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Dynacor: Receives New Analyst Coverage Feb 2013

Dynacor: Receives New Analyst Coverage Feb 2013

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Recognized for its leading shareholder returns in the mining industry.

“The sector has focussed on production and per ounce valuations for too long and will be forced to focus on shareholder’s returns as competition increases for the investor dollar. Gold Exchange Traded Funds offer similar gold price exposure, but with none of production, operating cost, political or management risks associated with gold producers.”
Recognized for its leading shareholder returns in the mining industry.

“The sector has focussed on production and per ounce valuations for too long and will be forced to focus on shareholder’s returns as competition increases for the investor dollar. Gold Exchange Traded Funds offer similar gold price exposure, but with none of production, operating cost, political or management risks associated with gold producers.”

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Published by: Dynacor Gold Mines Inc. on Feb 14, 2013
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This document is a marketing communication and is not independent research prepared inaccordance with legal requirements designed to promote the independence of investmentresearch and is not subject to a prohibition on dealing ahead of the dissemination ofinvestment research. Please see disclaimer for further information.
In this review, we analyse more than 85 of the major globally listed gold producersand continue to despair in a sector steeped in mediocrity. We continue to struggle tofind producers who can consistently meet our plus 25% annualised return on
shareholders’ funds criteria.
 The sector has focussed on production and per ounce valuations for too long and will
be forced to focus on shareholder’s returns as competition incre
ases for the investordollar. Gold Exchange Traded Funds offer similar gold price exposure, but with noneof production, operating cost, political or management risks associated with goldproducers.Elsewhere, we felt eleven stocks had the potential to meet or exceed our interestcriteria. Only
Nevsun Resources (NSU-TSX)
has lived up to its potential, althoughboth
Centamin (CEY)
and
Nord Gold (NORD)
have continued to produce returns thatare only slightly shy of our demanding criteria. Others such as
AngloGold Ashanti(AGD/AMG-JSE/ AU-NYSE/AGG-ASX)
,
Buenaventura (BVN-NYSE/BUE-LM),
 
AlamosGold (AGI-TSX)
,
CGA Mining (CGA-TSX/CHX-ASX)
,
DRD Gold (DRD-JSE)
,
KingsroseMining (KRM-ASX)
and
Perseus Mining (PRU-ASX/TS
X) have disappointed for avariety of reasons.
Gold Resource (GORO-NYSE)
which was dismissed from this list asit was very expensive, quickly ran into production issues which impacted the shareprice, however recent results indicate a recovery to superior returns. As this recoveryin annualised sharehold
ers’ return has not been reflected in any pick up in share
price, Gold Resource now joins the list of companies to watch closely.A new crop of potential high performers have been identified,
Dynacor Gold (DNG-TSX
) and
Mandalay Resources (MND-TSX)
are the most consistent, while recentnumbers from
Argonaut Gold (AR-TSX)
,
Northern Star Resources (NST-ASX)
,
RioAlto Mining (RIO-TSX/BVL)
,
Teranga Gold (TGZ-TSX/ASX)
,
Timmins Gold (TMM-TSX/TGD-NYSE)
and
Veris Gold (VG-TSX),
suggest they too should be monitored tosee if a high return trend is permanently established.
Gold SectorReview
WHITMAN HOWARD MINING EQUITY RESEARCH
6
th
Feb 2013
Mining Sector
Roger Bade - Mining Analyst
+44 (0)20 7087 4578
R.Bade@whitman-howard.com
Neil Pidgeon - Mining Sales
+44 (0)20 7087 4577
N.Pidgeon@whitman-howard.com
www.whitman-howard.com
Stocks Included:
African BarrickGoldGold Fields Osisko MinesAgnico Eagle Evolution MiningPan AfricanResourcesAlacer Gold Gold One Perseus MiningAlamos GoldGold ResourceCorpPetropavlovskAllied NevadaGoldGoldcorp Polymetal IntlAngloGoldAshantiGolden StarResourcesPolyus GoldApex Minerals Gryphon GoldPrimeroMiningArgonaut Gold Harmony GoldRamelliusResourcesAtnaResourcesHigh River GoldRandgoldResourcesAura Minerals Highland Gold Red 5 LtdAuRico Gold IAMGOLDRegisResourcesAurizon Mines Jaguar MiningResoluteMiningAvocet MiningKingsgateConsols.RichmontMinesB2 Gold Kingsrose Mining Rio Alto MiningBanro Corp KinrossSt AndrewGoldfieldsBarrick Gold Lake Shore Gold St BarbaraBesra Gold Luna Gold San GoldBrigus GoldMandalayResourcesSaracenMineralsBuenaventura McEwan Mining SEMAFOCentaminEgyptMedusa MiningSignatureMetalsCenterra GoldNevsunResourcesSilver LakeResourcesCGA MiningNew DawnMiningTanami GoldChina Gold Intl New Gold Teranga Gold
Coeur D’Alene
Newcrest Mining Timmins GoldCrocodile Gold Newmont Mining Troy ResourcesDRD Gold Nord Gold Unity MiningDundeePreciousNorthern StarRes.Veris GoldDynacor Nova Gold Yamana GoldEldorado Gold Oceana GoldEndeavourMiningOrvana Minerals
The Major GoldProducers
A sector steeped in mediocrity
 
 6th Feb 2013The Major Gold Producers
www.whitman-howard.com
2
Gold Review Introduction
Our analysis of the majority of the major globally listed gold producers (more than85) exposes a sector steeped in mediocrity. The sector has focussed on productionand per ounce valuations for too long and will be forced to focus on shareholder
s’
 returns as competition increases for the investor dollar. In this sector this is fromgold Exchange Traded Funds, which offer similar gold price exposure, but with noneof production, operating cost, political or management risks associated with goldproducers.We analyse those gold producers that may meet our return criteria and introducetheir poorly performing competitors.As a result of our analysis, we would focus on
Nevsun Resources (NSU-TSX), DynacorGold (DNG-TSX), Gold Resource Corp (GORO-NYSE),
and
Mandalay Resources(MND-TSX)
and would pay close attention to updates from
Argonaut Gold (AR-TSX)
,
Northern Star Resources (NST-ASX)
,
Rio Alto Mining (RIO-TSX/BVL)
,
Teranga Gold(TGZ-TSX/ASX)
,
Timmins Gold (TMM-TSX/TGD-NYSE)
and
Veris Gold (VG-TSX)
.We reiterate that we are not gold bugs, hence we do wish to add to the airwaveswith a view on the gold price, other than to point out that if a gold mining companyis not making decent returns now at almost US$1,700 per ounce (/oz), it will neverdo so, and certainly not at our preferred conservative long term gold price scenarioof $1,000/oz.With over 85 listed major gold producing companies worldwide, and many hundredsof listed juniors in the UK, Australia, Canada, South Africa and the USA, we alsoappreciate that covering this sector properly may be a major effort. In Appendix 1 webriefly introduce the major gold companies that we have analysed.Appendix 2 contains the annuali
sed returns on shareholders’ funds information for
each company.With gold mining shares underperforming the physical metal and Exchange TradedFunds, in order to focus on the fundamentals we will only consider those gold majorsthat generate consistently a plus 25% return on shareholders
equity. As noted veryfew gold companies are able to produce this sort of return on a consistent basis;hence a considerable cull of companies, many of them well known producers, can beundertaken.Therefore in this review we will not be considering
African Barrick Gold (ABG)
,
Agnico Eagle Mines (AEM-TSX)
,
Alacer Gold
 
(ASR-TSX)
,
Alamos Gold (AGI-TSX)
,
Allied Nevada Gold (ANV-TSX)
,
AngloGold Ashanti (AGD/ANG-JSE/AU-NYSE/AGG-ASX)
,
Apex Minerals (AXM-ASX)
,
Atna Resources (ATN-TSX)
,
Aura Minerals (ORA-TSX)
,
AuRico
 
Gold (AUQ-TSX/NYSE), Aurizon Mines (ARZ-TSX)
,
Avocet Mining(AVM)
,
B2Gold (BTO-TSX)
,
Banro Corp (BAA-TSX/NYSE)
,
Barrick Gold (ABX-TSX/NYSE)
,
Besra Gold (Olympus Pacific Minerals) (BEZ-ASX/TSX
),
Brigus Gold(BRD-TSX)
,
Buenaventura (BVN-NYSE/BUE-BVL)
,
Centamin Egypt (CEY)
,
CenterraGold (CG-TSX)
,
China Gold International Resources (CGG-TSX/2099.HK)
,
Coeur
d’Alene Mines (CDE
-NYSE/CDM-TSX)
,
Crocodile Gold (CRK-TSX)
,
DRD Gold (DRD-JSE)
,
Dundee Precious Metals (DPM-TSX)
,
Eldorado Gold (EGO-TSX)
,
EndeavourMining (EDV-TSX/EVR-ASX)
,
Evolution Mining (EVN-ASX)
,
Gold Fields (GFI-JSE)
,
Goldcorp (G-TSX)
,
Gold One International (GDO-JSE/ASX)
,
Golden Star Resources(GSC-TSX/GSS-NYSE)
,
Gryphon Gold (GGN-TSX)
,
Harmony Gold Mining (HAR-JSE/HMY-NYSE)
,
Highland Gold (HGM)
,
IAMGOLD (IAG-TSX)
,
Jaguar Mines (JAG-TSX)
,
Kingsgate Consolidated (KCN-ASX)
,
Kingsrose Mining (KRM-ASX)
,
Kinross Gold(K-TSX)
,
Lake Shore Gold (LSG-TSX/NYSE
),
Luna Gold (LGC-TSX/BVL)
,
McEwan
 
 6th Feb 2013The Major Gold Producers
www.whitman-howard.com
3
Mining (MUX-TSX/NYSE), Medusa Mining (MML/MML-ASX)
,
New Dawn Mining(ND-TSX)
,
New Gold (NGD-TSX)
,
Newcrest Mining (NCM-ASX)
,
Newmont MiningCorp (NEM-NYSE)
,
Nord Gold (NORD)
,
Oceana Gold (OGC-ASX)
,
Orvana Minerals(ORC-TSX)
,
Osisko Mining (OSK-TSX)
,
Pan African Resources (PAF)
,
Perseus Mining(PR-TSX/ASX)
,
Petropavlovsk (POG), Polymetal International (POLY)
,
Polyus Gold(POLG)
,
Primero Mining (PPP-TSX)
,
Ramellius Resources (RMS-ASX)
,
RandgoldResources (RRS)
,
Red 5 Limited (RED-ASX)
,
Regis Resources (RRL-ASX)
,
ResoluteMining (RSG-ASX)
,
Richmont Mines (RIC-TSX)
,
St Andrew Goldfields (SAS-TSX)
,
StBarbara (SBM-ASX)
,
San Gold Corp (SGR-TSX)
,
Saracen Mineral Holdings (SAR-ASX)
,
SEMAFO (SMF-TSX)
,
Signature Metals (SBL-ASX)
,
Silver Lake Resources (SLR-ASX)
,
Tanami Gold (TAM-ASX), Troy Resources (TRY-ASX/TSX), Unity Mining (UML-ASX),
and
Yamana Gold (YAU)
, as these companies do not come close to meeting ourshareholder return criteria and show no evidence of much improvement goingforward.
 
Shareholders
return calculations
As noted above we f 
ocus on annualised shareholders’ returns. This is calculated as
the shareholder return for the period divided by shareholders
equity. With quarterlynumbers, we times the quarterly shareholder
s’
return by four and divide by the end
period shareholders’ fu
nds, to get an annualised number. For interims, or half yearresults, we multiply the shareholder
s’
return by 2 and divide it by the end period
shareholder’s funds, again to get an annualised number. For annual or full year
results the full year shareholder
s’
return is divided by the end period shareholders
 funds.The shareholder
s’
return, or total profit for the period attributable to shareholders,
or owners of the parent, is calculated from the company’s profit and loss account
and is often given in the
company’s statement of comprehensive income. Hence this
number is made up of net income attributable to shareholders, plus or minus anyadjustments for foreign exchange movements, taxation, write off of assets, or profitsor losses on the sale of assets. It is important to ensure that this number excludesminority, or non-controlling interests.
Shareholders’ funds, or equity attributable to shareholder, or just equity, is given inthe company’s balance sheet. Again it is important to exclude minority intere
sts andit is equally important to exclude minority interests from both numbers!As shareholders
equity moves from quarter to quarter, or from half to half, the fullyear shareholders
 
return, won’t necessarily be the average of the four quarters, or
the two halves. The annual return is also not necessarily the sum of the four
quarterly shareholders’ return divided by four, as quarterly and interim data are
unaudited and can change as the year progresses.In our calculations we have aimed for three sets of 
annualised shareholders’ returns
from consecutive periods, either quarterly, or half and full years. If a shareholder
return is negative, we have given the shareholders’ return a zero value. If quarterly
data is available we have used it, even if the half yearly and annual data is readilyavailable.
For those Australian and UK companies that don’t issue quarterly financial
information, we have only used interim and final numbers in our calculations. Forthose that have occasionally issue quarterly data, we will use this to the detriment of half yearly numbers, once the company has confirmed that it will continue to issuethose quarterly numbers. This often happens when an Australian company obtains aCanadian listing. They then should issue quarterly number
s, but they often don’t.
 

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