Australian base metal miners

Transcription

1 AUSTRALIA Recommendation changes Outperform to Neutral Panoramic Resources Tiger Resources Nickel Miners Independence Group Outperform Price $2.88 Target $4.30 TSR 51% Western Areas Outperform Price $2.26 Target $3.30 TSR 49% Panoramic Resources Neutral Price $0.29 Target $0.30 TSR 22% Mincor Resources Underperform Price $0.27 Target $0.15 TSR (44%) Copper Miners OZ Minerals Outperform Price $3.30 Target $4.60 TSR 43% Sandfire Resources Outperform Price $5.39 Target $8.00 TSR 54% Tiger Resources Neutral Price $0.056 Target $0.070 TSR 25% MMG Price Target Outperform HK$1.57 HK$2.20 TSR 40% 24 September 2015 Macquarie Securities (Australia) Limited A deteriorating outlook Event We upgrade our earnings forecasts for our base metal coverage universe to incorporate ~20-30% cuts to our nickel price forecasts and 6-12% cuts to our copper price forecasts. The weaker outlook has been partially offset by 8-10% cuts to our A$/US$ forecasts. Impact Weaker stainless steel demand drives material cuts to our nickel outlook: Reductions in our stainless steel demand outlook have translated to material cuts to our nickel price forecasts. We lower our FY15 estimate by 22%, our FY17 forecast by 28% and our FY18 forecast by 25%. Our longerterm nickel price forecasts are also reduced by over 20%. Softer demand for copper sees cuts of ~10%: We have also reduced our forecasts for copper and other base metals by around 10% on the back of weaker demand. Our copper price forecasts fall 6%, 9% and 11% for FY16, FY17 and FY18, respectively, although we make no change to our long-term price of US$3.15/lb. We also lower our lead and zinc price forecasts by 5-10%. Currency cuts partially offset the downgrades: Cuts to our key exchange rate forecasts have partially offset the cuts to our bulk and base metal commodity price forecasts, but were also partly responsible for the downgrades. We have reduced our A$/US$, BRL/US$ and ZAR/US$ forecasts by 8-10% over the next five years. Material cuts to earnings for the nickel miners: Incorporating the weaker nickel price outlook has translated to material cuts to our earnings forecasts for the nickel miners. Our earnings forecasts for IGO fall 5%, 16% and 21% for FY16, FY17 and FY18, respectively, while our forecasts for WSA fall 55%, 42% and 33% for FY16, FY17 and FY18, respectively. We cut our price target for IGO by 14% and for WSA by 28%. Higher cost producers PAN and MCR are expected to report losses for the next two years and our price targets fall 40% and 40%, respectively. Outlook for copper miners more positive: The cuts to our copper price forecasts have been offset by the weaker A$/US$ forecast with OZL seeing a modest upgrade to our price target (+7%). Earnings changes are mixed with rises in FY16 offset by declines in FY17 and FY18. TGS sees 26-34% cuts to earnings over the next three years while MMG s earnings forecasts fall 35%, 28% and 19% for CY16, CY17 and CY18, respectively. Outlook Preference for low cost producers: We retain our positive ratings on lowcost copper and nickel producers SFR, OZL, IGO and WSA despite the material cuts to our base metal price forecasts. SFR s Monty discovery has the potential to materially improve the outlook for the company and presents a positive catalyst for the stock. Post the takeover of Sirius Resources, IGO is likely to release updated estimates for Nova, which could be a positive catalyst for the stock. MMG also offers excellent value at current levels. We downgrade PAN and TGS from Outperform to Neutral. Please refer to page 13 for important disclosures and analyst certification, or on our website

2 Rutile Nickel Manganese Alumina Iron-ore Coking coal Zircon Copper Thermal coal Aluminium Zinc Lead Silver Gold Macquarie Wealth Management Material cuts to our commodity price forecasts We have made some material cuts to our commodity price forecasts to reflect the perfect storm of weak demand, an absence of material supply cuts and declining cost curves due to lower energy prices and exchanges rates. For more detail on the commodity price cuts see today Commodities Comment. The most significant cuts are to our rutile and nickel price forecasts which fall 29% and 23% on average over the next five years. Bulk commodities also see significant cuts with manganese down 16% on average and alumina, iron-ore and coking coal down 10-12%. Cuts to other commodity prices, including the base metals are around 5-10% over the next five years. Fig 1 Average cuts to our commodity price forecasts for FY16-FY20 0% (5%) (10%) (15%) (20%) (25%) (30%) (35%) Source: Macquarie Research, September 2015 Weaker currencies provide some relief A contributor to the bearish outlook for commodity prices due to the negative impact on cost curves, weaker currencies provide some relief to the downgrades to our commodity outlook from an earnings perspective. Macquarie s Economics team recently pulled back its expectations for the key commodity currencies in their latest The Global Macro Outlook. Cuts to our global growth forecasts, incorporating further weakening of the Chinese RMB are declining commodity prices are all key drivers behind the cuts to our commodity currencies. We note that the US Federal Reserve interest rate cycle remains a key potential catalyst for commodity currencies and our base case remains for a rate rise in December, although the speed of the increases are likely to be more gradual given the weaker global economic outlook. We cut our A$/US$ forecasts by 7-9% over the next three years, expecting a trough of 0.63 for the first nine months of We also lower our long-term A$/US$ forecast from 0.82 to We make similar cuts to the other key commodity currencies, ZARUSD, BRLUSD and CLPUSD, although changes to the long term are less severe. Fig 2 Key commodity currencies cut by 5-8% Y/E June FY16e FY17e FY18e FY19e Long-term AUSUSD - Old AUDUSD - New Change (6%) (7%) (7%) (9%) (9%) ZARUSD - Old ZARUSD - New Change (9%) (8%) (5%) (1%) 0% BRLUSD - Old BRLUSD - New Change (8%) (8%) (7%) (5%) (5%) CLPUSD - Old CLPUSD - new Change (8%) (8%) (7%) (5%) (5%) Source: Macquarie Research, September September

3 Nickel hit hardest of the base metals With a further 5mtpa of Chinese aluminium capacity growth planned for the next five years and similar levels of alumina we believe prices will need to remain depressed to keep supply out of the market. We reduce our aluminium price forecasts by 5% in FY16 and ~8% from then on including our long-term price. However as with the cuts to our coal price forecasts, after factoring in reductions in our A$/US$ forecasts, aluminium prices received by Australian based assets have remained largely unchanged. Weak demand and high inventories have driven a material change in our view for nickel. We make severe cuts to our forecasts over the next few years, reducing our FY16 and FY17 average nickel prices by 23% and 28%, respectively. We also lower our long-term price from US$10.89/lb to US$8.62/lb and note that our price forecast assumes only a modest recovery over the next 12 months. Cuts to our other base metal forecasts are less severe and largely reflect the base effect of weaker demand and reductions in cost curves due to weaker currencies. Over the next four years we cut copper prices by 9% on average, zinc prices by 7% and lead prices by 4%. We note that our long-term prices for copper, zinc and lead remain unchanged. Fig 3 Severe cuts to nickel prices, but other base metals also suffer downgrades Y/E June FY16e FY17e FY18e FY19e Long-term (real) Aluminium (US$/lb)- old Aluminium (US$/lb)- new Change (5%) (8%) (8%) (6%) (8%) Nickel (US$/lb) - old Nickel (US$/lb) - new Change (23%) (28%) (24%) (22%) (21%) Copper (US$/lb)- old Copper (US$/lb)- new Change (%) (6%) (9%) (11%) (10%) 0% Zinc (US$/lb) - old Zinc (US$/lb) - new Change (12%) (10%) (7%) (3%) 0% Lead (US$/lb) - old Lead (US$/lb) - new Change (5%) (9%) (7%) (1%) 0% Source: Macquarie Research, September 2015 Gold and silver prices upgraded in A$ terms We have made only modest changes to our gold and silver price forecasts in this update, cutting our US$ forecast by less than 2% for both gold and silver in FY16 and make almost no changes to our forecasts beyond FY17. However after incorporating the changes to our A$/US$ forecasts, our gold and silver price forecasts in A$ rise 9-10% in the medium and long-term. Fig 4 Gold and silver prices largely unchanged in US$ but upgraded in A$ Y/E June FY16e FY17e FY18e FY19e Long-term (real) Gold (US$/oz) - old 1,125 1,206 1,306 1,375 1,250 Gold (US$/oz) - new 1,113 1,203 1,306 1,375 1,250 Change (1%) (0%) 0% 0% 0% Silver (US$/oz) - old Silver (US$/oz) - new Change (2%) (0%) 0% 0% 0% Gold (A$/oz) - old 1,580 1,732 1,724 1,690 1,524 Gold (A$/oz) - new 1,670 1,864 1,859 1,852 1,667 Change 6% 8% 8% 10% 9% Silver (A$/oz) - old Silver (A$/oz) - new Change 5% 8% 8% 10% 9% Source: Macquarie Research, September September

4 Prices targets cuts and two recommendation changes We have made two recommendation changes after incorporating the cuts to our commodity price and FX forecasts. We downgrade PAN and TGS from Outperform to Neutral. The cuts to price targets are significant for the nickel miners. IGO s target falls 14% as its gold exposure provides some insulation to the nickel price cuts. The pure play names suffer more with our price target for WSA cut by 28% and targets for higher cost producers PAN and MCR cut by 40%. The impact on the copper miners was mixed. OZL and SFR enjoyed modest upgrades to earnings and OZL s greater leverage to the A$ gold price has translated to a 7% upgrade to our price target, while our target for SFR remains unchanged. For TGS the absence of A$ leverage has resulted in its target falling 36% on the back of the weaker copper price outlook. Similarly for MMG, its price target falls 42% as the bulk of its valuation lies in Las Bambas. Fig 5 Two recommendation changes and material cuts to price targets Recommendation Price Target Company Code Old New Old New Change Nickel Miners Independence Group IGO Outperform Outperform (14%) Western Areas WSA Outperform Outperform (28%) Panoramic Resources PAN Outperform Neutral (40%) Mincor Resources MCR Underperform Underperform (40%) Copper Miners Oz Minerals OZL Outperform Outperform % Sandfire Resources SFR Outperform Outperform % Tiger Resources TGS Outperform Neutral (36%) MMG Limited 1208 Outperform Outperform (42%) Source: Macquarie Research, September 2015 Earnings cuts are significant for the nickel miners Incorporating the changes to our commodity price and FX forecasts has translated to material cuts to our earnings forecasts for the nickel miners. IGO s earnings fall 5%, 16% and 21% over FY16, FY17 and FY18, respectively, as the company s diversified earnings stream provided some insulation to the material cuts to our nickel prices. The nickel pure play stocks suffered significant cuts to earnings. Our earnings estimates for WSA fall 55%, 42% and 33% for FY16, FY17 and FY18, respectively. For PAN our forecasts swing from a small profit to a loss in FY16, while our earnings forecasts fall ~70% for FY17 and FY18. We widen our forecast losses for MCR FY16, swing from a profit to a loss for FY17 and cut our FY18 earnings estimate by more than 80%. The impact on the copper miners was mixed. OZL and SFR benefited from exposure to the weaker A$/US$, with our CY16 and FY16 earnings forecasts rising 22% and 1%, respectively. We make more modest cuts to our forward estimates for both stocks with CY18/FY18 earnings declining only 7%. For MMG our earnings forecasts fall 35% for CY16, 28% for CY17 and 19% for CY18 while we still expect the company to report a small loss in CY15. Our earnings forecasts for TGS fall on average by 30% for CY16-CY18. Fig 6 Material cuts to earnings for nickel miners Change CY15/FY15a CY16/FY16e CY17/FY17e CY18/FY18e Nickel Miners Independence Group NL IGO 0% (5%) (16%) (21%) Western Areas WSA 0% (55%) (42%) (33%) Panoramic Resources PAN 0% nm (69%) (72%) Mincor Resources NL MCR 0% (34%) nm (82%) Copper Miners OZ Minerals* OZL (6%) 22% (23%) (7%) Sandfire Resources SFR 0% 1% (2%) (7%) Tiger Resources* TGS (157%) (33%) (34%) (26%) MMG Limited* 1208 (9%) (35%) (28%) (19%) Source: Macquarie Research, September 2015 *December Y/E 24 September

5 Fig 7 Independence Group summary financials Independence Group ASX: IGO Price: (A$ps) 2.88 Year end: Jun Rating: Outperform Up/dn TSR Mkt cap: (A$m) 1,473 Diluted shares (m) Target: % 51% ASSUMPTIONS FY13 FY14 FY15 FY16e FY17e FY18e FY19e ATTRIBUTABLE MINE OUTPUT FY13 FY14 FY15 FY16e FY17e FY18e FY19e Exchange Rate (A$/US$) Nickel Production (equity) Nickel price (US$/lb) Long kt Gold price (US$/oz) 1,604 1,296 1,223 1,113 1,203 1,306 1,375 AISC US$/lb RATIO ANALYSIS FY13 FY14 FY15 FY16e FY17e FY18e FY19e Nova kt Diluted share capital m AISC US$/lb nm nm nm nm EPS (diluted and pre sig. items) A Zinc/Copper production (equity) P/E x 26.1x 8.6x 9.3x 17.3x 8.5x 4.5x 4.3x Zinc kt CFPS A Copper kt P/CF x 22.9x 4.4x 4.2x 7.8x 4.5x 2.3x 2.3x Net Cash Cost (per pay lb Zn) US$/lb DPS A Gold production (equity) Dividend yield % 0.7% 2.8% 3.0% 1.7% 3.5% 6.6% 6.9% Tropicana koz Franking Level % 100% 100% 100% 100% 100% 100% 100% All in Cash Cost (US$/oz) US$/oz Book value per share x EBITDA BY PROJECT P/Book value x 1.0x 1.0x 1.0x 1.0x 0.9x 0.8x 0.7x R.O.E. (pre sig items) % 4% 11% 11% 6% 10% 17% 16% 1,000 Long (A$m) Jaguar (A$m) Tropicana (A$m) Stockman (A$m) Nova (A$m) R.O.A. (pre sig items) % 4% 12% 13% 6% 12% 20% 18% 900 Interest Cover x -18.0x 22.9x 628.6x 13.9x 11.8x 48.9x -37.5x 800 EBITDA per share A$ps EV/EBITDA x 25.2x 8.3x 6.6x 7.6x 4.0x 1.5x 1.0x EARNINGS FY13 FY14 FY15 FY16e FY17e FY18e FY19e 400 Sales Revenue A$m ,240 1, Other Revenue A$m Total Revenue A$m Operating Costs A$m (145) (208) (234) (236) (290) (437) (451) 100 Operational EBITDA A$m Exploration Expense/Write-offs A$m (3) (4) (25) (16) (21) (21) (22) Corporate & Other Costs A$m (17) (12) (30) (8) (8) (9) (9) EBITDA A$m RESERVES AND RESOURCES (ATTRIBUTABLE) D&A A$m (24) (70) (99) (90) (136) (291) (301) Nickel reserves EBIT A$m Project (kt) Mt % Ni Ni (kt) Net Interest A$m 2 (5) (0) (9) (23) (10) 13 Long % 30 Profit Before Tax A$m Nova % 273 Tax Expense A$m (10) (21) (33) (36) (74) (142) (149) Total nickel reserves (kt) % 303 Minorities A$m Nickel resources Adjusted NPAT A$m Project (kt) Mt % Ni Ni (kt) Significant Items (post tax) A$m (8) (32) Long % 73 Reported NPAT A$m Nova % 326 Total nickel resources (kt) % 399 Gold reserves CASHFLOW FY13 FY14 FY15 FY16e FY17e FY18e FY19e Project (kt) Mt g/t Au Au (koz) Net Profit A$m Tropicana (IGO share) ,068 Interest/Tax/D&A A$m (0) Total gold reserves (koz) ,068 Working Capital/other A$m (33) (7) (32) (26) 4 Gold Resources Net Operating Cashflow A$m Project (kt) Mt g/t Au Cu (kt) Capex A$m (177) (123) (60) (303) (243) (125) (107) Tropicana (IGO share) ,262 Investments A$m (0) (0) 13 (1,012) Total gold resources (koz) ,262 Sale of PPE and Other A$m Copper reserves Free cash flow A$m (148) (1,101) Project (kt) Mt % Cu Cu (kt) Dividends Paid A$m (5) (9) (26) (23) (36) (77) (102) Jaguar % 23 Debt A$m (13) 9 (29) (300) (0) Total copper reserves (kt) % 23 Equity Issuance A$m Copper Resources Other A$m Project (kt) Mt % Cu Cu (kt) Net Financing Cashflow A$m (18) (0) (54) 1,054 (16) (377) (102) Jaguar % 71 Net change in cash A$m (165) (47) Total copper resources (kt) % 71 EQUITY DCF VALUATION Projects A$m A$ps BALANCE SHEET FY13 FY14 FY15 FY16e FY17e FY18e FY19e Long Cash A$m Jaguar PP&E & Mine Development A$m ,575 1,683 1,516 1,322 Tropicana Exploration A$m Stockman Total Assets A$m ,020 2,338 2,454 2,653 Nova 1, Debt A$m Undeveloped Resources Total Liabilities A$m Unpaid capital Total Net Assets / Equity A$m ,525 1,662 1,915 2,160 Corporate/forwards (44) (0.09) Net Debt / (Cash) A$m (10) (29) (121) (285) (713) Net cash (debt) (116) (0.23) Gearing (net debt/(nd + equity)) % (2%) (4%) (22%) 12% 9% (17%) (49%) Net Equity Value (@ 9% WACC) 2, Gearing (net debt/equity) % (1%) (4%) (18%) 14% 9% (15%) (33%) Price Target (1x NPV) 4.30 Source: IGO, Macquarie Research, September September

6 Fig 8 Western Areas summary financials Western Areas ASX: WSA Price: (A$ps) 2.26 Year end: Jun Rating: Outperform Up/dn TSR Mkt cap: (A$m) 531 Diluted shares (m) Target: % 49% ASSUMPTIONS FY13 FY14 FY15 FY16e FY17e FY18e FY19e ATTRIBUTABLE MINE OUTPUT FY13 FY14 FY15 FY16e FY17e FY18e FY19e Exchange Rate A$/US$ Nickel Production (equity) Spot Nickel Price US$/lb Flying Fox kt Spotted Quoll kt RATIO ANALYSIS FY13 FY14 FY15 FY16e FY17e FY18e FY19e New Morning kt Diluted share capital m Nickel in Ore kt EPS (diluted and pre sig. items) A Payable Nickel Production mlb P/E x 152.2x 14.6x 15.3x 12.9x 4.6x 3.4x 3.3x CFPS A Cash Nickel Price US$lb P/CF x 5.1x 4.9x 4.0x 5.8x 2.7x 2.4x 2.3x Net Cash Cost (per pay lb Ni) US$/lb DPS A Notional Cash Margin US$/lb Dividend yield % 0.9% 2.2% 3.1% 2.2% 6.6% 8.8% 9.3% Franking Level % 100% 100% 100% 100% 100% 100% 100% Operational EBIT Contribution (pre hedging) Book value per share x Flying Fox A$m P/Book value x 1.8x 1.3x 1.3x 1.2x 1.0x 0.8x 0.7x Spotted Quoll A$m R.O.E. (pre sig items) % -39% 7% 9% 10% 22% 24% 21% R.O.A. (pre sig items) % 7% 10% 10% 11% 26% 28% 25% OPERATIONAL OUTLOOK Interest Cover x 1.4x 2.9x 5.4x -15.8x -37.6x -23.6x -14.9x 35.0 EBITDA per share A$ps EV/EBITDA x 5.6x 3.3x 3.7x 3.7x 1.5x 0.8x 0.3x EARNINGS FY13 FY14 FY15 FY16e FY17e FY18e FY19e 20.0 Sales Revenue A$m Other Revenue A$m Total Revenue A$m Operating Costs A$m (163) (156) (182) (143) (167) (172) (177) Operational EBITDA A$m Exploration Expense/Write-offs A$m (9) Corporate & Other Costs A$m (17) (10) (7) (16) (17) (17) (17) 0.0 EBITDA A$m Flying Fox (kt) Spotted Quoll (kt) New Morning (kt) 10.0 Cash costs (US$/lb) AISC (US$/lb) FY09a FY10a FY11a FY12a FY13a FY14a FY15a FY16e FY17e FY18e FY19e FY20e FY21e D&A A$m (83) (86) (66) (72) (78) (82) (85) RESERVES AND RESOURCES (ATTRIBUTABLE) EBIT A$m High grade reserves Net Interest A$m (25) (23) (11) Project (kt) Mt % Ni Ni (kt) Significant Items A$m (139) (7) Flying Fox % 64 Profit Before Tax A$m (129) Spotted Quoll % 110 Tax Expense A$m 34 (12) (13) (18) (49) (66) (69) Total high grade reserves (kt) % 174 Minorities A$m Reported NPAT A$m (94) High grade resources Significant Items (pre-tax A$m (97) (7) Project (kt) Mt % Ni Ni (kt) Adjusted NPAT A$m Flying Fox % 101 Spotted Quoll % 150 CASHFLOW FY13 FY14 FY15 FY16e FY17e FY18e FY19e Total high grade resources (kt) % 252 Net Profit A$m Interest/Tax/D&A A$m Low grade reserves Working Capital/other A$m 150 (15) 39 (5) (6) (5) 0 Project (kt) Mt % Ni Ni (kt) Net Operating Cashflow A$m Diggers South % 29 Capex A$m (55) (34) (56) (70) (50) (51) (52) Digger Rocks % 2 Investments A$m (15) (0) (0) (19) (6) 0 0 Total low grade reserves (kt) % 31 Sale of PPE and Other A$m (0) Free cash flow A$m Low grade resources Dividends Paid A$m (15) (2) (16) (12) (26) (40) (49) Project (kt) Mt % Ni Ni (kt) Debt A$m (152) (15) (95) (127) Flying Fox % 41 Equity Issuance A$m New Morning % 31 Other A$m Diggers South % 100 Net Financing Cashflow A$m (103) 86 (112) (139) (26) (40) (49) Cosmos - Odysseus and AM % 240 Net change in cash A$m (85) 150 (35) (136) Cosmos - Mt Goode % 327 Other % 16 Total low grade reserves (kt) % 754 BALANCE SHEET FY13 FY14 FY15 FY16e FY17e FY18e FY19e EQUITY DCF VALUATION Cash A$m Projects A$m A$ps PP&E & Mine Development A$m Flying Fox Exploration A$m Spotted Quoll Total Assets A$m New Morning Debt A$m Undeveloped Resources Total Liabilities A$m Cosmos Total Net Assets / Equity A$m Unpaid capital Net Debt / (Cash) A$m 136 (18) (68) (59) (174) (308) (434) Corporate/forwards (68) (0.29) Gearing (net debt/(nd + equity)) % 36% (5%) (21%) (16%) (50%) (93%) (136%) Net cash (debt) Gearing (net debt/equity) % 56% (5%) (17%) (14%) (33%) (48%) (58%) Net Equity Value (@ 10% WACC) Price Target (1x NPV) 3.30 Source: WSA, Macquarie Research, September September

7 Fig 9 Panoramic Resources summary financials Panoramic Resources ASX: PAN Price: (A$ps) 0.29 Year end: Jun Rating: Neutral Up/dn TSR Mkt cap: (A$m) 93 Diluted shares (m) Target: % 5% ASSUMPTIONS FY13 FY14 FY15 FY16e FY17e FY18e FY19e ATTRIBUTABLE MINE OUTPUT FY13 FY14 FY15 FY16e FY17e FY18e FY19e Exchange Rate A$/US$ Nickel Production (equity) Nickel Price US$/lb Savannah Nickel kt Nickel Price A$/lb Lanfranchi Nickel kt RATIO ANALYSIS FY13 FY14 FY15 FY16e FY17e FY18e FY19e Nickel in Ore/Concentrate kt Diluted share capital m Nickel Production mlb EPS (diluted and pre sig. items) A P/E x -2.9x 22.7x -2.4x -11.8x 5.0x 5.5x 90.7x Cash Nickel Price US$lb CFPS A (1.0) Net Cash Cost (per pay lb Ni) US$/lb P/CF x -27.9x 1.9x 2.8x 37.8x 1.6x 1.3x 1.9x Notional Cash Margin US$/lb DPS A Dividend yield % 3.4% 6.9% 3.4% 0.0% 0.0% 0.0% 0.0% Operational EBIT Contribution (pre hedging) Franking Level % 100% 100% 50% 0% 0% 0% 0% Savannah Nickel A$m (18) (1) (1) (1) Book value per share x Lanfranchi Nickel A$m (16) 8 4 (4) P/Book value x 0.3x 0.3x 0.4x 0.4x 0.4x 0.4x 0.4x R.O.E. (pre sig items) % -9% 1% -16% -3% 8% 6% 0% OPERATIONAL OUTLOOK R.O.A. (pre sig items) % -11% 1% -16% -5% 8% 7% 0% Interest Cover x -92.9x 4.6x 66.6x 13.7x -21.3x -12.7x 0.5x 25.0 Savannah (kt) Lanfranchi (kt) Cash costs (A$/lb) AISC (A$/lb) EBITDA per share A$ps EV/EBITDA x 5.7x 0.6x 4.1x 2.4x 0.7x 0.2x -0.2x EARNINGS FY13 FY14 FY15 FY16e FY17e FY18e FY19e 15.0 Sales Revenue A$m Other Revenue A$m Total Revenue A$m Operating Costs A$m (154) (165) (162) (120) (150) (206) (181) 4.00 Operational EBITDA A$m Exploration Expense/Write-offs A$m (3) (3) (18) (2) (2) (2) (2) 5.0 Corporate & Other Costs A$m (10) (9) (9) (10) (10) (11) (11) 2.00 EBITDA A$m D&A A$m (54) (60) (62) (37) (40) (49) (40) EBIT A$m (40) 3 (52) (14) (1) FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16e FY17e FY18e FY19e FY20e Net Interest A$m (0) (1) RESERVES AND RESOURCES (ATTRIBUTABLE) Profit Before Tax A$m (41) 2 (51) (13) Nickel reserves Tax Expense A$m (8) (7) (0) Project (kt) Mt % Ni Ni (kt) Minorities A$m Kimberley % 34 Adjusted NPAT A$m (25) 4 (39) (8) Lanfranchi % 19 Significant Items (post tax) A$m (6) (13) 10 (5) Total nickel reserves (kt) % 53 Reported NPAT A$m (32) (9) (29) (13) Nickel resources Project (kt) Mt % Ni Ni (kt) CASHFLOW FY13 FY14 FY15 FY16e FY17e FY18e FY19e Kimberley % 129 Net Profit A$m (32) (9) (29) (13) Lanfranchi % 100 Interest/Tax/D&A A$m Total nickel resources (kt) % 229 Working Capital/other A$m (14) (6) (2) 9 Net Operating Cashflow A$m (3) Gold Resources Capex A$m (28) (18) (27) (12) (51) (38) (28) Project (koz) Mt g/t Au Au (koz) Investments A$m Gidgee Project ,325 Sale of PPE and Other A$m Total gold resources (koz) ,325 Free cash flow A$m (17) 28 7 (10) Dividends Paid A$m (3) 0 (10) PGM Resources Debt A$m (3) (3) (7) (1) (0) (0) (2) Project (koz) Mt g/t PGM PGM (ko Equity Issuance A$m 0 15 (0) Thunder Bay Other A$m Panton ,110 Net Financing Cashflow A$m (6) 12 (17) (1) (0) (0) (2) Total PGM resources (koz) ,842 Net change in cash A$m (23) 41 (10) (10) EQUITY DCF VALUATION Projects A$m A$ps BALANCE SHEET FY13 FY14 FY15 FY16e FY17e FY18e FY19e Savannah Nickel Cash A$m Lanfranchi Nickel PP&E & Mine Development A$m Gidgee Gold Exploration A$m Nickel resources Total Assets A$m PGM Resources Debt A$m Metals X Total Liabilities A$m Unpaid capital Total Net Assets / Equity A$m Corporate/forwards (27) (0.08) Net Debt / (Cash) A$m (12) (56) (51) (42) (50) (81) (102) Net cash (debt) Gearing (net debt/(nd + equity)) % (5%) (25%) (27%) (22%) (25%) (45%) (64%) Net Equity Value (@ 11% WACC) Gearing (net debt/equity) % (5%) (20%) (21%) (18%) (20%) (31%) (39%) Price Target (1x NPV) 0.30 Source: PAN, Macquarie Research, September September

8 Fig 10 Mincor Resources summary financials Mincor Resources ASX: MCR Price: (A$ps) 0.27 Year end: Jun Rating: Underperform Up/dn TSR Mkt cap: (A$m) 51 Diluted shares (m) Target: 0.15 (44%) (44%) ASSUMPTIONS FY13 FY14 FY15 FY16e FY17e FY18e FY19e ATTRIBUTABLE MINE OUTPUT FY13 FY14 FY15 FY16e FY17e FY18e FY19e Exchange Rate (A$/US$) Nickel Production (equity) Spot Nickel Price (US$/lb) South Kambalda kt Spot Nickel Price (A$/lb) North Kambalda kt RATIO ANALYSIS FY13 FY14 FY15 FY16e FY17e FY18e FY19e Nickel in Ore kt Diluted share capital m Payable Nickel Production mlb EPS (diluted and pre sig. items) A P/E x nm nm nm nm -8.1x 18.2x -55.8x Cash costs (A$/lb) CFPS A (10.8) AISC (A$/lb) P/CF x 3.6x 1.8x 2.9x -2.5x 5.2x 2.0x 2.3x DPS A Dividend yield % 14.8% 14.8% 7.4% 0.0% 0.0% 0.0% 0.0% Operational EBIT Contribution (pre hedging) Franking Level % 100% 100% 50% 0% 0% 0% 0% South Kambalda A$m (8) 5 (3) (27) Book value per share x North Kambalda A$m (4) (3) P/Book value x 0.4x 0.5x 0.8x 1.3x 1.6x 1.4x 1.5x R.O.E. (pre sig items) % -19% 2% -31% -70% -19% 8% -3% OPERATIONAL OUTLOOK R.O.A. (pre sig items) % -21% 2% -24% -69% -17% 8% -3% South Kambalda (kt) North Kambalda (kt) C1 cash costs (A$/lb) AISC (A$/lb) Interest Cover x 21.1x -2.0x 47.2x 119.0x -53.8x -58.6x 6.5x EBITDA per share A$ps EV/EBITDA x -1.3x 0.1x 3.6x -3.2x 3.7x 1.6x 2.1x EARNINGS FY13 FY14 FY15 FY16e FY17e FY18e FY19e 12.0 Sales Revenue A$m Other Revenue A$m Total Revenue A$m Operating Costs A$m (70) (67) (68) (59) (62) (65) (60) Operational EBITDA A$m (5) Exploration Expense/Write-offs A$m (16) (3) (8) (4) (2) (1) (1) 2.00 Corporate & Other Costs A$m (5) (6) (6) (8) (8) (9) (9) 2.0 EBITDA A$m (17) D&A A$m (34) (30) (29) (22) (23) (23) (22) EBIT A$m (28) 2 (22) (39) (9) 4 (2) Net Interest A$m (0) 0 0 RESERVES AND RESOURCES (ATTRIBUTABLE) Profit Before Tax A$m (26) 3 (22) (39) (9) 4 (1) Nickel reserves Tax Expense A$m 4 (1) (1) 0 Project (kt) Mt % Ni Ni (kt) Minorities A$m South Kambalda % 22.9 Adjusted NPAT A$m (22) 2 (20) (27) (6) 3 (1) North Kambalda % 0.1 Significant Items (post tax) A$m (0) 0 (14) Total high grade reserves (kt) % 23.0 Reported NPAT A$m (22) 2 (34) (27) (6) 3 (1) Nickel resources Project (kt) Mt % Ni Ni (kt) CASHFLOW FY13 FY14 FY15 FY16e FY17e FY18e FY19e South Kambalda % 72.0 Net Profit A$m North Kambalda % 57.5 Interest/Tax/D&A A$m Total high grade resources (kt) % Working Capital/other A$m 1 (4) 16 0 (2) (1) 3 Net Operating Cashflow A$m (21) Capex A$m (23) (29) (25) (7) (7) (18) (20) Investments A$m Sale of PPE and Other A$m Free cash flow A$m (9) (1) (7) (28) Dividends Paid A$m (8) (8) (8) Debt A$m 0 (0) (3) (1) (1) (6) 0 Equity Issuance A$m Other A$m Net Financing Cashflow A$m (8) (8) (11) (1) (1) (6) 0 Net change in cash A$m (16) (9) (18) (29) BALANCE SHEET FY13 FY14 FY15 FY16e FY17e FY18e FY19e EQUITY DCF VALUATION Cash A$m Projects A$m A$ps PP&E & Mine Development A$m South Kambalda Exploration A$m North Kambalda Total Assets A$m Undeveloped Resources Debt A$m Other Projects Total Liabilities A$m Unpaid capital Total Net Assets / Equity A$m Corporate/forwards (22) (0.11) Net Debt / (Cash) A$m (60) (47) (24) 4 1 (6) (9) Net cash (debt) Gearing (net debt/(nd + equity)) % (107%) (77%) (58%) 8% 3% (22%) (34%) Net Equity Value (@ 11% WACC) Gearing (net debt/equity) % (52%) (44%) (37%) 9% 3% (18%) (25%) Price Target (1x NPV) 0.15 Source: MCR, Macquarie Research, September September

9 Fig 11 OZ Minerals summary financials OZ Minerals ASX: OZL Price: (A$ps) 3.30 Year end: Dec Rating: Outperform Up/dn TSR Mkt cap: (A$m) 1,001 Diluted shares (m) Target: % 43% ASSUMPTIONS CY12 CY13 CY14a CY15e CY16e CY17e CY18e ATTRIBUTABLE MINE OUTPUT CY12 CY13 CY14a CY15e CY16e CY17e CY18e Exchange Rate A$/US$ Copper Production (kt) Copper (US$/lb) Prominent Hill kt Gold (US$/oz) 1,668 1,411 1,266 1,150 1,149 1,256 1,344 Carapateena kt Total copper production kt RATIO ANALYSIS CY12 CY13 CY14a CY15e CY16e CY17e CY18e Gold Production (koz) Diluted share capital m Prominent Hill koz EPS (diluted and pre sig. items) A Carapateena koz P/E x 6.7x -16.0x 33.0x 9.6x 8.0x 24.8x 14.3x Total gold production koz CFPS A Cash costs (US$/lb) P/CF x 2.9x 5.6x 4.5x 2.4x 2.0x 2.5x 2.2x Prominent Hill (US$/lb) DPS A Carapateena (US$/lb) Dividend yield % 9.1% 6.1% 3.0% 3.3% 5.2% 3.6% 0.3% Average cash costs (US$/lb) Franking Level % 0% 0% 0% 0% 0% 0% 100% AISC (US$/lb) Book value per share x Prominent Hill (US$/lb) P/Book value x 0.4x 0.4x 0.4x 0.4x 0.4x 0.4x 0.4x Carapateena (US$/lb) R.O.E. (pre sig items) % 5% -13% 2% 5% 5% 2% 3% Average AISC (US$/lb) R.O.A. (pre sig items) % 5% -4% 2% 5% 6% 1% 3% Interest Cover x -8.1x 14.7x -12.5x -18.8x -9.4x -1.5x -3.0x OPERATIONAL OUTLOOK EBITDA per share A$ps EV/EBITDA x 1.0x 5.5x 2.3x 1.3x 0.6x 0.5x 0.4x (kt) Prominent Hill Carapateena Cash costs (US$/lb) EARNINGS CY12 CY13 CY14a CY15e CY16e CY17e CY18e Sales Revenue A$m , Other Revenue A$m Total Revenue A$m , Operating Costs A$m (491) (406) (395) (365) (458) (473) (444) 2.00 Operational EBITDA A$m Exploration Expense/Write-offs A$m (114) (75) (55) (29) (20) (21) (22) 1.50 Corporate & Other Costs A$m (54) (49) (40) (30) (33) (34) (34) 40.0 EBITDA A$m D&A A$m (175) (219) (296) (272) (343) (392) (380) EBIT A$m 160 (103) Net Interest A$m Significant Items A$m 19 (232) Profit Before Tax A$m 199 (328) Tax Expense A$m (47) 33 (18) (44) (47) (15) (26) RESERVES AND RESOURCES Minorities A$m Copper Reported NPAT A$m 152 (294) Reserves Mt Cu (%) kt Significant Items A$m 19 (232) Prominent Hill % 822 Adjusted NPAT A$m 133 (63) Carrapateena % 2,500 Total % 3,322 CASHFLOW CY12 CY13 CY14a CY15e CY16e CY17e CY18e Copper Net Profit A$m 133 (63) Resources Mt Cu (%) kt Interest/Tax/D&A A$m Prominent Hill % 2,046 Working Capital/other A$m (5) 48 (123) (9) (5) 4 (1) Carrapateena 1, % 7,400 Net Operating Cashflow A$m Total 1, % 9,446 Capex A$m (316) (391) (326) (296) (265) (225) (418) Gold Investments A$m (30) Reserves Mt Au (g/t) koz Sale of PPE and Other A$m Prominent Hill ,412 Free cash flow A$m (1) (210) (89) Carrapateena ,500 Dividends Paid A$m (125) (91) (61) (18) (27) (49) (30) Total ,912 Debt A$m Gold Equity Issuance A$m (101) 0 (0) (3) Resources Mt Au (g/t) koz Other A$m (24) (20) Prominent Hill ,160 Net Financing Cashflow A$m (226) (85) (57) 11 (18) (72) (50) Carrapateena 1, ,300 Net change in cash A$m (227) (295) (146) (7) Total 1, ,460 BALANCE SHEET CY12 CY13 CY14a CY15e CY16e CY17e CY18e EQUITY DCF VALUATION Cash A$m Projects A$m A$ps PP&E & Mine Development A$m 1,358 1,305 1,332 1,315 1,237 1,070 1,108 Prominent Hill 1, Other A$m 1, Prominent Hill Resources Total Assets A$m 3,086 2,517 2,409 2,583 2,801 2,704 2,736 Carrapateena Debt A$m Other Total Liabilities A$m Listed investments Total Net Assets / Equity A$m 2,786 2,328 2,249 2,313 2,412 2,405 2,445 Exploration Net Debt / (Cash) A$m (659) (364) (219) (473) (701) (809) (802) Corporate (212) (0.69) Gearing (net debt/(nd + equity)) % (31%) (19%) (11%) (26%) (41%) (51%) (49%) Net cash (debt) Gearing (net debt/equity) % (24%) (16%) (10%) (20%) (29%) (34%) (33%) Net Equity Value (@ 10% WACC) 1, Price Target (1x NPV) 4.60 Source: OZL, Macquarie Research, September September

10 Fig 12 Sandfire Resources summary financials Sandfire Resources ASX: SFR Price: (A$ps) 5.39 Year end: Jun Rating: Outperform Up/dn TSR Mkt cap: (A$m) 845 Diluted shares (m) Target: % 54% ASSUMPTIONS FY13 FY14 FY15 FY16e FY17e FY18e FY19e ATTRIBUTABLE MINE OUTPUT FY13 FY14 FY15 FY16e FY17e FY18e FY19e Exchange Rate (A$/US$) Copper Production (equity) Spot Copper Price (US$/lb) DeGrussa kt Gold price (US$/oz) 1,604 1,295 1,223 1,113 1,203 1,306 1,375 Monty's kt RATIO ANALYSIS FY13 FY14 FY15 FY16e FY17e FY18e FY19e Copper (kt) kt Diluted share capital m Payable Copper Production mlb EPS (diluted and pre sig. items) A Gold (koz) P/E x 9.5x 10.7x 12.2x 6.4x 5.1x 4.2x 3.3x CFPS A Cash Copper Price US$lb P/CF x 3.7x 4.0x 3.9x 3.7x 3.1x 2.7x 2.2x Net Cash Cost (per pay lb Cu) US$/lb DPS A Notional Cash Margin US$/lb Dividend yield % 0.0% 1.9% 2.4% 5.4% 5.6% 7.4% 9.5% AISC US$/lb Franking Level % 0% 0% 50% 100% 100% 100% 100% Book value per share x DeGrussa A$m P/Book value x 4.0x 2.9x 2.4x 1.8x 1.5x 1.1x 0.9x R.O.E. (pre sig items) % 42% 27% 24% 29% 29% 27% 28% OPERATIONAL OUTLOOK R.O.A. (pre sig items) % 25% 23% 22% 27% 29% 31% 32% Interest Cover x 8.7x 9.2x 8.9x 62.4x x -44.8x -24.0x EBITDA per share A$ps EV/EBITDA x 3.9x 4.3x 3.9x 2.7x 1.9x 1.2x 0.4x EARNINGS FY13 FY14 FY15 FY16e FY17e FY18e FY19e Sales Revenue A$m Other Revenue A$m Total Revenue A$m Operating Costs A$m (192) (282) (307) (294) (310) (313) (292) Operational EBITDA A$m Exploration Expense/Write-offs A$m (22) (20) (19) (13) (13) (13) (9) Corporate & Other Costs A$m (10) (7) (5) (7) (7) (7) (8) EBITDA A$m D&A A$m (126) (95) (90) (97) (100) (105) (102) EBIT A$m DeGrussa (kt) Monty (kt) Cash costs (US$/lb) FY12a FY13a FY14a FY15a FY16e FY17e FY18e FY19e FY20e FY21e FY22e Net Interest A$m (16) (14) (15) (3) RESERVES AND RESOURCES (ATTRIBUTABLE) Profit Before Tax A$m Copper reserves Tax Expense A$m (38) (34) (36) (57) (71) (86) (111) Project (kt) Mt % Cu Cu (kt) Minorities A$m DeGrussa open pit % 33 Adjusted NPAT A$m DeGrussa underground % 343 Significant Items (post tax) A$m (1) 0 (13) Total high grade reserves (kt) % 376 Reported NPAT A$m Copper Resources Project (kt) Mt % Cu Cu (kt) CASHFLOW FY13 FY14 FY15 FY16e FY17e FY18e FY19e DeGrussa open pit % 33 Net Profit A$m DeGrussa underground % 546 Interest/Tax/D&A A$m Total high grade resources (kt) % 579 Working Capital/other A$m (21) 6 26 (7) 3 (7) (4) Monty's Mining Inventory % 200 Net Operating Cashflow A$m Gold reserves Capex A$m (188) (98) (94) (120) (102) (57) (41) Project (koz) Mt g/t Au Au (koz) Investments A$m (1) (6) (16) DeGrussa open pit Sale of PPE and Other A$m DeGrussa underground Free cash flow A$m Total gold reserves (koz) Dividends Paid A$m 0 0 (20) (22) (52) (49) (67) Debt A$m (66) (126) (41) (16) (11) (89) 0 Gold resources Equity Issuance A$m Project (koz) Mt g/t Au Au (koz) Other A$m DeGrussa open pit Net Financing Cashflow A$m (60) (126) (58) (38) (63) (138) (67) DeGrussa underground Net change in cash A$m (23) (19) Total gold resources (koz) BALANCE SHEET FY13 FY14 FY15 FY16e FY17e FY18e FY19e EQUITY DCF VALUATION Cash A$m Projects A$m A$ps PP&E & Mine Development A$m DeGrussa Exploration A$m Monty's Total Assets A$m ,126 Undeveloped Resources Debt A$m Other Projects Total Liabilities A$m Unpaid capital Total Net Assets / Equity A$m Corporate/forwards (26) (0.17) Net Debt / (Cash) A$m (76) (194) (400) (674) Net cash (debt) Gearing (net debt/(nd + equity)) % 49% 26% 4% (20%) (51%) (115%) (253%) Net Equity Value (@ 11% WACC) 1, Gearing (net debt/equity) % 98% 35% 4% (17%) (34%) (54%) (72%) Price Target (1.0x NPV) 8.00 Source: SFR, Macquarie Research, September September

11 Fig 13 Tiger Resources summary financials Tiger Resources ASX: TGS Price: (A$ps) Year end: Dec Rating: Neutral Up/dn TSR Mkt cap: (A$m) Diluted shares (m) Target: % 25% ASSUMPTIONS CY13 CY14 CY15e CY16e CY17e CY18e CY19e ATTRIBUTABLE MINE OUTPUT CY13 CY14 CY15e CY16e CY17e CY18e CY19e Copper Production (kt) Exchange Rate A$/US$ Kipoi copper in concentrate kt Copper (US$/lb) Kipoi copper in cathode kt Gold (US$/oz) 1,409 1,360 1,150 1,499 1,256 1,344 1,400 Total copper production kt Lead (US$/lb) Cost of production Zinc (US$/lb) Payable Copper Production mlb Cash Copper Price Realised US$lb C1 cash cost US$lb RATIO ANALYSIS CY13 CY14 CY15e CY16e CY17e CY18e CY19e AISC US$/lb Notional Cash Margin US$/lb Diluted share capital m , , , , , ,143.5 Operational EBIT Contribution US$m EPS (diluted and pre sig. items) US P/E x 2.6x 13.4x -9.6x 5.7x 2.2x 1.4x 1.0x Kipoi production outlook CFPS US (kt) P/CF x 0.8x 11.7x 2.9x 1.4x 1.1x 0.9x 0.7x DPS US Dividend yield % 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 40 Franking Level % 0% 0% 0% 0% 0% 0% 0% Book value per share x P/Book value x 0.2x 0.2x 0.2x 0.2x 0.2x 0.2x 0.2x R.O.E. (pre sig items) % 2% 7% 1% -2% 3% 9% 13% 20 R.O.A. (pre sig items) % 19% 8% 4% 9% 15% 19% 22% Interest Cover x 20.0x 3.0x 0.7x 1.9x 3.7x 6.4x 11.5x EBITDA per share US$ps EV/EBITDA x 1.32x 4.6x 6.7x 3.7x 2.0x 0.9x 0.0x EARNINGS CY13 CY14 CY15e CY16e CY17e CY18e CY19e Sales Revenue US$m Other Revenue US$m Total Revenue US$m TGS Net debt Operating Costs US$m (109) (85) (110) (108) (95) (95) (96) Operational EBITDA US$m Exploration Expense/Write-offs US$m (3) (3) (3) (2) (2) (2) (3) Corporate & Other Costs US$m (6) (12) (10) (11) (11) (11) (11) EBITDA US$m D&A US$m (21) (17) (18) (16) (15) (15) (15) EBIT US$m Net Interest US$m (3) (10) (22) (19) (17) (13) (10) Significant Items US$m 0 0 (0) Profit Before Tax US$m (7) Tax Expense US$m (20) (13) 0 (6) (15) (24) (34) Minorities US$m (17) (5) 0 (1) (2) (2) (3) Reported NPAT US$m 16 3 (7) Significant Items US$m 0 0 (0) Adjusted NPAT US$m 16 3 (6) CASHFLOW CY13 CY14 CY15e CY16e CY17e CY18e CY19e Source: TGS, Macquarie Research, September 2015 RESERVES AND RESOURCES Net Profit US$m TGS Copper Reserves Interest/Tax/D&A US$m Kipoi Central Mt Cu (%) Cu (kt) Working Capital/other US$m 15 (16) (1) (2) (1) Proved % 45 Net Operating Cashflow US$m Probable % 372 Capex US$m (158) (93) (23) (21) (9) (9) (9) Total % Investments US$m 0 (0) Kipoi Stockpiles Mt Cu (%) Cu (kt) Sale of PPE and Other US$m 0 (111) Proved % 134 Free cash flow US$m (103) (198) (1) Probable Dividends Paid US$m Total % Debt US$m (16) (8) (31) (31) (31) Kipoi North Mt Cu (%) Cu (kt) Equity Issuance US$m Proved FX impact US$m (0) (0) (0) Probable % 28 Net Financing Cashflow US$m (16) (8) (31) (31) (31) Total % 28.0 Net change in cash US$m 3 (0) (17) Kileba Mt Cu (%) Cu (kt) Proved Probable % 110 BALANCE SHEET CY13 CY14 CY15e CY16e CY17e CY18e CY19e Total % TGS Copper Resources Mt Cu (%) Co (%) Cu (kt) Co (kt) Cash US$m Measured % 0.14% PP&E & Mine Development US$m Indicated % 0.06% Other US$m Inferred % 0.05% 96 4 Total Assets US$m Total % 0.06% Debt US$m Total Liabilities US$m EQUITY DCF VALUATION Total Net Assets / Equity US$m Projects A$m A$ps Net Debt / (Cash) US$m (63) Kipoi Gearing (net debt/(nd + equity)) % 13% 32% 33% 29% 21% 7% (20%) Resources & Development projects Gearing (net debt/equity) % 15% 46% 50% 42% 27% 7% (17%) Investments Corporate (47) (0.04) TGS EARNINGS SENSITIVITIES Net Cash (Debt) (150) (0.13) Y/E December CY14 CY15e CY16e CY17e CY18e CY19e CY20e Net Equity Value (@ 10% WACC) % change in copper price 0% 41% 47% 33% 22% 20% 30% Price Target Copper in concentrate (kt) C1 cash costs (US$/lb) Copper in cathode (kt) AISC (US$/lb) CY10 CY11 CY12 CY13 CY14 CY15eCY16eCY17eCY18eCY19eCY20e Net Debt / (Cash) Gearing (net debt/equity) Gearing (net debt/(nd + equity)) 60% 40% 20% 0% -20% -40% -60% 24 September

12 US$m Macquarie Wealth Management Fig 14 MMG summary financials MMG Limited HKEx: 1208 Price: (HK$ps) Year end: Dec Rating: Outperform Up/dn TSR Mkt cap: (HK$m) 8,501 1,096 Diluted shares (m) Target: % 40% ASSUMPTIONS CY14 CY15e CY16e CY17e CY18e CY19e CY20e ATTRIBUTABLE MINE OUTPUT CY13 CY14 CY15e CY16e CY17e CY18e CY19e CY20e Copper Production (kt) Exchange Rate HK$/US$ Sepon kt Copper (US$/lb) Kinsevere kt Gold (US$/oz) 1,360 1,150 1,499 1,256 1,344 1,400 1,400 Las Bambas kt Zinc (US$/lb) Other kt Lead (US$/lb) Total copper production kt Gold Production (kt) Sepon koz RATIO ANALYSIS CY14 CY15e CY16e CY17e CY18e CY19e CY20e Las Bambas koz Rosebery koz Diluted share capital m 5, , , , , , ,414.3 Golden Grove koz EPS (diluted and pre sig. items) US Total gold production koz P/E x 11.0x -19.9x 4.7x 4.7x 6.1x 2.7x 3.1x Zinc Production (kt) CFPS US Century kt P/CF x 12.8x 17.8x 8.7x 5.9x 6.4x 4.6x 5.1x Rosebery kt DPS US Golden Grove kt Dividend yield % 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Dugald River kt Franking Level % 0% 0% 0% 0% 0% 0% 0% Total zinc production kt Book value per share x Total lead production kt P/Book value x 0.1x 0.1x 0.1x 0.1x 0.1x 0.1x 0.1x Total silver production koz 4,248 4,713 5,138 4,848 3,711 3,967 3,972 3,137 R.O.E. (pre sig items) % 4% 1% 0% 2% 2% 1% 3% AISC R.O.A. (pre sig items) % 2% 0% 3% 5% 8% 11% 12% Sepon (US$/lb) Interest Cover x 3.1x -0.6x 3.5x 3.1x 1.9x 2.3x 2.1x Kinsevere (US$/lb) EBITDA per share US$ps Las Bambas (US$/lb) EV/EBITDA x 11.6x 19.2x 7.8x 5.8x 4.3x 2.9x 2.4x Century (US$/lb) Rosebery (US$/lb) Golden Grove (US$/lb) EARNINGS CY14 CY15e CY16e CY17e CY18e CY19e CY20e FORECAST EARNINGS BY MINE Sales Revenue US$m 2,480 1,943 3,150 3,825 4,442 5,181 5,140 Other Revenue US$m Total Revenue US$m Operating Costs US$m (1,531) (1,199) (1,548) (1,836) (2,000) (2,098) (1,958) Operational EBITDA US$m ,603 1,989 2,442 3,083 3,183 Exploration Expense/Write-offs US$m (73) (40) (43) (44) (45) (47) (48) Corporate & Other Costs US$m (112) (87) (102) (105) (108) (111) (113) EBITDA US$m ,457 1,840 2,289 2,926 3,021 D&A US$m (537) (640) (963) (995) (957) (971) (973) EBIT US$m 244 (21) ,332 1,955 2,048 Net Interest US$m (79) (36) (142) (272) (689) (863) (985) Significant Items US$m Profit Before Tax US$m 164 (58) ,092 1,063 Tax Expense US$m (65) 2 (118) (191) (214) (364) (354) Minorities US$m (147) (250) (322) (358) Reported NPAT US$m 99 (55) Significant Items US$m Adjusted NPAT US$m 99 (55) RESERVES AND RESOURCES Source: MMG, Macquarie Research, September 2015 MMG Copper/Gold Reserves CASHFLOW CY14 CY15e CY16e CY17e CY18e CY19e CY20e Proved Mt Probable Net Profit US$m Total Interest/Tax/D&A US$m ,077 1, , MMG Copper/Gold Resources Working Capital/other US$m (338) (14) (84) 1 (9) Mt Net Operating Cashflow US$m ,429 1,325 1,850 1,663 Measured Capex US$m (1,038) (2,060) (661) (635) (499) (449) (414) Indicated Investments US$m 1, Inferred Sale of PPE and Other US$m (2,895) (21) Total Free cash flow US$m (2,160) (1,102) ,400 1,250 MMG Polymetallic Reserves Dividends Paid US$m (64) (5) Mt Debt US$m 2,178 1,044 (49) 45 (555) (1,034) (1,190) Proved Equity Issuance US$m Probable FX impact US$m Total Net Financing Cashflow US$m 2,114 1,039 (49) 45 (555) (1,034) (1,190) MMG Polymetallic Resources Au Ag Cu (%) Pb (%) Zn (%) Cu (Mt) Pb (Mt) Zn (Mt) Net change in cash US$m 114 (63) Mt (Moz) (Moz) Measured Indicated BALANCE SHEET CY14 CY15e CY16e CY17e CY18e CY19e CY20e Inferred Total Cash US$m ,443 1,714 2,081 2,140 PP&E & Mine Development US$m 11,101 12,481 12,179 11,819 11,360 10,839 10,279 EQUITY DCF VALUATION Other US$m 2,138 2,316 3,725 3,815 4,417 4,748 4,775 Projects US$m US$ps HK$ps Total Assets US$m 13,490 14,985 16,508 17,077 17,492 17,667 17,195 Sepon 1, Debt US$m 8,209 10,942 10,894 10,938 10,383 9,349 8,159 Kinsevere Total Liabilities US$m 2,307 1,133 2,468 3,211 4,052 4,633 4,742 Las Bambas 7, Total Net Assets / Equity US$m 11,184 13,852 14,039 13,866 13,440 13,034 12,453 Century (61) (0.01) (0.09) Net Debt / (Cash) US$m 7,958 10,754 10,289 9,495 8,669 7,268 6,019 Rosebery Gearing (net debt/(nd + equity)) % 42% 44% 42% 41% 39% 36% 33% Golden Grove Gearing (net debt/equity) % 71% 78% 73% 68% 65% 56% 48% Dugald River Resources & Development projects MMG EARNINGS SENSITIVITIES Investments Y/E December CY15e CY16e CY17e CY18e CY19e CY20e NPV Corporate (898) (0.17) (1.29) 10% change in copper price 85% 58% 75% 126% 105% 85% 55% Net Cash (Debt) (8,153) (1.51) (11.68) 10% change in zinc price 71% 6% 9% 15% 11% 4% 17% Net Equity Value (@ 10% WACC) 1, % change in gold price 6% 0% 3% 5% 4% 2% 2% Price Target ,600 1,400 1,200 1, Sepon Kinsevere Century Rosebery Golden Grove Las Bambas Cu (%) ASCu (%) Au (g/t) Cu (Mt) Cu (%) Au (g/t) Ag (g/t) Cu (Mt) ASCu (t) Au (Moz) Au (Moz) Ag (Moz) Cu (%) Pb (%) Zn (%) Cu (Mt) Pb (Mt) Zn (Mt) Ag (g/t) Au (Moz) Ag (ozs) Ag (Moz) 24 September