RBC Dominion Securities Inc.

Stephen D. Walker (Head of Global Mining Research)

(416) 842-4120; stephen.walker@rbccm.com (416) 842-9893; dan.rollins@rbccm.com

RBC Europe Limited

Jonathan Guy (Analyst)

+44 20 7653 4603; jonathan.guy@rbccm.com

Dan Rollins, CFA (Analyst) Sam Crittenden, P.Eng. (Analyst) April 8, 2013
(416) 842-7886; sam.crittenden@rbccm.com

Risk-Reward for NA Gold Producers in an Uncertain Gold Price Environment

With gold stocks under pressure, we believe this presents an opportunity to buy gold equities with an attractive risk-reward. To support this we: (1) run a downside stress-test to see how robust the balance sheets are for the North American gold producers; (2) estimate what gold price is discounted into the shares and review historic trading multiple ranges; and (3) examine relative valuations for North American gold producers to identify attractively-priced names.

Stress Test Suggests $1,200 Gold is a Critical Level

We have run flat gold price scenarios at $1,200/oz, $1,300/oz and $1,400/oz for the North American gold producers to determine when their current cash positions could decline to zero; both with and without their existing credit facilities (Exhibits 2 & 3). This second scenario, albeit unlikely in the current environment, would be a worst possible scenario. Most of the companies in our coverage universe appear to be able to weather a $1,500/oz and $1,400/ oz flat gold price environment, although we would expect most companies to cut G&A and exploration expenses, and begin to defer discretionary capital spending. At $1,300/oz gold, we would expect Barrick Gold, Lake Shore Gold, Allied Nevada, Osisko, Claude Resources and Kinross to draw down their existing credit facilities to avoid cash depletion, given their current spending plans. Most gold producers at $1,300/oz gold would have to cut discretionary capital sharply and/or seek new capital to complete their existing capital programs.

Gold Producers Can Survive by Slashing Spending and High Grading

A $1,200/oz gold price has a significant negative impact on the cash position for the NA Gold Producers. In particular, we see risks for companies, over a 12- to 36-month period, with some combination of the following: above average all-in operating costs, high levels of debt, and firm capital commitments. This includes Barrick Gold, Lake Shore Gold, Allied Nevada, SEMAFO, Claude Resources, Osisko, Detour Gold, Kinross, Centerra Gold, and IAMGOLD (Exhibit 2). At $1,200, within 24 months, most of the companies in our coverage universe would need to draw down credit facilities and in many cases (1) cut capital spending sharply, (2) seek new capital to complete their existing capital programs, (3) place high-cost operations on care and maintenance, and (4) cut dividends.

A Core of High Quality Names

In our view, at sharply lower gold prices, the most resilient NA gold producers with solid, yet flexible business plans would be Goldcorp, Yamana Gold, Agnico-Eagle, New Gold, Randgold Resources, Alamos Gold, Dundee Precious Metals, Argonaut Gold, and Timmins Gold with low net debt, low capital spending to cash flow ratio, and significant new mine development recently completed. Within our coverage universe, the gold companies with the most robust business models that are the best-positioned to weather a sharply declining gold price environment, in our view, would be the royalty and streaming companies, including Silver Wheaton, Franco-Nevada, Royal Gold, Sandstorm and Premier Royalty, which have minimal operating costs and no significant capital cost exposure. We estimate that the Tier I North American gold producers are discounting an estimated $1,520/oz gold price, the Tier II producers are discounting an estimated $1,360/oz , and the Tier III producers are discounting an estimated $1,300/oz (Exhibit 4). In addition, the NA gold producers are trading at valuation levels approximately 10% above the Q4/08 lows, offering investors an attractive entry point, in our view (Exhibit 5).
Priced as of prior trading day's market close, EST (unless otherwise noted). All values in USD unless otherwise noted. For Required Non-U.S. Analyst and Conflicts Disclosures, see page 16.

NA Gold Producers: Under Owned and Offering an Investment Opportunity

Gold stocks are currently out of favor and investors continue to liquidate equity positions to rotate into other industry sectors. We believe the three primary reasons for this are: 1) 2) 3) The inability to generate significant free cash flow on a sustainable basis, particularly during the previous rising gold price environment; Failure to execute and achieve operating and capital spending guidance on a consistent basis; and With golds recent sell off to $1,550/oz and concerns that gold could go lower, investors are asking how robust are the gold producer's business models at lower gold prices?
1

On average, the North American gold producers have an all-in cash operating cost of $1,200/oz (Exhibit 1). However, after accounting for cash taxes (~$200/oz) and current levels of new mine capital (~$250/oz), there is a modest amount of cash left for dividends or debt repayment for companies in a new mine development cycle. We would note that exploration and sustaining capital are discretionary items and can be cut or curtained without a significant negative impact over 12 to 24 month period, however, over the long-run, cutting exploration would reduce the mine life, and starving a mine of sustaining capital is likely to lead to eventual production-related challenges and higher operating costs. Exhibit 1: Average All-in Costs Including Taxes and New Mine Capital for the North American Gold Producers All-in Costs Average $1,200 before Taxes, New Mine Capital, Debt Repayment and Dividends.
$1,800 $1,600 $1,400
Taxes (~30%) New mine capital

$1,200

US$/oz

$1,000 $800 $600 $400 $200 $0

1/ 98 Q 1/ 99 Q 1/ 00 Q 1/ 01 Q 1/ 02 Q 1/ 03 Q 1/ 04 Q 1/ 05 Q 1/ 06 Q 1/ 07 Q 1/ 08 Q 1/ 09 Q 1/ 10 Q 1/ 11 Q 1/ 12 E Q

Corporate expense and sustaining capital

Total cash costs

Source: RBC CM Estimates, GFMS

RBC CMs all-in operating costs defined as total cash costs plus the companys entire budget for G&A, exploration and sustaining capital.

Identifying the Opportunity

While the gold sector on average may have thin net cash margins, we have identified a number of North American Tier I, II, and III gold producers and royalty/streaming companies that have favorable fundamentals and offer investors an attractive risk-reward investment opportunity in the current volatile gold price environment. We performed the following analysis in identifying these companies: 1) Near-Term Liquidity Analysis: A downside stress test is performed to assess near-term liquidity risk in terms of operations and balance sheet pressures at a range of lower gold prices. 2) Implied Stock-Discounted Gold Price Valuation and Historic P/E and P/CF Multiples: Using Net Asset Values, we estimate implied gold prices using both RBC CM commodity price assumptions as well as the current forward curve commodity prices, in order to determine attractively-valued Tier groups. We also review historic P/E and P/CF multiples to see how valuations have trended over time for certain gold producer Tiers. 3) Risk-Reward Relative Valuation: We select the most attractive names based on a range of valuation metrics and potential for opportunity in the current gold price environment.

Assessing Near-Term Liquidity Risk at Various Gold Price Scenarios

We have run a series of gold price scenarios for the North American gold producers to estimate when their current cash positions could potentially decline to zero. In this analysis, beginning in Q2/13, we run a series of flat gold prices at $1,200/oz, $1,300/oz and $1,400/oz, 2 while leaving all other commodities and currencies at current spot prices. We then look out over the next three years in order to estimate: 1) The quarter and year when a company is expected to draw its balance sheet cash position to zero, assuming a drawdown of the existing credit facilities if required (Exhibit 2); and 2) The quarter and year when a company is expected to draw its balance sheet cash position to zero, assuming no drawdown of the existing credit facilities (Exhibit 3). This second scenario above reflects the possibility that, at sharply lower gold prices, the undrawn balance of a credit facility may not be available to a company, similar to the situation that occurred during the global financial crisis in late 2008. However, we would note that most companies have the ability to slash near-term operating costs and capital spending and, in many cases, assume some form of distress financing (e.g. selling production streams, issuing equity, aligning with a strategic partner, etc.) prior to running out of cash, which examined on Page 6 of this report. Our findings are as follows: At $1,500/oz gold, we estimate that all of the North American gold producers in our coverage universe can survive over the next 24 to 36 months and most companies need not draw down their existing credit facilities to fund ongoing operations. At $1,400/oz gold, we estimate that Barrick and Lakeshore Gold would need to draw down their existing credit facilities and seek new financing to complete their existing capital spending programs within 24 months. We estimate that all remaining producers would need to make significant cuts in their G&A and exploration expenses, and begin to defer some discretionary sustaining capital spending (Appendix I, Exhibits 12 and 13). At $1,300/oz gold, we estimate Barrick, Lake Shore Gold, Osisko, Claude Resources and Allied Nevada would need to draw down their existing credit facilities to avoid cash

The silver price is assumed to move in tandem with the gold price at ~1:54 gold to silver price ratio.

depletion. We also expect all remaining producers to cut discretionary capital sharply and/or seek new capital to complete their existing capital development programs (Appendix I, Exhibits 10 and 11). At $1,200/oz gold, we estimate the most significant liquidity impacts for Allied Nevada, Barrick, Claude Resources, Lake Shore Gold, Osisko and SEMAFO, with all remaining producers scaling back operations and curtailing budgets as well. The $1,200/oz gold price scenario is discussed separately below.

$1,200/oz Downside is a Critical Level

At the $1,200/oz gold price level, we see a significant negative impact and cash burn over a 12 to 18 month period, particularly for gold producers with various stages of new mine development, significant mine expansions, and/or significant debt obligations. In Exhibit 2 below, we identify the companies that have the most rapid cash and credit facility drawdown and, within 24 months, would likely need to either (1) cut capital sharply, (2) seek new financing to complete their existing capital programs within a 12 to 18 month period, (3) place high cost mines on care and maintenance and/or (4) cut dividends, at $1,200/oz gold. At this price level, the companies that we believe would be most impacted in 2014 are Allied Nevada, Barrick, Claude Resources, Lake Shore Gold, Osisko and SEMAFO, while in 2015 we see significant risks for Detour Gold, Kinross, Centerra Gold, and IAMGOLD (Exhibit 2). Exhibit 2: Cash Burn Rates at $1,200/oz Gold for the NA Gold Producers, With Access to Credit Facilities

RGLD FNV SLW TMM PPP DPM

AUY RRS NGD EGO CEY ASR AEM NEM GG

2014
LSG ABX Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 SMF ANV Q2/14 CRJ Q3/14 OSK Q4/14 DGC Q1/15

2015
KGC Q2/15 CG Q3/15 IAG Q4/15

AUQ AR AGI

No Issues OK OK1

Source: RBC CM Estimates

At a $1,200/oz gold price, the companies with the greatest risks have a combination of significant near-term capital commitments, debt obligations, and/or above average operating costs. As an example, we assume Barrick and Allied Nevada are committed at this point to completing development of the Pascua-Lama project and the Hycroft mine expansion project respectively. As a result of a combination of above-average all-in operating costs, new project development, and/or debt obligations, we estimate that Lake Shore Gold, SEMAFO, Claude Resources, Osisko, Detour Gold, Kinross Gold, Centerra and IAMGOLD would see cash reserves drawn down. We would expect many of the remaining producers in our coverage universe to defer proposed mine development as many of the projects would become uneconomical at a $1,200/oz gold price. For example, we believe IAMGOLD would likely have to defer development of Cote Lake, while Osisko would likely need to defer the Upper Beaver project or extend its debt facilities beyond 2014, in our view.

A Core of High Quality Companies Can Survive Lower Gold Prices

Gold producers with the greatest capacity to withstand lower gold prices, without changing their current business plan or depleting lines of credit, would be Timmins Gold, Dundee Precious Metals, AuRico, Argonaut, Alamos, New Gold, Primero, Yamana, Randgold, Centamin, Agnico-Eagle and Alacer, in our view (Exhibit 3). In general, these companies have low all-in cash costs, significant cash balances, low or no debt and, in most cases, recently completed new mine development. One other favorable factor would be a high proportion of gold production coming from underground mines, which inherently have more flexibility with grade control and access to higher grade, lower-cost ore. Without full access to credit facilities and at sharply lower gold prices, we estimate that many of the companies on the left hand side of Exhibit 3 would see cash balances drawn down within 12 to 24 months and would likely need to seek alternative means of financing, slash capital spending, cut dividends and/or reduce discretionary spending significantly. Exhibit 3: Cash Burn Rates at $1,200 Gold for the NA Gold Producers, Without Access to Credit Facilities

RGLD FNV SLW LSG ANV KGC GG CRJ Q1/13 Q2/13 Q3/13 DGC Q4/13 ABX Q1/14 SMF NEM Q2/14 EGO Q3/14 OSK IAG Q4/14 CG Q1/15 Q2/15 Q3/15 Q4/15 TMM PPP DPM AUQ AR AGI AUY RRS NGD CEY ASR AEM

No Issues OK OK1

Source: RBC CM Estimates

Ultimately, the best protection in a sharply declining gold price environment would be the royalty and streaming companies, including Silver Wheaton, Franco-Nevada, Royal Gold, Premier Royalty and Sandstorm, all of which have minimal operating costs and no significant 3 capital cost exposure . The principal risk for streaming and royalty companies would be premature closure of mines where these companies receive revenues.

Lower Gold Price Alternatives: Slash Spending and High Grade

Based on our analysis, even at a long-term gold price of $1,200/oz, many of the gold producers within our coverage universe that can avoid drawing down cash reserves have a combination of (1) below-average all-in costs (due in part to significant by-product credits), (2) no significant new mine capital commitments and (3) a lower debt burden. However should gold trade below $1,500/oz we would expect all of the gold producers to begin to take cost-saving measures to preserve cash balances. In a sharply lower gold price scenario, the greatest balance sheet stress would occur for Barrick, Allied Nevada, IAMGOLD, Kinross and Eldorado who would have significant capital spending commitments that would be difficult to walk away from; i.e., where a mine could be in production within 12 to 24 months. The following are some of the cost-cutting alternatives, listed in the likely order of priority, for gold producers in a low commodity and/or high all-in operating cost environment. While there may be revenue generating opportunities, we would view these as distress financing 4 alternatives. We would note that companies could also "high-grade" their mines to survive a sustained lower gold price. 1) Reduction of Corporate Overhead: This includes staffing cuts and cutting exploration programs. 2) Minesite Cost-Saving Initiatives: Deferring low-return, non-critical sustaining capital and increasing cut-off grades. Alternatively, companies could place a mine on care and maintenance, which would defer reclamation costs. 3) Restructuring Balance Sheets: Maturing debt could potentially be replaced by convertible debentures, while new debt may require hedging revenues. Alternatively, issuing equity to strategic partners could also be an option. 4) Sale of Non-core Assets: This includes divestiture of equity holdings and/or selling royalties or metal streams. Receiving reasonable prices would be a challenge in a weak commodity price environment, especially in a distressed situation. 5) Dividend Cuts: We believe companies would begin to cut their dividends, if the above efforts are unsuccessful, however dividend cuts could be forced if debt covenants are triggered, possible scenario for some companies at lower gold prices. 6) Deferral of Growth Projects: With many companies relying on future growth projects and in many cases debt tied to these projects, we believe most companies will wait as long as possible to defer growth projects. In particular the capital-intensive, bulk tonnage open-pit projects with significant upfront investment are at risk.

3 4

RBC CM research report: Precious Metals Royalty and Streaming Primer. Dan Rollins et al, April 5th, 2013. High grading is where a company decides to mine above the current forecast cut off grade to process higher grade ore to reduce their costs per ounce. In many cases the remaining reserve material that is not mined may be uneconomic and may need to be written off.

Implied Gold Price and Historic Multiples Show Attractive Valuations

Implied Gold Price Valuation Favors the Tier II and III Companies
To estimate what gold price is discounted into the stocks, we use two scenarios: (1) a Net Asset Value analysis at a 7% discount rate using the RBC Capital Markets commodity price 5 forecast , and (2) the same analysis using the forward curve commodity prices. The difference between the implied gold price at forward curve prices vs. our commodity price assumptions are that the less favorable prices for Cu and exchange rates. We estimate that the Tier I North American gold producers are discounting an average $1,520 long-term gold price, the Tier II producers are discounting an average $1,360 longterm gold price and the Tier III producers are discounting an average $1,300 long-term gold price (Exhibit 4). We continue to favor the Tier II and III gold sector names based on their superior production growth, the ability to generate superior returns, overall stronger balance sheets and, in general, lower operating and geopolitical risk. Within our coverage universe, the companies with robust business plans at sharply lower gold prices, as discussed earlier, that are trading at or below the current $1,575 gold price are Agnico-Eagle, Alacer, Alamos, Argonaut, AuRico, Dundee Precious Metals, Goldcorp, New Gold, Primero and Timmins. Exhibit 4: NAV and Stock Discounted Gold Prices Under Different Commodity Price Scenarios
Current Price 5-Apr-13 $26.69 $31.79 $7.07 $39.37 NAV Under Flat Gold Price Scenario $1,200 $1,400 $1,600 (NAV's given in trading currency) $7.26 $22.90 $2.47 $8.76 $17.97 $28.31 $6.06 $26.96 $28.69 $33.73 $9.64 $45.16 RBC Implied Gold Price (US$/oz) $1,566 $1,515 $1,457 $1,541 $1,520 $1,447 $1,426 $901 $1,208 $1,296 $1,281 $1,356 $1,551 $1,372 $1,601 $1,157 $1,678 $1,360 $1,312 $1,185 $1,486 $1,349 $876 $1,301 $1,499 $1,364 $1,300 Forward Curve Implied Gold Price (US$/oz) $1,565 $1,539 $1,448 $1,588 $1,530 $1,493 $1,477 $1,132 $1,208 $1,356 $1,254 $1,396 $1,519 $1,397 $1,601 $1,157 $1,755 $1,400 $1,368 $1,242 $1,538 $1,360 $951 $1,298 $1,530 $1,425 $1,340

Tick. Tier I Gold Producers Barrick Gold Goldcorp Inc. Kinross Gold Newmont Tier I Average Tier II Gold Producers Agnico-Eagle Alacer Gold Allied Nevada Centerra Gold Detour Gold Eldorado Gold IAMGOLD New Gold Osisko Mining Randgold Resources SEMAFO Yamana Gold Tier II Average Tier III Gold Producers Alamos Gold Argonaut Gold AuRico Gold Claude Resources Dundee Precious Metals Lake Shore Gold Primero Mining Timmins Gold Tier III Average

ABX GG KGC NEM

AEM ASR ANV CG DGC EGO IAG NGD OSK RRS SMF AUY

$38.05 C$3.74 C$12.71 C$5.88 C$16.60 $8.16 $6.54 $8.63 C$5.44 52.07 C$2.34 $14.28

$26.65 C$2.10 C$27.07 C$5.73 C$13.02 $7.13 $3.56 $5.09 C$3.91 16.29 C$2.64 $8.15

$35.98 C$3.47 C$36.68 C$9.44 C$20.71 $9.90 $7.89 $7.30 C$5.86 27.68 C$3.95 $10.91

$45.30 C$4.85 C$46.28 C$13.14 C$28.41 $12.68 $12.21 $9.50 C$7.80 39.08 C$5.27 $13.67

AGI AR AUQ CRJ DPM LSG PPP TMM

C$12.68 C$7.87 $6.10 C$0.42 C$7.57 C$0.60 $6.19 C$2.90

C$10.76 C$8.09 $3.67 -C$0.30 C$11.80 C$0.18 $3.87 C$2.07

C$14.77 C$11.00 $5.59 C$0.67 C$14.41 C$1.01 $5.55 C$3.08

C$18.77 C$13.90 $7.51 C$1.63 C$17.03 C$1.85 $7.23 C$4.10

Source: RBC CM Estimates, Bloomberg

RBC CM gold price forecast is $1,700 in 2013, $1,700 in 2014, $1,600 in 2015, $1,500 in 2016 and $1,400/oz long term. The silver price forecast is $35.00 in 2013, $35.00 in 2014, $32.00 in 2015, $28.50 in 2016 and $25.00/oz long term. The copper price forecast is $3.75 in 2013, $3.75 in 2014, $3.25 in 2015, $4.00 in 2016, $4.25 in 2017 and $2.75/lb long term.

Tier I and II Producers Trading at Historic Lows on P/E and P/CF Multiples Basis
Many of the gold producers within our coverage universe have recently struggled to generate sustainable positive earnings. However, with a higher sustained gold price and a greater critical mass (+200koz of production), the gold producers have once again started to generate positive earnings and more favorable return metrics. While the market traditionally has not used earnings for gold company valuation, it is useful to look at where the gold sector has traded versus the broader market. In 2001, the larger North American Tier I and II gold producers were trading below the market multiples and gold stocks were clearly out of favor with investors. Currently the Tier I and II producers are once again trading at an estimated 300 to 500 bps discount to the North American market multiples (Exhibit 5). In addition, both the Tier I and II shares are currently trading not far from the recent trough valuations observed during the 2008 global financial crisis. In our view, the Tier I and II gold names offer investors an attractive entry point from an absolute valuation perspective with respect to the broader market. Exhibit 5: NA Gold Equities Tier I & II Average Historical P/E, Based on Forward Estimates
50x 45x 40x
Forward P/E (x)

35x 30x 25x 20x 15x 10x 5x 0x

Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

S&P TSX Tier I Average

Source: RBC CM Trend and Cycle and Factset Estimates

S&P 500 Tier II Average

The contraction in the earnings multiples for the gold sector began in 2004, coincidental with the creation of a number of gold ETF products, and has continued to the present for the Tier I and II companies. A similar contraction of the average annual forward cash flow multiples for the Tier I gold producers is shown in Exhibit 6. We believe much of the lower P/E and P/CF valuations are due to missed production guidance, significant operating/capital cost escalation and generation of little or no free cash flow, and not necessarily a result of higher earnings and cash flow per share for some miners.

Exhibit 6: North American Gold Equities Tier I Historical Average Annual Forward Cash Flow Multiples
60x 56x 52x 48x 44x $1,400
HIGH AVERAGE LOW

$2,000 $1,800 $1,600

Forward CF Multiple

40x 36x 32x $1,000 28x 24x 20x

1 7.6x 20.7x 1 8.0x 1 6.2x 1 4.8x 1 2.8x 1 0.6x 8.3x 6.5x 8.5x 9.2x 1 4.3x 1 1 .5x 1 2.8x 1 1 .4x 8.2x 9.4x 1 4.3x 21 .4x 1 8.7x 1 6.7x 1 3.3x 1 3.8x 1 8.6x 1 8.4x 1 5.5x 1 2.6x 1 1 .0x 1 5.5x 1 2.6x 1 1 .0x 1 2.6x 1 2.3x 1 0.1 x 9.0x 7.3x 6.5x 22.9x 26.4x

$1,200

$800 $600 $400 $200 $-

16x 12x 8x 4x 0x

Jan-00

Jan-01

Jan-02

Jan-03

Jan-04

Jan-05

Jan-06

Jan-07

Jan-08

Jan-09

Jan-10

Jan-11

Jan-12

Source: RBC CM Estimates

Jan-13

Average Montly Gold Price (US$/oz)

Risk-Reward Ranges Remain Attractive for Select Producers

A Focus on Three key Metrics
When we consider which gold equities offer the best risk-reward, we have selected names that can: (1) maintain a strong balance sheet in a sharply lower gold price environment, (2) achieve gold production growth via recently-completed mine expansions; and (3) be wellpositioned in a recovering or high sustained gold price environment with production growth and strong fundamentals. As discussed earlier, we believe that the gold producers best-positioned to weather a sharply-declining gold price environment would be the royalty and streaming companies, including Silver Wheaton, Franco-Nevada, Royal Gold, Premier Royalty and Sandstorm, which have minimal operating costs and no significant capital costs. The gold producers that we believe have an attractive risk-reward profile, as identified in blue on Exhibits 7, 8 and 9, are: Yamana, Goldcorp, Agnico Eagle, New Gold, Alamos, Dundee Precious Metals, Argonaut Gold, Randgold Resources and Timmins Gold. We combine three key metrics that illustrate free cash flow, growth and valuation. These are (1) 3-Year Operating Free Cash Flow (FCF) Yield; (2) the 3-Year Production CAGR; and (3) the 3-Year Average Price to Cash Flow Multiples. We choose a 3-year period in order to smooth the volatility in the numbers and coincide with the timeframe of our Liquidity Risk analysis discussed earlier in this report.

Ability to Generate Cash and Production Growth

Exhibit 7 has the 3-year FCF yield plotted against the 3-year gold production CAGR, and the companies in the upper right quadrant are viewed as favorable as they have production growth and are effectively fully-financed. In addition, most of these companies have amongst the lowest all-in costs within our North American gold producer universe. Exhibit 7: 3-Year FCF Yield vs 3-Year Production CAGR for the NA Gold Producers
20%

3-year Operating FCF Yield (2013E-2015E)

15%

TMM CG

Preferred Gol d Equi ti es

SMF ABX KGC

10% NEM 5% AEM Ti er I NGD 0% 5% -5% IAG -10% CRJ ASR AUY DPM OSK Ti er II GG

RRS

Favourable Quadrant
AR

(5%)

0%

10%

Ti er III PPP AGI EGO LSG 15% 20% 25%

30%

35%

3-yea r producti on CAGR (2012A-2015E)

Source: RBC CM Estimates, ThomsonONE

10

Favorable Valuation and Ability to Generate Cash

The second chart shows the 3-Year Operating P/CF versus the 3-Year FCF Yield (Exhibit 8). We believe that the combination of FCF and valuation helps identify the gold producers that are best prepared to maintain production growth and cash positions . In any gold price downturn, Cash is King and the companies in the upper right hand corner would be well positioned to take advantage of any attractive acquisition opportunities or distress sales with a strong currency in a lower gold price environment. We would also expect these companies to have relatively favorable cash positions, and be able to push ahead with organic growth should gold prices be at a level that generates favorable returns. Exhibit 8: 3-Year Average P/CF vs 3-year FCF Yield for the NA Gold Producers
9x AGI Preferred Gol d Equi ties DGC AEM AUY

NGD GG

8x AUQ
3-year P/CF (2013E-2015E)

7x 6x KGC 5x ANV IAG 4x 3x CRJ 2x (10%) LSG

EGO

AR PPP Ti er II Ti er I NEM Ti er III ABX DPM

Favourable Domain
RRS OSK TMM SMF

ASR

CG (5%) 0% 5% 10% 15% 3-yea r Opera ting FCF Yi el d (2013E-2015E) 20%

Source: RBC CM Estimates, ThomsonONE

11

Favorable Valuation and Production Growth

The third chart in this series shows the 3-Year Operating P/CF versus the 3-Year Production CAGR (Exhibit 9). We believe that the combination of production growth and valuation helps to identify investment flows. We would expect the gold producers with superior growth and reasonable valuations to see the initial investment flows, and these companies lie to the upper right side of the line. Subsequently, as gold prices recover, we would expect to see investment flows migrate to the lower left side of this chart. Exhibit 9: 3-Year Average P/CF vs 3-Year Production CAGR for the NA Gold Producers
9x NGD 8x
3-year P/CF (2013E-2015E)

AGI GG EGO AUY PPP Ti er III RRS TMM DPM

AUQ

Preferred Gol d Equi ties

AEM

7x 6x KGC 5x SMF 4x 3x CRJ 2x CG Ti er I Ti er II NEM OSK IAG ASR

AR

Initial Investment Flows

ANV

LSG

(10%)

0%

10% 20% 30% 40% 3-yea r production CAGR (2012A-2015E)

50%

Source: RBC CM Estimates, ThomsonONE

12

Appendix I: Cash Burn Rates at $1,300/oz and $1,400/oz Gold

Exhibit 10: Cash Burn Rates at $1,300 Gold for North American Gold Producers, With Access to Credit Facilities
RGLD FNV SLW TMM PPP DPM AUQ AR CRJ LSG ABX Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 OSK ANV Q4/14 Q1/15 Q2/15 KGC Q3/15 Q4/15 AGI AUY NEM SMF RRS NGD IAG EGO DGC CG CEY ASR AEM GG

No Issues OK OK1

Source: RBC CM Estimates

Exhibit 11: Cash Burn Rates at $1,300 Gold for North American Gold Producers, Without Access to Credit Facilities
RGLD FNV SLW TMM PPP LSG KGC CRJ DGC Q1/13 Q2/13 Q3/13 Q4/13 ANV Q1/14 GG ABX Q2/14 EGO Q3/14 OSK NEM Q4/14 IAG Q1/15 Q2/15 Q3/15 Q4/15 DPM AUQ AR AGI AUY SMF RRS NGD CG CEY ASR AEM

No Issues OK OK1

Source: RBC CM Estimates

13

Exhibit 12: Cash Burn Rates at $1,400 Gold for North American Gold Producers, With Access to Credit Facilities
RGLD FNV SLW TMM PPP DPM CRJ ABX Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 Q4/14 LSG Q1/15 Q2/15 Q3/15 KGC Q4/15 AUQ AR OK AGI AUY SMF RRS OSK NGD IAG EGO No Issues OK1 DGC CG CEY ANV ASR AEM NEM GG OK2

Source: RBC CM Estimates

Exhibit 13: Cash Burn Rates at $1,400 Gold for North American Gold Producers, Without Access to Credit Facilities
RGLD FNV SLW TMM PPP KGC CRJ Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 ABX Q3/14 ANV Q4/14 LSG EGO Q1/15 Q2/15 IAG Q3/15 Q4/15 DPM AUQ OK AR AGI AUY SMF RRS OSK NGD DGC CG CEY ASR AEM NEM GG

No Issues OK1 OK2

Source: RBC CM Estimates

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Global Mining & Materials Conference

Date: June 18 19, 2013 Location: Boston Harbor Hotel, Boston New for 2013: Opportunity to interact with Senior Management teams from major precious metals producers as well as base metals and bulk commodities Format: 1-on-1 and small group meetings along with key lunch addresses from industry experts. Confirmed Companies to date include: Base Metals Capstone Mining General Moly Hudbay Minerals Inmet Mining Imperial Metals Ivanplats Lundin Mining Nevsun Teck Resources Thompson Creek Metals Precious Metals Agnico-Eagle Alacer Gold Alamos Gold Allied Nevada AngloGold Ashanti Aurico Gold Centerra Gold Detour Gold Dundee Precious Metals Evolution Mining FrancoNevada Hochschild Iamgold New Gold Royal Gold Semafo Silver Wheaton Stillwater Mining Tahoe Resources Yamana Gold Diversified & Other Aquila Resources Anglo American ArcelorMittal Cameco CF Industries Cliffs Natural Resources Fortescue Glencore Illuka Resources Intrepid Potash Kenmare Labrador Iron Ore Manabi Iron Ore Methanex Tronox Uranium One Vale Walter Energy

By accepting this invitation you are confirming that it is permissible for you to do so under relevant laws, rules or regulations that apply to you and your organization as well as being permissible under your organization's code of conduct/ethics or policies.

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Companies Mentioned
Agnico-Eagle Mines Limited (NYSE: AEM; $38.05; Outperform) Alacer Gold Corp. (TSX: ASR.TO; C$3.74; Outperform) Alamos Gold Inc. (TSX: AGI.TO; C$12.68; Outperform) Allied Nevada Gold Corp. (TSX: ANV.TO; C$12.71; Outperform) Argonaut Gold Inc. (TSX: AR.TO; C$7.87; Outperform) AuRico Gold Inc. (NYSE: AUQ; $6.10; Sector Perform) Barrick Gold Corporation (NYSE: ABX; $26.69; Sector Perform) Centerra Gold Inc. (TSX: CG.TO; C$5.88; Sector Perform; Speculative Risk) Claude Resources Inc. (TSX: CRJ.TO; C$0.42; Sector Perform) Detour Gold Corporation (TSX: DGC.TO; C$16.60; Outperform) Dundee Precious Metals Inc. (TSX: DPM.TO; C$7.57; Outperform) Eldorado Gold Corporation (NYSE: EGO; $8.16; Outperform) Goldcorp Inc. (NYSE: GG; $31.79; Outperform) IAMGOLD Corporation (NYSE: IAG; $6.54; Sector Perform) Kinross Gold Corporation (NYSE: KGC; $7.07; Outperform) Lake Shore Gold (TSX: LSG.TO; C$0.60; Sector Perform) New Gold Inc. (AMEX: NGD; $8.63; Outperform) Newmont Mining Corporation (NYSE: NEM; $39.37; Sector Perform) Osisko Mining Corporation (TSX: OSK.TO; C$5.44; Outperform) Primero Mining (NYSE: PPP; $6.19; Sector Perform) Randgold Resources Ltd. (LSE: RRS.L; GBp5,290; Outperform) Royal Gold, Inc. (NASDAQ: RGLD; $67.71; Sector Perform) Semafo Inc. (TSX: SMF.TO; C$2.34; Outperform) Silver Wheaton Corp. (NYSE: SLW; $29.07; Outperform) Timmins Gold Corp. (TSX: TMM.TO; C$2.90; Outperform) Yamana Gold Inc. (NYSE: AUY; $14.28; Outperform)

Required Disclosures Non-U.S. Analyst Disclosure

Dan Rollins, Jonathan Guy and Sam Crittenden (i) are not registered/qualified as research analysts with the NYSE and/or FINRA and (ii) may not be associated persons of the RBC Capital Markets, LLC and therefore may not be subject to FINRA Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

Conflicts Disclosures
This product constitutes a compendium report (covers six or more subject companies). As such, RBC Capital Markets chooses to provide specific disclosures for the subject companies by reference. To access current disclosures for the subject companies, clients should refer to https://www.rbccm.com/GLDisclosure/PublicWeb/DisclosureLookup.aspx?entityId=1 or send a request to RBC CM Research Publishing, P.O. Box 50, 200 Bay Street, Royal Bank Plaza, 29th Floor, South Tower, Toronto, Ontario M5J 2W7. The analyst(s) responsible for preparing this research report received compensation that is based upon various factors, including total revenues of the member companies of RBC Capital Markets and its affiliates, a portion of which are or have been generated by investment banking activities of the member companies of RBC Capital Markets and its affiliates.

Distribution of Ratings
For the purpose of ratings distributions, regulatory rules require member firms to assign ratings to one of three rating categories - Buy, Hold/Neutral, or Sell - regardless of a firm's own rating categories. Although RBC Capital Markets' ratings of Top Pick/ Outperform, Sector Perform and Underperform most closely correspond to Buy, Hold/Neutral and Sell, respectively, the meanings are not the same because our ratings are determined on a relative basis (as described above).
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Distribution of Ratings RBC Capital Markets, Equity Research Investment Banking Serv./Past 12 Mos. Count Percent 294 37.60 172 25.15 8 11.43

Rating BUY[TP/O] HOLD[SP] SELL[U]

Count 782 684 70

Percent 50.91 44.53 4.56

Conflicts Policy
RBC Capital Markets Policy for Managing Conflicts of Interest in Relation to Investment Research is available from us on request. To access our current policy, clients should refer to https://www.rbccm.com/global/file-414164.pdf or send a request to RBC Capital Markets Research Publishing, P.O. Box 50, 200 Bay Street, Royal Bank Plaza, 29th Floor, South Tower, Toronto, Ontario M5J 2W7. We reserve the right to amend or supplement this policy at any time.

Dissemination of Research and Short-Term Trade Ideas

RBC Capital Markets endeavors to make all reasonable efforts to provide research simultaneously to all eligible clients, having regard to local time zones in overseas jurisdictions. RBC Capital Markets' research is posted to our proprietary websites to ensure eligible clients receive coverage initiations and changes in ratings, targets and opinions in a timely manner. Additional distribution may be done by the sales personnel via email, fax or regular mail. Clients may also receive our research via third-party vendors. Please contact your investment advisor or institutional salesperson for more information regarding RBC Capital Markets' research. RBC Capital Markets also provides eligible clients with access to SPARC on its proprietary INSIGHT website. SPARC contains market color and commentary, and may also contain Short-Term Trade Ideas regarding the securities of subject companies discussed in this or other research reports. SPARC may be accessed via the following hyperlink: https://www.rbcinsight.com. A Short-Term Trade Idea reflects the research analyst's directional view regarding the price of the security of a subject company in the coming days or weeks, based on market and trading events. A Short-Term Trade Idea may differ from the price targets and/or recommendations in our published research reports reflecting the research analyst's views of the longer-term (one year) prospects of the subject company, as a result of the differing time horizons, methodologies and/or other factors. Thus, it is possible that the security of a subject company that is considered a long-term 'Sector Perform' or even an 'Underperform' might be a short-term buying opportunity as a result of temporary selling pressure in the market; conversely, the security of a subject company that is rated a long-term 'Outperform' could be considered susceptible to a short-term downward price correction. Short-Term Trade Ideas are not ratings, nor are they part of any ratings system, and RBC Capital Markets generally does not intend, nor undertakes any obligation, to maintain or update Short-Term Trade Ideas. Short-Term Trade Ideas discussed in SPARC may not be suitable for all investors and have not been tailored to individual investor circumstances and objectives, and investors should make their own independent decisions regarding any Short-Term Trade Ideas discussed therein.

Analyst Certification
All of the views expressed in this report accurately reflect the personal views of the responsible analyst(s) about any and all of the subject securities or issuers. No part of the compensation of the responsible analyst(s) named herein is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the responsible analyst(s) in this report.
The Global Industry Classification Standard (GICS) was developed by and is the exclusive property and a service mark of MSCI Inc. (MSCI) and Standard & Poors Financial Services LLC (S&P) and is licensed for use by RBC. Neither MSCI, S&P, nor any other party involved in making or compiling the GICS or any GICS classifications makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability and fitness for a particular purpose with respect to any of such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of their affiliates or any third party involved in making or compiling the GICS or any GICS classifications have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.

Disclaimer
RBC Capital Markets is the business name used by certain branches and subsidiaries of the Royal Bank of Canada, including RBC Dominion Securities Inc., RBC Capital Markets, LLC, RBC Europe Limited, RBC Capital Markets (Hong Kong) Limited, Royal Bank of Canada, Hong Kong Branch and Royal Bank of Canada, Sydney Branch. The information contained in this report has been compiled by RBC Capital Markets from sources believed to be reliable, but no representation or warranty,

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express or implied, is made by Royal Bank of Canada, RBC Capital Markets, its affiliates or any other person as to its accuracy, completeness or correctness. All opinions and estimates contained in this report constitute RBC Capital Markets' judgement as of the date of this report, are subject to change without notice and are provided in good faith but without legal responsibility. Nothing in this report constitutes legal, accounting or tax advice or individually tailored investment advice. This material is prepared for general circulation to clients and has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. The investments or services contained in this report may not be suitable for you and it is recommended that you consult an independent investment advisor if you are in doubt about the suitability of such investments or services. This report is not an offer to sell or a solicitation of an offer to buy any securities. 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