RBC Exploration Upside Remains; Trading at a Discount to Low-Grade Peers

With the falling gold price and industry-wide cost inflation, low-grade deposits have come under pressure due to high leverage to gold prices and capital intensity. However, given the continuous nature of the Borden Lake deposit including a high-grade core, geometry amenable to open-pit mining, and excellent infrastructure in place, we continue to believe a mine can be built at Borden Lake. Additionally, as Probe is trading at a discount to low-grade peers and exploration upside remains, in our view, we reiterate our

Outperform rating.

1. Trading at a discount to low-grade peers: Based on the global resource of 5.9MMoz at 0.68g/t, PRB is trading at $8/oz, or $13/oz using the pit-constrained resource of 3.4MMoz at 1.0g/t, which in both cases is a significant discount to low-grade peers trading at $26/oz (Exhibit 2).

2. Borden Lake Continues to Grow: In our view, we have not yet seen the full potential of the Borden Lake deposit as it remains open in all directions and recent drilling suggests grades and widths improve at depth. We believe the current pit-constrained resource estimate of 3.4MMoz at 1.0g/t can grow to 5.0MMoz at 1.0g/t through extending the deposit along strike and at depth.

3. Potential for Second Deposit: While the first six holes on regional targets were disappointing, the potential remains to make a second discovery on the large, untested land package, in our view.

4. High Grade Core Should Improve Economics: The Borden Lake deposit contains a relatively continuous high grade core and the total resource would be 1.8MMoz at 1.44g/t using a 1.0g/t cut-off grade. We believe this material could be mined early in the mine life, which should improve the economics of the project and may enable a smaller project with lower initial capex.

Envisioning a smaller, higher-grade project

• We have adjusted our DCF model to include a 5.0MMoz resource at 1.0g/t vs. 7.0MMoz at 0.7g/t previously, which assumes a higher cut-off grade of 0.6g/t is applied. We now model a 25,000tpd mill, down from 50,000tpd, and lowered our initial Capex estimate to $800mm from $1B, which took our NAV to $2.71 from $3.65.

• We also lowered NAV multiple to 0.8x (from 1.0x) and our AMC/oz multiple to $25/oz from $31/oz and our calculation is now based on a higher-grade target resource of 5MMoz vs. 7MMoz previously, which reduces our price target to $2.50 from $4.00.