I pitched a mining company to a panel of industry experts. The pitch was an investment opportunity based upon risk analysis, relative valuation, NPV, NAV.
3. Key Drivers
• Increase pipeline and continuously decreasing
cost
• Diversified production of copper and gold
• Successfully pre-sold gold prior to mining
cycle
• Strong financial position with respect to
industry
BUY
Target Price:CA$ 4.2
Upside: 20%
Holding period return
Table here
Chart need to be substitute one day before competition
Recommendation Company
Overview
Business
Description
Industry &
Competitor
Valuation
Risk
Analysis
Conclusion
Leadership
4. Introduction
Main Features
Junior producer, strong financials
High grade ore, low AISC
Diversified revenue structure
Successful pre-sale of gold prior to mining cycle
Dundee Precious Metal Profile
TSE DPM
52 week range CAD 1.28-2.34
Market Cap in millions CAD 663.7
Dundee
Corporatio…
FI and
Funds 77%
SHAREHOLDER STRUCTURE
Gold 45%
Smelter
35%
Copper
19%
Silver 1%
REVENUE DIVERSIFICATION
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5. 2004
Acquisition of
Chelopech,
Bulgaria
2005
Initiated
exploration
activities in
Serbia
2006
First year
Chelopech mine
became profitable
2010
Acquisition of
Tsumeb Smelter,
Namibia
2016
Received all permits for
Krumvograd Project,
Bulgaria
Acquired 100% interest
in Avala Resources
Business
Description
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6. Business
Description
100% Chelopech, Bulgaria
U/G Copper and Gold Mine
100% Krumovgrad, Bulgaria
Development Project
100% Tsumeb, Namibia
Complex Copper
Concentrate Smelter
100% Avala
Resources Ltd, Serbia
Toronto
Head Office
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n
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8. Industry overview
High industry rivalry
Lack of substitutes for Cu, Au
Individual producers price takers
Product is undifferentiated
Barriers to entry include large upfront
capital costs
0
1
2
3
4
Threat of New
Entrants
Bargaining
Power of…
Bargaining
Power of…
Threat of
Substitute…
Industry Rivalry
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9. Why invest in Gold
mining companies?
Gold Price Stock are leveraged to gold price
Currency effect Avoid losses due to changes in
currency value
Reduction in AISC Technology is cause production
costs to decrease
Improving Financial Flexibility Stream financing has created new
opportunities
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n
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11. Industry overview
Criterian
Dundee
Precious Metal
Osisko Mining
Detour Gold
Corporation
Management High High Medium
Sensitivity to
Gold Price
Medium - High
Engineering Medium - Medium
Ore body
(Average Grade)
Medium High Low
AISC High - Low
Current
Exploration
Medium High Low
Ability to raise
Capital
(financing)
High High Medium
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n
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13. 2016 Nov 21st 13.55
2017 Feb 6th 52
2017 Feb 6th 30
Average Target price: $4
Statue: Doing exploration focusing on
Windfall Project
Target: Start construction in 2019
Stock market performance:Osisko
Recent good
news
Osisko fully
valued
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n
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14. Osisko
• No Current NI43-101 Report
(Windfall Project)
• No feasibility study
• No EA done
• No construction permit
• No history data can be referred
Lengthene
d
63%
Stayed the
same
20%
Shortened
17%
Permit approval over last
10 years
Lengthened Stayed the same Shortened
IMPAC
T
PROBABLITYof
uncertainty
OSISKO
DPM
Detour
Gold
High likelihood of high impactful delays
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n
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15. Osisko
Lengthened
63%
Stayed the
same
20%
Shortened
17%
PERMIT APPROVAL OVER LAST 10 YEARS
No Current NI43-101 Report (Windfall Project)
No feasibility study
No EA done
No construction permit
No history data can be referred
Osisko Speculative (Pension
Fund)
Company
Overview
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n
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16. DPM vs Detour
Gold
0
100
200
300
400
500
600
700
0
5
10
15
20
25
2013 2014 2015 2016E 2017E 2018E 2019E 2020E
PayableOuncesofGold(‘000)
Oremilled('000,000)
Comparative Gold Yield Production
DPM : DGC
5 : 1
DPM Detour Gold DPM Gold (oz) Detour Gold Gold (oz)
Did u add production from
Krumovgrad
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17. DPM vs Detour
Gold
0
100
200
300
400
500
600
700
0
5
10
15
20
25
2013 2014 2015 2016E 2017E 2018E 2019E 2020E
PayableOuncesofGold(‘000)
Oremilled('000,000)
Comparative Gold Yield Production
DPM : DGC
5 : 1
DPM Detour Gold DPM Gold (oz) Detour Gold Gold (oz)
Did u add production from
Krumovgrad
Company
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2 x Payable Au10 x Au milled
18. 0
2
4
6
0
500
1000
1500
2013 2014 2015 2016E 2017E 2018E 2019E 2020E
DPM OUTPERFORMS - AISC ($/oz)
Dundee AISC ($/oz) Detour AISC ($/oz)
DPM vs Detour
Gold
DPM Detour Gold
Pay-back
Period
Chelopech:
3.8 yrs
Krumovgrad:
2.5 yrs
6.7 yrs
TRIR (Last 4
years avg.)
1.6 2.2
Cut-off Grade
(Au)
3.0 g/t
Chelopech
0.9 g/t
Krumvograd
0.4 g/t
Average grade
(aug)
5.4 g/t
Chelopech
2.8 g/t
Krumvograd
1.1 g/t
Company
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n
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19. 0
2
4
6
0
500
1000
1500
2013 2014 2015 2016E 2017E 2018E 2019E 2020E
DPM OUTPERFORMS - AISC ($/oz)
Dundee AISC ($/oz) Detour AISC ($/oz)
DPM vs Detour
Gold
DPM Detour Gold
Pay-back
Period
Chelopech:
3.8 yrs
Krumovgrad:
2.5 yrs
6.7 yrs
TRIR (Last 4
years avg.)
1.6 2.2
Cut-off Grade
(Au)
3.0 g/t
Chelopech
0.9 g/t
Krumvograd
0.4 g/t
Average grade
(aug)
5.4 g/t
Chelopech
2.8 g/t
Krumvograd
1.1 g/t
Company
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Descriptio
n
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2 x AISC
21. DCF + Multiples Company
Overview
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Descriptio
n
Industry &
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or
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p
22. Industry
Comparable
0
5
10
15
20
25
30
35
40
Sierra Metals Richmont Mines Wesdome Gold DPM
EV/EBITDA
EV/EBITDA Industry Mean
0
5
10
15
20
25
Sierra Metals Richmont Mines Wesdome Gold DPM
P/CF
EV/EBITDA Industry Mean
0
1
2
3
4
5
6
Sierra
Metals
Richmont
Mines
Wesdome
Gold
DPM
P/S
P/S Industry Mean
Company
Overview
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Descriptio
n
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or
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24. DCF - Sum of the
Parts
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n
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25. DCF - Tsumeb
WACC Assumptions
Risk free rate
Beta (β)
Market Risk Premium
Country Risk
Cost of Debt
WACC 10.3%
0
1
2
3
4
5
6
2015 2016 2017 2018
Net debt/ebitda and balance sheet
headroom
headroom
- Adjusted EBITDA
- 10 years of forecasted cash flows + Terminal Value
- WACC of 10.3% (Mgmt Guidance)
- Terminal growth rate of 2%
- $0.79 Value
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n
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26. DCF - Chelopech
-Adjusted EBITDA
-10 years of forecasted cash flows + Terminal value
-WACC of 10.3%
-Terminal growth rate of 2%
-Value of $4.99
Company
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Descriptio
n
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27. DCF - Krumovgrad Company
Overview
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Descriptio
n
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or
Valuation
Risk
Analysis
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n
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p
28. Target Price
DCF Analysis
Weight – 50%
$5.40 CAD
Relative Multiple
Weight – 50%
$4.00 CAD
Target Price
$4.70 CAD
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n
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30. [name]
[equity target achieved]
Jonathan
Goodman
Murray John Peter Gillin Garth MacRae Peter Nixon
554% 400% 279% 191% 168%
Donald Young Jeremy Kinsman Anthony Walsh Rick Howes
Marie-Anne
Tawil
141% 132% 114%
77%(Target:
Apr 2018)
10%(Target:
Nov 2020)
Finance
45%
Geology
4%
Mining
14%
Diplomat
9%
Law
5%
Management
14%
Environment
9%
LEADERSHIP Portfolio
Company
Overview
Business
Descriptio
n
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or
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Leadership
31. Mining Maintenance Supply Chain
PLANNING & SCHEDULING
REAL TIME PROCESS
MONITORING & CONTROL
FEEDBACK AGAINST
THE PLAN IN REAL TIME
Drilling Loading Transportation Crushing Conveying
Support & Maintenance Processes
PlanningInformation
FeedbackInformation
Company
Overview
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Descriptio
n
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Engineering
32. 0.91 0.96
1.09
1.31
1.81
2.03 2.05 2.04
2.21
0
10
20
30
40
50
60
70
0.00
0.50
1.00
1.50
2.00
2.50
2008 2009 2010 2011 2012 2013 2014 2015 2016
CashCost/tonne(US$)
OreMined('000,000)
DPM - CHELOPECH, BULGARIA
WORKING TOWARDS WORLD-CLASS MINE
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n
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Engineering
33. 0
50
100
150
200
250
300
2013 2014 2015 2016F 2017F 2018F 2019F 2020F
DPM: Capital Expenditure translating into production
Payable Gold (Koz) CapEx ($M)
Company
Overview
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n
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Competit
or
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n
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Engineering
37. Labour Cost
Fluctuations of
Gold and Copper
price
Exchange rate
Utility cost
inflation
Delay in the
growth Project
Changes in
environmental
policy
Influence of state
and municipal
government
Drop in GDP
growth rate
Lack of extension
of the mining
concessions
Tax policy
Fluctuation of ore
grade and
Formation
Strike
Risk Analysis
PROBABLITY
IMPAC
Insignificant moderate
severe
Lowmoderatehigh
Market Economic
Operational Political
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n
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38. -4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
0
1000
2000
3000
4000
Bulgaria
Serbia
Romania,14
Hungary
Slovakia
Poland
Czech…
Croatia,14
Slovenia
Spain
German
Frence,13
Canada
2015 Labour Cost (Average monthly wage in
Euros)
Average Monthly Wage in EUR
Average Real Wage Increase Rate in 2013 - 2015
Reducing the impact of possible increase in
energy and labor
Mechanizing and intelligentzing mine
operations
Maintain good relations with employee
Application of energy conservation
technology
Hedging electricity price by joint venture
with power sector
0
0.02
0.04
0.06
0.08
0.1
0.12
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Electricity price in Bulgaria (€/Kwh)
Company
Overview
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n
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or
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Analysis
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n
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p
Market Economic
Operational PoliticalRisk Analysis
39. Reducing the potential of production delay or stuck
• Maintain good relation with government and local
community
• Keep technology improvement satisfying
increasingly strict environmental requirement
• Operating project safely, optimizing periodical
equipment maintenance
• Keep exploration, Keep company a good cash flow
Company
Overview
Business
Descriptio
n
Industry &
Competit
or
Valuation
Risk
Analysis
Conclusio
n
Leadershi
p
Market Economic
Operational Political
Finance
45%
Geology
4%
Mining
14%
Diplomat
9%
Law
5%
Management
14%
Environment
9%
LEADERSHIP Portfolio
Risk Analysis