1. EXPLORATION INSIGHTS – JOE MAZUMDAR
Growth - Margin versus Volume
Adjusting for changing themes in the gold industry
Metal Investor Forum, November Vancouver

2. EXPLORATION INSIGHTS – Joe Mazumdar
The times they are a changing
“In the hay days, people were pushing for the volume rather than the value piece, just looking for any additional ounce almost no matter what it cost.”
Gary Goldberg, Newmont CEO
Investor driven emphasis on margin growth versus production growth
Cost control, capex reductions, exploration cuts, impairments and improve balance sheets
Barrick, Newmont, and Goldcorp have flat production profiles and sold production
Barrick is focused on core assets in the Americas (75-80% of its production profile), which have a B/E gold price of US$1,020
Hurdle rates of 15% at gold prices of US$1,200 (reserve prices)
EXPLORATION INSIGHTS – Joe Mazumdar

3. EXPLORATION INSIGHTS – Joe Mazumdar
Production declines forecast
Will global mine production peak at ~100 Moz?
EXPLORATION INSIGHTS – Joe Mazumdar
Source: GFMS and Newmont Mining (Tom Brady presentation at DGG)

4. EXPLORATION INSIGHTS – Joe Mazumdar
Reserves are depleting
Major gold producers including G, NEM, ABX, NCM, AEM, K, AUY, AU, and HMY
EXPLORATION INSIGHTS – Joe Mazumdar
Source: Company reports and Goldcorp

5. EXPLORATION INSIGHTS – Joe Mazumdar
Breakdown of Newmont’s EOY 2015 reserves
8.5 Moz
EXPLORATION INSIGHTS – Joe Mazumdar
Down 8.5 Moz
Acquisition (4.0 Moz) and additions (5.0 Moz) offset a 17.5 Moz drop due to Conga write down, production depletion and gold price change
Source: Newmont

6. EXPLORATION INSIGHTS – Joe Mazumdar
Breakdown of Goldcorp’s EOY 2015 reserves
Up 1.6 Moz
Acquisition (2.2 Moz), positive gold price change (+1.0 Moz) and additions (1.1 Moz) offset a 2.7 Moz drop due to production depletion and gold price change. If not for the acquisition of the Coffee gold project, Goldcorp would not have replaced reserves.
EXPLORATION INSIGHTS – Joe Mazumdar
Source: Goldcorp

7. EXPLORATION INSIGHTS – Joe Mazumdar
Adding marginal ounces is not a problem
+/- US$100/oz = +/- 4 Moz change in reserves
+/- US$200/oz = +/- 11 Moz change in reserves
+11 Moz
+4 Moz
Base
EXPLORATION INSIGHTS – Joe Mazumdar
-4 Moz
-11 Moz
Source: Newmont Mining

8. EXPLORATION INSIGHTS – Joe Mazumdar
Drop in capital expenditures
$10 B
Steeper drop in development capex due to debt levels and hurdle rates
$6 B
EXPLORATION INSIGHTS – Joe Mazumdar
$4 B
$2 B
Source: SNL, Wood MacKenzie and Newmont Mining (Tom Brady presentation at DGG)

9. EXPLORATION INSIGHTS – Joe Mazumdar
Drop in exploration expenditures
$10 B
Low risk brownfield > High risk greenfield exploration
Goldcorp has cut greenfield exploration
80% of NEM’s US$200 M exploration budget is for brownfields
We would argue that the only chance to add quality projects is to find them
EXPLORATION INSIGHTS – Joe Mazumdar
$4 B
Source: SNL, Wood MacKenzie and Newmont Mining (Tom Brady presentation at DGG)

10. EXPLORATION INSIGHTS – Joe Mazumdar
M&A in 2016 is suitor specific
EXPLORATION INSIGHTS – Joe Mazumdar

11. EXPLORATION INSIGHTS – Joe Mazumdar
Agnico Eagle’s M&A history – Buy and grow
EXPLORATION INSIGHTS – Joe Mazumdar
Purchased - $43 to $186/oz
Discovery - $16 to 46/oz
Source: Agnico Eagle

12. EXPLORATION INSIGHTS – Joe Mazumdar
Coffee project – Buy and grow?
Coffee, he says, will grow into a 5 to 10 million ounce gold camp, “Minimum. That's the investment thesis.”
David Garofalo, Goldcorp CEO
Global Mining Observer interview
Kaminak currently has a 2P reserve of ~2.1 Moz (US$190/oz)
EXPLORATION INSIGHTS – Joe Mazumdar
Source: Goldcorp

13. EXPLORATION INSIGHTS – Joe Mazumdar
Putting geopolitical risk into context*
*Randgold, Goldfields, Anglogold Ashanti would be considered high geopolitical risk companies
EXPLORATION INSIGHTS – Joe Mazumdar
Source: Agnico Eagle

14. EXPLORATION INSIGHTS – Joe Mazumdar
Fiscal discipline is recognized
Randgold has been emphasizing hurdle rates and lower reserve prices for years
EXPLORATION INSIGHTS – Joe Mazumdar
Source: Agnico Eagle

15. EXPLORATION INSIGHTS – Joe Mazumdar
How has the market adjusted?
Brokerage firms and banks – analysts, sales, bankers – paying attention again
Driven by the lack of quality exploration projects - corporate development team focused on junior mining companies
M&A weighed by fiscal discipline prevents a spending spree
Junior miners outperform gold price
More investors interested in exploration plays – lower financing risk
EXPLORATION INSIGHTS – Joe Mazumdar

16. EXPLORATION INSIGHTS – Joe Mazumdar
Speed dating at the Precious Metal Summit
Beaver Creek Precious Metals Summit
60% increase in buy side, 36% increase in corporate [20-23% of total), some juniors with 18 back-to-back meetings in one day
EXPLORATION INSIGHTS – Joe Mazumdar
This year, registration for the Precious Metals Summit in Beaver Creek, not including the presenting companies, was up 60% from last year signaling a high-level of interest among industry players. A cross section of the attendees shows the presence of representatives from various sectors within the industry. It included equity investing (buy-side and press), corporate interests (M&A, joint ventures, placements, financings), and services (trading, financings, M&A advisory), like brokerage firms and banks with their teams of analysts, salespeople, and investment bankers.
Buy-side attendees, comprised half of the total, showing an increase of ~62% y-o-y.
Those representing corporate interests were up 36% year-on-year and amounted to 20-23% of the whole.
A few companies mentioned the presence of teams of up to six people from corporate development at their meetings, where the consistent theme was district scale land packages in mining friendly jurisdictions.
Some junior explorers had up to 18 back-to-back meetings on a single day.
There was a noticeable higher attendance of investment bankers and sales teams from the sell-side, as well as fairly large teams from the corporate development side of producing precious metals companies.
It is likely they were drawn by their eagerness to add exploration stories with district scale land packages in mining friendly jurisdictions to their development pipelines.
Source: Precious Metals Summit and Exploration Insights

17. EXPLORATION INSIGHTS – Joe Mazumdar
Footprints in junior companies
Kinross’ M&A strategy
Quality asset
Transact-able
Accretive
Jurisdiction
Kinross has JVs in B.C., Yukon and NWT
Goldfields JV to build Gruyere project in WA
Barrick Gold has JV in Guyana
Goldcorp has JVs with companies near Coffee project in Yukon
Anglogold Ashanti has a JV in Argentina
Yamana has a JV in Chile
EXPLORATION INSIGHTS – Joe Mazumdar

18. EXPLORATION INSIGHTS – Joe Mazumdar
$3.8 B worth of financings >$50 M
Cash flowing precious metal companies
EXPLORATION INSIGHTS – Joe Mazumdar
Source: Dundee Securities and Exploration Insights

19. EXPLORATION INSIGHTS – Joe Mazumdar
~$890 M worth of financings from $10-$50 M
Explorers appear
EXPLORATION INSIGHTS – Joe Mazumdar
Source: Dundee Securities and Exploration Insights

20. EXPLORATION INSIGHTS – Joe Mazumdar
~$370 M worth of financings <$10 M
Explorers dominate
EXPLORATION INSIGHTS – Joe Mazumdar
Source: Dundee Securities and Exploration Insights

21. EXPLORATION INSIGHTS – Joe Mazumdar
Junior mining provides leverage (5x) to gold
EXPLORATION INSIGHTS – Joe Mazumdar
Au is up +15%
GDXJ is up 80%
Source: Google Finance, Investing.com and Exploration Insights

22. EXPLORATION INSIGHTS – Joe Mazumdar
Summary
Profitability over volume
Reserves are depleting faster than the rate of replacement
Production is forecast to decline
Drop in capex due to balance sheets and more fiscal discipline
Drop in exploration with low risk brownfield favored over greenfield
Growing interest in junior explorers
Acquire quality projects not marginal ones
Grow ounces post acquisition
District scale land packages
Mining friendly jurisdictions
No fatal flaws
EXPLORATION INSIGHTS – Joe Mazumdar