Global Metals & Mining: “Killer Charts” from our Global Conference

Research evidence excerpt

Global Metals & Mining: “Killer Charts” from our Global Conference

Our price objective of A$69/share (US$89/share) represents c. 1.2x our DCF-derived

NPV. Our DCF is based on BofA commodity price forecasts and assumes a 9% discount

rate. Diversified miners traded in a range of 0.7-1.4x NPV over the last five years with

lower multiples paid during periods of economic slowdown and higher multiples paid

during periods of rising commodity prices and earnings.

Downside (upside) risks to our price objective are global economic slowdown (growth),

volatility in commodity prices, operational risks associated with mining, project

execution risk, currency pressures and mining cost inflation (deflation).

Endeavour Mining PLC (XEDVF / YEDV)

Our GBp5,700 (C$105) PO is based on the stock trading at 1.3x our estimated net

present value (NPV). In the last ten years, larger cap global precious metal stocks have

traded between 1.0x and 2.0x NAV.

While the gold price is a key driver of our rating, it is also a risk to our EDV

valuation/forecasts. Other downside risks to our EDV valuation are 1)

political/jurisdictional risk, 2) mine plan estimates in excess of EDV reserves, 3) lack of

commodity diversification, 4) mine plans that are based on outstanding permits or

approvals, 5) unfavourable changes in currencies, 6) unforeseen increases in input costs

(i.e. oil and labour), and 7) the possibility it could lose its social license to operate at any

of its mines or projects.

Upside risks are a higher-than-forecast gold price, the possibility for EDV to be acquired,

unexpected exploration success and improving gold miner sentiment, leading to greater-

than-expected multiple expansion.

First Quantum Minerals (YFM / FQVLF)