ATLANTIC GOLD: BUY PITCH - NATURAL RESOURCES GROUP GEN PELOW, JUSTIN YEUNG, CONNOR MCDIARMID, CONNOR MCSWEENEY, TEIMUR SIDDIQUI OCTOBER 31, 2018 ...
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Atlantic Gold: Buy Pitch Natural Resources Group Gen Pelow, Justin Yeung, Connor McDiarmid, Connor McSweeney, Teimur Siddiqui October 31, 2018
Disclaimer The analyses and conclusions of the Western Investment Club (“WIC") contained in this presentation are based on publicly available information. WIC recognizes that there may be confidential information in the possession of the companies discussed in the presentation that could lead these companies to disagree with WIC’s conclusions. This presentation and the information contained herein is not a recommendation or solicitation to buy or sell any securities. The analyses provided may include certain statements, estimates and projections prepared with respect to, among other things, the historical and anticipated operating performance of the companies, access to capital markets and the values of assets and liabilities. Such statements, estimates, and projections reflect various assumptions by WIC concerning anticipated results that are inherently subject to significant economic, competitive, and other uncertainties and contingencies and have been included solely for illustrative purposes. No representations, express or implied, are made as to the accuracy or completeness of such statements, estimates or projections or with respect to any other materials herein. Actual results may vary materially from the estimates and projected results contained herein. The sole responsibility for the content of this publication lies with the authors. Its contents do not reflect the opinion of the University Students’ Council of the University of Western Ontario (“USC”). The USC assumes no responsibility or liability for any error, inaccuracy, omission or comment contained in this publication or for any use that may be made of such information by the reader.
Table of Contents
§ Company Overview
§ Operations Overview
§ Annotated Stock Chart
§ External Analysis
§ Investment Thesis Overview
– Thesis I
– Thesis II
– Thesis III
§ Net Asset Valuation
§ Comparable Companies Analysis
§ Precedent Transactions
§ Catalysts
§ Risks & MitigationsCompany Overview
Atlantic Gold is a junior gold producer with four open pit deposits in Nova Scotia
Key Financials Business Overview
Ticker TSX-V:AGB IPO Date August 8, 1996
Share Price (C$) 1.64 Four Main Touquoy, Beaver Dam, Fifteen Mile
52 Week Low – High (C$) 1.36 – 1.97 Deposits Stream, Cochrane Hill
Market Capitalization ($M) 395.2 Production Commercial production began on March
Enterprise Value ($M) 503.4
1, 2018
P / NAV 0.63x 2018 Q1 Production (oz) – 18,183
P / 2018E Cash Flow 5.40x 2018 Q2 Production (oz) – 22,269
52 Week Performance % of Reserves per Deposit
$2.00 2,000
Total Reserves:
1,600 1,585,000
$1.80
ounces
Volume (000s)
Price (C$)
1,200 27% 27%
$1.60 Touquoy
800 Beaver Dam
$1.40 25% 21% Cochrane Hill
400
Fifteen Mile Strem
$1.20 –
Oct-17 Jan-18 Apr-18 Jul-18 Oct-18
Source: Corporate DiscolsuresOperations Overview
AGB has four deposits: Touquoy, Beaver Dam, Fifteen Mile and Cochrane Hill
Stage Completion Description
Commercial Production began during 1Q18, with an annual guidance
Phase I Execution 2018
of 82,000-92,000 oz at an AISC of $635-735/oz
Staged integration of two additional deposits, increasing annual
Phase II Expansion 2022
production to over 200,000 oz
Continuing AGB’s resource expansion drilling program, at the Fifteen
Phase III Growth 2023
Mile and Cochrane Hill deposits
Phase IV Exploration 2023+ Up to 100,000 metres of drilling along the Corridor Regional Program
Mineral Reserves and Resources Deposits Overview
15
12 § Touquoy: 425,000 oz of P&P reserves, 63.5%
Metric Tonnes (Mt)
owned by AGB
9
§ Beaver Dam: 335,000 oz of P&P reserves,
6 awaiting environmental approval in 2019
3 § Cochrane Hill: 393,000 oz of P&P reserves
– § Fifteen Mile: 432,000 oz of P&P reserves
Proven & Probable Me asured & Indicated Inferred
Fifteen Mile Cochrane Hill Beaver Dam Touquoy
Source: Corporate DisclosuresCurrent Gold Market
Gold market has seen mixed performance in 2018
Price Drivers Recent Developments
§ Investor Sentiment: as economic instability § Barrick Gold-Randgold merger is expected to be
arises, capital flows into gold markets completed in early 2019
§ Monetary Policy: gold prices vary inversely with § Tight monetary policy and a strong US dollar has
interest rates due to the opportunity cost of put pressure on gold prices in 2018
holding gold § After stagnating in the mid-year, gold prices are
rising due to growing risks in the equity market;
§ US Dollar Strength: as the currency appreciates,
prices rose last Friday to a three month peak
the price of gold tends to fall
Outlook Gold Prices
§ On-going trade wars between the US and China 1,400
has created uncertainty in the markets 1,350
§ If tensions escalate, a rotation out of riskier (USD/oz) 1,300
assets, such as US equities, will likely follow 1,250
– As investors turn towards “safe-haven” 1,200
assets, the price of gold will appreciate 1,150
– Potential price gains may be offset by a 1,100
strengthening US dollar Oct-17 Dec-17 Feb-18 Apr-18 Jun-18 Aug-18 Oct-18
Source: Industry researchJunior Mining Industry
Junior producers derive there value from the costs they can
Junior Mining Company Value Drivers Valuation Methods
§ Cost of production § NAV Model: Company’s provide audited,
– Low operating costs are important to ensure technical reports with detailed estimates on
consistent profitability production and expected costs
§ Management team § Comparable Companies: Since all Gold mines
– Past experience carries over to decisions on are price takers, relative valuation on cost and
capital allocation and cost management reserve basis is crucial
Key Terms Senior Producer Gold Reserves
800
§ Ore Grade
– Metric of the average proportion of gold
Millions Ounces
600
contained in the ore (g/t)
§ All-in Sustaining Cost (AISC)
400
– Metric reflecting the cost of mining and
sustaining production for one ounce of gold
200
2005 2007 2009 2011 2013 2015Annotated Stock Graph
Despite past setbacks, AGB is well positioned to create shareholder value over the long term
October 2016 to Date
March 5, 2018:
Declares commercial gold
January 19, 2018: production at MRC mine
Announces production October 10, 2018:
Share price reaction: +16%
$2.20 guidance for MRC mine Announces Q2 earnings with 4,000
Share price reaction: +3% 24% production increase QoQ
Share price reaction: +5%
October 5, 2017:
$2.00 Closes $16mm brokered 3,500
private placement
Share price reaction: (17)%
$1.80 3,000
$1.60 Share Price: 2,500
March 16, 2017: $1.67
Volume (000s)
Begins reporting drill results
Price (C$)
from Fifteen Mile Stream
$1.40 2,000
$1.20 1,500
$1.00 1,000
$0.80 500
$0.60 0
Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18
Sources: Yahoo Finance, press releasesInvestment Thesis Overview
AGB is a fundamentally strong company and is positioned to succeed amongst its peer group
• As a result of the decline in gold prices, capital has been flowing out of the sector
which has resulted in investors favoring more stable senior producers
Outflows from Gold • Recent guidance misses and poor performance from competitors has resulted in
and Poor Competitor
Performance negative sentiment directed towards junior producers
• Despite negative sentiments, AGB has been able to consistently meet guidance and
production expectations
• Due to a variety of favorable inputs, AGB is able to produce gold at an industry low
Industry Leading Cost All-In Sustaining Cost (AISC) of $647/oz
Structure Established
by Experienced • Management’s significant experience with similar style projects will ensure the low
Management production cost advantage is sustainable into the near future
• Due to its location in Canada, AGB benefits from low political and economic risk
AGB Operates in which many other junior producers are exposed to from overseas operations
Advantageous
Jurisdictions, With a • Large reserves and staged integration of satellite deposits will increase annual gold
Strong Resource production to over 200,000 oz
PortfolioInvestment Thesis 1: Junior Producers Sector Decline
Recent decline has led to a greater perceived risk of gold producers, specifically junior mines
Recent Outflows Guidance Missed By Competitors
§ As gold prices decline, capital generally tends to § Decline has led to significant guidance misses for
move towards other industries, and remaining competitors
capital is concentrated in senior producers § Detour Gold (TSX: DGC) and Alamos Gold (TSE:
§ Perceived risk of junior developers is amplified AGI) both recently missed on production and
when gold suffers, as these companies have revenue estimates, which furthered negative
reserves that are not as certain sentiment towards junior miners
MRC Prospects Gold Investment Flows
4.0 North America Europe Asia Other
§ Atlantic Gold Management has been able to 3.0
consistently meet higher end of guidance; yet is 2.0
still trading at a discount due to negative 1.0
0.0
sentiment from poor competitor performance
(1.0)
§ Industry downturn does not reflect MRC (2.0)
prospects, as it remains relatively better (3.0)
positioned than its competitors due to favourable (4.0)
Jun-17 Sep-17 Dec-17 Ma r-18 Jun-18 Sep-18
jurisdiction and cost structureInvestment Thesis 2: Low Sustainable AISC
Management’s experience and motivation should continue to drive an industry low AISC
AISC Drivers Proven and Motivated Management
§ Low AISC drivers include location, extraction § Atlantic has a vastly experienced management
classification, medium grade ore, and a low strip team (25-30+ years) that has worked in senior
ratio roles at a number of low-cost mining companies
§ New deposits coming online in close proximity to – Provides clear ability to keep the project on
current mine will maintain current margins and time, as well as the expertise to maintain
further leverage fixed cost base to lower AISC low AISC as new deposits come online
§ AGB has an insider ownership of ~33%
– Strongly incentivizes management to keep
Margin per Ounce of Gold Sold (1)
costs low and to set reasonable guidance
AISC Margin
expectations
22%
11% – Management has been steadily increasing
28%
38% ownership over the past year signalling faith
48%
in AGB’s ability to meet targets
100%
89%
72% 78%
62%
52%
Atlantic Pretium Alacer Alamos Wesdome Detour
(1) Assuming US$1,200/oz Gold PriceInvestment Thesis 3: Strong Resource Portfolio
Atlantic’s high-grade reserves are well supported by minimal geopolitical risk
Quality Asset Base Economic & Political Stability
§ MRC has an open-pit grade of 1.44 g/t § Operating in Canada offers geopolitical stability
– Resource model grade has accurately and minimizes risk from resource nationalism
predicted milled grade to date § Canadian government has been negotiating trade
agreements and building political capital in
§ Staged integration of Fifteen Mile Stream and
resource-rich countries
Cochrane Hill deposits will push annual gold
– Increases attractiveness of Canadian junior
production to over 200,000 oz
miners to foreign buyers
High-Grade Reserves Geopolitical Risk Ratings (1)
1.6 Grade (g/t) Gold Reserves (Koz) 500 9.0
1.4 8.0
400 7.0 Minimal geopolitical risk
1.2
6.0 compared to peers
1.0 300
5.0
(Koz)
(g/t)
0.8
4.0
0.6 200
3.0
0.4 2.0
100
0.2 1.0
– – –
Touquoy Beaver Dam Cochrane Hill 15 Mile Stream
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1: Geopolitical risk ratings are calculated based on weighted score of S&P Global Market Intelligence country risks (Political, Operational, Security)Comparable Companies Analysis
AGB trades in line with its peers despite having just declared commercial production
Operating Statistics
Junior Mining Producers
Stock Price Market Enterprise P/CF Current Current 2018E
Company ($US) Cap ($US M) Value($US M) LTM NTM Price / NAV EV / Reserves AISC
Alamos Gold $5.84 $2,293 $1,985 8.0x 6.6x 0.55x $70 $961
Detour Gold $9.67 $1,695 $1,794 5.0x 5.5x 0.51x $51 $1,227
New Gold $1.10 $637 $1,690 1.9x 2.2x 0.55x $52 $1,168
TMAC Resources $4.96 $558 $696 10.5x 3.7x 0.56x $193 $1,420
Wesdome $3.83 $515 $497 10.9x 10.4x 0.90x $1,344 $1,092
Mean 7.3x 5.7x 0.61x $342 $1,173
Median 8.0x 5.5x 0.55x $70 $1,168
Atlantic Gold $1.64 $419 $506 5.4x 4.9x 0.63x $487 $647
§ On an EV/Reserve basis, AGB trades above its peers meaning that the company is worth more, on average, per
oz of gold
§ On a P/NAV basis, AGB currently trades in line with its peers; however, we believe due to its ability to operate at
such high margins compared to its junior and intermediate peers that it will trade at a premium upon incorporation
of the remainder of deposits
Sources: SEDAR filings, Corporate DisclosuresPrecedent Transactions
Analysis of four recent comparable transactions in the gold sector
Precedent Transactions
Recent Gold M&A
Acquirer Target Transaction
Acquisition Close Acquirer Target Market Cap ($US M) Market Cap ($US M) Price Value ($US M)
Jan-18 Lea Gold Brio Gold $456 $147 $2.90 $225
Mar-18 Hecla Mining Klondex Mines $1,545 $117 $2.47 $462
Mar-18 Alio Gold Rye Patch $266 $83 $1.57 $128
Jun-18 Orion Mine Finance Dalradian NA $334 $1.47 $537
Transaction Mechanics
Exchange Shares Implied
Acquisition Close Acquirer Target Ratio Issued (M) Stock Cash EV / EBITDA Premium
Jan-18 Lea Gold Brio Gold 0.92 135.2 100% - 13.1x 57%
Mar-18 Hecla Mining Klondex Mines 0.63 77.4 66% 34% 8.5x 59%
Mar-18 Alio Gold Rye Patch 0.48 39.0 100% - NA 35%
Jun-18 Orion Mine Finance Dalradian - - - 100% NA 49%
Mean 89% 67% 10.8x 50%
Median 100% 67% 10.8x 53%
Source: Corporate DisclosuresPrecedent Transactions
Orion Mine Finance to Acquire Dalradian Resources Inc. – June 21, 2018
Dalradian Resources Inc. Orion Mine Finance
§ Owns the Curraghinalt Gold Deposit in Northern § Global alternative investment management firm
Ireland, which is an exploration property with $4Bn in AUM
§ NI 43-101 reported gold reserves: § Specialized in the base and precious metals
– 33,000 oz measured resources at 26.04 g/t sector
– 3.03 Moz indicated resources at 14.95 g/t § Deals with name mining companies such as
– 3.04 Moz inferred resources at 12.24 g/t Pretivm, Lydian, Lundin Mining, Nemaska Lithium,
and Premier Gold Mines
Transaction Details & Implications
§ Orion to acquire Dalradian in an all cash deal for C$1.47 per share valued at a total of C$537mm
§ Represents a 62% premium on the closing price of Dalradian on June 20, 2018
§ Prior to the transaction, Orion held 20.4% of Dalradian shares outstanding
§ The high premium acquisition shows that M&A opportunities for single asset mining companies are still possible
§ Uncharacteristic jurisdictions, like Northern Ireland, do not prove to be a deterrent for investors
Source: Corporate DisclosuresNet Asset Value
Model Output (1)
Financial Data (C$mm)
2018E 2019E 2020E 2021E 2022E Modelled Production & AISC Profile
Cash & Cash Equivalents 73 93 72 145 288
PP&E 217 217 258 279 273 300 800
Less: Depreciation (10) (24) (30) (50) (76)
Net PP&E 228 240 288 329 350
Debt 118 66 55 41 26 225 600
(US$/oz)
Income Statement (C$mm)
(Koz)
2018E 2019E 2020E 2021E 2022E 150 400
Revenue 118 195 216 377 492
EBITDA 76 145 150 232 237
EBIT 65 122 121 181 161 75 200
Net Income 45 74 70 138 155
EPS (C$/Share) 0.18 0.29 0.28 0.55 0.62
EV/EBITDA 5.13x 2.67x 2.58x 1.68x 1.64x – –
P/NAV 0.63x 0.63x 0.68x 0.69x 0.79x 2018E 2019E 2020E 2021E 2022E
Production Profile (Koz) AISC (US$/oz)
Cash Flow Statement (C$mm)
2018E 2019E 2020E 2021E 2022E
Operating Cash Flow 55 90 99 194 238 NAV Waterfall
Investing Cash Flow (23) (27) (74) (74) (73)
Financing Cash Flow 0 (42) (46) (47) (22)
Cash Increase (Decrease) 33 20 (21) 74 143
$0.16 $0.03
Ending Cash 73 93 72 145 288 $0.25
Unlevered Free Cash Flow 25 82 34 100 111 $2.24 $2.20
($0.47)
Valuation
MRC I (5%) 563
MRC II (5%) 62
Total NPV 625
Corporate Adjustments (72)
NAV 554
CH & FM ITM Cash NAV/Share
NAV/Share $2.20
MRC Phase I Cash Debt
Implied Upside 34.2%
(1) Model is based on a flat gold price of $1,265; based on consensus street researchRisks and Catalysts
AGB has a number of imminent catalysts that can result in share price appreciation
Risks Catalysts
§ Gold Price Decline § Favourable Environmental Approval
– If the price of gold falls, it will likely lead to a – AGB has spent $500K in 2018 on
decline in share price for AGB environmental approval for the Beaver Dam
– AGB has locked in the price for the next two deposit, which is expected to be approved
years of production with forward contracts, by early 2019
mitigating risk from fluctuating prices – AGB is currently conducting feasibility
– Additionally, analyst forecasts show the studies on the Corridor Regional Program
price of gold rising to $1,304 by 2021 – Management reported positive geological
§ Grade Control Risk trends at the Beaver Dam, Fifteen Mile
– AGB’s profitability will be affected by the Stream and Touquoy deposits, and if the
grade at which the gold is extracted positive results persist then it will result in
stock price appreciation
– Open-pit mining allows for better prediction
of head grade § Potential M&A Opportunity
– Management team has been conservative – AGB being acquired by a larger gold
with their guidance in the past producer would likely result in a large
acquisition premium
– Low AISC provides a margin of safety if
milled grade is lower than expectedCatalyst: Potential M&A Opportunity
B2 Gold is one of the largest senior Canadian producers, that could potentially acquire AGB
B2 Gold Key Financials Au Production & AISC
Ticker TSX:BTO Au Production (Koz) AISC (US$/oz)
1,200 1,000
Share Price (C$) 3.39 1,000 800
52 Week Low – High (C$) 2.77 – 4.06 800
(US$/oz)
600
(Koz)
Market Capitalization (mm) 3,354.1 600 940
400
400 631
Enterprise Value (mm) 4,076.3 493 550
200 384 200
P / NAV 1.13x
– –
P / 2018E Cash Flow 8.23x 2014 2015 2016 2017 2018E
52 Week Performance Producing & Exploration Assets
4.00 16
6% Fekola
12
3.50 Masbate
Volume (mm)
19%
Price (C$)
8 50% Otjikoto
3.00 La Libertad
24%
4
El-Limon
2.50 –
Oct-17 Jan-18 Apr-18 Jul-18 Oct-18Catalyst: Merger Model
Estimated Accretion / Dilution from an Acquisition of Atlantic Gold
Premium
30% 40% 50% 60% 70%
% Stock 100% $0.025 $0.022 $0.020 $0.018 $0.016
80% $0.028 $0.026 $0.023 $0.021 $0.019
60% $0.031 $0.029 $0.027 $0.024 $0.022
40% $0.033 $0.031 $0.029 $0.027 $0.025
20% $0.036 $0.034 $0.032 $0.030 $0.028
Premium
30% 40% 50% 60% 70%
100% 12.8% 11.5% 10.4% 9.2% 8.1%
% Stock
80% 14.4% 13.3% 12.2% 11.1% 10.0%
60% 16.0% 14.9% 13.8% 12.7% 11.6%
40% 17.3% 16.2% 15.1% 14.1% 13.0%
20% 18.6% 17.6% 16.6% 15.6% 14.5%
Transaction Assumptions
§ 50% Equity, 50% Cash (80% of the cash component being finance by new debt)
§ 50% premium on 26-Oct-18 closing price, interest rate on new date of 5%, interest rate earned on cash of 1%, and
tax rate of 26%Valuation Football Field
Target Price calculation for Atlantic Gold
Trading Value Transaction Value Model
Research Analyst
Market Value Comparable Metrics Average Premium Historical Premium NAV
Price Range
$4.00
$3.50
$3.00
Target Price: C$2.20 $2.65
Implied Upside: 34%
(C$/share)
$2.31
$2.09 $2.06
$1.97
$2.00
$2.06
$1.99
$1.85 $1.86
$1.80
$1.36
$1.00
Research Single Gold Producing High-Low Historical Model: Sensitize
52-Week Range P/CF 2018E vs. Peers Assets on a P/NAV Au Price
Description Analyst Premiums
High / Low Target Prices P/CF 2019E vs. Peers Basis; +/- 5% (2015-2018) US$1,200 - US$1,350
Source: Bloomberg; CapIQ, Analyst ReportsRecommendation
Recommendation:
Buy Atlantic Group at $1.64Atlantic Gold: Buy Pitch Natural Resources Group Gen Pelow, Justin Yeung, Connor McDiarmid, Connor McSweeney, Teimur Siddiqui October 31, 2018
Appendix A: Capital Structure
Despite large capital raises in 2017, AGB is projected to maintain liquidity and strong cash flow
Capital Allocation Overview Current Debt Obligations
§ Junior producers traditionally require financing Name Amount Rate
before commercial production begins Project Loan $65,000,000 CDOR (1) + 5%
§ One of the primary sources of financing for the Facility
company has been their project loan facility, which Convertible $13,000,000: Paid 8.5%
was issued in 2016 Debt 2Q18
§ Issued follow-on equity with proceeds of ~$21mm Equipment $10,409,317 CDOR + 5.5%
in 2017 Facility
Current Credit Health Projected Debt Repayments
Debt Balance UFCF Debt/CF
§ As of September 2018, AGB has $40mm of cash 120 4
on their balance sheet
§ During the second quarter of commercial 3
80
production AGB was able to generate $0.8mm of
(C$000s)
2
cash flow
40
§ Refinanced loan facility for 3Q18, with higher
1
capacity and more favourable rate
– 0
2018 2019 2020 2021 2022 2023
(1) Canadian Dealer Offered RateAppendix B: Reserves and Resources
Au
Category Tonnes (Mt)
Grade (g/t) Contained (Moz)
Touquoy 9.2 1.44 0.270
Cochrane Hill 11.2 1.10 0.393
Beaver Dam 7.3 1.43 0.334
Fifteen Mile 10.8 1.24 0.432
Total Proven and Probable 38.4 1.16 1.430
Touquoy 10.1 1.48 0.034
Cochrane Hill 10.7 1.16 0.427
Beaver Dam 9.3 1.43 0.092
Fifteen Mile 10.6 1.33 0.460
Total Measured and Indicated 40.6 1.21 1.012
Touquoy 1.6 1.51 0.049
Cochrane Hill 1.6 1.32 0.070
Beaver Dam 1.8 1.37 0.081
Fifteen Mile 6.6 1.12 0.246
Total Inferred 11.7 1.17 0.446
Total Resources 52.3 1.20 62.8Appendix C: Management
§ Has a 30+ year mining career, including as President of Teck Cominco Limited,
Steven Dean Canada’s largest diversified resource company
(Chairman, CEO, & § Former Chairman of Sierra Metals Inc. & current Chairman of Oceanic Iron Ore Corp.
§ Has been the Executive Chairman of Atlantic Gold Corporation since June 19, 2003
Director)
and its Chief Executive Officer since November 2014
§ Has over 30 years of experience in senior gold companies globally and holds a
Maryse Belanger Bachelor of Science Degree in Geology and a graduate certificate in Geostatistics
(President, CEO, & § Strong skills in operational excellence and efficiency
Director) § Recently responsible for the cost cutting success at Mirabela Nickel Ltd.’s Santa Rita
mine in Brazil during a period of extremely low metal prices
Chris Batalha § Certified Professional Accountant with over seven years of experience in accounting,
(CFO) finance, corporate governance, and mergers and acquisitions
§ Mining engineer with 27 years of international mining experience
Alastair Tiver § Holds a Master’s in Business Administration, is a professional engineer registered in
(VP Mine the province of British Columbia, and a member of the Australasian Institute of Mining
Development) and Metallurgy
§ Strong technical background in resource and reserve estimation
§ Structural geologist with over 30 years of international experience
Sally Goodman
§ Has a BSc Geological Sciences, MSc Mineral Exploration, and PhD Economic
(Chief Geoscientist)
GeologyAppendix D: Shareholders
Ownership Breakdown Major Holders
140 Institution % Of Common
Shares
51%
120
Sentry Investment Corp. 3.8%
OppenheimerFunds, Inc. 3.1%
100 Sprott Asset Management 1.6%
Baker Steel Capital 1.3%
Common Shares (mm)
80 32%
Craton Capital 1.2%
60 Main Direct Holders
§ Beedie, Ryan K. (Director)
40
16% § Dean, Steven G. (CEO)
§ Atkinson, Robert G. (Board Member)
20
§ Belanger, Maryse (President, COO)
§ Batalha, Chris (CFO)
0.2% § Armstrong, William (Director)
–
Public and Insiders Institutions Corporations
Other (Priva te)
Source: Yahoo FinanceAppendix E: Competitor Profiles
Company Type of Number Total Annual
Location of Mines
Name Producer of Mines Production (oz)
Northern Ontario: Young Davidson and Island
Alamos
Intermediate Four Gold Mines 684,800
Gold Inc.
Sonora, Mexico: Mulatos and El Chanate Mines
Detour Gold
Intermediate One Northeastern Ontario: Detour Lake Mine 612,974
Corp.
Fort Frances, Ontario: Rainy River Mine
New Gold Junior Three 525,000
Kamloops, British Colombia: New Afton Mine
TMAC
Junior One Nunavut, Canada: Hope Bay Mine 133,683
Resources
Wawa, Ontario: Eagle River Underground and
Wesdome
Mishi Open Pit Mines
Gold Mines Junior Four 65,866
Val D’Or, Quebec: Kiena Complex
Ltd.
Thunder Bay, Ontario: Moss Lake Property
Atlantic
Nova Scotia, Canada: Moose River
Gold Corp. Junior One 73,500
Consolidated Project
(1) Annual production capacity is based off of Management’s 2018 guidanceAppendix F: Net Asset Value
Sensitivity Analysis
Sensitivity
WACC
5.0% 6.0% 7.0% 8.0% 9.0%
Gold Price ($US)
$1,150 $1.59 $1.51 $1.43 $1.36 $1.30
$1,200 $1.86 $1.76 $1.68 $1.60 $1.52
$1,250 $2.12 $2.02 $1.92 $1.83 $1.74
$1,300 $2.39 $2.27 $2.16 $2.06 $1.96
$1,350 $2.65 $2.52 $2.40 $2.29 $2.18
WACC
5.0% 6.0% 7.0% 8.0% 9.0%
Gold Price ($US)
$1,150 (3.0%) (7.9%) (12.8%) (17.1%) (20.7%)
$1,200 13.4% 7.3% 2.4% (2.4%) (7.3%)
$1,250 29.3% 23.2% 17.1% 11.6% 6.1%
$1,300 45.7% 38.4% 31.7% 25.6% 19.5%
$1,350 61.6% 53.7% 46.3% 39.6% 32.9%Appendix G: Street Consensus Gold Price
Gold price is one of the key assumption in the NAV model
Consensus Gold Price Forecast
1400
1350
1300
1250
1200
1150
1100
2017 2018 2019 2020 2021 2022
Au Price
Source: Bloomberg; Analyst ReportsAppendix H: Merger Model
Pro-Forma Balance Sheet
B2 Gold Atlantic Gold Adjustments Pro Forma
Cash and equivalents 107 16 (113) 10
Accounts receivable 25 2 - 27
Inventory 235 10 - 246
Deferred tax assets 37 - - 37
Other current assets 6 1 - 7
PP&E 2,186 210 21 2,417
Intangible assets - 17 1 18
Goodwill - - 533 533
Other assets 41 9 - 50
Total assets 2,638 265 - 3,346
Accounts payable 75 14 - 89
Accrued expenses & def rev. 67 - - 67
Revolver and current debt 351 47 (47) 351
Long term debt 288 76 209 573
Convertible debt - - - -
Deferred tax liabilities 92 1 5 99
Mine Restoration LT 92 - - 92
Other liabilities 16 1 - 17
Noncontrolling interests 16 - - 16
Shareholders' equity 1,640 126 275 2,041
Total liabilities + shareholder equity 2,638 265 - 3,346Appendix I: Merger Model
Pro-Forma Income Statement
B2 Gold
Net income 190.71
Cash EPS 0.19
Diluted shares outstanding (weighted avg.) 989.26
Atlantic Gold
Net income 53.23
Cash EPS .04
Diluted shares outstanding (weighted avg.) 252.59
Transaction related expenses/income
Less: Interest expense from new deal debt (5.06)
Less: Interest income on cash forgone (.30)
Plus: Synergies 10.00
Less: Incremental D&A expense (1.40)
Less: Financing fee amortization (.22)
Taxes (assumed at acquirer's rate) (.78)
Total after tax transaction related income/ (expenses) 2.23
Pro Forma Net Income 246.17
Pro Forma Shares Outstanding 1138.58
Pro forma EPS 0.22
Acquirer standalone EPS 0.19
Accretion / Dilution per share 0.02
Accretion / Dilution % 12.2%Appendix J: Cost Structure How to Derive AISC Unit Costs Gold Site Operating Costs (C$/oz) Drilling, Grade Control, & Production (C$/t) Processing, Transportation & Refinement (C$/oz) Blasting (C$/t) Gold Cash Operating Costs (C$/oz) Loading (C$/t) By-products (C$/oz) Hauling (C$/t) Gold Cash Costs, Net of By-Products (C$/oz) Support (C$/t) Royalties (C$/oz) Site (C$/t) Total Cash Costs, Net of By-Products (C$/oz) Unallocated Labour (C$/t) Mine Operations GME (C$/t) Exploration Costs (C$/oz) Mine Maintenance GME (C$/t) Sustaining Costs (C$/oz) Mine Engineering GME (C$/t) Lease Costs (C$/t) All-in Sustaining Costs, Net By-Products (C$/oz) Site G&A Costs (C$/t) Processing, Transportation & Refinement: Total Processing Cost (C$/t) Operations Labour (C$/t) Maintenance Labour (C$/t) Power Supply (C$/t) Royalties Beaver Damn Royalty (C$000) Touquoy Royalty (C$000)
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