Industry Update Metals and Mining 22 July 2020 Canaccord Genuity Corp. (Canada) Metals and Mining ESG themes Dalton Baretto, CFA| Analyst - 1.416.869.7380 [email protected] Carey MacRury, CFA| Analyst - 1.416.867.6130 Key themes impacting the sector [email protected] The mining sector has often been perceived (sometimes, we believe, with justification) Kevin MacKenzie, P.Geo., MBA| Analyst - 1.604.643.7357 as a poor steward of ESG standards. The industry has collectively worked hard to [email protected] overturn this narrative, especially given the increased focus on ESG performance among Tom Gallo| Analyst - 1.416.869.3483 global institutional investors. We note that ESG was front and centre at the 2019 Denver [email protected] Gold Forum for many companies, including the royalty/streaming companies, with a Katie Lachapelle, CPA| Associate Analyst - general recognition that "it's the right thing to do". On September 12, 2019, the World 1.416.869.7294 [email protected] Gold Council unveiled an ESG framework, Responsible Gold Mining Principles, that many companies have since adopted. The framework addresses key environmental, social and governance issues for the gold mining sector. We believe that mining companies that meet stringent investor criteria will earn valuation premiums over time, and companies that do not will see their investor base shrink regardless of financial fundamentals. While the "G" in ESG is important, in this report we focus on the more often visible Company Rating Price Target factors related to mining: environmental and social factors. Base Metals - Producer Environmental: Mining, by nature, involves ground disturbance to extract minerals, ERO-TSX Buy C$17.23 C$22.00 and mines are often located in environmentally pristine and ecologically sensitive LUN-TSX Buy C$8.51 C$11.00 areas. As such, from an environmental perspective, the focus is generally on leaving Mining Royalties as small a footprint as possible. Key areas of focus for the industry include 1) tailings WPM-TSX Buy C$66.94 C$75.00 dam standards; 2) processing plant effluent discharge into local watersheds; and 3) Precious Metals - Producer "greening” operations to limit fossil fuel consumption, including electric transport and AEM-TSX Buy C$93.00 C$110.00 renewable power installations. AGI-TSX Buy C$14.56 C$17.50 BTO-TSX Buy C$8.63 C$11.00 Social: Community relations and social impact can often be a contentious topic NEM-NYSE Buy US$64.19 US$83.00 within the mining industry, as many mines are located on Indigenous lands and PAAS- Hold US$35.68 US$36.00 can dramatically affect traditional ways of life. Key areas of focus include 1) quality NASDAQ of relationships with local communities, proper consultation and ability to resolve SSRM-TSX Buy C$30.59 C$35.00 differences; 2) size and nature of revenue and other benefit-sharing agreements with Priced as of close of business 20 July 2020 local communities and governments; 3) job creation and training programs for local communities; and 4) more recently, support programs for workers and communities during the COVID-19 pandemic. How do we measure a company’s ESG performance? Most mining companies now release an annual ESG report, and many hold open calls to discuss their results. In addition, most institutional investors now have an ESG scorecard on each company, or a dedicated ESG team that will generate an internal view on the company’s ESG performance. Factors being considered vary from a mining- specific suite at some clients to a general sector-agnostic list at other clients (which tends to put mining at a disadvantage). In addition, specific events can lead to industry- wide movements; as an example, following VALE’s Brumadinho tailings dam tragedy, the Church of England led an institutional investor mandate requesting that major mining companies globally provide full disclosure on their tailings dam designs and risk- mitigation measures. Which companies are doing it best? Every mining company we cover is now making a significant effort to improve its ESG score, although we generally observe more focus on the ‘E’ and ‘S’ than on the ‘G’. Among the base metals companies we cover, our conversations with investors have indicated a preference for Lundin Mining and Ero Copper from an ESG perspective. Among the senior precious metals companies, Newmont, Agnico Eagle Mines, B2Gold, Pan American Silver, and Wheaton Precious Metals are perceived as ESG leaders. Among the mid-cap precious metals companies, we have observed a general preference for Alamos Gold and SSR Mining. Canaccord Genuity is the global capital markets group of Canaccord Genuity Group Inc. (CF : TSX) The recommendations and opinions expressed in this research report accurately reflect the research analyst's personal, independent and objective views about any and all the companies and securities that are the subject of this report discussed herein. 22 July 2020 9