to Generate Cash and Production Growth Exhibit 7 has the 3-year FCF yield plotted against the 3-year gold production CAGR, and the companies in the upper right quadrant are viewed as favorable as they have production growth and are effectively fully-financed. In addition, most of these companies have amongst the lowest all-in costs within our North American gold producer universe.

Exhibit 7: 3-Year FCF Yield vs 3-Year Production CAGR for the NA Gold Producers

CG

LSG

TMM

AR

RRS

ABXGG

KGC

NEMAEM

ASR

EGO

IAG

NGD

OSK

AUY

AGI

CRJ

DPMTier I

Tier II

Tier II I

SMF

PPP

-10%

-5%

0%

5%

10%

15%

20%

(5%) 0% 5% 10% 15% 20% 25% 30% 35%

3-year production CAGR (2012A-2015E)

3-ye

ar O

pera

ting

FCF

Yie

ld (

2013

E-20

15E)

Preferred Gold

Equities

Source: RBC CM Estimates, ThomsonONE

Favourable Quadrant

10

Favorable Valuation and Ability to Generate Cash The second chart shows the 3-Year Operating P/CF versus the 3-Year FCF Yield (Exhibit 8). We believe that the combination of FCF and valuation helps identify the gold producers that are best prepared to maintain production growth and cash positions. In any gold price downturn, “Cash is King” and the companies in the upper right hand corner would be well-positioned to take advantage of any attractive acquisition opportunities or distress sales with a strong currency in a lower gold price environment. We would also expect these companies to have relatively favorable cash positions, and be able to push ahead with organic growth should gold prices be at a level that generates favorable returns.

Exhibit 8: 3-Year Average P/CF vs 3-year FCF Yield for the NA Gold Producers

ASR

CG

IAG

CRJ

TMM

Tier I

SMFABX

GG

KGC NEM

AEM

ANV

DGC

EGO

NGD

OSKRRS

AUY

AGI

AUQ

DPM

LSG

Tier II

Tier II I

ARPPP

2x

3x

4x

5x

6x

7x

8x

9x

(10%) (5%) 0% 5% 10% 15% 20%

3-year Operating FCF Yield (2013E-2015E)

3-ye

ar P

/CF

(201

3E-2

015E

)

Preferred Gold

Equities

Source: RBC CM Estimates, ThomsonONE

Favourable Domain

11

Favorable Valuation and Production Growth The third chart in this series shows the 3-Year Operating P/CF versus the 3-Year Production CAGR (Exhibit 9). We believe that the combination of production growth and valuation helps to identify investment flows. We would expect the gold producers with superior growth and reasonable valuations to see the initial investment flows, and these companies lie to the upper right side of the line. Subsequently, as gold prices recover, we would expect to see investment flows migrate to the lower left side of this chart.

Exhibit 9: 3-Year Average P/CF vs 3-Year Production CAGR for the NA Gold Producers

ANV

CG

EGO

AGI AUQ

CRJ

Tier II

SMF

ARPPP

GG

KGCNEM

AEM

ASR

IAG

NGD

OSK RRS

AUY

DPM

LSG

TMM

Tier ITier II I

2x

3x

4x

5x

6x

7x

8x

9x

(10%) 0% 10% 20% 30% 40% 50%3-year production CAGR (2012A-2015E)

3-ye

ar P

/CF

(201

3E-2

015E

)

Preferred Gold

Equities

Source: RBC CM Estimates, ThomsonONE

Initial Investment Flows

12

Appendix I: Cash Burn Rates at $1,300/oz and $1,400/oz Gold Exhibit 10: Cash Burn Rates at $1,300 Gold for North American Gold Producers, With Access to Credit Facilities

ABX GGKGC NEM

AEM

ASR

ANV

CEY

CG

DGC

EGO

IAG

NGD

OSK

RRS

SMF

AUY

AGI

AR

AUQ

CRJ

DPM

LSG

PPP

TMM

SLW

FNV

RGLD

Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 OK OK1No Issues

Source: RBC CM Estimates

Exhibit 11: Cash Burn Rates at $1,300 Gold for North American Gold Producers, Without Access to Credit Facilities

ABX

GG

KGC

NEM AEM

ASR

ANV

CEY

CG

DGC EGO IAG

NGD

OSK

RRS

SMF

AUY

AGI

AR

AUQ

CRJ

DPMLSG

PPP

TMM

SLW

FNV

RGLD

Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 OK OK1No Issues

Source: RBC CM Estimates

13

Exhibit 12: Cash Burn Rates at $1,400 Gold for North American Gold Producers, With Access to Credit Facilities

ABX GGKGC

NEM

AEM

ASR

ANV

CEY

CG

DGC

EGO

IAG

NGD

OSK

RRS

SMF

AUY

AGI

AR

AUQCRJ

DPM

LSG

PPP

TMM

SLW

FNV

RGLD

Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 OK OK1 OK2No Issues

Source: RBC CM Estimates

Exhibit 13: Cash Burn Rates at $1,400 Gold for North American Gold Producers, Without Access to Credit Facilities

ABX GG

KGC NEM

AEM

ASR

ANV

CEY

CG

DGC

EGO IAG NGD

OSK

RRS

SMF

AUY

AGI

AR

AUQCRJ

DPMLSG

PPP

TMM

SLW

FNV

RGLD

Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 OK OK1 OK2No Issues

Source: RBC CM Estimates

14

Global Mining & Materials Conference

Date: June 18 – 19, 2013 Location: Boston Harbor Hotel, Boston

New for 2013: Opportunity to interact with Senior

Management teams from major precious metals producers

as well as base metals and bulk commodities

Format: 1-on-1 and small group meetings along with key

lunch addresses from industry experts.

Confirmed Companies to date include: Base Metals Capstone Mining • General Moly • Hudbay Minerals • Inmet

Mining • Imperial Metals • Ivanplats • Lundin Mining •

Nevsun • Teck Resources • Thompson Creek Metals

Precious Metals Agnico-Eagle • Alacer Gold • Alamos Gold • Allied Nevada •

AngloGold Ashanti • Aurico Gold • Centerra Gold • Detour

Gold • Dundee Precious Metals • Evolution Mining • Franco-

Nevada • Hochschild • Iamgold • New Gold • Royal Gold •

Semafo • Silver Wheaton • Stillwater Mining • Tahoe

Resources • Yamana Gold

Diversified & Other Aquila Resources • Anglo American • ArcelorMittal •

Cameco • CF Industries • Cliffs Natural Resources •

Fortescue • Glencore • Illuka Resources • Intrepid Potash •

Kenmare • Labrador Iron Ore • Manabi Iron Ore • Methanex

• Tronox • Uranium One • Vale • Walter Energy

By accepting this invitation you are confirming that it is permissible for you to do so under relevant laws, rules or regulations that apply to you and your organization as well as being permissible under your

organization's code of conduct/ethics or policies.

15

Companies MentionedAgnico-Eagle Mines Limited (NYSE: AEM; $38.05; Outperform)Alacer Gold Corp. (TSX: ASR.TO; C$3.74; Outperform)Alamos Gold Inc. (TSX: AGI.TO; C$12.68; Outperform)Allied Nevada Gold Corp. (TSX: ANV.TO; C$12.71; Outperform)Argonaut Gold Inc. (TSX: AR.TO; C$7.87; Outperform)AuRico Gold Inc. (NYSE: AUQ; $6.10; Sector Perform)Barrick Gold Corporation (NYSE: ABX; $26.69; Sector Perform)Centerra Gold Inc. (TSX: CG.TO; C$5.88; Sector Perform; Speculative Risk)Claude Resources Inc. (TSX: CRJ.TO; C$0.42; Sector Perform)Detour Gold Corporation (TSX: DGC.TO; C$16.60; Outperform)Dundee Precious Metals Inc. (TSX: DPM.TO; C$7.57; Outperform)Eldorado Gold Corporation (NYSE: EGO; $8.16; Outperform)Goldcorp Inc. (NYSE: GG; $31.79; Outperform)IAMGOLD Corporation (NYSE: IAG; $6.54; Sector Perform)Kinross Gold Corporation (NYSE: KGC; $7.07; Outperform)Lake Shore Gold (TSX: LSG.TO; C$0.60; Sector Perform)New Gold Inc. (AMEX: NGD; $8.63; Outperform)Newmont Mining Corporation (NYSE: NEM; $39.37; Sector Perform)Osisko Mining Corporation (TSX: OSK.TO; C$5.44; Outperform)Primero Mining (NYSE: PPP; $6.19; Sector Perform)Randgold Resources Ltd. (LSE: RRS.L; GBp5,290; Outperform)Royal Gold, Inc. (NASDAQ: RGLD; $67.71; Sector Perform)Semafo Inc. (TSX: SMF.TO; C$2.34; Outperform)Silver Wheaton Corp. (NYSE: SLW; $29.07; Outperform)Timmins Gold Corp. (TSX: TMM.TO; C$2.90; Outperform)Yamana Gold Inc. (NYSE: AUY; $14.28; Outperform)

Required Disclosures

Non-U.S. Analyst DisclosureDan Rollins, Jonathan Guy and Sam Crittenden (i) are not registered/qualified as research analysts with the NYSE and/or FINRAand (ii) may not be associated persons of the RBC Capital Markets, LLC and therefore may not be subject to FINRA Rule 2711and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by aresearch analyst account.

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Distribution of RatingsRBC Capital Markets, Equity Research

Investment BankingServ./Past 12 Mos.

Rating Count Percent Count PercentBUY[TP/O] 782 50.91 294 37.60HOLD[SP] 684 44.53 172 25.15SELL[U] 70 4.56 8 11.43

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