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Goodman Gold Challenge Investment Mining Management Competition PowerPoint
- 2. DUNDEE PRECIOUS METALS (TSX: DPM) Laurentian University BHARTI School of Engineering
- 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 Company Overview Business Descriptio n Industry & Competit or Valuation Risk Analysis Conclusio n Leadershi p
- 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 Company Overview Business Descriptio n Industry & Competit or Valuation Risk Analysis Conclusio n Leadershi p
- 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 Company Overview Business Descriptio n Industry & Competit or Valuation Risk Analysis Conclusio n Leadershi p
- 7. Industry overview & competitive positioning
- 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 Company Overview Business Descriptio n Industry & Competit or Valuation Risk Analysis Conclusio n Leadershi p
- 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 Company Overview Business Descriptio n Industry & Competit or Valuation Risk Analysis Conclusio n Leadershi p
- 10. Company Overview Forecast Company Overview Company Overview Company Overview Company Overview Company Overview Company Overview 1180 1200 1220 1240 1260 1280 1300 1320 1340 1360 2016 2017 2018 2019 2020 $/oz. Year Gold Price Forecast 2 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2016 2017 2018 2019 2020 $/lb Year Copper Price Forecast Sources Gold Forecast – Scotiabank Gold and Precious Metals Equity Research, consensus Gold Price Estimates Copper Forecast- World Bank Copper Forecast
- 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 Company Overview Business Descriptio n Industry & Competit or Valuation Risk Analysis Conclusio n Leadershi p
- 12. Company Overview Competitiors Financial Analysis Valuation Engineering Risk Analysis Conclusion Average Target price: $4 Statue: Doing exploration focusing on Windfall Project Target: Start construction in 2019 Osisko FI's Funds Other SHAREHOLDER STRUCTURE Cash raised through equity 2016 Nov 21st $13.6 million 2017 Feb 6th $52 million 2017 Feb 6th $30 million
- 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 Company Overview Business Descriptio n Industry & Competit or Valuation Risk Analysis Conclusio n Leadershi p
- 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 Company Overview Business Descriptio n Industry & Competit or Valuation Risk Analysis Conclusio n Leadershi p
- 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 Business Descriptio n Industry & Competit or Valuation Risk Analysis Conclusio n Leadershi p
- 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 Company Overview Business Descriptio n Industry & Competit or Valuation Risk Analysis Conclusio n Leadershi p
- 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 Overview Business Descriptio n Industry & Competit or Valuation Risk Analysis Conclusio n Leadershi p 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 Overview Business Descriptio n Industry & Competit or Valuation Risk Analysis Conclusio n Leadershi p
- 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 Overview Business Descriptio n Industry & Competit or Valuation Risk Analysis Conclusio n Leadershi p 2 x AISC
- 20. Valuation
- 21. DCF + Multiples Company Overview Business Descriptio n Industry & Competit or Valuation Risk Analysis Conclusio n Leadershi 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 Business Descriptio n Industry & Competit or Valuation Risk Analysis Conclusio n Leadershi p
- 23. Company Overview Industry Comparable Company Overview Company Overview Company Overview Company Overview Company Overview Company Overview Ratio EV/EBITDA P/CF P/S Exit Multiple 22.04 16.85 3.8 Adjusted share price $4.32 per share
- 24. DCF - Sum of the Parts Company Overview Business Descriptio n Industry & Competit or Valuation Risk Analysis Conclusio n Leadershi p
- 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 Company Overview Business Descriptio n Industry & Competit or Valuation Risk Analysis Conclusio n Leadershi p
- 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 Overview Business Descriptio n Industry & Competit or Valuation Risk Analysis Conclusio n Leadershi p
- 27. DCF - Krumovgrad Company Overview Business Descriptio n Industry & Competit or Valuation Risk Analysis Conclusio n Leadershi p
- 28. Target Price DCF Analysis Weight – 50% $5.40 CAD Relative Multiple Weight – 50% $4.00 CAD Target Price $4.70 CAD Company Overview Business Descriptio n Industry & Competit or Valuation Risk Analysis Conclusio n Leadershi p
- 30. [name] [equity target achieved] Jonathan Goodman Murray John Peter Gillin Garth MacRae Peter Nixon 554% 400% 279% 191% 168% Donald Young Jeremy Kinsman Anthony Walsh Rick Howes Marie-Anne Tawil 141% 132% 114% 77%(Target: Apr 2018) 10%(Target: Nov 2020) Finance 45% Geology 4% Mining 14% Diplomat 9% Law 5% Management 14% Environment 9% LEADERSHIP Portfolio Company Overview Business Descriptio n Industry & Competit or Valuation Risk Analysis Conclusio n Leadershi p Leadership
- 31. Mining Maintenance Supply Chain PLANNING & SCHEDULING REAL TIME PROCESS MONITORING & CONTROL FEEDBACK AGAINST THE PLAN IN REAL TIME Drilling Loading Transportation Crushing Conveying Support & Maintenance Processes PlanningInformation FeedbackInformation Company Overview Business Descriptio n Industry & Competit or Valuation Risk Analysis Conclusio n Leadershi p Engineering
- 32. 0.91 0.96 1.09 1.31 1.81 2.03 2.05 2.04 2.21 0 10 20 30 40 50 60 70 0.00 0.50 1.00 1.50 2.00 2.50 2008 2009 2010 2011 2012 2013 2014 2015 2016 CashCost/tonne(US$) OreMined('000,000) DPM - CHELOPECH, BULGARIA WORKING TOWARDS WORLD-CLASS MINE Company Overview Business Descriptio n Industry & Competit or Valuation Risk Analysis Conclusio n Leadershi p 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 Business Descriptio n Industry & Competit or Valuation Risk Analysis Conclusio n Leadershi p Engineering
- 35. Risk Analysis 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 2015 Corporation Tax Rate 4.5 3.9 3.9 3.8 3.6 3.2 3.1 2.2 1.7 1.3 -0.2 Czech… Poland Romania SLOVAKIA Bulgaria Spain Hungary Great Britain Germany France 2015 GDP Growth rate in EU Greece 0 500 1000 1500 2000 2500 3000 3500 2015 Labour Cost (Average monthly wage in Euros) 7 14 15 29 33 37 38 40 42 45 48 59 84 US Canada Germany Slovakia Spain Romania Bulgaria Croatia Hungary Italy Chile Serbia China Ease of Doing Business Rank Company Overview Business Descriptio n Industry & Competit or Valuation Risk Analysis Conclusio n Leadershi p
- 36. Risk Analysis
- 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 Company Overview Business Descriptio n Industry & Competit or Valuation Risk Analysis Conclusio n Leadershi p
- 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 Business Descriptio n Industry & Competit or Valuation Risk Analysis Conclusio n Leadershi 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
- 40. 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 2015 Corporation Tax Rate Company Overview Business Descriptio n Industry & Competit or Valuation Risk Analysis Conclusio n Leadershi p Market Economic Operational PoliticalRisk Analysis
- 41. Conclusion
Editor's Notes
- Cash cost reduced – installation of autoclave to deal with arsenic/sulphides in concentration reducing penalties.