Hannam Notes 21/07/22

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Seven operating drill rigs delivering 12 newly assayed holes since June update
GGP’s latest update unveiled assay results from 11 new holes and one extension, representing 5,622 metres of new drilling since the last update on 9th June. Two holes intersected the SE Crescent zone, with HAD153 of particular significance, returning 44.9m @ 2.5g/t Au & 0.14% Cu from 1,577m including 25m @ 4.1g/t Au & 0.09% Cu, extending the depth of the known mineralisation by ~100m. Four new results from the Eastern Breccia, including 54m @ 3.8g/t Au & 0.02% Cu from 1,854m in hole HAD145AW4, expanded the footprint and supported the interpretation of NW rending, high-grade sulphide corridors within this zone. Finally, two holes of note within the Northern Breccia, including 70.9m @ 2.0g/t Au & 0.11% Cu from 974m with a sub-interval of 1.4m @ 45.0g/t Au & 0.21% Cu in HAD055W7, showed the potential for high grades to be discovered beyond the limits of the main SE Crescent zone. Assays are pending for a
further seven holes, five of which are in the Eastern Breccia. We note drilling is continuing to test geophysical targets outside of the main Havieron system as part of an extensive growth drilling programme over the next 12 months.
Decline development accelerating & FS on track for Q4’22
Newcrest has continued development of an early works decline at Havieron which has now advanced to 489m, marking an acceleration in progress due to better ground conditions. The Feasibility Study remains on track to be released in the Dec’22 quarter, at which point Newcrest will provide an update on the timeline to first gold and copper production (previously guided to be in H2’24).
Option for further 5% stake priced at US$60m, with 30 days to exercise
GGP has also announced that pricing has been set at US$60m for Newcrest’s option to acquire a further 5% stake in Havieron. This would increase Newcrest’s stake to 75% under the Joint Venture Agreement (“JVA”), reducing GGP’s interest to 25%. The option price implies a valuation for 100% of Havieron of US$1.2bn, more than 5x the US$228m NPV (at US$1,500/oz Au) published in the Oct’21 PFS, but less than one-third of the ~US$3.9bn full value we see in the project. Indeed, GGP notes the pricing mechanism for the option prescribed by the JVA is highly mechanistic and leaves little room for the Copmany to advocate for a higher price in line with their view of the true market value of Havieron. Furthermore, this option pricing process only considered data available as at 15th Dec’21, just two months after the PFS, and therefore does not take into account the considerable progress that has been made since then. Newcrest now has 30 business days to exercise the option: assuming it does, this would more than offset GGP’s debt, last reported at ~£6m as of Dec’21; however, the reduction in the Company’s stake at an implied ~0.3x our Havieron NPV would dilute our target valuation by ~11%, all else equal.
Valuation: Dec’22E GBp25.8/sh target price implies 158% upside
We continue base our Havieron model on the SE Crescent PFS, adjusted for the Mar’22 Reserve update, with the addition of our provisional estimates for an assumed caving operation to be developed within the lower grade breccia zones.We derive a DCF for GGP’s 30% stake of US$1.17bn (using US$1,850/oz Au and a 5% WACC) and add US$100m valuation for the remainder of GGP’s exploration assets to arrive at a target price of 25.8p/sh, offering 158% upside.

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