Newcrest. Earnings and target price revision. Price catalyst. Action and recommendation

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1 AUSTRALIA NCM AU/NM CN Outperform Price (at 8:6, 13 Aug 212 GMT) A$25.4/C$23.5 Volatility index Low/Medium 12-month target A$ 32. C$ month TSR % Valuation A$ C$ - DCF (WACC 5.%, beta 1.1, ERP 1.1%, RFR 3.8%) GICS sector Materials Market cap A$m 19,418 3-day avg turnover A$m 75.8 Number shares on issue m Investment fundamentals Year end 3 Jun 212A 213E 214E 215E Revenue m 4,416. 4, ,34.6 4,951.1 EBIT m 1,59. 1, , ,445.4 Reported profit m 1,117. 1,53.7 1, Adjusted profit m 1,84. 1,53.7 1, Gross cashflow m 1,73. 1, ,21.4 1,594.1 CFPS CFPS growth % PGCFPS x PGCFPS rel x EPS adj EPS adj growth % PER adj x PER rel x Total DPS Total div yield % Franking % ROA % ROE % EV/EBITDA x Net debt/equity % P/BV x NCM AU vs ASX 1, & rec history Note: Recommendation timeline - if not a continuous line, then there was no Macquarie coverage at the time or there was an embargo period. Source: FactSet, Macquarie Research, August 212 (all figures in AUD unless noted) 13 August 212 Another step in the right direction Event has reset expectations such that its conservative FY13 and five year guidance is a positive impetus. Impact FY13 guidance very attainable. In our mind the FY13 production guidance range has been designed to provide a realizable benchmark for and is below the implied site by site guidance of moz. That said, we remain cautious on the ramp up of the Cadia East block cave over 2H13 and have incrementally decreased our forecast to 2.3moz. 5 year production guidance. outlined its five year guidance of moz by FY17. We currently forecast production to grow to +3.1moz in FY16 from existing projects. The primary driver of this growth is coming from Cadia East and Lihir Island. That said, we see the 3.5moz as a stretch target at this point in time. 5 year capex likely to increase. In what we see as a clear indicator that the Wafi-Golpu project will be progressing, Harmony and have leased three floors of office space in Brisbane. As such the five year capex profile provided by appears significantly short of what the actual profile will eventually be. When Wafi-Golpu is included in the profile we see capex being maintained at ~A$1.8bn over the coming three years. Using current spot rates and our production forecasts, we see having to draw down ~A$1.bn of debt over FY13 and a further A$75m in FY15 to fund its share of the capex. Current market conditions appear to remain robust for investment grade debt, which would indicate that will be able to roll over and increase its debt facility to meet its funding requirements. FY12 results in line. EBITDA, EBIT and Underlying earnings were all within 1-3% of our forecast and towards the higher end of the consensus expectations. As such, we see this in the same light as the June quarterly and believe it will be another marker to arrest concerns and provide positive momentum for the stock. Earnings and target price revision FY12: +.9% actuals; FY13E -12.4% and FY14E: -16.5% higher operating costs. Price catalyst 12-month price target: A$32. based on a Forward Curve DCF methodology. Catalyst: Wafi-Golpu PFS released 29th August Action and recommendation Outperform. s FY12 results were towards the higher end of our and the market s expectations. While we see this as a positive marker for the stock, it is the conservative and achievable FY13 production guidance that is likely to be the key driver of positive sentiment in the near term. The risk remains to the upside for as a constant flow of positive news is likely over the coming three months. Please refer to the important disclosures and analyst certification on inside back cover of this document, or on our website

2 FY13 production (koz) Analysis s FY12 results were towards the higher end of our and the market s expectations. While we see this as a positive marker for the stock, it is the conservative and achievable FY13 production guidance that we believe is likely to be the key driver of positive sentiment in the near term. The risk remains to the upside for as a constant flow of positive news is likely over the coming three months. Upcoming catalysts We see the FY12 results as the second of many positive markers in the coming 12 months for (June quarterly being the first). The results affirm the operational base for the company and provide a platform for growth over the coming years. Key upcoming dates are: Wednesday 29 th August Wafi-Golpu PFS Golpu Initial Reserve Wafi-Golpu Resource update Tuesday Friday 2 nd 5 th October Investor day Cadia Valley Operation site visit Lihir Island site visit Thursday 18 th October 1Q13 Quarterly production report FY13 guidance predicated on achievable incremental operational improvements pre-announced the guidance range for both of its two largest assets (CVO and Lihir) in April, and stated that total company production growth would be 5-1% year on year over the coming five years. The FY13 guidance range of moz was in line with our expectations of 2.32moz. In our mind the FY13 production guidance range has been designed to provide an attainable benchmark for and is below the implied site by site guidance of moz. That said, we remain cautious on the ramp up of the Cadia East block cave over 2H13 and have incrementally decreased our forecast to 2.3moz. Fig 1 Taking a conservative view for FY13 forecasts FY13 Low FY13 High FY13f Macq FY13 Guidance FY12a Au Production Cadia Hill Ridgeway Cadia East Total CVO Lihir Telfer Gosowong Hidden Valley Bonikro Other 48 Total 2,286 2,175 2,655 2,33 Cu Production CVO Telfer Total NCM guidance - Low NCM guidance - High Macq forecast 1, Total CVO Lihir Telfer Gosowong Hidden Valley Bonikro Source: Mining, Macquarie Research, August August 212 2

3 koz A$/oz has stated that it forecasts unit cash costs (pre-credits) to be ~5% higher due to pressure from rising input costs. We see this driving reported group cash costs to ~A$66/oz, up from A$63/oz in FY12, before the increased copper by-product credits from Cadia East mitigate cost pressures in later years. Fig 2 Operating cash costs to rise in FY13 Telfer total Cadia Valley Operations Gosow ong Cracow Hidden Valley Lihir Island Mt Raw don Bonikro Total cash costs/oz 3, 2, 2, 1, 1, 21a 211a 212a 213e 214e 215e Source: Mining, Macquarie Research, August 212 Five year guidance Driven by Lihir and Cadia East As per its announcement on 24 April 212 has revised its five year guidance from including likely growth options to only including projects which have been approved by the board to progress beyond PFS. As such, we note that the recent guidance does not include such projects as Namosi, O Callaghans (tungsten) or Wafi-Golpu. Fig 3 Five year guidance now only includes projects tollgated beyond PFS As at 27 Feb 212 As at 13 Aug 212 Source: Mining, Macquarie Research, August 212 We currently forecast production to grow to +3.1moz in FY16 from existing projects. The primary driver of this growth is coming from Cadia East and Lihir Island. That said, we see the 3.5moz as a stretch target at this point in time. 13 August 212 3

4 $m Fig 4 Lihir and Cadia East drive five year production growth Gold production (koz) 212a 213e 214e 215e 216e 217e Telfer open pit Telfer u/g Telfer total Cadia Ridgeway Cadia East Cadia Valley Operations Gosowong Hidden Valley Lihir Island Bonikro Total gold production 2,286 2,33 2,662 2,92 3,131 3,243 Source: Mining, Macquarie Research, August 212 Wafi-Golpu to impact the cashflow In what we see as a clear indicator that the Wafi-Golpu project will be progressing, Harmony and have leased three floors of office space in Brisbane. As such, we believe that the five year capex profile provided by was significantly short of what the actual profile will look like. When Wafi-Golpu is included in the profile we see capex being maintained at ~A$1.8bn over the coming three years. Using current spot rates and our production forecasts, we see having to draw down ~A$1.bn of debt over FY13 and a further A$75m in FY15 to fund its share of the capex. is in the process of renewing its bilateral debt facilities and is expected to complete this process no later than 3 September 212. Current market conditions appear to remain robust for investment grade debt, which would indicate that will be able to roll this facility over and likely increase it to meet its funding requirements. We note that the company s comments that gearing will peak in the second half of 212 are unlikely to be maintained once Wafi-Golpu has been included in its capex profile. Fig 5 Capex profile (including Wafi-Golpu) requires additional ~A$1.75bn of funding 4, Cash Capex Borrow ings Gearing 2% 4, 3, 3, 2, 2, 1, 1, FY9a FY1a FY11a FY12a FY13e FY14e FY15e 15% 1% 5% % -5% -1% Source: Mining, Macquarie Research, August August 212 4

5 FY12 earnings no surprise EBITDA, EBIT and Underlying earnings were all within 1-3% of our forecast and towards the higher end of the consensus expectations. As such, we see this in the same light as the June quarterly and believe it will be another marker to arrest concerns and provide positive momentum for the stock. We were forecasting a final dividend of 2cps unfranked, therefore the 23cps 15% franked dividend is a positive. We note paid a 2cps special dividend in the corresponding release in 211; we were not forecasting such a dividend this time. Fig 6 Results largely in line with our forecast FY12 Macq FY12 actual % Diff from f'cast FY1a FY11a YoY P&L Gross Operating Sales Revenue 2,81 4,12 4,477 4,416 8% -1% Mine production costs 1,97 1,813 1,992 2,221 23% 11% Royalty % 13% TC/RC % % Mining Adjustment % Inventory Mvmt % 164% Cost of Sales 1,268 1,9 2,96 2,65 9% -1% Exploration Expenses % 16% Corporate Admin Expenses % -8% Other revenue/other expenses % -92% EBITDA 1,427 2,59 2,194 2,151 4% -2% Depreciation % 2% EBIT 1,126 1,544 1,644 1,59 3% -3% Finance Income % -76% Finance cost % -58% PBT restructure and significant items 1,15 1,58 1,549 1,549 3% % Income tax expense % -6% Minority interest % 18% Underlying Profit 763 1,57 1,69 1,84 3% 1% Significant items % 15% Reported earnings ,98 1,117 23% 2% Balance Sheet Cash % -63% Current assets 1,411 1,542 1,869 1,464-5% -22% Non-Current assets 4,923 15,74 18,425 19,45 21% 3% Total assets 6,334 17,282 2,294 2,59 19% 1% Current borrowings ,2 934% 884% Current liabilities , % 119% Non-current borrowings ,442 1,28 77% -51% Non-current liabilities 997 2,59 4,395 3,423 32% -22% Total liabilities 1,324 3,47 5,33 5,415 59% 2% Net Assets 5,1 13,875 14,991 15,94 9% 1% Cashflow Operating activities % -1% Investing activities % 9% Financing activities % -13% Net cashflow % -87% Dividend Interim % % Final % 15% Special 2 Total % 9% Source: Mining, Macquarie Research, August August 212 5

6 koz $m A$/oz (NCM.ASX / NM.TSX) Share price: AUD $25.4 CDN $23.5 Target price: AUD $32. CDN $34. Income statement 21a 211a 212a 213e 214e 215e Gold production (koz) 21a 211a 212a 213e 214e 215e Revenue 2,81 4,12 4,416 4,733 5,341 4,951 Telfer open pit Other Revenue 1 Telfer u/g Total Revenue 2,82 4,12 4,416 4,734 5,341 4,951 Telfer total Total cost of sales (inc deferred) -1,268-1,9-2,65-2,133-2,358-2,566 Cadia Exploration Ridgeway Administration Cadia East Other expenses/(income) Cadia Valley Operations Operating EBITDA 1,428 2,59 2,151 2,423 2,798 2,184 Wafi-Golpu Depreciation and amortisation Gosowong Operating EBIT 1,127 1,544 1,59 1,823 2,118 1,445 Hidden Valley Finance costs - ordinary activities Lihir Island Interest received Bonikro EBT 1,16 1,58 1,549 1,592 1,917 1,223 Cracow Tax Mt Rawdon 9 24 Minority interest Total gold production 1,762 2,72 2,286 2,33 2,662 2,92 Adjusted NPAT 763 1,58 1,84 1,54 1, Significant items (post tax) Copper production (kt) 21a 211a 212a 213e 214e 215e Reported NPAT ,117 1,54 1, Telfer open pit Adjusted NPAT growth 58% 39% 2% -3% 2% -36% Telfer u/g Telfer total Cadia Adjusted EPS (A$/share) Ridgeway EPS growth 51% -5% -4% -3% 2% -36% Cadia East DPS ($ps) Cadia Valley Operations Dividend Yield 1.% 2.% 1.4% 1.6% 1.2%.8% Wafi-Golpu Total copper production Cashflow 21a 211a 212a 213e 214e 215e Cash costs (A$/oz) 21a 211a 212a 213e 214e 215e Operating cashflow 1,33 1,729 1,726 1,874 2,55 1,549 Telfer total Capex ,166-2,511-1,881-1,833-1,595 Cadia Valley Operations Exploration Wafi-Golpu Other Gosowong Investing cashflows ,294-2,755-2,41-1,993-1,745 Hidden Valley Net borrowings 427 1, Lihir Island Dividends Bonikro Equity Cracow Other Mt Rawdon Financing cashflows , Total cash costs/oz Net increase / (decrease) in cash Balance sheet 21a 211a 212a 213e 214e 215e Capex (A$m) 21a 211a 212a 213e 214e 215e Cash and cash equivalents Telfer Other 767 1,357 1,222 1,321 1,321 1,321 Cadia Valley Operations 26 1,96 1, Current assets 1,411 1,542 1,464 2,31 1,742 1,993 Wafi-Golpu Property, Plant and Equipment 1,764 3,31 4,364 5,646 6,799 7,656 Gosowong Exploration, evaluation and development 2,556 7,675 8,795 8,891 8,987 9,73 Hidden Valley Other 63 4,694 5,398 5,398 5,398 5,398 Lihir Island Non-current assets 4,923 15,74 19,45 2,423 21,672 22,615 Bonikro Total Assets 6,334 17,282 2,59 22,454 23,414 24,68 New projects Current debt Cracow Long term debt Mt Rawdon 12 1 Other 898 2,67 3,7 3,256 3,149 2,963 Total capex 594 1,93 2,29 1,881 1,833 1,595 Total Liabilities 1,324 3,47 5,415 6,592 6,485 7,7 Shareholders' Equity 5,1 13,875 15,94 15,862 16,929 17,62 Ratio Analysis 21a 211a 212a 213e 214e 215e Reserves Tonnes Grade Metal Total debt (mt) Au (g/t) Cu (%) Au (moz) Cu (mt) Ag (moz) Net Debt/Equity -4% 4% 14% 17% 17% 19% Cadia open pit ND to ND+E -5% 4% 13% 14% 15% 16% Ridgeway EBIT Net Interest Cover Cadia East underground 1, Net Interest Cover Total Cadia 1, Payout Ratio 16% 34% 25% 29% 18% 19% Main Dome (open pit) West Dome (open pit) EBITDA margin 51% 5% 49% 51% 52% 44% Telfer open pit EBIT margin 4% 38% 36% 39% 4% 29% Telfer Deeps underground EV/EBITDA (fixed debt) Total Telfer EV/EBITDA (prospective) Lihir Island Lihir Island stockpile GCFPS (A$/share) $1.77 $1.86 $2.19 $2.16 $2.54 $2.2 Total Lihir Island PGCFPS Bonikro FCF Yield 4% -2% -4% % 1% % Gosowong PER Hidden Valley JV (attrib) ROE (NPAT/Equity) 11% 7% 7% 7% 7% 5% Golpu JV (attrib) ROCE (EBIT/Debt + Equity) 21% 11% 9% 9% 1% 7% Namosi JV (attrib) Number of shares outstanding Marsden JV (attrib) GRAND TOTAL 3, NPV summary at 5% A$m A$/sh A$m A$/sh A$m A$/sh Assumptions FY1 FY11 FY12 FY13 FY14 FY15 Macquarie Spot Forward Macquarie Telfer , Gold (US$/oz) 1,68 1,371 1,684 1,925 1,888 1,538 Cadia Copper (US$/lb) Ridgeway 1, , , Silver (US$/oz) Cadia East 8, , , A$/US$ Lihir Island 4, , , Wafi-Golpu 6, , , Spot Hidden Valley , Gold (US$/oz) 1,68 1,371 1,684 1,61 1,61 1,61 Gosowong Copper (US$/lb) Bonikro Silver (US$/oz) Evolution A$/US$ Exploration 1, , , 1.31 Corporate -1, , , Forward curve Current interest bearing liabilities Gold (US$/oz) 1,68 1,371 1,684 1,674 1,697 1,727 Non-current interest bearing liabilities -3, , , Copper (US$/lb) Cash (and cash equivalents) Silver (US$/oz) Total 2, , , A$/US$ NPV prem/(disc) to share price 6% -4% 32% Market cap (A$b): 19,431 2, Cash Capex Gearing 2% Telfer total Cadia Valley Operations Gosowong Cracow Hidden Valley Lihir Island Mt Rawdon Bonikro Total cash costs/oz 2, 15% 3, 3, 7 6 1, 1% 2, 5% 2, 4 1, % -5% 1, 1, FY9a FY1a FY11a FY12a FY13e FY14e FY15e -1% 21a 211a 212a 213e 214e 215e Source: Mining, Macquarie Research, August August 212 6

7 Important disclosures: Recommendation definitions Macquarie - Australia/New Zealand Outperform return >3% in excess of benchmark return Neutral return within 3% of benchmark return Underperform return >3% below benchmark return Benchmark return is determined by long term nominal GDP growth plus 12 month forward market dividend yield Macquarie Asia/Europe Outperform expected return >+1% Neutral expected return from -1% to +1% Underperform expected return <-1% Macquarie First South - South Africa Outperform expected return >+1% Neutral expected return from -1% to +1% Underperform expected return <-1% Macquarie - Canada Outperform return >5% in excess of benchmark return Neutral return within 5% of benchmark return Underperform return >5% below benchmark return Macquarie - USA Outperform (Buy) return >5% in excess of Russell 3 index return Neutral (Hold) return within 5% of Russell 3 index return Underperform (Sell) return >5% below Russell 3 index return Volatility index definition* This is calculated from the volatility of historical price movements. Very high highest risk Stock should be expected to move up or down 6 1% in a year investors should be aware this stock is highly speculative. High stock should be expected to move up or down at least 4 6% in a year investors should be aware this stock could be speculative. Medium stock should be expected to move up or down at least 3 4% in a year. Low medium stock should be expected to move up or down at least 25 3% in a year. Low stock should be expected to move up or down at least 15 25% in a year. * Applicable to Australian/NZ/Canada stocks only Recommendations 12 months Note: Quant recommendations may differ from Fundamental Analyst recommendations Financial definitions All "Adjusted" data items have had the following adjustments made: Added back: goodwill amortisation, provision for catastrophe reserves, IFRS derivatives & hedging, IFRS impairments & IFRS interest expense Excluded: non recurring items, asset revals, property revals, appraisal value uplift, preference dividends & minority interests EPS = adjusted net profit / efpowa* ROA = adjusted ebit / average total assets ROA Banks/Insurance = adjusted net profit /average total assets ROE = adjusted net profit / average shareholders funds Gross cashflow = adjusted net profit + depreciation *equivalent fully paid ordinary weighted average number of shares All Reported numbers for Australian/NZ listed stocks are modelled under IFRS (International Financial Reporting Standards). Recommendation proportions For quarter ending 3 June 212 AU/NZ Asia RSA USA CA EUR Outperform 55.67% 61.% 53.43% 42.58% 69.23% 46.6% (for US coverage by MCUSA, 9.5% of stocks followed are investment banking clients) Neutral 3.5% 22.11% 36.99% 52.41% 28.2% 33.69% (for US coverage by MCUSA, 8.14% of stocks followed are investment banking clients) Underperform 13.83% 16.89% 9.59% 5.1% 2.75% 19.71% (for US coverage by MCUSA,.45% of stocks covered are investment banking clients) Company Specific Disclosures: Macquarie and its affiliates collectively and beneficially own or control 1% or more of any class of Mining Limited's equity securities. Macquarie Bank Limited makes a market in the securities in respect of Mining Limited. Macquarie Capital Advisers Limited is acting as financial adviser to Catalpa Resources Limited in relation to its all-scrip merger of equals with Conquest Mining Limited and concurrent acquisition of Mining Limited s interests in the Cracow and Mt Rawdon gold mines as announced on 15 June 211. Important disclosure information regarding the subject companies covered in this report is available at Analyst Certification: The views expressed in this research reflect the personal views of the analyst(s) about the subject securities or issuers and no part of the compensation of the analyst(s) was, is, or will be directly or indirectly related to the inclusion of specific recommendations or views in this research. The analyst principally responsible for the preparation of this research receives compensation based on overall revenues of Macquarie Group Ltd (ABN , AFSL No ) ( MGL ) and its related entities (the Macquarie Group ) and has taken reasonable care to achieve and maintain independence and objectivity in making any recommendations. General Disclosure: This research has been issued by Macquarie Securities (Australia) Limited (ABN , AFSL No ) a Participant of the Australian Securities Exchange (ASX) and Chi-X Australia Pty Limited. This research is distributed in Australia by Macquarie Equities Limited (ABN , AFSL No ) ("MEL"), a Participant of the ASX, and in New Zealand by Macquarie Equities New Zealand Limited ( MENZ ) an NZX Firm. s services in New Zealand are provided by MENZ. Macquarie Bank Limited (ABN , AFSL No ) ( MBL ) is a company incorporated in Australia and authorised under the Banking Act 1959 (Australia) to conduct banking business in Australia. 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The Macquarie Group may receive fees, brokerage or commissions for acting in those capacities and the reader should assume that this is the case. The Macquarie Group s employees or officers may provide oral or written opinions to its clients which are contrary to the opinions expressed in this research. Important disclosure information regarding the subject companies covered in this report is available at 13 August 212 7