TD Newcrest Action Notes January 11, 2011

8/8/2019 TD Newcrest Action Notes January 11, 2011

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Action Notes January 11, 2011Equity Research 2 of 86

RATING/TARGET/ESTIMATE CHANGES

ACE Aviation Holdings Inc. (ACE.A-T, ACE.B-T) C$12.86 ......4SPEC. BUY (Unchanged);Target: C$16.00 (Prior: C$17.00)Updating NAV to Reflect Revised Air Canada Target

Advantage Oil & Gas Ltd. (AAV-T) C$6.72 ...... 7HOLD (Prior: BUY);Target: C$7.50 (Prior: C$8.00)AAV-Reduced natural gas pricing results in lower target/rating

Alange Energy Corp. (ALE-V) C$0.50 .... 10BUY (Prior: HOLD);Target: C$0.75 (Prior: C$0.70)Upgrading to BUY

Canacol Energy Ltd. (CNE-V) C$1.54 .... 14BUY (Prior: HOLD);Target: C$2.00 (Prior: C$1.80)Upgrading to BUY

Crescent Point Energy Corp. (CPG-T) C$42.38 .... 18HOLD (Prior: BUY);Target: C$45.00 (Prior: C$46.00)NAV Update Results in Slight Target Reduction, Rating Lowered

Eldorado Gold Corp. (ELD-T, EGO-A) C$16.90 ....21BUY (Unchanged);Target: C$21.00 (Unchanged)Long Term Outlook Points to Strong Organic Growth Prospects

HudBay Minerals Inc. (HBM-T) C$16.21 ....27HOLD (Unchanged);Target: C$18.00 (Prior: C$20.00)Norsemont acquisition success hangs on exploration upside

Nexen Inc. (NXY-T, NXY-N) C$21.82 ....30BUY (Prior: HOLD);Target: C$27.00 (Prior: C$24.00)Time to Show Some Love - Upgrading to BUY

Paramount Resources Ltd. (POU-T) C$31.43 ....35REDUCE (Prior: HOLD);Target: C$26.00 (Prior: C$25.00)POU-Target Up, Rating Down On Share Price Performance

Pengrowth Energy Corp. (PGF-T) C$12.85 ....38HOLD (Prior: BUY);Target: C$14.00 (Unchanged)Rating Reduced on Strong Share Price Performance

PetroBakken Energy Ltd. (PBN-T) C$21.78 ....41BUY (Unchanged);Target: C$26.00 (Unchanged)PBN - 2011 Capex & Prodn Guidance + Bank Line Increased

Please see the final pages of this document for important disclosure information.


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TMX Group Inc. (X-T) C$37.19 ....46HOLD (Unchanged);Target: C$38.00 (Prior: C$35.00)December Stats: Solid Trading & Financing Activity

Talisman Energy Inc. (TLM-T, TLM-N) C$22.20 ....52HOLD (Prior: BUY);Target: C$25.00 (Prior: C$24.00)Positive Long-term Outlook Unchanged - Downgrading on Valuation

GENERAL COMPANY NOTES

Canadian Oil Sands Ltd. (COS-T) C$25.46 ....55HOLD (Unchanged);Target: C$28.00 (Unchanged)Transfer of Coverage - Maintaining HOLD Recommendation

INDUSTRY NOTES

Energy Producers ....58Year-end Commodity Price Deck Update

Industrial Products .... 68November Building Permits Disappoint

Media .... 77Canadian Media Industry Review 2011

INTRADAY NOTES (published January 10, 2011)

Enablence Technologies Inc. (ENA-V) C$0.49 .... 81HOLD (Unchanged);Target: C$0.55 (Prior: C$0.60)December Quarter Guidance Reduced


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January 11, 2011Action Notes Equity Research 4 of 86

Company ProfileACE Aviation Holdings Inc. is a holdingcompany of various aviation interests.Holdings consist of an 11% interest in AirCanada, a $366 million cash balance and AirCanada warrants. Air Canada is Canada'slargest domestic and international full serviceairline.

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Please see the final pages ofthis document for important

disclosure information.

ACE Aviation Holdings Inc.(ACE.A-T, ACE.B-T) C$12.86

Updating NAV to Reflect Revised Air Canada Target

EventWe recently updated our commodity and currency assumptions for our airtransportation coverage list. Due primarily to the impact of higher oil prices,we reduced our earnings forecasts for Air Canada and our Air Canada targetprice to $6.50 from $7.50.

Impact - SLIGHTLY NEGATIVEAs a result of the change to our Air Canada target, we are reducing our ACEAviation target price to $16.00 from $17.00 and maintaining our SpeculativeBUY rating.

For our Air Canada forecasts, we have increased our WTI oil priceassumption to $93/barrel ($85/barrel previously) for FY11 and $95/barrel($88/barrel previously) for FY12 based on the current futures curve. We haveincreased our US$/C$ assumption $0.03 (to $0.99) for FY11 and $0.02 (to$0.98) for FY12.

We estimate that ACEs holding company discount is currently 12.9%. With

ACE taking steps that we believe are aimed at an eventual dissolution of thecompany, we expect this discount to continue trending lower. However, giventhe modest 290bp differential between our target holding company discount(10%) and the current market-value implied holding company discount, themajority of the return to our ACE target continues to come from thesubstantial upside implied by our Air Canada 12-month target.

Given the uncertainty regarding the timing of a sale of ACEs remaining stakein Air Canada, there is clearly downside risk to our target price in the eventthat a sale occurs below our Air Canada target price. If we were to assumethat ACE divested its remaining stake in Air Canada at current market prices($3.60) and sold its Air Canada warrants for their intrinsic value, our currentvaluation methodology would imply a target of approximately $13.00 (using a10% holding company discount).

Transportation/Aerospace

Recommendation: SPEC. BUYUnchanged

Risk: SPECULATIVE

12-Month Target Price: C$16.00Prior: C$17.00

12-Month Total Return: 24.4%

Market Data (C$)Current Price $12.86

52-Wk Range $6.05-$13.53

Mkt Cap (f.d.)($mm) $418.0

Dividend per Share $0.00

Dividend Yield 0.0%

Avg. Daily Trading Vol. (3mths) 69,399Financial Data (C$)

Fiscal Y-E December

Shares O/S (f.d.)(mm) 32.5Float Shares (mm) 32.5

Net Cash ($mm) $366.3

Net Debt/Tot Cap NA

Cash ($mm) $366.3

Notes:TD Newcrest estimates

All figures in C$, unless otherwise specified.

Tim James, CFA Scott Farley, CA (Associate)


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Valuation and Justification of Target PriceWe value ACE by summing our estimated value of its component operating companies and adding in theestimated value of net assets in the holding company (Exhibit 1). Assets include $366 million in estimated necash, the companys 11% interest in Air Canada and 2.5 million Air Canada warrants. We then apply a 10%holding company discount.

Key Risks to Target PriceOverall air traffic levels, sustained high oil prices, fluctuation in the value of the Canadian dollar, potential forincreasing competition and capacity, managements ability to monetize business units and trading prices ofthose units, execution of share repurchase or special dividends, and management/union relations.

Investment ConclusionWe are reducing our target price to $16.00 from $17.00 and maintaining our Speculative BUY rating on ACE.

Exhibit 1: ACE Aviation Holdings Inc. Net Asset Value Derivation of Target Price

Air Canada (11%)

Current share price $3.60 $6.50

Current shares outstanding 278,149 278,149

Market Value of Equity 1,001,336 1,807,968

Percentage held by ACE Aviation 11.1% 11.1%

Value per ACE Aviation share $3.44 $6.20

Percentage of total ACE Aviation NAV 23.3% 35.0%

Remaining ACE Holding Company Net Asset Value (100%)

Cash 366,288 366,288

Warrants (1,250,000 - $1.51 strike; 1,250,000 - $1.44 strike) 5,225 12,575Other Debt -

Net Obligations (4,000) (4,000)

Net Assets (Liabilities) Remaining in HoldCo. 367,513 374,863

Value per ACE Aviation share $11.32 $11.53

Percentage of total ACE Aviation NAV 76.7% 65.0%

Other Data

ACE A and B Shares Outstanding 32,465 32,465

Issued upon Exercise of Options - 45

Cancelled Due to Issuer Bid - -

Total A and B Shares Assumed Outstanding 32,465 32,510

TOTAL ACE AVIATION NAV per share $14.76 $17.73

Current ACE Aviation share price $12.86 $12.86

Discount to NAV 12.9% 27.5%

Target Holding Company Discount 10.0%

TD Newcrest Target $15.96

(all figures in 000's, unless noted)

TDN Target

NAVCurrent Market

Price NAV

Source: Company reports; TD Newcrest estimates


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Exhibit 2: Justification and Key Risks to Target Prices of ACE Subsidiaries

Stock Name Ticker Share Price Target Price Rating Justification of Target Price

Air Canada AC.A,

AC.B

$3.60 $6.50 SPEC. BUY Our target is based on applying a 5.0x multiple to estimated EBITDAR for the

four quarter period ending September 30, 2012.

Stock Name Ticker Share Price Target Price Risk Rating Key Risks to Target Price

Air Canada AC.A,

AC.B

$3.60 $6.50 Spec. Overall air traffic levels, a sustained high fuel price, fluctuations in the value of

the Canadian dollar, potential for increasing competition and capacity, debt

levels, pension funding, financial leverage, variable voting shares, and

management/union relations.

Source: Company Data, TD Newcrest Estimates.


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Company ProfileAdvantage Oil & Gas Ltd. (AAV) is aCanadian oil and natural gas exploration,development and production companyfocused on the Glacier area located on theAlberta / B.C. border between Grande Prairieand Dawson Creek.

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Advantage Oil & Gas Ltd.(AAV-T) C$6.72

AAV-Reduced natural gas pricing results in lower target/rating

EventTarget and rating lowered with new commodity and YE-2010E reserveestimates.

Impact

Negative

DetailsEntering 2011 we are i) updating our commodity price forecast; ii)introducing 2012 estimates; iii) estimating year end 2010 reserves and usingthis updated reserve estimate in our Net Asset Value analysis (bothBlowdown and Modified Growth).

OutlookAlthough WTI crude oil prices recently tested levels above US$90/bbl, we aretaking a somewhat conservative view on prices and are estimating a WTIprice of US$85/bbl through 2011 and 2012. In our view, fundamentals for thecommodity, including inventories along with the supply and demand balance

do not support current prices.

Looking at natural gas, above-average withdrawals have somewhat reducedthe overhang in inventories; however, seasonal gas inventory levels remainnear record highs due to ample supply. Given the continued oversupply of thecommodity, we are now estimating a NYMEX gas price of US$4.50/mcf(previously $5.75) in 2011 and US$5.25/mcf in 2012. Our new commodityprice forecasts are outlined in Exhibit 1.

Our cash flow forecasts for Advantage have been reduced on the back ofour lower natural gas price assumption. As a result of lower cash flowcombined with a reduced subjective factor of 5/10 (previously 6/10) weare lowering our target price to $7.50 (from $8.00). We are also loweringour rating to HOLD (previously Buy).

Energy Producers - Intermediate

Recommendation: HOLDPrior: BUY

Risk: HIGH




52-Wk Range $5.69-$8.32

Mkt Cap (f.d.)($mm) $1,144.4

Dividend per Share --

Dividend Yield --

Avg. Daily Trading Vol. (3mths) 516260Financial Data (C$)

Fiscal Y-E December

Shares O/S (f.d.)(mm) 170.3Float Shares (mm) --

Net Debt ($mm) $483.0

Net Debt/Tot Cap --Estimates (C$)

Year 2009A 2010E 2011E 2012E

CFPS (f.d.) 1.26 1.04 1.10 1.15

CFPS (f.d.)(old) -- 1.03 1.21 --

Debt/CF 2.6x 2.8x 2.3x 2.1x

Oil (b/d) 9,509 7,226 6,795 6,521

Gas (MMcf/d) 104.5 101.3 125.0 134.8

MBOE/d 26.9 24.1 27.6 29.0

ValuationsYear 2009A 2010E 2011E 2012E

EV/DACF 5.9x 7.9x 7.2x 6.9x

P/NAV -- 87.0% -- --

Supplemental DataYear 2009A 2010A 2011E 2012E

WTI (US$/bbl) $61.97 $79.50 $85.00 $85.00

NYMEX (US$) $4.16 $4.36 $4.50 $5.25

AECO (C$) $4.00 $3.99 $3.90 $4.65

F/X (US$) $0.88 $0.97 $0.99 $0.98


Roger Serin, P.Eng. Aaron Bilkoski (Associate)


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Exhibit 1. Revised Commodity Price Forecast

Futures Futures

Commodity NEW Old Futures vs TD TD Futures vs TD

WTI (US$/bbl) $79.50 $85.00 $80.00 $93.23 10% $85.00 $93.94 11%

Edmonton ($/bbl) $76.80 $83.50 $80.90 - - $84.60 - -

NYMEX (US$/mcf) $4.36 $4.50 $5.75 $4.56 1% $5.25 $5.08 -3%

AECO ($/mcf) $3.99 $3.90 $5.10 $3.99 2% $4.65 $4.49 -3%

FX (US$) $0.97 $0.99 $0.97 $1.00 1% $0.98 $0.99 1%

2010A 2011E

TD Estimate

Actual

2012E

Source: Bloomberg, TD Newcrest.

ValuationP/NAVBD P/NAVMG EV/2PBOE D/CF Payout Yield % Gas

(Futures) (Futures) (2011E) (2012E) (2011E) (2012E) (2009A) (2011E) (2011E) (2011E) (2011E)

AAV 87% 87% 7.2x 6.9x $55,578 $52,279 $6.81 2.3x 75% - 75%

Average 157% 101% 10.2x 8.8x $93,744 $90,489 $25.91 2.1x 122% 5% 53%

>60% Gas 154% 112% 11.9x 9.2x $76,205 $68,787 $23.48 3.0x 135% 2% 78%

>60% Oil 168% 100% 9.6x 9.2x $127,358 $127,682 $32.73 1.3x 110% 6% 26%Yield 159% 98% 9.6x 8.6x $93,236 $92,893 $24.16 2.1x 118% 5% 49%

No Yield 148% 115% 13.0x 9.8x $95,901 $80,269 $33.37 2.1x 141% 0% 70%

i) EV based on forecast year-end net debt and units outstanding, ii) Payout = (Capex+Dividend-DRIP)/CF

Source: Company Reports, TD Newcrest

EV/BOEPDEV/DACF

Justification of Target PriceOur target price reflects a base valuation of $7.42 that combines 1.0x our modified growth NAV of $7.72 at a65% weighting and $6.87 using an EV/DACF multiple of 7.0x 2011E DACF at a 35% weighting. This is thenadjusted by a subjective factor of 0% (within a range of +/- 25% for the sector).

Key Risks to Target PriceKey risks associated with our target price include business risks of the company and industry, including but no

limited to: loss of key employees, drilling success, volatile commodity prices, operating costs, capital costoverruns, product supply and demand, financing/access to capital, government regulations, legislationroyalties, taxes, exchange rates, interest rates, environmental and weather concerns. Specific risks toAdvantage include asset concentration of the capital program in the Glacier region.

Investment ConclusionThe company continues to develop its core liquids rich Montney natural gas asset at Glacier. The currentdevelopment plan is expected to bring production from the area to 100 mmcf/d (representing ~50% of totalcorporate volumes). Upon completion of this current phase of development by Q2/11, production from the areawill have approximately doubled in twelve months. Asset sales and increasing production give the companyincreased flexibility relative to its credit facility. However, at current gas prices we forecast that capex in 2011will drop 35% from 2010, reflecting completion of its expansion at Glacier. While it has clearly demonstratedthe potential of the Glacier property and is meeting its growth expectations for the play, we highlight the

higher-than-average Future Development Capital (FDC) associated with its YE-2009 reserve report, largely weexpect for development of Glacier. The company has booked FDC of ~$1.3 billion equating to 6.2 years ofcapital spending at 2010 levels, well above the average of 1.6 years within our coverage group.


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TICKER TARGET RATINGAAV $6.72 AAV $7.50 HOLD

Per Share Metrics 2005A 2006A 2007A 2008A 2009A 2010E 2011E 2012ECFPS (fd) $3.67 $2.57 $2.21 $2.52 $1.26 $1.03 $1.10 $1.15DPS (Basic) - - - - - - -NAVMG - - - - - $7.72 -

ValuationShare Price (Avg) $19.76 $18.64 $12.37 $10.09 $5.29 $6.72 $6.72 $6.72

Shares Outstanding (Basic - Period End) 57.8 105.4 138.3 142.8 162.7 163.7 163.7 163.7

Market Cap ($mm) $1,143 $1,965 $1,710 $1,441 $862 $1,100 $1,100 $1,100

Net Debt ($mm) $410 $624 $788 $875 $502 $483 $435 $415Enterprise Value ($mm) $1,553 $2,589 $2,498 $2,316 $1,363 $1,583 $1,535 $1,515

Yield - - - - - - -P/NAV - - - - - 87% -P/CF 5.4x 7.3x 5.6x 4.0x 4.2x 6.5x 6.1x 5.9xEV/DACF 6.7x 10.8x 8.2x 5.8x 5.9x 7.9x 7.2x 6.9xEV/BOEPD $77,196 $108,996 $83,362 $71,763 $50,621 $65,638 $55,578 $52,279EV/2PBOE (Pro Forma) $18.63 $21.48 $16.54 $13.36 $5.87 $6.81 -

ProductionOil & NGLs (bbls/d) 7,029 8,074 10,462 11,792 9,509 7,226 6,795 6,521Heavy Oil (bbls/d) - - - - - - -Gas (mmcf/d) 78.6 94.1 117.0 122.9 104.5 101.3 125.0 134.8Total BOE/d (6:1) 20,122 23,753 29,961 32,273 26,930 24,113 27,624 28,980Gas % 65% 66% 65% 63% 65% 70% 75% 77%

Reserves (mmBOE) (Pro Forma)PDP 45.2 66.3 78.1 71.3 51.3 51.3 -Proved 53.6 78.0 94.7 101.4 107.9 107.9 -Proved + Probable 83.4 120.6 151.0 173.4 232.3 232.3 -% Proved 64% 65% 63% 58% 46% 46% -

RLI & Capital EfficiencyRLI (Proven) 7.6 7.3 7.6 8.8 13.1 - -RLI (P+P) 11.9 11.4 12.1 15.1 28.2 - -

FD&A + FDC (Proven) $21.82 $34.33 $25.15 $24.40 $24.05 - -

FD&A +FDC (P+P) $17.17 $26.02 $19.13 $16.68 $11.66 - -Recycle Ratio (Proven) 1.3x 0.7x 1.0x 1.2x 0.8x - -Recycle Ratio (P+P) 1.7x 0.9x 1.3x 1.8x 1.7x - -

GrowthProduction Growth

Absolute - 18% 26% 8% (17%) (10%) 15% 5%Per Share - (17%) (15%) (8%) (24%) (16%) 14% 5%Per Share (Debt Adjusted) - (19%) (19%) (15%) (35%) 11% 12% 7%

P+P Reserve GrowthAbsolute - 45% 25% 15% 34% - -Per Share - (21%) (5%) 11% 18% - -Per Share (Debt Adjusted) - (24%) (3%) (7%) 61% - -

Netback ($/BOE)

Gross Revenue $53.17 $47.80 $49.27 $65.14 $34.90 $36.39 $35.29 $37.77

Royalties ($10.11) ($8.82) ($9.02) ($12.39) ($4.99) ($5.24) ($4.94) ($5.29

Operating ($7.89) ($9.56) ($11.64) ($13.89) ($12.11) ($10.50) ($9.00) ($9.00Transportation $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00

Operating Netback $35.17 $29.42 $28.61 $38.86 $17.80 $20.66 $21.35 $23.48

Hedge Gain/(Loss) ($1.90) $0.61 $1.70 ($2.32) $8.80 $5.12 $2.59 $0.00

General & Administration ($0.74) ($1.58) ($1.96) ($1.90) ($2.99) ($2.79) ($2.55) ($2.65

Interest ($3.22) ($3.64) ($3.82) ($4.01) ($3.64) ($3.22) ($2.66) ($2.23

Cash Taxes ($0.30) ($0.17) ($0.13) ($0.21) ($0.13) ($0.15) ($0.14) ($0.14

Other Cash Items ($0.48) ($0.55) ($0.23) ($0.62) ($0.14) ($0.13) $0.00 $0.00

Cash Netback $28.53 $24.08 $24.16 $29.79 $19.70 $19.49 $18.59 $18.46

Cash Costs (Ex. Hedging) ($22.75) ($24.33) ($26.81) ($33.03) ($24.00) ($22.02) ($19.29) ($19.31Cash Flow ($mm)

Gross Revenue $391 $414 $539 $769 $343 $320 $356 $400

Royalties ($74) ($76) ($99) ($146) ($49) ($46) ($50) ($56

Operating ($58) ($83) ($127) ($164) ($119) ($92) ($91) ($95Transportation $0 $0 $0 $0 $0 $0 $0 $0

Hedge Gain/(Loss) ($14) $5 $19 ($27) $86 $45 $26 $0

General & Administration ($5) ($14) ($21) ($22) ($29) ($25) ($26) ($28

Interest ($24) ($32) ($42) ($47) ($36) ($28) ($27) ($24

Cash Taxes ($2) ($2) ($1) ($2) ($1) ($1) ($1) ($2

Other Cash Items ($4) ($5) ($3) ($7) ($1) ($1) $0 $0

Cash Flow ($mm) $210 $209 $264 $352 $194 $171 $187 $195

Cash Flow Sensitivity (%)

US$10.00/bbl WTI - - - - - - 6% 9%

C$1.00/mcf AECO - - - - - - 16% 22%

Hedging (%)

% Liquids Hedged - - - - - 28% 29% 0%

% Gas Hedged - - - - - 47% 24% 0%

% Hedged - - - - - 41% 25% 0%

Capex & Dividend ($mm)E&D Capex ($103) ($159) ($149) ($256) ($171) ($214) ($140) ($175

Net Acquisitions $3 $8 ($37) ($7) $245 $69 $0 $0

Total Capex ($100) ($151) ($186) ($262) $74 ($145) ($140) ($175

Dividend $0 $0 $0 $0 $0 $0 $0 $0DRIP Savings $0 $0 $0 $0 $0 $0 $0 $0

Free Cash Flow (Financing Requirement) $109 $58 $78 $90 $268 $27 $47 $20

Tax Pools $0 $1,184 $1,704 $1,815 $1,133 - -

Payout RatioE&D Capex/CF 49% 76% 56% 73% 88% 125% 75% 90%

Dividend/CF 0% 0% 0% 0% 0% 0% 0% 0%

(Capex+DPS-DRIP)/CF 49% 76% 56% 73% 88% 125% 75% 90%

Debt ($mm)Bank Debt $252 $411 $547 $587 $248 $329 $344 $382

Working Capital Deficit $32 $43 $28 $158 ($7) $20 $18 $20

Convertibles & Notes $126 $171 $212 $129 $261 $133 $73 $12

Net Debt $410 $624 $788 $875 $502 $483 $435 $415

Net Debt/Cash Flow 2.0x 3.0x 3.0x 2.5x 2.6x 2.8x 2.3x 2.1x

Credit Facility $355 $600 $710 $710 $525 $525 $525 $525

% Drawn 71% 68% 77% 83% 47% 63% 66% 73%

Commodity Price AssumptionsWTI Crude Oil (US$/bbl) $56.47 $66.07 $72.23 $99.92 $61.97 $79.50 $85.00 $85.00Henry Hub Natural Gas (US$/mmbtu) $8.91 $6.73 $6.97 $8.89 $4.16 $4.36 $4.50 $5.25AECO Natural Gas (Cdn$/mcf) $8.65 $6.38 $6.46 $8.20 $4.00 $3.99 $3.90 $4.65Foreign Exchange (US$/Cdn$) $0.83 $0.88 $0.93 $0.94 $0.88 $0.97 $0.99 $0.98


ADVANTAGE OIL & GAS LTD.


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Company ProfileAlange was incorporated as a privatecompany in January 2008, after which itacquired interests in five blocks in Colombia.The company began trading on the TSX-Vfollowing a reverse takeover in July 2009and subsequently expanded its acreageposition in Colombia through a series of

transactions.2008 2009 2010

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Alange Energy Corp.(ALE-V) C$0.50

Upgrading to BUY

EventWe are making several adjustments to our short-term and long-termcommodity price assumptions. The most important change for theInternational E&Ps is that we have increased our long-term crude oil outlookto a flat US$85/bbl from 2011E forward (from US$80/bbl previously), which

reflects a 6.3% increase. For complete details, please refer to our full lengthIndustry Bulletin to be published later today.

Reflecting this commodity update, we have increased our target price forAlange Energy Corp. (ALE-V) to C$0.75 (from C$0.70) due to an increase inour NAVPS estimates. As a result, Alange now implies a 50% total return toour target and we are upgrading Alange to BUY (from Hold).

ImpactNeutral. We are not materially adjusting any of our estimates other than fornew commodity price assumptions. However, we are upgrading ourrecommendation to BUY (from Hold) due to a higher implied return to targetcaused by a combination of a higher target price (driven by increased oil price

assumptions) and recent share price weakness.

Details and OutlookExhibit 1 summarizes changes to our key estimates. The increase in our CFPSand NAVPS estimates is due to the increase in our long term crude oil priceassumption.

The key news we are waiting for from Alange Energy is an update on itsongoing multi-well exploration program on the Topoyaco block in southernColombias Putumayo Basin. We also expect the company will provideregular updates on plans to grow production from its development assets inColombia.

Energy Producers - Internationals

Recommendation: BUYPrior: HOLD

Risk: HIGH




52-Wk Range $0.29-$0.80

Mkt Cap (f.d.)($mm) $393.3

Mkt Cap (basic)($mm) $374.0

EV ($mm) $409.6


Dividend Yield --

Avg. Daily Trading Vol. (3mths) 4,844,222

Financial Data (C$)Fiscal Y-E DecemberShares O/S (f.d.)(mm) 786.6

Shares O/S (basic)(mm) 747.9

Float Shares (mm) 735.0

Net Debt ($mm) $35.6

Net Debt/Tot Cap 12.9%Estimates (US$)

Year 2009A 2010E 2011E 2012E

CFPS (f.d.) (0.03) 0.02 0.10 0.14

CFPS (f.d.)(old) (0.03) 0.02 0.10 0.14

Oil (b/d) 1,203 2,509 4,978 6,824

Gas (MMcf/d) 0 2.5 6.2 10.2

MBOE/d 1.2 2.9 6.0 8.5

Valuations

Year 2009A 2010E 2011E 2012E

EV/DACF nmf 29.3x 5.2x 3.1xSupplemental Data (US$)

Year 2009A 2010E 2011E 2012E

WTI (US$/bbl) $61.85 $79.45 $85.00 $85.00

Base NAVPS -- C$0.22 -- --

Risked NAVPS -- C$0.81 -- --

All figures in US$, unless otherwise specified.

Jamie Somerville Wael Halaoui (Associate)


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Exhibit 1. Alange: TD Newcrest Estimate Changes

New Old % Chg New Old % Chg

Production (BOE/d) 2,920 2,920 - 6,013 6,013 -% Natural Gas 14% 14% - 19% 19% -

Financial ($mm)

Cash Flow $14 $12 18% $76 $71 8%

Capex $65 $65 - $63 $63 -

Ending Net Cash / (Debt) ($50) ($53) (4%) ($37) ($45) (17%)

CFPS - f.d. $0.02 $0.02 18% $0.10 $0.09 7%

Netbacks ($/BOE)

Revenue $59.46 $57.25 4% $69.76 $65.80 6%

Royalties ($6.00) ($5.78) 4% ($7.03) ($6.64) 6%

% Revenue 10% 10% 0% 10% 10% (0%)

Opex ($17.31) ($17.31) - ($19.40) ($19.40) -

Operating Netback $36.15 $34.16 6% $43.32 $39.75 9%

Base NAVPS C$0.22 C$0.19 13%

Fully-risked NAVPS C$0.81 C$0.74 10%

2010E 2011E

Source: TD Newcrest.

ValuationBased on most recent prices, Alange trades at 3.1x 2012E EV/DACF, which is a significant 38% discount toits closest peers. Additionally, at 0.60x Fully-risked NAVPS, it is also at a 21% discount to its closest peers.

Exhibit 2. Alange: Relative Valuation

Recent At Price At Price At Price

Price Current Target Current Target Current Target

Ticker 10-Jan-11 Estimate Multiple Multiple Estimate Multiple Multiple Multiple Multiple

BNK $8.28 $12.04 0.69x 0.96x $6.33 1.31x 1.82x 7.6x 10.9x

BKX $4.06 $5.31 0.76x 0.94x $1.84 2.20x 2.71x 15.7x 19.0x

CNE $1.54 $2.16 0.71x 0.93x $0.43 3.58x 4.65x 5.3x 7.9x

CZE $11.92 $17.50 0.68x 0.91x $4.60 2.59x 3.48x 3.5x 5.3x

GTE $8.13 $9.75 0.83x 0.97x $3.26 2.49x 2.91x 4.9x 6.0x

NKO $94.75 $166.57 0.57x 0.84x $23.04 4.11x 6.08x 10.8x 15.7x

PDQ $0.68 $1.36 0.50x 0.85x $0.02 nmf 61.06x 7.4x 14.3x

PRE $31.47 $38.83 0.81x 0.98x $18.48 1.70x 2.06x 4.1x 5.3x

PXT $9.33 $9.02 1.03x 1.00x $1.60 nmf 5.63x 4.0x 3.9x

PMG $35.47 $40.61 0.87x 1.03x $18.31 1.94x 2.29x 3.3x 5.0x

TNP $3.22 $4.86 0.66x 0.93x $2.40 1.34x 1.87x 7.5x 10.7x

Average 0.74x 0.94x 2.36x 8.60x 6.7x 9.5x

Closest comparables (bold) 0.75x 0.93x 2.89x 15.55x 5.0x 7.5x

ALE $0.49 $0.81 0.60x 0.92x $0.22 2.22x 3.44x 3.1x 5.1x

Fiscal 2012 used as equivalent to calendar 2011 for CNE and NKO

2012E EV/DACFFully-risked NAVPS Base NAVPS


Justification of Target PriceWe have increased our target price to C$0.75 (from C$0.70) due to the increase in our NAVPS estimates. Ourtarget price is based on multiples of 1.0x Base NAVPS and 0.9x Upside to Base NAVPS. The reasons for alower multiple relative to some of Alanges peers include a relatively high gas weighting, and an expectationthat the company will miss its near-term production targets, which could increase market perceptions offinancing risk. We currently use a range of 0.85-1.05x in terms of our multiples of Upside to Base NAVPS.


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Exhibit 3. Alange: Target Price Calculation

Base NAVPS $0.22

Multiple 1.00x

Target contribution $0.22

Fully-risked NAVPS $0.81Upside to Base NAVPS $0.60

Multiple 0.90x


Calculated target price $0.75

Actual target price (rounded) $0.75 Source: TD Newcrest.

Key Risks to Target PriceKey risks associated with our target price include business risks of the company and industry, including but nolimited to: loss of key employees, drilling success, volatile commodity prices, operating costs, capital costoverruns, product supply and demand, financing/access to capital, government regulations, legislationroyalties, taxes, exchange rates, interest rates, environmental and weather concerns.

The key near-term risks specific to Alange are:

Gas market and infrastructure risk is significant since ~80% of the companys P+P gas reserves areundeveloped gas and NGLs.

Higher than average security risk in the Putumayo and Catatumbo basins. Higher than average geo-political risk.

Investment ConclusionWe are increasing our target price for Alange Energy to $0.75 (from $0.70) due to an increase in our WTI oiprice assumptions for 2011 and beyond to US$85/bbl (from US$80/bbl). Following recent share priceweakness, our increased target price now implies a 50% return to target, and we are therefore upgrading ourrecommendation for Alange Energy to BUY (from Hold).

The key news we are waiting for from Alange Energy is an update on its ongoing multi-well explorationprogram on the Topoyaco block in southern Colombias Putumayo Basin. We also expect the company willprovide regular updates on plans to grow production from its development assets in Colombia.


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Exhibit 4. Alange: Summary

Alange Energy Corp. ALE TSX-V Rating BUY

Price C$0.49 Risk HIGH

Target C$0.75

Basic O/S (mm) 747.9

f.d. O/S (mm) 786.6 Total Return to Target 55%Market Cap. ($mm) $366.3 Fiscal Year-end 31-Dec

Net debt ($mm) $36.0 Last reported quarter Q3/10

Enterprise Value ($mm) $402.3 Reporting Currency : All dollar amounts in US$ unless otherwise noted

NET ASSET VALUE (2011E) PRODUCTION (BOEPD)* 2009 2010E 2011E 2012E

Risked Colombia 1,203 2,920 6,013 8,530

% Int. COS mmBOE $mm C$/sh

Colombia P+P n/a 100% 15.8 $199.8 $0.25

Total 1,203 2,920 6,013 8,530

of which gas (%) 0% 14% 19% 24%

Total P+P Reserves 15.8 $199.8 $0.25 * includes risked resources and exploration potential

Net cash/(debt) -$37.1 -$0.05 FINANCIAL SUMMARY 2009 2010E 2011E 2012E

Discounted proceeds from in-the-money options $10.3 $0.01 Cash Flow ($mm) ($10.6) $13.8 $76.2 $107.4

Other long-term investments $0.0 $0.00 CFPS - Basic ($0.03) $0.02 $0.10 $0.14

Base NAV 15.8 $173.1 $0.22 CFPS - f.d. ($0.03) $0.02 $0.10 $0.14

P / Base NAVPS 2.22 Net Income ($mm) ($13.9) ($24.6) $10.3 $13.8

EPS - Basic ($0.04) ($0.03) $0.01 $0.02

Colombia Resource n/a 27% 34.3 $472.8 $0.60 EPS - f.d. ($0.04) ($0.03) $0.01 $0.02

Revenue* ($/BOE) $59.12 $53.48 $62.87 $60.62

Operating Costs ($/BOE) $15.09 $17.31 $19.40 $18.62

Operating Netback ($/BOE) $44.03 $36.17 $43.46 $42.00

* net of royalties and hedging

Total Upside Resource 34.3 $472.8 $0.60 CAPITAL STRUCTURE 2009 2010E 2011E 2012E

Discounted proceeds from exercise-below-target options $0.1 $0.00 Wtd. Avg. Basic Shares (mm) 360.7 747.3 747.9 747.9

Wtd. Avg. f.d. Shares (mm) 360.7 747.3 781.4 780.1

Fully Risked NAV 50.2 $646.0 $0.81 Market Cap. ($mm) $176 $388 $366 $366

P / Fully Risked NAVPS 0.60 Net Debt ($mm) ($4) $50 $37 ($22

Enterprise Value ($mm) $172 $438 $403 $344

Unrisked Upside Resource 126.5 $1,357.2 $1.71 Capex ($mm) $58 $65 $63 $48

Discounted unused proceeds from Options $0.0 $0.00 Net Debt to Cash Flow 0.4 3.7 0.5 (0.2

Unrisked NAV 142.3 $1,530.4 $1.93

P / Unrisked NAVPS 0.25

AREAS OF OPERATION VALUATION METRICS 2009 2010E 2011E 2012E

P/CF - f.d. nmf 26.5 5.0 3.6P/E - f.d. nmf (14.9) 37.1 27.8

EV/DACF nmf 29.3 5.2 3.1

EV/BOEPD $143,136 $150,033 $67,094 $40,314

RESERVES 2009 2010 Proforma

Proved* (mmBOE) 8.5 nmf 8.5

P+P* (mmBOE) 31.7 nmf 31.7

FD&A Costs, P+P ($/BOE) nmf nmf

EV/BOE (Proved, $/BOE) $47.43

EV/BOE (P+P, $/BOE) $12.71

*Evaluated by Petrotech Engineering Ltd.

ASSUMPTIONS 2009 2010E 2011E 2012E

Brent (US$/bbl) $61.96 $79.73 $85.50 $85.50

WTI (US$/bbl) $61.85 $79.45 $85.00 $85.00

Discount rate (nominal) 10.0%

Spot FX rate (US$/C$) 1.0100

RECENT FINANCINGS INSIDER OWNERSHIP BASIC f.d

Price # of Shares Proceeds Management 0% 1%Date (C$) (mm) (C$mm) Management & Directors 2% 3%

7/7/09 $0.35 400.0 $140.00

Post-tax PV

Mature Growth Exploration

Colombia

Source: Company Reports, Bloomberg, TD Newcrest.


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Company ProfileCanacol was initially incorporated as aprivate company in early 2008 wtih assets inColombia and Guyana. Through a reversetake-over of BrazAlta Resources in October2008, the company acquired its listing on theTSX-V and added Brazilian asets to itsportfolio. Following the transaction, the

company expanded its position in Colombia.2008 2009 2010

0.0

0.5

1.0

1.5

0.0

0.5

1.0

1.5CNE-V: Price



Canacol Energy Ltd.(CNE-V) C$1.54

Upgrading to BUY

EventWe are making several adjustments to our short-term and long-termcommodity price assumptions. The most important change for theInternational E&Ps is that we have increased our long-term crude oil outlookto a flat US$85/bbl from 2011E forward (from US$80/bbl previously), which

reflects a 6.3% increase. For complete details, please refer to our full lengthIndustry Bulletin to be published later today.

Reflecting this commodity update, we have increased our target price forCanacol Energy Ltd. (CNE-V) to C$2.00 (from C$1.80) due to an increase inour NAVPS estimates. As a result, Canacol now implies a 30% total return toour target and we are upgrading Canacol to BUY (from Hold).

ImpactNeutral. We are not materially adjusting any of our estimates other than fornew commodity price assumptions. However, we are upgrading ourrecommendation to BUY (from Hold) due to a higher implied return to targetcaused by a combination of a higher target price (driven by increased oil price

assumptions) and recent share price weakness.

Details and OutlookExhibit 1 summarizes changes to our key estimates. The increase in ourNAVPS estimates is due to the increase in our long term crude oiassumption.

As published on December 8 in our TD International E&P 2011 Preview, weview Canacol as having the largest upside potential to our Fully-riskedNAVPS in our coverage from events we anticipate will occur in calendar2011, largely due to near-term high impact exploration drilling in Guyana, tobe followed by first drilling on the companys heavy oil acreage in H2/11.

Energy Producers - Internationals

Recommendation: BUYPrior: HOLD

Risk: HIGH




52-Wk Range $0.51-$1.87

Mkt Cap (f.d.)($mm) $739.7

Mkt Cap (basic)($mm) $675.6

EV ($mm) $625.6


Dividend Yield --

Avg. Daily Trading Vol. (3mths) 2,816,634

Financial Data (C$)Fiscal Y-E JuneShares O/S (f.d.)(mm) 480.3

Shares O/S (basic)(mm) 438.7


Net Debt ($mm) ($49.9)

Net Debt/Tot Cap nmfEstimates (US$)

Year 2009A 2010A 2011E 2012E

CFPS (f.d.) (0.03) (0.01) 0.16 0.22

CFPS (f.d.)(old) (0.03) (0.01) 0.16 0.21

Oil (b/d) 1,579 2,323 7,501 9,903

Gas (MMcf/d) 27 0 0 0

MBOE/d 1.6 2.3 7.5 9.9

Valuations

Year 2009A 2010A 2011E 2012E

EV/DACF nmf nmf 8.4x 5.5xSupplemental Data (US$)

Year 2009A 2010E 2011E 2012E

WTI (US$/bbl) $70.03 $75.14 $82.79 $85.00

Base NAVPS -- -- C$0.43 --

Risked NAVPS -- -- C$2.16 --


Jamie Somerville Wael Halaoui (Associate)


14/85


Exhibit 1. Canacol: TD Newcrest Estimate Changes

New Old % Chg New Old % Chg

Production (BOE/d) 4,520 4,939 (8%) 6,563 6,593 (0%)% Natural Gas 0% 0% nmf 0% 0% nmf

Financial ($mm)

Cash Flow $72 $76 (5%) $109 $103 6%

Capex $87 $87 - $85 $85 -

Ending Net Cash / (Debt) $36 $40 (10%) $61 $60 3%

CFPS - f.d. $0.15 $0.16 (5%) $0.22 $0.21 5%

Netbacks ($/BOE)

Revenue $53.76 $51.76 4% $59.63 $57.13 4%

Royalties ($6.14) ($5.96) 3% ($5.69) ($5.42) 5%

% Revenue 11% 12% (1%) 10% 9% 1%

Opex ($18.43) ($18.35) 0% ($18.06) ($18.00) 0%Transportation $0.00 $0.00 nmf $0.00 $0.00 nmf

Operating Netback $29.18 $27.45 6% $35.88 $33.71 6%

Base NAVPS C$0.43 $0.41 4%

Fully-risked NAVPS C$2.16 $1.97 9%

Fiscal 2011E Fiscal 2012E

Source: TD Newcrest.

ValuationCanacol is currently trading at 8.1x 2012E EV/DACF (a 45% premium to the average of other small- and mid-cap producing Colombia-focused E&Ps in our coverage), 0.71x Fully-risked NAVPS (an 7% discount) and3.58x Base NAVPS (a 52% premium).

Exhibit 2. Canacol: Relative Valuation

Recent At Price At Price At Price

Price Current Target Current Target Current Target

Ticker 10-Jan-11 Estimate Multiple Multiple Estimate Multiple Multiple Multiple Multiple

ALE $0.49 $0.81 0.60x 0.92x $0.22 2.22x 3.44x 3.1x 5.1x

BNK $8.28 $12.04 0.69x 0.96x $6.33 1.31x 1.82x 7.6x 10.9x

BKX $4.06 $5.31 0.76x 0.94x $1.84 2.20x 2.71x 15.7x 19.0x

CZE $11.92 $15.80 0.75x 1.01x $4.26 2.80x 3.76x 3.5x 5.3x

GTE $8.13 $9.75 0.83x 0.97x $3.26 2.49x 2.91x 4.9x 6.0x

NKO $94.75 $166.57 0.57x 0.84x $23.04 4.11x 6.08x 10.8x 15.8x

PDQ $0.68 $1.36 0.50x 0.85x $0.02 nmf 61.06x 7.4x 14.4x

PRE $31.47 $38.83 0.81x 0.98x $18.48 1.70x 2.06x 4.1x 5.3x

PXT $9.33 $9.02 1.03x 1.00x $1.60 nmf 5.63x 4.0x 3.9x

PMG $35.47 $40.61 0.87x 1.03x $18.31 1.94x 2.29x 3.3x 5.0x

TNP $3.22 $4.86 0.66x 0.93x $2.40 1.34x 1.87x 7.5x 10.7x

Average 0.74x 0.95x 2.24x 8.51x 6.5x 9.2x

Closest comparables (bold) 0.76x 0.99x 2.36x 3.10x 3.7x 5.3x

CNE $1.54 $2.16 0.71x 0.93x $0.43 3.58x 4.65x 5.3x 7.9x

Fiscal 2013 used as equivalent to calendar 2012 for CNE and NKO

2012E EV/DACFFully-risked NAVPS Base NAVPS


Justification of Target PriceWe are increasing our target price for Canacol to C$2.00 from C$1.80 due to increase in our NAVPSestimates. Our target price for Canacol is based on a combination of Base and Fully risked NAVPS. The


15/85


combination of 1.0x Base NAVPS and 0.9x Upside to Base NAVPS is close to the highest multiples used forour coverage of International E&Ps (we currently use a range of 0.85x to 1.05x in terms of our multiples ofUpside to Base NAVPS).

Exhibit 3. Canacol: Target Price Calculation

Base NAVPS $0.43

Multiple 1.00x


Fully-risked NAVPS $2.16

Upside to Base NAVPS $1.73

Multiple 0.90x


Calculated target price $1.99

Actual target price (rounded) $2.00 Source: TD Newcrest.

Key Risks to Target Price

Key risks associated with our target price include business risks of the company and industry, including but nolimited to: loss of key employees, drilling success, volatile commodity prices, operating costs, capital costoverruns, product supply and demand, financing/access to capital, government regulations, legislationroyalties, taxes, exchange rates, interest rates, environmental and weather concerns.

The key near-term risks specific to Canacol are:

A significant portion of our valuation is based on exploration potential. Financing risk is significant for Canacol. Higher than average security risk in the Putumayo Basin. Higher than average geo-political risk.

Investment ConclusionWe are increasing our target price for Canacol to C$2.00 (from C$1.80) due to an increase in our WTI oil priceassumptions for 2011 and beyond to US$85/bbl (from US$80/bbl). Following recent share price weakness, ourincreased target price now implies a 30% return to target, and we are therefore upgrading our recommendationfor Canacol to BUY (from Hold).

As published on December 8 in our TD International E&P 2011 Preview, we view Canacol as having thelargest upside potential to our Fully-risked NAVPS in our coverage from events we anticipate will occur incalendar 2011, largely due to near-term high impact exploration drilling in Guyana, to be followed by firstdrilling on the companys heavy oil acreage in H2/11.


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Exhibit 4. Canacol Energy: Summary

Canacol Energy Ltd. CNE TSX-V Rating BUY

Price C$1.54 Risk HIGH

Target C$2.00

Basic S/O (mm) 438.7

f.d. S/O (mm) 480.3 Total Return to Target 30%Market Cap. ($mm) $682.4 Fiscal Year-end 30-Jun

Net debt ($mm) ($50.4) Last reported quarter Fiscal Q1/11

Enterprise Value ($mm) $632.0 Reporting Currency : All dollar amounts in US$ unless otherwise noted

NET ASSET VALUE (F2012E) PRODUCTION (BOEPD)* FY2010 FY2011E FY2012E FY2013E

Risked C$/ Colombia 762 4,184 5,663 5,499

% Int. COS mmBOE $mm share Brazil 129 156 260 292

Colombia P+P n/a 100% 8.3 $123.7 $0.24 Canada 0 0 0 0

Brazil P+P n/a 100% 0.6 $14.3 $0.03 Guyana 0 180 640 1,231

Guyana P+P n/a 100% - $0.0 $0.00 Colombia Tariff 1,432 2,982 3,340 2,530

Total 2,323 7,501 9,903 9,552

of which gas (%) 0% 0% 0% 0%

Total P+P Reserves 9.0 $138.0 $0.26 * includes risked resources and exploration potential

Net cash/(debt) $61.3 $0.12 FINANCIAL SUMMARY FY2010 FY2011E FY2012E FY2013E

Discounted proceeds from in-the-money options $27.1 $0.05 Cash Flow ($mm) ($3.7) $71.6 $109.1 $114.5

Other long-term investments $0.0 $0.00 CFPS - Basic ($0.01) $0.16 $0.25 $0.26

Base NAV 9.0 $226.5 $0.43 CFPS - f.d. ($0.01) $0.15 $0.22 $0.23

P / Base NAVPS 3.58 Net Income ($mm) ($21.6) $13.5 $34.8 $41.8

EPS - Basic ($0.07) $0.03 $0.08 $0.10Colombia Resource n/a 15% 92.9 $556.4 $1.06 EPS - f.d. ($0.07) $0.03 $0.07 $0.09

Brazil Resource n/a 30% 0.7 $12.6 $0.02 Revenue* ($/BOE) $26.94 $50.06 $55.86 $59.36

Guyana Resource n/a 24% 22.1 $341.1 $0.65 Operating Costs ($/BOE) $19.07 $18.43 $18.06 $17.73

Operating Netback ($/BOE) $7.87 $31.62 $37.80 $41.63

* net of royalties and hedging

Total Upside Resource 115.6 $910.1 $1.73 CAPITAL STRUCTURE FY2010 FY2011E FY2012E FY2013E

Discounted proceeds from exercise-below-target options $0.0 $0.00 Wtd. Avg. Basic Shares (mm) 299.8 436.7 440.4 440.4

Debt reduction through assumed bond conversion $0.0 $0.00 Wtd. Avg. f.d. Shares (mm) 299.8 475.8 490.5 489.9

Fully Risked NAV 124.6 $1,136.6 $2.16 Market Cap. ($mm) $316 $679 $685 $678

P / Fully Risked NAVPS 0.71 Net Debt ($mm) ($33) ($36) ($61) ($55)

Enterprise Value ($mm) $283 $643 $624 $623

Unrisked Upside Resource 724.4 $4,691.3 $8.91 Capex ($mm) $25 $87 $85 $120

Discounted unused proceeds from Options $0.0 $0.00 Net Debt to Cash Flow 8.9 (0.5) (0.6) (0.5)

Unrisked NAV 733.4 $4,917.8 $9.34

P / Unrisked NAVPS 0.16

AREAS OF OPERATION VALUATION METRICS FY2010 FY2011E FY2012E FY2013E

P/CF - f.d. nmf 10.3 7.0 6.7

P/E - f.d. nmf 54.6 21.9 18.2EV/DACF nmf 8.4 5.5 5.3

EV/BOEPD $317,834 $142,247 $95,023 $88,677

RESERVES FY2010 F2011 Proforma

Proved* (mmBOE) 6.7 nmf 6.7

P+P* (mmBOE) 12.7 nmf 12.7

FD&A Costs, P+P ($/BOE) $14.68 nmf

EV/BOE (Proved, $/BOE) $93.64

EV/BOE (P+P, $/BOE) $49.59

* Evaluated by Ryder Scott, Netherland Sewell and DeGolyer & MacNaughton

ASSUMPTIONS FY2010 FY2011E FY2012E FY2013E

Brent (US$/bbl) $74.65 $83.57 $85.50 $85.50

WTI (US$/bbl) $75.14 $82.79 $85.00 $85.00

Discount rate (nominal) 10%

Spot FX rate (US$/C$) 1.0100

RECENT FINANCINGS INSIDER OWNERSHIP BASIC f.d.

Price # of Shares Proceeds Management 1% 3%

Date ($) (mm) ($mm) Management & Directors 2% 5%10/15/09 $0.28 142.9 $40.00

5/13/10 $0.75 76.7 $57.50

7/16/10 * * $41.50

* 8.00% convertible unsecured debentures convertible at $1.0526 per share

Post-tax PV

Colombia

Mature Growth ExplorationMature Growth Exploration

Colombia

Brazil

Guyana

Source: Company Reports, Bloomberg, Canacol Energy


17/85


Company ProfileCrescent Point Energy Corp. is aconventional oil and gas company with assetsstrategically focused in properties comprisedof high quality, long life, operated, light oiland natural gas reserves in western Canada.Two core areas for CPG are the light oilBakken development in SE Sask and the

Lower Shaunavon development in SW Sask.2008 2009 2010

15

20

25

30

35

40

45

50

15

20

25

30

35

40

45

50CPG-T: Price



Crescent Point Energy Corp.(CPG-T) C$42.38

NAV Update Results in Slight Target Reduction, RatingLowered

EventTD is now basing target prices on YE-2010E reserves and 2012E DACF

Impact

Negative

DetailsEntering 2011 we are i) updating our commodity price forecast; ii)introducing 2012 estimates; iii) estimating year end 2010 reserves and usingthis updated reserve estimate in our Net Asset Value analysis (bothBlowdown and Modified Growth).

OutlookAlthough WTI crude oil prices recently tested levels above US$90/bbl, we aretaking a somewhat conservative view on prices and are estimating a WTIprice of US$85/bbl through 2011 and 2012. In our view, fundamentals for thecommodity, including inventories along with the supply and demand balance

do not support current prices.

Looking at natural gas, above-average withdrawals have somewhat reducedthe overhang in inventories; however, seasonal gas inventory levels remainnear record highs due to ample supply. Given the continued oversupply of thecommodity, we are now estimating a NYMEX gas price of US$4.50/mcf(previously $5.75) in 2011 and US$5.25/mcf in 2012. Our new commodityprice forecasts are outlined in Exhibit 1.

In spite of the higher crude oil price incorporated into our NAV and cashflow models, our NAV estimate has declined modestly on higher expectedcash costs in 2011. The reduced NAV, combined with a slightly lowersubjective factor of 8/10 (previously 9/10) results in a revised target priceof $45.00 (previously $46.00). Given the lower target price and positiveshare price performance since our last published note, we are reducingour rating to HOLD (from Buy).

Energy Producers - Intermediate

Recommendation: HOLDPrior: BUY

Risk: HIGH




52-Wk Range $35.30-$45.60

Mkt Cap (f.d.)($mm) $11,506.2


Dividend Yield 6.5%


Fiscal Y-E December

Shares O/S (f.d.)(mm) 271.5Float Shares (mm) --

Net Debt ($mm) $1,060.0

Net Debt/Tot Cap --Estimates (C$)

Year 2009A 2010E 2011E 2012E

CFPS (f.d.) 4.14 3.90 4.22 4.45

CFPS (f.d.)(old) -- 3.94 4.07 --

Debt/CF 0.9x 1.1x 0.9x 0.7x

Oi l (b/d) 39,749 55,373 64,839 68,259

Gas (MMcf/d) 30.8 38.8 42.1 47.9

MBOE/d 44.9 61.8 71.8 76.2

ValuationsYear 2009A 2010E 2011E 2012E

EV/DACF 10.3x 12.6x 10.7x 10.3x

Yield 9.0% 7.0% 7.0% 7.0%

P/NAV -- 109.0% -- --

Supplemental Data

Year 2009A 2010E 2011E 2012E

WTI (U$/bbl) $61.97 $79.50 $85.00 $85.00

NYMEX (U$/mcf) $4.16 $4.36 $4.50 $5.25

AECO (C$) $4.00 $3.99 $3.90 $4.65

F/X (US$) $0.88 $0.97 $0.99 $0.98


Roger Serin, P.Eng. Aaron Bilkoski (Associate)


18/85


Exhibit 1. Revised Commodity Price Forecast

Futures Futures

Commodity NEW Old Futures vs TD TD Futures vs TD

WTI (US$/bbl) $79.50 $85.00 $80.00 $93.23 10% $85.00 $93.94 11%

Edmonton ($/bbl) $76.80 $83.50 $80.90 - - $84.60 - -

NYMEX (US$/mcf) $4.36 $4.50 $5.75 $4.56 1% $5.25 $5.08 -3%

AECO ($/mcf) $3.99 $3.90 $5.10 $3.99 2% $4.65 $4.49 -3%

FX (US$) $0.97 $0.99 $0.97 $1.00 1% $0.98 $0.99 1%

2010A 2011E

TD Estimate

Actual

2012E


ValuationP/NAVBD P/NAVMG EV/2PBOE D/CF Payout Yield % Gas

(Futures) (Futures) (2011E) (2012E) (2011E) (2012E) (2009A) (2011E) (2011E) (2011E) (2011E

CPG 154% 109% 10.7x 10.3x $178,918 $174,205 $36.49 0.9x 95% 7% 10%

Average 157% 101% 10.2x 8.8x $93,744 $90,489 $25.91 2.1x 122% 5% 53%

>60% Gas 154% 112% 11.9x 9.2x $76,205 $68,787 $23.48 3.0x 135% 2% 78%

>60% Oil 168% 100% 9.6x 9.2x $127,358 $127,682 $32.73 1.3x 110% 6% 26%Yield 159% 98% 9.6x 8.6x $93,236 $92,893 $24.16 2.1x 118% 5% 49%

No Yield 148% 115% 13.0x 9.8x $95,901 $80,269 $33.37 2.1x 141% 0% 70%

i) EV based on forecast year-end net debt and units outstanding, ii) Payout = (Capex+Dividend-DRIP)/CF


EV/BOEPDEV/DACF

Justification of Target PriceOur target price reflects a base valuation of $39.03 that combines 1.0x our modified growth NAV of $38.85 aa 65% weighting and $39.36 using an EV/DACF multiple of 9.6x 2011E DACF at a 35% weighting. This isthen adjusted by a subjective factor of +15% (within a range of +/- 25% for the sector).

Key Risks to Target PriceKey risks associated with our target price include business risks of the company and industry, including but no

limited to: loss of key employees, drilling success, volatile commodity prices, operating costs, capital costoverruns, product supply and demand, financing/access to capital, government regulations, legislationroyalties, taxes, exchange rates, interest rates, environmental and weather concerns.

Investment ConclusionCrescent Point is the dominant operator in the Saskatchewan Bakken and Lower Shaunavon light oil resourceplays. Combined, these plays represent over 8 billion barrels of OOIP. A recent acquisition provided Crescenpoint with approximately 1 million acres of land in the very early stage of what is being described as theAlberta Bakken (Exshaw) play. The company estimates it has greater than 6,000 future drilling locationsrepresenting ~20 years of development at its current drilling pace. For 2011, we anticipate that expandedBakken waterflood pilots will capture increased market focus and many will be looking for early results fromthe Alberta Bakken play. A review of the first two pilots indicate that the waterflood is working in the BakkenAt its Alberta Bakken play, three exploratory wells were drilled in 2010 (no results to date), and the company

plans to drill an additional 14 net wells in 2011.

Reserve growth has been strong for the company but production growth per share has lagged. Our analysisshows that modest i.e. 3% production growth per share on a debt adjusted basis, is achievable in 2011 and2012. While the company has only 40% drawn on its credit facility and will be spending or dividending ouless than cash flow in 2011 and 2012 in our forecasts, this is only because of the nearly 60% DRIP whichoffsets the 60% payout and cash costs of supporting its 7% yield.


19/85


LAST TICKER TARGET RATINGCPG $42.38 CPG $45.00 HOLD

Per Share Metrics 2005A 2006A 2007A 2008A 2009A 2010E 2011E 2012E

CFPS (fd) $3.01 $2.96 $3.47 $4.68 $4.14 $3.90 $4.22 $4.45DPS (Basic) $2.14 $2.40 $2.40 $2.61 $2.76 $2.76 $2.76 $2.76NAVMG - - - - - $38.85 - -

Valuation

Share Price (Avg) $19.36 $20.76 $19.88 $29.51 $31.99 $42.38 $42.38 $42.38Shares Outstanding (Basic - Period End) 41.7 69.5 113.8 125.1 208.7 267.6 279.8 293.4

Market Cap ($mm) $808 $1,444 $2,262 $3,692 $6,676 $11,341 $11,856 $12,436

Net Debt ($mm) $225 $258 $656 $956 $601 $1,060 $999 $846Enterprise Value ($mm) $1,033 $1,701 $2,918 $4,648 $7,277 $12,401 $12,855 $13,282

Yield 11% 12% 12% 9% 9% 7% 7% 7%P/NAV - - - - - 109% - -P/CF 6.4x 7.0x 5.7x 6.3x 7.7x 10.9x 10.1x 9.5xEV/DACF 9.0x 8.4x 7.8x 7.4x 10.3x 12.6x 10.7x 10.3xEV/BOEPD $84,908 $82,091 $103,786 $124,278 $162,125 $200,545 $178,918 $174,205EV/2PBOE (Pro Forma) $20.40 $18.37 $17.42 $24.34 $25.84 $36.49 - -

Production

Oil & NGLs (bbls/d) 9,197 17,418 24,349 32,583 39,749 55,373 64,839 68,259Heavy Oil (bbls/d) - - - - - - - -Gas (mmcf/d) 17.8 19.8 22.6 28.9 30.8 38.8 42.1 47.9Total BOE/d (6:1) 12,164 20,723 28,117 37,396 44,883 61,836 71,851 76,245Gas % 24% 16% 13% 13% 11% 10% 10% 10%

Reserves (mmBOE) (Pro Forma)PDP 26.4 53.7 70.9 77.2 107.3 119.5 - -Proved 34.7 65.6 115.7 132.1 185.7 222.5 - -Proved + Probable 50.6 92.6 167.5 191.0 281.6 339.8 - -% Proved 69% 71% 69% 69% 66% 65% - -

RLI & Capital Efficiency

RLI (Proven) 6.9 8.4 9.5 9.2 9.8 - - -RLI (P+P) 10.1 11.9 13.8 13.2 14.8 - - -

FD&A + FDC (Proven) $35.23 $19.82 $30.24 $26.78 $40.71 - - -FD&A +FDC (P+P) $24.72 $16.03 $22.79 $22.34 $28.64 - - -

Recycle Ratio (Proven) 0.7x 1.3x 1.1x 1.6x 1.0x - - -Recycle Ratio (P+P) 1.0x 1.6x 1.5x 1.9x 1.4x - - -

Growth

Production Growth

Absolute - 70% 36% 33% 20% 38% 16% 6%Per Share - (3%) (15%) 8% (7%) (6%) 1% 1%Per Share (Debt Adjusted) - (2%) (16%) 6% (2%) (3%) 3% 3%

P+P Reserve Growth

Absolute - 83% 81% 14% 47% - - -Per Share - 10% 11% 4% (12%) - - -Per Share (Debt Adjusted) - 11% (1%) (21%) 35% - - -

Netback ($/BOE)

Gross Revenue $56.55 $56.52 $63.55 $88.93 $60.71 $70.77 $73.29 $74.26

Royalties ($11.27) ($11.90) ($11.59) ($16.09) ($10.54) ($12.12) ($12.46) ($12.99)Operating ($8.08) ($9.18) ($9.25) ($9.01) ($8.92) ($10.85) ($10.75) ($10.75)Transportation ($1.04) ($1.35) ($1.73) ($1.87) ($1.48) ($1.63) ($1.60) ($1.60)Operating Netback $36.16 $34.09 $40.99 $61.96 $39.77 $46.16 $48.49 $48.92

Hedge Gain/(Loss) ($7.42) ($4.01) ($0.96) ($11.29) $7.64 $0.50 ($0.11) $0.40General & Administration ($1.45) ($1.62) ($1.50) ($1.60) ($2.22) ($1.72) ($1.52) ($1.60)

Interest ($1.22) ($1.81) ($2.12) ($2.45) ($2.14) ($2.71) ($1.71) ($0.79)Cash Taxes ($1.24) ($1.50) ($1.50) ($1.46) ($0.98) ($1.19) ($1.16) ($1.16)

Other Cash Items ($0.33) ($0.29) ($0.41) ($1.81) ($1.10) ($0.07) $0.00 $0.00Cash Netback $24.50 $24.87 $34.49 $43.35 $40.96 $40.98 $43.99 $45.77

Cash Costs (Ex. Hedging) ($24.64) ($27.64) ($28.09) ($34.29) ($27.39) ($30.29) ($29.19) ($28.89)

Cash Flow ($mm)Gross Revenue $251 $427 $652 $1,217 $995 $1,597 $1,922 $2,067

Royalties ($50) ($90) ($119) ($220) ($173) ($274) ($327) ($362)Operating ($36) ($69) ($95) ($123) ($146) ($245) ($282) ($299)Transportation ($5) ($10) ($18) ($26) ($24) ($37) ($42) ($45)Hedge Gain/(Loss) ($33) ($30) ($10) ($155) $125 $11 ($3) $11

General & Administration ($6) ($12) ($15) ($22) ($36) ($39) ($40) ($45)Interest ($5) ($14) ($22) ($33) ($35) ($61) ($45) ($22)

Cash Taxes ($6) ($11) ($15) ($20) ($16) ($27) ($30) ($32)Other Cash Items ($1) ($2) ($4) ($25) ($18) ($2) $0 $0Cash Flow ($mm) $109 $188 $354 $593 $671 $925 $1,154 $1,274

Cash Flow Sensitivity (%)

US$10.00/bbl WTI - - - - - - 11% 13%

C$1.00/mcf AECO - - - - - - 1% 1%

Hedging (%)

% Liquids Hedged - - - - - 44% 44% 24%

% Gas Hedged - - - - - 22% 17% 0%

% Hedged - - - - - 42% 41% 21%

Capex & Dividend ($mm)

E&D Capex ($38) ($143) ($236) ($467) ($358) ($925) ($800) ($850)

Net Acquisitions ($322) ($574) ($1,068) ($141) ($2,079) ($623) $0 $0Total Capex ($360) ($718) ($1,304) ($608) ($2,436) ($1,547) ($800) ($850)

Dividend $0 $0 $0 $0 ($441) ($655) ($755) ($791)

DRIP Savings $0 $0 $0 $0 $211 $377 $462 $520

Free Cash Flow (Financing Requirement) ($252) ($529) ($950) ($14) ($1,995) ($900) $61 $153

Tax Pools $0 $578 $1,023 $1,534 $4,596 - - -

Payout RatioE&D Capex/CF 35% 76% 67% 79% 53% 100% 69% 67%Dividend/CF 0% 0% 0% 0% 66% 71% 65% 62%(Capex+DPS-DRIP)/CF 35% 76% 67% 79% 88% 130% 95% 88%

Debt ($mm)

Bank Debt $226 $254 $596 $919 $519 $646 $561 $400Working Capital Deficit ($1) $3 $60 $37 $82 $97 $121 $128

Convertibles & Notes - - - - $0 $318 $318 $318Net Debt $225 $258 $656 $956 $601 $1,060 $999 $846

Net Debt/Cash Flow 2.1x 1.4x 1.9x 1.6x 0.9x 1.1x 0.9x 0.7x

Credit Facility $245 $350 $800 $1,150 $1,600 $1,600 $1,600 $1,600

% Drawn 92% 73% 74% 80% 32% 40% 35% 25%

Commodity Price AssumptionsWTI Crude Oil (US$/bbl) $56.47 $66.07 $72.23 $99.92 $61.97 $79.50 $85.00 $85.00Henry Hub Natural Gas (US$/mmbtu) $8.91 $6.73 $6.97 $8.89 $4.16 $4.36 $4.50 $5.25AECO Natural Gas (Cdn$/mcf) $8.65 $6.38 $6.46 $8.20 $4.00 $3.99 $3.90 $4.65Foreign Exchange (US$/Cdn$) $0.83 $0.88 $0.93 $0.94 $0.88 $0.97 $0.99 $0.98


CRESCENT POINT ENERGY CORP.


20/85


Company ProfileEldorado Gold Corp. is a mid-tier goldproducer with four producing mines,Kisladag in Turkey, and Tanjianshan,Jinfeng, and White Mountain in China.Eldorado also has development projects inTurkey, China, and Greece. Eldorado isexpected to produce approximately 1.0

million ounces per year by 2013.2008 2009 2010

0

5

10

15

20

25

0

5

10

15

20

25ELD-T: Price



Eldorado Gold Corp.(ELD-T, EGO-A) C$16.90

Long Term Outlook Points to Strong Organic Growth Prospects

EventEldorado provided a Q4 operational update, along with 2011 guidance. Thecompany also announced an increase to its semi-annual dividend.

Impact

NEUTRAL Production in Q4 was slightly above our estimate, however2011 guidance was below our expectations with lower production and highercosts. That being said, the company does have a track record of beingconservative with initial guidance numbers (guidance was increased twice in2010).

Also the companys longer term growth plans include production of 1.5moz targeted by 2015, well above our current forecasts, which currently maxout at 1.27m ozs. The company plans on achieving this through an expansionof existing operations, details of which will be released throughout 2011. Thefirst scheduled release is Kisladag with the plan to increase gold production to450,000/oz per year (up from approx. 300,000/yr currently).

The company also announced what amounts to a dividend increase with its2011 dividend to be based on approximately $100/oz of gold sold, taking theyield to approximately 0.6%.

Details

Q4/10 Operational Results

Production: 148,372 oz, slightly above our estimate of 145,715 oz andlargely in-line with Q3 production of 151,297 oz. A weaker quarter aJinfeng due to lower grades was offset by better than expectedproduction from TJS, and White Mountain.

Cash costs: $418/oz, above our estimate of $381/oz and up from Q3

cash costs of $386/oz. Higher costs at Kisladag and Jinfeng, the lattedue to lower grades, appear to be the main contributors to the costincrease.

Gold & Precious Minerals

Recommendation: BUYUnchanged

Risk: HIGH

12-Month Target Price: C$21.00Unchanged



52-Wk Range $12.02-$21.35

Mkt Cap (f.d.)($mm) $9,323.7


Dividend Yield 0.6%

Avg. Daily Trading Vol. (3mths) 2,662,498Financial Data (C$)

Fiscal Y-E December

Shares O/S (f.d.)(mm) 551.7Float Shares (mm) 551.7

Net Debt/Tot Cap 0.0%

NAVPS (current)(f.d.) $11.49Estimates (US$)

Year 2008A 2009A 2010E 2011E

EBITDA ($mm) 145.4 183.8 436.8 688.8

EPS (f.d.) 0.24 0.25 0.39 0.65

EPS (f.d.)(old) -- -- 0.40 0.73

CFPS (f.d.) 0.35 0.38 0.66 0.99

CFPS (f.d.)(old) -- -- 0.67 1.08

EPS (f.d.) Quarterly Estimates (US$)

Year 2008A 2009A 2010E 2011E

Q1 0.06 0.03 0.09 --

Q2 0.07 0.07 0.11 --

Q3 0.05 0.07 0.09 --Q4 0.07 0.08 0.10 --

Valuations

Year 2008A 2009A 2010E 2011E

P/EBITDA (f.d.) 64.6x 51.1x 21.5x 13.6x

P/E (f.d.) 70.9x 68.1x 43.6x 26.2x

P/CFPS (f.d.) 48.6x 44.8x 25.8x 17.2x


Steven Green, CFA Scott Parsons, CFA


21/85


Exhibit 1: Q4/10 Operational ResultsQ4/09 Q1/10 Q2/10 Q3/10 Q4/10 Q4/10 Quarterly

Production (ozs) Actual Actual Actual Actual Actual TDN Estimate Difference Change

Kisladag 70,131 82,240 70,451 62,086 59,815 60,466 -1% -4%

Total Cash Costs (US$/oz) $298 $307 $345 $359 $379 - -TJS 37,773 25,423 28,884 28,847 30,709 18,823 63% 6%

Total Cash Costs (US$/oz) $424 $504 $483 $493 $516 - -

Jinfeng 14,541 45,615 52,659 46,116 37,560 50,886 -26% -19%


White Mountain 6,148 11,650 15,946 14,248 20,288 15,541 31% 42%


Total Production

Gold (oz) 128,593 164,928 167,940 151,297 148,372 145,715 2% -2%

Cash Costs (US$/oz) $329 $371 $357 $386 $418 $381 10% 8%

Total Cash Costs (US$/oz) $364 $398 $410 $431 - $427 - - Source: Company reports, TDN estimates.

Dividend Increase Keeps Eldorado In-Line with Peers

The company also announced a special dividend of $0.05/sh, doubling its 2010 dividend to $0.10/shThis is based roughly on $100/oz of gold sold in H2/10. Yield will go to approximately 0.6%.

The company expects its 2011 semi-annual dividend will be based on roughly the same metric of $100/ozsold. This would amount to a payout of approximately $74.3m per year or $0.13, which would imply ayield of yield of 0.8% and put Eldorado in the middle of the pack in terms of its large cap peers.

We estimate the companys free cash flow generation of nearly $1.2b over the next three years can morethan support this increase.

Outlook

2011 Production Guidance - Below Expectations 2011 production guidance is 715,000 - 770,000 oz at cash costs of $375-$395/oz, below our previous

estimate of 791,255 oz at cash costs of $323/oz ($367/oz inc. royalties).

This is also down from initial 2011 production guidance (from Feb 2010) of 790,000 - 860,000 oz at cashcosts of $315-325/oz, due primarily to the delay in permitting construction of Eastern Dragon, and start-up of Efemcukuru disclosed last quarter. Also, it appears lower milled grades are expected to persist into2011 at Jinfeng, reducing expected production at that operation.

This represents a 13-21% increase over 2010 production, with the bulk expected from new production atEfemcukuru (70-80k oz) and Eastern Dragon (20-25k oz).

Despite the lower that expected guidance, the company does have a track record of meeting andexceeding guidance over the past few years. 2010 production of 632,537 oz ended up well above initiaguidance of 550,000 - 600,000 oz. As a result, we are comfortable being near the high end of guidance

and are assuming 2011 production of 760,405 oz at cash costs of $381/oz ($429/oz inc. royalties).

CAPEX: $230m has been budgeted for 2011 with more than half allocated to bringing Efemcukuru andEastern Dragon on-line. This was above our estimate of $180m, with higher spending at the two newoperations the largest contributor.


22/85


Exhibit 2: 2011 Guidance

Initial Production Cash Operating CAPEX

Year Guidance (k oz) Actual/Guidance (k oz) Costs (US$/oz) US$mm

2008A 290-300 308.8 257

2009A 325-340 342.8 3072010A 550-600 632.5 382

2011E 715-770 - 375-395 230

Source: Company reports, TDN estimates.

Exhibit 3: Initial Guidance vs Actual Production

295

333

575

743

1,500

308.8

342.8

632.5 7

60

(TD

Est.)

0

200

400

600

800

1000

1200

1400

1600

2008A 2009A 2010A 2011E 2012E 2013E 2014E 2015E

Production(0

00oz)

Initial Guidance (mid-point) Actual Production


Longer Term Target of 1.5m oz

The company also provided a longer term production target of 1.5m oz annually by 2015 throughoptimizations and expansions at its existing operations. This is well above our peak annual productionestimate of 1.27m oz, which still represents one of the strongest 5 year growth profiles amongst its largecap peers.

Details of the expansion plans are to be released through 2011 with the first study scheduled to be theproposed Kisladag expansion to 450,000 oz per year. This would represent a 58-67% increase over 2011guidance.

In addition, the company believes Efemcukuru, White Mountain and Eastern Dragon are expandable.


23/85


Exhibit 4: P/NAV vs. 5 Year Production Growth

KGC

AUYIMG

ELD

GGABX

AEM

0.75

1.00

1.25

1.50

1.75

2.00

2.25

0% 25% 50% 75% 100% 125%

Production Growth to 2015

P/NAV


Exhibit 5: Changes to Our Estimates

Gold Production (000 oz) Total Cash Costs (US$/oz)

2010E 2011E 2010E 2011E

New 633 760 $425 $429Old 630 791 $416 $367

EPS (US$/sh) CFPS (US$/sh)

2010E 2011E 2010E 2011E NAV (C$/sh)

New $0.39 $0.65 $0.66 $0.99 $11.49

Old $0.40 $0.73 $0.67 $1.08 $11.56

Source: TDN estimates.

ValuationWe calculate a NAV for Eldorado of C$11.49 (down slightly from $11.56). Eldorado currently trades at a 1.5xNAV multiple and 17x 2011 CFPS, slightly above its large cap producing peer average of 1.4x NAV and 13x

CFPS. We view Agnico-Eagle as Eldorados closest peer given the similar size and growth profiles. In ourview, Eldorado has higher political risk, but a significantly stronger balance sheet than Agnico. We believe thecurrent large valuation discount is unwarranted.


24/85


Exhibit 6: Gold Producers P/NAV

2.03x

1.44x

1.41x

1.38x

1.17x

1.15x

0.86x

0.86x

0.61x

1.15x

1.05x

1.10x

1.11x

1.35x1

.47x

1.65x

1.28x

Avg P/NAV - 1.2x

Avg Large Cap P/NAV - 1.4x

Avg Jnr/Intermediate P/NAV - 1.1x

0.00x

0.25x

0.50x

0.75x

1.00x

1.25x

1.50x

1.75x

2.00x

2.25x

AEM

NGD

ELD G

ABX CG A

GI

SGR K Y

RI

IMG

LSG

MFL

GAM

JAG

NGX P

Source: TDN estimates.

Exhibit 7: Peer Valuation Summary

Share P/E P/CF

Company Price P/NAV 2010E 2011E 2010E 2011E

Barrick Gold Corp. $49.05 1.41 15.0 10.8 10.5 8.0

Goldcorp Inc. $42.91 1.44 34.1 25.2 18.3 14.6

Kinross Gold Corp. $17.36 1.17 27.1 19.3 12.7 11.3

Eldorado Gold Corp. C$16.90 1.47 43.6 26.2 25.8 17.2

Agnico-Eagle Mines Ltd. $71.66 2.03 39.4 28.5 19.9 16.9

Yamana Gold Inc. $11.89 1.15 20.2 12.9 12.4 8.9IAMGOLD Corp. C$17.81 1.15 26.8 15.6 17.8 11.1

Average: 1.40 29.4 19.8 16.8 12.6 Source: TDN estimates.

Justification of Target PriceOur target price of $21.00 is based on a 1.8x multiple to our 5% NAV (weighted 60%) and an 18x multiple toour blended 2011/2012 CFPS estimate (40% weighted). We value Eldorado at the upper/middle end of ourlarge-cap producer range of 1.5 to 2.0x NAV and 12-20x CFPS reflecting, in our view, its strong growth, highquality assets and management team balanced by higher than average country risk in Turkey, China, andGreece.

Key Risks to Target Price

The main risks facing Eldorado include forecast, financial, technical and political risks. Among other thingsthese include risks related to gold, iron ore and fuel prices, the governing fiscal and legislative regimes, thetiming of key developments, market conditions, capital and operating costs, foreign exchange rates, resourcesand reserves, operating parameters, permitting, environmental, indigenous peoples, and staffing and keypersonnel retention. Eldorado also faces risk due to ongoing court cases against Kisladag and Efemcukuru inTurkey.

Investment ConclusionWe are maintaining a BUY recommendation and $21.00 target price.


25/85


Exhibit 8: Eldorado SnapshotSymbol ELD-T, EGO-N Target Price (C$): $21.00

Share Price (C$) $16.90 Return: 24.9%

Market Cap (C$mm) $9,324.1 Reserves (mm oz Au) 15.3

Stock Rating: BUY Total Resources (mm oz Au) 29.2

Ratio Analysis 2007A 2008A 2009A 2010E 2011E 2007A 2008A 2009A 2010E 2011E

Net Income (US$mm) 31 166 102 217 361 Average share price (C$) 6.19 7.04 11.18 16.90 16.90

EPS (f.d.) (US$/sh) 0.12 0.24 0.25 0.39 0.65 S/O (fd mm) 349.2 357.7 391.7 545.4 551.7

P/E (x) 50.4 28.2 43.0 42.4 25.4 Average Gold price (US$/lb) $697 $873 $975 $1,226 $1,400

Operating CF bf. ch. in WC (US$mm 65 127 147 361 549 Total cash costs (US$/oz gold) $263 $289 $337 $425 $429

CFPS bf. ch. in WC (US$/sh) 0.20 0.35 0.38 0.66 0.99

P/CF (bf. ch. in WC) (x) 30.7 19.6 29.1 25.0 16.7 Mine Production (000 oz)

Dividend (C$/sh) - - - 0.10 0.10 Kisladag 135 190 237 275 285

Dividend yield 0.0% 0.0% 0.0% 0.6% 0.6% TJS Production 126 118 106 114 116

LTD/Total capitalization NA NA NA NA NA Efemukuru - - - - 80

Jinfeng - - 15 182 184

Income Statement Items (US$mm) White Mountain - - 6 62 72

Total revenue 189 288 361 786 1,128 Eastern Mountain - - - - 24

Operating costs 73 92 132 279 351 Perama Hill - - - - -

Exploration 12 12 12 18 32 Total Production (000 oz) 269 309 364 633 760

SG&A 27 38 33 52 56

Depreciation 20 26 39 107 132 Quarterly Mine Production (000 oz) Q1/10A Q2/10A Q3/10A Q4/10E

Interest expense 3 3 1 8 6 Total Production (000 oz) 165 168 151 148

Other 1 (67) (3) (3) (2) Total cash costs (US$/oz gold) $398 $410 $431 $470

EBITDA 78 145 184 437 689

EBIT 58 119 145 330 557 Additional Ratio Analysis

EBT 54 183 147 325 553 Net interest coverage (x) 16.8 40.6 176.1 43.3 95.5

Taxes 22 12 42 91 166 Profit margin 61% 68% 63% 64% 69%

Effective tax rate 41% 7% 29% 28% 30% ROE 7% 21% 4% 7% 11%

Earnings bf. minority interests 31 171 105 235 387 ROA 5% 18% 3% 6% 8%

Minority interest - 5 3 17 26 EV/EBITDA (x) 26.8 16.6 22.4 20.1 12.5

Reported net earnings 31 166 102 217 361 Net Debt/Equity na na na na na

Adjusted net earnings 31 166 102 217 361 Book Value (US$/sh) 1.29 2.21 6.74 5.50 6.18

Reported EPS (US$/sh) 0.09 0.24 0.26 0.40 0.65 Free cash flow (US$/sh) (0.07) (0.05) 0.22 0.09 0.37

Adjusted EPS (US$/sh) 0.12 0.24 0.25 0.39 0.65 Production Profile

Cash Flow Statement Items (US$mm)

Net earnings 31 166 102 217 361

DD&A 20 26 39 107 132

Deferred taxes 17 (13) (3) 0 33

Minority interest - 5 3 17 26

Other (4) (57) 6 19 (3)

Operating CF bf. ch. in WC 65 127 147 361 549

CF from operating activities 70 105 192 315 502

CF from financing activities 8 (51) 25 (0) (27) NAV Analysis

CAPEX (94) (124) (107) (210) (242) Asset NAV (US$ mm) NAV/Sh (C$)

CF from investing activities (92) (38) (14) (205) (236) Kisladag 100% $2,102.6 $4.15

Net change in cash (14) 16 204 109 239 TJS project 85% $278.5 $0.55

CFPS bf. ch. in WC (US$/sh) 0.20 0.35 0.38 0.66 0.99 Efemcukuru 100% $584.7 $1.16

Balance Sheet Items (US$mm) Perama Hill 100% $334.9 $0.66

Cash 46 62 315 375 664 Vila Nova 100% $188.5 $0.37

Current assets 203 229 491 644 1,010 Jinfeng 82% $943.9 $1.86

Property, plant & equipment 378 668 2,581 2,825 2,935 White Mountain 95% $275.1 $0.54Total assets 592 905 3,436 3,866 4,342 Eastern Dragon 95% $382.4 $0.76

Short-term debt 65 0 56 90 90 Tocantinzinho 100% $209.4 $0.41

Current liabilities 106 44 218 255 293 Exploration & Other Assets Var $254.4 $0.50

Long-term debt 0 - 135 97 97 Mining Assets $5,554.4 $10.97

Total liabilities 143 114 795 865 933 Working Cap. & ITM Options $361.0 $0.71

Minority interest - 5 26 42 69 Net LT Debt ($97.2) ($0.19)

Shareholder's equity 449 792 2,641 3,001 3,409

Working capital 98 185 273 389 717 Total NAV $5,818.1 $11.49

Source: Company reports, TD Newcrest.

Steven Green, CFA (416) 307-6304 [email protected]

Company Profile:

Eldorado Gold Corp. is a mid-tier gold producer with four producing mines, Kisladag in Turkey, and Tanjianshan, Jinfeng, and White Mountain in China.Eldorado also has development projects in Turkey, China, Brazil and Greece. Eldorado is expected to produce approximately 1.0 million ounces per yearby 2013.

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Company ProfileHudbay Minerals owns and operates zinc-copper mines, concentrator facilities, a zincrefinery and a copper smelter in the regionsurrounding Flin Flon, Manitoba and inSaskatchewan.

2008 2009 20100

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HudBay Minerals Inc.(HBM-T) C$16.21

Norsemont acquisition success hangs on exploration upside

EventHudBay announced the acquisition of Norsemont Mining (NOM-T; not rated)for a cash plus shares consideration equivalent to C$520M.

Impact

Mixed The focus of the Norsemont acquisition is the Costancia copperproject in Southern Peru that could achieve production by 2015/16. While theacquisition enhances HudBays longer-term project development pipeline anddrives the companys revenue stream further towards copper, it is also10-14%dilutive to our EPS and CFPS estimates given that we do not expect theConstancia copper project to be in production until H2/15.

The Constancia project area incorporates a number of exploration targetsincluding the Pampacancha Skarn, from which high-grade Cu/Au/Mo drillintercepts have been reported. We believe that exploration success on thesetargets could be the variable that makes this a successful acquisition over thelonger term.

We estimate that HudBay is paying approximately US$1.60/lb of recoverablecopper using total cost analysis (purchase price + capital cost (includingsustaining capital) + LOM operating cost divided by pounds recoverablecopper). This compares to First Quantums purchase of Antares Minerals aUS$1.42/lb and Equinoxs acquisition of Citadel Resource Group aUS$1.66/lb.

The acquisition diversifies HudBay regionally and provides for explorationupside. As well, the Constancia project is of a scale that we believe HudBayhas the financial strength to build without a larger partner becoming involvedThe project is a step-out technically for management given that the companyhas never built a large scale, open pit mine in South America. Based on ourmodeling (we use a more conservative LT copper price, higher discount rateand higher capex than contained in Norsemonts optimization study), theacquisition is approximately 3% dilutive to our NAV. We have reduced ourtarget price to C$18.00 (from C$20.00) and we are maintaining our HOLDrecommendation.

Metals & Minerals

Recommendation: HOLDUnchanged

Risk: HIGH




52-Wk Range $9.86-$19.08

Mkt Cap (f.d.)($mm) $2,865.9

EV ($mm) $2,114.0


Dividend Yield 1.2%


Fiscal Y-E DecemberShares O/S (f.d.)(mm) 176.8


Net Cash ($mm) $751.7

Net Debt/Tot Cap NA

NAVPS (current)(f.d.) $15.67

Working Cap ($mm) $766.6Estimates (C$)

Year 2009A 2010E 2011E 2012E

EBITDA ($mm) 136.0 247.0 330.0 376.0

EBITDA (old)($mm) 136.0 247.0 330.0 376.0

EPS (f.d.) 0.31 0.43 0.63 0.75

EPS (f.d.)(old) 0.31 0.43 0.70 0.87

CFPS (f.d.) 0.81 1.17 1.24 1.30

CFPS (f.d.)(old) 0.81 1.17 1.38 1.49

EPS (f.d.) Quarterly Estimates (C$)Year 2009A 2010E 2011E 2012E

Q1 (0.02) 0.16 -- --

Q2 0.07 0.09 -- --

Q3 0.16 0.06 -- --

Q4 0.11 0.11 -- --

Valuations

Year 2009A 2010E 2011E 2012E

EV/EBITDA 15.5x 8.6x 6.4x 5.6x

P/E (f.d.) 52.3x 37.7x 25.7x 21.6x

P/CFPS (f.d.) 20.0x 13.9x 13.1x 12.5x

Supplemental Data (US$)

Year 2009A 2010E 2011E 2012E

Zinc-US$/lb 0.75 0.96 1.10 1.25

Copper-US$/lb 2.34 3.40 4.10 4.25

Zn (000s t) 105 83 76 66

Cu (000s t) 53 51 56 41


Greg Barnes Bonita To (Associate)


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DetailsTerms of the Transaction.

Norsemont shareholders have the option to receive either C$4.50/sh in cash or 0.2617 HudBay sharesplus C$0.0001 cash. HudBay will pay a maximum of C$130M in cash if Norsemont shareholders opfor the maximum cash payment, Hudbay would issue 23.4M shares; the maximum number of shares

issued would be 31M if Norsemont shareholders do not elect to take any cash. The transaction represents a 33% premium to Norsemont's 20-day VWAP ended January 7, 2011

HudBay has entered into lock-up agreements with some of Norsemont shareholders, representingapproximately 34.4% of Norsemonts outstanding shares. HudBay currently holds 1.1% of Norsemontsoutstanding shares. The lock-up agreements and HudBay's current interest represents approximately35.6% of the fully diluted shares outstanding.

The acquisition is expected to close by the end of Q1/11 and is subject to over 50% of Norsemontsshares being tendered to the offer and normal regulatory approvals. There is a C$21.6M break fee payableto HudBay in the event that Norsemont accepts a superior proposal (HudBay has matching rights).

We see the potential for a competing offer as low. Norsemont management revealed that 20 companieshave signed confidentiality agreements and that it has had an open door policy for much of the past threeyears. It would appear that any company that wanted to review the project has had the opportunity.

Constancia Copper Project

The Constancia project is located in Southern Peru in the same region as Xstratas Las Bambasproject and First Quantums Haquira project. The project hosts a Cu/Au/Mo deposit containingproven and probable reserves totaling 277Mt grading 0.43% Cu, 0.012% Mo and 0.05g/t Au.

Norsemont recently released preliminary results from an optimization study on a feasibility studythat was completed in September 2009 that suggest an 8% discounted NPV for the project rangingfrom US$780-840M. Preproduction capex was estimated at US$900-950M and cash costs at US$0.97-0.99/lb over a mine life of 15 years. Average annual production was forecast at 78kt Cu, 2.0Mlbs Mo and2.0Mozs Ag. We note that details available from the optimization study are few.

The September 2009 feasibility study estimated an 8% NPV of US$304M based on capex ofUS$846M, LT copper at US$2.00/lb and US$0.92/lb cash costs. Average annual copper production wasestimated at 68kt.

Our model suggests an NPV-10% of approximately US$327M at US$2.25/lb LT copper. We haveassumed cash costs after by-product credits are in the range of US$1.00/lb and a pre-production capex ofUS$1.05B. In Exhibit 1, we show an NPV-10% matrix based on various LT copper prices and pre-production capex estimates.

Exhibit 1. Constancia copper project sensitive to copper price and capex

LT Copper price - US$/lb 2.00 2.25 2.50

Capex - US$ millions

950 164 428 692

1050 63 327 592

1150 -28 235 500

1250 -112 152 416

10% NPV - C$ millions

Source: TD estimates

We have added C$100M for exploration upside. The Pampacancha discovery is located 2.5km south-east of the proposed mine development area and has the potential to add significant value to the projectThe Pampacancha Main Body covers an area of approximately 1,000m in a NS-NW direction and 300-400m wide. Drill intercepts have been reported that include more than 60m grading 2.5% Cu. In addition


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high grade gold mineralization has been identified in the area resulting from overprinting epithermalmineralization.

Norsemont acquisition is 3% dilutive to our NAV. Our revised NAV is summarized in Exhibit 2Taking into account both our NPV for the Constancia copper project and our exploration credit, our NAVhas declined to C$15.67/sh from C$16.13.

Exhibit 2. TD Newcrest revised HudBay net asset value matrix

Interest C$000 C$/sh C$000 C$/sh C$000 C$/sh

Mining Operations

Flin Flon 100% $912,414 $5.16 $847,767 $4.80 $789,871 $4.47

Balmat 100% $0 $0.00 $0 $0.00 $0 $0.00

Lalor Gold 100% $100,978 $0.57 $79,454 $0.45 $63,620 $0.36

Lalor Copper/Gold 100% $199,489 $1.13 $171,950 $0.97 $148,926 $0.84

Lalor Zinc 100% $489,272 $2.77 $363,858 $2.06 $265,692 $1.50

Reed Lake 70% $71,345 $0.40 $71,345 $0.40 $71,345 $0.40

Back Forty 65% $128,000 $0.72 $105,000 $0.59 $85,000 $0.48

Costancia Project 100% $625,756 $3.54 $427,380 $2.42 $227,735 $1.29

Fenix-Ferro 100% $150,000 $0.85 $150,000 $0.85 $150,000 $0.85

$2,677,255 $15.14 $2,216,754 $12.54 $1,802,189 $10.19

Plus/(Minus)

Corp Costs ($246,022) ($1.39) ($213,397) ($1.21) ($187,284) ($1.06)

Cash $751,739 $4.25 $751,739 $4.25 $751,739 $4.25

Net Working Cap. $14,873 $0.08 $14,873 $0.08 $14,873 $0.08

Long term Debt $0 $0.00 $0 $0.00 $0 $0.00

Sub Total $520,590 $2.94 $553,215 $3.13 $579,328 $3.28

Total NAV $3,197,844 $18.09 $2,769,969 $15.67 $2,381,517 $13.47

8% 10% 12%

Source: TD estimates

Outlook

We have assumed that HudBay issues 23M shares and pays C$130M in cash to Norsemont shareholders(maximum cash consideration). We have also assumed that the transaction closes at the end of Q1/11. Our2011 EPS and CFPS estimates have declined 10%, while our 2012 estimates have declined 13%.

ValuationHudBay Minerals currently trades at an EV/2012 EBITDA multiple of 5.6x and a P/NAV multiple of 1.0x,compared to its intermediate-small cap. peer group average of 4.5x and 1.1x, respectively.

Justification of Target PriceReflecting the dilution to our NAV and our estimates for the next several years, we have lowered our targetprice to C$18.00 from C$20.00. Our target price is based on an EV/2012E EBITDA multiple of 4.50x (40%weighting) and a 1.30x multiple to our NAV-10% (60% weighting).

Key Risks to Target PriceThe main risks facing the company include forecast, financial, technical and political risks. Among otherthings, these include risks related to copper, zinc and nickel prices, input costs and fuel prices, the governingfiscal and legislative regimes, the timing of key developments, market conditions, capital and operating costsforeign exchange rates, resources and reserves, operating parameters, permitting, environmental, and staffingand key personnel retention. The company will be developing the Fenix nickel project and Lalor Lake zincproject capital costs and timelines may not match our forecasts. There is forecasting risk related to the size ofthe Lalor deposit.

Investment ConclusionWe are maintaining our HOLD recommendation.


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Company ProfileNexen is a Calgary-based global E&Pcompany with operations in the North Sea,Western Canada (principally the oil sands,shale gas and CBM), the Gulf of Mexico,Colombia and West Africa.

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Time to Show Some Love - Upgrading to BUY

EventWe are upgrading Nexen Inc. (NXY-T) to BUY from Hold this morning. Weacknowledge that this is somewhat of a contrarian call but believe there areenough positive indicators to warrant an upgrade at this time.

Our decision to upgrade is underpinned by a) recent share priceunderperformance, b) operational shortcomings which now appear to bealmost fully reflected in the current share price, c) our expectations of top-quartile PPS growth in 2012 (driven by first production at Usan, offshoreNigeria, and to a lesser degree Horn River production additions), and d) thismornings price deck revisions. Our target price increases to $27/share, from$24/share previously.

ImpactPositive

Details

1) Relative share price underperformance: Nexens share price suffered ona

TD Newcrest Action Notes January 11, 2011

Documents

Transcript of TD Newcrest Action Notes January 11, 2011