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Yukon-Nevada Gold

Jerritt Canyon reaching steady-state production

Jerritt’s potential now being realised
Yukon-Nevada Gold (YNG) has reached a new level of confidence in its ability to mine and process gold ores. It stated on 18 June that it had been processing an average 4,112t of ore per day, an important milestone towards achieving its forecast 2012 production target of 140-150koz Au. This has only been possible with the US$200m+ financing via off-market forward gold purchase agreements and private equity raisings. We forecast YNG moving strongly into profit by end 2012 as it achieves its production target, and we value the company’s assets at US$0.56/share (at US$1,600/oz 2012, reducing to a long-term US$1,350/oz from 2014 and a 10% discount rate). Further upside is geared to YNG using its plant further by establishing unit-cost-friendly toll treatment agreements with third-party refractory gold miners, potentially adding US$0.23 to our base case (if 700ktpa at 6.22g/t Au is toll treated between 2013 and 2016), and moving the Smith mine to owner operated, potentially adding US$0.04 to our base case – YNG is still considering this option.
Year end 12/10 12/11 12/12e 12/13e Revenue (US$m) 71.4 105.1 232.2 327.2 PBT* (US$m) (85.3) (70.2) 80.1 102.9 EPS* (c) (12.9) (7.2) 8.1 10.0 DPS (c) 0.0 0.0 0.0 0.0 P/E (x) N/A N/A 3.8 3.0 Yield (%) N/A N/A N/A N/A

Metals & mining
12 July 2012

Price Market cap
Shares in issue Free float Code Primary exchange Other exchanges

C$0.31 C$317m
C$1.02/US$ 1,023.7m 70% YNG TSE Frankfurt

Share price performance

Note: *PBT and EPS are normalised, excluding intangible amortisation and exceptional items.

Protecting future production by investing now
It is easier to repair and modernise existing mine plant infrastructure in the US than tackle the protracted and bureaucratic process of permitting new infrastructure. This has special relevance to Jerritt’s processing plant, which received little major re-investment and maintenance capex (other than for installing new roasters in 1989) since it opened in 1981 until the January 2011 planned plant shutdown.

% Abs Rel (local)

1m 3.3 2.1

3m 3.3 7.7 C$0.52

12m (31.1) (21.4) C$0.23

52-week high/low

Business description
Yukon-Nevada Gold operates its Jerritt Canyon mine and processing plant in north Nevada, US. It also explores for gold and base metals in the Yukon Territory at its Ketza River project. YNG is currently in the process of re-permitting the Ketza River process facility.

Further value potential in toll treating/exploration
To maintain plant efficiency and current process cost levels at Jerritt Canyon it will be important for YNG to secure sufficient ore feed to the mill (currently permitted at 5,280tpd, maximum engineered capacity of 6,000tpd). YNG has two paths to explore: the traditional replenishment of depleting reserves by exploration (via the Mahala Basin and Starvation Canyon discoveries); and securing third-party ore through appropriately priced toll treatment agreements.

Next events
H112 results 15 August 2012

Valuation: Base case secured on NI43-101
Our base case uses production guidance stated in YNG’s May 2012 Corporate presentation, its December 2011 Jerritt Canyon NI43-101 and its June 2011 Ketza River Technical Report. Based on the production and cost data in these documents (see pages 6-8), we estimate the company’s discounted (theoretical) dividend flow is worth US$0.56 (at gold prices of US$1,600/oz 2012, US$1,600/oz 2013, US$1,350/oz thereafter). Considering the mine’s near-continuous operation since it opened in 1981, Jerritt’s official life of mine is likely to extend beyond the stated 4.5 years, which has been supported by a 46% increase in reserves (April 2012).

Tom Hayes Charles Gibson +44(0)20 3077 5725 +44(0)20 3077 5724 Edison profile page

Yukon-Nevada Gold is a research client of Edison Investment Research Limited

Yukon-Nevada Gold | 12 July 2012

Investment summary: Jerritt’s potential now being realised
Company description: Getting out of the starting blocks
Through a history of underinvestment in site infrastructure and exploration to replenish depleted gold reserves, Jerritt Canyon entered a period of unmanaged decline from 2003 (the year Anglo left the site) until recently. The asset most precious to YNG, and one worth noting, is its fully permitted and newly refurbished and modernised refractory ore process plant capable of producing c 332,000oz Au per year (at average Jerritt Canyon gold grades). Management states this asset alone has a replacement value of c US$1bn, which may not be far off the mark considering its refractory ore processing capacity and rarity within Nevada.

Valuation: Additional value to base case realistic
We have used YNG’s revised NI43-101 dated 31 December 2011 to provide our base case valuation model of Jerritt Canyon. The economic analysis within this report is based solely on mining proven and probable gold reserves at Jerritt Canyon. This report also states a US$182.8m capex programme running over the official 4.5-year life of mine. We also model YNG’s second major asset, the Ketza River project on information in its June 2011 technical report. Ketza River has a mothballed mine site including almost all the infrastructure required to commence mining again. Considering the existing infrastructure we assume a small capex requirement of US$25m over 2013-14 to restart gold production in 2014 (pending all permitting requirements being completed with the Yukon authorities). On the basis of these technical reports and assumptions, we value YNG at US$0.56 per share (using a decreasing gold price scale, of US$1,600/oz (2012 and 2013) reducing to US$1,350/oz thereafter and a 10% discount rate to reflect general equity risk).

Sensitivities: Largely de-risked to achieve Jerritt’s 4.5-year mine plan
We consider the company’s cautious approach to announcing steady-state production rates at Jerritt Canyon as an early sign of its optimism in achieving annual gold production of c 200koz. Coupled with the considerable amount of capital raised, we believe Jerritt Canyon should now move from a project focused on re-capitalisation and re-development of ageing infrastructure, to one of realistic ramp up and improving operational performance. Qualitatively our base case valuation is most sensitive to the gold price, where a move from US$1,500/oz to US$1,700/oz long-term (from 2014 onwards) would result in a c 17% increase in our valuation.

Financials: Re-capitalisation completed largely off-market
In August 2011 and February 2012 YNG announced two forward gold purchase agreements with Deutsche Bank totalling US$140m. They have allowed YNG to settle US$25m in senior loan notes and contribute significantly towards completing an extensive programme of capital expenditure over the course of Jerritt Canyon’s official 4.5-year life of mine (which officially total US$182.8m). Further financing from a warrant exercise of US$44.9m and private equity placements totalling US$37.3m have been completed, including a US$6.9m negotiated settlement on current accounts with site contractors. Based on the available data within the technical report for Jerritt Canyon, we foresee no further near-term funding requirement.


Yukon-Nevada Gold | 12 July 2012

Company description: Getting the most out of Jerritt Canyon
YNG has two main assets. The first is its flagship Jerritt Canyon gold mine and processing plant (capable of processing both oxide and refractory gold ores) in Elko County, Nevada, US. Jerritt Canyon is YNG’s main focus. It intends to fully use its process plant by continuing to ramp up existing mine production and by developing numerous new deposits present over the well endowed, though geologically complex, Jerritt Canyon lease area. The second is the Ketza River project in the Yukon Territory, Canada. Ketza River is an old mine with associated mine site infrastructure, including processing capabilities. A scoping study, dated June 2011, details the potential for an eight year life of mine producing a total of c 552,000oz gold.

Renovating ageing infrastructure at Jerritt Canyon
One major challenge to YNG’s plans at Jerritt Canyon was the significant amount of investment needed to renovate existing mine and process plant (including tailings storage) infrastructure and to replace ageing mine equipment. Much of the plant had no worthwhile maintenance performed on it after it was constructed in the early 1980s. This contributed to a steady decline in gold production, most notably after 2003, as did an order by the Nevada Division of Environmental Protection (NDEP) in 2008 to stop processing due to excess mercury emissions escaping into the atmosphere. This order has now been lifted after YNG fitted a brand new Calomel mercury emissions system. To implement this extensive capital expenditure programme, over the last 12 months YNG completed c US$140m of forward gold purchase agreements (see page 9) and a warrant exercise of US$44.9m, both with Deutsche Bank. A further two private equity placements totalling US$22.9m were announced in May 2012. These funds (totalling US$207.8m) have been largely spent. The US$183m capex programme detailed for the next 4.5 years, the timeframe of the newly revised Jerritt Canyon mine plan, will come from cashflow.

The assets – Jerritt Canyon and Ketza River
YNG’s two assets are split between its flagship producing gold mines on its Jerritt Canyon lease area in Elko County, Nevada, US and its Ketza River project in the Yukon Territory in Canada. Both projects are 100% owned by YNG or its wholly owned subsidiaries (ie Queenstake Resources at Jerritt Canyon). A four-year rolling reserve at Jerritt Canyon Exploration and definition drilling at Jerritt Canyon will concentrate on delineating new gold resources and reserves to replenish depleted stocks. YNG currently has a five-year life of mine plan at Jerritt Canyon. While a greater reserve base is more favourable and would reassure the investor, such complex and podiform gold deposits rarely allow for mine reserves to be delineated more than three to four years ahead of actual mining, due to the irregular nature of ore distribution and the amount of drilling required to produce NI 43-101 compliant resource estimates. To accommodate this, YNG has employed a policy of continual production drilling to define further pods of ore. This is accomplished using the company’s underground reverse circulation drill rig, while contracting external drilling companies to identify resources at surface. Mining methods employed at Jerritt Canyon Mining through sedimentary horizons can be problematic due to their weak strength, which increases the cost of mining as greater amounts of ground support are required. The main mining method used at the Smith and SSX mines, is that of underhand drift and fill. The process requires that all stoped-out


Yukon-Nevada Gold | 12 July 2012

areas are backfilled with concrete to maintain stability in the rock mass during mining. The SSX mine however, is increasingly being mined using the lower-cost long-hole stoping method where thickness or ore permits. Tried and trusted processing facility Because mines on the long-established Carlin Trend have become deeper, the ore has become more refractory (as oxidised gold ore near surface gets mined out first). So, when considering gold mining ventures in Nevada, the amount of available refractory processing capacity is key. Also, processing plants capable of treating refractory ores create harmful emissions that must be tightly controlled, so it can be very hard to get planning permission for these facilities in Nevada. However, YNG has a fully operational, environmentally-compliant mill, complete with industry leading ‘scrubbing’ technology (used to bring mercury emissions below the US environmental threshold) and that can process both oxide and refractory ore types.

Gold production target of c 140-150koz in 2012
Current ore production at Jerritt Canyon comes from two mines, the SSX/Steer/Saval complex (operated by YNG) and Smith (operated by a third-party contractor). By June 2012 Jerritt Canyon had reached a 150,000oz per year annualised production rate, with 140,000-150,000oz of gold production forecast for calendar year 2012, ramping up to a 200,000oz per annum production rate by end 2012. Currently 800tpd (ramping up to 1,200tpd by end 2012) is mined from the SSX/Steer/Sava complex and 1,200tpd from the Smith mine, which together will use only 55% of the permitted roaster capacity (5,280tpd) with further stockpiled material bringing average daily processing rates up to 4,112 tonnes.

Ramping up production – where the gold could likely come from
While detailed information is not yet available to show how YNG intends to ramp-up production at Jerritt Canyon and fully use its 6,000tpd mill (c 332koz contained gold per year at the life of mine average head grade of 6.22g/t and assuming 90% mill availability), we believe the company has three options: 1. To pursue toll-treating agreements with third-party miners/developers. Such an agreement would need to be on terms that would protect YNG’s cash costs at the sub US$500/oz level as this was not the case with the now expired (in December 2011) Newmont ore purchase agreement. Such agreements are being investigated with a number of domestic (see Hycroft agreement with Allied Nevada Gold on page 9) and foreign candidates, with management stating that C1 cash costs at Jerritt Canyon could potentially come down to below the US$400/oz level. 2. To organically grow production on site through continuing its aggressive exploration programme and consequently expanding reserves, either within close proximity to existing site infrastructure (<750 feet from existing access drives) or as a more distal deposit requiring a longer lead time to production and increased up-front capital expenditure. Success in drilling out the Mahala Basin (see page 5) between the SSX/Steer/Saval and Smith mines is testament to this being achievable. 3. To acquire projects/mines in Nevada whereby ore could either be trucked directly to Jerritt Canyon, or concentrated on site and then trucked. The latter allows a greater transportation distance to be achieved (though at an increased initial capex cost to fund a concentrator).


Yukon-Nevada Gold | 12 July 2012

Aggressive exploration to maintain production above 200koz pa
To maintain a steady annual gold production rate at Jerritt Canyon above 200koz long term, YNG will continue with aggressive exploration on its property. At present, exploration activities are focused on eliminating all potential ore targets around existing mine infrastructure so that pre-development costs of extracting ore are kept to a minimum. This also allows the company to use its extensive and robust historical drill hole database that contains over 25,000 drill holes, many of which were drilled from surface to only shallow depths (when the mine was focused on delineating open pit resources pre2003).

West Mahala: Proven success replenishing depleting resources
The podiform and geologically complex nature to gold mineralisation on the Jerritt Canyon lease block means that un-tested areas between previous mining blocks are the most obvious place to probe for further economic gold deposits. YNG’s technical team identified a clear opportunity between the preexisting Smith and SSX/Steer mines, named the Mahala Basin. Drilling undertaken as part of the 2011 exploration campaign in this area has resulted in numerous high-grade gold intercepts close to existing mine development, an important point as it will allow a quicker and cheaper route to mining West Mahala. The location of the West Mahala deposit is shown in Exhibit 1: Exhibit 1: Location of the Mahala Basin, where the West Mahala deposit sits

Source: Yukon-Nevada Gold

Ketza River and Yukon Territory projects
Ketza River: Old mine infrastructure still serviceable The Ketza River project enjoyed a brief period of mining between July 1988 and November 1990, producing 100,030oz gold at an average head grade of 11.6g/t Au at cash costs ranging from US$395/oz (1989) to US$433/oz (1988). It consists of a number of prospective zones, including the Manto, Peel, Hoodoo and Shamrock Zones. Ketza River has a mothballed milling facility with unused tailings dam capacity and is 42km off the Campbell highway in the south-east of the Yukon Territory. The site also includes a mine camp, exploration camp, office buildings, workshop and water treatment


Yukon-Nevada Gold | 12 July 2012

works. We see the presence of this serviceable infrastructure as a key reason to assume YukonNevada will re-develop the Ketza River mine site in the near term (see valuation section on page 6).

NI43-101 resources and reserves
Yukon-Nevada’s current NI43-101 compliant resources for its Jerritt Canyon property are: Exhibit 2: Jerritt Canyon NI43-101 resources, published 27 April 2012 (including reserves)
Measured Tons (kt) 4,906.8 Tonnes (kt) 4,451.4 Grade (oz/st) 0.210 Grade (g/t) 7.20 Gold (koz) 1,030.7 Gold (koz) 1,030.7 Indicated Tons (kt) 7,382.7 Tonnes (kt) 6,697.5 Grade (oz/st) 0.175 Grade (g/t) 6.00 Gold (koz) 1,288.5 Gold (koz) 1,288.5 Inferred Tons (kt) 4,115.6 Tonnes (kt) 3,733.6 Grade (oz/st) 0.182 Grade (g/t) 6.24 Gold (koz) 748.4 Gold (koz) 748.4 2,319.2

Total (M&I only) Source: Yukon-Nevada Gold May 2012 Corporate Presentation

Yukon-Nevada’s current NI43-101 compliant reserves for its Jerritt Canyon lease area: Exhibit 3: Jerritt Canyon NI43-101 reserves, published 27 April 2012
Proven Tons (kt) 1,980.2 Tonnes (kt) 1,796.4 Grade (oz/st) 0.189 Grade (g/t) 6.49 Gold (koz) 374.8 Gold (koz) 374.8 Probable Tons (kt) 4,076.7 Tonnes (kt) 3,698.3 Grade (oz/st) 0.168 Grade (g/t) 5.77 Gold (koz) 686 Gold (koz) 686 Proven & probable Tons (kt) 6,056.9 Tonnes (kt) 5,494.8 Grand total Source: Yukon-Nevada Gold May 2012 Corporate Presentation Grade (oz/st) 0.175 Grade (g/t) 6.00 Gold (koz) 1,060.8 Gold (koz) 1,060.8 1,060.8

The company’s current NI43-101 compliant resources for its Ketza River project are: Exhibit 4: Ketza River project NI43-101 resources, published 28 June 2011
Tonnes (kt) Measured Indicated Inferred Total 167.8 2,212.3 453.7 2,833.8 Grade (g/t) 5.38 5.46 4.62 5.32 Gold (koz) 29.0 389.0 67.0 485.0

Source: Yukon-Nevada Gold May 2012 Corporate Presentation

Assumptions, valuation and sensitivities
We have used YNG’s revised NI43-101 dated 31 December 2011 (for operating costs and capital expenditure schedules) and production guidance as given on page 12 of its May 2012 corporate presentation to provide our base case valuation model of Jerritt Canyon. The economic analysis in this report is based solely on mining probable and proven gold reserves at Jerritt Canyon. These reserves are spread across five underground deposits due to be extracted by underground mining methods. Alongside mining these ore sources, YNG will blend in ore that it stockpiled (c 800,000st) when no processing took place (specifically during closure of the process plant in 2009).


Yukon-Nevada Gold | 12 July 2012

Production from Ketza River from 2013 (under our assumptions)
We also model YNG’s second major asset, the Ketza River project due to the existence of site infrastructure (see page 6). The following exhibit details forecast gold production based on production guidance outlined in Yukon-Nevada’s May 2012 corporate presentation and the June 2011 Ketza River technical report (equivalent to a scoping study level of confidence). Exhibit 5: Gold production profile used in our base case valuation of Jerritt Canyon and Ketza River
300,000 250,000 200,000 150,000 100,000 50,000 0

Gold production (ozs)











Year Forecast Jerritt Canyon gold production (ozs)

Ketza River gold production

Source: Edison Investment Research and Yukon-Nevada Technical Reports for Jerritt Canyon and Ketza River

The operating parameters we have used to derive our base case valuation for Jerritt Canyon and Ketza River are given in the following exhibit: Exhibit 6: Jerritt Canyon and Ketza River operating parameters used in base case valuation
Jerritt Canyon Item Jerritt Canyon gold recovery factor Total ore tonnes Gold grade Total ounces produced over LOM Mining cost (underground) Processing cost Ore haulage Site administration Capex programme over LOM Sustaining capex per annum* Official mine life Unit % Mt g/t koz US$/st US$/st US$/st US$/st US$m US$m Value Ketza River Item Unit % Mt g/t koz US$/t US$/t US$/t US$/t US$m US$m years Value 77.0 3.71 6.00 552 2.82 12.00 5.00 3.00 25.00 5.00 2014-20

89.1 Ketza River gold recovery factor 6.05 Total ore tonnes 6.22 Gold grade 946 Total ounces produced 29.24 Mining cost 31.03 Processing cost 4.52 Surface facilities 9.30 Site administration 182.8 Assumed initial capex N/A Assumed sustaining capex per annum

years 2012-16 Estimated period of mine life

Note: * Sustaining capex is assumed to be contained within the overall capex budget of US$182.8m. Source: Yukon-Nevada Gold Technical Reports on Jerritt Canyon (December 2011) and Ketza River (June 2011)

Assuming YNG pays out all its spare cash in the form of dividends, we estimate the dividend stream to investors from 2012 to 2020 will be worth US$0.56 per share in current money terms (at a discount rate of 10% to reflect general equity risk). Of note is that dividends are depressed between 2012 and 2016 due to the impact of the two forward gold purchase agreements with Deutsche Bank (see financials section on page 9 for further details). Our forecast shows production at Jerritt Canyon finishing in 2016 and only Ketza River producing gold from then on, as shown in Exhibit 5.


Yukon-Nevada Gold | 12 July 2012

Exhibit 7: Edison estimate of base case EPS, fully diluted EPS and theoretical DPS, 2012-2021
0.20 $0.60 $0.50 $0.40



$0.30 $0.20 $0.10














Source: Edison Investment Research

Based on the above data from YNG’s technical reports and assuming Ketza River is brought into production 2014 (still pending a positive investment decision by the company) and gold production occurring at Jerritt Canyon as detailed in Exhibit 5, and using the cost data given in Exhibit 6, we value the company at US$0.56 (split US$0.36 for Jerritt Canyon and US$0.23 for Ketza River) per share (at 10% discount rate to reflect general equity risk). This valuation uses a decreasing gold price scale, reducing from US$1,600/oz (2012 and 2013) to US$1,350/oz thereafter.

YNG is exposed to the usual geological, geotechnical, engineering, processing, socio-economic and macroeconomic (commodity) risks associated with producer-stage mining companies. In addition, we have identified the following specific quantitative risks for YNG’s projects and operations: Exhibit 8: Sensitivity to long-term gold price (from 2014 onwards)
Gold US$/oz NPV (US$) Source: Edison Investment Research 1,000 0.35 1,200 0.47 1,350 0.56 1,500 0.66 1,700 0.77 1,900 0.91

Exhibit 9: Sensitivity to discount rate
Discount rate NPV (US$) Source: Edison Investment Research 5 0.68 7.5 0.62 10 0.56 20 0.41 30 0.31 40 0.25

Exhibit 10: Sensitivity to percentage change in unit costs
Percentage change NPV (US$) Source: Edison Investment Research (10) 0.61 (5) 0.59 0 0.56 5 0.54 10 0.52 15 0.48

One factor that could impact our sensitivity to percentage change in the cost of producing an ounce of gold is that YNG is considering moving the Smith mine at Jerritt Canyon from one being operated on a contractor basis (whereby the cost of mining and processing a tonne of ore is US$140.56) to being owner-operated. YNG believes that doing so would reduce operating costs per tonne to US$85. Adjusting our Jerritt Canyon production model for this owner-operator cost of US$85/t would equate to US$0.04 being added to our base case valuation.





Yukon-Nevada Gold | 12 July 2012

Agreement to treat loaded carbon from Allied Nevada’s mine
To use excess processing capacity, on 11 June 2012 YNG announced it had entered into an agreement with Allied Nevada Gold (TSX:ANV) to process 162 tons of carbon (used in the processing of gold ore) containing c 13,300oz gold and 39,600ozs silver. YNG and Allied Nevada expect this tonnage to be processed within the initial 90-120 day term of the agreement. After all of the 162 tons has been processed the agreement will allow for a further 15 to 30 tons to be processed per month. The Hycroft operation (owned by Allied Nevada Gold) currently generates 15 to 20 tons of loaded carbon per month. Yukon-Nevada has stated that revenues generated from this agreement will be ‘credited against operating costs’. Due to the small tonnages involved and lack of detail relating to costs and revenues generated, we have not factored this agreement into our model.

Potential toll treatment of third-party ores
Yukon-Nevada’s management envisages that it could realistically toll treat an additional 2,000tpd of third-party ore through its mill. To provide an illustrative view of how such an agreement may materialise we provide an example in Exhibit 11. We run this type of toll treatment structure from 2013 to 2016 to keep in line with our assumptions on Jerritt Canyon’s annual mine production and use the net annual cashflow figure to offset Yukon-Nevada’s operating costs. As a result the main effect of this agreement would be to reduce overall C1 cash costs. We estimate these could drop c 57% to US$305/oz from average C1 cash costs across the period 2014-16 of US$717/oz. Based on these first-pass indications of how such a toll treatment agreement would work, we estimate that a further US$0.23 could be added to our US$0.56 base case valuation. Exhibit 11: Potential toll treatment structure and revenues
Annual ore contract Toll treatment charge Variable processing cost Margin per ton processed YNG holdback Long term gold price assumption Source: Yukon-Nevada management oz US$/oz kt US$/t US$/t 700 Revenue from holdback 115 Treatment gross margin -8 Gross profit 107 Capex 4,292 Net annual cash flow 1,350 US$m US$m US$m US$m US$m 5.8 77.0 82.8 -0.5 82.3

In August 2011 and February 2012 YNG announced two forward gold purchase agreements with Deutsche Bank. These will allow YNG to complete an extensive programme of capital expenditure across its mines and process plant and tailings storage facility over Jerritt Canyon’s official 4.5-year life of mine (which officially totals US$182.8m).

Forward gold purchase agreements with Deutsche Bank
The first agreement, announced 3 August 2011, is for delivery of 173,380ozs of gold over a 48-month term, in return for an upfront pre-payment of US$120m (equivalent to YNG selling each ounce for US$690). In return, Deutsche Bank will receive scheduled monthly deliveries of gold at a base rate of US$850/oz for gross proceeds of US$147.37m or an equivalent 5.79% interest over the initial US$120m payment (exclusive of costs). After the receipt of the US$120m, the rest of the purchase price of the gold will be paid to YNG’s wholly-owned subsidiary, Queenstake Resources, on completion of the monthly gold deliveries to Deutsche Bank. This will equal the amount the gold price exceeds US$850/oz up to a maximum price of US$1,950/oz. For the purposes of our valuation we


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have used the same gold price profile as our base case valuation. The second agreement, announced 8 February 2012, is for delivery of 27,950 ounces of gold over a 43-month term for 650 ounces per month, starting 31 March 2012 (equivalent to YNG selling each ounce for US$716) in return for an upfront payment of US$20m. After the receipt of the US$20m, the rest of the gold’s purchase price will be paid to YNG’s wholly owned subsidiary, Queenstake Resources, on completion of the monthly gold deliveries to Deutsche Bank. It will equal the amount that the gold price exceeds US$850/oz, up to a maximum price of US$1,750/oz. For the purposes of our valuation we have used the same gold price profile as per our base case valuation. The above forward gold purchase agreements and warrant exercise for US$44.9m (as stated in our August 2011 Outlook note) mean YNG has sourced a total of over US$200m without any new dilution for the investor. This money is sufficient for YNG to complete the large majority of its recapitalisation projects at Jerritt Canyon (for example, amongst others; ramping up mine production at the SSX/Steer/Saval mines and start the development process for Starvation Canyon), which currently total US$182.8m over the current 4.5-year life of mine plan.

Private equity placements
Further to YNG securing its Deutsche Bank financing agreements, it has also previously undertaken three non-brokered private equity placements totalling US$37.3m. The first, announced 24 May 2011, was a US$14.4m private placement to sell to Deutsche Bank 33.5m units at a price of $0.43 per unit. The second, announced 14 May 2012, was for US$7m (30.4m units, each consisting one ordinary share and one share purchase warrant exercisable at US$0.40). The third placement, announced 17 May 2012, was for 39.1m units at US$0.23 each for total proceeds of US$9.0m. A further US$6.9m makes up the balance, and was a negotiated settlement on current accounts payable by the issuance of 22.8m shares at US$0.30 each. We understand this US$6.9m was made payable to site contractors, who may be considered knowledgeable as to the potential of Jerritt Canyon and therefore confident that YNG will now start to unlock the true value of the mine.

Convertible debenture financing
On 15 June 2012 Yukon-Nevada completed a private placement offering C$6.0m principal amount of unsecured convertible debentures to Whitebox Advisors. Yukon-Nevada states these funds will go towards development of the Starvation Canyon and to expand production at the SSX/Steer mine and to aid in the clean-up of historic rock disposal areas, one of the last items to be completed under the Consent Decree. The convertible debenture bears an annual interest rate of 11%, maturing in 42 months from the closing date. Subject to meeting certain requirements, Yukon-Nevada also has the option to require Whitebox Advisors to subscribe for an additional C$4m in convertible debentures, on the same relative terms as the first, four weeks after the closing date. Whitebox Advisors will also have the option, exercisable at any time prior to the date that is four months from the closing date, to acquire up to C$2m principal amount of additional convertible debentures, at the same relative terms as the first. Upon the maturity date, the debentures and all interest accrued thereon may, at the Company's discretion, be paid in cash, shares (up to a maximum of 75%) or any combination of cash and shares (up to a maximum of 75%). For the purposes of our valuation we assume only the initial C$6m debenture is issued by Whitebox and is repaid solely in cash by Yukon-Nevada upon maturity in 2014. For illustrative purposes only, if the debenture were to convert into equity at a share price of C$0.32, then c 39m shares would be issued by Yukon-Nevada in 2014.


Yukon-Nevada Gold | 12 July 2012

Exhibit 12: Financial summary
Year end 31 December PROFIT & LOSS Revenue Cost of Sales Gross Profit EBITDA Operating Profit (before amort. and except.) Intangible Amortisation Exceptionals Other Operating Profit Net Interest Other finanical items Exceptionals Profit Before Tax (norm) Profit Before Tax (FRS 3) Tax Profit After Tax (norm) Profit After Tax (FRS 3) Average Number of Shares Outstanding (m) EPS - normalised (c) EPS - normalised and fully diluted (c) EPS - (IFRS) (c) Dividend per share (c) Gross Margin (%) EBITDA Margin (%) Operating Margin (before GW and except.) (%) BALANCE SHEET Fixed Assets Intangible Assets Tangible Assets Mineral Properties Restricted funds/other Current Assets Stocks Debtors Cash Other Current Liabilities Creditors Short term borrowings Other Long Term Liabilities Long term borrowings Derivatives Other long term liabilities Net Assets CASH FLOW Operating Cash Flow Net Interest Tax Capex Acquisitions/disposals Financing Forward gold purchase repayment Dividends Equity portion of debt/derivatives/other Net Cash Flow Opening net debt/(cash) HP finance leases initiated Other Closing net debt/(cash)

IFRS 71,370 (82,943) (11,573) (18,020) (23,448) 0 (745) (963) (25,156) 251 (62,089) (105,024) (85,286) (192,018) 1,630 (83,656) (190,388) 646.7 (12.9) (8.7) (29.4) 0.0 (16.2) (25.2) (32.9) 193,457 0 828 157,936 34,693 25,784 21,280 4,504 0 0 (77,450) (68,524) (8,926) (19,543) (212,608) (15,030) (139,943) (57,635) (70,817) (19,240) 251 0 (16,292) 0 35,217 0 (32) (96) (185) 0 (89) 0

IFRS 105,116 (130,975) (25,859) (34,017) (40,693) 0 0 (781) (41,474) 137 (29,676) 97,203 (70,232) 26,190 192 (70,040) 26,382 976.5 (7.2) (5.4) 2.7 0.0 (24.6) (32.4) (38.7) 302,367 0 736 231,040 70,591 25,279 14,476 8,542 2,261 0 (78,001) (78,001) 0 (37,467) (162,495) 0 (1,785) (160,710) 87,150 61,448 137 0 (100,621) 2,137 39,191 0 0 0 2,292 0 0 (31) (2,261)

IFRS 232,230 (111,298) 120,932 89,272 80,077 0 0 (781) 79,296 0 0 0 80,077 79,296 0 80,077 79,296 987.2 8.1 6.2 8.0 0.0 52.1 38.4 34.5 334,052 0 736 267,506 65,810 212,800 17,394 19,087 176,319 0 (31,612) (31,612) 0 (22,464) (160,710) 0 0 (160,710) 354,530 51,262 0 0 (45,661) 0 168,457 0 0 (0) 174,058 (2,261) 0 0 (176,319)

IFRS 327,200 (143,478) 183,721 134,125 102,862 0 0 (781) 102,081 0 0 0 102,862 102,081 0 102,862 102,081 1,023.7 10.0 7.7 10.0 0.0 56.1 41.0 31.4 383,467 0 736 316,921 65,810 268,892 23,813 26,893 218,186 0 (34,257) (34,257) 0 (22,464) (161,357) (647) 0 (160,710) 456,746 122,545 0 0 (80,678) 0 (647) 0 0 0 41,220 (176,319) 0 0 (217,539)

Source: Yukon-Nevada company accounts and Edison Investment Research


Yukon-Nevada Gold | 12 July 2012

Contact details Yukon-Nevada Gold Corp. 900-688 West Hastings Street Vancouver BC V6B 1P1 Canada +1 604.688.9427 CAGR metrics EPS CAGR 2009-13 EPS CAGR 2011-13 EBITDA CAGR 2009-13 EBITDA CAGR 2011-13 Sales CAGR 2009-13 Sales CAGR 2011-13 Management team COO and joint acting president and CEO: Randy Reichert Mr Reichert has 23 years’ experience from his international work at various operating mines and process facilities. Most recently he was president and COO for Colossus Minerals responsible for the development of the Serra Pelada project in Brazil. Before this he was COO of Oriel Resources and Orsu Metals Corp. Vice president of exploration: Todd W Johnson Mr Johnson has over 17 years of experience in the precious and base metal resource industry and four years of geotechnical engineering experience. Mr Johnson is a qualified person as defined by the Canadian NI43-101 guidelines, and a recognised expert in the assessment of base and precious metal systems. Principal shareholders Orifer Sprott Deutsche Bank AG Marland, Francois Chafee, Robert E Schmeidler A R & Co. N/A N/A N/A N/A 140% 76% Profitability metrics ROCE 2012e Avg ROCE 2009-13 ROE 2012e Gross margin 2012e Operating margin 2012e Gross mgn/Op mgn 61% N/A 45% 52% 35% 1.5

Revenue by geography


100% US

Balance sheet metrics Gearing 2012e Interest cover 2012e CA/CL 2012e Stock turn 2012e Debtor days 2012e Creditor days 2012e N/A N/A 1.2 27 30 14

Sensitivities evaluation Litigation/regulatory Pensions Currency Stock overhang Interest rates Oil/commodity prices      

CFO and joint acting president and CEO: Shaun Heinrichs Mr Heinrichs has been with the company since 2008 as CFO. He has over 15 years of financial accounting experience, beginning with seven years of public practice experience with Ernst & Young where he was lead assurance or advisory manager on several large US and Canadian plcs. He has also recently joined YNG’s board. Corporate secretary: Graham H Scott Mr Scott combines 28 years as a resource and corporate finance lawyer with eight years of practical experience as an exploration geologist to give clients expert, balanced advice on all resourcerelated matters. He represents many Canadian public companies listed on the TSX and TSX Venture Exchanges. (%) 20.5 12.8 12.2 8.8 1.1 0.8

Companies named in this report Anglo American, Allied Nevada Gold, Deutsche Bank
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