Saracen Mineral Holdings

AUSTRALIA SAR AU Price (at 5:, Jan 17 GMT) Neutral A$1.11 Valuation A$ - DCF (WACC 5.%, beta.4, ERP 5.%, RFR 3.3%) 1.19 12-month target A$ 1. 12-month TSR % +.5 Volatility Index High GICS sector Materials ket cap A$m 892 3-day avg turnover A$m 6.5 Number shares on issue m 87.5 Investment fundamentals Year end 3 Jun A 17E 18E 19E Revenue m 276.5 435.8 5.1 521. EBIT m 38.6 84.8 4.7 1. Reported profit m 25.9 59.7 74.8 9.3 Adjusted profit m 25.9 59.7 74.8 9.3 Gross cashflow m 6.8 1.8 129. 3.4 CFPS 7.5.1.7 19.9 CFPS growth % -2. 87.5 11.4 26.7 PGCFPS x.7 7.8 7. 5.6 PGCFPS rel x 1.22.76.76.65 EPS adj 3.2 7.3 9.1 13.3 EPS adj growth % 129. 126.9 25.4 46.1 PER adj x 34.5.2 12.1 8.3 PER rel x 1.63.89.82.63 Total DPS. 1. 1. 2. Total div yield %..9.9 1.8 Franking % nmf ROA % 11.6 21.5 22.8 27.8 ROE %.6.5 21.2 25. EV/EBITDA x 11.5 6.1 5.4 4.2 Net debt/equity % -11.7-19.2-36. -53.9 P/BV x 3.4 2.8 2.3 1.9 SAR AU vs Small Ordinaries, & 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, January 17 (all figures in AUD unless noted) 11 January 17 Macquarie Securities (Australia) Limited Strong gold production in Dec quarter Event SAR has released preliminary gold production data for the December quarter. Impact Group production in line. SAR achieved a quarterly production record in the December quarter, producing 66,222oz of gold. Production was in line with our forecast of 66,oz and company guidance of 65,oz. Costs will be released in the full quarterly report later this month. Carosue Dam going well. Gold production from Carosue Dam totalled 37,692oz, marginally ahead of our forecast. Both the Karari and Deep South undergrounds appear to be operating well. As reported in SAR s exploration update in December, the two planned drill drives have now been completed at Karari, allowing an increase in ore tonnes. Drilling from the new drives has already picked up extensions to the Dhoni lode up to 135m below the current reserve. Thunderbox ramping up. Thunderbox produced 28,53oz, marginally below plan and our forecast as harder ores were encountered. Production is expected to ramp up to 35,oz in the June quarter as grade improves with depth in the A Zone and C Zone ore comes into the mix. Costs should also dramatically improve as strip ratio falls away. 3kozpa at less the $1,/oz by end FY17. The ramp-up of both the Carosue Dam operations and Thunderbox is expected to continue through the ch quarter with the company guiding to an annualised 3kopza run rate in the June quarter. SAR expects group ASIC to fall to ~$1,/oz once stripping at Thunderbox is completed and the target run rate is achieved. Cash holds steady whilst exploration accelerates. SAR spent $8.3m on exploration in the December quarter, bringing expenditure in the FY year-todate to $.8m out of a budget of $42m. After exploration and an additional $6.3m growth capital, cash remained steady at a healthy $43.9m. Earnings and target price revision We have made some minor changes to our 2HFY17 assumptions but our earnings forecasts are essentially unchanged. TP increases to $1./sh from $1./sh. Price catalyst 12-month price target: A$1. based on a Blend of % 1x NAV and % 5x CFPS methodology. Catalyst: SAR will release its full quarterly report later this month. The ongoing exploration programme has the potential to deliver reserve and mine life extensions, which would be positive. Action and recommendation Downgrade to Neutral. Another strong production quarter for SAR as the company ramps up to its targeted 3kozpa run rate. However, having rallied strongly from its recent pullback, the stock in now trading at our target. Please refer to page 5 for important disclosures and analyst certification, or on our website www.macquarie.com/research/disclosures.

Fig 1 Carosue Dam quarterly gold production Fig 2 Thunderbox quarterly gold production 45 4 35 3 25 5 11 Carosue Dam (koz) 11 12 12 13 13 Cash costs (A$/oz) 1,6 1,4 1, 1, 8 6 4 45 4 35 3 25 5 Thunderbox OP gold production (koz) 17 17 18 18 19 Cash costs (A$/oz) 1,4 19 1, 1, 8 6 4 Source: SAR, Macquarie Research, January 17 Source: SAR, Macquarie Research, January 17 Fig 3 Carosue Dam production by mine Fig 4 SAR cash flow outlook 2 Whirling Dervish OP Karari UG Whirling Dervish UG Red October UG Deep South UG Porphyry OP Stockpiles 2.. 1. Operating cash flow (A$m) Free cash flow (A$m). 1.. -. FY FY FY17e FY18e FY19e FYe -. FY11 FY12 FY13 FY FY FY FY17e FY18e FY19e FYe Source: SAR, Macquarie Research, January 17 Source: SAR, Macquarie Research, January 17 Fig 5 SAR net cash vs market capitalisation Fig 6 SAR NPV by project Net cash (A$M) ket cap (A$m) 8 Other 28% 6 Carosue Dam 36% 4 Jun Jun 17 Jun 18 Jun 19 Jun Jun 21 Jun 22 Jun 23 Jun 24 Jun 25 Thunderbox 36% Source: SAR, Macquarie Research, January 17 Source: SAR, Macquarie Research, January 17 11 January 17 2

Fig 7 SAR summary model ASX: SAR Price: (A$ps) 1.11 Year end: Jun Rating: Neutral Up/dn TSR Mkt cap: (A$m) 895 Diluted shares (m) 86.2 Target: 1. -1% -1% ASSUMPTIONS FY FY FY FY17e FY18e FY19e FYe ATTRIBUTABLE MINE OUTPUT FY FY FY FY17e FY18e FY19e FYe Exchange Rate A$/US$.92.84.73.75.74.74.74 Gold production (equity) Spot Gold (US$/oz) 1,295 1,223 1,7 1,197 1,3 1,356 1,388 Carosue Dam (koz) 133.5 7.5 7.2 5.1 171. 6.8 2.1 Spot Gold (A$/oz) 1,411 1,461 1,6 1,59 1,821 1,833 1,872 Thunderbox (koz).. 31.5 121. 13.4 13.6 131. RATIO ANALYSIS FY FY FY FY17e FY18e FY19e FYe Total (koz) 133.5 7.5 188.7 276.1 31.5 297.4 293.1 Diluted share capital m 657.3 797.5 89.1 821.8 821.8 821.8 821.8 Cash costs EPS (diluted and pre sig. items) A.9 1.4 3.2 7.3 9.1 13.3 18.2 Carosue Dam (A$/oz) 864 878 831 978 1,52 1,25 1, P/E x 1.7x 79.4x 34.7x.3x 12.2x 8.3x 6.1x Thunderbox (A$/oz) 977 1,171 891 754 CFPS A 6.6 6.8 12.7.1.2 19.4 24.1 Cash costs (A$/oz) 864 878 693 978 1,4 966 89 P/CF x.8x.3x 8.8x.9x 7.8x 5.7x 4.6x AISC Cash Costs DPS A... 1. 1. 2. 2. Carosue Dam (A$/oz) 1,517 1,85 1,55 1,188 1,246 1,212 1,18 Dividend yield %.%.%.%.9%.9% 1.8% 1.8% Thunderbox (A$/oz) 1,172 1,293 995 855 Franking Level % % % % % % % % AISC Cash Costs (A$/oz) 1,517 1,85 1,55 1,181 1,266 1,117 1,35 Book value per share x.35.29.32.39.47.59.76 Operational EBITDA Contribution (pre hedging) P/Book value x 3.2x 3.9x 3.4x 2.8x 2.4x 1.9x 1.5x Carosue Dam A$m 72 83 123 78 119 122 129 R.O.E. (pre sig items) % 3% 5% % 19% 19% 22% 24% Thunderbox A$m 68 79 117 R.O.A. (pre sig items) % 3% 5% 11% % 21% 25% 28% OPERATIONAL OUTLOOK Interest Cover x 5.4x 49.x 177.6x -174.9x -47.2x -29.1x -22.8x EBITDA per share A$ps.6.8.9.17.19.25.31 EV/EBITDA x.8x 13.x 11.9x 6.x 4.8x 3.1x 2.x FCF Yield % -2% 2% % 3% % % % EARNINGS FY FY FY FY17e FY18e FY19e FYe Sales Revenue A$m 211 2 277 436 5 521 548 Other Revenue A$m Total Revenue A$m 211 2 277 436 5 521 548 Operating Costs A$m (9) (174) (191) (285) (351) (36) (279) Operational EBITDA A$m 53 76 85 1 9 2 269 Exploration Expense/Write-offs A$m () () (1) (2) () () () Corporate & Other Costs A$m () () (12) () () () (11) EBITDA A$m 42 66 72 139 9 5 258 D&A A$m (32) () (34) (54) (54) (54) (54) EBIT A$m 17 39 85 5 1 4 Net Interest A$m (2) () () 2 5 9 RESERVES AND RESOURCES (ATTRIBUTABLE) Profit Before Tax A$m 8 38 85 7 6 213 Reserves Tax Expense A$m (2) (5) (12) (26) (32) (47) (64) Project Mt g/t koz Minorities A$m Carosue Dam 3.8 2.9 346 Adjusted NPAT A$m 6 11 26 6 75 9 9 Porphyry 4.9 1.2 181 Significant Items (post tax) A$m () Safari Bore.. Reported NPAT A$m 6 11 26 6 75 9 9 Red October.. Source: SAR, Macquarie Research, January 17 Stockpiles 1.1.9 33 Carosue Dam 9.7 1.8 56 CASHFLOW FY FY FY FY17e FY18e FY19e FYe Thunderbox.4 1.7 557 Net Profit A$m 6 11 26 6 75 9 9 Bannockburn & KOTH 5.4 1.5 35. Interest/Tax/D&A A$m 29 44 4 3 48 48 48 Thunderbox.7 1.7 862 Working Capital/other A$m 9 (1) 36 (7) (6) 2 1 Total 25.5 1.7 1,422 Net Operating Cashflow A$m 43 54 2 83 117 9 198 Resources Capex A$m (53) (36) (5) (48) (31) (27) (63) Project Mt g/t koz Investments A$m (11) (2) (4) Carosue Dam 28.5 2.1 1,888 Sale of PPE and Other A$m Porphyry 32. 1.5 1,541 Free cash flow A$m () (2) 31 86 132 135 Safari Bore 5.7 2.7 496 Dividends Paid A$m (8) (8) () Red October.1 1.8 573 Debt A$m (11) () (2) (1) (1) () () Stockpiles 4.6.7 2 Equity Issuance A$m 58 Carosue Dam 81. 1.8 4,6 Other A$m Thunderbox 46.3 1.9 2,754 Net Financing Cashflow A$m 47 () (2) (1) (9) (9) () Bannockburn 18.9 1.7 1,58 Net change in cash A$m 27 3 (4) 3 77 123 119 Thunderbox 65.2 1.8 3,812 Total 6.2 1.8 8,412 EV/Reserve (A$/oz) 68 EV/Resource (A$/oz) 3 BALANCE SHEET FY FY FY FY17e FY18e FY19e FYe EQUITY DCF VALUATION Macquarie forecasts Spot prices Cash A$m 36 38 34 65 2 265 384 Projects A$m A$ps A$m A$ps PP&E & Mine Development A$m 193 6 248 246 224 197 6 Carosue Dam 326.41 355.45 Exploration A$m 28 38 44 83 89 95 1 Thunderbox 313.39 351.44 Total Assets A$m 313 3 362 427 493 594 727 Undeveloped Resources 365.46 365.46 Debt A$m 1 4 3 2 2 2 Unpaid capital.. Total Liabilities A$m 82 71 1 6 6 5 5 Forwards (41) (.5) (73) (.9) Total Net Assets / Equity A$m 231 229 261 3 387 488 622 Corporate (46) (.6) (46) (.6) Net Debt / (Cash) A$m (22) (37) (31) (62) (139) (263) (382) Net cash (debt) 35.4 34.4 Gearing (net debt/(nd + equity)) % (%) (19%) (13%) (24%) (56%) (117%) (%) Net Equity Value (@ 5% WACC Real) 952 1.19 986 1.24 Gearing (net debt/equity) % (9%) (%) (12%) (19%) (36%) (54%) (61%) Price Target (% 1.4 x NAV, % 3x CFPS) 1. P/NAV.93x 3 3 2 1 Carosue Dam (koz) Thunderbox (koz) AISC (A$/oz) Gold (A$/oz) FY11a FY12a FY13a FYa FYa FY FY17e FY18e FY19e FYe FY21e FY22e FY23e 2, 2, 1, 1, 11 January 17 3

Macquarie Quant View The quant model currently holds a marginally negative view on Saracen Mineral Holdings. The strongest style exposure is Growth, indicating this stock has good historic and/or forecast growth. Growth metrics focus on both top and bottom line items. The weakest style exposure is Valuations, indicating this stock is over-priced in the market relative to its peers. 99/51 Global rank in Materials % of BUY recommendations 75% (6/8) Number of Price Target downgrades 1 Number of Price Target upgrades Fundamentals Attractive Quant Local market rank Global sector rank Displays where the company s ranked based on the fundamental consensus Price Target and Macquarie s Quantitative Alpha model. Two rankings: Local market (Australia & NZ) and Global sector (Materials) Macquarie Alpha Model ranking A list of comparable companies and their Macquarie Alpha model score (higher is better). Factors driving the Alpha Model For the comparable firms this chart shows the key underlying styles and their contribution to the current overall Alpha score. -.4 -.6 -.9-3. -2. -1.. 1. 2. 3. -% -8% -6% -4% -% % % 4% 6% 8% % Valuations Growth Profitability Earnings Momentum Price Momentum Quality Macquarie Earnings Sentiment Indicator The Macquarie Sentiment Indicator is an enhanced earnings revisions signal that favours analysts who have more timely and higher conviction revisions. Current score shown below. Drivers of Stock Return Breakdown of 1 year total return (local currency) into returns from dividends, changes in forward earnings estimates and the resulting change in earnings multiple. -.5.4 -.4-3. -2. -1.. 1. 2. 3. -% -% % % % Dividend Return Multiple Return Earnings Outlook 1Yr Total Return What drove this Company in the last 5 years Which factor score has had the greatest correlation with the company s returns over the last 5 years. Price to Sales LTM SAL Growth 5yr Historic Quick Ratio (Worldscope) Operating Leverage Inc. ROIC FY1 Net Income gin NTM Turnover (USD) 2 Day Turnover(USD) 125 Day -33% -35% -35% -38% Negatives Positives 29% 26% 32% 3% -4% -% % % 4% How it looks on the Alpha model A more granular view of the underlying style scores that drive the alpha (higher is better) and the percentile rank relative to the sector and market. Alpha Model Score Valuation Growth Profitability Earnings Momentum Price Momentum Quality Capital & Funding Liquidity Risk Technicals & Trading Normalized Score -.37 -.59 1.2.53 -.44.4.3. -1.3 -.88-1.28 Percentile relative to sector(/51) Percentile relative to market(/422) 1 1 Source (all charts): FactSet, Thomson Reuters, and Macquarie Research. For more details on the Macquarie Alpha model or for more customised analysis and screens, please contact the Macquarie Global Quantitative/Custom Products Group (cpg@macquarie.com) 11 January 17 4

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 >+% Neutral expected return from -% to +% Underperform expected return <-% Macquarie South Africa Outperform expected return >+% Neutral expected return from -% to +% Underperform expected return <-% 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 % 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 25% in a year. * Applicable to Asia/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 31 December AU/NZ Asia RSA USA CA EUR Outperform 57.53%.72% 45.57% 42.28% 6.58% 52.79% (for global coverage by Macquarie, 8.71% of stocks followed are investment banking clients) Neutral 33.9% 33.97% 43.4%.11% 37.23% 35.62% (for global coverage by Macquarie, 8.5% of stocks followed are investment banking clients) Underperform 8.56%.3% 11.39% 7.61% 2.19% 11.59% (for global coverage by Macquarie, 4.63% of stocks followed are investment banking clients) SAR AU vs Small Ordinaries, & rec history (all figures in AUD currency unless noted) 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, January 17 12-month target price methodology SAR AU: A$1. based on a Blend of % 1x NAV and % 5x CFPS methodology Company-specific disclosures: Important disclosure information regarding the subject companies covered in this report is available at www.macquarie.com/research/disclosures. Date Stock Code (BBG code) Recommendation Target Price -Dec- SAR AU Outperform A$1. 25-Oct- SAR AU Neutral A$1.3 26-Aug- SAR AU Underperform A$1.4 19-Jul- SAR AU Underperform A$1.3 7-Jul- SAR AU Underperform A$1.4 1-Jul- SAR AU Underperform A$1. 11-May- SAR AU Underperform A$1. 19-Apr- SAR AU Underperform A$.9 6-Apr- SAR AU Underperform A$1. -- SAR AU Underperform A$.9 24-Feb- SAR AU Neutral A$.8 29-Jan- SAR AU Neutral A$.77 11-Jan- SAR AU Neutral A$.76 21-Oct- SAR AU Outperform A$.7 24-- SAR AU Outperform A$.65 27-Aug- SAR AU Outperform A$.54 24-Jul- SAR AU Outperform A$.43 9-Apr- SAR AU Outperform A$.55 23-- SAR AU Outperform A$.56 21-- SAR AU Outperform A$.6 2-- SAR AU Outperform A$.55 11 January 17 5

This publication was disseminated on 11 January 17 at 9:31 UTC. 21-Jan- SAR AU Outperform A$. -Jan- SAR AU Outperform A$.42 8-Dec- SAR AU Outperform A$.4 23-Jul- SAR AU Outperform A$. 21-May- SAR AU Outperform A$.42 Target price risk disclosures: SAR AU: Any inability to compete successfully in their markets may harm the business. This could be a result of many factors which may include geographic mix and introduction of improved products or service offerings by competitors. The results of operations may be materially affected by global economic conditions generally, including conditions in financial markets. The company is exposed to market risks, such as changes in interest rates, foreign exchange rates and input prices. From time to time, the company will enter into transactions, including transactions in derivative instruments, to manage certain of these exposures. Analyst certification: We hereby certify that all of the views expressed in this report accurately reflect our personal views about the subject company or companies and its or their securities. We also certify that no part of our compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. The Analysts responsible for preparing this report receive compensation from Macquarie that is based upon various factors including Macquarie Group Limited (MGL) total revenues, a portion of which are generated by Macquarie Group s Investment Banking activities. General disclosure: This research has been issued by Macquarie Securities (Australia) Limited ABN 58 2 832 126, AFSL 238947, a Participant of the ASX and Chi-X Australia Pty Limited. This research is distributed in Australia by, a division of Macquarie Equities Limited ABN 41 2 574 923 AFSL 2374 ("MEL"), a Participant of the ASX, and in New Zealand by Macquarie Equities New Zealand Limited ( MENZ ) an NZX Firm. Macquarie Private Wealth s services in New Zealand are provided by MENZ. Macquarie Bank Limited (ABN 46 8 583 542, AFSL No. 2372) ( MBL ) is a company incorporated in Australia and authorised under the Banking Act 1959 (Australia) to conduct banking business in Australia. None of MBL, MGL or MENZ is registered as a bank in New Zealand by the Reserve Bank of New Zealand under the Reserve Bank of New Zealand Act 1989. Apart from Macquarie Bank Limited ABN 46 8 583 542 (MBL), any MGL subsidiary noted in this research,, is not an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Australia) and that subsidiary s obligations do not represent deposits or other liabilities of MBL. MBL does not guarantee or otherwise provide assurance in respect of the obligations of that subsidiary, unless noted otherwise. This research contains general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice, you should consider the appropriateness of the advice having regard to your situation. We recommend you obtain financial, legal and taxation advice before making any financial investment decision. This research has been prepared for the use of the clients of the Macquarie Group and must not be copied, either in whole or in part, or distributed to any other person. If you are not the intended recipient, you must not use or disclose this research in any way. If you received it in error, please tell us immediately by return e-mail and delete the document. We do not guarantee the integrity of any e-mails or attached files and are not responsible for any changes made to them by any other person. Nothing in this research shall be construed as a solicitation to buy or sell any security or product, or to engage in or refrain from engaging in any transaction. This research is based on information obtained from sources believed to be reliable, but the Macquarie Group does not make any representation or warranty that it is accurate, complete or up to date. We accept no obligation to correct or update the information or opinions in it. Opinions expressed are subject to change without notice. The Macquarie Group accepts no liability whatsoever for any direct, indirect, consequential or other loss arising from any use of this research and/or further communication in relation to this research. The Macquarie Group produces a variety of research products, recommendations contained in one type of research product may differ from recommendations contained in other types of research. The Macquarie Group has established and implemented a conflicts policy at group level, which may be revised and updated from time to time, pursuant to regulatory requirements; which sets out how we must seek to identify and manage all material conflicts of interest. The Macquarie Group, its officers and employees may have conflicting roles in the financial products referred to in this research and, as such, may effect transactions which are not consistent with the recommendations (if any) in this research. 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 www.macquarie.com/disclosures Macquarie Group 11 January 17 6