05 August 2020

Precious metal prices updated: equities lag with developers averaging just 0.38xNAVspot
Company: Adriatic (ADT AU) Price: A$2.29/sh Rec / Target: BUY / A$3.05/sh (up) Risk rating: HIGH
Company: Bellevue (BGL AU) Price: A$1.12/sh Rec / Target: BUY / A$1.30/sh (up) Risk rating: SPECULATIVE
Company: Benchmark (BNCH CN) Price: C$1.11/sh Rec / Target: BUY / C$2.10/sh (up) Risk rating: SPECULATIVE
Company: Emerald (EMR AU) Price: A$0.63/sh Rec / Target: BUY / A$1.10/sh (up) Risk rating: HIGH
Company: Geopacific (GPR AU) Price: A$0.68/sh Rec / Target: BUY / A$1.95/sh (up) Risk rating: SPECULATIVE
Company: GoGold (GGD CN) Price: C$1.79/sh Rec / Target: BUY / C$2.60/sh (up) Risk rating: HIGH
Company: Liberty Gold (LGD CN) Price: C$2.34/sh Rec / Target: BUY / C$3.95/sh (up) Risk rating: SPECULATIVE
Company: Marathon (MOZ CN) Price: C$2.35/sh Rec / Target: BUY / C$3.30/sh (up) Risk rating: HIGH
Company: Pure (PGM CN/LN) Price: C$2.08/sh Rec / Target: BUY / C$2.55/sh (up) Risk rating: HIGH
Company: Sabina (SBB CN) Price: C$2.34/sh Rec / Target: BUY / C$3.65/sh (up) Risk rating: HIGH
Company: Saturn (STN AU) Price: A$0.90/sh Rec / Target: BUY / A$1.95/sh (up) Risk rating: SPECULATIVE
Company: Skeena (SKE AU) Price: C$2.97/sh Rec / Target: BUY / C$4.80/sh (up) Risk rating: HIGH
Company: W African (WAF AU) Price: A$1.11/sh Rec / Target: BUY / C$1.95/sh (up) Risk rating: MEDIUM

We have updated our gold price assumption from US$1,650/oz to US$1,850/oz, and lifted our silver
assumption from US$21/oz to US$24/oz maintaining an ~75:1 ratio as per spot. We value explorers at
build start valuation fully-diluted for options but not mine build, developers diluted for option and fully-
funded for mine build with SCPe mine build equity, and producers fully-diluted for options. What becomes
immediately apparent is the extremely high FCF yields of producers, and the very low P/NAV multiples for
pre-producers on spot. Either the market thinks precious metal prices are pulling back in the short term, or
more likely, the implication on project NPV and per share valuations simply hasn’t sunk into the market
yet. Similarly, we focus on quality asset-backed names. The ‘hot’ stocks of recent months are
predominantly those without such pesky shackles are published resource or feasibility studies, with
valuations, in our view, completely detached from reality. Thus, we see the short-term as an ideal time to
shift into ‘real’ mid-tier names, and would look to the third quarter earnings for a material re-rate on less-
well covered smaller producers, such as West African, as the implication of bottom-line impact to balance
sheet of current share prices hits the tape.
Figure 1 Old and new price targets, and current stock P/NAV on our deck and spot prices
OLD New target P/NAV New Current P/NAV EV/oz*
Current P/NAV PT 1850 / 24 2050 / 27 PT 1850 /24 2050 / 27 M&I&Inf Reserve
Adriatic Metals A$2.29/sh 0.6xNAV1650/21 A$2.70/sh 0.6x 0.5x A$3.05/sh 0.45x 0.40x 80 130
Bellevue Gold A$1.12/sh 0.9xNAV1550 A$1.30/sh 0.7x 0.6x A$1.30/sh 0.60x 0.52x 354 476*
Benchmark Met. C$1.11/sh 0.4xNAV1550/17.5 C$1.15/sh 0.4x 0.3x C$2.10/sh 0.23x 0.18x 63* 63*
Emerald Res. A$0.63/sh 0.9xNAV1650 A$0.90/sh 0.9x 0.8x A$1.10/sh 0.53x 0.45x 256 322
Geopacific Res. A$0.68/sh 0.9xNAV1650 A$1.65/sh 0.7x 0.5x A$1.95/sh 0.25x 0.19x 72 108
GoGold Res. C$1.77/sh 0.8xNAV1650/21 C$2.10/sh 0.8x 0.7x C$2.60/sh 0.54x 0.45x 313 391*
Liberty Gold C$2.36/sh 0.6xNAV1650 C$3.25/sh 0.6x 0.5x C$3.95/sh 0.38x 0.32x 264* 259*
Marathon Gold C$2.35/sh 1xNAV1550 C$2.80/sh 0.7x 0.6x C$3.25/sh 0.57x 0.47x 141 234
Pure Gold Min. C$2.10/sh 1.2xNAV1550 C$1.85/sh 1.2x 1.0x C$2.55/sh 0.99x 0.83x 296 538*
Sabina Gold C$2.32/sh 0.8xNAV1550 C$3.00/sh 0.7x 0.6x C$3.65/sh 0.44x 0.38x 90 258*
Saturn Metals A$0.90/sh 0.3xNAV1650 A$1.45/sh 0.3x 0.2x A$1.95/sh 0.14x 0.11x 79 55*
Skeena Res. C$2.98/sh 0.5xNAV1650/18.5 C$3.60/sh 0.5x 0.4x C$4.80/sh 0.31x 0.26x 105 161
West African Res. A$1.11/sh 1xNAV1650 A$1.85/sh 0.9x 0.8x A$1.95/sh 0.51x 0.45x 302 337*
Source: SCP estimate , reserves based on published reserve, or 'mining inventory' in PFS/PEA/Scoping, or *based on
published SCPe where pre -resource / mine plan / SCP modified mine plan . All at 5% discount except ADT at 10%
Adriatic: maintain BUY rating, lift PT from A$2.70/sh to A$3.05/sh
We model Adriatic on a DCF basis, using a lower barite price than published by Adriatic. We add a nominal
US$11m for the Tethyan acquisition at acquisition value. This polymetallic is now a silver company with
36% of the NSR from silver, just over 50% including gold, with zinc and lead minorities at 29% and 17%,
respectively. We look for progress on permitting, an expanded licence, then a PFS and a concurrent
resource upgrade to drive momentum. Ahead of that a hostile move from shareholder Sandfire Resources
could well be in the cards. With a scoping study released, permitting progressing steadily, we apply a
0.6xNAV multiple to our fully-diluted NAV with 250m FD shares incorporating mine build equity.
Table 1 Valuation and sensitivities for Adriatic

Source: SCP

Bellevue: maintain BUY rating and A$1.30/sh PT

We model Bellevue on a DCF basis with a 1.69Moz inventory at 8.6g/t diluted into the mill, adding 1Moz
of exploration upside at US$50/oz. We apply a 0.7xNAV multiple to reflect a balance of the company being
fully-funded for the mine build, but no economic studies having being released, and recent drops of
endowment on infill at Viago. We see lots of upside in the Southern Extensions in particular, and would
look for the name to gain momentum in 2H20 once dewatering completes this year, and development to
access the south (surface access not possible) is put in ahead of drilling.
Table 2 Valuation and sensitivities for Bellevue

Source: SCP estimates

Benchmark: maintain BUY rating, lift PT from C$1.15/sh to C$2.10/sh

We model Benchmark on a DCF basis for a 1.8Moz AuEq LOM production adding a nominal C$10m for
Silver Pond and Marmot targets. We have estimated the resource for this pre-resource name, so apply a
conservative 0.4xNAV multiple to the project. We expect this summer’s aggressive 50,000m of drilling to
add momentum to the name ahead of a maiden resource next year. We would also look for multiple
‘flyers’ on new zones drilled last year, as well as new targets on the licence.

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 Table 3 Valuation and sensitivities for Benchmark Metals

Source: SCP estimates

Emerald Resources: maintain BUY rating, lift PT from A$0.90/sh to A$1.10/sh

We model Emerald on a DCF basis per their DFS, modelling published reserves only. We add a nominal
US$20m for exploration upside given their large strategic holding in Cambodia. We expect first pour in
2Q21 to act as a major catalyst with ‘only’ 2g/t in the pit looking pretty smart right now. Thereafter we
expect M&A in Africa or Australia to continue the momentum. Ahead of first pour we maintain our 0.9x
NAV multiple, with the stock trading at just 0.45xNAV spot indicative of upside in the short term.
Table 4 Valuation and sensitivities for Emerald Resources

Source: SCP

Geopacific Resources: maintain BUY rating, lift PT from A$1.65/sh to A$1.95/sh

We model Geopacific according to the DFS, adding US$50/oz for resources outside the reserve. We believe
the new CEO, coming from neighbouring mine Simberi, is a coup for the company, and alongside debt in
2H20 should lay a foundation for equity re-rate and move to construction in 1H21. Put simply, a shovel-
ready gold open pit with 1Moz reserve shouldn’t be trading at A$120m, so see short and long-term upside
here. We model the company on a fully-funded fully-diluted basis including mine build equity, and apply
a 0.7xNAV multiple to reflect key de-risking events of debt and mine build.
Table 5 Valuation and sensitivities for Geopacific

Source: SCP

GoGold Resources: maintain BUY rating, lift PT from C$2.10/sh to C$2.60/sh

GoGold is one of our few silver names; with ~2/3 of production being silver from Los Ricos, and 2Moz pa
of AgEq production from Parral around half silver, the company is well leveraged to the upside. With the
Los Ricos South maiden resource out recently, we would expect a move to both regional exploration
following Bonanza hits at Los Ricos North today, and engineering (plus more drilling) at Los Ricos South.

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We apply a 1xNAV multiple to operating Parral, with 0.7xNAV for Los Ricos South, adding a nominal
US$20m for Los Ricos North, and a nominal US$50/oz or US$8m for the Esmerelda dumps.
Table 6 Valuation and sensitivities for GoGold

Source: SCP estimates

Liberty Gold: maintain BUY rating, lift PT from C$3.25/sh to C$3.95/sh

We model Liberty on a DCF basis, modelling Goldstrike per the PEA. For Blackpine, we model a 1.8Moz
mining inventory based on our bottom-up 2Moz resource estimate. In reality, Blackpine is going to be far
bigger than this in our view. Adding cash and proceeds from sale, we apply a 0.6xNAV multiple for a
production asset. While high compared to peer pre-resource companies, this reflects our underlying view
of material resource growth.
Table 7 Valuation and sensitivities for Liberty Gold

Source: SCP estimates

Marathon Gold: maintain BUY rating, lift PT from C$2.80/sh to C$3.30/sh

We model Marathon on a DCF basis per the PFS, adding 250koz for satellites. With the company well
funded to drill just these satellites, as well as progress permitting and DFS, this is a rare ‘big mine’ at 150-
200koz pa, with low capex given the staged expansion. Being in a prime Canadian jurisdiction warrants a
premium, as does the exploration upside, hence we apply a 0.7xNAV multiple. We expect drilling on the
area between Berry and the Marathon pit, the ‘Sprite Corridor’ to drive momentum this year. Meanwhile
new management is being added at a high rate as both corporate and technical bench-strength is built:
make no mistake, this team is here to build a mine.

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 Table 8 Valuation and sensitivities for Marathon

PureGold: maintain BUY rating, lift PT from C$1.85/sh to C$2.55/sh

We model PureGold on a DCF basis per the DCF for the Madsen underground. We then add the Wedge
satellites (271koz per PEA) alongside a mill expansion in Y3, and add a nominal +100koz from Wedge given
that high-grade ore body is open at depth, and under new plans, will be accessible for drilling from higher
levels as soon as next year. ‘Red Lake Royalty’ is a moniker well deserved, with the suite of assets here
likely to extend to depth and along strike for years to come. Being fully funded with debt and equity, and
with flow-funding to drill during the build, we apply a 1xNAVspot multiple (1.2xNAV LT deck). We think
this premium is warranted as multiple peers nearby trade at many hundreds of millions of dollars with no
evidence to us of coherent mineable ore bodies. This is a classic case of the pre-resource companies
trading at premiums unsupported (or perhaps ‘not constrained by’) by any kind of published resources or
reserves. We would look for year end production, drilling, and permitting plus plans for expansions to
continue the momentum for this name in the short- and medium-term. Below we show sensitivities to
the core project, and also to increase satellite ounce growth.
Table 9 Valuation and sensitivities for PureGold
SOTP project valuation Project NPV @ build start (C$m, ungeared)*
C$m O/ship NAVx C$/sh NPV (+350koz, C$m) $1750oz $1850oz $1950oz $2050oz $2150oz
Madsen (2Q20) 868 100% 1.0x 1.95 9% discount 605 670 743 803 875
Net cash + new (1Q20) 60.6 - 1.0x 0.14 7% discount 689 761 842 909 988
Central costs (87.1) - 1.0x (0.20) 5% discount 788 868 958 1,033 1,122
Cash from options 46.4 - 1.0x 0.10 Ungeared project IRR: 45% 48% 52% 55% 58%
NAV5% (C$m) $1750oz $1850oz $1950oz $2050oz $2150oz
1xNAV5% 2Q20 US$1850/oz 888 1.99
+ Sat ounces 7g/t: 271koz 788 868 958 1,033 1,122
Shares diluted for options and mine build Market P/NAV5% 1.05x
Sat ounces 7g/t: 371koz 828 911 1,003 1,080 1,171
Sat ounces 7g/t: 471koz 868 953 1,048 1,127 1,221
*Project level NPV, excl. grp SG&A & fin. cost, discounted to build start
Source: SCP

Sabina: maintain BUY rating, lift PT from C$3.00/sh to C$3.60/sh

We model Sabina’s Back River project using the DFS as a basis but adding 1.4Moz of underground material
from Llama and Vault, an approach we think is conservative given the limited drilling to date, and that the
company’s drilling this year is targeting just this. We reduce our NAV multiple from 0.8x to 0.7x as we get
nearer to spot gold prices and in line with other pre-construction coverage. We expect that resource
growth at Back River offset any uncertainty around areas still being converted from inferred to M&I. The
volume of drilling at Vault combined with the start of the exploration decline bodes well for future upside.
Stepping back, we retain our view that this is the best (biggest and highest grade) undeveloped gold asset
globally. The prior knock on the project was the capex may be $100-200m higher than the prior studies.
With an NAV of somewhere between C$2-3bn, or more at spot as ounces lift, this is, in our view, utterly
immaterial. As Chinese buyers have agreed to acquire anything from insolvent Canadian producers to

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African beyond-fine-grind bulk deposits, this is one name that should be on the radar for mid-tiers and
majors alike.
Table 10 Valuation and sensitivities for Sabina
SOTP project valuation Asset value: 1xNPV project @ build start (C$m, ungeared)*
C$m O/ship NAVx C$/sh NPV (C$m) $1750oz $1850oz $1950oz $2050oz $2150oz
Back River 2Q20* 2,083 100% 1.0x 6.21
5% discount 1,909 2,083 2,257 2,431 2,606
Net cash 1Q20 + raise 78.9 - 1.0x 0.23
Cash from options 15.7 - 1.0x 0.05
7% discount 1,636 1,789 1,942 2,094 2,247
2,178 6.49 9% discount 1,406 1,541 1,676 1,810 1,945
*Diluted for options, not mine build Market P/NAV5%2019 0.36x Ungeared project IRR: 23% 27% 30% 34% 37%
Source: SCP

Saturn: maintain BUY rating, lift PT from C$0.90/sh to C$1.45/sh

We model Saturn on the basis 1.069Moz through a 4Mtpa plant processing 1g/t material from 2025
onwards and add a nominal A$10m for West Wyalong. We maintain our 0.3xNAVmutliple given that
Saturn’s Apollo Hill is pre-feasibility and largely based on our SCPe inventory. With recent step outs looking
likely to extend Saturn’s current 781koz resource and plethora of drill results, we remain confident that
Saturn has at least 1Moz in the ground. In fact, the company has double leverage to the gold price, with
the increasingly common stockpiling of 0.3-0.5g/t material lowering strip and increasing ounces as this is
treated at end of life.
Table 11 Valuation and sensitivities for Saturn Metals

Source: SCP

Skeena: maintain BUY rating and lift PT from C$3.60/sh to C$4.80/sh

We model Skeena on a DCF basis at build start, diluted for options, not mine build based on the company’s
PEA and US$50/oz for Snip. Our target price lifts from C$3.60/sh to C$4.80/sh as we maintain our
0.5xNAV1850-24 on the basis that Skeena is still at PEA stage with some inferred in the mine plan. We expect
significant upside for Skeena who currently trades at 0.26xNAV at spot gold and silver. Having recently
signed definitive agreements with Barrick for Eskay Creek, Skeena is now in a positon to focus on drilling
and resource growth while Snip (whose resource recently exceeded expectations) offers an opportunity
for a second asset.
Table 12 Valuation and sensitivities for Skeena
SOTP project valuation*
Asset value: 1xNPV project @ build start (C$m, ungeared)*
C$m O/ship NAVx C$/sh
Ungeared proj. @ build start (2Q21) 1,630 100% 0.50x 4.47 Project NPV (C$m)* $1750oz $1850oz $1950oz $2050oz $2150oz
SCPe cash 1Q20 + raise 68 100% 0.50x 0.19
10.0% discount 1,253 1,360 1,422 1,526 1,630
Cash from options 9 100% 0.50x 0.02
Barrick payment - 100% 0.50x - 7.5% discount 1,419 1,539 1,611 1,728 1,846
Snip (US$50/oz) 43 100% 0.50x 0.12
5.0% discount 1,615 1,750 1,836 1,969 2,101
Asset NAV5% C$1850/oz 1,750 4.80
*Shares diluted for options but not mine build Market P/NAV8% 2Q20 0.31x Ungeared project IRR: 101% 108% 107% 114% 120%
Source: SCP

Page 6
West African Resources: maintain BUY rating, lift PT from A$1.85 to A$1.95/sh
We model WAF on and fully funded, fully diluted DCF basis having added 711koz of production at grades
of 2g/t. Lifting our gold price sees our target price lift to A$1.95/sh at a 0.9xNAV multiple (0.8NAV at spot)
which was selected on the basis that Sanbrado is operating as expected, while Toega is still at a pre-
feasibility stage. WAF’s discount is evident, currently trading at 0.45xNAV while their US$337/oz mining
inventory (including Toega) is low for an operation well into production. At spot we expect a FCF yield of
37% next year while strong cash flow in the first half of this year means that WAF is well funded for drilling
at depth and progresses a Toega feasibility study in the short term.
Table 13 Valuation and sensitivities for West African Resources
Group-level SOTP valuation
Asset value: 1xNPV project today (US$m, ungeared)*
US$m O/ship NAVx A$/sh*
NPV Sanbrado 3Q20 1,578 100% 1.00x 2.48 Asset NPV (US$m) $1750oz $1850oz $1950oz $2050oz $2150oz
Central and finance cost (65.4) - 1.0x (0.10) 9% discount 1,258 1,337 1,415 1,493 1,571
Net cash 2Q20 (134.7) - 1.0x (0.21)
7% discount 1,360 1,447 1,534 1,621 1,708
Cash from options 2.2 - 1.0x 0.00
1xNAV5% 3Q20 US$1850/oz 1,380 2.17 5% discount 1,481 1,578 1,676 1,772 1,869
Source: SCP

Brock Salier Chris Tonkin

Partner, Sprott Capital Partners Research Associate, Sprott Capital Partners
T: +44.207.659.0841 T: +44.207.659.0841
M: +44.7400.666.913 M: +44.7470.766.724
bsalier@sprott.com ctonkin@sprott.com

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BUY: The stocks total returns are expected to be materially better than the overall market with higher return expectations needed for more risky securities markets
NEUTRAL: The stock’s total returns are expected to be in line with the overall market
SELL: The stocks total returns are expected to be materially lower than the overall market
TENDER: The analyst recommends tendering shares to a formal tender offering
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NOT RATED ((N/R): The stock is not currently rated

Issuer Risk rating 1 2 3 4 5 6 7 8 9

1
Adriatic Metals HIGH YES NO NO YES NO NO NO YES NO
Bellevue SPECULATIVE YES NO NO YES NO NO NO YES NO
Benchmark SPECULATIVE YES NO NO YES NO NO NO NO NO
Emerald Resources HIGH YES NO NO YES NO NO NO YES YES
Geopacific SPECULATIVE NO NO NO NO NO NO NO NO NO
GoGold Resources HIGH YES NO NO YES NO NO NO YES NO
Liberty Gold SPECULATIVE YES NO NO YES NO NO NO YES NO
Marathon Gold HIGH YES NO NO YES NO NO NO NO NO
Pure Gold HIGH YES NO NO YES NO NO NO YES NO
Sabina Gold HIGH YES NO NO YES NO NO NO YES YES
Saturn Metals SPECULATIVE YES NO NO NO NO NO NO NO NO
Skeena Resources HIGH YES NO NO YES NO NO NO NO NO
West African MEDIUM YES NO NO NO NO NO NO YES NO
Disclaimers above correspond with the research disclosures below

Research Disclosure

1 SCP and its affiliates collectively beneficially owns 1% or more of any class of the issuer's equity securities1

2 The analyst or any associate of the analyst responsible for the report or recommendation or any individual directly involved in the
preparation of the report holds or is short any of the issuer's securities directly or through derivatives

3 An SCP partner, director, officer or analyst involved in the preparation of a report on the issuer, has during the preceding 12 months
provided services to the issuer for remuneration other than normal course investment advisory or trading execution services

4 SCP has provided investment banking services for the issuer during the 12 months preceding the date of issuance of the research
report or recommendation

5 Name of any director, officer, employee or agent of SCP who is an officer, director or employee of the issuer, or who serves in an
advisory capacity to the issuer

6 SCP is making a market in an equity or equity related security of the issuer

7 The analyst preparing this report received compensation based upon SCP's investment banking revenue for the issuer

8 The analyst has conducted a site visit and has viewed a major facility or operation of the issuer

9 The analyst has been reimbursed for travel expenses for a site visit by the issuer

Sprott Capital Partners Equity Research Ratings:

Summary of Recommendations as of August 2020

BUY: 19
HOLD: 0
SELL: 0
UNDER REVIEW: 0
TENDER: 0
NOT RATED: 0
TOTAL 19

1
As at the end of the month immediately preceding the date of issuance of the research report or the end of the second most recent month if
the issue date is less than 10 calendar days after the end of the most recent month

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