China Gold International Resources Corp Ltd. (TSX: CGG, HKSE: … · 2013. 1. 4. · Sector/Industry: Exploration/Mining Market Data (as of December 18 ... *see back of report for

Siddharth Rajeev, B.Tech, MBA, CFAAnalyst

Nicole Engbert- BSc.

Research Associate - Mining

December 18, 2012

2012Fundamental Research Corp. www.researchfrc.com

PLEASE READ THE IMPORTANT DISCLOSURES AT THE BACK OF THIS REPORT

China Gold International Resources Corp Ltd. (TSX: CGG, HKSE: 2099) – Positive Expansion Studies

on Jiama and CSH

Sector/Industry: Exploration/Mining www.chinagoldintl.com

Market Data (as of December 18, 2012)

Current Price C$3.56

Fair Value C$4.32 (↓)

Rating* BUY

Risk* 3 (Average)

52 Week Range C$2.10 – C$5.13

Shares O/S 396.32 mm

Market Cap C$1,411 mm

Current Yield N/A

P/E (forward) 20.1x

P/B 1.0x

YoY Return 72.8%

YoY TSX 5.6% *see back of report for rating and risk definitions

Investment Highlights

• China Gold International Resources Corp. Ltd. (“CGG” or “the company”) recently announced a positive Prefeasibility Study (“PFS”) results on Jiama, and positive FS results on CSH.

• Base-case after-tax NPV @ 9% estimate on Jiama is $1.2 billion; base-case after-tax NPV @ 9% of CSH is $642 million. The total NPV estimate is $1.84 billion, or $4.65 per share.

• Q3-2012 revenues were $85 million versus $89 million in Q3-2011, and were below our expectations. Revenues dropped YOY in Q3 as production dropped at the CSH mine.

• We have raised our CSH gold production forecast from 128koz to 135koz, and maintained our copper production forecast from Jiama at 25 mm lbs for FY2012.

• Net income in Q3-FY2012 was $26 million (EPS: $0.06) versus $12 million (EPS: $0.03) in Q2-FY2012.

• We raise our net profit forecast for FY2012 from $63 million; EPS: $0.16 to $70 million; EPS: $0.18

• In June 2012, the company made a $20 million investment in China Nonferrous Mining Corporation Limited (HKSE: 1258). CNMC is a copper producer based in Zambia.

• At the end of Q3-2012, CGG had cash and cash equivalents of $330 million. Debt to capital of 15% remains lower than industry averages. CGG is currently in advanced discussions to arrange debt financing to support the expansion of Jiama.

• FRC Analysts have visited the company's projects in 2011.

• All the figures are in US$ unless otherwise noted.

Key Financials

USD; in millions, except per share items 2007A 2008A 2009A 2010A 2011A 2012E 2013E

Revenues -$ 29.37$ 81.05$ 133.20$ 311.31$ 326.22$ 339.88$

Net Income (16.95)$ 14.58$ (9.34)$ 26.22$ 79.40$ 69.55$ 70.02$

EPS (0.11)$ 0.09$ (0.06)$ 0.14$ 0.20$ 0.18$ 0.18$

Cash and cash equivalents 26.95$ 12.14$ 23.98$ 301.61$ 354.31$ 375.44$ 208.45$

Working Capital 14.67$ (8.21)$ (9.60)$ 224.77$ 260.96$ 262.87$ 94.22$

LT Debt 44.27$ 14.93$ 80.84$ 180.79$ 183.05$ 166.84$ 102.32$

ROE (172.19%) 59.52% (24.60%) 4.24% 6.39% 5.27% 5.04% China Gold International Resources Corp Ltd. is a gold and non-ferrous metal producing company with two flagship properties in

China - the Chang Shan Hao Gold mine in Inner Mongolia, and the Jiama poly-metallic mine in Tibet. China National Group

Corporation (CNG), a Chinese state owned company, and the largest producer of gold in China, owns 39% of CGG’s outstanding

common shares.

Page 2

2012 Fundamental Research Corp. www.researchfrc.com


Jiama Mine,

Phase II

Expansion

Prefeasibility

Study

On October 25, 2012, CGG announced the results of a Prefeasibility Study (“PFS”) for

Phase II expansion of the Jiama Copper-Polymetallic mine in Tibet. The expansion is

expected to see production increase from 6,000 tonnes per day (tpd) to 40,000 tpd over a

31 year mine life. The company will expand the current open pit operations and develop

additional open pit and new underground mining operations. This will total four open

pits and an underground mine feeding a new flotation plant. The open pits will mine all

three types of mineralization present (skarn, hornfels and porphyry) while the underground

operation will target the higher grade sections of the skarn mineralization.

Life of Mine Capital expenditures are estimated at $705 million, which covers $221

million for the new floatation plant, $355 million for mining, $76 million for engineering,

$28 million for loan interest, and $24 million for a mining camp. A summary of the base

case scenario for the PFS is shown below.

Mineral Resources (Measured and

Indicated)

10.2 billion lbs contained copper @0.44% Cu

(including Proven and Probable Reserves of 6.2

billion lbs contained copper @0.77% Cu)

Average Annual Production (ROM from

open pit operations)6.3 million tonnes ore

Average Annual Production (ROM from

underground operations)6 million tonnes ore

Mine Life 31 years

Life of Mine Capital Expenditures (US$) $705 million

Total Project Operating Cost (US$/t

processed)$51.82(Cu/Mo) $53.75(Cu/Pb/Zn)

Copper Price (US$/lb) $2.90

Molybdenum Price (US$/lb) $18.00

Gold Price (US$/oz) $1,380.00

Silver Price (US$/oz) $16.50

Lead and Zinc Price (US$/tonne) $2,000

Discount Rate 9%

After-tax Net Present Value (US$) $1.2 billion

After-tax Internal Rate of Return 53.7%

Payback 4.5 years

Base-Case Scenario

Page 3



Jiama Resource

Estimate

A summary of recoveries for each mineralization type is presented below.

Ore (Rock) Type Product Element Recovery (%)

Cu 88

Au 45

Ag 65

Mo Concentrate Mo 70

Cu Concentrate Cu 84

Mo Concentrate Mo 48

Cu 88

Au 45

Ag 60

Pb Concentrate Pb 88

Zn Concentrate Zn 75

Cu-Mo Ore (Skarn)Cu Concentrate

Cu-Mo Ore (Hornfels

& Porphyry)

Cu-Pb-Zn Ore (Skarn)

Cu Concentrate

Overall, we believe that the PFS outlines a bold plan of expansion for the mine that

will see a significant increase in annual production.

CGG also released an updated resource estimate for the Jiama Mine in 2012. The

previous estimate gave a measured and indicated resource of 1,006 million tonnes

averaging 0.41% copper, containing 4.08 million tonnes of copper. The new resource

estimate gives an increase in the measured and indicated categories to approximately 1,053

million tonnes averaging 0.44% copper for a total of 4.64 million tonnes of copper.

This is based on 22 infill drill holes, totaling 10,720m, completed in late 2011. It was

found that the gold and silver mineralization was more variable than the other elements,

and thus, a separate resource estimate was completed for gold and silver.

The 2012 Jiama Mine Cu, Mo, Pb and Zn resource estimate is presented below.

Rock Type ClassQuantity

(Mt)

Cu

(%)

Mo

(%)

Pb

(%)

Zn

(%)

Cu Metal

(kt)

Mo Metal

(kt)

Pb Metal

(kt)

Zn Metal

(kt)

Measured 35.6 0.71 0.05 0.11 0.07 252 17 38 25

Indicated 293.2 0.73 0.04 0.07 0.06 2,135 127 201 163

M+I 328.8 0.73 0.04 0.07 0.06 2,388 144 239 187

Inferred 174.0 0.6 0.05 0.16 0.08 1,036 79 286 146

Measured 38.4 0.28 0.04 0.04 0.01 107 14 14 5

Indicated 626.1 0.31 0.03 0.01 0.01 1,952 196 66 64

M+I 664.5 0.31 0.03 0.01 0.01 2,059 210 80 69

Inferred 219.0 0.29 0.03 0.03 0.01 633 74 72 32

Measured 2.1 0.22 0.06 0.01 0.01 5 1 0 0

Indicated 57.7 0.33 0.04 0.01 0.01 188 25 4 6

M+I 59.8 0.32 0.04 0.01 0.01 193 26 4 6

Inferred 2.9 0.23 0.1 0.02 0.04 7 3 0 1

Measured 76.0 0.48 0.04 0.07 0.04 364 32 52 30

Indicated 977.1 0.44 0.04 0.03 0.02 4,275 348 271 232

M+I 1053.1 0.44 0.04 0.03 0.02 4,640 380 323 262

Inferred 395.9 0.42 0.04 0.09 0.05 1,676 156 359 179

Skarn

Hornfels

Porphyry

Total

Reported at a 0.3 % Cu Equivalent Cut Off Grade*, as of April 28, 2012; Source: Company

Page 4



Chang Shan Hao

(CSH) Gold

Project

Expansion

Feasibility Study

2012 Jiama Mine Au and Ag resource estimate

Rock

TypeClass

Quantity

(Mt) Au (g/t) Ag (g/t) Au (Moz) Ag (Moz)

Skarn Indicated 256.5 0.31 17.01 2.537 140.29

Inferred 117.0 0.39 16.50 1.472 62.077

Hornfels Indicated 178.6 0.06 2.52 0.337 14.486

Inferred 68.9 0.08 5.06 0.186 11.195

Porphyry Indicated 15.7 0.24 8.22 0.121 4.145

Inferred 0.4 0.11 10.79 0.001 0.128

Total Indicated 450.8 0.21 10.97 2.995 158.921

Inferred 186.2 0.28 12.26 1.659 73.4

Reported at a 0.3 % Cu Equivalent Cut Off Grade*, as of April 28, 2012; Source: Company

On November 5, 2012, CGG announced the results of a Feasibility Study (FS) for the

proposed expansion of the CSH gold mine. The report outlines an expansion that will

increase production from 30,000tpd to 60,000tpd. This will be achieved by expansion of

the current open pit and heap leach processing facility. The table below provides a

summary of the base case scenario:

Mineral Resources (Measured and

Indicated)

263 million tonnes @0.60g/t Au containing 5.05

million oz Au (including Proven and Probable

Reserves of 213 million tonnes @0.59g/t Au

containing 4.08 million oz Au)

Mineral Resources (Inferred)133 million tonnes @0.49g/t Au containing 2.08

million oz Au

Average Annual Production 20.4 million tonnes

Mine Life 11 years

Life of Mine Capital Expenditures (US$) $213 million

Operating Cost (US$/tonne ore) $9.83

Gold Price (US$/oz) $1,380.00

Discount Rate 9%

After-tax Net Present Value (US$) $642 million

After-tax Internal Rate of Return 30.5%

Base-Case Scenario

Page 5



CSH Resource

Estimate

Revenues

improve QOQ,

but below

expectations

Doubling of the production rate has decreased the mine life from 21 to 11 years – which

has significantly increased the value of the project.

Based on an additional 208 drill holes, CGG has updated the mineral resources and reserve

estimates for the CSH mine. Compared to the previous estimates, the tonnage has

increase, but the grade has dropped slightly. The 2009 estimate gave measured and

indicated resource of 243 million tonnes (inclusive of reserves) averaging 0.64 g/t Au for a

total of 4.99 million ounces of gold, using a cut-off grade of 0.3 g/t. In comparison, the

2012 resource estimate gives measured and indicated resources of 263 million tonnes

(including reserves) averaging 0.60g/t Au for a total of 5.05 million contained ounces

of gold at a cut-off grade of 0.28g/t Au.

The following table shows the 2012 mineral resource and reserves estimate (resources are

inclusive of reserves);

ClassQuantity

(Mt)

Au (g/t)

(diluted for

reserves)

Au

contained

(million oz)

Measured 90.4 0.63

Indicated 172.2 0.58

M+I 262.6 0.60 5.05

Inferred 132.8 0.49 2.08

Proven 89.086 0.62

Probable 124.394 0.58

Total 213.48 0.59 4.08

Resources

Reserves

Q3-2012 revenues were $85 million versus $89 million in Q3-2011, and were below our

expectations. However, revenues were higher than Q1-2012, and Q2-2012’s, $78 million

and $77 million, respectively. Revenues dropped YOY in Q3 as production dropped at

the CSH mine.

As expected, CSH gold production dropped YOY from 36,985 to 34,363 oz as less ore was processed and due to a slight drop in grades (0.46 to 0.45 gpt). However, production is up YOY in the nine month period, from 92,244 oz to 104,041 oz. The drop in Q3 production was expected and the actual drop was lower than expected. Jiama copper production increased from YOY 5.81 mm lbs to 8.50 mm lbs in Q3-2012. In

the 9 month period, they were up YOY from 15.03 mm lbs to 18.56 mm lbs.

Management’s goal for FY2012 is unchanged at 130,000-135,000 ounces of gold from the

CSH Mine, and 21.60 million pounds – 25.35 million pounds of copper from the Jiama

Mine. As the drop in production was not as large as we had expected, we have raised our

Page 6



Operating Costs

Rise

Raising EPS

Estimates due to

Lower

Depreciation

Expenses

gold sales forecast from CSH from 128koz to 135koz, and maintained our Cu sales

forecast at 25 mm lbs for 2012.

Q3 revenues from Jiama did not meet expectations as we were expecting higher revenues

from by-products. Our higher gold production forecast at CSH was more than offset by our

lower revenue forecast for Jiama, and therefore, we have lowered our overall revenue

forecast from $349 million to $326 million for FY2012. For FY2013, our revenue forecast

has been slightly lowered from $341 million to $340 million (based on expected sales of

142koz of gold from CSH and 28 mmlbs of copper from Jiama). We used a gold sales

price of $1,600/oz and copper sales price of $3.30/lb in our FY2013 forecasts, up from our

previous estimates of $1,500/oz and $3/lb, respectively.

Operating costs per ounce of gold at the CSH Mine in Q3-FY2012, were $904 versus

$921/ounce in Q3-2011. The cost for the nine month period in FY2012 was up YOY from

$851 to $906/oz. Our forecast for FY2012 was $831/oz; which we have now raised to

$900/oz.

Operating costs per lb of copper at the Jiama Mine in Q3-2012, we estimate, were $2.79/lb

versus $3.29/lb in Q3-2011. The cost for the nine month period was, however, up YOY

from $3.23 to $3.38/lb, but lower than our $3.63/lb estimate for FY2012. We have lowered

our FY2012 estimate to $3.40/lb.

Margins dropped YOY due to the increase in operating costs. However, CGG’s margins

are still better than an average gold/copper producer; the average gross margins of gold

producers is 42%, and for copper producers is 11%.

Margins 2011 (9M) 2012 (9M)

Gross Margins 47.23% 44.05%

EBITDA Margins 41.91% 37.11%

EBIT Margins 34.87% 28.59%

Net Margins 24.45% 21.18%

EBITDA in Q3-FY2012 was $35 million versus $28 million in Q2-FY2012. Net income in

Q3-FY2012 was $26 million (EPS: $0.06) versus $12 million (EPS: $0.03) in Q2-FY2012.

Net income dropped YOY in the nine month period due to the increase in production costs.

For the 9 month period in FY2012, net income was $51 million (EPS: $0.13) versus $53

million (EPS: $0.13) in the comparable period in the previous year. Depreciation expenses

in the nine month period in FY2012 were significantly lower than our estimate. We have

therefore lowered our depreciation expense forecasts accordingly.

We have raised our EPS forecasts for FY2012, and FY2013, due to lower depreciation

expense and operating cost estimates for Jiama, partially offset by lower revenues and

Page 7



Cash Flow

Cash & Liquidity

higher operating cost estimates for CSH. Our FY2012 net income has been revised to $70

million; EPS: $0.18 (previous estimate - $63 million; EPS: $0.16), and we expect FY2013

net income to be $70 million; EPS: $0.18 (previous estimate - $55 million ; EPS: $0.14).

The following table shows a summary of the cash flows.

Cash Flows ($ million) 2011 (9M) 2012 (9M)

Cash Flow from Operations 29.53 38.75

Cash Flow from Investing (53.34) (67.57)

Cash Flow from Financing 25.08 2.49

Foreign Exchange Rate Adj. - -

Net Change in Cash 1.26 (26.33)

Free Cash Flows (23.81) (28.83)

Free cash flows were negative $29 million in the first nine months of FY2012, versus

negative $24 million in the comparable period in the previous year. Cash flow from

investing was negative $68 million in the nine month period in FY2012, which primarily

included $48 million in CAPEX associated with CSH and Jiama, and a $20 million

investment (70,545,000 shares) in China Nonferrous Mining Corporation Limited (HKSE:

1258) at HK$2.20 per share.

The company now owns 2.03% of CNMC’s equity. CNMC, with a market capitalization of

approximately $1 billion, is a copper producer based in Zambia. CNMC completed its IPO

and started trading on the HK stock exchange in June 2012. CNMC was founded in 1983

and is focused on the development of non-ferrous metal projects in Asian and African

countries. CGG acquired these shares purely as an investment. This transaction is in line

with the company’s 2010 prospectus, which states that the company will allocate about

$81 million for the acquisition of gold and non-ferrous mineral resources outside of China.

The company currently has about $61 million set aside for acquisitions. We do not believe

we will see any additional acquisitions in the near-term as all of its funds will be used

for the expansion of CSH and Jiama.

The following table shows the liquidity of China Gold.

Liquidity Analysis ($, mm) 2007A 2008A 2009A 2010A 2011A Q3-2012

Cash and Equivalents 26.95 12.14 23.98 301.61 354.31 329.75

Working Capital 14.67 (8.21) (9.60) 224.77 260.96 206.38

Current Ratio 1.97x 0.86x 0.80x 2.72x 2.96x 2.13x

Debt / Capital 0.82x 0.59x 0.72x 0.15x 0.15x 0.15x

LT Debt / Capital 0.82x 0.16x 0.62x 0.13x 0.12x 0.10x

Page 8



Warrants &

Options

Valuation and

Rating

Risks

At the end of Q3-2012, China Gold had cash and cash equivalents of $330 million.

Working capital and the current ratio were also strong at $206 million and 2.1x,

respectively. Debt to capital of 15% remains lower than the gold industry average of 23%

and copper industry average of 46%.

Our models indicate the company will not have to raise any equity in 2013. However,

the company has indicated that they are in advanced discussions to arrange debt

financing to support the expansion of Jiama.

The company has 540,000 stock options outstanding (weighted average exercise price - $4.62), with 140,000 stock options currently “in-the-money”. There are no warrants outstanding.

Our DCF valuation dropped from C$5.61 to C$4.26 per share as we adjusted our

operating and capital cost inputs on CSH, and Jiama, to be in line with the recently

completed studies.

Our comparables valuation increased from C$3.46 to C$4.37 per share primarily

because of higher comparable average valuation multiples.

EV/Sales EV/EBITDA EV/EBIT P/E

Mean 4.16 10.97 17.35 23.72

Valuation Based on Peer Average (CAD per Share) 4.10$ 3.99$ 4.80$ 4.58$ 4.37$

Our revised fair value on CGG is C$4.32 per share; down from C$5.07 per share. We

maintain our BUY rating with a Risk 3 (Average) rating. The following risks, though not exhaustive, may cause our estimates to differ from actual results:

• The value of the company depends on commodity prices. • The company currently does not use any financial instruments to hedge commodity

prices. • The company is subject to delays that are affecting the entire mining industry. • The success of drilling, resource expansion and development are important long-

term success factors at both flagship properties. • Technical difficulties and delays in expansion may impede realization of economic

benefits of the planned expansion. • The ability of the company to provide adequate financing for future expansion. • Political tension in Tibet may impact investor interest in the company. • The ability to maintain a consistent power supply to the operations given the

remote location of both properties.

Page 9



Income Statement

USD; in millions, except per share items 2010A 2011A 2012E 2013E

Revenue from Gold (CSH Mine) 128.41$ 214.48 213.89$ 221.05$

Revenue from Copper and other (Jiama) 4.79 96.83 112.33 118.83

Total Revenue 133.20 311.31 326.22 339.88

COGS (exclude dep) 58.03 152.99 180.37 190.33

Gross Profit 75.17 158.32 145.85 149.55

SG&A (excclude dep & stock base com) 4.74 17.15 24.95 25.57

Exploration and Evaluation Expenditure 0.63 0.46 0.32 0.32

Stock-based Compensation 0.49 0.23 0.72 0.75

Asset Retirement Cost - -

Other operating expense, total 5.86 17.84 25.99 26.65

EBITDA 69.31 140.48 119.86 122.91

Depreciation and Amortization 10.82 37.56 27.08 29.55

EBIT 58.48 102.92 92.78 93.36

Financing Cost (5.84) (14.05) (7.28) (5.13)

Interest Income 0.07 6.32 3.54 3.75

Net Financing Expense (5.78) (7.73) (3.74) (1.37)

Gain (Loss) of Foreign Exchange (1.48) 2.35 1.02 -

Listing Expenses (2.10) - - -

Fair Value Change on Warrant Liabilities (7.16) - - -

EBT Excl. Unusual Items 41.97 97.54 90.06 91.98

Gain (Loss) on Disposal of Subsidiary 0.02 6.93 - -

EBT Incl. Unusual Items 41.99 104.47 90.06 91.98

Income tax expense 14.86 22.52 19.41 19.83

Minority Interest in Earnings 0.91 2.55 1.10 2.13

Net Income 26.22 79.40 69.55 70.02

Page 10



Balance Sheet

USD; in millions, except per share

items2010A 2011A 2012E 2013E

ASSETS

Cash and Equivalents 302 354 375 208

Restricted Cash 7 - - -

Total Cash and Restricted Cash 308 354 375 208

Accounts Receivable 9 6 10 10

Total Receivables 9 6 10 10

Prepaid Expense and Deposits 3 6 10 10

Prepaid Lease Payments 0 0 0 0

Inventory 34 27 37 39

Total Current Assets 355 394 433 268

Asset Classified as Held for Sale 0 - - -

Gross PP&E 318 403 463 671

Accumulated Depreciation (20) (42) (69) (99)

Net PP&E 298 361 394 572

Prepaid Expense and Deposits 2 5 16 13

Prepaid Lease Payments 7 7 7 7

Amount due from non-controlling Shareholder 0 0 0 0

Long-term Receivable - - - -

Inventory 18 14 14 14

Available for Sale 20 20

Deferred Tax Asset 1 1 1

Intangibles 975 962 949 949

Total Assets 1,656 1,745 1,834 1,845

LIABILITIES

Accounts Payable and Accrued Expenses 91 71 89 91

Borrowings 32 44 63 65

Tax Liabilities 8 18 18 18

Total Current Liabilities 130 133 170 174

Liabiliities Classified as Held for Sale 0 - - -

Deferred Lease Inducement 0 0 0 0

Borrowing 181 183 167 102

Warrant Liabilities - - - -

Deferred Tax Liabilities 138 133 133 133

Deffered Income 1 1 - -

Environmental Rehabilitation 2 4 4 4

Total Liabilities 452 454 474 413

Common Stock 1,239 1,245 1,245 1,246

Retained Earnings (Deficit) (39) 40 109 177

Total Common Equity 1,200 1,285 1,354 1,423

Non-controlling Interest 3 6 7 9

Total Liabilities and Equity 1,656 1,745 1,835 1,845

Page 11



Cash Flow Statement

USD; in millions, except per share items 2010A 2011A 2012E 2013E

Net Income 26.23 79.40 69.55 70.02

Depreciation & Amort. 9.64 37.56 27.08 29.55

Amort. Of Good will and Intangibles 1.18 - - -

Impairment of Assets - - - -

D&A., Total 10.82 37.56 27.08 29.55

Other Amortization 0.01 - - -

(Gain) Loss From Sale Of Assets - - - -

Stock-Based Compensation 0.21 0.23 0.72 0.75

Other Operating Activities 17.87 - - -

Change in Acc. Receivable 2.48 3.21 (4.30) 0.39

Change In Inventories (18.20) 7.05 (9.96) (2.05)

Change in Acc. Payable (26.70) (20.30) 18.41 2.30

Change in Unearned Rev. 0.71 - - -

Change in Other Net Operating Assets (2.50) 20.88 (1.60) 2.72

Cash from Operations 10.92 128.03 99.91 103.69

Capital Expenditure (13.20) (68.13) (60.00) (207.72)

PPE 0.04 (0.88) -

Cash Acquisitions 13.61 - (20.01) -

Divestitures 0.02 - 0.73 -

Other Investing Activities 6.42 (2.96) (0.86) -

Cash from Investing 6.89 (71.09) (81.03) (207.72)

Short Term Debt Issued - - -

Long-Term Debt Issued 7.55 73.95 -

Total Debt Issued 7.55 73.95 - -

Short Term Debt Repaid - - - -

Long-Term Debt Repaid (52.70) (59.05) 2.25 (62.96)

Total Debt Repaid (52.70) (59.05) 2.25 (62.96)

Issuance of Common Stock 304.99 0.52 - -

Repurchase of Common Stock - - - -

Common Dividends Paid - - - -

Total Dividends Paid - - - -

Special Dividend Paid - - - -

Other Financing Activities - - - -

Cash from Financing 259.84 15.42 2.25 (62.96)

Foreign Exchange Rate Adj. 0.00 - - -

Net Change in Cash 277.65 72.35 21.13 (166.98)

Page 12



Fundamental Research Corp. Equity Rating Scale:

Buy – Annual expected rate of return exceeds 12% or the expected return is commensurate with risk Hold – Annual expected rate of return is between 5% and 12% Sell – Annual expected rate of return is below 5% or the expected return is not commensurate with risk Suspended or Rating N/A— Coverage and ratings suspended until more information can be obtained from the company regarding recent events. Fundamental Research Corp. Risk Rating Scale:

1 (Low Risk) - The company operates in an industry where it has a strong position (for example a monopoly, high market share etc.) or operates in a regulated industry. The future outlook is stable or positive for the industry. The company generates positive free cash flow and has a history of profitability. The capital structure is conservative with little or no debt. 2 (Below Average Risk) - The company operates in an industry where the fundamentals and outlook are positive. The industry and company are relatively less sensitive to systematic risk than companies with a Risk Rating of 3. The company has a history of profitability and has demonstrated its ability to generate positive free cash flows (though current free cash flow may be negative due to capital investment). The company’s capital structure is conservative with little to modest use of debt. 3 (Average Risk) - The company operates in an industry that has average sensitivity to systematic risk. The industry may be cyclical. Profits and cash flow are sensitive to economic factors although the company has demonstrated its ability to generate positive earnings and cash flow. Debt use is in line with industry averages, and coverage ratios are sufficient. 4 (Speculative) - The company has little or no history of generating earnings or cash flow. Debt use is higher. These companies may be in start-up mode or in a turnaround situation. These companies should be considered speculative. 5 (Highly Speculative) - The company has no history of generating earnings or cash flow. They may operate in a new industry with new, and unproven products. Products may be at the development stage, testing, or seeking regulatory approval. These companies may run into liquidity issues, and may rely on external funding. These stocks are considered highly speculative.

Disclaimers and Disclosure

The opinions expressed in this report are the true opinions of the analyst about this company and industry. Any “forward looking statements” are our best estimates and opinions based upon information that is publicly available and that we believe to be correct, but we have not independently verified with respect to truth or correctness. There is no guarantee that our forecasts will materialize. Actual results will likely vary. The analyst and Fundamental Research Corp. “FRC” does not own any shares of the subject company, does not make a market or offer shares for sale of the subject company, and does not have any investment banking business with the subject company. Fees were paid by CGG to FRC. The purpose of the fee is to subsidize the high costs of research and monitoring. FRC takes steps to ensure independence including setting fees in advance and utilizing analysts who must abide by CFA Institute Code of Ethics and Standards of Professional Conduct. Additionally, analysts may not trade in any security under coverage. Our full editorial control of all research, timing of release of the reports, and release of liability for negative reports are protected contractually. To further ensure independence, CGG has agreed to a minimum coverage term including an initial report and three updates. Coverage can not be unilaterally terminated. Distribution procedure: our reports are distributed first to our web-based subscribers on the date shown on this report then made available to delayed access users through various other channels for a limited time. The performance of FRC’s research is ranked by Investars. Full rankings and are available at www.investars.com. The distribution of FRC’s ratings are as follows: BUY (66%), HOLD (8%), SELL (5%), SUSPEND (21%). To subscribe for real-time access to research, visit http://www.researchfrc.com/subscription.htm for subscription options. This report contains "forward looking" statements. Forward-looking statements regarding the Company and/or stock’s performance inherently involve risks and uncertainties that could cause actual results to differ from such forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, continued acceptance of the Company's products/services in the marketplace; acceptance in the marketplace of the Company's new product lines/services; competitive factors; new product/service introductions by others; technological changes; dependence on suppliers; systematic market risks and other risks discussed in the Company's periodic report filings, including interim reports, annual reports, and annual information forms filed with the various securities regulators. By making these forward looking statements, Fundamental Research Corp. and the analyst/author of this report undertakes no obligation to update these statements for revisions or changes after the date of this report. A report initiating coverage will most often be updated quarterly while a report issuing a rating may have no further or less frequent updates because the subject company is likely to be in earlier stages where nothing material may occur quarter to quarter. Fundamental Research Corp DOES NOT MAKE ANY WARRANTIES, EXPRESSED OR IMPLIED, AS TO RESULTS TO BE OBTAINED FROM USING THIS INFORMATION AND MAKES NO EXPRESS OR IMPLIED WARRANTIES OR FITNESS FOR A PARTICULAR USE. ANYONE USING THIS REPORT ASSUMES FULL RESPONSIBILITY FOR WHATEVER RESULTS THEY OBTAIN FROM WHATEVER USE THE INFORMATION WAS PUT TO. ALWAYS TALK TO YOUR FINANCIAL ADVISOR BEFORE YOU INVEST. WHETHER A STOCK SHOULD BE INCLUDED IN A PORTFOLIO DEPENDS ON ONE’S RISK TOLERANCE, OBJECTIVES, SITUATION, RETURN ON OTHER ASSETS, ETC. ONLY YOUR INVESTMENT ADVISOR WHO KNOWS YOUR UNIQUE CIRCUMSTANCES CAN MAKE A PROPER RECOMMENDATION AS TO THE MERIT OF ANY PARTICULAR SECURITY FOR INCLUSION IN YOUR PORTFOLIO. This REPORT is solely for informative purposes and is not a solicitation or an offer to buy or sell any security. It is not intended as being a complete description of the company, industry, securities or developments referred to in the material. Any forecasts contained in this report were independently prepared unless otherwise stated, and HAVE NOT BEEN endorsed by the Management of the company which is the subject of this report. Additional information is available upon request. THIS REPORT IS COPYRIGHT. YOU MAY NOT REDISTRIBUTE THIS REPORT WITHOUT OUR PERMISSION. Please give proper credit, including citing Fundamental Research Corp and/or the analyst, when quoting information from this report. The information contained in this report is intended to be viewed only in jurisdictions where it may be legally viewed and is not intended for use by any person or entity in any jurisdiction where such use would be contrary to local regulations or which would require any registration requirement within such jurisdiction.

Documents

China Gold International Resources Corp Ltd. (TSX: CGG, HKSE: … · 2013. 1. 4. · Sector/Industry: Exploration/Mining Market Data (as of December 18 ... *see back of report for