DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST
CERTIFICATIONS, LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS.
US Disclosure: Credit
Suisse 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.
18 July 2017
Asia Pacific/Australia
Equity Research
Metals & Mining
Aus Gold, Copper and Nickel
SECTOR REVIEWResearch AnalystsMichael Slifirski
61 3 9280 1845
michael.slifirski@credit-suisse
Nick Herbert, CFA
61 3 9280 1754
nick.herbert@credit-suisse
Au, Cu and Ni review and JunQ previews
■
Commodity price updates:
CS has updated its gold prices forecasts
reducing our 2H CY17 forecast to US$1313/oz, but maintaining prices from
CY18 US$1375/oz through to our long-term US$1300/oz. We have also
taken a MtM on all JunQ commodity and FX prices ahead of JunQ results.
Our copper and nickel price forecasts are unchanged.
■
Most preferred exposures:
We maintain Outperform on EVN, OGC, AQG
and PRU. Our preferred gold exposure is OGC, which is trading at a
discount to our valuation and offers global diversity, portfolio quality, proven
management and growth options.
■
Least preferred exposures:
In our gold coverage, NCM and RRL, both
Underperform, are our least preferred exposures on valuation grounds
trading at premiums to valuation. We are Neutral on SBM on valuation and
its lack of current growth options. Our NST Neutral assumes material
reserve and resource growth necessary to substantiate our life assumption
and its un-compelling valuation. We assess both OZL and SFR to be
expensive relative to our valuation, but removing our Carrapateena
discount factor would close OZL's value gap. Our copper equity valuations
are heavily impacted by our depressed medium-term copper price
assumptions ($2.05/lb CY18, <$2.00/lb CY19/20). We are Outperform on
IGO and Neutral on WSA but recognise significant nickel price recovery
leverage, particularly to pure play, net cash WSA; our spot valuations are
$2.33/sh and $0.95/sh, respectively.
■
Best value opportunities:
AQG and PRU are trading at deep discounts to
our NPV-based valuations with investors pricing in risk factors: AQG
sulphide development risk, Turkish country risk and early stage exploration
potential; PRU African, Edikan operating stability, Sissingue development,
Resource definition and reconciliation risk. Both AQG and PRU offer the
potential to materially re-rate higher.
Figure 1: Share prices vs CS target pricesFigure 2: Share prices vs CS target prices
Share priceTarget priceDiscount / Premium to TP ($/sh)Discount / Premium to TP (%)
Gold
NCM19.70 18.20 1.50 8%EVN2.23 2.30 -0.07 -3%
OGC3.59 4.35 -0.76 -17%RRL3.73 3.50 0.38 11%
SBM2.68 2.60 0.08 3%AQG2.06 5.30 -3.24 -61%
PRU0.29 0.85 -0.56 -66%NST4.43 4.15 0.28 7%
Copper
OZL7.83 7.15 0.68 10%SFR5.76 4.65 1.11 24%
Nickel
IGO3.23 3.50 -0.27 -8%WSA2.25 2.50 -0.25 -10%
-66%-61%
-17%-10%
-8%-3%
3%7%8%10%
11%
24%
-80%
-70%
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
PRUAQGOGCWSAIGOEVNSBMNSTNCMOZLRRLSFR
Share price discount / premium to TP (%)
Source: Company data, Credit Suisse estimatesSource: Company data, Credit Suisse estimates
18 July 2017
Aus Gold, Copper and NickelCommodity and FX forecasts
Figure 3: Gold price change summary
2016A1Q-17A2Q-173Q-174Q-172017E1Q-182Q-183Q-184Q-182018E2019E2020ELT
NewUS$/oz
1,248
1,2181,2591,2751,350
1,276
1,3751,3751,3751,375
1,3751,3501,3251,300
OldUS$/oz
1,248
1,2181,3001,3251,400
1,311
1,3751,3751,3751,375
1,3751,3501,3251,300
Chg%0%0%-3%-4%-4%
-3%
0%0%0%0%
0%0%0%0%
Source: Credit Suisse estimates
Figure 4: Copper, Silver and Nickel prices—unchanged
2016A1Q-17A2Q-173Q-174Q-172017E1Q-182Q-183Q-184Q-182018E2019E2020ELT
CopperUS$/lb
2.21
2.652.602.502.30
2.51
2.102.102.002.00
2.051.951.953.00
SilverUS$/oz
17.11
17.4217.2517.0018.00
17.42
18.5018.5018.5018.50
18.5018.5019.0020.00
Nickel US$/lb 4.354.664.655.005.00
4.83
5.255.255.255.25
5.255.505.756.70
Source: Credit Suisse estimates
Figure 5: FX price change summary
2016A1Q-17A2Q-173Q-174Q-172017E1Q-182Q-183Q-184Q-182018E2019E2020ELT
NewUS$/oz
0.74
0.760.760.750.75
0.76
0.740.740.740.74
0.740.750.750.75
OldUS$/oz
0.75
0.740.730.730.72
0.73
0.720.720.730.74
0.730.750.750.75
Chg%
-1%
3%4%3%4%
3%
3%3%1%0%
2%0%0%0%
Source: Credit Suisse estimates
Figure 6: Gold price forecasts Figure 7: Copper price forecasts
1,000
1,050
1,100
1,150
1,200
1,250
1,300
1,350
1,400
1,450
1,500
US$/
oz
Gold
HistoricalsCS ForecastBB ConsensusForward curves
190
200
210
220
230
240
250
260
270
280
290
300
310
320
330
340
US$/
lb
Copper
HistoricalsCS ForecastBB ConsensusForward curve
Source: Bloomberg, Credit SuisseSource: Bloomberg, Credit Suisse
Figure 8: Nickel price forecasts Figure 9: AUDUSD forecasts
3.00
3.50
4.00
4.50
5.00
5.50
6.00
6.50
7.00
7.50
8.00
8.50
9.00
9.50
US$/
lb
Nickel
HistoricalsCS ForecastBB ConsensusForward Curves
0.670.69
0.710.73
0.750.77
0.790.81
0.830.85
0.870.89
0.910.93
0.950.97
0.99
AUDUSD
HistoricalsCS ForecastBB ConsensusForward curves
Source: Bloomberg, Credit SuisseSource: Bloomberg, Credit Suisse
18 July 2017
Aus Gold, Copper and NickelAu, Cu and Ni prices implied in equity prices
Figure 10: Au price for NPV = share price (US$/oz)
948
1,012
1,238
1,330
1,3961,431
1,4401,453
1,234
800
900
1,000
1,100
1,200
1,300
1,400
1,500
1,600
PRUAQGOGCEVNSBMNCMNSTRRLSpot
Implied gold price (US$/oz)
Source: Company data, Credit Suisse estimates
Figure 11: Cu price for NPV = share price (US$/lb)Figure 12: Ni price for NPV = share price (US$/lb)
$3.01
$2.80
$2.71
$2.00
$2.20
$2.40
$2.60
$2.80
$3.00
$3.20
OZLSFRSpot
Implied copper price (US$/lb)
$6.68$6.22
$4.33
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
IGOWSASpot
Implied nickel price (US$/lb)
Source: Company data, Credit Suisse estimatesSource: Company data, Credit Suisse estimates
18 July 2017
Aus Gold, Copper and NickelOther valuation metrics
Figure 13: Valuation comps (forecasts on CS estimates)
P/NPV
current2015A2016A2017F2018F2015A2016A2017F2018F
Gold
NCM1.121.735.324.816.010.810.19.37.5
EVN1.05.69.214.411.315.16.65.74.8
NST1.19.511.213.49.67.86.15.54.5
OGC0.818.518.37.39.010.06.74.34.2
RRL1.15.16.516.910.97.16.18.05.7
SBM1.05.06.09.17.89.55.04.54.1
AQG0.418.0136.83.25.72.06.32.51.7
PRU0.32.1-6.8-14.119.20.949.316.51.4
Copper
OZL1.19.410.022.25355.43.64.54.57.0
SFR1.211.818.611.515.74.35.13.94.8
Nickel
IGO0.914.6-22.639.410.110.152.112.95.1
WSA0.827.6-34.6232.311.34.213.48.23.8
Div Yield
20162015A2016A2017F2018F2015A2016A2017F2018F
Gold
NCM0.5%6.98.81.61.58.7%6.7%6.1%6.9%
EVN2.0%0.30.71.81.628.6%20.9%13.0%16.2%
NST3.2%0.20.54.33.223.5%13.7%8.1%12.1%
OGC0.2%1.73.21.00.94.4%-6.4%7.9%14.7%
RRL5.8%0.30.63.63.112.2%14.2%5.3%10.5%
SBM0.0%0.00.42.92.359.2%24.3%15.2%13.0%
AQG0.0%3.93.90.70.75.1%-9.4%-56.3%-25.6%
PRU0.0%1.31.00.40.427.6%-13.6%-49.4%3.2%
Copper
OZL4.5%4.04.51.01.017.8%16.9%4.2%-12.4%
SFR1.9%2.02.42.01.918.3%8.8%15.1%9.5%
Nickel
IGO0.7%4