Gold Sector Update
Outlook positive. Upgrade: GFI to OW, Downgrade:
HAR to N. F/casts, valuations & arguments reviewed
Gold & Precious Metals
Steve ShepherdAC
(27-11) 507-0386
steve.a.shepherd@jpmorgan.com
Allan CookeAC
(27-11) 507-0384
allan.j.cooke@jpmorgan.com
Abhishek Tiwari
(27-11) 507-0363
abhishek.x.tiwari@jpmorgan.com
J.P. Morgan Equities Ltd.
Summary Ratings and Estimates
Company Price Rating Price Target PT End Date Metric Current FYE Next FYE
AngloGold Ashanti Limited (c) 30,000 OW (c) 38,600 Aug-09 Adj. EPS (c) 3,107.00 (c) 3,132.00
prior (c) 26,700 May-09 (c) 1,816.00 (c) 1,784.00
DRDGold Ltd (c) 793 UW (c) 850 Aug-09 Adj. EPS (c) -11.00 (c) 100.00
prior (c) 420 May-09 (c) 42.00 (c) 70.00
Gold Fields Ltd (c) 9,450 OW (c) 14,400 Aug-09 Adj. EPS (c) 719.00 (c) 1,533.00
prior N (c) 9,100 May-09 (c) 553.00 (c) 883.00
Harmony Gold Mining Co Ltd (c) 11,642 N (c) 14,100 Aug-09 Adj. EPS (c) 587.00 (c) 1,231.00
prior OW (c) 10,800 May-09 (c) 309.00 (c) 438.00
Randgold Resources Ltd (p) 3,031 OW (p) 3,910 Aug-09 Adj. EPS ($) 1.86 ($) 3.46
prior (p) 3,600 ($) 1.24 ($) 2.35
Source: Company data, Reuters, J.P. Morgan estimates. All prices as at 03 Mar 09.
See page 39 for analyst certification and important disclosures, including non-US analyst disclosures.
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SA Gold sector EPS forecast changes
EPS (SA cents)
Old New % ch
ANG 2009E 1816 3107 71%
2010E 1784 3132 76%
2011E 1120 3538 216%
GFI 2009E 553 719 30%
2010E 883 1533 74%
2011E 825 1720 108%
HAR * 2009E 309 587 90%
2010E 438 1231 181%
2011E 391 1315 236%
DRD 2009E 42 -11 n/a
2010E 70 100 43%
2011E 62 128 106%
RRS 2009E 1.24 1.86 50%
($) # 2010E 2.35 3.46 47%
2011E 3.37 5.69 69%
Source: J.P. Morgan estimates. * HAR basis cont. ops.
# Randgold Resources is LSE and US (ADR) listed.
• We’ve revised our gold price and exchange rate assumptions and taken
account of the latest company disclosures to upgrade our forecasts,
valuations, price targets and ratings for the gold shares we cover. The rand
gold price has continued to post new highs driven both by a higher dollar
gold price and a weaker rand/dollar exchange rate. While SA gold
shares have benefited, with the sector up 14% YTD, we’ve yet to witness
any meaningful recovery in valuation multiples. The rand gold price is
up 17% YTD. We’ve upgraded Gold Fields to OW – DCF-based 6m PT
R144/sh (R91/sh), and downgraded Harmony to N – 6m PT R141/sh
(R108/sh). Gold Fields has underperformed the SA gold sector (-10% on a
6m basis) whilst Harmony has outperformed the sector (+23% on a 6m
basis). So Gold Fields looks relatively undervalued to us, as does our
other sector pick AngloGold Ashanti - OW, 6m DCF-based PT R386/sh
(R267/sh).
• The rand gold price has traded as high as R320,000/kg and we continue to
expect that higher gold prices and a weaker rand will benefit free cash
flows of the SA gold miners significantly in 2009 and beyond. Relative to
our base case valuations we've seen the reemergence of P/NPV multiples as
the shares have begun to track the gold price upwards. But they continue to
trade at a discount to our valuations on a spot basis. So we still see
significant upside in SA gold shares.
• Highlights: AngloGold Ashanti has solved its near-term financing issues
with the sale of its 33% stake in Boddington for c$1.3bn, Gold Fields
appears to be recovering operationally in SA after a horrible 1H09, and
Harmony continues to work at turning its SA mines. Overhang concerns
continue to plague AngloGold Ashanti (Anglo’s 11.9% stake) and Gold
Fields (Mvela Resources 7.7% stake). We continue to hold the view that
gold share prices will respond positively to improving free cash flows as
these become apparent in 2009. Key risks to our view include changes in
the gold price, the R/$ exchange rate, safety-related production losses and
production, costs and capex outcomes different to our forecasts.

Table of Contents
Investment conclusions – top stock picks ANG and GFI .....4
Gold price outlook synopsis ...................................................7
Our new gold price forecast.........................................................................................7
Forecasts, valuations, sensitivity analysis & price targets
update........................................................................................9
Currency and gold price assumptions ..........................................................................9
EPS forecasts summary................................................................................................9
DCF- based valuations and price targets....................................................................10
Sensitivity analysis ....................................................................................................11
Global industry valuation comparisons ...............................12
AngloGold Ashanti Limited ...................................................13
Description.................................................................................................................13
Model changes ...........................................................................................................13
Investment arguments and risks.................................................................................14
Key catalysts for rerating ...........................................................................................15
Constituency of our DCF valuation ...........................................................................15
Investment conclusion ...............................................................................................15
DRDGold .................................................................................18
Description.................................................................................................................18
Model changes ...........................................................................................................18
Investment arguments and risks.................................................................................19
Key catalysts for rerating ...........................................................................................19
Constituency of our DCF valuation ...........................................................................20
Investment conclusion ...............................................................................................20
Gold Fields..............................................................................22
Description.................................................................................................................22
Model changes ...........................................................................................................22
Investment arguments and risks.................................................................................23
Key catalysts for rerating ...........................................................................................24
Constituency of our DCF valuation ...........................................................................24
Investment conclusion ...............................................................................................25
Harmony..................................................................................27
Description.................................................................................................................27
Model changes ...........................................................................................................28
Investment arguments and risks.................................................................................28
Key catalysts for rerating ...........................................................................................29
Constituency of our DCF valuation ...........................................................................29
Investment conclusion ...............................................................................................29
Randgold Resources..............................................................32
Description.................................................................................................................32

Model changes ...........................................................................................................32
Investment arguments and risks.................................................................................33
Key catalysts for rerating ...........................................................................................33
Constituency of our DCF valuation ...........................................................................34
Investment conclusion ...............................................................................................34
Tables
Table 1: The gold price deck for equity models...........................................................8
Table 2: Changes to our rand/dollar exchange rate assumptions .................................9
Table 3: Changes to key pricing assumptions (calendar years) ...................................9
Table 4: Summary of EPS forecast updates...............................................................10
Table 5: DCF valuations, ratings and price target derivation.....................................11
Table 6: FY2010 EPS and DCF valuation sensitivity analysis ..................................11
Table 7: Global gold peer analysis: Key earnings and valuation metrics in US$ ......12
Figures
Figure 1: AngloGold Ashanti quarterly free cash flow margin and share price...........4
Figure 2: Gold Fields quarterly free cash flow margin and share price .......................4
Figure 3: Harmony quarterly free cash flow margin and share price...........................5
Figure 4: DRDGold quarterly free cash flow margin and share price .........................5
Figure 5: Randgold Resources quarterly free cash flow margin and share price .........6
Figure 6: JSE Gold index and the rand gold price .......................................................6
Figure 7: The Comex gold option price distribution....................................................8
Figure 8: AngloGold Ashanti Dec Q cash cost curve ................................................13
Figure 9: Breakdown of our AngloGold valuation at our forecast prices (R/sh) .......15
Figure 10: DRDGold Dec Q cash cost curve .............................................................18
Figure 11: Breakdown of our DRDGold valuation at our forecast prices (R/sh).......20
Figure 12: Gold Fields Dec Q cash cost curve...........................................................22
Figure 13: Breakdown of our Gold Fields valuation at our forecast prices (R/sh) ....24
Figure 14: Harmony Dec Q cash cost curve ..............................................................27
Figure 15: Breakdown of our Harmony valuation at our forecast prices (R/sh) ........29
Figure 16: Randgold Resources Dec Q cash cost curve.............................................32
Figure 17: Breakdown of our Randgold valuation at our forecast prices ($/sh) ........34
Figure 18: Non-commercial interest in gold at COMEX...........................................36
Figure 19: Consolidated gold ETF holdings ..............................................................36
Figure 20: Gold price and the euro/dollar exchange rate ...........................................37
Figure 21: Gold price and the oil price ......................................................................37
Figure 22: Gold price and the copper price................................................................37
Figure 23: Gold price and the platinum price ............................................................38
Figure 24: Gold price and the S&P 500 index ..........................................................38