Siddharth Rajeev, B.Tech, MBA Analyst Vincent Weber, BSc. Research Associate - Mining Investment Analysis for Intelligent Investors Kevin Liu, BBA, BSc Research Associate October 3, 20 Castle Gold Corp. (TSXV: CSG) El Castillo Commences Commercial Production; La Fortuna Resource Study Initiated; Corporate Restructure Sector/Industry: Junior Mining Gold Market Data (as of October 2, 20) Current Price C$0.29 Fair Value C$1.22 ( ) Rating* BUY Risk* 4 (Speculative) 52 Week Range C$0.25 - C$0.90 Shares O/S 75.31 mm Market Cap C$21.84 mm Current Yield N/A P/E (forward) 30.2 P/B 0.84 YoY Return -61.3% YTD TSXV -53.8% *see back of report for rating and risk definitions 600000 500000 400000 300000 200000 100000 0 07 03- Oct- Nov- Dec- Jan- Feb- Mar- Apr- Jun- Jul- Aug- Sep- 07-07 12-07 16-20- 26-30- 04-09- 13-17- $1.00 $0.80 $0.60 $0.40 $0.20 $0.00 www.castlegoldcorp.com Investment Highlights The El Castillo Mine commenced commercial production in July 20. An updated 43-101 compliant resource calculation on El Castillo was released on July 31, 20, highlighting a 50% increase in proven and probable reserves to 752,000 ounces of gold. Gold production was initiated on a second leach pad at El Sastre in Q2 and an additional two pads are under construction. Historical drilling results at La Fortuna have been replicated by twin drilling, and a NI 43-101 resource study is underway as is metallurgical testing of drill core material. Large scale corporate restructuring headed up by the Chairman of the Board has strategically revived the focus of the company. We have raised our valuation on the company from $1.15 per share to $1.22 per share. Risks Like other producing companies, the value of the company depends heavily on gold prices. The success of further development, exploration, and expansion is a significant factor in Castle Gold s succes. K ey F inancial D ata (F Y E - D ec 31) (U S$) 2007 20E 2009E R evenues 7,831,966 10,715,595 28,141,598 N et Incom e (1,520,053) 724,416 16,511,153 E P S (0.03) 0.01 0.22 C ash + M arketable Securities 1,415,491 378,848 13,617,759 W orking C apital 1,775,414 2,016,809 18,276,327 M ineral A ssets & P P E 39,340,141 42,311,995 43,202,463 T otal A ssets 43,329,923 47,602,730 67,860,405 Castle Gold is producing from the 100% owned El Castillo Gold Mine in Durango, Mexico and the 50% owned El Sastre Mine in Guatemala. The company s strategy, pioneered by experienced management, is to start with smal, low cost heap leaching operations, build resources and grow production out of cash flow. Advanced exploration to define a NI 43-101 compliant resource estimate at La Fortuna is underway.
Castle Gold Corp. (TSXV: CSG) Update Page 2 Company Overview Castle Gold is a production oriented company focused on low cost properties with long-term growth potential in Latin America. They operate the 100% owned El Castillo gold mine in Mexico, and jointly operate, and own, 50% of the El Sastre gold mine in Guatemala. In 20, the company has been very active achieving predefined goals including: the release of an updated NI 43-101 compliant resource for the El Castillo mine; initiating leaching on a second pad at the El Sastre project, and positioning themselves to commence additional exploration on the La Fortuna project. Progress at La Fortuna began with the replication of historical drill results to facilitate a NI 43-101 resource study, as well as metallurgical testing of the drill core material. The company also underwent extensive corporate restructuring. El Castillo Property Overview: The 216 ha El Castillo project is a bulk tonnage open pit heap leach operation. Mineralization involves a low sulphidation epithermal gold deposit hosted by volcanic rocks with the upper 150-200 meters having been oxidized. The project moved into commercial production as of July 1, 20, and has received an updated NI 43-101 compliant technical report dated July 31, 20. Updated Technical Report: The most important development relating to the El Castillo project is the release of the updated NI 43-101 technical report dated July 31, 20, and released by A.C.A Howe International Limited ( Howe ). The folowing comparisons are made against the 2006 technical report also released by Howe. The utilization of a much higher gold price of US$625/oz versus US$325/oz, as well as an estimated reduction in operating costs, allowed for a lower ore cut off grade. As a result, measured and indicated resources increased 16% to 1.18 million ounces of gold. Proven and probable reserves increased 50% to 752,000 ounces of gold. Based on revised operating figures, the report also recommended a 200% increase in annual production to 5 million tonnes per year, in turn increasing annual gold production by 79% to 52,000 ounces per year over a 10 year mine life. Net present value of the mine is estimated at US$53.8 million, assuming a gold price of US$625/oz, and a 10% discount rate, and US$70.4 million at a 5% discount rate. As a result of increasing gold prices, the report also recommends the company complete infill RC and/or core drilling on areas inside the in-pit mineable reserves considered waste in the mine model. The possibility to convert these areas into measured or indicated resources is present. The El Castillo deposit is potentially open to the west and south. As such, the company should plan additional drilling in these areas allowing for possible resource expansion. Current Status: During Q2 of the current fiscal year, the mine operated at pre-production levels, with ore material being mined and placed on the heap leach pad with gold being recovered. The project moved into commercial production as of July 1, 20, when consistent operating parameters and costs were met including monthly on average production of 1,250 ounces of gold per month.
Castle Gold Corp. (TSXV: CSG) Update Page 3 El Sastre Property Overview: The El Sastre Mine and regional exploration property, which includes the El Arena, Lupita and Bridge projects, is located in Guatemala. The company was working to earn 51% ownership in the Lupita and Bridge properties, however that option has recently been terminated. La Fortuna The project now consists strictly of the currently producing El Sastre Mine and El Arena project, both considered orogenic gold deposits. The company maintains a 50% ownership in the El Sastre Mine with two private individuals in Guatemala holding the other 50%. The government of Guatemala also retains a 1% net smelter fee. Bridge and Lupita Termination: In our last note, we had indicated a dispute concerning the Bridge and Lupita properties. Despite an extension to the schedule of exploration expenditures and payment obligations, joint venture agreements were terminated prematurely by the partner. All work was immediately suspended, and the company is working to pursue a satisfactory resolution which may involve reinstatement of the agreement. At this date however, the properties have been written off by the company. Production at El Sastre: The company witnessed lower overall gold production in Q2 20 (963 ounces for three months ended June 30, 20, compared to 1,780 ounces for the same period in 2007 company s 50% share). The decrease in production was the result of a focus on pad expansions for leaching of the gold ore. Reduced volumes of gold ore being mined were based on the delay in the leaching of gold ore at the recently constructed second leach pad. The first leach pad, also the sole producing leach pad, had reached capacity. The second pad began being stacked and underwent initial leaching. In addition, construction on two additional leach pads is well underway. The mining of lower grade regions during the quarter (1.83 grams per tonne during the second quarter 20, compared to 2.85 grams per tonne during the second quarter 2007) also contributed to reduced gold production. Current Status: The company estimates grades to average 2.2 grams per tonne moving forward but also expects anomalously higher levels of seasonal precipitation during the third quarter of 20; the result being temporary dilution of gold leach solutions and provisional reduction in gold production during the period. As drier weather returns in the fourth quarter, gold production is likely to return to more propitiatory rates. The company continues to focus on better defining the deposit and converting resources into additional reserves at El Sastre. At El Arenal, the company is planning drilling and trenching to expand present resources and define possible continuity between El Arenal and the company s other mineralized zones. Property Overview: The 10,457 hectare past producing La Fortuna Mine in Durango State, Mexico, was acquired in 2006, and is the company s next target for production. The company has a 100% interest in the property with a 1% NSR owed to Alamos Gold. Mineralization includes gold, silver and copper found in a mixture of stockwork, veinlets and fracture fillings.
Castle Gold Corp. (TSXV: CSG) Update Page 4 Current Status: The company has recently completed a drilling program at La Fortuna aimed at replicating historic drilling on the property. A technical report, completed in March 2007, recommended the company drill 750 meters of core twinning eight holes to verify historic driling data. The company has subsequently driled six diamond dril twin holes ; Table 1 presents the results of the twin holes compared to the original holes, and a reasonable correlation between the two can be seen. Management Restructuring As a result, the validity of historical data has been confirmed facilitating the initiation of a NI 43-101 resource study by the company. Preliminary metallurgical tests are also underway to determine the method and amount of recovery possible from the La Fortuna mineralized zones. The past months have seen a large scale revamping of management within the company. Major changes of note have been listed below in chronological order: John Paterson, a director of the company and former President and CEO of Aurogin Resources Ltd., resigned from the board of directors in late February, 20, for personal reasons. In April, 20, the company appointed Frederico Alvarez to the position of Vice President Operations. He is a citizen of Mexico, and is based in Mexico, to more efectively manage the company s Mexican and Guatemalan asets. In May, 20, Rodrigo Sanchez resigned from the board of directors. Mark James
Castle Gold Corp. (TSXV: CSG) Update Page 5 Plaxton and Leonard Harris were appointed to the board with Mr. Plaxton also being appointed Chairman of the Board. Mr. Plaxton brings experience in corporate restructuring and mergers and acquisitions, while Harris brings experience from a 59 year mining career. The company s interim Chief Financial Oficer, Ms. Maricruz Alvarado, also resigned in May due to both personal reasons, and other professional commitments, contributing to the company s delayed first quarter financial statements In June, 20, the company appointed Thomas Atkins as President and CEO. Mr. Atkins brings 23 years of experience in the mining industry including his most recent position as President and CEO of Crowflight Minerals Inc. In July, 20, Janet O Donnel was appointed as the new Chief Financial Oficer and Rory Quinn as Manager Investor and Public Relations. Both individuals have a background of experience in their respective positions. More recently, Chester F. Millar retired from his position as Director of the company. On September 26, 20, James Mark Plaxton, the chairman of the company, announced a restructuring initiative involving the formation of two advisory committees, specifically: Mergers and Acquisitions Advisory Committee (M&AAC) The M&AAC is to be comprised of three non-management members: Richard J. Adams, James Mark Plaxton, and a third member who has yet to be named. Its mandate is to work with management in its analysis and evaluation of potential merger or acquisition opportunities. Finance Advisory Committee (FAC) The FAC is comprised of three non-management members: James Mark Plaxton, Milton Baehr, and a third member who has yet to be named. Its mandate is to work with management to source and consider financing the company s growth. Outlook on Gold Supply and Demand: The chart on the next page shows the supply and demand figures from the World Gold Council and GFMS Ltd. Global demand for gold increased by 4% YOY in 2007 (3.40 million tonnes to 3.55 million tonnes), as supply dropped by 3% YOY (3.58 million tonnes to 3.47 million tonnes). The increase in demand and drop in supply led the gold market to move from a supply surplus of 182 tonnes in 2006 to a supply deficit of 79 tonnes in 2007.
Castle Gold Corp. (TSXV: CSG) Update Page 6 Source: World Gold Council and GFMS Ltd. (in 000 tonnes) The chart below shows gold prices since January 2006. Gold is currently trading at about US$845/oz. 0.027869 US$ / oz Gold Price (Jan 3, 2006 - Oct 2, 20) 0.0421-0.005255 1,200 0.004206 0.00445 1,000-0.003401 2007 Avg - $695/ oz 0.013018 800 0.003099 0.010772 600-0.001276 Avg (Jan 73 - Sept ) - $362/ oz 0.047147 400-0.003906-0.022262 200-0.004512 3-Jan-06-0.007566 Source: KITCO -0.002027 10-Sep-06 18-May-07 23-Jan- 29-Sep- Although gold prices have dropped considerably after achieving record highs (US$1,000/oz+) in early 20, we have maintained our positive short-term outlook on gold due to the following macro economic conditions.
Castle Gold Corp. (TSXV: CSG) Update Page 7 a) The slow down in the U.S. economy, relatively lower real interest rates and persisting inflationary expectations, we believe, will continue to put a downward pressure on the US$ with respect to other global currencies. The International Monetary Fund (IMF) has lowered their U.S. GDP growth rate estimate from 1.5% to 1.3% in 20 (versus 2.2% in 2007), and from 0.8% to 0.7% in 2009. Unemployment rates in the U.S. are expected to be between 5.5% and 5.7% this year, up from 4.6% in 2007. The ongoing financial crisis in the U.S., the recent downfall of financial institutions like Lehman Brothers Holdings Inc. (which filed for bankruptcy) and Merrill Lynch & Co., (which is being bought by Bank of America), and the new bail-out plan show that the credit crisis is intensifying and threatening the U.S. economy. In addition, real interest rates in the U.S., as we had predicted, has now turned negative as the Fed cut interest rates from 5.25% to 2.00%. Negative real interest rates are very unfavorable for the US$. The rate cuts also add to inflationary pressures and simultaneously depreciate the value of the US$. The Fed has raised their forecasts for inflation in 20 up from 2.1 2.4% to 3.1 3.4%. Although we do not expect the Fed to slash rates further in the rest of the year, we believe that real interest rates will continue to be negative (at least for the next 6 months) because of high inflation. b) We have noticed a positive correlation between gold and oil prices in times of high oil prices. High oil prices create inflationary expectations among investors and lead them to drift towards gold. The following chart shows oil and gold prices since 1986. We noticed that the positive correlation between monthly log changes in oil and gold prices increased during January 2006 January 20, when oil prices were high, from the historic correlation (1986 2006) of 0.18 to 0.49; a significant jump. 160 Oil Vs Gold Prices 1200.00 140 120 100 1000.00 800.00 US$/bbl 80 60 40 20 600.00 400.00 200.00 US$/oz 0 Jan-1986 Sep-1991 May-1997 Jan-2003 Sep-20 0.00 Source: EIA and Kitco WTI Spot Price Gold Although oil prices have dropped to US$93/bbl, prices are expected to stay above $80/bbl
Castle Gold Corp. (TSXV: CSG) Update Page 8 through at least 2010, which we believe will also have a positive effect on the demand for gold. c) The drop in investment demand in early September (as shown in the chart below), we believe partially explained the drop in gold prices in the first half of September. 30.00 Gold ETF Holdings (NYSE & LSE) 25.00 20.00 (mm ounces) 15.00 10.00 5.00 Source: ET G - 2-Jan-06 9-Sep-06 17-May-07 22-Jan- 28-Sep- We had predicted at that time that the drop in investment demand was temporary, and that we expect demandto increase as gold continues to hold its status as a capital preservation aset.investment demand actually increased by 19% during September 10, 20 and October 1, 20, and so did gold prices. Gold prices moved up by 13% during the same period. In summary, we continue to be bullish on gold prices in the near term based on a weakening U.S dollar, high oil prices and strong investment demand. The average consensus forecasts for gold prices are US$885/oz in 20, and US$900/oz in 2009. In the long term however, we have maintained our gold price assumption (2012+) at US$600/oz. Our models indicate thatcsg share price has not been sensitive to gold prices for the past 12 months. Although the CSG s beta with respect to changes in gold prices was significant using daily historical data from October 2007, to present, a very low R squared indicated that the beta has little relevance. Financial Analysis Revenues: In Q2 20, the company posted revenues of $0.85 million (from sales of 963 oz. of gold from the El Sastre mine), compared to $2.38 million (from sales of 1,927 oz of gold) in Q2 2007. For the first 6 months of 20, the company reported revenues of $2.46 million, compared to $3.20 million in the comparable period of 2007. Q2 and YTD Revenues were down primarily due to the production delay relating to initiating the second leach pad at the El Sastre mine.
Castle Gold Corp. (TSXV: CSG) Update Page 9 For the El Sastre mine, due to a temporary dilution of gold leach solutions, we expect gold production of 1,389 oz in Q3 20, and forecast production to increase to 1,980 oz in Q4 20. For the El Castillo mine, we expect the company to produce 7,500 oz of gold in the second half of 20. We forecast revenues of $10.72 million in FY20 (down from $25.54 million) and $28.14 million in FY2009. Earnings: The company posted a net loss of $0.32 million (EPS: -$0.00) in Q2 20, compared to net income of $0.35 million (EPS: $0.01) in Q2 2007. For the 6 months ended June 20, the company posted a net loss of $0.45 million (EPS: $0.01), compared to net income of $0.24 million (EPS: $0.00) in the same period of 2007. Our forecasts are net income of $0.72 million (EPS: $0.01) in 20, and $16.51 million (EPS: $0.22) in 2009. Cash Flows, Capital Structure and Liquidity: In the 6-month period ended June 20, the company generated $0.81 million from operations, and spent $5.29 million related to its mineral projects. Based on our estimate of capital expenditures of $3.15 million in the second half of FY20, we believe the company will have to raise $2 million in the second half of 20, to fund its mineral projects and working capital. The following table summarizes the company s liquidity position as of June 30, 20. (in US$) 2007 Q2 20 Cash + Marketable Securities 1,415,491 1,520,224 Working Capital 1,775,414 2,066,265 Current Ratio 1.8 1.9 LT Debts/ Assets 17.1% 16.4% Recent Financings: During the 6 months ended June 20, the company raised $0.52 million from the exercise of warrants. There was no major financing subsequent to the quarter ended June 20. Valuation Stock Options and Warrants: At the end of June 20, the company had 7.13 million outstanding stock options with exercise prices ranging from $0.24 to $1.02, and a weighted average remaining life between 1.2 to 4.9 years (0.05 million of the stock options are currently in the money). The company also had 3.91 million warrants outstanding with exercise prices ranging from $0.54 to $1.00, and a weighted average remaining life between 0.1 to 0.9 years (none of the warrants are currently in the money). Our revised valuation on the company increased from $1.11 per share to $1.22 per share primarily because we raised our resource estimate on the El Castillo project (based on the updated 43-101 compliant resource estimate) in our valuation models.
Castle Gold Corp. (TSXV: CSG) Update Page 10 Valuation Summary El Castillo $79,471,902 $1.06 El Sastre $10,374,984 $0.14 La Fortuna $7,592,867 $0.10 WC $1,520,224 $0.02 Debt (7,234,335) ($0.10) Net Value $91,725,641 $1.22 Shares (diluted) 75,310,782 The increase in valuation was partly offset by a drop in our valuation on the El Sastre project. Our valuation on the El Sastre project dropped as we removed the resource estimate of Bridge and Lupita from our valuation models. Conclusions & Rating Risks Based on our revised valuation models and review of the company s progres since our previous report, we reiterate our BUY rating and raise our valuation on the company from $1.15 to $1.22 per share. The following risks, though not exhaustive, will cause our estimates to differ from actual results: Like other producing companies, the value of the company depends heavily on gold prices. The success of further development, exploration, and expansion is a significant factor in Castle Gold s succes. We have also lowered our RISK rating on the company from 5 (Highly Speculative) to 4 (Speculative).
Castle Gold Corp. (TSXV: CSG) Update Page 11 Appendix: Financial Statements Castle Gold Corporation - Income Statement (in US$) 2007 20E 2009E Revenues 7,831,966 10,715,595 28,141,598 Cost of Sales 1,977,835 5,140,126 10,262,461 Gross Margins 5,854,131 5,575,468 17,879,137 Expenses General and Administrative 1,754,790 2,105,748 2,526,898 Exploration Expenses 433,247 476,572 619,543 Impairment charges 1,076,986 - - EBITDA 2,589,1 2,993,149 14,732,696 Depreciation, Amortization and Accretion 976,400 1,074,040 1,259,532 EBIT 1,612,7 1,919,109 13,473,164 Other Income (636,474) (869,230) (869,230) Non-controlling Interest (2,054,951) - - Income Taxes (441,336) 325,462 3,907,220 Net Income (Loss) (1,520,053) 724,416 16,511,153 EPS (0.03) 0.01 0.22
Castle Gold Corp. (TSXV: CSG) Update Page 12 Castle Gold Corporation - Balance Sheets (in US$) Assets 2007 20E 2009E Current Assets Cash and cash equivalents 1,162,491 125,848 13,364,759 Marketable securities 253,000 253,000 253,000 Accounts receivables 1,302,256 1,781,730 4,679,229 Inventory 1,130,905 2,939,070 5,867,966 Prepaid expenses 135,686 185,644 487,543 3,984,338 5,285,291 24,652,498 Mineral properties, plant and equipment 39,340,141 42,311,995 43,202,463 Other assets 5,444 5,444 5,444 43,329,923 47,602,730 67,860,405 Liabilities Current Liabilities Current portion of mineral property obligation 150,000 150,000 150,000 Current portion of long-term debt 858,984 - - Accounts payable and accrued liabilities 1,199,940 3,118,482 6,226,171 2,2,924 3,268,482 6,376,171 Long-term debt 6,550,985 6,550,985 6,550,985 Provision for site closure and reclamation obligations 482,169 332,169 332,169 Future income taxes 7,133,000 7,133,000 7,133,000 Other long-term liabilities 100,000 100,000 100,000 16,475,078 17,384,636 20,492,325 Non-controlling interest - - - Shareholders' Equity Share Capital 32,512,750 34,512,750 34,512,750 Contributed Surplus 1,858,567 2,497,400 3,136,233 Other (65,703) (65,703) (65,703) Deficit (7,450,769) (6,726,353) 9,784,801 26,854,845 30,218,094 47,368,1 Total Liabilities and S.E 43,329,923 47,602,730 67,860,405
Castle Gold Corp. (TSXV: CSG) Update Page 13 Castle Gold Corporation - Cash Flows (in US$) 2007 20E 2009E Operating Activities Net Income (1,520,053) 724,416 16,511,153 Non-Cash Items: Depreciation, depletion and accretion 976,400 1,074,040 1,259,532 Non-controlling interest 2,054,951 - - Unrealized foreign exchange loss 120,790 Impairment charges 1,076,986 Future tax recovery Change in fair value of marketable securities Others Stock Based Compensation 638,833 638,833 638,833 3,347,907 2,437,289 18,409,518 Change in Non-Cash Working Capital Items: Accounts Receivable (584,497) (479,474) (2,897,500) Inventory (1,230,372) (1,8,165) (2,928,897) Prepaid Expenses and Deposits (131,510) (49,958) (301,899) Accounts Payable and Accrued Liabilities 194,540 1,918,542 3,107,688 Other assets (1,869) (1,753,7) (419,054) (3,020,607) 1,594,199 2,018,235 15,388,911 Financing Activities Debt (858,984) - Equity 2,277,784 2,000,000 2,277,784 1,141,016 - Investing Activities Additions to mineral properties, plant and equipment (2,687,136) (8,442,255) (2,150,000) Mineral assets Capitalized revenues 4,396,361 Repayment of mineral property obligation (150,000) Cash acquired through amalgamation 183,537 Deconsolidation (858,107) (3,361,706) (4,195,894) (2,150,000) Increase(decrease) in Cash 510,277 (1,036,643) 13,238,911 Cash (BOP) 652,214 1,162,491 125,848 Cash (EOP) 1,162,491 125,848 13,364,759
Castle Gold Corp. (TSXV: CSG) Update Page 14 Fundamental Research Corp. Equity Rating Scale: Buy Annual expected rate of return exceeds 12% or the expected return is commensurate with risk Hold Annual expected rate of return is between 5% and 12% Sell Annual expected rate of return is below 5% or the expected return is not commensurate with risk Suspended or Rating N/A Coverage and ratings suspended until more information can be obtained from the company regarding recent events. Fundamental Research Corp. Risk Rating Scale: 1 (Low Risk) - The company operates in an industry where it has a strong position (for example a monopoly, high market share etc.) or operates in a regulated industry. The future outlook is stable or positive for the industry. The company generates positive free cash flow and has a history of profitability. The capital structure is conservative with little or no debt. 2 (Below Average Risk) - The company operates in an industry where the fundamentals and outlook are positive. The industry and company are relatively less sensitive to systematic risk than companies with a Risk Rating of 3. The company has a history of profitability and has demonstrated its ability to generate positive free cash flows (though curent free cash flow may be negative due to capital investment). The company s capital structure is conservative with litle to modest use of debt. 3 (Average Risk) - The company operates in an industry that has average sensitivity to systematic risk. The industry may be cyclical. Profits and cash flow are sensitive to economic factors although the company has demonstrated its ability to generate positive earnings and cash flow. Debt use is in line with industry averages, and coverage ratios are sufficient. 4 (Speculative) - The company has little or no history of generating earnings or cash flow. Debt use is higher. These companies may be in start-up mode or in a turnaround situation. These companies should be considered speculative. 5 (Highly Speculative) - The company has no history of generating earnings or cash flow. They may operate in a new industry with new, and unproven products. Products may be at the development stage, testing, or seeking regulatory approval. These companies may run into liquidity issues, and may rely on external funding. These stocks are considered highly speculative. Disclaimers and Disclosure The opinions expressed in this report are the true opinions of the analyst about this company and industry. Any forward looking statements are our best estimates and opinions based upon information that is publicly available and that we believe to be correct, but we have not independently verified with respect to truth or correctness. There is no guarantee that our forecasts wil materialize. Actual results wil likely vary. The analyst and Fundamental Research Corp. FRC does not own any shares of the subject company, does not make a market or offer shares for sale of the subject company, and does not have any investment banking business with the subject company. Fees of less than $30,000 have been paid by CSG to FRC. The purpose of the fee is to subsidize the high costs of research and monitoring. FRC takes steps to ensure independence including setting fees in advance and utilizing analysts who must abide by CFA Institute Code of Ethics and Standards of Professional Conduct. Additionally, analysts may not trade in any security under coverage. 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