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September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold


Equity Research

Leveraged names bounce on gold price move but valuations look stretched
Gold up 20% off lows on speculation,
physical buying and heightened risk
Gold has rallied 20% to trade above $1,400/oz off
lows, before receding back to $1,350/oz. The
recent uptick is a result, in our view, of investors
speculating on a slower exit to QE, higher
inflation and potential intervention in Syria.

resulting in a justifiable rally in more


leveraged names in our coverage
As the gold price rallied, fourth quartile leveraged
stocks have rallied (ABG +77%, ANG +15% and
HAR +20% from lows in May and June) on greater
operating leverage. As the gold price declines, we
believe that the stocks will de-rate.

After the rally leveraged names stretched on


valuation: ABG off CL-Sell, remains Sell, HAR
down to Sell; reiterate Sell on ANG
Since the gold price rally post July, the gold
names have been among the top performing
stocks vs. our broader coverage. Following this
rally, our gold names are trading on average
2013/14E P/Es of 29x/61x far above the historical
range.

Sibanye provides a compelling valuation


opportunity; catalysts ahead; upgrade to Buy
Sibanye is trading on 2013/14E P/Es of 3.2x/7.1x.
Given it has the highest dividend yield (2013/14E
7.5%/3.5% vs. sector 1.7%/1.1%) with a strong FCF
yield, we believe this discount is unwarranted.

Eugene King
+44(20)7774-2447 eugene.king@gs.com Goldman Sachs International
Abhinandan Agarwal
(212) 934-5057 abhinandan.agarwal@gs.com Goldman Sachs India SPL
Fletcher Tully, CFA
+44(20)7552-9935 fletcher.tully@gs.com Goldman Sachs International
Christophor Jost
+44(20)7774-0014 christophor.jost@gs.com Goldman Sachs International

The Goldman Sachs Group, Inc.

Rating
New
Randgold Resources

Old

Last
close
4614 p

Price target
New

Old

Upside/
Downside

African Barrick Gold

S*

170 p

110 p

100 p

-35%

AngloGold Ashanti

R 134

R 120

R 115

-11%

Gold Fields

R 50

R 55

R 58

9%

Sibanye Gold

R 12

R 15

R 10

30%

Harmony Gold

R 39

R 30

R 40

-23%

FY13E

5700 p

5650 p

FY14E

24%

New

Old

New

Old

Year
end

Randgold Resources

$ 3.24

$ 3.31

$ 2.62

$ 3.71

Dec

African Barrick Gold

$ 0.06

$ 0.06

$ 0.02

$ 0.06

Dec

AngloGold Ashanti

$ 1.26

$ 0.87

-$ 0.21

$ 0.81

Dec

Gold Fields

R 2.33

R 1.80

R 1.26

R 1.73

Dec

Sibanye Gold

R 3.59

R 2.40

R 1.61

-R 0.07

Dec

Harmony Gold

R 1.29

R 4.62

-R 0.49

R 0.35

June

EPS (US$/sh and ZAR/sh)

* denotes Conviction List membership


Source: Goldman Sachs Global Investment Research.

COVERAGE VIEWS:
Europe-Mining NEUTRAL
EMEA Mining Cautious

We forecast gold to decline from here


We expect gold to fall on improvement in US
economic activity and less accommodative
monetary policy (supported by our benign outlook
for inflation). We also expect ETF holdings to
continue to fall and central bank and physical
buying to be insufficient to offset price declines.
We believe this process has started.

12-MONTH PRICE TARGETS AND RATINGS

Another round of above CPI wage increases


in South Africa is disappointing
After much trepidation, the wage talks in SA are
coming to an end with the likely outcome of 8%10% wage increases as well as a 1-2 week strike.
While there is still risk of further disruption, the
more disappointing aspect is continued above CPI
wage hikes impacting costs.
Goldman Sachs does and seeks to do business with companies
covered in its research reports. As a result, investors should be aware
that the firm may have a conflict of interest that could affect the
objectivity of this report. Investors should consider this report as only a
single factor in making their investment decision. For Reg AC
certification and other important disclosures, see the Disclosure
Appendix, or go to www.gs.com/research/hedge.html. Analysts
employed by non-US affiliates are not registered/qualified as research
analysts with FINRA in the U.S.
Global Investment Research

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

Table of contents
Leveraged names bounce on gold price move but we remain negative on the commodity and valuations look stretched

Stocks in review Sibanye to Buy, Harmony to Sell, reiterate Sell on African Barrick and AngloGold

We raise our 2H 2013 gold price forecast; bearish medium/long-term outlook unchanged

Supply-demand model has reshaped; we expect 2H13 to replicate 1H changes

15

Even after recent rally in gold prices and self-help many mines still not generating cash

16

Balance sheets for senior golds are safe for now; 2014/15 to be crucial for ANG and GFI

22

Randgold Resources (RRS.L): The high quality gold miner; catalysts ahead; Neutral on valuation

24

African Barrick Gold (ABGL.L): Turnaround plans stabilises, but reiterate Sell on valuation

26

AngloGold Ashanti (ANGJ.J): Balance sheet shored up but portfolio restructuring ahead, strikes a risk; Sell

30

Gold Fields (GFIJ.J): South Deep delays impact investment case but Australia acquisition a positive; Neutral

32

Sibanye Gold (SGLJ.J): Up to Buy on valuation, Cooke acquisition and dividend catalysts

38

Harmony (HARJ.J): Wafi-Golpu pushed out; many sub-scale SA assets; down to Sell

41

Appendix 1: Refreshing our industry positioning framework

44

Appendix 2: Demand by country

50

Disclosure Appendix

51

RELATED RESEARCH
A weaker rand can help, but SA golds remain under pressure; Sell AngloGold, June 5, 2013
Europe, Middle East & Africa: Metals & Mining: Gold: Survival of the fittest as lower gold price puts high-cost mines in jeopardy; CL Sell ABG, May 3, 2013

The prices in the body of this report are based on the market close of September 11, 2013, unless otherwise stated.

Goldman Sachs Global Investment Research

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

Leveraged names bounce on gold price move but we remain negative on the commodity
and valuations look stretched
After reaching a multi-year low in July the gold price has rallied 20% (primarily on uncertainties surrounding QE tapering
and the Syrian crisis) to trade range bound between US$1,380/oz and US$1,425/oz. With this rally off lows of US$1,175/oz,
the higher cost, more leveraged gold and silver names have rallied (ABG 93%, ANG 18% and HAR 16% from their lows in
May and June) which we believe is justified as operating leverage increased. However, our ECS colleagues continue to
believe that gold prices will fall post this rally on continued improvement in economic activity in the US (leading to higher
bond yields) and less accommodative monetary policy (our Economists expect that the decision to begin tapering by
September end will be taken with the September 18 FOMC meeting). This process has already started with gold trading
under US$1,350/oz.

Gold has rallied but we believe a US recovery, higher yields and end of QE will see gold lower
The gold price has rallied more than 20% after reaching a multi-year low of US$1,175/oz in July this year. This rally in our view is a
result of uncertainty surrounding timing of QE tapering and more recently the Syrian crisis. We mark-to-market 3Q13 to US$1,400/oz
which results in an increase of 7% to our 2H13 forecasts: now US$1,388/oz (previously US$1,300/oz). However, we expect gold to fall
on continued improvement in economic activity in the US and less accommodative monetary policy (our Economists believes that
tapering will begin by September end). We expect ETF holdings to continue to fall and that continued central bank buying will not
be sufficient to offset this decline in prices. Further, we expect this decline in prices to coincide with rising jewellery/retail demand
(given the upcoming wedding/festival seasons in India/China), which we view as price responsive and not price setting.

Justified rally in more leveraged names has led to stretched valuations; we expect stocks to derate as gold price declines
With the rally in the gold price our fourth quartile leveraged stocks have rallied from their lows in May and June of this year. Most of
these stocks have total cash costs in the range US$1,200-1,300/oz and a small uptick in the gold price affords these names a high
operating leverage. Post this rally all these stocks are trading at significant premiums to both the sector and their historical valuation
range. We believe that as the gold price declines these stocks will de-rate sharply.

SA miners avoid big disruptions but 8%-10% wage rises continue to drive costs
The relatively minor one- to two-week disruptions felt by the majority of the gold mining industry in South Africa were not as bad as
many had forecast. But this outcome needs to be balanced against the decade-long cycle of above-CPI wage rises in the industry
and the companies objective of a less than CPI agreement. Most of the major producers have agreed c.8% yoy wage increases and
have taken minor one- to two-week disruptions. Overall, while not earnings destructive in 2013, the inability of the industry (and
government) to stop the trend above-CPI wage increases is disappointing.

Goldman Sachs Global Investment Research

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

Stocks in review Sibanye to Buy, Harmony to Sell, reiterate Sell on African Barrick and
AngloGold
African Barrick: Turnaround plan stabilises, but reiterate Sell on valuation
We downgraded ABG to Sell with a thesis that as one of the highest total cash cost producers at peak capex levels it would be under
severe pressure in a declining gold price environment. The stock declined to under 100p (June 28) as gold declined to under
US$1,200/oz. Since then the company has announced its turnaround plan with 1H13 results, gold has rallied to above US$1,400/oz
(retreating since to back under US$1,350)and the stock is up c.90% from lows. We can understand investors buying into the most
leveraged name but we believe the stock will again come under pressure as gold declines towards our target of US$1,144/oz in 2014
(-16% from todays spot) and the valuation for the stock is 43x/129x P/E on 2013/14E (and 42x/12x P/E on spot). After taking into
account the turnaround plan, we still do not forecast that ABG will generate free cash after capex and dividend in 2013, 2014 or 2015.
Our investment case remains that ABG has a portfolio of high cost mines, does not generate cash and is trading at a significant
premium to our coverage. It remains cheap on price-to-book and could screen strongly as a value stock but we believe that the book
value is over stated on our gold price assumption. We reiterate our Sell rating but remove ABG from the Conviction List as the risk
that investors continue to play the most leveraged names remains and the impact on the gold price of tension in Syria reduces our
conviction. Our 12-month price target is 110p, implying 35% downside.

AngloGold: Reiterate Sell on valuation; balance sheet actions positive but portfolio challenges ahead
New CEO, Venkat (former CFO), has aggressively managed the balance sheet with a new US$1.25 bn high-yield bond and the
relaxation of the debt covenants for 2014 to an upper limit of 4.5x net debt/EBITDA. This has reduced the immediate balance sheet
pressure given the >3x on our 2014 estimates and the upcoming May 2014 US$725 mn convertible. The challenge, however,
remains the portfolio, which has many high-cost mines that are producing well below capacity and will need either a) time to
address sub-capacity production performance (e.g., Obuasi, Geita); b) to take costs out of high cost mines, particularly in South
Africa; or c) to sell/close end-of-life assets. If gold goes to sub US$1,200/oz, as we forecast, then restructuring the portfolio is likely to
occupy management for the next 12-18 months. This challenging outlook is balanced with the low-cost, volume increase coming
from the Tropicana and Kibali projects in 2014. We remove AngloGold from the CEEMEA Focus List after underperformance.

Sibanye Gold: Upgrade to Buy on valuation, Cooke acquisition and dividend catalysts
Our primary investment thesis for Sibanye is that it is undervalued relative to peers trading on P/Es of 3.2x/7.1x on 2013/14E vs.
29x/61x for our broader coverage. With no significant growth projects and hence spending only sustaining capex, Sibanye is
generating cash at low gold prices at the corporate level. The company has announced (September 12) a maiden interim dividend of
37 rand cents (15% on underlying earnings) but is targeting a 35% payout for FY13 which would translate into DPS of c.R1 or up to a
8% dividend yield, making it the highest dividend yield in our mining coverage. Finally, Sibanye has announced the expected
acquisition of the Cooke operations from Gold One including the surface retreatment operations which could deliver c.220koz in
2014 rising to c.400koz in 2016 on our estimates at an average cost of c.US$1,200/oz, with the surface ounces planned to come in at
c.US$928/oz. We add Sibanye to the CEEMEA Focus List.

Goldman Sachs Global Investment Research

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

Harmony Gold: Downgrade to Sell on expected de-rating and over optimistic production guidance
We downgrade Harmony to Sell as we believe that with a relatively high-cost portfolio of mines and our view of a declining gold
price Harmonys earnings are most challenged into 2014. We also believe that its FY14 production guidance is too optimistic given
the climate in South Africa. We expect Harmony to guide lower in 1Q and 2Q14 results further reducing FY14 earnings.

Randgold Resources: The high quality miner; catalysts ahead; Neutral on weak outlook for gold
Randgold remains the best-positioned name with the strongest balance sheet and strong cash flow from operations on our
estimates. After the capex is complete at Kibali we estimate that the companys total cash cost (TCC) will be under US$800/oz. We
expect production to grow to 1,200koz by 2015 from an estimated 845koz in 2013 The company, on our estimates, has a strong 2014
FCF yield of 2.6% growing to 7.3% by 2015. The company has no development project in the pipeline post Kibali and we expect the
company to start ramping up its dividend. But given our weak outlook for gold and that Randgold is trading at 22.5x 2013E P/E, we
remain Neutral.

Gold Fields: South Deep delays impact investment case but Yilgarn acquisition positive; Neutral
The two most important announcements with the 2Q13 results were the delay in ramp-up schedule of South Deep (which will now
not hit the targeted 700koz annual run-rate in 2016) and the acquisition of Yilgarn South assets (for a total consideration of
US$300 mn) from Barrick Gold which could add c.450koz of gold to GFIs production profile. This acquisition improves the sovereign
risk profile of the company (Australia will account for 42% of production) but the impact of yet another setback for the South Deep
project will negatively impact sentiment towards the stock.

GDX index reweighting; positive for Sibanye and African Barrick


The rebalancing of the NYSE ACRA gold miners index scheduled for September 20, 2013, and the implied flows for the GDX ETF
will be a positive catalyst for Sibanye Gold US and ABG LN. The NYSE ACRA gold miners index is looking to increase the weights
of Sibanye Gold (US listing) and African Barrick Gold (ABGL.L).
For Sibanye the rebalancing will involve 26 days of buying which represents c.US$24.6 mn of additional buying, assuming daily
average volume of 0.23 mn shares at a share price of US$4.13 (as of September 2, 2013 close). For ABG rebalancing will need 14
days of buying which represents US$73.2 mn of additional buying, assuming daily average volume of 1.81mn shares at a share
price of 185.4p (as of September 3, 2013 close).
This rebalancing scheduled for September 2013 lends a small technical upside to the stocks.

Goldman Sachs Global Investment Research

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

Price and ratings summary


Exhibit 1: Our gold coverage summary of price targets and ratings
Prices as of the close of September 11 ,2013
P/E (x)
GS

Price

Last

Target

Rating

Ccy

Price

Price

Period

$mn

Randgold Resources

Neutral

GBp

4,614

5,700

12 months

African Barrick Gold

Sell

GBp

170

110

12 months

Company

Target Price Mkt Cap

EV

Upside
(%)

2013E

6,727

24%

1,102

-35%

Unrisked
M&I
P&P
Resource Reserve
NAV

Last Close
EV/Resource EV/Reserve

2014E

2015E

($mn)

($mn)

(mn oz)

(mn oz)

(US$/oz)

(US$/oz)

22.5

27.9

18.9

6,890

3,931

21.8

16.3

316

43.4

129.2

17.7

991

700

25.5

18.5

39

At Price Target
P/NAV

EV/Resource EV/Reserve

P/NAV

(x)

(US$/oz)

(US$/oz)

423

1.71

389

520

2.04

54

1.58

24

33

1.02

(x)

Gold - Senior producers

AngloGold Ashanti
Gold Fields
Sibanye Gold

Sell

ZAR

134

120

12 months

5,233

-11%

10.8

60.6

8,985

2,021

165.9

71.4

54

126

2.59

51

118

2.38

Neutral

ZAR

50

55

12 months

3,749

9%

21.6

40.0

17.5

5,930

3,113

114.2

59.5

52

100

1.20

55

105

1.17

Buy

ZAR

11.5

15.0

12 months

852

30%

3.2

7.1

6.6

919

1,435

1,752
1,783
Harmony Gold
Sell
ZAR
39
30
12 months
3,100
-23%
70.7
100.0
44.4
Gold - Senior producers
28.7
60.8
27.6
(1) All the values and multiples are calendarised; (2) Resources and reserves are in Gold equiv. mn oz; (3) *Conviction List member; (4) "nm" denotes not meaningful

74.1

13.5

12

68

0.59

16

87

0.74

150.2

52.9

12
81

33
134

1.74
1.57

16
92

46
152

0.82
1.36

Source: Goldman Sachs Global Investment Research.

Valuation methodology summary


Exhibit 2: Our senior gold coverage valuation methodology summary
Prices as of the close of September 11, 2013
Rating

Price Ccy

Price
target

Time
frame

Share
price

Implied upside/
(downside)

Methodology

Neutral

GBp

5,700

12m

4,614

24%

50/50 blend of P/E on '15 and 1x NAV

Sell

Sell*

GBp

110

12m

170

-35%

50/50 blend of P/E on '15 and 1x NAV

Sell

Sell

ZAR

120

12m

134

-11%

50/50 blend of P/E on '15 and 1x NAV

Neutral

Neutral

ZAR

55

12m

50

9%

50/50 blend of P/E on '15 and 1x NAV

Sibanye Gold

Buy

Neutral

ZAR

15

12m

11.5

30%

50/50 blend of P/E on '15 and 1x NAV

Harmony Gold

Sell

Neutral

ZAR

30

12m

39

-23%

50/50 blend of P/E on '15 and 1x NAV

Company

New

Old

Randgold Resources

Neutral

African Barrick Gold


AngloGold Ashanti

Gold - Seniors

Gold Fields

* denotes Conviction List membership


Source: Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

We raise our 2H 2013 gold price forecast; bearish medium/long-term outlook unchanged
We mark-to-market 3Q13 to US$1,400/oz and raise our 4Q13 price estimate to US$1,375/oz (from US$1,300/oz) which raises our 2013
price forecast to US$1,456/oz (from US$1,413/oz) given geopolitical tensions and upcoming seasonal buying in India where we
expect stronger bar and coin demand. Despite these changes we continue to have a bearish view on the gold price in the medium
and longer term:

We believe that with the 18 September FOMC meeting the Fed will take a final decision on QE tapering. Our Economists believe
that tapering will start by September end.

We expect ETF holdings to continue to fall. Furthermore, we expect continued central bank gold buying will not be sufficient to
offset this decline in prices. We also expect the decline in prices to coincide with rising jewellery/retail demand (given the
upcoming wedding/festival seasons in India/China), which we view as price responsive and not price setting.

Finally, while this forecast implies that the unwind of physical gold investments will push gold prices below the marginal cost of
production, we expect mined output to decline which will maintain prices over the longer term near US$1,200/oz (our forecast
for 2015 and beyond).

Exhibit 3: We raise our 2H13 gold price estimates but maintain our price outlook for 2014/15/16E
GS gold price forecasts
Commodity
Gold
Silver

US$/oz
US$/oz

Spot
1,363
22.91

New
1,400
22.58

3Q13
Old
1,300
21.67

%
8%
4%

New
1,375
22.18

4Q13
Old
1,300
22.41

%
6%
1%

New
1,456
24.57

2013E
Old
1,413
24.40

%
3%
1%

New
1,144
19.06

2014E
Old
1,144
20.60

%
0%
7%

New
1,200
21.05

2015E
Old
1,200
21.82

%
0%
4%

New
1,200
21.05

2016E
Old
1,200
21.82

%
0%
4%

New
1,200
21.82

Longterm
Old
%
1,200
0%
22.64
4%

Source: Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

Recent rally helped by Syrian uncertainty


Historically in times of war gold prices have shot up as demand for safe-haven assets jump. Gold and oil have had a positive
correlation (Exhibit 4) historically. A higher oil price typically slows economic growth which tends to be supportive of a higher gold
price. This has further added to demand for bullion pushing prices above US$1,400/oz.
With tensions relating to Syria having increased in the last couple of months (Exhibit 5), geo-political tensions have helped drive the
gold price up. We believe continuing geo-political tensions could act as a short-term catalyst for bullion but note that historically,
any risk premium has tended to come out of the metal once tensions subside.
Exhibit 4: Oil and gold prices have shot up in times of geopolitical tension

Exhibit 5: Syrian uncertainty has been a positive catalyst for gold prices

Brent and gold prices 1999 -current

Brent and Gold prices last two months

2,000

160

1,450

120

1,800

118
140
1,400
116

1,600
120

114

1,400
1,350
Syrian crisis
unfolds

1,200

80

US$/oz

1,000

US$/bbl

US$/oz

Syrian crisis

112

110

1,300

US$/bbl

100

108

800
60
1,250
600

9/11

106

2nd Iraq war


40

104

400
1,200
20

102

200
R2: 81%
0

Gold (US$/oz)

Source: Datastream.

Goldman Sachs Global Investment Research

100

1,150

Brent (US$/bbl)

Gold (US$/oz)

Brent (US$/bbl)

Source: Datastream.

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

Long interest in gold has recently increased on Syria tension and uncertainty on QE timing
Exhibit 6 shows the historical relationship between gold long and short positions. The market has generally been net long, with long
positions outweighing the shorts. However, post the sharp fall in gold price on April 15 the shorts rose sharply before reaching their
max in July. Since then the gold price has stabilized and has been trading between US$1,380/oz and US$1,425/oz.
The shorts since August (Exhibit 7) have fallen steadily, and the long positions have started to show some signs of recovery, after an
extended period of decline. We believe this is a direct result of the uncertainty surrounding the timing of QE tapering coupled with
Syrian tensions.
Exhibit 6: Short interest in gold has fallen substantially after rising sharply
since May

Exhibit 7: Long interest in gold has shown positive activity which we believe
is largely on Syria concerns and timing of QE tapering

Gold long shorts 2008 - current

Gold long and shorts - YTD

450,000

200,000

400,000

180,000

300,000

200,000

180,000
250,000

160,000

160,000

140,000

100,000
200,000
80,000
150,000
60,000

200,000

Contracts of 100 troy oz

120,000
250,000

140,000

Contracts of 100 troy oz

Contracts of 100 troy oz

300,000

120,000

150,000

100,000

80,000

Contracts of 100 troy oz

350,000

100,000
60,000

100,000

40,000
40,000
50,000

50,000

20,000
20,000
0

GOLD CFTC Long

Source: CFTC.

Goldman Sachs Global Investment Research

GOLD CFTC Short (right)

CFTC Long (LHS)

CFTC Short (RHS)

Source: CFTC.

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

ETFs: Daily outflows have slowed, moving to a net neutral since mid-July
The gold price has rebounded from a low of US$1,215/oz to a range around US$1,380/oz and US$1,425/oz which in our view is a
direct result of strong physical buying of bar and coins and the heightened risk relating to Syria.
ETF inflows and outflows have been strongly correlated to the gold price, and on occasions have even driven changes in the gold
price (Exhibit 8).
Since the gold price has been rebounding outflows have slowed (Exhibit 9) even moving to net neutral over the past month with
some days of additions.
It is hard to say if ETF outflows are reflecting the higher gold price or the slowdown in outflows is driving the gold price but in our
view as the gold price declines to US$1,200/oz we will see more outflows.
Exhibit 9: Since February 2013 a cumulative 24.5moz has been sold off by
ETFs and outflows have continued despite gold price recovering somewhat

Exhibit 8: ETF inflows and outflows have followed the gold price
Daily ETF flows vs. gold price 2008-current

Daily ETF flows, February 1, 2013-current


400

1,800

400

1,600

200

200

1,400
0

1,000
-400
800
-600
600

Daily inflows/Outflows (Koz)

1,200
-200

Gold - US$/oz

Daily ETF inflows/ (outflows) - Koz

-200

-400

-600

-800

-800
400

-1,000

200

-1,200

Daily Flow (Koz)

5 day moving average of inflows/outflows

Source: Datastream, Bloomberg.

Goldman Sachs Global Investment Research

-1,000

-1,200

Gold (US$/oz) - RHS

Daily Flow (Koz)

Source: Datastream, Bloomberg.

10

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

We still expect total ETF outflows of 880 tonnes by year end


ETF holdings remained relatively stable while the gold price declined from US$1,800/oz to US$1,600/oz (December 2012-February
2013). However, since late-February, over 660 tonnes (c.21.2 mn oz) have been liquidated from global ETFs, valued at c.US$29 bn (at
US$1,400/oz).
ETFs reflect predominantly institutional holdings, in our view because products such as gold can be owned by many equity funds as
well as by multi-asset funds, and are therefore a good guide to institutional sentiment towards gold.
At the beginning of 2013, global gold ETF holdings were c.84.6moz (2,398 tonnes), but have declined to c.62.7moz as of September
10 (1,786 tonnes). ETFs have been a relatively consistent source of demand for gold over the past few years (adding between 200
and 600 tonnes in the past four years). With outflows of c.580 tonnes year-to-date this has led to a reversal of c.800-900 tonnes in
2013.
Exhibit 10: ETFs have added 200-300 tonnes per year historically; in FY13 we
expect outflows of c.880 tonnes

Exhibit 11: The pace of outflows has decreased over the past month; but we
expect outflows to continue grossing 880 tonnes by FY13 end

Total physical gold in ETFs, 2008-current

Total physical gold in ETFs, last 12 months

3,000

2,000

2,800

1,800

2,600

1,900

1,800
2,500
1,600

2,400
1,700

1,400

800

Au oz in ETFs (tonnes)

1,000

1,500

Au price (US$ / oz)

Au oz in ETFs (tonnes)

1,200

1,600

2,000

1,800

1,500

Au price (US$ / oz)

2,200

2,000

1,600

1,000
600

1,400
1,400

400
500

1,300
200

GOLD ETFs

Source: Datastream, Bloomberg.

Goldman Sachs Global Investment Research

1,200

1,000

Gold ($/oz)

1,200

GOLD ETFs

Gold ($/oz)

Source: Datastream, Bloomberg.

11

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

India gold demand strong despite RBI measures but SGE premiums indicate China demand
softening
India currently has a 5% current account deficit and gold is the second major driver behind oil. The government has sought to curb
gold imports by: 1) raising import taxes to 10%; 2) restricting supply to domestic users other than against full payment; and 3)
banning sale of gold coins, medallions and dores without a license from the foreign trade office. However, this has only had a
limited impact on the apparently insatiable appetite for gold in India which imported US$2.9 bn worth of gold in July even as prices
hit an all time high as the local currency devalued (INR has depreciated 22% YTD against USD). With the upcoming wedding and
festival season, we expect gold demand to remain strong.
China (where demand, according to the World Gold Council, is set to overtake India) has shown demand softening with premiums
having fallen from a high of c.US$96.oz achieved in April this year just after the gold price collapsed (premium is a reflection of how
much the local market is willing to pay over the global gold price). Another reason why we believe demand in China is softening is
the muted response to the first gold ETFs launched in China. Huaan Asset Management and Guotai Asset Management attracted
just US$195 mn (vs. an expected US$400 mn) and US$66.7 mn respectively.
Exhibit 12: Gold demand has remained strong in India even as the gold price
in India has reached record highs on currency devaluation

Exhibit 13: SGE premiums have declined from their highs in April/May
indicating softening demand

INR and USD gold price

SGE premium (US$/oz)

35,000

1,800

120.00

1,600

100.00

1,400

80.00

33,000

27,000
1,200
25,000

US$/oz

Gold INR/10 grams

29,000

Gold (US$/oz)

31,000

60.00

1,000

40.00

800

20.00

600

0.00

23,000

21,000

19,000

17,000

15,000
1/1/2013

2/1/2013

3/1/2013

4/1/2013

5/1/2013

Gold (INR/oz)

Source: Datastream.

Goldman Sachs Global Investment Research

6/1/2013

7/1/2013

8/1/2013

400
9/1/2013

-20.00
04-Jan-13

04-Feb-13

Gold (US$/oz)

04-Mar-13

04-Apr-13

04-May-13

04-Jun-13

04-Jul-13

04-Aug-13

04-Sep-13

SGE Premium (US$)

Source: Datastream.

12

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

Longer term indicators still support our bearish stance: Gold has decoupled from US treasury
rates which indicates downside risks
Our Economists forecast 10-year US treasury yields to reach 2.5% by year end 2013 and 3% by year end 2014, however, the current
10-year US treasury yields are nearing 3%. A recent phenomenon we have observed is the decoupling of the gold price from 10-year
US treasury rates. This, in our view, is a reflection of risk related to timing of QE tapering, the geopolitical tensions in Syria and
rotation out of EM markets into safe haven assets, a move from which gold has benefitted.
In our view, the gold price will in time align to 10-year yields, i.e., US$1,200/oz. We continue to believe that this is the key long-term
driver of the gold price and therefore retain our bearish stance on the commodity.
Exhibit 14: USD is weakening while rates rise

Exhibit 15: Gold is rising even as US rates have increased

DXY and US 10 year treasury yields

Gold price and US 10 year rates

85

3.50%

84

3.00%

83

2.50%

82

2.00%

3.50%

1,800

1,700

3.00%

1.50%

80

Gold (US$/oz)

1,500
2.00%
1,400
1.50%
1,300

1.00%

US 10 year treasury yield (%)

81

2.50%

US 10 year treasury yield (%)

USD (DXY Index)

1,600

1.00%
1,200

79

78
08-Jan-13

0.50%

08-Feb-13

08-Mar-13

08-Apr-13

08-May-13

DXY

Source: Datastream.

Goldman Sachs Global Investment Research

08-Jun-13

08-Jul-13

08-Aug-13

0.00%
08-Sep-13

0.50%

1,100

1,000
08-Jan-13

08-Feb-13

US 10 year treasury yields

08-Mar-13

08-Apr-13
Gold( US$/oz)

08-May-13

08-Jun-13

08-Jul-13

08-Aug-13

0.00%
08-Sep-13

US 10 year treasury yields

Source: Datastream.

13

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

Other drivers: Production response unlikely to have a material impact in the short term, but
weaker pricing will eventually bring support from elsewhere
In our note Survival of the fittest as lower gold price puts high-cost mines in jeopardy, May 3, 2013, we argued that miners needed
to cut higher-cost production by at least 10% to lower their total cash costs/oz. With 1H13 results we have not seen any tangible
action by companies on making production cuts except a few announcements by companies about their intention to sell off some
assets. The total mine supply in 1H13 was 1,409 tonnes. We now forecast full year production of c.2,850 tonnes. In our view, the
rationale for not cutting production is based on companies views that the gold price will reach historical highs of US$1,800/oz. But
with the gold price now settling in a range of US$1,380-US$1,425/oz we believe that the companies will start to sell/shutter down
loss-making mines to stem the cash burn.
We continue to believe that mined output will need to adjust to offset the oversupply we forecast, and we expect high-cost mines
that cannot be turned around through high-grading or cost reduction to be put on care and maintenance if the lower price
environment persists. It is not an easy decision for the mining companies to take, and we would expect it to take a couple of
quarters of low prices to drive a response. However, we expect this to happen eventually, as it did in 2000-2002.

Mine production: As we believe that there is no cost support in gold mining, when the price settles we would expect the
miners with high-cost mines to reduce unit costs through high-grading (where possible), or by cutting operating costs and
capex to stay in business. If this cannot be done, then we would expect these mines to be put on care and maintenance.
Consistent with our published view, we believe that c.280 tonnes (c.10%) of mining capacity will have total cash costs above our
gold price forecast, and hence to be under threat of closure.

Producer hedging: Although hedging was still negative in the first half of the year, we expect the trend to change in the second
half as companies acknowledge the reality of a lower gold price. Australias Norton Gold and Evolution Mining have already
hedged a major portion of their output.

Recycling/scrap: We expect recycling to fall 13% yoy reflecting lower gold prices. Electrical and industrial scrap is unlikely to be
impacted, in our view.

Jewellery: Jewellery demand was strong in 1H13 and we expect the trend to continue into 2H13 with the upcoming wedding
and festival season in India and China.

Bar and coin demand: Following the sharp fall in gold price the bar and coin demand for 1H13 was at 914 tonnes (c.70% of
2012 demand). We expect the trend to continue into 2H13 with total demand of c.1,900 tonnes, up 52% yoy.

Central banks to be net buyers: Contrary to our belief that central banks would be large scale buyers of bullion, the total
demand for 1H13 was c.180 tonnes and for the full year we expect total purchases to be c.338 tonnes (down 38% yoy).

Goldman Sachs Global Investment Research

14

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

Supply-demand model has reshaped; we expect 2H13 to replicate 1H changes


In Exhibit 16 we discuss the impact of the lower gold price on the supply-demand balance. As expected the lower gold price led to a
fall in supply from recycling in 1H13 as investors hoarded bullion. As we move into the second half of 2013 we expect the following
notable changes from 1H13: 1) investment outflow to ease and recycling to pick up as the gold price stabilises; 2) with the upcoming
wedding/festival season in India, we expect jewellery demand to stay strong in 2H13 despite the slew of measures taken by the RBI
to curb demand; and 3) bar and coin demand to remain strong as we believe retail investors will continue to take advantage of the
low gold price.
Exhibit 16: Lower gold price shook up the S-D balance in 2013; we expect trend to continue albeit at a slower pace
Our supply-demand balance forecast assuming an average gold price of US$1,456 for 2013
2009

2010

2011

2012

2012vs
2011(%
diff.)

Mineproduction

2,611

2,739

2,836

2,848

0%

NetProducerhedging
Totalminesupply

236
2,375

108
2,631

11
2,847

20
2,828

1%

Recycledgold

1,735

1,719

1,669

1,626

3%

Totalsupply
Demand

4,110

4,350

4,515

4,454

1%

Jewelleryfabrication

1,814

2,017

1,972

1,908

3%

Technology
Subtotalabovefabrication

410
2,224

466
2,483

453
2,425

428
2,336

5%
4%

Totalbarandcoindemand

786

1,201

1,515

1,256

17%

ETFsandsimilar

617

382

185

279

51%

516
4,143

208
4,274

67
4,059

48
3,919

3%

Summaryof2013outlook

1H2013
actual

2013E

2013Evs
2012(%
diff.)

1,409

2,849

0%

Supply

OTCinvestmentandstockflows
Totaldemand
Officialsectorpurchases
Totaldemand(incofficialsector)
Balance
LondonPMfix(US$/oz)

34

77

457

535

17%

4,109
1
972

4,351
1
1,225

4,515
0
1,572

4,453
0
1,669

1%

6%

MiningproductionwillbecuttowhatisrequiredtobalancethemarketonceoutflowsfromETFshave
beenmetbyphysicaldemandorincreasesinjewellery/fabricationdemand.Weexpectc.10%of
miningproductiontobeshutteredin.
Wearelikelytoseeanincreaseinproducerhedgingaspricesfall.Debtholderswillforcejunior
producerstohedgepartoftheirproductiontosecureloans(e.g.ShantaGold).

Supplyfromscrapwilllikelyseeamaterialdeclinegivenscraptendsto"shake"outofthemarketon
fastmovingspikes;weexpecta12%declineinthegoldpriceyoyandhencescraplevelstofallin2013,
especiallyfrom"cashforgold"schemes.Scrapfromindustrial/electronicsourcesisunlikelytobe
affected.Ifscrapdoesnotpullbackmeaningfully,thenminingmayhavetotakefurtherreductions.

Weexpectstrongerjewellerydemandin2013onlowergoldprices,particularlyinIndiaandChina(the
largestconsumersofgoldjewellery)duringtheirupcomingweddingseasons.

Wehaveseenastrongjumpinbar&coindemandfromretailinvestorsfollowingthesharpdownward
moveinthegoldprice,particularlyinAsia.Thiscouldcontinuedepsitethelowergoldpricebutour
hypothesisisthatthisis"bargainhunting"andcouldrunoutofsteamifthegoldpriceeitherdoesn't
recoverorcontinuestodeclineoninstituionalselling.
Alowergoldpriceover2013islikelytoseeanexodusfromgoldETFs.Sofarin2013ETFholdingshave
outflowedc.300tonnes(c.10mnoz).AnextendedperiodofthegoldpricebelowUS$1,500/ozwillseea
significantnumberofETFholderssittingonanegativereturn.Anyfurthermoveslowerwilllikelysee
moreselling.
OTCflowstypicallyfollowETFflows.
Centralbankbuyingislikelytoremainrelativelyconsistent.ChinaandGCCstates,asbigUSDholders,
havebeenthemainbuyersinrecentyears.SmallerbuyerslikeRussiaandemergingEUcountrieslike
theCzechRepublichavebeenbuyersalso,butChinaandGCCstateswilldrivetheofficalsector
purchasesin2013.

26

14

1,383

2,863

1%

672

1,422

13%

2,055

4,285

4%

1,116

2,226

17%

207
1,322

407
2,632

5%
13%

913

1,903

52%

579

879

217
1,874

297
3,954

1%

181

331

38%

2,055
0
1,525

4,285
0
1,456

4%

13%

Source: World Gold Council actual 2010-2012; Goldman Sachs Global Investment Research for 2013.

Goldman Sachs Global Investment Research

15

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

Even after recent rally in gold prices and self-help many mines still not generating cash
The recent results calls were all about cost cuts and measures being taken by companies to adjust to the new reality which is a
lower gold price. As published in A weaker Rand can help, but SA golds remain under pressure, June 5, 2013 (in that note we used a
gold price of US$1,400/oz), we continue to believe that more than 50% of the mines are not making cash.
In Exhibit 17 we show the total cash costs for mines in our coverage for 2013 and 2014. Even after the recent wave of self help,
c.50% of mines (especially legacy mines in South Africa) are still burning cash at the current gold price (despite the cost optimization
plans companies have implemented) and in our view closures is the only viable option.
Exhibit 17: c.50% of mines in our coverage have a total cash cost above the spot gold price; the situation improves in 2014 but cash
burn continues on our gold price
Total cash cost/gold eq. oz by mine, 2013/2014E
3,500

3,000

2,500

TCC (US$/oz)

2,000

Gold price $1,400/oz

1,500

1,000

500

0
San Jose
Pallancata
Arcata
Noche Buena
Soledad-Dipolos
Cienega
Herradura
Saucito
Fresnillo
Beatrix
Kloof
Driefontein
Phoenix
Kalgold
Virginia - Unisel
Tshepong
Target 3
Target 1
Phakisa
Masimong
Joel
Kusasalethu
Doornkop
Steyn 2
Bambanani
Hidden valley
Agnew
St Ives
Cerro Corona
Damang
Tarkwa
South Deep
Cripple Creek & Victor
Serra Grande
Brasil Mineracao
Cerro Vanguardie
Tropicana
Sunrise Dam
Geita
Navachab
Sadiola
Siguiri
Obuasi
Iduapriem
Surface Ops
Tau Tona
Mponeng
Moab Khotsong
Kopanang
Great Noligwa
North Mara
Buzwagi
Bulyanhulu
Morila
Tongon
Loulo
RRS

ABG

ANGJ

TCC (US$/oz) - 2013

GFI

TCC (US$/oz) - 2014

HARJ

SGLJ

FRES

HOCM

Gold price

Note: Excludes expansionary capex for new projects (e.g. Randgolds Kibali
Source: Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research

16

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

At a company level the reduction in capex in 14 and 15 gets coverage under US$1,200/oz
Many companies in our senior gold and silver coverage have a total cash cost per ounce above our current 2013/14 gold price
forecast (Exhibit 18). In many cases, this reflects expansionary capex which should fall through 2014 and 2015 (Exhibit 19). However,
in many cases it is a result of low grades and high cost inflation and cannot be easily rectified (e.g. African Barrick Gold). Exhibit 18
reflects the capex cuts announced by the companies with their results. Most of the cuts, we believe, have been from budgeted
expansionary capex with only slight cuts made to sustaining capex. We believe that companies have very little headroom left to
bring their costs down in case of further gold price falls.
One option is high-grading the mines, increasing the mined grade and thus lowering the tonnes moved and the unit cost per
ounce. This can only be done if the geology or the mine allows mining in higher-grade zones without first having to mine lowergrade ores. ABG and AngloGold have both mined at their reserve grades in 2012, while Harmony, Randgold and Sibanye all mined
well below their reserve grade and have the potential to lower unit costs by focusing on higher-grade ores.
Exhibit 18: Many gold companies in our gold coverage have total cash costs
above the gold price in 2013/14
Total cash cost/gold oz eq., 2013-15E

Exhibit 19: Companies have cut capex to stem the cash burn but post these
cuts we believe they have very less headroom left in case gold price fell
further
Old vs. revised capex 2013-2016E
2,500

1,900
1,800
1,700
1,600
1,500

2013: $1,456

2,000

1,400
1,300

2015: $1,200

1,200

1,500

2014: $1,144

US$ mn

Total cash cost / oz

1,100
1,000
900

1,000

800
700
600
500

500

400
300
200
100

Source: Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research

FY2015E

SGLJ.J

GFIJ.J

HARJ.J

ANGJ.J

RRS.L

ABGL.L

SGLJ.J

GFIJ.J

2015E

HARJ.J

ANGJ.J

New

RRS.L

Old

2014E

ABGL.L

GFIJ.J

ANGJ.J

RRS.L

SGLJ.J

FY2014E

HARJ.J

2013E
FY2013E

ABGL.L

African Barrick Gold

SGLJ.J

AngloGold Ashanti

GFIJ.J

Sibanye Gold

HARJ.J

Gold Fields

ANGJ.J

African Barrick Gold

RRS.L

Randgold Resources

ABGL.L

2016E

Source: Goldman Sachs Global Investment Research.

17

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

Self-help in full swing: Capex and exploration first to be cutoperating costs harder
The recent quarterly/half yearly production/financial results show all gold producers grappling with the reality of a sustained lower
gold price. They have cut down on exploration budgets, both greenfield and near mine, and are focusing on making their operations
leaner by reducing costs.
Exploration spend is easy to cut. It does not impact short-term production and is material to free cash flow. Capex is harder but can
be flattened out over a longer time period or renegotiated or finally, projects can be deferred. Again this is good for short-term cash
flow and does not impact operations. Head office and support costs are usually next which typically have a smaller impact on total
costs but do not impact operations. Cutting operating costs is significantly tougher and this is where most of the costs are.

Reducing costs is hard: It is no surprise that taking costs out of a mine is very tough. There are three main areas: 1) people, 2)
energy (electricity and diesel), and 3) consumables (e.g., explosives, steel). Reducing employees is hard as a result of
unionization (as is clear from the threat by unions to strike should Amplats go ahead with the proposed 6,000 job cuts which
finally had to water down the job cuts to 3,300 and then only c.2,000 in the final announcement). Reducing workers pay is just
as tough and can also impact productivity. Energy costs are usually set by the government or the global oil price, and typically
efficiency initiatives take time to pay off. Finally, in the case of consumables, the costs of explosives and steel are almost always
linked to the price of the commodity the miner is producing and selling: they only tend to fall in price is when the commodity
price also falls.

Production matters more than costs: It is a truism that in mining units produced matter more than gross costs when
considering unit costs. Mines are effectively fixed cost operations, and producing more output has the dual benefit of lowering
the unit cost (more units on virtually the same costs) and producing extra revenue. If one thinks of the additional revenue as
offset against costs, then the benefits are significant. For example, if a mine produced 100koz gold at US$1,000/oz, gross total
costs would be US$100 mn. Cutting costs by 10% would see the unit cost fall to US$900/oz. Producing 10% more would see unit
costs fall 9%, and if the additional 10koz were counted against costs at US$1,470/oz (US$14.7 mn) then the unit cost would fall
to US$775/oz, or 25% below the original. In many cases, targeting cost reduction in the traditional sense is bad for business, as
spending more to expand production (if possible) almost always is of greater value. High-grading is the main way that a mining
company can increase its output.

In extractive industries such as mining, costs always tend to go up: The start-up of a new mine is always planned to
maximize the first 3-5 years of production, to maximize the NPV of the project. Each subsequent year of production sees the
mines pit (or shaft depth) get bigger (deeper). Consequently, travel times, haul trip times, air ventilation expense (and virtually
every other cost) rises each year. As a practical example: In Year 1 of an open pit mine, the haul truck travel time from loading
to tipping takes 30 minutes. In Year 2 because the pit is wider and deeper, the trip time is 35 minutes. To maintain the same
tonnes/hour output from the mine, management must insert an extra truck into the fleet which needs an extra drive/shift. The
new truck will burn fuel, need maintenance and consume tyres.

Goldman Sachs Global Investment Research

18

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

For structurally high-cost mines care & maintenance is a tough choice, but often the only choice
With the sharp fall in gold price companies have taken steps to cut capex. AngloGold put its Mongbwalu project in Africa on ice
with the 1Q13 results. Harmony recently put its attractive Wafi-Golpu project in PNG on hold citing unattractive returns at the
current gold price. This is a step forward in the right direction but in our view investors need to see more tangible action. Closures
of loss-making mines especially in South Africa in our view could turn the dial for the companies but as the recent developments in
South Africa (Amplats was forced by the SA government to water down its proposed job cuts from 14,000 to 6,000 and keep its
Khusulekha mine operational) have shown this is not straightforward. The Government (upcoming elections in South Africa in 2014)
together with the unions (both NUM and AMCU fighting for dominance) is strictly against any job cuts. The draft mining bill
currently in parliament which proposes tax increases on mining companies in a bid to increase revenues will also hit the companies
already battling the falling gold price.
Exhibit 20: Companies have undertaken cost cutting initiatives but we think they are insufficient
Cost cutting measures undertaken by gold cos.
Capital Reduction Exploration budget

RandGold Resources

Renegotiation of
contracts

Sale of assets/
Suspension of project

Organization
Restructuring

Targeted Savings

Realization

US$ 70mn

FY2013

Comments

1. Capex at Kibali reduced by $50mn


2. Capex reduced at Loulo-Gounkoto by US$20mn
1. $50mn reduction in sustaining capital
2. $25mn reduction in exploration spend
3. $15mn savings in corporate overheads
4. Targeted reduction in labour costs by 20%
5. Suspended Buly Upper East project
1. Asset sales (Navachab and Sadiola to IAMGOLD)
2. Mongbwalu project suspended
3. Exp. budget reduced by $40mn, capex by $100$150mn, corporate costs by $51mn & $140mn for
13/14 respectively

African Barrick Gold

US$185mn

FY 2013

AngloGold Ashanti

Upwards of $150mn

2H2013 - 1H2014

Harmony Gold

US$ 201mn

FY2014

1. Capex cuts of $45mn in South Africa


2. $111mn capex cut in PNG
3. 45mn in other costs (corporate)
4. Pushed out Wafi Golpu development

Gold Fields

c. US$250mn

FY2013

1. Exploration budget cuts by US$80mn.


2. Capex reduced by US$180mn.

Sibanye Gold

Undeclared

Next 2 years

1. New management operating model


2. Operational focus
3. Suspension of Beatrix West

Source: Company data, Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research

19

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

Weaker currency: A tailwind but comes with risks


Recent currency depreciation in EM (South African rand (ZAR) has depreciated 21% YTD against USD) and Australia (AUD has
depreciated 17% against USD) has helped the companies on the cost front as a major portion of a mining companys costs are in the
local currency. Our Strategists are forecasting even weaker mining currencies going forward.
In our view, with the S&P performing and enough green shoots to indicate a US recovery, investors do not need exposure to EM
markets to get returns. We have seen a rotation out of the ZAR back to the US$. Add to this the impact of the markets heightened
view of country risk and the currency sell-off seems logical. The depreciating currency is clearly a tailwind for those resource stocks
for which the US$ commodity price is set by global markets, as gold is, but the companies book the revenues in ZAR, as the South
African gold miners do.
On the face of it, a weakening local currency is a strong reason to buy stocks and the bounce in the shares would indicate that the
market agrees, but we highlight two risks: (1) one of the main reasons for the currency sell-off (particularly the rand) in our view has
been the instability in the mining sector; mathematically, earnings increase on a weaker rand but clearly the risk to delivery is higher
owing to strikes; and (2) a weaker rand also creates opportunities for unions to push for bigger pay rises (the NUM has negotiated
above CPI wage negotiations from SA golds). In a sense, investors cannot have their cake and eat it on the issue of the rand. The
problems in the sector have weakened the currency and these problems are just as likely to impact company performance.
Exhibit 21: AUD strengthens going into 2014 but ZAR depreciation to continue
Our currency forecasts
ForiegnExchange
$/
AUD/USD
ZAR/USD
PEN/USD

Spot
1.57
0.93
9.98
2.79

New
1.53
0.90
10.10
2.75

3Q13
Old
1.53
0.92
9.80
2.63

%
0%
2%
3%
4%

New
1.53
0.88
10.20
2.75

4Q13
Old
1.53
0.90
10.00
2.63

%
0%
2%
2%
4%

New
1.54
0.96
9.63
2.68

2013E
Old
1.54
0.97
9.50
2.62

%
0%
1%
1%
2%

New
1.53
0.85
10.68
2.78

2014E
Old
1.53
0.85
10.50
2.63

%
0%
0%
2%
5%

New
1.53
0.85
11.00
2.80

2015E
old
1.53
0.85
11.00
2.64

%
0%
0%
0%
6%

New
1.52
0.84
11.50
2.95

2016E
old
1.52
0.84
11.50
2.66

%
0%
0%
0%
11%

New
1.51
0.84
11.50
3.30

Longterm
old
1.51
0.84
11.50
2.67

%
0%
0%
0%
24%

Source: Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research

20

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

ANG has the greatest need to turn around cash flow; ABG could muddle through
Exhibit 22 shows the total cash costs (Y-axis) and balance sheet position (X-axis) of our coverage. Stocks such as Randgold (RRS.L),
Sibanye (SGLJ.J) generate cash at our lower gold price forecast and have net cash/improving cash positions. Even in a much lower
gold and silver price environment, both these companies are compelling equity investments in our view. Conversely, companies at
the bottom left of the chart (ANGJ.J) have high costs and deteriorating net debt positions, and will, in our view, come under
increasing pressure unless radical (and speedy) restructuring can be delivered. African Barrick on our estimates is net cash but this
could change rapidly if the gold price was to decline (as we forecast) and/or if the cost optimization savings do not come through.
Exhibit 22: Companies in the bottom left corner are poorly positioned as they
have higher total cash costs and leverage

Exhibit 23: Companies in the bottom left corner are poorly positioned as they
have higher total cash costs and leverage

Total cash costs (average FY13-16E) vs. net debt 2013 / EBITDA 2014 for our gold
and silver coverage

Total cash costs (average FY13-16E) vs. net debt 2014 / EBITDA 2015 for our gold
and silver coverage

2014

Low cost / high debt

Low cost / net cash

Improving balance
sheet on lower costs
and production

Low cost / net cash

RRS.L

800

GFIJ.J

900

SGLJ.J
1,000

1,100
Gold: US$1,144/oz

ANGJ.J

1,200

1,300

Deteriorating balance
sheets unless costs
can be reined in

1,400

HARJ.J

ABGL.L

Improving balance
sheet on lower costs
and production

700

Total cash costs, average '13-16E ($US / oz)

700

Total cash costs, average '13-16E ($US / oz)

2015

Low cost / high debt


600

600

RRS.L

800

GFIJ.J

900

SGLJ.J
1,000

1,100

ANGJ.J

1,200

Gold: US$1,200/oz
1,300

Deteriorating balance
sheets unless costs
can be reined in

1,400

HARJ.J

ABGL.L

High cost / net cash

High cost / net cash

High cost / high debt

High cost / high debt

1,500

1,500
3.5

3.0

2.5

2.0

1.5

Debt
Note: 1) We use calendar year values for net debt and EBITDA.
2) Harmony is June year end.

1.0

0.5

Net debt / EBITDA


2013 Net Debt /2014 EBITDA

Source: Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research

0.0

-0.5

-1.0

-1.5

Net cash

3.5

3.0

2.5

2.0

Debt
Note: 1) We use calendar year values for net debt and EBITDA.
2) Harmony is June year end.

1.5

1.0

0.5

Net debt / EBITDA

0.0

-0.5

-1.0

-1.5

Net cash

2014 Net Debt /2015 EBITDA

Source: Goldman Sachs Global Investment Research.

21

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

Balance sheets for senior golds are safe for now; 2014/15 to be crucial for ANG and GFI
Exhibit 24 shows the net debt and the available debt facilities for the senior gold companies in our coverage. Randgold, Harmony
and Sibanye are relatively secure with net cash/low debt on their balance sheets hence will not require any refinancing, in our view.
The most at risk are AngloGold and Gold Fields which have rising net debt and limited available headroom related to available
financing. Both AngloGold and Gold Fields would have to refinance in 2H2014/1H2015, in our view.
African Barrick is secure for now but if the gold prices were to decline from here (as we forecast) the company could face financing
issues.
Exhibit 24: All companies in our senior gold coverage have headroom in case the gold price turns downward, but most will need
some additional facilities or refinancing in 2015
Net debt and available financing facilities
1,000

US$mn

1,000

2,000

3,000

4,000

5,000
2013

2014
RRS.L

2015

2013

2014

2015

2013

ABGL.L

2014
ANGJ.J

2015

2013

2014
GFIJ.J

2015

2013

2014
HARJ.J

2015

2013

2014

2015

SGLJ.J

Source: Company data, Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research

22

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

Summary estimate changes


Exhibit 25: We make significant cut to our estimates
Summary of estimate changes
Gold - Seniors
Revenue (US$ mn)

Randgold Resources

2015E

2013E

2014E

2015E

2013E

2014E

2015E

2013E

2014E

2015E

FY2013A

FY2014E

FY2015E

New

$ 1,138

$ 1,201

$ 1,399

$ 897

$ 734

$ 802

$ 5,406

$ 4,800

$ 5,477

R 26,440

R 24,669

R 28,298

R 18,867

R 17,278

R 16,843

R 15,902

R 16,495

R 17,345

Old

$ 1,148

$ 1,325

$ 1,500

$ 916

$ 916

$ 943

$ 5,367

$ 5,635

$ 5,849

R 26,118

R 26,814

R 31,637

R 16,991

R 16,366

R 16,273

R 16,405

R 18,634

R 17,592

-1%

-9%

-7%

-2%

-20%

-15%

1%

-15%

-6%

1%

-8%

-11%

11%

6%

4%

-3%

-11%

-1%

New

$ 497

$ 464

$ 641

$ 189

$ 139

$ 220

$ 1,606

$ 1,096

$ 1,477

R 11,215

R 8,631

R 10,917

R 6,817

R 4,425

R 4,369

R 2,851

R 2,727

R 2,226

Old

$ 496

$ 527

$ 700

$ 189

$ 170

$ 154

$ 1,617

$ 1,571

$ 1,521

R 10,622

R 10,018

R 13,817

R 5,128

R 2,776

R 4,723

R 3,537

R 4,385

R 2,163

0%

-12%

-8%

0%

-18%

43%

-1%

-30%

-3%

6%

-14%

-21%

33%

59%

-8%

-19%

-38%

3%

New

$ 3.24

$ 2.62

$ 3.86

$ 0.06

$ 0.02

$ 0.15

$ 1.26

-$ 0.21

$ 0.22

R 2.33

R 1.26

R 2.88

R 3.59

R 1.61

R 1.74

-R 0.19

R 1.29

-R 0.49

Old

$ 3.31

$ 3.71

$ 5.01

$ 0.06

$ 0.06

$ 0.03

$ 0.87

$ 0.81

$ 0.69

R 1.80

R 1.73

R 4.86

R 2.40

-R 0.07

R 2.37

R 2.02

R 4.62

R 0.35

-2%

-29%

-23%

-1%

-63%

418%

44%

-126%

-68%

29%

-27%

-41%

49%

-2407%

-27%

-110%

-72%

-240%

New

$ 0.49

$ 0.26

$ 0.71

$ 0.02

$ 0.02

$ 0.03

$ 0.05

$ 0.00

$ 0.20

R 0.30

R 0.32

R 0.87

R 0.87

R 0.40

R 0.61

R 0.50

R 0.18

R 0.00

Old

$ 0.50

$ 0.51

$ 0.38

$ 0.07

$ 0.07

$ 0.06

$ 0.20

$ 0.20

$ 0.20

R 0.54

R 0.52

R 1.45

R 0.75

R 0.04

R 0.83

R 1.01

R 0.80

R 0.86

-2%

-48%

85%

-71%

-71%

-50%

-75%

-100%

0%

-45%

-39%

-40%

16%

982%

-27%

-50%

-78%

-100%

New

-$ 744

-$ 374

-$ 144

-$ 427

-$ 210

-$ 165

-$ 2,015

-$ 1,360

-$ 1,000

-R 7,506

-R 5,964

-R 4,230

-R 2,895

-R 2,664

-R 2,028

-R 3,605

-R 3,007

-R 2,858

Old

-$ 744

-$ 339

-$ 109

-$ 461

-$ 335

-$ 205

-$ 2,075

-$ 1,360

-$ 1,000

-R 8,169

-R 6,451

-R 4,709

-R 3,008

-R 2,846

-R 2,226

-R 3,917

-R 3,727

-R 3,792

0%

10%

32%

-7%

-37%

-20%

-3%

0%

0%

-8%

-8%

-10%

-4%

-6%

-9%

-8%

-19%

-25%

New

15.8%

12.4%

15.7%

4.8%

3.3%

5.0%

5.7%

5.2%

6.3%

3.9%

4.1%

5.0%

14.0%

8.2%

7.6%

5.1%

4.1%

3.1%

Old

15.3%

13.4%

16.2%

4.7%

3.9%

3.3%

7.0%

6.6%

6.8%

4.9%

4.9%

6.4%

9.8%

5.5%

8.0%

6.1%

6.2%

3.3%

3%

-7%

-3%

2%

-15%

52%

-20%

-21%

-7%

-21%

-16%

-21%

43%

49%

-5%

-16%

-34%

-5%

% change

CROCI (%)

Harmony Gold

2014E

% change

Capex (US$ mn)

Sibanye Gold

2013E

% change

DPS (US$)

Gold Fields

2015E

% change

EPS (US$)

AngloGold Ashanti

2014E

% change

EBITDA (US$ mn)

African Barrick Gold

2013E

% change

Source: Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research

23

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

Randgold Resources (RRS.L): The high quality gold miner; catalysts ahead; Neutral on
valuation
Investment Profile

Whats changed

Low

High

Growth

Growth

Returns *

Returns *

Multiple

Multiple

Volatility

Volatility
20th

Percentile

40th

60th

80th

100th

We update our estimates for our new gold price estimates and we now forecast Kibali reaching commercial
production in 4Q13 (we previously forecast first gold pour in 1Q13). Randgold announced with its 1Q13 results a
capex cut of US$50 mn at Kibali without affecting the schedule of the project. The company had also trimmed
capex at the Loulo-Gounkoto complex by US$20 mn.
Our 2013/14/15E EPS move -2%/-29%/-23% as we adjust our production, cost and metal price assumptions.

Randgold Resources (RRS.L)


Europe Mining Peer Group Average
* Returns = Return on Capital

For a complete description of the investment


profile measures please refer to the
disclosure section of this document.

Key data

Current

Price (p)
12 month price target (p)
Upside/(downside) (%)
Market cap ( mn)
Enterprise value ($ mn)

4,614
5,700
24
4,254.2
6,890.1
12/15E
1,399.2
(6.7)
441.3
(23.2)
3.86
5.01
9.9
18.9
1.0
7.3
15.7

Revenue ($ mn) New


Revenue revision (%)
EBIT ($ mn) New
EBIT revision (%)
EPS ($) New
EPS ($) Old
EV/EBITDA (X)
P/E (X)
Dividend yield (%)
FCF yield (%)
CROCI (%)

12/12
1,328.6
0.0
567.4
0.0
4.69
4.69
13.1
21.7
0.4
(3.7)
19.9

12/13E
1,137.6
(0.9)
345.6
(1.9)
3.24
3.31
13.9
22.5
0.7
(5.3)
15.8

12/14E
1,201.3
(9.3)
283.6
(29.5)
2.62
3.71
14.7
27.9
0.4
2.6
12.4

Price performance chart


8,000

430

7,500

420

7,000

410

6,500

400

6,000

390

5,500

380

5,000

370

4,500

360

4,000
3,500
Sep-12

350
340
Dec-12
Randgold Resources (L)

Share price performance (%)


Absolute
Rel. to FTSE World Europe (GBP)

Mar-13

Jun-13

FTSE World Europe (GBP) (R)

3 month
(6.3)
(10.6)

6 month
(15.4)
(16.0)

Implications
Randgold remains the best-positioned name with the strongest balance sheet and strong cash flow from
operations on our estimates. After the capex is complete at Kibali, we estimate that the companys total cash
cost (TCC) will be under US$800/oz. We expect production to grow to 1,200koz by 2015 from an estimated
845koz in 2013. The company has a strong 2014/15E FCF yield of 2.6% and 7.3% respectively. Post the
completion of Kibali we expect the company to start ramping up its dividend.
In our view investors with a positive view on the gold price would view Randgold as one of the better
opportunities since it is well protected on the downside with low-cost assets and operates in three countries
across four mines. But given our expectation for a weak outlook for gold, we believe the broader market will
continue to have a muted interest in the stock.

Valuation
We value Randgold using a 50/50 blend of our P/E valuation (a target multiple of 20x based on our GS SUSTAIN
framework (see Appendix 1) applied to our 2015 (previously 2014) earnings estimate) and our NAV estimate.
This results in our new 12-month price target of 5,700p (from 5,650p), implying 24% upside. We are Neutral
rated on the stock.

Key risks
Randgold operates in Mali (Loulo, Gounkoto, Morila), Cote dIvoire (Tongon) and the DRC (Kibali). All three
countries have experienced political instability in recent years. However, this has abated somewhat more
recently, though it remains a risk. The diversity of Randgolds operations across multiple countries helps, but we
believe country-specific risk impacting production or costs in the future are significant. Additional risks include a
weaker/stronger gold price and execution success/failure at Kibali.

12 month
(33.6)
(44.1)

Source: Company data, Goldman Sachs Research estimates, FactSet. Price as of 9/11/2013 close.

Source: Company data, Goldman Sachs Global Investment Research, FactSet.

Goldman Sachs Global Investment Research

24

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

Exhibit 26: Randgold Resources financial and operating data, 2011-15E


per-share data in US cents
Decyearend
Profitmodel($mn)

2011

Totalrevenue

1,131

1,329

1,138

1,201

1,399

562

629

641

738

758

Operatingcosts

2012

2013E

2014E

2015E

EBITDA

570

699

497

464

641

Depreciation&amortisation
EBIT

82
488

132
567

151
346

180
284

200
441

Netfinancecost
ShareofprofitsofequityaccountedJVs
UnderlyingPretaxprofit
Incometax
Taxrate(%)

2011

2014E

2015E

Pricetarget(12months,GBp)

5,700 EV($USm)/resource(Moz)

316

4,614 EV($USm/reserves(Moz)

562

Upside(downside)

24% NAV($USm)

Recommendation
Consolidatedproductionsummary(koz)

3,931

Neutral

11

Loulo

346

503

516

633

54

48

75

Morila

99

81

64

43

24

485

568

401

336

527

Tongon

250

210

239

246

260

52

58

49

50

105

Kibali

11%

10%

12%

15%

20%

Totalgoldproduction

56

79

53

44

65

1,200

376

432

299

242

356

1,000

UnderlyingpreexceptionalEPS

412

469

324

262

386

Netprofit(inc.Extraordinaries)

367

429

298

242

356

EPS

402

466

323

262

386

91

92

92

92

92

GoldProduction(Koz)

Minorities

Weightedsharesoutstanding(mn)

2013E

Lastclose

Underlyingpreexceptionalprofit

TotalExtraordinaries

2012

Salientmetrics

642

11

131

239

696

794

831

1,053

1,166

800
600
400
200

40

50

49

26

71

10%

11%

15%

10%

18%

123.1%
247%

17.4%
23%

14.4%
29%

5.6%
7%

16.5%
38%

EBITgrowth

258%

16%

39%

18%

56%

Loulo

264

462

297

224

EPSgrowth

253%

16%

31%

19%

65%

Morila

79

72

43

17

11

DPSgrowth

100%

25%

2%

46%

99%

Tongon

274

190

123

67

93

DPS(UScents)
Dividendpayoutratio(%)
Growth&margins(%)
Revenuegrowth
EBITDAgrowth

0
2011

Morila

2013E
Tongon

Kibali

2014E

2015E

DivisionalEBITDA

EBITDAmargin

50%

53%

44%

39%

46%

Kibali

EBITmargin
Cashflowstatement($mn)
Netincome

43%

43%

30%

24%

32%

EBITDAfromMining

368

429

298

242

356

Assumptions

Strippingtransfer

2012
Loulo

294

39

127

617

723

464

348

525

11.00

R/$

7.25

8.21

9.63

10.68

Minorities

56

79

53

44

65

$/

1.60

1.58

1.54

1.53

1.53

DD&A
Other

82
64

132
146

151
8

180
0

200
0

Gold($/oz)
NAVsummary

1,570
$USmn

1,669

1,456

1,144

1200

570

494

510

466

621

Loulo

2,709

Tongon

1,086

448

677

744

374

144

Morilla

Dividends

18

37

46

45

24

Kibali

345

Netcashflowfromoperations

Netdebt(2013)

(32)

4,614

Cashflowfromoperations
PerShare
Capitalexpenditures

103

220

279

47

453

Nonrecurringitems

Minorities&otherliabs

Acquisitions

GroupNAV

Divestments
Workingcapitalmovements

14

255
3,931

GroupNAV(mn)

2,556

34

171

132

87

36

NAV/share(GBp)

2,798

Pricetarget(12month,GBp)

5,700

Other

16

277

73

Surplus/deficit
Balancesheet($mn)

122

114

338

134

489

P/NAVatpricetarget
Valuation(x)

2.04

Cash&Cashequivalents

488

387

35

169

658

Shareprice(Avg,GBp)

5,696

6,407

4,614

4,614

Stocks

219

292

368

302

275

MarketCap(Avg,mn)

5,203

5,898

4,254

4,254

4,254

Debtors

131

285

258

212

193

EV(US$mn)

7,954

9,148

6,890

6,801

6,377
4.6

Othercurrentassets

7.0

6.9

6.1

5.7

Totalcurrentassets

845

968

663

684

1,126

EV/EBITDA

14.0

13.1

13.9

14.7

9.9

Netfixedassets

1,279

1,742

1,530

1,724

1,668

P/E

22.1

21.7

22.5

27.9

18.9

Netintangibles

406

406

1,109

1,109

1,109

EquityMethodinvestments
Otherlongtermassets

11

2,533

3,127

3,304

3,519

3,905

159

216

122

100

Shorttermdebt
Othercurrentliabilities

0
19

0
20

0
21

Totalcurrentliabilities

178

236

3
58

Totalassets
Accountspayable

Longtermdebt
Otherlongtermliabilities
Totalliabilities
Totalcommonequity
Minorityinterest
Totalliabilities&equity

EV/sales

Dividendyield
FCFyield

0%

0%

1%

0%

1.0%

1.8%

3.7%

5.3%

2.6%

7.3%

EV/GCI

3.8

3.2

1.9

1.8

1.6

EV/capitalemployed

3.5

3.3

2.2

2.0

1.7

91

Price/book

3.6

3.4

2.2

2.0

1.8

0
17

0
16

Ratios

143

117

107

CROCI

30%

20%

16%

12%

16%

17

3.9

2.6

2.0

1.6

2.0

89

76

76

76

26%

24%

14%

11%

15%

238

342

222

197

186

2,184

2,619

2,886

3,083

3,415

110

166

195

239

304

2,533

3,127

3,304

3,519

3,905

Workingcapital

362

443

448

461

467

Netdebt/(cash)

485

371

32

166

655

Capitalemployed

2,297

2,802

3,085

3,325

3,722

CROCI/WACC
ROIC
ROIC/WACC

3.4

3.1

1.8

1.5

1.9

ROA

17%

15%

9%

7%

10%

Netdebt/equity

22%

14%

1%

5%

19%

Netdebt/EBITDA

85%

53%

6%

36%

102%

0.3

0.2

0.0

0.1

0.2

8%

8%

8%

8%

8%

189

668

203

57

40

Gearing
WACC
EBITinterestcover

Source: Company data, Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research

25

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

African Barrick Gold (ABGL.L): Turnaround plans stabilises, but reiterate Sell on valuation
Investment Profile

What happened

Low

High

Growth

Growth

Returns *

Returns *

Multiple

Multiple

Volatility

Volatility
20th

Percentile

40th

60th

80th

100th

African Barrick Gold (ABGL.L)


Europe Mining Peer Group Average
* Returns = Return on Capital

For a complete description of the investment


profile measures please refer to the
disclosure section of this document.

ABGs shares are up 77% since hitting a low of 96p on June 28 this year. In our view the outperformance has
been driven by: 1) the increase in the gold price (+20% off lows); 2) the markets response to ABGs turnaround
plan; and 3) Barricks intention to sell the company. Investors have logically sought a leveraged producer in a
rising gold price environment.
We remove African Barrick from our Pan-Europe Conviction Sell List. Since being added to the Conviction Sell
List on May 3, 2013, the shares are up 11.3% vs. FTSE World Europe +2.5%. Over the last 12 months, the shares
are down 63.6% vs. FTSE World Europe up 18.8%.

Current view
Key data

Current

Price (p)
12 month price target (p)
Upside/(downside) (%)
Market cap ( mn)
Enterprise value ($ mn)

Revenue ($ mn) New


Revenue revision (%)
EBIT ($ mn) New
EBIT revision (%)
EPS ($) New
EPS ($) Old
EV/EBITDA (X)
P/E (X)
Dividend yield (%)
FCF yield (%)
CROCI (%)

12/12
1,087.3
0.0
172.0
0.0
0.15
0.15
7.1
46.0
2.4
(4.3)
7.5

12/13E
896.6
(2.1)
33.4
(14.2)
0.06
0.06
5.3
43.4
0.7
(15.8)
4.8

12/14E
734.1
(19.9)
20.5
(54.7)
0.02
0.06
7.6
129.2
0.7
(5.3)
3.3

170
110
(35)
697.2
991.2
12/15E
801.6
(15.0)
101.1
254.8
0.15
0.03
4.8
17.7
1.1
1.9
5.0

We remain bearish on ABG given its constrained capacity to make cash at both current and our forecast gold
prices. The cost optimization plan via which the company plans to save US$185 mn (US$100 mn in 2013 15%
in operating costs and 30% in corporate overheads) is insufficient and on our estimates ABG continues to burn
cash through to 2015E. Management is doing the right things but we believe gold will decline into 2014 and
further restructuring will thus be required.
Consistent with our note Survival of the fittest as lower gold price puts high-cost mines in jeopardy, May 3,
2013, we continue to believe that even with the cost optimization plan in place ABGs total operating cost is still
above our 2014/15 gold price estimates of US$1,144/oz and US$1,200/oz. And this we believe cannot easily be
remedied as the already-high sustaining capex is largely related to overburden stripping (i.e. required to prepare
for mining) in 2013 and 2014, or to delivering lower cost growth ounces at Buly. As such, reducing capex is not
likely to be straightforward. In addition, ABG is mining close to its reserve grade based on current reserves, so it
is likely that the company does not have the flexibility to high-grade the mines.

Price performance chart


500

430

450

420

400

410

350

400

300

390

250

380

200

370

150

360
350

100
50
Sep-12

340
Dec-12
African Barrick Gold (L)

Share price performance (%)


Absolute
Rel. to FTSE World Europe (GBP)

Mar-13

Jun-13

FTSE World Europe (GBP) (R)

3 month
33.4
27.3

6 month
(28.2)
(28.7)

12 month
(63.6)
(69.3)

Also, given the uncertainty surrounding the operations following the resignation of the COO (new CEO Brad
Gordon will take responsibility for all operations until a replacement is found) we highlight that the company
may not be able to get to the higher end of guidance of 540-600koz (1H13 production was 311koz).
We value ABG using a 50/50 blend of our P/E valuation (applying a target multiple of 7x based on our GS
SUSTAIN framework (see Appendix 1) to our 2015 earnings estimate previously 2014) and our NAV estimate.
This results in our new 12-month price target of 110p (was 100p), implying 35% downside. We reiterate our Sell
rating on the stock. The stock is overly expensive in our view trading at 2013/14E P/Es of 43.4x/129x vs. coverage
average of 29x/61x.
The key upside risks come from a higher gold price than we anticipate and better-than-forecast production. A
faster execution of portfolio review would be a positive catalyst. At current reduced valuation levels it is possible
that another M&A offer may emerge as Barrick Gold (ABX), the owner of 75% of the shares, seeks to rationalise
its portfolio.

Source: Company data, Goldman Sachs Research estimates, FactSet. Price as of 9/11/2013 close.

Source: Company data, Goldman Sachs Global Investment Research, FactSet.

Goldman Sachs Global Investment Research

26

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

Exhibit 27: Share price performance of African Barrick Gold vs. per group
Share prices as of the close of September 11, 2013
Company

Ticker

Primary analyst

ABGL.L
AMIq.L
AAL.L
ANTO.L
AQP.L
AUE.L
BAA.TO
BLT.L
BOL.ST
CEY.L
EDV.TO
FQM.L
FRES.L
GEMD.L
GLEN.L
HOCM.L
KAZ.L
KIOJ.J
LOND.L
LMI.L
LUN.TO
NHY.OL
NYR.BR
PDL.L
PTM.TO
RRS.L
RIO.L
SMF.TO
VED.L

Eugene King
Fawzi Hanano
Eugene King
Fawzi Hanano
Eugene King
Eugene King
Eugene King
Michele della Vigna, CFA
Eugene King
Eugene King
Eugene King
Fawzi Hanano
Eugene King
Eugene King
Eugene King
Eugene King
Fawzi Hanano
Fawzi Hanano
Fawzi Hanano
Eugene King
Fawzi Hanano
Eugene King
Eugene King
Eugene King
Eugene King
Eugene King
Michele della Vigna, CFA
Eugene King
Fawzi Hanano

Price
currency

Price as of Sep
11, 2013

Price performance
since May 3, 2013

3 month price
performance

6 month price
performance

12 month price
performance

170.00
167.00
1609.50
886.00
50.75
38.00
0.72
1932.50
104.80
46.20
0.77
1154.00
1218.00
165.25
339.00
278.00
309.20
482.00
122.00
348.10
4.88
25.36
3.86
123.40
1.15
4614.00
3207.00
2.00
1194.00

11.3%
-26.0%
-1.6%
-5.1%
21.6%
-6.7%
-33.3%
4.6%
1.7%
7.0%
-22.2%
-1.6%
1.3%
28.6%
-1.4%
8.5%
-17.0%
0.7%
10.2%
21.6%
17.9%
-7.4%
2.4%
16.4%
0.0%
-9.6%
6.1%
0.5%
-5.4%

33.4%
-21.9%
17.4%
0.2%
21.6%
15.6%
-35.1%
8.7%
14.0%
28.3%
-2.5%
4.2%
13.2%
32.2%
12.1%
27.7%
2.8%
2.0%
15.1%
24.0%
21.1%
-1.7%
4.3%
4.3%
6.5%
-6.3%
18.7%
3.6%
0.4%

-28.2%
-34.6%
-13.5%
-14.8%
-3.3%
3.4%
-63.6%
-9.1%
-4.6%
-11.9%
-51.6%
-13.7%
-18.3%
1.4%
-12.8%
-21.5%
-40.6%
-13.0%
-20.5%
4.9%
0.2%
-0.9%
-7.6%
3.4%
-18.4%
-15.4%
-6.7%
-21.3%
0.6%

-63.6%
-43.2%
-17.7%
-23.9%
33.1%
-40.6%
-84.3%
0.7%
-2.2%
-45.7%
-63.5%
-17.3%
-28.6%
-6.7%
-7.0%
-38.4%
-54.4%
-3.0%
-21.0%
7.1%
-0.4%
-6.3%
-18.8%
24.9%
0.0%
-33.6%
4.5%
-49.2%
22.0%

418.35

2.5%

4.8%

0.7%

18.8%

Europe Mining Peer Group


African Barrick Gold
African Minerals
Anglo American plc
Antofagasta plc
Aquarius Platinum
Aureus Mining
Banro Corporation
BHP Billiton Plc
Boliden
Centamin Plc
Endeavour Mining
First Quantum Minerals
Fresnillo PLC
Gem Diamonds
Glencore Xstrata plc
Hochschild Mining Plc
Kazakhmys
Kumba Iron Ore
London Mining
Lonmin
Lundin Mining Corporation
Norsk Hydro
Nyrstar
Petra Diamonds
Platinum Group Metals Ltd.
Randgold Resources
Rio Tinto plc
Semafo, Inc.
Vedanta Resources
FTSE World Europe (GBP)

p
p
p
p
p
p
C$
p
Skr
p
C$
p
p
p
p
p
p
R
p
p
C$
Nkr

p
C$
p
p
C$
p

Note: Prices as of most recent available close, which could vary from the price date indicated above
This table shows movement in absolute share price and not total shareholder return. Results presented should not and cannot be viewed as an indicator of future performance.
Source: FactSet, Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research

27

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

African Barrick: Our thesis in charts


Exhibit 28: Production is rising but costs are not relenting

Exhibit 29: On our 2014E gold price, ABGs mines do not generate cash

ABG production and total cash costs (US$/oz)

ABG total cash cost mine-wise

800

1,400

700

1,200
TCC ($US/oz)

2,000

600

1,000

500

800

400
600

300

US$/oz

Au(Koz)

2,500

200

100
0

Gold:1,144/oz

1,000

400

200

Gold:1,456/oz

1,500

500

0
2011

2012

2013E
Production

2014E

2015E

2016E

Bulyanhulu

TCC(US$/oz)

Buzwagi
FY2013E

Source: Goldman Sachs Global Investment Research.

North Mara

FY2014E

Source: Goldman Sachs Global Investment Research.

Exhibit 30: Cash burn continues into 2014; barely making cash into 2015/16

Exhibit 31: Net cash position deteriorates into 2014

CGO, capex, dividends, total cash flow

Net cash position of ABG

600

400
200

US$mn

US$mn

200
0

400

600

200
400

800

CFO

600
2011

Capex
2012

Dividends
2013E

Source: Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research

2014E

TotalCashflow
2015E

2016E

2011

2012

2013E

2014E

2015E

2016E

NetDebt
Source: Goldman Sachs Global Investment Research.

28

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

Exhibit 32: African Barrick Gold financial and operating data, 2011-15E
per-share data in US cents (priced at close of September 11)
Decyearend
Profitmodel($mn)

2011

Totalrevenue

1,218

1,087

897

734

802

674

756

708

596

581

Operatingcosts
EBITDA
Depreciation&amortisation
EBIT
Netfinancialincome/(expense)
Pretaxprofits

2012

2013E

2014E

2015E

2011

2012

2013E

2014E

2015E

Salientmetrics

544

331

189

139

220

134
410

159
172

155
33

118
21

119
101

Pricetarget(12months,GBp)

110 EV($USm)/resource(Moz)

39

Lastclose(GBp)

170 EV($USm)/reserves(Moz)

54

Upside(downside)

35% NAV($USm)

700

Recommendation
Sell
Consolidatedproductionsummary(koz)

NorthMara

171

193

221

182

182

403

164

26

12

92

Bulyanhulu

262

236

198

240

276
190

Incometax

118

71

13

28

Buzwagi

197

166

162

168

Taxrate(%)

29%

43%

50%

27%

30%

Tulawka

59

31

Minorities

10

11

12

688

626

585

590

648

Underlyingpreexceptionalprofit

275

104

25

62

800

67

25

15

700

45

729

275

59

704

62

67

15

172

15

UnderlyingEPS(US$)

0.67

0.25

0.06

0.02

0.15

Weightedsharesoutstanding(mn)

410

410

410

410

410

DPSdeclared(US$cents)

16.30

16.30

2.00

2.00

5.00

Dividendpayoutratio(%)
Growth&margins(%)

24.3%

112.4%

1.2%

96.1%

33.0%

CompanyExtraordinaries
Netincome(postexceptionals)
PostExceptionalsEPS(cents)

Goldproduction(koz)

UnderlyingEPS(US$cents)

Goldproduction(koz)

600
500
400
300
200
100
0
2011

2012
NorthMara

2013E
Tulawka

2014E

Bulyanhulu

2015E

Buzwagi

Revenuegrowth
EBITDAgrowth

25%
30%

11%
39%

18%
43%

18%
27%

9%
59%

EBITgrowth

32%

58%

81%

39%

393%

NorthMara

810

965

810

908

EPSgrowth

26%

62%

76%

101%

629%

Tulawaka

727

1,269

DPSgrowth

208%

0%

88%

0%

150%

Bulyanhulu

610

803

997

757

686

Cashoperatingcost/oz(US$/oz)
858

EBITDAmargin

45%

30%

21%

19%

27%

Buzwagi

691

1,087

1,077

1,016

839

EBITmargin
Cashflowstatement($mn)

34%

16%

4%

3%

13%

Groupaverage
DivisionalEBITDA($mn)

693

956

970

846

739

Netincome

129

118

132

36

55

68

16

(14)

257

204

74

88

136

275

59

704

62

NorthMara

Addbacktaxshield

71

13

28

Tulawka

Strippingtransfer

Minorities

Bulyanhulu

10

11

12

Buzwagi

166

86

86

38

49

DD&A
Other

134
83

159
20

155
728

118
0

119
0

EBITDAfrommining
Assumptions

619

424

278

162

240

Cashflowfromoperations

502

258

181

130

211

$/

1.60

1.58

1.54

1.53

1.53

/$

0.72

0.78

0.76

0.77

0.77

338

343

427

210

165

1,570

1,669

1,456

1,144

1,200

Pershare($)
Capitalexpenditures

Gold($/oz)

Dividends

28

70

55

12

Silver(USc/oz)

35.23

31.09

24.57

19.06

21.05

Netcashflowfromoperations
Nonrecurringitems

136
0

156
0

301
0

88
0

34
0

Copper($/t)
NAVsummary

8,823
$USmn

7,950

7,216

6,600

6,875

Acquisitions

NorthMara

Divestments

Tulawaka

13

33

71

21

26

Workingcapitalmovements
Other
Surplus/deficit
Balancesheet($mn)

33

50

183
2011

183
2012

280
2013

67
2014

9
2015

Buly
Buzwagi

73
0
619
55

Netdebt(2013)
Minorities&otherliabs

122
169
700

Cash&Cashequivalents

584

401

261

228

228

GroupNAV($USmn)

Stocks

317

335

224

199

230

GroupNAV(mn)

442

30

44

30

26

30

NAV/share(GBp)

108

Pricetarget(12months,GBp)

110

P/NAVatpricetarget

1.0

Receivables
Othercurrentassets

37

47

80

71

82

TotalCurrentassets

968

828

596

525

570

Grossfixedassets
AccumulatedDD&A

2,597
774

2,925
962

3,341
1,893

3,551
2,011

3,716
2,130

Netfixedassets

1,823

1,964

1,449

1,541

1,586

475

509

509

509

509

216

230

297

297

297

259

278

211

211

211

244

259

254

254

254

3,294

3,329

2,509

2,530

2,621

162

170

136

121

140

Shorttermdebt

Othershorttermliabilities

10

10

1
170

1
178

11
157

11
141

11
161

Grossintangibles
Accumulatedamortisation
Netintangibles
Totalinvestments
Otherlongtermassets
Totalassets
Accountspayable

Provisions
Totalcurrentliabilities
Longtermdebt

ADAPTPRICE
Valuation
Shareprice(Avg,GBp)

514

421

175

176

176

MarketCap(Avg,GBPmn)

3,382

2,735

1,102

1,102

1,102

EV($USmn)

2,835

2,356

991

1,059

1,052

EV/sales

2.3

2.2

1.1

1.4

1.3

EV/EBITDA

5.2

7.1

5.3

7.6

4.8

P/E

12.3

26.3

43.4

129.2

17.7

Dividendyield

1.9%

2.0%

2.4%

0.7%

0.7%

FCFyield

5%

4%

16%

5%

2%

EV/GCI

0.9

0.6

0.2

0.3

0.2

EV/capitalemployed
Price/book
Ratios

140

173

165

CROCI

Otherlongtermliabilities

326

375

205

205

205

CROCI/WACC

Totallongtermliabilities

326

375

344

378

369

ROIC

Totalliabilities

496

554

501

519

530

ROIC/WACC

2,761

2,752

1,997

2,001

2,078

37

23

10

11

13

Totalcommonequity
Minorityinterest

FY1

ROA
Netdebt/equity

1.0

0.8

0.5

0.5

0.5

76.4

62.7

35.9

36.0

34.6

16.3%

7.5%

4.8%

3.3%

5.0%

2.0

0.9

0.6

0.4

0.6

11%

5%

5%

1%

4%

1.4

0.6

(0.7)

0.1

0.4

9%

2%

24%

0%

2%

21%

15%

6%

3%

3%
10.2

3,294

3,329

2,509

2,530

2,621

5.1

8.4

11.4

15.8

Workingcapital

215

248

177

156

182

Gearing

27%

17%

6%

3%

3%

Netdebt/(cash)

584

401

122

54

63

WACC

8.0%

8.0%

8.0%

8.0%

8.0%

Capitalemployed

2,799

2,775

2,147

2,185

2,256

EBITinterestcover

56.6

21.0

4.7

2.4

11.3

Totalliabilities&equity

Netdebt/EBITDA

Source: Company data, Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research

29

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

AngloGold Ashanti (ANGJ.J): Balance sheet shored up but portfolio restructuring ahead,
strikes a risk; Sell
Investment Profile

Whats changed

Low

High

Growth

Growth

Returns *

Returns *

Multiple

Multiple

Volatility

Volatility
20th

Percentile

40th

60th

80th

100th

AngloGold Ashanti (ANGJ.J)


Europe Mining Peer Group Average
* Returns = Return on Capital

For a complete description of the investment


profile measures please refer to the
disclosure section of this document.

Key data

Current

Price (R)
12 month price target (R)
Upside/(downside) (%)
Market cap (R mn)
Enterprise value ($ mn)

134.45
120.00
(11)
51,846.4
8,984.6
12/15E
5,477.4
(6.4)
388.3
(41.9)
0.22
0.69
6.3
60.6
1.5
(2.5)
6.3

Revenue ($ mn) New


Revenue revision (%)
EBIT ($ mn) New
EBIT revision (%)
EPS ($) New
EPS ($) Old
EV/EBITDA (X)
P/E (X)
Dividend yield (%)
FCF yield (%)
CROCI (%)

12/12
6,353.0
0.0
1,589.0
0.0
4.08
2.15
7.0
8.8
1.0
(3.4)
10.4

12/13E
5,406.1
0.7
665.0
(23.7)
1.26
0.87
5.6
10.8
0.4
(18.4)
5.7

12/14E
4,799.9
(14.8)
104.3
(86.9)
(0.21)
0.81
8.4
NM
0.0
(3.3)
5.2

Price performance chart


350

440

300

420

250

400

200

380

150

360

100
Sep-12

340
Dec-12
AngloGold Ashanti (L)

Share price performance (%)


Absolute
Rel. to FTSE World Europe (GBP)

Mar-13

Jun-13

FTSE World Europe (GBP) (R)

3 month
(19.8)
(23.5)

6 month
(40.6)
(41.0)

12 month
(52.2)
(59.8)

Source: Company data, Goldman Sachs Research estimates, FactSet. Price as of 9/11/2013 close.

We update our estimates for the 2Q13 results and our revised gold price estimates. Production came in at 935koz
at a total cash cost (TCC) of US$898/oz. The company reiterated full year guidance of 4-4.1moz at a TCC of
US$815-845/oz. The company, like others in our coverage, focused on increased capital discipline by reducing
capex by c.US$100-150 mn, exploration expenditure by US$40 mn to US$377 mn. Corporate costs for FY13/14
were reduced by US$51 mn and c.US$130 mn respectively. We remove AngloGold from our CEEMEA Focus List
following recent underperformance.

Implications
Our 2013/14/15 underlying EPS moves to $1.26/-0.21/0.22. On our estimates, AngloGold is burning cash through
to 2015. The above-CPI wage hikes offered to workers (7%-8%) and the constant threat of strikes (platinum sector
wage negotiations up next) could further intensify the cash burn. Also we believe that the guidance for 2013 is
overly optimistic given that production for 1H was 1.8moz at a TCC of 895/oz. On our estimates (even after taking
the planned start-up of Kibali in 4Q) ANG will produce c. 3.8moz (vs. 4moz+ guidance) at a C1 cash cost of
US$848/oz. The new CEO (Venkat, previously CFO) has acted decisively to shore up the balance sheet. The newly
issued US$1.25 bn bond will both replace the May 2014 convertible (c.US$725 mn) and provide some additional
headroom. The new bonds coupon is 8.5% (compared to 3.5% for the convertible) implying an additional
US$40 mn interest costs. Additionally, the relaxation of the 3x net debt to EBITDA covenant to 4.5x for the next
two periods (FY14 and 1H2014) means that there is no imminent risk of the company breaching debt covenants
but on our estimates it could face this issue at end 2014. The net debt to EBITDA for FY2014 on our estimates is
3.21x. With most of the work on the balance sheet done, attention is now likely to turn to improving the
portfolio. ANG has multiple mines which are high cost (even after the cost reduction effort) and have short lives.
The company in our view needs to cut costs quickly and sell loss-making assets. Many of these assets are in
South Africa which 1) makes significant labour reductions hard to achieve (cf. the recent Anglo Plat attempt) and
2) asset sales hard to realize; in addition 3) recurring strike action and work stoppages could further impact cash
flow.

Valuation
We value AngloGold using a 50/50 blend of our P/E valuation (a target multiple of 9x based on our GS SUSTAIN
framework (see Appendix 1) applied to our 2015 earnings, previously 2014) and our NAV estimate. This results
in a 12-month price target of R120 (from R115), implying 11% downside. We reiterate our Sell rating.

Key risks
A higher gold price and no significant work stoppages owing to strike action by unions are the key risks to our
view and price target.

Source: Company data, Goldman Sachs Global Investment Research, FactSet.

Goldman Sachs Global Investment Research

30

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

Exhibit 33: AngloGold Ashanti operating and financial metrics 2011-15E


Per share data in USD
Dec year end
Profit model ($ mn)
Total revenue

2011

2012

2013E

2014E

2015E

6,570

6,353

5,406

4,800

5,477

-3,721

-3,554

-3,800

-3,704

-4,000

EBITDA

2,849

2,799

1,606

1,096

1,477

Depreciation & amortisation


EBIT

-778
2,071

-808
1,991

-941
665

-992
104

-1,089
388

Operating costs

2011

2012

2013E

2014E

2015E

Salient metrics
Price target (12 months, ZAR)

120

EV ($USm) / resource

58

Last close

134

EV ($USm) / reserves

122

Upside (downside)

-11%

Recommendation
Consolidated production summary (koz)

NAV ($USm)

2,021

Sell

Net Financial Income

44

64

91

-223

-263

South Africa

1,622

1,213

1,284

1,290

1,298

Share of equity a/c'd investments

74

-28

-190

Continental Africa

1,570

1,525

1,330

1,540

1,683

Exchange gain

-1

Australia

246

258

248

504

654

Pretax profits

2,350

2,000

667

-118

125

Americas

888

942

949

1,011

1,100

Total gold production

4,325

3,937

3,811

4,345

4,734

Income tax
Tax rate (%)

-403

-191

34

-36

-20%

-29%

-29%

-29%

5,000

-46

-19

-9

-2

4,500

1,629

1,578

468

-86

91

4,000

-116

321

2,290

3,500

Adjusted net income

1,629

1,616

485

-82

86

Adjusted EPS (cents)

422

418

126

-21

22

2,500

Reported EPS (cents)

453

325

-469

-21

22

2,000

Weighted shares outstanding (mn)

386

387

385

385

385

1,500

DPS ($)

0.50

0.37

0.05

0.00

0.20

1,000

Dividend payout ratio (%)


Growth & margins (%)

11%

11%

-1%

0%

89%

500

Revenue growth

30%

-3%

-15%

-11%

14%

EBITDA growth
EBIT growth

50%
73%

-2%
-4%

-43%
-67%

-32%
-84%

35%
272%

EPS growth

-56%

-1%

-70%

-117%

-206%

DPS growth

400%

-26%

-86%

-100%

na

EBITDA margin

43%

44%

30%

23%

27%

EBIT margin
Cash flow statement ($ mn)
Net income

32%

31%

12%

2%

7%

1,629

1,616

485

-82

86

19

South Africa

1,412

991

681

346

399

Continental Africa

1,111

1,129

833

558

650

111

100

Australia

115

98

303

415

46

19

-9

-2

Americas

739

955

684

327

427

770
-18

798
-785

941
-295

992
0

1,089
0

3,271

3,190

2,297

1,534

1,891

2,557

1,748

1,122

908

1,178

A/$

0.97

0.97

1.05

1.18

1.18

R/$

7.25

8.21

9.63

10.68

11.00

-1,527

-1,851

-2,015

-1,360

-1,000

$/

-169
861

-236
-339

-53
-946

0
-452

-58
120

500

South Africa

442

-172

-497

Cont. Africa

1,739
1,686

Underlying profit (excl. extraordinaries)


Post tax extraordinaries (for QP)

Stripping transfer
Derivatives cash flow
Dividend/Income received from assoc.
Minorities
DD&A
Other
Cash flow from operations
Per share (USD)
Capital expenditures
Dividends
Net cash flow from operations
Non recurring items
Acquisitions
Divestments

Koz

Minorities

-675
-29%

3,000

0
2011

2012
2013E
2014E
SouthAfrica
ContinentalAfrica
Australia
Americas

Cash Costs per oz produced


South Africa

758

939

937

911

930

Continental Africa

787

939

903

834

862

1,350

1,212

1,165

575

590

719
752

911
883

1,026
894

1,017
815

1,068
823

Australia
Americas
Group Average
Divisional EBITDA

EBITDA from Mining


Assumptions

Gold ($/oz)
NAV summary

1.60

1.58

1.54

1.53

1.53

1,570
$US mn

1,669

1,456

1,144

1,200

2015

110

91

Australia

-220

-318

-66

278

-311

Americas

Other

188

-246

41

Net debt (2013)

(3,598)

Surplus/deficit
Balance sheet ($ mn)

767

-1,309

-471

-174

-191

Minorities
Other BS items

11
(164)

Working capital movements

Cash & Cash equivalents

1,170

956

589

589

589

Stocks

1,064

1,287

1,175

962

1,200

350

470

495

405

506

0
2,584

0
2,713

0
2,259

0
1,956

0
2,294

Debtors
Derivatives
Other current assets
Total current assets

2015E

1,905

Group NAV ($US mn)

2,021

Group NAV (ZAR mn)

19,464

NAV / share (ZAR)


Price target (12-month, ZAR)

ADAPTPRICE

50
120

P/NAV at price target

2.38

Valuation

2011

Gross fixed assets

13,322

15,242

17,257

18,617

19,617

2012

2013

2014

Accumulated DD&A

-6,797

-7,594

-12,150

-13,142

-14,231

Share price (US$, Avg)

45

36

14

14

14

6,525

7,648

5,107

5,475

5,386

Market Cap (US$, Avg)

16,402

11,959

5,233

5,233

5,233

Gross intangibles

270

357

357

357

357

EV (US$ mn)

18,052

14,829

8,985

9,156

9,349

Accumulated amortisation

-60

-42

-76

-76

-76

EV/sales

2.7

2.3

1.7

1.9

1.7

Net intangibles

210

315

281

281

281

EV/EBITDA

6.3

5.3

5.6

8.4

Total investments

888

1,227

1,257

1,257

1,257

P/E

10.7

8.6

10.8

Dividend yield

1.1%

1.0%

0.4%

0.0%

1.5%

FCF yield

4.7%

-3.0%

-18.3%

-3.3%

-2.5%

Net fixed assets

Other long-term assets


Total assets
Accounts payable
Short-term debt
Other current liabilities
Total current liabilities

6.3
60.6

595

792

1,377

1,252

1,391

10,802

12,695

10,280

10,220

10,609

751

979

824

674

841

EV/GCI

1.2

0.8

0.5

0.4

0.4

32

859

1,281

1,281

1,281

EV/capital employed

2.4

1.6

1.2

1.2

1.2

0
783

0
1,838

0
2,105

0
1,955

0
2,122

Price/book
Ratios

Long-term debt

2,456

2,724

2,906

3,079

3,270

CROCI

Other long-term liabilities

2,397

2,664

1,954

1,954

1,954

CROCI / WACC

Total long-term liabilities

4,853

5,388

4,860

5,033

5,224

ROIC

3.5

2.5

1.6

1.6

1.6

17%

10%

6%

5%

6%

2.3

1.4

0.8

0.7

0.8

24%

23%

7%

1%

4%

Total liabilities

5,636

7,226

6,964

6,988

7,346

ROIC / WACC

3.2

3.0

0.9

0.2

0.6

Total common equity

5,029

5,447

3,326

3,245

3,273

ROA

16%

13%

4%

-1%

1%

Net debt / equity

26%

48%

108%

116%

121%

Net debt / EBITDA

46%

94%

224%

344%

268%

Minority interest

137

22

-11

-13

-10

10,802

12,695

10,280

10,220

10,609

Working capital

1,149

1,467

1,533

1,255

1,566

Gearing

21%

33%

52%

54%

55%

Net debt / (cash)

1,318

2,627

3,598

3,772

3,963

WACC

8%

8%

8%

8%

8%

Capital employed

7,654

9,052

7,502

7,592

7,814

EBIT interest cover

-47.1

-31.1

-7.3

0.5

1.5

Total liabilities & equity

Source: Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research

31

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

Gold Fields (GFIJ.J): South Deep delays impact investment case but Australia acquisition
a positive; Neutral
Investment Profile

Whats changed

Low

High

Growth

Growth

Returns *

Returns *

Multiple

Multiple

Volatility

Volatility
20th

Percentile

40th

60th

80th

100th

Gold Fields (GFIJ.J)


Europe Mining Peer Group Average
* Returns = Return on Capital

For a complete description of the investment


profile measures please refer to the
disclosure section of this document.

Key data

Current

Price (R)
12 month price target (R)
Upside/(downside) (%)
Market cap (R mn)
Enterprise value (R mn)

50.40
55.00
9
36,662.9
58,708.1
12/15E
28,297.7
(10.6)
6,195.0
(27.1)
2.88
4.86
5.3
17.5
1.7
5.6
5.0

Revenue (R mn) New


Revenue revision (%)
EBIT (R mn) New
EBIT revision (%)
EPS (R) New
EPS (R) Old
EV/EBITDA (X)
P/E (X)
Dividend yield (%)
FCF yield (%)
CROCI (%)

12/12
45,468.8
0.0
14,681.3
0.0
8.59
8.74
4.0
11.1
2.5
(11.0)
11.4

12/13E
26,440.5
1.2
6,366.2
8.7
2.33
1.80
5.2
21.6
0.6
10.5
3.9

12/14E
24,669.5
(8.0)
4,288.5
(13.7)
1.26
1.73
6.9
40.0
0.6
(0.8)
4.1

Price performance chart

We update our estimates for the 2Q13 results and revised guidance. Production results were in line with our
estimates but financials were skewed by the impairment charges the company took at its Ghana operations
(US$127 mn). GFI reiterated its production guidance at 1.82-1.9moz at a reduced cash cost of US$830/oz
(previously US$860/oz). It also announced stoppage of the Tarkwa heap-leach operations which on our
estimates will have a production impact of c.100-125koz. In common with the rest of the industry, the company
has implemented a cost cutting programme by cutting staff, reducing capex (FY13 guidance is now US$790 mn
vs. US$970 mn) and exploration budget (reduced to US$80 mn from US$130 mn).
The two most significant announcements were: 1) the ramp-up of South Deep is running behind schedule and
the company is unlikely to be able to hit the targeted 700koz annual run-rate in 2016; and 2) GFI will acquire
three Australian mines from Barrick Gold (NYSE:ABX) which delivered c.420koz in 2012 for c.US$300 mn,
pending regulatory approval.

Implications
We update our model for 2Q13 results including lower production from South Deep in 2013-16, but not for the
acquisition as it has yet to close. We provide pro-forma analysis of the acquisition for comparison. Our
2013/14/15 EPS estimates move +29%/-27%/-41% on lower costs in the near term but lower production in 2015,
which lowers earnings. The immediate negative reaction of the shares post the results reflects the
disappointment from yet another delay to the South Deep project. Cuts to the ramp-up of South Deep impact the
investment case for GFI as the mine was planned to add c.450koz production at c.US$750/oz costs by 2016 with
the capital largely spent.
The acquisition of Barricks Australian assets for US$300 mn for c.400-450k oz annual production appears
relatively cheap compared to recent deal comps. The assets have a relatively short life of c.6 years (c.2.6moz
reserves) but the deposit types have relatively short reserve lives that are typically extended as mining expands
into new areas.

100

460

90

440

80

420

70

400

60

380

Valuation

50

360

40
Sep-12

340

We value GFI using a 50/50 blend of our P/E valuation (a target multiple of 8x based on our GS SUSTAIN
framework (see Appendix 1) applied to our 2015 earnings, previously 2014) and our NAV estimate. This results
in a 12-month price target of R55 (was R58), implying 9% upside. We stay Neutral on valuation but look for news
on the South Deep production profile and the deal closure.

Dec-12
Gold Fields (L)

Share price performance (%)


Absolute
Rel. to FTSE World Europe (GBP)

Mar-13

Jun-13

FTSE World Europe (GBP) (R)

3 month
(16.4)
(20.2)

6 month
(30.6)
(31.1)

12 month
(45.3)
(54.0)

Source: Company data, Goldman Sachs Research estimates, FactSet. Price as of 9/11/2013 close.

Key risks
Higher/lower gold price and/or a weaker/stronger rand, outcome from wage negotiations, and execution
success/failure at South Deep are key risks to our view and price target.

Source: Company data, Goldman Sachs Global Investment Research, FactSet.

Goldman Sachs Global Investment Research

32

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

Exhibit 34: Gold Fields financial and operating data, 2011-15E


per-share data in ZAR
Dec year end
Profit model (ZAR mn)

2011

2012

2013E

2014E

2015E

41,877

45,469

26,440

24,669

28,298

-20,765

-24,493

-15,225

-16,039

-17,381

EBITDA

21,112

20,976

11,215

8,631

10,917

Upside (downside)

Depreciation & amortisation

-5,656

-6,294

-4,849

-4,342

-4,722

Recommendation

EBIT

15,456

14,681

6,366

4,289

6,195

-61

-304

-486

-535

-535

1,100

935

Beatrix

347

289

32

-3

-37

South Deep

273

270

302

395

480
540

Total revenue
Operating costs

Net financial income


Unrealised gain on financial instruments
Realised (loss)gain on financial instruments
Gain (loss) on FX

2011

2012

2013E

2014E

2015E

Salient metrics
Price target (12 months, ZAR)

55

EV ($USm) / resource

53

Last close (ZAR)

50

EV ($USm) / reserve

102

9%

NAV (US$ mn)

2,942

Neutral

Consolidated production summary (koz)


KDC

66

-113

115

Tarkwa

717

719

579

514

Other costs/income

-237

-255

-281

-240

-240

Damang

218

166

142

163

177

Share-based payments

-479

-636

-434

-200

-200

Australia

659

626

602

640

625

Exploration expense

-958

-1,414

-1,201

-800

-800

Cerro Corona

29

-314

-231

-200

-200

Total gold production

Associates
Profit from disposals

4,000

Royalties

-1,081

-1,238

-832

-757

-856

3,500

Underlying pre-tax profits

12,766

10,404

2,979

1,556

3,364

342

293

328

336

3,347

1,918

2,040

2,159

3,000

-36%

-36%

-36%

-36%

-36%

-4,508

-3,879

-1,171

-498

-1,076

-780

-273

-92

-129

-164

Underlying profit

7,478

6,252

1,716

929

2,124

1,500

Underlying EPS

10.34

8.59

2.33

1.26

2.88

1,000

-310

-552

-1,087

Reported net profit

7,168

5,700

629

929

2,124

EPS (basic, reported)

9.91

7.84

0.85

1.26

2.88

Weighted shares outstanding (mn)

723

727

737

737

737

DPS declared (ZAR cents)

330

235

30

32

87

32%

27%

13%

25%

30%

Notional Cash Expenditure Margin (NCE)


KDC

23%

16%

0%

0%

0%

-16%

9%

-42%

-7%

15%

Beatrix

25%

18%

0%

0%

0%

Income tax
Minorities

Post tax extraordinaries

Dividend payout ratio (%)


Growth & margins (%)
Revenue growth
EBITDA growth

2,500

Koz

Tax rate (%)

388
3,701

2,000

500
0
2011
KDC

Beatrix

2012
South Deep

2013E
Tarkwa

2014E

Damang

Australia

2015E
Cerro Corona

2%

-1%

-47%

-23%

26%

South Deep

-33%

-37%

-29%

-6%

20%

EBIT growth

18%

-5%

-57%

-33%

44%

Tarkwa

42%

37%

23%

11%

18%

EPS growth

-15%

-17%

-73%

-46%

129%

Damang

33%

44%

8%

2%

7%

DPS growth

74%

-29%

-87%

6%

174%

Australia

23%

11%

25%

15%

31%

EBITDA margin

50%

46%

42%

35%

39%

Cerro Corona

60%

52%

43%

46%

50%

EBIT margin

37%

32%

24%

17%

22%

Total Group

25%

19%

15%

11%

24%

Cash flow statement


Net income

Assumptions
7,478

6,252

2,459

929

2,124

780

273

92

129

164

DD&A

-5,656

-6,294

-4,849

-4,342

-4,722

Other

1,832

1,199

-2,394

15,746

14,018

5,006

5,400

7,009

22

19

10

Capital expenditures

-9,988

-13,063

-7,506

-5,964

-4,230

Dividends

-1,531

-2,943

-558

-390

-374

Tarkwa

4,227

-1,988

-3,058

-954

2,406

Damang

St Ives-Agnew

8,018

Acquisitions

-7,884

Cerro Corona

11,264

Divestments

Net debt (2013)

17,361

-755

-9,091

6,834

244

-449

Other

-1,074

9,720

-10,317

Surplus/deficit

-5,486

-1,360

-6,541

-710

1,957

Total NAV (ZAR mn)

6,049

5,196

4,129

3,419

5,376

Price target (12 months, ZAR)

55

P/NAV (at PT)

1.4

8,027

9,776

7,860

7,142

8,464

18,241

Share price (Avg)

101

96

50

50

50

Current assets

14,076

33,213

11,989

10,561

13,840

Market Cap (Avg)

72,951

69,647

37,123

37,123

37,123

Net fixed assets

62,683

53,789

60,241

61,863

61,371

EV (ZAR mn)

86,271

84,600

58,708

59,547

57,753

Net intangibles

4,459

4,459

4,459

4,459

4,459

EV/sales

2.1

1.9

2.2

2.4

2.0

821

2,318

2,821

2,821

2,821

EV/EBITDA

4.1

4.0

5.2

6.9

5.3

2,244

1,267

1,557

1,557

1,557

P/E

9.8

11.1

21.6

40.0

17.5

Minorities

Cash flow from operations


Per share (Rand)

Net cash flow from operations


Non recurring items

Working capital movements

Balance sheet
Cash & Cash equivalents
Stocks
Debtors
Other current assets

Total investments
Other long-term assets
Total assets

ZAR/$

7.25

8.21

9.63

10.68

11.00

$/

1.60

1.58

1.54

1.53

1.53

$/AUD

0.97

0.97

1.05

1.18

1.18

Gold ($/oz)

1,570

1,669

1,456

1,144

1,200

Copper (USD/t)

8,823

7,950

7,216

6,600

6,875

NPV

ZAR mn

South Deep

29,258
3,570
316

Minorities

4,225

Other BS items

2,516
28,324

Shares outstanding (mn)

737

Valuation

84,282

95,046

81,068

81,261

84,048

Dividend yield

3.3%

2.5%

0.6%

0.6%

1.7%

Accounts payable

7,617

8,002

5,192

4,718

5,591

FCF yield

6.9%

-11.7%

11.7%

-0.9%

6.3%

Short-term debt

4,447

343

1,474

1,474

1,474

EV/GCI

0.8

0.6

0.4

0.4

0.4

10,513

EV/capital employed

1.4

1.2

0.9

0.9

0.8

Total current liabilities

12,064

18,858

6,666

6,192

7,065

Price/book

1.5

1.3

0.8

0.8

0.8

Long-term debt

11,062

15,673

20,016

20,016

20,016

Ratios
CROCI

15.1%

11.4%

3.9%

4.1%

5.0%

1.82

1.36

0.47

0.49

0.61

19.3%

16.5%

7.1%

4.8%

6.8%

Other current liabilities

Other long-term liabilities

13,095

7,357

8,272

8,272

8,272

Total long-term liabilities

24,157

23,030

28,288

28,288

28,288

CROCI / WACC (x)

Total liabilities

36,221

41,888

34,954

34,479

35,353

ROIC

Total common equity

44,202

49,024

41,889

42,429

44,179

3,860

4,133

4,225

4,353

4,517

Minority interest
Preference
Total liabilities & equity
Working capital
Net debt / (cash)
Capital employed

ROIC / WACC (x)

2.3

2.0

0.8

0.6

0.8

9.2%

6.4%

0.7%

1.1%

2.6%

Net debt / equity

0.21

0.22

0.41

0.43

0.36

Net debt / EBITDA

0.45

0.52

1.55

2.09

1.48

ROA

84,282

95,046

81,068

81,261

84,048

411

9,502

2,668

2,424

2,873

Gearing

0.18

0.18

0.29

0.30

0.27

9,460

10,820

17,361

18,071

16,113

WACC

8.3%

8.3%

8.3%

8.3%

8.3%

63,571

69,173

67,603

68,272

70,185

EBIT interest cover

253.4

48.3

13.1

8.0

11.6

Source: Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research

33

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

South Deep delays impact investment case but Australia acquisition a positive; Neutral
Gold Fields 2Q13 production results were in-line with our estimates with financials skewed owing to an impairment charge
at the Ghana operations (US$127 mn). The outlook for production from existing projects is however weak with Tarkwa
heap-leach operations being suspended (an impact of c.100-125koz) and South Deep ramp-up delayed owing to a slower
material build-up. The company announced the acquisition of Yilgarn South mines from Barrick Gold in Australia for a total
consideration of US$300 mn. This acquisition mitigates the SA risk (Australia now forms biggest portion of GFI production
profile at 42%).

South Deep delay a concern; Tarkwa heap-leach suspension takes off c.100-125koz
Gold Fields announced that owing to slower production build-up and delay in destress mining South Deep would not reach peak
production in 2016. We previously forecast South Deep reaching peak production of 700koz by 2016 but now believe that this will be
delayed till at least 2017. GFI also announced suspension of the Tarkwa heap-leach operations in view of the lower gold prices. The
net effect of this is c.140koz and c.170koz of lower production in 2014 and 2015 respectively.
Exhibit 35: New production profile is c.150koz less than original plan (owing
to late ramp up of South Deep and stoppage of heap leach operations at
Tarkwa)

Exhibit 36: The original production profile had full production from Tarkwa
and South Deep ramping up in 2016
GFI original production and cash cost estimates

GFI new production and cash cost estimates

1,000

1,000

3,000

900

900
2,500

800
700

Au (Koz)

600
500

1,500

400

1,000

300
200

500

700

2,000

US$/oz

2,000

800

600

Au (Koz)

2,500

500

1,500

400

1,000

300
200

500

100

100
0

0
2011
South Deep
Australia

2012

2013E

2014E

Tarkwa
Cerro Corona

Source: Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research

2015E

2016E
Damang
Cash costs (US$/oz)

US$/oz

3,000

0
2011

South Deep
Australia

2012

2013E

2014E

Tarkwa
Cerro Corona

2015E

2016E
Damang
Cash costs (US$/oz)

Source: Goldman Sachs Global Investment Research.

34

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

Pro-forma analysis for Yilgarn South acquisition


Exhibit 37 shows the pro-forma analysis for Gold Fields post the announced Yilgarn South acquisition. The transaction is accretive
to Gold Fields on our estimates but we highlight that FY12 production was c.450koz compared to c.198koz in 1H2013. We forecast
total production of c.420koz for FY14 and ramp up the mine to full capacity c.450koz by 2015.
Exhibit 37: On our estimates the transaction is accretive to Gold Fields
Pro-forma analysis for Yilgarn South acquisition by Gold Fields

Gold Fields pro-forma


analysis
Gold price (US$/oz)
Pro-forma operational metrics
Production (Au Koz)
Unit costs (US$/oz)
Pro-forma financials
Revenue (Rmn)
EBITDA (Rmn)
EPS (Rand)
Ratios
FCF yield
CROCI
Net debt/ EBITDA
Valuation metrics
EV/EBITDA
PE

Pre-Deal

2014
Post Deal
Cash+
All cash
Equity
1,144

Pre-Deal

2015
Post Deal
Cash+
All cash
Equity
1,200

Pre-Deal

2016
Post Deal
Cash+
All cash
Equity
1,200

2,040
756

2,503
729

2,503
729

2,159
762

2,654
719

2,654
719

2,308
750

2,796
704

2,796
704

24,669
8,631
1.26

29,775
11,174
1.50

29,775
11,174
1.26

28,298
10,917
2.88

34,806
14,684
4.23

34,806
14,684
3.90

31,635
12,828
4.59

38,338
16,984
6.01

38,338
16,984
5.63

-0.9%
4.1%
2.0 x

0.0%
5.4%
1.6 x

0.2%
5.4%
1.6 x

6.3%
5.0%
1.7 x

10.4%
6.6%
1.4 x

10.3%
6.7%
1.3 x

10.8%
5.7%
1.3 x

16.1%
7.4%
1.0 x

15.8%
7.5%
0.9 x

6.9 x
40.0 x

5.7 x
34.9 x

5.5 x
41.5 x

5.3 x
17.5 x

4.1 x
12.4 x

4.0 x
13.4 x

4.3 x
11.0 x

3.3 x
8.7 x

3.2 x
9.3 x

Source: Goldman Sachs Global Investment Research.

Yilgarn south acquisition creates new opportunities


With the 2Q13 results the company announced the acquisition of Yilgarn South mines in Australia from Barrick Gold for a total
consideration of US$300 mn less c.US$30 mn working capital adjustment. As of 2012 the Yilgarn assets (Granny Smith, Darlot and
Lawlers) had a reserve base of 2.6moz and a resource base of 1.9moz. This analysis had been done at a gold price of US$1500/oz.
With the gold price now lower, we expect the final reserve and resource numbers to be lower, once integrated into GFIs resource
model.
The acquisition is positive for the company in our view as it improves its sovereign risk profile. Post the acquisition the company
will have c.42% production from Australia compared to 29% pre-deal (West Africa operations previously accounted for 42% of
production but this will fall to c.33% post acquisition).

Goldman Sachs Global Investment Research

35

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

Exhibit 38: Map showing Yilgarn south assets

Exhibit 39: Yilgarn south assets add c.420koz in 2014E and c.450koz from
2015
GFI production taking into account production from Yilgarn South from 2014

3,500
3,000

Au (Koz)

2,500
2,000
1,500
1,000
500
0
2011E

2012E

2013E

2014E

2015E

GFI production - existing asets

2016E

2017E

2018E

Yilgarn South

Source: Company data.

Source: Goldman Sachs Global Investment Research.

Exhibit 40: West Africa formed a major portion of GFI production profile
which increased its sovereign risk profile

Exhibit 41: Australia will now form the major portion of GFIs production
profile reducing sovereign risk

GFI production split pre-acquisition

GFI production split post acquisition

16%

13%

13%

29%

12%

33%
42%

42%

South Africa

Australia

Source: Company data.

Goldman Sachs Global Investment Research

West Africa

South America

South Africa

Australia

West Africa

South America

Source: Company data.

36

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

Currency tailwinds a short-term catalyst


Gold Fields operates in Australia, South Africa and Peru. All the currencies AUD, ZAR and Peruvian Sol have depreciated 18.5%,
13.6% and 9.3% respectively. We forecast further weakening of the currencies and this creates a short-term tailwind for the company
as a major portion of the costs are based in the local currency.
Exhibit 43: We forecast a further weakening in ZAR and PEN but a
strengthening AUD

Exhibit 42: ZAR, AUD and PEN have all depreciated YTD
ZAR, AUD, PEN performance rebased as of 1/1/2013

GS forecasts for ZAR, AUD and PEN

Currency movement (rebased 1/1/2013)

125

ZAR/$
AUD/$
PEN/$

120

2012
8.21
0.97
2.64

3Q2013
10.10
0.90
2.75

4Q2013
10.20
0.88
2.75

2013E
9.63
0.95
2.68

2014E
10.68
0.85
2.78

2015E
11.00
0.85
2.80

2016E
11.50
0.84
2.95

2017E
11.50
0.84
3.15

115

110

105

100
Jan-13

Feb-13

Mar-13

Apr-13
ZAR

Source: Datastream.

Goldman Sachs Global Investment Research

May-13
AUD

Jun-13

Jul-13

Aug-13

PEN

Source: Goldman Sachs Global Investment Research.

37

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

Sibanye Gold (SGLJ.J): Up to Buy on valuation, Cooke acquisition and dividend catalysts
Investment Profile

Source of opportunity

Low

High

Growth

Growth

Returns *

Returns *

Multiple

Multiple

Volatility

Volatility
20th

Percentile

40th

60th

80th

100th

Sibanye Gold (SGLJ.J)


Europe Mining Peer Group Average
* Returns = Return on Capital

For a complete description of the investment


profile measures please refer to the
disclosure section of this document.

Key data

Current

Price (R)
12 month price target (R)
Upside/(downside) (%)
Market cap (R mn)
Enterprise value (R mn)

11.50
15.00
30
8,436.4
9,101.7
12/15E
16,842.7
3.5
2,182.5
(19.0)
1.74
2.37
1.9
6.6
5.3
17.5
7.6

Revenue (R mn) New


Revenue revision (%)
EBIT (R mn) New
EBIT revision (%)
EPS (R) New
EPS (R) Old
EV/EBITDA (X)
P/E (X)
Dividend yield (%)
FCF yield (%)
CROCI (%)

12/12
16,553.5
0.0
3,317.1
0.0
4.26
4.26
-NM
NM
-19.6

12/13E
18,867.1
11.0
4,168.4
50.1
3.59
2.40
1.3
3.2
7.5
55.2
14.0

12/14E
17,278.4
5.6
2,060.8
653.9
1.61
(0.07)
2.1
7.1
3.5
7.1
8.2

Price performance chart


18

440

16

420

14

400

12

380

10

360

340

6
Sep-12

320
Dec-12
Sibanye Gold (L)

Share price performance (%)


Absolute
Rel. to FTSE World Europe (EUR)

Mar-13

Jun-13

FTSE World Europe (EUR) (R)

3 month
17.7
11.0

6 month
(16.7)
(20.3)

12 month
---

Source: Company data, Goldman Sachs Research estimates, FactSet. Price as of 9/11/2013 close.

We upgrade Sibanye to Buy with a new 12-month price target of R15 (up from R9.6) implying 30% potential
upside. Our primary investment thesis is that Sibanye is undervalued relative to peers trading on 3.2x/7.1x on
2013/14E vs. 29x/61x for our large-cap coverage. With no significant growth projects and hence spending only
sustaining capex Sibanye is generating cash at low gold prices at the corporate level. As expected following the
conclusion of a two-year wage agreement, the company announced an interim dividend of 37 rand cents as a
maiden interim dividend, equivalent to 15% on underlying earnings. Sibanye is targeting a 35% payout on
underlying earnings which on our estimates would translate into a FY13 DPS of c.R1 or c.8% dividend yield, the
highest dividend yield in our mining coverage. Finally, Sibanye announced the expected acquisition of the
Cooke operations from Gold One (JSE: GDOJ.J) including the surface retreatment operations much discussed by
Sibanye management as the potential 4th mine. Sibanye will distribute 150 mn new SGL shares (c.R1.5 bn,
US$150 mn) for the Cooke operations which we estimate can deliver c.220koz in 2014E rising to c.400koz in
2016E at an average cost of c.US$1,200/oz with the surface ounces planned to cost c.US$928/oz.
We update our estimates for the 1H13 results and our new gold price and FX forecasts. The company posted a
solid set of results with production of 656koz at total cash costs (TCC) of $983/oz. The company reiterated its
2013 guidance at 1.35moz at a NCE of R 360,000/kg (c.US$1,125/oz) at 10:1 ZAR: USD.

Catalyst
We see the following potential catalysts for Sibanye: 1) Successful completion of the cost cutting program
(currently underway) which would further reduce TCC and could offset the wage hikes to some degree. 2)
Consensus DPS estimates are currently R0.51, we forecast R1.0. 3) Sibanye has the highest FCF yield (2014E is
11.3% vs. sector average of 1.4%) and dividend yield (2013E is 10.3% vs. sector average of 2.3%) among our gold
and silver stocks and we believe that this is currently being under appreciated by the market as it is trading on
3.2x/7.1x 2013/14E. 4) The announced Cooke acquisition on our estimates is accretive to Sibanye. The Cooke
optimization plan (currently underway) could add c.34koz of gold production and reduce R/tonne costs c.40%.

Valuation
We value Sibanye Gold using a 50/50 blend of our P/E valuation (a target multiple of 6x based on our GS
SUSTAIN framework (see Appendix 1) applied to our 2015E earnings estimates (previously 2014) and 1x our
NAV. This results in a 12-month price target of R15 (previously R9.6) implying 30% upside potential. We upgrade
Sibanye to Buy from Neutral and add it to the CEEMEA Focus List.

Key risks
Key risks to our view and price target are a lower gold price than we expect, and a stronger rand; the above CPI
wage hikes and the continued threat of strike action and/or an extended period of strikes are further risks.

Source: Company data, Goldman Sachs Global Investment Research, FactSet.

Goldman Sachs Global Investment Research

38

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

Sibanye Gold: Our thesis in charts


Exhibit 44: Cooke adds c.260koz of gold

Exhibit 45: Sibanye has the best cost profile


among SA golds

Sibanye production and cost with and w/o Cooke

Exhibit 46: Sibanye has a strong FCF yield


FCF yield of SA golds

1,700
1,600

40%

1,500

1,200

1,800

2013: $1,456

30%

1,300

1,600

1,000

1,400

1,200

600

800
600

US$/oz

1,000

Total cash cost / oz

1,100

800

1,200

Au(Koz)

1,400

400

2015: $1,200

20%

2014: $1,144

1,000

10%

900
800

0%

700

2013E

600

400

200

200

0
2011
2012
Production(Koz)
Unitcosts(US$/oz)

2013E

2014E

2015E

2016E

2017E

400

20%

300

2014E

10%

500

200

2015E
2016E
2017E
ProductionCooke(Koz)
Unitcostsincl.Cooke(US$/oz)

30%

100

SGLJ.J

0
Sibanye Gold

Gold Fields
FY2013E

FY2014E

AngloGold Ashanti
FY2015E

Harmony Gold

ANGJ.J

GFIJ.J

HARJ.J

Source: Goldman Sachs Global Investment Research.

Source: Goldman Sachs Global Investment Research.

Exhibit 47: Sibanye has the highest dividend yield

Exhibit 48: Trading at a discount to peers

Exhibit 49: We are significantly higher vs. cons.

Dividend yield of SA gold stocks

P/E of SA golds

GS vs. consensus estimates

Source: Goldman Sachs Global Investment Research.

120.0

Rand mn
GS estimates
Consensus
GS vs. Cons

8%
100.0

7%
6%

Revenue
18,867
17,258
9%

FY13
EBITDA
EPS
6,817
3.59
5,089
1.69
34%
112%

DPS
0.87
0.48
81%

Revenue
17,278
16,411
5%

FY14
EBITDA
4,425
4,390
1%

EPS
1.61
1.57
3%

DPS
0.40
0.45
-10%

80.0

5%
4%

60.0

3%
40.0

2%
1%

20.0

0%
2011

2012

2013E

2014E

2015E

2016E
0.0

SGLJ.J

ANGJ.J

GFIJ.J

HARJ.J

Source: Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research

Randgold Resources

AngloGold Ashanti

Gold Fields
2013 P/E

Sibanye Gold

Harmony Gold

Gold - Seniors

2014P/E

Source: Goldman Sachs Global Investment Research.

Source: Goldman Sachs Global Investment Research, Bloomberg.

39

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

Exhibit 50: Sibanye Gold financial and operating data, 2011-15E


per-share data in ZAR
2011

2012

2013E

2014E

2015E

Totalrevenue

16,613

16,554

18,867

17,278

16,843

Operatingcosts

9,861

10,874

12,050

12,853

12,474

EBITDA

6,752

5,680

6,817

4,425

4,369

Depreciation&amortisation

2,193

2,363

2,648

2,364

EBIT
Netfinancialincome

4,559
61

3,317
21

4,168
241

2,061
111

Realised(loss)gainonfinancialinstruments

15

13

Kloof

523

578

440

Gain(loss)onFX

21

Driefontein

541

504

563

18

121

60

Beatrix

238

264

230

150

200

Othercosts/income
Sharebasedpayments
Explorationexpense
Associates
Profitfromdisposals

11.5

EV($USm)/reserves

Upside(downside)

30%

NAV(US$mn)

2,186

Recommendation

Buy

2,182
87

Consolidatedproductionsummary(koz)

35

93

74

80

80

3,745

1,880

1,975

290

282

331

301

277

Taxrate(%)

33%

14%

24%

25%

25%

Incometax

1,359

377

784

395

425

Underlyingprofit
UnderlyingEPS
Posttaxextraordinaries

2014E

Lastclose(ZAR)

3,021

Minorities

2013E

EV($USm)/resource

Royalties

2012

15.00

4,403

Underlyingpretaxprofits

2011

2015E

Salientmetrics

2,754

3,115

2,630

1,185

1,275

3.81

4.26

3.59

1.61

1.74

Pricetarget(12months,ZAR)

Totalgoldproduction

3.5
43
1,435

347

289

278

335

273

1,447

289

1,342

1,416

1,276

1,600
1,400
1,200

Goldproduction(koz)

Decyearend
Profitmodel(ZARmn)

1,000
800
600
400

190

135

925

Reportednetprofit

2,564

2,980

1,705

1,185

1,275

EPS(basic,reported)

3.55

4.07

2.32

1.61

1.74

Weightedsharesoutstanding(mn)

723

732

734

734

734

DPSdeclared(ZAR)

3.4

1.6

0.9

0.4

0.6

88%

38%

24%

25%

35%

Revenuegrowth

22%

0%

14%

8%

3%

KDC

EBITDAgrowth

1%

16%

20%

35%

1%

Kloof

16%

13%

23%

EBITgrowth

24%

27%

26%

51%

6%

Driefontein

16%

13%

23%

5%

EPSgrowth

47%

12%

16%

55%

8%

Beatrix

25%

16%

12%

22%

28%

DPSgrowth
EBITDAmargin

19%
41%

52%
34%

46%
36%

53%
26%

51%
26%

TotalGroup
Assumptions

23%

16%

21%

10%

14%
11.00
1.53

Dividendpayoutratio(%)
Growth&margins(%)

EBITmargin
Cashflowstatement

200
0
2011

2012

KDC

2013E

Kloof

2014E

Driefontein

2015E

Beatrix

NotionalCashExpenditureMargin(NCE)
23%
7%

27%

20%

22%

12%

13%

ZAR/$
$/

7.25
1.60

8.21
1.58

9.63
1.54

10.68
1.53

2,564

2,980

2,630

1,185

1,275

$/AUD

0.97

0.97

1.05

1.18

1.18

Gold($/oz)

1,570

1,669

1,456

1,144

1,200

DD&A

2,193

2,363

2,648

2,364

2,186

Copper(USD/t)

8,823

7,950

7,216

6,600

6,875

Other
Cashflowfromoperations

1,787
6,543

170
5,514

382
5,659

0
3,548

0
3,460

936

1,123

Capitalexpenditures

2,923

3,107

2,895

2,664

2,028

Dividends

2,423

731

271

846

308

Netcashflowfromoperations

1,197

1,675

2,493

38

1,125

Nonrecurringitems
Acquisitions

0
2,923

0
3,107

0
0

0
0

0
0

Netincome
Minorities

Pershare(Rand)

Divestments

Unitcosts(US$/oz)
KDC
Driefontein

na

na

959

950

866

Kloof

na

na

839

834

1,015

953

1,112

1,087

732

732

940
ZARmn

1,120

938

851

889

Beatrix
AverageUnitcost(US$/oz)
NPV

16

1,288

21,870

1,885

282

39

2,324

19,143

1,260

673

4,153

3,118

244

1,163

Cash&Cashequivalents

363

430

2,957

2,713

3,876

OtherBSitems

Stocks

252

536

1,357

1,157

1,184

TotalNAV(ZARmn)

Debtors

486

858

500

426

436

Othercurrentassets

648

61

36

30

31

Workingcapitalmovements
Other
Surplus/deficit
Balancesheet

Currentassets
Grossfixedassets
AccumulatedDD&A
Netfixedassets
Fixedassetinvestment
Investmentinsecurities
Totalinvestments
Otherlongtermassets
Totalassets
Accountspayable
Shorttermdebt

Kloof

718

Driefontein

9,741

Beatrix

5,826

Netdebt(2013)
Minorities

Sharesoutstanding(mn)

672
7
1,803
13,816
732

Pricetarget(12months,ZAR)

15

P/NAV(atPT)
Valuation

0.8

1,748
37,988

1,885
41,362

4,850
44,257

4,326
46,921

5,528
48,949

22,629

24,986

28,457

30,821

33,008

Shareprice(Avg)

11.5

11.5

11.5

15,359

16,376

15,801

16,100

15,941

MarketCap(Avg)

8,436

8,436

8,436

128

219

254

254

254

EV(ZARmn)

130

220

254

254

254

1,255

1,354

1,726

1,726

1,726

18,492

19,836

22,630

22,406

23,449

836

1,287

750

640

655

FCFyield

9,102

9,345

8,181

EV/sales

0.5

0.5

0.5

EV/EBITDA

1.3

2.1

1.9

P/E

3.2

7.1

6.6

Dividendyield

8%

4%

5%

55%

7%

17%
0.2

500

129

129

129

EV/GCI

0.2

0.2

Othercurrentliabilities

23,177

813

3,052

2,601

2,663

EV/capitalemployed

0.7

0.7

0.6

Totalcurrentliabilities
Longtermdebt

24,013
0

2,600
3,720

3,931
3,500

3,369
3,500

3,446
3,500

Price/book
Ratios

0.9

0.9

0.8

Otherlongtermliabilities

6,454

5,942

5,868

5,868

5,868

CROCI

Totallongtermliabilities

6,454

9,662

9,368

9,368

9,368

CROCI/WACC(x)

Totalliabilities

30,467

12,263

13,299

12,738

12,814

ROIC

Totalcommonequity

11,970

7,579

9,338

9,677

10,643

ROIC/WACC(x)

Totalliabilities&equity

18,492

19,836

22,630

22,406

Workingcapital

21,894

24

1,909

1,627

363

3,790

672

916

247

11,976

11,793

12,960

13,298

14,264

Minorityinterest
Preference

Netdebt/(cash)
Capitalemployed

14%

8%

8%

1.6

0.9

0.8

26%

12%

12%

2.9

1.3

1.3

ROA

8%

5%

6%

Netdebt/equity

7%

9%

2%

23,449

Netdebt/EBITDA

10%

21%

6%

1,666

Gearing

7%

9%

2%

WACC

9%

9%

9%

17.3

18.6

25.0

EBITinterestcover

Source: Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research

40

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

Harmony (HARJ.J): Wafi-Golpu pushed out; many sub-scale SA assets; down to Sell
Source of opportunity

Investment Profile
Low

High

Growth

Growth

Returns *

Returns *

Multiple

Multiple

Volatility

Volatility
20th

Percentile

40th

60th

80th

100th

Harmony Gold (HARJ.J)


Europe Mining Peer Group Average
* Returns = Return on Capital

For a complete description of the investment


profile measures please refer to the
disclosure section of this document.

Key data

Current

Price (R)
12 month price target (R)
Upside/(downside) (%)
Market cap (R mn)
Enterprise value (R mn)

39.07
30.00
(23)
16,831.4
17,681.1
6/16E
19,531.7
12.2
1,653.0
NM
2.24
(3.19)
5.1
17.5
0.4
1.6
5.0

Revenue (R mn) New


Revenue revision (%)
EBIT (R mn) New
EBIT revision (%)
EPS (R) New
EPS (R) Old
EV/EBITDA (X)
P/E (X)
Dividend yield (%)
FCF yield (%)
CROCI (%)

6/13
15,901.9
(3.1)
908.9
(47.1)
(0.19)
2.02
9.6
NM
0.8
(2.4)
5.1

6/14E
16,494.6
(11.5)
996.1
(63.6)
1.29
4.62
6.5
30.3
0.5
(3.1)
4.1

6/15E
17,344.9
(1.4)
278.3
(29.6)
(0.49)
0.35
8.5
NM
0.0
(6.9)
3.1

Price performance chart


80

440

75

430

70

420

65

410

60

400

55

390

50

380

45

370

40

360

35

350

30
Sep-12

340
Dec-12
Harmony Gold (L)

Share price performance (%)


Absolute
Rel. to FTSE World Europe (GBP)

Mar-13

Jun-13

We downgrade Harmony to Sell with a reduced 12-month price target of R30 (was R40) implying 23% downside.
Our thesis is that Harmony has 14 South African mines which delivered 1,139koz in FY13 (just reported) at an allin total cash cost of US$1,156/oz vs. our gold price forecast of US$1,094/oz for Harmonys FY14 (June year-end),
and we forecast Harmony will have a free cash flow yield of 0.6% and -3.4% in FY14 and FY15 respectively. The
company has guided to 2014 production of 1.3-1.4moz at a total cash cost of US$1,070-1,180/oz. Harmony also
reduced corporate expenditure and capex by R450 mn and R2.1 bn (mainly on account of lower capex at WafiGolpu) respectively.
The continued cash burn leads to Harmonys net debt rising to R926 mn in 2015E from R450 mn in 2013. The
2014 production guidance of 1.3-1.4moz is overly optimistic in our view. On our estimates the company will
produce 1.29moz for FY14 and this does not take into account work stoppages. We see continued threat of
strikes (although the NUM has accepted the 7%-8% wage hikes, AMCU has rejected the offer and it is the
majority union at Harmonys Kusasalethu mine).

Catalyst
We see several catalysts for Harmony: 1) We expect the gold price, which has recently increased to over
$1,400/oz on multiple uncertainty factors, to decline to $1,144/oz in calendar 2014 and given Harmonys total
cash cost position we believe it is negatively geared to a decline in the gold price. 3) Harmonys production
guidance is too optimistic given the climate in South Africa; we expect it to guide lower in 1Q and 2Q14 results.
3) Harmony is expensive vs. peers relative to its competitive position trading on a P/E of 30.3x FY14 and making
a loss in FY15E vs. 10.8x for ANG, 21.6x for GFI and only 3.2x for SGL (all in 2013E).

Valuation
We value Harmony using a 50/50 blend of our P/E valuation (a target multiple of 9x based on our GS SUSTAIN
framework (see Appendix 1) applied to our FY15 earnings (from FY14 previously). This results in a 12 month
price target of R30 which implies a 23% downside.

Key risks
A higher gold price could see HAR shares increase in value as investors seek the leveraged play to a rising gold
price. A potential sale of Harmonys 50% of the Wafi-Golpu project would be a significant upside risk.

FTSE World Europe (GBP) (R)

3 month
(1.1)
(5.6)

6 month
(33.7)
(34.2)

12 month
(44.6)
(53.4)

Source: Company data, Goldman Sachs Research estimates, FactSet. Price as of 9/11/2013 close.

Source: Company data, Goldman Sachs Research estimates, FactSet.

Goldman Sachs Global Investment Research

41

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

Harmony Gold: Our thesis in charts


Exhibit 51: Production is flattish as SA portfolio ages

Exhibit 52: 75% of mines do not generate cash in FY14/15

Production and unit costs for Harmony Gold

All mine total cash cost (US$/oz) for Harmony Gold

1,600

1,400

1,400

1,200

2,000

Gold: $1,261 (FY14),


$1,141 (FY15)

1,800

TCC ($US/oz)

1,000

1,000

800

800
600

600

US$/oz

Au (Koz)

1,200

1,600
1,200
1,000
800
600
400
200

400

400

1,400

200

200

0
2011

2012

2013

2014E

Production

2015E

2016E
FY2014E

Cash costs (US$/oz)

FY2015E

Source: Goldman Sachs Global Investment Research.

Source: Goldman Sachs Global Investment Research.

Exhibit 53: leading to continued cash burn till FY15

Exhibit 54: Harmony is trading at a premium relative to sector

CFO, capex, dividend and total cash flow

P/E for our senior gold coverage (calendarised)

6,000

800

4,000

100.0

600
400
200

80.0

R mn

2,000

R mn

120.0

1,000

60.0

-200

-2,000

-400

-4,000

40.0

-600
-800

-6,000
2011
CFO

2012

2013

Capex

2014E
Dividends

2015E

20.0

2016E

Total cash flow

0.0
Randgold Resources

AngloGold Ashanti

Gold Fields
2013 P/E

Source: Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research

Sibanye Gold

Harmony Gold

Gold - Seniors

2014P/E

Source: Goldman Sachs Global Investment Research.

42

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

Exhibit 55: Harmony Gold financial and operating data, FY12-16E


per-share data in ZAR
June year end

2012

2013

2014E

2015E

2016E

P&L (ZAR mn)


Total revenue

15,169

15,902

16,495

Operating costs

-9,911

-11,400

-12,842

SG&A and other costs


EBITDA
Depreciation & amortisation
EBIT
Net financial income / (expense)
Net Associates

17,345

19,532

-14,418 -15,154

2014E

2015E

2016E

Price target (12 months, ZAR)

30

EV (US$) / resource

Last close (ZAR)

39

EV (US$) / reserves

32

-955

-1,651

-925

-700

-700

Upside (downside)

2,851

2,727

2,226

3,678

Recommendation

-1,982

-1,942

-1,731

-1,948

-2,025

2,321

909

996

278

1,653

-103

102

-26

-147

-162

Hidden valley

89

85

91

103

112

56

Bambanani

34

52

90

98

129

Steyn 2

11

15

13

Doornkop

99

117

122

144

165

Kusasalethu

181

88

130

181

181

Evander

102

44

86

104

93

93

91

-144

-88

Other

-378

-350

-200

-200

-200

1,752

573

770

-68

1,291

Income tax

123

-656

-213

-144

-323

Tax rate (%)

7%

-115%

-28%

211%

-25%

Minorities

2013

4,303

Adjustments to investments
Pretax profits

2012
Salient metrics

-23%

NAV (US$ mn)

1,522

Sell

Gold Production (k oz)

Joel

104

116

130

162

176

1,875

-83

557

-212

968

Phakisa

82

78

92

122

127

Underlying EPS (ZAR cents)

435

-19

129

-49

224

Target 1

117

128

126

129

129

Extraordinaries post tax

375

-2,280

Target 3

36

52

55

55

55

2,250

-2,363

557

-212

968

Tshepong

170

134

136

155

155

Adjusted EPS (cents)

522

-547

129

-49

224

Virginia - Unisel

51

58

57

62

62

Weighted shares outstanding (mn)

431

432

433

433

433

Kalgold

33

43

42

41

41

90

50

18

14

Phoenix (Saiplaas)

26

27

24

24

24

21%

-260%

14%

0%

6%

Other Surface

52

43

38

17

1,272

1,183

1,237

1,392

1,446

Net income (pre-exceptionals)

Net income (post exceptionals)

DPS declared (ZAR cents)


Dividend payout ratio (%)
Growth & margins (%)

Masimong

Total Gold Production (k oz)

Revenue growth

22%

5%

4%

5%

13%

EBITDA growth

73%

-34%

-4%

-18%

65%

1,600

EBIT growth

228%

-61%

10%

-72%

494%

1,400

EPS growth

-19%

-104%

-770%

-138%

-557%

1,200

DPS growth

50%

-44%

-65%

-100%

EBITDA margin

28%

18%

17%

13%

19%

EBIT margin

15%

6%

6%

2%

8%

2,250

-2,363

557

-212

968

Cash flow statement (ZAR mn)


Net income
Stripping transfer

Minorities

1,982

1,942

1,731

1,948

2,025

DD&A
Other

Koz

1,000
800
600
400
200
0

-19

3,276

4,213

2,855

2,289

1,736

2,993

10

-3,747

-3,605

-3,007

-2,858

-2,670

-431

-435

-7

35

-1,185

-718

-1,122

316

Non recurring items

R/$

7.78

8.79

10.33

10.93

Acquisitions

-1,047

$/

1.58

1.57

1.53

1.53

1.53

Divestments

261

1,325

Gold ($ / oz)

1,672

1,605

1,297

1,141

1,200

3,313

2,898

2,124

1,954

2,105

Cash flow from operations


Per share (Rand)
Capital expenditures
Dividends
Net cash flow from operations

Working capital movements

-403

98

194

-52

-50

Other

930

403

Surplus/deficit

823

-406

-524

-1,173

266

Balance sheet (ZAR mn)


Cash & Cash equivalents
Stocks
Receivables
Other current assets
Total Current assets

2012
Hidden valley
Kusasalethu
Target 1

2014E

2015E

Steyn 2
Masimong
Tshepong

2016E
Doornkop
Phakisa
Virginia - Unisel

Assumptions

Silver (US cents / oz)


NAV summary

16,505

Hidden Valley

-4,583

1,773

2,089

1,827

1,827

1,827

Wafi-Golpu (50% share, est)

996

1,425

1,570

1,767

1,957

Net debt (2013)

1,245

1,162

1,366

1,537

1,702

Minorities

239

132

45

50

56

Other BS items

4,253

4,808

4,807

5,180

5,541

Group NAV (ZAR mn)

32,853

32,820

34,096

35,005

35,651

P/NAV(at target price)

Gross intangibles

2,373

2,373

2,373

2,373

2,373

11.25

NAV (ZAR mn)

South Africa mines

Net fixed assets


Accumulated Amortisation

2013
Bambanani
Joel
Target 3

6,489
449
0
2,246
15,716
1.1

Valuation (x)

-177

-182

-182

-182

-182

93

63

39

39

39

Net intangibles

2,196

2,191

2,191

2,191

2,191

Market Cap (avg, ZAR mn)

40,118

27,038

16,902

16,902

16,902

Fixed asset investments

1,878

2,244

2,244

2,244

2,244

EV (ZAR mn)

Investments in securities

146

Total investments

2,024

2,244

2,244

2,244

2,244

Other long-term assets

1,967

161

161

161

161

43,293

42,224

43,499

44,782

45,788

1,747

2,109

2,479

2,789

3,089

313

286

286

286

286

90

101

112

2,061

2,399

2,854

3,176

3,487

Price/book

Total assets
Accounts payable
Short-term debt
Other short term liabilities
Total current liabilities

Share price (avg, ZAR)

39,955

27,293

17,681

18,855

18,588

EV/sales

2.6

1.7

1.1

1.1

1.0

EV/EBITDA

9.3

9.6

6.5

8.5

P/E

21.4

30.3

5.1
17.5

Dividend yield

1.1%

1.6%

0.0%

0.0%

0.0%

FCF yield

0.2%

-2.4%

-3.1%

-6.9%

1.6%

EV/GCI

0.7

0.5

0.3

0.3

0.3

EV/capital employed

1.1

0.8

0.5

0.5

0.5

1.2

0.8

0.5

0.5

0.5

Long-term debt

1,503

2,252

2,514

3,688

3,422

Ratios

Other long-term liabilities

5,707

5,267

5,267

5,267

5,267

ROIC

6%

2%

2%

1%

Total long-term liabilities

7,210

7,519

7,781

8,955

8,689

ROIC / WACC

0.6

0.2

0.3

0.1

0.4

Total liabilities

9,271

9,918

10,636

12,131

12,175

ROA

5%

-6%

1%

0%

2%

34,022

32,306

32,863

32,651

33,613

Net debt / equity

0%

1%

3%

7%

6%

Net debt / EBITDA

2%

18%

23%

75%

69%

43,293

42,224

43,499

44,782

45,788

732

606

412

464

514

Total common equity


Minority interest
Total liabilities & equity
Working capital
Net debt / (cash)
Capital employed

43

449

973

2,147

1,881

35,838

34,844

35,664

36,625

37,320

2016
4%

Gearing

0%

1%

3%

6%

5%

WACC

9%

9%

9%

9%

9%

22.5

-8.9

38.9

1.9

10.2

EBIT interest cover

Source: Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research

43

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

Appendix 1: Refreshing our industry positioning framework


Focus on best commodities, volume growth and best positioned assets
We use an industry positioning framework to identify and analyse the factors that we believe will shape returns beyond our forecast
period. Exhibit 56 shows the factors we use for our industry positioning analysis, from which we derive our P/E based price targets.
Change in portfolio quality is driven, in our view, by the following key components:

Average cash costs: Companies which have low cost assets are best positioned in our view in a falling gold price scenario and
therefore deserve a premium versus the sector.

Mining growth: Key to increasing earnings is delivering growth. We believe companies with more growth deserve a premium
versus the sector, whereas those with no growth should trade at a discount.

Asset quality: Long life, low-cost assets which are less complex provide companies with superior positioning and, in our view,
deserve a premium versus other companies in the sector. Conversely, companies with lower-quality assets should trade at a
discount.

Fiscal and sovereign risk: Operating in less risky environments, with more certain fiscal regimes should warrant a premium in
our view. Conversely, those operating in higher-risk environments will likely face bureaucratic and fiscal changes and should
trade at a discount.

Exhibit 56: Our GS SUSTAIN framework positions companies within the sector
GS SUSTAIN framework

Industrypositioning

Industrypositioning

Portfolioquality

Risk

IPScoring

Cashcosts

Mininggrowth

AssetQuality

Fiscalandsovereignrisk

Averagecashcost2012
2015E

Productiongrowth

AssetQuality

%exposuretocountrieswith
highfiscalriskandnationalrisk
2012,2015&2020

USD/oz

Quartile

Quartile

Quartile

Quartile

Quartile

Source: Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research

44

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

Deriving our target multiples through industry positioning


Below we show how our GS SUSTAIN-based industry positioning framework is key to PE valuation multiples which we use to
derive our price targets.
Exhibit 57: Identifying winners and losers through GS SUSTAIN based industry positioning
GS SUSTAIN industry positioning framework and summary target multiples
Industrypositioning

Industrypositioning

Portfolioquality

Risk

Returns

IPScoring

Cashcosts

Mininggrowth

AssetQuality

Fiscalandsovereignrisk

Cashflowgeneration

CROCI

Averagecashcost2012
2015E

Productiongrowth

AssetQuality

%exposuretocountrieswith
highfiscalriskandnationalrisk
2012,2015&2020

AverageFCFyield201315E

AverageCROCI201315E

USD/oz

Quartile

Quartile

Quartile

Quartile

Quartile

Quartile

Quartile

Q1

GoldSeniors
RandgoldResources

726

Q1

15%

Q1

100%

Q2

77%

Q3

69%

Q2

2%

Q2

15%

AfricanBarrickGold

1,027

Q4

1%

Q4

33%

Q4

70%

Q2

29%

Q4

7%

Q4

4%

Q4

AngloGoldAshanti

947

Q3

6%

Q3

44%

Q3

63%

Q1

50%

Q3

7%

Q4

6%

Q3

GoldFields

914

Q3

6%

Q3

22%

Q4

63%

Q2

40%

Q4

7%

Q1

5%

Q4

SibanyeGold

934

Q3

5%

Q4

100%

Q2

80%

Q4

40%

Q4

31%

Q1

10%

Q2

HarmonyGold

1,128

Q4

10%

Q2

100%

Q2

80%

Q4

40%

Q4

7%

Q1

5%

Q4

Final

Old

Multipleadjustments
Cashcosts

LTMultiple

Mininggrowth

AssetQuality

Fiscalandsovereignrisk

GoldSeniors
RandgoldResources

19.25x

0.50x

Q1

0.50x

Q1

0.25x

Q2

0.50x

Q3

20.00x

20.00x

AfricanBarrickGold

8.50x

0.50x

Q4

1.00x

Q4

0.25x

Q4

0.25x

Q2

7.00x

7.00x

AngloGoldAshanti

9.00x

0.25x

Q3

0.25x

Q3

0.00x

Q3

0.50x

Q1

9.00x

9.00x

GoldFields

8.50x

0.25x

Q3

0.25x

Q3

0.25x

Q4

0.25x

Q2

8.00x

8.00x

SibanyeGold

8.00x

0.25x

Q3

1.00x

Q4

0.25x

Q2

1.00x

Q4

6.00x

5.00x

HarmonyGold

10.00x

0.50x

Q4

0.25x

Q2

0.25x

Q2

1.00x

Q4

9.00x

9.00x

Note: We assume a long term multiple for Sibanye since no trading history is available for the stock (listed in Feb. 2013)
Source: Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research

45

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

Cash costs: Key in falling gold price environment


We forecast gold to average US$1,144 in 2014 and US$1,200 in 2015. In the falling gold price environment we believe that managing
cash costs will be key. Randgold has the lowest cash cost mines hence gets a premium relative to the sector while African Barrick
Gold and Harmony Gold have fourth quartile costs hence attract a discount to the sector.
Exhibit 58: Managing cash costs will be key to stemming cash burn in a falling gold price environment
Total cash costs for senior gold and silver companies
UnitCost
Ticker

Unitcost/oz

Company
2011

2012

Ave.

2013E

2014E

2015E

2016E

201215E

Quartile

Multiple
Adjustment

GoldSeniors
RRS.L

RandgoldResources

779

791

758

702

650

614

725

Q1

0.50x

ABGL.L

AfricanBarrickGold

868

1,161

1,150

928

870

817

1,027

Q4

0.50x

ANGJ.J

AngloGoldAshanti

850

1,039

1,024

883

876

886

955

Q3

0.25x

GFIJ.J

GoldFields

778

1,469

841

705

682

658

924

Q3

0.25x

SGLJ.J

SibanyeGold

932

1,097

930

851

889

848

942

Q3

0.25x

HARJ.J

HarmonyGold

1,099

1,198

1,317

1,082

994

974

1,148

Q4

0.50x

Source: Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research

46

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

Production growth: Key to stemming cash burn


We remain positive on near-term (2012-2015E) growth for the miners, and believe that the ability to grow the portfolio is a critical
factor in increasing near-term returns. While holding a portfolio of assets in pre-feasibility stages (a growth pipeline) is essential to
longer-dated growth, we see near-term growth as of greater importance as:

Near-dated growth delivery dictates the ability to increase cash flows (in falling/flat gold price environment);

Near-term prices are easier to forecast, therefore allowing greater certainty on cash inflows;

Capex for near-term growth is mostly spent and there is greater certainty on the cash outlay required, thereby allowing more
accurate cash flow assumptions.

Exhibit 59: Production growth profile of senior golds and silver


Volume growth in Au equivalent terms

Ticker

Au equivalent production growth


Gold equivalent production (Koz)

Company
2011

CAGR

2012

2013E

2014E

2015E

2016E

2017E

2012-15E

Quartile

Multiple
Adjustment

Gold Seniors
RRS.L

Randgold Resources

721

796

845

1,050

1,166

1,171

1,219

14%

Q1

0.50x

ABGL.L

African Barrick Gold

776

651

616

642

668

743

655

1%

Q4

-1.00x

ANGJ.J

AngloGold Ashanti

4,186

3,806

3,712

4,197

4,564

4,891

4,937

6%

Q3

-0.25x

GFIJ.J

Gold Fields

3,701

2,030

1,880

2,183

2,430

2,705

2,846

6%

Q3

-0.25x

SGLJ.J

Sibanye Gold

1,458

1,208

1,372

1,526

1,418

1,353

1,104

5%

Q4

-1.00x

HARJ.J

Harmony Gold

1,294

1,165

1,120

1,271

1,536

1,644

1,711

10%

Q2

0.25x

Source: Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research

47

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

Asset Quality: Sustainably low-cost position assets key to a premium valuation


We build a composite score for asset quality based on two factors: (1) Grade; and (2) relative complexity. Both are scored from 1 to 3.
We use reserve life for grade and our teams judgement for a qualitative score for complexity. We then use the composite score to
adjust our target multiple.
Exhibit 60: Asset quality a key differentiator in industry positioning
Asset quality assessment

Ticker

Company

AssetQuality
Grade

Complexity(3
mostsimple)

Total

Quartile

Multiple
Adj.

GoldSeniors
RRS.L
RandgoldResources

100%

Q2

0.25x

ABGL.L

AfricanBarrickGold

33%

Q4

0.25x

ANGJ.J

AngloGoldAshanti

44%

Q3

0.00x

GFIJ.J

GoldFields

22%

Q4

0.25x

SGLJ.J

SibanyeGold

100%

Q2

0.25x

HARJ.J

HarmonyGold

100%

Q2

0.25x

Source: Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research

48

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

Risk: Who, what and where?


Fiscal risk
We assess the risk of operating in countries using the Fraser Institutes global mining survey (2011/2012), from which we derive the
lower risk (e.g. Sweden, Australia, US) and higher risk (DRC, Zambia) definitions. Based on exposure at the EBITDA level to these
countries, we adjust the target multiples to reflect lower / higher country risk.
Exhibit 61: Gold Fields, AngloGold Ashanti and the silver names operate in less risky environments
Summary exposure of EBITDA by country

RandgoldResources
Argentina
Australia
Brazil
BurkinaFaso
China
Cted'Ivoire
DemocraticRepublicofCongo
Egypt
Ghana
Greece
Guinea
Mali
Liberia
Mexico
Namibia
Niger
Peru
Philippines
PapuaNewGuinea
SierraLeone
SouthAfrica
Tanzania
Turkey
UnitedStates

2012

26%
0%

74%

7.5

Multipleadjustment

2015E

13%
18%

69%

7.7
0.5x

2020E

17%
23%

60%

7.8

AfricanBarrickGold
2012

100%

7.0

2015E

100%

7.0
0.3x

2020E

100%

7.0

AnglogoldAshanti
2012
7%
4%
14%

0%

7%

5%
4%

2%

32%
18%

8%
6.7

2015E
8%
22%
12%

7%

3%

5%
1%

0%

24%
22%

2%
6.3
0.5x

2020E
6%
21%
30%

6%

4%

4%
1%

1%

18%
17%

1%
5.9

GoldFields
2012

18%

33%

15%

33%

6.4

2015E

27%

30%

23%

21%

5.9
0.3x

SibanyeGold
2020E

13%

22%

23%

42%

6.6

2012

100%

8.0

2015E

100%

8.0
1.0x

HarmonyGold
2020E

100%

8.0

2012

6%

94%

7.9

2015E

2%

102%

8.0
1.0x

2020E

2%

102%

8.0

Source: Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research

49

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

Appendix 2: Demand by country


Exhibit 62: Annual gold demand by country and demand category
Country

2004
Investment
Demand
517
101
261
12
224
10
16
1
21
1
35
67
84
5
39
3
38
12
26
39
344
19
136
5
73
1
89
9
45
5
186
49
0
0
351
19
18
-18
77
0
70
0
38
-26
27
5
-2
2
44
1
1,896
309
720
45
2,616
354

Jewellery

India
Greater China
China
Hong Kong
Taiwan
Japan
Indonesia
South Korea
Thailand
Vietnam
Middle East
Saudi Arabia
Egypt
UAE
Other Gulf
Turkey
Russia
USA
Europe ex CIS
Italy
UK
France
Germany
Switzerland
Other Europe
Total above
Other
World total

2005
Investment
Demand
574
136
280
17
241
13
16
1
22
4
34
40
78
3
38
2
41
28
27
34
366
25
147
7
75
1
96
12
47
4
195
53
0
0
349
26
-2
2
71
0
59
0
35
-25
25
15
-9
9
53
3
1,978
366
741
32
2,719
398

Jewellery

2006
Investment
Demand
516
196
277
20
245
14
15
0
17
5
33
-45
58
-1
30
1
26
16
22
70
298
20
106
8
60
1
92
9
40
3
165
60
0
0
306
32
-15
15
65
0
53
0
31
-25
23
28
-11
11
50
1
1,717
383
583
34
2,300
417

Jewellery

2007
Investment
Demand
558
213
335
36
302
26
18
1
15
9
32
-56
55
0
30
1
20
5
21
56
330
21
122
9
68
1
100
9
40
3
188
61
0
0
258
17
-36
36
57
0
50
0
29
-22
21
36
-13
13
49
9
1,791
391
632
46
2,423
438

Jewellery

2008
Investment
Demand
600
223
370
73
341
67
17
1
12
5
31
-39
56
3
24
0
16
43
20
96
320
30
111
14
74
2
100
11
35
3
153
57
0
0
188
83
-238
238
49
0
37
0
26
-3
20
115
-89
89
118
37
1,540
808
764
66
2,304
875

Jewellery

2009
Investment
Demand
471
171
401
103
376
112
16
1
8
-10
22
-30
41
-6
19
-8
7
-10
15
58
238
21
82
11
57
2
75
8
25
1
75
32
0
0
150
114
-293
293
41
0
32
0
24
1
17
134
-97
97
116
61
1,147
739
669
52
1,816
791

Jewellery

2010
Investment
Demand
658
349
480
191
452
190
21
1
8
0
21
-40
33
15
16
1
6
63
14
67
217
28
72
15
53
2
70
9
22
2
67
40
0
0
129
106
-299
299
35
0
27
0
20
1
14
127
-93
93
105
78
1,342
1,120
678
98
2,020
1,218

Jewellery

2011
Investment
Demand
618
368
550
272
515
263
28
2
7
7
17
-47
30
25
13
3
4
104
13
88
167
33
56
17
34
2
58
11
19
3
70
73
0
0
115
84
-376
376
28
0
23
0
18
7
12
159
-116
116
127
94
1,220
1,379
755
140
1,975
1,519

Jewellery

2012
Investment
Demand
552
312
552
258
519
249
26
2
7
7
17
-10
31
22
10
3
3
78
11
65
153
31
47
16
40
2
50
10
17
3
62
48
0
0
108
53
-276
276
22
0
21
0
14
3
11
110
-81
81
90
83
1,224
1,137
672
119
1,896
1,256

Jewellery

1H 2013
Investment
Demand
348
220
361
242
337
234
19
2
5
6
9
2
19
14
6
2
3
62
8
34
103
19
31
9
25
1
37
6
10
3
43
69
0
0
38
44
-136
136
7
0
6
0
0
1
0
61
-35
35
35
39
800
844
326
69
1,127
913

Jewellery

Source: World Gold Council, Datastream.

Exhibit 63: Quarterly gold demand by country and demand category


Country
India
Greater China
China
Hong Kong
Taiwan
Japan
Indonesia
South Korea
Thailand
Vietnam
Middle East
Saudi Arabia
Egypt
UAE
Other Gulf
Turkey
Russia
USA
Europe ex CIS
Italy
UK
France
Germany
Switzerland
Other Europe
Total above
Other
World total

Q1 2010
Investment
Demand
190
79
126
41
118
40
6
0
2
0
5
-12
10
3
5
1
3
16
5
14
62
7
17
4
18
1
21
2
6
1
17
9
0
0
23
17
-48
48
5
0
4
0
4
0
3
19
-14
14
17
15
397
223
130
29
528
252

Jewellery

Q2 2010
Investment
Demand
117
61
95
35
88
38
5
0
2
-3
5
-8
6
3
3
-1
1
20
3
13
58
6
26
2
9
1
18
2
5
0
16
7
0
0
24
33
-115
115
7
0
5
0
4
0
3
50
-36
36
39
30
214
283
201
24
415
307

Jewellery

Q3 2010
Investment
Demand
165
96
123
51
116
50
5
0
2
1
4
-10
11
4
3
1
1
20
3
19
57
8
18
5
16
1
16
2
7
1
27
16
0
0
35
25
-56
56
5
0
5
0
3
0
2
24
-17
17
20
15
374
286
140
27
514
313

Jewellery

Q4 2010
Investment
Demand
185
113
136
64
129
63
5
0
2
1
7
-11
6
6
4
-1
1
8
3
21
40
7
10
4
11
1
14
2
5
0
7
8
0
0
47
32
-80
80
18
0
14
0
10
0
7
35
-26
26
30
19
357
328
207
18
564
346

Jewellery

Q1 2011
Investment
Demand
199
103
154
88
145
86
7
0
2
2
4
-6
10
5
5
1
2
29
5
14
49
8
14
4
9
0
22
3
5
1
19
17
0
0
19
21
-85
85
4
0
3
0
4
1
2
38
-28
28
30
18
382
366
173
34
555
401

Jewellery

Q2 2011
Investment
Demand
180
115
112
56
103
54
7
0
2
1
4
-9
5
6
2
1
1
18
3
14
49
7
20
4
8
0
17
2
5
1
22
15
0
0
21
21
-64
64
6
0
4
0
4
1
2
23
-21
21
23
21
335
307
156
32
491
339

Jewellery

Q3 2011
Investment
Demand
127
78
139
62
131
60
6
1
1
2
4
-20
9
6
2
0
1
34
2
34
37
9
13
5
9
1
10
3
5
1
22
24
0
0
32
22
-133
133
4
0
4
0
2
4
2
59
-37
37
39
33
242
383
215
39
457
422

Jewellery

Q4 2011
Investment
Demand
114
72
145
66
136
63
7
0
2
2
4
-12
6
7
3
1
1
23
2
26
31
9
9
5
9
1
9
3
4
1
7
17
0
0
42
20
-94
94
14
0
11
0
8
2
7
40
-31
31
34
22
260
323
212
35
472
358

Jewellery

Q1 2012
Investment
Demand
138
64
164
92
155
90
6
1
2
2
4
-3
11
9
4
1
2
31
5
17
42
8
11
4
9
0
17
3
4
1
15
15
0
0
18
14
-66
66
3
0
3
0
3
1
2
21
-27
27
29
17
336
314
155
30
491
345

Jewellery

Q2 2012
Investment
Demand
125
57
109
50
100
48
7
1
2
2
5
2
6
5
2
1
1
16
3
16
42
7
15
4
8
0
14
2
4
1
19
18
0
0
20
12
-76
76
5
0
4
0
3
1
2
34
-17
17
20
24
254
260
167
26
421
286

Jewellery

Q3 2012
Investment
Demand
136
83
134
52
127
50
6
1
1
1
5
-5
8
4
2
1
0
15
2
16
35
7
11
4
10
1
9
2
4
1
21
8
0
0
31
10
-68
68
3
0
4
0
2
1
1
29
-17
17
19
21
306
258
156
30
462
288

Jewellery

Q4 2012
Investment
Demand
153
109
146
64
137
62
7
0
2
2
4
-4
7
5
2
1
0
15
2
16
34
9
9
5
12
1
9
3
4
1
7
7
0
0
40
16
-67
67
11
0
11
0
7
1
6
26
-19
19
22
21
327
305
195
33
522
337

Jewellery

Q1 2013
Investment
Demand
160
98
194
114
185
111
7
1
2
3
4
-3
11
6
4
1
2
36
4
14
47
8
12
4
13
1
18
2
4
1
17
31
0
0
18
20
-50
50
3
0
3
0
0
0
0
21
-14
14
14
15
410
375
141
30
551
406

Jewellery

Q2 2013
Investment
Demand
188
122
167
127
153
123
12
1
2
3
5
5
8
9
2
1
1
26
3
20
56
12
19
5
13
1
19
4
6
2
26
38
0
0
20
24
-86
86
4
0
3
0
0
0
0
41
-20
20
20
24
390
469
185
39
576
508

Jewellery

Source: World Gold Council, Datastream.

Goldman Sachs Global Investment Research

50

September 12, 2013

Europe, Middle East & Africa: Metals & Mining: Gold

Disclosure Appendix
Reg AC
We, Eugene King, Abhinandan Agarwal, Fletcher Tully, CFA and Christophor Jost, hereby certify that all of the views expressed in this report accurately reflect our personal views about the subject
company or companies and its or their securities. We also certify that no part of our compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed
in this report.

Investment Profile
The Goldman Sachs Investment Profile provides investment context for a security by comparing key attributes of that security to its peer group and market. The four key attributes depicted are: growth,
returns, multiple and volatility. Growth, returns and multiple are indexed based on composites of several methodologies to determine the stocks percentile ranking within the region's coverage
universe.
The precise calculation of each metric may vary depending on the fiscal year, industry and region but the standard approach is as follows:
Growth is a composite of next year's estimate over current year's estimate, e.g. EPS, EBITDA, Revenue. Return is a year one prospective aggregate of various return on capital measures, e.g. CROCI,
ROACE, and ROE. Multiple is a composite of one-year forward valuation ratios, e.g. P/E, dividend yield, EV/FCF, EV/EBITDA, EV/DACF, Price/Book. Volatility is measured as trailing twelve-month

volatility adjusted for dividends.

Quantum
Quantum is Goldman Sachs' proprietary database providing access to detailed financial statement histories, forecasts and ratios. It can be used for in-depth analysis of a single company, or to make
comparisons between companies in different sectors and markets.

GS SUSTAIN
GS SUSTAIN is a global investment strategy aimed at long-term, long-only performance with a low turnover of ideas. The GS SUSTAIN focus list includes leaders our analysis shows to be well
positioned to deliver long term outperformance through sustained competitive advantage and superior returns on capital relative to their global industry peers. Leaders are identified based on
quantifiable analysis of three aspects of corporate performance: cash return on cash invested, industry positioning and management quality (the effectiveness of companies' management of the
environmental, social and governance issues facing their industry).

Disclosures
Coverage group(s) of stocks by primary analyst(s)
Eugene King: EMEA Mining, Europe-Mining.
EMEA Mining: Anglo American Platinum, AngloGold Ashanti, ENRC, Ferrexpo Plc, Gold Fields, Harmony Gold, IRC Ltd, Impala Platinum Holdings Ltd., Israel Chemicals, Jastrzebska Spolka Weglowa
S.A., KGHM Polska Miedz S.A., Kenmare Resources, Koza Gold, Mechel, Mechel (Pref), New World Resources Plc, Norilsk Nickel, Petropavlovsk PLC, Polymetal International Plc, Polyus Gold
International, Raspadskaya, Sibanye Gold, Sierra Rutile, United Company Rusal, Uralkali.
Europe-Mining: African Barrick Gold, African Minerals, Anglo American plc, Antofagasta plc, Aquarius Platinum, Aureus Mining, BHP Billiton Plc, Banro Corporation, Boliden, Centamin Plc, Endeavour
Mining, First Quantum Minerals, Fresnillo PLC, Gem Diamonds, Glencore Xstrata plc, Hochschild Mining Plc, Kazakhmys, Kumba Iron Ore, London Mining, Lonmin, Lundin Mining Corporation, Norsk
Hydro, Nyrstar, Petra Diamonds, Platinum Group Metals Ltd., Randgold Resources, Rio Tinto plc, Semafo, Inc., Vedanta Resources.

Company-specific regulatory disclosures


Compendium report: please see disclosures at http://www.gs.com/research/hedge.html. Disclosures applicable to the companies included in this compendium can be found in the latest relevant
published research

Distribution of ratings/investment banking relationships


Goldman Sachs Investment Research global coverage universe
Rating Distribution

Buy

Hold

Investment Banking Relationships

Sell

Buy

Hold

Sell

Global
31%
54%
15%
49%
41%
38%
As of July 1, 2013, Goldman Sachs Global Investment Research had investment ratings on 3,535 equity securities. Goldman Sachs assigns stocks as Buys and Sells on various regional Investment
Lists; stocks not so assigned are deemed Neutral. Such assignments equate to Buy, Hold and Sell for the purposes of the above disclosure required by NASD/NYSE rules. See 'Ratings, Coverage
groups and views and related definitions' below.

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Price target and rating history chart(s)


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Ratings, coverage groups and views and related definitions


Buy (B), Neutral (N), Sell (S) -Analysts recommend stocks as Buys or Sells for inclusion on various regional Investment Lists. Being assigned a Buy or Sell on an Investment List is determined by a

stock's return potential relative to its coverage group as described below. Any stock not assigned as a Buy or a Sell on an Investment List is deemed Neutral. Each regional Investment Review
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investment outlook over the following 12 months is favorable relative to the coverage group's historical fundamentals and/or valuation. Neutral (N). The investment outlook over the following 12
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Not Rated (NR). The investment rating and target price have been removed pursuant to Goldman Sachs policy when Goldman Sachs is acting in an advisory capacity in a merger or strategic
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there is not a sufficient fundamental basis for determining, or there are legal, regulatory or policy constraints around publishing, an investment rating or target. The previous investment rating and
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