Standard Chartered Research,Global gold All that glitters

Following our commodities team‟s gold price revisions, we cut our 2013-14E earnings
forecasts for gold equities under our coverage 12-41%. Our new gold price assumptions are
USD 1,437/1,400/1,300/oz for 2013/2014/2015.
 We downgrade Zhaojin Mining and G-Resources to In-Line (from Outperform) and Philex
Mining to Underperform (from In-Line).
 Zijin Mining remains our top sell in the China gold sector, given its rapidly rising gold
production costs – we forecast a 2012-15E CAGR of 15%, compared to 8% for Zhaojin
Mining.
On 10 and 16 July 2013, our commodities team lowered its 2013-15 gold and copper price
forecasts by 3-13% and 2-17%, respectively, along with other precious metal and base metal
prices. (See the full reports: Gold – Searching for a floor, as lease rates spike and Metals –
Precious metal markets lead the way down) We highlight key points and summarise the changes
to their forecasts below.
 For gold, it is still too early to conclude that the wave of investor selling has ended, but strong
outflows through 1H13 have been replaced by a more neutral picture so far this month.
 The physical market for gold is currently mixed and demand is not as strong as it was in late
April. We expect weak import numbers for India in July and August, following an 80%
decrease in June from May‟s very strong number. Demand from China and Vietnam has
helped offset the weakness in India.
 Central banks, including those of Kazakhstan, Russia and Turkey, have continued to buy.
In his 10 July note, our commodity analyst, Dan Smith, expected gold prices to find a floor soon
and then slowly rise over the next year, as supply is likely to be choked off by lower prices and
demand should slowly recover. A rising cost floor should provide support over the long term.

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Derating of the gold sector to continue
As a result of commodity price changes, we cut our 2013-14E earnings 12-41% for gold equities
under our coverage. Our 2013 earnings estimates are 30-40% below the consensus forecasts
(see Figure 1). We downgrade Zhaojin Mining and G-Resources to In-Line (from Outperform) and
Philex Mining to Underperform (from In-Line). We maintain our Underperform rating on Zijin
Mining.
 Our pecking order among the four stocks is: Zhaojin Mining, G-Resources, Zijin Mining, and
Philex Mining.
 We prefer Zhaojin Mining as it continues to deliver double-digit production growth at low costs.
 For investors with greater risk appetite, G-Resources is ramping up production after the mine
commencement in mid-2012. The stock is trading at 8x 2014E PE, the cheapest in our
coverage universe.
 We remain negative on Zijin Mining due to its rapidly rising gold production costs; we forecast
a 15% CAGR in 2012-15, compared to 8% for Zhaojin Mining.
 Philex Mining is operating under a temporary licence, which could potentially prevent it from
recapitalising its balance sheet. It is also trading at a premium valuation, in our view, i.e. its
2014E PER is higher than Zijin and Zhaojin‟s.