Mining Comment Precious Metals The Buzz From Beaver Creek

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1 Richard Gray, CFA, (416) , Tyron Br eytenbach, P.Geo, (416) , Mining Comment Precious Metals The Buzz From Beaver Creek Asanko Gold Inc. Target Price:C$7.00 Beadell Resources Ltd. Target Price: A$0.80 Dalradian Resources Inc. Target Price: C$2.70 Newmarket Gold Inc. Target Price: C$4.85 Recommendation: Market Perform Orezone Gold Corporation Target Price: C$1.50 (S) Pretium Resources Inc. Target Price: C$20.00 Richmont Mines Inc. Target Price: C$14.00 Recommendation: Market Perform Roxgold Inc. Target Price: C$2.20 Recommendation: Top Pick Victoria Gold Target Price: C$1.15 (S) Highlights: Unless otherwise denoted, all figures shown in US$ Thoughts From The Vail Precious Metals Summit The improved macro backdrop in 2016 has generated interest that is flowing down to even the micro-cap golds. Anecdotally, there was a great buzz at the conference and several of our meetings were held offsite given the meeting space was at capacity. We met over >30 issuers during the three-day event. Coverage Updates The conference gave us an opportunity to get an update on many of the companies in our coverage list. In this note, we have included a brief update from our conversations and noted important catalysts for the remainder the year. Presenting Our Beaver Creek Basket With the screws loosening on capital flows to the small-cap sector, we returned from the conference with a list of explorers and developers that we believe investors should watch. The 10 early-stage stocks that caught our eye include: Algold Resources (ALG.V, Not Rated) Auryn Resources (AUG.V, Not Rated) Cardinal Resources (CDV.AX, Not Rated) GFG Resources (CRPh.V, Not Rated) KEFI Minerals (KEFI.LN, Not Rated) Mariana Resources (MRA.V, Not Rated) Probe Metals (PRB.V, Not Rated) Sarama Resources (SWA.V, Not Rated) Toachi Mining (TIM.V, Not Rated) West African Resources (WAF.V, Not Rated) During the past twenty-four months, Cormark Securities Inc., either on its own or as a syndicate member, participated in the underwriting of securities and/or provided financial advice regarding the stock market insight and financial analysis regarding potential transactions for these companies

2 Renewed Interest And Record Attendance: After attending the Precious Metals Summit held at the Beaver Creek resort in Colorado, we walked away re-energized from a conference which saw strong investor presence and exciting potential from the developers and explorers. The conference boasted record attendance including 130 issuers/companies (vs. 110 in 2015) and 335 individual delegates. On sitting down to review our conference notes, we were struck by the volume of new and interesting stories in the gold space and we have compiled a list of our favorites below. We also recap any sound bites relating to our existing coverage list where applicable. Figure 1: Beaver Creek Attendance Attendees Buy-side Corporates Sell-side Source: Precious Metals Summit, Cormark Securities Inc. Juniors Catching A Bid In 2016: The expanded interest in the junior sector has been driven by some stellar share price gains this year. Thus far in 2016, we have seen the equities outperform the commodity (gold is up 26% vs GDX up 90%) and the junior equities in turn have outperformed the senior equities (junior GDXJ index up 131% YTD). For example, in Figure 2, we reference one of our recent coverage additions GoldQuest (GQC:V, Buy (S) rating, C$0.90 target) which we believe typifies an example of an oversold junior that has seen a resurgence in interest that was catalyzed by sector interest rather than changes at the asset level. Figure 2: Juniors Outperform In 2016 Source: Cormark Securities/ Thompson Reuters During the past twenty-four months, Cormark Securities Inc., either on its own or as a syndicate member, participated in the underwriting of securities and received a fee for the non-brokered placement of securities for Goldquest Mining Corp

3 Stocks Responding To Exploration News: We note that once again, news flow timing has become an important consideration in the sector. In , the publication of news was often associated with a liquidity window and exceptionally positive news was met with a wave of selling, which was rationalized given the illiquid nature of many of the juniors. However, recent news flow has translated into share price gains with the market paying up for new ounces. This bullish sentiment can be quantified by referencing EV/oz valuations for our developer coverage list which averaged $25-45/oz in 2015 and are currently at $57/oz. Structural Production Declines: The junior equity performance is in our view partially driven by the need for the sector to replace declining reserves and contrary to prior cycles we believe that the new crop of CEOs will be focused on quality assets that do not rely on higher gold prices to work. Juniors with sizable discoveries that meet the quality hurdle are well positioned to fill this need. Figure 3 demonstrates the production declines that are forecast to occur over the next five years for the senior producers. The lack of growth is exacerbated by the industry s inability to replace ounces, as despite record exploration spending through , few new projects are being uncovered and fewer still of high quality. Finally, increased regulatory requirements and lower grades are driving longer development timelines and higher capital requirements. The average time from discovery to production has increased from 10 years in 2000 to 17 today. That is why smaller but high grade projects (i.e. Roxgold s 55-Zone) should take preference in today s environment. We note that Roxgold poured first gold just ~4 years from publishing a maiden resource. Figure 3: Forecast Production Declines For Senior Producers Aggregate Gold Production (000 oz) 25,000 20,000 15,000 10,000 5,000 (% declines from 2015 production) -7% -7% -8% -23% -28% Note: Aggregate production for ABX, NEM, G, AEM, YRI, ELD,IMG During the past twenty-four months, Cormark Securities Inc., either on its own or as a syndicate member, participated in the underwriting of securities for these companies Source: Cormark Securities Inc., Company Reports Presenting Our Beaver Creek Basket 10 Stocks To Watch: With the screws loosening on capital flows to the small-cap sector, we returned from the conference with a list of explorers and developers that we believe investors should watch. The 10 early stage stocks that caught our eye include:

4 Figure 4: Junior Golds To Watch Company Ticker Market Cap (US$ MM) Algold Resources ALG:V $36 Auryn Resources AUG:V $155 Cardinal Resources CDV:ASX $152 GFG Resources CTPh:V $41 KEFI Minerals KEFI:LN $24 Mariana Resources MRA:V $90 Probe Metals PRB:V $113 Sarama Resources SWA:V $25 Toachi Mining TIM:V $16 West African Resources WAF:V $115 Source: Cormark Securities Inc., Thomson Reuters

5 1. Sarama Resources: Building Scale In The Houndé Belt Ticker SWA:V Shares Out (MM) Last Close Market Cap (US$) 25.5 Cash (US$) 1.9 Location Burkina Faso Brief Highlights: Sarama is the vehicle of the ex-moto Gold mines team that was behind the discovery of the 22 MMoz Kibali deposit (sold to Randgold and AngloGold Ashanti). The experienced team owns 20% of the stock. Sarama has identified the South Houndé greenstone belt as a focus area to build inventory and currently holds an interest in a 1,750 km 2 land package. The region has >12 MMoz of gold endowment and Sarama has already discovered or acquired attributable ounces of 2.22 MMoz, including a strong oxide component. There is sufficient scale for a starter heap leach mine and continued drilling success could drive a >120 koz/yr production scenario (note that a component of fresh rock requires oxidation). The most immediate drill target is the high grade depth extension of the MM/MC prospects (incl g/t over 15 m). Sarama struck a JV with Acacia Mining in 2014 to limit equity dilution while continuing to advance the project. The JV ensures that C$6.7 MM will be spent during the season and keep the news flowing. We view the South Houndé as a key growth district and expect an eventual consolidation of the camp as there is already >3.2 MMoz in total resources when neighboring projects are counted. Figure 12: Key Slide: Drilling Targeting Northern Extension Of Bulky U/G Resource Catalysts: Drill Results (Ongoing): South Houndé remains open along strike and at depth. Continued Consolidation (Ongoing): Sarama added the Bondi deposit from Orezone in May and we continue to expect the eventual consolidation of the South Houndé camp, with Sarama taking the lead

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