Australian Gold Equities - Sifting through the ashes by Macquarie Research

Event

• Following a torrid three and half months which has seen the gold price fall from US$1,600/oz on 1 April to its current level of US$1,320/oz (having reached as low as US$1,180/oz on 28 June 2013), gold equities have suffered significant falls.
• While we believe that the commodity has potentially found a floor, we are focussed on the balance sheets for the gold equities as they come to terms with the new operating conditions.
• Forward curve update (See Fig 2.) We have updated our commodity forward price curves upon which we base our valuations. Since our last update (25 April) the Long Term forward gold price has decreased ~6%. Our target prices continue to be based on our net asset values derived utilising the prevailing forward curve prices. On average, the impact of the lower forward curve is a 20% decrease in our target prices (range of 0% to -60%).

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